The future seems bleak for the carpet industry. A survey by the government confirms carpet manufacturers’ worst fears.
In 2008, carpet exports touched 3 million sq metres.
In 2008, carpet exports touched 3 million sq metres. Four years later the figure has shrunk to roughly 400,000 sq metres.
On the surface it might seem to be the result of a general slowdown in the global economy. But industry watchers know the crisis in the country’s once booming carpet industry was inevitable.
A joint survey by the Ministry of Labour, Social Affairs, Martyrs and Disabled (MoLSAMD) and Hirakata (which means move), a research institute, concludes nearly 98 percent of Afghan carpets are taken out of the country for scissoring and washing due to lack of facilities inside the country.
The Union of Afghan Carpet Producers and Exportersand the Chamber of Commerce & Industry sees lack of support from the government as the primary reason for the decline in carpet exports. “The Afghan government has just made promises and decrees on paper, nothing else, while Pakistan has supported Afghan weavers in different ways. The carpets are marketed outside the country under the Pakistani label,” says Mohammad Zarif Yadgari, head of the Union.
Mir Zaman Popal, director of Exports & Industries Promotion in the Chamber of Commerce & Industrysays that Afghanistan earned 250 million USD from carpet exports in 2007, but ever since the volume of exports has only grown smaller.
Declining exports
Afghan weavers who had voluntarily returned to the country have once again crossed the border into Pakistan because of lack of support from the government.
Popal believes carpet exporters are also frustrated by the imposition of new systems by the government, and the resultant ground for administrative corruption. Producers and exporters have to file income tax, present balance sheets; also, get export permits and pay taxes to two departments – AISA (Afghanistan Investment Support Agency) and Ministry of Commerce.
Afghan traders have been urging the government to streamline the system in order “to prevent administrative corruption and ensure compliance from exporters”, according to Popal.
Dr Ahmad Fahim Perzad, deputy in Tanweer Investment, complains the government does not have a “clear policy” on the growth of private industry. “Investors face problems at every stage,” he adds.
According to Perzad, absence of land and electricity are the biggest obstacles to investment. In addition, the government has failed to help find markets, provide manufacturing facilities and financial support like tax holidays, according to the Chamber of Commerce and the Union of Carpet Producers and Exporters.
Tanweer Investment’s Perzad points to the keenness of Afghan carpet weavers to dwell in Pakistan. He says Pakistani investors provide myriad facilities to Afghan carpet producers. “Making full use of Afghan weavers, Pakistani investors with the support of the Pakistani government have invested in the carpet industry and export Afghan carpets that are labeled as Made in Pakistan,” he explains.
Perzad blames the problems of the carpet industry on red tape in government offices, restrictions on transit and trade imposed by Afghanistan’s neighbours, and the Afghan government’s failure to ensure transit rights.
“Tanweer exports carpets by air, paying huge air fares,” he says. Pakistani exporters are assured of support from their government, he adds.
Unkept promises
In 2007, the government promised to set up an industrial park for carpet producers over 1,000 jeribs of land in Jalalabad. Unfortunately the process of land acquisition was only completed last year, and the land has not been handed over to carpet makers.
Neither has a fund of 10 million USD for the carpet industry, which was approved under bill number 40 of the Council of Ministers on Dec 1, 2012, been made functional.
Najibullah Manalai, the press advisor to the Ministry of Finance, says money for the industrial park in Nangarhar has been sanctioned, and construction is the concern of the Ministry of Commerce. A year ago the ministry passed the responsibility to AISA as per bill number 31 of the Council of Ministers and the decision of itseconomic committee.
Shawkatullah Farahmand, administrative director of Industrial Parks Management, AISA,did not give details about why the park was delayed, but said, “According to our information, the work on detailed plan of 653 jerib has been completed and an amount of 38 million Afs (664,000 USD) has been projected as budget by Ministry of Commerce for construction of the roads.”
Mutasel Komaki, deputy minister of commerce and industries, says there are efforts to get the president to sanction 10 million USD for the carpet industry.
However, Najibullah Manalai, media adviser in the Ministry of Finance, throws cold water on the optimism. “Unfortunately the government is not in a position to allocate 10 million USD from the central fund. Maybe the Ministry of Commerce has the money,” he says skillfully passing the buck.
