Pessimism about the future has given way to optimism about the country’s ability to bounce back in a few years.
With the drawdown only months away fear of the future has diminished.
With the drawdown only months away fear of the future has diminished. Khan Jan Alokozai, the acting director of the Afghan Chamber of Commerce & Industries, dismisses predictions of an economic meltdown as mostly “propaganda”. Trends in business and investment have not dramatically altered, according to him, even though the World Bank and “some other organisations (which he did not name) still spread propaganda that the risk has not ended and the Afghan economy has gone into dormancy”.
Hopes are pinned on the next government. On June 16, Afghans voted in a run-off poll, the winner of which will succeed President Hamid Karzai.
“I believe that if the next government encourages economic growth the country would be on track,” Alokozai told Killid. In his opinion the large infusions of foreign assistance over the last 13 years did not help make Afghanistan “self-reliant”. “The government is more guilty than anyone else for failing to create a self-reliant economy,” he says.
Investment figures from AISA (Afghanistan Investment Support Agency) also belie the fear of impending crisis. While 1.4 billion USD was invested in the country last year, 378 million USD had poured in by mid-May this year.
Zabihullah Ehsan, chief of the licence issuing authority in AISA, thinks investors will be reassured by the successful holding of elections. “Some Afghan investors are waiting for the results of the runoff election to make them content, and to figure out how to prepare conditions for investment,” he says.
Also Ehsan does not buy into fears that investment levels may be lower this year because of the planned withdrawal of US-led foreign combat forces. “Whatever the negative propaganda about the year 2014, it has not created any obstacles in the way of investors. The concern is with the elections,” he says.
He reiterates the point by citing investment figures for 2013, which were a record high. “2013 determines the maximum limit of investment (since 2002). There is expectation that the record might be broken,” he says, hopefully.
Not only is the economy growing, some imports have been replaced by domestically-manufactured products. “Earlier even a bottle of mineral water came from Dubai. Now locally-bottled water has taken its place,” he adds.
Ehsan considers the issue of insecurity as a “big obstacle” for investment, and thinks that were the government to ensure security to investors, their businesses and families, the economic situation would significantly improve.
Economic confidence
Meanwhile, officials are confident about the economy’s resilience despite shrinking international aid. Exports in 2013 increased by 33 percent compared to 2012, according to ACCI. Exports were valued at 393 million USD last year, mostly dry fruits (27 percent of trade) and other agricultural produce, while in 2012 the total value of exports was 131 million USD.
The Ministry of Commerce counts 16 items of export. “These exports include beverages, candy and shoes,” says Musafer Qukandi, spokesperson for the ministry. Gross Domestic Product per capita was 130 USD in 2002, and has grown to over 600 USD.
However, fear of the future after the pullout has dampened domestic business. Importers have reported a fall in trade; business has slowed down with shrinking demand.
Dr Kamal Sadat who heads an import company called Gio Afghan Qarghez China Transit Company, says their business has been hit hard by the slow-down. “We used to import 500-1000 container from abroad every month but now it’s no more than 100-150 containers. Demand in the baazar has decreased and our goods are not selling,” says Sadat.
Budgetary gaps
The Ministry of Finance has not been able to meet its budgetary requirements with the decline in international assistance and investment. Abdul Ghafar Jailani, the ministry’s spokesperson, explains a third of the budget is from international aid. In the 2013-14 financial year the government was 5 billion Afs (86 million USD) short of money largely because of fears of the future after 2014.
The situation has improved, he points out. The budgetary projections are 1.2 billion USD, and revenue generation was 39 percent by the middle of the second month of the second quarter of the financial year, he says. “The revenue graph in the current year shows a 14 percent increase compared to 2013,” he adds.
Hoping for recovery
The construction sector has been hardest hit by the 2014 fear. President Karzai’s refusal to sign the Bilateral Security Agreement (BSA) with the US in November last year was bad for traders, says Ahmad Farhad, manager of Rahbar Trade Company in Kabul which imports construction material from Iran. “We have 1 million Afs (18,000 USD) of stock but sales are very poor,” he says. “The elections and delay in signing the BSA have greatly impacted our business.”
Haji Mohammad who is the storekeeper of Ghazni construction materials has the same complaint. “Our business was better in 2012 and 2013. We are doing only 30 percent business,” he says. “While we sold 30 tonnes of girders daily two years ago, we don’t do this even in a week,” he laments.
With both presidential candidates committed to signing the BSA, the construction sector could be booming again.
