Economic crisis has worsened in the current financial year in Afghanistan. Capital appears to be withdrawing, and companies shutting shop.
Afghanistan Investment Support Agency (AISA) officials say 2015 has been unlike any previous year.
Economic crisis has worsened in the current financial year in Afghanistan. Capital appears to be withdrawing, and companies shutting shop.
Afghanistan Investment Support Agency (AISA) officials say 2015 has been unlike any previous year.
Ibrahim Shams, AISA deputy director, says some 800 companies, citing security concerns, have submitted applications to stop activities. The range of businesses includes construction, manufacturing, mining and agriculture.
The economy has not recovered from the beating in 2014, the result of shrinking international aid and months of uncertainty over the results of the presidential elections. According to Shams, these factors together with the poor infrastructure including the shortage of power have been bad for business. He also holds poor managerial skills in companies responsible for decisions to shut down.
Abdul Rahim Faizan, deputy director of the Afghan industrialists union, says many factories in industrial parks have downed shutters in the last year. Eight newly established factories dealing in food processing and medicines had to close because of chronic electricity problems and competition from poor quality products made in Iran. Even Kabul’s Juma Mohammad Mohammadi industrial park is crippled. Two factories have shut and 32 others are in the red. The situation is no better in Pol e Charkhi industrial park.
Industrialist union’s Faizan says they have had to lay off many workers. “If the government does not take action, the remaining (32 factories in Juma Mohammadi) will shut,” he warns.
Business in Jalalabad is similarly in the doldrums. No new business started in 2015. Instead two factories dealing in engine oil and six in the marble business closed. The marble business was adversely affected by the government’s decision to ban mining of marble.
Lack of faith
AISA’s Ibrahim Shams says there were fewer requests for permits from foreign and domestic investors in 2015 (2,750 applications) compared to the previous year (3,300). The 20 percent decline shows a lack of faith in the government’s ability to provide security and deliver a strong economy.
Investments fell from 800 million USD in 2014 to 589 million dollar in the current financial year. The share of foreign investment which fell in 2014 (55 million USD) rose in 2015 (170 million USD). According to Shams, the main reason was bilateral security treaties that were signed with the US-led NATO countries in 2014.
The Afghan Chamber of Commerce and Industries has called 2015 the toughest year since 2003. Khanjan Alokozai, deputy director, says not only did industry stagnate, there was considerable decline in exports and imports. Traders saw a slow-down in business because of poor demand. In addition, traders were targeted by extortionists. Some 120 traders were either abducted or received threats in the course of the last year.
Fruit farmers and traders had a bad year. Alokozai says they suffered a loss of an estimated 60 million USD in the melon season because of lack of access to international markets. Later when apples were being harvested, the situation was still bleak.
Meanwhile, the government went ahead and raised taxes on exports despite the objections raised. Authorities in the Ministry of Finance refuse to believe that trade may have suffered because of losses due to rising taxes. Ajmal Hamid Abdulrahimzai, the spokesperson in the finance ministry says the new levy is based on law.
He says the amount raised in taxes (121 billion Afs or 17.5 million USD) from big business and customs is justified. Tax was raised from 2 percent to 4 percent. Meanwhile, the 10 percent tax on mobile phone users, introduced in October last year, has yielded 500 million Afs (7 million USD) as revenue.
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