Here you will find general information about the rapidly-growing Afghan economy as well as in-depth reports on the country's most lucrative sectors. Peace Dividend Trust collaborates with a broad range of organizations and agencies to provide interested individuals with written materials on the Afghan marketplace from a variety of experts.
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General Reports
Informal Sector Survey |
| The Afghan economy is currently characterized by its high level of informality: few Afghan companies comply with all governing laws and regulations. This situation is detrimental to the country's long-term growth, stimulates corruption and hampers the development of protection systems for both employees and consumers. This survey seeks both to determine the drivers of formality and informality, and to understand the rationale behind the decisions made by businessmen to adopt or reject each individual aspect of formality. |
| Author: Altai Consulting |
Date: September 2006 |
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Integration of Returnees in the Afghan Labor Market |
| In the last 25 years, Afghanistan has experienced massive population displacement generated by the ex-Soviet Union invasion of Afghanistan in 1979, the civil war, and the Taliban regime. Since 2002 some 4.5 million Afghans have repatriated (altogether about four million returned in four years). There is a major interest, for the new Afghan Government as well as for the main organizations involved in the reintegration of returnees, to understand, after four years, how they have been able to reintegrate in the labor market. |
| Author: Altai Consulting |
Date: October 2006 |
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Enabling or Disabling? The Operating Environment for Small & Medium Enterprises in Rural Afghanistan |
| As emphasized in the January 2006 Interim Afghanistan National Development Strategy (IANDS), agriculture and rural development will play critical roles in facilitating Afghanistan’s transition from a largely informal economy into one with a prosperous, sustainable future. To date, however, reconstruction efforts have largely neglected the growth of small and medium-sized enterprises in rural areas. Luckily, there is significant room for improvements in promoting the marketing and quality of agricultural commodities to support small and medium-sized businesses. The measures with the most potential to bring tangible and widely distributed benefits to rural SMEs include strengthening and expanding transport networks, particularly roads; expanding the quality and availability of basic services including electricity and storage facilities; increasing energy production capacity; strengthening existing markets; increasing direct exports; reducing red tape; establishing mico-credit facilities for post-farm production; establishing new markets and regaining traditional ones; increasing accountability; formalizing the rural business activity of SMEs; establishing quality control standards; coordinating scientific research; increasing collaboration between rural SMEs and provincial educational institutions; and finally strengthening rural business representation. If designed carefully to take full advantage of available production inputs such as abundant unskilled local labor, modernization programs could create jobs, increase production volume, and improve productivity. |
| Author: AREU |
Date: September 2007 |
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Going to Market: Trade and Traders in Six Afghan Sectors |
| Although the nearly three decades of conflict has had a destructive impact on the Afghan economy, it is not starting from scratch. Rather, the conflict years created opportunities for production of and trade in certain commodities even as it closed others. Great hopes abound for Afghanistan’s strategic position as a hub for regional trade, many players in the Afghan market remain trapped at a micro-level of activity with limited profit margins. The Afghan government will have an important role to play in the future with regards to encouraging domestic producers and exporters, gathering revenue from industry and trade, issuing licenses, monitoring business practices, and ensuring that imported products meet certain standards. Moreover, high levels of growth with tangible benefits for poor Afghans will be needed to combat the opium trade, but further research needs to be done to assess whether or not current expectations are realistic. |
| Author: AREU |
Date: June 2006 |
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Putting the Cart Before the Horse? Privatisation and Economic Reform in Afghanistan |
| Privatization, involving the transfer of state assets and industries to private actors, has been gaining in momentum among the Afghan government and the international donor community. However, before embarking on the privatization of enterprises that are not doing much harm in fiscal terms, the Afghan government must address other structural reforms to ensure adequate investment legislation, improved security and the rule of law, improvements in infrastructure, and streamlined and strengthened regulation. Other issues such as improving clarification of ownership, transparency, public information, must also occur. In sum, greater strategic thought must be paid to sequencing economic reforms with attempts to increasingly privatize the Afghan economy. Privatization must be seen as a means of economic development rather than as an end in itself. |
| Author: AREU |
Date: November 2006 |
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Trading in Power: The Politics of "Free" Markets in Afghanistan |
| Currently, economic growth in Afghanistan is not open to all, benefits are not being spread evenly across Afghan society, and the way in which the markets themselves are operating is having a negative effect on political governance and "state-building." The appearance of economic dynamism is hiding the fact that informal social regulation is restricting competition and participation, meaning that the distribution of economic benefits is being skewed to those who are already wealthy and well-connected – trends which threaten to undermine Afghanistan’s future. Thus, it is critical that there be greater accountability of market operators to the state; more state intervention is needed to more equitably distribute the gains from economic growth, not less; more targeting of SMEs; and finally, there is a need for an overall political strategy which limits the power of those who gained control over the markets by force or illegal means and extends economic opportunities to the Afghan people at-large. |
| Author: AREU |
Date: June 2004 |
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Who Owns the Farm? Rural Women’s Access to Land and Livestock |
| Although the ownership of land and livestock is considered to be a key asset for rural Afghans, surprisingly little is known about the factors that enable or constrain the ability of women to access them. This report – which studied women from a range of religious, ethnic, geographic, and cultural backgrounds – shows that despite the fact that many women have a great deal of involvement in agriculture, very few actually own land or livestock themselves. When women did own one of these assets, most used them productively and with varying amounts of success. Moreover, this study found that although the numbers of women who claim rights to land and livestock are not great, they were in fact higher than anticipated. Two of the leading factors which compel women to stake their claims are poverty and a sense of not being cared for by their families. Numerous constraints, however, prevent most women from doing so. These include culture and tradition; lack of credit, land, and shelter for livestock; and poverty, with culture and tradition arguably the most powerful deterrent. This report recommends that NGOs and the Afghan government work to improve women’s access to land and livestock by supporting the role of women in and knowledge of agricultural activities; providing credit to women and widows; improving women’s ownership of land and rights to claim; and finally increasing women’s control over their assets. |
| Author: AREU |
Date: February 2005 |
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Reports by Sector
Agriculture
Flour: Sector Analysis |
| With the importance of wheat as a crop and bread as a dietary staple, flour is a sector with interesting opportunities for Afghan millers. Current demand is being met partly by imported flour, but there is strong potential for import substitution. |
| Author: Altai Consulting |
Date: May 2007 |
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Industrial Bread, Cakes & Candies: Sector Analysis |
| There is an increasing high-end market for processed bread, which is bound to grow with the rise in purchasing power of Afghans and the sophistication of consumption patterns. Cakes and candies are a significant part of the food consumption of Afghans and many products are currently imported, leaving room for increased domestic production at a regional/national level. |
| Author: Altai Consulting |
Date: May 2007 |
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Milk and Yogurt: Sector Analysis |
| Livestock is a major source of food and income for Afghan farmers, and a significant part of it comes from milk production. The potential to industrialize pasteurized milk and yoghurt production exists to meet an increasing internal demand. |
| Author: Altai Consulting |
Date: May 2007 |
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Vegetable Oil: Sector Analysis (Parts 1-7) |
| Coupling a high demand for vegetable edible oil products and an existing oil production industry, this sector offers import substitution opportunities based upon locally-cultivated and locally-produced vegetable oils. |
| Author: Altai Consulting |
Date: November 2007 |
Pt 1 Pt 2 Pt 3 Pt 4 Pt 5 Pt 6 Pt 7 |
Understanding Markets in Afghanistan: A Case Study of the Raisin Market |
| As the most lucrative part of the horticultural sector in Afghanistan, raisins will play an integral role in the growth of rural and farm incomes. Moreover, there is dramatic room for growth in the raisin industry, which now accounts for only 2 percent of the world market but once reached 60 percent in the 1960s and 1970s. It is important to note, however, the raisins are a by-product of fresh grape production (unlike in the West). Constraints which are currently limiting growth include outdated production practices; lack of knowledge and inputs which result in low yields; lack of capacity and investment; lack of farmer marketing associations; and poor packing and marketing strategies. In order to exploit the enormous potential for growth in the Afghan raisin industry, this report recommends helping farmers increase production of high-quality raisins and thereby sell them at a higher price; improve processing and packaging of the final product; and lastly facilitating exports abroad. |
| Author: AREU |
Date: June 2004 |
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Reports by Sector
Construction
Understanding Markets in Afghanistan: A Case Study of the Market in Construction Materials |
| Having been stimulated by donor-funded reconstruction projects, private business contracts, and international military projects, the construction market in Afghanistan is booming – and will continue to do so for the foreseeable future. This study notes five key trends which have emerged in the new Afghan construction economy. These include an overall reduction in the number of players in the construction business; the skewing of benefits to Afghan companies with strong, preexisting political connections and non-Afghan businesses; an increase in corruption in the awarding of contracts; an increase in the overall "militarization" of the construction business in response to security concerns; and finally extremely low levels of scrutiny, both financial and technical, or the implementation of construction contracts. Moreover, Afghanistan currently lacks the manufacturing capacity necessary to produce goods domestically and is forced to import virtually all manufacturing materials. In order to raise standards and distribute the benefits of economic growth more equitably, this report recommends ensuring high quality work, facilitating the development of the construction sector as a whole, and tackling broader issues relating to the Afghan political economy with particular impact on the construction industry. These steps include government regulation; self-regulation by construction businesses; improved monitoring and evaluation by donors; improved access to credit for SMEs; continued reform and improvements in trade and customs affairs; establishing free and democratic trader associations; a review of the numerous exemptions from export restrictions issued by government bodies; and finally increased transparency and monitoring of the awarding and implementation of contracts from the international community. |
| Author: AREU |
Date: June 2004 |
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Reports by Sector
Natural Resources
Gemstones: Sector Analysis |
| Afghanistan owns some of the best quality gems in the world (rubies, emeralds, lapis lazuli, etc.). These deposits are still being largely untapped and strong potential exists for new private sector investment in gemstone cutting and polishing. |
| Author: Altai Consulting |
Date: May 2007 |
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Minerals in Afghanistan: The Potential for Copper |
| There are around 300 documented copper deposits, occurrences and showings in Afghanistan. However, Afghanistan has yet to be evaluated in the light of modern mineral deposit models and improved analytical methods. From a global perspective, Afghanistan is relatively under explored and the potential for further discoveries of copper and other minerals is high. |
| Author: Afghanistan Geological Survey |
Date: n/a |
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Marble Strategy Presentation |
| Afghanistan has the natural resources to profit from marble & granite, but is not doing enough to capture local and foreign markets. Investment into better processing is key to improving industry competitiveness |
| Author: On The Frontier Group |
Date: February 2006 |
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Understanding Markets in Afghanistan: A Study of the Market for Petroleum Fuels |
| As a net importer of petroleum fuels, and where long distances and poor transport infrastructure add to the cost of imports, Afghanistan is particularly vulnerable to fuel price shocks on the international market. Moreover, the top of the fuel market is dominated by a very small number of large players – many of whom are well-connected politically. At the opposite end of the spectrum are large numbers of small players who have limited profit margins. However, better monitoring of the market to ensure openness and to combat anti-competitive and monopolistic business practices – in conjunction with renovation of strategic storage facilities – has the potential to protect Afghanistan against fuel price shocks as well as to allow competition to deliver a better product to the consumer. |
| Author: AREU |
Date: October 2005 |
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Reports by Sector
Textiles
Understanding Markets in Afghanistan: A Case Study of Carpets and the Andkhoy Carpet Market |
| This report focuses only on a certain type of carpet, the pile (the soft projecting surface of a carpet made up of many small threads) knotted into a textile backing, and only in the Jawzjan Province, in northern Afghanistan. Nonetheless, there are numerous trends which are relevant to the carpet industry as a whole. To date, much of the growth in the carpet industry has been driven by the relocation of previously wealthy and powerful traders back into Afghanistan. In order to distribute the benefits of economic growth more equitably and encourage the growth of local producers, however, two interlinked actions are required. First, the establishment and application of quality standards through labeling and certification could support the continued growth of traditional designs and materials. Second, there must be a concerted effort to increase the returns given to local producers, such as granting them access to external markets via mechanisms of formal credit and building linkages with outside actors. |
| Author: AREU |
Date: January 2004 |
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Reports by Sector
Manufacturing
Understanding Markets in Afghanistan: A Study of the Market for Pharmaceuticals |
| There has been a dramatic increase in the quantity of both donated and privately imported medicines entering Afghanistan since 2002. The private sector accounts for some 70 to 80 percent of total pharmaceutical consumption, in a growing market already in excess of $200 million. However, there is widespread smuggling of medicines into Afghanistan, and the pharmaceutical market itself is extremely chaotic. Given the enormity of the challenge facing the Afghan government in regulating the pharmaceutical trade, the GoA should initially focus its efforts on regulation medicines at the point of wholesale and retail. In addition, the GoA should continue training pharmacists at Kabul University, improve licensing procedures, and begin widespread public education programs about proper pharmaceutical use. |
| Author: AREU |
Date: December 2005 |
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Understanding Markets in Afghanistan: A Study of the Market in Second-Hand Cars |
| Vehicle use in Afghanistan has grown exponentially since 2002. Many Afghans rely on vehicles to make a living through provision of private transport services. However, the transit trade in second-hand spare parts continues to evade taxes and regulations and thus detracts from licit economic growth. Nonetheless, there is ample scope for streamlining cross-border procedures, such as the process of clearing vehicles through Afghan customs and registration, thereby reducing waiting times and minimizing the potential for corruption and bribes. Such streamlining, in conjunction with rejections in the informal charges paid by traders, the negotiation of favorable trade agreements with neighboring countries, and increasing local producers’ access to credit, could help promote cross-border vehicular trade as a key contributor to growth in the formal Afghan economy. |
| Author: AREU |
Date: October 2005 |
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