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investment in Afghanistan
March 2012
Research & Statistics Department
20%
45.2
28.8
0%
1381
1389
engaged in the agriculture or livestock (NRVA, 2009). Some sources maintain that more than
80 percent of households depend in some way on income received from agriculture-related
activities.
Afghanistan
India
Iran
Pakistan
Tajikistan
Turkmenistan
Uzbekistan
Openness
Average applied
tariff rate
Maximum
duty applied
No. of MFN
applied tariff lines
61.7
45.8
43.7
38.1
73.1
111.9
72.9
5.6
12.8
26
13.9
7.9
15.9
40
246
400
100
332
787
5,207
11,360
6,649
6,802
11,176
10,985
Sources: PENN WT (for openness) and WTO Tariff Profiles 2010 (for other indicators)
Note: All data is as of 2009, with the exception of tariff-related indicators for
Afghanistan which are as of 2008.
Output
Real GDP growth
Nominal GDP (million US$) b
GDP per capita (current US$) b
Prices
CPI Inflation (period average) a
CPI Inflation (end of period) a
Core inflation (excl. cereals & energy) a
Fiscal sector
Domestic revenues
Foreign grants
Expenditures
Overall balance (incl. grants)
Overall balance (excl. grants)
External sector
Exports of goods
Imports of goods
Trade balance
Current account balance
FDI
External debt
1382
2003/04
1383
2004/05
15.1
4,766
169
9.4
5,704
196
24.1
10.3
12.9
14.9
4.7
6.7
14.5
-3.1
-9.8
5.0
9.0
15.3
-1.4
-10.4
39.7
91.9
-52.2
-10.0
1.3
28.8
89.2
-60.4
-4.4
3.1
49.0
-11.3
47.8
10.1
1384
1385
1386
1387
2005/06
2006/07
2007/08
2008/09
(in percent, unless otherwise indicated)
16.4
8.2
14.2
3.4
6,815
7,722
9,777
11,940
228
251
307
367
(in percent)
12.3
5.2
12.9
26.8
9.5
4.8
20.7
3.2
11.8
6.7
5.1
10.2
(in percent of GDP)
6.4
7.5
7.7
7.8
11.2
10.2
12.3
9.8
16.6
19.6
22.0
21.7
1.0
-2.9
-2.0
-4.1
-10.2
-13.1
-14.3
-13.9
(in percent of GDP)
26.3
23.5
18.8
20.6
90.0
87.3
80.2
74.9
-63.6
-63.9
-61.4
-54.3
-2.8
-5.6
1.3
0.9
4.2
3.1
2.8
2.9
184.2
169.6
23.0
19.7
(in percent, unless otherwise indicated)
18.0
15.0
15.0
49.6
49.9
49.8
51.0
3.2
-0.2
5.5
21.6
7.0
61.9
36.0
7.9
29.0
1388
2009/10
1389
2010/11
1390
2011/12
20.4
14,214
425
8.4
17,243
501
-12.2
-5.1
3.1
8.9
15.9
8.8
10.6
9.1
12.1
10.3
10.2
22.1
-1.6
-11.8
11.0
11.0
21.1
0.9
-10.1
11.5
12.2
23.8
0
-12.2
17.7
62.4
-44.7
-2.8
2.4
9.2
16.4
53.0
-36.6
1.7
2.1
8.0
14.5
45.7
-31.2
0.1
2.1
7.9
15.0
49.3
-12.0
15.0
45.8
9.3
15.0
47.9
5.7
20,054
542
0.340
0.354
4.3
0.363
0.370
0.387
0.394
0.398
Sources: a: DAB; b: WDI; c: NRVA (2009); d: UNDP; e: AISA; For the rest of the series: IMF
Notes: Values in italics indicate estimates by their respective sources; Underlined values indicate estimates by AISA; Exports exclude the export of opium and drugs;
Trade statistics include both official records of and smuggled trade; R/P 20% refers to the ratio of average income of the richest 20% to the poorest 20% (calculated by
author based on NRVA data); REER (Real effective exchange rate) is calculated using Afghani's exchange rate vis--vis the most widely exchanged currencies in Kabul's
money bazaar (i.e. US Dollar, Pakistani Rupee, Indian Rupee, Euro and Iranian Ryal). The weights used for these currencies are based on the average share of their
respective countries' trade with Afghanistan over the period 2002-2009: US$ (49%), Pak Rs. (24.5%), Indian Rs. (12.6%), Euro (11.7%) and Iranian Ryal (2.2%). The
weight for US$ is obtained as a residual after deducting the trade share of the four latter countries -- it is the average share of the Rest Of the World. The data on trade
shares is obtained from UNCTAD Statistics; Financial year starts on March 21.
40
33.7
30
26.7
27.9
23.9
23.3
20
21.1
20.9
15.6
10
12.4
0
1381 1382 1383 1384 1385 1386 1387 1388 1389
Gross national saving
Investment
3,000
2,750
2,500
2,250
2,000
1,750
1,500
1,250
1,000
balanced fiscal budget no earlier than 2023. This forecast, however, is based on the presumption
that the security situation will not deteriorate. Any worsening security situation and/or an
increase in security forces beyond 2013, and thus an increase in military budget, would postpone
the fiscal sustainability by several other years.
Pakistan
Tajikistan
Uzbekistan
Turkmenistan
Iran
501
1019
820
1,384
3,966
4,526
11.9
5.2
7.6
7.6
12.1
4.1
11.4
9.6
11.0
11.4
6.6
15.0
Commercial lending
Interest rate
15.0
15.0
23.1
<
<
12.0
36
29
51
31
17
33
2
37
<
43
<
38
0.398
nd
(172 )
0.504
th
(145 )
0.607
th
(127 )
0.641
th
(115 )
0.686
nd
(102 )
0.707
th
(88 )
Sources: WDI; IMF WEO; EconomyWatch.com (for interest rate); and Human Development Report 2009;
Note: Data on poverty and GINI index is of 2009 for all countries with the exception of Afghanistan, for which
data is of 2007.
percent to around 25 percent making it as large as the industries sector. However, the gross
export value of opiates is estimated at 11 percent of licit GDP in 2010 a figure which was 50
percent in 2003 (UNODC, 2010).
Liberia
62.8
Iraq
60.0
Micronesia, Fed. Sts.
42.7
Afghanistan
26.6
Timor-Leste
42.6
Nigeria
24.3
Burundi
38.5
Vietnam
20.6
Marshall Islands
35.8
Ethiopia
20.2
Afghanistan
35.4
Tanzania
18.5
Sierra Leone
31.4
Congo, Dem. Rep.
18.5
Solomon Islands
31.0
Pakistan
17.6
Congo, Dem. Rep.
27.3
India
15.6
Iraq
26.7
Mozambique
15.1
Mozambique
26.2
China
14.9
Source: WDI and OECD STAT;
Figures above include disbursements by both DAC and non-DAC member countries.
According to the data provided by the Afghan Ministry of Finance, almost one-fifth of all
official assistance has been allocated to security issues. Agriculture and rural development
have received 13 percent of all assistance, followed by energy and education, each one receiving
9% and 7% respectively. As Figure 1.5 shows, the sectors of transport, governance and health
have received equal shares of almost 6 percent.
1
Commonwealth Secretariat defines small states as countries with a population of 1.5 million or less.
Official Development Assistance (ODA) comprises all flows of official financing which are disbursed at
concessional terms (i.e. having a grant element of at least 25 per cent). ODA include both bilateral and multilateral
aid. It excludes, however, grants from non-governmental organisations and charities raised through private or
individual contributions.
2
Other,
15.2%
Private
Urban
Sector Dvp. Dvp., 4.4%
&
Trade, 5.3% Refugees,
5.7%
Security,
20.4%
Agricluture
& Rural
Dvp., 13.2%
Health &
Nutrition, Governance,
6.6%
6.7%
Energy, 8.6%
Education,
Transport, 7.2%
6.8%
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Investment in Afghanistan
During the last ten years, private investment has had a strong and rapid growth in the
country. Share of private investment increased from 1.3 percent of GDP in 2003 to 8.6 percent in
2011. Total investment (including public and private), however, amounted to 22.6 percent of
GDP in 2011. Since 2003, more than 25,000 businesses in different sectors and activities
registered with AISA, which in total have invested almost $5.2 billion in Afghanistan. Foreign
direct investment (FDI) makes approximately one-third of all private investment in the country.
4.00
4.18
4.16
3.53
3.50
Billion US$
3.96
3.04
3.10
2.74
3.00
2.50
2.00
1.51
1.35
1.50
1.00
0.50
0.56
0.65
0.58
0.75
0.95
1.58
1.09
0.06
0.00
Total Investment
Private Investment
Source: IMF
34.6%
Domestic
73.3%
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Foreign
6.9%
Construction
24.4%
38.1%
Services
Industry
Agriculture
30.7%
2,807
900
Million US$
800
700
600
500
400
300
200
100
220
179
169
110
62
12
42
31
18
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AISAs statistics show that almost 4 thousand foreign companies have invested in
Afghanistan. Though this number represents only 15 percent of all registered businesses, total
value of foreign investments (i.e. $1.8 billion) makes almost one-third of all private investment
in the country (as shown in Figure 1.7). This shows that despite serious challenges Afghanistan
has been able to attract a relatively substantial amount of FDI. Foreign investment may
contribute to economic growth and job creation, and may increase transfer of technology and
market competitiveness in Afghanistan.
Top investing countries in Afghanistan, in terms of total value of FDI, are as following:
Countries
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
South Africa
Turkey
United Arab Emirates
Canada
United States
Pakistan
Iran
England
China
Netherland
India
However, in terms of number of FDI projects, top investing countries in Afghanistan are:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Countries
United States
Turkey
Pakistan
Iran
India
England
Germany
China
United Arab Emirates
France
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and permanent jobs, have been created in the construction sector, amounting to nearly 400,000
jobs.
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police unit has been created to provide necessary security measures to companies operating
in the mining sector.
6. Is AISA an independent institution?
According to the Law on Private Investment, Afghanistan Investment Support Agency
operates under the High Commission for Investment which is composed of eight sectoral
Ministers and is chaired by the Minister of Commerce and Industries. Therefore, AISA
operates independently from other Afghan ministries and institutions.
7. Does AISA engage in business and investment with private companies?
AISA does not engage in any sort of investment and business activities with private
enterprises. AISA has been established on a decree by the Afghan government. It thus acts as
a public investment promotion agency (IPA) and does not invest with private firms in any
form.
8. What procedures are required to obtain a business license?
The applicant refers to the Licensing Department at AISA, and verifies if the commercial
title he is willing to choose for his business is not already in use by another company. Next,
the applicant fills in the relevant forms and submits them along with the required documents.
Upon approval, he/she will then be required to pay the license fee at AISA. His application
will be sent by the Licensing Department to the TIN (Tax Identification Number) and ACBR
(Afghanistan Central Business Registry) offices, located within AISA, to obtain a tax
identification number and for official registry of the business in Afghanistan. The applicant
will obtain his license within 3 days of submitting his first application.
9. Which support activities does AISA provide to foreign and domestic firms?
The Investment Support Department at AISA provides all pre- and post-investment client
services to private enterprises, such as providing basic information to foreign and domestic
investors on market position, investment opportunities, legal framework, taxation and
insurance, providing administrative support for visa and passport-related issues, and taking
on mediation and dispute resolution activities.
10. Does the Afghan government provide bank guaranty for investors?
For the moment, the government does not provide public credit and guarantees.
11. Are there any incentives for local or foreign investments in Afghanistan?
The Afghan government provides all basic services (such as infrastructure, access to
energy, transportation, access to industrial land, etc.) and investment support activities to
foreign and domestic investors. However, as of now, there are no special incentives designed
to investors such as tax incentives or other types of incentive packages. Nonetheless, AISA is
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looking to provide such incentives in a near future which could encourage private investment
in the country.
12. Does Afghanistan have bilateral investment agreement with any country?
Afghanistan does not have any bilateral investment agreement with any country
13. Which types of taxes are applicable to businesses in Afghanistan and what are their rates?
Principally, there are two types of tax for businesses in Afghanistan. (1) Corporate
Income Tax rate is a 20-percent flat tax rate deducted on net taxable income. It is applicable
to all corporations, limited liability companies, and other types of legal business entities. (2)
Business Receipt Tax (BRT) rate is imposed at 2 percent of gross receipts on all types of
income by corporations and limited liability companies whose income is more than
Af.750,000 per quarter. However, the BRT rate is 10 percent for activities such as
international passenger airline services, telecommunications, and hotels and restaurants
providing high-quality services.
14. Is there a minimum wage in Afghanistan?
There is no minimum wage in Afghanistan.
15. What is the maximum working time allowed?
Maximum working time allowed per week is 40 hours.
16. What is the minimum age requirement for employment?
Minimum age requirement for employment is 18 years, while for physically nonintensive work it is 15 years.
17. Are there any institutions in Afghanistan which provide mediation and arbitration to
disagreed parties?
The Afghan Chambers of Commerce and Industries (ACCI) and Afghanistan Investment
Support Agency (AISA) both provide alternative dispute resolution (ADR) process to their
members and registered companies. Furthermore, Financial Disputes Resolution Committee
(FDRC) provides mediation to disputed financial cases in the banking and
telecommunications sectors.
18. Which types of financial product are offered by the banking sector in Afghanistan?
Commercial banks in Afghanistan offer most of conventional financial products such as
current account, savings account, term deposits, Islamic banking products (i.e. musharika,
mudaraba, murabaha, ijarah, and istisna), fund-based credits such as term loans, overdraft,
SME financing, and non-fund based credits such as letter of credit and bank guarantees.
Almost all banks provide international fund transfers through SWIFT, and offer ATM
services.
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References:
IMF. 2011. Afghanistan: ECF Review. IMF Country Report No. 11/330. November 2011
NRVA. 2009. National Risk and Vulnerability Assessment 2007/08: A profile of Afghanistan.
ICON-INSTITUTE. Kabul. October 2009
UNODC. 2010. Afghanistan: Opium Survey 2010. United Nations Office on Drugs and Crime
World Bank. 2004. Afghanistan: State Building, Sustaining Growth, and Reducing Poverty.
Country Report No. 29551-AF. World Bank. September 2004
The booklet has been prepared by the Research & Statistics Department at AISA. For any
inquiry, please contact:
Omar Joya
Research & Statistics Manager
Email: omar.joya@aisa.org.af
Phone: +93.(0)20.210.37.08; +93.(0)20.210.34.09
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