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Can Afghanistan and the UK have better and stronger economic ties?

Afghanistan being a landlocked country is grappling with lots of problems regarding transit and conducting business with countries which do not border with it. In some cases, Afghanistan has even tried to opt for ways that are costly for a country with the lowest economy in the region. The UK, on the other hand, is one of the richest countries, a country surrounded by sea, and still an EU member with broad economic relations. I would argue that these two countries can develop a stronger and better relationship, since UK can be a good market for the organic crops and unique handicrafts of Afghanistan. Similarly, Afghanistan can be an ideal place for UK’s investment.

Afghanistan is well-known for its organic and delicious fruits both fresh and dry, and its organic grains and vegetables; UK can be a great market for these fruits. In addition, Afghanistan’s fruits can meet world and EU standards.

Afghanistan is also one of the producers of best quality handmade carpets and handicrafts. Afghanistan’s carpet is globally known for its best quality and has lots of customers everywhere including the UK. In the past these carpets were processed and sold under other countries trademarks, but now they are made and processed inside the country and also sold with Afghanistan trademarks. However being a landlocked country, Afghanistan is well-connected to the world with. AirCorridors. The program of AirCorridors which was initiated in 2017 by President Ashraf Ghani has made the greatest contribution with Afghanistan products. So far, approximately 8,000 MT of Afghan goods to have been exported to our neighboring countries as well as destinations such as China, Turkey, the Gulf, and Central Asia and even beyond such as the UK and EU through AirCorridors in 824 flights, valued at $ 183 million. These goods include fruits such as, watermelon, apples, grapes, apricots and pomegranates.  

                                                                                  

Afghanistan is committed to boost economic ties with UK

The participation of high ranking Afghan officials in the second Afghanistan-UK business conference signifies Afghan government’s determination to develop concrete economic ties with UK and other European countries. Among the participants was Mr. Ajmal Ahmady the minister of MoIC. He attended this conference and casted light on the business environment and investment opportunities in Afghanistan. He emphasized that Afghanistan is transforming into a pro-investment and pro-business society, even though it has many security problems. He added that besides all the security issues last year Afghanistan’s economy remarkably grew. 

Why should UK invest in Afghanistan?

Afghanistan of today is not Afghanistan of 2001; it is country with a system of governance, an army powerful enough to secure Afghan citizens, a developing economy. To develop its economy the government of Afghanistan is firmly committed to provide facilitations and new opportunities for Afghan investors and foreign investors alike. The steps that have been taken for business and investment growth are as follow:

Industrial Parks: Government of Afghanistan has developed equipped and modern Industrial Parks with all required facilities for encouragement of industrialists/ investors. The price of land IP is only about 80 cents per square meter. 

Preferential Tariff: Preferential tariff is an incentive scheme for supporting the industrial under this the tariff on production/processing machinery become 0% while tariff on import of raw material become either 1-2% depending on its single or dual usability.  This cost saving scheme motivates industrialists and results in quality enhancement.

Discounted Power Charges: Commercial charges of electricity and power supply are normally higher while for motivation of the industrialists MoIC supports the investors to get electricity prices lower than commercial

Corporate Tax rate: The Corporate Tax rate in Afghanistan stands at 20 percent. Corporate Tax Rate in Afghanistan averaged 18.33 percent from 2006 until 2017, reaching an all-time high of 20 percent in 2007 and a record low of 0 percent in 2006.

Investor Facilitation Services: Investment facilitation directorate is officially tasked for providing administrative support to foreign investors including but not limited to visa services, market opportunities sharing, business registration and licensing services, Acquisition of land in Industrial park and other assistance as needed.

Investment opportunities in Afghanistan

It is clear that Afghanistan has many investment opportunities that are quite attractive for the UK’s investors in any form (solely privatized, PPP, and Joint Venture) with local investors or government SoCs & SoEs. The opportunities that the country provides to the UK’s potential investors are in different sectors and can provide a great return in the form of benefit from their investment in the country.

Infrastructure: Since Afghanistan economy is under rehabilitation therefore, there are many physical infrastructure development needs that covers both commercial and social infrastructure including; Air corridor support, Industrial Park Development, Hydro Power Dams, Professional & Vocational Institutes & Universities and others. The infrastructure development is cross sectoral issues therefore, is divided into the following main sectors.

Energy:The Afghan power sector remains in need of investment with domestic power production is mainly Hydro based with local generation ranging between 900-11000 GWh. The remaining 65% of domestic demand is fulfilled by imports. Increasing consumption levels are hence driven by the availability of electricity being imported.

Oil & Mine: Extraction and refinement of oil and gas in northern Afghanistan has just begun. Huge potential exists to explore, extract and refine the oil and gas of Afghanistan by expert UK companies. Afghanistan is considered a treasure of mines specially lithium and uranium that are the most valuable resources.

Health Sectors:Given the state of medical facilities and the fact that many Afghans travels to neighboring countries and import of millions of medical and surgery equipment and tools to the country indicate that there are opportunities for foreign investment in the country. There is a need for diagnostic centers, modern labs, regular healthcare Services and other services.

Agriculture Sector: Considering the Annually increased agricultural production and productivity, there is a huge investment gap in post-harvest handling and developing agricultural infrastructure such as cold storages, fruit and vegetable packing complex, Medicinal Plant processing centers, as well as production of agricultural technology. We have premium products in agriculture that could obtain global recognition and  are much lucrative for potential investors these includes but not limited to Pomegranate, Saffron, Medicinal/Herbal Plants, Aloe Vera, Mushrooms, dried fruits and others. The premium products are currently not handled based on ISO and other global food safety norms that have limited its trading opportunities.

To conclude, UK with great demand for best quality products and a powerful economy can be a good market and an investor; Afghanistan has everything UK needs. They both can be much better business partners, and develop their economies; besides being thousands of miles away.

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