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POLICY BRIEF
AGRICULTURE IN AFGHANISTAN LINKING PRODUCERS TO MARKETS (LOCAL, REGIONAL, INTERNATIONAL)
OCTOBER 2012
COMMISSIONED BY
The Asia Foundation - Afghanistan Houses # 48 & 50 Street No. 1, Hajji Yaquob Square Shahr-e-Naw, Kabul – Afghanistan
http://asiafoundation.org/country/overview/afghanistan
DEVELOPED BY
QARA Consulting, Inc.
H#158. Street III. Old Taimani
Kabul, Afghanistan
+93 (0) 788 888 125
www.qaragroup.com
The title and focus of the brief is specified by TAF. The research and writing is
conducted by QARA Consulting, Inc.’s associates.
Cover Photograph: Kabul International Ag-Fair 2010. Courtesy Ministry of Agriculture, Irrigation and Livestock.
Agriculture In Afghanistan
L I N K I N G P R O D U C E R S T O MA R K E T S ( L O C A L , R E G I O N A L , I N T E R N AT I O N A L )
I. Backdrop
The Afghan economy has always been
agriculture dependent. For centuries, farming
has been the lynchpin of economic life,
providing vital livelihoods to the rural
population and agribusiness opportunities for
local entrepreneurs. Though only 12 percent of
Afghanistan’s total land is arable and less than
half of it is currently cultivated, by some
estimates more than 80 percent of population
remain dependent on agriculture and allied
activities.i The sector contributes 34.9 percent
of Afghanistan’s GDP and engages 78.6 percent
of labor force in the country.ii
Prior to war, in the 1960s and 1970s,
Afghanistan emerged as a notable agricultural
producer in the region; thanks to its unique
varieties of pomegranates, grapes, apples,
apricots, and melons, and its large assortment
of dried fruits and nuts. Located along the
famous Silk Route, the country was able to
export more than 60 percent of its agricultural
products to neighboring countries such as India,
Pakistan and the former Soviet Union during.
The recent 30-‐plus years of war devastated
farmland, irrigation systems, and agricultural
infrastructure. Farming communities were
scattered, and export channels shut down.
Operating at a fraction of its potential,
Afghanistan’s agriculture sector not only lost its
share of the international market, but also
became incapable of feeding its own
population.
During the past decade of post-‐war
reconstruction, a strong consensus has
emerged that agriculture remains fundamental
to state building, and development in
Afghanistan. International donors have injected
millions to recover the sector, and to ensure
livelihood and food security for local
populations. A dedicated Ministry of
Agriculture, Irrigation, and Livestock (MAIL)
implements projects in collaboration with the
donor agencies. Agricultural production and
practices have accordingly been revived and
improved over the decade.
As production increases, there is need to link
the agricultural producers to local, regional and
Agriculture In Afghanistan
international markets. This policy brief
attempts to identify approaches for linking
producers to markets. It suggests the
importance of market linkage, analyzes current
initiatives and identifies gaps, challenges and
opportunities. Finally, it suggests a range of
measures for better linking Afghan agricultural
producers to local, regional and international
markets.
II. Rationale for Market Linkage
Linking farmers to markets can embrace a
whole range of activities, from the very small
and localized to the very large. It means
development of long-‐term business
relationships rather than ad hoc sales support.
On a small scale, it implies identifying local
traders and markets with help from agricultural
extension workers. On a larger scale, it means
finding broad and sometimes distant markets
for a particular product and organizing the
farmers to supply those markets. Still more
complex agro-‐economic forms, found in
developed countries, involve contract farming
that requires considerable long-‐term
investment on part of buyers as well as
producers.iii While this paper suggests
measures for whole range of linkage activities,
it emphasizes, as an immediate and practical
step, small and medium-‐ scale linkage activities
that involve donors and government.
Linking agricultural producers with the market
has obvious advantages for farmers. In some
cases the market buyers are prepared to supply
inputs and credit, which is not easily available
otherwise to small farmers. In advanced linkage
systems, the buyers may provide
mechanization services. Large buyers
(companies) may also provide technological
and extension advice, thus complementing
government extension services. By linking the
producers with buyers in advance of
production, farmers potentially have a more
assured market and often an agreed price.
Afghan farmers, who do not have access to
effective extension service, market credits,
modern technologies, and competitive market
price, can certainly benefit from the
arrangement with potential buyers.
Market linkage systems are vulnerable to the
ever-‐present risk that arrangements will
collapse because of lack of trust. Yet, these
linkages usually offer the best and most secure
return for the farmers, protect them from
market fluctuations and thus make agriculture
more economically viable.
In case of Afghanistan, agricultural market
linkage is primarily important to ensure food
security and human livelihoods. To ensure and
enhance food security in the country, it is
necessary to have mechanisms for country-‐
Agriculture In Afghanistan
wide produce distribution in proportion to
demand. Afghanistan has varied climate
conditions, which allows growing certain crops
in specific areas. To distribute these area-‐
specific produces, there is a need to connect
agricultural outputs to domestic market. At the
same, Afghanistan is a major producer of some
of the finest fruits and nuts, which have good
international market demand. In recent years,
Afghanistan again has started exporting fruits
and nuts to international market. In 2009-‐10,
agricultural products accounted for about 80
percent of total exports from Afghanistan,
amounting to nearly $300 million.iv Considering
the current amount of fruits and dried fruits
produced and the potential for future growth,
at least that segment of agricultural export may
rise substantially in coming years. Such a
development requires better linking of
Afghanistan’s horticulture producers with
regional and international markets.
III. Current Initiatives
Agricultural development has been a top
priority during the past decade of post-‐war
reconstruction, in particular since 2008.
International donors and the Government of
Afghanistan have taken several initiatives to
revive the agriculture sector. This section
discusses some of the key initiatives that have
emphasized market linkage.
a) USAID Interventions in Afghan Agriculturev
In 2002, after a long hiatus, USAID resumed
activity in Afghan agricultural development,
with several interventions in cooperation with
MAIL. This section discusses some of the
current initiatives with a focus on connecting
the producers with markets.
Afghanistan Farm Service Alliance project
(March 2008-‐ June 2012) worked with Afghan
partners to develop Farm Service Centers
(FSCs), profit-‐oriented, privately-‐owned
enterprises, intended to provide the
agricultural inputs, services and market linkages
farmers need to transition to successful
commercial agriculture. Over four years, the
project has established 17 FSCs (in Kabul,
Ghazni, Hilmand, Kandahar, Laghman, Kunar,
Zabul, Nangarhar, Logar, Wardak, Parwan,
Kapisa, Takhar, Kunduz, Balkh, Uruzgan, and
Nimroz), benefiting more than 83,000 farmers.
Agro-‐enterprise Support Program,
implemented during 2006-‐2007, provided
technical assistance in improving farm
technology, post-‐harvesting handling, market
linkages, business skill development, and
facilitating access to credit and capital in seven
districts of Herat province.
The ongoing Commercial Horticulture and
Agriculture Marketing Program, launched in
Agriculture In Afghanistan
February 2010, seeks to help farmers shift from
relatively low-‐value annual crops, such as
wheat to high-‐value perennial crops, such as
almonds, grapes, and pomegranates. The
Program works with farmers to improve quality
and with traders to improve methods of
packing, cooling, shipping and marketing. The
program currently operates in 16 provinces in
eastern, south-‐eastern, southern and central
regions of Afghanistan.
The Rebuilding Agricultural Markets Program
(June 2003-‐September 2006) claims to have
added values to the agriculture sector worth
$1.7+ billion. Results included rehabilitation of
agriculture infrastructure (Over 530 structures
and over 820 km of canals) benefiting 490,000+
hectares of farmland, extension services for
approximately one million farmers, over
580 km of improved farm to market road which
reduced post-‐harvest losses, poultry production
and management for 28,000 village women,
improved post-‐harvest facilities (50+ cold
storage rooms installed, 140+ market centers
and one dried vegetable factory),
vaccination/treatment of over 28 million
livestock, 28,000+ micro loans disbursed and
linkages established between farmers,
processors and traders for domestic and
international market specifications. The
program claims to have re-‐established trade
relations with India, Dubai, Pakistan, Russia,
Ukraine and United Arab Emirates and
introduced Afghan dehydrated vegetables to
the European market.
Accelerating Sustainable Agriculture Project
(November 2006-‐September 2011) was
designed to revitalize and improve global
competitiveness of Afghanistan’s agriculture
sector. The main objective was to develop a
dynamic agriculture sector capable of adapting
to market forces by engaging in activities that
would lead to: a) increased competitiveness of
Afghan agriculture products in domestic and
international markets; and b) improved public
policies and institutions in support of more
competitive agriculture and agribusiness. To
achieve the objective, the project provided
strategic support for market linkages, improved
farm technology and practices, improved post-‐
harvest activities to meet market requirements,
developed and enhanced business
organizations to provide support services to
small-‐and medium-‐scale agribusinesses, and
assistance in both production and post-‐harvest
infrastructure construction. This project,
covering all 34 provinces, established a network
of private rural farm stores called AgDepots,
which sell high-‐quality farm inputs and
extension services to local farmers, a state-‐of-‐
the-‐art juice concentrate facility in suburbs of
Agriculture In Afghanistan
Kabul city, a cold storage facility in Mehtarlam
(Laghman), and a cashmere dehairing facility in
Hirat that is boosting cashmere exports, and a
modern packing plant in Surkhrod (Nangarhar)
that complies with international food safety
standards.vi
USAID has also worked for provision of agricultural
incentives and economic alternatives for the poppy-‐
prone provinces in the east as well as the northern
and western regions of Afghanistan. It has also
worked to ensure credits for farmers through
programs like Agricultural Development Fund and
Agricultural Credit Enhancement.
b) Comprehensive Agriculture and Rural
Development-‐Facilityvii
Comprehensive Agriculture and Rural
Development Facility (Card-‐F) is an ongoing
project supported by UKAID. The project
started in 2009 in collaboration with MAIL and
Ministry of Rural Rehabilitation and
Development (MRRD), and will be completed
by March 2013. CARD-‐F aims to strengthen licit
agricultural markets and to minimize adverse
incentives to revert to opium production by
delivering a critical mass of investment and
services in the agricultural sector, coupled with
enabling rural infrastructure and focused on
targeted provinces and rural districts. The
project seeks to achieve these goals by
developing Economic Development Packages
including value chains in production,
processing, distribution and market
development, and critical infrastructure for
their growth. One of the major goals of the
project is to enhance agribusiness
opportunities and potential in 10 project
districts in four provinces. CARD-‐F primarily
aims at improving rural infrastructure to
encourage engagement in local economy.
c) Rural Business Support Program
Rural Business Support Program (RBSP) is an
Asian Development Bank (ADB) funded ongoing
project launched in 2007, in collaboration with
MAIL as the implementing agency, Ministry of
Finance as the executive agency and Roots of
Peace as the consultant. The main objective of
the project is to sustain the increase in farm
income by enabling farmers, agri-‐processors,
and traders to engage in profitable production,
processing and marketing activities. According
to project briefs, the project has benefitted
10,000 stakeholders involved in agribusiness
development in 12 districts of three provinces.
The project has taken a focused approach by
establishing value-‐chains for specific agri-‐
products in different provinces. A potato value-‐
chain was developed in Bamyan with 11,000
small storage facilities; cooking oil value-‐chains
were developed in Balkh and Nangarhar with
an oil processing facility in Mazar-‐e-‐Sharif; and
Agriculture In Afghanistan
wool and carpet value-‐chains have been
developed in all the three provinces. The
project claims to have doubled the income of
beneficiary farmers by reducing loss in storage
and securing a better market and value.viiiix
d) Horticulture and Livestock Project
Horticulture and Livestock Project (HLP) is a
World Bank supported ongoing program,
implemented by MAIL and currently in five
provinces. The project primarily attempts to
enhance agricultural practice and productivity
through sharing knowledge on modern
agricultural technologies and practices. The
project has created several producer groups in
nine districts as targeted beneficiaries and
communities for coordinated action. One of the
ten intensive trainings provided to these groups
includes information on post-‐harvest activities
and marketing of agriculture produces. The
training includes information on market
opportunities according to different levels,
value chain approach – market requirements,
production according to market requirements
(quality, quantity & time), importance of
reducing post-‐harvest losses (appropriate
storage), transaction costs and the role of
traders, and short term and long term options
for improvement. Yet, the project neither could
spread much awareness among the farmers,
nor could build their trust in market forces.
IV. Gaps, Challenges & Opportunities
While multiple donors and the Afghan
government have taken significant initiatives
for agricultural development in Afghanistan,
much remains to be done. So far, marketing of
agricultural produce has received at best
secondary attention. Much of the current
initiatives have a narrow focus in terms of
linking agri-‐producers with market. Like any
other donor project, these initiatives have
limited yet different geographical coverage.
Yet, none of them has come out with a scalable
pilot project. Rather, the donors could have
worked together to develop a concrete model
first and then scaled up that at national level. In
most cases, these initiatives have established
some aiding infrastructure facilities, but not in
adequate quantity. In some cases, the donors
have partially sponsored export of agri-‐
products, which is not sustainable when the
support is removed. Though all the programs
engage domestic state agencies for
implementation, none of those agencies has
contributed to an enabling environment for
market linkage.
Moreover, Afghanistan’s agriculture sector is
faced with several challenges that are unique to
the country. Lack of adequate infrastructure,
ranging from irrigation, storage, roads,
electricity to processing and packaging, is still
Agriculture In Afghanistan
the major stumbling block in making
Afghanistan’s agriculture competitive in
regional and global markets. In addition, low
farmer awareness of market operations and
resulting farmers’ apathy to direct marketing
activities, have discouraged private market
traders. Afghanistan bears all the added export
costs of a land-‐locked country. For example, the
cost of exporting a container from Afghanistan
to Kuwait or Dubai is about four times the cost
of export from North America or Europe to
these places. There are now only 20 exporters
active in Afghanistan, and only two of them
have adequate packaging facility that meets
international standards.1 Finally, the legal
environment is not yet very favorable for
exports.
However, the potential is huge. With its diverse
agro-‐climatic conditions, Afghanistan’s
agriculture sector is capable of meeting most of
its food needs, given that foods produced in
one part of the country is delivered to the other
parts as per demand. On the other hand,
Afghanistan’s fresh and dried fruits, nuts and
vegetables have a splendid reputation in
regional and global markets.
Because chemical fertilizers and pesticides are
unavailable, Afghan produce has retained
organic quality. With a growing international
niche market for organic products, Afghanistan
can leverage the natural state of farming by
branding its output as organic. However, the
agri-‐products need certification of quality and
origin to fetch better market value.x
PROPOSED APPROACHES This concluding section suggests some
measures to connect agri-‐producers in
Afghanistan with local, regional and
international markets.
a) Farmers’ Awareness
Because of illiteracy and generally low
awareness, farmers are reluctant to deal with
market traders who may offer higher price for
better products. Rather the preferred practice
is to sell entire produce to a local trader who
buys all irrespective of quality, albeit at a much
lower price. Farmers need to understand the
market trader option, and trust needs to be
built between farmers and market traders.
While raising awareness is important, it is a
long-‐drawn process. In Afghan context, it would
be more useful to have direct community level
interventions, campaigns and roadshows.
Bringing together local producers and traders in
small scale trade shows can help both parties to
know each other and their approach. At the
Agriculture In Afghanistan
same time, existing extension services should
engage rural people in efforts to improve this
dynamic.
b) Synchronizing Agricultural Production to
Market Requirement
Much of the existing initiatives focus on
creating a market for what is being produced by
the local farmers. Yet, to establish such a link,
farmers must learn to produce in accordance
with market demand in terms of variety,
quality, quantity and time. By synchronizing
production to market requirement, the farmers
can realize a better return, and agriculture can
again become economically sustainable. A
strong agricultural sector helps the state by
reducing import dependency and ensuring food
security.
However, synchronizing production to demand
requires extensive market research and
communication with farmers. To produce
according to market demand, farmers need
timely information which is currently beyond
their reach. The state must take initiatives to
conduct such market research and to
communicate market demand to the farmers.
c) Infrastructure Facility
After three decades of war and destruction,
infrastructure is the major challenge faced by
agriculture sector in Afghanistan. The country
lacks most basic forms of infrastructure, let
alone modern forms. To meet market demand
and delivery requirements, the sector needs
extensive expansion of basic facilities including
irrigation, electricity, storage, roads and
transportation. Despite donor involvement in
these areas post-‐2001, the infrastructure
development outcomes have been sporadic
and limited.
The state and donors must work together to
establish basic infrastructure facilities according
to local needs. The most needed basic
infrastructure to promote agribusiness in
Afghanistan are storage, processing and
packaging facilities. Irrigation, as an input
service, is sought by farmers to increase arable
land area and thus, production. Similarly,
credits must be available to farmers to enable
them in dealing with the market. In the absence
of formal credit, farmers are often forced to sell
their products pre-‐harvest to local traders, at a
vulnerably low price.
d) Institutional/Organizational Facility
Linking producers to market traders is also
enhanced by organizing both sides of the
transaction. Farmers may face significant
problems in moving from ad hoc sales to
becoming more market-‐oriented. Rural
farmers, while often reluctant and incapable of
Agriculture In Afghanistan
participating as individuals in the market, are
empowered when operating in groups. Linking
organizations, like farmer organizations or
NGOs, are crucial to overcome these
challenges. Several farmer organizations have
been created over the years, but their presence
is limited to few project areas. There is a need
to strengthen these existing farmer
organizations and introduce them at national
level. Similarly, there is a need to promote and
consolidate private actors in agribusiness to
trade products on different market levels. And
state agencies engaged in the sector should
strengthen their research and extension
services.
Food Procurement Policy
Food procurement policy is another
determinant of producer-‐to-‐market linkage. As
yet, Afghanistan does not have a concrete food
procurement policy, leaving the farmers
vulnerable to local traders. To build farmers’
trust in market and encourage them to
participate in the market, the state must
provide a detailed policy protecting the
interests of all parties. The policy must set
minimum prices for specific products that cover
the cost of production as well as ensure
procurement of all produces.
Food Processing and Packaging
Proper processing and packaging is important
to deliver agri-‐products to far-‐flung domestic
markets and even more distant international
markets. At present, however, the facility for
packaging and processing in Afghanistan is very
limited. Development of this facility is
especially crucial to Afghanistan because so
much of its agricultural income is derived from
sales to the international market. This
development can be best achieved through
participation of the private sector. At the same
time, however, the state must create an
enabling legal and regulatory framework for
private participation.
e) Certification & Branding
Agri-‐products of Afghanistan, particularly fruits,
nuts and vegetables, have a very good
reputation in the international market,
especially for their organic quality. The
potential for top-‐end sale prices exists, even
after factoring the high cost of exportation. As
yet, however, Afghanistan lacks a responsive
certification system to guarantee the origin,
quality and organic nature of these products.
With the world moving towards certification of
agri-‐products, Afghanistan must do the same.
Not only will farmers increase profits, but the
state can achieve more revenue.
Agriculture In Afghanistan
Simultaneously, branding the products is
important to target domestic market. With
rising brand consciousness among consumers,
branding is prerequisite to compete with
imported products and establish a dedicated
consumer cartel.
f) Trade Treaties & Agreements
Another important aspect in targeting
international markets is participation in trade
agreements. Afghanistan has established trade
agreements with several countries (including
India, Iran, Pakistan and USA) and is trying to be
a member of World Trade Organization. Such
agreements and memberships will certainly
boost its access to regional and international
markets. The state must pursue this process.
Enabling Policy Environment
Producer-‐to-‐market linkage depends on a
vibrant private sector, still nascent in
Afghanistan. The Afghan government must
create an attractive environment for private
sector development in agribusiness. At the
same time, it must protect the interest of
agricultural producers. The state has an
important role to play in establishing producer-‐
to-‐market linkage though regulation,
monitoring and occasional need-‐based
intervention.
To connect Afghan agricultural producers to
domestic, regional and international markets,
Afghan government must work with donor
communities and private sector. Coordination,
communication and collaboration are crucial to
success here. The state and donors must seek
to establish a supply chain, rather than sporadic
interventions. The first step should be
developing a concrete model at a small scale,
which can be scaled up later at national level,
building on experiences. At the same time,
improving agribusiness activity needs vibrant
private sector participation. While the state
should strive to build an enabling legal and
policy environment for private sector
participation, the donors can build trust of
private sector in the emerging system and
directly invest in infrastructure. Future
interventions to connect Afghan agri-‐producers
with markets must build on local experiences,
considering future challenges, tailor made to
suit local context and must be sensitive to local
culture.
Producer-‐to-‐market linkage can take various
forms, including: a) farmer to domestic trader;
b) farmer to retailer; C) linkages through a
leading farmer; d) linkages through
cooperatives; e) farmer to agri-‐processor; f)
farmer to exporter; and g) contract farming.
Each model has its own specific requirements.xi
Agriculture In Afghanistan
However, considering that Afghanistan and its
agriculture sector are at an early stage of
development, this paper recommends simpler
forms of market linkage, with less risk. More
complex forms of linkage will develop over
time.
Agriculture In Afghanistan
END NOTES i United States Department of Agriculture, Foreign Agricultural Services. Retrieved from http://www.fas.usda.gov/country/afghanistan/us-afghanistan.asp, on 20 September 2012. ii CIA World Fact Book. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/af.html on 20 September 2012.
iii Andrew W Shepherd. 2007. Approaches to Linking Producers to Markets: A Review of Experiences to Date. Agriculture Management, Marketing and Finance Occasional Paper 13. Rome: Food and Agriculture Organization of the United Nations. iv 2011 Afghan Agricultural Economy Update, USDA Foreign Agricultural Service. Retrieved from http://static.globaltrade.net/files/pdf/20110728224517739.pdf on 20 September 2012. v Retrieved from
http://afghanistan.usaid.gov/en/programs/agriculture on 21 September 2012. vi USAID. 2011. Accelerating Sustainable Agriculture: ASAP Final Report. Afghanistan: United States Agency for International Development. vii Retrieved from http://www.cardf.gov.af/ on 21 September 2012. viii Interview with a senior official of RBSP, 15 September 2012, Kabul. ix ADB. 2011. Rural Business Support Project (RBSP) Afghanistan. Afghanistan: Asian Development Bank. x Interview with the director of a lead exporting company, 18 September 2012, Kabul. xi Andrew W Shepherd. 2007. Approaches to Linking Producers to Markets: A Review of Experiences to Date. Agriculture Management, Marketing and Finance Occasional Paper 13. Rome: Food and Agriculture Organization of the United Nations.