The Future of Plastic Industry in Afghanistanaisa.org.af/Content/Media/Documents/TheFutureofPlasticIndustryin... · PE Polyethylene PE-HD ... The current size of plastic industry

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Author: Ahmad Shah Momin

Research, Planning & Policy Directorate

Afghanistan Investment Support Agency

The Future of

Author: Ahmad Shah Momin

Research, Planning & Policy Directorate

Afghanistan Investment Support Agency (AISA)

uture of Plastic Industry in

Afghanistan

ndustry in

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Acknowledgement:

I would like to express my gratitude to all those who helped me to complete the research

report, which was not possible without their support and help.

First, I would like to thank the president of Afghanistan Investment Support Agency (AISA) Mr.

Wafiullah Iftikhar, for their continuous support to the Research, Policy and Planning department. I

should express my gratitude to all colleagues in the department, particularly to our director

Mr.Junaidullah Shahrani & Mr. Ahmad Hamid Populzi policy and planning expert who provided

insightful comments and guidance throughout this study.

I am thankful to the provincial team of (Herat, Nangarhar, Mazir-Sharif, Kandahar) of AISA,

which they helped me in conducting the field survey timely and accurately in the mentioned

provinces of the country.

I would also like to acknowledge with appreciation and express my gratitude to all my

colleagues for their valuable comments and inputs during the various stages of this study

especially to Miss. Chamindika Weerakoon who is currently a lecturer at Uva Wellassa

University Badulla Sri Lanka.

Finally, Mr. Mohammad Hannif Roostam, Mr.Ahmad Zaki Stanikzai, Mr.Nisar Ahmad

Hassan, Dr. Fazal Rabi & Sayed Reza Shah have assisted me throughout the research in conducting

surveys, onsite visits, data collections, desk research and data entry to whom I am grateful.

About Us:

Afghanistan Investment Support Agency began as an agency that provided licenses to

companies wishing to invest in Afghanistan. "AISA” has now evolved into a pro-active institution

on promoting and attracting investment to Afghanistan. AISA, having its main office in Kabul and

regional offices in Herat, Kandahar, Mazar-e-Sharif, Khost, Kunduz and Nangarhar provinces,

delivers a wide range of services to investors all over the country.

Our Vision is to become a world-class investment promotion and support agency by ensuring a

business-friendly environment for private sector development and thereby robust and sustainable

economic growth in Afghanistan.

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Executive Summary:

Since 2003, there have been huge private investments in Afghanistan – $1.8 billion foreign

and $3.8 billion domestic investments1. Most of these investments are allocated to the

construction, telecommunications, banking, and transportation sectors. Other industries, such as

the low-cost, labor intensive industries despite having huge potential for investors, have been

overlooked. Therefore this report thrived to examine the hypothesis that those industries which

received no attention from the government and investors – in this case the plastic industry – have

good potential to grow and can have high return for investors.

The objectives of this paper is to study the market structure and performance of plastic

industry, to look at the potential opportunities from an investor’s prospective, to identify the

constraints and factors of market failure, and to finally recommend measures and actions for the

development of this industry.

In order to serve the objectives of this paper, we relied in my methodology on using the

SCP (structure-conduct-performance) model to study the market structure and performance,

whilst we employed a more general approach for the identification of market opportunities and

constraints. Data and information was collected through onsite visits to businesses and factories,

interviews and discussions with business owners.

Using the SCP model our findings consist of:

� The imported data shows that Large number of investment opportunities exist in the

plastic industry, the investors can invest in the plastic industry in the following activates:

o Raw material

o Pipes

o Windows & doors

o Bottles

o Carpets

o Watercolour

o Shopping bags

o Roll plastic

o Toys

o Water Tanks

1 Afghanistan Investment support Agency, Data base

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o Home Products (Jugs, caps, glasses, plates, spoons, bin, bucket, Tub.. etc)

o Office equipments (Chairs, stationery, clear bags...etc) and

o Injections

� The size of domestic production in the plastic industry ranging from the 3,500-6,000 tons

and we imports plastic products ranging from 30,000 – 60,000 tons, so here is huge gap

between the domestic supply and domestic demand, it can be fulfil through the local

industries when the new investment take place, government support the local industries in

term of providing public goods and through adopting of industrial promotion policy.

Using an SCP model, we also found that in the domestic plastic industry, due to lack of

competition which is the result of non efficient market structure, firms performance and

conduct are not desirable; the quality of the finished goods is dire because majority 90-99% of

the producing firms did not have the quality certification (ISO & HCAAP), As a result, more

firms are fail to get contracts & Afghan market is dominated by foreign products. Moreover,

there is no tendency among the Afghan firms to acquire new technology and to improve their

industrial and marketing management.

To resolve all these problems arising from market deficiencies, the paper recommends that

government provide support to the infant plastic industry.

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List of abbreviations:

AISA Afghanistan Investment Support Agency

GDP Gross domestic product

NGOs Non governmental organization

OLED Organic light emitting diode

PA Polyamide

PE Polyethylene

PE-HD Polyethylene, high density

PE-LD polyethylene, low density

PET Polyethylene entrephthalate

PUR Polyurethane

PMMA polymethyl methacrylate

PP polypropylene

PRF plastics Recovery facilities

PS Polystyrene

PS-E polystyrene, expandable

PVC polyvinyl chloride

SAM Styrene-acrylonitrile plastic

EU European Union

SMEs Small and medium sized enterprises

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Table of Contents

Introduction: ..................................................................................................................................................6

Methodology: ................................................................................................................................................7

Chapter 1

Overview of Plastic Industry ......................................................................................................................9

Global Plastic Industry: ....................................................................................................................... 10

Afghanistan Plastic Industry................................................................................................................ 14

Chapter 2

Plastic industry ........................................................................................................................................... 26

What is plastic? ....................................................................................................................................... 26

Types of Plastics ...................................................................................................................................... 26

Major Plastics ......................................................................................................................................... 27

Characteristics of Plastics: ...................................................................................................................... 29

Plastics Uses: .......................................................................................................................................... 30

Chapter 3

Market Analysis ...................................................................................................................................... 34

Market structure ................................................................................................................................. 34

Firms conduct: .................................................................................................................................... 40

Firms performance.............................................................................................................................. 41

Chapter 4

Market Opportunities: ........................................................................................................................ 44

Chapter 5

Recommendations .................................................................................................................................. 50

Conclusion .............................................................................................................................................. 55

References .................................................................................................................................................. 57

Appendix A ................................................................................................................................................. 58

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Introduction:

Three decades of war not only destroyed the physical infrastructures in Afghanistan but

also eradicated the regulatory, social, political and economic frameworks. Therefore there is a

special need for economic development of the country for the economic development of the

country there is need for industrialization to enter to the industrialization process, so there is a

special need for establishing a low-cost, labor-intensive manufacturing sector which absorbs many

unemployed Afghans.

The development in such sectors as important as the number of unemployed persons is

higher with the immigrations of refugees from other countries. This has become one of the crucial

matters that Afghanistan Investment supporting agency is also stressing on industrial

development in it priority list. It is identified that the agriculture sector cannot absorb the existing

unemployment as well as the future unemployment in the country. During the last decades the

plastic industry is neglected, while today, plastics product have become an integral part of our

daily life. Just zoom and zoom out eyes around, we will notice that we are surrounded by plastics

in every way. To promote and encourage domestic and foreign investments in the country in

relation to labor-intensive, cost-effective manufacturing sector manufacturing of low-end

products, such as toilet paper, plastic ware, footwear, clothing, tires and tubes, soaps and

detergents, and blankets can offer a viable area of investment. The huge pool of unemployed

resources can be utilized for successful production and thereby to achieve the economic

development of the country.

There is no paper; reports regarding the market study of plastic industry in the context of

Afghanistan, this paper will touch all the market related issues which will include:

� The current size of plastic industry in Afghanistan.

� Imports of the plastic products from the world countries especially from Pakistan, Iran and

China.

� Current Issues faces by the plastic industry in the country.

� Total employment created by this sector in the country.

� Total investment & Investment opportunities in the plastic industry.

� Policy recommendations to promote the current plastic industry and

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Methodology:

The methodology employed in this paper is based on two distinct approaches. Chapter two

uses the SCP (Structure- conduct- performance) model to study the structure and performance of

the plastic industry in Afghanistan. The SCP model is usually used to analyze the relationship

among firms’ performance, firms’ conduct, and the market structure.

The model states that market structure determines the firms’ conduct, and thereby sets

the level of firms’ performance. On the other hand, firms’ performance is determined by their

conduct which in turn depends on market structure. However, in this paper, the focus was not on

the nature of relation between the market structure and firms’ conduct and performance. Instead,

I simply use the SCP model to study the basic market characteristic.

I use the stratified random sampling in this study. For the data collection, I relied on

primary data which is collected by the filed surveys in the five provinces which includes Heart,

Nangarhar, Mazar-e-Sharif, Kandahar, and Kabul of the country, where the different plastic items (

pipes, foot wares, water tanks, shopping bags, home appliance and stationery ) producing

companies are surveyed by these firms. The sample size for each province was as stated blew:

Kandahar province I will mention the sample size which I have taken

Provinces Sample size

Heart province 11

Mazar-e-Sharif 12

Kabul province 40

Nangarhar province 6

Kandahar 7

For the collection of secondary data I relied on the plastic industry reports of the different

countries. The collected data is analyzed through SPSS and Ms. Excel software’s.

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Chapter 1

Overview of the plastic Industry

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Overview of Plastic Industry:

This section first talk about the world plastic industry in terms of exports, imports total

production, total consumption, and rate of growth, and will find out the top dominant countries in

the global plastic market. In the second step, the paper will study the Afghanistan market for

Plastic item production. By using a supply and demand model, we can get insight into the potential

of this industry.

Overview global Plastic Industry:

(From 2009 to 2010 the global production of plastics increased by 15 million tons (6%) to

265 million tones, confirming the long term trends of plastics production growth of almost 5% per

year over the past 20 years. In 2010 Europe accounted for 57 million tons (21.5%) of the global

production and China overtook Europe as the biggest production region at 23.5%. The plastics

industry also plays an important role in enabling growth through innovation in a wide range of key

European industries such as automotive, electrical & electronic, building & construction and food

& beverage sectors. Plastic are the true resource champions by saving more resources than they

use. I.e. “more means less”. For example substituting plastics with alternative materials would

result in a 46% increase in energy consumption, a 46% increase in CO2 emissions and generate

100 million tones more of waste every year across the EU.

The success story for plastic is expected to continue as its unique properties lend itself to

more and more innovation applications. Whilst global demand per capita is expected to grow by

4% each year, consumption in Asia and new EU member states is significantly below that of

mature industrial regions where growth rates are expected to remain slightly above GDP. Thus

there is room for further growth. The European Union has traditionally been an important net

exporter of plastics and plastic products. This trade balance grew by over 100% between 2000 and

2010.Reaching a total trade surplus of 15.7billion Euros in 2010. Despite a shrinking workforce and

loosing the number one production position to China the European plastic industry continues to

be a key contributor to EU trade surplus.

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The biggest export markets for plastics raw material remain China (Incl, Hong Kong),

Turkey, Russia and Switzerland. EU exports (Extra EU) of converted products primarily went to the

following countries: Switzerland, Russia and USA.)2

Global Plastic Industry:

Stable growth thank to increasing demand, especially in Asia: Plastic is one of the more

stable growing industries in the world with 9% of growth averagely during the past 50 years, even

through the economic crisis in 2008 left huge impacts on many industries, global plastics industry

still maintained its growth at 3% in 2009 and 2010. The plastic industries in China and India

impressively grew more than 10% in 2010 and it was more than 20% in South East Asian countries.

This on-going and sable development of the industry is to thank to the global demand

being in the peak period. Global plastics consumption reached 500 million tons in 2010, growing at

5% per year (according to BASF). The average consumption per capita in 2010 was 40kg/year. The

North America and Western Europe regions have the highest regions have the highest average

consumption rate of more than 100kg/year. Demand for plastics in these areas did not drop in

2009-2010 and increased the strongest in Asia at 12-15%. Aside from geographical factors,

demand for plastics products also depends on the growth of end-application markets like food

industry (3.5%), electrical and electronic (2.9%), building and construction industry (5% in Asia),

and so on. Demand for plastics rise averagely 3.8% in food processing industry; 3.1% E&E, and 6-

8% in building and construction industry (US), which is a key factor that boosts global plastics

demand. Supply recovered significantly in 2010 and came quite near the level before the

economic crisis but still could not satisfy the fast growing demand.

Global plastic production picked up greatly in 2010 more than 300 million tons, 32% more

than in 2009. Plastic production in the world decreased in 2009 mainly was because of soaring

production cost and economic crisis. With various stimulus packages, especially in Thailand, global

supply returned to the growth level before the crisis but was still insufficient for global demand.

Together with the sudden hike in raw materials’ price, the price of plastic products also climbed by

25% in 2010.

2 Plastics- the facts 2011, an analysis of European plastics production, demand and recovery for 2010

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(The production in Asia (in particular China, India and South East Asian countries) increased

spontaneously ~15% in 2009 and 2010. This was the ground for the more

Asia last year. Asia currently supplies 37% of total plastic in the world with 15% belongs to China.

Europe and NAFTA follow closely with 24% and 23% respectively. The production in these 2

regions declined slightly in 2010 due to strong competition from Asia and the prolong effects of

the worldwide financial crisis and the debt crisis in Europe

(Global plastics consumption to reach 297.5 million tons by 2015, according to New Report by

(Global Industry Analysts, Inc GIA announces the release of a comprehensive global outlook on the

Plastics Industry. Recovering economic conditions and resurgence across most end

driving the demand for various types of plastics and plastic ma

prime growth driver for the plastics industry, with China and India expected to foster growth in

the medium to long-term period. The market is significantly influenced by the development of

new age plastics, emergence of new applications, and the focus on green chemistry due to

legislative and environmental requirements

Lading in raw material supply and dependent on energy source

exceeding supply was the common trend in 2010. The drop in production heightened the price of

3 Nauyen Thi Va Anh- Analyst, Sme securities, research & investment, May 20122 Report

4 San Jose, California (PRWEB), Global industry Analyst, Inc Report 2012

The production in Asia (in particular China, India and South East Asian countries) increased

and 2010. This was the ground for the more-than




the worldwide financial crisis and the debt crisis in Europe).3

Global plastics consumption to reach 297.5 million tons by 2015, according to New Report by

GIA announces the release of a comprehensive global outlook on the

Plastics Industry. Recovering economic conditions and resurgence across most end

driving the demand for various types of plastics and plastic materials. Asia-Pacific is emerging as a


term period. The market is significantly influenced by the development of

of new applications, and the focus on green chemistry due to

legislative and environmental requirements). 4

Lading in raw material supply and dependent on energy sources like oil and natural gas, d


Analyst, Sme securities, research & investment, May 20122 Report

San Jose, California (PRWEB), Global industry Analyst, Inc Report 2012

The production in Asia (in particular China, India and South East Asian countries) increased

than-2-digit growth in




Global plastics consumption to reach 297.5 million tons by 2015, according to New Report by

GIA announces the release of a comprehensive global outlook on the

Plastics Industry. Recovering economic conditions and resurgence across most end-use markets is

Pacific is emerging as a


term period. The market is significantly influenced by the development of

of new applications, and the focus on green chemistry due to

s like oil and natural gas, demand


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plastic resins, the main cause was the hike in prices of oil and natural gas which was main inputs to

produce plastic resins.)

(China and Middle East are taking over the leading position from the US and Western

Europe in both demand and supply for plastic resins. In 2009, the world consumed 280 million

tons of plastic resins, up 26% since 2006.Among which, Asia accounted for 42% of total

consumption, followed by Europe and North America with 23% and 21% respectively. Majority of

demand is for PE and PP resins (29% and 19%). PET (8% of total demand) is the best growing group

with 7% per year. Supply for PET resin has gone up 25% since 2006 but still could not meet the

demand for this resin. All the present, China, Middle East, and Russia are the biggest three in

producing and exporting plastic resins in the world. China has the fastest transforming with more

than 21 million tons of resins in 2010, 23% more than the same period of 2009. 28% of China

resins production is of PVC. Meanwhile, Middle East is the main producer for PE resins. PE supply

from this region is expected to perk up from 4.3million tons to 11.7 million tons in 2013, exceeding

Asia and Europe (ICIS). AS such, the price of PE and PP depend greatly on the macroeconomic of

these regions. The global plastic industry on end-application markets like food, building and

construction, electronic, and automotive, the industry is fragmented into many small segments

based on end-products like packaging segment, building and contractions, automotive, E&E, etc.

the development of these segments is closely linked to the demand for plastics products and

growth in these markets.

Automotive (7%): the segment is growing averagely 5%/year in Asian market and might be

affected negatively by the earthquake and tsunami in Japan as Japan is one of the largest suppliers

of automotive parts.

Electrical and Electronic Equipment ( 5.6%): With rising demand for electrical equipments like PC,

TV, Printers, etc in India, South Asia, and China, this segment has the potential to go up 5%/year

averagely.

Recycled plastic is increasingly encouraged by many Governments and recycled products are still

under supply: Compared with other products, recycle plastics is new segment that is more and

more popular, especially in developed countries. Recycled plastics products are environmental

friendly and can preserve energy. Production of recycled plastics has been rising averagely 11% for

the past 10 years. This segment’s expansion is one of the most impressive ones in the global

plastic industry. Up to 2009, the proportion of recycled plastic in European countries like France

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and Germany is around 15%-30% and highest in the UK with 40%. Recycled plastics supply has

improved substantially but is still insufficient.

Packaging segment (40%): is the largest segment with more than 40% of total produced products.

The value of this segment is said to reach 180 billion USD in 2011. The stable growth of 4%/year is

thank to end-products markets like food, beverage, and pharmaceutical, etc which were not

affected strongly by difficulties in economic environment.

Building and Construction (20%): During 2009-2010, this segment was strongly impacted by the

US and European reduction in public spending on building and construction industry. These

regions are unfortunately the largest markets for the segment’s products. However, the plastic

building and construction segment is forecasted to rebound in 2011-2012 as global demand for

plastic pipes goes up to 4.5%/Year reaching 8.2 billion meters. The highest growth is from

developing countries like China (30% of global demand), and Japan to rebuild the country after the

earthquake. Western Europe and North America even though might slow down a little but are still

the regions that consume the most plastic pipes, it is estimated that the value of plastic pipes

(main product) will jump 6.6% to 38.6 billion USD from 2010-2015 in the US.

Products and prospects: Most recycled plastic products are from the packaging segment, for

example PET bottles, food packaging, etc. in recent year, the number of recycled PET bottles

doubled, accounted for 30% of total PET bottles produced globally. This is also the most

impressive sub-segment in the packaging segment. Demand for green plastics in developing

countries is getting higher and it also leads to upward demand for PET and HD-PE resins. PET

resins consumption exceeded 500,000 tons in 2010 and will probably overcome the 600,000 tons

mark in the coming years. The future prospect for recycled PET is very optimistic. According to the

US environmental protection Agency, recycled bottles only account for 2% of green plastics in the

US. The country is aiming for a new target of 25% which will guarantee rising PET production and

market share.

Technology: the most important machine to produce PET is a stretch blow molding machine. The

most basic type is single stage blow molding machine which was first used in 1975. The single

stage machine can create bottles in any shape and size. An injection molding machine is used to

shape mold before putting them in the blow molding machine. The more updated blow machine

has 2 stages (Two Stage Blow Molding machine) including both injection and extrusion blow

molding. It is more flexible than the one stage one and can produce 4000-6000 bottles/hour,

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depending on the models. The most modern machine currently is called the integrated two sage

blow molding machine which is suitable for producing small chunks of bottle with smooth surface.

The more modern the technology is; the better the production capacity is).5

Afghanistan Plastic Industry:

According to our field survey which is done in the five provinces of Afghanistan Nangarhar,

Balkh, Herat and Kandahar along Kabul which are having majority of the plastic producing units,

which produce the following finished plastic products:

� Plastic footwear’s

� Plastic pipes

� Plastic water tanks

� Plastic shopping bags

� Home products (Jugs, caps, glasses, plates, spoons, bin, bucket, Tub.. etc)

� Office equipments ( bags, tray & boxes)

Overall more than 100 companies are operating in the plastic industry to produce mentioned

items. The total production of these firms ranging from 3,500 tons to 6000 tons if the public goods

especially efficient electricity along with the protection industrial policy of infant industry of is

undertaken the production capacity will increase to 20,000 tons, In accordance with the Central

Statistics organization data from 2006 to 2012, a continual growth can be understood in relation

to the plastic products related industry. The figure 1 in the next page clearly depicts that the

positively growing trend in production throughout six years period stressing a higher demand for

plastic products in the country. Apart from that this demand is being absorbed by higher imports

from countries such as Iran, Pakistan, China, Turkmenistan, Uzbekistan, Turkey, Belgium and many

other countries according to the statistics of Central statistics organization of Afghanistan.

5 Nauyen Thi Va Anh- Analyst, Sme securities, research & investment, May 20122 Report

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Figure-1- Plastic related goods production from 2006

2011/2012

2009/2010

2007/2008

Pe

rio

d

2011/2012

2009/2010

2007/2008

Pe

rio

d

2011/2012

2009/2010

2007/2008

Pe

rio

d

Plastic related goods production from 2006-2012

0 20 40 60 80

2011/2012

2009/2010

2007/2008

Quantity produced (Tons)

Plastic bags production

80 85 90 95 100 105 110

2011/2012

2009/2010

2007/2008

Quantity produced ('000 Kg)

Plastic dishes production

0 500 1000 1500

2011/2012

2009/2010

2007/2008

Quantity produced ('000 Kg)

Other plastic goods production

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Source: Central Statistics Organization

Imports of Plastic Raw materials & Products:

Chart 1:

The bar chart shows the total dollar

Afghanistan from world market in the year 2009.

Source: Custom Houses, Afghanistan

Total imports of Plastic products & raw materials had reached to 49 million USD in the year

2009, the 2009 data shows that Afghanistan’s

2011/2012

2009/2010

2007/2008

Pe

rio

d

0.00 5.00 10.00

Pakistan

Iran

China

United Arab Emirates

Turkey

South Korea

Saudi Arabia

India

others

Imports of plastic products & raw material in 2009

Source: Central Statistics Organization

Imports of Plastic Raw materials & Products:

The bar chart shows the total dollar value of plastic products & raw materials imported




, the 2009 data shows that Afghanistan’s major import partner is Pakistan which contributes

0 10 20 30

2011/2012

2009/2010

2007/2008

Quantity produced (Millions pairs)

Shoes &Plastic sandal Production

10.00 15.00 20.00

Imports of plastic products & raw material in 2009

Values in Millions USD

ducts & raw materials imported by


import partner is Pakistan which contributes

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nearly 31%of the total plastic products imported to Afghanistan. Mainly, the imported products

include pipes, shopping bags, plastic floors, plastic string, labels, and office tools, plastic home

Products such as plates, jugs, watercolor, water tanks, empty bottles and raw materials. It is

important to mention that major plastic products which are imported from Pakistan include

shopping bags with a value nearly 3.2 Million USD, Plastic carpets with a total custom value of 2.3

Million Us Dollars, Pipes with a value of 1.1 Million USD and Home products worth of 1.2 Million

USD.

The second major import partner of plastic products & raw materials is Iran, and

contributes around 27.2% of the total plastic products imports of the country. The imported

products are as same as imported from Pakistan, while the major share of those plastic products

include plastic home Products worth of almost 7 Million USD, Shopping bags and roll plastic nearly

4.5 Million USD & raw materials worth of 2 Million USD. The third major import partner of plastic

products & raw materials is China and accounts for around 15.5% of total plastic products imports

along with raw materials. These imported products are pipes, shopping bags, home Products, raw

materials, plastic empty bottles & feeders. The major imported plastic products of China are Home

Products 1.1 Million USD, shopping bags 1.2 million USD & raw materials worth of 1.5 million USD.

Apart from these three major players, Afghanistan imports plastic products and raw materials

from the following countries also:

United Arab Emirates: 7% - The main items are home appliance

Turkey: 6.5% - The main items are home Products & pipes

South Korea: 4%

Saudi Arabia: 2%- The main item imported is raw material

India: 1.5% -The main item import is Plastic bangles

A part from the above mentioned countries Afghanistan had imported plastic products &

raw materials from other different countries in 2009, which consist of 7% of total imported plastic

items, other countries consist of namely Malaysia imported items was plastic scrip which are used

by the industrialist as a raw materials for the production of plastic products, Thailand from which

plastic is imported for packing purpose, United State main imported plastic product was plastic

made communication instruments, from Germany imported item was plastic which was used for

advertising & finally from Indonesia plastic imported item was plastic which was used for the

packing purpose.

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Chart 2:

The bar chart shows the total dollar value of plastic products & raw materials imports to




2010 and further it is identified that the major import partner is Iran which contributes nearly

30.5% of the total plastic products imported to Afghanistan. Mainly, the imported products

include raw materials, Shopping bags, pipes, bottles, water tanks, plastic home Products such as

plates, jugs & water color. It is important to mention that major plastic products which are

imported from Iran include raw materials with a value nearly 2.4 million USD, Home Products a

total custom value of 2.3 million Us Dollars, shopping bags with a value of 2 Million USD, pipes 0.7

million USD, and Water tanks 0.6 million USD.

The second major import partner of plastic products & raw materials is Pakistan, and


products are includes shopping bags, pipes, bottles, shopping carpets, water tanks, and home

appliance while the major share of those plastic products include shopping bags worth of almost

0 5 10 15 20 25

Iran

Pakistan

China

united Arab Emirates

Turkey

India

Taiwan

Saudi Arabia

South Korea

Others

Imports of Plastic products and Raw materials in 2010


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2.6 Million USD, plastic carpets 2.6 millions USD, plastic bottles a worth of nearly 2 million USD,

pipes 1.4 million dollars and home Products merely 1 Million USD.

The third major import partner of plastic products & raw materials is China and accounts

for around 17.8% of total plastic products imports along with raw materials. These imported

products are pipes, shopping bags, home Products, raw materials, plastic empty bottles & feeders

and others such as office Products, strings, toys, shaving machine, plastic stumps, hair clips, cloth

hangers, gloves & wall portraits. The major imported plastic products of China are shopping bags

worth of 2.5 Million USD, others worth of 2.2 million USD, home Products having total value of 1.5

million USD & bottles worth of 0.5 million USD. Apart from these three major players, Afghanistan

imports plastic products and raw materials from the following countries also.

United Arab Emirates: 8% - the main imported items are raw materials, home Products, roll and

shopping bags.

Turkey: 7% - The main items are home appliance, pipes & EPE foam.

India: 2.5% - The main items are bangles and raw materials

Taiwan: 2.3% - the main imported item is raw material

Saudi Arabia: 1.6%- The main imported item is raw material

South Korea: 1.6% - The main imported item is raw material


raw materials from other different countries in 2010, which consist of 6.2% of total imported

plastic items which is a huge amount, other countries consist of Belgium main imported plastic

products was plastic carpet, Indonesia main imported products was raw materials& from Italy

main imported plastic products was home Products.

Chart 3:

The bar chart shows the total dollar value of plastic products & raw materials imports to


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Total imports of Plastic products & raw materials had reached to 71.2 million USD in the

year 2011 and further it is identified that the major import partner is Iran which contributes nearly

31.7% of the total plastic products imported to Afghanistan. Mainly, the imported products

include raw materials, Shopping bags & roll plastic, pipes, bottles, water tanks, and plastic home

Products such as plates, jugs, disposable plates & glasses & water color. It is important to mention

that major plastic products which are imported from Iran include plastic empty bottles having a

custom value of 9.9 million USD raw materials with a value nearly 6.5 million USD, pipes 2.1

million USD, shopping bags roll plastic with a value of 1.7 Million USD and Home Products a total

custom value of 1.5 million Us Dollars.

The second major import partner of plastic products & raw materials is Pakistan, and


products are includes shopping bags, pipes, bottles, shopping carpets, water tanks, home

appliance & stationery while the major share of those plastic products include plastic bottles a

worth of nearly 2 million USD, shopping bags worth of almost 2.6 Million USD, plastic pipes 2.6

millions USD, plastic carpets worth of 1.8 million USD, raw materials worth of nearly 1.1 million

USD, home Products worth of 1.3 Million USD and others only 0.7 million USD.

The third major import partner of plastic products & raw materials is China and accounts for

around 14.6% of total plastic products imports along with raw materials. These imported products

are pipes, shopping bags, home Products, raw materials, stationary, water tanks, strings, toys,

0 5 10 15 20 25

Iran

Pakistan

China


Kazakhstan

India

South Korea

Egypet

Others

Imports of Plastic products & raw matierls in 2011


21 | P a g e

shaving machine, plastic stumps, hair clips, cloth hangers, carton hanger’s gloves & wall portraits.

The major imported plastic products of China are raw materials worth of 3.6 Million USD, Home

Products worth of 3.5 million USD, Shopping bags worth of 2.3 million USD, Pipes worth of 1.7

million USD & stationery worth of 200 thousand USD. Apart from these three major players,

Afghanistan imports plastic products and raw materials from the following countries also.

United Arab Emirates: 10.3%- main imported item is raw materials

Kazakhstan: 3.5% - main imported item is bottles

India: 1.5%- main imported items is Bangles

South Korea: 1.4% main imported item is EPE foam

Egypt: 0.8 % - main imported items are bottles and shaving machines



plastic items, which consist of Indonesia main imported plastic products raw materials, Germany

main imported products includes pipes and water tanks, Malaysia main imported plastic items is

home Products, Italy imported plastic items is home Products, & from Belgium Afghanistan had

imported plastic carpet in 2011.

Chart 4: The bar chart shows the total dollar value of plastic products imports & raw materials to


Source: Custom houses, Afghanistan

0 5 10 15 20

Pakistan

Iran

China

Turkey


Kazakhstan

US

South Korea

Others

Imports of plastic products & raw materils in 2012


22 | P a g e

Total imports of Plastic products & raw materials had reached to 49.9 million USD in the

year 2012, and further it is identified that the major import partner is Pakistan which contributes

nearly 36.1%of the total plastic products & raw materials imported to Afghanistan.

Mainly, the imported products include pipes, shopping bags, and plastic floors, plastic string,

labels, and office tools, plastic home Products such as plates, jugs, water color, water tanks, empty

bottles and raw materials. It is important to mention that major plastic products which are

imported from Pakistan include Pipes with a value nearly 8.6 Million USD, Plastic carpets with a

total custom value of 1 Million Us Dollars, shopping bags & roll plastic which are used for

construction purpose with a values 1.6 million USD, Home appliance with a total value of 1.8

millions, raw materials having a total custom value of 1.4 million USD ,empty bottles total custom

value of 0.5 million USD and others plastic imported items nearly having a total custom value of 3

million USD.

The second major import partner of plastic products & raw materials is Iran, and


products are Pipes, shopping, roll and packing bags, raw materials, empty bottles, home appliance,

Gloves, shoes (mostly people during the snow) and water tanks, while the major share of those

plastic products include raw materials worth of 6.9 million USD, bags worth of 1.1 million USD,

pipes worth of 1 million USD, Home Appliance worth of 0.4 million USD and empty bottles worth

of 0.4 million USD.

The third major import partner of plastic products & raw materials is China and accounts

for around 16.1% of total plastic products imports along with raw materials. These imported

products are pipes, shopping bags, home Products, raw materials, toys, stationary & feeders. The

major imported plastic products of China are raw materials worth of 3.1 million USD, Home

Products 1.3 million USD, bags worth of 1.2 million USD, pipes worth of 0.5 million USD, stationery

0.5 million and others includes toys, feeders, plastic shaving machines, bangles and those items

which have just invoice number worth of 2 million USD. Apart from these three major players,

Afghanistan also imports plastic products and raw materials from the following countries:

Turkey: 9.3% - The main imported items are EPE foams and Gloves.

United Arab Emirates: 6.5% - The main imported items are EPE foam and stationery

Kazakhstan: 2.8% - The main imported items are bottles

United state of America: 1.5%- The main item imported is pipes

23 | P a g e

South Korea: 1.5% -The main item import is EPE foam



plastic items, other countries consist of Belgium main imported plastic products was plastic

carpet, India main plastic imported item is raw materials, labels & bangles bottles, Germany

imported plastic items is Pipes & EPE foams, Uzbekistan main imported item is raw materials,

Thailand main imported item is EPE foam, Canada main imported item is pipes, and Italy imported

plastic cotton and show polishing brush to Afghanistan in 2012.

Chart 5:

The bar chart shows the trends of imported plastic products & raw materials to Afghanistan from

world market from 2009 Till 2012.

Source: Custom houses of Afghanistan

It is clear from the chart 5, the trend of imports of plastic products and raw materials has going

upward in the last three years while in 2012 the imports has been decreased.

2009 2010 2011 2012

48.662.9

86.7

49.8

1 2 3 4

Imports of plastic products and raw materials in the last

four years

Series1 Series2

Values in Millions

USD

24 | P a g e

Five year projection of Afghan Plastic industry:

Despite the fact that all micro- and macro-level data are not available to allow us produce

more accurate forecasts, the paper attempts to provide a medium-term projection of the size of

output and employment out. Based on an extrapolation method and using simplified assumptions,

we forecast that total plastic products production will reach 20,000 tons 2018 and will create

employment opportunities around 5000 people of the country. These projections are largely

based on the assumption that major market constraints are eliminated by the government over

the next few years.

25 | P a g e

Chapter 2

Overview of Plastic

26 | P a g e

Plastic industry:

This section will talk about the plastic in term of its kinds, characteristics, usage, lifecycle, raw

materials, major plastic and methods use for productions.

What is plastic?

Plastics represent one of the most important raw materials that are extremely common in wide

range of industrial productions as well as our daily life usages; it is a common saying that Plastic

industry is the mother of all industry.

Worldwide Plastics are used in a variety of consumer products and industries. One of the most

common uses is preserving food; polyvinylidene chloride, polyethylene, polypropylene are used to

wrap foods (mead, vegetables), drinks (milk, juice) and products such as butter respectively. They

are necessary to prevent food from becoming spoiled, to protect from illness and to preserve the

nutrient content of food. The medical industry uses plastics in a range of equipment like tubing,

intravenous bags, gloves, masks, syringes, lab ware and stethos copes. Plastics are also used in

home insulation, PVC pipes for plumbing, transportation, clothing (spandex, polyester and nylon),

and electronics such as mobile phones.

Plastic industry encompasses areas of activities including manufacturing polymer materials

(natural and synthetic compounds), building construction, packaging or transportation. Plastic

industry covers a large area ranging from aerospace to electronics industry and that is why plastic

industry has a huge potentially over the other associated industries. The plastic industry is a

vivacious and global industry that covers sectors from household commodity to polymer. Plastic

industry also includes fields like biochemical’s, petrochemicals, and ceramics.

In the early phases, plastic industry was built up with natural and synthetic materials of different

forms, attributes and appearances. Over time, plastic industry started developing on the basis of

organic compounds (a material that contains carbon and hydrogen and other elements), rather

than natural and other synthetic materials.

Types of Plastics:

There are different types of plastics with a variety of grades to help deliver specific properties for

each application.

The “big five” plastic types that stand out in terms of their market share are:

27 | P a g e

� Polyethylene – Including low density (PE-LD), linear low density (PE-LLD) and high density

(PE-HD)

� Polypropylene(PP)

� Polyvinyl chloride (PVC)

� Polystyrene (Solid PS and expandable PS)

� Polyethylene terephthalate (PET)

Major Plastics

PETE

Polyethylene Terephthalate (PET or PETE) is clear, tough and has good gas and moisture

barrier properties making it ideal for carbonated beverage applications and other food containers.

The fact that it has high use temperature allows it to be used in applications such as heatable pre-

prepared food trays. Its heat resistance and microwave transparency make it an ideal heatable

film. It also finds applications in such diverse end uses as fibers for clothing and carpets, bottles,

food containers, strapping, and engineering plastics for precision-molded parts.

HDPE

High Density Polyethylene (HDPE) is used for many packaging applications because it

provides excellent moisture barrier properties and chemical resistance. However, HDPE, like all

types of polyethylene, is limited to those food packaging applications that do not require an

oxygen or CO2 barrier. In film form, HDPE is used in snack food packages and cereal box liners; in

blow-molded bottle form, for milk and non-carbonated beverage bottles; and in injection-molded

tub form, for packaging margarine, whipped toppings and deli foods. Because HDPE has good

chemical resistance, it is used for packaging many household as well as industrial chemicals such

as detergents, bleach and acids. General uses of HDPE include injection-molded beverage cases,

bread trays as well as films for grocery sacks and bottles for beverages and household chemicals.

PVC

Polyvinyl Chloride (PVC) has excellent transparency, chemical resistance, long term stability,

good weather ability and stable electrical properties. Vinyl products can be broadly divided into

rigid and flexible materials. Rigid applications are concentrated in construction markets, which

include pipe and fittings, siding, rigid flooring and windows. PVC's success in pipe and fittings can

be attributed to its resistance to most chemicals, imperviousness to attack by bacteria or micro-

28 | P a g e

organisms, corrosion resistance and strength. Flexible vinyl is used in wire and cable sheathing,

insulation, film and sheet, flexible floor coverings, synthetic leather products, coatings, blood bags,

and medical tubing.

LDPE

Low Density Polyethylene (LDPE) is predominantly used in film applications due to its

toughness, flexibility and transparency. LDPE has a low melting point making it popular for use in

applications where heat sealing is necessary. Typically, LDPE is used to manufacture flexible films

such as those used for dry cleaned garment bags and produce bags. LDPE is also used to

manufacture some flexible lids and bottles, and it is widely used in wire and cable applications for

its stable electrical properties and processing characteristics.

PP

Polypropylene (PP) has excellent chemical resistance and is commonly used in packaging. It

has a high melting point, making it ideal for hot fill liquids. Polypropylene is found in everything

from flexible and rigid packaging to fibers for fabrics and carpets and large molded parts for

automotive and consumer products. Like other plastics, polypropylene has excellent resistance to

water and to salt and acid solutions that are destructive to metals. Typical applications include

ketchup bottles, yogurt containers, medicine bottles, pancake syrup bottles and automobile

battery casings.

PS

Polystyrene (PS) is a versatile plastic that can be rigid or foamed. General purpose

polystyrene is clear, hard and brittle. Its clarity allows it to be used when transparency is

important, as in medical and food packaging, in laboratory ware, and in certain electronic uses.

Expandable Polystyrene (EPS) is commonly extruded into sheet for thermoforming into trays for

meats, fish and cheeses and into containers such as egg crates. EPS is also directly formed into

cups and tubs for dry foods such as dehydrated soups. Both foamed sheet and molded tubs are

used extensively in take-out restaurants for their lightweight, stiffness and excellent thermal

insulation.

Other Plastics

There are many other plastics beyond the most common ones described above, for example

nylon, ABS copolymers, polyurethanes, and polymethyl methacrylate.

29 | P a g e

Characteristics of Plastics:

Plastics are divided into two distinct groups: thermoplastics and Thermosets. The majority

of plastics are thermoplastic, meaning that once the plastic is formed it can be heated and

reformed repeatedly. Celluloid is a thermoplastic. This property allows for easy processing and

facilitates recycling. The other group, the Thermosets, cannot be remelted. Once these plastics are

formed, reheating will cause the material to decompose rather than melt. Bakelite, poly phenol

formaldehyde, is a thermoset. Each plastic has very distinct characteristics, but most plastics have

the following general attributes.

� Plastics can be very resistant to chemicals. Consider all the cleaning fluids in your home

that are packaged in plastic. The warning labels describing what happens when the

chemical comes into contact with skin or eyes or is ingested, emphasizes the chemical

resistance of these materials. While solvents easily dissolve some plastics, other plastics

provide safe, non-breakable packages for aggressive solvents.

� Plastics can be both thermal and electrical insulators. A walk through your house will

reinforce this concept. Consider all the electrical Products, cords, outlets and wiring that

are made or covered with plastics. Thermal resistance is evident in the kitchen with plastic

pot and pan handles, coffee pot handles, the foam core of refrigerators and freezers,

insulated cups, coolers and microwave cookware. The thermal underwear that many skiers

wear is made of polypropylene and the fiberfill in many winter jackets is acrylic or

polyester.

� Generally, plastics are very light in weight with varying degrees of strength. Consider the

range of applications, from toys to the frame structure of space stations, or from delicate

nylon fiber in pantyhose to Kevlar®, which is used in bulletproof vests. Some polymers float

in water while others sink. But, compared to the density of stone, concrete, steel, copper,

or aluminum, all plastics are lightweight materials.

� Plastics can be processed in various ways to produce thin fibers or very intricate

parts. Plastics can be molded into bottles or components of cars, such as dashboards and

fenders. Some plastics stretch and are very flexible. Other plastics, such as polyethylene,

polystyrene (Styrofoam™) and polyurethane, can be foamed. Plastics can be molded into

drums or be mixed with solvents to become adhesives or paints. Elastomers and some

plastics stretch and are very flexible.

30 | P a g e

� Polymers are materials with a seemingly limitless range of characteristics and

colors. Polymers have many inherent properties that can be further enhanced by a wide

range of additives to broaden their uses and applications. Polymers can be made to mimic

cotton, silk, and wool fibers; porcelain and marble; and aluminum and zinc. Polymers can

also make possible products that do not readily come from the natural world, such as clear

sheets, foamed insulation board, and flexible films. Plastics may be molded or formed to

produce many kinds of products with application in many major markets.

� Polymers are usually made of petroleum, but not always. Many polymers are made of

repeat units derived from natural gas or coal or crude oil. But building block repeat units

can sometimes be made from renewable materials such as polylactic acid from corn or

cellulosic’s from cotton linters. Some plastics have always been made from renewable

materials such as cellulose acetate used for screwdriver handles and gift ribbon. When the

building blocks can be made more economically from renewable materials than from fossil

fuels, either old plastics find new raw materials or new plastics are introduced

Plastics Uses:

whether you are aware of it or not, plastics play an important part in your life. Plastics'

versatility allows them to be used in everything from car parts to doll parts, from soft drink bottles

to the refrigerators they are stored in. From the car you drive to work in to the television you

watch at home, plastics help make your life easier and better. So how is it that plastic have

become so widely used? How did plastics become the material of choice for so many varied

applications? The simple answer is that plastics can provide the things consumers want and need

at economical costs. Plastics have the unique capability to be manufactured to meet very specific

functional needs for consumers. So maybe there's another question that's relevant: What do I

want? Regardless of how you answer this question, plastics can probably satisfy your needs. If a

product is made of plastic, there's a reason. And chances are the reason has everything to do with

helping you, the consumer, get what you want: Health. Safety. Performance and Value.

Shopping:

Just consider the changes we've seen in the grocery store in recent years: plastic wrap helps

keep meat fresh while protecting it from the poking and prodding fingers of your fellow shoppers;

plastic bottles mean you can actually lift an economy-size bottle of juice and should you

31 | P a g e

accidentally drop that bottle, it is shatter-resistant. In each case, plastics help make your life

easier, healthier and safer.

Packaging:

Modern packaging—such as heat-sealed plastic pouches and wraps—helps keep food fresh

and free of contamination. That means the resources that went into producing that food aren't

wasted. It's the same thing once you get the food home: plastic wraps and resalable containers

keep your leftovers protected—much to the chagrin of kids everywhere. In fact, packaging experts

have estimated that each pound of plastic packaging can reduce food waste by up to 1.7 pounds.

Plastics can also help you bring home more products with less packaging. For example, just 2

pounds of plastic can deliver 1,300 ounces—roughly 10 gallons—of a beverage such as juice, soda

or water. You'd need 3 pounds of aluminum to bring home the same amount of product, 8 pounds

of steel or over 40 pounds of glass. Not only do plastic bags require less total energy to produce

than paper bags, they conserve fuel in shipping. It takes seven trucks to carry the same number of

paper bags as fits in one truckload of plastic bags. Plastics make packaging more efficient, which

ultimately conserves resources

Light weighting:

Plastics engineers are always working to do even more with less material. Since 1977, the 2-

liter plastic soft drink bottle has gone from weighing 68 grams to just 47 grams today,

representing a 31 percent reduction per bottle. That saved more than 180 million pounds of

packaging in 2006 for just 2-liter soft drink bottles. The 1-gallon plastic milk jug has undergone

a similar reduction, weighing 30 percent less than what it did 20 years ago. Doing more with less

helps conserve resources in another way. It helps save energy. In fact, plastics can play a

significant role in energy conservation. Just look at the decision you're asked to make at the

grocery store checkout: "Paper or plastic?" Plastic bag manufacture generates less greenhouse gas

and uses less fresh water than does paper bag manufacture. Not only do plastic bags require less

total production energy to produce than paper bags, they conserve fuel in shipping. It takes seven

trucks to carry the same number of paper bags as fits in one truckload of plastic bags.

Plastics in Home Construction:

Plastics also help to conserve energy in your home. Vinyl siding and windows help cut

energy consumption and lower heating and cooling bills. Furthermore, the U.S. Department of

32 | P a g e

Energy estimates that use of plastic foam insulation in homes and buildings each year could save

over 60 million barrels of oil over other kinds of insulation.

The same principles apply in Products such as refrigerators and air conditioners. Plastic parts and

insulation have helped to improve their energy efficiency by 30 to 50 percent since the early

1970s. Again, this energy savings helps reduces your heating and cooling bills. And Products run

more quietly than earlier designs that used other materials.

33 | P a g e

Chapter 3

Market analysis

34 | P a g e

Market Analysis:

To study the characteristics of the Afghan plastic industry, this section will employ the SCP

(Structure-Conduct-Performance) model. SCP model is used to analyze the relation among firms’

performance, firms’ conduct, and market structure. The SCP indicates that market structure

determines the firms’ conduct, and thereby sets the performance of firms. In other words, firms’

performance is determined by their conduct, which in its turn depends on the market structure.

Economists are especially interested in studying the SCP model because they tend to

believe that seller concentration affects the industry’s social performance. Macroeconomists

explain the effect in terms of higher profits earned by the monopoly, whilst industrial economists

express the effect in terms of allocative efficiency in the market.

Market structure:

In order to know whether the structure of the Afghan Plastic products market is monopoly,

oligopoly, monopolistic competition, or perfect competition, we need to study the following

elements to determine the market structure.

Number and size distribution of firms: the size of plastic industry of Afghanistan is limited by the

producing of some items (water tanks, pipes, footwear’s, shopping bags & a number of firms

producing home Products).

Table 1:

Statistics of Plastic products producing units operating in Kabul province

Total

No of

firms

Pipes Footwear’s Water tanks Plastic

Appliances

Shopping bags Others

No of

compani

es

Active

No of

compani

es

Active

No of

companies

Active

No of

companie

s

active

No of

companies

Active

Not

working

200 30 24 61 50 4 4 8 8 4 4 93

Source: Survey & AISA data base

It is clear from the AISA database that around 200 companies have valid license in the plastic

industry till 2013 and in these 200 companies around 37 companies had obtained license for the

production of pipes, 30 companies for the production of footwear’s, 4 companies production of

35 | P a g e

Shopping bags, 6 companies in the recycling, 9 companies in the production and 110 companies

did not have the specific production.

The table which is the result of the field & telephonic survey where we tried to have a

conversation with each and every companies, Above table shows that in Kabul province overall

200 companies have the valid license till 2013, in the production pipes we have total of 30

companies in the Kabul which have the license to produce pipes while there only 24 companies

which are active which mean that these companies are having production activities in these 30

pipes producing units 13 producing firms have been randomly surveyed according to their

information in Kabul around 80% of the market is covered by the imported pipes the main

countries from which we imports the pipes are Pakistan, Iran, China and UAE.

The second item in the table is Footwear’s which shows that there are around 61 companies have

the valid license from which around 50 companies are activity participating in the production

process according to our survey only 5-15% market is covered by the imported footwear’s. The

main imported footwear’s are imported from the China, Iran and Pakistan.

Throughout our survey we have found that there are 4 companies producing water tanks, 8

companies’ plastic appliances and 4 companies’ shopping bag. The survey shows that 20-50% of

the market is captured by the water tanks imported from Pakistan and Iran, 75-90% market is

covered by the imported plastic appliances (Jug, plates, disposable plates, chairs,) which mainly

come from Chain, Pakistan & Iran, 80-90% market is covered by the imported shopping bags which

are imported from Pakistan and Iran.

Among these 200 companies 46.5% of the companies are those companies which are in active in

the sense that these companies have the valid license but currently due to some problems they

are not able to actively take a part in the production process.

Table 2:

Source: Filed Survey & AISA Database

Statistics of Plastic products producing units operating in Nangarhar province

Total No of

firms

Pipes Footwear’s Water tanks Other

No of

companies

Active No of

companies

Active No of

Companies

Active No of

companies

Inactive

125 13 3 10 1 1 1 101 101

36 | P a g e

It is clear from the AISA database that around 125 companies have valid license in the plastic

industry till 2013 and in these 125 companies around 22 companies had obtained license for the

production of pipes, 9 companies for the production of footwear’s, 4 companies production of

vessels and 91 companies had obtained the license where the activity is not clear.


conversation with each and every company, the table shows that in Nangarhar province overall

125 companies obtained license from 2003.

For the production pipes we have total of 13 companies in the Nangarhar which have the license

to produce pipes while there only 3 companies which are currently Operating and busy with in the

production which mean that these companies are having production activities. According to our

survey in Nangarhar province around 60-70% of the market is covered by the imported pipes the

main countries from which we imports the pipes are Pakistan, Iran, and UAE. The third and fourth

column shows that in Nangarhar province there is only 1 company in the production of water

tanks and Footwear’s. Among these 125 companies 80.8% of the companies are those companies

are in active in the sense that they obtained the license but currently due to some problems they


Table 3:

Source: Field Survey & AISA data base

It is clear from the AISA database that around 26 companies had obtained the license in the

2003. in these 26 companies around 8 companies had obtained license for the production of

pipes, 5 companies for the production of footwear’s, 2 companies production of Shopping bags, 2

companies in the production of vessels, 9 companies did not have the specific production.

Statistics of Plastic products producing units operating in Kandahar province

Total

No of

firms

Pipes Footwear’s Shopping bags Plastic Appliances Others

No of

companies

Active No of

companies

active No of

companies

Active No of

companies

Active Not

working

26 8 6 5 3 3 1 2 2 8

37 | P a g e


conversation with each and every company, the table shows that in Kandahar province overall 26

companies obtained license from 2003. For the production pipes we have total of 8 companies in

the Kandahar which have the license to produce pipes and only 2 companies are not taking active

part in the production of pipes. According to our survey in Kandahar province around 40-60% of

the market is covered by the imported pipes the main countries from which we imports the pipes

are Pakistan, and Iran.

The fourth column shows that in Nangarhar province there are 3 companies but only 1 company is

active, the fifth column shows that there are two companies producing plastic Products like jugs,

plates, etc. Among these 26 companies 30.8% of the companies are those companies which are in

active in the sense that they obtained the license but currently due to some problems they are not

able to actively take a part in the production process.

Table 4:

Senses of Plastic products producing units operating in Herat province

Total

No of

firms

Pipes Footwear’s packaging Plastic

Appliances

Shopping bags Others

No of

compan

ies A

ctive

No of

companies

Active

No of

companies

Active

No of

companies

active

No of

companies

active

Not

working

107 29 6 18 1 1 1 7 1 4 1 48

It is clear from the AISA database that around 107 companies have obtained license in the

plastic industry from the 2003 till 2012. In these 107 companies around 29 companies had

obtained license for the production of pipes, 18 companies for the production of footwear’s, 4

companies production of Shopping bags, 6 companies in the production of vessels, and 50

without specifying their production .


conversation with each and every company, above table shows that in Herat province overall 107

companies had obtained the licences from 2003 till 2012.For the production pipes we have total of

38 | P a g e

29 companies in which 6 companies are actively engage in the production process. According to

Survey in Herat province around 60-85% of the pipes market is covered by the imported pipes the

main countries from which we import the pipes are Pakistan, Iran and China. The third column is

Footwear’s which shows that around18 companies had obtained the license from which only 1

company is activity participating in the production process according to our survey only 80-85%

market is covered by the imported footwear’s. The main imported footwear’s are imported from

the China, Iran and Pakistan. The fourth column shows that in Herat province we have one

company operating in the production of plastic which is used for the packing purpose according to

survey 70% of the market is captured by Iran. The fifth and the sixth column show plastic Products

and shopping bags respectively in the both activities one and one producing units are operating.

According to survey the imported commodities covered 90% of market in both commodities.

Among these 107 companies 44.9% of the companies are those companies which are inactive in

the sense that these companies have the valid license but currently due to some problems they


Table 5:

Senses of Plastic products producing units operating in Mazar-e-Sharif province

Total

No of

firms

Footwear’s Pipes Plastic

Appliances

Shopping

bags

Others

No of

compani

es

Active

No of

companies

Active

No of

companies

Active

No of

companies

Active

Not

working

56 10 6 4 1 5 2 6 3 40

Source: Field Survey & AISA Database

It is clear from the AISA database that around 37 companies have obtained license in the plastic

industry from the 2003 till 2012. In these 37 companies around 29 companies had obtained

license for the production of pipes, 6 companies for the production of footwear’s, 1 company

produces of Shopping bags and 50 without specifying their production.


conversation with each and every company, above table shows that in Mazar province overall 56

39 | P a g e

companies had obtained the licences from 2003 till 2012. The first column is Footwear’s which

shows that around 10 companies had obtained the license from which only 6 companies is activity

participating in the production process according to our survey only 40-50% market is covered by

the imported footwear’s. The main imported footwear’s are imported from the China, Iran and

Pakistan. For the production pipes we have total of 4 companies in which 1companies are actively

engage in the production process. According to Survey in Herat province around 70-85% of the

pipes market is covered by the imported pipes the main countries from which we import the pipes

are Pakistan and Iran. The third column show plastic Products, in which we have 5 companies and

two producing units are operating. According to survey the imported commodities covered 80-

90% of market which is mainly imported from Pakistan and Iran. The fourth column shows that in

Herat province we have 8 companies in shopping bags while from these 8 companies3 companies

currently operating two companies in the production of shopping bags and one company in the

production of roll plastic which is mainly use in the packing and construction of building & homes,

According to survey 70-80% of the market is captured by Iran, Pakistan, China, Dubai and south

Arabia. Among these 56 companies 71.5% of the companies are those companies which are in-

active in the sense that these companies have the valid license but currently due to some

problems they are not able to actively take a part in the production process.

Type of product: the plastic industry of the country produces limited products such as pipes,

footwear’s, shopping bags and disposable home Products. The item which are produced by the

firms are different in term of quality & design Therefore, we can assume heterogeneous

(differentiated) products within the market. However, the difference in quality is natural, and

firms cannot do much about it.

Ease of entry and exit: There are the following barriers to entry in the Plastic industry

� Capital depends on the item which you are going to produce, but Minimum capital

required for any item to produce is over $200,000.

� Minimum time to set up machineries and build a production unit is around 4 months which

makes the total time spent around a year.

Exit barriers: To exit the market, a firm bears the following costs:

40 | P a g e

It is difficult to sell second-hand machineries at a good price – there is no market for specialized

second-hand machineries in Afghanistan.

� The network you build over the years will vanish.

� The government does not pay for the infrastructure you built at your production site.

Information flow between buyers and sellers: there is no perfect information flow between the

buyers and the sellers the sellers don’t focus on consumer needs as they have inward looking

strategy instead of outward focus.

Control over prices by established firms: the domestic firms producing the plastic products did not

have control on the prices due to the taught completion with the imported products.

Firms conduct:

In this section, the objective is to study the conduct of firms (both quarries and processing plants)

in terms of policy objective, pricing strategies, marketing strategies, and R&D activities.

Furthermore, to evaluate the question that how market structure affects the way the firms

compete.

Policy objectives: Unfortunately, firms in this market are short-sighted – their main objective and

focus is instant profit. They have no long-term plan for growth and market share. This is why they

are concentrating on the production of the few items and overall the Afghan market of plastic

industry 80 to 85 percent is dominated by Pakistani, Iranian and Chinese plastic products.

Pricing objectives: This study found that firms plastic market have competitive strategy for pricing.

These strategies give them the chance to earn lower profits However, with such a strategy, they

will short term profits but in long term they will dominate on the large market share which will

help them in increasing the profit margin.

Marketing strategy: Firms in this industry neither have market research nor effective advertising

activities. Mostly the managers and owners of plastic products producing firms do not understand

the importance of marketing activities.

Research and development (R&D): This study found no R&D activities, even at the level of an

individual firm, which is a significant barrier to the industry’s growth. Absence of innovation in

production and product development is mainly due to the lack of R&D – this in turn is the reason

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why Afghan plastic products cover 15 to 20 percent of the market and level of exports is

negligible. Among many other factors, one is lack of competition between the firms this due to the

oligopolistic structure of the market. This shapes an environment in which Afghan firms behave in

a way that is neither optimal for themselves nor for consumers – price is competitive, quality of

finished product in terms of is dire, innovation lacks, market is dominated by foreign products, etc.

In upcoming sections, we will provide recommendation for relevant bodies to improve this

situation.

Firm’s performance:

It is very obvious in theory that, when there is no competition in the market, firm’s profitability is

high. But on the other hand, there is no tendency for firms to bring efficiency, improve product

quality and make technological upgrading. But to prove this theory is right, we present the

following findings.

Profit margin: it is not easy to talk about the profit margin of all the plastic products produced

domestically because the raw materials, size and price of every item differ from each other’. The

field survey shows that the average profit margin in the plastic industry in Afghanistan is 20-30%.

Efficiency: It is very difficult to precisely measure the efficiency of plastic products producing firms

in Afghanistan. But roughly speaking, we can have the overall picture of firms’ efficiency by

looking at their size of production and the technology they employ.

Size of production: Normally, plastic producing firms in Afghanistan produce 1500 to 5000 tons

annually, Therefore, the productive efficiency of plastic producing firms in Afghanistan are low, as

they cannot take advantage of the economies of scale.

Technology: Among all firms working in the plastic industry, only one firms in Kabul use standard

equipment and technology. The rest of the firms in Afghanistan employ traditional and

unproductive methods in production. There are two reasons that firms do not employ standard

and productive technology. One is the lack of skilled labour , and the other is lack of public goods –

such as industrial parks, access to electricity, transport infrastructure, etc. – that firms cannot do

much about it.

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Product quality: It would be not easy to determine the quality of the plastic products but during

our field survey we have found that the majority of firms did not have product quality certificate

from ISO and HCAAP. Therefore, most of the contractors prefer imported products.

During our interviews with plastic products producing firms, we learned that Afghan firms pay less

effort to employ advanced methods of production and do not care much about expanding their

market both domestically and internationally. Such behaviour of Afghan firms may have been

influenced by four factors. First, acquiring modern technology for plastic item productions

requires substantial amount of capital, which these firms do not possess. Lack of access to finance

is a major constraint for economic development in Afghanistan. Second, lack of technical staff to

operate these machines which increase demand to establish a training centre in industrial parks.

Third, Afghan firms do not have long-term insight for their business development due to lack of

strategic management and research skills and the fourth is implying dumping strategies by the

foreign competitors which is quite risky for the country infant industry.

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Chapter 4

Market Opportunities

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Market Opportunities:

To find out market opportunities, we use a simple supply-demand model. Our approach will

consist of studying the quality and quantity of raw materials (i.e. oil and natural gas) available in

Afghanistan, and assessing the current and future demand for plastic products at local markets. In

a second step, we will thoroughly evaluate the factors of production (i.e. land, labour, machinery

and equipment, capital, and entrepreneurship) and study the potential for investment

opportunities in plastic industry. Finally, we will identify the barriers and constraints that firms are

faced with, in order to evaluate the implicit costs which exist in the market. In the next chapter,

we will have policy recommendations to government and private sector to overcome the

persisting constraints and challenges.

Raw materials:

Natural gas and oil are considered the primary raw materials in plastic production.

Today most plastics are made from petrochemicals (crude oil and natural gas), although they can

also be produced from corn and other biomasses. In manufacture from petrochemicals, refineries

process crude oil to produce, first, fuels, such as gasoline, diesel, and a number of different

lubricants. Then they spin off a wide variety of other petrochemicals. Some of these other

petrochemicals are then used by chemical plants to make a wide variety of products such as

fertilizers and plastic resins. Plastic resins are, in turn, used to produce many different types of

plastic. There are many other types of polymer, both natural and synthetic: cellulose, starch,

silicones, Teflon, PVC, etc. The United States Geological Survey (USGS) and the Afghanistan

Geological Survey (AGS) jointly assessed the oil and gas resources in northern as well as in

Western and Southern Afghanistan. The estimated mean volumes of petroleum in the Northern

assessment area were 1.6 billion barrels of crude oil, 16 trillion cubic feet of natural gas, and 0.50

billion of natural gas liquids, (USGS FS-3031, 2006). Most of the undiscovered crude oil occurs in

the Afghan-Tajik basin and most of the undiscovered natural gas is located in the Amu Darya

basin. These two basins within the Afghanistan encompass area of approximately 515,000 square

kilometers.

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Basins in Afghanistan:

(Afghanistan has five (5) major and 1 minor sedimentary basins (figure1), all of which are

underexplored. Almost all of the petroleum exploration and development activities were confined

to northern Afghanistan within the Amu Darya and Afghan-Tajik basins. During the Soviet era

(1957-1989), a total of seven (6) oil and eight (8) gas fields were discovered. Limited exploration in

the Tirpul basin (Herat Province) confirmed the presence of oil whilst Katawaz and Helmand basins

have no reported shows, owing to negligible or no work at all.

Northern Afghanistan Basins:

The Afghan –Tajik, Amu Darya, and Kushka basins represent a total petroleum system,

(figure 2). The Kushka Basin is an extension of the highly prolific Amu Darya Basin. This basin has

giant and supergiant fields in Turkmenistan and Uzbekistan including the South Yolotan field in

Turkmenistan which is one of the largest gas fields in the world.

The Afghan-Tajik basin offers similar geology and reservoirs making it a prized prospect for

development. Lack of investment in post-Soviet times has precluded any active exploration

programs to date within Afghanistan. Over 500 structures are discovered in the Amu Darya Basin.

Five important plays are recognized in the North Afghanistan basins that together are assumed to

contain more than 95 %of the hydrocarbons.

Tirpul Oil Basin:

The Tirpul basin covers an area of approximately 26,000km2 and is located to the West in

the Herat Province. Exploration comprised of geological mapping, seismic survey, shallow

structural drilling and 5 deep exploration wells. Over 20 potential structures were identified; 3

were subjected to further deep exploration drilling. In Ahmadabad area, presence of oil in

Palaeogene sediments was intersected at 840 meters and 1,190 meters; oil flowed at 6.7 cubic

meters per day. With the application of 3-D Seismic and further exploration this area has potential

to uncover large deposits in the area.

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Katawaz and Helmand Basins:

Negligible exploration has been undertaken in these basins and hence remains untested,

despite of its favorable geological settings.

Petroleum reserves and resources estimated by Soviet:

Between 1957 and 1984, a total of 14 petroleum fields comprising 6 oil and 8 gas fields were

discovered and developed. About 370 wells have been drilled in northern Afghanistan of which 59

of these wells are classified as exploration and 211 development wells. By 1989, 88 MMBO of

recoverable reserves and a geological resource of 233 MMBO were estimated from the 6

identified oilfields in the Amu Darya-Tajik basins. Only five (5) oilfields (Angot, Kashkari,

Bazarkami, Zamarudsay and Aqdarya) contain significant accumulations, totaling 74 MMBO

recoverable reserves and 219 MMBO geological reserves within the Hauterivian, Albian, and

Aptian Formations (Cretaceous). Estimated reserves as at end of 1989 are shown below).6

Reserve Estimates

Initial Recoverable Reserves 88MMBO 5TCFG

Estimated Produced Volumes 0.17 MMBO 2TCFG

Remaining Reserves 87 MMBO 3TCFG

It is clear that we have large number of oil and natural gas resources, Oil refineries ‘refine’ crude

oil in massive quantities, to produce the fuels we need. These include diesel, petrol and heating

oil. However, some of the raw materials we need to manufacture plastics such as polystyrene are

also extracted from oil at the refinery. When crude oil is refined, four percent ends up as raw

materials for the production of plastics. Naphtha is distilled from crude oil and it is processed to

yield polystyrene.

6 Ministry of Mines of Afghanistan, http://mom.gov.af/en/page/4788

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(The below diagrams, describe how the raw materials is process into manufactured plastic

products.

The below diagram describe how the raw materials is processed into manufactured plastic

products.

Crude oil is pumped out of oil wells, for example

those in the North Sea or the Gulf of Mexico.

The crude oil is transported by pipeline or oil

tanker to an oil refinery

The raw material crude oil is refined at an oil

refinery. During this process, fuels and chemicals

are distilled from the crude oil and also

NAPHTHA.

Naphtha is processed at a processing plant to

produce a range of plastics, including

polystyrene. The polystyrene is normally in the

form of small granules at this stage. The granules

are transported to the manufacturing plant

(factory) making polystyrene products.

Products such as polystyrene cups, chairs, mobile

phone casings, car components and many more

are the result. These are manufactured by

injection molding, blow molding, extrusion,

compression and vacuum forming machines)7.

7. Materials – raw materials to products, crude oil to polystyrene,

http://www.technologystudent.com/prddes1/plasty2.html

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Demand in local market:

There is an obvious correlation between construction activities and demand for plastic products;

moreover, throughout the years the awareness and use of plastic in the country has become

extremely prevalent. People on the advantages of using plastic products. Aside from being

extremely versatile, plastics don't rot nor do they break easily, Ideal for packaging and carrying

things, which increase the domestic demand for the plastic products. Even though some plastic

items are used for construction (pipes, windows, doors) and used interior kitchens, bathrooms and

offices. According to the three years 2008- 2012 import data of plastic products from the world

markets to Afghanistan shows that annual plastic products consumption is between 30,000 to

60,000 tons. But domestic quarries can only produce between 3,500 and 6,000 tons per year.

Factors of production:

By factors of production we mean all inputs, such as land, labour, machinery and equipment,

capital, and entrepreneurship that produce finished and final products such as Pipes, footwear’s,

home Products etc.

Land: for the production unit land is one of the most important factors, lack of access to land is

the biggest obstacle per the following explanations:

� It is very difficult to access land in Kabul or other provinces where security is not a big

concern and where public goods such as electricity, water supply, and road infrastructure

are available.

� The price of land to purchase or to rent is too expensive and costly.

� According to our research, minimum land required for standard plastic items producing

firms is around 2000m2.

Labor: There is a lack of skilled labour force in Afghanistan. In fact, there are no technical training

centres which could train workers in production of plastic products However, due to abundant

labour in Afghanistan; it is fairly feasible to provide on-the-job training for unskilled labours. In

processing plants, a very short-term training on the job is sufficient. Therefore, lack of labour is

not a serious issue in this business.

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Required Capital: The amount of required capital differs depending on the products you produce

and also the required capital varies from one site to another depending on location, availability of

road, and geological circumstances. According to our survey, the minimum capital required for

quarrying activity (is around $300,000. It should be noted that with millions of dollars of

investment, one can have very good machineries which are almost 10 times more productive than

average old processing plants. This in turn can provide competitive edge for the investor. Access

to capital remains restricted in Afghanistan. Commercial banks do not offer large-size, long-term

credit, and businesses find it hard to borrow from abroad. Lack of capital is, thus, a major

constraint in this business in Afghanistan.

Entrepreneurial skills: In today’s challenging business environment, entrepreneurial skills are the

key to success and survival of a business. However, in Afghanistan, plastic items producers neither

have efficient entrepreneurial skills (including large firms) nor they have any intention to build

such capacity within their enterprises. The following entrepreneurial skills are the essential

requirements for those who run a plastic item producing unit in order for them to grab the

opportunities which exist in local markets:

� Management skills – the ability to efficiently manage time and people (i.e. the production

process, operations, and activity of the firm)

� Strategic decision-making and planning

� Financial literacy

� Market research skills to assess the market demand, suppliers, customers, and the

competition

� Marketing techniques

� Innovative ideas, methods and techniques

� Ability to develop a successful business plan for a new venture

� Willingness to take risks (or at least not be risk averse)

� Willingness to change their routine behaviour, if necessary

� Awareness of laws and regulations

Technology: One of the most important factors of production in plastic industry is technology (i.e.

machineries and equipment in use). Due to the nature of business, machineries play a big role in

the success and productivity of firms. By employing standard machineries, they can enormously

increase their productivity; e.g. a firm with standard machineries can produce 10 times more

plastic products than a firm with old system of operation.

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Chapter 5

Recommendations & Conclusion

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Recommendations:

Despite the fact that there is almost infinite best enormous demand exists within the

domestic and international markets, Afghan firms are not performing very well – price is high,

quality of finished product is dire, innovation lacks, market is dominated by foreign products, and

export of plastic products are negligible is low. Moreover, the current market condition cannot

attract enough investment. Reasons for this situation range from undesirable legal framework and

bureaucracy to lack of factors of production. But the reason for bad performance of established

firms is lack of direction which is caused by both lack of incentives and lack of effective regulation

by the government. In order to push private firms to perform well (i.e. to decrease their prices and

to increase their quality of products), the Afghan government, especially the Ministry commerce &

industry, Ministry of water and power, Da Afghanistan Brekhna Shirkat , Ministry of Finance and

Afghanistan investment support Agency should take the following steps:

Tax relaxation: The ministry of finance should provide tax relaxation to the plastic infant industry,

which will enable the firms to stand on their feet in term of increasing their production and

output. Such a tax relaxation policy will encourage the firms to employ modern technology and

use more efficient production methods to benefit from the incentive. This, in turn, will enable the

firms to benefit from the economies of scale, to decrease their total cost, to supply at a lower

price and thus to increase their competitiveness. Moreover, employing modern technology will

also have positive effect on the quality of their products.

Provision of Hydropower & Subsidy on power charges: the production of plastic products is

continues process it need continues electricity, if the electricity cuts during the production process

it harms the quality of the product and increases the cost of production of the finished goods. As it

is a general problem within the country it will take time to tackle this problem, it will be helpful for

the plastic producing firms if the times are known before to them when the electricity cuts or

providing a schedule by the electricity providing authorities to the plastic producing firms, it will

enable the producer to plan their production. Meanwhile, DABS (Da Afghanistan Brekhna Shirkat)

should give the subsidy on power charges if the prices per unit decreases from 6AFN to 3AfN in

this case the plastic products producing firms will enjoy the subsidies on power, in the result the

cost of production will decrees and they will be able to compete with the imported products.

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Allocation of Plots in the Industrial parks: Land is the first required factor of production, and firms

in plastic industry need over 2000m2 of land. Finding and leasing such large area of land in and

around Kabul city is the biggest barrier for new entries and for existing firms to employ more

machinery. According our research findings majority of the industrialist around 40-60% in the

plastic industry produces plastic products in the rental production units because of the practices

of selling plots in industrial parks, therefore, it is worthwhile give the plots to those plastic

producing firms which are currently have production and operating in Rental plots.

Increasing Import Duties on the imported plastic products: Ministry of finance (MOF) should

increase import duties on the plastic products. This will insure continues supply of domestic plastic

products to the market and as well as encouraging value added activities to take place within the

country.

Exemption of Tariff on raw materials: in order to support the infant plastic industry of the country

Ministry of finance should exempt the raw materials from the tariff which are used in the

production of plastic products.

Building infrastructure: During our field survey we observed that the roads of the Puli charkha

Industrial parks was dire and it is difficult for the plastic producer to supply their finished goods to

the market in the winter season because of the poor roads, therefore one way to support our

infant industry is to re-construct the current infrastructure in current industrial parks.

Raw material production facility: the transit problem with the neighboring countries is a hurdle in

the development of our infant industry and currently most of our plastic producing firms facing

the problem in the availability of raw materials for the production. As we know that the main raw

material for the production of the plastic products are crude oil and natural gas and Afghanistan

have abundance resources of crude oil and natural gas, so here is an opportunity for domestic and

international firms to establish raw materials producing firms. It is worthwhile to mention that in

the year 2012 only from the three major import partners (Pakistan, China & Iran) Afghanistan had

imported a total raw materials having a custom value of 12 million USD.

Ban of scrip materials: According to our field survey we have found that only in Puli-Charkhi

industrial park there are around 8 plastic producing firms that they recycle the old plastic products

(scrip), these firms also provide raw material (resin) for other plastic products producing firms,

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beside that mentioned firms created employment opportunities for a large number of local people

and feed their families from the income they earned from these employment. the scrip materials

is export to Pakistan according to the information of the owners, if this process is continued it will

cause to close their businesses, therefore it is requested from the concerned government

authorities to ban the export of scrip materials.

Provision of Credit Facility: Entering to plastic industry requires investing huge amount of capital.

Access to large-size credit is restrained by high interest in Afghanistan, as commercial banks and

other financial institutions offer large-size long-term loans by charging high interest rate 10-15%

per annum. Therefore the to protect plastic infant industry government should initiate to establish

industrial bank to provide long term credit facility on low interest rate to plastic producing firms as

to enable them to acquire necessary machinery and equipments.

Provision of Security: security is the first and the most important factor to attract the local and

foreign investments. During our field survey we have found that most of the plastic producing

firms did not use marketing strategies for introducing and increasing supply of their product due

the security reason they think that marketing could create security problems to us, therefore the

government should take necessary steps to protect local and foreigner investors.

Establishing of technical institute: As mentioned in the previous chapter, there is no vocational

and technical training centre in Afghanistan to train workers in the plastic production activates

therefore, the Afghan ministries such Ministry of commerce and industry, Ministry of Labour and

Ministry of Education & AISA, should collaborate to build such training centres. This will not only

provide know-how skills to the market but it can also increase investment in the manufacturing

sector.

Entrepreneurial skills: As emphasized in the previous chapter, entrepreneurial skills are the key to

success and survival of a business. Afghan firms remain less competitive and less productive, due

to their inefficient management techniques. Therefore, the Afghan government should provide

capacity development programs to Afghan industrialists, and help them increase their managerial

skills and technical efficiency. AISA can be the relevant institution in this regard.

• The National environment protection agency should prohibit the use of those raw

materials in the production of plastic products which are hazards to the environment.

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• The Afghan government should adopt policies which promote domestic plastic products

usage and encourage purchase of Afghan plastic products throughout their procurement

system - by adopting “Afghan product first” policy. Such policies increase domestic demand

for Afghan plastic product and ensure a sustainable expansion of Afghan plastic products

market.

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Conclusion:

The paper studied the Afghan plastic products market in terms of market structure and

performance, looked at potential opportunities from an investor’s prospective, identified the

constraints and factors of market failure, and finally recommended some measures and actions for

the development of this industry.

Looking at the global and regional markets of plastic industry shows that from 2009 to

2010 the global production of plastics increased by 15 million tons (6%) to 265 million tones,

confirming the long term trends of plastics production growth of almost 5% per year over the past

20 years. In 2010 Europe accounted for 57 million tons (21.5%) of the global production and China

overtook Europe as the biggest production region at 23.5%., despite the fact that Afghanistan has

lower quality and less quantity of plastic products compared to regional and world countries, the

import data shows that Afghanistan have huge demand for the plastic products. Therefore, if the

market barriers remove and government support the plastic industry there is no doubt that plastic

industry in Afghanistan has good potential to. The paper forecasts that within the next 5 years, the

Plastic industry in Afghanistan can grow 3 folds if the major market constraints are eliminated.

With regard to market structure and performance, we found that although plastic industry

is dominated by the foreign imported products. Therefore, there is no full competition in the

market, and this creates an environment in which Afghan firms adopt such behaviour that neither

helps themselves nor the consumers – price is high, quality of finished product in terms of quality

and finishing is dire, innovation lacks, etc. Such unfriendly market behaviour is due to lack of

competition in the market and lack of management skills for firms’ owners. Hence, we strongly

recommend that the Government of Afghanistan, especially Ministry of commerce and industry,

provide incentives for firms to increase their production. Such a supply-side policy helps them

benefit from the economies of scale, decrease their total cost, sell at a competitive price, and

finally increase their market share. In addition, the government and the private sector must focus

on improving the management skills of firms’ managers which helps them increase their firms’

efficiency.

In terms of market opportunities, the paper argues that there is huge demand for plastic

products at domestic market. However, looking at the factors of production, there are many

challenges which hinders the foreseen opportunities; i.e. lack of access to land, lack of access to

capital, lack of skilled workers, and lack of necessary infrastructure. The paper recommends both

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institutional and market reforms to the government to tackle some of the existing challenges;

including construction and development of a specialized industrial park for plastic items producing

firms, provision of long-term financing solutions, technical and management skills trainings, etc.

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References:

European commission (2004), Life cycle Assessment of PVC and of principal competing

Materials.

Oil & Gas Resources (Ministry of Mine) Afghanistan,

http://www.mom.gov.af/en/page/4788.

Deloltte (2010), PVC markets of Europe and South-East Asia: analysis of profitability and

production cost.

BCC Research (2010), Plastic industry, Market research report & statistics and Analysis.

Moh.Seraj Islam (2011), prospects and Challenges of plastic industries in Bangladesh.

Abdul Gafar Raseen (2012), a comprehensive study of Marble industry in Afghanistan, AISA.

US Environmental protection Agency (2010), waste resources conversation- common wastes &

materials http://www.epa.gov/osw/conserve/materials/plastics.htm

American Chemistry council, Life cycle of plastic products,

http://plastics.americanchemistry.com/Life-Cycle

IMF2011. “Afghanistan ECF review. “IMF Country Report No. 11/330, November 2011

Plastics- the facts 2011, an analysis of European plastics production, demand and recovery for

2010

Nauyen Thi Va Anh- Analyst, Sme securities, research & investment, May 20122 Report

San Jose, California (PRWEB), Global industry Analyst, Inc Report 2012

Materials – raw materials to products, crude oil to polystyrene,

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Appendix A:

Figure 1 shows general location of the 6 sedimentary basins in Afghanistan

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Figure 2 Satellite image of northern Afghanistan showing locations of the Amu Darya and Afghan-Tajik basins, as well as the

Total Petroleum Systems, (After USGS, 2006).

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Figure 3 typical stratigraphic columns in the northern Afghanistan basins

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Figure 4 Oil Potential in the Suprasalt Assessment Units, (After USGS, 2006).