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UNITED NATIONS ASSISTANCE MISSION IN AFGHANISTAN (UNAMA)
EASTERN REGION/ KUNAR PROVINCIAL OFFICE
DEVELOPMENT COORDINATION UNIT (DCU)
THEMATIC REPORT ON
PRIVATE SECTOR DEVELOPMENT
KUNAR PROVINCE
June, 2012
Prepared by: Ghulamullah Afghanyar
Field Assistant, Development Coordination Unit
UNAMA, Eastern Region/Kunar
Technical Guidance by: Ms. Ravza Andelic
Head of Development Coordination Unit
UNAMA, Eastern Region/Jalalabad
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Table of Contents
List of Acronyms…………………………………………………………………………..…I
Map of Kunar province………………………………………………………………….…...II
1. Background………………………………………………………………………………1
2. The Kunar Economy…………………………………….....………………….………….1
3. The current status of private sector in the province……………………….…….………..2
3.1 Economy and the state of provincial private sector...…………………………………….2
3.2 Economical Basis…….……………………………………………………………..…….4
3.2.1 Agriculture and Livestock….………..……………………………………..………...5
3.2.2 Natural Resources…………………………………………………………………….7
3.2.3 Industrial, Commercial and Services Sectors...……………………………………....7
3.2.3.1 Industries……….……………………………………………………………………7
3.2.3.2 Trade and Commerce……….………………………………………………………..8
3.2.3.3 Transport and Logistics Services Sector…………………………………………….8
3.2.3.4 Other Services…….………………………………………………………………….8
4. Potential investment opportunities in Kunar province……….………………………….9
5. Underlying constraints on private sector development in the province……………....….9
6. Accelerating private investment in Kunar – What Needs to be Done?…………………10
7. Legal Framework for Private Sector…………………………………………………….11
8. Key stakeholders of Private Sector in the province and their role…………….………...12
9. References
10. Annexes
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List of Acronyms
NDF National Development Framework
PDP Provincial Development Plan
GIRoA Government of the Islamic Republic of Afghanistan
MoCI Ministry of Commerce and Industries
ANDS Afghanistan National Development Strategy
ACCI Afghanistan Chamber of Commerce and Industries
AISA Afghanistan Investment Support Agency
DAI Development Alternatives Incorporation
IDEA – NEW Incentive Driven Economic Alternatives – North East West
FAO Food and Agriculture Organzation
USAID United States Agency for International Development
PRT Provincial Reconstruction Team
MoCN Ministry of Counter Narcotics
BPRM/U.S Bureau of Population, Refugees and Migration/United States
WFP World Food Programme
ASMED The Afghanistan Small and Medium-Sized Enterprise Development
Ha Hectare
NGOs Non Governmental Organizations
PSD Private Sector Development
BRT Business Receipts Tax
KVO Kunar Vocational Organization
STAY Skills Training for Afghan Youth
BPRM Bureau of Population, Refugees and Migration
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1. Background
In late 2001 at the fall of the Taliban, The Afghan economy was reeling from protracted conflict and
severe drought, with cereal grain production down by half, livestock herds decimated, orchards and
vineyards destroyed by war and drought, more than five million people displaced as refugees in
neighboring countries, and remaining economic activities steered in an informal or illicit direction by
insecurity and lack of support services. Numerous people were suffering (and still are) from low food
consumption, loss of assets, lack of social services, disabilities (for example, from land-mine accidents),
and disempowerment and insecurity. The Afghan state had become virtually non-functional in terms of
policymaking and service delivery, although the structures and many staff remained.
Afghanistan, with robust support from the international community, has to break out of this vicious
circle—and move toward a “virtuous circle” whereby improving security, state capacity building, revenue
mobilization, formal private sector development, and sensible, coordinated actions against drugs all
reinforce each other and put Afghanistan on a path of sustained economic growth and poverty reduction.
The Government has set forth a compelling development vision in its National Development Framework
(NDF), articulated into a detailed strategy. The NDF is anchored in six “Pillars” of development: (i)
human capital and social protection; (ii) physical infrastructure and natural resources; (iii) Health and
Nutrition; (iv) Agriculture and Rural Rehabilitation; (v) Education, culture, media and sport; and (vi) the
private sector development. The NDF also emphasizes three cross-cutting themes: (a) governance,
financial management, and administrative reform; (b) human rights, security, and rule of law; and (c)
gender. The Government’s holistic vision and broad development strategy provide a solid foundation for
specific strategic directions and programs which can be organized around conceptual frameworks for
poverty reduction and for sustainable development.
The Government has supported good economic performance by following prudent macroeconomic
policies; it has begun to build capacity and has developed the nationally-led budget process and made the
budget into its central instrument of reform; and it has made extraordinary efforts to develop key national
programs (for example public-works employment programs and community development programs) and
to revive social services like education and health.
Nevertheless Afghanistan remains one of the poorest countries in the world in terms of both per capita
incomes and social indicators, with large gender gaps. The difficult challenge of poverty reduction is
made even more difficult by continuing insecurity, weak rule of law, and narcotics. Worsening security in
many parts of the country threatens to derail reconstruction, undermine state building efforts, adversely
affect the aspects of political normalization, reduce private sector activity, and keep it in the
informal/illicit economy. The burgeoning revival and spread of opium production during the last few
years (opium accounted for about a third of the Afghan economy and three-quarters of global illicit opium
production in 2003, even more in 2004, and is now found in all 34 of Afghanistan’s provinces) has fueled
insecurity and funded antigovernment interests. Drugs, insecurity, “capture” of large parts of the country
by regional powerbrokers, and the weak capacity of the state (including difficulties in centralizing
revenue) all contribute to a self-reinforcing “vicious circle” that would keep Afghanistan insecure,
fragmented politically, weakly governed, poor, dominated by the informal/illicit economy, and a hostage
to the drug industry.
Afghanistan has areas of good potential for sustained long-term economic growth, ranging from
agricultural production and processing to mining, construction, trade, and other services. There is no
certainty regarding the specific sectors where Afghanistan will grow and export: with appropriate
institutions and policies, the economy itself will “discover” areas of growth potential.
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Private Sector Development and Trade is a critical element in the Government’s poverty reduction
strategy. Private sector growth, driven by increased investment and productivity growth will have a major
impact on employment and incomes, leading to significant and sustained poverty reduction.
2. The Kunar Economy
In comparison to other provinces, Kunar is one of the poorest provinces of Afghanistan. Agriculture is a
major source of revenue for nearly seventy four percent of households in Kunar province. Seventy nine
percent of rural households own or manage agricultural land or garden plots in the province, however’
one-third (33 percent) of households derive some income from trade and services. Over a quarter (28
percent) of households, earn income through non-farm related labor.
The Kunar province economy is dominated by agriculture mainly cereal crops (27 percent). The main
agriculture crops include fruits and nuts, cereals, vegetables and industrial crops. The important export
products are walnut and grapes. While the Kunar River Valley provides usable land for farming and
grazing, the local economy at the higher elevations revolves around a competition over limited natural
resources—especially timber and marble. The timber trade is particularly lucrative, causing extensive
deforestation and smuggling.
Besides agriculture activities, livestock also accounts for income for half of rural households. Most
farmers have livestock, especially the Kuchi, whose livelihood depends on animal husbandry. Sheep and
goats are the dominant household livestock. Livestock are used for meat, milk, and wool, hides and skins
production. Milk is processed into different products like butter, cheese, yogurt and other local products.
Wool and skins are mainly exported to Pakistan but in some parts of the provinces local products are
made from wool and sold in Jalalabad or provincial centre. Cheese and butter are the milk products which
are sold or bartered in the local market and Jalalabad. \
3. The Current Status of Private Sector in the Province
A key to Afghanistan’s transition to economic self-dependence is premised on public-private policy
initiatives that stimulate domestic production, trade and encourages foreign direct investment. For its part,
the Department of Economy as a leading institution for the promotion and facilitation of trade and
investment services in Kunar province, in close collaboration with the Afghan Chamber of Commerce
uses its considerable reach to influence inclusive, pro-growth and pro-business policies. In comparison to
the other sectors specified in the pillar III (Social and Economic Development) of the Afghanistan
National Development Strategy (ANDS), the private sector still need necessary steps toward its
development.
3.1 Economy and the state of Provincial Private Sector
During the current situations, the Kunar province private sector depends upon the productions through the
traditional activities, such as carpet weaving, tailoring, dried fruit production and processing, animal’s
productions and processing and other small-scale activities. Also, transportation and construction services
are the two major traditional private sector service activities. The bulk of Afghanistan’s carpets are
produced in villages, by women weavers. These find their way to export markets through a network of
domestic markets and traders. During the conflict many carpet weavers and traders migrated to Pakistan,
mostly to Pakhtoonkhwa province. As a result, a large proportion of carpet exports in Pakistan’s trade
statistics are attributable to the Afghan carpet industry—in Afghanistan, or displaced in Pakistan. Raisins,
once the most successful Afghan export, have been hampered by damage to orchards and processing
Source: Kunar Demographic Profile, 2006
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plants, although the recent preferential trade agreement with India has seen Afghan dried fruit exports
back in fourth position in that market in 2003—a major recovery. If traditional activities, such as carpets
or dried fruits, are to contribute significantly to broad-based growth, it will be important not only to
revive production but also to ensure that the smaller players, especially producers, benefit more from
these activities.
a. Construction: Construction is also booming in the province and is expected to continue to be an
important driver of private sector activity. Most construction of roads and new schools and clinics
are being implemented by private firms (many registered as Non Government Organizations –
NGOs and Private Construction Companies – CC ), in the case of some of the social and
infrastructure projects largely implemented by international contractors. Afghan companies
generally do not have sufficient experience, skilled personnel, or equipment to handle larger
contracts. However, many Afghan companies have successfully completed contracts for primary
roads and, as sub-contractors to international companies, are increasingly becoming eligible for
handling the larger contracts too. Some donors are trying to ensure greater participation by
Afghan companies through policies such as local content requirements. During the last few years,
the Afghan-owned construction industry was growing rapidly. The Department of Economy has
registered 163 for profit private construction companies and 37 Non Government Organization
(NGOs-Non for profit) engaged in development activities in the province. According to the report
of the Department of Economy during the last years the number of private construction
companies is coming down and that of the NGOs is increasing in comparison to the past.
b. Construction Materials: The construction boom has led to high demand for construction
materials, such as cement and cement blocks, wood, steel and steel products, bricks, aggregate
and sand, plumbing products and sanitary fixtures, and glass. Most demand is met through
imports (mainly from Pakistan, Iran, Russia, and to a lesser extent the United Arab Emirates and
China), since there is very little manufacturing capacity Afghanistan. There are three basic trade
patterns: (i) large contractors import materials for their own use; (ii) import/export companies buy
from manufacturers and sell to wholesalers, who in turn sell to retailers and large consumers; and
(iii) manufacturers export directly and sell to Afghan wholesalers (relatively rare). Some barriers
to entry exist at the lower end of the commodity chain. Lack of credit, and vertical integration of
the top end of the business, make it difficult for small and medium-sized businesses to expand.
Corruption appears to be endemic and bribes to municipalities, police and, judicial services act as
a disincentive to market engagement. The industry currently lacks quality regulations to protect
against low-quality materials which often come into the market, and sub-standard construction is
common.
c. Transport: Transport was an important activity during the conflict, and private transport
companies have expanded rapidly since the end of the war. There is a number of flourishing
freight and passenger transport companies. There are 165 registered bus companies with
approximately 14,000 buses (the majority of these are minibuses and vans), and the number of
registered taxis rose from 17,000 in 2000 to 33,500 in 2002. The Government-owned Millie bus
company operates only 5 vehicles in Kunar.
d. Infrastructure: The largest private investment in infrastructure has been telecommunications.
While very modest fixed-line telecom services are provided by the public sector, there are four
private mobile companies i.e. the AWCC, Roshan, MTN and Etisalat operates its services in all
districts of the province.
Currently there is very little involvement of the private sector in the main electricity generation,
transmission, and distribution system. However, there are thousands of generators in operation which are
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privately supplied and maintained. These range from household usage of very small generators to
workshops and small businesses using diesel-powered generators of a significant size. International
agencies typically use either private contractors or a combination of private contractors and their own
implementation operations to construct wells, manufacture hand-pumps, and install systems. There are a
number of Afghan hand-pump suppliers operating, which provide an illustration of how public sector
demands, in this case from international aid agencies, can stimulate Afghan private enterprise.
The growing importance of the construction industry as an area of investment and its potential for the
future is reflected in the composition of new investment projects.
The primary group of potential foreign investors for Kunar and all over the nation currently consists of
returning Afghan nationals who left the country as many as 25 years ago for Europe, Australia, North
America, and countries in the region. There are also interested investors from countries that have
traditionally had trade ties with Afghanistan, such as India, Iran, Pakistan, Turkey, and Uzbekistan, as
well from U.S. and European companies. Some foreign investors view Afghanistan as a central business
“hub” and vital trade route, where the Middle East meets Southern, Central, and East Asia. In addition,
some businesses are striving for “first mover advantage” in establishing a presence in Afghanistan.
Moderate interest has been expressed by potential investors in power, telecommunications and internet
services, banking, business hotels, housing and related infrastructure, agro-business, textiles, steel, and
the oil and gas industry.
3.2 Economical Basis
3.2.1 Agriculture and Livestock
a. Agricultural Products: Agriculture and natural resources are dominant economical activities in
the province and they have a significant presence of private sector activity. The major producers
of most agricultural commodities are smallholder farmers. Agribusiness has a large potential but
little has been done to promote value addition of the sector. The sector has remained largely in
traditional commodity markets. There has been a shortfall in two other areas: insufficient
demand-driven public-private partnership and little effort in identifying new value adding
products and tapping new market opportunities. The total amount of agricultural land of the
province is 24,000 hectares in which 18,000 hectares is irrigated and the remaining 6,000 hectare
receive rainfall (rain fed), also there are 336,223 hectares of natural forests and as well 75,832
hectares are pastures. The amount of agricultural land in comparison to the population is not
enough to fulfill the needs of population. 85 percent of the population is engaged in agriculture
and they get their income through agriculture products.
Wheat and cereal production is Kunar’s traditional agricultural mainstay. Fruits and nuts make up
37% of the total crop production. Other important crops include wheat, maize, potato, onion and
cotton. The main export products include walnut and grapes. Recently, with the assistance of the
international community, other agricultural activities have taken root, including sugarcane, fish
farms, and various fruits. Unfortunately the overall agricultural production dramatically declined
following four years of drought as well as the sustained fighting and instability in rural areas.
At the provincial level, local markets are operational to facilitate purchase and selling of
agricultural products. Most of the vegetables and crops produced in Kunar are supplied to
Nangarhar, Nuristan and Chatral areas of Pakistan. Some of the crops and vegetables are sold
locally. Business in both vegetables and fruits at provincial and regional markets is a growing
industry which absorbs lots of the population by providing them employment.
Source: Reports from the concerned Provincial Line Ministries Departments and ACCI – Jan, 2012
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b. Livestock and Poultry Productions: As there is a lack of agricultural land in Kunar province,
hence it has given a significant importance to livestock. Also the existence of abundant pastures
has provided a good opportunity to the growth and strengthening of the sector. According to the
animals survey conducted by FAO in 2002 (1380) there are 198000 cows, 97516 sheep, 354181
goats, 15809 donkeys, 3829622 poultry in the province. Since the fall of the Taliban regime, in
partnership with the international aid community, DAIL struggled to promote the agriculture
sector especially livestock in order to encourage farmers to develop the livestock.
Almost, one third of the Kunar’s population earns their income through livestock productions.
They are used for meat, milk, and wool, hides and skins production. Milk is processed into
different products like butter, cheese, yogurt and other local products. Sale of live animals is very
common. Wool and skins are mainly exported to Pakistan but in some parts of the provinces local
products are made from wool and sold in Jalalabad or provincial centre. Cheese and butter are the
milk products which are sold or bartered in the local market and Jalalabad.
To encourage the sector in Kunar province, IDEA-NEW/USAID awarded different kind of
unpaid in-kind grants including in-kind grants of US$ 1,000 to women grocery stores and US$
3,500 to each of the seven private poultry farms.
c. Fisheries: Kunar has got enough water resources and has a suitable climate for fish production
but unfortunately very less has been done in this sector. Fishing is primarily a private sector
activity in the province. In recent years with the financial assistance of PRT and IDEAN-
NEW/USAID, several fish ponds have been created in Khas Kunar, Nor Gal and Wata Por
districts for the production and export of fishes but unfortunately due to the low capacity for
policing, controlling, and actually enforcing the regulations has not helped to develop private
sector activity in a sustainable manner.
d. Honey bees: Honey bees’ production has a good potential and market in the province. Although
the climate is suitable for bees but due the last few years drought has remained affects on honey
bees. Majority of them have forced to migration to the neighboring province due to the no
availability of flowers. With the support of Relief International funded by the State Department -
Bureau of Population, Refugees and Migration (PRM) and Ministry of Counter Narcotics
(MoCN) there are 15 honey bee farms in Kunar province. The main obstacles in the development
of this business are the lack of technical staff, diseases outbreak and transportation.
3.2.2 Natural Resources
The province has abundant natural resources including forests for wood, marble and gemstones.
a. Forestry and Horticulture: Forestry activities are also predominantly private sector and present
immense opportunities for further private sector development. Forestry resources are exploited
not only for timber and furniture, but also for the fuel needs of the low-income populations, often
to the detriment of the environment. Wood is used for fuel for rural areas and for the majority of
the low-income urban population. Production of timber and timber products is mainly in the
hands of the private sector, ranging from the informal private sector involved in small-scale
timber processing and manufacture of furniture to the formal sector in the larger-scale saw
milling and wood products manufacturing plants. The capacity for management and regulation of
private sector activity in the exploitation of forestry resources is still inadequate in the province.
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Kunar is one of the four provinces of Afghanistan still having a significant cover of natural
coniferous forests and pastures. According to the Department of Agriculture, Irrigation and
Livestock, Kunar has 33, 6223 Ha of forest area and 75,832 Ha of pasture land. During last thirty
years these forests have indiscriminately cut and mainly sold to bordering Pakistan markets.
Kunar forests are the significant source for industrial and non industrial timbers of the country. It
was also a shelter for various kinds of wild animals; hence the cuttings of these forests by
national and international smugglers in addition to destruction of the forest it also destroyed the
life of wild animals. Until now 40 percent of the forest has aimlessly cut, as a result now 50,000
Ha of these forests needs to rehabilitation. The effects of this deforestation are being seen in
rapid run-off, giving rise to flash flooding which damages irrigation intakes and contributes
seriously to water loss. There is a lack of local leadership to organize repairs of irrigation intakes.
Until now 40 Ha pine forest has been rehabilitated in Dangam and Asmar district and also work is
ongoing on 50 Ha watershed programme in Mazar Dara, Noorgal District. DAIL has two
nurseries on 25 jerrib land in Asadabad and 10 jerrib nurseries in Asmar and Khas Kunar
districts, in which fruit and non fruit saplings are trained consecutively for the rehabilitation of
these forests. The Private Nurseries Association established in Kunar province which has 63
nurseries, as well as MADERA has established a Citrus Gardner’s Association which has 304
members. DAIL and other aid agencies are assisting these nurseries in the production of different
species of saplings.
b. Marble and Gemstones: Kunar province is endowed with a wealth of natural resources,
including extensive deposits of marble and gemstones, which have not been fully mapped
or quantified. A considerable part of the present mining activity is small-scale and
informal. While abundant marble resources exist in the province, due to the effects of war
over the last three decades, there has been limited opportunity to extract marble and
develop a thriving marble processing industry in the region. Currently, marble is exported
from Kunar as rough hewn blocks to Nangarhar and Pakistan where it is processed and
exported back to Afghanistan and other countries.
Currently, In Kunar, there are two large marble factories offering products to markets
inside Afghanistan – the Pashad Marble Factory in Khas Kunar district and the Aftab
Marble Company in Asadabad. The factory workers are inexperienced and lack training
in producing high quality marble which makes it difficult to compete with the regional
and neighboring country Pakistan marble in the international markets. The main reason is
the lack of workers technical knowledge and training on proper use of specialized
machinery which can result in wastage at the marble factories with blocks often breaking
during the cutting and polishing stages of production. IDEA-NEW/USAID awarded
unpaid in-kind grant worth US$ 6,000 for the upgrading the pashad marble factory.
The gem sector plays a key role in enhancement of domestic revenue, create diverse but
sustainable job opportunities, and gem mining makes strong economic, social and political
sense. Opportunities for gem mining are present in virtually every part of the province especially
in Chapa Dara, Sarkani and Manogai districts which needs the initial support from the
Government to facilitate a market-based sector in the province. The current markets for the sector
include domestic production and sales but more viably, export markets as close as to China,
Pakistan and India. A key challenge to a functioning gem market in Kunar province is the firmly
entrenched ways of doing business combined with a lack of modern gem market operations are
resulting in ad hoc resource extraction, virtually no state return in the form of taxes, licensing
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fees, custom payments, and no capacity building that would ensure sustainability of safe and
viable gemstone operations. The inadequacy of these arrangements provides considerable areas
for corrupt practices.
However, these valuable natural resources presents a potential for investment to produce high
quality marble with properly trained, professional workers in cutting, washing and designing
marble products.
c. Water and Energy: Energy is a critical input to economic growth. Energy projects support
agricultural growth and improve management of water resources. The energy infrastructure
projects will increase power supplies and contribute to expanded irrigation and rural
development. Energy provides essential power supplies needed for private sector development,
job creation and poverty reduction. Investment in the sector will create direct employment
opportunities in the development of local production and manufacturing fields, the construction
of grid systems and the commercial operations of the sector. The development of small energy
installations will also contribute to local economic development, particularly in rural areas. The current electricity generating capacity is some 400 kilowatts (KW) which is not enough for
the existing population and that is the reason majority of the investors does not pay proper
attention to their services due to the lack of power.
There are two major rivers in the province, the largest of which is the Asmar River. The
feasibility study of a Kunnar Hydro Power Development Project on Asmar River is already
completed in 2008. The production potential of this project is hydropower generation of 300MW
in the first stage and 900MW in the second stage. The total cost of the project is about US$1.8
billion. If invested in this project, it will take an estimated time of 5 years to complete and all
provinces of Afghanistan will be benefited including Kunner. The Project will have Impact on
supply of reliable hydropower to 1,340,000 beneficiaries, Hydropower generation 900MW,
supply of reliable hydropower for all sectors, contribution to the national food security
(production of more crops, fishery and industry) /Pump installation along Kunar River,
improvement of Environment and prevention from the air pollution, jobs opportunity and
increasing revenue.
The initiatives that are being under consideration in the areas of fishing, safety of navigation on
the river, rehabilitation and development of the infrastructures, land management and land
restoration programme, revitalization of farmers and producers extension services and other
economic activities for improving livelihoods and food security. These initiatives offer
opportunities for private sector participation in their design and implementation development
programmes.
Investment opportunities exist in the energy/electricity industry in:
Generation
Transmission
3.2.3 Industrial, Commercial and Services Sectors
The Soviet backed government in the 1980s worsened the situation by attempting to set up a centrally
planned economy. Many traditional industries, such as carpets, closed and moved to neighboring
countries and others, such as horticulture products, basically shut down because of the lack of suitable
inputs. Today, despite a recent resurgence, the Afghan economy is dominated by small-farm agriculture.
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Outside of agriculture, the private sector is overwhelmingly composed of informal family owned micro-
enterprises, most of which are engaged in trading or basic services. 80-90 percent of all economic activity
is informal. There are few small and medium enterprises and only a handful of large firms. The
manufacturing sector is tiny, export orientation is minimal and most producers, with the exception of a
few agro-processors, source their raw materials from abroad.
3.2.3.1 Industries
Currently, as the Kunar province industrial activities depends upon the productions through the traditional
activities, such as carpet weaving, tailoring, dried fruit production and processing, animal’s productions
and processing and other small-scale activities, the local industries includes;
a. Handicrafts: The Kunar handicrafts industry is highly labour intensive cottage based industry
and decentralized, being spread all over the province in rural and urban areas. Numerous artisans
are engaged in crafts work on part-time basis. The industry provides employment opportunities
to artisans (including those in carpet trade), which include a large number of women and people
belonging to the weaker sections of the society.
In addition to the high potential for employment, the sector is economically important from the
point of low capital investment, high ratio of value addition, and high potential for export. . The
diversity of the handicrafts is expressed on textiles – embroidery etc, metals – precious and semi-
precious, wood, precious and semi-precious stones, clay, woodwork, stone craft and jewelry. It is
a sector that is still not completely explored from the point of view of hidden potential areas and
also this segment of the industry is a good source for providing sustainable employment
opportunities to local population but unfortunately during the last few years a little has been done
to promote this sector.
b. Dairy Productions: With the end of the lengthy war in the country, rehabilitation is in progress
and there is now a good chance to develop and strengthen the milk and by products production.
This will help in the development of the economy and resistance against disease. There is a need
for government, national and international agencies to work for this sector, to solve the problems
and hardships faced by dairy businessmen and women and milk producers.
Rearing and keeping cows has been a family business for a long time in Afghanistan, especially
in Kunar province. A lot of people are involved in this business and receive benefits and income
from this livelihood and the Kunar breed has good reputation all over Afghanistan. The 30 years
of devastating war has damaged the dairy industry, and people are faced with a lot of problems
and hardships. According to a need assessment survey on dairy production in March, 2008
conducted by the Agriculture Development Association for Afghanistan or ADAA with the
financial support of DAI under the USAID funded project (The Afghanistan Small and Medium-
Sized Enterprise Development Activity – ASMED), there are around 285 dairy farmers and 7,620
milk producers in Kunar province. These farmers and milk producers are the best entity for the
development and progress of dairy industry, to increase the quality and quantity of agricultural
yields and raise the economical condition of area and Kunar province. These intensive activities
will develop employment opportunities for people and will decrease imports of packaged milk
from neighboring countries especially Pakistan.
The business of dairy production is important for the development and progress of the area and
has a positive effect on the life of humans, increasing the yield of many valuable agricultural
products like soybean, alfalfa, cotton, almonds, apples, oranges peaches, cherries grapefruit.
There will be a reduction in poppy cultivation in Kunar Province due to the rehabilitation,
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development and promotion of the dairy industry. There will be more trends to provide Job
opportunities to the community people at local level. Improving living conditions of the poor,
landless and small land owners involved in poppy industry (who are restrained from cultivation
and affected by eradication) providing them with a licit alternative livelihood. There needs to be a
complete laboratory for the diagnoses of animal diseases established in the province. Kunar
province has good climate for rearing milk producing cows. The dairy industry has progressed
well in Kunar Province, but still there are numerous problems needs high considerations of the
Government and other aid entities involved in the development process of the province.
c. Construction: Construction is expected to continue to be an important driver of private sector
activity in Kunar province. Most of the infrastructure projects including construction of roads,
bridges, buildings for schools and clinics, rehabilitation and construction of canals intakes and
protection walls are being implemented by private firms. The Afghan companies generally do not
have sufficient experience, skilled personnel, or equipment to handle larger contracts. However,
many Afghan companies have successfully completed contracts for primary roads and, as sub-
contractors to international companies, are increasingly becoming eligible for handling the larger
contracts too. The Afghan-owned construction industry is growing rapidly.
Due to the past years revolution the people of Afghanistan has lost their skills due to forced job
diversification. There is also anecdotal evidence of skilled labor coming in, notably in the
construction industry, at relatively high wages, to take on various activities like carpentry,
masonry, plumbing etc from the neighboring countries especially Pakistan. To fulfill the
space, since 2008, USAID has launched a vocational center in Shegal district of the province –
Kunar Construction Center (KCC) recently changed its name i.e. Kunar Vocational Organization
(KVO). The purpose of the KVO is to build a skilled local workforce that can then contribute to
the growth of the local economy. The KVO has provided hundreds of its graduates with the
confidence to work for local construction companies or have gone into business for themselves in
the areas of plumbing, masonry, painting, carpentry and electricity wiring. The Center has
become a hub for gainful employment in the region – graduates enjoy a high rate of job
placement – and a resource for local construction firms.
3.2.3.2 Trade and Commerce
As Kunar is one of the poorest provinces of Afghanistan depends upon the imports from its neighboring
country Pakistan. Nawa Pass and Ghakhi Pass, that lies about 10 miles south of Asadabad, are the major
border crossing points north of the Khyber Pass for the province. Nawa Pass is under constant observation
due to its relative ease to cross for commerce and its potential usage for smuggling and Taliban
insurgents.
Currently, Jalalabad city of Nangarhar province is the main trade route and market for Kunar province.
Torkham is the border crossing which serves as the main entryway into Afghanistan. Torkham is located
by the Khyber Pass, a mountain pass that links Afghanistan and Pakistan inside the Hindu Kush mountain
region. The majority of trade cargo moving into Afghanistan moves by truck after vessel transport to
Karachi, Pakistan. These supply trucks transit Pakistan and then cross into Afghanistan by way of a
border crossing. Torkham is the busier of the two major border crossings. It is also serves as a major
transport, shipping, and receiving site between Afghanistan and Pakistan
Kunar deals with a moderate amount of trade goods. The main goods that are imported from Pakistan
through Torkham and Jalalabad Custom’s points are cooking oil, tea, rice, flour, garments, construction
materials and food items. The main items that are exported through these points are apricots, grapes,
animal skins and dry fruits. Asadabad city is the hub of trade with major business in food commodities,
13
construction materials and agricultural products and inputs which are mostly imported from Pakistan
through Torkham. There is also substantial timber business in the city, both selling wood by-products and
also ready-made products including furniture. The furniture industry which plays a key role in economic
development has not well developed because majority of the skill labor working in Kunar province
belongs to neighboring countries especially Pakistan.
Another fast growing sector of trade in the province is selling of cars and its spare parts. Currently there
are 8 private car selling agencies that import cars from various provinces of Afghanistan and abroad.
The Afghanistan Chamber of Commerce (ACCI) with the financial assistance of ASMED/USAID
businesses in almost all sectors in the provinces are somewhat regulated by associations such as Transport
association, furniture association, financial cooperatives association, traders association, shopkeepers
association, timber traders association, Gold seller association and others. There are 2050 businessmen
registered in the ACCI. Each of the associations held meetings for the solution of the problems.
3.2.3.3 Transport and Logistics Services Sector:
Transportation and logistics services are also the major traditional private sector activities in the province.
This sector represents a vital support-industry to other sectors which will not be able to perform well
without an up-graded transport and logistics sector. The improvement of transport infrastructure in the
province (According to the report of Department of Public Work more than 275 Kilo Meter road has been
asphalted) has provided a significant facilitation and support to the Kunar’s trade. Goods and
commodities come from Pakistan, Iran and other neighboring countries through main transit routes and
flows back.
Kunar’s growing market for basic logistics and transportation services presents a ground-floor
opportunity for new providers. This opportunity is open to domestic and foreign firms of all sizes and
origins. While investment in the sector is increasing, the field is virgin territory for many services.
Commercial transport is a high-growth sector in Afghanistan especially in Kunar province. Among the
commercial markets as well as the donor community, demand for transport services is expected to remain
strong in the medium and long term. Kunar has immediate, almost unlimited demand for both industrial
materials and consumer products. Finally, improving infrastructure and security is resulting in increased
transshipment of goods throughout the province.
An important demand in the logistics sector is the provision of cold transportation and storage facilities
such as cold rooms and refrigerated trucks and containers. Some 20-40% of post-harvest horticulture
products are wasted because of poor packaging. Majority of the products also wasted due to the non
availability of cold storages in the province.
3.2.3.4 Other Services
Asadabad – The capital city of Kunar province has a market for various services from financial services
to moneychangers to commercial banks. Other services include communication services, post services,
various accommodation, telephone (both land line, although less developed than mobile) and internet
services.
Also, the local population can easily find services including hair dressers, beauty salons or gyms.
Shopping and local phone centers can all be found clustered in the heart of the city. The current level of
services in the districts is not as developed even though various services can be found in the districts with
limited clinics and access to communications.
Source: Interviews and reports from the PSD key stakeholders – Feb, 2012
14
4. Potential Investment Opportunities in Kunar Province
Investors in Kunar Province are exploiting only a small subset of available opportunities. As there is a
lack of production industry, hence a variety of investment opportunities are emerging. Some of these
involve the revival of traditional activities. Some involve the breaking of new ground (e.g., mobile phones
and nontraditional exports). Yet others represent activities that were carried out in the past but either on a
smaller scale (e.g., construction) or exclusively in the public sector (e.g., power generation, banking, and
etc). These activities may be categorized into several groups:
a. Import-substituting activities: As Kunar province never had a broad, diversified industrial base,
a substantial part of local demand was historically met through imports. With a large part of the
industrial base destroyed, imports have become even more important in post conflicts. Many of
these products, especially the low value-added products that use simple technology, represent
areas where Kunar and the people of the province may have a comparative advantage. Examples
include food products, such as poultry and wheat-based products, and light consumer products
such as soaps, shampoo, and laundry detergents.
b. Traditional exports: These include handicrafts such as carpets, woodwork, stone craft etc and a
wide range of agriculture and animals products especially beans, walnuts, animals skins and
wool. The bulk of Kunar's traditional export materials are produced in villages, especially
handicrafts by women weavers.
c. Exotic exports: A second potential area consists of "exotic" exports. Some of these are agro-
based and some mineral based. Examples include cashmere, spices such as cumin and saffron,
perfumes, herbicidal medicines, and gems.
d. Construction-related activities: The current boom in construction spending, not an unusual
feature in post conflict situations, has generated substantial opportunities in construction-related
activities. It is unclear if this sector will continue to remain an important arena for investment
activity as experienced in the last few years. However, in the interim, this environment can be a
breeding ground for entrepreneurship, which, in the future, may be channeled into other activities.
e. Infrastructure and utilities services: Existence and operations of mobile telephone companies
remain the best known example in Kunar province of significant private sector entry in the
infrastructure and utility sector.
However, a wide variety of opportunities wait to be exploited across various sectors. These
sectors include large and small-scale power generation, management contracts in power
distribution, fixed-line telephony, value-added services in telecommunications, transportation,
agribusiness, facilities of cold storages, agriculture productions processing, extraction of mines,
distribution and usage of water resources, construction of small-scale water systems and
construction and maintenance of roads.
5. Underlying Constraints on Private Sector Development
The central government has made important strides toward creating an enabling investment climate, but
much more remains to be done. Some underlying factors whose relative importance is difficult to
15
gauge and needs further analysis, but which certainly combine to constrain healthy private sector
development. The following sections consider these constraints:
a. Insecurity: Insecurity is clearly a significant factor – not solely or primarily the risk of outright
conflict or destruction (although that remains in all parts of the country), but especially the
insecurity of contracts, lack of a legal framework, weak justice system, and vulnerability of
private sector actors to extortion etc.
b. Access to land: Access to land is a very serious constraint faced by the private sector, including
uncertainties about titling, availability of serviced land, etc. For many entrepreneurs, land appears
to be a binding constraint on getting started.
c. Corruption and bureaucracy: are rampant, particularly at municipal level but also in other
spheres especially in customs and in Office of Revenue. The costs to the private sector in
time required, administrative burden, and disruption to business activity are likely to be even
more important than the monetary costs in many cases.
d. The entrance of Warlords and Commanders into business world: More generally, and
related to all of the above constraints, the power of warlords and commanders is frequently
used to extort resources from, distort, and often “capture” private sector activities. These
kinds of interactions, which reflect more generally the lack of rule of law and Government
authority in many parts of the province, heavily burden the private sector, obstruct
competition, and create further disincentives to private investment.
e. Limited sources of credit and financing: particularly for slightly longer-term investments,
are often cited as a serious constraint by businessmen. Only a two commercial banks and the
Kunar Investment and Finance Cooperative (KuIFC) are operating, the banks do not lend to
private businesses at all, or only on a highly restricted basis. The KuIFC commenced its
services with the financial support of a USAID funded programme – Rural Finance and
Cooperative Development (RuFCoD). Currently it offers loans to promote small scale
businesses with 2 percent benefit.
f. Regulatory Burdon: Although there have been improvements in the regulatory regime,
including streamlining business registration, customs procedures, and trade licensing
systems, there are still numerous excessive regulatory burdens.
g. Corruption: Corruption by public sector employees is considered a major constraint to
business. The illicit levies imposed by many local and regional authorities further exacerbate
the burden on the private sector. Private sector operators state that bribery to police, judicial
services, municipal, revenue office and other sector departments staff is almost a daily affair.
h. Illegal Trade: In some cases at least, it appears that the lucrative opium poppy and other
illegal trade opportunities has been such an attraction to private entrepreneurs that it has
diverted their attention from legitimate business opportunities.
i. Private sector capacity limitations: Also constitute a significant constraint, closely related
to the lack of relevant skills in the labor market. For example, many firms are unable to
16
respond to tender advertisements, submit qualified bids, keep accounts, etc. Lack of business
support services is another closely-related impediment to private sector activity.
j. Lack and inefficiency of basic infrastructure: In Kunar province electricity is a major
constraint to business. As electricity is often an essential input for manufacturing; in the
absence of a well-functioning power grid, alternative sources of power like small private
generators can be prohibitively expensive, especially for smaller firms, discouraging such
activities from starting up in the first place. Also non existence of metrology, standards, testing,
and quality (MSTQ) infrastructure has resulted imports and exports without information on standards.
k. Limited Access to land: The scarcity of serviced land, as well as unclear ownership of land,
is a major constraint to investment in Kunar province.
l. Lack of Skill Labor: High illiteracy, poor education, war, and political upheaval have
resulted in a critical shortage of skilled ???. Though some returning Afghans have brought
with them significant technical skills, the majority of the civil servants lack training, skills,
and education to effectively provide service (Source of info)
m. Legal Framework for Private Sector Development: Afghanistan has inherited many laws,
regulations, and procedures that inhibit trade and investment instead of encouraging it. A
legal framework that allows businesses to start up easily, to function efficiently while they
are in operation, and to exit the market in a timely and efficient manner is needed.
6. Accelerating Private Investment in Kunar – What Needs to be Done?
Achieving private sector growth on a sustained basis requires a combination of unleashing the private
sector by means of pro-active efforts to improve the business environment and supporting the private
sector through positive actions, carried out in a transparent and competitive manner that does not
detract from private sector leadership and dominance in the economy which may include, the need
for an overall political and security strategy that limits the power of those who have gained control of
the markets through force of arms and illicit activities. Below sets of actions are recommended that
will increase incentives to invest and improve capacity to carry out productive activities;
a. Improve access to inputs: Private firms need factors of production, notably finance, land,
skilled labor, physical utilities and infrastructure including power, water, telecoms, roads and
ports. Improved access to such inputs is important to weaken the hold of informal arrangements
that draw their strength to a large extent from control over such resources. Improved access will
require an expansion in the supply of inputs and also a more transparent process of allocating
them.
b. Clarify and strengthen property rights: By creating a sound legal, judicial, and regulatory
framework for investment. This framework is needed both for tangible property, such as land and
equipment, and for intangible property, such as a license to operate or a permit to import raw
materials. Strengthening property rights will require developing a sound legal framework and an
effective judicial system that enforces decisions.
Source: The World Bank Country Study – Afghanistan State Building, Sustaining Growth and Reducing poverty
17
c. Improve the flow of information: Informal arrangements thrive when information flows are
weak. When market players lack information-about market opportunities and trends, quality of
products, availability of resources, and government policies and regulations-they become
dependent on informal contacts and patrons for information because they do not know where else
to go. Lack of information about government policies also increases uncertainty. Actions in this
area will need to focus on increasing awareness of government policies, laws, and regulations.
d. Improve the provision of business services: Enterprises need a variety of business services to
help them enter (e.g., help with preparing business plans and negotiating with creditors), operate
and grow (e.g., trucking, freight forwarding, accounting, market information, quality assurance
services, management services, and legal assistance), and manage risk (e.g., insurance). These
services are best provided by the private sector but the government needs to put in place a policy
and regulatory framework to facilitate private entry.
e. Promote transparency and eradicate the nuisance taxes: There are numerous small taxes
which have very low revenue yields and no impact at all, except to enrich corrupt officials and
exacerbate the administrative and financial burden on the private sector. These should be cleared
out allowing the Government to focus on its main revenue sources (for which rates are
reasonable), and removing a significant burden on the private sector.
f. Encourage procurement practices at local level: Dialogue should have to be initiated with
international donors and military force commands to encourage them to make maximum efforts
to facilitate Afghan private sector participation in bidding and contracting (or sub-contracting, if
prime contracting is not realistic), on a transparent, competitive basis. Similar efforts should be
made in civilian reconstruction programs.
g. Developing value-added exports of agro-based goods: Pilot programs may be effective in
this regard. Innovative approaches to break into export markets (including contractual
arrangements with traders/wholesalers in the export markets, supported by necessary public
investments (e.g. in cold storage, power, logistics, quality control apparatus, etc.). More
generally, development of metrology, standards, testing, and quality (MSTQ) infrastructure will
be a critical ingredient for sustained export development in the province.
h. Jump-starting financial support for the private sector: Shortage of financing is widely
cited as a serious constraint hindering private investment in the province. Innovative approaches
can be explored to provide financing to encourage private investments and start-ups, in an
incentive-compatible manner. Provision of matching grants to support specified types of private
sector investments. Currently a little have been done under the USAID funded IDEA-NEW
programme through the provision of grants to local businesses, but it needs to be accelerated.
7. Legal Framework for Private Sector Development
Afghanistan is a country working hard to reestablish itself, encourage investment, and improve its
gross domestic income level following a quarter of a century of continuous war and strife. The
constant conflict has had a significant impact upon every aspect of daily life, business, and the
landscape. In addition to insecurity, poor land tenure and corruption, the high level of uncertainty and
Source: The Investment Clime in Afghanistan, the World Bank Report – Dec, 2005
18
risk facing investment in Afghanistan comes from the absence of a clear legal framework. However,
establishing a strong legal framework would lower risk and encourage investors.
7.1 Sector Licenses and registration:
Depending on the specific sector in which business engage, they may be required to obtain sector
licenses. In particular, all businesses (sole proprietors, partnerships or incorporated entities) with activities
in any of the following 22 sectors must obtain sector licenses:
MoCI Trading (Import and export), Transit and
Freight Forwarding Activities
Pharmaceutical production
Insurance Transportation
Banking Aviation
Foreign Exchange Dealer Construction
University and higher education Telecommunication
Hospital/Clinic Radio and TV
Drugstore/pharmacy Travel agency
Security Real estate agency
Animal clinic Printing press
Film production Oil pipeline
Natural resources: Iron, copper, coal, cement Hotels and restaurants
Detailed information on documentation, time fame, costs, and step by step procedure for most of the
sector licenses can be found on MoCI and AISA websites i.e. (www.commerce.gov.af and www.aisa.org.af).
a. Registration of For-Profit Entities: The Afghanistan Investment Support Agency (AISA) has
been charged with the responsibility to facilitate registration, licensing and promotion of all
investments in Afghanistan. AISA issues licenses for investors in manufacturing, health services,
construction and the service sector such as consulting and security services. It concentrates on
pro-active measures to attract industrial investment from both within and outside Afghanistan,
thus generating employment and economic growth. In capital cities of provinces small businesses are registered at municipality level, where
municipality issues business licenses to the traders, shopkeepers, wholesalers and others.
b. Registration of Non For-Profit Entities (NGO): An “NGO” is a domestic or foreign non-
governmental, non-political and not-for-profit organization which provides different kinds of
humanitarian and development services in Afghanistan. NGOs are registered by the NGO
Department within the IRoA – Ministry of Economy (MoEC), which is responsible for both
registration and supervision of NGOs. According to the Afghanistan NGO Law, an NGO must
submit a semi‐annual activity report and an annual activity report to the MoEC. Failure to submit
the reports could result in the dissolution of the NGO. The semi‐annual report should be prepared
in one original and three copies for submission to the central and regional offices of the MoEC. In
addition, an NGO must provide its annual financial statements/reports, prepared in accordance
with international auditing standards, to the MoEC.
c. Registering with Afghanistan Central Business Registry (ACBR): In accordance with the
Corporation and Limited Liability Company, Partnership, and Arbitration Laws of January2007,
businesses who want to become legal entities in Afghanistan (Corporations, limited liability
companies or partnerships), need to register with the newly created Afghanistan Central Business
19
Registry (ACBR) office within the Ministry of Commerce and Industries (MoCI). This one--
‐stop--‐shop streamlines and combines all business registration functions previously performed by
the Commercial Court, the Ministry of Justice (MoJ), the Ministry of Finance (MoF). This service
is provided for business persons, their agents, and through the Afghanistan Investment Support
Agency (AISA).
Businesses can now register, obtain a Tax Identification Number (TIN), register business
specification in the Revenue department of MoF, and publish business specification in the
Official Gazette, receive one bill to pay fees to the Da Afghanistan Bank branch, and get a
referral letter to any licensing agency all in one central location.
7.2 Public Finances
7.2.1 Revenue:
According to the Revenue’s Office report, revenue collection continues growing strongly by over
50 percent per year. The 2010/11 fiscal year closed with collections at an all time high of 200
Million Afghanis, exceeding the Ministry of Finance target of 90 Million, but this amount can be
decreased for the next upcoming years because the mentioned amount has a part of the shift of the
Kunar timbers with the presidential decree for nine months. Nowadays the registration of the
private firms are scaled back which will consequently impact on revenue. At the provincial level
Offices of Revenue of the Ministry of Finance are assigned to collect various kinds of taxes.
According to the Income Tax Law 2009, income tax is imposed on
Income from Afghan sources of all natural persons and legal persons, whether resident of
Afghanistan or not, and Income from non-Afghan or foreign sources of residents of Afghanistan
Income Tax:
All individual persons, companies, and organizations which are, according to the Income Tax
Law and Customs Law, required to pay taxes or customs duties, including social, non-profit and
welfare organizations which are withholding taxes from the salaries of employees or from rental
payments, are required to pay their income taxes to the Government concerned entities.
a. Corporate (legal persons): Corporate income tax is a flat tax of 20 percent (Article 4) of
net taxable income. Net taxable income is computed by deducting all ordinary and necessary
business expenses from gross income (Chapter 2). Corporate rates apply to legal entities such
as corporations, limited liability companies, and other legal entities. The annual tax return is
due and payable by the end of Jawza (3rd month) of the next fiscal year.
b. Personal (natural persons): Resident natural persons are taxed on income from all
sources worldwide, including but not limited to wages, salaries, rents, certain types of
partnership income, royalties, etc. Non-residents are taxed on all income with its source in
Afghanistan.
Source: Official websites of the Ministries of Economy, Trade and Commerce and AISA
Source: Interview with the Head of the Revenue Office – Jan 2012
20
c. Wage withholding tax: Employers with two or more employees are required to withhold
tax from their employees' salaries and wages based on the above rates (Article 58). There is a
monthly exemption of AFN 5000 per person. Salaries and wages include: regular pay,
overtime pay, cash allowances (e.g. food, transportation) and non-cash payments. These rates
are pro-rated based on the frequency of payment (monthly, weekly, etc.).
d. Sole proprietors: Self-employed individuals must file a tax return and are allowed to
deduct all ordinary and necessary business expenses against their income to compute net
taxable income. Tax is calculated on net taxable income using the same annual tax rates and
thresholds as applies to other individuals (Article 4).
e. Withholding tax on rental services (Article 59): This is a pre-payment of landlords'
income tax. Legal entity tenants and natural person tenants conducting business at the rented
property, and paying more than AFN 10,000 per month in rent are required to withhold the
tax (and are liable for the tax) at the time the rent is paid. The tax withheld is 10 percent of
the rent payment for payments over AFN 10,000 per month but less than or equal to AFN
100,000 per month, and 15 percent of the rent payment for payments over AFN 100,000.
f. Business Receipts Tax (BRT): A two percent business receipts tax is imposed on gross
receipts of all types of income of corporations and limited liability companies and individuals
whose income is more than AFN 750,000 per quarter, except for certain types of income
described below where the BRT rate is 5 percent or 10 percent.
g. Fixed taxes: There are fixed taxes in lieu of income tax imposed on certain business and
transaction types. In some cases the fixed tax is a prepayment of income tax but does not
relieve the taxpayer from the need to file an income and/ or business receipts tax return. The
following fixed taxes are addressed by MoF:
Fixed tax on imports
Fixed tax on the transport of goods or passengers for business purposes
Fixed tax of contractors
Fixed tax on exhibitions
Fixed tax on small businesses
7.2.2 Custom Duties:
Taxes, especially customs duties, are driving domestic revenues. Tax collection through the
custom duties in Asadabad reaching an estimated US$ 6.7 million/ 11.4 million in 2010 -11, grew
much more in comparison to the previous years, exceeding the Ministry of Finance target of 6.6
million. Behind these successful collection efforts is the high growth of tax and customs duties
collected during the transfer of timber for nine months with the decree of the president’s office
and through the registration process of imported vehicles in the province, which are the drivers of
revenue. Overall, more than half of the resources from customs are attributed to duties on motor
vehicles, parts imports and timbers and other agriculture products export from the province.
Majority of the imported materials from Pakistan are controlled at the torkham customs house.
The Kunar Customs House suggested the Nawapass or Ghakhipass roads as transit routes for
exports and imports from Pakistan which are near to Kunar province and also it will strengthen
play a key role in the growth of the custom duties revenue.
Source: Investment guide for investors to Afghanistan, Ministry of Mines – Afghanistan
21
8. Key stakeholders of Private Sector in the province and their role:
a. Line Departments and their role: (Municipality, Mines and Industries, Customs, Office of
Revenue, Economy, Water and Energy and Licensing.
To prepare and develop provincial strategic plan (PSP) for the PSD in the province
Ensure availability and explanation of PSD – PSP to all active stakeholder in the province
To encourage donors to actively participate in the development of private sector
Maintain effective coordination among stakeholder through facilitating of meetings and
mentoring
Liaises with the donors at provincial level on issues pertaining to development, arrangement of
meetings, field missions, and assessment on the levels of funding for on-going initiatives and
possible future projects.
Initiates and or liaises with the other stakeholders on surveys of the areas in close coordination
with relevant government departments
Monitors and evaluates the ongoing activities at provincial level
b. Role of Donors
In November 2001, with the possibility of the fall of the Taliban and a potential opening for sustainable
reconstruction work, the international donor community quickly established and implemented new
initiatives. In addition to providing their own assistance to Afghanistan, international organizations and
International financial institutions administered donor conferences, trust funds, and humanitarian and
reconstruction programs. The role of donors is as:
To help strengthen capacities of the government authorities
To support the implementation of the Afghanistan National Development Strategies
Alignment and base their support on the National Priority Programmes, systems and procedures
Eliminate duplication of efforts and rationalize activities to make them as cost-effective as
possible.
Provide timely, transparent and comprehensive information on aid flows
c. Role of the Afghanistan Chambers of Commerce and Industries (ACCI)
The Afghanistan Chamber of Commerce & Industries is an independent organization that is serving the
advocacy and business facilitation needs for a burgeoning private sector economy. ACCI is uniquely
positioned to influence the pace of economic growth and reform. Strategically nestled at the nexus of
public, investor, donor, academia, media, and foreign channels, the Chamber is facilitating the interests of
the Afghan private sector to a diverse audience. Through its business advocacy, the Chamber is seeking a
balance between regulation and revenue. As a vehicle for promoting trade and investment, it is opening
new markets for Afghan products, matching potential buyers with potential sellers, and advancing the
investment narrative of the nation. From access to networks of global partners, the Chamber is acquiring
valuable market information and international lobbying services on behalf of the Afghan business
community.
22
d. Role of UNAMA at provincial level
In line with the UNAMA mandate, as well as the development priorities identified in the ANDS-2008,
UNAMA focuses on the improvement of effective coordination of development efforts of UN Agencies
and other international stakeholders. UNAMA encourages the international community to support
strengthen Afghan ownership, align assistance to the national priorities and exercise high level of
transparency by sharing both technical and financial reports. UNAMA main focus in Kunar is now on
strengthening the role of sub-national government in coordination mechanisms by facilitating the
Provincial Development Committee (PDC) – an important coordinating body to build up the horizontal
links between and among line departments and stakeholders in order to better design and implement fully
integrated development plans. UNAMA collects data base on development activities and shares with all
stakeholders.
9. References:
- The Afghanistan Private Sector Development Strategy (2007/08 – 2012/13)(link)
- Afghanistan – State Building, Sustaining Growth and Reducing Poverty (the world bank country study)
- The Investment Climate in Afghanistan (The World Bank Report) – December, 2005
- Stability through Economic Initiatives – Department for International Development (DFID) special report
- MRRD and Central Statistics Office (The National Risk and Vulnerability Assessment) – May 2007
- Reports of the key local institutions (Department of Economy, ACCI, Customs, Office of Revenue)
- Need Assessment Survey on Dairy Production in Kunar province by DAI-ASMED/USAID
- GRM Report – Regional Rural Economic Regeneration Strategies (RRERS)
- Afghanistan Economic Update, The World Bank – October, 2011
- National and International Non-Governmental Organizations Reports/Fact Sheets
- Investors Guide to Afghanistan – Ministry of Mines(year)
- Kunar Provincial Development Plan (PDP)
- Kunar Provincial Profile (year)
- Afghanistan Small and Medium Enterprises Development (ASMED-Annual Report, 2008)
23
Annex I: The most active businesses in Kunar as of June 2012
No Type of Business Company
1 Poultry/eggs Toryalai Poultry Farm
Faqir Poultry Farm
Awami Poultry Farm
Mujib Poultry Farm
2 Fuel Stations Razaullah Filling Station
Bakhtullah Filling Station
Sher Jehan Filling Station
Mohammad Yousaf Filling Station
The number of Fuel station are increasing
3 Veterinary/Animals Health Care Asadabad Veterinary
Sawi Veterinary
Jawad animals medicines store
4 Construction
a. Construction Companies More than 150 private construction companies have
been registered in the Department of Economy
b. Imports of construction materials Haji Said Azim cement selling agency
Haji Sakhi Jan Cement agency
Arif Cement selling agency
5 Agriculture seed/grains Yar Mohammad Seed and Grains selling agency
Insaf Seed/Grain Selling company
Arifullah Seed & Grain selling agency
6 Medical drugs/Pharmacies Shifa Pharmacy
Almadina medical store
Masoud Pharmacy
7 Grocery Business Haji Said Azim whole seller
Asadullah whole seller
8 Productions
a. Marble Pashad Marble Factory
Aftab Marble Factory
b. Dairy Production Noorgal Cheese production
c. Construction timber Afghan Construction Timber company
Raz Mohammad Furniture company
9 Other Small enterprises Cold Beverages, tailoring
24
Annex II: Contact information of Key Stakeholders as of June 2012
Organization Contact Person Mobile Number
a. Local Government Institutions
Department of Economy Mr. Abdul Rashid Safi 0775064361
Customs House Haji Khanzad Gul 0777794095
Office of Revenue Mr. Abdul Ghafoor Nooristani 0700181331
Municipality Mr. Abdul Ghani Abbasi 0799323595
Afghan Chamber of Commerce Haji Mohammad Jalal 0700472077
b. Donors Supporting PSD
USAID John Wiels 070-232-3257
PRT CDR Mike Yesunas 079-823-1373
25
Annex III: Some of the donor funded projects for PSD
Project/Sub-Project Name Donor/Implementing Partner Project Description
Small Grants under IDEA-
NEW Programme
USAID/Development
Alternatives Incorporation (DAI)
The IDEA-New programme provided:
- 60,000 In-Kind Grant for the
upgrading of the Pashad Marble
factory in Kahs Kunar District
which has created 15 new job
opportunities
- Support to the Gender Micro
Enterprises (US$ 15,000
establishment of a cheese
production company in Noorgal
District in which 111 women are
working
- Established orchards, nurseries,
poultry farms, fish ponds
- Grants of US$ 1000 to women
grocery stores in Chowkai and
Noorgal Districts
Agriculture and personal loans
(Rural Finance and
Cooperatives Development)
USAID/Islamic Investment and
Finance Cooperatives (IIFC)
The programme is designed to support the
small and medium enterprises, agriculture
activities and trade in the province through
providing cash and non cash loans
Carpet Weaving US Embassy/Afghanistan Social
Development (ASD – a national
NGO
PRT
USAID-ASMED/DAI
- The US$ 48,800 worth project
trained 50 women in carpet weaving
in Asadabad during 6 months
- Other professional trainings women
including Tailoring, soap
production, Bee Keeping and Honey
production, Animals Husbandry,
preserves (Jams) production etc.
- The PRT funded projects trained
women in tailoring, preparation of
Jams, poultry raising etc in
Marawara, Narang, Noogal and
other districts of the province
- According to the ASMED Report
2008, Asmed provided a grant of
US$5,000 purchase order to Aimal
Carpet Weaving Center who used it
to provide training and equipment to
50 new employees. The factory is
located in the Pech Valley of Kunar
Province. The equipment was on
order with delivery expected in May
2008.
Poultry Raising USAID/DAI
US Embassy/Asia Foundation
- The IDEA-NEW programme has
provided a US$ 24,500 worth in-
kind grant to 7 poultry farms in
Kunar
- Provided poultry raising training to
30 women in Asadabad
Honey Bees State Department - Bureau of
Population, Refugees and
Migration (PRM) and Ministry of
Relief International distributed honey bees
and established 15 honey bee farms in the
province
26
Counter Narcotics (MoCN)/Relief
International
Fisheries - USAID-IDEA/NEW-
DAI
- PRT
With the financial support of USAID and
PRT several fish ponds have been created in
Watapor, Khas Kunar and Noorgal Districts
Skills Training for Afghan
Youth (STAY)
USAID/Education Development
Center Incorporation (EDC)
The Kunar Vocational Organization (KVO
formerly Kunar Construction Center-KCC)
located in Shigal District trained more than
700 local Afghans in carpentry, masonry,
painting, plumbing and electrical wiring;
Since its opening in March 2008, with the
help of USAID and the Kunar PRT, the KVO
has helped create jobs and build a skilled
work force for one of the fastest growing
economies in Kunar, the construction
industry.
Capacity Building of Small
and Medium Enterprises
USAID-ASMED/DAI ASMED has provided the below capacity
building to training to various SME’s in the
province in which more than 800 participants
were trained:
- Business Management,
communication and negotiations
- Project Management
- Basics of Business Marketing
- General IT and Management
- Accounting
- English Language
