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Afghanistan growing trade deficit rings alarm bells

Afghanistan growing trade deficit rings alarm bells

Mar 27, 2016 - 14:36

KABULinfo-icon (Pajhwok): The deteriorated security situation, administrative corruption and political instability are found main hurdles to the development of trade, industry and movement of goods and services in the country.

Pajhwok Afghan News has learnt that these problems have resulted in a sharp decline of trade activities, with tax evasion contributing to the phenomenon. Exact figures and the volume of Afghanistaninfo-icon’s exports are yet to be known.

Afghanistan continues to depend on imports despite a decade of massive US aid money inflow into the country, which could not be spent on basic infrastructural development projects and a large amount of the billions of dollars foreign aid ate up by administrative corruption.

A negative decline in trade balance:

According to the Central Statistics Organization (CSO), imports of Afghanistan had been on the increase between 2002 and 2012, but started declining after 2012, but still remained multiple times higher than exports.

Khanjan Alokozai, deputy head of the Afghanistan Chamber of Commerce and Industries (ACCI), said after the collapse of the Talibaninfo-icon regime, trade and industry thrived, , but declined after 2008 as foreign aid faded away.

He said the increase in exports from $100 million to $571 million was not satisfactory because it should have been in billions of dollars.

Concerned over the negative decline in trade balance, Alokozai asked the government to initiate economic development projects like development of natural resources, improvement in quality of local products and promotion of agricultureinfo-icon and industry sectors.

A research by the University of Central Asia in 2014 shows Afghanistan is a country deeply depended on imports from foreign countries. It says the country’s export products have a low quality as well.

The research paper includes interviewsinfo-icon from the individuals concerned and comments from the authorities concerned on exports and imports of Afghanistan and overall the trade deficit.

The paper maintains the Worldinfo-icon Bank (WB) has ranked Afghanistan at 148th place among 189 countries in cross borders trade.

According to the research, Afghanistan exports reached at the highest point in 2008 due to investments in small businesses.

Also an investigative report of Pajhwok Afghan News in 2013 shows several times higher Afghanistan’s exports compared to the registered facts and figures. 

Based on this report, exports figures, according to the private sector, were 79 percent less than stated due to tax evasion that casused Afghanistan billions of afghanis losses during the past eight years.

Najla Habib Yar, an economic expert and former head of the Exports Development Department at the Ministry of Commerce and Industry, said Afghanistan’s exports declined due to a lack of proper strategy, corruption in administration and customs offices.

According to her, the Ministry of Commerce and Industry (MoCI) and the ACCI should strive to find solution for this issue.

Abdul Salam Munir, head of the exports development department, said the problem to register exact figures of exports remained.

But Mir Zaman Popal, industries and export development director at ACCI, said they had fruitful discussions with the private sector in this regard and the issue had been resolved to some extent.

Ajmal Abdul Rahimzai, spokesman for the Ministry of Finance (MoF), acknowledged massive corruption in customs departments, adding that the MoF had initiated strict measures in this regard, citing the 20 percent increase in revenue as a proof. He, however, said complete eradication of corruption would take time.

Problems preventing business development

According to the report of the University of Central Asia (UCA), administrative corruption, insecurity and political uncertainty are main problems lowering Afghanistan’s exports.

The report says defects in the country’s economic system are paid more attention after the cut in international aid and withdrawal of foreign forces from Afghanistan.

The country’s high reliability on international aid and high expenses of Afghan forces has sidelined from attention the private sector rather than being the heart of economic growth.

The uncertain and unpredictable business environmentinfo-icon, dependence on donor organizations, a lack of industrial-level energy, access to market, and the dearth of a clear link between market needs and what the educationinfo-icon system offers are main issues impeding the growth of small and medium enterprises, the report says.

Had business affairs paid attention earlier, SMEs would have been better developed and investors become self-sufficient, the report adds.

A report from Afghanistan Investment Support Agency (AISA) also shows private companies are faced with different problems in Afghanistan.

Haji Abdur Rahman, director of Aumid Bahar beverages production company at Kabul Industrial Park, said neither the previous nor the current government had worked to encourage investments in the country and traders continued to suffer from several problems.

A lack of access to industrial land, electricity, microfinance and high amount of goods’ import, which are also available inside the country, are among problems traders face.

Rahman said goods produced inside the country should be promoted, an issue that was paid no attention.

However, Ministry of Commerce and Industry spokesman, Musafir Qoqandi, said his ministry has started efforts at promoting small and medium enterprises.

Without providing more information, he said, problems concerning industrial land, power and microfinance services had been resolved to some extent.

Qoqandi said the Ministry of Commerce and Industry would focus more on development of exports and supporting the private sector during the ongoing solar yearinfo-icon.

Insecurity and Corruption:

According to a survey launched by the World Bank between May 2013 and July 2014, financial corruption was cited a major obstacle to trade activities in Afghanistan.

Each of five company interviewed in the survey said administrative corruption is main obstacle to their activities and two in five companies called corruption in Afghan courts their major concern.

Based on the survey, insecurity has also slowed down business activities in the country.

More than 50 percent of companies interviewed said criminal activities are major obstacle to their activities; three in 10 companies paid six percent of their annual revenue for their security and protection.

Deputy Afghanistan Chamber of Commerce and Industry (ACCI) head, Khan Jan Alokozai, also called insecurity a big problem to improve business affairs.

A majority of traders are discouraged from investing in Afghanistan due to security problems. Most of businessmen have faced kidnapping and security threats and some were even killed, he said.

He asked the government to take decisive action against current problems plaguing the country’s business affairs.

Interior Ministry spokesman Seddiq Seddiqi said: “We have strong intention to improve security for the private sector. We are discussing with traders their problems and we implement all suggestions the private sector provides.”

Afghan forces units operating under ‘Public Protection Forces’ are ensuring security for all big projects, he said.

He said the units created in all 34 provinces had been activated four months ago and they played effective role in maintaining security.

Current problems limit exports to traditional items

Development director at the ACCI, Mirzaman Popal, said current problems, including bad environment for business activities, financial and administrative corruption and some other problems had limited Afghanistan exports to traditional items and heightened need for imports to meet domestic requirements.

Pakistaninfo-icon, China, Iran and India are major business partners of Afghanistan after Uzbekistan, Tajikistan, Russia and some other countries, he said.



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