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Industrial problems in Afghanistan

in Afghan Business

Industrial problems in Afghanistan

By: Waseequllah

Afghanistan, known as the heart of Asia, is one of the most important countries in the region for its strategic location. However, the 35 years of war has left the nation in shambles. Being in a state of war, it is almost impossible for any country to develop and stabilize its economy.

Afghanistan is one of the most impoverished nations in Asia with 36% of its population living below the poverty line.

If a country wants to develop its economy and stand firm in national and international markets, it must make a strong base for its industries, but unfortunately, we are missing this phenomenon by miles. There is no balance in trade, which is biting our economy every day. The fall in our currency rate is directly connected to the balance in trade of our country. With a considerable difference between import and export volumes, the economy cannot be easily stabilized.

If our government officials want to tackle this issue, then the only solution is to develop the industries in the country which will bring down the import rate and boost the export rate.

The following are the hurdles facing the industrial sector in Afghanistan:

  1. Electricity Break Down: Electricity plays the role of blood in the life of industries.  I have visited the industrial park in Pul-e-Charkhi area of capital Kabul. And, I witnessed the daily blackout from 4pm to 9-10pm. The industries dealing with fruits and vegetables suffer the most as they cannot provide the right temperature to store their items.  The company must use other sources to provide electricity for its products, and this increases the cost of production, reduces the net profit and discourages the industrialist from further production as the cost exceeds the profit.
  1. Custom Clearance at Airport: Every exporter has unyielding issues with the method of custom clearance at the airport. Export items such as fruits and vegetables are left in the open area until the checking process is done. As a result, a lot of the items go rotten before they are shipped. Availability of cold storages at custom clearance would resolve this issue.
  2. Taxation: Paying tax is the sole responsibility of every trader and industrialist. Afghanistan must improve its tax collection system in order to generate revenue and increase its GDP, and it needs to loosen its taxation rules if it wants to attract investors. After stagnation and decline in 2013-2014, Afghanistan’s total budgetary revenue increased by nearly 22% in 2015. This was an extraordinary turnaround of 30% as compared to the 8% drop in 2014. More than half of the revenue recovery was linked to stronger tax collection efforts, including better control of corruption. The more the government reforms its tax collection system, the more tax payers willingly pay their taxes.
  1. Non-Availability of Quality Packing Material: Packaging is very important in the sale of every product and companies must meet international packaging standard in order to be able to compete in the international market.  The non-availability of quality packaging material has been hurting the industries in Afghanistan. Most of the companies in Afghanistan are forced to import the packaging material from either Pakistan, India or Iran. This increases the cost of production and reduces the gross and net profit. Investors and industrialists are discouraged to invest further after receiving a very low amount of profit for all the efforts.

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