Economy of Afghanistan - Economic Development and Recovery

Economic Development and Recovery

Further information: Communications in Afghanistan

Afghanistan embarked on a modest economic development program in the 1930s. The government founded banks; introduced paper money; established a university; expanded primary, secondary, and technical schools; and sent students abroad for education. In 1952 it created the Helmand Valley Authority to manage the economic development of the Helmand and Arghandab valleys through irrigation and land development, a scheme which remains one of the country's most important capital resources.

In 1956, the government promulgated the first in a long series of ambitious development plans. By the late 1970s, these had achieved only mixed results due to flaws in the planning process as well as inadequate funding and a shortage of the skilled managers and technicians needed for implementation.

Da Afghanistan Bank serves as the central bank of the nation and the "Afghani" (AFN) is the national currency, with an exchange rate of about 47 Afghanis to 1 US dollar. There are over 16 different banks operating in the country, including Afghanistan International Bank, Kabul Bank, Azizi Bank, Pashtany Bank, Standard Chartered Bank, First Micro Finance Bank, and others. A new law on private investment provides three to seven-year tax holidays to eligible companies and a four-year exemption from exports tariffs and duties. According to a UN report in 2007, Afghanistan has received over $3.3 billion from its expatriate community in 2006. UN officials familiar with the issue said remittances to Afghanistan could have been more if the banking regulations are more convenient. Additionally, improvements to the business-enabling environment have resulted in more than $1.5 billion in telecom investment and created more than 100,000 jobs since 2003.

Afghanistan is a member of SAARC, ECO, OIC, and has an observer status in the Shanghai Cooperation Organisation (SCO). It seeks to complete the so-called New Silk Road trade project, which is aimed to connecting South Asia with Central Asia and the Middle East. This way Afghanistan will be able to collect large fees from trade passing through the country, including from the Trans-Afghanistan Pipeline. Foreign Minister Zalmai Rassoul stated that his nation's "goal is to achieve an Afghan economy whose growth is based on trade, private enterprise and investment". Experts believe that this will revolutionize the economy of the region.

The capital of Kabul symbolizes the spirits of all Afghans and international cooperation, sets at the heart of this highly resourceful region, with great potential to turn into a business hub. After 2002, the new geo-political dynamics and its subsequent business opportunities, rapid urban population growth and emergence of high unemployment, triggered the planning of urban extension towards the immediate north of Kabul, in the form of a new city.

In 2006, President Hamid Karzai established an independent board for the development of Kabul New City. The board brought together key stakeholders, including relevant government agencies, representation from private sector, urban specialists and economists, with cooperation from the government of Japan and French private sector, to prepare a master plan for the city in the context of Greater Kabul. The master plan and its implementation strategy for 2025 were endorsed by the Afghan Cabinet in early 2009. The initiative turned into one of the biggest commercially viable national development project of the country, expected to be led by the private sector.

As part of an attempt to modernize the city and boost the economy, a number of new high rise buildings are under construction by various developers. An initial concept design called the City of Light Development, envisioned by Hisham N. Ashkouri, for the development and the implementation of a privately based investment enterprise was proposed for a multi-function commercial, historic and cultural development within the limits of the Old City of Kabul, along the southern side of the Kabul River and along Jade Meywand Avenue. Some of the national development projects include the $35 bn New Kabul City next to the capital, the Ghazi Amanullah Khan City east of Jalalabad, and the Aino Mena in Kandahar. Similar development projects are also taking place in Herat in the west, Mazar-e-Sharif in the north and in other cities.

In the last decade, companies such as Coca Cola Company and PepsiCo launched or re-launched operations in Kabul. In addition, a number of local mineral water and juice plants, including factories of other products, were built. This not only promotes foreign investment but also makes the country less dependant on imports from neighboring countries and helps provide employment opportunity to many Afghans. Watan Group is a company based in Afghanistan that provides telecommunications, logistics and security services.