Economy of Afghanistan - Trade and Industry

Trade and Industry

The current trade between Afghanistan and other countries is at US$5 billion a year. In 1996, legal exports (excluding opium) were estimated at $80 million and imports estimated at $150 million per year. Since the collapse of the Taliban government in 2001, new trade relations are emerging with the United States, Pakistan, Iran, Turkmenistan, the EU, Japan, Uzbekistan, India and other countries. Trade between Afghanistan and the U.S. is beginning to grow at a fast pace, reaching up to approximately $500 million per year. The Afghan handwooven rugs are one of the most popular products exported from the country. Other products include hand crafted antique replicas as well as leather and furs.

Afghanistan is endowed with a wealth of natural resources, including extensive deposits of natural gas, petroleum, coal, marble, gold, copper, chromite, talc, barites, sulfur, lead, zinc, iron ore, salt, precious and semi-precious stones, and many rare earth elements. In 2006, a U.S. Geological Survey estimated that Afghanistan has as much as 36 trillion cubic feet (1.0×10^12 m3) of natural gas, 3.6 billion barrels (570×10^6 m3) of oil and condensate reserves. According to a 2007 assessment, Afghanistan has significant amounts of undiscovered non-fuel mineral resources. Geologists also found indications of abundant deposits of colored stones and gemstones, including emerald, ruby, sapphire, garnet, lapis, kunzite, spinel, tourmaline and peridot. In 2010, U.S. Pentagon officials along with American geologists have revealed the discovery of nearly $1 trillion in untapped mineral deposits in Afghanistan. A memo from the Pentagon stated that Afghanistan could become the "Saudi Arabia of lithium". Some believe, including Afghan President Hamid Karzai, that the untapped minerals are worth at least $3 trillion. Another US Geological Survey estimate from September 2011 showed that the Khanashin carbonatites in the Helmand Province of the country have an estimated 1 million metric tonnes of rare earth elements. Regina Dubey, Acting Director for the Department of Defence Task Force for Business and Stability Operations (TFBSO) stated that "this is just one more piece of evidence that Afghanistan's mineral sector has a bright future."

Afghanistan signed a copper deal with China (Metallurgical Corp. of China Ltd.) in 2008, which is to a large scale project that involves the investment of $2.8 billion dollars by China and an annual income of about $400 million dollars to the Afghan government. The country's Ainak copper mine, located in Logar province, is one of the biggest in the world and is expected to provide jobs to 20,000 Afghans. It is estimated to hold at least 11 million tonnes or 33 billion US dollars worth of copper. Experts believe that the production of copper could begin within two to three years and the iron ore in five to seven years as of 2010. The country's other recently announced treasure is the Hajigak iron ore mine, located 130 miles west of Kabul and is believed to hold an estimated 1.8 billion to 2 billion metric tons of the mineral used to make steel. AFISCO, an Indian consortium of seven companies, led by the Steel Authority of India Limited (SAIL), and Canada's Kilo Goldmines Ltd are expected to jointly invest $14.6 billion in developing the Hajigak iron mine. The country has several coal mines but need to be modernized.

Afghanistan's important resource in the past has been natural gas, which was first tapped in 1967. During the 1980s, gas sales accounted for $300 million a year in export revenues (56% of the total). 90% of these exports went to the Soviet Union to pay for imports and debts. However, during the withdrawal of Soviet troops in 1989, Afghanistan's natural gas fields were capped to prevent sabotage by the Mujahideen. Gas production has dropped from a high of 8.2 million cubic metres (2.9 × 108 cu ft) per day in the 1980s to a low of about 600,000 cubic meters (2.2 × 107 cu ft) in 2001. After the formation of the new Karzai administration, production of natural gas has been restored again. A locally owned company, Azizi Hotak General Trading Group, is currently the main supplier of diesel fuel, gasoline, jet fuel and LPG in Afghanistan. In December 2011, Afghanistan signed an oil exploration contract with China National Petroleum Corporation (CNPC) for the development of three oil fields along the Amu Darya river. The state will have its first oil refineries within the next three years, after which it will receive 70% of the profits from the sale of the oil and natural gas. CNPC began Afghan oil production in late October of 2012, with extracting 1.5 million barrels of oil annually.

Trade in goods smuggled into Pakistan once constituted a major source of revenue for Afghanistan. Many of the goods that were smuggled into Pakistan have originally entered Afghanistan from Pakistan, where they fell under the Afghan Trade and Transit Agreement (ATTA). This permitted goods bound for Afghanistan to transit through Pakistan free of duty. This resulted in considerable problems for the Pakistani government, particularly its customs bureau who realized that many of the items being resold on the black market in Pakistan were the very same items being allowed duty free exemption from Pakistani ports (mainly Karachi) on their way to Afghanistan. When Pakistan clamped down in 2003 on the types of goods permitted duty-free transit, and introducing stringent measures and labels to prevent such practices, re-routing of goods through Iran from the Persian Gulf increased significantly. The pre-2003 smuggling trade provided undocumented jobs to tens of thousands of Afghans and Pakistanis, but also helped fuel the black economy, often intertwined with the drug cartels, of both countries. Afghanistan and Pakistan recently signed into law a new Afghan-Pak Trade and Transit Agreement (APTTA), which allows their shipping trucks to transit goods within both nations. This revised US-sponsored APTTA agreement also allows Afghan trucks to transport exports to India via Pakistan through the Wagah crossing point. According to Afghanistan's Chamber of Commerce and Industries deputy head, Khan Jan Alokozai, about 500 shipping containers of trade goods enter Afghanistan via the Torkham and Wesh-Chaman border crossings on a daily basis. Other major trade routes in Afghanistan are via the crossing borders in Zaranj, Islam Qala, Hairatan, Shir Khan Bandar, and Towraghondi.