About 40 UK businesses operate from Afghanistan, including security companies and larger firms such as GSK, and Unilever.
Benefits for UK businesses exporting to Afghanistan:
- low levels of competition which create opportunities to bring in new products with potentially good profit margins
- United Arab Emirates (UAE) or Pakistan based companies with access to Afghan market offer low risk option for market entry
- young and growing population with 70% below 25 years of age
- new government committed to tackling corruption
- local, highly capable companies, which are adaptable, entrepreneurial and have survived in hard times
- a growing middle class
- significant potential for exploration in minerals, and in oil and gas
There are some unique challenges when doing business in Afghanistan. These include:
- terrorism and kidnapping threats
- Afghanistan is ranked very low in the World Bank’s Ease of Doing Business index
- weak infrastructure
- legal system isn’t experienced in dealing with complex commercial issues
- lack of experience in project development/management and in dealing with Western companies
- corruption is a major problem with Afghanistan ranking very low on Transparency International’s
- 3.1 Economic growth
The economy grew at about 9% per annum from 2001 to 2013.
The economy suffered in 2014 due to uncertainty over security and the outcome of the Presidential elections. As a result investors postponed projects. The election of the new president has reduced uncertainty. The new government is focussing on developing a new strategic partnership with the private sector to generate jobs and economic growth.
The World Bank currently forecasts Gross Domestic Product (GDP) growth of 2.5% in Afghanistan for 2015. Growth could reach 5% in the medium term, but that is dependent on improved stability and delivery of important reforms.
4 - UK and Afghanistan trade
The UK exported goods worth USD 48.8 million in 2014.
The UK exported services worth £600 million to Afghanistan in 2013.
Top UK goods exports included:
- power generation machinery
- electrical and electronic equipment
- meat, cereals, fish
- opto photo, technical, medical etc apparatus
- pharmaceutical and medical products
- 5.1 Aid funded projects
- supporting infrastructure development
- governmental capacity development
- 5.2 Mining
The Afghan government has put out to tender some major contracts following international standard tender processes. Some projects may receive final approval soon. Over the next 5 years the focus will be to explore and develop the potential through exploration.
Opportunities for UK companies include:
- early stage exploration support services
- 5.3 Oil and gas
There will be significant opportunities for UK companies to export mining, and oil and gas services and equipment to Afghanistan.
- 5.4 Security
- 5.5 Construction
There will be opportunities to supply price competitive construction equipment, products and services. The development of the retail sector is at an early stage, but there will be opportunities in retail franchising.
6 - Start-up considerations
You can enter the market by:
- exporting directly from the UK, or via Dubai or Pakistan
- setting up an agency
- appointing a distributor
- forming a joint venture or manufacture under license agreement with an Afghan company
If you’re looking to set up a company, normally a local subsidiary in Afghanistan, you should use a:
- consultant or accountant (UK companies operate in this field in Afghanistan)
- local or international lawyers operating in country
Business meetings with Afghan companies are sometimes held in Dubai, where some Afghan companies have offices.
7 - Legal considerations
You should seek legal and taxation advice before entering into a joint venture or similar type of partnership with a local company in Afghanistan.
- 7.1 Standards and technical regulations
- 7.2 Intellectual Property (IP)
8 - Tax and customs considerations
- Corporate taxation
- Customs duties
Afghanistan maintains the lowest import tariffs in the region. Tariff duties range from 2.5% to 16%.
Updated 15 September 2015