Afghanistan’s economic score is 54.7, making it the 136th freest in the 2020 Index economically. The GDP development has increased lately, which stays blocked due to political instability, narco-dealing, and a dangerous lack of security.
If you want to start a business here, you need to keep in mind certain pointers which can cause an economic boom.
|Benefits of Doing Business in Afghanistan||The drawback of Doing Business in Afghanistan|
|Punctuality in meetings||Interruption in the meeting is common|
|Flexibility during delays||No small talk, no business for rudeness|
|Exchange of cards not essential||Progress is slow for most issues|
|Refreshments throughout meeting||Being direct is bossy/rude|
|People join simply to learn/listen||Correcting is embarrassing|
|Decisions include all sides||Fixed timings only during midday praying|
Advantages of doing business in Afghanistan
- Relationship Orientation
To gain the trust that will encourage business, an Afghan will need to know a great deal about you. This involves time spent asking plenty of questions. Be persistent and give answers since understanding and responsibilities are not considered without this often.
Afghans are keen on a person’s character and tend to doubt you if they observe you are nervous. Welcoming an Afghan to your home is an incredible method of building an exclusive relationship.
- Export Prices are Low
The credentials required to start a business are similar to other countries. For example, a bill of lading, exemption duty form, origin insurance certificates, and so on. Even while recruiting a lawyer to set up the records accordingly, the related charges of customs fees and transportation, exporting a shipment has a lower cost than most countries around the world.
- Transport and Logistics Business has High Demand
International assistance, government requests, and private sectors interest for the hardware and apparatus that is expected to embrace the nation’s recreation program are improving to come at a proper level. This way it helps in making a steady market for transport and logistic businesses.
- Food and Beverage Processing in High Quality
Afghanistan has a few business sectors to which it has exported specific items such as, dry fruits and nuts. Using the nation’s brand for traditional and high-quality products may give a bit of leeway to new producers.
- Large Market Proximity
The most populated nations of the world including China, India, and Pakistan are in proximity to Afghanistan. There is a huge market for Afghanistan’s products in these countries and it can be extended to other products as well.
- Material Costs are Low
Afghanistan’s parched atmosphere and summers are useful for developing an enormous assortment of foods and other materials. Afghanistan likewise has great surface water accessibility compared to Central Asian Republics and Iran. This implies Afghanistan could create lower irrigation costs than other nations.
- Preferred Trade Access
Handmade Afghan goods have been granted preferential duty-free access into the United States and European Union business sectors. This gives an advantage to the pricing of Afghan goods which won’t be valued without such access.
- Demand is High for Construction Materials
Because of the boom that Afghanistan is going through now, there is an interest in mineral-based materials, including paving stones, concrete and concrete squares, blocks, rock, wood, steel, sand, glass, and tile. Even essential materials like concrete are imported from Pakistan and Iran making Afghanistan potential for imports.
Disadvantages of doing business in Afghanistan
- Business License
The Afghanistan Investment Support Agency (AISA) handles the issuance of these licenses and the charges run from 100 USD to 5000 USD.
The process may take close to 6 days but could be longer as the Agency cross-checks for existing organizations, collects the investors’ or owners’ criminal history, and checks tax identification numbers with the Ministry of Finance.
- Contract Enforcements
Afghanistan is famous for being a country in which it is hard to implement contracts. Courts hold power because you cannot use that power to your advantage. If acquainted with the framework, you can help or guide to increase your chances of enforcing contracts.
- Weak Property Laws
Property rights and the laws related to it are feeble, since 2018. A legal framework is a blend of lawful codes administered by inadequate authorities and old folks or shuras. Changes to decrease corruption still remains to be frozen.
- Lack of Efficiency
Various business-accommodating changes have been set up, yet there is an absence of regular efficiency due to administrative bodies placing an imprint in business. There is hardly any existence of talented workers and a requirement for experts.
The administration’s effect is restricted since Afghanistan has serious problems regarding the financial framework.
- Use of The Term Candy
The vernacular used for working together in Afghanistan is “Shirni” or Candy. It simply means bribe. An all-around business will not succeed without a bribe.
The civil servant giving your permit to operate may deny you until you have offered him some good candy. Your provisions might be taken from your worksite if you have offered the police with candy as well.
- Financial Incapability Hampers Growth
Laws and security obstructions keep on blocking necessary development that can boost the economy. The monetary framework has restricted capacity and this hampers business growth. Laws that oversee banking are inadequate and the segment stays weak forever.
- Hiring Workers is a Challenge
A business may recruit or fire representatives as they see fit. They will give notice to different government offices while terminating workers with specific years of experience. There is no order for the minimum wages permitted by laws here.
A business may recruit an employee for any wage they are happy to work for. The current compensation in Afghanistan is 200 USD every year.
- Size of Government
The top salary and expense rates are 20 percent. The general taxation rate is 7.6 percent. Government spending is 26.3 percent of the nation’s yield (GDP) in recent years.
Inefficient security and government challenges have caused a huge monetary weakness. The financial plan surpluses have been found to have a middle value of 0.1 percent of GDP. Public debt is proportional to 7.1 percent of GDP.