Afghanistan- The one and only

Thomas Berry

April 7, 2010

International Relations

Professor Sean

Trade and Commerce of Afghanistan

Afghanistan is one of the least developed countries and poorest in this world. Though much of the economy of Afghanistan is still dependent on foreign aid, the country has seen dramatic improvement since the early 2000’s due to multiple reasons. One of these reasons is the huge investments and assistance by the United States and others. Another is the ending of a drought that plagued the country for four long years in the first decade of the 21^st century. The ending of this drought brought about unimaginable improvement in the agriculture area of the country.

In 1979, the Soviet Union invaded Afghanistan; civil war soon followed this invasion. These destructive occurrences crippled the country’s infrastructure and economic activity leading for Afghanistan to go from a traditional economy to a centrally planned economy. This centrally planned economy lasted until 2001 when it was switched with a free market economy. The economy of Afghanistan has fallen greatly since the 80’s due to factors such as loss of transportation to hampered efforts to rebuild the country. A big part of the Afghanistan economy for many years has been the trade of opium. In recent years, mainly due to the United States, this trade has been hampered at best and in past years has accounted for nearly a third of the GDP of Afghanistan.

Agriculture continues to play the biggest part in the Afghanistan economy, even though only 12% of Afghanistan’s total area is arable, and of that only 6% is actually cultivated. Of the land that is cultivated, irrigation is primitive at best, with people relying on winter snows and random spring showers to water crops. Very few machines and chemicals are used, and the country’s nut and fruit export is only $113 million, though estimates show that given the right investment this could jump to closer to $800 million. Wheat and cereal is Afghanistan’s mainstay. In 2005, estimates from the United Nations showed that roughly 9% of the entire Afghanistan population was involved opium cultivation. Opium cultivation, while illegal and risky, provides poor Afghans the chance to gain prosperity, even if it requires dealing with dangerous criminals. Opium catches ten fold more than wheat production and is the reason many Afghans switch to growing opium and won’t go back to growing wheat. It is also estimated that nearly 92% of the world’s opium comes from Afghanistan. This opium is this modified to make the narcotic heroin, which is then sold for a high price throughout the world. Heroin/opium alone in the world account for trade revenue of $120 billion. This is a major barrier stopping Afghans from farming other crops because of their pursuit for higher profits. Overall, Afghanistan thrives off of agriculture, and thus in order for the continued existence of Afghanistan, agriculture must be at a frontline when discussing the future prospects of the country.

Livestock, fishing, and timber all provide a minimum to the economy of Afghanistan. Since the beginning of the civil wars in the 80’s , much of the livestock in Afghanistan has greatly depleted. This is due to instability on the country and lack of grazing lands for the livestock. Fishing also provide a low amount for the economy, with some fishing being done in the lakes and rivers of Afghanistan. Forests only cover roughly 3% of the land in Afghanistan. Illegal logging, forest fires and the instability of the country have lead to massive deforestation in the country and bad forest management practices. As a result, this has lead to timber as a non-reliable source for the economy to rely upon. Overall, the instability of the country is the main reason behind of the decline in these three areas of the economy and with stability will see a rise.

Currently, the trade between Afghanistan and other countries is estimated at $5 billion US dollars a year. Since the fall of the Taliban, Afghanistan has seen its trade with foreign nations increase significantly from trading with the United States to the EU and Japan. Trade with the United States alone is roughly $500 million dollars. Some of the biggest exports of Afghanistan are Afghan hand-woven rugs, antique replicas, furs and leathers. Afghanistan is also greatly endowed with an abundance of natural resources. These include natural gas with 36 trillion cubic feet, petroleum, 3.6 billion barrels of oil, coal, gold, copper, marble, talc, chromite, zinc, sulfur, lead, salt, iron ore and precious and semi-precious stones. These stones include emeralds, ruby, sapphire, lapis, spinel, peridot, tourmaline, and garnet. In 2008, China signed a contract with Afghanistan concerning a copper mining project. The investment by China is of $2.8 billion dollars and gives Afghanistan an annual income of $400 million in addition to creating 20,000 new jobs for Afghans. This mine is one of the largest in the world for copper. Natural gas is one of Afghanistan’s biggest endowments, but with recent and past instability, the means to capture this gas has been unsuccessful. Overall, stability of the country is the biggest factor in securing a better economy through natural resources.

The Afghanistan fiscal year starts March 21^st and goes through to the following March 20. The currency used is the Afghani (AFN). In 2009, the estimated GDP of Afghanistan was $13 billion and GDP growth in 2009 was estimated at 15.1% with a forecasted 7.6% growth in 2010. The GDP per capita was estimated in 2009 of being $457. The GDP by sector is agriculture at 31%, industry at 26% and services at 43% as of 2008. An estimated 36% of the Afghanistan population is below the poverty line and the labor force consists of 15 million as of 2004. These numbers are low due to the high amount of emigrants to foreign countries due to the country’s instability. The labor force by occupation is 80% is agriculture, 10% is industry and services is 10%. The unemployment rate was 40% as of 2008. The main industries produce textiles, soap, shoes, furniture, fertilizer, cement, hand-woven rugs, natural gas, petroleum, coal and copper. It’s exports as of 2009 was at $2.128 billion, with export goods being opium, wheat, nuts and fruit, hand-woven rugs, cotton, wool, hides/pelts, and precious/semi-precious stones. Afghanistan’s main export partners are India with 23.7%, Pakistan with 22.7%, the United States with 21.3% and Russia with 4.1% as of 2007. Imports as of 2009 were at $8.55 billion with goods ranging from food to textiles. Afghanistan’s main import partners are Pakistan with 23.9%, the United States with 11.8%, Germany with 6.8%, India with 6.5%, Turkey with 5.1%, Turkmenistan with 5%, Russia with 4.7% and Kenya with 4.4% as of 2005. As of 2007, Afghanistan has a public debt of $1.23 billion, to Russia and Multilateral Development Banks. It’s annual revenues are $2.587 billion and it’s annual expenses are $2.86 billion as of 2009. Overall, Afghanistan is a developing country and without stability, will not have a chance at development.