Doing Business with Afghanistan
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KNOWLEDGE PARTNERSHIP PROGRAMME Doing Business with Afghanistan Federation of Indian Chambers of Commerce & Industry (FICCI) Submitted to Department for International Development (DFID) IPE Global Pvt. Ltd. November 2013 DOING BUSINESS WITH AFGHANISTAN CONFERNECE REPORT:18-20 NOVEMBER, 2013 2 DOING BUSINESS WITH AFGHANISTAN: CONFERENCE REPORT India and Afghanistan enjoy a rich civilization and historical relationship that spans many millennia; a relationship that has gained strength from India’s role in the reconstruction of Afghanistan. The principal objective of India’s development partnership is to assist in building indigenous Afghan capacity and institutions and to ensure that development touches all the regions of Afghanistan and encompasses all the sectors of development. Taking the spirit of rebuilding Afghanistan further FICCI, in partnership with Governments of India and Afghanistan, organized an International Conference cum Exhibition on “Doing Business with Afghanistan” on 18th -20th November 2013 at Federation House, New Delhi. The event was organized under the aegis of the Trade Commerce and Investment Opportunities Confidence Building Measure envisaged under the Heart of Asia Process for Afghanistan. Under the overarching theme, Doing Business with Afghanistan: Harnessing Afghanistan’s Economic Potential, the event attempted to unlock Afghanistan’s colossal investment potential, besides providing an excellent opportunity for Afghanistan and its near and extended neighbours to engage in a sincere dialogue to build confidence and promote economic cooperation at the regional level. The event included a high-level interactive Ministerial segment wherein Mr Salman Khurshid and Dr Hazrat Omar Zakhilwal, Mr Mohammad Asif Rahimi, Mr Noorullah Delawari, Amb Shaida Mohamad Abdali, Ambassador of Afghanistan to India Mr Sidharth Birla, President Elect, FICCI and Mr V S Sahney, President, SAARC CCI participated. A High powered Afghan delegation was led by Dr Zakhilwal, including Mr Mohammad Asif Rahimi, Minister of Agriculture, Irrigation and Livestock, Islamic Republic of Afghanistan, Mr Noorullah Delawari, Governor, Central Bank, Islamic Republic of Afghanistan, two Deputy Ministers, fifteen senior government officials and more than 70 business groups including women entrepreneurs and 30 exhibitors. A paper on ‘Doing Business with Afghanistan’ was released by the Indian External Affairs Minister. Also, a Memorandum of Understanding was signed and exchanged between FICCI and Afghanistan Chambers of Commerce & Industry on the occasion. 3 This was followed by panel discussions on thematic as well as sector specific issues covering mining, energy, agriculture & food processing, infrastructure, logistics, and select services, Exhibition of Made in Afghanistan Products, structured Business-to-Business Meetings and an interactive session with the Afghan Regulators. Each session provided an excellent opportunity to get information on investment and commercial prospects in various sectors in Afghanistan, as well as on the regulatory environment directly from Afghan government representatives and experts in the field. The Conference attracted over 400 participants from the business community, senior government officials, academicians and international development agencies from across nineteen countries which form the part of the Heart of Asia region. The Event was widely covered by media. The exhibition was also a great success with a whooping footfall of more than 500 per day over the three days with the exhibitors doing sales to the tune of Rs 10 lakhs. The event drew significant media coverage in Indian and Afghan dailies as well as international media. There were five Afghan media personnel participating in the event and they facilitated near real time transmission in Afghanistan TV channels. The wide publicity of the event and existing investment opportunities in Afghanistan created awareness among the international business community. Transition Beyond 2014 The year 2014 is extremely important for Afghanistan. The country will be concluding the transition in 3 key spheres- Security, Political and Economic transition. While security transition remains the key focal point of international community, the Doing Business with Afghanistan event focussed on the economic aspect, which is inter-related to the other two transitions. In the recent years Afghanistan has shown impressive growth rates, however going sustain this high growth momentum will be difficult to sustain after 2014. While Afghanistan offers huge opportunities, political and security uncertainties undermine business confidence. It is envisaged that the planned foreign troop withdrawal by the end of 2014 will have direct impact on the Afghan economy, by some estimates to the tune of two or three percentage 4 of GDP growth rates. The main reason for this will be the reduced local spending, currently being incurred by the foreign forces and also upto a certain extent by the concurrent withdrawal of foreign civilian organizations with international and national staff. Afghanistan’s aid dependency is one of the highest in the world and has increased sharply in the last decade. In 2010/11, total military and civilian aid1 was US$ 15.7 billion, about the same size as of the GDP. The civilian component of aid was nearly 40 percent of the GDP. Aid contributed to domestic demand for construction and procurement of goods and services thereby contributing to economic growth. Further the conditionality on compliances put by the traditional donors will get more and more stringent and will impact the aid flow adversely. In spite of all the above challenges, the message from the Afghan delegates and their leaders was clear that Afghanistan will emerge much stronger after 2014. Afghanistan is at the cusp of transition, the current event will go a long way towards allaying a lot of fears which are generated due to lack of awareness about the country. The economy no doubt requires a lot of helping hand, but it’s not all gloomy. A lot of opportunities exist for a business which knows how to manage its risks and reap huge rewards. Situated strategically at the heart of Asia, Afghanistan is a land bridge connecting South Asia with Central Asia, Eurasia and the Middle East. Afghanistan is also a key transit route for oil and gas of Central Asia to reach the major sea ports and markets of South Asia and overseas2. Inaugural cum Ministerial Session: Afghanistan’s Growth Strategy, Priorities & Plans In the inaugural session Mr. Khurshid said, “We have an open arms approach and we hope that your confidence in yourself will reflect the confidence you repose in India.” As the lead country in supporting Afghanistan’s nation building process, “We have no exit policy and we will be with you for so long as you desire, in good times and bad times,” he added. He said that it was important for Indian business to see and seize the enormous business opportunities in Afghanistan, and once B2B ties are firmly established they will become 1 Aid here does not include spending on international military forces. 5 major stepping stones and hubs for India’s outreach in South Asia, extending to Europe, and in Russia. Mr. Khurshid said on the question of success of Afghanistan efforts to re-build its institutions, “We should say that Afghanistan should succeed and express the confidence that Afghanistan will succeed.” A paper on ‘Doing Business with Afghanistan’ was released by the External Affairs Minister. Also, a Memorandum of Understanding was signed and exchanged between FICCI and Afghanistan Chambers of Commerce & Industry. Dr. Hazrat Omar Zakhilwal, Afghanistan’s Minister for Finance, pointed out that the Afghan government was committed to unleashing more and deeper reforms to make the business environment friendlier. “The future of Afghanistan resting on the planks of transit, trade and tourism will positively contribute to internal stability and stability in the region,” he said and assured Indian investors that they would be dealt with on a privilege basis and “You will consider your decision as a wise one.” He called upon the international business community not to be swayed by doomsday prediction of chaos in Afghanistan as the country was today undergoing three major transitions – security, political and economic. Speaking on the security transition in Afghanistan, he said, foreign troops will withdraw from the country by the end of 2014. Dr. Zakhilwal assured that the security of the country has strengthened and the people of Afghanistan are whole-heartedly supporting the efforts of the Afghan security forces. Dr. Zakhilwal said post-2014 elections, Afghanistan will be more secure, stable, united and process-oriented. Afghan’s young and talented populace is now in-charge of the affairs of the country and these young people are keen to ensure that apart from internal integration, Afghanistan integrates fully with the rest of the world. A manifestation of this integration is that there are today as many as 18.5 million mobile phones for the total population of 30 million, connecting the remotest districts of Afghanistan. 6 Furthermore, all the 10 candidates currently in the election fray have given highest priority to building an inclusive society and are willing to forsake winability for the sake of inclusiveness. This has further contributed to the unity of Afghan people. Mr. Sidharth Birla, President-elect, FICCI, said that FICCI is designated as the implementing agency of activities under the