Marble and Granite Sector

Ministry of Industry and Commerce Islamic Republic of Afghanistan AFGHANISTAN’S NATIONAL EXPORT STRATEGY 2018-2022 AFGHANISTAN • MARBLE AND

NATIONAL EXPORT STRATEGY - MARBLE AND GRANITE SECTOR • 2018-2022 SECTOR GRANITE AND - MARBLE STRATEGY EXPORT NATIONAL GRANITE SECTOR The cornerstones of the Afghan economy ITC is the joint agency of the World Trade Organization and the United Nations. As part of ITC’s mandate of fostering sustainable development through increased trade opportunities, the Chief Economist and Export Strategy section offers a suite of trade-related strategy solutions to maximize the development pay-offs from trade. ITC-facilitated trade development strategies and roadmaps are oriented to the trade objectives of a country or region and can be tailored to high-level economic goals, specific development targets or particular sectors, allowing policymakers to choose their preferred level of engagement.

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Layout: Jesús Alés – www.sputnix.es AFGHANISTAN NATIONAL EXPORT STRATEGY 2018-2022 MARBLE AND GRANITE SECTOR

Ministry of Industry and Commerce Islamic Republic of Afghanistan This project is funded by the European Union

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ACKNOWLEDGEMENTS

The Marble and Granite Sector Export Strategy forms an integral part of Afghanistan’s National Export Strategy (NES). It was developed under the aegis of the Islamic Republic of Afghanistan, the leadership of the Ministry of Industry and Commerce ( MoIC ) and the Afghanistan Chamber of Commerce and Industry (ACCI), in close collaboration with the Afghanistan National Standards Authority (ANSA). The Strategy builds on the work and priorities established by the Ministry of Mines and Petroleum (MoMP), and benefited from the contribution of sector stakeholders and associations. This Strategy was elaborated thanks to the technical assistance of the International Trade Centre (ITC) and falls under the framework of the European Union (EU)-funded ‘Advancing Afghan Trade : EU Trade-Related Assistance’ project.

This document reflects the ambitions of the public and private stakeholders who defined the enhancements and future orientations for the sector with a view to increasing export performance and social dividends. iv

NOTE TO THE READER

Afghanistan’s NES was developed based on a participatory approach during which over 500 Afghan industry leaders, small business owners, farmers and public sector representatives held consultations to reach consensus on key sector competitiveness issues and priority activities. These inclusive consultations were held throughout the country, including in Mazar-e-Sharif, Herat, Kandahar and Kabul, with participation of stakeholders coming from Nangarhar Province.

Besides in-depth research and value chain analysis, these consultations were com- plemented by :

Factory visits through which supply chain assessments were carried out to gain further knowledge on key issues such as quality procedures, technical skills, lean management, quality of raw materials, access to market, etc. Interviews with domestic, regional and international buyers to guide the NES with strategic insights and market intelligence as well as buyers’ requirements in terms of quality standards, food safety, packaging, buying cycles, distribution channels, prices, etc. Donor coordination meetings to identify synergies with ongoing / planned initiatives of development partners to eventually result in collaboration during the implementation phase.

In spirit and in action : The NES is aligned with existing national and sector-specific plans and policies and builds on ongoing initiatives in areas related to private sector development, regional integration, investment, and youth and women’s economic empowerment.

Equally important, the NES initiative already accommodates budgeting to support implementation of critical pilot activities identified during the design process. This will ensure that impact and momentum are generated from early on, and support further resource mobilization and confidence-building. v

The principal outputs of the NES Afghanistan design initiative are endorsed, coherent and comprehensive export Strategy documents with a five-year detailed plan of action ( PoA ) and implementation management framework. These documents include :

1. A main NES document, which contains Trade Support Functional strategies, offering critical support across value chains and acting as enablers for sector development. 2. Individual NES priority sector strategies packaged as separate documents but in alignment with the main NES findings and overarching strategic objectives.

NES Afghanistan

Main NES document comprising Trade Support Functional Strategies :

Quality management Trade facilitation Trade information and promotion Skills development Business and professional services Access to finance

Individual NES priority sector documents :

Saffron Fresh fruits and vegetables Dried fruits and nuts Carpets Marble and granite Precious stones and jewellery vi

CONTENTS

Acknowledgements iii Note to the reader iv

EXECUTIVE SUMMARY 1

MARBLE AND GRANITE’S PRESTIGIOUS POSITIONING IN THE GLOBAL STONE SECTOR 5

PRODUCT MAP 5

GLOBAL PLAYERS 6 Global exporters 6 Growth of Asia and the Middle East as importing regions 9

GLOBAL TRENDS 11 Cracking the growth of global demand 11 Significant competition from regional quarries 13 Re-export stimulated by worldwide demand for high-quality stone 14 Bricks and clicks : emergence of e-commerce as a distribution channel 16

AFGHANISTAN : BETWEEN A ROCK AND A HARD PLACE 17

NOT YET CARVED IN STONE : A SECTOR OFFERING BEAUTY AND HOPE FOR AFGHANISTAN 17

PRODUCTION CRAVING FOR ROCK-SOLID INVESTMENTS 19

CASTING THE FIRST STONE : A VALUE CHAIN WITH HIGH POTENTIAL 20 A brick-and-mortar production 20 Pebbly distribution 21

PROMISING EXPORT PERFORMANCE 23

POLISHING THE KNOWLEDGE OF KEY COMPETITIVENESS CONSTRAINTS 25 Compete 25 Change 31

MARKETS : SHAPING STRATEGIC DIRECTION 33

MARKET POSITIONING : THE REAL GEM IN PREMIUM AND HIGH-QUALITY SEGMENTS 33 Short-term priorities ( 1-3 years ) : Increase production quality and volume of existing plants 33 Medium-to-long-term priorities ( +3 years ) : Move up the value chain 33 vii

EXTRACTING FACTORS DRIVING GROWTH 34 Short-term : polish product quality and cultivate relationships with leading importers 34 Long-term : capitalize on established brand and advance up the value chain 35

THE PHILOSOPHER’S STONE : VISION AND STRATEGIC OBJECTIVES 37

VISION 37

STRATEGIC OBJECTIVES 37 Strategic objective 1 : Improve supply-side capacity and quality management to ensure adequate volume and supply consistency. 38 Strategic objective 2 : Improve the business environment and reduce costs of doing business 40 Strategic objective 3 : Improve market access by providing market intelligence 42

LEAVING NO STONE UNTURNED : MOVING TO ACTION 45

KEY REQUIREMENTS FOR EFFECTIVE IMPLEMENTATION 45

STRATEGIC PLAN OF ACTION 47

REFERENCES 55 viii

FIGURES

Figure 1 : Theory of change 3 Figure 2 : Marble and granite products 6 Figure 3 : Top marble and granite exporting countries 2016 ( US $ millions ) 7 Figure 4 : Imports by world regions, 2006 and 2016 ( US $ millions ) 10 Figure 5 : Top 10 importing countries by imported value in 2006 and 2016 ( US $ millions ) 10 Figure 6 : World exports of marble and granite, 2005–2016 ( US $ millions ) 11 Figure 7 : Performance of regional competitors of Afghanistan, 2005–2016 ( US $ millions ) 14 Figure 8 : Exports of marble ( left ) and granite ( right ) in different stages of processing, 2005–2016 ( US $ millions ) 15 Figure 9 : Re-exporting hubs of marble and granite 16 Figure 10 : Costs of processing of marble and granite 19 Figure 11 : Current value chain 22 Figure 12 : Trade balance of Afghan marble and granite, 2005–2016 ( US $ thousands ) 24 Figure 13 : Comparison of exported value of Afghan natural stone, 2010 ( left ) and 2015 ( right ) ( US $ thousands ) 24 Figure 14 : Compete problem tree 27 Figure 15 : Connect problem tree 30 Figure 16 : Change problem tree 32 Figure 17 : Future value chain, strategic objective 1 39 Figure 18 : Future value chain, strategic objective 2 41 Figure 19 : Future value chain, strategic objective 3 43 ix

BOXES

Box 1 : Main industries related to marble and granite 5 Box 2 : Marble and granite forecast 12 Box 3 : Implications for Afghanistan 12 Box 4 : Quality and price determinants of marble and granite 18 Box 5 : Standard machinery required for quarrying and processing 20 Box 6 : Quarries in Afghanistan 23 Source: ITC xi

ACRONYMS

The following abbreviations are used :

ACCI Afghanistan Chamber of Commerce and Industries MoCIT Ministry of Communications and Information Technology ACIM Afghanistan Chamber of Industries and Mines MoF Ministry of Finance AMGPA Afghanistan Marble and Granite Processor Association MoFA Ministry of Foreign Affairs

AMIA Afghanistan Marble Industry Association MoMP Ministry of Mines and Petroleum

ANSA Afghanistan National Standards Authority NES National Export Strategy

B2B Business-to-business PoA Plan of Action

EPAA Export Promotion Agency of Afghanistan R&D Research and development

EU European Union SMEs Small and medium-sized enterprises

ITC International Trade Centre TVET Technical and Vocational Education and Training

MENA Middle East–North Africa UAE United Arab Emirates

MoCI Ministry of Commerce and Industries Source: ITC 1

EXECUTIVE SUMMARY

Afghanistan’s marble and granite sector possesses sig- This Strategy is driven by the following overall vision : nificant potential to stimulate national-level development. With rich deposits of exquisitely coloured stone scattered throughout the country, the sector has access to a natural resource that is highly prized ( and highly priced ) around Marble and granite : the cornerstones the world. With this in mind, the NES has designated mar- of the Afghan economy ble and granite as a priority sector. Notably, achievements in this sector are expected to generate spill over effects in the production and exports of other promising dimension “ stones, such as onyx and travertine. ” While Afghanistan is blessed with vast reserves of high- quality natural stone, there are still several deposits remain- To achieve this vision, the Strategy will pursue measures ing untouched and even undetected. Further, extractive and to reduce binding constraints on trade competitiveness, processing companies are not operating to their full capac- along with capitalizing on unrealized opportunities for sec- ity. To date, several constraints including lack of invest- tor enterprises. In the short-to-medium term, the Strategy will ment, regulatory framework, security concerns and weak assist Afghan exporters to boost exports by offering value infrastructure, have kept the sector in an underdeveloped added-products in current markets and penetrating prom- state. The majority of high-quality crude marble and granite ising new markets. In terms of long-term capacity-building, is sold without any value addition. For the sector to achieve structural reforms and technology upgrades that will further its full potential, there must be a concerted effort to upgrade enable sector enterprises to increase their ability to export Afghanistan’s stone processing capacity and diversify the processed marble, and granite and penetrate new markets sector’s product basket. Besides the sale of unprocessed will be implemented. stone, the sector should also endeavour to meet demand for semi-processed stone, fully processed retail-ready tiles The Strategy focuses on three strategic objectives. and slabs, home decor products ( e.g. vases, mosaics and carved decorative items ), and marble and granite powder. Recognizing the existing opportunities and challenges, public and private sector stakeholders in Afghanistan’s mar- STRATEGIC OBJECTIVE 1 : IMPROVE ble and granite sector have joined forces to develop this SUPPLY-SIDE CAPACITY AND QUALITY sector strategy. The Strategy lays out a highly localized and practical road map to revitalize the marble and granite sec- MANAGEMENT TO ENSURE ADEQUATE tor, spur small and medium-sized enterprise ( SME ) competi- VOLUME AND SUPPLY CONSISTENCY. tiveness, and raise the standard of living in the communities engaged in the sector’s value chain. This Strategy comple- Increasing the available supply of high-quality marble and ments and supports the government’s ongoing efforts to granite is a critical step towards boosting the sector’s export improve the performance of Afghanistan’s minerals and hy- performance. To achieve this end, steps must be taken to drocarbons sector through the recently developed Mining upgrade facilities and machinery used in the sector, in order Sector Roadmap ( 2017 ). to put Afghan enterprises on a par with their international competitors. Improvements in technology in the quarrying Accordingly, the Strategy aims to achieve the following im- and processing stages and the adoption of quality stand- pact, with the overarching goal of strengthening the Afghan ards will gradually translate to increased exports of higher marble and granite value proposition to international buyers : quality semi-processed and finished marble, and granite Increase marble and granite production and export in products. terms of volume and value ; Gradual migration from medium / low-quality unprocessed material to the production of high-quality processed stone ; Positioning of Afghan marble and granite as a high-quality product with a lasting brand in international markets.

[ EXECUTIVE SUMMARY ] 2

Source: ITC

STRATEGIC OBJECTIVE 2 : IMPROVE STRATEGIC OBJECTIVE 3 : IMPROVE THE BUSINESS ENVIRONMENT BY FIRMS’ ABILITY TO ACCESS MARKETS STREAMLINING PRODUCTION AND THROUGH TRADE INTELLIGENCE EXPORT PROCEDURES While Afghanistan’s marble and granite enterprises have al- The Afghan marble and granite sector currently faces sig- ready established market links with regional buyers, there is nificant regulatory and administrative hurdles when it comes still significant potential to increase export volumes to these to opening and operating quarries and processing facilities. markets. There must also be a concerted effort to penetrate These impediments can be addressed with the launch of a untapped markets, with the goal of diversifying marble and one-stop shop, operated by the Afghan Government, that is granite export destinations. To succeed in this area, export- dedicated to providing administrative and regulatory compli- ers must improve their ability to navigate regional and inter- ance support to marble and granite enterprises. national markets and connect to potential buyers. Promotion Afghan marble and granite products face higher costs programmes and marketing strategies will raise awareness and uncompetitive prices in the domestic and global mar- of Afghan marble and granite, and spread the benefits of kets. Consolidating mining and processing facilities at large- using them in related industries. Enhancing the capacity of scale industrial parks will contribute to attracting investment, industry associations will allow exporters to better respond due to cost savings achieved through economies of scale. to the needs of marble and granite enterprises and pro- Once productivity is increased, there remains the challenge duce / disseminate actionable market intelligence. of delivering Afghan marble and granite to international buyers. This can be addressed, in part, by reviewing export Figure 1 captures the marble and granite sector vision and procedures on the Afghan side and simplifying them. strategic objectives. With increased transparency provided by the one-stop shop, and with convoluted export procedures streamlined, the sector as a whole will become more appealing to investors. This is critical for the sector’s development, as the relatively small number of enterprises has resulted in oligopoly-like market conditions that keep prices high and deter further growth.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 3

Figure 1 : Theory of change

Increase marble and granite production and export in terms of volume and value Gradual migration from medium low quality unprocessed material to the production of high -quality processed stone Positioning of Afghan marble and granite as a high-quality product with a lasting brand in IMPACT international markets

VISION

Marble and granite: The cornerstones of the Afghan economy

1. Improve supply-side capacity 2. Improve the business 3. Improve firm’s ability to

STRATEGIC OBJECTIVES STRATEGIC and quality management to environment by streamlining access markets through trade ensure adequate volume and production and export intelligence supply consistency procedures

Increase absolute Enable strong Establish a Attract Upgrade volumes while market links with strong Afghan investment and technology improving global distribution brand for support through quality levels channels marble and the Government granite STRATEGIC THRUSTS STRATEGIC

A high-potential sector needing support to unlock untouched, redundant resources through modernization and technological upgrades in quarrying and processing IMPACT

Compete Connect Change

Limited domestic availability Poor logistics and of critical machinery trade-related infrastructure and tools Limited coordination Weak access to working Low productivity and low and dialogue among value and investment capital volume of production chain actors Poor investment in RD Severe quarrying and Underdeveloped marketing Lack of expertise in marble processing losses and branding and granite production Limited access to credit and Weak market intelligence Limited access to quarry government support schemes provision and land permits SITUATION ANALYSIS SITUATION Poor production management Weak market mechanism Weak management skills practices limiting ability to connect with foreign buyers

[ EXECUTIVE SUMMARY ] Source: ITC 5

MARBLE AND GRANITE’S PRESTIGIOUS POSITIONING IN THE GLOBAL STONE SECTOR

PRODUCT MAP

Since ancient times, marble has been a symbol of beauty and wealth. Its colour ranges from plain white to blue-grey, red, yellow, green and deep black. The very tight crystalline structure allows marble to be finely polished, making the stone a popular material for architectural and sculptural uses. Marble has more flexible applications than granite, as it can be formed into various shapes and slabs due to its softer composition. Marble is widely used for decorative and structural purposes, ranging from outdoor sculptures to walls, veneers, flooring, ornamental features, stairways and walkways. Beyond construction and architectural uses, smaller marble pieces can be further processed to produce handicrafts. Tiles and mosaics made of marble are used for decorative purposes. Marble powder, which accrues as waste when cutting the stone, can be applied in both chemical and artificial stone production ; as a pigment for whitening in paint or paper ; as a calcium feed supplement for animals ; and as Photo: ITC lime for agricultural soil treatment. Granite is another popular building substance and is en- tirely made of crystals. Granite is more durable than marble Granite is also commonly used in the construction of walls, and less prone to scratches and chipping. Such features paved paths and bridges. Roughly cut granite blocks are make granite more suitable for areas exposed to higher wear relatively inexpensive and provide a rugged-yet-elegant ap- and tear, while marble is more often applied for decorative pearance. Due to its high durability and aesthetic appeal, purposes. Granite’s durability makes it particularly suitable granite is also often used for street kerbing and monuments. for creating workstations, such as kitchen countertops.

Box 1 : Main industries related to marble and granite

• Construction • Paint and coatings ( marble powder ) • Architecture and interior design • Lime and chalk ( marble powder ) • Sculpture and decorative stones • Animal feed ( marble powder ) • Do-it-yourself projects ( e.g. tiles and mosaic ) • Artificial stone production ( marble and granite powder and • Agriculture ( marble powder ) shredded stones )

[ MARBLE AND GRANITE’S PRESTIGIOUS POSITIONING IN THE GLOBAL STONE SECTOR ] 6

Figure 2 : Marble and granite products

Applications of marble granite

Powder Dimension stones Panels Tiles Mosaic Shredded stones (predominantly marble)

Artificial stone Construction Construction Construction Decorative stones production Chemical usage

Sculptures and Sculptures and Architecture and Pigment for stone carving stone carving Decorative stones interior design whitening

Crushed stone as Architecture and Architecture and Architecture and lime for agricultural Calcium feed interior design interior design interior design supplement soil treatment

Artificial stone Lime for Practical crafts Practical crafts Practical crafts production agricultural soil treatment

Artificial stone production

GLOBAL PLAYERS

GLOBAL EXPORTERS

Natural marble and granite deposits are located in Italy, China, Turkey, the Philippines, France, Brazil, the United States of America, India, Morocco, Australia, the Russian Federation, Japan, Portugal, Greece , the Islamic Republic of Iran and Spain. Despite a lot of untapped resources, marble is not an infinite resource, given that it is formed through slow compression by gravity layer upon layer. The world’s biggest producers of marble and granite are China, India, Turkey, Italy, the Islamic Republic of Iran, Spain and Brazil. These seven countries are responsible for approximately 71 % of all natural marble and granite produced internationally.1 In the following section, the most important players in the global marble and granite industry are profiled. On the export side, countries with exports worth more than US $ 1 billion are considered for further investigation.

1.– Centre for the Promotion of Imports from Developing Countries ( 2010 ). CBI Market Survey – The Natural Stone and Stone Products Market in the EU, p. 13. Available from www.marble-institute.com/default/assets/File/ stone-professionals/2010_Natural_stone_EU_Market_Survey.pdf. Photo: ITC

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 7

Figure 3 : Top marble and granite exporting countries 2016 ( US $ millions )

6.000,00

5.000,00

4.000,00

3.000,00

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1.000,00

- China Italy Turkey India Brazil Spain Greece Egypt Portugal Germany

Source : ITC ( 2017 ). Trade Map. Available from http ://www.trademap.org/Index.aspx. Accessed 12 November 2017.

China further processing. In 2016, China’s primary export markets were the Republic of Korea ( US $ 1.1 billion ), the United Responsible for approximately 26 % of global marble and States ( US $ 551 million ), Japan ( US $ 483 million ), Viet Nam granite production,2 China is the world’s leading marble and ( US $ 343 million ) and Saudi Arabia ( US $ 242 million ). granite exporter. In 2016, China recorded US $ 5.6 billion in Despite having the facilities and logistical know-how exports of marble and granite. In the last 10 years, China has to supply distant consumers, China has had little success nearly tripled its export volumes. Recent increases in export penetrating European markets. While natural stone as a con- volumes are most likely the result of the easing of restric- struction material is considered more sustainable than many tions on foreign investment. This has created the appropriate alternatives, the EU follows sensitive sustainability policies conditions for Chinese and Taiwanese firms to participate in in relation to the production of natural stone. It pays very joint ventures with Italian firms. This increased investment has close attention to the quarrying and processing practices pushed the Chinese marble and granite sector up the global of exporting countries. Countries that neglect internation- value chain. Almost 60 % of Chinese exports in the sector ally recognized occupational health and safety standards consist of granite that has been processed to some degree, may find themselves on EU blacklists for certain product i.e. cut, polished and / or otherwise worked. Other main ex- categories, and these policies have served as a trade bar- ported goods of the Chinese natural stone industry are cut rier for Chinese supply. The same applies for quarrying and and sawn granite and marble, as well as polished marble. processing practices involving discrimination, child labour, Besides exports of processed domestic stone, China substandard wages, and restriction of freedom of associa- also imports stone in raw and unprocessed form from tion and collective bargaining. Countries ignoring environ- Turkey, India, Brazil, Italy and other countries for further mental standards also risk their exports being refused by the processing and re-exporting. As a re-exporter, China im- EU. The Centre for Research on Multinational Corporations ports US $ 1 billion of unpolished, roughly cut marble and detected such issues in the Chinese natural stone sector. US $ 807 million in crude and roughly trimmed granite for Although the Chinese marble and granite industry shows great potential for future growth regarding its natural stone reserve, the country still faces hurdles to supply world mar- 2.– Ibid. kets and to keep up with other competitors in the industry.

Enabling factors Deterring factors

High untapped reserve Sustainability issues are a barrier to the EU market Diverse variety of natural stone Comparatively young sector still lacks knowledge and production experience Strong growth of the marble and granite sector Proximity to fast-growing markets Large supply of affordable natural stone varieties Asia’s main re-exporting hub Availability of high-tech processing technology at a reasonable price

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Italy Italy is the world’s second-largest exporter of stone. In 2016, Italy recorded US $ 1.4 billion in exports of marble and Italy is positioned as a key marble producer and exporter. US $ 504 million in exports of granite to world markets. Italy Italian marble is internationally renowned for its brilliance also imported US $ 352 million of mainly raw and unpro- and high quality. As far back as the Renaissance, Italy’s cessed marble and granite from Brazil, India, Mozambique white marble had been carried to distant places and found and other countries. Considering that Italy’s main export admirers far from its origin. Insatiable demand, especially consists of finished and semi-finished stone, imports of raw from the Arab Gulf states, currently fuels Italy’s booming and unpolished stone indicate further processing and re- marble trade. Italian natural stone enjoys a high reputation exports to world markets. High value addition takes place for its quality, which is furthermore promoted by a joint trade- within Italy and contributes to 80 % of the total value of Italian mark, ‘Pietra Naturale’, representing more than 30 prominent stone exports. High processing quality is the driving force players in the Italian stone industry. The ‘Made in Italy’ brand behind the Italian sector’s strong performance. protects as well as manages the industry’s know-how and As a result of a reduction in imports of raw granite and tradition in order to maintain its high reputation and compete the ever-increasing specialization of the global industry in against foreign suppliers. Italy’s natural stone sector is highly finishing marble, ( re- )exports have been declining over the professional and highly developed, and enjoys strong busi- past 10 years. In 2016, Italy’s primary destination market was ness ties with buyers of premium-quality stone from around the United States ( US $ 458 million ), followed by Germany the world. ( US $ 160 million ), China ( US $ 147 million ) and India ( US $ 90 million ). High brand recognition and high quality make Italy capable of exporting marble and granite to more than 140 countries around the world.

Enabling factors Deterring factors

• High reputation for quality • Severe competition from nearby European countries such as • High brand recognition Spain and Greece • Export network spanning 140 countries worldwide • Losing production and export share to cheaper suppliers from • Extensive experience in extraction and processing outside the EU with improving technology and greater availability • Application of the most advanced technology for extraction, processing and transportation of know-how in developing economies • World leader in modern mining expertise using the latest technology • Tremendous infrastructure and facilities throughout mineral-bearing areas and processing clusters • An abundance of warehouses in the vicinity of processing clusters and seaports ensures supply consistency • European re-exporting hub • Heavy promotion of Italian stone through active participation in exhibitions/trade fairs • Highly developed information on markets and international trends in the sector • High degree of involvement in human resource development activities and research and development ( R&D )

Turkey

Turkey contains a mass of natural stone deposits between Turkey’s marble and granite sector is expansive, consist- Anatolia and the Thrace region. According to some esti- ing of approximately 1,000 active quarries, more than 7,000 mates, Turkey may control as much as 40 % of global mar- workshops and 1,500 stone processing factories.4 Large- ble reserves. This abundant supply puts Turkey in a leading scale private companies have invested in processing plants, position in world exports. Historically, Turkey’s location in the which has pushed forward technological development in the world’s richest natural stone area meant that the country was industry. The Turkish natural stone sector exported US $ 1.8 the largest marble exporting country in the world, but China billion in 2016. Considering that exports stood at US $ 998 took over Turkey’s position in 2009. Turkey’s total reserves – million 10 years earlier, the sector shows impressive annual which include visible, probable, and possible sources – are growth, establishing Turkey as the third-biggest world sup- estimated at around 5 billion square metres.3 The Turkish plier of marble and granite. Turkey’s global importance as a natural stone sector exported US $ 1.8 billion in 2016, making natural stone producer is not only reinforced by its reserves it the third-largest world exporter. and export share but also by its technological prowess.

3.– Transmer ( 2017 ). Marble reserves. Available from www.transmer.com.tr/ 4.– Atlantis Marble ( 2015 ). Turkish marble. Available from www.atlmar.com/ all-about-marble/marble-reserves/. page/turkish-marble/.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 9

Closely connected to global shipping lanes, Turkey is eas- ily able to send its stone around the world by cost-effective sea freight. The main importers of Turkish marble and granite are China ( US $ 728 million ), followed by the United States ( US $ 280 million ), Saudi Arabia ( US $ 117 million ), Iraq ( US $ 69 million ) and India ( US $ 55 million ). Turkey’s main stone export products are raw, simply sawn, or merely cut marble blocks. Granite makes up only 1 % of Turkish stone exports.

Enabling factors Deterring factors

• High reputation for quality • Severe competition from nearby European countries, • Great variety of stone types and colours such as Italy, Spain and Greece, as well as China and • Extensive experience in extraction and processing India • Favourable geographic location with international markets accessible by sea • Large reserves of untouched stone • Use of the world’s most advanced, fully electronic and completely automatic machines

India a bridge between industry and Government. These interven- Indian marble and granite is characterized by an astonishing tions have resulted in a sector with higher processing effi- array of colours, ranging from white to pink, yellow, green ciency, fewer regulatory barriers to production, and outputs and red-to-black. In the global marble and granite market, that are consequently lower in cost. India has been able to improve its comparative advantage As a result of India’s development of the value chain based on superior-quality stone and low prices. As a result in recent years, a majority of exported Indian marble and of rapid adoption of advanced mining technology and a granite has been processed, involving some degree of cut- concomitant increase in its processing expertise, India has ting and polishing. In 2016, India exported US $ 1.5 billion of established itself as one of the most dynamic stone produc- natural stone, with 93 % of that volume consisting of granite ers and traders in the world. products. The primary destinations for Indian stone have The Federation of Indian Granite and Stone Industry has been China ( US $ 383 million ), the United States ( US $ 228 been a critical entity contributing to the sector’s growth. The million ), Germany ( US $ 60 million ), Turkey ( US $ 55 million ) Federation has supported R&D efforts while also serving as and Viet Nam ( US $ 54 million ).

Enabling factors Deterring factors • Cost-effective provider of natural stone • Serious competition from China, which offers lower prices • Wide variety of stone types and colours in the granite market, and Spain, which has invested in • R&D supported by a strong industry association infrastructure and machinery • Government-backed promotion of the industry, improved regulatory framework and infrastructure facilities, including warehouses ; technology development ; and sector development through institution-building, marketing, financial and technological support • Adoption of the latest technology for mining • Active participation in international fairs and exhibitions, and aggressive promotion of Indian stone

GROWTH OF ASIA AND THE MIDDLE Middle Eastern countries have displayed a growing appetite EAST AS IMPORTING REGIONS for these materials in the past few years. The greatest growth in demand is driven by Asia, en- While worldwide imports of marble and granite stood at compassing countries such as China, the Republic of US $ 11 billion 10 years ago, this number climbed to US $ 13 Korea, Viet Nam and India. These aforementioned countries billion in 2016. Asia, the United States and Europe account in particular, and the region as a whole, have experienced for 94 % of imported marble and granite worldwide. Resulting notable economic and population growth over the course from development in the construction industry and aware- of the last decade. The outlook for the Middle East is also ness about the benefits of marble and granite, Asian and promising ; the value of natural stone imports to the Middle East increased from US $ 444 million to almost US $ 1.5 billion

[ MARBLE AND GRANITE’S PRESTIGIOUS POSITIONING IN THE GLOBAL STONE SECTOR ] 10

in the 10 years leading up to 2016. During the same period, the past 10 years. Current growth rates suggest that China Europe and the United States decreased their marble and is likely to overtake the United States as the leading importer granite imports in terms of dollar value. The decrease in of marble and granite in the near future. This appears to be import value in Europe and the United States is likely the re- part of a global trend of marble and granite demand shifting sult of greater availability of low-cost stone from developing from the West to the East. In 2006, the top importing coun- countries. This has put pressure on the prices of traditional tries were the United States, Japan, Germany, Italy, Spain, suppliers of marble and granite. and the United Kingdom of Great Britain and Northern The United States, which alone accounts for nearly 18 % Ireland. By 2016, China, the Republic of Korea, Viet Nam, of global imports, is the largest importer of natural stone. India and the United Arab Emirates ( UAE ) had become lead- United States imports, however, have been declining over ing importing nations.

Figure 4 : Imports by world regions, 2006 and 2016 ( US $ millions )

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- Asia America Europe Middle East Africa Oceania

Imported value in 2006 (US$ million) Imported value in 2016 (US$ million)

Source : ITC ( 2017 ). Trade Map. Available from http ://www.trademap.org/Index.aspx. Accessed 12 November 2017.

Figure 5 : Top 10 importing countries by imported value in 2006 and 2016 ( US $ millions )

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US$ million 500 -

UAE Italy China Japan India Germany Viet Nam United States Chinese Taipei Republic of Korea

Imported value in 2006 (US$ million) Imported value in 2016 (US$ million)

Source : ITC ( 2017 ). Trade Map. Available from http ://www.trademap.org/Index.aspx. Accessed 12 November 2017.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 11

GLOBAL TRENDS

CRACKING THE GROWTH OF GLOBAL sustained its prestigious image. Elegant bathrooms and DEMAND kitchens accented with marble are no longer unattainable dreams. With the increased use of floor heating, marble and Natural stone is becoming ever more popular for different granite have become attractive alternatives to traditional applications, from use in large-scale construction projects flooring material such as carpets. The decline in prices has to small do-it-yourself home renovations. In addition to tra- also led to a wider range of quality and price distinctions ditional markets already accustomed to using natural stone, between and within various varieties of marble and granite new markets in the Middle East and Southeast Asia are now on the international stone market. increasingly aware of the benefits of marble and granite. With high-end marble and granite being substituted with Not only are houses of worship and other ceremonial cheaper alternatives from new suppliers, the global vol- structures using natural stone in construction, but also mod- ume of the natural stone trade is increasing, while the dol- ern office complexes, hotels and airports. The use of natural lar value of world exports has plateaued at around US $ 50 stone increases aesthetic appeal, improves structural dura- billion. The demand for marble is significantly higher than bility and is increasingly affordable as prices go down. The for granite ; in 2016, the value of marble imports reached natural stone sector is also benefiting from the increasing US $ 43 million, while granite imports represented less than popularity of natural stone baths and pools, spurred by the a quarter of that amount, with US $ 8 million. Until then, mar- growth of the wellness and relaxation sector. ble and granite had shown steady growth, reaching US $ 51 With greater availability of different varieties and the rise billion of exports in 2016, whereas exports in the natural of new stone suppliers from Asian countries such as China stone sector stood at US $ 27 billion in 2005. World granite and India, the price of natural stone has dropped significant- exports stood at US $ 6 billion in 2006 and developed into ly. Natural stone used to be a luxury material only accessi- a US $ 8 billion export industry in subsequent years. Marble ble to the wealthy. With the decrease in marble and granite showed stronger growth than granite over the past 10 prices and the growing number of middle- and high-income years, from US $ 23 billion to US $ 43 billion in 2016, indicat- households in Asia and the Middle East, the potential cus- ing a greater demand for marble than granite. The greater tomer base for natural stone has increased dramatically. popularity of marble can be traced back to its more diverse While more households may have the budget to use applications in the form of blocks, tiles, mosaic and powder marble and granite for home decor, natural stone has in various industries.

Figure 6 : World exports of marble and granite, 2005–2016 ( US $ millions )

60.000,00

50.000,00

40.000,00

30.000,00 Granite

US$million Marble 20.000,00

10.000,00

- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source : ITC ( 2017 ). Trade Map. Available from http ://www.trademap.org/Index.aspx. Accessed 12 November 2017.

[ MARBLE AND GRANITE’S PRESTIGIOUS POSITIONING IN THE GLOBAL STONE SECTOR ] 12

Box 2 : Marble and granite forecast

Marble : an increasingly accessible luxury Increasing use of marble slab and powder Marble slabs can be shaped and moulded into tiles, mosaics and Greater availability blocks for application in the construction industry. Marble powder, Marble’s variety and beauty has attracted builders from differ- a waste by-product of stone cutting, has proven to be a valuable ent cultures ( and historical eras ) around the world. The stone input in the paint and coating industry as a whitening agent. It has been used to create iconic structures such as the Taj Mahal, is also directly employed in the pharmaceutical and agricultural the Parthenon and the United States Supreme Court, along with industries. All of these industries are growing, especially in de- abundant use in churches, cathedrals, mosques and tombs across veloping countries, indicating that demand for marble powder will the world. With more quarries in developing countries being likely continue to grow in the future. discovered and exploited, the range of marble varieties on the international market has increased steadily. Granite : providing durable elegance to the construction industry Decreasing prices Benefits in construction Greater availability of marble has led to spirited price competition. Although marble has historically been associated with wealth and After a period of stagnation caused by the 2008 global financial extravagance, with greater price competition resulting in lower crisis, construction activity is picking up in both developed and prices, marble has become an affordable luxury suitable for a developing countries. In the Asia–Pacific region – the largest and greater audience and additional applications. fastest-growing market worldwide – demand for granite is especially strong. Rapid urbanization and continued industrialization is Diverse applications a positive indicator for granite sales, as it is highly favoured by the construction industry. This has certainly been the case in China, Due to its attractive appearance and high resistance to water dam- India, Thailand, Indonesia and other South-East Asian nations, age, the construction industry has shown greater interest in marble where residential and infrastructure construction activities have as prices have gone down and incomes have risen. Demand has stimulated growth in granite sales. been especially strong for marble in the construction of high- end hotels, theatres, temples, churches, memorial buildings and Considering that further economic growth is likely to continue tombs in developing countries. Strength and robustness also allow in populous China and India, the demand for granite will almost marble to serve less glamorous purposes ; its powdered form can certainly grow in parallel with the rise of national income levels in be used as a filler for concrete in the construction of stairs, pave- these countries. Changing attitudes towards indoor and outdoor ments, floor coverings and external walls. decor represent further opportunities for growth in the region.

Box 3 : Implications for Afghanistan

• The position of Afghanistan can improve with increases in • Proximity to growing importers such as South-East Asia and worldwide demand for marble and granite, but production the Middle East will be an important advantage. levels must be increased. • Afghanistan is home to high-quality stone that is in demand • To enter more markets, processing is a crucial element to be from the luxury goods industry, which may allow for premium considered and improved. pricing of marble and granite products.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 13

SIGNIFICANT COMPETITION FROM capacity. However, based on better technology and strong- REGIONAL QUARRIES er trade links, the Islamic Republic of Iran has achieved a higher export performance than its regional peers. Due to Immediate regional competitors its immediate proximity and easy access to shipping by sea, the country is a formidable competitor for Afghanistan. Pakistan is one of Afghanistan’s immediate regional competitors in natural stone exports. Pakistan, like many new en- Competition from the Middle East–North Africa trants to the natural stone industry, still relies on uncontrolled ( MENA ) region blasting at its quarries, which causes quarry loss of up to 70 %. Irregular shapes and cracks in the blocks hinder the A high performer in the MENA region is Egypt, which export- export of around 20 % of mined products.5 Only three quar- ed marble and granite worth US $ 226 million in 2016. While ries in Pakistan use modern mining techniques that meet this is certainly an impressive figure, the export performance international standards. Pakistan has not invested in modern of Egypt’s marble and granite sector has declined since machines, indicating a lack of attention to the sector by the 2013. More providers of low-cost natural stone are entering Government and private investors. The country also lacks the market from different corners of the world, and Egypt strong sector associations that could support R&D activities has also found itself outpaced by competitors in South and and promote Pakistan’s stone in international markets. East Asia who have invested heavily in technical capacity. The Pakistani marble and granite industry is driven by Nevertheless, Egypt is the most successful natural stone local consumption and is highly dependent on the domestic exporter in the MENA region, with millenniums of experience construction industry. The marble and granite sector has quarrying and processing stone. Marble is responsible for thus suffered in parallel with the recent decline of that in- 99 % of Egyptian exports of natural stone. dustry. The scattered distribution of quarries and processing While crude marble exports declined steeply over the facilities cannot ensure regular supply and consistency in last decade, from US $ 85 million in 2006 to US $ 6 million grade, shade, colour of material and size of stone. This is in 2016, exports of semi-processed and processed marble mainly due to poor infrastructure and low-capacity process- have increased significantly. This would indicate that Egypt ing facilities. Despite these shortcomings, Pakistan’s exports possesses a competitive edge in the export of value added of natural stone were higher in 2016 than the year before, stone. Egypt’s top export destinations in 2016 were Libya reaching US $ 51 million. The vast majority of these exports ( US $ 55 million ), China ( US $ 50 million ), Lebanon ( US $ 15 ( 78 % total ) made their way to China. million ) and Kuwait ( US $ 10 million ). Besides exports of After China, Pakistan’s main buyers of natural stone semi-processed marble to China, Egypt’s natural stone en- are the Republic of Korea ( US $ 3 million ), the United joys an excellent reputation in Africa and the Middle East. States ( US $ 1.8 million ) and Lebanon ( US $ 1.3 million ). While Egypt may become a serious competitor to Unprocessed marble dominates Pakistan’s natural stone Afghanistan as the former moves up the marble and granite trade. Pakistani crude and merely cut stones are shipped value chain, at present, they are not in the same league of to China, Asia’s re-export hub, for further processing. production because Egypt’s expertise in stone processing Considering Pakistan’s great untouched reserve of up to is more sophisticated. Egypt should rather be seen as a 160 million tons of natural stone, Afghanistan’s neighbour possible destination market for processing and re-export, will remain an immediate competitor in the region for the as well as a role model as Afghanistan explores ways to foreseeable future. enhance its processing capacity. Another immediate regional competitor is the Islamic Like Egypt, Oman has been transitioning from raw to Republic of Iran, which exported natural stone worth US $ 146 semi-processed and processed marble exports over the last million in 2016. The Islamic Republic of Iran is also a major decade. Oman’s exports of natural stone reached US $ 113 exporter of crude and unprocessed stone, supplying the million in 2016. Since 2014, Oman’s industry has experi- main global re-exporting hubs of China, Italy and Turkey, enced a slight decline in export value, with the recent market where Iranian marble and granite are further processed. entrance of Asian suppliers. Oman predominantly supplies Almost 90 % of exports of Iranian natural stone consist of semi-processed and processed marble to Middle Eastern marble. Besides sales to re-exporting hubs in China ( US $ 96 and Asian countries. million ), Italy ( US $ 10 million ) and Turkey ( US $ 1.3 million ), Oman is rich in marble quarries but does not have many the Islamic Republic of Iran exports to India ( US $ 5.5 million ), granite deposits. The largest export destination for Omani Kuwait ( US $ 3 million ) and Kazakhstan ( US $ 2 million ). stone is Saudi Arabia, with an exported value of US $ 33 mil- The Islamic Republic of Iran faces similar issues to lion in 2016. Other top destination markets for Oman are the Pakistan and Afghanistan in the production of marble and UAE ( US $ 27 million ), India ( US $ 11 million ) and the Republic granite, in terms of underdeveloped mining and processing of Korea ( US $ 8 million ). Oman is geographically closer to Afghanistan than Egypt and has the potential to become a serious competitor when Afghanistan shifts towards ex- 5.– Pakistan, Small and Medium Enterprise Development Authority ( n.d. ). Marble and Granite Sector Development Plan, p. 29. porting greater quantities of value added stone. At present,

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because of its sophisticated processing technology, Oman US $ 41 million in natural stone in 2016. The UAE predomi- should be viewed less as a competitor and more as a re- nantly exports semi-processed marble and granite and en- exporting partner for Afghan stone. joys strong export ties with other Middle Eastern countries. The UAE is another Middle Eastern competitor of The value of UAE natural stone exports has been slightly Afghanistan, mainly exporting semi-processed stone to re- declining since 2013, due to increasing competition from gional markets. The UAE’s top export markets include Oman other suppliers in the MENA region. As Afghanistan looks to ( US $ 12 million ), Qatar ( US $ 8 million ), India ( US $ 6 million ) boost its sales of semi-processed stone, it is likely to come and Saudi Arabia ( US $ 5 million ). In total, the UAE exported into direct competition with the UAE in the medium term.

Figure 7 : Performance of regional competitors of Afghanistan, 2005–2016 ( US $ millions )

600

500

400

300 US$million 200

100

- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Egypt Iran Oman UAE Pakistan Afghanistan

Source : ITC ( 2017 ). Trade Map. Available from http ://www.trademap.org/Index.aspx. Accessed 12 November 2017.

RE-EXPORT STIMULATED BY WORLDWIDE DEMAND FOR HIGH- QUALITY STONE

Trade data indicate that semi-processed and processed stone dominate exports in the natural stone industry. The increasing volume of exports of value added marble and granite reveals higher demand for high-quality, processed products. With rapid economic development and population growth in South-East Asia and the Middle East, high-quality stone for the construction and luxury goods industries have

contributed to this boost in demand. Many exporting coun- Photo: ITC tries have moved up the value chain by concentrating on the production and export of value added, processed products such as polished granite and semi-processed stone cut with from European countries and Turkey are among the few ex- a flat surface. porters of further processed, chipped and powdered marble Developing countries using outdated extraction and pro- and granite. Data reveal that stone chips and powder, which cessing technologies are the main suppliers of unprocessed are by-products from cutting and processing stone blocks, stone in global markets, while traditional suppliers ( and are less commonly used as export products from develop- China ) concentrate on value added products. Suppliers ing economies.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 15

Figure 8 : Exports of marble ( left ) and granite ( right ) in different stages of processing, 2005–2016 ( US $ millions )

Marble Granite

9.000 10.000 8.000 9.000 7.000 8.000 6.000 7.000 6.000 5.000 5.000 4.000 4.000 3.000 3.000 2.000 2.000 1.000 1.000

- -

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Granules, chippings and powder Chippings and powder Crude or roughly trimmed Blocks or slabs Blocks or slabs Simply cut or sawn Crude or roughly trimmed Simply cut or sawn In any form Polished

Source : ITC ( 2017 ). Trade Map. Available from http ://www.trademap.org/Index.aspx. Accessed 12 November 2017.

Unprocessed marble and granite are predominantly shipped to re-exporting hubs in China and Italy – where the most advanced technology is available – for value addition. China is the main re-exporting hub in Asia, possessing advanced cutting, polishing and processing technology and machines. Turkey is the largest exporter of natural stone to the Chinese market, predominantly supplying raw uncut stone. China also receives crude stone from India, Brazil and Italy. The majority of Chinese exports consist of polished and processed marble and granite, which are re-exported to developed economies in Europe, Japan, the Republic of Korea and the United States. China emerged as the world’s dominant marble and granite ( re- )exporter by investing in technology that improves product quality while simultaneously reducing price. The European ( re- )exporting hub is Italy, which is the world’s second-largest exporter of high-quality marble and Source: marble, By USAID Afghanistan (100525 Hirat Marble Conference granite. Italy receives raw and unprocessed stone from 275) [Public domain], via Wikimedia Commons.jpg African countries, India and Brazil. Imported and domestically extracted raw stone is processed using Italy’s world- and granite from domestic quarries, although it does import leading technology and expertise. After undergoing value some crude stone from the Islamic Republic of Iran and addition, finished stone is shipped to European countries, Macedonia for value addition and re-export. While Turkey’s the United States, Canada and the UAE. processing capacity does not match that of China or Italy, Another smaller ( re- )exporting hub is Turkey. Turkey pre- Turkey is nevertheless able to apply a high level of value dominantly exports semi-processed and processed marble addition at low cost.

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Figure 9 : Re-exporting hubs of marble and granite

Source : ITC analysis based on Trade Map ( 2017 ).

BRICKS AND CLICKS : EMERGENCE OF E-COMMERCE AS A DISTRIBUTION CHANNEL

One of the challenges that marble and granite exporters have typically faced is accessing end users in the international market. E-commerce may offer a partial solution to this challenge, driven by the increasing popularity of do-it- yourself home renovations. Individual consumers – especially high-income consumers – are more aware of the use of natural stone in kitchens, bathrooms and flooring, thanks to the rise of the luxury spa and the wellness industry. To promote affordable luxury to a greater range of consumers, tra- Photo: ITC ditional natural stone powerhouses such as Italy and China have found it convenient to open up a new sales channel by selling their tiles, mosaics and natural stone products online. While natural stone for national monuments and other icon- Despite the weight of marble and granite, along with their ic structures may be quite costly to ship, this is less the need for gentle handling during shipping, the online market case with household stone products like tiles and mosaics. is particularly suitable for the natural stone industry. This Recognizing the opportunity, an increasing number of e- is mainly due to the increase in choices that consumers commerce services have been launched that specialize in have when shopping online, in terms of the quality, shape natural stone sales. Such online intermediaries offer special and colour of different types of stone. The major re-export- care in the transportation of heavy and / or delicate marble ing hubs, having received and processed raw stone from and granite products. Many interior design retailers have around the world, are in the best position to present seem- also started to offer marble and granite products in their own ingly endless options to online shoppers. online marketplaces.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 17

AFGHANISTAN : BETWEEN A ROCK AND A HARD PLACE

This Strategy aims to achieve the following goals : • Optimize time of entry in key markets • Improve overall marketing of Afghan marble and granite • Increase volume of production and exports • Position Afghan natural stone as a middle- to premium-quality • Gradually upgrade the quality of quarrying and processing to product, reclaiming its brand and reputation in international step up from unprocessed to semi-processed and finished markets. stone exports

NOT YET CARVED IN STONE : A SECTOR OFFERING BEAUTY AND HOPE FOR AFGHANISTAN

Global trends indicate a promising outlook for the Afghan marble and granite sector. Global demand for affordable marble and granite is expected to grow with the continued expansion of the construction and luxury goods industries in rapidly developing economies around the world. Geographical proximity to high-growth economies in Asia and the Middle East, where demand for natural stone is ris- ing fastest, favours Afghanistan’s marble and granite sector. Accessibility to European and Asian markets is going to improve with the opening of air cargo corridors through India, which itself is also an important destination for Afghan natural stone. The new corridor will not only enhance timely delivery but also reduce damage to products. Despite positive growth prospects for the Afghan natural stone industry, sector enterprises must temper expectations to an extent, considering the dominance of certain players in the international market. Moreover, the global marble and granite market is entering a new era, where recent entrants such as China and India are processing a wide variety of Photo: ITC stone and selling at low prices, thereby stimulating intensive price competition. In the midst of this highly dynamic, highly price- and quality-sensitive market, Afghanistan may benefit quality of its products. China uses sophisticated technology from concentrating on specific market segments, such as to process raw stone from various countries while keeping the mass market or premium segment. its own operating costs low. Italy, another important player, In terms of mass marketing, it is unlikely that Afghanistan is an established supplier of premium products and benefits will be able to beat other suppliers on price, considering its from the renowned ‘Made in Italy’ brand. While China and technological and infrastructural weaknesses. China is the Italy are providers of semi-processed and finished products, strongest player in the low-price market segment and was immediate competitors such as Pakistan and the Islamic able to carve out this position for itself without sacrificing the Republic of Iran are exporters of crude stones.

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Box 4 : Quality and price determinants of marble and granite

Pattern, colour and the glaze of the stone determine the qual- and marketability are homogeneity of pattern, and glaze. Stone ity and price of marble, and granite, which also applies to other with homogeneous pattern, rare colour and fine glaze achieves the dimensional stones, such as onyx and travertine. Colour plays highest price. Stone with rare colours and heterogeneous patterns a dominant role in the determination of quality and price. Stone still places in the medium category, as the uniqueness of colour infused with rare colours achieves high prices on the international dominates other categories. market due to its limited availability. Other determinants of quality

High quality / high price Medium quality / medium price Low quality / low price

•Homogeneous pattern •Homogeneous / heterogeneous •Heterogeneous pattern •Rare colours pattern •Common colours •Fine glaze •Rare / common colours •High glaze •Fine glaze

Afghanistan, controlling quarries with high-quality stone of unique colours, should position itself as a middle / high-end premium stone supplier in the long term, to counter structural cost disadvantages that decrease its price competitiveness. When thinking about Afghanistan’s positioning in world markets, it is important to keep in mind that large- scale investments in technology upgrades, which would improve value addition and reduce production losses, are less appealing in Afghanistan compared with other countries involved in natural stone production. Investment attractive- ness is diminished by a number of factors, including weak protections for investors, burdensome regulatory and tax re- gimes, high costs of electricity ( when it is available ), and the fact that most production is small-scale. With such hurdles, Afghanistan is unlikely to succeed in price competition and become a mass producer. Afghanistan does, though, have the potential to meet high-end buyer needs, as it is home to varieties of stone with unique colours that garner high prices in the international market. To achieve maximum potential, Afghanistan must shift away from lower tech and poorly planned quarrying meth-

ods to market-led and consistent production by promoting Photo: ITC specialization in highly appreciated marble and granite varieties. Natural stone production in Afghanistan currently relies on trial and error methods instead of systematic extraction higher exports of semi-processed and finished marble and of stone designed to meet market needs. granite products. This would have spillover effects on re- Regarding destination markets in the short-term, lated industries, such as onyx and travertine. Taking this Afghanistan has the opportunity to strengthen regional ex- approach, Afghanistan can concentrate on strengthening ports and ship to re-export hubs. In the long run, Afghanistan existing trade ties while taking deliberate steps to increase should focus on steady capacity-building that will lead to its expertise in natural stone processing.

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PRODUCTION CRAVING FOR ROCK-SOLID INVESTMENTS

Figure 10 : Costs of processing of marble and granite

Quarrying Transportation •Discovery of quarry •US$2 Millions to •Minimum processing US$10 Milions 2 •$500,000 •Investment in plant 2,500 m •Investment in human transportation •Investment in human resource training resource training techniques and equipment Land Processing

Both quarrying and processing of marble and granite require high initial investment in equipment and machines, with years of effort required to reach maximum capacity. Access to capital, especially in the form of large, long-term credit, is difficult to secure in Afghanistan. Quarrying starts with an initial R&D investment to detect potential deposits containing high-quality stone. When no sophisticated soil research has been conducted – as is the case in Afghanistan – this process is based on trial and error. Without sufficient government support and private sector investment, costly initial quarry detection serves as a barrier to entry for the industry. After detection of quarry sites, production of marble and granite requires access to land for processing facilities close Photo: ITC to the source. Accessibility of such land is an obstacle, as few sites are connected to public utilities such as electricity and water, or linked with the ground transportation network. Access to high-quality mining equipment is therefore cru- On top of that, producers must obtain the consent of lo- cial for effective mining and reducing product damage. This cal communities. In most cases this requires payments to again requires high investments, not only in the hardware influential community leaders. Processing plants are also itself but also to train workers capable of correctly operating not located in a single cluster and are therefore not able these machines. to take advantage of economies of scale. This makes the The structural integrity of crude stone is particularly production of natural stone in Afghanistan more costly and important for the ensuing processing stage, as quarrying inefficient. methods directly contribute to the quality of finished mar- As per Natural Stone Processing Company, a major in- ble and granite. US $ 400,000 of investment in processing vestor in Afghanistan, capital required for quarrying activi- facilities allows purchases of advanced machinery, which is ties is around US $ 500,000, and between US $ 2 million to almost 10 times more productive than that currently used in US $ 8 million for processing plants. With this amount, sec- Afghan processing plants. This creates a competitive edge tor enterprises could access state-of-the-art extraction and for the investor. Besides financial investment, production re- processing technologies, and be able to export the product quires a minimum time of six months to set up machines and to international markets. build offices on quarry sites until production can finally start.

[ AFGHANISTAN : BETWEEN A ROCK AND A HARD PLACE ] 20

Box 5 : Standard machinery required for quarrying and processing

Standard machinery required for quarrying Important machinery for processing plants • Pneumatic steel drills for vertical, horizontal or inclined drilling, manual or mounted • Gang saws 80 blade ( for cutting marble blocks into slabs ) US $ 300,000 to US $ 40,0000 on special devices ( US $ 2000–US $ 3000 ) • Semi/Automatic 14 to 18 polishing head for slab ( US $ 400,0000 to US $ 800,000 ) • Pneumatic down-the-hole hammer drills to make vertical holes for introducing the • Marble Bridge Cutting Machine for cut to size ( US $ 110,000to US $ 140,000 ) diamond wire ( US $ 10,000 ) • Block Cutter for marble ( US $ 110,000 to US $ 130,000 ) • Large and small diamond wire machines for cutting primary large blocks and sec- • Semi/Automatic 12 to 14 polishing head for polishing of tiles maximum size 6 cm wide ondary cuts ( US $ 220,000 to US $ 320,000 ) • Chainsaws for fast, straightforward vertical and horizontal cuts on large quarry fronts • Cross Cutter for tiles ( US $ 30,000 to US $ 50,000 ) ( US $ 10,000–US $ 15,000 ) • Calibrating/chamfering line for marble tiles ( US $ 65,000 to US $ 75,000 ) • Hydraulic cushions for enlarging space between cut benches or for splitting up narrow • Gantry cranes ( to lift marble blocks and put them on the gang saw ) openings ( US $ 40,000–US $ 50,000 ) ( US $ 100,000–US $ 130,000 ) • Hydraulic jacks for moving blocks and hydraulic splitting wedges for splitting up drilled • Overhead crane for moving processed slab ( US $ 50,000 to US $ 100,000 ) sections ( US $ 100 per piece ) • Arm Caren for lifting slab to polishing machine ( US $ 5,000 to US $ 7,000 ) • Derrick cranes to handle blocks or heavy equipment ( US $ 40,000–US $ 50,000 ) • Water Recycling System or Water Treatment Plant ( US $ 200,000 to US $ 400,000 ) • Stationary wire saw machines for block-squaring ( US $ 8,000–US $ 15,000 ) • Air compressor ( US $ 15,000 to US $ 20,000 ) • Front-loaders ( T-lift blocks ) ( US $ 60,000–US $ 80,000 ), excavators ( for cleaning and • Multi wire for cutting granite ( US $ 350,000 to US $ 700,000 ) excavating ) ( US $ 50,000–US $ 90,000 ) and dump trucks ( US $ 30,000–US $ 50,000 ) • Semi/Full Automatic 14 to 20 Head Polishing Machine for Granite ( US $ 450,000 to US $ 800,000 )

Note : important machines for processing of slab and tiles the stone is cut out of a quarry, blocks are transported to represent between 40 to 50 % of total cost of establishment processing facilities. In Afghanistan, stone cut from quarries of Marble and Granite Factory. The investor should consider in rural areas must get to processing sites over unpaved allocating between 50 to 60 % of investment capital for es- roads, which is not ideal. Bumpy roads and poorly equipped tablishing the structure of the factory including foundations vehicles can both contribute to costly damage to the raw for stone machines. stone. For Afghan natural stone enterprises to become reli- Investments in transportation are also critically needed able, consistent suppliers to international buyers, there must for the Afghan marble and granite sector, as even raw un- be further investments in both vehicles ( by the enterprises ) cut stone can be damaged if not handled with care. Once and roads ( by the Government ).

CASTING THE FIRST STONE : A VALUE CHAIN WITH HIGH POTENTIAL

A BRICK-AND-MORTAR PRODUCTION

The marble and granite industry is one of the fastest-grow- worth highlighting that vast areas of potential resources in ing sectors in Afghanistan. With marble or granite quarries Afghanistan remain unknown. in almost every province, the country is rich in natural stone Approximately 60 % of marble production is concen- varieties. Not all marble and granite deposits in Afghanistan trated in extraction hubs in Jalalabad, Wardak and Herat. have been discovered or surveyed properly. The size of Other marble extraction sites are in Kabul Province, Logar, granite reserves in Afghanistan are estimated to be around Badakhshan, Bamyan, Nangarhar, Ghazni, Samangan, 2,4 billion m³. According to the MoMP, there are about Faryab, Paktia and Parwan. Accurate data on production of 40 types of marble of 40 different colours in Afghanistan. granite in Afghanistan is unavailable. Granite deposits have been identified mainly in Bamyam, Marble and granite extraction starts with the discovery and in Nooristan, Badakhshan, Panjsher, Jalalabad, Herat of deposits of natural stone that are sufficient for quarry in- and Konar. On the other hand, the size of marble reserves vestment. Afghanistan is naturally rich in marble, and gran- in Afghanistan are estimated to be roughly 1.3 billion ite, as well as other dimensional stones such as onyx and metric tons, valued at approximately US $ 150 billion. It is travertine.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 21

According to MoMP, there are approximately 60 marble occurs when parts of fractured raw blocks break up during quarries in the country, operated by around 24 extractive the cutting and polishing stages. Besides high incidences companies in four provinces. These extractive companies of microfracturing during extraction, product loss is also are categorized by MoMP in terms of quality, technical incurred due to poor treatment of stones as well as lack and financial capacity. Only four – two in Herat and two of knowledge about processing and how to operate main Wardak – comply with all the requirements to be con- chinery. Inefficient processing practices result in relatively sidered category A companies, among others to possess poor-quality stone with a comparatively high unit cost of certain specific machinery, at least 5 technical staff, and production. The finished good is checked for quality and adequate financial, marketing and human resources in sorted according to variety before packaging. Powder and place. Five companies belong to category B and fifteen to slurry waste from cutting can be further processed and sold category C. as sand and other materials, although this additional step is Extraction of marble in Afghanistan is taking place below still uncommon in Afghanistan. its maximum capacity. It is estimated that in Afghanistan, extraction companies have the capacity to produce 30,000 tons of marble per month. Nevertheless, they produce only PEBBLY DISTRIBUTION 3,000 tons of marble per month. Moreover, some quarries rely on outdated technologies for excavation, loading, haul- Afghan natural stone is sold to both domestic consumers ing and dredging. Afghanistan imports the majority of avail- and international buyers. As the following brief sections re- able channelling machines and wire saws for cutting, as veal, sales performance is lacklustre in both areas. Afghan well as crusher and hammer mills for mining. Due to this stone is soundly outperformed in the domestic market by lack of modern equipment, a considerable segment of the Pakistani stone, and its international sales have not yet bro- sector still relies on outdated mining practices. When this ken the US $ 1 million mark. occurs, poor extraction methods relying on explosives significantly reduce the quality of Afghan unprocessed marble Domestic markets and granite, which results in important wastage at the extraction stage. Following this process, a large share of the Domestic consumption of finished marble in Afghanistan rough-hewn marble blocks are illegally exported to Iran and currently stands at approximately 270,000 tons. Due to lack Pakistani processing factories at very low prices. of both quality and sufficient supply of marble and granite, Domestic processing factories add a total value of many natural stone enterprises are forced to supplement around US $ 105 million to the marble and granite. It is their business by importing marble produced or processed important to highlight that processing companies oper- in neighbouring countries. According to some estimates, ate below their potential. Estimates indicate that process- Pakistani stone has captured as much as 85 % of the Afghan ing companies are expected to produce 248,720 m² per market, although much of that volume is believed to be month. However, their actual production is of 130,000 m² Afghan stone that has undergone value addition in Pakistan per month. A total of 130 companies operate in the marble before being shipped back. Marble and granite are mostly industry in Afghanistan, which have invested a total of about used in counter-insurgency-related construction projects, $ 70 million. Marble processing companies in Afghanistan Afghan Government projects, private businesses, homes, are also divided into three categories in terms of quality, farms and military projects. financial and technical capacity. Three companies currently belong to category A. To belong to this category, these International markets enterprises met certain requirements, among others, an investment of minimum US $ 2 million, to count with at least In 2016, Afghanistan exported US $ 979,000 in marble, 10 technical and professional staff and to possess certain with top export destinations including Italy ( US $ 499,000 ), specific machinery. On the other hand, 37 processing com- Pakistan ( US $ 341,000 ), India ( US $ 73,000 ), China panies belong to category B and approximately 90 belong ( US $ 32,000 ), Turkey ( US $ 21,000 ), Spain ( US $ 15,000 ) and to category C. the United Kingdom ( US $ 15,000 ). Notably, informal trade of After the extraction of large blocks of stone, crude marble unprocessed marble reaches the Iranian and Pakistani mar- and granite pieces are transported to processing facilities. kets, where they are further processed and exported. Thus, As specialized cranes are required for loading and unload- a considerable amount of Afghan exports of this product ing stones, this is a costly and tedious process. Materials goes unreported. This situation is expected to improve, as for processing, such as special cutting and polishing sand, the Afghan Government has taken measures to prevent and edge-polishing machines, polishing powder and stone cut- ban this illegal practice. Afghan marble has lately caught the ters must be imported. attention of the European market. Italy has shown particular Blasting at the extraction stage produces small and ir- interest in Afghanistan’s white marble for sculptures and art regular pieces and causes microfracturing, leading to higher projects. Available data did not reveal any granite exports to rates of product loss during the processing phase. Loss international markets in 2016.

[ AFGHANISTAN : BETWEEN A ROCK AND A HARD PLACE ] 22

Figure 11 : Current value chain Domestic market Distribution Processing International factories industry is around US$ 105 million Total value added of the Afghan marble Assembly Value chain map: Marble and granite in Afghanistan Production (Mining of raw material, annual marble production is around 124,000-155,000 each quarry produces 3,000-4,000 tons

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 23

PROMISING EXPORT PERFORMANCE

A 2009 United States geological survey estimated the value of marble reserves in Afghanistan to be around US $ 200 billion. The majority of exported stone from Afghanistan consists of crude marble, which can be found in almost all Afghan provinces. Granite has thus far played a minor role in Afghan exports of natural stone. To date, 66 marble and granite deposits have been positively identified in Afghanistan.6

6.– Ibid., p. 8.

Photo: ITC

Box 6 : Quarries in Afghanistan

Kabul Province • Proterozoic marble quarries are in Ghazak, Karez-e-Mir, Tarakhel, Hazara-e-Baghal, Pul-e-Charkhi, and Qalamkar • Ghazak marble, known as ‘Black Ghazak’, is located 32 km east of Kabul • Karez-e-Mir marble consists of granular white and, rarely, grey-yellow marble, and is situated 40 km north of Kabul City • In total, there are 13 marble deposits in Kabul Province Logar Province • Proterozoic marble is quarried in Awbazak, Dehnow, and Mohammad Agha • Awbazak marble is bioclastic and brown • Dehnow marble is brecciated and brown • Mohammad Agha marble is black and white Wardak Province • Proterozoic Wardak marble ( grey and dark grey marble ) is deposited near Maidan-Shar • In total, there are six well-known marble quarries in Wardak, which have been quarried for the past 40 years Badakhshan Province • Bini Kama deposits, consisting of medium and coarsely crystalline marble belonging to the Silurian and Devonian eras ( 420–450 million years ago ) • This deposit of marble is estimated to be 1.3 billion tons Herat Province • Proterozoic Chesht-e-Sharif deposits are located 120 km east of Herat City • Its marble is finely crystalline, with colour ranging from white to light green • The deposits are estimated to be 30 million tons Nangarhar Province • Proterozoic Khogyani marble deposit located 35 km south-west of Jalalabad City • This marble is known as the ‘Afghan white marble’ Note : the box shows state-of-the-art geological survey information, which needs to be updated

Production and exports have both shown a steady in- Exports of marble and granite experienced a temporary crease in value, with average annual growth between 2012 decline with the NATO invasion of 2012. With larger and and 2016 standing at 13 %. However, as information from more frequent shipments heading to the re-export hubs of desk research and consultations revealed, trade to Iran Pakistan, Italy and China, Afghanistan’s marble and granite and Pakistan is underreported and actual growth is ex- industry has experienced a revival in exports after a decline pected to have been much greater in 2016. Ten years ago, in 2012. This success has led to a positive trade balance in Afghanistan’s exports of natural stone were marginal, with natural stone, beginning in 2013. Before 2013, processed Pakistan as the sole destination for what little did leave the natural stone used as a construction material was imported country. Afghanistan rapidly started to realize opportunities from foreign countries, as the volume of domestically pro- in the marble and granite sector with its gradual accession cessed stone was negligible. Afghanistan imported semi- to regional markets and global re-exporting hubs, where processed and finished marble from China and Italy, as well Afghan stone is further processed. as Pakistan, India and Turkey.

[ AFGHANISTAN : BETWEEN A ROCK AND A HARD PLACE ] 24

Figure 12 : Trade balance of Afghan marble and granite, 2005–2016 ( US $ thousands )

5000 4000 3000

2000 1000 0

-1000 -2000 -3000

-4000 -5000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Exports Imports Trade Balance

Source : ITC ( 2017 ). Trade Map. Available from http ://www.trademap.org/Index.aspx. Accessed 12 November 2017.

During the last five years, Afghanistan has not only signifi- China is a comparatively new export destination, which cantly expanded its export volumes but also diversified its has added Afghan marble to the diverse array of stone destination markets. Pakistan has been the most important from around that world that it processes and re-exports. export destination for years, where the majority of value ad- Afghanistan has also been serving Central Asian countries dition to Afghan stone takes place. Over the last five years, such as Kazakhstan, with steady demand over the last sev- the volume of Afghan natural stone exported to Pakistan eral years. Aside from regional markets, Afghanistan entered has more than quintupled. Exports to Italy and India have the Republic of Korea and Japan recently, although the ex- also increased significantly during this five-year time frame. port volume remains low.

Figure 13 : Comparison of exported value of Afghan natural stone, 2010 ( left ) and 2015 ( right ) ( US $ thousands )

700 4000

600 3500

500 3000 2500 400 2000 300 1500 200 1000 100 500 0 0

Iran Italy India Italy India Pakistan China Japan Kazakhstan Azerbaijan Pakistan Australia Kazakhstan Chinese Taipei Russian Federation Republic of Korea

Source : ITC ( 2017 ). Trade Map. Available from http ://www.trademap.org/Index.aspx. Accessed 12 November 2017.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 25

POLISHING THE KNOWLEDGE OF KEY COMPETITIVENESS CONSTRAINTS

The following section analyses sector challenges on Connect : Issues restraining connectivity to suppliers, three levels – firm capabilities ; institutional and trade markets and clients. This dimension includes chal- support ; and national environment, policy and regula- lenges related to market information, marketing and tions. For this analysis, the issues that are crucial for the trade promotion, branding, and trade agreements. competitiveness of Afghan exports can be sorted into three dimensions. Change : Issues limiting the sector’s capacity to change, innovate and tap into emerging trends. This Compete : Issues limiting the sector’s capacity to com- dimension relates to challenges accessing trained / pete in national and foreign markets. This includes skilled labour, intellectual property protection, institu- challenges related to access, inputs, productivity, tional support to innovate, investment promotion and quality management and complying with standards, protection, corporate social responsibility, and youth / and national infrastructure. women’s employment.

COMPETE non-profit Afghan Credit Guarantee Foundation. Whether or not Afghan natural stone enterprises qualify for the available Outdated production lines and low levels credit-backed loans must be investigated further. of technology for quarrying and processing With difficulty accessing loans, and with foreign investors hesitant to sink money into a country characterized by se- of marble and granite are major drags curity challenges and weak investor protections, the natural on the competitiveness of the industry stone sector in Afghanistan has become dominated by a handful of enterprises. The oligopoly-like conditions further The potential of Afghanistan’s marble and granite sector is contribute to sluggishness in development and lack of inter- limited by the low availability of modern quarrying and pro- national competitiveness. cessing technology. By relying on outdated, low-tech methods and machinery, Afghanistan’s natural enterprises have Value chain segment Inputs / production lower output with lower quality than their global competitors. Most distressingly, the inefficiency of Afghan enterprises re- Severity ● ● ● ● ● sults in higher per-unit costs for both crude and processed PoA reference Activities 1.2.5. / 1.3.1. / 2.3.1. stone, which makes sales difficult in a highly price-sensitive global market. For Afghan natural stone enterprises interested in ramping up production with the help of advanced machinery, a Economies of scale are difficult to achieve critical challenge is accessing capital. All machines and due to low levels of coordination among actors tools required to produce natural stones are costly, with prices on the rise due to the frenzied increase in natural in marble and granite production stone production over the last decade. On top of the list price, an additional cost is shipping, as any modern machin- In Afghanistan, known natural stone deposits often remain ery must be imported from abroad. Because the country is untouched due to the lack of investment necessary to landlocked, delivery of heavy shipments to Afghanistan is launch a quarrying operation. When quarries are opened, both time-consuming and expensive. stone that is extracted often ends up reaching international In terms of access to finance, high collateral require- markets in an unprocessed state without any value addition. ments mean that loans from Afghanistan’s commercial This is more prone to happen when there are few ( if any ) banks are not an option for most Afghan natural stone en- processing facilities in regions close to the quarries. Even terprises. Two Afghan commercial banks, the First Micro- when processing facilities are available, the number of sites Finance Bank and the Afghanistan International Bank, do and capacity of each site is insufficient to achieve maximum offer credit-backed loans to SMEs, in partnership with the potential value addition.

[ AFGHANISTAN : BETWEEN A ROCK AND A HARD PLACE ] 26

Photo: ITC

This is not particularly surprising, as extremely high invest- enterprises must invest in industrial generators and keep ments are required to prepare a deposit for quarrying, as them fuelled. well as establish complementary processing sites. The high capital requirements necessary to increase produc- Other factors leading to high production costs relate to hu- tion could be mitigated, to a certain extent, with increased man resources. The shortage of skilled labour means that coordination and cooperation among industry players. If the existing quarrying and processing sites are likely not oper- costs of developing a new quarry could be shared across ating at optimal capacity. For those enterprises that have several enterprises, with a result of much higher outputs in invested in advanced machinery, hiring qualified techni- both crude and processed stone, then the financial equation cians is expensive due to a scarcity in the Afghan labour becomes much more favourable as economies of scale are market. If technicians cannot be recruited from the Afghan achieved. labour market, then additional budget must be allocated for the recruitment and salary of foreign experts. In terms Value chain segment Production of the unskilled or minimally skilled labour requirements of the sector, the gruelling work handling heavy stone day in Severity ● ● ● ○ ○ and day out does not make such employment particularly PoA reference Activities 1.2.4. / 2.1.2. appealing. This leads to high turnover, which in turn results in few experienced workers and additional costs accrued in training new hires. Uncompetitive prices resulting from higher Another factor leading to high production costs is the extraction and processing costs compared time and human resources involved in launching a quarrying or processing operation. When a natural stone deposit is with regional and global competitors, identified, marble and granite enterprises looking to exploit despite competitiveness in colour, it face an array of administrative requirements and permit uniqueness and quality of raw stone applications that must be addressed prior to the launch of operations. The lengthy process involved in achieving regu- Afghan marble and granite is not price-competitive on the latory compliancy requires inordinate amounts of time, dur- global market due to the high cost of production coming which enterprises must invest in administrative staff to pared with regional peers. This is the result of a number process paperwork and nudge applications along. of factors, one among them being the high cost of energy. Afghan energy prices are the highest in the region and Value chain segment Production supply from regional power grids is erratic. In order to con- Severity ● ● ● ● ○ tinue work during power blackouts, Afghan natural stone PoA reference Activities 1.1.6. / 2.1.5.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 27

Figure 14 : Compete problem tree

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[ AFGHANISTAN : BETWEEN A ROCK AND A HARD PLACE ] 28

ConnectCritical factors constraining the marble and gran- Insufficient in-market support to create ite sector’s capacity to connect with international buyers and maintain relationships with international include the poor promotion and branding of Afghan marble and granite in global markets. As a result, the sector’s ex- markets ports predominantly flow to a handful of regional and global re-export hubs, particularly Pakistan and Italy. Additional institutional support is required to help marble and granite producers connect with international buyers Dependence on foreign processing inhibits and maintain commercial relationships. Given that there is the ability of Afghan firms to connect directly a large quantity of Afghan marble and granite being sold as a product of the re-export hubs, it is crucial for Afghan with international buyers exporters to introduce their products directly to international buyers. Afghan marble and granite enterprises have had Foreign processing facilities – primarily in Pakistan – cut and minimal exposure at international natural stone exhibitions polish Afghan stone and send it along to international buy- and fairs, in part due to the difficulties Afghan traders face ers. One consequence is that Afghan marble and granite when it comes to obtaining short-stay visas for business enterprises have very limited sales networks and often few purposes. ( if any ) connections with international buyers outside the Besides difficulties making initial contacts with inter- region. A second consequence is that the development of national buyers, Afghan natural stone enterprises are also an Afghan brand for marble and granite has been stunted. poorly informed about the state of the global marble and Pakistani ( or Turkish, or Italian ) processing facilities do not granite industry. Critical support is needed to collect and promote the Afghan origin of the finished stone they sell. disseminate market intelligence regarding industry trends Finally, without direct communication with international buy- and consumer preferences in target markets. Marble and ers, Afghan natural stone enterprises are not able to gain granite exporters need increased support to sell their prod- feedback about trends in the global market and adapt their ucts directly and connect with buyers by participating in production outputs accordingly. trade fairs and exhibitions.

Value chain segment All segments Value chain segment Marketing / distribution

Severity ● ● ● ● ○ Severity ● ● ● ○ ○

Activities PoA reference Activities 1.1.5. / 2.1.4. PoA reference 2.3.2. / 3.1.1. / 3.1.3. / 3.1.4. / 3.2.1.

Poor infrastructure and weak institutional Afghan marble and granite shipped to re- support degrades the ability of enterprises export hubs is processed and relabelled, to get Afghan stone into international markets losing opportunities to build an Afghan brand Sector development also requires increased institutional As a result of the limited processing facilities available in support to facilitate the movement of goods across borders. Afghanistan, a large share of Afghan crude marble and Afghan marble and granite exporters struggle to access granite is sent to Iran and Pakistan and other re-export hubs distant markets due to underdeveloped transportation and for finishing. This stone is often labelled as a product of the logistics facilities. This makes the process of building rela- country where the processing takes place. While deceptive, tionships with international buyers more difficult, as buyers there is nothing that indicates that this practice violates inter- from developed economies expect timely delivery and have national commercial laws. The proliferation of smuggling of plenty of alternative sources if a seller proves unreliable. Afghan natural stone along both the Afghan–Pakistani bor- Due to the weight of the stone, most marble and granite der and the Afghan-Iranian border, further prevents inquisi- exports are delivered by road or sea freight. For Afghanistan, tive buyers from knowing the true origin of Afghan natural this is extremely discouraging, as transit agreements with stone traded in the global market. This makes it difficult for neighbouring countries have been ratified on paper but have the Afghan marble and granite sector to build a globally not proved useful in practice. With an underdeveloped do- recognized brand. mestic logistics industry, many Afghan stone enterprises have decided to dump both crude and processed marble Value chain segment Marketing / distribution and granite in the Islamic Republic of Iran and Pakistan rather than take the time ( and risk ) of subjecting their ship- Severity ● ● ● ● ● ments to additional land border crossings or arranging sea PoA reference Activities 3.1.2. / 3.2.8. transport at the Bandar Abbas Port in the Islamic Republic of Iran or Karachi Port in Pakistan.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 29

Photo: ITC

Value chain segment Marketing / distribution There are natural stone associations currently operating in Afghanistan but there have been complaints that these as- Severity ● ● ● ● ● sociations favour the dominant players at the expense of PoA reference Activities 2.2.4. / 3.2.5. / 3.2.7. new entrants to the sector. There is also a focus among the associations on short-term increases in production output rather than on building long-term technical capacity, pro- Weak organization among stakeholders moting the Afghan natural stone brand and producing mar- and limited services provided to members ket intelligence to help Afghan enterprises penetrate new markets. The weak organization among marble and granite producers limits not only their opportunities to achieve economies Value chain segment All segments of scale but also their ability to pool resources to support technical training, market intelligence gathering and other Severity ● ● ● ○ ○ activities that would elevate the sector as a whole. An indus- PoA reference Activities 2.2.3. / 3.2.6. try association is the conventional platform for organizing such activities, but in Afghanistan, forming effective natural stone associations has proven difficult.

[ AFGHANISTAN : BETWEEN A ROCK AND A HARD PLACE ] 30

Figure 15 : Connect problem tree

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[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 31

CHANGE Advanced geological research is needed to identify marble and granite deposits The Afghan marble and granite industry does not use modern processing methods for various reasons, such as capi- While geological studies have been conducted in tal constraints that limit investment in advanced machinery. Afghanistan, further research is needed to identify high- There also appears to be little high-level interest from gov- value quarries, what stone varieties exist therein and their ernment institutions in building the capacity of the sector. approximate value. Such efforts would lead to significant increases in quarry output volumes as well as output qual- Limited available capital for investment ity. If undertaken by the Afghan Government, such research constrains the sector’s ability to upgrade would drastically reduce costs and risk for potential investors in the sector, thereby making investment prospects quarrying and processing methods much more appealing. Were such research conducted, transparency in disseminating findings would be critical, The sector’s ability to upgrade its quarrying and process- along with information on how to apply for permits to exploit ing methods has been constrained by limited capital to in- confirmed deposits. Moreover, existing studies undertaken vest in machinery, tools and training. The lending terms and by foreign competitors and relevant ministries, as well as de- conditions offered by Afghanistan’s commercial banks are velopment partners and research institutes, have been insuf- not applicable to the sector ( high collateral requirements ficiently disseminated among key stakeholders throughout and short repayment periods ), while outside investors are the value chain. hesitant to invest in a country with weak investor protections, legal ambiguity related to land ownership, difficulty obtain- Value chain segment Processing ing permits to establish quarries and processing sites, and weak property rights. That the Afghan Government is also Severity ● ● ● ● ○ fighting armed insurgent groups in many areas close to de- PoA reference Activities 1.1.2 / 1.1.3. posit sites is another barrier to investment. More efforts are required to promote investment in machinery for quarrying and processing, which may include in- Obstacles to obtaining quarry permits centives offered by the Afghan Government. Such incentives and land hinder sector development could include government funding for industrial parks and pledges to construct roads connecting quarries, processing There is plenty of marble and granite in Afghanistan. sites and urban centres. However, accessing these resources is a huge challenge, limiting the opening of quarries as well as the development Value chain segment All segments of consolidated production sites, such as the construction of industrial parks. The non-existence of a one-stop shop for Severity ● ● ● ● ○ administrative purposes hinders the expansion of the sector PoA reference Activities 1.2.1. / 1.2.2. / 1.2.3. into additional processing activities such as the establishment of cutting and polishing facilities, which would add value to Afghan marble and granite products. The current Sector enterprises have weak management system lacks clear property rights and a transparent licens- skills, limiting their ability to expand their ing process, while land conflict resolution remains weak. Moreover, land ownership is highly informal, as public docu- business ments are virtually absent.

Afghan sector enterprises frequently lack management skills Value chain segment All segments to run their businesses effectively. On top of that, management and marketing skills are also often lacking among Severity ● ● ● ○ ○ exporters, in addition to language and computer ( Internet ) PoA reference Activities 2.1.1. / 2.1.3. / 2.3.4. skills to be able to contact and maintain relationships with international buyers.

Value chain segment All segments

Severity ● ● ● ● ○

PoA reference Activities 2.3.3. / 3.2.2. / 3.2.3. / 3.2.4.

[ AFGHANISTAN : BETWEEN A ROCK AND A HARD PLACE ] 32

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[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 33

MARKETS : SHAPING STRATEGIC DIRECTION

MARKET POSITIONING : THE REAL GEM IN PREMIUM AND HIGH-QUALITY SEGMENTS

Afghanistan has significant potential to become a premium Not all improvements in production capacity require mas- natural stone supplier by strategically marketing its diverse sive investments. Minor improvements to existing process- and colourful marble and granite varieties. To this end, the ing facilities can help enterprises increase their output of sector must take short-term and long-term steps to increase premium stone. production volumes while simultaneously moving up the value chain. MEDIUM-TO-LONG-TERM PRIORITIES ( +3 YEARS ) : MOVE UP THE VALUE SHORT-TERM PRIORITIES ( 1-3 YEARS ) : CHAIN INCREASE PRODUCTION QUALITY

AND VOLUME OF EXISTING PLANTS Through a concerted effort to increase, aggregate, modern- ize and scale up production sites, the Afghan marble and Afghanistan can position itself to compete on quality even granite sector will be able to increase its absolute value. in the short-to-medium term by investing in quality manage- Once the country is capable of processing high-quality ment across existing institutional and enterprise levels. For stone domestically in sufficient volumes for export, there traditional buyers of marble and granite in the global market, will be less dependence on sales to regional and global especially those in European countries, quality is a critical re-exporters, who currently capture much of the profit from factor in purchasing decisions. In order for Afghan natural Afghan stone through value addition. stone to build a reputation for quality – and consequently Technology improvements would allow the sector to attract international buyers who will pay premium prices – diversify its product range by offering value added semi- Afghan enterprises must take steps to improve quality con- processed and finished stone to global markets. Moreover, trol of their shipments. waste from the quarrying and processing stages, such as In the short term, Afghanistan can enhance production in loose stone and stone powder, is currently not recycled. existing quarries and processing plants by introducing clear This is an opportunity cost for natural stone enterprises that quality standards for exported stone. Blasting and other must be remedied. More variety in product lines would also outdated quarrying techniques damage the stone ( in ways increase the ability of Afghan marble and granite enterprises that are often invisible to the naked eye ), cause excessive to enter new markets and build the reputation of Afghan nat- product loss and decrease saleable output. Training of hu- ural stone. For handicrafts made of marble and granite, such man resources and upgrades in technology would not only as mosaics and tiles, Afghan traders may also find it viable improve the quality of quarried stones but also decrease to reach consumers directly using e-commerce platforms. stone damage and waste.

[ MARKETS : SHAPING STRATEGIC DIRECTION ] 34

EXTRACTING FACTORS DRIVING GROWTH

The following section divides the proposed Marble and positioned to compete with their Pakistani rivals on price Granite Sector Export Strategy into two broad phases ; the and quality, and thereby capture an ever-increasing share first related to the short-term outlook and the second to the of the domestic market. medium-to-long term outlook. By the latter period, it is expected that a significant portion of the NES and the sector PoA will have been implemented. This two-phased approach aims to stage interventions in alignment with the evolving capacities of sector Strategy for the domestic market enterprises and trade and investment support institutions as NES implementation moves forward. Increase market share of domestic stone by im- The following product–market combinations are further proving production capacity and quality. prioritized. These recommendations should not deter indi- Adopt policies to promote use of domestic marble vidual enterprises from acting on their own strengths and and granite. weaknesses ; in fact, they are likely to benefit equally from Encourage purchase of Afghan marble and granite the support and structural improvements to the value chain over imported varieties in Government-related con- which should result from implementing this Strategy. struction projects : an ‘Afghan product first’ policy would increase Afghan stone consumption and ensure sustainable expansion of the Afghan marble and granite market. SHORT-TERM : POLISH PRODUCT QUALITY AND CULTIVATE RELATIONSHIPS WITH LEADING IMPORTERS Regional markets Domestic market Immediate regional market – Pakistan : Pakistan is the largest export destination for Afghan marble and granite, According to the Afghanistan Investment Support Agency, with an exported value of US $ 3.7 million in 2015. This figure Pakistani marble dominates almost 85 % of the Afghan do- is likely much higher, due to rampant smuggling along the mestic market, totalling between 920,000 and 1,230,000 Afghan–Pakistani border. Only two countries – China and tons annually. Of this amount, 270,000 tons are finished India – supplied more stone to Pakistan than Afghanistan. marble. The dominance of Pakistani stone is due to the Almost 100 % of Afghan stone reaching Pakistan is raw mar- lower prices and higher processing quality of Pakistani marble exported directly from quarries. ble, despite abundant reserves of untouched high-quality Pakistan remains an important export destination, es- marble in Afghanistan. Domestic quarries in Afghanistan can pecially in the short term, while Afghan natural stone enter- only produce between 184,500 and 246,000 tons per year, prises work on increasing the quantity and quality of their of which some is exported to Pakistan for processing. No outputs. With Afghan enterprises years away from upgrad- data is officially available regarding granite production. The ing their processing capacity, an immediate option is to in- majority of Afghan-produced natural stone is consumed lo- crease exports of crude marble and granite to Pakistan and cally, as the local supply of marble remains less expensive accept that Pakistan will be capturing a large share of the than imported varieties. profit from the stone following value addition and re-export In recent years, domestic demand for marble and granite ( often back to Afghanistan ). has increased significantly. This demand was first driven by Heavy two-way trade in natural stone between the NATO-led reconstruction effort but is now sustained by Afghanistan and Pakistan has an additional, so far unex- advancements in the construction sector, resulting in more plored potential benefit for Afghan natural stone enterprises. interest in higher-quality building materials. Unfortunately, As two countries in the same region with similar develop- the processing capacity of Afghan marble and granite en- mental challenges, Pakistani natural stone enterprises terprises is not able to meet domestic demand, in terms of are an excellent model for their Afghan peers. At present, both quantity and quality. This has led to the aforementioned Pakistan is far ahead of Afghanistan in production volumes, reliance on Pakistani suppliers of processed stone. With the processing quality and cost-effectiveness. In all of these ar- adoption of advanced quarrying and processing technol- eas, Afghanistan has a lot to learn from its neighbour. ogy, Afghan marble and granite enterprises should be better

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 35

may not be promoted during the sale of the stone to the end Strategy for the Pakistani market user. Although Afghanistan’s trade relations with Italy may not provide much in the way of long-term marble and granite Stabilize exports of crude marble and granite to sector development, the revenue generated from the sale supply Pakistan’s growing construction sector. of crude stone has the immediate effect of helping main- Learn from Pakistani processing technology tain positive cash flow for sector enterprises, as well as the through trade in order to substitute Pakistani im- long-term potential of generating enough profit to upgrade ports with domestic supply in the long run. processing capacity.

Re-exporting hub in Asia – China : In the Asian market, Greater regional market – India : India was the third-great- China plays a similar role to Italy in that it imports crude est export destination for Afghan marble and granite in 2016, stone from developing countries, processes it at a very ad- with an exported value of US $ 73,000. India also prefers vanced level and then re-exports it around the world. Afghan imports of unprocessed stone, in order to capture profits supply of crude natural stone to China, compared with its gained through value addition. Unlike the long export rela- supply to Italy, is marginal ; 2016 export figures show only tionship with Pakistan, exports to India only started in 2008. US $ 23,000 of Afghan marble shipped to China. Chinese Since then Afghan supply to India has increased steadily. demand for Afghan stone is likely to increase, though, with Exports peaked in 2011 at US $ 283,000. Demand for marble the rise of household incomes in China and the global in- and granite in India is only expected to grow as the rap- crease in marble and granite demand. When global demand idly growing economy spurs construction. With the expan- increases, China, as a major re-exporter, will require more sion of the Indian middle class, more and more people are and more crude stone to fuel its processing facilities. It is es- building homes with luxury construction materials such as timated that Afghan annual exports of marble to China can marble and granite, which have suddenly become popular reach up to US $ 500 million7. In the long term, the Afghan ( and affordable ) for home decor. Exports of crude Afghan marble and granite sector can aspire to supply Chinese con- marble and granite to India for processing and domestic struction firms directly with processed stone. In the short consumption are likely to grow at a faster pace as Afghan– term, Afghan natural stone enterprises must cede the profits Indian trade passing through the Islamic Republic of Iran’s from value addition to the Chinese and focus on increasing Chabahar Port increases and shipping costs decline. exports of crude stone.

Strategy for the Indian market Strategy for re-exporter markets

Increase supply of crude and merely cut marble, Use networks of re-exporters : linking with retail dis- and stabilize supply of large amounts for the grow- tribution networks through branded chain networks ing Indian market, which prefers bulk imports. in Europe and Asia. Promote Afghan marble as a brand for unique and Spread the Afghan brand and promote the unique high-quality stone. colour and high quality of Afghan stone in European Directly target growing Indian construction and lux- and Asian markets. ury goods industries. Learn about Italian and Chinese processing technologies through trade links.

Re-exporting markets Re-exporting hub in Europe – Italy : Afghanistan began LONG-TERM : CAPITALIZE ON exporting crude marble to Italy in 2009, with export value ESTABLISHED BRAND AND ADVANCE reaching US $ 499,000 in 2016. Italy imports crude marble from around the world, applies advanced value addition, UP THE VALUE CHAIN and then re-exports the processed stone to a wide network Middle Eastern market of global buyers. As most processing takes place in Italy, the finished stone products take the ‘Made in Italy’ label. While The Middle East ( including the Islamic Republic of Iran ) has an honour of sorts, the Afghan marble and granite sector the most rapidly growing demand for marble and granite gains little from this, aside from the revenue generated from in the world, making it a long-term export target for Afghan the sale of the crude stone. Italy captures the profits from the value addition and the Afghan origin of the stone may or 7.– Afghanistan, Ministry of Mines and Petroleum ( 2017 ), p.20

[ MARKETS : SHAPING STRATEGIC DIRECTION ] 36

stone. Geographic proximity and strong economic growth, and granite sales in the Republic of Korea and Japan may particularly in the Islamic Republic of Iran and the Arab Gulf be marginal at present but prospects for future growth states, indicate that sustainable demand for Afghan natural are positive. The difficult first step of establishing mar- stone is likely. ket links has been accomplished, and increased access The Islamic Republic of Iran : Iranian marble and gran- to shipping by sea through the Islamic Republic of Iran’s ite imports were worth US $ 59 million in 2016. Despite the Chabahar Port should translate to lower prices offered by adverse effects of sanctions, the rapid growth of the Iranian Afghan traders. economy has led to parallel growth in demand for marble and granite to satisfy the needs of the Iranian construction and luxury goods industries. According to reported figures8, Afghanistan exported US $ 2.5 million of crude and merely Strategy for the East Asian market cut marble to the Islamic Republic of Iran in 2016. The figure is likely far higher, due to smuggling along the porous Strengthen trade relationships with the Republic Afghan-Iranian border. of Korea and Japan to further increase export vol- UAE : The UAE imported US $ 392 million of marble and umes and export value. granite in 2016. After a severe recession following the 2008 Establish the Afghan brand in the attractive East global financial crisis, the UAE is once again flourishing, with Asian market by promoting the unique colour and construction and luxury goods enterprises buying increas- high quality of Afghan stone. ing quantities of premium-quality natural stone to meet the Target households directly in the popular do-it- needs of their clientele. The Afghan marble and granite sec- yourself home renovation market. tor has a long way to go to fully capitalize on the UAE’s in- Use growing trade ties in East Asia to better under- creasing appetite for natural stone ; in 2016, Afghan exports stand trends and identify niches for Afghan natural to the UAE totalled just US $ 26,000. This leaves plenty of stone. room for improvement, and further research must be conducted to identify the causes of – and solutions for – the current low export volume. Kazakh market

Strategy for Middle Eastern markets Afghanistan first accessed the Kazakh market in 2014, and export volumes remain minimal. This could change in the Promote the Afghan brand based on the unique years to come, considering that Kazakh officials agreed in colour and high quality of Afghan stone. August 2017 to expand trade with Afghanistan and improve Directly target the growing Middle Eastern con- transit relations between the two countries. This has sig- struction and luxury goods industries. nificant long-term implications for the Afghan marble and Concentrate on increasing supply to the rapidly granite sector, considering the sheer size of the Kazakh growing economies of the Middle East. market. In 2016, Kazakhstan imported US $ 59 million in Use existing export relationships in the Middle East natural stone, predominantly from China, Italy, Turkey and to increase export volume and penetrate new mar- the Russian Federation. In order for Afghanistan to increase kets in the region. market share in Kazakhstan, transit agreements on paper must be applied in the real world to ensure reliable product delivery.

East Asian market Strategy for the Kazakh market East Asia is another region replete with booming economies and consumers with fast-growing tastes for luxury goods Strengthen the export relationship with Kazakhstan and high-end household decor. Auspiciously, Afghanistan to increase exported volume and value. was able to send its first shipments of natural stone to the Establish the Afghan brand in the Central Asian Republic of Korea and Japan in 2015. These markets in- market by promoting the unique colour and high creasingly demand products for luxurious natural stone quality of Afghan stone. interiors, handicrafts and do-it-yourself home renovations. Use momentum from recent agreements between Tiles and mosaics for households are predominantly sold Afghanistan and Kazakhstan to explore how clos- online, where many different stone varieties and colours er government-level cooperation can facilitate in- are demanded. Afghanistan’s market share for marble creased exports on the ground.

8.– TradeMap ( 2016 ), direct data of Afghanistan.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 37

THE PHILOSOPHER’S STONE : VISION AND STRATEGIC OBJECTIVES

VISION

The following vision has been developed to increase the The scope for improvements is immense and extends export competitiveness of Afghanistan’s marble and granite across the value chain. In some cases, the scope involves sector. the strengthening of existing links, while in other areas there is a need for structural modifications. Both dimensions of Marble and granite : the cornerstones improvements must lead to : of the Afghan economy Market penetration – increasing exports in existing markets Market development – increasing exports of existing “ products in new markets ” Full diversification – increasing exports of new products in new markets. The Afghan marble and granite sector has the potential to carve out a lucrative place for itself in the global natural stone market but remains hampered by constraints in sev- To fulfil this ambitious vision and the bottom lines described eral areas. The comparative advantage held by Afghanistan above, the following strategic objectives have been identi- in terms of the quality of Afghan natural stone is in dan- fied. These objectives provide a framework for developing ger of being overshadowed by its limitations in logistical solutions over the next five years. The strategic objectives infrastructure, limited technology, high production costs, agreed on by stakeholders to uphold the vision are as weak marketing and lack of global recognition. Significant follows. improvements are required to compete against other international suppliers.

STRATEGIC OBJECTIVES

The strategic objectives are structured around a specific set Each of the strategic objectives relies on a set of opera- of activities that are intended to address the wide range of tional objectives. The operational objectives are intermediate issues confronting the marble and granite sector. The im- achievements that must be reached to realize the strategic pact of implementing these activities can also spillover to objective. On the most basic level, the operational objec- related mining sectors such as the mineral industry, includ- tives are realized through various concrete activities, each ing talc production. Independent, yet mutually supporting, of which supports a specific priority area within the relevant activities will bolster specific areas of weakness. The coordi- operational objective. Ideally, each activity will be translated nated resolution of such weaknesses will be the foundation into a project of its own. for value added interaction between functional areas. This, in turn, will lead to the realization of the strategic objectives and, ultimately, the sector vision.

[ THE PHILOSOPHER’S STONE : VISION AND STRATEGIC OBJECTIVES ] 38

Photo: ITC

STRATEGIC OBJECTIVE 1 : IMPROVE launching existing quarries and processing facilities has left SUPPLY-SIDE CAPACITY AND QUALITY many Afghan natural stone enterprises with little additional capital for further investment. Because of these high start-up MANAGEMENT TO ENSURE ADEQUATE costs, as well as the high cost of upgrading existing sites, VOLUME AND SUPPLY CONSISTENCY. special attention must be given to the issue of financing. Afghanistan’s commercial banks cannot be forced to ap- This strategic objective has the overall goal of increasing prove loans that they believe are excessively risky but they quality consistency and production volumes. This objective can be given more access to credit-backed SME lending will be realized through the following activities : programmes that already exist in Afghanistan. This would require making contact with the Afghanistan Credit Guarantee Help quarries and processing factories upgrade equip- Foundation, with the Afghan Government pledging tangible ment and production lines through technology transfer support for the sector ( e.g. provision of roads and electricity ) initiatives, increased access to capital and long-term in order to reduce the risk to lenders. credit, and R&D activities. Another potential source of finance is equity investment Support product diversification by commercializing stone in new and existing natural stone enterprises. Again, the powder and scaling up production of stone handicrafts. Afghan Government has a critical role to play in this effort by pledging to streamline compliance procedures and prepar- On the supply side, improving the availability of high-quality ing a package of investment incentives ( again, this relates marble and granite will be key for the industry’s export per- mainly to provision of roads and electricity ). If finance for formance. By introducing improved quality management technology upgrades and exploitation of new quarry / pro- methods and applying modern technology, damage to cessing sites can be secured, the time frame for exploiting stone will be reduced and overall production levels will rise. Afghanistan’s many untapped natural stone deposits can This objective can be achieved through investments be sped up considerably. Launching a targeted initiative in technology, and by facilitating product diversification to to attract investment in the sector will further support this make use of smaller stone waste and powder produced dur- objective. ing the quarrying and processing stages. These activities Finally, product diversification must be encouraged to aim to achieve a consistent supply of construction-grade increase revenue streams. This includes ramping up pro- stone and stone by-products to target markets, with pre- duction of high-quality semi-processed and finished stone, mium pricing. as well as utilizing production waste for use in handicrafts A key activity necessary to boost sector growth is raising and as stone powder. By selling a wider array of products, awareness about modern technology and methods, and the Afghan natural stone enterprises have the opportunity to importance of R&D to ensure long-term growth. Upgrading grow their network of buyers in different markets, thereby equipment is easier said than done, as the costs involved in contributing to market penetration.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 39

Figure 17 : Future value chain, strategic objective 1 Domestic market International market Distribution Processing International factories Assembly Production Strategic objective 1: Improve supply-side capacity and quality management to ensure adequate volume supply consistency

[ THE PHILOSOPHER’S STONE : VISION AND STRATEGIC OBJECTIVES ] 40

Photo: ITC

In parallel, a more investment-friendly regulatory envi- STRATEGIC OBJECTIVE 2 : IMPROVE ronment, achieved in part through the introduction of a THE BUSINESS ENVIRONMENT AND one-stop shop for applying for quarrying and processing licences, would greatly enhance growth prospects for the REDUCE COSTS OF DOING BUSINESS sector. The one-stop shop would increase transparency in the sector and reduce both compliance costs and the A business environment that is excessively challenging for time between initial investment and revenue generation. All Afghan natural stone enterprises results in higher costs and of these benefits would reduce risk for both investors and uncompetitive prices in the global market. Addressing this lending institutions, thereby increasing available capital for issue involves activities in the following areas. sector expansion. While the one-stop shop would be a tangible institution, a complementary form of support would be Lower the barrier for opening and operating new quarry- the provision of information and export guides online. This ing and processing sites by introducing one-stop shops could be done under the umbrella of the one-stop shop or to streamline application processes ( among other func- managed by a separate entity. tions ). The strengthening of industry associations is another Encourage focused, tangible government support to the means to raise the capacity of the sector as a whole. The sector in the form of industrial parks, connection to power sector stands to benefit from improved coordination be- grids and transport infrastructure. tween various actors involved in the value chain, thereby Develop the capacity of trade and investment support in- bolstering business-to-business ( B2B ) links between quar- stitutions and other support services to provide essential ries, cut-and-polish service suppliers and traders. Trade services to the sector. fairs and exhibitions organized by or in close collaboration Strengthen competition within the sector and reduce the with industry associations are further opportunities to bring negative impact of existing oligopoly-like conditions. stakeholders together. Industry associations could also address the oligopoly-like conditions in the sector that stunt growth and deter outside investment. Reforms to existing Developing industrial areas and zones for marble and associations, such as the implementation of transparent granite enterprises will be key for the sector’s future growth. internal voting procedures for consequential industry-wide Concentrating enterprises in industrial areas makes it pos- decisions, would be a positive step forward. Allegations of sible to reduce the cost of launching processing facilities, as price-fixing by dominant players in the sector must also be critical infrastructure would already be in place. addressed, preferably by the associations themselves.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 41

Figure 18 : Future value chain, strategic objective 2 Domestic market International market Distribution International factories Processing Assembly Production Strategic objective 2: Improve the business environment by streamlining production and export procedures

[ THE PHILOSOPHER’S STONE : VISION AND STRATEGIC OBJECTIVES ] 42

Photo: ITC

Several factors contribute to the limited links between STRATEGIC OBJECTIVE 3 : Afghan marble and granite enterprises and international IMPROVE MARKET ACCESS BY buyers, such as the lack of opportunities to connect with potential buyers and limited marketing expertise. One means to PROVIDING MARKET INTELLIGENCE address this issue is developing and disseminating profiles of target markets, as well as conducting marketing training Once the sector is able to increase output volume and qual- for sector enterprises. ity, it will have to expand beyond its established base of Building the capacity of industry associations is another re-export clientele. At present, Afghan exports of natural element of the equation, in particular strengthening their stone are limited to a small handful of regional and global ability to gather and disseminate actionable market intel- re-exporters. This degrades the ability of Afghan exporters ligence information ( e.g. global prices, global trends in con- to negotiate prices and also leaves the sector vulnerable to sumer preferences and potential target markets ). regional decreases in demand. To address these issues, After years in which Afghan stone was shipped to re- this Strategy proposes the following activities : exporters, processed and labelled as a product of the processing country, focus needs to be placed on the promotion Coordinate marketing and business development efforts of an Afghan brand for marble and granite. Participation in to raise awareness in specific target markets of both trade fairs and exhibitions, with support from a systemat- Afghan marble and the benefits of using marble in con- ic campaign to highlight the attractive qualities of Afghan struction. natural stone, are both potential activities to achieve this Support export market diversification through research end. Any campaign to promote Afghan marble and granite initiatives and strengthening trade and investment sup- should consider the growing importance of online market- port institutions. ing and sales. The launch of an online hub for the promotion of Afghan natural stone is an option, with links to the websites of Afghan enterprises that have set up their own e-commerce sites.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 43

Figure 19 : Future value chain, strategic objective 3 Domestic market International market Distribution International factories Processing Assembly Strategic objective 3: Improve firms’ ability to access markets through trade intelligence Production

[ THE PHILOSOPHER’S STONE : VISION AND STRATEGIC OBJECTIVES ] Source: ITC 45

LEAVING NO STONE UNTURNED : MOVING TO ACTION

KEY REQUIREMENTS FOR EFFECTIVE IMPLEMENTATION

The development of the future value chain for the marble Coordinate and monitor the implementation of the and granite sector is a five-year project defined through a Strategy by the Government, private sector, institutions consultative process between Afghan public and private or international organizations to ensure implementation sector stakeholders. Achieving the strategic objectives and is on track ; realizing the future value chain depends heavily on the ability Identify and recommend allocation of resources neces- of sector stakeholders to start implementing and coordinat- sary for the implementation of the Strategy ; ing the activities defined in the Strategy’s PoA. Assess the effectiveness and the impact of the Strategy ; The Strategy in and of itself will not alone be sufficient Ensure consistency with the Government’s existing to ensure the sector’s sustainable development. Such de- policies, plans and strategies, and align institutions’ velopment will require the coordination of various activi- and agencies’ internal plans and interventions with the ties. While the execution of these activities will allow for the Strategy PoA ; Strategy’s targets to be achieved, success will depend on Elaborate and recommend revisions and enhancements the ability of stakeholders to plan and coordinate actions in to the Strategy so that it continues to best respond to the a tactical manner. Apparently unrelated activities must be needs and long-term interests of the national business synchronized across the public sector and private sector, and export community ; non-governmental organizations and local communities in Propose key policy changes to be undertaken based on order to create sustainable results. Strategy priorities, and promote these policy changes To ensure the success of the Strategy, it is necessary among national decision makers ; to foster an adequate environment and create an appro- Guide the sector secretariat in monitoring, coordination, priate framework for implementation. The following section resource mobilization, and policy advocacy and com- presents some of the key success conditions considered munication to enable effective implementation of the necessary for effective implementation. Strategy ; Provide the sector secretariat with the mandate and the necessary resources to fulfil its functions in an effective ESTABLISH AND OPERATIONALIZE manner. A PUBLIC AND PRIVATE COORDINATING BODY AND EXECUTIVE SECRETARIAT Composition of the steering committee Marble and granite sector steering committee It is recommended that the steering committee be comprised of key entities involved in the sector, with special fo- A key success criterion for the Strategy is the ability to coor- cus on ensuring equitable involvement of both the public dinate activities, monitor progress and mobilize resources and the private sector. for implementation. It is recommended that a steering committee comprised of the key public and private sector enti- Secretariat ties be formed or supported ( if such a committee already exists ). This will function as a platform with balanced repre- A secretariat will assist the steering committee by acting as sentation of all major marble and granite sector stakeholders an operational body responsible for the daily coordination, to share information in open communication. monitoring and mobilization of resources to implement the Overall it is proposed that the steering committee be PoA. It is proposed that it takes on this role with technical responsible for the following tasks related to Strategy support from key ministries and technical agencies. The implementation : secretariat will be composed of 1–2 technical operators.

[ LEAVING NO STONE UNTURNED : MOVING TO ACTION ] 46

Photo: ITC

The core responsibilities of the sector secretariat should be Both the steering committee and its secretariat will work to : hand-in-hand with existing entities established to stream- Support functioning of the steering committee ; line Government operations and enhance donor operations. Collect and manage data to monitor the progress and These include the NES secretariat and others. It is possible impact of Strategy implementation ; that the secretariat would be accommodated as part of an Liaise with and coordinate development partners for existing entity, with an extended mandate and resources Strategy implementation ; allocated to it. Elaborate project proposals and build partnerships to mobilize resources to implement the Strategy ; Follow up on policy advocacy recommendations from the steering committee ; Ensure effective communication and networking for successful Strategy implementation.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] STRATEGIC PLAN OF ACTION 48 ), MoF, MoF , AMIA, AMGPA Ministry of , MoMP, AMIA, , MoMP,

Lead and supportingLead implementers EPAA MoMP, MoCI, Communications and Information Technology ( MoCIT ), universities ANSA AMGPA MoMP, universities MoCIT, Bank associations, Ministry of Finance ( Da Afghanistan Bank, ACCI, Afghanistan Chamber of Industries and Mines ( ACIM ) Bank associations, Da Afghanistan Bank, ACIM ) ) ------) Turkish Chinese, Italian, e.g. Afghanistan International Bank, Afghanistan Afghanistan International Bank, Afghanistan

One major list of relevant research created, in created, research One major list of relevant the on based information relevant all cluding of the inventory on existing research result projects estab platform peer-learning major One lished, allowing access to the list of relevant additional for capacity increased and research knowledge-sharing with provinces in events networking Regional stakeholders twice a year information material on One common standard and at developed implementation standards con programme capacity-building one least site ducted in each quarry and processing certificate intro One common standardized the successfully completing firms duced for workshop research foreign leading three with Collaboration ( institutions established based on technical stud Recommendations ies disseminated short course developed to One standardized inform stakeholders about recommendations, and short twice a year in implemented courses hubs main processing One major technical study carried out on im methods and inputs to be used proved Governmental guarantee scheme established Baseline model developed and workshops banks leading with year a twice conducted ( Afghan Bank, Ghazanfar Bank, Commercial United Bank, Azizi Bank-e-Mille Afghan, Bank, New Kabul First MicroFinance Bank, Bakhtar Bank Pashtany

Targets* • • • • • • • • • • •

2022 2021

2020

2019

2018 Implementation period 2017

2 1 3 3 2 3=low Priority 1=high 2=med

- - - split / e.g. universities universities e.g.

) and granite stand especially Islamic C503M-15 / processing practices. processing ASTM C503 / ) through awareness-raising campaigns, capacity-building and certification campaigns, capacity-building awareness-raising ) through ). – on marble and granite production at the national, regional and international levels levels international and regional national, at the production granite and marble – on C615M-11 / establish new marble and granite fairs to facilitate business relationships. / ASTM C615 ) by reaching a higher priority on the Government’s support scheme agenda, to enable companies up ) by reaching China, Turkey e.g. Italy, Conduct an inventory of existing research projects undertaken by relevant stakeholders – stakeholders undertaken relevant by projects research existing of inventory an Conduct companies private and ( mediums of variety a through stakeholders relevant to access provide and findings research Disseminate ( brochures, pamphlets ). knowledge- initiate to level local at the facilities processing and quarrying for platforms Establish peer-learning existing market opportunities and quarrying sharing regarding networking events among key value chain stakeholders to facilitate the establishment regional Organize among possible new trading partners. of business relationships Upgrade into upgraded methods institutions on research research Facilitate collaboration between national and foreign and inputs to be used in cut-and-polish processes. methods and inputs to be used in post-quarrying processes. Conduct technical studies on improved short courses. and associations through to marble and granite producers Disseminate recommendations Conduct workshops to sensitize bank officers sector financial needs and encourage them develop new loan instruments. to sector stakeholders. tailored Assist banks in developing financial products organizations for machines and tools to quarry processing leasing options and credit Deploy affordable banks. commercial through Activities information on marble and granite to equip stakeholders with relevant 1.1.1. Enhance the sharing of research about the sector. • • • • • 1.1.2. Sensitize firms on the importance of international marble ( ( ards volume and information on how quality management affects produced workshops and providing programmes, due to poor quality management causing cracking losses of products supply consistency induced from ting / breaking of stones. methods and intensification by conducting technical studies on improved market-let product 1.1.3. Promote of marble and granite. inputs to be used in production • • • 1.2.1. Establish a governmental guarantee scheme for industrial loans given by banks ( loans lines and expansion activities. production grade their machinery, value chain from 1.2.2. Assist banks in developing a baseline model to assess business proposals stakeholders. • • • : Improve supply-side capacity and quality management to ensure adequate volume supply consistency. - - - Similarly, the lead and supporting implementers column remains indicative as the implementation will require collective efforts, supporting and will implementation lead the the indicative remains additional column added. as be implementers institutions which Similarly, may for Targets are indicative only and will be the subject of further refinement at beginning of the implementation management stage. Strategic objective 1 Operational objectives 1.2. Upgrade the machinery and production lines in quarries and cutting factories. 1.1. Sensitization and capacity-build ing on the imple mentation of stand ards and product diversification *

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 49 , AMIA, AMGPA , ANSA, MoF Lead and supportingLead implementers MoCI Exhibition Directorate, MoCI Investment Promotion Directorate, bank associations, ACIM, MoF, MoMP MoMP MoMP Sector enterprises, AMIA, AMGPA, Ministry National of Economy, Protection Environmental Agency Sector enterprises, Afghanistan Women and Chamber of Commerce AMIA, AMGPA Industry, - - - grant scheme for companies inte grant scheme for companies / A list of investment attraction opportunities developed pro promotion investment Sector-specific grammes developed material developed One common promotion extrac twice a year in each of three Workshop and Herat tion hubs in Jalalabad, Wardak tools and machines available of list Rental developed machines and processing for cutting Standards developed A machine certification agency established One focal point for information on machines and extraction tools established and Feasibility study on factory for new products and new add-ins in existing factories production development carried out product Special loan to their production grating secondary products line established Fifty trainees

Targets* • • • • • • • • • • •

2022

2021

2020

2019

2018 Implementation period 2017

1 1 2 3 1 3=low Priority 1=high 2=med ------). - quality, accessibil quality, handicrafts, sculp ), which will be a strategic project ), which will be a strategic project ) to showcase sector potential and fa : stone sludge, waste China, Turkey e.g. Italy, : slurry ( / ), which are demanded by international markets. ), which are loan scheme for companies adding secondary products to their production to their production loan scheme for companies adding secondary products / : Facilitate machine and tool rental to explore the possibility of cooperation to to explore : Facilitate machine and tool rental ). between companies focusing on new products interest or a consortium or a cooperative based on shared

Conduct awareness-raising workshops at the district level to encourage formation of associations and Conduct awareness-raising cooperatives. equipment initiative Leasing cover each other’s weakness by sharing machines and tools. step opportunitiesInvestigate processing specific a in facility each specializing by scale of economies for knowledge and fulfil contracts. volume, share to increase – – – Develop a shortlist of investment attraction opportunities. and in local, regional targeting programmes investment promotion Develop and implement sector-specific ternational investors. in to promote programmes material, such as market factsheets, and awareness-raising promotional Create vestment in the sector. investment missions and exhibitions ( Organize cilitate investment opportunities. Support and enable the formation of sector associations – – – processing and cutting for standards develop ministries, key and sector private the with collaboration In machines. to inspect and cer agency for machine certificationa lead implementing Establish and technical procedures tify the quality of machines. tools ( extraction on machines and information provide in MoMP to point focal Set up a price etc. ity, for the certification of imports of machines. requirements Develop and introduce governmental support schemes for facilities using certifiedIntroduce machines. investment site through Enhance financing of certified machines when opening a new quarry or processing for financial requirements. the Government and banks, by lowering threshold support from that could be devel a technical and financial feasibility study to identifyConduct products secondary potential oped based on powder and waste, taking into account national international market demand. and facilitate the establishment of a manufacturing com promote of the feasibility study, Based on the results a special grant pany by creating line ( Activities initiative to attract investment the sector. a targeted 1.2.3. Launch • • • • facilities. of processing 1.2.4. Enhance aggregation • machines. access to quality cutting and processing 1.2.5. Improve • • • • • • powder made from 1.3.1. Develop new products This the environment. millions of tons this waste and help protect that enables companies to benefit from out in the following steps activity should be rolled • • ( companies to develop new products for interested a training programme 1.3.2. Organize talc, etc. special items, antique products, ture, : Improve supply-side capacity and quality management to ensure adequate volume supply consistency. Strategic objective 1 Operational objectives 1.3. Diversify the range of products. 1.2. Upgrade the machinery and production lines in quarries and cutting factories.

[ STRATEGIC PLAN OF ACTION ] 50 MoCIT , MoF,

MoMP, AMIA, AMGPA, , ACIM, , AMIA, AMGPA, Lead and supportingLead implementers MoMP, ANSA, ACIM, Afghanite MoMP Afghanistan Geological Arazi Survey, MoMP ACIM MoCI, MoMP ACIM EPAA, ------An independent study is carried An independent study is carried are out and recommendations integrated into industrial parks’ operations New quarry licensing procedure established Annual information sessions to licens about stakeholders inform main ex in three ing procedures hubs in and processing traction Afghanistan and indus One industrial area trial park established in each of extraction hubs in Jalalabad, three and Herat Wardak system licensing shop One-stop established implemen the on trained staff Ten proce shop one-stop the of tation per year dure An export-one-stop shop, one of ficial website for exporters and one department relevant all training for staff established

Targets • • • • • • •

2022

2021

2020

2019

2018 Implementation period 2017

1 1 2 1 2 3=low Priority 1=high 2=med ------) with the the ) with : permits. ). / ; and to develop new revision under currently Law, Mineral roads, electricity networks, etc. roads, ) in order to encourage investment and facilitate doing ) in order : ) to search for marble and granite mineral deposits, consolidate ) to search public goods ( / : one-stop shop : i.e. Afghanistan Geological Survey Expand existing work ( impact assessments in identified sites. information and make it available. Conduct environmental ( modifyactivity 2.1.1., procedures licensing quarry from study on Based of tendering processes. transparency and increasing objective of streamlining to intro stakeholders in order Hold training and information sessions for companies, sector associations other related duce the new licensing procedure. Conduct a survey to identify the site with most potential. for marble and granite. for an industrial area Apply for approval Establish a development company for site infrastructure ministries delivering industrial and quarry licences permits. network of all relevant Establish a coordination stipulate that transparency, With the aim of increasing be to processes all Make Pashto. and Dari English, in website MoMP’s the on published be bidding of Announcements - licenses except for reconnaissance open bidding processes, all contracts. financial terms through - Standardize bidders mandatorily to disclose of the beneficial ownership each company and names documents request -Tender of all its shareholders. recommendations Assess level. international and regional the at bidding fair and -Identify open for rules on practices best other and policies, as required. measures corrective Initiative. Introduce made by the Afghanistan Extractive Industries Transparency agen and ministries relevant all for formalities and services relevant the all deliver to MoMP at shop one-stop a Establish cies in the network applications for quarry and facility licences departmental staff in ministries to streamline relevant Train and establish a one-stop shop for licensing formalities. licensing procedures on streamlining a regulation Promulgate the stakeholders to introduce Hold training and information sessions for companies, sector associations other related one-stop shop for licensing. indicating and explaining require export an exporters’ process, website containing information about a step-by-step Create all with ministries, relevant and agencies border all to point entry an containing and step, each at times delivery and ments format. the documentation needing to be completed by exporters downloadable in electronic departmental staff. training for relevant Provide and trans the simplification, streamlining in the local language and English regarding regulation a corresponding Promulgate to international standards and the establishment of exporters’ one-stop shop, according of export procedures, parency and access to information for trade facilitation purposes. on transparency : Improve the business environment by streamlining production and export procedures. 2.1.1. Undertake an independent study to identify the main gaps and flaws to obtain licenses establish quarrying Assess the level of service support, technical capacities and activity im provinces. parks in the main production processing institutions. and other relevant among others of the Ministry Mines and Petroleum, plementation, level of transparency these gaps. workshops for key government officials to address capacity-building and tailored Develop policy measures Activities the following out through Activity to be rolled for tendering processes. 2.1.2. Simplify and accelerate public procedures steps : • • • and industrial parks supported by the Government to gather stone companies in one place, 2.1.3. Establish an industrial area the cost of investment by offering necessary infrastructure to facilitate their businesses and reduce as follows Further components are activities and new products. • • • 2.1.4. Establish a new industrial licensing system ( the following steps out through Activity to be rolled administrative, cost and time burdens. business to reduce • • • • • • • • • • an export costs and time, par one-stop shop to deliver all the services and formalities exporters2.1.5. Create to reduce the following measures ticularly through • • • 2.1. Lower the barrier for opening and operation of new quarrying and processing sites. Strategic objective 2 Operational objective

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 51

MoMP, EPAA MoMP, AMIA, AMGPA, , AMIA, AMGPA, , AMIA, AMGPA, , AMGPA, MoMP , MoMP Lead and supportingLead implementers MoF MoMP ANSA MoCI, and CSO MoMP, MoMP ANSA, Afghanite MoMP, EPAA ANSA, AMIA - - Two round tables to discuss tax tax discuss to tables round Two opportunities in a year regulation data collected and one analysis Tax of available data in established centre service One hubs in extraction three of each and Herat Jalalabad, Wardak database available Comprehensive the MoMP’s website through One annual short course Four fairs and exhibitions per year to bring industry stakehold ers together each in trainings annual two to One Wardak in Jalalabad, hub extraction and Herat exist in introduced system Voting ing associations

Targets • • • • • • • •

2022

2021

2020

2019

2018 Implementation period 2017

2 1 2 2 2 1 2 3=low Priority 1=high 2=med - - - : ). e.g. close to many quarries ; develop cutting and polishing facilities to improve the qual ; develop cutting and polishing facilities to improve needs analysis and impact measurement of activities needs analysis and impact measurement / : : Facilitate a discussion on taxation of the industry. information and materials. table with relevant a discussion round Provide Conduct feasibility studies to select areas in which to establish these centres, considering access to water and electricity in electricity and water to access considering centres, these establish to which in areas select to studies feasibility Conduct of the supply chain ( addition to strategic location vis-à-vis the rest technology for small operators Facilitate access to processing waste. and reduce ity of final products could also offer cutting and polishing facilities. service centres these shared Potentially, their products. to promote to enable processors Showrooms and raw materials. Storage facilities for finished products delivery to international context aimed to raise their level of service mining for the Afghan short a course tailored Create Activity 2.1.1. into consideration findings from Take standards. a voting mechanism for decision-making. associations and introduce Reorganize by sharing information. transparent Make decision-making processes the equality of member votes is accepted. to ensure Devise a mechanism by which MoMP can be an observer, attention to smaller and new entrants. down monopolies in the marble and granite market by paying more Break : Improve the business environment by streamlining production and export procedures. 2.1.6. Review taxation for the industry. 2.1.6. Review • • Activities as well and associations in the stone sector, the lack of organization to overcome service centres 2.2.1. Establish shared asso to producers’ transportation and processing stone evaluation, sourcing, facilities, by providing the lack of processing areas. ciations in major marble and granite production The following will apply to operations within the centres • • • could also provide The centres • • data on marble and to capture in order organizations 2.2.2. Collaborate with the Central Statistics Office and other relevant stakeholders with aim of getting a better hubs, workshops and other related miners, mines, production granite producers, overview of the sector. and greater picture data availability of the sector facilitate gap analysis Improve technology bar consultants who can help companies overcome 2.2.3. Cultivate mining support companies and professional solutions to minerals exploration process. riers, and provide • of fairs the organization 2.2.4. Facilitate B2B links between quarries, cut-and-polish service suppliers and traders through of quarries, cut-and-polish service parties. Develop a directory and exhibitions to bring together suppliers interested suppliers, and traders. damage and losses during transportation. packaging training for exported stone to prevent 2.2.5. Provide each a voting system where 2.3.1. Equalize the influence of members marble and granite associations by introducing the following measures especially through one vote, to limit the market power of big producers, member represents • • • • - - - 2.1. Lower the barrier for opening and operation of new quarrying and processing sites. Strategic objective 2 Operational objective 2.2. Develop the capacities of trade and investment support institu tions and other support services to provide essen tial services to the sector. 2.3. Strengthen competition within the sector and in troduce market mechanisms by breaking down the current oligopoly structure.

[ STRATEGIC PLAN OF ACTION ] 52 MoMP MoCIT, EPAA, MoCIT, EPAA, MoCIT, Lead and supportingLead implementers MoMP, ANSA MoMP, ACIM Customs, - - - Information on international and and international on Information is shared prices market domestic various four times a year through media channels A focal point for market and infor mation is established in MoMP by the end of 2018 is Government-led market research conducted and disseminated Pakistani of tons 70,000 Control marble entering the Afghan market Fifty Customs officers on the by trained Pakistan with border equipping them with sector-spe cific knowledge and establishing con scheme control Customs a by the Government trolled tables held per year to round Two discuss unauthorized illegal entry input goods of sector-related

Targets • • • • • •

2022

2021

2020

2019

2018 Implementation period 2017

1 3 1 3=low Priority 1=high 2=med - Establish a focal point for market information in MoMP. local newspapers, radio, and regu Inform stakeholders about international and domestic market prices online through and pamphlets. lar brochures sector association cooperation and Government- on marble and granite through market research Actively encourage and share led information-sharing initiatives. Share information about international markets for marble and granite. Share campaigns and missions, to better integrate into international Advertise Afghan marble and granite internationally through higher visibility of Afghan stone. markets through Pakistan. from neighbouring countries, in particular products from on products Customs controls Strengthen raw materials. Facilitate access to domestically provided as measures corrective input goods. Introduce table to discuss unauthorized illegal entry of sector-related Set up a round required. : Improve the business environment by streamlining production and export procedures. 2.3.2. Share information on international and domestic market prices publicly to avoid price-setting by marble granite 2.3.2. Share market leaders. • • • Activities instead of short-term profit. market share and increasing 2.3.3. Incentivize firms to focus on long-term plans for growth • • the competitiveness of domestic input materials by fixing legal barriers concerning raw and other 2.3.4. Increase input goods. • • • - 2.3. Strengthen competition within the sector and in troduce market mechanisms by breaking down the current oligopoly structure. Strategic objective 2 Operational objective

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 53 - MoCIT

EPAA, Ministry MoFA, MoMP MoFA, MoMP , sector enter MoFA, MoMP, MoFA, MoMP, Lead and supportingLead implementers MoMP, MoMP, Affairs of Foreign ( MoFA ), EPAA EPAA, MoMP prises, MoCIT EPAA, EPAA, AMIA, AMGPA - - the / Japan / construction Kabul, Kandahar, Kabul, Kandahar,

of Korea Republic / trade delegations and B2B and B2B trade delegations / ) each year ) and more offered depending on depending on offered ) and more Participation in fairs Participation months with at least meetings at least every three 10 Afghan companies web matching buyer and vendor official One by MoMP site and one export platform approved established trade attachés trained At least 20 sector-specific disseminated to Print catalogue developed and 100 potential buyers Afghan marble Campaign established to promote and granite in 10 potential markets ( and luxury industry One official domestic communication campaign developed domestic market con One analysis on the current distributed ducted and the results all in out carried campaign promotion Domestic in Afghanistan 34 provinces China, One market study conducted for India, Italy, of of Iran, Republic UAE, the Islamic Republic Japan and Kazakhstan Korea, in the UAE At least one B2B meeting organized of Iran Islamic Republic Middle East and/ in the fair organized B2B Annual or Asia, with at least 10 Afghan firms participating exporters for organized sessions training Annual main exporting hubs ( in three Mazar-e-Sharif needs

Targets • • • • • • • • • • • •

2022

2021

2020

2019

2018 Implementation period 2017

1 2 2 3 1 1 3=low Priority 1=high 2=med - - - the Middle East including opportunities arising : : : ). ) through the following steps ) through Participation in fairs, trade delegations and B2B meetings. Participation sales in these markets. to increase Establish new distribution channels in order Establish a vendors and buyers matching website B2B export platform for Afghan marble and granite and exporters. producers exporters. current of competitiveness price the and supply of consistency quality, and variety product Increase markets target and granite in foreign Afghan marble promoting attachés sector-specific and introduce Train based on samples. Afghan marble and granite varieties products Leading of production Regions Certifications available Afghan exporters’ directory for marble and granite varieties in Afghanistan. individual booklets and brochures Publish Conduct market studies, in particular for the Middle Eastern and Asian markets. B2B meetings in the Middle East and Asia, alongside participation in construction fairs. Organize which to enter those markets ( Identify the best distribution channels through online channels recent from Marketing and business skills. documentation. and related Export procedures Financial skills International level negotiation, trading, contracting and dispute resolution mar of interpretation on Focus accordingly. strategies business adjust and intelligence trade analyse to How ket information. How to pitch international investors Activities markets current strategies for Afghan marble and granite to target 3.1.1. Develop marketing and promotional : through • • • • • 3.1.2. Develop a marble and granite online printed catalogue to be disseminated among potential buyers. The catalogue should be designed cooperatively between the Government and sector associations to reflect Catalogue to include both sides’ interests. • • • • • target the consumption of stone in future of marble and granite in general to increase awareness 3.1.3. Create to penetrate untapped markets. Select re the benefits of using marble and granite in order markets. Promote consumption and knowl markets to carry out a campaign promote gional and international key emerging edge of Afghan marble and granite to construction luxury industries as well end consumers. domestic demand for marble and granite. to increase programmes 3.1.4. Promote of communication campaigns, encourage national demand for marble and granite. the rollout Through domestic market. Develop a study to analyse the potential unmet market Conduct a study to analyse the current development alternatives for marble and granite domestic consumption. product and corresponding markets ( 3.2.1. Undertake international market diversification into dynamic and thus promising and Asia • • • by enhancing their business and marketing capacities. 3.2.2. Facilitate SME decision-making processes training sessions for companies on Organize • • • • • • : Improve firms’ ability to access markets through trade intelligence. - - - - Strategic objective 3 Operational objectives aware 3.1. Raise ness of Afghan marble and gran ite, and the ben efits of using mar ble and granite in construction. the 3.2. Facilitate diversification of target markets.

[ STRATEGIC PLAN OF ACTION ] 54 - MoCI MoMP, MoFA, MoMP, , MoMP, AMIA, , MoMP, MoFA, MoMP, MoFA, MoMP, MoFA, MoMP, MoFA, MoMP, MoFA, MoMP, Lead and supportingLead implementers EPAA, AMIA, AMGPA EPAA, MoCI, ACIM EPAA, MoCI, ACIM EPAA, MoCI MoCI, EPAA MoFA, MoCIT AMGPA, sector en terprises, information technology enterprises - - - - ) ) for the targeted Middle Eastern markets for the targeted India, Italy, China, UAE, the Islamic Republic of China, UAE, the Islamic Republic India, Italy, Market profiles developed for eight target markets eight target for developed Market profiles ( Japan, Kazakhstan of Korea, Iran, Republic pub and created attachés trade of list single A licly accessible Detailed capacity assessment study published and evaluated afterwards for manager a and established unit Consultancy it hired memorandums of understanding signed Three Indian institutions and Italian Turkish, similar with assessment report Annual export readiness published andin English prepared brochure promotional One Arabic ( countries distributed to eight target Brochure by offered enterprises for trainings annual Three Government procedure visa approval New streamlined for the sec One feasibility study on e-commerce tor conducted One pilot initiative set up with 10 selected com depend expanded initiative and 2018 in panies ing on the outcome Online payment modalities established

Targets • • • • • • • • • • • • •

2022

2021

2020

2019

2018 Implementation period 2017

1 3 3 3 2 1 3 3=low Priority 1=high 2=med ) - - - - - print, : : Italian, Chinese, Turkish, Indian Italian, Chinese, Turkish, : ) ). ) companies to set up websites, online payment modalities and / under preparation assessment to explore ecommerce as an option for selling and shipping Afghan ecommerce assessment to explore / e.g. quality, shipping, contracts e.g. quality, including digital marketing ). Institutionalize partnerships with delivery providers. Mandatory requirements ( Mandatory requirements markets, if applicable with selected target International trade agreements trends and emerging Market prospects Risks of entering the market markets of main buyers in target Distribution channels and directory fairs available in-country Trade Contact details of trade attachés. – – – – – – – – – – – – – – ( communication of channels various via information trade disseminate actively to mechanisms Implement television, Internet a manager for it. Establish a consultancy unit and hire Sign memorandums of understanding with similar international institutions ( their experience. to help staff learn from Assist application of its strategic plan ( of the host country materials in the language and culture promotional Preparing and visibility ( Presentation Managing supply and demand potential buyers. Identifying and targeting arrangements for business stays with key markets’ Governments. Examine visa reciprocity affairs ministries in key markets to discuss im of foreign meetings with high representatives regular Organize for Afghan business visitors. visa approvals proving Conduct a brief feasibility study mosaics and other products. marble and granite tiles, handicrafts, powder, As a pilot initiative, assist select cooperatives in are firms technology information local that Ensure applications. e-commerce in involved functions other volved in the implementation, and scale up initiative based on its success. Activities markets. Information to include for target 3.2.3. Develop market profiles • 3.2.4. Conduct a capacity assessment of support institutions and exporters to identify overlaps and gaps in ser and alignment with enterprises’ needs, as well capacity constraints to be able vice provision and adjust its service offering. better respond in terms of service offering, measures 3.2.5. Based on the assessment in activity 3.2.3, undertake corrective Further components include mobilization and overall capacity-building. staff training, resource • • • will con The programme for the marble and granite industry. programme 3.2.6. Establish an export readiness to sector exporting technical assistance and capacity-building assessments and provide duct export readiness This will be to marketing and promotion. related enterprises and potential exporters in specific technical areas on export vocational training and certification marketing man programme a sector-level achieved by creating negotiation and exportagement for stone exporters capacity. to build their marketing, promotional, for market development and participation in trade fairs by enterprises on how to prepare 3.2.7. Train • • • • of visas for business purposes in key markets. 3.2.8. Facilitate approval • • development possibilities. e-commerce 3.2.9. Explore • • : Improve firms’ ability to access markets through trade intelligence. Strategic objective 3 Operational objectives the 3.2. Facilitate diversification of target markets.

[ AFGHANISTAN’S NATIONAL EXPORT STRATEGY / MARBLE AND GRANITE SECTOR 2018-2022 ] 55

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