Growth & Security through Advancing Regional Integration
Afghanistan’s location as a transit hub between East, South, Central and West Asia is a major untapped economic resource. The National Unity Government has made initial investments in cross-border energy transmission and dry ports for long-distance trans-shipment. Afghanistan’s recent accession to the WTO is helping to facilitate more cross-border projects and policy reforms to promote regional trade, and the government is working with the International Monetary Fund, the Asian Development Bank, and the World Bank to develop models that can attract not only global investments but also domestic and regional private sector financing.
Regional economic cooperation has the potential to be an important driver of growth for Afghanistan. Innovative areas of regional cooperation will be investments in the Central Asian digital highway, regional energy projects to augment the ones discussed earlier, and regional railways and roads.
Though this is a decades-long process, several strategic and technical steps have been taken toward this goal over the past four years to lay the foundation.
Achieved (5/8): 62.5 Achieved (5/8): 62.5 %Partially achievedand ongoing (2/8):25.0 %Partially achievedand ongoing (2/8):25.0 %In process (1/8): 12.5 %In process (1/8): 12.5 %Achieved (5/8)Percentage: 62.5
– Making Afghanistan an attractive trans-Asia shipment hub
PROGRESS: – Partially Achieved and On-going.
- On December 13, 2018, Afghanistan inaugurated the Lapis Lazuli Corridor, a new trade route that connects Afghanistan to Central Asian and European markets. It is a critical step in diversifying Afghanistan’s trade routes and situating it as a interconnected hub of regional trade.
- For the first time, the Afghan government developed a five-year blueprint for infrastructure development that highlights structural challenges and the way forward for transforming Afghanistan from a landlocked country into a land-connected country.
- Afghanistan’s accession to the World Trade Organization on July 29, 2016, thus paving the away for legal and regulatory reforms to allow for more cross-border projects and regional trade
- The Afghanistan Railway Authority prepared commercial freight and mineral-focused development masterplan for establishing a northern link to Central Asia, a southwestern link to Iran, and six logistics hubs to provide export access to each of Afghanistan’s major regions. Approximately 350 KMs of railway are at the advanced design stage.
- The National Infrastructure Plan transport sector priorities reflect the importance of regional trade connectivity. Three of the six Central Asian Regional Economic Cooperation (CAREC) corridors have a significant link in Afghanistan with the national highways.
– Diversifying our export routes
PROGRESS: – Achieved.
- In 2017, Afghanistan’s export volume reached $784 million, an increase of 27.7% since the previous year. There was a marked decrease in export volume with Pakistan, which signified a positive result of export diversification efforts over the past few years.
- Air cargo trade corridors have been established with the following countries over the past four years, with overflight fees also resulting in 2.67 billion Afghanis in 2016, an increase from 1.92 billion Afghanis the previous year:
- India: New Delhi, Amritsar, & Mumbai
- Saudi Arabia
- An increase in the number of transit routes through Central Asia and Iran has increased the diversity of transporting goods to and from Afghanistan, including the following:
- Inauguration of the Asian International Railway Transport Corridor (from Atamyrat to Aqina)
- Commencement of the Chabahar Port Trilateral Trade Agreement with India and Iran (Transit trade volume between Afghanistan and Pakistan declined by $1.6 billion in 2017, while transit trade through Chahbahar port increased)
- The Lapis Lazuli Corridor was inaugurated December 2018 and offer an alternate route for goods from China as well a opening up a trade route from Afghan products to reach Europe via Turkmenistan and the Caspian Sea.
- A transportation infrastructure improvement agreement with Uzbekistan
- A bilateral transport agreement with Turkmenistan
- Trilateral transport agreements with China and Tajikistan.
– Improving security by enhancing confidence and mutual benefit from stable trade
PROGRESS: – In process.
It is anticipated that over the years as trade relations stabilize and mutually benefits outweigh perpetuating conflicts, it is anticipated that security will improve as a result of the strategy.
– Join regional projects such as One Belt, One Road (OBOR);
PROGRESS: – Achieved.
- Afghanistan officially joined China’s “One Belt, One Road” initiative. Afghanistan is located along the corridor connecting Tajikistan via Sher Khan Bandar to Bandar Islam Qala, leading to Iran.
– Encourage PPPs and private sector infrastructure development
PROGRESS: – Achieved.
- The new Public Private Partnership (PPPs) Law was approved by Presidential Decree No. 103 in 2017. The National Policy on Public Private Partnerships was published by the Central Partnership Authority in 2017. The PPP Regulation, which is the implementation mechanism and explanation of the Law, is developed. Guidelines and operating manuals are being developed. PPP Units are established in some line Ministries. These laws, policies and regulations were enacted specifically to regulate PPPs and establish an enabling environment to attract PPP investments, particularly in the energy and infrastructure sector.
- Afghanistan joined the Asian Infrastructure Investment Bank, allowing access to opportunities for financing or co-financing of infrastructure projects, such as energy and power, transport and telecommunication, rural infrastructure and agriculture development, and water and sanitation. Membership also offers opportunities to Afghan companies to take part in tenders for projects approved for financing.
- The following is a partial list of entry sector PPPs currently at various stages of implementation:
- 52 MW Mazar gas-to-power project with Ghazanfar Company ($75 million)
- 40 MW Sheberghan gas-based power project in Jowzjan province with Bayat Energy to generate 192 MWs of electricity using natural gas reserves in Jawzjan province and creating 200 direct job opportunities ($250 million)
- 30 MW Kandahar solar power with 77 Construction Company and Zularistan ($47.3 million)
- The Indian company, Dynasty Oil & Gas, is building a 10 MW solar power plant in Kandahar. The $10 million project is the first of its capacity in Afghanistan.
- The Mumtaz Group was contracted by the Urban Water Supply and Canalization Company to improve Kabul’s water supply. The $11 million project is the first of a three-phase project which will provide 10,000 families with clean water on tap.
- In March 2018, the investment licensing contract for a $383 million National Fiber Optic Network project was signed.
- Private investment has been attracted for a number of dam projects, namely Bagh Dara (240MW), Qalay Mami (445MW), Kajaki (151.5MW), Kajaki II (150MW), Bakhshabad (27MW), Surobi II (180MW), as well as 30 renewable energy (100MW), gas-to- power (52+192MW), and solar power (100MW).
– Ensure regional energy projects, including CASA 1000 and TAPI, receive funding and administrative support
PROGRESS: – Achieved.
- Currently, there are three main regional energy projects under implementation, including:
- The Turkmenistan-Afghanistan-Pakistan (TAP) transmission line, when complete, will initially move 2,000 MW of power from Turkmenistan to Pakistan via western Afghanistan, with the capacity to carry 4,000 MW. TAP’s estimated cost is $1.6 billion.
- The Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline will transport natural gas from Turkmenistan to Pakistan and India via Afghanistan. TAPI’s cost is $12.5 billion, with $7 billion to be sourced from the private sector. In February 2018, the construction of the pipeline reached Afghanistan at the border in Herat.
- The Central Asia South Asia (CASA)1000 transmission line project will move over 1000 MW of electricity from Kyrgyzstan and Tajikistan to Pakistan via Afghanistan. CASA 1000 is a $1.17 billion project. The project’s operational phase was officially inaugurated in May 2016 in Tajikistan, and contracts signed in early 2018 in Kabul. Afghanistan will earn $45-50 million in transit fees annually and will attain a share of 300 MW for its domestic use. The World Bank, the United States, the United Kingdom, the European Investment Bank and Islamic Development Bank are funding the project.
– Enhance engagement with regional organizations
PROGRESS: – Achieved.
- In addition to focusing on the strengthening of bi-lateral relations, the government has also invested in strengthening Afghanistan’s participation and voice in regional organizations, via regional platforms such as the Istanbul Process: Heart of Asia conference, and the Regional Economic Cooperation Conference on Afghanistan (RECCA).
- In the year 2017 and 2018, President Ghani addressed the annual summit of the Organization for Islamic Cooperation
– Strengthen our embassies and trade missions
PROGRESS: – Partially achieved and on-going.
- In April 2018, 21 new and qualified commercial attachés were hired through a merit-based transparent recruitment process via the Civil Service Commission for placement in Afghan Embassies across the globe. They are being dispatched to embassies.
- An overhaul of all attachés in Afghan embassies across the globe is on-going now via the Civil Service Commission and Ministry of Foreign Affairs to ensure that resources are being consolidated in pursuit of priority commercial and economic interests abroad.