A Special Economic Zone can be considered a significant economic strategic move for Afghanistan that shall be connected with the neighboring SEZs such as Chabahar Free Zone- Islamic Republic of Iran, Gwadar SEZ- Islamic Republic of Pakistan, The Navoi Free Industrial Economic Zone the Republic of Uzbekistan and regional SEZs of China, India and UAE.
A special economic zone (SEZ) is an area in which business and trade laws are different from rest of the country. SEZs are located within a country’s national borders, and their aims include: increased trade, enhance investment sphere, ward off steep unemployment and effectively administer trade relevant affairs. To encourage businesses and set up zone, make it functional, ensure financial policies are heavy but foundational stones for such initiatives. These policies typically regard investing, taxation, trading, quotas, customs and labor regulations. Additionally, companies may be offered tax holidays, where upon establishing in a zone they are granted a period of lower taxation.
We can mention the deliberate practice of China who initiated SEZs namely Shenzhen in the Pearl River Delta region, Zhuhai and Shantou in Guangdong and Xiamen (Amoy) in Fujian Province since 1979 part of the open door policy. Chinese SEZs are now contributing 62% (USD1265 billion-2016) to the export and have created more than 35 million jobs and as soon as the SEZ launched then China’s merchandise exports have increased 125-folds and it’s real gross domestic product (GDP) has grown nearly 15-folds. China might be the most successful country in terms of leveraging SEZs to achieve far-reaching economic transformations. It started with four zones at the initial stage to experiment with market-oriented economic reforms which involves laws, regulations, taxation, land, labor, finance, customs, immigration, etc.
India can be well-thought-out another regional country who launched their first SEZ in 2006 and now has more than 213 operational SEZs that contributed USD 78 billion for year 2016 to the Indian exporting economy. SEZs in India varies over a number of sectors like IT/ITES, Electronics and Hardware, Textiles and apparels, Chemical and Pharmaceuticals, Gems and Jewelry and. SEZs in India have witnessed a rapid increase in total production and export after the SEZ Act 2005 came into effect. Export from SEZs have rose from Rs.22840 crores in the year 2005-06 to Rs.463000 crores (67 billion USD)in the year 2014-15, which means the export rose by around 2000 percentage during the short period of 9 years.
The Philippines may be another successful example who implemented the similar experience of US Military Base Transfers into SEZ while US military decided to leave Philippines in 1991. At a glance, the Philippines 60% export is coming from SEZ, around 393 economic zones are currently functioning across the Philippines, and it is estimated that SEZ contributes more than half of the Philippines’ inward FDI every year and approximately 7 million jobs have been created by SEZs.
As of 2017, Afghanistan GDP was 19.47 billion US dollars that represents 0.03 percent of the world economy where it exports was increased to 831 million USD and import was equal to 7722.80 USD Million in 2017 that shows trade deficit of around 90% and the Unemployment Rate in Afghanistan still remained unchanged at 8.50 percent accordingly. Afghanistan is ranked 167 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings dated 2018.
Looking to the current development of Special Economic Zones in the region where SEZ played an important role in terms of creating jobs, increasing exports, revenue and GDP, therefore, HE the President Ashraf Ghani decided to launch Special Economic Zones in Afghanistan that shall work as network of Special Economic Zones, focused on key industry to stimulate the private sector economy with advance knowledge-based industries that shall help transform importing economy into exporting economy, create jobs for afghan and increase GDP of Afghanistan.
In London conference 2010 it was decided that the security responsibility would be transferred from North Atlantic Treaty Organization (NATO) to Afghan security forces and the transition ended in December 2014. As soon as the ISAF operation ended, Afghan Forces assumed full responsibility for security leadership in January 2015, NATO launched the Resolute Support Mission (RSM) to train, advice and assist Afghan security forces and institutions. Following to the security transition, RS intended to partially handover the eight strategic airfields to Government of Islamic Republic of Afghanistan (GIRoA) that include (Kabul, Kandahar, Bostion-Helmand, Herat, Shindand, Mazar –e-Sharif, Nangarhar and Bagram Airfields).
It is estimated that there are approximately US$ 10.1 billion infrastructure exists in these airfields, where H.E President Mohammad Ashraf Ghani took a strategic decision dated 23 July 2015 by establishing Afghanistan Airfields Economic Development Commission (AAEDC) to convert these bases into viable Special Economic Zones.
The strategic location, untapped natural resources, vast agricultural opportunities, available infrastructure and cheap labor force makes Afghanistan a better place for investors to set up business inside Afghanistan’s SEZs.
Afghan Government has targeted 8 strategic airfields of Kandahar, Helmand, Herat, Shindand, Mazar, Kabul, Nangarhar and Bagram to be converted into Special Economic Zone gradually. These Airfields have been chosen based on the availability of infrastructure that includes on site roads, cold storage facilities, ware houses, electricity, water treatment system, residential areas and security. Fortunately these airfields have been located strategically which has an easy access to raw material, labor force and potential markets. It could be considered turning point for afghan government to effectively utilize these infrastructure that shall generate revenue, increase export, create jobs, and increase GDP which will ultimately affect the peace, economy and political stability of the country.
AAEDC has therefor developed concept to launch pilot Special Economic Zone (SEZ) of Kandahar which is approved by the High Economic Council dated 23 April 2018 that shall become functional within 36 months after the land and equipment transfer by Resolute Support to Afghan Government in Kandahar. Subsequently Herat, Mazar, Nangarhar, Kabul, Bagram and Helmand would be followed simultaneously.
It is projected that Special Economic Zone within first 5 years shall create the opportunity of thousands of jobs, increase GDP at least by 10%, export by 144%, revenue by 3.6% accordingly. This has direct link with peace and political stability of the country.
We noted that US new strategy for Afghanistan focus on the untapped natural resources where Global estimates shows that world demand for lithium will exceeds supply in near future and the world will face a shortage of a key metal which are rich in Afghanistan. Global demand for these precious metals could eventually transform Afghanistan into one of the most important mining centers in the world and will lead the lithium market accordingly.
The Trump administration’s new South Asia strategy which covers Pakistan, India, and the Central Asian countries that extends further into Southeast Asia, which also emphasize on Afghanistan. In fact with the trump administration the Resolute Support Mission is uncertain to hand over the 8 strategic airfields to Afghan government, which was expected in 2016 as transfer plan. The concept of establishing SEZs in Afghanistan is interlinked with the airfields transfer as it has sufficient infrastructure, in case the transfer may delay the SEZ establishment shall be affected seriously.
However, the implementation of the SEZs in Afghanistan is a dire need but deteriorating security situation may hinder this process and peace deal with Taliban would be turning point to boom the afghan economy and bring peace and political stability to the country.
American negotiators inch closer to a peace deal with the Taliban in Afghanistan, the U.S.-backed government in Kabul remains heavily dependent on foreign money and military support to fight insurgent groups, finance its security forces, and prevent regional warlords from splintering the country.
U.S. and Taliban negotiators have reportedly agreed to a draft timeline for the withdrawal of all U.S. forces from the country. In response, the Taliban have agreed to cut all ties with groups like al Qaeda and the Islamic State within all their ranks and join a unity government.
Over 2,400 U.S. service members have died in Afghanistan and Washington has poured over $780 billion into the country since launching combat operations just a month after the 9/11 attacks in 2001.
We do understand that Peace is the complex, multi-faceted and multi-dimensional process and afghan peace should be led by Afghan Government. Beside various efforts for years, it still spotters. As ex-President Obama asserted that it is difficult to end the war than to begin the war, it is true, and realistic assumption. Though, peace can’t come over night, but we need to assure the factors of war which is monumental joblessness and extreme poverty and these needs to be addressed. SEZ can cope with the factors of war rather than with peace itself, therefore, we call for precaution to mitigate or end the war itself.
Special Economic zones cannot be panacea for all the country level challenges, but of course it can be a good start toward economic development, export promotion, reduction of joblessness and criminal economy. SEZ can shape the war thorn development process to a lasting peace with foundational reconciliation and political settlements.
In order to successfully establish SEZ in the country the Afghan Government may need to establish an Independent Special Economic Zone Authority, finalize the competitive Incentive regime, endorse the SEZ law, adopt the available Infrastructure that exists in these airfields, and further provide attractive business climate, proper marketing of the Zones, skilled labor, regional and international connections.
With this final note, I hope our dreams for SEZ will be realized soon where Afghanistan could be self-reliant, prosperous and capable of delivery services and ensuring political stability through the existence and functioning of Special Economic Zones.
*Mr. Nasrullah Sahibzada has over ten years’ experience in various leadership capacities on program management, Planning, economic development, Special economic zone, women empowerment and has extensive knowledge of working in Afghanistan. He currently works as Executive Director- AAEDC presidential palace ARG and has worked as Senior Project Manager for Harkat-DFID,