Recognising the many challenges facing potential investors, Afghanistan’s government is establishing a number of managed industrial estates around the country. These modern parks will offer investors the benefits of high-quality infrastructure and reliable power supply in ‘build to suit’ sites, strategically located in several key industrial areas.
Designed to accommodate all sizes of firms, the parks reduce the risks and delays associated with land acquisition, zoning and planning permission. In particular, costly title disputes will be avoided – Afghanistan has no reliable land register and the rightful ownership of land is often in question. Moreover, foreign investors will be permitted to acquire clean title to land in the industrial parks, circumventing the existing investment law prohibiting foreign ownership of property.
These industrial parks will offer tenants reliable electric power, 24-hour site security, a full pressure water system, paved roads, a central sewage system, and professional management. Economies of scale mean services are provided at a lower cost than if investors provided for the services themselves. “Admittedly, it is still more expensive than investors should have to pay if service were provided by municipal authorities but we anticipate that power, for instance, will be priced at half the rate it would otherwise cost investors to generate for themselves on a small scale,” says Malik Mortaza, the top adviser to the Afghanistan Industrial Parks Development Authority.
“The government has not had the funding in the last three years to address the country’s infrastructure backlog comprehensively, so it made sense to provide an environment that met all of investors’ infrastructure needs in a defined area,” says Mr Mortaza. He adds that German development agency GTZ and the US Agency for International Development provided technical assistance in the design, regulation, marketing and management of the sites. “The parks have been designed around the needs of investors,” he says.
The first phase of construction initiated by the development authority is for three parks: Bagrami on 24 hectares, 7km east of Kabul; Mazar-e-Sharif on 26 hectares, 7km north of the city; and Kandahar on 15 hectares, 10km east of the city. An allocation of $20m has been made for the construction of the sites.
A second phase is also under way, which includes parks in Kamari, 120 hectares located 13km from central Kabul; Sinjet Dara, a 120 hectare park located 7km south of Charikar; and Deh Sabz, a 750 hectare park located 5km north of Kabul Airport. Twenty-one sites are planned to eventually dot the country.
Taking the bait
The first public offering of slots at the Bagrami site near Kabul has been met with strong demand from the national and international business community. Roughly one-quarter of applications have come from foreign investors, says Mr Mortaza. Slots are offered at competitive prices calculated on the basis of land prices plus the development and infrastructure costs. Coca Cola’s production facility will be the showcase investment of the Bagrami park, but the developers envision additional investments in light manufacturing, plastics, textiles, pharmaceuticals, and food products in the years ahead.
Mr Mortaza acknowledges that the many challenges facing investors push up the cost of doing business in Afghanistan, often convincing them to look elsewhere. The government’s response, he says, is to keep the industrial park fees as low as possible and discount the cost of the land. The government is keen to attract Afghans who fled the country to Pakistan and Iran, and these investors are particularly cost-conscious.