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The Future of Special Economic Zones in Afghanistan
A U.S. Marine with Task Force Southwest (TFSW) provides security in the tactical operations center while Marines advise 1st Brigade, Afghan National Army (ANA) 215th Corps during Operation Maiwand 12 at Camp Shorserack, Afghanistan, March 10, 2018.
Image Credit: U.S. Marine Corps photo by Sgt. Conner Robbins/ Released

The Future of Special Economic Zones in Afghanistan

 
 

The concept of special economic zones in Afghanistan is not intentional, rather accidental.  The scheduled withdrawal plan of U.S. and NATO forces in 2014 left a huge amount of infrastructure to Afghan forces. This included $2 billion worth of infrastructure and equipment at eight strategic airfields in the country, equipped with sophisticated machinery and a well-developed infrastructure.

Bastion-Helmand and Bagram-Kabul, in particular, are of considerable importance. Ashraf Ghani, the current president of Afghanistan and a former World Bank employee, proposed creating special economic zones (SEZs) at each airfield. An SEZ is a designated area where investors encounter more liberal investment and trade laws. Ghani’s proposal followed the path of Jordan, Panama, and the Philippines, which did the same with airfields in the past.

In order to efficiently utilize these airfields, President Ghani issued decree #43 in July 2015 for the establishment of the Afghanistan Airfields Economic Development Commission (AAEDC) which will carry through the SEZ plan. The development of SEZs in the country could pave the way to boosting the war-torn economy and decreasing dependency on foreign aid and donors by attracting foreign direct investment (FDI), creating domestic jobs, promoting exports and developing infrastructure.

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The concept of SEZs is a groundbreaking initiative of the National Unity Government (NUG), and AAEDC is giving a momentum and shaping the idea into practice. AAEDC has been working on several pathways to create the foundation and framework for the transition and development of portions of various NATO/ISAF-built facilities at several airbases in order to take practical steps to convert the airfields into SEZs.

Research by Samuel Hall reflects that Mazar-e-Sharif, Kabul and Herat are possible options for establishing SEZs. These zones can be further extended to other provinces. The AAEDC in conjunction with its member ministries and the Chief Executive Office made a strategic plan for the upcoming three years to transform the SEZ idea into reality. Subsequent to these objectives, AAEDC intends to establish the first SEZ adjacent to the Kandahar airfield for which the approval of the High Economic Council has already been granted and later will expand the SEZ network to other viable regions within the country.

The Kandahar airfield has a strategic location vis-a-vis the international ports of Chabahar and Gwadar. Kandahar province is rich in agricultural and natural resources with comparative advantages in terms of raw material availability and potential business opportunities in the designated area. Afghanistan’s untapped wealth of minerals, including lithium and copper is estimated to be worth from $1 trillion to $3 trillion. Lithium and copper are essential to modern industry.

The Trump administration’s new strategy for Afghanistan seems to be influenced by mining interests, with the administration taking seriously Afghanistan’s mineral resource potential. Global estimates show that world demand for lithium will exceed supply by 2020 and the world will face a shortage of a key metal which are abundant in Afghanistan. Global demand for these precious metals could eventually transform Afghanistan into one of the most important mining centers in the world.

The 16th century geographic importance of Afghanistan was summarized by Babar, founder of the Mughal dynasty: “In Afghanistan you can go in a single day to a place where the snow never falls, and in two hours you can also reach a place where the snow never melts.” In the 21st century, the great potential geoeconomic importance of Afghanistan remains robust — a hub of international trade connecting the energy producing countries of Central Asia with the energy hungry economies of South Asia. The establishment of SEZs in Afghanistan pairs well with connectivity initiatives in Central and South Asia to bring economic and political stability across the region. Joint-SEZ initiatives could change trade across the region. Such Joint SEZs could bridge the demand and supply gap in Asia, by Asia, through Asia. The Joint SEZ concept also pairs with China’s Belt and Road Initiative (BRI).

Well-developed infrastructure, resource availability, and location are the key determinants for the success of an SEZ; Afghanistan is blessed inherently with the latter two. Regional economic cooperation organizations like the South Asian Association for Regional Cooperation (SAARC), Economic Cooperation Organization (ECO), Central Asia Regional Economic Cooperation (CAREC), and the Shanghai Cooperation Organization (SCO) can assist in feasibility studies and assessments targeted at the extractive industry of Afghanistan. The government of Afghanistan should prioritize open discussion among the regional countries for joint-SEZ. Establishing SEZs will also impact private sector growth, create opportunities for employment and will give relief to the headache of unemployment in the country.

Although the implementation of the SEZs is a win-win situation, believed to bring the economic prosperity, security is the main problem preventing progress beyond financial issues. Taliban and other insurgents continue to seize territory and carry out coordinated attacks in the capital and in major provinces.

The Trump administration’s new South Asia strategy encompasses Pakistan, India, and the Central Asian nations and extends into Southeast Asia, but there is also an emphasis on Afghanistan. It does not involve a withdrawal of U.S. troops from the United States’ longest-running war but instead an increase in troop levels in four garrisons (Kabul, Kandahar, Bagram and Jalalabad) to halt the deteriorated security situation. As such, the United States is reluctant to hand over its strategic airfields to the Afghan government, which was expected in 2018 as laid out in a previous scheduled transfer plan. NATO allies and global partners like Australia are also supporting the new strategy and have already pledged additional troops and funding increases to Afghanistan. The concept of establishing SEZs in Afghanistan is interlinked with the airfields transfer.

The SEZ idea will be buried under the dust of new boots on the ground in Afghanistan, as the United States is set to send up to 3,000 additional troops. Afghanistan’s meager developmental budget alone cannot answer the question of establishing SEZs, and the idea will likely have to wait for a later time.

Farmanullah Bismil is a freelance writer and economist who focuses on social, economic, and political topics. He has worked for several governmental organizations in Afghanistan. He holds a master degree in economics as well in international relations.

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