on behalf of our partners, the government of india and the...

DELHI Investment Summit on Afghanistan –28 June 2012 iii

On behalf of our partners, the Government of India and the Confederation of Indian Industry,

we are delighted to welcome you to the Delhi Investment Summit on Afghanistan. This

unique gathering brings together senior policy-makers with some 350 business

representatives from Afghanistan, India, across the region, and beyond to map out exciting

new investment opportunities in Afghanistan for the international business community. As

the Government of the Islamic Republic of Afghanistan moves forward through the current

period of Transition up to 2014 and prepares for the Transformation Decade (2015-2024),

with the sustained commitments of its friends and development partners, we view the Delhi

Investment Summit as an important step towards the promotion of foreign investment and

joint ventures in promising Afghan economic sectors.

Afghanistan's mineral and hydrocarbon wealth alone is estimated at between $1 and $3

trillion dollars, whereas the country's transport and energy infrastructure and regulatory

environment are receiving renewed attention through innovative Public-Private-Partnerships.

At the same time, sustained investments over the past decade in an increasingly educated and

healthier Afghan population and business-friendly laws are translating into increased

productivity in export sectors, including agriculture (e.g., world class dried fruits, grapes,

raisins, almonds, saffron, and pomegranates), financial services, information and

communication technologies, and small-and-medium-sized industries (e.g., cashmere,

carpets, marble, steel, and construction). Together, they have contributed to an average 10

percent annual growth and a four-fold increase in the country’s Gross Domestic Product over

the past decade.

Despite continued security, governance, and infrastructure challenges, senior Afghan

Ministers and business community representatives will demonstrate at the Delhi Investment

Summit on Afghanistan, through practical reforms, risk mitigation strategies, and robust

economic analysis, that significant returns on international investments are possible. In short,

“Afghanistan is Open for Business”, and the most significant economic rewards can and are

being reaped by those companies and individuals who pursue new opportunities on the

ground floor.

Message from the Government of the Islamic Republic of Afghanistan

DELHI Investment Summit on Afghanistan –28 June 2012 iv

With presentations by senior business executives with deep economic experience in

Afghanistan, as well as by World Bank officials and Afghan Ministers of Commerce,

Finance, Mining, Agriculture, Telecommunications, and Health, among others, the Delhi

Investment Summit will underscore four major attributes to doing business at the crossroads

of Asia: i) Afghans are among the most industrious and resilient people; ii) the country's

abundant natural resources, including water and natural gas, are accessible and profitable; iii)

last May in Chicago and next month in Tokyo, the international community will recommit its

sustained support for Afghanistan, including for foreign investments; and iv) through the

South Asian Association For Regional Cooperation (SAARC), Central Asia Regional

Economic Cooperation (CAREC) program, and other regional forums, the country is rapidly

integrating economically with its neighbors. From rail and natural gas pipelines to land ports

and cold storage facilities, a mix of private and public investment will pave the way for

Afghanistan's regional future as a trade and transit hub at the heart of Asia.

With an eye towards the 8 July 2012 high-level Tokyo Development Cooperation Conference

on Afghanistan, the Delhi Investment Summit will consolidate key business community

recommendations and select private sector investment opportunities (including the 25

initiatives introduced in this overview document) within a practical, results-oriented

Afghanistan Action Plan for Private Investment (AAPPI). New tools and incentives for cross-

border investment, as well as the promotion of Joint Chambers of Commerce, will be given

special attention.

In closing, we extend our friendship and highest appreciation to the Government of India and

Confederation of Indian Industry for hosting this historic event.

DELHI Investment Summit on Afghanistan –28 June 2012 v

Acronyms ................................................................................................................................. vi

Key Information for Investors ................................................................................................ vii

Delhi Investment Summit – Key Private Sector Investment Opportunities

Energy

1. Turkmenistan, Afghanistan, Pakistan, and India Natural Gas Pipeline – TAPI ................. 1 2. Sheberghan Natural Gas Project ......................................................................................... 2 3. Compressed Natural Gas (CNG) for Automobiles and Generators .................................... 3 4. Afghan-Tajik Basin Tender ................................................................................................ 4 5. Central Asia-South Asia Regional Energy Market Project – CASA -1000 ........................ 5 6. Kokcha Hydropower Plant Irrigation Project ..................................................................... 6

Minerals

7. Syadara Iron Ore Deposit ................................................................................................... 7 8. Cement Plant Opportunity .................................................................................................. 8

Transport

9. Afghan Rail System ........................................................................................................... 9 10. East-West Road Corridor and upgrade Kabul-Jalalabad-Peshawar Highway to a Four-

Lane Expressway .............................................................................................................. 10 11. Rehabilitation of the Salang Tunnel and Construction of By-Pass Road ......................... 11

Agriculture

12. Investment Profile on Fruit Juice and Concentrate Production ........................................ 12 13. Saffron Processing and Marketing .................................................................................... 13 14. Farm Machinery Manufacturing ....................................................................................... 14 15. Dairy Component Economic Development Package ........................................................ 15 16. Fresh Fruit Processing – Eastern Region .......................................................................... 16 17. Poultry Economic Development Package ......................................................................... 17

Small and Medium-Sized Industries

18. Moving Up the Value Chain in Carpets ............................................................................ 18 19. Processing Cashmere ........................................................................................................ 19 20. Processing and Exporting Marble ..................................................................................... 20 21. Production of Rolled Steel Products ................................................................................. 21

ICTs, Finance, Health Services, and Construction

22. Digital Broadcasting Nationwide Distribution Network (Broadnet) ................................ 22 23. Financial Services ............................................................................................................. 23 24. Public-Private-Partnerships for Regional Hospitals ......................................................... 24 25. Kabul New City ................................................................................................................ 25

Table of Contents

DELHI Investment Summit on Afghanistan –28 June 2012 vi

ACBR Afghan Center for Business Registry

ACCI Afghan Chamber of Commerce and Industry

AGS Afghanistan Geological Survey

AISA Afghan Investment Support Agency

ARS Afghan Rail System

B/C Ratio: Benefit-Cost Ratio

CASA Central-Asian South-Asian

CIB Credit Information Bureau

CII Confederation of Indian Industries

CNG Compressed Natural Gas

EDP Economic Development Package

EIRR Economic Internal Rate of Return

EoI The Expression of Interest

HVDC High Voltage Direct Current

MoCI Ministry of Commerce and Industry

MoU Memorandum of Understanding

NEPS North Eastern Power System

NFPP Northern Fertilizer and Power Plant

NPV Net Present Value

OBMDC Omaid Bahar Marketing and Distribution Company

PPP Public-Private-Partnership

RTD Ready-to-Drink

TAPI TURKMENISTAN, AFGHANISTAN, PAKISTAN, AND INDIA NATURAL GAS

PIPELINE

Acronyms

INVESTORS ESSENTIALS

DELHI Investment Summit on Afghanistan –28 June 2012 vii

Key Contacts

Get to know your potential partners and their capabilities for doing business, and meet with the local Afghanistan Chambers of Commerce and Industry (visit: http://www.acci.org.af/, which has a membership of more than 67,000 members), the Afghanistan Investment Support Agency (AISA) and the Ministry of Commerce and Industry’s Export Promotion Agency of Afghanistan (EPAA). Many businesses may find it beneficial to partner with a local firm that knows the region and can advise on security and other issues for doing business in the region. A non-governmental organization, the Peace Dividend Trust (PDT), maintains a business portal with approximately 6,500 licensed, screened, and verified Afghan-owned businesses.

Establishing a business in Afghanistan

The Afghanistan Investment Support Agency (AISA) is a one-stop-shop for investors, foreign and domestic, for registering and establishing a business in Afghanistan. To operate a business legally in Afghanistan requires a business license. This license is awarded through AISA and must be renewed annually. Certain industries, (e.g., the health sector), require an additional license from the responsible ministry. Both need to be obtained prior to starting business operations. The AISA website provides detailed information on both the AISA license, as well as all other Afghan Government licenses [http://www.aisa.org.af/]

Land, Property & Infrastructure.

Foreign investors are not permitted to purchase real estate. Renters are also required to pay a 20% renters tax, which they must personally withhold from their monthly rent payment and remit to the Afghan Government.

Taxes, Charges, and Governance Framework

The Afghan Government issues a corporate income tax of 20%; Personal income tax ranges from 0 to 20%. Business Receipts Tax ranges from 2 to 10%, based on the sector, revenue and billing. Import tariffs range from 0 to 25%.

Key Private Sector-related Investment Laws include:

The Company Law; Consumer Protection Law; Competition Law; Partnership Law; and Arbitration Law

Key Web Resources for Private Investors:

Afghanistan Chamber of Commerce and Industry (ACCI) http://www.acci.org.af/

Peace Dividend Marketplace Afghanistan http://afghanistan.buildingmarkets.org/

Afghanistan Investment Support Agency (AISA) http://www.aisa.org.af/

World Bank Doing Business 2012 Report http://www.doingbusiness.org/data/exploreeconomies/afghanistan/

Afghan Ministry of Foreign Affairs (MoFA) http://www.mfa.gov.af/

DELHI Investment Summit on Afghanistan –28 June 2012 viii

Afghanistan Central Business Registry (ACBR) http://www.acbr.gov.af/

Afghan Ministry of Justice (MoJ) http://www.moj.gov.af/

Afghan Ministry of Finance (MoF) http://www.mof.gov.af/

Afghan Ministry of Commerce & Industries (MoCI) http://www.commerce.gov.af/

Afghanistan Ministry of Agriculture Irrigation and Livestock (MAIL) http://www.mail.gov.af/en

Afghanistan Ministry of Mines (MoM) http://www.mom.gov.af/en

Afghan Ministry of Economy (MoE) http://www.moec.gov.af/index_eng.aspx

Afghanistan Reconstruction and Development Service (ARDS) http://www.ards.gov.af/

Afghanistan National Standards Authority (ANSA) www.ansa.gov.af/index_eng.aspx

Office of Foreign Assets Control (OFAC) http://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx

United Nations Development Program (UNDP) http://www.undp.org.af/

Export Promotion Agency of Afghanistan (EPAA) http://www.epaa.org.af/

Afghan-American Chamber of Commerce (AACC) http://www.a-acc.org/

Afghanistan Builders Association (ABA) http://www.aba.af/

Private Sector Investment Opportunity No. 1

TURKMENISTAN, AFGHANISTAN, PAKISTAN, AND INDIA

NATURAL GAS PIPELINE – TAPI

DELHI Investment Summit on Afghanistan –28 June 2012 1

Investment Objective: A significant investment opportunity for private investors, the 1,775 kilometers TAPI pipeline will deliver 33 billion cubic meters (bcm) of natural gas a year from the Galkynysh gas fields in southeastern Turkmenistan through Afghanistan to growing energy markets in Pakistan and India. To be built and operated by an international consortium (which could include international oil and gas companies), the pipeline is expected to pass through Herat and Kandahar in Afghanistan, running along parts of Afghanistan’s Ring Road. The pipeline will then extend to Quetta and Multan in Pakistan and finally connect to the Indian town of Fazilka at the Indo-Pakistani border. The pipeline could be operational by 2017/2018.

Investment Type Private/Public/Donor (including, among others, the Governments of Turkmenistan, Afghanistan, Pakistan, and India, and the Asian Development Bank)

Budget Est.: $7.6 billion in 2005. Likely in the range of $10‐12 billion today.

Funding Status The ADB and TAPI partner countries are preparing a roadshow in 2012 to discuss financing, construction, and consortium formation with potential investors and partners. Substantial private financing will be required.

Summary of Progress: Leaders from Turkmenistan, Pakistan, Afghanistan and India have demonstrated great commitment and made marked progress on the project’s commercial terms since signing a preliminary agreement to proceed with the pipeline on 11 December 2010 in Ashgabat. The ADB has undertaken feasibility studies and is acting as transaction advisor for the project. On 23 May 2012, Turkmenistan’s state gas company Turkmengaz signed gas sales and purchase agreements with Pakistan’s Inter State Gas Systems and Gas Authority of India Limited, an Indian state-run utility. Along with high estimated rates of return (see table), the commercial agreements reinforce the project’s economic base and political backing.

TAPI Summary of Economic and Financial Results CAPITAL INVESTMENT COSTS (in 2010 US$ Million) Total

Initial Capital Cost 7,600 Discount Rate: 10% Total 8,000 – 15,000 BENEFITS: Financial & Economic Financial Economic

NPV (US$ Million) - 7,342m EIRR B/C Ratio

- -

19% 1.5

AFG Government Revenue (2010 US$ Million) Net Gross Annual Estimate US$74m US$148m

For further information, please contact: Abdul Jalil A Jumriany, DG Policy & Promotion, Ministry of Mines, o: +93‐799‐302‐184; email: [email protected]


SHEBERGHAN NATURAL GAS PROJECT


Investment Objective: To support the delivery of cost-effective energy to industries and communities in Northern and Eastern Afghanistan, as part of the Northeastern Power System (NEPS), through the construction of the 200 megawatt (MW) gas-fired Sheberghan power generation plan and rehabilitation of the 48 MW power plant at the Northern Fertilizer and Power Plant (NFPP) facility in Mazar-e-Sharif.

The development of Sheberghan gas fields will rehabilitate the gas fields and install gas‐fired power generation capacity of up to 200 MW within 3 years (supplying base load power to North East), with an expected life span of 20 years for the plant, and considerably longer (30 years plus) for the gas field. Supplying the North East Power System (NEPS), the principal benefit will be to lower costs and increase availability of power to users in the Northeast, with significant impacts on local economic growth and employment. The project consists of 14 components that will revitalize the natural gas and power industries in Afghanistan.

Investment Type Public/Donor/Private

Budget Sheberghan: USD $650 million

Funding Status ADB and the US (OPIC, USAID) are providing financial and technical support.

Summary of Progress: With the Afghan Government Cabinet’s full endorsement on 30 January 2012, the Sheberghan Natural Gas Power Project reached a critical milestone. In addition, in 2011, the project demonstrated a commitment of significant financial and technical support from a combination of donor and potential private sector partners (though financing has not been yet been secured for the new 200 MW or rehabilitation of the old 48 MW power plant). A feasibility study has been conducted for gas field rehabilitation but only pre‐feasibility studies have been carried out for (i) the gas‐fired energy generation and (ii) the energy transmission and related sub‐stations. The gas plant will also supply gas to the Fertilizer Plant situated about 70 km east. Feasibility data suggest a large potential for future expansion of these facilities to supply the domestic market, which has considerable unmet demand.

SHEBERGHAN Summary of Economic and Financial Results CAPITAL INVESTMENT COSTS (in 2012 US$ Million) Total

Transmission Activities $119 Gas Field Activities $181

Independent Power Producer Activities Mazar-e-Sharif Activities

Security

$869 $632 $90

Total $1,891 BENEFITS: Financial & Economic Financial Economic NPV (US$ Million) $27 EIRR B/C Ratio

17.0% 13.1% 1.01

Economic Growth (% Annual Increase) Income / Capita 0.01% Government Revenue (2010 US$) Net Gross Annual Estimate $1 million $64 million



COMPRESSED NATURAL GAS (CNG) FOR AUTOMOBILES

AND GENERATORS


Investment Objective: The Ministry of Mines has successfully launched a Compressed Natural Gas (CNG) pilot program to provide the Afghan fuel market a cheaper, cleaner, domestically-produced fuel source for vehicles and power generators. In the pilot program, the Ministry has successfully established a CNG station and a conversion center for automobiles. Natural Gas is provided by the currently producing gas fields in Sheberghan. The Ministry of Mines is currently putting the established CNG Station in Sheberghan for tender; the winning bidder will gain exclusive ability, as the prime mover, to develop the Afghan CNG market and profit from its expansion.

Investment Type Private/Public

Budget Est. (Financial Consultants): $3 Million.

Funding Status The Pilot station will be put out for tender in July/August 2012.

Summary of Progress: The CNG Pilot station in Sheberghan has been successfully established, and the station is currently operational. The conversion center is tied to the pilot station and has successfully converted more than 50 taxi vehicles to dual fuel engines. Ministry of Mines will be converting additional 50 vehicles to CNG in the next month. The Ministry of Mines will procure trucks for the transportation of CNG to the Power Generator sites. The Pilot station has a separate filling panel for the trucks that will be used for the transportation of CNG from one place to another. The notice for the Expression of Interest will be posted in July/August and the qualified bidders will be asked to submit their bids for the tendered station.

CNG Pilot Project CAPITAL INVESTMENT COSTS (in 2012 US$ Million) Total Initial Capital Cost $ 0.3

For further information, please contact: Abdul Jalil A Jumriany, DG Policy & Promotion,

Ministry of Mines, o: +93‐799‐302‐184; email: [email protected]


AFGHAN-TAJIK BASIN TENDER


Investment Objective: A significant investment opportunity for private investors, the Government of Islamic Republic of Afghanistan is undertaking privatization and licensing program for six blocks, i.e. 14,757 Km2, of its hydrocarbon prolific basin. The Ministry of Mines is undertaking a privatization and licensing program for six of its hydrocarbon prolific basins. The country’s rich mineral resources have the potential to substantially transform the nation’s economy and provide early investors with substantial returns on investment.

The contract for the Afghan‐Tajik Basin will be a Production Sharing Contract. Using a geology based assessment methodology, the US Geological Survey – Afghanistan Ministry of Mines and Industry Joint Oil and Gas Resource Assessment Team estimated mean volumes of undiscovered petroleum in Northern Afghanistan; the resulting estimates are 1,596 Million Barrels of crude oil, 15,687 Billion cubic feet of Natural Gas, and 562 Million Barrels of Natural Gas liquids. The tendered blocks have recently gone through a 2D Seismic Survey.

Investment Type Private/Public

Budget Est. (by Consultants): $250 Million.

Current Status Expressions of Interests are due by 30th June

Summary of Progress: The Expression of Interest (EoI) for the six-tendered blocks is due by 30th June, and the qualified bidders will be asked to submit bids in the next couple of months. The Ministry of Mines has already promoted the investment opportunity internationally and is expecting International Oil Companies to bid for the tendered blocks.

Afghan-Tajik Tender CAPITAL INVESTMENT COSTS (in 2012 US$ Million) Total Initial Capital Cost $250 M



CENTRAL ASIA-SOUTH ASIA REGIONAL ENERGY

MARKET – CASA-1000


Investment Objective: To create a regional electricity market by establishing a transmission line between Central Asia and South Asia. The Central Asia – South Asia Electricity Transmission and Trade Project (CASA 1000) will develop the necessary physical infrastructure and create the institutional and legal framework to transmit surplus power available from existing facilities in Tajikistan and Kyrgyzstan to Afghanistan and Pakistan. The project will catalyze additional energy investments and trade both in the four CASA 1000 countries and wider region, generating a positive demonstration effect for other regional infrastructure projects. Physical infrastructure plans for CASA 1000, which is projected to enable a trade of 1000 to 1300 MW of summer surplus electricity between Central Asia (namely Kyrgyzstan and Tajikistan) and South Asia (namely Pakistan and Afghanistan) over a 30 year project life-span, include: (i) A 500 KV High Voltage Direct Current (HVDC) transmission system between Tajikistan and Pakistan through Afghanistan; (ii) An AC transmission link from Kyrgyzstan to Tajikistan to bring electricity south; and (iii) DC electricity sub-stations in Kabul, Peshawar, and Sangtuda.

Investment Type Public/Donor/Private (at a later phase); Afghanistan, the Kyrgyz Republic, Tajikistan, and Pakistan, the World Bank, Islamic Development Bank, Russia, and the U.S.

Budget USD $1 billion

Funding Status In addition to financing from the World Bank, Islamic Development Bank, and Russia, the projects partners intend to seek a commercial partner.

Summary of Progress: Throughout 2011, the World Bank has helped to convene a technical working group involving all CASA 1000 participating countries to achieve progress towards the commercial negotiation of a sales and electricity transmissions operating agreement. In particular, the CASA-1000 project was revitalized when the governments of Afghanistan, the Kyrgyz Republic and Tajikistan signed a Memorandum of Understanding (MOU) at a meeting, held in 2011 in Bishkek, Kyrgyzstan. Under the Bishkek MOU, each country is required to establish a national Working Group dedicated to implementing the CASA-1000 project. During the preparatory phase, which is expected to last 12 to 18 months, the World Bank, Islamic Development Bank, and USAID are providing financial and technical assistance. In February 2012 in Almaty, Kazakhstan, working groups met to further streamline steps toward CASA-1000’s implementation.

CASA 1000 Summary of Economic and Financial Results CAPITAL INVESTMENT COSTS (in 2010 US$ Million) Total

Estimated Costs for HVDC Interconnection plus network reinforcement 592.3 Estimated Costs for HVAC Interconnection 176

Environmental and social costs 15.8 Total 784.1

BENEFITS: Financial & Economic Financial Economic NPV (US$ Million) - 440 EIRR

B/C Ratio - 15.6%

1.1 Economic Growth (% Annual Increase) Income / Capita 3.3% Government Revenue (2010 US$ Million) Net Gross Annual Estimate 88 – 175 -


KOKCHA HYDROPOWER PLANT AND IRRIGATION

PROJECT


Investment Objective: To construct large-scale irrigation works to enhance trade in agricultural products, as well as generate power and drinking water, in northern Afghanistan using the waters of the Amu Darya Basin. The Kokcha Hydropower Plant and Irrigation Project includes building a concrete gravity dam, 67m high and 240 m long, that will generate an estimated 450 MW through hydropower and provide irrigation for farming and grazing lands in northern Afghanistan along the Kokcha River. The project will result in the irrigation of approximately 140,000 Hectres of land and include a hydropower component in the provinces of Kunduz and Taloqan (in northern Afghanistan near the Afghan-Tajik border). The power plant will have a total installed capacity of 125 MW, of which 50 MW would be utilized for pumping stations and the remaining 75 MW available for domestic consumption. The lifespan of this project is estimated to be 30 years. Key components include: (i) Irrigation for farming and grazing lands in northern Afghanistan along the Kokcha River; and (ii) Generating an estimated 450 MW through hydropower.

Investment Type Public/Donor/Private

Budget USD $2.280 billion (over a seven year construction period)

Funding Status No resources allocated to date. A commercial partner will be sought.

Summary of Progress: A pre-feasibility study of the Kokcha dam was performed to identify the technical, social, environmental, and economic viability of the project, followed by refinement of physical characteristics of design parameters for a recommended project suitable for final design and construction. Regional economic integration will be promoted and stability enhanced by increasing arable farming lands in the Amu Darya Basin, which in turn could potentially ease conflict over land. The subsequent economic prosperity will create more jobs (an estimated 5,000 direct jobs and 70,000 indirect jobs) and help to further stabilize the provinces in northern Afghanistan. Additionally, through the collection of user fees, taxes, and exporting of power, the Kokcha Irrigation and Hydropower Plant Project can provide a significant and steady source of revenue to the Afghan Government.

KOKCHA MULTI-PURPOSE DAM Summary of Economic and Financial Results CAPITAL INVESTMENT COSTS (in 2012 US$ Million) Total Discount Rate $3,209

10% BENEFITS: Financial & Economic Financial Economic NPV (US$ Million) ‐ $2,822 EIRR B/C

‐ 22% 1.88

Economic Growth (% Annual Increase) Income / Capita 1.9% Government Revenue (2012 US$ Million) Net Gross Annual Estimate $94 $201


SYADARA IRON ORE DEPOSIT


Investment Objective: After the successful bidding round for the Hajigak the Islamic Republic of Afghanistan is tendering another big Iron Ore deposit called Syadara. Extensive massive magnetite bodies were discovered by Afghanistan Geological Survey (AGS) geologists near Syadara village, in Bamiyan province during the 2010 field survey. This body is located approximately 110 km west of the Hajigak Iron Ore Deposit, which was recently tendered. Based on the outcrop dimensions, an inferred resource of more than 400 million tons of Iron Ore is plausible. Assay results from composite grab samples returned grades ranging from 50 – 67% Fe (65% Fe), which are consistent with grades at Hajigak.

The magnetite outcrop in the northern end of Syadara, is centered in 66.89710 o E longitude and 34.61906o

N latitude. The deposit is located approximately 215 mm from the Afghan capital of Kabul. The area can be reached by road from Kabul to Bamyan and then Yakawlang the district capital where the deposit is located.

Investment Type Private

Budget Est. (Financial Consultants): $50 Million.

Current Status The Ministry of Mines will issue a notice for the Expression of Interest in October of 2012.

Summary of Progress: The Ministry of Mines has completed the business plan for this investment opportunity which includes the financial aspects of the project. The notice for the Expression of Interest will be posted in the month of November, and the interested companies will also be taken to the Syadara deposit for a site visit in March 2013.

Syadara Iron Ore Deposit CAPITAL INVESTMENT COSTS (in 2012 US$ Million) Total Initial Capital Cost $50Mn



CEMENT PLANT OPPORTUNITY


Investment Objective: Cement is the most basic of all modern building materials; hence, the availability of reasonable priced cement to the construction industry in Afghanistan is a high priority for reconstruction and development of the country’s infrastructure. The demand for cement in Afghanistan is projected to exceed 5 million metric tons per year by the end of 2012; the demand is currently being met by imports from neighboring countries at prices set by foreign suppliers. There are currently few potential sites for cement production in Afghanistan; one of the sites where the Government of Afghanistan is looking for such investment is the Jabal-e Seraj Cement Factory, which is located south of the Hindu Kush at Jabal-e Saraj in Parwan Province. This facility has not produced cement for some years. The factory would require a new plant to produce cement. The chief advantage of Jabal-e Saraj is its location near-by Kabul. At present, the surface of road linking Jabal-e Saraj to the Kabul highway is in good condition, and another road in the areas is planned for the near future. The Government of Afghanistan welcomes proposals for the production of Cement in Afghanistan, especially in the Jabal-e Saraj area.


Budget Est. $23,000,000

Funding Status This estimate is for a “mini” plant at 500t/d. Larger plants could also be considered.

Summary of Progress: The Government of Afghanistan is looking for a business person to invest in the Cement Plant in Jabal-e Seraj. Any investment in the Cement sector of Afghanistan would be welcomed.

Jabal-e Seraj CAPITAL INVESTMENT COSTS (in 2012 US$ Million) Total Initial Capital Cost $ 16 M



AFGHAN RAIL SYSTEM


Investment Objective: To establish an Afghan Rail System (ARS) through regional public-private partnerships to facilitate Afghan exports, spur economic growth, and integrate regional markets. The combination of “steel wheel on steel rail” contributes to low friction, efficient energy use that reduces pollution, and the ability to carry 20-30 million tons of cargo yearly through Afghanistan. The ARS will facilitate the country’s further internal, inter-provincial economic integration, as well as wider regional integration with Central and South Asia, and beyond. Near-term rail link priorities include:(i) Kolkhozobod – PanjiPoyen (Tajikistan, 50km) and Shir Khan Bandar - Kunduz (Afghanistan, 61 km); (ii) “North-South Rail Line” between Mazar-i-Sharif to Kunduz to Hajigak to Kabul to Aynak to Jalalabad (Afghanistan, 900 km); (iii) Jalalabad – Torkham (Afghanistan, 75 km) - LandiKutal (Pakistan, 23 km); (iv) Gorian (Iran) - Herat (Afghanistan) (62 km); (v) Atamyrat – Imomnazar (Turkmenistan, 90 km) and Aqina – Andkhoy – Sheberghan (Afghanistan, 108 km); and (vi) Completion of Torgondi - Herat (Afghanistan, 100 km).

Investment Type Private/Public/Donor (including the Asian Development Bank, China Metallurgical Group, and the Uzbek National Railway Company)

Budget Budget estimates under preparation.

Funding Status No funding is allocated at this time. The Steel Authority of India Ltd. (SAIL) has expressed support for rail line construction from the Hajigak Iron Ore Mine, and the ADB has expressed support for a rail line from Mazar‐i‐Sharif to Andkhoy.

Summary of Progress: The first Afghan train ran on the completed Hairatan to Mazar-i-Sharif rail line on 21 December 2011. Construction of the rail line cost USD $165 million (US$160 provided by the ADB and USD $5 by the Afghan Government). In August 2011, a three-year contract was awarded to the Uzbek state-owned national railway company (UTY) to operate and maintain the line until 2014.The China Metallurgical Group Corporation (MCC) is required to perform a pre-feasibility study for the line from Kabul to Mazar-i-Sharif by 2013, as part of its Aynak Copper Mine rights agreement. The full recommendation to establish a National Rail Authority will soon be introduced to Cabinet for endorsement and formation.

Afghan Rail System Summary of Economic and Financial Results CAPITAL INVESTMENT COSTS (in 2012 US$ Million) Total

Construction 5,708 Operations and Maintenance 6,810

Total 12,518 BENEFITS: Financial & Economic Financial Economic NPV (US$ Million) $3,397 million EIRR B/C Ratio

14% 1.3

Economic Growth (% Annual Increase) Impact on GDP per Capita 0.4% Fiscal Impact Net Gross Annual estimate $74 million $346 million



EAST-WEST ROAD CORRIDOR AND UPGRADE KABUL-JALALABAD-PESHAWAR HIGHWAY TO A FOUR-LANE

EXPRESSWAY


Objective: To further internal, inter-provincial economic trade and integration in Afghanistan, as well as wider regional trade and integration in Central, West, and South Asia, through expanded transportation infrastructure. The East-West Road Corridor project includes the provision of technical, administrative, and financial support for completing the remaining sections of the 665 km East-West Highway (from Herat to Chagcharan to Gardandewal - near Kabul). The Kabul-Jalalabad-Peshawar (KJP) Expressway focuses on upgrading the 142 km Kabul-Jalalabad Highway from two to four lanes, and improving the Jalalabad to Torkham segment of the Jalalabad-Peshawar Expressway (74 km). These linked road projects fulfill a strategic national objective for linking Eastern-Central and Western parts of Afghanistan, and Afghanistan with neighboring countries by promoting:1)private sector economic development through better access to markets; 4) shortening the travel distance from Herat-KBL (750 km) compared to the Ring Road HRT-KDH-KBL (1047 km); and 5) providing access to natural resources. Components: (i) Road: Herat – Chest-e Sharif (160 km); (ii) Road: Chest-e Sharif – Chaghcharan (175 km); and (iii) Road: Chaghcharan – Gardandewal (330 km); (iv) Road: Kabul-J-bad (142 km); and (v) Road: J-bad-Torkham (74 km)

Investment Type Public/Donor/Private (including ADB, Italy, EU, and Pakistan)

Budget USD $733 million for the East‐West Road Corridor USD $120 million for the expansion of the Kabul‐Jalalabad Highway from two to four lanes Budget under preparation for upgrade of the Jalalabad‐Peshawar Expressway

Funding Status Italy has allocated USD $95 million and the Afghan Government USD $20 million for the East‐West Road Corridor. The EU has expended USD $86 million to rehabilitate the Kabul‐Jalalabad Highway, and Pakistan has expended US$50 million on basic rehabilitation of the Torkham‐Jalalabad Road.

Summary of Progress: Initially planned for completion in 2008, the East-West Road Corridor has faced delays due to under-funding. In February 2007, with support from the EU, rehabilitation of the 142 km two-lane Kabul-Jalalabad highway was completed. Since this period, daily traffic levels have increased significantly, with around 12,000 to 15,000 light cars and heavy trucks transporting goods and military cargo. The highway winds through an elevated pass that is threatened with rockslides during the rainy season, thereby resulting in delays and accidents.

Kabul-Jalalabad-Peshawar Summary of Economic and Financial Results CAPITAL INVESTMENT COSTS (in 2010 US$ Million) Total Total 90.2 BENEFITS: Financial & Economic Financial Economic NPV (US$ Million) - 148.49 EIRR - 27 Economic Growth (% Increase) Income / capita 0.10 Government Revenue (2010 US$ Million, for 1-5 years) Net Gross Annual estimate - 1.65

For further information, please contact: Jamil Hare, Director; Program Management Office, Ministry of Public Works, [email protected], +93 700-161-194


REHABILITATION OF THE SALANG TUNNEL AND

CONSTRUCTION OF BY-PASS ROAD


Investment Objective: To further internal, inter-provincial trade and economic integration in Afghanistan, as well as wider regional trade and economic integration in Central and South Asia, through expanded and strategically important transportation infrastructure. When complete, the projects will support expanded national and regional trade, increased transit, and better management of natural disasters (flooding, blizzards, etc.). The Salang Tunnel is the only major north-south route to remain in operation year round, and its rehabilitation is crucial for land transport within Afghanistan, as well as between Afghanistan and the surrounding region. It connects Kabul to eight provinces and Afghanistan to both Uzbekistan and Tajikistan. Major components: (i) Salang Tunnel Emergency Repair (completed in Oct. 2011); (ii) Salang Tunnel Full Restoration; (iii) Road: Maiden Shar - Bamiyan (136 km); (iv) Road: Charikar - Bamyan Section 6 (16 km); and (v) Road: Bamiyan - DushiSalang Bypass (151 km).

Investment Funding: Public/Donor/Private (including USAID, World Bank, and ADB)

Budget: USD $1.6 billion for the full rehabilitation and by-pass road project

Funding Status: USD $5 million committed (but not allocated) by U.S. for upgrading/emergency repairs.

Summary of Progress: Emergency repair work on the Salang Tunnel was completed in October 2011. Planned to commence in 2014/15, full rehabilitation of the tunnel will take an estimated three years, but the Bamiyan-Dushi By-Pass Road must be completed before full rehabilitation can begin. In anticipation of this effort, a feasibility study is being undertaken, tentatively scheduled for completion in late 2012. Through increased regional trade, additional customs duties and transit fees, and personal contacts, the completion of the project will also facilitate increased public revenues (estimated at USD $1.8 million annually) and improved regional relations. The Salang Tunnel and By-Pass Road have the potential to be an anchor project capable of generating significant induced and catalytic impacts on import and export growth, as well as employment in the eastern region of Afghanistan. In terms of net government revenue, benefits would include expected fees for transit of goods from countries north of Afghanistan.

SALANG TUNNEL Summary of Economic and Financial Results CAPITAL INVESTMENT COSTS (in 2010 US$ Million) Total

Salang Tunnel Emergency Repairs (only) 47.4

Total 47.4 BENEFITS: Financial & Economic Financial Economic NPV (US$ Million) - 15.51

EIRR - 16%

Economic Growth (% Annual Increase) Income / Capita -

Government Revenue (2010 US$ Million) Net Gross Annual Estimate - $1.8

For further information, please contact: Jamil Hare, Director; Program Management Office, Ministry of Public Works, [email protected], +93 700-161-194


INVESTMENT PROFILE ON FRUIT JUICE AND

CONCENTRATE PRODUCTION


Sector Overview ($100m Concentrate Capacity– Expanded Exports –Kabul Production Facility – Major Agri-Business Manufacture)

Global Industry 2012 Analysts report: Source: www.prweb.com International Fruit Juice Sector “Set For Growth”. Omaid Bahar Fruits Processing Ltd. (OBFPL) is the first and only Afghan company to produce fruit concentrate, as well as fill, pack, and distribute RTD (ready to drink) fruit juice drinks under their own brand. Fruits concentrates and juices include Afghan pomegranates, apples, mulberries, apricots, peaches, plums, cherries, watermelon, and carrots. The current market size in Afghanistan for non-alcoholic beverages is in excess of US $100 million per year. The current market is estimated to be growing up to 15% per year, as more and more people gain access to markets, better education, and are becoming more health conscious.

Investment Expansion: Omaid Bahar Juice Concentrate Limited has invested over $25m thus far in setting-up the company’s current operations. The production facilities are located in Kabul.

Recent Development: The Company has had a number of significant achievements in 2012. Not only were 1000ml and 200ml Tetra Pak filling lines installed, but the company is in the process of finalizing agreements with a number of large multi-national companies for both of its concentrate and fresh juice programs. It also holds two letters of intent with major U.S. and UK multi-national concentrate, importers. In the last 60 days, OBFPL has produced and shipped over 300 tons of juice to Pakistan, Dubai, and India.

Case for Investment: The Omaid Bahar Juice Concentrate Limited will utilize new investment for cost of goods expansion to new markets. New legislation is presently being considered in 2012 that would place tariffs on all juice imports from Pakistan, India, Dubai, and other neighboring countries to match the tariffs imposed on Afghan juice exports into those countries. This will level the playing field and enhance competition. 2012 will be the first year for operating profits, and the company is ready to move into the next levels of profitability expansion.

Investment Type Private/Public/Donor (including the Governments of the United Kingdom, Afghanistan, Pakistan, India, United Arab Emirates, the World Bank, and the Asian Development Bank)

Budget Est. (by OMAID BAHAR FRUIT PROCESSING, LTD): $20,350,000

Funding Status The OMAID BAHAR JUICE CONCENTRATE is preparing a confidential investor packet for direct discussion to discuss funding and financing, options, with potential investors and partners.

Progress Summary Omaid Bahar Fruit Processing Ltd. has demonstrated significant progress in all areas of operations and commercial sales.

Summary of Economic and Financial Results CAPITAL INVESTMENT COSTS (in 2012 US$ Million Estimated) Total Total Investment to Date 25,000,000 BENEFITS: Financial & Economic Financial Economic 2012 2013 2014 Total Sales 20,315,583 24,378,699 29,034,460 Expenses 18,802,289 22,727,033 27,213,740

Estimated Net-Profit 1,513,294 1,651,666 1,820,720

Note: These financial projections are expected to double or triple with an additional $10 million investment.

For further information, please Contact: Mustafa Sadiq, President; [email protected], +93 786-002-007


SAFFRON PROCESSING AND MARKETING


Investment Objective: The purpose of this project is to promote the processing of saffron and value addition. An investor will be encouraged to build a saffron processing plant in Herat province. In addition, an investor will allocate funds to develop a marketing strategy to promote sales, as well as develop an international “Afghan” brand. Year one plans are for the purchase of 4,000 kg of saffron, which is expected to increase in year two to 6,000,000 and 10,000,000 in year three.

Investment Funding: Private

Budget: $6,550,000 US (Construction of processing plant and facility in 2012: $350,000; Purchase of 4,000 kg. saffron in 2013: $6,000,000; Marketing: $200,000)

Funding Status: Funding is required to meet the above budgetary targets.

Summary of Progress: Since 2001 the public and private sector in Afghanistan have focused on rehabilitating the farming sector to provide profitable options to farmers. As an alternative crop, saffron production has been successfully established in western Afghanistan, mainly in the province of Herat. 300 ha of land are currently under cultivation, and production in 2012 is to projected to be approximately 4,000 kg., with some 5,000 farmers involved in the cultivation of this crop. Afghan saffron is currently exported to Spain, France, UAE, India, the USA, and Japan; however, processing, packaging and marketing require improvement in order to maximize the returns from saffron cultivation. There are three major Afghan companies that are heavily involved in the production and export of saffron. It is estimated that saffron could generate an income of $100 million USD annually, if cultivation is extended to an area of 5,000 to 7,000 hectares of farmland having the requisite agro-ecological conditions to promote the highest yields.

Key Economic Indicators Table:

Capital Investment Costs $350,000 US

Benefits: Financial & Economic Afghan prices have been as high as $5,000/kg US in recent years; prices internationally vary depending on market and world production.

Economic Growth Average yields are 7 Kg/ha with a maximum of 24 kg/ha. The potential production in Herat is 49,000-168,000 kg annually. The strategy and size of the investment will determine the rate of growth.

Export Growth Potential Excellent. Recent exports indicated more than 50% growth in volume and this pattern is expected to continue. Expanded air routes to Moscow, India, Middle East and Europe offer new growth opportunities.

Employment 1 ha. saffron requires 250 person days/year. Current cultivation requires 75,000 labour days. 1,750.000 labour days are required for 7,000 ha.

For additional information, please contact: Ms. Sima Ghoryani, Ghoryan Women Saffron Association, +93 (0) 703188020/93 0799361730; [email protected] or Mr. Azizullah, Afghan Red Gold Saffron LLT, +93 (0) 799 666650/93 (0)700402340, [email protected]; Mr. Atiquallh, Afghan Saffron, 93 (0) 799‐‐0904, [email protected], www.afghansaffron.af


FARM MACHINERY MANUFACTURING


Investment Objective: The purpose of this project is to promote the manufacture and distribution of farm machinery and tools. Farm Machinery manufacturing (especially tractor-powered threshers and cultivators) is a sunrise sector experiencing high growth today in Afghanistan. The farm machinery sector is dependent on Afghanistan’s rapidly mechanizing agricultural sector. Cereal and other non-fruit production sub-sectors are among the easiest sectors to mechanize. Machinery and tools in these sectors are estimated to grow by 10% annually. Investment Funding: Private

Budget: $ 10,000,000 US (Manufacturing plant: $3,000,000; Working capital: $5,000,000; Marketing investment $2,000,000)

Funding Status: Funding is required.

Summary of Progress: The Afghan farm machinery sector is already moving in a more technically‐oriented direction and is one of the more efficient sub‐sectors in Afghanistan. However, it has not improved its production or increased its capacity sufficiently to be the major supplier domestically, In short production of farm machinery has not kept pace with the demand for such products. Higher grain prices have also contributed to high levels of mechanization; consequently, demand for agricultural machinery. Increasing mechanization has meant that by 2011 the acreage under major cereal crops had increased to 1,150,000 ha covered by wheat, 210,000 ha under rice cultivation, and 183,000 ha for maize cultivation. There are four main manufacturers of farm machinery in Afghanistan. Jawed Afghan with its foundry and precision machine tools is the most well‐known farm machinery company in Afghanistan. This firm produces threshers for wheat and rice cultivation, farm trailers, plows and cultivators. Akhtar Mohammed Smith and Agricultural Tools’ main products are tractor‐mounted blades for soil mulching, farm trailers, as well as plows and cultivators. Hussein Implement Manufacturer specializes in plows and cultivators, and it is slowly expanding into corn threshers. Jan Agha has the lowest level of production in the farm machinery sector. This firm also produces corn and rice threshers, as well as plows and cultivators.


Capital Investment Costs Unavailable at present.

Benefits: Financial and Economic The farm machinery units produced in Afghanistan in 2007 accounted for 2,500 units including tractor shovel plows, cultivators, farm trailers, and corn/rice/wheat threshers. The estimated revenue for these products was $1,500,000 US. It is estimated that this will double by 2012.

Economic Growth (% increase) The nascent farm machinery sector accounts for $2,000,000 US of a growing market that is valued at up to $20,000,000 including imports.

Export Growth Potential Not evaluated at present.

Employment Direct employment with a state of the art manufacturing plant is estimated to create 1,000 full time jobs and around 2,000 indirect jobs.

For further information, please contact: Qayoom Bassam, +93 799-840-047, [email protected]


DAIRY COMPONENT – ECONOMIC DEVELOPMENT

PACKAGE


Investment Objective: The specific goal of the Economic Development Package (EDP) is to deliver sustainable growth in licit rural incomes and employment in Balkh District of Balkh Province. Its more general purpose is to precipitate growth in the agricultural sectors in which Balkh District has a competitive advantage. A significant investment opportunity for private investors, component A of the EDP consists of initiatives to develop a commercially viable system for the production, collection, processing, and subsequent marketing of homestead milk supplies. Afghanistan’s produces 1,719,000 tons of milk per year, much of which is not currently processed. It is also worth noting that Afghanistan imported 10,160 tons of milk in 2010. As a result, there exists a significant opportunity for this existing project to be replicated to other regions that currently have surplus milk or could increase current production levels. Because of these considerations, this project profile is budgeted at $7.52 million and reflects an additional dairy site as yet to be determined.

Investment Funding: Private (3 proposed; UHT processor, milk processing unit entrepreneur, implementing partner responsible for technical assistance, operation, and commercial acumen) and Public ($2.18 million grant towards capital equipment and building costs provided)

Budget: $7.52 million for 4.5 years

Funding Status: Private funding required in the processing with cost sharing from CARD‐F.

Summary of Progress: ITALTREND has been contracted as the implementing partner (IP) for the first project. The inception phase is almost complete, and ITALTREND is in the process of conducting baseline surveys and identifying entrepreneurs who will be part of the package. Soon the IP will start working on the establishment of milk collection points.

Key Economic Indicators:

Capital Investment Costs $2 million US approximately, including a private cost share grant

Benefits: Financial & Economic 19.76% EIRR, $1.896 million NPV

Economic Growth (% increase) Approximately 260% increase in milk production for each participating household after four years.

Export Growth Potential In the short-term, production increases would be consumed domestically. In the future, surpluses could be exported to surrounding countries.

Employment 1000 plus income generating opportunities in the value chain.

Other Key Economic Variables The GoIRA will address inadequate, low-cost grid-supplied electricity necessary for chilling and processing milk products.

For further information, please contact: Qayoom Bassam, Ministry of Agriculture +93 799-840-047, [email protected]


FRESH FRUIT PROCESSING EASTERN REGION


Investment Objective: The main objective of this project is import substitution for juices ($24,016,542 USD 2011), and jams and jellies ($1,840,784 USD). A processing plant would be constructed in eastern Afghanistan to purchase fresh fruits from the eastern and central regions. Processed products will be sold nationally and export possibilities for concentrates explored. The processing plant will be equipped with a Tetra Pak Line in order to produce juices with a long shelf-life. Project preparation can start from August 2012, and production can commence in March 2013.

Investment Funding: Private

Budget: Processing plant construction US$ 12,000,000

Purchase of approximately 20,000 Mt of fresh fruit: US$ 4,000,000

Marketing and promotion: not estimated at present

Funding Status: Private funding is required.

Summary of Progress: Development support and farmer led investment over the past seven years have facilitated increased fruit production through the rehabilitation of old orchards and the establishment of new orchards. Since 2007, these farmers have been organized under the Eastern Region Fruit Growers Association which represents approximately 100 village based fruit marketing groups. There are a few small fruit processing facilities which could explore joint ventures with new investors. One such company is Masroor Food Processing established in 2008 and located in Jalalabad. Its processing capacity is 2 Mt/day, and it includes juices, jam and jellies. In 2005, orchards covered an area of 500 ha with an estimated production of 2,000 mt of fresh fruits; the area had increased to approximately 7,000 Ha in 2010, and production is predicted to reach 50,000 mt by 2014. The estimated value of the fruits to be produced by 2014 is $15,000,000 US.

Capital Investment Costs $ 16,000,000 USD

Benefits: Financial & Economic EIRR, NPV Not available at present

Economic Growth (% increase) Not available at present

Export Growth Potential To be evaluated

Employment Direct: 60 full-time jobs

Indirect: 200 full-time jobs

Fruit growers: 4,000 individuals

Other Key Economic Variables/Factors Relatively better access to water resources can increase levels of fruit production.

For further information, please contact: Qayoom Bassam, Ministry of Agriculture +93 799-840-047, [email protected]


POULTRY ECONOMIC DEVELOPMENT PACKAGE


Investment Objective: The specific goal of the EDP is to deliver sustainable growth in licit rural incomes and employment in Kama District, Nangahar. It’s more general purpose is to precipitate growth in the poultry sector in which Kama District has a competitive advantage. A significant investment opportunity for private investors, this EDP proposes the following interventions: establishment of four breeder farms, four hatcheries, 50 new and 13 expanded broiler farms, and 1,000 new household layer farms. Contingency funding is also included in the EDP to support the establishment of a feed mill and/or a slaughterhouse.

Investment Type: Public (CARD‐F will provide advisory services for the following in addition to: four new breeder farms and four new hatcheries – 40% grant for capital set‐up costs, 50 new and 13 expanded broiler farms – 50% grant for capital set‐up costs, 1,000 new layer farms – 70% grant for capital set‐up and first year operating costs) and Private (implementing partner and entrepreneurs to be indentified).

Budget: $5 million US/39 months

Funding Status: Almost 50% funded by project donor (CARD‐F).

Summary of Progress: ITALTREND has been contracted as the implementing partner (IP). The inception phase has been completed.


Capital Investment Costs $2 million US approximately

Benefits: Financial & Economic 146% EDP IRR, three year payback, $11.6 million in present value terms

Economic Growth (% increase) $14 million earnings over seven years

Export Growth Potential In the short-term, production increases would be consumed domestically. The total production will only substitute for 2-3% of annual domestic demand.

Employment 1,145 new jobs

For further information, please contact: Ajmal Rahimy, Ministry of Agriculture, [email protected] +93 700-239-450


MOVING UP THE VALUE CHAIN IN CARPETS


Sector Overview: Afghanistan has a long tradition of handmade carpets including Chob Rung (pile and knotted carpets made from wool, silk and cotton); Kilims (non-pile fabric woven carpets), and felted woolen carpets. More than 95% of Afghanistan’s production occurs in homes, on one or two looms, with a number of family members participating. Carpets currently account for some 20 per cent of Afghanistan's exports and USAID predicts an 11 per cent annual growth rate, estimating that the market could be worth US$350 million by 2015 as industry experts predict high growth in the handmade carpet sector over the next five years.1 Globally, the market for hand-made carpets is $1.5-$2 billion per annum. In capturing market share, Afghanistan is in competition with five other major global players: Iran, India, China, Nepal and Pakistan (although it is difficult to ascertain what proportion of Pakistani exports are in fact Afghan products that have been finished in Pakistan and re-branded as Pakistani).

Location: The majority of Afghan production (70%) is located in the north, where a combination of traditional and newer Chob Rung carpets are woven. Kabul is a relatively new centre of production, focusing on Chob Rung carpets (25% of national production).

Recent Developments: Higher value activities continue to be repatriated from neighbouring countries. Cut and wash facilities have recently opened in Kabul, Mazar, Jalalabad and Herat. Carpets that previously would have been exported under a “Made in Pakistan” label (following finishing there) are now being exported from Afghanistan. A more active carpet association is attempting to revamp the branding for Afghan carpets and to raise their profile internationally. In 2010, Afghanistan’s carpet sellers recorded $12,116,500 in sales at Domotex (the World’s largest flooring expo) in Germany – a 400% increase over the event sales of 2009. A number of entrepreneurs have established overseas warehouses and are trucking carpets to them through central Asia.

The Case for Investment: Afghan carpets are world famous and comprise its largest export. They are in demand world wide – even though little by way of marketing has taken place. The market for them is growing strongly. In the decades of conflict, many of the higher value and most profitable steps in the production and sale of Afghan carpets moved to neighboring countries. The process of repatriating these steps has only just begun. As a result, the opportunities for profitable investment abound.

Investment Opportunities: There is an opportunity to invest in the following:

The establishment of further cut and wash facilities; and

Improving the design, marketing and export of Afghan carpets.

For further information, please contact: Mr. Abdul Rahim Saeedi, Director General, Private Sector Development, Ministry of Commerce and Industry, +93 20 250 23 25 (off)

+93 786 -146-162 (mob), Email: [email protected]

1 Global Industry Analysts, Inc., 2010

Mazar

WestHaving faced declining demand, fallingprices and higher costs (of both labourand inputs), the carpet cluster in theHerat area is under threat. Estimated toaccount for 5% of total production

CentreProduction in the Kabul area ismainly the newer variety ofChob Rung carpets, with agenerally higher portion of menweaving than in other regions.Estimated to account for 25% oftotal production.

NorthThe carpet belt in the north isestimated to account for almost70% of Afghanistan’s output

Andkhoy

Maimana

Shebergan

Herat Kabul


PROCESSING CASHMERE


Sector Overview: Afghanistan is one of three countries where cashmere is produced. In 2007 Afghanistan produced 1000 metric tonnes valued at $18 million. This was 6% of global supply. It is estimated that 30% of Afghan cashmere-producing goats are being harvested with the remaining 70% of Afghan goat farmers unaware of the value of cashmere or the channels for trading the product. USAID’s ASAP (Accelerating Sustainable Agriculture Programme) and a number of other donor programs are making significant efforts to raise awareness of the opportunities for selling cashmere goat hair. Ongoing efforts are also being made to improve the quality of the fibre being harvested and to reduce the mixing of fibres of different quality. Traditionally, Afghanistan has exported more greasy cashmere fibres for processing abroad. As a result, it captured only a small part of the value chain.

Local processing of cashmere has begun in a couple of locations in Herat where scouring and de-hairing is taking place. In March 2006, Afghan Macau’s (a JV with a Chinese company) established a scouring line and installed mechanical de-hairing equipment in operations in Herat. In 2011 a British and a Belgian company entered into a Public Private Partnership (PPP) with the Ministry of Commerce to do scouring and de-hairing in a former cotton factory outside of Herat City.

Location: Cashmere is produced across most of Northern Afghanistan. Processing of the raw fibre occurs in Herat.

Recent Developments: A proposal to weave yarn from cashmere fibres in the Herat Textile Park has been received by the Ministry of Commerce. One of the current companies has well advanced plans to weave the yarn into fabric and make garments out of cashmere. A number of international investors (primarily European) have expressed an interest in investing in the sector, most notably in the spinning of yarn and weaving of fabric.

The Case for Investment: Afghanistan is one of three countries that produces cashmere wool. The amount of raw cashmere in Afghanistan will continue to increase in the forseeable future as existing herds are harvested and farmers respond to increased demand for cashmere by increasing herd size. Shipping unprocessed wool is expensive. Processing can be done cost effectively in Afghanistan. The market for carded / combed cashmere fibres is a large one: in 2010, it was valued at $189,841,385, and demand for cashmere globally has increased rapidly over the last decade.2 Spinning yarn from the processed fibres is relatively simple and it looks likely that this will begin soon in two locations in Herat.

Investment Opportunities: There is an opportunity to invest in the following:

establishment of further dehairing and scouring operations. establishment of cashmere yarn spinning operations



2 UN, COMTRADE, 2010, 510531 (Fine animal hair, carded/combed, of Kashmir [cashmere] goats)


PROCESSING AND EXPORTING MARBLE


Sector Overview: Afghanistan is home to 60 known marble deposits, and it is estimated that there are as many as 400 varieties of marble. The deposits in Cheshti Shifri and Khogiani are home to top quality white marble, very similar to world famous Carerra marble from Italy and have replaced imports of Italian marble to Central Asia. Afghan exports of marble are growing strongly.

Until recently, most sites used low-tech, wasteful, explosive‐based extraction to remove marble, which was then typically transported to Pakistan for cutting and polishing. Most of the value in production of marble is created in the final two steps (cutting and polishing), which has typically been undertake in Pakistan but is increasingly done in Afghanistan. Of the 30 quarry operators in Afghanistan, six have been converted to wire and saw block extraction, and five are in the process of now doing so. A recent study conducted by the ASMED project estimated that prompt and effective action would result in the creation of an additional 15,000 jobs and $435 million in GDP by 20163. However, this would require investment of approximately $100 million. This estimate now looks conservative as exports are increasing more rapidly than expected.

Location: Besides Cheshti and Khogiani, numerous other deposits with export potential have been identified. The onyx deposit in Helmand is one of the few in the world and is reputed to be of the highest quality; onyx currently sells for 3-5 times the price of marble in global markets. There is also a deposit of white onyx in Maymana. Key areas of activity for marble are Herat, Kabul, Jalalabad and Kandahar.

Recent Developments: There is much interest internationally in developing Afghanistan’s marble deposits, and a number of MOUs have or are being signed with foreign companies and marble associations (for example, in Italy and the US). Attempts have been made by international firms to buy Afghan firms and/or enter into joint ventures. A new $4.5 million processing line for both slabs and tiles has opened in Herat.

The Case for Investment: Afghanistan marble is world class. It is already competitive and is outcompeting traditional suppliers in much of Central Asia. The sector is experiencing rapid growth in exports. Productivity is increasing rapidly as more advanced technology is introduced. There are a number of unexploited deposits.

Investment Opportunities: There are opportunities to invest in the following:

Development of marble quarries, including as a joint venture. The cutting and polishing of raw marble. Export/import of marble slabs and tiles.



3 MOCI, SME Strategy, 2009


PRODUCTION OF ROLLED STEEL PRODUCTS


Sector Overview: Afghanistan uses 400,000-450,000 MT of rebar (worth $300-400 million) and 340,000-440,000 MT of beams and profile steel (worth $280-380 million). 99% of this is imported from the CIS (f.o.b. price $740-780 MT), Iran and Pakistan (f.o.b. price $650-700 MT).

Local production of these products has started in Afghanistan: the Abdurahman Baba Re-Rolling Mill of Kandahar uses scrap metal to produce 900 MT of rebar per annum. Afghan-made rebar sells for between $825 and $925 in Kandahar.

Location: Rolled steel products are used throughout Afghanistan. Production is currently located close to major industrial centers with an existing mill in Kandahar and new mills being constructed in Kabul and Herat.

Recent Developments: Increased access to power means potential investors should be able to find a suitable location for a modern, mains powered mill.

The Toulid-e-Shoeb Sobhan Re-Rolling Mill is under construction in Kabul. This facility will use billets to produce 25MT a day of rebar.

The ASMED project has provided 25% of the start-up costs to a firm in Herat to enable it to begin construction of a mill there.

The Case for Investment: Afghanistan is a large and growing market. Afghanistan has higher wages and electricity costs than Pakistan. Current and planned mills are small and partially dependent on expensive generator power. As a result, they have a higher cost of production than Pakistani mills ($826 MT v $646). However, in parts of the country, they are already competitive, because the cost to transport the product from the mill to the point of sale is much lower than the cost of shipping the product from Pakistan.

A new more modern, scale efficient mill in Afghanistan using mains power is estimated to have production costs of $670 MT. This is $24 higher than a mill in Pakistan ($646 MT), but because of an $84 difference in transport costs from Lahore to Kabul, it would have a $60 cost advantage over Lahore sourced products.

Investment Opportunities: There is an opportunity to invest in the establishment of a modern rolling mill using mains power. Given the size of the Afghan market there appears to be room for a number of mills in each regional market.




DIGITAL BROADCASTING NATIONWIDE DISTRIBUTION

NETWORK (BROADNET)


Investment Objective: The robust growth of the mobile communications market – from zero to 18 million subscribers over the past decade – illustrates the strong demand by Afghans for being connected to each other and with the rest of the world. The mobile sector has attracted US$1.5 billion in private sector investment and created over 100,000 well-paying jobs. The growth in analogue broadcasting is almost as amazing, with 45% of Afghans reporting that they have a television. However, most radio and TV content is very localized, and the main bottleneck is the lack of a nationwide distribution system. The proposed BroadNet system will utilize existing fiberoptic cable and digital microwave for the long-haul and newly-authorized digital broadcast spectrum for the last-mile connectivity to the consumer.


Budget US$25 million (Initial year, to reach six major urban centers)

Funding Status The Afghanistan Telecom Regulatory Authority (ATRA) has just commenced the preparation on an international competitive tender for one license to build, operate, maintain and own an integrated digital backbone network to serve as a national multimedia distribution system.

Summary of Progress: Afghan Ministry of Communication and Information Technology Minister Sangin announced this initiative to the Afghan Parliament in March 2012, as one of the top priorities for the next three-year ICT sector development strategy. A policy paper on the migration to digital broadcasting is being prepared and will be discussed with the Council of Ministers in July 2012. ATRA intends to issue the tender by October 2012 and to announce the winning bidder by the end of 2012. The winning bidder will be required to have the local distribution operational in Kabul within six months of licensing, then cover the five next-largest urban areas by the end of the first year of service.

BroadNet Summary of Economic and Financial Results CAPITAL INVESTMENT COSTS (in 2012 US$ Million) Total

Initial Capital Cost 25 BENEFITS: Financial & Economic Financial Economic NPV (US$ Million) - EIRR B/C Ratio

- -

19% 1.5

AFG Government Revenue (2010 US$ Million) Net Gross Annual Estimate

For further information, please contact: Ajmal Ayan, ATRA Board Member, Ministry of Communications and Information Technology, [email protected]


FINANCIAL SERVICES


Sector Overview: The long-term advancement of the private sector in Afghanistan will ultimately be linked to the parallel development of a diverse, well-regulated, and well-capitalized banking system serving a variety of institutional needs. Financial markets and institutions that meet global standards will enhance both market liquidity and credit availability.

Banking and finance is Afghanistan’s second largest service-based industry after telecommunications, and the sector has grown rapidly since 2002. Seventeen commercial banks currently operate in Afghanistan, with total assets of $4 billion (compared to assets of less than $300 million in 2004). However, the primary business focus is almost exclusively on retail banking services or at best short-term (less than one year) lending to smaller businesses. The availability of basic international banking services to move money or support trade letters of credit is inadequate.

Location: While every province has access to at least one limited service branch, the envisioned institutional investment opportunities are initially Kabul-based.

Recent Developments: Da Afghanistan Bank (DAB), the Central Bank, has made significant strides in strategic planning and monetary policy management fostering price stability – particularly important for private sector growth. DAB has established a Credit Information Bureau (CIB), with regulations and reporting procedures. The supporting legal framework related to commercial law has improved. The rapid growth of the sector, however, revealed supervisory and regulatory gaps that had not kept pace and the Kabul Bank crisis became the vehicle by which those gaps became evident – damping growth of the sector. This chapter is now coming to a close with legal prosecutions and asset recovery well under way. All banks have been thoroughly audited and any corrective measures instituted. A national strategy to combat economic crimes has been incorporated into Afghanistan’s National Priority Programs.

The Case for Investment: There is little current appetite or process capacity for the provision of start-up or growth capital to the private sector, let alone longer-term infrastructure and industrial development project finance. The Government is fully cognizant of the critical role that institutional lending and capital markets development will play in the success of private sector growth in Afghanistan. While the coming decade will not be a simple risk evaluation proposition, mechanisms can be structured to mitigate those risks and maximize financial sector reward opportunities.

Investment Opportunities: De novo establishment of commercial banks focused on institutional lending and services; acquisition of existing institutions, such as the privatization intent later this year of the New Kabul Bank; or partnering with existing Afghan institutions to expand institutional product and service offerings responsive to the needs of the business community. The Insurance sub-sector within Financial Services is also a growth area that could additionally and ultimately serve – as it does in many other markets – as a significant source of medium-to-long-term investment capital.

For further information, please contact: +93 (0)20 210 4146, [email protected]


PUBLIC-PRIVATE PARTNERSHIPS FOR REGIONAL

HOSPITALS


Why Invest in Afghanistan’s Health Sector? Health Sector: The health sector remains poised for growth with increased healthcare demands. The Asian Development Bank estimates that, from 2001-2008, the supply of hospital beds in Afghanistan has remained constant at less than 1 bed per 1000 people, one of the lowest ratios in the world. It is estimated that Afghans spend $90 million per year seeking healthcare in short supply within the country. The Ministry of Public Health (MoPH) is engaging international donors and Public Private Partnerships (PPP). With nearly twenty hospitals complete or under development, MoPH is poised to harness private investments to maximize the value generated.

Hospital PPPs: MoPH is currently developing the internal capacity to initiate and manage these partnerships. In the near future, MoPH will open a competitive process to private investors. The hospitals are expected to be modern facilities developed, accredited, and managed using international best practices. In particular, Afghanistan offers the following opportunities.

1. SHEIKH ZAYED MOTHER & CHILD HOSPITAL

Investment Objective: A significant investment opportunity for private investors, the Sheikh Zayed 100-bed Ob/Gyn hospital, located in Kabul city, aimed to provide quality tertiary health services. The core services in this hospital will include maternity health services, pediatric health services, social services, academic and research, diagnostic services and other auxiliary services, such as blood banks, ambulance service, mortuary etc. Sheikh Zayed 100-bed Ob/Gyn hospital, located in District #15 of Kabul city, was constructed through a $4 million donation by the UAE. The construction work of the hospital ended in 2011, and it is ready to operate as a public-private partnership.

2. JALALABAD KIDNEY TREATMENT CENTRE.

Investment Objective: An attractive investment opportunity for private investors is the Jalalabad 100-bed Kidney Hospital. Kidney diseases have a very high ratio in Afghanistan, and this hospital is aimed to provide high quality treatment of kidney diseases. Afghanistan has the highest rate of kidney disease in the world at 61.43 per 1,000 population. Followed in Asia by Cambodia at 31.86/1,000 (at number 20 in the world) and Thailand at 29.45/1,000 (at number 27 in the world). Patients who can afford treatment go to Iran, India, Pakistan at enormous cost. Donor transplant legislation will be necessary before this centre commences. Jalalabad’s 100-bed Kidney Hospital, located in Jalalabad city in Eastern Afghanistan, was constructed through a $25 million donation by the Islamic Republic of Pakistan. The construction work of the hospital ended in 2011 and is ready to be operated as a public-private partnership hospital.

3. NAYEB AMINULLAH KHAN HOSPITAL

Investment Objective: An investment opportunity for private investors, the Nayeb Aminullah Khan 200-bed general hospital located in Logar province is aimed to provide quality secondary and tertiary health services to the population of Logar province, as well as the neighboring provinces in southeast Afghanistan. Nayeb Aminullah Khan 200-bed general hospital, located in Logar province, is being constructed through a $26 million donation by the Islamic Republic of Pakistan. The construction work of the hospital is scheduled to end in mid-2012, and it will be operational shortly as a public-private partnership hospital.

For further information, please contact: Dr. Shafi Saadat- Ministry of Public Health, [email protected], +93 700-036-371


KABUL NEW CITY - BRINGING STRONG SOCIO-ECONOMIC CHANGE IN AFGHANISTAN


Implementation and Operation of Kabul New City as an Excellent Business Development Opportunity

In partnership with the Government of Afghanistan, the private sector as an efficient service provider will have the key role in the economic development of Afghanistan. Access to clean and sufficient land, access to infrastructure and public facilities, provision of pre-prepared city development plans, guidelines, standards, and business plans (in accordance with up-to-date scientific knowledge and technologies) are the measures utilized by the Government of Afghanistan to enable national and international businesses to undertake secure, efficient, and profitable investments in the development of Afghanistan’s capital city.

The current population of Kabul is estimated to be well above four million people. It is expected that, by 2025, Kabul’s population will rise to around 7-8 million people. In 2006, the Afghan Government initiated development planning of a new city in the immediate north of the existing capital. An independent board, consisting of relevant government agencies, private sector and urban development specialists, was formed. The Board established the Dehsabz-Barikab City Development Authority (DCDA) as its executive body, and it is supported by the international community. The DCDA has developed a Master Plan for greater Kabul that includes both existing Kabul city and Dehsabz-Barikab City as the future new Kabul city capital.

The City Development Process

Realistic approaches towards planning and development of any city requires accurate research and careful study. Likewise, planning and development of the Kabul New City acquires great effort and endurance by all involved stakeholders. The city’s concept design, initial feasibility studies, and technical and economic assessments were completed under the leadership of the Kabul New City Board by the French Company of Architecture-Studio and its European partners. The Master Plan was completed in early 2009 with the technical and financial support of Japan International Cooperation Agency (JICA). The Structure Plan for Phase-1, which will cover around 5000 hectare of land and around 80,000 homes for approximately a population of 400,000, includes recently approved commercial, industrial, and recreational areas.. The procurement process for development of Parcel 1, Phase 1 of Kabul New City is in progress. The Structure Plan will serve as the signature kick-off project for the implementation of the Kabul New City project.

In accordance with the Master Plan, Kabul New City, with an area of approximately 438km², is envisaged to accommodate in Step 1 some 1.5 million inhabitants through 250.000,00 housing units by 2025 and create more than 500.000,00 employment opportunities. The realization of each phase of the master plan provides a unique opportunity for investment and growth. Step 2 of the Master Plan’s implementation will accommodate another 1.5 million inhabitants.

For further information, please contact: Gholam Sachi Hassanzadah, Dehsabz City Development Authority, [email protected], +93 799-279121

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