Proposed Theory for the Economic Growth of Afghanistan

The Problem

Afghanistan’s economy is primarily an agriculture-based economy with most of its population being occupied in agriculture(a sign of an underdeveloped economy).

Historically Afghanistan’s economy was rather a prospering economy due to it being a doorway between ancient India and ancient Persia, in modern times, the economy of Afghanistan saw some development in times King Amanullah Khan and Sardar Daud Khan.

Afghanistan’s main exports are agricultural products and Gemstones, and main imports are machinery and textiles, such exports and imports are a sign of an underdeveloped country.

Afghanistan is rich in natural untapped resources, having been called the Saudi Arabia of Lithium(19), and many other semi-precious and rare earth minerals, these being discovered, Afghanistan is probably home to many many undiscovered natural resources.

Economic projects such as the Helmand valley authority, TAPI, CASA and a less successful agricultural reform are among some of the big economic plans implemented in Afghanistan, thus showing that Afghanistan has a severe need for multiple economic plans to be implemented.

Afghanistan has great potential for tourism due to its vast historical sites and artifacts.

Afghanistan’s economy has been in crisis mode since the Saur revolution and is among the least developed countries

• Currently 178^th by nominal GDP
•  GDP per capita of less the 600 dollars
•  GDP growth at less than 3%
•  The import-export deficit of more than 5 billion dollars.
• The budget deficit is more 100%
• Afghanistan is 146th in the production of electricity (1)(28)
• Corruption and Security situation remains the biggest challenges to the economy

That all said, the biggest challenge in Afghanistan’s economy is finding a sustainable, stable and capable source of growth.

The Situation

The current global economy is dominated by multinational companies, the reason more than 50% of the world’s money rests in less than one percent of the population is because of these companies, I would like to give a few examples

• Samsung currently accounts for almost 20% of S.Korea’s entire market value and more than 15% of the entire economy. (2)
• Apple is worth more than 1 trillion US dollars and would be the 16 richest countries if it was a country. (3)
• Recent companies such as Xiaomi which was only made in 2010, currently has a yearly revenue of 26 billion US dollars which is almost equal to the government budget of Pakistan, 65% of the company’s revenue is from mobile phones. (3)
• People like Bill Gates and Jeff Bezos are worth almost three times  Afghanistan GDP.

More than half of Netherlands GDP comes from Royal Dutch Shell (23), its economy basically consists of big companies such as Shell, ING group of Banks, Philips, Unilever and many others, it’s interesting because almost all of these companies rely on foreign markets rather than the internal market due to the small population, although Netherland has almost 25% of Europe’s natural gas resources, Shell’s revenue comes mostly from doing its trading in other countries, same goes for its multinational banking companies and others, meaning although they lack in resources and population yet still the Netherlands is the 16th biggest economy (nominal GDP) in the world.

Israel’s economy is noteworthy, despite having no resources except the recently discovered diamond deposits it’s the second most developed country in the middle east next to Qatar which has enormous reserves of Oil, Israel, with 82% of its workforce occupied in services, it currently has the second-largest amount of startup companies after the US (4) and 3^rd in the world for the most NASDAQ listed companies after the US and China. (5)

The Solution

Objective: To find a sustainable source of economic growth in the form of revenue from enterprises and companies in different sectors of the economy

Step by Step Solution

1. Create an independent organization similar to the Kankor examination, that despite being governmental is completely independent.
2. A special budget of anywhere between 100 million dollars or higher should be separated.
3. Leadership should be given to someone who is passionate and truly bot corrupt or belonging to any fraction
4. The function of this organization would be to create enterprises and companies imitating sector leaders in different parts of the industry.
5. Multiple companies should be made in each sector of the industry.
6. The funding and revenue would belong to the organization but the government would have no direct involvement neither should it try to establish an illegal monopoly, hence boosting competition in the local market.
7. The examples of different sectors where these companies can be made are given below:

• Retail stores:   

Walmart (13), currently with a workforce of 2.3 million and yearly revenue of more than 500 billion US dollars, is a chain of hypermarkets, such hypermarkets have a greater chance of success due to the success of many small superstores in different provinces of Afghanistan, These hypermarkets should be made in the 5 main provinces and are sure to be successful if it accompanies the right marketing tactics.

• Advertising: This would probably be the most important sector as the success of all the other proposed companies would tie to capability and competency of this company, although its direct profitability for producing a profit would be difficult to see in its early times, but its indirect impact would be greatest among these all sectors, marketing tactics and employees of these companies should be of highest capability and experience brought to Afghanistan from countries such as India or the US.(6)(7)(14)

• Electronics: examples are Xiaomi (3) and Huawei, note that I haven’t mentioned companies such as Apple or Samsung or even Microsoft as the reason for their success was a new game-changing invention and that their success has taken multiple decades however companies such As Xiaomi and one plus have only taken 9 years to get to the top.

The Main electronic device would be Mobile Phones, Tablets and Computers, if possible made in Afghanistan, if not assembled in Afghanistan, other electronic devices such as televisions and other home appliances or entertainment use electronics and other electronic devices should be produced which require light industry but are either absent in Afghanistan or not organized enough to be considered a player in the market.

• Oil and petroleum industry: although there are many petrol pumps and oil transporters in the country however a lack of a central and organized brand is the reason the success and expansion of such small-time oil providers are considered next to none, as an example: although it may be because of Pakistan’s huge population (the profit may be lower because of the military interventions and corruption as a whole) but the Pakistan State Oil is the only Pakistani company that sits in the Forbes global 2000 (15). A central and an organized petroleum and oil provider would quickly fill the empty market of Afghanistan and if properly expanded to neighboring and other countries could be a great success, the model and example would be Royal Dutch Shell because Shell’s main business market is outside its origin country, hence would make a good model for Oil and petroleum company.

• Restaurant chains: restaurant chains such as McDonald’s have a net worth of almost 105 billion dollars.

• Banking: the lack of a trusted and capable banking still exists in Afghanistan, with the failure rate for international newly made banks low and the capital which is easily raised this would be a profitable endeavor after the Kabul Bank incident many are yet to trust the Afghan banking sector, such mindset can be changed by the use of proper marketing tactics and expansion to international markets copying firms such as ING group of the Netherlands. (16)

• Security firms: in order to protect the private and government business endeavors and till the time that the Afghan military is completely capable to protect all, (promoting the capability of the Afghan military is another proposed idea which I could explain if given a chance).

• Transportation: both public transportation and transportation of objects and items. Companies such as uber are quite successful in other countries, with a growing number of internet users and also quickly spreading it to other and more demanding markets would be a key for its success, such companies could be pivotal for even the establishment.

• Construction Companies: Most of the construction companies in Afghanistan are run by frauds, and most of their products are damaged creating several of such companies following the example of the China state Construction company would absolute necessary.

• Delivery and postal services: the model would be FedEx which has an annual revenue of 65 billion US dollars, such an organized and international company if made is sure to be successful.

• Media and entertainment: examples are Walt Disney and Aljazeera:

•   TV channel: the lack of a quality TV channel is something that should be fixed the only TV channel that earns all of its budgets by itself and doesn’t require foreign help is Tolo(18), but due to its polarizing ideas, the need for a proper and quality channel is seen dearly.

•   TV serial and Movies: something that has been present in the foreign for a long time such 21st-century fox and other entertainment corporations, a lack of such companies is the reason Afghan culture is being infiltrated with Indian and Turkish cultures, such endeavors if executed correctly would result in turning Afghanistan into a cultural hub.

•   Radio: rural areas mostly only have access to Radio, so focusing on this would be quite important.

•   Other entertainment: Parks, Toys and many more, an empty market for these should be the reason for its success.

• Telecommunication: although present in Afghanistan yet the lack of quality should make this endeavor successful, foreign companies such as AT&T have a worth of over 200 billion US dollars, that alone should be considered.

• Food products: companies such as Nestle with a revenue of 92 billion US dollar and PepsiCo with a revenue of 60 billion US dollars should give as a good idea on the profitability of this sector the biggest source of revenue for these companies were nutrition, beverages, soft drinks, energy drinks, and refined oil, as per demand and supply rule should also boost and update the old tactics of agriculture in Afghanistan.

• Clothing and Fashion brands: I’m not mentioning the textile industry instead I’m mentioning brands such as Gucci, Versace many others if the correct marketing tactics are used can result in great profits, clothing, shoes, bags, watches, jewelry and much other clothing and fashion items with the correct branding will not only be profitable in Afghanistan but also in other markets.

• Solar Panel and wind turbines: Hydropower requires a lot of base funding due to each turbine being very expensive and oil and coal are extremely expensive, at the moment wind and solar-based electricity are cheaper than their coal and oil-based counterpart, Also since Afghanistan has huge reserves of Lithium (19), the fundamental item used in Solar panels, this business should be a great success, Afghanistan is said to have a greater capacity for Solar energy than both Pakistan and India and also Parwan and Herat have a capacity of more than 30000 megawatt of wind-based electricity due to its organized and heavy wind. (20)

• Education: schools such as Afghan Turk are considered to the best among all Afghan schools the lack of an alternative has led to its dominance and high fees if given time a well systemic alternative can be made that is not only profitable but provides Afghanistan with an educated young generation.

• Universities: although there is a chance that it wouldn’t be profitable in the short term, its effectiveness, in the long run, would be of immense proportion, instead of sending our students to foreign countries we could import qualified teachers and set an established University here, AUAF is an example where now the teachers are mostly Afghans and would stand to be an example for newly made universities if possible deals with other universities to open their branches in Afghanistan would be of great benefits, such Universities would not only be of importance in the public sector but of grave importance in the military sector, where the scholarships have great disadvantages and are dangerous on the premise of the student becoming puppets for the country sent to, such organized Universities with proper Faculty preferably foreign well qualified would help Afghanistan in every way possible, which would help the economy in its own turn.

• Hospitals: recently India had a deal with the royal college of surgeons and physicians of the UK, in which hospitals with a qualified staff were set up in parts of India, where the doctors would give the PLAB exam which is mandatory to practice and do a fellowship in the UK, after the exam instead of going to the UK they would train in these hospitals and would get the certification from the UK’s Royal college and would be able to practice medicine in the UK (21) if such an example is followed in Afghanistan, the outflow of over 500 million dollars could certainly be reduced.

• Internet services: although it may not seem to be profitable, internet services such as Spotify are worth more than countries such as Mauritius, although Afghanistan lacks the qualified people to make such services by imitating the big companies with foreign-trained staff these imitations would be successful to some extent the following company models should be copied

These companies would have a rather smaller market in Afghanistan but would be a source for profit if expanded to international markets.

• Amazon: among the 4 giants of the internet world, consists of E-commerce, which although present in Afghanistan is not marketed or developed enough, the integration of these to the retail department would result in fewer expenditures.

• Search engines.
• Pay-pal: online payment is on the rise snd there is a complete lack of such a service in Afghanistan.
• Video services such as Youtube, Netflix, daily motion
• Social networking
• Messengers
• Travel
• Email services

In all these mentioned sectors the government should form a company that is organized and all these products are coordinated by competent leadership, the benefit of such would be that these products in whatever form would be organized and the goal of the government which is expansion would be easy to implement.

Such imitation or copying of global companies will have another advantage and that is the reduced amount of spending on research.

The need for expansion is almost absolute, Afghanistan has a rather small market, hence if these companies are not quickly yet timely expanded are not certain to make a big profit, expanding companies would make sure these companies are not stricken by war or other situations.

Afghanistan’s resources are yet bot accessible and the market small, expanding businesses to neighboring markets is the only choice, internationally most companies or at least many have their foreign markets as their source of revenue such Shell(24) and One Plus(25), and this is one more reason this plan will help Afghanistan’s economy.

• The production of Quality material and the use of modern and focused and effective modern marketing tactics which is yet to be seen in Afghanistan would results in the overtake of national markets.
• Due to Afghanistan’s small and rather weak market, these enterprises should quickly expand to nearby sizable markets such as Central Asia, India, Middle East and China.
• If industry required for such enterprises are not available, the Chinese industry can be used, similar to how it was used by Indian and Pakistani companies such as Micromax and as the economy and industry progress, there would come a time when there won’t be a need.
• These companies will lack the Technical staff required, hence the key technical staff should be imported, each having experience in the sector they will be employed, some staff such as the CEO would demand a high salary, which should be compensated by some shares may be under conditions such as no inheritance or selling to foreigners in the company which might also make them more motivated to work more efficiently.
• The success of all these brands and companies would depend primarily on these three things:
• Quality
• Marketing
• Expansion

If these 3 things are respected, then Afghanistan’s economy will grow at an unprecedented rate.

Afghanistan is considered to be an open market economy as such was tried to be implied by the Karzai administration, the Idea mentioned above, from a far view would seem to contradict that and one might think it would be the butchery of laissez-faire, although mentioned before, I would like to mention again it would not be a violation of laissez-faire because these proposed companies are meant to be treated private, although the government would detain stocks so one could argue over it. Personally, if something could boost the economy as the proposed theory can, I don’t think laissez-faire or any other model should be of importance, even if they are of importance, we have the example of the German state buying stocks in the national companies to prevent them by being bought by the Chinese(22).

This plan would create an economy that is neither damaged by wars or the enormous uneducated population and if correctly implemented would give the government an enormous amount of surplus budget, which could be used in fixing all problems of the state thus guiding Afghanistan to becoming a developed country.

Challenges and Obstacles: The biggest challenge this plan will face is corruption and security

Corruption: To make sure this endeavor would be safe from corruption some steps should be taken:

• As mentioned before, a separate branch of the government should be formed, similar to the Kankor examination organization; thus making sure no interference from officials and others happens
• The leadership of this branch should be given to someone trustable and someone devoted
• The help of intelligence agencies should also be put to use

Security:

• All security problems should be assisted by the military. ( Different Plan)

Consider if even one of these companies, such as the restaurant chain makes 100th the revenue McDonald makes, it would give Afghanistan a sustainable and capable source of economic growth, let alone of multiple of these companies would become profitable, it would do wonders for the Afghan economy.

Answering Doubts and Questions:

1. What makes you sure these government made companies will succeed?

Ans: The reason that I am quite sure that the companies would be a success is because of examples we have,  Pakistan’s phone brand Qmobile, with that of bigger but almost a similar market regarding the status to Afghanistan, which although its growth was pushed back due to its alleged illegal importing of devices, yet still has an estimated revenue of 500 million dollars, its success was mentioned in the news outlet The Nation(10), quoted “marketing strategy of Qmobile is the reason behind its success”, Another example could be seen in the success of the Chinese company One Plus which due to its unique marketing strategy is among the top mobile device provider along with companies such as Apple and Samsung.

Local examples are the brand Alokozai, especially its soft drinks brand due to its local production, cheaper and due to the use of extra marketing, it has become the most consumed soft drinks/beverage in the country.

• Where will you find the staff to run these companies?

Ans: Finding staff with experience in this field would be difficult to find locally, key technical staff should be brought from foreign countries with experience in the sector they will be employed and when and where Afghans are capable, they would lead the company

• The companies you named have huge spending, we don’t have that much money?

Ans: most of these companies I proposed will be treated like startups, that don’t require that much money to start. A Hypermarket with all resources would cost a maximum of 1 million dollars(26), an electronics company would cost up to (27) and banks would require even less.

• Public enterprises are usually a failure, why won’t this be?

Ans: Because this isn’t a public enterprise, the only thing governmental is the funding and that’s it, CEO’s, staff and the whole organization would be independent of any kind of government intervention, CEO or other key staff might be given some shares so they would be motivated to make the company more profitable.

• Wouldn’t this contradict Capitalism?

Ans: The basic answer would be no because once again the government would only be the funder and secondly even if that does happen, why should it matter? Germany recently bought shares in their own companies to make sure they stay in the country.

• We don’t have access to the resources for these companies, how can they succeed?

Ans: Resources are of less importance, most developed nations have almost no resources (eg South Korea) and secondly most of these examples that I have given don’t require resources all such as a hypermarket chain or a banking sector.

• Afghanistan doesn’t have a market large enough to make all these companies so profitable?

Ans: That is the reason I keep mentioning expansion, companies like Shell, OnePlus and most of the international companies have international and foreign markets as their biggest source of revenue(24)(25).

Note:

In the end I would like to state that the success of each of these companies in interweaved with one another, for example, if retail services are successful, then the online service or E-commerce would also be successful, and so on.

Conclusion:

The implementation of such a plan where companies and enterprises, imitating international companies in different sectors of the economy, are made and expanded is surely to boost the economic growth to such a level where they need for foreign aid would not be needed and Afghanistan would be out of poverty and the status of being an underdeveloped country.

Consider if even one of these companies, such as the restaurant chain makes 100th the revenue McDonald makes, it would give Afghanistan a sustainable and capable source of economic growth, let alone of multiple of these companies would become profitable, it would do wonders for the Afghan economy.

References

1. https://www.worldbank.org/en/country/afghanistan/overview
2. https://money.cnn.com/2017/02/17/technology/samsung-south-korea-daily-life/index.html
3. https://globalnews.ca/news/4367056/apple-1-trillion-market-cap/
4. https://en.m.wikipedia.org/wiki/Xiaomi
5. https://seekingalpha.com/article/4151094-israel-became-startup-nation-3rd-companies-nasdaq
6. http://www.list.goodinformationabout.com/money/israel-nasdaq-companies/
7. https://www.smartling.com/resources/blog/what-can-we-learn-from-coca-cola’s-global-marketing-success/
8. https://www.paladinstaff.com/blog/marketing/7-reasons-marketing-is-the-heart-of-business-success/
9. https://biv.com/article/2018/10/international-expansion-key-lululemon-success
10. https://www.entrepreneur.com/article/252190
11. https://nation.com.pk/07-Dec-2014/success-story-of-qmobile
12. https://www.incpak.com/tech/micromax-qmobile-same/
13. https://en.m.wikipedia.org/wiki/Big_push_model
14. https://www.geekwire.com/2019/walmart-posts-514b-revenue-year-plans-double-grocery-pickup-delivery/
15. https://digitalmarketinginstitute.com/blog/which-countries-have-the-most-demand-for-digital-marketers/
16. https://www.forbes.com/companies/pakistan-state-oil/
17. https://iwaweb.org/wp-content/uploads/2014/12/Kabul-Bank-policy-brief-august-2015-%C3%99%E2%80%98Final-and-approved-English.pdf
18. https://books.google.com.af/books?id=x6oxDQAAQBAJ&pg=PA64&lpg=PA64&dq=tolo+tv+only+profitable&source=bl&ots=dBj_y8v_Xu&sig=ACfU3U3u7YhEHb_n9l35pECNRQmq2_VL_g&hl=en&sa=X&ved=2ahUKEwi2oe3dosvjAhUMohQKHV7gBZQQ6AEwBHoECAoQAQ#v=onepage&q=tolo%20tv%20only%20profitable&f=false
19. https://m.huffpost.com/us/entry/us_622414?test_ad=readmo_test&guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAKybSLHloToJc6SQh_Hz2djI3y4uqg3ZgBsog-FNIj4yVpuY0zs1Ph8ILm5_MImKQh0Wmbl5-mzhjeeNWXY5GwWJOt75wWyBrGMZp70rodfFLx_CwBYXiuGawCLk8baUScCkV1B0jD4JuFKiwWeR3NSrQPtmdVjskMU-tpE4Invu
20. https://www.smart-energy.com/renewable-energy/adb-aids-afghanistan-to-pursue-220000mw-of-potential-solar/
21. https://www.thehindu.com/news/cities/Coimbatore/Royal-College-of-Surgeons-plans-FRCS-course-in-India/article16302887.ece
22. https://www.reuters.com/article/us-germany-industry-idUSKCN1PU11D

23.https://en.m.wikipedia.org/wiki/Royal_Dutch_Shell

24. https://www.statista.com/statistics/279424/royal-dutch-shells-revenue-by-region/

25.https://www.google.com/amp/s/m.economictimes.com/news/company/corporate-trends/oneplus-wants-to-make-more-in-india/amp_articleshow/62922704.cms

26.https://www.reddit.com/r/theydidthemath/comments/35zkf1/request_how_much_does_everything_inside_a/

27. https://www.quora.com/Id-like-to-start-a-smartphone-company-Where-do-I-start-and-how-much-would-it-cost-me

28. https://www.worldbank.org/en/country/afghanistan/overview