Guidance

Doing business in Afghanistan: trade and export guide

Updated 1 March 2021

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This publication is available at https://www.gov.uk/government/publications/exporting-to-afghanistan/doing-business-in-afghanistan-afghanistan-trade-and-export-guide

Managing risk

Find out how UK companies can control risks when doing business in Afghanistan.

Export opportunities and advice

Find more export advice and explore opportunities overseas on great.gov.uk.

1. Afghanistan export overview

Early indications are that support for the economy and increasing trade and investment will be priorities for the Afghanistan government.

Afghanistan is a challenging export market best suited for companies used to managing risks and handling difficult security environments. Corruption is widespread and the bureaucracy is a challenge. Despite this there are some 100 UK companies that either export goods or services and or are based in Afghanistan. UK strength is in the provision of services - legal, advisory, security, re-insurance, risk management and consultancy services to key Afghan government ministries often funded by international donors or direct to international donors. Amongst European countries the UK is the main trading partner with Afghanistan after Germany who has the lion share when it comes to exporting goods.

Before starting any export related business in Afghanistan please contact: Director, DBT Afghanistan simon.williams@fcdo.gov.uk for more information or call on <00971 505523199>

Contact a Department for Business and Trade (DBT) Afghanistan export adviser for a free consultation if you are interested in exporting to Afghanistan.

2. Challenges doing business in Afghanistan

There are some unique challenges when doing business in Afghanistan. These include:

  • Terrorism and kidnapping threats
  • Afghanistan is ranked very low in the World Bank’s Ease of Doing Business index
  • Bureaucracy
  • Weak infrastructure
  • Legal system lacks experience in dealing with complex commercial issues
  • Lack of experience in project development/management and in dealing with Western companies
  • Corruption is a major problem with Afghanistan ranking very low on Transparency International’s Corruption Perceptions Index

You should ensure you take the necessary steps to comply with the requirements of the UK Bribery Act.

3. Growth potential

3.1 Economic growth

The Afghan economy remains heavily dependent on foreign aid. In 2018, estimates suggest that 80% of public expenditure was provided for by foreign grants. Government spending is equal to around 58 percent of GDP, with most expenditure being on security.

The aim is that it should become self-sufficient and private sector led over the next decade.

The impact of COVID-19 is expected to reduce the Afghan economy by between 5.5 percent and 7.4 percent in 2020. Even without COVID-19, economic growth was weak in Afghanistan. Increased political uncertainty and a rise in conflict has meant that over the last three years Afghanistan’s economic growth averaged just 2.3 percent.

The World Bank currently forecasts Gross Domestic Product (GDP) growth of 2.5% in Afghanistan for 2015. Growth could reach 5% in the medium term, but that is dependent on improved stability and delivery of important reforms.

4. UK and Afghanistan trade

The UK exports to Afghanistan amounted to £328m in 2019.

The UK exported services worth £248 million to Afghanistan in 2019.

Top UK goods exports included:

  • Power generation machinery
  • Electrical and electronic equipment
  • Vehicles
  • Meat, cereals, fish
  • Opto photo, technical, medical etc apparatus
  • Pharmaceutical and medical products

5. Opportunities for UK businesses in Afghanistan

DBT provides free international export sales leads from its worldwide network. Search for export opportunities.

5.1 Aid funded projects

Aid funded business projects will continue in Afghanistan for the foreseeable future. These will create opportunities for UK consultants with experience in working in conflict zones and expertise in:

  • Education
  • Healthcare
  • Supporting infrastructure development
  • Governmental capacity development

Identify opportunities to supply products and services to the international aid agencies. Contact DBT’s Aid Funded Business Service for more information.

5.2 Mining

The Afghan government is in the process of amending the Minerals Law to make the mining sector more attractive to foreign investment. Several domestic mining companies already have active operations in fluorite, talc, coal, marble and other industrial minerals. Afghanistan is also a large producer of precious and semi-precious stones, but this sub-sector remains largely informal. In September 2020, the Government of Afghanistan and Australia’s Fortescue Future Industries signed Deeds of Agreement to undertake studies for the development of hydropower and geothermal projects for green industries, as well as studies across a range of mineral resources.

Opportunities for UK companies include:

  • Early stage exploration support services
  • Consultancy
  • Equipment

5.3 Oil and gas

Oil production work has started recently in northern Afghanistan. Further exploration work is due to start over the next few months and an additional major tender may be awarded soon.

There will be opportunities for UK companies to export mining, and oil and gas services and equipment to Afghanistan.

5.4 Security

The security sector continues to have high demand for products and services. There are many opportunities for UK companies in the sector.

Contact Export Control Organisation (ECO) to check your goods you are meeting legal requirements for export.

5.5 Infrastructure

As they seek to diversify, Afghan businesses are likely to begin investing in some new projects, such as property or retail or city development. There are numerous PPP projects in Afghanistan, some financially and technically supported by international donors. A key opportunity is the proposed PPP upgrade to Hamad Khazai International Airport which will include a new terminal, cargo sheds, export processing zone and 4 star hotel.

6. Start-up considerations

You can enter the market by:

  • Exporting directly from the UK, or via Dubai or Pakistan
  • Setting up an agency
  • Appointing a distributor
  • Franchising

In all cases you should take care when choosing a local Afghan partner and undertake due diligence including referring to: Director, DBT Afghanistan simon.williams@fcdo.gov.uk for help to identify partners who can also make relevant personal introductions to key reliable Afghan banks, law firms and Afghan company with a UK partner who provide a range of back office functions to international companies (visas, customs clearances, HR, pay role, audit, tax functions). Advice can also be offered on secure compounds and security companies who operate in Kabul but it is for the UK company to make their choice.

You should seek legal and taxation advice before entering a joint venture or similar type of partnership with a local company in Afghanistan. Rules and regulations are challenging and open to misinterpretation by UK companies and Afghan government officials who can be tasked to raise revenue.

7.1 Standards and technical regulations

Afghanistan currently has no laws or regulations governing labelling and marketing requirements for products.

7.2 Intellectual Property (IP)

Intellectual property protection is a very new area for the courts in Afghanistan. Afghanistan is a member of the World Intellectual Property Organization (WIPO) and has some intellectual property laws. Local companies have used these laws, but there are few cases yet showing use by foreign companies.

8. Tax and customs considerations

8.1 Corporate taxation

The corporate tax rate in Afghanistan is 20%.

8.2 Customs duties

Afghanistan’s tariff is based on the Harmonised tariff System.

Afghanistan maintains the lowest import tariffs in the region. Tariff duties range from 2.5% to 20%. The Afghanistan Customs website provides more information on tariffs and procedures.

You can find more about import tariffs in the Market Access Database.

9. Business behaviour

English is understood by many, but not all Afghan business people.

Afghanistan is an Islamic State. You should therefore respect Muslim customs. Women are expected to dress conservatively and have a scarf draped on the shoulders when attending meetings. Western attire is acceptable.

Pork is banned in the country. Alcohol is officially banned for Afghans, but overseas visitors can buy alcohol at some leading hotels. This can only be consumed on the premises.

Muslims observe the month of Ramadan. You should not plan a business trip during this month.

9.1 Entry requirements

You need a visa before you travel to Afghanistan.

Work visas are required for all expatriate individuals working in Afghanistan and can be applied for once a company is registered in Afghanistan.

9.2 Travel Advice

If you’re travelling to Afghanistan for business, check the Foreign and Commonwealth and Development Office (FCDO) travel advice beforehand.

10. Contacts

For help in doing business in Afghanistan, contact our regional international support team at ditmeap.enquiries@fcdo.gov.uk.

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