Afghanistan, especially its market, has suffered from many negative consequences such as internal disorders, long wars, corruption and others, caused by mismanagement of diversity, low levels of education, and political acrimony among different groups. The purpose of this article is to create awareness about Afghanistan’s market for businesses and external investors starting from their culture up to conditions for entrepreneurial activities. It aims to present the main problems and challenges in Afghanistan that damaged its market and made Afghan market less efficient and less attractive for businesses and investors. Nevertheless, this article aims to highlight opportunities and prospects for businesses and solutions to the mentioned issues, that should be done by policymakers, leaders and variety population that consist of different individuals from different ethnic group, which lead to forming better business environment in the market. Design and methodology of the article is a literature review paper. It covers prospects, risks and threats for entrepreneurship and business in Afghanistan based on findings from the literature. Paper type is a Review Article.
In present time, businesses are developing in a global manner by expanding business environment worldwide, especially international businesses that always try to observe foreign nations’ markets to increase its capacity, scale and profit by adopting its business in that countries. Different transnational corporations, governments and investors aim different markets as potential for business. One multinational corporation such as McDonalds, for example, may choose Tajikistan to expand its business activities or an investor can invest his or her financial funds to business projects in Brazil or Denmark. It can be said that there are a lot of countries suitable for businesses. At the same time Afghanistan also can be seen as potential business market. At first glance it seems irrational decision making to set up business in Afghanistan, but that is not exactly true. Afghan market, like any other, has a risk but higher than others’ and it can be accepted as opportunities for businesses. Today’s Afghanistan is more adoptable for businesses compared to its past. Let’s look through the historical patterns of this country’s business perspectives. Deeply understanding the main factors and features of Afghanistan can lead to see it as potential business market. In the beginning it is needed to observe culture of the nation that is low on individualism which means that they are more collective culture and obviously high on masculinity. Diversity that caused by stereotypes and misinformation also should be considered due to it brings conflicts among different ethnic groups. Effective management of diversity, that can be reached through educational programs, can leads to positive synergy, otherwise negative synergy may appear. In addition, there are three main challenges that Afghanistan faces, they are: mismanagement of diversity; low level of education; and conflicts between different ethnic groups. That is why present government officials do their best to reach inclusive culture where everyone is treated fairly and there is transparency to solve another major problem that is corruption. Moreover, Afghanistan should not be isolated from other countries, it should work interdependent with other nations in order to create fair work culture for businesses. In terms of geographical location Afghanistan is in inefficient and very disadvantage position because it is considered double landlocked country which means that it has no access to sea, so it is not able to trade in global and regional level easily. There is no sea around but there are neighbour countries and in order to have good relationships with neighbours it should has a culture with high consciousness (Mujtaba, 2019). Answer to the question why is it needed to have a well and close relationships with neighbour countries is that because they can provide with goods and services, that are on demand but are not produced there, through trade with the lowest possible cost. Consider the example of Uzbekistan that is close to Afghanistan not only in geographical location, but even in interstate relations. Uzbekistan sees the Afghanistan’s market as attractive and necessary for export activities. Due to this reason, Uzbek government makes completely new dynamic character of Uzbek-Afghan relations (Press service of the Chamber of Commerce and Industry of the Republic of Uzbekistan, 2018). In this article it is provided all relevant risks for businesses starting from long wars inside of the country and internal disorders to adverse security conditions and high level of corruption. Also provided with prospects of entrepreneurial activities that were found out in survey where participated Afghan entrepreneurs. Also illustrated critical perception of why education is vital for Afghanistan based on historical events of the country. In addition, it provides a rebuilding process of Afghanistan after 9/11 events, in other word after fall of the Taliban regime that was started in 1996. Another risks include crime, as one afghan entrepreneur said: “You can be robbed anytime” (Muhammad et al., 2011, p. 10). However, at the same time Afghanistan has opportunities for businesses and to illustrate these opportunities and other factors such as strengths, weaknesses and threats, in the article will be SWOT analysis. In literature point of this article will be discussed the consequences of poor economic structure and threats for businesses, according to survey, such as security, shortage of capital, corruption and brief historical overview of the country (Muhammad et al., 2011).
Afghanistan is a country geographically located in southwest Asia. Afghanistan has a population of about 38 million. Most Afghan people do not have formal schooling experience because of bad conditions in economy, absence of appropriate security which ensures the safety of children who attend school and long-term wars within country. Approximately 80 percent of Afghan population belongs to this category of people. Main languages are Persian (Dari), spoken by 60% of population and Pushtu, spoken by around 38% of Afghan people. Main religion is Islam with 99 percent of Afghans.
Culture and Diversity
Afghanistan’s inside main problems caused by three major reasons. First, mismanagement of diversity, then low level of education and political conflicts among different groups. Culture is the approach of how majority people perceive, do and expect things in every given society. Culture of Afghanistan is low on individualism which means that they do not encourage autonomy and self-reliance and therefore we can understand that they are more collective culture. In most cases they are in groups. Afghans are not able to achieve targets, complete tasks or solve issues on their own, they always rely on help from others. It is frequently noted that culture of Afghanistan is high on masculinity in which social gender roles are clearly different. Because of this reason it is difficult to find out women in business environment there. Moreover, its culture is high on uncertainty avoidance so they take a calculated risk. They try to stay away from uncertainty despite the fact that it requires high amount of expenditures. However, this aspect is changing because number of people who are becoming global entrepreneurs and take more calculated risks is increasing. In addition, Afghans’ culture low on short-term orientation, they are long-term oriented about their beliefs, family relationships, honour, loyalty and values.
Diversity can be understood as the difference or “unlikeness” between individuals or groups of people. As Ryan (2007) has suggested, “The most obvious kind of diversity is represented in the heritages, histories, and cultures of students” (p. 9). Recognizing differences or diversity can include categories that are more “visible” such as gender, ethnicity, some religious affiliations and disabilities. Other differences are less visible, such as class, academic disabilities or sexual orientation (Pollock & Briscoe, 2020). Diversity is often associated with negative outcomes such as fewer social interactions and negative team cohesion due to the social categorization (Bogilović et al., 2020). In our case, diversity in cultural, physical, and ethnic measurements among social classes in the Afghan culture. Diversity can also include individuals with various disabilities, especially in Afghanistan where millions have been impacted due to their physical and mental injuries from the four decades of continuous war. Therefore, the term “diverse workforce” refers to a workforce where the workers have a variety of different characteristics including but not limited to gender, disability, culture, ethnicity, religion, experience, body size, skills, etc. (Mujtaba, 2010).
The emergence of diversity in Afghanistan
In Afghanistan, there are different ethnic groups and each consist of different afghans. Because of the reason that this diversity is not managed efficiently this leads to the fact that there are a lot of conflicts between different groups. These issues and conflicts occur due to two main reasons, the first is misinformation and the second is stereotypes. One ethnic group can have misinformation, which means wrong or false data, about other ethnic group. As an illustration, it can be said that those who speak Dari may have false information about those Afghans who speak Pushtu and reverse is also true. Over the course of time, these incorrect thoughts about each other become stereotypes in relation to other groups and their values. The main point is that people in this country receive lots of information and some false information about individuals who are different from them, which tends to form their view about values that are different from their own. Most people cannot do anything with diversity because they received these conditions in childhood during long wars in Afghanistan that mainly based on strategy which is known as " divide and conquer". Transformation can change these disadvantages to better side. Adults have an opportunity to change their beliefs about people from different groups and understand their values. This transformation requires education related to understanding diversity and effective management of it. In order to develop economy, the nation should attract businesses and investments that can be reached by resolving mentioned above issues. One way to deal with these problems is that since in Afghanistan live large number of different people from different ethnic groups Afghan leaders and officials have to provide achievement of synergy for all citizens to reach its goals. Afghan leaders and officials should make it understandable for everyone that if there is no needed and required management of diversity eventually this will lead to more misunderstandings and conflicts among different ethnic groups.
When there is high level of diversity among ethnic groups in Afghanistan, however their collective culture can be an example for all ethnic groups because of groupthink. Daft (2009) report that Groupthink is homogeneity and agreement, among themselves, at the expense of accurately assessing information relevant to a decision. Mujtaba (2010) states that investigation established that homogeneous teams, teams that consist of people from one ethnic group, are not creative and productive as heterogeneous teams, those teams collected and created with different people from different ethnic groups, when dealing with or solving complex problems.
Collective culture increases productivity and efficiency that can be reached when different people, organizations, teams or departments coordinate their actions in order to achieve the same goals. So why and how high rate in collective culture or high level of heterogeneous teams beneficial and productive? The answer to this question can be found in one example from their past history. By way of example of this coordination, synergy or collective culture is when different ethnic Afghan groups were able to coordinate and unite with each other in fighting against the communist regime in Afghanistan during 1980s. One of these two ethnic groups were “freedom fighter” and the second called “mujahidden”. Ultimately, they could win much stronger army of the former Soviet Union, which was strategically and technologically better than these two united groups. This historical example illustrates that synergy, coordination and groupthink can be productive and necessary in order to reach one worthy goal because everyone will move forward in one direction and the best way to achieve these conditions when ultimate goal is clear, understandable and valuable for everyone. Here it can be seen one way of solution for one of the main problems of Afghan nation, mentioned above, known as mismanagement of diversity.
In present time Afghan leaders and policy makers should coordinate all diverse individuals and groups to achieve understandable and clear goals which are valuable for every Afghan citizen in the country. In addition, Afghan policy makers should give chance and opportunity to use advantages of today’s national and global diversity for everyone. Each individual should understand, that each of us is responsible for security, peace, and prosperity of each other. Policy makers should give to everybody the opportunity to understand the benefits and advantages of synergy. Everything should start with recognizing that diversity can be an advantage when it is efficiently managed and when individuals respect each other equally. However, if there is no diversity awareness and no desire and appropriate actions to understand diversity, this can lead to occurring a negative synergy.
Negative synergy is when two or more people working together produce less than what they could produce individually (Covey, 1989). In the cases when people do not respect and value each other’s differences, the negative synergy may occur. The main reason for occurring this kind of situation is that they do not have knowledge and education about what is diversity and how to manage it. Teams collected with different people from different ethnic groups, that can manage synergy within the team efficiently and also known as heterogeneous, are usually more productive in dealing with complex problem or in completing tasks compared to those teams that are known as homogeneous. If in heterogeneous teams, people value each other, respect each other’s value, develop good work relationships and work environment and also work co-ordinately and synergistically, the productivity of this organization will grow during long-term.
Geographical location of Afghanistan
As mentioned above Afghanistan is a country located in southwest Asia. It is frequently noted that countries that are geographically located far away from sea, that do not have direct access to the sea, are in unfavorable position and Afghanistan one of them. Afghan state is considered a double landlocked country with no access to sea, so it makes it challengeable or impossible to trade in global and regional level easily.
The security, peace, well-being and prosperity of double landlocked countries depend on the well-being of their neighbors. Afghanistan has six neighbor countries with whom it should to have good relationships. These neighbors are Pakistan, Tajikistan, Turkmenistan, Uzbekistan, China and Iran. These six countries should collaborate with Afghan state in development effort so that Afghan people can also enjoy the security, stability, prosperity, territorial integrity, democracy and human rights in the region. While economic reasons are the main drivers of reform, the advancement of neighboring economies provides an additional impetus for regulatory change. Afghan leaders need to generate a culture that encourages diversity consciousness in order to grow and have prosperity with their diverse neighbors in the region. Diversity consciousness indicates that in the workplace and in culture everybody should work and behave in efficient and productive way so the ethnic differences are respected and acknowledged. Thomas Publisher (UN Office of the High Commissioner for Human Rights, 2010) states that diversity consciousness is one of the best method in managing cultural diversity in the workplace and larger society that leads to personal success. Diversity awareness in ground level does not function good at the organizational level and this can be an obstacle in the process of creation of the inclusive culture in the country, that was one of the main goal of the government. Thus, diversity must be continuous in learning with positive synergetic outcomes to create inclusive culture.
The main reason for having close and good relationships with neighbor countries is their ability to provide an Afghan market with goods and services, that are on demand but are not produced there, through trade with the lowest possible cost. Uzbekistan, for instance, close to Afghanistan in geographical and interstate relations manner. Uzbekistan makes completely new dynamic character of Uzbek-Afghan relations for the reason that Uzbek government view the Afghanistan’s market as attractive and necessary for export activities. On June 20, 2018, in the city of Termez, the first round of dialogue between representatives of the public and private sectors of Uzbekistan and Afghanistan was held with the participation of representatives of ministries and departments, as well as business circles of the two countries. The delegation of the business circles of Afghanistan was represented by enterprises of the construction, food, pharmaceutical, oil and gas, mining, jewelry industries, agriculture, logistics and trade. During the meetings between the ministries and departments and business circles of the two countries in the B2G format, prospects for the further development of Uzbek-Afghan trade and economic cooperation were discussed, including an exchange of views on enhancing partnership relations between enterprises of Uzbekistan and Afghanistan.
The sphere of trade, transportation and transit of exported goods to third countries, the organization of joint ventures for the processing of agricultural products, the production of ready-made clothes and building materials were noted as promising areas of bilateral cooperation. As a result of the event, a Memorandum was signed on the establishment of the Afghan-Uzbek Business Council with the participation of the Chambers of Commerce and Industry of the two countries. During the exhibition, direct negotiations were organized between enterprises of the two countries in the B2B format. There were discussed possibilities of exporting Uzbek products to the Afghan market. At the end of 2017, the volume of trade between Uzbekistan and Afghanistan increased by 15%, amounting to $ 598.9 million, including exports - $ 596.7 and imports $ 2.2 million (Press service of the Chamber of Commerce and Industry of the Republic of Uzbekistan, 2018). The main problems that were mentioned before, that stop viewing of Afghan market as potential market and stop investments, can be solved by creating inclusive and ideal culture. To deal with this task, Afghan policymakers have to have educational programs that provide knowledge of diversity, effective synergy and conflict management skills. Furthermore, Afghanistan should deal with legislation such as discrimination laws that punish people for treating unequally in promotion and in recruitment processes or for discriminating others because of their language or ethnic differences. Implementing all of these actions can force afghan people to change their behaviors toward the inclusive, ideal culture.
Additionally, in order to the country’s strategy will be successful, the government should have organizational leaders and government officials with knowledge of diversity, conflict management and discrimination so they will create strategies according to their knowledge and experience.
For Afghanistan, the development of inclusive culture is required in order to develop its market. In addition to what has been noted this inclusive culture also can be reached by providing transparency. This transparency can fight against corruption that is another enemy of Afghanistan. All state officials must be more transparent about their recruiting processes based on qualification and not based on ethnic relations. Then, to reduce corruption, they must be transparent and show their annual earning and existing assets when they take new position in government work, and must illustrate their financial earnings when they leaving office, and of course, at the same time it should has rules that penalize them for not obeying to these transparency actions. Also, Afghanistan should work interdependent which means not isolated from other countries, to benefit from certain comparative advantages, which are afforded to it through its natural resources.
The Afghan workforce should be inclusive and should not be tempted to hire only people of their own nationality to create a fair work culture. Afghans can expect local, national and global entrepreneurs to be attracted to investment opportunities in Afghanistan only through the development of a fair work culture (Mujtaba, 2019).
United Nations Office of the High Commissioner for Human Rights (2010) indicate that Afghanistan is one of the poorest countries in the world where long-run wars and internal disorders have destroyed the country’s economy. Large number of people have been killed and injured and also a great number of infrastructures and industries have been damaged. For this reason, the present Afghan government pays big attention in promoting entrepreneurship.
Entrepreneurship in Afghanistan
Economic growth and attractiveness for businesses can be reached by a formal entrepreneurship structure that guarantee rise of inflow of graduate and educated entrepreneurs who register their businesses with government officials and pay regular taxes. To increase these educated class of society the government have to provide educational programs. It can be noted that in order to develop entrepreneurship, the Afghanistan have to adopt educational programs that will lead to favourable culture, innovative technology and strong national economy.
The importance of education can be seen from the historical archives of Afghanistan. Historical data indicates that in the past many Afghan people desired and tried to get education and actively took part in national economic development. As an example, under the reign of King Zahir Shah, where there was education, trade and industry flourished and in addition, cross-border activities with neighbouring countries increased. And now, after long internal disorders and wars Afghanistan has a lot of opportunities for businesses and development. An accident that was on eleventh of September and more known as 9/11 catastrophe brought new positive economic changes to Afghan country. After the 9/11 catastrophe, with the fall of the Taliban regime, with American forces, Afghan nation started to form new free market economy and after that, relative peace was established.
Purpose of the Study
Main risks for businesses and governments to view Afghanistan as potential business market are wars during the long run, internal disorders that lead to risky security conditions for businesses and widespread corruption within country. These are the major problems faced by Afghanistan.
Risks and prospects for businesses
According to the field research, where Afghan entrepreneurs were interviewed, carried out by Muhammad et al. (2011), in the eyes of graduate entrepreneurs, entrepreneurial prospects in Afghanistan are:
- Entrepreneurial potential/characteristics
- Foreign remittance, which means cash inflows from friends and/or family
- Support agencies
- Western education along with basic religious teachings
In that research, where participated Afghan entrepreneurs, also found out entrepreneurial problems, they are:
- Adverse/risky security conditions
- High level of corruption
- Lack of capital for start-ups
The main risks, that were mentioned before, such as long wars and poor security are reasons that push Afghans to move their businesses into neighboring countries. As Jalal, one of the Afghan entrepreneur, says: “I love my country more than anything else, but I cannot do what I want. I had to invest in Pakistan and Iran because of poor security measures. You can be robbed anytime.” (Muhammad et al., 2011, p. 10). Another risk is that as United Nations Office of the High Commissioner for Human Rights (2010) report that almost 50 percent of the population live in extreme poverty and one in every three Afghans is poor, which means that businesses may not be able to sell all planned and desired goods and services just because majority have no enough financial resources. These risks and internal problems brought a surplus of human capital which in turn brought high unemployment and turnover about 40 percent in 2005. The research Ali Muhammad et al. (2011) asserts that 61,77 percent of firms identifying crime, theft and disorder as major limitations that are considered threats for potential businesses. Generally, in this survey most interviewed Afghan entrepreneurs noted security, shortage of capital and corruption as the main obstacles and limitations for businesses and start-ups.
Using a SWOT analysis is a powerful method to assess a country and its market. In this article, it is provided SWOT analysis for Afghanistan and its market where potential businesses can analyze the country and its market (See Table 1).
Doing Business is measurement of business environment and regulations in 190 countries and selected cities. The main goal of Doing Business is to provide an objective basis for understanding and improving the regulatory environment for business around the world.
Ease of Doing Business rankings
Economies are ranked on their ease of doing business, from 1–190. A high ease of doing business ranking means the regulatory environment is more conducive to the starting and operation of a local firm (See Table 2).
Afghanistan is placed in 173 place among 190 economies after Iraq.
Ease of Doing Business score
The ease of doing business score helps assess the absolute level of regulatory performance over time. It captures the gap of each economy from the best regulatory performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s ease of doing business score is reflected on a scale from 0 to 100, where 0 represents the lowest and 100 represents the best performance (See Table 3).
It can be seen that Afghanistan’s an ease of doing business score of 44.2 in Doing Business 2019 means an economy was 55.8 percentage points away from the best regulatory performance. A score of 44.1 in Doing Business 2020 would indicate the economy is not improving. This means that reforms and changes in the business regulatory environment, legislation, government and other, making it more difficult to do business in Afghanistan.
This article, first of all, gives general understanding about Afghanistan country by providing an overview of the culture and people of Afghanistan along with the problems and possible resolutions regarding diversity management, corruption and discrimination the victims of which become a large part of the Afghan population. Afghan leaders and policy makers are responsible for forming inclusive, ethical and just work culture by adopting educational programs and dealing with discrimination laws that on its own will force Afghan people to adjust their behaviors toward the ideal culture. It is only through the development of a fair and just work culture that Afghans can anticipate local, national, and global businesses to be attracted for investment opportunities in
Afghanistan and see Afghan market as potential business market. Continuous education programs and training programs that focus on interpersonal relationships, conflict management, justice and fairness for everyone, and ethical behaviors in all respects can create an inclusive culture.
This article highlights prospects, risks, threats, problems and opportunities for businesses and entrepreneurial activities in Afghanistan. Long wars within the country and internal disorders brought a high level of corruption and damaged a great number of infrastructures and industries that negatively affected to the whole economy of the country. In general, this article describes the country’s internal conditions for entrepreneurs and businesses. In order to deal with issues, risks and threats for businesses in the economy and at the same time to provide business opportunities for entrepreneurs and investors and make its market more attractive, the governments should introduce education programs that leads to solving mismanagement of diversity problem and conflict management skills and develop economic structure of the nation.
The article demonstrates Afghanistan’s ranking place in Ease of Doing Business rankings prepared by World Bank that aims to provide understanding the regulatory environment for business around the world. Afghanistan has very low and bad place in this rankings, in particular 173 place out of 190. It also provides score in Ease of Doing Business score by World Bank where it has 44.1 score.
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25 September 2021
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Economics, social trends, sustainability, modern society, behavioural sciences, education
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Gulomov, O., & Sharipova, Z. (2021). Afghanistan As Potential Business Market: Does Highest Risk With Lowest Opportunity Worthy?. In I. V. Kovalev, A. A. Voroshilova, & A. S. Budagov (Eds.), Economic and Social Trends for Sustainability of Modern Society (ICEST-II 2021), vol 116. European Proceedings of Social and Behavioural Sciences (pp. 2511-2522). European Publisher. https://doi.org/10.15405/epsbs.2021.09.02.279