Infrastructure Projects Initiated by the Islamic Emirate of Afghanistan and Recent Progress

By Ahmad Shah Rashed

Introduction

Since the re-establishment of the Islamic Emirate of Afghanistan, significant infrastructure projects have been undertaken in the country on an unprecedented scale. Although the construction of the second phase of the Kajaki Dam in Helmand began several years ago, it faced challenges due to corruption and mismanagement. However, under the renewed leadership of the Islamic Emirate of Afghanistan, the project gained momentum, and within 11 months, it was successfully completed. On July 27, 2022, a ceremonial handover of the dam took place, attended by Mullah Abdul Ghani Baradar Akhund. The completion of this project has resulted in a power capacity increase from 51 to 151 megawatts, supplying electricity not only to Helmand but also to Kandahar.

Following the inauguration of the second phase of the Kajaki Dam, a crucial agreement was signed with the National Development Corporation for the remaining works and development of the Kamal Khan Dam. As per the terms of this agreement, the National Development Corporation will finalize the remaining construction of the Kamal Khan Dam within the current calendar year. Additionally, the Islamic Emirate of Afghanistan is committed to completing the remaining works of the Bakhshabad Dam in Farah province, which is nearing completion.

The significance of these large-scale infrastructure projects in Afghanistan cannot be understated. They play a vital role in stimulating economic growth and attracting both domestic and foreign investors. This article explores the importance of infrastructure projects and discusses strategies to encourage investment in such initiatives. Furthermore, it examines the substantial impact these fundamental projects have on our national economy.

The Urgency for Major Infrastructure Projects in Afghanistan

Afghanistan, a third-world country with abundant natural resources and a strategically favorable location is in dire need of large-scale infrastructure projects. Despite its potential, Afghanistan has remained one of the poorest nations in the world, largely due to foreign interventions, prolonged conflict, widespread corruption, and a lack of effective management. In light of these challenges, the Islamic Emirate of Afghanistan is committed to leveraging the country's strategic advantages and natural resources to foster economic development. It has prioritized crucial areas such as groundwork, water management, energy production, and highway reconstruction while striving to enhance regional connectivity. Notably, these efforts have facilitated increased transit between Central and South Asia and the export of gas and electricity to neighboring countries.

Noteworthy Infrastructure Projects

Qosh Tepa Canal Project: This significant national endeavor aims to irrigate hundreds of thousands of hectares of land in northern Afghanistan. Stretching from the Kaldara district of Balkh province to the Andkhoi district of Faryab province, the Qosh Tepa Canal Project spans 285 km. Divided into three phases, it is being executed by the National Development Corporation. The completion of the first phase is imminent and has already provided employment opportunities for thousands of people. This project addresses the pressing issue of uncultivated arable land, with 4.28 million hectares remaining untapped due to water scarcity. The canal's construction, along with other infrastructure projects in the region, will help alleviate this problem.

Second Phase of Kajaki Dam: The completion of this phase has significantly increased the power capacity of the Kajaki Dam from 51 MW to 151 MW. Besides supplying electricity to Helmand, the dam now serves Kandahar as well. The Islamic Emirate of Afghanistan is steadfast in its commitment to domestic energy production. Efforts to generate electricity from natural gas in Jawzjan Province and harness wind energy in Herat Province are already underway. The goal is to prioritize the production of 200 MW of electricity and explore further renewable energy sources. The Deputy PM for Economic Affairs, Mullah Abdul Ghani Baradar Akhund, announced during the opening of the Kabul International Exhibition on May 11, 2023, that Afghanistan aims to reduce its dependence on imported electricity, which currently accounts for 80% of its total consumption.

Completion of Large Dams (Kamal Khan, Shah Wa Aros, Pashdan, and Bakhshabad): The National Development Corporation has commenced the remaining works of the Kamal Khan Dam, which is expected to store 52 million cubic meters of water, irrigate 174,000 hectares of land, and generate approximately 9 MW of electricity. Additionally, initial surveys for the Laghman Shahi Canal and Sarubi 2 Power Dam have been initiated based on the decision of the Economic Commission. The ongoing construction of the Shah Wa Aros Dam, upon completion, will provide Kabul city with 5 million cubic meters of drinking water annually, irrigate 2,700 hectares of agricultural land, and generate 1.2 MW of electricity. The preliminary works for the Bakhshabad Dam have also begun, with an annual storage capacity of 1,360 million cubic meters of water. This dam has the potential to irrigate up to 100,000 hectares of desert land and generate 27 MW of electricity. It will play a pivotal role in groundwater replenishment, flood control, and overall surface water management.

Construction of an Industrial Park in Perozi Town: The inauguration of an industrial park in Perozi Town on April 29, 2022, witnessed the presence of Mullah Abdul Ghani Baradar Akhund, the Deputy PM for Economic Affairs. The park's development has reached an advanced stage, with completed designs for internal and external roads, water supply systems, canalization, and electricity distribution. Construction of essential infrastructure, such as water wells and perimeter walls, is already underway. Additionally, various blocks for food production, logistics delivery centers, warehouses, laboratory buildings, vocational training centers, solar power production areas, health clinics, and more have been completed or are near completion. With an investment of $216 million, this industrial park aims to house 150 small and medium-sized food and non-food factories. Upon its completion, the park will generate employment for 13,600 individuals directly and an additional 30,000 indirectly. It will also reduce reliance on imports, lower prices of essential goods in the market, and provide vocational training opportunities. Educational centers, commercial and residential blocks, green spaces, mosques, and amusement parks are also included in the plans for Perozi Town.

Conversion of Foreign Military Bases into Special Economic Zones: The Economic Commission has decided to transform the remaining foreign military bases, including those in Parwan, Kandahar, Herat, Balkh, Nangarhar, and Kabul, into special economic zones. These bases, which encompass vast areas, possess significant potential for economic activities. Preliminary research has deemed them suitable for the establishment of special economic zones. This move aligns with global practices in attracting direct foreign investment. By repurposing these bases, the Islamic Emirate of Afghanistan aims to stimulate economic growth and generate employment opportunities.

Amu River Oil Basin Extraction Contract: On January 5, 2023, the Ministry of Mines and Petroleum signed a contract with the CPEIC Chinese Company for oil extraction in the Amu River Basin. The contracting company will invest up to $150 million in the first year, with the amount increasing to $540 million over three years. As per the contract, the Islamic Emirate will hold a 20% stake, which will gradually increase to 75%. The daily oil extraction rate will commence at 1,000 tons and gradually rise over time. This project directly creates employment for 3,000 Afghans. Covering an area of 4,500 square kilometers across Sar-e-Pul, Jawzjan, and Faryab provinces, the exploration sites are estimated to contain 87 million barrels of oil. With further exploration, the daily oil production of the Qashqari oil and gas project is expected to increase from 200 tons to 1,000 tons. The contract includes a significant clause stipulating that failure to fulfill the agreed-upon materials and resources within one year will result in automatic termination.

Investment Facilities in Afghanistan

Afghanistan presents numerous investment facilities that can benefit both domestic and foreign investors. The country possesses vast natural resources, making it rich in potential for various industries. The current pro-investment government is committed to creating a conducive environment for businesses. Key factors that make Afghanistan an attractive investment destination include:

1. Abundance of Natural Resources
2. Supportive Government Policies
3. Skilled and Affordable Workforce
4. Reduced Trade and Business Expenses
5. Access to International Markets
6. Bilateral and Multilateral Trade Agreements
7. Untapped Market Potential
8. World Trade Organization (WTO) Membership
9. Commercial Dispute Resolution Center
10. Enhanced Security
11. Ease of Doing Business

Attracting Investment for Major Infrastructure Projects

While Afghanistan presents investment opportunities, large-scale infrastructure projects require significant financial resources beyond the capabilities of the Islamic Emirate of Afghanistan in the current situation. Despite foreign investors' interest, sanctions imposed by the USA pose challenges to foreign investment. Nevertheless, the Islamic Emirate remains committed to providing a business-friendly environment and facilities for domestic and foreign investors. Investments in energy and electricity, mining, agriculture, transportation, healthcare, and information technology are prioritized.

Investment can play a vital role in Afghanistan's economic growth, job creation, inflation reduction, currency stability, increased tax revenues, import reduction, export expansion, innovation, and technology advancement. By capitalizing on these opportunities, economic stability can be achieved. The Islamic Emirate has taken steps to facilitate investment, and there is hope for Afghanistan's economic stability as it moves forward.

Conclusion

Following two decades of occupation and emerging from a war-torn state, Afghanistan is witnessing significant investments in construction, agriculture, industry, and services. The Islamic Emirate of Afghanistan has prioritized investment in these sectors, encouraging domestic and foreign investors to seize various opportunities. Investors are offered incentives such as tax benefits, long-term land leases, and opportunities for joint ventures. The Investment Support Agency reports an increase in investment during the first ten months of 1401 compared to the previous year. Investments have been made in mining, agriculture, electricity, and other sectors. Factors contributing to investment growth include enhanced security, a stable central government, measures against administrative corruption, investment support systems, favorable laws, and reduced taxes. These activities have paved the way for the implementation of infrastructure projects and other economic developments in Afghanistan.