According to UNCTAD's World Investment Report 2022, FDI flows into Afghanistan have declined sharply over the past years to USD 21 million in 2021, down from USD 119 million in 2018. The decline was partly due to the global economic crisis triggered by the Covid-19 pandemic and then by the takeover of the Taliban regime in 2021. In the same year, the total stock of FDI was estimated at USD 1.6 billion.
Among the main projects is the railway infrastructure programme which aims to connect Turkmenistan, Tajikistan and Afghanistan. In 2015, the Chinese Government expressed interest in supporting the development of railway infrastructure and the construction of a hydroelectric plant. The railway connection from China to Hairatan, Northern Afghanistan, was established in September 2016, allowing goods to be carried from Eastern China to Afghanistan in two weeks compared with six months by road. The railway was launched in September 2019, providing a boost to Afghan exports and investment from China, already the largest investor in Afghanistan since 2014. In December 2020, Iran launched a new railway connection to Afghanistan, supporting freight transport between both countries. In February 2021, Afghanistan agreed on a roadmap with Uzbekistan and Pakistan for a railway project that would connect all three countries. Furthermore, in 2023 the Taliban regime cut its first major energy extractions agreement since taking control of the country, agreeing to a 25-year pact with China's Xinjiang Central Asia Petroleum and Gas Company to drill for oil in the country's Amu Darya basin.
Since the takeover of the Taliban in August 2021, the country’s already weak business climate has worsened drastically. Before the withdrawal of foreign troops, Afghan law guaranteed foreign companies the same investment opportunities as domestic enterprises, and official support for open markets and private sector participation was restated in the Afghanistan National Development Strategy (ANDS). Foreign investors were not required to have an Afghan partner, but due to the restriction on land ownership, they almost always chose to work with one. Private investors had the right to transfer their capital and profits out of Afghanistan, including for debt service for offshore loans. Nevertheless, the situation is currently unstable, investment in the country is almost impossible, and future foreign financial assistance is placed under a cloud of uncertainty. Among the structural problems Afghanistan is facing there are political violence, weak regulations regarding property protection, a substantial lack of skilled workforce, under-developed financial markets and insufficient infrastructure that limit the country's potential for attracting foreign investors. Furthermore, Afghanistan no longer has access to international development assistance. Due to the difficult political and economic situation, Afghanistan is not ranked in the main studies concerning the business environment.
|Foreign Direct Investment||2020||2021||2022|
|FDI Inward Flow (million USD)||13||21||n/a|
|FDI Stock (million USD)||1,592||1,613||1,613|
|Number of Greenfield Investments*||0||0||0|
|Value of Greenfield Investments (million USD)||0||0||0|
Source: UNCTAD - Latest available data.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Any Comment About This Content? Report It to Us.
© eexpand, All Rights Reserved.
Latest Update: September 2023