Studies on Afghan Competitiveness for Job Creation - Agricultural Value Chains

Project Objective

Agriculture plays a vital role in the Afghan economy. To help the Afghan Government identify competitive agricultural sectors for priority development, the ILO Office for Afghanistan carried out a cross-border study in Afghanistan and its main trading partners, Pakistan and Iran, on the competitiveness of the main agricultural sectors, including wheat, rice, tomatoes, potatoes and grapes/raisins. This study sets out to explore appropriate approaches to address growth challenges faced by these sectors in Afghanistan. It covers not only these crops but also their inputs, processed products, by-products and recyclable items along the respective value chains.

Main Findings

The study found that with the exception of the grapes/raisins sector where prices continue to rise, the other selected agricultural sectors all suffered from a loss of price competitiveness vis-à-vis those of Pakistan and/or Iran 2007-12. The eroding price competitiveness of the agricultural value chains is reflected in the declining profits of both farmers and processors, and the bleak job market.

It also found that the Afghan agricultural sector in general suffers from a higher cost of production than that of Pakistan and this gap has been widening while Iran’s agro products have become price-competitive despite the high cost of production.

The drastic and continuous depreciation of the currencies of Pakistan and Iran correlates with the widening trade gap between Afghanistan and the two countries, including in the area of key agricultural products.

Recommendations

Policy and strategic measures:

The study indicates it will be necessary to address a number of broad policy and strategic issues related to the structural constraints of a high-cost landlocked country, an adversarial currency and trade situation, and insufficient data, before discussing sub-sectoral development measures.

Value chain development measures (under the current circumstances):

• Replicate the success of market penetration by addressing value chain pressure points.
• Let the lead firms grow with decent work without exploiting the power imbalance.
• Replicate proven productivity gains through market facilitation.
• Promote productivity with occupational saf