Afghanistan is an economically challenged country which mainly depends on livestock and farming. The country’s Gross Domestic Product (GDP) experienced an astronomical decline during the last twenty years of the 20th century. The disruption in transport and trade, and the loss of labor and capital led to the drastic decline. The Soviet invasion and civil war have disrupted most of the country’s economic activities and destroyed vast areas of Afghanistan’s infrastructure. Fortunately, in 2001, the decline of the Taliban forces, as well as the infusion of billions of US dollars, helped to rapidly revive trading. Afghanistan does trading mainly with neighboring countries (Economy Watch Content Par.1).
Although known traditionally to be rich in natural resources, Afghanistan has done little to exploit them. Among these resources are the extensive natural gas deposits, chromite, salt, lead, precious and semi-precious stones, talc, sulfur, zinc, barites, coal, iron ore and petroleum. The country’s poor transport network hinders most trading activities. In the 1980s, natural gas exports were at their peak, amounting to about $300 million annual export revenues. Unfortunately, 90% of this revenue was used to pay for imports and debts to the Soviet Union. The economy also rode on smuggled goods into Pakistan (Economy Watch Content Par. 2).
Afghanistan’s major exports include dried fruit, fresh fruit, nuts, cotton, opium, precious and semi-precious germs, hand woven carpets, hides and pelts, natural gas, and wool (Afghanistan’s Web Site par. 1). There are intense speculations that some people in the country engage in, like illegal exportation of opium and hashish. It is also rumored that the country is a producer of heroin, which is derived from opium. The country’s main imports include capital goods and other machinery, petroleum products, textile and food (Economy Watch Content par.4). The government and government-controlled monopolies control the country’s foreign trade. One of Afghanistan’s chief trading partners is the USSR. They have been in trade even before the 1979 Soviet invasion. Other purchasers of Afghan products include Pakistan, Germany, India and the Great Britain (Afghanistan’s Web Site par.1).
There are no controls imposed or formulated on imports and exports, capital transactions, and payments. Traders only need to have commercial business licenses to export and import products. However, some transactions are subjected to more licensing and quotas. Some of the businesses that require a special license include pharmaceutical products, petroleum products and mining items. Special permission is also required for imports of certain drugs, arms and ammunition, and liquor. These are banned for security reasons and public policy statement. Totally prohibited are the exports of opium and museum pieces. All imports and exports are registered with commerce ministry in order to monitor their eligibility for export incentives (International Monetary Fund 19).
By far, Afghanistan is the largest producer of opium in the world. According to the United Nations Office on Drugs and Crime (UNODC), over 70% of opium world supplies originate from Afghanistan (International Monetary Fund 20). Despite of the fact that Afghan has not traditionally been an opium exporter, over 10 million people consumed Afghan opiates in the year 2003. Large scale cultivation of poppy is actually a recent phenomenon. It dates back to early 1980s when opium production was banned in Turkey, Pakistan and Iran. This automatically raised the world price of opium. Owing to the firm international demand and absence of legal and social control, the cultivation of poppy went up in Afghanistan, making the country a main supplier of opiates to the Middle East and Europe.
After the Soviet withdrawal, the economic collapse of many central governments and the need for alternative financial sources increased adaptability of opium to the prevailing circumstances in Afghanistan (International Monetary Fund 20). By 1999, opium has become the country’s largest cash crop. It was also Afghan’s main illicit export earnings. The dedicated efforts of UNODC in cooperation with the country’s transitional government have put strategies into place to reduce and eventually eliminate poppy from the country. There is a surveillance monitoring system and regular opium surveys that give detailed data on poppy cultivation. By 2002-3, the government has increased its interdiction activities in order to reduce opium production by 75% in a period of 5 years and remove the commercial production in ten years. These efforts were not successful, and the production has only increased because of the world demand for opium (International Monetary Fund 21).