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POLICY BRIEF

AGRICULTURE IN AFGHANISTAN LINKING PRODUCERS TO MARKETS (LOCAL, REGIONAL, INTERNATIONAL)

OCTOBER 2012

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Cover Photograph: Kabul International Ag-Fair 2010. Courtesy Ministry of Agriculture, Irrigation and Livestock.

Agriculture In Afghanistan

L I N K I N G P R O D U C E R S T O MA R K E T S ( L O C A L , R E G I O N A L , I N T E R N AT I O N A L )

I. Backdrop

The Afghan economy has always been

agriculture dependent. For centuries, farming

has been the lynchpin of economic life,

providing vital livelihoods to the rural

population and agribusiness opportunities for

local entrepreneurs. Though only 12 percent of

Afghanistan’s total land is arable and less than

half of it is currently cultivated, by some

estimates more than 80 percent of population

remain dependent on agriculture and allied

activities.i The sector contributes 34.9 percent

of Afghanistan’s GDP and engages 78.6 percent

of labor force in the country.ii

Prior to war, in the 1960s and 1970s,

Afghanistan emerged as a notable agricultural

producer in the region; thanks to its unique

varieties of pomegranates, grapes, apples,

apricots, and melons, and its large assortment

of dried fruits and nuts. Located along the

famous Silk Route, the country was able to

export more than 60 percent of its agricultural

products to neighboring countries such as India,

Pakistan and the former Soviet Union during.

The recent 30-‐plus years of war devastated

farmland, irrigation systems, and agricultural

infrastructure. Farming communities were

scattered, and export channels shut down.

Operating at a fraction of its potential,

Afghanistan’s agriculture sector not only lost its

share of the international market, but also

became incapable of feeding its own

population.

During the past decade of post-‐war

reconstruction, a strong consensus has

emerged that agriculture remains fundamental

to state building, and development in

Afghanistan. International donors have injected

millions to recover the sector, and to ensure

livelihood and food security for local

populations. A dedicated Ministry of

Agriculture, Irrigation, and Livestock (MAIL)

implements projects in collaboration with the

donor agencies. Agricultural production and

practices have accordingly been revived and

improved over the decade.

As production increases, there is need to link

the agricultural producers to local, regional and


international markets. This policy brief

attempts to identify approaches for linking

producers to markets. It suggests the

importance of market linkage, analyzes current

initiatives and identifies gaps, challenges and

opportunities. Finally, it suggests a range of

measures for better linking Afghan agricultural

producers to local, regional and international

markets.

II. Rationale for Market Linkage

Linking farmers to markets can embrace a

whole range of activities, from the very small

and localized to the very large. It means

development of long-‐term business

relationships rather than ad hoc sales support.

On a small scale, it implies identifying local

traders and markets with help from agricultural

extension workers. On a larger scale, it means

finding broad and sometimes distant markets

for a particular product and organizing the

farmers to supply those markets. Still more

complex agro-‐economic forms, found in

developed countries, involve contract farming

that requires considerable long-‐term

investment on part of buyers as well as

producers.iii While this paper suggests

measures for whole range of linkage activities,

it emphasizes, as an immediate and practical

step, small and medium-‐ scale linkage activities

that involve donors and government.

Linking agricultural producers with the market

has obvious advantages for farmers. In some

cases the market buyers are prepared to supply

inputs and credit, which is not easily available

otherwise to small farmers. In advanced linkage

systems, the buyers may provide

mechanization services. Large buyers

(companies) may also provide technological

and extension advice, thus complementing

government extension services. By linking the

producers with buyers in advance of

production, farmers potentially have a more

assured market and often an agreed price.

Afghan farmers, who do not have access to

effective extension service, market credits,

modern technologies, and competitive market

price, can certainly benefit from the

arrangement with potential buyers.

Market linkage systems are vulnerable to the

ever-‐present risk that arrangements will

collapse because of lack of trust. Yet, these

linkages usually offer the best and most secure

return for the farmers, protect them from

market fluctuations and thus make agriculture

more economically viable.

In case of Afghanistan, agricultural market

linkage is primarily important to ensure food

security and human livelihoods. To ensure and

enhance food security in the country, it is

necessary to have mechanisms for country-‐


wide produce distribution in proportion to

demand. Afghanistan has varied climate

conditions, which allows growing certain crops

in specific areas. To distribute these area-‐

specific produces, there is a need to connect

agricultural outputs to domestic market. At the

same, Afghanistan is a major producer of some

of the finest fruits and nuts, which have good

international market demand. In recent years,

Afghanistan again has started exporting fruits

and nuts to international market. In 2009-‐10,

agricultural products accounted for about 80

percent of total exports from Afghanistan,

amounting to nearly $300 million.iv Considering

the current amount of fruits and dried fruits

produced and the potential for future growth,

at least that segment of agricultural export may

rise substantially in coming years. Such a

development requires better linking of

Afghanistan’s horticulture producers with

regional and international markets.

III. Current Initiatives

Agricultural development has been a top

priority during the past decade of post-‐war

reconstruction, in particular since 2008.

International donors and the Government of

Afghanistan have taken several initiatives to

revive the agriculture sector. This section

discusses some of the key initiatives that have

emphasized market linkage.

a) USAID Interventions in Afghan Agriculturev

In 2002, after a long hiatus, USAID resumed

activity in Afghan agricultural development,

with several interventions in cooperation with

MAIL. This section discusses some of the

current initiatives with a focus on connecting

the producers with markets.

Afghanistan Farm Service Alliance project

(March 2008-‐ June 2012) worked with Afghan

partners to develop Farm Service Centers

(FSCs), profit-‐oriented, privately-‐owned

enterprises, intended to provide the

agricultural inputs, services and market linkages

farmers need to transition to successful

commercial agriculture. Over four years, the

project has established 17 FSCs (in Kabul,

Ghazni, Hilmand, Kandahar, Laghman, Kunar,

Zabul, Nangarhar, Logar, Wardak, Parwan,

Kapisa, Takhar, Kunduz, Balkh, Uruzgan, and

Nimroz), benefiting more than 83,000 farmers.

Agro-‐enterprise Support Program,

implemented during 2006-‐2007, provided

technical assistance in improving farm

technology, post-‐harvesting handling, market

linkages, business skill development, and

facilitating access to credit and capital in seven

districts of Herat province.

The ongoing Commercial Horticulture and

Agriculture Marketing Program, launched in


February 2010, seeks to help farmers shift from

relatively low-‐value annual crops, such as

wheat to high-‐value perennial crops, such as

almonds, grapes, and pomegranates. The

Program works with farmers to improve quality

and with traders to improve methods of

packing, cooling, shipping and marketing. The

program currently operates in 16 provinces in

eastern, south-‐eastern, southern and central

regions of Afghanistan.

The Rebuilding Agricultural Markets Program

(June 2003-‐September 2006) claims to have

added values to the agriculture sector worth

$1.7+ billion. Results included rehabilitation of

agriculture infrastructure (Over 530 structures

and over 820 km of canals) benefiting 490,000+

hectares of farmland, extension services for

approximately one million farmers, over

580 km of improved farm to market road which

reduced post-‐harvest losses, poultry production

and management for 28,000 village women,

improved post-‐harvest facilities (50+ cold

storage rooms installed, 140+ market centers

and one dried vegetable factory),

vaccination/treatment of over 28 million

livestock, 28,000+ micro loans disbursed and

linkages established between farmers,

processors and traders for domestic and

international market specifications. The

program claims to have re-‐established trade

relations with India, Dubai, Pakistan, Russia,

Ukraine and United Arab Emirates and

introduced Afghan dehydrated vegetables to

the European market.

Accelerating Sustainable Agriculture Project

(November 2006-‐September 2011) was

designed to revitalize and improve global

competitiveness of Afghanistan’s agriculture

sector. The main objective was to develop a

dynamic agriculture sector capable of adapting

to market forces by engaging in activities that

would lead to: a) increased competitiveness of

Afghan agriculture products in domestic and

international markets; and b) improved public

policies and institutions in support of more

competitive agriculture and agribusiness. To

achieve the objective, the project provided

strategic support for market linkages, improved

farm technology and practices, improved post-‐

harvest activities to meet market requirements,

developed and enhanced business

organizations to provide support services to

small-‐and medium-‐scale agribusinesses, and

assistance in both production and post-‐harvest

infrastructure construction. This project,

covering all 34 provinces, established a network

of private rural farm stores called AgDepots,

which sell high-‐quality farm inputs and

extension services to local farmers, a state-‐of-‐

the-‐art juice concentrate facility in suburbs of


Kabul city, a cold storage facility in Mehtarlam

(Laghman), and a cashmere dehairing facility in

Hirat that is boosting cashmere exports, and a

modern packing plant in Surkhrod (Nangarhar)

that complies with international food safety

standards.vi

USAID has also worked for provision of agricultural

incentives and economic alternatives for the poppy-‐

prone provinces in the east as well as the northern

and western regions of Afghanistan. It has also

worked to ensure credits for farmers through

programs like Agricultural Development Fund and

Agricultural Credit Enhancement.

b) Comprehensive Agriculture and Rural

Development-‐Facilityvii

Comprehensive Agriculture and Rural

Development Facility (Card-‐F) is an ongoing

project supported by UKAID. The project

started in 2009 in collaboration with MAIL and

Ministry of Rural Rehabilitation and

Development (MRRD), and will be completed

by March 2013. CARD-‐F aims to strengthen licit

agricultural markets and to minimize adverse

incentives to revert to opium production by

delivering a critical mass of investment and

services in the agricultural sector, coupled with

enabling rural infrastructure and focused on

targeted provinces and rural districts. The

project seeks to achieve these goals by

developing Economic Development Packages

including value chains in production,

processing, distribution and market

development, and critical infrastructure for

their growth. One of the major goals of the

project is to enhance agribusiness

opportunities and potential in 10 project

districts in four provinces. CARD-‐F primarily

aims at improving rural infrastructure to

encourage engagement in local economy.

c) Rural Business Support Program

Rural Business Support Program (RBSP) is an

Asian Development Bank (ADB) funded ongoing

project launched in 2007, in collaboration with

MAIL as the implementing agency, Ministry of

Finance as the executive agency and Roots of

Peace as the consultant. The main objective of

the project is to sustain the increase in farm

income by enabling farmers, agri-‐processors,

and traders to engage in profitable production,

processing and marketing activities. According

to project briefs, the project has benefitted

10,000 stakeholders involved in agribusiness

development in 12 districts of three provinces.

The project has taken a focused approach by

establishing value-‐chains for specific agri-‐

products in different provinces. A potato value-‐

chain was developed in Bamyan with 11,000

small storage facilities; cooking oil value-‐chains

were developed in Balkh and Nangarhar with

an oil processing facility in Mazar-‐e-‐Sharif; and


wool and carpet value-‐chains have been

developed in all the three provinces. The

project claims to have doubled the income of

beneficiary farmers by reducing loss in storage

and securing a better market and value.viiiix

d) Horticulture and Livestock Project

Horticulture and Livestock Project (HLP) is a

World Bank supported ongoing program,

implemented by MAIL and currently in five

provinces. The project primarily attempts to

enhance agricultural practice and productivity

through sharing knowledge on modern

agricultural technologies and practices. The

project has created several producer groups in

nine districts as targeted beneficiaries and

communities for coordinated action. One of the

ten intensive trainings provided to these groups

includes information on post-‐harvest activities

and marketing of agriculture produces. The

training includes information on market

opportunities according to different levels,

value chain approach – market requirements,

production according to market requirements

(quality, quantity & time), importance of

reducing post-‐harvest losses (appropriate

storage), transaction costs and the role of

traders, and short term and long term options

for improvement. Yet, the project neither could

spread much awareness among the farmers,

nor could build their trust in market forces.

IV. Gaps, Challenges & Opportunities

While multiple donors and the Afghan

government have taken significant initiatives

for agricultural development in Afghanistan,

much remains to be done. So far, marketing of

agricultural produce has received at best

secondary attention. Much of the current

initiatives have a narrow focus in terms of

linking agri-‐producers with market. Like any

other donor project, these initiatives have

limited yet different geographical coverage.

Yet, none of them has come out with a scalable

pilot project. Rather, the donors could have

worked together to develop a concrete model

first and then scaled up that at national level. In

most cases, these initiatives have established

some aiding infrastructure facilities, but not in

adequate quantity. In some cases, the donors

have partially sponsored export of agri-‐

products, which is not sustainable when the

support is removed. Though all the programs

engage domestic state agencies for

implementation, none of those agencies has

contributed to an enabling environment for

market linkage.

Moreover, Afghanistan’s agriculture sector is

faced with several challenges that are unique to

the country. Lack of adequate infrastructure,

ranging from irrigation, storage, roads,

electricity to processing and packaging, is still


the major stumbling block in making

Afghanistan’s agriculture competitive in

regional and global markets. In addition, low

farmer awareness of market operations and

resulting farmers’ apathy to direct marketing

activities, have discouraged private market

traders. Afghanistan bears all the added export

costs of a land-‐locked country. For example, the

cost of exporting a container from Afghanistan

to Kuwait or Dubai is about four times the cost

of export from North America or Europe to

these places. There are now only 20 exporters

active in Afghanistan, and only two of them

have adequate packaging facility that meets

international standards.1 Finally, the legal

environment is not yet very favorable for

exports.

However, the potential is huge. With its diverse

agro-‐climatic conditions, Afghanistan’s

agriculture sector is capable of meeting most of

its food needs, given that foods produced in

one part of the country is delivered to the other

parts as per demand. On the other hand,

Afghanistan’s fresh and dried fruits, nuts and

vegetables have a splendid reputation in

regional and global markets.

Because chemical fertilizers and pesticides are

unavailable, Afghan produce has retained

organic quality. With a growing international

niche market for organic products, Afghanistan

can leverage the natural state of farming by

branding its output as organic. However, the

agri-‐products need certification of quality and

origin to fetch better market value.x

PROPOSED APPROACHES This concluding section suggests some

measures to connect agri-‐producers in

Afghanistan with local, regional and

international markets.

a) Farmers’ Awareness

Because of illiteracy and generally low

awareness, farmers are reluctant to deal with

market traders who may offer higher price for

better products. Rather the preferred practice

is to sell entire produce to a local trader who

buys all irrespective of quality, albeit at a much

lower price. Farmers need to understand the

market trader option, and trust needs to be

built between farmers and market traders.

While raising awareness is important, it is a

long-‐drawn process. In Afghan context, it would

be more useful to have direct community level

interventions, campaigns and roadshows.

Bringing together local producers and traders in

small scale trade shows can help both parties to

know each other and their approach. At the


same time, existing extension services should

engage rural people in efforts to improve this

dynamic.

b) Synchronizing Agricultural Production to

Market Requirement

Much of the existing initiatives focus on

creating a market for what is being produced by

the local farmers. Yet, to establish such a link,

farmers must learn to produce in accordance

with market demand in terms of variety,

quality, quantity and time. By synchronizing

production to market requirement, the farmers

can realize a better return, and agriculture can

again become economically sustainable. A

strong agricultural sector helps the state by

reducing import dependency and ensuring food

security.

However, synchronizing production to demand

requires extensive market research and

communication with farmers. To produce

according to market demand, farmers need

timely information which is currently beyond

their reach. The state must take initiatives to

conduct such market research and to

communicate market demand to the farmers.

c) Infrastructure Facility

After three decades of war and destruction,

infrastructure is the major challenge faced by

agriculture sector in Afghanistan. The country

lacks most basic forms of infrastructure, let

alone modern forms. To meet market demand

and delivery requirements, the sector needs

extensive expansion of basic facilities including

irrigation, electricity, storage, roads and

transportation. Despite donor involvement in

these areas post-‐2001, the infrastructure

development outcomes have been sporadic

and limited.

The state and donors must work together to

establish basic infrastructure facilities according

to local needs. The most needed basic

infrastructure to promote agribusiness in

Afghanistan are storage, processing and

packaging facilities. Irrigation, as an input

service, is sought by farmers to increase arable

land area and thus, production. Similarly,

credits must be available to farmers to enable

them in dealing with the market. In the absence

of formal credit, farmers are often forced to sell

their products pre-‐harvest to local traders, at a

vulnerably low price.

d) Institutional/Organizational Facility

Linking producers to market traders is also

enhanced by organizing both sides of the

transaction. Farmers may face significant

problems in moving from ad hoc sales to

becoming more market-‐oriented. Rural

farmers, while often reluctant and incapable of


participating as individuals in the market, are

empowered when operating in groups. Linking

organizations, like farmer organizations or

NGOs, are crucial to overcome these

challenges. Several farmer organizations have

been created over the years, but their presence

is limited to few project areas. There is a need

to strengthen these existing farmer

organizations and introduce them at national

level. Similarly, there is a need to promote and

consolidate private actors in agribusiness to

trade products on different market levels. And

state agencies engaged in the sector should

strengthen their research and extension

services.

Food Procurement Policy

Food procurement policy is another

determinant of producer-‐to-‐market linkage. As

yet, Afghanistan does not have a concrete food

procurement policy, leaving the farmers

vulnerable to local traders. To build farmers’

trust in market and encourage them to

participate in the market, the state must

provide a detailed policy protecting the

interests of all parties. The policy must set

minimum prices for specific products that cover

the cost of production as well as ensure

procurement of all produces.

Food Processing and Packaging

Proper processing and packaging is important

to deliver agri-‐products to far-‐flung domestic

markets and even more distant international

markets. At present, however, the facility for

packaging and processing in Afghanistan is very

limited. Development of this facility is

especially crucial to Afghanistan because so

much of its agricultural income is derived from

sales to the international market. This

development can be best achieved through

participation of the private sector. At the same

time, however, the state must create an

enabling legal and regulatory framework for

private participation.

e) Certification & Branding

Agri-‐products of Afghanistan, particularly fruits,

nuts and vegetables, have a very good

reputation in the international market,

especially for their organic quality. The

potential for top-‐end sale prices exists, even

after factoring the high cost of exportation. As

yet, however, Afghanistan lacks a responsive

certification system to guarantee the origin,

quality and organic nature of these products.

With the world moving towards certification of

agri-‐products, Afghanistan must do the same.

Not only will farmers increase profits, but the

state can achieve more revenue.


Simultaneously, branding the products is

important to target domestic market. With

rising brand consciousness among consumers,

branding is prerequisite to compete with

imported products and establish a dedicated

consumer cartel.

f) Trade Treaties & Agreements

Another important aspect in targeting

international markets is participation in trade

agreements. Afghanistan has established trade

agreements with several countries (including

India, Iran, Pakistan and USA) and is trying to be

a member of World Trade Organization. Such

agreements and memberships will certainly

boost its access to regional and international

markets. The state must pursue this process.

Enabling Policy Environment

Producer-‐to-‐market linkage depends on a

vibrant private sector, still nascent in

Afghanistan. The Afghan government must

create an attractive environment for private

sector development in agribusiness. At the

same time, it must protect the interest of

agricultural producers. The state has an

important role to play in establishing producer-‐

to-‐market linkage though regulation,

monitoring and occasional need-‐based

intervention.

To connect Afghan agricultural producers to

domestic, regional and international markets,

Afghan government must work with donor

communities and private sector. Coordination,

communication and collaboration are crucial to

success here. The state and donors must seek

to establish a supply chain, rather than sporadic

interventions. The first step should be

developing a concrete model at a small scale,

which can be scaled up later at national level,

building on experiences. At the same time,

improving agribusiness activity needs vibrant

private sector participation. While the state

should strive to build an enabling legal and

policy environment for private sector

participation, the donors can build trust of

private sector in the emerging system and

directly invest in infrastructure. Future

interventions to connect Afghan agri-‐producers

with markets must build on local experiences,

considering future challenges, tailor made to

suit local context and must be sensitive to local

culture.

Producer-‐to-‐market linkage can take various

forms, including: a) farmer to domestic trader;

b) farmer to retailer; C) linkages through a

leading farmer; d) linkages through

cooperatives; e) farmer to agri-‐processor; f)

farmer to exporter; and g) contract farming.

Each model has its own specific requirements.xi


However, considering that Afghanistan and its

agriculture sector are at an early stage of

development, this paper recommends simpler

forms of market linkage, with less risk. More

complex forms of linkage will develop over

time.


END NOTES i United States Department of Agriculture, Foreign Agricultural Services. Retrieved from http://www.fas.usda.gov/country/afghanistan/us-afghanistan.asp, on 20 September 2012. ii CIA World Fact Book. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/af.html on 20 September 2012.

iii Andrew W Shepherd. 2007. Approaches to Linking Producers to Markets: A Review of Experiences to Date. Agriculture Management, Marketing and Finance Occasional Paper 13. Rome: Food and Agriculture Organization of the United Nations. iv 2011 Afghan Agricultural Economy Update, USDA Foreign Agricultural Service. Retrieved from http://static.globaltrade.net/files/pdf/20110728224517739.pdf on 20 September 2012. v Retrieved from

http://afghanistan.usaid.gov/en/programs/agriculture on 21 September 2012. vi USAID. 2011. Accelerating Sustainable Agriculture: ASAP Final Report. Afghanistan: United States Agency for International Development. vii Retrieved from http://www.cardf.gov.af/ on 21 September 2012. viii Interview with a senior official of RBSP, 15 September 2012, Kabul. ix ADB. 2011. Rural Business Support Project (RBSP) Afghanistan. Afghanistan: Asian Development Bank. x Interview with the director of a lead exporting company, 18 September 2012, Kabul. xi Andrew W Shepherd. 2007. Approaches to Linking Producers to Markets: A Review of Experiences to Date. Agriculture Management, Marketing and Finance Occasional Paper 13. Rome: Food and Agriculture Organization of the United Nations.

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