Investment Risk in Afghanistan
Risk Associated with Investing in Afghanistan in 2016
January 28, 2016
Demyan Plakhov - Primary Article Contributor following AfPak
Nathan Sukhdeo - Team Leader following AfPak
Keywords: Market, Security, Development, Afghanistan, TAPI, Investment
Many years of conflict has engulfed Afghanistan in treacherous conditions, which has left the government in need of desperate reconstruction. In this process, the United States and Great Britain have been – to some extent – helpful in supporting forces to secure vital territories and projects that can help rebuild the country. Furthermore, Afghanistan and Pakistan are recharging their cooperation in alliance to take down negative opposition forces that are threatening the reconstruction of the region. Investing in regions of Afghanistan and Pakistan has been very difficult and dangerous, with the presence of the Taliban and the expanding Islamic State. However, with this risk, Afghanistan and Pakistan have been able to prove that investing in the region assists in the reconstruction and is possible to contain with proper security enforcement.
Withdrawing U.S. and NATO troops from Afghanistan has increased the control of Taliban in many regions of the country. The training of the Afghan troops has been proven to be unsuccessful to its projected extent, and has resulted in many failed attempts at securing war-plagued regions of the country. With the addition of the expanding Islamic State, the situation has become more complex and unstable – increasing the risk of investing in restoration developments.
As of 2014, the Afghan security forces had sustained more than 5000 casualties, primarily due to corruption, weak logistics, remoteness of regions and lack of medical support. With the expansion of the Islamic State into Afghanistan, some are suggesting an alliance with the Taliban – the enemy we know. More significantly, the presence of another group such as IS, which is proven to be incredibly violent, will bring additional convolution to the conflict and damage Afghanistan’s rejuvenation.
Even with these troubling threats at hand, the Afghanistan government has initiated a cultivating energy project of grand scale. What some call to be the ‘Afghanistan Land Bridge’, is a gas pipeline reaching over 1 000 miles, in most dangerous parts of Afghanistan and into Pakistan and India. The ambitious $10 billion TAPI – Turkmenistan, Afghanistan, Pakistan and India – pipeline “could bring prosperity and stability”. The TAPI pipeline could foster cross-border energy projects and has the ability to rebuild friendly international relations between the four countries. A project of this scale will bring further development in Afghanistan and Pakistan if it can be secured. The Afghan President, Ashraf Ghani has called it the “superhighway of cooperation”, and the Pakistani Prime Minister, Nawaz Sharif, has concurred with this position stating that it will bring “greater regional economic collaboration”.
This pipeline is a chance for the nations to collaborate with security forces and stand together against a common opposition, unifying them in solidarity. Considering the TAPI pipeline as an example, Afghanistan will need to protect it since it will be crossing into the heartland of the Taliban. As well, with the growing threat of IS extension into Afghanistan, the TAPI pipeline will be under extreme risk and will need protection from all four countries. The Taliban also reportedly support the pipeline, which could be a disconcerting warning that they would want to take control after its establishment. To protect the pipeline, Afghanistan has assured that 7 000 troops will secure the 1 000 mile pipeline from opposition – this would have 7 Afghan soldiers per mile, which has been indicated to be enough. Nonetheless, the remaining countries of this agreement must also contribute in forces and Pakistan has confirmed that it will assist with a military contribution of an unspecified amount. Although India has yet to state its position on providing security for the pipeline, Indian Vice President Mohammad Hamid Ansari is likely to push for security cooperation after affirming that the pipeline is the “first step [toward] unification of the region”. The prospect for resource development in Afghanistan and Pakistan, is not only dangerous, but appears to have more risk than benefit. However, over time, this risk may be mitigated by a continued focus on supporting the training of domestic security forces.
