Industrial sector

Library of Congress, Country Study, Afghanistan, 14 January 2002


Afghanistan's industrial sector was still at an infant stage at the time of the Soviet invasion. The bitter fighting that ensued disrupted the emerging industrial structure and hurt many industries. In comparison with agriculture, industry made relatively small contributions to GDP and employment-about 21 and 10 percent, respectively, in 1982. These figures were up slightly from the 1966 levels of 20 percent and 6 percent. The public sector dominated the industrial scene, but private enterprise still flourished in handicrafts and small-scale concerns. Afghan industry was primarily concerned with processing local agricultural raw materials and mining local mineral resources. Unlike many other less developed countries, there were few import-substitution industries, and before 1978 there was considerable freedom to import industrial goods, especially consumer goods. Aside from the difficult security situation, the economy confronted substantial constraints impeding rapid industrial growth. These related to the country's very poor income level, poor investment infrastructure, and geography. Transport remained costly and slow, and the domestic market was still fractionated and traditional. There was little experience in management and a serious shortage of technical skills. Outside observers, however, felt that Afghanistan still had some comparative industrial advantages because of its low labor costs and the potentially large supplies of agricultural raw materials as well as mineral resources. The Afghan government placed a very high priority on industry. Industrialization was perceived as a means of improving the physical quality of life and also transforming the social relationships of the country.


In 1985 Afghanistan produced large amounts of natural gas and was preparing to exploit further other natural resource deposits. Natural gas was the most important mineral resource and industrial product. The country was thought to possess 110 to 150 billion cubic meters of total reserves. With Soviet assistance, production began in 1967 at the Kwoja Gugerdak field, 15 kilometers east of Sheberghan in Jowzjan Province. The field's reserves were thought to be 67 billion cubic meters. The Soviets also completed in 1967 a 100-kilometer gas pipeline, 820 millimeters in diameter, linking Keleft in the Soviet Union with Sheberghan. Other fields were discovered at Kwaja Bolan, Yatim Taq, and Jousik, with reserves of about 2.5 billion cubic meters. Gas production rose from 1.68 billion cubic meters in 1968 to 2.8 billion in 1980. In 1982 a new field at Jarquduk, also in Jowzjan, started production, again with Soviet aid. In spite of the new field, gas production slumped somewhat after the record year in 1980. In the mid1980s the country was producing about 2.5 to 2.6 billion cubic meters annually. The government attributed this decrease to reduced pressure in the gas fields (see table 8, Appendix).

The government placed a high priority on expanding the country's natural gas industry. In 1985 the Afghans, with Soviet assistance were trying to restore pressure in the existing fields. In 1978 a gas desulfurization plant was completed by the Soviets at Jarquduk with a capacity of 2 billion cubic meters annually. The plant could also produce 15,000 tons of condensate annually. Geologic exploration intensified in the early 1980s with the key assistance of Soviet experts, despite hazards to their physical safety. Satellite photos were also used. In 1984 two new gas fields were found at Bashikor and Jangal in Jowzjan. Work on a second gas pipeline to the Soviet Union was also under way in the mid-1980s.

The Soviets had long exhibited interest in the natural gas deposits across the Amu Darya in Afghanistan. They began geologic exploration in earnest in 1957 with the conclusion of a technical assistance agreement. From the beginning, Soviet aid was designed to promote large exports of natural gas to the Soviet Union. Although production started in 1967, there was no Afghan gas consumption until 1975, when about 2 percent of the output was diverted to a thermal power plant at Mazar-e Sharif. The value of these gas reserves jumped with the advent of the Iranian Revolution. In late 1979 a dispute over prices caused Tehran to halt gas exports to the Soviet Union. It was, as a result, a cold winter for many citizens of the Soviet Central Asian republics. After their intervention in Afghanistan, the Soviets secured control of the Afghan gas facilities, whose production aided the development of the Turkmen, Uzbek, and Tadzhik republics. By the mid-1980s gas exports to the Soviet Union represented 90 percent of total production and constituted a vital element in the Afghan budgetary and trade picture. The Soviets, however, paid Afghanistan a very low price for gas; in 1981 it was only half the price of Soviet gas piped to Western Europe. These relatively low prices dated back to the initial Afghan gas exports. Whereas world gas prices varied according to calorific value, Afghanistan received prices far below those of any major world exporter. In addition, Afghan officials were unable to verify the actual amount of gas pumped to the Soviet Union because the meters were on the Soviet side of the border, and Afghan officials had no access to them.

Afghan gas consumption was concentrated in the city of Sheberghan, where in 1982 a local distribution network was finished. About 3,000 homes had access to the network. In 1980 the thermal electricity plant at Mazar-e Sharif was converted to operate on coal rather than gas. Gas still powered the thermal plants providing electricity for Balkh and Mazar-e Sharif, and the fertilizer plant at Mazar-e Sharif used gas as a production input.

Petroleum exploration in Afghanistan began before World War II when an American firm, American Inland Oil Company, undertook field surveys. In the late 1930s the Americans withdrew because of the unsettled international situation and the declining world oil market. After World War II the Afghans invited the French to develop potential petroleum resources in the north. The Soviets protested operations of a North Atlantic Treaty Organization country beside their border, and Afghanistan therefore replaced the French with a Swedish team in 1954. In 1956 the Afghans had their first oil find, and, with further Soviet help, the oil reserves were evaluated. The country was estimated in 1978 to have petroleum reserves totaling some 70 to 100 million barrels located in Faryab and Jowzjan provinces. In late 1984 there were reports of seven new oil fields discovered with Soviet aid. By 1984, however, Afghanistan was not producing oil, but fields in the Saripul region of Jowzjan were being prepared. Another indication of significant petroleum discoveries was the government's plan to build a petroleum refinery in Jowzjan with an annual capacity of 500,000 tons after crude oil production commenced. Until Afghanistan starts its own petroleum production, it will remain dependent on Soviet refined products to meet its national needs.

In 1985 coal was Afghanistan's second major hydrocarbon resource. It was the oldest fuel industry, dating back to shortly after World War I. All Afghan coal production was consumed domestically, and official statistics did not show any imports of coal. The main user of the coal was the electric-power industry in thermal plants in the Mazar-e Sharif region. The emphasis on natural gas exports to the Soviet Union made coal the primary fuel for domestic industry. Despite labor shortage problems, production rose steadily during the 1970s but then slumped after 1979. Although it recovered somewhat, official figures show that in 1983 coal output was still 24 percent below the 1978 level. Other observers guessed the 1983 figure to be only a third of the 1978 level. Coal production was centered in three mines: Darra-i-Suf, south of Mazar-e Sharif, and the older Karkar and Ispushta mines near Pol-a Khomri. The latter two mines had been in operation since the 1950s and were thought to be nearly exhausted. The Darra-i-Suf coal was of very high quality, and some was suitable for coking. Opened in 1966, the field was Afghanistan's largest, possessing an estimated 60 million tons of highquality coal reserves. The country's overall coal reserves were estimated to be about 400 million tons in 1975.

In January 1984 a report was published by the chief engineer of the Afghan Geological Survey Department of Soviet uranium mining in Afghanistan. It revealed that uranium production was begun in the mountains of Khawaja Rawash north of Kabul after the discovery of deposits in 1983. Soviet engineers were also said to be mining uranium at Koh Mir Daoud, between Herat and Shindand, and also in the Khakriz area of Qandahar province. The uranium projects were restricted to Soviet personnel in order to maintain secrecy and security. All production was sent to the Soviet Union.

Afghanistan has reserves of a wide variety of nonenergy mineral resources, including iron, chrome, copper, silver, gold barite sulfur, talc, magnesium, mica, marble, and lapis lazuli. By 1985 Soviet surveys had also revealed potentially useful deposits of asbestos, nickel, mercury, lead, zinc, bauxite, lithium, and rubies. The Afghan government in the mid1980s was preparing to develop a number of these resources on a large scale with Soviet technical assistance. These efforts were directed primarily at the country's large iron and copper reserves. The iron ore deposits contained an estimated 1.7 billion tons of mixed hematite and magnetite, averaging 62 percent iron. These reserves, among the world's largest, are located at Hajji Gak, almost 4,000 meters up in the Hindu Kush, northwest of Kabul in Bamian Province. Development started in 1983, and because the Afghan authorities had put forth no plan to establish an iron and steel industry, the output appeared destined for the Soviet steel mills in Tashkent.

Afghanistan's largest copper deposits were in Aynak 50 kilometers southeast of Kabul. The reserves were thought to contain about 280 million tons of 0.7- to 1.5-percent copper ore. The Aynak deposits were being developed with considerable Soviet and Czechoslovak aid. Because the Afghan ore was of a grade notably superior to Soviet ore, the Soviet firm Machinoexport was preparing the infrastructure for a mine and mill having an annual capacity of 114,000 tons of copper concentrate. A smelter was being built near the Soviet embassy in Kabul to receive the mill's output. The US$600million project was scheduled to start up in 1985.

The Soviets were also involved in chrome extraction in the southeastern part of Afghanistan. By 1985 two main deposits had been identified at Hesarak in Nangarbar Province and at Mohammad Agha in Lowgar Province. Another mineral produced in Afghanistan was barite. The Sangilayan mine, 65 kilometers northwest of Herat, had an output of about 12,000 tons annually during 1977-79; figures after that period were unavailable in late 1985. Reserves amounted to 867,000 tons, and there were another 300,000 tons of inferred reserves. Plants at Ghori, Jabal os Saraj, and Herat produced cement. Output fell sharply after the Soviet invasion but then rebounded to preinvasion levels by 1983. The Ghori plant was the largest producer of the three.

Before the 1979 Soviet intervention, precious and semiprecious stones were a major industry in Afghanistan. Eighty percent of the world's lapis lazuli had come from the country. These minerals came from Sar Sang, a remote region in the high ranges of the Hindu Kush. Production, thought to be 6,000 kilograms in 1979, fell sharply after the Soviet invasion. The extent of the decline, however, was unknown.


By the 1980s the manufacturing sector was still at an early stage of development. Other than handicrafts, the importance of manufacturing to the economy was relatively slight compared with mining. Factories generally depended on local agricultural raw materials for production. The first industrial plants were established by private entrepreneurs, led by Banki-Melli, and received government support in the form of monopoly concessions. By the outbreak of World War II, the bank had set up joint stock companies for cotton ginning, cotton textiles, edible oil extraction, and sugar refining. The war disrupted further progress, and private investment lagged.

In order to speed the pace, during the first two development plan periods, from 1956 to 1967, the government set up a number of industrial enterprises with foreign aid and technical assistance. Although the government sought to stir private investment with the 1967 FDPIL, the public sector became increasingly involved in industrial activities. The government took over weak or abandoned enterprises from the private sector, such as the Woolen Industries in Pol-a Charkhi, formerly owned by Germans. The nationalization of banks in 1975-76 made the government a majority shareholder in some of the largest manufacturing firms, such as Afghan Textiles, formerly owned principally by Bank-i-Melli. By the mid-1970s the public sector controlled nearly all large-scale industry, representing most of the country's industrial investment. This provided only a fraction of total industrial output and employment, however. The most important public sector industries were based on cotton and were usually located in the north and east of the country near cottongrowing regions. Other major public sector enterprises included cement and construction materials at Ghori, urea fertilizer at Mazar-e Sharif, and food processing, mainly in Kabul. Although the government sought during the 1970s to establish some importsubstitution industries, domestic consumption of manufactured goods consistently equaled or surpassed the sector's capacity in the few areas where there was domestic production. In addition, the public sector lacked any capital goods production facilities, with the exception of the Jangalak Ironworks, which produced furniture, spare parts for Soviet-made vehicles, and related material. Nearly all industrial goods, therefore, had to be imported. After the PDPA took power, it assumed control of all heavy industrial enterprises. It then denied private enterprise any role in major industrial operations.

Private nonagricultural enterprise was usually small and family based. Private sector activities included services, such as internal and foreign commerce and transport. There was also a small private industrial sector, which included such operations as small machine shops and furniture-making establishments. Most of these shops were found in Kabul. The most important private industrial activity was handicrafts production. In 1981 the government estimated that the handicrafts sector contributed 9 percent of GNP and employed 300,000 people, far more than the work force in heavy industry and mining combined. Most of the workers were women. Handicrafts production was scattered throughout the country but was specialized by region. Textile embroidery and leather goods were found mostly in the south around Qandahar. Wood and stone carving were concentrated in the northeastern provinces, while jewelrymaking was done primarily in the Kabul area. Carpet and rug weaving, the most important handicraft, came from the north and northwest. Carpets and rugs provided over 10 percent of export revenues in 1981 and were especially popular in Western Europe. In addition, a significant number of carpets were thought to go into Iran unofficially. Afghan carpets were made of pure wool and were hand-knotted. Apart from carpets, however, the quality of handicraft goods was often poor. Production techniques were simple and had scarcely changed for generations. Output was directed primarily to local markets and was limited in volume. Crafts were often disappearing from the larger cities because the small elite's tastes were changing. It was developing a preference for modern imported goods rather than traditional objects of wealth. Artisans retained markets in smaller towns that served a traditional hinterland. Except for the small elite, however, private industrial operations continued to serve most people's needs for clothing, furnishings, and building materials.

Effects of the War

The outbreak of fighting in 1978 curtailed the output of manufacturing, as it did for coal mining. Some production facilities, such as the Kabul bakeries, were damaged. Shortages of agricultural raw materials plagued certain industries, and there were also serious shortages of skilled labor. Many workers either fled the country, joined the resistance, or were drafted into the army. Internal transport difficulties prevented part of the available industrial crops from reaching the processing plants. The textiles and food-processing industries, particularly dependent on the hard-pressed agriculture sector for their inputs, were especially depressed. Even official statistics admitted a dramatic reduction in their output as supplies of industrial crops-cotton, wool, oilseeds, and sugar beets-declined. Ginned cotton production decreased by 73 percent between 1978 and 1982; cotton textile output fell 50 percent. Other textile production also decreased. The rayon industry, dependent on imported inputs, was hurt by transport difficulties, and production fell by 71 percent. Output from woolen textile plants also declined by a third during the period. In the foodprocessing industries, sugar production plummeted by 97 percent between 1978 and 1982, and vegetable oil production fell by 73 percent. The bakeries were able to use Soviet wheat imports to maintain their output. The output of carpets also fell during the period.

The government, however, claimed significant industrial success and said that greater wheat flour and bakery production were recorded in 1982 than in 1978. The fertilizer plant at Mazar-e Sharif was said to have increased its output by 6 percent during the first five years of PDPA rule. The government also claimed that coal and cement production were rising steadily after initial dramatic reverses in the early 1980s. Industries that exported heavily to the Soviet Union, such as natural gas, fertilizer, and cement, received substantial Soviet aid. Soviet assistance was a key factor in maintaining Afghan industrial output levels, even for bakeries dependent on Soviet wheat imports. According to the government in March 1984, 70 percent of state industrial production came from AfghanSoviet projects. The overall industrial situation reflected a decline and a growing dependence on trade with the Soviet Union and Eastern Europe in general.