|Event Date||September 24th 2019|
|Event Venue||Baran Imparatory Hotel, Balkh|
|Event Topic||Financing the Carpet Value Chain|
|Supported By||World Bank Group and ACCI|
|Number of Participants Invited||65|
On September 24, 2019, the Afghanistan Center for Excellence (ACE) in coordination with the Executive Committee on Private Sector Development (PriSEC) organized its first Public Private Dialogue (PPD) event in Balkh province on Financing the Carpet Value Chain. For better coordination, ACE managed the event in collaboration with ACCI. Representatives from the government, private sector, and international partners were invited to attend.
Responsibility for event coordination and facilitation amongst the ACE and PriSEC team members was based on the relevancy of the topic to relevant PriSEC and ACE team members and PriSEC Working Groups. Accordingly, the following representatives attended the event from Kabul:
- Khalil Rahman Burhani – Technical Advisor at PriSEC Secretariat
- Shekib Mir – Director of Financial Inclusion Department at the Central Bank
- Shoaib Rahim – PPD Consultant at ACE
- Massoud Wardak – PriSEC Consultant at ACE
- Farhad Ahmad – PriSEC Consultant at ACE
Facilitator: Shoaib Rahim (PPD Consultant)
- Farhang Farhang, Sectorial Director, Balkh Governor Office
- Abdul Satar Bikzada, Director, Northern Zone Carpet Association
- Shekib Mir, Director of Financial Inclusion, Central Bank
- Khan Nazar Nazaryar, Zone Manger, Agha Khan Bank
- Shekiba Shekib, Chair, AWCCI
The anticipated number of participants for the event was 65, including representatives from all sectors of the carpet value chain, the private sector, the government, donor agencies working in the area, and civil society. On the day of the event, the participation rate was negatively impacted due to the upcoming elections, the president’s visit to Balkh, road blockages, and recent security threats in the city. Despite these challenges, the event was well managed and major stakeholders of the carpet value chain were well-represented at the event.
Private sector representatives to the PPD included BMO members, carpet association members, carpet weavers, carpet washers, carpet sellers, and carpet exporters. Financial institution representatives included staff from the Central Bank, the First Micro Finance Bank, and the Afghan United Bank. Government representatives included staff from the Office of the Balkh Governor, the Ministry of Industry and Commerce (MoIC), the Ministry of Agriculture and Livestock (MAIL), and the Ministry of Rural Rehabilitation and Development (MRRD). Civil society representatives included two television journalists and a university professor.
Key issues and challenges addressed during the event:
- Lack of comprehensive carpet sector studies by financial institutions
- Lack of formal business documentation in the value chain for categorizing legitimate businesses
- Lack of collateral or guarantee for supporting carpet sector loans through financial institutions
- Lack of industrial parks or cities for a unanimous carpet production center and a centralized wholesale market
- Lack of support from MoIC on identifying and linking with international markets, providing access to industrial lands, and responding to the demands of local carpet producers
- Lack of licensed/certified craftsmen for carpet weaving to improve production quality and standardization
- Lack of carpet weaving schools to further improve the quality of products and build capacity within the industry
- High tariffs on the domestically produced carpet exports
- Lack of marketing and public awareness in international markets on locally produced Afghan carpets
- Lack of standards and quality control on the production, export, and import of carpets and its production inputs, such as the raw material used for carpet production
- Lack of coordination of among MoIC, carpet associations, and carpet weavers, which leads to gaps between supply and demand in the sector
- Delays in the import of raw materials including wool, chemical washing material, and dyes. These challenges often necessitate exporting unfinished carpets to neighboring countries for further processing.
- Lack of marketing local carpet products through Afghan commercial attachés abroad, MoIC and carpet associations, and lower entry barriers on the imports of foreign carpet products
- Lack of coordination and unity among carpet associations and carpet sellers
Key messages, outcomes, and recommendations:
- Commercial banks and microfinance institutions should conduct sectorial studies and identify markets to support financing the carpet value chain.
- The Central Bank, commercial banks, and BMOs should support capacity building initiatives in various stages of the carpet value chain.
- The Central Bank, commercial banks, and BMOs should support and ease documentation requirements from sectorial businesses and licensing in order to facilitate access to finance through formal mechanisms.
- MoIC, municipalities, commercial banks, and BMOs should work on formalization of the carpet value chain and provide sectoral licenses to officially recognize and categorize skilled labor and support expansion of the carpet sector.
- MoIC in coordination with BMOs should facilitate access to international markets and exhibitions in the carpet sector. This activity should be further extended to awareness programs conducted for carpet producers about the demands of international markets.
- Though much existing industrial land is currently occupied illegally, MoIC should provide carpet sector entities official access to industrial parks/cities.
- Donor agencies should support establishment of carpet weaving schools to train the labor force in the sector and provide skilled labor licenses/certifications.
- MoIC and Ministry of Finance (MoF) should work on improving quality control at customs for both imported and exported raw material in the carpet value chain. This activity should include quarantining imported and exports raw and finished goods for quality control.
- MoIC and MoF should institute preferential tariffs for domestically produced carpets.
- MoIC, MoF, and BMOs should ensure on-time import and export of finished carpet products and raw materials at customs.
- Carpet associations should take the lead on establishing quality standards and conducting quality control and verification of carpet quality. Similarly, the associations should also conduct raw material quality control based on established standards on imported goods.
- The Government of Afghanistan should promote locally produced carpets in government offices to increase demand in the domestic market.