a comprehensive study of marble industry in afghanistan

Transcription

A COMPREHENSIVE STUDY OF MARBLE
INDUSTRY IN AFGHANISTAN
Abdul Ghafar Rassin
April 2012
Research & Statistics Department
Afghanistan Investment Support Agency
Research & Statistics Department, AISA
The views expressed in this paper are those of the author and do not necessarily
reflect the official position of AISA (Afghanistan Investment Support Agency).
ii
Acknowledgement
This paper reflects the work, ideas, and generosity of many individuals and
organizations within the Afghan government and particularly at Afghanistan Investment
Support Agency (AISA).
At AISA, I would like to thank the top management, especially Naseem Akbar the
Acting CEO, for their continuous support to the Research & Statistics department. I
should express my gratitude to all colleagues in the department, particularly to Omar
Joya and Mir Tawfiq Ansari who provided insightful comments and guidance throughout
this study.
At the Ministry of Mines, my special thanks go to Marzia Akbari for her endless
cooperation with our department, to Sayed Zaman Hashemi for supplying us information
on legal aspects, and to the staff of Cadastre department.
At AMGPA (Afghanistan Marble Granite Processing Association), I am especially
grateful to Engineer Rahmatullah Rahmat and Haji Kamali who frequently provided me
with helpful information. I should acknowledge that without Engineer Rahmat’s help, this
report would not have been as informative at it is now.
At AMIA (Afghanistan Marble Industry Association), my great appreciation goes
to Nasim Doost and Mr. Mohebi for sharing all information that helped me to complete
this report. I also thank Mr. Daqiq who explained in every detail the marble process at
the factory of Nasim Doost.
Finally, Daryosh Tabesh, Ahmad Shah Momin, Abdul Samad Katawazy and
Qudratullah Halimi have assisted in the research through surveys, onsite visits, and
data collection, to whom I am grateful.
Abdul Ghafar Rassin
[email protected]
iii
Executive Summary
Since 2003, there have been huge private investments in Afghanistan – $1.8
billion foreign and $3.8 billion domestic investments. Most of these investments are
allocated to the construction, telecommunications, banking, and transportation sectors.
Other industries, such as the marble and granite industry, despite having huge potential
for investors, have been overlooked. Therefore this report thrived to examine the
hypothesis that those industries which received no attention from the government and
investors – in this case the marble industry – have good potential to grow and can have
high return for investors.
The objectives of this paper are to study the market structure and performance of
marble industry, to look at the potential opportunities from an investor’s prospective, to
identify the constraints and factors of market failure, and to finally recommend
measures and actions for the development of this industry.
In order to serve the objectives of this paper, we relied in my methodology on
using the SCP (structure-conduct-performance) model to study the market structure and
performance, whilst we employed a more general approach for the identification of
market opportunities and constraints. Data and information was collected through onsite
visits to businesses and factories, interviews and discussions with business owners,
heads of associations and officials at the Ministry of Mines, and previous studies and
reports made on marble industry in Afghanistan and in the neighbouring countries.
The paper argues that given the strong growth of the global market for marble
and the increasing demand in most regions of the world, there is strong potential for
marble exports – and thus production – in Afghanistan. Estimates show that the annual
growth rate of marble production in the world is over 8 percent. Average world annual
production of marble is over 100 million metric tonnes and world consumption is
equivalent to $40 billion. Almost half of world’s marble output is consumed in the Middle
East, Far-East and in European countries.
The Afghan marble industry has grown by 60 percent since 2008, and it should
be a good reason for the government to place this sector at its top priority for support.
Based on the data collected by the Ministry of Mines, our projections show that marble
industry in Afghanistan in terms of number of employees, size of production, and share
in GDP could grow fivefold over the next five years. However, these projections are
based on some hypotheses discussed in Chapter 4 of this paper under the
Recommendations.
Using an SCP model, we found that although the marble industry is fragmented
in Afghanistan, few big players control the market price. Due to lack of competition –
which is the result of a non-efficient market structure – firms’ performance and conduct
iv
are not desirable; while their prices are very high, the quality of their finished products in
terms of polishing and finishing is dire. As a result, Afghan market is dominated by
foreign products. Moreover, there is no tendency among the Afghan firms to acquire
new technology and to improve their industrial and marketing management.
To resolve all these problems arising from market deficiencies, the paper
recommends that the government (i.e. Ministry of Mines and Ministry of Finance)
provide incentives for firms operating in marble quarrying to increase their output and
acquire technological upgrading. Since the supply chain for marble production has two
major stages, namely quarrying and processing, any incentive designed to increase the
production will result for firms operating in both quarrying and processing to employ
standard and more modern technology (to be able to produce more). An increased
supply of goods at the first stage of supply chain will increase the supply of goods at the
latter stage. Thus, the processing plants will equally employ more standard technology
to catch up with the extra supply of quarrying firms. When the amount of final product in
the market is increased, the prices will fall. The incentive to encourage quarrying firm to
increase production will have the following effects:
 Fall in the prices – this can increase share of Afghan firms in domestic markets
 Usage of more standard and modern technology which increases productivity of
Afghan firms, and allow them to benefit from economies of scale
 Increase quality of Afghan products due to the usage of standard machinery, this
in turn may increase the exports of Afghan marble at the global market
 Finally, increase competitiveness of Afghan firms (through higher quality and
lower prices)
To identify investment opportunities and constraints in the marble industry in
Afghanistan, we look at the marble market from supply and demand prospective. Over
half of the world marble output is consumed in regional and European countries, and
Afghanistan can potentially supply these markets – given the unique quality of Afghan
marbles. Almost 85 percent of domestic market is dominated by Pakistani marble; this is
only due to lower prices. Therefore, there is huge external and internal market for
Afghan marble products. However, looking from the supply side, despite the fact that
Afghanistan has almost infinite reserves of best quality marble, the industry is still very
small. The main constraints are attached to the factors of production; shortage of land
for processing plants, lack of skilled labour, lack of capital, lack of technology and
modern machinery, and finally lack of entrepreneurial skills. In order to respond to these
constraints, the paper recommends various institutional arrangements (such as creating
an independent agency for the development of industrial parks, providing capital to firms
in need of liquidity, establishing training schools for mining workers, etc.).
v
List of abbreviations
AISA
Afghanistan Investment Support Agency
AMGPA
Afghanistan Marble Granite Processing Association
AMIA
Afghanistan Marble Industry Association
BGS
British Geological Survey
DFID
Department for International Development
EPAA
Export Promotion Agency of Afghanistan
GDP
Gross Domestic Product
MoM
Ministry of Mines
R&D
Research and Development
SCP
Structure-Conduct-Performance
UNDP
United Nation Development Program
USAID
United States Agency for International Development
USGS
United State Geological Survey
Note:
The conversion rate used in this paper for converting Afghanis to US dollars is AFN 50 = $1.
A billion means a thousand million.
vi
Contents
Pages
• Introduction
1
•
2
Methodology
Chapter One
1. Overview of marble industry
3
1.1 The world marble markets
4
1.2 Regional markets
6
1.3 Pakistan marble industry
7
1.4 Afghanistan marble industry
8
1.5 Comparison of Afghanistan and Pakistan marble industries
10
1.7 Five years projection of Afghan marble industry
11
Chapter Two
2. Market Analysis
12
2.1 Market structure
13
• Number and size distribution of firms
• Type of product
• Ease of entry and exit
• Information flow between buyers and sellers
• Vertical integration
• Control over prices by established firms
2.2 Firms conduct
•
Policy objectives
•
Pricing objectives
•
Marketing strategy
•
Research and development
14
2.3 Firms performance
•
Profit margin
•
Efficiency
15
vii
•
Product quality
Chapter Three
3. Market Opportunities
19
3.1 Raw materials
20
3.2 Demand within internal and external markets
22
4.2 Factors of production
24
• Land
• Labour
• Capital
• Entrepreneurial skills
• Technology
Chapter Four
4. Recommendations
31
4.1 Role of government
32
4.2 Role of private sector
34
4.3 Role of donors
35
5. Conclusion
37
6. References
38
Appendix A
List of marble association members
Appendix B
Calculations
Appendix C
Location of marble reserves throughout Afghanistan
viii
I. Introduction
Thirty years of war not only destroyed the physical infrastructures in Afghanistan
but also eradicated the regulatory, social, political and economic institutions which
guarantee for an efficient environment for investment. Fortunately, since the fall of
Taliban regime in 2001, the government has been engaged in establishing and
developing the institutional requirements and arrangements which are necessary for
investors to do business in Afghanistan. As a result, many investment opportunities
heaved up in the country and investors are increasingly investing in all sectors.
However, some sectors such as construction, telecommunications, banking, and
transportation sectors have received most of the investments, whereas other potential
sectors – such as marble production – have not attracted much attention.
There are many papers and reports, written by various institutions, which
address the quality and quantity of Afghan marble. ASMED (2010), Afghanistan Marble
Industry Directory, argues that Afghanistan has over 400 varieties of marble with total
value of around $150 billion up to $200 billion. Mitchell (2008) discusses the size of
marble reserves in Afghanistan, and asserts that Afghanistan can supply marble to
regional and international markets almost for indefinite period of time. This means that
Afghanistan has endless amount of marble reserves. Moreover, other studies such as
the OTF Group (2006), Stephen (2007) and EPAA (2006) discussed the potential of
marble industry in Afghanistan that can be a driving force of the Afghan economy. The
paper by Yahya (2009), using Porter’s Diamond Analysis model, found a series of
problems such as absence of cluster. His paper thoroughly analysed the weakness and
strength of Afghan marble industry. The model he employed was a management model
– more helpful for existing firms to draw strategy for future.
These studies also addressed the issues that marble industry faces in a crude
way. A critical assessment of these reports would suggest that they all focus on the
quality, quantity and the potential demand and supply of Afghan marble within domestic
and foreign markets. Neither these reports rigorously study the market characteristics in
order to find all underlying problems that curb potential growth of the industry; nor do
they look at the market from an investor’s perspective, by adopting a clear cost-benefit
approach or simply explaining the profitability of this business for investors.
This paper, however, touches to those issues which are left undiscussed by
previous studies. The main objectives of this paper are to:
•
•
understand the overall nature of marble business in the world, regional and Afghan
markets;
study the characteristics of the marble industry in Afghanistan, particularly the
market structure and performance;
1
•
•
identify potential investment opportunities in marble industry, by taking a clear costbenefit approach and demonstrating the profitability of this business from an
investor’s viewpoint;
have recommendations to both public and private actors in order to correct market
deficiencies and to improve the market conditions to reach its optimal productivity,
competitiveness and profitability.
The perceived value of this paper is to get a clear picture of current marble
business, both from an investor’s prospective to invest in Afghanistan and from the
governments prospective to support the industry.
The next section explains the methodology used in this paper for studying the
marble industry. Chapter 1 makes an overview of marble business in the world and in
the region. Chapter 2 studies the marble market in Afghanistan, mainly the market
structure and performance. Chapter 3 looks at potential investment opportunities in
Afghanistan for marble production. Chapter 4 presents some recommendations to both
public and private actors for further enhancement of the marble market in Afghanistan.
Finally, the last section concludes this paper.
II. Methodology
The methodology employed in this paper is based on two distinct approaches.
Chapter 2 uses the SCP (Structure-Conduct-Performance) model to study the structure
and performance of the marble market in Afghanistan. The SCP model is usually used
to analyze the relation among firms’ performance, firms’ conduct, and market structure.
The model states that market structure determines the firms’ conduct, and thereby sets
the level of firm’s performance. On the other hand, firms’ performance is determined by
their conduct, which in return depends on market structure. However, in this paper, we
do not focus on the nature of relation between the market structure and firms’ conduct
and performance. Instead, we simply use the SCP model to study the basic market
characteristics.
On the other hand, Chapter 2 adopts a clear cost-benefit approach to identify the
market opportunities. It looks at basic supply and demand conditions of the market and
determines the profitability of the business from an investor’s perspective.
For the data collection, we relied on both primary research through field surveys
and on secondary research on previous studies and reports. For field surveys, we
visited marble processing units and marble quarrying sites in Kabul, Nangarhar and
Herat provinces. Interviews and discussions with marble associations and MoM’s
officials were another main source of information. To find out how much the Afghan
marble industry has the potential for growth in terms of value addition and employment
opportunities, we will gather the required information and present them in conclusive
manner.
2
Chapter 1:
An overview of world marble industry
3
1. An overview of world marble industry
This section first talk about the world marble industry in terms of total production,
total consumption, and rate of growth, and will find out the top dominant countries in the
global marble market. In the second step, the paper will study the regional market for
marble production including Afghanistan. By using a supply and demand model, we can
get insight into the potential of this industry.
1.1. The world marble market
According to Mehdi (2006), the world total production of marble and granite
reaches over 100 million tons and total consumption is valued about $40 billion per
year. In 2010, the world export value of marble and granite was $62 billion. Since 1999,
world marble production grew at a high rate of 8.7 percent and the industry is expected
to grow over 8 percent till 2025.
Marble and granite are produced in more than 40 countries in the world. Italy,
Turkey, Spain, India and China are the top five dominant countries in terms of marble
production. These countries control over half of the world market – only Italy produces
over 17 percent of world marble. A major part of production is consumed locally by
producing countries, and only a small percentage of total production is exported. This
fact indicates that local supply of marble remains less costly, while the transportation
cost increases the price of exported marble products. Therefore, Afghan firms can win
the domestic market with least effort. Figure 1 and 2 show world top ten marble
exporters and importers.
4
Figure 1: World top ten marble exporters
Source: Korai et al (2011)
Figure 2: World top ten marble importers
5
1.2. Regional markets
The regional countries that dominate Afghan marble market are primarily
Pakistan followed by Iran. Despite the fact that India is a large exporter of marble in the
world, but due to high transportation cost – especially due to transit problem with
Pakistan – Indian exports to Afghanistan are very limited. According to the OTF group
report (2006), currently, almost 50 percent of the world’s marble output is consumed in
the Middle East, Far East and European countries. Hence, there is huge demand for
marble in these regions. The main country that dominates the Afghan marble market is
Pakistan, so there is need to study Pakistan’s marble industry.
Figure 3: Asian top ten marble importers
6
Figure 4: Asian top ten marble exporters
1.2.1. Pakistan Marble Industry
Despite that marble and granite have been mined for centuries and mass
production was introduced in the 20th century, the marble industry in Pakistan started to
develop in late 1960’s without any quality consideration. At that time most of the
processing equipments were made locally at Gujranwala and Lahore. In mid 1970’s, few
plants were imported from Italy which were of 2nd generation plants. Only in late
1970’s, few large companies and wealthy private businessmen imported modern
machineries and focused on higher quality products.
Since 1990, mining and quarrying of marble has consistently contributed by 0.5
percent to Pakistan’s GDP. The industry also employs around 40,000 workers.
According to Korai et al (2011), marble and onyx reserves in Pakistan are estimated
7
more than 300 billion tons. There are around 17 active quarries and 1600 processing
plants. Around 150 to 160 processing plants are equipped with appropriate machineries
(Korai et al, 2011). By producing more than 900,000 tons of marble, Pakistan only
contributes by 1 percent to world total production. In 2010, Pakistan’s marble and
granite exports reached $60 million.
1.2.2. Afghanistan Marble Industry
According to Mitchell (2008) Afghanistan has the potential to supply Middle
Eastern and Asian markets with an almost unlimited amount of marble. It is important to
mention that, as of now, not all Afghan marble deposits are discovered or surveyed
properly. According to some unverified reports, total estimated marble deposits in
Afghanistan reach over 9 billion tons as described in Table 1 below.
Table 1: Estimated marble reserves in Afghanistan
Province
Wardak
Jalalabad
Bamyan
Badakhshan
Herat
Helmand
Others
Total
Marble
(million m3)
1,500
3,500
/
1,300
30
300
2,500
9,130
Granite
3
(million m )
/
/
2,400
/
/
/
2,400
The US geological survey has discovered 66 marble and granite reserves in
Afghanistan, which are shown in Table 2 below.
Table 2: Number of marble and granite reserves per province
Kabul Parwan Nangarhar Wardak Bamyan Panjshir Laghman Herat Balkh
13 (M)
4 (T)
1 (OX)
5 (M)
2 (G)
2 (M)
1 (G)
3 (TRA)
2 (M)
3 (G)
5 (TRA)
8 (M)
7 (G)
Source: USGS, GPS Survey 2009
M: marble; G: granite; TRA: travertine; OX: onyx; OT: others
Figures in front of the brackets are number of reserves.
8
2 (M)
1 (G)
4 (M)
1(OT)
1 (M)
Afghanistan annual marble production is around 124,000 to 155,000 tons. But
over half of unprocessed marble goes to Pakistan and Iran. Total consumption of
finished marble in Afghanistan is around 270,000 tons. Around 80 to 85 percent of
Afghan market is dominated by Pakistani marble. Currently the total value added of the
Afghan marble industry is around $105 million which makes 0.6 percent of GDP
According to the Minister of Mines, Wahidullah Shahrani, “Afghanistan marble
boasts more than 100 high quality varieties, spanning diverse colors and patterns.
Current marble exports are estimated at $15 million per year. With improved extraction,
processing, infrastructure, and investments, the industry could grow into a $450 million
per year business” (US embassy, 2010)
Here in Afghanistan we have 31 active quarries, 72 processing plants and over
100 small-scale handicraft units (see appendix A for the details of these firms), and
4000 to 5000 people are directly employed in this industry. The overall growth rate of
the marble industry in term of production is around 60 percent per annum. This is due to
the fact that Afghan marble industry has been recently reinvented. But the growth rate
of 60 percent is not evenly spread over all marble firms e.g. a quarry’s production in
Herat province in the last 5 years grew at a rate of 100% (doubled every year) whereas
the production of a quarry in Kabul in the last 5 years only grew at a rate of 13%.
Figure 5 below shows the trend in marble production since 2008 – the data is
based on the contracts made between the Ministry of Mines and the private companies.
Production (in thousand tons)
Figure 5: Marble production over 2005-2011
50
45
40
35
30
25
20
15
10
5
0
2004
2005
2006
2007
2008
(Years)
Source: Ministry of Mines
9
2009
2010
2011
2012
1.3. Comparison of Afghanistan and Pakistan marble industries
In order to have a clear picture of the Afghan marble industry, there is a need to
compare the Afghan and Pakistani marble industries in terms of total production,
number of firms, growth rate, number of people employed in this sector, total exports,
and price per unit.
Table 3: Marble industry indicators in Afghanistan and Pakistan
Indicators
Afghanistan
Pakistan
155,000
950,000
Average annual growth rate (percent)
60
20
Number of firms
200
1600
Export value in 2011 (million US$)
15
60
4,500
40,000
Total value of marble industry in 2011
(million US$)
105
650
Share in GDP (percent)
0.6
0.5
Total production (tons)
Number of workers
1.3.1. Comparison between Afghani and Pakistani marble prices
The price of Afghan marble is much higher than that of Pakistani marble. For
example, the Chesht-e Sharif marble which comes from Herat province in Afghanistan
is priced 4 times higher than the Pakistani marbles. The White Afghan marble is 3 times
more expensive than the White Ziarat marble of Pakistan. In addition to the quality,
there are two other factors which have pushed the price of Afghan marble much higher;
e.g. the high production cost and the price strategy of Afghan firms. Afghan firms try
their best to have high profit margin (i.e. to increase the prices per unit of production)
without focusing on their market share (i.e. to concentrate on increasing their sales
through lower price). This is a very risky strategy, because in the long-term they might
lose their customers and may be forced out of the business. Table 5 shows the price of
different Afghan and Pakistani marble slabs. The quantity is the same for all products
(100cm x 30cm x 2cm).
10
Table 4: Price comparison of Afghan and Pakistani marble
Name and origin of product
Quantity
Price (US$)
White Ziarat marble, Pakistan
100 cm x 300 cm
5.1
Travertine (Teri-Wera), Pakistan
100 cm x 300 cm
6.1
Zebra, Peshawar, Pakistan
100 cm x 300 cm
5.1
Red & White, Peshawar, Pakistan
100 cm x 300 cm
6.1
Wardak marble, Wardak, Afghanistan
100 cm x 300 cm
12.2
Afghan White, Jalalabad, Afghanistan
100 cm x 300 cm
14.3
Chesht-e Sharif, Herat, Afghanistan
100 cm x 300 cm
26.5
Rokham marble (Onyx), Helmand, Afghanistan 100 cm x 300 cm
40.8
1.4. Five year projection of Afghan marble industry
Despite the fact that all micro- and macro-level data are not available to allow us
produce more accurate forecasts, the paper attempts to provide a medium-term
projection of the output, exports and size of marble industry in Afghanistan. Based on
an extrapolation method and using simplified assumptions, we forecast that total marble
production will reach 1.6 million metric tons in 2016. Total value-added of the industry
will be $800 million in 2016 which will equal 3 percent of GDP. However, these
projections are largely based on the assumption that major market constraints are
eliminated by the government over the next few years. Table 6 provides five-year
forecast for the marble market in Afghanistan.
Table 5: Five-year projection of marble industry in Afghanistan
Indicators
In 2016
Total production
1.6 million tons
Number of people employed
24,000
Export value of marble
$367 million
Estimated total value of marble industry
$800 million
Share in GDP
3%
11
Chapter 2:
Market analysis
12
2. Market Analysis
To study the characteristics of the Afghan marble market, this section will employ
the SCP (Structure-Conduct-Performance) model. SCP model is used to analyze the
relation among firms’ performance, firms’ conduct, and market structure. The SCP
indicates that market structure determines the firms’ conduct, and thereby sets the
performance of firms. In other words, firms’ performance is determined by their conduct,
which in its turn depends on the market structure.
Economists are especially interested in studying the SCP model because they
tend to believe that seller concentration affects the industry’s social performance.
Macroeconomists explain the effect in terms of higher profits earned by the monopoly,
whilst industrial economists express the effect in terms of allocative efficiency in the
market.
2.1. Market structure
In order to know whether the structure of the Afghan marble market is monopoly,
oligopoly, monopolistic competition, or perfect competition, we need to study the
following elements to determine the market structure.
•
Number and size distribution of firms: There are around 31 quarries, and 72
processing plants in Afghanistan. But in terms of market share there are 7
companies – 2 in Jalalabad, 2 in Wardak, and 3 in Herat – that supply over 60
percent of overall Afghan marble production. It shows that concentration is high in
the market.
•
Type of product: Despite that all firms produce marble in the same form and shape
(i.e. similar types of slabs), the quality of marble products varies from one firm to
another. For example, the Chest-e Sharif marble from Herat and Afghan White
marble from Jalalabad have very higher quality compared to marble quarried and
produced in other provinces. Therefore, we can assume heterogeneous
(differentiated) products within the market. However, the difference in quality is
natural, and firms cannot do much about it.
•
Ease of entry and exit: There are the following barriers to entry in the marble market:
o Minimum capital required for quarrying activity is over $250,000 and for a
processing plant is over $400,000.
o Minimum time to win the contract and finish all legal requirements from
different government agencies – including MoM, provincial office, National
Environmental Protection Agency, local people’s consent, payment of
guaranty fee and first quarter of royalty fee – take around 6 months.
13
o Minimum time to set up machineries and build office on quarry site is around
6 months which makes the total time spent around a year.
o Once you bid for a quarry contract, there is no guaranty that you will win –
most bidders have no intention to extract marble but to win the contract and
then resell it to others, or even to just sabotage the bidding process.
o You have to get the consent of local people; mostly the quarry plant must pay
to local influentials
•
Exit barriers: To exit the market, a firm bears the following costs:
o It is difficult to sell second-hand machineries at a good price – there is no
market for specialized second-hand machineries in Afghanistan.
o
The network you build over the years will vanish.
o The government does not pay for the infrastructure you built at your quarrying
site.
•
Information flow between buyers and sellers: there is no perfect information flow
between the buyers and the sellers in both activities (quarrying and processing). The
sellers don’t focus on consumer needs as they have inward looking strategy instead
of outward focus.
•
Vertical integration: Mostly large producers of primary marble products (i.e. quarry
firms) own downstream firms with processing, polishing, finishing and distribution
activities. But those firms that only process more often face difficulties such as lack
of supply from quarry firms.
•
Control over prices by established firms: The biggest producers not only use their
market power but they also use other instruments to control the market price. For
example, the biggest producers are influential members of marble associations
(director, deputy director, and management member), and therefore they engage in
price setting activities.
Despite that there are numerous firms; only few have over 60 percent of market
share. Products are differentiated, entry-exit condition is limited, information flow is
imperfect, and firms engage in a price-setting mechanism. Therefore, the Afghan
marble market is close to an oligopoly.
2.2. Firms conduct
In this section, the objective is to study the conduct of firms (both quarries and
processing plants) in terms of policy objective, pricing strategies, marketing strategies,
and R&D activities. Furthermore, to evaluate the question that how market structure
affects the way the firms compete.
14
•
Policy objectives: Unfortunately, firms in this market are short-sighted – their
main objective and focus is instant profit. They have no long-term plan for growth
and market share. This is why 80 to 85 percent of Afghan market is dominated by
Pakistani marbles.
•
Pricing objectives: This study found that firms in marble market have no other
strategy for pricing except to adopt a price discrimination policy. These strategies
give them the chance to earn higher profits than what they would have received if
they had a competitive pricing strategy. However, with such a strategy, they will
lose a large number of their customers in the long-run.
•
Marketing strategy: Firms in this industry neither have market research nor
effective advertising activities. Mostly the managers and owners of marble firms
do not understand the importance of marketing activities.
•
Research and development (R&D): This study found no R&D activities, neither at
the level of an individual firm, nor at the level of industry association, which is a
significant barrier to the industry’s growth. Absence of innovation in production
and product development is mainly due to the lack of R&D – this in turn is the
reason why Afghan marble products cover 15 to 20 percent of the market and
level of exports is low.
Among many other factors, one is lack of competition between the firms this due
to the oligopolistic structure of the market. This shapes an environment in which Afghan
firms behave in a way that is neither optimal for themselves nor for consumers – price is
high, quality of finished marble in terms of processing and polishing is dire, innovation
lacks, market is dominated by foreign products, etc. In upcoming sections, we will
provide recommendation for relevant bodies to improve this situation.
2.3. Firms performance
It is very obvious in theory that, when there is no competition in the market, firms
profitability is high. But on the other hand, there is no tendency for firms to bring
efficiency, improve product quality and make technological upgrading. But to prove this
theory is right, we present the following findings.
•
Profit margin: In the next paragraphs, we assume that firms have both quarry and
processing plants – looking at different levels of value chain as a single value-added
process.
Because of difference in product quality and size of production, profitability of
Afghan marble business differs within the market. But we would like to look at the
profitability of three different products, namely Chest-e Sharif, Afghan White (from
15
Khogiani in Jalalabad) and Sang-e Tara Khel (from Kabul), assuming that they are
all produced around 5000 tons per year.
According to our calculations, the cost of extraction, transport, processing,
polishing and finishing of one ton of Chesht and Khogiani marbles is around $100,
whereas that of Tara Khil marble is around $60. This cost variation is due to location
and availability of public goods such as energy, road and market access. Also we
found that, if quarries and processing plants employ standard technology, one ton of
marble can produce 10m2 of slab or 30 slabs – each having 1m length, 30cm
breadth, and 2cm thickness (see Figure 6). For further details of calculation, please
refer to Appendix B.
Figure 6: One ton of marble can produce 30 slabs
1m
30cm
The market price of 1m Chesht marble (with 30cm breadth, and 2cm thickness)
is $24 to $28, while 1m Afghan White marble is sold at a price between $16 and
$20, and the Tara Khel marble is priced $10 to $12. Normally, 30 percent of the final
price is the profit of retailers. Therefore, the net profit of marble producers (both in
quarrying and processing activities), calculated as the total revenue minus total cost
and retailers’ profit, is $476 for the Chesht marble, $322 for Afghan White marble
and $222 for Tara Khel marble. Table 6 estimates the profit margin for different
types of Afghan marble.
16
Table 6: Profit margin estimates for different types of marble
Products
Total revenue
from 1 ton
Total Cost
per ton
Retailers
profit
Net
Profit
Profit
Margin
Chesht (Herat)
$780
$100
30%
$476
61%
$540
$85
30%
$322
60%
$330
$60
25%
$202
61%
Khogyani
(Jalalabad)
Tara Khil
(Kabul)
Table 6 shows that the average profit margin of marble quarrying and processing
in Afghanistan is over 60 percent, whereas in countries such Italy, Egypt, and India,
which are the largest producers of marble, the profit margin in the marble business
ranges between 20 and 40 percent.
•
Efficiency: It is very difficult to precisely measure the efficiency of marble firms in
Afghanistan. But roughly speaking, we can have the overall picture of firms’
efficiency by looking at their size of production and the technology they employ.
Size of production: Normally, marble quarries in Afghanistan produce 2000 to 4000
tons annually, whereas the average annual production of Italian or Egyptian quarries
is between 30,000 and 40,000 tons. Therefore, the productive efficiency of marble
firms in Afghanistan are low, as they cannot take advantage of the economies of
scale.
Technology: Among all firms working in marble quarrying and processing, only two
firms (one in Herat and the other in Jalalabad) use standard equipment and
technology. The rest of the firms in Afghanistan employ traditional and unproductive
methods such as blasting, cutting with hummer, polishing with hands, etc.
There are two reasons that firms do not employ standard and productive
technology. One is the lack of competition among firms, which is influenced by
market structure, and the other is lack of public goods – such as industrial parks,
access to electricity, transport infrastructure, etc. – that firms cannot do much about
it.
•
Product quality: Many reports, including Mitchell (2008), Yahya (2009) and Dolley
(2004), argue that Chesht and Khogiani marbles have been favourably compared to
Carrara marble, an Italian marble recognized to be one of the best quality marbles in
the world. Nonetheless, all of these reports agree that Afghan marble is not
acceptable for international markets due to the poor polishing and finishing process
17
they receive. Therefore, in most cases quarried marble is exported to Pakistan for
processing purposes – much of this shipping happens illegally. These are often reimported as higher value-added polished marble product, or exported from Pakistan
to international markets as Pakistani marble.
During our interviews with marble processing firms, we learned that Afghan firms
pay less effort to employ advanced polishing technology and do not care much
about expanding their market both domestically and internationally. Such behaviour
of Afghan firms may have been influenced by two factors. First, acquiring modern
technology for marble polishing requires substantial amount of capital, which these
firms do not possess. Lack of access to finance is a major constraint for economic
development in Afghanistan. Secondly, Afghan firms do not have long-term insight
for their business development due to lack of strategic management skills.
18
Chapter 3:
Market Opportunities
19
3. Market Opportunities
To find out market opportunities, we use a simple supply-demand model. Our
approach will consist of studying the quality and quantity of raw materials (i.e. marble)
available in Afghanistan, and assessing the current and future demand for marble at
local and foreign markets. In a second step, we will thoroughly evaluate the factors of
production (i.e. land, labour, machinery and equipment, capital, and entrepreneurship)
and study the potential for investment opportunities in marble industry. Finally, we will
identify the barriers and constraints that firms are faced with, in order to evaluate the
implicit costs which exist in the market. In the next chapter, we will have policy
recommendations to government and private sector to overcome the persisting
constraints and challenges.
3.1. Raw materials
The US geological survey estimated the value of marble reserves in Afghanistan
around $200 billion. Having considered this fact, Mitchell (2008) emphasizes that
“Afghanistan has the potential to supply Middle Eastern and Asian markets with an
almost unlimited supply of marble”. Moreover, most Afghan provinces have marble
mines. According to recent geological findings, marble deposits formed during the
Proterozoic age (542 – 2500 million years ago) are some of the best known marbles in
the world. Below is a description of marble reserves in Afghanistan.
•
Kabul province: The proterozoic marble quarries are in Ghazak, Karez-e Mir,
Tarakhel, Hazara-e Baghal, Pul-e Charkhi, and Qalamkar. The Ghazak marble
which is known as the “Black Ghazak” is located 32km east of Kabul. The Karez-e
Mir marble consists of granular white, and rarely grey-yellow marble, which is
situated 40km north of Kabul. In total, there are 13 marble deposits in Kabul.
•
Logar province: The proterozoic marble is quarried in Awbazak, Dehnow and
Mohammad Agha. Awbazak marble is bioclastic and brown in color (Figure 8),
whereas Dehnow marble is brecciate and brown in color (Figure 9) and Mohammad
Agha marble is black and white in colour.
20
Figure 8: Bioclastic brown marble slab
Figure 9: brecciate brown marble slab
•
Wardak province: The Proterozoic Wardak marble is deposited near Maydan-Shar
(provincial capital) and it has grey and dark grey marble. The mine bed is up to 450
meters thick which is interceded with Schist (a metamorphic rock). Totally there are
six well-known marble mines in Wardak which people have been quarrying for the
past forty years.
•
Badakhshan province: Bini-Kama deposit which consists of medium and coarsely
crystalline marble belongs to Silurian and Devonion era (440-450 million years ago).
This deposit of marble is estimated to be 1,300 million tons.
•
Herat province: The Proterozoic Chesht-e Sharit deposit is located 120km east of
Herat city. The marble is finely crystalline; its color ranges from white to light green.
Figure 10: White-colour marble slab from Chesht-e Sharif
21
•
Nangarhar province: The Proterozoic Khogiani marble deposit located 35km southwest of Jalalabad city. The marble is white and known as the “Afghan white marble”.
Afghanistan has also the best quality marble known as “Onyx marble” which is
called by its local name as “Sang-e Rokham”. Onyx is a banded variety of chalcedony, a
cryptocrystalline form of quartz. Afghan Onyx deposits are located in Bamyan,
Helmand, Parwan, and Faryab provinces. So far, 66 marble and granite deposits have
been discovered in Afghanistan (see appendix C for the location of these deposits).
Furthermore, it is worth mentioning that the British Geological Survey report
(Mitchell 2008) found that Chesht and Khogiani marbles have better quality than
Carrara marble, an Italian marble recognized to be one of the best quality marbles in the
world.
3.2. Demand in local and foreign markets
There is an obvious correlation between construction activities and demand for
marble; there tend to be an increase in marble demand whenever construction activities
increase. Last 10 years provide evidence that Afghan construction industry is growing at
an astonishing rate of more than 22%. Although there has been an enormous supply of
commercial buildings and housing estates in Afghanistan, there is still huge demand for
housing construction activities to accommodate the fast growing Afghan population.
Therefore, one can expect a continuous increase in demand for marble in Afghanistan.
Moreover, increased awareness of people on the advantages of using marble
(i.e. durability, environmentally friendly, low future repairing and maintenance cost, etc.)
is a promising sign for the increase in domestic demand for marble.
Even though a big portion of marble is consumed for construction (surfacing and
flooring) and interior decoration (kitchens, bathrooms and stairs), recently the artistic
use of marble (sculpture, monuments, tables, etc.) is reinventing itself. The reinvention
of artistic use of marble in Afghanistan is another reason to expect an increase in
domestic demand. More than that, artistic application of marble business is extremely
profitable as it is a very high value adding process – for example, from one ton of best
quality marble which costs around $100 one can make 10 beautiful birds, each worth
over $400. Figures below illustrate different uses of marble around the world.
22
Figures 11: Buildings and structures with marble
(1) Taj Mahal is made of white domed marble
(2) A luxury bathroom made of marble
(3) A marble structure at Salim Karwan square in Kabul
According to our findings, annual marble consumption in Afghanistan is between
920,000 to 1,230,000 tons. But domestic quarries can only produce between 184,500
and 246,000 tons per year. Part of unprocessed Afghan marbles is exported to Pakistan
for processing purpose. These are often re-imported to Afghanistan as higher valueadded (processed) marble. Therefore, over 85 percent of marble consumption in
Afghanistan (almost 780,000 to 1,000,000 tons) is met by imported marbles, mostly
from Pakistan. In order to capture the bigger share of the market, Afghan firms need to
struggle intensively. They need to be as efficient as possible by adapting lean
production concept. To do so, firms need to reconsider their management, technology,
and production and marketing strategies. First, they should improve their management
skills through hiring professional staff for the management of their enterprises. Second,
they should update their technology and equipments, and employ the latest generation
of machineries available at the international markets. Finally, they must have clear
23
understanding of the fact that increasing market share by lowering their prices (and thus
increasing their sales) is a good strategy rather than looking for high profit with small
market share and yet for a short-term.
Given the high quality of Afghan marble, there is a huge demand in regional
countries (mainly Turkmenistan, Saudi Arabia, Kuwait, and UAE) and in some
international markets (such as Italy, Germany, the UK and the US). Nonetheless, many
challenges need to be overcome by the government and the private sector, so that
Afghan firms can access these international markets. First, Afghan firms need to
increase their polishing quality; they can only do this by employing new standard
technology. Secondly, the relevant government institutions – mainly the Export
Promotion Agency of Afghanistan – should provide the necessary physical and
institutional facilities to help Afghan firms access international markets.
It is worth mentioning that the industry is growing at a 60-percent rate (in terms of
output) which is very promising for the investors, and we expect that by the end of 2016
total value-added created by this sector can reach as high as $800 million.
3.3. Factors of production
By factors of production we mean all inputs, such as land, labour, machinery and
equipment, capital, and entrepreneurship that produce finished and final products such
as marble slabs, tiles, sculptures, tables, etc.
•
Land: For quarrying activities, no additional land is needed. However, for processing
plants, lack of access to land is the biggest obstacle per the following explanations:
1. It is very difficult to access land in Kabul or other provinces where security is not
a big concern and where public goods such as electricity, water supply, and
road infrastructure are available.
2. The price of land to purchase or to rent is too expensive and costly.
3. According to our research, minimum land required for standard marble
processing plant is around 2500m2, while processing plants in Egypt and Turkey
operate using 5000m2 of land. It is very difficult to find such large-size land in
Kabul or other major provinces.
4. Processing plants are not located in a single cluster to take advantage of the
economies of agglomeration.
•
Labour: There is a lack of skilled labour force in Afghanistan. In fact, there are no
technical training centres which could train workers in marble quarrying and
processing. However, due to abundant labour in Afghanistan, it is fairly feasible to
provide on-the-job training for unskilled labours. In processing plants, a very shortterm training on the job is sufficient. Therefore, lack of labour is not a serious issue
in this business.
24
•
Required Capital: The amount of required capital differs for quarrying and processing
activities. Generally, quarrying business requires less capital compared to
processing. However, the required capital varies from one site to another depending
on location, availability of road, and geological circumstances.
According to our survey, the minimum capital required for quarrying activity
(employing standard technology and not blasting) is around $250,000 whereas for
the processing plants the minimum capital required is over $400,000. It should be
noted that with $400,000 of investment, one can have very good machineries which
are almost 10 times more productive than average old processing plants. This in turn
can provide competitive edge for the investor.
Access to capital remains restricted in Afghanistan. Commercial banks do not
offer large-size, long-term credit, and businesses find it hard to borrow from abroad.
Lack of capital is, thus, a major constraint in this business in Afghanistan.
•
Entrepreneurial skills: In today’s challenging business environment, entrepreneurial
skills are the key to success and survival of a business. However, in Afghanistan,
marble producers neither have efficient entrepreneurial skills (including large firms)
nor they have any intention to build such capacity within their enterprises. The
following entrepreneurial skills are the essential requirements for those who run a
marble company in order for them to grab the opportunities which exist in local and
foreign markets:
o
o
o
o
o
o
o
o
o
o
•
Management skills – the ability to efficiently manage time and people (i.e. the
production process, operations, and activity of the firm)
Strategic decision-making and planning
Financial literacy
Market research skills: to assess the market demand, suppliers, customers,
and the competition
Marketing techniques
Innovative ideas, methods and techniques
Ability to develop a successful business plan for a new venture
Willingness to take risks (or at least not be risk averse)
Willingness to change their routine behaviour, if necessary
Awareness of laws and regulations
Technology: One of the most important factors of production in marble industry is
technology (i.e. machineries and equipment in use). Due to the nature of business,
machineries play a big role in the success and productivity of firms. By employing
standard machineries, they can enormously increase their productivity; e.g. a firm
with standard machineries can produce 10 times more marble than a firm with old
system of operation.
In quarrying activity, blasting is the old method of production, while diamond wire
cutting is the new method of quarrying. With blasting, quarries not only lose 50 to 80
percent of the material, they also cause great damage to the entire quarry by
enforcing micro-fractures throughout the entire deposit. Whereas with diamond wire
saw cutting, the percentage of waste can be reduced to 7 percent, while creating no
damage to the marble deposit. Standard machineries required for quarrying marble
25
are listed below. However, it does not imply that all these machineries are necessary
to have to be able to start a quarrying operation.
o Pneumatic steel drillers needed for vertical, horizontal or inclined drilling,
manual or mounted on special devices
o Pneumatic down-the-hole hammer drillers required for making vertical holes
for introducing the diamond wire
o Large and small diamond wire machine for cutting primary large blocks and
secondary cuts.
o Chain saws as it best works for fast, straight forward vertical and horizontal
cuts on large quarry fronts
o Hydraulic cushions needed for enlarging space between cut benches or for
splitting up narrow openings
o Hydraulic jacks for moving blocks & hydraulic splitting wedges for splitting up
drilled sections
o Derrick cranes to handling the blocks or heavy equipment
o Stationary wire saws machine is needed for block-squaring
o Front-loaders (T-lift blocks), excavators (for cleaning and excavating), and
dump tracks
Below are the photos and prices of each machine which required for marble quarrying:
Figure 12: Equipments and machineries required for marble quarrying
(1) Pneumatic drillers, $500-$1000
(2) Down the whole driller, price $10,000
26
(3) Diamond wire machines for large primary cuts, $10,000-$15,000
(4) Quarry saw machine, $40,000-$50,000
(5) Hydraulic cushions, $100 per piece
(6) Rock splitting machine, $10,000
27
(7) Stationary saws, $8,000-$15,000
(8) Derrick crane, $40,000-$50,000
(9) Loader, $60,000-$80,000
(10) Excavator, $50,000-$90,000
(11) Dump tracks, $30,000-50,000
28
Bellow is the list of important machineries for a marble processing plant and their
photos shown subsequently. However, it does not imply that all these machineries are
necessary to have to be able to start a marble processing.
•
•
•
•
•
•
Gang saw machine (for cutting marble blocks into slabs)
Multi cutter machine (it can work as a gang saw machine, but it is not as durable
as gang saw.)
Single cutting machine (for single cutting purpose)
Gantry crane (to lift marble block and put them on gang saw machine)
Marble bridge cutting machine (to cut slabs as required)
Automatic marble polishing machine
Figure 13: Equipments and machineries required for marble processing
(1) Cutting machine, $20,000-$30,000
(2) Multi wire machine, $50,000-$100,000
(3) Gang saw machine, $130,000-250,000
(4) Gantry crane, $30,000-40,000
29
(5) Marble cutting machine, $15,000-$20,000
30
(6) Polishing line, $50,000-$100,000
Chapter 4:
Recommendations
31
4. Recommendations
Despite the fact that there is almost infinite best quality marble deposits
throughout the country and enormous demand exists within the domestic and
international markets, Afghan firms are not performing very well – price is high, quality
of finished product in terms of polishing and finishing is dire, innovation lacks, market is
dominated by foreign products, and export of marble is low. Moreover, the current
market condition cannot attract enough investment. Reasons for this situation range
from undesirable legal framework and bureaucracy to lack of factors of production. But
the reason for bad performance of established firms is lack of direction which is caused
by both lack of incentives and lack of effective regulation by the government.
4.1. Role of government
In order to push private firms to perform well (i.e. to decrease their prices and to
increase their quality of products), the Afghan government, especially the Ministry of
Mines should take the following steps:
1. The MoM should provide strong incentives for quarries to increase their production
and output. Such a supply-side policy will encourage the firms to employ modern
technology and use more efficient extraction methods to benefit from the incentive.
This, in turn, will enable the firms to benefit from the economies of scale, to
decrease their total cost, to supply at a lower price and thus to increase their
competitiveness. Moreover, employing modern technology will also have positive
effect on the quality of their products.
A simple incentive mechanism can be offering discounts on the royalty fees for
each additional amounts of marble produced. For example, quarry A is supposed to
extract 10,000 tons of marble per year according to its contract with the MoM. If this
firm extracts 20,000 tons within a year, the MoM should give a 50% royalty discount
on the additional amount (i.e. 10,000 tons). For the next 10,000 additional tons of
marble, the ministry should offer a 75% discount.
Such a mechanism can provide strong incentive for quarries to produce more.
Afghan firms will benefit from the economies of scale and will have lower total cost.
They can thus easily sell at a lower and competitive price, and will be able to
compete with Pakistani marbles. Eventually Afghan firms can increase their share at
the local market, and even at foreign markets.
Nonetheless, the decrease in royalty revenue of the government will be more
than offset by an increase in income/sales tax, business receipt tax (BRT) and other
types of taxes due to increased production of marble in the economy.
32
2. The Ministry of Mines must prohibit the use of explosive materials in extracting
marble. Prohibition of explosive devices can save 50 to 70 of waste and prevent
damage to the entire deposit. It can also push the quarrying firms to use standard
technology which is more productive and safe.
3. Ministry of Mines should also provide incentives for the use of standard technology
(e.g. a royalty discount) or prioritize in the bidding process those companies which
employ standard technology and modern machineries.
4. The Afghan government should adopt policies which promote domestic marble
usage and encourage purchase of Afghan marble products throughout their
procurement system - by adopting “Afghan product first” policy. Such policies
increase domestic demand for Afghan marble and ensure a sustainable expansion
of Afghan marble market.
5. Ministry of finance (MoF) should increase export tax on row marble (unprocessed
marble blocks). This will insure continuous supply of marble for processing firms as
well as encouraging value added activities to take place within the country.
6. In order to promote private investment in marble industry, the government should
provide necessary public goods and access to factors of production for marble
producers. Infrastructure, land, and capital are such goods need to be facilitated by
the government. Below, specific policies have been proposed for each factor or
services.
Land: Land is the first required factor of production, and marble processing business
needs over 2500m2 of land. Finding and leasing such large area of land in and
around Kabul city is the biggest barrier for new entries and for existing firms to
employ more machinery. Therefore, there is a strong need to build a specialized
industrial park for marble industry. All neighbouring countries including Pakistan,
India, and Iran have especial cities for marble and granite industry. For instance,
Pakistan has 5 big marble cities. In 2005, the Government of Pakistan created an
industrial park for marble and granite which brought the country a great success in
terms of attracting investment and increasing marble production and exports.
When we look at the strategies of regional countries (such as India, Malaysia and
Iran) in attracting investment and promoting growth, we find that their top priority has
been to develop special economic zones (SEZs). It should be emphasized that
without having enough SEZs, Afghanistan cannot rebuild and nurture its industries
which play a substantial role in achieving a sustainable growth. Therefore, in order to
find a permanent solution for the lack of industrial land in Afghanistan, the
Government of Afghanistan should take a comprehensive approach by creating an
independent Industrial Parks Development Authority. The agency will be responsible
33
for the construction and development of industrial parks, prioritizing industrial
sectors, distribution of land plots, and all relevant services.
This paper emphasizes that the creation of an independent and competent
agency for the development of industrial parks will be a big achievement for the
Afghan government. The agency could play an important role in the development of
Afghan industries, and shape Afghanistan’s future industrial growth path.
Nevertheless, for the time being, Afghanistan Investment Support Agency and the
Ministry of Commerce and Industries – which both have departments for the
development and administration of industrial parks – should allocate land plots for
marble and granite processing plants in one of their industrial parks.
Labour: As mentioned in the previous chapter, there is no vocational and technical
training centre in Afghanistan to train workers for marble quarrying activities.
Therefore, the Afghan ministries such Ministry of Mines, Ministry of Labour and
Ministry of Education should collaborate to build such training centres. This will not
only provide know-how skills to the market but it can also increase investment in the
mining sector.
Required Capital: Entering the marble quarrying and processing business requires
investing huge amount of capital. Access to large-size credit is restrained in
Afghanistan, as commercial banks and other financial institutions do not offer largesize long-term loans. Borrowing from abroad is not a good option due to risks
associated with currency exchange. Therefore, the government should initiate a
public credit scheme and public guarantee scheme to help the companies in need of
capital. At least, the government should provide “leasing finance” to marble
quarrying and processing firms as to enable them acquire necessary machineries
and equipment.
Entrepreneurial skills: As emphasized in the previous chapter, entrepreneurial skills
are the key to success and survival of a business. Afghan firms remain less
competitive and less productive, due to their inefficient management techniques.
Therefore, the Afghan government should provide capacity development programs
to Afghan industrialists, and help them increase their managerial skills and technical
efficiency. AISA can be the relevant institution in this regard.
4.2. Role of Private Sector
The biggest weakness of private firms in the marble market is lack of
management skills. Managers and owners of these firms do not employ efficient
management techniques. During our survey and visits from companies, we found that
firms do not have any professional staff to use financial management methods and to
conduct marketing operations and market research, and these firms do not have any
34
R&D unit. This paper emphasizes that private firms along with their association must
take the management issue very seriously. The paper presents the following
recommendations for private firms and their associations:
1. There are two associations of marble producers in Afghanistan, namely Afghanistan
Marble Granite Processing Association (AMGPA) and Afghanistan Marble Industry
Association (AMIA). The paper strongly recommends that these two associations
merge into a single association in order to have a stronger negotiation power.
Merging both associations into one can help both the government to provide them
with a single help package, and the association to have more power for lobbying. It
can help them to solve the problem of their industrial park in Arghandai. 1 Moreover,
merging to a unified association has other benefits e.g. it will cost less to provide
training for the members and they can benefit from the spillover effect of their
activity within the association.
2. Since entering the marble business and establishing a quarry or processing unit
requires investing huge capital, and since the concentration ratio in the marble
market is higher and most firms struggle to expand or to even conserve their share
at the market, this paper suggest that firms can engage in mergers and/or create
joint-ventures. This can help them raise sufficient capital and use the information
and experience of each other in the market to become more competitive.
3. Marble firms should hire professional managers or build their management
capacity. This will help them increase their efficiency, and practice successful
market and production strategies, which will ensure their long-term growth.
4. The marble associations should hire professional staff to manage their affairs and
to provide them with professional advises. They should using modern marketing
tools such creation of a website, and carry out R&D activities. This can bring
transparency and alleviate conflict of interest within the association.
5. In terms of strategy, private firms should practice competition through prices. By
decreasing their prices, they can increase their sales and thus expand their market
share. This in turn increases their profit. Such a strategy has been discussed in
detail in Chapter 2.
4.3. Role of donors
According to the World Bank data, Afghanistan has been one of the major aid
recipients in the last decade. Since the fall of Taliban regime, Afghanistan received over
1
Afghanistan Marble Industry Association (AMIA) members bought land in Arghandai (West of Kabul City) for the
purpose of building an industrial park. They are asking the government to provide the infrastructure facilities such
as electricity and road construction. But AMGPA members are not involved in this initiative. Therefore AMIA
members are left alone in their request and demand for the construction of the industrial park.
35
$30 billion of aid through the assistance of donor countries. Most of what has been done
in the process of economic development in Afghanistan is the result of such huge
foreign aid inflows. However, there is no doubt that the foreign assistance could have
been spent more effectively and could have been more successful.
Donors as supporting institutions should provide hand-on support to productive
and promising sectors such mining, manufacturing, production of construction materials,
etc. To help the marble industry grow, donors can consider the following
recommendations:
•
Major donor agencies such as USAID, DFID, European Commission, the World
Bank and others should allocate part of their funds in the form of long-term credit
and investment to Afghan marble enterprises. These institutions can practice
different forms of investment and credit facilities which can be in accordance to their
agencies’ objectives and programs.
•
They can also provide technical assistance to quarrying and processing firms on
different areas such as on industrial management, production techniques,
installation and operation of machineries, marketing management, distribution
activities, etc. The donor institutions can also fund exhibitions, trade shows and
other events which can help market the Afghan marble products.
•
Donor agencies can fund geological surveys in order to determine the size and
quality of existing marble deposits in Afghanistan, and to discover new marble
deposits in the country which could be designed in the form of new investment
projects.
•
Donor institutions should provide capacity development programs to the Ministry of
Mine’s personnel and help them in designing strategies and policies to attract foreign
investment in the marble sector.
36
5. Conclusion
The paper studied the Afghan marble market in terms of market structure and
performance, looked at potential opportunities from an investor’s prospective, identified
the constraints and factors of market failure, and finally recommended some measures
and actions for the development of this industry.
Looking at the global and regional markets, it found that there are huge export
opportunities for Afghan marble. By comparing Afghanistan with Pakistan, the paper
found an interesting fact: despite the fact that Pakistan has lower quality and less
quantity of marble compared to Afghanistan, its marble industry is much bigger in terms
of number of firms, level of production, exports value, etc. Therefore, there is no doubt
that marble industry in Afghanistan has good potential to grow if market and institutional
barriers are removed. The paper forecasts that within the next 5 years, the marble
industry in Afghanistan can grow 5 folds if the major market constraints are eliminated.
With regard to market structure and performance, we found that although marble
industry is fragmented, few big players control and set the prices. Therefore, there is no
full competition in the market, and this creates an environment in which Afghan firms
adopt such behaviour that neither helps themselves nor the consumers – price is high,
quality of finished product in terms of polishing and finishing is dire, innovation lacks,
market is dominated by foreign products, etc. Such unfriendly market behaviour is due
to lack of competition in the market and lack of management skills for firms’ owners.
Hence, we strongly recommend that the Government of Afghanistan, especially Ministry
of Mines, provide incentives for firms to increase their production. Such a supply-side
policy helps them benefit from the economies of scale, decrease their total cost, sell at a
competitive price, and finally increase their market share. In addition, the government
and the private sector must focus on improving the management skills of firms’
managers which helps them increase their firms’ efficiency.
In terms of market opportunities, the paper argues that there is huge demand for
Afghan marble both at domestic and foreign markets, due to its high quality. However,
looking at the factors of production, there are many challenges which hinders the
foreseen opportunities; i.e. lack of access to land, lack of access to capital, lack of
skilled workers, and lack of necessary infrastructure. The paper recommends both
institutional and market reforms to the government to tackle some of the existing
challenges; including construction and development of a specialized industrial park for
marble processing firms, provision of long-term financing solutions, technical and
management skills trainings, etc.
37
6. References
ASMED (2010), Afghanistan Marble Industry Directory. http://www.asmed.af/marble
BGS (2012), Marble brochure, http://www.bgs.ac.uk/AfghanMinerals/scripts [Accessed,
January 2012]
Korai, M,A., Hussain, S. & Abro, A. (2011), “A report on marble & Granite”, Trade
Development Authority of Pakistan,
http://www.tdap.gov.pk/doc_reports/tdap_report_on_marble_and_granite.pdf
Mehdi, Abbas, (2006), “Diagnostic Study: Marble & Granite Cluster”, UNIDO-SMEDA
Cluster Development Programme, Pakistan
Minerals Law of Afghanistan (2005), Article four: Ownership of Minerals, Kabul.
Mitchell, Clive, (2008), “Afghanistan Revival & Redevelopment”, British Geological
Survey, Kabul.
MoM, (2012), Ministry of Mines website: http://mom.gov.af/en/page/4832 [Accessed,
January 2012]
Remarks at Afghanistan Minerals Roadshow. Available from:
http://www.implu.com/government_news/474/192823 [Accessed, January 2012]
Stephen G. Peters and others (2007), “Preliminary Non-fuel Mineral Resource
Assessment of Afghanistan”, Kabul
The OTF Group (2006), “Afghanistan Competitiveness Project”, Kabul.
The OTF Group (2006), “Business Plan template”, Kabul.
Thomas P. Dolley (2004), “Stone Dimension”, Kabul.
US Embassy (2010), Press Releases: Afghanistan International Marble Conference
Kicks Off in Herat
38
Appendix A:
Afghan Marble Granite Processing Association (AMGPA) members list
No
1
Company Name
President Name
Mobile No
Province name
Factory or
Mine
Rahmat Fazal Company
Rahmatullah
0777333689
Wardak
2
Rahmat Fazal Company
Rahmaullah
0786923500
Wardak
M
3
Dara e Noor Tangi
Abdul Raoof
0798273911
Wardak
M
4
Tangi Wardak
M.Qasem
0799624553
Wardak
F
5
Shekh Abad
Haji Hashem
0795256408
Wardak
F
6
Safi Gran
Abdul Bari
0775458555
Wardak
7
Omer khel company
Eng M,Salem
0789076801
Wardak
F
8
Esteqlal
Hashmatullah
0788432244
Kabul
F
9
Haqyar company
Serajudin
0799304151
Kabul
F
10
Khalid Omid Company
Hewad Ahamd
0789903010
Kabul
F
11
Shahen koh factory
Amrullah
0774414586
Kabul
F
12
Abdulrahman sons factory
Ahmadullah
0700216011
Kabul
F
13
Ahadi Brothers
Emal
0786224848
Kabul
F
14
Saheb Yar
Sahib khan
0799306111
Kabul
F
15
Pamir
Athakhel
0799384700
Kabul
F
16
Sadaf Kabul
Eng Nematullah
0777328636
Kabul
F
17
Takht e Rostem
Abdul Baqi
0700503464
Balkh
F
18
Anjirak
Esmatullah
0788432244
Kabul
19
Afghan Sorat Zada
Zabihullah
0789908820
Mazar e sharif
F
20
Aryan
Fazal mawlla
0700727214
Jalal abad
F
21
New Aryan
Haji kamen
0799324544
Jalal abad
22
National
Dr.Shams
0774708826
Jalal abad
39
F
M
M
M
M
M
M
F
23
Toor mining
Haji Toor
0778651984
Jalal abad
M
24
Helmand mar mar
Ali Ahmad
0799600003
Helmand
M
25
Ghavsi Brothers company
Toryalay
0700400126
Heart
F
26
Insaf
Fawad Ahmad
0777319061
Panjshir
F
27
Bena e khedmat
Abdul wali
0786892007
Kabul
28
Watan
Amanullah
0786445923
Kabul
F
29
Koh Zamarod
Abdul karim
0700292772
Kabul
F
30
Kabul Mar Mar
Besmellah
0700213134
Kabul
F
31
Sam
Safiullah
0799373480
Kabul
F
32
Gholghola Group
M.Nabi
0799436567
Kabul
F
33
Setara e paytakht
Abdul Ali
0799263244
Kabul
F
34
Pesaran e pir zada
Shah mahmod
0777262784
Kabul
F
35
Nagin sadaf
Nematullah
0700279027
Kabul
F
36
Yousaf factory
M.yousaf
0799353919
Kabul
F
37
Rokham Helmand
M.Aref
0799660003
Helmand
M
38
Mir Group
Sayed Mirwais
0773030525
Herat
M
39
Jamal
Farhad
077592919
Kabul
F
40
Narin company
Asadullah
0786179044
Jalal abad
F
41
Younas Sons
M.Anwar
0700253865
Kabul
F
42
Seraj Brothers company
Dr. Seraj
0798595595
Kabul
F
43
Abdullah Sons
Zakaria
0777331227
Kabul
F
44
Sher mining
sher mohamad
0786115563
Kabul
M
45
Gollab mining
Gollabdin
0799409337
Kabul
M
46
Lajebar Marble & mining
Ajab khan
0778872487
Kabul
M
47
Rahman mining
Fazal rahman
0700606148
Jalal abad
M
40
M
M
48
Abdul Rahman company
Sanaoullah
0788542084
Balkh
F
49
Khana sazi
Shafi
0700203899
Kabul
F
50
Sahil Mar Mar
Rohullah
0700600095
Jalal abad
F
51
Shahzad company
Shahzada
0788382454
Jalal abad
F
52
Shamshad Marble
Dr.Ezat
0777863332
Jalal abad
F
53
Afghan Marble design
Khalid Ahmad
0772002582
Kabul
F
54
Mar Mar & Rokham Seraj
Dr.Serajudin
077700876
Kabul
F
55
Zolfaqar Haqyar
M.Malik
0787526041
Qundoz
F
56
Samangan Mine
Abdul Ahad
0799108880
Samangan
M
57
Habibullah limited
Taj mohammad
0787042855
Kabul
M
58
Hajari yasmin factory
M.qasim
0700301457
Kabul
F
59
Mostafa Hamid
Abdul wakel
0799339561
Kabul
F
60
Hasibullah nazari
hasibullah
0700290744
Kabul
F
61
Amiri
Abdul qadir
0787710777
Kabul
F
62
Anis
khalilullah
0700253905
Kabul
F
63
Momen zada
Zabihullah
0799333333
Kabul
F
41
Afghan Marble Industry Association (AMIA) members list
No
Company Name
President Name
Mob/Tel
Location
1
Doost Marble Factory
Nasim Doost
0799361172
Herat
2
Nasim Doost
0799361172
Chesht/Herat
3
Mohebi Marble production
Abdul Qadir
0700219514
Kabul
4
Naik Qadam Jawid
Haji Hussain
0700448000
Kabul
5
Naik Qadam Jawid
Haji Ali-Jawid
0787728900
Kabul
F
6
Naqsh Jahan
Anwar Hussaini
0700202767
Kabul
F
7
Jahan-Noma Jaghori
Mohhamad Sarwar
0799806496
Ghazni
F
8
Ghiasi Marble decoration
Mohamad Ghiasi
0774004738
Kabul
0
0
9
Wahidula Hesar decoration
Mehdi Moradi
0700293939
Kabul
0
0
10
Qalam Kar decoration
Mohamad Daud
0774417905
Kabul
0
0
11
Bakhtar Marble
Mohamad Salim
0799320421
Kabul
M
12
Herawi Koshan Marble
Haji Faqeri
0700202744
Kabul
M
13
Safa Giran Marble
Abdul Bari
0700204456
Wardak
M
14
Sang Sadaf decoration
Anayatullah
0775019336
Kabul
0
0
15
Sang Alah-dad decoration
Haji Abas
0799095735
Kabul
0
0
16
Milad Kochi decoration
Husain Haidari
0799301630
Kabul
0
0
17
Sang Maihan decoration
Shekaib
0776190342
Kabul
0
0
18
Kabul Marble decoration
Ramazan
0700040305
Kabul
0
0
42
Mine/Factory
F
M
F
M
Member list of Herat Marble Union
No.
1
Factory name
Location
Phone
President
MR NASIM
DOOST
MR FARID
AHMAD
Industrial Town
0799361172
HERAT
Khaja Abdullah
Road
0700427260
3
Ghousi Brothers
Industrial Town
0799771772
MR GHAOSI
4
Haji Nadir
Industrial Town
0700717276
MR NADER
Jami Brothers
Industrial Town
0799360164
MR MOH.
AZAM
Khushnuma
Industrial Town
0799065447
MR ALI JUMA
2
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Majidi
Marmar Herat
Khaja Abdullah
Road
Beside of
MALAN JUE
0700405793
0799566600
MR
DEGARVAL
MR HAJI
SALEH MOH
MR NESAR
AHMAD
MR HAJI
HABIBULLAH
MR HAJI
MIRZA
MR HAJI MOH.
ALI
MR MOH.
NAEEM
MR
ESMATULLAH
Mohseni Ahmadi
Industrial Town
0799329150
Sadaf Nagin
Industrial Town
0700400747
Saheb
Industrial Town
0707473078
Vali Asr Malistan (1)
Industrial Town
0774334931
Vali Asr Malistan (2)
Industrial Town
0787564004
Zangir Gah Ansari
Industrial Town
0782515708
Azimi
Industrial Town
0784151610
MR HUSSAIN
Marmar Chesht
Beside of
MALAN JUE
0784223292
MR AQA
Foolad Ghaem Rah
Industrial Town
0789152242
MR REZAI
Qurban zadeh
Industrial Town
0781439363
MR HAJI
ESHAQ
ABDULAH OSMANI
Industrial Town
0799237628
MR OSMANI
BASET FAHIM LTD
Industrial Town
0787346071
MR AB.
BASET
SARALLAH
Industrial Town
0787564003
MR AB. HAKIM
HERAT MARBLE
Industrial Town
0784223469
MR MOH.
AZAM
ASLAMI
Industrial Town
0799652041
MR ASLAMI
MODERN MALISTAN
Industrial Town
0789978498
MR HAJI
KAZEM
43
Appendix B
1. It is clear that 1 M3 = 100cmx100cmx100 (assume bellow figure is 1m3 marble)
100 cm
100cm
100cm
When you cut the above cube into slabs with 2cm thickness, it will produce 50 slabs each will be
1m2. But during sliding the cube, there is 1cm wastage in each slide (0.8cm is the thickness of
saw and 0.2cm is the wastage from polishing). Therefore, the above cube can produce 33.3 m2
marble slabs. Again, if you cut each m2 into 30cmx100cm slabs, each slab (100cm length,
100cm breadth) can produce 3.33 slabs with 100cm length and 30cm breadth. Hence,
1M3 marble = 33.3 * 3.33 = 111 slabs (with 100 cm length, 30 breadth, and 2 cm thickness).
Because 1M3 marble = 2.5 tons marble, 1 ton marble can produce 111/2.5= 44.4 slabs
During all process of production, we assumed 33% wastage (this is the highest possible
wastage during processing, we tried to be very conservative, firms can easily reduce the
percentage of waste).
Now, 1 ton marble can produce = 44.4 – (44.4*33%) = 30 slabs, each has 1m length, 30cm
breadth and 2 thickness.
44
Appendix C

a comprehensive study of marble industry in afghanistan

Transcription

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