PEST Analysis


Afghanistan follows a Unitary Presidential form of government, where the head of government is also the head of the state and leads an executive branch that is separate from the legislative branch. Legislation in the country is conducted through people’s representatives in the upper house (Meshrano Jirga) and lower house (Wolesi Jirga). As political stability in Afghanistan is relatively recent, it is in the process of deepening it further rather than ushering drastic political change in the near future. During the last decade, freedom of press and rule of law (especially in the urban areas) have improved significantly, and the current government is taking concrete steps to reduce bureaucratic overreach and corruption in the country. Also, in the past year, regulations have been passed to protect the public from what is viewed as unethical business acts. Furthermore, the principle of a free market has been incorporated in Chapter 1, Article 10 of Afghanistan’s new constitution, which states, “The State encourages and protects private capital investments and enterprises based on the market economy and guarantees their protection in accordance with the provisions of law”. In keeping with this, the government has developed rules and laws for banking, customs, investment, environment, insurance, labor, minerals etc. as well as precise policies for taxation and trade. In Afghanistan, Chamber of commerce, associations, unions and political parties play an active role in all decisions made by the government.  


The economy of Afghanistan has improved significantly since 2002. This has been mainly due to infusion of billions of dollars in investments, international aid and remittances from Afghan expatriates. Increased Foreign Direct Investment (FDI) and improved domestic production has resulted in robust economic growth; inflation has been low and public finance management has made healthy progress. Afghanistan, currently in an economic recovery stage, is in transition from a centrally planned and heavily regulated economy towards an open and free economy based on the market system. The economy has been through a structural change over the last decade after the political shift in 2001 occurred due to international intervention. The new constitution acknowledges ‘market economy’ as the economic system and guarantees promotion and protection of private investment (Article 10 of the Constitution). The economy has since been liberalized and the government has increasingly focused on private sector-led growth.  


Afghanistan’s social environment has seen considerable improvement in the past decade in terms of efforts towards meeting the demands for a high standard of living and improving social status of people across the various classes of its people. Afghanistan’s society can be divided into urban and rural populations. Of the total 28.6 million estimated population, 20.1 million (71.5%) lives in rural areas while 6.5 million (23.13%) stay in urban areas. In addition, 1.5 million (5.33%) are living as nomads. The urban population’s education level, income level, values, beliefs, and customs vary from those living in the rural areas of the country. The unique aspect of Afghanistan is its many different ethnic groups with varying social mores such as Pashtuns, Tajiks, Uzbeks, Hazaras and a number of other minor ethnic groups.  

Technological Environment

Afghanistan has experienced unprecedented development in Information and Communication Technology (ICT) during the last decade. In 2001, the number of operational telephones in the country was as low as 20,000, and international connectivity was nonexistent. In contrast, mobile subscriptions have increased from 145,000 in 2003 to 24,888,202 in 2015, covering nearly 90 per cent of the population. And, the cost of a call has decreased from USD 30 cents/ min in 2003 to USD 5 cent/ min in 2015. Private ICT companies are now offering money transfers, online banking, e-commerce, market information and other innovative services. Moreover, e- governance and TV digitalization are other areas where Afghanistan has experienced some development. However, Unlike ICT, where private initial investment has been more than USD 2 billion, the other technological developments have not been as steady. Afghanistan is open for technology transfer and is taking steps towards making technological environment conducive for investments especially in the areas of automation, research and development. According to Ministry of Communications and Information Technology, Afghan Telecom (Public Company) has gone beyond its national borders to the international markets, forming a network of businesses to international carriers with the OFC backbone with the total network length 3,100Km in Afghanistan; currently interconnected with neighboring countries Pakistan, Iran, Tajikistan, Uzbekistan, and Turkmenistan with its National Optical Fiber System. For the first time in Afghanistan telecommunication companies will be able to provide better quality service through a satellite named “AfghanSAT1” that belongs to Afghanistan, located in space, 50 degrees east. People from across the globe will also be able to access Afghan channels through the AfghanSAT1.