The US Special Inspector General for Afghanistan Reconstruction (SIGAR) in a new report released on August 4 has found that a $9.4 million project to improve the carpet industry in the country has met progress towards self-sufficiency, but its critical targets on sales, revenue and job creation have not been met.
The program was initiated by the United States Agency for International Development (USAID) in June 2018 to establish the Kabul Carpet Export Center to develop self-sufficient company, create thousands of jobs and a true “Made in Afghanistan” product, according to SIGAR report.
But despite meeting several milestones, Kabul Carpet Expert Center is not fully operational, and has missed sales, revenue, and job creation targets by wide margins in its first two years of operation, the report says.
Need for money to buy wool, lack of skills needed for proper packaging, excessive customs red tape and disconnect between Afghan manufacturers and global carpet industry are critical factors that keep Afghan carpet manufacturers tied to Pakistani wholesalers, the report finds.
The report says that Pakistani companies created sales strategy that used Afghan weavers’ skills in Pakistani refugee camps, providing yarn for rug on credit, and later finishing and packaging rugs for export with “Made in Pakistan” label.
According to the grant agreement, Kabul Carpet Export Center is required to facilitate all steps of the sales process, such as connecting international buyers with Afghan carpet weavers, providing financing services to carpet makers for the purchase of raw materials, and handling quality control and export processes.
Providing details, the report says In addition, Kabul Carpet Export Center has not achieved its sales, revenue and job creation targets.
Despite receiving a six-month extension (from May 31, 2019 to November 30, 2019), the center could not meet its first year targets of $714,286 in sales, $48,000 in revenue and the creation of 5,715 new jobs.
The second year target is to double sales and revenue, and create an additional 5,715 new jobs, the report says, adding that as of April 1, 2020, the center has reported that it has generated $717,030 in sales, $41,836 in revenue and created 8,825 new jobs.
With 3 months until the end of the second year (extended to June 30, 2020) and the COVID19 worldwide pandemic causing trade shows to be cancelled, there is little chance to achieve these targets, thereby placing KCEC’s ability to become self-sufficient by June 5, 2021 in jeopardy, the report says.
SIGAR recommends that the website of the center should be updated to facilitate e-commerce, the financial program should be reassessed and a system that conforms to prevailing lending norms of the Afghan carpet industry should be considered.
Carpet industry owners said Afghan carpet exports have reduced considerably over the last five months due to the COVID-19 crisis, adding that the industry has exported at least 10,000 square meters of carpet in the last five months, but it was more than 60,000 square meters in the same period last year.