Formation of the strategy of sustainable SMES development based on SWOT analysis in Afghanistan
Table of contents: The Kazakh-American Free University Academic Journal №12 - 2020
Author: Hasamuddin Wasim, Kazakh-American Free University, Herat, Afghanistan
Many definitions exists by scholars describing what is SWOT analysis
definition, SWOT Analysis is important part of strategic Management a tool used
for strategic planning and strategic management in organizations. It can be
used effectively to build organizational strategy and competitive strategy. In
accordance with the System Approach, This process of examining the organization
and its environment is termed SWOT Analysis. SWOT Analysis is a process that
involves four areas into two dimensions. It has four components: "Strengths",
"weaknesses", "opportunities", "threats". Strengths and weaknesses are internal
factors and attributes of the organization, opportunities and threats are
external factors and attributes of the environment .
We will conduct a SWOT analysis of the activities of SMEs to develop
recommendations on the formation of a strategy for their sustainable
1. SMEs are an industry segment that can be used as a vehicle and
the main pedestal of the most promising for the creation of new entrepreneurs,
as it is the closest level that can be reached by people who are just starting
entrepreneurship in Afghanistan.
2. SMEs have the characteristics of large capacity to the
realization of the aspirations of the wider community to obtain an economic
livelihood, especially those classified as low-income and middle-income in Afghanistan.
3. SMEs have high flexibility and resilience to anticipate and adapt
to the dynamic changes or market developments, due to its dominant foothold
benefited from the domestic market and strongly in the use of inputs (raw
materials) derived from Afghanistan.
4. There are many financial institutions in the banking and
non-banking and supporting business capital of the government of Afghanistan
Revolving credit and loans.
5. Not easily penetrated by its domestic market of similar products
imported because the level of sophistication of the technology used is low and
does not require high skills.
Afghanistan government and majority of SMES did
not have a clear SME strategy yet.
1. There are no central databases or information points dedicated to
SME analysis in Afghanistan that provide easy access to relevant information.
2. The SMEs are incorporated in Afghanistan but not yet under the
monitoring, evaluation and reforms process of the Ministry of industry and
commerce due to high level and high frequency of corruptions and direct
interference of warlords.
3. Shortage of Facilities and infrastructure to support the
development of SMEs, especially in terms of the amount sufficient in Afghanistan.
4. Human resource who are involved in many highly qualified SMEs,
yet reliable and professional, especially also in the field of
5. Low-cost work: in Afghanistan, labor costs are the lowest in the
6. Limitations of skilled human resources in the field of SMEs
resulting limitation management, marketing, capital, partnership and
7. Most of raw materials need still imported from outside countries,
skill of production technology and product quality as well as insight into the
orientation of the majority of SMEs is still limited and has not been
developed, including innovation, the production technology used mostly still
relatively simple / traditional and the limited use of information technology
to promote SMEs in Afghanistan.
8. The SMEs entrepreneurs to access markets is still limited,
entrepreneurs in general are still not able to meet the market demand requires
the stability of quality, a large number of orders, fast and timely delivery
and there is a shortage of effective marketing institutions and other support
facilities for SMEs products in Afghanistan.
9. Not its financial administration and management system that is
good because it's not yet separated the ownership and management of the company
and SMES development of business networks and lack of data and information that
is sharp and up to date of SMEs are ready to be marketed and specification
needs of individual SMEs.
10. Condition of facilities and infrastructure, especially from the
aspect of quality is still low, such as roads, electricity, water, waste
Potential opportunities in the domestic market, the need for
products, goods SMEs results still have not been met and opportunities would be
open export markets, at least it will be easy access to the markets.
1. The emergence of new technologies and production processes in the
field of information and communication technology (ICT) that really support
dynamic business activities, including supporting the ability to access the
2. Food feeding economic growth: Afghanistan progress in
industrialization has been very disappointing for the past four decades of War,
compared to the performance of our past and that of other countries.
Industrialization is one of the main sources of economic growth because it
creates jobs, uses our human resources and leads to the development of a
manufacturing sector. The Make in Afghanistan campaign aims to accelerate
Afghanistan growth by converting it into a manufacturing center and Self-sufficiency being
an ending to starvation and poverty to be achieved two most memorable global
3. Presence of numbers of local, international NGOs and UN agencies
in formation SMES, financial supporting SMEs in Afghanistan as ABADE
organization assists SMEs with better planning, appropriate equipment and
technologies, better management skills and business specific skills,
innovative-supporting alliances, and by facilitating a business environment
conducive to SME growth. AISA Business advice to national and international
business persons wishing to start up in Afghanistan, ALYAL conducts Ongoing
research on agriculture, food retail and distribution, and other aspects of private
sector development funded by USAID, World Bank, and others, AKDN Research
including baseline for own extension projects, mostly in rural areas and
focused SMEs and private sector development, APPRO Extensive research based on
primary data collected through surveys on clustered micro, small-sized
enterprises analyses of microfinance and SMEs in Afghanistan, analysis of
gender and agricultural production value chains, analysis of trade between
Afghanistan and its neighbor's (Iran, Pakistan, and Central Asian countries),
AREU A number of studies of emerging markets in pharmaceuticals, oil, and
agricultural produce in 2005-2007, ASMED Supporting private sector development
in Afghanistan with a focus on SMEs and women owned and operated businesses and
associations nationally and internationally linking Afghan businesswomen with
businesswomen elsewhere, MEDA Agricultural market research for microfinance and
SME interventions, mostly for own projects but also other donors, UNDP Market
Sector Assessments for SME Development and World Bank Best known for
multi-country "Enterprise Survey", surveying between 100-120 medium- sized and
large enterprises in Afghanistan.
1. Product or
activity deemed illegal, production of poppy or poppy processing, business of
arms and ammunitions, toxic and hazardous chemicals, business of alcoholic
beverages, gambling, political campaigning etc. resulting terrorist activities.
2. According to the latest World Bank Enterprise Survey 2014, the
top critical areas impacting on SMEs are "political instability, corruption,
access to land, access to finance". To design adequate BDS it is also necessary
to be aware of the World Bank Doing Business Indicators that are good at
capturing the enabling (or disenabling) environment and assess reform.
3. The top challenges for Afghan enterprises remain external, such
as protecting investors, trading across borders, political instability,
corruption, access to land, and access to finance. In addition to these, a weak
labor market, low literacy levels and an unskilled workforce are highlighted as
major challenges to inclusive growth.
4. Corrupt government officials, kidnappers, insurgents, warlords,
politically-active individuals can be seen as beneficial.
5. Remains useless to a large extent because its neighbors have not
installed the same technology. Corruption at the borders means goods transiting
from Pakistan get priority over Afghan exports. Corruption also makes market
competition for importers difficult. Those traders importing goods through more
porous borders with Pakistan, where customs revenue collection is less rigid
due to corruption, can sell their goods at a cheaper price than traders
importing the same product via northern borders with Central Asia.
6. Afghanistan is a Land-locked country geographical proximity of
Kandahar to the Pakistani border, and Pakistan's domestic market and Pakistani
ports on the Arabian Sea, is a major advantage for Afghan exporters though not
without problems with border crossing, the shared border with Pakistan is not
always passable for Afghan exporters and, sometimes resulting in fresh produce
rotting in truck containers held up by Pakistani border officials due to the
political and security uncertainties. The volume of trade with Pakistan has expanded, but so has informal trade, costing the Afghan government
tremendously in customs revenues.
7. Economic growth is expected to slow down because of a reduction
in aid and political uncertainty which creates a perception of risk for
investors not to the realization of the commitment, consistency of policy and
the spirit of integration of various parties / policy decision makers to the
development of SMEs, not only the vision and attitude as well as the
integration of SMEs handler's guidance from the government, and not full
support arrangements by the government, facilitate, ease and expedite business
entrepreneurs incentives for SMEs, among others, special rates, easier
requirements, subsidies and technical assistance, fraud protection against
8. Environmental issues: According to estimates by the World Health
Organization (WHO), most polluted cities in the world belong to Afghanistan. The worst city is Kabul. In addition, Afghanistan "Doing in Afghanistan" policy could increase pollution and aggravate the situation. The
government has not explained any ecological or social criteria about
"Doing in Afghanistan". On the other hand, the government is already
proposing diluted environmental and labor laws that attract investors to Afghanistan. "Make in Afghanistan policy could destroy soils; evacuate farmers,
increase deforestation and pollution in the absence of environmental
9. The use of materials that are less efficient, the instability of
the exchange rate against foreign currencies, there are many raw materials that
must be brought in from outside, and the low participation of residents in the
activities of SMEs.
10. There is a widespread embedded caring attitude, partnership and
social solidarity of large employers to SMEs, in the perspective and attitude
is not negative, as would be set, do not want to exploit the potential of the
wealth of art and culture that is optimal, essentially all of which is a
challenge for the development of SMEs.
11. In the perspective and attitude is not
negative, as would be set, do not want to exploit the potential of the wealth
of art and culture that is optimal, essentially all of which is a challenge for
the development of SMEs.
SWOT Analysis In formulating various alternative strategies can be
used SWOT analysis matrix models. There are four alternative strategies that
can be suggested; SO, WO, ST and WT strategy. SWOT matrix analysis model using
data obtained from tables IFAS and EFAS [5-8].
1. Increased partnerships, both in the areas of marketing,
technology and capital needs to be done with great entrepreneurs.
2. Development of SMEs needs to be done in an integrated and synergy
with development medium and large scale industries.
3. Creating a favorable business climate for the development of
SMEs and to encourage the creation of new entrepreneurs through business
modernization policy, policy stability Enterprises, SMEs and weaknesses
4. To involve SMEs in the program of exhibitions and bazaars in
order to help SMEs to market and promote their products through exhibitions and
bazaars or the people in the domestic market and abroad.
1. Empowerment existing SMEs, and development of SMEs in an
integrated manner in the field and has a strong commitment to do the
development of SMEs.
2. Human resource development such as; entrepreneurship training,
training production technology SMEs for various types of businesses, training
of marketing management, training in the field of banking credit financing and
training in export and import.
3. Development promotion services unit, technical services unit,
information services unit, promotion and marketing center, development trading
house and development promotion center.
1. Designate one official who actually became a coordinating body to
be a "filter". It is expected that the role and functions of the
Central Agency have been coordinating the implementation of coaching or
capacity development. The benefits of coordination on the ground, so that each
agency is able to perform the function not to over-lapping, because is a
tendency to overlap in coaching.
Facilitate Meeting venture between entrepreneurs of SMEs with
financial institutions such as the Banks and other micro-finance organizations,
empowering microfinance institutions.
2. Increased participation and community participation including
government related institutions and NGOs working in the area in the development
3. To disseminate the importance information technology, especially
the use of the internet to promote the products of SMEs, and need to have a
system of computer networks and the Internet to connect with related agencies
as well as having a website that can be accessed by the public or prospective
buyers both domestically and abroad.
4. Creating a conducive security conditions.
1. Special effort provisioning scheme for entrepreneurs SEMs.
2. Supplying government market.
3. Lightening system in the field of venture capital.
system / marking scheme (i.e. venture capital, loan guarantees, etc.),
5. Facilitating linkages enables entrepreneurs to exchanging ideas
with other businesses in their clusters or value chain and develop business
6. Simplifying the permit / registration system
Here are the suggested strategy formation and tips for sustainable
a) Proactive market orientation: the "Make in Afghanistan" campaign aims to make India a global manufacturing center, foreign investors can
use the proactive market orientation to develop a new product and satisfy the
domestic demand for this product. The strategy, in order to provide customers
with correct and satisfactory solutions, helps investors to understand and
understand the latent needs of customers.
b) Responsive business orientation: domestic and foreign investors could
use the receptive business orientation to respond to customer demand for new or
existing products as part of the Make in Afghanistan campaign.
c) Knowledge management: using current knowledge to create a new
business and conduct a new business in Afghanistan, knowledge management can
help foreign and Afghan investors gain access to existing knowledge and store
new knowledge about the organization that can be used to improve, decisions in
the future and in the present.
d) The government should establish national skills development
institutions to address the skills gap in Afghanistan.
e) In order to develop the manufacturing sector worldwide, the
government should focus on research and development institutions and invest in
research and development to meet the demand for advanced investor technology
through this campaign.
f) The need to develop production facilitation facilities is very
important for the effective implementation of this policy. The government
should focus more on road infrastructure and industry and invest to create
global growth and competition.
g) Afghanistan mergers and acquisitions to be undertaken will
generate speed. These startups will create more innovative approaches to
attract attention and retain the talent of Afghanistan.
h) The revival of production and industrialization in Afghanistan requires coordination between monetary policy, exchange rate policy, trade
policy and industrial financing. As members of the government, these policies
need to be harmonized and function in a coordinated way to succeed in Afghanistan, all over the world.
1. Raise awareness of the role of government in business
development: With the decline in aid and military spending, the Afghan
government will increasingly become the focal point for businesses. Many
business owners remain uncertain about the role of government in business
facilitation under the new economic policy. A well - orchestrated campaign is
needed to inform business - owners about when they can seek help from the government
and when demands go beyond the government's limited role in the market economy
2. Include women: Female business leaders are completely missing
from policy - making bodies such as the Afghanistan Investment Support Agency
and the Afghanistan Chamber of Commerce and Industry. Female - owned SMEs are
struggling and public acceptance of women working outside home is declining.
The presence of women in the decision - making bodies could result in
formulation of polices that create more enabling environments for women in
3. Coordinate the Implementation of the SME Strategy: With a clear
SME strategy finally in place, the SME Directorate at the Ministry of Commerce
and Industry coordinating implementation remains understaffed. The government
needs to increase human resource capacity within the directorate to meet the
4. Build SME Capacity to find and Engage New Markets: Afghan traders
still struggle in finding markets abroad. The culture of exhibitions, largely
subsidized by international organizations over the past decade, needs to be
better rooted in the trade community. The government needs to help SMEs in
marketing and networking strategies to engage long - term clients, not just
immediate sales at exhibitions.
5. Link Business Needs and the Education System: The SME Directorate
should work with public and private educational institutions to ensure that
educational curricula reflect local economic and business needs.
6. Facilitate SME Formalization: Inefficient bureaucracy and corruption,
combined with no clear incentives for SMEs, has kept a majority of SMEs outside
the government's sphere of influence. The process of registering businesses has
been simplified, but licensing remains complicated. The Afghan government needs
to simplify the licensing for SMEs if it wants to bring more of the sector
under its formal supervision.
7. Improve Communication with Central Asia: Afghanistan has struggled with communications with Central Asian countries. Officials describe
interactions as infrequent and difficult to arrange. The result is low level of
coordination at the border crossing point. Streamlined channels of
communication are needed to facilitate hearing about problems from traders and
the removal of barriers. Improved communication could help address transit
issues, such as the frequency and condition of ships at Hairatan port, or
working out an agreement for Afghan goods to be transported in train wagons
that return empty.
8. Gain Clarity on the New Silk Road Initiative: The United States
needs to clarify the exact framework for its New Silk Road Initiative. This
clarity could help Central Asian nations assess the benefits of investing in
customs technology and trade facilitation to pave the way increased trade with Afghanistan.
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Table of contents: The Kazakh-American Free University Academic Journal №12 - 2020