40% Factories Shutdown: Concern Over Impending Economic Crisis Post-Coronavirus

Reports indicate that over the last two months, 40% factories have shut down and 30% are semi-active throughout Afghanistan. As the number of people infected with Coronavirus in Afghanistan continue to increase, industry leaders are concerned that the worsening crisis could lead to bankruptcy and increased layoffs.

Due to the spread of Coronavirus and the resulting restrictions, many factories stopped operating. A survey by the Afghan Chamber of Industries and Mines (ACIM), found that of these, 40 to 45% have stopped all together or have decreased their production by almost 50%.

“We import most of the raw materials from abroad. The fact that the raw materials are stopped in the port of Karachi [in Pakistan], is a big challenge, and bad for factory owners,” said Sakhi Ahmad Payman, head of ACIM.  “They are hurting the country’s industry. Afghanistan’s industry is young, and with the lack of control and sustainability, many businessmen and artisans may go bankrupt.”

The survey found factory incomes have gone down by 50 to 60%.

Only pharmaceutical production, detergent factories and flour silos, are fully or semi-active. They make up the 30% that produce essential commodities, required to keep the country running.

The World Bank has predicted the Afghan economy would contract by up to four percent in 2020 due to COVID-19. Weak labour demand and security-related concerns will keep poverty rates high. The trade deficit will continue to increase, and the imbalance would become a huge concern for the government.

Fear of unemployment

Before the COVID-19 pandemic, there were 350,000 workers in Afghan industries, many of whom have now been laid off.

“Under these circumstances, most factories have paid 50-100% of the salaries to their employees, and some have not been able to pay them, temporarily,” said Payman.

Haji Shad Mohammad, an entrepreneur in Kabul, told Reporterly: “Since the start of quarantine, we have been forced to lay off 60% of our employees and work with only 40%, all of whom have quarantined inside the factory itself.” He is paying only 40 to 70% of the employees’ salaries. Mohammad added, “By selling goods… we can provide for ourselves and all our employees –both those who are working and those who are currently on leave.”

Other owners have paid their employees’ personally. But these are only stop-gap measures. If the conditions persist, they fear bankruptcy is imminent.

Another factory owner, Abdul Wakil, has been able to pay half of his employees’ salaries each month. He owns five factories and said, “With the market situation and declining purchasing power… now it’s very difficult to make a living for my employees.”

Meanwhile, some factory owners are complaining about the government’s lack of attention or support. They said the government has not even exempted them from taxation or utility bills. They have yet to announce a bailout as the situation worsens. There might be a 100% stagnation of the economy post the crisis.

Contributed by Zackaria Noori; Edited by Anugya Chitransh

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