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Jacksonville State University
Country Analysis of Afghanistan
Madeline Paris, Abigail Jaskowski, Chloe Cardwell, Kristi Cunningham,
and Elizabeth Benefield
CBA 396
Lenn Rainwater
December 2, 2016
Table of Contents
Executive Summary -Abigail Jaskowski..........................................................................................1
Country Overview and History- Abigail Jaskowski.........................................................................3
Natural Resources- Madeline Paris................................................................................................5
Economic Resources and Factors- Kristi Cunningham...................................................................6
Social and Demographic Factors- Madeline Paris........................................................................10
Political System and Political Forces- Chloe Cardwell..................................................................11
Legal and Trade Analysis- Chloe Cardwell....................................................................................13
Cultural Analysis- Elizabeth Benefield..........................................................................................15
References................................................................................................................................... 20
Country Analysis of Afghanistan
Executive Summary -Abigail Jaskowski
Afghanistan is not overly attractive for exports or direct investment. Due to a lack of
education, there is a shortage of skilled labor. Corruption runs rampant in daily business
transactions, particularly with government regulations, taxation, and the smuggling of illegal
goods into Afghanistan. This corruption stems from a legal system that is struggling to develop.
Because the legal system is unclear and enforced irregularly, this makes it difficult for foreign
investors to decipher their tax laws and government regulations. Overall, the country is poor,
with few industries providing jobs or adding value to the economy; the economy is even
growing at a slower pace than normal. Transport costs are high; poor quality goods and services
coming from China, Iran, and Pakistan serve as sources of competition with their cheap prices.
The infrastructure is currently severely limited, with no railroad, limited and expensive air
delivery services, and only trucks distributing most of the goods. Despite all of these deterrents,
Foreign Direct Investment could still be accomplished if executed properly by entering the
market in small intervals with the assistance of franchisees possessing knowledge and
successful experience (3).
Because of Afghanistan’s general lack of any type of sophisticated infrastructure, they
have been undergoing recent reform in order to efficiently transport goods by water and road,
as well as construction regarding small stores and residential areas. Therefore, exporting
various types of construction materials such as concrete, bricks, steel, and glass to Afghanistan
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would be a wise investment for the upcoming years, but not a permanent endeavor, as they are
already several years into intensive reconstruction. Along with the need for materials, the
country is in need of construction services. With the withdrawal of United States troops from
Afghanistan, U.S. military funding for construction has solidly declined. However, there is still
critical demand for domestic housing and commercial construction (1). The majority of
exporting and direct investment opportunities are found in the need for transporting goods and
services. Afghanistan also lacks efficient telecommunication (3). The meat-processing sector
fails to meet international standards, and therefore imports a great deal of meat from the
United States. This sector would be advisable for either exporting or Foreign Direct Investment;
FDI would require investing in the updating of existing facilities in Afghanistan. Considerations
would need to be made as to the specific preparation of these meats and the type of meats
provided, as a large population of Muslims exists in Afghanistan. Muslims do not eat pork and
the cow is revered as sacred, so chicken, lamb, and a limited number of other meats would be
acceptable (4). Other investment opportunities lie in dairy, fruits, nuts, and non-traditional
products. Afghanistan’s climate would allow for various plants to grow, and in turn be used in
markets such as the pharmaceutical sector. There is currently little to no competition in this
area, and presents first-mover advantages (5).
Overall, Afghanistan’s primary needs are found in the most basic of markets. This is an
underdeveloped country lacking a great deal in education, resources, transportation, and
logistics. However, Afghanistan has untapped potential that, if properly and wisely invested in,
could bring favorable return on investment. FDI is highly risky here due to the overall cultural
climate in regard to business, especially with American investors, but still plausible. It would not
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be wise to export only to Afghanistan, but to take advantage of all exporting and investing in
countries directly surrounding Afghanistan, such as Iran, Pakistan, Turkmenistan, and others.
However, Afghanistan is gradually becoming more open to FDI; their government is seeking to
turn their economy around and to invest in exporting around the globe (21).
Country Overview and History- Abigail Jaskowski
In 1747, one leader united the Pashtun tribes,
establishing Afghanistan, and creating a zone between
Great Britain and Russia for many years; it finally broke
away from Britain’s control in 1919. During and
following this period of time were many years of
constant war and the unrelenting overthrows of their
government (21). Afghanistan is entirely landlocked,
surrounded by Iran, Turkmenistan, Uzbekistan,
Tajikistan, Pakistan, and China. Though it possesses a mountainous and dessert terrain,
Afghanistan has long been a sought after territory, due to its lying along important trade routes.
It has also had a volatile political climate for centuries, where the government has changed
hands an infinite number of times, leaving the country in poverty and underdeveloped stages.
Afghanistan is around two hundred and fifty thousand square miles and has an estimated
population of roughly thirty million, with nearly seventy-six percent of its people living in rural
areas and conditions. A great majority are simple farmers with miniscule plots of land. The
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Source: Brittanica Academic (20)
small portion of Afghanistan that is urbanized is largely due to the driving out of citizens from
rural areas because of war. Kabul, the capital, has seen urban settlements popping up in its
area. Because of constant wars, it has been difficult to get an accurate census of the many
Afghans who have been scattered throughout the country; only rough estimations exist. The
economy is continuing to improve, but still far from stable in comparison to its surrounding
neighbors (20).
In relation to the United States, Afghans live shorter life spans, are more likely to be
unemployed, are more likely to die in infancy due to a lack of adequate health care, and live in
poor conditions. The United States interference with the Afghanistan government and the war
that was waged a very short period of time ago on Afghanistan’s own soil has left Afghans with
a less than desirable perspective of Americans. However, according to the Wall Street Journal, it
is “a fallacy to assume that most Afghans are Anti-American” (20). Therefore, when considering
exporting to or investing directly in this country, adaptation is a necessary endeavor, as it
always is when dealing with a foreign country and market. It is always necessary to adapt your
product or service to best accommodate your target market in the context of their daily
customs and social backgrounds (20). The Afghan culture is rich, but quite a contrast to
American culture. Afghanistan has many different languages, such as Afghan, Persian, Dari, and
Pashto. Over sixty percent of the population is twenty-four years old or younger. The vast
majorities of people are Muslim, and hold strongly to their convictions. All of these are hefty
factors when considering whether or not to export or invest (21).
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Natural Resources- Madeline Paris
One of the major contributors to a nation’s economic success is its natural resources.
The goods that a country can naturally produce can give the country an advantage. If a country
has natural resources that other want and or need, it can export those goods. Businesses may
also decide to put a foreign direct investment into a country based on what natural resources
are there. Afghanistan’s primary natural resources are cotton, grain, nuts, and fruits (21). It’s
geography also makes the country have plenty of areas for the grazing of sheep, goats, and
camels (21).
Although Afghanistan is a landlocked country, it has elements to its topography that
make it fortunate. The average altitude is about 1200 meters (21). The Hindu Kush mountain
range has a height of 6100 meters (21). This mountain range divides the northern provinces
from the southern (21). Some of the southwestern parts of the country are deserts, but other
parts contain many small fertile valleys that are perfect for growing the country’s main crops.
(4) There are a few lakes in Afghanistan, but none of notable size (21). The country has four
main rivers. The Amu Darya is located in the north, the Harirud and Morghab are located in the
west, and the Kabul is located in the east (21). Many nations are interested in the primary
resources of Afghanistan. The country’s main exports are fruit, nuts, and wool (21).
The country would be considerably more attractive for business investments due to the
topography and natural resources if it was not for the economic and political factors. Even
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though the country is landlocked, it would be a viable entity for international business
regarding the natural resources.
Economic Resources and Factors- Kristi Cunningham
Afghanistan’s stage of economic development is now nearly two and a half times
greater than it was in 2002. Despite their attempts to overcome some economic hurdles they
are still one of the poorest countries in the world. The deterioration of the political structure
continues to destroy any confidence in their economy (2). The hardships they face can
undoubtedly be traced back to the constant wars taking place in the region.
Their inflation rate in 2015 was -1.5%. They have a large underground economy for
opium, which is also their largest export. Opium makes up about half of their exports alone. The
currency for Afghanistan is the Afghan afghani and the currency code is AFN. The exchange rate
is 61.14 AFN per 1 USD (21). The most recently reported gross national income was in 2013 at
59.87 billion USD. Gross domestic product per capita was 1,900 USD in 2015. Gross national
income per capita was reported in 2015 at 630 USD which was a drastic drop from 2013 where
it was 730 USD, see Figure 1.
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Source: The World Bank (9).
The citizens of Afghanistan do not have many opportunities for leisure spending
because money is extremely tight and is reserved for necessities. The minimum wage rate in
2013 was 0.57 USD, which means the workers, would earn roughly 5000 AFN per month.
Though the cost of living in the country is relatively low it is not equivalent to the minimum
wage. This made them the third poorest country in the world in 2013 (15).
The country’s imports are machinery and other capital goods, food, textiles, and
petroleum products, which equaled out to about 7.004 billion USD. The largest import partner
in 2015 was Pakistan at 38.6% and the only export partner that is also an import partner is
India. The other import partners were the US, Turkmenistan, China, Kazakhstan, and Azerbaijan
(21). Their exports are opium, fruits and nuts, handwoven carpets, wool, cotton, hides and
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pelts, and precious and semi-precious gems. The exports in 2015 totaled up to 658 million USD.
Their largest export partner in 2015 was India at 42.3% followed by Pakistan and Tajikistan; see
Figure 2 (P.11).
Afghanistan is considered to be a heterogeneous society, because the citizens differ so
much from region to region. This is due to the fact that they have both tribal and non-tribal
communities throughout the country. They are a minority’s country since no ethnic group
makes up more than one third of the population (19). The official languages are Afghan Persian
or Dari and Pashto. However, a good portion of the population speaks Turkic languages which
are mainly Uzbek and Turkmen and thirty different minor languages. The Turkic languages as
well as Balochi, Pashai, Nuristani, and Pamiri are the third official language in regions where the
majority speaks them (21).
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Source: CIA World Factbook (21).
The primary natural resources are natural gas, petroleum, coal, copper, chromite, talc,
barites, sulfur, lead, zinc, iron ore, salt, precious and semi-precious stones, and arable land.
Many of their natural resources make up their largest exports. The interest rate is 15% as of the
beginning of 2016. They had an extremely high unemployment rate of 35% in 2015. The high
unemployment rate is not necessarily correlated with lack of job capabilities, but most likely
with the difficulty finding and keeping a job in such a volatile, war ridden country (21).
The country relies heavily on foreign aid despite the significant improvement in the
economy in the past few years. Their living standards are among the lowest in the world due to
a lack of what most people consider to be common amenities, like clean water and electricity.
Recent efforts to fight corruption and rebuild the political structure have allowed for more
growth in the economy than they have seen throughout the years of war that have plagued the
country.
Social and Demographic Factors- Madeline Paris
The life expectancy at birth for a citizen of Afghanistan is roughly sixty years (20). This
number has steadily gone up over the last four decades. Although this positive trend is
beneficial for the country, Afghanistan is still the 171st in the world in life expectancy (20).
Literacy rate is defined as the ability to read and write for those over the age of fifteen.
The literacy rate for Afghanistan’s population is about thirty eight percent (12). Only about
twenty four percent of females are literate, while fifty two percent of males are literate (12).
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It is widely known that the most prominent religion in Afghanistan is Islam. The
population is almost one hundred percent Muslim (12). This fact affects many other aspects of
the country. Countries who are predominately Muslim usually have less ability to achieve
economic success and personal freedom for the residents.
About twenty seven percent of the total population is considered urban (12). The
number of people who are a part of the urban population is increasing by nearly four percent
every year (12). Even though this seems like a positive trend, the country still has somewhat of
a slum problem. Afghanistan still has many people who have issues finding drinking water
sources and sanitation facilities (12). The population still has an intermediate risk of contracting
diseases such as bacterial diarrhea, hepatitis A, typhoid fever, and malaria (12). This is most
likely a result of the poor water facilities.
These social and demographic factors make the country unattractive for business
investment. Most businesses will most likely put their investments towards other countries
over Afghanistan. Low literacy rates make the available workforce difficult to train. The issues
with disease control will also deter many businesses from investing. Organizations will see any
investment into Afghanistan as a risk.
Political System and Political Forces- Chloe Cardwell
The political and legal systems in Afghanistan are of course unique to their nation, just
like any other. The form of government that Afghanistan has is a Presidential System, in which
the head of government is also the head of state and it leads an executive branch that is
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separate from the legislative branch. The current President of Afghanistan is Ashraf Ghani and
the Chief Executive of the Islamic Republic of Afghanistan is Abdullah Abdullah. For better
understanding, the United States has a Presidential System. Afghanistan also operates under
an Islamic Republic. This means that that country is under Islamic laws.
Trade between Afghanistan and other countries is currently at five billion U.S. dollars
per year. They average around seven hundred and seventy million dollars in exports and
around six billion dollars in imports, most recently resulting in a negative trade balance of
around five billion dollars (6). Afghanistan is currently the 158th largest export economy in the
world with a GDP of twenty billion dollars. The top exports consist of grapes and scrap iron, at
14.7% and 10.3%, respectively. The top imports consist of refined petroleum and peat, at
8.37% and 7.09%, respectively (6).
Being one of the most complex economies in the world, the fight against drug trade in
Afghanistan is a huge controversy that affects trade in many areas, both politically and legally.
Poppies are a huge agricultural component of the nation, which has lead to an increase in
opium exports and the battle of legalizing the medical use of morphine from poppies. There is
no real worldwide demand for legal opium, as the current supply of licit opiate raw materials
exceeds world demand (8). Using the Afghan poppies for legal opiates has no realistic or
beneficial reason to be traded; however, it is a constant battle as opium consumes the majority
of Afghanistan’s trade. The Government of Islamic Republic of Afghanistan does however take
action against the drug trade; in fact, they have succeeded in decreasing poppy cultivation in
four major areas of the nation.
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Afghanistan, similar to any other nation around the world, faces current challenges that
will ultimately decide its future. The first and perhaps the most significant challenge the Afghan
nation faces is the idea of sustaining political unity (14). The history of political unity in
Afghanistan is almost nonexistent. The inauguration of the nation’s unity government took
place in late 2014, which signified the new and historical democratic transition. Another
challenge that Afghanistan currently faces is achieving their key priorities in a comprehensive
reform agenda (14). The leaders of the nation, Ghani and Abdullah, have agreed to implement
their priorities in a political culture that will best serve their people. Lastly, a large challenge
that the Afghan nation faces today is the promotion of reconciliation and peace (14). The
inauguration of the two newest leaders gives hope to the people of Afghanistan. The
newfound political government of unity in Afghanistan is perhaps the first step in this goal.
Politically, the Afghan government is on the right track to the betterment of their nation
due to their recent inaugurations and reform policies. Of course, there are still battles against
the issues that have existed there and still exist today that prohibit complete success. The
nation’s leaders are hoping and working towards a better nation that will be feasible for the
future of Afghanistan.
Legal and Trade Analysis- Chloe Cardwell
Yet another ongoing battle that the Afghan nation faces is safety. Being a middle-
eastern country, this is to be expected in this day in time. The majority of areas in Afghanistan
remain unsafe because of the consistent risk of kidnapping, hostage situations, military
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operations, landmines, political and tribal group violence, fire, suicide bombings, and various
forms of attack (8). Attacks target all areas including the Afghan and U.S. government
installations there, hotels, airports, non-governmental organizations, education centers, and
more. Along with these dangers, extremist/terrorist groups, such as Taliban groups, the Islamic
State of Iraq and the Levant, and various other opposition groups, are at large in the area.
These groups have routine attacks planned and often succeed in their endeavors. To show the
concern surrounding this area, travel to the country by United States government officials and
employees is restricted and requires approval from the Department of State (8).
Legally, trade in and with Afghanistan is complicated and complex, similar to its
economy. In 2014, the World Bank ranked Afghanistan 184 out of 189 in trading across borders
(6). Perhaps this has something to do with the fact that their customs regulations and
procedures are not consistent and are not exactly transparent. All goods imported and
exported into Afghanistan must be classified for Customs in order to determine duty
assessment, statistical information for economic planning, trade negotiations, and the
enforcement of trade laws nationally and globally. However, this advice is not legally binding,
meaning that a country may not receive accurate verbal advice on the tariff classification in
Afghanistan (6).
The Islamic Republic of Afghanistan is a member of several international organizations
such as the Asian Development Bank (ADB), Colombo Plan (CP), Economic Cooperation
Organization (ECO), Food and Agricultural Organization (FAO), Group of 77 (G77), International
Atomic Energy Agency (IAEA), International Bank for Reconstruction and Development (IBRD),
among several others, and is an observer of the World Trade Organization (WTO) (16).
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Politically and legally, Afghanistan is a nation under much stress due to the area and
many other forces that make its safety and success a hard task to achieve. However, in hopeful
thought, the two leaders of the Afghan nation will prosper and achieve their goals and meet the
challenges that exist in order to further develop Afghanistan’s economy, both politically and
legally.
Cultural Analysis- Elizabeth Benefield
To describe Afghanistan’s culture Hofstede’s five dimensions is one of the two ways to
describe it. Hofstede’s dimension’s studies how values in the work place relate to the culture.
The first Hofstede dimension is the power distance which is used to measure how unequal
people are in physical and intellectual capabilities. The society of Afghanistan has a large power
distance between the rich and the poor. The second dimension that can be put into use is the
individualism versus collectivism. Afghanistan is more of a collectivism society which means
that they place more value in everyone rather than just one person. Families generally live in
one house and the older members of the family are taken care by their children once they are
grown. The masculinity and femininity dimension has a huge role in the Afghan culture and
those values can also be seen in the work place. Just within the society men have a higher value
and are the head of a household and decision makers. Women are required to stay inside and
be covered from head to toe if they do ever go out. They also cannot be seen or heard by other
people or families. So, the question may be “how is this also reflected in business?” In business
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Afghan men, will not interact with a woman at all even if they are an associate. They will not
shake a woman’s hand unless she initiates it first. In public, it is expected that women also dress
conservatively and wear a headscarf so that also is reflected in the workplace. The last
dimension is the long-term versus short-term orientation which means the extent a culture
programs its citizens to accept delayed gratification. Afghanistan seems to be more of a short-f
keep with tradition and stay within each person’s social hierarchy rather than looking towards
the future and staying in the present. Hofstede’s five dimensions is one of the two ways to
describe Afghanistan’s culture and to measure it up against other countries.
The second way to describe Afghanistan’s culture is through Trompenaar’s dimensions.
The first dimension is universalism versus particularism. Afghanistan leans more towards
universalism because of the importance in their laws and values. The second dimension is
individualism versus communitarianism. Whereas the U.S. is more individualism, meaning that
people in the U.S. believe in personal freedom, Afghans are communitarianism, they believe
that the group comes before the individual. Then comes specific versus diffuse, a better way to
describe this dimension is how far people will get involved in a situation. People in Afghanistan
are more on the side of diffuse where their business and personal lives will overlap one
another. The fourth dimension in Trompenaar’s model is neutral versus emotional. Afghanistan
people are emotional and they find ways to express their emotions. Where Afghanistan falls
into the fifth dimension is ascription over achievement. They use titles and show respect to
authority. Sequential time versus synchronous time, in other words punctual or flexible with a
person’s time. Since Afghans are less structured and more fluid when it comes to business
meetings they have more of a synchronous time. The last dimension is internal versus outer
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direction. Afghans have an internal direction where they believe they can control their
environment and how they work with teams and organizations. Trompenaar’s dimensions
model is another good way at describing Afghanistan’s culture and people.
The main religion in most of Afghanistan is Islam with a very small minority of other
religions. Afghanistan takes their religion very seriously. They pray five times a day and even if
they are working or have business they take a pause during their day to pray. When going over
there for business it would be better to not conduct business during the month of Ramadan
because the work hours change during this time. They only work six hours a day and during
Ramadan they fast so they cannot eat, drink, smoke, or chew gum. Islam is an important part of
Afghan’s lives so foreigners should be respectful towards their religion. Afghan’s beliefs do not
have a huge impact on business however during Ramadan it could be troublesome when trying
to conduct business and you are only able to be in the country for a day or two.
There are many rules for etiquette in Afghanistan varying from business, to dining, and
to gift giving. Within this section some, but not all the rules of etiquette for each of the points
mentioned previously will be discussed. Business etiquette in Afghanistan is different than it is
when compared to other countries. Before beginning a meeting always shake hands in greeting
along with asking about the health of one’s family, themselves, or their business. In the meeting
with Afghans people will take phone calls or they may come in and out of the room. Overall the
meetings are not very structured and are more fluid. Business in general in Afghanistan is
personal and you need to establish trust with your business counterpart to get to the reason for
the meeting or wanting to work with. Always be mindful of honor and shame when speaking as
those are large components in the culture of Afghanistan and you do not want to accidently
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shame the Afghan business partner. Giving a gift is a choice when an invitation to lunch or
dinner has been offered. If a person does choose to give a gift to the host it needs to be
wrapped nicely. So, the gift is not too expensive or ornate it is a good idea to give the host
sweets or fruits. When giving a gift, it needs to be done subtly and not be made a show of. Food
or dining in Afghanistan is incredibly different when compared to the Western World. When
you are eating in a person’s home it is customary to remove your shoes and before eating to
wash one’s hands. Usually everyone will sit cross-legged on cushions sat around a table and if
they extend out their legs it is considered rude. “Food is generally served communally and
everyone will share from the same dish.” (17) When eating, or passing food always use the right
hand. The rule of etiquette in Afghanistan should be closely followed since the country puts so
much weight in honor and shame. To shame a business partner or person in Afghanistan
accidentally could have an extremely negative effect on the rest of your time in the country. So,
to have good relations with the people in the country follow these rules or guidelines and you
should have good relations.
In most countries, there is an underground economy that may be unknown or known,
but not challenged, and Afghanistan has one. Their underground economy is the opium market.
This market is quite massive despite the efforts of the Afghan government and NATO to put a
stop to it and has been around for many years. The impact it has on business is not incredibly
extensive. Although it could have an impact on transportation because some of the profits “go
to funding group that attack both the Afghan and coalition forces.” (11) That within itself could
be dangerous because you would be a foreigner starting up a business and the target of these
group acts are foreigners.
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“How does someone begin a business in this country?”, that is a question someone in
business may ask themselves if they are looking to start a company in Afghanistan. The best
way to go about starting a business is to work with a network such as the U.S. Commercial
Services to work with their specialists. Two of the main reasons you would want to work with
the specialist is for the fact that every, or most businesses, want to “target the best market and
meet the best distributors and agents for your products and services.” (13) In Afghanistan, the
best market to target is the richer areas or the growing middle class rather than the poor areas
in the country. Another reason to work with this network specifically is to be better equipped to
overcome the trade barriers or challenges that may come with starting up a business in the
country.
To start a business or to decide to have it in Afghanistan the person needs to recognize
that the country is an incredibly corrupt nation and it is a way of life for the people. The
Transparency International rating gives Afghanistan a score of 11 and is ranked 166 out of 168
countries. The reason that corruption is a way of life for Afghans is because in the Middle East
“political corruption remains a huge challenge” (22). It also does not help the countries rating
when terrorist groups such as Isis and the Taliban are prevalent in the Middle East. Corruption
is a way of life in Afghanistan because of political corruption that goes unchallenged.
The businessman or woman desiring to take their business to Afghanistan needs to
know how dangerous this country is and should do extensive research. The country is still a
highly dangerous place for living and traveling and the reasons are extensive. There are still
military operations, constant “armed rivalry between political and tribal groups, and direct and
indirect fire.” (8) For people wanting to move to this country it would be highly unadvised due
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to not only the previous two reasons, but also the fact that the Taliban is still prominent and
have been using explosive devices to target citizens of other countries. The list for way this
country is still dangerous could go on, but to shorten it those are three main reasons as to why
Afghanistan is a highly dangerous place for living.
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