As the Afghan economy crumbles, small businesses struggle to hang on – The Washington Post

KABUL — In a cramped workshop, reeking of glue and stuffed with piles of plastic straps and rubber soles, half a dozen men and boys hunched over scarred tables last week, scraping and hammering, stitching and gluing. By day’s end, they would produce 70 pairs of women’s sandals, ready to send to street bazaars at a deeply discounted price of $8 each.

“We don’t make men’s shoes anymore. All the men are jobless,” explained Abdul Bashir, 55, the workshop’s owner. He has been making shoes his entire adult life — through a civil war, stints of communist and Islamist rule, a ruinous flood of cheap Chinese footwear, and two decades of conflict between Taliban and U.S.-backed Afghan forces.

Now, eight months after the Taliban takeover of the country, he and other small-business owners are confronting their direst crisis to date. Sales everywhere are down drastically. The new rulers have promised some relief, including partial forgiveness of back taxes and a slight reduction in the income tax. But many are doubtful that token gestures will reverse their plummeting fortunes.

“Reduced taxes will not help us if we cannot sell anything, meet the rent or keep our workers paid,” said Bashir, whose enterprise is one of about 120,000 small businesses in Kabul, ranging from beauty parlors to clay-oven makers. “We are eating all our income,” he lamented.

But Taliban authorities are pursuing more-sweeping changes. With almost all foreign aid, bank business and financial transactions halted, officials say they hope to boost domestic revenue by ending decades of corruption, modernizing government financial systems and creating confidence among local business owners.

Najeeb Ahmadjan, an official at the government’s Revenue and Tax Administration, personifies this vision. If successful, he said, their efforts should help ease the country’s economic crisis — and prove to Afghans and the world that the new rulers are both capable and committed.

“Before the Islamic Emirate came, there was much more economic activity and international support. But there was also a lot of corruption,” Ahmadjan said, using the Taliban’s name for its government. “Now, there is much less support but much less corruption, and much more commitment from the top. Government employees feel more energy, and public taxpayers feel more trust.”

In market stalls, workshops and one-room offices across the capital, the consensus seems to be that the Taliban has good intentions but has not yet figured out how to help small businesses, let alone manage a large, badly ailing economy. Some merchants expressed frustration and anger. Others had almost given up in despair.

At a metal-roofed block of furniture showrooms filled with beds, desks and wardrobe chests, owner Yasin Hamidullah said he had sold only one piece in the past month, a large cabinet that he let go for $60. He had just borrowed money to pay his monthly rent of $150, mostly to have a safe place to store his unsold inventory.

“When we had foreign customers, we could hardly keep up with the demand. Now they have all left and nobody comes to buy,” Hamidullah said. He decided not to pay his last income tax bill of $250, expecting to get the promised tax break, but it never came. “I feel cheated,” he said. “I am still paying the same tax I paid five years ago — and we are selling nothing.”

Several miles away, in a maze of auto parts shops with mufflers and mirrors dangling from the ceilings, Samir Ahady is facing a different problem. The shelves in his store are lined with car batteries from Japan and Thailand. Since the Taliban raised customs fees, he said, his cost per battery has gone up from $90 to $100, while his sales have cratered.

“I have noticed some positive changes. Taxes are faster and easier to pay,” Ahady said. “But the prices are all higher, people have no jobs and they can’t afford to keep their cars fixed.”

“My income is 80 percent down, and my whole life has changed,” he added. “No more family picnics, no more meat with dinner, beggars everywhere. The future is totally unclear.”

Noor Ulhaq Omeri, who heads the capital’s association of small businesses and artisans, has a more patient approach to dealing with the new authorities. He has met repeatedly with Taliban officials and proposed various forms of tax relief. Most have been turned down so far, but he still has hope.

“For many years, the system was bad and there was a lot of corruption. You had to pay bribes for everything,” said Omeri, 55. “The new authorities do seem committed to fixing this problem, and we are happy about that, but they have been far away from governing for a long time. They may be honest, but there is a distance. People want to cooperate, but they are still mistrustful.”

Across the capital, in 22 neighborhood tax offices, daily interactions between small-business owners and new government officials are beginning to bridge that gap. In Khushal Khan, a busy mixed-income district, the tax office director, Obaidullah Omarkhel, has been on the job for just six weeks.

On a recent morning, Omarkhel sat at his desk, which was empty except for a stack of large detailed maps of the district. Every few minutes, another taxpayer entered hesitantly with a sheaf of papers in hand. Omarkhel reviewed the papers carefully, then signed and handed them back with a few pleasantries, sending the customer to a nearby office to pay.

“I want to be sure not to make any mistakes,” Omarkhel said. “We want to encourage people to pay, not to force them.”

While acknowledging the country’s long struggle with official corruption, he said he reassures his customers that things are different now. “I tell them the past is past,” he said. “I am here now, and this is my responsibility.”