Go­ing Lo­cal

As for­eign troops grad­u­ally leave Afghanistan, will its eco­nomic setup sus­tain and grow? What the coun­try needs now is lo­cal and for­eign in­vest­ment and a de­pend­able sup­port struc­ture.

Southasia - - War & economy - By Haseeb Ah­san

As an­nounced by the U.S. govern­ment, Amer­i­can troops will be mov­ing out from Afghanistan by 2014 and will hand over the over­all se­cu­rity to Afghan army. Here the big ques­tion that arises is whether the Afghan Army is ca­pa­ble to take care of Afghanistan with no U.S. and NATO su­per­vi­sion? The ba­sic con­cern is - will Afghanistan sus­tain?

The econ­omy of any na­tion is its back­bone which en­sures its sus­tain­abil­ity. Look­ing at the per­for­mance of Afghanistan over the past decade, the econ­omy is grow­ing but at a slow pace. This is due to mas­sive for­eign in­vest­ments and mil­i­tary spend­ing. How­ever, an­a­lysts fear that as the for­eign troops move out of Afghanistan, this sup­port will drop dras­ti­cally.

The World Bank’s ‘Do­ing Busi­ness In­dex 2011’ ranked Afghanistan at 167 out of 183 economies in the ease of do­ing busi­ness. Although this rank­ing is not very en­cour­ag­ing, the coun­try has achieved an av­er­age growth rate since 2002. In or­der to make the Afghan econ­omy ca­pa­ble of stand­ing on its own, de­ci­sion-mak­ers have to think around how the Afghan lo­cal pop­u­la­tion can be em­pow­ered. Only this can en­sure that the econ­omy moves for­ward smoothly.

Afghanistan is a coun­try with huge min­eral re­sources but un­for­tu­nately it has not been able to self-sus­tain. Be­sides the se­cu­rity chal­lenge, one huge eco­nomic chal­lenge is its lo­cal in­dus­try which is hardly ap­pre­ci­ated. Last year the im­port of Afghans to­taled $5.3 bil­lion whereas the exports were only $547 mil­lion, com­pris­ing mostly hand-made prod­ucts. Sim­i­larly, most of the con­tracts are handed over to for­eign con­trac­tors and sup­pli­ers, who in turn em­ploy a very small num­ber of lo­cals.

Over the past decade the ser­vices in­dus­try of Afghanistan has made a ma­jor con­tri­bu­tion in the coun­try’s over­all growth. The ser­vice in­dus­try mostly in­cludes trans­porta­tion, com­mu­ni­ca­tion, fi­nance and in­sur­ance. An­other con­trib­u­tor in the Afghan growth is its agri­cul­ture in­dus­try. Cur­rently this in­dus­try is volatile due to im­proper ir­ri­ga­tion sys­tem. Most of the lands are de­pen­dent on the cli­mate and hence the pro­duc­tion is un­pre­dictable.

An­other chal­lenge to the econ­omy is the com­pli­cated reg­u­la­tion to start a new busi­ness in Afghanistan. Though for­eign in­vestors are in­ter­ested in in­vest­ing in the coun­try, laws and reg­u­la­tions are not fa­vor­able in an al­ready in­se­cure in­vest­ment cli­mate. As a re­sult, the in­vestor has to go through te­dious stages to start any new ven­ture. Some 12 le­gal doc­u­ments are re­quired for imports or exports. These in­clude NOCs, cer­tifi­cates, tax challans and more.

For eco­nomic sus­tain­abil­ity, it’s not only the di­rect in­vest­ment that mat­ters but there are also in­di­rect fac­tors like im­prov­ing the ed­u­ca­tional sys­tem and liv­ing stan­dards. Sim­i­larly, pro­grams like Afghan Sup­port Fund (ASF) and dif­fer­ent health pro­grams na­tion­wide can also play a sig­nif­i­cant role. In re­cent years donors and in­vestors have started un­der­stand­ing these con­cerns and have started to ap­pre­ci­ate the po­ten­tial in the lo­cal in­dus­try, es­pe­cially the man­u­fac­tur­ing sec­tor. Giv­ing the con­tracts of de­sign­ing the Afghan Army uni­form is a one good ex­am­ple. What more needs to be done is to help the min­ing, oil and gas sec­tor and to de­velop a proper ir­ri­ga­tion sys­tem so that the agri­cul­ture in­dus­try can be made more pro­duc­tive. Sim­i­larly, roads across the coun­try also need to be built and im­proved thereby en­abling a strong do­mes­tic com­mu­ni­ca­tion.

When one looks at Afghanistan to­day, the em­pow­er­ment of the pri­vate sec­tor is the need of the hour. In re­cent years the con­cept of en­trepreneur­ship is also ex­celling in Afghanistan where the en­trepreneurs are strongly sup­ported by the state-owned and for­eign-funded fi­nan­cial in­sti­tu­tions and ven­ture cap­i­tal­ists. Such sup­port struc­tures need to be strength­ened in or­der to help the Afghan econ­omy stand on its own. The writer writes on en­trepreneur­ship and skill de­vel­op­ment for var­i­ous pub­li­ca­tions.

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