The South Asia Channel
From Aid to Trade
For Afghanistan's economy to stand on its own feet, the government must begin with these four reforms.
For those who watch Afghanistan, the collapse of the economy will cause the collapse of the country.
Afghan President Ashraf Ghani and Chief Executive Officer Abdullah Abdullah are trying to prevent this, making the promises that everyone wants to hear: From selling Afghanistan’s raisins to Tesco in the United Kingdom to connecting Kabul with Silicon Valley in the United States to turning Afghanistan into the land bridge of Asia by attracting Chinese investment in infrastructure. The vision is praiseworthy and probably the only hope for Afghanistan.
For the government’s vision to materialize, the most important stakeholder and partner capable of leading Afghanistan towards economic self-sustainability is the private sector. Governments are never good at doing business; The Afghan government must leave business to the private sector and provide all the support to make sure that trade, investment, and business can be done easily internally and externally. Similarly, coalition partners and donor agencies should increase their focus and pursue an Aid-for-Trade and Aid-for-Entrepreneurship strategy. For every dollar given in Aid-for-Trade, it generates $8 in further trade.
Afghanistan can achieve economic self-dependence by taking action. I am highlighting four critical points — a to-do list — which is based on my discussions and work as a social entrepreneur, philanthropist, and private sector leader with stakeholders from the private, public, and non-governmental sectors in Afghanistan, the United Kingdom, the United States, and China.
- The government must show leadership:
First and foremost, Afghanistan is in dire need of true leadership. I believe leadership is the first and most fundamental requirement because it is the leadership from which the vision for the nation will stem.
As things stand in Afghanistan right now, the people feel the country is being torn apart between two poles, the Ghani pole and the Abdullah pole. The unity government and its leadership seem to be in a state of absolute confusion, pity politics, and disconnect with the people. Ghani and Abdullah must stand together, show unity, and fight this extremely negative notion.
In our globalized and highly interdependent world, modern leadership now encompasses tri-sector leaders from the three sectors — government, private, and non-governmental – who have extensive experience in multiple sectors, which allows them to come up with very inclusive, multi-dimensional, and balanced decisions. Ghani and Abdullah must utilize tri-sector leaders and harness private sector skills, expertise, leadership, and collaborate with the private sector through modern methods like the public-private partnership.
An unfortunate phenomenon that can be observed — and people speak about when meeting ministers, business leaders, and civil society leaders in Afghanistan — is that the smallest of issues are catapulted higher and higher up the chain to the extent that it reaches the president and CEO, wasting months. Authority must be delegated and accountability demanded. Every issue has to be dealt with at the lowest level possible with the greatest accountability. Leadership should not just stop with Ghani and Abdullah but it has to be extended to every ministry and department level where qualified people are put in-charge. A leader is never a micro-manager but rather a great delegator.
- Government must ensure security and fight corruption:
In my countless and extensive discussions in national and international seminars, conferences, and roundtables, time and again, there is one thing above all that all investors and private sector leaders want from the government, that is to ensure security. The private sector is at the mercy of the government for basic security but if the government can deliver on its fundamental responsibility to ensure security then the private sector can guarantee to give Afghanistan a self-sustaining economy by 2025.
The second most important concern for the private sector and the people of Afghanistan is the rampant corruption in the government. While security is an external threat, corruption is the biggest internal threat to the rise or fall of Afghanistan in the years to come. In both cases, only the government has the power and authority to eliminate these threats and prosecute those responsible.
So rampant is the corruption in the government departments in Afghanistan that people often confuse every rich government employee or mafia kingpin with an entrepreneur and businessman. A disheartening situation for any social entrepreneur and investor who wants to transform Afghanistan to be put in the same category with a criminal, who has accumulated wealth by destroying lives, communities, and societies.
- Government must make doing business easy:
Afghanistan is a country blessed by geography and natural resources. Situated on the ancient Silk Road in the heart of Asia, it is rich with unexplored natural resources and a virgin market for products and services. The country is also blessed with a young, multilingual, and entrepreneurial population where two-thirds of the country’s population is under the age of 25. Harnessing the power of the local entrepreneurial start-ups and attracting international companies into the country should be a key objective of Afghan government’s economic policy.
Afghanistan is currently ranked as the 7th worst place in the world to do business by the World Bank. A 2014 Wall Street Journal article on worst places to do business started with this paragraph “You’d have to be heroic — or perhaps willing to break the law — to start a business in Venezuela, Afghanistan or Libya.”
Afghanistan Investment Support Agency (AISA) has some of the most confusing and complicated rules in the world when registering a new business. Chairing a recent entrepreneurship event a few months ago in Kabul organized by Founders Institute and Afghanistan’s only start-up incubator Ibtikar, I cannot express the joy I felt to meet so many talented entrepreneurs in a war-ravaged country but also the sadness to learn that the biggest hurdle to the success of most of the start-ups was AISA, a department which is meant to support entrepreneurship.
The complications start with the very inception of a business idea and the branding of a start-up. In Afghanistan to start a business, the name has to have the industry in the name of the company. Suppose if an entrepreneur wants to start a small consulting company and name it Kabul Associates, he would be forced to change the name to Kabul Associates Consulting. Similarly, construction companies are expected to use “construction,” printing companies to use “printing,” and other companies from other sectors to do the same.
If that does not put an entrepreneur off from registering his dream start-up, then the next stage will surely make him think twice. The young entrepreneurs with little to no experience could open a consulting firm in the United Kingdom within 20 minutes online, paying only £15 ($23), and start operating with a name of his choice the same day. But in Afghanistan, he would not only be asked to rebrand his name as per AISA rules, he would also be asked whether he has a Master’s degree or not and the AISA registration fee for registration of a consulting firm is $2,000 – 87 times the amount needed in the United Kingdom. (And registration of foreign businesses is even more complex.)
A common excuse given for the complicated procedures by some executives in the government is that AISA is trying to curb corrupt and illegitimate businesses by making the process harder. In Europe, Small and Medium-sized Enterprises account for more than 99 percent of all European businesses. They account for two out of three private sector jobs and comprise more than half of the total value-added created by businesses in the European Union. Making small business start-up harder and longer is suicidal for future Afghan economy.
- Afghanistan must be internally and externally connected, communication channels established, and sustainability put at the core of every initiative:
In the last 14 years, Afghanistan has transitioned from a theocracy into a democracy, record numbers of children are going to school, and youth are graduating from university; it has an army, judiciary, and many other aspects of a modern functioning state.
We have a huge number of students graduating but no jobs to offer them. We have great production of commodities whether it is saffron, gemstones, or the revival of carpet and dried fruits industries but no access to international markets. We have loads of natural resources but no foreign direct investment. Why? First, because government never had a strategy, and second, because in the past most programs were designed to deliver quick fixes rather than ensuring state building. Now, we have to do things different to deliver short, medium, and long-term results.
In the modern technological era, Afghanistan’s key priority should be to be connected internally and externally through internet. Internet prices in Afghanistan are sky-high for individuals as well as small and medium-sized businesses. While mobile phone penetration is one of the highest and people can access the internet using their phones, internet service is extremely expensive and not available to everyone. The cost of a 1MB internet connection can range anywhere between $150-$300 per month compared to a 100MB connection for around $30 in the United Kingdom.
This has to change whether through government relaxation of taxes on the internet or subsidization. The benefits to individuals, educational and research institutions, and the business community will be monumental. Easier access to internet and tech innovation and entrepreneurship should be key priorities.
Learning from success stories such as that of Estonia — a country which gained independence in 1991 but has become a global record holder for start-ups per person — is an ideal example for Afghanistan. In 2000, the Estonian government declared internet access to be a human right and according to the World Bank, high-tech industries now account for 15 percent of GDP.
The president’s economic council should have private sector leaders from Afghanistan as well as leaders from business chambers from across Europe, America, Middle East, and China. Ministries must be directed to have specific communication channels and support departments dedicated to the private sector.
On an international level, coalition countries such as Britain, Australia, Canada, and many more must understand that Afghanistan is no more a country stuck in the past but burgeoning towards a viable future.
Countries such as Britain must begin issuing visas in Kabul instead of forcing Afghan businessmen and entrepreneurs to visit a third country such as Pakistan or the UAE to apply for a visa. Afghanistan needs capacity building and connections with the rest of the world to trade and do business in the next phase of its lifecycle. If the coalition countries who sacrificed their citizens in Afghanistan cannot dedicate a small visa application section in Kabul, then how on earth can the donor world expect Afghanistan to be freed from its aid-dependency?
Furthermore, donor agencies must work with and fund local and international chambers of commerce focused on promoting trade, investment, and business between Afghanistan and the world.
Not only should Afghanistan and coalition partners encourage people-to-people and business-to-business exchange between them, they should dedicate funds to holding private sector-led trade and investment matchmaking conferences and trade delegations to London, Paris, Washington, and Beijing.
The next phase of Afghanistan’s nation building cycle needs exchange with the rest of the world in terms of trade, investment and business. If Afghanistan’s government — along with coalition partners — ensure security, fight internal corruption, remove barriers and bureaucracy that hinder entrepreneurship and private sector growth, support technological innovation and internet availability to the masses, and listen to the private sector, Afghanistan can be transformed into an economically self-sustaining nation by 2025.
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