In complex post-conflict environments such as Afghanistan, security and development needs are intertwined. Without addressing both at the same time, it would be hard to ensure an environment that enables sustainable economic growth. In other words, bullets alone cannot remedy Afghanistan’s current situation. In fact, as former U.S. President Bill Clinton once said, “it’s the economy stupid,” something that is even more relevant in the fight against terrorism in Afghanistan.
Terrorism in the country is fueled by a large number of Taliban foot soldiers former ISAF Commander General David Petraeus used to call “ten-dollar-a-day Taliban.” They are non-ideological, but have resorted to violence in the absence of a sustainable livelihood that supports themselves and their families. Many of these rental fighters can and should be weaned off the battlefield with an alternate long-term income.
Hence, it is the creation of more jobs for Afghanistan’s youthful population in urban and rural areas that can ensure durable stability in the country. But those jobs should be sustainable in a productive economy, since the lessons learned so far demonstrate that employment created through “quick fixes,” like cash-for-work projects, has only temporarily addressed what remains Afghans’ top need and concern. In the final analysis, short-term job creation measures are sure to fail-unless they are geared towards promoting and facilitating sustainable income generation in the Afghan economy.
Around 70% of Afghanistan’s 35 million citizens are below the age of 25, a vast majority of whom are the breadwinners of large households that include war widows and children. Given the personal experience of this author, because Afghans begin working from an early age to support their families, they are resilient and enterprising. And despite a high rate of illiteracy, they constitute a responsible, energetic, and industrious workforce. Unfortunately, they lack access to skill development opportunities, capital, and credit to grow the small- and medium-sized businesses that make up Afghanistan’s vast informal economy.
This situation provides for numerous investment opportunities in every sector in Afghanistan. During last June’s Delhi Investment Summit on Afghanistan, for example, the Afghan Ministry of Commerce and Industries presented potential investors with a detailed list of investment opportunities in Afghanistan. These investors, representing 320 international businesses, were informed of investment opportunities in the agriculture, construction, energy, finance, health services, information and communication technologies, minerals, small- and medium-sized industry, and transportation sectors.
However, with the exception of a few domestic and foreign “first movers” in each of these sectors and their related markets, most of the Afghan markets remain under-invested. The government of Afghanistan frequently encourages regional and international investors to visit Afghanistan and see for themselves the countless, highly profitable investment opportunities that exist.
Last November, during his state visit to India, President Hamid Karzai also encouraged the Indian business community to explore investment opportunities in Afghanistan. Meeting with a group of business leaders in Mumbai, he even promised to roll out a red carpet for major Indian firms, if they made moves to enter Afghanistan’s virgin markets.
However, most investors are genuinely concerned about the overall business environment in Afghanistan, as security and governance are two of the key enablers for any business to flourish. Insecurity and weak governance undermine business efforts and put investments at risk; and like most post-conflict countries, Afghanistan is not free of these challenges. But the country continues to confront and address them, in partnership with the international community.
Despite sensationally negative news reports on Afghanistan, the country has made monumental gains in building the civilian and military institutions of the state, which are based on one of the most progressive constitutions in the region. The Afghan Constitution also provides for a private sector-led economy.
In January, the World Bank welcomed Afghanistan’s 2012 double-digit growth rate of 11 percent, and listed the country as the fasted growing economy in South Asia in its Global Economic Prospects report. Moreover, the World Bank’s Doing Business Index for 2013 ranks Afghanistan 28 out of 185 countries in establishing a business in the country. These positive rankings have been made possible by the work of the Afghanistan Investment Support Agency, which serves as a one-stop-shop for investors, both foreign and domestic, enabling the easy registration and establishment of a business in Afghanistan within a couple of weeks.
Over the past 12 years, Afghanistan has also enacted a number of commercial and investment laws, including a company law, a consumer protection law, a competition law, a partnership law, and an arbitration law. These laws have streamlined many of the problems associated with Afghanistan’s former central-planned economy. However, there are times when a lack of institutional capacity prevents the Afghan government from implementing and enforcing these laws, which meet international business and investment standards. But these bottlenecks can be addressed through Afghan business consulting firms or joint ventures with successful, reliable Afghan firms that have local investment experience.
As for security, there are only a handful of districts in Afghanistan where it is hard to do business. Most of the country is secure, and open for business and investment. Domestic and foreign investors have prospered in provinces throughout the country, including Balkh, Herat, Kabul, Kandahar, and Nangarhar.
Besides vast investment opportunities inside the country, Afghanistan serves as a gateway to a region that includes some of the fastest growing economies in the world. This makes the country a natural trading hub that connects the Indian subcontinent with Central Asia, the Middle East, and China, markets that include over 50 million consumers. Also, its central location makes Afghanistan a natural locus for an emerging regional network of trade routes and pipelines.
The ease of competition and the ample potential for growth in Afghanistan are relatively new developments. For the first time in decades, Afghanistan enjoys the most investment-friendly environment in the region. Afghans see these new opportunities as a way to rebuild their homeland. They are proud of their long, 2000-year history as a commerce and cultural exchange.
With each economic opportunity that is fulfilled, the people of Afghanistan move one step closer to reconnecting with their heritage and securing a good future for their country. Afghan and foreign investors can play a major role in helping the Afghan people fulfill their national destiny.
M. Ashraf Haidari is the deputy chief of mission of the Afghan Embassy in India. He formerly served as Afghanistan’s deputy assistant national security adviser, as well as deputy chief of mission of the Afghan Embassy in the United States.