Afghanistan’s track towards a self-sustaining economy

Afghanistan is a country where the reality is different to the first glance. The ten-year partnership between Afghanistan and the international community has transformed the nation from a global pariah to a modern Islamic state, with a thriving economy, security forces with an increased level of professionality and an improved living standard of the people. In spite of this, the cycle of violence in Afghanistan has not been eliminated. Insurgency will not be defeated by military means. The actions of security forces remain essential to allow improvements in govern­ance and socio-economic development to lift the status of the Afghan people, and firmly establish the legitimacy of the government.

To reduce and eliminate the causes of insurgency, the government has brought forward a series of National Priority Pro­­grams (NPPs). Perhaps most importantly, ministries, led by Cluster Coordinators, have prepared detailed National Priority Programs, which were mandated at the 2010 Kabul Conference, and 15 NPPs were endorsed by the Joint Coordination and Monitoring Board (JCMB) in October 2011, prior to the Bonn Con­­ference on 5 December 2011. These programmes focus on growing agricultural productivity and increasing rural development, developing the human capital and providing jobs, building infrastructure to support economic growth, improving the business climate for investors, increasing the effec­­tiveness of our civil service, reducing corruption and ensuring rule of law across Afghanistan. The Government of Afghan­istan has set clear, quantitative targets and is working hard to reach them with the assistance of its international partners; they join and support the Afghan people.

In the face of continuing great need, it is easy to overlook the tremendous acco­­m­­plishments of our partnership with the international community. Over the past ten years, Afghanistan has:

  • increased access to primary health care from eight per cent of our popu­­­lation to more than 60 per cent,
  • brought education to 8,000,000 youth and will graduate more than 157,000 students from high school in 2011,
  • created nearly 2,000 kilometres of new roads, cutting travel times be­­tween centres by 75 per cent, and we expect to complete the Afghan Ring Road in 2014, once again making Afghan­­istan the bridge of Asia,
  • increased access to electricity by 250 per cent and our national power utility has grown into a more efficient, well-managed corporation,
  • brought access to telecommunication services to 80 per cent of the population,
  • through the National Solidarity Pro­­gramme started to improve governance at regional and local level in Afghan­­istan, empowering local communities to make decisions to allocate 1.2 billion dollars in support of local priorities,
  • established new democratic institutions and held successive elections under challenging circumstances for both the legislative and executive branches of government,
  • driven the economy growth per capita gross domestic product from 180 dollars in 2001 to more than 530 dollars today,
  • improved total investments from 2008 to 2010 by more than 50 per cent to approximately 600 million dollars per year, while foreign direct investment has grown by 73 per cent and is ap­­­­­pro­­aching 200 million dollars,
  • developed an emerging vocal and vibrant civil society, and
  • enabled an open media where a range of views are publicly debated.

 

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In the Afghan society the role of women has grown, girls make up 39 per cent of pupils in our schools and successful women have emerged as political, business and civil society leaders and role models.

Over the past year, the Government has progressed towards establishing Afghan ownership and leadership: seven provinces have transitioned to Afghan security control. The second round of transition has been announced at the end of 2011, and responsibility for the security of around 50 per cent of Afghans will pass to our national security forces. We have con­tinued to build our systems for revenue mobili­­sation and public financial management, achieving a 27 per cent increase in domestic revenue collection in 2010, and a 150 per cent increase since 2009. Our economy remains strong, growing by over eight per cent this fiscal year despite a global economic downturn and con­tinuing the trend of an average of nine per cent growth per year since 2002. We have laid the groundwork for foreign investment in our extractive industries, taken steps to improve the business climate, and applied transparent processes to award several minerals contracts including the Hajigak iron deposit. This contract alone is expected to result in approximately ten  billion US dollars in foreign direct investment.

The ten-year partnership between Afghani­­stan and the international community has produced tremendous accomplishments for the Afghan people, with significant benefit for the region. The Government of the Islamic Republic of Afghanistan’s goal is to build upon this partnership to develop a sustainable economy for Afghanistan that depends less and less on international donor assistance. This remains a formidable task, given the damage caused by decades of war and lack of development. The Government of Afghanistan is committed to building a secure, prosperous, demo­­cratic Afghanistan based on fiscally sustainable private sector-led economic growth, well-governed and transparent government institutions, and mutually beneficial regional economic cooperation. We will set priorities and take difficult decisions to embrace reform and make effective use of international assistance, in accordance with the following objectives:

  • increasing Government capacity and building on structural reforms to im­­prove public service delivery,
  • strengthening public financial management systems, improving budget execution, and increasing revenue col­­­­lec­­tion, including phased implementation of a value-added tax,
  • increasing transparency and account­­ability to prevent corruption,
  • creating a strong enabling environment for private sector investment, including public-private partnerships in social and economic development, supported by adequate regulatory and institutional reforms and a robust financial sector; and
  • working closely with the International community to develop strategies to reduce overall security costs.

 
 

 

Progress towards the achievement of these objectives is vital. They will help us to reach shared goals for improved security, governance, and development. The Govern­­­ment believes that clear, mutually agreed targets, pursued with the international community, are the best means for monitoring our joint performance. For these reasons, and with the support of the international community, the Government commits to:

  • improve Afghanistan’s ranking in Trans­parency International’s Corruption Per­­ception Index, moving from a current rank of 176 to a rank of 150 within three years,
  • improve by 15 positions on the IFC’s Doing Business survey within three years, and maintain or improve our ranking on each of the ten indicators,
  • grow the ratio of revenue collection to gross domestic product from 11 per cent to 15 per cent within four years, and to 20 per cent by 2025,
  • within five years: improve the management of public funds as measured by the PEFA assessment by 20 per cent, improve transparent accountable use of public funds measured by the Open Budget Index to 40 per cent and improve budget execution to 75 per cent, and
  • improve our score in the UNDP human development index by 25 per cent in the next three years, and by 50 per cent in the next ten years.

The Government of Afghanistan believes that with the support of the international community, these commitments are realistic and achievable.

The Kabul Process, initiated at the London Conference in January 2010 and formalised at the Kabul Conference in July 2010, provides the framework for partnership and mutual accountability for the Afghan Government to assume full responsibility for security, development and governance and the realisation of a secure country with a sustainable economy. The Govern­ment will continue to employ the Kabul Process including the necessary donor engagement to channel international sup­­port for the specific activities that can further these overarching objectives. These activities will support the Government of Afghanistan to develop policies and under­­take programmes aimed at: (a) achieving financial sustainability through future revenue streams by creating critical infrastructure that is sustainable and can be supported by Afghanistan’s budget, (b) reforming and creating critical institutions for effective governance, (c) increasing pro­­ductivity in agriculture and rural areas for growth, poverty reduction and increased food security, (d) strengthening rule of law, and continuing improvement to Afghan­istan’s legal framework, (e) establishing an enabling environment for private-sector-led growth and private investment, including a strong financial sector, secure access to capital and transparent responsible regulatory environments, (f) building skilled human capital, (g) achieving economic and social stability through increased access to improved job opportunities, (h) strengthening regional economic integration through initiatives such the New Silk Road vision and the Central Asia Regional Economic Cooperation (CAREC) Program to promote trade, facilitate transit, expand market access and support economic growth.

Successful implementation of this strategy will be a gradual process and the Govern­­ment of Afghanistan seeks continued support from the international community – in both security and non-security assistance – to achieve shared objectives in governance and development. This will involve implementing existing commitments and directing diminishing internat­­ional resources to­wards the most effective and efficient channels for expen­­­diture of aid funds.

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This support will assist Afghanistan to achieve the following shared objectives:

  • By 2015 Afghanistan will have taken over full responsibility for its own sec­urity, and will be leading develop­ment initiatives and processes with the con­­­­fidence to make critical foun­­dational investments that will lead to economic growth and fiscal sustainability.
  • By 2025 Afghanistan will have elimi­nated its dependency on international assistance for funding to non-security sectors and will only receive support consistent with all other least developed nations. A robust and growing extractive industries sector will have developed. Through effective development and improved delivery of Govern­­ment services, the root causes of in­­­sur­­gency will be reduced and, in con­­sultation with international partners, plans will have been put in place to reduce the size of the Afghan National Security Forces (ANSF).
  • By 2030 Afghanistan will be funding a professional, highly effective ANSF. Achievements in development and governance will see Afghanistan emerge as a model of a democratic, developing Islamic nation.
  • .

The Bonn Conference has offered the ideal opportunity for the Afghan Govern­­ment and the international community to signal a renewed commitment to move forward under Afghan leadership to the creation of a secure, self-reliant Afghanistan. We appreciate that the international com­­munity has signalled its willingness to continue working with us to implement and monitor the success of our National Priority Programs, which put Afghanistan forward to a self-sustaining economy. We believe that these programmes form a sound basis on which current spending levels can be substantially reduced in a manner that does not undermine the progress that has been made.

Zakhilwal-Photo-3-KopieThe author was born in 1968 and obtained his bachelor’s degree in economics at the Uni­­­versity of Winnipeg, Canada. He earned a master’s degree at Queen’s University in King­­­ston, Ontario. He received his doctor­ate in eco­­­­­­­nomics at Carle­­­ton Uni­­versity in Ottawa, where he also teach­ed economics. From 2005 until 2009 he has been President & CEO of the Afghan­­­­istan Invest­­ment Support Agency. In March 2009 Dr. Zakhilwal was nominated as Minister of Finance.