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Improving the
Business Climate in Afghanistan
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The Provincial Economic Development Project
(PEDP)
1. The Project
The Private Sector Development Directorate
initiated the Provincial Economic Development Project (PEDP) in February
2007. A focus on provincial economic development from within the
Ministry of Commerce and Industry is particularly important since
balanced growth is needed in the economy over the long-term. The
Directorate is actively contributing to sub-national economic
development through understanding the issues and problems faced by
Provincial business communities, and by devising policy solutions for
those issues. |
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The PSDD team in a meeting with key private sector
development stakeholders in the Afghanistan National Chamber of
Commerce and Industry (ANCCI) in Herat city |
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2. Goals
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Establish relationships between the
Ministry of Commerce and Industry and key Private Sector Development
stakeholders at the provincial level.
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Identify key economic policy issues
and problems faced by the private sector in Provincial economies
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Develop policy responses to overcome
the key issues faced by the private sector in the Provinces.
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Share selected policy initiatives
being developed by the PSDD with provincial private sector
stakeholders and seek constructive feedback from them
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Understand the work various
governmental and non-governmental agencies are undertaking on economic
development in the Provinces, and identify avenues for the PSDD to
support the process of Provincial economic growth.
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| 3. The Approach
Preliminary work has been undertaken
in Herat, Balkh and Nangrahar Provices as a pilot phase of the PEDP.
Provincial Economic Profiles have been prepared for these Provinces,
based on pre-existing information sources. The profiles will
subsequently be used as a quick reference for each Province, as well as
a base for analysis of the market situation and economic potential in
each. |
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On completion of the Provincial
Profile Issues Papers, based on information collected during the visits
to the Provinces will be prepared and shared with provincial
stakeholders for review and comments. Subsequently, common policy issues
will be presented in a Policy Working Paper prepared covering all the
pilot Provinces visited..The Policy Paper will include specific
recommendations for government actions on key Provincial matters.
4. The Directorate in action: Herat
and Balkh provinces 2007
The PEDP team visited the first two
pilot Provinces in June, October and December 2007. The team was
assisted by the ASI Technical Assistance office’s international advisor
Saurabh Naithani and national counterparts. It was led by the PSDD
Director, Mr. Hafizullah Wali Rahimi. As a result of these visits the
Directorate made considerable strides both in terms of building the
confidence and technical capacities of its staff, and established a
presence for the MoCI in the Provinces. The PSDD teams identified
crucial issues in the pilot Provinces and brought them to the attention
of the government in Kabul. |
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The Pamir Zam-Zam Company’s
Beverage/Bottling Plant in the Herat Industrial Park. The owner has
installed a quality-control laboratory equipped with relatively
expensive instruments but, in the absence of a government
attestation/quality-control system, sees limited benefits in having
done so
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Private Sector Development in the
Provinces today: Issues, problems and the way forward
Some of the key issues that have
emerged are highlighted below. PSDD staff has been undertaking
structured efforts to help resolve those issues that fall within MoCI’s
mandate, and engaged with other government agencies to find solutions in
the areas for which they are responsible.
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CUSTOMS AND TAXES Concerns
about additional paperwork and charges over and above those required
by Customs were raised. These additional requirements are raised
outside of Customs by other agencies and appear to be illegal. PSDD is
gathering information on the situation in relation to Customs and, in
particular, information on paperwork and charges levied by agencies
other than Customs, including MoCI/EPAA, AISA and the Chambers of
Commerce. A recommendation to the Central Government will be
formulated when information collection is completed.
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THE NEED FOR INFORMATION
There is a general lack of readily-available and accurate information,
and/or a coordinated system to provide information about government
rules and regulations for private sector activities. This matter is
being addressed in the PSDD, with a focus on a sustainable outreach
effort to meet the needs of the Provinces.
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SERVICES NEEDED Constraints
on business activity occur because government services are
concentrated in Kabul – licensing and laboratory (quality) testing are
of particular concern.
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The Provincial Economic
Development Project team in Herat Industrial Park.
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The first matter will be addressed in
PSDD’s work on the streamlining of business licensing. It has also held
meetings with line ministries that need to be involved with the
setting-up of laboratories in the provinces, as well as with the
recently established Afghanistan National Standards Agency (ANSA).
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PROCUREMENT
Opportunities to gain procurement contracts are limited by poor
information dissemination at provincial level, and some agencies, such
as MoCI, tend to advertise only in Kabul. This issue was discussed
with the Procurement Policy Unit in MoF and with the Director of PSDD
for possible action within MoCI. This concern will be conveyed to the
Procurement Unit in the Ministry of Finance and, through the Director
of the PSDD to the Minister, MoCI.
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NORMS AND STANDARDS
The lack of official controls on product standards was raised by both
the Herat and Balkh business communities. This will ultimately be the
responsibility ANSA. The PSDD team has discussed this issue with
relevant ANSA officials. In most cases low quality products are a
reflection of consumer demand in a country, such as Afghanistan, that
is typified by low incomes. Over time, patents and laws on copyright
will assist Afghan producers. Currently, however, cheaper but lower
quality products are largely a reflection of market demand.
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Biscuit producing/packaging unit
at the Herat Industrial Park
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The PSDD, through the ground-breaking
work that the Provincial Project is undertaking, is currently exploring
possibilities to assist provinces in the preparation of economic growth
strategies. Discussions are under way in Kabul and in the Provinces
(thorough the PSDD visits) with relevant stakeholders, and areas are
being identified, such as technical assistance and training for
provincial directorates, where the PSDD can help. This work, along with
the need to engage more strongly with the provinces, necessitates a
permanent staff presence in the Provinces and the Directorate will
actively pursue and meet this need in 2008. |
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The marble processing plant, Herat
Industrial Park, brought up the issue of local procurement,
suggesting that government offices and, in due course, private
establishments and international agencies, should be given
incentives to purchase locally rather than look to other countries |
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| The PEDP team in Mazar-e-Sharif,
Balkh Province
An Afghan businessman raises a
point in a meeting with members of the Afghanistan Investment
Support Agency (AISA) in Mazar-e- Sharif. On the right,
Directorate staff Parwaiz Hafizi and Ali Shah in discussion with the
regional manager of AISA in Mazar.
Seen on the left is the
off-loading and loading of imported wheat at the border post of
Hairaton in Balkh province. This wheat is being imported from
Uzbekistan. The rail-wagons (seen on the left-hand side) carry the
wheat from Uzbekistan, off-load, and return empty. In the absence of
facilities in Hairaton, these wagons could be utilized to
export/transit goods from Afghanistan to Uzbekistan and beyond.
However, there is no formal arrangement between the two countries to
allow such exports or transit of goods through Uzbekistan. On the
right, the PEDP team on the premises of the Customs House in
Hairaton border post, Balkh province.
The team seen here with the
steering committee of the Carpet Union in Balkh. The Union requested
government incentives and waivers to reinvigorate a sector that has
progressively lost out to carpet export enterprises in Pakistan
where Afghan carpets go for finishing and branding – the high-end of
the value-chain. On the right, the team in a shoe-making unit
in Balkh Industrial Park. Notice the very basic nature of facilities
and infrastructure available to this enterprise. This was also
evident by the fact that the rubber boots had a “Made in Iran” stamp
on the sole; the team was told that the casting equipment had been
brought over from Iran and hence the stamp. There was no affordable
alternative other than to use this machinery. |
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| The PEDP team in Mazar-e-Sharif,
Balkh province (December 2007)
The PEDP team with the Afghanistan
National Chamber of Commerce and Industry (ANCCI) in Mazar-e-Sharif,
Balkh Province. On the right, the team is seen with the
Governor of Balkh Province, H.E. Mohammad Atta Noor |
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