Context

As a land locked post conflict country (population 32 million), Afghanistan is a very difficult environment for business growth. Nevertheless the country achieved rapid economic growth from 2001 to 2012 according to World Bank data. However more recently economic growth has been less impressive.

Business and investor confidence has been eroded by uncertainty associated with an unpredictable political context, security transition from international forces and transition from an economy largely fueled by international aid flows.

The Asian Development Bank report that anecdotal evidence showed growth in Afghanistan picking up slightly in the first half of 2017, though the poor security situation continued to restrain investment and consumption and thus the economy. Rainfall below average in many parts of the country from March to May adversely affected the first harvest and so constrained growth in agriculture. Nonetheless, economic growth should continue its upward trend in the second half of the year, as ample precipitation more recently augurs for a better second harvest.

BERF work in Afghanistan

Afghanistan, and in particular the Harakat Investment Climate Facility, has been a major client for BERF.  Work has included three assignments under BERF’s technical support work stream: an organizational design review, a procurement manual, a diagnostic assessment; and also an evidence and learning note on gender in the context of Fragile and Conflict Affected States.

BERF Afghanistan Projects

  1. Evidence and Learning Note Business Environment Reform and Womens Economic Empowerment in Afghanistan May 2017
  2. BERF Business Environment Reform Diagnostic for Harakat March 2017
  3. BERF Harakat Organisational Review and Design Report March 2017

 

World Bank Doing Business 

The World Bank Doing Business 2018 ranks Afghanistan 183rd out of 190 countries on ‘ease of doing business’, unchanged from its 2016 ranking. Its Distance to Frontier (DTF) score fell from 37.95 in 2017 to 36.19 in 2018, placing it last in South Asia, well below the regional average of 53.64 and even further from the regional best ranked country Bhutan at 66.27. No significant reforms are reported for Afghanistan last year, but Afghanistan made starting a business more costly by requiring that entrepreneurs pay the business license fee for three years at the time of incorporation.

 

DFID Afghanistan Strategy

Economic development: The UK will create more than 35,000 jobs by 2023 and generate $600m of new private sector investment. The UK will improve land productivity and create jobs by clearing over 87 km2 of land, made unusable by mines and explosives (equivalent to over 12,000 football pitches).

Basic services and humanitarian: The UK will help poor people, including girls and women, access essential services such as health care and education. The UK will help 1.7 million more people, half of whom will be women, to have access to agriculture or irrigation services by 2018.  The UK will provide life-saving humanitarian assistance to 1 million people a year, including refugees or people who have fled their homes due to conflict or disasters.

Building institutions: The UK will support the government’s ability to fight high level corruption. UK support has helped the Afghan government establish the Anti-Corruption Justice Centre to investigate and bring to trial high level corruption cases. The UK will continue to support efforts to address corruption and to encourage greater transparency.

The UK is the fourth largest donor to Afghanistan after the United States, Japan, and the European Union. During the period from 2002 to 2013, DFID disbursed £1.3 billion to Afghanistan with 50% of funds channelled through the multi-donor Afghanistan Reconstruction Trust Fund (ARTF). The Government of the Islamic Republic of Afghanistan (GoIRA) has responsibility for all programmes, reflecting the UK’s commitment to direct at least half of its annual country budget through Afghan government systems that support the capacity of Afghans to plan and implement their development strategy effectively. DFID’s operational budget for 2105-2016 is £178m apportioned across 26 projects. The largest commitments are to projects for Wealth Creation (£94m) and Education (£39m).