Can Afghanistan become a destination for investment rather than charity?

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Can Afghanistan become a destination for investment rather than charity?

Afghanistan’s President Ashraf Ghani at the United Nations in Geneva. (Reuters)

Geneva played host last week to an important conference on Afghanistan, in which delegations from about 60 countries participated. The event, which was also attended by a large number of international organizations and representatives of civil society, the private sector and the media, was co-hosted by the government of Afghanistan and the UN. The main agenda item was a comprehensive interaction and dialogue between the Afghan government and the international community to measure progress on peace and prosperity and discuss the way forward. It was also an opportunity for the Afghan government and the international community to renew their partnerships and cooperation on peace, prosperity and self-reliance. 

In 2016, during the Brussels conference, the international community made a commitment of $15.2 billion for Afghanistan’s development. In Geneva, that commitment was reaffirmed to be provided up to 2020. Additionally, new pledges of more than €400 million ($453 million) were made by the EU. One must note, however, that the foreign aid to Afghanistan is conditional upon clear and measurable actions by the recipient country in terms of the fight against corruption, reforms in the financial sector, and good governance that lead to aid effectiveness. 

Unfortunately, Afghanistan does not have a good track record of efficient and effective use of foreign aid during the post-Taliban period. Billions of dollars of aid money was spent on development, rehabilitation and capacity-building without producing a proportionate impact and change in the quality of lives of Afghan citizens. Yet the international community shares responsibility for this inefficient use of financial resources, as most of the foreign funds were spent off-budget without being channeled through the government of Afghanistan. 

A mechanism of mutual accountability between the Afghan government and the international community was thus one of the points emphasized during the Geneva conference. What came out of Geneva is that Afghanistan has made progress on several fronts, but a lot more needs to be done and challenges, including insecurity, corruption and poverty, remain on the horizon. 

The two major obstacles to a favorable business environment are insecurity and corruption.

Ajmal Shams

The exit of most international forces from the country in 2014 and the resulting drawdown of financial resources have led to a serious economic crisis, resulting in high unemployment and increased poverty. When international security forces were present, much of the Afghan economy remained artificial and dependent on foreign aid. Unfortunately, no fundamental efforts were made to create sustainable economic activities. This resulted in an economic and financial crisis as soon as the foreign troops started pulling out. 

Afghanistan’s growth pattern is based on a private sector-led economy. But the investment climate for the private sector, to a large extent, depends on how far the government has got in introducing the necessary reforms. According to the World Bank’s Doing Business 2019 report, Afghanistan ranks among the top few countries that have significantly improved the business environment for private investors. Yet there is room for a lot more improvement and reforms. The two major obstacles to a favorable business environment are insecurity and corruption, and these issues were prominent on the agenda of the Geneva conference.

On peace, the message from the international community was loud and clear: The Afghan government must advance on peace and reconciliation with the Taliban and other armed opposition groups in the best interests of the country. On this occasion, President Ashraf Ghani presented his comprehensive peace plan that provided the Afghan government’s road map for peace with the Taliban. The basic principles stressed on the need for the peace process to be Afghan-owned and Afghan-led, take into account the rights of women and minorities, and for the Afghan constitution to be respected by the Taliban. 

It is noteworthy that US Special Envoy Zalmay Khalilzad’s accelerated efforts for peace have been in progress for the last couple of months. Khalilzad has been keeping the Afghan leadership apprised of his peace talks with the Taliban. But it is absolutely vital that the peace plan by the Afghan government and Khalilzad’s efforts are in harmony. Any disconnect between the two will convey differing messages to the Taliban and thus complicate the entire process. The ultimate losers in case of any failure of the peace negotiations will be the Afghan people, who have been longing for peace as their most cherished dream. 

Ghani’s remark in his address to the international community that “Afghanistan should not be approached as a charity but as an investment” is thought-provoking. To turn Afghanistan into a true investment destination requires peace, as well as a strong political will by the Afghan government to implement its ambitious agenda for reforms, and this cannot be achieved without the help of our international partners. 

  • Ajmal Shams is President of the Afghanistan Social Democratic Party and is based in Kabul. He was a Deputy Minister in the Afghan National Unity Government and served as Policy Adviser to Ashraf Ghani when he chaired the security transition commission before his presidential bid. Twitter: @ajmshams
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