As Karzai visits US, time to listen to Afghan business

With President Hamid Karzai visiting Washington this week, the performance of his government and the international community’s development effort in Afghanistan will be under the spotlight, writes Gregg Willhauck.

While the military operations in the south – moving from Helmand to Kandahar – will remain a hot topic, talks should also emphasize improving the Afghan economy since success in that realm will reverberate acrosss nearly every other sphere of society.

Perhaps it is time to encourage Afghan leaders to listen to their own business people’s views on what needs to be done to spur economic growth, new jobs, and higher living standards. After all, there is much talk about the Afghans taking on a greater share of the burden in national security. And there is growing pressure on the government – especially from its own citizens – to improve the delivery of essential services.

Why not encourage the Afghan government to engage the indigenous private sector more proactively in order to identify obstacles to growth in the domestic economy and to fashion appropriate reforms?

Afghan businesses are hiring more workers, remain optimistic about economic prospects and expect further growth, but remain frustrated by rampant corruption, a new survey reports.  The Center for International Private Enterprise (CIPE) surveyed 738 Afghan businesses located across six of the country’s largest cities: Kabul, Jalalabad, Khost, Kandahar, Herat, and Mazar-e-Sharif. CIPE is a core institute of the National Endowment for Democracy.

The businesspeople surveyed were generally positive about the health of the economy and equally optimistic about business prospects in the near future: 

• Nearly 40 percent of businesses had hired more employees in the past year, and roughly the same number said their company’s earnings had increased. 
• Two-thirds of those surveyed stated that the current economy in their community was either very good or somewhat good, and 56 percent said it was better than the previous year. 
• Three-quarters of these businesses expect their local economy to grow – and over one-third of these expect it to grow significantly.

While these numbers are encouraging, Afghan businesspeople are not naïve. They realize that serious problems continue to confront the economy and the country. They identify security, corruption, and poor infrastructure (specifically, the lack of electricity) as the three factors most adversely affecting business growth.

A significant majority of businesses in each of the cities surveyed claimed the security situation had improved in the past year. And while improvements in infrastructure (e.g., roads, water and electricity) remain slow, those businesses receiving these government services are largely satisfied.

Corruption is a key determinant of progress toward democratic governance. It provides a glimpse into the government’s desire and capacity to tackle rule of law issues as well as its willingness to listen to citizens and respond to matters they deem important. Just as important, given how vital a strong economy is to democratic success, is the seriousness of purpose with which all elements of Afghan society will approach this seemingly intractable issue.

The bad news is that corruption is clearly a major problem for Afghans doing – or seeking to do – business. Fifty-four percent stated that it was necessary for businesses to pay bribes, unofficial “fees” or to provide gifts in order to operate a business. Roughly one-quarter said that corrupt practices added 11 percent or more to operating costs. However, the good news is that Afghan business people are not resigned to it. Ninety percent of those surveyed said that while corruption is a significant problem, more can be done to combat it. 

The question is how best to engage decision-makers in the Afghan government and advocate for the necessary economic and governance reforms. In CIPE’s experience, business associations and chambers of commerce are well-suited for this role. In Afghanistan, such associations often lack the capacity even to provide basic services to their members, let alone take on the critical but complex role of advocating policy issues to the government.

Once Afghanistan addresses the immediate issues that prevent its economy from functioning effectively and efficiently, we will see an economy that is vibrant, dynamic, self-sustaining, and attractive to foreign direct investment. However, this requires that the government and the international donor community heed the opinions of local business. We also need to assist the business community in obtaining the tools and capabilities to speak to their own government directly.

Gregg Willhauck is the director of congressional and government relations at CIPE. He also serves as CIPE’s Washington, DC-based Afghanistan program officer.