Afghanistan: enabling trade for economic growth and regional cooperation (en)
Small and medium-sized enterprises (SMEs) in Afghanistan that want to become a part of the global trade market are faced with a myriad of problems that render this objective very difficult, if not impossible, in many cases.
Afghan SMEs face a plethora of barriers. These include a lack of competitiveness and knowledge of international markets, crumbling infrastructure, a poor business environment, declining investments, and economic and political and security instability. Being a landlocked country adds to the problem, which increases significantly the costs of exports, as does a shortage of trained personnel and skilled labour, and access to finance. A key is challenge is ensuring that the country is re-integrated into the regional and global economy.
Though there is no doubt that SMEs based in Afghanistan need assistance, the country has made remarkable progress in addressing trade barriers. In recent years governance structures have become more stable, more jobs have been created and a greater number of people have access to education and healthcare services. Increased economic growth would help create sustainable alternative employment for even more people, particularly those who are currently the most at disadvantage, such as the young and inexperienced.
Despite such challenges, Afghanistan remains at a strategic crossroads and could take greater advantage of this to export its own goods or be used as transit to link for bordering countries and beyond. This could help ensure that the country benefit more from better cooperation with its neighbours and strengthen its ties with the global economy.
A sure sign the country is taking steps to be a part of the global system, is the country’s recent accession to the World Trade Organization (WTO). This demonstrates that the country is on the right track and is a recognition of the work done by the Government of Afghanistan and the private sector to align themselves with the multilateral community.
However, much has yet to be done before Afghan SMEs can fully benefit from access to regional and international markets. Internal conflict continues to negatively affect Afghanistan’s human, social and economic development, effectively discouraging vital private investment.
Trade and investment institutions are not as efficient as they could be. Focusing on reworking costly and tedious regulatory requirements and approaching trade facilitation on a regional level can improve trade and investment immensely.
The international community understands the urgent need to address these issues in the interests of regional economic cooperation, reduced trade barriers, connectivity and creating a business environment that can boost the country’s competitiveness and potential. Many countries and international agencies have promised financial and political support for the reform agenda proposed by the government.
This includes a joint project by the EU and the International Trade Centre to strengthen the capacity of government institutions to formulate and implement trade strategies and policies, improve cross border movement of goods, enhance and quality standards of products to meet international standards and equip Afghan businesses better to seize the opportunities stemming Afghanistan’s accession to the WTO.
’Moving forward, the private-sector development agenda must be a priority for Afghanistan if it wants to shift from aid dependency towards sustainable growth and job creation,’ says Franz-Michael Skjold Mellbin, former ambassador of the EU to Afghanistan. ‘The ITC-implemented National Export Strategy will guide Afghanistan’s efforts to realize the potential of its exports sector as an important driver for economic growth.’
Support for the implementation of the WTO Trade Facilitation Agreement will provide Afghanistan with faster customs clearance that will better enable SMEs to get goods to neighbouring countries and ports without competitiveness-reducing delays, which will improve Afghanistan’s appeal as a transit route.
To accelerate trade and growth, Afghanistan’s short and medium-term focus needs to be on strengthening relations with its neighbours and trading across borders. For job creation and economic growth, the country should also focus on regional trade and strengthening Afghan SMEs’ competitiveness, along with improving the business environment.
‘Finalizing a national export strategy will be a top priority, to be followed by the implementation of its recommendations for reforms to catalyse export-led growth and job creation in promising sectors,’ said George Cunningham, deputy head of the EU delegation in Afghanistan.
Afghanistan’s potential is clear and can be realized by making it easier for SMEs to trade via an effective domestic reform agenda and improved trade relations with its regional partners and the international community.