The economy as the driver of development

Project description

Title: Sustainable economic development in northern Afghanistan and Kabul
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Afghanistan
Lead executing agency: Afghan Ministry of Commerce and Industries (MoCI)
Overall term: 2010 to 2014

Afghanistan. © GIZ.

Context
Although the state of the economy in Afghanistan has improved in recent years, it remains one of the poorest countries in the world. Unemployment and underemployment are estimated at around 50 per cent. The security situation is precarious and this has a negative impact on the economic and investment climate. Despite reforms to the legal and regulatory framework, there are still serious shortcomings in terms of developing the private sector, which is not yet sufficiently competitive.

The Afghan Government has put the expansion of enabling conditions to develop the private sector at the top of the agenda of the National Development Strategy. However, administrative units in Kabul and the rest of the country are often unable to implement measures geared to economic promotion because staff lack the necessary know-how and administrative systems are not sufficiently organised to handle this task. This situation leads to stagnation in local value creation, declining growth rates, unemployment, low incomes and ultimately to poverty.

Objective
Competitiveness in selected areas of Afghanistan’s private sector is improved and leads to increased employment and income opportunities for men and women.

Approach
The project focused on five provinces in northern Afghanistan: Balkh, Baghlan, Kunduz, Takhar and Badakhshan.

It provided support to micro, small and medium-sized enterprises in selected value chains: processing of semi-precious stones, milk production and dairy processing, cashmere products, wool spinning and carpet weaving, fruit juices, dried fruits, leather processing and tomato concentrate.

The project helped with the reorganisation of the Export Promotion Agency of Afghanistan. It also collaborated closely with the Afghanistan Chamber of Commerce and Industries (ACCI). It supported ACCI during its nationwide elections, which improved its potential to influence government policy where the interests of the private sector are concerned.

At the same time, the creation of 21 provincial chambers has improved the range of services for companies at provincial level. A gender department was set up to deal specifically with enquiries from female entrepreneurs.

The project worked with the umbrella association of the guilds to broaden its range of services and helped expand these into new provinces. In addition, it provided support to the umbrella association in representing the interests of micro, small and medium-sized enterprises in public-private dialogue. At government level the project advised sectoral working groups seeking to further improve existing value chains. The working groups are currently in the process of implementing action plans they developed for various industries.

The project advised the Ministry of Commerce and Industries (MoCI) on introducing simplified export procedures, concluding regional trade agreements and establishing legal initiatives to promote the private sector. At the same time, it supported accession to the World Trade Organization (WTO) and the signing of the Afghanistan-Pakistan Transit and Trade Agreement. Since September 2013, Afghanistan has been an official member of the Customs Convention on the International Transport of Goods (TIR). This has opened up new trade routes from the Persian Gulf to China.

In 2014 the project was subsumed into the new Sustainable Economic Development and Employment Promotion project.

Results
Improving processes for the production and sale of local products such as carpets, cashmere wool, fruit and semi-precious stones resulted in the creation of almost 4,000 new jobs in the northern provinces of Afghanistan. 15,000 people achieved a higher rate of income.

The Ministry for Commerce and Industries (MoCI) simplified export procedures and signed off new trade agreements. New legal initiatives are preparing the ground for improved competitiveness in the private sector. A forum provides a platform where representatives of public authorities and governments at national and provincial level can meet with representatives of the private sector; here they can work together to develop reform measures to increase competitiveness in various sectors.

The Chamber of Commerce and Industries (ACCI) and the Export Promotion Agency of Afghanistan are now better equipped and better able to represent the interests of the private sector. ACCI has recorded a significant increase in membership, particularly in the north.

A project for women in Kabul, providing training on spinning wheels. The women generate five times more income with guaranteed sales. © GIZ

Contact

Francisco Villela
francisco.villela@giz.de