Islamic Republic of Afghanistan - Enhanced Integrated Framework ...

terprises will be implemented by end-1388(2009).”• Afghanistan Compact: Regional Cooperation:“By end-1398 (2010) Afghanistan andits neighbors will achieve lower transittimes through Afghanistan by means ofcooperative border management and othermultilateral or bilateral trade and transitagreements; Afghanistan will increase theamount of electricity available through bilateralpower purchases; and Afghanistan,its neighbors and countries in the regionwill reach agreements to enable Afghanistanto import skilled labor, and to enableAfghans to seek work in the region andsend remittances home.”• MDGs: Goal 8: “Further develop an opentrading and financial system that is rulebased,predictable and non-discriminatory,which includes a commitment to goodgovernance, development and poverty reduction.Goal 8: In cooperation with theprivate sector, make available the benefitsof new technologies — especially informationand communications technologies.”The macroeconomic framework presented inChapter 4 makes clear that maintaining highrates of economic growth during the life of theANDS and beyond depends on a substantialincrease in the level of private investment inthe economy.Key components of the private sectordevelopment strategyThe strategy to foster private sector developmentand increase domestic and foreign investmentconsists of three main components: (i)continued efforts to build a strong and stableenabling environment that will encourage acompetitive private sector; (ii) expand thescope for private investment in developing nationalresources and infrastructure; and (iii)strengthen efforts to promote investment fromdomestic sources, the Afghan diaspora andforeign investors.Component 1: Strengthening the enablingenvironmentThe main objective of an improved enablingenvironment is to reduce the costs of doingbusiness. This entails the elimination of excessiveor unnecessary impediments to businessactivity that raise costs, and improving the‘soft’ and ‘hard’ infrastructure essential to efficienteconomic activity. This requires that theprivate sector have access to necessary inputsat reasonable cost, including land for commercialpurposes, credit and imported raw materialsand intermediate goods. Efficient land, laborand financial markets and a stable, opentrade regime have a major impact on the abilityof firms to operate competitively.Private sector development requires macroeconomicstability and an environment wherethere is a general reliance on the rule of law.While it is relatively easy to introduce a suitablelegal and regulatory framework, it is considerablymore difficult to ensure that it is effectivelyimplemented. This requires that allparties, both public and private, reliably abideby the legal system. It is critical that contractscan be entered into and enforced with disputesreadily resolved. A high priority of the ANDSis the strengthening of the institutions, includingthe establishment of effective commercialcourts, responsible for the implementation ofcommercial laws.ANDS strategic priorities to promote privatesector development involve activities in thefollowing areas:• A stable macroeconomic environment andsupportive financial system: The Governmentwill control inflation at low levelssimilar to those achieved in recent years.The growth of a supportive financial sectorthat is able to extend credit to viable firmswill be supported through legal and regulatoryreforms, including the implementationof secured transactions laws.• Private sector investment: Attracting privateinvestment is the responsibility of theentire Government and will be an integralpart of all projects and programs implementedunder the ANDS. This will requireinstitutional strengthening of Governmentagencies and ministries, including AISA asthe lead investment promotion agency. Allministries have the scope to expand theopportunities for private business activitiesand to increase their contribution to thegrowth and development of the economy.Donors will be encouraged to fulfill their74Afghanistan National Development Strategy (ANDS)