Islamic Republic of Afghanistan - Enhanced Integrated Framework ...

capacity limitations throughout the public andprivate sectors. Meeting these challenges andrebuilding the country will take many yearsand require consistent international support.The successful transformation of Afghanistaninto a secure, economically viable state that canmeet the aspirations of the Afghan people, liveat peace with itself and its neighbors and contributeto regional and international stabilitywill depend upon the effective utilization of allavailable human, natural and financial resources.In this partnership a critical role mustbe played by the private sector. Significantlyreducing poverty will require substantially increasingemployment which depends on maintaininghigh rates of economic growth in theyears ahead. It is not sufficient to rely on theGovernment and the international communityto sustain the high rates of investment neededto generate the levels of employment to have amajor impact on reducing poverty. As themacroeconomic projections presented in Chapter4 indicate, a substantial increase in privateinvestment will be essential if significant progressis to be realized in meeting the social andeconomic objectives of the country.Afghanistan is a country with significant potentialfor economic development. It has substantialwater, agricultural and mineral resourcesand is well positioned to become atrade and business hub linking the markets ofCentral Asia, the Middle East, South Asia andChina. The potential exists or sustainable economicgrowth in the future. However, thereare a number of fundamental limitations in theeconomic environment that must be addressedif these efforts are to succeed:• The country’s ‘hard infrastructure’, includingroads and reliable supplies of waterand power, is inadequate to support rapidand sustained economic growth.• The corresponding ‘soft infrastructure’,which includes the human and institutionalcapacity necessary for an economy to function,is also extremely limited. Considerableemphasis is being given to developingcapacity in both the public and private sectorsand to institutional development, butthese efforts will take time.• Economic governance is weak. The Governmentis pursuing comprehensive economicreform, including the introductionof new commercial laws and regulations,but the establishment of institutionsneeded for effective implementation andenforcement are largely lacking and willtake years to develop.1• Afghanistan’s commercial connections toregional and global economies were severelydisrupted and must be redeveloped.The development of a competitive privatesector will depend on establishing access toforeign markets and developing viable exportactivities.• Critical markets for land and finance arelargely undeveloped, limiting the ability ofprivate investors to establish and operatebusinesses. Property rights are often contestedor difficult to defend.• Afghanistan is experiencing high population.Continued rapid population growthwill substantially increase the levels of investmentthat will be required to substantiallyreduce poverty.Both the Government and the internationalcommunity recognize that prolonged aid dependencywill undermine the chances ofachieving sustained economic growth and povertyreduction. However, given the major limitationsin the economic environment that mustbe addressed, the successful transition to acompetitive market economy will require sustainedcommitment by the Government, withthe support of the international community.Simply creating conditions in which the privatesector can operate alone will not be sufficient.Increased efforts by both the Government andthe donor community to attract Afghan andforeign investors are needed if the goals of theANDS are to be realized.Social and economic development will also beseverely curtailed if the insecurity that prevailsis not resolved. Despite the considerable effortsby the Government and the international com-1 Many of the government’s initiatives in this area are describedin “A Policy for Private Sector Growth and Development” presentedat the Enabling Environment Conference, Kabul, June2007.4Afghanistan National Development Strategy (ANDS)