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Booming Afghan Biz: One Key to Long Term Peace

By Craig Charney & Mohammed Nasib | New York Post | July 24, 2010

What’s the most under-reported reason to feel optimistic about Afghanistan? Its booming economy.

Afghanistan has averaged over 10 percent growth a year since the Taliban’s fall late in 2001. That’s as fast as China or India (if from a much lower base). And a recent survey shows that, despite the ongoing war, Afghan firms are doing well and feeling hopeful.

They should be: Money is pouring into infrastructure improvements, job creation and corporate investments that are starting to transform one of the world’s poorest economies. Big mineral finds have even opened the possibility of self-sustaining growth — if Afghanistan can achieve reforms and stability.

For now, Afghan businesspeople worry about security, corruption and poor infrastructure — though they also report progress on those issues. Economic takeoff will demand much more progress on those fronts and better education, too. But the growth of private Afghan business and investment to replace US aid and military spending is vital to any viable, non-Taliban future.

Since the Taliban’s overthrow, Afghanistan’s national income has grown 8 percent to 16 percent a year, except in the 2008 slump. For 2010, the World Bank projects 10 percent growth. The private sector doubled in size just between 2005 and 2008, the World Bank says.

Recently-reported mineral discoveries worth up to $1 trillion — including iron, copper, cobalt and gold — eventually could become the foundation of a market-based Afghan development strategy. China is already establishing a huge copper mine in Logar province. Many other deposits are in the country’s more stable north, and the Afghan government will soon invite bids from multinationals for mining rights.

Afghan businesspeople feel the local economy is good and business is getting better, we learned in a recent poll for the Center for International Private Enterprise, a US nonprofit. Three firms in four expect higher sales, profits and investment this year.

All this will startle cynics, who’ve assumed the cash America is dumping in-country is flowing out just as fast to the Swiss accounts of corrupt officials and drug traffickers. In fact, an ABC News poll found that since 2004, 70 percent of Afghans say local schools were built or rebuilt, 56 percent say the same of roads and 50 percent of clinics. Our business survey found companies busy hiring and training workers, improving facilities and buying technology and office equipment.

After war-related insecurity,the big problems for business are corruption and poor infrastructure. Security, cited by 78 percent, tops the list. But 54 percent say their firms had to bribe officials, and two-thirds believe Afghan government contracting is rigged. Unreliable electricity is mentioned by almost half.

The good news: Majorities of those polled in all six main cities said security improved during 2009, as US and Afghan forces surged into the population centers. Most expect government purchasing to become more transparent. Three-fifths say electricity supply improved last year, after Afghanistan hooked into neighboring Uzbekistan’s grid.

Afghan firms also demand a much better-educated and -trained workforce: 30 years of disrupted schooling due to armed conflict have left most Afghan workers illiterate and under-skilled. But here, too, there is progress. Most Afghan boys are now in school — far more than before 2001. So are two-fifths of Afghan girls, forbidden to attend under the Taliban.

International mining investment could continue to drive growth when the aid spigot is turned off — if business gets the changes it needs there. But will the Afghan government curb corruption, bolster security and make other tough choices?

Afghan business leaders want their business associations to push for this. But we found that just 40 percent belong to such groups, and few say they lobby for the business agenda before government. They need help building membership and political savvy — a job for Americans in suits, not camouflage.

Almost unnoticed, Afghanistan has made remarkable economic strides since 2001. Business there is a key lever for progress, because businesspeople understand better than anyone else what’s needed to foster an open, dynamic market system. With continued US help in creating a flourishing Afghan private sector, a self-supporting, peaceful Afghanistan is possible.

Craig Charney is president of Charney Research, an international polling firm. Mohammed Nasib is Afghanistan country director at the Center for International Private Enterprise in Kabul.

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