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Address of H.E. Ahmad Zia Massoud, First Vice President of the Government of Afghanistan, at the Enabling Environment Conference (Kabul, Afghanistan)

04 June 2007

 

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In the name of Allah, the Most Merciful, the Most Compassionate

Your Excellency Prime Minister, Your Highness Karim Agha Khan, Professor Naderi, Prince Amin Agha Khan, Ladies and Gentleman:

It is my pleasure to be with you today. On behalf of the Afghan Government and the Afghan people I would like to thank to The Aga Khan Development Network, The World Bank, UNDP and ADB for helping to organise this gathering.

It has been our pleasure to host all of you. We have been especially privileged to have had with us H.E. Shaukat Aziz, Prime Minister of Islamic Republic of Pakistan, H.E. Abdullah Ahmad Badawi, PM of Malaysia , His Highness the Aga Khan and Prince Amyn Aga Khan. Let me also thank all others who put effort into enabling this conference and discussions.

Private sector development is one of the most important priorities for us, as stated yesterday by H.E. President Hamid Karzai. Thus, it is already part of the process of preparation of the Afghanistan National Development Strategy (ANDS). I was encouraged to see strong representation of the Afghan private sector and foreign investors at this conference. This fact by itself is already an indicator of great success of the Enabling Environment Conference. I hope that this dialogue will become a regular practice. It is vital for us to listen to what the Afghan private sector has to say. The Afghanistan Compact, through the Joint Coordination and Monitoring Board (JCMB), already obliges government to improve the environment for private sector development.

I would like to note that despite challenges and shortcoming, we have had some tangible achievements in private sector development. During the past few years, private sector in our country has enjoyed macroeconomic stability. The real economic growth has been one of the highest in the region, and well above the Asian average growth of around 7 percent. Inflation has been brought down to a single digit, our currency has remained stable. Moreover, we have created a one-stop-shop for investors to tackle the obstacle of administration.

As H.E. Dr. Anwar-ul-Haq Ahadi emphasised yesterday, the tax incentives have been introduced – today Afghan businesses pays the lowest average customs tariffs in the region. Foreign trade has been liberalised. Due to growing regional cooperation Afghanistan has joined several trade agreements which opened the market for Afghan export to several hundreds of millions of consumers.

Business registration has been significantly streamlined through the creation of the Afghanistan Investment Support Agency (AISA). According to the recent Doing Business 2007, Afghanistan is top among the Central and South-East nations when it comes to time required to start a business. We have also made great strides in rebuilding basic infrastructure such as the national highways and the Ring Road.

Some of us would remember the first Afghanistan Investors’ Conference that was organised in March 2004 in Berlin . Several speakers emphasised the need to convince the Afghan population to embrace and get involved in private sector activities. Today, if you only go outside of this hotel and walk down couple of blocks you will see that the private sector activities are booming.

This is not surprising if we look at the Afghan history beyond recent years of war and destruction. As noted by several speakers, for centuries Afghans have been known as skilled traders and business people. There is no doubt in our minds that the private sector has a bright future in Afghanistan . The private sector is already proving itself as important for our economic growth. Today it provides more jobs than the entire public sector and contributes more and more to fiscal sustainability through constant growth of domestic revenues. The traditional centrality of the agriculture sector is on decline as services, dominated by the Afghan private sector, have been leading the growth for several years, especially in construction and telecommunications.

Let us admit that despite progress the private sector in Afghanistan faces a number of major challenges and obstacles. This conference managed to identify most of them. These issues were also highlighted in the Government’s Policy Paper.

Ms. Ameerah Haq, Deputy Special Representative of the UN Secretary General, raised an important issue yesterday: how to achieve a delicate balance and ensure that the Afghan Government becomes an efficient partner to the private sector and enabler of its growth. We are all aware that potentials are great. However, as Professor Ishaq Nadiri pointed out, it is a great responsibility of the Afghan Government to translate these potentials into tangible improvement to all Afghan people.

Based on the discussions from this conference and our previous experience Dr. Mohammad Jalil Shams, Minister of Economy just laid down the Government’s strategic plans and actions to improve private sector growth.

Let me use this opportunity to focus on several issues:

Public – Private sector – Civil Society partnership and accountability
Given the need to increase private sector growth, generate jobs, decrease poverty and given the traditional role of civil society in our country, public-private sector partnership is of strategic importance for Afghanistan . This was very well emphasised by His Highness the Aga Khan, who pointed out that the Government should not view civil society and private sector as competitors. However, in my view this partnership has to be based on accountability. Rule of law has to be respected; the current high level of informal economy will have to be decreased as part of the overall strategy to improve the business environment, investment and growth.

Regional cooperation and trade
Further liberalisation of trade in the region is of key importance for strengthening regional cooperation. Afghanistan has already liberalised its trade and in fact our trade regime is the most liberal in the region. Non-tariff barriers will need to be removed and greater regional cooperation in planning of key infrastructure projects and in the security sphere would be of great benefit to all countries.

Access to capital
Thanks to a number of donors, Afghanistan ’s reconstruction is making progress. However, there is no specific program to support access to capital and investments for the private sector. The banking sector is weak and improving the business environment for greater foreign direct investment inflows will take time. At the same time, security and the country’s negatively portrayed image still prevent foreign investments. In this situation the idea of establishing an Afghan Private Sector Investment Fund deserves our serious attention.

Human Development
We are grateful to H.E. Prime Minister Badawi for the reminder that investment in human capital through education and health is necessary for private sector development. The Afghan education system must produce skilled people that are needed and marketable in the Afghan economy.

Rule of Law
I am also grateful to His Highness Prince Amyn Aga Khan’s words that it is in the best national interest of any nation to ensure reasonable return on investment in a reasonable period of time. Therefore, ensuring investor security is an important precondition for achieving Afghanistan ’s strategic goal of enabling private sector development. As the ninth century Islamic scholar Ibn Qutayba wrote, “There is no money without prosperity and there is no prosperity without good justice and administration.”

Social responsibility and Islamic tradition
Afghanistan ’s Constitution has embraced a free market economy. However, it is important to stress that traditional Islamic social responsibility needs to remain part of it. Social solidarity, as demonstrated in the case of some of our companies, will be encouraged as important part of our Islamic tradition.

Let me reemphasise that the private sector is an important element of the future prosperous Afghanistan . The Private Sector Development Strategy is at the centre of our efforts to develop the full Afghanistan National Development Strategy. The ANDS consultations are a good opportunity for the Government and private sector to continue building something that we would like to see as our joint strategy for partnership and private sector growth.

Donor assistance is not the future of Afghanistan ; however, it is still an important part of our reality. This is a reality that we want to replace with stronger private sector growth and a greater inflow of FDI. We have informed you about numerous opportunities to invest in Afghanistan and about the number of cases where investments were recovered and profits taken in less than five years. To the investors who are present here I would like to say that a dollar of investment in Afghanistan today will be worth more than several dollars tomorrow.

In closing, I would like to re-emphasise the importance of continuing the dialogue between the Afghan Government and the private sector to enhance public/private sector partnership. I know that the business people among many of you here face enormous problems on a daily basis and that you are not satisfied with the pace of implementation of reforms. I believe that this conference could be an important shift toward better cooperation in the future. As the first Vice President and Chairman of the Economic Committee Cabinet, I promise you that the Afghan Government will take the outcomes of this conference into serious consideration. I also want to promise you that my future efforts will be invested in implementing the private sector Roadmap, which was developed here together with you. This is where the Government will need your help. Let us work together to make Afghanistan a better place for business people and investing, not only for the Afghans but for our region.

Thank you very much.

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