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Speech to the Closing Session of the Enabling Environment Conference by Praful Patel, Vice President, South Asia Region, World Bank (Kabul, Afghanistan)

05 June 2007

 

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Honorable Prime Minister,
Your Highness,
Honorable Vice President,
Prince Amyn Aga Khan,
Ministers,
Excellencies and delegates of the conference,

Thank you for giving me the honor to present the Conference Road Map to this prestigious and hard-working group.

Yesterday His Highness the Aga Khan challenged us with what he called an impertinent question. Does the work we are all doing make a difference? How will we measure that? Will this conference make a real difference? Let us remind ourselves that for the 80 percent of Afghans in rural areas there is surely no roadmap, and often not even a road. How will today’s conclusions travel the multiple, small pathways to reach them?

What we’ve agreed in the Road Map before us is a viable plan of action designed to meet the urgent needs for private sector growth. But to respond to the challenge of His Highness we need a firm commitment to implementation. We need to hold ourselves accountable in our different roles as government, donors, civil society and organizations like my own. I look forward to reviewing our progress in six months.

For the task before us is urgent. After almost six years of establishing a basic governing framework and democratic institutions in Afghanistan, the country’s citizens are impatient. It is the dynamic and inclusive potential of the private sector that can move the country towards greater self-reliance. Today we accelerate our efforts towards this common goal. In this Road Map we have chosen the right priorities. It is essential that we live up to our commitment in the Conference Statement: I remind us all that we commit to, I quote, “bold and immediate action to move from a climate of uncertainty and shortterm perspectives to one which inspires confidence in the long-term future of Afghanistan”.

Over the last five years the economy has grown substantially. It has been supported by stability, by better harvests, and by substantial inflows of donor money.

Construction has boomed. The government has matched this with a number of important reforms, some which look to our agenda here. For example, business registration in Afghanistan is now close to best practice. There is a flexible labor force. Tax payments and customs have been simplified. They are amongst the lowest in the region.

But we are not there yet. We are not nearly there yet because we have not done enough to create an enabling environment. Further reform is urgently needed. For example, despite much progress, Afghanistan still ranks 162 nd out of 175 countries in the World Bank’s index of doing business indicators.

I don’t quote this as just another ranking. The evidence is all around us:

construction companies that rely on small and expensive loans because commercial banks are risk averse;

the 252 days and 11 steps that businesses go through to secure land title;

pharmaceutical factories that run generators day and night paying high fuel prices.

So the agenda is challenging; but Afghanistan has advantages. The success of the Afghanistan Investment Support Agency demonstrates what is possible – that substantial gains can be made with only a few simple reforms.

Time is critical.

I know from our work elsewhere that reformist governments have to take action fast. Windows of opportunity open – but they can also slam shut. Look around the room – there is no lack of expertise and authority. But if there is one message
I want to leave you with it is that technical expertise cannot substitute for dedicated, highlevel political commitment if we want to see concerted and swift action.

Let me underline some of the key challenges that our Road Map points to.

Firstly, let us see the completion of the basic set of laws in an open and consultative process. And by consultative I mean we need to listen harder to our colleagues in business and civil society. They can tell us where laws are contradictory or
unclear and where regulations can be made lighter.

We must also support this new legislation with the capacity to enforce it and to arbitrate cases. Business must see proof that new laws are applied transparently, consistently – and, wherever possible, on a timely basis. As Mo Ibrahim warned us
yesterday, the private sector struggles to deal with a government that does not respect its own laws; that contracts must be respected by both sides.

Legislation, regulations and business processes must also be simple if they are to support a strong business environment. I understand that the Economic Committee of Cabinet is looking at ways of reducing red tape. I would urge that these improvements be put in place as speedily as possible.

Secondly, business is still starved in multiple ways: land, power, skilled workers and credit.

An efficient market for land will require legislation for property rights, registration and adjudication. In the short term, the Government should focus on practical and concrete reforms. I quote Mo Ibrahim again: “If there is no clear law on land
ownership, how do you expect people to start building things?”

In rural areas, communities are the best placed to govern the complex process of formal titling and adjudication. I am pleased that we are taking seriously their capacities for effective governance at the local level.

Power: The shortage of electricity is the number one constraint to doing business here. Public private partnerships will be the most viable strategy over the medium term.

As a product of our discussions today we are now committed to establishing the principles of how these arrangements will work in Afghanistan. But as a priority we must accelerate projects that are already moving – such as the import of electricity from Tajikistan, domestic generation of power and the commercialization of the public utility.

Skilled labor: Businesses need skilled workers but equally have a role in developing that skilled workforce. We all know public education is vital but there is a powerful space for the private sector in providing vocational training driven by the needs of the market.

Credit: We also need to develop a financial sector that actually lends to a wide range of businesses in support of investment and growth. There are 15 licensed private banks. But they are not adequately servicing Afghans who often have to turn to their own savings to start their businesses. However, lending can grow to meet the huge demand, and it can be undertaken on a commercial basis. The highly successful micro-finance system is proving just that point. Lending should ultimately be provided through a competitive and privately owned financial sector. As an interim measure, restructuring needs to commence, on an urgent basis, within Bank Millie and Bank Pashtany. They represent the only branch network that currently provides banking services throughout the country.

Finally civil society is one of Afghanistan’s most valuable resources. I think it is a real step forward today that we have recognized the important role of civil society for it is a critical partner in development. This conference has proposed a clear framework to increase trust and credibility between government and civil society. Government cooperation with NGOs has already demonstrated the constructive role that NGOs, CSOs and community organizations are playing. For example, they have helped re-establish governance institutions in over 17,000 villages throughout the country; and they are partnering with the Ministry of Public Health to improve basic health services.

This is powerful evidence of the productive energies that exist within this country.

Our greatest aspiration should be simply to use it.

Dr Abed of BRAC spoke yesterday of ambition. What lies before us with this Road Map is a challenge to be ambitious enough to really translate the energy of these two days into a measurable difference. Remember the 80 percent of Afghans I spoke of who live in rural areas far from any road. Our private sector development plan needs to think big infrastructure and big plans but it also has to make those multiple small linkages that will bring the villages of Afghanistan to the main road and a better future.

Thank you.

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