Editor in Chief: Moh. Reza Huwaida Friday, June 22nd, 2018

The Diverse Effects of Investment Barriers

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The Diverse Effects of Investment Barriers

Paving the way for foreign and domestic investment is considered as a key factor for developing the Afghan fragile economy. Promoting investment will help domestic production, unemployment reduction and decrease Afghanistan’s reliance on imports of foreign goods.  Though the National Unity Government (NUG) officials stress that encouraging and facilitating investments is a top priority for the government to help grow the country’s economy but Afghanistan is facing major constraints to economic growth, stability and investment outflow. Insecurity remains a foremost concern hampering new investment and prevent the expansion of previous ones. Yet, there is a strong dependence on donor assistance, which funds more than two-thirds of the national budget.
Given the economic policy of the past 17 years, it seems that since the beginning of Karzai’s administration there has never taken any serious measures against economic issues though we were happy with that unsustainable economic growth during Karzai’s administration. Almost, all the people believe that it is because of being dependent to foreign countries and lack of political wills for fundamental change in this sector. But now, more than anytime, country is faced with critical economic condition with less than 2 % growth per year! Economic experts say when a country has 2/3% annual growth in a year, it is a sign of entering to economic Stagflation. The major symptoms for this economic sickness is high rate of unemployment, low labor income, investment outflow, capital flight and decline in values of national currency.

 the values of Afghan currencies decrease with the passing of each hour, but the central bank has not done anything as a policymaker and responsible for the stability of the Afghan currency, except for direct intervention by pumping dollars to maintain its value. Whereas, the currency policy is all economic policy which affect the supply and demand of currencies, and in particular the exchange rate of domestic currency against foreign currencies. ther countries, never allow to use direct-policy (Direction Action) using the Auction tool, but unfortunately the central bank has relied on this policy unreasonably. This is a misunderstanding and ineffectiveness of the Central Bank of Afghanistan which the value of Afghan currencies today is decreasing with the passing of each day.
The investment support agency, AISA, was established in 2003 aimed at removing investment barriers and providing facilitations for potential investors. The Afghan government also established a ministerial-level High Economic Council for overseeing efforts to improve the economy and attract foreign investors for investments in Afghanistan. Nevertheless, statistics and economic indicators shows incomparable economic stagnation in the country. For instance, the rate of unemployment upturned to more than 3 million today comparing to three or four years ago, when it was nearly 2 million. It which means nearly one million people became jobless in contrast to the president’s pledge to create millions new jobs.
Afghanistan has enough economic potentialities such as: mines, agriculture, transportation, industries and business to end the long-term economic crisis. there also is interest for investment in aforementioned fields provided that we have a clear vision for supporting and creating safe environment for investments in the country. many experts have called on government to clarify its vision for short-term and long-term investment attraction. The Afghanistan Chamber of Commerce and Industry (ACCI) believes that government has not done enough to solve the challenges around attracting investors. Recently, the Chamber of Commerce and Industries claimed that the rift between President Ashraf Ghani and Atta Mohammad Noor, the CEO of Jamiat-e-Islami party and outgoing governor of Balkh, has affected investment in the province. Thus, the recent lockdown strikes against cruel attacks on Nangahar money exchanging shop and the brutal attacks in Kabul is another example of daily challenges which create fears and concerns for the investors.
In addition to insecurity challenge, there are some other barriers such as corruption, racism, nepotism, lack of financial resources, lack of clear strategy, required infrastructure and maybe political will. However, according to expert Improved security is the prime factor needed for boosting investment and promoting economic growth. Potential foreign investors have fears and concerns regarding the future of the investments they make in a country not only stable politically but also with less structural services and regulatory and financing backing. Afghanistan’s legal and regulatory frameworks for making investments and doing business are nascent and to some extent and some areas flawed.  Improved regulatory framework would assure the investors of protection of their capital, investment and rights at any circumstances. The Afghan government needs to take extra measures for assuring investors and industrialists for their security. Though, in general, security situation is related to the war and peace efforts in the country and the government’s ability to defeat the insurgency and improve security across the country.

Overall, the economy of Afghanistan should not override by political games; elsewise Afghanistan may face irrepressible uprising against current crisis, which will not only be in our interest, but also will aggravate the Asian economy. The way out of this situation is a detailed discussion of the work, but what is very important is the existence of economic self-sufficiency at the strategic level of Afghanistan. It is important for Afghan policymakers to go further from artificial and expeditious stage. The history taught us that myopia policy does not rescue this nation. for immediate consideration, there is need for an extra measure to ensure safe environment for investors and industrialists in the country.

Mohammad Zahir Akbari is the permanent writer of the Daily Outlook Afghanistan. He can be reached at mohammadzahirakbari@gmail.com

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