IX. PRIVATE SECTOR DEVELOPMENT
84. The Secretary of State rightly emphasised the
importance of an enabling environment: "the right enabling
environment allows the domestic private sector to grow and makes
the country more attractive to inward investment".[301]
Ashraf Ghani took the same view and had set his Finance Ministry
to work on carrying out a value chain analysis and promoting business
linkages. Private sector development is at a very early stage;
during the visit some of our informal discussions left us with
the impression that local business had not advanced beyond plans
to import shampoo for aid workers and export Afghan carpets. The
Finance Minister suggested a "made by Afghan women"
label as a marketing tool which could stimulate the private sector
through capitalising on Afghanistan's handicrafts and textile
industries and current tariff free access to the EU.[302]
There is significant potential for development of the sector,
for example through a revival of what was once a buoyant agricultural
and horticultural industry. Other sectors with longer-term potential
for development include assembly, tourism and mining.[303]
85. The lack of banking infrastructure in Afghanistan
has forced aid workers to use the Hwala system or resort to carrying
around suitcases of cash, not an ideal arrangement at the best
of times but one that is particularly hair-raising in the context
of Afghanistan's lack of security.[304]
It is hard to imagine private sector development getting very
far in such circumstances. It was encouraging therefore to hear
that banking was one of Ashraf Ghani's top priorities. DFID's
Anne Freckleton, based in Kabul, also stressed the importance
of developing both the judicial system and a regulatory framework
for business. These, along with the rule of law and the securing
of basic property rights will be fundamental to encouraging domestic
and foreign investment. As always, sound economic management is
the bedrock of an enabling environment and the Transitional Administration
has taken its first step towards improving fiscal control by replacing
the old currency. In the past, warlords have been able to print
money but the new currency should allow the money supply to be
controlled for the first time. In the long term, private sector
stimulation is likely to be the best strategy for tackling poverty
in Afghanistan. Regional trade will also be important in allowing
Afghanistan's economy to develop and a recent paper for the World
Bank emphasises the likely benefits of developing a regional trade
infrastructure and of opening up trade across the region.[305]
301 Q247 Back
302
Meeting with the Committee, Kabul, October 2002 Back
303
Afghanistan's reconstruction: regional and country context,
William Byrd, October 2002. Back
304
Hwala is a traditional Islamic, informal banking system where
money can be paid in Pakistan and re-emerge in Afghanistan. Q247 Back
305
Afghanistan's reconstruction, regional and country context,
William Byrd, October 2002 Back
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