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Speech
29 June 2008
Investing in growth and prosperity in Afghanistan
Speech by Douglas Alexander, Secretary of State for International Development, at the launch of the Afghanistan Investment Climate Facility, Kabul
Thank you, Karim. It is a great pleasure to be here in Kabul and announcing our partnership in an initiative as important as the Afghanistan Investment Climate Facility.
Because the purpose of our endeavour here today is nothing less than supporting Afghans to transform their lives for the better. The long term future of Afghanistan – as for all countries – lies in the establishment of a successful, sustainable economy.
We have already seen economic achievements since 2001:
- Average incomes have more than doubled;
- The economy has grown on average by 15% a year since 2002;
- Private sector investment reached $1 billion per year in 2006;
- Success in the telecoms sector: the number of phones has increased from 57,000 in 2002 to 4 million this year, attracting over US$300 million in private investment; and
- The services sector has quadrupled as a share of GDP since 2001.
Alongside those economic achievements, we have seen social progress:
- 6 million children are now in school, of which a third are girls;
- Most of the population (80%) now has access to a basic package of healthcare services; and
- The rate of infant mortality is falling – last year 40,000 children lived to see their first birthday, when under the Taliban they would have died.
But much more remains to be done:
- 4 out of 10 Afghans are unemployed;
- 4 out of 10 Afghans live in chronic poverty;
- 4 out of 10 children under three years of age are underweight.
The international community will continue to support Afghanistan to increase education and healthcare, and tackle extreme poverty. At the recent Paris conference donors pledged an additional $21 billion to help Afghanistan’s reconstruction effort by implementing its National Development Strategy.
Yet we know that aid cannot by itself bring prosperity – Afghanistan urgently needs to provide jobs, income and security for its people. The growth of the private sector represents the only sustainable way to deliver jobs and give Afghans hope for the future to bring prosperity and peace.
There are clear opportunities for future growth:
- 65% of the Afghan population are under the age of 25 – a large workforce in a society renown for it’s entrepreneurial spirit
- The agricultural sector has enormous potential: the nuts and fruits sector alone could contribute $1.5 billion to annual exports within 10 years.
- A wealth of undeveloped mineral resources including metals, precious stones, coal, oil and gas. The recent $3 billion investment by a Chinese company in the Aynak copper mine shows the promise and potential for success.
Yet significant challenges remain. Of course one such challenge is the problem of insecurity, and the international community is committed to supporting the Afghan government to improve security – including recruiting and training over 140,000 police and army officers.
But insecurity is not the only challenge. According to the World Bank, Afghanistan ranks near 159th out of 178 countries in terms of the ease of doing business. This is borne out by the difficulties that entrepreneurs face every day:
- A businessman in Jalalabad complains that it takes him over 40 signatures and 60 days to export his fruit across the border. By which time almost half of it is no longer fit for sale;
- A company can’t buy land to build a factory because there is no system in place to make it absolutely clear who owns it;
- It takes a business over four years to get their money back if a deal goes sour; and
- Business licensing is 14,000 times more costly as a percentage of GDP per capita in Afghanistan than in Dubai.
It is precisely these kind of challenges that the Afghanistan Investment Climate Facility is intended to overcome.
The AICF will give Afghanistan’s private sector a powerful new tool to identify constraints to doing business in Afghanistan, and establish practical solutions for removing them.
We’ve seen this approach work elsewhere:
- In Kenya, cutting red tape around licensing and registering companies saved businesses $8 million a year – from an initial investment of $800,000;
- In Mozambique, a $30 million customs reform project yielded – in its first year - a 49% increase in Government revenues. That was a $50 million return in just one year. Three years later the return had increased to $90 million per year, an increase of 175%;
- So I am delighted today to announce the United Kingdom’s partnership on the AICF, working together with companies such as Roshan, Tolo TV, the Afghan Government and donors such as AKDN and the United States on this important reform agenda.
And to demonstrate our commitment to fostering economic progress in Afghanistan, I can announce to you today that the United Kingdom will provide £30 million to support the AICF to raise a total of $100 million.
By showing that there are opportunities in an untapped market and making itself an attractive business destination, Afghanistan can reverse the effects of decades of conflict and foster new levels of prosperity.
We need to work in partnership to make this vision a reality. This is our shared challenge and I invite you to join us to make this our shared achievement.
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