KABUL - Bob Saum is the World Bank’s Country Director in Afghanistan. He has been on the ground for a little more than a year and is “looking forward to several more years here.” He has previous experience in the region, having worked for the non-governmental organization Mercy Corps in Quetta, Pakistan, where he dealt with issues related to Afghanistan, some 20 years ago.

In 2002, then working for the World Bank, he helped establish the institution’s first project mission in Afghanistan, centred on a public financial management project. He also helped set up the Afghanistan Reconstruction Trust Fund.

UNAMA recently spoke with him about his thoughts on the outlook and challenges facing the Afghan economy.

UNAMA: What are the general challenges of the Afghan economy?

Bob Saum: I think the number one challenge for the Afghan economy, right now, is jobs. That is the number one challenge for the people of Afghanistan as well. When we are looking at poverty reduction, when we are looking at gender issues, we are looking at people having opportunities to improve their own lives – and jobs very much comes into this. So then when you deconstruct this challenge, what is it about? It is about skills and human capital, and developing them to the fullest extent, which brings you to education – primary, secondary, vocational, technical and higher education – it is about the business investment climate, it is about making it easier for companies in the private sector to set themselves up, to grow, resolving licensing-related obstacles, making it easier to have investments happen. And, of course, access to finance: the banking sector is important so that the companies which want to grow can have those opportunities.

UNAMA: How is the banking sector developing in the wake of the Kabul Bank affair of 2010?

Bob Saum: The banking sector remains weak. There is no question that the impact of the Kabul Bank crisis remains. So, going forward, there is going to be a need for greater confidence in the system. There is still a need for regulatory oversight in the banking sector to improve so that it can play the role that it needs to play as in other countries – in providing financing, helping the export sector develop and with job creation, as well as helping businesses which need access to capital in order to enable them to grow.

UNAMA: There are concerns that the departure of international military forces from Afghanistan will have a direct and indirect impact on employment. What can Afghan authorities do about this?

Bob Saum: I think, in the first instance, we do need to remember that the commitments made in Tokyo – as outlined in the Tokyo Mutual Accountability Framework, in which the international community and people and Government of Afghanistan came together – does not point to an immediate or drastic pullout or cut in international aid. You have the four-year commitments of international assistance. And any drawdown in international aid should be done in an orderly fashion and predictable manner so that the Government, the people and the private sector can adjust to it as we move forward.

So what can the Afghan Government do going forward? There are certainly areas on the policy side that it can focus on, such as the mining law, to make sure that this goes through, and create an environment for the foundation of investments in natural resources, which are going to be an important part of the future of Afghanistan in the longer-term. This is step number one.

On the land issue, it can focus on the land acquisition and land management legislation, and its full implementation, because we find that – whether you talk to the private sector, whether you are working on infrastructure projects or whether you are talking agriculture – land is a common issue that arises just as it does for the average Afghan person.
On the fiscal side, the Government’s budget remains very important. The focus here should be on increasing its domestic revenue, pushing through reforms, maintaining control over expenditures, concentrating on human capital development activities that are going to improve the skills and the abilities of Afghans to contribute to their own livelihoods, to their own poverty reduction and to the betterment of the country.

UNAMA: In a March report, the International Monetary Fund noted the Afghan Government’s underperformance in revenue collection, by 20 to 30 per cent. How do you see that, coupled with a general anxiety about the stability of the Afghan economy after 2014, unfolding?

Bob Saum: In the first instance, we all need to recognize that in the post-transition, post-2014 period, we are not expecting a collapse of the Afghan economy, even though that may go against the conventional wisdom in which people tend to think that during or following the transition, the economy is going to collapse.

We do not see this happening. Our reports on the transition, on the country’s economic situation, which we first did for the Bonn Conference in 2011 and updated for the Tokyo Conference last year, lays out much of this information in their analyses. While the Afghan economy has been growing in the eight to nine per cent range for many years in this decade, we do expect that growth is going to decrease to the four to five per cent range. So there will be a significant decrease in the growth of the economy – but there are many countries in the world that would love to have growth at even four or five per cent. Now, even with that, there will be pockets of impact from the transition – whether it will be geographical parts of the country or segments of the economy which have had a greater reliance on the military presence or some of the development assistance – that may feel a greater impact during the transition and the withdrawal of the troops. But, at the same time, even with the growth of four or five per cent, it’s not going to be sufficient for Afghanistan, with its population and with its low base, to move well beyond meeting its basic needs. This is why we continue to focus on economic growth as being very important.

Recently, the Government has said that especially customs revenues in the first quarter of the fiscal year have decreased, compared to what was being collected last year. The Government attributes this to both economic impact and leakages.

The Government is obviously very concerned about this, as are its supporters in the international community. You have already seen certain action the Government has taken with changes of personnel – a new deputy minister, a new director-general and many other staff members in the customs department. That has been the first step the Government has taken and it is now looking at which actions, within the customs action plan, it is going to implement immediately, bringing in greater transparency and greater revenue collection on the customs side.

The decline in customs revenue is an essential issue to watch, because as when we talk about the stability and sustainability of Afghanistan, its fiscal sustainability and the Government’s ability to finance its own development needs are absolutely essential.

UNAMA: Your overall view on the outlook for Afghanistan from an economic perspective?

Bob Saum: I remain and I am always hopeful! I have an optimistic outlook and I remain cautiously optimistic. I think as the people of Afghanistan, its Government and the international community know: the Afghans need to come out of elections in a very positive way, with a result that is going to facilitate an orderly transition on the security side and that is going to instill confidence in the hearts of the Afghan people as well as the private sector and others, for continued growth.
 

[This interview was originally published in the summer edition of "United Nations-Afghanistan Quarterly" 2013.]