24 November 2009 - A latest World Bank survey has found that a strong private sector growth, albeit from a small base, is taking place in Afghanistan.

The report entitled: The Afghanistan Investment Climate in 2008, is based on the findings of a survey conducted in 2008 that covered more than 1,000 firms in 10 key Afghan cities, including Kabul, Herat, Mazar, and Kandahar.

According to the report, Afghanistan’s private sector is “growing fast” with the industrial and service sector doubling in size since the last similar survey in 2005.

It further states the average revenue growth in the surveyed firms is very high – 220 per cent – because of some strong performers.

The survey suggests that this rate of growth will continue, as 77 per cent of the surveyed firms plan to expand in the near future.

However, it’s not all good news: despite this growth, the country suffers from a number of problems including poor governance, weak factor markets, and lack of firm-level innovation which affect industry.

The survey also finds that weak policy enforcement, crime and theft, corruption, and access to land and finance are some of the constraints that were found to be dominant across businesses country-wide.

Interestingly, crime and theft increased dramatically since 2005, while corruption was rated as a problem by 44 per cent of respondents and that it touched “virtually every aspect of a firm’s dealings with government.”

Another problem identified by the report was the low levels of foreign direct investment (FDI) into the country, as less than two per cent of the firms surveyed in 2008 were foreign owned.

“The report does not aim to identify areas of concern for the Bank. The reports aims, however, to find out business environment in Afghanistan. And the 2008 survey aimed to compare the business environment between last survey (2005) and find out whether there have been improvements since then,” said the World Bank’s External Relations Officer Abdul Raouf Zia.

Since April 2002, the World Bank has committed over US$ 1.89 billion for development and emergency reconstruction projects and budget support operations in Afghanistan.

Currently, the Bank has 26 active projects in Afghanistan with net commitments of over US$ 1 billion.

By Aditya Mehta, UNAMA

Website: World Bank Afghanistan