The EastAfrican

Afghanistan has turned to a development model first tried in Nairobi in 1986 to give its reconstruction a badly needed burst of energy after nearly three decades of war against Russia and a civil war.

The meeting in 1986 in the Kenyan capital was hosted by then President Daniel arap Moi and it was there that the Aga Khan raised, for the first time, the need for governments to provide an enabling environment to attract investments. 

Kenya at the time faced some of the problems bedevilling Afghanistan today, with reluctance by foreign investors to move into a high- risk environment topping the list.

It was at the Nairobi meeting that the phrase “enabling environment” was coined. It signifies the presence of political stability, safety and security, citizens’ rights, predictable democratic practices and efficient legal and administrative frameworks. 

Last week, a similar message was passed on to Kabul during a high-level conference believed to be the largest such gathering held in the Afghan capital in recent years. It was jointly organised by the Afghanistan government and the Aga Khan Development Network (AKDN) to help spur development in the war-weary country. The World Bank, the United Nations Development Fund and the Asian Development Bank were also involved in hosting the Conference, which was attended by the Afghan President Hamid Karzai, his First Vice-President Ahmad Zia Massoud and several Cabinet ministers and government officials.

The prescription was one that any country that has seen its economy looking up in the recent years knows only too well — open up for business, ease movement of goods and services into and out of the country, fix the infrastructure, attract foreign investment and ensure a secure environment, the ingredients for the so-called enabling environment.

While the case at hand was the reconstruction of Afghanistan, many lessons abound for other developing countries, especially Kenya and the Eastern African region, where the idea was first planted.

Badly in need of foreign investment to set it on the path to growth, Afghanistan is reaching out for goodwill from key regional and world heavyweights in politics, business, aid and civil society.

Key leaders who have chosen to help the country rise, and who participated at last week’s Enabling Environment Conference, included Malaysian Prime Minister Abdullah Ahmad Badawi, the Aga Khan, Pakistani Prime Minister Shaukat Aziz, Celtel founder Dr Mo Ibrahim and Prince Amyn Aga Khan. Others were representatives from the World Bank, the UNDP and the Asian Development Bank.

The conference provided a rare opportunity for the state, business and civil society — including multilateral institutions such as the World Bank — to come together and discuss the measures that needed to be taken to set the mountainous country on the road to development.

The challenge is huge, but two aspects stand out. First is the need to reduce the insecurity orchestrated by Taliban insurgents, who are yet to accept defeat five years after they were deposed from power post-9/11. Second is the long-thriving growing of opium poppy has ensured that the country remains the chief producer of the heroin worldwide.

The deliberations gave birth to eight action points, whose implementation was seen as key to the country’s development:

1. Enactment of laws to establish the basic legal and regulatory framework that will encourage private sector involvement in social and economic development.

2. Strengthening the governance and operations of civil society organisations to enhance their contributions to the country’s social and economic development.

3. Alleviation of constraints hampering the operations of the private and public sectors.

4. Involvement of the private sector in the provision of public services through private-public partnerships (PPPs) and other means in areas such as power generation and distribution, water supply, transportation infrastructure and social development.

5. Facilitating access to land by clarifying property rights, simplifying procedures for the transfer of titles and allowing for longer-term leases.

6. Significantly expanding the outreach of a broad range of financial services throughout the country.

7. Building the structures, systems and capacity of mediation and arbitration tribunals to ensure efficient and impartial resolution of disputes.

8. Instilling active practice of social responsibility and philanthropy that leads to the institutionalisation of private (business and individual) support for economic and social development through civil society.

Setting the pace at the beginning of the conference, the Aga Khan called for a “great alliance” of government, communities and business to help drive growth in the developing world.

He said that while there are plenty of cases of good work by each of the three, their potential to improve lives is watered down by the fact that they apply their efforts separately.

The Aga Khan, the 49th hereditary Imam (spiritual leader) of the Shia Ismaili Muslims, was joined by several world leaders in calling on governments in developing countries to pursue policies that drive development by accelerating business growth.

“Laying the state’s political foundation is a necessary first step for an enabling environment, but even effective government can take us only so far,” said the Aga Khan, who marks his 50th anniversary as the leader of the Ismaili Community this year. “And that is why we have been talking more in recent years about two other sectors: first, what I often call the role of civil society; and, second, the capacities of the private sector.”

He said one of the major obstacles to development today “is that the efforts of all three sectors are too often scattered and fragmented”.

President Karzai told the conference that the long-term future of Afghanistan would depend on Afghans themselves. “Afghanistan’s prosperity today and in the future will be linked to our ability to attract and support private business,” he said. 

Malaysian Premier Badawi said one of his country’s key decisions in the 1980s was to progressively reduce the role of the state in conducting business. “We made the private sector, not the public sector, the primary engine of growth. We opened and liberalised our economy,” he said.

Speaking to journalists later, the Aga Khan urged patience with emerging countries as they work on reconstructing their economies.

“Society does not change that quickly,” he said. “I don’t expect a country that has just come out of decades of civil war to change within a few years,” the Aga Khan said in response to reports that some local businessmen had misgivings about the Kabul Government’s commitment to implementing the conference’s action points.

He discussed AKDN’s involvement in organising the Enabling Environment Conference as part of efforts to rebuild Afghanistan.

“Here we are talking about a young government working with a constitution that has not been tested?. What people are looking for is confidence in the process of change,” he said.

The Aga Khan said it was important for development agents to understand the value systems that drive poor communities and to find ways of working with them to improve their living standards.

He added that there is a need to develop civil society at the community level to help in driving growth.

“Ultimately, it is civil society that brings development. It is not the money, it is the institutions. You need money, but what changes lives are the institutions,” said the Aga Khan.

He said there were instances where international development agents have misled emerging countries, citing Africa, where countries that attained independence 50 years ago were discouraged from investing in higher education.

“Experts looked at the cost of producing a Bachelor of Arts graduate on a balance sheet and realised the individual would never bring back the money put into higher education. As a result, many African countries did not invest in higher education. 

“Several years later, experts came back and declared higher education in Africa a disaster,” he said, adding that many of the affected countries were today turning to civil society to help them provide decent higher education.

When he took the floor, Pakistani Prime Minister Shaukat Aziz said the key to growth for the developing world were bold policy reforms, each country’s diaspora and the repeal of foreign investment caps.

Mr Aziz said most of these decisions required great courage, adding that experience around the world shows that the three things have helped emerging countries sustain development.

“In Pakistan, we are already seeing the benefit of the government having insisted on reforms that saw ministries solely focused on policy formulation, new institutions created for regulation and business left to the private sector,” he said.

He said the second thing was tapping the often immense potential inherent in a nation’s diaspora, citing the case of China: “The single-most important factor that propelled China’s growth initially was the Chinese diaspora.” 

The third point, he said, was allowing unlimited access for foreign investment in national economies. He discounted investment caps favoured by some countries to limit the level of equity that foreign investors can hold in different sectors.

“I call it the investment rate card. They tell you that as a foreign investor, you can only hold 30 per cent in this sector and 50 per cent in the other. In Pakistan, we have no such rate card,” he said in a keynote address during the closing of the conference.

Mr Aziz said developing countries should compare equity and debt: “If you go for equity, you pay back if the investment makes money, but if you go for debt, you pay back either way.” 

The PM said such policies have helped his country sustain annual growth for eight years, consistently registering more than 7 per cent in the past five years.

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