Presentation Title

download report

Transcript Presentation Title

Reviving Afghanistan’s economic
growth through a vibrant business sector
Aynul Hasan
Director
Macroeconomic Policy and Development Division
United Nations Economic and Social Commission for Asia and the Pacific
(UNESCAP)
1
Main messages
• Near-term economic growth outlook is improving on
greater political stability and low inflation, but
– Projected growth rates remain below past trends
– Growth has to be more inclusive
• A more vibrant private sector would help to revive
Afghanistan’s medium-term growth
– Reform effort to streamline business regulations is moving
forward
– A broad-based policy reform to ensure social order,
improve governance, provide high-quality infrastructure,
enhance human capital, and facilitate access to finance is
also needed
Despite its subdued growth, Asia-Pacific still
drives the global economy
10
Developing Asia-Pacific
World
Advanced economies
8
Percent
6
4
2
0
-2
-4
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f
Source: ESCAP and IMF.
3
Economic growth in South and South-West Asia
is trending up, led by India
10
South and South-West Asia
India
Percent
8
6
4
2
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f
Source: ESCAP.
4
Afghanistan’s growth outlook is improving…
but still below potential trends
20
Percent
15
10
5
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f
Afghanistan: Real GDP growth
Afghanistan: Average growth 2005-2014
South and South-West Asia: Real GDP growth
5
Low inflation is supporting
Afghanistan’s economic growth
30
25
Afghanistan
20
South and South-West Asia
Percent
15
10
5
0
-5
-10
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f
Source: ESCAP.
6
Faster and more inclusive growth is needed
• During 2008-12 when economic growth was already
higher than that in recent years,
– The poverty rate was stagnant at a high level of 36%.
– Income inequality (Gini index) widened.
• The bottom 40% of the population accounts for only
21% of total consumption.
• A majority of population engages in basic agriculture,
and is vulnerable to becoming poor.
7
Some policy options for more inclusive growth
• Expanding the provision of and ensuring equal access
to basic public services
– Out-of-pocket payments for healthcare reach almost 80%
– Access to education, water facilities and sanitation is
limited, especially in the rural areas.
– At least 85% of population does not receive any form of
social protection.
• Boosting agricultural productivity
– Expand the irrigation system, ensure access to credits,
make available more agricultural land, and promote crop
diversification.
8
Key constraints to Afghanistan’s
medium-term growth (1)
• Domestic security issues
– Civilian casualties rose to almost 3,000 during January-April
2015, or 16% higher year-on-year.
• Weak government revenue collection
– The tax-to-GDP ratio is low at 9%.
– External grants account for 70% of government revenue.
– The provision of basic public services, e.g. internal security and
education, relies on foreign aid
– Weak government revenue collection
• Governance Issues
- Afghanistan ranks 172nd out of 175 economies in the
Transparency International’s Index 2014.
9
Key constraints to Afghanistan’s
medium-term growth (2)
• Limited domestic production capacity
– Trade deficits were about 40% of GDP in 2013.
– Merchandise exports are only around 6% of GDP.
– Key export items are unsophisticated (e.g. carpets and
dried fruits) and destined mainly to India and Pakistan.
– About 75% of domestic energy use and 60% of cereal
consumption are imported.
• Poor business climate
– Afghanistan ranks 183rd out of 189 economies in the World
Bank’s Doing Business 2015.
10
A more vibrant business sector would help
support Afghanistan’s medium-term growth
• Private sector-led growth is missing
– Manufacturing accounts for only 13% of GDP
– Services are mostly basic, e.g. retail trade and transport
• A more dynamic business sector helps to:
–
–
–
–
–
Create more jobs
Increase production capacity, reduce reliance on imports
Contribute to much needed government revenue
Reverse the declining trend in foreign direct investment
Integrate Afghanistan with other Asia-Pacific peers and the
world markets
11
Some aspects of the business climate are enabling
• Investment Incentive Policy (July 2013)
–
–
–
–
–
Liberal allocation and renting of government land
Tax holidays and exemptions
Subsidized power tariff
Concessional loan in agriculture
Exemption to small and medium-sized mines from bidding
• Full foreign ownership allowed in most sectors with
full repatriation of profit
• Low-tax environment
– Corporate income tax rate at 20%
– Income tax rates at 0-20%
12
Top 5 most binding business obstacles
Political
instability
24.9
Corruption
16.2
Access to land
13.5
Access to
finance
12.1
Electricity
Percent of surveyed firms
10.2
0
5
10
15
20
25
Source: World Bank Enterprise Surveys, based on 410 firms
surveyed in 2013-14.
13
Enabling business environment is already a
government priority
• The new government’s priority areas are all
conducive to better investment climate
–
–
–
–
Improving security and political stability
Tackling corruption
Building better governance
Bolstering private sector confidence
• The Afghanistan National Development Strategy
2008-13 (June 2014) notes:
– “The current trade balance is not tolerable…we have to
focus more on improving our domestic products capacity,
further enabling environment for domestic investment…”.
14
Effort is being made to improve business climate
• $1.3 billion under Afghanistan National Development
Strategy 2008-13 was spent to promote private sector
development.
• Laws to improve economic governance made progress in
legislation
– Banking, anti-money laundering and state enterprises laws
• A high-level National Economic Council is set up to
coordinate policies to enhance investment climate.
– Streamline the issuance of trade and investment licenses
– Set up a one-stop services shop for private businesses
– Reduce duplications of government agencies working on
investment promotion
– Introduce a mechanism to monitor and disclose reform progress
15
Sustained implementation of a broad-based
policy reform is needed
• Improving the investment climate requires a regulatory
and institutional setting and economic structure that:
– Reduce economy-wide risk and uncertainty
– Make necessary inputs available: land, workers, financing,
infrastructure, energy, etc.
• The needed reform is beyond easing business regulations
– It involves policies aimed at ensuring social order, enhancing
economic governance, building qualified workforce, providing
high-quality infrastructure, and facilitating access to finance.
• A sustained implementation of government plans to
address these development issues is key to success.
16
Thank You!
[email protected]
www.unescap.org