Editor in Chief: Moh. Reza Huwaida Friday, November 24th, 2017

Any Hope for Afghanistan’s Future Economy?

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Any Hope for Afghanistan’s Future Economy?

We are all eager to know about the future of Afghanistan’s economy. The country’s economy declined within the past decades, mainly during the civil unrests. Considering the recent relatively positive changes in the country’s economic state which was mostly dependent on foreign aids, the economic stagnation was ended. Now the question to be answered by our economists and politicians is how one can imagine the economic future of Afghanistan particularly if the financial aids of developed countries are cut off?
Considering the current situation, you will simply think of exploiting natural resources and revenues that can be achieved from the relative advantages of the country, such as transit and also foreign direct investment that plays a crucial role. This view will be logical but not sufficient.
When economists want to categorize development resources at a macro level, they usually point to the following:
1. Increased labor supply
2. Increased investment
3. Increased human capital by training
4. Promoting the level of technology
5. Appropriate methods and proper allocation of factors.
To put it simply, investment and manpower are needed for production at a macro level; training will increase the productivity of manpower and promotion of technology level will increase the productivity of capital. 
If one examines the development of Afghanistan’s economy based on this theoretical framework since the beginning of the century, s/he will come to know that the bulk of the development within the past decade and half was due to the support of foreign investments and aids. The presence of young activists and the population pyramid of the country or the increase of years of education have not had much effect on this. As a result, one can claim that if we pass this route without reforming the educational system, we will encounter a high unemployment rate formed by educated individuals having academic qualifications – this is the very challenges being wrestled by developing countries. Considering this fact, it can be said that with the decrease of foreign capital and the cutoff of foreign aid, there can be no hope for the country’s economic growth in the coming years.
With regard to this significant issue, the first point flashes through the minds of Afghan economists and politicians is to pave the ground for attracting foreign investment. Perhaps, they will be of the opinion to provide social security for achieving this objective since foreign investors can promote both the levels of investment and technology, which will reinforce economy. It is a positive step but not a sufficient one. What will be the more appropriate way for economic development?
Before answering to this question, let me point out an issue about America’s economy. Everyone knows that America’s economic performance was very distinct in 1990s. The origin of the US economic growth was a matter of question for economists. On the surface, it seemed that the Information Technology (IT) was the main reason behind economic growth, but the fact was otherwise. According to Robert Solow, an American economist and a Nobel laureate, computers were on the table but not in the process of production. It means that computer was not the reason behind the America’s economic growth. So, what was the origin of economic growth for America in 1990s?
Pertaining to this issue, Joseph Stiglitz says in one of his books that no one would thought of the deciding factor of US economic growth. The existence of chain stores and entrepreneurs looking for new and innovative ideas were the cause of economic development. He adds that these chain stores had adopted a way to distribute and trade, which led to a dramatic increase in productivity, put impact on the entire American economy.
The lesson to be taken for Afghanistan’s economy is that sometimes the country should pay heed to the sources which never flash through the minds of officials or economists. For instance, establishing and supporting micro industries, especially in underprivileged and remote areas, will be highly crucial. On the other hand, we have to consider rural development – which is taken into account of many economic thinkers – to prevent from forced urbanization and the challenges posed by it. To support the country’s industries, we need to establish online markets similar to many other countries. It can also be very useful to raise the speed of money circulation in the country.
To put it another way, over 80 percent of future jobs in the world will be formed by electronic instruments and internet. The more a country uses the cyber space the faster it will develop. Thus, much contact with the field of electronics will develop Afghanistan’s economy, too.
Since this development is not necessarily dependent on natural resources or foreign aid, it is highly significant. The answer for the question that if one can be hopeful about the future economy of Afghanistan is positive. With our entrepreneurship, especially in internet and electronic fields, our country’s economy can reduce many transaction costs and experience endogenous growth. In short, considering this view, reforming educational system, having a large strategy in the field of entrepreneurship, and promoting the culture of entrepreneurship in the country generate hope for the economic future of Afghanistan.

Mustafa Ahmadi is the permanent writer of the Daily Outlook Afghanistan. He can be reached at the outlookafghanistan@gmail.com

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