Afghanistan's Agenda for Action - Economic Growth - usaid

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Afghanistan’s Agenda for Action: Developing the Trade & Business Environment – August 2007with the Shanghai Cooperation Organization.Moreover, as noted in this Diagnostic, Afghanistan alsohas been granted Observer Status in the World TradeOrganization and has commenced the process ofaccession as a member country of the WTO.The first step toward WTO accession, the creation ofa Working Group in Geneva, has been accomplished.Reportedly, the group – which includes representativesfrom the U.S., EU and Pakistan – has been formed, withthe Dutch representative as chairperson. The nextstep, preparation of a Memorandum of Foreign TradeRegime by Afghanistan, is reportedly underway at thetime of this Diagnostic. In that regard, an interministerialtask force has been working on theMemorandum, led and funded by the Ministry ofCommerce and including the Central Bank, the CentralStatistics Office, and the Ministries of Agriculture,Finance, Economy, Justice, and the environmentalprotection agency. The inter-ministerial task force wasformed in August 2005, and is tasked specifically withworking on the WTO accession. All the workingrepresentatives on the task force are senior levelofficials in the ministries, just below the level of DeputyMinister. The members of the task force receivedspecial training by the WTO, in Geneva with regard tothe WTO accession process and trade policy, generally.At the time of this Diagnostic, the Memorandum was inits eighth draft. Significantly, the drafting process hasbenefited from considerable international advisor input.The Office of the U.S. Trade Representative andvarious donor-organizations reviewed the sixth draft,and the seventh and eighth drafts have been preparedwith considerable assistance from UNCTAD.Currently, a translation of the eighth draft is beingreviewed by key Afghan ministries, the Afghan HighCommission on Economics, and the office of PresidentKarzai. It is anticipated that a final Memorandum will besubmitted to the WTO by the summer of 2007.Implementing InstitutionsThe Ministry of Commerce and Ministry ofForeign Affairs take the lead in matters ofinternational trade. At the time of this Diagnostic,however, the respective roles of each and the lines andparameters of authority were quite unclear. While theMinistry of Foreign Affairs, for example, initially tookthe lead in implementing the WTO accession processin 2003, that responsibility was shifted to the Ministryof Commerce in July 2005 because literally no actionhas been taken (not even meetings). Of course, the bicameralNational Assembly (the Wolesi Jirga orHouse of People and the Meshrano Jirga or House ofElders) will have a legislative role in international tradematters, but this has yet to be seen. Similarly, the roleof the President in international trade and treaties, asexecutive, is anticipated to be considerable, but still anunknown.Supporting InstitutionsThere are only just-emerging trade and investmentsupport institutions in Afghanistan. To the extent thatthey exist or are operational, they are discussed morefully elsewhere in this Diagnostic, especially in thesection on Foreign Direct Investment. Most notable arethe Afghanistan Investment Support Agency(AISA), a quasi-private enterprise whose mandate isto promote and facilitate investment in Afghanistan, 162and the High Commission on Investment (HCI)(chaired by the Minister of Commerce and including sixdifferent ministers of six different ministries and thePresident of the Afghan national bank).Certain trade and industry associations are justemerging. For example, there is a Builder’sAssociation, a Banker’s Association, a DriedFruit Association, the Afghan Women’s BusinessFederation, the Afghan Chamber of Commerceand Industry and most notably, the AfghanInternational Chamber of Commerce (AICC).Social DynamicsIt is difficult to ascertain the social dynamics that impactinternational trade, mainly because there is very littleunderstanding or knowledge within Afghan society – atall levels – with respect to the framework, parameters,and dynamics of good trade policy and the impact ofthe current regime. Indeed, there is also a significant162Website available at http://www.aisa.org.af/index.htm.108
Afghanistan’s Agenda for Action: Developing the Trade & Business Environment – August 2007lack of communication within the Afghan businesscommunity and the population at large as to the actualstatus of various trade initiatives, including mostnotably WTO accession. As such, in various interviews,one realizes that there is a great deal of ambivalenceand countervailing opinions/tensions betweeninterviewees. For example, only a few intervieweesgave unequivocal opinions as to whether tariffs shouldbe increased or kept low; whether WTO accession is agood step for Afghanistan which will at least provide afurther forum for trade disputes and force Afghanistanto “clean up its act” in many areas of government andoverall legislation, or whether it is a premature stepwhich will force certain tariff restrictions to thedetriment of Afghanistan. 163It has been observed that a great deal of resistance tochanging the current “system” exist largely due toconfusion and lack of knowledge. One advisorcommented during an interview that most people inAfghanistan, including even government officials, onlyknow about WTO accession from what they see onCNN. 164 Interestingly, several international advisorsnoted that the Afghans with whom they had discussedthese issues generally did “turn around” in favor of theproposed trade reforms, including WTO accession, butonly after the key issues are explained to them.vocabulary in areas of business, commerce andeconomics), and to be tasked with greaterexchange of information across areas of technicalexpertise and across ministry lines. 165• The legal framework for trade needs to beconsiderably strengthened and brought to the levelof international standards: it is suggested, forexample, that anti-dumping laws, countervailingduty laws, and laws supporting secured tradefinance on imported and exported goods bestudied and enacted as and when appropriate.• Greater input from the business community needsto be elicited and trade organizations need to besupported and strengthened.• Strengthen and update trade agreements withregional trade partners, as well as tradeagreements with other countries outside theregion.• Nominate a single Ministry to have responsibilityfor trade negotiations and concluding tradeagreements, with the authority to demandallocation of resources and information from otherministries.• Better coordination and communication needs tobe established between the various NGOs anddonor-sponsored organizations advising the Afghangovernment on trade matterRecommendations• A better program of information and trainingneeds to be implemented with respect to tradepolicy issues, not only at the grass-roots level, butwithin the Afghan business community and midlevelgovernment offices.• A WTO negotiation team needs to be formed,including both government officials (apart from theinter-ministerial task force) as well as drawn fromthe business community and chambers ofcommerce, to be trained in negotiation skills andEnglish-language skills (particularly technical163164As one interview pointed out, under the current legaland institutional framework, “trade is easy.” He went onto explain that the system of bribes and the “informal”trade regime worked quite well and, despite someincreased costs of doing business at times, it probably165should be left intact.Interview in Kabul on 12 February 2007.A similar proposal is already being studied and has beenrecommended by other international advisors, as well.109
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Nicholas Klissas, USAID/EGATTel: 20
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