Major Challenges For Entrepreneurship In Afghanistan – OpEd

Entrepreneurship in Afghanistan remained tenacious despite the decades of conflicts. the country’s miserable era was started since the Soviet Invasion in 1979 which lasted for 9 years till 1989, the thereafter civil war among different Afghan parties, followed by the Taliban tenure and the US war, which was started in 2001, as a result, all the institutions were obliterated including the financial system and economic sectors of Afghanistan.

Entrepreneurship is the key source for Afghanistan to upgrade the current economy. however, over the last five years the economy of Afghanistan has improved as compared to the earlier years, such as; the number of infrastructural projects, investments, the opening of Afghanistan’s trade corridors with China, Azerbaijan, Turkey and India and the declaration of Afghanistan as one of the top 10 improvers in doing business.

Despite the abundance of natural and human resources in Afghanistan, the country still requires facilitated platforms to manage them, as yet there has been no proper management and utilization of those resources, that could yield the economy of Afghanistan. Hence, there is an immense need for Entrepreneurship to become conventional in Afghanistan which unfortunately faces serious complications in the country.

According to a recent study published by the UNU-Wider, there are five major dimensions for Entrepreneurship in Afghanistan;

1. Household features:

The positive effect on the likelihood of being an entrepreneur is exerted by the number of activities in which the household is involved and household size, this suggests that it is much easier to hold a business when the risk of incurring income losses is covered by the involvement in a large number of other activities. Risk-averse Entrepreneurship is confirmed by the effect of household assets.

2. Access to resources:

Entrepreneurship is considered to be a coping strategy in Afghanistan. This is reflected in the finding that access to resources is not related to entrepreneurial activity. Furthermore, there are no formal institutions that provide loans, this is consistent with risk-averse Entrepreneurship, which means that entrepreneurial activities in the country are aimed at survival not pursuing opportunities.

3. Social Capital:

Social capital is another pivotal dimension, which unfortunately does not have a considerable contribution to Afghanistan, a country that has witnessed conflicts for decades.

4. Government and Institutions:

It is observed that there is a significant relationship between being a part of the governmental body and having a small business, which may or may not be productive, certainly continued conflicts have generated a strong incentive dynamic for non-productive and destructive entrepreneurship in the country. Numerous warlords and people of high influence have leveraged handsomely from the conflict by getting involved in many reconstruction projects that require local counterparts and contractors to be implemented. Along with that, corruption and nepotism are the two main diseases in Afghanistan.

5. Infrastructure:

The menacing impact of the ongoing conflict has appeared for the Entrepreneurs to operate through the inadequate access to markets and lack of adequate infrastructure to support business activity. These two factors are the productions of the ongoing conflict and have a consequential but indirect effect on Entrepreneurship.

Nevertheless, the Entrepreneurial activity is still persisted in the country and Afghanistan is a home for number of small ventures, operating on micro level commonly aiming at producing handwoven products such as rugs and cloth. The major export partners of Afghanistan are India, Pakistan, Turkey, China, and Iran, with the export rate of goods and services as a percentage of GDP is 5.90 %.

The unemployment rate in Afghanistan is expected to be 8.90% by the end of this quarter, according to (Trading Economics global macro models and analysts’) expectations. Thus, the Government needs to pave private sectors, ventures, and start-ups the ways by providing them special security, fund providing institutions, infrastructure and capitals, this way the unemployment problem will be overcome through the creation of job opportunities by the Entrepreneurial activities.

Additionally, there are four grave effects thwarting growth for Entrepreneurs in Afghanistan;

1. Socio-Political Issues:

Pressures from people of influence, having networks in central and local governments have created a halt for start-ups in terms of paying them a certain amount of money and several installments, in order to allow the Entrepreneurs, establish and run their ventures.

Second, the ambiguous political stability of Afghanistan creates an atmosphere of untrustworthiness in the individual’s mind to undertake start-ups.

Third, the threat of extremism from beyond the Durand line, and the insurgent groups entering into Afghanistan, fighting the Afghan government, forcing the local residents for cultivating narcotics which is monetarily lucrative both for the local residents and the insurgents. This practice diverts the local and small starters from running their desired businesses to the illegitimate businesses i.e. trade in narcotics, the majority of which is carried out through Pakistan.

2. Socio-economic Issues:

Though, President Ghani has promised to provide 2.1 million jobs within the next years but, the unemployment rate is expected to be 8.90% in the year 2019, it is further projected to be around 8.80 in the year 2020.

A statistical study shows that the poverty rate of Afghanistan raised to 58% in the years 2016-17 from 38% in 2011-12 which is now 36% and another 37% of the population lives above the specified poverty line, and half of the population is living on less than a dollar per day.

Shubam Chaudary, the World Bank director for Afghanistan said about the survey carried out by the World Bank; “High poverty rates represent the combined effect of strategic economic growth, increasing demographic pressure, and deteriorating security situation”.

3. Lack of Confidence on the Brand:

Most of the products made in Afghanistan are intentionally sold under Chinese, Pakistani, and Indian trademarks, the reason behind this is, the brand image of the Afghan Manufacturing enterprises, is misperceived in the minds of the customer. which is why the Afghan Investors tend to do investments in the products being imported from outside, than the domestic products.

Further, a large number of Afghan Businessmen run their businesses in China, Dubai, India, and Pakistan, this practice severely influences both the GNP (Gross National Product) and GDP (Gross domestic product) of Afghanistan, for instance, The Afghan Refugees living in Pakistan, run their businesses over there, many of them buy/sell the Afghan products under the different brand names, which severely affects the brand image of Afghan enterprises.

Therefore, Afghan Entrepreneurs are not ready to initiate their ventures in Afghanistan, due to the low brand image of the Afghan products.

Absence of fund/credit providing Institutions:

Unlike other countries, Afghanistan has no proper funding organizations for Start-ups, which is a major deterrence for the individuals in Afghanistan to instigate ventures.

On the other hand, in India, there are number of facilitated organizations that provide funds for Start-up, such as; Angel Funding for Start-ups in India, Seed Funding for Indian Start-ups, Business Startup Funding Company India, these organizations have made it quite easy for the individuals to start their ventures, which is why India is lucrative for new ventures.

The unavailability of Fund providing Organizations in Afghanistan impede the Afghan Entrepreneurs to start their businesses.

In order to enhance the country’s economy and put out the slowdown, the Government of Afghanistan must avail the proper platforms for Start-ups and Entrepreneurs to undertake their ventures. There needs to be sufficed Fund providing institutions for start-ups.

Entrepreneurship should be kept away from the political influences, the required Capital has to be made available for the Starters, the Afghan Brand image should hold a trustworthy position and a reliable identification both in domestic and international levels.

*Hamayun Khan is from Afghanistan, studying an MBA at Punjab Technical University, Punjab-India.