Reviving Trade & Investment

Khalil HamdaniLearning from Experience for Afghanistan

Trade and InvestmentTrade is essential for economic revivalImport of essential goods and services. Exports restore incomes and livelihoods Investment can also contributeNot just capital but technology and skillsBut investment is not a substitute for ODA

Trade and InvestmentTrade revives earlier, easier than investmentImports revive earlier than exportsImports are driven by demandExports depend on supply capacity, which takes time to restore and needs investmentPrimary exports and services revive easier than manufactures

Trade and InvestmentActions to revive trade and investment must begin now, even though positive impacts may not be felt immediatelyFailure to initiate policy actions can have immediate negative impactsImport bottlenecks, rent-seeking behaviour among enterprises and retrenchment of corruption

Trade: Immediate PrioritiesFormulate trade policyImport regime, regulatory frameworkEstablish trade procedures and institutionsImport/export, insurance, payments, customsTransit arrangementsRebuild transport networkRoads, rail, airports and inland ports

Trade: Medium-term PrioritiesTrade policy/negotiations WTO accesion, bilateral agreements, Integrated Framework for LDCsStrengthen institutions covering all aspects of trade efficiency/management and logisticsTrade faciliation (information, marketing, credit, SME support)

Trade StrategyTurn handicap of being land-locked into an asset of being an efficient transit location between Central Asia, South Asia and Indian OceanActivate Trade and Transit Framework AgeementTransit fees as much as $500 million per year Establish first-class transit arrangementsImprove infrastructure Pipeline royalties estimated at $300 million

Successful ExperienceTrade policy formulation and implementation requires:Government leadershipInstitution buildingInvolvement of all actorstrade and other ministries, business, civil society

RisksDonor coordination difficult due to conflict between development objectives and commercial interestsSolution: Integrated FrameworkAdded safeguard: involve civil society

Investment: Immediate PrioritiesWelcoming attitudePrepare policy statementNational regulatory frameworkUpdate Investment Law of 1967 and 1974Consider Mining ActInstitutional arrangementsRe-establish Investment Promotion Department

Regulatory FrameworkAllow ease of entryProvide adequate standards of treatmentGrant investors legal protection and guarantees against non-commercial risksAccede to international instruments at the bilateral or multilateral levels

Main Areas of PromotionPrivatizationBOTs (build, operate, transfer)Support services to small enterprisesHundreds of SMEs in past years Target former investors (hotels, textile, energy)Target expatriates

The greater the linkages between foreign affiliates and local enterprises and public institutions, the greater the spillovers into the domestic economySuccessful Experience