1. Background Information of Afghanistan
Afghanistan had suffered from a stagnant economy in the early period under the Afghan monarchs. During this period they raised money by the imposition of state monopolies on the sale of commodities and high taxation, which ultimately slowed the long-term development of the country. However, the economy has improved significantly since 2002 due to the infusion of billions of dollars in international assistance investments.
- Population: 33,332,025
- Population growth rate: 2.34%
- Health expenditure: 3.4% of GDP (2015)
- GDP per capita: 2,000 (2016 est.)
- Trading partners: Pakistan, India, Iran, United Arab Emirates
2. Comparing levels of development
Education: Literacy rate of adults overtime
Literacy rates overtime in comparison to China
GDP & GNI Differences
- Afghanistan: GDP per capita -620/ GNI per capita-1,960
- China: GDP per capita -6500/ GNI per capita -11,850
Education: education is the only sector where the people seem to have a positive image of the government's efforts. 46% of the people surveyed state that they have better access to schools than they had under the Taliban regime. -> promotes challenges and productivity
Property Rights: protection of property rights is weak due to the lack of comprehensive land titling system, disputed land titles, and the incapacity of commercial courts. Therefore, corruption is endemic throughout society and demand for bribery at border crossings hamper development of a market economy.
Use of appropriate technology: they employ technology to assists the poorest members of the communities and disabled persons by utilizing locally available natural and humanitarian resources with the communities through introduction of appropriate technology. Also is making an effort in the communication industry. e.g. mobile-money and banking revolution
Access to credit: Afghanistan has low access to credit of micro, small and medium enterprises. Therefore the USAID is working to increase access to quality technical and business education as well as facilitate access to credit and business development opportunities.
Women empowerment: Although there is low levels of equality among different sex, USAID is also working to increase job placements and wages for 25,000 Afghans, 25%of whom will be women.
Political Instability: Afghanistan’s economy largely hinges on the success of the upcoming political and security transitions. Otherwise, it is unlikely that the economy can succeed in an unstable state fraught by corruption and the persistent danger of physical attacks such as suicide bombings. Afghanistan’s economic development has been uneven, and Afghanistan still lags far behind many other low-income countries in social and physical infrastructure. Maintaining progress and protecting gains is going to be critical as international aid begins to drawdown and security transfers to Afghan control.
Access to international markets: There are high trade barriers due to the government corruption that has been prevalent throughout especially under the Taliban influencing the economy. Afghanistan has a narrow range of products that are hard to sell to the rest of the world, with textiles such as carpets, and farmed goods (fruits and nuts) being some of their main exports. These items are hard to sell because they are specialized and there is not an overabundance of demand for these in the trading world. There is more of a need for farmed goods however their means of shipping and production are less than satisfactory compared to the competition meaning that it is a hard good to sell.
Market Diversification: Market diversification must be assigned a crucial role in export strategy. A clear distinction should be drawn between the convertible currencies, dollars, pounds, marks, and Swiss francs and the nonconvertible currencies of India and Pakistan. Because convertible currencies can be used for the purchase of more valuable things, such as capital equipment of high quality, Afghanistan's market diversification programs should give particular care to drawing more customers from the West.
Role of WTO: By joining the WTO, it will help the country strengthen its rule of law, establish transparency and lay the foundations for healthy economic growth. The WTO would also help put pressure on Pakistan and neighboring countries to stop illegal activities regarding trade and transit through Afghanistan. The countries has also been liberalizing its own tariff barriers, which has increased import competition in some segments of industry but at the same time allow consumers to benefit from lower prices.
Positive impact of Aid, Trade or FDI: Afghanistan has benefitted mostly from the Bilateral ODA, mainly from the United States, Germany and United Kingdom as top donors to the Afghanistan economy. According to OECD, a big proportion of the Bilateral aid has gone into the social infrastructure and services. In addition, the openness of Afghanistan has also contributed to the amount of FDI flowing in the country. The investment in certain sectors, such as production and sales of weapons and explosives, non-banking financial activities, insurance, natural resources and infrastructure has greatly contributed to the overall growth of the Afghanistan economy.
International Debt and the problems that arise in balance of payments: There are opportunity costs of debt is the poverty reduction expenditure such as health care, social care, education, sanitation that they could have spent instead of paying back debt.