Originally posted December 2009
Despite the capital infusion and increased commerce that have occurred since 2001, the Afghan economy today faces an astounding 40% unemployment rate. The dismal figure is not a result of global economic crises; rather, it is due to the ineptitude of the Afghan government to create stable jobs outside the public sector. Imagine what a low-skilled, unemployed father would do to feed his eight starving children? In Afghanistan, the possibilities range from petty theft to drug trafficking, and even terrorism that can reach the doorsteps of Europe and America. In Western countries, there are support systems to re-train labor forces and thereby ease the transition into new jobs. In Afghanistan, there is no support system, making the situation even more daunting for the unemployed.
Afghanistan’s Labor Force Predicament
Since 1979, Afghanistan has focused mostly on building its “defense industry,” primarily consisting of guerrilla warfare, as the main source of employment. As the result of three decades of conflict and the lack of education and training, an entire generation of the Afghan workforce was practically lost. According to the CIA World Factbook, the current Afghan labor force is slightly over 15 million, with roughly 80% of the working employed in the agriculture sector and the remaining 20% split evenly between industries and services. In other words, the Afghan labor pool consists primarily of an uneducated labor force with few skills that can be transferred to other industries. Read more importantly, whether in farming or carpet weaving, these few industries have neither access nor visibility to global markets and are mercilessly exploited by enterprising businesses from the region.
According to the UN High Commissioner for Refugees (UNHCR), the 6.3 million Afghans who managed to escape the war and took refuge in surrounding countries had neither access to basic education nor vocational training. In addition, remittances from Afghan expatriates in the West created a “welfare state” mindset, thus further contracting the skilled labor pool and sapping the desire to work.
The Pathway to Sustainable Jobs
While the Afghan story is quite complex, there are ways to turn it around. The dismal situation of high unemployment coupled with a high number of low-skilled members of the labor force can be dealt by means of a short-term job infusion and a long-term strategy for creating a more skilled labor force.
In the short term, the government of Afghanistan must clearly define and articulate their vision and strategies of creating more sustainable jobs to increase economic growth. On the policy side, the Afghan government must establish an unemployment target of less than 10% and begin implementing public works projects to reach that target. The recent announcement of the decision to privatize some 50 public enterprises will help, but the magnitude of the unemployment problem requires the implementation of agricultural and infrastructure projects throughout the country, not just in metropolitan areas such as Kabul. Decentralizing economic activities offers two potential benefits. First, it could prevent the further concentration of wealth and income in Kabul, which has increased the gap between the rich and poor. Second, it could cause the labor force to respond to employment opportunities in the provinces. This, in turn, would redistribute the population away from Kabul, which has a capacity of 500,000 inhabitants but whose current population is estimated at more than four million. Additionally, foreign non-governmental organizations (NGOs) must transfer their work to local Afghans, thereby reducing the army of foreign consultants and contractors. This will not only put people to work, but also lower labor costs and reduce the initial start up cost of development projects.
In the longer term, the Afghan government must create jobs that are within the reach and expectation of the local population through education and training. Lack of education is one of the key drivers of Afghanistan’s social and economic development problems. Increased levels of literacy and vocational training will lower unemployment rates as well as increase productivity and economic output. Read more importantly, education and vocational training will increase the rate of economic and technological convergence between Afghanistan and the rest of the world. This convergence will foster more investment, including foreign direct investment (FDI).
The Afghan government must establish an organization charged with implanting vocational training centers throughout the country, including at the provincial level, training locals with new job skills and providing on-the-job training. Depending on the area, the vocational training curriculum can range from office skills and entrepreneurism to specialized fields such as automotive and heating/air conditioning repair. This organization also should assist training centers to team up with local businesses so that participants also can gain on-the-job training and job placement following the completion of their courses.
The Afghan government also will need to team up with local banks to create specialized small private loans, such as micro-finance loans, to create new local businesses in conjunction with training centers. Perhaps they can put local entrepreneurs to work with the creation of 100,000 new small businesses throughout the country capitalized with low-interest investment loans.
Today, Afghanistan is caught in a vicious cycle whereby the lack of security and corruption make foreign direct investment impractical. While some government officials are simple opportunists and take bribes, others are forced to fall into this practice to make ends meet. Regardless of the reason, this high level of imposed corruption “tax” must be removed. While Afghanistan cannot compete directly for foreign direct investment with regional economic powerhouses (e.g., Russia, India, and China), it nonetheless has a comparative advantage in agriculture and in handicrafts such as carpet weaving. In order to exploit its advantage in agriculture, Afghanistan must institute measures to provide farmers with canneries, food storage, pesticides, farm equipment, and irrigation systems, as well as access to global markets.
Afghanistan’s dismal economic situation can be rectified. In the short run, there is a need for the infusion of jobs through public works projects. In the longer run, with a more transparent government, less corruption, and better security, Afghanistan can attract foreign direct investment and become self-sufficient. With guidance from regional economies and the West, Afghanistan can once again live the dream of becoming a trading post along the Silk Road. With education and vocational training, the Afghan economy can move up the value chain, creating and attracting newer industries in order to develop a more balanced economy. The creation of sustainable jobs will not only attract FDI, but also bring peace and prosperity to this war-torn country.