The Center for a New American Security (CNAS) recently released a policy brief entitled Afghanistan’s Willing Entrepreneurs: Supporting Private-Sector Growth in the Afghan Economy. Researchers Jake Cusack and Erik Malmstrom traveled to Afghanistan to interview over 130 business and economic stakeholders in Kabul, Kandahar, Jalalabad, Mazar-e-Sharif, and Herat. They argue that there is “tremendous potential to nurture an entrepreneurial economy in Afghanistan.”

Afghanistan relies on foreign aid more than any other country in the world. Although the nation’s GDP has more than tripled over the last decade, 40 percent is derived from official development assistance. Critics have been pushing for an economic model that emphasizes entrepreneurship over reliance on aid, claiming that it will spur growth and empower the Afghan people. Cusack and Malmstrom’s field research revealed five characteristics of the business environment in Afghanistan that have implications for policymaking:

1) Afghan businesses are responding rationally to economic incentives in a highly distorted economic environment.
2) Uncertainty and unpredictability, not physical insecurity, are the fundamental obstacles to business.
3) Businesses are adapting through strategies such as vertically integrating, pursuing short-term trading over long-term enterprises and “buying” security in multiple ways.
4) Many business people believe that the Afghan government not only fails to provide basic services but also engages in corruption that directly threatens their businesses.
5) International actors distort the business environment in ways harmful to Afghan businesses.

In order to address these issues and empower Afghan entrepreneurs and firms, the researchers claim that a comprehensive new strategy consisting of the following elements should be implemented:

1) Infuse private sector talent to support the growth of Afghan businesses.
2) Support Afghan enterprises with a better regulatory and operating environment, public-private partnerships and linkages to multinational firms.
3) Empower Afghans by increasing access to capital and business advisory services.
4) Change development incentives to ensure implementation and reward long-term results.
5) Make clear long-term commitments.

All of these points are elaborated upon in the full policy brief, which can be downloaded in pdf format here.