November 22, 2010

Afghanistan’s Willing Entrepreneurs: Supporting Private-Sector Growth in the Afghan Economy

By Erik Malmstrom and Jake Cusack

Despite ongoing security challenges, the Afghan private sector has enormous opportunity for development and growth and will be a significant determinant to long-term stability in the country, according to the Voices from the Field policy brief Afghanistan’s Willing Entrepreneurs: Supporting Private-Sector Growth in the Afghan Economy. Authors Jake Cusack and Erik Malmstrom are Iraq and Afghanistan combat veterans and graduate fellows at Harvard's Kennedy and Business School.

Afghanistan’s Willing Entrepreneurs is based on over 130 on-the-ground interviews with business owners and key stakeholders in Afghan cities Kabul, Kandahar, Jalalabad, Mazar-e-Sharif and Herat. They describe five key characteristics of the Afghan business environment that have implications for policymakers: 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; 4) many businesses feel threatened by the Afghan government; and 5) international actors distort the business environment in ways harmful to Afghan business.
 
“Based on our field research, we conclude that robust private sector development is possible and vital to Afghanistan’s future… [but] private sector development is not a quick or easy solution to Afghanistan’s ills,” write Cusack and Malmstrom. “Moreover, it requires a fundamental shift: Afghan entrepreneurs must be empowered to be the key drivers. Outsiders must accept an enabling role while remaining aware of their potential to create armful distortions. Importantly, this effort requires smarter policy and the right people, not necessarily more money. With targeted help, Afghanistan can see real and sustainable growth in the next decade and beyond.”

The Kauffman Foundation, who funded the research, will release an expanded and detailed version of this report in December 2010.

  • Erik Malmstrom

  • Jake Cusack

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