ADB announces that the US$1 million grant is helping Afghanistan prepare a program that will enhance the role of the private sector in economic growth and poverty reduction.
One of the key challenges facing Afghanistan is establishing a supportive environment for the country's large and mainly informal private sector. The private sector is estimated to control as much as 89 percent of the country's gross domestic product and employs about 1.7 million people. However, the private sector contributes just 6 percent of the economy's gross domestic capital formation while accounting for 92 percent of consumption.
“While this in part reflects a lack of general awareness of potential business opportunities and limited business development skills, it also reflects the absence of incentives for the private sector to formalize its activities,” says Eugenue Zhukov, an ADB Principal Economist.
The program being prepared will support reforms that will lead to private sector growth in the country by directly addressing the key issues that constrain investment and entrepreneurship, such as a lack of an enabling legal and regulatory framework, unfair business practices and limited access to much needed business development services and financing.
“Experience from other countries show that transparent and appropriate legal and regulatory structures, well-functioning markets, and access to credit will play a vital role in promoting private sector-led growth,” adds Elaine Glennie, an ADB Senior Financial Governance Specialist.
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