Afghanistan: World Bank Country Director Sees 'Staggering' Changes

World Bank's director for Afghanistan, Alastair McKechnie (World Bank photo) (Courtesy Photo) May 7, 2007 (RFE/RL) -- The World Bank's director for Afghanistan, Alastair McKechnie, says he expects the Afghan economy to continue its rapid growth -- leading to considerable improvements in people's lives. McKechnie spoke with Radio Free Afghanistan broadcaster Mustafa Sarwar on May 4 about South Asia's fastest-growing economy, and about challenges stemming from threats to public security. What follows are excerpts of that interview.

RFE/RL: You've said you expect Afghanistan's economy to continue to grow rapidly. In which sector has Afghanistan seen this economic growth?

Alastair McKechnie: The Afghan economy has grown at rates greater than 10 percent, on average, during the past five years. And this growth has come in several sectors. First of all, construction -- as the infrastructure is rebuilt and as there are high rates of investment in the future. The second area is trade -- trade with the rest of the world, with the region. And a lot of this [trade] is fueled by investment, reconstruction, and also rising incomes. And the third major source of growth is in agriculture -- partly due to the recovery from draught, but also due to a lot of small-scale investment by farmers in irrigation, in improved seeds, in looking after improving the health of livestocks, and also restoring horticulture, such as grapes. In fact, several tens of thousands of grapes were exported from Afghanistan last year.

RFE/RL: To which sector is this growth related? Is it related to the government economy or the private sector?

McKechnie: I think it's both. Part of it has been government -- or should we say public -- investment, because a lot of foreign aid is provided outside the government budget. That is essentially for public goods, such as education, sanitation, and so on. Some of it is private-sector driven, particularly oriented towards trade and consumer goods. And also it's probably true to say that there is some spillover from the illegal narcotics economy into the legal economy -- as people who have made fortunes from drugs invest in real estate, new houses, and so on.

RFE/RL: You were quoted as saying that soon this economy will reach double-digit growth, what does this double-digit economic growth mean?

McKechnie: Well, firstly, the Afghan economy has already achieved double-digit economic growth. It's been the fastest-growing economy in South Asia, if you look at the last five years. There's been some year-to-year fluctuation, particularly caused by agriculture as rainfall varies from year to year. But what these high rates of growth mean is that there is increasing prosperity, there is a recovery of the economy, recovery of normal business activity. And for those of us who have been visiting Afghanistan for the past five years, the differences between early 2002 and today are quite staggering -- whether it's the number of shops that are trading, whether it's the condition of buildings that have been rehabilitated, whether it's the capacity of government to implement programs, [or] whether it's the amount of traffic on the road, which to some extent is a negative aspect as well. All of these things indicate that this is an economy that's moving.

RFE/RL: In your opinion, to what extent is insecurity in Afghanistan a challenge to economic growth?

McKechnie: Well, I think it's firstly important to have an accurate view of what the security problems are and how widespread the insecurity is within Afghanistan. For example, two-thirds of the country are reasonably safe -- certainly as safe as other low-income countries. But it's also true to say that there is an insurrection in parts of the south and parts of the east, and that's a fact of life. However, what this means -- particularly the perception of insecurity -- is it is a constraint to private investment, particularly large-scale or foreign investment. There are other factors as well, such as the shortage of land, the shortage of electricity, the business environment. But when it comes to investment, perceptions count -- especially as Afghanistan is really competing with perhaps a hundred other countries for foreign investment.

RFE/RL: You talked about rapid economic growth in the Afghan economy, although we are experiencing an increasing level of unemployment and skyrocketing price hikes in the country. Why do we still have this high rate of unemployment?

McKechnie: Firstly, there is very little data available on unemployment -- or employment, for that matter -- in Afghanistan. Nevertheless there are perceptions that there is...underemployment. And I think that part of the problem is that, for many people, they don't have the security of a regular job. I think there is part-time work around. But it's essentially daily work, which is inherently insecure, particularly if people have families to support and other commitments. So we need to recognize this real problem there. Nevertheless I think that it's probably true to say that employment overall has increased substantially since the end of the Taliban regime. People even in rural areas look more prosperous, and I think [they] are generally much better off. Nevertheless there are acute problems of poverty, and also there are some problems in the labor market -- particularly because due to the collapse of the education system in 20 years of war, many Afghans do not have the skills that are needed in the recovering economy. And that is a real problem. Another problem is that several million refugees have returned from Pakistan and Iran, so that the labor supply has increased quite substantially; maybe as many as 5 million refugees have returned.

RFE/RL: And how can we provide people with employment in Afghanistan?

McKechnie: Well, I think the first thing is to ensure that public investment is directed towards investments that are labor-intensive -- that require Afghan skills. And that means may small-scale reconstruction activities -- small construction projects, rather than large megaprojects that require very highly skilled labor to implement. That's number one. Number two is to deal with the problems of skills, and this has several aspects: One is at the level of basic education, literacy; and there has been a tremendous increase in access to education. More girls, more children overall, are at schools that at any time in Afghanistan's history.