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Beyond “Doing Business”: The Economic Implications of Public Opinion in Afghanistan

Posted on the 14 January 2015 by Center For International Private Enterprise @CIPEglobal

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In early November, the World Bank published its annual “Doing Business Report,” which assesses government regulations that support or constrain business activity across 189 countries. This year, Afghanistan again ranked near the bottom, down one spot from last year, in the 183rd position. The full report on Afghanistan can be found here.

There is no disputing that Afghanistan is a difficult place to do business, yet as has been noted in the past on the CIPE blog, there are inherent limitations to what the Doing Business rankings measure. We frequently point out that these indicators reflect the “laws on the books,” or the formal economic environment, but do not address the so-called implementation gap between those laws and practice. There have been cases in which countries introduce reforms specifically to move up the rankings, but surveys of entrepreneurs reveal that business continues “as usual,” as these new laws do not work in reality, either because of a lack of political will or low public administration capacity. In addition, political stability and democratic legitimacy are not captured in the Doing Business rankings. Egypt was a “top reformer” prior to 2010, but the events in Tahrir Square were to a great extent fueled by economic woes.

In order to get a more comprehensive view of a country’s economic environment, it is useful to consider public opinion and understand attitudes towards state institutions and processes. In the case of Afghanistan, the Asia Foundation’s annual Survey of the Afghan People is one such tool. This year’s report is especially meaningful given the country’s post-election mood, and its implications for public confidence in the country’s economic environment.

In the past, CIPE too has examined the importance of public opinion in Afghanistan. In 2010, in collaboration with Charney Research, CIPE published a survey on “Afghanistan Business Attitudes on Economy, Government, and Business Associations.” This highlighted general optimism among Afghan businesses about their business prospects. CIPE’s report also showed that Afghans have a keen understanding of policy reform needs.

The report also stressed the importance of concerns over security and corruption, which are key challenges that are not easily captured in a survey of the regulatory environment. Likewise, while the Asia Foundation’s new survey might not necessarily paint an optimistic picture of Afghanistan’s economic environment, it highlights other important factors that contribute to shaping the business climate beyond the regulatory environment, helping develop a more nuanced understanding of the country and more informed prospects for international support.

To prepare its report, the Asia Foundation surveyed 8,705 Afghans across all 34 provinces; most respondents were from accessible, “secure” areas, and 500 were from less accessible, semi-secure and insecure areas. There was an even gender ratio in the secure areas, with all in-person, same-sex interviewees. This survey raises several interesting points regarding the post-election mood, concerns about unemployment and corruption, the role of women in the economy, and security challenges.

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It is most interesting to note that despite the challenges the country faces, the majority of Afghans surveyed after the elections believed Afghanistan is “moving in the right direction,” thanks to reconstruction efforts, better security, and improved education systems. In addition, 64 percent of Afghans believe that the elections will “make life better,” up from 58 percent in 2013, and only 12 percent believe the elections will “make life worse.”

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The survey highlights an issue that we frequently emphasize at CIPE: the importance of the economy  as a national political issue. The biggest “areas for concern” for Afghans included unemployment and the poor economy (37 percent) and corruption (28 percent). At the local level, economic concerns also rank highly. Indeed, the centrality of employment concerns has not varied considerably since the first survey was conducted in 2006.

At the same time, corruption has become a more significant issue over the years, with 62 percent of Afghans agreeing that it was a “major problem,” compared to only 42 percent in 2006. Of course, the economic climate is undoubtedly impacted by Afghanistan’s volatile security environment, with insecurity still a key reason for pessimism. The percentage of those who fear for their personal safety has increased since 2006.

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The survey also provides interesting data about the role of women in Afghanistan’s economy.  There has been a five percent increase this year in the number of households in which women contribute to a family’s income. The majority of Afghans support a woman’s right to work outside of the house (though survey trends also show that the percentage of those opposed has not decreased). A greater percentage of Afghan women now consider themselves “unemployed” rather than “housewives,” which points to a re-shaping of personal identity with great implications for entrepreneurship. To capitalize on such momentum, CIPE has recently begun to work with the Peace Through Business Network, a nascent women’s association, to build its capacity to advocate for expanded opportunities for women.

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While women’s economic participation has been hampered by a persistent imbalance in educational opportunities, there is some evidence that this might be changing. Despite the fact that 74 percent of surveyed women had no formal schooling (as opposed to 42 percent of men), this figure does not reflect the under-18 population, for which increased girls’ enrollment rates are estimated to have increased from three percent in 2001 to 43 percent today.

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These results demonstrate why it is important to consider public opinion in Afghanistan to gain insight onto the variety of factors that shape its increasingly dynamic, yet volatile, economy. Surveys can serve as a global public good to shed light onto perceptions of on-the-ground realities, which technical analyses of the codified legal environment simply cannot. A more nuanced understanding of Afghan attitudes can improve the efforts of international partners and champions of economic reform, and can support the country’s emerging path to prosperity and equality.

Janani Ramachandran is a Program Assistant for Eurasia and South Asia at CIPE.


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