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  • Toby Marsden

Barriers to Economic Growth and Development in Afghanistan

One barrier to economic growth in Afghanistan is the continual conflict and insecurity the country suffers, slashing levels of confidence for consumers and entrepreneurs within the economy, hindering growth as there are a reduced number of start- up companies and in turn foreign direct investment, resulting in the economies output remaining relatively low; this will be the enduring case if the political climate does not calm.

Moreover, the informal labour market disincentives potential employees entering the labour market as they are not guaranteed safe working environments or non-wage benefits, as experienced by regulated labour markets. Consequently, unemployment levels are increased and thus there is reduced productivity within the economy which leads to less production of goods and services, and the low economic output of Afghanistan.

A further consequence of the informal labour market and a barrier to economic growth is the Brain Drain Afghanistan is experiencing. Due to the poor economic climate of one country, educated and skilled people will emigrate in search of a regular income, health benefits and economic stability, often found in that of a more economically developed nation; for example, the United Kingdom. Afghanistan could lose all of its skilled labour force - who are required for economic development - due to the lack of incentive provided by the informal labour market, resulting in a barrier to economic growth.

However, the dependence on agriculture as an economic source isn’t necessarily a significant problem for now, as there are talks with the Taliban and neighbouring countries to form a bilateral trade and legislation agreement. The resulting reduction in conflict and insecurity from these agreements could incentivise regulated labour markets, encouraging employment as the trade deals will incur increased productivity and a demand for labour, stimulating the embryonic manufacturing industry. The result: economic growth, and the birth of a transition through the economic sectors.

However, the overarching factor limiting economic growth in Afghanistan is its proneness to natural disasters, which will inevitably impact the heavily relied upon agricultural sector. The arbitrariness of a natural disaster affecting crop yields creates uncertainty around annual output. In turn, this discourages possible Foreign Direct Investment as the level of lack of confidence in Afghanistan as a reliable market. Therefore, the economy is without direct investment, reducing potential development. Future investment should focus on building infrastructure to mitigate a natural disasters impact, and instil confidence into the economy to ensure development.

In summary, for economic development to occur, profound change is required. Political unrest must calm and trade agreements must follow; money raised from these trade agreements should be spent on mitigating the impact of natural disasters which dilute trust in the economy; and a formal labour market must be established in order to prevent Brain Drain. All of such actions are necessary to ensure a chance of foreign direct investment on a large and successful scale. Only time will tell.

Edited by: Charles E.Cheadle - Co-Founder and Law Writer


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