By F. Maria Bonaventure
Many economists have defined an underdeveloped economy but none of the definitions could be treated as composite as an underdeveloped economy exhibits a variety of features. Some economists view an underdeveloped economy as one, which is characterized by low per capita income. Some others are of the view that in an underdeveloped economy unemployment is a major feature where raw materials are exported and high valued finished products are imported. We have tried to analyze some of the factors with reference to Afghanistan and ways to overcome the shortcomings.
The majority of Afghanistan’s citizens suffer from a high level of poverty. The U.N. Development Program (UNDP) has warned that 97% could fall below the poverty line by mid-2022. The same report stated that about half of the population lived in poverty before the Taliban takeover. Thus, it could be clearly seen that poverty had been in existence in Afghanistan not only now but for many years in the past also.
The only way that could be opted for, to remove the poverty of the masses is to make the economy of Afghanistan a self-sustaining one from its present donor-based economy status. The world bank, in close coordination with the international community, development partners and the Afghanistan Reconstruction Trust Fund (ARTF) donors, is unlocking ARTF funds to support the Afghan people and deliver critical health, education and livelihoods supports. As could be seen from the World Bank statement, Afghanistan had all along been dependent on donations to support the Afghan people by way of humanitarian aids be it for health, education, salary or for technological improvement.
“Low per capita income” is another feature commonly prevalent in Afghanistan. Investopedia defines per capita income in the following words. Per capita income is a measure of the amount of money earned per person in a nation or geographic region. The annual
One of the ways that could be used to eradicate poverty and to increase the per capita income of every Afghan citizen is by removing the dependence on agriculture. Agriculture has traditionally dominated Afghanistan’s economy and has contributed for a large part to its growth. About 70 percent of Afghans live and work in rural areas, mostly on farms, and 61 percent of all households derive income from agriculture..
Most of the industries that are thriving in Afghanistan are mainly Agro based. As stated above, the percentage of people dependent on agriculture for their livelihood is still vast and more than 60% of all households are dependent on agricultural income.
Unemployment- Another feature of an under developed economy is unemployment and under employment. The rate of unemployment in Afghanistan has peaked to 40% in the year 2022, registering a hike of 15% over the previous year as was reported by Tolo News. The worst draught staring at the face of the Afghan economy and the major changes brought about by the world bank in succession of the sanctions imposed by the Biden administration has thrown more fuel into the burning fire in increasing the level of unemployment in Afghanistan.
Export of raw materials and import of high value finished goods – Afghanistan is a country not short of natural resources. It has an abundant supply of untapped mineral wealth like iron, copper, lithium, rare earth elements, cobalt, bauxite, mercury, uranium and chromium, the value of which had been pegged at
Due to the non-availability of technical expertise, Afghanistan relies upon its neighbors like China to tap its natural resources. It had been reported that many representatives of Chinese companies have arrived in Afghanistan on special visas to enter into collaboration with the care taker government of the Islamic Emirates to Though, as of now it could not be expected of the ruling care taker government of the Islamic Emirates to immediately improve the technical expertise of its human capital, required of it to extract the rich mineral wealth and to process them, the Government can enter into tie ups with the interested multinational companies and can enter into joint ventures with those companies to implement the policy of “Make in Islamic Emirates” as was successfully carried out in India. Here it should be noted that even for a comparatively well-advanced country like India, it took 7 years to enjoy the full benefits of the Make in India policy.
By adapting to this “Make in Islamic Emirates” policy the rich untapped natural resources of Afghanistan could be put to proper use by improving the accessibility of the mineral wealth. The mineral wealth could be fully exploited by improving the technical expertise or by collaborating with multi national companies, which are fully equipped with technical expertise. The technical expertise of human capital could be improved within Afghanistan; either by sponsoring qualified youngsters to undergo foreign studies or by introducing needed curriculum in the universities of Afghanistan itself.
Another factor that causes the under utilization of the available natural resources is because of the limited availability of capital in the country. The capital formation in Afghanistan is not only limited but also the rate at which the capital formation is taking place has taken a major blow. Afghanistan has also been depending on foreign inward remittances from its nonresident citizens and from its donor countries for inflow of capital and for capital accumulation. The recent sanctions and freezing of assets have brought in more pressure to the already sagging economy. Experts and executives must think proactively and act to avoid a future blockade that may freeze the assets and will bring the economy to a standstill.
Poor banking set up is another feature that has been the characteristic of an under developed economy like Afghanistan. The banking system in spite of its computerized network is ill developed. A well-developed banking system supported by an efficient human force will enable Afghanistan to carry out institutional reforms and modernizations easily. As was seen in Afghanistan very recently the failure of the banking system due to various extraneous factors has brought in a total stand still to the economy causing a huge depreciation in the value of the Afghani, a very high increase in inflation rate and massive unemployment.
To conclude if Afghanistan desires to upgrade the level of its economy from an under developed one to at least a developing economy the Rulers must take into consideration the above-mentioned factors which may cause a chain reaction thus increasing the per capita income and in eradication of poverty among the masses. If the per capita income is increased wiping off the poverty automatically the economy of Afghanistan will reach the self-sustaining status and may not depend upon donor contributions and aids.
[highlight color=”gray”]F. Maria Bonaventure has formerly served as Chief Operating Officer (COO) in Azizi Bank, Afghan United Bank and Maiwand Bank. He has also served as Senior International Adviser at Exchanger zone – Aryapool group.[/highlight]