Afghanistan - Washington Times Published March 17,
By Saad Mohseni and Don Ritter
Afghanistan's rapid transformation from a political and economic
basket case into a viable democratic state has been nothing short
The international community, led by the United States, has contributed
to the reconstruction of a beleaguered nation to the extent that
there now are a democratically elected president, free media, progressive
businesses, investment and civil laws plus a viable banking industry,
all of which in turn have assisted in the development of a thriving
Both the government and donor nations pronounce their dedication
to building a market economy. Afghanistan has emerged from an emergency
situation to be confronted with a new phenomenon: Aid organizations
have tapped into the financial lifeblood of private enterprise development
and the government itself is competing with the private sector.
Here are five reasons why this contingent of nongovernmental organizations
and government-engaged businesses have alarming long-term implications:
First, the United Nations and other international organizations
generally do not outsource functions critical to improving the private
sector. International agencies and the United Nations (and its divisions)
favor sister entities or the NGO community, or they set up parallel
structures to the private sector.
Take the recent UNESCO educational TV pilot project. Rather than
contracting with existing TV stations for delivery of services,
they have opted to purchase all the equipment and set up duplicate
Second, NGOs compete directly with the private sector. Lack of market
competition, access to public funding and the ability to operate
tax-free all mean that NGOs can offer products and services at highly
subsidized rates, creating an anti-competitive environment for businesses
that vie for the same markets.
This is rife in the media sector. The donor-nation mantra is "support
free media," but rather than run their programs in existing
and available free and independent media, they choose to create
new subsidized media organizations, competing in a tight market.
In Kabul, we have the BBC, Radio Free Europe/Radio Liberty, Kilid
(NGO), VOA, AINA/Women's Radio (NGO) and others that compete directly
with the commercial ARMAN FM.
Third, NGOs and International agencies absorb Afghanistan's best
employees. With a ready source of funding and no need for return
on equity or having to deal with other free-market exigencies, they
have attracted, with large salaries, Afghanistan's best and brightest
workers. The resulting drain on human resources away from the private
sector and into the vast nonprofit economy has severely limited
the private sector's ability to build human-resource capacity.
Fourth, international contract and grant mechanisms tend to favor
NGOs. Today's NGOs — organizations funded by the international
community — can undercut any business entity in Afghanistan
and secure lucrative contracts that private businesses depend on.
NGOs can disregard factors relating to life-and-death business issues
like supply, demand and profit margins. They also have the benefit
of starting with a fully geared-up infrastructure, also funded through
donors, while many firms in similar areas must start from scratch.
Fifth, some government departments compete with the private sector,
creating huge conflicts of interest. The role of government, as
elaborated in Afghanistan's National Development Framework, is to
regulate rather than compete. However, in some cases, entrepreneurial
government bureaucrats develop capacity and do work that clearly
competes with the private sector, in direct conflict with the government's
A few examples of such government-owned or -controlled entities
include: (1) The Afghan Chambers of Commerce and Industry, which
is the voice of government in business, not a voice for the private
sector; (2) Afghan Film, which virtually controls matters pertaining
to film and cinema; (3) Ariana Airlines: a government-run airline;
(4) Afghan Tel, which, controlled by the government, also has a
stake in Afghan Wireless, while other telecom entries are funded
entirely by the private sector.
A five-point private-sector "affirmative action" plan
is needed before public enterprise overwhelms the private, and should
include: (1) favorable treatment vis-a-vis the subsidized NGOs in
bidding for contracts; (2) significant outsourcing by nonprofits
to local businesses; (3) more local-level salary structures for
NGOs; (4) a means of limiting government involvement in business;
and (5) direct flow of donor funds to the private sector, bypassing
Such proactive steps are absolutely necessary to overcome the powerful
momentum that is pushing the Afghan economy in a non-market direction.
And while a market economy is enshrined in the country's constitution
and policies, it will take more than words for the private sector
to be able to provide for the needs of the Afghan people.
Saad Mohseni is a director of Moby Capital
Partners, a media entity in Afghanistan that includes ARMAN FM and
Tolo TV. Former Rep. Don Ritter is an investor in Afghanistan and
a senior adviser to an Afghan business community effort to promote
investment and market-based economic policies.