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Investment in agriculture can accelerate economic growth, generate jobs

Investment in agriculture can accelerate economic growth, generate jobs

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On
Apr 06, 2017 - 12:34

KABUL (Pajhwok): Despite its huge economic potential, both government and private investors have neglected agriculture for over a decade.

Around four percent of private investment in Afghanistan in the past 14 years has gone to the agriculture sector even though it is relatively low risk sector with high job creation. A third of all of Afghanistan’s land has the potential for agricultural production.

Investment in agriculture is desperately needed in order to combat poverty and economic stangantion. According to the World Bank (WB) Afghanistan’s economy has stagnated, with an economic growth rate of just 0.5% in 2016. According to the Central Statistics Organisation (CSO), more than 11 million job-seekers are unemployed or have no permanent employment.

Abundant water resources, a conducive climate for agriculture and the availability of more than 21 million hectares of arable land means that Afghanistan has the potential to attract billions of dollars in investment. Experts criticize the government and the private sector for paying inadequate attention to agricultural development. They believed Afghanistan could attain economic independence by boosting the agriculture sector. Most Afghans are dependent on farming.

Government officials also acknowledge little work has been done in the past to motivate the private sector to invest in agriculture. However, they claim more attention is now being paid to it.

Investment

According to a private sector investment data released by the Ministry of Commerce and Industries (MoCI), over $10.8 billion was invested in Afghanistan from 2003 to 2016. Investment in agriculture by the private sector was trivial.

A February 2015 the Afghanistan Investment Support Agency (AISA) report also measured investment from 2003 to the first quarter of 2013. It explained that lack of government support was one of the primary deterrents for private sector investment in the sector.

Short-term returns and the need for small-scale investment drove government spending decisions and prompted a surge in investment in industrial sector with. Construction projects supported by foreign and domestic donors drew funds toward the infrastructure sector.

The mining sector witnessed surge in investment because the private sector believe it to be more lucrative and unregulated. The government would give them more independence in mining rights so they could reap more of the profits.

The sale of agriculture products has increased slights over the last 15 years because of the minimal investment, adoption of proper processing of some agriculture products and the exploration of global markets for agro-products. But the growth falls far short of its potential, according to most reports.

Nasratullah Akbarzada, agriculture department lecture at Kabul University, viewed insecurity as a main reason for lack of agricultural growth in particular and the economy in general. The return on investment timeline is also longer for agriculture, which can scare away potential investors. The case is different in other sectors such as industry or construction.

He argued that considering the importance of the agriculture sector for the country, the government should encourage investment and provide subsidies to counteract market forces.

Ghulam Hazrat Halimi, advisor to the Ministry of Agriculture and Livestock, acknowledged little work had been done in the past to encourage investment in the sector. He however, over the past two years, that has begun to change.

He said the Ministry of Agriculture was striving to develop a proper infrastructure in the form of dams and other facilities to facilitate and lure investors into agriculture. Policies were being formulated to encourage entrepreneurs and provide them investment licenses quickly.

The government’s development budget

Statistics of the annual development budgets for 2014, 2015, 2016 and 2017 show the government has paid little attention to the agriculture sector.

Based on the statistics, on average, less than five percent of the development budget was allocated to the Agriculture Livestock and Irrigation Ministry.

 

According to Akbarzada, the government was more focused on the security situation in the past, and did not give the development of agriculture proper attention. In addition, the involvement of few professionals in the policymaking process was another problem. The officials concerned could not convince the government to allocate more development funds for agriculture in order to encourage long-term growth of the economy.

Ajmal Abdul Rahimzai, spokesman for the Ministry of Finance, described the development of agriculture as the government’s top priority. He said they allocated development funds to ministries in line with annual development schemes they suggest but some ministries are unable to spend allocated funds.

He said the Agriculture Ministry only managed to spend 65 percent its development budget in 2014 and 69 percent in 2015. Now the capacity of the ministry has improved and it spent 80 percent of the development budget last year.

He said in line with the Finance Ministry’s new policy, more development funds could be released to a ministry that expend funds before the end of a fiscal year.

Lutfullah Rashid, spokesman for the Ministry of Agriculture and Livestock, said there had been a shortage of professional individuals at the ministry in the past but the current government had resolved the issue and improvement had been made.

He called agriculture a vital sector for the country, believing it could play an important role in Afghanistan’s economic development and creation of jobs.

Investment opportunities for unexploited land to meet food demand

Because of lack of investment, huge amounts of natural resources for agriculture are underutilized.

Million hectares of agriculture land are not being cultivated due to lack of proper infrastructure and resources. Much of the land requires initial investment to prepare it for cultivation.

 

A report from the UN’s Food and Agriculture Organisation (FAO) divided Afghanistan’s land into 11 parts -- rangeland, barren land, sand cover, rain-fed, irrigated, marshland, forests and shrubs, permanent snow, built-up, fruit trees and vineyards.

The Agriculture Ministry says over 3.8 million hectares of land in the country is under cultivation. This land included vineyards, fruit trees and part of irrigated and rain-fed farms. That means only about one out of every six hectares that is suitable for agriculture is currently being cultivated.

A third of all of Afghanistan’s land has the potential for agricultural production. Over 21 million hectares of land, including barren land and part of rain-fed and irrigated, is arable, meaning it has the potential for production, but is not yet ready to for cultivation. The remaining 39 million hectares of land is part of sand cover, forest, marshes, range, and snow-covered. This land cannot be cultivated.

The ministry spokesman said considering the immense need for both cultivation and distribution, there were investment opportunities worth billions of dollars in creation of cold stores, processing factories and human resource deployment.

Additionally, he added, Afghanistan itself was in dire need of agriculture products and thus there was need for more investment and development of agriculture for internal consumption.

Attiqullah Nusrat, head of the Afghanistan Chamber of Commerce and Industries (ACCI) delegation, said during the last solar year Afghanistan imported over $7 million worth of goods while its exports accounted for $500 million. He explained 70 percent of the exports and 57 percent imports were agricultural products.

Lack of attention on the part of the government and a decline in investment in the agriculture sector were the main reasons for the imbalance between exports and imports, he continued.

Gul Jan, head of a national businesswomen’s association, remarked: “It is a crying shame that we imported even vegetables from other countries. But we still claim Afghanistan is an agricultural country.”

She said investment opportunities in the agriculture sector were available for women as well, but the people of Afghanistan still imported vegetables from other countries due to government neglect.

Limited use of water resources

Getting water to the millions of hectares of arable land is one of the areas ripe for investment. Keeping in mind the population of the country, the current level of water resources -- if properly managed and utilized -- could be instrumental in Afghanistan’s development schemes and the expansion of the agriculture sector.

Abdul BasirAzimi, Energy and Water Ministry spokesman, said that Afghanistan being a mountainous country had underground and aboveground water resources. The country, with five water zones, produces 57 million cubic metres of flowing water and 18 billion cubic metres of underground water resources annually.

Due to mismanagement only 30 percent of water was being used and the remaining flowed into Iran and Pakistan, he explained.

He said the incumbent government was committed to better water management and work on several dams was underway.

Earlier, President Mohammad Ashraf Ghani in reference to the construction of 21 dams said agriculture development and water management were his government priority.

Pajhwok Afghan News report show that a feasibility study of 21 small dams has been completed. It would take seven years to complete the dams and develop irrigation systems for 500 hectares of land. The dams will be completed at a cost of $2.1 billion.

Capacity for economic growth &job creation

A World Bank (WB) analysis of Afghanistan’s economy presented at the 2016 Brussels Conference shows that the potential for economic growth and job creations in the agriculture sector is higher than in other areas.

According to the baseline (country current situation) in the World Bank (WB) report, Afghanistan’s economic growth will increase to 3.8 percent until 2030

Afghanistan’s economic growth was stagnant at 0.5 percent in 2016 according to WB.

However, the analysis reveals the country’s economic growth would rise to 6.5 percents in 2030, due to a short-term influx of foreign aid and the long-term growth of domestic revenue. The foreign aid would taper off as domestic revenue soars.

Attaining a 6.5 percent economic growth would depend on government’s non-military expenses soaring from 35 to 50 percent, with employment programmes for Afghan refugees abroad managed more efficiently, the report said.

The World Bank said there was a high potential for job creation and low risk for investors in the agriculture sector.

Despite the immense potential in agriculture and other sectors, unemployment is still a huge problem in Afghanistan.

According to Afghanistan’s Central Statistics Organization (CSO), the country’s population is 29.2 million of which half  (13.1 million) were qualified for work.

Hasibullah Mohid deputy of (CSO) Said around one in 12 people who had the ability to work were jobless.

Four in 12 people who are eligible to work do not earn enough to meet their needs and are seeking better opportunities, he added.

Moahid said, in line with the international definition of employment, a person is not jobless if he has worked an hour in a week ahead of being surveyed, according to Mowahid. Based on the national definition, a person is not called jobless if he/she has worked eight hours in a week before being surveyed.

Dr. Sikandar Hussaini, head of chemistry, biology and agriculture at the Sciences Academy of Afghanistan, called unemployment a major problem facing the country.

He said joblessness was one of the main factors behind insecurity in Afghanistan. Many jobless people either swell the ranks of militants or commit criminal activities, he claimed.

Without providing exact figures, he admitted a large number of Afghan youth had left the country and some of them drowned at sea while illegally migrating to Europe last year due to joblessness.

The government should devote at least as many resources to the agriculture sector as it the military sector because agriculture development would decrease joblessness and improve people’s economic situation compare to other sectors, he said.

A fresh figure of Afghan migrants was not available but a report showed 250,000 Afghan sought asylums in 44 foreign countries in 2015.

Based on reports, more than four million Afghans are living abroad -- most of them in Iran and Pakistan.

A number of people who emigrated complain about joblessness and the government’s inattention to resolving the problem.

Ahmad QaisHamidi who received his bachelor in economy from the Maiwand University in Kabul, said: “We were happy that President Ashraf Ghani as an economist would pay more attention to youths’ situation, but he did not. Thousands of youth like me are jobless today.”

The graduate said he previously worked at the Independent Election Commission (IEC). But for the past two years, he has been jobless. “I have no relatives in any office to find me a job, so I have to suffer unemployment and serious economic problems,” he said.

Suggestions:

Proper utilization of current resources can improve Afghanistan’s agriculture and transform the country into an exporter of agricultural products both through internal and external investment.

The Regional Centre for Strategic Studies (RCSS) in a report -- Afghanistan in 2001-2015, published in February, suggested agriculture should be made an economic priority by the government.

It suggested increasing the national budget for agriculture, actively incentivizing foreign investments and modernizing agricultural equipment.

The RCSS also stressed water management and extension of farmlands, asking the government to strive for self-sufficiency in agriculture, improved quality and regulation of products and development of lucrative markets in the region and the world.