Transport sector development as a key priority for investment attration and doing business

1. Unlocking investment
opportunities in Afganistan
Manuchekhra Madzhanova

2. Background
• Afghanistan is a landlocked country neighboring on the north with
Turkmenistan, Uzbekistan, and Tajikistan; on the extreme northeast with
China; on the east and south with Pakistan; and on the west by Iran.
• Afghanistan’s geography, terrain, and dispersion of population over a large
area results in high transport costs and makes internal and external trade
dependent on the performance of the transport sector.
• Afghanistan is struggling to afford a rudimentary transport network that
would enable it to harness the country’s natural resources and connect
scattered rural communities and urban areas.
• Access to basic facilities remains unsatisfactory, particularly in rural areas.
An added challenge is to create the conditions for transport sector
sustainability.
• Although donor funding for road maintenance has increased over recent
years, budget allocations do not match needs and a maintenance
management system is still not in place.

3. Key challenges
The performance of Afghanistan’s transport and logistics sector is impeded by
cumbersome procedures; weak standards and regulations; slow progress in
computerization; lack of trade finance, cold storage facilities, and insurance.
The high cost of transport logistics reduces the country’s trade
competitiveness. The World Bank’s 2016 Logistics Performance Index ranks
Afghanistan 150th of 160 countries
Traffic safety on Afghanistan’s roads has emerged as a serious problem. With
almost 800 fatalities in 2013, Afghanistan has one of the worst road traffic
safety records among Asian countries
Eliminating some of the bottlenecks will require improved BCP infrastructure
and procedures. Although infrastructure constitutes an obstacle to trade
facilitation, procedures at BCPs often disrupt trade more severely than BCP
facilities and infrastructure.

4. Afghanistan in Doing business ranking -2017
Topics DB 2017 Rank DB 2016 Rank Change in
Rank
DB 2017
DTF (%
points)
DB 2016 DTF
(% points)
Change in DTF
(% points)
Overall 183 182
1
38.10 38.42
0.32
Starting a Business 42 38
4
92.08 92.19
0.11
Dealing with
Construction Permits
186 185
1
22.39 22.39 -
Getting Electricity 159 157
2
45.04 45.51
0.47
Registering Property 186 185
1
27.50 27.50 -
Getting Credit 101 97
4
45.00 45.00 -
Protecting Minority
Investors
189 189 - 11.67 11.67 -
Paying Taxes 163 150
13
51.29 55.64
4.35
Trading across Borders 175 176 30.63 28.90

5. Trading across borders’ procedure (according to
Doing business report -2017)
Indicator Afghanistan South Asia
OECD high
income
Time to export: Border compliance (hours) 48 59 12
Cost to export: Border compliance (USD) 453 376 150
Time to export: Documentary compliance
(hours)
228 78 3
Cost to export: Documentary compliance
(USD)
344 183 36
Time to import: Border compliance (hours) 96 116 9
Cost to import: Border compliance (USD) 750 645 115
Time to import: Documentary compliance
(hours)
324 106 4
Cost to import: Documentary compliance
(USD)
900 348 26

7. Recommendations
• As Afghanistan’s fragile and conflict-affected situation remains the
overriding concern in the transport sector, the transport strategy
and program must to be sensitive to this situation.
• Development partners must continue to provide stable and
predictable support and adopt a concerted approach to supporting
sector reforms in order to create the environment for efficient and
sustainable infrastructure and transport operations.
• A crucial challenge will be to create the conditions for transport
sector sustainability as well as climate change adaptation and
climate proofing should be as key priorities.
• The financial dimension of sustainability has been a lingering
concern for a long time. Although resource allocations to the
transport sector have steadily increased over the past years,
maintenance remains underfunded. Unless the past allocation
pattern is reversed, the situation is likely to worsen.

8. Recommendations
• The strategy and the program must address
several important transport sector issues.
• These issues include asset sustainability and its
various dimensions, notably operation and
maintenance (O&M) of assets, road traffic safety,
trade logistics, urban transport, and climate
change impact mitigation.
• The current state of the national road contracting
industry is seen as a potential source of
countrywide employment, and measures to tap
this source are recommended.

9. Recommendations
• Maintaining Afghanistan’s roads will require greater
funding for maintenance and a road asset management
system. Given the shortage of government resources,
lack of a systematic O&M regime Afghanistan should
rely on donor contributions to finance road
maintenance in the foreseeable future.
• Accordingly, donors should balance their assistance
between investments and support for O&M. Increased
funding for O&M is a necessary condition, though not a
sufficient one, for road asset sustainability. A road
asset management system is urgently needed.

10. Recommendations
• To develop and implement policy and
institutional reforms on harmonization of
regulations, procedures, and standards for cross-
border movement of goods to maximize the
impact of both past and future investments .
• expand the national and provincial road network;
• Develop and support an intensive operation and
maintenance plan
• develop asset management tools and capacity;
• develop an innovative financing approach and
public–private partnerships;