A new way of working in Afghanistan

August 29, 2022
UNDP's ABADEI programme reaches underserved Afghanis with business support,

UNDP's ABADEI programme reaches underserved Afghanis with business support.

UNDP Afghanistan/Haroon Hamdard

One year after the 15 August leadership change in Afghanistan, UNDP Resident Representative Abdallah Al Dardari sat down with Communications Advisor Stanislav Saling to talk about how Afghans have been affected by political events, and what UNDP is doing to support small business growth.

What was the economy like before 15 August?

The Afghan economy relied heavily on aid. Seventy five percent of the budget was grant aid. Forty percent of GDP was grant aid. So that’s why the main impact of 15 August was the immediate cessation of all the grant aid and that is a dramatic shock. This is not a typical situation, this is a unique situation and therefore we saw 40 percent annualized drop in GDP,  and we started seeing the impact of this on unemployment, with about 700,000 to 900,000 additional unemployed.

What has been the impact on women?

There was a reduction of 16 percent of female labour market participation. We estimate that the cost of the 16 percent drop varies between US$600 million to $1 billion dollars every year. It also cost around $500 million  to household incomes in the first six months after 15 August, so the withdrawal or partial withdrawal of women from the economy has already had a dramatic impact on the Afghan economy and we believe it will have even more dramatic impact in the future. Because female labour market participation was characterized by an average higher productivity rate than males.

What has changed in the past 12 months?

Classical development does not work anymore, because it requires a very strong central planning or strong macroeconomic indicators, it doesn’t exist at the moment. We as a UN system have to work directly with the people, inject cash into the hands of the people, provide access to finance, direct training, capacity building in order for the people to generate their own revenues through small and micro enterprises, through community level infrastructure. It’s a big challenge and also a very innovative way of approaching development. We don’t do development cooperation with the State, what we do is development assistance to the people of Afghanistan.

Where do we go now?

Afghanistan is facing a tremendous challenge. Our estimate as UNDP is that with the current situation continuing until 2030, we will only achieve 30 percent of Sustainable Development Goal (SDG) targets. Even in the best-case scenario, meaning that there is peace and tranquillity and that the country manages to receive or generate $67 billion of development spending, it will only achieve 46 percent of SDGs, which means that what the country requires is dramatic change in its economic model.

Afghanistan community business leaders

Community members of Behsud District in Jalalabad at a grant disbursement for small businesses, especially those run by women.

UNDP Afghanistan/Haroon Hamdard

What are we doing now to ensure growth and development is inclusive?

We launched a big programme called ABADEI to reach the people of Afghanistan, to provide them with finance. We are targeting 50,000 women-owned enterprises for grant aid, for soft loans, for technical assistance, or connecting them to clusters for ensuring that they have domestic and international markets for their products. We are aiming at creating 2 million jobs in the next three years. We would like to create employment at the micro level and see how much growth it will generate at the macro level. So that’s a completely new approach, we’re calling it trickle-up economics rather than trickle-down economics. We are also supporting innovative youth projects. We want the young people of Afghanistan to be able to be free and innovate and propose interesting projects, and they are brilliant entrepreneurial people, so the changes that happened on 15 August may ironically provide an opportunity for the UN to change the way it works in Afghanistan, to start thinking and acting on how to we have inclusive growth that benefits the poor and women and young people, rather than a growth that is narrow and benefits a small group of business community. We are also starting a big programme for private sector recovery, focusing on the small private sector. The big people, the big cronies if I may use that term, can manage. It is the small people that we want to support.

How has the international community responded?

There is a very important concept I’d like to stress. We should not repeat the experience of an aid-dependent economy. What we need to do is to spend that money to generate domestic engines of growth. Revenue for the ordinary people and also revenue for the State to be able to perform the public goods that are needed in infrastructure, education and health and so on. The question is not only how much we receive, it is how do we spend this money? Do we just go back and repeat the past? Or do we make sure that every dollar we spend here creates domestic engines of growth. So money is coming. There are good sums of money received by the UN so far, by UNDP, we need much more, but we also need to have a compact with our donors that we are not trying to repeat the past, we are not going to try to ask for 20 more years of the same levels of aid.

It's very important to highlight that what we are trying to do through this trickle-up economics is empower ordinary people. So if we want to talk about a democratic economic process, it is a process that touches the majority of Afghans, the majority of Afghans are the poor, so this is the proposal we are putting forward, an empowerment of the poor and the marginalized.

To watch the full interview, click here.