Urban Economy: Cities as drivers of Economic Growth in Afghanistan.pdf
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Économie & finance
In the presentation, we have focused on how the Cities of Afghanistan could have driven Afghanistan's economy before its Humanitarian Crisis began in 2021.
2
GROUP ( C ) Architecture
Office Use
Name F/Name Roll NO Lecturer
Iftikhar Ahmad Abdul Rauf Haqyar 7 Prof. Najib Wali
Zainullah 14 Date Received
Muhammad Nasim Abdul Hakim 18 DD/MM/YYYY
Khaleel-ul-Rshmsn 24 Approved
Hizbullah 27 Yes/No
Noorulhaq Thor Jan 48 Grade
Khaleel Ahmad 53 NN%
Esmatullah Ahmad Shah 57
URBAN ECONOMY: CITIES AS
DRIVERS OF ECONOMIC
DEVELOPMENT
❖ Although the majority of the Afghan population is engaged in
agricultural activity, agriculture only accounts for approximately
one-quarter (24.6%) of total Gross Domestic Product (GDP).
❖ Largely ‘urban’ economic activities (such as wholesale and
retail trade, manufacturing, public administration, services,
transport and construction) have increasingly been driving the
Afghan economy, and now comprise roughly three-quarters of
total GDP.
❖ Cities, therefore, play a fundamental and increasingly
important role in Afghanistan’s economy.
URBAN ECONOMY: CITIES AS
DRIVERS OF ECONOMIC
DEVELOPMENT – con.
❖ The services, manufacturing and construction sectors in Kabul
and the regional trading hubs of Kandahar, Herat, Mazar-i-
Sharif, as well as some secondary trading and transit hubs such
as Kunduz, have experienced a massive surge of growth over the
past decade, largely due to an influx of foreign aid.
❖ However, these sectors have been shrinking in recent years due
to the international military drawdown, protracted 2014
election process and general uncertainty around Afghanistan’s
security and stability.
❖ Unemployment and underemployment: Close to 80% of poor
urban households have only one income earner or none at all.
Youth unemployment will increase given that 49% of
Afghanistan’s population is under the age of 15.
URBAN ECONOMY: CITIES AS
DRIVERS OF ECONOMIC
DEVELOPMENT – con.
❖ Informality is at the core of urban life in Afghanistan. 90% of
economic activity in Afghanistan occurs in the informal sector.
❖ Urban poverty is pervasive & requires serious attention. In 2011,
1/3 of urban Afghans lived in poverty (29%); increases further.
❖ Afghanistan’s large cities can help in economic growth but
requires increased investment in key urban economic
infrastructure (industrial parks, roads, electricity, etc.), a
higher skilled workforce, and improved governance to promote
private sector confidence and investment.
3.1 Macroeconomic Context
Afghanistan’s annual GDP
stands at an estimated
20.3 billion USD in 2013.
GDP grew by an average of
9% per year between 2004
and 2013, but the GDP
growth rate has begun to
decrease: falling sharply
from 11% (2012-13) to 6%
(2013-14).
as the “protracted
political transition a
further blow to
confidence in the non-
agriculture
sectors.”
As of 2013, over half (51.8%) of Afghanistan’s GDP was derived
from ‘services’ (Telecoms, Information Technology (IT),
transportation, retail trade, etc.), which had been steadily
increasing since 2002.
Economic growth and sector contributions
Agriculture
as “Shock
Absorber’’
The sector is not modernized to the extent
where technology can provide some safety net
to mitigate external factors. However,
agriculture, particularly peri-urban agriculture,
is likely to be an important ‘shock absorber’
over the coming years as international funds
become less significant in Afghanistan’s
economy and the services sector may not be
able to maintain the relatively high levels of
growth of recent years.
The service sector now comprises over
half of GDP (52%), whilst manufacturing
comprises 10%, and construction 8%.
Figure 3.1
Trade:
❖ Although Afghanistan’s exports have increased over the years, its
imports are still relatively high leading to a large trade deficit.
Exports equate to only 6% of GDP, while its imports equated to
47% of total GDP in 2014. This is less than half the figure from
neighbouring countries for example India (25%); Tajikistan
(19%) and Pakistan (13%).
❖ Exports have increased from 141 million Euros in 2003 to 471
million Euros in 2013. over the same time period imports have
increased from 1,423 million Euros to 6,484 million Euros.
❖ Afghanistan’s main export trading partners are India (146m
Euros, 2013) and Pakistan (130m Euros, 2013), while its imports
mostly originate from Pakistan (1,788m Euros, 2013), USA
(1,189m Euros, 2013) and the EU (612m Euros, 2013).
Employment:
❖ Despite significant improvements in education indicators over
the last ten years, a very significant proportion of Afghanistan’s
workforce remains unskilled. Data from the World Bank
Enterprise Survey (2014) indicates that more than 40% of the
workforce is unskilled.
❖ There is a risk that the shortage of skilled labour is further
exacerbated by ‘brain drain’. In urban centres, a massive
emigration of the most educated and skilled youth may soon
become a reality as a significant portion of the 400,000 youth
who join the labour market every year choose to migrate to
neighbouring Iran and Pakistan in the absence of work
opportunities in their native cities,
The informal economy:
❖ Formal wage employment is the exception in Afghanistan,
including in cities. It is estimated that up to 90% of economic
activity in Afghanistan occurs in the informal sector. The bulk of
the labor force is employed by the informal economy working in
petty trade, construction (as day workers), brick making, etc.
Paid by the day (often at a rate of 250 - 350 AFN (4.4 - 6.3 USD)
for an unskilled worker), many urban workers make considerably
less money in the winter than in the summer.
❖ The narcotics industry arguably comprises the largest share of
informal economic activity. Drug-related activities (including
opium production and processing) were estimated to equate to
9% of GDP in 2011, significantly lower than their estimated 50%
share in 2003.
❖ The total area under opium poppy cultivation in Afghanistan was
estimated at 224,000 hectares in 2014, a 7% increase from the
previous year and the highest on record.