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Creating new jobs in Afghanistan: What do we know and what should we do?

By Sabawoon Ahmadzai

The national labor conference in Kabul April-May 2018 brought to light a number of issues impacting the Afghan labor force, which need to be redressed to fix the growing unemployment and underemployment rates in the country. In Afghanistan, there is currently a significant lack of decent subsistence job. However, the two biggest challenges facing the Afghan workforce is underemployment and lack of job opportunities, resulting in 80-90 percent of the Afghan labor force being forced into the informal economy surviving off subsistence farming and petty trade (Private Sector Status report, 2015). The Afghan labor market largely marked by income disparities among civil servants, a relatively small private sector and a large informal sector. For example, in Kabul province, over 50 percent of the workforce is currently employed in the informal sector. This situation is representative of the labor divisions across most major cities throughout Afghanistan. 

The informal economy plagued with numerous problems placing workers’ health, safety and livelihoods at risks, such as hazardous working environments, very low paying jobs, harassment by city management authorities, and a lack of job security. The Afghan government is challenged by the growing population to add new jobs in the basket of the economy. Surprisingly, the rapidly growing informal jobs remained untouched by the policymakers and practitioners.

The dilemma in the demand and supply sides of the labor force lies in the inability of the government and its supporting institutions to create a sustainable and broad-based formal employment sector. Human capital deficiencies, a lack of demand-driven training packages, widespread corruption, minimal infrastructure, and pervasive red tape further exacerbate the development of a robust formal employment sector and have created a climate whereby the private sector is hesitant to invest. Despite significant progress in school enrollment, the curricula and training programs fail to equip students with the skills most sought after on the job market So, what can be done?

Increasing Labor Demand

International experience suggests that labor-intensive industrialization is the key to boosting income and unleashing employment opportunities in developing countries such as Bangladesh, India, Sri Lanka  (World Economic Forum 2017). Afghanistan is poised to benefit from its membership with the World Trade Organization (WTO) not only in the agriculture sector but also in the extractive and manufacturing industries.  The Afghan government fails to provide public goods and harasses formal-sector enterprises through nuisance taxes and informal supervision of government agencies, resulting in many enterprises being forced to shut down or becoming part of the informal economy. This situation negatively impacts the ability of Afghanistan to attract significant private investments (national and foreign direct investment). The real loser of this dissuasive investment climate is the labor force, who, as a result, suffer from fewer employment opportunities and low paying informal jobs. 

The Afghan government has a long way to go and show fruitful results in terms of national and international competitiveness to increase investments and job creation. Experiences in other emerging economies show that integration into the global economy and exports of labor-intensive products are vital to boosting labor demands. While Afghan’s meager export basket notably to the south and central Asia have boomed, they tend to be in agriculture, creating few jobs (Mathew et al. 2016). Afghanistan should expand in the area of import substitute industrialization to empower the local labor force.

As stated, there is a large number of the workers in the informal sector in Afghanistan, for instance, average size family of four cannot survive with the income they make on a daily basis in the informal jobs. On the other hand, tiny labor-intensive manufacturing enterprises have emerged on the screen; this is due to fluctuation in exchange rates, low labor productivity continued deficiencies in infrastructure, and the investment climate above all, the notoriously expensive and unreliable supply of electric power.

Afghanistan has significant potential in becoming a champion in agro-based and light manufacturing industries. Not only would this help boost the economy, but it would also increase the productivity level and demand of labor, both for men and women, and shrink the income gap between the formal and informal sectors.

Improving Labor Force Training

Almost all the small and medium enterprise surveys identify the lack of core competencies in the Afghan workforce as a significant constraint (SME survey 2016.) While enrollment in secondary and higher education has risen impressively, vocational education has lagged since 2003. The trial and error approach to vocational training programs are mostly poorly designed, tend to be Kabul centric, and above all, mismatch the market skill needs and demand. For instance, in 2010, an enterprise survey (Development of Small and Medium Enterprises in Post Conflict Afghanistan) shows the majority of manufacturing industries (small and medium size) had to import laborers (expatriate technicians) from Pakistan and Iran with salaries up to 20-30 times higher than their local counterparts. Recent Labor Market Intelligence (LMI) corroborate these findings.

Further, this situation aggravated by the fact that many Afghan perceive Technical Vocation Education and Training (TVET) is second-class education. This may be one reason why many students take the Kankor examination (University entrance examination), their aim being able to attend university. Even existing students in TVET institutes and high schools express their desire to continue their studies in a higher education institution.

There is a complete lack of formal training programs for blue-collar jobs such as plumbers, carpenters, electricians, and mechanics.  Instead, skills are learned through ad-hoc training schemes such as apprenticeships or in informal schools run by NGO and private consulting firms.

The education system also fails to foster entrepreneurship, as it remains oriented towards preparing students to become civil servants. However, the Afghan government very recently integrated entrepreneurship in the curricula of public schools. Self-employment constitutes around 80-90 percent of total employment in Afghanistan, all of which is in the informal sector. These workers and entrepreneurs are willing to take risks, resilient to the adverse business environment, and adept at providing goods and services that low-income Afghans can purchase.

Improving Worker Training and Building Entrepreneurial Skills

In a 2017 study, for example, found that the Polyvinyl chloride pipes (PVC) manufacturing enterprise had to resort to hiring expatriate technicians with salaries up to 15 times higher than their local counterparts, to compensate for the latter’s lack of relevant skills. Nonetheless, lack of training opportunities, i.e., finances, accounting, management, limit the potential of labor at the subsistence job to flourish and expand employment.

Since 2014 economic growth in Afghanistan has picked up substantially, i.e., 3 percent GDP growth (National labor conference 2018) yet, job creation and poverty reduction continue to lag behind. What measures (quick, medium, and long-term) can be taken to tackle the lack of decent work in Afghanistan. One way forward for the government is to adopt targeted policies, which raise the demand for the Afghan labor force, with a particular focus on the informal sector; while improving training and skill standards across the country and unleashing entrepreneurship. This is an urgent call for widening the national and international markets for the Afghan workforce, the establishment of accredited TVET board, investment in infrastructure while renewing efforts to curtail red tape and harassment of enterprises.

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