92363 COUNTRY HIGHLIGHTS AFGHANISTAN 2014 The World Bank interviewed a representative sample of the private sector in 5 of the most active economic regions in Afghanistan. The sample consisted of 410 business establishments surveyed from May 2013 through July 2014. The Enterprise Survey covers several topics of the business environment as well as performance measures for each firm. Below are the main highlights from the survey. Sales and employment growth are robust but have decreased over time The Enterprise Survey data show that 14 performance in the private sector in Afghanistan 12 remains strong but it has deteriorated since 2008. 10 While sales and employment growth figures remain positive they have decreased since the Percentage 8 2008 survey. Real annual sales growth is at 3.7%, 2014 AFGHANISTAN ENTERPRISE SURVEY 6 which is less than half the sales growth rate reported in 2008 and also half the rate of what 4 firms in landlocked developing countries (LDC) 2 experience. Annual employment growth, at 4.6%, is also less than the rates experienced by firms in 0 Real annual sales growth (%) Annual employment growth (%) other low income countries and in LDCs. Afghanistan2014 Afghanistan2008 Low income LDC Exporting activities for Afghani firms lag behind comparator countries The level of involvement of the Afghani private 14 sector in export markets remains low, even when 12 benchmarked against other landlocked 10 developing countries. Nevertheless, the Percentage 8 percentage of Afghani firms which are involved in exporting activities, directly or indirectly, 6 increased slightly in the last six years. When 4 restricted to just direct exports, the gap between 2 Afghanistan and other landlocked developing economies widens revealing relatively less direct 0 Percent of firms exporting directly or Percent of firms exporting directly (at interaction between Afghani firms and the rest of indirectly (at least 1% of sales) least 1% of sales) the world. Afghanistan2014 Afghanistan2008 LDC Afghani firms experience long wait times for a construction-related permit 12 1 160 Senior managers spend approximately 9.8% of 140 10 their time dealing with the requirements of 1 120 government regulations. This overall measure of 8 1 regulatory burden, the time tax, is comparable to 100 Percentage businesses in other low income countries. 6 80 Days 1 However, certain transactions such as obtaining a 60 construction-related permit take long compared to 4 0 other countries. The average number of days to 40 obtain a construction permit in Afghanistan is 2 0 20 140, considerably higher than what it was in 2008 0 0 and higher than the average for low income and 0 Time tax Days to obtain construction-related landlocked countries. permit Afghanistan2014 Afghanistan2008 Low income LDC Afghani firms experience a high incidence of bribery compared to firms in other countries 50 Almost one out of two Afghani firm experience at 45 least one bribe payment request across 6 transactions 40 dealing with utilities access, permits, licenses, and 35 taxes. This measure is known as Bribery Incidence. 30 Percentage The Afghani private sector experiences more than 25 twice the incidence compared to other LDC 20 countries. Bribery Depth measures the percentage of 15 transactions where a gift or informal payment is 10 requested. Again the depth is almost twice that of 5 other LDC countries, highlighting the high degree of 0 corruption experienced by Afghani entrepreneurs. Bribery incidence Bribery depth Afghanistan2014 Afghanistan2008 Low income LDC 2014 AFGHANISTAN ENTERPRISE SURVEY Afghani firms have extremely limited access to finance Afghani firms are much less likely to have bank 100 3 25 accounts compared with firms in low income and 90 80 20 landlocked developing countries. The precipitous 2 70 drop from 73% to 44% across the two surveys may 60 15 be a result of citizens having less faith in banks after 2 Percentage Percentage 50 the Kabul Bank scandal which emerged in 2010. On 40 10 the credit side, only 2% of firms use banks to finance 1 30 investments; this is less than one-tenth the average 20 1 5 for firms across all LDC. Despite a slight increase 10 from 2008, access to bank finance for investments 0 0 0 remains extremely low. Percent of firms with a checking or Percent of firms using banks to savings account finance investments Afghanistan2014 Afghanistan2008 Low income LDC The Afghani private sector considers political instability as the biggest business environment obstacle Among 15 areas of the business environment, firms Political instability Access to land in Afghanistan are more likely to rate political Corruption instability to be the biggest obstacle to their daily Access to finance Electricity operations, followed by access to land, corruption Tax rates and then access to finance. Interestingly, firms in Crime, theft and disorder Transport other South Asian countries such as Bangladesh and Poorly educated workers Nepal also indicate political instability to be their top Customs & trade… Informal competitors business environment obstacle. It is also interesting Licensing and permits that crime, theft, and disorder is no longer the top- Tax administration Afghanistan2014 Labor regulations rated obstacle in 2014 as it was in the 2008 Courts Afghanistan2008 Afghanistan Enterprise Survey. 0% 5% 10% 15% 20% 25% 30% Percentage of firms The Enterprise Analysis Unit is a joint World Bank and IFC team of economists, survey experts specialized in private sector development. Surveys implemented by the team reveal what businesses and firms experience across the world by interviewing representative samples of the formal, non-agricultural, non-extractive, private sector with 5 employees or more. The resulting globally comparable firm-level data is used to construct business environment indicators and measure firm performance. The findings and recommendations help policy makers identify, prioritize, and implement policy reforms that support efficient private economic activity. For more information on the survey visit http://www.enterprisesurveys.org Generated using Enterprise Survey data as of September 15, 2014