Government Urged to Ditch Public-Sector Industry

Friday, 18 November, 2005

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Amanullah Nasrat

The two buildings may be in the same city, but the activities going on inside them are worlds apart.

In one, an old outdated structure in the Afghan capital Kabul, workers who used to be employed by a now defunct state-owned enterprise turn up once a month to sign timesheets and get paid for jobs that no longer exist.

In the other, entrepreneurs gather at the Afghanistan International Chamber of Commerce, AICC, with some of the most modern office space in Kabul, to push for the elimination of government-owned companies and their replacement by the private sector.

The government says it needs to remain involved in the economy - even if that means paying workers for jobs which no longer exist - in order to provide employment and keep prices low.

The AICC wants the government out of commerce altogether, so that the trade and production are entirely in the hands of private businessmen.

Haji Mahmood Shah Wafa, is among about 600 workers at a plant caught up in the government's tentative commitment to scale down its own role and develop a free-market economy. He was a senior staff member in a state-controlled factory producing medical products which was closed last year.

"I used to earn 100 US dollars a month and I’m still getting paid that," said Wafa, who was with the company for 25 years, although he concedes it produced little, especially during the latter part of the Taleban regime.

His salary is double the average wage of 50 dollars a month paid to each of the 19,000 employees at the 71 enterprises still run by the state. Many of these are "ghost workers" who only show up at work periodically and have very little to do, according to a senior finance ministry official.

Nazar Mohammad Tabeh, deputy head of the finance ministry's department of enterprise, says that apart from those public-sector firms that have closed down completely, many others have been run down, leaving staff largely idle.

“All 18,680 workers are paid from the budgets of the enterprises which are still active and have their own incomes,” he told IWPR.

He said the plants that have closed included manufacturers of medical supplies, wool and fabrics for export, and a construction company that built houses in Kabul. They employed a total of 600 people.

Hamid Qaderi, the president of the AICC, which has 210 member companies, says the continuing state involvement not only flies against the free market system laid out in the 2001 Bonn accord that served as the basis for the post-Taleban administration, but is also a deterrent to trade and investment.

“If the government doesn’t end its involvement in trade, all those Afghan traders who currently live in foreign countries will never invest in Afghanistan,” he said.

Deputy Commerce Minister Ziauddin Zia argues that the private sector cannot provid for all the needs of Afghanistan's estimated 27 million people, and that public-sector industries are essential for other reasons, too.

"The government is keeping these enterprises in existence in order to prevent a lot of workers becoming unemployed," he said. "It is also keeping prices low through the use of subsidies and retaining control over some essential imports."

But Khan Jan Alokozai, a major importer of spare parts for vehicles from Japan and Britain, says government enterprises have caused major losses for independent traders by undercutting them in the marketplace.

“Government enterprises subsidise the goods they deal in, but if traders did that, they’d lose millions of dollars,” he said.

Private business still seems to be flourishing . The AICC says its members and their 15,000 workers handle more imports and exports than the government. It estimates they deal with exports worth 400 million dollars and imports totalling four billion dollars annually.

Official figures show that state enterprises in 2004 were responsible for 305 million dollars in exports and imports totalling 2.15 billion dollars.

The AICC is now waving the Bonn accord at the government and pushing it to move out of the economic sphere so as to live up to its pledge to support free enterprise.

The chamber is also using the constitution ratified last year to increase the pressure. Article 10 of that document says that “the state encourages and protects private capital investments and enterprises based on the market economy”.

Qaderi says he has asked the government several times to close its enterprises and stop doing commercial business. He claims it has agreed to do so, but that it has done nothing to fulfil that promise.

Deputy Minister Zia points to the problem of throwing thousands of workers out of a job, although he acknowledges that paying them not to work is no solution.

“It’s a problem for the government that workers at these enterprises are getting paid without actually doing anything, and we have so far been unable to overcome this,” he said.

Government figures show the wide range of imports still handled by state enterprises in 2004. They include 407 million dollars spent on goods deemed essential, ranging from clothing to soap.

Vehicles and spare parts, which public-sector firms imported mainly from Japan, Germany and China, cost 599 million dollars, while foodstuffs were also a major import, totalling 266 million dollars.

One apparent anomaly in a country where electricity is in short supply is that government-controlled enterprises imported 580,000 televisions, worth 28 million dollars, from Japan and China.

Exports by public-sector companies included dried and fresh fruit, worth 85 million dollars, second only to sales of Afghan carpets abroad at 169 million.

The AICC sees no reason for the government to be involved in any of these businesses.

“There isn’t anything that the traders here wouldn’t be able to handle and import into the country," said Qaderi.

Amanullah Nasrat is an IWPR staff reporter in Kabul.