Safi Ahmad Jamshid

Undergraduate MBA

Eurasian National University named after

L.N. Gumilev's Astana ., Kazakhstan

NECESSITY TO IMPROVE STRATEGIC MANGEMENT

OF STANDARDIZATION IN AFGHANISTAN

 

Following the 2001 intervention of the International Alliance and the subsequent fall of the Taliban regime, Afghanistan faced the immense challenge of building a functioning institutional framework with the support of the international community. Beyond the important focus on the establishment of political institutions, a part of these efforts, largely supported by the World Bank, were placed on establishing a favorable environment for the development of a market economy in Afghanistan.

Yet, in this area, the country faces many obstacles and, more than ten years after the end of the Taliban regime, Afghanistan's private sector remains extremely fragile and dependent on international assistance. Three decades of conflict have significantly impacted the entire productive and business apparel, leaving Afghanistan with a very important trade deficit and a private sector that is unable to compete with its main neighbors. Economy will be a necessary basis for the future of the country, especially once the 2014 transition is achieved. A 2011 World Bank report raised the flag on the harsh difficulties that the Afghan economy is likely to face following the 2014 political and security transition [1].

In 2012 the conditions for doing business are still among the worst in the world, with Afghanistan being ranked 160 out of 183 countries in the Doing Business 2012 ranking. Among the obstacles faced by private actors in the development of their business come regularly the same three major challenges: security, corruption and lack of electricity [2].

Yet, beyond these obvious issues, private-sector actors also long for a sound business environment based on clear and respected regulatory frameworks and guidelines. Among them, the development of national standards and of an adequate National Quality Infrastructure is crucial. In this respect, the establishment in 2004 of the Afghan National Standards Authority (ANSA) was a very promising step. Initially under the authority of the Afghan Ministry of Commerce and Industry (MoCI), ANSA was declared independent in 2007. This was followed by an important effort at capacity building within ANSA, supported by the World Bank Emergency Custom Modernization and Trade Facilitation Project. A National Standard Law was drafted and enacted in 2010. It served as the basis of the progressive development of national standards in Afghanistan. As of 2012, ANSA has developed 125 standards officially approved by the Supreme Council of Standards, established in December 2010. These are encouraging achievements; but the task of building a complete and efficient quality infrastructure out of nothing is immense and requires time. ANSA therefore still has a series of steps to undertake to reach an operational level in country. The 2011-2015 strategy exposes some of these main steps, but the implementation of national standards whilst on paper, is very slow at being functional in real time.

In order to identify the priorities for the implementation of national standards in the country, it is necessary to have a look awareness and usage of standards in the country so far for each kind of standards: available, national, foreign and international.

According to conducted survey by UNDIO found that 47.8% of surveyed respondents declared being aware of the existence of national standards, while 52.2% of respondents were not. This figure is surprisingly high if compared with the very low level of awareness of businessmen about ANSA. Some disparities between sectors appeared in the level of awareness about national standards: the level of awareness of the production sector is lower than in the rest of the private sector, with 'only' 39.6% of respondents declaring that they are aware about the existence of national standards. On the other hand, the level of awareness in the trade, service and construction sectors about national standards is higher. These differences may be linked to the different socio-economic profiles of private actors in these different sectors. It appears that respondents from the production sector showed a lower access to literacy and school education than in other sectors with 14% of respondents illiterate or literate without having attended school as opposed to 6.1% in the trading sector and 3.6% in the construction sector. Managers in the production sector are also characterized by a reduced access to university as compared to other sectors, with 18.9% of respondents having attended university as against almost 30% for traders and service providers. This lower awareness about standards in the production sector might also be linked to the fact that a lot of production units in Afghanistan are small-size and rely on traditional techniques while the service sectors is more recent and more capable of modernizing itself and staying aware of innovations and regulations. It is also a direct result of the lack of provincial outreach of ANSA, which action is concentrated in Kabul. As this study showed that 58% of Afghan SMEs' market did not go beyond provincial borders, there is a discrepancy between the landscape of the private sector and ANSA's coverage, explaining the lack of awareness about standards. Between various sub-sectors, the level of awareness of private actors notably follows the path of standard development followed by ANSA. While four out of five managers of companies working in the petroleum sector were aware of the existence of standards, 56.5% of respondents working in the construction sector and 55.6% of respondents from the food and beverage sector declared being aware of the existence of standards, it was only the case for 23.8% in the metallurgical sector and only for 1 out of 4 pharmaceutical companies. Among the sectors that appeared the least aware of the existence of national standards, we found mining & quarrying (33%) and chemicals (20%). There is an interesting correspondence between ANSA's priority sectors of development of standards and the level of awareness of actors within these sectors. This can have two explanations: a) ANSA's outreach is progressively increasing and starts impacting the sectors where ANSA was the most efficient in terms of standardization b) these sectors were already sensitized to the issues of standards and were therefore rightly identified by ANSA as key sectors for standardization.

The level of awareness of companies differed between cities, following a similar although less striking geographical pattern than the one analyzed above regarding the level of awareness about ANSA. Kandahars private sector also appeared to be less aware of the existence of national standards than the rest of the cities with only 40% of respondents responding affirmatively, as against 50% in Kabul or Mazar-e-Sharif. Once again, any implementation plan for the national standards will have to take into account the geographical nuances in the country, and the lower level of awareness of the Kandahari private sector.

Graph 1.1 - Are you aware of the existence of national standards?

PRODUCTION

RETAIL-WHOLSALES

SERVI CES

CONSTRACTION

00% 20% 40% 60% 80%

According to survey their awareness of the existence of international standards, 41.1% of respondents answered positively (cf. graph 3.2). Given the relatively low internationalization of Afghan companies, and their difficult access to the export market, it is understandable to find a lower proportion of company managers having some knowledge about international standards. As shown by graph 1.2, the use of international standards is less common within Afghan companies than the use of foreign standards, as only 25% of companies (i.e. 87 companies) in total declared that some of their products conformed to international standards. Once again, the trading sector is more advanced in terms of use of international standards, as 34.8% of respondents from this sector, declared selling products and services that conform to international standards. For the same reasons than with foreign standards, international trade and imports in particular introduces international standards in the Afghan market.

Graph 1.2

Our food products our salt were not standardized. We wanted to sell our production to the WFP but they did not trust that our products were standardized. Now one of our ten factories respects international standards (30-59 PPM iodine) [3].

Priorities in the development and the implementation of standards are distinct for import and export products, as they respond to different logics. The development of standards is not expected to have the same outcomes for these two different fields. Implementing national standards for imported goods and national consumption is related to issues of public safety and import-substitution while the development of national standards for exports will aim at boosting Afghanistan's exports by focusing on its main competitive products on international markets. This is why these two sets of standards have been analyzed in separate sections in this report. The implementation of standards is crucial for the support of Afghan exporting companies. Presently, only the private actors who have been able to develop bilateral relations with foreign traders, especially in the US or in Europe, have been able to enter these markets, thanks to compliance with foreigner standards.

The priorities in terms of implementation of standards for exports followed quite logically the previously identified and well documented most dynamic and promising sectors of production of the Afghan economy. The five priority subjects for the implementation of national standards should therefore include the following products:

1. Dried and Fresh Fruits

2. Carpet sector

3. Marble

4. Gemstones

Companies, private and public stakeholders and many Afghan consumers were asked to determine the priority subjects for the implementation of standards in country. As it appeared, in the country, there is a broad consensus among these various actors on where the priorities should be set first for the implementation of standards. The survey and qualitative interviews confirm that the implementation of standards should be prioritized for:

1. Food, beverages and oil products

2. Pharmaceutical products

3. Petroleum Products (already started)

Literatures:

1. World Bank, 2011, Transition in Afghanistan, Looking beyond 2014.

2. Kauffman Foundation Research Series, 2011, Bactrian Gold: Challenges and Hopes for the Private-sector Development in Afghanistan.

3. The salt refinery plant was opened in September 2011 and belongs to the Mullah Azad Group.

4.'http://www.goodafghannews.com/2011/09/25/salt-refinery-plant-inaugurated-in-balkh-province/