# **Box 9. Diaspora investment in Afghanistan**

A high-profile example of diaspora investment in a post-conflict setting is in the mobile telecoms sector in Afghanistan. Approximately $75 million was invested in the new Afghan Wireless Communication Company (AWCC), which is 80 percent owned by Telecommunications Systems International, a company founded by an Afghan diaspora entrepreneur based in the United States.

AWCC is one of the two initial mobile phone operators in Afghanistan. Since inaugurating GSM services in Kabul in April 2002, AWCC has grown to 90,000 subscribers and 800 employees, and has deployed operations in Herat, Mazar-i-sharif and Kandahar. Traffic on the network has quickly exceeded all expectations.

_Source_ : International Alert (2006).

The diaspora can be an important partner in reconstruction. Diaspora communities are often committed to rebuilding their country and can contribute expertise and funds (both through remittances and direct investment). Their knowledge of both the local economy and the political economy means that they are often prepared to invest in small to medium enterprises that are either off the radar screen of foreign investors or deemed too risky. Their activities can also galvanize local private sector activity, either through increasing market contestability or through their demand for local goods and services inputs into their businesses.<sup>47</sup> Development partners have an important role to play in this area. They can encourage the conditions needed for dialogue, as well as catalyzing, supporting and facilitating the dialogue itself. An “honest broker” may be needed in some situations, and this is an area where development partners have something important to offer, either in facilitating dialogue directly, or in helping to identify a suitable facilitator. Development partners may also be well-placed to catalyze diaspora involvement. At the same time, any external inputs must not come at the expense of local ownership: external actors need to know when to disengage.

# **Appropriate Reform Trade-Offs and Sequencing**

Investment climate reforms, as with any other reforms, do not come as a coherent package. Tough policy choices need to be made, with close attention paid to trade-offs and sequencing. One of the first trade-offs to be addressed is the extent to which the policy framework that shaped the investment climate before conflict should be re-adopted.

One perspective is that the post-conflict period presents a unique opportunity for institutional, policy and management innovations that may not have been possible in the pre-conflict period. The post-conflict period represents a window of opportunity for reforms that might otherwise be highly disruptive of the business environment. For example, the opportunity can be used to

> 47 However, it is important to note that the diaspora’s contribution can be affected by the political context. The very existence of a significant diaspora can sometimes be linked to political disputes in the home country, as well as being a significant factor in the causes of conflict. This implies that the nature of diaspora involvement depends on the conflict’s outcome.

28