The Asian Development Bank (ADB) will provide 1 million U.S. dollars of grant to Afghanistan to help it enhance the role of private sector in economic growth and poverty reduction, said ADB on Thursday.

One of the key challenges facing Afghanistan is establishing a supportive environment for the country's large and mainly informal private sector, which is estimated to control as much as 89 percent of the country's gross domestic product and employs about 1.7 million people, said ADB.

However, the private sector contributes just six percent of the economy's gross domestic capital formation while accounting for 92 percent of consumption, said ADB.

"This in part reflects a lack of general awareness of potential business opportunities and limited business development skills, it also reflects the absence of incentives for the private sector to formalize its activities," says Eugenue Zhukov, an ADB Principal Economist.

The program will support reforms that will lead to private sector growth in the country by directly addressing the key issues that constrain investment and entrepreneurship, such as a lack of an enabling legal and regulatory framework, unfair business practices and limited access to much needed business development services and financing.

The Afghan government will contribute about 60,000 U.S. dollars to the project's total cost of 1.06 million U.S. dollars.

The Ministry of Finance is the executing agency for the program, which is due for completion in July 2006.

"Experience from other countries show that transparent and appropriate legal and regulatory structures, well-functioning markets, and access to credit will play a vital role in promoting private sector-led growth," said Elaine Glennie, an ADB Senior Financial Governance Specialist.

Source: Xinhua