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After 23 years of war of war and more recently years of drought, the Afghan economy is in a shambles. The economic gains of the 1970s, leading to agricultural self-sufficiency and the development of an educated elite, have given way to economic collapse and dependency on opium and foreign aid. Following the American-led invasion of Afghanistan in late 2001, the international community pledged 4.5 billion $US in reconstruction aid over a 5 year period at the Tokyo Conference. Of this, only a small fraction of the aid has been delivered. The Afghans face enormous challenges not only in recovering from a war-ravaged economy but also in rebuildng a private-sector, market-driven economy from what was once a marxist economy with government ownership of most major means of production.
Challenges To The Tokyo Conference
The Tokyo Conference pledges have been complicated by several factors: conservative estimates place the initial need for reconstructive aid at an initial 20 billion $US, well above 4.5 billion $US over five years only a small portion of the promised aid has been delivered ; this is due in part to the lack of security and governmental authority funds intended for reconstruction aid are being diverted for urgent humanitarian needs Afghanistan's outstanding debt is substantial, has not been forgiven, and could hamper economic reconstruction (Shahryar, 2002)
Four Economies
Andrew Natsios, administrator of the United States Agency for International Development (USAID), has characterized Afghanistan as currently having four economies:
1) War economy : based on a weapons market, kidnapping, looting, and mercenary fighting. This economy has absorbed the legions of young unemployed men into militias. 2) Poppy economy : Afghanistan provides a large portion of the world's herion supply, second only to Burma/Myanmar. Several factors have contributed to this growing poppy economy. The drug mafia has filled the void left by the collapse of the banking system ; land once productive for farming and grazing has been lost to mines and UXOs ; depressed prices for wheat can't compete with the price paid for opium ; opium generates taxable income for warlords and militias. 3) Humanitarian aid as an economy : NGOs and U.N. agencies have been operating for decades in Afghanistan. A necessary but "artificial" economy, humanitarian aid continues to play an important role and is often subject to competition among local militias and warlords. Aid agencies provide equipment, food, medical and educational services, and continue to be the largest employers in Afghanistan. 4) Agricultural/transport economy : geostrategically and economically well situated, Afghanistan is a transportation crossroads and could well serve as a route for natural gas and oil pipelines, providing Central Asian energy suppliers with a route to the Indian Ocean. Agreements have been made with Turkmenistan and Pakistan to invest in a gas pipeline in the near future. Agriculture, although devastated by years of drought, mining, and war, remains a traditional way of life for many Afghans. Despite major displacements, depopulation of the countryside and escalating urbanization, farming and animal husbandry still ranks as a primary form of economic activity. (Natsios, 2002) Afghanistan's Reconstruction Challenges
Afghanistan has many challenges to overcome before its economy will be strong enough to ensure growth and opportunity for its people. The most immediate areas of focus are as follows: Education : From a brain drain and war that has seen the loss of Afghanistan's educated class to the physical collapse of the educational infrastructure, it's essential that Afghanistan rebuild its educational system to sustain economic recovery and activity. Afghanistan will also have to resolve the heritage of the Taliban's discriminatory policy of not allowing girls and women access to education and the rote inculcation of a Koranic curriculum for boys. Rule of Law/Investment Law : Confusion abounds with multiple, unofficial systems governing property law. Much progress has already been made in rewriting a new 'Rule of Law". Banking System : The banking system has collapsed with the unfortunate consequence of contributing to the growing opium economy, as drug dealers fill the void. Private banks and currency reform are foundational to the economic reconstruction of the country. Exploitation of Natural Resources : Copper, precious minerals, iron, coal, gas, and water as a natural resource. Demining : The reclamation of irrigation systems and grazing and farming land is essential. Agricultural reform : The reclamation of mined land will allow this traditional sector to return to prominence. Afghanistan, once self-sufficient in agriculture, can now take advantage of scientific advances in GMO seed stock that will maximize agriculture on marginal land and help resist loss. Drought resistant seed stock and veterinary programs to immunize the animals being brought into Afghanistan to reconstitute its animals herds will safeguard production and eventually provide more jobs as surpluses help agricultural-sector private businesses. The re-introduction of traditional seed stocks is combining tradition with scientific development. Road Reconstruction/Public Works : Important not only for commerce, but also to tie the country together economically. Japanese, Saudi, and American investment has earmarked several 'ring-roads' for reconstruction. The physical reconstruction of government ministries, bridges, and water treatment facilities will not only improve health and economic opportunity, but will also build the capacity and authority of the government. Housing : Afghanistan has lost a substantial housing stock due to war. It is also prone to earth quakes. Returning refugees and internally displaced persons require shelter. The rising rate of urbanization also requires increased housing stock. With the assistance of volunteer experts and foundations, new technologies, materials, and designs are being used in some pilot housing projects. An Afghan exile, Masum Azizi, has designed a 'Village of Hope' as a model for housing development. Inadequate Capital for Investment : The legacy of war, Marxism, and economic collapse resulted in a loss of national wealth and flight of capital. Reforms in banking, rule of law, and investment policy will hopefully build on the entrepreneurial traditions of Afghanistan and attract adequate foreign investment. Coupled with adequate civil security, new business sectors will be able to draw on investment. (Shahryar, 2002)/(Natsios, 2002)(Abdullah, 2002)
Afghanistan's Economic Opportunities in the Central Asian and South Asian Regions
As Afghanistan moves beyond immediate humanitarian relief concerns, there are several growth opportunities that it should be able to successfully exploit : Transport : particularly north-south roads Regional contractors and suppliers Electricity trade : bilateral and regional Gas Trade : local trade and gas to India Water Resources Management Trade Facilitation Development of Border Areas (Natsios, 2002)/(Howe, 2002)/(Shahyar, 2002) IT & Development: Afghanistan Dot Com?The telecommunications sector in Afghanistan has been virtually destroyed and yet might offer the most promise for development. At present, Afghanistan has one of the weakest telecommunications systems in the world with only one out of every 625 Afghans having access to telephone services. This level is far below the developing country average of 2.6 lines per 100 people. Access to phone and internet service is a 'digital divide'. (SiliconValley.com, 2002) Although there are many challenges and constraints for its development and modernization, in Afghanistan this is the only sector of the economy attracting significant private foreign investment. (Church, 2003) Cisco Systems has partnered with the United Nations Development Program (UNDP) to open the first Cisco Networking Academy in Afghanistan. Based at the University of Kabul, the Academy aims to create a core of Afghan specialists who can help move the country into the digital age.
Afghan Wireless Communication Company (AWCC), in a collaboration with the Afghan Ministry of telecommunications, is implementing Afghanistan's first GSM mobile network for celluar phone and internet service. (wired.com, 2003) There is also a trend toward expanding and computerizing the micro-lending industry in the developing world. American high-tech firms such as Cisco and Hewlett-Packard seek to catalyze economic development in developing countries in order to grow their own markets. The technology industry is the most dynamic sector in which collaboration with nonprofit organizations and foreign governments is creating emerging markets. ("Technology Companies Take Hope in Charity", 2003) Radio plays a prominent role in Afghanistan, especially in light of high illiteracy. The Americans and Australians have agreed to focus on rebuilding Afghan radio and the Japanese have offered to assist in establishing a television system. (Natsios, 2002) Most Afghans do have access to radio receivers and are accustomed to using radio as a source of news, information, education and entertainment. The Communication Assistance Foundation sponsored a study on the potential impact of community radio in Afghanistan. The report's main conclusion is that community radio is not only a viable option for Afghanistan, it is also a low-cost and effective way of contributing to medium and long-term efforts for reconstruction, development, democracy and nation-building. (Girard, 2003) The IT sector will also allow the innovative use of new technology to rebuild and expand infrastructure and economic growth. Trends in wireless technology will allow for affordable management information systems and communication networks. Mesh networks, wireless personal area networks, adaptive radio, software-defined radio, and ultrawideband can all take advantage of inexpensive Wi-Fi gear and optimize it for long-range, high-performance use. These innovations can provide solutions to the regions "digital divide" and "last-mile" problems and bring Afghanistan into the global economy. (Jardin, 2003) As if a symbol of Afghanistan's potential "rebirth" after years of war devastation, Afghanistan planted its flag in cyberspace in March 2003 with the formal activation of the country's Top Level Domain : ".af ". |
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