In late February, the United Nations issued an emergency appeal for $1.18
billion in immediate relief aid in Afghanistan, illustrating the dire
humanitarian situation in the country. At the same time, the vision for a new Afghanistan is slowly
turning into reality as local and foreign businesses capitalize on
Afghanistan’s reconstruction needs. But
successful reconstruction hinges in large part on the amount of internal
security as well as the flow of development aid, both of which require continued
support from governments and organizations around the world.
Immediate needs
The UN plea to the international community reflects the enormity of
Afghanistan’s current crisis. More
than 700,000 Afghans face imminent starvation, 3.8 million depend on food aid,
and hundreds of thousands among the 3.5 million Afghan refugees in Pakistan and
Iran are heading back to the country. Although donor nations pledged $4.5 billion for
reconstruction over the next five years, that amount is failing to make its way
to the country in time to meet its immediate needs.
Furthermore, while at least $10 million is needed each month just to run
the government, the new finance minister, Hedayat Amin Arsala, said only 3
percent or 4 percent of the government’s budget is coming from domestic
sources. Afghan civil servants
received their first pay in 7 months only when the UN Development Program
channeled $6 million to the Afghan central bank in February.
The central bank, called Da Afghanistan Bank, is in fact nothing more than a
makeshift institution attempting to reconstruct a shattered monetary system now
operating completely in cash. It is currently working to straighten past records —
yet the Taliban kept few records and reportedly took millions of dollars with
them when they fled in November. As
a result, interim Prime Minister Hamid Karzai said he has no idea how much money
is in circulation. Further
complicating the situation is the circulation of three currencies: Gen. Abdul
Rashid Dostum, the ethnic Uzbek warlord in the north, created a currency worth
half of the official afghani; and in Kabul, the dollar is now widely accepted.
Development plans
These dismal economic circumstances, however, have not discouraged the
government or the international government and business community from
envisioning Afghanistan as a future center of economic activity in Central Asia.
Despite the utter destruction and ongoing military operations against al Qaeda operatives, Afghanistan is awash in long-term public and
private plans for investment and reconstruction. The central bank is in close consultation with the World Bank
and the International Monetary Fund (IMF) regarding the establishment of a
functional banking, monetary and accounting systems. On the table is Karzai’s proposal to use Europe’s new
euro as Afghanistan’s official currency, though the World Bank/IMF team has
recommended the use of the U.S. dollar until the installation of a new Afghan
currency.
Neighboring countries are keen to build a new and stable Afghanistan that
would help boost regional business and trade.
Pakistan has offered training for banking personnel to develop financial
infrastructure. The two countries
also recently agreed to open bank branches in their major cities to facilitate
trade. Pakistani banks said they
are ready to open branches in Kabul, Kandahar and Jalalabad; Afghanistan will
have branches in Karachi, Quetta and Peshawar.
Considering the total disarray of Afghanistan’s banking sector —
the teetering central bank aside, the country has no commercial banks, and
regional banks are only loosely tied to the central bank — Pakistan’s
offer is telling of its optimism in its next-door neighbor’s revival.
Pakistan has also pledged to meet immediate electricity needs in the
cities of Kabul, Kandahar and Jalalabad, in addition to providing technical
assistance for the development of hydropower facilities for long-term
electricity supply.
On the northwestern front, Turkmenistan has its own economic reasons to
invest in Afghanistan’s recovery. Home
to the world’s fourth largest oil reserve, Turkmenistan has for years sought
to build an oil pipeline from the country to Pakistan via Afghanistan.
Neighboring governments had hailed the pipeline plan as a catalyst for
regional stability and economic growth. However,
the development project came to a halt in 1998 after the Taliban-sponsored U.S.
embassy bombings in Africa destabilized Afghanistan and its relations with the
West. Now, Turkmen and Afghan
leaders have revived the plan, and Western oil companies are again vying for a
stake in the project. Under the
provisional plan, Afghanistan would receive a twelfth of the Turkmen profits in
addition to many new jobs. Turkmenistan
has also pledged gas and electricity supply.
The government of Tajikistan is in discussion with the Karzai administration
on the delivery of electricity from Tajikistan to the Kunduz and Talukan regions
in northern Afghanistan. In addition, Tajikistan Airlines began operating weekly
flights to Kabul in late March. Iran
has exported a range of goods worth more than $7 million to Afghanistan since
January. Alcatel, a French telecom
equipment maker, is already negotiating a contract to provide 30,000 mobile
phone connections to Afghanistan. A
number of Indian businesses are eying Afghanistan’s pharmaceuticals,
healthcare and hospitality sectors, among others.
Prospects for international trade are also on the rise.
Pakistan has completely deregulated its trade with Afghanistan in recent
months. The United States has plans
to grant most-favored-nation status to Afghanistan.
And the European Union is reviewing its textile quotas to facilitate
trade with the Afghans.
The new Afghan government is also encouraging domestic enterprises to
initiate plans for vigorous socioeconomic recovery.
The country’s national airline Ariana, though it only owns two
airplanes after losing the rest in the U.S. air campaign last fall, already made
its first international flight in over two years in February.
The Afghan Wireless Communications Company began developing a mobile
phone system in Kabul in February and began operations in April.
The government also has high hopes for the tourism industry.
“Give me two months,” and the industry will have made a comeback, the
country’s new minister for civil aviation and tourism said in January (USA
Today 01/24/02).
Need for continued reconstruction support
There are staggering differences between the country’s current state of
devastation and these ambitious development projects.
The recovery plans and business proposals are not unrealistic, however
— provided that Karzai and his successors are able to ensure two key
ingredients for successful reconstruction: security and sufficient aid money. Businesses
will only invest in areas where security guarantees the soundness of their
investment. If Kabul is the only
such locale, theory projects that Afghans would rush to the city to seize new
jobs, likely resulting in massive and destabilizing internal migration and the
creation of large informal markets in the capital. The reluctance of countries around the world to expand the
mandate of the Afghan peacekeeping mission, and the simultaneous resurgence of
factional clashes throughout the country, may be keeping many potential
investors at bay.
The recovery of Afghanistan will also require the international community to
continue to provide aid money and ensure its prompt delivery.
Though the $1.8 billion nations allocated for this year has been called
“generous,” the total of $4.5 billion for the next five years falls short of
the UN-estimated reconstruction cost of $10.2 billion over five years, and $14.6
billion over ten years. Afghan
reconstruction is underway and the country is teeming with new opportunities.
A socioeconomic transformation in Afghanistan is well within scope, but
success depends as much on the world’s commitment to Afghanistan’s
reconstruction as it does on the Afghan government’s ability to turn pledges
into concrete progress.
Sources:
UN Country Team for Afghanistan, “Immediate and Transitional Assistance
Program for the Afghan People 2002,” http://www.developmentgateway.org/download/117560/un_afg_21jan.pdf.
UNDP, “Afghanistan: Preliminary Needs Assessment for Recovery and
Reconstruction,” http://www.reliefweb.int/library/documents/2002/undp-afg-15jan.pdf.
Various articles from AFP; AP; BBC News; The
Economist; EurasiaNet.org; Far Eastern
Economic Review; Financial Times; Los
Angeles Times; Miami Herald; The Pakistan Observer; PakNews.com; Reuters; USA Today; UzReport.com; The
Washington Post
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