Foreign Aid: a curse of a cure for afghanistan
The World Bank forecast released last Tuesday, shows concerns that the Afghan economy will enter a deep recession as the international community gradually reduces both the aid it provides to the government of Afghanistan and the start to draw down the troops by the end of 2014. It begs a question of why Afghanistan is still dependent on foreign aid.
Even after 10 years of nonstop foreign assistance, the Afghan government can’t maintain an effective security force that costs about $7 billion annually with its $2.5 billion annual revenue. To keep things in perspective, 10 years ago the international community decided to wage a war against the Taliban and Al-Qaeda in Afghanistan. Right after the Taliban left the country, governments and other donors come together, and committed extraordinary resources to address the crisis in Afghanistan. In the 2002 Tokyo Conference, international donors pledged more than $3.5 billion in reconstruction aid for Afghanistan. The UN, as well as various NGOs, donors, and other international companies set up operations to begin delivering critical services and rebuilding infrastructure.
This all sounds like good news, however the real question should be: how much aid money is actually spent in Afghanistan? The answer is not much: as little as 5 percent of budgets reach the Afghan local economies. Most goods and services needed to carry out and sustain operations are imported from other countries.
Why is this a problem? For Afghanistan to be independent of international assistance, the country not only needs clinics and roads, it needs a functioning economy that can create jobs and supply the goods and services Afghans demand. While billions of dollars are spent on aid and peacekeeping each year, most products and proceeds are sent back to the developed world, leaving little sustainable investment behind. This creates a cycle of dependence on foreign resources, where Afghans remain unemployed, economic growth is slowed, and instability can return.
What is the solution? Instead of shipping goods and services in from other countries to carry out projects, the international community could start buying local Afghan products, and sub contract construction projects to local companies. This would allow critical services to be provided while creating much needed livelihoods, and developing local capacity.
Why isn’t this happening already? There are some key obstacles to local Afghan procurement, including an absence of information, corruption, lack of accountability, and convoluted contracting processes – all of which inhibit local sourcing. The good news is that through an innovative approach, the Afghan market, with the help of government resources, can provide a set of services that help facilitate connections between the international community and afghan companies, so that domestic firms are used whenever possible to carry out business. This includes training firms on how to find and bid on contracts, setting up and maintaining a supplier directory where verified local companies can be easily located, market research and advocacy, tender distribution services, and matchmaking promising local firms with development demands.
By spending locally, businesses are encouraged to grow and industries of awe. The Afghan governments would be able to invest new tax revenue to improve infrastructure, and corruption would be reduced as businesses enter the formal economy. That is how Afghanistan will become independent of foreign aid, and that is how it would sustain its economy after the troops withdraw and foreign aid is reduced after 2014.
MINERALS: THE BLOOD DIAMOND OF AFGHANISTAN
Last year in June, the United States discovered nearly $1 trillion in untapped mineral deposits in Afghanistan, far beyond what was previously estimated. The mineral wealth of Afghanistan was no secret for Afghans. They knew Afghanistan was an intact mineral reservoir, and for centuries they used crude tactics to extract accessible resources. This recent discovery indicates that Afghanistan has a rich prospect ahead, and the country could be raised by its own bootstraps with the revenue from the mining industry. However, the real question is if the Afghan government is ready – and has the tools – to responsibly develop these deposits.
In 2007, the Afghan government auctioned off the largest copper deposit in Aynak, and the winning bidder was the China Metallurgical Group Corporation (MCC). Aynak holds the second largest known unexploited copper deposit in the world. This contract represents the largest foreign investment in the history of Afghanistan. The signing bonus was the biggest, and offered the highest royalties to the Afghan government, as well as building infrastructure, such as establishing an extensive railroad from Uzbekistan in the north to Pakistan in the south to carry copper ore back to China. Most importantly, MCC said they would be hiring and training Afghans locally, and had a timetable for when Afghans would be in technical, and management positions. However, MCC have brought in their own people, and they buy their own goods from China, and have them shipped in. The large capital investments by MCC are not benefiting the Afghan people like they should. Now the question is whether MCC will deliver on their other promises.
The fact of the matter is that mining companies like MCC will not deliver on all their promises, because the Afghan government doesn’t have the capacity to implement such large contracts effectively, as of yet. First, the Ministry of Mines is lacking the expertise in carrying out the development process of the deposits. It should slow down, accumulating more experience in contract negotiation and bidding procedures first. Worst still, the Ministry does not have the experience of regulating the mining industry. While there are laws in place, they have not been implemented effectively. Clearly, the Ministry should reach out to the international community for training its personnel, and gaining some expertise before developing other deposits.
The second biggest challenge is the lack of transparency and corruption in the Afghan government. The ex-minister of Mines Ibrahim Adil was arrested by Afghan authorities on accusations that he took 30 million dollars bribe from MCC. The Ministry of Mines should apply for membership to the Extractive Industries Transparency Initiative, which will hold the Ministry responsible to the development of natural resources. In effect, it will essentially require the Ministry to hold the mining companies such as MCC to the contract.
All in all, if the Afghan government continues to develop the deposits in the current situation of insecurity, lack of experience, and corruption, of course, they will earn hundreds of millions of dollars from these mines. But if they develop the deposits in the near future when they have the capacity to do so, the earnings will be much greater, and will benefit the people of Afghanistan as it should.
Three transit routes for landlocked afghanistan
Last November when the U.S. unmanned drone killed 24 Pakistani soldiers, in retaliation, the government of Pakistan decided to block the supply routes to Afghanistan. Since then, not only NATO supply trucks have been stopped, but also thousands of Afghan-bound containers loaded with commercial goods have been stranded in the port city of Karachi. Each and every time commercial goods are grounded in Pakistan, Afghan businessmen are losing money and Afghan consumers are paying higher prices for goods that are imported through Pakistan. It seems like landlocked Afghanistan is highly dependent on trade roads from Pakistan. However, there are three alternative transit routes that the Afghan government can exploit to facilitate exports and imports.
First, the Afghan government can maintain the status quo. Pakistan will remain the major transit route into and out of Afghanistan. Business as usual, hundreds of trucks will camp out in Pakistan, when and if there is tension between Washington and Islamabad. As a result, the Afghan businessmen and household will ultimately bear the burden. In addition, there are major security concerns in this supply route from the Pakistan, which enters Afghanistan through the Khyber Pass. Militants always target cargo trucks near Torkham. In the last several years, we have seen an uprise in these attacks. This means Afghan businessmen will suffer huge losses, if similar attacks continue. This will also create unpredictable market behavior, which will result in inflation. If the status quo is retained, the Afghan economy will remain dependent on Pakistan, which could be used as leverage over Afghanistan.
The second option is the Northern Distribution Network (NDN) through Russia, the Caucuses, Kazakhstan, Uzbekistan and Tajikistan. The NDN is a network of road, rail, and air routes. In Afghanistan, Balkh province has a strategic position in the north as it has completed a rail link from Mazar-i-Sharif to Termez on the Uzbekistan border. These routes are far less dangerous than the supply routes that go through Pakistan. While the shorter Pakistani transit routes are less costly, the Northern Distribution Network is much more reliable. There are fewer custom issues, roads are paved, the rail system is steady, and freight delivery is guaranteed and on time. However, in order for Afghan businessmen to fully utilize this network, the Afghan government needs to sign a pact with several countries. The most important country in this network is Russia. The Afghan-Russian relationship has not been very good in the past few decades. Moscow wants to destabilize Afghanistan because this serves as a justification for Russian security and military engagement with Central Asian neighbors. Russia’s mixed interests and motivations in Afghanistan are a point of concern, as these two countries have bitter memories from the past Soviet invasion of 1979. The Northern Distribution Network is a feasible, but not an optimal option for the Afghan economy.
The third viable alternative trade route for Afghanistan is through Iran. Recent rounds of sanctions by the U.S. have pushed Iran’s economy into a nose-dive. As the European Union is adopting its sanctions on Iranian oil, Tehran is very vulnerable. It is turning eastward for doing business. The Afghan government could exploit Iran’s desperation, and sign a deal for access to the Iranian port of Chabahar. It is a port outside the Persian Gulf, and about 1,700 Kilometers away from the major western Afghan city of Herat. Unlike Pakistan, Iran in recent years has encouraged Afghan businesses to relocate their international offices from the United Arab Emirates, Saudi Arabia, and Pakistan to Iran. While ports of Karachi in Pakistan are overburdened with severe congestion, and lack infrastructure, Chabahar is less crowded, and strategically well positioned for Afghan imports and exports. Iran and India are building a highway and a railroad system that leads from the port into Afghanistan. The Iranian trade route is very cost effective and short distanced, as compared to that of Pakistan. In addition, this route is less dangerous and very reliable. However, with one caveat, Iran’s foreign policy has proven to be focused on thwarting U.S. interests in Afghanistan. Tehran might use the economic ties with Afghanistan as a tool to hurt U.S. interests in the region, which might upset the U.S.-Afghan relationship. By and large, this is the most viable and optimal option for the Afghan economy as a whole.
All in all, because of Afghanistan’s landlocked location, its economy hugely depends on neighboring countries for transiting goods into and out of Afghanistan. The choice is between Pakistan, Northern Distribution Network, and Iran. However, in order to alleviate Afghan dependence on the Pakistani port of Karachi, Iran’s Chabahar port is the most cost effective, secure, and reliable trade route for the Afghan economy.
Why are Afghans leaving afghanistan?
More than 30,000 Afghan citizens filed for political asylum abroad in the first eleven months of 2011, according to UN statistics. The figure indicates a 25 percent increase over the same period in 2010. The number of people fleeing Afghanistan has trebled since four years ago despite the international community pouring billions of dollars into Afghanistan to try and boost the economy, rebuild infrastructure, and defeat a Taliban-led insurgency. Experts believe the actual number leaving is likely to be far higher than those only seeking asylum because of a large smuggling market that has developed. However, this rising trend begs a question of why so many people are leaving Afghanistan. In other words, what are the major incentives abroad that are encouraging Afghans to flee their country?
First, most of these people are economic migrants. Marco Boasso, the director of IOM in Kabul, said: “The majority of people arriving in Europe are not refugees or people under threat. They are economic migrants.” The outlook of many young Afghans have grown more pessimistic in the past five years. In 2002, after the Taliban were ousted from power, if you would ask an Afghan man what his future plans were, the answer would definitely not be to leave Afghanistan and go abroad. Instead, at the time more and more immigrants were returning from Iran and Pakistan. They wanted to settle in their home country and build a prosperous life. However, in the last five year most of them have been disappointed. The unemployment rate in the country has remained at more than 40 percent since the fall of the Taliban government. Most young men are escaping redundancy and poverty, and taking shelter abroad. They are turning to an increasingly sophisticated human smuggling industry, paying anywhere from a few hundred dollars to more than $30,000 for fake papers and flights to countries in Europe and Australia.
The second reason why so many Afghans are seeking asylum abroad is the thirst for education. Nearly 200,000 students graduated from high school in 2008, and only 34,460 of them were enrolled in public tertiary education system, according to the Afghan Ministry of Education. About 500 students went on a scholarship to Indian colleges and universities. A few hundred others were fortunate enough to earn Fulbright or similar grants to America, Europe, and Turkey. The Afghan Ministry of Higher Education has not had the capacity to absorb a large chunk of these graduates to higher education institutions. Thus, the remaining 82 percent or so who want to pursue higher education cannot attend college or university in Afghanistan. Each year more and more students are joining the ranks of those deprived from higher education. After three decades of war, Afghans have realized the importance of knowledge. They are in thirst of getting their college degrees, but unfortunately cannot. Therefore, there is no better alternative for them but to leave Afghanistan and go to Britain, the Netherlands, Sweden, etc. to get educated.
Above all, the security situation in the country has been deteriorating as the coalition forces are planning to withdraw by the end of 2014. There are growing concerns and uncertainty among Afghans as to what will happen when the troops leave the country. The memories of the Soviet withdrawal in 1989 and the civil war that followed are fresh in minds of many. Afghans fear that once most foreign troops leave, the Taliban will take over more territory and civil war could erupt along ethnic lines. They are leaving Afghanistan to secure a safe future for themselves and their children abroad.
Is the Quran only for Afghans to Defend?
The major news out of Afghanistan this week has been the Quran burning violent protests around the country. On Tuesday the news broke that the U.S. – led military coalition forces had sent the holy books by mistake or intentionally, that remains to be investigated, to a garbage burn pit in Bagram Air Filed. Afghans were outraged by this appalling act, and thousands of them came out on the streets to protest. At first the demonstrations were peaceful. As the protests continued around the country in different provinces, they turned violent. Thus, at least 28 people have been killed and hundreds wounded since Tuesday. In addition, four American soldiers have been shot dead. However, it is important to know why only Afghans are protecting the Quran, and protesting against burning the Islamic holy book. Remember it is not the Afghan holy book, but the Islamic holy book. Why don’t people in Iran, Saudi Arabia or other Islamic countries also come out to protest? Not suggesting that they should, but isn’t the Quran their holy book too?
Certainly, Afghanistan is different than almost all other Islamic countries. First, it has the lowest literacy rate among Muslim nations – thanks to the four-decade long war. Three out of four Afghans age 15 and over cannot read and write. If they cannot read the Quran, they definitely do not understand it. Therefore, the majority of the population receives its basic Islamic knowledge from the tribal elders, the local Imams, and other religious leaders in the community. These individuals have strong political incentives to take advantage of incidents such as these protests. They mobilize people, appeal to their anger, and emotions in order to promote their political agendas. On the other hand, Muslims in Iran or Saudi Arabia are well educated. They do not take their religious leaders’ call for protest for granted. Almost 80% of Iranians are literate. They can read and understand the Quran. That is a major difference in literacy rate between Iran and Afghanistan – two neighboring countries, and it makes a huge difference in peoples’ approach to problems like the Quran burning.
Second, the unemployment rate in Afghanistan has been fluctuating between 30-40% since 2001, unlike any other Muslim country. That means almost 7 to 8 million people are unemployed in the country. A man from Parwan province was quoted in the 2010 Oxfam survey saying, “If the people are jobless, they are capable of doing anything.” Many of these young unemployed men are frustrated. They develop a sense of negative attitude towards the central government. Some leave the country, those who can afford to do so, and others get involved in widespread antisocial and criminal behaviors like the Quran burning violent protests. The bottom line is that while young Muslims around the world are employed, and enjoy a good life, the Afghan youth are struggling with unemployment and uncertainty that fuels anger, and violent activities, as a result.
Third, according to some estimates, almost 36% of the Afghan population is living under the poverty line. It is an unprecedented figure compared to any other Muslim country. In other words, one out of every three Afghans has a total income of less than $1 a day. They can at best barely meet their minimal needs for survival. Remember Afghanistan has had the harshest winter this year, and reportedly 40 people, most of them children, have frozen to death. These are the people living under the poverty line, in tents. Their children do not have warm clothes, and they walk around in the snow with bare feet, or torn apart sandals. People are sick and tired of living a subsistence life. They are frustrated and annoyed by the fact that so much foreign aid money has been poured into the country and their lives haven’t changed a bit, in some cases have gotten worse. These people are easily motivated by those who have political agendas to join violent protests.
In sum, it is not only Afghans responsibility to defend the Quran; however, the current social and economic problems have created the platform for Afghans to engage in such violent activities. Other Muslim nations are not amenable to such threats; therefore, we haven’t seen the Quran burning related incidents elsewhere.
Fixing development aid in afghanistanWritten by Abid Amiri | 13 APRIL 2012 Published in the Diplomatic Courier Magazine
Recently in Washington there is a lot of talk about what has gone wrong in Afghanistan. It is now considered the longest war in U.S. history. The American public is growing wary about the war, and their support for the military presence in Afghanistan has dropped sharply. According to the latest New York Times/CBS News poll, 69 percent of Americans think that the U.S. should not be at war in Afghanistan. Also, the recent Quran burning incident and the Kandahar massacre by staff sergeant Robert Bales have angered the Afghan population. Anti-U.S. sentiment in Afghanistan is at an all-time high.
There are several arguments as to what’s gone wrong in Afghanistan. Some believe the war in Iraq shifted the focus from Afghanistan, which allowed the Taliban to re-group and come back stronger. Others blame President Obama’s counterinsurgency (COIN) strategy for the lack of success in Afghanistan. Critics argue that in the absence of a reliable partner in Kabul, the COIN strategy is too costly and potentially self-defeating. While the U.S. military strategy is at the core of every argument, failure of the U.S. foreign assistance strategy in Afghanistan is completely ignored. What has gone wrong in Afghanistan is not that the U.S. has failed militarily, but it has failed to develop a sustainable local economy for Afghans – a reliable economy that could have convinced the Taliban to lay down arms and make a better living by contributing to the overall economy.
When the U.S. went into Afghanistan in 2001, the country did not have an economy. There were no roads, no airports, no electricity, and no water. Basically, there was no infrastructure – thanks in large part to the four decades of constant war. There were no institutions to support the Afghan economy. The government barely had money to fund its activities, and most importantly, everyone lacked access to basic needs in schooling, health care, sanitation, and nutrition. There were lots crucial development projects that the aid money could have been used for and it would have helped the Afghan economy.
Instead, the United States came in and spent billions of aid dollars on projects without having a clear strategy for the country’s economy. Aid money was spent inefficiently on projects without strong oversight or any involvement from the Afghan government. Portion of the fund ended up in hands of the Taliban, in exchange for protection in remote areas controlled by the insurgents. The effectiveness of aid was seriously impaired by a lack of active oversight. The aid money went into pockets of corrupt leaders, warlords, and the Taliban, while the majority of the people did not see any benefit. It undermined the central government, empowered the enemy of the state, and gave rise to corruption. Therefore, the aid money has not produced tangible results on the ground in Afghanistan. The Afghan economy is heavily dependent on foreign aid, according to the World Bank report. The decrease in foreign assistance post-2014 is likely to cause the economic bubble to burst, plunging the country into an economic recession.
Afghans are hardworking people and ready to act, both individually and collectively. They are prepared to struggle to stay float and to get ahead. They have a very realistic idea about their conditions and how to improve them. But they are too poor to solve their problems on their own. So, too, is the Afghan government. Had the U.S. come up with a Marshall Plan based on the country’s needs, Afghanistan would have had a reviving market economy today. The Taliban would have laid down arms and made a prosperous living by contributing to the overall economy. The country would have played a crucial role in connecting regional markets through the Silk Road, which would have contributed to the stability of the region.
In short, what has gone wrong in Afghanistan is not the failure of U.S. military strategy, but the lack of an effective foreign assistance strategy – a blueprint for spending aid money on projects that are relevant to the Afghan economy. It is not too late to design such a strategy and finance projects important to the country’s economy, so that the future is more sustainable, and the already achieved success is durable.
Thoughts on the Strategic agreement between the u.s. and AFGHANISTANWritten by Abid Amiri | 05 MAY 2012 Published in the KHAAMA PRESS
I had a chance to read through the full text of the Strategic Agreement between Afghanistan and the United States attached below. Here are some of the points that stood out to me the most. I am less concerned about the political features and more interested in the economic and development components of the Pact. However, it is important to mention a couple of political pieces of the treaty.
First, the Agreement states that “[t]he Parties [Afghanistan and the US] … pay tribute to the sacrifices made by the people of the United States in this struggle.” While I do commend Americans, and their government for their sacrifices – both human and monetary sacrifices -, it is important to note that the Agreement should have acknowledged the sacrifices made by Afghans, too. We – Afghans and Americans – are equally harmed by this fight against terrorism. We both have lost lives, and treasure. The Pact should have instead indicated that the Parties should pay tribute to the sacrifices made by the people of Afghanistan and the United States in this struggle.
Second, the agreement calls Afghanistan a “Major Non-NATO Ally.” This is significant for two main reasons. This designation confers a variety of military and financial advantages that otherwise are not obtainable. It allows Afghanistan to use American financing for the purchase of certain defense equipment, and permits entry into research and development projects with the Pentagon on a shared-cost basis. Also, Afghanistan is the first nation to receive this title from President Barak Obama, while George W. Bush designated 6 countries as non-NATO allies.
On the economic and development front, there are a few major points in this agreement that I would like to highlight. First, it encourages Afghanistan to pursue consolidation and growth of a market economy, taking into consideration its historical and social realities. In other words, the US is hopeful that Afghanistan can have an open market economy, not similar to the US, but an economy that severs the culture, religion and the people well. To achieve this goal, according to the Agreement, the US will help strengthen and develop Afghanistan in the areas of agriculture, transportation, trade, and energy infrastructure. These are all critical sectors of the Afghan economy. Also, the US will encourage private investment in Afghanistan.
Most importantly, the Pact shows a strong desire that the Afghan people should be the primary beneficiaries of Afghanistan’s mineral wealth. The US will support Afghanistan to govern its natural resources through a framework that is accountable, efficient, effective and transparent. As I argued in my article Mineral: The Blood Diamond of Afghanistan, the Afghan government doesn’t have the capacity to develop its minerals now. Let’s get the tools first, and then exploit the natural resources. That way the earnings will be greater, and the primary beneficiaries will be the Afghan people.
Finally, one more point that I found significant in this Agreement is the United States’ commitment to promote exchange programs such as Fulbright and other similar programs. As a Youth Exchange and Study program (YES) alum, I can attest to the benefit of such exchange programs. It definitely helps develop Afghanistan’s human resources in the long run.