Are we there yet papa smurf?
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A roadmap for Afghanistan's reconstruction
November 28, 2001
ISLAMABAD - Over the past few years, international assistance to Afghanistan has ranged from between US$200 million to $300 million annually, with most of it devoted to humanitarian relief projects.
This figure will be a mere drop in comparison to what it will take to reconstruct the country, ravaged as it is by more than 20 years of conflict, a three-year drought, loss or degradation of most of its infrastructure, depletion of its human resource base and social decay.
Key parts of the economic infrastructure are impaired, including banking, treasury, tax collection, civil services and the judicial system. Just the clearance of landmines alone from all mine-contaminated areas in the country could cost as much as $500 million.
Against this backdrop, a three-day international conference on "Preparing for Afghanistan's Reconstruction" opened in the Pakistani capital on Tuesday. The conference, organized by the World Bank, the Asian Development Bank (ADB) and the United Nation's Development Program (UNDP), has attracted wide interest with more than 200 delegates from around the world attending, among them a number of Afghans.
While there are no firm figures yet on the cost of reconstruction, the World Bank's first estimate puts the humanitarian and development aid bill at $1 billion-$2 billion a year for the next decade.
As an example of other reconstruction programs, in the West Bank/Gaza (with a population of less than 2 million compared to Afghanistan's 20 million) a total of $3 billion of reconstruction assistance was proposed in the first two years. In Lebanon (population 4 million) reconstruction assistance was in the range of $400 million per year for 10 years. In Bosnia (population 5 million) total pledges (for humanitarian relief and reconstruction) were $5.4 billion during 1995-99. And East Timor, with a population of less than half a million, is receiving $350 million of reconstruction aid over a three-year period.
At the conference in Islamabad, groups of delegates will discuss issues most critical to the immediate post-crisis recovery period. These include agricultural recovery and food security, community participation and leadership, demobilization, employment generation, mine action, private sector development and public sector capacity building.
The groups will look at the challenge of social and infrastructure development in Afghanistan which embraces education, health, the role of women in rebuilding the country, water and sanitation, roads, irrigation, housing, energy and telecommunications and the environment. The final sessions on Thursday will look ahead with perspectives from Afghan participants, NGOs, development banks, the UN and donors.
Afghanistan was a founding member of the ADB in 1966 but the ADB's operations in the country were suspended in 1979. Now, the ADB has established a country team on Afghanistan, but first it has to find donors to cover the $16 million that Afghanistan owes the organization. Similarly, Afghanistan's $23 million debt to the World Bank has to be cleared before it can be extended further assistance.
The ADB says that it has learned from its operations in post-conflict situations. In Cambodia it says that it should have increased the already substantial resources allocated for institutional capacity building. In Tajikistan, it initiated measures to establish appropriate policy and institutional frameworks before undertaking rehabilitation programs in the power and road sectors. This sequencing, it says, led to more successful implementation.
Speaking on Tuesday, a senior UNDP representative for Afghanistan said that reconstruction should not be deferred until a stable government is set up in Kabul: "There is a need to act immediately. Creating a peace economy as soon as possible is the objective."
Reconstruction plan
# The World Bank, in partnership with the rest of the assistance community, aims to: formulate a reconstruction strategy and plan for Afghanistan whose process and product would follow the model of the Comprehensive Development Framework (CDF);
# design and help put in place appropriate mechanisms to fund and manage reconstruction;
# initiate full-scale needs assessments leading to the development of detailed reconstruction plans, and;
# develop specific plans for areas where the bank can be of help through financial support and/or technical assistance (TA).
The reconstruction plan would have both short-term and medium-term components. Examples of short-term priority areas include:
# agricultural recovery and food security;
# generating livelihoods for returning refugees and displaced people;
# supporting existing communities through provision of basic services and small-scale development and empowerment programs;
# rapid rehabilitation of Afghanistan's main road network;
# expansion of the de-mining program;
# massive short-run employment generation through public works programs;
# re-starting and expanding key social services like education and health, with a focus on reaching girls and women, and;
# human capacity mobilization for social services, infrastructure, and public administration.
Other elements of the reconstruction plan will take time to reach fruition and have an impact. Notable examples include:
# establishment of sound economic management institutions (central bank, ministry of finance, treasury, and statistical systems);
# developing education and health systems that reach the bulk of the population (something which has never been achieved in Afghanistan);
# developing a lean, effective, and honest civil service and institutions of public accountability;
# urban management, and in particular avoiding permanent large "refugee cities";
# enabling environment for private sector development - particularly to attract and productively utilize Afghans from Pakistan, Iran, and the Middle East;
# export development, focusing on agricultural and livestock products and minerals;
# energy development and management, and;
# environment and natural resource management (especially forestry).
The 'economy'
Afghanistan's pre-war economy was mainly based on agriculture and animal husbandry. The country has a low population density due to difficult topographical and climatic conditions (high mountains covering most of the country, extremes of temperatures, and arid to semi-arid climate). In 1978, the last year of peace, Afghanistan was largely self-sufficient in food and was a significant exporter of agricultural products.
Agriculture was largely concentrated in narrow river valleys and plains where irrigation water from snowmelt was available. Manufacturing industry was largely undeveloped, with only a few plants established (in textiles, medicines, cement, etc).
Afghanistan's strategic position during the Cold War period made it a large recipient of foreign aid, which funded the running of the state without substantial domestic taxation. Macroeconomic policy was balanced, with budget surpluses, a market-based, competitive exchange rate and modest foreign and domestic debt. As a result of foreign aid, the country had a relatively good major road network, as well as some other infrastructure including major irrigation and hydroelectric facilities. This modern infrastructure, however, did not extend beyond the main arteries and urban centers. Social and other services (such as education and health) were largely limited to the relatively small urban sector.
The long drawn-out war of Soviet occupation and subsequent internecine conflict severely damaged Afghanistan's economy. By the mid-1990s, most of the country's limited modern infrastructure was destroyed and traditional irrigation systems had greatly suffered from destruction and lack of maintenance. Even more important than the physical damage was the increasing breakdown of the state and civil society over time and the progressive erosion of institutions - both modern and traditional - which had governed the pre-war economy and society.
Government-provided social services, which had never had a strong outreach into the rural areas, atrophied and to a large extent stopped functioning. NGOs and UN agencies have essentially taken up the task of providing essential social services to parts of the population, building on community-based efforts in various parts of the country. Inflation wiped out the value of the Afghan currency in the 1990s, and at present the currency is printed by the Northern Alliance without any monetary control. Agricultural output came down sharply, livestock herds were depleted, and large-scale industries almost ceased functioning. Millions of Afghans became refugees in neighboring Pakistan and Iran, and to a lesser extent elsewhere. This external population played an important role in supporting Afghanistan's economy through remittances. And finally, land and infrastructure were widely and indiscriminately sown with landmines, causing enormous human and economic losses.
There was a modest economic recovery in the mid-1990s in areas that became largely free of conflict. Agricultural production increased; livestock herds sharply rose in numbers, taking advantage of widely available unutilized grazing lands; and horticultural production also grew based on restoration and expansion of orchards and vineyards. Substantial numbers of refugees returned to their homes with international assistance. The economic recovery was concentrated in areas taken over relatively early by the Taliban. However, the deterioration in social services (particularly education) was aggravated by the Taliban's social policies, which largely excluded women from work and girls from school.
The introduction of a certain degree of stability in large parts of the country also facilitated the growth of various kinds of unofficial economic activities, most notably long-distance trade (particularly re-exports to Pakistan) and opium poppy cultivation. Although these activities had always been present, they underwent unprecedented expansion in the 1990s. Unofficial exports to Pakistan are roughly estimated to have exceeded $2 billion in 1996, and by the late 1990s Afghanistan had become the largest producer of opium poppy in the world. Also falling in this category of economic activities is uncontrolled exploitation of natural resources - timber, gems, marble and granite, etc - which have resulted in extensive deforestation and environmental degradation, among other problems.
Most recently, Afghanistan has been hit by a severe, protracted drought, which started in 1999 and has lasted until the present. Given the breakdown of the state and civil society, and consequent inability to respond adequately, this drought has led to famine. Crop production has been halved and livestock herds heavily depleted, more than erasing the modest gains of the early and mid-1990s. Large and increasing numbers of people have lost their means of livelihood and have become displaced, either internally or to neighboring countries. Malnutrition has significantly worsened, and starvation deaths have been reported. The impact of the drought, which would have been serious under any circumstances, has been aggravated by the continuing conflict in parts of the country (particularly in northeastern and central Afghanistan), and by the run-down condition of irrigation systems and other agricultural infrastructure.
In sum, Afghanistan's economic structure has been gravely weakened, distorted, and made more vulnerable through two decades of conflict. Agriculture (including livestock), the most important economic activity, is highly vulnerable to natural conditions as is demonstrated by the current drought. Trade activities are vulnerable to the policies of neighboring countries, most notably Pakistan - in fact, there appears to have been a substantial decline in Afghanistan's unofficial re-exports to Pakistan in the recent past, probably reflecting changing policies and stronger enforcement in Pakistan.
Remittances, another major source of income, tend to be more stable, but nevertheless they are vulnerable to changes in economic conditions in the source countries. The Taliban's recent complete ban on opium poppy cultivation, which was a positive move and has been largely effective, has sharply reduced the incomes of those small farmers and rural wage laborers who were dependent on poppy cultivation and related work. Foreign aid, another important albeit smaller source of income, has increased sharply in the wake of the drought but also is subject to fluctuations and severe logistical constraints. The ongoing conflict has led to a transformation of social and economic networks. Although the majority of the territory of Afghanistan has not been constantly at war, economic distortions and vulnerabilities affect the entire country, and there is a pervasive sense of insecurity.
Afghanistan's economic situation has significant regional spill-over effects through unofficial trade, narcotics, terrorism and extremism, financial flows, and movements of people. These spill-over effects tend to undermine revenue collection, governance and the effectiveness of economic policies in neighboring countries, particularly Pakistan. The long drawn-out conflict situation, without an effectively functioning state most of the time, has led to a situation where conflict-related or conflict-enabled economic activities and structures have become entrenched, and there are significant groups who are benefiting from the current situation and therefore have a vested interest in its continuation.
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