Economy of Afghanistan

Afghanistan is an impoverished and least developed country, one of the Worlds’ poorest. In 2010, the nation’s nominal Gross Domestic Product (GDP) stood at $16.63 billion and the GDP per capital was about $1,000.[9] Its unemployment rate is 35 % [10] and roughly 36% of its citizens live below the poverty line.[11] About 42 percent of the population lives on less than $1 a day, according to USAID.[12] However, due to the infusion of multi-billion dollars in international assistance and investments, as well as remittances from expats, the economy has been steadily improving, growing at approximately 12 percent per year during the past six years.[13] It is also due to improvements in agricultural production, which is the backbone of the nation’s economy because over 75% of its citizens are involved in this field.[14]

One of the main drivers for the current economic recovery is the return of over 5 million Afghan expatriates, who brought with them fresh energy, entrepreneurship and wealth-creating skills as well as much needed funds to startup businesses. A number of small factories began operating in different parts of the country in recent years, which not only provide revenue to the government but also create jobs. The Afghan rugs have become a popular product again and this gives the large number of rug weavers in the country a chance to earn better income. While the country’s current account deficit is largely financed with the donor money, only a small portion is provided directly to the government budget. The rest is provided to non-budgetary expenditure and donor-designated projects through the United Nations system and non-governmental organizations.

The Afghan Ministry of Finance is focusing on improved revenue collection and public sector ex-penditure discipline. Since 2003, over 16 new banks have opened in the country, including Afgha-nistan International Bank, Kabul Bank, Azizi Bank, Pashtany Bank, Standard Chartered Bank, First Micro Finance Bank, and others. The Afghanistan Bank serves as the central bank of the nation and the “Afghani” (AFN) is the national currency, with an exchange rate of ca. 50 Afghanis to 1 US dollar.

Afghanistan is a member of the SAARC, ECO and the OIC. It is known for producing some of the finest pomegranates, grapes, apricots, melons, and several other fresh and dry fruits, including nuts.[15] According to the World Bank, economic growth has been strong and has generated better livelihoods since late 2001.[16] Opium production in Afghanistan has soared to a record in 2007 with about 3 million Afghans reported to be involved in the business [17] but then declined significantly in the years following.[18] The government started programs to help reduce cultivation of poppy, and by 2010 it was reported that 24 out of the 34 provinces were free from poppy grow. [19]

The web site [20] reports that Afghanistan budget expenditure is nr.118 on the world wide list with $ 3.300.000.000 in 2009/2010. Measured according to real growth rate, however, Afghanistan comes out as no. 6 from top on the World list with an annual GDP growth rate of 8,9 % (2011), see figure below [21].

Fig. (1) The GDP real growth rate percent of 2011
country ranks, with Afghanistan no.6 on the list [21].

The same source shows that Afghanistan is no. 32 with 36 million populations below the poverty and no. 146 on the list of budget-revenues country ranks with $ 1 billion, but no. 118 on the list of expenditures budget 2011 country with $ 3.3 billion.

Since 2003, when the National Endowment for Democracy funded the Center for International Private Enterprise (CIPE), the organization has been researching into business growth and economic development in Afghanistan. Their report is based on various interviews and discussions with business people in Afghanistan’s six principal cities: (Kabul 204), Jalalabad (123), Mazar-e Sharif (113), Herat (111), Kandahar (102) and Khost (85), a total of 738 interviews with business owners.

According to the interviews, security challenges, corruption, and unreliable electricity, are the key obstacles to economic development. These survey results highlight the Afghan business community’s desire to engage policymakers in Afghanistan on the numerous pressing business development challenges of the country. While chambers of commerce and other business associations exit and the vast majority of Afghan businesspeople recognize their utility and influence, these organizations lack the capacity to provide necessary technical and advocacy services to the business community [22]. The CIPE interview report comprises many charts, of which three are included below (Fig.2: A, B and C).

(A)
(B)
(C)

Fig. (2) Interviews by International Private Enterprise (CIPE) about the involvement of local business in government contracts, in which the majority answered “no” as to wheather they have been bidding (A); about half of the respondents answer that they belong to a business association (B);  and (C), that the overwhelming majority have been in operation for quite some time (6-11 years) [22].

The intertwined economy of Afghanistan is not a recent construction but was essentially developed during wars over the three past decades. From 1953 to 1963 Afghanistan’s Prime Minister Mohammed Daoud Khan had solicited military and economic assistance from both the United States (US) and the Union of Soviet Socialist Republics (USSR), believing that, without rapid growth, Afghanistan would become severely politically fragmented. The country received 50 % of its foreign aid from the Soviet Union between 1950 and 1970, and 30 % from the United States during that same time span [23].

After the USSR entry into Afghanistan in 1979, the western aid was terminated, and USSR paid around $ 200 million per year [23].

During the war against USSR and subsequently during the period with internal fighting from 1992 to 2001, the economy of Afghanistan was almost completely destroyed, what remained was village based economy, depending mostly on Pakistan and Iran.

After 2001, Afghanistan received aid from about 40 western countries, illustrated by the following figure concerning foreign aid and GDP growth during 2001 to 2008 [23].

Fig. (3) The aids and GDP growth during 2001 to 2008,
Source: World Bank, World Development Indicators, 2002-2009  [23].

Afghanistan therefore does not have an independent economy, which in effect creates obstacles to the development of the country’s politics, culture and other social parameters, feeding all sorts of internal conflicts.

[10]”35% (2008 est.)”. The World Factbook. Central Intelligence Agency.https://www.cia.gov/library/publications/the-world-factbook/fields/2129.html?countryName=Afghanistan&countryCode=af&regionCode=sas&#af. Retrieved October 20, 2010.

[11] “36% (FY08/09)”. The World Factbook. CIA. https://www.cia.gov/library/publications/the-world-factbook/fields/2046.html?countryName=Afghanistan&countryCode=af&regionCode=sas&#af. Retrieved October 20, 2010.

[12] “Afghanistan: Food still unaffordable for millions”. IRIN. March 12, 2009.http://www.irinnews.org/Report.aspx?ReportId=83417. Retrieved October 11, 2010.

[13] “USAID/Afghanistan Strategy”. USAID. http://afghanistan.usaid.gov//en/Page.CountryOverview.aspx. Retrieved October 20, 2010.[dead link]

[14] “Objective: Accelerating market-led growth in agriculture”. USAID. http://afghanistan.usaid.gov/en/Program.19c.aspx. Retrieved October 20, 2010.[dead link]

[15] U.S. Embassy, Kabul, Third Afghanistan Marble Conference, May 25, 2011.

[16] Exporting Afghanistan, by P.J. Tobia. Nov 17, 2009.

[17] “Poverty Reduction – Poverty in Afghanistan”. Web.worldbank.org.http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/EXTSAREGTOPPOVRED/0,,contentMDK:20574056~menuPK:493447~pagePK:34004173~piPK:34003707~theSitePK:493441,00.html. Retrieved December 29, 2009.

[18] UN horrified by surge in opium trade in Helmand.

[19] Afghan opium production in significant decline, UNDOC.

[20] http://www.photius.com/rankings/economy/budget_expenditures_2011_0.html.

[21] http://www.photius.com/rankings/economy/gdp_real_growth_rate_2011_0.html.

[22] Sullivan, J.D., Ph.D.; Wilson, A.; Nasib, M.; Naim, M. and Wallace, T., (2009-2010): Afghan Business Attitudes on the Economy, Government, and Business Organizations- 2009-2010 Afghan Business Survey Final report.

[23] Nijssen, S. (Otober 2010): Special Report on Economic Development in Afghanistan. The Afghan Economy: A Brief History.

afgeopol@gmail.com

Mining in Afghanistan

It is estimated that forty million years ago the tectonic plates of India-Europe, Asia and Africa collided in a massive upheaval. This upheaval created the region of towering mountains that now includes Afghanistan. This process also deposited vast amounts of different minerals and other geologic materials, including gold, copper, lithium, iron ore, cobalt, natural gas, and oil etc. in a country later written off as war-torn and poverty stricken [24]. But the fact remains, that Afghanistan’s resources could make it the richest mining region on Earth [25].

According to recent U.S. Geological surveys that were funded by the Afghan Ministry of Mines and Industry, Afghanistan may be possessing up to 36 trillion cubic feet of natural gas, 3.6 billion barrels of petroleum and up to 1,325 million barrels of natural gas liquids. Other recent reports show that the country has huge amounts of gold, copper, coal, iron ore, and other minerals. In 2010, Pentagon officials along with geologists from the United States announced the discovery of $1–3 trillion worth of untapped mineral deposits in Afghanistan [26]. Several independent websites describe the value of Afghanistan like: ”Afghanistan’s resources could make it the richest mining region on the Earth”, and a memo from the Pentagon stated that Afghanistan could become the “Saudi Arabia of lithium” (a deposit of which the West uses vast amounts, e.g. for batteries and other products) [27][28][29][30][31].

Analysts believe that if the Afghan state was to generate even $10 billion per year from its mineral deposits, its gross national product would double and provide long-term funding for Afghan security forces and other critical needs [32].

These vast amounts of minerals are deposited in different provinces around the country, divided by different ethnics, religions, languages, political parties, and cultures. In the past, these differences were unfortunately the basis for many conflicts, the result being a region with many nations (Pashton, Hazar, Tajik, Ozbik, Turkaman etc.). Whenever a nation comes to power, they try to impose their language, culture, and ideas on the others. Of course the other nations resist and try to act similarly.  A future understanding bridging these language differences needs either a compromise on one of those languages, or another international language, e.g. English.

Consequently, there is no body, party, nor organizations, neither official nor unofficial, able to define one Afghan nation acceptable to all.

The problem is that when a person like Karzai rises to power, or a king during Afghan history, or parties like communists and Mojahedin or Taliban, they use their power to gain strength and direction for their ethnic and religious interests, not looking after the general interest. Everyone is trying to force other nations to accept their own rule for nationality and citizenship. For example, Pashton ethnics have always displayed such power, and they think like racists and will try to make other nations like Hazara, Tajik, Ozbik accept their ethnic supremacy. Because of a lack of common interest, these ethnics are not compatible and never will be, if the situation continues like today.
Now we know why the Karzai regime is not successful, even if more than forty countries have contributed with billions of dollars for maintaining and developing security, macro-economics, science etc.: The regime is failing, and furthermore widely known around the world as a back-oriented and corrupt regime, because it lacks any plan for developing other ethnics or nations within the country.

For countries with the same problems and possibilities like Afghanistan, I suggest the following solution: A new political strategy by the name of geological politics!

[25] http://www.independent.co.uk/news/world/asia/afghanistans-resources-could-make-it-the-richest-mining-region-on-earth-2000507.html.

[26] Afghanistan’s Energy Future and its Potential Implications, Eurasianet.org.

[27] “Afghanistan’s Mineral Fortune” (pdf). Institute for Environmental Diplomacy and Security Report. 2011. http://www.uvm.edu/ieds/node/568/.

[28]”Afghanistan: The Saudi Arabia of Lithium?”. News.discovery.com. June 14, 2010.http://news.discovery.com/earth/afghanistan-minerals-lithium.html. Retrieved November 14, 2010.

[29] “Afghanistan is suddenly wealthy: US finds $1 trillion in mineral deposits”. Ksdk.com.http://www.ksdk.com/news/local/story.aspx?storyid=204154. Retrieved November 14, 2010.

[30] Sengupta, Kim (June 15, 2010). “Afghanistan’s resources could make it the richest mining region on earth”. London: Independent.co.uk.http://www.independent.co.uk/news/world/asia/afghanistans-resources-could-make-it-the-richest-mining-region-on-earth-2000507.html. Retrieved November 14, 2010.

[31] Page, Jeremy; Evans, Michael (June 15, 2010). “Taleban zones mineral riches may rival Saudi Arabia says Pentagon”. The Times (London).http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article7149696.ece.

[32] O’Hanlon, Michael E. “Deposits Could Aid Ailing Afghanistan”, The Brookings Institution, 16 June 2010.

afgeopol@gmail.com

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