News / Asia

Next Afghan President to Tackle Ailing Economy

Supporters of Afghan presidential candidate Abdullah Abdullah attend a campaign rally in the Paghman district of Kabul, Afghanistan, June 9, 2014.
Supporters of Afghan presidential candidate Abdullah Abdullah attend a campaign rally in the Paghman district of Kabul, Afghanistan, June 9, 2014.
Spozhmai Maiwandi
More than three decades of continued conflict in Afghanistan has taken a toll politically, socially and psychologically.

But the greatest damage may have been inflicted on the country’s economy.

By 2001, agricultural production had been disrupted, local manufacturing had come to a halt, and basic infrastructure was destroyed largely because of the Taliban government. Since 2001 and the U.S.-led invasion, the advances made in the local economy have been largely dependent on foreign aid.

During this year’s presidential campaign, voters consistently raised concerns about their economic future.

What will happen to Afghanistan once foreign aid and investment levels off when the U.S. pulls out after 2014?

Landlocked and without access to any ports, Afghanistan has traditionally been an agrarian economy.

In the 1950s and 1960s, the country not only produced enough food for its own citizens but had a surplus, which was exported to neighboring countries and beyond. The chief export commodities were wheat and fresh/dried fruits. There was also an industrial sector, based on agriculture and pastoral raw materials. Goods produced included olive oil, carpets, and Karakul, a fine sheep’s wool native to Central Asia.  

Afghanistan is rich in mineral and precious stones deposits-resources such as copper, gold, and iron ore and gemstones including emeralds, rubies, and lapis lazuli.

Northern Afghanistan has untapped natural gas and oil resources. Because of its strategic location between Central Asia to the north and the ports of Pakistan to the south, various projects are currently underway to develop natural gas and oil pipelines through the country.

Economic growth

According to the World Bank, Afghanistan’s economy has grown exponentially since the fall of the Taliban regime, from $2.462 billion in 2001 when the Taliban was ousted to $20.5 billion in 2012. That growth was due largely to the flow of international development monies.

The U.S. alone has spent more than $100 billion in non-military funds for reconstruction efforts.

The return of millions of Afghan refugees - many without homes and jobs - from Pakistan and Iran have further strained the already precarious economy. The population of the major cities has ballooned with returning refugees and people from the provinces looking for work.

Kabul alone has grown from a city of an estimated 500,000 in 2001 to nearly 3.3 million in 2012 inhabitants to more than 4 million.  Even in the capital city, the majority of Afghans still lack clean water, electricity, medical care, and jobs.

The situation is considerably worse in the provinces.  Afghanistan's living standards are among the lowest in the world, with an estimated per capita GDP of $1,100 in 2012.

Nine donors’ conferences between 2003 and 2010 raised more than $67 billion in military and civilian aid for Afghanistan reconstruction. An additional $16 billion in civilian aid was pledged by donors at the Tokyo conference in 2012.

Corruption

However, Afghanistan’s ability to absorb and spend such large amounts of money along with lax oversight has “created ample opportunities for corruption,” according to a U.S. military study in February.

In his latest report, the U.S. Special Inspector General for Afghanistan Reconstruction says corruption -- and insufficient oversight by the United States of its massive spending -- has led to “schools built so badly they are in danger of collapsing, clinics with no doctors or medical supplies, police and army barracks that are not fit to use, and roads that are disintegrating for lack of maintenance.”  
 
Afghanistan cannot survive, let alone prosper, on international aid monies. Not only is foreign aid likely to decrease as time goes on but also the industries that it has supported are not sustainable in the long term.

Whichever presidential candidate wins in the second round of national elections will have to face growing economic challenges.

Abdullah's plan

As former Foreign Minister Abdullah Abdullah and former World Bank official Ashraf Ghani head toward Saturday’s presidential runoff, the candidates are faced with growing questions of how they plan to improve Afghanistan’s economy amid the challenges of low revenue collection, anemic job creation, high levels of corruption, weak government capacity, and poor public infrastructure. 
 
Abdullah Abdullah
 
  • Received 45 percent of vote in first round of presidential election
  • Served as Hamid Karzai's foreign minister
  • Ran for president in 2009
  • Was an eye doctor
  • Father is Pashtun, mother is Tajik

Ashraf Ghani
 
  • Received 32 percent of vote in first round of presidential election
  • Served as Hamid Karzai's finance minister
  • Ran for president in 2009
  • Former World Bank official and professor at Johns Hopkins University
  • Pashtun

In February 2014, during one debate, Abdullah, the presidential front-runner, said he would support large developmental projects for the construction of infrastructure as a means to boost the economy and to create jobs.

Without citing specifics, he added that the Ministry of Labor would be tasked with reducing unemployment. He also said his administration would have no tolerance for corruption. Abdullah has released a formal economic plan that includes expansion of industrial townships in provinces, foreign investment attraction, and the process of changing the country from a consumption economy to a production economy.

While discussing the issue of national economic development, Abdullah said that his government will focus on issues such as the establishment of a railway to connect southern and northern regions of the country, rehabilitation of basic infrastructure, development of the livestock sector, and promotion of self-reliance in the agriculture sector.

“Our economic policy is to change the country from a consumption economy to a production economy," Abdullah said. "This includes agricultural growth, mines extractions, construction, and other sectors that have the potential to boost the nation's incomes."

Ghani's plan

Ghani, who served as finance minister under President Hamid Karzai and worked as an economist in the World Bank, does not think that large developmental projects would be a major source of job creation.

In a presidential debate, Ghani proposed convening multiple commissions to study the issue of unemployment. Although he did agree that the construction of infrastructure would bring some unemployment relief, he added that given the primarily agricultural base of the Afghan economy, other measures, like strengthening the private sector, were important.

Ghani said the country would have to make major strides toward industrialization in order to become economically self-sufficient. He encouraged foreign donors to assist the country for a few years in this effort, and he cited India and China as two regional powers who already have shown interest in investing in the nation's future.

Running a successful campaign is a different matter than leading a country, and it is unclear whether and how either candidate’s campaign promises will translate into national policy.

And yet, after so many decades of violent transfers of governmental power, even this is a welcome problem.

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