Afghanistan Impoverished by More Than War

Hello readers. Welcome to the first of my Owleye blog posts – a monthly column of commentary on the most important issue facing the world – in place of my Writings on The Wall blog posts, that now says goodbye. This one is on Afghanistan’s economic troubles and its future.

After the longest war that the US has ever fought, it has left Afghanistan not just in tatters, but an impoverished country. And it’s not merely on account of the war, but because Afghanistan is a country that has been living on life-support. International aid assistance is what has kept the country going for over a decade. And who knows if it will continue and for how long, now that the West has fled?

Clearly this state of matters is not tenable. Besides, while the economy was on life-support, politically and militarily, the country was clearly going downhill. Even while the war was being fought, Afghanistan tried setting up democratically elected governments and only two years ago, did the last election conclude there. The fact of the matter is that no matter how much the West intervenes in setting up or supporting regimes in Afghanistan, the country is a deeply tribal one with several tribes represented by their own local leaders and some who are even warlords. From what one reads, important policy matters are still decided by the loya-jirga, a council of tribal leaders and elders, if you like.

Now that the US has pulled out of the country and NATO forces too have left, following a take-over by the Taliban, the country faces a perilous future. Why it had to end this way is another discussion beyond this piece, but America and the international community have to accept some responsibility for it. The biggest irony is that the Taliban itself was a creation of the US, originally as mujahideen meant to fight Soviet occupation forces. If all this sounds terribly familiar, it is because the US has always resorted to this strategy: arm rebel forces and force regime change. Except this time, it backfired on them, and after 20 years of futile war in which hundreds of thousands lost their lives on all sides, it is the US who have been forced out of the country. But even as they were preparing to leave, they were trying to negotiate in talks with the Taliban, their enemy of 20 years. They also justified their actions with talk of a good Taliban and a bad Taliban!

In my opinion, these talks for a negotiated settlement leading to a democratically elected government with political participation by the Taliban ought to have been held years ago. If the US was fighting terrorism and was in search of Osama Bin Laden, they found him in 2012. That ought to have been the end of the offensive and talks should have begun soon after. Trying to negotiate after yet another decade of war and eager to arrive at a quick settlement, even agreeing to the Taliban condition that the Afghan government be kept out of the initial discussions, the US sent the Taliban a clear signal that they were rushing for the exits. It was game over already, for the US-led NATO forces.

If we look at where Afghanistan is now and its future, it is in the hands of the Taliban, the very terrorists the US had been fighting. When Biden says that the US was never there for nation-building but for counter-terrorism, he ought to realise the irony of his statement. The economic controls, however, are still in the hands of the US and its western allies. While the Taliban is trying to form a government, the international community is keen on maintaining its leverage over the regime by freezing their assets. One wonders what moral high ground the US and the West has anymore in Afghanistan, having fled the country and left millions of ordinary Afghans to their own devices, or worse, at the mercy of the Taliban. And isn’t it also hypocrisy that while the US thought negotiating with the Taliban was alright, recognizing their government is not.

The Afghan economy is in a shambles. According to the World Bank, the country’s GDP of around US $20 billion is mostly thanks to international aid assistance. Almost 60%-70% of the population lives off agriculture, which is the mainstay of the economy. Unfortunately, much of the land under cultivation especially in southeast Afghanistan is for opium which, while curtailed during most of the war, has started to grow again. There is hardly any manufacturing, and the rest of the economy is propped up by services of a very elementary kind such as basic education, healthcare, finance, communications and transport, among others. It is here that international aid assistance has been making a difference, at a very localized level.

The most positive signs for the Afghans in the past couple of decades have been the huge strides made in girls’ education and women joining the workforce. That looks doomed as the Taliban plan to impose sharia law which clearly forbids women from stepping out of their homes, and reports of the Taliban’s earlier term certainly vouch for that. On the downside, the poverty ratio by the country’s own poverty lines, has risen steadily since 2007.  

There is hardly any private sector investment, and understandably so, since that requires security and political stability at the very least, of which there is precious little. Physical infrastructure too is inadequate, though India is said to have invested in quite a few projects. Afghanistan is believed to be quite rich in natural resources and mining is an industry that can be developed in an organized way in the future.

Economically, Afghanistan resembles Bangladesh in its early years, since the latter too developed mainly on the basis of international aid assistance and NGOs. There is yet another country with which a parallel can be drawn: Rwanda, after its brutal genocidal conflict of the 1980s and 1990s. Both Bangladesh as well as Rwanda emerged to become self-sustaining economies through the help of the international community and massive aid assistance, though I would prefer to compare it with the former since it is also in South Asia and closer home.

What can Afghanistan learn from the Bangladesh experience? Plenty, but first that the country needs a competent government and proper institutions. Bangladesh is perhaps a much more homogenous society than Afghanistan is, and even while being Islamic, is not governed by Sharia law. More importantly, Bangladesh has never been so racked by terrorism as it has suffered from natural disasters like cyclones, floods and famines. The country also starts off from a much higher base in terms of education, health and other human development indicators. Indeed, it is ahead of even India on some of them now.

Like in Bangladesh, international aid assistance can be used to make individuals and communities independent and self-reliant in Afghanistan. To that end, entrepreneurship in small scale industries ought to be encouraged. To enable that, a well-functioning system of finance and credit needs to be set up. In Bangladesh it was microfinance that was a huge success, and a similar system can be set up in Afghanistan.

Along with progress in education and healthcare, occupational training, and financial credit, private sector investment must be encouraged gradually. This might take longer since political stability and security are prerequisites for this. Meanwhile, physical infrastructure too must be developed, be it in roads, power, water, telecommunication, ports, etc. If Afghanistan receives a specific sectoral boost, as Bangladesh did with garment exports, it would do wonders for its economy and its people.

On trade, though, Afghanistan suffers from a significant trade deficit, as one would expect, given that it imports nearly all its requirements of manufactured goods. The latest import bill according to the World Bank is around US $ 8.6 billion and its trade deficit has traditionally been almost a third of its GDP. Meanwhile, its foreign reserves are only around US $ 9.5 billion, enough to last just a year of imports.

Afghanistan’s foreign reserves are not even accessible to the country since all of it is frozen by the US and its western allies. And since the Taliban takeover, even the IMF has withheld the next tranche of its loan of some US $400 million. Other international aid assistance too will probably stop flowing into the economy, choking its growth.

This cannot continue for long. At the most recently concluded UN Conference on Afghanistan in Geneva, around US $ 12.5 billion are reported to have been pledged as economic assistance. But, as always, there is a long path between pledging assistance and it reaching the people of Afghanistan, especially given the current stalemate between the new Taliban government and the international community which, for the greater part, has refused to recognize the government.

The Taliban for its part, has been issuing statements to the media ever since the US started withdrawing its troops along with Afghans, that have not borne out in practice. For example, they said they are not against women studying and working, but were asking them to stay home for their own safety until law and order is restored. Weeks later, even after the government has been announced, women are still being kept indoors. In fact, the ministry for women’s affairs has been done away with. They said they would form a representative government including leaders from different provinces and tribes, but have announced a cabinet of hardline Taliban leaders.

If the West led by the US persists in imposing sanctions and strangling the economy, they risk losing the sympathy and support of ordinary Afghans, who already feel betrayed and abandoned by the NATO forces. There is also a humanitarian crisis to consider, and immediate aid to be delivered. The way forward is dialogue and discussion with Afghan leaders; perhaps the foreign reserves can be unfrozen in tranches, based on certain conditions that the Taliban government must meet. Otherwise, the country could very quickly spiral into a civil war, which would end up radicalizing the extreme elements of the Taliban and its Al-Qaeda allies, as well as IS, even more.

I have not touched upon Pakistan’s importance in what goes on in Afghanistan, as that too is a separate discussion, and I wished to focus on the economic troubles that Afghanistan faces here. However, this article in The Economist on what the world can expect from Pakistan in the backdrop of the current face-off is worth reading.

If world leaders don’t want Afghanistan to become a haven for terrorism, as they keep saying, they have no choice but to engage with the new government and chart a way forward. And they would do well to heed the lessons of WWI and the Paris Treaty negotiations, in which intransigence on the part of the Americans led to the rise of Nazism and Hitler a decade later. Else, we may have to be prepared for another decade-long conflict in what is already one of the most troubled regions of the world.

What shall Afghanistan’s future be: Bangladesh, or Yemen?

The animated owl gif that forms the featured image and title of the Owleye column is by animatedimages.org and I am thankful to them.

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