Can Afghanistan’s Economy Stand on Its Own?
Image Credit: REUTERS/Luke MacGregor

Can Afghanistan’s Economy Stand on Its Own?

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At the turn of the century Afghanistan was economically comatose. The arrival of international forces in 2001 also marked the start of unprecedented international support. After 12 years of conflict, Afghanistan remains a burden for the international community.

The day is approaching when Afghanistan will have to stand on its own. To do that, Afghanistan will need to adapt to the dynamics and rules of globalization. The international community and incumbent administration have made a start to this adaptation process. The new administration will have to continue it with stronger commitment and at a faster pace – it has no pretexts to do otherwise.

Over the last twelve years, most media outlets, think tanks and experts have focused on the challenges that Afghanistan faces. Given the ravages of decades of conflict, this is not surprising, but it has led to a virtual “analysis paralysis.” Despite the very serious security challenges that clearly remain, few experts have underlined the fact that Afghanistan enjoys a highly unique convergence of factors that it could potentially seize to develop the nation

To begin with, there are a myriad of countries contributing to Afghanistan in a variety of ways: militarily, diplomatically, or financially. The U.S. has allocated an astonishing $100 billion of nonmilitary funds to Afghanistan since 2002, the largest amount the U.S. has ever spent on reconstructing a country. Even after the drawdown of forces this year many nations will remain committed: Germany, for example, has committed 430 million euro ($587 million) a year until at least 2016, while major aid organizations like the Asian Development Bank and the UN will also remain dedicated for years to come. This, the international community’s support and attention, is the exogenous advantage the country enjoys.

Add to this a set of endogenous advantages. Some of these have been in place for years, while others have emerged only recently. Among the latter are Afghanistan’s democratic political institutions, which permit participation and competition. Allowed to work as intended, these institutions should prevent the country becoming subject to the whims of a single authority. The election process meanwhile functions as a flushing mechanism for entrenched elites and ossified ideas – on paper at least. Supporting this and giving civil society a voice is a free media: today there are some 35 TV stations, over 100 radio stations and more than 150 newspapers. These are luxuries that civil societies in so many other underdeveloped nations can only dream of.

Afghanistan also boasts an astonishing resources endowment worth nearly $1 trillion. These include massive veins of coal, copper, lithium, gold; deposits of gemstones, and substantial natural gas and oil fields. Moreover, it hosts a number of rare earths; China currently controls over 90 percent of the global supply of rare earths.

Afghanistan has nutrient-rich soils for significant agricultural output: some 12 percent of the arable land of the country can annually produce food for up to 160 million people according to the chief economic advisor to the president of Afghanistan. Investing in this sector could enable food processing and substantial exports. Moreover, while some claim that the nation suffers from the tyranny of geography, it does in fact occupy a unique position connecting landlocked Central Asia with South Asia. This offers potential as a trade and energy corridor and subsequent prospects for downstream industries.

If all of these advantages could be seized, the revenues generated could then be invested in physical infrastructure, as well as social infrastructure such as schools.

The brains (and muscle) to develop the country, the Afghan people, is there: a youthful labor force (aged 0-25) of some 23 million, representing an incredible 68 percent of the population. Obviously those brains would have to be filled with the knowledge needed to develop the nation. Primary school enrollment has, at least, gone up, from 21 percent in 2001 to 97 percent ten years later.

The cherry on top? Afghanistan has the good fortune of having two manufacturing giants next-door: China and India. Both are captivated by its natural resources endowment. Afghanistan could take advantage of their reemergence and join their economic orbit. Mining and smelting operations will generate significant tax revenues, employment and spin-off enterprises and initiate much needed economic growth.

This array of exogenous and endogenous advantages and its very timing is an opportunity that many other developing nations could only dream of. As with all opportunities, it will not linger and Afghanistan will have to quickly embrace it with both hands if it wants to develop – and circumvent looming social disorder. The incredible youth ratio can be an advantage, but it could also be a liability: youngsters who do not have sufficient incentive or a stake in construction might instead lean towards destruction, especially unemployed and frustrated angry young men. Socioeconomic stasis is also a strong motivator for insurgents – the longer socioeconomic development wanders the more confident they will grow and the more appealing their lure to Afghan youth.

Afghanistan needs to realize the enormous development potential it possesses; there is a convergence of factors that will most likely not return for generations. If the new administration lacks the political determination and fails to seize these opportunities, Afghanistan will continue to disappoint and decades hence Afghans themselves will only look back and lament.

Richard Ghiasy is a Research Fellow at the Afghan Institute for Strategic Studies (AISS) in Kabul, Afghanistan. The views presented here are the author’s own and are not necessarily associated with the views of AISS. Fraidoon Sekander is Director of the Development Economics Department at AISS.

Comments
18
Aman kazak
April 17, 2014 at 15:27

With proper utilization of natural resources and modifying corruption from its department, Afghanistan can stand among the developed
countries

Haav
March 7, 2014 at 02:03

$100B US funds for nonmilitary aids? W.T.F.? Who pocketed those money. American ‘contractors’ or Afghan warlords? We need those money for better education and healthcare.

Jiban Krishno Roy
February 3, 2014 at 02:04

The significant endogenization 97% primary enrolment will provide electrolyte to young Afghan blood. If committed Afghan Leader can keep an eye on inequality many problems of choices will be compromised and development caravan will move in desired speed. Thanks my friends for time tuned analysis of Afghan prospect.

tom
January 31, 2014 at 13:47

US need to stop interfering into others’ nation politics. and others nation need to stop turning to US for help. The world is big, go ask China, Russia, European Union, etc. American public are tire of interfering/helping others nation. unless it’s trade deal go some where else

Irfan
February 1, 2014 at 01:59

Afhans didnt asked to be bombed, You saying like they were really happy when you arrived.

Anjaan
February 3, 2014 at 03:00

@ Tom,
Wish it was that simple … you American public are naive, to say the least … do you think the US State Dept. is on a charity mission in Afghanistan … ?? … do you think the US have spent hundreds of billions and sacrificed thousands of American soldiers for charity … ?? … do you think the US offers massive military and economic aid to Pakistan, a known heaven for terrorists, for charity … ?? … do you think the US relations with Saudi Arabia, a known financier of the terrorists, including Al Qaeda, is for world peace … ?? …. you American public have to ask your Govt. what is the Eurasia strategy of the US State Dept. and how far they are willing to go, to pursue the strategy …

Jackov
January 31, 2014 at 05:02

With a 50% literacy rate among the population, Afghanistan will never have a modern, industrial economy.

Dilawar Ahmadzai
January 31, 2014 at 03:26

80 billion dollars are spent by the US forces. Afghan government has nothing to do with that. Afghan government was not allowed to audit these projects. only 11 billion dollars are spent directly by Afghan government which is mostly visible in the country. to give an example of the US projects in Afghanistan, its better to talk about the projects such as Gardez Khost roads which is 88 klmts. the amount estimated for this contract was about 120 million dollars. its the most expensive road of the world. its worth mentioning that the condition of the road is worst than before.

Anjaan
January 31, 2014 at 05:06

The US led wars abroad are a way for the US contractors and their benefactors in the US Congress and the State Dept. to make money … !!

Faiysal AliKhan
April 4, 2014 at 08:29

Dear Mr. Ahmadzai,

I would be very interested to hear more of your views on the Afghan economy and what are areas of opportunity or potential you see for the future?

Dilawar Ahmadzai
January 31, 2014 at 03:13

the person who wrote this article should do a deep study about Afghanistan. the natural resources of Afghanistan according are worth 3 trillions. these estimation are also less than that of the estimation which the Russian did in late 1980s. according to Afghans officials these estimations covers only 35% to 45% of resources. moreover today’s Afghan generation is not the generation of 30 years before. the western media always undermine the ongoing change in Afghanistan. they are mostly concern about making propaganda in order to play their role in presenting their foreign policies.

Happyding
January 31, 2014 at 03:09

There is no security to begin with and the Afghan system is basket case. About the mentioned manufacturing giants next-door: China is too far away and it does not want to get involved in any internal politics. About India, well, India is India.

Joezhifu
March 22, 2014 at 18:42

Just simply don’t fxxk with them. However for last few centuries the West kept on trying to bugger with it. Hope everyone can leave them alone and let them heal.

Mark Thomason
January 31, 2014 at 00:48

“To do that, Afghanistan will need to adapt to the dynamics and rules of globalization.”

No, not really. It is a domestic policy choice whether to use tariffs to protect domestic light industry and agriculture, and whether to impose duties on exports of raw materials such as oil nations do. There is a surplus of capital in the world chasing investments, so if there is some profit there will be investment, not matter if it is not on the most one-sided lucrative terms for foreigners. The Mexican experience with NAFTA crushing its rural population (almost all of Afghanistan is rural) is a warning NOT to participate in globalization as the US promotes.

Anjaan
January 31, 2014 at 05:07

Totally agree …

Anjaan
January 30, 2014 at 20:05

To succeed as a viable nation, the least Afghanistan needs is stopping of interference and bad influence of the imperial powers from the west, in its internal affairs … the US led occupation forces must be out of the country lock, stock, barrel and drones a.s.a.p. … let the Afghan people take control of their own destiny …

Mark Thomason
January 31, 2014 at 00:51

No nation has ever prospered while foreign nations fight a war on its soil. Being a battleground is just destruction.

joe zhifu
January 31, 2014 at 12:21

True. Let them be and let them manage it at their own speed and style. They need help then they will ask. You wish to give them give and if not then go to another country

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