The Taleban insurgency may still be raging but the poor state of the economy could pose a bigger threat to Afghanistan’s long-term viability, and huge mineral reserves are unlikely to offer a quick fix.
After a decade of near double-digit growth, the Afghan economy has stalled in the last two years, hit by a disputed presidential election and the end of NATO’s combat mission, which formally closed on Sunday. Now the tricky political and security transitions are joined by an equally tough economic hurdle. The fact is not lost on the moneychangers who deal in “hawala” transactions, an informal system of transferring funds internationally seen as a barometer of economic confidence.
A recent survey of more than 9,000 Afghans by the Asia Foundation, a US NGO, found unemployment and a weak economy were the biggest concerns, beating insecurity and corruption.
Since 2002, America has pumped more than $104 billion into Afghanistan — a figure that, when adjusted for inflation, surpasses the Marshall Plan that helped Europe rise from the ashes of World War II, according to the Special Inspector General for Afghanistan Reconstruction (SIGAR), a US watchdog. But the bulk of this money has gone on combat operations rather than reconstruction and while Afghan forces are taking over the fight against the Taleban, their wages still come from overseas support. The Kabul government is expecting income this year of around $1.8 billion —less than the value of Afghanistan’s opium crop, which feeds the coffers of the Taleban. Without the $8 billion a year in international aid currently guaranteed until at least 2016, the Afghan government is unable to pay the salaries of the 350,000 soldiers and police.
However, Afghanistan’s NATO decade has brought huge economic growth — GDP has risen from $2.5 billion in 2001 to more than $20 billion, according to the World Bank, boosted by transport, construction, telecoms and media. Agriculture — not including opium — has also boomed to the point where dried fruits have surpassed carpets in the country’s principal exports. One sector which has caught investors’ eyes more than any other is mining. The US Geological Survey has estimated the value of Afghanistan’s mineral deposits, including gold, iron and copper, at between one and three trillion dollars. This could in theory free the Afghan government of its reliance on foreign aid, but there is a dizzying list of obstacles to exploiting the potential, Afghan mineral expert Javed Noorani said.
Afghanistan needs to reform its law on mines, make the process of bidding for concessions more transparent, extend the rail network and tackle rampant corruption in existing mines.
To do all this and set up a proper mining sector will take at least 10 years, estimated Noorani, who urged President Ashraf Ghani to develop a long-term vision for the sector. Before that, the country needs stability and will have to create services and opportunities to keep its young population, a third of whom live in poverty, away from the lure of extremism.
