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  AFGHANISTAN

REPUBLICAN REFERENCE

Area (sq.km)
647,500

Population
26,813,057

Capital
Kabul

Currency
afghani (AFA)

President
Hamid Karzai

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Afghanistan

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Background:
Afghanistan was invaded and occupied by the Soviet Union in 1979, in the attempt to rescue and consolidate the pro-Soviet regime in place. It took 10 years before the USSR could withdraw its forces, having been delayed by the fierce resistance of anti-communist mujahidin forces, supplied and trained by the US, Saudi Arabia, Pakistan, and others. The pro-soviet regime survived for two years and a half, contrary to the expectations of many, and then fell in April 1992, having outlived its own mentor, the USSR. Fighting subsequently continued among the various mujahidin factions, but the fundamentalist Islamic Taliban movement had been able to seize most of the country. In addition to the continuing civil strife, the country suffers from enormous poverty, a crumbling infrastructure, and widespread land mines.

Update No: 03

After an apparent good start, between mid-January and mid-February the interim government of Hamid Karzai appeared to run into trouble, especially with regard to its relationship with the warlords who were part of the anti-Taliban coalition. The military expulsion of its newly appointed governor from the town of Gardez and the row between Gul Agha, governor of Kandahar (southern Afghanistan), and the Iranian authorities over support to warlord Ismail Khan in western Afghanistan were the most publicised events. The fact that President Bush and several members of its administration have openly sided with Gul Agha and the others who accuse Ismail Khan of receiving support from Iran has contributed to attract international attention. However, for Afghanistan's internal politics the most worrying development was the increasingly tense situation in northern Afghanistan, where the local strongman, General Dostum, is seeing his predominance over the region increasingly challenged. Local commanders of Jamiat-i Islami, the dominant party in Kabul, possibly helped by the local Pashtun tribes, which an ally of Jamiat, Ittehad of Prof. Sayyaf, is trying to recruit among its followers, appear to think that they can expand their influence at the expense of Dostum. Despite a ceasefire around the city of Mazr-i Sharif, clashes have continued to take place in the surrounding provinces throughout February.
The widespread feeling is that, without American planes circling over Afghanistan and the presence of American and other troops on the ground, Afghanistan would already have slipped back into the civil war, this time between the members of the United Front, which defeated the Taliban. The assassination in mid-February of the Minister for Tourism, monarchist Abdul Rahman, allegedly by members of Jamiat-i Islami, has done nothing to ease this feeling. Such developments have pushed Karzai to renovate and strengthen his call for a drastic increase in the number of international peacekeepers deployed in Afghanistan. Despite a general agreement that this would be an opportune move, few countries seem willing to actually provide the troops required. Since his call, only Bulgaria has come forward. The collection of weapons, which had started in earnest amongst much fanfare in early January, has now stalled and there are reports that more weapons are actually being distributed to the populations by some militias, especially in northern Afghanistan where the situation is very tense. 
On the political side, the only good news appears to be that the Shiite party, Hizb-i Wahdat, appears to have decided to stand by the Karzai government, even daring to criticise its mentor, Iran, for the alleged interference in Afghanistan internal affairs. The failure to improve security quickly enough, together with the severe climatic conditions, continue to hamper the relief efforts in some parts of northern Afghanistan, where people are still reported to be starving. 
While some reconstruction money is finally beginning to flow to Afghanistan, together with former Taliban funds now being unfrozen by the US government, the political and security climate in Afghanistan is such that international investors are making clear their unwillingness to take part in the reconstruction effort. It appears increasingly obvious that at least in its early phases rebuilding Afghanistan will be the job of neighbouring countries, whose motives are rather more political than business. Iran, for example, is offering plans to build tens of small factories within Afghanistan, together with roads and bridges. Russia, on the other hand, is offering its expertise in heavy engineering, while Pakistan appears intent on bidding for reconstruction of the telecommunication infrastructure. After the Karzai-Musharraf meeting in early February, Pakistan appears to have regained some ground in terms of its ability to take part in the re-building of Afghanistan and influence the Kabul government. Pakistan had already committed itself to contributing US$100 million, of which US$10 million are to be disbursed immediately. 
In the meanwhile, the Karzai government is starting to reactivate some of the state structures that had crumbled under the weight of 23 years of war. The central bank is now active again, although for the moment being it is doing little more than analysing the situation. Its main concern is taking control of the money supply, which has long been disrupted by the fact that three of the main political players in the country, that is Jamiat, Dostum and Ismail Khan have thrown into circulation large quantities of freshly printed currency to fund their military effort. After having continued to use Russian-printed Afghanis until January to buy influence and pay its troops, Jamiat has now agreed to hand over US$200 million worth of Afghanis to the central bank. At the same time the wild printing of Afghan notes in the neighbouring countries appears to have stopped, so that Abdul Sattar, the newly named governor of the central bank, can now claim to have brought the situation under control, although not everybody agrees. The IMF even proposed a temporary dollarisation of the economy as a means of stabilisation.
The debate about reconstruction, in any case, is just about starting. IMF and World Bank delegations have now arrived in Kabul to study the situation and their assessments will certainly be influential. Some international firms have already been commissioned to carry out urgent reconstruction work, mostly with material imported from Pakistan, although Central Asian countries are also scrambling to participate. The focus, however, remains on security and building a 250,000-strong army and a 70,000-strong police, for which Defence Minister Fahim has been seeking Russian assistance during his February trip to Moscow. Significantly, the Russian Foreign Minister Ivanov had travelled to Kabul a few days earlier. While there is certainly a rationale in the statement put forward by the government, that security must come first, international donors are wary of seeing their money end up being invested in the army, although helping to re-establish a proper police force is seen in a rather better light. Even contributing to rebuilding the government structure is not a popular task among donors, who would rather like to be associated with some visible project beneficial to the population. Moreover, some donors, foremost among them Japan, are keen to see the establishment of some body to supervise the way money is spent. If enforced, this could limit the ability of the government to buy support from local groups.
Paradoxically, one of the biggest obstacles to the consolidation of Karzai's government is the attitude of the Bush administration, which continues its bombing campaign despite its decreasing military effectiveness and the continuing damage being inflicted to civilians. This contributes to making Kabul-nominated governors unpopular in the southern Pushtun belt of the country. Moreover, under American pressure the Karzai government might be moving too quickly in addressing such issues as the ban on growing of poppy fields in several regions of the country. Assuming it really tries to push the local governor to enforce such policies, this could detract from its popularity too. 

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AVIATION

Afghan airline seeks 10 planes for battered fleet


Sharjah, United Arab Emirates-Ariana Afghan Airlines said on 11th February that it wants to buy 10 aircraft to rebuild its war-battered fleet and charter up to four freight planes to resume cargo services, key to reconstructing Afghanistan, Reuters has reported. 
"We have asked the government to provide us with five wide-body aircraft, five narrow-body aircraft and some small aircraft for bush flying in Afghanistan," Feda Mohammad Fedawi, the national flag carrier's technical adviser told reporters. 
Ariana, down to just two planes after years of war and neglect, flew a Boeing 727-200 to Sharjah airport in the United Arab Emirates on Monday, resuming flights to the UAE, a major exporter to Afghanistan and home to 100,000 Afghans. 
Fedawi said the cash-strapped airline did not know yet whether it would order new or used aircraft. He said he would have discussions in the UAE about chartering three or four freight planes from regional airlines, such as Il-76s, An-24s or Boeing 707s. 
"We expect to get money (to purchase planes) from the government from what the donor countries gave Afghanistan during the Tokyo talks," Fedawi said, referring to total pledges of US$4.5 billion in aid at the donor's conference last month. 
"And we expect to get some aircraft as a grant. We want the United States to give us (planes) because they've destroyed our aircraft," he added. 
Ariana had three Boeing 727s and five Antonov 24s before the October launch of U.S. air strikes on Afghanistan to topple the Taliban movement and to capture Osama bin Laden, blamed by Washington for the September 11 attacks on U.S. cities. 
Ariana used to operate five flights a week to Sharjah and Dubai, the Gulf's trading hub, before U.N. sanctions were imposed on Afghanistan in 1999 in an effort to force the Taliban to turn over bin Laden, then suspected of masterminding bombings of U.S. embassies in Africa. 
The U.N. Security Council lifted the sanctions in January, which had included a flight ban on Ariana. 
Fedawi said the airline would start daily freight flights to Sharjah on Tuesday, eventually increasing to five flights a day in addition to one passenger flight per week. He said he would discuss resuming flights to Dubai during his three-day visit. 
"We will start to transport humanitarian aid, construction material and maybe in the future tourists. Many officials, business people and journalists are flying to Afghanistan," he said, adding that the airline expected to fly home more than 1,000 Afghans held in the UAE as illegal immigrants. 
The UAE was one of only three countries that once recognised the ousted Taliban. Afghanistan's interim leader Hamid Karzai reopened his country's mission in the oil-rich Gulf Arab state, which cut ties with Taliban shortly after the September attacks. 
Sharjah airport Director General Ghanem al-Hajri said he hoped the airport would become the hub for transport of humanitarian aid to Afghanistan.

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BANKING

Islamabad, Kabul to open banks


Pakistan and Afghanistan have agreed to open three bank branches each in the two countries on reciprocal basis to promote bilateral trade and economic relations, The DAWN Group of Newspapers, has reported. 
Finance Minister Shaukat Aziz told a news conference that he had a meeting with Afghan Finance Minister Hidayat Amin Arsala in Washington to discuss a number of things to start more economic activity in the two countries. 
"We asked them to open their bank branches here in Peshawar, Quetta and Karachi and we will open branches (of Pakistani banks) in Kabul, Kandahar and Jalalabad on reciprocal basis," said the minister. 
He said Afghan minister was on a private visit to the US and the two sides would finalise the subject when he was back to Kabul. Asked as to which Pakistani bank would open its branches in Afghanistan and vice versa, he said these details would be addressed in next few days when Afghan team visits Islamabad. 
Shaukat said the opening of banks was also discussed during the recent visit of Afghan interim authority Chairman Hamid Karzai to Pakistan. 
The volume of trade traffic between Pakistan and Afghanistan through Torkhum and Chamman land-route, he pointed out, had gone up significantly and average value of Pakistan's products officially crossing these borders amounted to Rs14 million per day. 
Another border post at Ghulam Khan, near Miranshah in Waziristan agency, the minister added, was being opened to expedite trade between the two countries.

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ENERGY

Pakistan, Afghan leaders agree to revive pipeline


Afghanistan's interim leader Hamid Karzai said on Friday he and Pakistani President Pervez Musharraf had agreed to revive a plan for a trans-Afghan gas pipeline from Turkmenistan to Pakistan, Reuters reported on 8th February. 
"Both sides have agreed that the construction of this pipeline will be very beneficial for both the countries as well as for the entire region," Karzai told a news conference after talks with General Musharraf. 
"We both have agreed on this," he said, calling the project "very essential."
Karzai was in Islamabad on his first official visit to Pakistan after his "U.N.-backed interim administration took office in December, following the collapse of the Taliban government in the face of U.S.-led military strikes." 
Turkmen President Saparmurat Niyazov, seeking new export outlets for his country's abundant gas reserves, said on Friday he hoped the fragile peace in Afghanistan would allow work to resume on the major regional natural gas pipeline.
"Peace is finally being installed in Afghanistan. And we can now build a pipeline to Pakistan across its territory," state television quoted Niyazov as saying during a visit to eastern Turkmenistan. 
A consortium led by U.S. Unocal had originally aimed to build the US$1.9bn, 1,400-km (875-mile) pipeline to run from gas-rich Turkmenistan via northern Afghanistan.
But in August 1998 Unocal halted development of the project after U.S. forces fired missiles at guerrilla camps in Afghanistan in the wake of bomb attacks on two U.S. embassies in Africa. 
Under the original plan, a 740-km (460-mile) stretch of the pipeline would run across northern Afghanistan. Turkmen officials say Niyazov plans to raise the issue with Karzai in the near future. Turkmenistan, a neutral country which steered a careful course between Afghanistan's purist Taliban movement and the opposition northern Alliance, supported U.S. strikes on its war-torn neighbour last autumn.
Niyazov has not allowed coalition warplanes to use Turkmen airbases, although his country has become a key route for humanitarian cargo supplies to northern Afghanistan. 

Tajikistan resumes Afghan power supplies

Tajikistan says it has resumed supplies of electricity to the northern regions of Afghanistan after a break of six years, the BBC World Service has reported.
The Afghan charges d'affaires in Dushanbe, Mukhamadsalim Sokhib, is quoted as saying that the supplies began on 15th February.
Power had previously been supplied to Afghanistan during the former Soviet era, but was cut off when the Taleban regime took power in 1996. 
An agreement to resume supplies came during a visit to Tajikistan by the Afghan leader, Akhmnad Karzai, in January.

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FINANCIAL NEWS

Afghan currency 'expected to stabilise'


The Afghan currency, the Afghani, has seen huge changes in value over the last few months, the BBC's Kate Clarke has reported from Kabul. 
Exchange rates have ranged from 12,000 to 100,000 Afghanis to the dollar, causing havoc to potential investors and customers alike. However, the acting governor of the Central Bank in Afghanistan, Abdul Sattar, says the Bank now has the money supply under control. 
Many Afghans have little money to spend. He expects the value of the currency, currently at about 40,000 to the dollar, to stabilise. Mr Sattar says printing of new Afghani banknotes has now stopped. 
The Jamiaat faction of the Northern Alliance, which headed the Afghan government of the mid-1990s and whose officials again hold several key ministries in the interim government, kept the contract to print new banknotes through the Taleban era. 
Jamiaat printed money in Russia to fund the war, causing inflation throughout Afghanistan. 
Mr Sattar says money already paid out to commanders was lost, but over US$200m worth of Afghanis have now been handed over to the Central Bank. That is important because there were fears that such a huge sum of money controlled by one armed faction could destabilise the peace process. 
The acting Governor of the Central Bank says he is confident the Afghani would stabilise now as warlords weakened and security improved. And he says, in the short term the payment of civil servants' salaries with the help of foreign currency should boost the value of the national Afghan currency. 
Women becoming economically active again. In the last few weeks the Afghani has been steadily losing value after a visiting official from the International Monetary Fund said one option to stabilise it would be to replace the Afghani with the dollar for a short time. 
The Central Bank moved swiftly to reject the option, but people who had been storing Afghanis in Pakistan began cashing them in. Money changers say about 10 billion Afghanis are arriving on the markets every day. Some of the notes are old, but others are recently printed, still wrapped in plastic. 
Money changers have been asking the Central Bank to release dollars onto the market. 
Even rumours that this was happening have had a small stabilising effect on the currency.

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FOREIGN ECONOMIC RELATIONS

1st Iran-Afghan joint trade fair to be held in Zahedan


Sistan Baluchestan province Governor-General, Seyed Mahmoud Hosseini, said on 17th February that the first Iran-Afghanistan joint trade fair is due to be held in Zahedan in the next Iranian year (starting March), IRNA News agency has reported. 
Addressing the meeting of provincial non-oil export committee, Hosseini said that the goods and services to be displayed at the proposed fair should meet the demands of Afghan people. He said that Iran-Afghanistan joint commercial council is due to be formed with this objective. 
He added that a conference will also be held on the sidelines of fair to review the commercial trend between the two countries. He recalled that once national security was established in Afghanistan, supplying the demands of Afghan people is the next crucial step. 
He said that the country's reconstruction and reopening of its universities would be the next priorities. He noted that Iranian tradesmen have been active presence in Afghanistan during the long years when no other country had any trade relations with it. 
He called for identification of genuine Afghan businessmen with the aim of establishing better trade ties with Afghanistan and added: "Any measure in Afghanistan in various commercial, cultural, educational and economic fields should be taken once the necessary arrangements are made jointly by its interim central government and Iran's ministry of foreign affairs." 
Also the director-general of Sistan Baluchestan province Commerce Department, Nader Mishkar, said at the meeting that over the first ten months of the current Iranian year (starting March 21) the value of non-oil goods exported from the province reached US$32.8m. 
He concluded, "The exported items included almond, various cereals, cumin seed, date, dried fruits, biscuits, plasticware, paraffin and tomato paste."

Abad, Turkish builders reach accord: Afghan reconstruction

Builders and contractors of Pakistan and Turkey have reached an understanding to work jointly in the reconstruction and rehabilitation in the worn-torn Afghanistan, Aamir Shafaat Khan wrote, the Dawn Group of Newspapers has reported.
A meeting of Association of Builders and Developers (ABAD) and Chairman of Turkish-Pakistan Business Council (TPBC), Sait Gonen was held at the FPCCI head office to discuss at length the possibilities of carving out sizable share in Afghanistan's reconstruction process. Sait is the Chief Executive Officer of STFA Construction Group in Turkey. 
The Chairman of ABAD, Hafeez Butt told Dawn after the meeting that both sides agreed to make interaction jointly and Turkey will depend on Pakistan which is a gateway to Afghanistan. 
He admitted however, that the situation in Afghanistan is still not clear and so far no contracts have been awarded nor tender enquiries for construction have been received from Afghanistan. But, he said, both sides including All Pakistan Contractor Association (APCA) have mutually agreed to work jointly as soon as calm prevails in Afghanistan and any tender enquiries arrive. 
The Turkish Contractors Association (TCA) says that it is a clear fact that the necessary construction work in Afghanistan should be done productively with due regard to value for money as the envisaged international aid would possibly not be enough to cover the cost of overall reconstruction and other building needs arising from the former administration's long neglect. 
According to TCA, Turkish contractors are following the developments related to Afghanistan closely. They believe that with their experience in the region, with their existing establishment and machine parks in nearby countries, they could contribute to future projects in Afghanistan in a productive way.
Preparations for the Turkish-Afghan Business Council has been started in Turkey and by now 42 firms have applied for the membership, more than half of them being construction companies, TCA said. 
The chairman, Pakistan Turkish Business Council of the FPCCI, Amjad Rafi said that Turkey has so far invested US$1.6bn in different projects in Pakistan and prominent among them are Lahore by-pass project, two sections of Indus Highway, berths at the Karachi Port and Islamabad-Peshawar motorway.

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TELECOMMUNICTIONS

Mobile Phones Installed in Afghanistan


Multinational telecommunication company Ericsson has installed the first GSM mobile phone network in Afghanistan together with the World Food Program (WFP) of the United Nations, a U.N. spokesman said, Xinhua News Agency has reported. 
The installation of the WFP/Ericsson GSM mobile telephones for the humanitarian agencies and the interim administration in Kabul was completed in late January, Yusuf Hassan told a press conference. 
"This is the first time ever a fast response GSM system was installed to support communications in an emergency," said Yusuf. 
The system was tested and proved to give excellent indoor coverage in the center of Kabul, but also covered up to 12 kilometers from the centre of the town on the main exit roads, said the spokesman. An initial allocation of 200 phones has been made. Among the recipients, is the Chairman of the interim administration of Afghanistan Hamid Karzai, said Hassan..

Siemens could receive US$40m Afghani contract

Siemens (SI) would be the preferred choice to receive a US$40m contract to rebuild and expand the fixed-line network in Afghanistan, Minister for Telecommunication Abdul Rahim said in an interview with the German daily 'Handelsblatt.' 
"Siemens can construct a digital system here, when they simultaneously repair the existing analogue system," Rahim said, raising only the one precondition. 
A Chinese group has also presented an offer costing US$125 per customer.

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