a NEW service
a FREE service
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.
During the first half of 2002, the interim administration led by Hamid Karzai was mostly busy preparing the ground for re-establishing a government structure and getting reconstruction help from the international community. Perceived as a honest and well-intentioned man, but at the same time as a weak ruler, Karzai faced the resistance of the warlords who rule the various regions of the country, but also the difficulty of keeping his own coalition together. The interim government was an alliance between Pashtun monarchists of secularist tendencies and the various factions of the United Front, mostly composed of moderate Islamists from the ethnic minorities, who favour an Islamic republic. The coexistence between these radically different approaches would have been difficult in any case, but the situation was made worse by the fact that one of those factions, the so-called Panjsheris, quickly monopolised the real power by getting not just three of the most important ministries (defence, interior and foreign affairs), but also most top positions in the bureaucracy and in the army. The resentment caused by the attitude of the Panjsheris led to rising political tensions within the interim government, while the return of the former king Zaher Shah in April emboldened the monarchists to become more assertive. Other political factions, apart from the monarchists and the moderate Islamists, mostly opted to keep a low profile during 2002, siding with either faction depending on their own interests, but might become more active in the future.
The watermark in the consolidation of the regime in Afghanistan was expected to be the Loya Jirgah (June), which was to select a new transitional administration and a parliament. However, in many regards the Loya Jirgah turned out to be disappointing, although it did elect Karzai as President. The government was not subjected to approval by the Jirgah and no parliament was selected. A significant opposition emerged from the ranks of the Loya Jirgah, showing how the monarchists were increasingly divided between moderates favourable to Karzai and more assertive elements, who resented the relatively marginal role played by the Pashtuns in the new regime. As a result, Hamid Karzai, had to slightly increase the weight of the Pashtuns within the new government, succeeding in enlisting the cooperation of some groups previously opposed to him.
Starting from August, there were also signs that he was trying to reduce the power of the Tajik Panjsheri faction within army and the state administration, causing a deterioration of his relationship with them. Nonetheless, opposition to his government continued to rise in the following months, especially among Pashtun monarchists, who felt that remnants of the Taliban and other fundamentalist groups might gain from the inability of the monarchists to defend the interests of the Pashtuns.
The "Jihadi" alliance of mostly moderate fundamentalists, led by former president B. Rabbani, emerged on the other hand as an important force and ended up supporting to some extent the pro-Karzai coalition, being then rewarded with some ministerial positions and a vice-presidency, but at the same time continuing to work for Karzai's replacement. Meanwhile, the central government tried to increase the pressure on the regional warlords, to force them to come to terms with it, but only achieved moderate success. In November Karzai took his boldest step yet, dismissing about 20 officials across the country on charges ranging from negligence to corruption, extortion and drug trafficking. The move was widely welcomed, especially in Kabul, although many were quick to point out how the 20 officials were just the tip of an iceberg of wrongdoing. Karzai also tried to weaken the total control exercised by the warlords over whole regions, confining them to specific institutional roles. However, the credibility of the central government's campaign against the abuses of governors and local officials suffered a severe blow in mid-November, when Kabul's policemen repressed with extreme violence a student demonstration in favour of better living conditions in their dormitories, leaving as many as seven dead. By the year's end the discussion about the legal system began to heat up, with tensions arising between those who want the Sharia (Islamic law) confirmed as a basis for the legal system and those who want a more secular approach. A similar split was emerging within the commission working on the new constitution of Afghanistan, with the debate focusing on issues such as equality between men and women and the separation of religion and the state.
The row between the US and Iran, which is being accused of meddling in Afghanistan, with the aim of destabilising the interim administration of Hamid Karzai, faded away from the centre stage over the summer and autumn, after having attracted much attention during the first half of the year. Russia remained relatively indifferent to the internal politics of Afghanistan, but clearly wanted to ensure the presence of a government compatible with its geopolitical aims. Its strongest links were with Jamiat-i Islami, a party mostly composed of Tajiks, which it supported during the war against the Taliban. The former Soviet republic of Tajikistan is a Russian 'de-facto' protectorate, a fact that also favoured Russia's alignment with Afghanistan's Tajiks.
While Pakistan and Uzbekistan kept a low profile, the role of the US in affecting events in Afghanistan was undoubtedly dominant. The debate was mostly centred on the scope of military operations and the extent of US involvement in the consolidation of the new regime in Kabul. The relationship of the US armed forces with private militias remained controversial and one of their allied warlords even ended up fighting against government militias. During autumn 2002, the scale of American military operations was cut down, although this might well be more due to lack of suitable targets than to political considerations.
By the end of 2002, the international politics of Afghanistan was characterised by renewed efforts to secure its freedom from the interference of neighbouring states, in the wake of the forthcoming war in Iraq. The fear was that the presence of Americans and ISAF forces in Afghanistan might weaken after the start of a war in the Middle East. On 22 December China, Iran, Pakistan, Uzbekistan and Turkmenistan pledged not to interfere again in the internal affairs of Afghanistan. However, such agreements took place amid reports that Iran continued to support Ismail Khan, the warlord who rules over most of Western Afghanistan, that Russia continued to provide arms for the Panjsheri faction of Jamiat-i Islami and the Pakistani intelligence service was helping the radical Pashtun groups in the East of the country.
The return of the old King Zahir Shah at the end of April was interpreted by many Afghans as a further sign that peace might really be at hand, a feeling that was already prompting hundreds of thousands of Afghans to come back to their native country from Pakistan or Iran. By mid-November, 1,870,000 had already done so. However, this development, while welcome in itself, added a further strain to an already difficult economic situation. By the autumn there were clear signs that scratching a living was a major challenge for most Kabulis, while in the countryside the population was often still at risk of starvation.
The economic situation was compounded by the slow start of the reconstruction. International donors pledged US$4.5bn in March and another US$600 million before that, of which a total of US$2.3 billion was for the current year. However, only US$1.7 billion has been confirmed in the form of actual commitments and by the end of August just about US$1.2 billion had been received. Of this amount, the largest part ($840 million) went to humanitarian relief, while US$160 million were spent on staff salaries and the armed forces, with just US$200 million going to actual reconstruction and development. Between the end of the summer and the beginning of autumn, however, there started to be signs of a growing willingness of donors, including the US, to make more funds available. On the other hand, the interim government was unable to raise funds on its own until the end of the summer, when some of the provincial warlords started paying in at least some of the income deriving from taxes and customs. The government itself expected to be able to raise just US$83 million in 2002.
Apart from merely trying to start to reconstruct the country, the government had to keep international donors happy. For example, the international organisations decided that the Afghan government would be in charge of the reconstruction process, but demanded a properly scrutinised process of allocation of resources. They also expected the interim government to act towards the eradication of the poppy fields in several regions of the country, but during 2002 the Karzai administration has had only a very limited success in this regard. The UN estimated the 2002 harvest at 3,400 tons of opium this year, short of the peak of 4,600 tonnes reached in 1999, but still much more than 74 tons of 2001 under the Taleban, and higher than previous estimates. Even discounting the many allegations of fraud that have been surrounding the operation, it appeared obvious that a great deal more has to be done in order to reduce the impact of the Afghan opium on the European markets. Many of the warlords and military leaders of both Northern and Southern Afghanistan were reportedly involved at least indirectly in the trade, which made the eradication of the crop all the more difficult.
The focus of the reconstruction effort during 2002 was on investment on transport infrastructure, which is in extremely bad shape. Iran was at the forefront of such efforts in 2002, in part also due to its willingness to exercise some influence on its Eastern neighbour. During the autumn, a number of other projects, funded by a variety of donor countries and the Asian Development Bank, also kicked off, but the rebuilding of the highway network is not expected to be completed before two years. Longer-term projects were discussed at length during 2002, mostly the plan for a 850 km pipeline crossing Afghanistan, which could provide the Afghan government with as much as US$205m in transit fees every year. By the end of the year the plan was slowly progressing towards a detailed feasibility study, funded by the Asian Development Bank, but it still looked likely to struggle to find suitable funding, despite the support of the Turkmen, Pakistani, Afghan and US governments, and of the Asian Development Bank. Many international financiers would regard it as the highest of high risk investments.
During the whole of 2002, the government struggled to bring the money supply under control yet and as a consequence the local currency (Afghani) fluctuated wildly. This negatively affected whatever economic life was left in the country, with traders and state employees being hit especially badly. A first serious currency crisis took place in April, when the Afghani hit a new low of 45,000 to a dollar, the Afghan central bank for a while succeeded in stabilising the Afghani at around 36,000 to a dollar. However, the currency continued a slow decline during the following months, until a new crisis developed in November, when the Afghani slipped to a new low of 58,000 to a dollar in November. The introduction of a new currency starting from 7 October, which was key to the stabilisation plans of the government, proceeded too slowly to appease a population which, wary of being left with worthless notes, rushed to the money changers to convert their savings. However, when the transition to the new currency was completed in January, its value stabilised at 43 for a dollar.
Despite the slow start, in Kabul and other main cities, by the autumn there were already clear signs of a new economic vitality, as small trades were re-opening or being created ex-novo, although most of the rural areas had seen little improvement yet. After some initial enthusiasm, the various communities of Afghans in exile, who were expected to play a key role in the economic recovery, are now showing signs of losing faith. Many who returned from exile in the West are already reported to have left the country again. More than the slow pace of reconstruction, these potential investors were scared off by the high level of corruption and red tape in the Afghan state administration.
Forecast for 2003
If the consolidation of a central state in Afghanistan succeeds, in the longer term those countries will be rewarded which invested in befriending the Kabul government rather than regional factions. In this regard, a potentially very important development was in early January the signing of an agreement for the routing through Iran of Indian goods aimed for Afghanistan and Central Asia, with the concession of preferential treatment and tariff reductions. At about the same time, Afghanistan and Iran signed an agreement which allowed Afghanistan to trade with the rest of the world through the Iranian port of Chabahar, where it would enjoy a 90% customs discount. Taken together, the two agreements represented a massive blow for Pakistan's aspirations in Afghanistan and a resounding victory for both India and most of all Iran. Most commentators agreed that Pakistan courted disaster in recent months, by exercising pressure on the Afghan government through raising the costs of Afghan imports and exports though the Pakistan territory and increasing the restrictions on Afghan goods. The choosing of Iran as a leading trade partner for Afghanistan might even have contributed to President Bush's decision to grant Afghanistan preferential trading status in mid-January.
Assuming that the international community will maintain a strong presence in Afghanistan in 2003, the transitional government appears likely to survive without major crises for another year, continuing slowly to push the reconstruction of Afghanistan forward. The institutional debate is likely to contribute to gradually shaping the political landscape of the country. While the Taleban and their allies will probably cling on to some bases of support in remote areas of Central and Eastern Afghanistan, carrying out a low-level guerrilla warfare against the government and international troops, they will find extremely difficult to mount any major military offensive. Given the very limited presence of international troops and government structures on the ground, this guerrilla strategy will not be able to inflict major casualties. Among the political forces which support the transitional government, the increasingly heated debate about secularism and religion will begin to challenge the ethnic divide as a major factor in deciding political alliances. Federalism will also be a matter of a heated debate. Key efforts like poppy eradication and the disarmament of the private militias will continue to see the government struggling.
During 2003 Afghanistan will continue to be kept afloat mainly by international help. Towards the end of 2002, the Oslo meeting of the donors to Afghanistan indicated that the level of international support will be maintained in 2003 at roughly the same levels of 2002, that is US$1.7bn. The government appears considerably less optimistic and stated that it would be happy to receive half that amount, perhaps trying to prevent the negative impact that a drop in the levels of help actually received might have among the population.
The growing presence of foreign personnel, both military and civilian, will stimulate the economy, but any recovery that will take place will be limited to the services. Even the agriculture will need to wait for much reconstruction work to be done before starting to climb out of its present depressed condition.
In other terms, 2003 will still be a year of transition in Afghanistan. At the end of it, the country will still not be able to function on its own, even if all the current plans are accomplished. No viable independent army is expected to be deployed before 2004, that is about the same time when the highway network should be completed. Even the repatriation of Afghan refugees should be mostly complete only by 2004. The United Nations expect another 1.2 million refugees to return to Afghanistan in 2003.
During 2003, however, the first elements of a banking system should be re-established in Afghanistan, contributing to create a somewhat more favourable business climate. The government will likely continue to be short of cash, much to the chagrin of officials, soldiers and policemen, who will continue to be underpaid (if at all). Attempts to reform what is left of the Afghan economic system will intensify. In January, a privatisation commission was launched, with the purpose of handing over to private businessmen what is left of Afghanistan's state industries. Only about 74 state-run business are still in existence and those active in the transport, construction and agricultural sectors will be targeted for privatisation, while the energy and water sectors are expected to remain under state control. Social tensions might mount as some elements of the middle class, involved in trade or working for the international community, will increasingly lift themselves above the mass of the population, who will by contrast continue to scratch for a living. Despite a much better harvest than in previous years, many areas of the countryside, on the other hand, far from recovering are still at risk of starvation. International aid agencies estimated in December that between 2 and 4 million Afghans will be at risk during the 2002-2003 winter.
Update No: 15 - (27/02/03)
In Iraq's shadow
The fear that Afghanistan might be abandoned to its fate once again was strengthened in late February, when the German Defence Minister declared that in the event of a war in Iraq its country might withdraw its troops from Afghanistan. Since Americans have already been scaling down their activities and Germany is one of the largest participants in ISAF, the prospect of a significant reduction in international commitment to Afghanistan does not look completely unrealistic. In part because of this, President Karzai intensified his calls for a continuing international involvement in Afghanistan during February. His visit to Tokyo at least allowed him to bring home a further US$50.7 million for demobilising the private militias, but left the issue of long term security still undecided. The fact that the Bush administration omitted to include aid to Afghanistan in its new budget was also seen by many as a sign of declining interest, despite the fact that US officials attributed the omission to technical reasons.
Most observers now agree that the Pakistani intelligence services are once again supporting the insurgency in South and South-eastern Afghanistan, carried out by remnants of the Taliban and other radical islamist groups. Although this is at present little more than a nuisance, external support might allow it to expand more quickly than it was originally thought possible. The fact that relations between Afghanistan and Pakistan are not good at all was confirmed during the first two months of the year by the continuing wrangling about trade issues. Following the agreements between Iran and Afghanistan and between Iran, India and Afghanistan in early January, Afghan importers tried once again to get the Pakistani government to improve the terms of the Afghan Transit Trade agreement, which they judge as highly unfavourable to them, but without much success.
The policy of the little steps continues
The difficult international environment probably contributed to prompt both Karzai and the Americans to intensify their efforts to stabilise the internal political situation. As part of his continuing, if weak, efforts to improve the ethnic balance within the state administration, Karzai appointed at the end of January a new and younger interior minister, Ahmad Ali Jalali, in the hope that he could reform the police force and make it "nationally oriented, ethnically balanced, professionally skilful and more disciplined". In February, then, Defence Minister Fahim appeared to give way to pressures and announced a spate of new appointments to his ministry, which were supposed to break the virtual monopoly of Tajiks belonging to the Panjsheri faction. It is unclear, however, whether these changes will be enough to appease the critics.
Significantly, Karzai, avoided taking sides in the ongoing dispute between fundamentalists and secularists, which concerns both institutional issues such as the drafting of the new constitution and more practical ones, such as the banning of cable TVs. It has been noted that Karzai adopts a rather pro-secularist approach when speaking to the international media and one more friendly to the fundamentalists when talking to Afghan media. Some members of his government, however, took a clearer stance on the matter of the banning of cable TVs, when information and culture minister Raheen promised a new law in January, which would clarify the status of cable TVs and allow them to operate. His deputy Mubarez was even clearer and stated his opposition to the ruling of the supreme court, controlled by the fundamentalists, which had banned the cable channels. A large part of Afghan popular opinion appears opposed to the fundamentalists desire to maintain a strict code of behaviour in the country, as shown by the fact that Indian and Western music and movies are in high demand on Afghanistan's streets. The UN also reported that the enrolment rate of girls in Afghan schools is exceeding the expectations, a fact which contributes to give the impression that support for the fundamentalists among the general population is not as strong as sometimes claimed.
The overall character of Karzai's approach remains very cautious. Typically, the new census which started at the beginning of 2003 will avoid one the biggest bones of contention in Afghan politics, that is ethnic identity. This might make it easier to carry out, but will not contribute to resolve the dispute about the weight of the different ethnic groups. Similarly, the Karzai administration decided to ban party politics from the future appointed parliament, at least until a new law on political parties will be approved. In the new parliament, the weight of the different parties and factions could have been easily gauged and this in turn could have led to more tension.
Still little sign of economic recovery
Faced with a rampant inflation, the government surprised many by introducing price controls in January and cutting prices of consumer goods by an average of 20%. The government is clearly anxious to protect living standards, but since trade is one of the few sectors of the Afghan economy which is flourishing, the final effect might be to harm the economic recovery. Many traders, in any case, failed to implement the price cuts and the price control regime in many cases only led to more corruption, with government officials taking bribes to allow traders to continue charging the old prices. Paradoxically, even the relative stabilisation of the Afghani currency in January possibly had in the short term more negative effects than positive ones, throwing into crisis another of the few thriving businesses in Afghanistan, that is money changing. With little fluctuation in the exchange rates, moneychangers had few opportunities to make significant profits.
To contribute to a worrying economic climate came in January the news of attacks on gas pipelines in Pakistan, a development which might discourage potential investors in the Turkmenistan-Afghanistan-Pakistan pipeline project.
Trans-Afghan gas pipeline project invites India to join
Turkmenistan, Afghanistan and Pakistan have issued an official invitation to India to take part in the implementation of plans to supply Turkmen gas to South Asia.
The invitation was issued at the end of the regular session of the managing committee for the implementation of the Trans-Afghan gas pipeline construction project, which was held in the Pakistani capital of Islamabad on 22nd February, a Turkmenistan.Ru correspondent was told at the office of the deputy chairman of the government, Yolly Gurbanmyradow, who headed the Turkmen delegation at the talks.
The next session of the managing committee for the implementation of the Trans-Afghan gas pipeline is planned to be held on 8-9th April 2003 at the headquarters of the Asian Development Bank in the Philippine capital, Manila.
FOREIGN LOANS & AID
Afghan aid tops 6 billion yen
The international community pledged $50.7 million (6.08 billion yen) at a conference to help Afghan warlords, their followers, soldiers and others to reintegrate into society, Asahi News has reported.
Japan's contribution of $35 million was followed by the United States with $10 million, Britain $3.5 million, and Canada $2.2 million.
The money will fund the first year of a United Nations Development Program project aimed at helping a large segment of the population to disarm and make the transition back into society. The three-year project will cost an estimated $134 million.
Achieving disarmament, demobilization and reintegration "answers the deepest aspirations of the Afghan people, who are eager to move away from war and violence toward a peaceful, safe and civil society," Afghan President Hamid Karzai, told the Tokyo.
But conference Chairman Mutsuyoshi Nishimura, Japan's ambassador for assistance and coordination of Afghan issues, said more funds are needed.
Conference participants emphasized that additional financial aid is necessary, said Nishimura, adding that Japan will continue to play a central role in the reconstruction of Afghanistan and could host another similar conference.
Delegates from more than 30 donor nations, the European Union and 10 international organizations attended the conference.
ADB Reaffirms Support for Afghanistan Reconstruction in 2003
The Asian Development Bank [ADB] is planning to provide about US$200m in financial assistance for the reconstruction of Afghanistan this year, said Dr. Jungsoo Lee, Resident Director, ADB´s Japanese Representative Office, Asia Pulse has reported.
"ADB is committed to working with the Government and the people of Afghanistan to promote peace and stability in their country, to improve living standards and to reduce poverty," said Dr. Lee in an address to the Conference on Consolidation of Peace in Afghanistan in Tokyo.
Dr. Lee emphasized that efforts continue to build capacity, and improve administration, financial management, planning and project design and implementation.
A year ago in Tokyo, ADB pledged to provide assistance to Afghanistan in the order of US$500m in concessional loans and grants over the first two-and-a-half years. ADB approved concessional loans and grants totalling nearly US$200m in 2002, according to a statement.
Dr. Lee said ADB will provide US$150m to support an Emergency Infrastructure Rehabilitation and Reconstruction Project, subject to approval of the ADB Board of Directors. This will focus on rebuilding key infrastructure in the transport and energy sectors, and is designed to help revive the economy
In addition, ADB hopes to provide US$50m to support an agriculture sector program to develop policy and institutional reforms essential for sustainable agriculture sector growth and natural resource management, and $10 million in grant technical assistance, he noted.
Dr. Lee said, "ADB is playing a key role in the international community's efforts to plan and assist in Afghanistan's reconstruction. Working with the Government and other development partners, we are deeply committed to promoting a long-term peace-building process."
Telephone Systems International purchases Siemens switch for Afghanistan GSM System
Telephone Systems International, Inc. (TSI) has agreed to purchase 4 million Euro worth of GSM switching equipment from Siemens Mobile Communications S.p.A, BUSINESS WIRE has reported.
The equipment, including a Siemens switch, will support TSI's subsidiary, the Afghan Wireless Communication Company (AWCC), which operates the first commercial mobile phone system in Afghanistan. The switch will be installed in Kabul and will be integrated into the existing AWCC network, which currently supports up to 40,000 users.
The purchase agreement marks a significant step forward for Afghan Wireless and the nation of Afghanistan. The Siemens switch and related equipment will support up to 100,000 simultaneous users, which is five times the original capacity of the AWCC network in Kabul. Siemens also will assist in the installation and configuration of the switch.
Since its public launch in April 2002, the AWCC network has expanded dramatically, attracting between 4,000 and 5,000 new subscribers a month. 'This purchase represents our commitment to provide high quality communications services to the people of Afghanistan,' said Tom Bosley, Chief Operating Officer of TSI. 'Working with Siemens, we are creating a GSM system that will meet the needs of subscribers now and well into the future.'
For more information, contact: Matthew Petrillo Director of Public Affairs, Telephone Systems International, +01-201/302-0400, +01 202/460-9758; (GSM) firstname.lastname@example.org
INVESTMENT BACKGROUND REPORTS
Our analysts and editorial staff have many years experience in analysing and reporting events in these nations. This knowledge is available in the form of geopolitical and/or economic country reports on any individual or grouping of countries. Such reports may be bespoke to the specification of clients or by access to one of our existing specialised reports.
For further information email:
Considering an investment or a trip to any newnation? First order our Investment Pack which will give you by e-mail the last three monthly newnation reports and the complete worldaudit democracy check for the low price of
U$12. The print-out would be a good companion to take with you. Having read it, you might even decide not to go!
To order please click here: