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AFGHANISTAN

The Problems of Creating a New Afghan army -
and the critical dangers of failure!
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The essential companion to follow the complex events in Afghanistan - as they unfold - includes reports on the main warlords and a map of the territory held by them, as well as other key descriptive material.

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AFGHANISTAN


  
   

 

REPUBLICAN REFERENCE

Area (sq.km)
647,500

Population
26,813,057

Capital
Kabul 

Currency
afghani (AFA)

President
Hamid Karzai
 

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.

Internal politics
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 an 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.

International politics 
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.

Economy
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. 

Summary and forecast for 2003

International relations
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 during the previous 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. After touching their lowest level in mid-April, Afghanistan's relations with Pakistan showed some sign of improvement in late April and May, after president Bush's envoy to Afghanistan Khalilzad issued a veiled warning to Pakistan, saying that a threat to stability in Afghanistan is a threat to us interests. After the Karzai visit to Islamabad, the two countries agreed on upgrading the trade levels, improving banking links and facilitating travel between them. Trade with Pakistan is up on last year, but has not yet reached the peak level of the Taliban period, when Pakistan was by far the main source of imports. However, in July the relationship between the two countries worsened again, with armed border clashes and the ransacking of the Pakistani embassy in Kabul. Some factions within the Kabul government seem to be exploiting the simmering tension with Pakistan to delay the launch of the disarmament of the warlord militias. In fact, the beginning of the disarmament program, initially scheduled for the beginning of July, was postponed until October at the earliest. Under US pressure, during August both the Pakistani and Afghan governments made renewed efforts to soothe the tension between the two countries, with some success, as Pakistan eased the regulations concerning Afghan transit trade and exports. However, although President Karzai expressed his satisfaction, hostility towards Pakistan is growing in Kabul. Even those ministers who used to sympathise with Pakistan are now very critical of the attitude of Islamabad, or at least of its security services.
At the beginning of May the departing commander of US forces in Afghanistan Mcneill hinted at the possibility of the beginning of the withdrawal of US troops starting from summer 2004. Assurances that this is not going to be the case routinely followed, but it is likely that president Bush will want to start some sort of withdrawal, however slow, before next year's American elections. During July, however, there was growing speculation that the Afghan political election scheduled for the coming year might have to be postponed, although the US maintain that the election date will not be allowed to slip. While many NGOs and international observers had raised the issue before July, this is the first time that both the Karzai administration and UN envoy Brahimi hinted that this might be inevitable. 

Internal politics
As long as 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. 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. A large part of Afghan popular opinion appears opposed to the fundamentalists desire to maintain a strict code of behaviour in the country, but the conservatives are well entrenched in the judiciary and within the government and state administration. The fact that the consultation process for the new constitution was started without even making available the draft of the constitution to the public has led to not unreasonable accusations that the whole process is a farce. The only official indications about the character of the constitution are that the judicial and religious powers are separated and that it provides for a constitutional court, which would take precedence over Islamic courts. These reassurances have been issued in part because the constitutional commission is dominated by Islamic fundamentalists. 
While the Taleban and their allies showed signs of recovering some operational capability by spring 2003, they are unlikely to go beyond a low-level guerrilla warfare against the government and international troops. However, the growing signs that the Pakistani intelligence is supporting the guerrilla, together with rising discontent at the behaviour of the government troops, mean that the insurgency has the potential to develop into something rather more serious. Over the summer violence escalated in the southern regions, contributing to undermine faith in the central government. In part as a result of this, during August some steps towards deploying troops outside Kabul were taken in the form of small Provincial Reconstruction Teams, but problems loom ahead, as the Italians have announced that they will withdraw their units from the Coalition forces hunting the Taliban and the Germans will reduce their commitment by 800 troops.
Various democratic groups tried to organise a National Democratic Front in March 2003, but were immediately targeted by the security services with threats and arrests. The creation in early August of a new royalist party, which includes some relatives of the former King, seems to have a greater potential, but the fact that the King has disowned it might hamper its political chances. President Karzai will continue in his weak efforts to improve the ethnic and political balance within the state administration, as shown in January by the appointment of a new and younger interior minister, Ahmad Ali Jalali. 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. In June Karzai finally succeeded in getting the regional power holders to contribute some more money to the state coffers, while efforts to seize control of the custom posts were intensified. Modest signs of progress were being noticed by June at the Ministry of Interior too, the power of some of the more controversial characters was being reduced. 
Key efforts like poppy eradication and the disarmament of the private militias will continue to see the government struggling. In International politics, tensions are being caused within the government by the situation in the Middle East and especially the war in Iraq, with the Islamist elements within the government opposing US policies and the moderate monarchists being more inclined to approve them. There are also contrasts with regard to how to deal with Pakistan, especially since its intelligence service is widely believed to be helping insurgent groups along the border shared by the two countries. Again, the moderate monarchists headed by Karzai favour a rapprochement with Pakistan, which is however opposed by the Islamists of Jamiat.

Economy and aid
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 mid-March Brussels conference of donor countries ended with the promise of another US$2 billion of help to Afghanistan, an outcome judged a "success" by Finance Minister Ghani. However, even if help was forthcoming, there is increasingly an issue of delivering it to the rural areas, where the lack of security is hampering reconstruction efforts. A new US$1 billion aid pledge from President Bush is expected to boost the reconstruction, but it appears obvious that the Bush administration feels the need for exercising a tighter control about what is going on in Kabul, in order to speed up the recovery process. Otherwise Bush will not be able to claim Afghanistan as a clear victory by the time of his reelection campaign at the end of 2004.
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. The bad state of the roads will contribute to feed inflation and the government's efforts to contain it will not be very effective, as shown in January, when it tried to introduce price controls and cut prices of consumer goods by an average of 20%. 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 the first half of 2003 the reform and reconstruction of the Afghan state proceeded slowly as in 2002. The bureaucracy is reported to be becoming somewhat more efficient, although admittedly starting from a very low level, while communication between regions has increased and improvements in the tax-collection system have also been reported. The Afghan state is still building up capacity in most sectors. 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. A draft of the new commercial law, prepared by US and European attorneys and expected to encourage foreign investment to flow in, is also ready. 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). The central Bank will continue to struggle to stabilise the currency. 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 businesses 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. In April, the National Solidarity Program was launched, a US$95 million program to provide village leaders with cash to spend locally in improvements and rebuilding activities. In some regards the government efforts to maintain the economy under control appear clumsy. The attempts to impose price and to increase its control over the NGOs that operate in the country are unlikely to deliver any good, given the inability of the country's bureaucracy to work with any degree of efficacy. Plans to cut the state bureaucracy staff by 20%, announced in April, might contribute to increase social tensions, which might also be stimulated 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. On the other hand, donors are also becoming louder in their demand that the Afghan state bureaucracy be brought under control. Harassment and corruption are not only discouraging foreign investors from becoming active in Afghanistan, but are also contributing to frustrate the reconstruction effort. Karzai issued on 10 June a decree aimed at reforming the state administration. A commission will be established, with powers to appoint and dismiss state bureaucrats. It remains to be seen whether this will be enough to tame the multitude of 262,000 underpaid state employees, who are often forced to seek bribes to feed their families.
In August the government dramatically revised upwards its GDP growth estimate for 2002/2003, which is now estimated at 30%. A similar figure is provided by the Economist Intelligence Unit, which estimates growth at 28%. Trade figures also confirm that fast growth has taken place. Imports of the Afghan Transit Trade through Pakistan have risen by 22.5% in 2002/2003. Up-to-date figures about agricultural production were the main cause of such GDP growth revision. The crops exceeded the most optimistic expectations and according to UN sources cereal production should hit 5.37 million tonnes, the best crop ever. The end of the drought, the provision by international organisations of high-quality seed and a greater availability of fertiliser have all helped. Small businesses also continue to boom in the cities, helped by the presence of many expatriates, but the weak spot in the recovery process is the delay of big reconstruction projects. Electricity supply is still precarious or missing in large parts of Kabul, mainly because the dams have not been repaired, which affects agriculture negatively too, due to lack of irrigation. Even in Kabul most roads have not been repaired yet. The land phone system is still waiting for repair, while the new mobile system is already running into trouble due to oversubscribing. On the positive side, many shops have been opening throughout the country, however, deeper signs of actual economic recovery are still scant. The carpet industry is enjoying a revival and an estimated 200 carpet workshops have opened over the last 18 months, employing 40,000 people, but otherwise industrial activities have lagged. Good news is coming from the agricultural sector, at least. Good rains after years of drought are expected to lead to a record harvest this year. Unfortunately, they will also lead to a record poppy harvest, especially since the harvest area has been expanding during 2003, reaching provinces previously never affected by the opium business. Finance minister Ashraf Ghani declared at the end of June that the government is targeting economic growth of 12-14% over the next five years, after the 10% that it estimates was achieved in 2002/2003. 2003/2004 is already expected to represent an improvement over the previous year, mainly because of the end of the drought. From the point of view of the average Afghan, the achievements of 2002/2003 appear much less exciting. The return of two million refugees in 2002 meant that in per capita terms the economy was virtually stagnant. If the projected growth for the current year was actually achieved, it might be more easily perceived as real by the population, because the influx of returning refugees is much slower this year. During the first half of 2003, the number of returning refugees had reached 224,000 and is not expected to exceed half a million by the end of the year. International investment has so far remained very limited, with just two hotel projects in development, although the government expects that soon some banks will start activities in Afghanistan. Extraction and mining activity is the most promising sector for foreign investment, with gas, some oil, and large deposits of copper and iron. The government is now attempting to attract foreign investment towards the iron ore reserves of Bamian, the Ainak copper mine and the gems of Panjshir. However, until security is firmly established, foreign investment will be lagging and no major initiative is expected for the rest of 2003.
This year's budget has been set at US$500 million, plus US$1.2 billion which are expected to be spent on reconstruction. Of last year's US$460 million budget, only US$380 million could be spent, due to lower-than-expected tax and custom revenues. Since the government had planned to receive US$83 million from that source in 2002/2003, it can be seen that very little of that money entered the coffers of the state. Hence the growing political pressure to improve revenue collection. Moreover, this year, like in 2002/2003, international funding is coming through slowly. 

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Update No: 22 - (03/10/03)

Conflict increases within ruling coalition
The Afghan political environment began to heat up in September, as the deadlines for the Constitutional Loya Jirga and the political elections, which are expected to put an end to the transitional phase of institutional reconstruction and deliver a fully legitimized government, look increasingly close. The postponement of the Constitutional Loya Jirga, announced on 7 September by Karzai, was officially due to organizational problems, which seem to be real enough, but there are reports of increasing conflict within the constitutional commission and between the commission and the conservative clergy. The most important issues are the reference to democracy in the constitutional text, the rights of women and last but not least the role of Islam in public life. 
The presentation of the new law on political parties in September also highlighted the importance of the last of these issues. The draft states that only parties that do not "pursue objectives that are opposed to the principles of the holy religion of Islam" will be legalized. Inevitably, this is already leading to bitter debates about what does it mean not to oppose Islam. Even before the draft was made public, the chief justice Shinwari called for the banning of a new party, the National Union Party, formed by former members of the moderate wing of the old communist party, on the ground that this party is anti-Islamic. The former communists appear to have regained a substantial following, especially in Kabul, following the loss of credibility of the Islamic parties, which are beginning to perceive them as a potential threat in next year's elections. There are credible reports that Karzai himself supported the creation of the new party hoping that the new force, together with other secular groups, might act as a counterbalance to the power of the Islamic fundamentalists. It is interesting to point out how the circle of ministers and officials around Karzai, who until recently seemed to be leaning towards appeasement with the fundamentalists, is now adopting a more challenging posture against them. The conflict was ignited by an apparently minor development, the eviction of villagers from a suburb of Kabul in order to make land available for the building of the villas of the elite of army generals, who largely belong to the fundamentalist groups. Some key ministers, including defence minister Fahim, stand accused of being behind this abuse. However, the very fact that this particular abuse was picked up, among many which take place all the time in Afghanistan, appear to signal a change of tack in the attitude of the more liberal elements within the Karzai administration. A commission was set up to investigate what happened. The police chief of Kabul, a man of Fahim, was sacked, although it is not clear whether this was related to the land grab issue or not.

Time for complacency is over
The growing conflict within the coalition government is taking place against a backdrop of continuing violence in the southern regions, although during September the US started to intervene in the fighting more directly, blocking the advance of the Taleban. The resurgence of the Taleban and other anti-government groups seems to have convinced not just the government, but also the US and the UN that the time for complacency is over. The US is now committed to spend an additional US$1.1 billion dollar on Afghanistan, although of these just US$300 million will go towards reconstruction, the rest being destined for the army, the police, the demobilization of the militias, institutional reforms and the organization of the elections. The UN, on the other hand, has been advocating in recent months an expansion of the size and mandate of the international forces, while on 8 September special representative Brahimi stated for the first time that the conditions for holding free and fair elections in June 2004 are just not there. 

Shadows over the economy despite good performance
Despite the recent release of optimistic data about Afghanistan's economic growth, the preconditions for a lasting recovery just do not seem to be there. This year's 28-30% GDP growth is due to exceptional circumstances, i.e. an exceptional harvest after years of drought, but development in economic sectors other than agriculture and trade remain weak. The first trade figures for 2003-2004 show that between 21 March and 20 April 2003 Afghan Transit trade through Pakistan was up 11.6%, still a remarkable increase, but half of the increase recorded in the previous 12 months as a whole. The inability of the government to improve the infrastructure is a major cause of the weak prospects. Although some progress is finally being made in repairing the road network, with the Kabul-Kandahar road approaching completion, power supply is in a critical state. On 24 August power was cut in Kabul and is not expected to be back before December. There is not enough water in the reservoirs to keep the hydro-electric dams going and works to build new dams or build the structures required to import electricity from abroad have not even started. In other terms, improvement is not, and cannot be just around the corner. The government is trying hard to get as many reconstruction and development projects started as possible. 5,000 have been approved so far, but only a quarter have started or are approaching the implementation stage. Overall, the 5,000 projects should employ 400,000 people, which would contribute to ease the economic situation for many Afghans. 
Things are going a little better in the field of communications, where private capital is eager to invest. A second mobile telephones operator is now active in Kabul, while a Chinese company is planning to install a digital network next year, but the government too is trying to give its contribution. It has drafted plans to make internet and fax facilities and public phones available to the population of six provinces out of 33. The reform of the banking system too is finally seeing the light. The new banking law was ratified in September and the first two private banks have been granted licenses, Standard Chartered, a UK bank, and First MicroFinance Bank, controlled by the Agha Khan Foundation. 
Some of the efforts of the government are not going to make it popular even, or especially, if it were to succeed. The introduction in September of a new tax system, which makes it compulsory for businesses to register for a tax identification number if they want to keep their licenses, will win the approval of economic analysts, but not of Afghan businessmen, who are not used to paying taxes. If the system is implemented, the Afghan state will move one step forward towards self-sustainability, but inevitably marginal businesses will struggle to survive. 

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AGRICULTURE

IMF: Afghan economy shows signs of growth but farmers need alternatives to opium


Afghanistan's shattered economy is clawing its way back but its leaders must fix security problems and find ways to wean farmers off growing opium, an IMF official said, Dirk Beveridge reported for AP.
The non-opium economy rose by 30 percent in the fiscal year that ended March 31 albeit from a very low level and it looks set for 20 percent growth this year, Adam Bennett, the International Monetary Fund mission chief for Afghanistan, said on Monday.
The Afghan central government is making important strides in collecting revenues from the provinces and has achieved reforms such as a new currency and better banking rules, but much hard work remains to lift the nation out of poverty after 20 years of war and isolation, Bennett told a news conference.
"One dark cloud over this scenario is the production of opium,'" Bennett said, adding that if the drug-growing was included in the economic statistics it would represent 40 percent to 50 percent of the economy.
Opium farmers use some of Afghanistan's most fertile land in the south, where the security problems are worst, creating a "vicious cycle" that won't be easy to stop, Bennett said, discussing an IMF assessment of the Afghan economy ahead of the IMF and World Bank annual meetings that open here Tuesday.
"Eradication, which is clearly needed, must go hand in hand with developing alternative livelihoods for the farmers, and there needs to be an improvement of the security situation,'" Bennett said. Bennett said opium farmers should get the chance to make their livings growing traditional crops, including wheat.

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ENERGY

Ukraine says will participate in construction of new trans-Afghan pipeline

Ukraine announced it will participate in the construction of a trans-Afghan pipeline, AFP reported.
The pipeline will join the central Asian republic of Turkmenistan to Pakistan. "A key issue is the participation of Ukrainian firms in the reconstruction of Afghanistan, and we have offered our services in the fields of power supplies, roads and bridges, and irrigation systems," Foreign Minister, Anatoly Zlenko, said after talks with his Afghan counterpart, Abdullah Abdullah. "Ukraine is also interested in joining in the construction of the trans-Afghan gas pipeline linking Turkmenistan and Pakistan," Zlenkpo added.
Abdullah arrived for a working visit, and stated that the Ukrainian contribution would be embraced in all projects and made a point of stating that there would be a "transparent tender process." The venture for the trans-Afghan gas pipeline was drafted 20 years ago. Because of the multiple Afghan wars the pipeline was never implemented.
It is intended to carry up to 30bn cubic metres of natural gas annually from the gas fields in Turkmenistan, which border the Caspian Sea to Pakistan. The pipeline will cost approximately US$2.5bn and would add to the progress of a region with high levels of poverty. Before the tender process takes off for the construction of the pipeline, the countries of Afghanistan, Pakistan and Turkmenistan stated they wanted to carry out studies.

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FOREIGN ECONOMIC RELATIONS

Bulgarian premier, Afghan foreign minister discuss reconstruction


Prime Minister Simeon Saxe-Coburg-Gotha has received Dr Abdullah Abdullah, foreign affairs minister of Afghanistan, who was on a two-day official visit to Bulgaria. It was the first visit by an Afghan minister since 1988, BGNES web site has reported. 
Issues of mutual interest were discussed at the meeting, including Bulgaria's participation in the democratization process of Afghanistan and the participation of Bulgarian companies in the country's reconstruction. Abdullah underscored that the reconstruction of Afghanistan is crucial to the stabilization of the peace process. He pointed out that the drafting of a new Constitution is a priority for his country, to would allow the conducting of transparent and fair parliamentary elections next year. The guest expressed the hope that the efforts of the international community will help lower the tension in his homeland.
Bulgaria is firmly committed to the process of Afghanistan's liberation, democratization, and reconstruction, said Foreign Affairs Minister, Solomon Pasi, after the meeting with his Afghan counterpart.
Abdullah Abdullah also met National Assembly Deputy Chairman, Yunal Lyutfi, with whom he discussed the fight against drug trafficking.

French minister signs training accord with Afghanistan

The French minister-delegate in charge of industry, Nicole Fontaine, on 10th September] concluded a 48-hour visit to Afghanistan by signing an agreement on the training of Afghan technicians in the field of telecommunications, it has been learnt from a French diplomatic source, AFP News Agency has reported.
This agreement, which was concluded with the minister of communications, Masum Stanakzai, provides for the training of technicians and opens the way for other training programmes, the same source added without giving further details. 

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FOREIGN LOANS & AID

Germany to send civilian experts to western Afghanistan


Apart from sending a reconstruction team to Konduz in north Afghanistan, Germany will also dispatch a group of purely civilian helpers to Herat, in western Afghanistan. Some 30-40 experts from the interior, development aid and foreign ministries should help authorities there to establish civilian structures, Cologne Deutschlandfunk Radio reported on 27th August. Plans provide for, among other things, the training of border protection officials, the disarming of militia, the halting of the narcotics trade, and the establishment of administrative authorities and schools. 
Deutschlandfunk added that, due to the low threat potential, the Bundeswehr was not to be deployed at Herat. Plans provide for organizing the mission together with France in a "German-French house."

Afghanistan wrings more money from global donors 

Afghanistan says international donors have agreed to give the impoverished country more money for a longer time, despite pleas for aid from Iraq, Reuters has reported. 
Afghan Finance Minister Ashraf Ghani told reporters on Sunday that he had warned donors on the fringes of International Monetary Fund and World Bank meetings here they would have to spend more to fight terrorism and drugs if they did not back his war-torn country. 
"We received very strong expressions of support (from donors) to stay engaged with Afghanistan not just today, but in the medium and long term," said Ghani, who gave donors a review of his government's budget and how aid funds were being used. 
"First you pledge, then you commit, then you disburse. From pledge we have gotten acceleration to commit, from commitment we have gotten acceleration to disburse." 
Several speakers at the meeting on Afghanistan urged the international community to expand the mandate of NATO's 5,500-strong International Security Assistance Force (ISAF) across the whole country, a World Bank statement said. 
US Treasury Secretary John Snow said chances looked "pretty good" that the U.S. contribution of $1.2bn in new aid for Afghanistan would be matched by other countries. 
Washington had wanted other countries to match at least $1bn of its own aid, but Snow and other U.S. officials said it was not important for the commitments to be made in Dubai. The US Treasury chief said he hoped other countries would make pledges of support by November and that specific plans could be set for using the funds by mid-year 2004. 
On top of the $1.2bn US contribution, Ghani said the European Union had pledged to pay 50 million euros (35 million pounds) for security, adding that a full tally of the new funds could take a day. 
Praful Patel, World Bank vice president for South Asia, said the figure for additional contributions announced would add up to a significant sum that would be "in excess of $100m." 
Some countries, including Norway, said they would extend their commitment to aid Afghanistan for several years, Ghani said. Japan moved to commit promised aid to specific projects. 
Ghani said Afghanistan needed up to $30bn in aid in the next five years to generate enough growth to support itself. International donors pledged $4.5bn for Afghan reconstruction in January, 2002, a sum that underestimated Afghanistan's needs and the cost of continued insecurity. 
"Appropriate funding at this point gives the country a chance to go in a direction that uplifts prospects for the people or to descend into poverty, criminality and drugs," Snow told reporters after the conference. Snow said they did not see a problem raising aid for Afghanistan while a major donors' conference for Iraq looms around the corner. Not in the U.S. case at least. 
"Our commitment to Iraq does not in any way gainsay our commitment to Afghanistan," Snow said. "We are going to be steadfast. We can afford to support both." 
Ghani said Iraq had not diverted donor attention away from Afghanistan. 

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