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AFGHANISTAN

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Area (sq.km)
647,500

Population
26,813,057

Capital
Kabul 

Currency
afghani (AFA)

President
Hamid Karzai
 

Update No: 036 - (23/11/04)

Waiting for a new cabinet
After Karzai's victory in the 9 October presidential elections, the political focus shifted to the new cabinet, that Karzai should appoint before the end of November. Rumours about the identity of the new ministers are plenty in Kabul and do not necessarily reflect the reality, but there seem to be some firm points. Key ministers like Ashraf Ghani and Ali Ahmad Jalali are virtually certain to be still there, but they might be shifted to other ministries (they currently occupy finance and interior respectively). Others, like Defence Minister Fahim, are almost certain to be removed from their post. Like him, other fellow members of his faction, such as Foreign Minister Abdullah and Education Minister Qanuni, seem bound to go, although negotiations with the latter appear to be underway. The main issue will be the ethnic balance within the cabinet. Karzai announced that he will appoint ministers according to their professional skills regardless of factional or ethnic pressure, but it looks unlikely that he will be able to ignore the ethnic issue altogether after Hazaras and Uzbeks voted overwhelmingly for candidates from their own ethnic group. Tajik Islamist leaders like Prof. Rabbani and the Massud brothers, as well as an Uzbek intellectual like Azam Dodfar might be the new entrants in the forthcoming cabinet. There is by contrast little talk at present of the parliamentary elections, due in April/May. The kidnapping of three UN election workers has further complicated the issue of holding parliamentary elections on time, although the UN has been careful to play down the issue.

A new friendship with Pakistan?
As far as international relations are concerned, the main event in October was the visit of Pakistani president Musharraf. The first foreign head of state to meet Karzai after his election, Musharraf was trying to impress a new spin on Afghan-Pakistani relations. There were indeed positive steps taken as a consequence of the visit, like the setting up of a joint committee to supervise terrorist activities along the border shared by the countries. The Bush administration is pushing the two countries to get closer, in order to counter Iranian influence in Afghanistan and to stabilise the insurgency in the southern and eastern parts of the country. However, Musharraf did not succeed in convincing Karzai to accept a major Pakistani role in the training of the new Afghan National Army, due to Pakistan's lingering unpopularity in many quarters. 
After the resolution of the dispute caused by the decision of Sind's government to raise a tax on Afghan transit trade, which caused trade between the two countries to fall in July-September, trade between the two countries is expected to start increasing again. Interestingly, however, trade with Iran is growing much faster. 

IMF assessment: positive with shadows
At the beginning of November, the IMF issued its quarterly review of the Afghan economy. It was the first attempt to measure the impact of the new drought on the Afghan economy. Cereal production fell by 25%, dragging overall economic growth (the legal economy) down to 7.5%, significantly less than projected earlier. Construction, transport and services are the fastest growing economic sectors. The illegal economy, on the other hand, is estimated to be growing much faster. The poppy harvest was hit by the drought too, but because harvested surfaces went up by 64% over the last year, according to UN figures, overall production still recorded double digit growth. This means that the incidence of the shadow economy on total GDP keeps growing. Inflation is being contained, in part due to the re-evaluation of the Afghani currency, and is now estimated at 14.1% yearly. Fiscal revenue has been increasing faster than planned and amounted to US$125 million in the first half of the 2003/2004 fiscal year, although this still corresponds to a very modest level of tax collection. There were good news on the front of the external current account deficit too, as it narrowed to 12% of GDP in the first half of the current year, down from 22% a year earlier. This was due to both an increase in exports and a decrease in imports, which is however attributable to the slow progress of reconstruction. The government spent less than a tenth of what it had planned in reconstruction, mainly due to precarious security conditions. 

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ENERGY

Russian electricity in Afghanistan via Tajikistan

Unified Energy Systems of Russian (EES Rossii) could enter Afghanistan's energy system via Tajikistan, the chief of the national electricity utility, Anatoly Chubais, said recently. During a news conference held recently he said stated: "This will be possible in case of the implementation of our projects in Tajikistan, to which three to ten years are given."
Chubais stressed that "Afghanistan is even now receiving electric energy from Tajikistan" that is in turn connected to Russia. "We are seriously analysing grid projects for Afghanistan," he said, Itar-Tass News Agency reported.
Chubais did not rule out that the EES Rossii could join China's energy system in prospect. "At present this topic sounds hypothetical, but it could become a reason for serious talks," Chubais said.
"China is now present in our discussions, even though Iran is in them more often," Chubais said.
He added that he could probably hold talks in Iran soon. As for other operations of EES Rossii abroad, Chubais said: "Large-scale projects could appear in the nearest time in Tajikistan and Kyrgyzstan." He admitted that talks on the Russian company's buying a 50 per cent stake in Kazakstan's Ekibastuz hydroelectric station were difficult, but were nearing completion. Besides, "we have got positive results in Georgia," he added.
"Despite the most acute political events, our business in this country is developing positively, and the Georgian leadership on the whole has been able to find a sound approach to solving these issues," Chubais said. He expressed hope that the coming winter in Georgia, whose energy system EES Rossii owns, would go without failures of the energy and heat supply. 

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