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Hamid Karzai


Update No: 038 - (27/01/05)

A cabinet, finally
On 23 December 2004 President Karzai finally announced the new cabinet list. As expected, there have been many changes. For a start, even if he did not stand by his earlier commitment to cut the number of ministries to 20, a number of ministries were merged: planning and reconstruction were merged into the new ministry of economics, civil aviation was integrated into transport, light industries was unified with the ministry of mines and industries. However, an altogether new ministry was also created, Counter Narcotics. With regard to the actual members of the cabinet, only two members of the previous one survived in their post, Abdullah, the Foreign Minister, and Jalali, the Minister of Interior. Some ministers in the previous administrations got new jobs, like Qarqin, who moves from Social Affairs to Education, and Mir Mohammad Amin Farhang, who moves from Reconstruction to Economy. Hedayat Amin Arsala, formerly vice president, is now Minister of Commerce. Among the most noteworthy new entries are Minister of Finance Anwar ul Haq Ahady, formerly head of the National Bank, Minister of Defence Abdurrahim Wardak, promoted from his previous post of deputy minister, Minister of Energy Mohammad Ismail Khan, a well-known warlord from Herat, and Minister of Women's Affairs Dr. Massuda Jalal, who ran as a presidential candidate against Karzai. On the whole, the new cabinet is much more closely aligned with Karzai than the previous ones. Most of the new entries are double citizenship Afghans from America and Europe, although some cronies who campaigned for Karzai in the presidential elections are also there, like Sayyed Ikramuddin, Minister of Social and Labour Affairs. The big names to have been dropped from the cabinet include former Minister of Defence Fahim and Education Minister Qanuni, who campaigned against Karzai in the elections, but also Ashraf Ghani, the Minister of Finance who had won the appreciation of the international community. At least 9 of the ministers in the new cabinet hold PhDs and most of the remaining ones have degrees, so that the educational level is certainly not going to be a problem. On the other hand, the new cabinet looks in many regards politically weaker then the previous one. The absence of factional leaders and warlords will likely bring more benefits than harm, but few of the ministers have any significant following in their own right, which might make it difficult to implement any decision taken by the government.

Economic recover difficult to consolidate
January was mainly a month of good news from the perspective of economic development. Rains in a number of regions appeared to signal that the drought which cut the harvest by 25% last year might be about to end soon. Moreover, for the first time after the war an agreement has been finalized to reactivate a relatively large factory. The sugar factory in Baghlan province used to be the largest in Afghanistan and will restart production in two months thanks to investment from a German company and the cooperation of FAO and the Afghan government. However, even if a few more factories were to restart production anytime soon, their output is unlikely to match the losses suffered by clothing and shoes craftsmen, who are unable to compete with cheap Chinese imports. The ministry of commerce has so far refused to consider the imposition of higher tariffs on such imports, arguing that poor Afghans are advantaged by the possibility of buying cheap goods. Others argue that this policy mainly favours foreign firms and Afghan traders and that Afghanistan will never develop it's own industry this way. At present the tariff on clothing and shoes is just 5%. The tax on imports of machineries is only marginally lower, at 4%. The few Afghan industrialists also suffer from the lack of reliable any energy supply. Despite great improvements over the last three years, still no part of the country benefits from effective 24 hour energy supply, a fact which greatly hampers production. 

Private banking will expand
Most Afghans remain diffident towards the various private banks (11 so far) that began emerging in Afghansitan. Since private banking has been officially allowed, only 30% of the cash deposited in private accounts at the National Bank has been transferred to private banks. One of the reasons why Afghans are reluctant to switch is that the National Bank pays higher interest rates and does not charge maintenance costs to customers. Some Afghans are also concerned that saving with private banks might not be safe, as there is no insurance system in place yet. Afghans will soon have to get used to the idea of using private banks anyway, because the Afghan State Bank has decided to cease its retail services, in accordance with the new banking law.

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