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In-depth Business Intelligence
Books on Afghanistan
REPUBLICAN REFERENCE
Area (sq.km)
647,500
Population
26,813,057
Capital
Kabul
Currency
afghani (AFA)
President
Hamid Karzai
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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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