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afghani (AFA)

Hamid Karzai


Update No: 051 - (23/02/06)

More promises
The London conference of donors, held between the end of January and the beginning of February, divided the observers with regard to its outcome. Most saw it as a success and a sign that the international community remains concerned with Afghanistan, given the attendance of many high-level officials. However, the actual amount of new cash pledged showed a decline compared to previous similar conferences, at just over US$8 billion for a 5-year period, whereas the Afghans had asked for US$20 billion. Donors also renewed pledges for another US$2 billion. The main development in London was the victory achieved by the Afghan government in becoming the main conduit for the disbursement of funds. The move was supported by the World Bank, which argued that this would result in 20% savings compared to the previous system, where the funds were channelled thorough international organisations, including NGOs. Critics argue however that given the current very high level of corruption in the government and the administration, it is far from certain that such savings will reach the intended beneficiaries. Although there is talk of stricter supervision of how the government spends the money, in the past similar attempts at monitoring have been frustrated by the lack of transparency of Afghan government and the lack of local knowledge among international supervisors. 

Where are the private investors?
As part of the campaign leading up to the London conference, the Afghan government also renewed its efforts to woo private investors, especially from the Afghan diaspora, but scepticism remains given the high and growing level of corruption and nepotism. The property sector, which so far attracted most private investment, might be sliding into a crisis, as most new high rise, modern-looking buildings remain empty and investors wonder whether they will ever return a profit. Corruption aside, the road network in the capital keeps getting worse and the delivery of an essential service such as electricity remains erratic and mostly limited to just 4 hours a day. Even the government admits that 24-hours supply will not be available before 2008. Finally, low custom duties on imports discourage indigenous production. A measure that might restore some credibility for the government among investors would be the privatisation of state enterprises, but most Afghan economists oppose the move. Another measure appreciated so far by investors is the creation of business parks around the main cities. Since these are created on state land which is then lent to businessmen, they resolve at least the problem of land property rights, which in Afghanistan are very confused following contradictory initiatives by a succession of governments. 

Clouds in the blue sky
Without higher levels of investment in productive activities, international help will not suffice to keep the pace with population growth. On top of a high rate of natural growth, returnees contributed an additional two percentage points to demographic growth, with 500,000 officially registered returns in 2005. In 2006, UNHCR expects 600,000 more. Although dubious opinion polls continue to show very high levels of satisfaction among the Afghan population, it is also obvious that frustration is growing in at least some quarters. The February riots, despite being mainly set off by the indignation caused by the Danish cartoons, had in reality different motivations in the various localities affected, but all reflected increasing distrust of the "foreigners". Even more worryingly, there are signs that spoilers might be trying to raise the stakes in order to realise political gains. In February the first sectarian riots in post-Taleban Afghanistan caused 19 deaths in Herat, when Sunnis and Shias clashed in the streets. The conflict seems to have its roots in the competition for the control of the western region between different potentates. 
Population growth and frustration among the population are not the only clouds in the sky. The international environment surrounding Afghanistan shows signs of deterioration. Nor only Russia appears increasing restive and irritated by its marginalisation, but Iran too, which had played very carefully so far, is increasingly rumoured to be increasingly inclined to support radical elements in order to prevent developments which it considers contrary to its interests, such as the long-term concession of military bases to the United States. 

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