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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: 042 - (24/05/05)

Violence returns
The month of May was characterised by an unexpected surge of violence in Afghanistan. A series of riots mainly in eastern Afghanistan perturbed the atmosphere of optimism which had been prevalent after the presidential elections of October 2004. At the same time, even if Taleban activity did not reach the level of the previous spring, it still exceeded most expectations. Most worryingly for the international community, there were obvious signs of resurgent xenophobia among certain sectors of the population, motivated both by the slow pace of reconstruction and by the disproportionally high salaries paid to Afghans working for international organisations. The perceived loose behaviour of many expatriates and Afghan returnees, not in line with Afghan mores and traditions, contributed to feed this sentiment of hostility. A sign of this new trend was the renewed effort of the government to downgrade the role of NGOs, national and international, and advocate for itself as big a share of international aid as possible. 
In the run up to the parliamentary elections more tension and occasional outbursts of violence are likely. Although the demonstrations of May were originated by protests against the alleged desecration of the Koran in Guanatanamo, a number of radical groups intervened and turned them into violent riots, during which many offices of international organisations and NGOs were looted and burnt. 

Fewer poppies?
As part of its renewed public relations effort to woo international support, the Afghan government is now claiming that finally the poppy eradication effort is being successful and it expects the area under cultivation to fall this year by 30-40%. Reports from the provinces confirm that the cultivated area has reduced somewhat, although the government claims might be somewhat inflated. In some areas, traders might have supported the eradication effort in order to push prices areas and increase the value of their stocks. If this is the case, the sustainability of the eradication effort would be in great doubt. 
On the political side, the registration of candidates to the parliamentary elections took place during May. As the end of May approached, only two coalitions had been formed, one around former presidential candidate Qanuni and mostly composed of Islamic groups, and the other one gathering 13 progressive parties. The electoral law does not encourage coalition making, so it appears likely that most parties will not form alliances, a fact which might lead to a very fractured parliament. 

More taxes
Eager to increase its revenue (it only covers 7% of its total expenditure) the government plans to introduce new taxes soon. Individuals earning US$250 or more will have to pay a 10% tax, while companies are going to be liable for a payroll tax and a 10% services tax, on top of the 20% corporate tax and of a 12.5% tax on gross receipts. The government is also planning to reduce custom duties and increase sales tax, which would further discourage investment in productive activities. The business community is becoming increasingly critical of the government, both because of taxation and because of the failure to improve policing. It complains that relatively high taxes add up to heavy transport and security costs, as well as the lack of a skilled workforce. Moreover, foreign investors, including diaspora Afghans, are held back by the bureaucratic red tape and by uncertain status of land. Because Afghan industrial production remains negligible, imports continue to grow faster than exports, despite being already several times higher. During the July 2004-April 2005 period, imports from Pakistan grew by 84%, while exports only grew by 15%. 

More competition
Another important development in May was the announcement that the government will auction two more licences for mobile phone networks, bringing the number of operators to four. This move has caused some complaints from Roshan, Afghanistan's largest mobile operator, which did not expect the number of operators to exceed three. Admittedly, since the number of Afghans owning mobile phones has already reached 600,000, the space for new players might be restricted, although the current very high profit margins might mean that more competition would be beneficial to consumers.

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ENERGY

Pakistan, Turkmenistan and Afghanistan reach pipe deal


A proposed trans-Afghanistan gas pipeline running from Turkmenistan to Pakistan was given the go ahead recently by the Asian Development Bank (ADB) which declared that the multi-billion dollar project was feasible, Deutsche Presse-Agentur (dpa) reported.
"This is good news for all the 3 countries," Pakistani Petroleum Minister Amanullah Jadoon told reporters after a meeting attended by Turkmen Oil and Gas Minister Amangelgi Pudakov and Afghan Engineering Minister Mir Mohammad Saddiq.
Pakistani Prime Minister Shaukat Aziz who chaired the meeting said the 1,600km long gas pipeline would improve ties and strengthen regional cooperation.
One of the major hurdles to undertaking the project was the quantity of gas reserves in Turkmenistan's Daulatabad field. Pakistan insisted the project would be profitable only if it provided 3bn cubic feet of gas supply every day.
The security of the proposed project, in view of the volatile situation in Afghanistan, was another major concern of the planners.
Experts observe the project could ultimately be extended to India as well where energy requirements are increasing by 27% each year.

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FOREIGN RELATIONS

Dushanbe and Kabul target stronger relations

Tajik president, Emomali Rakhmonov, accompanied by a senior delegation for Tajikistan, arrived in Kabul recently for an official three-day visit. A meeting was held between Rakhmonov and Afghan President, Hamid Karzai, at which both leaders discussed the fight against terrorism and illicit drugs. "Tajikistan benefits from peace in Afghanistan and Afghanistan benefits from peace and security in Tajikistan. We share common interests. Tajikistan and Afghanistan are like twins," Karzai said recently, Interfax News Agency reported.
For his part, Rakhmonov said the most important subject of the meetings and talks was the exploration of fruitful ways to expand the bilateral relations of the two neighbouring and friendly countries. Tajikistan and Afghanistan have signed an agreement to boost further already existing bilateral cooperation between the two countries. The leaders of both countries also signed several cooperation protocols in order to strengthen relations between the two neighbouring countries. The protocols signed include those dealing with energy, industry, education, trade and transit, good neighbourly relations, counter-narcotics and counter-terrorisms.

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