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Update No: 079 - (30/06/08)

Karzai gets through Paris
The Paris conference of donor countries took place in June. President Karzai had asked US$50 billion over 5 years to re-launch the rebuilding of the country and to boost his re-election campaign. On the whole, the government seemed to be pleased with the outcome of Paris. Even if for the first time donors openly complained about the corruption and inefficiency of the Afghan state and made demands that these issues be addressed, but once again failed to impose strict terms and conditions. The conference ended up quite with a more modest promise of an additional US$21 billion in aid, but there is still money left unspent from previous years and the government hopes to raise a few billion of its own. The current estimate is that revenue collection stands at 7% of GDP and has stopped growing. The general economic conditions seem bound to complicate Kabul’s task. Inflation is estimated to be close to 20% this year, a marked increase over the previous year, even if the IMF forecasts that the rate will halve next year as food prices recede. The pumping of external money will keep GDP growth at relatively high levels (over 8% both this year and next according to the IMF), but with little impact outside the capital and a few other cities. 

China to the rescue
Afghanistan’s best hope for increasing government revenue and investment levels seem to lay with China. The bidding for the Aynak copper mine signalled last year a turning point in China’s attitude towards Afghanistan: the Chinese state company which won the bid offered twice as much as the competitors. While this practice is common among Chinese state companies when raw materials of strategic interest to China are concerned, some observers construe this as an indication that China is also trying to woo Afghanistan by building up its economic influence there. Reportedly Chinese companies have shown interest in other natural resources of Afghanistan. The other main potential source of revenue for Kabul, the planned Turkmenistan-Afghanistan-Pakistan-India gas pipeline, continues to look rather unconvincing for several reasons. The Afghan government has committed itself to free its path from Taliban influence by 2010, a target that most commentators consider utterly unrealistic. 

Campaigning the Afghan way
After several months, the tension between Hazaras and Pashtun Kuchis has finally erupted in violence in Wardak province, leading to loss of life and to thousands of people fleeing their homes. Karzai is not keen to clamp down on the Kuchis, who are largely responsible for the violence, because he is courting Pashtun support in the future elections. That Karzai is clearly in re-election mode is also shown by the fact that although in the past he had long refused to sign death sentences, now he courts public opinion by sending criminals to the gallows. Recently the Supreme Court has confirmed another 100 death sentences and Karzai will have to decide whether to sign them or not. The proceedings have been criticised by human rights activists because the trials took place behind closed doors and without defence attorneys. Karzai’s threat to send Afghan troops inside Pakistan to hunt Taliban insurgents has also to be read as part of pre-election campaigning – the Afghan army would not be able even to reach the border with Pakistan without American support, let alone enter Pakistan. Karzai is clearly trying to erase his image of a weak leader, although whether his strategy will be successful or not remains to be seen. The executions carried out in the past led to a temporary surge in his popularity, until it emerged that the most dangerous of the sentenced criminals had managed to get out of prison before the execution with the complicity of the police. Similarly, once it will be clear that Karzai cannot live up to his threats to Pakistan, any support that he might have gained is likely to falter again. 

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