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Update No: 081 - (26/08/08)

Readying for the elections
In August President Karzai reaffirmed his intention to seek a renewal of his mandate in next year’s presidential elections. The announcement surprised few people, as the government has been clearly gearing up for Karzai’s re-election for some time. Kabul continue its clamp down on independent media, particularly critical television journalists, who are being intimidated, sacked and even arrested if they discuss issue such as corruption. Kabul goes as far as to accuse the critical media of being funded by foreign powers to discredit the government. The Election Commission has in the meanwhile raised the issue of whether candidates who have been residing abroad until close to the elections should be allowed to run, a statement clearly meant to irritate Karzai’s main contender at this point, Ali Jalali, who lives in the United States. Even if he is not likely to be barred from running, the president of the Commission reminded the voters of his non-resident status. Opposition groups in the parliament try to offset Karzai’s moves as they can, that is with populist moves that will likely cause more trouble than they will resolve. The latest one was the reduction of the salary of top government officials. However, Karzai is also reportedly negotiating with elements of the opposition in order to draw them towards his camp before the elections. 

Kabul still waits for electricity
The rise in fuel costs is hitting Afghanistan’s few industries particularly hard, as few of them have access to electricity and have to rely on generators, which are more expensive and increasingly so. The government keeps promising that it will bring electricity to the industrial park of Kabul, but so far has failed to deliver. The status of an old deal with Uzbekistan to bring power to Kabul is uncertain, despite the completion of the power lines, while a new deal has been signed with Kyrgzstan and Tajikistan to import 300MW of electricity through new power lines, which will cost US$235 million. The government investment agency expects foreign investment to double to US$300 this year, after the low touched in 2007, and as much as US$1 billion in 2009, but many observers are sceptical, particularly after the government rejected a US$300 million bid by a British company to acquire a state telecom company. The World Bank rates Afghanistan 162 of 175 countries in terms of ease of doing business. Much foreign investment has been going to the Telecom sector, centred in Kabul. The only other city to have attracted any significant foreign investment is Herat, mainly due to Iranian businessmen but also to the availability of electricity and (until recently) higher levels of security. 

Air transport also hit by high fuel prices
Fuel price rises are also becoming a political problem because the airlines that serve Afghanistan’s airports are dramatically increasing their fares, despite a government demand that increases do not exceed 20%. Air travel has become of much greater importance in Afghanistan, because of the insecurity of the roads. The country’s main highway, linking Kabul to Kandahar and then Herat, is often raided by the insurgents. Over the last few months the rebels have intensified their activities in the immediate surroundings of Kabul, with an immediate psychological impact. On a positive note, fiscal revenue seems to be benefiting this year at least from higher customs output from the west, after stagnating last year, if for no other reason that custom duties have been increased. However, this seems in part to be due to reduced traffic along the southern border, more and more affected by violence and seizures of lorries on the roads.
 

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