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Update No: 095 - (25/11/09)

Time to tackle corruption?
President Karzai is coming under unprecedented pressure from his international partners to tackle the issue of corruption in the country. The growing awareness among western public opinions of the extent of graft and corruption in Kabul is clearly undermining the war effort. Karzai has built his power base on the toleration of corruption and it will not be easy for him to tackle the issue. He will however have to pay at least to pay lip service to it. But contradictions are already emerging. Some corrupt officials and policemen have been apprehended in recent weeks, but of them, the most significant catches have been then released under Karzai’s own pressure… In one case Karzai even defended publicly the mayor of Kabul, who had just been convicted for corruption. Several ministers are under investigation, but all seems to indicate that the approach to corruption will be highly selective: those who will be booted are likely to be chosen because of being politically redundant, not because they are more corrupt than others. The same approach has in the past characterised earlier anti-corruption efforts and counter-narcotics. Sources within the government itself estimate that about US$10 million are smuggled outside the country daily through Kabul airport alone, corresponding to about a third of the official GDP. Foreign diplomats believe that government officials and political leaders have embezzled or accumulate through corruption US$2.5 billion a year. One of the former vice-presidents was caught in Dubai two years ago with US$70 million in cash, but then let go.

No trust, no business
In August-October, government revenue collapsed by about 30% because of the instability and uncertainty deriving from the post-election diatribe. Revenue recovered in November, where in fact it reached a record because many delayed payments took place. So far this year, total revenue is up by a third compared to the previous year, to US$1.2 billion. This is in part due to the fall in the value of the American dollar, but also to a continuing rise in imports, driven by foreign presence and foreign funded projects. The ministries, however, remain paralysed by the electoral mess. In the first quarter of the Afghan financial year only 3% of infrastructure projects were awarded, a figure which fell further in the second quarter. Everybody in the ministries is waiting to know his own fate as Karzai is expected to replace or reshuffle almost all the ministers. Now Afghan businessmen are even less keen than before to invest because they have heard President Obama say that disengagement from Afghanistan will start in 2011 and they have no faith that the Karzai regime would survive more than a few days after an American withdrawal. Of US$5.3bn privately invested in Afghanistan over the past seven years, only 27% was foreign investment and the percentage is falling fast. The inability of government and donor agencies to achieve anything in the economic field, adds to the frustration: the provision of electricity seemed to have been addressed at least in Kabul earlier this year, but now most families are back in the dark. Many power projects are not functioning properly. The distribution network is badly designed and managed even worse. The big Kajaki dam project is now postponed indefinitely because the contractors refuse to work in the insecure environment of Helmand.
On the positive side, this year’s harvest is a bumper one; production of wheat in the north is five times what it had been last year. Prices have more than halved, meaning that even poor families will have to eat.

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