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Update No: 100 - (25/05/10)

Dawn of a new Afghan-American friendship?
Karzai’s visit to the US was hailed as a success by most observers. The relationship with Washington seems to have eased, perhaps even sorted out, with Obama hailing Karzai as a friend of America and Karzai making claims that all has been sorted out. In contrast to his rhetoric of the last year, Karzai in Washington has been praising the change in ISAF’s attitude and the shift of the focus away from violence and towards an increased expenditure on infrastructure and administration. Karzai and the Obama administration also seem to be trying to play down differences on the issue of negotiations with the armed opposition. Karzai was afraid of direct talks between Taliban and Washington and has moved to pre-empt them by starting his own negotiations. Washington did not like the timing, nor probably does it fully trust Karzai’s intentions. Whether the contrast is fully solved or not is difficult to say, but Washington seems resigned to the fact that Karzai needs to have his own thing going. The fact that the Taliban are not responding positively to Karzai might also be reassuring the Americans. The thaw between Kabul and Washington will never probably restore the relationship that existed between the two capitals during the Bush administration, but it now seems to be more at least than mere public relations. Signs of a more substantial change can be seen on the ground, particularly in Kandahar, where after much criticism of Karzai’s half brother Ahmad Wali, now ISAF is seeking his cooperation in the effort to clean Kandahar of the Taliban presence. The allegations of abuse and of involvement in the drugs trade have been once again sidelined, but Ahmad Wali is still a very polarising figure in southern Afghanistan. Showing to his country that the relationship with Washington has been re-established is of great importance to Karzai, whose role has always been to act as the conduit for American money to Afghanistan. Without that, he has no political future.

Dawn of Chinese influence in Afghanistan
While the Americans discuss with great fanfare and dubious results how to salvage their Afghan operation, the Chinese are quietly moving in to strengthen their position in Afghanistan’s economy. In March Chinese President Hu Jintao and Karzai signed deals concerning economic cooperation, technical training and the granting of preferential tariffs for some Afghan exports to China. China is already investing in the largest ongoing mining project in Afghanistan and is interested to bid in other, forthcoming projects. There are rumours already that the Chinese have offered President Karzai training for the Afghan army and for his intelligence services, in the event of a NATO disengagement. There might well be some truth in this, as Afghanistan seems to be turning into ‘the Congo of the 2010s’: apart from the already well established Pakistanis (on the Taliban and Hizb-i Islami side) and the omnipresent Iranians, the Indians reportedly have offered to send troops (sheer poison to the Pakistanis), while Turks are already deploying a small contingent in the north-west, to protect their fellow Turkic speakers from the infiltration of the Taliban.

A boom year
Strong and well distributed rainfall delivered a bumper harvest in 2009-10, more than doubling agricultural output and contributing to a 22.5% GDP growth. The services sector also keeps growing, boosted by aid expenditure and the ever growing foreign presence. The only non-agricultural productive sector which shows growth is mining, which over the last two years has expanded by 30%. Tax collection as a result has also been growing, although an improved administrative structure also contributed by reducing leakage. Tax collection was up 68% in 2009/10, while custom duties grew by 48%. Doing forecasts is always difficult because agricultural output, dependent as it is on rainfall, is unpredictable. The World Bank sees GDP growth at over 8% in 2010/11, while inflation is expected to be around 5%. On the other hand a poor poppy harvest is expected this year, because of a disease affecting the plants; this could affect the legal economy indirectly. 

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