Landlocked
Afghanistan is highly dependent on livestock raising
and farming. In the 1970s agriculture and pastoralism
accounted for about 60 per cent of Afghan GDP. According
to some estimates, the cash economy constituted slightly
less than half of Afghanistan's GDP till the
early 1970s. The oil price boom of 1973 and the subsequent
increase in remittances from Afghan labour working
in the Gulf increased the share of the cash economy
in the country. Government expenditure was less than
a tenth of the size of the economy. Even then the
government could not generate enough resources internally
to meet its expenses and in the 1960s depended on
foreign aid to cover two-fifths or more of the budget.
Both the US and the Soviet blocks contributed, but
the share of the latter was more. As aid declined
in the late 1960s, export of natural gas from northern
Afghanistan to the Soviet Union (principally Uzbekistan)
replaced it. Most of the rest came from taxes on a
few items of foreign trade and government monopolies
of commodities such as fuel and tobacco.
In Afghanistan property rights came to depend on enforcement
by the state, rather than being a manifestation of
local social relations. The state assured Pashtun
nomads and landlords access to pasture and agricultural
land in the largely non-Pashtun areas of central and
northern Afghanistan. The state also made possible
the development of absentee landlordism in the periphery
of major cities. Till the mid-1950s the merchant class
has substantial control over the country's economy.
However, later the state nationalized the banking
system and controlled the small industries that developed.
Urban society depended on the redistributive activities
of the state. After the mid-1950s the role of the
Afghan private sector became largely confined to trade.
The state controlled most urban employment, which
expanded alongside the foreign funded state.
About 80 per cent of the Afghan population is engaged
in agriculture, while almost the entire fifth not
in agriculture are nomads, travelling to their summer
quarters (yaylaqs) in the highlands in summer, and
returning to the lowlands to stay in their winter
residences (qishlaqs) in winter. Among the agriculturists
are the landed gentry (those who own between 50 and
500 acres of land) and the farmers. The gentry are
also involved in commerce, and some from this group
hold high positions in government. In contrast the
farmers are a poorer lot. The well-off farmers own
between 20 and 50 acres of land, the moderately rich
ones own between 8 and 20, while the petty landowners
own between 3 and 8 acres. This group sometimes rent
in land from the richer groups to cultivate. However,
nearly 85 per cent of Afghan agriculturists are landless
peasants, for whom the only available occupation is
to work in the fields of the three richer groups.
Afghanistan does not have a rich industry. In fact
industry in the country has been barely above the
cottage industry level. Before the Soviets came into
the country, around 60,000 workers were working in
the industrial sector.
The economic interest in Afghanistan can be traced
to the British desire to annex the country to India
to gain an upper hand over the Russian Empire, which
was threatening to gain control over Afghanistan.
The British however failed in all their efforts to
conquer Afghanistan, and in 1919 gave up control over
the country's foreign policy, and accepted the
independence of Afghanistan.
The departure of the British allowed the then newly-formed
Union of Soviet Socialist Republic to become a major
ally of Afghanistan. In March 1919, Amir Amanullah,
then ruler of Afghanistan, welcomed the Soviet Union
as the first state to recognize Afghanistan as an
independent country. During Amanullah's regime,
payment of taxes in kind was abolished. Livestock
taxes were unified, private ownership of land was
legalized, there was an attempt to settle some nomadic
tribes living in northern Afghanistan, and waqf (religious
endowment in land) was abolished.
Amanullah also tried to promote modernisation of the
agricultural and industrial sectors in the country.
However, in the field of agriculture, Amanullah failed
to change the difficult conditions in which Afghan
peasants were trapped. They remained tied to the land,
were increasingly surviving at the mercy of the landlord
and the tax collector, and many could pay their taxes
only by selling portions of their land every year.
Reforms undertaken by Amanullah, however, angered
the religious and tribal chiefs in the country, as
their power and control over the populace got diminished.
Amanullah had to finally abdicate power, and Habibullah
(Bacha Saqaw), a Tajik wrested control over the country
in January 1929. His rule (till October 1929) was
not successful as Habibullah hardly had any expertise
to govern over a nation.
When Nadir Shah ascended the throne of Afghanistan,
aided by the British, the Afghan economy was in shambles.
The rural economy was ravaged by inter-ethnic, inter-tribal
and religious conflicts, as well by neglect of the
state. However, Nadir Shah's regime was also
fairly short and he was assassinated in the year 1933.
His only surviving son, 19-year-old Zahir Shah, succeeded
him. However, during the initial years, it was Zahir's
uncle, Hashim Khan, who actually ruled over Afghanistan
in the name of Zahir Shah. Later, the king's
cousin Daoud Khan also gained considerable powers.
During Zahir Shah's rule Afghanistan witnessed
a massive overhaul of its education system. The figures
below can give one an idea about the educational facilities
that were made available in the country during this
time.
10
|
Universities |
22
|
Colleges |
31
|
Professional
schools |
52
|
High
schools |
533 |
Elementary
schools |
788 |
Rural
schools |
26 |
Islamic
schools |
1,436 |
Schools |
235,000 |
Students
(ratio of girls to boys: 1/7) |
5,983 |
Teachers |
14,719 |
Graduates |
229 |
University
graduates |
907 |
Professional
school graduates |
1,743 |
High
school graduates |
|
During this period there was a significant improvement
in the health care facilities available in Afghanistan
as well. While in comparison with other nations the
figures do not inspire, nevertheless things definitely
improved during the reign of Zahir Shah.
59
|
Hospitals |
5
|
Maternity
wards |
5
|
Sanitariums
for TB |
19
|
Laboratories |
18 |
X-ray
facilities |
157
|
Pharmacies |
2,111
|
Beds |
250
|
Doctors |
69 |
Assistant
doctors |
|
The patient-doctor ratio in comparison
to neighbouring countries
Country |
Afghanistan |
Pakistan |
Iran |
India |
Turkey |
Ratio |
50,000 |
14,000 |
8,000 |
5,000 |
4,000 |
|
Source: http://www.angelfire.com/rnb/bashiri/Afghanistan/AfghanOverview.html |
|
The Soviet contacts with Afghanistan during the 1950s
and 1960s helped Afghans to become familiar with Soviet
technology, so that Soviet aid packages (which mostly
have a technology content) could be utilised in Afghanistan.
These included kits for building a combined flour mill-bakery-granary
or a motor repair workshops or an asphalt factory in
the initial phases, and equipment and trained personnel
for building roads in the later stages. Such expertise
helped Afghans to construct the Salang highway through
the Hindu Kush Mountains. Although this road is only
100 miles long, this helped to reduce the journey-time
between Kabul and Mazar-I- Sharif from four days to
three days. Another highway was constructed joining
Kushka in southern Uzbekistan to Kandahar in the south
of Afghanistan. This highway was 680 kilometres in length.
Another 750-kilometre long highway was built in the
1960s between Kabul and Sherkhan. Other infrastructural
projects completed in Afghanistan with Soviet aid included
the Naghlu hydroelectric station, the Jalalabad irrigation
system, and the Kabul polytechnic. A gas pipeline, spanning
the Amu Dariya, and several airports, including smaller
ones at Aq Chah, Mazar-I-Sharif, Heart, Farah, Kandahar,
Khost, and Bamiyan, besides an international airport
in Kabul, were among the other major infrastructural
facilities set up in Afghanistan with Soviet help.
Soviet expertise also helped Afghanistan to improve
the irrigation facilities in the country. Not only were
more canals and dams constructed with Soviet aid and
technology, Afghanistan also improved in the fields
of mechanized farming, setting up of fertilizer plants,
and adopted Soviet techniques to improve on its traditional
river valley farming practices.
However, while the Afghan population welcomed Soviet
help in building infrastructural facilities in their
country, the attempt by the erstwhile USSR to influence
policies of the Afghan government met with resistance.
To overcome this opposition USSR made a move to gain
control over Afghanistan and installed Babrak Karmal
as the ruler of Afghanistan and on December 27, 1979
executed Hafizullah Amin, whom Karmal displaced, and
many of his followers.
Afghanistan under the Soviets:
The state of the Afghan economy worsened since the Soviet
took control of the country in 1979. The mujahideen,
backed by Pakistan, Saudi Arabia, and the United States,
fought throughout the 1980s in an effort to oust the
Soviet-backed regime from Afghanistan. This ravaged
the nascent Afghan economy entirely and the only profitable
ventures remained opium cultivation, and illegal trade
in narcotics and arms. The war economy destroyed what
could have been called a rural subsistence economy.
With most of the men fighting the war for one side or
the other, the civilian role of women increased in Soviet-ruled
Afghanistan. Besides, the country now had to depend
only on Soviet aid and revenue from the sale of natural
gas as aid to the Afghan government from the US and
its allies had now ceased to flow. Many fled to neighbouring
Iran and Pakistan, with those going to the latter often
finding them initially confined to Pak camps for Afghan
refugees, and many among them returning to Afghanistan
to fight the Soviet-backed state army.
Agriculture took a backseat during this period. While
the Afghan government wanted the peasants to grow cash
crops like cotton and sugar beets and sell the produce
to government factories, opium cultivation and trade
was the more lucrative option to earn money for the
mujahideen. The income from opium per hectare of land
sown was almost 2.5 times that from wheat in provinces
like Farah, Kandahar, Nimroz, and Hemland. The peasants
however received only a fraction of the eventual price
at which this opium got sold in the market. The production
of opium led to a major macroeconomic change induced
by the war: a rapid increase in the supply of money,
which, combined with the destruction of the much of
the subsistence economy, induced an apparently large,
if as yet unmeasured, monetization of economic and social
relations, as well as hyper-inflation.
Once the Soviet troops started moving out of the country,
taking with them the Soviet technicians who ran the
gas fields, revenue from natural gas also dropped. In
order to pay its employees, particularly the expanded
security forces, the Afghan government also issued more
currency notes. Data published by the IMF shows that
beginning in 1987 and until the fall of Najibullah in
April 1992, the value of banknotes in circulation increased
by an average of 45 percent per year. Food prices rose
by factors of five or ten. The afghani rapidly lost
value against the dollar, trading at 1000 to the dollar,
or about twenty times the official rate, by the summer
of 1991.
From Soviets to Taliban:
The departure of the Soviets and the subsequent fall
of Najibullah threw Afghanistan into utter chaos with
several ethnic groups fighting with one another for
wresting control over the country. However no single
faction could get control over the whole of Afghanistan.
While the UN and other international agencies tried
to provide aid and food to the Afghan people, a job
the Soviets were doing previously, it fell far short
of what the war-torn country needed, and the food aid
was less than half the amount supplied by the Soviets
(120,000 tonnes of wheat per year compared to 250,000
tonnes of wheat per year). The most important source
in the hands of the state, of financing its expenditure,
remained printing of new notes. The afghani devalued
further as a consequence, and by September 1996 (when
Kabul fell to the Taliban) it was trading at 17,800
to the US dollar. In Mazar-I-Sharif the afghani was
trading at 25,600 to the US dollar at that time. While
pipelines through the country to bring oil from Central
Asia and the Caucasian nations remained a lucrative
proposition for Afghanistan to earn valuable foreign
exchange, political uncertainty has prevented this proposal
from seeing the light of the day even till date.
Economy under the Taliban:
Two decades of war have devastated the Afghan economy.
A third of the country's population fled Afghanistan
during the decade-long military occupation of the country
by USSR from 1979. Pakistan and Iran gave shelter to
more than 6 million Afghan refugees during this period.
The warring factions who kept fighting with one another
even after the Soviets left (on 15 February 1989), and
the Taliban rule during the latter half of the 1990s
prevented the return of all Afghan refugees to the country.
Even as late as early 2000 two million Afghans remained
in Pakistan and another 1.4 million remained in Iran.
This flight of labour alongside the capital loss and
disruption of trade and transport during the years of
unrest resulted in a substantial fall in Afghanistan's
GDP. The severe drought that affected the country between
1998 and 2000 added to the woes of the Afghan economy.
With most of the male members fighting or getting killed
in the war, and female members being barred from getting
employment, many women-only families did not have anybody
to work and earn to sustain themselves. Basic necessities
like food, clothing and shelter remained in short supply,
and international aid failed to match the need for it.
Almost 80 per cent of the grain shortfall in the country
was being provided by Pakistan. Inflation continues
to be a problem.
The years of strife witnessed a rapid rise in illegal
production of opium poppies and narcotics trafficking.
While initially the Taliban put a check on the trade
of narcotics and opium production, faced with economic
ostracization by most of the international community,
the Taliban regime very soon gave up its opposition
to this illegal trade, and in fact took steps to boost
it. Opium cultivation and trade in narcotics remained
a major source of revenue all through the Taliban regime.
In 1999 the country had become the largest producer
of illicit opium in the world, overtaking Myanmar in
this regard. A total of 51,500 hectares were sown with
opium poppy in Afghanistan in 1999, and the estimated
output was 1650 metric tonnes. Area under the crop in
1999 rose 23 per cent over the area under opium poppy
in 1998. With all the major political factions in the
country profiting from drug trade, the number of heroin-processing
laboratories in the country increased significantly
during the period of civil strife in Afghanistan.
The main source of the Northern Alliance (like the late
Tajik Ahmad Shah Masood) for financing the war was by
mining for emeralds and other precious stones, mostly
using environmentally destructive methods in the Panjshir
area in the Hindu Kush Mountains.revenues from such
unsustainable mining amounted to anything between US
$60-100 million every year. The Northern Alliance also
used to print currency notes that had acceptability
in the regions they controlled. Between 1996-2001 an
estimated seven trillion afghanis, or about US $175
million were printed. Another US $8 million were quickly
printed in December 2001, shortly before Karzai took
over as the leader of Afghanistan.
Afghanistan's GDP, prior to the war to oust the
Taliban, was estimated at US $6.9 billion in nominal
terms. The per capita income in 1989 was US $300. With
the Taliban gradually gaining control over most of Afghanistan,
the ‘security' provided to goods carriers
boosted internal and external trade in the country.
However, most of the goods that were being transported
even under Taliban ‘protection' were goods
being smuggled in and out of Pakistan. ). A World Bank
study estimates that in 1997, the first year after the
Taliban capture of Kabul, this trade amounted to at
least $2.5 billion per year, equivalent to nearly half
of Afghanistan's estimated GDP and around 12-13
percent of Pakistan's total trade. Only a few
ventures were started by foreigners in Taliban-controlled
Afghanistan, but almost all of them were to cater to
the transit trade.
Indeed, the Taliban started acting as a rentier, seeking
rental incomes from traders in order to allow them to
carry on with trade in illegal goods and drugs. One
reason that sanctions against the Taliban regime did
not have the intended impact was that the economy was
predominantly illegal. Indeed efforts to curb smuggling
across the Afghan-Pak border have failed in the face
of opposition from various quarters. For example some
economic technocrats from Pakistan had suggested that
for duty-free trade as well traders should pay duty
on entry of goods into Pakistan, which would be refunded
at the point of entry into Afghanistan. However this
proposal was never implemented.
The World Bank study stated above estimated that the
Taliban got at least US $75 million in 1997 by simply
taxing trade between Pakistan and Afghanistan. Zakat,
an Islamic tax to fund ulama and jihad, amounting to
20 per cent of the trade in opium and opium derivatives,
helped the Taliban garner another US $100-200 million
in revenues.
However this money did not reach Kabul. While Kabul
remained the capital of Afghanistan, Kandahar was the
base of the Taliban and its leader, Mullah Omar. This
resulted in much of the trade shifting out of Kabul,
with the population in the city becoming more and more
dependent on aid for survival. Most of the funds collected
by the Taliban went to finance their war efforts. Even
civil servants were paid US $5 per month, and that to
at irregular intervals.
Afghanistan after the Taliban:
While there has been a lot of hope arising from the
exit of the Taliban and the subsequent appointment of
Hamid Karzai as the President of Afghanistan, the policies
that are being executed by the Afghan ruling class hardly
inspire confidence amongst the masses of impoverished
Afghans. The externally driven, and spatially segregated
economic system, dependent on outside dollars for economic
prosperity will surely enough bypass Afghanistan existing
traditional, subsistence, and nomadic economy that is
prevalent widely in the informal sector. The economic
system the West is trying to hoist on Afghanistan is
consumptionist, and hugely dependent on imports. In
contrast, the only avenues for the country to earn the
foreign exchange necessary to finance these imports
were from oil pipeline fees, tourism, and from export
of traditional items like carpets and fruits.
The foreign interest in post-Taliban Afghanistan has
not been so much for the advancement of the Afghan economy
as much as to cater to the business interests of their
own corporations. The major interest of the US in particular,
in Afghanistan, has been to get access to the largely
unexploited oil and gas reserves of Central Asia. Till
date all access to these reserves has been through Russian
territory as the existing pipelines run through that
country. Getting pipelines through Afghanistan will
help the US to wrest control over the reserves from
Russia. Provided that the Afghan government can provide
security, UNOCAL (of which Karzai had been an employee)
is planning a pipeline that would run from Turkmenistan,
through Afghanistan, into Pakistan.
Also almost all the new investments those are being
proposed are mostly targeted either towards exploiting
Afghanistan's natural resources (like a copper
mine at Aynak in Loghar province, a cement plant in
Herat, a gas liquification unit in Sheberghen, or a
gold mine in Kandahar), or are coming in sectors like
telecommunications, reconstructing demolished buildings,
and also in creating a large police and military establishment.
However, in a country where even in the capital city
of Kabul only a fifth of the residents have access to
clean water, such reconstruction measures mean nothing.
According to the United Nations figures, annual per
capita income is $178, malnourishment afflicts 70 percent
of Afghans, and men's life expectancy is 44 years [for
women it is 43]. The World Health Organization reports
a mere 24 percent of Afghans have access to safe drinking
water -- which is a major cause of disease
[1].
Also such measures have mostly bypassed rural areas
which are home to 78 per cent of the Afghan population.
Nearly 90 per cent of the Afghan economy is agro-based,
but there has been hardly any investment in this sector.
Only there has been distribution of about 3,500 tonnes
of controversial GM wheat seeds to around 60-70,000
Afghan farmers under a US $12 million grant from the
USAID. Even those getting some job in the cities and
towns are mostly employed on a casual or contractual
basis and are paid abysmally low wages.
The additional demand that is being generated as a result
of technology-intensive investments and consumption
needs of the Afghan and western elite serving in Afghanistan
is mostly catered to by products either entirely imported
or having strong import contents. The presence of foreign
organizations like the UN and several NGOs has driven
house rents in Kabul through the roof. Real estate prices
in the capital of Kabul have doubled. Owners of such
houses now have suddenly become rich and are buying
imported and luxury items. Sales of TV's, VCRs, music
cassettes, videotapes and satellite dishes, all Taliban
taboos, are soaring. The market has seen the arrival
of many imported eatables as well.
However, the trouble with the plan visualised for Afghan
reconstruction is, as said before, that it is entirely
dependent on outside monies. In February 2002, Amin-Arsala,
Karazi's Minister of Finance admitted that the government
would be able to finance only three to four percent
of its budget from domestic resources. While the Afghan
Reconstruction Conference held in Tokyo in January 2002
had pledged US $4.5 billion over five years, more than
a quarter of it towards repairing Afghanistan's
roads, most of it has to be approved by the parliaments
of donor countries. In the meanwhile Afghan roads have
become virtually non-existent with 95 per cent of the
country's 30,000 miles of highways being either
destroyed or damaged by warfare or neglect. Also there
is hardly any cash grant component in the amount pledged
by the donors to Afghanistan. And Karzai has promised
that the country will assume responsibility for the
foreign debt incurred by previous governments. This
is worth US $ 5.5 billion, a billion more than the aid
pledged to the country.
Capitalism has hardly created
new markets; they have only followed existing ones.
So multinational presence in Afghanistan is not going
to make the Afghan economy a vibrant one. The opening
up of Afghanistan may only allow some Afghan and non-Afghan
entrepreneurs abroad to set up factories in Afghanistan
to produce traditional items for western markets. The
widening gap between a Westernized Kabul and an impoverished,
under-educated, and powerless countryside does not bode
well for Afghanistan. If steps are not taken to correct
the rising imbalance within the Afghan society, the
nation may be thrown back into a state of utter chaos
and lawlessness.
December 19, 2003.
[1] http://www.cursor.org/stories/karzai.htm |