Afghanistan Economy the Future of Term Paper

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The majority of the population was left extremely poor, lacking food, clothing, housing and medical care. The economy virtually collapsed..." During this time, any formal financial sector was essentially nonexistent, basic infrastructure was lacking, and a severe drought from 2002-2001 further ravaged the economy (United Nations Office on Drugs and Crime).

During this decade, violence and political instability had a tremendous impact on Afghanistan's economy. Inter-regional trade was greatly disrupted, and often brought to a virtual standstill by violent instability. However, the appearance of the Taliban regime saw improvements in inter-regional trade in areas controlled by the regime (United Nations Office on Drugs and Crime)

In the last decade, the opium trade played an important role in Afghanistan's economy. In an economy where the monetary system was virtually destroyed by prolonged war, opium "became both the medium of exchange and the only form of saving" (United Nations Office on Drugs and Crime) in opium-producing areas. The growth in illicit opium was profound, and average annual growth rate for the opium trade held at 19% between 1989 and 1994 (United Nations Office on Drugs and Crime).

Overall, Afghanistan's prospects for economic growth in the last decade were extremely poor. The United Nations Office on Drugs and Crime noted, "as of late 2001 all available social and economic indicators pointed to Afghanistan being the country on the verge of complete collapse, having already been close to social and economic breakdown for many years before." The basis of this poor economic outlook rested largely in the country's horrific history of political instability and war.

The Future of Economic Growth in Afghanistan

Today, the Afghan economy remains marked by "enormous poverty, a lack of skilled and educated workers, a crumbling infrastructure, and widespread land mines" (CIA World Factbook). As such, the future of economic growth in Afghanistan depends largely upon overcoming many of these obstacles.

Today, realistic expectations for future economic growth in Afghanistan rest upon the successful establishment of a number of perquisites for economic growth. The USAID notes, "For years, Afghanistan had a dysfunctional economy based on illicit drug trade and the business of war." In order to create economic growth, Afghanistan's economy must be radically transformed. Prerequisites for future economic growth in Afghanistan include the establishment of political stability and good infrastructure, a reduction in the opium trade, improvements in health, education, and the status of women, improved governance, and an increase in political and social freedoms.

One significant impediment to future economic growth in Afghanistan is poor infrastructure. The U.S. Agency for International Development (USAID) notes, "Years of unrest in Afghanistan, followed by Taliban rule, has left public infrastructure in ruin. All sectors of the economy struggle when poor roads prevent the transport of goods, or a shortage of clean water affects a community's health" (USAID).

The current state of telephone service, communications, highways, and airports reflects the relatively poor state of infrastructure in Afghanistan. Telephone service is highly limited, with only 0.1 telephone line per 10 people. However, telephone service is improving as two mobile phone operators were established as of 2003. Radio broadcasts are also limited, with seven AM stations (six of which are inactive), one FM station, and one shortwave station. At least ten television stations are available in the country, including one government-run central television station that is located in Kabul. Internet access is increasing through the creation of a nationwide network that includes public kiosks in Kabul, and Internet cafes (CIA World Factbook).

Afghanistan has 2,793 km of paved highways, and 18,207 km of unpaved highways. The major port is Kheyrabad, Shir Khan. There are 10 airports with paved runways, and five heliports (CIA World Factbook).

A number of USAID initiatives are helping to improve public infrastructure in Afghanistan. These include the construction of a ring road (the Kabul-Kandahar-Herat Highway), which the USAID optimistically notes, has "revitalized entire villages" (USAID), by increasing access to health care, schools, jobs and markets. USAID notes, " at the national level, the highway has already begun to contribute to Afghanistan's improved economic growth, security and national unity."

Current efforts to reduce the opium trade may have a significant directly negative effect upon Afghanistan's economy. Today, opium has surpassed wheat as the largest single agricultural product in Afghanistan (CountryWatch). As such, abolishing the opium trade should have a negative economic impact.

At the same time, the drug trade plays an important role in instability within Afghanistan (CIA World Factbook). Specifically, some funds generated through the opium trade have been used in insurgency funding (CIA World Factbook).Thus, reduction in the opium trade seems necessary in order to increase stability, an essential precursor to economic growth. Making this task especially difficult is the fact that several government groups profit from the opium trade (CIA World Factbook).

In addition, the opium trade in Afghanistan has been linked to the spread of drug-related HIV, abuse, and trafficking, therefore creating more impetus to stop the opium trade (United Nations Office on Drugs and Crime).

Today, Afghanistan is the largest producer of opium in the world. Despite eradication efforts by the government, cultivation of the opium poppy (which is used to make heroin) has increased in recent years. In 2002, cultivation of the poppy expanded to 30,750 hectares. The potential opium production from this is 1,278 metric tons. Between 80 and 90% of heroin that is consumed in Europe comes from Afghanistan. Further, Afghanistan is especially vulnerable to money-laundering through narcotics (CIA World Factbook).

Other illegal drugs are produced in Afghanistan, and some exported. The country contains numerous narcotics-processing laboratories, and also produces hashish (CIA World Factbook).

Today, Afghanistan's agricultural economy is reeling from the effects of a four-year drought, coupled with the devastating impact of political an economic instability. Close to 70% of Afghanistan's population is involved in agriculture, and this significant population was dramatically hurt by Georgian instability (USAID).

Economic growth in Afghanistan will be linked closely to improvements in the agricultural sector. Notes USAID, "Revitalizing agriculture is key to the growth of the Afghan economy." As such, USAID is attempting to stimulate the economy by rehabilitating irrigation systems, providing a fertilizer, seeds, agricultural equipment, and tools. The aim is to increase productivity and intercultural sector, as well as increase stability (USAID).

Improvements in Afghanistan's education and health systems may also play a role in improving economic growth in the country. As of the year 2000, 97% of women did not attend school, and the end of Taliban rule saw the damage or destruction of 80% of the country schools. The average life expectancy for the Afghan people is about 46 years of age, and the "health status of the Afghan people is among the worst in the world" (USAID). USAID is currently involved in improving basic health and nutrition among those in Afghanistan, and the building schools and providing school supplies and training materials (USAID). If effective, these improvements in education and health will go a long way to creating an environment where economic growth can flourish.

In a similar vein, improvements in the status and education of Afghanistan's women will be an important factor in the country's economic growth. Under Taliban rule, women were banned from public life, punished for showing their faces, denied education, and commonly stopped from working outside the home (USAID). USAID has provided resources to improve the status of women in Afghanistan, including establishing a Women's Resource Center in Kabul, and integrating a focus on women within sector programs such as democracy, governance, agriculture, health, and education (USAID).

Strong economic governance will also be important in Afghanistan's future economic growth. This includes a number of different factors, including developing a national budget, and creating effective taxation and customs system (USAID). Notes CountryWatch, "the challenge of reestablishing a tax revenue system is enormous." Afghanistan's Central Bank must implement and create commercial banking regulations and licensing, establish national and international money transfer services, implement monetary policy, and be involved in public utilities and trade reform (USAID).

An improvement in social and political freedoms in Afghanistan will go a long way to helping Afghanistan's future economic growth. Notes USAID, "years of corruption, brutality, and tyranny imposed upon Afghanistan by the Taliban reduced the country to political, economic, and social ruin." Improvements in this area include the development of a media at that is independent from the government. Similarly, the establishment of an effective democratic government, supported by the people of Afghanistan, is essential. Positive steps in this direction include work with United Nations supporting voter registration, and support for Human Rights Commissions and Judicial Reform (USAID).

Despite a number of positive indications of improving infrastructure, social political freedoms, health and education, economic governance, and a commitment to reducing the opium trade, Afghanistan to economy still has a long way to go. Notes CountryWatch, "the kind of security that will foster long-term private investment has certainly not returned," even though many refugees are returning in economic activity is increasing (CountryWatch).

One major impediment…[continue]

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