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Afghanistan’s Economy, From Civil War to 2014 And Beyond

AttaullahNawrozy – Afghanistan has been a war stricken country. The civil war for overly three decades destroyed the infrastructure in the country altogether, which profoundly affected the economy of Afghanistan. During the civil war, Afghanistan’seconomy descended to the lowest level that led the GDP (PPP) of Afghanistan at average $2billion in a year. (indexmundi.com)

The civil war ended and gave birth to the barbaric regime of the Taliban, whotookpower in 1996. The economy had been at the same condition as it was during the Civil war even it went worse that caused the migration of the Afghans to the neighboring countries to seektheir survival.

Eventually, following the terrorist attacks of September 11, 2001, the NATO and Allied Forces led by the United States invaded Afghanistan to dismantle the Al-Qaida terrorist organization and to overthrow the Taliban government, which at the time controlled 90% of Afghanistan and hosted Al-Qaidaleadership.

The presence of Nato Troops led by the United States gave way to a far-stabilized security situation that caused the influx of NGO’s. These Institutions felt the dire need of presence in Afghanistan to transform the lives of the people in every aspect. The presences of the NATO troops and the World NGO’s have caused infusions of billionsof dollars in to the Country that created hundreds of thousands of employment.

The infusion of billions of dollars and outsourcing tens of thousands of logistic supportcontracts of the NATO troops, construction projects linked to donor activities awarded to the Afghan Contractors. This helped revive the ravaged economy. In the meantimeestablishment of the Telecommunication Companies generated thousandsof employment opportunities for the un-employed people. Exporting the country agricultural products have caused the fund flow and proportionately caused the economy to prosper.

Manyforeign investors have already shown their interest in helping Afghanistan utilize the untapped natural resources. The Chinese Metallurgical Group Corporation (MCC)is investing $ 3billion in the Aynak copper mine south of Kabul. In the meantime, in December 2011, Afghanistan signed a deal with China National Petroleum Corporation(CNPC) for the development of oil blocks in the Amu Darya basin, a project expected to earn billions of dollars over two decades; the deal covers drilling and a refinery in the northern provinces of Sar-e Pol and Faryab and is the first international oil production agreement entered into by the Afghan government for several decades.It has already been established.Moreover, The Indian group that will mine Hajigak includes state- owned RashtriyaIspat Nigam Ltd., and private-sector companies JSW Steel Ltd. (JSTL), Jindal Steel & Power Ltd. (JSP), Monnet Ispat Ltd. (MISP) and JSW Ispat Steel Ltd. The Indian group’s going to build a power plant and invest $1 billion in a railroad to export the ore. India has said it is exploring a rail line from Hajigak to the Iranian port of Chabahar.

With the support of foreign forces and the international community, Afghanistan has exhibited dramatic signs of economic, social and cultural revival. According to (online.wsj.com The untold Story of Afghan Progress)Today, there are over eight million children enrolled in schools and 2.6 million of those students are girls. In 2001, the nations classrooms seated only 900,000 boys and indeed no girls. The literacy rate is currently 33% and is set to grow to 60% by 2025 and to 90% by 2040. Afghans increasingly are on the grid, on the go, and connected. Access to regular electricity has nearly tripled to 18% over the past decade. In 2002, there were only about 32 miles of paved road in the entire country. Now, over 7450 miles now join our cities.

According to Wikipedia, Afghanistan GDP (PPP) in 2001 was $2billion. In 2012 the GDP rose to $33.7billion and per capita rose to $1,053 compare to the year 2001 it was 92.21$ According to (indexmundi.com)

After a decade the withdrawal of NATO Troops has surfaced and this sparked an uncertainty in the minds of Afghans that what would happen to Afghanistan after the withdrawal? Will it lead to the resurge of the Taliban or will the former warlords re-claim their power that will eventually cause a civil war? These uncertainties have put on a standstill the entire economy of Afghanistan once again.

Having said that, nowhere in the President’s June 2011 speech did he mention a deadline for the full withdrawal of US troops from Afghanistan, and no date for full withdrawal has been specified since then. In fact, the Strategic Partnership Agreement, which was signed between the United States and Afghanistan in June 2012, provides for a US military presence after 2014however, the magnitude of the presence was not specified.

In mid-October 2012, Afghanistan and the United States were on the cusp of beginning negotiations for the Bilateral Security Agreement, which will govern the US military presence in Afghanistan post-2014, including how many troops are left in Afghanistan, and for how long.

After an overly one year and half the negotiation between Afghanistan and United States has calumniated the holding of grand assembly (Loya Jirga) to draw the approval of the Afghan Elders to sign the Bilateral Security Agreement between the two countries. The speech of President of Afghanistan Hamid Karzai on the opening day of grand assembly was indeed a campaign that showed approval of himself and encouraging the elders in the assembly to patron and grant the approval altogether to signing the strategic pact.Hopefully it will be signed at a later stage.

Now that the NATO troops will reduce in number or eventually will pull out. After the reduction of the NATO troops it will affect the Economy of Afghanistan but not to a larger extent.

I believe Afghan economy will be in crisis in the short term but will prosper in the long term say, in couple of years after the Withdrawal of NATO troops from Afghanistan incase. It is justified as follows:

Afghans during the last decade wasby and large involved in supplying logistic supports to the NATOtroops, NGOs and other Private sectors linked with the donors. Such business promised not below the 40% return on investment. Due to the promising return on investment, Afghans are much reluctant in Primary and Secondary Industries that benefits thosenot exceeding15%. Following the end of such Businesses, Afghan Investors will turn to the Primary and Secondary Industries that will lead to self dependency of the Afghaneconomy at large.

Moreover, Afghanistan will not be abandoned by the international community until unless Afghanistan’s economy is revived and is self-dependent. International donors have offered $16billion (£10billion) in development aid for Afghanistan to reassure the government that it will not be abandoned after most foreign troops pull out in two years (Tokyo Conference).They stressed the aid would be closely monitored to assure it was not squandered through corruption or mismanagement.

The $16billion is close to what the World Bank believes Afghanistan needs to close the gap between how much money it can afford and how much it needs to sustain its transition. The Japanese hosts had said before the conference they hoped to secure pledges of nearly $4billion per year, meaning the result was in line with expectations. A follow-up conference will be held in Britain in 2014.

The US secretary of state, Hillary Clinton, said America, by far the largest donor, planned to maintain its assistance at about $2billion a year until 2017. Japan, the second-largest donor, said it would provide up to $3billion through 2016.Germany said it would keep its contribution to rebuilding and development at its current level of $536m a year, at least until 2016. The Asian Development Bank announced it is providing $1.2billion through 2016.

During the past decade Afghanistan has received a tremendous aid from international donors that these funds were spent through their proxies and almost one fourth of these funds were spent on those expatriates working on projects. The $16billion dollars pledged by international donors now will be given to the Government of Afghanistan and will be spent by the Government;hence, it would be spent wholly in Afghanistan.

Afghanistan Economy will regain its shape post 2014.Afghanistan this timewon’t be abandoned by the world countries until it is self-dependent enough to maintain and promise stability and no longer pose risk to the world. In the meantime regional countries will support the Afghanistan Government to uproot the militancy as it poses huge risk towards their borders or beyond.

AttaullahNawrozy holds Business Administration Bachelor Degree from India and he is a freelance writer and blogger.

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