A protracted election year has brought the economy to its knees, the GDP growth shrank to 1.5 percent in 2014 from a high of 6.4 percent in 2013, the state revenues substantially decreased to a negative 22 percent below target.
Salaries of government officials are being paid with significant delays, but spending on development projects financed directly by the Afghan government has come to a complete halt.
To worsen the situation, the reduction in NATO troops has resulted in the lessening of aid and limited economic activities associated with military presence. Some donor countries have reduced their support given that their aid contributions to Afghanistan have conventionally been tied to their military engagement. Others, citing limited progress on reforms, have withheld or reduced their development aid to Afghanistan.
Despite these difficulties, 2014 is also a year of historic achievements. The agreement about the unity government reflected an important set of shared goals and a faith in the country’s future that many observers thought not possible. The Bilateral Security Agreement (BSA) which was confirmed by a consultative Loya Jirga in 2013 was signed and recently approved by both houses of the Afghan Parliament.
Ghani is re-engaging with Afghanistan’s neighbouring countries on economic and security matters. There has also been notable progress on governance, economic development and anti-corruption including the progress on resolution of the Kabul Bank scandal.
Foundation for future growth
The London Conference can help lay the foundation for future economic growth in Afghanistan. Despite competing demands for engagement in Iraq and Syria, the international donor community will publicly reaffirm its long term and sustained commitment to development in Afghanistan. It will also commit to make aid more effective and fit for purpose.
The conference can help redefine the partnership between Afghanistan and the international community to be based on shared economic and political interests. This is not only crucial for Afghanistan but for the region as a whole in order for Kabul to reduce its reliance on foreign aid and to diversify its development portfolio.
Improving trade and transit in the region, allowing market access to Afghan exports, providing a specific set of financial instruments including investment guarantees and export credits, and providing access for the Afghan labour force to the key regional labour markets are areas where cooperation can be extended.
Since aid alone cannot help fulfil Afghanistan’s vision of self-reliance, regional economic cooperation becomes a necessary tool for economic development. Support for implementation of prominent regional investment projects such as CASA 1000 (power transmission from Tajikistan to Pakistan through Afghanistan), the Trans-Afghanistan pipeline known as TAPI (Turkmenistan, Afghanistan, Pakistan and India pipeline), the Trade in Electricity project known as TUTAP (Turkmenistan, Uzbekistan, Tajikistan, Afghanistan and Pakistan) are but a few examples of major infrastructure projects in the country.
Likewise, regional infrastructure such as roads, railways and power transmission which connect through Afghanistan can be considered as a single integrated system that will remain incomplete without Afghanistan. With the participation of regional countries, the conference can also commit to help with operationalisation of various trade and transit agreements between Afghanistan and its neighbouring countries that will enhance regional movement of people, goods and services.
Environment for private sector
The potential of the private sector as the engine of growth and prosperity has not been fully exploited in the past. This is in part because the enabling environment for private sector development has been weak. The World Bank’s “Doing Business” index ranks Afghanistan 183 out of 187 for ease of doing business. The London Conference is an opportunity to facilitate networking among Afghan and international businesses to form joint ventures and public private partnerships.
The business community will also have an opportunity to voice their recommendations on reforms such as access to finance, contract enforcement, tax administration and access to infrastructure. Similarly, civil society through its grassroots network can help reinstate the trust of the population in the democratic process, can promote accountability and transparency of the state institutions and can be a catalyst in the peace and integration process at the national and regional levels.
The London Conference is not intended to be a pledging conference, running the risk of being seen as yet another talk shop on Afghanistan if it did not produce tangible and timely results.
The Afghan government also needs to realise that critical reforms that will create strong, sustainable and accountable institutions is expected by both the Afghan public and the international community. Continued progress on tackling corruption, countering production and trade in narcotics, protecting human rights including the rights of women and children and reforming law enforcement and judicial institutions are fundamental for peace and security and a requirement for the international community to sustain its engagement in Afghanistan.
The international community for its part should demonstrate patience as Afghanistan weathers this difficult path of transition and strongly support the new government to deliver on its promises of reform. The new government provides more than a few glimmers of hope. It is moving towards a far more robust and convincing reform programme than its predecessor. It has certainly been a long and difficult road, but the prospects for successful reform are significant.
One of the key tests of any new democracy is whether it can make a peaceful transition of executive power. Afghanistan’s recent elections seemed at one point to have the makings of a meltdown. But in the end, the two final round candidates found enough common ground to form a government of national unity and avert a disaster.
Still, scepticism about Afghanistan’s prospects and the ability of the government formed by President Ashraf Ghani and Chief Executive Abdullah Abdullah to actually pursue its reform agenda runs high, especially since the prospects of the new cabinet being formed are at least some weeks away.
Afghanistan’s leaders and its donors are now gathering at a conference in London, cohosted by the UK government that will draw ministers and representatives from 55 countries and 20 international organisations.
This is not a pledging conference. Indeed, many donors are weary from their engagement in Afghanistan, and the new government can expect to face tough questioning about its reform agenda. Donors have not been satisfied with the follow through since the Tokyo gathering two years ago, although that may not be attributed to the new government. At the end, the donors are expected to reaffirm their support for the Ghani-led government in exchange for tangible progress on key reforms such as institutional governance, economic stability and growth, fiscal management and respect for basic human rights: principally the rights of women and children.
A difficult year
Afghanistan is emerging from a difficult year since the engagement of the international community began in 2002. The most recent pattern of intense assaults in the capital as well as in the provinces, notably the recent incident in Paktika where over 50 civilians were killed in a playground, may have dented the hope for a fresh beginning.