USAID
USAID
Rebuilding Afghanistan: Practical Measures for Improving the Economy

Originally posted December 2009 

It is a difficult task to suggest a specific recipe for the improvement of the economy of any failed state. The case of Afghanistan presents even more challenges.

The Magnitude of the Challenge

The country has been in a state of war for 30 years. In fact, the Soviet invasion damaged the socio-economic core of this impoverished country almost beyond repair. The aftermath of 14 years of Communist regimes devastated the country even further, followed by the two-year reign of warlords and the six years of Taliban rule. The 9/11 tragedy prompted the United States to drive the Taliban and al-Qa‘ida from Afghanistan and bomb their training facilities.

 Unfortunately, at the end of 2001, the United States, under a United Nations umbrella, haphazardly installed a provisional government through the Bonn Process. But this came about only with a great deal of manipulation and arm-twisting. With the job undone, the United States shifted its focus to Saddam Husayn’s Iraq, leaving Afghanistan in a state of flux. Meanwhile, other regional powers continued to meddle in Afghan affairs. Added to this mix was the growth of the drug trade, which reached unprecedented levels.

The so-called democratic system that the West, spearheaded by the United States, imposed on Afghanistan, did not work under Hamid Karzai’s inept stewardship, as the necessary institutions to hold the system were absent. Indeed, the controversial August 2009 presidential election highlights the inherent weaknesses of the state machinery and demonstrates that the country’s fate remains uncertain, with the insurgency ever growing.

 Given this complex set of circumstances, it is very difficult to suggest a particular formula to rebuild Afghanistan. Nevertheless, a number of practical measures can be adopted which would help the country avoid a further waste of time and resources, and would create the framework for appropriate state-building and sustainable socio-economic development.

It must be emphasized that the most important precondition for success is respecting Afghanistan’s sovereignty — including a demilitarized Afghanistan free from interference by all powers, and neighboring countries in particular. Based on the respect for sovereignty, a clear process must be created through which Afghans can establish a credible government with proper security and defense forces, a sustainable financial system, and a viable socio-economic development strategy.

Meeting the Challenge

Despite the enormity of the challenge, it is nonetheless possible to suggest guidelines for a few practical and practicable measures in three broad areas for improving the country’s economy:

1. State Building

Capacity building must be the cornerstone of any strategy aimed at fixing a failed state. Toward this end, the main focus must be on “Afghans for Afghanistan,” that is, concentrated on training Afghans to build their own country. While intensive technical, as well as vocational, training must be launched within the country, the educated diaspora must be encouraged to take part in this crucial endeavor. This could be accomplished through several means:

 • A Global Initiative of Volunteer Expatriates for Afghanistan (GIVE Afghanistan).
This initiative would aim to use the expertise of young diaspora Afghans who have either completed their studies or are in the process of doing so for the reconstruction of their homeland on a short-term basis. This is essential for capacity building and future socio-economic and political stability of Afghanistan. The Afghan diaspora possesses unique characteristics and capabilities, including linguistic ability and cultural and religious values that are deeply ingrained in Afghan society. This, coupled with their expertise in various professions, will enable the Afghan government to build capacity through direct transfers of knowledge.

 • Worldwide Townhall Meetings
By holding townhall meetings where there are sizeable Afghan communities, the Afghan government can, and must, galvanize support for its efforts. The purpose of these meetings would be to invite talented Afghans who have either worked in Afghanistan or hold prominent jobs overseas to return to their homeland to assist in rebuilding the country.

 • Advisory Group for Reconstruction (AGR)
The formation of an Advisory Group of eight to ten capable Afghans with national and international experience must be invited to advise the United Nations system (including the World Bank and the International Monetary Fund) and other international and bilateral stakeholders on how to approach the economic ills of Afghanistan. The important distinctive attribute of the AGR would be its independence from the government, which would enable it to provide objective advice on socio-economic matters and to avoid superimposing certain costly, foreign ideas on the country.

 • A Master Plan to Assist and Support Refugees and Internally Displaced Persons (IDPs)
This plan would focus on helping Afghan refugees and internally displaced persons in need of shelter, particularly those still living in makeshift homes and tents, to build their own homes; for example, by drawing upon the experiences of the UN High Commissioner for Refugees, UN Habitat, and other international and bilateral institutions. The World Food Programme’s (WFP) food-for-work program could prove very useful in this respect.

2. Aid Coordination

It is now well known that billions of dollars of donors’ money intended as Afghan has been wasted. The lack of accountability, transparency, and coordination has led to extravagant salaries for inexperienced workers hired by crony contractors/non-governmental organizations. Their multi-tiered subcontractors have caused overhead costs to skyrocket. To circumvent these intractable problems, I would like to propose the following mechanisms:

 • Afghan Reconstruction Fund (ARF)
The ARF would be the resource mobilization and allocation vehicle for reconstruction and should be subject to an impartial audit by a reputable international firm. Under its resource allocation responsibility, the ARF must insure the quality and sustainability of the proposed projects and programs. The ARF would be bolstered by a strong Board of Trustees consisting of an equal number of high-level donor representatives and the Afghan public and private sectors. Since the Board may not be obliged to meet more than twice a year, its Executive Board, consisting of professional economists and other seasoned staff, would run ARF’s day-to-day work.

 • Reconstruction and Development Authority (RDA)
Since the Ministry of Finance handles the Ordinary Budget of the country, the RDA would be responsible for the Development Budget. RDA’s most important tasks would be drawing up, in coordination with the ministries involved with reconstruction as well as with all provincial governments, a multi-year development plan for the country as a whole. RDA would have to work hand-in-hand with ARF in order to devise a viable reconstruction and development plan. Overseeing the Development Plan as a whole and its implementation at all levels of the Government would be the next important responsibility of RDA.

 3. Economic Policy

 • Council of Economic Advisors (CEA)
The primary function of this body would be to provide the President with a clear set of macroeconomic policies and to devise a coherent strategy. The CEA should be comprised of a chairman and three top-notch Afghan economists. Additionally, the CEA must be staffed with competent individuals and equipped with an up to date library. Their activities must be digitized, using cutting edge technology. In addition to providing advice to the President, the CEA must also provide clear guidance to the ARF and RDA on all national economic policy matters; in fact, the above three bodies must work together in a coordinated fashion in order to implement an efficient and effective macroeconomic plan.

Conclusion

Given the extensive damage inflicted on Afghanistan by three decades of continuous conflict, the enormous waste of resources by international contractors, lack of transparency and endemic corruption in the Government, there are no simple prescriptions for improving the economy. However, in addition to respecting Afghanistan’s sovereignty — the most important precondition for success — it is urgently necessary to build human capacity and further develop the state’s institutional infrastructure.

It is now well known that billions of dollars of donor's money intended as Afghan has been wasted