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  • Author: William A. Byrd
  • Publication Date: 05-2015
  • Content Type: Policy Brief
  • Institution: United States Institute of Peace
  • Abstract: For several years, Afghanistan’s economy and public finances have worsened, culminating in a full-blown fiscal crisis in 2014. Political uncertainties, the weakening Afghan economy, corruption in tax collection, stagnant government revenues, and increasing expenditures have contributed to the current fiscal impasse. In the absence of bold actions by the Afghan government along with proactive international support to turn around the fiscal situation, the fiscal crisis and its insidious effects will continue.
  • Topic: Conflict Resolution, Corruption, Economics, Financial Crisis
  • Political Geography: Afghanistan, Central Asia
  • Author: Ishrat Husain, Muhammad Ather Elahi
  • Publication Date: 08-2015
  • Content Type: Policy Brief
  • Institution: United States Institute of Peace
  • Abstract: Pakistan and Afghanistan are among each other’s largest trading partners. Though an agreement was signed in 2010 to strengthen trade relations and facilitate Afghan transit trade through Pakistan, implementation has been mixed, with many on both sides of the border complaining of continued barriers to exchange. Both nations need to improve trade facilitation through streamlined payments settlement and improved insurance mechanisms, the use of bonded carriers, visa issuance, trade financing, tax collection, and documentation.
  • Topic: Economics, Foreign Exchange, International Trade and Finance, Bilateral Relations
  • Political Geography: Pakistan, Afghanistan
  • Author: William A. Byrd
  • Publication Date: 10-2015
  • Content Type: Policy Brief
  • Institution: United States Institute of Peace
  • Abstract: Some say reviving the Afghan economy in a time of intensifying violent conflict and declining external financial inflows will be impossible. Expectations need to be kept modest, and measures must go beyond conventional economic approaches in order to be effective. This brief puts forward some outside-the-box ideas, which, combined with greater government effectiveness and, hopefully, reductions in violent conflict, may help turn the economy around.
  • Topic: Conflict Resolution, Political Violence, Development, Economics
  • Political Geography: Afghanistan, Central Asia
  • Author: William A. Byrd
  • Publication Date: 08-2014
  • Content Type: Policy Brief
  • Institution: United States Institute of Peace
  • Abstract: Afghanistan faces a fiscal crisis that reflects worsening domestic revenue shortfalls since 2011, which could reach $1 billion in 2014 compared with the 2011 outlook. The massive theft and fraud at Kabul Bank, failure of mining activities to pay taxes and royalties, and mislabeling of some commercial imports as duty-free are among other contributing factors. Turning the fiscal crisis around will take time, but a legitimate, credible new Afghan government coming into office is essential. Quality leadership and management teams in the Ministry of Finance and the Central Bank will be crucial for success. Urgent measures are needed to turn around poor revenue performance, including strong signals from the top, possible exploitation of limited new revenue sources, and cooperation among different agencies to reduce smuggling and contain revenue leakages. Accelerated recovery of stolen and lost Kabul Bank assets should be a priority, which could provide over $100 million per year of extra fiscal space for the budget. Reforms of the revenue system need to be initiated, including introduction of a value-added tax, and possibly reform of the revenue and customs services. Expenditures will need to be cut. This requires the elimination of unnecessary and wasteful expenditures as well as the meaningful prioritization of programs within a tight resource envelope. Additional international fiscal support will be needed to help stabilize the budget in the short run. Linking aid for the Afghan discretionary budget to increases in domestic revenues and Kabul Bank recoveries would make sense.
  • Topic: Debt, Economics, Foreign Aid, Financial Crisis
  • Political Geography: Afghanistan
  • Author: William A. Byrd, Javed Noorani
  • Publication Date: 12-2014
  • Content Type: Policy Brief
  • Institution: United States Institute of Peace
  • Abstract: Case studies of five ongoing mining operations show that Afghan mining companies are wantonly exploiting easily extractable mineral resources with little or no taxes and royalties going to the government. Revenue losses from just two sources —royalties and land rent —at the five mines are more than US$50 million per year. Total revenue losses from all sources for the hundreds of mines contracted to different companies easily could be hundreds of millions of dollars annually. The tendering processes, awards, and contents of contracts issued, contract implementation, and actual operations at the mines all showed clear signs of political interference, favoring bidders that often had no prior mining experience. Companies usually began extracting resources soon after mining contracts were awarded, without paying any taxes and royalties —even though the contract called for an initial exploration period. Companies did not provide the legally and contractually required documents, such as exploration reports and environmental and social impact assessments. Effective inspections of mines were not conducted, and companies were not held accountable for payments due. Sometimes mining activities precipitated local conflicts, resulting in violence and deaths; weaker local communities called on Taliban elements for support in one such dispute. Serious reforms are needed to ensure that mining activities are developmentally beneficial and that revenues generated are paid to the government.
  • Topic: Economics, Political Economy, Natural Resources, Governance, Reform
  • Political Geography: Afghanistan, Taliban
  • Author: William A. Byrd
  • Publication Date: 09-2013
  • Content Type: Policy Brief
  • Institution: United States Institute of Peace
  • Abstract: Massive amounts of money flowing into Afghanistan since 2001 (foreign military spending, aid, domestic revenues, opium profits, land takeovers and development, informal mineral exploitation, theft of funds such as at Kabul Bank) have had profound political economy impacts, not least by further entrenching factionalized politics and fragmented patronage networks. The ongoing transition involving the drawdown of international troops and Afghan takeover of security responsibilities will be accompanied by drastic declines in international military expenditures and aid. Total resources for patronage will fall sharply; the Afghan government's share in remaining funds will increase; declines will be greatest at local levels, especially in insecure areas in the south/east which had heavy international military presence and high aid; and drug money will become increasingly important. At lower levels of patronage, competition over declining resources may intensify, so even in the absence of major armed conflict at the national level, localized conflicts may continue and even proliferate, aggravated by taking revenge and “settling accounts” by currently excluded and marginalized groups.
  • Topic: Arms Control and Proliferation, Development, Economics, Islam, Foreign Aid, Narcotics Trafficking, Foreign Direct Investment
  • Political Geography: Afghanistan, Central Asia
  • Author: Steven E. Steiner
  • Publication Date: 09-2013
  • Content Type: Policy Brief
  • Institution: United States Institute of Peace
  • Abstract: Ongoing dialogues and forums on nations in transition reinforce the commonality of challenges related to women's rights and roles in society, especially leadership in government. Women leaders in Afghanistan, Iraq and the Arab Spring countries face major challenges, including heightened insecurity and the risk of women's rights being rolled back significantly. Steps to address these challenges are to build coalitions across internal divides, engage male religious leaders and other men to support women's rights, reach out to youth, develop gender-based budgeting, and underscore the importance of women's economic empowerment. Keys to progress in these areas include obtaining grassroots support and taking a long-term strategic focus in international programs.
  • Topic: Development, Economics, Gender Issues, Government, Labor Issues, Governance
  • Political Geography: Afghanistan, Arabia
  • Author: William Byrd
  • Publication Date: 08-2012
  • Content Type: Policy Brief
  • Institution: United States Institute of Peace
  • Abstract: At the Tokyo conference on July 8, donors committed to provide massive civilian aid to Afghanistan and improve aid effectiveness, while the Afghan government committed to a number of governance and political benchmarks. The outcome at Tokyo exceeded expectations, but a review of Afghan and international experience suggests that implementing the Tokyo mutual accountability framework will be a major challenge. The multiplicity of donors could weaken coherence around targets and enforcing benchmarks, and undermine the accountability of the international community for overall funding levels. Uncertain political and security prospects raise doubts about the government's ability to meet its commitments, and political will for needed reforms understandably may decline as security transition proceeds and the next election cycle approaches. It is doubtful whether major political issues can be handled through an articulated mutual accountability framework with benchmarks and associated financial incentives. The civilian aid figure agreed upon at Tokyo ($16 billion over four years) is ambitious and exceeded expectations; if the international community falls short, this could be used to justify the Afghan government failing to achieve its benchmarks. Finally, given past experience there are doubts about how well the Joint Coordination and Monitoring Board (JCMB) process (mandated to oversee implementation), and the series of further high-level meetings agreed at Tokyo, will work.
  • Topic: Conflict Resolution, Security, Development, Economics, Governance, Law Enforcement
  • Political Geography: Afghanistan, Asia
  • Author: William Byrd
  • Publication Date: 12-2012
  • Content Type: Policy Brief
  • Institution: United States Institute of Peace
  • Abstract: Afghanistan has sizable underground mineral resources, which have potential positive economic impacts but also possible downsides—the so-called “resource curse” often involving negative macroeconomic, developmental, fiscal, governance, political and conflict effects. The success of the broader political transition in coming years as well as regional geopolitical factors will have a major influence on prospects for Afghanistan's underground resources. For “mega-resources” such as the Aynak copper and Hajigak iron deposits, the Afghan government has conducted credible tendering to ensure that contracts with foreign companies are on favorable terms for Afghanistan. Good-practice approaches for mega-resources should continue and be further strengthened, but there will probably be further delays in exploitation, and realization of potential will take much time. Exploitation of other largish and medium-sized resources may involve joint ventures with politically-connected Afghan firms and deals with local strongmen, or sometimes criminal networks with linkages to corrupt officials and insurgents. Spreading patronage can reduce short-run conflict risks, but there are risks of corruption, and conflicts could arise over time. For these resources, priorities include transparent contracting and clarity about ownership of companies; setting basic financial parameters for different resources (e.g. royalty rates) to reduce the risk of overly favorable arrangements for extracting entities; and addressing criminal elements and associated corruption. For smaller, concentrated, high-value resources (notably gemstones), informal exploitation using crude techniques is typically combined with illicit export trade, and local strongmen are involved, which can mean periods of stability but also conflicts when bargains are reopened or new actors get involved. The way forward for these resources includes gradually improving and regularizing the framework; setting low royalty rates to encourage formalization of existing activities rather than leasing resources to outsiders; technical assistance to promote more effective extraction; and encouraging processing and value addition within Afghanistan. Finally, further analytical work is required to better understand the political economy and conflict ramifications of mining in Afghanistan.
  • Topic: Conflict Resolution, Development, Economics, Political Economy, Natural Resources
  • Political Geography: Afghanistan
  • Author: Hodei Sultan
  • Publication Date: 09-2011
  • Content Type: Policy Brief
  • Institution: United States Institute of Peace
  • Abstract: The Istanbul Conference slated for November 2, 2011 aims to bring to the discussion table issues relating to the transition in Afghanistan, including Afghan security, recruitment, training and equipment of Afghan security forces, as well as the reconciliation process. The conference will also focus on regional economic cooperation.
  • Topic: Security, Economics, Peace Studies, Regional Cooperation, Treaties and Agreements, Insurgency
  • Political Geography: Afghanistan
  • Author: Robert Perito
  • Publication Date: 01-2009
  • Content Type: Policy Brief
  • Institution: United States Institute of Peace
  • Abstract: While the U.S. and world economies are slowing markedly, Security Sector Reform (SSR) is a growth industry for the private sector. U.S. government employees may set SSR policy and design projects, but implementation is extensively outsourced to private contractors. With the forthcoming surge of U.S. military forces into Afghanistan, the U.S. Army has announced contracts worth $1.1 billion for the construction of military bases and training centers for Afghan military and police. Private firms supply everything from construction materials to trainers and administrative staff. Private contractors operating in Pakistan and Afghanistan are required to provide their own security. Up to 15 percent of the cost of construction will go to private security firms, which guard convoys, facilities and personnel.
  • Topic: Security, Economics, Government, International Trade and Finance, Markets
  • Political Geography: Pakistan, Afghanistan, United States
  • Author: Sam Parker, Rusty Barber
  • Publication Date: 12-2008
  • Content Type: Policy Brief
  • Institution: United States Institute of Peace
  • Abstract: Since their 2005 inception in Iraq, PRTs have struggled to fully define their mission, overcome structural problems, learn to work alongside their military counterparts and assist Iraqis down the path to self-governance and stability so that U.S. forces can withdraw. While the concept was born in the Afghan conflict, PRTs in Iraq bear little resemblance to their Afghan cousins, which are led and largely staffed by military officers. PRTs in Iraq are largely civilian-led and are required to address a host of issues including local governance, economic and women's development, health, agriculture, rule of law and education. In this respect, they resemble mini development task forces, harnessing civilian expertise sourced from the U.S. and augmented by military civil affairs officers.
  • Topic: Conflict Resolution, Security, Economics, Health, Terrorism, War, Governance
  • Political Geography: Afghanistan, United States, Iraq, Middle East
  • Author: Beth Ellen Cole
  • Publication Date: 11-2007
  • Content Type: Policy Brief
  • Institution: United States Institute of Peace
  • Abstract: Afghanistan has now laid the foundation for a market-based economy. A new economic system, based on the state as a regulator, not a producer, of goods, with a clear separation between the public and private sectors, stands in place of the centralized economy of the past. An independent central bank, a liberalized foreign exchange system, and laws permitting foreigners to wholly own property characterize the new economic landscape. A doubling of the gross national product and per capita income, a 13 percent growth rate in 2007, and modest inflation paint a vibrant picture.
  • Topic: Security, Development, Economics
  • Political Geography: Afghanistan, Asia