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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: Paul Fishstein , Murtaza Edries Amiryar
  • Publication Date: 10-2015
  • Content Type: Working Paper
  • Institution: United States Institute of Peace
  • Abstract: The general expectation among Afghans after the fall of the Taliban was that the state, equipped with financial resources and technical assistance from the international community, would once again take the lead in the economic sphere. Instead, Kabul adopted a market economy. The move remains controversial in some quarters. This report, derived from interviews conducted in 2015 and 2010, takes stock of the competing ideologies in Afghanistan today with respect to the economy.
  • Topic: Conflict Resolution, Development, Economics, Markets
  • Political Geography: Afghanistan, Central Asia
  • Author: Frances Z. Brown
  • Publication Date: 07-2014
  • Content Type: Working Paper
  • Institution: United States Institute of Peace
  • Abstract: The conclusion of the U.S.-led "surge" of 2009 onward and the closure of provincial recon¬struction teams and other local civil-military installations have affected how aid is delivered in Afghanistan's more remote and contested areas. The time is ripe for a recalibration of donor approaches to local governance and development in areas previously targeted by the surge. Specifically, foreign stakeholders should reexamine three central principles of their previous subnational governance strategy. First, donors should revise their conception of assisting service delivery from the previous approach, which often emphasized providing maximal inputs in a fragmented way, to a more restrained vision that stresses predictability and reliability and acknowledges the interlinked nature of politics, justice, and sectoral services in the eyes of the local population. Second, donors should reframe their goal of establishing linkages between the Afghan govern¬ment and population by acknowledging that the main obstacles to improving center-periph¬ery communication and execution are often political and structural rather than technical. Third, donors should revise the way they define, discuss, and measure local governance prog¬ress in contested areas, away from favoring snapshots of inputs and perceptions and toward capturing longer-term changes on the ground in processes, structures, and incentives. The coming political and development aid transition provides an overdue opportunity for Afghan governance priorities to come to the fore. At the same time, the ever growing chasm between Kabul's deliberations on the one hand and local governance as experienced in more remote, insurgency-wracked areas on the other presents renewed risks. In the short term, donors let the air out of the aid bubble carefully. In the long term, resolving Afghanistan's local governance challenges continues to demand sustained commitment and systematic execution.
  • Topic: International Relations, Economics, Foreign Aid
  • Political Geography: Afghanistan, United States
  • 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: Sadaf Lakhani
  • Publication Date: 10-2013
  • Content Type: Working Paper
  • Institution: United States Institute of Peace
  • Abstract: While Afghanistan's economy has experienced strong growth in the past decade, declining levels of overseas development assistance beginning in 2014 are expected to substantially reduce the country's economic growth rate, with attendant political implications.
  • Topic: Conflict Resolution, Development, Economics, Natural Resources, Foreign Aid
  • Political Geography: Afghanistan