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1. Afghanistan's Continuing Fiscal Crisis: No End In Sight

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, and Financial Crisis
Political Geography:
Afghanistan and Central Asia

2. The Future of Afghanistan-Pakistan Trade Relations

Author:
Ishrat Husain and 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, and Bilateral Relations
Political Geography:
Pakistan and Afghanistan

3. Reviving Afghanistan's Economy

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, and Economics
Political Geography:
Afghanistan and Central Asia

4. Afghan Economic Policy, Institutions and Society Since 2001

Author:
Paul Fishstein and 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, and Markets
Political Geography:
Afghanistan and Central Asia

5. Afghanistan's Looming Fiscal Crisis: What Can Be Done?

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, and Financial Crisis
Political Geography:
Afghanistan

6. Exploitation of Mineral Resources in Afghanistan Without Government Revenues or Development Benefits

Author:
William A. Byrd and 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, and Reform
Political Geography:
Afghanistan and Taliban

7. Rethinking Afghan Local Governance Aid After Transition

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, and Foreign Aid
Political Geography:
Afghanistan and United States

8. Changing Financial Flows During Afghanistan's Transition: The Political Economy Fallout

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, and Foreign Direct Investment
Political Geography:
Afghanistan and Central Asia

9. Common Strategies for Women in Transition Countries

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, and Governance
Political Geography:
Afghanistan and Arabia

10. Extractive Industries and Peacebuilding in Afghanistan: The Role of Social Accountability

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, and Foreign Aid
Political Geography:
Afghanistan

11. Political Economy and Conflict Dimensions of Afghanistan's Mineral Resources: A Preliminary Exploration

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, and Natural Resources
Political Geography:
Afghanistan

12. Mutual Accountability: Lessons and Prospects for Afghanistan Post-Tokyo

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, and Law Enforcement
Political Geography:
Afghanistan and Asia

13. Istanbul and Bonn Conferences: Building Blocks of the Afghan Transition Process

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, and Insurgency
Political Geography:
Afghanistan

14. Refugees and IDPs after Conflict: Why They Do Not Go Home

Author:
Patricia Weiss Fagan
Publication Date:
04-2011
Content Type:
Working Paper
Institution:
United States Institute of Peace
Abstract:
Programs to return refugees and internally displaced persons (IDPs) to their homes after conflict, implemented by national authorities with international support, frequently leave far too many without viable futures. The measures are often inadequate for three reasons: a widely shared but flawed assumption that the need to create a future for returnees is satisfied by restoring them to their prior lives; a lack of long-term engagement by implementing authorities; and a focus on rural reintegration when many refugees and IDPs are returning to urban areas. These arguments are illustrated in four country cases—Bosnia, Afghanistan, Iraq, and Burundi. In each case, the places that refugees and IDPs were forced to flee have been greatly reshaped. They often lack security and economic opportunities; governance is weak and services are inadequate. Returnees have made choices about their futures in large part on the basis of these factors. While reclaiming land or receiving compensation for losses is important, the challenge for many returnees is to settle where they can maintain sustainable livelihoods; find peaceful living conditions; have access to health care, education, and employment opportunities; and enjoy full rights of citizenship. This may mean a move from rural to urban areas and a change in the source of income generation that has to be accounted for in the design of reintegration programs. Returning refugees and IDPs should be assisted for a sufficient amount of time to determine which location and livelihood will suit them best. For international organizations, this may involve greater creativity and flexibility in supporting returnees in urban settings. To accommodate inflows of returnees and their general mobility, national and local governments should develop urban planning strategies to manage the growth of their cities, coupled with regional development plans in rural areas that may involve investment in commercial agriculture. Linking rural and urban areas by strengthening government institutions can also provide returnees with more livelihood options and promote development.
Topic:
Security, Economics, Refugee Issues, and Labor Issues
Political Geography:
Afghanistan, Iraq, Bosnia, Middle East, Balkans, and Burundi

15. Securing Afghanistan

Author:
Seth G. Jones and C. Christine Fair
Publication Date:
02-2009
Content Type:
Working Paper
Institution:
United States Institute of Peace
Abstract:
More than seven years after U.S. forces entered Afghanistan, important gains made in bringing stability and democracy to Afghanistan are imperiled. While there have been some positive developments in such areas as economic growth, the Taliban and other insurgent groups have gained some ground in the country and in neighboring Pakistan, the drug trade remains a significant problem, and corruption has worsened in the Afghan government. According to United Nations data, insurgent incidents have increased every year since the 2001 overthrow of the Taliban regime. The situation in parts of Afghanistan's south and east is particularly concerning because of the twin menace of insurgent and criminal activity. Despite these challenges, the insurgency remains deeply fractured among a range of groups, and most have little support among the Afghan population. This presents an opportunity for Afghans and the international community to turn the situation around.
Topic:
Security, Political Violence, Development, Economics, and War
Political Geography:
Afghanistan, United States, and Central Asia

16. The Private Sector in Security Sector Reform: Essential But Not Yet Optimized

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, and Markets
Political Geography:
Pakistan, Afghanistan, and United States

17. Evaluating Iraq's Provincial Reconstruction Teams While Drawdown Looms: A USIP Trip Report

Author:
Sam Parker and 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, and Governance
Political Geography:
Afghanistan, United States, Iraq, and Middle East

18. Afghanistan's Economy: On the Right Road, But Still a Long Way to Go

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, and Economics
Political Geography:
Afghanistan and Asia

19. Managing Natural Resource Wealth

Author:
Jill Shankleman
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United States Institute of Peace
Abstract:
This report analyzes the particular challenges of stabilization and reconstruction missions in countries rich in hydrocarbons and minerals and provides lessons learned from the recent experience of such countries as Iraq, Sudan, Angola, Liberia, and Afghanistan. It offers recommendations for the U.S. government and others involved in natural resource–rich countries emerging from conflict and also to the extractive industry companies and banking sectors––that play a critical role in these states. War-torn countries rich in hydrocarbons and minerals face particular problems in the stabilization and reconstruction of their states despite the apparent promise that natural resource wealth holds. Unless deliberate efforts are made to avoid the “resource curses”—corruption, economic instability, conflict over the distribution of resource wealth and control of resource–rich areas—these curses will undermine peace building. Elite groups who receive royalties and taxes paid by extractive industry companies have shown themselves consistently resistant to democratization. Control over natural resources is fundamental to sovereignty. Ultimately, it is the governments and people of resource–rich countries who must put in place the systems that enable resource wealth to support stability and development However, through early and consistent action, the international community can play an important role in helping resource–rich states emerging from conflict manage the wealth that accrues from these resources, and can make proper wealth management a condition for donor assistance. It is essential that international missions and indigenous transitional governments immediately secure effective control of natural resource wealth (physical and monetary) and establish the laws, institutions, and capacity to manage that wealth transparently, accountably, and in ways that support reconstruction. Achieving these goals requires prior planning by relevant U.S. agencies, a willingness to confront vested interests, a consistent approach from the international community and donors, the involvement of civil society, and the deployment of human resources, such as forensic accountants able to “follow the money,” as part of the mission staff. To be successful, the extractive industries and their bankers, the international financial institutions, and non-governmental organizations (NGOs) must be brought into this process
Topic:
Development, Economics, and Environment
Political Geography:
Afghanistan, United States, Iraq, Sudan, Middle East, Liberia, and Angola