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The Economic Disaster Behind Afghanistan’s Mounting Human Crisis
The Economic Disaster Behind Afghanistan’s Mounting Human Crisis
The Cost of Escalating Violence in Afghanistan
The Cost of Escalating Violence in Afghanistan
An Afghan woman and her children carry bags on their heads as they walk along a path on the outskirts of Mazar-i-Sharif, 5 November 2015. AFP/Farshad Usyan
Statement / Asia

The Economic Disaster Behind Afghanistan’s Mounting Human Crisis

Donors and Afghan state agencies must urgently tackle an economic crisis building up since 2014, when foreign troops started leaving and political instability worsened. The starting point must be a socio-economic assessment of just how big the problems are.

­As Afghanistan’s international donors meet in Brussels in a summit co-hosted by the European Union and the Kabul government on 4-5 October, Afghanistan’s rapidly deteriorating economy must be their central concern. Before this and an escalating humanitarian crisis merge to reach a dangerous critical mass, all must agree on several priorities – alongside renewed efforts to bring peace and political stability: realistic planning based on a thorough new socio-economic assessment, currently absent; adequate aid and support for state policy implementation, especially to help an alarming rise in numbers of displaced and shelterless people; halting repatriation of Afghan refugees, especially from Europe and Pakistan; and boosting investment and above all job creation in the country.

Afghanistan’s impressive average annual growth of nine per cent from 2002-2013 has declined rapidly since 2014. According to the World Bank’s World Development Indicators, annual GDP growth fell from 14.4 per cent in 2012 to 2 percent in 2013, and 1.3 and 1.5 per cent in 2014 and 2015 respectively. This drastic economic decline is mainly the result of the post-2014 international military drawdown and the year of intensified political instability that followed the 2014 election. Foreign troops once brought hundreds of millions of dollars into the Afghan economy, and their departure from 800 bases, large and small, deprives the country of what was after 2002 its largest single source of revenue. By one estimate, more than 200,000 Afghans have now lost jobs in logistics, security, and other sectors of a war-driven economy.

Heightened security concerns, political uncertainty and the erosion of the rule of law since 2014 have added to a devastating loss of confidence by consumers, producers and investors. Pervasive fears of a political meltdown have led to a surge in capital flight, with both wealthy and middle-class Afghans moving assets to the Gulf States, Pakistan, Iran, Turkey and Central Asia. Afghanistan’s human capital shrank too, especially among the urban middle class that had emerged after 2001 to play a stabilising role in Afghan politics. Hundreds of thousands of Afghans, mostly young and educated, left the country in 2014 and 2015, often to seek refugee status in Europe.

This sudden economic reversal has considerable political, security and social implications. Rising unemployment and widespread poverty is already widening the legitimacy gap between the National Unity Government (NUG) and the Afghan public, and expanding the reservoir of grievances that insurgents as well as hardline ethnic and regional players could further exploit. Unfortunately, it is not the NUG’s only pressing problem.

An Underestimated Humanitarian Crisis

The economic crisis may have been predictable, but its impact remains poorly understood and insufficiently reflected in strategic thinking and policies about the country’s future. The most revealing indication of such gross underestimation of the situation is the absence of any current, reliable socio-economic data. Three years after the economic reversal began, neither the NUG nor the international community have conducted any substantial assessment of the impact of the collapse of the war economy on the Afghan people and state.

The available figures show that the most vulnerable segments of the population are bearing the brunt of the burden. According to the Afghanistan Living Conditions Survey, the unemployment rate rose from 9.3 per cent in 2011-12 to 24 per cent in 2014. During the same period, the number of people who were not engaged in gainful employment increased from 26.5 per cent to 39.3 per cent of the labour force; among women, the rate increased from 42.4 per cent to 49.8 per cent. Those who manage to find work have to provide for a large number of dependents, with 47 per cent of the population under the age of fifteen. Although no such figures are available for 2015 and 2016, anecdotal evidence makes it abundantly clear that these negative trends are worsening. With Afghanistan’s estimated 32.5 million people growing by perhaps three per cent annually, adding half a million people to the work force every year, the decline in employment opportunities can only worsen.

Even without reliable Afghan government statistics for 2015 and 2016, the trends indicated by anecdotal evidence and UN figures point to a silently evolving, increasingly alarming humanitarian crisis. According to UNHCR, the total numbers of “people of concern”, including Internally Displaced Persons (IDPs), refugees and returnees, nearly doubled between 2013 and 2015, rising from 985,197 to 1.77 million people. UNOCHA estimates that 265,141 more were displaced from their homes in 31 of 34 provinces between 1 January and 15 September 2016.

On top of this has come an unprecedented rise in recent months in the return of registered and unregistered refugees from Pakistan, averaging 5,000 people daily in early September. Combined with the new internally displaced, an alarming one million (57 per cent of whom are children) could be on the move just as winter sets in between September and December 2016. All will require urgent food assistance, health, shelter and other essential services. This spike in the numbers of IDPs and returnees will increase the percentage of the population facing seasonal or permanent food insecurity beyond the current estimate of 40 per cent, and will further strain already meagre economic and employment opportunities and public services.

As Budgets Shrink

The decline in economic opportunities has long-term consequences for overall political stability. Over the past three years, state institutions have become by far the largest source of employment and providers of essential public services, but available economic resources are shrinking fast. Reductions in donor assistance and international contracts are increasing the fragility of the post-2001 political order, which is largely based on networks of patron-client relations in which powerful political players have become dependent on the continuous flow of international largesse. As international military spending and contracts shrink, these networks will rely even more on the proceeds of the informal economy including corruption, criminality, the opium trade and the illegal exploitation of resources such as mines.

The decline in economic opportunities has long-term consequences for overall political stability.

The NUG’s inability or unwillingness to respond to these challenges has profound implications for both its legitimacy and the future of the post-Taliban political order. In the Asia Foundation’s 2015 Survey of the Afghan People, citizens who believed the country was going in the right direction declined to 37 per cent from 55 percent in 2014. After insecurity, worsening economic conditions were cited as the main reason for such pessimism. While the NUG inherited problems that were already mounting before it was formed in September 2014, the Afghan public increasingly links the worsening economy with the government’s policies and/or inability to perform. While the NUG has prioritised the economy in its policy reform agenda, popular expectations created by such rhetoric have yet to be matched by a track record in forging or implementing reforms, let alone actual economic benefits. Aside from some major infrastructure projects such as energy transit routes, which depend on good security and may take years to make a tangible impact on the economy, the NUG has done little to respond to immediate asks such as job creation or the protection of the private sector against rising criminality and insecurity. 

The potential gains of some of the government’s most important infrastructure projects, including CASA 1000, which aims to carry power from Central Asia to South Asia, are threatened not just by insurgent violence but also by increased social and political discord over the distribution of national resources. For instance, in mid-2016 a persistent, predominantly Hazara Enlightenment protest movement emerged to oppose the government’s decision to change the route of another power transmission line bringing electricity from Turkmenistan to Afghanistan, from a route passing through the Hazara-majority Bamiyan province to one running through the Salang Pass. Absent transparency and accountability, such policy decisions could further escalate ethnic tensions.

The government’s ability to implement economic reforms is hampered by internal political gridlock, bureaucratic hurdles and pervasive corruption. Capacity constraints in most government ministries continue to adversely affect the execution of development projects. Payments are delayed to private sector contractors, suppliers and even the state’s own personnel. As of September 2016, nine months into the current Afghan fiscal year, the NUG has spent only 30 per cent of a $2.5 billion development budget. This slow pace in spending and execution is depriving a cash-starved economy of much-needed funds.

The government’s ability to implement economic reforms is hampered by internal political gridlock, bureaucratic hurdles and pervasive corruption.

Despite its many weaknesses and shortcomings, the NUG has succeeded in maintaining a degree of macro-economic stability and addressing the budgetary shortfalls it encountered in 2014. It has also raised domestic revenues above targets set by the International Monetary Fund. However, the new Afghanistan National Peace and Development Framework, 2017 to 2021 is based on an unproven assumption that the three-year economic decline has been stemmed and that over the next five years the economy will grow by an average of five per cent. Domestic revenue mobilisation is in fact a poor indicator of the economy’s overall health, and the current effort to raise more money runs the risk of further shrinking an already fragile and struggling formal tax base.

While taxation rates remain low in comparison to other countries in the region, there is a widening mismatch between what the government demands in terms of revenue and the services it offers. Meanwhile the costs of doing business are increasing, and rising violence and weakening government control is exposing an already shrinking private sector to extortion and other acts of criminality, including kidnapping for ransom. Those responsible may be the Taliban, urban criminal networks or a range of other actors, some with links to the state. 

Despite a rise in revenue collection in 2015, the U.S. Special Inspector General for Afghanistan Reconstruction (SIGAR) estimated that over half of the country’s customs revenues were lost to graft that year. Public sector appointments, including critical security sector positions, are often casualties of infighting and nepotism. All this indicates the complicity of powerful political networks at the highest levels of government, costs the state and Afghan people hundreds of millions of dollars in revenues, and curtails the delivery of even basic services. Astonishingly, corruption within the security sector extends to the sale of military hardware and ammunition to insurgents.

Recommendations

As international donors and the Afghan government devise their responses to address the deteriorating situation in Afghanistan, they should prioritise – alongside coordinated efforts to bring peace and political stability – a comprehensive and robust approach to an escalating humanitarian crisis, and adopt a more realistic vision of economic recovery and growth. They should:

  • Conduct a thorough national assessment of post-2014 socio-economic conditions and challenges to serve as the basis of more realistic strategic planning;
     
  • Urgently respond to the fast-growing humanitarian crisis, pledge adequate resources for the immediate needs of IDPs and refugee returnees for shelter, food, health and sanitation, and support the NUG in devising and implementing a coordinated policy to meet their longer-term needs for access to gainful employment;
     
  • Halt the deportation of Afghan refugees and asylum seekers from Europe; encourage the Pakistan government to end coercive, involuntary returns of all Afghan refugees, registered or unregistered; and provide financial and other incentives to sustain the millions that remain; 
     
  • Create new momentum in the fight against fraud by (i) tackling politically connected corruption networks within government; (ii) integrating robust anti-corruption policies with current revenue collection efforts; and (iii) ensuring robust oversight over payments in government contracts to private contractors and suppliers, while also streamlining these payments;
     
  • Ensure that funds reach the provinces, to promote more equitable distribution regionally and improve the writ of the government, while also prioritising the most under-developed and isolated regions;
     
  • Consider boosting private sector investment through guarantees and other protections and incentives; in particular encourage job-generating and long-term investments by the private sector through tax incentives; and provide, as far as possible, access to public services, including electricity, to firms that create jobs;
     
  • Take immediate, coordinated measures to ensure the security of private investors and business persons, including by targeting criminal networks, some containing elements within or linked to government institutions.  

CORRECTION: An earlier version of this article wrongly stated that the Enlightenment protest movement emerged to oppose the government's decision to change the route of the CASA 1000. This has now been updated to correctly cite that the opposition was towards the government's decision to change the route of another power transmission line bringing electricity from Turkmenistan to Afghanistan.

Survivors walk after a blast in Kabul, Afghanistan 13 March 2017. REUTERS/Mohammad Ismail
Commentary / Asia

The Cost of Escalating Violence in Afghanistan

Taliban attacks in Kabul in late January 2018 are part of an escalation in violence in Afghanistan, where the civilian population is bearing the brunt of a particularly intense winter of fighting.

Over one week, as many as 130 people, the overwhelming majority civilians, were killed in twin attacks claimed by the Taliban in Kabul. On 20 January, five Taliban suicide bombers attacked the Intercontinental Hotel, killing at least 22 people, mostly foreigners, after breaching the security of the heavily guarded building. Almost half the dead were employees of Afghan airline carrier, Kam Air. Families and friends of civilians trapped in the fourteen-hour siege spent the night in the sub-zero temperature outside the hotel waiting for news of their loved ones.

A week later the Taliban launched a deadlier attack, killing over 100 people, again mostly civilians. This attack, near an old interior ministry building, was carried out using an ambulance. Despite their reluctance to accept responsibility for such attacks in the past, the Taliban this time were quick to claim the attack, but denied civilians were killed. An International Committee of the Red Cross statement condemned the attack as “senseless”, noting that ambulances should be used “for saving lives, not destroying them”.

A third suicide attack, this one claimed by the Islamic State’s local branch, Islamic State – Khorasan Province (IS-KP) hit a military academy of the Afghan army on 29 January.

The attacks have provoked widespread fury at the Taliban, prompting some Afghan political leaders and activists to press the government to crush the insurgency instead of pursuing peace talks. Some have even called for the execution of Taliban prisoners; government officials said they were considering the option. Afghan President Ashraf Ghani described the 27 January attack as “our 9/11” and vowed to order massive operations against the Taliban. Similar anger was directed by Ghani, other politicians and the public at Pakistan, which hosts Taliban leaders and is widely perceived as a key external enabler of the insurgency.

The attacks have provoked widespread fury at the Taliban [and] have added to Afghans’ mounting frustration with their government.

The attacks have added to Afghans’ mounting frustration with their government. Many view the government as bogged down in micromanagement and too distracted by a power struggle against potential rivals ahead of the 2019 presidential elections to adequately protect against insurgent attacks.

The attacks not only provoked rage among Afghans, but attracted sharp condemnation from abroad. On 29 January, U.S. President Donald Trump said: “They’re killing people left and right”. He appeared to rule out engaging insurgent leaders: “We don’t want to talk to the Taliban. We’re going to finish what we have to finish, what nobody else has been able to finish, we’re going to be able to do it”.

The day after President Trump’s statement, Deputy Secretary of State John Sullivan, visiting Kabul, appeared to walk it back, saying it was meant to highlight the depravity of the Taliban’s recent attacks and did not reflect a policy shift. Talking to reporters, Sullivan argued that the U.S. overall still hopes to move toward peace talks.

Despite Sullivan’s recalibration, Trump’s words matter in Afghanistan and the region. His rhetoric should be seen in the light of a new U.S. strategy in Afghanistan that thus far has mostly involved committing further U.S. forces and an escalating military operation against the Taliban. U.S. signals on engaging the Taliban – or at least on encouraging the movement’s leaders to enter talks with the Afghan government – have been mixed. In principle, and notwithstanding President Trump’s 29 January remarks, top U.S. officials say the new approach includes both military and diplomatic efforts to achieve a political settlement with the Taliban. Yet U.S. diplomacy has clearly taken a back seat to military operations. U.S. contacts with insurgent leaders, which were ongoing, albeit limited, in the latter years of the Obama administration, appear to have petered out.

A Wider Escalation

The recent Taliban strikes take place amid a wider escalation of the war. The uptick in attacks is not the first such increase over the past few years. Nonetheless, Afghanistan is suffering more intense violence now than during any other winter – winters usually see a lull in fighting – since 2001.

This comes alongside U.S. public messaging that its military posture against the Taliban will be increasingly aggressive, winter will offer no respite and spring will bring ever fiercer operations. Indeed, the Afghan security forces and U.S. military are already conducting record numbers of airstrikes and raids against the Taliban. Their stated intention is to gain the upper hand before the fighting season starts, undermine the insurgency and convince its leaders they cannot win militarily.

The U.S. military has stepped up airstrikes, raids and operations by U.S. Special Forces.

Throughout December and January, airstrikes and ground raids appear to have affected the Taliban’s battlefield mobility across the country and have inflicted losses on the insurgency at a level unprecedented for a winter season. Facing increasing battlefield pressure, the Taliban seem to be shifting toward tactics that pressure the Afghan government, its security forces and the U.S. while reducing insurgents’ exposure. Recent Taliban statements warn of an increase in suicide strikes and attacks by insurgents that have infiltrated security forces or related security partners. Taliban sources also threaten further massive attacks against Afghan and U.S. troops. The lethality of the attacks has increased, in part thanks to sophisticated modern equipment such as sniper rifles, laser sights and night-vision goggles.

Suicide attacks have long been part of the movement’s urban warfare. As military operations against the Taliban escalated over 2017 – even before the new U.S. strategy was formally announced – so too did suicide attacks. Last year saw a 50 per cent increase in the number of such attacks compared to 2016: 48 versus 32, according to the Taliban’s own records (this may exclude attacks it did not claim). As the movement faces further pressure this year, the pace of spectacular attacks and urban warfare may well continue as pressure on the battlefield is unlikely to radically undermine insurgents’ ability to stage them. The same week Kabul suffered the two Taliban attacks described above, the provincial capitals of Helmand and Kandahar provinces in the south were also struck by suicide bombers.

The Kabul attacks suggest the Taliban is sending signals of its own: that the U.S. cannot fight its way to peace. Taliban spokesman Zabihullah Mujahid said in a statement that the movement “has a clear message for Trump and his hand kissers that if you go ahead with a policy of aggression and speak from the barrel of a gun, don’t expect Afghans to grow flowers in response”. By turning Kabul into a battlefield, insurgents gain wider attention, shake public confidence in the government, while showing their continued ability to strike hard.

The U.S. military has stepped up airstrikes, raids and operations by U.S. Special Forces. In December 2017, U.S. and Afghan forces conducted 455 airstrikes, compared with just 65 in December 2016. Even in the same month in 2012, when nearly 100,000 U.S. troops were present in Afghanistan, barely 200 strikes took place. All told, 2,000 airstrikes were carried out between August and December of last year, nearly as many as in all of 2015 and 2016 combined.

The increased battlefield tempo might have hurt the Taliban. But it does not yet appear to have translated into increased territorial control for Afghan forces, which the U.S. military has defined as a key metric for measuring progress (U.S. Defense Department officials reported in late January, with data from October 2017, that more territory had slipped from government to Taliban control).

Increasing Civilian Suffering

The escalation clearly has not improved security for the population – another critical metric for any campaign’s success, though not one referred to by the U.S. administration. The U.S. Inspector General for Afghan Reconstruction (SIGAR) reported in its quarterly report in late January that the number of civilian casualties (4,474) from 1 June to 27 November 2017 increased by 13 per cent compared to the same period during the previous year. Civilian casualties due to airstrikes have increased too. According to UNAMA, civilian casualties by airstrikes increased 52 per cent in first nine months of 2017, compared to the same period in 2016. The toll from airstrikes is mostly borne by rural populations, whose suffering receives considerably less attention than that of those affected by the Taliban’s strikes in Kabul. Indeed, a striking feature of the Taliban’s own propaganda is what they charge as the double standard in reporting by Western and Afghan media.

Nor is it clear that a military build-up, despite its tragic costs, will necessarily make insurgent leaders more willing to talk. In fact, the opposite may be true: it risks empowering elements within the movement more resistant to reconciliation.

The [Taliban] leaders [who have signalled interest in peace talks] may not always be in sync with the mood on the battlefield.

The Taliban faces its own internal struggle. Those on the political-civil front, including parts of the leadership and representatives in the Doha political office, appear to have already accepted in recent years that they are unlikely to win the war militarily and have quietly signalled interest in peace talks. These leaders may not always be in sync with the mood on the battlefield. Although command and control within the movement is still fairly coherent, leaders outside the country find it increasingly hard to shape the daily decisions of their on-the-ground commanders, who in any case enjoy considerable autonomy and whose units are suffering high casualties. This could mean a gradual erosion of influence among insurgents who are more inclined toward talking and more power for harder line fighters on the ground.

NATO chief Jens Stoltenberg reacted to the Taliban’s Kabul attacks by vowing that the alliance will continue and increase support to the Afghan forces. But he highlighted too the need to ramp up diplomatic efforts: “It is essential to redouble efforts to achieve peace and reconciliation”, he said. Notwithstanding the many difficulties peace talks would pose, he and the U.S.’s other allies should press Washington to do exactly that: keep channels of communication to insurgent leaders open and at least lay the ground for peace talks by continuing to test with Afghanistan’s neighbours and other regional powers what a settlement might look like.

Absent that, U.S. strategy risks further increasing the intensity of violence across the country, with no foreseeable end in sight. Civilians on rural front lines will bear the brunt of much of the fighting, but those in the capital and other towns will suffer too if the Taliban continues to perpetrate horrific attacks like those last week.