January 13, 2005

Supporting Entrepreneurship in Afghanistan
Carl Robichaud

Since the fall of the Taliban, Afghanistan has experienced extraordinary economic growth, with GDP rising by over 20 percent each of the past three years. This growth has been fueled principally by an injection of capital from two sources: the international presence and the poppy trade. Neither of these sources are sustainable.

A market in Maimana, Faryab Province, Afghanistan, June 2003 © Luke Powell, 2004

Afghanistan faces another problem as well: it lacks the legal and financial institutions to sustain its growth potential. Rebuilding these institutions is a thorny problem, since reform opposed by many stakeholders, from warlords to judges steeped in Taliban-era law. In the meantime, however, strategies exist to spur commerce and growth even in a post-conflict country with poor law enforcement, banking and legal institutions.

That's precisely the topic of a World Bank online discussion that has clear implications for Afghanistan. The discussion, which became the most popular the site had ever hosted, started with the observation, by moderators Ian Bannon and Tim Harford, that:

The inventiveness of entrepreneurs in some failed states borders on the legendary. Entrepreneurs in Somalia, for example, have turned to these innovative tactics to operate in an institutional vacuum: "importing institutions," such as banking systems from nearby countries; using traditional dispute resolution mechanisms; and simplifying transactions to a point where other tactics are not needed. But there are limits to what the private sector can achieve without the support of a capable state.

What lessons can be learned from the Somali experience? How can donor agencies support, sustain and spread entrepreneurial success in conflict states? How can the private sector successfully operate in an institutional vacuum? How can fledgling states be encouraged to support, rather than predate on, entrepreneurs? Can entrepreneurship be harnessed to support peace and reconciliation? How can the expertise and financial capital of diasporas be effectively encouraged and channeled?

Click here to read the start of the World Bank online discussion, or read the documents below (PDF format) for more in-depth look at the issue:

• Microfinance Institutions in Conflict Environments, World Bank
• The Private Sector's Role in the Provision of Infrastructure in Post-Conflict Countries, by Jordan Schwartz et al.
• How Does Somalia's Private Sector Cope Without Government? by Tatiana Nenova & Tim Harford
• Private Sector Response to the Absence of Government Institutions in Somalia, by Tatiana Nenova
• Globalization and Development: A Diaspora Dimension, by African Foundation for Development
• Investment Climate Reform-Going the Last Mile: The Bulldozer Initiative in Bosnia and Herzegovina, by Benjamin Herzberg Working Paper No.: 3390 Pub. Date: August 25, 2004
• The Hawala System in Afghanistan, Samuel Munzele Maimbo, World Bank Finance and Private Sector Unit, South Asia Region, June 2003 .
  

January 13, 2005

News Update

Containment of heavy weapons stalled in Panjshir

Kabul, Jan 10 (Reuters) - According to Reuters, "A UN-backed programme to contain heavy weapons in the northern Panjshir Valley has been temporarily interrupted by local ex-militia groups who threatened to block the valley if the process continued. The incident happened on Monday in Dashtak district, about 100 km north of the capital, Kabul, a day after the UN and the Afghan Ministry of Defence (MOD) officially launched the cantonment of heavy weapons in Panjshir, already delayed by several weeks after prolonged negotiations."

Disarmament has progressed according to plan in every region, with the exception of the Pansjir Valley, where an estimated 110 heavy weapons remain in the hands of former combatants (See Disarmament: Not just how much, but what and from whom, AW, Sept 28..)

Afghan judge arrested for Kabul bombing

KABUL, Jan 9 (Reuters) - "Afghan security forces have detained a supreme court judge suspected of being involved in an August car bomb attack that killed 10 people, including three Americans, in the capital Kabul, a court official said on Saturday…Judge Naqibullah belonged to a faction of the Mujahideen, or holy warriors, which fought the 1980s Soviet occupation and then the Taliban from the late 1990s, helping U.S.-led forces topple them in 2001."

According to reports, security forces discovered explosives during a raid on Naqibullah's house, and the Judge has acknowledged that the suspected organizers of the attack stayed there.

NGOs victims of growing criminality

KABUL, Jan 5 (IRIN) - "Aid workers in the capital Kabul have raised concern about the increase in violent attacks on aid agencies over the last couple of months. In just four weeks, several NGOs have been targeted by gunmen and criminals in the capital."

Desert drug route stymies Afghan police

ZARANJ, Afghanistan, Jan 2 (The New York Times) - "There are three main routes for drugs out of Afghanistan: from the northeast into Tajikistan and on to Russia; into Pakistan and its ports; and westward across the desert into Iran. Of the three, this corner of Afghanistan, where Baluch tribesmen have survived by banditry and smuggling for centuries and tend not to recognize national boundaries, is perhaps the most notorious." More...

Interview with chief adviser on refugees
KABUL, Dec 28 (IRIN) - "More than three million Afghan refugees have returned home from neighboring Pakistan and Iran in the last two years. But millions remain in exile and are reluctant to return due to a lack of reintegration opportunities and shelter.

In an interview with IRIN, Habibullah Qadiri, the chief adviser to the Afghan government on refugees and returnees, said donor assistance was not enough to help the returnees reintegrate, while a lack of shelter and land remained problematic." More...

January 13, 2005

An Afghan Quandary for the U.S.

WASHINGTON Jan 2, 2005 (LA Times) - "With a bumper poppy harvest expected in Afghanistan in the new year, a debate has erupted within the Bush administration on whether the United States should push for the crop's destruction despite the objections of the Afghan government. Some U.S. officials advocate aerial spraying to reduce the opium crop, warning that if harvested, it could flood the West with heroin, fill the coffers of Taliban fighters and fund terrorist activity in Afghanistan and beyond. They estimate the haul could earn Afghan warlords up to $7 billion, up from a record $2.2 billion in 2004.

With the January planting season approaching, the State Department is asking Congress to earmark nearly $780 million in aid to Afghanistan, the world's largest opium producer, for a counter-narcotics effort that would include $152 million for aerial eradication." More...

Under the State Department's three-year budget request, eradication consumes almost 40% of funding, while "alternative livelihoods" (providing economic options for farmers to stop growing poppies) receives 15%. Here's the breakdown: