The South Asia Channel
In the Afterglow of the London Conference
Where does Afghanistan stand after the London Donors Conference? Richard Ponzio, a former coordinator of the U.S. Government’s New Silk Road initiative, explains.
With the uptick in violence since the formation of the National Unity Government in Afghanistan in September, led by Ashraf Ghani and Abdullah Abdullah, the Taliban and their allies once again demonstrate that they have no intention to lay down arms and work towards a negotiated settlement. Meanwhile, thirteen years of Western-backed military efforts have failed to deliver sustainable peace in Afghanistan. The London Conference on Afghanistan Communiqué and associated Afghan government reform agenda, Realizing Self-Reliance, deliberated on Dec. 4th, offer an opportunity to turn attention to economic recovery, while building conditions for durable local and regional stability.
Beginning with the Tokyo Conference on Afghanistan in January 2002, donor conferences held every two years — in Berlin, London, Paris, Kabul, and again in Tokyo — have helped the Afghan government and its international partners mobilize support for specific economic and social development goals. While these gatherings made passing references to how these goals reinforce peacebuilding, their intersection and mutual dependence have grown more acute in recent years, particularly as well-resourced military efforts and political talks to resolve Afghanistan’s long-standing conflict have fallen short of achieving peace.
To generate forward-leaning ideas for the London Conference on Afghanistan and the country’s new government, fifteen leading Afghan and international experts convened, on Sept. 3, 2014, at The Hague Institute for Global Justice. With an emphasis on economic interventions likely to promote stability and create “incentives for peacebuilding” — whether between the government and anti-government forces or between Afghanistan and its neighbors — key insights and recommendations presented during the expert roundtable included:
- International private investors and Sovereign Wealth Funds (e.g., from Gulf Cooperation Council countries) are reluctant to invest in Afghanistan without greater certainty. At the same time, the perceived economic benefits from political stability may encourage the formation of a “hybrid political system” in Afghanistan (e.g., power-sharing between a president and a prime minister) that accommodates different interest groups and keeps people at the table. The prospect of broad-based economic growth can, therefore, help Afghans move beyond destructive forms of the winner-takes-all politics that has previously dominated Afghanistan.
- Feasibility reports are also needed to demonstrate returns on investment in Afghanistan. Only hard numbers (and a good business case) will lead to increased investment and private sector-led development solutions. Donors and the Afghan government can improve conditions for private investment through the provision of political risk insurance, infrastructure development, and other incentives.
- In a conflict situation, access to finance through a central banking system is critical (infusions of small amounts of money can create micro-entrepreneurs). The government can help further by framing the needs of a specific economic sector through, for example, introducing regulatory reforms, sponsoring research, and convening policy dialogues and business-to-business matchmaking events.
- Imports into Afghanistan, mostly related to the country’s war economy, far outweigh national exports. National economic conditions that reinforce political stability will depend on several steps to stem the significant outflow of foreign currency; steadily increase the share of government revenue necessary to sustain essential public services (especially from customs where leakage continues); reduce dependency on imports that sustain Afghanistan’s war economy (and focus more on domestic production); and increase the national savings rate.
- Kabul is a donor city, and donors often do not have a good understanding of local business needs, especially with regard to small and medium-sized industries. Indigenous industries fail to take root when local ownership is absent. For example, the Bangladesh Women’s Chamber of Commerce has been successful because its activities are responsive to local needs and are informed by baseline surveys of local entrepreneurs.
- The government of Afghanistan has not had to confront hard macroeconomic issues for several decades. Issues such as trade and budget deficits and the lack of a convertible currency could be ignored because of foreign aid. At the same time, Afghanistan is not going to build an economy on limited national exports. A likely solution lies in both international transit and trade in minerals, which underscore the need for an efficient national rail system. With regard to energy requirements within the region (and, therefore, the potential demand for trade in energy resources), of five land-locked states surrounding Afghanistan, three maintain an energy surplus, while both Pakistan and India suffer from severe energy deficits. The Central Asian Republics know their capacities and, fortunately, wish to connect with South Asia. Afghanistan requires better leadership to manage and capitalize on these relationships.
On the latter point, both Ghani and Abdullah appear committed to transforming Afghanistan into a regional trade and transit hub. “We have a choice … we either become the lynchpin of Asian integration where only roads will come to our countries and go out of our countries to connect Central Asia, South Asia, West Asia, and East Asia, or we will become the cul-de-sac — the forgotten piece of history, because time will not wait,” declared Ghani in his remarks at the closing session in London. The conference’s Communiqué outlined specific elements of this vision, noting:
The Participants highlighted the importance of collaboration and coordination between the Afghan-led Istanbul and RECCA processes and all regional organisations and programmes, and committed to work together and with other Governments in the region towards effective trade and transit agreements, streamlined border procedures and customs harmonization, required transport infrastructure for critical interconnectivity and an effective regional energy network in Central and South Asia.
Building on commitments made earlier this month in London, as well as through regional initiatives such as the Istanbul Process, Regional Economic Cooperation Conference on Afghanistan (RECCA), and the Asian Development Bank-facilitated Central Asia Regional Economic Cooperation (CAREC) program, a regional economic cooperation strategy can buttress peacebuilding efforts, as peace negotiations engaging multiple actors and issues are shown to be more durable than narrowly-focused talks involving only limited groups of political elites. This is because the parties most affected by the conflict are involved in finding a way forward through dialogue. Indeed, economic cooperation between Afghanistan and its neighbors can provide the glue for future discussions on sensitive political and security matters, by creating trust and confidence in relationships where both are in short supply.
Since 2011, the United States has actively promoted regional economic cooperation with Afghanistan through the New Silk Road initiative. Outgoing U.S. Deputy Secretary of State William Burns reiterated, in a speech this past September in New York, the central importance of translating cross-border economic cooperation with Afghanistan into wider international efforts to achieve regional stability and prosperity in Greater Central Asia. It is hoped that similar regional initiatives, such as Central Asia’s Silk Wind project, Turkey’s Modern Silk Road endeavor, and China’s Silk Road Economic Belt, will also promote Eurasian commercial links through Afghanistan that help, simultaneously, to foster conditions for durable local and regional stability.
PHOTO: LEON NEAL/AFP/Getty Images