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Copyright 2010 by the Brown Journal of World Aairs
Giaciaxa oii Casriiio has been an adviser to international organizations, governments, and the
private sector, and her articles have appeared in top economic and political journals. She has has been
a participant in USAID bids for reconstruction projects in Afghanistan and Iraq. She is the author of
Rebuilding War-Torn States (Oxford Press, 2008).
Peace Through Reconstruction:
An Effective Strategy for Afghanistan
Giaciaxa oii Casriiio
Senior Research Scholar
Columbia University
Wu\ uas Aicuaxisrax xovio ro the top of the U.S. foreign aairs agenda?* In his
West Point speech announcing a new troop surge on 1 December 2009, President
Obama argued that U.S. security is at stake in Afghanistan and Pakistan, an area he
called, the epicenter of the violent extremism practices by Al-Qaeda.
1
Following
Taliban attacks in December 2009 and earlier this year, a response to terrorism in the
region has acquired renewed urgency.
Since 2006, the political and security situation in Afghanistan has deteriorated
signicantly. Te Afghan elections in August 2009 and the large increase in foreign
troops may have deepened the ethnic divisions in Afghanistan and continued to feed
the insurgency.
2
In the aftermath of the most serious nancial crisis since the Great Depression,
and amid high rates of unemployment, Americans are increasingly wary of the war
and its human cost, politicians are preoccupied with 2010 mid-term elections, and
taxpayers are increasingly concerned about the budgetary cost of the Afghan war that
might reach $100 billion in 2010.
3
In February of this year, 6,000 U.S., UK, and Afghan troops launched an air
and land assault on Marjah, the largest Taliban sanctuary inside Afghanistan,

as part
of an strategy designed to clear, hold, build and transfer.
4
While some success has
been reported in clearing the area from Taliban, it is too early to determine whether
the government will be able to hold control of this area and build local governance and
security so that foreign troops can transfer full control to the Afghan security forces.
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At the same time, the Afghan economy continues to be underinvested and a large
majority of Afghans have not been able to benet from better living conditions and
increased security despite the huge military cost of the war and the signicant volumes
of aid prevailing since 2001. Aid policies are clearly in disarray and often harmful: not
only have they failed to achieve basic objectives, but, most worrisome, they also have
threatened the legitimacy of the government, facilitating corruption and creating all
types of distortions. Te open confrontation between the Obama administration and
the Karzai government is not helping in establishing what needs to be done, who should
do it, and what is the best and most eective way of doing it.
What has gone wrong? Could the current situation have been prevented? What
are the lessons we can apply to Afghanistan and other countries attempting the tran-
sition from war to peace? Is there any hope for Afghanistans future? Will the policy
of muddling through with a military strategy and development on the side make
a dierence? Or do we need a comprehensive reconstruction strategy based on the
governments priorities to jumpstart the Afghan economy and reintegrate the Taliban
and other armed groups into society, and productive activities?
In addressing these questions, I will argue that the strategy for peace through
security, which has been the U.S. strategy in Afghanistan since 2007, has clearly failed
in stabilizing the country despite its large human and nancial cost and that the recent
civilian surge will be insucient to make a dierence.
5
I will argue that a strategy for
peace through reconstruction could be more eective and less costly and should be put
in place as soon as possible.
6
Tis would require a major change in how donors operate
in the country and a rebalancing of military resources and reconstruction aid.
7
For a country like Afghanistan, economic reconstruction should encompass the
rehabilitation or creation of basic health and educational systems and physical infra-
structure, the reversal of environmental degradation, and the control of illegal practices
and activities. It also encompasses the modernization or creation of a basic macro- and
microeconomic institutional policy and regulatory framework to support the eective
utilization of aid, the creation of a viable and stable economy, and the reintegration of
groups aected by the conict into society and the legal economy.
Te experience of the two decades following the end of the cold war gives strong
evidence that economic reconstruction, dened in this broad way, is a sine qua non
for peace and for avoiding long-term aid dependency.
8
One welcome development is
President Karzais belated announcement at the London Conference on Afghanistan
in January 2010 that his government is willing to start a process of reintegration and
national reconciliation. National reconciliation is necessary to end tribal, ethnic, and
religious confrontations so that former enemies can live with each other in peace. Indeed,
a process of reintegration of the Taliban and other groups that have been acting outside
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the rule of law and the legal economy opens up new opportunities and challenges for
Afghanistan and for the international community going forward.
9

WHY IS AFGHANISTAN AT THE TOP OF THE AGENDA?
Afghanistan wields a disproportionately large political weight on the U.S. foreign
policy agenda relative to its tiny economic weight, representing only 0.02 percent of
the world economy. In the past, this was related to the important role Afghans played
as allies and main protagonists in the cold war against the Soviets. In the present, the
countrys political importance is related mainly to its geopolitical and strategic location
at the crossroads of Asia and Europe, and the fact that seven atomic owning nations
are vying with each other in Afghanistan (Pakistan, India, China, Russia, possibly Iran,
the United States, and the United Kingdom).
10

Afghanistans privileged position in the U.S. foreign policy agenda is probably
also related to the fact that the country seems to be at the border of a precipice. Te
right steps might bring a large part of it out of chaos, but tiny missteps can convert
the whole country into a failed state. As invariably happens, failed states become in-
cubators for terrorism, drug and human tracking, and other illicit activities. In the
case of Afghanistan, avoiding the political and security destabilization of Pakistan and
preventing a permanent regional sanctuary for Al Qaeda is of utmost importance. Te
stakes are high and there is little room for error.
EIGHT YEARS INTO THE MULTI-PRONGED TRANSITION
More than two decades of continuous foreign occupation and conict resulted in the
deaths of well over one million people. A month after the rout of the Taliban in No-
vember 2001, the signature of the Bonn Agreement established the Afghanistan Interim
Authority (AIA).
11
Afghanistan embarked on a complex multi-pronged transition:
to pull back from violence and insecurity (the security transition)
to transform a repressive, militaristic theocracy into a society based on demo-
cratic principles, the rule of law, and respect for human rights (the political transi-
tion)
to end tribal and ethnic confrontations and start a process of national recon-
ciliation (the social transition)
to move away from a state-controlled, war-torn economy and engage in eco-
nomic reconstruction (the economic transition).
12
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It is understandable that such an overwhelming process would necessarily take a
long time. Operation Enduring Freedomas the military intervention in Afghanistan
following 9/11 was calledand the Bush administrations promises to help rebuild
Afghanistan in the tradition of the Marshall Plan, however, created high expectations
among the Afghan population that security and economic conditions were going to
improve in the short-run. After eight years, Afghans feel disappointed by the lack of
human security: in the southern and eastern parts of the country, security has deterio-
rated sharply and terrorist attacks are on the rise.
Civilians have suered extensive casualties and the humiliation of having their
homes searched by foreign troops, something that is culturally unbearable to the
Afghan population.
13
Even in the more secure areas, security is weak and living stan-
dards have not improved as much as was expected following the Bonn Agreement. At
the same time, disarmed Taliban over the last
few years have not been suciently rewarded
with sustainable jobs for giving up their arms,
which has discouraged others from following
the same path.
14
Frustrated expectations of
economic conditions and lack of reconciliation have been major factors driving the
country back to conict.
Lack of productive economic alternatives drove farmers to cultivate poppies
and others to rely on corrupt practices for survival. Despite progress in certain areas,
Afghanistan has yet to build an economy in licit activities that can facilitate the reinte-
gration of drug farmers and other war-aected groupsthe most important challenge
of the economic transition.
Te media and policymakers have given their utmost attention to the political
transition (particularly the 2009 elections) and military and security issuesand to
the neglect of economic and social concerns, which are equally crucial to national
reconciliation. Failure to give the Taliban, their potential supporters, and those who
have been ghting them a stake in the peace process has been a major reason for the
present dismal security record. A peace dividend in terms of better living conditions
and rewarding jobs is necessary for a durable peace.
WHAT HAS GONE WRONG AND WHAT ARE THE LESSONS FOR OTHER COUNTRIES?
Te experience of the last two decades, in which multiple countries have emerged from
civil wars or other internal conicts, provides ample evidence of a number of premises
that are associated with eective reconstruction. Tese cases also indicate that the viola-
tion of these key premises often has tragic consequences.
15

A peace dividend in terms of better
living conditions and rewarding jobs
is necessary for a durable peace.
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In Afghanistan, two of these premises were clearly ignored. Te rst one is that
economic reconstruction is fundamentally dierent from development as usual. Te
second one is that a simple and exible institutional and policy framework is key to
eective post-war reconstruction.
If anything, reconstruction is a development-plus challenge. Treating it as nor-
mal development has led to inadequate policies and unrealistic expectations. Despite
Afghanistans extreme socio-economic development challenges, policymakers neglected
the need for national reconciliation.
A critical aspect of national reconciliation has proved to be the disarming, demo-
bilization, and eective reintegration (DDR) of former combatants and other war-af-
fected groups into society and into the legal economy. Tis was clearly not a priority of
the government or of the international community in Afghanistan.
16
Lessons from El
Salvador, one of the most successful experiences in keeping the peace and avoiding aid
dependencies following post-war reconstruction, should not have been neglected.
17
National reconciliation is indeed a political challenge. In El Salvador, it was the
United Nations that mediated and monitored the peace agreement between the gov-
ernment of El Salvador and the Frente Farabundo Mart para la Liberacin Nacional
(FMLN), the insurgent group. A number of peace-related programs resulting from such
agreement were implemented in the nancial framework of the National Reconstruction
Plan (NRP) between 1992 and 1997. Te main objective of the NRP was to provide for
the immediate needs of those groups hardest hit by the conict, the reconstruction of
damaged infrastructure, and the economic reactivation of the former conict zones.
Tere were two programs within the NRP that were instrumental in creating
stability in El Salvador: (1) the creation of a new civilian police force, separate and
distinct from the armed forces; (2) the arms-for-land programfor former combatants s; (2) the arms-for-land program for former combatants
of both sides and for supporters of the FMLN who had occupied land during the war FMLN who had occupied land during the war
years. Given that land tenure and the repressive military forces had been root causes
of the conict, these two programs were the main vehicle for reintegrating those most most
closely involved in the conict into society and productive activities. involved in the conict into society and productive activities. involved in the conict into society and productive activities. in the conict into society and productive activities. in the conict into society and productive activities. the conict into society and productive activities.
To be eective, these programs need to be implemented by applying the ethics
of reconstruction, rather than the ethics of development or equity principle, which
guides all development policies and activities. While the equity principle species that
people with the same socio-economic needs should be treated equally in the normal
process of development (with any violation to this principle seen as an aberration),
the ethics of reconstruction refers to the need to give priority treatment to those most
aected by the conict during the transition to peace, even if there are other groups
with the same socio-economic needs. Tis is because conict-aected groups are more
likely to take up arms again if their grievances are not addressed.
18

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Te 2002 Afghan National Development Framework (NDF)as its title well il-
lustratesis a development-as-usual framework that rejects the ethics of reconstruction
in favor of the equity principle, or ethics of development. In fact, the NDF notes that,
Given the levels of impoverishment of the population, plans must largely be based
on economic support to communities rather than the targeting of ex-combatants as
a special group. Tensions are best diused through the creation of equitable income-
generating opportunities.
19
Tis, of course, would be ideal in a world in which there
are no nancial constraints, which was not at all the Afghan case.
Given the nancial impossibility of addressing the needs of the whole popula-
tion, people in general could have nevertheless perceived an immediate peace dividend
from improved security resulting from preferential treatment of those that gave up the
illicit use of arms. Improved security would have eventually facilitated investment and
other activities that could have reactivated the private sector and had an impact on the
population at large.
Tus, the overall strategy followed in Afghanistan from 2001 to 2003 ignored
the fact that, in the short-run, the challenge of reconstruction in carrying out criti-
cal peace-related programsmost importantly, DDR programsare clearly distinct
from development ones. Te programs should have been carried out actively, both at
the national and at the community level.
20
Poverty alleviation and complying with the
Millennium Development Goals (MDGs), are indeed long-term objectives, particularly
in a country as poor as Afghanistan.
21

Tere cannot be development without peace. Terefore, the objective of peace and
reconciliation should always prevail over that of developmentif the two ever clash as
they often do, particularly with regard to budgetary allocations. Because of the extra
burden of peace-related projects, optimal economic policies are not always possible or
desirable during reconstruction; this is what makes reconstruction so dierent from
normal development.
22

Te Ministry of Finance and the multilateral and bilateral institutions ignored
the premise that a simple and exible institutional and policy framework is essential to
eective reconstruction. Instead, they decided to set up a complex and rigid framework
that included the independence of the central bank and a no overdraft rule for budget
nancing.
23
Tese policies could be best practice for countries in the normal process
of development, but certainly not for a country like Afghanistan, where the scarcity
of human resources and technical capabilities is widespread. Te central bank inde-
pendence and the no-overdraft rule ultimately deprived the country of any exibility
through decit nancing to carry out critical peace-related activities. Such exibility
could have had some inationary impact in the short-run but it could have saved the
peace process.
24
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Te Afghan framework has not only lacked exibility, but it has also proved to be
much too complex for a country that lacks human resources and technical capabilities.
Civil servants, politicians, parliamentarians, and others have taken advantage of such
complexities to carry out all kinds of opaque and corrupt practices.
AID IS IN DISARRAY AND OFTEN HARMFUL
Although aid-related problems are by no means restricted to Afghanistan, the govern-
ments large reliance on aid ows brought some of these problems to the forefront. Even
more than in other places, aid to Afghanistan needs to become more eective and its
delivery more accountableboth at the national and international levels.
Aid in general has clearly failed to support reconstruction in Afghanistan. In
fact, it has created serious distortions: the main sources of growth relate directly to the
bubble created by huge volumes of humanitarian aid and by the large presence of the
international community and foreign troops in the country. Like all bubbles, this one
is not sustainable. Growth is also related indirectly to the illicit drug economy. Neither
source of growth oers much hope for genuine economic development and will never
allow the country to stand on its own feet.
Such growth has also resulted in large price and wage distortions that have discour-
aged investment and work. It has deprived the civil service of needed expertise since
professionals and other skilled-people often prefer to work as drivers, interpreters, and
secretaries in higher-paying international agencies and NGOs. Tis aects not only
the present government capacity to provide services, but it also aects the current and
future productive capacity of the country since people are not using their skills and
will lose them over time.
Te Karzai government has failed to establish legitimacy as a result of its inability
to provide eective security, justice, human rights protection, and basic services to the
population, sine que non for establishing legitimacy. Tere are basically three reasons
for this. First, donors channel about 75 percent of aid outside government control,
allowing them to set their own priorities and utilize their own people and goods. Sec-
ond, the government has been unable to raise tax revenue to reasonable levels, in large
part because a number of warlords in border provinces control customs revenue that
they are not inclined to share with the government.
25
Tird, with the support of the
International Monetary Fund (IMF) and the World Bank, Afghanistan established a
business as usual macroeconomic and legal and regulatory framework that does not
allow it to engage in decit nancing by printing money.
Furthermore, rather than building national capacity of government employees so
that they can perform their basic functions and promote local entrepreneurship in the
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private sectorto increase local production of goods and services aid to Afghanistan
has largely relied on donors contractors for services and goods produced by their own
companies back homewhat is known as tied aid. At the same time, donors pro-
curement, including that of U.S. and NATO forces, is done internationally, providing
little incentive for local production or the creation of local jobs.
Because many donors channel a large part of their aid through their own little
projects based on their own agendas and priorities rather than those of the government,
aid policies have led to a fragmented rather than an integrated approach. An integrated
approach based on national priorities is essential for eective reconstruction. Te Neth-
erlands, for example, rightly advocates
channeling support through national
Afghan programs.
26
The fragmented
approach of other donors, however, has
led to unsustainable projects and has
facilitated corruption. Parallel aid systems need to be eliminated as soon as feasible.
27
With so much aid circulating in the economy outside government control, it
is not surprising that impoverished low-level sta and even their superiors charge
bribes as much as they can to expatriates and others trying to carry out projects in
the country.
28
But corruption and other ineciencies are not by any means restricted
to Afghan ocials. Te U.S. Government Accountability Oce (GAO), the Special
Inspector General for Afghanistan Reconstruction (SIGAR) numerous press reports,
and serious academics have reported a number of horror stories showing the inecien-
cies, lack of accountability, nepotism, and corruption among foreign contractors, the
United Nations, the World Bank, the U.S. government, and other international actors
in Afghanistan.
29
Aid in Afghanistan is also associated with an unusual amount of waste, in part
because of the large number of stakeholders in the process. Te number of reports by
dierent UN bodies, international nancial institutions (IFIs), other multilateral and
regional organizations, bilateral development bodies, think tanks, NGOs, and the
governments of Afghanistan, the United States, and others is not only huge but also
largely repetitive and incredibly expensive.
30
A recent New York Times article mentioned
that it costs the United Nations an average of $2,473 per page to create every single
document that the organization produces in its six ocial languages, a charge that was
not refuted by the organization.
31

Furthermore, overhead charges by the dierent stakeholders accounts for a large
percentage of the aid allocated to particular projects. Ashraf Ghani and Clare Lockhart
report that, from 2002 to 2004, while Ghani was Minister of Finance, the Afghan
government and citizens continuously and publicly requested disclosure of the manage-
It is not surprising that impoverished low-
level staff and even their superiors charge
bribes as much as they can to expatriates.
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ment of funds provided by the UN agencies and the outcomes they had achieved. Te
UN agencies refused to comply with the request. Estimates were that up to 70 percent
of this fund had been spent on the international costsfor international salaries, white
Land Cruisers, satellite communications, and specially chartered airlinesto set up a
UN agency presence.
32
Tis use of foreign aid is particularly puzzling to the Afghan
people, the majority of whom live on less than one dollar a day.
33

Visits by donors and other aid-providers to the country, including heads of UN
agencies and NGOs, often tax the capacity of the few government ocials that speak
the language to receive them. Furthermore, Afghan policymakers often have to make
plans without knowing what kind of assistance they can count on. Tis is partly because
the information on all the aid channeled outside the government is often scant, and
partly because of the fact that donors often pledge money at one forum that they had
already pledged somewhere else, or they fail to disburse what they have pledged.
Last, but not least, a serious problem with aid in Afghanistan is the exorbitant
humanitarian aid and little reconstruction aid provided. Humanitarian or charity
aid in the form of food, shelter, potable water, medical care, and refugee resettlement
is indeed important to save lives and provide minimum levels of consumption in the
short-run. Food aid, for example, is popular in donors countries since their farmers
can see their production and prices for their products rise. However, if extended for too
long, food aid creates price and wage distortions, which discourage local production
and result in aid dependency in the receiving country. It should therefore be stopped
as soon as feasible.
On the other hand, economic or reconstruction aid is targeted at increasing
investment, rather than consumption. Its economic impact will depend on how pro-
ductively it is invested. Tis type of aid in Afghanistan has been mostly allocated to
and has had an impact on improving health and education systems, and on developing
basic infrastructure. Nadiri reports that some of the notable achievements with this
type of aid include the enrollment of 6.5 million children in primary and secondary
education, the establishment of a basic package of health services that covers 85 percent
of the population and 12,200 km of roads that have been newly built or rehabilitated,
including a national road network.
34
As Nadiri has also pointed out, reconstruction aid has been insucient in creating
the power, water, and irrigation systems that are key to recovering agricultural produc-
tion and food security. It has also failed to create a dynamic private sector by target-
ing investment in small and medium-sized enterprises. Investment in the agriculture
and business sectors is key to generating the large number of jobs required to absorb
Afghanistans large and rapidly growing labor force and its armed groups that need to
be reintegrated into the economy once they agree to give up arms.
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A STRATEGY FOR PEACE THROUGH RECONSTRUCTION
A strategy for peace through reconstruction involves nothing less than changing the
political economy of the country. Job creation will not be possible without the reactiva-
tion of investment, production, and exportswhich in turn requires an adequate policy
and institutional framework. With the right kind of incentives and support, it should
be possible for the international community to help the Afghan government to turn
the entrepreneurial spirit of the Afghans away from producing drugs and using arms
to lawful production of cotton, wheat, fruits, lavender, woodlots, and textiles.
35
Reintegration of rogue groups into licit employment requires the creation of a
dynamic economy able to produce a large number of jobs, both in the public and private
sectors. Trough the 2002 National Development Framework, subsequent documents
discussed at donors meetings since 2004, and the Afghanistan National Development
Strategy for 20082013, the government has clearly set up its priorities. Given these
priorities and President Karzais announced intention to start a process of reintegra-
tion and reconciliation, the international community should focus on facilitating
nancing and technical assistance as well as providing preferential market access for
Afghan products in the Organization for Economic Co-Operation and Development
(OECD) markets.
Te replacement of the illicit economy requires a new strategy with viable op-
tions but the idea should not be to reinvent the wheel. In the same way that the aid
model based on foreign experts and contractors outside government control has proved
wasteful, inecient, and corrupt, there are government and private sector models
that have proved ecient in the Afghan context and should be expanded and emu-
lated. Among the former there are two examples of programs that can be emulated:
the National Solidarity Plan, in which block grants are provided to villages across the
country empowering communities to decide by consensus on priority reconstruction
and development projects; and the National Telecoms Program based on a transparency
licensing and regulatory framework.
36
Among the latter, the Global Partnership for Afghanistan, a U.S.-based NGO that
uses trained local sta and has allowed 10,000 families across 10 provinces and 400
villages to revive and expand nurseries, orchards, vineyards and woodlots, is another
model to be emulated.
37

If donors want to do good in Afghanistan, they should channel reconstruction aid
through the government budgetfor example, through the Afghanistan Reconstruction
Trust Fund (ARTF) administered by the World Bankto enable the government to
provide subsidies or other incentives (such as price support programs) and to provide
necessary technical assistance and training to a group of Afghans, so that they can in
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turn train other Afghans at the local level. In addition, the World Bank will need to
nd ways to accelerate the process of disbursement, which has been too cumbersome
and slow up to now.
Earmarked funding, together with technical assistance and preferential treatment
for Afghan products in OECD markets, would allow the government of Afghanistan
to achieve its goals. To facilitate international support, these goals could be included in
a ve-pronged economic reconstruction strategy. Such strategy would create economic
dynamism and inclusion through the short-run reactivation of investment, production,
and trade. Although Afghanistan has a unitary type of government where decisions
are primarily made by the central government, it is also a large and diverse country.
Hence, any strategy would have to be adapted to local circumstances to ensure local
ownership and support.
38


THE FIVE-PRONGED STRATEGY:
1. Promoting investment in national and local infrastructure by national and
international companies: Tis investment is particularly necessary to reactivate agri-
culture and to promote other private sector investment. Afghan entrepreneurs should
be encouraged to participate in bidding projects for the construction of infrastructure,
alone or in joint ventures. Dierent forms of public-private partnerships (PPP), per-
haps with the participation of the Asian Development Bank or other international
or regional companies or banks, need to be explored to share nancing and dierent
types of risk.
Afghanistan could attract foreign direct investment to build infrastructure such as
dams and power, or to exploit the oil, gas, and other minerals and metals that geological
surveys have shown could be promising investments.
39
In this regard, the government
needs to negotiate agreements based on a fair allocation of natural resources and a
commitment on the part of investors to employ local labor and respect the environ-
ment. Te microeconomic foundationincluding an adequate institutional, legal, and
regulatory frameworkneeds to be in place to ensure that the investments will not be
a source of new conicts.
40

With the right kind of joint regional infrastructure, Afghanistans location would
allow the country to become once again a strategic corridor for trade in goods, services,
and oil between Central Asia and South Asia, and between the Middle East and China.
As Ghani notes, Afghanistan is at the center of three billion potential consumers in
China, India, the Gulf, and Europe.
41
2. Providing subsidies, price support, loans, and technical assistance to local
agricultural producers for the supply of the domestic and foreign markets: Both
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the United States and the European Union assist their farmers through subsidies and
price support programs, loans, and other incentives. If donors channeled aid through
the government budget, the government could provide these incentives to farmers as
a way to lure them away from poppy production. Given the current low prices for
opium, this seems like an ideal time to pursue this objective. United Nations Oce of
Drugs and Crime (UNODC) Afghanistan Opium Survey 2009 reports that the income
per hectare produced has fallen from $12,700 in 2003 to $3,560 in 2009. Because of
changes in prices, the income from opium now triples that from wheat, while in 2003
it was 27 times larger.
3. Promoting local entrepreneurship through investment in micro- and small-sized
enterprises (MSEs) for the domestic market: Such investment could be facilitated
by the provision of credit at low cost, technical and marketing support, and by the
creation of a simple tax and regulatory framework for MSEs.
4. Providing subsidies to local enterprises, large and small, to hire and train targeted
groups, and produce for the domestic market, and to local construction companies
for building houses, commercial buildings and government infrastructure: Tis
would facilitate reintegration eorts and would ensure that trained people acquire skills
for which there is demand in the local market.
42
5. Promoting special reconstruction zones for domestic and foreign companies to
produce goods and services exclusively for exports: Tese zones could oer investors
preferential tax treatment and the right kind of security and infrastructure that would
be dicult to provide in larger areas, at least initially. Tese zones could produce low-
skilled textile and food manufacturing utilizing both local and foreign inputs, or they
could be used to produce vegetables and owers for neighboring countries.
OECD and other countries could oer preferential trade arrangements for goods
produced at the reconstruction zones. Tese zones could also be used to provide logistics
and transportation services so as to make Afghanistan a trade hub connecting Asia, the
Middle East, and Europe. In this regard, ongoing plans for the Development of the
Kabul Metropolitan Area, also known as New Kabul City or Dehsabz, are a welcome
development that opens a number of possibilities for large foreign and domestic invest-
ment. Tis area, 70 km in radius from the Kabul City Center, contemplates housing
and urban facilities development, land use for the intensive production of vegetables,
fruits, and owers, and important infrastructure including energy, electricity, roads,
water supply, green parks for recreation, and industrial parks for labor-intensive produc-
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tion. Tis project is also a good model of partnership between a major donor, Japan,
and the Dehsabz City Development Authority (DCDA) in support of governments
priorities.
Given the prominence of Afghanistan in the U.S. foreign aairs agenda, and
the harmful impact of aid owing outside, and often in clash with, governments
priorities, there is a need for the international community to support an integrated,
Afghan-led strategy that could help Afghanistan stand on its own two feet. Te ve-
pronged general strategy presented aboveor any similar one producing and adding
value to fruits, vegetables, minerals, metals, services, infrastructure or anything else that
Afghans can and want to producewould allow the country to fulll its goals and
aspirations. By creating dynamism, rather than mere growth, and economic and social
inclusion through job creation, such strategy could help create a functioning and licit
economy. It would be a way of establishing the legitimacy of the Afghan government
and decreasing the large levels of corruption that make good governance so dicult in
the present context. It would also be a way of establishing a true partnership between
Afghanistan and the donor community.
NOTES
* Te author is particularly grateful to M. Ishaq Nadiri for many useful discussions on the issue of
reconstruction in Afghanistan. I am indebted to him, Herman Schaper, and Roger Myerson for com-
ments on an earlier draft and to the Journal Editors for their queries and suggestions. Errors, of course,
remain my own.
1. In his speech, President Obama emphasized both past attacks and future threats, It is from here
that we were attacked on 9/11, and it is from here that new attacks are being plotted as I speak. Tis is
no idle danger; no hypothetical threat. In the last few months alone, we have apprehended extremists
within our borders who were sent here from the border region of Afghanistan and Pakistan to commit
new acts of terror.
2. For a brief history of Afghanistan, the Pashtun and other tribes, and the Taliban see Adam Ritscher, A
Brief History of Afghanistan, (http://www.afghangovernment.com/briefhistory.htm); Ruhullah Khapalwak
and David Rohde, A Look at Americas New Hope: Te Afghan Tribes, e New York Times (January
31, 2010); and Ahmed Rashid, Taliban (New Haven, Conn.: Yale University Press).
3. As Joseph E. Stiglitz and Linda J. Bilmes argue in their book e ree Trillion Dollar War: e
True Cost of the Iraq Conict (NY: W.W. Norton), non-budgetary costs should be added to the budgetary
ones. Tese include, inter alia, the cost in terms of lost earnings, lifetime disability payments, and health
costs of dead soldiers and severely wounded veterans, equipment replacement, recruitment bonuses, and
interest on nancing the war.
4. C.V. Chivers and Dexter Filkins, Allies Attacking Big Taliban Haven in Afghan South, New York
Times, 13 February 2010 and Joshua Partlow, Focus on Marjah Turns to Building Government, Fi-
nancial Times, 1 March 2010.
5. Te human cost of war has been high: thousands of Afghan troops and civilians have died since the
beginning of the war in 2001; U.S. and NATO casualties have amounted to 1,650, with 520 alone in
2009. And so has been the nancial cost of Operation Enduring Freedom: Congress authorized $224 bil-
lion between 2001 and 2009, and this amount could exceed $300 billion by end of 2010. Of the money
spent up to December 2009, about 94 percent was allocated to the Department of Defense, basically
for military and security purposes (although about $2 billion or 0.7 percent of the total was used by the
$
:
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Provincial Reconstruction Teams (PRTs) for humanitarian and reconstruction purposes). Te surge alone
will add about $33 billion or about $1 million per soldier per year in 2010. Economic aid to Afghanistan
amounted to $21 billion out of the roughly $50 billion U.S.-provided support to Afghanistan (the rest
was used for nancing the Afghan security forces, elections and other political activities). Tus, aid to
Afghanistan represented 17 percent of the $300 billion allocated to the Afghan War.
6. Tis was the title of the conference that I organized at Columbia University on 23 October 2009.
Te conference was jointly sponsored by the Center on Capitalism and Society (where I was the Associate
Director at the time) and the Earth Institute. Te program and video coverage of the conference, including
Panel 2 on Afghanistan, can be found at http://capitalism.columbia.edu/view/events/conference#ptr.
7. U.S. assistance for reconstruction purposes has been roughly $40 billion since the start of the war.
In 2009, however, of $10.3 billion, $5.7 went to support Afghan security forces rather than economic
reconstruction. For data see various Congressional Research Service (CRS) and Special Inspector General
Afghan Reconstruction (SIGAR) reports.
8. Graciana del Castillo, Rebuilding War-Torn States: e Challenge of Post-Conict Economic Reconstruc-
tion (Oxford: Oxford University Press, 2008).
9. Te Taliban rank and le is more likely to react positively to incentives toward economic reintegration.
As Herman Schaper has noted, an unemployed young Pashtun is an often used short-hand description of
the average Taliban; the perspective of better living conditions and rewarding jobs may induce them to give
up arms. Negotiations with the religiously motivated hard-core Taliban, and the even more fundamentalist
non-Afghans who joined them, will require hard negotiations and dierent incentives.
10. See M. Ishaq Nadiri, Economics as a Pre-Requisite for the Stability of Afghanistan and the Region,
Paper presented at the Conference on Peace Trough Reconstruction, ibid., http://capitalism.columbia.
edu/les/ccs/Nadiri%20Working%20Paper%2045.pdf and his presentation in Panel 2, http://capitalism.
columbia.edu/view/events/conference#ptr.
11. At the Bonn Conference convened by the United Nations with the participation of the four major
ethnic groupsPashtuns, Tajiks, Uzbeks, and Hazarait was agreed to create a provisional government
for six months under President Hamid Karzai and an International Security Assistance Force to help bring
a lasting peace to the war-torn country. Te agreement gave the provisional government sole and ultimate
power on all policymaking decisions in the transition from war to peace. For more details on the political
process, see del Castillo, ibid.: 168-169.
12. Although these transitions take place simultaneously and are aected by each other, reconstruc-
tion needs to start right away, whatever the political and security framework is at the time. Waiting for
an improved framework may well turn the country back into conict. Tis is, indeed, what happened
in Afghanistan.
13. Nadiri, ibid.
14. Dexter Filkins, Afghans Oer Jobs to Taliban Rank and File if Tey Defect, New York Times, 28
November 2009. Filkins reckons that 9,000 insurgents had turned in their weapons.
15. Del Castillo, ibid., Chapter 4: 40-47.
16. For a comprehensive analysis of past and present eorts, see Michael Semple, Reconciliation in
Afghanistan (United States Institute of Peace Press, 2009). For evidence of failure with earlier eorts, see
Simonetta Rossi and Antonio Giustozzi, Disarmament, Demobilization and Reintegration of Ex-Combat-
ants (DDR) in Afghanistan: Constraints and Limited Capabilities, LSE Working Papers 2, Series 2 (June
2006), http://www.crisisstates.com/download/wp/wpSeries2/wp2.2.pdf. For an analysis of the political
diculties of carrying out these programs see Barnett R. Rubin, Disarmament, Demobilization and Re-
integration in Afghanistan, mimeo (2 December 2004), http://www.jca.apc.org/~jann/Documents/DDR.
pdf and Barnett R. Rubin, Identifying Options and Entry Points for Disarmament, Demobilization, and
Reintegration in Afghanistan, Center on International Cooperation, New York University (March 2003),
http://www.cic.nyu.edu/peacebuilding/oldpdfs/General_DDR_paper2.pdf. Larry P. Goodson, Te lessons
of nation-building in Afghanistan, in Francis Fukuyama (ed.), Nation-Building: Beyond Afghanistan and
Iraq (Baltimore: John Hopkins University Press, 2006): 145-69, discusses the failure in linking reconstruc-
tion to security in the earlier period and argues in favor of a RDD process where reintegration precedes
and paves the way for their eventual demobilization and disarmament (156-57). Tis is something that
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should be seriously considered in new plans for national reconciliation.
17. Del Castillo, ibid., Chapter 7 (Case study on El Salvador): 103-36.
18. For a discussion of why policymaking and best practices during reconstruction are dierent from
those under normal development, see del Castillo, ibid., Chapter 3: 29-39.
19. Based on the ethics of development, the NDF framework relied on three pillars: humanitarian
assistance and social policy to create sustainable living conditions and promote human development;
external assistance for rebuilding physical infrastructure in order to create an environment conducive to
private-sector investment; and an emphasis on the private sector, both domestic and foreign, as the major
driving force in reactivating the economy, creating employment, and thereby ensuring social inclusion.
Mention of DDR was notoriously missing from this framework as it had been from the Bonn Agreement.
Eorts at reactivating the private sector, although essential, turned out to be futile as security deteriorated
in large parts of the country.
20. By 2004, the government decided that the implementation of a DDR program had become essential
to change the security situation and that To replace the rule of the gun with the rule of law, it is essential
to break down the destructive patronage-based power structures that pervade the country. As a result, DDR
was set up in the framework of security reform so that the country would regain a monopoly on the use
of coercive force. Tis sidestepped the issue that, to be sustainable, DDR needs to ensure the long-term
remunerative employment of disarmed groups. Not surprisingly, the DDR strategy was a failure.
Pushing the Taliban to Pakistan instead of nding ways to reintegrate them peacefully was not a so-
lution either. As Rubin noted, Te Bush Administration failed to provide those Taliban ghters who
did not want to defend al Qaeda with a way to return to Afghanistan peacefully, and its policy of illegal
detention at Guantnamo Bay and Bagram Air Force, in Afghanistan, made refuge in Pakistan, often
with al Qaeda, a more attractive option. Barnett Rubin, Saving Afghanistan, Foreign Aairs 86 (Janu-
ary-February 2007): 57-78.
21. Te MDGs are enshrined in the 2002 Afghan National Development Framework (NDF), 2006
Afghanistan Compact and the Interim Afghanistan National Development Strategy (I-ANDS), and in the
2008 Afghanistan National Development Strategy (ANDS). Te ANDS builds up on the earlier develop-
ment strategies, reports and plans and embodies the countrys commitment to achieving the Afghan
MDGs by 2020.
22. Alvaro de Soto and I rst argued this when we both were at the UN Oce of the Secretary-Gen-
eral in the early 1990s when a number of countries were coming out of conict following the end of the
Cold War. For details see, Alvaro de Soto and Graciana del Castillo, Obstacles to Peacebuilding, Foreign
Policy 94 (Spring): 69-83. In the months following the signature of the Salvadoran peace agreements, the
IMF-supported economic stabilization program imposed scal restrictions that made it dicult to nance
the Plan for National Reconstruction through decit nance to cover the gap in donors nancing and
fulll peace-related programs. Because of such restrictions and a business as usual approach on the part of
the government and the IMF, the FMLN, holding the government responsible for not having started the
arms-for-land program, unilaterally halted the third phase of its ve-phase demobilization (each phase was
to demobilize 20 percent of its forces). As the peace process was at the verge of being reversed, it became
clear that optimal economic policies were not realistic and that the main objective was to keep the peace,
even if the stabilization policies and the overall development of the country suered in the way.
23. Del Castillo, ibid., Chapter 4: 40-47 and Chapter 9 (Case study on Afghanistan): 166-90.
24. Afghanistan, just like other war-torn countries, has proved how much easier it is to restore mac-
roeconomic stability than to consolidate peace. Te IMF, for example, reports that despite corruption,
limited administrative capacity, and political tensions that hamper policymaking, the authorities have
been successfully implementing the 2009/10 economic program. Economic activity is recovering from last
years drought, ination has been tamed [and projected at 6 percent], tax collection is expected to exceed
expectations [and reach 8 percent of GDP], and the envisaged structural reforms have been implemented,
http://www.imf.org/external/pubs/ft/scr/2010/cr1022.pdf.
25. According to the IMF Country Report 09/135 (April 2009), grants channeled through the govern-
ment core budget represented 10.1% of GDP in scal 2008/09 (4.4 percent through the operating budget
and 5.7 percent through the development budget). Since estimates of the external budget (under donors
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control) represented 43 percent of GDP, 77 percent of aid was channeled outside government control
or in support of government priorities. International Monetary Fund (IMF) data (various reports) also
shows that revenue averaged roughly only 5 percent of GDP in 2002-2006 and increased to 7 percent
in 2007-2009. Te government has found it dicult to increase customs revenues in border provinces
controlled by warlords.
26. Herman Schaper, Permanent Representative of the Netherlands to the United Nations and Former
Ambassador to NATO argued that his country believed that Te best way to build capacity is not to deal
with dozens of dierent programs devised by individual donors, but to have donors fund programs that
are well-coordinated on the basis of Afghan priorities and with an Afghan lead. See video recording of
the Conference on Peace Trough Reconstruction, ibid., Panel 2 and paper, http://capitalism.columbia.
edu/les/ccs/Schaper%20Working%20Paper%2046.pdf.
27. Alastair McKechnie, World Bank Country Director for Afghanistan at the time noted: Experience
demonstrates that channeling aid through government is more cost- eective. To take one example, a basic
package of health services contracted outside government channels can be 50 percent more expensive
than the package contracted by the government on a competitive basis. Furthermore, the credibility of
the government is increased as it demonstrates its ability to oversee services and become accountable for
results to its people and the newly elected parliament. See also his presentation in Panel 2, ibid.
28. Contrary to popular belief, corruption is not a major factor in US taxpayers money going to the
Afghan budget. First, less than 25 percent of aid is channeled this way. Second, most of this money is
channeled through trust funds, administered by the World Bank under transparency and accountability
best practices.
29. See, for example, the video recording of William Easterly presentation on Panel 2, ibid. In Fixing
Failed States (Oxford, 2008: Chapters 4 and 5), Ghani and Lockhart report a number of misuses of aid
nancing. For example, the UN rst use for the $1.6 billion of donor nancing channeled through the
UN in 2002 was for an airline devoted to serving UN and other international sta, with the continued
cost of subsidizing this airline estimated at between $180 million and $300 million. Tey also point out
that, had the UN adopted an electronic system, parliamentary elections in 2005 could have cost $140
million and would have generated an estimated $80 million in its rst year by issuing passports, drivers
licences, and identity cards. But the UN stuck to the old cardboard system at a cost of $400 million with
the excuse that one of its donors had supplied $10 million worth of cardboard and would have been of-
fended if is were not used. In Flaws shown in Afghan aid, USA Today (2 February 2009), Ken Dilanian
reports that USAID continues to pay hundreds of millions of dollars annually to private contractors that
frequently fail to demonstrate resultsOf six dierent audits conducted by the agencys inspector general,
only one found a program working largely as it was supposed to.
30. Te IFIs include the IMF, the World Bank (WB) and the regional development banksthe Asian
Development Bank (ADB) is the relevant of these for Afghanistan.
31. Neil MacFarquhar, Budget Fights Are Brewing at the United Nations, New York Times, 8 No-
vember 2009.
32. Ghani and Lockhart, ibid.: 93. In 2007, Rubin, ibid, also reported that donors spent $500 million
on poorly designed and uncoordinated technical assistance.
33. While many people think that government corruption involves taxpayers money going to the Af-
ghan Government, this is not in general the case. First, as discussed earlier, less than a quarter of donors
aid is channeled through the government budget. Most of this money is channeled through two trust
funds, administered by the World Bank under transparency and accountability best practices. Te controls
are so tight, that the problem with these funds is that disbursement is often slow. Second, because aid
money is largely channeled outside the government-operating budget, the government is unable to pay
competitive salaries to civil servants, ministers, and other government and parliamentary sta. Tis situ-
ation has limited the ability of the government to recruit competent people. It has also led to a pervasive
culture of bribes.
34. See Nadiri, ibid.: 2 and the video recording of Panel 2, ibid. As Senior Economic Advisor to
President Karzai from 2005 to 2008, he played a key role in the design of reconstruction policies and in
setting up priorities.
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35. U.S. policy in this respect has lacked the right incentives. When the United States abandoned its
poppy crop eradication policywhich killed subsistence crops and polluted water at the same timeit
briey irted with the idea of paying farmers for not producing. For a country that urgently needs to
resume production and exports, this is also the wrong policy. So far, there has not been a consistent and
widespread policy for alternative production that provides the right kind of incentives for farmers to
switch into licit production. Furthermore, President Obamas assertion in his brief visit to Kabul on March
28, 2010 that President Karzai should step up the ght against the drug trade and reports that U.S. and
NATO forces are turning a blind eye to opium production in Marja despite eorts by Afghan ocials to
destroy the harvest is adding to the confusion. See Rod Nodland, Fearful of Alienating Afghans, U.S.
Turns Blind Eye to Opium, New York Times (20 March 2010).
36. Ashraf Ghani, A Ten-Year Framework for Afghanistan, Report of the Atlantic Council of the United
States (April 2009): 11-12.
37. http://www.gpfa.org/ProjectSummary.pdf.
38. In A Short Overview of the Fundamentals of State-Building, paper presented at the Conference
on Peace Trough Reconstruction, ibid., http://capitalism.columbia.edu/les/ccs/Myerson%20Working
%20Paper%2044.pdf, Roger Myerson argues that centralization often alienates local leaders who are not
aligned with the faction that holds power in the capital. In a more decentralized, de facto if not de jure,
regime that devolves substantial power to locally elected provincial council or municipal governments,
local leaders throughout the nation would compete for a share of local power and an opportunity to spend
public funds responsibly. Tus, local leaders could have more of a vested interest in carrying out an eective
strategy for reconstruction. At the present time, the president chooses the provincial governors. Myerson
argues that the most important rst step to success in Afghanistan could be simply to require that provincial
governors can only serve with the condence of the locally-elected provincial councils.
39. Te most promising include copper, gold, gas, iron and barite, as well as gemstones such as emeralds,
lapis lazuli and rubies. See U.S. Government, Doing Business in Afghanistan, for the full list.
40. A Chinese state-owned enterprise, the China Metallurgical Construction Corp. reached an agree-
ment in 2009 to invest $3 billion to exploit one of the worlds largest unexploited copper reserves in a
former al Qaeda stronghold 30 miles southeast of Kabul. Although the mines have great potential in terms
of production, government revenue, exports, infrastructure and job creation, it can also turn into a target
for sabotage by the Taliban and a source of conict among local groups living in that area. For a discussion
see Raymond Gilpin presentation at the Conference on Peace Trough Reconstruction, ibid, Panel 3.
41. Ghani, ibid.: ix.
42. Te experience of training programs relating to DDR of war-aected groups conducted by UNDP
and other institutions have been largely a failure. Trained people usually cannot nd jobs once they go
into the market. Tat is why on-the-job training often works better.
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