Vladimir Paramonov and Alexey Strokov1 (2013)
In order to normalize the situation in Afghanistan and ensure long-term stability, coordinated interna- tional action is needed in Afghanistan to restore the following: (1) the transportation network; (2) indus- trial facilities; and (3) agriculture. This requires mobi- lizing the economic potential, above all, of the coun- tries neighboring Afghanistan, including Uzbekistan.
It is precisely Uzbekistan that—given competent co- ordination of international assistance—could play a decisive role in rehabilitating the northern provinces of Afghanistan, which are home to over two million ethnic Uzbeks (about 7 percent of the total popula- tion of Afghanistan) and formerly contained at least two-thirds of the country’s industrial facilities.
The Current State of Economic Relations
From the birth of Uzbekistan as an independent state in 1991 up to 1998, when the Taliban took control of Mazar-i-Sharif, economic ties between Uzbekistan and Afghanistan remained insignificant, notwith- standing the aid that Uzbekistan provided the north- ern provinces before the Taliban regime established its control over them. During the period 1998-2001, when the Taliban controlled almost the entire territo- ry of Afghanistan, Uzbek-Afghan economic ties were practically nonexistent. With the start of the interna- tional anti-terrorist campaign in Afghanistan, how- ever, Uzbekistan became one of the main forward bases in the fight against the Taliban. It is generally recognized that this played a key role in enabling the United States and its allies to consolidate their posi- tions in Afghanistan.
After the “overthrow” of the Taliban regime, eco- nomic relations between Afghanistan and Uzbekistan were gradually restored. This was greatly facilitated by the fact that the two countries share a border—
of about 137 kilometers—and that Uzbekistan has a developed transportation infrastructure that links with Afghanistan. In 2002 Uzbekistan opened the Khairaton Bridge on the Uzbek-Afghan border. In 2003 the Airitom Customs Complex began to op- erate in the border town of Termez, speeding up the process of registering and delivering freight to Afghanistan. Over the period 2002-3 alone, about 2.5 million tons of freight were delivered to Afghanistan via Uzbekistan. In turn, Hamid Karzai’s government expressed willingness to develop economic interac- tion with Uzbekistan, the matter coming under dis- cussion during numerous visits to Tashkent by highly placed Afghan officials. In addition, Uzbekistan has participated in a number of projects to develop trans- portation arteries in Afghanistan.
In spite of the above, Uzbek-Afghan economic relations remain at a low level, being confined mainly to small-scale trade that has a certain significance for Afghanistan (more precisely, for its northern prov- inces), but which, as of yet, is of no great importance to Uzbekistan.
Uzbek-Afghan Trade
The volume of Uzbek-Afghan trade rose through- out the period 2002-2010, with the exception of 2005 when trade between the two countries dropped sharply largely due to difficulties in Uzbek- American relations. The volume of trade in 2011 was also some- what lower than in 2010. According to data for 2011, Uzbek-Afghan trade accounts for under 3 percent of the foreign trade turnover of Uzbekistan and roughly 6 percent of that of Afghanistan. This is far below its potential level (see Table 1 below).
The structure of Uzbek-Afghan trade (see Figure 1) remained practically unchanged throughout the period 2002-2011. Uzbek deliveries to Afghanistan included fuel, electricity, and petrochemicals (60-62 percent), ferrous metals and their products (20-24 percent), food products consisting of flour, cereals,
1 Co-founders of the web think-tank “Central Eurasia” (www.ceasia.ru), Tashkent.
fruits, and vegetables (11-13 percent), and services (about 3 percent). Uzbek exports go predominantly to the northern provinces of Afghanistan, constitut- ing either international humanitarian aid or are paid for from funds provided to Afghanistan by internati- nal financial institutions.
Table 1. Trade between Uzbekistan and Afghanistan over the Period 2002-2011, in US$ Million
Year Total Vol- ume, US$
Million
Uzbek Exports to
Afghani- stan, US$
Million
Afghan Exports to Uzbekistan,
US$ Mil- lion
Export Balance in
Favor of Uzbekistan, US$ Million
2002 61.5 61.3 0.2 +61.1
2003 89.6 89.4 0.2 +89.2
2004 130.1 126.2 3.9 +122.3
2005 19.3 19.2 0.1 +19.1
2006 163.7 161.7 2.0 +159.7
2007 332.3 331.4 0.9 +330.5
2008 533.1 530.5 2.6 +527.9
2009 703.9 703.8 0.1 +703.7
2010 663.5 663.3 0.2 +663.1
2011 456.3 456.1 0.2 +459.9
Source: Economist Intelligence Unit2
Volumes of Afghan exports to Uzbekistan were insignificant throughout the period 2002-2011 and remain minor today. Except for the years 2004, 2006, and 2008, when their value was in the range of $2-4 million, the value of exports from Afghanistan was at an extremely low level. Moreover, they were made up almost entirely of services (about 99 percent).
Deliveries of goods are very modest and consist of certain kinds of agricultural raw materials such as ed- ible fruits and nuts.
This distinct lack of exports from Afghanistan to Uzbekistan is not surprising considering that the real sector of the Afghan economy (its industrial and agro-industrial segments) was practically destroyed, while the population of Afghanistan survives mostly on account of the subsistence economy and by culti- vating opium poppy. As a result, the scale of Afghan- Uzbek trade is determined mainly by the magnitude of international financial assistance to Afghanistan:
it is primarily with foreign money that Afghanistan buys industrial and consumer goods in Uzbekistan.
Figure 1. Structure of Commodity Deliveries from Uzbekistan to Afghanistan (2011)
Source: Figure utilizes data from the Economist Intelligence Unit
Projects with Uzbek Participation
The economic projects carried out in Afghanistan with Uzbek participation are mainly concerned with the restoration or building of transportation arter- ies. These projects are financed by international in- stitutions on account of Uzbekistan being unable on its own to make investments of any significance in Afghanistan. Nevertheless, the contribution that Uzbekistan makes to the process of reconstruction in Afghanistan may be considered significant: the proj- ects in which Uzbekistan participates are important to Afghanistan.
After the overthrow of the Taliban and the acces- sion to power of the Karzai government, Uzbekistan participated very actively in restoring the motor road between Mazar-i-Sharif and Kabul. Between 2003 and 2011, Uzbek specialists restored and reopened eleven bridges along this route. Another major proj- ect in Afghanistan has been the construction of the rail branch line from Khairaton to Mazar-i-Sharif (75 kilometers). This project was carried out during the period 2009- 2011 on the basis of an agreement concluded in 2009 between the State Joint-Stock Railway Company (SJRC) Uzbekiston Temir Yullari (the operator of the project) and the government of Afghanistan. The project itself included the laying of the railway line and the building of a freight terminal and accompanying infrastructure in Mazar-i-Sharif.
The total funds allocated to the project were about $180 million, of which $165 million was a grant from the Asian Development Bank and $15 million came from the government of Afghanistan. The line came into operation at the end of 2011. The volume
2 Economist Intelligence Unit (“Uzbekistan: Country Report,” The Economist Intelligence Unit, London, June 2003, June 2004, June 2005, June 2006, June 2007, June 2008, June 2009, June 2010, June 2011, March 2012).
of freight predicted for the initial stage is 7 million tons a year, subsequently rising to 20 million tons.
Main Obstacles to the Economic Reconstruction of Afghanistan: A View from Uzbekistan
Regarding Afghanistan as an inseparable part of Central Asia, Uzbekistan focuses its main efforts on the search for mechanisms to rebuild the country. At the same time, it is understood in Uzbekistan that the current level of economic relations with Afghanistan is extremely low and does not correspond to the interests of either country. However, the chief rea- sons for this have very little to do with Uzbekistan and Afghanistan themselves, but rather because the
“Afghan problem” is a direct result of the global con- frontation of the Cold War period. It is therefore ap- propriate that the main measures for the reconstruc- tion of Afghanistan should also be international in scope.
Especially relevant here is an analysis of the in- ternational effort to aid Afghanistan. It should be rec- ognized that, hitherto, the aid provided by the inter- national community has been extremely ineffective and has done very little to tackle the country’s under- lying structural problems. The three main problems are as follows:
t The weakness and ineffectiveness of inter- national efforts to restore the transportation infrastructure of Afghanistan;
t The weakness and ineffectiveness of interna- tional efforts to restore the Afghan economy and the country’s regional economic ties;
t The weakness and ineffectiveness of interna- tional efforts to counter the drug trade.
Not only does the volume of international aid fall far short of the real needs of Afghanistan, but even those foreign funds that are available are put to extremely ineffective use in terms of the contribution they make to restoring the country’s economy.
The United States spends enormous financial resources in Afghanistan. American financial out- lays have been increasing year on year. Thus, while in 2002-2004 the United States spent about $12 bil- lion per year, by 2010-2011 annual expenditure had already reached around $160 billion; in 2012 the White House allocated $110 billion to the war in Afghanistan. Nevertheless, practically all this mon-
ey is allocated to maintaining the American military presence and the establishment of the new Afghan army and force structures. Even these enormous outlays have thus failed to normalize the situation in Afghanistan. To a large extent this is because the United States takes no account whatsoever (or does not wish to do so) of the real needs and interests of Afghanistan itself. Practically nothing is allocated to finding a systemic solution to the problems of restor- ing the devastated Afghan economy, creating em- ployment, and normalizing the everyday lives of the population.
The Weakness and Ineffectiveness of International Efforts to Restore the
Transportation Infrastructure of Afghanistan The rebuilding of the transportation infrastructure of Afghanistan is one of the main preconditions un- dergirding the country’s economic reconstruction.
However, international efforts have yet to address this issue adequately with the result that the Afghan transportation infrastructure today remains weakly developed, even though the country in geographic terms occupies a very favorable position for the cre- ation of transportation corridors from Central Asia to South Asia, and also to the Middle East. Today the country has practically no railway network—
there exists only the 75- kilometer branch line be- tween Khairaton and Mazar-i-Sharif recently build with aid from Uzbekistan. This clearly does not suf- fice to substantially intensify freight flows through Afghanistan. In fact, the sole form of transportation in Afghanistan is by motor vehicle. There are about 21,000 kilometers of motor roads in the country, of which only 2,800 kilometers (about 13 percent) have a hard surface. Due to the endless fighting and the virtual absence of road repairs, however, road surfac- es are in an extremely unsatisfactory condition, while the throughput capacity of the roads themselves is small. Moreover, for four to five months of the year (late autumn, winter, and early spring) the majority of the roads are almost or completely impassable. The routes connecting Afghanistan with its neighbors also continue to be extremely poor. Consequently, Afghanistan’s existing transportation infrastructure prevents it from becoming a regional transportation crossroads: regional trade flows continue to bypass Afghanistan and do not “feed” the process of its re- construction and development.
The Weakness and Ineffectiveness of International Efforts to Restore the Afghan Economy and the Country’s Regional Economic Ties
In the course of over 30 years of continuous armed conflict, all branches of Afghan industry (including those created with Soviet assistance in the 1960s and 1970s) have been destroyed. The situation in agricul- ture also fares only marginally better with there hav- ing been a sharp decline in the volume of agricultural output as a result of the fighting and mass migration from the villages. The country has become increas- ingly dependent upon deliveries of food from abroad.
The collapse of the Afghan economy in turn deter- mines the weakness of the country’s regional eco- nomic ties from which it finds itself cut off. For ex- ample, over the period 2002-2011 the five neighbors of Afghanistan (Iran, Turkmenistan, Uzbekistan, Tajikistan, and Pakistan) together accounted for only some 10 percent of its foreign trade turnover.
It is obvious that the reconstruction of Afghanistan requires, therefore, large-scale invest- ment in the country’s industry and agriculture as well as the development of economic ties with neigh- boring countries. If this is to be achieved it is essen- tial that cooperation between Afghanistan and its neighbors be bolstered and accelerated. However, the near total absence of international aid to Afghanistan directed toward the restoration of its industrial and agro-industrial sectors, combined with the weakness of the country’s regional economic relations, make it impossible even to tackle this crucial task. While international donors allocated a portion of funding to the restoration of certain Afghan roads (mainly those used to supply the NATO troops deployed in Afghanistan), the prospects for the reconstruction of Afghanistan’s industry and agriculture remain hazy.
The Weakness and Ineffectiveness of
International Efforts to Counter the Drug Trade The most important obstacle to the reconstruction of Afghanistan—and therefore to the development of Uzbek-Afghan economic cooperation—is the growing resistance of the international drug cartels.
Moreover, it was precisely after the Taliban regime was overthrown and NATO forces arrived that the production of drugs in Afghanistan began to rise rap- idly. According to UN data, the production of heroin
in Afghanistan rose by 61 percent from 3,600 tons in 2010 to 5,800 tons in 2011—a figure that exceeds 90 percent of global output. A similar quantity of other drugs is also produced in Afghanistan. Altogether, over the ten years since the start of the “antiterrorist campaign” the production of drugs in Afghanistan has increased by a factor of 40.
The international drugs business is a powerful force in Afghanistan—financially and organization- ally incomparably stronger than the Karzai govern- ment and, apparently, even stronger than the forces of the American-led anti-terrorist coalition. Indeed, according to certain estimates, revenues from the sale of Afghan drugs are in the magnitude of $640 billion a year, while the incomes of Afghan farmers and the revenues of the Afghan government togeth- er amount to just $4 billion a year. Therefore, in or- der to maintain its control over this hugely lucrative business, the drug cartels have an objective interest in keeping the central government in Kabul weak and in perpetuating the situation of “smoldering conflict” in Afghanistan.
In sum, the process of reconstruction in Afghanistan—and also the development of Afghan- Uzbek economic ties—is making little headway, with the international community yet to devise a clear, coherent, and agreed upon international program to provide funds and resources for this task.
Conspicuous by its absence has been the po- tential contribution of regional cooperation to this task, which, instead, has been almost completely neglected. All this renders international efforts to reconstruct the Afghan economy and provide securi- ty in the country even less effective than they would otherwise be. As a result, Afghanistan has entered a vicious circle. On the one hand, without targeted international investment in the development of the Afghan economy (transportation, industry, agricul- ture) and stimulation of regional cooperation there can be no guarantee of even a modicum of stabili- ty in Afghanistan, but, on the other hand, without any guarantee of stability there will be no regional cooperation or large-scale foreign investment in the Afghan economy.
Prospects for the Reconstruction of Afghanistan:
Main Recommendations
The effectiveness of any efforts targeted at the eco- nomic reconstruction of Afghanistan will to a large
extent be determined by the success or failure of the following top-priority measures:
1. Creation of a More Effective International Mechanism for the Reconstruction of Afghanistan It seems to us that the main potential for a fundamen- tal solution to the problems of Afghanistan lies in the creation of a more effective international mechanism to implement targeted programs for the reconstruc- tion of the Afghan economy. Any new program must satisfy the following basic conditions: (1) active par- ticipation by the leading powers, international do- nors, and Afghanistan’s neighbors; (2) the setting of priorities for reconstruction; (3) the greatest possible transparency of international money flows; and (4) strict control over the use of international financial and material resources. Even at the initial stage of their implementation, these measures might give a powerful impulse to regional economic cooperation.
From the economic point of view, the most efficient way to carry out reconstruction work in northern Afghanistan is to involve companies and specialists from Uzbekistan.
2. Accelerated Building of Transportation Arteries The issue of building trans-Afghan transportation arteries is of fundamental importance. In thus do- ing, the idea of creating an international transpor- tation consortium for Afghanistan would appear to be worthy of consideration. The members of the consortium could be those states with a direct in- terest in developing a network of transportation ar- teries to connect the regions of Central Asia, South Asia, and the Middle East by the shortest possible routes. The building of trans-Afghan arteries may lead to a significant expansion of economic ties between Afghanistan and its neighbors. Moreover, transportation costs in Afghanistan and in a num- ber of other countries (Uzbekistan, Tajikistan, and also countries of South Asia) may fall by over 60 percent.
This in turn may expand the international flow of goods through Afghanistan, which in it- self will speed up the reconstruction of the coun- try. For Uzbekistan, for example, a route through Afghanistan to ports on the Indian Ocean would reduce by more than half the distance to ports on the Baltic and Black Seas; the former route would also be almost 80 percent shorter than routes to ports on the Pacific Ocean. The trans-Afghan route of greatest interest to Uzbekistan would start
at Termez, pass through Mazar-i-Sharif, Shibargan, Herat, and Kandahar, and continue to internation- al seaports in Iran (Chakhbakhar and Bender- Abbas) and in Pakistan (Karachi). Another vital consideration is that development of the Afghan transportation infrastructure may be one of the decisive factors in normalizing the socio-eco- nomic situation in Afghanistan, at the same time as undermining the positions of extremist forces and the drugs business in the country. Turning Afghanistan into a transportation hub connecting Central Asia, South Asia, and the Middle East is objectively in the interests of all strata of Afghan society. The large-scale development of transporta- tion infrastructure could substantially expand the circulation of goods among these regions through Afghanistan. This will create many new jobs, help to solve the problem of unemployment, and poten- tially lead to a significant raise in the incomes of the Afghan population.
3. Development of Industrial and Agricultural Cooperation between Afghanistan and Its Neighbors
In the course of implementing various international projects in Afghanistan, industrial and agricultural cooperation between Afghanistan and its neighbors may give significant impetus to the country’s eco- nomic development. Thus, Uzbekistan together with other states might assume responsibility for a broad spectrum of work to restore Afghan agriculture, in- frastructure, and industrial and social facilities. This would substantially increase the effectiveness of all international aid to Afghanistan, and especially to the country’s northern provinces. One reason for this is that Afghanistan’s main industrial facilities, which in the 1970s (before military-political desta- bilization) accounted for over 60 percent of GDP, used to be concentrated in the northern provinces.
There are also specific opportunities to accelerate the reconstruction process in the agrarian sector.
A promising approach might be for Afghanistan and neighboring states to jointly establish bilater- al and multilateral agricultural holding companies specializing in animal husbandry (for instance, the breeding of Astrakhan sheep) and the cultivation and processing of cotton, fruits, and vegetables.
This would make it possible to offer Afghan farmers alternative crops to replace the opium poppy—fur- thermore, crops that would be in stable demand on the world market.