Afghanistan’s economic transition

Laurentina Cizza reports:

“Transformational development” is not something we generally associate with Afghanistan. Yet that was the term Alex Thier, Assistant to the Administrator and Director of the Office of Afghanistan and Pakistan Affairs at USAID, used to describe Afghan social and economic development over the past decade.

Thier opened the Center for American Progress panel on “Afghanistan’s Economic Transition,” which focused on the role of the US and the international community in the transition toward a sustainable political outcome that safeguards its development progress. The panel, composed of the former Afghan Ambassador to the US Said Jawad and Clare Lockhart, Co-Founder and CEO, Institute for State Effectiveness, concluded that to help safeguard Afghan stability, the US and it’s allies should shape economic assistance to reduce dependence on foreign aid and foster a sustainable, private-sector led economy.

Thier’s keynote speech made three main points:

1) US and allies’ investments in Afghan civilians fostered tremendous development in a mere ten years.

Since 2001 Afghanistan’s GDP increased ten-fold from $2 billion to $20 billion. Although poverty in Afghanistan still runs deep, this rise in GDP brought the country’s per capita income up from $100 a year to $600 a year. Ten years ago life expectancy in Afghanistan averaged about 42 years, one of the lowest ranking countries in the world. Any form of basic health care could reach a mere 6% of the population. In this past decade, life expectancy rose 15 to 20 years and investment in low-cost distributive health care increased access ten-fold, now reaching 64% of Afghans.

Education also underwent a transformation. In 2002, a mere 900,000 boys attended school. Today, of the 8 million children that attend school, 37% are girls.

2) Maintaining these gains is critical for the future stability of Afghanistan.

Although flaws permeate the political, economic, and educational systems, millions of Afghans are now stakeholders in a government responsible for the successful delivery of many services. A USAID fragility analysis found that abrupt interruption of global resources to Afghanistan would increase the risk of a return to conflict by 15%. Although politics and security remain more decisive factors in Afghanistan’s stability, economic growth plays a fundamental role as Afghans attain unprecedented degrees of agency.

3) USAID today has changed its investment strategies to amplify the impact and sustainability of its efforts.

USAID’s new approach involves three main tenets: promoting economic growth with a strong emphasis on agriculture, maintenance of the gains made in the past decade, and developing Afghan capacity to sustain these gains.  However, the “how” trumps the “what” in this new investment approach. Thier emphasized USAID’s focus on cost-effectiveness and accountability.

Today, the Afghan government delivers 50% of USAID development resources.  Agreements like the Tokyo Mutual Accountability Framework hammer out the details of what Afghans and the international community must continue delivering to keep the investment and aid forthcoming.  USAID programs like the Accountable Assistance for Afghanistan Initiative vet partners and limit subcontracting to ensure US taxpayer dollars don’t go to waste. This investment strategy aims to create a path for Afghanistan, alleviating the uncertainty the country faces in 2014 and beyond.

Jawad’s overall message was simple: the Afghans need assurance. Assurance that 2014 will not represent an abrupt break. Uncertainty more than insecurity represents Afghans’ more immediate fear. Reducing dependence on foreign aid and transitioning toward a private sector led economy should be the priority.

Lockhart insisted that the paradigm in Afghanistan should shift from aid to development. Although US support will remain critical, the World Bank and the Asian Development Bank will take on increasingly critical roles. She warned that getting the right design for aid is of fundamental importance. Continued investment in human capital that helps the private and social sectors get on their feet is crucial for creating an environment that doesn’t drive citizens to destabilize the state.

Development cannot be forced, and Afghans must want it more than we do. Afghan ownership of the challenge is the only path toward endogenous growth. Our role now is to re-assure Afghans that the world will not abandon them come 2014.

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2 thoughts on “Afghanistan’s economic transition”

  1. Thank you for this post. Fixing Failed States brought awareness of the need to use more diplomacy and development efforts and reduce the foreign military efforts. The New Silk Road vision of an economically vibrant Afghanistan being a pivotal point for moving both goods and people through South and Central Asia becomes all the more important. The Asian Development Bank, World Bank and Islamic Development Bank working in harmony can help constructively fund and lead on-going regional development efforts.
    Bringing an end to the endless Kashmir conflict, and promoting rural grass-roots entrepreneurial development in towns and villages are critical.

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