Question

what are the main issues with Afghanistan's political economy? Discuss the political power structures there, unofficial and official, and how these intersect with economic interests. What are the long-term implications for the local economy? What are the U.S. foreign policy implications of Afghanistan's war economy?

Answer 1

The 20-year old Afghan conflict has created an open war economy, affecting Afghanistan and surrounding areas. Not only has Afghanistan become the world’s largest opium producer and a center for arms dealing, but it supports a multibillion dollar trade in goods smuggled from Dubai to Pakistan. This criminalized economy funds both the Taliban and their adversaries. It has transformed social relations and weakened states and legal economies throughout the region. Sustainable peace will require not just an end to fighting and a political agreement but a regional economic transformation that provides alternative forms of livelihood and promotes accountability.

Incompetent, Divided, and Corrupt Governance
The reporting and metrics in this section show the weaknesses and level of corruption in the Afghan government, and that the World Bank ranks Afghanistan as one of the worst governed countries in the world. They show that nearly two decades of reform efforts have only had a marginal impact in developing the kind of central government that Afghanistan needs, as much because of its ethnic, sectarian, and tribal divisions – and its fractured and divisive politics – as because of the weaknesses in the structure of Afghan governance.

Work by the World Bank shows that the Central government is making progress in raising its revenues, but no source indicates that there is clear evidence that it is using its funds more effectively or with less corruption. The World Bank and SIGAR also show that the Government remains critically dependent on massive outside aid to fund its overall security and civil budgets, and no source indicates that this dependence will drop sharply in the near and mid-term.

Work by SIGAR shows that the central government is to some extent the government of “Kabulstan,” rather than the entire country, and that provincial, district, and local government all have serious problems. SIGAR also reports that the role of the Taliban in providing de facto governance and rule of law continues to expand.

US relationships with Afghan

Afghanistan remains an important partner of the United States in the fight against terrorism, working with us to eliminate al-Qaeda, ISIS-Khorasan (ISIS-K) and their affiliates in Afghanistan. In order to strengthen Afghanistan’s capabilities as a partner, and to improve the lives of the Afghan people, we continue to invest U.S. resources to help Afghanistan improve its security, governance, institutions and economy. Our strong bilateral partnership is guided by the Enduring Strategic Partnership Agreement between the Islamic Republic of Afghanistan and the United States of America (SPA) signed in May 2012, which outlines respective economic and political commitments, as well as by the Bilateral Security Agreement (BSA) signed in September 2014, which outlines mutual security understandings. In July 2012, following the entry into force of the SPA, President Obama designated Afghanistan a Major Non-NATO Ally (MNNA). President Trump’s conditions-based South Asia Strategy, announced in August 2017, seeks to set conditions for a political process between the Taliban and the Afghan government that ultimately leads to a peace agreement and an end the conflict in Afghanistan. President Trump was clear that military power alone will not end the war but can set the conditions for a political process that leads to lasting peace.

Bilateral Economic Relations

Afghanistan signed a Trade and Investment Framework Agreement with the United States in 2004. The TIFA is the primary forum for bilateral trade and investment discussions between the two countries. Exports from the United States to Afghanistan increased 525% from $150 million in 2004 to $937 million in 2017. Efforts are underway to improve the business climate, including strengthening Afghanistan’s commercial regulatory and legal framework to attract foreign trade and investment, as well as to stimulate additional trade with the United States through trade capacity development. Implementation of new, WTO-compliant legislation and policies will improve Afghanistan’s business environment and trade regime, and provide an international legal framework that will help further Afghanistan’s regional integration.

Political Relations

Following the controversial 2014 presidential election in Afghanistan, the United States called for and financially supported the United Nations audit of the vote, and helped mediate a political agreement that resulted in the creation of the National Unity Government. The United States remains committed to political stability and the democratic transfer of power in Afghanistan. After a three-year delay, the Afghan government held parliamentary elections in October 2018, and the next presidential election is scheduled for September 2019. The United States fully supports efforts to reform Afghanistan’s electoral institutions in order to hold timely, credible, and transparent elections.

U.S. Assistance to Afghanistan

The United States is part of a coalition of more than 100 countries and organizations that provide both security and civilian assistance to Afghanistan. The United States and more than 30 other nations provide financial support to the ANDSF. The international community made almost $5 billion available for the ANDSF in 2019, with the United States providing the greatest share. At the Brussels ANA Trust Fund Plenary June 2019, NATO Allies and Operational Partners reaffirmed their commitment to financial sustainment of the Afghan forces through 2024.

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