17 August 2004
February 24, 2004
by ActionAid Afghanistan
Some thoughts on securing Afghanistan’s Future: Compilation of thoughts/feedback received from individuals/organisations associated with govt, NGOs and academics in Afghanistan.
This report has had a limited circulation. Although it has been circulated among development partners, many key persons from Afghan civil society as well as the govt. - people who should be playing a major role in redefining the future for the country – have been left out of the discussions. When such a strategy, that aims to become the backbone for Afghanistan’s reconstruction, is being prepared, affected stakeholders should be notified, the draft disclosed and adequate time granted for discussion and feedback (the letter signed by the Minister of Finance, and dated January 29 2004, requested comments by February 4, 5pm). Such crucial questions should be examined through ratified democratic processes that actively engage citizens, especially the poor and the vulnerable groups. Only through public debate can we assess the risks and/or benefits of the proposed measures and only through public engagement and consultation can we truly give legitimacy to any state building-process.
Overall this document does seem to engage with some of the key issues and challenges – this seems rudimentary. There are some doubts about the realism of the solutions and approaches offered.
Reads quite like an IFI document (e.g. use of IMF source for trade statistics), especially in emphasis on private-sector-led development. Apart from the obvious problem that the writ of central government is limited, this raises real doubts about how far this strategy is really owned even by the Kabul government.
Provision of basic social services
The report estimates 70% of the population to be living in extreme poverty and that “Afghanistan ranks below the average for both developing countries and for Sub-Saharan Africa” (Securing Afghanistan, p. 2) and recognizes that “investment in education, with a special effort to include girls, is the single most important investment in development that any country can make.”
Nevertheless, despite claiming “that the government is prepared to make significant investment in education and healthcare”, the proposed budget shows that investments in infrastructure exceed by more than the double those allocated to social services: just over $7 billion for basic services, including health, education and social security, while some $14.4 billion is to be invested to rebuild the country’s infrastructure.
To compare some of the targets in the report:
According to table 2.2 (p.16), in terms of eradicating extreme poverty and hunger, 2015 targets poverty reduction by 30% (current level being 53% and by 2015 it is claimed to be reduced to 23%) and hunger rate to be reduced by half (from 48% to 24%), while 20% of the population will still not have access to safe drinking water. How is poverty seen and how is poverty defined?
Table 2.9 states that by 2010, 100% of Afghan population will have access to public TV with satellite broadcasting established by 2015!
In terms of provision of basic social services, there is little information on just how this new “relationship” between the government, the private sector, community and NGOs will be articulated. Will this lead to privatising of water? The report also talks of privatising water distribution: “In order to maximize coverage, water will be supplied through a mix of private and shared connections and community distribution systems” (p. 55).
Education
The report clearly asserts its vision for the education sector:
- Secondary and higher education should aim to “meet the private-sector driven national development”, and vocational education be made “more market-driven.”
- The role of the Ministry of Education is reduced to a mere policy maker and regulator.
- Financing strategies for Education include contributions from communities, NGOs, the private sector, students and employers. Priority for public spending is given to the primary education sector. Outside the compulsory nine years of education, the document suggests “resources must be mobilized through cost-sharing with students, from the private sector, and from foundations.”
In such a situation who but the elite will be able to go past grade nine? Once tuition fee is imposed, even in spite of cultural biases, who will send their daughters to university?
Experience everywhere indicates that while a few poor families might be willing to pay more fees for better schooling, most families in most regions cannot afford to pay more. As costs to students and families increase, fewer children and students attend school. In Afghanistan, user fees are especially disadvantageous for girls who historically have not been sent to school because cultural barriers. Privatising universities and imposing tuition fees will further discourage schooling for girls and boys and threaten Afghanistan’s development.
Health and Nutrition
Concerning the reforms in the health sector, once again the strategy consists of transforming the function of the Ministry of Health from service delivery to policy guidance. How this is to be done is however not clear from the few pages in the report that deal with this issue, but mention of the private sector as a provider of services is worrisome.
Physical infrastructure and natural resources
The section discussing physical infrastructure is particularly driven by neo-liberal policies, where the State is relegated to the backbench and its role totally reshaped.
Instead of simply acknowledging that 25 years of conflict and instability are the root causes for the present poor state of infrastructure and grossly inadequate levels and quality of services, the report mainly accuses heavy state involvement as one of the prime causes of these setbacks. Increased private-sector involvement is thus presented as a panacea.
Moreover, it argues that “Afghan people have demonstrated willingness to pay for services if they are effectively delivered” (p.38). The question is what percentage of Afghan people can pay for such services, in spite of delivery efficiency? How will this strategy reduce disparities between the centre and the regions and won’t it instead deepen these breaches? What studies have demonstrated that “electricity customers in most parts of the country are prepared to accept relatively high tariffs when power is actually provided”? And won’t this strategy favour regions and districts were clients can afford to pay relatively high tariffs for the provision of electricity? Won’t the inequalities in development only threaten, once again, national security?
Energy and mining
Concerning the energy sector, the strategy envisages massive privatization, including commercialisation of national enterprises such as Afghan Gas.
If we take mining for example, wouldn’t it be wiser to promote State development, as this can become a profitable sector, that can ensure the governments financial sustainability and its ability to provide other less-profitable services, and really see to it that the benefits are shared by all Afghans?
There would be the general problem in misuse of mining and energy rents. The long-term market for coal is dead, because the global warming problem will see movement away from coal, even in the Asia region, over the next 5-10 years. Gas is possibly more sustainable. It would be more sensible for Afghanistan to look at the other major energy resource it has, namely solar energy, principally for domestic use.
An export oriented-economy
Concerning agriculture, the report supports the passage from a subsistence-oriented sector to an export oriented-economy. Although promoting potentially exportable crops can in some cases favour local economies, an export-oriented production may also divert labour capital away from local communities and in some cases even threaten already fragile ecosystems
We need to keep in mind that any change in agriculture has far-reaching implications for the livelihood of communities.
About cost recovery
On page 11 there is a throwaway comment that “much” of social service provision and infrastructure should be funded through “cost recovery.” Apart from the social impact of this approach, evidence has shown widely that so-called cost-recovery –i.e. fees – rarely in fact covers more than 10-20% of the cost of services. This approach seems not thought out, as well as anti-poverty reduction.
Cost recovery cannot be a prerequisite at this stage of Afghanistan’s development. The capital requirements for installing and expanding basic infrastructure to all are enormous. In a country that has undergone some twenty-five years of war, we can’t expect to recover investments in the short-term. Or maybe we should appraise this recovery in a completely different manner, with a more people-oriented approach: When we invest in health, education and social services, five or ten years from now, this will be paid off by simply witnessing a new generation, literate and healthy. A generation that will be finally have the opportunities to live in peace.
Program Management Units
Program Management Units “staffed with national and international consultants” that are to be set within several Ministries will, remove bureaucrats from direct service provision, tie the government to the private investors, promote market reforms and make difficult any independent decisional process.
The States’ role
The draft report calls for a transformation of the role of the government from a provider of basic services to a role of regulator and that service provision should be left to the private sector.
The document outlines that “private sector-led development is the key to Afghanistan’s longer-term economic development and poverty reduction (Securing Afghanistan, p. 67)”. It even qualifies the « administrative apparatus of government as an enabler and facilitator of private sector development ». “Policy and strategy are expected to emphasize the primacy of the private sector and the role as regulator (p.50).”
Privatising or « contracting out » in a state with little or no regulatory capacity can be a very perilous strategy as it will only reduce the state’s ability to guarantee responsible use of funds. Despite the will to create an “adequate regulatory framework” in Afghanistan, a “friendly government”, at the mercy of the private sector, will neither have the authority, nor the freedom to stand its grounds and to confront the private sector on any critical issue. This climate, conducive of investment, will only lead to a weak regulatory environment.
This new role that is given to the state can only reduce popular participation in policy design, execution and monitoring. In a democratic system, there can be more opportunities for communities to participate and provide input on a state-led programme. The citizen owns the state. When taken over by the private sector, the citizen becomes a client who has no political say in the company’s decisions.
We should not continue to see the State as merely “a Soviet legacy” (mentioned several times throughout the report) but instead recognize the importance of the state’s role as a motor for development. Only a state that can adequately provide the basic services to its citizens will gain public recognition.
By reducing the state to a mere regulator, we will also decrease the state’s legitimacy: “If you leave all services to be provided by the private sector, what will the common man in the street think of the states’ role? No one will support the government. And Afghanistan will fall back into a state of anarchy. This strategy can’t bring stability to the country. What we need now is a strong central government, with legitimacy, power and a vast development programme. Let the agencies fill in the gaps that the government is not able to fill, let them undertake the loopholes in the system. The government needs to play a central role in providing basic services. This proposed strategy may be suitable for the third millennium, once everyone in Afghanistan is educated and the country has overcome its main development challenges, but now is not the time for such a system.” – as said by one of the senior govt advisors.
At this stage of Afghanistan’s development, providing basic social services to its citizens should be the core function of the state.
Can the private sector – driven by profit - carry through on its promise to extend services to the poor?
Economic recovery
The overall economic policy model outlined on page 69 is the standard Washington consensus model. Experience from elsewhere (e.g. Uganda) suggests that post-conflict countries may get recovery under this model, but they will not necessarily get investment and sustained growth. At the same time, what growth there is will be unequalising, especially if there are initial inequalities in agricultural assets. Also, letting the private sector take the lead in agricultural services (p 70) will not work in remote areas, and may lead to cartels. There needs to be active government regulation and monitoring here, and that means the capacity to do it.
The report applauds the country’s “economic recovery” since the fall of the Taliban. It is important to note how this has also put serious strains on some of the most vulnerable segments of Afghan society, who can’t cope with the price rises in terms of basic services. Inflation in Afghanistan has reached 120% over the last year. However, officials still continue to say that Afghanistan has not suffered any such phenomenon, since there has been no serious fluctuation since the introduction of the new Afghan currency.
Great deal of confidence placed on development of the private sector. Not sure about Afghanistan, but it would seem that much of it is operational in the very sector seen as a problem (opium), and that it will generally be small in capacity and there will be many market failures. Might be worth looking at other post-conflict situations (e.g. Sierra Leone, Mozambique) to see what can and cannot be expected from the domestic private sector.
The document is not convincing on attaining broad based growth and having a private sector led strategy. If there are strong inequalities in assets, either material such as land, capital, vehicles etc, or in human capital, including education and external links, then a private sector led approach will lead to unequal growth. Basically the rich will get richer. This is not to say there is no role for the private sector, rather that the expectation of redistribution from government will be higher.
The economic growth projections are very ambitious. Comparison with SE Asia seems at this stage rather like wishful thinking, as by the time these countries hit growth rates of 5-10%, they had strong and stable states, an industrial base and working financial institutions, sophisticated industry and trade policies, along with strong redistributive programmes in land, education, etc.
The section on page 7 discussing the feasibility of growth projections also makes some optimistic assumptions –Basically the scenarios for agriculture and industry are entirely dependent on mobilising enough capital (aid or private capital) and on peace. There is little detailed discussion about potential sources of capital. The comments about debt and loan finance on page 12 imply that public finance will be limited. However, given the state of Afghanistan’s infrastructure, and the reputation problems, it is unlikely that the country will attract much private investment (domestic or foreign) without a clear public commitment – i.e. that there will be “crowding in”. There is also little discussion about the likely sources of foreign capital – Indian? Pakistani? Re-patriated capital flight from Afghans?
The central issue of opium cultivation does not seem to be convincingly addressed – what economic incentives will there be for growers to switch? If there is no economic incentive, does this imply a military/coercive solution? This raises the question of mixed objectives: is the aim of this strategy broad-based growth, or eradication of poppy growing? Where is the case made that these are entirely synergistic?
The statistics (e.g. Table 1.1) are back of an envelope calculations, as it is not possible to collect good survey data yet. This makes projections even more risky.
On revenue collection (page 11), a comparison is made with other low-income countries(LICs). The problem with this is of course that Afghanistan’s warlord problem is not shared by other LICs, and the political feasibility of central government being able to command revenues of 10-15% of GDP is surely a big question, at least in the next few years.
On becoming integrated into the world economy (page 68). The analysis seems a bit general. Presumably at the moment, Afghanistan’s trade is dominated by trade with Pakistan, India and maybe some of the Central Asia republics, so bilateral trade agreements with them are key. For the EU and the US, Afghanistan as an LDC will automatically get duty free access in most areas under the “Everything but Arms” agreement and the GSP (Generalised System of Preferences) anyway. On these grounds, WTO membership wouldn’t be a big priority. Afghanistan would enter the WTO as a weak member, and the general pressure towards open borders is not necessarily what Afghanistan needs if it is trying to rebuild some consumer goods industries.
Conclusion
Without effective public intervention, certain people – the poorest and most vulnerable sections of society – can be excluded from, or denied access to public goods. Rights to such services have been enshrined in Afghanistan’s new constitution.
Why is it that the authors of this report continuously argue that State reduction is the only option to sound development, when in developing countries the government accounts for over 40% of the GDP?
Women would be able to participate only if sufficient will and resources are put in.
Although public services in many industrialised countries are thought to reliably provide universal services of acceptable quality (most of us have and are benefiting from public education, health and social services), when we look at the role of the State in developing countries, such as Afghanistan, we continue to argue that a strong State is the source of under-development, as it is incapable of overcoming weak capacity, inefficiency, corruption, poor leadership, poor accountability and weak legitimacy. Afghanistan’s government has its flaws, as it is coming out of more than two conflict-ridden decades. Capacity building and strengthening of State structures should be a priority.
As it is mentioned in the executive summary, “Afghanistan is at the crossroads” and “has the opportunity to break this vicious circle”.
The proposed model will not get the country back on the track of development. This strategy will only foster gross inequality, undoubtedly increase disparities between rich and poor, rural and urban centres, Kabul and the rest of the country, men and women.
At least for the first years, the government of Afghanistan should play a major role in defining the country’s future and be the backbone of development. Fifteen years from now, once Afghanistan has reached “acceptable” development standards, we can then think of implementing some of the strategies mentioned in the report.
ActionAid Afghanistan
House no. 74, Opposite Medina Bazar
Qala- e- Fateullah,Kabul
Phone: +93(0) 79345549
Email: smruti@actionaidafg.org