The slow pace of legal and regulatory reform is a recurring frustration across all sectors of the economy but is only one piece of a bigger puzzle.

Engineering sustainable economic growth depends on whether the Afghan government will be successful in creating a competent, functioning state; whether it can hold together Afghanistan’s many fractious tribes and ethnic groups; whether it can effectively sideline anti-government elements; and whether it can clamp down on criminal drug lords who destabilise the rural areas. And it has to do this all before donor funds and assistance dry up.

“I think we have reached a point where we have done a lot of ‘unseen’ work. Results will become far more visible in the next three years. In the first three-and-a-half years, we re-established services like education. In the next three we must focus on the quality of these services. We will also see the country’s security forces becoming more effective,” says the finance minister.

Despite the ongoing problems, no-one is predicting a slide into chaos. In fact, intelligence sources anticipated the current state of insecurity, after learning that mountain roads had become passable again following a harsh winter. Many people feel that, on balance, security has improved.

It is difficult to determine how welcome foreigners – especially military forces – are in Afghanistan, particularly in light of recent allegations of brutal abuse at a US-controlled Bagram detention centre in 2002. The widespread consensus among Afghanistan’s urban political and business elite is the hope that foreign troops to remain in the country for as long as is necessary to secure the peace. There even appears to be support for the US to build a base on Afghan territory.

But it is unclear who holds ultimate sway over the country’s restless under-classes, from which the foot soldiers of any popular uprising against foreign interests would be recruited. Anti-government agitators proved themselves adept at inflaming tensions when they triggered riots in response to a Newsweek article alleging desecration of the Koran by US interrogators.

Despite security threats from different sources – Pakistan-based foreign extremists, Afghan Taliban-sympathisers, drug barons and tribal war lords – the response is the same: the government has to extend economic development and prosperity to all parts of the country, providing appealing alternative livelihoods. It is a long-term project but one that the country is now better geared to achieve. “Afghanistan is shifting from a post 9-11 crisis mindset to a more developmental footing. This entails a more strategic, long-term approach to ensuring stability, and it is the only approach that is sustainable,” says Geoff Paton, second secretary political at the British Embassy in Kabul.

Shrewd moves

Against the odds, the country has fashioned a functioning, effective political system, a process that has included two Loya Jirga (a ‘grand council’ traditionally convened by Afghan leaders to decide important political matters), a new constitution and a generally successful presidential election. Parliamentary elections are slated for September.

President Hamid Karzai has shrewdly brought warlords and tribal leaders into government, removing them from their powerbases but not alienating them from the political system. His ministers have adopted sensible, development-friendly policies, and the national treasury adheres to strict fiscal constraints. Inflation and the exchange rate are by and large stable.

The progress has not gone unnoticed. The positive change has attracted trailblazing investors, with further deals worth $1bn – or just less than 20% of GDP – in the pipeline. “Of this, perhaps only 40%-50% might materialise, but it is indicative of the interest that is out there,” says Samuel Maimbo of the World Bank’s finance and private sector development team in Afghanistan.

The country is also responding in other areas. Civil society is growing in strength and voice and private media is expanding. Tolo TV, which is pushing the boundaries of cultural sensitivity by broadcasting such items as pop videos, is hugely popular and subversive in a positive way. Kabul, in particular, has adjusted easily and quickly to internationalisation. More and more women are appearing outdoors without being concealed under burqas.

Indeed, many inhabitants are quick to point out that back in the 1960s, the country was a centre of liberal mindedness. These Afghans see no conflict between Islam and democracy.

Problems of capacity

However, Afghanistan’s window of opportunity – foreign aid, international support and the people’s patience at home – will not last forever. Some in the aid community believe the government’s capacity problems are terminal. At the World Bank, for instance, there is obvious frustration.

“We have helped with drafting of laws but there is a bottleneck at the ministry of justice, where there is an absolute lack of capacity to vet new laws,” says Nancy Zhao, operations adviser at the World Bank’s mission in Afghanistan.

“Is there frustration at the slow pace of delivery? Is there assistance fatigue? Perhaps. But we need to keep in mind that an enormous amount has been achieved, particularly when considering where this country has come from. There is political stability and the country is fiscally responsible and has achieved monetary stability. A lot of projects have long lead times but are now under way, in sectors such as health and education,” says Allan Kelly, senior project implementation specialist at the Asian Development Bank in Afghanistan.

Mr Kelly gives short shrift to the idea that aid agencies may turn tail before the job is done. “A lot of aid partners have made multi-year commitments. [The ADB] committed to four years and we see ourselves here beyond that,” he insists.

Use of aid

Most agree the government’s overarching priorities – good governance, infrastructure development and investment in human capital – are sound. Problems arise at ministerial level, where objectives are unclear and poorly prioritised. The Afghan government is pushing for a greater proportion of donor aid to be passed through the national budget, arguing that this would ensure better co-ordination and would build capacity. Donors, however, fear the government’s lack of capacity would impede efficient and transparent use of the funds.

The government acknowledges the importance of aid and insists the investment in infrastructure and skills is what will secure the country’s future. “I sincerely hope the international community does not leave here too soon. If that happens before we have built the necessary institutional capacity and rehabilitated our infrastructure, we might not make it. It will take at least five to six years for us to fund the recurrent budget. Hopefully, by then, we will have rebuilt infrastructure,” says Mr Ahady.

For the moment, at least, the government benefits from the patience of the people and private sector businesses. “People have big expectations, which are natural, considering where Afghanistan has come from. But, although the process of reconstruction and economic development has been slow, the general thinking is still that things will get better,” says Najib Murshed, the Afghan commercial officer at the British Embassy in Kabul.

Parliamentary elections in September are the next step in political normalisation but also auger even slower progress. Policy co-ordination and effective implementation is at risk of falling victim to political


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