From ruin to resurrection, the rebuilding of Afghanistan

The developed world has pledged to rebuild Afghanistan. But, writes HAMISH McRAE, it is what it does with the money that is the problem.

The developed world plans to rebuild the shattered economy of Afghanistan and has just pledged $US1.8 billion ($4.2 billion) in the first year to this end, with a total of $US4.5 billion over the next few years.

That is nearly halfway to the United Nations target of $US10 billion - although the World Bank believes that $15 billion will eventually be needed. The task is to make sure that the money does not disappear down a black hole and that there is a viable economy that can sustain a decent standard of life for its people when the aid cheques run out.

Can it be done? Afghanistan ranks at or about the bottom of the world scale on most conventional measures of human endeavour. Life expectancy is 42.5 years, 25 out of every 100 children die before they are aged 5, 70 per cent of the population are undernourished and only a third of the adults can read and write.

It is, in that unpleasant expression so often used nowadays, a "failed state". If it can come right, that would be a wonderful demonstration to the world that out of catastrophe can come, if not triumph, at least a modicum of success.

But there are clear limits to what outsiders can achieve. Consider the money pledged: it is tiny by the standards of developed countries but enormous by the standards of Afghanistan.

The $4.5 billion, of which Britain's share is $288m, is less than the British taxpayer spent last year in eradicating foot-and-mouth disease. Put another way, Britain spent four times as much on the Dome as it is spending on Afghanistan.

But relative to the Afghan economy, the money is big. No reliable statistics for its GDP exist but it is probably about $20 billion a year. There are some 25 million people, but per capita income is only around $800, 20 per cent lower than in neighbouring Tajikistan and only half that of Pakistan. The aid flow will be more than 5 per cent of GDP per annum - and a lot more in the first year - which ought to be enough to make a material difference to the country's wellbeing.

But it has to be a lasting difference. Some day the cheques will dry up and the expensive consultants in their white Range Rovers will go back home. In any case these are proud, independent people who would not want to live off the meagre handouts of Western aid agencies.

It would be nice to think that the various Western "experts" from the World Bank and other agencies were going to be more successful at encouraging self-sustaining development here than they have been in, for example, most of Africa. But their track record is discouraging. Are there any reasons to suppose that, 10 years from now, Afghanistan will be seen as even a modest success?

I think there are. But it will be largely because of them, not us.

We know enough about economic development to realise that there are several necessary but insufficient conditions for success. For a start, there has to be physical safety. It is not just that wars are immensely destructive of wealth but conditions of lawlessness greatly raise the cost of any economic activity. There is no point trying to create a business if the proceeds are liable to be stolen; local people don't bother; and potential outside investors stay away.

It seems a reasonable assumption that there will be a period of reasonable order, or conditions where order is possible. That creates a climate where contracts can be made and enforced, where titles to land and property are respected and, therefore, where businesses can be allowed to develop.

Next, the basic physical infrastructure has to work adequately. If you have power cuts it becomes impossible to run the basic essentials of a modern economy, such as computers and faxes. Roads have to be passable in bad weather, the water has to be on, the airport has to be functioning, flights have to be affordable, and health care has to be adequate.

Again, there seems a reasonable possibility that most of this physical infrastructure will be fixed to an acceptable level in the next five years. There is also a reasonable possibility that living conditions will be sufficiently attractive to encourage skilled people to return to Afghanistan to run the infrastructure, something that is as important as basic reconstruction.

Next there has to be a functioning state, performing core services and able to collect taxes to pay for these. There has to be a functioning banking system, enabling and encouraging savings and lending in order to finance economic activity. This, too, looks set to happen.

So it is possible to be reasonably optimistic about these necessary conditions for economic recovery. These are problems that money and technical help can solve but, ultimately, whether the country is successful will turn on less easily generated - and less easily identified - qualities. These have to come from within.

On the face of it the country seems short of things (opium poppies aside) to sell to the rest of the world. There are some obvious possibilities, for example ecotourism and the export of traditional craft products. The economy will be supported, too, by emigrants' remittances and has, in the diaspora, a body of skills and contacts that could be of enormous help in the future. But all experience of successful economic development is that it is impossible to plan success. Instead you have to remove blockages to development, spot market signals that suggest that there is an opportunity, and then try to reinforce it.

The greatest reason for hope, though, is what has been happening in the past few weeks. Within a few days of the end of hostilities, there was a burst of economic activity. Shops opened, trading began. Despite extraordinarily difficult circumstances, the economy got going again. This is an enormously encouraging signal that, given half-decent governance, Afghanistan can do much better for its people over the next 20 years than it has over the past.

- INDEPENDENT

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