Ashraf Ghani: Rebuilding Afghanistan

There are few places in the world where the challenge of building security and prosperity is more pressing or more complex than in Afghanistan. The stakes are high and the difficulties immense. Ashraf Ghani, the country’s finance minister, outlines his priorities – and the role that the international community can play – to Oonagh Leighton

Ashraf Ghani works 17-hour days, seven days a week and has not had a weekend off for as long as he can remember. “Luckily I am married to a saint,” he says, chuckling.

Some people might consider Ghani himself a candidate for canonisation. Plucked from Washington in December 2001, where he was lead anthropologist at the World Bank, Ghani was initially appointed as chief adviser to Afghanistan’s president Hamid Karzai. Shortly afterwards he was thrust into office as the country’s finance minister. It is a position few would envy. “The challenges are enormous,” agrees Ghani, “but we need to move forward and demonstrate that there are indeed ways to move successfully out of conflict and achieve stability and prosperity.”

After two decades of conflict, Afghanistan’s economy has been ravaged. A prerequisite for economic prosperity is security. Arguably the most pressing issue is combating the country’s opium trade. “The emergence of a narco-mafia state is now a real possibility,” warns Ghani.

In war-torn Afghanistan opium trading has been able to flourish, controlled by provincial warlords. Business is booming. The United Nations estimates that narcotics sales account for more than 20% of the country’s GDP. The corruption this engenders is threatening to become all pervasive. “It is a threat to our very democracy,” says Ghani.

He is clear, though, that this is not a battle that Afghanistan can win alone. Control of the drugs trade is a responsibility and cost that should be shared with the international community. “Afghanistan should not be approached as a charity, but as an investment,” he says. “The security expenditure in Europe to contain flows of drugs should be costed, and then the benefits of investing in a security regime in Afghanistan should be considered in light of that. [The international community] needs to look at what kind of security is necessary to cut at the roots of the drug dealers.” One of the problems is that strong demand from the international drug market keeps opium prices high, making it a valuable industry in beleaguered Afghanistan.

Another expenditure that needs to be included in the cost equation is health expenditure. “That again should be entered into the costs to identify more clearly the benefits of containment,” says Ghani. “When these figures are put on the table they should be looked at from the perspective of benefiting Afghanistan, the region and the world. The international community needs to realize that an investment in Afghanistan is an investment in its own future.”

Time, however, is running out. “The window of opportunity is open now. Later, if the narco-mafia state is consolidated, we might not get that opportunity or, if we do, it will cost $125 billion, not $30 billion, to give the country a chance of lasting prosperity.”

Ghani’s present job is in stark contrast to his previous life as an academic. He obtained a PhD from Columbia University in New York and then taught for many years at Johns Hopkins University in Washington. But the quieter academic life seems a long way away now.

Aside from drugs, the administration is fighting on two other fronts: against terrorists and the remaining Taliban forces in the south; and against factionalism in the north, where warlords are fighting the idea of a centralized state. “The question of the Taliban is being attended to rapidly, and we are now moving our efforts to the question of good corporate governance. In particular we are focusing our attentions on Kandahar and the surrounding area. We have launched a number of initiatives there,” says Ghani.

One of them is a district rebuilding initiative. “This is the physical indication of the commitment of the government,” says Ghani. “Previously in the majority of our districts the government buildings were destroyed. We are now building a series of government complexes that will be adapted to the physical locales. These will include a community hall and a court of justice, all fitted out with modern communication equipment. In early November the government approved this, and we already have eight pilot projects underway.” “We also have a committee for the recruitment of officials, based on merit and ability,” says Ghani: “We want to create a climate of trust.”

Great strides have also been taken to introduce a measure of authority in the north of the country. “In the north we are working on a number of measures to improve security, including the demilitarization of Mazar, the second largest city in Afghanistan and key city in the north,” says Ghani. Several important changes have already been implemented. “We are merging the two army corps that existed separately in that city and we have replaced the governor with a man from the central government. All key civilian functionaries have also been replaced. It is a series of extensive measures,” he says.

Given the magnitude of the landmass in Afghanistan, the administration is working hard to strengthen the security forces. Ghani says that by October 2004, the country should have an 18,000-strong national police force and the government is working to speed up the pace of training these police. In addition there is a major effort underway to strengthen the judiciary.

“We must also see international cooperation on information – on naming and shaming. We need to have consistent cooperation between Interpol and the other intelligence services to provide evidence that is prosecutable in courts of law,” he says.

Providing a dual service of security and reconstruction are the provincial reconstruction teams. Operating across the country to provide assistance in the rebuilding of Afghanistan, the core staff of these teams are international, including personnel from the United States, Germany and New Zealand. Ghani says that the government is in talks with other Nato members about increasing the number of these teams.

But it is not just people that the country needs. It is also money. To date $5 billion has been committed by international donors. Ghani says that this figure needs to be closer to $30 billion, released over a five-year period. “Alongside the United Nations, the World Bank and other multilaterals, we are working on a detailed plan at the moment and the results of this will be out at the end of January. We will be looking at our funding needs and a realistic time period under which to work.”

On a per capita basis, the aid that Afghanistan has received so far is significantly less than that given to other post-conflict countries. “That is true,” says Ghani. “And unlike with those other countries the expectations of the international community have gone sky high in the wake of September 11. The money does not correspond to the words,” he says.

Despite this Ghani is encouraged by the amount of attention that the country is receiving. According to him, Iraq has not overshadowed the country’s needs. “Quite the opposite,” he says. “Afghanistan is a great example of how the multilateral, multipronged approach has worked and where you have Afghans in charge. Simultaneously the risks emanating from an unstable Afghanistan are really being grasped.” He adds: “To its credit, the United States has been revising its approach and is indicating there should be more resources forthcoming.”

An Afghan constitution has been drafted setting out a new political system and defining Islam’s role in the country. “We are fully committed to presidential elections and these should go ahead in 2004,” says Ghani. “They will be followed a year later by parliamentary elections. We are a transitional government, and legitimacy is the most important aspect of governance. We need to get the mandate for change.”

Ghani says that the IMF is recommending the country access funds through grants rather than loans. “The aim this year is to secure grants. In five years’ time we will then be in a position to take out loans on a large scale. But to do this we really must have in place the necessary infrastructure, human capital base and good governance to be able to participate fully in the global economy through loans and other instruments.”

Managing the money

To achieve a sustainable improvement in the livelihood of the Afghan people Ghani says that the country needs to see a doubling of GDP per capita every 10 years, extracted from the legal economy. “This would provide the domestic revenue base that would enable the government to meet the key expenses of health and education, which are critical to the formation of human capital,” he says. “We would also be able to take care of the excluded and the poor as part of a poverty reduction strategy.”

Creating a large middle class is very important for Ghani. “Central to our strategy is to look at the private sector. We are not one of those countries that wants to play the aid game,” he says.

The minister has already made remarkable progress in creating a working public finance system in the country. A recent IMF report (published in November 2003) described the success of fiscal reform in the country as “remarkable”. “That is a generous acknowledgment of the effort that we have undertaken in this area,” says Ghani. “We are living within a very tight fiscal system. Not a single cheque has been issued from the central bank without the capital being there to back it.”

He also wowed the international community with the speed and efficiency with which he introduced a new currency, the afghani, into the country. “There were two months of planning and two months of implementation. It was achieved in the shortest possible period of time,” he says. “The international community thought that it would take at least two years and that we would encounter serious difficulties. We have shown them that this was not the case.”

The treasury system has been fully computerized and a single treasury account is in the process of consolidation. “There will be only one government account. We are eliminating hundreds of other bank accounts belonging to ministers and provincial governors.” The country is also in the throes of re-establishing a working banking sector. “We have passed a new banking law,” he says, “and the central bank has been given the full mandate to manage and implement a monetary policy.

Private banks are beginning to open offices here and we are taking the state out of the banking system.”

The UK bank Standard Chartered and the National Bank of Pakistan have received banking licences. Ghani says that he expects at least 10 banks to be operating in the market by the end of 2004, the majority of which will be international. “By the end of 2003, I expect these banks to be active on the transfer of remittances and transactions as well as enabling the large expat community here to have bank accounts.”

“The private sector is really making money here,” says Ghani. “The telecom company Roshan (a consortium including Vivendi, Monaco Telecom, Alcatel and the Aga Khan Development Network) has invested here and demand for mobile phones is four times higher than forecast. Growth has been rapid. At the end of 2002 we saw a growth rate of 30% and the rate of growth for 2003 is projected at 20%. Admittedly this is coming from a low base, but nonetheless it is a significant figure,” he says.

According to Ghani, you can see the growth as you walk the streets of Afghanistan’s cities. “The main cities are booming. I remember when I came back at the end of 2001 they were virtually ghost towns. Entire quarters of the cities that were devastated are coming back. Now the amount of capital in the shops amounts to hundreds of millions of dollars.”

Weaning Afghanistan off opium

To combat the opium trade in the long term, the government must also concentrate on providing viable alternative job opportunities to the Afghans working in the industry. “We must work hard to provide an incentive and an alternative approach to livelihood,” says Ghani. A number of crop-substitution programmes are in place, although these remain costly and will take time to bed in. “A number of crops have emerged, through a process of trial and error, that are successfully competing with drugs. Saffron and black cumin are two of these. Their expansion and the underwriting of market opportunities for these crops, being calculated now, are extremely important.”

Credit arrangements must also be put in place to help reduce the reliance of Afghan workers on the poppy trade. “Drug dealers give advances in money and then come to collect the opium,” says Ghani. “We need to see the rapid expansion of a micro-credit financing facility. We are working with the multilaterals, including the World Bank, to develop this.”

Water also provides a key to unlocking the power of the opium traders. “We must look at the management of water,” says Ghani. “The poppy is a crop that is drought resistant. If we had water security it would allow us to make our case that there are alternative crops that will provide a sustainable livelihood. We need to work on providing the infrastructure to make this happen.”

Thailand provides a useful reference point, he says. “For Thailand it was really tourism that provided a sustainable answer to drug cultivation. We can begin planning for this. For us we must first look at security, but then in the medium-term to eco-tourism which could be an extremely important avenue for us.”

After five years of drought, Ghani says that benevolent weather conditions have seen a turnaround in horticulture with fruit and vegetables thriving. “We are seeing a lot of economic activity in this area,” he says. “Some of the key provinces border Pakistan and we have seen large number of Pakistanis coming to work in Afghanistan because the wages are so much higher.”

The government has also introduced a series of measures aimed at attracting investment and encouraging enterprise. These include liberalising trade laws, overhauling customs procedures and introducing tax reforms. “We are keen to signal to the private sector at home and abroad that we are open for business,” says Ghani.

In June 2003, the country entered the World Bank’s Miga (Multilateral Investment Guarantee Agency) programme. This membership allows Miga to provide political risk insurance for investments going into and out of Afghanistan as well as helping the country to attract investment. “A number of projects are under discussion, including the building of a major hotel complex.

To date the country has succeeded in attracting over $100 million in foreign direct investment. “We are expecting this figure to rise rapidly once we get to the critical sectors such as oil, gas, mining and cement. Then we will be dealing with substantial flows of investment,” says Ghani. A gas pipeline from Turkmenistan, which would provide useful transit fees, is again under discussion.

“A lot depends on security. We have hired the UK firm Crown Agents for procurement, the transfer of goods and services. They are one of the most reputable international companies and this move is totally unprecedented in most developing countries.”

Ghani emphasizes the importance of cooperation between Afghanistan and Pakistan. “For us this is a win-win situation,” he says. “We see ourselves as the land-bridge between central and south Asia. Fortunately my counterpart in Pakistan [Shaukat Aziz] has come to the same realization. I think that we have the agenda for an enormously productive partnership that would allow us both to grow our economies.”

Ghani’s long-term goal is to train and create a management team that will make him dispensable. “I will never return to the United States, but I would like to stay here and teach at the local university. There are so many things to do – from rebuilding my village to teaching the next generation.” For Ghani, it seems, and for his country, the challenges of rebuilding a nation are endless.