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Rebuilding Afghanistan from Scratch


Muhammad Ullah knows firsthand the vagaries of doing business in Afghanistan. Ullah runs a plastic shoe factory on the outskirts of Kabul. Every few hours the capital's power grid falters, bringing production at Ullah's Nawai Sadaqat Plastic plant to a halt. Each time that happens, Ullah wastes $33 in spoiled materials. That may not sound like much, but in Afghanistan it can mean the difference between making a profit and losing money. Now, with the Taliban gone, the roads are no longer as secure and Ullah is finding it harder to get his shoes, sandals, and slippers to customers in and around Kabul. Says the 31-year-old entrepreneur: "I want the government to take better care of industry."

It's a forlorn hope. For while Ullah and his neighbors at the Soviet-era Parkhai Sanati industrial estate show remarkable entrepreneurial spirit, theirs is a seriously sick country. More than two decades of war have destroyed much of Afghanistan's infrastructure: its roads, bridges, power plants, hospitals, and water mains. Money-changers have replaced bankers. The few phone lines usually ring busy. In Kabul, residents pump their own water, light their homes with flashlights, and warm themselves with cheap electric space heaters made in China.

Moreover, despite a great deal of optimistic talk about bringing Afghanistan into the 21st century, few sober-minded people believe such a feat possible any time soon. Even ministers of the new interim government scheduled to take power on Dec. 22 acknowledge that rebuilding the economy is a daunting job. The economic and educational policies of the theocratic Taliban regime didn't help. "We had textile factories run by priests who didn't know two plus two," says Abdul Sami Wali, an adviser to Finance Minister Hedayat Amin-Arsalan. "It will take at least 15 years to rebuild our economy."

With few ideas of their own, the nation's new leaders are dependent on the good offices of the international community--its billions in aid, its security forces, its legions of experts, and not least, its commitment to stick around. The new administration was cobbled together so quickly that it has yet to formulate coherent policy. While the new President, 47-year-old Hamid Karzai, was a deputy foreign minister in the Soviet-backed regime of the 1980s, he never considered himself a candidate for the top job, according to a prominent Afghan exile in India. Moreover, the leaders were picked for their ethnicity, not their ability to govern. "Of the government," says Masood Khalili, a senior adviser to the Northern Alliance, "only two may know administration. They're all politically oriented." Karzai's main task will be to keep the coalition stable for six months--until a loya jirga, or tribal council, meets to either reconfirm his regime or install a new one pending elections scheduled for 2004.

Afghanistan's untested leaders are faced with the prospect of rebuilding key national institutions from scratch. Consider the Central Bank of Afghanistan. What little reserves it had--probably only a few million dollars--were long ago spirited away by the Taliban. Sitting in his dimly lit Kabul office, the central bank president, Said Aallah Hashimi, acknowledges he has no idea how many units of the local currency, the afghani, are in circulation. As it is, there are two versions of the afghani: one issued by the Northern Alliance and printed in Russia, the other put out by the faction of Uzbeki warlord Rashid Dostum. Along with the afghani, Kabulis use U.S. dollars and Pakistani rupees to buy groceries.

Over at the Commerce Ministry, the new minister, Mustafa Kazimi, has some broad ideas--very broad. He favors free trade and giving firms from donor nations the first crack at plum investments. Asked what might stimulate some economic activity, he points to a long-discussed pipeline that would cross Afghanistan, bringing natural gas from Turkmenistan to Pakistan's coast and taxes to Kabul. With bandits infesting the countryside, the project is little more than a dream.

All of this is not to say the situation is hopeless. As Ullah, the footwear maker, demonstrates, the Afghans are remarkably resourceful. Take Sakhi Mohammad, proprietor of the Kabul Supermarket on Flower Street, one of the capital's few undamaged commercial thoroughfares. The moment he learned the capital was about to fill up with U.N. officials and aid workers, he managed to get his hands on the goods foreigners crave: King Edward cigars, Toblerone chocolate bars, Carr's crackers, Camembert cheese. Now he claims to ring up $350 in daily sales, five times what he did during Taliban times. "In the past, I didn't buy anything pricey," says Mohammad. "No one bought it."

To be sure, every aid mission is at first a gold rush that eventually fades away. But Mohammad and his ilk provide clues to what Afghanistan's economy could look like in a few years. The landlocked nation has been a trading crossroads for Central Asia since medieval times--and that hasn't changed. Each year, millions of dollars worth of smuggled cars, electronics, and textiles move through the country. Some say legitimizing and taxing the trade would provide the government with a steady revenue stream. But such a plan would require neighboring nations to lower tariffs on foreign goods--and that won't be so easy.

Before anyone can seriously contemplate rebuilding the economy, millions of Afghans must be fed and housed before the full onset of winter. The first step is securing the roads so aid can get through, especially Route A1, along which goods travel to and from Pakistan, Turkmenistan, and Iran. British forces, familiar with humanitarian missions, are expected to lead the effort. British troops have been charged with helping maintain law and order in Kabul. This is crucial; aid workers are predicting renewed fighting in the capital.

Establishing a financial system is another crucial first step. In the coming months and years, Afghanistan will be flooded with as much as $10 billion in aid; all that money needs to get to the right people and places. Another priority: rebuilding the agricultural sector, which employs much of the population and has been hammered by drought. Then, perhaps, the government can look for foreign investors to develop an inactive coal mine and six inactive gas fields, among other coal, gas, and mineral deposits. "If we could export our natural resources," says acting mines and industry minister Akram Ghiasi, "we could become a rich country."

Much depends on the international community. "Peace will pave the way for Afghanistan," says Commerce Minister Kazimi. "But we know peace is not enough." Indeed, if Afghanistan is to avoid reverting to its role as terror factory, it will need to rebuild--and fast. By Michael Shari in Kabul, with Manjeet Kripalani in New Delhi and Frederik Balfour in Islamabad


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