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Afghans bid to join world economy

Goods once prohibited by the hardline Taliban are now proudly displayed in Kabul
Goods once prohibited by the hardline Taliban are now proudly displayed in Kabul  

By Marianne Bray
CNN Hong Kong

KABUL, Afghanistan (CNN) -- In post-Taliban Kabul there is little of the sitting around on haunches that characterizes other parts of Asia, as Afghans bustle about their daily business.

Markets in Jad Nadir Pashtoon and in the Shari Nau area of Kabul are abuzz, touting VCRs, TVs, food and other once forbidden goods from Iran, Pakistan and Dubai.

Six months ago most shops were closed, but with the coming of spring and the setting up of an interim government full of hopes for peace and stability, money has started flowing back into the urban areas that the purist and once-ruling Taliban deemed sin cities.

But while Kabul's streets are full of life, Afghanistan still has little economy to speak of and with few figures available, gauging its size is almost impossible.

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Much of the landlocked country is in ruins reminiscent of the Middle Ages, the treasury is virtually empty, there is almost no industry, very little infrastructure and the government is still trying to set itself up.

Dependent on agriculture, the country's drought-stricken and war-ravaged lands are barely able to feed its 23 million impoverished people.

Adventure destination

This Afghanistan is a far cry from the dynamic land of the 1960s and 1970s, when the entrepreneurial Afghan spirit was evident, says Thomas Gouttierre, director of the Center for Afghanistan Studies in America.

At the crossroads of Central Asia, the ancient trade route was marked on the map as an adventure destination. Its cottage industry was famed -- with Afghan carpets, trinkets, jewelry and handicrafts winging their way across the world.

The country's fruits and nuts were also in demand, served up on platters in South Asia and the Persian Gulf.

But when the Russian communists invaded in 1979, followed by mujahideen infighting and the Taliban Islamic fervor of the mid 1990s, the economy took a backseat, sparking an exodus of businesspeople and their assets, and weighing on the government's coffers.

"The attention went to the politics and the war," says Raheem Yaseer, assistant director of the Center for Afghanistan Studies.

Over two decades, treasures and banks were looted, highways and dams destroyed, lands mined, investment came to a standstill, merchants lost interest in importing and three years of drought added to the agricultural nation's woes.

Afghanistan became one of the world's poorest and least developed nations, with the Asian Development Bank estimating per capita income at only $200.

Amid this chaos the black market thrived, with farmers turning to contraband opium to line their purses, and others smuggling goods from the Middle East to Pakistan, according to the Economist Intelligence Unit (EIU).

Epidemic of hope

After the Taliban were toppled last year, leaders of the interim and pro-Western government put reconstruction at the top of the agenda, estimating it would cost $45 billion to rebuild.

Under the Taliban, women were not allowed to work
Under the Taliban, women were not allowed to work  

After 23 years of occupation and civil war, a rare epidemic of hope broke out on the streets. In April peacekeepers had a hard time dealing with a curfew, as people didn't want to go home, says Yaseer.

Afghans who had fled with money returned, while relatives sent cash back to their homeland.

All this was bolstered by the promise of nearly $5 billion from a flurry of nations over five years.

Factories began returning to life in Kabul's industrial area, tenders were put out for telecoms and banks, a feasibility study was started on a gas pipeline, with plans afoot to redevelop the Kabul Hotel, Afghan officials say.

"There is a great deal of interest in telecoms as a profitable business and we are very much interested in foreign banks coming here," says the head of Afghanistan's central bank, Anwar Ahady.

One wealthy Afghan emigre has helped launch the Afghan Wireless Communications Company, a $50 million mobile phone operator, the EIU reports.

All these steps were part of a blueprint to open up the battered economy to attract capital and push it into the global economy, bolstered by a June move ratifying a new law to spur foreign investment.

Container-loads of fake notes

Each new Afghani note would be worth 1,000 old ones
Each new Afghani note would be worth 1,000 old ones  

Just last week, Afghanistan said it was shipping in new banknotes, to replace trillions of mostly fake notes so worthless they needed to be carried in sacks on people's backs.

The central bank will now know how much cash is circulating and will be able to boost or cut the supply of money to manage the economy, says Ahady.

Inflation too is under control, dropping from 25 percent in the first months of the new administration to one percent in June, adds Ahady, who is charged with unifying the shattered economy and connecting it to the global financial system.

The former U.S. university professor has hinted that private banking will be allowed and state banks may be privatized in a nation where banks have not changed since the 1940s and don't exist in 95 percent of the country.

Getting governors to pay up

Key too is centralizing the country's taxes, which at present comes from provincial customs and border houses. Many governors have been reluctant to pay the central government their dues.

Herat governor Ismail Khan paid $200,000 to the government, a small portion of his annual take of $60-$80 million
Herat governor Ismail Khan paid $200,000 to the government, a small portion of his annual take of $60-$80 million  

Sorting out this customs tax is a priority for the minister of finance, who has said he wants to raise revenue transparently and then remit expenditure and budgets across the nation. To this end he has already started visiting governors.

Because data is the life-blood of economists, it has become a priority to collect, especially since no figures have been gathered since 1996. Ahady, for one, hopes to have a national rollout within the next two years.

In its country report the EIU expects real GDP growth to be high in 2002-03, partly reflecting the low base for comparison.

'No golden age'

But Afghan officials have admitted that economic efforts will amount to little unless the country's devastated roads, electricity system and national water are rebuilt and people emerge beyond the grip of poverty.

While inroads are being made, not one big development has yet been started and the country has been beset by a string of assassinations and attacks over the past few months as warlords jockey for positions and Taliban and al Qaeda remnants fight back.

The United Nations has warned that this could be boom year for poppies
The United Nations has warned that this could be boom year for poppies  

"It's being constructed, not reconstructed as there's no golden age to go back to," says Gareth Price, an EIU editor.

While Afghan officials are more optimistic, saying the country does have some basic laws, and roads do exist, they admit the task is arduous with security and global support prerequisites for a fully functioning economy.

"We are rebuilding the infrastructure for an open economy, encouraging international investment so that we can reach a stage where we become part of the world economy," says Ahady.

He is counting on investors to identify which projects they are interested in, but knows that Afghans need to be educated to move their country forward.


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