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Growing Afghanistan’s Economy Requires Providing Alternative Opportunities to Opium Cultivation

Posted on the 21 February 2018 by Center For International Private Enterprise @CIPEglobal

The past year in Afghanistan has been marked by a continued deterioration of political, economic, and security conditions. Analysts estimate that a full one-third of the country is under Taliban control or is contested between insurgent and government forces, while the National Unity Government's (NUG's) ability to respond is hamstrung by constant political infighting. Compounding these issues is the presence of illicit economic networks that feed money, power, and influence to insurgent groups, criminal organizations, and corrupt government officials. Chief among these networks is Afghanistan's vast opium production and distribution trade. In November 2017, the United Nations Office on Drugs and Crime (UNODC) reported in its annual Afghanistan Opium Survey that potential opium production across the country increased by a whopping 87% since 2016, while the total area under opium poppy cultivation increased by 63%. The survey goes on to indicate that the record levels of opium poppy cultivation will create a number of challenges for the country and the region at large. Violence and political instability are bound to increase, not only due to greater levels of funding to the Taliban and other insurgent groups, but also because an expanded illicit economy fuels corruption and weakens governance.

In response to these concerns, U.S. and NATO forces began a major air offensive on November 21 against Taliban drug labs in Helmand province. Gen. John Nicholson, U.S. commander of NATO forces in Afghanistan, stated that these attacks were part of a new strategy targeting the sources of the Taliban's financial resources. However, most Afghanistan analysts remain highly skeptical that a military-centric counter-narcotics and eradication campaign will be effective. While a significant percentage of the Taliban's funding does come from the drug trade, it remains just one of many sources of funding. In a December 2017 article, the International Crisis Group's Senior Afghanistan Analyst, Borhan Osman, explored how the Taliban's involvement in the drug trade is actually fairly limited. Local commanders frequently levy taxes on opium production and distribution, but are not directly involved in the trade itself. Only a small number of commanders in major opium-producing hubs, such as Helmand and Uruzgan provinces, are involved in all stages of the process. It is therefore unclear that eliminating the Taliban's ability to process opium would bring it to its knees financially, or have any significant impact on its ability to continue as an insurgent movement. In many cases, previous counter-narcotics and eradication efforts have had the reverse effect. Large swathes of the Afghan population remain dependent on opium cultivation for their livelihoods. Therefore, destroying what is effectively their sole source of income fuels resentment against the Afghan government and drives them into the arms of the Taliban.

In addition to having a limited impact on insurgent activities, a military-centric counter-narcotics strategy ignores the underlying economic and political causes of increased opium production, effectively treating the symptom rather than the disease. In a November 2017 policy brief for the Afghanistan Research and Evaluation Unit (AREU), noted Afghanistan economic expert William Byrd outlined how increased opium production is a result of the declining control and influence of the Afghan government outside of Kabul. The NUG's failure to address severe governance deficiencies limits opportunities for Afghan farmers and citizens to find alternative ways of supporting themselves and their families. Inadequate infrastructure, limited access to markets and financial services, and scarce employment opportunities outside of Kabul have also driven many farmers to cultivate opium. Moreover, the rampant corruption and lack of accountability that pervade the Afghan government further encourage the growth of illicit economic networks. Many government officials profit heavily from the drug trade, in many instances more so than the Taliban, and therefore have no incentive to implement policies or take measures that encourage the development of a licit economy that can offer alternative livelihoods to opium production.

In order to effectively cut off the Taliban's economic resources and restrict the growth of illicit economic networks, the United States and the international community must pursue a strategy that addresses the root causes of the drug trade. This includes supporting the beleaguered NUG in cracking down on graft and corruption, and developing and implementing reforms that improve governance and incentivize economic development. It will also be vital to support the small-but-resilient lawful Afghan private sector. Afghan farmers and unskilled laborers will continue to turn to opium as a cash crop as long as no other viable options exist. Currently, there are few incentives for Afghans to participate in the licit economy. The World Bank's Doing Business 2018 report ranks Afghanistan 183 out 190 countries. Afghan businesspeople face a host of obstacles on an almost daily basis. Business registration and tax payment procedures are lengthy and cumbersome, and industrial parks frequently lack basic infrastructure needed to function, including electricity and running water. Afghans looking to export their products to Pakistan or Iran are faced with repeated border closures and corrupt customs officials, who in many cases benefit from the continued chaos and instability. In short, any strategy hoping to limit the Taliban's ability to sustain itself and break up illicit economic networks must address the economic governance deficiencies that allowed such networks to grow and take root in the first place.

In this context, initiatives such as CIPE's Provincial Business Agenda (PBA) program can play a key role in combating the drug trade and other illegal economic activity by supporting lawful economic growth and improving governance across Afghanistan. Conceived in 2014, the PBA program is a grassroots, private-sector-driven initiative to advocate the development and implementation of policies that improve the business climate and incentivize economic growth at the local and provincial level. Over the past three years, CIPE has supported the Afghan private sector in developing policy recommendations to overcome the barriers they face in starting or growing their businesses, and in engaging with national and provincial level government officials to advocate their enactment. Already, the PBA program has seen successes that help lay the groundwork for licit economic growth. CIPE's partners in the Afghan private sector have consistently pressured provincial governments to crack down on public sector corruption, simplify bureaucratic procedures, and improve basic infrastructure. Industrial parks in Jalalabad, Mazar-e-Sharif, and Kandahar, which previously were cut off from electric power grids, have all reported full electric connectivity, resulting in new factories and businesses opening that can provide more employment opportunities for both skilled and unskilled laborers. Thanks to simplified business registration procedures, more businesses have been able to officially register and pay taxes, boosting the government's ability to collect revenue, which in turn maximizes its ability to govern and effectively provide services to its constituents. The Afghan private sector has also been able to play a key role in advocating the implementation of the nascent Afghanistan-India air trade corridor, which opens new markets for Afghan products and further incentivizes licit economic growth. While economic development in Afghanistan can be a painstakingly slow process, advancements such as these are vital to addressing the root causes of illicit economic activity.

Of course, there is no "silver bullet" to successfully combat insurgent groups like the Taliban, especially in an environment as challenging as Afghanistan. There are multiple drivers of violence and political conflict in the country that cannot all be addressed by a single program or initiative. However, it is clear that any effective strategy must focus on treating the causes of the conflict, rather than the symptoms. Instead of seeking to eliminate the Taliban's ability to participate in the drug trade or other illicit economic networks, the United States and its partners in the international community should work with the Afghan people to address governance deficiencies that prevent licit economic growth and provide alternative opportunities to opium cultivation.

Vivek Shivaram is CIPE's Assistant Program Officer for South Asia.


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