Economics and finance, Trade and industry, International relations, National security | Asia, South Asia, The World

11 May 2016

President Ghani must seize all opportunities for transforming the economy of his war-torn country, Hemant Shivakumar writes.

For conflict-torn Afghanistan – a nation whose revenues depend heavily on foreign aid and a shadow economy of narcotics – its accession to the World Trade Organization (WTO) represents both a democratic milestone and an important opportunity to move towards economic self-sufficiency.

After nearly 11 years of negotiations, Kabul’s WTO membership in December 2015 is also a reflection of the few successes that multilateral institutions have had in Afghanistan’s nation-(re)building process.

Afghanistan continues to be the lowest-ranked South Asian country in the Ease of Doing Business Index, (below Bhutan, Nepal and Pakistan), and is beset with corruption issues, yet its new WTO status could provide political space for Ashraf Ghani’s government to reinforce fiscal measures and fix a lopsided economy.

With nearly 70 per cent of the nation’s labour force employed in agriculture, and its growing manufacturing and services sector reverse-linked to the agricultural economy as well, emphasis on agriculture will help: improving productivity, and diversifying agro-exports by moving away from narcotic crops like opium will make Afghanistan’s agricultural framework more robust.

Greater public-private partnerships in this sector could also yield results, like the Asian Development Bank’s recent initiatives in boosting horticulture and livestock practices in the nation. Similarly, its natural resource wealth (estimated to be nearly US$1 trillion) also attracts considerable interest from extractive industries in the USA, China and others. The Ministry of Mines could make use of this mining to boost national revenue and generate employment for the Afghanis.

Given the growing aspirations among Afghani youth – that President Ghani sought to address once elected – job creation in such sectors will generate political goodwill for the current government. As one of Kabul’s most reliable partners, India could be pressed into helping build capacity among Afghanis by extending scholarships for technical training and education to Afghanistan’s bureaucrats and youth, that would help with their country’s development.

The Afghan president will also be buoyed by ongoing developments with neighbours, such as Iran. As the Afghan Ministry of Foreign Affairs observed, development of strategic infrastructure around Iran’s Chabahar port through New Delhi’s US$150 million credit line will be favourable to landlocked Afghanistan, since its trade with New Delhi and other nations will receive a shot in the arm with an alternate route.

The republic’s optimism about the project was evident during the visit of Afghanistan’s CEO, Abdullah Abdullah, to Tehran, where he encouraged Afghani investors to explore trading through the Chabahar port.

Projects such as the Lapiz Lazuli corridor (connecting Afghanistan’s western Herat province to Turkey via road and rail) and the Asian Development Bank-funded five nations railway project (beginning in China and crossing Afghanistan before connecting to Iran) will diversify Kabul’s trading destinations, and will coincide with President Ghani’s vision of transforming Afghanistan into a connectivity hub.

However, Kabul might have little time to secure and turn the WTO welcome into an economic catalyst. The US Defence Secretary Ashton Carter warned of a serious reverse decline in security recently.

Growing concerns about Afghanistan’s preparedness to counter an advancing ISIS and the Taliban significantly threaten the emerging development narrative in Afghanistan. Relations with Islamabad – that President Ghani rightly prioritised at the beginning of his term – will therefore be central to Afghanistan’s post-WTO economic vision.

The recent thaw in Afghanistan-Pakistan relations during the Heart of Asia conference, and the ongoing Pakistani military offensive in Waziristan against militants near the Afghan border, have ensured that the beleaguered Afghani national armed forces are not overstretched. Considering bilateral aid commitments by donors such as the USA, Germany, Australia, Japan and India over the next few years, and with the USA likely to retain its 7000-odd forces in the NATO to support counter-terrorism operations in Afghanistan, Kabul can act on borrowed time to force its way to a strong economic narrative.

Despite Kabul’s suspicions about Pakistan, China’s lofty projects – such as the US$100 billion Silk Road Project and the US$46 billion Chinese-Pakistan Economic Corridor – offer considerable economic and political incentives to Islamabad to work closer with Afghanistan and maintain peace. This (and pressure from the USA) could also partly explain Pakistan’s efforts to lead peace talks with the Taliban.

Indian PM Narendra Modi’s recent missives to his counterpart in Pakistan are likely to have strengthened Pakistan’s motives to cooperate in regional economic projects like the TAPI pipeline – a project that Afghanistan’s President Ghani called a beacon of hope and stability for his country.

In the wake of Kabul’s WTO accession, the window of economic opportunity remains for Afghanistan to seize. Domestic suspicions towards engaging with Islamabad are growing in Kabul, and getting Pakistan and the international community – especially US-led military assistance – swiftly on its side will add muscle to President Ghani’s post-WTO plans.

Encouraging private investment and aid to agriculture could spur productivity and improve the agricultural framework. Further, Kabul can use the prospects that large-scale regional projects and the local mining industry generate to secure employment for young and educated Afghans.

In an ongoing struggle between the aspirations of a new young society in Afghanistan and the traditional jihadists who threaten to undermine the development narrative, all will hinge on the economic progress that President Ghani can extract.

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Shivakumar, H. (2016). Growing peace and prosperity - Policy Forum. [online] Policy Forum. Available at: