The South Asia Channel

Ashraf Ghani’s Afghanistan

Can an efficient government and an improved economy in Afghanistan do what twelve years of conflict and nation-building by international forces have not? Ashraf Ghani believes they can. Ghani, a highly educated, pro-Western, intellectual alternative to Afghanistan's age-old system of corruption and warlordism, served as Afghanistan's finance minister under President Hamid Karzai from 2002 to 2004 and subsequently refused to take on any further cabinet positions because he saw that Karzai was reluctant to go after corrupt power brokers who added to bad governance. In 2009, he campaigned and challenged Karzai alongside several other candidates in the presidential election, but flopped with only 3 percent of the votes. This time, however, he is one of the leading contenders in the ongoing presidential race to succeed Karzai. 

Ghani is currently locked in a head-to-head race with Abdullah Abdullah, another major contender, and although it remains to be seen whether Ghani will emerge victorious in next month's runoff, many of his significant accomplishments while serving under Karzai go unnoticed. 

As finance minister, Ghani undertook sweeping reforms, including issuing a new Afghan currency; introducing a country-wide budget; centralizing government revenue; adopting and institutionalizing a single treasury account; and computerizing the ministry's operations. Additionally, he reformed the country's tariff system and overhauled customs so that the government receives the bulk of the customs revenue, and adopted regular reporting to the Afghan cabinet as well as to Afghanistan's international partners as a tool of accountability. Ghani took tough measures against corruption and sacked corrupt officials, ignoring the risks of reprisal. In one example, Ghani even refused to pay the Afghan Defense Ministry after rightly questioning that the figures provided by the Defense Ministry about Afghan forces were overstated so as to claim extra funds. Ghani's tough stance against graft has prompted alarming calls from his political opposition that if he becomes president, half of the Afghan government employees will become unemployed.

Most importantly, as a major advocate of public investment, he devised a set of public programs to improve the lives of ordinary Afghans. One of his crowning achievements was the National Solidarity Program, a platform for rural development, which has funneled nearly half a billion dollars from World Bank to over 20,000 Afghan villages in block grants of $200 per family, and up to $60,000 per village for small-scale agricultural and infrastructure projects. Moreover, as finance minister, Ghani worked closely with Afghanistan's Ministry of Communication to ensure that telecom licenses were granted through a competitive bidding process. Consequently, the number of cell phones in Afghanistan jumped from a couple hundred in 2002 to over a million in 2005, and almost a decade later today, nearly 20 million Afghans have access to cell phones At the same time, private investment in the sector surpassed $200 million, turning the sector into one of the major revenue generation venue for Afghan government. It was because of some of these efforts that Ghani was recognized as the Best Finance Minister of Asia by Emerging Markets.

If Ghani wins in next month's runoff, his administration will undoubtedly inherit tough economic challenges. His single most important task would be to create a self-sustaining economy, an objective that Karzai's government has paid little attention to. Afghanistan has a nominal GDP of $19 billion, out of which at least 60 percent is foreign aid, another estimated 20 percent comes from opium cultivation, and the remaining 20 percent accounts for a legitimate economic activities. That means Afghanistan's real annual economic output stands at roughly $4 billion-a trifling number that, despite the $7 billion in international reserves, gives the country little buffer against possible economic shocks.

Against that backdrop, Ghani offers a vision and a viable framework that is defined by assets, threats and weaknesses in order to convalesce the Afghan economy and create a more capable and accountable government. It would seem that in Ghani's mind, unless there is a roadmap that sketches Afghanistan's future in the years ahead so that short- and medium-term actions can be taken today, there cannot be benchmarking. Ghani's goal is to articulate an agenda that would create at least one million jobs in the first couple years. The key to his plan, however, is to exploit and invest in the multitude of long-term economic advantages that Afghanistan has to offer.

First, Afghanistan sits on a very lucrative mineral and mining reserves, ostensibly valued at trillions of dollars, which could provide the basis of a sustainable economy but remains largely untapped. Additionally, the World Bank estimates that the copper mine at Aynak and iron ore project at Hajigak could easily generate $2 to $3 billion, with each deposit potentially delivering over half a billion dollars in government revenue in just a few years. 

Second, Afghanistan owns abundant water resources but it remains largely unused with regard to agriculture production, in generating hydropower, or in creating jobs. The country reportedly produces over 80 billion cubic meters of water a year but pumps the bulk of it to its neighbors, particularly Pakistan, without getting anything in return. Despite this free flow of water, estimates show that over 9 million Afghans are dealing with severe droughts and water shortages that have affected irrigation, agricultural production, and daily life. 

Nonetheless, water is going to become very valuable in Afghanistan in the years ahead as it provides the basis for hydropower, a critical element of development. For instance, the Amu River in northern Afghanistan alone has the potential to produce 10,000 megawatts of electricity a year. Recognizing this potential, Ghani sees water and energy as a critical driver in transforming not only Afghanistan, but also regional dynamics by connecting the energy markets in South Asia and Central Asia. In Ghani's words: "If 40 of the world's worst polluters come together to finance the hydropower in Afghanistan, the country could become a major exporter of electricity in the region within four to six years." 

Finally, given that Afghanistan has historically been an agrarian economy, Ghani's goal is to galvanize the country's nascent agriculture sector. Although illicit drugs currently constitute a large chunk of this sector of the economy, Ghani's objective of raising the income level of ordinary Afghans from $1 a day to $4 a day would make poppy cultivation nonsensical to the average Afghan farmer.  Ghani believes that no amount of investment in Afghan institutions would help to contain opium cultivation unless it is simultaneously accompanied by an agricultural development. But while, to many Afghans, ‘industry' merely means saffron, dried fruits, and carpets, the country actually holds many opportunities for large-scale foreign investments. Afghanistan needs more investments, not only in its extractive industry and farms, but also in its infrastructure. As future income levels rise, the demand for infrastructure is expected to soar. Importantly, Ghani realizes the vested interests of the private sector in stability and the important role it plays in fostering growth. Successful investment in infrastructure can be done by attracting private financing through effective public-private partnerships and building skills within the government to manage risk sharing.

Although these are achievable goals, the challenges in bringing them into fruition should not be underestimated. However, an effective, actionable, and inclusive government led by a person with a successful track record in governance can help Afghanistan realize its potential. Ashraf Ghani is a qualified sense of hope for Afghanistan and appears to be that man to lead the country into a better future. 

Javid Ahmad is a Program Coordinator for Asia at the German Marshall Fund of the United States. Follow him on Twitter: @ahmadjavid. The views expressed here are his own.

 

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