Policy Issues

Crosscutting Policy Issues

The promotion of regional cooperation could revive the historical importance of Afghanistan. Kabul might emerge once more as an international city, a melting pot and meeting point of traders and different cultures. Afghanistan could eventually play a major role in fostering the stability and economic prosperity of the entire region, extending from Iran to the People's Republic of China and India, and from the Central Asian Republics (CARs) to Pakistan.

Afghanistan is already reaping substantial revenues from fees for commercial aircraft flying over its territory, and these fees are expected to continue and increase. Surface transit trade through Afghanistan will also generate fees, as well as income from transportrelated services. However, transit fees should be set at reasonable levels to encourage transit trade through Afghanistan, particularly before its road infrastructure is fully rehabilitated, and revenue generation should not be the primary objective of these fees. Furthermore, better security guarantees are necessary, making transit visitor activities difficult in the short run, though they could be developed in the medium run starting with the safer areas.⁸⁸

Given the country's landlocked but strategic location, an open trading regime and regional cooperation should have many advantages for Afghanistan and its partners. Afghanistan has very few significant tariffs and food and goods are relatively inexpensive as a consequence. It is in its interest to maintain this system of low tariffs, as higher tariffs would largely not support domestic industries and would only result in higher costs for Afghani consumers. Furthermore, keeping an open system encourages neighbors to lower their tariffs over time (except in particularly justified categories), benefiting their economies and allowing them to take advantage of freer trade.

In the pre-war period, Afghanistan had significant exports of carpets and dried fruits like raisins, and such exports have continued and in some cases expanded through various channels, including carpet production in refugee camps, during the war. Thus, there are promising existing export channels which Afghanistan can exploit. There also appear to be good prospects for exports by air of certain fresh fruits, such as melons and grapes, to destinations such as the Middle East. Exports can be facilitated by the diaspora of expatriates and entrepreneurial networks in many of the countries of likely export destination. It is also very important that preferential access to exports from Afghanistan, offered by OECD countries, be maintained and to the maximum extent possible include Afghanistan's agricultural and agriculture-based exports.

Transit Trade Agreements ⁸⁹

As mentioned in Section I.5 above, the main transit trade agreement at present is with Pakistan, largely through the port of Karachi and Port Quasim. This agreement was established in 1965, but during 1994–96 the Pakistan authorities unilaterally banned several items from the eligible list; and since 1996, 18 items have been placed on the negative list. The ban was imposed because of concerns that a large part of these imports were being smuggled back into Pakistan.

Following a series of meetings since 1991 between the two countries, the issues of disagreement are expected to be resolved during 2003/04. Six of the banned items have recently been restored to the list and the time taken for processing and clearing procedures of transit goods has been reduced from 20 to 5 days. At the same time, it has been agreed that some categories of imports for which Afghanistan has little need and are clearly intended to be smuggled back into Pakistan will be eliminated from the eligible list. To reinforce this measure, it is expected that Afghanistan will levy punitive import tariffs on these goods. Both countries are committed to making substantial progress on lifting the ban on the remaining 12 restricted items at a meeting later in the year. In addition, agreement was reached, with the support of aid from Pakistan, that the Torkham (the railhead in Pakistan) to Jalalabad (in Afghanistan) road would be repaired and a new road parallel to the existing one would be constructed by early 2005.

A new transport agreement with Iran was signed in January 2003. Changes under the new agreement included lifting previous restrictions on the routes that could be used by Afghanistan trucks between the border and destination cities. In addition, Afghan truckers were allowed to buy Iranian fuel at the same subsidized price as Iranian truckers. Discussions on trade and transit agreements have been initiated with Kyrgyz Republic, Tajikistan, and Uzbekistan. In August 2003, a Memorandum of Understanding was signed by the Uzbek and Afghan authorities, and a draft agreement with Tajikistan is under discussion in order to establish mutually beneficial trade, transit, and railway development treaties.

In March 2003, Afghanistan and India signed a new preferential trade agreement replacing an earlier one that was little used because of the Taliban presence and strained relations between India and Pakistan. Under the new agreement, India has granted 50–100 percent tariff reductions on 38 export items from Afghanistan, and duty-free access has been given to India for eight tariff lines. In June 2002, preferential access to the European markets was obtained under the Everything But Arms agreement, and in January 2003, the United States granted Afghanistan GSP access to its domestic market. On April 10, 2003, Afghanistan applied for membership to the WTO.

Iran, India, and Afghanistan signed a Memorandum of Understanding in January 2003 to improve access to the Iranian port of Chabahar on the Indian Ocean, along the Chabahar-Malik-Zaranj- Delaram route into Afghanistan. Under this understanding, Iran will build a new transit route to connect Milak in the southeast of Iran to Zaranj inside Afghanistan including the Milak bridge over the Helmand river. For its part, India will build a new road connecting Zaranj to Delaram, which is on the main Herat-Kandahar road. These improvements will shorten the transit distance between Chabahar and Delaram by some 600–700 kilometers.

Also, India and Iran plan to build a railroad from Chabahar to the Iranian Central railway station on the railroad between Karachi and Tehran (and further west), and Iran will extend its railway to the port of Islam Qaleh. This will provide cheaper access to Chabahar and open up markets along the railroad and to Europe. In addition, Afghanistan was granted full access to the duty-free zone at the port of Chabahar. The Iranian authorities are also providing storage facilities and have permitted Afghan inspectors and trade representatives on-site. Port fees have been cut by 90 percent and warehousing and other charges by 50 percent; smaller cuts were granted for oil tankers.

Cross-Border Infrastructure

There is also a strong potential for regional cooperation in road transport and energy development.⁹⁰ Improved governance would remove corruption, which is a serious nontariff barrier to trade. Streamlining of customs and border procedures and improving the quality of information would foster regional trade. Regional cooperation in natural gas and/or natural gas-based power development and distribution has great potential. Iran and Turkmenistan are gas-rich, and the Kyrgyz Republic and Tajikistan have large hydroelectric potential. Pakistan may have a periodic power surplus. The possibilities for regional power trade include (i) the export of power from hydroelectric projects in Afghanistan; (ii) the resumption of exports of gas from Afghanistan; and (iii) exports of gas from Turkmenistan to India via Afghanistan and Pakistan and exports of power from Turkmenistan to Afghanistan. This Trans- Afghanistan Pipeline Initiative (TAPI) is a key regional cooperation project for which ADB is funding a feasibility study. This could eventually result in net revenues of $250 million per year to the Afghan government, but care must be taken to ensure that such benefits are realized in an agreed regulatory formula.

The same is true of the hydroelectricity potential. There is considerable scope for regional cooperation in water resource management, given that many rivers originate in the Afghan highlands and flow to neighboring countries. The headwater watersheds of the Indus and Amu Darya are located in the Northern highlands of Afghanistan. A beginning could be made with meteorological and hydrologic monitoring and data sharing.

The Joint Economic Commission between Pakistan and Afghanistan was reestablished in late August 2002, after a 10-year hiatus, following a meeting between the two countries' finance ministers. The ministers also discussed the Afghan Transit Trade Agreement (ATTA) and Pakistan's support in the establishment of banks, post offices and micro-credit facilities in Afghanistan.

The Economic Cooperation Organization (ECO – which comprises Iran, Pakistan, Afghanistan, Turkey as well as the 6 neighboring former Soviet Union countries: Azerbaijan, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan and Uzbekistan)29 set up a fund to help rebuild Afghanistan following a meeting in Turkey in mid-October 2002.

Gender

According to the UNDP Human Development Report 1995,⁹⁰ Afghanistan's gender disparity index⁹¹ was the lowest in the world. Since 1994, all of these indicators seem to have worsened. For example, gross primary school enrollment ratio for female pupils was 32 percent in 1995 but declined to virtually zero by 2000, while the ratio for male pupils also declined from 64 percent to 29 percent during the same period (see Appendix 3, "Economic and Social Statistics"). A 2002 UN report found that in the 1990s, women and girls continued to have restricted access to services and employment except in teaching, medicine (doctors) and government work, and their rights to movement and freedom of association were limited.⁹²

Most of the IDPs were women who did not have access to health services. One of the key gender issues is a significant disparity in the lives and expectations of urban and rural women, and there is an important role for education and cultural sensitivity in effecting change. The history of Afghan women's emancipation can be traced back to the 1920s: by the late 1970s, Afghan women enjoyed considerable freedom of movement, educational opportunities and a relatively wide range of career choices, but there were strong contrasts with the positions of rural and uneducated women. Perhaps the single biggest failure of past development efforts was the widening gap between the cultural outlook of the urban elite and that of the rural masses.⁹³ This gender bias appears to persist, particularly outside Kabul.

The experience of war and displacement has had a profound impact on Afghan women over the past 25 years. As a result of widowhood and displacement, more households are now headed by women, while the absence of men for long periods to fight led women to take on new areas of responsibility. In addition, exposure to refugee camp health care facilities, and to education and vocational skills training, has led to changed attitudes and aspirations. It is of critical importance that agencies do not ‘reinvent the wheel', but take care to build on existing foundations. Significant numbers of women both served or were employed in existing health services, even under the Taliban regime. Energy should be focused on scaling-up investment and training of personnel in this sector as well as others and on ensuring the widest possible coverage in rural areas. The same applies to education and the civil service.⁹⁴ All three sectors traditionally employed large numbers of women and, therefore, it is important to build upon the broad acceptability that exists for women working there. Above all, through the new constitution, Afghan women must be considered as equal citizens to men. This was the state of affairs nearly 40 years ago as well as in the currently operational constitution. According to Gross, unless women's rights are protected in the constitution, any civil code of lesser authority would eventually be inadequate (Gross, 2003).

Environment

One of the critical environmental problems of Afghanistan is massive deforestation and overgrazing, which could be aggravated by the return of the refugees, especially if their livelihoods cannot be restored quickly and they employ environmentally unsound practices. Extensive deforestation took place during the hostilities of the past 20 years.

Large-scale movements of population and livestock since the late 1970s have put severe pressure on the environment, increasing deforestation and encroachment on protected parklands. More than 90 percent of rural households use wood as a source of energy. More than 40 percent of urban households use charcoal as a source of energy.⁹⁵ Forest cover has declined from 3.4 percent of total land area in the 1970s to 2.6 percent in 1991, 2.1 percent in 2000, and to less than 2 percent now. Deforestation has caused a degradation of watersheds, soil erosion, and desertification. Land degradation has also been caused by land mines, reducing access to agricultural land and irrigation. The country's 40 million hectares of pasture cover remains under threat.

Urbanization in Kabul, Herat, Mazar-i-Sharif, and Kandahar are taking place in an uncontrolled fashion. This process is making it virtually impossible for municipalities to plan for and provide even the most fundamental management of drainage, protection of groundwater supply and quality, household and commercial wastewater management, piped water supply, air pollution control, and urban zoning or land-use planning.

Certain regions of the country were subjected to intensive attacks with chemical weapons during the war with the Soviet Union. Between 1979 and 1981, chemical attacks reportedly killed more than 3,000 people. However, there is no information available as to the persistence of toxins in soil, vegetation, and animal tissues.⁹⁶

A UNEP report (February 2003) found that the environmental situation in Afghanistan is even worse than had been expected. Satellite imagery has revealed that 99 percent of the wetlands have dried up since 1998. The Helmand River, the main tributary of the wetlands which drain 31 percent of Afghanistan's land area, has run as much as 98 percent below its annual average in recent years. Four years of drought have compounded the problems caused by uncoordinated management of the river basin's dams and irrigation schemes during two decades of conflict. In the absence of a stable source of water, much of the natural vegetation of the Sistan basin has died or been collected for fuel. This has contributed to soil erosion and significant movements of sand onto roads and into settlements and irrigated areas. In central Afghanistan, the UNEP team found the national waterfowl and flamingo sanctuaries at Dasht-e-Nawar and Ab-e-Estada were completely dry.

At the regional level, Afghanistan must work harder with direct neighbors on water, forest and desertification issues. The report concludes that the collapse of local and national forms of governance during Afghanistan's two decades of conflict has been one of the main contributors to the environmental decline. It has also destroyed infrastructure, hindered agricultural activity and driven people into cities that were already lacking the most basic public amenities. The droughts have compounded a situation of lowered water tables, dried up wetlands, denuded forests, eroded land and depleted wildlife populations. And with 1.5 million refugees expected to return this year, the pressure on natural resources and environmental services will increase further. With the restoration of national-level governance, the country has an historic opportunity to create environmental laws and policies and build the capacity for the sustainable management of natural resources.

Other environmental issues include toxic residues from chemical warfare, the use of agrochemicals, and the degradation of wetlands. The approach to preservation and enhancement of the environment must be based on local traditional knowledge and people's participation. People need to have choices and the means to take rational decisions that are environmentally friendly. The costs of environmental degradation and the benefits from environmental preservation have to be made transparent. An appropriate policy and incentive framework would ensure that individuals and communities could contribute to sustainable development. Mainstreaming environmental concerns in all sector development projects would help to prevent actions threatening the environment and to put appropriate mitigation measures in place.

At the central and provincial level, one serious institutional problem is the involvement of 6 ministries in the management of water resources: MAAH; MIWRE; MMI; MWP, MRRD and MUD. In particular, the division of responsibilities between MAAH and MIWRE is unclear and not properly institutionalized. Forestry legislation has been in draft form for years, awaiting the clarification of tenure and land use rights of local tribes in many parts of the country. The lack of a legal framework clarifying tenure, user rights and oversight responsibilities, combined with the collapse of government institutions, has led to resource rents being controlled by local elites. A natural resource policy unit should be established in MAAH to ensure that policies, legislation and regulations are harmonized across sub-sectors. On the other hand, environmental concerns should be addressed through the enactment of an Environment Protection Act. MIWRE should prepare action plans for implementing environmental policies and strategies.