Revisioning the International Compact for Afghanistan

The Bonn Agreement, signed on December 5, 2001, provided the road map for the transformation of the Afghan state, culminating in the September 18, 2005 legislative elections. The landmark polls, which proceeded largely peacefully, have elected an Afghan Parliament for the first time in more than three decades. 1 Although the Bonn political process has made great strides toward facilitating Afghanistan ‘s transition to democracy, the costs and challenges associated with the reform agenda are immense and continue to spiral. With a narrow revenue base, Afghanistan will remain dependent on support from the international community for many years to come, not just to cover the capital costs associated with reconstruction and poverty reduction but also to underwrite core operating expenditures. Once funding for Coalition military operations is factored in, the cost of maintaining relative peace and stability in Afghanistan could exceed the $16-18 billion per year currently being spent—a prohibitively high figure in light of creeping donor fatigue. With the security situation in the country still volatile, regional posturing intensifying, and the United States signaling that troop withdrawals are imminent, Afghanistan’s transition remains fragile and uncertain. Senior Washington officials already quietly acknowledge that the reform process has failed to maintain the critical momentum that the Afghan government’s landmark report, Securing Afghanistan’s Future: Accomplishments and the Strategic Path Forward, appeared to generate when it was launched at the spring 2004 Berlin Donors Conference.

With the parliamentary elections marking an end to the Bonn political process, it is time to take stock of the process’ achievements and to assess whether it has indeed provided a firm foundation for a sustainable and sovereign Afghan state. 2 It is also time to chart a new course for the next phase of Afghanistan ‘s transition, through a post-Bonn compact. The political process that such a compact will set in motion, already dubbed in some quarters as the Kabul agenda, must feature an Afghan face and prioritize three overarching issues: (i) fostering good governance and enhancing the capacity of the state to deliver public goods, (ii) stimulating economic growth in the formal economy while limiting the space for illicit economic activity, and (iii) confronting Afghanistan’s security dilemma through the revitalization and refocusing of the security sector reform agenda. Addressing these issues will require both sustained international economic and military support and a renewed commitment by the Afghan government to pursue deep structural, public administration, and civil service reforms. Perhaps more than anything else, this Herculean effort will require time. State-building is a resource-, time-, and labor-intensive process in which Afghanistan is only at an intermediary stage.

National Assembly and Provincial Council Elections

The September 18, 2005 legislative elections marked a watershed in Afghanistan ‘s recent history (see Box 1). Coupled with the successful October 2004 presidential elections, the establishment of an elected lower house of Parliament ( Wolesi Jirga ) has seemingly signaled the return of civilian governance to Afghanistan after decades of conflict and authoritarian military rule. However, since many of the country’s most powerful military commanders were able to circumvent the electoral law and compete and win Parliamentary seats in the elections either directly or through proxies, it cannot be said that Parliament will be wholly composed of civilians. Furthermore, the establishment of the legislative branch will bring with it a whole new set of challenges, placing increasing demands and pressures on an already-weak central government. The election of Provincial Councils, which will facilitate the decentralization of certain powers and responsibilities, will also exert pressure on the executive to demonstrate provincial equity in the allocation of scarce national resources. Since the majority of development and operating funds are provided by external actors, this may be difficult.

Although the constitution was framed to create a powerful executive, the national assembly will provide an important check on executive power and can hold the President accountable for government policy on issues such as the national budget, economic reforms, and poverty reduction. Furthermore, issues such as national security, the presence of foreign troops on Afghan soil, and the privatization of state-owned enterprises will no longer be wholly determined by the international community. Making such decisions, the executive may find itself caught between the demands of a representative assembly and the divergent interests of its international partners.

Civilian oversight will have profound implications for the functioning of the state, the establishment of national development priorities, and the pace, shape, and sequencing of the ongoing reform program. Even though the assembly may be polarized along ethnic and political lines, its establishment will represent a major step forward in enhancing national ownership of the reconstruction and political process, as all documentation will have to be translated into both Dari and Pashto. Hitherto this has not been the case. Most important policy documents have been drafted in English, making them inaccessible both to the vast majority of the population and to a significant portion of President Karzai’s Cabinet.

The new national assembly is constitutionally mandated to approve Cabinet appointments and the passage of laws. Parliamentary scrutiny of executive decisions and appointments is an integral aspect of the democratic process. However, considering that the lawmaking process is already laborious and that there is a high probability of a fragmented and polarized assembly, its formation could severely bog down government decision-making. Delays to important reforms at such a critical juncture in Afghanistan ‘s political and economic transition could be very costly and damaging. The government will be vulnerable to factional blocks in the assembly that could manipulate the legislative process to derail the reform effort.

Reflections on the Bonn Process

Circumspect observers of the December 2001 Bonn Conference would have scarcely believed that within four years the country would have held a largely peaceful presidential election that would see one candidate prevail with a clear majority of the vote; a constitution promulgated, one of the most progressive in the Muslim world; and a complex legislative electoral process undertaken without major security incidents. Media reports about Afghanistan continue to present the familiar narrative of a stable Kabul, governed by a beleaguered central government, encircled by a lawless periphery that is dominated by voracious warlords. This picture, perhaps accurate in 2001 and 2002, has given way to a more nuanced situation today. Through the implementation of the Bonn process and complex bargaining that reaches down to the district and village level, the Karzai government has been able to extend its authority to most areas of the country and to curtail the overbearing influence of warlords in national level politics. The de facto veto that prominent warlords seemingly held over national policy from 2001-03 has largely been removed.

This is not to say that the threat of warlordism has receded. Politics at the local level are still highly militarized and factionalized, and regional commanders remain the dominant presence in the political and economic life of villages and districts across the country. But the Bonn process, buttressed by international military and development assistance, has positioned the government to challenge these local power dynamics. As Francesc Vendrell, the Special Representative of the European Union, notes, “the authority of the central government of Karzai, which was reduced to Kabul at the beginning, has extended virtually everywhere, even if his commands are not always followed.” 5

There is ample evidence of the achievements of Afghanistan ‘s reconstruction process. Over the past four years, 4 million Afghan refugees have repatriated from neighboring countries; 5 million children have returned to school, and 6,000 teachers have been trained; more than 60,000 former combatants have been demobilized; a new currency, the Afghani , was almost seamlessly introduced; and the economy grew by 28.6% in 2002-03, 15.7% in 2003-04, 7.5% in 2004-05 and is projected to grow at 8-9% over the coming decade. Yet, despite these advancements and the completion of the Bonn political process, poverty remains the norm and stability is elusive. The 2004 United Nations Development Program (UNDP) report for Afghanistan titled, Security with a Human Face — Challenges and Responsibilities illustrated the scale of the challenge that exists in the country. Afghanistan features some of the worst development indicators in the world, particularly in areas such as health, education, and per capita income, placing it at 173rd out of 178 nations on the UNDP Human Development Index. 6

Persistent insecurity, weak governance, and endemic corruption have engendered growing frustration among the Afghan people. In large parts of the country, Afghans have yet to see a peace dividend. For many, the most noticeable change from the Taliban period has been an increasingly perilous security situation and stifling corruption. Despite the influx of $10 billion in aid over the past two years and the deployment of 20,000 Coalition and 11,000 International Security Assistance Force (ISAF) soldiers, Afghanistan’s national infrastructure (roads, electricity, and water)—vital for sustaining economic growth—is in disrepair, a stubborn Taliban-led insurgency refuses to abate, and warlords continue to rule mini-fiefdoms with relative impunity.

Corruption and inefficient governance have become particularly potent disenchantments for the Afghan population. In 2004, the President established an Anti-Corruption Office to tackle the problem, but it has achieved few tangible results. Certain areas of government continue to lack the institutional and human capacity to deliver basic services to the population, and the majority of public finances are channeled toward the development of ever more complex and expensive institutions, even as their overall functions remain largely uncharted. Compounding the problem posed by this capacity deficit and the government’s weak fiscal position, chronically low civil service salaries (the average salary in the civil service is roughly $40 per month) have spurred corruption and clientelism. Numerous high-ranking government officials, up to the level of Cabinet minister, have been implicated in criminal activities, most notably the drug trade.

Growing public resentment has been reflected in the editorial pages of Afghan newspapers. Erada , an independent Afghan publication, has tellingly complained that “the government is doing nothing” to combat the problem of corruption. It went on to warn, “If it does not attend to these problems, the people will no longer trust it.” 7 The frustration of the Afghan people is palpable and, if not addressed, could erode confidence in the country’s democratic experiment. As the UN Special Representative of the Secretary-General in Afghanistan , Jean Arnault, has stated, “At the end of the day, many Afghans feel that the Bonn process has been disappointing.” 8

The State of the Reconstruction Process

Although gains have undoubtedly been made in the area of reconstruction, major challenges still exist in extending the authority of the central government outside of Kabul, in maintaining high levels of economic growth to offset a continued reliance on the illicit economy, and in delivering basic services to the poor. The achievements of the process have been largely predicated on the availability of external financial assistance, much of which is likely to decrease over time. Paradoxically, the more successful Afghanistan is in dealing with security issues, the less international support it is likely to receive for poverty reduction. The fiscal situation of the Afghan government is a pivotal problem that will need to be addressed, since less than 10% of national budget resources are currently covered by domestic financing. The Ministry of Finance has recently approved new tax policy measures that will improve the government’s revenue position, but rising pressure to inflate wages in line with market wage comparators could negate any gains made in stabilizing the country’s fiscal base.

Government operating costs are set to increase rapidly in the coming years, particularly when expenditures associated with the Afghan National Army (ANA), Afghan National Police (ANP), the operation of the Parliament and Provincial Councils, and the slated salary increase for teachers and healthcare workers 9 are fully incorporated into the budget. Only a small percentage of all national budget resources are currently funded through domestic revenue, and the willingness of donors to continue high levels of subsidies is diminishing. Without significant annual increases in domestic revenue levels, contingent on continued reforms of the customs and taxation system, the Afghan state will likely remain on a fiscally unsustainable path for up to a decade.

Underpinning the Afghan state building project is the belief that national-level institutions are best placed to deliver basic public goods to the population. The ineluctable outgrowth of this notion has been a movement to centralize state authority and service delivery functions, a trend that runs contrary to traditions and norms of governance in Afghanistan , characterized by highly decentralized and fragmented power structures and the precedence of localized support networks. Consistent with this trend, the bulk of international and local resources have been employed to strengthen and underwrite the operating costs of national institutions, with funds channeled to sub-national administrative bodies only to cover fixed non-productive costs (primarily wages). This approach not only ignores historical precedent but also the contemporary reality that many services are best delivered through local communities. Accordingly, there is an urgent need to enhance the capacity of local governance structures, both formal and informal, enabling them to partner with the central government in the delivery of services. Just as Parliament should scrutinize executive decisions, communities could enforce the accountability of local and provincial administration. However, with district elections now off the immediate political agenda, the development of a workable, cost-effective, and output-oriented model of service delivery remains a distant objective. The mindset in Kabul is that centralization of state authority should precede any consideration of decentralization. Perhaps centralization and decentralization should be viewed as complementary and mutually inclusive rather than antithetical. Since there is no easy solution to this dilemma, the overall architecture of the Afghan state and the way that services are delivered remain either unresolved or uncharted.

The record of the Afghan economy over the past four years can be described as mixed. Inflation decreased from 53% to 16% from 2002-05, but the rate of economic growth displayed a downward trend falling from 28.6% in 2002-03 to 7.5% in 2004-05. Although the growth rate is expected to stabilize in the range of 8-9% over the coming decade, it is vital that the government determine future sources of non-illicit growth and invest accordingly. Without robust incentive-laden alternative livelihood and rural development programming for farmers, the criminalized economy—whose main industry is drugs—will continue to provide the primary means of income enhancement. Since the formal taxable economy accounts for roughly 10% of all productivity, Afghanistan could easily slip into a low-growth-rate scenario that could further deprive the Afghan population of a peace dividend.

The distinction between opium GDP and non-opium GDP is somewhat artificial because the multiplier effect from growth in the illicit economy has a direct impact on the growth rate of the licit economy. This causal relationship was illustrated in Nangahar Province , where an estimated 70% reduction in opium production over the past year triggered a slump in household incomes that adversely impacted local economic growth, employment, and the rate of fixed capital formation. Given that foreign aid tends to be ineffective in creating and sustaining alternative livelihoods and that Afghanistan ‘s nascent private sector is still incapable of offsetting revenue lost from the drug trade, poppy eradication efforts will invariably stimulate a decline in total per capita income. Moreover, the opium trade is a major foreign currency earner, which helps to finance the current trade deficit, sitting at $1.7 billion. In its enthusiasm to cripple Afghanistan’s drug trade, the Afghan government and international community have overlooked the potential cost of success, notably the curtailment of growth in the licit economy (both formal and informal).

To address these problems, the government is developing an Afghan National Development Strategy (ANDS) focused on the attainment of broad-based growth as the key to curbing high rates of poverty. The ANDS will be a key driver of government policy, as it will likely be central to the current administration’s economic manifesto and become the locus for consensus-building with the new Parliament. For the ANDS to achieve its goals, it will need to tackle the central issue of how to enhance growth in the formal taxable economy as well as in the legal informal economy so the dividends of peace can be shared equitably by all citizens. Currently, no growth diagnostic has been conducted to inform areas of investment, so production sectors exhibiting potential comparative advantages in regional and world markets have not been identified. Improving the climate for investment is a prerequisite for economic growth and necessitates an increased focus on: (i) expanding security and stability, (ii) improving the regulatory framework, (iii) enhancing labor productivity, (iv) expanding access to productive infrastructure, (v) increasing access to commercial finance and insurance, and (vi) further rationalizing the taxation system.

Setting targets for an aggressive campaign against poverty, the Afghan government presented its development goals (based on the UN’s Millennium Development Goals) during the UN World Summit held in New York from September 14-16, 2005. Financing efforts to meet these targets remains wholly contingent on external support, the future of which appears increasingly uncertain. With ever more funds being sucked into security expenditures, any reduction in external assistance in the coming years will severely circumscribe the Afghan government’s ability to meet these targets and set a base line for service delivery.

Governance

The 2004 presidential elections gave President Karzai a popular mandate to remake the government. During the interim and transitional administrations, Karzai had been under tremendous pressure to remove prominent warlords and other figures involved in the illicit economy or implicated in human rights abuses. He did not disappoint, selecting what most observers agreed to be a largely clean Cabinet. He also succeeded in co-opting Ismail Khan and Rashid Dostum, two of the country’s most powerful warlords, coaxing them away from their regional strongholds through the offer of postings in the central government. Perhaps the most important change with the new Cabinet was the removal of Marshall Fahim as Defense Minister. In the eyes of many, Fahim had been one of the main impediments to reform in the defense sector and had surreptitiously obstructed the demilitarization process. The appointment of Rahim Wardak, a reform-minded professional soldier, opened the Defense Ministry to much-needed reforms and gave a boost to the demilitarization process.

Although Karzai’s purge of the Cabinet was significant, many observers felt that it did not go far enough. The removal of Fahim and the co-option of Dostum and Ismail Khan confirmed in the minds of many that the regional commanders were “paper tigers” whom the government, with a robust electoral mandate and international military and political support, could sideline. Rather than antagonize Afghanistan ‘s commanders, who continued to be heavily armed in spite of the UN-sponsored Disarmament, Demobilization, and Reintegration (DDR) program, Karzai retreated to a policy of accommodation that defined his leadership style during the interim and transitional administration periods. Karzai’s unwillingness to further challenge the status quo stemmed in part from a lack of international support for this policy course. Without a green light from the United States, which would be required to leverage its political and military muscle to back up the Kabul government, such an aggressive policy would be ill-advised.

The accommodationist approach, endorsed by the United States , is characterized by the formation and management of a complex network of relationships with commanders, tribal leaders, and other power brokers stretching down to the village level. Typifying this approach is the game of musical chairs played by the country’s provincial governors in 2005. In July alone, four provincial governors who had earned the ire of both the public and the central government due to their inadequate performance were shifted to the same post in other provinces rather than being removed. The pressing need to avoid alienating these power brokers and risking a violent reaction among their supporters appeared to supersede the imperative of good governance. It was persistent disagreements over the appointment of provincial governors that reportedly led to the resignation of Ali Jalali as Interior Minister shortly after the Parliamentary elections in September 2005. Jalali, a western-educated technocrat who had garnered the respect and support of the international donor community due to his reformist approach, was allegedly at odds with President Karzai over his willingness to appoint factional commanders to key government posts. The resignation of Jalali could serve as a serious setback to efforts to modernize and professionalize the Interior Ministry and police service.

The accommodationist stance could also be detected in the process used to vet candidates for the parliamentary elections. Afghanistan ‘s electoral law “prohibits anyone who commands or belongs to an unofficial military force or armed group from becoming a candidate.” 10 The independent Electoral Complaints Commission, formed to adjudicate all electoral complaints and challenges, had removed 45 candidates from the ballot in the run-up to the election, the majority due to their links with illegal armed groups. 11 Yet according to one estimate by officials organizing the election, 207 of the remaining 5,800 candidates maintained private armies. 12 The Afghan Independent Human Rights Commission, an independent body established by the Bonn Agreement and later reaffirmed by the Constitution to monitor the observation of human rights and promote their protection, goes a step further, asserting that more than 80% of the winning candidates in the provinces and 60% in Kabul maintained ties to armed groups. 13

Numerous Afghan and international observers have deplored the decision to allow these armed candidates to stand in the elections, referring to it as another missed opportunity to remove the rule of the gun from Afghan politics. These concerns were echoed in a public survey conducted in the run-up to the legislative elections by the Kabul-based Human Rights Research and Advocacy Consortium (HRRAC), a group of 15 Afghan and international nongovernmental organizations working in the country. Survey respondents were deeply concerned that local commanders, warlords, and war criminals would become ensconced in the Parliament. However, President Karzai argued that allowing a wide range of candidates to stand in the election, including those accused of human rights abuses, would help advance national reconciliation. 14 This laissez-faire approach to the vetting process was also driven by concerns that armed power brokers barred from the elections would oppose the central government, undermining the fragile network of disparate groups that Karzai had meticulously constructed.

The elections could serve to legitimize numerous actors who have demonstrated an interest in maintaining the weakness of the state. With Parliament mandated to review all legislation and Cabinet appointments, they will be endowed with significant authority to “impose their own interpretation of the laws and … promote impunity,” in the words of Ahmed Nader Nadery, a member of the Afghan Independent Human Rights Commission. 15 In the long-run, this could have the effect of eroding public confidence in the government and the wider democratic process.

Building Government Capacity and Combating Corruption

It is widely accepted that corruption, clientelism, and an excessive reliance on systems of patronage will remain a major challenge in Afghanistan for years to come. Current civil service salary levels are out of sync with the average cost of living in the country, creating an incentive for corruption and criminality. Corruption is even more acute outside of Kabul in the provincial and district administrations, where oversight and fiduciary management controls are less stringent. The United Nations Office on Drugs and Crime has noted that corruption, principally at the level of the provincial governors, has been one of the principal impediments to counter-narcotics activities. It has called for the adoption of a “zero tolerance” policy toward all corrupt public officials and military commanders implicated in the trade. The Government has been receptive to such calls for action. President Karzai, his chief economic adviser, and the Minister of Finance are strong advocates of clamping down on corruption, and the Civil Service Law clearly articulates a code of conduct for public employees. However, deeds as well as words will be needed to confront this debilitating problem. The government must demonstrate the political will to undertake a purge of corrupt officials, regardless of their status or political clout. Otherwise the international donors underwriting 50% of the operating budget may seek to apply more rigorous safeguards to their aid disbursements, further slowing the pace of reconstruction, or even reconsider their aid commitments altogether.

Extending the Authority of the Government

The election of the Provincial Councils and the prioritization of efforts to meet national poverty reduction targets have spurred initiatives to enhance the effectiveness of government outside Kabul . In a move to strengthen provincial administration, the central government recently began overhauling personnel structures in several provincial governors’ offices, replacing existing staff who lack educational and professional credentials with more highly qualified university graduates selected through a system of merit-based recruitment. Applying these reforms to all Afghan provinces should enhance the efficacy and accountability of subnational administration and facilitate a strong partnership with the elected Provincial Councils. Since all administrative structures of the state fall under the jurisdiction of the Ministry of Interior, advancing reforms within the ministry will be a precondition for effective administrative reforms at the subnational level.

Given the government’s continuing fiscal constraints, some observers have expressed concern that growing investment in provincial-level capacity has drawn vital funding away from the task of developing community-level governance structures. Many feel that investment in local governance may have even greater utility in expanding public service delivery than the implementation of reforms at the provincial level. It is not clear what institutional framework offers the optimal route for service delivery in the Afghan context; however, it is imperative that any emergent framework is bureaucratically lean and output-focused, ensuring that the bulk of funding is expended on basic services rather than the mechanisms established to deliver them.

The process of electing Provincial Councils is, in effect, a process of political decentralization. A new law will be passed in the coming months that will provide the councils with a clear—though narrow—set of responsibilities regarding reconstruction and development. Since the councils are responsible for electing one-third of the upper house of Parliament, there is likely to be mounting political pressure on the central government to allocate resources to integrated provincial development programs. However, since the central government has little discretion over the allocation of external resources, devising a system to equitably fund provincial programs will remain problematic.

Security

Insecurity remains one of the foremost challenges to Afghanistan ‘s democratic transition. As the UN Secretary-General’s August 2005 Report on the Situation in Afghanistan and its Implications for International Peace and Security stated, “ Afghanistan today is suffering from a level of insecurity, especially in the south and parts of the east, not seen since the departure of the Taliban.” 16At the core of Afghanistan ‘s security problem is the Taliban-led insurgency. In the past two years the Afghan government and the U.S.-led Coalition have on numerous occasions declared the demise of the Taliban movement. The premature nature of these claims was made evident in the first nine months of 2005, which saw a major upswing in insurgent activity. The violence left more than 1,200 dead, including 69 American soldiers, making it the deadliest year for the Coalition since 2001.

The Taliban has evolved considerably since its removal from power in the fall of 2001. Deterred from operating in large numbers due to superior Coalition technology and airpower, the insurgents function in small cadres under a loose command structure. Taliban operations primarily focus on soft targets such as aid workers, government employees, and Afghan citizens deemed to be collaborating with the government. For example, in June 2005 the Taliban began targeting mullahs that endorsed the Karzai government, killing six by the time of the parliamentary elections. The Taliban has become younger, recruiting men typically in the 18-25 age range from madrassas straddling the border with Pakistan . Profits from its involvement in the drug trade coupled with increased support from benefactors overseas (including al-Qaida) have enabled the Taliban to purchase more sophisticated weaponry, including Russian and Chinese surface-to-air missiles. The downing of an MH-47 helicopter carrying 16 U.S. personnel in June 2005 demonstrated the operational advantage that such weapons have conferred on the Taliban. 17

One of the more disturbing aspects of the recent upsurge of violence has been the apparent importation of tactics utilized by insurgents battling U.S. forces in Iraq . These include an increased use of improvised explosive devices (most often employed as roadside bombs), beheadings of U.S. collaborators, occasional kidnappings of Western aid workers, and (rarely) suicide attacks. Although much of this could likely be attributed to imitation, a perverse manifestation of the “CNN effect,” there has been speculation that contacts have been opened between the Afghan and Iraqi insurgents, perhaps facilitated by al-Qaida.

The Taliban operates openly in Pakistani territory, greatly complicating Afghan government and Coalition efforts to combat the group. In Pakistani cities like Quetta , the Taliban recruits soldiers and raises funds. There is strong evidence that elements of the Pakistani Directorate for Inter-Services Intelligence, the military, and even local police have provided clandestine assistance to the Taliban. 18 In a recent interview with the British Broadcasting Corporation (BBC), President Karzai called for a re-examination of current Coalition strategies for fighting terrorism. In a veiled reference to Pakistan , he declared “we have to go to the sources of it … where terrorists are trained.” 19

In September 2005, to deflect growing criticism from the Afghan government and the United States over continuing Taliban cross-border incursions, the Pakistani government deployed an additional 9,500 troops to the border region, bringing the total number of Pakistani troops in the area to 80,000. Although these troops have proven adept at combating al-Qaida and non-Pakistani militants (Chechens, Arabs, and Central Asians), they have been less effective in containing the Taliban. A Pas