UK House of Lords International Relations and Defence Select Committee

Inquiry on the UK and Afghanistan

Written Evidence Submitted by the Drugs & (dis)order Research Project,

through BAAG (British and Irish Agencies Afghanistan Group)

Date: 7 September 2020

1. Introduction

1.1           ‘Drugs & (dis)order: building peacetime economies in the aftermath of war’ is a four-year Global Challenges Research Fund project generating new evidence on how to transform illicit drug economies into peace economies. Led by SOAS University of London it comprises: the Afghanistan Research and Evaluation Unit (AREU), Alcis, Christian Aid, Kachinland Research Centre (KRC), London School of Hygiene and Tropical Medicine (LSHTM), Organization for Sustainable Development and Research (OSDR), Oxford School of Global and Area Studies, University of Oxford, PositiveNegatives, Shan Herald Agency for News (SHAN), Universidad de los Andes, and Universidad Nacional de Colombia.

1.2           Since its formation in 1987, BAAG has grown to include most of the major British and Irish aid and development agencies working in Afghanistan. BAAG is a unique advocacy and networking agency which aims to support humanitarian and development programmes in Afghanistan.

2. Submission Topic

2.1 This written evidence is concerned with Question 6 of the call for evidence: What are Afghanistan’s principal economic sectors and trade relationships?

1. How can these be built upon to achieve the Sustainable Development Goals and create jobs and livelihoods?
2. To what extent are the illegal drugs trade and the grey economy still an important source of income?

      3.   Overview

3.1 Afghanistan is a landlocked country with a high degree of economic interdependence with its neighbours. Despite widespread poverty and chronic political and economic insecurity, Afghanistan undertakes a significant amount of annual trade with its neighbours and is geographically well-placed to benefit as a crossroads connecting West, Central and South Asian markets.

1. Its principal economic sectors are relatively low-value agricultural products and artisanal goods such as carpets.

2. The illicit drugs trade and other informal economic activities comprise a large share of the economy. Despite their status as illicit, they are vital to supporting economic and social systems which underpin Afghanistan’s progress towards the Sustainable Development Goals, particularly those related to jobs, livelihoods and poverty reduction.

3. Dependency on the drug economy and other illicit economies is unevenly spread across Afghanistan and has fluctuated geographically, adapting to external pressures, environmental change, conflict and market dynamics. Borderland regions, centres of production, processing and trafficking, have become key hubs in the drugs industry.

4. As such, policies with respect to illicit economies – from eradication, alternative livelihoods, public health to peacebuilding initiatives – must firstly take into account difficult trade-offs between illicit drug eradication, livelihoods/poverty reduction, and violence reduction/peacebuilding, especially because it is intertwined with the licit economy. Attempting to pursue all three goals simultaneously has proven ineffective in the past and is likely to upend the country’s already-fragile political settlements. Further, policies aiming to address drugs need to be cognizant of subnational variation and the regional dimensions of the ‘drugs problem’.

3.2 Afghanistan’s sizeable drug economies cannot be tackled primarily as a crime and security issue; they are a long-term, complex development issue.

1. Policy makers and donor agencies need to keep a focus on the illicit drug trade’s distributional impacts at different places and times, and ask 'who benefits?' and 'who loses?'

2. In Afghanistan, violence and coercion, or the threat of coercion, are central to the functioning of most trading networks, not just the drugs trade.  

3.3 Alternative approaches to war-to-peace transitions must start by recognising that individuals and communities surviving in drugs-affected environments face tough trade-offs. Policy makers need to engage honestly with these trade-offs, and on how to best achieve a lasting and equitable peace while strengthening the delivery of the SDGs. These trade-offs include:

1. Income vs. violence -- balancing the short-term income benefits of illicit crop cultivation with the longer-term costs of enduring the violence of eradication policies, law enforcement, and corruption,
2. Licit vs. illicit crops -- cultivation of illicit crops is typically preferred over cultivation of licit crops in areas which lack land security, and access to resources like water, credit, and reliable farm-to-market roads.
3. Violence of armed conflict vs. the ‘slow violence’ of drugs misuse -- although levels of outright armed conflict may reduce where illicit crops are grown (because it appears that armed fighting prevents illicit trade), local populations become more vulnerable to the social impact, criminal violence, anti-social behaviours, and community disruption from drugs misuse.
4. Opportunity and investments vs. inequality and insecurity -- in Afghan frontier towns like Ziranj in Nimroz, rapid accumulation linked to licit and illicit trade has been accompanied by investments in housing, public services, regional roads, and other related infrastructure. But ‘boom towns’ can be unruly, violent, and insecure places; and a new class of elites emerges, associated with large-scale corruption, land seizures, and rising inequalities.
5. Border security vs. borderland livelihoods -- Iran and Pakistan have both tightened their respective borders with Afghanistan, with significant negative consequences for local cross-border economies.   

Further information on these matters is detailed below.

4.  Economic Overview

Ranking 170th out of 189 countries on the Human Development Index, Afghanistan is one of the poorest countries in the world.[1] Despite experiencing continued economic growth and improvements in some development indicators such as maternal mortality and life expectancy since the fall of the Taliban in 2001, numerous challenges, notably growing insecurity and endemic corruption, continue to impede Afghanistan’s economic prospects. Over the past decade, Afghanistan has experienced significant economic slowdowns triggered by the withdrawal of international forces, declines in international aid, and chronic infighting amongst the country’s political elites.[2] These slowdowns have been compounded by the ongoing COVID-19 crisis, which has caused massive disruptions in international trade and is projected to shrink real GDP by between 5.5 and 7.4 percent in 2020.[3]

Economic Sectors and Trade Relationships

As a landlocked country bridging West, Central and South Asia, Afghanistan has served as an important trading crossroads for centuries. Since 2001, successive Afghan governments have sought to deepen trade with neighbouring countries and to drop existing barriers to trade, inter alia through the signing of regional trade agreements and significant investments in roads and other infrastructure. Afghanistan largest export is Pakistan, receiving approximately 40% of Afghanistan’s exports, while it imports most through Iran. India, China, and Turkey are also important trading partners.[4] In recent years, improving Afghanistan’s linkages with Central Asian countries has been a growing priority, notably through energy-focused initiatives such as the Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline, officially projected to become operational in 2021.[5] Afghanistan formally joined the WTO at the end of 2015.

Afghanistan’s economy is predominantly agricultural, with over 90 percent of manufacturing and the vast majority of exports dependent on this sector.[6] Although the country has an abundance of natural resources, including vast mineral deposits estimated to be worth over $1 trillion dollars, much of this wealth remains inaccessible due to poor security, weak legal frameworks and organisational capacity, and corruption.[7]

Afghanistan’s Illicit Economies

Many of Afghanistan’s economic activities are informal and operate in the shadow economy. Afghanistan remains the largest source of illicit opium in the world, producing between 80 and 90 percent of global supply.[8] The opium economy is estimated to be worth 6 to 11 percent of Afghanistan’s GDP, more than all officially recorded licit exports combined.[9] Hashish is also cultivated and trafficked in large quantities, and in recent years, synthetic drugs such as methamphetamines have appeared in the domestic illicit marketplace.

The illicit drug economy is of crucial importance in securing the livelihoods of a large number of Afghan communities. Recent estimates suggest that opium is cultivated in approximately a third of rural villages in Afghanistan[10], employing hundreds of thousands of Afghans with few other prospects. However, the indirect effects are much wider: the Afghan government estimates that three million Afghans benefit directly or indirectly from the drug economy.[11] The salience of the illicit drug economy is particularly acute in the country’s borderlands, in which a large proportion of economic activity is linked not only to poppy cultivation but also to trade and trafficking of both licit and illicit goods.

For many individual farmers, opium poppy cultivation constitutes part of a wider strategy to minimize their exposure to economic risks. Poppy-growing farmers often point to the greater potential for opium to generate profits compared to licit agricultural goods. Opium has a longer shelf life than most other produce and can be stored for five to seven years without losing all of its value, allowing families to use it as a form of savings. Furthermore, in areas where poppy-growing is tolerated by local authorities, it can be safer and more convenient to grow poppy as opposed to alternative goods, since farmers can sell to local intermediaries instead of traveling through insecure or difficult terrain to bring their goods to markets.[12] Finally, many communities in Afghanistan use opium for medicinal or other customary purposes, particularly remote areas with limited access to health services.

These realities encapsulate a chronic dilemma for Afghan policy makers: despite ongoing external pressure to curb the illicit drug economy and countless counter-narcotics initiatives by international donors, the illicit drug economy provides benefits to the poorest communities that few, if any, alternatives can match. Afghanistan’s progress towards the Sustainable Development Goals (SDGs) is underpinned to a large extent by illicit activities, despite illicit economies being largely ignored in SDG frameworks.[13] This is likely to become even more critical in the near future, given the severity of the Covid-19 downturn, which will likely push many more Afghans into the illicit economy to supplement precarious jobs and livelihoods. 

And yet, illicit economies often come with significant trade-offs. The drug trade is considered to be a significant source of income for the Taliban, estimated at approximately US$250-400 million per year -- though the figures and the degree of Taliban dependence on the drug economy has been disputed.[14] Other armed groups, both pro- and anti-government, have been implicated in the drug trade. Afghan government officials are also frequently linked to illicit activities. One account from a government-controlled area of Helmand found that farmers openly cultivated poppies under government protection, and profits from the opium trade were collected at the village level and passed upwards through multiple government bodies, including the local police, the district governor and police chief, provincial officials, senators and assembly members, and employees of Kabul-based oversight agencies.[15] These activities have contributed to widespread public frustration with high levels of corruption in the government, and undermined the government’s credibility in attempts to curb illicit activities. However, it should be acknowledged firstly, that the rents generated by drugs may play a role in consolidating political settlements and secondly, that illicit economies are not necessarily more violent than licit economies - rather, violence and coercion are central to the functioning of most trading networks.[16]

The Limitations of Counter-Narcotics Initiatives

Despite investing billions in counter-narcotics programs since 2001, the international community has repeatedly failed in its efforts to reduce opium cultivation in Afghanistan.

In the early and mid-2000s, counter-narcotics strategies predominantly emphasized interdiction and poppy eradication, including manual eradication by armed military units, over alternative livelihoods programs. Both of these policies had unintended negative effects. Interdiction efforts ended up mainly targeting low-level traders, allowing the drug trade to be concentrated in the hands of power-brokers with enough resources and connections to bribe or intimidate law enforcement officials.[17] Forced eradication programs were often deeply unpopular, prompting unrest and costing the government a great deal of legitimacy.[18] These grievances created favourable opportunities for the Taliban, who could offer protection to traffickers and opium producers.

While the government and donor community eventually recognized that eradication had to be accompanied by alternative livelihoods programs, these programmes were often poorly designed and haphazardly delivered. Cash-for-work programs designed to provide farmers with economic alternatives to cultivation often reached only a small number of residents affected by the opium ban, typically those living close to urban areas.[19] Programmes typically lasted for weeks or months, providing only short-term benefits. Programmes to distribute seeds, fertilizers, and other types of agricultural support were widely executed but largely failed to address structural deficiencies in the rural economy, particularly safe access to markets, effective storage of produce, supplementary non-farm income opportunities, and reliable micro-credit and insurance schemes to help farmers make investments in farm goods and cope with the effects of poor harvests.[20] Counter-narcotics strategies have also been undermined by a lack of coordination between different donors operating in Afghanistan and an absence of proper long-term monitoring and evaluation.[21]

Attempts to stem trading and transporting of illicit goods has proved similarly fruitless and counterproductive. A recent study in two provinces of Afghanistan found that tightened border restrictions along the Iranian and Pakistani borders had a deleterious effect on informal cross-border trade, prompting many young people to turn to drug and/or people smuggling trades due to a lack of alternatives.[22] State officials have little power to halt illicit activities of the country’s warlords and other elite powerbrokers, many of whom are able to use their positions and connections to circumvent nominal government controls.[23]

5.  Policy Recommendations

Afghanistan is facing a daunting economic downturn over the coming year. As a result of declining international engagement and funding, the illicit drugs economy has become more central to the economy and livelihoods.  Yet whilst this issue is so central to Afghanistan’s political economy, it has fallen off the policy agenda in recent years. The UK and other international donors can play a vital role in supporting Afghanistan through this crisis and helping to set it on a pathway to economic recovery. However, it is important that the Committee recognize the embeddedness of illicit economies in the Afghan context and support the implementation of measures in line with these realities.

5.1 Key Issues for Consideration

Peace Process and Transitions from War to Peace Economies

During the peace process currently underway, one of the issues for consideration will be how to grapple with the economic legacies of war. While illicit economies and the demobilization of armed actors that control licit and illicit trading networks will be an important issue in the upcoming talks, international donors should resist pressing for aggressive illicit drug eradication to be a condition of a peace settlement. Given the degree of economic dependence on illicit economies, attempts to integrate counternarcotics strategies into the peace agreement is likely to produce a backlash amongst the public and potentially undermine support for the peace process itself. Lessons from the peace process in Colombia demonstrate that the government’s ambitious alternative livelihoods programs have produced sub-par results and alienated large segments of the population.[24] The donor community’s emphasis should be on reducing violence, not prioritizing short-term counter-narcotics targets. There is also a need for the peace process to focus, not only on elite politics at the national level; the drug economy plays a crucial role in subnational politics, which in turn shapes national political settlements.

Illicit Economics and the Sustainable Development Goals

A large body of evidence suggests that, for many communities, illicit activities provide access to jobs and livelihoods in ways that are consistent with the advancement of many of the SDGs. Development strategies should take these realities into account and recognize that attempts to curb illicit activities may undermine progress towards these goals. Likewise, policy makers should avoid initiatives that stigmatize or stereotype marginalized communities engaged in illicit activities.

Engaging with Drugs-affected Borderlands Through Local Partnerships and a Political Economy Approach

Afghanistan’s political economy is shaped by strong centre-periphery tensions, which have often been exacerbated by international engagement in the country. Due to the difficult security situation, the vast majority of donor coordination is done in Kabul, which has often produced policies that are overly centralized and insufficiently attuned to the dynamics of borderland regions. This tendency has become more pronounced since the closure of the Provincial Reconstruction Teams and the gradual withdrawal of international forces since 2014. Donors should therefore renew efforts to establish local partnerships outside Kabul, particularly within borderland communities with limited representation in the centre. Investing in more decentralized and high quality data collection and establishing local partnerships with social and political organizations rooted in these areas can help overcome these deficiencies and produce better policies. Similarly, utilizing political economy frameworks when designing economic initiatives, including an understanding of elite bargains and local power dynamics, is of critical importance in designing policies that are likely to be successful.

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This submission was drafted by Jasmine Bhatia, with contributions from Jonathan Goodhand, Karen Brock, Jan Koehler, Louise Ball and Eric Gutierrez.

Received 8 September 2020

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