Sunday, January 6, 2008

Nobel laureate on solutions for Afghanistan

Edmund Phelps and Graciana del Castillo have an op-ed on Afghanistan;

The main sources of growth in the economy relate directly to the large presence of the international community and indirectly to the illicit drug economy. This does not offer any possibility of genuine economic development, and will never allow the country to get out of its aid dependency.

Is it possible to turn the entre­preneurial spirit of the Afghans away from producing drugs into lawful production such as cotton and textiles? Crop eradication – which often kills subsistence crops and pollutes water at the same time – has proved ineffective in controlling drug cultivation. It has proved to be a way to create huge profits for criminal and armed groups. It is likely to increase the power of the Taliban further.

The replacement of the illicit economy requires viable options. Both the US and the European Union assist their farmers through loan and price support programmes and other incentives. If donors want to “do good”, they should support a two-pronged economic reconstruction strategy.

First, donors should channel reconstruction aid through the budget to enable the government to provide subsidies or other incentives (such as price support programmes) to replace poppies with lawful crops such as cotton, which was produced in the past. The UK government is at present considering price support for Afghan farmers. Other donors should do the same.

Second, once production of lawful crops increases, donors should provide know-how, technical support and credit for the local industrialisation of such crops. At the same time, donors should open their markets through special preferential tariff treatment to light, labour-intensive manufactures from Afghanistan, including textiles.

Such a strategy – or any similar one producing and adding value to fruits, vegetables, grains, lavender or anything else that Afghans can produce – could help the country to stand on its own feet. By increasing dynamism and social inclusion this strategy would create a good economy. It would also be a way of establishing the legitimacy of the Afghan government and decreasing the attractiveness of the Taliban.

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