Fiscal stability underpins all Afghan consolidation efforts. India and the US should help by making robust new investment commitments, says FRANK O'DONNEll
International war-weariness toward Afghanistan is highlighted by the accelerating drawdown of multilateral forces there. Several states have even indicated that they may end their military presence in Afghanistan before the end of 2014 and formal assumption of full security responsibilities by the Afghan National Army. A motivator for this withdrawal is electoral politics. The Obama administration is extremely cautious regarding new foreign commitments and the 2014 US midterm election, coinciding with the Afghanistan transition, will encourage the same external caution. 2014 will also mark national elections for another state crucial to Afghanistan's future, India — and here too politicians are similarly loathe to commit to the risky foreign endeavour that an expanded Indian security and economic presence in Afghanistan would entail. Thus for the US and India, as two of Afghanistan's most important partners, the transition period will compete with the internal myopia that characterises any election.
The long-term strategic consequences of this likely oversight threaten the gains made in Afghanistan. However, the economic stability of Afghanistan underpins its entire state consolidation efforts, and should be the focus of the US and India as the military drawdown continues. Afghanistan's economic and military security remains very much a work in progress. Analysts worry about the ability of the Afghan National Army to safeguard the country and retain coherence in the face of the pre-existing ethnopolitical allegiances of its soldiers. Significant areas of the country remain open to manoeuvres by destabilising groups such as the Taliban and Haqqani network. While relying on multilateral forces to secure broad swathes of its territory, the Afghan Government also depends on foreign funding streams to pay its bills.
This issue of external economic dependence is often overlooked, but is no less crucial to its future. Donor aid accounts for 95 per cent of Afghanistan's GDP, and international donations provide 90 per cent of its budget. Post-2014 multilateral donations will taper off, as contributor states feel they have done their part and that Afghanistan should now resolve its own problems.
This trajectory threatens grievous consequences for Afghanistan. A poorly financed central state will be unable to compete with warlords and insurgent groups, who are better funded by their external sponsors. Closer economic linkages of parts of the country with other states, rather than with the national economy, will undermine state consolidation efforts. Without the fiscal means to prosecute its own interests, Afghanistan or parts of it could easily fall into the strategic aegis of a neighbour state, or to infighting among regional competitors.
An economic surge is what is now needed. Afghanistan's international partners should make robust new investment commitments to development projects in the state, and scale up training of civilian officials in economic management. The target should be improving Afghanistan's revenue generative capacity, rather than helping it avoid immediate fiscal ruin on a contingency basis.
India is uniquely positioned to lead this effort. It is presently engaged in several major reconstruction projects and also engaged in a civilian official training programme, with calls from within Afghanistan for this to be diversified to include accountancy and managerial training. Having devoted around $2 billion to Afghanistan's development since 2001, India is clearly unafraid of taking a substantial economic stake in the future of a neighbour of critical strategic importance to it. As well as these direct investments, India has also taken the lead in successfully integrating Afghanistan into the South Asian Association for Regional Cooperation, and providing a preferential customs environment to encourage export of Afghan goods.
There is a debate within India regarding whether it should become more deeply involved in Afghanistan. These debates tend toward recommending caution, principally due to a perceived fear of extensive Indian activity in Afghanistan provoking increased destabilising actions from a nervous Pakistan. While this is indeed a risk to be managed, allowing it to justify continuing on Afghanistan's dangerous present trajectory is a greater danger.
(The author is a doctoral candidate at King's College london)