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Afghanistan: Economic Incentives to Reduce Opium Production

Afghanistan: Economic Incentives and Development Initiatives to Reduce Opium Production

Afghanistan: Economic Incentives and Development Initiatives to Reduce Opium Production

Report Summary:

Feb 5, 2008 - This report discusses how to progressively reduce Afghanistan’s dependence on opium by development initiatives and shifting economic incentives toward sustainable legal livelihoods. It identifies responses that can counterbalance the economic advantages of opium.


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Facts:
- Afghanistan remains one of the poorest countries in the world and insecurity represents a major impediment to development.
- Afghanistan produces and trades more than 90 percent of the world’s illicit opium.
- The size of the opium economy is around 30 percent of licit GDP, and millions of Afghans benefit directly or indirectly from it.
- Drug economy thrives in remote or insecure areas which lack markets for other crops and alternative livelihoods.
- Production is concentrated in the South where the security situation is most acute.


Executive Summary
This report discusses how to progressively reduce Afghanistan’s dependence on opium – currently the country’s leading economic activity – by development initiatives and shifting economic incentives toward sustainable legal livelihoods. It identifies investments and policy and institutional measures to support development responses that can counterbalance the economic advantages of opium.

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Chapter 1: The Policy Context
This chapter gives a summary of Afghanistan’s development since the fall of the Taliban in 2001. The country has made real progress in re-establishing political institutions and economic growth has been high at an average of over 10 percent per year. However, Afghanistan remains one of the poorest countries in the world and insecurity represents a major impediment to development.

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Chapter 2: The Opium Economy
This chapter describes the scale and nature of the opium problem. Afghanistan produces and trades more than 90 percent of the world’s illicit opium. The size of the opium economy is around 30 percent of licit GDP, and millions of Afghans benefit directly or indirectly from it. The links and synergies between opium poppy and insecurity are becoming increasingly apparent; opium production is concentrated in five southern provinces where the security situation is most acute.

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Chapter 3: Increasing Value Added, Competitiveness and Productivity in Agriculture
This chapter examines the characteristics and growth potential of the farming economy and of Afghan farmers. It looks at current development interventions in agriculture and at opportunities for further engagement that can impact on the opium economy. Constraints to further opium-reducing development in agriculture, and recommendations going forward, are also discussed.

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Chapter 4: Fostering Enterprise Development
This chapter looks at the role of private enterprise and its growth potential, and at ways of adding value to labor. It discusses current interventions to support business and human resource development and the scope for scaling up and for new initiatives. Ways to overcome pressing doing business constraints, and further program interventions and related policy and institutional changes are also discussed.

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Chapter 5: Expanding Rural Infrastructure
This chapter looks at the role of access, safe water, and electricity in the rural economy. It reviews current programs and opportunities for scaling up. It also analyses constraints and needed actions, and gives a summary of expected growth, poverty reduction, and opium economy impacts.

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Chapter 6: Enhancing Governance
This chapter discusses the importance of good governance to the phasing out of opium. It looks at the roles and responsibilities of the different institutions at the village, district, and provincial level, and how they fit in with the unitary state mandated by the Constitution. The chapter also analyses the current development interventions in the sector and provide suggested interventions for additional engagement.

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Chapter 7: Cross-Cutting Counter-Narcotics Issues
This chapter looks at other policy and institutional aspects that cut across sectoral or sub-sectoral programs: Afghan leadership, aid effectiveness, “mainstreaming” of counter-narcotics objectives into development programs, and of long-term commitment versus short-term expediency. The chapter also looks at issues such as geographical balance, the security situation, the challenge of Helmand and the South, and the political economy constraints to counter-narcotics efforts.

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Chapter 8: Implementation
The chapter sets out criteria for prioritizing proposals. Six priority sets of interventions are discussed in detail and subsequent sections look at how to add further value to key ongoing programs. Key cross-cutting policy and institutional issues for further dialogue are summarized and a final section provides a brief overview of expected impacts on the opium economy.

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More Resources on Afghanistan
World Bank Program
Website maintained by the World Bank Office in Kabul, a launching pad to all information on World Bank activities in the country (strategy, projects, publications, etc.)
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Afghanistan Development Forum 2007
The fourth Afghanistan Development Forum (ADF) convened in Kabul on April 29-30, 2007.
Visit Page »
Development Data
A wide range of social and economic measures on Afghanistan, including links to the World Bank's most important online development databases.
Visit Page »
Analysis and Research
Compilation of all the World Bank's publications on Afghanistan, with 'search' options and links to analysis and research on other South Asian countries.
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World Bank Program in South Asia
Launching pad to all information on World Bank activities in Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.
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Request an interview
To interview the report's author e-mail South Asia media contact.
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