Economic Opportunities for Poor Afghan Farmers Key to Opium Fight, Says DFID-World Bank Report

Contacts

In Kabul: Abdul Raouf Zia (93) 702 80800

Azia@worldbank.org

In Washington: Erik Nora

(202) 458 4735

enora@worldbank.org

TOKYO, February 5, 2008 ─ Development solutions will be required to change economic incentives and wean Afghanistan's rural communities from dependence on opium production in the medium and long term, says a report released today by the UK’s Department for International Development (DFID) and the World Bank.

The report suggests there is much to be reaped from sustained investments in the rural agricultural economy and urges Afghanistan’s foreign community to shop locally and encourage local production.

According to the report, entitled Afghanistan: Economic Incentives and Development Initiatives to Reduce Opium Production, such interventions will comprise an essential component of Afghanistan’s broader counter-narcotics strategy, also including law enforcement, political and administrative actions, improving security, better governance, awareness-building, and demand reduction and treatment.

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 economic challenge of opium is overwhelmingly a rural one, argues the report: opium is the most valuable agricultural activity, and it provides income and employment for hundreds of thousands of Afghans.

Launched at a meeting of international donors and the Government of Afghanistan in Tokyo, the report says the drug economy thrives in remote or insecure areas where markets for other crops and alternative livelihoods are lacking. Today, production is increasingly concentrated in five southern provinces where the security situation is most acute. This makes it vital that alternatives to opium address the problems of these vulnerable rural farmers by supporting their access to land, credit, food security, and sustainable economic livelihoods.

The report suggests a development effort over several years which will put in place a critical mass of infrastructure, markets, and services that can spur sustainable growth. It is also essential, the report argues, to ensure security and support better governance and effective grassroots institutions. This will strengthen the relationship of responsibility and trust between rural people and their local and central government.

With these conditions in place, experience shows that reductions in opium poppy cultivation can be achieved. For example, in those parts of Badakhshan province where households are in close proximity to urban areas, with access to both agricultural commodity and labor markets, reductions in opium poppy cultivation have been achieved in a relatively short time.

The report underlines the importance of security and good governance. “Legal livelihoods can only be sustained under conditions of decent governance and security that allow the development of licit markets, the accumulation of assets, and the growth of normal economic activities,” saidAlastair Mckechnie, World Bank Country Director for Afghanistan. “A strong institutional framework needs to be built, based on the promising community institutions already set up by efforts like the National Solidarity Program.”

Six short-term interventions are suggested as priorities in the report:

1.       Accelerating rural development through community-based programs;

2.       Expanding arable agricultural land through irrigation;

3.       Increasing livestock to provide more livelihoods and assets for the poor;

4.       Creating opportunities for rural enterprise and business development;

5.       Encouraging international partners involved in protecting and rebuilding Afghanistan to buy and hire locally; and

6.       Exploiting potential opportunities for production and marketing of suitable industrial crops.

While recognizing that insurgency and conflict in some parts of the country narrow the scope for development, the report suggests possible ways forward, such as: maximizing local ownership and community engagement; working with local implementing partners and staff, preferably from the communities; ensuring that projects are at the top of local communities’ priorities; and removing “foreign badging” from projects. In the most insecure places like Helmand Province options are even more limited, but it may be possible to invest heavily in enclaves in and around cities; support labour-intensive public works; expand rural road coverage where the security situation permits; and promote investment in human capital, if necessary in educational institutions elsewhere. There should be no illusion however about prospects if conflict and insecurity continue at current levels.

Linking support to rural development with governance building can have a large impact on livelihoods and, in turn, on the opium economy. The report calls for scaling up and combining successful ongoing national programs like the National Rural Access Program and the National Solidarity Program (NSP) that have proven very effective in delivering investments in rural areas. It also proposes expanding the role of Community Development Councils (CDCs) set up as part of NSP as local development partners. This will help rural communities to build the physical and institutional infrastructure needed to support a shift toward commercial activity. Infrastructure is particularly critical. Currently, 108 out of Afghanistan’s 396 districts have no road access to their provincial capital.

The report identifies irrigation and livestock as prime areas for support. Afghanistan is an arid land where most agricultural production requires irrigation, making it essential for building livelihoods and helping farmers move to higher-value cropping. The report proposes a phased 10-year program for increased investments in the order of US$1.2 billion. Scaled-up support to livestock is also feasible, the report says, citing national programs underway to strengthen veterinary services and support small-scale initiatives in dairy and poultry.

The job and wealth creation impacts of rural enterprise development also are considerable. The report puts forward many recommendations that would help improve the business environment and enhance the impact of business support programs. These include better access by Afghan trucks to neighboring countries, pooled financing, scaling up Industrial Parks, improving export standards, and strengthening the Customs Service.

One immediate action that would reap rich rewards is local procurement by the foreign community. A worldwide study found that only 4-9 percent of the benefits of international peace-keeping budgets stay in the host country. The report urges all governments supporting the Afghanistan Compact to make firm commitments to sharply increase local procurement. The bulk of such procurement would be high-value agricultural produce, and much of it could be grown in opium-vulnerable areas.

Many areas of Afghanistan have potential for producing high-value horticultural, industrial, or export crops such as oilseeds, fruits and nuts, cotton, and vegetables. The report says an integrated production and market development program for such crops can yield huge benefits.

Finally, the report emphasizes that the progressive elimination of the opium economy in Afghanistan will come about through the creation of a web of good governance and incentives in favor of legal economic activities. All of this will take time, sustained commitment, and resources.

“Chasing quick fixes in the hope of rapid reduction of opium production creates illusions and undermines long-term impacts,” saidWilliam Byrd, World Bank Economist and co-author of the report.  “The dividend will be in the medium to long term, and will be reaped through consistent approaches, persistence in the face of short-term setbacks, and massive, coordinated, and sustained investments.”