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Tokyo
– Afghan interim leader Hamid Karzai dropped a bombshell
at the International Conference on Reconstruction Assistance to
Afghanistan on January 21, but the media failed to pick it up.
While outlining his blueprint for a stable new government, Karzai
promised the meeting of donor nations: "Afghanistan will
assume responsibility for the foreign debt incurred by all previous
governments.'' U.S. Secretary of State Colin Powell nodded in
smug approval. Karzai's remark elicited a smile from US Treasury
Secretary Paul O'Neill, who was also part of the high-powered
American delegation to the aid meeting, a follow-up to the Bonn
conference on Afghanistan in December.
The
Tokyo conference fell short of U.N. Secretary General Kofi Annan's
goal of raising 10 billion USD over the next 5 years. The 61 donor
nations and the World Bank pledged USD 1.8 billion in fiscal 2002
as part of a USD 4.5 billion commitment over the next five years.
Much of this proposed package, however, has yet to be approved
by respective national parliaments, and much of that aid will
consist of goods and services and salaries for the nationals of
donor countries rather than outright cash grants. While the Tokyo
meeting was billed as a forum to discuss reconstruction of a war-devastated
land, Karzai's remarks suggest the core issue at hand was the
reintegration of Afghanistan into the global financial system
in order to repay its foreign debt. This giving only for the purpose
of getting was consistent with the irony of a conference held
in Tokyo's Pamir center, named after an Afghan mountain chain
claimed by Tajikistan in an age-old territorial dispute, and in
a host country where the word for king is pronounced "Osama."
Garbed
in a tailored silk suit and glib with technocratic jargon, Karzai
is the sort of Afghan that bankers can do business with. His natty
attire and fiscal conservatism are reminiscent of Carlos Menem,
and his strong-currency policies could prove to be as disastrous
for the Afghans as Menem's policies turned out to be for the Argentinians.
As has been the trend since the Cambodian and East Timor crises,
the Afghan conference sponsors stressed a shift in priorities
from humanitarian aid to ''institution-building'' – restructuring
of the Central Bank, making the currency convertible and close
monitoring of the civil service. The ministers of Western countries
extolled the virtues of accountability, transparency and cost-efficiency
with the zeal of mullahs (as if these values exist in Houston).
The dirt-poor Islamic republic is to be transformed into a shiny
new Utopia for foreign investors. In this ''vision'' – a word
repeated over and again by the donors – reopening schools was
seen as more important than food or medicine, since schools are
the necessary re-education camps to convert unkempt Islamic scholars
into clean-shaven model bookkeepers.
Karzai's
calculations, however, don't add up in the balance sheet. Afghanistan's
foreign debt last stood at USD 5.5 billion in 1990, the year that
major international lenders suspended further loans to the country,
according to the UN Commission on Trade and Development (UNCTAD).
That is nearly four times larger than the gross domestic product
(GDP) of 1.55 billion in 1999, the first year of a lingering drought
that has since withered the Afghan economy. If the outstanding
debt is divided on a per capita basis, every man, woman and child
carries an annual debt burden of USD 230, while the average individual
GDP in 1999 was USD 70 per year.
Making
annual interest payments of USD 115 million on this debt will
be difficult, to say the least, when more than half of Afghanistan's
22 million people subsist in absolute poverty and cannot afford
to eat minimally, much less pay taxes.
The
annual foreign debt service is about one-tenth of annual GDP,
unrealistically high for a society without an economic surplus.
For purposes of debt repayment, available sources of revenue are
few. Income tax will not be a factor for years to come, since
only civil servants earn salaries, and irregularly at that. Karzai's
main purpose for being in Tokyo was to plead for the cash needed
to hire civil servants, the politically acceptable method for
establishing a patronage system.
The
bulk of the landlocked country's estimated USD 680 million in
exports of grapes, pomegranates, carpets, goat hides and lapis
lazuli will not bring in much hard currency since most of the
product is sold to Pakistan, whose own currency has been depressed
due to a long recession.
Raising
tariffs on imports will impose a crushing burden on the Afghan
poor, who survive because of the cheapness of Pakistani wheat,
rice, cooking oil, diesel fuel, toilet paper and cloth. Karzai's
open hostility and ingratitude toward Pakistan at the conference
was, thus, shocking and provoked the Saudi representative to reaffirm
Pakistan's massive contribution to Afghan welfare, starting with
sanctuary and support for more than 2.4 million refugees.
The
Afghan government no longer has any national industries to privatize,
since all the hydroelectric power stations and its telephone system
were bombed by US warplanes. The only assets with potential market
value were summarized by Chris Patten, European Commissioner for
External Affairs: "Afghanistan has oil, gas and minerals, and
these will be attractive to foreign investors.'' A less than charitable
comment, considering this was supposed to be an humanitarian aid
conference.
Karzai
pledged to ban the cultivation of opium poppies, the income of
last resort for Afghanistan. Afghanistan will not be able to simply
print money. On the contrary, the country is being put under an
international trusteeship that aims to shrink the money supply
– mainly by taking it out of the hands of the poor.
To
prevent any tax revenues from being consumed by inflation and
to protect foreign investors, the Karzai government will peg the
national currency called the afghani to the US dollar. An Asian
Development Bank official explained at a press briefing that the
ADB, World Bank, United Nations and Islamic Development Bank are
forming a trusteeship to oversee the aid payments to the government
and control the currency. In other words, aid will be doled out
only if the Afghans obey the bankers' rules.
Afghanis
were minted by different governments, and these various notes
have differing real values in the marketplace. Still, the Afghani,
for all the confusion about its value, has served as an effective
medium of exchange since it is generally traded not against the
US dollar but with the Pakistani rupee, as nearly all trade is
with Pakistan.
If
the currency crises in Asia and Latin America serve as indicators,
the dollar peg and convertibility are likely to cause higher prices
for the poor and capital flight among the middle class (not to
mention foreign investors, who will trade afghanis for dollars
at the first signs of trouble). Convertibility is a recipe for
social suicide in an economy as weak as Afghanistan's, when even
Singapore and Hong Kong are having difficulty keeping up with
the strong dollar. Another problem is that the consumerist spending
of highly-paid foreigners and civil servants could rapidly widen
the economic gulf between rich and poor, as has happened in Cambodia.
The
economic disparities caused by a sudden influx of foreign aid
was, in fact, the original source of Afghanistan's long-term economic
and political crises. In the 1960s, King Zahir Shah opened the
isolated agrarian country to foreign aid projects. The disparity
between those who earned foreign dollars and the impoverished
majority led to unrest among the urban poor and student protests
. . . and eventually to the leftist coup of April 1978 and the
exile of the king, who took much of the borrowed money with him
to Rome.
The
pro-Soviet Babrak Karmal government introduced education for girls
and devalued the currency after overborrowing from abroad to invest
in ambitious construction projects. These rapid modernization
programs went against the traditional values of the rural population,
who form the demographic majority . . . and thus began the Afghan
mujahideen resistance to Soviet occupation.
Now
these failed reform programs of the past are to be resurrected
under the very same King!
Nearly
every speaker mentioned the ''20 years of civil war and three
years of drought'' as if the causes for Afghanistan's problems
are homegrown. Not a single delegate dared to mention the obvious:
That it was a co-chair of the donor conference, the United States
government, that destroyed the Afghan economy with weapons and
economic sanctions. The US provided the ordnance and explosives
that destroyed the factories, highways, tunnels, airports, television
station and gas fields that were built by the leftist governments.
This past autumn, American planes and missiles destroyed what
remained of Afghanistan's assets, including a telephone system
that was more modern than Pakistan's.
Addressing
the interim leader as ''General Karzai' ' – who was actually
just a minor warlord swept to power literally aboard a US helicopter
gunship – Colin Powell showed a keen interest in the proposed
National Army, Police Force and Intelligence Bureau for Afghanistan.
America's contribution to Afghanistan has always been weaponry,
and it seems that priority will not change if Powell carries out
the Bush promise that "America is in Afghanistan for the
long term.'' Powell pledged USD 296 million in aid to Afghanistan
in the next fiscal year, plus release of more than 200 million
in Afghan government funds seized by the US Treasury Department
– without the accrued interest, however. In contrast, the
United States has spent at least USD 4.5 billion since September
for the military action against Afghanistan.
It
is ethically unconscionable that Washington is now demanding debt
payment from the Afghan people for what they were robbed of by
America. With subtle signals, the Japanese hosts expressed some
unease with the American attempts to dominate the donor conference.
It is too early to determine whether Japan's persistent and peaceful
''Asian'' approach is mere window-dressing and logistical support
for a global bankers' regime or if it can ultimately save Afghanistan
from the catastrophic economic policies being imposed by Washington.
The level of applause in the conference room showed that many
of the delegates clearly favored the Japanese and Saudi approach
of providing civilian humanitarian assistance rather the US mindset
of waging war and making others pay for the damage . . . and then
having the gall to extract debt payments and natural resources
as quickly as possible.
If
the Bush team can gain the political momentum for for military
attacks on other countries, the reconstruction conferences in
Bonn and Tokyo could serve as a precedent for many more to come.
The Tokyo meeting ended on a chilling note when US Treasury Secretary
Paul O'Neill warned: ''I have no doubt that this process of pursuing
and defeating terrorists wherever they go – and rebuilding countries
– can be repeated again and again.''
Yoichi
Shimatsu, former editor of The Japan Times Weekly and journalism
lecturer at The University of Hong Kong, was based in Pakistan
over the summer and autumn to report on the Afghan war and Kashmir
dispute.
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