First, the Financial Times reported on Feb. 25, 2008 ("Afghan Drug Body Hit By UK Funding Reversal") that "The country's narcotics economy has grown in strength in the six years since the overthrow of the Taliban regime, which had successfully banned poppy cultivation in 2000. Last year Afghanistan produced its biggest harvest, with output up 17 per cent on 2006. It has also moved into the lucrative business of refining raw opium into heroin inside its own borders. This week the International Monetary Fund said poppy production was worth $1bn to farmers. The value to the drug refiners and traffickers is far greater."
According to the IMF's Staff Report for the 2007 Article IV Consultation, issued Jan. 28, 2008:
Opium remains, by far, the largest cash crop in Afghanistan. Opium production has increased steadily from 185 metric tons in 2001 to 8,200 metric tons in 2007. As a result, Afghanistan has become the world’s largest opium producer, with its share of the total world supply increasing from 52 percent in 1995 to 93 percent in 2007. The increase in production has resulted in a decline in the farm-gate price of fresh opium at harvest time. Although opium prices declined in 2004–07, they were still three times higher than in 1994–2000. In 2007, about 81 percent of the opium production was located in the south and south-west regions of Afghanistan, where anti-government elements are most active.
The impact of opium cultivation on the economy has been substantial. About 12 percent of the population (or 3.3 million people) were involved in opium poppy cultivation during the 2007 season, with the farm-gate value of the opium harvest amounting to $1 billion (11 percent of projected licit GDP). The United Nations Office on Drugs and Crime estimates that the total value of the opium harvest (accruing to farmers, laboratory owners, and traffickers) was about $4 billion in 2007, compared with $2.7 billion in 2005.
According to the Financial Times, the Afghan anti-narcotics agency faces a funding crisis. They report that "The Afghan ministry set up to tackle the drugs trade is facing a staffing crisis after the UK, on the instructions of the Kabul government, withdrew funding for salaries. The best-educated workers at the fledgling ministry of counter-narcotics, which is intended to play a key role in reducing the country's poppy crop, have been looking for other jobs after pay for senior staff dropped from $1,500 (UKP762) to $200 a month. The ministry said 30 senior workers had left since November when pay was cut. One official, a senior aide to counter-narcotics minister General Khodaidad, said he could no longer afford the rent on his Kabul flat and was trying to find an information technology job in one of the NGOs in Kabul, which pay far more than government jobs. Other staff members claim to have received no pay since November. Britain, 'lead sponsor' of anti-drugs efforts in Afghanistan, withdrew its subsidy as part of a process designed to bring pay into line with other ministries."
Recently however the UK government and the World Bank released a joint report in which they estimate that eliminating Afghanistan's opium economy will take an investment of at least one billion UK pounds over a 20 year period. The Guardian reported on Feb. 6, 2008 ("Opium Economy Will Take 20 Years and UKP1BN to Remove") that "Afghanistan's opium economy will take up to 20 years to eradicate and require a UKP1bn investment from world leaders, according to a government study published yesterday. The 102-page report was welcomed by the international development secretary, Douglas Alexander, even though it contains some highly critical messages about the effectiveness of some of the aid programmes. Compiled by the Department of International Development and the World Bank, the analysis suggests at least an extra UKP1bn needs to be invested in irrigation, roads, alternative crops and rural development to attract farmers away from the lucrative and growing opium industry. Its conclusions came as the UN produced fresh figures on the opium trade. The UN's Office on Drugs and Crime ( UNODC ) believes this year's crop will be similar to, or slightly lower than, last year's record harvest. In 2007 Afghanistan had more land growing drugs than Colombia, Bolivia and Peru combined."
According to the Guardian, "Highlighting the lack of coordination in the current aid effort, the report warns: "The result of weak Afghan leadership and poor donor adherence ... will be some very messy and ill co-ordinated development activities. "In rural livelihood programmes for example some donors have agreed to consultations, but nevertheless finance programmes outside the budget with scant reference either to the government or agencies." It says less than a quarter of the total aid to Afghanistan currently goes through the Afghan national budget, and also criticises the military forces in Afghanistan for not sourcing goods and products from within Afghanistan. "The economic growth needed to displace the opium economy and the development of the necessary infrastructure and governance to support it will take at least one or two decades"."
The Guardian noted that "The report recommends investments of $550m ( UKP275m ) to boost rural enterprise development, and $400m for rural road planning, construction and maintenance. Overall, Afghan farmers need start-up assistance, matching investment grants, cost sharing market development and a commitment to deliver through community development councils with the aid itself seen as coming from the Afghan government, and not the true donor."
The report, Afghanistan: Economic Incentives and Development Initiatives to Reduce Opium Production, concludes:
There is an asymmetry between the political expectations of government and donors for rapid changes in the opium economy and the reality of the one to two decades that are realistically needed before the opium economy dwindles. Effective counter-narcotics efforts inevitably are a combination of economic development, the provision of social services, and better governance and the rule of law. This will take considerable time, massive and sustained financial commitment, and political vision and stamina.
