Fears rise as Afghan aid dries up

The Milli Factory once made 1,500 pairs of boots a day for Afghan forces, paid for by the international coalition.

By Graham Bowley, NYT Global Edition, 31 Jan 2012

KABUL, Afghanistan — The anticipated withdrawal of most international forces is still two years away, but already Afghans who have depended on the decade-old foreign presence for their livelihoods are feeling tremors as the first troops leave and spending and aid money dries up. Many fear that the rumblings could be a harbinger of far worse things to come.

The withdrawal of tens of thousands of foreign troops and international aid workers — and the billions of dollars in aid they have brought to the country — has all the potential to undo the fragile progress Afghans have made under the international occupation and, some fear, even set off a new round of insecurity and civil unrest. So dependent is Afghanistan that in 2010, international assistance amounted to roughly 97 percent of the country’s gross domestic product, according to a commonly cited World Bank estimate.

That foreign money, and the end of the Taliban government, lured back Afghan refugees and moneyed entrepreneurs alike, and it has lifted important parts of the economy to unnatural highs.

“The investors, they are still trying to sell their properties to collect their cash money and move their families back abroad,” said Toryalai Babakarkhail, 45, a former brick kiln operator who now runs a small real estate business here.

Already real estate prices, salaries, store sales and factory orders are shrinking, leaving Afghans in nearly every quarter to wonder what will happen next — to them, their society and their economy.

At the Milli Factory, 150 men and a few women hammered, glued and bent over dimly lighted sewing machines on a recent afternoon. They once turned out 1,500 pairs of boots a day, exclusively for the Afghan security forces — light brown for the army, black for the police. But even those orders were paid for by the international coalition, and already they have stopped.

Farhad Safi, the company’s chief executive, said Milli had received no new boot orders for eight months. As the international coalition withdraws and Afghanistan is forced to pay for more of its own equipment, the government is buying Chinese and Pakistani boots — which are lower in quality but cost 15 percent less, Mr. Safi complained.

“These products we are producing are for our stocks,” he said.

Such a turnaround could reverse the fortunes of Milli and all those who work at the factory, where employees can earn $240 a month, a good salary here.

It could do the same for many other parts of the Afghan economy that flourished as about $54 billion in aid and military spending poured into Afghanistan over the past 10 years.

That money generated thousands of jobs for Afghans. It also produced a new elite in cities like Kabul, who clogged the streets with cars and created wealthy neighborhoods, like Ahmad Shah Baba Maina, a few miles to the east of Milli Factory, where electricity towers sprouted and six-floor apartment blocks rose amid the muddy hovels.

From a prefabricated tin shack on the edge of the neighborhood, Mr. Babakarkhail, the real estate broker, trades property to company directors, government ministers, members of Parliament and others in a class that has benefited from the infusion of foreign cash.

Outside his shack, a salt cart trundled past, pulled by a horse, its driver calling out through a loudspeaker — a reminder of how the neighborhood bridges the old Afghanistan and the new, and how easily the country could slide back.

Already, the housing bubble is deflating. A typical house normally costs $30,000 to $230,000 depending on size and location, but deals dried up and prices dropped by $10,000 to $50,000 last year as people worried about the pullout, though prices bounced back in December, Mr. Babakarkhail said.

The same tremors are being felt about 20 miles away on the icy hills north of Kabul, where Miraj Din, 48, who used to deliver food and firewood in a wheelbarrow, now manages Mumtaz’s Car Salesroom, selling imported cars to the country’s elite.

Last year, he sold about a dozen cars a month, but this year he is selling only one car a month as Afghans with enough money to buy these fancy vehicles delay their purchases or move their money abroad, he said.

Sixty cars, including a blood-red Mercedes-Benz and a gold 2006 Toyota with “Amarican” scrawled on its windscreen for $18,000 — one of the cheapest in the lot — gleamed in the sun.

“Now people think the 1980s and 1990s crisis will start again and people will fight,” Mr. Miraj said.

Fueled by reconstruction and defense assistance, total output for the Afghan economy, adjusted for inflation, has roughly doubled over the past nine years. Because of population growth, the increase in real gross domestic product per capita was about 50 percent.

But by 2018, on some assumptions, 90 percent of all that outside aid could be gone, the World Bank predicts.

The optimists in Kabul hope that Afghanistan’s decade-long progress will help it weather this decline — that the Afghan security forces, paid and trained until now by the international coalition, will be strong enough to keep the country secure and the Taliban at bay despite signs that the insurgency has strengthened, and that capital investments in infrastructure, including electricity, bridges, roads, new schools and clinics, could be a catalyst for private-sector enterprise.

But this rural country of 30 million people, where life expectancy is only about 45 years and infant mortality is among the highest in the world, will have to adjust slowly from the boom in services and construction to something more durable and modest.

With currently little export growth and scant large-scale manufacturing, some officials hope that there will be a renaissance in agriculture and regional trade or even a substitution effect from construction to manufacturing.

“Contractors currently dependent on work offered by foreigners will hopefully be able to use the skills they have learned and turn them to more productive activities, including, perhaps, for building businesses that could manufacture goods for sales abroad,” said Josephine Bassinette, the World Bank’s acting country director for Afghanistan.

As aid is withdrawn, the World Bank forecasts that growth could fall to 5 or 6 percent for the next few years. But the slowdown could be more severe if security worsens, if Afghans cannot maintain their new infrastructure or if the government fails to garner royalties from contracts for the country’s mineral wealth.

The government calculates that these mineral resources, including big copper, iron and other deposits in provinces like Logar to the east or Bamian in the heart of the country, will play a large role in Afghanistan’s post-transition future. But any delay in extracting the minerals, or sharing the wealth among average Afghans, would serve only to underscore the gap left in the economy as international spending is withdrawn.

“It is a bubble economy, and people will lose jobs when it deflates,” said Thomas Ruttig, co-director of the Afghanistan Analysts Network.

Standing on a stony forecourt beside a highway into Kabul, Ghulam Sarwar, 40, a stocky man with a thin mustache, fled the Taliban for Pakistan but returned to start a business renting out cranes and earth-moving equipment for $200 to $300 a day to the military bases and nongovernmental organizations in the capital.

His business depends directly on foreign spending, and he has few illusions about the future.

“The Afghans, they can’t build anything for themselves or they would have built these things long ago,” Mr. Sarwar said. “I have no expectation for the Afghans.”

No one knows when, but a painful slowdown seems to be coming to Afghanistan.

One barometer of economic confidence might be Mohammad Atta’s store on what Westerners call “Toilet Street” in downtown Kabul, where the windows show off faucets, basins and the Western-style toilets favored by foreigners.

In the construction boom of the past few years, Mr. Atta sold 50 Western-style porcelain toilets each day, he said, as modern hotels and guesthouses went up, but now he is selling 10 a day.

On a recent morning, two contractors entered his store to argue that they wanted a better water pump for the money they had paid, but Mr. Atta waved them away impatiently.

“Ten is not enough,” he said. He complained that the international coalition of the United States and its allies was leaving before it had finished its job of securing peace and fixing Afghanistan.

He held up his glass of tea. “They make a glass whole, and then they drop it and let it fall apart,” Mr. Atta said. “When they are here there is more demand, but when they leave it will change everything.”


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