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Afghan Conflict Confirms Tie Between Security and Investment

January 29, 2008


In my discussions about Development-in-a-Box™, I have repeatedly stressed that development and security must advance hand-in-hand. Remove security and investment dries up. Remove investment and developing countries remain locked in poverty’s grip. One needs look no further than the conflict in Afghanistan to see the connection [“Sharp Drop in Afghan Private Investment,” by Fisnik Abrashi, Washington Post, 28 January 2008].


Private investment in Afghanistan dropped last year to $500 million — about half the amount invested in 2006 — due to the worsening security situation in the country, a business group said Monday. The Afghanistan Investment Support Agency said investment last year compared unfavorably to the $1 billion invested in 2006 and the $570 million invested in 2005. Security concerns, the targeting of businessmen by criminal gangs and ‘burdensome bureaucracy’ were among the key factors that caused the sharp drop, AISA said. ‘The targeting of businesses and businesspeople by criminal gangs for ransom has had the most profound impact on the morale of private entrepreneurs and, therefore, on private business and investment,’ the statement said. … The Afghanistan Investment Support Agency was established by the Afghan government in 2003 as an independent outlet for local and international investors. Since its creation, AISA has registered and supported over 11,300 private companies, including more than 1,200 foreign investments.”


Targeting businesses and their people has an impact on more than their morale. Couple a bad security environment with poor governance and you have a toxic mix for investment. Despite that, the Afghanis are hopeful that the Chinese hunger for resources will find it investing in the country even with the current security situation.


Despite the sharp drop last year, AISA believes investments will rise in 2008 to more than $1 billion, in anticipation of a planned investment by a Chinese company, China Metallurgical Group, in a copper mine south of Kabul.”


Abrashi notes that 2007 was not a good one in Afghanistan.


Last year was Afghanistan’s most violent since the ouster of the Taliban in the U.S.-led invasion in 2001. More than 6,500 people — mostly militants — died as a result, according to an Associated Press count of figures provided by local and international officials. [A recent] clash between police and the Taliban in the Dihrawud district of southern Uruzgan province left eight militants dead and three officers wounded. … The country has also been affected by record-breaking opium production, which has had a corrupting influence on local officials and provides funds for the Taliban insurgency. Kidnappings for ransom — mostly of Afghans — are on the rise in the country.”


Investment is critical in a war torn country like Afghanistan, which makes security critical as well. Without investment, jobs will remain scarce and the best paying option for most Afghanis will continue to be growing opium poppies. An economy primarily dependent on the illegal drug trade will ensure that Afghanistan remains a hotbed of insurgency and strife. Support from the local populace is critical, but unless you show them hope of a better future, they will continue to choose what they know best. It’s a cruel circle that must be broken. The fact that powerful and well-armed warlords run much of the country (and have their hands deeps into the opium poppy trade) complicates the situation immensely. Nothing happens in the territories they control without their knowledge. They, too, must be convinced that their future is best invested in legitimate business opportunities rather than in the illicit drug trade and that helping secure the peace is critical to that future.

Rational argument, however, does not always work. The current situation in Kenya is a good example of people doing things for emotional rather than rational reasons [“Having Driven Out Business, Kenyan Town Faces Consequences,” by Stephanie McCrummen, Washington Post, 28 January 2008].


Three weeks after burning down the old Kimwa Grand Hotel here, many of the admitted arsonists returned to its charred remains, scavenging sheets of scrap metal, doors and wires. Many did so proudly, even triumphantly, offering an explanation now familiar in this city of broken windows and flowering trees: The business was owned by a supporter of President Mwai Kibaki, whom many here accuse of stealing the Dec. 27 election. ‘We have to resort to this to send a message to Kibaki!’ said Humphries Odongo, hauling off a share of metal. But there was another reason he was picking through the ruins. With his city half-wrecked and food prices skyrocketing, Odongo said he hoped to sell the scraps so he could eat.”


No one could rationally argue that destroying businesses and putting thousands of people out of work in a country desperate for jobs is a smart thing to do. But as numerous studies have shown, emotions (personal and national) cause people to do irrational things to satisfy an emotional need. Some of the perpetrators of destruction in Kenya may have been people who had no job and, therefore, felt that attacking businesses couldn’t hurt them. They were wrong. The ripple effect from the destruction and looting hits everyone hard.


It took just a few days of window-smashing, rock-throwing, car-burning fury to drive most members of Kibaki’s tribe, the Kikuyu, out of this opposition stronghold on the edge of Lake Victoria in western Kenya. The riots and looting were part of a wave of violence that followed the disputed election, plunging Kenya into possibly its worst political crisis since independence. But people in Kisumu say they were also venting frustrations with what they consider to be an economic imbalance between themselves and their Kikuyu neighbors, widely perceived across Kenya to be part of a privileged political class. To emphasize that their motives were economic as well as ethnic, Odongo and some of the other looters pointed out that they had also torched several Indian-owned businesses, including a supermarket that was one of the largest employers in Kisumu but whose owner was accused of paying substandard wages. Now, however, people are facing the consequences of driving out the neighbors and business owners they resented: rising unemployment, food shortages and skyrocketing prices. The local chamber of commerce estimates that 5,000 jobs have been lost so far. The damage reflects the larger story across much of Kenya, whose promising economy has been devastated by the post-election crisis.”


McCrummen reports that up to a half million jobs could be lost if a solution to the political crisis and a way to end the violence are not found. The tourist trade, she writes, is dead. Some people in the towns devastated by the destruction now face starvation and they hope that business owners driven out will return and once again start hiring. Many of those business owners, however, lost everything and the chances that they will return are slim. The riots were a result of years of bad governance that favored one tribal group over others. Raila Odinga, the candidate who ran against President Kibaki and enjoyed a large pre-election majority in the polls, offered hope to some of the tribes that had felt like outsiders in their own country. The election dashed those hopes and wrought the destruction that followed — not a rational response but a real one. In both Afghanistan and Kenya, bad governance, poor security, and lack of investment work against development. The international community must do its part to help change all three factors, but it can do nothing if the locals don’t do their part.

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