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Good News From Afghanistan—Not April Fool’s Joke

April 1, 2010

Diverging from its usual polemics, the Aid Watch blog presents three development success stories in Afghanistan, pinpointed by Clare Lockhart, CEO of the Institute for State Effectiveness, who gave a presentation and NYU’s Development Research Institute. According to Lockhart, these are not ephemeral reforms; they will persist even in the face of deteriorating security.

The first case concerns currency exchange.

In 2001, Afghanistan’s money was comprised of three different warlord-produced currencies whose values see-sawed unpredictably; only the informal money exchangers—known as hawala dealers—knew the exact rates. Now that Afghanistan no longer needs a trisected currency regime, international donors recommended pegging to the dollar.

However, the proposed transition would be costly and lengthy—up to two years’ time. Naturally, the Afghans turned to the hawala dealers, whose intricate network was able to reach the entire Afghan population in a mere four months! Despite all the failures—and, one would hope, lessons learned—from the structural adjustment era, the West continues to overlook country-specific institutions.

Photo: Benjamin Lowy via benlowy.com

Second, the telecom industry got underway, thanks to the Overseas Private Investment Corporation (OPIC), a US agency that encourages emerging market investments. Immediately following the US invasion, telecom companies, understandably, demurred from entering such high-risk markets. And thus OPIC wrote a $20 million risk guarantee—which, in the end, was unnecessary—and Afghanistan now boasts 11 million phones.

Third, Afghanistan’s National Solidarity Program issued grants to thousands of Afghan villages, whose councils allocate the funds. To ensure transparency and accountability, the program continues to award grants so long as the villages produce a project audit report. Access to capital has allowed villages to engage in larger investments, such as irrigation systems, whose positive externalities resonate throughout Afghanistan.

We swear we’re not making this up!

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