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Economic analysis of Iraq & Afghanistan
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Economic analysis of Iraq
2009-11-02
Profs say economic factors contributed to failure in Iraq:
By JACKIE LYONS
Frank Gunter, associate professor of economics, and Chaim Kaufmann, associate professor of international relations, gave a presentation regarding Iraq's failing surge. Gunter said he believes the surge is beginning to fail, not because of security or political reasons, but because of economical ones. He attributes the failing economy to several factors: the increase in the unemployment rate, the difficulty of starting a business legally and the corruption in the country. "According to the 2008 Transparency International surveys, Iraq is tied with Myanmar as the second most corrupt country in the world," Gunter said. Gunter and Kaufmann agree the U.S. cannot save Iraq's failing military efforts. "American politicians have given credit of the decline of violence to our military surge, but this had minor effects," Kaufmann said. Kaufmann went on to say the Iraqis no longer welcome U.S. presence and have finally insisted that the U.S. withdraw from their country. They are confident with their Shia-dominated government, and they are outraged about U.S. cooperation with former Sunni rebels, he said. "The bottom line is we can't do much about Iraq's economic problems - the outcomes will be determined by how Iraq deals with it themselves," Kaufmann said. Gunter agreed. "Unless [Iraq] can reduce corruption, the instability will return; the blood and treasure shed by us and our allies is going to be wasted," Gunter said. Gunter said Iraq's corrupt market and hostile business environment are main factors in the impending collapse of the country's economy. He also said while Hussein's regime was incredibly corrupt, it was structured and well-managed corruption, and now the corruption is competitive and unclear. "The confusion and the uncertainty that corruption causes now is probably more serious than it was before 2003," Gunter said.
2009-02-26
Falling Revenues Threaten Rebuilding and Stability in Iraq :
N.Y. TIMES: Both oil revenues and American financial support have plummeted just as the country has the chance to take advantage of its increasing stability to improve basic services and upgrade its ruined infrastructure.
Now, projects are being put off as Iraq struggles to pay for huge raises granted to government employees as well as the salaries and equipment for hundreds of thousands of new Iraqi security troops. Last summer, with oil prices above $100 a barrel, Iraq was so flush with cash that many in the United States were arguing that a country so rich should be paying for its own reconstruction and possibly even reimbursing American taxpayers. Six months later, the question is whether a decline in Iraqi government revenues, which depend almost entirely on oil, could threaten the relative security and stability won here at the cost of so much American treasure and life. Indeed, political pressure is rising here, as more Iraqis demand precisely the services, like better electricity, water and education, that could now come more slowly. A stable Iraqi economy and an adequately prepared Iraqi military are crucial if American combat troops are to withdraw by August 2010, as aides to President Obama suggested this week. And illustrating just how closely the two countries are still intertwined, a faltering Iraq could also complicate Mr. Obamas plan to lower the American deficit with billions in savings that would come from such a withdrawal.
2008-09-10
Investment opportunities in Iraq:
An improved security and political climate in Iraq—while still fragile—is creating conditions for a market economy that could represent a significant long-term opportunity for U.S. investors.
By Thomas J. Pritzker, William H. Strong and Stephen R. Wilson September 9, 2008 / Chicago Tribune/ An improved security and political climate in Iraq—while still fragile—is creating conditions for a market economy that could represent a significant long-term opportunity for U.S. investors. And if Iraq assumes a position of economic significance in the region, as we believe it will, it is very much in the interests of the American business community to begin establishing strong economic ties now. These are our conclusions following a recent five-day mission to assess Iraq's progress in rebuilding and developing a climate conducive to business investment. We, rather than the U.S. or Iraqi government, planned the trip's itinerary—which included visits to locations as varied as a fertilizer plant near Basra and a farm in Babil province. We held more than 25 face-to-face meetings with senior U.S. and Iraqi government and business representatives. We encountered an Iraqi leadership committed to rebuilding the country's economic base, interested in promoting foreign investment and focused on leveraging the country's significant human and natural resources in pursuit of their development objectives. We also visited commercial and residential areas in Baghdad outside the International Zone. We even met street merchants in Abu Nawas, a section of Baghdad that was once a primary staging ground for attacks by Al Qaeda.
Economic analysis of Afghanistan
Is the Quran only for Afghans to defend?
The major news out of Afghanistan this week has been the Quran burning violent protests around the country. On Tuesday the news broke that the U.S. – led military coalition forces had sent the holy books by mistake or intentionally, that remains to be investigated, to a garbage burn pit in Bagram Air Filed. Afghans were outraged by this appalling act, and thousands of them came out on the streets to protest. At first the demonstrations were peaceful. As the protests continued around the country in different provinces, they turned violent. Thus, at least 28 people have been killed and hundreds wounded since Tuesday. In addition, four American soldiers have been shot dead. However, it is important to know why only Afghans are protecting the Quran, and protesting against burning the Islamic holy book. Remember it is not the Afghan holy book, but the Islamic holy book. Why don’t people in Iran, Saudi Arabia or other Islamic countries also come out to protest? Not suggesting that they should, but isn’t the Quran their holy book too? Certainly, Afghanistan is different than almost all other Islamic countries. First, it has the lowest literacy rate among Muslim nations – thanks to the four-decade long war. Three out of four Afghans age 15 and over cannot read and write. If they cannot read the Quran, they definitely do not understand it. Therefore, the majority of the population receives its basic Islamic knowledge from the tribal elders, the local Imams, and other religious leaders in the community. Second, the unemployment rate in Afghanistan has been fluctuating between 30-40% since 2001, unlike any other Muslim country. That means almost 7 to 8 million people are unemployed in the country. A man from Parwan province was quoted in the 2010 Oxfam survey saying, “If the people are jobless, they are capable of doing anything.” Many of these young unemployed men are frustrated. They develop a sense of negative attitude towards the central government. Some leave the country, those who can afford to do so, and others get involved in widespread antisocial and criminal behaviors like the Quran burning violent protests. Third, according to some estimates, almost 36% of the Afghan population is living under the poverty line. It is an unprecedented figure compared to any other Muslim country. In other words, one out of every three Afghans has a total income of less than $1 a day. They can at best barely meet their minimal needs for survival. Remember Afghanistan has had the harshest winter this year, and reportedly 40 people, most of them children, have frozen to death. These are the people living under the poverty line, in tents. In sum, it is not only Afghans responsibility to defend the Quran; however, the current social and economic problems have created the platform for Afghans to engage in such violent activities. Other Muslim nations are not amenable to such threats; therefore, we haven’t seen the Quran burning related incidents elsewhere.
Why are Afghans leaving Afghanistan?
More than 30,000 Afghan citizens filed for political asylum abroad in the first eleven months of 2011, according to UN statistics. The figure indicates a 25 percent increase over the same period in 2010. The number of people fleeing Afghanistan has trebled since four years ago despite the international community pouring billions of dollars into Afghanistan to try and boost the economy, rebuild infrastructure, and defeat a Taliban-led insurgency. Experts believe the actual number leaving is likely to be far higher than those only seeking asylum because of a large smuggling market that has developed. However, this rising trend begs a question of why so many people are leaving Afghanistan. In other words, what are the major incentives abroad that are encouraging Afghans to flee their country? First, most of these people are economic migrants. Marco Boasso, the director of IOM in Kabul, said: “The majority of people arriving in Europe are not refugees or people under threat. They are economic migrants.” The outlook of many young Afghans have grown more pessimistic in the past five years. In 2002, after the Taliban were ousted from power, if you would ask an Afghan man what his future plans were, the answer would definitely not be to leave Afghanistan and go abroad. Instead, at the time more and more immigrants were returning from Iran and Pakistan. The second reason why so many Afghans are seeking asylum abroad is the thirst for education. Nearly 200,000 students graduated from high school in 2008, and only 34,460 of them were enrolled in public tertiary education system, according to the Afghan Ministry of Education. About 500 students went on a scholarship to Indian colleges and universities. A few hundred others were fortunate enough to earn Fulbright or similar grants to America, Europe, and Turkey. The Afghan Ministry of Higher Education has not had the capacity to absorb a large chunk of these graduates to higher education institutions Above all, the security situation in the country has been deteriorating as the coalition forces are planning to withdraw by the end of 2014. There are growing concerns and uncertainty among Afghans as to what will happen when the troops leave the country. The memories of the Soviet withdrawal in 1989 and the civil war that followed are fresh in minds of many. Afghans fear that once most foreign troops leave, the Taliban will take over more territory and civil war could erupt along ethnic lines. They are leaving Afghanistan to secure a safe future for themselves and their children abroad..
Three Transit Routes for Landlocked Afghanistan.
Last November when the U.S. unmanned drone killed 24 Pakistani soldiers, in retaliation, the government of Pakistan decided to block the supply routes to Afghanistan. Since then, not only NATO supply trucks have been stopped, but also thousands of Afghan-bound containers loaded with commercial goods have been stranded in the port city of Karachi. Each and every time commercial goods are grounded in Pakistan, Afghan businessmen are losing money and Afghan consumers are paying higher prices for goods that are imported through Pakistan. It seems like landlocked Afghanistan is highly dependent on trade roads from Pakistan. However, there are three alternative transit routes that the Afghan government can exploit to facilitate exports and imports. First, the Afghan government can maintain the status quo. Pakistan will remain the major transit route into and out of Afghanistan. Business as usual, hundreds of trucks will camp out in Pakistan, when and if there is tension between Washington and Islamabad. As a result, the Afghan businessmen and household will ultimately bear the burden. The second option is the Northern Distribution Network (NDN) through Russia, the Caucuses, Kazakhstan, Uzbekistan and Tajikistan. The NDN is a network of road, rail, and air routes. In Afghanistan, Balkh province has a strategic position in the north as it has completed a rail link from Mazar-i-Sharif to Termez on the Uzbekistan border. These routes are far less dangerous than the supply routes that go through Pakistan. While the shorter Pakistani transit routes are less costly, the Northern Distribution Network is much more reliable. The third viable alternative trade route for Afghanistan is through Iran. Recent rounds of sanctions by the U.S. have pushed Iran’s economy into a nose-dive. As the European Union is adopting its sanctions on Iranian oil, Tehran is very vulnerable. It is turning eastward for doing business. The Afghan government could exploit Iran’s desperation, and sign a deal for access to the Iranian port of Chabahar. It is a port outside the Persian Gulf, and about 1,700 Kilometers away from the major western Afghan city of Herat. Unlike Pakistan, Iran in recent years has encouraged Afghan businesses to relocate their international offices from the United Arab Emirates, Saudi Arabia, and Pakistan to Iran. While ports of Karachi in Pakistan are overburdened with severe congestion, and lack infrastructure, Chabahar is less crowded, and strategically well positioned for Afghan imports and exports. Iran and India are building a highway and a railroad system that leads from the port into Afghanistan. All in all, because of Afghanistan’s landlocked location, its economy hugely depends on neighboring countries for transiting goods into and out of Afghanistan. The choice is between Pakistan, Northern Distribution Network, and Iran. However, in order to alleviate Afghan dependence on the Pakistani port of Karachi, Iran’s Chabahar port is the most cost effective, secure, and reliable trade route for the Afghan economy.