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Open market and poverty increase in Afghanistan

By Najib Khelwatgar Kabul- Afghanistan The economic politics of open market in Afghanistan has deteriorated the economic conditions in Afghanistan and increased the poverty rate in the country. For last five years open market as economic policy of Afghanistan has not only halted the development of the society it has also increased the rate of poverty in the public. The system of open market is one of the four fame systems of the world founded by Adam Smith. According to the system the market is controlled by private sector and the government plays the role of regulator and supporter. The system made Afghanistan a consuming country and all its requirements are imported by businessmen from abroad. Open market is theory of Adam Smith: "an invisible hand that directs and leads human which was no part of his intention, and that is the work and promotion of the society" According to economist of the country Adam Smith was one of the people who converted feudalism to investment. Today's developed investments system has been based on the primary theory of Smith. Adam Smith, Scottish philosopher was born on June 5 th, 1723 and died on July 17th, 1790, is considered one of the leading economic politician. Haji Abdul Hakim, head of a washing detergent factory in western Herat province said raw materials were tax free in the past to encourage the traders, however now it has imposed 10 per cent taxes. He added for last six months they were unable to produce due to high taxes, low quality of imported materials, high price of power and water. Hakim said the finance ministry allotted 5 per cent tax on produced imported materials while it is 10 per cent on raw materials. Shahreyar Ghafori, head of Almas-i-Sharq factory in Herat province believe that the import of low quality goods from neighboring countries threat the factories in the country to tumble. According Ghafori, Iran has established an industrial park in Taibad area bordering Afghanistan where it produces, food items, clothes and other goods with low quality, price and cost and export them to Afghanistan. He blamed the government and added that the government did not have proper control on customs. He reminded that the custom staffs were taking bribe to allow such low quality goods to be imported to Afghanistan. Ghafori said 250 factories have been established producing various goods in Herat industrial park during last six years.

Toryali Ghausi, Herat Industrial Union deputy head said insecurity, lack of control on the prices by government , low quality and price of imported goods and high tax on the raw materials caused 100 factories to stop production which were activated in last five years in Herat province. He also considered the high price of water, power and fare of the buildings for factory to stop productions. Abdul Ghafar resident of Qala-i- Fatullah locality in Kabul city said the government wants all the factories which were active in previous years, should be gradually closed and the traders import the goods with low quality from abroad. He said the policy of the neighboring country is that to export goods with low quality and low price to halt the local factories production and find market for its own production. He added when the local factories stop production then the foreign factories could increase the prices as much as they would want. Qais Faqiri, a student of Kabul University said the factories in the country have newly started production and they do not have enough investment to compete neighboring countries that is why they lose its production procedures. According Zuhil Yousafzai, a staff of Azizi Bank in Kabul, Afghanistan has little production, all goods are imported from neighboring countries and if the neighboring countries stop export for one day the prices will jump up unexpectedly. Farhad Jabari, head of Aryan salt producing company in Kabul believes that the government should stop importing goods which are produced in the country, because the factories can not continue its production due to various reasons when foreign goods are imported. He said producing 500 gram pack of iodine salt cost 7 afghanis at his factory, while the same amount of imported low quality salt could be found with 6 afghanis in the market. Sayed Masoud, a lecturer at Kabul University said this was a game of big foreign factories to undermine the small and newly established factories and control the market. He said big factories supply goods to the market at lesser cost than it has been produced, and when they occupy the market then increase and set the prices for their own choices. Meanwhile the system of open economy in Afghanistan has increased the rate of poverty and lack of ability of public to purchase goods. Experts and economists criticizing the economic system and say the open market has caused economic problems, deepening the differences between majority of poor and minority of reach and have halted the internal productions. Lecturer Masoud said lack of involvement of the government on the market let the traders to set the prices, subsequently the ordinary people can not afford to purchase basic needs and commodities. He said only 15 per cent of population in Kabul have good economic conditions, the rest even can not afford to buy 100kg flour bag in a month.

Another lecturer at Kabul University believes that if this situation persists and if people could not afford primary commodities the rate of crime could go higher. Ahmad Shah, 29, worker at education ministry and resident of Kart-i-Seh area in Kabul city said the government is led by those who are traders or supporting traders, they do not care about people who are dying due to hunger. A government staff member gets paid $50 to $60 a month, which can not fulfill the requirement of a family, only a bag of flour and a five kg can of ghee could be purchased with that amount of money. There are 0.3 million government employees who earn between $ 50- 160 monthly, while over 70000 people are employed by national and international NGOs who earn between $400- 1000 monthly. Ahmad Shah said he pays his 3000 afghanis salary to the owner of the house, and he runs his family in a street vendor where he sells vegetable after office hours. Abdul Ghafor a student at Al-bironi University of Kapisa province, commenting about the current situation that if it continues: "if no action is taken about the open market system, the people who live under poverty line will be even poorer, and the investors will be sacking the blood of the poor and miserable people of the society and gradually the investors will become stronger and more danger" He added at the end poor people will ask government for their rights and a big anarchy could happen. Ramin Ahmadi, a retailer in Kabul main market said: "In such situation if the government does not take any action, people will be obliged to eat grass and will die due to hunger" It is mention worthy that the system of open market in Afghanistan has caused the commodities prices to jump up several times. Abdul Hashim, a vendor in Sarai- Shamali locality of Kabul city said about the price and rates that after collapse of Taliban in 2001 the price of 100 kg bag flour was 1200 afghanis, a can of five kg ghee was on 150 afghanis, and 5 litre petrol on 80 afghanis. He said the price of 100 kg bag of flour is 3600 afghanis a can of five kg ghee 480 afghanis and five litre petrol is sold on 210 afghanis. Jafar Nangarhari, resident of Kabul believes that lack of involvement and attention of the government and setting the rate on then choices of traders cause the price hike. Zuhil Yousafzai, employee of Azizi Bank in Kabul said: "The market in Afghanistan is in the hands of mafia who call themselves traders, what ever they want they would do it" He asked the government to provide subsidies to food items and import food stuff immediately and supply it to market to halt the current disaster. Masoud believes when the agriculture ends and the internal production reach zero and the government would not pay attention to the issue the price of commodities will increase day by day.

Muhammad Amin Farhang, minister of commerce about the increase of food stuff said that the prices have increased in world market which affected markets in the country. He said they planned to purchase wheat at the cost of $50 million from India and neighboring countries to prevent further price increase. The condition in Afghanistan after collapse of Taliban has not been suitable for open economic market, there for it increased problems in the society. Jalil Shams, spokesman for finance ministry said the open economic system was a successful system but in current situation of Afghanistan it is a failure. He added: "we wanted mix market, where government and traders are involved, but the government is obliged to enforce the system according to the constitution" He considered the failure of the system due to lack of investment, lack of capacity of traders, lack of production in the country and a consuming and importing country. On the other hand Azrakhsh Hafizi, deputy head of Afghanistan Chamber of Commerce considered the open economy system useful for the country and said that the system let international community to help Afghanistan and attract investment. Hamid Faroqi, an expert and lecturer at Kabul University believes that open market provides opportunity for competition in which the consumer benefits. Faroqi said: "in reality open market is to protect the interest of consumers, of course it is the aim of all economic systems, but with the open economic system the consumers can get their requirements in the market with low price and high quality" According to the critics, in the agriculture economy and in current situation of Afghanistan the open market was not applicable, and the figures presented by economy ministry about the development of Afghanistan were not close to reality. Sayed Masoud, Lecturer at economic department of Kabul University said strong government, proper law, security, infrastructure and the culture of open markets are the criteria of the open economy system and non of these could be found in Afghanistan. Masoud said: "if the government says the economy growth was 12 per cent, such figures are to attract the trust of international community and satisfaction to the people. If we assess the situation of the country we are in regrettable conditions" Abdul Majid, a member of the economic commission of the wolesi Jirga or lower house of the parliament said poor countries do not have enough capacity and are always in need to investment of other countries, problem is that the developed countries analysis the poor country from their own vision which deteriorate the situation in poor countries. Zuhil Yousafzai, employee of Azizi Bank in Kabul about the open economic system said the system was good for developed countries, but in Afghanistan due to destruction of all companies, factories and lack of law it has no benefit for the nation.

In the past the governments have copied system from other countries which on the one hand implemented the law on the other hand it created problem in the society. Aziz Ahmad Nadem, a member of the economic commission of the wolesi Jirga or lower house of the parliament said it would have been better for those who approved the system should have thought once if the economic, social and security situation of the country allow the system to be implemented. He said the government body copies the system and laws of other even though there are a lot of problems and are only symbolic- which causes economic crisis. Nadem added: "activities in our country are taking place as mafia, crime lawlessness have been unprecedented in the country and people suffer in bad economic conditions" According Masoud the open market system was applicable in Iran and was useful, because all the conditions needed for open markets were available there. At the same time the system of open economy caused the government to lose most of its assets. Masoud said Afghan government had factories, trade zones and permission to interfere in the market, but with this system the government lost its assets. Muhammad Amin Farhang, minister of commerce said one of the conditions of the open market was that government provides opportunities to private sector and selling of trade zones, privatization of factories and others were part of promoting open market. The current government of Afghanistan have handed over big factories to traders with merely little price such as the sugar factory of Baghlan and Ghory cement factory. Fazl Ahmad Joya, another lecturer at economic department of Kabul University said the biggest textile factory in the country was established with the support of Germany in Afghanistan, but the government was unable to revive it. He said several other factories such as the textile factories are pending to be renovated and reactivated. Aziz Shams, spokesman for finance ministry said Afghanistan had 75 governmental factories and according to the law of privatizing factories, 45 of those were ready to be privatized. He said the privatization of 9 factories will be launched very soon. He did not know about the property of factories but said that each factory had its own property and buildings. Jamil, 58, resident of Bagrami district of Kabul, who worked as distributor manager in Bagrami factory said over 4000 people were working in various section of the factory in the past, but the war turned it to ruin. He said after fighting erupted and the Bagrami textile factory was destroyed, he started selling fruit in Macro Ryan.

The open economy system has also cost some people to lose their jobs, In the past most people were busy with agriculture and producing handcrafts, but now they are jobless. According Masoud, there were 2500 shoe making plants in Kabul and until 1998 the Central Asian markets were occupied by the production, but now non of the plant could be seen. He said 15000 people involved in the handcraft of shoe making are currently jobless. He said over 80 per cent of population in Afghanistan were involved in farming and agriculture, but now the agriculture in the country has collapsed and the foreign imported goods have seized the position of internal products. Masoud added most people involved in handcrafts; rug weaving, embroidery and shoe making are now jobless because the goods they produced are imported from neighboring countries with low quality and cheaper prices. An official of Afghanistan labor association said 25 per cent of the population of Afghanistan, particularly in north were involved in the handcraft, but now only five per cent continue, the rest are jobless. Safiqa, embroider in Kabul women garden said she was working for many years and was making money. She said it was the only female embroidery market in the city, but now she can barely provide enough to run her family. She sad: "in the past most of my products were sold in Afghanistan and some were exported to abroad, but now such materials are imported from abroad" The open economic system has been approved for Afghanistan in the Loya Jirga by the people's representatives as the part of the constitution. The experts believe that another Loya Jirga would resolve the problem. Aricle 10 of the constitution reads: "The State encourages and protects private capital investments and enterprises based on the market economy and guarantees their protection in accordance with the provisions of law" Sayed Masoud said Afghanistan constitution stated the open economy system, but looking to the political and social situation of the country the system can not be useful for Afghanistan. Fazl Ahmad Joya, lecturer at Kabul University suggests mix economy for the current conditions of the country. He said: "mix economic system was in favor of government, would develop private sector and lead to national interests" He said this system is suggested temporarily and would provide base to select an economy system for future. He said the system would establish law, infrastructure and rules which will help to establish, support and strengthen private sector and be self- sufficient.

Fazl Ahmad Joya said no one can choose an economic system in advance, because the law and the demand of the system will establish a role model and policy. Even though there are military presence of 37 countries in Afghanistan and over $25 billion has been spent on the country through NGOs and government, still there were families last winter who sold their children on $10 due to poverty and bad economic conditions.

DISCLAIMER: This report has been produced as part of the Joint Training of Pakistan-Afghanistan journalists on Conflict Reporting funded by the British High Commission, Pakistan. The author is responsible for the entire contents and the opinions expressed in this report do not necessarily reflect the views of Intermedia and/or the British High Commission.