Friday, 20 May 2022

In Governance

Afghanistan War: Opportunity Costs of a US$2 Trillion Loss

Perspective matters when assessing the Afghanistan War, especially for Africans. Business owners, large or small, will tell you that it does not make sense to keep spending in a business unit that is lossmaking and draining financial resources for years; that is Afghanistan War to the American economy.

Exiting Afghanistan was one of the most economically smart moves that Joe Biden has done for the United States of America, because this war spent US$2 trillion of American Tax payers' money. The War on Taliban has cost the American economy more than just decades spent fight, and African business owners need to learn from that. 

Africans need to realise that the United States of America spent money that is equivalent to the whole GDP of the continent of Africa, on just one country, whilst imposing sanctions on several African states. Could that money not been used for better things on the same continent? 

To put things into perspective, realise that of this US$2 trillion, each African country could have benefited US$37 Billion from this capital injected into Afghanistan. Since 2000 to 2020, the US invested a total of US$700 Billion in Africa. 

Since 2001, the country has been at war with Afghan Taliban insurgency. And in order to win this war, America has spent more than a trillion dollars on this conflict. The money went into infrastructure that Afghanistan needs to run itself, and it also went into fighting people who oppose the government of Afghanistan. By looking at the history of this, it appears to be a long-drawn-out fight against an enemy that seemed too weak to stand up against military might of the United States. The idea here was that America could easily gain ground in this war and win it. Rather than its being a military stalemate, Afghanistan War stands as a losing battle for at least 20 years now, and all the signs are pointing that the conflict will go on for at least 30 more years. 

In all this, the cost of the Afghanistan War was being paid by the American Tax payer, which paid an average US$100 Billion a year, for two decades. That is not only irresponsible leadership, but a sheer waste of investment from a business perspective. 

The issue here is that Afghanistan has been at war with Taliban insurgency for almost 16 years now, and America's money could have been put in better use somewhere else. The country of Afghanistan never had a lot of economic activity before the United States got involved, and there is no reason to expect that it will develop economically on its own now; so, it is assumed.  

There are better ways to spend taxpayer money, after all. 

Economic sanctions were a better strategy, than a full invasion, bearing in mind that history is littered with countries that have been embarrassed by Afghanistan when they tried invading it. The biggest thing that could be done for Afghanistan is to stop the war and make peace. 

Afghanistan was once a functioning economy with some interesting options for things other than fighting; but now it is so overrun with fighting, it can only keep its inhabitants alive through aid from foreign countries such as America, but this aid has kept falling over the years.

Afghanistan was not always like this. In fact, at one point in time the United States of America was the second largest investor in Afghanistan. The country is rich with natural resources like copper, iron and precious stones. There is also oil present in some drilling fields there. This small region has always been rich with natural resources, and their presence says a lot about American involvement there too. That the United States of America would want to invest in Afghanistan then makes sense for business reasons alone.

Afghanistan produces 90% of the world’s opium and is also a leading hashish producer. The drug trade has become one of the main pillars of the Afghan economy accounting for 16% of GDP and involving 5% of the population. It is also intrinsically linked to insecurity: generating revenues that pay the operational expenses of insurgents (an estimated $155 million for the Taliban in 2009) and incentivising poor governance.

Afghanistan’s underground resources, valued between US$1 and US$3 trillion dollars, include gemstones, uranium, precious metals, gas, oil and coal. Extractives can generate jobs, earn revenue and fund infrastructure. However, rich mineral resources can also be a curse that breeds violent conflict, corruption, and bad governance, stunts economic growth and causes new environmental and social problems. Afghanistan contains rich underground resources: gemstones, uranium, common metals, rare-earth metals and precious metals such as gold and silver. It also holds potentially valuable reserves of gas, oil and coal. Developing Afghanistan’s mineral resources is a strategic priority for the Government and the international community, who see the sector as an engine for growth and the best hope for Afghanistan becoming financially self-sufficient.

US exits Afghanistan when its GDP is at US$98 Billion (est 2019), population at 39 million (est 2020), labour force at 14 million (est 2019), and major exports being Agriculture and Services. Clearly the economy is undervalued and extremely under-utilised, and that must be priority for the incoming leadership, from a socioeconomic and a political security perspective. 

The exit of US from Afghanistan creates an opportunity for the Taliban led government to demonstrate what they have fought for all these decades, and extract these natural resources and agriculture, to not only grow the economy, but return it to its ancient greatness of the Persian Empire.

It is important to understand that Taliban are not rebels, but human beings that chose to go to war in order to rule their own country against economic powerhouses that felt they could just walk in and out and take what they desired and use the label of "terrorists" as a media decoy. The exit of US from Afghanistan should raise questions of "why then did you even go into the country in the first place, only to exit after 20 years"? Could it be that the US has already got its return on investment that they choose to take flight now?

Whatsoever reason US has taken flight, it creates an opportunity to build its economy the Afghani way. Afghanistan belongs to Afghani people, and that includes those labelled as Taliban. The whole world can only plead with then not to exert vengeance upon those that benefited from the American influenced economy of the last two decades. 

At the end of the day, we must look at this as what it is – a bad investment by an investor in economics of war, and their exit is also creating opportunity for new business partners for Afghanistan. 

Sources: UN, World Bank, Statistica

Cabanga Media Group publishes of thoughtful economic and business commentary magazines and online media, in several African markets, that include South Africa, Botswana, East Africa Community, Ethiopia, Egypt, Nigeria, and Zambia.