Afghans worry as U.S. spending boom comes to an end


A store assistant sits surrounded by gold jewelry displayed for sale inside Noor Shopping Center in Kabul. (Victor J. Blue/Bloomberg)

Zabi Tamanna’s life was transformed by the U.S. war in Afghanistan.

A few years after the American invasion in 2001, the Afghan photographer started a construction business. His work on U.S.-funded military bases made him a well-to-do man by local standards, allowing him to help put his sister through dental school, pay his brother’s high school tuition and buy himself a shiny new Toyota 4Runner.

But with American troops withdrawing and fears of violence swelling, Tamanna’s business is deteriorating quickly. Recently, he sold the SUV to get enough cash to pay his staff.

“This has affected my whole family,” Tamanna said during a recent interview here. “Now, imagine a whole city like this.”

For the past decade, billions of dollars in American aid poured into one of the world’s poorest countries, providing previously unimaginable opportunities to thousands of Afghan workers.


Brick factories emit smoke in the village of Aqa Sarai on the outskirts of Kabul. (Victor J. Blue/Bloomberg)

Now, the boom is over. The Afghan economy, which had been expanding by as much as 14 percent a year, has slumped. Growth this year is expected to be just 3.2 percent, according to the World Bank. That slowdown reflects the declining American spending as well as apprehension about security.

President Obama’s announcement that U.S. troops will leave for good by the end of 2016 has only fanned Afghans’ concerns. The economy is a topic in the Afghan presidential election Saturday.

“People are worried — what will happen in the future?” said Yarbaz Hamidi, a businessman who has invested a half-million dollars in two private hospitals in Kabul. “I am also worried — what will happen to my investments?”

Fears of economic collapse

Since 2002, Congress has appropriated $103 billion to help Afghanistan rebuild its security forces, government and economy. During the past seven years, when the bulk of the money arrived, U.S. aid has accounted for about 75 percent of the country’s gross domestic product, according to the Special Inspector General for Afghan Reconstruction.

And that funding does not include the money the Pentagon spent in Afghanistan executing the war, for expenses such as maintaining bases and feeding the troops.

The World Bank is cautiously optimistic that Afghanistan will avoid an economic collapse. It noted in an April report that the country is expected to receive about $8 billion in annual foreign assistance in the coming years. There is also $17.9 billion in U.S. funds that were approved but not spent, U.S. officials say. Obama has pledged that American aid will flow into Afghanistan for years to come.

But the World Bank says the situation remains tenuous, with projections of a 5 percent growth rate contingent on security and the country’s ability to control corruption and tap its rich mineral deposits.

In a nation racked by decades of fighting — first a Soviet invasion, then civil war, then an ongoing conflict with the Taliban — many people fear that the government won’t be able to maintain order. Well-to-do Afghans have already started shifting assets abroad.

“If this was just peacetime, you would probably have a minor recession, but this is wartime,” said Anthony H. Cordesman, a prominent national security analyst at the Center for Strategic and International Studies in Washington. “People panic. People protect themselves. They get out if they can. You don’t loan. You don’t invest. You basically wait.”

Easy money

Afghanistan remains a largely rural country in which broad swaths of the population don’t have electricity and the average annual per-capita income is less than $500.

Afghan officials are optimistic that they will avoid a deep recession. They say the U.S.-led coalition’s spending was too narrowly focused to have a direct impact on the wallets of most Afghans.

“The way the investment was made in the country, it was not in an upward, efficient manner,” said Mohammad Ismail Rahimi, director general of police and monitoring and evaluation for the Afghanistan National Development Strategy. He noted that the country’s poverty rate has remained about 36 percent in recent years.

Indeed, many of the U.S.-funded reconstruction projects were hampered by theft and corruption. Auditors also have cited numerous cases of shoddy work, at times requiring projects to be halted and rebuilt from scratch.

Some Afghans who benefited from the boom snapped up luxury purchases, including second homes in Dubai or Istanbul. But the U.S. spending also helped expand a small middle class in cities such as Kabul, and it enabled Afghans to help relatives and educate their children.

According to coalition officials, more than 700 coalition bases, outposts and checkpoints have been closed or handed to the Afghan military or government since October 2011. With each closure, Afghan businessmen say, it’s become more difficult to obtain contracts.

Abdul Raziq Naderi, 28, started his cleaning business at age 22 after friends told him there was easy money to be made bidding on U.S. military contracts.

Within a few weeks, Naderi had landed a $60,000 contract providing cleaning crews for a coalition military base. He and his partners went on to win an additional 12 contracts, Naderi said.

“I had 74 employees just as cleaners,” Naderi recalls. “Now all of them are jobless.”

Sayed Sabir Rasooly, 27, president of a Kabul construction and logistics company, said the value of his business grew from a few thousand dollars to $3 million in 2012. He bought a new house and traveled abroad.

But his last coalition contract — supplying cases of Red Bull to a military and diplomatic compound near Kabul — expired last month. Now he’s trying to immigrate to the United States.

“We have lost everything,” Rasooly said. “I talk to a lot of Afghan businessmen, and the situation is not good.”

Afghan companies have been affected not just by the troop withdrawal, but also by uncertainty over security and the outcome of the race to replace outgoing President Hamid Karzai. Tamanna said his financial difficulty began after his company expanded into helping to construct highways. One of his major projects in northern Afghanistan was suddenly postponed late last year.

He said he believes the project, funded by the Asian Development Bank, is being delayed until Karzai or his successor signs a long-term security agreement with the United States. Bank officials said the suspension was most likely because of security problems along the highway’s planned route.

Rahimi, the Afghan government official, acknowledged that even if the country escapes a deep recession, some citizens will need to “adjust their standard of living.”

He said salaries have become inflated compared with other countries in the region. “Obviously, there will be a reduction in wages,” Rahimi said.

Businesses suffering

As people make less money, retailers say their businesses are suffering, particularly for goods and services targeted to the wealthy and middle class.

Ahmad Javed Entezari, who seven years ago opened an electronics store at Kabul Mall, a four-story bazaar, said his business has dropped by 50 percent this year.

“When the rumors started that the Americans would withdraw, people started keeping their money,” said Entezari, 35, as he looked toward a 65-inch Samsung television that retails for $3,000.

At the nearby Turkish Fashion store, men’s suits go for as much as $1,000. But Sadiq Niazy said he isn’t selling many Turkish-made suits this year.

“Now we sell more Chinese-made, because it’s cheaper,” Niazy said.

And at Rahmani Jewelry, where Russian, Egyptian and Saudi necklaces and bracelets carry price tags of up to $5,000, owner Abaidullah Rahmani said that only women preparing for their weddings seem to be spending money.

“When I talk to friends, there is no fun, there is no money, there are no contracts,” said Rahmani, 37. “There is only fear.”

Sharif Mohammad and Sayed Salahuddin contributed to this report.

Tim Craig is The Post’s bureau chief in Pakistan. He has also covered conflicts in Iraq, Afghanistan and within the District of Columbia government.
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