Annex II.1. The Poppy Dimension in the Afghan Economy18
52. Afghanistan is by far the largest producer of opium in the world, accounting for more than 70 percent of world supplies on average over the last decade according to the United Nations Office on Drugs and Crime (UNODC).19 Afghanistan, however was not a traditional opium exporting country. The cultivation of the poppy on a large scale is a relatively recent phenomenon, dating back to the early 1980s when strict bans on opium production introduced in Turkey, Iran, and Pakistan pushed up the world price of opium. At the same time, governments in Afghanistan were progressively losing control over rural areas. Faced with strong international demand and virtually no legal or social impediments, poppy cultivation flourished. It did not take long for Afghanistan to displace the so-called Golden Triangle (Thailand, Lao P.D.R., and Myanmar) as the main supplier of opiates to Europe and the Middle East.
53. The almost complete collapse of any form of central government after the Soviet withdrawal, the warring parties’ needs for alternative sources of financing, and the fact that opium was a crop well adapted to the prevailing circumstances, greatly added momentum to this trend. Opium became firmly entrenched in the economy. While the annual rate of growth of opium production had been, on average, 14 percent per year between 1979 and 1989, it accelerated to 19 percent per year between 1989 and 1994. Afghanistan’s share in world production grew accordingly from about 20 percent in 1980 to 50 percent in 1995, just prior to the Taliban takeover, and to 79 percent in 1999.20 Opium became the country’s largest cash crop and its only significant source of (illicit) export earnings. Two decades of expanding Afghan production has contributed to the dramatic decline in the street price of heroin (in real terms) in Western Europe, which fell from the equivalent of about $300 per gram (after adjusting for inflation) in 1987 to $70 per gram in 2000.
54. In spite of the illicit nature of the opium economy, a wealth of information is available. This is mainly thanks to the dedicated work of the UNODC, which as part of its global Illicit Crop Monitoring Program (ICMP) operates a poppy crop monitoring system in Afghanistan, now in close cooperation with the new transitional government of Afghanistan. As part of this monitoring regular opium surveys are conducted that combine satellite imagery with cross-checking on the ground to produce a detailed mapping of poppy cultivation. The surveys are complemented by in-depth interviews with farmers and traders, the collection of comprehensive price data, and studies of seizure data in neighboring countries. The results are published annually, normally a few months after the end of the April-June harvest season, and supplemented by interim reports. Most of the analysis presented in this annex is based on information from the 2002 survey and some preliminary data for 2003. It is expected that the 2003 survey will be available in early October 2003.
Demekas, Dimitri G., Kosma, Theodora, and Jimmy McHugh, 2002, “The Economics of Post Conflict Aid,” IMF Working Paper 02/198 (Washington: International Monetary Fund).
United Nations International Drug Control Program (UNDCP), 1998a, Afghanistan Strategic Studies #1, An Analysis of the Process of Expansionof Opium Poppy Cultivation to new Districts in Afghanistan, (June).
United Nations International Drug Control Program (UNDCP), 1998b, Afghanistan Strategic Studies # 2, The Dynamics of the Farmgate Opium Trade and the Coping Strategies of Opium Traders, (October).
United Nations International Drug Control Program (UNDCP), 1999a, Afghanistan Strategic Studies # 3, The role of Opium as a Source of Informal Credit, (January).
United Nations International Drug Control Program (UNDCP), 1999b, Afghanistan Strategic Studies #4, Access to Labor: The role of Opium in the Livelihood Strategies of itinerant Harvesters working in Helmand Provinces, (June).
United Nations International Drug Control Program (UNDCP), 1999c, Afghanistan, Strategic Study #5, An Analysis of the Process of Expansion of Opium Poppy to New Districts in Afghanistan, Second Report, (November).
United Nations International Drug Control Program (UNDCP), 2000b, Afghanistan, Strategic Study #7, An analysis of the Process of Expansion of Opium to New Districts in Afghanistan, Final Report, (November).
United Nations International Drug Control Program (UNDCP), 2003b, Afghanistan, Strategic Study #9, Opium Poppy Cultivation in a Changing Policy Environment. Farmers’ Intentions for the 2002/203 Growing Seasons.
Prepared by Ron van Rooden and Louis Dicks-Mireaux.
Data from World Development Indicators (2003), World Bank.
For comparison, average per capita GDP in 2002 in Iran was $1,610; Pakistan, $446; Yemen, $437; Sudan, $418; Mauritania, $355; and Ethiopia, $89.
This estimate is based on data for the early 1990s. The share of agriculture in Afghanistan’s GDP may well be even larger, given the level of destruction of the country’s infrastructure and industries.
This does not automatically mean that Afghanistan would no longer require food assistance. While sufficient grains may be available, not every Afghan will have access to it. Many Afghans remain dependent on food aid.
A new currency was introduced on October 7, 2002, with 1 new Afghani replacing 1,000 old ones. The conversion process ended on January 2, 2003. For more details, see Chapter V.
The customs data, as reported by CSO data, differ from the Direction of Trade (DOT) data beginning 1999. For exports, CSO data show a slightly higher amount destined for Pakistan and India, which is reflected in a slightly higher value of total exports. For imports, the CSO data show much larger imports from Japan (with the discrepancy rising) and under unclassified.
ECO members comprise Afghanistan, Azerbaijan, Iran, Kazakhstan, Pakistan, Tajikistan, Turkey, Turkmenistan, and Uzbekistan.
Following the customs policy reform (see Chapter IV), customs valuation will use the market exchange rate.
The World Bank provides a special commitment letter to the correspondent bank in which the World Bank commits to guarantee payments made under the letter of credit; this obviates the need for the usual advance collateral deposit.
Prepared by Bruno de Schaetzen.
For a detailed discussion of world illicit opiates markets, see United Nations International Drug Control Program (UNDCP; 2002b).
UNODC estimate that in Europe alone more than $20 billion was spent on Afghan opiates.