It was meant to be boom-time after decades of war and privation.
Over the past few years, shiny new shopping malls started to spring
up around the Afghan capital and construction cranes dotted Kabul's
spectacular, snow-capped horizon.
But the cranes have since disappeared and many buildings are empty
and unfinished, having failed to reach completion before the money
began to dry up.
Business has ground to a halt across much of Afghanistan. Political
uncertainty abounds before another presidential vote and security
fears are growing as the last foreign combat troops prepare to
"To invest in such an environment would be craziness," acknowledges
Hameedullah Omar, marketing manager of a deserted nine-storey office
complex in Kabul's main shopping district that was completed only
Foreign donors worried about deteriorating security are leaving as
Western forces wind down operations, leaving aid-dependent Kabul to
manage its threadbare finances on its own.
The United States and Britain, two of the biggest donors, have
already cut aid by up to half.
International aid groups, which provide a lifeline for marginalized
Afghans, say funds are drying up fast. One U.S. non-profit group
that runs 13 schools for 3,000 girls says it hasn't paid its
teachers for more than a year.
Property prices have slumped as much 50 percent, rents are down 75
percent by some counts and investors have pulled funding from
The afghani currency has also fallen and is now at around 57 to the
dollar, from 52 at the start of 2013.
"Investment is mostly on hold in Afghanistan," the deputy chief of
the central bank, Khan Afzal Hadawal, told Reuters.
International institutions expect Afghanistan's GDP growth to fall
from a high of about 14 percent in 2012 to about 3.5 percent this
year. The World Bank has said more uncertainty could dampen growth
further this year.
The International Crisis Group think tank said in a report released
last week that the number of attacks by Islamist insurgents had
risen since the drawdown of foreign troops began, and forecast a
bloody future unless there was more foreign assistance.
Investors and foreign donors have hit the 'pause' button, anxious
about what lies ahead as Afghanistan strives to go it alone after
nearly 13 years during which hundreds of billions of dollars of
foreign capital kept it afloat.
Their main concern stems from a year-end deadline for foreign combat
troops to leave, and stalled negotiations between Kabul and
Washington on a Bilateral Security Agreement (BSA) to allow a small
force of U.S. troops to stay after December 31.
"The uncertain fate of the BSA and election runoff has damaged all
businesses," said Omar. "It is not only ours but all around the
country people live in such an uncertain future."
After years of bitter wrangling over a range of issues, President
Hamid Karzai has refused to put his name to the security pact,
saying he would leave it to his successor.
But a presidential vote last month failed to produce an outright
winner, setting the stage for a second round run-off - and yet more
uncertainty. The process has been delayed further by investigations
into unprecedented levels of fraud.
That means it could be months before a new president is inaugurated,
leaving little time to sign the BSA.
The two men poised to contest the second round run-off next month,
Abdullah Abdullah and Ashraf Ghani, have vowed to complete the deal
that will allow some U.S. troops to stay for counterinsurgency and
"If the run-off takes a long time and the security pact is not
signed soon, the impact would be even more severe," said Mohammad
Ismail Afzal, manager of the Zia Shuja construction firm. "Many
businessmen have already taken their money out, and the rest will
take it out, too."
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Afzal says his company alone has experienced an 80 percent fall in
business since the start of last year.
Overall, the Afghanistan Chamber of Commerce says investment is down
40 percent compared with a year ago.
Hadawal, the central bank deputy, said talks with four unidentified
foreign banks interested in tapping into the Afghan market have been
put on hold.
"They are interested to come, but it is important for every investor
to see what is going to happen, if there is continuity," he said.
London-based bank Standard Chartered <STAN.L> was the first major
foreign bank to enter Afghanistan amid a banking sector boom after
the fall of the Taliban in 2001, but it backed out due to security
fears in late 2012.
Kabul's residential property market, which experienced a boom in the
years after U.S.-led forces drove the Islamist Taliban from power in
2001, is also in the doldrums.
Foreign contractors arrived en masse in Afghanistan, gobbling up
hundreds of millions of dollars, mostly dished out by the U.S.
government, to build everything from roads to schools and hospitals.
U.S. auditors said Washington's relief and reconstruction bill in
Afghanistan from 2002 topped $100 billion this year.
"A house which rented for $8,000 last year is now $2,000, and
housing prices have fallen by 50 percent," said Jani Mohammadzai,
owner of the Nawi Afghan Durani estate agency.
"Foreign companies have already left ... and even if the BSA is
signed and the election goes smoothly, I don't think the situation
is going to get any better."
AID HITS THE SKIDS
The hardest hit are the poor who depend on foreign aid. More than
half the population still lives below the poverty line.
Aid fell to $508 million in 2013 from $894 million in 2011,
according to U.N. data. Less than a fifth of a $406 million United
Nations' humanitarian plan for Afghanistan has been funded so far
At the start of the year, U.S. lawmakers halved civilian aid for
Afghanistan amid concerns about waste and fraud. Britain has pledged
$178 million a year from 2012 to 2017, down from $296 million per
year between 2009 and 2011, official data shows.
The aid cuts are already hitting projects around the country. Aid
Afghanistan for Education (AAE), which runs schools for girls, lost
$1 million in annual funding from USAID last year and hasn't paid
its teachers for a year.
"As the economic situation gets bad, the security becomes even
worse," said Sarwin, 28, a teacher at one of AAE's schools in Kabul.
"If the international community leaves Afghanistan by itself there
will be another civil war like we had in the 1990s."
The group's founder, Hassina Sherjan, said foreign donors were
waiting to see how cooperative the new government would be with the
international community, as well as assessing the security risk of
staying in Afghanistan.
"Can people really work here?," Sherjan says. "I'm hoping all will
be resolved in the next month or two, because we can't go on like
(Writing by Jeremy Laurence; Editing by Paul Tait)
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