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services, elections can lead to kleptocracy rather than democracy, and many Afghans fearthat this process is already under way.ResourcesAfghanistan has one of the weakest governments in the world. The InternationalMonetary Fund (IMF) estimates that the government revenue will total 5.4 percent ofnondrug GDP in 2005–2006, less than any country with data. Furthermore, theadministration has difficulty disbursing the funds it has: the ten poorest provinces receivethe smallest budgetary allocations, leading to nonexistent government presence andrampant security problems. 21Attempts to raise domestic revenue are stymied by the lack of control over thecountry’s borders, the small portion of the economy in the formal legal sector, and theweakness and corruption of the administration, particularly in tax collection. Currently,would-be tax payers are discouraged by collectors, who suggest they pay bribes instead.The Afghanistan Compact requires the government to raise domestic revenue toover 8 percent of GDP by fiscal year 2011 and to be able to cover 58 percent of therecurrent budget with its own resources, compared to 28 percent in fiscal year 2005.Nonetheless, escalating costs of security and civil service reform will make these targetsdifficult to achieve.Recommendations:• The Coalition and Afghan government should support continuing fiscal reform,including ISAF and Coalition military deployments in support of control ofborders (for revenue collection) and state banks (for expenditure). Thegovernment should rationalize the procedures for business taxation, abolishnuisance taxes, and find other ways to tax the expenditures of the international21 Ashraf Ghani, Clare Lockhart, Baqer Massoud, and Nargis Nehan, “Public Finance in Afghanistan: TheBudget as the Instrument of State-Building and Policymaking,” in James Boyce, ed., Peace and the PublicPurse: Building State Capacity after Violent Conflict (New York: Center on International Cooperation,forthcoming).26
presence, as it has done through rent taxes. For instance, the government could taxnon-work-related imports.• Aid programs should assist the ministry of finance in establishing electronic taxpayment, revenue tracking, and expenditure systems, compatible with the treasurysystem already in place. Developing and funding of programs, including thosesponsored by PRTs, through the Afghan budgetary process, rather than throughindependent donor mechanisms, is essential to developing a fiscally sustainablestate.Administration and Service ProvisionThe government has started reforms at the national level, but many ministries are stillnonfunctional or corrupt. The provincial and district administrations, the face ofgovernment for most Afghans, are largely controlled by illicit or violent power holders.In Afghanistan’s centralized unitary state, the president appoints all ministers,deputy ministers, governors, and provincial security chiefs. The character of theseappointees is one of the important political issues in the country. The AfghanistanCompact requires the government to establish formal vetting procedures by anindependent board for senior appointments. This board would vet potential appointees forqualifications and involvement with drug trafficking, corruption, armed groups, or pasthuman rights violations.Recommendation:• In addition to confidential vetting, the Afghan appointments board shouldintroduce more transparency into the appointments process. Candidates should berequired to make public their assets, as is required for the most senior figures byarticle 154 of the constitution, and extend this requirement to their families.Appointments of deputy ministers, governors, district officers, and provincial anddistrict police chiefs should also be announced for public comment thirty daysbefore taking effect.27
Page 1 and 2: THE CENTER FOR PREVENTIVE ACTIONAfg
Page 3: CONTENTSForewordvAcknowledgmentsvii
Page 7 and 8: ACKNOWLEDGMENTSI would like to than
Page 9: Source: Map graphic provided by map
Page 13 and 14: INTRODUCTION:THE AFGHANISTAN COMPAC
Page 15 and 16: • An exchange rate inflated by ai
Page 17 and 18: SECURITYThere are two international
Page 19 and 20: expand coverage by PRTs, help disba
Page 21 and 22: Yet more than four years after the
Page 23 and 24: presidential visit to the region, w
Page 25 and 26: without active engagement and assis
Page 27 and 28: enforcement services. The inhabitan
Page 29 and 30: manage its water resources, connect
Page 31 and 32: efforts.” 18 In response to Afgha
Page 33 and 34: Using pressure to hold such leaders
Page 35 and 36: • The central police force also m
Page 37: Afghans also have shown that they w
Page 41 and 42: development budgets. Currently, the
Page 43 and 44: ECONOMIC AND SOCIAL DEVELOPMENTBasi
Page 45 and 46: • Counternarcotics development st
Page 47 and 48: military operations of the Coalitio
Page 49 and 50: Figure 3: U.S. Assistance to Afghan
Page 51 and 52: This will require both national bud
Page 53 and 54: ABOUT THE AUTHORBarnett R. Rubin is
Page 55 and 56: CENTER FOR PREVENTIVE ACTION ADVISO

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