Catalog

Afghanistan's Opium Economy
ADB Review [ December 2005 ]

The illegal opium trade accounts for a huge part of the Afghan economy—and has a negative impact far beyond its borders

By Grant Curtis, (gcurtis@adb.org)
Senior Country Programs Specialist (Afghanistan)

LUCRATIVE CROP The average gross income per hectare from opium cultivation exceeded that of wheat—the main alternative crop—by as much as 27 times

Among Afghanistan’s many development challenges, its large and illicit opium economy is among the most intractable, and poses some of the most difficult challenges.

The impact of opium on Afghanistan’s economy, governance, and society is profound. Cultivating opium poppy helps supplement subsistence-level incomes derived from other agriculture-based pursuits. Yet, the opium trade has a harmful impact on Afghanistan’s security, its political normalization, the process of governance and state-building, as well as its longer-term economic development.

It also spreads far beyond the country’s borders. Afghanistan’s poppy fields are the source of three quarters of total world heroin production, and thus contribute to worldwide drug abuse and addiction, as well as the spread of HIV infection. According to the United Nations Office on Drugs and Crime (UNODC), at least 100,000 people die annually—directly or indirectly— because of their addiction to Afghan opium. In addition, the lucrative trade in opium and heroin contributes to regional and international insecurity through narco-terrorism, drug trafficking, money laundering, and other illicit activities.

Top

Over recent years, opium poppy cultivation has spread to every corner of Afghanistan. In 2004, poppy cultivation increased by as much as 64%, pouring $2.8 billion in illicit revenue into the pockets of warlords and traffickers—with only a small fraction of that going to the poor farmers who produce the poppy. The farmers are all too often bound to traffickers through opium debt.

Afghanistan’s illicit opium economy represented as much as 52% of the country’s legal gross domestic product in 2004, according to UNODC.

Although the amount of land and labor resources used for opium production is relatively small—only about 7% of the country’s irrigated land area in 2004— as many as two million Afghans are involved in opium production, earning far higher incomes from poppy cultivation than from any other activities, says UNODC. In 2003, the average gross income per hectare (ha) from opium cultivation exceeded that of wheat—the main alternative crop—by as much as 27 times.

While the farm gate price of opium plummeted in 2004, opium poppy still remained at least 10 times more profitable than any other cash crop, and also provided wage labor as much as five times the market wage for rural unskilled labor.

Top

BIG BUSINESS Afghanistan’s illicit opium economy represented as much as 60% of the country’s nondrug gross domestic product

Opium poppy is also an ideal cash crop. It does not require good soil or irrigation and is somewhat drought resistant. It is durable (opium paste is not subject to postharvest losses and actually increases in value with age). It commands a good, although volatile, farm gate price, attracts credit and other inputs from traffickers (at the risk of opium debt), has a guaranteed international market, and is easy to transport with well-established and highly organized trafficking routes protected by international criminal elements, according to a report by William Byrd and Christopher Ward, Drugs and Development in Afghanistan, published in December 2004.

The Government of Afghanistan, with international community support, has mounted a concerted National Drugs Control Strategy (NDCS). Based on the mutually reinforcing approaches of interdiction, eradication, and alternative livelihoods, the NDCS has set out ambitious goals. It aims to reduce opium poppy cultivation by 70% in 5 years and totally eliminate it in 10 years, and interdict and prosecute trafficking, processing, and distribution of narcotics and precursor materials. It also aims to forfeit drug-generated assets of those benefiting from opium poppy cultivation, control money laundering, and promote better regional and international anti-narcotics cooperation.

Top

In terms of overall drug control, this strategy has produced some positive results. UNODC’s initial 2005 assessment suggests a decrease in cultivation from 131,000 hectares (ha) in 2004 to 104,000 ha in 2005, a significant decline of 21%.

However, heavy snow and rain conditions in early 2005 and the absence of largescale poppy diseases (contrary to the situation in 2004) have boosted yields in 2005, increasing from 32 kilogram (kg) per ha in 2004 to a projected 39 kg in 2005 for an overall productivity gain of some 22%. As a result, Afghanistan’s total 2005 opium production is expected to yield some 4,100 tons, only a 2% decrease from 2004’s harvest (although still well below a peak production of 4,600 tons in 1999). Because of increased per hectare productivity in 2005, Afghanistan will retain its dubious distinction of producing some 87% of world opium, says UNODC.

As an essential complement to interdiction and elimination activities, the “alternative livelihoods” approach will only be successful if drug control objectives are mainstreamed into all development activities, particularly rural development programs. ADB’s irrigation rehabilitation and water resource management activities, in particular, will make a measured contribution to the huge task of reducing—and then eliminating—Afghanistan’s drug economy and its attendant problems (see related story).

To beat opium for good, however, Afghanistan needs to build an economy that provides an annual income of some $1,000 per year, said Ashraf Ghani, as reported in Bloomberg Markets magazine. Although this is not a huge sum, it is five times 2005 levels—a measure of how much and how quickly Afghanistan’s economy will have to grow if the scourge of poppy production is to be eliminated.

Go back to current issue

Email this to a friend