BizCLIR

The magnitude of Afghanistan’s Opium Poppy (Poppy) narco-economy is almost unfathomable, reaching up to 36% of the licit GDP in 2004/2005. It permeates the entire economy and culture of the country, influencing effective demand, providing income and employment in rural areas, supporting the balance of payments, and generating government revenues (from customs on drug-financed imports). On the other hand, the opium economy contributes to massive corruption, undermines public institutions, and hinders the development of the rule of law. Though ubiquitous and debilitating in its pervasiveness, and despite impeding the emergence of a vibrant and dynamic economy, the story is not all negative and the Afghan people are making great strides in overcoming the influence of Poppy. The results of this Diagnostic suggest that the licit economy is growing and that some of the legal instruments needed to combat the narco-economy are nearly in place. The goal of eliminating Poppy production, or at least of making the impact of the narco-economy negligible, is near at hand and fully achievable, assuming the right development instruments are supported and the political willingness to sustain them is manifest.

Poppy is an agricultural crop which, when processed, is transformed into morphine or heroin. It is grown during the winter months in Afghanistan. It competes with wheat and other winter crops. Like all crops, when production is high, the price tends to fall – when production is low (and demand remains high) the price often skyrockets. This tendency is accentuated when farmers produce a large wheat crop (due to good weather and adequate rains). Wheat prices then fall dramatically, forcing farmers to produce more Poppy to compensate for their low wheat crop incomes. Of course, the cycle can be repeated over and over as farmers react to these market signals. Afghanistan’s government, however, is intent on reducing or eliminating Poppy production because it is a narcotic crop. Although the new laws and implementation strategies are well-intentioned, initial efforts to enforce the laws and implement the strategy have met with innumerous obstacles and constraints.