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Research Philosophy

My project will focus on leading change in Afghanistan. My project will explore in specific terms how Army leadership, World Bank, IMF, and ADB have implemented and adapted various strategic visions, plans, and policies to overcome the challenges faced in Afghanistan to restore security and economic stability.. For instance, World Bank, IMF for further financing for the development of Afghanistan, has stressed that corruption in Afghan should be rooted out, opium production should be curtailed, and stressed for the development of sectors like roads, education, and agriculture.

Of late, the officials of Afghanistan have initiated a variety of paces to enhance the trade atmosphere, as corroborated by the reduction of the process to start a trade and espousal of a moderate structure for the labor market. The high rate of hourly wages in the licit rural economy of Afghan mirrors vibrant rivalry for labour from the opium segment, particularly throughout the harvest season of the poppy.

A statistical evaluation of data reveals that the wage rate is relatively higher in Afghan as compared to its neighboring nations. Other factors influencing the external competitiveness of Afghanistan include acute power shortages, structural rigidities, and a weak banking regulatory and business environment. In 2008, the Afghans inflation shot up to 27.2% mainly due to the acute drought in 2008 and due to the sharp increase in international food prices. I will explore how the unpopular and prolonged war in Afghanistan required a paradigm shift from the United States and our coalition partners to gain support from the local nationals by winning the hearts and minds of the people, mainly by introducing structural reforms in administration, agricultural, electricity and education sectors.

I will focus on barriers hindering change, and I will discuss the current effectiveness of various change agents and processes and the way ahead for Afghanistan to grow into an established and functioning society. For instance, for reducing the evasion of taxes, the Afghan government has reduced the rate of corporate taxes and also introduced carry forward losses and depreciation provisions. In Afghanistan, the existence of an extremely weak administration structure and low level of compliance has resulted in the case for setting up a dedicated Largest Taxpayer Office (LTO) to audit, monitor, and enforce for collection of taxes from large taxpayers. Ongoing reforms in the customs sector in Afghanistan include the following.

1. new procedures and regulations are to be introduced.
2. With the support of the European Commission, USAID, and World Bank, the custom and excise substructure will prolong to be updated all through the nation.
3. A computer management and recording system was introduced
4. Mobile customs police and teams were inducted to make sure for the efficient enforcement.

In Afghan, it will take about eleven days for the clearance of imported goods without a bribe and this is somewhat higher than what is in Pakistan and relatively longer than in other adjoining nations. A statistical evaluation of data reveals that the wage rate is relatively higher in Afghan as compared to its neighboring nations. The existence of upper reparation mirrors the heightened dearth of experienced labour in Afghanistan aggravated by sturdy rivalry from the donor society. Investment in land by foreign companies is being discouraged due to uncertainty surrounding land tenure.

On aggregate, it takes about 252 days for a new investor and expenses about 9.2 % of the sale value of the land to conclude a property registration, as analyzed with one-hundred twenty-four days in adjoining nations. However, there remain many provinces throughout Afghan where the new government is yet to be more effective and offers few services, particularly where extremists have a strong bastion.

Capstone Project Problem Statement

After almost 40 years of war and lack of government stability Afghanistan is struggling to become a secure and functioning society and without the United States and our coalition partners they are doomed to fail why? USSR invaded Afghanistan in 1979. From then onwards, many coups mirrored the confronts within Afghan among various factions with varied notions about how Afghan should be administered and whether it should have the communist ideology and with some degree of fascination towards the USSR. Concerned with these developments and to stop a communist leaning government in Afghan, which could be loyal to USSR in Afghanistan, the USA started funding a group of insurgent forces to wage war against the Soviets in Afghanistan.

Mujahedeen or strugglers, who were the US-funded Afghan insurgents and were organized into different political ideologies backed and armed by different nations including Pakistan Saudi Arabia, and the USA. The renowned brutality of mujahedeen fighters and their stringent idea of Islam and their motive to expel Soviet foreigners from Afghan attracted many Arab Muslims thereby longing to witness an opportunity to experiment with waging a jihad. Osama Bin Laden was one such Jihadist, and he headed the Egyptian Islamic Jihad agency namely Ayman Al Zawahri. This Jihadist group headed by Bin Laden was later turned to be Al Qaeda. (Burns, 1978, p3).

By the year 1989, the Mujahedeen was able to drive away from the Soviets from the Afghan, and in 1992; Mujahedeen installed their government in Kabul by ousting Muhammad Najibullah, a Marxist president. However, under the mujtahid leader Burhanuddin Rabbani, there was severe infighting within the mujahedeen factions and this had devastated not only Kabul but many civilians who lost their lives, and many infrastructures facilities throughout Afghan was destroyed by rocket fire. (Burns, 1978, p3).

This political stalemate and chaos in Afghan helped the Taliban to assume power in Afghan. By 1998, the Taliban brought the whole of Afghan under its control. The world community was not happy with the Talibans rigorous laws based on Quran, which had complete disrespect to human rights. Immediately, after September 11 incident, a military strike was launched by the USA along with its coalition partners namely Canada, Britain, Germany, Australia, and France.

After a short battle, the Taliban was ousted from power and an interim government headed by Hamid Karzai was inducted in Afghan. In 2006, again insurgent Taliban emerged in force and started its fight by employing suicide attacks thereby imitating the Jihadist group somewhere in the region. Thus, the duty of the present elected government of Afghan is to concentrate to eradicate the Taliban in total and to dismantle its suicide attacks to bring permanent peace in Afghan.

As of now, there is no strong and popular leader available in Afghanistan to lead a change. According to Burns transformational leadership, it is the need of the hour in Afghan as the transformation leader can rise above the demarcation by relying on higher values and ideals of followers. They use charismatic strategies to lure people not only to the leader but also to the values. (Burns, 1978, p3).

Leading change for the betterment of the entire population has been slowed due to corruption, cultural differences, internal and external threats, and lack of leadership from those in power within the Afghan Government.

Proposed Research

My analysis will also include collected and studied data from various media sources to discern patterns and principles that guided various decisions and practices. I will also include case study material focused on internal and external influences that developed the current conditions and interactions between the United States and our coalition forces and the Afghan Government. I have used case studies from the World Bank study report both in 2005 and 2010. The IMF and ADB report and employed their data to corroborate my findings that Afghan is heading towards change that makes its economy stronger and vibrant. I will include my evaluation of the current situation and trend analysis of the current and probable future direction of events.

Statement of Objectives

Afghan has taken amazing swiftness towards restoring itself as an economically and politically viable state. After the fall of the Talibans regime in 2001, the Afghan government with the backing of the international community has spearheaded economic reforms and has reinstituted several political institutions.

Many reforms like the introduction of a new constitution, nationwide elections were organized for choosing Afghans first democratically elected president and a new parliament was elected in September 2005. The security scenario in the nation has dramatically enhanced and a return to general warfare does not seem to be immediate. The new central Afghan government has started to construct multiethnic police and army force for exerting governmental control in the provinces outside the capital with the help of aids from international communities. However, there remain many provinces throughout Afghan where the government is yet to be more effective and offers few services, particularly where extremists have strong bastion. (Hayes & Sedra, 2008, p.ix).

The power struggle within Afghan has been paved to war on a global level. Poor Afghans are witnessing ongoing suffering, while terrorist functioning from the nation has shaken the rest of the globe.

Global leaders have committed themselves to various international conferences held in Rome ( July 2007), Tokyo ( February 2008), Bucharest ( April 2008), and in Paris ( June 2008) to address the serious challenges that now impend before Afghan citizens  a live rebellion, destabilized infrastructure and services, aid dependency, food insecurity, poverty, and a consolidating narco-ascendancy.

There has been a sharp argument over whether endeavors to attain stability and growth to Afghanistan are attaining momentum or are on the brim of utter failure. (Hayes & Sedra, 2008, p.ix).

The peace that seems to be attained in Afghanistan as of now is only a partial peace, as the losers, the Taliban were yet to be overpowered and have retained some authority thereby posing new challenges to the new political order. (Goodhand and Sedra, 2006, p35).

However, permanent peace and stability can be attained in Afghan if its leaders like Karzai follow positive reinforcement leadership techniques in Afghan administration. The employment of positive reinforcement strategy is not only a growing but also a successful technique employed by leaders to inspire and to reap desired demeanors from their followers. I strongly suggest that the Afghan government, World Bank, IMF should employ a reinforcement strategy in Afghan to improve its economy and to raise the morale of the working force. (Lussier & Achua, 2007, p96).

To accomplish the magnitude of stability essential to meet the Bonn benchmarks, the Afghan government tried to co-opt rather than challenge armed power brokers, a guise of way lord democratization. (Goodhand and Sedra 2006). While the Afghan government attained legitimacy through two elections, its friendship with armed commanders under the government tent delayed reform efforts and caused public distrust of the Afghan government. (Hayes & Sedra, 2008, p.xiv).

One of the main aims of this research paper is to evaluate the social change in Afghanistan, its impact on womens legal status and social positions, womens diverse reactions to and participation in, change procedures. Social transformation is normally described in terms of revolution, modernization, cultural confronts, and social movements. (Moghadam, 2003, p96).

According to IMF (International Monetary Fund), there has been an average growth of GDP (non-opium) of 22.5 percent between the years 2002 and 2004. Further, IMF has estimated that annual growth in 2004-05 is around 7.5 percent and has estimated that growth would around 14 percent in 2005/06. Investments have accounted for 22% of GDP and the lions share of investments (about 90%) in public investment funded through aids flowing from the international community.

Despite rapid economic growth, the structure of Afghans economy has transformed little. About 90 % of Afghans economic activity is informal and about 47% of the estimated total GDP in 2003 was shared by the agriculture sector. One of the major shares of Afghans economy is the illicit opium production which accounted for nearly 33% of GDP in 2003. Though there has been a decline in the area devoted to opium production by about 20% in 2005, opium remains a serious hazard to stability and security. (IMF, 2006, p30).

Though the GDP of Afghan doubled from the year 2002, GDP per capita stayed at US$425 in 2008 thereby making Afghan one of the poorest nations in the world. (World Bank, 2010, p1).

The above chart depicts that in 2008/09, real GDP expanded 2.3% slowed down from 16.2% in 2007/08. It is to be observed that the production of cereals occupies eighty-one percent of aggregate agricultural production. The drought in 2008 acutely affected cereal production, which declined 20% in 2008-09 alone. The precipitous decline in GDP in 2008/09 is due to a fall in agricultural income. Fortunately, the rainfall during the chief crop reason (May-September 2009) in 2009 had been normal, and it had augured wells for the harvest in 2009. (ADB, 2010, p19).

With an approximate per capita GDP of only $315, Afghan remains to be one of the worlds poorest nations. Afghan is also having some of the worlds worst social indicators as mirrored in high rates of illiteracy, high rates of infant and maternal mortality, general disparity, and malnutrition. (World Bank, 2005, p7).

Continued conflict in Afghan destroyed the majority of Afghans manufacturing capacity and has driven the flight of many skilled managers and workers. Both international and domestic infrastructure facilities have been crippled due to the sabotage and have severed industry from customary markets. The Afghan government in the 1980s which was supported by USSR deteriorated the scenario by endeavoring to establish a centrally planned economy. Political instability in Afghanistan has closed down many carpet industries and compelled them to move to adjacent nations. In Afghan, there are very few small and medium industries and only a handful of large firms.

The fall of the Taliban regime and the end of major conflict caused to increase in private investments but these investments have been restricted about Afghans needs. (World Bank, 2005, p 9).

Between the years 2003 and 2005, AISA has received about US$ 1.3 billion by way of new investment but the majority of this is just approved investment and just a small fraction has occurred. Further, about half of the projects approved by AISA have been in the construction material and construction industry. The major portion of investment in the construction industry mirrors the huge inflows of external foreign aid and the necessity to reconstruct Afghans distressed infrastructure. Thus, Afghan industrial enterprises are embryonic and not able to efficiently compete against imports or vie in the export market. (World Bank, 2005, p 9).

Review of the Literature

Despite the recent conflict, the economy of Afghan has traditionally been volatile. However, the effect of the international financial crisis on Afghan has been quite modest. Due to its restricted economic transactions with the rest of the globe, Afghan remains insulated from the global economic crisis. The Afghan economy is chiefly agricultural-based and the Afghan economy is backed by foreign grants and by agricultural production.

The effect of the surge in commodity prices in 2008 was worsened by a drought in the Afghan economy resulting in an acute food crisis in the year 2008.( ADB,2010,p19)., However, despite the global recession, the financial sector of Afghan stayed stable as banks in Afghan have very limited international associations. As of July 2009, the capital adequacy of Afghan banks is about 29% and this indicates that commercial banks in Afghan are adequately capitalized. (ADB, 2010, p20).

Many were of the view that Afghan became a country in late 1947. Many invading groups ruled the Afghan province during the majority of the Afghans history. Ahmad Khan, a Pashtun, the largest ethnic group of Afghans started to rule Afghanistan in 1747. In 1880, Great Brittan swapped power in Afghan. The British rule was overthrown in August 1919 under the leadership of Amanullah Khan, who was responsible for introducing the first constitution in Afghan. The Taliban reigned the power between 1996 and 2001 with assistance from USSR. An Afghan militant group with the help of U.S troops has overthrown the Taliban in late 2001.

Hamid Karzai headed the transitional government. Taliban being a fundamentalist which followed the Islamic laws in letter and spirit. Under the Talibans rule, men could not shave their beards, and women were compelled to cover their whole bodies and faces in public. Hamid Karzai captured the power again in elections held in 2004. (Olson, 2005, p.3).

Ethnic Groups in Afghanistan

Afghan had no rich resources, and hence it was not colonized by any major European power. Due to this, no one assisted the Afghans to enhance their transport systems like railways and roads, better higher education or to administer their nation in a democratic style. Further, until 1978, Afghan was ruled by powerful dictators, and as such Afghan peoples had little say in how their nation was to be administered.

After releasing itself from British clutches in the 1960s, Afghan was struggling economically as it had very few trading associations with the rest of the globe. There was widespread poverty and the majority of the children received little schooling and Afghan was under the command of a small ruling group.

The economy of the Afghan was always in turmoil. For instance, in 1966, the average Afghan manufactured products worth around $ 70, and at the same time, American manufactured products worth around $ 3500, which is fifty times more than the Afghan. Due to this poor status of the Afghan economy, the majority of Afghans were determined to modernize their nation. They longed for better education, good jobs, enhanced technology, and a fairer political system. However, fundamentalists like the Taliban resisted any change. (Downing, 2008, p10).

Since the 1970s, Afghan has been a hot spot, when the first of many civil wars started. From then onwards, Afghans have prolonged to fight against Afghans. Some factions wanted a modern Afghan, whereas fundamentalists wanted a customary Islamic lifestyle. There was the involvement of foreign nations like the USA and Russia, which dispatched its troops to assist different warring groups in Afghan. However, this has produced mixed results and often ended in the worst things rather than streamlining. Due to weak governmental structure, drug dealers and international terrorists have been able to function from Afghan.

The rate of female illiteracy is highest in Afghanistan among Muslim nations and the Afghan government after the revolution of April 1978 initiated some important steps to expand income-generating activities and educational facilities for women. However, setbacks happened when fundamental Islamists captured authority at the start of the 1990s. (Moghadam, 2003, p14)

According to Dr. Zahir Tanin, Permanent representative to U.N for Afghanistan, when she visited President Hamid Karzai palace in 2001, at night, there was no electricity and heat. In 2007, Tanin has observed that there were lots of changes in the past six years. At the start of 2001, Afghan was termed as a failed state. During the Taliban regime, about eight million Afghans had emigrated either to Pakistan or Iran. When Karzai took as interim president, he introduced a new constitution that offered women with equal rights and had built many roads, schools and hospitals. Thus, Karzai government is able to see at least sixty percent of children are in school.

Women are employed both in government and in the media. Women started to play a leading role in the family also. Due to international intervention, now Afghan economy has become vibrant and has grown at double digits during the last years. (Skaine, 2008, p32).

The cost of doing business in Afghanistan is badly influenced by the existence of corruption, illicit revenue collection, uncertainties and ambiguities in tax laws. According to World Bank recent business survey , there has been improvement in the business environment in Afghan due to the positive nature of recent tax reforms but also emphasized the necessity for further improvements. Business community has observed that corruption and illicit charges are extensive and the municipality tax codes are ambiguous thereby paving to occasions of double taxation. For instance, some municipalities also collect property taxes despite the fact that in 2004, Afghan federal government has implemented a rent withholding tax. Business communities have also protested that the legal code is often ambiguous. There has been a potential source of administrative corruption due to the lack of transparency and accountability. (ADB, 2010, p23).

Some chief constraints discourage private investors from investing into Afghanistan.

Afghan Revenue Policy

From the above table, three major poignant apprehensions seem to be policy enforcement, poor law and order and electricity; there has not been much improvement in these concerns in the year 2008 also as compared to the year 2005. There has been very little improvement in these regimes over the last three years, mainly due to the intricacies of accomplishment during the prolonged domestic conflict. However, in the year 2008, firms seem to be less worried about corruption as compared to year 2005. Further, in the year 2008, firms are discovering it easier to access financing their projects and to access land. Thus, Afghanistans key success is more relying on its success at reforming its institutions. (ADB, 2010, p23).

The ideal tax system should be devised to collect revenues needed to accomplish a sustainable financial arrangement while being transparent, reasonable and downplaying alterations. So as to assist to encourage a strong private segment, the tax scheme should 1) curtail meddling with saving by individual, investment and consumption decisions, 2) be comparatively translucent , rule-based and simple to support compliances with the restricted available capacity and to eschew corruption 3) it should be predictable and stable to minimize the economic costs of vagueness.

Afghanistan has perused a very limited and minimum corporate and trade tax rate in the province. In 2004, changes were ushered in which justified the erstwhile twenty-five tariff bands , ranging from seven percent to one hundred fifty percent with a peak rate of sixteen percent and an aggregate duty of about four percent. Further, in Afghan, corporate income-tax rate was also lowered to twenty percent from twenty five percentage of net chargeable revenue. Further, in 2004, Afghan introduced liberal carry forward of loss and depreciation provision, which replaced ineffective tax exemptions and tax holiday systems. (IMF, 2006, p30).

Comparison of Corporate Tax Rate

Afghan president introduced a tax reform package in June 2004, which included the implementation of a BRT cess on chosen high-value services like hotels and eatery; the re- institution of a wage withholding tax; a diminution in the corporate tax to 20 percent from twenty-five percentage and introduction of a maiden withholding cess. Further, in 2004, a Taxpayer Identification Number (TIN) was also implemented. (IMF, 2006, p32).

In Afghanistan, the existence of extremely weak administration structure and low level of compliance has resulted in the case for setting up a dedicated Largest Taxpayer Office (LTO) to audit, monitor and enforce for collection of taxes from large taxpayers. (IMF, 2006, p 32).

In 2004, Afghan government introduced custom administration reforms and introduced the following measures 1) simplification of the custom tariff system by using market exchange rates for import valuation 2) simplified customs clearance documentation was introduced and effective supervising monetary system for duty exempted imports especially. Afghan conflict aid related 3) To introduce custom handling brokers to facilitate a more robust and speedier transit process and after some delay, in March 2005, a modern custom code was introduced.

Ongoing reforms in custom sectors in Afghanistan include the following.1) new procedures and regulations to introduce the new customs were introduced. 2) With the support of European Commission, USAID and World Bank, the custom infrastructure will prolong to be uprated all through the nation. 3) A computer management and recording system was introduced 4) Mobile customs police and teams were inducted to make sure for the efficient enforcement. (IMF, 2006, p.31).

Despite these reforms , according to World Bank Doing Business 2005 survey report illustrated that a variety of roadblocks to commerce, which includes large distortions in introducing inspection and valuation procedures , which eventually resulted in corruption and delays. Though, there has been a considerable reduction in road blocks and illicit charges and the World Bank report has stated that it has taken about eleven days for the clearance of imported goods without a bribe and this is somewhat higher than what is in Pakistan and relatively longer than in other adjoining nations. (IMF, 2006, p31)

Further, serious deficiencies of the present indirect tax system can be removed by moving to a wide-range consumption tax regime. The drawbacks of present BRT include

1. low revenue yield due to a narrow tax base
2. serious disincentive to export.

Further, the tax authorities are taking steps to move toward wide-range sales tax at the manufacturing level as an intermediate step towards shifting to VAT (Value added tax). (IMF, 2006, p7).

To attract more investment both local and from foreign investors, a new investment incentive law which contained tax holidays for the setting up business in eligible sectors was introduced in the year 2002. The recovery in the industry sector is also corroborated by its investment activity. Despite the fact that the return of expatriate Afghan investors and the magnitude of foreign investment may be discouraging, existing business firms are slowly adding to their capital stock. In a survey conducted, about seventy percent of the surveyed firms had reported that they had invested in new machinery or equipment sometime in the past year.

Further, about 33% of the Afghan business has either introduced new product lines and more than forty percent have improved their existing product line in the last two years. This corroborates that in expectation of future opportunities, the existing Afghan firms are involved in upgrading their capabilities and increasing their capital stocks. (IMF, 2006, p7).

Though, the Afghan currency namely the Afghani appreciated over the 30 months to September 2005 by about 20 percent but this increment seems to be the outcome of Dutch disease emanating from aid-associated and drug associated influxes. Other elements influencing exterior competitiveness of Afghanistan comprise acute power shortages, morphologic rigidnesses and a fragile banking regulatory and business atmosphere. (IMF, 2006, p7).

The low magnitude of branching out of the Afghan financial system and its profound dependency on agricultural markets makes it more susceptible to exogenous and external distresses. The Central Statistic Office (CSO) of Afghan has estimated the total trade of Afghanistan in 2005 was around $5.4 billion, which consisting of $1.7 billion exports and $ 3.9 billion imports. Precious stones, dried fruits, carpets, nuts and sheepskins are the main exports from Afghan. Imports originate mainly from India, China, Pakistan and Japan. (IMF, 2006, p.8).

In 2008, the export growth was dictated by chiefly agricultural products like nuts, opium, dried fruits, hides, wool and customary products like hand-woven carpets. Through smuggling, there is also large undocumented trade in Afghan. In 2008, the imports mainly consist of duty free imports, mainly by donors besides products for local consumption. During the 2008 drought, the Afghan government was compelled to import giant quantity of wheat mainly from Pakistan. (ADB, 2010, p21).

A statistical evaluation of data reveals that wage rate is relatively higher in Afghan as compared to its neighboring nations. For instance, the average hourly wages paid in the manufacturing sector surpass those reimbursed in Iran and Pakistan by a factor of 1.2 and 2.3 correspondingly. As regards to compensation of highly trained professionals and managers, the wage gap is wider. In neighboring nations, the salaries per annum of this group of staff are within the $ 3500 to $ 8100 series, they happen to be around $ 12000 in Afghanistan. The existence of higher payment mirrors severe paucity of experienced labour in Afghanistan aggravated by vibrant rivalry from the donor society. (IMF, 2006, p 13).

Relative Wage Levels, 2005 (In US $).