Thank you, Colonel Pellerin.
Ladies and gentlemen, a conventional mantra has been that there is no military solution in Afghanistan. In our view, a far better way of phrasing that would be to say that there cannot be, without the military-provided security, any chance of development. And we have noticed in this past year that there has been an extension of the area in which the Afghan citizenry feel that security has been improved.
The United Nations Office on Drugs and Crime, which is a highly respected international institution, conducts each year its Afghanistan opium rapid assessment winter survey, and that has just been published within the last month. It covered structured interviews with the headmen of 508 selected villages across Afghanistan in 236 of the districts, and thus provides a useful grassroots database of opinion at the village level.
The winter survey reports that the security situation was rated by these grassroots village headmen as either very good or good in 23 provinces and as very bad or bad in eight provinces, including those of the southern region. In late 2006, then, some 75% of Afghanistan's provinces felt secure. The challenge for ISAF is to extend that area of felt security even farther, and with security comes development.
That same UN Office on Drugs and Crime survey asked about whether or not external assistance activities were reaching their villages, and the village headmen reported that 451 of the 508 villages had in fact received external assistance in some 828 separate activities. Of these activities, 54% were provided by the Government of Afghanistan; 24% by United Nations and international organizations; 17% by NGOs; 4% by USAID; and 1% by others.
The assistance activities took the form of medical activities, some 50%; infrastructure activities, 20%; agricultural activities, 13.5%; education, 11%; and employment, 4%.
We can also turn from the grassroots perspective to the macro level of looking at changes in the gross domestic product, the investment, and the exports of Afghanistan over the past five years. When I draw these statistics from the recent report of the International Monetary Fund, which was tabled about six weeks ago, it showed that over the past five years the average GDP growth rate was in the order of 15% annually; the growth rate in the investment of capital formation was in the order of 40% annually; and the increase in exports from Afghanistan, not counting the export of heroin or opium, was growing at a rate of about 20% annually.
The IMF report commended that despite a difficult security environment and persistent expenditure pressures, Afghanistan's performance during the first six months of the 2006-07 fiscal year was in line with the program. The authorities met all of the end-of-September 2006 qualitative and quantitative performance criteria and indicative targets, the structural performance criterion, and most structural benchmarks except for those related to the state-owned banks.
Other evidence may be found in the report of the Canadian Ministers of Foreign Affairs, Defence, and International Aid, which has been tabled before you and does not, therefore, require further comment from me.
We conclude from our examination of data at both the micro grassroots level and the macro international organization level that significant progress has been made and is continuing to be made. We nevertheless need to go a great deal further than that. Nonetheless, there has been a successful track record.
This leads me to my second point, which is the assessment of the danger of ISAF's withdrawing prematurely. This is the question of what would happen if we were to withdraw. Here the question I think centres upon the capacity of a fragile state to provide the security needed to allow future development to continue along its past success path. And here again is another crucial problem, and that is the balance of financial resources between those possessed by the Government of Afghanistan on the one hand and those possessed by the anti-government forces on the other.
The International Monetary Fund report that I have already cited shows that the domestic tax and non-tax revenues of the Afghan government amounted to about 4.5% of GDP in 2003, and are projected to rise to only 6.8% in 2007-08. This has been supplemented, of course, by grants from the international community, which would raise the central government's revenue base to about 9% of GDP in 2003, and about 14% in 2007.
Clearly, this is a very weak financial resource base. In developed countries, we would normally expect to see central government expenditures between 40% and 55% of GDP. In third world countries, developing countries, we would normally expect to see it somewhere in the order of 20% to about 25% of GDP. In comparison to those benchmarks, the actual revenue base available to the Government of Afghanistan is quite small.
Set against this are the financial capacities of the anti-government forces, particularly those coming from opium and heroin production. The UN Office on Drugs and Crime reported that in 2006, the export value of opium and heroin to neighbouring countries amounted to about $2.7 billion, of which the farmers got about 20%, or about $0.5 billion, with the drug traffickers getting the remaining $2.14 billion, or about 80% of the total value.
This was followed up by another study done by the World Bank and the UN Office on Drugs and Crime, entitled Afghanistan's Drug Industry: Structure, Functioning, Dynamics, and Implications for Counter-Narcotics Policy. It estimated that the trade at that point had increased to about $3 billion, accounting for 92% of global production and for about one-third of the total economic activity of Afghanistan. It traced a process of consolidation taking place in the drug business, and it also looked at the effects of this in terms of the ability of the drug traffickers and their allies to bribe and corrupt public officials and to fund the hiring of soldiers for the Taliban and the forces that are engaged against us.
The executive director of the UNODC stated on March 20 of this year, in a briefing to the United Nations Security Council, “In the south—the vicious circle of drugs funding terrorism, and terrorism supporting drug lords is stronger than ever.” In other words, opium cultivation in the south of the country is less a narcotic issue and more a matter of insurgency, so it is vital to fight them both together.
At the CDA, we believe that this great disparity in financial resources between the drug traffickers and their allies on the one hand, and the revenues of the national government on the other hand—a ratio of 6.8% to 33%—is such that if ISAF were to withdraw, it would result in a complete overthrow of the Afghan national government. The country would be quickly pitched back into civil war, with a decline into regional warlord control at best, and the coming to power of a new Taliban structure at worst, depending on the moneys to be provided by the drug traffickers. In our view, Afghanistan would evolve from being a narco-economy to being a neo-Taliban narco-state, with the prospect of the return of human rights abuses and perhaps the al-Qaeda training camps, and the destruction of everything that we have stood for and sought to achieve in our program of assisting the reconstruction of a formerly failed state.
Thank you, sir.