The Opium Economy, Part 1


Afghan President Hamid Karzai has described the nation’s illicit opium problem as “the single greatest challenge to long term security, development, and effective governance of Afghanistan.” Money from the opium trade funds the insurgency and undermines the legitimate government. Alan Zhao investigates to find out more about what drives this illicit economy.

Let’s start with the numbers.  According to the United Nations Office of Drug Control, UNODC , approximately 70,000 hectares of opium poppy were cultivated in 2002.  Despite its illicit status and governmental eradication efforts, production gradually increased until reaching nearly 200,000 hectares in 2007.  UNODC’s 2010 report, estimated production steady at 90,000 hectares.  The US government and foreign experts have estimated the opium economy to be responsible for 30-60% of the total Afghan GDP.

All of this has gone on, despite the Afghan government and its international partners devoting billions of dollars in various efforts to fight opium production over the past decade.  Why haven’t they been successful in stopping farmers from growing opium? One reason accord to Paul Fishstein, agricultural expert and Harvard University Belfer Center Fellow, is that agriculture in Afghanistan is precarious.

FISHSTEIN: You know agriculture by its nature, are a high-risk endeavor, and particularly the physically and institutionally insecure environment, there is a whole bunch of other risks, on top of climate, and economic related risks.

NARRATOR: Opium poppy has numerous biological advantages in Afghanistan’s dry climate.  It grows well, with little care, and without irrigation.  But, Fishstein says, the market itself helps further opium’s comparative advantage by reducing risk.

FISHSTEIN: The structure of the opium economy, in a way, takes a way some of that risk. Its storable, it’s not perishable, people will buy it at your farm gate. And they cover the transport and all the corruption related expenses, and that is a way of minimizing risk.

Adam Pain, a rural development expert at the Afghanistan Research and Evaluation Unit, sums up the relationship between poor farmers and opium poppy.

It works for poor people in areas where markets are highly fractured.  It is a low-risk market in a high-risk environment.  There are price incentives that are certainly there.

But farmers’ decision to grow is not the entire story.  Once harvested, opium must be refined into heroin, and transported to foreign markets.  As Fishstein describes, who handles and profits from the heroin trafficking is no mystery.

Is opium helping to fund the insurgency and does the insurgency facilitate the production and transport? Absolutely. There is no question about that. I don’t think anyone would tell you there isn’t a link.

Though opium is illegal, it is not without regulation. Gretchen Peters, investigative reporter with a decade of experience in Afghanistan, elaborates on the Taliban’s almost governmental role in the illicit market.

PETERS: Meanwhile the Taliban are actually quite successful in collecting all sorts of revenue, whether they are taxing poppy farmers, or taxing labs that are processing opium and into narcotics, taxing the shipment of drugs that are coming through their control, and taking security payment or extortion payments on all sorts of local businesses and even some of the construction projects that are funded by the new coalition that is in Afghanistan.

While it is known that opium’s profits support the insurgency, Fishstein says its exact impact is unknown.

The Opium economy is funding the insurgency. How much is it? What percentage? We don’t really know. Is it 20%, is it 30%, is it 50%, is it 60%?

However, the insurgency’s role in fostering the drug trade is the result of a lawlessness in opium producing provinces, and in Afghanistan as a whole.  Peters describes this relationship.

Drug producers always gravitate to areas where there is a lack of governance and this is probably one of the main driving factors, the fact that Afghanistan has a weak and corrupt government, and in fact the region is populated by weak and corrupt government, this to me is the biggest challenge that the international community faces in the region, that’s not actually fighting the insurgency.

Joel Hafveinstein, a former USAID contractor, remarks on how bribes within the Afghan National Police force show the police’s complicity in drug trafficking.

HAFVEINSTEIN: If you look at the bribes required for police promotions, they increase dramatically when they are based in an area where opium is being trafficked.  The cost of a district police chief post can be dramatically higher.  There is no comparison. It is clear that the only way to be promoted to a police official is to be complicit in the opium trade.

Peters suspects that the corruption goes even higher.

PETERS: And I think the problem goes right to the top. There have been dozens of cases where president Karzai or I should say there have been dozens of cases where drug traffickers and officials involved in protecting the drug trade have actually gone through the afghan court system, have been tried, convicted, sentenced, and president Karzai has turned and pardoned them because they are political cronies.

But why is opium profitable in the first place?  Pain argues that the West’s demand for opium-derived heroin is the ultimate driver of Afghanistan’s opium economy.

PAIN: It’s a market driven by demand in the west. Now what other markets do we seek to address by controlling the supply rather than the demand side.  The fact that it is illegal creates the price incentive by forcing it into the shadows.

NARRATOR: And a demand will always find a supply.  For the time being, Pain states, Afghanistan is the supply.

PAIN: If we push it out of Afghanistan, it will go somewhere else.  It won’t disappear. The market exists and it is the demand side and the way the market is structured which are the key issues which drives it.  Then if add on top of that the insecurity, the lack of alternatives, people are in a sense trapped in a rural economy.  The conditions for them to move out of the opium economy simply do not exist.

Heroin’s international demand, poppies’ biological advantages, and domestic political instability make Afghanistan the perfect place for growing opium.  With an estimated 30-60% share of the total GDP, the opium economy will continue unless there is effective intervention. Next week, I will examine the effectiveness of different counter narcotics efforts.  For War News Radio, I’m Alan Zhao.

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