AFGHANISTAN'S ECONOMY STILL HOOKED ON OPIUM, SAYS UN

VIENNA - A year on from a ban on opium trade and cultivation, Afghanistan
still produces almost three-quarters of the world's opium, while high drug
prices keep the crop attractive for poor farmers, a United Nations survey
has said

The study by the United Nations Office on Drugs and Crime (ODC) shows the
narcotic so rooted in the economic life of the country it serves as a
regular commodity, collateral for credit and even currency in a highly
evolved "opium economy".

"Dismantling the opium economy will be a long and complex process. It
cannot simply be done by military or authoritarian means," said ODC
Executive Director Antonio Maria Costa.

The report added that combating the opium economy was also necessary for
stability in Central Asia, where the trade flourishes under the protection
of warlords and encourages corruption.

The ODC started annual opium poppy surveys in Afghanistan in 1994,
collecting details of cultivation, production and prices, and tracking the
almost 15-fold increase in production since 1979, the year of the Soviet
invasion.

The study cites the almost continuous warfare of the last 20 years as
eroding agricultural and economic infrastructure and destroying the
storage, marketing and transportation facilities needed to grow and sell
legitimate crops.

"Opium does not face these limitations. It is durable, easy to store and
carry to the market," the study says. "Opium markets operate like spot and
futures markets, with traders providing credit for future production,
buying the opium in local bazaars, and traffickers taking over the marketing."

The study adds that in the last two decades opium cultivation and trading
were de-facto legal and very profitable, with opium evolving initially as a
financial instrument where a formal financial system had collapsed.

"Opium farmers could sell their harvest in advance at a fixed price, i.e.
using their future crop as collateral, and received cash immediately. The
repayment of the loan was in kind," the study says.

But as the Taleban first banned opium cultivation, and then Afghanistan's
new government banned opium trade, prices soared to about US$450 ($835) per
kilogram, acting as an additional incentive for farmers.

The study says that although only under one per cent of all arable land is
used for poppy cultivation, annual revenues from opium in 2002 were around
US$1.2 billion, in a country where the average daily wage is around US$2.

The report concludes that apart from policing, Afghanistan needs support to
promote alternate crops and implement macro-economic structures that boost
legal commodity markets.

"National efforts will not be enough," Costa said. "The problem is
international. All countries that are part of the Afghan drug problem
should be part of its solution."