The Road Ahead for Afghanistan

Afghan President Ashraf Ghani joins Robert E. Rubin, co-chairman of CFR's Board of Directors, to discuss his government's political and economic priorities. Ghani describes his plans to ameliorate the weaknesses in Afghanistan's economy and addresses youth unemployment, the widespread narcotics trade, and poor infrastructure. He outlines his vision for regional partnerships with countries like China, India, Pakistan, and Iran. Ghani additionally offers an assessment of his country's security situation, noting that the Afghan government will require long-term economic, military, and diplomatic support from the United States.

HAASS: Well, good afternoon. I'm Richard Haass, president of the Council on Foreign Relations, and I want to welcome you to this meeting with the president of the Islamic Republic of Afghanistan, Ashraf Ghani. I also want to welcome the president and his distinguished delegation, one that includes the foreign minister, the national security adviser, the U.N. ambassador, and several of the president's closest aides.

The format of this meeting will be a conversation between the president and Robert Rubin, who is co-chair of the Council on Foreign Relations and the former secretary of the treasury. The two of them will discuss a range of political and economic subjects and then the floor will be open to questions from CFR members.

Before turning things over to Bob, I wanted to say a few things to help set the stage. The relationship between the United States and Afghanistan has been both complicated and intimate. It has gone through any number of chapters, but I want focus briefly on three, the first two of which I participated, one as a White House official and the second from the State Department.

The first chapter began in the mid-1980s and involved significant American assistance to Afghan mujahideen who fought the Soviet-backed regime and Soviet forces themselves. The Soviet military presence in Afghanistan ended in February 1989. The regime collapsed several years later, but the aftermath proved to be a major disappointment, and in the end, a failure, as the Taliban came to power.

The second phase of our relationship begins with the Taliban-controlled government in Afghanistan facilitating al-Qaeda's operations, and this phase came to a head after 9/11. U.S. intelligence and military personnel again worked with the Afghans, in this case to oust the Taliban regime, after which the United States played a central role in helping Afghans form a representative government under President Karzai.

Over the ensuing decade and a half, U.S. involvement in the Afghan war, one both civil and regional, has been considerable to say the least. The cost of this war has been great both to Afghans and to Americans. Dr. Ghani is best placed to speak of Afghan sacrifices. Those of Americans include more than 2,300 lives, some 20,000 casualties and spending on the order of $1 trillion once long-term medical costs are factored in. Nearly 1 million American men and women served over in Afghanistan, and I want to thank President Ghani for paying tribute to all these Americans in his remarks this past Monday.

There's now a new Afghan government and a new opportunity for both countries to create conditions of greater stability, greater prosperity and greater freedom. There is also a set of challenges, some familiar, some new.

The Afghan government will require long-term economic, military and diplomatic support from the United States, its neighbors and others if it is to hold its own against a determined enemy, or bring about conditions in which those pursuing their goals through arms decide to pursue them through politics.

Progress will also require concerted efforts by Afghans themselves to overcome their many divisions and meet their many challenges. Outsiders can assist, but there's necessarily a limit to what they can do. All of which is to say is that we thank President Ghani for being with us today,and that we very much look forward to learning about his plans for his country.

Sir?

RUBIN: Thank you, Richard.

Mr. President, let me add my welcome to you. We are really honored to have you with us. And I'll just make one personal comment. If you look in your materials adjustments (ph), you'll see the—the president's resume. And it really is a remarkable resume of academic achievement and practical experience at the World Bank and dealing with countries that faced problems of the type that Afghanistan faces. So, your country and the global community, Mr. President, are really very fortunate to have you in the position that you're in.

The program today will consist of my first engaging with the president. I'll pose a number of questions to the president. And we're going to focus on the economic prospects of Afghanistan, which obviously interrelate with and intertwine with the political stability and security.

And then we'll take the second half of the program and ask for questions from all of you.

So, with that, Mr. President, let's start with this. I think anybody who is focused on the economic prospects of Afghanistan would start with the question of what your perspective would be with regard to national security and political stability. And then we'll turn to more specific economic issues after that.

GHANI: In the name of God, the confession (ph), the merciful, first of all, it's a great pleasure to be with you. I've been an admirer, reading your biography—autobiography with intense attention.

Rubinomics really transformed the world and...

RUBIN: Thank you.

GHANI: ... it's—it's a pleasure to be with you.

I'd also like to thank Mr. Haass for his immense contribution to Afghanistan. I had the rare opportunity to interact with him in October of 2001, when the engagement was shaping. And then throughout the bond (ph) process where we set the new course. His discipline, his approach, his phenomenal memory, his focus are always appreciated. And I hope that you will engage again, and bring large groups of Americans to Afghanistan.

First, Mr. Secretary, we have to deal with the (inaudible) analysis. Afghanistan's problems are not confined within geography of Afghanistan. We're dealing with a changed ecology of terrorism. And there's a term I recently coined in the Bonn—in the Munich Security Conference.

Without understanding terrorism as a system where both a symbiotic and competitive relationship take place, we're not going to understand the full dimensions of security. State system is a chain. When links are severed and when several links break simultaneously, the rest—the rest of the system increases. So, we are faced with new threats because of collapse of Syria, because of collapse of Iraq, collapse of Yemen. This needs to be appreciated.

We have an onslaught from the West that up to last year, we did not have to deal with. We could go subsequently into those dimensions. From the East, also, for the first time in the last nine years we have had a season of fighting.

This year, Pakistan is going to have its own season of fighting, and that changes the dynamic. We've already had 200,000 refugees flowing into Afghanistan as a result of the military operations in Pakistan. The great network of terrorism that was centered in North and South (inaudible) from al Qaeda to Chechens, to Uzbeks, to the Chinese, (inaudible) and others is being dislocated.

In this context, this is one driver. The second driver is criminality. The impact on—of criminality on security unfortunately has been under theorized. The global criminal economy is 1.7 trillion a year. Afghanistan is certainly among the 20 top contributors to this because of the heroin trade. But heroin has been sidelined as a phenomenon and its impact.

We have at least 15—or 35 people who are worth $10 to $20 billion, and they have yearly income from this trade, it's $300 to $500 million. We—they fuel insecurity. So, that, again, needs to be understood.

And then, of course, there's the phenomenon of the Taliban as a distinctive ideological phenomenon, but simultaneously socioeconomic. In this environment, what I'm proud to say is that at the beginning, when authority was transferred to be, the attempt was to bring down the state collapse, like Yemen, or like Syria, or others.

In the last six months, we've gone from a defensive position to an offensive position. Today an unprecedented movement by the Afghan army is taking place in the Helmand Province and in a number of related areas. But (inaudible) a conclusion.

2015 is going to be a very difficult security year. We had no break during the winter. We have demonstrated our capability and will, but we are going to be tested.

Relationship with the economy, we've inherited one million unemployed youth. Every year, we have to create minimally 600,000 jobs. 36 percent of our population lives below poverty. This means a reserve army of unemployed youth up for grabs.

Without focussing on youth and without the economic empowerment of youth, women, and the poor, the three majorities, numerical majorities, that are political economic minorities, you cannot have stability. So, stability needs to be defined in structural terms, a system where people become stake holders, both economically and politically.

Related, two other observations. One, the formal economy is underdeveloped. The market instruments that are required for market integration have been subverted because of the overwhelming presence of sudden foreign money that created a glut and is now creating a drought.

Transport sector, for instance, accounted for 22 percent of the GDP. the construction sector accounted to 12 percent, but that's because 120,000 foreign troops, 100,000 America, were the drivers. Now, those two sectors have really slumped.

In agriculture, where the bulk of the people live, only accounted for 25 percent of the GDP, but it has not received market integration. The best market integration is a criminal one. Credits and others are provided.

So the challenge is simultaneously to think an economic system suited to a landlocked country with immense potential natural wealth in a regional context where regional integration is key to stability.

RUBIN: Let me ask you a question in that context if I may, Mr. President. I read your economic program which was really very impressive. In fact, before I get to my question, why don't you do this. Why don't you describe briefly to all of us the economic program. I think you presented it in December of 2014, if I remember correctly.

GHANI: Yes.

RUBIN: And it was a really—it was a really interesting program because it had a focus on the opportunities in Afghanistan, and there are a lot of dimensions to that that I at least was not aware of and that, although very difficult to realize, nevertheless do provide real potential. But also, it was very candid about the challenges. Why don't you briefly describe that program.

GHANI: Sure. Well, in terms of opportunities, the first is our location. Our location for 200 years has been a disadvantage. For three millennia, our location was a phenomenal advantage because we were at the central of the circle (inaudible) all roads led to us. And then, we were marginalized.

Now in the next 25 years, Asia is going to become the largest continental economy. What happened in the United States in 1869 when the continental railroads were integrated is like—very likely to happen in Asia in the next 25 years. Without Afghanistan, central Asia, south Asia, east Asia and west Asia will not be connected, so this is our first advantage. We—our goal is to become a transit country, for transport, for power transmission, for gas pipelines, for fiber optics. It's a networked approach to the economy because this will create massive jobs and opportunities.

The constraint, of course, is lack of infrastructure. We have created the road network, but the railway network—we have only one of our cities linked to our neighboring country, which is with Uzebekistan. But now, our attempt is to get linked to China and to all our neighbors. So this is the first step.

Second, we have water. We are the source, the headwater source for all our neighbors, but only 10 percent of our water is utilized. As a result, we face a cycle of droughts and floods. Floods alone cost us a billion (dollars) a year. Harnessing this water is the critical driver now of brining prosperity to agriculture and the value chains. In land utilization. Again, we have plenty of land, but no. 

The third asset is our mineral wealth. And here, I'd like to differentiate. First, in terms of rare earth, we have 14 of the 17 rare earth material. In terms of lithium, we are described as the Saudi Arabia of lithium. The future—so Silicon Valley connects to us directly because we are the only country that can break the monopoly on lithium and related rare earth.

Here, both national security and national economic policy come together. In 10 years, we can be the largest producer of copper and iron in the world. The largest deposits of copper outside Chile, or currently, Mongolia has deposits, but ours are larger.  Iron equally.

We'll be a very significant player in the gold market, our gas is looking very good and oil is beginning to look good.  The phenomena—the problem here is the curse of natural resources. We do not have the institutions today to manage our natural resources credibly, so I want to emphasize those.

And then two other assets.

One, we are a country of war shorn (ph) money. Once you take the source of the money out, it's a extremely poor country, but the wor shorn (ph) money. But money is not capital. We have to transform money into capital, and that's our fundamental challenge.

Merchants make 400 percent profit, industrailists don't make 10. Neighbors dump, and then it's on our entrepreunorial people. you—You do not find Afghans begging in the streets. It's extraordinarily rare compared to any of—of South Asian phenomenon that if you visited.

With these assets, what are the problems? The first problem is grand corruption. Corruption is the system. We have to break out of it because it's not an apiration (ph), the way terrorism is not an apiration (ph), corruption has become very deep and entrenched and we have to break it.

Breaking it means creating resistance, but moving on it and specifying the drivers of corruption to be able to.

Two, foreign has been framented and there's very little Afghan ownership of—of the infrastructure or the developmental agenda because it was easy as long as it could be contracted out.

Three, the efficiences required to use money properly have not been created. Without the national construction industry, a national procurement system, you cannot do this.

And last, I revealed when I came to the presidency, because the telecom sector is the second largest tax payer in the country, so I read all of their audit reports. In the press (ph) I discovered that every audit report was based on a different accounting standard. So, when I looked, the country didn't have accounting standards.

These fundamentals need to be dealt with and where the market is required, we need to deliver instruments. For instance, in Afghan, American's money is gauranteed by OPEC. But in Afghan's money, there's no guarantee, no insurance, no system. Risk taking in environment is a considerable phenomenon, so how do you inform this (ph)?

When they come, we have not created the risk profile and the risk management instruments for managing those. For instance, if today we let our natural resources, that's beyond risks of today. But it's a sort of pehenomenon to saying that the risk profile would be divers every two and royalties would be redistributed according to the risk, then you'd have a very different type of partnership.

RUBIN: Let me ask you a follow question, if I may, Mr. President.

My impression would be that if you can secure sufficient resources for infrastructure, there are tremendous—you say you could be—you're—you're the least expensive way for goods and services to get across the different—across your region from country to country.

The problem is, you don't have the infrastructure.

Are China and Pakistan, but particularly China given its vast capital resources, are they getting engaged in—in this process? And I guess a—a somewhat related question is, with respect to the resource developement and also trade, corruption is—is obviously a tremendous challenge, not just in Afghanistan, but in any country that has these assets. How do—how do you hope to deal with that?

GHANI: Sure. The first thing is, China has given us more assistant as sort of (inaudible) that I made there than the last 13 years combined. China has acquired a stake in one of our critical copper mines. Fortunately, now we have another series of mines that are larger than even then (inaudible) and also become an investor in the oil sector.

But the market, the commodities has changed and they'd like to renegotiate, so it is really important to look at that profile.

GHANI: China, fortunately—they promised us $330 million, and I want to use it all for infrastructure and to create the feasibility.

RUBIN: Is that—is that aid or is that investment?

GHANI: No. This is aid. It's grants.

RUBIN: What about...

GHANI: It's (inaudible) grant. They're going to come with investment, too. China has been—China and India have been the two countries that have made significant investment. And China—case of China, state-run (ph) corporation. In case of India, private. So, we are looking at both countries, plus the Gulf. And Azerbaijan. Azerbaijan is a country that we think will make the first serious investment in Afghanistan. I've struck a very good relationship with the president of Azerbaijan. And they're likely to come.

So, we are putting a consortium approach to the development of infrastructure. China is now looking at the Wakhan Corridor. We have a 60-mile...

RUBIN: Mm-hmm.

GHANI: ... common border at the tip of the Parmise (ph) to link directly to Afghanistan. And this will open up the transit between Iran and China over land, as well as disperse (ph) to very (inaudible) situation.

There's some serious examination on the part of China to be able to—to do this. Northern Afghanistan and Southwestern Afghanistan, as a result, would really be transformed.

The copper mine is close to Kabul and Eastern Afghanistan. And that, again, is the key to the this link (ph). The problem, simply put—what they are going to produce—the bulk of what we are going to produce in the next 10 years is very heavy (ph). Without rail, there is no possibility of creating the economies of scale.

Our first great law (ph) in terms of transit is coming by Central Asia to Afghanistan, Azerbaijan, Georgia, and Turkey. In three years, we hope to be reaching Europe within five days. So, Caspian is really becoming simple to our—our economy. And in three years, we could have 70 percent of our imports and exports by the Caspian.

Pakistan now has a choice of—it has reached agreement with us to process our goods in Karachi, 90 percent of them within a day. The remaining 10 percent within a second day. It's—but 60 percent of the goods are now being processed, but transit in Pakistan is a fundamental (inaudible). Not just for us, but for the...

RUBIN: If you're successful, Mr. President, in developing the necessary railroad infrastructure over the next whatever period of time it would be, the capital will come predominantly—this is a question, not a comment, though I stated it as a comment—will come predominantly from China?

GHANI: No. It—they can—they can (inaudible). The United States is also contributing. So, I'm very pleased that Secretary Kerry, for instance, made a commitment to create an energy task force. We're—we've solved all the good agreement framework questions to transfer electricity from Kyrgyzstan, Uzbekistan (ph) to Afghanistan to Pakistan. This is called (inaudible).

RUBIN: You might explain to people—it's sort of interesting—I gather that the "stans" have been developing these very large hydro projects...

GHANI: Yes.

RUBIN: ... that the Soviets built.

GHANI: Yes.

RUBIN: They don't need the energy.

GHANI: They don't need the energy...

RUBIN: Pakistan does, and you're the—you're the...

GHANI: Exactly. We are the transit country.

RUBIN: Yeah.

GHANI: So, we will...

RUBIN: So, where are those—but where are those transmission lines going to come from?

GHANI: They will come, first, from Kyrgyzstan to Turkmenistan (ph) to Afghanistan to Pakistan.

RUBIN: And who's going to finance that?

GHANI: World Bank, Asian Development Bank, Pakistan, Afghanistan, Kyrgyzstan and Turkmenistan (ph). 90 percent of the money has been committed. It's at 10 percent issue now that we are all focusing on.

RUBIN: And as the construction goes forward on the lines, but also on the railroads, how will you provide security?

GHANI: Well, we have one of the best special forces in the region—24,000 strong. So the approach to security is to look at the changing nature of conflict. We also have a special police force created just for providing security for the projects. But the most significant thing is mobilizing people who are going to be the beneficiary of these projects. So without public participation, you really cannot provide security.

The problem during the height of international engagement was that a custom was spread to pay strongmen for providing security that, in turn, became a disincentive. Now, engagement is really important because I cannot afford to pay ransom money for infrastructure, so different parts of the country would really need to make a decision that development requires taking part. And now, we are mobilizing it. Everything a component of community participation either in kind or in resources so that the significance of infrastructure for transformation of lives.

Woman's work, for instance. Woman's work in our country is largely unpaid. They work extremely hard, much longer hours than men, but the work is unpaid. If they are going to be participating in the market, then this unpaid work has to be transformed to paid work, and this infrastructure is critical.

Our mortality at birth. We have one of the worst rates—we have had a lot of progress but we still have one of the worst rates of women at birth mortality. And one reason is that they cannot be taken to hospitals at the right time. This explanation and public mobilization that infrastructure is a national priority needs to really dawn (ph) in their contribution to it.

Once they do this—for instance, in schools. We had a very interesting experience some years back. Mr. Atmire (ph) was then minister of education. Some of the Taliban came to threaten schools. The women of the community chased them out. They said we want our kids to be educated, what is this burning of schools? And that's the ultimate weapon. You don't want an Afghan woman wielding a broom at you.

(LAUGHTER)

RUBIN: Mr. President, I think that's probably right.

(LAUGHTER)

Mr. President, historically, Afghanistan had been a very fruitful and—actually literally fruitful—

GHANI: Yes.

RUBIN:—agricultural producer, and now, obviously, you have all kinds of problems getting your produce to market. But is there a large potential in the agricultural area? And if so, how do you realize that potential?

GHANI: It's a phenomenal potential. One is, in terms to really link food security in the Gulf with investment in agriculture in Afghanistan. And again, it depends on the transit arrangement, but this. We are seeking because this is a—Saudi Arabia has just made the decision that they are not going to grow wheat. The water resources were exhausted, and underground water is really important.

The Gulf is a very important importer of food. So is Iran because our poppy problem is simultaneously Iran's problem. It's one of the largest narcotic problems. They spend roughly $8 billion a year on medical care and on security. So as part of our relationship with our neighbors, we are asking for very different trade policies and agricultural rules because this is not just for our security or food security, but the first driver is, you know, I have had six meetings on wheat since I've become president. None had taken place before.

We produce 700,000 tons of wheat a year when it's a good year, and the prices between May and June are rock-bottom, below production cost. Then they triple. Neighbors dump. So one of the first things we are saying this year, we are going to create because we cannot afford to support wheat prices the way you did during the New Deal, but we want market mechanisms that we can—the government because of its purchasing power, particularly in the security sector, can buy about 200,000 tons. That will change the dynamic.

And now, we are really focusing on the remaining 700,000 tons that we import. This is the first goal. Second is to become an exporting country in agriculture. Believe it or not, we are importing over $2 billion in meat, dairy and eggs, and it's shear madness because we have all the possibilities but we are not focused. So our trade balance is to fundamentally change from the current situation where imports are 30 times our exports.

And this is creation of those systems, the value chains are really critical and market access domestically, regionally and then globally.

RUBIN: Let me ask you one final question, then we'll turn it over to everybody else. It's obvious—but I knew this anyway before we had this discussion—that you are extraordinarily conversant with economic issues. And if—for those of you who are interested, the present economic plan, which—it was December 2014, wasn't it—

GHANI: Yes.

RUBIN:—is really worth reading. It's a—it's a remarkable strategy for this country and it gives you a sense of how tremendous the opportunities are, as well as tremendous the challenges.

In terms of the political system that you're operating in, I mean, we as you know, have a somewhat complicated political system at the moment that perhaps not—let us say not fully—

GHANI: I got my parts of—

(CROSSTALK)

GHANI:—all in favor of your political system.

RUBIN: I have no doubt you are and I wouldn't ask you to comment on our political conditions, nor would I suggest that you model yourself after us. But anyway—

(LAUGHTER)

-- but I was going to ask this question. You have a lot of objectives to accomplish.

GHANI: Yes.

RUBIN: How is your political system going to work in order to enable you and your colleagues to make the decisions effectively that you need to make to pursue these objectives?

GHANI: First, we—I'm very pleased to say that we've overcome our tradition of the last 200 years. For 200 years, the Afghan elite was the largest problem of Afghanistan. It always chose, when it had an opportunity, to opt for unity, it chose division, and it brought down havoc to the people.

We have chosen unity over division. That means political consensus is key. In tackling corruption, for instance, we are tackling its underlying drivers, but we are not in a position to imprison everybody who's corrupt. And it's a very frank acknowledgment of our limitation because if we imprisoned everybody, there would be nobody left.

(LAUGHTER)

RUBIN: On the other hand, you could build prisons, which is a good business. So anyway—

GHANI: It didn't work in Vermont—

RUBIN: No it didn't.

GHANI: Communities would revolt. Anyway. I mean, so the issue is that Afghan are very good when our back is to the wall. That's when we make decisions. And because we can no longer take the work for granted, I think we are really determined to put our house in order.

When the 50 nations were rushing in, every one of our problems became the problem of the international community. So there's laziness. Every one of us became lazy because, as I said, at the provincial level, at the district level, you have these top people, you know, from best schools coming and advising you.

Literally, an Afghan colonel had a secretary, at times, was an American colonel. That really produced laziness. It produced lack of ownership of the problems and it did not bring about a commitment to solutions.

Our minister of agriculture, for instance, has had over 100 advisers. They produced a ream of papers; I read all of them.  But the deputy minister didn't know that these papers existed because they were produced. So they were beautifully written policies, but they did not become.

What we are doing now with our political system is to making sure that the functions are clearly defined, that the areas of overlapping responsibility are removed, that we can deal with them. And in terms of—I'll just make one illustration with the security sector.

Since taking over, I've retired 62 generals. Not a single one was retired in the last 13 years. And there was a contractor for fuel that was worth around $1 billion. There were allegations that a difference between the contract that was awarded and the next bid was $211 million difference. I canceled the contract. Now we are civilianizing that entire component of the ministry of defense, ministry of interior so that effectiveness—efficiency can be provided.

You know, we had the Government Accountability Office of the United States writing reports. The Congressionally-mandated special inspector, nobody paid him attention. Now, we have a contract to do it. Each time they find something, they share it in draft, we respond. So the partnership—but the most significant voice is that of the ordinary Afghan.

Corruption hurts the poor. It marginalizes women, it marginalizes the youth, but particularly it's a tax on the poor. And when you remove that, energies come, people contribute. And it's this environment where creativity can be rewarded. And I'm really blessed with an excellent team, and that team both are very accomplished people like Minister Admar (ph) and Rahimi (ph) and younger, Mr. Rabbani (ph) and younger colleagues who are the second of men and women.

That's our hope. I hope to be a bridge for the election of these people to the highest office in the land, including the first woman president of Afghanistan.

RUBIN: Well leaving aside questions of first women presidents, Mr. President—

(LAUGHTER)

GHANI: We may accomplish it before you.

(LAUGHTER)

RUBIN: I am going to absolutely stay out of that question. But now, having ventured into that—well, we're going to venture out of that area, actually—we would be delighted to entertain questions from whoever would like to ask them.

I don't wear a wristwatch. Susan, would you tell me when we have five minutes left to go? OK, thank you.

If you have a question, I'll call on you, then you stand, you identify yourself, ask the question briefly so we can get in as many as possible. We are on the record, as you probably know. Yes, ma'am. And there's somebody with a microphone coming around.

QUESTION: I'm Lucy Commissar (ph). I'm a journalist. You talked a number of times about the grand corruption and also about the international drug trafficking that has a number of billionaires in your country. To what extent do you think that this is facilitated especially by the big players, by the international offshore bank and corporate secrecy system, where they can stash their money in accounts that do not have their names? Do you think that the system, which is controlled by the Western financial powers, should be changed so that bank accounts and shell companies are listed in the names of their true beneficial owners?

GHANI: I am for transparency across the board.

RUBIN: What, Mr. President?

GHANI: Oh. Do you want me to answer every question? Or—or take them in a group?

RUBIN: No, take them in order. You might as well take them...

GHANI: Let me take them in a group.

RUBIN: Yeah. Oh, you want to take them in a group? OK. We'll ask...

GHANI: Yeah.

RUBIN: ... fair enough.

GHANI: Three (ph)—if they're (inaudible)—so more people can...

RUBIN: Yeah, sounds fine. OK.

Yes?

I can't see faces, so I'll just point to people.

QUESTION: Jeff Laurenti, Mr. President.

GHANI: Very good to see you again.

QUESTION: Good to see you, Mr. President.

Over the past dozen years, you've had a substantial in the number of people who are at least basically literate in Afghanistan. Bit expansion of education—primary education. A big expansion of media and media choices. How has this changed Afghan society's sense of self-agency in political decision-making? You still have a regime in which the president picks governors in all the provinces. To what extend does this change in attitude,if there has been one, make it more difficult for the Taliban ideology of the state to find traction? In fact, are they finding more and more difficulty when they do acquire control of regions because there's a changed attitude on the part of inhabitants? How do you see this political evolution continuing?

RUBIN: You want another one question?

GHANI: Yes. One more?

RUBIN: OK. One more. We'll go way—no, we'll up front, right here.

QUESTION: Mr. President...

RUBIN: Could you identify yourself?

QUESTION: ... oh, my name is Roland (ph) Paul. I'm a lawyer.

The—in the past, relations between Afghanistan and Pakistan were not as good, but I understand from the media that there's been a substantial improvement since you've taken office. Could you explain why the changes occurred?

GHANI: Sure. Thank you.

First, then—the drug system is composed of producers, plus there's traffickers and consumers. And this is a chain. The price of an ounce is a dollar in Afghanistan, a dollar and 6 cents in Iran, and $42 in Amsterdam. The bulk of the profit are directed (ph) by international traffickers. This is quite well documented.

The 1.6 million Afghans take the least amount. We could deal with that. But—so one needs to really do a lot more work on criminal—on global criminal ecology. (inaudible) that some work (inaudible) another part.  But the implications of this for weakening state authority, I think is—is really work in progress. Because we're dealing much more with impressionism (ph) than with systemic analysis. And alternatives have really not been formulated.

The legal economy is receiving very low global attention. And we have not been able to create a single credit system—legal credit system—functioning credit system for Afghan farmers. But those who are in the drug economy have perfect credit system. And the banking (ph)—you know—because the banking system is weak (ph)—and—and Afghanistan routinely—five tons, six tons of drugs have been destroyed. The largest haul in Europe is not more than a ton. Because freedom of trade requires less control. So, we all have common cause to join in this and be able to deal with it.

GHANI: Under the second question, Afghanistan is a completely different country, compared to 2001. Just a couple of illustrations.

First, the majority of our population—60 percent of our population is under 30. This generation—most of them have no investment in the past. What they are invested in is the future. And the biggest indication of this is the economic refugees. You know, they drown in attempting to get to Australia. They get exported in Europe. But you see their desire. They want to be part of the global world, not to revolt against it.

In terms of media—the media has made a tremendous difference. At least 50 percent of Afghans now have access to television. Last year's presidential elections, without television, would have been a completely different world.

I held town hall meetings, and so did (inaudible). Every single one of our rallies was broadcast at least on five or six television stations. The simultaneity of participation, very old for you, is really novel for us. Because before that, if you're talking to 1,000 people, it remained confined to 1,000 people. But when 6 million—8 million people routinely watched these, and the debates that were really intense, were watched across. And—and that result was percent women participated in the election.

The Taliban were marginalized because the communities came out. Most striking future was the Ulema. I had 30,000—3,000 Ulema gathered to endorse me and then campaign mosque to mosque. And we recently had 4,000 Ulema endorse the security forces of Afghanistan.

Our problem is that—that we've really not operated from within the universe of discourse. We need to own Islam and speak from within it, and put our beliefs. Practicing Muslin, we need to talk about the civilization. Us, our rightful inheritance. We vacated the space. So, it is extraordinarily important.

To take account of the media, its diversity, its freedom, and its engagement. We are a debating people, and we like doing it. So, I think it's—it's important.

On Pakistan, we have had—I'm cautiously optimistic that we began a—a process of fundamental transformation. First is that we've defined the problem. The problem is that Pakistan has been in undeclared state of hostilities with Afghanistan for 13 years. Fortunately, they've accepted this definition. We are working to end this state of hostilities. So, peace between Afghanistan and Pakistan is the primary piece.

Peace with the—with the Taliban then is international (inaudible). Because Mr. Haass' work and others show, without sanctuary—with ending—without sanctuary, a long-term rebellion is impossible.

When sanctuaries end, peace breaks out. That's what happened in Central America and Latin America, that's what has happened in Africa when South Africa changed its policy and regarding places. And the reason for the change is the changing nature of the threat.

Pakistan is now threatened, particularly after the tragedy of Peshawar. And as I brought earlier to your attention, the psychology of terror does not know—terrorists neither require passports nor recognize nationalities, and we need to be able to deal regionally with a compact for stability in prosperity, otherwise we will all sink. And I'm hopeful that we will have sufficient wisdom not to sink, but swim together.

RUBIN: Let me—a follow-up question if I may, Mr. President. You referred before to Afghanistan as a transit hub, as an energy hub, et cetera. Doesn't Pakistan stand to gain tremendously from that if it can be accomplished?

GHANI: It does.

RUBIN: And are there powerful interests in Pakistan that would support a peace process --

GHANI: Yes.

RUBIN:—because of that which they could stand to gain?

GHANI: Absolutely. I mean, one reason we are so interested in power, energy, is to put something on the table very rapidly.

RUBIN: Exactly.

GHANI: And then with the railways and others, now there is (ph)—studies have demonstrated that when peace takes place in a country, its neighbors have as much as 1 (percent) to 2 percent additional rate of growth. This in Pakistan would mean 20 million people will come out of poverty and with a vision of regional integration that we have, it's really the wealth that can be generated is unlimited.

And of course, Pakistan—the useful data is that trade between Pakistan and India has been multiplied sevenfold in the last decade. This is important because if you take 1947, prior to the creation of Pakistan, if you go in that regard, trade could be $70 billion a year. That brings about very different sets of possibilities between central Asia and south Asia, and historically, these two regions had been really united.

Textiles from north India, now Pakistan, and Delhi were sent as far as Russia by camels while the south India was integrated with the European market.

RUBIN: It's a powerful vision, and realizing it is a—is a great challenge, but also a great opportunity. Right there. Yes ma'am.

QUESTION: Hi, I'm Dina Temple-Raston with National Public Radio. And in your press conference with President Obama, you alluded to some of the abuses committed by Afghan forces and militias. How serious is this, and what can you do to rein them in?

GHANI: Well first, I salute Senator Feinstein and Senator McCain for their courage to face the abuses that were committed by U.S. forces and by their Afghan counterparts and associates. So we have a legacy issue.

Hatred usually results in abuse, and that is a byproduct. And when you psychologists, two trained psychologists, writing manuals for torture, it's degradation of humanity. I hope that these people are prosecuted to the fullest extent in law and held accountable because they have destroyed hundreds of lives in my country as well as elsewhere.

There are abuses. Abuses in the past, Human Rights Watch reports and others indicated. We are determined to prevent these abuses, but we need to also understand that systemic transformation requires over all attention and significant time.

The horrible incident the other day in Kabul where a young woman was lynched, is something that we're not going to tolerate. Thirty-two people have been arrested already, over 10 policemen are under investigation, so we can uphold the rule of law.

This has not place within our religion or within our constitution or within our legal system.

But dealing with 36 years of legacy of conflict requires attention. We are a deeply traumatized society. And like South Africa and Rwanda we need a culturally appropriate method to deal with it, to put an end to it.

Just imprisoning people is not the way to deal with it. An acknowledgement, and again, part of the peace process will require serious attention to grievances and resolution of those grievances with culturally appropriate ways.

RUBIN; Do you think out of all of this, Mr. President—it's a related question, I guess, will there be a sense of Afghan nationality that will transcend the tribal and other loyalties?

GHANI: Yes, yes, yes. Absolutely.

RUBIN: Yes, sir?

QUESTION: (OFF-MIKE)

GHANI: Of course, good to see you.

QUESTION: Good to see you, sir.

GHANI: What have you done to yourself?

QUESTION: Chasing grandchild.

(LAUGHTER)

GHANI: It's not Asian Development Bank this time.

QUESTION: No.

One of your greatest problems that you were concerned about when I was working with you was the borders. And you just spoke so well about increasing trade across the borders, et cetera, and you and I and others faced the holdups at Spin Boldak and Herat, et cetera.

So, as you go forward with your very brave program, how are you handling, now those slowdowns and those corruptive border guards?

GHANI: Well, thank you. First, Mr. Speltz (ph) was on the board of the Asian Development Bank, represented—very ably represented the United States, and I was finance minister, so I want to thank him for immense attention.

And your vision and joint vision on making TAPI happen is finally moving. This is to transfer natural gas from Turkmenistan to Afghanistan, to Pakistan, to India. Finally, the economics is working. I think in five years it's likely to happen, but we are trying to take a shortcut by bringing Turkmen natural gas introducing fertilizer in Afghanistan just so we can demonstrate it quickly.

Trackers (ph) are abuse. Transport is a cash cow for corruption. I dismissed the entire staff of the director of Bureau of Customs and a lot of the staff and put them under investigation.

We need—so I'll give you an illustration of our Central Statistics Office says that our imports from Pakistan are $800 million, as reported to them by the ministries. Pakistanis tell us that their exports to Afghanistan is $2.5 billion. That gives you an illustration of the volume of the problem, what I have to deal with.

So wish me luck and more determination.

(LAUGHTER)

RUBIN: Oh, lordy.

(LAUGHTER)

It sounds like there's arbitrage to be done there, but in any event—yes, ma'am?

There's a microphone right there.

QUESTION: Thank you. And thank you for all your brilliant answers. I just would love to—my name is Paula DiPerna from the NTR Foundation. I'd love to hear more about your thinking with regard to the royalties and the natural resources. Obviously, this is a critical element in public-private benefit, et cetera.

GHANI: Well, thank you. The first thing is, I'd really like to thank Columbia Law School for the work that they did in Liberia and (inaudible).

One of—the first thing to regard natural resources is that the legal (inaudible) is very uneven. Corporations that come for investment or state-owned enterprises come with an enormous legal power. And then on the other side, you find very weak capability to understand laws.

Each one of those—a paragraph wrongly drafted can cost you hundreds of millions of—of revenue losses in the future. And here, countries like mine, if they are to avoid the natural resource curse, need a consortium of legal advisers to be able to provide us the best advice in—in this regard.

Second, the legal framework. The consulting industry—we have gone through three revisions of our mineral (ph) resources law. And I must say, tragically, it's gotten worse, rather than better.

So, again, to put a stable legal framework is fundamental to this business. And now we are dealing—and, again, when you have the law, you don't have the enabling regulations capabilities. But the third thing, which is most significant—we have some fantastic agreements because the World Bank's International Finance Corporation Procedures were adopted. But when you look at the capacity that the government needs to monitor these agreements, the playing field, again, becomes very uneven.

So, I'm focused on creating the human capital capability regarding this. The other is the time (ph) nature. As I run (ph) into the very good job in this (ph), for instance, the profile—risk profile 10 years ago was very, very high. So, the companies were demanding of return for their investment was a natural demand. What the other is, then, (ph) is—is agree to a changing profile. Now they are getting 80 percent of the royalties versus the companies because the companies have made their profit.

So, we need to think much more creatively about this.

And the last observation—the Columbia Law School study of Liberian-related issue—this thing about secrecy has no basis in law. And we really have to come out of it and disclose contracts for scrutiny. Because in the age of Internet, we can have much more capability, (inaudible) less support and have examination, and we provided with (ph) advice.

And then it's a critical tradeoff issue. Time to prepare properly versus time to rush. We are under immense pressure to show that we are fiscally sustainable. 13 contracts in mines are going to make an immense difference. Within (ph) 10 years, Afghanistan is going to pay for all its expenses out of these revenues, and the people will benefit or will lose it. And balancing the needs of the current generation and the future generation, again, is really fundamental to this.

The problems, fortunately, have had a number of good answers. So, it's not only Norway now that you look at, because Norway, we cannot be Norway. But we can certainly avoid being Congo.

(LAUGHTER)

RUBIN: We have time for one more question. And let's see—I will arbitrarily select right to the—yes, the gentleman with—yes, now standing. OK.

QUESTION: Hi. Barney Rubin (ph), New York University.

Mr. President, you referred several times to the role of Iran in Afghanistan's future and present. And as you know, the U.S. is engaged in very momentous negotiations with Iran now. I wonder if you could sketch out different scenarios of how different outcomes of those negotiations would affect Afghanistan, the region, and what you refer to as "the ecology of terror"?

GHANI: Thank you. It's good to see you again. We co-wrote a lot together at the former (inaudible) Brahimi preparing the Bonn agreement.

RUBIN: You know a lot of people, Mr. President.

(LAUGHTER)

GHANI: It's an interest of...

RUBIN: You should have run for office here.

(LAUGHTER)

Anyway, go ahead.

GHANI: Once (inaudible) they declared me to be unfit to be secretary general of the U.N. because he was mad at me.

(LAUGHTER)

So that again is part of these long-term relationships.

Anyway, a pleasure to see you.

(LAUGHTER)

I hope you don't declare me unfit to be president of Afghanistan.

(LAUGHTER)

Thank you.

No, seriously, the question. Thank you for asking. First, Iran is extremely important for stability in Afghanistan. We have a package of relationships that is multi-dimensional. There's the narcotics issue, refugees, Iranian dumping. Economically, we're really in their shadow because of dumping. There's an enormous question of smuggling. There's the question of border controls in a regime that would increase.

And there's the question of—of transit, mutually. Sanctions have had a deep impact on the Iranian economy, as everyone can understand. Improvement of relationships will change that sanctions regime, and will open up different prospects.

To think through the full scenarios, you know, I used to make a living from writing scenarios. I will not engage at this time because oftentimes when you write—when you write scenarios, people think that you are advocating. Safe to say that the decision does have momentous consequences both for West Asia, for Central Asia, and relationship of these two regions with South Asia.

RUBIN: Let me make one personal comment and one logistical comment.

The personal comment is this. As is true of many of you, I've had the opportunity to meet a lot of people who've been heads of state. Mr. President, you are truly extraordinary.

GHANI: Thank you.

(APPLAUSE)

RUBIN: And both for the sake of your country, but also for the sake of the global community, I think it's extraordinarily important that you succeed economically, in terms of political stability and security. And I hope that our country does everything it can to help you.

Secondly, as a matter of security, we've been asked to all remain seated while the president leaves.

Mr. President, we thank you and we are deeply honored by your presence here.

(CROSSTALK)

GHANI: (inaudible) a pleasure. Thank you.

RUBIN: Thank you, Very good to see you, sir.

GHANI: Thank you.

END