KABUL // Opium poppy cultivation in Afghanistan reached a record high in 2014, highlighting the failure of the multi-billion-dollar US-led campaign to crack down on the lucrative crop.
The total area under cultivation was about 224,000 hectares in 2014, a seven per cent increase on last year, according to the Afghanistan Opium Survey released by the United Nations Office on Drugs and Crime (UNODC).
Just 74,000 hectares was being used to grow poppies in 2002, a year after the Taliban regime was toppled.
Despite a decade of costly US and international counter-narcotics programmes, poppy farming has boomed in the south and west regions, which include the most volatile parts of the country where the Taliban insurgency is strongest.
With US-led Nato troops withdrawing from Afghanistan, fears are rising that worsening instability could trigger further growth in opium cultivation as Afghan security forces struggle to push back the resurgent Taliban.
“The country is having to stand on its own feet [and]... will have to deal with this criminalisation of its economics and politics as a matter of priority,” said Jean-Luc Lemahieu, director of policy analysis at UNODC.
Poppy farmers are often taxed by the Taliban, who use the cash to help fund their insurgency against government and Nato forces.
Despite the presence of tens of thousands of foreign troops since a US-led invasion ousted the Taliban, Afghanistan grows about 80 per cent of the world’s opium, which is used to produce highly addictive heroin.
The survey said that potential opium production was estimated at 6,400 tons in 2014, a rapid increase of 17 per cent from 2013, but not as high as the record 7,400 tons produced in 2007.
“In 2014, opium prices decreased in all regions of Afghanistan. One probable reason for the decrease was an increase in supply due to an increase in production,” the survey said.
It said that the “farm-gate” value of opium in Afghanistan was about US$0.85 billion (Dh3.12b), or four per cent of the country’s GDP.
Just 2,692 hectares of poppy fields were eradicated in 2014 – a 63 per cent drop from the previous year.
“Most of the areas in which we were fighting cultivation was under enemy control. This affected our plans very badly,” Mubariz Rashidi, acting minister of counter-narcotics, said.
“The security forces that should have destroyed the poppy fields were busy providing security for the presidential elections.
“With opium, Afghanistan cannot go towards progress, prosperity and development,” he added.
Earlier this year the US Special Inspector General for Afghanistan Reconstruction John Sopko warned that the country could turn into "a narco-criminal state" after the bulk of the Nato-led force withdraws.
About 12,500 Nato troops will remain into 2015, but the force’s 13-year combat mission against the Taliban will finish at the end of this year.
The poppies, which provide huge profits in one of the world’s poorest countries, play a large part in the corruption that plagues Afghan life at every level.
President Ashraf Ghani, who came to power in September, has vowed to tackle corruption as he seeks to steer his strife-torn and impoverished country into a new era after the rule of Hamid Karzai, president since 2001.
“Action against high-level traffickers is required to create a level of deterrence and a sufficient risk level,” said Mr Lemahieu from UNODC.
Heroin addiction levels in Afghanistan have also risen sharply – from almost nothing under the 1996 to 2001 Taliban regime – to more than one million heroin addicts today, according to UN figures.
* Agence France-Presse
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
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