EDITED TRANSCRIPT OF INTERVIEW CONDUCTED WITH AFGHAN PRESIDENT HAMID KARZAI IN THE PRESIDENTIAL PALACE, KABUL

JULY 31, 2007

With books about George Washington arrayed on a shelf behind him in his office in Kabul, Afghan President Hamid Karzai talked to FORTUNE recently about the nation-building challenges that still confront his country five years after the fall of the Taliban

KARZAI: Wow! Fortune! Wow, what a good name!

FORTUNE: Do you have one?

KARZAI: Fortune itself is good, good fortune is even better

FORTUNE: Shall we start?

KARZAI: Yes..

FORTUNE: It’s been five years since 9/11. How do you rate development in Afghanistan since then? The successes? The failures?

KARZAI: Five years ago, when I started the first school day for Afghan children, I saw the teachers and students looking very pale, uncertain about the future. That picture in the mind of that day is like a black and white picture…this first school day after the Taliban…now when I see them, I see a colored picture, different dresses, uniforms, happier faces, healthier faces..better fed, better dressed people. This is an overall improvement in life. When people visit me from all over the country, I ask them ‘how’s life? Is it better than ‘four’ (sic) years ago?’ (and they say)..’yes, definitely, much better.’ (But) are there people who sleep hungry in Afghanistan, who may not get three meals a day? Yes. So while its better, there are still people who don’t find three meals a day, they are still there. While our economy has improved a lot, while our (annual) per capita (income) has gone up from $180 to $350 today..we are still among the poorest in the world. While our health services have improved significantly, from 15-20% coverage to 70-75% now, we are still the worst in the delivery of better services. While we have better roads, we are still the worst in the world. While we have improved our supply of electricity, we are still the worst in the world. While our education has picked up a lot, we are among the worst, we still have the lowest literacy rates in the world. We are still the worst in child mortality. Now if you asked me, has the country succeeded in terms of economic recovery (I would say) yes, massively. But is Afghanistan a rich place? No. Would Afghanistan be a rich place ten years from now, compared to Iraq…Turkey? No, we might catch up to Pakistan, to other neighbours but not with those who have a wealth of natural resources..

FORTUNE: There is an enormous expectation amongst Afghans for your government to deliver prosperity. How do you meet that, manage that?

KARZAI: Part of the problem in Afghanistan, for me and the rest of the Afghan people, is expectation. I’m no different, I have the same expectations, I’m in a hurry, I’m impatient, I want (us) to be a rich country very very soon, I want to have an income per capita above $5000 very soon, I want to have all the roads paved, I want to have electricity....I don’t want to be reliant on the rest of the world. Now, how do we manage this desire and put in a perspective of reality of life? That is the trick, and that it what I should be delivering to the Afghan people as the leader of this country, as the president of the country. And that is what I did not realise when I started. I spoke exactly like what any other Afghan would speak in the villages and streets of this country. My job is to bring the realities of life to the Afghan people, and the hopes of the future of the Afghan people and to do the best we can for today…

FORTUNE: But people are impatient…….

KARZAI: Exactly. Now I have begun talking to them on this, I did not do this before….I have begun to tell our people, look, we have done better but we are still the poorest and it will take us time before we can be reasonably satisfied with what we have achieved…

FORTUNE: Do you have any targets on this, a timeline?

KARZAI: When I was giving the Afghan people my campaign address (during the 2004 presidential race), I told them that our income per capita will be $500. It looks I will be able to deliver on that before five years. When I was giving that address two years/18 months ago, our income per capita was something like $250. Today it is at $355 and I have three years left to complete (the presidential term) and that would bring us to $500. The same is with GDP, the same is with trade, the same is with production…

FORTUNE: You are saying you are ahead of target?

KARZAI: I would be very proud if I can go ahead of target, I would be very proud if I can deliver to the Afghan people by 2009 not $500 per capita but $600 or $700.

FORTUNE: That’s legal GDP per capita?

KARZAI: Legal! Not narcotics! Absolutely legal. If you add that (narcotics) to the GDP, then it's much higher. That’s what the Afghan people earn from legitimate work. So what else has improved? Services, construction, massive construction, thousands of homes are being built, not just in Kabul but all over the country. I don’t trust statistics in Afghanistan, it will take us a long time to be good on statistics, but I was talking to a businessman from (Karzai’s hometown of) Kandahar the other day and asked him how many homes were being built in Kandahar in the past four years, and the person said more than 10,000 homes. More than 10,000 homes in four years is massive. How much money is in those 10,000 homes? The cheapest one built would be $30-50,000…the more expensive one would be nearly $200,000 -$300,000, that would take us easily to $500 (per capita income). The same is in Kabul, in Mazar, in other places, hotels, businesses, shopping malls, anything that you need is available. Those are the improvements.

FORTUNE: What are the failures?

KARZAI: We have not been able – perhaps this was a bad expectation of ours - to gain quick capacity of our own in the ministries, in the administration, the managerial jobs, we have not been able to raise efficiently our revenues. Our revenues are shameful.

FORTUNE: You mean your tax collection, your customs..?

KARZAI: Tax, customs, mostly it is customs collections. (The collection of) other sources of revenues are absolutely shameful. Why can’t we do it? Many reasons. From the beginning until about a year ago, (it was) warlordism. People with guns who were holding revenues…an inability of the administration to grasp the sources of revenues. Our revenues were dismal, yes, at the beginning, now they have crossed probably, er, we’ll be collecting something like $500 million this year. But against the capacity that we have, it's not satisfactory. We should be in a hurry to raise revenues much more and much faster. And we have the ability, to be able to collect electricity bills, municipal taxes. Another area of failure is corruption. There is a lot of talk of corruption in this country. I don’t think we can end corruption by arresting people the whole day long here and there. Those are surgical ways of dealing with corruption.

FORTUNE: There is corruption in your ministries?

KARZAI: There is corruption in the whole system, whether it's in the ministries, the NGOs, the donors’ implementation of projects, in all spheres of the Afghan recovery. I’m now looking at the factors that are causing corruption in Afghanistan society, the fears of war, the collapse of the civil service and the rebuilding of that in the process, NGOs, the availability of money and the poverty of Afghan society..

FORTUNE: You talk about warlordism and you talk of corruption and they are sometimes two of the same thing. You have warlords in your cabinet, in your administration. Why? These aren’t technocrats.

KARZAI: I don’t have warlords in my cabinet.

FORTUNE: In your administration..

KARZAI: In the administration? Where?

FORTUNE: (The Uzbek warlord) General Dostum, for example…

KARZAI: He has a job with me as the commander in chief of the Afghan Army but he never is in his job. We have adopted a method of inclusiveness in order to take this country forward, so that everybody shares the pies, so they are participants rather than spoilers..

FORTUNE: But they may not have the technocratic capability that you talk about that is necessary to… (interrupted)

KARZAI: But in technical areas there are other people, where we need technical capacity, we have technical people…our own sons and daughters. The Minister of Finance, the governor of the (central) bank, the Minister of Communications, of Education, in charge of the economy, the various other, ummmm…(calls out to his aides) Name some Ministers?! Capable ones? Technical ones? Rural Development!

FORTUNE: One of your cabinet colleagues criticizes you as tolerating ministers who are technocratically weak but politically influential. Is that a fair criticism?

KARZAI: That is not. You do that all over the world. They are not allies. I do not have allies, or opponents. It’s a country, and the country has a population, the country has a background, and against that background we are building the future…you get my point? You have to carry the past in a way that will not hurt or stop what you are building for the future. You have to have a reasonable sense of inclusivity in order to protect the progress you want to achieve for tomorrow. And we have done it.

FORTUNE: Yes, but you have a unique set of political circumstances. Afghanistan is not Iraq, the international community is not divided over Afghanistan, you have almost unanimous support in the international community, and its military at your disposal, you are in a position to be much stronger…..

KARZAI: You mean the international community will stand with every decision that I make? Every decision of …this kind? That is not true..

FORTUNE: Could you be stronger?

KARZAI: Strong means what?

FORTUNE: To force your vision, don’t accommodate some of these characters…

KARZAI: That is not true. The international community did not stand with me on these issues. They didn’t, four years ago, when I asked them to. I’m not going to give details but they didn’t. I did raise these questions with the international community. ‘No.’ They called all of us ‘greens.’ They said ‘no green on green’ (meaning no internal conflict among the anti-Taliban coalition). So it isn’t a blank cheque. I had to work through, er, internal and external factors, and take Afghanistan to where we are today. And I am very proud of that ….I am very much happy with what we have achieved as Afghans and with the way the international community has helped us. The international community could’ve helped us better…in the beginning, we could have done better but always when you look back, you find things that you could’ve done differently. Look at what we have. Afghanistan is the home of all Afghans again, 4.5 million refugees returned. Children going back to school. Whatever that that was asked of us in the (post-war 2001) Bonn agreement, we have delivered on time; the constitution, the presidential elections, the parliamentary elections, all that, on time. And today we have a new Supreme Court, as I talk to you, just appointed, accepted by the Parliament, the economy has done marvellously, the Afghan people have come back to invest. Things could’ve been better but things could’ve been much worse too.....had we not done what we did four years ago.

FORTUNE: Your authority. How much of the country do you genuinely control?

KARZAI: In terms of political authority? The whole country, 100%

FORTUNE: Including the south?

KARZAI: I can dismiss and appoint anybody, in any part of the country, as I have done. I can send a delegation, a mission, into any part of the country.

FORTUNE: They will accept your word?

KARZAI: More than accept my word. That is one serious problem of perception in the international community, and I think we have not done a very good job of explaining it, Ludin! (calls to his chief of staff Jawed Ludin, sitting adjacent), this is our fault. We have not done a good job of explaining how powerful this government is, with regard to reaching out. There were some people who were bombed (by pro-government forces) while chasing the Taleban about 20 days in (the restive southern province of) Uruzgan. Lots of children, lots of women who were wounded, some were killed and the Taliban were also chased out. They should’ve disliked us. Any man would dislike a situation like that, I would dislike it very much. But I sent for them and they were here the day before yesterday. The man whose wife was wounded, whose daughter was killed, in those bombs and he didn’t even raise it with me.

FORTUNE: You raise the Taliban..

KARZAI: Yes, that is a problem, those are among the problems..

FORTUNE: ….and you criticized the US a month ago, you told it not to bomb our civilians, help us build our institutions…how strong is the Taliban?

KARZAI: The situation is this. The international community is here helping Afghanistan. The Afghan people and the international community, together, have achieved a lot for this country. Now, suddenly, a Canadian soldier is killed, an American soldier is killed, an Indian engineer is killed, a Lebanese engineer is taken hostage. Who is doing this? Is it the Afghan people? If it is the Afghan people, then we have no right to ask for international community for help. Why should they help people who are killing them or kidnapping them?

FORTUNE: Who are you blaming?

KARZAI: If it us, then we have no business asking the world to help us. All those taxpayers in Europe and America and Australia, who work hard, I know how hard they work, these people, who earn a living and of that they pay us for our life, our rebuilding, our reconstruction, our security. And then we kill them, or kidnap them? If it is then we do not deserve their help. But if it is not us, then who is it? I just want to raise a question, with the international community. Therefore, my plea a month that the international community must look for the source of terror, of instability, of trouble in Afghanistan. If that source is in Afghanistan, well let’s talk. Weak police? Yes, strengthen it. Weak army? Yes, strengthen it. Weak bureaucracy? Yes, help it stand on its own feet. Corruption? Yes, let’s handle it together. But is corruption killing a Canadian soldier? No.

FORTUNE: So who is?

KARZAI: The international community is here for a purpose, to fight terrorism and to strengthen Afghanistan to be able to stand on its own feet in fighting terrorism. Therefore it has to look around to see where there is a place where terrorism is maybe trained, maybe equipped, maybe financed, maybe motivated, maybe sent to Afghanistan to kill us, and to kill the international community.

FORTUNE: Who are you pointing the finger at?

KARZAI: I’m not pointing the finger anywhere, I’m just raising the question and unless we find the answer to this question, we will be going in a vicious circle. That is what I want to point out and that is what I want to seek from the international community, to go along with Afghanistan, and with their own taxpayers in freeing this nation from this pain.

FORTUNE: You raise the taxpayers of the international community. About $10 billion in aid has been spent in this country in the last five years, and there’s about another $10 billion pledged for the immediate future. Has that money been well spent? There have been suggestions the riots of late May (after a US convoy in Kabul had killed Afghan pedestrians) was in part caused by resentment among Afghans of the foreigners here.

KARZAI: Absolutely not. There was a bombing in Kandahar by the coalition of Taliban where civilians were killed and I wanted to criticize that bombing but the elders of Kandahar told me not to criticize, they said we need this action by the US to free this country of terrorism. We have suffered, we will suffer again but we want freedom from terrorism and instability and attacks on our mosques and children and schools and clergy and elders. There was an attack in Kunar (province) in which civilians were killed and the people of that village came to our chief of army and told him we have suffered, we are not happy but we accept it, provided it you establish government strength here, don’t leave so that the Taleban, the terrorists, come back. Now what happened in Kabul (the May riots) was an accident, the vehicle accident and in the consequence of that some people suffered, some people were killed. We are sorry for that, very very sorry. And those who demonstrated that day were right, they were protesting rightfully against an accident that hurt them. But the others, those who looted banks, who looted hotels, who stole things, who destroyed things, were criminals, were gangsters. It had nothing to do with the way aid is delivered, absolutely not. It is the simplicity of the Western media that did not grasp it.

FORTUNE: Are you getting ‘value for money’ with the aid available to you, with the calibre of foreign advisors?

KARZAI: In some cases yes…(but) we are not getting good value by the money given to some of the NGOs. Many of them are bad, some are good. The Afghans are not happy about that, we are not happy about it. We can’t do anything about it. We have made laws but sometimes members of the international community break those laws, go beyond those laws. We want the donors to spend the money through channels that will find value in their spending, not through NGOs that take heavy administrative costs or do lousy work.

FORTUNE: You appointed various officials to fix (the national airline) Ariana. Money was spent on foreign consultants earning up to $2500 a day, I’m told up to $20 million was spent, or even wasted, and yet Ariana is still in trouble..

KARZAI: It’s very sad. That is a case of Afghan capacity, and the absence of that capacity that is misused by outsiders.

FORTUNE: Foreigners are scared to come here. Does that impact on the calibre of advice you get from the international community?

KARZAI: They have no reason to be scared. We have thousands of foreigners here, Kabul is full of them and there has not been any incident in the past four years but one, one or two.

FORTUNE: How is the security situation?

KARZAI: Security in Kabul is very good. Security in the country generally is very good. Security in certain provinces in the south of country, because of terrorism and attacks of Afghanistan, is not good in parts of them, otherwise its good and that is what we should face.

FORTUNE: Your brothers/relatives are active in business. Are they trading off your cachet, your prestige, to advance their business interests?

KARZAI: Who is in business actively?

FORTUNE: Your brothers..

KARZAI: No, Mahmoud is in business.

FORTUNE: Ahmad?

KARZAI: No he’s not in business, he’s a member of the provincial council of Kandahar.

FORTUNE: Mahmoud, isn’t he involved with car trading? Toyotas?

KARZAI: He is with Toyota. I wrote to the Japanese government, to the Toyota company I believe…I said I hope this is not a case of favoring the president’s brother, and they wrote back to me to say we are too big a company to worry about things like that, that the application came from America. That was a fair deal. I also asked the US government about this….I am very much aware of that..

FORTUNE: Isn’t Hashem, your cousin, involved in the new mobile telephone licence of Etisalat of the UAE?

KARZAI: I am not aware of that. You should be very sure of that. I am extremely vigilant about that. There is no way they get it through this office. If they get it through their foreign contacts it’s their business. If there is something like that, I’d like to find out and kick some….(laughs).

FORTUNE: Are you confident they are not availing of your prestige?

KARZAI: If they try, and I come to know about that, they would be in serious trouble, as they were. I’m not going to give you an example but some of them were. Hashem’s company was rejected, by the Ministry…..the message that goes from this office to the Afghan people, to the international community, is that I am against nepotism, so strongly. I am playing with my life to prove that nepotism is not allowed.

FORTUNE: Poppies. The new NATO forces say they will defeat the poppy barons. Is there anyone in your administration who benefits from poppy production?

KARZAI (as the evening call to prayer begins): A lot of people.

FORTUNE: Why can’t you take them out?

KARZAI: Look, it’s a problem that is deeply run into our society. This country’s desperation in the last 30 years brought a serious dependence of our people on poppy cultivation, and that is society. If we say two million people….now two million that means there must be definitely people in the administration. Its 30% of our economy, that’s massive. Can you in one day, in one year, in two years, get rid of that? What have you done in other countries? Why should Afghanistan be treated different? If you work this out, for example, in Thailand in 20 years, in Colombia in 20 years, in Pakistan in 15 years, why would you expect Afghanistan with a war, with terrorism, with this terribly destroyed infrastructure, this terribly weak economy just emerging out of misery can fix things in one day, especially in narcotics. So this was one of my naivetes, four years ago I thought I could fix in one year, destroy the poppies, eradicate the poppies, that’s wrong. I am even thinking that eradication alone would even deliver is of this problem, it will not. So it needs dedicated work by the international community, sufficient alternative resources, sufficient work in the overall growth of the economy, and work against druglords in Afghanistan and beyond. A lot have been taken out, those that we recognize have been taken out but those that you don’t recognize cannot be taken out.

FORTUNE: What is the best economic alternative to poppies that has come across your desk? The most realistic?

KARZAI: We have a very good fruit producing country. We can have a very good agriculture. We can produce quality products. We can market them. Somebody should help us buy those products. You cant tell me ‘well, grow pomegranates, grow grapes, grow cucumbers or watermelons and I’m not going to buy it from you.’ If the international community wants to help us get rid of narcotics, they must help us all around, buying our products, helping with marketing, trade, institutions, providing alternative livelihoods and all that.

FORTUNE: Are you introducing a (Taliban-style) vice and virtue department?

KARZAI: Look, the mullahs, the clergy proposed that to end corruption, you need that department, and (to address) other vices in society and I said ‘fine, we will consider it’ and that’s it, there has not been a decision. There was a report that the cabinet had approved it but that’s wrong, it never came to the cabinet, it was not even on the agenda in the cabinet, its just a rumour.

FORTUNE: Where’s Osama?

KARZAI: Osama is not in our country, definitely not.

FORTUNE: Is he in Pakistan?

KARZAI: I can’t say about that, I don’t know, I don’t know about other countries. I know about my country.

FORTUNE: Your political plans. The election is coming up in 2009. Are you running again?

KARZAI: Well, I want to leave a good legacy for Afghanistan. I want to have this country stable and constitutionally strong. I want to have this country left with a stable environment of alternative leaders. And I don’t think it is good to be running all the time. Let other people get a chance to run.

ends