Afghanistan has begun the slow process of reconstruction. According to many observers, themost serious challenge facing Afghans and Afghanistan today remains the lack of security. Whilethe Taliban regime fell and the new government has celebrated its first anniversary, Afghanistan isstill in a peacebuilding process, an essential part of which is reconstruction. Most observers agreeon the need for substantial, long-term reconstruction and the need for international support, butquestions are raised about the funds required, the priorities, and the coordination necessary for thisprocess. This report examines U.S. foreign aid to Afghanistan in the context of the internationaleffort and explores the major issues for Congress. The United States, other countries, and international relief organizations have long been active in providing assistance to the Afghan people. (1) During the 1980s, the United States along with othercountries had funded, through Pakistan, the mujahedin forces fighting against the Soviet Union, aswell as providing humanitarian aid to the large refugee camps in Pakistan. After the Soviet Unionleft Afghanistan and dissolved, the United States sharply reduced its programs. From FY1994, theUnited States Agency for International Development (USAID) did not have a mission inAfghanistan, but continued to provide aid mainly through U.N. agencies and non-governmentalorganizations (NGOs). During the violent civil war that lasted throughout the 1990s, the UnitedNations continued to seek a peace agreement, which would allow for sustained reconstruction. However, with the failure of several peace agreements, the international donor community focusedprimarily on humanitarian aid because the conditions were not stable for long-term development anddonors did not want to provide assistance to the Taliban, which came to power in 1996. Between1996 and 2001, the United States alone provided half a billion dollars in emergency aid toAfghanistan. (2) The assistance situation changed dramatically once the Taliban was removed from power, allowing for the implementation of humanitarian assistance and the development of reconstructionplans. These plans quickly took shape with the Bonn Accord on December 5, 2001, which led to theformation on December 22, 2001 of an interim government led by Hamid Karzai. The centralgovernment was further strengthened in June 2002 through the loya jirga , which was attended by1,550 delegates. It chose a new government to run Afghanistan for the next two years during whichtime a new constitution is to be drafted and elections are to be held. At the loya jirga , Karzai waschosen to lead the new government named the Islamic Transitional Government of Afghanistan(ITGA). The Afghan government has been working with the international donor community onreconstruction programs and plans, since a major donor conference in January 2002 in Tokyo andsubsequent ongoing meetings with international donors. As a result of decades of violent conflict, Afghanistan is in great need of substantial reconstruction, from roads and schools to a broad range of development projects encompassing thewhole country. According to USAID, the decades of civil war and proxy regional war have createdfour intertwining and competing economies in Afghanistan. (3) These economies create conflictingincentives for Afghans and their neighbors and have a determining influence on the future ofAfghanistan. There is the war economy, an economy of arms trafficking, looting, kidnaping, black market activity, and the brokering of violence. Different factions, funded by neighboringcountries, control border crossings, generate revenue from trade and illicit smuggling, supportmilitias through arms purchases, and thus fuel violence. Some contend that this economy createsincentives for the continuation of conflict; Connected with the first is the drug economy. (4) Poppy trade provides substantialincome for some Afghans, but also has led to skyrocketing addiction rates in the region and createdincentives leading away from other forms of agriculture critical to the sustained livelihood of thecountry; As a result of decades of conflict, deep poverty, and on-going drought, manyAfghans rely on the benevolence of the international community, which has created a humanitarianaid economy. While humanitarian aid is essential in the short-term, the influx of money and peoplecan create distortions in local markets and provide few incentives for local production. As a result,development aid agencies will be critical to assisting Afghans with local production; Agriculture has always been a mainstay of the Afghan economy, and, before the civil war, Afghanistan had been self-sustaining in agricultural production. In addition,Afghanistan also has other economic sectors, though much weakened by war. The most vibrantsector is transportation, which has long traversed Afghanistan and connected Central Asia with theMiddle East and South Asia, but Afghanistan also has coal mines, oil and natural gas reserves, anda carpet weaving industry. Effective reconstruction assistance could reconfigure these economies, reduce the war and drug economies, and provide incentives for viable economic growth. Before reconstruction recently got underway, the United States and the international community provided other forms of assistance: humanitarian, military, and security. During the height of theanti-Taliban war and with the preparations for both winters (2002 and 2003), the focus of assistancewas on the continuation of the war and on humanitarian aid and quick-impact projects. Humanitarian, military, and security assistance continue. Humanitarian Assistance. The United Nations and other organizations have provided Afghans humanitarian assistance since at least 1979, whenthe Soviet Union invaded Afghanistan. (5) As a resultof this long-term involvement, the UnitedNations and other organizations had a basic institutional network in the region to provide and expandhumanitarian assistance. Since the fall of the Taliban regime and the establishment of a new government, this institutional network has been utilized. The Afghan government and the international donorcommunity have sought to focus on reconstruction, but humanitarian relief assistance continues tobe greatly needed. The overwhelming majority of assistance (outside of military aid) to date hasbeen spent on humanitarian needs. The United States has been the largest contributor ofhumanitarian assistance to Afghans. (6) Refugees and internally displaced persons (IDPs) have been the focus of much humanitarian assistance. These groups have been returning to their homes in unexpectedly high numbers. The U.N.High Commissioner for Refugees (UNHCR) reports that since March 1, 2002, more than two millionAfghan refugees have repatriated mainly from Pakistan but also from other neighboring countries. This is more than double the number expected by UNHCR. As of August 2002, another 230,000IDPs returned to their homes with the assistance of the International Organization for Migration(IOM). (7) Returnees require continuing humanitarianaid, but they also need transitional assistancefor resettlement, such as housing supplies, seeds and agricultural resources, jobs, and other services.With the return rate higher than expected, UNHCR and other aid agencies remain very concernedthat they cannot provide returnees with the same level of resources as previously and that returneesare also returning to a lack of adequate resources. At the same time, there are many other refugees and IDPs who have still not returned to their homes and require humanitarian assistance. The difficulties of winter are affecting large proportionsof the Afghan population, not only returning refugees and IDPs. In response, aid agencies haveprepositioned food, clothing, and other items, particularly in areas typically isolated during thewinter. Furthermore, the region has been affected by a severe drought since 1999. While some areashave improved, the drought continues, which means that some areas cannot return to previous levelsof agricultural production and continue also to rely on humanitarian assistance. Military Assistance. The international military involvement in Afghanistan, Operation Enduring Freedom (OEF), began on October 7, 2001.Twenty-seven nations have deployed more than 14,000 troops in support of OEF. (8) Of these twentyseven, 14 NATO members, NATO Partners, and other countries have been involved through specialoperations forces, the provision of planes and ships, and operations involving surveillance andinterception. OEF continues with 9,000 U.S. troops and about 2,500 non-Afghan, non-Americantroops. These troops in Afghanistan continue to search for Taliban and al Qaeda fighters andweapons caches in southern and eastern Afghanistan. (9) According to the Department of Defense(DOD), the cost of the war in Afghanistan has been $12.595 billion for the United States inFY2002. (10) According to the Afghan government, the United Nations, and international NGOs, the lack of security remains the most serious challenge. (11) Former commanders maintain control over their ownareas and continue fighting with their rivals, which further makes difficult the extension of thenational government, the provision of humanitarian assistance, and the initiation and implementationof reconstruction. With the continued fighting and insecurity, the process of demobilization andintegration of combatants has been slow, but on January 10, 2003, the United Nations and theAfghan government announced a plan for 250,000 militiamen to hand over their weapons inexchange for cash, vocational training, and employment assistance. (12) The main programs to improve the security situation have been the insertion of the International Security Assistance Force (ISAF) and the creation of an Afghan National Army (ANA) and policeforce. (13) ISAF is a U.N.-mandated, multinationalforce deployed in and around Kabul as apeacekeeping force since December 20, 2001. Twenty-three countries, mostly NATO allies, havecontributed troops or personnel to the 4,500-strong force. The mission of the ISAF is to (1) assistthe interim Afghan government in building a national security infrastructure, (2) assist in thecountry's reconstruction, and (3) assist Afghanistan in training its future security forces. At the endof June 2002, the United Kingdom handed over to Turkey the command of ISAF.