Afghanistan is a mountainous, arid, land-locked country with limited natural resources, bordered by Pakistan to the east and south; Tajikistan, Turkmenistan, Uzbekistan, and China to the north; and Iran to the west. At 647,500 square kilometers, Afghanistan is slightly smaller than the state of Texas. The country is divided into 34 provinces, more than 300 districts, and approximately 30,000 villages. Afghanistan is one of the world’s poorest countries; its population, estimated at more than 31 million, is ethnically diverse, largely rural, and mostly uneducated. Development indicators published by the World Bank and the UN rank Afghanistan at the bottom of virtually every category, including nutrition; infant, child, and maternal mortality; life expectancy; and literacy. Over the last two decades, conflict ravaged Afghanistan. The Soviet Union invaded Afghanistan in 1979 and withdrew only after waging a prolonged and destructive war against Afghan resistance groups. Following a protracted civil war, by 1998, most of Afghanistan was under the control of the fundamentalist Taliban group. Under the Taliban, Afghanistan became a haven for terrorists. After the terrorist attacks of September 11, 2001, the United States and a coalition of its allies invaded Afghanistan and removed the Taliban from power. Following the Taliban’s removal, the coalition began the process of establishing a new Afghan government. To help rebuild the country and create a stable Afghan society that would not be a threat to itself or others, in fiscal years 2002 through 2004 the United States spent $1.6 billion on humanitarian and reconstruction projects. In June 2004 and again in July 2005, we reported that U.S. humanitarian and short-term assistance over the two-year period had helped Afghanistan’s vulnerable population, but that longer-term reconstruction efforts achieved limited results in creating a stable Afghan society. The United States and several other donor nations met in Geneva, Switzerland, in April 2002, to help Afghanistan address threats to its security. At the Geneva conference, the donors established a five-pillared security reform agenda and designated a donor country to take the lead in reforming each pillar. In a June 2005 report on efforts to establish the army and police, we reported that there needed to be concurrent progress in all security pillars, otherwise Afghanistan could again become a haven for terrorists. Furthermore, we reported that limited progress had been made in reforming Afghanistan’s judiciary and combating illicit narcotics. Afghanistan is the world’s largest supplier of opium and has been a source of illegal opium for decades. Opium poppy is a hardy, drought-resistant crop that is easily grown throughout Afghanistan’s rugged territory. Opium poppy, as seen in figure 1, is an annual crop with a six to seven month planting cycle that starts earlier in the south and later in the north of Afghanistan. It is planted between September and December and flowers approximately three months after planting. After the flower’s petals fall away, the opium, an opaque, milky sap found in the plant’s seed capsule, is harvested between April and July. The sap can then be refined into morphine and heroin. United Nations Office on Drugs and Crime (UNODC) surveys indicate that the primary deterrent to farmers growing poppy is the threat of eradication. The majority of eradication takes place after the poppy plant has sprouted and before it is harvested, approximately a two-month long period. According to UNODC, in the three-year period, 2002 through 2004, Afghanistan’s opium harvest increased substantially. In 2005, the number of hectares of opium poppy cultivation declined by over 20 percent, yet the crop yield per hectare rose because of favorable weather conditions. Thus, the estimated amount of potential opium produced declined only slightly. In 2006, poppy cultivation increased to 165,000 hectares, yielding a record poppy crop estimated at a potential 6,100 metric tons of opium, or more than 90 percent of the world’s illicit opium (see table 1). State attributed the reduction in cultivation in 2005 to surplus opium from previous years, public information efforts by President Karzai and others, promised alternative livelihoods assistance, and farmers’ fears of eradication. However, eradication fears were not realized; only an estimated 5,100 hectares of poppy were eradicated. Further, drug-related corruption is a problem at all levels of government and remains pervasive at the provincial and district levels. Conversely, the reasons for the growth in 2006 cultivation are not fully known, but U.S. officials described a combination of factors, including the relatively small amount of eradication in 2005 and pressure from traffickers and the Taliban on farmers to grow. For example, U.S. officials said that in southern Afghanistan, farmers reported finding “night letters” from the Taliban left on their doors threatening them if they did not cultivate poppy. Moreover, UNODC reported that many farmers paid eradicators not to eradicate their fields and that eradication was often a consensual decision between eradicators and farmers. From 2002 through 2004, the United States saw increasing opium poppy cultivation and drug trafficking as a growing threat to stability and security of Afghanistan and provided approximately $380 million for Afghan- and United Kingdom-led counternarcotics efforts. The United States used these funds to train Afghan narcotics interdiction units, construct border and highway checkpoint facilities, and supply operational support and nonlethal equipment to Afghan eradication teams. These efforts failed to have any significant effect on the illicit narcotics industry because of limited security and stability across Afghanistan. As a result, the U.S. government made counternarcotics a top priority and developed a strategy in 2004 to reduce poppy cultivation, drug production, and trafficking. This new strategy is comprised of five pillars, as illustrated in figure 2. The five- pillar counternarcotics plan is intended to offer incentives to stop the growing of opium poppy through alternative livelihoods projects, combined with strong disincentives in the form of forced eradication, interdiction, and law enforcement, while spreading the Afghan government’s antinarcotics message. These U.S. efforts are also expected to build the Afghan government’s capacity to conduct counternarcotics efforts on its own. The United States originally planned to use crop-dusting airplanes to spray herbicide on the opium poppy before it could be harvested. However, the Afghan government would not allow the use of herbicides. Consequently, the United States and Afghanistan rely on manual eradication, such as police on foot using sticks, sickles, and scythes to knock or cut down poppy, and mechanized eradication, which involves police using tractors, all-terrain vehicles, and other vehicles to drive over or plow up the poppy. USAID also modified some of its projects to specifically focus on counternarcotics in those provinces where opium poppy cultivation was greatest. These alternative livelihoods projects are coordinated with USAID’s on-going reconstruction efforts, and several of the short term cash-for-work projects stem from prior humanitarian assistance projects designed to help vulnerable populations. To accomplish U.S. counternarcotics goals in Afghanistan, the United States provided about $782 million in fiscal year 2005, of which $532 million was administered by USAID and State, as shown in table 2, and over $250 million by Defense and DEA. The majority of USAID and State funding was provided by the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Tsunami Relief, 2005, which was enacted into law in May 2005. Several federal and agency regulations govern USAID’s and State’s use of these funds for counternarcotics programs, prohibiting use of the funds to assist terrorists, drug traffickers, or human rights violators. Though not explicitly addressed in this report, funds administered by Defense and DEA are being expended on projects, such as constructing the counternarcotics justice center and supporting Afghan interdiction efforts. USAID and State established goals for each of the U.S. counternarcotics strategy’s five pillars, funded projects under each pillar, and made progress toward some project objectives. However, the implementation of several projects was hindered by the security situation, poor infrastructure, and other factors. Moreover, USAID’s and State’s projects (see fig. 3) had not been in place long enough to determine whether they had contributed toward the overall goal of significantly reducing poppy cultivation, drug production, and drug trafficking. As shown in table 3, USAID provided $180 million to fund licit economic alternatives to poppy cultivation and thus reduce the amount of Afghanistan’s economic activity attributable to the drug industry. According to UNODC, as of 2006, 2.9 million Afghans were involved in a narcotics industry that is equivalent to about half of Afghanistan’s legal economic activity. USAID provided about $125 million for regional alternative livelihoods projects. The projects were split into three regions—Nangarhar, Laghman, and Konar in the east; Badakshan and Takhar in the north; and Helmand, Kandahar, Oruzgan in the south—and were implemented by different contractors in an effort to ensure the projects were tailored to the appropriate needs and potential of each region. In all the regions, similar types of labor intensive, cash-for-work projects were implemented, such as road repair, as illustrated in figure 4, and irrigation and drainage canal rehabilitation. The contractors in each region were supposed to develop longer-term projects more suited to their provinces.