This report is about how toprogressively reduce over time Afghanistan's dependenceon opium - currently the country's leading economicactivity - by development initiatives and shifting economicincentives toward sustainable legal livelihoods.Specifically, the report identifies additional investmentsand policy and institutional measures to support developmentresponses that can counterbalance the economic advantages ofopium. It analyzes ways to change the relative incentivesbetween licit and illicit cropping and to help enhance rurallivelihoods for the poor, under better governance andsecurity conditions. The report puts forward concreterecommendations and the expected impacts on growth, povertyreduction and the opium economy are assessed. The reportfirst briefly discusses the policy context (Chapter 1) andprovides an overview of the opium economy (Chapter 2),focusing on how different segments of the rural populationinteract with it. The report then analyzes the scope forincreasing value added, competitiveness and productivity inagriculture (Chapter 3) and for promoting enterprisedevelopment and off-farm employment (Chapter 4). Thecomplementary role of further investments in ruralinfrastructure is examined in Chapter 5, and measures forstrengthening governance are analyzed in Chapter 6. InChapter 7 issues that cut across all counter narcoticsefforts are examined. A final chapter looks atimplementation, and at issues of prioritization, synergiesand phasing (Chapter 8). The recommendations of the reportare encapsulated in a matrix at the end of the Executive Summary.