By Sonya Hepinstall

KABUL, April 23 (Reuters) - The level of destruction in Afghanistan was far underestimated from the beginning which fuelled unrealistic expectations about how fast the country could be rebuilt, one of the country's top economic officials said.

Ishaq Nadiri, senior economic adviser to President Hamid Karzai, pointed to a legacy of conflict and division that started almost 30 years ago with the Soviet invasion and continued into civil war and the rule of the strict Islamist Taliban.

"Afghanistan is not your ordinary post-conflict country ... the degree of the devastation of this country has been highly underestimated. So the expectation has been very high," he told Reuters in an interview late on Sunday.

The international community has met in Bonn, Tokyo, Berlin and London to garner aid for rebuilding Afghanistan since U.S.-led forces ousted the Taliban in 2001.

Donors and Afghans must be patient with the government formed after Karzai was elected in 2004 as it faced the huge task of building a society and economy basically from scratch, he said. "We have to build the institutions, we have to build democracy, we have to educate the kids, we have to feed the people and we have to bring the hundreds of thousands per month or whatever of immigrants back, refugees back ... which other society has done that?" Nadiri said.

Disappointment is rife in Afghanistan more than five years after U.S.-led forces ousted the Taliban.

Unemployment is high -- up to 40 percent by some counts -- and work on infrastructure such as roads, electricity and water distribution is proceeding much slower than hoped.

Donor countries pledged $30 billion for reconstruction and other aid since 2001, according to the finance ministry. Of that, $13 billion had been spent as of March this year, it says.

Critics say the allocation of aid toward reconstruction that the ordinary Afghan can see and enjoy has been hampered by corruption as well as by the inefficiencies of the international aid system, which relies heavily on third party contractors.

Out of every aid dollar allocated by the United States, 86 cents is "phantom aid" that will not directly reach Afghans, according to an account cited by New America Foundation senior fellow Peter Bergen in testimony to U.S. Congress.

Nadiri said he also was concerned about money spent on so-called "technical assistance", which he estimated at about $1.6 billion from 2002 to 2005.

"Very little footprint (of this money) has been left," he said, but added: "Basically that's something endemic about aid maybe ... that's the way it is set up. It's not particular with Afghanistan."

Arching over all has been the shadow of increased violence spearheaded by Taliban insurgents, who have vowed to drive out foreign troops and topple Karzai.

About 4,000 people were killed last year and hundreds more, including about 30 Western troops, have died so far this year, regarded as a crunch period for all concerned.

NOT ALL BAD NEWS

Nadiri, who returned to Afghanistan to work with Karzai from a position as professor of economics at New York University, argued not all the news was bad.

Citing World Bank, IMF and government figures, he projected annual GDP growth for the five years from 2007/08 at 11 to 12 percent and inflation in 2007/08 at 5.4 percent. Annual per capita income was now about $380 against $182 in 2001, he said.

The country's first agricultural trade fair this week was an example of an event sponsored by government and aid agencies that worked and promoted a key sector of the economy which has not seen as much investment as it should, said Nadiri.

"It has a great value ... concentrating people's attention ... that yes, well, we can do it, it's possible," he said.

The two-day fair bustled with activity as curious onlookers mingled with purposeful traders around booths.

Haji Stana Gul, from the Eastern Region Fresh Fruit and Vegetable Wholesalers Association, stood proudly in front of a stand piled high with tomatoes, eggplants and other produce.

"I am happy to be here because this is how we can improve our business. If we don't spend on promotion like this, we can't expand," he said. "Security is not the problem in Afghanistan, the economy is."

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