Afghanistan — Amid development failures, some see reduced foreign aid as a boon to Afghanistan

As Afghanistan braces for reduced for­eign aid as part of the NATO draw­down over the next two years, some gov­ern­ment and aid offi­cials — cur­rent and for­mer — view an expect­ed drop in inter­na­tion­al sup­port as a bless­ing in dis­guise despite the like­ly neg­a­tive impact on the local econ­o­my. These offi­cials argue that low­er aid lev­els will force Afghanistan to become less aid depen­dent and lim­it oppor­tu­ni­ties for ram­pant cor­rup­tion. More impor­tant­ly, they say, for­eign aid that builds up the Afghan gov­ern­ment and tack­les long-term objec­tives like infra­struc­ture could cre­ate a path to tru­ly sus­tain­able devel­op­ment in a coun­try long plagued by devel­op­ment dis­ap­point­ments.

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Inter­views with these gov­ern­ment and aid offi­cials, as well as with ana­lysts and busi­ness­men work­ing in the coun­try, sug­gest the prospect for Afghan devel­op­ment is less tied to over­all aid fund­ing and more to the spe­cif­ic projects select­ed for sup­port and the way funds are chan­neled to those projects.

“Poor donor coor­di­na­tion and flaws in most inter­na­tion­al devel­op­ment assis­tance mod­els are so pro­found in Afghanistan that I am not sure reduc­ing the lev­el of aid will cause great prob­lems because most aid has not caused great good,” said Jere­my Pam, who par­tic­i­pat­ed in a U.S. Cen­tral Com­mand high-lev­el review of US strat­e­gy in Afghanistan and recent­ly returned from an 18-month stint in the coun­try where he over­saw local gov­er­nance ini­tia­tives for the U.S. State Depart­ment.

There is evi­dence that devel­op­ment in Afghanistan is not sim­ply a ques­tion of mon­ey. Under the belief that more is bet­ter, the U.S. dou­bled its assis­tance in 2010 from rough­ly $2.3 bil­lion to $4 bil­lion only to go back to $2.3 bil­lion in 2011 with­out either the increase or the reduc­tion hav­ing had any vis­i­ble impact accord­ing to knowl­edge­able sources. The sud­den and tem­po­rary increase may have high­light­ed the lim­its of Afghanistan’s abil­i­ty to absorb aid and, per­haps more impor­tant­ly, put a spot­light on the lim­i­ta­tions of a for­eign aid sys­tem designed large­ly to serve donors’ polit­i­cal goals.

“The inter­na­tion­al donors have been a major prob­lem. We inter­na­tion­als want­ed big sym­bol­ic state­ments. We dou­bled the resources and didn’t care about absorp­tion capac­i­ty,” added Pam.

All in all, the impact of fluc­tu­at­ing aid lev­els on the local econ­o­my may be less than expect­ed because, some say, most for­eign aid is not spent in Afghanistan and much of what is spent there, leaves the coun­try through imports, expa­tri­at­ed prof­its and out­ward remit­tances.

Wadan Farahi, a for­mer spokesman of the Afghan women’s min­istry asserts donor spend­ing has focused on “quick fix­es” and that “mon­ey spent did not pro­duce long term ben­e­fits.” Hav­ing left gov­ern­ment ser­vice to become a con­sul­tant, Farahi argued that strength­en­ing the government’s capac­i­ty to han­dle large amounts of aid should be a pri­or­i­ty. He said a lit­mus test would be the government’s will­ing­ness to enforce the law and hold those account­able who were respon­si­ble for past finan­cial mis­man­age­ment. “Our econ­o­my can­not with­stand anoth­er Kab­ul Bank cri­sis. It would spark hyper­in­fla­tion,” Karahi said refer­ring to last year’s dis­cov­ery that $1 bil­lion had van­ished from the bank as a result of insid­er loans. He said the Tokyo Coop­er­a­tion Con­fer­ence on Afghanistan this com­ing July was expect­ed to help the gov­ern­ment stream­line its pro­cure­ment pro­ce­dures in a bid to roll back cor­rup­tion and focus on its devel­op­ment pri­or­i­ties.

Iron­i­cal­ly, at least one well-placed offi­cial says Afghanistan’s gov­ern­ment, despite ram­pant cor­rup­tion and lim­it­ed capa­bil­i­ty, has so far achieved a sig­nif­i­cant­ly high­er rate of effec­tive aid deliv­ery than donor man­aged funds. “The mon­ey spent through the gov­ern­ment had an 80 per­cent effect. In con­trast, the mon­ey spent by donors had a 15 per cent local impact. There is not a lot of trans­paren­cy in donor com­mu­ni­ty spend­ing. It involves mul­ti­ple lay­ers of con­tract­ing and sub-con­tract­ing. If they go through the Afghan gov­ern­ment a lot of lay­ers are erad­i­cat­ed. It is much eas­i­er to have the Afghan gov­ern­ment as a sin­gle source to coor­di­nate and mon­i­tor,” said Ari­an Shar­i­fi, a part­ner in Afghan Finan­cial Ser­vices, a pri­vate­ly owned con­sul­tan­cy, and for­mer senior finance min­istry offi­cial.

Shar­i­fi and oth­ers may be over­stat­ing the evi­dence to argue their case. Nonethe­less, donors implic­it­ly admit­ted that the Afghan gov­ern­ment was more effi­cient at aid deliv­ery with their deci­sion at the Kab­ul con­fer­ence in 2010 that 50 per­cent of all aid would be chan­neled through the gov­ern­ment (so called ‘on-bud­get’ spend­ing) by the sum­mer of 2012. Ana­lysts and Afghan offi­cials note that the country’s GDP rose in 2011, the year aid was cut back, although eco­nom­ic growth was also aid­ed by increased agri­cul­tur­al pro­duc­tion as a result of the end of a four-year drought in the coun­try.

“That is what we demon­strat­ed to the World Bank,” revealed Najib Man­alai, an advi­sor to Afghan Finance Min­is­ter Omar Zakhilw­al, argu­ing that for­eign aid is not the only socio-eco­nom­ic dri­ver in the war-torn coun­try.

Local offi­cials like Man­alai say that a decade of chan­nel­ing aid through donor agen­cies, non­govern­men­tal orga­ni­za­tions and con­trac­tors ori­ent­ed devel­op­ment strat­e­gy toward vest­ed inter­ests of donor coun­try insti­tu­tions and a rush to allo­cate bud­gets – all at the expense of con­sid­er­ing a project’s local results.

“Bil­lions of dol­lars were spent, projects were devel­oped that were not doable. For exam­ple, a school but no teach­ers, desks or chairs, a clin­ic with no nurs­es and no doc­tor. Every aid orga­ni­za­tion had spe­cial­ists apply exam­ples from else­where, mon­ey spent was not pro­duc­ing long term ben­e­fits,” Farahi said.

Mikhael Shahmah­mood, the Unit­ed States Insti­tute for Peace rep­re­sen­ta­tive in Kab­ul, not­ed the fail­ure to exploit Afghanistan’s eco­nom­ic strengths in agri­cul­ture. “We are sit­ting with French imports of chick­en and eggs; we import 200 mil­lion chick­ens a year from Brazil. We import grapes and yoghurt from Iran,” he said, sug­gest­ing those could eas­i­ly be pro­duced by Afghanistan itself. Sharafi recalled being pushed by the World Bank dur­ing his days with the finance min­istry to spend his $600,000 bud­get for capac­i­ty build­ing despite his lack of qual­i­fied can­di­dates.

“I orga­nized a few train­ing work­shops in Dubai and New Del­hi but could not find a sin­gle per­son with suf­fi­cient Eng­lish to par­tic­i­pate,” he said.

A decade of inef­fec­tive aid cou­pled with the immi­nent draw­down of inter­na­tion­al forces has like­ly cost West­ern donors the abil­i­ty to sig­nif­i­cant­ly influ­ence the future course of Afghan devel­op­ment. That future will be deter­mined to a large extent by domes­tic and region­al play­ers, and involves the abil­i­ty of the Tal­iban, the Haqqani net­work and the Hek­mat­yar group to under­mine the gov­ern­ment of Pres­i­dent Hamid Karzai as well as the roles of Pak­istan, India, Iran, for­mer Sovi­et Cen­tral Asian republics, Rus­sia and Chi­na.

Com­pli­cat­ing plan­ning for the tran­si­tion is lack of clar­i­ty around what funds donors have poured into Afghanistan over the past decade and how those funds were used. “No one actor – inter­na­tion­al or Afghan – knows how much mon­ey over­all is being spent and where it goes. How do you plan a tran­si­tion under those cir­cum­stances?” Pam, the for­mer U.S. gov­ern­ment advi­sor, asked. Crit­ics argue that nei­ther the Unit­ed Nations nor the U.S. Depart­ment of State, U.S. Agency for Inter­na­tion­al Devel­op­ment, oth­er donor nations, the World Bank or the Afghan gov­ern­ment has ever pub­lished a trans­par­ent assess­ment of the flow of aid to Afghanistan, its impact of the civ­il and secu­ri­ty aid pro­grams or an assess­ment of how aid has impact­ed the Afghan econ­o­my. Nei­ther has any of these orga­ni­za­tions devel­oped cred­i­ble mea­sures for the effec­tive­ness of aid, accord­ing to a recent­ly pub­lished study of aid to Afghanistan by ana­lyst Antho­ny H. Cordes­man of the Cen­ter for Strate­gic and Inter­na­tion­al Stud­ies as well as a report late last year by the U.S. Sen­ate For­eign Rela­tions Com­mit­tee. In con­trast to Iraq, the U.S. Spe­cial Inspec­tor Gen­er­al for Afghanistan has no cri­te­ria to val­i­date plans and require­ments for civ­il and secu­ri­ty aid efforts in Afghanistan that go beyond the tra­di­tion­al audits which sim­ply doc­u­ment past fail­ures.

As a result, donors may find it dif­fi­cult to assess the required finan­cial sup­port to ensure the troop draw­down and expect­ed aid cuts do not dri­ve the coun­try into reces­sion. Those even­tu­al­i­ties would reduce demand for Afghan goods and ser­vices as well as pub­lic sec­tor invest­ment. The eco­nom­ic fall­out is like­ly to occur amid an uncer­tain post-draw­down secu­ri­ty vac­u­um and a dete­ri­o­rat­ing human­i­tar­i­an sit­u­a­tion. With­out a base­line to work from, it will be chal­leng­ing to ensure that the Afghan gov­ern­ment can spend enough to off­set the reduced inter­na­tion­al fund­ing flows. Last Novem­ber, a World Bank study of Afghanistan’s post-2014 fund­ing and aid needs warned that a cut-off of aid could spark a fis­cal melt­down and result­ing chaos. Under such cir­cum­stances, the study said, Afghanistan could wit­ness the erup­tion of a civ­il war with rival war­lords and a mil­i­tant Islamist fac­tion bat­tling one anoth­er much like in Soma­lia.

Cordesman’s first work­ing draft report, “Afghanistan: The Uncer­tain Eco­nom­ics of Tran­si­tion,” con­clud­ed that if “the lev­el of future U.S. aid and oth­er donor mil­i­tary and civ­il aid efforts is to have any chance of cre­at­ing a rea­son­able lev­el of post-2014 secu­ri­ty and sta­bil­i­ty” plan­ners would have to “approach eco­nom­ics with a lev­el of integri­ty that has been sad­ly lack­ing to date.” That would involve being “hon­est when the data and sources are in con­flict, or so con­flict­ing and poor­ly based that they can­not cred­i­bly be used for plan­ning – a state of affairs that is more often than not the case.”

Over­all, some local offi­cials and devel­op­ment experts are call­ing for delink­ing aid from mil­i­tary objec­tives and mak­ing jobs, human secu­ri­ty, jus­tice and gov­er­nance a pri­or­i­ty. Those inter­viewed for this arti­cle all argued for a shift away from quick impact projects dri­ven by donors’ need to demon­strate progress against mil­i­tary and polit­i­cal objec­tives to less flashy, long-term devel­op­ment and infra­struc­ture ini­tia­tives.

“Afghanistan has been doing quick impact projects for the last 30 years. The effect is obvi­ous, they are not the solu­tion,” said Shahmah­mood.

Con­tra­dict­ing this view, a major­i­ty staff report of the U.S. Sen­ate For­eign Rela­tions Com­mit­tee rec­om­mend­ed last sum­mer that “our aid should be vis­i­ble among Afghans, and we should have a robust com­mu­ni­ca­tion strat­e­gy in place so that Afghans know what U.S. aid in Afghanistan is accom­plish­ing.” The report defined a sus­tain­able U.S. strat­e­gy as one that would “pur­sue a lim­it­ed num­ber of high-impact pro­grams that do not require com­plex pro­cure­ment or infra­struc­ture.”

If West­ern donors are to change their strat­e­gy, they are like­ly to increas­ing­ly rely on Islam­ic orga­ni­za­tions and region­al insti­tu­tions such as the Aga Khan Foun­da­tion, the Orga­ni­za­tion of the Islam­ic Con­fer­ence and the Asian Devel­op­ment Bank, accord­ing to Brad L. Brasseur of the Brus­sels-based East­West Insti­tute. The Aga Khan Devel­op­ment Net­work has already con­tributed around $700 mil­lion to large-scale rur­al devel­op­ment, health, edu­ca­tion and micro-finance in Afghanistan. More­over, Islam­ic and region­al agen­cies could help devel­op and finance fea­si­ble annu­al provin­cial devel­op­ment plans involv­ing trans­par­ent trans­fers of devel­op­ment funds in line with gov­ern­ment capac­i­ty to imple­ment projects. This larg­er role for the Afghan gov­ern­ment and region­al play­ers, some say, may be the unex­pect­ed devel­op­ment ben­e­fit of the com­ing reduc­tion in for­eign aid.

About The Author:
James M. Dorsey is a senior fel­low at the S. Rajarat­nam School of Inter­na­tion­al Stud­ies at Nanyang Tech­no­log­i­cal Uni­ver­si­ty in Sin­ga­pore and the author of the blog, The Tur­bu­lent World of Mid­dle East Soc­cer.