Motus Mentis

Recently the Senate Foreign Relations Committee produced a report on how things are going in Afghanistan, and I’ve given it a careful going-over. Despite my natural optimism, I’ll confess it’s left me a little chopfallen.

I’ve excerpted a few snippets below:

Foreign aid, when misspent, can fuel corruption, distort labor and goods markets, undermine the host government’s ability to exert control over resources, and contribute to insecurity. According to the World Bank, an estimated 97 percent of Afghanistan’s gross domestic product (GDP) is derived from spending related to the international military and donor community presence.

Real progress, if you ask me. Why, I think it was as high as 98 percent just a few years back.

The administration is understandably anxious for immediate results to demonstrate to Afghans and Americans alike that we are making progress.

Worth repeating, that one: the United States of America is “understandably anxious” to demonstrate to the Afghans that they’re getting our money’s worth.

However, insecurity, abject poverty, weak indigenous capacity, and widespread corruption create challenges for spending money.

Well, spending the taxpayer’s money is always a hard job, even under the best of circumstances. And the problem here is that we have to spend so much of it.

High staff turnover, pressure from the military, imbalances between military and civilian resources, unpredictable funding levels from Congress, and changing political timelines have further complicated efforts. Pressure to achieve rapid results puts our civilians under enormous strain to spend money quickly.

Right: we need to get rid of the stuff as fast as we can.

We need to take a closer look at how we are spending money in Afghanistan and the impact it is having on the Afghan state.

Oh, I don’t know. Is that really necessary?

The U.S. Government relies heavily on contractors in Afghanistan, but multiple reports and the recent crisis at Kabul Bank have raised alarms about the lack of robust oversight.

Bit of a shock, that.

Most U.S. aid bypasses the Afghan Government in favor of international firms. This practice can weaken the ability of the Afghan state to execute its budget, lead to redundant and unsustainable donor projects, and fuel corruption. The United States has committed to funding more aid directly through the Afghan Government, but stronger measures must first be taken to ensure greater accountability of our funds. The U.S. strategy is focused on building the capacity of Afghan institutions to deliver basic services. The State Department and USAID are currently spending approximately $1.25 billion on such efforts. But our overreliance on international technical advisors to build Afghan capacity may undermine these efforts. Our aid projects need to focus more on sustainability so that Afghans can absorb our programs when donor funds recede.

Yes, well, that should be easy enough if we really put our minds to it; we just need to get that remaining sliver of GDP — what was it again, 97%? — sorted out.

The goal of our assistance in Afghanistanis to create the conditions for a more stable, democratic government capable of resisting attempts by Al Qaeda and other insurgent groups from returning and establishing safe havens from which to launch attacks on the U.S. homeland.

…and teaching pigs to fly.

As we begin the transition process to Afghan-led security and as our civilians absorb more tasks from the military, our civilian assistance strategy must focus on what is necessary, achievable, and sustainable.

Which is to say, nothing.

While the U.S. Government will continue to support the government and people of Afghanistan with foreign assistance after our troops come home, in the words of USAID Administrator Shah, we must provide assistance ”˜”˜in a way that allows our efforts to be replaced over time by efficient local governments, thriving civil societies and vibrant private sectors.’’

Got it: “efficient local governments, thriving civil societies and vibrant [vibrant!!] private sectors.” Check.

This next is my favorite part, I think:

Today, the focus of U.S. assistance in Afghanistan is to build the capacity of Afghan institutions and promote economic development in order to create jobs and weaken popular support for the insurgency. Secretary of State Hillary Clinton has argued that this approach is ”˜”˜far from an exercise in nation-building’’ because it aims ”˜”˜to achieve realistic progress in critical areas’’ and is aligned with our security objectives.

Let’s see: creating “efficient local governments, thriving civil societies and vibrant private sectors.” Building the capacity of Afghan institutions, promoting economic development, and creating jobs. Yep, that sounds pretty far from “nation-building”, all right. And “realistic”, too! (After all, promoting economic development and creating jobs is exactly what this administration specializes in.)

And the logic’s iron-clad: this can’t possibly be “an exercise in nation-building”, because it’s “aligned with our security objectives.”

Well, great so far. But how are we getting it all done?

To accomplish this mission, the State Department and USAID dramatically increased the number of civilians on the ground in Afghanistan from 531 civilians in January 2009 to about 1,300 today,with approximately 920 in Kabul and 380 in the field. The number of civilians is expected to peak at roughly 1,450 by mid-2014, according to Embassy officials. But overall funding levels peaked in 2010. This means that the Embassy will have more civilians in the field with fewer resources in 2014, just as the security transition is in full swing. Safely maintaining civilians in Afghanistan is costly. According to senior Embassy officials, each U.S. civilian costs about half a million dollars.

Wow, that’s pretty expensive! But given that it includes all the security costs, etc., it’s not really so bad, I guess.

Oh, wait…

This figure covers training, salaries, and travel expenses but excludes security costs covered by the military, which civilians will have to absorb as we begin drawing down troops. It also excludes the cost of emergency protection details (EPD) that transport our civilians in theatre. An EPD for an Ambassador in Kabul, for instance, can cost approximately $8 million a year.

Oh.

Well, okay, okay: yes, we’re spending a lot of money over there, but we have every reason to believe it’s going to be well worth it in the long run:

Our stabilization strategy assumes that short-term aid promotes stability in counterinsurgency (COIN) operations and ”˜”˜wins hearts and minds’’ by improving security, enhancing the legitimacy and reach of the central government, and drawing support away from the Taliban. It presumes that the international community and the Afghan Government have shared objectives when it comes to promoting longer term development, good governance, and the rule of law.

Right! There you are.

These assumptions may not be correct.

Oh.

In March 2010, a conference at Wilton Park in the United Kingdom brought together leading experts on the role of development in counterinsurgency. The conference report found ”˜”˜a surprisingly weak evidence base for the effectiveness of aid in promoting stabilization and security objectives’’ in Afghanistan.

Administrator Shah agrees that ”˜”˜we must strive to uncover the true drivers of instability in a region, based . . . on local perspectives. . . What we’ve found is that it is generally not the case that a lack of schools or roads drives conflict. Often the situation is far subtler, having to do with local power dynamics or long-held grudges.

Our aid strategy cannot assume that poverty or unemployment alone fuel the insurgency. For example, according to the World Bank, poverty rates in the insurgency-plagued Helmand and Kandahar provinces are less than 30 percent. By contrast, in the more peaceful central and northern provinces, poverty rates run from between 42 and 58 percent in Bamyan and Ghor to upward of 58 percent in Balk province. In a recent study of the drivers of political violence, USAID found limited evidence linking poverty and low education to support for radical groups.’’

Doh!!!

Security and governance matter. Development spending can strengthen the government and weaken insurgents in areas that are secure and enjoy good governance.

Well, no worries, then — because as we all know, most of Afghanistan is secure, and enjoys good governance.

It can also have the opposite effect when security and governance are poor or absent. As historian Mark Moyar observes:

. . . the United States spent more than $100 million repairing and upgrading the Kajaki hydropower plant to provide electricity to Helmand and Kandahar provinces, but last year half of its electricity went into areas where the insurgents control the electric grid, enabling the Taliban to issue electric bills to consumers and send out collection agents with medieval instruments of torture to ensure prompt payment. The consumers in these places use the power for the irrigation of fields that grow poppies, whichin turn fuel the opium trade from which the Taliban derive much of their funding.

Whoops!

Afghanistan is not Iraq, which had a functioning state and robust government and civil society institutions. After the fall of the Taliban, we were faced with the challenge of building a democratic style government and modern economy.

That’s all fine, just as long as we aren’t doing any of that “nation-building”.

The U.S. effort began in earnest in 2009, when the administration and Congress recognized the need for properly resourcing the civilian effort. Ongoing development aid will be needed for the foreseeable future to help Afghanistan become stable.

No problem there! We’re pretty flush these days.

Given the emphasis on annual budget cycles in Washington and the lack of a multiyear authorization for Afghanistan that could provide a roadmap for future funding, the administration is again under pressure to demonstrate quick results to Congress. Many in Congress are fixated on ”˜”˜burn rates,’’ or how fast the money is spent and how much money is left in the ”˜”˜pipeline.’’ This results in undue emphasis at USAID and the State Department on getting money out the door to ensure future appropriations at significant levels. Political pressures create perverse incentives to spend money even when the conditions are not right.

Boy, if only we didn’t have to worry about those darn “political pressures”, we could really do this thing up right. Makes you wish we were more like China!

But don’t despair: at least we’re getting something done with the money we do spend. We’ve got our top people on the job over there, after all…

In addition to the risk of contractor fraud, the use of large numbers of contractors raises other significant opportunities for waste and mismanagement. By contracting with U.S. and international contractors at western prices (the ”˜”˜primes’’), donor funds can be lost to corruption through multiple subcontractors over which the U.S. Government has little to no control (the ”˜”˜subs’’). Projects may be built at costs substantially less than the amount originally paid, using substandard materials and methods. Poor security conditions and a lack of contracting officers overseeing contactor performance could deter site visits to confirm whether the project was properly built, or even built at all. Afghanistan is littered with abandoned or half-built structures.

In 2010, massive fraud was uncovered at Kabul Bank, including loans totaling $900 million to shareholders at the Bank,which is nearly 5 percent of Afghanistan’s current Gross Domestic Product (GDP). Fraud of this scale resulted from failures at every level, including internal bank control; Kabul Bank’s auditors””A.F.Ferguson & Co., a Pakistani affiliate of Pricewaterhouse Coopers; Afghanistan’s Central Bank; the Central Bank’s advisors, Deloitte, under a USAID contract; the political establishment; and USAID. At the time, USAID had only one contracting officer’s technical representative overseeing the $92 million contract with Deloitte to provide technical assistance to the Central Bank. An investigation undertaken by the USAID Office of Inspector General determined that Deloitte knew or should have known that there were serious problems at Kabul Bank and failed to alert USAID officials in Kabul.

Fraud?? At the Kabul Bank???

Oy… So how do we pay out all this money, anyway? Straight to the government, or what?

ON-BUDGET VERSUS OFF-BUDGET FUNDING

Most international donors, including the United States, channel much of their aid ”˜”˜off-budget,’’ meaning it does not go through the Afghan Government. Off-budget funding is appealing because it provides more financial and programmatic control to the donor, which is important in an environment where there are significant concerns about weak government capacity and corruption.

Oh. Well, okay, if that’s what works best.

However, off-budget funding has significant downsides.

Uh-oh…

It can weaken the ability of the Afghan state to control resources, which results in donor duplication, and can fuel corruption. It has also led to the creation of thousands of donor-driven projects without any plan for sustaining them, including 16,000 CERP projects funded by the military at a cost of over $2 billion. As USAID notes, there is a daily tension between ”˜”˜building capacity in the Afghan Government, putting U.S. taxpayer money on-budget, and ensuring that urgent [Afghan] government functions happen.’’

Ultimately, the Afghan Government must be a genuine partner for our assistance efforts to succeed. It cannot be held accountable for processes over which it has little to no control. Thus, the U.S. Government is working to meet its Kabul Conference commitment to fund up to 50 percent of our aid ”˜”˜on-budget’’ by FY 2012 from approximately 21 percent in FY 2009, 35 percent in FY 2010, and 37”“45 percent in FY 2011.

“Pay to the order of… is that K-A-R-Z-A-I?”

According to the London and Kabul conference communiques, delivering aid through the Afghan Government is ”˜”˜conditioned on the Government’s progress in further strengthening public financial management systems, reducing corruption, improving budget execution, developing a financial strategy and Government capacity towards the goal.’’ For instance, the Afghan Government committed at the Kabul Conference to pass an improved Audit Law as part of its effort to improve public financial management. This is also an Afghanistan Reconstruction Trust Fund (ARTF) benchmark.

Good. Hold their feet to the fire. Keep ’em honest. Show ’em we mean business. Let’s have some US-style transparency and accountability!

Yet the U.S. Treasury Department and many at Embassy Kabul believe that the Audit Law passed by the government is insufficient and does not meet the Afghan obligation under the ARTF benchmark.

Hmpf. Well, so be it, then. We U.S. taxpayers won’t fork over a red cent till they straighten up and fly right!

Failure to meet the benchmark would mean that for the first time, a certain amount of funds””approximately $17 million””would not be disbursed to the Afghan Government, sending a signal that these commitments matter.

Exactly. A little tough love. That’ll get ’em in line.

However, the U.S. Government’s current position is to accept the deficient Audit Law, despite strong internal opposition, in order to avoid a confrontation with the Afghan Government.

Oh.

Well, yes, I suppose we can’t have that.

Anyway, you get the idea, readers. There’s lots more here.

In short, and all kidding aside: it’s time to go.