Afghanistan’s Donor Strategy Crisis

Rudik ISKUZHIN (Russia)

On commission from the Asian Parliamentary Assembly (March 2010 session of the Committee on Social and Cultural Issues in Palau), a delegation from the Russian Parliament began addressing the effectiveness of international financial aid in the reconstruction of Afghanistan in conjunction with Afghan Members of Parliament.

As part of that discussion, the “Financial Review of Donor Aid to Pakistan. Report 1388” was analyzed together with the Afghan Members of Parliament. The report had been prepared by the Ministry of Finance of the Islamic Republic of Afghanistan in November 2009. It is an account of the amounts of financial aid received, the main areas affected and the structure through which it was provided to Afghanistan by donor nations between 2001 and 2009.

Analysis and review of the main sections of that report allow us to state the following.

First, the amount of financial assistance provided to Afghanistan by the 56 donor countries ($35.5 billion from 2002-2009) does not appear to fully meet the immensity and severity of the challenges facing the Afghan government in protecting the country’s national security and rebuilding its economy and society, and it needs to be both increased and restructured.

Secondly, the current structure for distributing financial aid to the public sector also needs to undergo a major transformation. The financial aid directed towards the socioeconomic sector, particularly the energy and transportation infrastructure, education and health should be increased without reducing funding for defense and security.

Thirdly, not all funds reach the intended recipients because the system for supervising the use of donor funds badly lacks transparency and functions poorly.

Afghan authorities justifiably believe that the existing donor aid system does not meet the country’s reconstruction and development challenges and must be revised to strengthen the Afghan government’s supervisory role for the majority of donor aid coming into the country. 75% of the total aid goes for projects and programs developed, started and supervised by the donor nations themselves, with little or no participation by the Afghan government. The remainder is provided through the Afghan treasury for administering the national budget, and only 2% is available for use at the discretion of the government.

Given that, and considering that in most countries parliament is vested with the function of parliamentary control, it is important to develop and implement measures to increase supervision of the receipt and distribution of donor aid by the Afghan parliament. In Afghanistan, where there is an unacceptably high level of corruption (including in government circles), elevating the issue of donor aid distribution for deliberation at the parliamentary level would make the distribution system more transparent and publicly accessible.

Fourthly, the Afghan National Development Strategy is the main conceptual document defining the key areas for development of the country. It obviously must be complemented by national targeted programs for Afghanistan’s reconstruction that provide funding for specific projects and identify completion timelines and the people responsible for implementing the programs, as well as mechanisms for supervising the use of funds from both donor nations and the Afghan government.

In our view—and this is the fifth point—agreement must be reached and regulations established in documentation of the Asian Parliamentary Assembly and the European Parliament to the effect that the individual countries providing non-repayable aid to Afghanistan are entitled under agreements with the Afghan government and in coordination with donor countries to implement their own programs for restoring the country’s economic entities and infrastructure facilities.

Like other countries, the Russian Federation is prepared to proceed with the restoration and reconstruction of the following facilities:

– The gas production and gas processing companies in northern Afghanistan;

– The Salang Pass;

– Irrigation works in Nangarhar, Kunar, Helmand and elsewhere;

– The Naghlu and Surobi hydroelectric facilities, as well as low-power facilities;

– A house-building factory in Kabul and cement plants.

During the discussion on international financial aid to Afghanistan, the Russian and Afghan Members of Parliament arrived at the following conclusions and made the following proposals.

1. We must recognize the link between drug trafficking; corruption and other forms of organized crime, including human trafficking; firearm sales; cyber crime; international terrorism; and money laundering, including money laundering to finance terrorism.

2. The Islamic Republic of Afghanistan (IRA) is in the process of strengthening its government agencies and enhancing the role played by its national parliament. Nevertheless, the government is weak. Economic development is at a low level. There is corruption and poverty, and, most importantly, people are only able to earn money from opiates. The need to strengthen regional and international efforts to effectively and decisively carry out counter-drug operations must be emphasized (93% of the world’s opium comes from Afghanistan). Such efforts must include providing farmers with an alternative source of income by developing regional markets and transit capacities, providing international support for Afghanistan’s law enforcement and judicial authorities, eliminating drug laboratories, strengthening counter-drug oversight in order to curb trafficking in precursors, and reducing drug demand and use.

3. It would be useful to analyze the effectiveness of work done to develop alternative types of agricultural production and acquire foreign financial assistance through the Special-Purpose Fund to implement the Best Performance Initiative for encouraging counter-drug efforts by the provinces, eradicate drug crops, train narcotics police, effectively fight corruption, encourage farmers to grow legal crops, identify ways of expanding the network of treatment centers for drug addicts, and establish additional ways of legally earning money.

According to the Financial Review of Donor Aid to Afghanistan, 5% of donor aid (para. 3.2) is applied to development of the agricultural sector in the effort to find alternative ways of earning a living for Afghan farmers who are forced to grow drug crops. That is a very modest contribution to the fight against the Afghan drug industry.

4. With regard to the initiative of the Special International Fund to implement the national reconciliation strategy addressed at the London Conference on Afghanistan that was held on January 28, 2010 (to force the Taliban into the mountains and deprive them of income from the opium trade)—one of the largest budgets is for unification and drug enforcement. However, no special plan is apparent. No one knows where the funds went and what results were obtained. It would be advisable to work out in more detail the composition of the Committee for Peace and Reconciliation, whose members would have the opportunity and influence to actually negotiate with the Taliban.

5. Given the current financial and economic situation in the Islamic Republic of Afghanistan, there is a need to continue targeted donor aid in order to ensure stable economic development, strengthen government agencies and create the conditions needed for the country’s people to pursue a normal, peaceful life. Obvious priorities for donor funding include projects in infrastructure, the power industry, the oil and gas sector, irrigation, construction, and distribution of appropriate resources through the Afghan state budget for implementing the high-priority projects specified in Afghanistan’s National Development Strategy.

Particularly promising is the reconstruction of Afghan economic facilities that were built during the 1970s-80s using foreign donor funding and experience available in Afghanistan, as well as in technical documentation. Donor funds obtained to reconstruct and modernize these facilities should be adjusted and mechanisms developed to fund repairs. Restoration of the strategically important Salang Tunnel could serve as a pilot project.

6. There is a need to support transregional projects, particularly the construction of a joint infrastructure network and an energy corridor, and the development of the transportation sector and through haulage to support comprehensive development of the region with consideration given to the activities of appropriate regional organizations.

7. Regarding the acute issue of corruption, which has a negative impact on governance and corporate management and undermines Afghanistan’s social and economic development, there is a need to continue cooperation and the exchange of information and international experience on effective anticorruption policies and measures.

The establishment of 25,000 qishlaq councils throughout Afghanistan, the extension of microloans to villagers and the implementation of local socioeconomic projects are certainly positive signs of change. However, corruption is rampant because there is no mechanism for making and recovering microloans. Corruption at all levels of government involving military, police and judicial institutions, down to individual offices and high-ranking officials, prevents donor aid from being used effectively and money from being spent as intended.

Under the circumstances, donors should continue supporting the Afghan government in its efforts to accelerate the fight against corruption at all levels.

8. Finally, it is necessary to provide advice and increase the exchange of information between Kabul and the donor countries regarding the aid provided to assist Afghanistan in optimizing the budgeting process by striving for transparency and accountability on both sides.

In conclusion, we note that work started in the Asian Parliamentary Assembly (APA) and the European Parliament to examine the system by which donor money is spent in order to see that it is used more effectively and get the US Congress to pay more attention to the process is already bearing fruit. According to some reports, during Afghan President Hamid Karzai’s visit to the United States he received assurances that 50% of the funds allocated by the United States would pass through the Afghan government, and it would be provided not only to strengthen the army and the police, but would also be used to develop infrastructure, agriculture, health care and education, and for mineral exploration.

Rudik Iskuzhin is Chairman of the Permanent Delegation of the Russian Parliament in the Asian Parliamentary Assembly.

Source: New Eastern Outlook

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