Afghanistan, SIGAR, and State-Building: Just Say No
Anyone who has ever taken the time to read through one of Special Inspector General for Afghanistan Reconstruction’s quarterly reports to Congress will certainly tell you that the experience is harrowing. The audits reveal wasted taxpayer dollars, acts of fraud and corruption by U.S. contracting companies and government employees, as well as massive, unfixable development failures. As someone who spent two years working in the development sector in Kabul, I feel compelled to read these reports. But when I do, I need a bottle of whisky on hand and a warm blanket for comfort.
SIGAR’s 24th quarterly report to Congress, released Wednesday, is no different than its predecessors. Some ‘highlights’ include $18.2 billion of examined projects and programs that demonstrate “poor planning, shoddy construction, mechanical failures, and inadequate oversight;” the Afghan National Army’s inability to account for some 465,000 U.S.-provided small arms; and a $661.3 million Afghan Mobile Strike Force Vehicles program that may be in question due to a lack of spare parts and maintenance training.
Beyond concerns of an insurgency returning in full force, a drug trade too legit to quit, and the stability of the Afghan National Security Forces (ANSF) is the question of self-sufficiency. Can the Afghan government sustain the reconstruction and development gains bought and paid for by the international aid community over the last decade?
Historically, few countries have received as much aid per capita as Afghanistan. International donors fund more than 60% of Afghanistan’s national budget, as well as reconstruction and development projects on top of that. This is a result of the U.S.-led decision to implement a policy of state-building following the fall of the Taliban in 2001. Assessments of the state of Afghanistan in 2001 portrayed the country as one of the poorest in the world, with the state apparatus in ruins. There were fears that Afghanistan would turn into a narco-mafia state due to the ever-growing illegal drug economy. And others felt guilty, perhaps, for abandoning Afghanistan after the defeat of the Soviets. Consequently, Afghanistan has experienced a gross influx of money and has become what Astri Suhrke refers to as a “rentier state … characterized by heavy reliance on income from foreign aid…rather than revenue from domestic production, trade, and services.” In the process of creating the modern trappings of a state, Western aid agencies established a central government, paid the salaries of the employees who worked in the ministries, and also picked up the bill for the training they received, the projects they implemented, and the foreign consultants they hired to provide advisory services. The same was done with the ANSF. The problem with this type of structure is that it creates an accountability scheme more accommodating to external donors than to domestic institutions. This was evident as far back as 2006, when Suhrke wrote,
Dependence was self-perpetuating by favouring imported capacity rather than the slower process of building local capacity. The government’s reliance on foreign troops and funding signalled its own weaknesses, thereby encouraging potential supporters to hedge their commitments or enter into “spot contracts” that inhibit institutional development.
Further, agencies also established infrastructure, projects and programs in sectors such as health care, education, and governance that continue to require maintenance, equipment, fuel, and skill sets — all things that cost money. However, a World Bank observation cited in SIGAR report states,
Education levels are too low and the manufacturing sector too underdeveloped (in size and capacity) to expect leapfrogging the classic pattern of structural transformation in which a natural resource-based economy is transformed into a diversified and productive economy dominated by manufacturing and services.
The bottom line is that after 2014, Afghanistan will still need to rely heavily on the international community if the reconstruction gains made are to be sustained. Yet, while some countries, such at the United States, have pledged to continue providing development aid for years to come, research within the report suggests that when international troops’ presence is reduced, so is civilian aid. And with Afghanistan failing to meet many of the benchmarks qualifying it for aid under the Tokyo Mutual Accountability Framework, it is possible that donors may reconsider their financial commitments to the country. Therefore, the alternative is for Afghanistan to do more to cover its revenue requirements. Interestingly, between 1956 through 1973, Afghanistan was in a similar position. Eighty percent of its investment and development expenditures was covered by foreign grants and loans; the government failed to build a domestic system for collecting taxes and thus was unable to develop institutions necessary for effectively governing the country.
Presently, Afghanistan remains one of the lowest-ranked countries in the world in terms of domestic revenue collection, one of the key ways that governments pay for state-building efforts. According to the report, in 2013, the Afghan government’s domestic revenue was only $2 billion, compared to its overall budget expenditures of $5.4 billion.
While the International Monetary Fund’s mission chief for Afghanistan laid out the four pillars detailing the government’s strategy for increasing revenue streams — improving tax compliance, implementing a value-added tax, development of the Afghan mining sector and imposing new taxes in addition to a VAT — Afghanistan is nowhere near achieving fiscal sustainability, the keystone for maintaining much of the work implemented through international aid. So what does SIGAR recommend?
- Engage closely with other donors to stress the importance of coordinated effort and avoidance of large or abrupt changes in aid flows;
- Maximize support to the Afghan government in efforts to suppress money laundering, corruption, diversion of customs revenues, and other “leakages;”
- Intensify advisory services to promote Afghan economic development to take up the fiscal slack created by the reduced international presence;
- Encourage Afghanistan to take steps to improve its poorly rated business climate;
- Offer Afghan ministries technical advice on scenario modeling, program- prioritization, and triage techniques to help them make informed and systematic decisions on cutbacks in case domestic revenues and donor grants fall chronically short of covering planned outlays.
These proposals are not much more than a laundry list of vague recommendations that have been put forward for years. When they have been occasionally picked up, they have been poorly implemented or just did not make enough of an impact. As SIGAR continues putting forward guidance to the U.S. government for consideration “when planning any future large-scale development and military-assistance efforts,” perhaps it should consider using the same brutally honest approach it takes with its audits and say, “Don’t do it.”
Photo credit: Special IG for Afghanistan Reconstruction