Afghanistan Watch: Where did the money go?

September 06, 2006

Where did the money go?

Ann Jones, author of Kabul in Winter, takes on America's "phantom aid" to Afghanistan:

How U.S. dollars disappear in Afghanistan: quickly and thoroughly
San Francisco Chronicle, Sept 3, by Ann Jones: ... To understand the failure -- and fraud -- of reconstruction in Afghanistan, you have to take a look at the peculiar system of U.S. aid for international development. During the past five years, the
United States and many other donor nations pledged billions of dollars to Afghanistan, yet Afghans keep asking: "Where did the money go?" American taxpayers should be asking the same question...

...answers appear in a fact-packed report issued in June 2005 by Action Aid, a widely respected nongovernmental organization headquartered in Johannesburg. The report studies development aid given by all countries worldwide and says that only part of it --
maybe 40 percent -- is real. The rest is phantom aid. That is, it never shows up in recipient countries at all.

Some of it doesn't even exist except as an accounting item, as when countries count debt relief or the construction costs of a fancy new embassy in the aid column. A lot of it never leaves home; paychecks for American "experts" under contract to USAID go directly to their U.S. banks. Much of the money is thrown away on "overpriced and ineffective technical assistance," such as those hot-shot American experts, the report said. And big chunks are tied to the donor, which means that the recipient is obliged to use the money to buy products from the donor country, even when -- especially when -- the same goods are available cheaper at home.

To no one's surprise, the United States easily outstrips other nations at most of these scams, making it second only to France as the world's biggest purveyor of phantom aid. Fully 47 percent of U.S. development aid is lavished on overpriced technical assistance. By comparison, only 4 percent of Sweden's aid budget goes to technical assistance, while Luxembourg and Ireland lay out only 2 percent.

As for tying aid to the purchase of donor-made products, Sweden and Norway don't do it at all. Neither do Ireland and the United Kingdom. But 70 percent of U.S. aid is contingent upon the recipient spending it on American stuff, including especially American-made armaments. The upshot is that 86 cents of every dollar of U.S. aid is phantom aid.

According to targets set years ago by the United Nations and agreed to by almost every country in the world, rich countries should give 0.7 percent of their national income in annual aid to poor ones. So far, only the Scandinavian countries, the Netherlands and Luxembourg (with real aid at 0.65 percent of its national income) even come
close.

At the other end of the scale, the United States spends a paltry 0.02 percent of national income on real aid, which works out to an annual contribution of $8 from every citizen of the wealthiest nation in the world. (By comparison, Swedes kick in $193 per person, Norwegians $304, and the citizens of Luxembourg $357.) President Bush boasts of sending billions in aid to Afghanistan, but in fact we could do better by passing a hat.

The Bush administration often deliberately misrepresents its aid program for domestic consumption.

Last year, for example, when the president sent his wife to Kabul for a few hours of photo ops, the New York Times reported that her mission was "to promise long-term commitment from the United States to education for women and children." Speaking in Kabul, she pledged that the United States would give an additional $17.7 million to
support education in Afghanistan. But that grant had been announced before; and it was not for Afghan education (or women and children) at all but for a new private, for-profit American University of Afghanistan. (How a private university comes to be supported by public tax dollars and the Army Corps of Engineers is another
peculiarity of Bush aid.)

Ashraf Ghani, former finance minister of Afghanistan and president of Kabul University, complained, "You cannot support private education and ignore public education." But that's typical of American aid. Having set up a government in Afghanistan, the United States stiffs it, preferring to channel aid money to private American contractors. Increasingly privatized, U.S. aid becomes just one more mechanism for transferring tax dollars to the pockets of rich Americans.

In 2001, Andrew Natsios, then head of USAID, cited foreign aid as "a key foreign policy instrument" designed to help other countries "become better markets for U.S. exports."

To guarantee that mission, the State Department recently took over the formerly semi-autonomous aid agency. And because the aim of U.S. aid is to make the world safe for U.S. business, USAID now cuts in business from the start. It sends out requests for proposals to the short list of usual suspects and awards contracts to those bidders currently in favor. (Election time kickbacks influence the list of favorites.) Sometimes it invites only one contractor to apply, the same efficient procedure that made Halliburton so notorious and so profitable in Iraq.

The criteria for selection of contractors have little or nothing to do with conditions in the recipient country, and they are not exactly what you would call transparent.

Take, for example, the case of the Kabul-Kandahar Highway, featured on the USAID Web site as a proud accomplishment. (In five years, it's the only accomplishment in highway building in Afghanistan -- which is one better than the U.S. record building power stations, water systems, sewer systems or dams.) The highway was also featured in the Kabul Weekly newspaper in March 2005 under the headline, "Millions
Wasted on Second-Rate Roads."

Afghan journalist Mirwais Harooni reported that even though other international companies had been ready to rebuild the highway for $250,000 per kilometer, the Louis Berger Group got the job at $700,000 per kilometer -- of which there are 389. Why? The standard American answer is that Americans do better work. (Though not Berger, which at the time was already years behind on another $665 million contract to build schools.)

Berger subcontracted Turkish and Indian companies to build the narrow two-lane, shoulderless highway at a final cost of about $1 million per mile; and anyone who travels it can see that it is already falling apart. (Former Minister of Planning Ramazan Bashardost complained that when it came to building roads, the Taliban did a
better job.)

Now, in a move certain to tank President Hamid Karzai's approval ratings and further endanger U.S. and NATO troops in the area, the United States has pressured his government to turn this "gift of the people of the United States" into a toll road and collect $20 a month from Afghan drivers. In this way, according to U.S. experts providing highly paid technical assistance, Afghanistan can collect $30 million annually from its impoverished citizens and thereby decrease the foreign aid "burden" on the United States.

Is it any wonder that foreign aid seems to ordinary Afghans to be something only foreigners enjoy? ...

Click here to read the whole article...

Posted by Carl Robichaud on September 06, 2006 at 12:22 PM in Books, Economics, Investment, Reconstruction, U.S. Policy | Permalink

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September 06, 2006

Where did the money go?

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