by Elliott Morss, Morss Global Finance
Most Americans want to put the Afghanistan and Iraq wars behind them and “bring the troops home”. But these wars have had great human and financial costs to both the US and the countries invaded. And these costs continue to accumulate – more deaths, more instability, and more military expenditures. These wars and the lessons to be learned from them should not be forgotten. In this 2-part series on Afghanistan and Iraq, I provide detail on what has happened and what the US will leave behind.
The US had only one reason to go into Afghanistan: to “get” Bin Laden for being the mastermind behind the 9/11 bombings. I have some knowledge of Afghanistan. I remember at the time of 9/11 hoping/praying that the US would not follow in the footsteps of the Soviet Union by getting into a hopeless and unwinnable ground war. But it did. And since 2002, the US Congress has appropriated nearly $103.2 billion to “rebuild” Afghanistan through such programs as “Operation Enduring Freedom”. This is a huge amount: it is more than the United States has ever spent on reconstruction of any other nation. And this number does not include most of the US military costs.
This “assistance” dwarfs the size of the Afghan economy. For example, the total of Afghanistan’s annual GDPs from 2002 through 2013 is $136 billion. Operation “Enduring Freedom et al.” added 75% more over this same period. This huge outlay has artificially expanded the Afghan economy in a totally unsustainable way. These large injections raise several questions:
- Can such an amount be spent effectively?
- What will happen when this support ends?
To answer these questions, I have examined the reports of the Special Inspector General for Afghanistan Reconstruction (SIGAR). SIGAR’s mission is “to provide independent and objective oversight of Afghanistan reconstruction projects and activities” by “conducting audits and investigations to:”
- Promote efficiency and effectiveness of reconstruction programs; and
- Detect and prevent waste, fraud, and abuse.
To accomplish these tasks, SIGAR has a $50 million annual budget and 203 employees. It submits quarterly reports to Congress: its most recent quarterly report had 840 footnotes.
According to SIGAR, the $103.17 billion spent for relief and reconstruction in Afghanistan since FY 2002 has been allocated as follows:
- $58.84 billion for security;
- $25.96 billion for governance and development;
- $7.55 billion for counternarcotics efforts;
- $2.78 billion for humanitarian aid; and
- $8.05 billion for civilian operations.
Have These Monies Been Spent Effectively?
No. Corruption is rampant and there are numerous examples of mismanagement on a grand scale.
Of the 177 countries rated for corruption by Transparency International, Afghanistan tied for last place with Somalia and North Korea. The United Nations Office of Drugs and Crime (UNODC) reported that in 2012, “half of Afghan citizens paid a bribe” and that bribes paid to public officials amounted 20% of the country’s GDP.
SIGAR: “Massive military and aid spending overwhelmed the Afghan government’s ability to absorb it. This coupled with weak oversight, created opportunities for corruption.”
With such a rich corruption history, it is not surprising that a significant portion of US monies disappeared. And with opportunities so obvious, it should also not be surprising that members of the US military (Army, Air Force, Army National Guard, and their contractors) got involved. The most common activities involving Americans were bribes for contract awards and stealing fuel. A few examples:
- The U.S. District Court of Colorado just sentenced Stephanie Charboneau to 87 months in jail, three years supervised release, and restitution of $1,225,000. Apparently, Charboneau, Sergeant Christopher Weaver, and Jonathan Hightower, a former contractor, conspired with Afghan nationals to steal fuel from the military in exchange for cash.
- John Dawkins, Candice Boulware, and Geoffrey Nordloh of the Mesopotamia Group have been debarred from further work in Afghanistan. They falsely claimed approximately $5,000,000 as part of a U.S. Army contract to provide medical-equipment maintenance to Afghan National Army hospitals.
- Since 2008, SIGAR’s suspension and debarment referrals total 433 – encompassing 230 individuals and 203 companies.
- Perhaps the quintessential example of Afghan corruption involves the Kabul Bank. Before its near collapse in 2010, the Kabul Bank was Afghanistan’s largest private bank. Individuals and companies associated with the bank stole about $935 million from the bank, largely through fraudulent loan activity. Afghanistan’s central bank covered the losses, which represented about 5% of the country’s GDP. Concerns over the soundness of the bank caused a run during which the bank lost about half of its $1.3 billion deposits.
- The IMF has an agreement with Afghanistan to provide it with low-interest loans. The loans are contingent on the government’s making banking and financial reforms that would increase transparency and accountability. These include passing an internationally acceptable anti-money-laundering law — something the Afghan government has refused to do. The IMF has not disbursed any funds since 2012 because Afghanistan has not made enough progress on reform.
And finally, The U.S. Army has chosen to ignore SIGAR’s request that it debar 43 individuals and companies SIGAR has linked to opposition groups including the Taliban, the Haqqani network, and al Qaeda.
When such large amounts must be spent quickly, there are bound to be some waste. The Afghan experience bears this out. Some examples:
- SIGAR recently requested all records relating to the planning and construction of an unoccupied 64,000-square-foot building at Camp Leatherneck in Helmand Province that was just completed. It requested these records because the building was originally intended to serve as a command headquarters in support of a troop surge that ended in September 2012.
- The Helmand Power Program (KHPP) is one of the US Agency for International Development’s (USAID) largest active programs in Afghanistan, with a total estimated cost of about $266 million. An additional $75 million has been added to fund the installation of an additional turbine unit. SIGAR is concerned that with this cost increase to $345, KHPP may no longer be economically viable. According to a 2012 USAID economic analysis of KHPP, the costs of the program would outweigh its benefits if actual costs exceeded the original cost estimate of $266 million costs by more than $43 million.
- SIGAR has reported that USAID cancelled 17 projects after some $212 million had been disbursed.
Consider next a couple of programs that are part of almost all US development assistance programs: improving the status of women and reducing drug trade. One might wonder whether these activities should be included in what is essentially a war operation. They are part of the Afghan program.
a. Improving the Status of Women
I quote from a SIGAR report:
“Despite progress, the goal of 10% of the Afghan National Army (ANA) to be women remains a distant milestone. Women make up less than 1% of the force. The Combined Security Transition Command recognized that “training” alone is not sufficient to change deep-seated cultural and religion-based attitudes toward women in the ANA. This training is a critical first step, but behavior will almost certainly not change significantly until male ANA personnel have the experience of working alongside well trained, capable females.”
b. Reducing Opium Production
More than $7 billion is programmed for this. One program activity is the “Good Performer’s Initiative” (GPI). Under the current terms of the GPI program, a province is eligible for $1 million in GPI development projects for each year that it achieves poppy-free status. Since the start of the GPI program in 2007, more than 200 development projects either have been completed or are in process in all 34 of Afghanistan’s provinces, including: school construction, road and bridge projects, irrigation structures, farm machinery projects, and hospital and clinic construction.
Fine. But is it working? According to an April 2014 United Nations Office of Drugs and Crime (UNODC) report on drug use, “Afghanistan is the world’s largest producer and cultivator of opium poppies,” accounting for nearly “three quarters of the world’s illicit opium.” The latest UNODC Opium Survey estimates that 209,000 hectares are under opium-poppy cultivation, an all-time high and a 36% increase from 2012.
So Why All of This Corruption and Mismanagement?
People often miss a key element that shows up in all overseas US projects: in the absence of reliable program evaluation/outcome data, Washington officials focus on whether the money for programs is being disbursed. The US Afghan managers have jobs to do: worrying about corruption and whether the money is being spent properly slows them up.
Departure Implications What Happens When This Support Ends?
To address this question, data and views from several international organizations are presented:
- The UN reports that the number of armed clashes in Afghanistan was up 51% compared to the number in 2012 and that between November 2013, and February 2014, the number of security incidents increased by 24% over the number recorded during the same period in the prior year. As part of that increase, there were 35 suicide attacks compared to 17 the previous year.
- The World Bank predicts that Afghanistan will suffer an economic contraction as Coalition troops draw down. 32% of government revenues come from foreign grants. Afghan government revenues in 2014 could cover as little as a third of the country’s $7.5 billion budget. The revenue decline comes at a time when dozens of reconstruction projects and their associated operation-and-maintenance costs are being turned over to the Afghan government.
On March 12, General Joseph F. Dunford, the head US Forces in Afghanistan predicts:
“If we leave at the end of 2014, the Afghan security forces will begin to deteriorate. The security environment will begin to deteriorate, and I think the only debate is the pace of that deterioration.”
The Department of Defense (DOD) selected The Center for Naval Analysis (CNA) to do a required independent assessment of “the strength, force structure, force posture, and capabilities required to make the Afghan National Security Forces (ANSF) capable of providing security for their own country.” The CNA study predicts that the insurgency in Afghanistan will be a greater threat in 2015–2018 than it is now due to the reduction in U.S. and NATO forces and continued presence of insurgent sanctuaries in Pakistan.
“Withdrawal of international community support is likely to have consequences up to and including renewed civil war in Afghanistan and increased instability in the region.”
Consider finally some of the stated objectives of the Afghan initiative and whether they have been achieved:
- A sustainable and secure Afghan government that will be able to thwart initiatives of the Taliban and other terrorist groups – NO.
- A real democracy – NO.
- Poppy reduction – NO.
- Improved status of women – NO.
There are still 33,000 US soldiers in Afghanistan. They will leave shortly. Since operations began in 2001, a total of 2,178 U.S. military personnel have died in Afghanistan—83% of whom were killed in action—and 19,523 were wounded.
So what will happen in Afghanistan when the US leaves? It will go back to what it was before the US arrived: a tough, tribal country where force rules.
And oh yes, the US did “get” Bin Laden – in Pakistan.
 Implementing Rural Development Projects: Lessons from AID and World Bank Experiences / edited by Elliott R. Morss and David Gow Westview Press, 1985.