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US ready to cut off development aid to Afghanistan if graft persists

by Stella Dawson | https://twitter.com/stelladawson | Thomson Reuters Foundation
Friday, 1 February 2013 14:43 GMT

Alex Thier, director of USAID's Office of Afghanistan, says it's "essential" for the U.S. to act if necessary and calls on Afghan leaders to own their development programmes

WASHINGTON (TrustLaw) – The United States is prepared to cut off development aid to Afghanistan if funding is not channelled into the projects it’s intended for and officials fail to tackle corruption, said a senior administration official on Thursday.

Afghan leaders have to be completely committed to dealing with development challenges “not because we state they have to deal with corruption, or that we say you have to use the resources this way, but because they believe that this is what they have to do to succeed,” said Alex Thier, director of the Office of Afghanistan and Pakistan Affairs at the U.S. Agency for International Development (USAID), speaking at a panel discussion on the economic transition of Afghanistan after troop withdrawal in 2014.

Of the need to tackle corruption, he added: “I think it is essential.”

At the same time, the United States must be very clear about its expectations. Then, if Afghan officials fail to perform or follow through on promises to deal with corruption, the U.S. will act, Thier said at the Center for American Progress panel discussion.

Afghanistan received $1.8 billion from USAID in fiscal year 2012, accounting for almost half the total foreign aid the country received to rebuild after more than a decade of warfare. The U.S. has spent more money on relief and reconstruction there than in any other single country, including Marshall Plan recipients after World War II.

There have been some notable successes. Access to health care has increased sharply since 2001 and life expectancy has risen by 15-20 years. GDP has expanded four fold and growth has averaged 9 percent a year. Education has spread from 900,000 boys to 8 million students, including 37 percent of girls, according to USAID data.   

But fraud, graft and bribery are prevalent. A former U.S. auditor has estimated that 15 percent of development aid is lost in waste and corruption. The most shocking case was $935 million stolen from Kabulbank two years ago, which caused civil disorder and a run on bank deposits. Leading business and political figures were implicated.

The case is still under investigation and its outcome is seen as a barometer of Afghanistan's commitment to stabilising the economy and its fight against corruption ahead of troop withdrawal and a possible winding down of billions of dollars in international aid.  

Clare Lockhart, chief executive of The Institute for State Effectiveness and a former United Nations adviser in Kabul, said she expects a challenging transition. 

“Money is seen as an entitlement and when you try to take away the entitlement, it is really, really tough,” she said at the same event.

Thier argued that aid reduction should be gradual and allow for sustainable growth to take hold.  He cited a study by former World Bank economist Paul Collier, which found that in post-conflict states, half reverted to conflict within 5 years, but that fell by 15 percent in countries where economic growth was strong. And a USAID study found that an abrupt decline in aid creates extreme fragility, whereas a gradual decline reduces the risk by 50 percent, he said.

Donors also are transitioning to giving money directly to the Afghan government instead of non-governmental organisations. Studies have found that aid is more effective if programmes are delivered by Afghanistan, Thier said. But this would be phased in, based upon both the Afghan government and the international community meeting certain commitments.

Other actions USAID is taking to lessen the risk of corruption include careful vetting of who receives the funding, limiting the number of sub-contractors in a project, strong project leadership, and an assessment of capacity manage projects, he said. Using a third party to assess the results of projects also helps, he said.   

“My approach is one of layers,” Thier added. “You have to put as many possible layers in place because not one system is fully sufficient in this environment.”

One success story was police pay. Thier said some officers thought they had received a 30 percent pay raise when a cell phone message informed them their salaries had been deposited directly into their bank accounts. In fact, the technology meant that the middle person, who had been skimming 30 percent off the top, had been cut out of the loop.

Our Standards: The Thomson Reuters Trust Principles.

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