Thursday, June 09, 2011

Afghanistan: Evaluating U.S. Foreign Assistance to Afghanistan

Source: Government of the United States of America

The Senate Foreign Relations Committee has been at the forefront of examining progress in Afghanistan. This report— which is the most comprehensive congressional investigation to date of our foreign assistance to Afghanistan— continues that effort. Building on 2 years of staff research and travel, the report focuses on funding appropriated by Congress to the State Department and the U.S. Agency for International Development (USAID) in the Function 150 account. It does not cover U.S. military aid, such as the Commander’s Emergency Response Program (CERP), which we believe deserves closer scrutiny.

The committee provided a draft of this report to the State Department and USAID. In a response letter to Chairman John F. Kerry on June 6, Deputy Secretary of State Thomas R. Nides underscored the importance of sustainability and expressed support for our recommendation to develop a multiyear assistance strategy. His comments are reproduced in Appendix VI. USAID Administrator Rajiv Shah acknowledged the need to do more to spend our aid money effectively in Afghanistan and provided several recent examples of how USAID is addressing the issues raised in this report. His comments are reproduced in Appendix VII.

Today, the United States spends more on foreign aid in Afghanistan than in any other country, including Iraq. After 10 years and roughly $18.8 billion in foreign aid, we have achieved some real successes.1 There has been a sevenfold increase in the number of children attending school and significant improvements in health care. But we should have no illusions. Serious challenges remain that will prevent us from achieving our goals unless they are addressed.

Foreign assistance can be a vital tool for promoting stability in Afghanistan. Given the security challenges and limited resources at its disposal, USAID has performed admirably and assumed considerable risks in support of the President’s civil-military strategy for Afghanistan. However, we believe the administration can be moreeffective in how it spends aid in Afghanistan. U.S. assistance should meet three basic conditions before money is spent: our projects should be necessary, achievable, and sustainable.

The State Department and USAID are spending approximately $320 million a month on foreign aid in Afghanistan. In part, the administration has been using aid to ‘‘win hearts and minds.’’ For instance, roughly 80 percent of USAID’s resources are being spent in Afghanistan’s restive south and east. Only 20 percent is going to the rest of the country.4 Most of the funds in Afghanistan’s south and east are being used for short-term stabilization programs instead of longer term development projects, though that balance may now be changing.

The evidence that stabilization programs promote stability in Afghanistan is limited. Some research suggests the opposite, and development best practices question the efficacy of using aid as a stabilization tool over the long run. As discussed below, the unintended consequences of pumping large amounts of money into a war zone cannot be underestimated.

We must understand the impact of our assistance—positive and negative—on the local population. For instance, we are investing heavily in agriculture to provide alternatives to joining the Taliban and discourage poppy cultivation. While this may be the right approach, the strategy has raised expectations and changed incentive structures among Afghans. The administration is pursuing an assistance strategy based on counterinsurgency theories that deserve careful, ongoing scrutiny to see if they yield intended results.

Foreign aid, when misspent, can fuel corruption, distort labor and goods markets, undermine the host government’s ability to exert control over resources, and contribute to insecurity. According to the World Bank, an estimated 97 percent of Afghanistan’s gross domestic product (GDP) is derived from spending related to the international military and donor community presence. Afghanistan could suffer a severe economic depression when foreign troops leave in 2014 unless the proper planning begins now.

The administration is understandably anxious for immediate results to demonstrate to Afghans and Americans alike that we are making progress. However, insecurity, abject poverty, weak indigenous capacity, and widespread corruption create challenges for spending money. High staff turnover, pressure from the military, imbalances between military and civilian resources, unpredictable funding levels from Congress, and changing political timelines have further complicated efforts. Pressure to achieve rapid results puts our civilians under enormous strain to spend money quickly.

We need to take a closer look at how we are spending money in Afghanistan and the impact it is having on the Afghan state. The U.S. Government relies heavily on contractors in Afghanistan, but multiple reports and the recent crisis at Kabul Bank have raised alarms about the lack of robust oversight. Most U.S. aid bypasses the Afghan Government in favor of international firms. This practice can weaken the ability of the Afghan state to execute its budget, lead to redundant and unsustainable donor projects, and fuel corruption. The United States has committed to funding more aid directly through the Afghan Government, but stronger measures must first be taken to ensure greater accountability of our funds.

The U.S. strategy is focused on building the capacity of Afghan institutions to deliver basic services. The State Department and USAID are currently spending approximately $1.25 billion on such efforts. But our overreliance on international technical advisors to build Afghan capacity may undermine these efforts. Our aid projects need to focus more on sustainability so that Afghans can absorb our programs when donor funds recede. The administration is taking welcome steps to improve oversight.

We support USAID Administrator Shah’s initiatives such as USAID Forward, which will incorporate more vigorous measurement and accountability tools, streamline contracting rules, and fund smaller, local agents of change. USAID has also established the Accountable Assistance for Afghanistan initiative (A3) to ensure dollars are not being diverted from their purpose by extortion or corruption. These and other steps, including planned improvements to USAID’s acquisition strategy and support for third party monitoring and evaluation, will help ensure proper use of U.S. taxpayer funds.

We believe additional action is needed and provide recommendations throughout the report. Perhaps the single most important step the U.S. Government can take is to work with the Afghan Government and other donors to standardize Afghan salaries and work within Afghan Government staffing constraints. Donor practices of hiring Afghans at inflated salaries have drawn otherwise qualified civil servants away from the Afghan Government and created a culture of aid dependency.

As we draw down our troops in Afghanistan, our civilians will have to absorb missions currently performed by the military. The State Department and USAID will need adequate resources to ensure a smooth transition and avoid repeating the mistakes we made in Iraq.9 Transition planning should find the right balance between avoiding a sudden dropoff in aid, which could trigger a major economic recession, and a long-term phaseout from current levels of donor spending.

There must also be unity of effort across the U.S. Government and international community. If we conclude that a civilian program lacks achievable goals and needs to be scaled back, no other actors should take over the effort. Too often, when our civilians determine that a project is infeasible, we simply transfer the program to other actors, such as the U.S. military or other donors.

The theme echoed throughout this report is that our strategies and projects should meet the conditions of being necessary, achievable, and sustainable before funding is allocated. The report describes how these principles have been applied in practice through the cases of the National Solidarity Program and Basic Package of Health Services (Case Study A) and the ongoing effort to improve sub-national governance through the Performance-Based Governors Fund (Case Study B).

Read the complete report (PDF)