C I V I L - M I L I T A R Y

F U S I O N

C E N T R E

The Relationship between Aid, Insurgency & Security: Part Two

July 2011 Comprehensive Information on Complex Crises

K. Hughes & S.A. Zyck Security & Economic Devt Knowledge Managers
kathleen.hughes@cimicweb.org steve.zyck@cimicweb.org

This document, which is the second in a series by the CFC, examines various elements of the reconstruction strategy in Afghanistan that have at times impeded the ability of development assistance to contribute to improved security. Further information is available at www.cimicweb.org. Hyperlinks to source material are highlighted in blue and underlined in the text.

his report is the second in a series addressing the relationship between foreign aid and security in Afghanistan. The first report in this series focused primarily upon the statistical correlation between development assistance and levels of insurgent violence. While its findings were nuanced, the research outlined in the first report suggested that reconstruction and development assistance while commonly viewed as a means of countering insurgency may actually be correlated with greater numbers of insurgent attacks. Case study evidence from the Feinstein International Center (FIC) at Tufts University cited in the first report also suggested that, in Afghanistan, aid had a negligible or perhaps negative impact upon levels of insurgent violence. This second report focuses more upon Afghanistan than the first report in this series and moves away from statistical correlations. Rather, it presents various explanations that have been developed by leading analysts and researchers for why security in Afghanistan has decreased sharply while development assistance increased markedly. The goal of this report is primarily to identify ways in which the reconstruction and development strategy relates to the intensity and scale of the conflict. The following issues are examined: (i) the congruence between Afghans priorities and the allocation of development assistance, (ii) the relationship between aid and governance, including corruption, and (iii) the potential for aid funding to have inadvertently financed insurgent groups.

The Rapid Expansion of Aid for Afghanistan

The impact of aid upon security is particularly important given the varied volumes of official development assistance (ODA) that have been spent in and for Afghanistan.1 A major 2005 study by the RAND Corporation provided a breakdown of how much development assistance had been provided to a range of countries, on a per capita basis, during the first two years after they emerged from war. These included post-World War II Germany and Japan through to post-2003 Iraq.2 This study highlights that Afghanistan initially received USD 57 per person for the first two years after the international intervention. In comparison, Bosnia-Herzegovina received USD 679 per person while Iraq received USD 207 per person. Aside from post-WWII Japan, Afghanistan received less assistance, during the first two years, than any other US-led reconstruction process, according to RAND. Even as
1

ODA spent for Afghanistan do not necessarily result in comparable funds being spent in Afghanistan or on project implementation; for a discussion of aid flows and aid effectiveness in Afghanistan, see Falling Short: Aid Effectiveness in Afghanistan. 2 The RAND study included only per capita spending during the two immediate post-conflict years, though the figures for Afghanistan references in this paragraph include aid to Afghanistan (for all years) since 2002.

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a proportion of per capita gross national incomes (GNI), aid to Afghanistan was relatively limited. BosniaHerzegovina, to provide a comparison, received per capita assistance equivalent to 28.5% of GNI in 1996, the year after a peace agreement was signed. In contrast, Afghanistan in 2002 received aid equivalent to only 10.6% of the countrys GNI, according to the authors calculations of RAND and World Bank data.3 The initially limited levels of post-Taliban ODA were not to persist. Data from the Organisation for Economic Cooperation and Development (OECD) shows that development assistance for Afghanistan was gradually increased to record-setting levels over the next eight years. Increasing at an average compounding rate of 25.80% per year, the OECD shows that Afghanistan received USD 6.24 billion, or USD 254.65 per person, in 2009, the most recent year for which complete figures are available.4 To offer a bit of perspective, Afghanistan in 2009 received assistance equivalent to 29.61% of the countrys GNI that year and equivalent to 47.15% of the countrys 2002 GNI level. Indeed, the economic impact of aid is also further reaching than these numbers might suggest, with foreign troops and international agencies also injecting large amounts of money into the economy as salaries, rent, fuel purchases and so on. The World Bank, according to a recent report from the United States Senates Committee on Foreign Relations estimates that 97% of Afghanistans gross domestic product (GDP) is derived from spending related to the international military and donor community presence. (See the CFC Report, Aid Flows to Afghanistan, December 2010, for further discussion concerning levels of development assistance.)

Aid Allocation & Afghans Aspirations

Analysts have suggested that aid in Afghanistan may not have met the local populations expectations. For instance, a study by the London School of Economics (LSE) and the consulting firm PricewaterhouseCoopers (PwC), found that international development agencies had raised expectations among the Afghan population to unachievable heights through a series of needs assessments and fact-finding teams conducted by individual international donors, as well as consultations for strategy papers such as the Afghanistan National Development Strategy (ANDS). The report suggests that these assessments led many Afghans to conclude that their needs would be comprehensively addressed through a deluge of development assistance. A similar statement appears in a 2010 article in the Christian Science Monitor, which notes that many Afghans have become jaded by needs assessments conducted by foreign soldiers given that they very rarely resulted in the sorts of projects that were requested. Likewise, a 2010 article in the journal Studies in Conflict & Terrorism noted that [m]ore than 22,000 communities, or two-thirds of those in the country, have received assistance in establishing participatory local councils through the National Solidarity Program (NSP), but only one in six farmers had received agricultural support half a decade after aid dollars began flowing. The limited attention paid to agriculture is supported by the annual Survey of the Afghan People conducted by the non-governmental organisation (NGO) Asia Foundation. As of 2008, only 19% of respondents to the Asia Foundations survey knew of or heard of any development project or program in their area related to agriculture.5 Agriculture, along with industry, electricity and irrigation were consistently the types of programmes that Afghans surveyed by the Asia Foundation had experienced the least, but desired the most (see Table 1, next page).

All figures are given in current USD values, and GNI figures account for purchasing power parity. It should be noted that per capita GNI does not necessarily reflect individuals actual income, which is substantially lower than per capita GNI. 4 The Afghan governments Central Statistics Organisation (CSO) lists the nations population in 2010-11 (Solar Year 1389) as 24.49 million. Others have estimated the population at closer to 28 or 30 million. 5 By 2009 this figure had risen to 22% and to 26% in 2010.

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Table 1. Alignment between Afghans Self-Described Problems and Aid Allocation

% of Afghans Identifying as Biggest Local Problem (2006)6 % of Afghans Familiar with Projects in the Sector (2008) % of Residents of NE Afghanistan Seeing Improvements in the Sector (2010)

Sector

Unemployment/ Livelihoods Electricity Potable Water Supply Healthcare Roads and Transport Education

34 25 18 15 14 14

157 22 43 42 588 59

2.6 1.2 61.0 61.0 40.1

Source: Biggest problem data was collected in 2006 but taken by the authors from the Asia Foundation, Survey of the Afghan People, 2010. Figures in the second column are from the Asia Foundations Survey of the Afghan People: 2008. Information in the third column comes from Christoph Zrcher and Jan Koehler, Assessing the Impact of Development Cooperation in North East Afghanistan 2005 2009 (Berlin: Federal Ministry for Economic Cooperation and Development, 2010).

As Table 1 highlights, sectors received varying levels of support, and Afghans commonly reported not seeing projects or progress in areas that they deemed to be particularly important or problematic. Unemployment was deemed to be the biggest problem by 34% of Afghans in 2006, according to the Asia Foundation, but only 15% of a nationwide sample had seen projects in this area by 2008. Only 2.6% of Afghans in the north-eastern part of the country believed that development actors had contributed positively to reducing unemployment. Similar statistics apply to electricity. Far more visible progress was made in areas such as roads, healthcare and education, which Afghans likely viewed as important but not necessarily the biggest problems for their communities. Similarly, official records of development assistance suggest that aid volumes in Afghanistan may also not have corresponded to Afghans self-described biggest problems. The Creditor Reporting System (CRS) of the OECD, a database that contains information on aid contributions from major donor countries, indicates that only 2.7% of assistance to Afghanistan was provided for electricity. Another 6.9% was provided for the productive sector, which includes mining, tourism, banking and economic policy alongside agriculture and livelihood-oriented programming.9

Four years into the international intervention, it is possible that areas such as health, education and roads were lower priorities than they may have been in 2002 or 2003. Comparable data from the immediate post-Taliban phase is not, however, available to test this hypothesis. 7 This figure is given as the average of the percentage of Afghans who were familiar with industrial development projects (11%) and the percentage familiar with agricultural projects (19%). 8 This figure is noted by the Asia Foundation surveys as applying to reconstruction/building of roads, bridges. 9 CRS data was used in the calculation of these percentages. Data from the OECD by sector was taken as a percentage of total sector allocable ODA for Afghanistan. Data in this table only includes contributions from 24 OECD-DAC members.

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Development Assistance & Accountable Governance

Improvements in governance are considered crucial in enhancing security in Afghanistan, according to Kenneth Katzman of the US governments Congressional Research Service (CRS). While conventional wisdom and recent research suggest that aid can benefit governance by helping the government build capacity and provide common goods to its citizenry the truth appears to be more complex and oftentimes less positive. For instance, empirical and econometric research has shown that aid may actually pose a number of governance challenges. One study of 32 African countries over 15 years found that greater levels of development assistance often resulted in worse performance vis--vis various measures of governance. A 2007 study similarly found that industries which rely heavily upon a strong and accountable institutional environment (e.g., to prevent corruption, enforce contracts, adjudicate disputes, etc.) were least likely to grow in places with high levels of foreign aid. This finding countered the common presumption that aid would finance institutions to create an enabling environment for private sector growth and foreign direct investment. Finally, a 2009 study found that in a sample of 106 aid-receiving nations, those that received greater levels of ODA were likely to perform worse in regard to several elements of governance (i.e., corruption, law and order and bureaucratic quality).

Figure 1. Development Assistance & Corruption in Afghanistan, 2006-2010

Source:

ODA data from OECD CRS database; corruption perceptions from Asia Foundation, Survey of the Afghan People, 2010. ODA figures for 2010 are based on a projection using ODA data since 2002; official 2010 figures are currently unavailable.

Survey data from Afghanistan points to a similar trend. Local populations perception of corruption has increased in proportion to aid levels (see Figure 1), and one of the World Banks governance datasets, the Worldwide Governance Indicators (WGIs), suggest that every measure of governance in Afghanistan has declined since 2004. These include control of corruption, rule of law, political stability, regulatory quality, government effectiveness and voice and accountability.

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Examples and case studies also suggest that aid and corruption are linked in Afghanistan. While some such evidence emerges from media reports and watchdog groups, the majority comes from official audits and investigations. The aforementioned report by the United States Senate suggested that large volumes of American aid had resulted in various forms of corruption and misappropriation. These included sub-contracting arrangements that result in highly inflated project costs and the well-documented over-billing by Louis Berger Group, an American firm operating in Afghanistan and other crisis zones. In another example, a 60-year-old Australian man working for the International Organization for Migration (IOM) in Afghanistan was arrested in India after having sought bribes of approximately USD 190,000 from Afghan companies to award them lucrative contracts to build schools and medical facilities, according to the Australian Broadcasting Corporation. The US militarys Special Inspector General for Afghanistan Reconstruction (SIGAR) indicated in April 2011 that in fiscal year (FY) 2011 it had thus far received USD 35.2 million in savings, fines, penalties and recoveries that otherwise would have been lost to corruption or other forms of misappropriation. As the aforementioned US Senate report notes, corruption emerges from aid volumes which are significantly greater than contracting, management and oversight capabilities within both the international community and the Afghan government. Indeed, Integrity Watch Afghanistan (IWA), a research and monitoring group, found in 2010 that 23% of Afghans had reported paying a bribe or otherwise been subject to corruption during the prior year. Public officials, particularly police, were found to be the greatest sources of rent-seeking behaviour, a fact which IWA says has hindered the legitimacy and level of popular support for the Afghan government.

Box 1. Aid and the Capture of Qualified Afghan Officials and Civil Servants
In addition to facilitating corruption, the US Senates recent report, Evaluating US Foreign Assistance to Afghanistan, suggests that aid hindered effective and accountable governance in Afghanistan by drawing the best and brightest away from the civil service (as well as the private sector) and into embassies and other foreign and international institutions. The reports authors wrote: 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. Such comments build upon remarks by Ashraf Ghani, Afghanistans former Minister of Finance, who told The Times in 2008 that [w]hen we started in 2001 we had 240,000 civil servants willing to work for a government salary of 25 [USD 40] a month. By 2004 all the talented ones had left to become drivers for the UN, the World Bank or charities. By removing the best and brightest in Afghanistan from the government, it seems likely that service delivery and good governance, both of which are crucial in helping to establish political legitimacy and stability, were undermined.

Has Aid Financed the Insurgency?

Finally, a number of reports identify ways in which foreign aid to Afghanistan has ended up in the hands of insurgents and helped to finance their operations. As a recent Economist article noted, ISAFs funding is vast compared with the size of the Afghan economy, and much of that money sloshes dangerously around inside the country. Large sums go to contractors who may pass them on to the Taliban, or to drug-runners, to pay for supplies and protection, especially in the south where insurgency has traditionally been the strongest. Reuters presents several examples of Afghan businesspeople that are, in essence, forced to pay as much as 10% of their project values to the Taliban in parts of the country to be able to engage in reconstruction and development. Such costs, which are commonly borne by Afghan contractors working under the aegis of international firms, are passed

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along to donor agencies in aid-funding nations. If one imagines that even one percent of total ODA to Afghanistan in 2009 ended up in insurgent pockets, that would amount to USD 62 million; such figures suggest why some analysts in Afghanistan are increasingly claiming that aid dollars are among the most significant sources of financing, more than the opium trade, for the insurgency. Aram Roston, a journalist who in early 2010 wrote the first notable news article about Taliban extortion from reconstruction projects in The Nation, estimates that insurgent groups have skimmed hundreds of millions of dollars from the international aid effort. In other cases, it is not reconstruction projects but rather the ordinary process of supplying a major international force that provides opportunities for the Taliban to profit, according to a major study commissioned by a subcommittee of the US House of Representatives, Warlord, Inc. The study found that the US militarys USD 2.16 billion Host Nation Trucking (HNT) contract in Afghanistan, which financed a logistical and supply network used by American forces, helped finance the insurgency. The financing was not direct but worked through protection rackets and sub-contracting arrangements. The American government paid eight firms to oversee supply chains; these firms then paid warlord-linked militias and private security companies (PSCs) to provide security to truck convoys. Finally, these militias and PSCs paid the Taliban and other insurgent groups not to attack the convoys. Moreover, when the Taliban sought greater resources or when the PSCs wished to demonstrate their usefulness to foreign military officers and officials they organised attacks against convoys. In such cases, aid actually creates an incentive structure that promotes rather than counters insurgent violence, according to the report. The pervasiveness of corruption among Afghan public officials is another means by which insurgents get a hold of aid money. The influx of several billion US dollars in international assistance with limited oversight contributes to the growing nexus between aid, corrupt officials and insurgents eroding governance and potentially financing the Taliban at the same time. In a recent report published by the International Crisis Group (ICG), analysts suggest that corruption among Afghan public officials and their subsequent ties with insurgents are contributing to a profusion of criminal networks. Corruption among elements of the Afghan security apparatus is particularly problematic with regard to funnelling aid to the insurgency. According to the ICG report, the insurgency has benefitted from military counterinsurgency strategies that reward volatile provinces with substantial aid volumes. For instance, the aforementioned US Senate evaluation of American foreign aid to Afghanistan notes that 80% of assistance from the United States Agency for International Development (USAID) went to the southern and eastern parts of the country. In particular, National Directorate of Security (NDS) entities operating in provinces such as Kapisa, Logar, Parwan and Laghman are believed to collude with insurgents and benefit from local insecurity by attracting international assistance funds. Millions of aid funds have been earmarked for the NDS and poor oversight has resulted in the inadvertent empowerment of malign elements within the agency and created incentives for collaboration with insurgent and criminal networks, says ICG. Lastly, the basic output of aid and development funds may benefit targeted population groups while simultaneously benefiting the insurgency. Mark Moyar, a leading military scholar and counterinsurgency expert on Afghanistan, cites the Kajaki Dam project in Helmand as an example of unplanned support to the Afghan insurgency, according to the Associated Press. Moyar argues that in the case of the Kajaki dam, a large international investment of time, force and resources produced minimal popular support for the Afghan government and its international allies. Rather, half the electricity from the project services Taliban territory, which ultimately enables the insurgents to issue power bills and grow the poppies that finance their insurgency, says Moyar. Such examples suggest that even successful aid projects may have unintended consequences that influence conflict and insurgency in unanticipated ways.

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Conclusion
This report has attempted to identify a small number of the various ways in which the reconstruction and development strategy has related to the ongoing conflict in Afghanistan. It does so particularly be examining the way in which aid did or did not meet the priorities of the Afghan people and how aid has interacted with factors such as governance, corruption and the financing of insurgent groups. In sum, this report has shown that the focus of aid spending did not necessarily match what the population saw as its most urgent needs, and aid may have created challenges for governance, particularly by making corruption easier and attracting the best and brightest away from the public sector (and private sector). Finally, large volumes of aid with limited oversight and complex chains of contracting and sub-contracting have perhaps allowed aid to fall into the hands of insurgent groups. Complementing and building upon the findings of the first report in this series, this publication suggests that the interaction between aid, insurgency and security in Afghanistan is highly nuanced and that development assistance may interact with conflict both in positive and negative ways.

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The Civil Military Fusion Centre (CFC) is an Information and Knowledge Management organisation focused on improving civil-military interaction, facilitating information sharing and enhancing situational awareness through the web portal, CimicWeb. CFC products are developed with open-source information from governmental organisations, non-governmental organisations, international organisations, academic institutions, media sources and military organisations. By design, CFC products or links to open sourced and independently produced articles do not necessarily represent the opinions, views or official positions of any other organisation.

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