Memorandum submitted by British Agencies
Afghanistan Group (BAAG)
1. INTRODUCTION
"I've never seen a country where everything
has to be done from scratch." Markus Muller, Co-ordinator,
Swiss Aid, 7 October.
The return of the International Development
Committee to the question of Afghanistan's reconstruction needs
is timely and to be welcomed.
The continued commitment of the international
community in the provision of assistance to a country devastated
by 22 years of war and four years of drought is essential if the
process of recovery is to be sustained. The UK Government is to
be commended for the continued public reiteration of its commitment
to Afghanistan and its people and it is to be hoped that there
will be no change in this. The stability of Afghanistan is critical
to the maintenance of stability in the region and beyond.
The reality in Afghanistan has fallen disappointingly
short of the high expectations held by the population at large
and by the Afghan government. Hopes have been raised, arguably
to unrealistic levels, by the international community's pledges
of aid to Afghanistan. Yet reconstruction of the country's basic
infrastructure has not begun.
There are a number of reasons underlying delays
in the release of major funds for reconstruction some of which
are outlined in this paper. The ongoing humanitarian crisis—fed
by an unexpectedly high number of returnees and the continuing
effects of the drought—has been a key factor. As a result,
funding has been directed at humanitarian aid rather than reconstruction.
Funding for the running costs incurred by the Afghan Transitional
Administration (ATA) has been minimal, undermining its authority
which is already compromised by the deteriorating security situation
in the regions. The ability of the Afghan government to extend
its remit beyond Kabul has consequently been severely constrained.
The fact that the majority of funding has been
absorbed by humanitarian need leaving minimal funds for reconstruction
may underlie the Afghan government's continued expressions of
concern that donors have not followed through with pledges. Most
donors are meeting requirements from pledges made at Tokyo at
the beginning of the year. Despite this funding, Karzai's position
is increasingly fragile and much more needs to be done if the
situation is to be stabilised. It is also apparent that donors'
pledges at Tokyo amounting to US$1.8 billion are insufficient
if humanitarian and reconstruction needs are to be effectively
addressed. We are concerned that the extent of devastation and
destruction in Afghanistan has been underestimated in setting
funding levels and that per capita funding allocations to the
Balkans, Palestine and East Timor, for example, if applied to
Afghanistan, would translate to almost three times the annual
figure pledged at Tokyo.
It remains essential to meet the humanitarian
needs of the six million Afghans whom the UN's Food and Agriculture
Organisation and World Food Programme estimate are vulnerable
due to the continuing impact of the drought, the approaching winter
and ethnic targeting amongst other factors. However, it is vital—if
popular confidence is to be maintained in the Bonn process—that
major reconstruction projects to allow the recovery of economic
and social life are funded without further delay. In this regard,
we welcome the announcement by the President of the US, the Prime
Minister of Japan and the Foreign Minister of Saudi Arabia (12
September) to fund the reconstruction of the major highway linking
Kabul, Kandahar and Herat. It is hoped that funds will arrive
in Kabul by October 2002. We also welcome the European Commission's
(EC) announcement for EC funding to repair the Kabul to Jalalabad
road which should start by November 2002. In October, the World
Bank funded Emergency Transport Rehabilitation Sector: Transport
Processing announced that project preparation is underway.
If the government does not survive, it is predicted
that there will be significant levels of displacement and an increase
in the need for relief assistance. The first priority must be
to provide reconstruction assistance on a sufficient scale to
bolster the government and provide employment opportunities for
the 1.7 million refugees who have returned since March 2002. A
high percentage of refugees are under 20 years of age and may
be tempted to resort to criminal activity if employment opportunities
do not materialise. The clear trend for returning refugees to
move to cities, hugely increasing pressure on labour markets there,
heightens this danger. A shortage of basics including water, shelter
and food already exists. The onset of winter will make life more
difficult for everyone, if not impossible for newly returned refugees.
Consequently, the Afghan government has publicly requested governments
with Afghan refugee populations not to encourage them to return
at this time.
Negative views of the international community
have been increasing as visible signs of assistance are lacking.
Feelings are running high about the perceived consumption of aid
monies by the United Nations and NGOs for their vehicles, offices
and staff.
2. FUNDING
At the Tokyo conference and other fora, donor
governments pledged between US $4.7 and $5.2 billion for 2002-06,
with approximately $1.8 billion allocated for the first year.
The Afghan delegation argued for double this figure. The World
Bank also projected the country may need at least double the $5.2
billion pledged for the reconstruction of Afghanistan between
2002 and 2006. None of the needs estimates were based on field
surveys.
2a. Conflicting figures
There has been continuing confusion surrounding
the interpretation of varying sets of figures relating to levels
of disbursements on donor pledges made at Tokyo for 2002. The
tracking mechanisms now in operation may address this.
The US pledged US$296 million for this year
(UN financial year ends 30 Sept 2002) all of which has been disbursed,
the largest tranche going on food aid ($120 million). The US felt
that other states were lagging behind. Tensions culminated at
the end of August in public criticism by the Assistant Secretary
of State for Population, Refugees and Migration (PRM), Arthur
A Dewey. Mr Dewey accused European countries of not providing
their share of food aid for Afghanistan. This led to a retraction
and apology to Brussels as figures could not be produced to substantiate
this allegation. EC efforts regarding Afghanistan have been faster
than usual, while delays on the EC budget line for food aid are
due to fears of further destabilising the local market.
Figures released by the Afghan Assistance Coordination
Agency (AACA) in Kabul on donor pledges and levels of disbursements
post-Tokyo, on 7 September, also contributed to the confusion.
The figure of 12.6 per cent was cited for the UK, though a footnote
on this table mentioned the UK donation of US $94.4 million. This
footnote in fact refers to 90 million from the last financial
year which was aimed at Quick Impact Projects and was not a part
of the UK Government's Tokyo pledge.
The UK Government's Tokyo pledge initially amounted
to US $62 million (£40 million) but this figure was raised
to $85 million (£55 million) as extra funding became available.
The FCO had hoped that by the end of August 2002, 75 per cent
of this pledge would have been disbursed. This has been delayed
by unexpected difficulties and only 47 per cent has been disbursed.
The Government now expects to meet its target of 75 per cent by
the end of October 2002.
Indications that the figures published by the
Afghan Assistance Coordination Agency (AACA) on 7 September were
based on data that was out of date by that time is also exemplified
by the figure given for the EC's disbursal rate against pledge
at 40.6 per cent. According to our calculations based on recent
figures allocations for 2002 stand in the region of 70 per cent.
The latest available figures published by United Nations Assistance
Mission in Afghanistan (UNAMA) on 7 September 2002, confirm this
higher figure of 70 per cent which will increase by the end of
October.
The UK and the EC, amongst other donors, now
realise that the onus is on them to provide the Afghan Assistance
Coordination Authority (AACA) or United Nations Development Programme's
(UNDP) databases in Kabul with up-to-date and accurate figures
to avoid similar confusion arising in the future.
The additional $280 million recently passed
by the US Congress and signed through by President Bush for Afghanistan
is a positive indication that the US retains a focus on Afghanistan.
It is essential that this continues as the situation in Afghanistan
is at a critical juncture and local perceptions are coloured by
what happens on the ground now, rather than in two to five years
time.
2b. Shortfalls for the Afghan Government
One of the main problems is that the Afghan
Transitional Administration (ATA) has been unable to generate
customary revenues in the regions which remain under the control
of local powerholders. It was anticipated that these projected
revenues would cover 50 per cent of the ATA's running costs. As
a result only half of the ATA's costs have been met so far. Steps
are being taken to address the funding crisis now faced by the
ATA in the short-term, but its root cause is located in the question
of security which remains a challenge beyond the capacity of the
Afghan government to solve on its own.
The outcome of the Afghanistan Reconstruction
Support Group (composed of the US, Japan, the EU, Saudi Arabia)
meeting in Washington DC on 26 September appears to have been
fairly positive. At this meeting Colin Powell noted that "Afghanistan's
government was facing a US $166 million budget deficit that must
be closed to prevent government services being closed off."
These services include the payment of salaries to police, teachers,
minesweepers and construction workers. At this meeting the recurrent
budget shortfall was reportedly reduced to $100 million and a
further $100 million in pledges were estimated by UNAMA.
The majority of the UK's funding has been allocated
to humanitarian assistance programmes. A small part (approximately
10 per cent) has funded the Afghan Reconstruction Trust Fund (ARTF)
which is used for the Afghan Transitional Administration's daily
budgetary needs. An additional $5 million has been allocated to
the ARTF from the UK's overall budget for Afghanistan.
Some governments, like Japan, are constrained
by domestic laws which would make contributions to the ARTF illegal.
Japan's solution is to donate $30 million worth of equipment to
the Afghan government, which is then sold, with the proceeds going
into funding the recurrent budget of the ATA. This indicates that
donors are actively considering imaginative ways forward. Nonetheless,
the perception and the reality, is that the Afghan government
does not have actual control over the funds being made available
for Afghanistan. The recent insistence by the ATA that it should
have the decisive say in the content of the next UN appeal for
Afghanistan is indicative of its unhappiness with the status quo.
And in particular, with the fact that the UN is, as the ATA perceives
it, operating as a parallel government.
3. FUNDING DELAYS
FOR RECONSTRUCTION
The humanitarian crisis has absorbed approximately
60 per cent of the funds disbursed to date in 2002. The remaining
40 per cent channelled into reconstruction has been focused on
education, basic sanitation to IDPs/returnees and demining. Very
little has gone on the conventional reconstruction sector such
as transport, power, telecommunications or other infrastructure.
However, the problematic security situation,
the lack of a banking system or government infrastructure providing
the necessary capacity are other contributing factors underlying
the delay in the release of funding pledged in January. It is
to be hoped that the introduction of the new Afghan currency on
7 October will see the start of an improvement in capacity in
the banking system.
International recognition of the narrowing window
of opportunity to stabilise the situation in Afghanistan is reflected
in the desire to see aid shifting from the humanitarian effort
to reconstruction. This has been flagged up in Washington, Brussels
and London and the US is keen to see this as policy by the end
of 2002.
It should also be noted that a considerable
part of donor effort may lie in the "invisibility" of
some of the aid provided, eg capacity building within the Afghan
government which is not apparent to the Afghan people.
3a. Soft loans versus grants
It remains unclear exactly what proportion of
aid pledged at Tokyo is in the form of soft loans as opposed to
grants but AACA analysis (25 September 2002) indicates that $4.3
billion of the $5.2 billion pledged at Tokyo is in grant form.
The UK Government is currently only giving grants to Afghanistan.
There is a difference of opinion within the
Afghan cabinet regarding the question of funding reconstruction
via the use of soft loans. President Karzai is reportedly hostile
to the use of loans. Ashraf Ghani, the Minister of Finance raised
this issue in Washington on 26 September. It is understandable
that the Afghan government does not wish to saddle a devastated
country with the burden of loans at this critical stage. However,
there appears to be a willingness to accept loans from the World
Bank, the International Monetary Fund and the Asian Development
Bank as opposed to a reluctance to accept loans from Saudi Arabia
and other states.
Although aid preferably should come in the form
of grants, opposition to the use of soft loans will act as a brake
on the release of funding commitments pledged in that form for
reconstruction. It could be argued that a willingness to provide
loans to Afghanistan indicates a degree of confidence in the credit-worthiness
of the country and a belief that the political process is going
to work. It should also be noted that the paying back of soft
loans starts six to seven years later and at very low interest
rates.
4. NO AID
AND DEVELOPMENT
WITHOUT SECURITY?
Afghans and other actors continue to identify
the deteriorating security environment as the main obstacle to
the effective provision of aid and reconstruction in the regions.
There is still no viable plan to close the security gap between
what the Afghan government is doing and what can be done given
their lack of capacity. (For information on possible options see
the Stimson Center's Security and Peace Support in Afghanistan,
9 August, available online at www.stimson.org.)
Well-armed powerholders control the regions
and are able to access resources independently from central government
control. In the opinion of most experts it will take a number
of years for a fully functional national army and effective police
force to be developed. In effect, with the collapse of the Taliban,
Afghanistan is left with a fragmented power structure with de
facto responsibilities for security lying not only with the central
government, but with regional power-holders as well.
The security situation has led to the emergence
of negative views of the US and the international community within
Afghanistan. It is significant however, that since public announcements
have been made on reconstruction of key roads moving underway,
public opinion has reportedly improved.
Apparent signs in August that a major change
in US policy was underway towards backing the extension of peacekeeping
forces beyond Kabul have failed to materialise. Though the US
has now ended its opposition to International Security Assistance
Force's (ISAF) extension in principle, the US still shows no sign
of contributing troops for this effort. This is critical if European
states, which have hitherto refused to contribute troops to an
expanded ISAF, are to be persuaded to change their policy on this
axiomatic issue. It should be noted that any changes to ISAF's
current minimalist mandate are likely to take some months to effect
on the ground.
The problem of maintaining ISAF at current levels
appears to have been resolved as of 24 September when Germany
and the Netherlands proposed a joint take-over of control of ISAF
when Turkey's mandate expires on 20 December 2002.
The security situation has adversely affected
multinational, regional and local investment in the Afghan economy,
while benefiting "Afghanistan's darker forces—drugs
and arms traders and the men of violence." (CARE International
in Afghanistan, Policy Brief, September 2002) NGOs have been able
to maintain both humanitarian and development programmes but in
some areas, at some times, this has not been possible due to lack
of security leaving the most vulnerable Afghans without the assistance
they need.
5. VOLUNTARY
RETURNS
Experience shows that voluntary returns programmes
are most effective when people are given clear, informed choice
and in the absence of measures that place undue pressure on refugees
to go home before they are ready. We welcome the fact that the
UK Government has committed to an "Explore and Prepare"
package to assist people in the decision making process. It should
be recognised that extremely limited resources including housing,
power and water in Afghanistan are already overwhelmed and that
large-scale involuntary returns would place impossible strains
on an already fragile infrastructure.
A viable and sustainable returns programme which
functions as a complement to international aid assistance to Afghanistan,
with training linked to areas of skills shortage, to promote re-integration
and reconstruction, as well as ensuring the requisite capacity
on the ground to absorb returnees, is recommended. (The Refugee
Council is working with the UK Government on this issue and can
provide more detailed briefings if required.)
6. CONCLUSIONS
The provision of humanitarian aid, reconstruction
and longer-term development assistance are not separate categories
but flow into one another, forming aspects of a whole which must
be addressed simultaneously if Afghanistan is going to succeed
in forging a peaceful future.
Concern is deepening amongst NGOs, that needs
have been underestimated and that funding pledges are manifestly
insufficient. The Afghan government has repeatedly attempted to
galvanise donors into converting pledges into hard cash to allow
them to provide the tangible benefits the Bonn Agreement is supposed
to deliver to the population at large and to establish their credibility
beyond Kabul in the process. The much lower overall funding levels
for Afghanistan compared with other recent post-conflict recovery
situations documented in a number of reports, run the risk of
being dismissed by donors on the basis of varying conditions eg
harsh winters in Kosovo or hot summers in Sudan. However, Afghanistan
not only suffers harsh winters but is also coping with drought
and earthquake and has one of the poorest infrastructures of any
other post-conflict country.
It must be recalled that pledges were made by
the international community to have Afghans in control, to the
greatest extent possible, of the reconstruction of the country.
While recognising that lack of capacity is a significant obstacle,
the minimal funding received by the Afghan government to date
militates against this process and undermines the government's
credibility. It is also critical that funding is released for
human rights and protection and for the strengthening of civil
society. These key areas have also suffered from a serious shortage
of funds.
Any analysis of the situation in Afghanistan
leads back to the question of security. If the international community
is not going to address the security gap then it must focus on
funding visible core infrastructure projects such as roads, airports,
power, and water supplies as well as building hospitals and schools.
The instability of the security situation demands swift action
on this front both to revitalise the economy and to demonstrate
clearly that the international community remains committed to
Afghanistan's future.
7. RECOMMENDATIONS
Bearing in mind the commitment and support provided
by the UK Government to the Afghan Transitional Administration
in the reconstruction of Afghanistan and the provision of humanitarian
assistance, we recommend that—
1. The UK Government supports and encourages
other donor governments to significantly increase funding for
aid and reconstruction. These costs need to be met simultaneously
as a matter of urgency.
2. The UK Government should encourage other
donor governments to support and legitimise the Afghan Transitional
Administration by increasing the amount of money that is channelled
through the trust fund set up for this purpose.
3. The UK Government should continue to
support initiatives that increase the capacity of the Afghan government
to assume strategic leadership for the country's reconstruction.
4. The UK Government should respond to the
requests from the Afghan government and from expert analysts to
ensure adequate security in Afghanistan.
5. It is critical at the present juncture
that reconstruction assistance is highly visible in order to sustain
hope for the future.
British Agencies Afghanistan Group (BAAG)
October 2002
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