II. RESOURCES
9. Prior to the International Conference on Reconstruction
Assistance to Afghanistan held in Tokyo in January 2002, a preliminary
needs assessment carried out by the World Bank, UNDP and the Asian
Development Bank estimated that, as a base case, Afghanistan would
need $14.6 billion over the next ten years.[11]
At the Tokyo conference international donors pledged approximately
US$4.8 billion of assistance to Afghanistan.[12]
It had been agreed that commitments made at Tokyo would cover
a five year period but in practice most pledges only looked at
a two year horizon and included both grants and loans.[13]
Of the Tokyo money, $1.9 billion was pledged to be spent in 2002.
Development Initiatives, an aid consultancy specialising in aid
policy and monitoring donor behaviour and performance, reported
that $1.8 billion has been committed to specific agencies, funds
or projects, and that by October 2002 $1.4 billion of that amount
had been disbursed.[14]
Some donors have made pledges since the Tokyo conference which
has brought the overall sum up to approximately $5.8 billion.[15]
10. The Tokyo conference confirmed that existing
multilateral and bilateral mechanisms would be the primary vehicle
for major donors plus the creation of a single trust fund. Participants
also advocated the formation of a common data system for monitoring
aid flows.[16] Despite
the fact that the conference was intended to raise money for reconstruction,
most estimates indicate that around two thirds of the money spent
so far has been spent on humanitarian relief and some of the pledges
made at Tokyo have consisted of food aid.[17]
Development Initiatives estimate that out of the USA's $500 million
pledge, $200 million worth has been a donation in kind in the
form of "food commodities".[18]
In Afghanistan we heard complaints that some countries' contributions
have partly consisted of financial contributions made to the International
Security Assistance Force (ISAF) and, in certain cases, even money
spent on refugees within their own national borders. Although
the UK's contribution does not include its ISAF contribution,
donations to UNHCR and the International Organisation for Migration
(IOM) for refugee programmes in Afghanistan's neighbours were
counted as part of the pledge.[19]
Some of the Tokyo pledges were partly in the form of concessional
loans which the Transitional Administration has been reluctant
to use. However, President Karzai has since expressed a willingness
to use loans within a managed strategy.[20]
TERMS AND DEFINITIONS
11. At Tokyo, governments "pledged" money
to Afghanistan. These pledges are statements of a serious intention
to supply funding. They are followed by "commitments"
when funds have been committed to a specific organisation or sector.
Funds are "disbursed" once they have been transferred
to the recipient organisation or are available to be drawn down.[21]
Although disbursement means that money has been transferred to
the organisation or agency implementing projects, it does not
mean that the money has actually been spent.[22]
The following table details the level of disbursement of pledge
in 2002:
KEY INSTITUTIONS AND ORGANISATIONS
12. As well as the Afghan Transitional Administration
and its Ministries, there are a number of other relevant institutions.
The Afghanistan Assistance and Coordination Authority (AACA) is
a Transitional Administration agency working to promote an Afghan-led
vision for reconstruction and development and has played an important
role in the production of the National Development Framework.
It is also involved in monitoring and tracking aid to Afghanistan
using its Donor Assistance Database which is now operational and
in use.[23] The Afghanistan
Reconstruction Trust Fund replaced the Afghan Interim Authority
Fund in May 2002. As recommended at Tokyo, this single trust fund
was established to coordinate donor support within the framework
of a unified budget, to fund the Transitional Administration's
recurrent budget as well as priority sectoral investment and programme
costs and capacity-building projects.[24]
THE BREAKDOWN OF THE TOKYO MONEY
BY DONOR
13. Thirty five donors made pledges at Tokyo and
the Russian Federation, Lithuania, Singapore, Thailand, New Zealand
and Bahrain have made commitments since. The ten largest pledges
came from, in descending order: the World Bank, Iran, Asian Development
Bank, Japan, United Kingdom, USA, Germany, Saudi Arabia, EC, India,
China, Denmark and Pakistan.[25]
Some of these pledges, notably from the USA and India, consisted
largely of food aid in kind. The following table shows levels
of pledges, commitments and disbursements from the USA, Japan
and other Organisation for Economic Co-operation and Development
(OECD) Development Assistance Committee (DAC) donors, from EU
member states, from non-DAC donors and from Development Banks:
The USA is providing about 30 per cent of total reported
commitments. Within the European Union, the UK, Germany and the
Netherlands are the three largest providers.[26]
Outside the DAC, the three largest donors were India, Iran and
China with Saudi Arabia, Lithuania, Korea, the Russian Federation,
Kuwait, Singapore, Turkey, Venezuela and Thailand also making
pledges.[27]
As we heard in evidence, the Tokyo money was a very mixed bag
with heavy involvement from regional donors; non-DAC members'
pledges made up about one third of the total.[28]
We welcome the involvement of regional donors in making pledges
to Afghanistan. For too long it has been the same set of countries
which put their hands in their pockets when it comes to giving
development aid. We urge the UK government to seek to encourage
other developed countries to play their full part in the international
development system.
Levels of funding
14. One year on from Tokyo it is clear that the sums
pledged are not going to be enough. Almost all of the evidence
received from those with experience of what is happening in both
urban and rural areas emphasised the need for more money. Those
of us who visited Afghanistan returned aware of the enormous amount
of work still to be done. Ministers from the Afghan Transitional
Administration stated: "We definitely think the pledges made
are not going to be sufficient... the World Bank estimate between
$10 and $20 billion...".[29]
At a recent meeting of the Afghan Support Group in Oslo, twenty
countries pledged a further US$1.2 billion and this figure is
expected to rise to a total of $1.7 billion to be spent in 2003.[30]
15. A possible reason for the apparent underestimation
of how much money would be needed for Afghanistan's reconstruction
is that the pledges were made on the basis of imperfect information
and without a proper needs analysis.[31]
DFID's Chris Austin emphasised that the preliminary needs assessment
was something of a back of an envelope calculation saying that:
"Tokyo was a fairly rough and ready estimate based on comparisons
of how much it cost to rebuild Bosnia and other post-conflict
countries but it was not based on thorough analysis of the situation
in Afghanistan".[32]
But even the preliminary needs assessment indicated a need for
a much larger than the amount pledged at Tokyo. CARE international
have stated: "The World Bank determined in January 2002,
that, as a 'base-case', Afghanistan would require $10.2 billion
over five years—about twice that actually pledged in Tokyo.
Most experts concede that it will take considerably more than
that".[33]
16. The fact that only a few of the Tokyo pledges
covered a period of more than two years has made long term planning
difficult.[34] Multi-year
pledging is crucial to provide adequate resources for future years
and predictable funding to allow a rational allocation of resources.
Regardless of the immediate humanitarian imperative, long-term
commitment is important to meet the international community's
aims of ensuring long-term security and stability. Given the clear
need for more money over longer periods and the greater availability
of information for conducting needs analyses, we were reassured
to hear that DFID anticipates further pledges for Afghanistan
in the future. Chris Austin told us: "In terms of has Afghanistan
got enough at the moment? Yes, to start with, but it was only
ever seen at Tokyo as the first stage".[35]
However, there are worries, which the Committee shares, that there
is a planned reduction in DFID spending on Afghanistan next year.[36]
Although DFID has confirmed that it is on track to disburse its
£200 million pledge over five years, disbursement of the
money has been front-loaded and so commentators have expressed
concern that the amounts will decrease next year and throughout
the rest of the five years.[37]
17. One of DFID's great advantages is the flexibility
which it has to move its money across departments, depending on
extra or growing need.[38]
Clare Short would not be drawn on specific spending commitments,
stressing that the money had to be based on a needs assessment
and on the absorptive capacity of those institutions in Afghanistan
which would be tasked with delivering the services. DFID plans
to disburse £65 million of its pledge this year (£50
million has already been disbursed) and will discuss future support
plans and pledges with the Transitional Administration at the
March 2003 Development Forum.[39]
There needs to be a rolling programme of pledging measured against
progress on the ground in Afghanistan, to give all donors a chance
to demonstrate their continuing commitment and to ensure that
they will not leave Afghanistan as a job half completed. There
should also be a timetable within which the international community
aims to hand over areas of responsibility to the Afghan Transitional
Administration.
THE BALANCE OF SPENDING: FROM HUMANITARIAN
RELIEF TO RECONSTRUCTION AND DEVELOPMENT
18. At the time that money was pledged in Tokyo no
distinction was made between spending on humanitarian relief and
spending on reconstruction. When lives are at risk spending on
humanitarian relief has to take priority, but reconstruction is
fundamental to dealing with food security and vulnerability in
the long term. Without investment to address the underlying causes
of the humanitarian crisis, there can be no expectation of Afghanistan
breaking out of the downward spiral. The British Agencies Afghanistan
Group (BAAG) told us that the Afghan agricultural economy was
not currently capable of supporting the population and that labour
migration and opium production acted as safety valves for some
of the vulnerable.[40]
Creation of viable livelihoods and development of the Afghan economy
are therefore key to resolving the problems of food crisis in
the long term. Although some work on reconstruction projects such
as road building has now started, there remains an imbalance in
spending which is tipped toward humanitarian relief.[41]
Many witnesses spoke of the need to redress the balance of spending
between humanitarian and reconstruction as part of the necessity
of securing enduring, long-term commitments from donors.[42]
Islamic Relief commented that:
"Right now, there is one kitty, so to speak,
which is having to be split between both humanitarian and reconstruction
needs and, as always, humanitarian needs are seen to be taking
precedence because that is tangible, it is visible, when people
die, you see them. If the road is not reconstructed this month
compared to saving a life, well, let us reconstruct the road next
month. That is how the split has been done".[43]
Afghan Ministers were particularly critical of the
imbalance between humanitarian and reconstruction assistance.
They argued that humanitarian assistance addressed symptoms
not causes and that the huge proportion of assistance (about 25
per cent) which was spent on food aid "is only postponing
death rather than strengthening lives and livelihoods".[44]
19. There are still large numbers of vulnerable people
in Afghanistan and there is a continuing need for spending on
humanitarian relief. Distinguishing humanitarian relief from reconstruction
spending is no simple task. Different donors have differing perceptions
of the breakdown of humanitarian and reconstruction spending contained
in their contributions. Some activities, such as provision of
a supply of drinking water, can be categorised as both humanitarian
and reconstruction, depending on the donor.[45]
The problems involved in separating humanitarian and reconstruction
spending also make it difficult to estimate how much has been
spent on each. About two-thirds of the UK's spending to date has
been on humanitarian relief.[46]
20. Differentiating between funding for humanitarian
relief and reconstruction could help to focus development on long-term
reconstruction. If there were two separate pots of money and provided
that the humanitarian relief is adequately funded, reconstruction
work could progress without the moral dilemma of whether the funding
should have been used elsewhere. CARE International told us that
there should be: "Funds for both emergency work and
reconstruction to be made available with urgency so that Afghans
are not forced to choose between the two".[47]
But the Secretary of State saw the traditional divide between
humanitarian and development assistance as an unhelpful polarisation
of the argument. She was particularly scathing about complaints,
especially from the Transitional Administration, that funding
had been skewed towards humanitarian assistance. For her, such
comments showed an immaturity about the responsibilities of government:
"If six million of your people... need food daily... to think:
'someone else's job is the humanitarian and we want to build roads',
shows a lack of grasp of the duty of government".[48]
21. If a clearer indication of the general purpose
of funds (for reconstruction or humanitarian relief) were made
at the time of pledging, it would be easier to ensure that enough
funding is made available for each purpose. Sufficient funds
must be available for both reconstruction and humanitarian
relief and better information about needs will be important in
determining how much money is required. We understand the problems
involved in separating humanitarian and reconstruction spending
but consider that DFID and the international community needs to
have a clear strategy, or at least set out milestones, for moving
from humanitarian relief towards supporting reconstruction and
development. This could involve the prioritisation of humanitarian
work which also provides long-term benefits such as the supply
of clean drinking water.
INTERNATIONAL COMPARISONS
22. The $4.8 billion pledged over 3-4 years is small
in relation to the total needs of a country recovering from over
two decades of conflict destruction and drought. Inevitably, many
commentators have compared aid levels and disbursements in Afghanistan
with recent post-conflict settings in other countries. Tokyo pledges
were based on calculations made using comparison with the reconstruction
of Bosnia. In Kabul and later at Westminster, Afghan Ministers
spoke with one voice when it came to making the comparison between
Afghanistan and other recent, post-conflict countries to demonstrate
that levels of aid to Afghanistan are relatively low: "For
example in Bosnia per capita assistance over five years
was around $328, Kosovo $288, East Timor $175, Rwanda something
similar. In Afghanistan in 2002, based on pledges which have been
made, the per capita figure is $75; over five years it is roughly
$40".[49] But the
Secretary of State described such comments as unjustified and
unattractive carping. She rejected the comparison with other countries
because "a dollar in the Balkans is worth less than a dollar
in Afghanistan".[50]
Tom Phillips of the Foreign and Commonwealth Office also stressed
that the different purchasing power of a dollar in different countries
meant that such per capita comparisons could be misleading.[51]
23. The criticisms of international comparisons offered
by the Secretary of State certainly apply where the spending is
on humanitarian relief for, say, the purchase of food or tents
from local sources. But money spent on reconstruction, whether
technical assistance for institution building or for major infrastructure
projects is spent on consultants and engineers in international
markets. The Programme Director of CARE International stated:
"The vast majority of the costs of reconstruction efforts
are not locally incurred and I think that the appeal to the fact
that things are cheaper in Afghanistan is not [a] very strong
argument to explain away the order of magnitude difference between
the resources made available to Afghanistan and to other places".[52]
CARE International were emphatic that reconstruction needs in
Afghanistan were significantly higher than in Rwanda, Bosnia,
Kosovo or East Timor. Afghanistan's economy was at a standstill
with core infrastructure destroyed on a massive scale. No other
country had more mines and unexploded ordnance.[53]
Development Initiatives told us that per capita figures
were generally calculated using the total population of a country
rather than the total number of people affected by a crisis.[54]
As a result, the size of a country's population has a significant
impact on the per capita calculation and it is not likely
to indicate the average amount spent on each affected person,
but rather the average across the whole population. But the value
of such international comparisons was not dismissed out of hand
and in terms of assessing how much more money might be needed
for Afghanistan, Development Initiatives have resorted to comparison
with overall aid sums for countries such as the former Yugoslavia
and Rwanda.[55] As a
final comment, we have already noted in paragraph 12 that Chris
Austin of DFID described the Tokyo money as an estimate based
on other post conflict situations.
The way money is channelled
24. Aid from donors is channelled into Afghanistan
in a variety of ways. Not all of the money pledged is spent in
Afghanistan but, of that which is, a proportion is spent by donors
directly through programmes which the donor runs and manages.
For example, DFID has directly funded a £3 million project
aimed at developing capacity within the Transitional Administration.[56]
Donors also channel some of their contributions through implementing
partners, either NGOs or the United Nations Agencies. Most of
the money DFID channels through the UN is disbursed directly to
UN Agencies rather than through the UN coordination mechanism,
UNAMA (United Nations Assistance Mission in Afghanistan).[57]
A further mechanism for channelling funds is the Afghanistan Reconstruction
Trust Fund (ARTF) which is a multilateral trust fund operating
to channel assistance to the Afghan government.[58]
The ARTF is administered by the World Bank and has a Management
Committee consisting of the Asian Development Bank, the Islamic
Development Bank, UNDP and the World Bank.[59]
The Afghan Ministry of Finance is also represented on the Committee.[60]
This Committee meets regularly to review available monies, the
government's preferred use of funds and to agree allocations.
There is also a Donor Committee on which all donors are represented
which provides policy guidance and can earmark funds for specific
activities.[61] Development
Initiatives described the ARTF as a means by which donors could
support the Afghan Transitional Administration but with the safeguard
of having the fund run by the World Bank.[62]
Almost 55 per cent of UK disbursements to date have been channelled
through the UN, a further 15 per cent has been channelled through
NGOs and 14 per cent has been channelled through the ARTF and
its predecessor, the Afghan Interim Authority Fund.[63]
25. Some of the money pledged at Tokyo was in the
form of concessional lending. The Afghan authorities, the aid
community and commentators were not aware of this at the time
of pledging.[64] The
Transitional Administration has been slow to draw down on these
loans. We heard during our visit to Afghanistan that this reluctance
was partly related to concern over repayments but may also be
linked to a desire to maximise the amount of grant aid received.[65]
Some witnesses sympathised with Afghan reluctance to indebt itself
but it was also pointed out that the loans on offer were on excellent
terms and would not have a negative impact on the developing economy.[66]
However, there is a distinction between borrowing for capital
projects, which is widely seen as acceptable, and borrowing to
cover recurrent costs which is unsustainable in the long-term.
After an initial reluctance, the Transitional Administration has
recently declared its willingness to draw down on some of the
loans it has been offered.[67]
The Secretary of State told us that a programme to clear Afghanistan's
debt arrears was already underway and would provide Afghanistan
with a clean slate for borrowing from International Financial
Institutions such as the World Bank and Asian Development Bank:
"They can then borrow hundreds of millions of dollars and
get all the technical expertise that goes with it .... there is
something good about a country taking responsibility for its own
long-term concessional borrowing .... you have to make sure it
produces results [and] ... it provides that sense of being responsible
for their own future."[68]
We believe that the use of loans, as part of a managed economic
strategy, will allow the Afghan economy to develop, decreasing
its reliance on grant aid and helping to demonstrate that Afghanistan:
"is a place where investors can put money with confidence,
knowing that they can get a return on their investment and they
will be able to repatriate the profits".[69]
Sovereign debt is another matter, however. Afghanistan has massive
debts to the Paris Club, mostly to Russia, a country which they
may not be very keen to repay. A Paris Club clearance will be
necessary to normalise Afghanistan's finances and pave the way
for a level of inward investment which the Transitional Authority
is hoping for.[70]
11 Afghanistan: Preliminary Needs Assessment for
Recovery and Reconstruction, World Bank, UN Development Programme
and Asian Development Bank, January 2002 Back
12
Ev 68 Back
13
Q33 Back
14
Ev 68 Back
15
Q91 Back
16
Background paper: Funding for Afghanistan-a quick guide
to institutions and funds, Afghan Aid Flow Information Bulletin,
9 October 2002 submitted by Development Initiatives. Not printed.
The Donor Assistance Database is operational and is managed my
the Afghanistan Assistance Coordination Authority Back
17
Q164 Back
18
Ibid. Back
19
Q40 Back
20
Q38 Back
21
Ev 68 Back
22
Q161 Back
23
Background paper: Funding for Afghanistan-a quick guide
to institutions and funds, Afghan Aid Flow Information Bulletin,
9 October 2002 submitted by Development Initiatives. Not printed Back
24
Ibid. Back
25
Ev 68 Back
26
Ev 68 Back
27
Ibid. Back
28
Q177 Back
29
Q1 Back
30
Afghanistan set to receive 2 billion in aid in 2003, Agence
France-Presse, 18 December 2002 Back
31
Q121 Back
32
Q229, Q33 Back
33
Ev 52 Back
34
Ev 58 Back
35
Q33 Back
36
Q207 Back
37
Ev 117, Q208 Back
38
Q213 Back
39
Ev 117 Back
40
Q183 Back
41
Q36 Back
42
Q185 Back
43
Q144 Back
44
Q1 Back
45
Q164 Back
46
Ibid. Back
47
Ev 52 Back
48
Q209 Back
49
Q1 Back
50
Q229 Back
51
Q33 Back
52
Q136 Back
53
Background paper: Rebuilding Afghanistan: A Little Less Talk,
a Lot More Action, CARE International in Afghanistan: Policy
Brief. Submitted by CARE International. Not printed Back
54
Q160 Back
55
Q159 Back
56
Ev 15 Back
57
Q45 Back
58
Ev 68 Back
59
Background paper: Funding for Afghanistan-a quick guide
to institutions and funds, Afghan Aid Flow Information Bulletin,
9 October 2002 submitted by Development Initiatives. Not printed
Back
60
Q223 Back
61
Q174, Background paper: Funding for Afghanistan-a quick
guide to institutions and funds, Afghan Aid Flow Information
Bulletin, 9 October 2002 submitted by Development Initiatives.
Not printed Back
62
Q174 Back
63
Ev 68 Back
64
Q1 Back
65
Meetings with Asian Development Bank and European Commission Representatives,
Kabul, October 2002 Back
66
Ev 52, Q38 Back
67
Q38 Back
68
Q227 Back
69
Q38 Back
70
Q227 Back
|
