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TUESDAY 19 NOVEMBER 2002 __________ Members present: Tony Baldry, in the Chair __________ Memorandum submitted by Secretary of State for International Development Examination of Witnesses MR CHRIS AUSTIN, Head, Western Asia Department, Department for International Development, MR TOM PHILLIPS, UK Special Representative for Afghanistan, Foreign and Commonwealth Office, MS JAN THOMPSON, Head, Afghanistan Unit, Foreign and Commonwealth Office, examined. Chairman
(Mr Phillips) The key part of the job is as a director in the Foreign Office for the Afghan Unit and policy there; also trying to co-ordinate the Whitehall effort and trying to be the point of co-ordination; and also seeking to ensure that there is coherence in the international agenda towards Afghanistan. So it is those three tiers. (Mr Austin) There are a number of other issues that came up in those comments and perhaps I could try to address those as well, Chairman. The level of aid compared to others, I know, has been used quite a bit by the Afghans as their sort of core script. I think it could be misleading to think that there is a per capita amount that a post-conflict needs in order to reconstruct itself. The discussions that the international community and the then Afghan authorities were having round about December/January, at the turn of the year, were a combination of: What does Afghanistan need over a medium-term horizon? - and people were looking at 10 years at least - what can the country and what can the Government absorb in the shorter term, and what would be therefore a reasonable thing to start with for the Transitional Authority? The majority of the pledges then made at Tokyo were for less than five years. I think there are only five or six donors that looked at a five-year horizon. Many were just for one year. I think either the Afghan Co-ordination Authority or the Ministry of Finance between them have averaged the Tokyo pledges as being over two and a half years. 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. There was then a question or a comment that you were making about the duration. I think it is certainly the case that Afghanistan will need substantial international resources for at least the next 10 years and maybe beyond. I think we are now 10 months into the Transitional Authority, getting to the stage where the Government is beginning to determine its priorities and to identify what the needs are more precisely, and 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. I think we are just beginning to get the clearer picture of the scale of the needs, different kinds of mechanisms which it would be useful to use and absorptive capacity. The next stage, in looking at: Will Afghanistan have enough for the next five/10 years? will be a major topic of discussion at the Development Forum that the Afghans have tentatively scheduled for February next year, where they will lay out their plans for the coming year/two years. I think the expectation there is that donors would look to make multi-year pledges, as they do in other countries. I hope that addresses the question. (Mr Phillips) Subject to Chris's correction, this is a question I asked myself new to the job, but, as I understand it, the per capita comparisons can be slightly misleading because you really need to look at what a dollar buys in a particular situation, and that can be very different. So it is purchasing power that matters. Tony Worthington (Mr Austin) You are right that predominately the expenditures in 2002 have been for what is broadly defined as humanitarian aid. I think there is a definitional issue there that it is important to recognise. It is probably hard to reach agreement on it, but the Afghan Government Implementation Group referred to $600 million of the 1.2/1.3 disbursed this year as having gone through UN agencies, NGOs, and the kind of presumption is that that is humanitarian, emergency needs, food aid for the most vulnerable, but it also includes the money that went through UNICEF that got three million children back in school, it includes money that went through NGOs for rehabilitating water supply and irrigation and so on, so some of those things under a different lens would be defined as the building blocks for a recovery process. We had assumed, and I think many other donors had assumed at around the time of Tokyo, that Afghanistan would continue to have large numbers of vulnerable people for some time, and so the challenge then, which I think still holds, is to manage provision of assistance to the most vulnerable people in a way that does not create dependency and in a way that builds the foundations for longer term development: so you move from food handouts to cash for work, so that people have the means to improve themselves rather than being dependent on a food aid handout. That transition process is still going through. I think Afghanistan has come a long way in 2002 in terms of the political process, setting the parameters for economic and social development through the national professional framework, but there are still something between four and six million who are going to be dependent on emergency shelter and emergency food and that process is continuing. We had thought at the start of the year that perhaps three-quarters of the money in 2002 would be needed for emergency-type stuff and the balance would be setting the foundations. I am hopeful that that balance will begin to shift, but there is quite a bit in the middle that could be defined either as humanitarian or reconstruction. The definitions get a bit blurred in the middle. (Mr Austin) I think that is what has happened. Through UN agencies, through NGOs, including ones that DFID supported, a number of quick impact, quick recovery activities have been undertaken. I saw some examples of this in the Shengali(?) Plain, which I think members of the Committee who visited may also have seen. These were opportunistic, sort of supply-led. There is a local NGO or there is a UN agency that is able to have access to a particular area. The needs are massive. Whatever you do is going to be of benefit in its own right. Let's make a start and make things happen and not wait for a long period of strategising or whatever. The challenge in that context is to avoid setting up a sort of parallel structure where either NGOs or UN agencies become the permanent suppliers of services, the permanent providers of rehabilitation support. This is what the UNAMA is trying to do now. It is looking to create either single UN offices in the province - and I accompanied Clare Short when she met the team in Kandahar for the South - or ideally have UN staff seconded to provincial level administrations or provincial level representatives of line ministries, to carry on the work that has already been done and the immediate activities but to continue it through the Afghan institutions so that they begin to develop their own capacity to direct where things should happen first. (Mr Austin) On irrigation first, perhaps to clarify what I meant by opportunistic, the activities that we financed happened in areas where NGOs were able to have access and where they were operating and we had quite a job to identify effective implementing partners to be able to do activities. I will admit, it was not part of a strategic plan, but then agriculture in Afghanistan is not managed on a large scale commercial basis. Most vegetables and wheat production is for subsistence use, with maybe a little bit of local market. On roads, certainly the national infrastructure has been seriously damaged by 20-odd years of relative neglect and then the effects of war and bombing. A number of major proposals have now or recently been announced with international financing from a range of sources, and that work is starting but it will take a long time. It will take a level of resources that will require both IFI lending and also probably some private sector investment. (Mr Austin) On the first part of that, the Afghan Government and a number of donors, including the UK, have been very keen to try to build up capacity in the Afghan authorities from a pretty low or non-existent base. We have been directly supporting the Ministry of Finance and Central Bank, providing, on a fairly modest level, advice to the Ministry of Public Health and the Ministry of Rural Reconstruction. Other donors, UN agencies, have got personnel in the central Afghan institutions at the Kabul level, helping to develop the National Development Framework and the Government's plans and priorities and, in the process, training up Afghan civil servants. So there is a major task ahead on the whole area of civil service reform. On the second part of your question about diversion of resources, at the moment the approach the UK has followed, which has mirrored others, has been to finance UN agencies who may be subcontracting to NGOs or other private sector people locally, to contract them to do the implementation direct because they have got the capacity to do that. Or we have provided funds through the Reconstruction Trust Fund for the Government to manage, essentially, for their operating costs and public pay roll at the moment but, hopefully, in due course for investment activities. Those two things provide two things: (1) a degree of certainty that things will happen relatively quickly, and (2) a degree of certainty that the money will be used for the purposes intended for next stage of Afghan's development. The next stage of Afghan's development will be to prime the Government's own budgets so that it can manage its finances and its spending activities more directly. Mr Khabra (Mr Austin) If I may update the Committee first. President Karzai informed Clare Short when she was there at the end of October that he had now decided that Afghanistan would take loans from the international financial institutions within a managed strategy. You are absolutely right that the Afghan Government needs to take on new debt in a careful, managed way. It had always been clear within the international community, perhaps not to the Afghan authorities at Tokyo, that certainly World Bank and Asian Bank pledges would be for concessional (ie, very soft) credit terms rather than complete grant terms. What that means in practice for Afghanistan taking an IDA credit or an Asian Development Fund loan would be something that has a 30 year pay-back with up to 10 years' grace at one per cent interest. So the immediate debt servicing impact on the economy is zero, but nevertheless Afghanistan needs to take on this debt in a managed way. The level of need that we were talking about a bit earlier is very, very large. I think Afghanistan, to demonstrate its creditworthiness, its place as a country to do business for private sector and for NGOs and so on, needs to have a balanced portfolio, if you like (to use a finance term), not just relying on grant assistance and emergency need but managing its economy in a way where it can take on concessional debt and leverage more resources from the donor community but also demonstrate that it 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. (Mr Austin) I do not think it is a risk for Afghanistan in the near future. With respect, the IMF assessment of Afghanistan's indebtedness is that it is fairly low at the moment compared to the HIPIC(?) criteria in terms of debt servicing to likely export areas. These are fairly bold assumptions at the moment, but, because Afghanistan has effectively not been part of the international community for a long time, it does not have a large portfolio of either official or private debt. There is a particular issue about debt aid to the Russians, previous Soviet debt, but to the World Bank, Asian Bank, IMF, it is a very, very small portfolio, so it is starting from a relatively clean piece of paper but nevertheless there needs to be a cautious, gradual process of taking on debt finance for investments that will generate economic growth and thereby enable Afghanistan to be able to service those debts comfortably. It is something that the World Bank and the IMF, with the Afghan Minister of Finance, have already been looking at and is keen to monitor. Tony Worthington (Mr Austin) For the Tokyo pledge of £200 million over five years, that is just for the DFID bilateral expenditure. It does not include UK contributions to ISAF. It does include UK contributions to UNHCR and ION for refugee programmes in neighbouring countries because that is deemed as part of our assistance to Afghans. Nor does the £200 million figure include global pool money that FCO, MOD and DFID contribute for security sector reform. (Mr Austin) "Admin" would be another short term phrase. In the context of the UK wanting to minimise transaction costs for the Afghan authorities, it means having a harmonised system of providing funds and technical assistance. As an example, I use one from Pakistan rather than Afghanistan: the Social Action Programme in Pakistan was financed by about half a dozen donors. Over time it developed a system where there was a single monitoring process that the Pakistan Government produced that satisfied all the donors. It took quite a long time to get there and there were other concerns about that particular programme, but that was a way to try to minimise the transaction costs for the recipient government. Similar issues apply in Afghanistan. For the first few months, when the quick impact project and support through UN agencies and through NGOs was essentially being led by the providers of that assistance rather than directed by the Government, each of the donors, including the DFID, would have its own project procedures to follow and report and accountability requirements to meet which imposed transaction costs on us and on the implementing agencies but did not really affect the Afghan authorities because they were not part of the picture. As we move forward with the National Development Framework, any money that is provided to Afghanistan now that involves the Government is going to require a discussion with the Government, exchanges of letters of understanding and meetings and so on, and those are all transaction costs. If we, the UK, have a set with the Ministry of Rural Reconstruction, the Ministry of Finance, the Ministry of Public Health, and then the Canadians do, the Americans do and the Dutch do, the Afghan authorities will quickly be overcome by incoming donor missions, meaning well, offering support but saying, "We would like a report like this or a proposal like that." (Mr Austin) I do not know exactly what the costs are that the UN have had on their direct operations. I know that the Ministry of Finance has asked the UN agencies and NGOs to provide a kind of account sheet of: What have you spent money on? Where in Afghanistan? What is the intended or actual output? How much have you spent on your direct admin costs. I think there is an element of needing to create a capacity in the country to be able to exist there safely, to be able to get around the country and to be able to plan and design interventions. We have had to do it ourselves in the UK on a much more modest scale than the UN agencies. Certainly it is a valid question to ask: Are these efforts being most cost efficient? (Mr Austin) I do not know. Part of me does not know how you would answer that question. I guess what we have at the moment in broad terms, and this does not encompass everything, is $600 million spent in 2002 through UN agencies and NGOs as the input. The output: 3 million children back in school; polio almost eradicated; a measles vaccination campaign hitting a large number of children - and I have heard it reported, from I think UNICEF, that this vaccination campaign has prevented a large number of measles-related deaths, which is an invisible gain; there has been a National Development Framework established; and systems of financing and accounting established within the Government for setting its own budget managing public expenditure. All of those things are positives. Is that a good enough outcome in return for $600 million? I am sure it could have been done for $550 million or $610 million, but I think at the moment it has been worth it. I think there are valid questions now being asked by the donors themselves about how best to take things forward from here with the Afghans, to build their capacity to do things. (Mr Austin) For DFID we are looking at continuing to provide technical assistance for the Ministry of Finance for building up its budget and at the moment we are doing that through a consultancy contract. There would be questions about the next stage. For example, the design for customs reform has been prepared. There would be questions for us about how best would we support the Afghan authorities if they wanted us to help take that forward. Would it be through providing a team of international expensive consultants or would it be working through Afghan officials in the Ministry of Finance, maybe at a slightly different pace, maybe in a slightly different model? As the first example that comes to mind, that kind of question I think would be going through other agencies' minds. Mr Khabra (Mr Austin) I will try. You are asking the same questions we are asking ourselves, so I apologise if my answers sound as though I still have the same questions but no responses. The first one is slightly more easy: UNAMA or UN agencies? Most of our support through UN has gone direct to UN agencies like UNHCR or UNICEF or WFP for programmes that they are implementing in Afghanistan. We have also provided some resources through UNAMA for the political process. For example, some of the costs of the logistics of the Emergency Loya Jirga were supported by a grant that we gave to UNAMA from DFID. In terms of channels for the figure, I think this is very much a moot point for us and for other donors. The Afghan Government has made it clear that its preference would be for donor funds to go through the Afghan budget and they have devised systems for tracking expenditure either for sector specific programmes or general budget support. A second best preference for them is the Afghan Reconstruction Trust Fund which is another way of pooling donor resources. At the moment the capacity at the Ministry of Finance for line ministries to manage their own budget is still fairly young and developing. From where I sit at the moment, the Afghan Reconstruction Trust Fund looks like a better vehicle for providing money in a way that the Afghans will be able to direct how it is used. Some of it may well go through its own expenditure systems if the implementing body is going to be one of the line ministries or if the line ministry is going to contract, but similarly that pot of funds could equally be directed straight to a private sector private contractor, for a road contractor, for example, or to an NGO or to a UN agency for a programme that it was going to implement. Civil service reform is a massive agenda. I think the Committee has had some of the data on the recurrent, but, just to recap, the Afghan set themselves a fairly austere recurrent budget for this year of $483 million, of which about $400 million was going to be dependent on external finance. Of that budget, I think 80 per cent is for civil service pay roll, including military and police related expenditures. The civil service is somewhere between 200,000 and 250,000 people. I think it is fair to characterise the Afghan public services as poorly paid, poorly organised and, probably, in large measure poorly qualified because they have been operating either in a vacuum for several years or people's skills have atrophied a little bit. The Afghan Government is very keen to develop plans quickly for a large scale reform looking at the structure of the civil service, the pay roll and the criteria for entry and for promotion to certain levels and to get a pay system that is more differentiated between the senior levels and the junior levels. We have offered an advisor to the vice-president who is responsible for that, to help him formulate the plans. I am sure there will be massive specific technical assistance required for different bits of it and the costs of it will be enormous as well. Ann Clwyd (Mr Austin) Yes. The figure that sticks in my mind, because the Finance Minister uses it quite often, is that deputy ministers get $34 a month. I am not sure if that can be applied to civil servants as well. The other thing that I have heard often is that there is really no differentiation between permanent secretaries and most junior clerical grades, but it is that sort of order of several tens of dollars per month or the equivalent in Afghanis. In the donor community, again it is hard to generalise, and I do not have our own salary scales entirely in my head and I would not want to embarrass my colleagues in Kabul, but people are more likely to get something like $200 a month working in a UN agency or even in an international NGO, so there is quite a differentiation there. And there is a limited labour market, that NGOs particularly have been very concerned about since before Tokyo, that this donor invasion, whether it is a light footprint or not a light footprint, does not snaffle up all the best-qualified Afghans to work in the external environment and not work in government. (Mr Austin) One of the road projects to which I referred earlier will connect Kabul to Kandahar, which is the President's home area. It used to be the centre of the Taliban Government, so it is one of the most unstable in the country. It has also suffered most acutely from the last four or five years from drought. When I was there at the end of last month it was very evident that the infrastructure has been poorly neglected for some time: I can call it agricultural land, but there was a sense of desert. Nevertheless, we saw one or two positive examples of things beginning to happen. There was a raisin factory, employing a lot of local people, including a large number of women, that was producing for export to Eastern Europe and other parts of the world and there is potential more demand for that kind of thing. I think the authority of the President and of the Government around the country is linked as well to the issue of security and how that can be achieved beyond Kabul and its immediate environment, and to what extent the federal government can exert the right kind of control over the provincial governors and several regional power brokers who operate in a fairly autonomous state. The Southern Region is the same size as Bangladesh or Nagpur (I forget which) but different parts of Afghanistan are fairly large and at the moment inaccessible, both in practical terms but also in terms of extension of power and authority. Chairman (Mr Austin) On the time scale, I think there are two parts to this. The sense that I got from the Implementation Group meeting in the middle of October, which I think other donors shared and which was reflected in Finance Minister Ghani's discussions with Clare Short subsequently, is that the Government wants to be the channel for external assistance but not necessarily the mechanism, the distinction being that the Government recognises that to implement roads projects, to build up its education and health systems across the country, to have a strategic approach to rehabilitating irrigation schemes and so on, it is going to rely on local communities, on private sector, including domestic private sector, on NGOs and on UN agencies to do all of those things. What it would like to change from now is that it has a say in where resources are directed and for what purposes, so that the National Development Framework/the National Development Budget embraces everything that might be implemented directly by a bilateral donor or a multilateral donor but the Government has the strategic direction. That is what ought to happen from next year. The Afghanistan Development Forum in February or March, just before the start of this fiscal year, will set out the Government's priorities in more detail for the coming year, and the Government is in the process, between now and then, of trying to get some idea of what donors' plans are for levels of resources, sectors of operation, financing mechanisms. The Government wants to sort of iterate this into a plan of: "Okay, if the Dutch are going to do this and the Germans are going to do it that way and the Brits are going to do it another way, it all sticks together and looks like the following thing, and we think there are some gaps and some areas that we want to modify." I see that as being the kind of conversation at the Development Forum of how much external aid is planned for Afghanistan over the coming two, three, four, five years; what kind of mechanisms; and are the Government's priorities being covered. To come to the Reconstruction Trust Fund, it was established as a way of pooling bilateral resources in a way to reduce transaction costs for the Afghans first and for the donors second. It can finance recurrent costs, which is principally what it is doing this year; it can finance investment projects; and it can finance support for return of qualified Afghans - and there are proposals in the latter two categories that the Government is beginning to develop with some UN and World Bank support. The management of the Reconstruction Trust Fund was originally World Bank, Asian Bank and UNDP, but as the Interim Administration evolved into the Transitional Government, the Ministry of Finance now has the kind of leading chair in that table and the Government will direct how the resources are used through the trust fund. There is a question for us and for other donors for next year and beyond: How soon do we think it is feasible or sensible for the Afghans to move to direct budget support to the Afghan Government and to what extent should we be directing resources to the trust fund because that is a more efficient way of getting it to the implementing agencies, with the Afghans determining what those end-users are for things to happen? I suspect we are going to look at a bit of a balance but, until the civil service reform questions have begun to be tackled, donors could be looking at financing large numbers of poorly paid civil servants not delivering much in the way of public services. Is that as sensible way for donor money to be used in the very short-term? (Mr Austin) I suppose, I question whether that is a fair assessment. We are now in November. The disbursement figure may be around $1.4 billion, it may have edged up a little bit, against $1.8 billion or $1.9 billion pledged for this year. I think for most people, including the Afghans, that is their fiscal year, which runs to the end of next March, so it is actually quite a high rate of disbursement, given where we are in the financial year. Nevertheless, there are a large number of needs for finance in Afghanistan for emergency supplies for winter, which is now upon the country, as well as for longer-term reconstruction. I think what the Implementation Group meeting last month achieved was a shift in the conversation, from: "How do we respond to the next two/three months of food aid, pipe line or emergency shelter or the next batch of returning refugees?" - which, again, is larger than we had anticipated - and has moved ahead to: "What is the game plan for agriculture, for irrigation, for transport over the next three, five, 10 years? What capacities does the Afghan Government need to have at the centre and around the country to manage those processes and therefore what are the alternative instruments and sources of finance for meeting those needs?" So we have moved to a kind of medium-term perspective. I think there is a role for us and for others to keep examining our own plans and proposals and the level of finance we are looking to commit over the next three years to see whether we have the right instruments, whether we are following our own objective of wanting to let the Afghan Government lead, but at the same time to make sure that there are not vulnerable pockets of the population that miss out. That is not to suggest the Afghan Government would ignore them, but there is a trade off for us between, for example, money through WFP for supplementary feed versus money through the budget for civil service salaries. We cannot do the same amount of money for both, so how do we divide it up? Chairman: There is clearly going to be a long-term issue there of when we increasingly hand over the reins of responsibility to the Afghan Government to take responsibility for themselves. Tony Worthington (Mr Austin) I think it is getting there. I think we experience in DFID ourselves some of the transaction costs of meetings either in Kabul or with various groups that meet internationally to discuss Afghanistan, with the Afghanistan Reconstruction Steering Group, the Afghanistan Support Group, the Implementation Group, the World Bank annual meetings and so on, all of which tend to involve the same officials and include the same officials from the Afghan Government. I think there is an overdue need to rationalise these. I think the decision to move to a Development Forum (also known as a consultative group in other countries) is very welcome. That seems to be the ideal forum for bringing together the Afghan Government, donors, both bilateral and multilateral, and the NGOs and the Government made it clear last month that it wants NGOs to be part of this Development Forum. A number of us have been saying that that is the direction we should move to as quickly as possible. "Multiplicities of strategies" and competing objectives - I am not familiar with the report you have mentioned - I know that there have been a number of sector-related missions and strategies done by the Afghan authorities with the Asian Bank, with different UN agencies, with the World Bank, with the European Commission covering transport, agriculture and so on, and those have informed the National Development Framework and the priority programmes and they ought to be the framework within which all external assistance is channelled. I am sure it is right that at the moment that is not the case, although I know from the evidence I have seen, which the Committee has had for this hearing, and from conversations of the Implementation Group, that that is the direction in which most donors and NGOs want to move as quickly as possible. Chris McCafferty (Mr Austin) Could I pass that to Tom. Chairman (Mr Phillips) Thank you. I do not think there is any prospect of ISAF being expanded outside Kabul. That would require a change in the UN mandate and to date there has been no real appetite from potential contributors to go down that road. However, I think we fully agree with you that the issue of security in the regions is critical to the reconstruction effort. A number of ways are being looked at to - the term is - "expand the ISAF effect" to the regions and I think some of these are becoming more conceivable now as the security situation evolves nationally. So that consideration is under way on that front and one of the favourite ideas out there at the moment is of fairly small teams going out to main areas in the regions, civilian and military, with a range of responsibilities, including linking into the reconstruction world. Our initial view is that that evolving concept is quite favourable, but there are a lot of questions to be answered about it. Chris McCafferty (Mr Phillips) Of course a lot of the nations that are involved out there at the moment are from NATO countries and when the Germans and Dutch take over ISAF 3, which they have agreed to take over from the Turks, they are planning to use the joint - I think it is called - "high-readiness HQ", which is a NATO developed concept. The Americans are certainly looking at ways to tackle security in the regions, and when I talked about this concept of regional teams, that is one that they are themselves working on and we are in discussion with them about. (Mr Phillips) The security threat at the moment is different. One hears quite a lot of different accounts of it and it is quite difficult to get an objective, nationwide picture. In Kabul itself I think the picture at the moment is pretty good: I mean, the curfew has just been lifted. In the rest of the country I think there are threats from ... to try to list them. There obviously has been from time to time fighting between faction leaders. I think, when one talks to people who were looking forward a year ago, it is still happening but it is not as bad as many feared. On the whole I think the situation has improved. There is still a residual threat from Taliban and al-Qaeda elements out there, especially in the south-east against coalition forces, and then there is a general law and order problem because you do not yet have an operating local force and local police out there in the regions. But I think on the whole, looking at the country nationally but from some still problem areas, the situation is improving. In terms of: Do I think there is a realistic prospect of the Afghan national army and the police developing? I think, yes, we are encouraged by the deliberations that are going on in the Defence Commission at the moment on the shape of an Afghan national army 70,000 strong. Those talks do seem to be doing better than some exercises have done in the past, so that is good news. The Germans are also fairly vigorously getting in with the police force element of the security sector. They have now set up a police training academy and the Americans I think are helping with a four-month course for existing police officers while the Germans are taking the lead on new police officers. So a lot of things are happening. It is going to take some time before one sees the full benefits of that around the country and that is why people are also looking at these new ideas for security in the regions. (Mr Phillips) You have raised a number of issues there. On the human rights front we are obviously aware of the reports, talking to the Afghan Government about them and we are encouraged by some of the things we are hearing from the Government. We can talk about individual cases if you like. Do I think that the regional leaders, the warlords, the factional leaders can play a part in the Transitional Administration? Of course you then get on to what is a warlord. For instance, many people talk of Fahim Kahn as the leader of the of the Tajik or one of the leaders of the Tajik community. He is now the Minister of Defence. He is playing, as we understand it, a full and productive role in the talks going on in the Defence Commission on the formation of a new Afghan national army. And in that Defence Commission you have also either the regional leaders themselves or their representatives. So, as we hear and as we hope, they are playing a creative role in the design of the new Afghan national army. Of course the demobilisation element is going to be critical and demobilisation is being looked at as part of the planning of the Afghan national army and we are very keen to play a role in helping there. We have come up with, I think, £0.5 million from our Conflict Prevention Pool for a project which should help to identify ways in which DDR can happen. On the revenues front, I think that Finance Minister Ghani has been going round the regions trying to encourage some of the regional leaders to give more of their revenue to the centre. As we understand it, from what he has told us, we have had some success but I think not as much as we wanted. But that effort is ongoing. (Mr Phillips) In the earlier days, there was a parity war fighting agenda to deal with the al-Qaeda and Taliban and one understands why there was a close relationship between the coalition forces and some of the leaders in the regions. As we understand it, that relationship is changing as the security situation changes. (Mr Austin) This issue of regional power brokers, regional governors and their role in governing Afghanistan ultimately is a question for the Afghan authorities, but I think we want to signal from our official perspective (as I am sure you have from the Committee's) the importance of the political process that needs to happen between now and July 2004 to enable there to be national elections. A lot of that process will be defining what kind of state does Afghanistan want itself to be, what does that mean for relationships on finance and on divisions of authority between the federal government and regional governments. Ann Clwyd: Do I understand you to say that there is no definite agreement to expand the ISAF, either the force itself or some equivalent NATO force or some UN peacekeeping force or anything of the kind? Because it seems to me that we have been talking about this for such a long time and there does not seem to be any progress, there just seems to be an idea that is floating around somewhere. Some people have said the Germans will be bringing in extra troops. That is not going to happen but what is going to happen? Everybody told us that the expansion of ISAF or the equivalent was an absolute necessity to ensure stability in Afghanistan. Chairman (Mr Phillips) I agree entirely - the phrasing there: "This House believes that security is a pre-requisite to the reconstruction ..." I think all of us see that. There is no agreement on ISAF expansion or on exactly what shape this might take. As I have said, at the moment what people are looking at is ways to expand the ISAF effect into the regions. The idea that is currently being looked at and which we hope will be accepted is based on small deployments of multi-disciplinary teams out into the regions. We hope this is going to be a runner. There are a lot of questions being asked about it at the moment. It would not be part of ISAF. Ann Clwyd (Mr Phillips) They would have to come from contributing nations and they would be civilian/military teams - there would also be civilians involved. But you are talking about changing the security environment in which they might be deployed. If, for instance, the Americans moved from what is called phase 3, the war-fighting phase of the coalition, to phase 4, reconstruction and stabilisation in at least some parts of the country, then you are talking about a different security environment from the one you have now in which people can operate in the regions. In that sort of environment different approaches become possible. (Mr Phillips) There are no current plans for a NATO operation in Afghanistan. (Mr Phillips) No, I think the discussion in NATO has been of what sort of support might be given to the lead nations in ISAF, in terms of helping the force generation and things like that. Those discussions have gone on, yes, so there is that degree of NATO involvement, and at HQ level, as I have discussed, the German/Dutch HQ is a NATO asset that will be used in the new ISAF. So it is a live issue, but there is not going to be a NATO force there. (Mr Phillips) Yes, indeed. The same request was put to us when the High Commissioner was here and we are considering at the moment. I do not know how that is going to come out. There are a number of factors, as you will understand. (Mr Phillips) The request for help with the protection. As the investigation teams go in, as it were, he has made that request to us as well. Clearly the allegations about mass grave sites are very worrying to all of us and we welcome the statements that Karzai and other members of his Government have made that they will co-operate with investigations into these sites. We have raised with the Afghan Interior Minister the alleged murder of contributors to the recent Channel 5 documentary on events in Sherbegan last November and he has agreed the matter is serious and has undertaken to co-operate in the UNAMA/Afghan Human Rights Commission investigation. Obviously it is for the Transitional Authority and for the Afghan people themselves to decide how to deal with past crimes, but we stand ready to play a supportive role if we can identify a realistic one. We would expect the UN to be at the heart of any investigation and we like the look of their two-stage approach to investigations, which has been forensic investigations and dignified re-burials now, to be followed at a later stage, when the security situation allows it, by more detailed witness interviews and investigations. That is the approach we have been taking to date. Mr Khabra (Mr Phillips) You are right that there is a very sharp perception of the relationship between what happens in Pakistan and what happens in Afghanistan. I and Foreign Office Ministers have talked to the transitional administration - President Karzai - recently about this. In fact, I have been in Islamabad myself in the wake of the elections talking to the Pakistani Government and what they have told me is that they will continue to co-operate with the war against terrorism and the reconstruction and rebuilding of Afghanistan. President Karzai is, I think, hoping to reach agreement soon on a declaration of regional non-intervention. We trailed that idea at a recent summit in Istanbul. We would certainly see that as a very helpful step forward and I hope there would be movement on that front in the region. Our general message to everyone in the region is that we expect them to play their part in the reconstruction and rebuilding of Afghanistan. We certainly do not think Afghanistan should be in any way a focus for regional rivalries. That is a message we are carrying to everyone in the region. Could I go back to a previous question. I had a point on the human rights front. There are various ways in which we are trying to help on human rights but just to pick up one project from our global conflict prevention pool. We have come up with £1 million to give to the Afghan Human Rights Commission in the Office of the High Commissioner for Human Rights' project. This is going to be earmarked for human rights education and human rights for women and institution building and general project costs. We are seeking to very actively support the human rights front. Alistair Burt (Mr Austin) I think both need to proceed in parallel. The Ministry of Finance, the Ministry of Rural Reconstruction and Development and the Ministry of Health that we are directly involved with through DFID have all been operating in buildings that were either poorly resourced or in a poor state of repair initially or have recently been refurbished, including by some DFID funds. That is the kind physical institution building and one of the six priority programmes for the government in its national development framework is a kind of government buildings programme around the country so that provincial and district administrations and regional representatives of line ministries have somewhere to base an office and organise their affairs. In parallel the UN has organised a series of capacity building groups with each ministry where the ministry is identifying a small number of key staff, about 12 or 15, to undergo a fairly intensive, short-term training programme for themselves in how to organise the administration of their particular ministry. That is proceeding with patchy success in terms of identifying people and in terms of being able to carry through a programme. I think there is a third part to your question which is the distinction between institutional development and institutional building. Has the Government got the right structure, the right number of ministries, the right division of responsibilities? This is part of the civil service reform agenda that we were discussing a little bit earlier. At the moment there are 32 ministries. The Government acknowledges that that in part reflects the political process, but they would expect there to be rationalisation and reduction in the number of ministries. I do not know if the Committee have a view on this but I thought it quite impressive that at the Implementation Group meeting that all of the ministers who spoke referred to some of their colleagues who were also involved in taking forward a particular programme. I think it has been quite encouraging that the Committee, as well as donors and ministers from the UK, had a core script line to take from government and it is quite an impressive, positive signal of capacity. Chairman (Mr Austin) Either that or they have had a very good lobbying firm telling them how to pester us all effectively. Alistair Burt (Mr Austin) In the ministries that we are most involved with - the Ministry of Rural Reconstruction, the Ministry of Finance and the Central Bank - it is something we have been supporting in parallel. I am less familiar with the situation in other line ministries and certainly in the provinces. I think it is part of the Government's game plan and it needs to be something that donors look at, a combination of support for basic refurbishment of buildings which would generate some local employment in the economy around the country, at the same time as looking to the development of capacity and skills of Afghans. Both of them are going to take a long time. The implication of your comment that the physical bit of it needs to come first is right and I know this is something that the Government will report back on at the Development Forum, probably with a pitch for further assistance for the government rebuilding and refurbishment programme. (Mr Austin) It is a team of consultants that we are financing (we plan at the moment) for a period of three years. They have been operating since July. They are working very much in conjunction with teams of advisers from the World Bank and IMF. There is also a USA ID financed team about to start. So we are a small part of this overall effort. For that reason the terms of reference brief for the UK finance team was deliberately cast very wide to supporting Customs reform, to determining the payroll, to helping the Government sort out its own financing and accounting systems of procurement. We wanted the consultancy team to be as flexible as possible to identify and support design work in whatever areas the Afghans identified as priority, but also to fill gaps that the World Bank and IMF advisers could fill. The main achievement so far being is to help the Government define the payroll and create the supporting documentation needed to justify the reimbursement of civil service salaries through the ATRF. A second major achievement has been planning for customising Customs' revenues and the next stage will be to roll those forward. My sense at the moment is that UK support will focus more on support of civil service reform as an extension of the defining of the payroll because that was the first priority that the Vice President and Finance Minister discussed with Clare Short at the end of last month. Chairman (Mr Austin) They were of course selected as the result of competitive tendering. Alistair Burt (Mr Austin) I think it was a necessary and desirable focus in the first few months of this year that DFID and the other donors and NGOs financed a series of relatively modest (in their own right) activities wherever they could be done around the country. We supported the first wave of activities very much in the Kabul area. Subsequently we have been able to finance activities more widely and to deliberately do things outside the country. That is part of helping to underpin the authority of the central government by showing that benefits are being brought to local communities. The challenge that we want to support the Government with now is to take forward these activities and up-scale the coverage and make the interventions more strategic. The Government has devised a national solidarity programme which at the moment has got some World Bank finance. This is another one of its six priority programmes in the national development framework for the rest of this year and 2003, and this programme is looking at providing cash assistance and "in kind" assistance at a village and community level, in a similar way to quick impact projects, but in a way that responds to communities' needs rather than the supply of the implementing agency and which allows the communities to take choices about what it wants to do first. These are very much at the formative stage and one of my colleagues is going to Afghanistan later this week for discussions with the Ministry of Rural Reconstruction who is leading this programme, and others, about how this will be implemented. We have started small and a little bit ad hoc but the Government is looking to make this strategic and widespread. (Mr Austin) I think you are right. Mr Walter (Mr Phillips) There are a number of questions there. On statistics it is sometimes very difficult to get a grip on it. As we understand it, this year's crop, ie the 2002 planting season, which came out at 74,000 hectares, was not as big as the largest ones under the Taliban, which is 90,583 in 1999 and 82,000 in 2000 and, of course, under the Taliban is when drugs production really took root. In the first years after the Taliban took control drugs production doubled, so that is where the problem came from. Then one had that strange year when the Taliban imposed a ban on growing things but they did not actually do much about the stocks and the laboratory facilities, so they were still making money higher up the chain as it were. Last year the Afghan Government estimates that about 25 per cent of the crop was eradicated in the eradication programme, so that was a fairly substantial success. The amount of heroin destroyed there is £5 billion at UK street prices, so it made quite a significant impact. We are working on a ten-year approach here to try and eliminate drug production in Afghanistan and these things do take time, as we know from other countries like Thailand. Our goal is 70 per cent reduction by 2008 and 100 per cent elimination by 2013. We know that is a very ambitious and difficult target and it is going to depend on a number of things, including reconstruction, building up law enforcement capability, institution building and tackling drug abuse at the Afghanistan end itself. We are going to face a particular problem in the coming season. I do not think reconstruction has yet reached a level where one can be confident that there are a lot of alternative livelihoods available to a significant number of Afghan farmers. We very much support the tough line that President Karzai is taking on the need to tackle the drugs problem vigorously and we are looking at options at the moment on how to help the Afghan Government cope with the coming planting season. That thinking is still in the fairly early stages. In terms of how it is co-ordinated within Whitehall, there is an across-Whitehall group that meets very regularly to consider this. There is extremely strong central interest from the Cabinet Office and Number 10 and I think all governments are working together on a joint strategy because clearly the reconstruction front and the various other aspects have to lock together if we are going to get anywhere. (Mr Austin) Can I answer this question first because there was a previous one about alternative crops and DFID's role and perhaps that can lead in to the wider discussion of eradication. The strategy that the UK is leading on with the Afghans looks at a combination of improving the security environment and that means restructuring the army and the police, border guards and customs officials so that law and order and interdiction activities can proceed. That means providing the right kind of environment where the incentive for people to grow poppy is reduced, although I do not think anybody is pretending that alternative livelihoods either in the agriculture sector or in the non-farming sector are going to provide the same kinds of returns as opium. Our assumption is that the Afghan people in poppy growing areas would much rather do something legal and predictable than something high risk and potentially with a higher return. It will take a long time to create environments where people can access credit. They can run small business, they can get themselves a job and earn a living, provide for their families in a way other than doing opium. If I may answer your specific question about alternative crops, I do not think experience elsewhere has shown that crop substitution is really going to work in Afghanistan. The main reason is that returns to a farmer for opium are much higher than they are for any other crop and Afghan farmers are predominantly subsistence farmers, so there is a desire to create conditions where people will grow vegetables and grow wheat or grow grapes and look at those as a better thing than poppy, but there needs to be non-farm options as well. DFID's role in this HMG strategy is very much focused on the livelihood reconstruction effort through the building capacity of the Ministry of Rural Reconstruction and Development, understanding where vulnerable people are and what the damage has been to their coping strategies - I know this has been covered by various pieces of evidence the Committee has had for this hearing - and devising a strategy for tackling those. So that is the reconstruction effort in the round. I think the points that you were beginning to raise about eradication and so on are ones for Tom to pick up on. (Mr Phillips) Just on this question of whether or not production is increasing, as I pointed out, the figures from the 2002 season were less than in the two peak years of the Taliban, 1999 and 2000, so it is not a one-way flight path upwards as it were. Are we putting in sufficient vigour? I think the answer is yes. If you think of what it took to get opium poppy production in Thailand down to four per cent or less, it was a 30-year programme or something like this and we are trying to focus now on the possibility of achieving that kind of result in a ten-year period. So we know we have a lot to do and we know it is going to require a very cross-sector approach. There is a full range of activities under the various headings that I gave you that we are seeking to work under. For instance, we are working with the Germans on the law enforcement front. The Germans are the lead nation on police reform. We are working with them on anti-drugs training for the police as part of their plans for setting up a police academy. We are helping to develop with the Americans and the Germans a central intelligence unit in the Ministry of the Interior. We are hoping to establish a regional drugs control unit for model one in Kandahar and we are working with UNDCP to develop capacity building support for the National Security Council and UNDCP, in turn, are working with the Afghan Ministry of Justice to develop drug control legislation. So I think a very positive part of all this is that the government is taking a very clear and consistent line. Working with them on how to tackle this is proving very positive. Ann Clwyd (Mr Phillips) The children one I did not know about, that is the first I have heard of it. On the issue of last year's erradication efforts, I have heard complaints that the compensation did not come through on time and the alternative livelihoods were not there in the immediate wake. On the compensation front, I think there were some cases where there had been delay and, as I understand it, there is a proceedure going on in Kabul at the moment to look back at that and pay it. I do not know exactly where that stands. On the immediate provision of alternative livelihoods, I think it always was extremely difficult which was why the idea was cash compensation for erradication last year. The notion that you can pluck a poppy out of the ground and immediately have something there to replace it that very season was a very tall order. (Mr Austin) I was not aware of that issue. We were aware of the issue of debt but thinking of that in a financial sense and this is part of the constraint against people stopping growing poppy, because they have got hard pressures against them making them do it. On the timelag on livelihoods point and so on, it is part of the challenge --- sorry, I keep talking about challenges in Afghanistan but it is a very challenging environment to work in. There were very high expectations raised by the relative smoothness and rapidity of the political process and the expectation that external finance would follow the external military support for the country and then everything would improve very, very quickly. I think there is a message for the debt community and an issue that the Afghan Government is conscious of, that is of needing to explain more thoroughly and positively what is changing and what is happening. In terms of livelihoods in poppy growing areas, the Minister for Reconstruction and Rural Development is very keen that livelihoods, benefits and activities happen in all the vulnerable areas of Afghanistan and are not seen perversely to reward those who are growing poppy. It will be a while before things move to the point where ministers can say very robustly, "Destroy this crop or we'll come and destroy it for you and, by the way, the Government is bringing in these alternative ways of surviving that you can see all around you." That is not there yet. We will need to investigate the sale of labour issue. Chris McCafferty (Mr Phillips) I agree. All these issues are out there now to be looked at. On the judiciary issue, the Italians are the lead nation on that in the way these sectors were consigned. I think they have had one conference in Rome back in September/October and they have been a little bit stalled to date while waiting for the formation of a judicial commission in Kabul. A judicial commission has now been appointed and the Italians' plans are to hold a second conference in Rome on the 17th and 18th December which we hope will carry forward the judicial sector work fairly substantially. We are looking for an adviser to go and help - which I think DFID will fund - in this sector because we agree entirely that getting the detail right is important. In fact, there are quite a lot of quite good laws out there from the 1960s and 1970s. I think a lot of it is working out what is already there and putting it together. There are also issues of reconstruction, rebuilding courts, the training of judges and all those physical infrastructure issues out there as well. (Mr Phillips) The 1964 constitution is the one operating in the country at the moment except for the provision regarding the King and that is a constitution which says that, first, there is the constitution, then there is the sectoral law beds and when you cannot find an answer in any of those you resort to Hanah Sharia law. I think what has happened in the country is sometimes difficult to get at, but my own sense is that with the break down of infrastructure in the country over the last 20 years what is actually happening in some villages and locations round there is local law is operating, so you turn to your village elders and there is probably quite a Sharia input into that. The formal legal position at the moment is that the 1964 constitution holds, then sectoral law, then Sharia. This touches on the whole issue of what sort of new constitution is the country going to come up with which is clearly going to be a very, very important exercise and it is now starting to get underway. Mr Walter (Mr Austin) To answer the headline question, we very much agree that the Government should be in the lead in formulating policy and setting direction, and that is what we see the national development framework as providing, both for priorities between now and the next fiscal year that starts in March and beyond then. That is the framework within which all external assistance in future should be set, including emergency support. The next consolidated appeal by the UN agencies for Afghanistan for its emergency needs will be launched early next month and it has been deliberately delayed so that it can be discussed with the Afghan Government and set within the framework of the national development plan. The Government announced to donors that the Implementation Group, which the Cabinet decided on, would allocate 45 per cent of its total available resources, including external ones, to what it describes as "human social capital", which includes emergency aid, 35 per cent to physical infrastructure, and the balance to what might be broadly termed "governance" but including the private sector framework. So there is a role for us between now and the Development Forum in persuading our donor colleagues to have the same view and to keep exchanging information and suggestions with them about how best to direct our resources, in a way that works with the grain of this framework that the Government have set, recognising that different donors, both bilateral and multilateral, will have either slightly different mechanisms that they wish to favour or a range of sectors that they would wish to be involved with. The Government is keen for all donors to be focused and selective, although I find in my own experience that if one says, "We will be involved with economic management but we will not be involved with health", that you very quickly come up against the problem of, for example, should you be involved with Civil Service reform that includes the Health Service. We need to have a detailed dialogue between ourselves and the Afghans about what our areas of engagement will be within the national development framework. Developing the voice of the Afghan people is equally important. It is wrapped up in the discussion we have just been having about the constitutional process which will follow the Afghanistan model of consultation around the country and we need to make sure that our support is available in a way that allows that process to happen without giving the impression of us trying to direct it in any particular way. DFID has already provided some modest support for women's groups. Clare Short met some representatives of them when she was there at the end of last month through the UNIFEM programme and I am not sure if there was direct assistance through an NGO as well. The Government is very keen for the voice of civil society to be developed. It is very keen for Afghan civil society to be participating in formulation of the development plan and the implementation of it and in the process of holding government to account that the Development Forum will be. An issue for us will be to look at coming back to transaction costs, what is the most effective and efficient way for us as DFID to support further development of civil society voices, including women's voices. Is it direct allocations to NGOs that are looking to build women's groups in Afghanistan, is it money that is channelled through the Ministry for Women's Affairs, is it through donor colleagues, possibly with part of the Afghan authority or with multi-laterals? We are at the process of mulling all those things over and formulating our own strategy for the next two to three years. (Mr Austin) The impression I get from people in ministries in Kabul is that, yes, I think they feel that their firm line taken at the Implementation Group and subsequently is having the desired effect of making donors think about the way they do business. UN agencies at the Implementation Group said, "We need to look at a different way of doing our business in Afghanistan." I suspect - and this may sound arrogant - that the people in Afghanistan do not really care. They would be much more interested in what is happening in their local village or community. The elders that I met in Shomali Plains and in Kandahar were interested in a very local perspective, and were either sceptical or relaxed about whether the Government would provide the assistance or whether it would be an NGO or some external force. The main message that I heard was, "We are very relieved that the war was over. We wish it would rain. We would like a little bit of help to get on with our own lives. Give us an irrigation system and, by the way, do not give us any more food aid." Ann Clwyd (Mr Austin) Is the rate of return sustainable? It is a bit hard to judge just at the moment. It is higher and faster than had previously been anticipated so it is creating more pressures in the places where refugees are returning to, whether it is their home area or some other part of Afghanistan. I do not think that is an insuperable challenge, it is just underlining the need for an accelerated and larger-scale process of the reconstruction effort generally. The refugees are one large and important constituency amongst several that need to be reintegrated into the economy and into society. There are former combatants or people in militias who will become part of the former militia as part of the Army restructuring. There are people currently planting and producing poppies who, hopefully, will be persuaded not to do that. There are people displaced within Afghanistan who are returning home and, as the Minister of Finance said at the Implementation Group, there may well be people currently on the public service payroll who will need to be retrained as part of the reform process. All of those different constituencies need to be catered for in the process. I am not aware of any pressure from neighbouring countries to export their refugees back into Afghanistan with indecent haste in a way that moved the problem from the neighbouring country to Afghanistan in such a way that the people are worse off when they get back there. Individuals will judge for themselves whether they want to make the move completely or whether they want to do it in stages. There are a couple of people in our office in Kabul who are probably amongst the relatively privileged Afghan exiles who decided to return to Afghanistan, but not all of their family members have done so yet because the first influx of people who have got a job there are also looking to refurbish the family home or establish a bit of a base before the others come back. I imagine other refugees will be having a similar approach. I think there was a third question but I am afraid I have lost sight of it. (Mr Phillips) I think this is largely for UNHCR to take a lead role, as it were, in co-ordinating things, or trying to. I was in Pashar (?) recently trying to get a handle on the flow back from Pakistan and it is clear it has been massive. I find that very, very moving. I know there are lots of problems when people get there but it is voting with their feet to go back and it is an enormous vote of confidence in the transitional administration, although it is also an enormous strain. (Mr Phillips) I think the numbers are still pretty small and there are stories about them trying to get two loads of international help for going back. There are all sorts of other angles to that, but as far as I could work out the numbers were small of those trying to cross back. In Iran - and I have not been there yet, I will be going in December and it is one of the subjects I will be talking about while I am there - I think they have a tripartite agreement with UNHCR and Afghanistan. I do not know the detail of that agreement yet, but that is where I would look to see if that is being properly implemented. I am not aware of any such problem. (Mr Austin) We would hope to get an update of the situation on refugees and on emergency support when the consolidated appeal, which is now called the TAPA - I am afraid I cannot remember what that stands for, but it is the consolidated appeal for Afghanistan now within the national development framework - is completed in early December, at the last meeting of the Afghan support group and we will get more information there about UNHCR's current assessment of the situation and the extent to which it is manageable from their point of view. We have been supporting UNHCR's efforts in Afghanistan for some time and we will be wanting to see how well it is progressing and what needs to happen next. Chairman: Thank you. We have covered a pretty broad canvas this morning and we are very grateful to you for your detailed answers and, as you say, some of those answers themselves raise a number of questions which I suspect will only be resolved over a period of time. Thank you very much for your help this morning. |