America’s "Phantom Aid" to Afghanistan

by: Matthew J. Nasuti, former U.S. State Department Official and U.S. Air Force Captain

Reuters reported on April 23, 2007 that Peter Bergen, a senior fellow at the New America Foundation, had testified before the U.S. Congress that 86% of American Government aid to Afghanistan is “phantom” in that it never reaches the Afghan people. Ann Jones, an American aid worker, in a September 3, 2006, article for the San Francisco Chronicle titled: “How U.S. Dollars Disappear in Afghanistan,” estimated that:

83% of American aid to Afghanistan is “phantom aid.”

The term “Phantom Aid” was coined by the NGO ActionAid in 2005 to describe how international aid is siphoned off by donors before it ever arrives in the recipient country.

Former Afghan Planning Minister Ramazan Bashardost told Dominion reporter Gwalgen Geordie Dent, for her February 26, 2008 article titled: “Canada’s Phantom Menace in Afghanistan” that donor funds received from the West since 2001 have not resulted in any improvement in the lives of the Afghan people.

One of the many forms of “phantom” aid arises due to the insistence of entities such as the U.S. Agency for International Development (USAID) that it, and not the appropriate Afghan ministry, must directly manage the aid. Once USAID begins a project, it usually assigns the work to one of its pre-selected American contractors instead of seeking the most cost-effective international company. These pre-selected contractors are referred to in the United States as “beltway bandits.” They are given that title because they have their headquarters inside of the Washington, D.C. beltway and because they receive U.S. government contracts due to their political connections. Once these overpriced bandits enter the picture, they use Afghan aid funds directly or indirectly to pay for:

- Executive salaries in the United States,

- Home office expenses in the United States

- Technical advisors who work in the United States

- Unneeded project managers

- Inflated salaries for foreigners to work in Afghanistan

- Prime contractors making a profit on subcontractors

- Subcontractors making a profit on second-tier subcontractors

- USAID subcontractors in Turkey and India

- Supplies and materials purchased in Turkey and India

- Foreign security contractors from Nepal and South Africa

- Luxury homes being rented in Kabul

- Alcohol consumed by foreigners in Kabul

- Brothels in Kabul that cater to foreigners

Much of this money is phantom because it is not expended in Afghanistan for Afghans.

The Obama Administration is well aware of this problem but, inexplicably, refuses to undertake any remedial action. U.S. Secretary of State Hillary Clinton, in her January 13, 2009, testimony before the Senate Foreign Relations Committee, stated that:

USAID is no longer an “an operational agency with the ability to deliver.”

She went on to criticize the Pentagon for the manner in which it funds reconstruction in Afghanistan. She referred to the Commander’s Emergency Response Program (CERP) and stated that reconstruction was proceeding ad hoc and that American military officers in the field were distributing aid “with very little accountability.” Ten days later she gave a speech to USAID employees and went even further. In referring to the CERP, she stated: “It is not a sensible approach,” a comment which drew cheers from the assembled USAID employees.

Secretary Clinton’s dismal opinion regarding the ability of the American Government to effectively distribute aid in Afghanistan may be due to a January 28, 2008, report commissioned by the U.S. State Department and conducted jointly by Vanderbilt University and the University of Pittsburgh. It is titled “Deepening Our Understanding of the Effects of U.S. Foreign Assistance on Democracy Building.” The report is a mixed bag of positive and very negative findings. It concludes that USAID wasted potentially hundreds of millions of dollars in democracy efforts. It found that democracy funding may only have temporary benefits and those benefits may evaporate when the funding ends.

It found that USAID may be skewing its data because it normally invests in democracy in countries where democracy is already flowering, so the aid does not promote democracy as much as the emerging democracy permits the aid to be dispensed. The authors of the report found that USAID’s human rights assistance usually has a “significant negative impact” on the cause of promoting human rights (i.e., American assistance not only does not help the effort but it is so ineptly managed that the USAID efforts actually set back human rights efforts).

The U.S. State Department’s own report concluded that USAID funding
has “an insignificant impact” in countries such as Afghanistan and Pakistan.

A review of the report calls into question whether USAID should even exist as an agency.

American aid, in addition to being largely phantom, with the balance ineffective, undermines the efforts of the Afghan government. Afghans seeking to have a road built, a school constructed, a well dug or an irrigation system repaired, turn to foreigners for assistance because their own government lacks funding. The Americans want instant credit for the aid they provide, so they dispense much of it directly. They emphasize “quick impact projects” which have resulted in the construction of cheap roads and buildings that begin to fall apart in a few years. The current manner in which American aid is dispensed has left the Afghan government underfunded, with no ability to conduct long term planning or to initiate long-term development.

Because the State Department and USAID are not willing to deploy experts who speak Dari or Pashto to Afghanistan for multi-year assignments and because they refuse to have their employees live and work with local Afghans, the American Government’s continuing management of its aid needs to cease. Aid projects across Afghanistan cannot be supervised by officials who refuse to leave the safety and comfort of the U.S. Embassy compound in Kabul. Aid work is field work and it requires a 24/7 commitment.

The solution is for the American Government to provide all of its aid in cash directly to the Afghan Government. The Government of Afghanistan will gain credibility and authority if it dispenses all the financial aid. The American Government should limit itself to military operations and to directing military and police training efforts.

The Afghan government must be in charge of all reconstruction efforts
and must assume control over all of the Provincial Reconstruction Teams.

Significant capacity building might be required within some Afghan ministries, but that is to be expected. The American Government can assist in this effort by assigning technical experts and auditors to the Afghan ministries, but the direction and management of reconstruction efforts must be by Afghans.