The Financial Times, March 25, 2008

Afghan aid 'wasteful and ineffective'

The difficulties of working in an insecure country with high levels of corruption contributes to the shortfall, the report concedes.

By Jon Boone in Kabul

The international aid effort in Afghanistan is in large part "wasteful and ineffective", with as much as 40 per cent of funds spent going back to donor countries in corporate profits and consultant salaries, Kabul-based charities will say today.

At the same time, the administration of Hamid Karzai has failed to tackle high-level corruption in a government that relies on international handouts for 90 per cent of public spending, a report by the Agency Co-ordinating Body for Afghan Relief (Acbar) says.

The body, which represents 94 non-government organisations in Afghanistan, said the failure of donors to disburse promised funds quickly and the ineffectiveness of some projects was jeopardising the future of a country struggling against the Taliban, the Islamic extremist movement that has staged a comeback since being removed from power in 2001.

The cost of engaging a foreign contractor can be as much as $500,000 (€324,000, £252,000) a year, and many donors insist that contractors use material and labour from their own countries rather than sourcing locally, the report says.

It warns that countries such as Spain and France are contributing too little, while big donors are failing to fulfil their commitments.

It says the US, Afghanistan's single biggest donor, has disbursed only half the $10.4bn promised for 2002-2008, while India and the Asian Development Bank have put in just a third of what they promised.

Big shortfalls are also apparent from the European Commission and Germany, which have disbursed less than two-thirds of their respective promises of $1.7bn and $1.2bn.

The difficulties of working in an insecure country with high levels of corruption contributes to the shortfall, the report concedes.

Yesterday the World Bank said it was satisfied with its spending rate - just over half of the $1.6bn it has promised - because of its focus on big infrastructure projects such as roads and power schemes that were only paid for on completion, which could take years.

Craig Steffensen, ADB country director, said the bank was constrained by the challenge of finding skilled contractors prepared to operate in dangerous environments and the "lack of capacity in the government to process the funds and co-manage the projects".

The machinery of the Afghan state, which was systematically run down by the former Taliban regime, is often unable to spend the money it is given because of the lack of expertise or competent civil servants.

Kabul lacks information on how one-third of all assistance since 2001 - or $5bn - was spent, the Acbar report says.

Acbar also published figures showing how the most insecure provinces benefit the most from international funding. If the troubled southern province of Helmand were a country, it would rank as the fifth biggest recipient of US development aid, it says.

But Panshir, a relatively secure area in the north, also does disproportionately well, according to the report, possibly because of the political influence of Panshiris.

Matt Waldman, q policy adviser for Oxfam and author of the Acbar report, said rewarding the most volatile provinces was "short-sighted".

"There must be strong support for development in the south but if other provinces are neglected then insecurity could spread."

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