The Smart Money in Afghanistan

By Anne Applebaum
Wednesday, September 24, 2008

KABUL -- The scene is a small textile factory in a new industrial park on the outskirts of Kabul; the characters are an Afghan businessman, his American partner and a USAID official, the latter straight out of central casting: flustered, important, accompanied by gun-wielding bodyguards. She speaks of the U.S. Agency for International Development's plans for "small and medium-sized enterprise development," lauds the USAID-funded industrial park and alludes to the "$5.4 billion" the agency has spent in Afghanistan since 2002. She hands out an expensive-looking, glossy USAID brochure that describes, among other things, the goal of our meeting: "to show international media opinion leaders that progress is being made in economic growth in Afghanistan."

Unfortunately, the factory is half-empty that day: Prices for fuel and other inputs are so high in Kabul that no textile business can compete with those in India or Pakistan. The factory depends on Afghan army uniform orders, which come in irregularly. So does the fabric to make them, since the customs bureaucracy is still plagued by corruption and inefficiency. When the USAID official starts listing the assistance given to the Afghan customs service -- this includes training for officials, construction of border posts, even gifts of uniforms -- the American partner shrugs, unimpressed. "It would be good to move forwards instead of backwards," she says. "There's never any follow-through." Afterward, the Afghan businessman confides that he has been robbed by the police. It isn't the Taliban that Afghan entrepreneurs fear; it is their own government, corrupted by international money and now infiltrated by criminal networks, too.

This is the chaos that is foreign aid in Afghanistan, a place where every mistake ever made in an underdeveloped economy is being repeated. This is a country in which all the best people are being hired away from the national government by the alphabet soup of aid agencies on the ground; in which the same aid agencies are driving up real estate and food prices; in which millions are squandered on dubious contractors, both local and foreign; in which the minister for rural development admits he doesn't know what all of the NATO reconstruction teams in rural districts do; in which the top U.N. official, given a mandate to coordinate the donors, says the donors don't respond to his attempts to coordinate them.

Conflicting agendas, overlapping projects, money badly spent: We've been here before, many times, and the conclusions are always the same. Some of them have recently been restated by a former Afghan minister of finance, Ashraf Ghani, and Clare Lockhart, director of the Institute for State Effectiveness, in their book, "Fixing Failed States." Its central argument: Well-meaning foreigners should not fix roads; they should teach the Afghan government to fix roads, thus helping it acquire legitimacy. Foreigners shouldn't feed Afghans but, rather, develop Afghan agriculture so that the Afghans can feed themselves, export their surplus and develop a stake in the rule of law too.

Some of this thinking has filtered down to the provinces, where "Afghanization" is now a buzzword and foreign construction projects now fly the Afghan flag. But the change in attitude may have come too late: A harsh winter, a bad drought and constant fighting mean that Afghanistan, which suffered a terrible famine in 2001, could well be on the brink of another one. Starving Afghans? Think about it: A greater indictment of the massive international aid and reconstruction effort would be hard to imagine.

And a famine here would not just constitute a humanitarian crisis. To put it bluntly, Afghans who have no food are easily purchased by the Taliban, al-Qaeda and other extremists who come over the border from Pakistan, looking to pay insurgents. Last weekend's bombing of the Marriott Hotel in Islamabad is an excellent reminder of just how sophisticated these groups have become. But you don't have to cross the border to find trouble. Recent attacks on NATO soldiers in previously peaceful parts of northern and western Afghanistan are evidence that poverty and insecurity are spreading, not shrinking, within the country as well.

For once, the solution lies not in greater funding but in more intelligent use of the massive resources available. It may partly lie in smaller Afghan charities such as Afghan Health and Development Services, which sends family doctors (without security teams) out to the provinces, where they work in conjunction with the Ministry of Health; or with less demanding foreigners such as the Filipino aid workers who have set up a credit union-- following Islamic banking practices, of course -- in the provincial city of Tarin Kowt. They lack qualified staff, and they don't like the gunfire they hear at night. But, with the advantage of "looking Afghan" ("people think I am Tajik," one of them told me, laughing), they soldier on: Their credit union has 467 members and has made 83 loans. A little bit of money goes a long way in Afghanistan, they tell me. Too bad so many in the aid community still haven't learned this, after all these years.

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