Editor in Chief: Moh. Reza Huwaida Tuesday, March 20th, 2018

Averting a Post-2014 Economic Downfall


Averting a Post-2014  Economic Downfall

Robert Zoellick, the World Bank's President, in an article published in Washington Post, has been the latest public figure to warn about the future of Afghanistan's economy in the wake of the withdrawal of international forces. According to World Bank's chief, the theme of often-repeated and much-cautioned economic downfall in a post-2014 Afghanistan is close to reality as the economy is heavily dependent on foreign military-related spending and foreign aid. Mr. Zoellick, as the head of an international institution that has provided Afghanistan with billions of dollars of developmental aid over the past one decade, is the right person to be concerned with the state of an economy which his organization has been helping to stand back on its feet.

What Mr. Zoellick calls for is a "viable" economy for Afghanistan; an economy that can produce sufficient financial means for the government to support the rising security needs and for the common people to improve their abysmal standards of living, move out of abject poverty and provide for decent livelihoods. He is right in saying that without such an economy, the government of Afghanistan will not be able to pay for its own security, remain unable to gain legitimacy among the masses of disillusioned people and will be under-resourced to counter the insurgency on a long-term footing.

Mr. Zoellick seems to have good ideas as to how to soften the negative impacts of foreign troops' withdrawal on the fledgling Afghan economy; but some of these ideas do not stand much chance of working in an environment like Afghanistan. In the following lines, I will explain the deficiencies of some of these ideas. He calls for much more efficient utilization of "every dollar" so that a better-managed delivery system can serve better the underprivileged Afghan people.

He also argues for greater Afghanizaton of military-related spending so that even if the volume of such spending is decreased after 2014, the remaining funds can be spent inside Afghanistan in the form of contracts given to Afghan companies and contractors. Keeping the military-security dollars inside Afghanistan, in Zoellick's view, will go a long way in making the most out of a shrinking stream of military-related spending. Another remarkable idea put forward by the World Bank chief is to increase the ownership of the Afghan government of the development process by channeling more funds through the government of Afghanistan.

These ideas put forward and insisted upon by Mr. Zoellick are, after all, the right strategies to be pursued and are, in fact, the only alternatives available if Afghanistan is going to regain a relative financial and economic autonomy. However, there exists a large gap between these ideas and action in the real world and more so in a tough and extremely challenging environment such as Afghanistan. Let us take a closer look at the possibility of each of these visions being implemented in Afghanistan.

Greater Afghanization of military-related spending in Afghanistan, a strategy called for by Mr. Zoellick, would involve handing more and more number of military-security contracts to Afghan security and logistics firms that employ local Afghan staff and are based inside Afghanistan rather than elsewhere. Doing so is not possible at least in the short-term until 2014 when there are not enough Afghan security-logistics firms that have the right expertise and capability to handle and fulfill million dollar contracts. Providing security or delivering critical logistical services to tens of thousands of international troops in a thriving and lucrative business with a turnover of hundreds of billions of dollars a year.

Currently, most of this huge, lucrative contracts windfall goes to European and North American companies that possess the required expertise and experience to provide logistics services to the international forces stationed in Afghanistan. How much of this huge contracts pie the Afghan firms, suppliers and contractors will be able to grab will, in any likelihood, remain negligible given their lack of expertise and experience to deal with the complexities of the business and fulfilling contracts in an orderly fashion.

Even if local Afghan contractors can take part in a greater share of this billion dollar business, the financial and economic benefits are unlikely to reach to a large segment of Afghan population. This argument of Mr. Zoellick, therefore, cannot be a reliable base for propping up the fragile Afghan economy in a post-2014 environment. It does not conform to the realities of Afghan economy where expertise and experience in its fledgling private sector is scarce and lucrative contracts mostly go the influential and the corrupt as rent-seeking behavior is widespread.

Mr. Zoellick also calls for greater efficiency in the management of foreign aid spent in Afghanistan. This involves both the non-profit, non-governmental organizations that are currently spending the bulk of the foreign aid and also the government of Afghanistan, as the single largest institution that has a pan-Afghanistan reach. It is an open secret that the work of most of the NGOs engaged in Afghanistan is riddled with wasteful practices and squandering of large part of aid funds. In reality, the inefficient work of the aid agencies has long turned into a not-for-profit "business" in which the lion's share of the aid funds is spent on logistics with a small fraction reaching the needy or spent on developmental projects.

With such a pervasive and chronic culture of wastefulness in the aid community, it is difficult to imagine how it would be possible to make these agencies extract more out of a dollar of foreign aid than they currently do. The government of Afghanistan too does not fare much better. Year after year, it has been unable to spend more than half of its developmental budgets allocated to its different ministries and departments.

Low capacity and expertise in planning, coordination and implementation of developmental projects has long bogged down the government of Afghanistan coupled with acute leadership deficit and pervasive corruption plaguing its ministries and provincial departments. Unless there is a revolutionary change in the way the government of Afghanistan conducts itself, it is again difficult to imagine how it would be possible to increase the ownership of this government in the development process and make a dollar of foreign aid do more for the impoverished people of Afghanistan.

The author is the permanent writer of the Daily Outlook Afghanistan. He can be reached at outlook afghanistan@gmail.com

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