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US Spent $78 Million On Afghan Anti-Corruption Scheme That Failed Epically
Four years ago, U.S. and Afghan officials launched a $77.8 million project to track customs payments in Afghanistan electronically and crack down on financial corruption. Today, the military’s top watchdog for waste and corruption in Afghanistan released a new report that details just how thoroughly that project failed — and it suggests trouble for the White House’s latest plan to make Afghanistan stable enough to bring U.S. troops home.
At first glance, the report by the Special Inspector General for Afghanistan Reconstruction, released Aug. 22, focuses on what seems like an isolated and dull issue: a single aid project to trace customs duties. But it speaks to a larger fundamental problem with stability operations like the U.S.’s 16-year military engagement in South Asia. Here’s how.
One persistent tenet of the U.S.’s Afghanistan policy over three presidential administrations is that to stabilize the country, you need to get the Afghan government to a point where it can sustain itself — and that involves increasing the government’s revenues. “The collection of customs duties on goods entering Afghanistan is one of the largest revenue sources for the Afghan government,” SIGAR notes. But in 2015, U.S. officials noticed a severe drop in Afghan revenues, leaving Kabul’s government unable to fund itself. One reason, SIGAR says, is “that approximately half of customs duties” collected in 2013 in Afghanistan “were believed to have been stolen.” Customs agents, customs brokers, and organized criminals all take a cut of the country’s cash-only duties.
So the U.S. Agency for International Development came up with a novel plan: Put Afghanistan’s customs offices on an electronic payment system to better track dollars and cut down on the cash lost to baksheesh in the chain. In late 2013, USAID awarded D.C.-based contractor Chemonics International a $77.8 million contract to implement an e-pay program in Afghanistan; while some money would always be lost to graft or waste along the way, it was hoped that 75% percent of Afghan customs revenues would be collected electronically by November 2017.
To say that the plan failed is an extreme understatement. According to SIGAR, the “data shows that more than three years after the [e-payment] project began… e-payments still account for less than 1 percent (0.59 percent) of all customs duties collected.” Just as had been the case when the inspector general looked at the project in its early stages in 2014, "nearly all Afghan customs revenues are still collected in cash."
In other words, USAID flipped a light switch on Afghanistan’s customs fraud, and all the grub-stealing critters skittered away like mice on the kitchen linoleum. With all the grub.
This was a plan everybody wanted. SIGAR itself had recommended the electronic payment system as a “critical anti-corruption” measure in 2014. It was considered a minimum basic requirement of a stable Afghan government.
But USAID and Chemonics’ explanations for the e-pay system’s failure are a primer in how development aid usually plays out in a wartorn failed state: poorly. “Electrical and connectivity problems” plagued the system across Afghanistan; Afghan commercial banks just don’t have the staffs or reserves to do a high volume of electronic transfers; and the e-pay process strikes many Afghans as an “inefficient,” pain-in-the-ass system.
But most important, virtually everyone SIGAR spoke with agreed that cash is king in Afghanistan, and that’s the way Kabul officials like it, because financial corruption is what makes the world go ‘round:
Another challenge to implementation of the e-payment system is an Afghan regulatory regime that ostensibly encourages the continued use of the cash-based system by corrupt actors benefiting from its lax controls... Traders also prefer not to pay custom duties and taxes through commercial banks because they do not want a financial record of their transactions, so that they can evade annual tax calculations by tax authorities or avoid subsequent analysis of their transactions by the Financial Intelligence Unit.
SIGAR points out that any bank transfer over $7,328 gets investigated by the nation’s financial intelligence unit “to determine the source of the money.” That’s a pretty solid incentive for bandits, black-market dealers, and terror financiers to keep their transactions off the grid with a little cash-money palm-greasing.
For their part, USAID and Chemonics “have not altered project targets to account for the reality of the situation,” SIGAR says, “and instead continue to invest in an endeavor that appears to have no chance of achieving its intended outcome.”
And that’s the ultimate rub in Afghanistan, which was the ultimate rub in Iraq and Haiti and South Vietnam before it: No matter how much time or cash you’ve got, you can’t spend your way to security in an insecure state teeming with warlords, organized criminals, and everyday people just trying to get a buck.
Now, a third consecutive U.S. commander-in-chief — President Donald Trump — has announced his own plan to win Afghanistan: Redouble our efforts, pressure our allies, and get the Afghan government to stand up on its own… all courses we’ve taken before. “No one denies that we have inherited a challenging and troubling situation in Afghanistan and South Asia,” he said in prepared remarks introducing the strategy Aug. 21. “But we do not have the luxury of going back in time and making different or better decisions.”
As the saga of Afghanistan’s customs e-pay program shows, it’s not always clear what better decisions very smart Americans could have made in the past 16 years to combat the financial corruption that enables terror, weakens the South Asian nation, and keeps U.S. troops away from home. But if Trump has better ideas, now is the time to introduce them.
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