[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
U.S. PROMOTION OF THE AFGHAN ECONOMY: IMPEDIMENTS AND OPPORTUNITIES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON NATIONAL SECURITY
AND FOREIGN AFFAIRS
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
JULY 14, 2009
__________
Serial No. 111-58
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
http://www.house.gov/reform
----------
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland JOHN M. McHUGH, New York
DENNIS J. KUCINICH, Ohio JOHN L. MICA, Florida
JOHN F. TIERNEY, Massachusetts MARK E. SOUDER, Indiana
WM. LACY CLAY, Missouri JOHN J. DUNCAN, Jr., Tennessee
DIANE E. WATSON, California MICHAEL R. TURNER, Ohio
STEPHEN F. LYNCH, Massachusetts LYNN A. WESTMORELAND, Georgia
JIM COOPER, Tennessee PATRICK T. McHENRY, North Carolina
GERALD E. CONNOLLY, Virginia BRIAN P. BILBRAY, California
MIKE QUIGLEY, Illinois JIM JORDAN, Ohio
MARCY KAPTUR, Ohio JEFF FLAKE, Arizona
ELEANOR HOLMES NORTON, District of JEFF FORTENBERRY, Nebraska
Columbia JASON CHAFFETZ, Utah
PATRICK J. KENNEDY, Rhode Island AARON SCHOCK, Illinois
DANNY K. DAVIS, Illinois ------ ------
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
------ ------
Ron Stroman, Staff Director
Michael McCarthy, Deputy Staff Director
Carla Hultberg, Chief Clerk
Larry Brady, Minority Staff Director
Subcommittee on National Security and Foreign Affairs
JOHN F. TIERNEY, Massachusetts, Chairman
CAROLYN B. MALONEY, New York JEFF FLAKE, Arizona
PATRICK J. KENNEDY, Rhode Island DAN BURTON, Indiana
CHRIS VAN HOLLEN, Maryland JOHN L. MICA, Florida
PAUL W. HODES, New Hampshire JOHN J. DUNCAN, Jr., Tennessee
CHRISTOPHER S. MURPHY, Connecticut MICHAEL R. TURNER, Ohio
PETER WELCH, Vermont LYNN A. WESTMORELAND, Georgia
BILL FOSTER, Illinois PATRICK T. McHENRY, North Carolina
STEVE DRIEHAUS, Ohio JIM JORDAN, Ohio
STEPHEN F. LYNCH, Massachusetts JEFF FORTENBERRY, Nebraska
HENRY CUELLAR, Texas ------ ------
MIKE QUIGLEY, Illinois
Andrew Wright, Staff Director
C O N T E N T S
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Page
Hearing held on July 14, 2009.................................... 1
Statement of:
Callear, Mildred, esq., executive vice president and chief
operating officer, Small Enterprise Assistance Funds [SEAF]
and Afghan Growth Fund, executive board member; Mohammad
Usman, Ph.D., agricultural economist, former senior
advisor, Ministry of Agriculture, Irrigation and Livestock
[MAIL], Government of Afghanistan; Aly Mawji, Aga Khan
Development Network [AKDN], Afghanistan country director;
and Jeremy Pam, esq., visiting research scholar,
sustainable development, U.S. Institute of Peace........... 5
Callear, Mildred, esq.................................... 5
Mawji, Aly............................................... 35
Pam, Jeremy, esq......................................... 25
Usman, Mohammad, Ph.D.................................... 15
Letters, statements, etc., submitted for the record by:
Callear, Mildred, esq., executive vice president and chief
operating officer, Small Enterprise Assistance Funds [SEAF]
and Afghan Growth Fund, executive board member, prepared
statement of............................................... 8
Mawji, Aly, Aga Khan Development Network [AKDN], Afghanistan
country director, prepared statement of.................... 40
Pam, Jeremy, esq., visiting research scholar, sustainable
development, U.S. Institute of Peace, prepared statement of 28
Quigley, Hon. Mike, a Representative in Congress from the
State of Illinois, prepared statement of................... 62
Usman, Mohammad, Ph.D., agricultural economist, former senior
advisor, Ministry of Agriculture, Irrigation and Livestock
[MAIL], Government of Afghanistan, prepared statement of... 17
U.S. PROMOTION OF THE AFGHAN ECONOMY: IMPEDIMENTS AND OPPORTUNITIES
----------
TUESDAY, JULY 14, 2009
House of Representatives,
Subcommittee on National Security and Foreign
Affairs,
Committee on Oversight and Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2154, Rayburn House Office Building, Hon. John F. Tierney
(chairman of the subcommittee) presiding.
Present: Representatives Tierney, Kennedy, Van Hollen,
Murphy, Foster, Cuellar, Quigley, Flake, Duncan, Jordan, and
Issa (ex-officio).
Also present: Representative Bilbray.
Staff present: Andy Wright, staff director; Elliot
Gillerman, clerk; Talia Dubovi and Scott Lindsay, counsels;
Brendan Culley and Steve Gale, fellows; Adam Hodge, deputy
press secretary; Catherine Ribeiro, communications director,
Hon. John F. Tierney's office; Mariana Osorio, Daniel Murphy,
Ken Cummings, Cal Garner, and Robyn Russell, legislative
assistants; Anne Bodine, fellow; Dan Blankenburg, minority
director of outreach and senior advisor; Adam Fromm, minority
chief clerk and Member liaison; Kurt Bardella, minority press
secretary; Howard Denis, minority senior counsel; and Daniel
Epstein and Jonathan Skladany, minority counsels.
Mr. Tierney. Good morning. I want to thank all of our
witnesses for being here with us this morning, as well as our
witness from Afghanistan. We appreciate all of the effort he
has made to allow himself to be videoconferenced in today from
Kabul.
I do note that the quality of the conferencing doesn't seem
to be quite as good as some we've had in the past, so there may
be a delay if we want to have an exchange on that basis. So we
will leave some time for the answers and make sure everybody
hears.
A quorum is present, and the Subcommittee on National
Security and Foreign Affairs hearing entitled, ``U.S. Promotion
of the Afghan Economy: Impediments and Opportunities,'' will
come to order.
I ask unanimous consent that only the chairman and ranking
member of the subcommittee be allowed to make opening
statements. Without objection, so ordered.
And I ask unanimous consent that the hearing record be kept
open for 5 business days so that all members of the
subcommittee will be allowed to submit a written statement for
the record. And without objection, so ordered.
Today, the subcommittee will take a look at the economic
dimensions of the U.S. efforts in Afghanistan. Afghanistan's
stability will depend in large part on what the United States,
our partners and allies and, most critically, the Afghans
themselves do over the coming several years to bring economic
progress to a population ravaged by 30 years of war.
Observers note that the Taliban originally secured a
foothold in Afghanistan, in part, because severe poverty
continually dashed hopes for a better life. For the average
Afghan, life was simply getting worse, with no good prospects
for improvement anytime soon.
The Afghan government was unable to provide even the most
basic services like electricity and potable water; justice was
either slow, arbitrary or nonexistent; unemployment topped 50
percent; and police were either absent, or corrupt. Roads and
irrigation canals had fallen into disrepair; and the once-
productive agricultural base was so severely degraded that
farmers, to make a decent living, chose to grow poppies rather
than traditional products like wheat, dates, and pomegranates.
In short, following the Soviet withdrawal, the Taliban
offered a different, albeit tyrannical, vision for Afghans
increasingly weary of endless conflict and growing personal
insecurity. And while the average Afghan was not supportive of
the Taliban, per se, the post-Soviet era was so adverse
economically that the Taliban were able to find a toehold, and
eventually a safe haven.
After the fall of the Taliban and the arrival of the United
States and NATO, there has been modest economic gain.
Afghanistan has experienced rapid growth on the strength of the
international donor community, especially the United States as
its largest donor.
More than $2.4 billion in new investment has been
registered since 2003, two-thirds of which represent public
investment financed through donor aid, and one-third foreign
direct investment. As a result, in 2008, in terms of the GDP
growth rate, Afghanistan ranked 24 out of 231 countries, with a
2008 real gross domestic product growth rate of 7.5 percent.
Unfortunately, at present, this silver lining does not obscure
the dark and ominous cloud over Afghanistan's economy.
Today, after almost 10 years, and $37 billion of U.S.
taxpayer funds, Afghanistan is still one of the five poorest
countries in the world. Transparency International rates
Afghanistan as one of most corrupt countries in the world, 176
out of 180. A 2009 World Bank report says Afghanistan is one of
the most difficult places in the world to start a business. And
in Foreign Policy Magazine's just-released 2009 Failed State
Index, Afghanistan is rated as one of the least stable, most
fragile states, 7th out of 177.
Last year, about 18,000 Afghans applied for asylum in
Europe, nearly doubling the 2007 outward migration total. This
was the largest spike in migration-seeking for any country in
2008, and one of the most common explanations offered by
Afghans as to why they are leaving is that people can't find
jobs.
This dismal scorecard and disturbing trend begs the
question, what has been the net effect of the U.S. support to
Afghanistan to remedy the underlying economic and social
conditions that allowed the Taliban to find an initial safe
haven in the first place? Unless we begin now to improve the
quality of life for the average Afghan, those dismal statistics
are likely to be go unchanged and the security conditions will
continue to deteriorate.
Everyone, from development professionals to
counterinsurgency experts to senior ranking Afghan officials
say the shift from combat operations, to counterinsurgency
operations, to post-conflict operations is largely dependent on
growing the Afghan economy. As former U.S. Commander in
Afghanistan, General David Barno, recently put it, ``Only if we
solve the economic problems of Afghanistan can we ever hope to
win the longer war.''
Accelerating economic development in Afghanistan is a
central feature of the new U.S. Af-Pak strategy announced by
President Obama on March 27, 2009. Reinforcing the importance
of economic development to the overall strategy, National
Security Advisor James L. Jones recently noted, that the Obama
administration wants to hold troop levels here flat for now,
and focus instead on carrying out the previously-approved
strategy of increased economic development, improved
governance, and participation by the Afghan military and
civilians in the conflict.
Economic development is vital for a stable, secure, and
prosperous Afghanistan. In other words, we must move--and the
sooner the better--from policy pronouncements on paper to
concrete actions on the ground.
I have just one final note. We originally envisioned having
a second panel here this morning with administration
representatives, but scheduling issues require that we reserve
that prospective for a later date, probably at the end of the
summer or in the fall. By then, we should expect that the
administration's new Afghanistan team will have had sufficient
in-country experience to better shed light on the issues that
are raised at today's hearing.
So, with that, I refer to Mr. Flake for his opening
comments.
Mr. Flake. I thank the chairman. He outlined pretty well, I
think, the purpose of the hearing and what we hope to
accomplish here.
What I am particularly interested in is the interplay
between security and economic development. Obviously, much of
the country is too dangerous for a lot of nonprofits or others
to work in, absent security, so I am interested in your
perspective on what we need to do moving ahead, and at what
point we are likely to see economic growth and investment
vastly improved.
As mentioned, I'm anxious to hear the administration
explain their goals and objectives as well, and I guess we'll
have to wait a while for that, but I look forward to your
testimony. Thank you.
Mr. Tierney. Thank you, Mr. Flake.
Now we are going to receive testimony from the panel that's
with us today. I will start by introducing all of them briefly.
Ms. Mildred Callear serves as the executive vice president
and chief operating officer of the Small Enterprise Assistance
Funds [SEAF], a not-for-profit manager of private equity funds
investing in small- and medium-sized enterprises and emerging
markets. She also serves on the board of Afghan Growth Finance
Fund, a $25 million investment fund which provides long-term
capital to startup enterprises in Afghanistan.
Prior to joining SEAF, Ms. Callear served for almost 20
years with the Overseas Private Investment Corp. She holds a
J.D. from Georgetown University Law Center and a B.A. from the
University of Illinois.
Welcome.
Dr. Mohammad Usman is an agricultural economist and a
former senior advisor to Afghanistan's Ministry of Agriculture,
Irrigation and Livestock. In that role, he focused on improving
Afghanistan's agricultural policies and public resource
efficiency.
Dr. Usman has performed similar work as a consultant with
the World Bank and a number of other governments around the
world, including Pakistan, India, and Egypt. Dr. Usman holds a
Ph.D, from Colorado State University.
We are happy to have you with us, sir.
Mr. Aly Mawji--sir, I hope I pronounced your named
properly--is the country director for Afghanistan with the Aga
Khan Development Network, where he manages the Network's
programs and relations with the Government of Afghanistan. He
has served with the Aga Khan Network since 1996 and has held
various positions around the world, including negotiating and
operating a large-scale humanitarian program to Afghanistan in
the late 1990's.
Mr. Mawji holds a degree from the University of London.
We are glad to have you with us, sir, and thank you, for
surmounting the inconveniences imposed on you for video
teleconferencing.
Mr. Jeremy Pam currently serves as a visiting research
scholar for sustainable development at the U.S. Institute of
Peace. Prior to that, he was co-director of the U.S. Central
Command Assessment Team. From 2006 to 2008, Mr. Pam served in
Iraq with the U.S. Department of the Treasury, both as a
financial attache at the U.S. Embassy in Baghdad, and as a
member of the Government Assessment Team.
Mr. Pam is a retired captain with the U.S. Air Force, holds
a J.D. from Columbia Law School, an M.A. from Columbia
University, and an A.B. from Harvard college.
Thank you for joining us, sir.
I want to thank all of our witnesses for being here today
to share your substantial expertise. I also again would like to
thank the folks at the U.S. Embassy in Kabul for helping us to
arrange to have Mr. Mawji testify through their facilities.
We swear in the witnesses as a matter of course on this
panel, so if you would kindly raise your right hands.
[Witnesses sworn.]
Mr. Tierney. The record will indicate that all the
witnesses have answered in the affirmative.
I do want to say that all of your written testimony, which
we appreciate greatly, has already been put on the record by
unanimous consent. So we ask that you summarize, to the extent
possible, or supplement, if you'd like. We like to allot each
witness about 5 minutes to share with us their comments, after
which we will have some questions and answers back and forth.
Ms. Callear, why don't we start with you, if we could, and
invite you to give your remarks.
STATEMENTS OF MILDRED CALLEAR, ESQ., EXECUTIVE VICE PRESIDENT
AND CHIEF OPERATING OFFICER, SMALL ENTERPRISE ASSISTANCE FUNDS
[SEAF] AND AFGHAN GROWTH FUND, EXECUTIVE BOARD MEMBER; MOHAMMAD
USMAN, PH.D., AGRICULTURAL ECONOMIST, FORMER SENIOR ADVISOR,
MINISTRY OF AGRICULTURE, IRRIGATION AND LIVESTOCK [MAIL],
GOVERNMENT OF AFGHANISTAN; ALY MAWJI, AGA KHAN DEVELOPMENT
NETWORK [AKDN], AFGHANISTAN COUNTRY DIRECTOR; AND JEREMY PAM,
ESQ., VISITING RESEARCH SCHOLAR, SUSTAINABLE DEVELOPMENT, U.S.
INSTITUTE OF PEACE
STATEMENT OF MILDRED CALLEAR, ESQ.
Ms. Callear. I appreciate this opportunity to talk about
the role of small and medium enterprises, and what that means
to Afghanistan's long-term economic development and to the
security of the country, because we do believe that those are
deeply linked and that they're mutually dependent on one
another.
Jobs do have to be created and income has to be generated
if you want to improve security; and, in our view, we are
looking at where those jobs are most likely to come. What we
are finding is that the SME sector, indeed, is where the
largest proportion of the employment base exists today; and it
also provides the majority of available goods and services. So,
in our view, SMEs are a very critical part of the equation, for
both economic development and security in Afghanistan.
Industry and products need to be improved. More value needs
to be added in the country. And we think that, in fact, will
come if we can do a better job of linking up rural farmers and
others in the rural areas to more urban processing centers,
distribution, warehousing, and other facilities that are needed
to take those primary products and add the value that will
ultimately bring economic growth to the country.
SEAF has done this type of investing in 25 different funds,
290 individual investments all throughout the emerging markets.
We've been around for about 20 years. So, although we recognize
that Afghanistan has some very unique challenges, we think that
many of the challenges that small companies face throughout the
emerging markets are, indeed, very similar; and we believe that
you've got to approach this whole exercise not wearing your
not-for-profit hat, but with a lot of commercial discipline.
Because, in the end, only a commercially successful company is
going to have long-term economic benefits for the country.
So a little over a year ago, in 2008, SEAF created Afghan
Growth Finance as a nonbank financial institution in
Afghanistan. We are providing growth capital anywhere from
$50,000 to $2 million. So we are well above micro finance, but
we are far below what the average target size for some of the
larger projects might be. We are making medium- to long-term
loans. We've got a fair amount of flexibility on how we can
structure those loans, so that the companies can pay out of
their cash-flow.
So far, we've committed $5 million to 10 different loans.
We expect $10 million to be committed by the end of this
calendar year, which would mean that we have effectively placed
half of the $20-something million that we have at our disposal
through cooperation with OPIC, through a risk credit facility
they've made available to us.
The funds are being used to purchase machinery, to
establish processing and manufacturing facilities, and to
provide working capital. And what we're finding is that there
is, in fact, a strong demand for the loans, because the
commercial banking sector is not reaching this level of
company.
What we also are finding is that the benefits go beyond
just the financial benefits to the enterprise itself. We've
done a fair amount of analysis in terms of what that
developmental impact is in other parts of the world, and what
we're finding is that Afghanistan is very similar and in some
cases the benefits are even stronger. But what we have found is
that every dollar that you invest into a small company, in
fact, generates an additional $12 in benefits to the broader
stakeholder community. And that means customers, that means
employees, it means government through taxes, it means
suppliers, it means others in the broader community.
What we're seeing in Afghanistan is that, after a year in
operation, some of the companies that we have funded have been
able to increase their employment by as much as 50 percent;
they have increased their wages by as much as 30 percent, and
they have taken what are largely unskilled employees and
trained them and provided them with a skill set that makes them
much more marketable in the future.
We have invested in several companies in the agribusiness
sector. We've got a licorice root and extract processor that is
exporting to China. Dried fruit and nuts that were manually
being processed and sorted, now we've helped them acquire
production equipment, so they've got a processing line. Their
daily production is 20 times what it was, their gross sales are
up 400 percent, and we've helped them find a new export market
in China. And we've also got a raise in export in the
agribusiness sector. So we calculate that a thousand or more
suppliers and farmers and input providers are now linked into
these three or four agribusinesses that we've funded.
And, of course, the other message that is out there is that
there are ways to make a good living, as an alternative to
poppy cultivation.
We've got two companies that are producing construction
inputs in-country. So instead of importing circuit panel boxes
and metal pipe, they are being fabricated locally in
Afghanistan, going into construction projects, so that more
value again is being created in the country. The overall cost
of the construction is going down, you're getting training in
terms of the workers, and you're seeing better prices overall,
in terms of the projects that are being built.
We have a renewable energy company that's quite
interesting. They are producing wind and solar panels; and they
have a new, unique design that is being deployed for the Afghan
police in their border posts. They are doing it on a pilot
basis now. They've got five under way. If that's successful in
replacing diesel generators, we could see in the future that
this company will be able to expand to 70 or 80 additional
posts, which we think is a wonderful story, not only for the
economic benefit of this production and design in Afghanistan,
but obviously from an energy standpoint as well.
We have a technology and Internet service provider that's
providing cheaper, more reliable access to the Internet,
outreaching to schools, hospitals, government, military, to a
whole range of institutions that will make good use of it.
In the media area, we've got an Afghan-language local
broadcasting program that we are funding through a media
company. And they're also broadcasting to the United States and
to the EU, so the Afghan perspective is getting out to the rest
of the world.
Now, of course, there are challenges. You've mentioned many
of them. I think one of the comments I would make on the
challenges, whether it's security or the lack of
infrastructure, is that SMEs do have ways of being very
flexible and adaptable. They are less visible in terms of being
targets, whether it's targets for corruption or targets for
terrorism, they're not the big, high-profile entities that will
gain a lot of publicity, and so they tend to be left alone a
lot more regularly. But they are serious issues that all of our
companies are dealing with.
The other thing they deal with is an untrained work force.
What that means is they have to invest in that work force; and,
overall, we're finding that is, in fact, what's happening. And
they are taking low-skilled employees, they are training them,
they become more productive, the wages go up, and then,
overall, what we are finding is that you've got a low-skill
base that's being raised and you've got wages that are growing.
And as the work force is trained and companies become more
productive, they increase, with capital as well. They are able
to increase that overall size of the work force.
Mr. Tierney. Thank you. Do you want to wind up for us? We
are going to get to questions and answers, too; and I am sure
we will cover a lot of this.
Ms. Callear. Absolutely.
So I think really, at the end of the day, lack of financing
does remain a challenge, but more than capital is needed. It's
a partnership. It's technical assistance. It is a variety of
support. And we think that, overall, working with OPIC and
others in the U.S. Government, we hope to expand the program;
and we think that our initial year has been quite successful
and had very good results.
Mr. Tierney. Thank you very much.
[The prepared statement of Ms. Callear follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Tierney. Dr. Usman.
STATEMENT OF MOHAMMAD USMAN, PH.D.
Dr. Usman. Chairman Tierney, Ranking Member Flake, and the
members of the subcommittee, first of all, I want to thank you
for giving me this opportunity to share some of my insights on
this issue.
The agriculture sector has the potential to reestablish its
historical role in nurturing growth and development in
Afghanistan. However, as you mentioned, in the last 30 years,
agriculture went through devastating effects. Most of the
infrastructure of agriculture, which are rooted in research and
irrigation systems, seed multiplication farms, and
laboratories, have been completely destroyed. And as a result
of all these are now gone. We once enjoyed food sufficiency,
and now we have a chronic food deficit.
And the farmers, due to economic pressures, and pressures
from the drug lords, have reverted to poppy production. Afghans
lost a share of fruit and nut exports in the international
markets. If the economy, of which agriculture is a vital
component, would not be improved, the current situation of $14
of import for every $1 of export could not be continued without
considerable food or aid, or revenue from the illegal crops.
In 2006, the Ministry of Agriculture, with the help of
donors, established a comprehensive national development
agricultural plan. And the plan priorities of agriculture have
been identified: food security, expansion of high-value
horticulture crops, production of livestock, and cultivation of
natural resources.
Unfortunately, the master plan has not been fully
implemented, due to the position of some donors insisting that:
the development plan should be initiated at the community and
village level, that extension and research should be conducted
by the private sector, that current NGO's' operation
arrangements should continue, and that the focus should be on
rural poverty alleviation, instead of focusing on increasing
farm production. While these positions have merit and are
necessary, especially in the long run, such efforts are not
sufficient or useful in establishing the solid foundation
necessary for agriculture to develop.
Based on my thorough review of the general political and
economic situation in Afghanistan and potential problems with
its agricultural sector, I would strongly recommend that these
six actions must be taken immediately. These actions proved to
be successful in Afghanistan during the 1970's; and, with
appropriate modifications, they will solve the agriculture
situation once again today.
First, the overriding objective of any project and program
should be to enhance government credibility in assisting its
citizens. Right now the government lacks visibility in the
rural areas especially. While all parties in agriculture should
work in a coordinated and coherent way, the government must
play a leading role in the implementation of investment
program? It is imperative that donors and NGO's take a back
seat position by limiting their involvement to advisory
functions, institution building, project design, and the
establishment of proper accounting, monitoring, and reporting
systems. Through this arrangement, transparency and
accountability would improve, government visibility would be
strengthened, and the expenditures of the NGO's on security
would be reduced.
Second, a coordinated effort by all parties should be made
to strengthen the nation's research in extension capacities.
Re-activate seven strategic research centers to serve as the
hub of change for agriculture. The extension cadre will need to
be strengthened, to disseminate improved practices to the
farmers and to convey farmers' problems back to the researchers
for resolution.
Third, it is strongly recommended that a viable regional
agricultural credit system must be established, in order to
gain farmer support, and to enable the farmers to finance
modern technology to meet their needs.
Revitalization of the Agricultural Development Bank, with
its past proven record, must be considered for channeling
credit and deposits to the farmers.
Fourth, improving irrigation efficiency, and the
rehabilitation of the irrigation system with the expansion of
irrigation areas is very important. Afghanistan receives about
75 billion metric cubes of water in the form of rain and snow
yearly, just 20 billion metric cubes of which is used mainly
for agriculture, with water-use efficiency of about 25 percent.
With efficient forms of irrigation techniques in farm water
management, this water use efficiency could be doubled.
In addition, agrable land in Afghanistan is about 3.3
million hectares. However, with proper investment, it could be
increased to 5 million hectares.
Prior to the Russian invasion, there were several new
projects in the investment pipeline, such as Khush Tepa,
diverting water from Amu Darya, and irrigating 600,000
hectares, which was halted due to political unrest. These
projects need to be reconsidered for investment.
Fifth, farmers should be encouraged to organize themselves
in production, marketing, processing, and water use
associations.
Six, consideration should be given to procurement of food
and rations for foreign military and civilian personnel
locally.
Thank you, sir.
Mr. Tierney. Thank you very much, Dr. Usman.
[The prepared statement of Dr. Usman follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Tierney. Mr. Pam, we would be happy to hear your
remarks.
STATEMENT OF JEREMY PAM, ESQ.
Mr. Pam. Chairman Tierney, Ranking Member Flake, members of
the subcommittee, thank you for inviting me to appear before
you today. I am pleased to have the opportunity to participate
in this important hearing in U.S. promotion of the Afghan
economy.
I know your time is limited, so let me start with a
summary.
I recommend that we adopt an approach to economic
development and governance assistance to Afghanistan
emphasizing three pillars: an orientation toward Afghan public
finance and budgets as a strategic focal point for the entire
civil side effort; two, the collaborative development, with
relevant Afghan experts, of road maps, setting out a few high-
impact programs in key sectors, such as agriculture; and,
three, a greater use of catalytic financial instruments, to
share risk with Afghan entrepreneurs.
The written testimony I've submitted places the
significance of the Afghan economy in the context of a broader
legitimacy crisis of the Afghan state that has, at least three
other, and arguably more important, dimensions: security,
namely, the state's inability to protect the population;
political, the reluctance of a critical mass of Afghans to
identify politically with their government; and governance, the
government's difficulty performing basic governmental functions
and delivering essential services.
I thought the centrality of legitimacy to the current
crisis was worth discussing at some length in my written
testimony first, because it helps explain why past United
States and international civil side assistance to Afghanistan
has had so limited an impact as to be, in Secretary Clinton's
word, ``heartbreaking.'' If the problem is legitimacy, Afghan
actors failing to do things Afghans expect them to do, then it
shouldn't be surprising that international civilians trying to
do those things directly--the default international approach--
for reasons I discuss in my written testimony, has not worked
as a solution.
As an aside, please note that all of my comments relate to
the civilian and not the military effort, although I suspect
there are points of overlap, when noted military expert like
John Nagl publish op-eds with titles like ``We Can't Win These
Wars on Our Own.''
The second reason it's worth framing things in terms of
legitimacy is that seeing the Afghan crisis as a problem of
legitimacy explains why improving the situation requires us to
adopt approaches that deliberately structure international
efforts in ways that improve Afghan legitimacy, by helping
Afghans implement their priorities through their institutions,
despite the many frustrations and inefficiencies of such an
approach. This legitimacy analysis leads directly into the
three-pillar strategic concept for civil side assistance that
my colleagues, Dawn Liberry of USAID, Clare Lockhart of the
Institute for State Effectiveness, and I developed this spring,
which my written testimony describes in further detail, and
which was also referenced by Patrick Cronin, of the Institute
for National Security Studies at NDU, in his May 19th testimony
to the subcommittee.
As already mentioned, these three pillars are: an
orientation toward Afghan public finance and budgets as a
strategic focal point for the civil side effort; the
collaborative development of new road maps for key sectors; and
a greater use of catalytic financial instruments to share risk
with Afghan entrepreneurs.
I will return to the public finance pillar in a moment, but
there is more on all three pillars in my written testimony.
More important for this discussion is the common idea
underlying the concept as a whole, the requirement to use
Afghan institutions or business enterprises as the focal point
for international assistance, which should better ensure that
our efforts are aligned with Afghan policy or business
priorities and is consistent with Afghan institutional
capacity, thus increasing the likelihood that the efforts will
both be sustained by Afghans, and contribute to resolving the
underlying legitimacy crisis.
My discussion thus far has emphasized explaining all of the
current crises in Afghanistan, the limitations of past civil
side international assistance, and the rationale for the
alternative approach we've recommended, solely by reference to
the Afghan situation and the dynamics of international
assistance; in other words, without bringing recent experience
of any other country into it.
I would like to now conclude by describing briefly how the
U.S. experience in Iraq reinforces both the general component
of this analysis and the feasibility and effectiveness of the
particular solution proposed.
While Afghanistan and Iraq are, indeed, apples and oranges
in many respects, perhaps no more so than in public finance and
economic terms, where Afghanistan ranks near the bottom in
terms of wealth and human capital indicators and Iraq has the
second-largest proven oil reserves in the world; but the
Afghanistan and Iraq efforts do have one major factor in
common--us. In both countries, the same United States and U.K.
civilian and military organizations operate according to
broadly similar organizational dynamics, setting the stage for
the same kinds of misalignment with local country priorities
and institutional capacity, and the same tendencies toward a
fragmented international effort.
Indeed, I am sure you will all recall that in 2004, 2005,
and 2006, the Iraq effort was routinely condemned as seriously,
perhaps even fatally, hindered by coordination challenges
between civilians in the military, between different civilian
agencies, and, most importantly, between the U.S. efforts and
the Iraqis themselves. I think that stories about those
coordination challenges are familiar to us from both efforts.
Both official audits and journalistic accounts produce
story after story about how the left hand didn't know what the
right hand was doing, and all of the ways in which this was
undermining our efforts to get to the point when the Iraqi
Government and economy could stand on their own. As it
happened, the little appreciated but significant factor in
addressing some of the most important coordination problems and
improving the effectiveness of our efforts to support Iraqi
self-governance was the belated recognition of the strategic
importance of Iraqi public finance, particularly budgets. This
led to a significant shift in emphasis across the U.S.
assistance effort toward helping Iraqi officials, at both
national and provincial levels, execute Iraqi budgets.
As recounted in the Capstone report of the Special
Inspector General for Iraq Reconstruction, ``Hard Lessons,'' in
2006, most Americans in Iraq were still focused on spending
U.S. money, largely independent of Iraqi government
institutions. Consequently, in many cases, there was a lack of
sufficient Iraqi participation in deciding how or what to
reconstruct and ensuring that projects could be maintained
afterwards.
The end of 2006, however, saw ``the rise of budget
execution as a U.S. civilian and military priority.'' By mid-
2007, the standard for useful expenditure of U.S. funds had
largely shifted to, ``If it can't be done by Iraqis, we
probably shouldn't do it. What is better is a project that
takes 60 days instead of 30 days, but is done by Iraqi
managers, and is sustainable by the Iraqis, and that their
operations can support.''
By mid-2008, the Iraqi public finance and budgets had
become such a central organizing principle to the U.S. effort
that the Embassy and Multinational Force Iraq created a civil
military Public Financial Management Action Group [PFMAG],
chaired by the senior civilian and military leaders responsible
for governance and the economy and incorporating the
participation of dozens of U.S. organizations working on the
civil side in Iraq, in order to ensure that all civilian and
military personnel, whether working with ministries from
Baghdad or with provinces from Provincial Reconstruction Teams,
would make assisting with the execution of Iraqi budgets a
paramount civil administration mission priority.
By the end of 2008, in an independent U.S. Institute of
Peace study, the PRTs had concluded, ``The budget execution
role is critical to the U.S. mission in Iraq and is the primary
strategic justification to continue the PRT program.''
I hope it goes without saying that nothing I have just said
should be taken as suggesting that an approach having worked
modestly in Iraq, is by itself, a reason to adopt it in
Afghanistan. Indeed, I limited my written testimony to
Afghanistan in order to avoid any such implication.
However, if we believe that there are some common, daunting
challenges to finally establishing an effective civil
assistance effort in Afghanistan, which have as much to do with
the international challenges of providing effective assistance
in this kind of environment as with Afghanistan, we might find
some value in the idea of public finance as a strategic focal
point. And in the broader idea of deliberately structuring our
assistance to better align our civil side efforts in
Afghanistan with Afghan priorities and institutional capacity,
I believe that by strengthening the ability of Afghanistan
state institutions and the private sector to recover from the
current crisis of legitimacy, and stand to a greater degree on
their own, such an approach would advance our national interest
and greater stability in this region.
I thank you, Mr. Chairman, for giving me the opportunity to
testify today. I look forward to any comments or questions you
may have.
Mr. Tierney. Thank you, Mr. Pam. We appreciate your
remarks.
[The prepared statement of Mr. Pam follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Tierney. Mr. Mawji, again, we thank you for joining us
from afar; and we look forward to hearing your remarks, sir.
STATEMENT OF ALY MAWJI
[Note.--The following testimony was delivered via
videoconference.]
Mr. Mawji. Thank you very much, Mr. Chairman; and thank you
for the opportunity to be able to share some of our experiences
here in Afghanistan with you.
May I, at the outset, also, coming from the field, pay
tribute to the large number of soldiers here who are fighting
on under very delicate circumstances, and my condolences and
prayers to the families of those young men and women who have
lost their lives in recent days and in the past.
The Aga Khan Development Network is founded and chaired by
His Highness the Aga Khan. It essentially works in three
pillars: the social, cultural, and economic. The social and
cultural pillars are predominantly not-for-profit
organizations, whereas the economic is a for-profit
organization.
There is often confusion as to why we run for-profits and
not-for-profits, but, for us, investment in the economic side
of things is as important if we want to try and establish best
practices, if we want to try and raise incomes, dual capacity,
and so on and so forth. We draw no profits from these economic
investments, even though they are for-profit companies, and
these profits go back into social and cultural development as a
cycle.
I welcome the opportunity to share with you some of our
experiences here in the field, and to draw some conclusions of
what we've learned from the large investments of over $700
million across three pillars over the last 7 to 8 years. And if
I might say, I find myself kind of trying to walk with one foot
in a bucket of hot water and the other foot in a bucket of cold
water, and I'll explain why in a second. And perhaps I can turn
to the bucket of hot water first.
I would like to say that Afghans are inherently very
entrepreneurial people. That is what has allowed them to
survive 23 years of war. It's what has allowed them to rebuild
Afghanistan in terms of businesses and so on since the war. And
with that comes a huge amount of hospitality and warmth. And
after 23 years of war in this country, there really is total
devastation; and this devastation is not only just
institutionally, but it's also in terms of the country. And I
think we should not be shortsighted, but we're going to need a
long and a very sustained engagement in Afghanistan if we are
to make progress.
The second point I would make is that our focus and
experience has shown that today we've got to move away from
what I would sometimes call the ``country of Kabul'' to the
country of Afghanistan. There is a lot of effort being placed
in Kabul, in processes such as the Afghan National Development
Strategy and so on, which is government-led, and which is
important, but I think we have to ask ourselves, how does this
translate in the field and benefit communities, people, and a
society of lives in Afghanistan?
And, at this point, I would like to underline the huge
importance of civil society. Civil society is not trusted in
this country. It's seen as something that's been perhaps under
the scheming of financial resources that's being available in
Afghanistan. Yet we see civil society as part of the private
sector that plays a huge bridge between people and government,
plays a key role in implementing the principle of democracy and
state transparency that is accountable to citizens. Civil
society creates an environment through which various segments
of the population can take part in the process of
decisionmaking.
In true home-grown programs like the National Solidarity
Programme, we are essentially molding what has been traditional
Afghan civil society and their leadership, the shuras as they
call them, and modernizing it, getting them to prioritize. What
are the key concerns around their community? How are they going
to implement it? How are they going to be accountable toward
developing their societies?
And, therefore, I think the importance of civil society and
the private sector is something that needs to be recognized and
enforced in the Afghan conflicts, particularly as we look at
the bridge from moving from policy and government services to
delivering on the ground.
And let's not be mistaken, while we all appreciate that
Afghanistan is a sovereign state and we need to build the
institutions of the state, it's going to take a while to do
away with institutions; it's going to take a while to get the
right kind of capacity to deliver. And we have seen over the
last 4 or 5 years how ministries have crumbled, how corruption
has come to set in, how Afghanistan's development budget has
never been able to expand more than 40 or 45 percent per annum.
And that, for us, should be a wake-up call in the way that we
approach Afghanistan.
The next point I would make is that we tend often to talk
about sectors, and we say we need to invest in agriculture, we
need to invest in water, we need to invest in X, Y, and Z,
which I think is absolutely right. But I think what we also
need to understand is that where the rubber hits the road,
where you start working and engaging with communities, you need
to bring in what we in the Aga Khan Development Network call
MIAD, which is a multi-input area development system, where
you're looking at bringing in a package of interventions that
are relevant, that come together in a way that is relevant and
in an equation that actually affects the societies in which we
are trying to operate. That calls for us to really look at
provinces where the enabling conditions exist and ask
ourselves, what is the political profile of these provinces?
What are the economic opportunities? What are the social
development needs and opportunities? And mesh them in an
equation, bringing in a multi-input system that is relevant.
To date, I think we have been extremely busy in
Afghanistan. We go in and say we're doing lots of work in
agriculture, or we're doing a bit of work in microfinance.
Roles are sometimes confused in provinces between the PRT,
between civil society actors, between government, because
there's no clear vision that really binds people together in a
coherent fashion.
The next point I would make also is we need to continue to
encourage public-private partnerships. Today, we are running a
hospital with the French Medical Institute for Children, which
has just received the first-ever in the history of Afghanistan,
as far as we know, ISO EPPP with the French government, with
the Afghan Government, with two French NGO's and the ATVN. And
we are able to deliver quality health care in the government;
and we need to encourage much, much more of the PCPs, which
have shown success.
Let me quickly turn to some of what I have addressed in the
testimony; and that is, you know, my other foot, which is in
the cold bucket; and let me return to the business side of
things.
If you look at the whole business angle, I mean, we spent a
year doing research before we held the Enabling Environment
Conference in Afghanistan that really asked the deep questions,
what is impeding civil society and business to go forward in
Afghanistan? And you see, there is a road map that came out
which has been submitted as part of the testimony.
But, you know, the issues are very, very clear. There is
very weak policy enforcement. Creating policy and enforcing
policy is a huge problem. In a recent survey done by the World
Bank, they said 14 percent of the people surveyed report
unpredictability of the laws, even though they exist, and poor
provision of electricity. If we are going to try and rebuild
Afghan's economy, there is no way that it can be cost effective
if the cost of energy is so extremely high that the final cost
of production makes it untenable in the region. So the major
investments in infrastructure, water, power, roads, and so on.
Crime and security has become a major issue. Corruption is
a phenomenal issue. I recall a young Afghan-American lady who
had set up a business in Afghanistan, who made a statement as
we were doing research for the Enabling Environment Conference;
and she said, Aly, I went to the Ministry of Finance four times
to pay my taxes, my income taxes, but nobody could tell me
where I could pay these taxes. And then she said, finally,
somebody said, I'll help you pay your taxes, but you need to
pay me to help you pay your taxes, in which case she was paying
corruption to pay her taxes, and this is completely bizarre.
Access to land has become a critical issue. Let me give you
an example. An earlier colleague talked about the importance of
microfinance. We have seen microfinance become extremely
successful. We have $100 million out in loans. We find there is
98 to 99 percent repayment of these loans. But when people hit
a certain ceiling where microfinance is not enough, and they
want to increase their businesses into small and medium
enterprises, none of the banks are willing to give them the
loans, because they have no collateral.
And what is collateral for Afghans today? It's land. But
they can't use this land as capital because the land
registration rights in Kabul are so corrupt that no banks will
trust it. And there is a need for a whole land reformation and
re-registration process, which is not difficult to do, but
should be part of the priority that we address in the
international community and the Afghan Government as outlined
in the road map.
In the World Bank survey, 84 percent of the respondents
said that the court system in Afghanistan is corrupt and
unfair, and the Attorney General's Office has often been
associated with high corruption. Now, I can't validate this,
but this is what the feelings and the perceptions and the
experiences of Afghan businessmen are in Afghanistan.
Business licensing and permits are also such issues.
If I were to conclude, Mr. Chairman, I would like to look
at a few broad things that I think are completely fundamental
sine qua nons as we look ahead and if we want to address the
kind of issues that you made, quite rightly, in your statement
in terms of the challenges that lay ahead of us.
No. 1, I strongly encourage that we put in resources to
address the issues outlined in the Enabling Environments
Conference road map, which are clear, and to push the Afghan
Government to be able to prioritize these in a systemic fashion
so that we can start addressing the primary concerns of
private-sector development in Afghanistan.
No. 2, in the wake of what is a really highly insecure time
in Afghanistan, where it is quite unlikely we are going to get
huge amounts of foreign direct investments coming into the
country, we would really propose that we take a hard look at
local Afghan businesses. How can we really enable Afghan
businesses to flourish within the context and the constraints
that they're working in?
No. 3, work to rebuild and strengthen the institution of
government. And in this I would strongly recommend that, in the
interest of one who demonstrates progress very quickly, is that
we identify five or six key ministries that are absolutely
critical for us in order to deliver to the people of
Afghanistan. And we can give conferences of those ministries to
help them develop the kind of vision that's necessary and to
implement the vision at that point.
Fourth, invest and encourage and nurture and build civil
society. Because civil society is already demonstrating a
tremendous role in Afghanistan, as it has in many, many
countries around the world.
A wider investment in water and power and other
infrastructure. We need to work hard at enabling regional
opportunities, and we have focused on agriculture in
Afghanistan as one of the key priorities. Let's not forget that
Afghans will use 77 percent of the food that they actually
produce. If you really want to rebuild the economy, Afghanistan
should become traditionally what it was when it was thriving,
and that was a land bridge in the Silk Route.
So how do we open up the corridor between Pakistan, Iran,
Tajikistan, Uzbekistan? We've had three regional economic
cooperation conferences now on Afghanistan, and I'm sorry to
say we've made extremely little progress in terms of tangible
outcomes.
The seventh point I will make is the equity of development
investments. So far, if you look at Afghanistan, a recent
survey shows that those areas that are most insecure, whether
it's high military action, has received the largest amount of
development assistance with the least amount of output. Whereas
those provinces, like Bamian, for example, where we've had the
most amazing conditions for success, has received the least
amount of development assistance.
I think we need to readdress that balance, because if
there's one other thing we have learned in our experience, it's
that success stories spread very, very quickly in Afghanistan.
And if you want to get three or four provinces and make them
into success stories at a provincial level, you would speak
volumes to those insecure areas in the south to which you could
respond to them in faith, you could create those conditions
where it is profitable and stable. We would be able to help you
to get to that point.
I would like to conclude by just drawing on a quote by the
European Ambassador in Afghanistan, who I thought made a very
interesting statement the other day wherein he said--his name
is Ettore Sequi--when he said, ``As long as Afghan institutions
are perceived as being able to provide those basic services
that the state should deliver to people--a clean and effective
public administration, a functioning and fair justice, an
effective police, a sound system of education, job creation
capacity, economic opportunities, etc.--the confidence of
Afghans in their own institutions will increase, leaving less
room for insurgency propaganda and appeal.
It's the institutional dimension of security which is key
for an enduring security. It is this perspective that will be
crucial to strengthen and better coordinate programs already in
place in these fields, and in particular justice, the rule of
law, etc.
It will also be necessary to actively and substantially
support the strengthening of management in the administrative
capacity of the Afghan public administration.
I would only add to that we look at strengthening the goal
of the private sector in helping to deliver services for the
government and the people of Afghanistan.
Thank you.
Mr. Tierney. I thank you very much, sir.
[The prepared statement of Mr. Mawji follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Tierney. I think the testimony here this morning has
been excellent and very helpful. I notice that we didn't keep
anybody within the 5 minutes, and I think that's fine. I think
we all benefited from it.
Mr. Mawji, you win the prize because you couldn't see me
fidgeting when you got to the 5-minute point, so we were able
to get all of your information in, which was quite helpful. We
appreciate that.
Let me start the questioning section, if I can.
I thought Mr. Pam framed this situation--and others also
touched upon it quite well--on this crisis of legitimacy
concept. And it was helpful to put it in that frame.
Mr. Mawji, when you were talking about that issue and about
prioritizing different projects, can you tell me what your view
is of Mr. Pam's comments, that he thought one way to best
prioritize them would be to work through the public budget, in
other words, to work with the Afghan Government's budget,
allowing them to set the priorities, and then working through
that, as opposed to each NGO or other entity trying to go off
on their own deciding what they thought was important?
Mr. Mawji. I would completely comply with the view that we
need to work within the government priorities. There's no
question about this. And I think those priorities are not
rocket science. They are in health. They're in education.
They're in rural development.
What I do fear, though, is that there is a role to be
played or investments to be made to help deliver those
services. So I think we do need to look at a concurrent and
parallel process. And that's not to create a parallel system.
It is to invest in the state, to build its institutions, its
capacity, its thinking, but also then to empower civil society,
the private sector, and others to be able to deliver some of
those services, either through government funding or otherwise.
Mr. Tierney. Thank you.
Mr. Pam, I would like your reaction to that, first of all,
but also the additional question, what about the corruption
issue? We've all touched upon it here, and I think everybody
has a concern that the investment might not get where either
the governmental budgeting process of Afghanistan wants it to
go or where individual investors want it to go.
Mr. Pam. Well, let me start by addressing the previous
comment.
I think that the suggestion that government efforts to
deliver services take advantage of all of the capacity that
exists in Afghan society, including Afghan NGO's in places
where the government doesn't reach, I think that is perfectly
consistent with using public finance as a focal point for our
efforts. I think that ties into the second pillar of the three-
pillar approach of these new sector road maps which would
create new national programs, sort of on the model of the
National Solidarity Programme, which is a national program in
the sense that there is a ministry in Kabul that is responsible
for it, but it's implemented through, in many cases, through
nongovernmental entities down at the village level. And so
you've got to marry up the formal governmental structure with
whatever capacity exists in Afghanistan, whether it's at the
formal or the informal level. And I think you've got--the
answer to that will be context-dependent.
But I think what we've got to avoid is saying that, because
a ministry in Kabul doesn't have officials that allow it to
reach all the way down to a particular province or municipality
or district or village, we should therefore give up on a
state's structure and devote our efforts to parallel
internationally funded efforts that go directly to NGO's at the
district. I think there are ways of combining the two, but we
can't give up on the public process if we want to address the
underlying legitimacy crisis, which is, at bottom, a crisis of
what the state can do.
On the corruption point, quickly, I think it's a central
point; and I don't want to suggest for a moment that there are
simple answers to it.
The suggestion that we place a greater emphasis on the
Afghan budget, which entails greater United States and
international financial support for the budget, greater use of
budget support, for instance, is a risky proposition. And I
think that one would do that as part of a multi-step process
which would also involve some intensive technical assistance
work, assessing the quality of the public finance systems. The
World Bank and the IMF have already done a tremendous amount of
work on those systems; and my sense from them, in general, is
that those systems are actually in decent shape, but obviously
the United States would want to hear that directly and see that
directly and do some work preparing the national budget and
then, if there's going to be a degree of fiscal
decentralization, subnational budgets to receive additional
money. Some money will be lost, but some money is lost when
it's done through parallel systems, too.
The argument is that, only by putting money through their
system and concentrating our efforts on making that system
work--which it will only do imperfectly at the beginning--will
we ever get to the point where there is a functional system
that can respond--that can perform all of the functions that
the quote from the EU Ambassador just described.
Mr. Tierney. Thank you very much.
Mr. Flake.
Mr. Flake. Thank you, Mr. Chairman. I appreciate the
testimony.
Regarding the question of security, is the situation
improving over the past several months in terms of,
particularly, agricultural production and the need for outside
investment? But in so many areas of the country we have
difficulty operating, or at least other organizations outside
of government.
Mr. Usman, do you want to address that? Is that situation
improving?
Dr. Usman. Yes, sir. I think it is improving, but I want to
come to, if I may, the question of corruption a little bit.
You see, once, according to a rough estimate, our Ministry
of Agriculture had something like 11,400 or 11,500 staff.
However, at this time, probably the Ministry of Agriculture
system has something like 4,000 to 5,000 staff.
And the salary of these people are something like $50 or
$60 or $80 maximum, and rent and everything else in the Kabul
area is $100, $200. Then to expect that these people could live
on that salary, it is impossible.
It is a symptom--I am not critical of NGO's, but NGO's are
paying lucrative salary allowances to their staff. There is a
sort of jealousy we've developed with the NGO's. NGO's actually
get the cream of the experts of the government staff at their
employment.
I was thinking of that. I said, OK, if from this 5,000 pool
that we need in the Ministry of Agriculture supposedly, then
probably, based on a good selection criteria, we should supply
them with some sort of hardship allowances and put some tough
sort of requirement there; and I think they would function
best. According to my experience, when the Agricultural
Development Bank functioned properly in the region, it was a
successful bank.
The bank was giving, compared to the rest of the employees
of the government, some 50 percent more salary to their staff
and good selection area and good selection character. And all
the staff were working perfectly, and they were sort of
appreciating the jobs, and the corruption reduced.
Mr. Tierney. Our apologies. These are notices with regard
to what is going on, on the floor of the House. So we'll wait 1
second, and then they will stop, and we will give you extra
time.
Dr. Usman. OK. If we are completely sort of ignoring that--
OK, there is corruption. Therefore, we do not want to deal with
it. In the Ministry of Agriculture, while I was there, we
wanted to align our financial system with international
accounting procedures. For 6 months, I was looking for an
expert to come and fix the system. An expert was not available.
And then the ministry for some reason, had something like $3
million. They gave it to SAO, if I remember correctly, for a 35
percent fee, to spend it on their accounting procedures.
Therefore, accounting, bookkeeping, financing, reporting
need a lot of work. And I know it is difficult, but we have to
do it. We have to reconstruct the system.
As far as agriculture is concerned right now, you know, as
I said in my written testimony, that the crop production per
hectare is something like 1.6 to 2 tons per hectare. And for
the dry land, which is around 4.5 million hectares of the dry
land, this is 0.6. In the regions, they are getting 4.5 from
irrigated and 2 tons from dry land. This is for staple foods
like wheat. But we have to work on reducing the cost of
production. Otherwise, we cannot compete with the neighboring
countries.
In 2002, Afghanistan was supposed to have a bumper crop,
but similarly several of the neighbors had more bumper crops,
and the farmers would not even bother to go and harvest the
crop.
Therefore, research--bringing back the research, bringing
back the extension system is really, really necessary, putting
the engineer expert along with the ministry expert to
complement each other.
Mr. Flake. Thank you.
Mr. Pam, with regard to so much emphasis on public finance
going through the Afghan government, for a body like this, the
U.S. Congress that has to appropriate the money to the extent
that we are talking about direct assistance, there is a point
at which you simply say we cannot tolerate so much money being
drained off with significant corruption. But you seem to be
making the point that we have no choice, that we have to funnel
through that system and not through a parallel system.
But, I mean, give us some guidance here. What kind of
strictures or mandates or whatever can we put in place? And if
they are not met, what are our choices at that point? Because
it is a difficult thing, I can tell you, to sell foreign aid in
general. But when a significant chunk of it will be drained
off, it is tough to just accept that as a matter of doing
business.
Mr. Pam. I understand, Congressman. I think I would give
three answers to that question.
The first is what the alternative is. We have been in
Afghanistan for 8 years. The chairman gave a figure for the
amount of money that has been appropriated to Afghanistan
during that time. It has been a very large number. The question
is, what results have we received for that investment? It is my
sense that there is a broad consensus that we haven't received
a very good return on that investment by the U.S. taxpayer.
This is why Secretary Clinton said that looking at the effort,
looking at the results achieved was heartbreaking.
And I mentioned the Iraq case, because that is another case
that has happened contemporaneously with our investment in
Afghanistan where we appropriated--Congress appropriated $20
billion, $40 billion for civil side assistance and it produced
very poor results.
Now--so the advantage of that investment thus far has been
greater accountability. We appropriated it through the standard
modalities for foreign assistance, which meant that it went to
U.S. agencies who used U.S. contractors who were used to the
U.S. rules for accounting for the money. The problem with it is
that, too often, the investments made with that money were not
synched up with Afghan priorities and institutional capacity in
such a way that it moved the Afghan government toward greater
capacity and self-sufficiency and self-governance. In other
words, further toward a point at which we could eventually
scale down our presence, both military and civilian.
So the first point is what the alternatives are. I am
suggesting that business as usual has not worked very well. I
think this is consistent with the President's new strategy for
Afghanistan and Pakistan, which calls for a new approach.
My second point is what the approach that I am recommending
would entail. Again, I am not suggesting that we simply
transfer all the money that we would have appropriated through
the systems we know and trust directly into the Afghan budget,
by no means. I think this is something that has to take place,
has to be done gradually. And I think it is already--the first
steps of it may already be in motion.
There have been some cases where intensive work with
particular ministries has given our agencies comfort that
ministry is now ready to receive a greater degree of budget
support. And I think USAID's work with the Ministry of Health
is one of the examples there. But my argument is that we need
to do that on a broader scale, and doing that is something that
will require intensive technical assistance in public financial
management.
Fortunately, we are not starting from scratch. As I said,
the World Bank and the IMF have been working on this since
2001, have produced reams of documents about it. There are
detailed assessments of how--the state of the system and the
confidence that we can have in it.
And we have a further advantage in that we appear to be in
the process of sending over a significant number of additional
civilians and/or military reservists to focus on civilian side
assistance. Many of those people could be used to help enable
this public finance focus, stationed at every level of the
Afghan government, given sufficient training in public
financial management, and they could help us track it.
But the point is that the money has to go through the
Afghan institutions, with us on the outside helping the
institutions work, rather than going through us on the outside
providing the benefits to the Afghans.
Mr. Tierney. Thank you very much. Thank you, Mr. Flake.
Mr. Foster, you are recognized for 5 minutes.
Mr. Foster. With unanimous consent, I would like to enter
this into the record. This is a document which is volume one of
the Afghan Judicial Reports.
Mr. Tierney. Without objection, so ordered.
Mr. Foster. Which my father was involved in producing in
1975 and 1976, where he essentially rode circuit in a Land
Rover to the local--whoever it was who was in charge of making
legal decisions at the time. And I recommend it to anyone
that--it is very sobering reading to understand the huge chasm
that exists between a modern functioning western legal system
and what was in place at least in 1975 and has probably gone
backward, is my guess, because of the wars and the time period.
So my questions to Mr. Pam and Mr. Mawji are, what is the
structure of the Afghan legal system today, and what are the
useful alliances that could be encouraged to build a functional
legal infrastructure? Are the alliances with Western or Islamic
countries going to be more valuable in this? And if Islamic
alliances are the best, with whom? Where are the Islamic
partners that might have high-functioning legal systems that
could be most easily culturally adapted to Afghanistan?
Either one.
Mr. Pam. Well, I will answer briefly. I am a lawyer, but I
have never worked on legal issues with respect to Afghanistan.
I would just say that I think you raise an excellent point
in distinguishing between, and asking the question of whether
Islamic--technical assistance on the legal system might be more
effective coming from Islamic lawyers than from Western
lawyers. And I think that is--the larger point there--we face a
decision generally in providing assistance of whether we want
to--our goal is to set it up to look like our system--which in
many cases implies a Herculean effort, because they are coming
from very different starting points not only in terms of
economic development but culturally, religiously, legally--or
whether we want to focus on what is there and what other
resources are much closer to what is there in order to produce
incremental improvements.
Mr. Foster. Mr. Mawji, did you hear the question?
Mr. Mawji. Yes, I heard the question; and I think it is an
excellent question.
I think we have to divide the legal system or the rule of
law into various parts. I think there are certain parts of the
legal system which we can associate with internationally. You
know, do we have a policy for investment? Do we have a policy
for trade? And so on and so forth.
I think when the Islamic issues come in is when it comes
into conflict resolution amongst communities, amongst personal
wealth, and so on. And the constitution of Afghanistan
certainly makes provisions for the Islamic system to be used
under different interpretations of the faiths--for example, the
Salafi and the Shia.
Now, while there might be particular areas that need to
developed specific to this case, but in the context of why
there is Islamic law or how it has been used in Islamic
countries, I think we need to draw on countries like Malaysia,
for example--Malaysia is an extremely progressive Islamic
state--some countries like Bahrain in the Middle East, who has
also sort of made progress. And I think your point is extremely
valid, because we should welcome or draw in the inputs of these
countries in trying to help Afghanistan shape its legal system.
Mr. Foster. Mr. Mawji, I was interested also in your
discussion of the difficulty of obtaining clear title to many
plots of land as being an impediment to economic development. I
remember my father talking about a plot of land that was
claimed by six different people, and they have been arguing
about it for generations as to who actually owned it. And it
strikes me there may be an opportunity for us to make a
contribution by actually establishing a central data base of
who owns what. This is a sort of technical project that the
United States actually could help out with. And then, of
course, you would have to go through and make all the
independent educations. And I was wondering if you thought that
was a promising avenue for United States or foreign assistance.
Mr. Mawji. I would agree with you, sir. I think that is an
extremely needed area in Afghanistan. Land registration or land
ownership goes under the title deeds here. They call them
Khawalas. And you have a huge set of issues. You have
corruption and faith Khawalas. You have had two administrations
in Afghanistan, the Taliban and the pre-Taliban. And a lot of
refugees have moved over to Pakistan. Iran's land was taken
over by the Taliban, resold, and new Khawalas given.
And the system of land rights amongst families here: Your
father would then pass it on, divide the land equally amongst
children, and there is often disputes amongst children as to
how much land is owned by who because there is no clarity of
documentation.
And I think any effort that can be made regarding trying to
bolster up the municipality and other areas of governance, is
very valuable. The Ministry of Urban Development should look at
land administration, so that it becomes a credible document
from which they can turn land into capital.
Mr. Tierney. Mr. Murphy, you are recognized for 5 minutes.
Mr. Murphy. Thank you very much, Mr. Chairman.
I missed the opening remarks, so, Mr. Chairman, I don't
know if you mentioned this, but, Dr. Usman, in our trip that
Chairman Tierney and myself and a few other members of the
committee took earlier this year, we heard stories about
farmers who were spending more money paying customs, charges,
paying tariffs, paying different forms of extorted payments as
they transported their goods through the country to whatever
port the goods were going to, to an extent that it essentially
canceled out the benefit of producing the good in the first
place, which was consequently driving people to the illicit
trades in which they were not responsible for the transport of
those goods.
Can you talk a little bit about where we stand today in
terms of the difficulty of transporting agricultural products
throughout the country and what we need to be doing as a
government in terms of trying to make that process easier?
Dr. Usman. I think the situation from the time I was there
has been, as I heard, improved a lot. And generally, the
observations that you had, were true. But especially in the
case of Buddhist trades, supposed trucks that are taking fruits
through Pakistan, and several times the truck is unloaded and
loaded. By the time it reaches India, its cargo is completely--
especially grapes--rotten. And lately there has been some
agreements to improve the situation.
And one of the things that implicitly I indicated in my
testimony was that these farmer associations, producer
associations, marketing associations have to be firm, because
farmers in Afghanistan are small and weak. That way, through
their association and in direct contact with the final
customers, then they will find a sort of political pressure,
which they can utilize to see these things improve. And at the
present time, we have something like 1,000 of these
associations, but they are so weak financially, technically,
that they could not stand and fight for their benefit. I think
it needs both from the government side and from the grassroots
side, and we have to mobilize the people.
Thank you.
Mr. Murphy. Let me ask a more general question to the
panel, and that is this: I think whether we are talking about
our military or diplomatic or economic progress in countries in
which we occupy, benchmarks continue to be a problem in terms
of trying to identify our levels of success. So as you look 5
years out, maybe even 10 years out, to the Afghan economy, what
are the benchmarks for success that we should be looking at to
try to decide whether our investment there has made the kind of
gains that we hope? What are the indicators that we need to be
looking at in a 5- or 10-year timeframe that help us understand
the success or failure of our mission there?
Dr. Usman. I think the benchmark from, let's say,
agriculture--80 percent of the population lives in the rural
area, and their life is directly and indirectly connected with
agriculture--the benchmark there would be productivity in
agriculture.
Supposed, we have 95,000 hectares of land which is devoted
to orchard. If we see that the benchmark is to double that
hectarage, and according to the expert, even the present
orchard could be increased, yield could be increased or could
be doubled, if that would happen, if the production of wheat
per hectare reached the level of neighboring countries, then we
are really successful on the national level. Not on the small
project here and there, that would be temporary and not long-
lasting sorts of indicators that would make that country stand
on its feet.
Thank you.
Mr. Murphy. Mr. Pam or Ms. Callear.
Mr. Pam. Well, I would like to, with your permission,
interpret your question more broadly than just benchmarks for
the economy, but benchmarks appropriate to the civilian side
effort more broadly.
The benchmark that I--in my written testimony--suggest is
budget execution performance. Which is to say how much they are
spending through their system. It is--obviously, just merely
spending money is a very gross measure, as we know. But in my
experience, using a metric like that would have the benefit of
focusing the Americans working in the country who are supposed
to be building the capacity of the Afghan institutions,
focusing them on ways to improve that specific element of
performance. And it is something that everyone understands.
And if the number will start out low--I think there was a
reference in previous testimony to the Afghans only being able
to spend 40 percent of their development budget. Those numbers,
numbers like that, are common in the developing world. Budget
execution is a problem in every emerging market.
But you start with a number like that, you give the effort,
the objective, the task of doing what is necessary to improve
that number so that money does flow more effectively through
the system with less leakage and producing more results at the
end. And I think what you end up with is both a more focused
and effective U.S. effort on the one hand, and an Afghan
government which is producing more results on the other.
Mr. Murphy. Thank you.
Mr. Tierney. Thank you, Mr. Murphy.
I look at the testimony of all of the witnesses and I see
one common tie about credit, availability of credit.
Mr. Usman spoke about it, about enhancing government
credibility with better credit in the agricultural realm on
that.
Mr. Pam talked about the need to better use Afghan
capacities, that there was plenty of entrepreneurial spirit out
there, but capital was a problem on that.
Mr. Mawji talked about expanding significantly the outreach
of a broad range of financial services throughout the country.
And, Ms. Callear, you talked about it as well and talked
about the Afghan Growth Fund and expanding the capital flow to
small and medium enterprises in Afghanistan.
So let me start with you, Ms. Callear, because we haven't
heard enough from you. Does the infrastructure exist to
increase that flow of capital? Is there enough structure there,
for the writing of these types of loans to the administration
of the loans? What about security or collateral on those loans?
And just round that out for anybody to comment. What would a
well-run enterprise fund look like if we decided to go in that
angle?
And then, at the end, I will ask Mr. Pam to talk a little
bit about his comment that enterprise funds have failed
elsewhere.
Ms. Callear, can you help us there?
Ms. Callear. Yes. Well, we are certainly--I think what we
are finding is a surprising level of demand. So there are--as
many have said, there is a real entrepreneurial culture. But
what has been missing is the ability to really apply that
desire in a very practical way, because access to capital has
been lacking.
But it is more than just the capital. It is also providing
the various other kinds of support. We were talking about the
need for proper accounting and so on. So it is a business-
building effort that requires capital, but also various types
of technical support.
And I think we have also said it is important to make sure
that the reach is beyond Kabul. We are trying at a limited way
to do that. I think, in order to reach some of the other areas,
we would certainly need some additional support. But it is a
very important thing. Because I think otherwise, in answer to
one of the other questions, a lot of the potential economic
benefit is being left on the table because you are not doing
the value addition in country. You are exporting raw product,
or you are not getting the distribution to the places where it
needs to go.
So the demand is there. It is challenging. But these
challenges are not all unique to Afghanistan. And I think in
terms of what is needed, whether it is an enterprise fund or
more--for larger investments or more smaller investments, it is
the combination of the capital and technical assistance, and
then trying to structure it all in a way that is culturally
sensitive in an Islamic culture, as well as dealing with the
constraints that one has in the legal system. But there are
ways to do it, and you can get good repayment rates at the
micro finance level, and we found at the SMA level, as well.
Mr. Tierney. Dr. Usman, what would that loan situation look
like in Afghanistan, that might be different than a Western
loan? Ms. Callear just mentioned that it might be good to be
culturally sensitive in the way that we are getting this money
out to the entrepreneurs, and the terms in which it is
distributed. How might that differ from what we, in the West,
would consider a loan prospect?
Dr. Usman. Well, you know that in Afghanistan--let's say,
for the example, at the time of the king--we had three or four
specialized banks. There was Agriculture Development Bank, AID
Bank, and Industrial Development Bank. And I don't know who
went there and came with the idea that this specialized
banking--we don't have experience worldwide. This comes from
Afghanistan, too. And without actually considering the idea, we
look for experience, that actually, this Agriculture
Development Bank received three loans, from the time of the
king and the time of Daoud, from the World Bank, and they are
handling it fine. The people, repayment was picking up and the
farmers were really healthy in Afghanistan, you know.
And now all--the Minister of Agriculture, everywhere they
go, the people ask, where is credit for us? And in the form of
vouchers, the government gave, I think, with the help of
donors, something like $100 million in vouchers, and collection
of that is negligible. But the people are used to getting the
loan, like here, and paying the interest and paying it back.
If you have the technical capacity, if you improve the
accounting system, improve the banking system, and especially,
in agriculture, if you connected these associations--farmer
associations--with--the bank board and put them to work,
eventually they would become the owner of the bank. It would be
a really a good system.
The system is working here. In some other countries that I
have seen, it is working. Supposedly it is working in Egypt.
The Agriculture Development Bank there, they were giving $5
million a year as lending to the farmers and to the
agribusiness people, and they were successful.
Mr. Tierney. Thank you, sir.
Mr. Flake.
Mr. Flake. Thank you.
Mr. Usman, just to followup, to what extent are the NGO's
that are operating locally purchasing food from local vendors
and farmers?
Dr. Usman. Well, there was--for national security purposes,
I think at one time they--if I can remember correctly, they
bought something like 10,000 or 15,000 tons locally. But
Hindus, so far as I see, they don't buy from local markets. And
that is a difficulty; but I say there are international markets
right in Afghanistan. In Afghanistan, like the soldiers are
there and the foreign community is there. Then, if we built the
standards, laboratory facilities, certificates, and all the
documents, then that would open up for Afghanistan products
inside the country. And then later on, like FDA, you could
establish quality control checks for both domestic and
international products. Right now, the difficulty is that even
wheat is imported from Afghanistan's neighboring countries.
Mr. Flake. Mr. Pam, how realistic is it to move
significantly from poppy production, over a sustained period of
time? And in that question is the problem the government--I
sensed it in the couple of visits that I made to Afghanistan.
From the first visit to the second visit, there seemed, at
least with the President's office, less of a commitment to
fight the drug war, if you will, and less candor, in terms of
what is going on outside of Kabul.
To what extent--is it going to be difficult to offer
incentives? How long is it going to take to move to--whether
it's pomegranate or whatever else--to offer something
sustainable, particularly if the government doesn't seem as
committed as perhaps they should be to move away from poppy
production?
Mr. Pam. Congressman, I am not an expert on the
agricultural sector and that issue.
Mr. Flake. In terms of the government though, in terms of
the government's commitment there, do you sense--and this goes
back to the problem of how much do we run these programs
through the government. Do you sense an increased commitment or
lessened commitment over the last couple of years to transition
away from poppies?
Mr. Pam. I am not sure. I haven't had any discussions with
the government on that subject.
Mr. Flake. Dr. Usman, you look like you are itching to
answer. Go ahead.
Dr. Usman. I think, based on my experience, the government
is fully competent to actually find alternatives to poppy
production. But we have to--you know, there is one commitment
on the paper, one actually that work would be done toward
accomplishing it. But the government has to build the right
infrastructure to actually conduct that activity. The
infrastructure is not there.
There was at the time of the King and the time of Daoud,
when we had 26, or 24 such stations, 14 sub research and 7 main
research stations. None of those research stations are working
now.
You have to produce seedlings. You have to produce
seedlings somewhere. You know, it is a good idea to provide
free seedling for the farmers. But then you have to provide
proper technical support to the farmers after they grow. There
is new variety of almond that would bear fruit, I think, in 3
to 5 years. Then, with that, then you have to teach the farmers
how to do mixed farming.
But the unfortunate thing is that a lot of experienced
farmers that migrated outside of Afghanistan, they died; and
they could not pass their skills that they had to the new
generation. And the government, does not have capacity and
means to do it or the commitment. But we have to establish, as
you said, the infrastructure for it. The infrastructure is not
there now.
Mr. Tierney. Thank you.
Thank you, Mr. Flake.
Mr. Kennedy, we passed you up on the first round because
you stepped out for a second. We apologize for that. We
recognize you for 10 minutes.
Mr. Kennedy. No problem. Thank you, and thank you for your
commitment to this issue and your work. I welcome the
panelists.
Just following up on that past question, it is hard for me
to think that the government is really committed to the
restriction of poppy growth when you see the enormous economic
value that it provides for the country of Afghanistan. What is
currently the percentage of poppy crop in Afghanistan as a
percentage of overall poppy growth in the world? Do you know?
Dr. Usman. Well, I know I have my information from the
newspaper, probably so does Congress. It is 92 percent or
something like that. But I think we have to give to the farmers
an improved agriculture package.
And Ms. Callear was mentioning--you know, the time I was
there, even the dry fruit and nuts, which could compete with
the poppy--because in India they really appreciate and pay
higher prices for the almonds of Afghanistan--if they made a
rough budgeting analysis, it was two hectares of, supposed,
almond that could substitute on a profit basis for one hectare
of poppy. And with the value added, and you would have that
processing, packing, cleaning, grading right in the farmer
field and involve the farmers there, then probably it could
compete on economic terms.
But, right now, 70 percent of the irrigated land is devoted
to wheat production. And with wheat, it takes one hectare of
poppy to substitute it with 14 to 24 hectares of wheat.
Then, with this divergence, there would be problems all the
time; and sometimes, for the politician, it would be difficult
to convince the people to actually apply new methods. But if
you go in this other route, then probably the government would
make their argument clearly with the people.
Mr. Kennedy. Then why are we not doing that, the nuts and
the fruits?
Dr. Usman. Well, as I was saying, sir, we don't have the
infrastructure to do it--the research, the extension, the
technology, the technical know-how of the work. We have to
build it.
In the last 7 years, you know, I have said that you would
see in two districts, the Hindu is involved in sort of
upgrading the wheat. But then the proper seed for it was not
there to actually give to the farmers.
Mr. Kennedy. Well, they have done it. In Pakistan, from
what I understand, we have been working with the agricultural
sector--because Pakistan had a huge, huge poppy crop. And they
have worked very hard to try to eradicate it doing exactly what
you said, substituting with the nuts and fruits.
Ms. Callear. And I can see----
Mr. Kennedy. And they have successfully done that in many
parts of Pakistan. So--and if it takes so long to do the wheat
and the wheat is a ``no-go'' in terms of the farmers, then I
think we should just move right on to what the local people
think works best. And if it takes the infrastructure, that is
what we need to do. So I think we should listen to that message
loud and clear and get with the program.
Ms. Callear. And the nut processor that we have lent funds
to is telling us that they cannot meet the demand in the Indian
market for the higher-value, better-quality processed nuts. And
that goes directly to his point, that the agricultural
infrastructure needs to be there to support the production, so
that when you have the capital for the processing facility and
the ability to bring that value added back to the farmer level,
you will be able to do it if you invest it at the agricultural
level.
Mr. Kennedy. What I am trying to figure out, Mr. Chairman,
is why there is a missing connection here. Why we are forcing
this wheat thing on them, when it is clear that the locals are
not really into it.
Mr. Tierney. If the gentleman will yield, that is exactly
why there are two parts to this hearing. One part is to talk to
these folks that are with this morning, and the second part is
going to be talking to the administration. I don't think they
can answer for the last 7 years, but by the time they come in
at the summer, the fall, they will have to answer for January
20th until now whether or not they are following the wiser
course, or continuing on the less wise course.
Mr. Kennedy. Let me ask you just another question on health
care.
Dr. Usman. And in continuation of your answer--You know, we
have 4.5 million hectares of dry land for farming. If we
supposedly gave to the farmers--provide to the farmers--
technology to increase the yield, average yields from 0.6 to--
dry land Afghanistan is getting to 2 tons that the neighbor is
getting it, this 4.5 million hectares would come--would bring
something like 8 to 9 million tons of grain. Afghanistan only
needs something like 6 million tons. But that technology
unfortunately, actually, is not there.
Mr. Kennedy. Let me ask you with respect to land mines. Is
there a problem when you are doing any of this agriculture with
land mines left over from the former Soviet war?
Dr. Usman. Well, I think that has been the main problem.
Farmers are doing this with a lot of casualty anyhow, because
of the necessity. But land mines in some parts are still there.
Mr. Kennedy. Would it be useful for us to try to get the
Physicians Without Borders, those who do the rehabilitative
medicine, to try to help do more satellite communications, so
forth, help consult with doctors there for more rehab medicine,
so the farmers and the families and the like that happen to
get----
Dr. Usman. Sure.
Mr. Pam. Could I say something on this point about
agriculture? I think Dr. Usman makes an excellent point in
emphasizing the need for infrastructure. And I think the need
for infrastructure that he is referring to it is worth noting
that it's state infrastructure. The need to rebuild an
agricultural extension system within Afghanistan is the need
for a national program. This could be part of the--this could
be one of the key sectors that the road maps described.
Mr. Kennedy. Can you get us some of the statistics on these
entries as a result of land mines, and what would be your
proposal to see what NGO's could help in terms of
rehabilitative medicine for those farmers and the like who get
injured as a result? Because I understand Afghanistan is
littered with land mines, and I just want to know what we are
doing to help in rehabilitative medicine.
Mr. Pam. I wasn't saying anything about land mines.
Mr. Kennedy. I know you weren't. I am asking you now,
because you are part of the Sustainable Development of the U.S.
Institute of Peace to help us with this.
Mr. Pam. Certainly.
Mr. Kennedy. And in terms of infrastructure for health
care, there is very little drinking water and sewage. What is
going on with that for the farmer and for the population there
in terms of public health? Could you tell us about what is
going on there, in terms of building infrastructure? I mean,
you can't have much of the farming life and community if people
can't have drinking water.
Mr. Pam. Yes. I am afraid I can't give you any detail on
the efforts that--the water efforts in particular. But I can
look into it, along with land mines.
Mr. Kennedy. OK.
Mr. Mawji. Could I make a comment?
Mr. Kennedy. Please.
Mr. Mawji. Just a couple comments. One referring to the
question on health and water. The other one also on narcotics.
And just to say that, on the narcotics side, our experience has
been in Afghanistan that it is very, very difficult to compete
with any kind of agricultural productivity in the wake of just
the sheer income revenues that are coming in from narcotics.
And, for example, we would play $2 a day just to build a
canal or a road for unskilled laborers, and the narcotics poppy
growers will pay $15 a day plus three meals to harvest the
poppy in the same construction period, during the year. And we
really have to ask ourselves, do we compete with narco wage
prices?
And I fear that while the point has been made on
agriculture--and some are absolutely valid, and I do believe
that the infrastructure needs to come into play in terms of
improving the agricultural prospects--we will not be able to
really address the narcotics issue until there is a sense of
consequence for the people who grow it. And I fear there is a
large amount of impunity at this point in time and with very--
we have various carrots, but very, very little sticks to stop
them.
And experience has also shown that large-scale eradication
doesn't really help. It makes the poorer, poorer. It doesn't
affect the rich.
So we really need to look at a multi-pronged strategy that
looks at targeted eradication, but that also looks at naming
and shaming bad actors, interdicting routes that are quite
traditional--I mean, I could tell you in areas where they
operate in northeast in Afghanistan, and people--farmers are
able to tell us what kind, how much narcotics cross and at what
point in the border. And the reason they can do it is because
it is such common knowledge. There is pure impunity. There is
no stick to go with narco production.
With regards to the second question on water and health
care, I have to say that the basic package of health services
provided by USAID have gone a long way in terms of reaching out
to basic health care in the villages.
The whole notion of water has been less well tackled. Yes,
it is one of the smaller investments that one makes, $100,000,
$200,000 in a village or a cluster of villages, and you drop
child morbidity by 14 or 15 percent; and it is something that
we have been not pioneering, but certainly advocating for, with
other colleagues working in Afghanistan, that providing basic
water supplies is extremely important. But the government also
needs to look at the whole issue of water supply in a much
broader policy level and at how we are going to tackle the
needs for water in what is a very, very diverse geographic
landscape in Afghanistan, from the Pamirs and the Hindu Kush
going north-northeast, to almost a desert situation in the
south, where the solutions to the problems are going to be very
different.
Thank you.
Mr. Tierney. Thank you for that; and thank you, Mr.
Kennedy, for your questions. They were well placed.
One of the interesting notes that our expert on the staff
here says: Of the $37 billion spent in Afghanistan, $37
billion, less than 1 percent has gone to agriculture. Less than
1 percent. And that was 80 percent of the economy. So for all
of our witnesses, I guess the staggering point--if I can speak
for Mr. Flake as well--to us would be, who is doing the central
planning here? Who is doing the overarching view of what needs
to be done that is important? Who is deciding what projects are
the ones that ought to be prioritized? And then making sure
that something is done.
I know that Agha Khan has done significant work there. They
are the largest private investor in Afghanistan. So is there
any functioning entity, comprehensive planning group that pulls
all of the NGO's, all the private investors, all the government
investors together and says this simple thing like spending a
couple hundred thousand dollars on a cluster of villages is
going to be that helpful for public health? Who talks about the
land mines and what we might do on that effort, that talks
about putting more than 1 percent of all the money that is
coming in toward 80 percent of the project? That talks about,
as Ms. Callear indicates, getting more capital into the flow.
Just from each of the four of you, very briefly, because I
understand we are back in session on the floor. But what do you
know about whether or not that kind of an entity exists, what
the work has been doing or what has been planned in that
regard?
I will start with you, Mr. Mawji, please.
Mr. Mawji. It is a very, very valid question.
I have to say that there is much better, increased
coordination in recent months, particularly under the
leadership of the United Nations. And I think the United
States, together with the Government of Afghanistan, has tried
to look at much more concerted, coordinated mechanisms that
allow us to be more accountable, but also look at specific
priorities within the rural areas.
But I have to say a caveat, because I do believe that,
while there is a lot of rhetorical thinking and coordination
about it, we don't really, say, have a Kandahar development
forum or we don't have a Helmand development forum or a
Badakhshan development forum that sits in Kabul, that sits in
the province in a systematic fashion and says what the tactics
are that we need to bring in, and how the investment is going
to come in to make a real difference in the quality of the
people's lives.
Mr. Tierney. Thank you.
Ms. Callear.
Ms. Callear. I would have to say that we have worked fairly
independently in terms of what we have done. We have gotten
good support in terms of access to the credit line that we are
now using for lending through OPIC. But in terms of broad-based
interaction on the ground with the eight agencies there, there
really hasn't been much. We try to stay in contact. But trying
to figure out what exactly you are asking, what's that
strategy, it is not----
Mr. Tierney. I am not saying it's your responsibility,
because I commend the work that you do. But the fact of the
matter is, commending the work that you do, you may not be
doing the highest priority work for that society. So as much as
you are doing, and as well as you are doing it, and as hard as
it is, nobody has helped you focus on what their needs are.
Ms. Callear. And I think there can be more coordination,
for sure.
Mr. Tierney. Absolutely.
Dr. Usman.
Dr. Usman. Yes, sir.
I actually was working in the Ministry of Planning before
the Russian invasion. And at that time, one, it was our
responsibility to see that priority is taken into
consideration; and based on the priorities, we controlled the
budget and then controlled the budget quarterly, how much they
spent, how much work was accomplished. But that ministry--now I
think they call it the Ministry of Economy, and that is getting
quite weaker and probably could not do this job.
And at the time I was there, President Karzai's government
under the proviso that came by name of his authority, they were
doing that job. But they didn't have that much expertise to
actually conduct that job properly.
Now the U.N., with the help of Afghans, are doing it. I
think it is really a good step to actually create something
like that, to actually see and coordinate the activity. Even in
each ministry there should be--you know, like one of the
difficulties we had in Ministry of Agriculture, there were 20
donors, and each one of them based on their country policy, one
of them going one direction, another going another direction,
another going another direction. There was not that much
coordination, and there was not that much capability to
coordinate with the ministry. And I think that should have to
be done and that capacity has to be stringent at the macro
level, and also the micro and the factual level.
Thank you, sir.
Mr. Tierney. Part of my understanding is that Mr. Holbrooke
is supposed to be working in this effort, and we certainly want
to find out how this is going.
Mr. Pam, do you want to just wrap that up, with Mr. Flake's
indulgence?
Mr. Pam. I thank you for the question. I think it is one of
the most important questions that we have to ask, and I agree
with the way Dr. Usman has just framed it. I addressed this in
my written testimony.
When development intervention A is the priority for donor
X, and development intervention B is the priority for donor Y,
and in the case of Afghanistan you have to multiply that A
through Z, double A through double Z, to include all of the
countries, all of the NGO's operating in the country, what you
have is everyone doing A through Z and double A through double
Z and a very incoherent approach.
Now, in theory, you could have an international body like
the U.N. Assistance Mission in Afghanistan performing that
coordinating function, and UNAMA has tried. But UNAMA doesn't
have the authority to direct the programs of individual donors.
So my conclusion is that the only way to accomplish that
kind of coordination is to fall back on the entity that has the
strongest authoritative claim to be responsible for
coordinating and prioritizing, which is the Government of
Afghanistan itself. The system worked when it was the Ministry
of Planning, but the Ministry of Planning and the Ministry of
Finance have both been taken out, have been disempowered. And
my recommendation to focus on Afghan public finance and budgets
is in part motivated by the desire to find a way to put them
back in the loop, in order--in substantial part--to solve this
coordination problem.
Mr. Tierney. I guess that is part of the tension that we
find up here. If we are to look at trying to put the money
through the Afghan Government, because that is the way they are
coordinated around their budget priorities, and then to see
that one of their priorities is to weaken those 30 agencies
that would probably be best at coordinating all of the various
sorts, puts a conflict up there. And the Karzai government in
particular, having weakened those agencies, as Mr. Mawji said,
you know, having no punitive aspect at all to those people that
are transporting the opium, like not necessarily the growers
but those on the chains above that, just letting them get away
with impunity, those kinds of decisions make it difficult for
us up here to say, OK, let's put all our eggs in that basket.
It seems to us it is going to take a lot of work,
particularly where Dr. Usman had testified earlier, a lot of
that human capacity no longer exists. They are either moved out
of country for fear of their physical condition, or their
families have been killed in some of the conflicts, or have
gone because there were no jobs--nobody was taking advantage of
their skills and moved on.
Mr. Pam. May I just throw in one more?
Mr. Tierney. One more frustration? Go ahead.
Mr. Pam. Well, a potential part of the problem, which is--I
understand your reservations about putting all your eggs in a
basket that you have finite confidence in. But this is why I
think that part of the solution might lie with fiscal
decentralization.
And, in my terms, creating multiple entities that have
budgets and that have some--that are closer to the people and
that have responsibility for providing some of the--performing
some of the governmental functions, providing some of the
essential services, that then creates a competitive environment
where we are not solely reliant on the national government.
Neither we nor the people of Afghanistan are solely reliant on
one government, and instead can sort of go to multiple
governments and try to encourage at least some of those
governmental entities to perform.
Mr. Tierney. And I guess that focuses even more importance
on the number of civilians and the nature of the civilians'
experience that the President has recommended sending in, as
well as members that the international community is sending in.
Mr. Flake.
Mr. Flake. No further questions. Just to comment.
I think you hit on the most relevant point here. There
seems to be testimony and need--and we have heard this again
and again and again--I think, for greater coordination. And so
I am very anxious to hear the administration's plan, come the
fall. I hope that they are monitoring this hearing to get a
taste of your testimony and what you have said here. So thank
you.
Mr. Tierney. Thank you, Mr. Flake. Thanks for your
participation in the hearing and your ideas.
I want to thank all of our witnesses. Mr. Mawji, thank you
from afar. We have really benefited from having your expertise
and congratulate you on the work that your agency is doing in
Afghanistan and elsewhere.
And the witnesses that are here today, thank you very, very
much for both your written testimony, your conceptualizing of
this, helping us frame the questions as well as some of the
answers and your time spent here this morning.
I agree with my colleague, Mr. Flake, that we really want
to grill the administration on where they are or where they are
going on this. I think we might expand it out, too, as to where
some of the international organizations are playing in this.
Where is the U.N. in terms of coordination? What other
international agencies might be playing a role in that? Or at
least if Mr. Pam says that nobody seems to have the authority
to do it, who has had the best capacity to step up and suggest
that we all volunteer to work together and set up some
framework up for that?
Thank you very much. We are privileged by your testimony
and appreciate it a great deal. Meeting adjourned.
[Whereupon, at 11:56 a.m., the subcommittee was adjourned.]
[The prepared statement of Hon. Mike Quigley and additional
information submitted for the hearing record follow:]
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