[Senate Hearing 112-201]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 112-201
 
          AFGHANISTAN: RIGHT SIZING THE DEVELOPMENT FOOTPRINT 

=======================================================================

                                HEARING

                               BEFORE THE

                     SUBCOMMITTEE ON INTERNATIONAL 
                        DEVELOPMENT AND FOREIGN
                   ASSISTANCE, ECONOMIC AFFAIRS, AND
                 INTERNATIONAL ENVIRONMENTAL PROTECTION

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 8, 2011

                               __________

       Printed for the use of the Committee on Foreign Relations


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                COMMITTEE ON FOREIGN RELATIONS         

             JOHN F. KERRY, Massachusetts, Chairman        
BARBARA BOXER, California            RICHARD G. LUGAR, Indiana
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
BENJAMIN L. CARDIN, Maryland         JAMES E. RISCH, Idaho
ROBERT P. CASEY, Jr., Pennsylvania   MARCO RUBIO, Florida
JIM WEBB, Virginia                   JAMES M. INHOFE, Oklahoma
JEANNE SHAHEEN, New Hampshire        JIM DeMINT, South Carolina
CHRISTOPHER A. COONS, Delaware       JOHNNY ISAKSON, Georgia
RICHARD J. DURBIN, Illinois          JOHN BARRASSO, Wyoming
TOM UDALL, New Mexico                MIKE LEE, Utah
              Frank G. Lowenstein, Staff Director        
        Kenneth A. Myers, Jr., Republican Staff Director        

                         ------------          

           SUBCOMMITTEE ON INTERNATIONAL DEVELOPMENT        
           AND FOREIGN ASSISTANCE, ECONOMIC AFFAIRS,        
           AND INTERNATIONAL ENVIRONMENTAL PROTECTION        

             BENJAMIN L. CARDIN, Maryland Chairman        

ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
CHRISTOPHER A. COONS, Delaware       MARCO RUBIO, Florida
RICHARD J. DURBIN, Illinois          JAMES E. RISCH, Idaho
TOM UDALL, New Mexico                JAMES M. INHOFE, Oklahoma

                              (ii)        

  


















                            C O N T E N T S

                              ----------                              
                                                                   Page

Cardin, Hon. Benjamin L., U.S. Senator From Maryland.............     1
Corker, Hon. Bob, U.S. Senator From Tennessee....................     3
Feldman, Daniel, Deputy to the Special Representative for 
  Afghanistan and Pakistan [SRAP], Department of State, 
  Washington, DC.................................................     4
    Prepared statement...........................................     6
Thier, Alex, Assistant to the Administrator and Director of the 
  Office of Afghanistan and Pakistan Affairs, United States 
  Agency for International Development [USAID], Washington, DC...     8
    Prepared statement...........................................    10

                                 (iii)

  


          AFGHANISTAN: RIGHT SIZING THE DEVELOPMENT FOOTPRINT

                              ----------                              


                      THURSDAY, SEPTEMBER 8, 2011

        U.S. Senate, Subcommittee on International 
            Development and Foreign Assistance, Economic 
            Affairs, and International Environmental 
            Protection, Committee on Foreign Relations
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:33 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Benjamin L. 
Cardin, presiding.
    Present: Senators Cardin, Menendez, Udall, and Corker.

         OPENING STATEMENT OF HON. BENJAMIN L. CARDIN,
                   U.S. SENATOR FROM MARYLAND

    Senator Cardin. Good afternoon, everyone. The Subcommittee 
on International Development and Foreign Assistance, Economic 
Affairs, and International Environmental Protection will come 
to order. Let me thank Senator Kerry for his help in arranging 
this subcommittee hearing to deal with Afghanistan, Right 
Sizing the Development Footprint. I also want to thank Senator 
Corker for his cooperation in convening this hearing.
    We are at a critical juncture in our role in Afghanistan as 
we approach the beginning of U.S. forces drawdown in 
Afghanistan. The United States will begin to transition toward 
a more robust civilian presence; and therefore, it is paramount 
that we clearly define our position in the region. We must 
emphasize the importance of assistance as a tool in promoting 
the stability of that country.
    But the United States must also insist on accountability 
for this assistance, accountability for the money spent, and 
accountability for the effectiveness and success of these 
programs. The U.S. taxpayers and the Afghan people deserve 
nothing less. We must understand the full impact of our 
assistance, both positive and negative, on the Afghan people.
    When done correctly, foreign assistance can fundamentally 
change countries for the better and is a vital tool in our 
national security toolbox. When misspent, it fuels corruption, 
distorts markets, undermines the host government's ability to 
exert control over resources, and contributes to insecurity and 
instability.
    In the last few years, the United States has spent more on 
foreign aid in Afghanistan than in any other country. And after 
10 years and roughly $18.8 billion spent, we have achieved some 
real successes. There has been a sevenfold increase in the 
number of Afghan children attending school and a significant 
improvement in health care. It should be noted that the amount 
of money spent in 10 years on aid in Afghanistan is about the 
same as 6 weeks of military spending there.
    But we should have no illusions. Serious challenges remain 
that will prevent us from achieving our goals unless they are 
addressed. Given the considerable capacity and security 
challenges on the ground, the State Department and USAID have 
performed admirably and have assumed considerable risks in 
support of the President's civil-military strategy for 
Afghanistan.
    However, moving forward, our assistance can be more 
effective and should meet three basic and necessary conditions 
before it is spent. It should be necessary, achievable, and 
sustainable. Unless these conditions can be met, I am skeptical 
that a comprehensive strategy can be crafted that will help 
build a government and society the Afghans would be willing to 
support and carry on after the United States leaves.
    In 2001 the United States intervened in Afghanistan to 
destroy al-Qaeda's safe haven and pursue those who planned the 
September 11 attacks on our Nation. Those initial objectives in 
Afghanistan have been largely met. We have removed the Taliban 
government that sheltered al-Qaeda. We have tracked down and 
killed Osama bin Laden. We have disrupted the terrorist network 
allied with al-Qaeda, and we have hunted down those who planned 
the 9/11 attacks.
    Now a different responsibility remains, ensuring the Afghan 
people can govern and secure themselves, while working to 
increase the capacity and empowerment of all their citizens to 
become contributors to their own governance. We are here today 
to explore how we achieve those goals.
    In June this committee released a report about the status 
of United States assistance in Afghanistan, including the level 
of corruption and inefficiencies in United States assistance in 
Afghanistan. As a part of this hearing I would like to hear 
concrete steps have been taken to address the problems that the 
committee's report brought out.
    Congress has previously put conditions on the use of some 
funds, including concerns about corruption, the ability to 
strengthen accountability, and the role of women. We will want 
to know how the agencies are complying with the restrictions 
that Congress placed in the appropriations legislation.
    I want to make particular note of the status of women. 
Perhaps no country highlights the challenges facing gender 
equality as does Afghanistan, including among the lowest life 
expectancies and literacy rates in the world. It also has some 
of the highest incidents of domestic violence and lack of 
political inclusion. We must continue to press the Karzai 
government on this priority and build the capacity and 
sustainability of grassroots women-led organizations.
    Integrating women into Afghan society and government is not 
only the moral thing to do, but is also smart and strategic. If 
women are marginalized in the political process and 
reconciliation, there will be no lasting peace. Today I would 
like to hear how in practice U.S. programs are implementing our 
commitments to improve this situation.
    The State Department and USAID are spending approximately 
$320 million a month on foreign aid in Afghanistan. While a 
small number in comparison to our military budget there, as we 
work to reduce the budget deficit and rebuild our economy it's 
important to examine how this money is being spent. We have a 
responsibility to the Afghan people, but also a responsibility 
to ensure that the hard-earned taxpayer money is being used as 
it is expected.
    The World Bank estimates that today as much as 97 percent 
of Afghan gross domestic product is derived from spending 
related to international military and donor community presence. 
Afghanistan could very easily suffer a severe economic 
depression when foreign troops and donors leave, unless there 
is proper and realistic planning for its transition.
    Additionally, I have concerns about the reliance on 
contractors in Afghanistan. Numerous audits have raised serious 
concerns about the lack of robust oversight. The corruption in 
Afghanistan has diverted contractors resources and some of 
these funds have ended up in the hands of insurgents. 
Corruption costs United States lives and threatens the future 
of Afghanistan. We must work to improve the capacity of the 
Afghan Government and civil societies to blunt these efforts.
    True development in Afghanistan will only succeed if 
Afghans are legitimate partners and there's a path to 
sustainability. Critically, we must continue to measure the 
impacts of our programming, enabling us to know what is working 
and what needs to change. Moving toward 2014, we cannot 
continue with business as usual when it comes to assistance. To 
that end, I am heartened that Administrator Shah issued new 
guidance for USAID engagements in Afghanistan earlier this 
summer which calls for bringing stability to Afghanistan and 
confidence to the Afghan people in their government, assisting 
the Afghan people to build more capabilities, inclusion, and 
pluralistic governance that will help ensure sustainability. We 
also need to find ways to encourage both public and private 
sector investments.
    I look forward to hearing more about this from the 
witnesses we have today. I want to thank both of our witnesses 
for being here, and I will introduce them shortly. But first 
let me turn to Senator Corker for his opening comments.

             OPENING STATEMENT OF HON. BOB CORKER,
                  U.S. SENATOR FROM TENNESSEE

    Senator Corker. Mr. Chairman, thank you for calling the 
hearing. I think most people in the Senate know I don't make 
much in the way of opening comments, but I do thank both the 
witnesses for being here. I spent a lot of time with Mr. Thier 
yesterday going through some of the points he's going to make 
today, but I think almost everybody in the Senate has been to 
Afghanistan multiple times and knows that at the very least 
what we're doing there financially is highly distortive to the 
culture, and you could probably make other comments regarding 
it, as you did in your opening comments, which I appreciate.
    So I look forward to your testimony and the many things 
that you're doing to try to rectify and make sure that the aid 
that is being put in place in Afghanistan is being done in a 
way that's most appropriate.
    So I again thank you for calling the hearing.
    Senator Cardin. Thank you, Senator Corker.
    Our first witness will be Mr. Daniel Feldman. He's the 
Deputy to the Special Representative for Afghanistan and 
Pakistan, the United States Department of State. He will be 
followed by Mr. Alex Thier, Assistant to the Administrator and 
Director of the Office of Afghanistan and Pakistan Affairs, 
United States Agency for International Development.
    Mr. Feldman.

      STATEMENT OF DANIEL FELDMAN, DEPUTY TO THE SPECIAL 
REPRESENTATIVE FOR AFGHANISTAN AND PAKISTAN [SRAP], DEPARTMENT 
                    OF STATE, WASHINGTON, DC

    Mr. Feldman. Thank you, Senator Cardin and Senator Corker, 
for your leadership on these issues and for inviting us to 
testify before you today. We appreciate your thoughtful opening 
statements, and I think our testimony will hope to get at many 
of the questions that you raise, and we look forward to 
discussing the rest in the question-answer session.
    Almost exactly a decade after 9/11, all of our military, 
civilian, and diplomatic efforts in Afghanistan remain focused 
on one core goal--disrupting, dismantling, and defeating al-
Qaeda. As Secretary Clinton stated to this committee in June, 
the administration has a three-pronged strategy to achieve this 
goal: First, a military surge, which reversed Taliban momentum 
and trained 79,000 additional Afghan National Security Forces 
in 2010 alone; second, a civilian surge, to give Afghans a 
stake in their country's future and provide credible 
alternatives to extremism and insurgency. Our civilian surge 
was not, nor was it ever designed to solve all of Afghanistan's 
development challenges. Measured against the goals we set and 
considering the obstacles we faced, we are and should be 
encouraged by what we have accomplished. Most important, the 
civilian surge helped advance our military and political 
objectives in Afghanistan.
    Finally, in February the Secretary announced a diplomatic 
surge to support an Afghan-led political process that aims to 
shatter the alliance between the Taliban and al-Qaeda, end the 
insurgency, and help to produce more stability.
    With Osama bin Laden dead, the Taliban's momentum reversed, 
and the initial seeds of an Afghan-led reconciliation process 
planted, we're now entering a new phase of our efforts in 
Afghanistan and Pakistan. As Secretary Clinton noted earlier 
this year, we have now reached the height of the civilian 
surge, with roughly 1,150 U.S. experts serving in Kabul, on 
PRTs, and in District Stabilization Teams. Our civilians have 
helped Afghan farmers rebuild irrigation systems and expand 
into licit high-value crops for export beyond Central Asia, 
providing economic alternatives to joining the insurgency.
    As the transition process advances, we will be shifting our 
civilian efforts from short-term stabilization projects, 
largely as part of the military strategy, to longer term 
sustainable development that focuses on spurring growth, 
building Afghan Government capacity in critical areas, and 
integrating Afghanistan into South Central Asia's economy. This 
approach is consistent with this committee's recommendation, as 
you referenced, Senator Cardin, that we focus on increasingly 
implemented projects that are necessary, achievable, and 
sustainable.
    But even as we begin transitioning greater responsibility 
to the Afghan Government and focus on increasing Afghan 
ownership, we have been clear that this transition does not 
mark the end of the United States commitment to the people of 
Afghanistan or their region. An updated strategic partnership 
is currently being negotiated this very day with a delegation 
from Afghanistan between the United States and Afghanistan. It 
will reaffirm our shared commitments to a stable, independent 
Afghanistan that is not a safe haven for al-Qaeda, as well as 
United States respect for Afghanistan's sovereignty. And it 
will provide a transparent political framework for long-term 
cooperation, not only on security issues, but also in the areas 
of economic and social development.
    Our long-term commitment reflects a belief a belief that we 
cannot afford to repeat the mistakes we made in 1989 when our 
attention shifted to Afghanistan from other challenges. Indeed, 
even as we have made great strides over the past decade in 
laying the foundation for sustainable economic growth in 
Afghanistan, the World Bank and other financial institutions 
have warned, again as you noted, Senator, that the drawdown of 
the international combat presence in Afghanistan will have 
significant economic consequences. Spending on goods and 
services in Afghanistan, now a critical basis of Afghan 
economic growth, will decrease and the United States, alongside 
Afghanistan and members of our international contact group, is 
working to implement a strategy for sustainable economic growth 
that would undergird political stability and the security gains 
we have achieved, including ensuring equal access to economic 
opportunities for women.
    Afghanistan will continue to need development support to 
achieve this goal, but we are acutely aware that the United 
States cannot bear the full burden. We recognize the financial 
constraints. Other donors, private investment, and Afghans 
themselves must carry the majority of the load.
    A key challenge in the economic development of Afghanistan 
is finding a way to integrate the Afghan economy into the 
broader region. So 2 months ago in India, the Secretary of 
State outlined her vision of a New Silk Road to foster Afghan 
growth and prosperity by promoting stronger economic ties 
throughout South and Central Asia, so that goods, capital, and 
people can flow more easily across borders. This vision is 
meant to act as a guide for Afghanistan's future development, 
not a prescriptive menu of projects or a commitment from the 
United States to fund a particular project or sector.
    Over time, an economically connected region will generate 
lasting employment for Afghanistan's population, raise 
consistent revenue to pay for government services, and attract 
international private investment in key sectors. This vision is 
built upon existing Afghan development priorities and 
especially upon the foundational investments that USAID is 
already implementing and that my close colleague, Alex Thier, 
will describe in more detail.
    We are working toward this long-term vision of a New Silk 
Road with eyes wide open. We understand the economic and policy 
constraints and are realistic about what we hope to achieve. We 
are working with our allies and partners in advance of 
important foreign ministerial conferences in Istanbul and Bonn 
later this year to build the framework for a truly 
international effort.
    This framework is not only important in and of itself, but 
as a demonstration that the region and the international 
community, not just the United States, are sustaining a 
commitment to a secure, stable, and prosperous Afghanistan that 
is not used as a base for international terrorism.
    We are also well aware of the constraints of doing business 
in Afghanistan and are continually trying to mitigate those, 
particularly with regard to corruption.
    Because of Afghanistan's prime importance to our national 
security, we are committed to a continued effort, working 
closely with the Afghans, Congress, and international partners, 
to ensure that our development strategy and civilian transition 
strategy drives the size of our footprint in direct pursuit of 
our interests.
    We recognize the unique fiscal challenges here at home and 
will continue to be vigilant when implementing programs to 
ensure that American development assistance achieves maximal 
impact for our national security interests. And we believe our 
modest civilian investment, which totals barely more than 3 
percent of the overall financial commitment to the mission, is 
paying important dividends.
    We appreciate the opportunity to speak with you, and we 
welcome your questions.
    [The prepared statement of Mr. Feldman follows:]

                  Prepared Statement of Daniel Feldman

    Thank you, Senator Cardin and Senator Corker, for your leadership 
on these issues, and for inviting us to testify before you, today.
    Almost exactly a decade after 9/11, all of our military, civilian, 
and diplomatic efforts in Afghanistan remain focused on one core goal: 
disrupting, dismantling, and defeating al-Qaeda. As Secretary Clinton 
stated to this committee in June, the administration has a three-
pronged strategy to achieve this goal.
    First, a military surge, which reversed Taliban momentum and 
trained 79,000 additional Afghan National Security Forces (ANSF) in 
2010 alone, bringing the total Afghan National Security Force to 
305,000 which is 100 percent of the goal for fiscal year 2011, and on 
track to grow to 350,000 by the end of fiscal year 2012. Even as we 
begin reducing our combat troop levels and transitioning lead security 
responsibility to these Afghan forces, we will continue our 
counterterrorism activities and training efforts.
    Second, a civilian surge, to give Afghans a stake in their 
country's future and provide credible alternatives to extremism and 
insurgency. Our civilian surge was not nor was it ever designed to 
solve all of Afghanistan's development challenges. Measured against the 
goals we set and considering the obstacles we faced, we are and should 
be encouraged by what we have accomplished. And most important, the 
civilian surge helped advance our military and political objectives in 
Afghanistan.
    Finally, in February the Secretary launched a ``diplomatic surge'' 
to support an Afghan-led political process that aims to shatter the 
alliance between the Taliban and al-Qaeda, end the insurgency, and help 
to produce more stability. Our diplomatic surge recognizes the need for 
Afghanistan's neighbors and the broader international community to be 
more concrete and specific about the ways in which they will support 
Afghanistan through the current challenges of transition and Afghan-led 
reconciliation.
    With Osama bin Laden dead, the Taliban's momentum reversed, and the 
initial seeds of an Afghan-led reconciliation process planted, we are 
entering a new phase of our efforts in Afghanistan and Pakistan. I want 
to briefly discuss how we see our civilian efforts evolving.
    As Secretary Clinton noted in June, we have now reached the height 
of the civilian surge, with roughly 1,150 U.S. experts serving in 
Kabul, on 28 Provincial Reconstruction Teams and 38 District 
Stabilization Teams. Our civilians have helped Afghan farmers rebuild 
irrigation systems and expand into licit high-value crops for export 
beyond Central Asia--providing economic alternatives to joining the 
insurgency. Since 2002, our civilians have helped train over 170,000 
teachers and ensured that basic health services are available to 85 
percent of Afghans within 1 hour via any mode of transport, building 
confidence in a vision for a more positive future. Joint United States-
Afghan counternarcotics efforts are disrupting opium production and 
drug networks. These results come even as we continue to work in a very 
challenging security environment.
    As the transition process advances, we will be shifting our 
civilian efforts from short-term stabilization projects, largely as 
part of the military strategy, to longer term sustainable development 
that focuses on spurring growth, building Afghan Government capacity in 
critical areas, and integrating Afghanistan into South Central Asia's 
economy. This approach is consistent with this committee's 
recommendation that we focus on increasingly implementing projects that 
are, ``necessary, achievable, and sustainable,'' and includes a 
continued emphasis on maintaining respect for human rights such as 
freedom of religion and freedom of speech.
    But even as we begin transitioning greater responsibility to the 
Afghan Government and focus on increasing Afghan ownership, we have 
been clear that this transition does not mark the end of the United 
States commitment to the people of Afghanistan or the region. An 
updated Strategic Partnership is currently being negotiated between the 
United States and Afghanistan. It will reaffirm our shared commitment 
to a stable, independent Afghanistan that is not a safe-haven for al-
Qaeda, as well as U.S. respect for Afghanistan's sovereignty. And it 
will provide a transparent political framework for long-term 
cooperation not only on security issues, but also in the areas of 
economic and social development. Our long-term commitment reflects a 
belief that we cannot afford to repeat the mistakes we made in 1989, 
when our attention shifted from Afghanistan to other challenges.
    Indeed, even as we have made great strides over the past decade in 
laying a foundation for sustainable economic growth in Afghanistan, the 
World Bank and other financial institutions have warned that the 
drawdown of the international combat presence in Afghanistan will have 
significant economic consequences. Spending on goods and services in 
Afghanistan--now a critical basis of Afghan economic growth--will 
decrease. The United States, alongside Afghanistan and members of the 
International Contact Group, is working to implement a strategy for 
sustainable economic growth that would undergird political stability 
and the security gains we have achieved, including ensuring equal 
access to economic opportunities for men and women. Afghanistan will 
continue to need development support to achieve this goal, but we are 
acutely aware that the United States cannot bear the full burden. We 
recognize the financial constraints. Other donors, private investment, 
and Afghans themselves must carry the majority of the load.
    A key challenge in the economic development of Afghanistan is 
finding a way to integrate the Afghan economy in the broader region. 
Earlier this year the Secretary of State outlined her vision of a ``New 
Silk Road'' to foster Afghan growth and prosperity by promoting 
stronger economic ties throughout South and Central Asia, so that 
goods, capital, and people can flow more easily across borders. This 
vision is meant to act as a guide for Afghanistan's future development, 
not a prescriptive menu of projects or a commitment from the United 
States to fund a particular project or sector. Over time, an 
economically connected region will generate lasting employment for 
Afghanistan's population, raise consistent revenue to pay for 
government services, and attract international private investment in 
key sectors, such as licit agriculture and the extractive industries. 
This vision is built upon existing Afghan development priorities, and 
especially upon the foundational investments that USAID is already 
implementing and that Assistant to the USAID Administrator Alex Thier 
will describe in more detail.
    We are working toward this long term vision of a New Silk Road with 
eyes wide open. We understand the economic and policy constraints and 
are realistic about what we hope to achieve. Within the U.S. 
Government, we are working with our interagency partners to develop a 
strategy for U.S. economic assistance for Afghanistan that rationalizes 
and prioritizes industry sectors and Afghan development goals. 
Additionally, we are working with our allies and partners in advance of 
important foreign ministerial conferences in Istanbul and Bonn later 
this year to build the framework for a truly international effort. This 
framework is not only important in and of itself but as a demonstration 
that the region and the international community--not just the United 
States--are sustaining a commitment to a secure, stable, and prosperous 
Afghanistan that is not used as a base for international terrorism.
    We also are well aware of the constraints of doing business in 
Afghanistan, and are continually trying to mitigate those, particularly 
with regard to corruption. We have increased our oversight capacity for 
U.S. assistance projects including through the work of Taskforce 2010 
and Taskforce Shaffiyat which identify and address weaknesses in our 
processes. Even with increased oversight, we are going to encounter 
challenges similar to those that you would encounter in any developing 
country destroyed by more than 30 years of war. In these situations, we 
will work with the international community and the Afghan Government to 
eliminate sources of corruption and strengthen systems of 
accountability.
    Our handling of Kabul Bank is one example of this approach. The 
United States and the international community have been clear to the 
Afghan Government that the situation must be properly addressed 
including compliance with IMF conditions to prosecute wrongdoers, 
recapitalize the Central Bank and recover assets at Kabul Bank.
    As I stated earlier, Afghanistan is of prime importance to our 
national security, and we are committed to a continued effort, working 
closely with the Afghans, Congress, and international partners, to 
ensure that our development strategy and civilian transition strategy 
drives the size of our footprint, in direct pursuit of our interests. 
We recognize the unique fiscal challenges here at home, and will 
continue to be vigilant when implementing programs to ensure that 
American development assistance achieve maximal impact for our national 
security interests. We believe our modest civilian investment--which 
totals barely more than 3 percent of the overall financial commitment 
to the mission--is paying important dividends.
    Thank you for the opportunity to speak to you today, and I welcome 
your questions.

    Senator Cardin. Thank you very much, Mr. Feldman.
    Mr. Thier.

  STATEMENT OF ALEX THIER, ASSISTANT TO THE ADMINISTRATOR AND 
  DIRECTOR OF THE OFFICE OF AFGHANISTAN AND PAKISTAN AFFAIRS, 
  UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT [USAID], 
                         WASHINGTON, DC

    Mr. Thier. Mr. Chairman, Senator Corker, Senator Udall. 
Thank you for the opportunity to appear before you today.
    Ten years ago this week, our Nation was abruptly awoken to 
the dangers of unchecked extremism. The terrible, untimely 
deaths of over 3,000 innocents in New York, Pennsylvania, and 
Washington was a tragedy and a portent, one that changed the 
way a generation of Americans view the world.
    For nearly 20 years I have spent my career working in or on 
the issues of peace and security in Afghanistan and its region. 
Following the attack, like many Americans, I responded to the 
call and went back to Afghanistan. Our Nation pledged that 
Afghanistan would never again become a haven for international 
terrorism, a pledge that President Obama has repeatedly 
reaffirmed as a central plank of U.S. national security policy.
    We appreciate the attention this committee has devoted to 
Afghanistan and the support you have shown for the civilian 
surge that has gone in to parallel our military effort. As 
President Obama has said many times, Afghans must take 
responsibility for their own future. Our current assistance 
effort is designed to help them do just that.
    Our current effort, which focuses relentlessly on 
accountability and impact, is delivering real results. 
Approximately 1,000 American civilians, including over 300 
direct hire USAID staff, and tens of thousands of Afghans take 
risks every day to implement U.S. Government programs and turn 
the tide against violent extremists. Insurgent attacks and 
assassination campaigns kill our partners and raise security-
related costs significantly.
    But despite some of the world's most challenging 
conditions, Afghanistan has in fact made some dramatic 
development gains in the last decade. Several of them were 
highlighted by Senator Cardin. I won't repeat those, but will 
list a few others.
    Our investments have contributed heavily to the 10-percent 
annual growth rate of the Afghan economy over the last decade, 
by building infrastructure, promoting agriculture, and 
improving the investment climate. Customs revenues alone have 
increased 400 percent since 2006 and the gross domestic product 
per capita has doubled since 2002, with 5 million people lifted 
out of a dire state of poverty.
    Access to basic education and health have expanded 
dramatically, as the Senator noted, and there are now more than 
400 new women-owned small and medium enterprises created in 
Afghanistan in the last few years alone. We have also 
rehabilitated more than 1,700 kilometers of roads, increasing 
mobility and strengthening trade and security.
    Though still a deeply impoverished country, Afghanistan has 
made significant progress from the war-wracked country I first 
knew in the 1990s. But Afghanistan does remain an extremely 
high-risk environment, and we face considerable challenges in 
implementing our efforts there. Because of these difficult 
conditions, we've made oversight and accountability an 
essential part of how we operate in Afghanistan. To ensure that 
proper procedures are in place to protect our assistance 
dollars, we developed last year, last fall, the Accountable 
Assistance for Afghanistan, or A3 Initiative.
    USAID in the last few months has dramatically enhanced the 
safeguards for development assistance in four categories: 
decreasing the number of subcontractors, undertaking a dramatic 
vetting program, tightening financial controls, and increasing 
project oversight. I'm happy to elaborate those in the question 
and answer, but one example of this is that in the last 18 
months we have tripled the size of our contract oversight 
staff, and in the next 12 months we will double it again. We 
have also tripled the number of USAID staff in Afghanistan 
overall since 2009. This presence has dramatically increased 
our oversight capacity in Afghanistan.
    Going forward, our assistance strategy places primary 
emphasis on enabling a sustainable and lasting transition, by 
investing in priority sectors that will lay the foundation for 
long-term growth, helping Afghanistan sufficiently develop its 
economy and governance to prevent it from ever again becoming a 
safe haven for terrorists.
    We are making foundational investments to shore up the 
Afghan economy in the face of sharp decreases in wartime 
spending, lay the groundwork for sustainable economic growth, 
and boost Afghan capacity to govern effectively and raise 
revenue for fiscal sustainability.
    Perhaps most important, as you yourself emphasized, our 
investments need to be sustainable, and it was to this end that 
we issued our new sustainability guidance. This guidance aims 
to ensure that USAID's resources our people, our time, and our 
budget are closely aligned with both United States and Afghan 
national interests, and we're examining the entire complement 
of our programs in Afghanistan to ensure that we meet three key 
principles: Afghan ownership and capacity; increasing stability 
and confidence; and effectiveness, both programmatically and 
cost-wise.
    I will conclude by saying that, as President Obama stated 
in June, we are helping Afghanistan to move away from an 
economy shaped by war to one that can sustain a lasting peace. 
Indeed, as Secretary Clinton noted in her recent testimony and 
you repeated, USAID's budget, although significant in terms of 
its global spending over the last decade has been equivalent to 
only 6 weeks of our current cost of our military presence in 
Afghanistan.
    I emphasize this because our contribution to transition in 
Afghanistan will fundamentally affect our ability to drawdown 
our troops effectively and make a durable contribution to 
Afghanistan.
    When I arrived in Afghanistan 18 years ago, it was a 
collection of warring fiefdoms, no government, no economy, 
millions of refugees, and a perfect breeding ground for violent 
extremism. Today, through the efforts of our Nation and our 
Afghan and international partners, we have lifted Afghanistan 
far from that place of desolation and increased the security of 
our homeland and our allies in the process.
    This effort is far from finished, but our commitment to an 
effective, accountable, and sustainable mission is resolution.
    Thank you.
    [The prepared statement of Mr. Thier follows:]

                Prepared Statement of J. Alexander Thier

    Mr. Chairman, distinguished members of the subcommittee, my name is 
Alex Thier. I serve as Assistant to the Administrator and Director of 
the United States Agency for International Development's (USAID) Office 
of Afghanistan and Pakistan Affairs (OAPA). I will provide brief 
opening remarks but would ask that my full written statement be entered 
into the hearing record.
    Ten years ago this week, our Nation was abruptly awoken to the 
dangers of unchecked extremism. The terrible, untimely deaths of 3,000 
innocents in our largest city, the Pentagon, and on United Airlines 
Flight 93 was a tragedy and a portent one that changed the way a 
generation of Americans view the world.
    For nearly 20 years, I have spent my career working in or on the 
issues of peace and security in Afghanistan and its region. Like others 
who followed the intertwining paths of Afghanistan and al-Qaeda in 
prior years, I knew immediately on the morning of September 11 that our 
future was tied to Afghanistan's. The hateful, failed ideology of the 
late Osama bin Laden is squarely to blame for these attacks. But our 
abandonment of post-Soviet invasion Afghanistan contributed to the 
misery and decline that lead to the Taliban regime, al-Qaeda's safe 
haven, and eventually the attack on America. Following that 
realization, our Nation pledged that Afghanistan would never again 
become a haven for international terrorism, a pledge that President 
Obama has repeatedly reaffirmed as a central plank of U.S. national 
security policy.
    It has been a long decade, and there have been many missteps. 
Indeed, prior to the three surges--military, civilian, and diplomatic--
put in place by President Obama, our aid efforts and fighting forces 
did not represent the full complement of resources required to 
accomplish the goal of stabilizing Afghanistan. The civilian assistance 
generously provided by American taxpayers and overseen by USAID
and State is a central component to ensuring we achieve our national 
goals in Afghanistan.
    We appreciate the attention this committee has devoted to 
Afghanistan, and the support for the civilian surge that has paralleled 
our military buildup. We all understand that improving governance, 
creating economic opportunity, and supporting civil society is critical 
to solidifying our military gains and advancing our political and 
diplomatic goals for Afghanistan and the region.
    I welcome the opportunity to appear before you today to talk about 
how U.S. assistance to Afghanistan is an essential part of building the 
peace and enabling U.S. troops to drawdown by 2014, as announced by 
President Obama.
    As President Obama has said many times, Afghans must take 
responsibility for their own future. Our current assistance effort is 
designed to help them do just that. This has not always been the case. 
Too often over the last decade, goals have not fully taken into account 
the limitations presented by the Afghan reality. Some programs have 
been designed to meet immediate needs, and not long-term needs in a 
sustainable fashion. Some programs have assumed more robust capacities 
and resources than exist in one of the poorest countries on earth. Our 
current effort--which focuses relentlessly on sustainability, 
accountability, and impact--is delivering real results.
    Our approach has three main elements:

   First, in support of President Obama's pledge to disrupt, 
        dismantle, and defeat al-Qaeda, we will build upon the dramatic 
        development progress made over the last decade that is critical 
        to Afghanistan's long-term stability.
   Second, accountability will be central to our policies and 
        programs to make the most of current and future funds. To 
        ensure development assistance in Afghanistan is achieving 
        intended goals, we launched the innovative Accountable 
        Assistance for Afghanistan (A3) initiative, which is 
        achieving important results.
   Third, as we focus our programs with an eye toward 
        transition, ensuring that sustainability is at the forefront of 
        every decision we make, we will make key investments in 
        priority sectors that will lay the foundation for sustainable 
        economic growth and increasingly effective, legitimate 
        governance.

    We understand fully that the fiscal reality at home means that 
resources available for Afghanistan will decline over time. Weaning 
Afghanistan from unsustainable levels of assistance is necessary for 
us, and essential for them. To achieve this without triggering a 
crisis, we are making tough decisions and prioritizing investments that 
have the greatest potential for long-term sustainability by Afghans 
themselves, and that ensure our troops can drawdown safely, 
efficiently, and permanently.
                  significant development achievements
    Approximately 1,000 American civilians, including over 300 direct 
hire USAID staff, and tens of thousands of Afghans, take risks every 
day to implement. USAID programs and turn the tide against violent 
extremists. Insurgent attacks and assassination campaigns kill our 
partners and raise security-related costs significantly. Since 2003, 
387 USAID partners implementing our programs have been killed in action 
and another 658 wounded in action. Between 2009 and 2010, there was a 
twofold increase in the number of attacks on partners, from an average 
of 29 a month in 2009 to 57 a month in 2010. Afghanistan is a difficult 
operating environment to say the least.
    Despite some of the world's most challenging conditions for 
stabilization and development, Afghanistan has made some dramatic 
development gains--with strong support from the U.S. Government. For 
example:

   Our investments have contributed heavily to the 10-percent 
        annual growth rate of the Afghan economy over the last 6 years 
        by building infrastructure, promoting agriculture, improving 
        the investment climate, and helping the government increase 
        revenue collection.
   Customs revenues have increased 400 percent since 2006. And 
        GDP per capita has doubled since 2002 with 5 million people 
        lifted from a state of dire poverty.
   Access to basic education has expanded dramatically, 
        increasing literacy and cultivating a new generation of more 
        capable Afghan workers and future leaders. Under the Taliban, 
        less than a million boys and no girls attended school. Today, 
        over 7 million students are in school, 37 percent of whom are 
        girls.
   We've worked closely with the Afghan Ministry of Public 
        Health to massively expand access to health services from 9 to 
        64 percent of the population. In 2002, Afghanistan had one of 
        the highest infant mortality rates in the world and our efforts 
        have contributed to a 22-percent drop in infant deaths. 
        Maternal mortality has also dropped significantly as the use of 
        antenatal care in rural Afghanistan has risen from an estimated 
        8 percent in 2003 to 36 percent in 2008, thanks in part to a 
        USAID midwives training program that has trained over 1,600 
        midwives, contributing to an increase in active Afghan midwives 
        from 467 to 3,250. Afghanistan is one of only four countries 
        where polio remains endemic. Thanks partly to USAID's efforts, 
        over 90 percent of children under 5 have been vaccinated 
        against polio since 2002.
   USAID has sponsored training and internships for over 5,500 
        women, and there are now more than 400 new women-owned small 
        and medium enterprises in Afghanistan since 2006.
   We have rehabilitated more than 1,677 kilometers of roads, 
        increasing mobility and strengthening trade and security. 
        Approximately 80 percent of Afghans now live within 50 
        kilometers of the newly constructed Ring Road.
   Improved access to water for Afghan farmers has enriched 
        irrigation systems on nearly 15 percent of Afghanistan's arable 
        land--in addition to the creation of 90,000 new agricultural 
        employment jobs, Afghan farmers now have access to improved 
        technologies and financial services.
   USAID has also helped bring reliable, low-cost electricity 
        to more than 18 percent of the population up from 6 percent--
        taking Afghanistan's total electricity supply from 117 MWh to 
        223 MWh per month--according to the Afghanistan Energy 
        Information Center, which is supported with USAID and DOD 
        funds. Now, Kabul has gone from barely having 2 hours of 
        electricity a day to being fully powered all day. The supply of 
        reliable, low-cost electricity has contributed to the doubling 
        of the Afghan economy since 2006. DABS, the Afghan electric 
        utility USAID has helped establish, has doubled revenues each 
        of the last 3 years--reaching $170 million this year, reducing 
        government fuel subsidy by nearly $100 million this year and 
        increasingly placing Afghans in a position of running and 
        maintaining their energy network on their own. Indeed, 2 weeks 
        ago I joined our Administrator, Dr. Rajiv Shah, in Afghanistan 
        to launch the new Afghan National Load Management Center--
        giving the Afghans the tools and capacity to literally light 
        their own future path.

    It is important to take stock of the many taxpayer funded programs 
that have delivered results in Afghanistan and make sure that their 
results endure. Though still an impoverished country, Afghanistan has 
made significant progress from the civil war-racked country I first 
knew in the 1990s.
                    accountability and transparency
    Afghanistan remains an extremely high-risk environment, and we face 
considerable challenges. Because of these difficult conditions, we've 
made oversight and accountability an essential part of how we operate 
in Afghanistan. This is an area on which USAID's leadership, including 
Administrator Shah and myself, has focused intensively. It represents a 
key part of our Agency's largest reform agenda and our team's approach 
in Afghanistan.
    To ensure that proper procedures are in place to help protect 
assistance dollars from being diverted from their development purpose 
to malign actors, USAID developed the Accountable Assistance for 
Afghanistan (A3) initiative in the fall of 2010.
    As a result, USAID has enhanced its safeguards for development 
assistance in the following four categories:

   Award Mechanisms--A subcontracting clause is being included 
        in new awards requiring that a certain percentage of work on a 
        contract be done by the prime contractor. It also provides for 
        the ability to restrict the number of subcontract tiers, and to 
        prohibit subcontracts with broker/dealers who do not perform 
        work themselves.
   Vetting--The mission established a Vetting Support Unit in 
        February 2011. The unit conducts checks on non-U.S. companies 
        and non-U.S. key individuals for prime awards contractors, 
        grant recipients and subawardees to determine whether or not 
        they have a criminal history or association with known malign 
        organizations.
   Financial Controls--The USAID mission is working with the 
        USAID Inspector General to establish a new program of auditing 
        procedures for 100 percent of locally incurred project costs.
   Project Oversight--The mission is devolving more project 
        monitoring responsibilities to USAID personnel located in field 
        offices outside of Kabul. Assigned to specific projects, USAID 
        On-Site Monitors will have the authority to monitor 
        implementation of USAID projects and report to the USAID 
        Contract/Agreement Officer's Technical Representative.

    Our A3 systems are yielding results.
    Our project and contract oversight capacity has grown dramatically. 
I testified before the Commission on Wartime Contracting in January 
that we have tripled the size of our contract oversight staff since 
2007. This year, we ordered a doubling of our contracting staff, and we 
are in progress to complete this goal. Further, we have also tripled 
the number of USAID staff in Afghanistan overall since 2009, with 
approximately 56 percent of our 325 current U.S. staff deployed outside 
Kabul, working alongside the military and other agencies. This presence 
has increased our oversight capacity exponentially. Security conditions 
in some areas do prevent us from getting out as much as we would like 
to. We mitigate this by deploying national staff, and employing third-
party monitors who do independent assessments of our programs. The 
Inspector General community also plays a critical role in the 
monitoring and evaluation process through their investigations. Since 
2003, our own USAID Office of Inspector General has conducted 45 
audits, investigations and/or reviews and recovered over $150 million 
in tax payer funds.
    Consistent with the USAID Forward agenda, we also seek to empower 
Afghan institutions, both public and private, to check and balance one 
another in detecting and deterring corruption. This effort includes 
strengthening the oversight role of elected Afghan institutions, such 
as Parliament and provincial councils, as well as executive branch 
agencies charged with combating corruption. An essential component of 
our plan for sustainability, transparency, and accountability is to 
strengthen Afghan capacity to manage more funds themselves.
    As was noted in the recent full committee majority staff report, 
``the Afghan Government must be a genuine partner for our assistance 
efforts to succeed.'' Channeling assistance dollars through the Afghan 
Government is an essential part of this process and important part of 
ensuring the long-term viability of our investment. In 2010, we 
committed with other donors at the Kabul conference to move toward 
putting 50 percent of our assistance through Afghan institutions. We've 
gone from providing 10 percent through Afghan institutions in 2008 to 
37 percent today. However, USAID has a rigorous assessment process in 
place to guarantee that every entity receiving funds has the capacity 
to transparently and effectively handle U.S. funds. As a result, we are 
very selective in which institutions we will fund directly, having 
approved a few and rejected many more.
    One specific example of this approach is work we've done with the 
Ministry of Public Health (MOPH). With USAID's on-budget support, the 
MoPH has been successful in procuring, managing, and monitoring 18 
contracts with 10 NGOs to deliver basic health services in over 530 
facilities in 13 provinces. In FY 2010, USAID helped the MoPH increase 
basic health services coverage to 10 million people in 13 provinces, 
serving over 800,000 patients each month. Seventy-six percent of 
beneficiaries are women, and children under age 5. Ultimately this 
approach is a triple win: it develops sustainable Afghan capacity; it 
saves money by reducing reliance on contractors and security firms; and 
it enhances government legitimacy by delivering effective services 
through the government.
            sustainability through foundational investments
    Going forward, our assistance strategy places primary emphasis on 
enabling a sustainable and lasting transition by investing in priority 
sectors that will lay the foundation for long-term growth, helping 
Afghanistan sufficiently develop its economy and governance to prevent 
it from again becoming a safe haven for terrorists.
    Recognizing that the financial and human resources available to 
USAID for Afghanistan will decrease as the transition proceeds, we are 
increasing the focus in our portfolio on those sectors that can serve 
as a bulwark against economic and political instability. These 
foundational investments are intended to shore up the Afghan economy in 
the face of sharp decreases in wartime spending, lay the groundwork for 
sustainable economic growth, and boost Afghan capacity to govern 
effectively and raise revenue for fiscal sustainability. They will 
complement the more traditional investments in development, such as in 
health and education, and in stabilization that we will continue to 
support.
    Foundational investments require some combination of substantial 
up-front financing, concentrated technical expertise, and sustained 
political engagement on the part of the United States. Foundational 
investments also exploit synergies created by our current civ-mil 
presence in Afghanistan. For example, foundational investments in the 
energy sector are required to unlock Afghanistan's most promising near-
term and long-term economic growth drivers: agriculture and extractive 
industries. Given the current security situation, expanding the 
national power grid would not be possible without the willingness of 
our military colleagues to work hand-in-glove with us and our Afghan 
partners. Similarly, expanding Afghanistan's nascent mobile financial 
services sector--which will increase transparency in Afghan payment 
systems and dramatically broaden financial inclusion--requires little 
U.S. funding but intensive advocacy with Afghan officials and 
cooperation with private sector partners. USAID's foundational 
investments will focus on economic growth (agriculture, extractive 
industries, financial inclusion through technology); infrastructure 
(energy, water); and human capacity development (higher education, 
vocational skills training).
    Perhaps most importantly, our investments need to be sustainable. 
To this end, the USAID Administrator recently issued our Sustainability 
Guidance for Afghanistan. This guidance aims to ensure that USAID's 
resources--our people, time, and budget--are closely aligned with both 
U.S. and Afghan national interests. To confirm that our work is focused 
on achieving the U.S. and Afghan immediate objective of transition, and 
to ensure that the impact of our work is sustainable and durable beyond 
2014, we are examining our programs to ensure that each meets three key 
principles: (1) increases Afghan ownership and capacity, (2) 
contributes to stability and confidence, and (3) is effective both 
programmatically and cost-wise.
    We are currently reviewing all of our projects through a lens of 
sustainability. Based on this analysis, USAID is calibrating its 
portfolio, and we are making tough choices to end or modify projects 
that don't meet the new standards.
Economic Growth
    Economic growth and jobs will lead to greater stability and help 
increase the government's own revenues thereby lessening, over the 
years, the Afghan Government's reliance on donor assistance. Boosting 
the agricultural sector, in which 80 percent of the population 
participates, is the most promising means of sustaining reliable 
employment and enhancing economic security for the greatest number of 
people. Pending availability of appropriations, USAID intends to 
allocate over $1 billion of its Afghanistan assistance program over the 
next 5 years for agricultural and alternative development programs to 
increase food security, the production of high-value crops, and the 
capacity of the government and the private sector to support 
agriculture and agribusiness.
    Afghanistan is also rich in untapped mineral and hydrocarbon 
resources, with some of the world's largest undeveloped reserves of 
copper and iron. With USAID, the efforts of the Task Force for Business 
and Stability Operations, and other donor support, diverse mineral 
sites throughout the country will continue to be developed to generate 
increased incomes, public sector revenues, and employment. Our near-
term objective in the mining sector is to help Afghanistan develop its 
technical capacity and infrastructure to manage these resources and to 
meet international standards in transparency, regulations, royalties 
and government oversight. This will help lay the groundwork for private 
investment in the mining sector, generating a large and growing source 
of public revenue for Afghanistan's robust development beyond 2014. Our 
investments in transport and energy infrastructure will serve as key 
enablers of the growth of the primary drivers of the Afghan economy 
going forward: agriculture, extractives, and trade.
Energy
    Asia Foundation surveys of the Afghan people reveal that access to 
electricity is one of their highest priorities. The lack of electricity 
reduces economic and social development opportunities and feeds 
perceptions that the government has not been responsive to the needs of 
its people. Since 2002, an annual 20-percent increase in electricity 
supply has helped fuel an average annual 10 percent GDP growth rate. 
Because of the power sector's critical importance to economic growth, a 
key component of our work is building Afghan capacity in the power 
sector and supporting power sector reform.
    Developing a national energy grid and accompanying infrastructure 
is accelerating investment in mining and agriculture, fueling private 
growth and productivity, and facilitating value chain development. 
USAID investments will provide electricity to more than 3 million 
people, serving over 50 percent of the population in urban centers 
along the ring road in eastern Afghanistan.
    Our three integrated efforts include: building transmission 
infrastructure to bring additional power to Kabul and the south; 
improving energy security by increasing domestic power generation; and 
developing the energy utility, DABS, that will fund and maintain the 
energy infrastructure through revenue collection and capacity 
development.
Human Capacity Development
    A skilled workforce capable of servicing the needs of a rapidly 
growing and diverse economy is a cornerstone of any country's 
sustainable development. USAID's foundational investments in human 
capital are increasingly being moved on-budget, and include vocational 
training as well as post-secondary education. These investments will 
result in cost savings compared with the cost of providing expatriate 
technical assistance--it costs an estimated four to five times less to 
work with and through the Ministry of Education and through the 
Ministry of Public Health than it does to import expatriate technical 
assistance. In addition to significant cost savings for the U.S. 
taxpayers, these investments will also contribute directly to the 
sustainability of these programs by building and reinforcing the 
capacity of the Afghan Government to manage such programs in the 
future.
    USAID investments in human capital during the past decade have 
helped expand access to basic, secondary, and vocational education and 
increased literacy. Overall, increased levels of educational attainment 
will generate significant social and economic returns over time and 
lead to improved prospects for employment, enhanced participation in 
democratic society, declines in fertility and improved health status.
    Building on essential investments in basic education, over the next 
few years USAID will support secondary and post-secondary technical and 
vocational education and workforce development programs for young men 
and women to generate informed and skilled workers to support increased 
demand in government, business, and industry as the economy grows. With 
a large and growing youth population, training in vocational and 
productive skills is both a priority for long-term economic growth and 
also improves the employability of youth at high risk by providing them 
with marketable skills.
                               conclusion
    USAID plays a vital role in implementing the President's strategy 
for Afghanistan. We face significant challenges, but we're confident 
that our work is necessary and our goals achievable. As Secretary 
Clinton recently noted in testimony before this committee, USAID's 
entire budget over the last decade in Afghanistan is the equivalent of 
only 6 weeks of the cost of our military presence in Afghanistan. The 
civilian portion of our assistance is not only a vital component to our 
overall objectives, but one that can provide significant cost savings 
as the military begins to drawdown. Civilian assistance to Afghanistan 
is needed to help build peace as our troops come home. We owe it to the 
Afghan people, and we owe it to the American men and women who have 
made great sacrifices to help Afghanistan move toward a secure and 
prosperous future.
    As President Obama stated in June ``we're helping Afghanistan move 
away from an economy shaped by war to one that can sustain a lasting 
peace.''
    When I arrived in Afghanistan 18 years ago, it was a collection of 
warring fiefdoms--no government, no economy, millions of refugees--and 
a perfect breeding ground for violent extremism. Today--through the 
efforts of our Nation and our Afghan and international partners--we 
have lifted Afghanistan far from that desolation, and increased the 
security of our home and our allies in the process. This effort is far 
from finished, and our commitment to an effective, accountable, and 
sustainable mission is resolute.

    Senator Cardin. Mr. Thier, thank you for your testimony.
    Let me start by expressing my appreciation, and I think the 
appreciation of all the Members of the Senate, for the 
dedicated public servants who have been working in Afghanistan 
on the civilian side to rebuild that nation. It's at great 
risk, sacrifice, and they do it because they want to make a 
difference, and I hope we first want to express our 
appreciation for all those who have put themselves at risk in 
order to try to provide stability in that region of the world.
    We clearly have made a difference, and I very much want to 
acknowledge that up front. I also want to acknowledge that a 
good part of our assistance has come through the Department of 
Defense, which we don't have a representative here today, and 
many of the reports about moneys going to the insurgents have 
been coming from--the source was more likely the Department of 
Defense than it was the funds that are administered by the two 
witnesses we have here today. I just want to also at least 
acknowledge that point.
    But I want to start out with the macrochallenge we have 
here about sustainability that we talk about frequently. The 
reports indicate, as I said in my opening statement, that less 
than 10 percent of the economy of Afghanistan is generated 
internally, that the overwhelming majority of their economy is 
based upon the war economy, based upon international 
activities, and not about domestic local production.
    When I take a look at the amount of funds that the United 
States is providing, the overwhelming amount of that goes into 
security. That's the largest single part of the pie. After 
security does come economic development, but it's a much 
smaller piece. And then we look at humanitarian assistance, 
counternarcotics, et cetera.
    How do we transition to a domestic economy that's 
sustainable if we have to maintain that type of allocation of 
assistance? Can we really develop a sustainable economy in the 
timeframe that the President has laid out as we're starting to 
drawdown our troops, with the type of investments that are 
currently being made in Afghanistan?
    Mr. Feldman. Thank you, Senator. I'll start with that 
answer and then let Alex conclude.
    On the broader piece of this, the sustainable piece, you're 
absolutely right. And this is the issue that we've all been 
grappling with. This is exactly what was behind the vision 
that, as I referenced in my opening statement, the Secretary 
laid out of the New Silk Road. That's not looking at particular 
projects. It's not looking at specific initiatives. It's the 
vision that as we seek some sort of reconciliation, 
reintegration, that we can lay out for the Afghan people to 
say, this is what you can buy into; you can buy into an 
economic web that is more integrated, more part of the broader 
region.
    We've been saying it's the vision of a safe, stable, 
prosperous Afghanistan within a safe, stable, prosperous 
region. Through our series of big conferences, ministerials, in 
the coming months, and particularly concluding at the Bonn 
conference, almost 10 years after the initial Bonn conference 
in December, that's exactly what we're seeking. We're looking 
for some sort of political assurances from the region, 
neighbors, and near neighbors to Afghanistan, ideally a 
consultative mechanism to accompany those, but even perhaps 
more importantly, having the Afghans themselves lay out what 
this broader vision would be of sustainability, whether it's 
dependent on the extractive industries, building the 
infrastructure for that, on continued agriculture for jobs, on 
building sustainability and capacity within ministries, on 
continuing to build the infrastructure so that the Afghan 
Government can deliver for its own people.
    Senator Cardin. The way you said it is exactly right. They 
have to have a game plan that can replace an economy so that 
there's stability in their country, frankly. But the clock is 
ticking. The President's timeframe, which may or may not be 
accelerated, there's certainly an interest here to try to 
advance that timeframe. We're still talking about coming up 
with that plan. It seems to me the Afghan Government needs to 
be implementing that plan.
    Mr. Thier.
    Mr. Thier. Let me address your question at two levels. When 
we talk about sustainability, there's the big question is, does 
Afghanistan have a viable economy that can support its state 
and some of the infrastructure and the civil service that we've 
built for it. Then there's the smaller question about whether 
our specific investments have sustainability built into them.
    On the broader question, we have been very, very focused on 
this concern because of the decrease in our assistance, the 
decrease in international assistance. I've made four trips to 
Afghanistan in this calendar year, and they have all been very 
focused on this question. We are working with the World Bank to 
answer the question of how much does the Afghan state cost and 
what path is their economy on? In other words, what proportion 
of that cost are they going to be able to carry?
    And if it turns out, as we all know it will, that the 
proportion is lower than what the state costs, then how are we 
going to bridge that difference, and how are we going to bridge 
it in a way that doesn't cause instability.
    Senator Cardin. What's the timeframe for this?
    Mr. Thier. Well, the timeframe, the immediate timeframe, is 
that we are really working very intensively toward the end of 
this year, in part because of the Bonn process, to examine 
exactly what that state costs and to put programs in place that 
we think are going to be generating an increase in revenue.
    So there's two things we can do. We can decrease the cost 
of the Afghan state and/or we can increase the revenues that 
the Afghans are drawing so that they'll be able to pay. We're 
trying to do both at the same time to meet the approaching 
deadline.
    Senator Cardin. Will you have by the end of the year a game 
plan as to what type of industries within Afghanistan will meet 
those revenues that you're suggesting?
    Mr. Thier. Absolutely. Let me just give you an example. In 
the agriculture industry, agriculture makes up about 75 percent 
of Afghan employment and gross domestic product. It is the 
agriculture industry that in the near term is going to provide 
the greatest potential for increased employment and revenue 
generation in Afghanistan. So we are looking very intensively 
at a number of initiatives in terms of increasing agricultural 
yield, increasing market access, increasing trade, that are 
going to generate those livelihoods and generate those revenues 
for the Government of Afghanistan.
    In the longer term, we're of course looking at things like 
broader regional trade and mineral resources development. But 
that's, frankly, not going to impact the next 3 or 4 years in 
terms of revenues to the state. At the same time, what we're 
doing is making sure that those investments that the Afghans 
have gotten from our investment and other members of the 
international community are going to be sustained. So we are 
looking intensively at things like the energy sector, where 
there is starting to be some investment. We've spent the last 2 
years building an Afghan utility that has grown, so that the 
$175 million subsidy that they required from the Afghan 
Government 2 years ago has now fallen by 80 percent, so that by 
collecting revenues from people who are getting energy they 
will be able to sustain their energy sector.
    Senator Cardin. I think you've raised a very valid point 
about sustainability of the Afghan economy and sustainability 
of our projects. We need accountability on sustainability of 
our projects, and I think what you're raising on the energy 
sector is exactly on target. I'm going to ask that you make 
available to this committee the details that you expect to have 
by the end of this year as to the blueprint for sustainability 
of the Afghan economy, as specific as is available. I'm very 
interested as to where they see their short-term, long-term 
economy from sectors and where they expect to make that type of 
progress.
    You mentioned agriculture, and I just point out, it's a 
real challenge if you don't have land reform, it's a real 
challenge if they don't change their whole attitude toward 
women, as to how an agriculture sector could be productive for 
that type of economy. So they have a long way to go in regards 
to agriculture and women if it's going to be a sustainable type 
of growth that they should have in their country.
    We'll come back to some of these points, but let me turn it 
over to Senator Corker and we'll follow up on some of these 
points.
    Senator Corker. Go ahead and finish up.
    Senator Cardin. Well, OK, let me just finish up this one 
point, then. Is it reasonable to expect that we could get that 
type of information by the end of this year?
    Mr. Thier. Well, yes, that's something that we're all 
working on. But I think the most important piece of this, 
obviously, is that this is an Afghan-led process. So we're 
working very closely with the Afghans on developing exactly 
what this is. So there's a role for the Afghans in 
prioritizing. Many of the things which we've talked about as 
part of this broader, New Silk Road vision are drawn from the 
Afghan national development strategy, from their own stated 
priorities over many years.
    Second of all, it's involving the rest of the international 
community, other donors, and particularly the multilateral 
institutions. So we're working with the World Bank, and we're 
working with other donors very, very closely. A number of those 
meetings are going on even in the next few weeks, and I think 
you'll start to see much more specific talk about this and then 
the Afghans really taking ownership of where this plan will go. 
But it's a very collaborative process.
    Senator Cardin. I'll take that as a yes, you'll have the 
information by the end of the year.

    [The information referred to above was not available when 
this hearing went to press.]

    Senator Cardin. I just point out again, I understand it's 
an Afghan process. The United States taxpayer has been asked to 
be a partner here, and I can tell you, if this was a business 
venture and if you don't have a good plan partners walk away. 
So I think we obviously want to be a partner, but we don't want 
to be part of a process that's not going to lead to a 
productive conclusion. So we have a responsibility to make sure 
there is a game plan there for a sustainable economy based upon 
the types of reforms necessary to achieve a growing economy.
    Senator Corker.
    Senator Corker. Thank you, Mr. Chairman.
    Thank you both for your testimony and I'll second what the 
chairman said. I appreciate your service to our country and 
what you do, which brings me to--I've been in the Senate 4 
years and 7 months and it seems like every so often our reasons 
for being in Afghanistan evolve to a different reason. I know 
that has to wreak havoc on what people are doing on the ground 
there.
    The most recent I guess description of how we want to leave 
Afghanistan is ``good enough.'' It's fairly abstract. I just 
wonder if--I talked to Mr. Thier about this yesterday, but has 
there in the State Department crept in thoughts of, look, what 
we're really trying to do is cause this place to hang together 
for a couple of years after we leave, so we can at least say 
for a period of time we've been successful?
    I'm wondering if that has affected--has that thought 
process been discussed any in the State Department, and if that 
kind of ``good enough'' thinking affects what you're doing on a 
daily basis. Mr. Feldman?
    Mr. Feldman. I appreciate the question, Senator. I think 
the goals have actually been extremely consistent over the 
years. The way in which we address those goals, and, as I noted 
in my opening statement and as the President and the Secretary 
have said many times, it remains to disrupt, dismantle, and 
defeat al-Qaeda and prevent its return. Obviously, there have 
been some great successes.
    But our goal is still for Afghanistan's sovereignty and 
territorial integrity to be assured and sustained by Afghan 
forces in the lead, and that we will continue to support that. 
We obviously still see a very distinct national security 
interest in the region as a whole--2 billion people with 2 
nuclear-armed nations--and we have to ensure that we have that 
stability.
    Our specific interest is the same in terms of defeating al-
Qaeda. The military operation with counterinsurgency has been 
quite successful. As we are transitioning to the transition 
phase of this, we are looking at a different role for the 
civilian surge. It's hand in hand. These things must all go 
together, civilian, military, and diplomatic. So the mechanisms 
to the goals have shifted as the battleground has shifted, but 
the goals remain the same.
    Senator Corker. I'm not sure I understood. Let me go a 
different level. We talked about the budget, and I guess the 
ability of the country to sustain itself. I suppose one of the 
big components is just the payment of paying for the Afghan 
National Police and military. I think the budget authority, 
last I saw in Afghanistan, was about $1.3 billion. I think it's 
risen slightly. But what is that budget authority today? Their 
ability to carry out a budget is what in Afghanistan, what 
level?
    Mr. Feldman. I believe the Afghan Government's revenues are 
about $1.5 billion.
    Senator Corker. $1.5 billion now. So it's grown a little 
bit. So I guess you'd have to have a little over five times 
that in income to the government just to sustain the military 
and the police that will be left after we leave; is that 
correct?
    Mr. Feldman. If we are striving for Afghan National 
Security Forces of around 350,000 to 370,000, yes, the 
estimates are anywhere between $6 to $10 billion.
    Senator Corker. So that being the case, when you account 
for this sustainability that Mr. Thier was referring to are you 
taking those kinds of things into account?
    Mr. Feldman. Of course. I mean, the only way that we can 
ultimately drawdown American troops is that if the Afghan 
security forces themselves are stood up and capable of doing 
this. That includes being able to do the training and 
everything else that that money helps to ensure.
    The goal is, first of all, that if we have some sort of 
political-diplomatic resolution that perhaps you may not need 
as many of those Afghan National Security Forces. There's the 
recognition that countries as they begin to drawdown will 
hopefully recognize their own savings and start contributing to 
funds to help ensure that the security is there. That's in part 
why we and NATO are designing these longer term strategic 
partnership relationships, which are defining what we will do 
over the course beyond 2014.
    And last, we're trying to build over the long term the 
Afghan economy itself so they can ultimately support these 
costs themselves. The economy obviously is growing year by 
year. Whenever it gets to a point that----
    Senator Corker. I would say in your lifetime it would be 
very difficult for them to have the budget ability just to 
carry out the security piece, right? So that's a pretty awesome 
goal that you have.
    Mr. Feldman. Well, it's dependent, of course, on whether 
that number stays that amount, and then how much we can do on 
developing the economy over the next decade or two.
    Senator Corker. So we talked extensively with a gentleman 
who had just come from there. I think he's pretty respected. I 
guess the question of the Afghan police--you can only have an 
effective justice system if there's actually a justice system, 
meaning that you have police who enforce the laws. My guess is 
in Afghanistan they're going to be not what we would hope to 
have on the streets of Washington, DC.
    Then if you have a justice system that just doesn't operate 
at all, which apparently is the way it is right now in 
Afghanistan, how does that work together, where you have a 
trained police force, but you don't have any ability to judge 
whether people are innocent or not innocent after they've been 
apprehended?
    Mr. Feldman. There are several different pieces, obviously, 
rolled into that question. On the issue of the ANP as well as 
the army, I actually think we've made very----
    Senator Corker. I understand I don't think they're ever 
going to be of a very high level, from what I've seen on the 
ground. But back to the justice piece, so they're probably not 
infallible. So since we haven't really been able to make much 
headway, if any, as it relates to a real justice system there, 
how do you deal with that, getting back to some of the issues 
that Mr. Cardin was raising regarding human rights and that 
kind of thing?
    Mr. Feldman. Well, first of all, I think you have to look 
at what the baseline is, what the starting point is. For that 
alone, I think we have made great strides. No, we're not 
seeking a police force on parity of Washington, DC. But the 
fact that we have now incorporated----
    Senator Corker. That might not be the right level, by the 
way.
    Mr. Feldman. Or any other city here in America.
    But the fact that we have now incorporated literacy 
training, the fact that there's much more continuity, the fact 
that we've addressed salary issues, all these have gone to the 
fact that there is a much more professional force.
    Broader justice issues are also incredibly complex, 
obviously, and there's been some headway, but again I think you 
have to look at the baseline. I think issues of prison reform 
have been quite successful. I think there have been some pilot 
programs on rule of law, which Alex and others can talk about a 
little bit more.
    So there has been some headway, but there's much more to 
do. And you're obviously talking about things that could be 
generational in terms of how quickly they change, and we're 
doing the best we can with the resources we have to stand up a 
sovereign entity.
    Senator Corker. But you would agree just that if you have a 
police force and you don't really have any system of 
adjudication or anything like that, it's kind of problematic? I 
do think that that's an area that there's been like almost no 
real progress in. Would you agree with that?
    Mr. Feldman. I would say that there's two different 
mechanisms here. There's a formal justice system and there's a 
more informal system.
    Senator Corker. But the informal system is hard to use with 
the police force, right? I understand about the informal, elder 
system that occurs, but typically that's not going to involve 
the Afghan police, is that correct?
    Mr. Feldman. I think that's correct, but we can certainly 
get you more detail.

    [The information referred to above was not available when 
this went to press.]

    Senator Corker. I know my time's almost up, or maybe it is. 
But we talk about the coordination and sustainability issues. 
How do you feel about the CERP funding then? It's pretty 
amazing. Our men and women in uniform are my heroes, and I 
think they're probably yours, too, and I hold them on a 
pedestal. But at the same time, a lieutenant colonel I guess 
can spend 200 grand without talking to anybody, and millions 
and millions and millions are being spent in that fashion.
    How does the CERP funding relate to all these other things 
you're talking about? Basically, you're the mayor, you're the 
everything when you're in that position with CERP funding. How 
does that tie to what you're doing and how do you measure the 
sustainability of what our military is actually spending on 
civilian activities?
    Mr. Thier. Let me say one thing about that. Having been 
working on this over the last 10 years, I think it's really 
important to note how far we have come in making what we call 
civ-mil, the civil-military relationship, a real partnership 
from where it was a decade ago. It used to be that people were 
doing separate things, and we would kind of share information. 
Today it is much more integrated.
    So the good news in terms of what you're asking is that our 
folks, our development folks, our State Department folks, our 
Department of Agriculture folks, are sitting at the same 
platforms with our military folks, and there is much less of a 
distinction in terms of these funds. If there's an important 
project to fund, then people sit around the table and decide 
how to go about and do that.
    Although I can't speak to the evaluation--that's not 
something that we do--of CERP programs. We evaluate our own 
programs. But I have really noticed a dramatic increase in the 
extent to which we are working together to make sure that those 
funds that are coming in, whether civilian or military, are 
being used in a way to further our combined objectives in the 
area.
    Mr. Feldman. Both in the field and in Washington.
    Mr. Thier. Yes.
    Senator Corker. Mr. Chairman, thank you. I appreciate it.
    I would say to Mr. Feldman in closing, the international 
community I don't think is quite as impressed with prison 
reforms as you are, based on recent reports we've seen. It 
might be something you could look at a little bit.
    I thank you both for your testimony.
    Senator Cardin. Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    I want to follow up on Chairman Cardin's line of 
questioning because I think it leads to the question of not 
only right sizing the development footprint, but the integrity 
of the development footprint and the fiduciary responsibility 
we have to the taxpayers of this country.
    I am very concerned about the lack of coordination and 
accountability for United States funds expended on Afghan 
reconstruction and development. In addition to reports about 
the inability of the United States to oversee these projects, 
account for project expenditures, and limit funding to 
sustainable projects, the most recent SIGAR report indicates 
that United States assistance may be making its way into the 
hands of Afghan insurgents. I am incredulous that at the end of 
the day, United States taxpayer dollars go to the very people 
we're trying to defeat.
    I recognize the difficult environment in which United 
States civilian and military personnel and contractors are 
operating, but since 2002 the United States has spent $18.8 
billion on Afghan development and reconstruction and another $3 
billion on CERP. And SIGAR has repeatedly flagged lack of 
oversight and sustainability in both programs.
    So it seems to me that the parameters for providing any 
civilian or military assistance should be that the project 
funded is necessary, achievable, and sustainable. For me the 
mere expenditure of funds is not a measurement of success. I am 
concerned enough about the issue of SIGAR that I'm circulating 
a letter to Secretaries Panetta and Clinton on it.
    I'd like to know, how does the Department and the Agency 
intend to integrate SIGAR's recommendation into project 
oversight?
    Mr. Thier. Let me say, thank you for your question. I am 
equally concerned about the issues that you raise, and in fact 
one of the reasons I took this job was to make sure that 
precisely what you outline is actually coming to fruition, that 
we are spending our money responsibly and that it's achieving 
the results that it needs to and that it's doing so 
sustainably.
    We have taken some pretty dramatic steps in the last year 
to get at some of the very concerns that you raise. When we 
developed the Accountable Assistance for Afghanistan Initiative 
last fall, it was really targeted at several of the points that 
you've raised. First of all, vetting. We believe that it is 
critical that we know where our money is going down to the last 
subcontractor level and who those people are. So we have taken 
steps that had not been taken previously by the Agency: (a) to 
demand that information from our contractors and, (b) to put 
all of those subcontractors into a vetting process that 
includes information from multiple sources, including 
intelligence sources, so that we can make sure that our money 
is not being misdirected and certainly that it is not going to 
insurgents.
    We have already, having put this process in place, vetted 
thousands of individuals and hundreds of subcontractors, and 
some have been cut out of the system. Those that we have found 
derogatory information about have been precluded from receiving 
U.S. assistance.
    Another way that we get at this problem is by overall 
limiting the number of subcontractors that we have. When there 
are multiple subcontractors we lose oversight, we lose privity 
of contract, and that makes it much more difficult for us to 
demand full accountability. So we are putting clauses into our 
new agreements that limit the number of subcontracts and 
increase the percentage of work that all prime contractors or 
grant recipients must do themselves, again for precisely these 
reasons, because we don't want the money to be misused, and we 
don't want it going into places, frankly, that we can't see.
    The third thing that we've done is that we have tripled 
overall the number of staff that we have on the ground in 
Afghanistan who are there to see projects every day, and we 
have also specifically tripled the number of contract oversight 
staff that we have. Some of the reports that you allude to and 
others over the last several years have consistently noted that 
the lack of enough specific oversight staff has led to an 
inability to be able to effectively monitor.
    We took that on board and have tripled the number of staff 
and are going to again double them over the next year, for 
precisely this reason, because we need to have the staff in 
place on the ground in Afghanistan, not sitting in Washington 
or in Bangkok, who can watch where those dollars are going.
    By building in these multiple layers of accountability, we 
believe that we are responding to the types of concerns that 
have been raised in the past and are going to do a much more 
effective job of accountability going forward.
    Senator Menendez. So when you have this all in place, the 
next SIGAR report is unlikely to reflect most of these 
concerns?
    Mr. Thier. All we can do is try our hardest to improve our 
record. I think that we can already demonstrate real progress 
over the last year and will continue to do so.
    Senator Menendez. If you could, submit to the committee--
SIGAR had a series of recommendations, and you've referred to 
some of the actions you've taken. If you could submit to the 
committee which of those have been implemented, are in the 
process of being implemented, and which you dispute, I'd 
appreciate that.
    Mr. Thier. I would be happy to do so.

    [The information referred to above was not available when 
this went to press.]

    Senator Menendez. Second, on Tuesday, Norway announced that 
it is freezing aid payments of $55 million to Afghanistan until 
issues surrounding the collapse of the country's biggest 
private lender, Kabul Bank, are resolved. The Norwegian Foreign 
Minister indicated that good governance was a priority for 
Norway and a major obstacle in providing aid.
    The IMF has also withheld a scheduled payment of $70 
million from the World Bank-administered Afghan Reconstruction 
Trust Fund for similar reasons. The CIGAR report stated that 
the lack of cooperation by Afghan ministries and the central 
bank has limited the oversight of U.S. funds flowing through 
the Afghan economy.
    Can you comment on Afghan cooperation and whether this 
issue has been addressed with President Karzai and senior 
Afghan leaders?
    Mr. Feldman. I can assure you, Senator, that this issue is 
raised very, very frequently with President Karzai and with 
senior Afghan leaders.
    Senator Menendez. What was the response?
    Mr. Feldman. We have laid out a series of things that we 
would like to see in support of the IMF statement, to restart 
the IMF program, including prosecutions, recapitalization of 
the bank, forensic or particular types of auditing, and 
recapturing some of the lost assets.
    There has been some movement on some. There's a lot of 
evaluation and this is something that's at the core of our 
bilateral relationship right now and our multilateral 
relationship with other donors.
    Regarding that particular report, we actually did reach out 
to the Government of Norway when we saw it. I don't think that 
there's anything new there. There's a series of governments, 
including Norway, which have decided with us several months ago 
to not allow any--to seek to push for the IMF program to be 
restarted, and we have kind of all agreed on this together. 
We'll have to--there's an Afghan Reconstruction Trust Fund 
board meeting, quarterly board meeting, next week and this is 
continuing the process of evaluation. But we work very closely 
with Norway and the other donors on this.
    Senator Menendez. Mr. Chairman, I appreciate the evaluation 
process. What concerns me is that if others who are engaged do 
the same as the IMF and Norway have in holding back funds, we 
will be left on our own to face the challenges that I just 
discussed with Mr. Thier. We need other countries and entities 
like the IMF to be engaged.
    That doesn't seem to stop us from continuing our funding, 
even though accountability questions exist. So it gives some of 
us, who have been supportive of providing resources, real 
concerns about how we continue to be supportive when there are 
issues with the Government of Afghanistan and problems with 
attaining the type of accountability and transparency that we 
want.
    So I look forward to hearing the result of that 
conversation. It's great to bring it up to President Karzai. 
I'd like to see what his actions will be, so that we might 
understand whether or not we should continue to have faith and 
confidence as we move forward.
    Mr. Thier. Senator, could I just add one thing to what my 
colleague just said, just to emphasize, because I think this is 
where your question was going. You should rest assured that the 
United States has actually been the most stringent of all the 
donors in demanding results on Kabul Bank, and in fact we have 
not made certain payments to the Afghan Government in 
anticipation of that.
    So it's not as though there are donors, the Norwegians or 
others, who are ahead of us in demanding this level of 
accountability. We have done the same quite vigorously.
    Senator Menendez. Then I'd appreciate knowing what we've 
withheld, the dollars amount, to understand whether that's a 
serious enough message to the Afghan Government.
    Thank you, Mr. Chairman.
    Senator Cardin. Senator Udall.
    Senator Udall. Thank you, Chairman Cardin.
    I also echo what others have said. We very much appreciate 
your service and appreciate the hard work that you're putting 
in. But I, like others that have questioned, have some real 
doubts about the aid and about the corruption and about the 
problems that Afghanistan is facing.
    On Tuesday the BBC first reported that NATO forces have 
suspended the transfer of detainees to at least eight Afghan-
run prisons after a U.N. report set to be released this week 
revealed--and this is the quote--``commonplace and systematic 
torture and other abuse'' at the facilities.
    What kind of aid did we put into the process? We were 
talking earlier about the justice system, and there were 
questions about the justice system. I assume that these 
facilities were first run by us, and then there was an aid-and-
development process to turn them over to them, with extensive 
consultation and dollars put in place. Now what we're seeing is 
that they aren't capable of running these.
    What can you tell us about this U.N. report and where we're 
headed on what's happening to detainees in Afghanistan and 
these prisons and the holdup of detainees going in?
    Mr. Feldman. Well, I can tell you what I know about it, 
which obviously this is still being played out. We're obviously 
aware that the U.N. is working on this report, and the United 
States also, obviously, takes all allegations of human rights 
abuses extremely seriously and is very committed to protecting 
the safety and dignity of people all over the world.
    We encourage and support any action by the Afghan 
Government to investigate these allegations of human rights 
abuses, hold those people----
    Senator Udall. Are they investigating? The Afghan 
Government, are they investigating these abuses?
    Mr. Feldman. This is all as of the last few days, but my 
understanding is yes, that that has already started. And 
because the report is not yet public, I can't say too much more 
about that. And DOD would have to answer specific questions 
about transfer from ISAF.
    But it does allow me to go back to the previous point I 
made to Senator Corker, where the prison reform I was talking 
about was actually the infrastructural improvements themselves, 
and obviously some of what we had done there in terms of the 
categorization, the advice and training on categorization of 
prisoners and things like that, in an effort to deradicalize, 
has been quite successful.
    So there are pieces of it--and there's also a variety of 
different types of prison systems. There's the DOD versus DOJ 
equivalent of prisons, whose transferring to what. So it's a 
more complex issue than just that. But yes, we have raised 
these issues, as has the rest of the international community, 
and the Afghans are looking into this straight away.
    Senator Udall. These were facilities that were run by ISAF 
originally, these eight Afghan-run prisons now?
    Mr. Feldman. I think I would have to defer until the actual 
report is out, which talks in more detail about that. I'm 
sorry, Senator.
    Senator Udall. Well, when the report comes out I hope that 
you'll update our committee on the questions I've asked and 
anything else that you would like to include.
    Mr. Feldman. Of course.
    Senator Udall. I wanted to follow up on some of the 
questions that were asked earlier about the Afghan economy and 
then what's happened since our intervention. I think the figure 
was used that 10 percent of the economy is really generated 
internally, and so that 90 percent is from the outside, from 
the United States and from all of this aid from our military 
efforts.
    It seems to me that we built this very, very war-heavy 
economy within Afghanistan if they're only generating a very 
small part, and I assume most of that is from agriculture, 
because this is a very tribal society. I think the per capita 
income is a couple of hundred dollars a year. These are people 
that are living on the land, except in several of the larger 
cities, that are just eking out a living.
    What were the things before we got in there that they were 
doing that we're trying to complement at the local level? It 
seems to me when we talk about sustainability, what's really 
important with sustainability is helping them do the things 
they were doing well before we got there and trying to build 
upon those.
    So could you talk a little bit about that, both of you, and 
how much our aid right now is trying to build upon the things 
that were the basis of their economy?
    Mr. Feldman. Let me just say a few words by introduction, 
and then I'll let Alex talk about kind of more of the 
specifics. But my former boss, Ambassador Holbrooke, was fond 
of saying that agriculture was the most important nonsecurity 
initiative that we had in Afghanistan. So, given that 75, 80 
percent of the country is rooted in the agriculture industry, 
the fact that we poured a huge amount of effort in, as we talk 
about the civilian surge, it's very important to note that our 
USDA colleagues went from someplace around 15 or 16 in country 
to about 60 at this point, complemented by another 25 or so 
USAID agriculture experts.
    So connecting farmers to market, providing seeds, 
reinvigorating the agricultural industry, pomegranates, which 
are now being exported to Dubai, raisins, a range of other 
things, has been a big focus of the capacity-building and the 
sustainability piece.
    Some of it obviously was also--there is a stabilization 
aspect to it, which is in sustainable cash-for-work programs 
and other aspects. But it was based on continuing to grow and 
reinvigorate this industry.
    But it gets to Senator Corker's question as well in terms 
of what ultimately is going to provide the type of revenue to 
support the national security forces and the range of other 
things. That's not going to come ultimately from agriculture. 
So it's got to be complemented over the longer term with some 
of these other issues in extractives and energy and elsewhere.
    That is why we're trying to meld those pieces together for 
what will take us through a short to medium term to what may 
ultimately hopefully be much more sustainable over the longer 
term.
    Mr. Thier. Let me say, first of all, our understanding of 
the Afghan economy is that Afghanistan's gross domestic product 
right now is around $16 billion a year. We only estimate that 
probably $2 to $3 billion is actually due to local spending in 
the economy. There is a roughly equivalent amount of money 
that's coming from the international community to support the 
Afghan economy. But overall I think that the figure that the 
Afghan--that domestic product represents of the economy is 
probably closer to something like 50 percent of the aggregate 
of economic activity in Afghanistan.
    But specifically to your question, you are exactly right. 
What we need to be doing in Afghanistan is emphasizing the 
things that Afghans can do, know how to do, traditionally have 
done, have the ability to do within their means.
    The good example in agriculture is that in the 1970s before 
all of the crises that hit Afghanistan their biggest export was 
dried fruit and nuts. We have today, for the first time since 
that period, returned Afghanistan to that place by improving 
very simple things, like increasing crop yields, like having 
small-scale dehydration facilities so that they can take their 
crop and dry it and sell it abroad.
    We have brought that industry back, not to where it was, 
but to being the largest export that Afghanistan has today. The 
point is just to underscore what you're saying, that if we're 
going to succeed in Afghanistan it's going to be to build on 
the traditional things that Afghans have done in the past and 
know how to do. I believe that that really is where our focus 
is in terms of the near-term economic generation, because 
that's proven again and again to be what works.
    Senator Udall. Thank you.
    Sorry for, Senator Cardin, running over on that.
    Senator Cardin. Actually, I think you used less time than 
any of the rest of us.
    Senator Udall. I know Senator Corker wants to ask many 
questions, other questions.
    Senator Cardin. I want to ask a few more questions, but 
just clarify that math for me? You said--did you say 50 percent 
or 15 percent?
    Mr. Thier. About 5-0, the best that we can discern.
    Senator Cardin. I don't understand your math. Maybe you can 
just help me quickly. I don't want to get bogged down. I 
thought you said $3 billion was your estimate of their local 
consumption? You said $15 billion is the revenues coming in?
    Mr. Thier. Sorry, no. Gross domestic product for 
Afghanistan overall is about $16 billion.
    Senator Cardin. $16 billion, I mean.
    Mr. Thier. About $3 billion of that--local spending of 
international community, international forces in the Afghan 
economy is estimated to be in the 3 or so billion dollar 
figure.
    Senator Cardin. So you think the Afghans themselves are 
developing about $8 billion?
    Mr. Thier. No; probably more--including all agricultural 
output and everything, probably in the neighborhood of $12 
billion domestically produced economy.
    Senator Cardin. These are huge differences from what we're 
seeing here. So I'm going to ask that you again give us the 
details on that, and we'll come back to you with some questions 
as it relates to it, because that's a huge difference.
    What we've been told is that it's somewhere between 90 to 
97 percent is war economy.
    So, if we could clarify that, that would be helpful.
    Mr. Thier. We'd be happy to do that.

    [The information referred to above was not available when 
this went to press.]

    Senator Cardin. I want to get to accountability for one 
moment. You had exchanges with just about every member of our 
committee on the accountability of these funds. You talked 
about A3, Accountable Assistance for Afghanistan, 
which was clearly a positive step. But let me just remind you, 
the report that came out from our committee, which was June of 
this year--the A3 came out well before that--was 
critical on the accountability of the USAID funds. It said: 
``The United States Government relies heavily on contractors in 
Afghanistan. Multiple reports have raised alarms about the lack 
of robust oversight and accountability for multibillion dollar 
investments. USAID and the State Department have insufficient 
qualified contracting staff serving in Afghanistan to oversee a 
multibillion dollar portfolio.''
    You have talked and said, well, you've increased your 
staff, but this report's indicating the staff has a very high 
turnover, so you don't have the expertise and institutional 
memory in order to adequately oversight the accounts. The off-
budget issues, the committee reported this approach can weaken 
the ability of the Afghan state to control resources, which can 
fuel corruption and has led to the creation of thousands of 
donor-driven projects without any plan for sustaining them.
    This is June of this year, the report from our committee. 
And I'll have you respond. Then the Appropriations Committee 
included in its restrictions on the use of these funds that 
none of the funds may be appropriated unless you certify that 
the Government of Afghanistan is demonstrating a commitment to 
reduce corruption and improve governance, including, et cetera, 
and a whole list of things that are there, to support 
reconciliation and reintegration activities, only if Afghan 
women are participating at national, provincial, and local 
levels of government, et cetera.
    It's a whole list here. Then I was told that a relatively 
summary response was sent to the committees this past week in 
regards to the concerns of Congress. These are major concerns 
we have. And we know you're making progress, but we have a 
responsibility to get detailed information about changes that 
are being made to protect against U.S. taxpayer dollars being a 
source of corruption.
    We're working in a country that is not known for its 
honesty of government and therefore it's challenging to make 
sure that our funds don't fuel a corrupt society. But that's 
our demand. We've had hearings in this committee where we've 
said: Look, we'll walk away from countries rather than support 
corruption. That's our policy.
    So we have a responsibility to get details from you as to 
what steps you're taking in a very challenging environment to 
make sure that our funds are not being used to help finance any 
form of corruption, whether it's a local official taking bribes 
or whether it's someone just padding their pocket on the 
contract dollars that we're making available.
    I don't know if we've gotten that detailed information, and 
I think you have a responsibility. We have a responsibility to 
make sure you supply it. I'm not yet satisfied we have as much 
information as we need.
    Mr. Feldman. I would say in regard to the certification 
that you referenced, Senator, we did send up the certification 
on meeting certain guidelines, baselines, on corruption and on 
women's empowerment issues, which I hope was not perceived--
this was sent up in early July, so I'm not sure if it's the 
same thing that you're referencing as earlier this week or not. 
But it was certainly not a summary response, because it was 
something that we worked on for quite a bit, and we would be 
happy to do any additional briefings on it, but which really 
sought to lay out where we thought there had been strides made 
and what we were able to accomplish.
    On the gender issues, it looked at what had been 
accomplished, including references on women's rights by 
President Karzai and others, the goals that had been made on 
basic education and health, the incorporation of women into 
civil society. This is obviously something that Secretary 
Clinton and Ambassador Grossman and Ambassador Crocker all 
speak about quite a bit, and we would be happy to do a briefing 
particularly on that.
    On corruption, the certification focused on a few key 
organs. I think again there's at least two pieces of the 
corruption here. Obviously, corruption is a fundamental 
challenge in a society like Afghanistan, and I think you have 
to look at again what the baseline is. We've been working 
closely with Afghanistan to try to continue to strengthen 
bodies like the High Office of Oversight, the adoption of 
subnational governance policies, continuing structural reform. 
Much, much more has to be done, but we are there working on it 
every day.
    In terms of the USG money, I think that there have been 
great strides over the course of the last year or 2 on the 
interagency piece of this, the coordination between the 
civilian and military sides, particularly on such things as the 
formation of Task Force 2010.
    Then within that are the kind of general accountability and 
oversight mechanisms like A3 that Alex laid out. So 
this is something that we recognize the great burden that we 
have with U.S. taxpayer money, and we are doing everything that 
we can to control that and have the appropriate levels of 
oversight to prevent that corruption, but recognizing that in 
the circumstances that we're operating it's impossible to get 
to 100 percent of that.
    Senator Cardin. Staff turnover?
    Mr. Thier. Let me say something about that. We have tried 
to address the concern that you're raising in two different 
ways. One is by actually really increasing the number of 
oversight staff we have, period, which was necessary.
    The second is dealing with the problem of rapid staff 
turnover. We've done two things. One is that we have moved to 
encouraging and offering 2-year tours, which is up from 1 year 
and so it's a dramatic improvement.
    Senator Cardin. How many of these contract officers are 2-
year assignments?
    Mr. Thier. We'll have to get that answer to you. I don't 
know that off the top of my head.

    [The information referred to above was not available when 
this went to press.]

    Mr. Thier. The other thing that we've done this year is, 
taking a cue from our military colleagues, we have started what 
we call the AFPAK Hands Program, where we take people who have 
done a year or 2 of service in country, we bring them back to 
serve in Washington working on Afghanistan and Pakistan, and 
then their commitment is to go out for a second tour.
    I can tell you, as somebody who has worked on the region on 
and off for the last 18 years, that it is a place where 
relationships matter, where an understanding of the culture 
matters, and I agree fully with the premise of your question. 
We need to have staff who know what they're doing, who have 
familiarity with the context, in order to be able to do their 
jobs effectively. We are looking at multiple ways, both the 
State Department and USAID, to increase the length of time that 
our staff spend in these environments, despite the hardships 
that they face in doing so, in order to be more effective.
    Senator Cardin. Well, if you would give us the length of 
time that the staff is there, that would be helpful for us to 
analyze, because numbers are important; experience is 
invaluable. You are dealing with a long-term problem of 
corruption in their society, and without experience of having 
to deal with this it's difficult to believe that a significant 
part of our funds are not going to corruption, and that is 
something that we will not tolerate. So I would appreciate as 
much information as you can get to us about turnover.
    I couldn't agree with you more, 1 year is hardly enough to 
be able to understand the local community as it relates to 
overseeing contracts and making sure the money is going for its 
intended purpose.
    One last question, and that is: Is there anything that you 
would like to see Congress do that could make your jobs a 
little bit easier, other than giving you a larger budget? I'm 
not talking about dollar amounts. Is there something we could 
do to help?
    Mr. Thier. To be honest, Senator, I think we have an 
extremely constructive working relationship with Congress right 
now. We are here frequently briefing staffs, briefing members, 
talking to members before they head out on CODELs. I think it's 
just asking for continued understanding and flexibility about 
what the needs are going to be, which at this point we can't 
necessarily determine. We'll have to see what the facts on the 
ground are like, conditions on the ground, a year from now. 
We'll have to see where the military campaign goes and then how 
that's supported on the civilian side.
    But I think in these very difficult economic times here it 
obviously can seem easy to cut a piece of this, and the 
civilian piece might be important. I would just say, given, as 
you noted, the very small percentage that that represents of 
the overall amount spent, I think it's getting great value for 
that, and it's an integral part of the combined military and 
diplomatic effort.
    Senator Cardin. Thank you.
    Senator Corker.
    Senator Corker. Thank you, Mr. Chairman.
    First of all, I want to again thank you for what you do. I 
think you sense some frustration here. We had a little off-line 
conversation a minute ago. I think we're in Afghanistan today, 
we're there because we're there. If the situation on the ground 
were there and our military wasn't, there's no way we'd send 
them in.
    On the other hand, our presence there probably has created 
the positive developments that we've seen in Afghanistan. But 
it's very frustrating to all involved, and our frustrations, 
which I have many and I'm sure the chairman has many, are not a 
reflection of how we feel about individuals like you that are 
trying to carry out the work.
    I will say to Mr. Thier the turnover issue can be solved 
within the U.S. Government, but we have about 40 percent of the 
activity on the ground taking place by other international 
players; is that correct? And they I don't think are engaging 
in the same type of tenure. We have people coming in for 8 
months, making a name for themselves, changing what the last 
person did, and then the next person coming in to change what 
the person before them did. And there's not a lot we can do 
about the tenure of those from the international community, is 
there?
    Mr. Thier. I think that contractually it's probably quite 
difficult to do. But I will note, having come from that 
community before serving here, that in fact it's often in those 
implementing partners where the people who have much longer 
term experience and association with the region do reside. So 
many of our implementing partners actually have people in 
place--of course, not to mention that Afghans make up the vast 
majority of the staff of all of our implementing partners--have 
a lot of experience in the region.
    But it's something that we need to consistently encourage, 
because it only helps our effort.
    Senator Corker. So let's talk about the corruption issue, 
which I think is--we had a conversation with a gentleman 
yesterday at length about this. Is there something about the 
Afghan culture itself, the culture, that causes it to be a more 
corrupt culture than the culture we're used to here in America?
    Mr. Thier. In my experience, Senator--and this goes for 
other countries I've worked in as well--there are not 
particularly cultures that are more or less susceptible to 
corruption. The problem is lack of institutions, lack of rule 
of law. There are many societies that once previously 
experienced an enormous amount of corruption, were not 
democratic, and have made that transition, not because the men 
and women of that country suddenly became better, but because 
institutions were established that enforced the rule of law.
    Ultimately, I believe that we've seen and in fact 
demonstrated in Afghanistan that that is possible. Some of our 
partners in Afghanistan, some of the institutions that we work 
with on a daily basis, like the Ministry of Rural 
Rehabilitation and Development, which implements the national 
solidarity program, or the Ministry of Public Health, have 
received funds from the international community for a number of 
years. They have made enormous impacts. They have good leaders, 
and they have not been cited for problems with corruption.
    So it can work in Afghanistan, but it requires leadership, 
and it requires institutional development, and it's critical 
that we apply that metric more broadly to the other 
institutions in the country.
    Senator Corker. So that's consistent actually with what 
another, ``noted'' expert said yesterday, that culture itself 
is not the issue.
    So let me ask another question. Obviously, there's huge 
amounts of money flowing in from us and other places. Like 
Senator Cardin, I would question the part of the Afghan GDP 
that's generated internally and the part that's coming in 
because there's a war there. I too would assume that much more 
of it is because of the money that is coming in because of the 
war activities and the rebuilding activities.
    But do you think that it's our money, then? I know we 
talked about institutions, and I want to get back to that in 
just a second. But is the huge amounts of money that's coming 
into the country from us and other donor countries and involved 
countries, is that creating the environment also for additional 
large amounts of corruption?
    Mr. Thier. I believe that in any country it is critical 
that the primary funding source for the government is derived 
from the revenue of its people. Building that connection 
between citizen and state is ultimately what creates 
accountability and the rule of law.
    I think that our, the international community's, assistance 
is critical in diminishing corruption in Afghanistan, in the 
sense that it invests in institutions and training, so that 
corruption is reduced. But at the same time, it creates a 
dependency on assistance that will not be healthy in the long 
term for Afghanistan, which is why we all I think sit before 
you with an understanding that our inputs into the Afghan 
economy, our inputs into Afghanistan's budget, need to decline 
over the next years as the Afghans' ability to fund their own 
budget increases.
    Ultimately, that link of accountability is going to be what 
will improve the rule of law and make Afghanistan's leaders 
more accountable to their people.
    Senator Corker. So my sense is--and I don't have near the 
evidence or stats that any of you have--I can feel it on the 
ground, that the huge amount of money that we are pouring in is 
highly distortive to their culture. I think many of the inputs, 
as you would describe them, have been very damaging to the 
Afghan people and to their culture.
    Sitting down with tribal elders who are beginning to talk 
about nuclear reactors, I mean, craziness. Seriously, I think 
we have done tremendous harm to the people of Afghanistan with 
the huge amounts of United States dollars that have come into 
the country, and especially the way that they've come in. So 
both from a standpoint of just our own sustainability, but, 
candidly, what we've done to that culture ourselves to me has 
been highly destructive.
    I know that people were doing all of that with good 
intentions, and I know this goes between two different 
administrations of two different parties. I'm not in any way 
being partisan with this. But I think that's true.
    Now let's move just to the justice system then again. So 
you have a culture that on its own is not more corrupt than 
ours, I think is what you just said. You're going to be cutting 
back on the inputs, and I think we may be pushing you to cut 
back more than you may be talking about pushing back.
    But I really do think, I go back to this justice system. We 
have a President that I don't think is trying to deal with 
corruption. We have a hospital that we turn over and the 
physicians and nurses are taking bribes to keep people from 
having--I won't even describe it, it's so grotesque what 
happens to these people in these hospitals.
    I don't think we're dealing with a leadership group that 
wants to deal with corruption, and I absolutely know we've 
failed miserably at putting in place any kind of justice system 
that would allow corruption to be weeded out. Again, you can 
build an Afghan police and military, but if you don't have a 
justice system to sort of figure out whether someone committed 
a crime or not, you're just going to have tremendous 
corruption. It's going to expand, actually, because the police 
are not infallible, and certainly in many cases there are going 
to be bribes.
    So I think it's a really depressing scenario, highly 
depressing. I think this whole nation-building effort that has 
been put on steroids, and now I know it's been weaned down per 
our conversations, but other administration officials have said 
the same--I think we have really fouled up, and I think we've 
done a lot of harm. I think the fact is that this economy is 
just--it's not going to be sustainable.
    What's going to happen as we move away with our military 
and as we begin to sort of tone down the amount of inputs, 
there is going to be a major, major recession economically, 
major recession, because I think, like Senator Cardin, the 
number's a whole lot bigger as it relates to what we're placing 
into the country relative to their overall GDP than I think you 
just said.
    So I think we've helped create a major, major problem in 
the country. I hope that smart people like you and maybe with 
some assistance from a lot of folks, maybe even us, we can 
figure out a way of withdrawing over time and doing so in an 
appropriate way.
    Senator Cardin. Thank you, Senator Corker.
    Senator Udall.
    Senator Udall. Thank you, Chairman Cardin.
    I just have one more question on this corruption issue. 
These figures come from the Commission on Wartime Contracting. 
I'm interested in whether or not you agree with them or not. We 
have an insurgency which is very strong. We have made impacts 
with it, as Mr. Feldman has said, but our fellow committee 
member on Foreign Relations, Senator Casey, just returned and 
the number of IEDs is dramatically higher. So they're getting 
resources out of Pakistan, this fertilizer and everything, to 
build these IEDs.
    This commission has said that the number one thing fueling 
the insurgency in terms of resources is the opium and the poppy 
and all of that. But the No. 2 is the dollars from the 
corruption, the dollars from U.S. aid and NATO aid and all the 
organizations around. Do you agree with that? This is an 
astounding issue, that if the insurgency is living off opium 
and then it's No. 2 is all the dollars that are flowing out of 
all the activity we've been talking about, that's something 
that's very worrisome. Do you agree with that? Do you dispute 
it? What are your numbers on this?
    Mr. Thier. I certainly think that the CWC report as regards 
USAID or civilian assistance in Afghanistan does not attribute 
that charge to our assistance, that civilian assistance is one 
of the leading sources of that corruption. In fact, although 
the CWC report does focus on I think some important 
recommendations and some projects, many of them completed 
several years ago, there was not a significant percentage of 
our assistance in any way, shape or form that was indicted as 
being problematic or prone to corruption in that report.
    I think we drew from this some important lessons and, 
frankly, the CWC process has been going on for some time, and 
we've been engaged in an ongoing dialogue with them. So very 
few of their conclusions or recommendations came as a surprise 
to us because we've been having this discussion with them.
    But I haven't seen anything that characterizes corruption 
resulting from USAID civilian assistance as being anything that 
is a significant factor in fueling the insurgency. In fact, 
we've never found any direct evidence of any of our funding 
going to the insurgency and, although it remains a concern and 
why we put these safeguards and vetting programs in place, I 
certainly don't think that in any way, shape, or form it's fair 
to characterize that our assistance is a primary or even 
significant contributor to insurgent financing. I've never seen 
that before.
    Senator Udall. Mr. Feldman.
    Mr. Feldman. Well, let me just say, on the fueling of the 
insurgency, you have to look at every input. The narcotics 
trade is clearly one of them, and that's why we have sought to 
make the strides in our counternarcotics policy, switching from 
eradication to interdiction, along with Afghan-led eradication 
programs, and we've seen a decline in opium production in the 
last few years.
    It's in the flow of funds and that's why we've instituted a 
variety of reforms there over the past few years that help to 
track this terrorist financing. Of course, you have to look at 
all the money that's flowing into Afghanistan from multiple 
entities, from across the array of United States agencies, and 
again where the civilian assistance is a very small piece of 
that, to what the rest of the international donor community is 
doing.
    We have sought to do everything we could do within our 
remit, within our jurisdiction, and we have continued to do 
much more on the interagency side. And we've done much more on 
the international coordination side.
    But again, with that amount of money flowing in and with 
the lack of the inherent institutions, yes, of course it's 
going to fuel it as one of several factors.
    Senator Udall. Thank you, Mr. Chairman.
    Senator Cardin. Thank you.
    As I noted earlier, of course, DOD funds are also involved 
here, which we don't have before our committee.
    Just to underscore what Senator Udall said, the report of 
our committee in June did point out that most United States aid 
to Afghanistan is off budget, meaning it doesn't go through the 
Afghan Government. This approach can weaken the ability of the 
Afghan state to control resources, which can fuel corruption.
    Do you disagree with that finding?
    Mr. Thier. No. In fact, we believe strongly that the amount 
of our civilian resources going through the Afghan Government 
needs to be increased, and in fact it has increased from 12 
percent to 37 percent. But I do want to add a significant 
caveat, which is that we will not provide funding to any Afghan 
Government institutions without very stringent controls.
    For example, one of the main ways in which we have funded 
the Afghan Government programs in the past is through the 
Afghanistan Reconstruction Trust Fund. That fund is a dual-key 
fund with the World Bank, so everything that's done is very 
heavily audited. We also conduct intensive examination of 
Afghan institutions that are going to be receiving United 
States resources to make sure that they have the appropriate 
accounting and other standards.
    So while we have increased the amount of money on budget, 
which frankly is a real triple win because it increases the 
capacity of the Afghan Government, it often lessens the cost of 
programs, and at the end of the day increases the likely 
sustainability of the program, we have done that, but we also 
do so very deliberately so as not to risk any taxpayer 
resources in the process.
    Senator Cardin. What is your goal as to what percentage 
should go on budget?
    Mr. Thier. We committed in Kabul at the Kabul conference 1 
year ago in July 2010 with other donors to move toward a 50-
percent funding level through the Afghan budget. That said, we 
will only reach that goal if we are convinced that the 
institutions have the absorptive capacity and the 
accountability to handle those funds. This year we're at 37 
percent, and we'll continue to work towards that target.
    Mr. Feldman. I completely concur with Alex on this, and 
actually I'm glad you raised this issue because I think it's a 
little-understood piece of what we do in terms of our 
assistance in Afghanistan, but a very important one and a much 
better news story than I think there's a recognition about. 
Because of the fact that we, along with the rest of the 
international donor community, sought this 50-percent 
aspirational goal, we've made great strides in getting it from 
below 10 percent up to the 37 percent in the last few years, 
but hand in hand with a very vigorous vetting and oversight 
process.
    So right now we're funding four or five ministries on very 
targeted programs with that level of oversight. It's taken a 
very lengthy amount of time to make sure that they meet our 
vetting processes, but those have been some of our most 
successful programs.
    Senator Cardin. We want you to have that oversight. What 
Senator Corker said I happen to agree with, and that is the 
problems of corruption within the Government of Afghanistan, so 
therefore you need to have the confidence that the funds moving 
on budget in fact will be used for its intended purpose and not 
be siphoned for governmental corruption funds. So we agree with 
that.
    We understand the challenge. Believe me, we do. And we 
understand the difficult circumstances in which you're 
operating. The question I asked as to how we can be helpful was 
a sincere question because we want you to succeed in building a 
stable Afghan Government and society. But there's a limit to 
our patience and there are certain standards that we cannot 
deviate from, including corruption, the empowerment of women, 
equality issues, and we need to make sure that there is 
constant progress being made in good faith for the continued 
support of the U.S. involvement.
    I'm going to keep the committee record open until close of 
business Monday. There may be some additional questions that 
will be asked by members of the committee. I would ask that you 
respond to those questions in a timely manner. I've also asked 
for some additional information, which when it becomes 
available I'd appreciate you making it available to our 
committee.
    As each member of our committee has said, we really do 
thank the two of you and the people who work for your agencies 
for their incredible public service in an extremely challenging 
part of the world that is very, very important to U.S. 
interests. We appreciate your dedication.
    With that, the hearing will stand adjourned.
    [Whereupon, at 4:08 p.m., the hearing was adjourned.]

                                  
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