Armed Nation Building: The West's Unhappy History

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Editor's Note: Sergio Miller offers an important look at armed nation building in Vietnam and Afghanistan, with a brief excursus on Laos.  While many love to deny the parallels between these wars, his look at the effects of spending on capacity building are extremely important and often poorly discussed in the literature.  Our debates over COIN and our current wars are informed by a very poor understanding, a misunderstanding most commonly, of the tortured process of state-building in the west and the long legacy of corruption, warlordism, and the like in our own history.  As Charles Tilly has argued, our states were made as protection rackets.  It is the height of lunacy that we should expect that actors in troubled states of the developing world should exhibit more scruples in the face of a wash of foreign monies.  Like soil, if the ground is not ready to absorb a deluge, rain can be more harmful than helpful.

Introduction

Letters home from the front are usually filled with personal matters.  Occasionally, a soldier will discuss the war.  Below is an example, with some references deleted:

‘Dear Doroth[y],

Another empty meaningless day is past…two letters arrived from you today. I do hope Michelle’s crack on the head was a concussion – that is the first thing I thought when I read the first letter.  Are you still off the smoking itch? I think that’s [a] very strong characteristic of you to have gone on the wagon for 2 weeks…as you know…the theory is we can’t ‘win’ this war in a conventional sense because of the fundamental character of the conflict.  Thus we must somehow give ‘our’ ------ an ideology that will interest them at least as much as -------- does.   Military power can buy time/security but the real progress must be made otherwise.  Something of a revolution is necessary but must be brought about by peaceful means (development)…as to whether or not it will work I haven’t any idea.[1]’

Perhaps most soldiers who have served in Afghanistan will recognise the sentiments.   But this letter was not written by a soldier in Afghanistan.  It was written by James Meacham, in Vietnam, in the late 1960s.  We have been here before.

This article compares the experiment in armed nation building of the Vietnam War with the current war in Afghanistan.  Although there are over 40 troop contributing and donor nations in the present war, US data is almost exclusively used throughout, for three reasons.  First, the US is the largest donor nation by a significant margin.  All the other nations could withdraw aid. This would cause pain but not collapse.  If the US withdrew, there would be collapse. Second, US data is both available and clearly presented by several official bodies.  And lastly, US organisations (such as the GAO and SIGAR[2]) openly and honestly report the significant losses of aid funds to embezzlement and fraud where other nations either do not provide this information at all, or are very reluctant to admit the scale of waste.  On this latter point, it should be noted that a US organisation like SIGAR pursues own national and armed forces fraud which has resulted in numerous prosecutions.  This is not just about Afghans, anymore than the Vietnam War was just about the Vietnamese.  Money does not make people virtuous.  It taints and corrupts anyone and everyone[3].

Laos

The story starts in Laos because it was this mysterious, peaceful and poorly understood country that led the Kennedy administration to greater involvement in South Vietnam. The story is worth telling, as a foretaste of what was to come.

The Kingdom of Laos was a deliberately created buffer state between communist China and North Vietnam and Thailand, a sort of Belgium of the Far East. Following the 1954 ‘Little Geneva’ Accords Laos began to receive economic and military aid from America through the International Cooperation Administration or ICA ($300 million by the time of Kennedy’s inauguration, or three times the country’s Gross National Product).  Laos could not absorb this sudden influx of Western aid and the US Treasury was required under-write the Laotian kip by depositing dollars to back the newly-printed Laotian currency. 

Following the prevailing orthodoxy of the time, aid was provided through the mechanism of imports. These were the CIPs (Commercial Import Programs) widely used in the 1950s and 60s. Mostly, they went to 90 odd governments of ‘developing’ countries. By the 17^th year of operation US foreign aid topped the $100 billion mark (almost $1 trillion in today’s money) – an excessive sense of generosity shown towards Third World crooks, villains and ruffians by any measure. Laotian businessmen were allowed to import goods with dollars and re-sell these with the local currency. This had the predictable effect of provoking rampant corruption amongst in the ruling classes, only interrupted by ‘intermittent pauses to protest their devotion to anti-Communism and thus keep the U.S. cash coming in^[4]’- in much the same way that ‘global terrorism’ is invoked by foreign governments today seeking US aid. The embezzlement was inevitable as the official exchange rate was set at 35 kips to the dollar, but in neighbouring Thailand, an exchange rate of 100 kips could be found (the same exchange rate would be set for the Vietnamese piaster).  As one official put it, American policy in Laos amounted to a fairy tale^[5]. Fake import licences became a cottage industry.  Did Laos really need 37 tons of toothpaste, 4 tons of feather dusters and $1.3 million dollars’ worth of cars (the country had a few miles of hard-topped roads)?  When a job lot of American cheese was imported to Laos, the locals tried to use it as soap.  It was all too reminiscent of Milo Minderbinder and Catch 22.

Throughout the late 1950s Laos suffered an intermittent war instigated by Pathet Lao, an ostensibly communist guerrilla group supported by North Vietnam. In mid-August 1960, a paratrooper captain called Kong Le marched into the capital Vientiane, with his battalion, and announced a coup d’état. To give legitimacy to this act, he declared Prince Souvanna Phouma as a member of the new ruling committee.  Phouma, a former premier and brother of Souvanaphong, the leader of the Pathet La, wanted nothing to do with the coup and retired from the field (incidentally, the suit-wearing Souvana Phong was also related to the king and came across to most observers as some sort of businessman, which is what he was, rather than communist guerrilla leader, which he was not).  In the meantime, Premier Tiao Somsanith who had been caught by surprise by the coup (the entire government was in the royal city of Luangprabang paying respects to King Savang Vatthana), pleaded for Western help.  Although Captain Kong Le denied any truck with the communist Pathet Loa, Washington feared close links between the two groups and saw communism infiltrating Laos through the back door.  The truth was that a thoroughly corrupted Laos had descended into petty power struggles between various family members of the ruling clans.

The coup failed but the fighting went on. The Royal Laotian Army – trained and bankrolled in a $25 million aid program furnished by the Department of Defense (DoD) - proved completely useless^[6].  The police, trained in a token way by the British and French were also hopeless. A 29,000 strong force had been raised but the only effective units were two paratrooper battalions.  One was being led by Kong Le. The other was being led on the government side by General Phuomi Nosavan who struggled to contain raids carried out by Pathet Lao across northern Laos.  The portly Prince Boun Oum was appointed premier of a new government but this made no difference.  Outside the capital and a handful of other settlements there was no government authority. Some hill tribes were not even aware that they belonged to a political entity called Laos. 

The departing Eisenhower administration had little appetite for intervention and the problem of Laos was consequently bandied between two ineffective organisations: the United Nations and South-East Asian Treaty Organisation (SEATO).  When SEATO finally did meet in Bangkok, the language was as pastel-coloured as the diplomats’ wives, which the press seemed to find more interesting. Admiral Harry Donald Felt’s Seventh Fleet was put on standby but this amounted to symbolism rather than real intent.  The real dividing line in Laos was the naked contradiction between the reality on the ground, tirelessly argued by some honest State Department officials, and the simplistic anti-communist rhetoric drummed thousands of miles away in Washington.  American policy, as one astute correspondent noted, amounted to colossal, naïve waste:

‘Ironically, the unattractive dilemma in which we now find ourselves is to a degree of our own making. In Laos U.S. money has been wasted, squandered and mismanaged by both Americans and Laotians. But the real loss comes from Washington’s insistence – often against appraisal of U.S. diplomats on the scene – in trying to fit Laos into a broad strategic military picture, creating and inflexibly following goals and aims which the backward, imponderable little country could not possibly have achieved.^[7]’

How many more times would this observation hang over American foreign policy in the next half century?

Eventually the Laotian question was settled (by agreement to its neutrality and by allowing the ruling family to divide the spoils), but it all left a sour taste. It had taken a whistle blower called Hayes Miller (who lost his job) to highlight the follies of the intervention.  It would have been no consolation to Miller to then witness the same and greater follies perpetrated in neighbouring Vietnam.

Vietnam

The US provided massive economic aid to Vietnam from 1954 to 1975 – if nothing else it was a grand experiment in armed nation building.  The aid started at a modest $10.1 million ($81.9 million in 2010 prices[8]), hit a peak of $978.7 million in 1971 ($5.27 billion in 2010 prices), and finally ended in 1975 with the North Vietnamese victory on $270.9 million ($1.1 billion in 2010 prices)[9].  In total, the US poured $10.153 billion ($41.3 billion in 2010 prices) in economic aid into South Vietnamese, only to see its investment evaporate as a T-55 tank from 324 PAVN Division knocked down the gates of Independence Palace at 11.30am on 30 April 1975. Perhaps there was sense of relief that it was all over.

The manpower required to manage this delta of financial aid rose like the monsoon floods.  When Kennedy assumed the presidency, there were just over 1,000 civilian employees (US, third party contractors and local nationals) distributing aid funds. At the height of the programs, there were over 10,000, the majority local nationals, greatly increasing the possibilities of embezzlement and corruption[10].  The same pattern has been manifested in Afghanistan/Iraq but on a gross scale – around 65 per cent of contractors have been local nationals (around 138,000) who face unemployment as aid programs wind down. In Vietnam, this expansion of civilian staff was mirrored by the expansion of the military commitment, from 800 servicemen in the MAAG (Military Assistance Advisory Group) under Eisenhower, to the high of 538,700 in MACV (Military Assistance Command Vietnam), in the summer of 1969 under Johnson.

American aid to Vietnam began with the package of aid offered to the French government in the First Indo-China War (without which it would have lost the war far more quickly).  This became the Special Technical and Economic Mission (STEM), following the 1955 Geneva Accords that created modern-day Vietnam. Over time, STEM became the United States Operations Mission (USOM). It was USOM, with ICA that ran economic aid to South Vietnam in the first half of the war.  In 1966, USOM was re-designated USAID (Agency for International Development) South Vietnam. One year later this new organisation was absorbed into the Office of Civil Operations (OCO).

As in Laos, USOM initiated a program to bring goods into the country. These were then sold for Vietnamese piasters, given to the South Vietnamese government as aid (at the time, the Diem government could barely cover one third of its budget with internal revenues).  In the beginning, the rough allocation of this aid was 70 per cent military expenditure, 20 per cent technical and economic assistance, and ten per cent to refugees.  Military aid was also provided separately by the DoD.

The priorities, as USOM viewed the problem, were: re-establishing the country’s agriculture and industry (damaged by years of war), and creating a professional class of administrators and technicians i.e. modernizing South Vietnam. Education and health were also high on the agenda. In parallel, there would be political reforms – democracy, whether the South Vietnamese liked it or not, was riding into town.  The Diem government, obviously, had no wish for democracy but he got it in the sense that he was assassinated in a CIA-supported coup.  His eventual successors, Ky and Thieu, really only paid lip service to representative government.

USOM established seven generic areas for aid funds: public administration (civil servant and police training); information; education; health services, public works, industry, and agriculture.  Institutes and academies were built, training programs were started, and a sense of public service was inculcated.  Much of this work (including the police training) was conducted under contract by Michigan State University that provided ‘subject matter experts’ in the various fields.  In this respect, Michigan State University took on the role of a ‘super-NGO’ with very wide responsibilities.  It was only in 1962, when it became clear that the situation was deteriorating, that the university stopped working in South Vietnam and withdrew.  From this period, the work was undertaken either by state employees, or contractors equipped to work in a war zone, or local nationals.

US policy makers very early on recognized that the war was going to be lost or won in the countryside, not in Saigon.  Winning over the rural population was at the heart of the US strategy but it initially met with great resistance from the corrupt Diem government as well as from provincial governors unwilling to be ‘reformed’ by well-intentioned US advisors.  Nonetheless, USOM persisted and eventually fielded a large number of officers across rural South Vietnam who were responsible for the plethora of programs that followed.  Like Afghanistan, keeping up with the name changes was a challenge: the Civic Action cadres became the Rural Development cadres, which intersected with the Strategic Hamlets program, which grew into the wider Pacification program, which became the CORDS program (Civil Operations and Rural Development Support), which eventually became Vietnamization.   Pacification and CORDs closely resembled the McChrystal strategy for Afghanistan in 2009-10. In fact, McChrystal would not have been amiss dusting off the old plans and changing some names, such are the similarities.  In Afghanistan, changing a name to hide failure almost became a compulsive habit: the Provincial Stabilization Strategy became the Regional Development Zones (RDZs), which became the Afghan Development Zones (ADZs), which eventually generated in the British case the poorly resourced ‘Helmand Road Map.’ Also like Afghanistan, it should be recognized that there were real and tangible achievements: roads were built, railways were fixed, ports were improved.  School enrolment jumped, mortality from common diseases plummeted, rice yields improved. Much ‘good’ was done despite the disruptive efforts of the VC (Viet Cong) guerrillas.  Most of this good, however, took place in Saigon, which like Kabul was a special case. 

In the countryside, where the real war was being fought a different story unfolded.  Here USOM faced huge challenges: an 80 per cent illiteracy rate; a lack of infrastructure; petty, corrupt local power-brokers; widespread insecurity; a war that ebbed and flowed; and not least the peasants whose ‘hearts and minds’ they were hoping to win. For most Vietnamese farmers, the war was an experience in hedging bets between two warring parties.  One side used high explosives, napalm and Agent Orange and the other resorted to torture and murder but if you were sitting in the middle, it was difficult to tell the difference.  There were many My Lais, committed by both sides.

The key year was 1962 when USOM decisively switched from peaceful economic development to supporting the counter insurgency war, or ‘armed nation building’ to use the modern phrase.   Dollars would now be used as bullets or Money As A Weapon System (MAAWS in the modern acronym).   One obvious priority was the police, which like the current Afghan Uniformed Police (AUP) had to be persuaded to be honest policemen as well as counter-insurgents, neither role in which they excelled. Funding to train more police jumped sevenfold, and the size of the force tripled.  Another was getting out in the field.  As the military surge took hold, USOM was able to post field officers in the four Corps areas, a policy seen as vital to bypass the corruption in Saigon.  In Afghanistan, the Provincial Reconstruction Teams (PRTs) have been used in the same way to bypass Kabul.

There were other similarities and differences to current aid appropriations for Afghanistan.  Although the aid was ‘economic’ its purpose was warlike.  USOM’s budget in 1963, for example, was derived from several Congressional budgets, the second largest of which was the ‘Food for Peace’ budget.  By the time the money emerged at the other end, in South Vietnam, it was about neither food nor peace. Around 90 per cent of USOM funds were being spent in three buckets: ‘Military Budget Support’, ‘Counter-Insurgency’, and ‘War Infrastructure.’  Around five per cent was being devoted to ‘Economic and Social Development.[11]’  A civil servant working in the US Embassy in Kabul today may smile.  A difference was money spent on contractors. Just five per cent went to ‘Contract Services’ and ‘Direct Hire Personnel’.  In Afghanistan it is commonly reckoned that a third of all aid money is in fact used to pay contractors, mostly security and foreign.  This reflects the modern proliferation of private security companies (in Afghanistan, US contractors out-number all the other ISAF troops combined).

The second key date is 1967, when policy was reversed again.  The now-renamed USAID was once again given the task of revitalising economic and social development, allowing the military to focus on ‘fighting the war.’  Counter-intuitively, the civil programs which had previously been run by the US Ambassador – outside the military command - were now all placed under a single chain of command headed by General Westmoreland.  The Deputy Ambassador assumed the responsibility for CORDS and he reported to Westmoreland.  Although the principle and practice of a unified campaign was sound (the ‘One War’ concept), this had the unfortunate effect of bending CORDS towards supporting military operations.  How could Westmoreland not resist influencing how CORDS funds were allocated and spent – after all, he commanded the program.  Despite these tribulations, USAID like its predecessor USOM, could point to real successes. Elections were organised, more schools were opened; more roads were repaired; water, power and telephone infrastructures were established.  Much of this good work was undone by the Tet Offensive of 1968, over the course of which South Vietnam suffered damages estimated at $173 million (just over £1 billion in 2010 prices).

From 1968 to 1973, USAID gradually ran down its operations under the Vietnamization program.  Stabilisation rather than development was the watchword, or ‘Vietnam good-enough’ to steal the vogue euphemism.  The aim was to handover a more or less functioning civil infrastructure and broadly pacified countryside to the South Vietnamese government.  To its credit, USAID achieved this with dwindling funds and staffs.  Several factors ruined these last years.  South Vietnam’s population grew (as has Afghanistan’s) exacerbating an already creaking infrastructure.  The armed forces in particular grew so large (over 1 million men in arms) that they became unsustainable. And the North Vietnamese government opportunistically attacked across the DMZ in late 1972, throwing everything into confusion again. This last offensive in fact caused more infrastructure and economic damage than the 1968 Tet Offensive. By the following year, America was out.

Credible figures on waste, embezzlement and fraud are hard to find.  It is inconceivable that this was not on a gross scale, especially during the period of US withdrawal when it became apparent to any sensible South Vietnamese that the wisest course of action was to stuff mattresses with dollars and prepare for flight.  One concrete example can be given of the scale of false metrics and consequent embezzlement.  The Strategic Hamlets program attracted aid funnelled through national and provincial ministries. This program was run by the President’s brother Nhu, a notorious crook who eventually got his come-uppance (he was stabbed 20 times and then shot by an irate army officer). As it was difficult to check whether or not the hamlets even existed, South Vietnamese figures were accepted (in the same way, for example, that ISAF accepts Afghan figures on how many Community Development Councils (CDCs) have been established under the National Solidarity Program – the point about CDCs being that they attract an average $30,000 block grant from the Ministry of Rural Rehabilitation and Development)[12]. In late 1963, the South Vietnamese government claimed that 8,544 strategic hamlets had been established.  The following summer, USAID decided to check the veracity of the claim. In fact, only 4,207 hamlets existed[13].  The remainder were bogus.  Over 50 per cent of funds to support the Strategic Hamlets program had gone who knows where (possibly into the pockets of the equally notorious Madame Nhu, a sort of proto-Imelda Marcos in her time).  The same bogus claims appear to be true of Community Development Council statistics in Afghanistan, including those made by the British in Helmand.  By 2007, there were a staggering 487 claimed Community Development Councils in Helmand, including 72 in Now Zad where the war began for the British (Operation Mutay, May 2006).[14] There are barely a dozen recognised settlements with names in Now Zad begging the question how 72 councils could possibly have been established, but then no Western aid official has ever visited and checked whether these councils actually exist.

By now, any reader familiar with the war in Afghanistan will have noticed parallels. Nobly and in good faith – it must be recognised - Washington set about supporting a corrupt government that could not stand on its own two feet; it tried to fix a country damaged by years of war, in the middle of another war; it tried to spread democracy, albeit at the end of an M16 barrel; it presided over continual, cosmetic name changes of organisations, programs and initiatives that could not alter the facts on the ground; it grew unsustainably large and dependent armed forces and an unreliable police force; and all of this cost almost 60,000 American lives and over $800 billion in 2010 prices[15], huge sums of which were squandered or stolen.  It is a wonder the Vietnam War Memorial does not weep tears.

Afghanistan

Who is paying for Afghanistan?

A short answer is the United States. Or as former Defense Secretary Robert Gates put it before he left office: ‘Let’s not kid ourselves.  We are the only ones paying for this in any significant way.[16]’  The more detailed answer is below.

In ten years, the US has spent over $51 billion in the reconstruction of Afghanistan.  This is already a greater sum than was spent in Vietnam. The breakdown is $18 billion spent on ‘economic aid’ and $32 billion spent on ‘military aid.[17]’  Other donor countries have spent in the order of $10 billion (from a total of about three times this sum pledged).  Total US spend on the war in Afghanistan through to FY 2012 has been $557 billion[18]. The majority of this aid has bypassed the Afghan government in favour of international institutions and private companies.  In this respect, the patient has almost been incidental to the blood transfusion.  The aid has been administered by staffs experiencing a yearly 85 per cent turnover rate[19].  It is not just the military that can be accused of having short-term attitudes – virtually every foreigner in Afghanistan ticks off the days.

Bypassing the Afghan government has been both a forced and deliberate decision: forced because the national ministries do not have the staffs, expertise or systems to handle large budgets or programs; and deliberate from a reluctance to pour money into corrupt black holes with poor or no oversight.  Afghanistan does not lack civil servants.  According to the former Finance Minister, Dr Ghani, the international community has been paying a monthly salary of $25 to 240,000 civil servants - but this is the problem.  You can earn more as a driver for a multinational firm, and significantly more as a consultant ‘technical expert’, which is how the Afghan government is really being run.  How many of the claimed 240,000 civil servants actually exist is anyone’s guess.

As in Vietnam, everyone agrees that standing up credible and reasonably competent Afghan National Security Forces is fundamental to the success of the war. Using the most current figures[20], US funding for the Afghan Security Forces Fund (ASFF) was $9.2 billion. Other ISAF countries were contributing just $100 million[21].  Funding for police salaries is via the Law and Order Trust Fund Afghanistan (LOTFA).  Over eight years the international community has provided $1.74 billion to this fund, just under half the amount provided by the US[22]. It is thanks to US funding that the ANSF have vehicles and weapons that work ($530 million maintenance contract), and buildings in which to sit ($6.7 billion infrastructure spend)[23].

The dependence on US funding can be illustrated in Helmand Province, where the British Task Force has been fighting since 2006.  Gold has finally poured into Helmand, but it has been a US gold rush.  Over 2010 -11 around $500 million was committed to reconstruction in the province[24]. About half of this pot was drawn from American Commanders’ Emergency Response Program (CERP) funds – effectively, US Marines have been leading the rebuilding of Helmand.  The problem with CERP funding, well recognised and debated, is that it amounts to providing money for unsustainable projects to buy (or bribe) some local peace. An absence of gunfire cannot be lightly dismissed, but equally it does not represent a long term development strategy. To date, around 16,000 CERP projects have been completed across Afghanistan, costing over $2 billion. Another fifth of the funds in Helmand has been provided by USAID and Britain has set up a central ‘conflict pool’ that contributes around $90 million.  The Department for International Development (DfID) is the third smallest contributor of aid money to Helmand, after Estonia and Denmark[25].  When the USMC Task Force Leatherneck and USAID withdraw from Helmand, reconstruction funds will plummet.  Boom will turn to bust.  The conditions for a flourishing insurgency will return. Regardless of the donor country or organisation, a not insignificant proportion of this Western money in Helmand has been diverted to the Taliban.  After the opium trade, ironically, it has been assessed that aid money has become the second-biggest income source for the very enemy the ISAF is trying to defeat[26].

For an American reader it may be dispiriting to reflect that a country that stands in the long-term to make massive profits in Afghanistan (exploiting the mineral wealth) is China.  China’s contribution to the reconstruction of Afghanistan to date has been just $130 million[27]. This represents a potentially excellent return on American blood and treasure.

Can the Afghan government pay its way?

In 2010-11, the World Bank assessed that total Afghan government spend on the core and external budgets was $17.1 billion, of which $15.7 billion was Western aid money[28].  From this lump of aid money, $1.9 billion contributed to the core budget of $3.3 billion. Domestic revenue (that is, money raised by the Afghan government) accounted for just under half of the core budget, and about ten per cent of GDP. This accorded with World Bank’s overall assessment that 97 per cent of Afghanistan’s GDP is derived from foreign military and development spend.  Leaving aside the unique case of the Palestinian Authority and Gaza, no other Third World recipient is so dependent on Western aid.

The dilemma is shown in the graph below.  The Afghan government has no reasonable expectation of funding its budget commitments between now and withdrawal in 2014, without Western aid.

Government of the Islamic Republic of Afghanistan (GIRoA) Spending Against Revenue

The same problem of insolvency beset the Soviet-supported government in the 1980s.  The pre-war government had been solvent and not reliant on foreign aid.  By 1991, with Afghanistan wrecked by war, over 70 per cent of government revenues were derived from Soviet aid[29].  When the former Soviet Union broke up the aid was terminated and the collapse of the Afghan government swiftly followed.  Soviet economic aid, per capita, actually exceeded current Western aid.  Between 1980 -89, Soviet aid (converted in 2007 dollars) totalled $29.7 billion or $1,980 per capita.  Western aid between 2002- 2009 totalled $44.4 billion or $1,346 per capita[30].

Afghan Government Spending and Revenue During the Soviet Intervention

With acknowledgements: Defence R&D Canada/ R&D pour la défense Canada

Is Operation Enduring Freedom armed nation building at all?

Since 2001, US civil aid spend has represented between 5-10 per cent of the total spend, with DoD spend accounting for the remaining 90-95 per cent.  Similar ratios would be found with the other major ISAF countries, including Britain.  There is a strong argument that the West has simply not attempted to put the Afghan humpty-dumpty back together again – it has fought a war instead.  This is illustrated in the graph below.

US Civil versus Military Spending

The same pattern of military overspend and civilian underspend was manifested in the Vietnam War.  Perhaps this should not surprise.  It was a war, as the conflict in Afghanistan is a war and not a euphemistic ‘operation’.

A comparison with the Soviet experience reveals the same pattern of military funding. Between 1980 -85 military spend roughly doubled.  The Soviet surge in the second half of the war, the build-up of Afghan security forces, and the final withdrawal then provoked a massive increase in military spend, as it is doing currently.

Soviet Military Aid

With acknowledgements: Defence R&D Canada/ R&D pour la défense Canada

The Soviet surge was successful – the Russian Army did not ‘lose the war’ as popularly depicted. How could the increase in financial firepower not have an effect?  But it amounted to military boom and bust.  The military funding was unsustainable and its main legacy was the ensuing civil war and the thousands of tons of weapons and ammunition that ISAF would subsequently encounter 13 years later.

Currently, it is estimated that the planned 379,000 ANSF will require $6 -8 billion per year to fund.  This includes a $2.7 billion ‘iron mountain’ of 22,000 vehicles, 40,000 weapons, 44 aircraft and helicopters, and ammunition. This is the largest delivery of weaponry in modern Afghan history[31].  It remains to be seen whether it will share the same fate as the Soviet arms aid packages.

Corruption and Waste

The problem of official corruption in Afghanistan is a well-worn subject.  The problem is recognized by the government and several initiatives have been started to address the problem (the High Office for Oversight of Anti-Corruption (HOO), the Anti-Corruption Tribunal, the Major Crimes Task Force, and the Joint Monitoring and Evaluation Committee).  Bashing the Afghan government one more time, in this article, it is judged would serve little purpose.  More than enough words have been written on the subject, for the time being.

The problem of waste and contractor fraud is less highlighted but no less pernicious.  ISAF contracts around 11,000 contractors, with a much smaller number of (foreign) firms accounting for the bulk of the funding. Contractor fraud has been a real problem. One of the largest of the US contractors was recently forced to admit in court that it had been submitting ‘false, fictitious and fraudulent overhead rates.[32]’  The number of documented tales of shoddy building construction is legion – the West is leaving behind a legacy of facilities and other structures many of which will become derelicts because they were poorly built in the first place and cannot be maintained.  In the first half of the war, contracting benefited warlords. In the second half, the Taliban have become recipients of recycled aid money (by demanding a cut from local contractors in what amounts to a national protection racket).

In the summer of 2010 the House of Representatives published a report damning the manner in which $2.16 billion’s worth of funding had been mismanaged in a so-called ‘Host Nation Trucking’ contract[33].  Under this generous arrangement, eight Afghan, Arab and American firms were granted the contracts for between 6,000 and 8,000 truck missions per month, accounting for about 70 percent of supplies arriving overland in Afghanistan.  A typical convoy might comprise of 300 trucks protected by several hundred guards.  These are frequently attacked with loss of lives.  To mitigate the risks the trucking firms pay ‘tens of millions’ of dollars to highway warlords, who in turn pay off the Taliban.  Everybody denies that this is happening, however transparent to a casual observer. One firm complained that it was paying between $1,000 and $10,000 in bribes to every governor, police chief and military chief through whose territory it transited. 

Instances of armed forces fraud have been few but they do happen.  Recent prosecutions include an Army staff sergeant who stole $210,000 in Kandahar; an Army captain who solicited over $1 million in bribes in Kunar Province; and two Army sergeants who also solicited bribes of $200,000 from a trucking company[34].  As at the early winter of 2011, SIGAR (Special Inspector General for Afghanistan Reconstruction) was pursuing 111 investigations, 68 involving procurement and contract fraud.  There had been 7 convictions, 9 indictments and 14 arrests[35].

The Kabul Bank Saga

Any discussion of corruption in Afghanistan eventually ends with a weary re-telling of the saga of Kabul Bank.  This, briefly, is the story, with the names of individuals omitted. In early September 2010 it emerged that Kabul Bank was close to insolvency.  This bank had been established in 2004.  Perhaps $1.2 billion had been deposited in the bank since its formation[36].  A proportion of these funds were derived from the narcotics trade and some accounts were stuffed with embezzled aid money.  The bank mattered - and still matters - because it accounted for about half of the banking sector in Afghanistan. The bank was also responsible for the payroll of Afghanistan’s civil servants and security forces on which the West’s hopes lie for a stable, future Afghanistan. It transpired that a small clique in Kabul had effectively been using the bank to fund luxury lifestyles and to pursue personal business interests. The chairman of the bank allegedly bought sixteen properties in Abu Dhabi’s Palm Jumeirah complex.  In total, perhaps some $160 million was invested in properties by the bank’s executives in this luxury resort.  On one occasion, an Afghan minister arrived in Abu Dhabi with $52 million stuffed in suit cases. This activity was so brazen that locals jokingly nicknamed the cluster of new properties Kabul Bank Street. 

News of the bank’s insolvency spread causing panic amongst its 2 million depositors. Within days $300 million had been withdrawn by account holders, forcing the bank to close its doors, which provoked civil disturbances.  The US government refused to countenance a bail-out (especially after the bank refused to allow American auditors to inspect the books, an exercise that would have revealed the scale and depth of government corruption), and no other donor countries came forward to rescue the bank.  It should never have come to this because the Western auditing firm entrusted with inspecting Kabul Bank’s accounts received numerous warning signals that all was not well, not least death threats when accountants became too inquisitive.  This firm did not warn the US government of the impending disaster and was sacked. There were calls for the bank to go into receivership but the number of corrupt officials who would have lost money temporarily blocked this measure. Eventually the bank was forced into receivership in the spring of the following year after it transpired that £525 million had been lost, representing 94 per cent of the bank’s deposits and just under ten per cent of Afghanistan’s GDP[37]. Britain’s DfID suspended aid payment of £80 million but this was shutting the stable door after the horse had bolted. 

When the Public Accounts Committee sat to deliberate on DfiD’s financial management in 2011, its findings were predictably severe^[38]. The Department had stopped monitoring its own finance plan in 2010. It had no credible mechanism to estimate leakage through fraud and embezzlement. It was increasing its aid through multilaterals over which it had little or no visibility. Aid was being channelled through complex and costly delivery chains. Each hand through which the money passed naturally took a cut. In the Committee’s view, DfID could neither demonstrate that it was achieving value for value nor indeed whether it had a convincing way of measuring value for money. The Committee concluded that DfID’s claims of funds lost to fraud were not credible (anyone who has worked in Afghanistan as a contractor would not find them credible):

‘We were unconvinced that figures of around 0.01% were an accurate reflection of the scale of fraud, and were concerned that no instances of fraud were identified in half of the countries to which the Department gave aid in 2010-11. In our view, current levels of reported fraud are unbelievably low.’

DfID’s coyness over admitting the scale of waste of British aid money contrasts sharply with American openness.  Following a three year study, the bipartisan Commission on Wartime Contracting in Iraq and Afghanistan[39] concluded that ‘at least $31 billion, and possibly as much as $60 billion, has been lost in contract waste and fraud in America’s contingency operations in Iraq and Afghanistan.’’[40] Amazingly, the Commission added that future losses due to an inability to realistically sustain these Western projects will probably exceed the money already squandered through fraud, waste and embezzlement. An example well known to the British is Kajaki Dam.  In 2008, the British Task Force took part in what was hailed as one of the most difficult operations in a generation to deliver a third turbine to Kajaki Dam under a £200 million project. Today, the parts remain ‘unassembled and rusting’ and not a single watt of electricity has been added to Helmand’s rickety power grid. The Commission soberly points out that this waste amounts to ‘a breach of agencies’ fiduciary duty to efficiently manage budgets and resources. Worse still, it undermines U.S. defense, diplomatic, and development missions.’  It is valid to ask whether the same sentence might be written about British aid.

The financial woes of Kabul Bank were mere ripples on the surface of a very murky pool.  In August that year, Afghanistan’s deputy attorney general was sacked.  He did not go quietly.  In an interview with The New York Times he revealed that he had been blocked from prosecuting cases against corrupt officials.  These included 17 members of the government and five provincial governors.  Another 22 cases had been suspended without explanation[41]. 

It took Anthony Cordesman (the Arleigh A. Burke Chair at the Center for Strategic and International Studies) to say the unsayable in the early autumn of 2010[42]:

‘There is a massive difference between the kind of relatively low-cost corruption, fees, and charges that Afghans have paid in the past and the level of corruption in today’s Afghanistan. Afghanistan has always had a large black economy, and Afghan officials, the military, and police have long taken bribes or charged illegal fees. Like at least two-thirds of the countries in the world, this has long been the way the Afghan government and economy operate. What is different from the past is the sheer scale of today’s corruption. Virtually all Afghans believe it cripples the government, creates a small group of ultra-rich powerbrokers and officials at the expense of the people, and empowers a far less corrupt Taliban by default’. 

In his view, the waterfall of Western money has encouraged manic levels of corruption and fraud amongst Afghans who have witnessed this all before with the Soviets, and who know that the only rational survival strategy is to grab fistfuls of dollars before the waterfall runs dry. Corruption has spread like a virus enriched with the oxygen of Western aid.  No anti-corruption drive has ever succeeded in the developing world – why would any such initiatives succeed in a country rated as the second most corrupt society in the world?  ‘There is virtually zero probability’, Cordesman asserts, ‘that classic anti-corruption efforts can have a major impact on Afghan corruption on any scale beyond scapegoating and tokenism before the war is lost or won’.  Gloomily, his analysis concludes: ‘Nobody really knows how bad the situation is.’

Concluding Observations

The West has an extremely poor record in armed nation building.  The Vietnam War has been used as the comparison in this article but a much longer list could have been selected: the First Indo-China War, the Algerian War, and the many Far Eastern and African ‘wars of liberation’ of the 1950-60s in which former colonial powers made futile bids to retain their possessions by frantic ‘capacity building’, to use the current euphemism, which amounted to backing a corrupt and compliant ruler.

The reasons for failure have surprisingly repeated themselves. They have only been alluded to in this article because of the need for brevity.  They include: massive influxes of aid money distorting unsophisticated economies; an irresponsible belief that money does good when the manifest evidence of its contrary effect is unassailable; notions of ‘doing good’ that run contrary to local truths; fashionable Western aid dogma colliding with a good old fashioned human propensity for corruption, embezzlement and fraud; a focus on promoting misleading aid ‘success statistics’ or meeting arbitrary targets to satisfy domestic audiences and funding agendas that do not reflect the reality of the lives of locals who make up those statistics or targets; false, anecdotal or simply unproved metrics of ‘success’; prestige programs with little local relevance; poor coordination; even lousier accountability and transparency; woeful auditing; a lack of responsibility allied to short-term attitudes in officials and contractors only looking to the end of their six month stints in-country; naivety and sometimes plain dishonesty over the scale of the waste; inconsistent and sometimes contradictory strategic goals; misunderstanding, competition and even antipathy between military, government and non-government organisations; abrupt switches of policy with different governments, military units or forceful personalities that confuse the locals; the incapacity of the recipient governments, at national and local level, to manage the aid effectively; a resigned tolerance of corruption; the promotion of programs and projects that cannot realistically be sustained; and, finally, giving up when failure can no longer be denied.

Where does Afghanistan stand in this tale of disappointments? The fact is nobody can tell. It is commonly argued that the country effectively has four economies.  The Western aid and military contracting economies account for over 90 per cent of the country’s GDP.  The next biggest slice is accounted by the narcotics economy.  The licit economy is the smallest by a significant margin.  In 2014-15 the first two economies will contract dramatically, as they did in Vietnam.  The US Treasury has highlighted that the best case funding cut will amount to 12 per cent of GDP, or equivalent to the drop experienced in the Great Depression. The worst case is around 40 per cent, or catastrophe[43]. The success or failure of the West’s latest foray into armed nation building remains in balance.

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