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PMESII Analysis Afghanistan June 2010: Economic Analysis

Updated on July 7, 2010

Economic Analysis

 

Much of the money that flows into Afghanistan through various sources finds its way to the Taliban who in turn use their funds gained through “protection” and extortion and the opium trade.  It seems that US operations are contributing a significant source of income to the Taliban through routine operations.

Corruption has been a big concern for Coalition Forces in Afghanistan.  While it’s considered unethical or otherwise immoral in the US, it’s practically a way of life in Afghanistan.  The word “reishwat” literally means “sweet” or “sweetness,” however, it colloquially refers to anything that would “sweeten” a deal such as a discount on a purchase or a verbal agreement to use one supplier exclusively in exchange for lower rates.  However, the most common translation that Americans know if is bribery.  While bribery may grease the wheels of politics in a country where the government is still trying to get on its feet, it becomes a problem when those funds find their way into the hands of Al Qaeda and the Taliban. 

Warlords run what has been described as a "Vast Protection Racket"
Warlords run what has been described as a "Vast Protection Racket"

 

One venue for corruption is actually propagated by the US military. They provide tens of millions of dollars to Afghan security firms that use the money to pay off warlords along a supply convoy’s route for safe passage. If the payments aren’t made, then the convoys are attacked. Estimates say that up to $4 million per week can be given to these firms.[1] The congressional subcommittee that conducted the investigation reports that bribes are part of a “Vast Protection Racket” where the security firms act as brokers between the convoys and the Taliban. One of the major sources of the Taliban is protection money[2]. Unlike in Iraq, the US is using locals to provide logistics under Afghan Host Nation Trucking. Currently one of the largest security companies under investigation Watan Risk Management is reported by the military to negotiate safe passage through a given area and then issuing a warning to trucking companies that are late or refuse to pay up. Not only is US taxpayer money being used to fund the enemy, it is being done is such a way that it undermines stability in the country.

Other instances of corruption are evident in the $3 billion in hard currency consisting of Saudi riyals and Pakistani rupees to Norwegian kroners and even outdated Deutsche marks (now redeemable for Euros) just to name a few being flown out of Kabul Airport over the past three years. At present, it is believed that these funds are being distributed to create terrorist safe havens around the world. The funds are being targeted by officials as part of anti-corruption and drug trafficking investigations. Much of the money is believed to have been skimmed from western aid to the region as well as military reconstruction contracts combined with profits generated by the opium trade. Also included in the funds are thought to be Taliban drug and extortion money. Afghanistan’s Gross domestic Product last year was 13.5 billion and yet more was declared leaving Kabul than the government collected in taxes and customs during that same period.[3] Much of the funds being moved are being transported by hawalas. There are rumors that the hawala customers who have sent millions abroad include high ranking officials and their associates. For example, Afghanistan’s vice president and President Karzai’s brother Mahmood Karzai, an American citizen, who said in an interview he has engaged in only legitimate businesses and has never transferred large sums of cash from the country. However, in January he declared his net worth was $12,157,491 with assets of $21,163,347 and liabilities of $9,006,106. He reported an annual income of just over $400,000 but didn't provide dates.[4] President Karzai addressed the matter at a news conference Saturday, June 19, 2010 calling for greater scrutiny of business run by relatives of officials.

$3 billion in hard currency have been flown out of Kabul Airport over the past few years.
$3 billion in hard currency have been flown out of Kabul Airport over the past few years.

When going through customs, must record their own names and the origins of the money they are transporting. Instead, they usually record the name of the Afghan hawala that is making the transfer and the one in Dubai that is accepting the cash. Often, the actual sender of the money isn't named.[5]

Other economic issues include the opium trade which generally pays better than regular crops. Recently Development Alternatives International (DAI) was bombed by the Taliban. DAI is a USAID contractor which provides social and economic development assistance in developing countries. It has been in Kunduz for the past few months. DAI provides alternatives to the poppy agriculture helping locals find means to sustain themselves without supporting the Taliban.[6]

ANALYSIS

There is widespread corruption and a shifting of funds that is controlled strongly by the Taliban and Hawala systems in Afghanistan. There is also corruption in the government. The Taliban can be expected to continue taking advantage of the situation until their funding is cut off. Government officials who may not have much faith in their country will likely look out for themselves first while the local farmers will have mouths to feed and if opium is what facilitates them taking care of their families, they can be expected to continue harvesting poppies. The Taliban will respond strongly to neutralize threats to their funding as can be seen by the attack on the DAI office which provided alternatives to growing opium.

ADDITIONAL RESOURCES

PMESII Analysis Political Aspects

PMESII Analysis Military Aspects

PMESII Analysis Economic Aspects

PMESII Analysis Social Aspects

PMESII Analysis Information & Infrastructure Aspects

Notes

[1] Report of the Majority Staff. Warlord, Inc Extortion and Corruption Along the U.S. Supply Chain in Afghanistan. June 22, 2010. http://oversight.house.gov/images/stories/subcommittees/NS_Subcommittee/6.22.10_HNT_HEARING/Warlord_Inc_compress.pdf (accessed June 30, 2010).

[2] Russia Today. Some of US taxpayers’ money leaks to Taliban – report. June 23, 2010. http://rt.com/Top_News/2010-06-22/us-taxpayers-money-taliban.html (accessed June 30, 2010).

[3] Rosenberg, Matthew. Corruption Suspected in Airlift of Billions in Cash From Kabul . June 25, 2010. http://online.wsj.com/article/SB10001424052748704638504575318850772872776.html?KEYWORDS=Afghan+officials+and+their+associates+were+sending+billions+of+diverted+US+aid+a (accessed June 26, 2010).

[4] (Rosenberg 2010)

[5] (Rosenberg 2010)

[6]Development Alternatives International. Afghanistan - Alternative Development Program/Eastern Region (ADP/E). 2010. http://www.dai.com/work/project_detail.php?pid=98 (accessed July 04, 2010).

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