CORRUPTION IN CONFLICT

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capacity, legislative and regulatory frameworks, and enforcement; non-meritbased hiring; low salaries of public servants; and a dysfunctional judicial system. 27 Other factors included tribal rivalries and power struggles, the cash-based economy, expanding drug trade, and burdensome administrative procedures that presented many opportunities to extract bribes. Many of these causes of corruption can also be seen as symptoms of corruption, acting and reacting in a harmful feedback loop. Weak governance allows opportunities for corruption to occur. 28 As corrupt networks grow more entrenched, its members resist the development of accountability systems that would strengthen governing institutions and threaten the corrupt practices upon which the network’s survival depends. In addition, as corruption diverts resources away from the state, it undermines the ability of government to deliver goods and services to the public. Ongoing uncertainty about security and limited economic opportunities created strong incentives for Afghans—particularly those within criminal patronage networks—to focus on the near-term. A “short-term maximization-of-gains mentality” developed, anticipating the eventual cessation of money flows from the international military and reconstruction effort. 29 This dynamic is described in academic literature as a collective-action problem: Participants try to maximize their self-interest when there is a shared expectation of corruption. In this frame, “individuals will opt to behave in corrupt ways because the costs of acting in a more principled manner far outweigh the benefits, at least at the individual level.” 30 Drivers Emanating from the International Intervention To understand why corruption became so pervasive and entrenched after 2001, it is important to also look at the international community’s security and reconstruction efforts, which entailed an enormous influx of money, weak oversight of contracting and procurement practices, and short timelines. After 2001, opportunities for corruption expanded as the amount of money in the economy grew from millions to billions of dollars. Many of those funds were licit, arriving via civilian and military contracts. At their peak in fiscal year (FY) 2012, DOD contract obligations for services in Afghanistan, including transportation, construction, base support, translation/interpretation, and private security, totaled approximately $19 billion, just under Afghanistan’s 2012 gross domestic product (GDP) of $20.5 billion. 31 From FY 2007 to 2014, these contract obligations totaled more than $89 billion. 32 The full amount of these contracts was not spent in Afghanistan; for example, some portion of a contract with a U.S. firm would be injected into the U.S., not Afghan, economy. Nevertheless, these amounts indicate that huge sums, relative to the Afghan economy, flowed into the country. 33 The inflows of foreign aid were also large compared to the size of the Afghan economy. As defined and tracked by the OECD, official development assistance (ODA) disbursed to Afghanistan rose from $2.1 billion in 2003 to a peak of $6.8 billion in 2011; Afghanistan’s GDP was $4.6 billion in 2003, and $17.9 billion in 2011. 34 According to a 2009 OECD report, international assistance accounted for roughly half of Afghanistan’s lawful economy. 35 8 SIGAR I CORRUPTION IN CONFLICT I SEPTEMBER 2016
Figure 3 shows that U.S. appropriated reconstruction assistance often approached or exceeded Afghanistan’s GDP. FIGURE 3: U.S. Appropriated Reconstruction Funding Compared to Afghanistan’s GDP $25 $25 $20 $19.20 $20 $15 $15 $10 $5 $4.13 $1.07 $5.95 $10 $5 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0 Gross Domestic Product of Afghanistan ($Billions) U.S. Appropriated Reconstruction Funding for Afghanistan ($Billions) Note: Funds for most reconstruction accounts are normally disbursed one to five years after they are appropriated. U.S. appropriated reconstruction funding includes categories usually excluded in OECD’s ODA reporting, such as military aid funded through the Afghanistan Security Forces Fund. Source: SIGAR, Quarterly Report to the United States Congress, January 30, 2016, p. 187; SIGAR, Quarterly Report to the United States Congress, October 30, 2014, pp. 202-203; World Bank, World Development Indicators: GDP at market prices (current U.S. dollars), World Bank Databank, accessed July 12, 2016. In addition, illicit money flows increased after 2001 through the growth of the drug trade. State’s Bureau of International Narcotics and Law Enforcement (INL) estimated Afghanistan’s poppy cultivation increased nearly seven-fold between 2002 and 2014. 36 In 2005, the International Monetary Fund (IMF) attributed an estimated 40 to 60 percent of Afghanistan’s GDP to narcotics. 37 The influx of money from aid and military contracts was not always accompanied by strong oversight. Controls were sometimes insufficient to prevent embezzlement, bribery, fraud, and other forms of corruption—by both Afghan and international actors—that drained resources from the reconstruction effort. 38 As a former senior U.S. official described the problem: In a conflict environment, oversight is difficult, but our systems of accountability are also poor. So when you push large amounts of money through and there’s no way to pull it back, it creates an incentive for corruption. The environment in which you are operating shifts and corrupt actors create ways to bleed the system for all it is worth, because they know the money will keep flowing no matter what they do, and they can make more by being corrupt than non-corrupt …. This is a SIGAR I CORRUPTION IN CONFLICT I SEPTEMBER 2016 9
Page 1 and 2: Special Inspector General for Afgha
Page 3 and 4: Special Inspector General for Afgha
Page 5 and 6: TABLE OF CONTENTS EXECUTIVE SUMMARY
Page 7 and 8: ILLUSTRATIONS FIGURES FIGURE 1: Sha
Page 9 and 10: In the early years of the reconstru
Page 11: Recommendations To address corrupti
Page 14 and 15: 1. Corruption undermined the U.S. m
Page 16 and 17: large sums of money. For example, a
Page 18 and 19: Corruption Has Increased from Pre-2
Page 22 and 23: dynamic we have to change if we wan
Page 24 and 25: in corruption. 58 Afghans also witn
Page 27 and 28: ISAF Public Affairs photo PART ONE
Page 29 and 30: checkpoints, activities which they
Page 31 and 32: usinesses that served the internati
Page 33 and 34: for the long-term threat that corru
Page 35 and 36: combat corruption globally, which i
Page 37 and 38: opium when they raided the governor
Page 39 and 40: measurable benchmarks and target da
Page 41: While certain individuals and offic
Page 44 and 45: that Afghan leaders were not commit
Page 46 and 47: U.S. government documents increasin
Page 48 and 49: the state’s legitimacy and capabi
Page 50 and 51: and helping to fund the enemy. The
Page 52 and 53: would benefit from an approved stra
Page 54 and 55: fundamental flaw: The Afghan govern
Page 56 and 57: By the time of Salehi’s arrest an
Page 59 and 60: U.S. Marine Corps photo PART THREE
Page 61 and 62: and partners, other countries in th
Page 63 and 64: BOX 2: ABSORPTIVE CAPACITY In the d
Page 65 and 66: Capacity-building efforts would be
Page 67 and 68: “The international community held
Page 69 and 70: success, due in part to unwillingne
Page 71 and 72:
ability to conduct robust oversight
Page 73 and 74:
The story elicited a sharp congress
Page 75 and 76:
London, Kabul, and Tokyo Conference
Page 77 and 78:
officials. The task force member no
Page 79 and 80:
These cancelled or forestalled cont
Page 81:
a desire to tackle corruption and a
Page 84 and 85:
These findings underscore that the
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LESSONS USAID/Afghanistan photo Bas
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eport, international assistance acc
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in Afghanistan failed to address th
Page 94 and 95:
This legislation should: • Requir
Page 96 and 97:
Intelligence agencies should: • C
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10. The State Department should pla
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the U.S. Embassy in Kabul, which wa
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APPENDIX B ABBREVIATIONS 4A Assista
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ODA OECD OEF OSD-P OTI PACC PRT PSC
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APPENDIX D Strategy or Plan Assessm
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Organization Lead Agency Mandate Hi
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APPENDIX F U.S. Support to Afghan G
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ENDNOTES 1 Ryan Crocker, SIGAR inte
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34 OECD Development Assistance Coun
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65 Fishstein and Wilder, Winning He
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101 Joint Staff, Joint and Coalitio
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148 Dressler, Counterinsurgency in
Page 122 and 123:
192 NSC, White Paper on the Interag
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235 U.S. Embassy Kabul, “Afghanis
Page 126 and 127:
284 Department of the Treasury, “
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Transition to Transformation, July
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368 SIGAR, Quarterly Report to the
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411 Torabi, email to SIGAR, March 5
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463 Congressional Research Service,
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525 U.S. Embassy Kabul, U.S. Govern
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586 U.S. Embassy Kabul, “Update o
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633 DOD, Report on Progress toward
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SELECT BIBLIOGRAPHY Afghan Research
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Century Foundation. Afghanistan: Ne
Page 146 and 147:
Federal Bureau of Investigation.
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Human Rights Watch. Blood-Stained H
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Koumans, Mark. Testimony before the
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Pritchett, Lant, Michael Woolcock,
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Schmeidl, Susanne. “The Man Who W
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Stanekzai, Mohammad M. “Afghanist
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U.S. Department of State, Office of
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United Nations Development Programm
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ACKNOWLEDGMENTS SIGAR acknowledges
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SIGAR SPECIAL INSPECTOR GENERAL FOR
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CORRUPTION IN CONFLICT

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