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Kabul Korrespondence

Fresh, factual, and funky view of Afghanistan and the surrounding Central Asian region

Where does all that money go......?

Saturday, November 24, 2007

Andrew Mayeda and Mike Blanchfield CanWest News Service Thursday, November 22, 2007
KABUL -- Six years after the fall of the Taliban, the reconstruction of Afghanistan is a booming business for the private sector, but much of the work is still going to big foreign firms, say Afghan officials and development workers.

The building boom is no more evident than in Afghanistan's capital, where a five-star hotel, western-style mall and revamped U.S. Embassy have sprouted up in recent years.

"Construction is one of the motors of the economy," said Afghan Economy Minister Mohammad Jalil Shams. "Four years ago, Kabul was nothing like it is now."

Reconstruction is also moving forward in the more secure regions of the country, such as the areas around Herat in the west and Mazar-e-Sharif in the north.

But much of the rebuilding is funded by foreign aid agencies, which often award contracts to a select pool of multinational companies based outside Afghanistan.

"The biggest amount, let's say about two-thirds or even three-quarters, is going through the foreign budgets," Shams explained in an interview. "They, of course, choose their contractors."

Major donor nations, including Canada, spent about $1.36 billion in official development assistance to Afghanistan over a one-year period ending March 2006.

But only $424 million, or about 31 per cent, had a "local impact," according to a study released this spring. Peace Dividend Trust, an Ottawa non-profit agency, conducted the study for the Afghan Ministry of Finance. Local impact is defined as the proportion of aid money spent locally on goods and services.

Even Canada, where the Conservative government frequently trumpets the importance of development alongside security, has spent only 43 per cent of its development money with Afghan companies.

Compared with the U.S. and Germany, Canada generated much more local impact through its development aid, but was well behind the leader, Britain, which had a local impact of about 60 per cent.

"You can hire someone in Virginia, or you can hire someone locally," said Gilmore.
"When you hire locally, it has so many positive multiplier effects on the economy."

"It's the path of least resistance," said Gilmore. "It's often easier for the procurement officer to pick up the Dubai yellow pages than it is to find an Afghan company to do the job."

Germany and the United States relied most on international contracts. In fact, nearly half the aid money spent by the United States Agency for International Development (USAID) went to five big U.S. firms.

Peace Dividend declined to identify the firms, due to confidentiality agreements with the countries that provided data. But the big U.S. names in Afghanistan's reconstruction industry are well known: firms such as Bechtel, Louis Berger Group and BearingPoint.

A 2003 study by the Center for Public Integrity also found that most companies awarded the biggest contracts in Afghanistan or Iraq employed former high-ranking U.S. officials or had close ties to the government.
posted by Travis, 5:37 am

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