National University of Singapore

EC3371 Part 2 of Project

Essay

NGO10 Solutions on Phantom Aid in Afghanistan

Done By:
U091686A TAN LI LING
A0071159E MEENACHI ROHINI D/O KARUPPIAH
A0073732H TAN XINYI CELINE

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Table of Contents
Introduction
FOREIGN Campaign: Commitment to Terms of Past International Agreements

3
4-5

FOREIGN Campaign: Positive Conditional Aid for Mutual Accountability and Corruption
Prevention
5-6
Local Campaign: Anti-Corruption
LOCAL CAMPAIGN: Business Privileges for Donor Countries

7
7-8

CONCLUSION

BIBLIOGRAPHY

Appendix

10-11

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Introduction
Afghanistan illustrates a strong case of phantom and ineffective usage of aid, resulting in
35 to 40 percent of total aid wastage (Innocent, 2010). The occurrence of misused aid is
attributed not only to the profit-seeking donors (external factor) but also to the corruption
within the recipient nation (internal factor). As of 2006, Afghanistans top donors are
America, Japan, United Kingdom and Canada (Nation Master, 2006).
Widespread corruption within Afghanistan has impeded the progress of poverty reduction
activities and direct governmental operations. The situation of unaccounted and
untraceable donated aid has caused uncertainty and distrusts among donor countries
(Rezaie, 2012). This is particularly serious for the case of aid. Although the country has
begun to develop most of the institutions needed to fight corruption such as the Control
and Audit Office, such measures are stunned by the lack of capacity in many areas.
Believing that the government and external forces alone are insufficient for corruption
elimination, empowering Afghans to be politically active is essential.
In light of the issue, we propose for ActionAid to undertake this campaigning enterprise
as the organization has published several reports on the issue of misused aid, and thus can
be regarded as an expert on the issue. In addition, they have practical knowledge in
running anti-corruption campaigns and are widely recognized for their work all over the
world. As such, these will allow the organization to implement the programme with
greater impact.
ActionAid can obtain funds form USAID through the Development Grants Program. It
will have to register for funds under the Local NGO section. Moreover, sustainability of
funding is ensured as USAID commits to providing aid for grantees over the life of the
projects. Although the continuity in grant provision is subject to assessments on
organizational needs, we hope that through the program the organisation would progress
healthily to qualify for funding in subsequent years.
The mission set for ActionAid is to eradicate or at the least limit phantom and misused
aid, and by doing so, increase aid effectiveness in targeting a set of specifically tailored
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development goals for Afghanistan. Through this movement we hope to see long-term
improvements in the areas prescribed under the Development Goals in the appendix. The
NGO will be undertaking a two-tiered campaign programme targeted at the external and
internal factors of misused aid mentioned above.
Table 1: Main Framework

1.

2.

Foreign Campaigns (External)

Local Campaigns (Internal)

Countries: US, UK, Canada

Countries: Afghanistan

Commitment to Resolutions of Past

1.

Anti-Corruption

International Conferences

2.

Business Privileges for

Positive Conditional Aid for Mutual

Donor Countries

Accountability and Corruption Prevention

Foreign

Campaigns:

Commitment

to

Resolutions

of

Past

International Conferences
The first external campaign aims to advocate and encourage governments to honour the
main principles of the Paris Declaration and the Acccra Agenda for Action and to align
their aid programmes with the recommended policies. To gain public awareness,
dissemination will be done through ActionAids international websites and other online
advertising platforms like YouTube, and radio broadcasts. The organization will also
undergo continuous petitioning and lobbying with governments of the targeted countries.
The following shows the focus of terms from international agreements:
Paris Declaration
1.

Donors align with partners strategies

2.

Untie aid: getting better value for money

3.

Partner countries strengthen development capacity with support from donors

4.

Mutual Accountability

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Accra Agenda for Action

1.

We will adapt aid policies for countries in fragile situations

2.

We will be more accountable and transparent to our publics for results

3.

We will continue to change the nature of conditionality to support ownership

Foreign Campaigns: Positive Conditional Aid for Mutual

Accountability and Corruption Prevention
Similar with the first, the following governmental plan on aid effectiveness will be
recommended to intended governments through lobbying and petitioning.
Research has shown that aid effectiveness depends on one condition: If the condition is
fulfilled, aid helps, and if it is not, aid harms. We recommend aid to be given in parts
instead of the full lump sum. Through this method of aid transference, donor countries
can set specific aid usage terms to each part of the aid donated. For instance, donor
countries could set each part of the aid to one or more goals, depending on the scale and
magnitude of each goal. We recommend adopting the goals (DouCouliagos & Paldam,
2009) specified in the appendix as these are tailored for the present situation in
Afghanistan. This will allow donor countries to monitor aid usage easily and significantly
decrease the percentage of misused aid, as opposed to when a single aid payment is
given.
In order to monitor aid usage, we propose for a social auditing system and external
review system. To allow for transparency and accountability of the system, foreign
auditing officials and international consultancy firms should come down to audit aid
usage reported by the Afghan government biannually. Taking SGS Bangladesh Limited
as an example, reports are prepared by them and then submitted to the respective donor
countries for a review. Specifications of the review (The Millennium Development
Goals: the fight against global poverty and inequality, 2012) are provided in the
appendix. The same auditing measures will apply to donor countries or international
organizations if they handle aid management instead.
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Based on the external review and the performance of the development programmes,
donor countries can then decide on dispensing subsequent parts of aid amounts. To
motivate the Afghan government to follow the conditions and to use aid meaningfully,
aid amounts can be increased progressively. If successful in the long-term, there will be
reduced foreign aid dependency, increase in ownership and government capacity in
overseeing development goals.
On the part of ActionAid as a form of follow-up and ensuring the authenticity of audit
reviews, randomized inspection will be conducted on physical development project sites
where aid was used (Rezaie, 2012). Interviews on the civilian level in the areas of
development can also be done to examine if development works have truly improved
certain aspects of community life.
We hope these methods will instill greater confidence in the donor countries over
Afghanistan's ability to distribute and manage aid effectively. We also believe that
Afghanistan's government would also be compelled to handle aid in a more transparent
manner.

Local Campaigns: Anti-Corruption

At home in Afghanistan, the NGO will be executing two campaigns. The first will be an
Anti-Corruption campaign geared towards increasing public awareness of aid misuse by
officials in the country. As corruption usually hurts the poorest of the people, a largescale undertaking is required with talks held in all provinces to prevent exclusion of poor
and neglected rural areas. In schools, educational talks will be held from high schools to
universities to inculcate students on the effects of corruption economically, socially and
politically, and the advantages of being respected as a clean and honest nation. In
addition, informational pamphlets will be distributed to the students to allow them to
transfer the knowledge over to their families. In addition, meetings will be held with
village heads to spread information about recent aid received by Afghanistan and the
intended use of aid. The meetings can also provide information on planned development
programs of aid in their province if any. This would raise public awareness of
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government obligations and we hope government officials would be compelled to uphold

their promises and meet the conditions of aid. Press conference can be organized in
Kabul, Kandahar and Herat to sensitize and gather public support, and as well as to gain
appropriate media attention if the planned programs are not promptly delivered. The
audio version of the press conferences will also be radio broad-casted in stations such as
Arman Fm.

Local Campaigns: Business Privileges for Donor Countries

Afghanistan is an emerging economy with many sectors proving to have great business
potential (Haidari) and opportunities for foreign investors (E.G. New sites for expanded
carpet and textile operations). This is a result of the governments efforts in actively
pursuing policies targeted at increasing investments. By strategic lobbying with the
elected members of the House of the People, we propose that these measures be
exclusively repackaged for donor countries to give donors further incentives for
increasing investments in the country on the condition that they provide more
accountable aid.
There are several ways in which Afghanistan government can do so. For pioneering
foreign MNCs (Multinational Cooperation) or investors from donor countries, it can offer
a reduction of gross profit tax (Tan, 1999) from 21.4 percent to 10 percent, for a period of
15 years. There can also be further tax reductions on royalties, license fees and R&D
(Research and Development) costs payable for donors. Furthermore, a full tax exemption
for up to 12 years can be imposed on the condition that their exports exceed US$300,000
making up at least 20 percent of their sales.
There are currently many infant industries in Afghanistan, such as the development of
natural resources, that has great potential and opportunities. Since there is almost no
competition (The Investment Climate In Afghanistan, 2005), it will give pioneering
companies favourable access to inputs, lower overhead costs and other first-mover
advantages. To further motivate investments in these sectors, the government can offer
exclusive priority rights to foreign MNCs or investors from donor countries, especially
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when competition for certain development deals with companies from non-donor
countries arises.
Possible benefits for Afghanistan from these investments will include greater job
creations, transfer of technology and information, and greater development within the
country.

Conclusion
Achieving aid effectiveness is a long-term process. It requires each Afghan officials hard
work and commitment to serve his people. Often, this process begins with the ordinary
citizen, and thus programs initiated ought to effectively reach out to the general public
masses. Moreover, goodwill foreign aid from donor countries is also essential, and their
foreign policies have great impacts on the people and the development of developing
nations. Hence, complete eradication of phantom and misused aid can only be realized
when there is healthy and positive bilateral and multilateral cooperation.

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Bibliography
(2006, December). Retrieved March 24, 2012, from Nation Master:
http://www.nationmaster.com/graph/mil_aid_to_afg_tot_dev_aid_est-aidafghanistan-total-development-estimates
DouCouliagos, H., & Paldam, M. (2009, April 3). CONDITIONAL AID
EFFECTIVENESS: A META-STUDY. Retrieved March 24, 2012, from University
of Warsaw - Faculty of Economics:
http://www.development.wne.uw.edu.pl/uploads/Courses/dw_8_p4.pdf
Haidari, M. A. (n.d.). Afghanistan: The Silk Road to Opportunities. Retrieved
March 24, 2012, from Diplomatic Traffic:
http://www.diplomatictraffic.com/opinions_archives.asp?ID=156
Innocent, M. (2010, September 24). To Better Afghanistan, Boot the Contractors.
Retrieved March 24, 2012, from The National Interest:
http://nationalinterest.org/blog/the-skeptics/better-afghanistan-boot-thecontractors-4134
New sites for expanded carpet and textile operations. (n.d.). Retrieved March 24,
2012, from Trade.Gov:
http://www.trade.gov/static/afghanistan_carpetstextiles.pdf
Private Sector. (n.d.). Retrieved March 24, 2012, from Afghan Investment
Support Agency: http://www.aisa.org.af/english/pri-sectors.html#low
Rezaie, M. (2012, March 7). Audit, Control and Vigilance Against Corruption.
Retrieved March 24, 2012, from The Daily Outlook Afghanistan:
http://outlookafghanistan.net/topics.php?post_id=3603
Tan, A. H. (1999, August 27). 1999 EWC/KDI Conference on Industrial
Globalization In The 21st Century: Impact And Consequences For East.
Retrieved March 24, 2012, from Official Efforts To Attract FDI: Case Of
Singapores EDB: http://www.fas.nus.edu.sg/ecs/pub/wp/previous/AHTAN2.pdf
The Investment Climate In Afghanistan. (2005, December ). Retrieved March 24,
2012, from International Trade Adminstration:
http://www.trade.gov/static/afghanistan_investmentclimate.pdf
The Millennium Development Goals: the fight against global poverty and
inequality. (2012, March 26). Retrieved March 30, 2012, from AusAID:
http://www.ausaid.gov.au/keyaid/mdg.cfm
Assessment of Corruption in Afghanistan.
(2009, January 15). Retrieved March 20, 2012 from USAID
http://pdf.usaid.gov/pdf_docs/PNADO248.pdf

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Afghanistan National Development Strategy. (2008) Retrieved March 10, 2012 from
UNDP http://www.undp.org.af/publications/KeyDocuments/ANDS_Full_Eng.pdf

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Appendix

Development Goals
1.

The proportion of people whose income is less that USD1 a day decreases by 3%
per annum until the year 2020.

2.

All provinces will have the capacity to provide primary to high school education
with the following conditions fulfilled,
i.

by 2020, the full course of primary education will be mandatory for all
children in the country boys and girls alike,

ii. by 2024, the full course of primary to high school education will be
mandatory for all children; national legal dropout age is 16,
iii. standardized national education with a review of education standards every
2 years.
3.

All provinces will have the capacity to provide healthcare services acceptable by
WHO established standards by 2020, and with the following targets fulfilled,
i.

increase medical specialization

ii. reduce by 50 percent in under-5 infant mortality rate between 2013 and
2017, and a further reduction to a third of the 2013 level by 2020
iii. reduce by 50 percent in the maternal mortality rate between 2013 and 2017,
and a further reduction to 25 percent of the 2013 level by 2020.
4.

Fundamental hard infrastructure, including roads, public transportation networks,

telecommunications, reliable supplies of water and power, to be constructed by
2023 in all provinces.

5.

Proper urban town planning and improved housing policies by 2022.

6.

A sustained decline of opium poppy cultivation till cultivation level reaches 25

percent of the 2013 level by 2022. The following counter strategies should be in
place,
i.

educate and increase public awareness of the damaging impacts of opium

poppy cultivation

ii. increase security capabilities of the opium popppy eradiction forces

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iii. increase alternative livelihood programs with 100 percent conditional on the
reduction of opium poppy cultivation
7.

Increased work safety in high-risk occupations like coal mining, with the following
strategies in place,
i.

education on the issue for high-risk workers and firms

ii.

enforce regulated work safety rules on high-risk firms

Specifications of Review
The report should contain a detailed analysis of the following:
a. Amount of aid used on various sectors of the economy
b. Programs the aid was used for
c. Targets of the social programs (if any)
d. Outcomes of these programs (to include if these targets were achieved)
e. Provinces the aid was used in
f. Intended recipients of aid
g. Amount provided for each individual recipient or organisation
h. Salaries of officials recruited to run these welfare organisations

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