This story is over 5 years old.


US Aid to Afghanistan Has Largely Been Wasted and Stolen, Report Says

Intended to improve government and grow businesses, the 110 billion in aid became a crutch that sustained kleptocrats and stifled entrepreneurship, the report says.
Afghan girls working at a brick manufacture pose for a photo with buckets of stones on the outskirts of Kabul, Afghanistan, 11 June 2013. S. Sabawoon/EPA

The United States has spent around $110 billion to rebuild Afghanistan since 2002, the year after American troops invaded the country in the wake of the September 11th terror attacks, according to the US government.

That's enough money to dig a new train tunnel under the Hudson River between New Jersey and Manhattan, lay a high-speed rail link from San Diego to Sacramento, reconstruct New Orleans' levees after a storm like Hurricane Katrina, and still have around $10 billion left over to construct a few hundred schools from Chicago to Houston.


Yet the Stockholm International Peace Research Institute issued a report on Monday saying that Afghan businesses have failed to capitalize on the loads of greenbacks that have rained down on the country in the past 13 years.

"The Afghan private sector has thus far failed to fulfill its potential as an engine of economic growth or an instrument of social inclusion," the report found. "While there is a prospect of tapping this potential, the country's economy is currently mostly deadlocked."

Related: Afghanistan: What We're Leaving Behind

The Institute's report is a cautionary tale for American taxpayers as well as foreign aid groups that were dumping around $15.7 billion a year into the country annually — providing around 98 percent of the Afghan gross domestic product, according to a 2010 World Bank report — before the international community and American troops began pulling out in recent years.

The report found that only around 10 percent of the Afghan economy is legitimate. The rest is black market commerce that discourages entrepreneurs from investing and hiring.

"Popular dissatisfaction with unequal access to economic resources, flawed public services and goods, the adverse security situation, and predatory government activity undermine an effective and sustainable private sector," the report said

Among their findings, the Swedes blame foreign governments and aid groups for giving Afghans too much money, which they couldn't spend wisely even if the country weren't riddled with corruption. Intended to improve government and grow businesses, the aid became a crutch that sustained kleptocrats and stifled entrepreneurship, the report said.


Gregg Willhauck, who has been advising Afghan businesses for years with the US Chamber of Commerce-affiliated Center for International Private Enterprise, said that he's seen firsthand the problems outlined in the Swedish report.

"It's been a war and/or contract economy," said Willhauck, referring to contracts for one-off projects that didn't result in long-term jobs. "Not enough has been done to build and sustain an indigenous Afghan economy. All those military bases and outposts that were built are now basically empty. The Afghan construction companies that were often brought in as subcontractors or primary contractors — those businesses aren't sustainable anymore."

Willhauck largely agreed with the Swedish report's recommendations that included targeting businesses in rural areas and women-owned businesses, improving infrastructure, and nudging Kabul crack down on bribery, nepotism, and other corruption.

Related: The US Just Can't Stop Blowing Billions in Afghanistan

He also noted that defeating the Taliban — while crucial — was not the number one priority for Afghan business owners. Bad politicians, complicated tax rules, and the unclear future role of American troops in the region were bigger problems, he said.

"The Afghans have been dealing with insecurity for 30 years," said Willhauck. "Afghan business people have figured out how to navigate the insecurity. The uncertainty is a much bigger problem."


The country sits on massive untapped mineral reserves, but Willhauck noted that mining would not be a cure-all. China purchased the rights to a massive copper deposit in Mes Aynak in 2007, for example, he said, but they have yet to break ground.

There are no railways to the site and Beijing and Kabul have squabbled over royalties.  The Taliban have also been active in the area, which is around an hour's drive from the Afghan capital. Those problems must be surmounted before miners can get to work, Willhauck said.

"If I see another newspaper article about how the US Geological Service believes there is $3 trillion worth of precious minerals in Afghanistan waiting to be extracted, I am going to throw up," said Willhauck. "That's not what we should be focusing on right now."

Follow John Dyer on Twitter: @johnjdyerjr

Watch the VICE News documentary The Battle for Aleppo: