Afghanistan Analysts Network – English

Economy, Development, Environment

Return of the Goodwill? London conference as symbol of a new start

Christine Roehrs 12 min

Initially, the upcoming London Conference on Afghanistan (3 and 4 December) was supposed to be a hard check on the Afghan leadership’s governance standards. Corruption, women’s rights, elections – how did the country do, and would it deserve fresh aid commitments? However, the new government to discuss these things is, except for president and CEO, not yet in place. Yesterday, 30 November, the two leaders said they would not even be able to introduce a few of the new key ministers before London (security, economy, as they had promised before); the international community had hoped to see new faces there as a sign of progress. So it will be a mainly symbolic conference, says AAN’s Christine Roehrs – but not entirely uninteresting. For one, Ashraf Ghani will present his plans to reform Afghanistan, summarising a 19 page tour de force through Afghanistan’s shortcomings and the remedies he envisions (much of which still needs to be concretized). And also the atmosphere in which the international community will meet the Afghan leader has, for the moment, changed: from strained and sceptical back to, in principle, sympathetic and of good faith. 

London conference, albeit not meant to be a pledging conference, could become a new beginning for the relationship of donors and Afghan government. The atmosphere between them has improved, and the new Afghan president will present his ambitious reform paper. Photo: sunrise over Bamyan, Christine Roehrs

This week’s London Conference on Afghanistan is the 12th large Afghanistan conference since Bonn I in 2001. It will take place on 3 and 4 December with representatives of 50 countries and 24 international organisations present. On 3 December, the event will start with a number of so-called side events, including a civil society meeting (see its already published position paper here) and a meeting of representatives of the private sector. The main event will happen on 4 December, with as its most important part President Ashraf Ghani introducing a reform paper called “Realizing Self-Reliance – Commitments to Reform and Renewed Partnership.” Ghani will speak last during the day (his CEO Abdullah Abdullah will open the conference), probably because some of the attending ministers will fly into London late, after attending the OSCE conference in Basel where the Ukraine crisis is the main agenda item. The latter can be seen as an indicator of the relevance of the conference (after it had already been postponed for the SAARC summit in Nepal on 26 and 27 November): something to show up for, but not necessarily first on the agenda.

One can indeed argue that the value of this conference has been diluted over the past months: from a very practical meeting to check on the progress made against governance indicators established in the so-called Tokyo Mutual Accountability Framework (TMAF), that was agreed during the 2012 conference in the Japanese capital, to a meeting now described as ‘political’ (read: symbolic).

The Mutual Accountability Framework had, for the first time, sought to make aid dependant on the Afghan government meeting governance standards, for example in the fields of the rule of law, the fight against corruption, human rights (particularly the status and protection of women and girls), and inclusive and transparent elections. It was decided that a “Ministerial-level Meeting [was] to be held in 2014 [in London], and every second year subsequently to review progress, update indicators, assess resource requirements and renew international commitments.” With the international community in general being unhappy about the previous government’s progress (Norway, for instance, cut its aid from 750 million Krona (around 107 million dollars) to 700 million (around 100 million dollars) for 2014, as “the result of a lack of willingness on the part of Afghanistan to meet its commitments from Tokyo in a number of areas, particularly its commitment to combat violence against women and to fight corruption“), a TMAF-meeting at this time would have probably asked for some serious discussions.

This will not happen this time, though, simply because the drawn out elections have overturned the timetable. The new president came into power much later than expected and, although he and his chief executive Abdullah Abdullah had promised to agree on at least the ministers for “security“ (ie Ministry of Interior and Defence, also the head of the NDS) and the economic sector before London, they announced at the last minute, on the evening of 30 November, that it will probably take them another two to four weeks to gradually introduce the new cabinet. So the new government that was supposed to report and work on the TMAF-indicators is simply not in place yet and the mutual accountability negotiations have been postponed until a Senior Officials Meeting that will probably take place in June 2015.

Pondering what still could be done with this somewhat stunted meeting (and apparently considering it worse not to have it than to have it), both sides now seem to want to make it a demonstration of a changed relationship: from strained and sceptical back to ‘sympatico’ and trusting. Even though it is not a ‘concrete’ conference anymore, this has value in itself.

The conference comes at the end of the ‘transition’ period, at a point where most international troops have withdrawn and parliaments, media and voters at home are wondering about money wasted and shaky progress. It also comes after a long period of the two sides – the Afghan government and the donor countries – being severely annoyed by each other. The hope that has animated Afghan society in the face of a whirlwind of a president who seemed to touch on all the ‘right’ issues (Kabul Bank, abysmal services from hostpitals to the judiciary, relations with Pakistan, the emphasis on women’s rights with a wife active in the Palace), can also be felt among international diplomats. No one wants to spoil what they call “the momentum,” and there is palpable relief over what is considered to be a president who is willing to tackle problems – and who might actually be up to the task. “Getting a reform minded, knowledgeable president is a once in a generation opportunity, a golden moment for a developing country,” one western official said to AAN.

This is also why a TMAF-‘score card’ for the old government seems to have been taken out of the program. “It wouldn’t have fit the agenda,” one source said, meaning it would not have set the intended engaging tone of the conference which is supposed to be friendly, encouraging, lauding. “There will be no finger-wagging,” the official added.

At the same time, speaking to diplomats, it becomes apparent that this narrative of a president who intends to take matters into his own hands may be a convenient prelude for the – slow but sure – withdrawal of assistance. Several donors have hinted at aid reductions after 2016.

Donor conference or just … conference?

It will thus not be the “major donor conference” London had occasionally been called, at least not in terms of major commitments. “We had long hoped donors would pledge fresh money,” one Ministry of Finance official said in an interview with AAN: money beyond the 16 billion promised during Tokyo conference in 2012, as most pledges do not go beyond 2016 or 2017. But western diplomats told AAN clearly that they did not want London to be a pledging conference (a discussion that has preceded all recent major donor conferences). One suggested this was why some of the largest development contributors such as the US and the UK have shot money beforehand – from the Tokyo pledges, no ‘new’ money – into the hefty budget deficit (1), or more accurately: the acute cash crunch that had crippled the Afghan government to the extent it could not pay public servants’ salaries anymore. Donors, suggested the source, wanted to prevent the situation from becoming too desperate before London.

The joint final communique of the London conference will now simply “renew“ the pledges made in Tokyo in 2012, as confirmed by the UN’s Nicholas Haysom, acting Special Representative of the Secretary General, in the press conference that introduced the upcoming conference to the Afghan public on 27 November. In itself a sad reminder of the current state of affairs, the live broadcast was cut off halfway for the coverage of an attack in Kabul that killed at least five and injured more than 30 people, just when Britain’s ambassador Richard Stagg spoke about “security being bedrock” for future economic prosperity. In the evening of the same day, another complex attack on a foreign guesthouse in Kabul prompted an international journalist to speculate whether both attacks might have been meant as a “Taliban message to London.”

Ghani’s reform paper – a heavy focus on the economy

With most of the conference foreseeably replaying the usual vague messages of “continued support for” or “enduring solidarity with” Afghanistan, President Ghani’s presentation of his 19-pages reform paper will be the highlight. This, too, however, is still rather vague: a ‘best-of-reform vision’ that, fully formulated, will only be presented at the Senior Officials Meeting in early summer. The paper, in its current form, does in most part not say much more than intentions, needs, goals already presented over the past years (rightly so, but remaining idle talk only, all too often): improving security and political stability, tackling the underlying drivers of corruption, building better governance, restoring fiscal sustainability, reforming development planning and management, ensuring citizen’s development rights and so on. Every donor country will find what they are looking for in the language that provides all the right catchwords.

In two ways, though, it also reads as uniquely ‘Ghani.’ Being a former World Banker, he focuses strongly on the economic aspects of reforming the country. The first draft of the paper had been produced by the Ministry of Finance, although AAN was told that the president had then rewritten it thoroughly. Of the 19 pages (the draft AAN saw was an advanced one, but not necessarily the final one) about 10 pages outlined economic reforms, including the fight against corruption. Here, the read gets interesting as he is already giving details. They include the formation of an “independent anti-corruption mission with time-bound prosecution powers,” the “reform of the Supreme Audit Agency,” the formation of a “national procurement board that will manage all large-value contracts,” and the “limitation of [the mandate of] ministries to strategy, policy and monitoring” while physical construction will be outsourced “through a national construction agency that uses standard cost register and publicly audited accounts.”

In terms of the economic reforms he mentions the creation of an Independent Revenue Authority, the raising of taxes (something that might trigger hot debates in a country where joblessness remains a huge problem, and the economy, anyway weak, just took a hefty hit) and the strenghthening of tax enforcement. Other enterprises remain rather ambitious headlines (“improving the investment climate,” “establishing a one-stop-shop for private businesses,” “raising agricultural productivity.”)

This economic focus is also visible in the design of the conference. Among the first speakers are representatives of World Bank and IMF, who will give a joint statement, as well as President Ghani’s National Economy Advisor Hazrat Omar Zakhilwal. The president himself will also take part in the private sector meeting on the day before where the participants will discuss how to reform business regulations, improve banking services and further the private sector (see 11 recommendations for economic growth developed for London by “private sector leaders” here; Ghani has also taken private sector representatives along on his recent trips to Pakistan, China and Saudi Arabia.) There is also a dinner dedicated to regional economic cooperation.

The new Afghan leadership envisions “a new face of aid.” “What we expect from London,” one Ministry of Finance official told AAN, “is to redefine our partnership with donor countries through a refreshed TMAF, not just regarding aid, but also in other areas of development cooperation. We want to strengthen the role of the private sector in development of Afghanistan. For this, we will demand that donor countries open their markets for Afghan products and help provide investment guarantees for those who want to invest in Afghanistan. London will be used as a matchmaking opportunity for our private sector actors and an opportunity to foster regional economic cooperation.”

There also seems to be some ‘tough love’ in store for the international donors. The mentioned “refreshed” Mutual Accountability Framework will, seemingly, ask for more mutuality – including on reporting on funds spent (whether on- or off-budget), more ‘alignment’ of funds (probably, although not yet formulated, with the president’s economic reform agenda), and more on-budget assistance, possibly up to 100 per cent. With Ghani’s past as a severe critic of the effectiveness of international aid structures in the country, both in the early years and during his time as development and economy advisor for President Karzai in 2010, there is chance that this might not remain idle talk.

The other thing that is ‘typical Ghani’ is the sheer mass of reforms referred to with no prioritisation or timeline visible yet. The draft radiates the impression that this is a president who would like to tackle everything immediately, something he himself calls the “whole state approach.” He will still need to provide a timeline, prioritise reforms, allocate responsibilities (and resist the urge to do everything himself). He also needs to break down the many reform areas that so far are headlines only into tangible projects and goals. Development people are, for example, wondering which National Priority Programs will be axed to make them “no more than 10-12” (there are currently 22).

The future of donor funding

With London ‘pausing, not pledging,’ there will be little public clarity about the future funding for Afghanistan, particularly beyond 2016 – something the NGO umbrella organisation ACBAR, too, has noted with concern and tries to address with its pre-London campaign “Do Not Forget Afghanistan. The World Is Gradually Forgetting.” Among the four largest donors, the EU has the longest-term plan, with the new so called Multiannual Indicative Programme that was signed by Afghanistan in October. A press statement said, “This document outlines the EU development and aid policy for the next 7 years. From 2014 until 2020, the total EU commitment is Euro 1400 million. Euro 200 million a year, which means that the budget for Afghanistan has not been reduced.” This is what the EU had also pledged in Tokyo in 2012.

Germany, too, keeps up its support of “up to” 430 million Euro per year, although only until 2016, saying that then support will need to be “negotiated anew.” Japan, that pledged three billion dollars in Tokyo, will continue to give about 700 million dollars per year, although also only until 2017. The US, that in Tokyo promised to, as reported, “maintain its level of financing” had already cut its support for 2014 by 50 per cent, and while the bone of contention, the long unsigned Bilateral Security Agreement, is now removed with the agreement (plus the SOFA with NATO) signed, it seems unlikely aid money will return to the old levels.

Other countries could follow. Some already have. Australia, for example, got a new government last year and changed its aid interests (towards its own region, dealing mainly with refugees). This media report puts aid for the previous financial year still at 182 million Australian dollars, but dropping to 152.3 million dollars for this financial year. The report also states that, in Tokyo, “then prime minister Julia Gillard pledged aid commitment would rise […] to $250 million by 2015-16.” Future allocations are not yet clear.

Sweden, where the support for Afghanistan within the population and the government remained probably strongest in Europe, is reconsidering its aid budget in the face of new international crises. The country is among the largest recipients of refugees from the Middle East and Syria (see here, here and here in Swedish), so the new development minister Isabella Lövin recently announced in the Svenska Dagbladet (see here in Swedish and here in English) that there would be cuts to Sweden’s aid to Asia – around 50 per cent of which traditionally went into Afghanistan. Among the few countries who, in Tokyo, had promised an increase in aid for Afghanistan, Sweden had hoped to go from about 625 million Krona per year (around 84 million dollars) to about 850 million (around 114 million dollars) in 2015. Now, Swedish officials say they hope they can keep at least the current level. The national budget will be decided upon on 3 December, the first day of the London conference.

The overall tenor thus seems to be reduction – and while warnings about this have been around for a while, one gets the impression that this time it is meant in earnest. AAN heard much about the “need to make a leaner national budget,” “to get a grip on revenues” and “to increase self-reliance.” The effects can already be felt. Tolo TV reported on 18 November that the new national budget plan included “five to fifty per cent decreases in allocations for a number of sections of the budget.” Ashraf Ghani, too, reacts to this concern in his vision paper where he says that “Development costs must be reduced, because money saved is money earned. Neighbouring countries are developing the same infrastructure at much less cost.” But this does not stop Ministry of Finance officials from stating that they are “confident the president can re-engage donors.”

The hopes are not only for longterm aid support, but also for the short-term assistance needed to help with the cash crunch. In the budget for 2015 that was just introduced to the parliament, the budget deficit is not there anymore. This may signal an expectation on the side of the government that the donors will help them out again. Diplomats have already, politely, indicated that they “are speaking with them about their expectations.” The government may also be hoping to access new sources of support. President Ghani has taken great pains recently to court the so called non-traditional donors China, Pakistan, India and Saudi Arabia.

The return of the goodwill?

All of this may render London a largely symbolic conference, but there is value in the symbol nevertheless, particularly as it signals a possibly fundamentally changed relationship. In 2010, before the Kabul Conference that was mainly meant to endorse the Afghanistan Peace and Reintegration Program (APRP), AAN’s Martine van Bijlert wrote that “the internationals are – privately – deeply uncomfortable with an expanding intervention that does not seem to be going anywhere. […] they are […] priding themselves in having salvaged a difficult relationship, but courting a president who no longer trusts them and does not necessarily want them to succeed […].” She also wrote, “There seems to be a resignation that this government will not be reformed.” And before the Tokyo conference in July 2012, AAN guest author Anja de Beer described how “the romance in the relationship between the Afghan Government and the international community is long gone.”

But with the – at least publicly stated – international support for Ashraf Ghani’s active first weeks, it feels as if some of the sympathy that was lost over the past years may be creeping back into the world’s hearts. If Ghani now manages to quickly deliver on forming his much delayed cabinet and then on the concretisation of his reform paper before the Senior Officials Meeting in early summer, the goodwill might hold.

 

(1) The deficit was mostly caused by a shortfall of domestic revenues during the period of protracted post-election wrangling and rising insecurity, but also as a result of the slow bursting of the ‘economic bubble’ that had been artificially created by large military-related contracts that were coming to an end, which in turn resulted in dropping employment and income in the Afghan workforce. According to the most recent quarterly report of the Special Inspector General for Afghanistan Reconstruction (Sigar) dated 30 October 2014, revenues in the first seven months of the fiscal year had already “missed budget targets by 22% and decreased by about 3.8% from the same period last year.” According to President Ghani’s reform paper for London, a draft of which AAN has seen, economic growth “has fallen sharply to 1.5 per cent (estimated) in 2014 from an annual average of 9.4 per cent during 2003-12.” According to media reports this resulted in an immediate shortfall of 537 million dollars in September 2014 (see for example here), while arrears continue to increase – although according to observers of the matter told AAN, the actual sum is probably 150 to 200 million dollars higher.

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Development Aid donors budget London conference

Authors:

Christine Roehrs

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