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Friday, September 23, 2011

Buying local: Will the US troop pullout pull the afghan out from under the Afghan economy?

Andrew Shaver, MPA

American military officials have initiated plans to withdraw the first contingent of US forces from Afghanistan this year despite the Afghan government’s dependence upon US operations for its own security and political survival. No less important, though infrequently mentioned, is the very uncertain economic future for Afghanistan in the wake of American withdrawal. The Senate Foreign Relations Committee cautioned earlier this summer that, without proper planning, Afghanistan “could suffer a severe economic depression when foreign troops leave…” Meanwhile, the Congressionally-mandated Commission on Wartime Contracting (an independent, bipartisan group established to study wartime contracting in Iraq and Afghanistan) warned in its final report this summer that many social and security programs developed in Afghanistan by the US government likely cannot be sustained by the government of Afghanistan.

While significant investigation has been done into the nature and possible effects of the significant State, Defense, and USAID spending in Afghanistan, similar scrutiny has not been applied to a major Department of Defense (DoD) program established in 2006 under which many billions of dollars have been spent on goods and services procured from Afghan firms.

Last month, Defense officials provided me with data recently made public on all contractual obligations made to Afghan firms by US Central Command’s primary contracting entity. The data are impressive. Based on commitments already made this year, DoD is on track to make more than $2 billion in obligations with Afghan firms by in fiscal year 2011. (To put matters in perspective, Afghanistan’s 2010 gross domestic product was roughly $27 billion.) While the US military begins to reduce its presence in Afghanistan, CentCom spending on goods and services provided by Afghan firms continues to increase significantly – obligations this fiscal year are 100% greater than 2009 and are set to exceed 2010 obligations by more than half a billion dollars.

Policymakers should consider possible effects on Afghanistan’s security conditions of terminating, quickly or slowly, billions of dollars in business with local firms. Has DoD business with local firms created industries that will remain functional in the years following America’s withdrawal? Has military spending created bubbles of economic activity that threaten to implode as the war effort grinds to a halt, leaving ranks of young males unemployed and susceptible to terrorist recruiting?

It is possible that the effect will be minimal. Of the roughly $1.7 billion already committed this fiscal year, nearly $1 billion are slated for purchases of various commodities. Because contracting guidelines do not require that Afghan businesses satisfy strict local-content or local-hiring requirements, little deters these firms from importing such commodities from abroad. Thus, the cessation of spending in Afghanistan may do little more than sound the death knell for an inflated market of Afghan middlemen. My discussions with contracting officials deployed in theater tend to corroborate this possibility. However, no formal study has been undertaken in this regard.

However, on the services side, data indicates that there may be jobs at stake, albeit within a somewhat narrow set of industries. Of the remaining approximately $700 million obligated this fiscal year, most are designated for the provision of “professional, administrative and management support services,” “utilities and housekeeping services,” and “transportation, travel, and relocation services.” Central Command also reported recently employing over 46,000 Afghans and estimated that a further 18,000 Afghans are employed as private security contractor personnel. Granted, many of these jobs may remain in place following a draw-down. But research into the way such industries have developed through US military spending is needed to provide policymakers with better understanding of how the timing and magnitude of troop withdrawal might ultimately affect Afghanistan’s economy.

Getting at such a question may not be as challenging as might otherwise be the case. Last year, now-retired General David Petraeus *85 *87 and Admiral Mike Mullen established Task Force 2010 to examine whether the Department’s contractual spending in Afghanistan is undermining efforts to stabilize the country. So far, this mandate has translated into investigations into whether funds have fallen into the hands of insurgency members, culminating with this summer’s finding that that the Taliban has extracted rents on US transportation spending. Yet, as an organization created to “follow the money,” as Petraeus testified to Congress, Task Force 2010 not only enjoys senior-level support but employs the type of civilian and military experts qualified to consider the broader effects of major contract spending on the country and the implications for its withdrawal. If properly resourced and directed, the task force could offer policymakers a unique way forward. Let’s hope.

A version of this article was published earlier this month by the Small Wars Journal blog, and is accessible here.

1 comment:

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