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Buying from the Afghans – Factoring patterns of U.S. military spending in Afghanistan into plans for withdrawal

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09.09.2011 at 04:13pm

American military officials have initiated plans to withdraw the first contingent of U.S. forces from Afghanistan this year despite concern that Afghanistan’s dependence upon U.S. operations there makes for a very uncertain economic future for Afghans. 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 Commission on Wartime Contracting warned in its final report issued last week to Congress that many social and security programs developed in Afghanistan by U.S. Government likely cannot be sustained by the Afghan government.

Yet, while significant investigation has been done on the nature and possible effects of much State, Defense, and USAID spending in Afghanistan, similar scrutiny has not been applied a major Defense Department (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 U.S. Central Command’s primary contracting entity. The data are impressive. Given commitments already made this year, the DoD is on track to make more than $2 billion in obligations with Afghan firms by the end of this fiscal year. (To put matters in perspective, Afghanistan’s 2010 gross domestic product was roughly $27.36 billion.) While the U.S. military begins to reduce its presence in Afghanistan, Central Command spending on goods and services provided by Afghan firms continues to increase significantly – obligations this fiscal year are 100% greater than for 2009 and set to exceed 2010 obligations by more than half a billion dollars.

Policymakers might 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 the U.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? The answer may simply be that the effect is likely to 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. Should this be the case, 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. Yet, no formal study has been undertaken in this regard.

On the services side, data indicates that jobs within a somewhat narrow set of industries are at stake. Of the remaining approximately three quarter billion dollars 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. Study of the way such industries have developed through U.S. military spending could provide policymakers with better understanding of how the timing and magnitude of troop withdrawal might ultimately affect Afghanistan’s economy.

Fortunately, getting at such question may not be as challenging as might otherwise be the case. Last year, General Petraeus 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, such 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 U.S. 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 spending on contracts that could subvert U.S. interests in the country.   If properly resourced and directed, the task force could offer policymakers a unique way forward.

The views expressed in this piece are the author’s alone and do not necessarily reflect the official policy or position of the National Defense University or any other U.S. Government entity.

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