WASHINGTON, May 16: As much as 30 per cent of the US aid for Afghanistan and Pakistan is siphoned off as overhead expenses before it reaches the region, US lawmakers have been told.
Since the two countries have received billions of dollars in aid since Sept 11, 2001, the overhead expenses run into hundreds of millions of dollars.
“I think that on the high end, it might touch 30 per cent,” US Assistant Secretary of State Richard Boucher told a recent hearing of the House Foreign Affairs Subcommittee on the Middle East and South Asia. “For some of the not-for-profits, their overhead is going to be much closer to, say, 10 per cent.”
The issue was raised by the panel’s chairman, Congressman Gary Ackerman, who asked Mr Boucher and another witness: “How much of the funds are we talking about that were skimmed in the United States before it ever got to Afghanistan or Pakistan or anywhere else?”
When Mark Ward, a senior administrator at the US Agency for International Development, objected to his choice of words, Mr Ackerman changed it to an equally provocative “milked.”
Mr Ward told the lawmaker that “these are costs that the US government was well aware of before it entered into these contracts and grants.”
Last week, former US ambassadors Richard Holbrooke and Thomas Pickering told the House Committee on Foreign Affairs that large sums from US assistant to a foreign nation went on consulting fees and overhead costs. They noted that much of the $750 million earmarked for the tribal areas will never leave the US soil.
Mr Ward, however, assured the panel that the administration was now making a serious effort to cut costs by hiring local contractors.
“It’s strange that it’s taken us all this time and billions of dollars to figure out that the money to be spent on the ground should be spent on the ground,” Mr Ackerman retorted.
He drew comparisons with a Homeland Security contract for hiring screeners at airports, which was sub-contracted three times at a cut of 20 per cent each. Consequently, the actual people doing the work received just 40 per cent of the total amount.
Congressman Mike Pence, an Indiana Republican, underlined another anomaly in US aid policy, pointing out that while the United States gave $80 million in foreign assistance to Bangladesh, it charged the country $500 million in tariffs. “This is a classic case of the left hand not knowing what the right hand is doing in American foreign affairs,” he said.Mr Ackerman also objected to the practice of involving US contractors for designing earthquake-proof schools in the areas destroyed by the 2005 earthquake in Pakistan.
Mr Ward told the congressman that although a Pakistani firm was building these schools, one of the top engineering firms in the United States was supporting the construction.
This prompted Mr Ackerman to ask if there was a limit on the reimbursement rate for such contractors. “No, is the answer to your question,” said Mr Ward.
“How much profit do they make on a million dollars?” asked Mr Ackerman.
“Oh, I don’t — you’ll have to ask them. I think they hold that pretty close,” said the USAID official.
“When an earthquake hits another country, do we start all over again and try to figure out how to build an earthquake-proof school, and have new people design it, and go through that process all over again? Or do we go to the “earthquake-proof school” folder, and pull it out and say, here’s an earthquake-proof school plan, why don’t we just implement it?” asked Mr Ackerman.
“It depends on the capacity in that government to build schools,” said Mr Ward.
“If we go out on the street with a bid document for a $100m construction project, there are no firms in Afghanistan that can compete for that and there are only a couple in Pakistan that could,” he added.
Administration officials say some of the problems can be resolved by breaking the mega-contracts into smaller ones — but for that they need more manpower.
“If we have more officers to keep an eye on a bigger number of smaller contracts, that means a lot of firms in Afghanistan and Pakistan can compete,” said Mr Ward.
But for now, the fact remains that billions of dollars directed at winning hearts and minds and creating opportunities for locals are given to rich contractors mostly in the United States.