Millions collected on goods coming into Afghanistan isn’t making it to state coffers.
- By Jamila TrindleJamila Trindle is a senior reporter who covers finance, economics and business where they intersect with national security and foreign policy. Her beat spans everything from the economic underpinnings of conflict to sanctions, corruption and terror finance. Before coming to Foreign Policy magazine, Jamila reported for the Wall Street Journal’s Washington bureau, covering financial regulation and economics. She has also worked as a foreign correspondent in China, Indonesia and Turkey as a freelancer for NPR, Marketplace, The Guardian and others. She moved back to the U.S. to cover the post-crisis economy for PBS in 2009.
Corruption at border crossings in Afghanistan is so rampant that it threatens the customs revenue on which the government depends, raising questions about whether the country will be able to fund itself after U.S. troops withdraw.
Even though the United States spent $120 million to improve the Afghan customs system over the past three years, a new report by the watchdog overseeing U.S. reconstruction efforts in Afghanistan says corruption is still the biggest threat to the import system, and it could grow.
Fees and taxes on goods crossing the Afghan border make up nearly half of all the revenues (44 to 48 percent) that the Afghan government brings in. But the government could be making twice as much if fraud were eliminated, according a report released Tuesday by the Special Inspector General for Afghanistan Reconstruction (SIGAR).
"Afghanistan remains poorly positioned to develop a self-sustaining economy because of corruption, mismanagement, and continuing instability along its borders," the report said.
The watchdog has long pressed the U.S. government to make cleaning up fraud and abuse in the Afghan government a higher priority in Afghanistan. "Allowing corruption to continue unabated will likely jeopardize every gain we have made over the last 12 years," Inspector General John Sopko said in a speech last month.
The report highlights graft as one of the key problems facing Afghanistan’s new leadership, as the country faces a post-war future with a lot less international money flowing into state coffers. Import duties that could contribute more to the state budget are being syphoned off by corrupt officials. One Afghan governor made as much as $4 million a month collecting unauthorized taxes at a major border crossing in 2012, the Wall Street Journal reported. That money could go a long way toward helping the Afghan government stand on its own. Kabul has at times over the past 10 years generated as little as 10 percent of its own budget, while the rest has been made up from outside donors, principally the United States. Those contributions are expected to dwindle as international forces leave the country.
President Hamid Karzai didn’t build a track record for rooting out corruption, and it’s unclear whether his successor, who is expected to be in place by this summer, will make it a priority, either. Many U.S. officials see the election as an opportunity to redefine Washington’s relationship with Kabul, but that could be difficult considering many of the experienced diplomats in Afghanistan are packing it in and heading home.
It’s difficult to know exactly how much revenue is lost through goods smuggled into the country without paying official taxes and fees at the border; customs data is so unreliable that it’s hard to tell what goods are coming in and out of the country, according to the report’s authors. Goods smuggled into the country illegally through one checkpoint alone cost the government about $25 million a year, according to the report.
A mentorship program administered by U.S. Customs and Border Protection made some progress teaching Afghan customs agents how to properly collect fees, the report found. But that didn’t stop some agents who followed the U.S. advice from being kidnapped or threatened by smugglers.
U.S. efforts to automate customs payments hit a snag when an Afghan official wanted to allow only one bank to process electronic transactions, creating further opportunity for abuse, the report found. Attempts to streamline the customs system by requiring fewer steps in the process "met with resistance because each step allows for the associated official to demand payment from an importer."
The report said that U.S. programs run by Customs and Border Protection, as well as the U.S. Agency for International Development, could be further stymied by the deteriorating security situation after the U.S. leaves. It’s already made it harder for auditors to measure the extent of graft and corruption. In the course of collecting information for their report, SIGAR inspectors were unable to visit some customs sites because of bombings or the threat of violence.
In response to the report, USAID acknowledged that reforming the Afghan customs system still faced "major challenges." The agency said it would direct the contractor charged with improving the system, Chemonics Inc., to "put forth its best effort" to combat corruption. After past reports, the State Department and Pentagon have complained that SIGAR’s criticism is unwarranted.