The government has come up with a novel way to check endemic corruption and raise revenue. But what is needed is transparency, say critics.
It has decided to plug the leak in customs by ordering offices to collect 7 billion Afs (110 million USD) annually as revenue
The government has come up with a novel way to check endemic corruption and raise revenue. But what is needed is transparency, say critics.
It has decided to plug the leak in customs by ordering offices to collect 7 billion Afs (110 million USD) annually as revenue. President Ashraf Ghani announced that it should be handed over to the treasury by the end of the year.
Assistant Secretary to the Wolesi Jirga, Erfanullah Erfan Afghanistan says the country is grappling with an 800 million dollar budget deficit in 2015.
Finance Minister Eklil Hakimi has warned customs officials that they would have to face an investigation if they failed to deliver. Those who have not met their target will get only a three-month grace period. “If they still don’t meet their targets they should resign gracefully,” the minister told reporters. In mid-August, the minister had identified corruption as the root of Afghanistan’s economic problems following a review of economic indicators for the first six months of the year.
The new strategy is based on the hope that some 120 billion Afs (1.8 billion USD) would be collected for the government exchequer from customs. The High Office for Oversight and Anti-Corruption has found that offices collecting customs duties at border checkpoints are rife with corruption.
However, critics say the strategy makes for less transparency in government. Without a real assessment of exports and imports and the income sources of the country, putting a random figure on what customs officials must give yearly as revenue to the government would only fan corruption.
Saifudin Saihoon, an economist at Kabul University says, “Transparency should be created, all exports and imports registered, and revenue should be collected based on assessments and standards so that targets can be specified. Simply, raising customs duties because revenue targets have increased is a big mistake.”
According to his analysis, the government wants to put the burden of balancing the budget unjustly on people’s shoulders. Unless there is a system of registration and transparency in customs, raising customs duty is impractical and worsen people’s plight.
Customs is not the only source of revenue for the government.
Reckless spending
Based on Killid’s continuous research and investigations over the years into government expenditure and waste, corruption in custom offices, fraud in contracts, lack of transparency in contracts for mining, the aggression of big tax payers, high salaries of some of the employees and consultants in the ministries, embezzlement, permanent privileges of high-ranking government authorities, the reckless spending of many million Afs under different pretexts are some of the reasons why the government is facing serious financial problems.
AISA (Afghanistan Investment Support Agency) has announced that the rate of investment has decreased by 30 percent in the last six months, which will further lower government earnings and targets set for customs offices.
Mohammad Qurban Haqjo, the head of AISA, said at a joint session with the Union of Afghanistan’s Industries on July 29 in Kabul that most of the decrease in investment is in mines, industries and construction. Haqjo said the government’s focus was mostly on security and military matters and there was not enough attention to investment and the economy.
Mining
Afghanistan’s mining wealth should make it financially self-sufficient but the industry is in the hands of powerful individuals.
“Unfortunately natural resources are looted, and many hundreds of small and big mines are illegally extracting. The government has no control over mines, and instead has resorted to increasing taxes on ordinary people to raise revenues,” says Kabul University lecturer Saihoon.
Even big mining contracts have not been transparent, he says, citing the examples of the Aynak copper mine in Logar province, awarded to the Chinese state-owned MCC in 2007; Hajigak iron ore project awarded to India’s SAIL in 2011; and oil exploration and extraction in the Amo river basin awarded to the Chinese CNPC, also in 2011. All three projects, signed by the previous government, are under review.
Abbas Ibrahim Zada, member of parliament who is representing Balkh, says the Ministry of Mines has “perpetrated big disloyalty on Afghan people … There is big corruption in the awarding of contracts. The government of national unity must review the decisions.”
According to Ibrahim Zada, the ministry has embezzled many billions that belong to the Afghan people. “The extraction from the Amo river was contracted with a Chinese company that promised to invest some 4 billion USD, which could create 4,000 jobs but because of the ministry’s negligence, the company has invested roughly half a million USD. He says all mines are under the control of powerful individuals and neither the government nor Ministry of Mines can do anything.
Since 2012, corruption in the Ministry of Mines and lack of transparency in the award of contracts have been pointed out as concerns for institutions like Tansparency International, Integrity Watch and Revenue Watch. Transparency International ranked Afghanistan at 172 out of 175 countries in the 2014 Corruption Perceptions Index. A 2012 Asia Foundation poll of people in Afghanistan cited corruption as their second most important concern at the national level after security.
Big fraud
One of President Ghani’s first decisions was to reopen the probe into the Kabul Bank fraud scandal, which was a campaign promise.
Later, the government ordered the arrest of a number of senior officials in the Ministry of Urban Development in an embezzlement scandal running into millions. Their dossiers were handed over to the Attorney General’s (AG’s) Office but no new developments have been shared with the media.
In June, Sayed Ghulam Husain Fakhri, who heads the High Office for Oversight and Anti-Corruption said, “Only announcing the investigation is not enough. The investigations need to be followed up.”
Beyond estimates
There are allegations of misappropriation of money in big projects like road building. Investigations by Killid two years ago found that not only were roads that were built of very poor quality but huge amounts of money had been paid to some of the contracted companies. Reports from the president’s office, Kabul municipality and the High Office for Oversight and Anti-Corruption indicate projects have run into millions. Take for instance, a 70-metre stretch west of Kabul airport, which was estimated to cost 4.43 million USD but eventually cost 7.2 million USD. The same company was paid 18 million USD for another road from the airport to Inter-continental hotel.
There are other such over-priced projects:
• cost of a completed road in Qala Zaman Khan, Kabul, was estimated at 5.1 million USD but the company was paid 10.5 million USD
• cost of a 60-metre stretch of Ahamad Shah Baba Mina via Bagrami was 11 million USD. The municipality paid 12.95 million USD.
Killid’s investigations show the former minister of borders and tribal affairs spent some 19 million Afs, the budget for the construction of a complex at Khushal Khan high school located in Dasht-i-Padola, part of a “strategic plan”, which is largely useless, according to officials. Documents with Killid show that all individuals working under the Strategic Plan project have been paid between 25,000 Afs (390 USD) and 250,000 Afs (3900 USD).
Mohammad Hanan, the head of the Supreme Audit Office, says that some 16 million USD out of 19 million USD have been paid to researchers and consultants of the project. Mohammad Yaqub Ahmadzai, deputy minister of tribal and border affairs, says some researchers and consultants have not submitted even one report after a year. There were consultants who were living abroad and being paid under the Strategic Plan.
Fraud
A fact-finding team headed by Hamidullah Faroqi, appointed by the president’s office, has found an estimated 100-million USD fraud in awarding contracts by the Ministry of Defence. The contracts are for providing fuel to security agencies. Eleven other defence contracts are also under the scanner, he told reporters in April this year, and promised to submit the team’s findings in two months. Nothing further has been told to the media.
Permanently privileged
The government’s wage bill is huge and a drain on the exchequer. The rights and privileges of high-ranking officials including the president and chief justices are for life, former president Karzai decreed in the last months of his term. The draft law that faced much uproar in Parliament, and underwent some changes before it was approved on June 1, 2013, was cleared by Karzai on July 31 that year. Others permanently privileged are: head of the secretariat in the president’s office, head of state administration, special assistant to the president, members of ministers’ council, head of the AG’s Office, head of National Directorate of Security, advisor of national security, senior consultants and ministers.
Consultants’ wages
The Ministry of Finance has earlier revealed that there were 57 consultants in the national unity government, and they earn roughly 200,000 Afs (3,130 USD) each. There was nearly double the number under president Karzai. Ghani and Chief Executive Abdullah Abdullah are reported to have eight consultants each while First Vice President Rashid Dostum has 13 and the Second Vice President Sarwar Danesh seven.
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