SIGAR* has released its 3rd lessons learned report on Afghanistan’s public sector development. It makes interesting reading if you follow Afghanistan, care about international development, and pay attention to how international aid funds are managed.
The lessons learned, which are summarized below, are U.S. Government- and Afghan-specific, but they can apply to any “development” policy and program implementation considerations. There is nothing new under the sun: (i) we always fail to take into consideration the magnitude of the projects involved, (ii) we are arrogant in our determination that we know better -even if we have never lived abroad and have zero sense of what other cultures are like (and, mind you, you can never quite know about this unless you live among them and learn from them)-, (iii) donor countries’ government official “experts” come and go way too quickly to make much of a difference, (iv) we always underestimate the extent that corruption -as we define it- might be someone else’s way of life, and, (v) “change”, if there is going to be any, is a painful process that threatens many, making them feel extremely vulnerable and reticent to engage in it.
From my limited experience, any “development” process needs to ensure that the rule of law is the foundation. You cannot develop a justice sector dealing with just the “criminal” side of justice. Commercial, economic, private sector, education, infrastructure, land rights, health, etc., development programs have to have the proper legal foundation first. You cannot create the program first and then develop the regulatory framework later. Further, you cannot ignore the children and their schooling. Whatever “development” programs are accepted by the host country (whether they involve building a dam, helping women obtain micro loans, or drafting a new penal code), the underlying premises that will make the programs sustainable need to be introduced at an early age.
This report identifies 12 lessons drawn from the U.S. experience with private sector development and economic growth in Afghanistan.
1. It is not realistic to expect robust and sustainable economic growth in an insecure and uncertain environment.
2. Establishing the foundational elements of an economic system at the beginning of a reconstruction effort sets the stage for future success.
3. Any new economic system which represents a break with a host nation’s past knowledge and practice must be introduced carefully and with sufficient time to ensure adequate buy-in and the development of the robust institutions required to maintain it.
4. Spending too much money too quickly can lead to corruption and undermine both the host nation and the goals of the United States, while too abruptly reducing funding can hurt the economy.
5. Inadequate understanding and vetting of the webs of personal, sometimes criminally related, networks can allow elites to control economic activity at the expense of open and competitive markets.
6. Successful private sector development efforts must be nested within the development of the rule of law and overall good governance.
7. The choice of a model for economic growth must realistically acknowledge a country’s institutional and political environment and its physical endowments.
8. The provision of grants and below market rate loans can undermine commercial banks and other market-oriented institutions and create unsustainable businesses.
9. Support to businesses and government institutions needs to be tailored to the environment.
10. Clear agreements on institutional roles, responsibilities, and lines of authority, reinforced by human resource policies that fit a post-conflict environment, are necessary for an effective private sector development strategy and for overall development.
11. Rigorous monitoring, evaluation, and analysis, which transcend individual projects and programs, are necessary to understand the effectiveness of private sector development interventions.
12. Investments in human capital have significant returns, although it may be years before they are realized.
*Special Inspector General for Afghanistan Reconstruction