18 November 2010


The Respective Levels of Financing for Non-Profit and For-Profit Actors in Afghanistan’s Reconstruction and Development
Economic Development Knowledge Manager
steve.zyck@cimicweb.org www.cimicweb.org Steven A. Zyck

This fact sheet presents the available data pertinent to a current issue which has been portrayed in highly divergent terms within the media. Additional information is available at www.cimicweb.org.1 Hyperlinks to source material are highlighted in blue and underlined in the text.
The Issue In mid-August, Afghan President Hamid Karzai issued Presidential Decree 62, which specified that all private security companies (PSCs) operating within Afghanistan, foreign as well as domestic, would be required to disband by 17 December 2010. Soon thereafter media reports began noting the possibility that private firms and organisations involved in Afghanistan‟s reconstruction, some of which utilise PSCs for protection of offices, construction sites, staff and materials, would be adversely affected. The Scotsman newspaper, for instance, reported that one firm had chartered planes to evacuate its staff in the event that the PSC ban went into effect. The issue gained momentum after 22 October, when the Washington Post cited American officials as estimating the PSC ban would “affect” USD 1.5 billion in United States-funded projects and would result in the loss of some 20,000 Afghan jobs associated with road and energy infrastructure construction alone. Reuters described one American company, Development Alternatives, Inc., which has already begun to wind down or cancel USD 27.2 million in projects financed by the United States Agency for International Development (USAID). Such outcomes were deferred though not resolved by President Karzai‟s recent decision to delay the effective date of the PSC ban by 90 days. While the initial round of media reports portrayed the PSC ban as severely disruptive for reconstruction and development projects within Afghan, non-profit, non-governmental organisations (NGOs), in particular, offered a differing perspective. On 25 October, the Agency Coordinating Body for Afghan Relief (ACBAR) and the Afghanistan NGO Safety Office (ANSO) issued a joint statement which indicated that only six of the approximately 2,360 NGOs in Afghanistan used PSCs. This statement claimed that “the ban on PSC will have no negative impact on aid delivery by the vast majority of humanitarian NGO‟s.” The EurasiaNet news source suggested that the PSC ban would help humanitarian organisations in Afghanistan by differentiating neutral aid agencies, very few of which use PSCs, from military or privatesector actors. This differentiation between the media‟s, private sector‟s and NGOs‟ perceptions thus provokes the question: What is the relative proportion of reconstruction activities being handled by NGOs and by

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private firms? While no indicator can suggest which is more „important‟ or which has a greater impact

upon reconstruction and development outcomes, it is possible to compare the volumes of aid financing flowing to these two categories of actors. The Data The question identified above is difficult to answer definitively given the range of donor countries and institutions involved in the reconstruction and development of Afghanistan. Furthermore, individual countries often engage with Afghanistan through a number of institutions. Consider, for instance, that aid from the United States, Afghanistan‟s largest development financier, is provided via more than 10 government departments and agencies, according to the US Official Development Assistance Database. Indeed, a recent report issued by the US military‟s Special Inspector General for Afghanistan Reconstruction (SIGAR) indicated that it was not possible to “disentangle” USD 18 billion in American assistance to Afghanistan between the years of 2002 and 2007. Furthermore, while international conventions such as the Paris Declaration on Aid Effectiveness and Accra Agenda for Action strongly encourage comprehensive donor reporting, public records do not necessarily specify the implementing agency. As such, all figures regarding aid recipients should be understood as best possible approximations rather than as definitive. Source 1: The Organisation for Economic Co-operation and Development (OECD) The OECD is the multilateral agency mandated with tracking official development assistance (ODA) from donor governments and institutions to developing countries and, hence, may be understood as the most appropriate and credible source of information. While the OECD‟s Creditor Reporting System keeps records for funds provided by numerous donor countries to NGOs, civil society organisations (CSOs) and multilateral institutions such as the United Nations (UN), it does not identify which funds are provided to private-sector contractors.

Figure 1. NGO and Multilateral Recipients of Development Assistance for Afghanistan, OECD Data
7,000 6,000 5,000 4,000 15.0% 30.0%



5.0% 0.0% 2004 2005 2006 2007 2008


Total Development Assistance NGO and Civil Society Recipients

Mulitlateral Recipients (e.g., UN agencies) NGO/Multilateral Recipients as % of Total Assistance


Data up until 2008, the most recent year for which complete records are available, suggests that NGOs as well as multilateral agencies have received between 10% and 25% of development assistance, with between 2.1% and 6.2% being provided specifically to NGOs (excluding multilateral agencies such as the UN). However, as Figure 1 suggests, NGOs and multilateral agencies appear to be receiving a greater proportion of humanitarian and development assistance for Afghanistan as the years progress. In addition to providing information on the overall role of NGO financing, data from the OECD also suggests which donors‟ aid programmes in Afghanistan are most heavily reliant upon NGO implementing partners. The results suggest that northern European countries such as Belgium, Sweden, the Netherlands, Norway and Finland, along with the European Union and Switzerland, are the most active in terms of financing non-profit institutions such as NGOs and multilateral agencies. Ireland and Sweden are most active in specifically supporting NGOs, which have received approximately a quarter of the aid distributed by each country in Afghanistan. Moreover, several major donors to Afghanistan, including the United States, Japan, Germany and Canada, are also among those which use NGOs and multilateral agencies as a relatively small part of their overall aid programmes.

Figure 2. NGO and Multilateral Aid Recipients, by Donor, in Afghanistan, 2002-8, OECD Data2
Belgium Sweden Netherlands Norway Finland EU Institutions Switzerland Australia Ireland Italy United Kingdom Japan United States Germany Denmark Canada France









% of Assistance Received by NGOs

% of Assistance Received by NGOs and Multilateral Agencies

Source 2: United States Special Inspector General for Afghanistan Reconstruction (SIGAR) While the OECD is the official source of data on international development assistance, data from the United States, the single largest donor to Afghanistan, also merits analysis. The balance between NGOs and private companies – or between non-profit and for-profit institutions – within US aid programmes can also be assessed according to recent data released by the US government‟s reconstruction auditor,


The two lines are cumulative. For example, France provided 5% (approx.) to each NGOs and multilateral agencies.


SIGAR. This report lists all organisations or institutions which have received significant 3 contracts from the US government for reconstruction in Afghanistan between FY2007 and FY2009. These include USD 8.34 billion in reconstruction-related assistance from the military and USD 3.12 billion in assistance from civilian agencies, or USD 11.46 billion in total. The full volume of military assistance noted in the SIGAR audit report, which includes funding from the Joint Contracting Command, Army Corps of Engineers and Air Force Center for Engineering and the Environment, was provided to private-sector entities. Perhaps more relevant is the assistance provided not by the American military but by USAID, which is more closely involved in the sorts of community-based, social and economic development activities associated with NGOs and other non-profit institutions.4 USAID funding is divided between contracts, cooperative agreements and grants; while the first two categories are applicable to for-profit and nonprofit institutions, grants may only be awarded to non-profits. Contracts are awarded in exchange for either goods or the provision of a service sought by USAID, while a cooperative agreement is provided for organisations which work alongside US government personnel, as a partner, to achieve a specific goal (e.g., to provide technical assistance to a government ministry as part of a USAID programme). Grants, on the other hand, are provided for organisations to pursue an objective independently (in operational terms) from the US government. While all grant aid went to non-profit institutions between 2007 and 2009, the majority of aid in the other categories (and nearly all of the contracts) went to pro-profit institutions. On average, approximately one-third of USAID support went to non-profit implementing agencies.

Table 1. For-Profit and Non-Profit Recipients of USAID Assistance for Afghanistan, SIGAR Data
Aid to NonProfit Recipients (USD Millions) 79 873 624 1,576 Aid to For-Profit Recipients (USD Millions) 1,997 1,123 0 3,120 Total Aid USD Millions) 2,076 1,996 624 4,696 Aid for NonProfits as % of Total Aid 3.81% 43.74% 100.00% 33.56%

Aid Type

USAID Contracts USAID Cooperative Agreements USAID Grants Total

Source 3: United Kingdom‟s Department for International Development (DFID) Given that the United States has at times been a leader in involving the private sector in post-conflict reconstruction and stabilization operations, it is also prudent to consider an additional donor which is closely involved in Afghanistan (and which makes detailed breakdowns of its aid disbursements publicly available). Britain‟s international development agency, DFID, maintains a project database inclusive of 102 projects which the United Kingdom has funded in Afghanistan since 2003. Again, while private sector recipients are not specifically identified in each case, the database does clarify which projects were implemented by multilateral institutions and non-profit organisations. Furthermore, a category for

“Significant contracts” includes all recipients who have received at least USD 4 million from the US military‟s Joint Contracting Command and at least USD 1 million from other agencies between 2007 and 2009. These “significant” recipients account for 84.1% of all military spending and 99.7% of all USAID spending. 4 The SIGAR data also includes funding for UN agencies, universities and non-profit research centres, hence the references to „other non-profit institutions‟.


procurement of goods and services appears likely to have been primarily allocated to the private-sector. The amounts reflected in Table 2 are based on the total value (not expenditure level) of projects.

Table 2. Categories of Recipients of DFID Assistance for Afghanistan, DFID Project Database
Aid Type Emergency Aid Not for Profit Organisation Multilateral Primarily Non-Profit Recipients
Includes Emergency, Not for Profit and Multilateral

Value (USD Millions)5 29.89 172.36 138.78 341.03 669.95

Proportion of Total Assistance6 2.50% 14.39% 11.59% 28.47% 55.94%

Procurement of Goods and Services

Available data suggests that NGOs receive a significant level of civilian reconstruction and development assistance to Afghanistan – approximately a quarter to a third of the total – but that a large amount of funds are also provided to for-profit institutions for materials or services. While the OECD does not provide any figures regarding private-sector implementing agencies, DFID and, in particular, SIGAR figures suggest that between half and two-thirds of all reconstruction funding is allocated to for-profit institutions, including the sorts of reconstruction contractors which have expressed the greatest concern regarding the PSC ban. Once again, it is integral to understand that the sorts of funding divisions and breakdowns noted here may not necessarily suggest the relative importance of either non-profit or for-profit actors within Afghanistan. The data presented in this fact sheet may, however, prove useful as discussions on the PSC ban and its potential effects upon reconstruction and development in Afghanistan continue.

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5 6

Calculations from GBP to USD were made according to the rate on 1 November 2010 (1 GBP to 1.60353 USD). It should be noted that a significant portion of DFID assistance is provided to the recipient government (i.e., the Afghan government). Given this and other factors, the figures reflected in this chart do not add up to 100% of the total value of UK aid to Afghanistan. What is reflected in this table is a breakdown strictly of project and programmebased assistance.