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USAID spent $160mn on failed e-payments program for Afghanistan – watchdog

USAID spent $160mn on failed e-payments program for Afghanistan – watchdog
A program to implement an electronic payments system for collecting taxes in Afghanistan to fight corruption and bribery has failed miserably, a US watchdog says. It’s become the second such unsuccessful program, with some $160 million spent on both.

The new report, with the self-explanatory name ‘USAID’s Afghan trade and revenue: Program has failed to achieve goals for implementation of e-payment system to collect customs revenues’ has been issued last week by the Special Inspector General for Afghanistan Reconstruction (SIGAR).

The report focuses on the outcome of a four-year program, which was “one component of USAID’s Afghanistan Trade and Revenue (ATAR) program that was intended to implement an electronic payment (e-payment) system that would provide a more efficient and effective way to collect custom duties.”

The US Agency for International Development (USAID) awarded a $77.8 million contract to implement the system to the Washington DC-based development company Chemonics Inc. The drafted goal was collecting of 75 percent of all customs duties electronically, but the contractor has missed the objective entirely, SIGAR stated.

“Our review found that by the end of December 2016, less than 1 percent (0.59 percent) of all custom duty collections were being collected electronically,” the report reads.
The implementation of the e-payments system was designed when the United States discovered that the majority of the cash-based customs payments, which are the main source of income for the Afghan government, were missing.

“For example, in a March 5, 2015 SIGAR inquiry letter to the US Agency for International Development (USAID) Administrator, SIGAR pointed out that representatives from the US Embassy’s Economic Section noted that a large portion of the decline in revenue could be attributed to concerns that approximately half of the customs duties for Afghan fiscal year 1393 which ran from December 21, 2013, through December 20, 2014 are believed to have been stolen,” the report reads.

Surprisingly, it’s not the first unsuccessful, however expensive, attempt to bring e-payments to Afghanistan. USAID ran a similar program, called Trade Accession and Facilitation for Afghanistan (TAFA), in 2009-2013, also carried out by the same contractor Chemonics Inc. at a total cost of $83.8 million, according to the SIGAR report. The broader TAFA program also included the implementation of e-payments in Afghanistan.

In a 2014 audit, SIGAR found that “progress in implementing an electronic payment system for customs duties has been slow” and customs paid electronically amounted to exactly zero, which prompted the launch of the ATAR program.

After eight years and over $160 million spent electronic payments in Afghanistan’s customs system are above zero, but only just.

“When SIGAR posed the question to Chemonics regarding the establishment of the 75 percent target, one official stated, ‘I don’t know the reasoning behind that’ and the people who developed the target were likely unaware of obstacles in infrastructure linkages,” the report reads.

Among the problems encountered during the system implementation “officials at Chemonics and USAID cited … software and connectivity problems between Da Afghanistan Bank, Afghan commercial banks, and the ACD [Afghan Customs Department], a lack of political will to direct the move away from the cash-based system” as well as “capacity issues at Afghan commercial banks.” Lack of electricity and “connectivity problems” have been also named among the obstacles for the Afghan e-payment system.

“The system remains unimplemented at many locations and is unused at most of the locations where it has been implemented. Moreover, the goal of reaching 75 percent of customs duties collected through e-payment appears to have been totally unrealistic,” the report concludes.

The $160 million wasted on the failed e-payments system in Afghanistan is dwarfed by the total amount the US has pumped into the country: an early August report by SIGAR has estimated the sum at over $700 billion, including both the 16-year-long war and the reconstruction.

The spending is likely to continue after US President Donald Trump announced he will be boosting the US troops’ presence in Afghanistan on Monday, in a U-turn from his calls during the presidential election campaign for America to “get out” of the dragged-out conflict.

One massive failure in Afghanistan, according to the Russian Foreign Ministry, is the US anti-drug program: despite the $8.5 billion spent by Washington, “drug production in Afghanistan is beating records, and the country remains the world’s biggest producer and exporter of opium,” the ministry said in its August 18 statement.