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Good Money After Bad? A Proposal to Ensure Canada's Money Gets to Where its Needed

The Ruxted Group commends the government for taking an active interest and making a substantial contribution towards law enforcement in Afghanistan. Ten million dollars is not a great deal of money but, if it is well applied it can make a big difference. Many, many more tens of millions have already been supplied by many countries but it is not clear that the money spent has produced much in the way of useful results.

One of the keystones to any successful administration in any country is an efficient, effective and, at least relatively, honest police force. This is especially important at the local level – where the citizen ‘meets’ the government day by day. In addition, an honest, loyal local police force can be a vital tool in defeating an insurgency.

One way to reduce corruption in police forces is to pay the members well and regularly. Ruxted members with recent experience in Afghanistan report that Afghan policemen often abandon their posts to go collect enough money to feed their families and then, in some cases, abandon their post again to take the money to their families. Some never return to duty.

There is a pressing need for two things:

1. Adequate salaries for the police and other public servants; and

2. A proper financial distribution system - which will allow the police officer to receive his full, fair salary, on time, and send most of it, safely, to his family.

Canada could and should help with both.

The current system, including the ‘Law and Order Trust Fund for Afghanistan’ into which Canada’s $10 Million will be paid does not work. Funds for payroll are paid from the fund, to the Ministry of the Interior, then to the provincial chiefs of police, and in turn to the district chiefs of police who are responsible for paying the police officers in their district. Canadians in Kabul saw that payments were being made from the trust fund but that little or no money actually made it to the police officers in the field. The fact that there is minimal international oversight on where the money goes once it leaves the trust fund is a big part of the problem. The problem was so bad that BGen Fraser had to go to Kabul to find out why the ANP in Kandahar province hadn't been paid in 3 months.

There is, without doubt, lots of drooling amongst Afghan bureaucrats and police chiefs at this extra lump of cash. Until a proper payroll and financial system is set up in the Afghan Ministry of the Interior, to get the money to the front line police officers and their families, throwing more money at the problem by adding $10 million to the existing ineffective, leaky pot will not make things better.

The existing Asian ‘systems’ of hawala1 or hundi2 and angaria3 might serve individual and even business well enough but they cannot form the basis of an effective national money management regime. There must be a system in which depositors, customers and governments alike can trust and which governments and shareholders can audit. This means that the ‘paperless’ systems which are so common throughout Asia and Africa cannot be allowed to be the national banking system.

The fact that many (most?) Afghans are comfortable with paperless disbursement systems may mean that an efficient, effective electronic funds transfer system could be introduced without too much difficulty – making systemic theft and Taliban ‘fund raising’ shakedowns more difficult.

Canada is a world leader in the financial management and services business. Canadian bankers know how to move cash to and from remote regions and how to manage all sorts of transactions. Surely Canadians can help the Afghans design, build and operate an efficient and effective national banking system.

Ruxted urges the Government of Canada to mobilize some experts from our commercial banking sector to help the Afghans solve their pay and disbursement and national banking problems and, simultaneously, help us address a real counterinsurgency deficiency.

1 See: for a general description of hawala
2 See for a discussion of how hawala also known as hundi can be used to launder money
3 Refers to the classical Roman postal service – it is used today to describe cash couriers serving e.g. the hawala


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