July 31, 2016
The U.S. state-building watchdog reported on July 29 that despite Washington investing $3 billion in Afghanistan’s power sector the country still suffers from one of the worst electrification rates in the world. The report, issued by the Special Inspector General for Afghanistan Reconstruction (SIGAR), beat around the bush citing issues like “poor project management” and “technical issues” as contributing factors. However, the real culprits are systemic contractor fraud, corruption and avarice and the government agencies responsible for vetting these criminal enterprises and preventing them from preying on poverty-stricken countries like Afghanistan in the first place.
The release of the SIGAR report was timely, coming a day after the U.S. Justice Department announced that it had sued executives from the Louis Berger Group Inc. (LBG) on charges of fraudulently overbilling the government for reconstruction work in Afghanistan and Iraq. LBG settled related criminal charges back in 2010, paying nearly $70 million in penalties. The lawsuit is unique in that it represents one of the first times the federal government went after high level executives in a False Claims Act case, according to the Corporate Crime Report.
“The effect of fraud is profoundly personal – its victims are the men and women of our armed forces and the people of Iraq, Afghanistan, and the other countries where LBG was hired to build important infrastructure projects,” Tim McCormack, one of the attorneys who represented the auditor who blew the whistle on LBG, stated.
LBG is the same company, by the way, that helped build the $335 million Tarakhil power plant, a veritable monument to contractor malfeasance. The dreadful plant, which earned the apt moniker “The White Elephant,” operated for more than a year at a mindboggling rate of under one percent of its production capacity.
As Veterans Today Financial Editor Mike Harris pointed out, the disaster of Tarakhil cannot be chalked up to simple managerial ineptitude. Harris accused LBG of “mal-management” for deliberately gouging the Afghans with “evil intention,” corroborating DOJ’s charges against the company’s CEO and CFO who “designed and directed various accounting schemes,” inflated rates, and double-billed executive salaries.
Corrupt contractors, however, cannot commit these abuses without accomplices within what journalist Jim Lobe calls the U.S. government’s “development industrial complex.” USAID, for whatever reason, be it inability or unwillingness, have failed to effectively scrutinize implementing partners, thereby allowing these rapacious organizations a seat at the trough. Such partners are driven by a raw “for profit” free market ideology in full pursuit of an end that has little to do with the well-being of the Afghans.
Moreover, predatory contractors inflate their rates at the expense of Afghans who desperately need the electricity. Per capita consumption of electricity in Afghanistan is 100 kilowatt-hours (kWh) a year, the equivalent of powering a 50-watt light bulb for about five hours a day, compared to the global average of 3,100 kWh. The annual average in North America is over 13,000 kWh.
The Afghan Ministry of Energy and Water reported that more than 60% of Afghans “live in dark homes.” According to the Afghanistan Analysts Network, in early 2015 Kabul residents experienced power blackouts of up to 15 hours a day, some due to deliberate “load-shedding” to relieve strained transmission lines and substations. The problem is even worse in the rural areas where less than 9% of the population has access to electricity.
The Asian Development Bank (ADB) estimates that installed power capacity in Afghanistan is 520 megawatts (MW), half derived from hydropower, 40% from thermal sources and the remainder from distributed generators. Afghanistan’s “unsuppressed demand” for electricity is roughly 2,500 MW, a shortfall of nearly 1,980 MW.
And the future does not look much brighter, no pun intended. Afghanistan’s Power Sector Master Plan projects that demand shortfalls will reach 3,000 MW by 2020 and 6,000 MW by 2032. Hence, one can imagine the disappointment when a plant like Tarakhil runs at less than one percent of its stated 100 MW capacity.
Knock-on effects include low economic productivity while some studies have even shown a linkage between energy shortages and extremism. In neighboring Pakistan, for example, one economic advisor argued that the country’s energy crisis has led to job losses, creating “a fertile breeding ground for extremism and insurgency against the [Pakistani] state.”
USAID Inspector General Ann Calvaresi Barr applauded the DOJ crackdown “against those responsible” for fraud, waste, and abuse. This is laughable in light of the fact that LBG has been dealing with corruption charges for years while continuing to score massive USAID contracts. Since 2002, according to data queried from USAID’s Foreign Aid Explorer, LBG has been awarded more than $1.7 billion in contracts. Since the charges against LBJ surfaced in 2010, LBG has reaped approximately $310 million in revenues, including $1.2 million in 2016.
In January of 2015, Senator Bob Corker called on Secretary of State John Kerry to debar LBG and similar corrupt companies from reconstruction projects, going so far as to claim they pose a threat to U.S. national security. Corker forgot to mention, however, the security of the country most at risk by the pernicious activities of these beltway bandits: That country being, of course, Afghanistan.