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Conference for Afghan Reconstruction Assistance

International Conference for Reconstruction Assistance to Afghanistan

Alan P. Larson, Under Secretary for Economic, Business, and Agricultural Affairs Special Briefing to the Press Washington, DC January 25, 2002

11:05 a.m. EST

MR. BOUCHER: Good morning, ladies and gentlemen. We have a briefing here this morning on the subject of Afghan reconstruction. Your briefers will be Under Secretary of State for Economic Business and Agricultural Affairs Alan Larson, and we also have with us the Director of the Central Asia Task Force, Bear McConnell, who is familiar to many of you in his previous appearances here.

So Under Secretary Larson will have a brief statement, and then he will be glad to take your questions. Thank you.

UNDER SECRETARY LARSON: Thanks. Good morning. We thought we'd do a little bit of a wrap-up on the Afghan donors conference, which was held in Tokyo Monday and Tuesday of this week. We felt that this was one of the most successful events of this kind that we have ever participated in. Secretary Powell kicked the conference off by underscoring President Bush's message that we are going to stand with Afghanistan for the long run. The United States pledged over $296 million in FY 2002 funds. The total donations pledged for the first year were in excess of $1.8 billion, which exceeds the estimated first year requirements for the Afghan Interim Authority, as estimated by the World Bank, the Asian Development Bank and UNDP.

A number of countries were able to make multiyear pledges, and the sum total of those pledges, some of which were one-year pledges, some of which were two-and-a-half year pledges, some of which were five-year pledges, was $4.5 billion. We felt this showed that a very substantial dent is being made in the five-year reconstruction needs.

The Secretary also mentioned in his remarks that we are making a very strong effort to identify and unfreeze assets that could be available to the Afghan Interim Authority. I have a slight update on that. There is $193 million worth of gold and $24.9 million in cash that is Central Bank of Afghanistan assets. We have completed, within the US Government, all of the actions that need to be taken for that money to be made available, and now it is simply a matter of working out the technical arrangements between the New York Fed and the Central Bank of Afghanistan.

We're also moving forward to try to unblock some smaller amounts of money. There's $1.3 million that is money belonging to the Ariana Afghan Airlines. Beyond that, there's roughly another $25 million that is Central Bank money that is held in other accounts that we are making progress on, and we are working with other countries on roughly $23 million that is held -- it is basically overflight fees that have been held in escrow and now can be made available to the government of Afghanistan.

QUESTION: So the 25 million in central -- in other accounts and the 23 million are two separate things?

UNDER SECRETARY LARSON: Correct.

QUESTION: Where are those -- the 25 million? Other accounts? Does that mean in the US?

UNDER SECRETARY LARSON: Various banks in the US. As we announced in Tokyo, the assistance of the United States is going to be focused on high-impact, job-creating projects in the area of agriculture and education, health, humanitarian de-mining and counter-narcotics. We are going to take a small amount of our pledge and make it available early on to help defray some of the startup costs of the Afghan Interim Administration.

One of the things that was striking about the conference was the emphasis that was placed by the Secretary General, the Secretary of State, Chairman Karzai and others about the importance of having a secure environment for the reconstruction effort to succeed. There was a breakout session on security that Ambassador Jim Dobbins led. In addition, there were breakout sessions on the narcotics, anti-narcotics issue, and also a breakout session on de-mining. In the de-mining breakout session we were actually able to generate roughly $27 million in additional financial support for humanitarian de-mining.

QUESTION: Are those US dollars or international dollars?

UNDER SECRETARY LARSON: International dollars. This was a breakout session that brought together a number of the participants in the conference to focus on that issue, and we were able during that breakout session to raise some additional money for humanitarian de- mining.

QUESTION: And that's not including the 1.8 billion?

UNDER SECRETARY LARSON: It is included in the rounding here as the 1.8 billion. I can just say on the numbers, we try to be on the conservative side. The co-chairs -- Japan, the United States, the EU and Saudi Arabia -- made a running tally during the course of the interventions of all the pledges that had been made, and in many cases as possible we went back to get clarification from the countries about exactly what they were pledging.

When in doubt, we sort of rounded down, so the 1.8 billion is meant to be our best understanding, but a conservative understanding of what the actual pledges are. And we hope through follow-up action to be able to not only clarify, but perhaps even raise those numbers slightly.

The last thing I would say by way of introduction is that this was the first major international event for the new Afghan Interim Administration. I think most of the participants felt that Chairman Karzai and his team made a very, very strong showing.

QUESTION: It was long?

UNDER SECRETARY LARSON: A strong and long showing. One of the striking things about what he had to say in his opening statement and in remarks later on in the meeting was the very strong commitment that he had to running an accountable administration, to using correctly the funds that would be provided for reconstruction, and the stress he put on self-reliance. He made clear they needed help in the short run, but he put a lot of emphasis on what he called the traditional entrepreneurial character of the Afghan people and their desire, as quickly as possible, to be standing on their own two feet.

Why don't I stop there, though, and Bear McConnell and I would be happy to try to answer any questions you've got.

QUESTION: In Tokyo, a senior administration official who bears a striking resemblance to you -- (laughter) -- told us that the out-year pledges are increasingly speculative; that the pledges you can count on are the ones for the first year, and then it gets kind of iffy. And I asked that in the context of the 4.5 billion that they came up with, for I believe was the first five years.

What are your thoughts on that?

UNDER SECRETARY LARSON: My thoughts are that the 4.5 number is a very encouraging number, particularly given the fact that many, many governments operate like our government does and can only make firm pledges for one year. Some of those multi-year pledges are coming from the international financial institutions and so they are representing their estimates of what they will be able to do given the cash that they have, but in estimating what they think their boards are going to be prepared to support. In some cases, the multi-year pledges -- Japan made a multiyear pledge, the European Union made a multiyear pledge.

I think that you're right in saying that the out years become more and more speculative, because legislatures haven't acted. But I do think that the fact that you're able to get $4.5 billion in out-year pledges on such short notice at this time is a very positive indication, and that's the way we've taken it.

QUESTION: Beyond the numbers, what influence do you see and what part do you see the United States playing in exactly how the money is spent and where it is spent? What US, both authority and personnel, will be involved in that?

UNDER SECRETARY LARSON: Andrew Natsios is in Afghanistan today, following up on the conference and making some of the first investigations about how we can move our money quickly, and looking into the sectors that we would like to put our money into. Each of the bilateral donors that runs their own assistance programs will be making those decisions for themselves, but they'll try to do so in coordination with the Afghan Interim Authority and within the context of the needs assessment that really has set up the strategy of the framework for the assistance effort.

One of the things that was done at the conference was to agree that there should be an implementation group that would meet on the ground in Afghanistan under the chairmanship of the Afghan Interim Authority. And that's going to be the place where the donors come together to coordinate their efforts, to make sure that there's no duplication, make sure there's no significant gaps in the assistances being provided by the various bilateral donors, as well as the World Bank and UNDP.

QUESTION: What mechanism do you have, or what assurances do you have that people will actually cough up the $1.8 billion?

UNDER SECRETARY LARSON: I regard that as part of the responsibility of the co-chairs. The co-chairs organized the Tokyo meeting, as well as the two meetings that led up to it. We agreed that we'll have another meeting by the middle of this year. I think one of the real points of emphasis at this upcoming group of the steering committee that the co- chairs will bring together will be to hold countries accountable for the pledges that they have made, and really try to make sure that the money and the programs are moving quickly.

We know that there is an emphasis, there's a real need to show results on the ground. There's an economic need, there's a political need to do that. And so we'll want to make sure that those things are actually happening.

QUESTION: Just two or three things. On the frozen assets, the 1.3 million that you said was Ariana money, is that just in a bank account, a single bank account in the US?

UNDER SECRETARY LARSON: That is my understanding, yes.

QUESTION: Okay. And the IATA money, the 23 million, that is not just a US decision, right?

UNDER SECRETARY LARSON: That is correct.

QUESTION: Okay, and then the last thing is, does the United States take a position on what the Afghan Interim Authority should do with the unfrozen assets, particularly the gold? Are you recommending that they leave it here, or are you saying you can do what you want with it, we don't mind if you bring it back to Afghanistan and use it to pay teachers?

UNDER SECRETARY LARSON: We had consultations with Finance Minister Arsala the week before the Tokyo donors conference. It was immediately clear that both he and we agreed that the sensible thing for the gold was to have it be part of the backing of the central bank and backing for the Afghan currency. So it really isn't an issue. They see it as something that they need to keep as a reserve.

QUESTION: And so that means they are going to leave it here?

UNDER SECRETARY LARSON: I assume so, but I don't honestly know. I assume that it serves as a reserve for them just as effectively in the New York Fed as it does to be physically in the country, but it is really their decision.

QUESTION: Leading up to the conference, the US said repeatedly that it felt no pressure to be the largest donor. Was there ever an expectation that the US wouldn't be the largest donor? Was there at least a hope that some other country would come up with more money than we produced?

UNDER SECRETARY LARSON: Our target was really making sure that the needs for reconstruction were met. And when we heard that the European Union, which is one of the co-chairs, was planning on making a pledge that would include not only the contribution from the Commission of the European Union, but also aggregating in that contributions from each of the 15 states of the European Union, it would only be natural, we certainly welcomed the fact that they came up with a large number; in fact, a number of roughly $500 million for the first year.

QUESTION: Maybe I should say the only country, the only single country, to come up with that amount of money. Was there ever an understanding beforehand that maybe somebody would top the US pledge?

UNDER SECRETARY LARSON: No. I mean, we didn't have that sort of a discussion. Our focus was maximizing the contributions that each country or group of countries could make, and we did take the lead in pushing and prodding our partners to come up with maximal contributions. We sent out cables and had our ambassadors in each of the participating countries go in and, you know, raise questions about what their plans were.

QUESTION: Maybe this is a stupid question, but is any thought being given to getting American companies to get involved in the reconstruction of Afghanistan? Is that something that you are doing?

UNDER SECRETARY LARSON: We do believe that there is a role for the private sector in reconstruction of Afghanistan, and the Afghan Interim Authority is also thinking about the fact that they want this ultimately to be a private sector-driven economy with a large role for foreign investors and foreign businesses.

The week before the conference, the Overseas Private Investment Corporation, OPIC, chaired a meeting that brought in a number of Afghan Americans, including many that have businesses and business capabilities. In fact, Bear McConnell and I were both at that meeting, and this was really designed to begin priming the pump for that type of activity. Chairman Karzai stressed in some of his remarks the importance of getting foreign businesses involved in Afghanistan at the earliest possible moment.

QUESTION: Are there specific projects that are in the pipeline now?

UNDER SECRETARY LARSON: There will be some early requirements in this area. I mean, just to take one example in telecommunications, it's very difficult to communicate by telephone within Afghanistan. One of the very, very early needs for reconstruction is to have some type of operating telephone system. There may be public money involved in that, but it's something that the services and the equipment are going to have to come from the private sector. So that will be one early example.

QUESTION: Is there something envisioned with OPIC, having a special Afghan program?

UNDER SECRETARY LARSON: I envision an OPIC role at some point. There's not an immediate plan for that.

QUESTION: Can you tell us what the right word is? The trip wires are the stated problems that might arise in the future that the Afghans have been told will see that the out-year pledges won't happen? What do they have to do, or what should they not do?

UNDER SECRETARY LARSON: Well, two very specific points that were emphasized at the conference were, first of all, adherence to the Bonn process, and secondly, making sure that the monies that are received at the beginning are used effectively for developmental purposes.

On the Bonn process, it was really written into the conclusions of the conference that the participants expect that the process launched by Bonn will be adhered to, and it's very important to participants that there be broad-based representative government established, because that's the political goal of the whole process, and that feeling that it will be -- one wouldn't expect to see donor contributions sustained.

The second point, which Chairman Karzai took the lead in emphasizing in his remarks, was his understanding that there was a responsibility on the Afghan Interim Authority to show that the monies and the programs were being put to good developmental purposes.

So those are, I think, two important points that the Afghan Interim Authority really has taken to heart.

QUESTION: If I could follow up on that, I understand that a lot of the money is going to be going through NGOs and projects administered by maybe the UN. How long do you think it will take until -- or I don't know if you have this idea at this point -- but until the Afghan people are self-sustaining, with their own money, and the money goes directly into their own coffers?

UNDER SECRETARY LARSON: Right. I can't give you a time frame, but I can say that this is one of the points that all the participants in the Tokyo conference put a lot of emphasis on. We would like to see the economy in Afghanistan revive as quickly as possible, and we'd like to see the interim authority and the finance ministry begin to generate revenues and establish a budget. The finance minister expects to pull together by March 21st a budget for their first fiscal year, which runs from March 21st of this year until next year.

In that context, there will obviously be an expenditure and a revenue side. The revenue side of the ledger will be probably small in the first year, but it is important that it be positive. And it is something that should grow.

The IMF is going to send a technical assistance team out very soon to help them in this process, and again that is just setting the foundation for the development of a budget system that can generate their own resources.

QUESTION: By the way, can I follow up very quickly? I don't know if you went over this before I came in, but what kind of revenues do you expect, at least in the first year? I mean, both in -- like where are they getting that revenue from, outside of international assistance, and how much do you expect?

UNDER SECRETARY LARSON: Well, customs revenue -- I don't have any estimate on how much to expect, but one example of revenues that traditionally have been gathered in Afghanistan, and presumably can be again, are customs revenues.

QUESTION: Doesn't de-mining have to come before all of this? You can't have people out setting out power lines if there is a possibility they are going to be blown up. Is there a plan to start widespread de-mining in all of the inhabited areas before you can replant crops and all this kind of stuff?

UNDER SECRETARY LARSON: Well, there is a very aggressive program of de- mining. As I said, we brought together at the conference a group to discuss the de-mining challenge and to raise additional resources for de-mining. I think that it isn't quite as sequential as your question suggests. I think there are some areas of the country where it will be possible to begin reconstruction efforts, and we're not going to just do this in phases. But you are absolutely right; de-mining is essential. This is probably the most heavily mined country in the world, and de-mining is not only a humanitarian priority but it is also something that has to occur if you are going to get any expectation of economic growth.

QUESTION: Could you talk about your understanding of China's contribution in the Tokyo conference, and are you happy with their level of commitment at this point?

UNDER SECRETARY LARSON: I did talk to the Chinese Ambassador about their contribution. My understanding is that they made an initial contribution and that they have indicated a willingness to do more based on the results of an assessment team that they plan to send in to Afghanistan. I know that Chairman Karzai visited China immediately after the conference, and that may well have been one of the subjects that was discussed.

QUESTION: Can you just give us -- what was the total pledge that they made for the first year?

UNDER SECRETARY LARSON: One of the things the co-chairs have said that we're not going to do is talk about other countries' specific pledges. We'll talk about our own, we'll talk about the totals; but we're not going to, at least at this stage, talk about individual country pledges, and we're certainly not going to do it until we've gone back and verified all of the details.

QUESTION: Well, just to follow up, I understand that it has been significantly smaller than other countries, particularly given a country the size of China. Has the US asked them to increase that pledge at all, or maybe commit more?

UNDER SECRETARY LARSON: Well, in my conversation with the Chinese representative at the conference, I did inquire about the level of their pledge, and I did ask whether this was a first contribution. And he indicated that, in fact, it was; that in their minds they considered the pledge that they made at the conference a first contribution and that it was their plan to do more after they had done an assessment mission and found out a little bit more about where their capabilities could match Afghanistan's needs.

QUESTION: Can I ask about the phone system? Given the primitive nature of their phone system, has the State Department had difficulty communicating with ministers in Kabul?

UNDER SECRETARY LARSON: I am perhaps not in the best position to answer that. I have not been attempting to communicate with them. I have communicated with them when they were here, when Finance Minister Arsala was here, and obviously we were there. That is maybe a question we should take. I'm just not in a position to give you a good answer.

QUESTION: Mr. Secretary, I just wanted to ask you, you were in Kabul for those few hours with Secretary Powell and catching a glimpse of the devastation for yourself. As Chairman Karzai pointed out in Tokyo, what's the situation on the ground in Afghanistan is not at all like that glittering ballroom in Tokyo. All talk of Generally Accepted Accounting Principles and international auditing standards, this is all well and good, but I'm not quite sure how to ask this question.

But is there some realization among the co-chairs and all the participants in this that what happens in Afghanistan in the next few months is not going to look like a Harvard Business School case study, and it's going to be kind of messy, and there are going to be two steps forward and one step back? How are the co-chairs thinking about that process as what will be reasonable standards of -- reasonable indices of progress toward the goal that you would like to have?

UNDER SECRETARY LARSON: Well, first of all, I think all of the co- chairs have been involved in post-conflict reconstruction efforts, and I think we all understand that there are a lot of difficulties in any situation of that type.

Second, AID, which will be our leading agency in this effort, is experienced in Afghanistan. And as I said, the Administrator is in Afghanistan right now looking into how we can be helpful. A lot of our assistance early on is going to be project assistance, assistance-in- kind.

I think that when it comes to direct budget support for the Afghan Interim Authority, something that is being provided through the UNDP now, it is going to be important to have a degree of accountability about how those funds are being used. I think that can be done. I think that is one of the things we believe the IMF team, working with the Afghan Interim Authority, can provide.

All that said, I think we would agree -- I would agree -- with the premise of your question that this is going to be a difficult environment, it's going to be important to get in there, move quickly and get some things done, and that that means that you can't let perfect be the enemy of good.

Thanks.

(The briefing was concluded at 11:32 a.m. EST.)

[end]

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