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25 January 2002

Transcript: State's Larson on Funding Afghanistan Reconstruction

(Says five-year pledges substantial) (4090)
Five-year pledges to fund Afghanistan's reconstruction are
substantial, Under Secretary of State Alan Larson says.
At a January 25 news conference in Washington, Larson said the United
States is working to unfreeze assets that can be made available to the
interim Afghan government.
He said the amount of money pledged by the U.S. and other donors at an
international conference in Tokyo January 21-22 totals $4.5 billion.
Larson said Afghanistan's interim leader, Hamid Karzai, is committed
to running an accountable administration for disbursing donated funds.
He added that Karzai also wants to attract foreign investment.
(Note: In the following text "billion" equals 1,000 million.)
Following is the transcript of Larson's press briefing:
(begin transcript)
January 25, 2002 Washington, D.C.
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.
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 [U.N. Development Fund].
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 U.S.
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
QUESTION: So the 25 million in central -- in other accounts and the 23
million are two separate things?
LARSON: Correct.
Q: Where are those -- the 25 million? Other accounts? Does that mean
in the U.S.?
LARSON: Various banks in the U.S. 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
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
Q: Are those U.S. dollars or international dollars?
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.
Q: And that's not including the 1.8 billion?
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 [European Union] 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
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.
Q: It was long?
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.
Q: 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?
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.
Q: 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 U.S., both authority and personnel, will be
involved in that?
LARSON: [U.S. Agency for International Development] 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.
Q: What mechanism do you have, or what assurances do you have that
people will actually cough up the $1.8 billion?
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
Q: 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 U.S.?
LARSON: That is my understanding, yes.
Q: Okay. And the IATA money, the 23 million, that is not just a U.S.
decision, right?
LARSON: That is correct.
Q: 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
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.
Q: And so that means they are going to leave it here?
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
Q: Leading up to the conference, the U.S. said repeatedly that it felt
no pressure to be the largest donor. Was there ever an expectation
that the U.S. wouldn't be the largest donor? Was there at least a hope
that some other country would come up with more money than we
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.
Q: 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 U.S. pledge?
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.
Q: 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?
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.
Q: Are there specific projects that are in the pipeline now?
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.
Q: Is there something envisioned with OPIC, having a special Afghan
LARSON: I envision an OPIC role at some point. There's not an
immediate plan for that.
Q: 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?
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
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.
Q: 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?
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 [International Monetary Fund] 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.
Q: 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?
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
Q: 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?
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.
Q: 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?
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.
Q: Can you just give us -- what was the total pledge that they made
for the first year?
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.
Q: 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?
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.
Q: 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?
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.
Q: 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?
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,
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.
(end transcript)
(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: http://usinfo.state.gov)

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