Afganistan | Following the Money

AT LONG LAST, construction of the new Parliament building on Darulaman Road in Kabul is nearing its final stages of completion, with the exterior expected to be finished later this fall. The $178 million brass-domed structure, whose foundation stone was laid by Prime Minister Manmohan Singh and King Mohammed Zahir Shah in August 2005, is a gift from the Indian government, a fitting token of support for Afghanistan from the world’s largest democracy.

The Parliament building is perhaps the most visible sign of India’s $2 billion development aid programme in Afghanistan. Managed by India’s Central Public Works Department (CPWD), the construction of the building is a joint venture between two large Indian construction companies, both well-known for building roadways: BSCPL Infrastructure Ltd, Hyderabad, and C&C Constructions Ltd, Gurgaon. While the building marks their first ‘vertical’ project in Afghanistan, the two firms have already done major work in the country—including the recently completed $176-million Gardez-Khost highway, funded by the United States Agency for International Development (USAID).

But the Gardez-Khost highway stands out for another reason. According to an investigation published in TheNew York Times in May, the subcontractors working on the project, including BSCPL and C&C, paid millions of dollars in protection money to one of Afghanistan’s deadliest—and most anti-Indian—insurgent groups. It’s a story that highlights the compromises that Indian companies—like other international firms—have had to make in order to do business in the rough world of Afghan politics. It also raises concerns that Indian companies will be put in an increasingly untenable position in Afghanistan as the security situation deteriorates and US forces withdraw.

“Indian companies already have a significant investment and sunk cost. If they want to get anything out of it, they need to make these compromises,” said Harsh Pant, a professor at King’s College London and an expert on Asia-Pacific security issues. “The Indian government has basically told them they’re on their own.”

An equal-spoils project like the BSCPL/C&C joint venture is to be expected of the well-connected companies that undertake India’s development work abroad. BSCPL’s chairman, Bollineni Krishnaiah, is a former Congress party legislator in the Andhra Pradesh state assembly, while the company’s director (technical), Utthandumpillai Jayakodi, worked for 12 years in the Union ministry of road transport and highways. At C&C, the director, Rajendra Mohan Aggarwal, was a former executive engineer with the CPWD, which awarded the contract for the Afghan Parliament building.

After arriving in Afghanistan in 2003 during the heady days of postwar reconstruction, BSCPL/C&C combined has completed a number of major projects, including contracts for 700 km of roads, worth nearly $250 million and funded by USAID, the World Bank and the Asian Development Bank. These roads, which pass through some of the most volatile parts of southern Afghanistan, are precisely the kind of projects that have given rise to large payments to the insurgents and local warlords.

The Gardez-Khost highway project was typical of the work BSCPL and C&C have done in Afghanistan. The contract was awarded in 2007 to Louis Berger Group and Black & Veatch, two large American development contractors, and then subcontracted to BSCPL/C&C and ISS-Safenet, a South African private security company. It was to run roughly 100 km through a stretch of mountainous terrain controlled by the Haqqani network, a virulently anti-Indian insurgent group widely considered to be working closely with Pakistan’s Inter-Services Intelligence.

“Hiring a subcontractor from India—Pakistan’s mortal enemy—in a region dominated by people with close ties to Pakistan was like waving a red flag at Pakistan’s insurgent proxies,” the NYT article noted.

So it should come as no surprise that the local warlord, named Commander Arafat, who was hired to provide security for the project, ended up being a conduit for payoffs to the Haqqanis, according to the NYT. At one point, the South African security company consulting on the project, ISS-Safenet, was paying $160,000 per month to Arafat.

“Mr Arafat’s insurgent connections appear to have been known to virtually everyone,” TheNew York Times reported in May. “Subcontractors, flush with American money, paid Mr Arafat at least $1 million a year to keep them safe, according to people involved in the project and Mr Arafat himself.”

Led by the former mujahideen commander Jalaluddin Haqqani, the Haqqani network is believed to have been responsible for massive car bombs that targeted the Indian Embassy in Kabul in 2008 and 2009, as well as the attack last year on the Bakhtiar Guesthouse that left six Indian nationals dead. In other words, one of the Indian government’s largest contractors in Afghanistan participated in a project that ended up paying off the insurgent group most responsible for killing Indians in Afghanistan.

Rajiv Wadhawan, the Afghanistan country manager for the BSCPL/C&C joint venture, claims to be unfamiliar with either the New York Times article or Arafat. “Never heard of his name,” he said in a recent interview. Wadhawan said that USAID had been responsible for the security on the Gardez-Khost project, but that on other projects, BSCPL/C&C had hired its own Gurkha and Afghan security, often from local actors they knew little about. “We don’t get involved in any politics, we just finish the work and move on,” he said. “As long as we are safe, we don’t care.”

This sort of toxic nexus between development spending, international contractors, murky local middlemen and the insurgents is not a new discovery in Afghanistan. As recently as 2009, US investigators were aware that their host nation trucking contract, a $2.16-billion programme that supplies US military bases around the country, was being diverted to fund corrupt warlords and insurgents.

Indian officials denied that any of India’s spending in Afghanistan—nearly $1 billion have been disbursed to date—has ended up in the hands of the Taliban. “Frankly, our financial controls are very strict,” said a diplomat at the Indian Embassy in Kabul.

At the same time, the diplomat said that although the embassy wasn’t aware of any evidence that Indian companies had made financial arrangements with the insurgents, it wouldn’t be surprising if they had done so. “These are purely commercial decisions being made by the companies, and they have to make compromises. I wouldn’t think it beyond the possible.”

BSCPL/C&C’s alleged murky dealings with the insurgents highlight the increasingly difficult position of Indian companies in Afghanistan as the country’s security and governance situation deteriorates. “The only way that Indian companies can operate is by negotiating some sort of modus vivendi with those who control the areas they work in,” said Harsh Pant. Moreover, India’s strategy of concentrating its influence on the volatile Pashtun-dominated provinces bordering Pakistan has arguably made this situation even more difficult.

Initially, the involvement of the Indian private sector had been key to the government’s strategy in Afghanistan, which envisioned business investment as an important pillar of development. But this had been based on a scenario in which the US and NATO were the guarantors of stability and development in the country.

“There is a lot of discontent in the Indian private sector about the role that the government has played in putting them in this situation,” said Pant. Now, as a post-US scenario looms, in which the roles of the Taliban and Pakistan are likely to be strengthened, tensions have arisen between the government and the Indian firms doing work in Afghanistan. “The private sector is increasingly asking the Indian government to reveal its post-US-withdrawal strategy.”

But so far this scenario has not figured—publicly, at least—in the Indian government’s calculations for Afghanistan, which seem to be based on the assumption that both development and private sector investment in Afghanistan will continue to be viable. In May, Manmohan Singh announced an additional $500 million in aid over the next few years to Afghanistan, bringing India’s total commitment since 2001 to $2 billion. Moreover, a consortium of Indian private and public sector companies, led by the Steel Authority of India Limited, is widely considered to be the frontrunner in bidding for rights to mine the massive Hajigak iron ore deposits, located in mountainous Bamyan province in central Afghanistan.

It’s a massive project that could lock Indian companies into Afghanistan for years, well past the date when the bulk of US troops are to be withdrawn. “Warlords will certainly be tempted to become active in Hajigak and in the sector, and this will be a sure trigger for violent conflicts over resources,” warned a recent report from Integrity Watch Afghanistan, a local anti-corruption group.

If, subsequent to a US withdrawal, Afghanistan descends into violent conflict, those companies may regret having bid for Hajigak—given that they may find themselves paying whoever holds power afterwards. “That’s a disaster waiting to happen,” said Pant. “There are so few cards to play here. But when you don’t think through the implications of your policy, you start relying on wishful assumptions.”