Following is the text of Larson's prepared testimony:

(Note: In the text, "billion" equals 1,000 million.)

Alan P. Larson, Under Secretary of State for Economic, Business, and Agricultural Affairs
Testimony on Afghanistan Reconstruction
before the House International Relations Committee
March 14, 2002

Mr. Chairman, distinguished Members of the Committee, it is my privilege to appear before you to discuss our assistance efforts in Afghanistan.

Many members of Congress have visited Afghanistan in recent months and have seen first hand the country's daunting challenges: a fledgling, fragile, and fractious government, surrounded by independent warlords, in a country prostrate after more than two decades of war.

The long years of conflict destroyed Afghanistan's physical and political infrastructure, shattered its institutions, and wrecked its socio-economic fabric. Many, if not most, of the talented and educated left. What little industry the country had was mostly destroyed. The little it exported was mostly narcotics. Many parts of the countryside are heavily mined. This devastation was brought about by conflict but exacerbated by a severe and prolonged drought, now in its fourth year.

The Taliban intensified the anguish of Afghans. They pursued policies that victimized their own people, especially women and girls and ethnic minorities. They made no effort to provide health, education, and other social services. Instead, they devoted their resources to waging war on the Afghan people, and exporting instability to their neighbors. They welcomed terrorists and provided them with safe haven and support with tragic results.

As a result of the economic and political devastation of the country, Afghanistan is among the least developed countries in the world by any criteria. Average life expectancy in Afghanistan has been reduced to 46 years; according to the World Health Organization, the infant mortality rate at birth is 152 per 1,000 births; the mortality rate for children under 5 is 257 per 1,000.

It is not surprising that such an environment became the crucible in which terrorists found safe haven and drug traffickers flourished.

With the downfall of the Taliban, the challenge the United States and the international community face is to ensure that Afghanistan never again becomes a threat to its own people, its neighbors, or to civilized society. We want to see an Afghanistan that is a responsible member of the world community and never again a hub for terrorists and drug traffickers that threaten our security. We would like to see an Afghanistan in which its people are able to express their voice within a representative political system and the government respects human rights, especially of the most vulnerable -- women and minorities.

The Administration is working with its partners in the international community to help Afghanistan make this transition from a failed state to a stable one. Such an approach requires that we address simultaneously and weave together all strands of public policy that make for a stable society -- political, military
, security, economic, reconstruction, and humanitarian. Lack of progress on any one of these elements will make it harder to achieve our objectives on the others. We would like the international community to help Afghanistan fashion a virtuous circle in which political stability leads to a secure environment, which allows economic activity and reconstruction to flourish, which creates income and employment, which alleviates the humanitarian crisis of the people, which creates a constituency for greater political stability.

Mr. Chairman, we believe the Congress and the Administration share the same goals, objectives, and priorities on support for Afghanistan. The Congress and the Administration agree on the need to address the humanitarian crisis in Afghanistan and to support programs that build representative institutions, enhance the role of women in society, fight narcotics production and trafficking, build AIA [Afghanistan Interim Authority] capacity, and support reconstruction, especially in the agriculture, education, and health sectors. This is exactly what we are trying to do.

Domestic Political Situation

The ouster of the Taliban and the establishment through the Bonn Agreement of a broad-based interim government has created an opportunity to break with Afghanistan's recent history. It will not be an easy task and there will be disappointments along the way. The situation remains fragile and volatile. There have been clashes in the North and Southeast; there are reports of anti-Pashtun violence in the North; the Afghanistan Interim Authority must still establish its authority in many parts of the country; the recent killing of the Minister of Aviation at Kabul International Airport was of particular concern.

Nevertheless, the domestic political situation is moving in the right direction. The AIA and the UN have begun a process which will lead towards a constitutional government that respects all ethnic and religious minorities, that values its women and girls, and that does not harbor terrorists and drug traffickers.

The Loya Jirga ["Grand Assembly"] is set for late May or early June. A 21-member organizing committee, which includes 3 women, was announced last month. The committee has begun public meetings to establish the procedures for the Loya Jirga. The USG [U.S. government] supports this process fully. We are in discussions with Afghan leaders and the UN on how to ensure broad participation of all ethnic groups, geographic regions, religions, and women. We are ready to assist the AIA and the UN in any way we can, including with logistical help for participants.

ISAF [International Security Assistance Force]

For recovery and reconstruction to proceed rapidly, it is essential that the immediate security environment be enhanced. ISAF, under UK [United Kingdom] lead, is fully operational with 4,400 troops on the ground from 18 countries. Joint patrols with Afghan police are proceeding well. Streets in Kabul are free of armed groups, but crime at night remains a problem.

A robust and credible international military presence in Kabul has been key to stability of the Karzai government. Continued ISAF presence is required during the run-up to the Loya Jirga and through the end of the year.

Although an ISAF fund has been established by the UN, no donor has contributed to date, and ISAF is currently self-financing. It is conceivable, however, that at some point we would be asked to contribute to this fund to support ISAF operations.

Afghan Military

The development of a credible Afghan army is the key to long-run security in Afghanistan, and, as such, an important component of Afghanistan's future stability and economic recovery. It is, therefore, a high USG priority. A CENTCOM [Central Command] assessment team visited Kabul last month and is now in the process of preparing its report and making recommendations. President Bush has pledged U.S. support for the development of Afghanistan's security forces. We are encouraging the international community to assist with the large amount of resources needed for demobilization, training, and professionalization of the military. We have stressed to the AIA that it needs to focus on a modest force configuration, with a broad-based ethnic mix. ISAF is currently training a battalion to provide static security for the government in Kabul. CENTCOM is poised to begin training additional battalions.

Regular and reliable payment of Afghan military salaries -- both to those currently under arms and to those that will form a new national army -- is important. Failure to provide for regular military salary payments would enhance the threat of civil disorder and endanger efforts to build a new Afghan national army.

The AIA has a limited capacity to pay military salaries due to donor funding constraints and a lack of internal resources. To ensure the AIA has the ability to establish an effective new Afghan army, an appropriate, reliable way must be found to pay the salaries of military personnel of that army.

Police

Ensuring the domestic stability needed for long-term recovery requires as well a professional police force. The AIA has indicated its intention to develop a national police force, and Germany has agreed to take the lead on organizing international police assistance to the Afghan authorities. The United States recently sent a team to Kabul to assess the state of the police and examine from the U.S. perspective what assistance we can best provide in coordination with the Germans and other donors.

Recovery and Reconstruction

The administration views reconstruction of Afghanistan as a continuation of our campaign against terrorism. Our military campaign is succeeding. These successes can be fully consolidated only if the international community, working with Afghan authorities, supports a recovery and reconstruction plan that stabilizes Afghanistan and help prevent it from again becoming a haven for terrorists and drug traffickers.

Our commitment to assist the people of Afghanistan has been long-standing and firm. Even before September 11, we were by far the largest provider of humanitarian assistance to Afghans; in FY 2001, we provided $183 million in aid. Thus far in FY 2002 we have given $240 million. The U.S. channels the majority of its humanitarian assistance through U.N. agencies, such as the World Food Program and the UN High Commissioner for Refugees. We also work directly with several large nongovernmental organizations.

Our first priority has been the stabilization of the humanitarian crisis in Afghanistan. According to the United Nations, famine in Afghanistan has been averted, in large part due to the heavy infusion of U.S. food aid.

While we will continue to provide humanitarian assistance, we have begun to implement recovery and reconstruction programs with a focus on quick impact, employment-generating projects. Our reconstruction focus in Afghanistan will be on agriculture and rural development, de-mining, education, and health care.

The International Effort

The United States took the lead in focusing the international community's attention on Afghanistan's reconstruction needs. We knew we could not and should not do this alone and immediately set about finding partners.

As co-host with Japan of the November 2001 Senior-Level Afghanistan Reconstruction Conference in Washington, we kicked off the planning effort for Afghanistan's recovery by inviting the major donor countries. At that time, the EU [European Union] and Saudi Arabia agreed to join us as co-chairs of a Steering Group that would help coordinate international engagement in Afghanistan. Together, in a series of almost daily conference calls linking officials in Washington, Riyadh, Tokyo, Brussels, and later Madrid (once Spain assumed the EU Presidency), as well as during a planning meeting in Brussels in December, we worked out plans for the January Afghanistan Conference on Reconstruction Assistance in Tokyo. We also encouraged the World Bank, the United Nations Development Program, and the Asian Development Bank to prepare an urgent needs assessment.

This exhaustive preparation was critical. We were gratified at the success of the Tokyo conference, in large part due to excellent cooperation and coordination among the co-chairs. The $1.8 billion in first year pledges exceeded our expectations. It exceeded needs assessment estimates of the UNDP [United Nations Development Program], World Bank, and the Asian Development Bank. Multi-year pledges totaled $4.5 billion.

In Tokyo, the United States pledged $297 million for the first year of the reconstruction effort. This pledge represents previously appropriated and authorized funds. We intend to continue to make substantial contributions in future years.

The international community also formalized an organizational plan for implementing Afghanistan's reconstruction. The conference established a Steering Group consisting of the 62 countries that met in Tokyo, with the. United States, Japan, the European Union, and Saudi Arabia as co-chairs to provide policy guidance for the reconstruction effort. An Implementation Group, with the AIA as Chair and the World Bank, the Asian Development Bank, the Islamic Development Bank, the Afghan Support Group, and the United Nations Development Program as co-chairs, was to coordinate the implementation of reconstruction on the ground. The Afghan Support Group remained responsible for coordination of humanitarian assistance.

We continue to collaborate closely with our Steering Group co-chairs to monitor the reconstruction response and to develop ideas to address problems, including through regular conference calls involving multiple agencies from all the co-chair governments. We also work with the international financial institutions, the development banks, the United Nations. These organizations have played a key role in providing us with detailed assessments of Afghanistan's needs and will be key players in successfully addressing those needs. Afghan reconstruction is truly an exercise of global scope.

Key Reconstruction Issues

Although the Tokyo conference was a good beginning to the reconstruction effort, many obstacles remain as we go forward. The AIA, the Administration, and the other Steering Group co-chairs have been concerned that reconstruction is not moving fast enough. There are inherent limitations, however, on the speed with which assistance programs can be implemented, such as:

-- The uncertain security situation in many parts of the country is a major obstacle to the delivery of reconstruction assistance.

-- We need to enhance the capacity of Afghanistan and the AIA to absorb the reconstruction effort. We are actively exploring with the UN and other international partners ways of strengthening the AIA's administrative and bureaucratic capacity.

-- It is essential resources be used in an accountable and transparent manner. Secretary Powell raised this issue with Chairman Karzai in Kabul, and he made a clear commitment that it was one of his priorities too. Nonetheless, we will remain vigilant and establish monitoring systems to guard against waste and malfeasance.

I would also like to make some additional observations regarding our assistance programs in Afghanistan:

-- The United States and other Steering Group co-chairs agree that we need to make sure the reconstruction effort is used to politically strengthen the AIA and its legitimate successor, and advance the Bonn process. Assistance for regions and provinces and local communities should be used as a carrot to influence them to support the AIA and the Bonn process.

-- Counter-narcotics must be an important part of our assistance in Afghanistan. We will work with the UN, bilaterally, and with other donor countries to strengthen counter-narcotics efforts, which will include alternative crop assistance.

-- The bulk of U.S. assistance in Afghanistan is through USAID [U.S. Agency for International Development]. About $200 million in USAID programs are currently being implemented or will be implemented in the next few weeks. Mr. Natsios [USAID Administrator Andrew Natsios] will provide you more detail on these programs, but let me say that our focus is on projects that are visible and create immediate employment and generate incomes.

-- Return of displaced Afghans, whether they be in neighboring countries or within Afghanistan, will be an important gauge of progress, and will require significant international assistance. The State Department's refugee account is prepared to support the reintegration of those refugees and displaced persons who choose to return home this year, and to assist communities in absorbing returnees back into their populations.

-- It is vitally important that our efforts be coordinated with the AIA, the UN, and other donor countries and organizations to avoid duplication and gaps. To date our coordination has been exemplary.

-- Looking ahead, we will come to the Congress for additional funding for Afghanistan. The process of establishing an effective and broad-based central government, managing a credible political process, enhancing the security situation, implementing counter-terrorism and counter-narcotics programs, demobilizing tens of thousands of troops, and supporting a return to economic stability is going to require significant resources.

-- Some recent reports suggest that the drought in Afghanistan continues to be severe. As a result, the humanitarian assistance effort will continue longer than had been expected, and this may slow down the pace at which recovery can move forward.

Narcotics

Working with the international community, the United States will offer strong support for Afghanistan's policy to ban opium cultivation, processing and trafficking. We are concerned at initial reports that Afghan farmers have planted a substantial crop of opium poppy, which will mature for harvest in April and May. Unless action is taken in the next few months, Afghanistan is poised once again to become the world's leading producer of illicit opiates.

We are working actively with our G-8 partners to develop diplomatic and operational strategies to counter the Spring 2002 opium harvest in Afghanistan. We are working with the international community through the UNDCP [U.N. Office for Drug Control and Crime Prevention] to encourage the AIA to make eradication of the spring opium crop one of their top priorities, and to develop an effective counter-narcotics capability within the AIA. At the same time, we are working with the AIA on developing employment generation projects in poppy growing areas, and on funding alternative crop and farmer input programs in poppy growing areas. A difficult security situation and the absence of effective law enforcement in the rural areas are complicating our efforts.

Building AIA Capacity

Much of what we hope to see happen in Afghanistan depends on the AIA and its successors being able to establish effective government. Yet reports from the field indicate AIA lacks the capacity at this time to engage fully with the international donor community on the reconstruction effort. It lacks equipment (e.g., phones, computers, pencils, paper), well-trained people, and technical assistance.

We are working with our reconstruction partners, particularly the Afghan Reconstruction Steering Group co-chairs, to address this gap. We have asked UNDP to reorganize the activities of their Fund for start up and recurrent costs. UNDP has focused on paying civil service salaries; we have urged them to shift some resources to capacity building.

In addition, USAID has begun planning a mission to assess Afghan Ministerial capacity needs. This mission should give us a well-defined idea of what the ministries need so we can gauge and plan the appropriate response. The study will also help us focus other donors on this issue, and help us generate resources from them. We will continue to work with the UN and the AIA to explore innovative ways of strengthening the AIA's capacity.

AIA Operating Needs

Another key issue is the short-term operating needs of the AIA. Before it fled Kabul and other cities, the Taliban looted the central bank vault, leaving no funds for AIA operations. As noted, government ministries had to start operations without even the most rudimentary supplies and equipment.

Donors established a trust fund in the UNDP to assist with the short term operating needs of the AIA. To date donors have pledged about $37 million, and provided about $27 million to this trust fund. This money has been spent primarily for the salaries of civil servants. SRSG Brahimi [Special Representative of the U.N. Secretary-General Lakdar Brahimi] has asked donors to increase the funding to $50 million. We have provided $4 million for this trust fund and have urged others to donate generously.

On a separate track, the Department of State and the Department of the Treasury have worked aggressively to unblock over $240 million in gold and cash of the Afghan Central Bank at U.S. financial institutions. While the bulk of the unblocked Afghan deposits will likely remain in the U.S. as reserves (e.g., $195 million in gold), about $47 million in cash is available for the AIA to access and use now. We have spoken at length with AIA officials, and together we have developed procedures allowing access while ensuring that only the appropriate AIA officials can withdraw funds. The Afghan Central Bank also has considerable assets in other countries. We have worked with governments holding assets and the AIA to ensure those funds are unblocked as soon as possible. We have helped AIA receive its escrow overflight fees from IATA [International Air Transport Association].

Internal Coordination

An effort as ambitious and complicated as Afghan reconstruction requires remarkably intensive coordination internationally and at home. The connections between the various levels of this enterprise -- the security, humanitarian and developmental -- cut across traditional bureaucratic lines. This requires people in a number of different parts of the U.S. government -- the Departments of State, Defense, Treasury, USAID, the NSC and others -- to talk frequently to make sure we're all pointed in the same direction and that our plans, actions and words reinforce one another. The Secretary has named Ambassador James Dobbins as the coordinator to ensure this coherence.

We have established a number of mechanisms to manage this constant dialogue. The interagency Policy Coordinating Committee on Development that I chair has a subgroup on Afghanistan chaired by our Assistant Secretary for Economic Affairs that has met frequently -- sometimes two or three times a week -- since November. Officials on the security side have held daily secure video conferences in which we often discuss the relationship between security, reconstruction and humanitarian assistance. As a result, the interagency coordination has been close to ideal.

Status of Embassy

Obviously, our success will depend critically on our presence on the ground. Our embassy resumed operations in December. Charge d'Affaires Ryan Crocker is leading our mission in Kabul. The Secretary visited our dedicated, enthusiastic staff in Kabul on January 17. Our staff is operating in very difficult conditions but we are doing everything possible to improve those conditions quickly. Many of your colleagues in Congress have visited Kabul and have seen first hand the difficult circumstances under which our Embassy personnel are operating.

Currently, we have a relatively small number of State Department personnel in Kabul, which we expect to increase by about 40 percent by summer's end. We have purchased modular housing units to accommodate our personnel and are planning chancery rehabilitation projects. We would, of course, be happy to provide, in a closed session or non-public report, any further details the Committee wishes to receive on a number of personnel and the housing and security arrangements for them.

It goes without saying that our Embassy remains on the highest possible security alert in this critical threat environment. The 4th Marine Expeditionary Brigade provides security for the chancery.

Conclusion

Mr. Chairman, in closing, I want to say that the recovery and reconstruction of the country is an important Administration priority. The State Department and other U.S. agencies are working hard to achieve the President's goals in Afghanistan. Thank you.