Thomas P.M. Barnett :: Weblog

ARTICLE: "Scents & Sensibility: How the author helped Afghans build a thriving soap and body-oil business--and overcome the incompetence of America's aid establishment," by Sarah Chayes, BusinessWeek, 12 November 2007, p. 80.

Worth reading.

Former NPR reporter covering the Taliban decides to take matters into her own hands, creating her own version of development-in-a-box. She sees plenty of fruit in Kandahar and figures that, if she turns it into beauty products, she could move it outside of the country without spoilage.

Then she does some classic, Bill Easterly "searching" among the locals for skills and supplies to pull it off, and she's running.

But she needs some start-up capital and turns to a USAID program for support.

Then the fun begins:

As I was to learn over the next two bewildering years, the Alternative Livelihoods Program exemplifies the disturbing evolution of the international development industry. With neither the staff nor the mobility to carry out or even full monitor the projects it supports, USAID acts strictly as a moneybag. Though it does fund nonprofit, nongovernmental organizations dedicated to humanitarian action, many American development dollars go to huge for-profit companies that have adapted over recent decades to capture the manna. Chemonics, which landed the contract for ALP in the southern region of Afghanistan--know, inevitably, by the clumsy ALP/S--is one of these.

Chemonics' initial contract provided for $119 million, for use in three Afghan provinces over a four-year period. Roughly one year after the contract became official in early 2005, Chemonics had spent only a tiny percentage of its authorization, and a large part of that on its own start-up costs. Earlier this year, at its well-equipped building in Kandahar, guarded around the clock by a private security detail, I counted 10 brand-new SUVs. And yet, until this year, ALP/S was hardly visible in Kandahar, and only rarely had an international presence there. According to a former worker on the project, international employees can earn up to about $180,000 a year--plus 35 percent hazard pay, 35% "post differential," and 20 percent for working Saturdays. But USAID, the former worker said, pays the company some $500,000 to $600,000 for each of them. Little surprise that Afghans wonder where the development dollars are going.

Chayes begins with a business plan asking for 50-70k in investment capital. It was 15 pages long and the predictions on cost have proven quite accurate. Chemonics wanted a lot more numbers and sent her a complex spreadsheet that began with "production coefficients." She began wondering how ordinary Afghans would be able to negotiate such paperwork.

Hernando de Soto would as well.

Chemonics also wanted the company to break even in six months.

After filling out all this complex paperwork, Chayes' proposal was rejected.

Chayes perseveres anyway, getting bits and pieces of capital here and there. PR is similarly cobbled together, as are Western retail customers.

As progress continued and a "maverick" Chemonics employee pushed her case, Chayes did eventually get $80k from the program. The result? All production goals were met a month early and so it looked like follow-on funding would result.

Problem? The just-in-province new administrator wanted a "ream of further documentation."

After more frustrating back-and-forth comms, Chayes eventually withdraws her proposal, with the approval of her Afghan workers. She later locates a small network of angel-style investors, to include the Canadian version of USAID.

You'd want $119m to buy you a bit more in impact, but there you have it--at least according to this anecdote persuasively delivered in this business magazine.