It was a photo opportunity that was meant to signal a new dawn for Afghanistan. In January 2006, then British Prime Minister Tony Blair hosted a conference for some 60 international delegates in London on the future of the country. Standing side by side with Tony Blair for the conference photo was US Secretary of State Condoleezza Rice, then UN head, Kofi Annan and Afghan President, Hamid Karzai. According to the US State Department, the conference “represented an historic milestone for the Afghan people and the international community” in which “Afghanistan sets its reconstruction and development priorities.”

The centerpiece of the conference was the endorsement of the “Afghanistan Compact”, which set out an ambitious programme for Afghan development, committing to specific and achievable goals in security, governance, economic and social development. The document also included an entire annex on “improving the effectiveness of aid”. At the conference, the international community pledged some $10 billion dollars in aid. For the photo, Karzai held a copy of the Compact proudly in his arms.

Now two years on a new report has shown that the Compact has been a complete failure and billions of aid money to the county has either been wasted or not even delivered. The report is published by the Agency Coordinating Body for Afghan Relief (ACBAR), which is a leading alliance of 94 national and international non-governmental organizations working in Afghanistan.

Its author Matt Waldman argues: “The reconstruction of Afghanistan requires a sustained and substantial commitment of aid — but donors have failed to meet their aid pledges to Afghanistan. Too much aid from rich countries is wasted, ineffective or uncoordinated.”

It seems the last two years of effort has been wasted. Even before the London conference in 2006, the politicians knew they had a problem with aid money. Despite the billions pouring into Afghanistan, there were already reports of wasted money, corruption and incompetence. Just two months before the London meeting, the Washington Post had run a high profile piece entitled: “A Rebuilding Plan Full of Cracks”.

The paper noted that in September 2002, the United States launched what would become an aggressive effort to build or refurbish as many as 1,000 schools and clinics by the end of 2004. However, Congressional figures showed that they managed to finish and hand back to the Afghan government only 40 schools by late 2005.

This story of failure was not unique. At the time, the World Bank director in Afghanistan Jean Mazurell estimated that between 35 to 40 percent of the aid was “badly spent”. “In Afghanistan the wastage of aid is sky-high: there is real looting going on, mainly by private enterprises. It is a scandal,” said Mazurell. “In 30 years of my career, I have never seen anything like it.”

Other stories of wasted money began to emerge. A 45 million contract with the UN’s Food and Agriculture Organisation to supply badly needed food for the country, included the proviso that four million dollars went to financing its headquarters in Rome.

The tragedy is that aid has often been ineffectual and wasted. Often it does not even leave the country it is being offered from, as it goes to the country’s own consultants. The fraud of aid never actually leaving rich countries has been known about for decades.

In the late eighties the British All-Party Parliamentary Foreign Affairs Committee had noted bluntly: “In practice, the purpose of bilateral aid programmes in the UK, as in most countries, has rarely been viewed as the purely selfless promotion of other peoples’ welfare. It has always been understood that such programmes should be carried out with British commercial and industrial interests and political interests in mind.”

As Ben Jackson wrote in his book Poverty and the Planet published in 1990, “Aid is commonly thought of as handing over money to Third World governments for development. In fact, aid largely consists of funding from Western governments for services, machines, technical experts and consultants to be supplied by companies in rich countries, frequently their own.” The bottom line was that “most aid money is actually spent in the rich world.” Of the $20 billion the World Bank handed out in 1988, $15 billion went to its own contractors or consultants.

There are many more cases like this. Another book written around that time, called Lords of Poverty, examined the “freewheeling lifestyles, power, prestige and corruption of the multibillion dollar aid business.” It found, for example, that in the African country of Tanzania, “over 80 per cent of all Canadian development assistance was tied to the procurement of Canadian goods and services.”

Another problem that has been known about for years is that rich countries often promise aid, but never actually deliver it, or if they do, what they eventually give is woefully short of what they promised.

The record of failed promises is long. After Hurricane Mitch hit Central America in 1998 only a third of pledged aid was delivered; after the floods in Mozambique in 2000 and the earthquake in Bam in Iran just over half was delivered. After the Tsunami hit Asia in December 2004, Max Lawson, from the development charity Oxfam noted that: “History has shown us pledge-making is consistently undervalued by governments delivering about half of what they actually promised.”

Nearly two years after the Tsunami, Oxfam’s worries remain true. According to the UN, America promised Indonesia over $400m, but delivered $70m. For Sri Lanka, Spain promised $60m, but delivered less than $1m. France pledged $79m and came up with just over $1m. The Chinese promised $301m and delivered just $1m. In the Maldives, Kuwait promised $10m but actually delivered nothing.

So has Afghanistan been any different? The tragic answer is no. ACBAR’s report is truly shocking. The international community has simply repeated well known mistakes. Firstly, despite the pledge made in the “Compact” the reasons for giving the money have been dictated by the big donors rather than responding to Afghan needs.

According to ACBAR, the donation of aid has “been heavily influenced by the political and military objectives of donors, especially the imperative to win so called ‘hearts and minds’.” Given to reflect expectations in donor countries, it is not what Afghan communities want and need. A significant proportion of aid to Afghanistan is being used to achieve military or political objectives, rather than help Afghans on the ground.

For example, over 70% of the Afghan population rely either directly or indirectly on agriculture for their livelihoods. However agriculture has received only $400-500 million since 2001, a tiny fraction of the multi-billion international aid budget to Afghanistan.

Secondly, there is a huge disparity between what America spends on war and what the international community spends on aid. The US military currently spends nearly $36 billion a year in the country, some $100 million a day; yet the average volume of aid spending by all donors since 2001 is just $7 million per day. Whilst the military budget is vast, 2.5 million Afghans face severe food insecurity, and one in five children still dies before five. Life expectancy is woefully low at 45 years. Thirdly, over half of all aid to Afghanistan is tied, by which donors often require procurement of services or resources from their own countries. Rather than go to help Afghanistan, the money just lines the pockets of Western contractors and companies. So of the aid actually spent, a staggering 40% has returned to donor countries in corporate profits and consultant salaries.

The report notes: “Vast sums of aid are lost in corporate profits of contractors and sub-contractors, which can be as high as 50% on a single contract … A vast amount of aid is absorbed by high salaries, with generous allowances, and other costs of expatriates working for consulting firms and contractors — each of whom costs $250,000-$500,000 a year.” In contrast, an Afghan civil servant is paid less than $1000 per year.

Often the contractors spend vast amounts of money on something that could be done much cheaper: For example, a road between the centre of Kabul and the international airport cost the US over $2.3 million per kilometer, at least four times the average cost of building a road in Afghanistan.

Finally, there is the inevitable short-fall of some $10 billion — equivalent to thirty times the annual national education budget. Just $15 billion in aid promised since 2001 has so far been spent. The list of culprits is long. The European Union has distributed less than two-thirds of its commitments for 2002-2008. The US and World Bank has distributed only half of their’s and the Asian Development Bank and India have disbursed only a third of what they promised.

Why do we just make the same mistakes time and again. As history repeats itself, the US and Britain wonder why they are losing the war…