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Inside Story

Can Afghanistan tackle corruption?

As a new report on the Kabul Bank scandal places a spotlight on corruption, we ask what Hamid Karzai will do about it.
Last Modified: 29 Nov 2012 13:16

A scandal has cost Afghanistan's Kabul Bank hundreds of millions of dollars. And a new report now says political meddling is preventing efforts to find out why it happened.

The scandal began nearly three years ago.

"Within the government, within the cabinet of President Karzai, there was immense pressure and immense understanding between all of them that we have to, really, flourish this bank. So it is very crystal clear that President Hamid Karzai and his royal family, royal team, or his political allies - whatsoever people called them - they were all together into it."

- Najeeb Azizi, from Kabul University

And now, thanks to an independent audit, Kabul Bank is once again in the spotlight.

The report says the bank funneled $900m into the pockets of the country's political elite.

Dragan Kos, who heads up the committee that produced the report, says that what many in Kabul have long believed is that a corrupt elite benefitted at the expense of other Afghans, and did so with the help of those close to Hamid Karzai, the president.

There is no evidence that the president benefited from the loans, but his brother, Mahmood Karzai, did. He denies any wrongdoing, and says he has paid back the loan.

But while the political elite allegedly siphoned off money from Kabul Bank, Afghanistan remains extremely poor, with 36 per cent of its population living below the poverty line.

Kabul Bank was founded in 2004. And five years later, in 2009, Afghan authorities learnt that it was smuggling money out of the country.

After fears of its collapse led to customers taking their money out, it was bailed out by international donors in 2010.

"What is at stake here ... is whether the international community are building a system that can sustain itself and whether Afghans themselves are being part and co-opted into a system that they can feel is legitimate."

- Peter Middlebrook, from Geopolicity Inc.

In April last year, President Karzai announced that the Bank would be put into receivership - a process in which most of its assets were transferred to a new bank.

Then in May of the same year, a report by an anti-corruption office said $467m worth of loans were made without proper collateral.

So, how will Hamid Karzai handle the aftermath of the Kabul Bank scandal?

And what can be done to deal with corruption in Afghanistan?
 
To discuss this, Inside Story, with presenter Ghida Fakhry, is joined by guests: Najeeb Azizi, a former economic adviser to the Afghan ministry of finance and a visiting professor at the economic faculty at Kabul University; Fahim Dashty, the chief editor of Kabul Weekly and president of Afghanistan's national journalist union; and Peter Middlebrook, the managing director and CEO of Geopolicity Inc., an advisory consulting firm specialising in political and economic intelligence. 


THE KABUL BANK SCANDAL:

  • A report says Kabul Bank was involved in the embezzlement of almost $900m 
  • The report was funded by international donors and released by Kroll Associates 
  • The brother of President Karzai is alleged to be a beneficiary of fraud 
  • The missing money is said to be equal to five per cent of Afghan GDP 
  • The bank gave illegal loans to a group of 19 individuals and companies 
  • Kabul Bank employed people to forge documents for fake companies 
  • Investigators found 114 rubber stamps used for fake companies 
  • The embezzled money was moved to foreign accounts in 28 countries 
  • The report says the money was smuggled out of Afghanistan by Pamir Airways 
  • The now defunct Pamir Airways was set up with loans from Kabul Bank 
  • Officials promoted Kabul Bank as a model of Western-style banking 
  • The US has threatened to cut Afghan aid unless the guilty are prosecuted 
  • In 2010, revelations of corruption led to a run on the Kabul Bank 
  • The Kabul Bank had to be bailed out by international donors

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Source:
Al Jazeera
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