US officials are happy with a program that helps steer Pentagon contracts to local businesses in Central Asia. But Central Asian governments are grousing that they aren’t making enough of a profit off of the Afghan war.
In 2010, the US Congress and Department of Defense changed regulations on how supplies can be procured for troops fighting in Afghanistan. The changes aimed to encourage a larger share of supplies to be bought from sources in the Caucasus, Central Asia, and Pakistan. Later, the program was altered to focus only on the five Central Asian republics. The hope in Washington was that spreading the wealth, in terms of Pentagon contracting, would strengthen the support of Central Asian governments for the Northern Distribution Network (NDN) [6], a network of road, rail and air routes that now comprises the main supply line to US and NATO forces in Afghanistan. NDN stands to be a critical element in ensuring that foreign troops meet a 2014 withdrawal deadline [7].
“The procurement of supplies (to include construction materials) and services from the CAS [Central Asian states] will provide economic opportunities and bolster stability in that region and could impact positively our ongoing negotiations with the CAS to gain regional access and permissions to support current and future supply and retrograde operations in Afghanistan,” wrote Frank Kendall, the undersecretary of defense for acquisition, technology and logistics, in a September 2012 memo [8]. “In addition, procuring products and services from the CAS will reduce the distance, complexity, risk, and cost associated with these operations.”
Since 2010, US forces in Afghanistan have purchased about $40 million-worth of office supplies, construction equipment and other goods from businesses in Central Asia and the Caucasus, according to officials from the General Services Administration, the US government agency that provides supplies for federal government offices. That is more than expected, and in the coming year the US expects to make another roughly $50-60 million in local purchases, said Joel Lundy, the GSA's program manager for Central Asia and South Caucasus local sourcing and logistics. “We're very pleasantly surprised,” he said. The $40 million pertains only to products bought by the GSA, and does not include food, fuel and other categories of goods the United States procures in the region.
Of that $40 million in local goods, 51 percent has come from Kazakhstan [9], 39 percent from Georgia, 9 percent from Uzbekistan and small amounts from Kyrgyzstan and Tajikistan, according to Boban Simonovski, program manager for TWI, the company contracted by the GSA to implement its purchasing program in Central Asia. Officials from the GSA and TWI described the program at an October 24 event at the Center for Strategic and International Studies in Washington, DC.
The most common items bought in Central Asia are paper towels, toilet paper and cleaning supplies. The largest single item is printer cartridges, which alone account for $9.1 million of the total. The cartridges aren't produced in Central Asia, but are purchased through a distributor in Kazakhstan.
The GAS has produced a catalog for US forces in Afghanistan of 140 items that can be bought from Central Asia. (Click here [10] to see the list). Lundy said Americans in Afghanistan have been pleased with the quality of goods they get from Central Asia, and have asked for more to be put in the catalog because locally procured items can be delivered much faster than their American equivalents.
That has done little to assuage the concerns of Central Asian officials, particularly those of Kazakhstan and Uzbekistan, who frequently complain to their American partners about the paucity of business, Lundy acknowledged.
“The Uzbek government was probably the loudest among the Central Asian countries, they say: 'You said you were going to buy from us – why don't we see $100 million being spent each year in our country by the DoD?' But doing business in Uzbekistan has been hampered by the common business practice there of paying for goods upon order, rather than upon delivery as the US requires, Lundy said.
Lundy added that officials in Kazakhstan want the Pentagon to buy more locally manufactured goods. “The Kazakh government is very sensitive when US Central Command goes to them and says 'here's what we spent in your country in support of the NDN, to keep allowing our trains to roll through,' they say 'well, how much of that is manufactured here? We don't care about anything else,'” Lundy said.
Central Asian governments had unrealistic expectations of the business they could do with the United States, said Marc David Miller, executive director of the Kyrgyz-North American Trade Council. This was an opportunity for Central Asian businesses to get a jump start in international markets, but Central Asian governments didn't think of it that way, Miller said. First, they had in mind the fuel contracts for the Manas air base, as a way for government officials to enrich themselves, and also thought they would be able to dictate to the Americans what to buy and how much.
“Local governments did not take this seriously enough, they saw it as a way of generating cash for whoever controls the purse strings,” he said.