Deputy Secretary of the Treasury Neal S. Wolin Remarks at the American University of Afghanistan

February 10, 2010 - Thank you, Dr. Smith. It is an honor to be here today at the American University of Afghanistan. I feel very lucky to be able to visit Afghanistan and particularly privileged to spend time here at this center of educational excellence.

For 30 years, this city has been in the shadow of violence and conflict. I drove here in an armored convoy. I have been surrounded by guards. But as soon as I walked through the gates of this university, I felt a sense of energy, enthusiasm and optimism all around me. That atmosphere is a testament to the courage and commitment of every member of the AUAF community.

Not very many years ago, a university with AUAF's mission could not have existed here in Kabul. Today, it is both a source and a symbol of Afghanistan's progress. The founding of AUAF represented a critical step in the effort to lead Afghanistan into an era of freedom and opportunity. That transition is a difficult one. But institutions like this one will play a central role in securing Afghanistan's future.

When Dr. Sharif Fayez founded AUAF, he dedicated the university not only to training leaders in business, technology, education, and social services, but also to providing an environment free from violence, corruption and ideology – an environment in which curiosity and creativity can thrive.

We can only hope that AUAF will serve as the model for many more such institutions. With nearly forty-five percent of Afghanistan's population under the age of fifteen, there is nothing more important to Afghanistan's future than the education of its young people.

Edward Everett, a nineteenth century American politician and president of one of America's great universities, once said: "Education is a better safeguard of liberty than a standing army." He had the luxury of speaking those words at a time of peace. His words may sound naïve to a nation that has faced so much violence and conflict. Much depends today on the capabilities of the Afghan National Army and Police, as those forces increasingly assume responsibility for Afghanistan's security. But the longer-term success of Afghanistan's democracy undoubtedly depends upon the preparation of the next generation of leaders.

You, the students of AUAF, know better than most the profound power of education. For many of you, your early education was an act of brave defiance. Many of your families or neighbors took great risks to ensure that you learned to read and write – that you learned math and history. Those bold efforts brought you to this place. And that education will allow you, when you graduate, to become leaders of your communities and of your country.

You here at AUAF also know another powerful truth: that no nation can truly flourish if one half of its population is deprived of the opportunity to learn and to lead. Approximately twenty percent of the student body at this university is women. And women play a vital role in the life of the school. I understand from some of my conversations today that women make up nearly thirty percent of the student government. That stands in stark contrast to the condition of women in many Afghan communities. And it stands in stark contrast to the vision held by the Taliban and other extremist groups that would return Afghanistan to a period of darkness and repression.

I believe that all of us here today share the same vision for Afghanistan as a stable, free and economically independent member of the community of nations – a nation in which every citizen has the chance to go to school, to get a job, and to make full use of his or her talents. The work being done here at AUAF is the surest sign I have seen that that vision can be realized.

Educating the next generation of Afghan leaders – doctors, business leaders, public servants, and teachers – is vital to securing the future. But, of course, it is not sufficient on its own. In addition to preparing you and others like you for leadership in Afghanistan, there is another, equally important and perhaps more challenging imperative: preparing Afghanistan for you.

First and foremost, that means making Afghanistan more secure. It means disrupting, dismantling and defeating al Qaeda, and seizing the initiative from those who espouse ideologies of hatred and repression. But it also means building Afghanistan's economic capacity and governing capacity. And it means combating corruption, so that capable, honest, public-minded people like you can succeed in effecting change.

In December, President Barack Obama outlined the United States' strategy here in Afghanistan. The strategy focuses both on security and on civilian engagement. We are increasing troop levels to improve security and to prepare for a responsible transition to the Afghan security forces. And we are reinforcing that military surge with a civilian increase – civilian experts and professionals who are working with Afghan partners to transfer skills in areas ranging from agriculture to revenue collection.

It is that emphasis on civilian partnership that brings me to Kabul. The work of the United States Treasury Department here in Afghanistan is not often in the spotlight. But it is significant. I'd like to talk about that work briefly this afternoon, because it illustrates the kind of civilian partnership to which President Obama is committed. And it touches on some of the most important challenges facing Afghanistan.

Treasury's role in Afghanistan started small. In February of 2002, one of the first civilian advisors from the U.S. arrived in Afghanistan. He was a member of our Office of Technical Assistance named Larry Seale. Working with the Afghan Interim Authority, Larry helped put together the country's first post-Taliban budget on his laptop computer.

Since those early days, the number of Treasury advisors has grown, and we expect to send additional personnel in the coming months. Working closely with the Ministry of Finance, Treasury technical advisors have helped streamline the budget process, improve the payment system for government employees, establish a Debt Management Unit within the Ministry of Finance, and restructure Afghanistan's debt.

Each of these achievements is important. And taken together, they represent significant progress toward our overarching goal: strengthening Afghanistan's systems of financial management so that Afghan authorities can collect, manage and spend Afghan resources on Afghan priorities – transparently and effectively.

In the United States, President Obama recently put forward his proposed federal budget for 2011. That proposal is being debated as we speak, not only in the halls of Congress but also in newspapers, community centers and kitchen tables across the country. In the United States, the budget serves as the catalyst for policymaking, for discussion and for compromise. It expresses our national priorities. It is an essential part of our democracy.

The national budget can and should play a similarly central role in the political life of Afghanistan. But to play that role, it must be the primary instrument of policy formation and implementation. And that means that the people of Afghanistan must have confidence in the integrity and the effectiveness of the budget process. Otherwise, the budget will simply be words on a page or numbers in a spreadsheet – not the powerful, democratic document it ought to be.

That is why the U.S. Treasury has made building and reforming the system of public financial management in Afghanistan a priority. There is much work still to do, but – again – there has been progress. The government has begun implementing a revenue action plan with measures aimed at limiting corruption. The Ministry of Finance has gained authority to audit specific ministry expenditures. And for its part, the United States and the international community have committed to channeling a greater proportion of foreign aid directly into the Afghan national budget.

That last point is important: today, the large majority of international financial assistance bypasses the Afghan budget and Afghan authorities. Afghanis miss out on the opportunity to shape the projects such funds support. The government of Afghanistan misses the opportunity to develop the capacity to administer such large-scale expenditures effectively.

Breaking from the practices of the past, funds pledged to the World Bank's Afghanistan Reconstruction Trust Fund flow through the Afghan budget, not around it. The disbursement of funds is, however, conditioned on continued reform. That incentive program has sparked an important dialogue between donors and the Afghan government as we work to agree to a common reform agenda, focused on accountability and transparency.

The work of promoting Afghanistan's fiscal independence will not be finished anytime soon. There are many people that have a vested interest in keeping the government's system of financial management weak and opaque. But I hope that, through our partnership, we can help lay the groundwork for more effective, transparent and trusted management of the public purse.

Let me now turn briefly to the second part of Treasury's mission here in Afghanistan: combating illicit financial activity and denying funds to terrorists.

A few weeks ago, the Taliban staged a brazen and bloody attack in the heart of Kabul. As you know, the Central Bank of Afghanistan, the nation's chief financial regulator, was one of several targets. That was not an accident. A strong Afghan Central Bank facilitates and promotes economic growth. A strong Central Bank enables the Afghan government, rather than the Taliban, to provide services to the Afghan people. And, crucially, a strong Central Banks can help disrupt the financial networks on which terrorists depend.

The Taliban understand all this. They know that money is every bit as important to their operations as weaponry, hopelessness, and extremist ideology. And they know that efforts to isolate them from their sources of financial support are every bit as threatening to their operations as military strikes.

Treasury is actively engaged in helping to build Afghanistan's capacity to combat illicit finance. Our technical advisor in the Central Bank's financial intelligence unit has helped to develop the systems and expertise the Central Bank needs to track financial transactions. He has worked closely with the Central Bank on their initiative to license hawalas. In the coming days, another advisor will arrive in Afghanistan to assist the Central Bank in its broader effort to regulate the Afghan financial sector.

In addition, along with other U.S. departments, Treasury helped establish the Afghan Threat Finance Cell in 2009. Working in close coordination with Afghan counterparts, the Threat Finance Cell uses a full range of tools to target terrorist financial networks in Afghanistan.

Finally, the Treasury Department and the United States Agency for International Development are working with Afghan partners to help bring mobile banking and payment card services to the Afghan people. While it will take some time to develop, mobile banking in the long run has the potential to facilitate the distribution of micro-finance loans in agricultural sector, a powerful tool for economic development. At the same time, expanding the reach of the formal financial sector can help displace cash transactions, making it harder for criminals and terrorists to move money undetected.

As the United States continues to ramp up both its military presence and its civilian assistance to Afghanistan, I am hopeful that the strong partnerships between Treasury officials and their Afghan counterparts will grow even stronger. Many challenges remain. There is much work left to do. But we must keep at it. Because you who have worked so hard to educate yourselves, to develop the skills and tools to lead, deserve to inherit a nation in which those skills can be put to use.

The many challenges aside, I am optimistic. And what makes me most optimistic of all is the fact that some of you may soon join us in our efforts. I spent some time this morning reading through the course offerings here at AUAF. The range and depth of the curriculum is impressive. And I was particularly impressed with the expansive offerings in finance, business, accounting, and management.

Those disciplines are desperately needed in Afghanistan. Just as the United States Military looks forward to the day when we can begin to effect a responsible transition of to Afghan forces, we at Treasury look forward to the day when our technical expertise is no longer needed. Your education at this institution will hasten that day.

This spring, those of you in the "senior class," the first undergraduates of the American University of Afghanistan, will receive your diplomas. You will be among the best-prepared and best-trained citizens of Afghanistan. You will join in the difficult but vital work of building a nation that is stable, united, and economically independent; a nation in which honest, transparent governance is the rule, not the exception; a nation in which the ballot box, not the Kalashnikov or the roadside bomb, is the ultimate source of authority.

Before I close, let me add one thing: I have spoken this afternoon primarily about the importance of strengthening Afghanistan's public sector. As someone who has spent the majority of my career in public service in the United States, I believe that there is no higher calling than public service. But service to your nation can come in many forms. And although Afghanistan needs skilled and honest men and women to fill the ranks of government, Afghanistan also desperately needs people like you in other spheres: in business, in medicine, even in the arts. So I encourage you to ask yourself, as you pursue your education here at AUAF, and as you prepare for life beyond these walls, how can your talents be best used? How can you best contribute to the life of your nation?

Thank you again for the privilege of talking with you this afternoon. It is an honor and an experience that I will never forget. I look forward, in the time remaining, to a discussion with you.

Thank you.