 Ladies and gentlemen, I know that there is a firm regulation in Washington that every meeting has to start 15 minutes late. But given the fact some people are standing, we may break that rule. I'm waiting on my colleague, Ryan, to give me the wave on when we're set up. So I guess we are now officially ready to begin. Let me just say that my colleague, Stephanie Sanook, and I have both been to Afghanistan on separate trips, and both of us have been there before. What I would like to do is simply take you very quickly through some key indicators that came out of both the command briefs I saw during the trip and some other data that help explain the progress in the war. And then let's Stephanie take you into some of the economic and development issues and then open things for questions. And first, let me begin with the fact that during the McChrystal exercise, we were asked two questions. One was, what is the mission? And the second is, can the mission succeed? The fact is, as you might expect, there was not great agreement on what the mission was. Some people saw it as an exercise in denying terrorist sanctuaries. Some people saw it as an exercise in building up in Afghanistan, which would be stable, and capable of operating on its own. Some people saw the primary problem in terms of the stability of Pakistan, which was seen both as a potential nation where there would be a terrorist threat and the problem of nuclear weapons. I think in broad terms, I would have defined the goal much more modestly. At the end of 2014, if that is the point where we see combat operations, do you have a reasonable level of stability in Pakistan? And do you have an Afghanistan which is stable enough to go forward with limited outside aid and military advice, with some confidence that the structure will hold together after you leave? The acid test is not what happens up to 2014. The question that really matters is what happens afterwards. And since we have now spent something like $1.4 trillion on Iraq and Afghanistan through FY 2012, and this war will end up costing close to $800 billion under the funding profiles we have, these are not casual questions, particularly because even if we leave Afghanistan, we're talking on something in the order of between $80 and $100 billion through FY 2014. And then depending on what the costs are, and none of us can predict it, a very substantial aid portion beyond that. Looking at the key questions, can you defeat the insurgency not only in tactical terms, but by eliminating its control and influence over the population? The original goal in the McChrystal exercise, which did not have a withdrawal time limit, was to have a surge of around $40,000 and to sustain it as long as necessary. We obviously are not going to do that. That doesn't mean the risk is unacceptable, but it does mean we have a radically different plan for US troop presence. The assumptions made about Allied forces also were that we would have a significantly higher Allied troop presence than now seems likely to exist. There are no magic troop to task ratios here. There's no way to say there's a magic number of forces you need, but the risks that we will now face are substantially higher than they were in formulating the strategy. It is also true that in terms of building up local governance and stability, we continue to fall substantially behind our goals in the South. We are certainly behind them in the East, and we are not able to create the structures in other parts of the country, which give us a clear picture of our ability to make the key districts we are focusing on stable over time. Again, this is not a conclusion that we can't succeed, but it is a conclusion that if you look at the reporting coming out of the embassy out of other assessments in ISAF, we are not as yet able to meet the goals we have set for the civilian side of stability, and this is a key indicator. We are not going to have the level of resources either from our allies or the United States that we had counted on. That's simply a fact. Will that be a critical problem? It may well be. The goals we set for 2012 at the start of this year are probably unachievable. That does not mean you cannot succeed by 2014. It does mean that you are, with the resources you have, probably going to take at least another campaign season to achieve the goals that you had wanted to achieve in 2012. Can you build up a much larger and more effective and enduring base in the Afghan national security forces? I think the answer for the Afghan national army is clearly yes. The answer for the Afghan national police is probably no, not within the foreseeable future. But the police is not the critical element. The army is. And again, the key question there more than anything else is to make this work, it requires a truly major effort after 2014. The figures and the work that's being done in theater do not show that we achieved these goals in 2014. They basically say that depending on how serious the threat is, the goals will require a really major presence through 2020 and possibly 2024. Are you building up the area of legitimacy and capacity in the Afghan government? To be perfectly honest, and I speak personally here, not for my colleague through the United States government, the assumption I had was that Karzai had already successfully rigged the presidential election and that we did not need to worry about a serious crisis over the presidential election. As is often the case with predictions by analysts, this one was clearly wrong. It was followed by a legislative election, which is still in crisis. And there also is the practical problem that no one has yet been able to figure out what the legislature would do if it actually was stable and in session. We have made some gains at the provincial level, but those gains are certainly far short of the broad reforms people wanted. We've made gains at the district level and the critical districts. And there I think there have been some useful reforms, but the rate is certainly substantially behind the goals set originally in formulating the strategy and substantially behind the goals that were set in late 2010. When we come down to the urban and local levels, the fact is that we simply do not have the people we need to meet the goals we would like to have met. But that doesn't again mean they can't be met over time. Do we have an effective and truly integrated operational civil and civil military plan? No. That planning effort effectively collapsed in the course of 2010. You have a military plan and a civilian set of concepts. Those concepts essentially had to be almost put aside this spring. The fact is that we will never have the aid resources to meet the goals of the Afghan National Compact or the Afghan National Development Plan. We are improving the unity between the US military and the US civil effort. I think that's been a significant improvement. But in talking to the UN and ISAF people, the truth is that coordination between the overall effort within ISAF and within the aid community, that basically is something we will not be able to achieve. The UN enama in the course of this war has never issued a report on the course of the aid effort in Afghanistan. And quite frankly, talking to the officials there, they realize they can't even put together a credible estimate of the size of the aid effort, much less its impact. And that is not the fault of the UN. It is the fact that many of the countries simply do not comply with reporting requirements, even the minimal requirements, under Afghan law. That does not mean these efforts are not, in many cases, productive. But I think it is probably true that when you see the estimates by the World Bank or Oxfam, groups that don't normally agree on much of anything, that in terms of the longer-term aid, something like 40% of it passes through without actually benefiting the country. It simply moves outside the country or directly through various institutions, and then to, shall we say, the UAE and other banking institutions. One major shift, one critical shift in a practical terms, which is a result of the initiatives of General Petraeus and others, is that for the first time, you are actually trying to institute an accounting system which would figure out how the contracting system works, which would effectively debar corrupt and ineffective contractors and provide for the first time some basic fiscal controls on the flow of military and aid expenditures. That will not, of course, affect NGOs, which will operate to their own peculiar system of accounting. But the reality is that we cannot direct or coordinate the aid effort. And talking to the UN people, they simply see this as a priority that is not practical. Just as, and this, I think, is the most critical element of what is happening here, we fail to realize the problems of what you would face in Afghan governance. The situation in Pakistan has deteriorated steadily over the course of the last year, not only in terms of our ability to coordinate with Pakistan, but there has been a steady rise in violence in other parts of Pakistan and a steady increase in instability. That is a critical problem because one of the key questions here is, if we can succeed in Afghanistan and we watch Pakistan continue to deteriorate, what is the value of the conflict? If we can't succeed in Afghanistan because we can't succeed in Pakistan, the question is even more serious. But trying to predict the future again, you can be as optimistic or dismal as you want. But the fact we have had accelerating problems for a year does not necessarily mean they can't be reversed. Now, having said that, let me just very briefly take you through some of the key factors. That incredibly complex strategy chart is General Petraeus's. It doesn't mean it isn't perfectly valid because it is complex. That is the number of factors you have to consider in making a successful transition and strategy work. And on the military level, we have made real progress in all of the other areas we have made some progress, but not the progress we had hoped to make at this point in time. In a lot of the areas, the question is can we reverse the insurgent momentum? The answer is at this point in time, particularly with the schedule for US withdrawal and with allied withdrawals of other types, it is uncertain. The concept of operations we had in May 2011 basically called for a structure in which we could secure most of the country's critical districts, which are shown in green or gray areas by the end of the 2012 campaign season. We cannot meet that schedule with high probability at this point in time. And that is a military schedule. It does not mean there is effective governance or that Afghan services, aid, and other activity will be present in those districts. We do not have the assets as yet to fill that in. And this is the goal we had for 2012 in March of this year with the current schedule for withdrawals. And with what we are seeing in terms of aid or governance, again, I cannot say we will fail. What I would say is it's pretty clear that for this to work, it will be 2013 at the earliest and not 2012. And that means we will not leave a country unless the Taliban simply collapses, where we have had the impact in terms of aid, improved governance, the time to help Afghanistan transition we had hoped for. The threat has been reduced. But as these charts from the command show, it remains. And all of this will be on the web. I realize it is not readable. But what is a key here? There is no one Taliban. There is no one group of insurgents. This chart actually simplifies the number of major factions. There are something like eight different Taliban groups operating in the greater Kandahar area alone. The difficulty with defeating them is we are having a major impact in attacking both the Taliban for strength and the leadership. But that doesn't mean you can somehow decapitate or weaken this structure. There is a basic difference in perception of risk between ISAF and the UN and the various outside NGO groups. This black area shows the NGO assessment of risk. It is much higher than the assessment by ISAF. And the problem we have here is we are often reducing risk at a tactical level, but we are not finding aid workers and aid efforts willing to move into the areas where we have improved security. And that is a critical part of the strategy. We do have a clear set of adaptive, very creative insurgent activities, moving into new areas, focusing on high visibility attacks. We understood from the start this was not a tactical conflict. It would ultimately be a conflict as a political war of attrition. We could either destroy their capability to exist within the time we had and the money we had, or they would win by outweighing us. And I would say this is an open-ended race. At this point in time, there is simply no way to make that judgment from the indicators we have to date. But we, as General Petraeus has been very careful to note, have in many ways halted their momentum on a national level, but we have not reversed it. And the gains we have to date are very correctly being defined as fragile. Estimates of attack vary, but the enemy attack trends and these data obviously do not get into the full campaign season have continued to increase. In other words, in spite of the damage we have done to the Taliban, we have not affected their ability to generate attacks as yet. And this is a critical measure of capability in terms of war fighting. We have all kinds of charts, and I will leave these to you. One key chart. In the areas we have liberated, which have been critical Taliban areas, where we can put people in, either aid workers or effective Afghan government, the reversal of behavior on the local population is remarkable. The reason we find so many of those Taliban caches, these are arms depots, munitions, and what have you, is essentially that the Afghans start reporting them. This is a very positive indicator, but it is an indicator driven by the ability to put troops into the area, keep troops in the area, and have enough time for Afghan capability to gradually develop in the field and take over. A 2014 withdrawal schedule is, to put it mildly, a race. It will be extraordinarily difficult to do this on anything like a national level. The regional trends are mixed, but they're favorable where we are able to operate, which has been very much driven by the south. There is a constant problem with perceptions of casualties. The casualty figures have not increased with the intensity of the war in terms of civilian casualties and the impact of the mistakes that are inevitable by ISAF and the United States. In terms of Afghan casualties has been very low, whether it is the UN or the US or outside, there's mentioning or measuring it. The difficulty is that the Afghan perception is not based on statistics or intelligence reporting, and there is a rising Afghan sensitivity to casualties and military activity. We do find in the areas again where we score gains that that sensitivity tends to disappear over time, but that is where we can provide lasting security and services. And right now we're at approximately between half and 60% of the districts that we would have liked to have had at this point in time in the fighting. Looking at special operations, obviously this isn't something I can get into on an unclassified level, but sometimes this is described as something that only affects a very narrow part of the country. If you look at the map, we really are hitting at the Taliban on a national level, and that ring you see simply represents where the people are. You do not put troops into empty mountains in territory that no one cares about. You've had major impacts in the South, the drone strikes have been often successful in Pakistan. But when you look at what has happened in Pakistan, there has not been one offensive that has served the purpose of helping us in Afghanistan. And this is not a matter of not having troops in critical areas. The fact is in some of the critical areas the Pakistani forces are present and simply do not act. And as you have seen over the last few weeks, actually months now, we have not moved forward and in fact, there is more tension on the border, more problems on both sides than there was three months ago. Centers of Gravity, again, these are all on the web. Progress in the South is real. Influence in the South is real. Village stability operations, the Afghan local police have scored very significant successes to show that where you can put the resources in, you have gains. The warning I would give you from Vietnam and from Iraq and elsewhere in eastern Afghanistan is, our schedules for holding those gains often are so accelerated that we really want to accomplish in half the time what is really necessary to hold that stability. That was a critical reason the programs failed in Vietnam. It has been a very major problem in Iraq and it affects Afghanistan as well. I mentioned the insurgency and how diverse it was in Kandahar. This is a map of the different movements but the other problem we have are power brokers, criminal networks. What some people still refer to in the commands in Afghanistan as malign influences. This war in many ways will be won or lost not by what we do or the Taliban does but by the failures of the Afghan government to move forward in ways that hold the loyalty of the people or win it. And when you look at where the Taliban expanded before we went in, it was almost universally a choice. It was not they were militarily strong, it was they were perceived as better than the Afghan officials and the level of governance that existed in the areas where they were successful. The east is a critical problem. We will withdraw troops at a schedule which makes shifting to the east and holding the south extremely difficult. This is a high risk tactical and strategic operation. On certain status of the ANSF, let me just remind you this is not a US war. The problem with the ANSF is it has to interact with a very wide variety of allied countries and it has to be successful by interacting with civilians in the Afghan government with provincial reconstruction teams that are allied as well as us. Some of you have worked in the field or worked in the aid area. And when I tell you there are some allied countries where the tour of duty for an aid worker in Afghanistan is as short as three months, it doesn't take a great deal of expertise to figure out just how wasteful and destructive that process can be. Are we going to improve that in any way? No. Is it going to get worse? Yes. Under the current withdrawal schedule, will we have to cut our number of PRTs very significantly by 2014? And will we be down to something like five locations in Afghanistan by the time we withdraw? Yes, that's the plan. Ability to fund the Afghan forces over time. Again, the figures are in the handout. We have no plan today. Because of the change in the withdrawal schedule, we simply have no idea what comes next on a formal level. The withdrawal schedule is not tied to a plan for Afghan force development. But the fact is, is the United States prepared to pick up between $7 and $9 billion a year and sustain an aid effort through 2020 that would take a very significant true presence I don't know? I have to compliment the people in the NATO training mission. I think they have done an amazing amount given the fact that in 2010, many of our training facilities didn't even have basic communications facilities for the Afghan troops. And some of the trainer to Afghan ratios were so bad, you had one trainer to 486 troops. That is just an amazing amount of progress over what existed before then. But can we make these numbers work? I really doubt it, particularly because at this point in time, we are simply not at those levels of capability. This is not a bad set of readiness figures for what we planned, but it is not something that brings you to readiness in 2014. And frankly, the problem with the Afghan police is, it does not measure corruption, ties to power brokers, or other problems within the police force. In other words, the Afghan readiness figures for the police are completely meaningless. They all they do is measure who's trained, whether they have the equipment and whether they have a place to operate from. If you are running narcotics or something like 40% of the border money is disappearing, these ratings aren't very helpful. Local police, let me just on the trainer level. I have been in the United States government for some time. I've left it for some time, but in my history in Washington, we have never before counted people who are pledged as being there. The difficulty you have is, that when you look at the number of critical trainers in the right, only the green trainers are there. And the number of trainers that are supposed to be there is the yellow, the white, and the green. These figures come from General Caldwell. They've gotten better, but we will be at least eight to 14 months behind the trainer levels we wanted to have this spring. The good news is the Afghans have taken over a lot of their own training effort. The bad news is this is a critical capability and meeting 2014 without these trainer figures is potentially a high risk. I'm going to let Stephanie take over most of the civil military side, but I can't resist. Some of you are aware that the Senate Foreign Relations Committee put out a report recently on aid to Afghanistan. I'm gonna be very blunt. I don't know what the hell they were doing in Afghanistan, but looking at the contents of it, they did not pick up the kind of reform taking place in contracting and they took for granted figures coming out of USAID, which are just absurd. You look at some of these claims, hey, gee, wow. We have less than 200 agricultural experts now in Afghanistan, and according to USAID, they provided hands-on aid in the last fiscal year to 633,000 Afghans. These people basically should be running the world if they can accomplish that. You have these education figures, which are being quoted again and again, and they're quoted in the Senate report, except when you actually look at the numbers, they come from the Afghan Ministry of Education. And what is amazing about it, quite aside from the real precision in knowing down to the last digit how many of them are women, what happens when you take that claim of students and then take the claim number of schools? The average Afghan school would have to have over 800 students, or these numbers are meaningless. Well, guess what? The numbers are meaningless. Yes, you can get away with saying, oh yeah, we just took the Afghan data, so there are a lot of countries in the world whose claims you can take for granted if you want to prove something, even if you know they're rubbish. Another figure down there that is particularly irritating is the one on health statistics. It's not quite clear whether this says that 84% of Afghans have access to healthcare because they're within a one-hour or a two-hour walk of the healthcare facility. But guess what? We just solved our national budget crisis. We can eliminate Medicare and Medicaid entirely because if we really measure it, that percentage of Americans are within that walking distance, not to mention driving distance of a healthcare facility. If you don't care whether anybody's at the facility or who can get in, and that's your idea of making a claim as a U.S. agency, be my guest. Development measures, this is a bit old, but it's a last unclassified figure. These are the critical districts and you will see that there are two areas in the country where we show a positive polling data for development indicators. And let me just close and shift to Stephanie with this figure in terms of aid. We have given up. We know we cannot fund the aid plan. We do not know what the aid plan will be. What we do know is the core structure of the Afghan budget is roughly one-fourteenth of the funds going into the Afghan government from aid and other organizations. And if you look at this World Bank figure, it is something on the order of one-hundredth of the total aid and military expenditure in Afghanistan, which is where those rising gross domestic product figures come from. This adds up to a potential crisis because this funding is already beginning to ramp down very, very sharply. And at this point, let me just turn it over to Stephanie. I'm actually gonna do this from down here if that's okay with folks. As Tony mentioned, my name is Stephanie Sannick. I'm with the Defense Industrial Initiatives Group here at CSIS, and because I know you all are here to speak to the giant to my left, I'll keep this short and sweet so we can get to the Q&A session. I mentioned that I'm with the Defense Industrial Initiatives Group, and a lot of times when people hear defense and industrial in the same sentence, much less beside each other, they think immediately of the Defense Industrial Complex. Well, at CSIS, we take a more expansive view of that definition, and we like to look at the complex relationship between the defense establishment and the industries that support it. So we're not just looking at U.S. industry, we're looking at Afghan industry. And earlier in June, there was a team of five of us who went to Afghanistan specifically to speak to local Afghan vendors to get their sense of where is their country going? Why did they start a business? Is it sustainable next year, in 2014, and beyond? And we found some interesting, we got some interesting insights from the folks on the ground there, U.S. officials and Afghan vendors. But first, I just wanna set the stage a little bit. The concept behind a lot of what the U.S. government is doing in Afghanistan is to claim that governance, rule of law, economic development can help to address the root causes of instability, give somebody a job, give them access to justice, essential services, give them a job. You can basically improve their quality of life, get them off of the street, less likely to contribute to the insurgency. But not a lot of research has been done into does that actually happen? Are U.S. government efforts and coalition efforts to improve the local business life of the Afghan people resulting in exactly that? Less instability, greater stability, and sort of a hope for the future? It seems intuitively obvious, but again, not a lot of research has gone into this. So our team is examining this issue, but we were on the ground, not up in the relatively peaceful north, but we were in Kabul, Kandahar, and Helmand, again speaking to local vendors as well as U.S. officials. And I just want to give you a snapshot of what has happened to the Afghan economy in the last 10 years. Per capita GDP has doubled since 2002. According to the World Bank, it's lifted about five million people out of abject poverty, I guess into relatively acceptable poverty, but that's a figure that the World Bank stands behind. Government revenue has grown to $1.7 billion with a 400% increase in customs revenue since 2006 alone. And I apologize in advance, but I'm gonna throw a lot of numbers at you. I don't have slides, which may be a good thing or a bad thing depending on your view of PowerPoint, but I'm just gonna throw numbers at you and we can talk about their validity if you want during the Q&A session. Economic growth, since 2002, it's seen an average of about 12% per year. And a lot of attention has been paid to agriculture, not just poppy crops and opium production, but as the fundamental backbone of the Afghan economy. And it is true that the ag sector plays a critical role in Afghanistan's GDP. In constant $2,009, the agriculture, hunting, forestry, and fishing sector in 2002 was worth about $2.6 billion. The second most prevalent sector manufacturing was only 900 million. So you can see 900 million versus 2.6 billion in 2002, the role agriculture played in Afghanistan. By 2009, economic output had tripled since the start of the decade. Most of that was due to growth in the non-agricultural sectors, 60% of that. So just for parody, we'll tell you, by 2009, ag had almost doubled to $4.5 billion, but manufacturing more than doubled to $2 billion. Wholesale, retail, restaurants, and hotels, probably host to a lot of coalition folks, also more than doubled. And construction went from 300 million in 2002 to 1.1 billion in 2009. Interestingly enough, the greatest annual growth rate in this period was between 2008 and 2009. According to the World Bank, the Afghan economy grew 22% in that year. This is perhaps driven by the growing U.S. government emphasis on manufacturing and retail trade, which grew 46% respectively, 86% in wholesale trade. This is hopeful for a lot of development experts, maybe not Tony, but a lot of development experts has have hope because manufacturing is often the basis of developing economies, and so growth in that sector is closely watched. Taking a step back and thinking strategically, how do we use this information? How does Afghanistan fit within the broader region? What's its comparative advantage? What sector should we, as a coalition, more specifically as a U.S. government, be pushing to help them create something that's sustainable beyond 2012, 2014, and into the out years? How can we help them compete? We hear a lot about construction, and we hear a lot about mining, and I'm gonna wrap up pretty quickly, but I just wanted to say, construction seems to be the sector of the past. And I say that because the years of greatest growth in construction in Afghanistan, not surprisingly, it was between 2002 and 2006. A lot of it was construction related to coalition presence. In that timeframe, their annual growth rate in construction was 36%, and that has slowed down dramatically. Why is that? Well, if you talk to the Afghan vendors, they can do anything you want. They all started out, it appears to me, all of them, as construction companies, delivering gravel, trying to learn what is U.S. standard, trying to figure out what Afghan good enough is in terms of construction, but then they liked U.S. government contracts, and so they started to offer supplies and services. Travel agencies started talking about creating pomegranate farms. Instead of just supplying logistics of getting things to and from, they wanted to own what was on the plane. This is not surprising, but it does lead to a lack of specialization which could not perhaps be sustainable over time. Mining received a lot of attention in the last year because of the discovery of resources below Afghanistan's surface, and also understanding which countries were buying up those particular fields. And in the last year or so, mining has grown 63%. That's not surprising, whether it's sustainable is the question, whether they have the basic essential services in those areas, electricity, water in particular for mining leads, means we're gonna see growth in mining, but I don't think we'll see the full impact economically of that until five to seven years from now. That is a backdrop. I'm gonna echo Tony's wariness about looking at the, I won't say that they're crazy, but they're his wariness at the Senate Foreign Relations Committee, Majority Staff Report. They took two years to do that report. It has a lot of goodness in it, but I would like to take that report in the context of who is doing what in Afghanistan. And I think it's important to note who has the money in Afghanistan, and it's not USAID. It is the US military and their withdrawing. And so the long-term implications of that leads one immediately to assume that there will be some sort of recession in the Afghan economy. How big that is remains to be seen and that is dependent on the pace of the withdrawal and is it just troops or how much money will be taken out of Afghanistan as well. At the end of the day for a sustainable economy, you have to talk about Afghan capability. You have to talk about Afghan institutions. Governance is a key role in that, but we need to transfer things to Afghan control, but only when the Afghan government can take control. All too often we transfer responsibility too soon, and then we look at it in surprise when it fails. So I think having a strategy for transition is a really good thing for the US government to be thinking about right now. Part of that is to put a lot of our development assistance on budget. That means give the Afghan ministries money and help them execute budgets, help them figure out how to encourage their own economy and other areas, but doing things off budget just giving money to people who are gonna either take it to UAE or otherwise funnel it outside of Afghanistan is not a sustainable strategy. I'll just wrap up by saying one of the things that we talk about is what do you need first, chicken and egg, what do you need first, stability from a security standpoint or stability from an economic standpoint? They are mutually reinforcing. You need a bare minimum of stability security-wise in order for business to flourish, but they do feed on each other and I don't think we quite understand that relationship as well as we should. And with that, I think Tony and I should open it up for questions and anybody wanna be the first one? The gentleman in back, but let me first say a couple of caveats. You can see how many people there are in the room. We would, so please make it a question and a short one and please do identify yourself so we know who's asking the question. Hi, my name is Jim Pierce. It's hard to be optimistic about meeting the definition of winning that we were giving and this gives rise to two related questions. Number one, to what extent is that definition of winning shared by the administration and Congress? And number two, will that definition change as we get to 2014? Well, the definition of winning is, I think, what is today called Afghan Right and it is in the campaign plan and it's fairly clear. It is to create an Afghanistan you can leave that is not a sanctuary for terrorism, where you have a force that can basically maintain security and where the Afghans have the opportunity to develop. Now, all of that is outlined in the handout or the, which shows you where you can go to the web to see what is actually in the campaign plan. Yunama doesn't have, at this point, a set of aid goals. On paper, the Afghan National Compact and Development Plan would create a totally different Afghanistan. When you ask what the administration's goal is, the president's speech pretty well defines Afghanistan in terms of victory without mentioning Pakistan and it's fairly close to the definition that I gave you in the campaign plan. The difficulty, the risks of getting it are not insuperable, but they are high and a lot of it does depend on us. Aid will peak USAID effort at around $6 billion in fiscal 10. It'll probably be somewhere about round two point, something billion in FY 13 and then I have no idea what will happen. But, Stephanie is absolutely right. If you look at the figures, the total aid effort we've had in Afghanistan so far has been under $30 billion through FY 2012. The military expenditures have been roughly $525 billion. That basically has driven an awful lot of the figures Stephanie quoted. If you look at the rise in GDP and a lot of these sectors it is directly proportionate to the increase in US spending and it's directly in proportion to the US military spending, particularly because we've shifted to more reliance on Afghan services where previously we were relying far more on foreign contractors, food and so on. Yes. Thank you, sir. George Knuckles from Stratt Corp. Last week I attended the hearings on Capitol Hill for the new commander in Afghanistan, General Allen, also for Admiral McRaven. And one of the key questions that kept on both sides of the aisle is what about Pakistan? When are we gonna hold them accountable? In terms of what your look at the future, at what point is Congress gonna reach the point and say we're gonna have to cut off that support? I think quite simply if you look at the alternative transit routes, one can cut off one's nose despite one's face but it doesn't necessarily improve the appearance and that would be true of war fighting as well. Do we have any indicators at this point in time that Pakistan is responding to the pressure and initiatives we have put on it? The answer is no, not yet. Is it an impossible situation? No, it isn't impossible. And I do think as Americans we need to realize two things. First, Pakistan's goals are not identical with ours. They are to expand its influence and secure itself in the region. There is no reason they should have the same internal priorities. Their internal security threats are substantially higher to them from groups that are not associated with the Hecani or Afghan Taliban and that is a natural area of focus even if they ignore India. So this is a very delicate, uncertain relationship. It is not something that's going to be solved by the United States being in a position to take stands that it can't necessarily enforce without effectively defeating itself. We'll reach the best compromise you can and will that compromise be effective? I don't know. One of the key arguments in fact for staying in Afghanistan is it will help us stabilize Pakistan but when you ask somebody to explain how that will take place, there is sort of no sequel. You basically are asserting it without explaining how it could function. And these are realities. We're going to live with it as we are going to live with the fact that Stephanie mentioned the risk that all of this will impact on the economy precisely at the time we're pulling troops. We see Karzai in theory unable to run again in the same year we are withdrawing our combat presence and we will see this aid crisis and we may have a Pakistan crisis but then we may not. Let's see. Let me get to the, yes, go ahead. Thank you so much, Anthony. My name is Mohammad and I'm an intern at the Embassy of Pakistan. I just had a question. In the recent weeks, President Karzai has accused the Pakistani army for firing rockets into Afghan territory. A lot of people have pointed fingers at the US for this issue. Many have also said that the US is trying to adapt the British strategy of divide and conquer in the Afghan tribal areas and Pakistan tribal areas. What are your views and comments on this? Thank you. Well, a lot of people in Pakistan may have that view but there are, I think, some fairly concrete indicators. Exactly why Pakistan fired a number of those rockets into Afghanistan is not clear. But what is clear is neither country has security in the border areas. And you have seen Afghan insurgents move into Pakistan. As you have seen, Pakistan have reason on occasion to deal with an Afghan threat in Afghanistan. But the idea that we somehow see this as a desirable goal, divide and conquer or simply divide and make things worse for ourselves. It frankly is a question where you have to ask yourself what conceivable benefit to the United States would you get out of making things even worse on the Afghan-Pakistani border? And are we really that clumsy and stupid? And the answer is no. I love conspiracy theories. I try to think up a new one every day. But I also try to keep them mildly credible. Yes, sorry. Pakistan years ago with the Peace Corps and go back periodically. How do you respond to the following comment? That the drone strikes in Pakistan and do more harm than good in the sense that they're a case of the measurable, killing Mr. Bad Guy, trumping the unmeasurable, the circle of anger of the people killed or injured who weren't necessarily the target in that tribal culture. Of course, you kill or injure my uncle, I have to die, I have to try to kill you. It's part of the culture, obviously. And we don't measure how to measure that. So I'm worried that this equality is not very, very good in our favor. So first, the fact is this is war and war tends to be violent. That is one of its many defects. The second thing is if you actually look at the pattern of drone strikes, a very significant number of them have been targeted by the Pakistani government on Pakistani targets. So when you look at the impact of this, remember that something on the order of 35 to 40% are being targeted or were being targeted by the Pakistani government on targets which weren't relevant to the R war in Afghanistan. And that was, well, let me also go on. When we talk about being blamed for the deaths, you have to look very carefully at public opinion polls. You have a very systematic increase in negative polling. It is not tied to those casualty figures. Nor is there any real indication that you have significant civilian casualties. Remember what these drones are delivering. They are actually very small weapons which are precision guided, usually after a very extensive surveillance of the target. Whatever happens, they're simply not powerful enough or frequent enough to produce anything like significant civilian casualties. Now that doesn't necessarily produce anything like a realistic impression when you have a press that is going to take any American action and look at it as negatively as possible. But the fact is, are you going to have no options for dealing with the sanctuaries? Are you really going to let these networks simply stay and grow without any loss of security, particularly when you have been precise enough to hit at many of the core leader structures and that is recognized by the movements themselves? So the alternative is basically this means which probably produces less collateral damage than any other use of force in terms of the casualties involved I can think of or nothing. And I don't think nothing is going to be a practical option. Not if we have any interest in either winning this war in Afghanistan or getting rid of the insurgent sanctuaries in Pakistan. Hello, I don't know when the last time was that you were both in Afghanistan but following the June 29th through 30th Transition Conference in Kabul there has been significant progress made by both the Afghan government, ISAF and NATO on developing an economic transition plan forward particularly provincial budgetary plans and an economic strategy to soften the blow of the war economy or the decline of the war economy. What are your thoughts on the progress that has been made thus far? I'd like to see that plan published and actually related not to the input flow of money but to the goals people are actually trying to achieve with some level of credible actual reporting because to be blunt, when I watched a lot of this develop what I saw were a lot of noble conceptual power points with statistics where the source of them was at best the government based on a guesstimate. Stephanie mentioned some of the figures but you look at some of these numbers and you can get very positive indicators. You also look at some of the figures I've seen from Yanama and the embassy and what they show is a very serious recession building up that's going to occur precisely at the point because of the collapse of aid funding that we're pulling the troops out. I see figures being generated by groups like the World Bank that show with the past amount of money we had something like a 54% peak execution rate in terms of the Afghan government or the amount of money that was put in to the Afghan ministries. And while some of the central ministries are increasing the expenditure rate what I do not see is any indication that they're improving their audit capabilities or in any sense their ability to figure out where the money's going and what it is doing as distinguished from making claims. I see plans that ignore the size of the World Food Program and either the World Food Program is lying about having to feed something like 30% of the Afghan population at some point in the year or writing a plan that ignores all of these numbers is an exercise in paperwork. So to be blunt, before I, until we see some transparency and accountability what I saw when I was out there which is now three months, I don't know about Stephanie, does not impress me one bit. I've seen eight years of exercises of this kind and they have certainly done a great deal to benefit the organization's writing. If I could just add a couple of points to what Tony's just said. I too would like to see something published but what I would like to see published and up for public discourse is what outcomes are we aiming for? We hear so much about inputs and expenditures and outputs really. What are the outcomes? What are we really aiming for? And that's sort of where I differ or I'm less hopeful about those kinds of plans. It's only been a couple of weeks since that conference and so it remains to be seen. How much authority are the provincial and regional governments going to be given? They don't get a budget so much. It's all run out of cobble. And so from my perspective, the two things that I would be talking are what are the metrics and are they measuring outcomes or just simply expenditures? Which to me is interesting but not particularly useful. And the other part is from a budget execution standpoint, what role are the local and provincial regional governments playing because they should be playing a stronger role for sustainability purposes because not everything should be coming out of cobble. And so with that, wrap that one up. Hi, my name is Nakib Ahmad and I'm a student from Afghanistan. My question is, Stephanie, you talked about the possible crisis in Afghan economy after the drawdown. Is there any plan from the United States to invest in the mining industry of Afghanistan which can sustain Afghan economy after the 2014? And my second question is, what are some indicators the U.S. use to measure Pakistan progress against the Afghan insurgents in the Ursoil? Thank you. Answer the first if you want to tackle the second. I'll give you some time to think about it. In answer to the first question, to my knowledge, the U.S. government is spending a lot of time with the Ministry of Mines to develop capacity within that ministry to, it's gonna sound really boring and bureaucratic, but first things first, you need licensing, you need the bureaucracy of the mining sector to exist. And so you have a very vibrant and intelligent Minister of Mines who is very open to advice and assistance from the U.S. and others, to be honest, within the coalition to establish how can the Afghan government wrap its head around the resources it will have at its disposal once the mines come online. From a U.S. government investment perspective, I think the idea is to encourage private investment as much as possible within the mining sector from a sustainability standpoint. Again, we want to get away from, I don't want to say dependency, although that's what it is right now, but in the future, an overreliance on government and donor funding to prop up the economy, there will be, I think, a recession in Afghanistan when the withdrawal occurs. Again, it's the extent to which that recession is really painful. Mining is part of the Afghan economy going forward. Hopefully it will be a substantial part, but again, you have to get the bureaucracy in place so that the government can wrap its head around it and then move on to private investment. Tony, you want to talk about the second question? Oh, I think there are two things. First, just looking at the figures on the Ministry of Mines, the budget has never been designed for the ministry to actually invest or execute mining programs, so that's not a function of the Ministry of Mines and to reshape it at this point. There simply is no capacity that you could create between now in 2014. And also be aware that a successful revenue structure for a mine takes anywhere from five to seven years. It also is not a labor-intensive activity. You can tax the mines, you can get revenue from the profits off the mines, but mines do not in general hire large numbers of people today. They're machine and capital-intensive structures and they require infrastructure, which often is even more of a lead time because it has to be safe and built than creating the mines. So be very careful about what sometimes called the breadbasket fallacy. Virtually every country in the world that's in serious trouble has the potential to be a wealthy nation. The problem is we've had about six to eight examples since 1945 of countries which actually executed successful development and the talking, excluding oil exporters. And that's a warning. In terms of measures of capability, here is a handout. It shows that we have a whole group of sets of capability. One of them is the frequency and presence of Taliban or insurgent attacks. Another is overall levels of violence because once you get rid of the Taliban, they may go to night levers, kidnapping, extortion and other methods. You have basically measures which are very simple. Are the markets active? Are the roads secure? Are you able to move crops? That's one simple measure. Another is first, you have actual Afghan police or local police presence. Second, how are they raided? Are they beginning to be effective? Have you gone from counterinsurgency to some kind of effective security? Which is usually the highest priority in an area which is in transition. You have the question, do you have a effective local government which may have nothing to do with the district or provincial government? Then you have the question, is the district government actually present and can it actually operate? Very often in the past you've had district governments but their area of influence was the building in their security guards. We are using different metrics. As you move along, you get into the question of, do you begin to see significant economic activity? Are their schools actually present? The difficulty with this is those measures exist but we're only actually able to put them into practice in about half the areas we wanted to have them in practice in operation with now. And the fact is that some things like what USAID had as its district stability model basically proved to be a failure so it's being completely restructured now by the US team in Afghanistan to find better measures. This is a very experimental structure and one of the keys has been more and more to figure out what is it that the local people want? How do you figure out what they really want? How do you cut across various family, tribal, ethnic and other divisions so that you force them to coordinate and measure things collectively rather than almost arbitrarily find an elite and figure out what the elite wants and thinks? And trying to get this done when you begin in one of the worst areas like Helmand and then move it around the country, when you really only have the US operating in about 35% of Afghanistan and the other PRTs and ISAF countries are not willing as yet to coordinate on any of this is not all that easy. Yes, this gentleman. My name is William Scheimer, I'm with the Henry Stimson Center and my question is, what role will the Taliban play in the Afghan government after 2014? Well, it's a very good question and if you could answer it, you would probably be immediately promoted to a high position. Look, the fact is that we have only very low level talks in terms of success and content, not necessarily in terms of contacts with the Taliban as yet. There is no clear indication at this point in time that significant numbers of the Taliban are willing to negotiate. They may be a lot more willing after this campaign season. They may be more willing after the campaign season after that or they may see the fact we're leaving in 2014 as a reason to simply try to ride it out. The official doctrine is that they're not willing to negotiate at all. Now, historically, when you deal with a group you've never negotiated with speculating on what it's going to do hasn't worked out too well for anyone. I can think of one successful case where you actually brought the rebels into an effective power structure since 1945. That was the Dofar Rebellion in Oman. And you actually very quickly found that even though it seemed to be an extreme Marxist group, you had ministers under the Sultan, none of which was expected even two years before all of this took place. You also have examples like Nepal or Cambodia or many others, including Pakistan and previous British negotiations in the South, where basically the negotiation simply ended up handing the area over to the Taliban or to Islamist extremist groups because they were better able to manipulate the system than the local government. And that's about the limit of my capability in prophecy, but I guess as a rough rule of thumb, you don't usually concede when you're winning and we haven't as yet firmly convinced them that they're decisively losing, particularly because remember that issue of the war of attrition. All they have to do in many ways is outlast us effectively. I can't believe we've achieved a total consensus, but yeah. You're that persuasive. Ladies and gentlemen. There's no way out. Hi, Matthew Patterson's my name. I'm wondering, going forward, how does our experience in Afghanistan inform us regarding the risks and rewards of future nation building versus surgical strikes and counter-terrorism operations? Well, the problem in practice is you need to look at the funding profiles of what happened in Afghanistan. First, you didn't fund nation building. We'll leave without having funded nation building. Remember the ratio of aid to military operations. Second, when you talk about surgical strikes, it's an interesting idea, but remember most drone strikes occur inside Pakistan and the exact targeting methods perhaps do not always rely totally on high technology. When it comes down to focused special forces raids, which have been a dominant way of fighting in Afghanistan, not the use of drones, special forces operate in the context of the overall structure of U.S. forces. They're not out there operating on their own, particularly they're not on their own without relation to human. There are individual teams which operate with considerable independence, but it's in the context of an overall campaign structure. It's not something where simply you have a bunch of people parachuting in and sort of using a magic carpet to get out. These are people fighting in the context of over 100,000 troops. And this is not a casual issue because I notice we keep having people talk about, well, we don't need a counterinsurgency strategy. What we need is simply a focused counterterrorism strategy. Fine, tell me how you're gonna base them. Who's going to tolerate having them in the country? How are they going to get the structure of human intelligence they need? And if all they're doing is targeting the supposed terrorists or insurgents and they've become the government because you can't hold the country together, exactly how does this amount to victory? So I think that you've asked a very relevant question, but it's one that a lot of people who prose this counterterrorism versus coined exercise need to get far more realistic about. It's a little like if we stay in Afghanistan, we can bring stability to Pakistan. Fine, show me how. And I think what you've asked is a critical issue because so many people are basically simply saying that this is a way to get our costs and our troops down, but they can't explain how it works. If I could just add one thing to that, I think there has been a conflation within the national discussion between counterinsurgency and nation-building. Everyone's been saying to my knowledge, we've been undertaking nation-building. No, we haven't. As Tony said, if we've been undertaking nation-building, there would be a much more parity or definitely a different balance between military spending and aid spending if we were truly nation-building. But what does counterinsurgency mean? And I think people start to assume counterinsurgency if you're winning the hearts and minds of people, clearly you're building their nation. That doesn't necessarily follow. And so I think Tony has it exactly right. The conversation that needs to happen is what's counterinsurgency? What's counterterrorism? Nation-building is something different. And that's a conversation that I don't think we've been having, and it's something we need to have. I think, again, if you look at the material and the handouts, you'll see in there the World Bank figures, you'll see a lot of data on the actual scale of the aid effort. I know politically that people have said we're not involved in nation-building. Well, somebody earlier mentioned the transition plan, such as it is. Interestingly enough, the transition slide has transition, has nation-building in it, and it has nation-building through 2024. The problem is there really isn't any money. And you are looking at a place where we already have absolutely critical problems simply in getting the central government to execute. I was looking at the figures from the World Bank, and they're now a year old, but it actually went down in execution capability last year and the figure, the ratio of execution to budget overall for the Afghan ministries with 34%. That doesn't mean the money doesn't get spent occasionally, but you grossly oversaturated a very weak state in which we never had enough aid workers or other people to build up its governance and execution capability and where largely due to our mistakes, much of the Afghan civil service disappeared in 2002 and became translators, drivers, and people who were in the contract community. That model is not the model I think we want to follow. Yes, we'll let you in the front. Hi, my name is Maria and I'm a student at Montreal Institute of International Studies. I have two questions I would like to ask you as since the number of suicide missions are increasing in Afghanistan, and it has been a big obstacle for development in this country and reaching in digits. Most of these suicide mission has come from federal region in border with Afghanistan, and I would like to have your comment on that. My second question is that how does the US measure Pakistan's progress in acting against insurgents and what pressures can US put on them? Thanks. Maybe I didn't understand. Could you repeat the first question because I'm not. Frankly, okay, now I understand. We've seen this pattern very consistently in many places. The nice thing about suicide missions is they're very cheap. They don't really have to be targeted to achieve a major political effect. All you have to do is kill large numbers of people in the general vicinity of a government facility. If you can get inside the facility, even if it's three, four people you've scored and you've got all kinds of worldwide media attention. And this is what we're seeing in Iraq. When you begin to defeat an insurgency in terms of influence and presence, it's very easy to shift to this kind of high visibility attack profile and extremely difficult to guard against some of these taking place. Looking at the figures in Iraq, basically the numbers of suicide attacks have not diminished over the last three years. And that's simply a fact of life. You may eventually get to those levels of security, but they're not going to go away quickly. The second question was. Pressures on Pakistan. Pressures on Pakistan, we've tried incentives in the term form of aid. I think Admiral Mullen will have retired as the leading visitor to Afghanistan, trying to improve our dialogue. We have tried to work with the ISI. We have tried to target the elements in the ISI that are negative. We brought in people to help train the Pakistanis in counterinsurgency. We've offered major amounts of military aid to help focus them. But this is effectively a relationship with a country which first has massive internal security problems that have nothing to do with the Afghan war and is focused on. It is a country which has massive economic problems, very serious demographic pressures, which has led its education system through gross underinvestment come under the hands or influence of extremist elements through much of the country. It has a military which I think is now very clearly from recent reporting, suffering from serious problems, not only with corruption, but atlamist elements. And you have very significant numbers of very patriotic Pakistanis who believe that Pakistan's interests require them to use Afghanistan as a buffer because of Indian presence, that India still is a major threat. And I think our ability to influence Pakistan is extremely uncertain. This is a relationship which is difficult at best to put it mildly. Well, ladies and gentlemen, thank you very much. Again, let me just summarize that or state. This type of data, a lot of these numbers we've quoted are available in a summary form on the net already. If you have specific questions about military effectiveness, the situation in Pakistan, how the aid system is working as assessed, what our goals are. These are all outlined using data that we brought back from Afghanistan or through US sources in general or the World Bank and that's available on the web. And I'd really strongly encourage people to look at it because we've had far too many concepts and perhaps far too few facts. And again, thanks very much for coming.