Analysis: Why can't Afghanistan tackle corruption?

Afghan President Hamid Karzai speaks during a meeting with Senator John Kerry at the Presidential Palace in Kabul August 20, 2010.

KABUL (Reuters) - Afghan President Hamid Karzai might talk tough about dealing with endemic corruption that has weakened his country for so long, but tangible results have been hard to find.

Words, unlike votes, are cheap in Afghanistan, it seems.

In the past three months alone there have been accusations of interference in the work of Afghanistan's major crime taskforce and corruption watchdog, senior officials on the payroll of the U.S. Central Intelligence Agency and graft on a huge scale at the country's top private bank.

"It is a government similar to a corporation, where people are after making themselves rich," said Waheed Mozhdah, a veteran Afghan political analyst.

Corruption costs Afghans $2.5 billion a year, the United Nations has estimated, with European lawmakers also saying graft stops billions of aid dollars from reaching ordinary Afghans.

Mozhdah told Reuters a big part of the problem is that Karzai, consummate politician that he is, has no real power base.

That means the man who won last year's presidential vote must tread carefully for fear of alienating the political, ethnic and even tribal powerbrokers whose loyalty keeps him in office, effectively painting himself into a corner.

One of the biggest concerns from last year's presidential vote -- won by Karzai despite having a third of his votes thrown out as fake -- is the number of electoral promises he was forced to make to keep some of his more colorful backers happy.

Rights groups, for example, have criticized Karzai's decision to appoint former militia chief General Abdul Rashid Dostum as his chief of staff. Dostum, an ethnic Uzbek and former communist general, helped swing last year's election Karzai's way, returning from exile days before the vote to rally support.

Dostum has denied accusations of human rights abuses, which include questions over how 2,000 Taliban fighters suffocated to death in cargo containers after they surrendered to him.

ONLY SOMALIA IS MORE CORRUPT

Observers and analysts like Mozhdah fear the same pattern has emerged this year. Even though he is not running in this month's parliamentary elections, Karzai must keep as many people as possible happy, or risk facing a hostile legislature that could block policies and cabinet appointments.

It is little wonder that Afghanistan ranked 179th out of 180 on Transparency International's 2009 list of the world's most corrupt countries, ahead of only Somalia. Corruption and cronyism are among the most common complaints of ordinary Afghans.

Washington fears widespread graft is boosting the Taliban-led insurgency and complicating efforts to strengthen central government control so U.S. and other foreign troops can begin withdrawing from July 2011.

Karzai promised that fighting graft would be his top priority when he was sworn in for a second five-year term, echoing demands from U.S. counterpart Barack Obama, but frustration is growing 10 months after Karzai took his oath.

It didn't help when Karzai was seen to intervene and order the release of Mohammed Zia Salehi, a senior National Security Council official arrested in July as part of a corruption investigation. U.S. media later reported Salehi was on the CIA's payroll, which Karzai denies.

ALL IN THE FAMILY

Another big problem for the president is his family, typified by the crisis at the Kabulbank, Afghanistan's largest private financial institution. The crisis was sparked by unproven media allegations that the bank's top two directors had been forced to resign and the chairman ordered to hand over $160 million worth of luxury villas bought with bank funds in Dubai.

The central bank has denied it has taken over Kabulbank and assured depositors their money is safe, but the crisis turned violent on Wednesday when angry customers were beaten by security forces as they scrambled to withdraw savings.

Karzai's family is at the center of the scandal. His brother, Mahmoud Karzai, is a major shareholder at the bank. Mohammad Haseen, the brother of First Vice President Mohammad Qasim Fahim, is among major shareholders who have had assets frozen.

Some Afghans blame Karzai for the bank's troubles.

"If you can run the government properly, do so. If not, just resign, go away," one angry customer named Rahim said outside a Kabulbank branch.

And then there is Karzai's half brother, Ahmad Wali Karzai, a leader in Kandahar province, the birthplace of the Taliban and one of the centers of Afghanistan's illegal opium trade. He has been accused of amassing a fortune from drugs, intimidating rivals and of having links with the CIA, charges he denies.

Karzai says he is trying to tackle corruption, that most of the graft is in big contracts awarded by foreign firms and that the issue has been blown out of proportion by the Western media.

Mohammad Yasin Usmani, chief of his graft watchdog, says 400 members of the judiciary have been purged under new reforms.

"One only has to pay a visit to the prisons to find out what has happened with regard to the campaign," Usmani said.

Karzai alone can't be blamed for allowing corruption. Commanders in the NATO-led force of almost 150,000 troops admit they have also made mistakes.

"I think inadvertently we have sometimes been photographed shaking hands in places with people who the local community probably don't have as much respect for," said Lieutenant General Nick Parker, deputy commander of the NATO-led force.

(Editing by Paul Tait)