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This paper aims to address the gap in critical analysis of the state-building agenda from a governance and aid policy perspective and highlights potential problems with both the theoretical and practical application of state-building in a development context.

This paper aims to address the gap in critical analysis of the state-building agenda from a governance and aid policy perspective and highlights potential problems with both the theoretical and practical application of state-building in a development context. It is argued here that there are inconsistencies and contradictions between the state-building agenda and the good governance agenda that have not be adequately explored or reconciled. In particular, the paper explores these tensions using the example of the Performance- Based Governors‟ Fund (PBGF) in Afghanistan, where some donors are looking to build integrity in local government in a very difficult environment, despite having to compete against the Taliban, the drugs trade and even their own governme nts‟ „bags of gold‟, in order to encourage „warlord‟ governors to run their administrative offices with integrity. The Afghanistan case shows how tensions between state-building and good governance are actually built in at the level of theory as well as practice, because the donor literature on state-building – including work by the UK‟s Department for International Development (DFID), one of the funders of the PBGF – often draws on literature from the modernisation school of political development in the 1960s. This same literature often displayed a much greater ambiguity towards corruption than current donor approaches to corruption typically allow. Certainly insofar as good governance can be described as a development paradigm, state-building – as currently articulated – is in many ways closer to modernisation theory than it is to the more „technocratic‟ good governance discourse. As such, the paper also contributes to a growing discussion within academic circles about the theoretical underpinnings of state-building from a development perspective.