The Reality of US Aid to Pakistan

[Aamir Hussain]

Well i know first hand that most officers with integrity had strong dislike for Zia...

The damage Zia did to Army and Pakistan is tremendous.

The ideology of Pakistan was hijacked and our culture was tied to just that of the Arabs, we were made to feel a nation which had to borrow its history from others...we are Muslims but we have a separate heritage as well, that of one of the most ancient civilizations of the world...all this was jeopardized by Zia and his cosmetic Islam...

Our Army was politicized and promotions were based on Yes Sir basis, many good officers were not promoted...

We imported the extremists from all around the world without a care for our future and that of our children...the Jihadi culture we see was not just a result of US led Afghan Jihad but also our own stupidity and ignorance in not ensuring a roll back of the Jihadi networks...a wolf on an empty stomach has to eat something when starving...too bad we did not figure it out in time...

Musharraf has had a very good account of himself from the economic
development point of view, key roads were constructed and mega projects were continued, lots of educational reforms including huge spending on supporting scholarship programs, many economic indicators were good.

Now also see that a major calamity occurred in the form of earthquake and still the country absorbed the shock both from the tremendous support of Pakistanis but by a huge spending from government as well...

Yes, the strategy displayed by Musharraf regarding the TTP was not very effective, but he was faced with a situation which no other leader in Pakistan had encountered before...difficult to judge him against Zia who was in the good books of his American masters for a good 10 years and had much more soft concessions from US due to the much more covert nature of US operation...
In the War on terror the US gov was like a holy avenger and they were not playing soft so Musharraf was always doing a circus act between pleasing everyone and trying to do the right thing for Pakistan...

I will not deny that i do not see eye to eye with Musharraf over everything he did but still he was much more balanced person than Zia... both however were not legal heads of states...

I agree with most of what you have written. However, I would like to point out that most of us Pakistanis do not have a good track record of sane and unbiased thinking.

If you take into account the professional careers of most of the most successful manager in this world ( I am talking about the top 100 corps.), you will find out that they only took 20% correct decisions out of many hundreds that they took during their careers. However, these 20% correct decisions changed the destinies of their companies.

The issue of Afghan Taliban and not pursuing them in totality by Mushi in Pakistan -- in hindsight -- was correct since now the very same links have elevated the position of this country when US is about to leave this region.

He did make some mistakes ( one of them was the judges the other one was getting in cahoots with the nincompoops of Q-League-- I for one do not call the Lal Masjid a wrong decision -- they were the very same people who later turned out to the Pakistani Talibans that we are dealing with today) but you have to judge his tenure based upon the batting average and not just one or two bad shots!!!

One must give credit where credit is due. You or I might not like some of the things he has done but let us be fair -- overall he started taking us out of the Mullahism of Zia-ul-Haq era. The Kashmir issue was at a breakthrough point (Corroborated by both our ex Foreign Minister and the ex Indian ambassador on Business Plus).

Ask any industrialist or small business man and they will tell you how good things were during his tenure – business was booming and orders were coming – 7th December broke our back. I for one had a personal experience in negotiating a contract with Pakistan Railways during the early part 2002 -- I was apprehensive about kickbacks as PR has a bad track record. In the end, got the contract on merit, did not pay a dime!!!! PR was being overhauled with professional management.

In my line of work I generally come across very small business men from rural areas - all of them clearly acknowledged the progress made -- access roads, Telecommunications, empowerment (through the local bodies system), working gates on canals etc. But when I asked them who they will vote for, they surprisingly adhered to their traditional power bases of PPP (In Sind) and Baradari Voting in Punjab.

I happen to be associated with the Program for Economic Revival of Karachi (PERK) in a small way back in 2001 to 2003. Attended some meetings and sat through some of the planning sessions with Mushi in attendance. To me he came across as a fiercely nationalist with a hunger to change things. In the end the shape of Karachi did change. I remember when a Rs. 7 Billion plan was finally taken to him by the committee -- he said “It is too little -- you guys need to think big.” In the end he told us to re-plan for a major upgrade ( At that time there was a JI Nazim in KHI) he did not know where the money was going to come from but he gave the green light to go ahead start upgrading the basic infrastructure. In the end KHI got Rs 21 Billion over seven years -- I wonder where the funds came from!

I remember the time I had to travel to Nagarparkar ( right on the Indian Border) on a WWII open truck ( Called a Cakera-- crab) over sand dunes and rough it out -- Three years ago there was fully functional mettled road with an emergency landing strip on it!!!

I am not going to talk about the growth rates, the media freedom (till today loves to beat upon him daily), slow crawl back of our moderate views or the brinkmanship he displayed when getting US & China to work against each other to the benefit of Pakistan (this was being done very successfully by India in the case of USSR for decades) or the sending of hundreds of young scholars ( funded by ISI through HEC) to western universities to pursue non-traditional subjects including journalism on scholarships to ensure that these future journalists will become the future Riz Khans of CNN & BBC etc. ( BTW India has been doing this for atleast two decades) and get settled in those countries.

I feel sad that if actual work is not acknowledged and we keep on "Party and Bradari Bazi," we are doomed. The essence of Democracy is deliverance and not "My Chacha comes to power." Unfortunately the masses love democracy for this very reason in Pakistan!!!! This is not democracy!!!!

Let us call "A spade a spade" for a change!

 

[jit onet]

On the original topic of 10B aid to Pakistan I have a question. I only read the first post which has an exhaustive article explaining what happened to the money.

The biggest item of about 6B is said to be re-imbursement for Pakistan army's involvement in the war on terror. My question is, why should this be reimbursed? isn't it in Pakistan's own interest to get rid of the terrorists? A number of other countries including UK participated as well - are they all expecting reimbursement? No - I think only Pakistan is being reimbursed.

Secondly, I want to know (because I don't know, not challenging the concept), whether Pakistan army personnel were actively engaged in fighting between 2001 and 2005 or 2006. My impression is that while Pakistan was providing basic logistics (space, power etc) their army actually started combat only in the last 2 or 3 years.

Is my impression wrong?

 

[AgNoStiC MuSliM]

Most U.S. aid to Pakistan still in America’s hands​

Posted By Josh Rogin Tuesday, March 1, 2011 - 6:49 PM Share

U.S. economic aid to Pakistan, which totals over $1.5 billion per year, is a key part of the Obama administration's strategy to strengthen the U.S.-Pakistan strategic partnership. However, most of the aid that was allocated for last year is still in U.S. government coffers.

Only $179.5 million out of $1.51 billion in U.S. civilian aid to Pakistan was actually disbursed in fiscal 2010, the Government Accountability Office stated in a report released last week. Almost all of that money was distributed as part of the Kerry-Lugar aid package passed last year.

$75 million of those funds were transferred to bolster the Benazir Income Support Program, a social development program run by the Pakistani government. Another $45 million was given to the Higher Education Commission to support "centers of excellence" at Pakistani universities; $19.5 million went to support Pakistan's Fulbright Scholarship program; $23.3 million went to flood relief; $1.2 billion remains unspent.

None of the funds were spent to construct the kind of water, energy, and food infrastructure that former Special Representative for Afghanistan and Pakistan (SRAP) Richard Holbrooke advocated for diligently when he was the lead administration official in charge of managing the money. Moreover, according to the report, the Obama administration hasn't yet set up the mechanisms to make sure the money isn't misspent.

"The full impact of the fiscal year 2010 civilian assistance could not be determined because most of the funding had not yet been disbursed," the report stated. The GAO tracked Kerry-Lugar money sent to Pakistan up until Dec. 31. "It will take some time before significant outcomes of the civilian assistance can be measured."

Holbrooke's office, which is now run by the new SRAP Marc Grossman, told The Cable that the leftover funds were due to the fact that the money was appropriated belatedly and the first year of the program carried with it unique challenges.

"While the facts of the GAO report are accurate, it doesn't reflect the big picture nor adequately represent what we've achieved with civilian assistance over the last year," said Jessica Simon, a spokesperson for the SRAP office. "As the FY 2010 funding was appropriated in April 2010, it is hardly surprising that only a portion of the funding was disbursed by the end of the year."

Simon said that in total, the U.S. government has disbursed $878 million of Pakistan-specific assistance since October 2009, which includes over $514 million in emergency humanitarian assistance in response to the devastating July 2010 floods.

The floods also slowed the progress of the Kerry-Lugar program, Sen. John Kerry's spokesman Frederick Jones told The Cable.

"The floods last summer changed the Pakistani landscape, literally and figuratively, and required us to take a step back and reexamine all of our plans," Jones said. "Bureaucracies move slowly and redirecting aid at this level requires time and some patience. It is difficult to allocate billions of dollars in a responsible way without proper vetting, which takes time."

Experts note that the disparity between U.S. promises to Pakistan and funds delivered is a constant irritant in the U.S.-Pakistan relationship.

"There are always complaints and in terms of the delays there are pretty valid reasons on both sides," said Shuja Nawaz, director of the South Asia Center at the Atlantic Council. He said that Congress's requirement that the money be tracked and accounted for is a source of contention.

"For a long time the U.S. didn't ask any questions about the money. And so it became a bit of a shock," he said.

The GAO has long called for better oversight of the funds, especially in Pakistan's Federally Administered Tribal Areas (FATA). This lack of accountability is what spurred Congress to mandate better oversight of the Kerry-Lugar money, including provisions that require reporting on the Pakistani military's level of assistance to the United States.

Those provisions were portrayed in some parts of the Pakistani press as unwarranted interference in Pakistani affairs. Popular reception of the Kerry-Lugar bill in Pakistan was filled with skepticism of U.S. intentions.

Regardless, Holbrooke was determined to make sure the money achieved the desired result of improving America's image in Pakistan. He battled successfully with some in Congress and even those inside the Obama administration to steer the money directly toward Pakistani organizations rather than filtering it through USAID contractors.

"The big shift was that the Pakistani government had complained that most of the money was being given to U.S. contractors and not making it Pakistan. The big shift was to reduce the role of the beltway bandits... and that shift is here to stay," said Nawaz.

According to the GAO, the United States has given Pakistan over $18 billion, mostly in security-related aid, since 2002.

Most U.S. aid to Pakistan still in America

 

[AgNoStiC MuSliM]

Flawed Narrative​

THAT Pakistan`s relations with the US have been complicated and episodic from the start is well known. Beyond this fact, answers to even basic questions regarding US assistance to Pakistan remain opaque. For starters, just what is the current quantum of non-military assistance?

A follow-up question: how important is US economic assistance to Pakistan anyways? Given the veiled hints from some quarters in the US of a possible rupture in ties in the wake of the `Lahore incident`, it will be useful to explore the broad contours of Pakistan`s economic relationship with the US.

In terms of overall assistance, Pakistan has been a recipient of substantial inflows from the US in fits and starts over the years, with the bulk being in the realm of military aid. In terms of US economic assistance to Pakistan, the defining features since inception appear to have been:

— It has not been enduring, but spasmodic;

— The US has invariably followed a short-sighted, `transactional` approach in its relationship with Pakistan, and continues to do so despite a strong case having been made at the start of the Pakistan-US strategic dialogue for a `transformational` relationship (more on this later);

— Assistance has peaked in non-democratic set-ups;

— US aid has generally been pro-cyclical, reinforcing upturns in the economy, rather than supporting Pakistan`s economy in a downturn (as currently);

— As a result, the impact has not been `visible`, since external inflows in economic upturns in Pakistan have given rise to wealth effects based on asset ownership — which, by definition, means the true beneficiaries are likely to have been the already affluent rather than the poor or vulnerable;

— US programmes are mired in bureaucracy, with large `lags` and high transactional costs (to be fair, the latter is pretty much the case with all aid programmes across the board);

— Spending has, until now, either ignored areas deemed high-impact by the Pakistan side (agriculture, water, market access, for example) or, has been spread too thin over a large number of projects. As a result, the impact has been diffused, denying the US visibility for the taxpayer dollars it has spent in Pakistan. New York Times Wall Street Journal

In the current episode of engagement, the flagship assistance programme on the non-military side is under the aegis of the Kerry-Lugar-Berman Act (KLB). If the embedded wisdom of , CNN, et al is to be believed, the country receives $1.5bn a year in non-military assistance under `KLB`. However, the fact is that Pakistan has received less than $750m two years on. Even for the current fiscal year, $600m has been budgeted under KLB — not $1.5bn.

One explanation for this anomaly held out by the US refers to concerns relating to non-transparent use of the money. With `made in USA (and UK)` written all over the infamous NRO that brought Pakistan`s `transparency` issues into power in the first place, this is quite rich — in the same league as the `we-have-been-busy-promoting-democracy-in-the-Middle East-for-the-past 30 years` narrative that is currently being weaved.

The most potent form of economic assistance the US can provide to Pakistan, one with the greatest externality, is allowing preferential market access to the country`s textile and clothing (T&C) exports. If focused on the right products, such as garments (labour-intensive and value-added), the US intervention has the potential to create hundreds of thousands of additional direct and indirect jobs, carving a powerful urban, educated (and possibly currently unemployed) constituency comprising the country`s youth. This will also be the `lowest cost` in terms of US taxpayer dollars, since the additional exports from Pakistan will most likely displace existing imports into the US from some other producer.

Strangely, this is proving to be the second hardest legislation to bring to Congress after domestic gun control. Pursued actively by Pakistan since 2004, this request has routinely met the same response: Congress will not sacrifice the interest of North and South Carolina and other states with a large textiles constituency. Since then, however, Congress has allowed duty-free access for textiles and clothing to large regional blocs in Central America, the Andean states and a number of African countries. In addition, it has signed a number of Free Trade Agreements with countries in close proximity to Pakistan (such as Oman) which is hurting Pakistan`s exports. On top of this, China and other large T&C producers have already made substantial inroads in the US market in the wake of the phasing out of the Multi-Fibre Agreement, making the protectionist argument redundant in any case.

Instead, Pakistan has been offered a bizarre piece of legislation — the Reconstruction Opportunity Zones (ROZs) initiative — which potentially provides for duty-free access for a limited number of small ticket lines that Pakistani exporters generally shun, with the additional proviso that the factories are located in conflict-affected areas such as Fata.

Moving beyond the ineffectiveness of US economic assistance, it is imperative to change the flawed narrative that Pakistan is a hapless, fragile economy that will collapse without foreign assistance. That job will get done by our failure to mobilise our own substantial domestic resources. This narrative emanates from ruling elites that benefit most from the status quo — a reliance on foreign inflows, without taxing themselves.

While it is true that Pakistan currently has a high degree of dependence on foreign savings, this can be mitigated to a large extent by correct policies. Pakistan is a richly-endowed country, but like most of its other resources, the country is not utilising its vast financial resources too. This is as good a time as any for Pakistan to wean itself from the aid dependency syndrome that has been cultivated.

The writer was until recently the principal economic adviser to the Ministry of Finance.

Flawed narrative | | DAWN.COM

 

[VCheng]

..................

While it is true that Pakistan currently has a high degree of dependence on foreign savings, this can be mitigated to a large extent by correct policies. Pakistan is a richly-endowed country, but like most of its other resources, the country is not utilising its vast financial resources too. This is as good a time as any for Pakistan to wean itself from the aid dependency syndrome that has been cultivated.

Great article, but what are the practical steps to start and implement the "weaning" process, as the writer's calls it? Words, unless backed by concrete actions, mean nothing. It is well past high time already.

 

[jahangeer yousaf]

it does go back towards usa through swiss accounts .... keep chilling

 

[AgNoStiC MuSliM]

Great article, but what are the practical steps to start and implement the "weaning" process, as the writer's calls it? Words, unless backed by concrete actions, mean nothing. It is well past high time already.

The 'practical steps' have been discussed over and over again in the media and on this forum.

My two main steps would be the following:

1. Broadening the Tax base

2. Reforming/selling Public Sector Enterprises that cost billions of dollars annually to keep afloat, and cost billions more indirectly because of corruption, inefficient products and services and their cumulative socio-economic impact.

Just the second step alone would allow for billions of dollars of additional resources to be available annually, far more than what we receive in Aid from the US.

Practical and feasible steps to increase resources have been known of for a long time now, it is getting the leadership to implement it that is the problem, which is what the author is exhorting the Pakistani leadership to do. Unfortunately, many liberal commentators in the Pakistani media have shown tremendous hypocrisy and disingenuity when addressing the issue of dependence on aid and the lack of resources.

Inevitably the liberals focus on military spending, and bashing the military and its businesses (forget the fact that the military businesses are hugely profitable and pay billions in taxes and use their profits to cover Military retirement benefits and benefits for the dependents of soldiers, thereby saving the taxpayer billions). The liberals condescend towards those who call for an end to accepting aid from the US and our relationship with it in the WoT, but it is they themselves who are the hypocrites since they refuse to hold this PPP government accountable and focus on the reforms needed to break our dependence on foreign aid, and choose to merely bash the military.

IMO this is the result of a liberal belief that the PPP is the only 'progressive' political party available to Pakistanis, and they do not want to hold it accountable and choose to be duplicitous in order to hide its failings so that it may somehow continue to cling to power. The military then becomes an easy punching bag to distract away from the real issues that need to be addressed, as mentioned above.

 

[VCheng]

AM: What you describe as "steps" are actually mere milestones along the "weaning process" if it were to be implemented.

For example "broadening the tax base" is something everybody would agree upon, but who and how to take concrete steps is the problem. Will the elected politicians suddenly move to include agricultural incomes into the tax net? Will the bureaucracy suddenly resolve not to divert nearly a third of the tax revenues into their own pockets? Similarly "reforming/selling Public Sector Enterprises" means nothing as a reformative step until and unless something concrete happens, like cronies and sycophants not being appointed to lead key PSEs.

It is not just a "leadership" problem. The status quo works so well for a selected and inter-connected few that they have been, are, and will continue to maintain it for the foreseeable future. Hence all the words of the intelligentsia will continue to be just read and tossed away or heard and forgotten.

"We have seen the enemy and he is us!"

 

[AgNoStiC MuSliM]

AM: What you describe as "steps" are actually mere milestones along the "weaning process" if it were to be implemented.

For example "broadening the tax base" is something everybody would agree upon, but who and how to take concrete steps is the problem. Will the elected politicians suddenly move to include agricultural incomes into the tax net? Will the bureaucracy suddenly resolve not to divert nearly a third of the tax revenues into their own pockets? Similarly "reforming/selling Public Sector Enterprises" means nothing as a reformative step until and unless something concrete happens, like cronies and sycophants not being appointed to lead key PSEs.

It is not just a "leadership" problem. The status quo works so well for a selected and inter-connected few that they have been, are, and will continue to maintain it for the foreseeable future. Hence all the words of the intelligentsia will continue to be just read and tossed away or heard and forgotten.

"We have seen the enemy and he is us!"

Those are 'solutions' for sustainably generating more resources that would substitute the current aid Pakistan receives. As I said, these solutions and the nitty gritty of implementing them has been discussed for years now, the problem is, and has been, the lack of political will to implement them, and that boils down to the 'leadership'.

Now, whether the FBR pockets a third of the money or not, the solutions mentioned above still result in an increase in revenues if implemented. On the question of PSE's, when I refer to 'reform' I mean no government control in management. Even if the entire PSE is not privatized, enough shares need to be sold to put management in private hands and take out government influence.

Again, the solutions exist and have been debated to death, it is a matter of the political leadership implementing them, and therefore your criticizm of the author was invalid - he is doing what he can, highlighting the issue and pointing out that Pakistan has the necessary resources to survive without the current relationship with the US.

 

[VCheng]

Great article, but what are the practical steps to start and implement the "weaning" process, as the writer's calls it? Words, unless backed by concrete actions, mean nothing. It is well past high time already.

.....and therefore your criticizm of the author was invalid - ........

I actually liked the article and did not criticize what was written at all. My only point was that such articles are many, but unless there is any action, mere words will not change anything.

Of course solutions exist. Look at South Korea, going from studying our five year plans in the sixties to where they are today. Pakistan can do the same no doubt. It is just that I am too much of a realist to see that happening anytime soon (and believe it or not, it truly hurts me to say that.).

 

[Dance]

WASHINGTON: Pakistan’s finance minister on Monday dismissed as “a myth” in the United States that his country is a major recipient of tens of billions of dollars in US aid.

Finance Minister Abdul Hafiz Shaikh told an audience in Washington that the United States had not delivered what it promised under the Kerry-Lugar-Berman Law aid package, which is meant to provide $7.5 billion in civilian aid over five years.

The law authorized $1.5 billion a year.

“There is a perception that there is a lot of money going to Pakistan,” Shaikh told the Woodrow Wilson Center policy think tank.

“It is largely a myth that Pakistan is a beneficiary of tens of billions of dollars. The truth is that in the Kerry-Lugar-Berman arrangement this year we have not even received $300 million,” he added.

Pakistan is dependent on foreign aid and plagued by political instability and violence. Massive floods last year, the worst natural disaster the country has ever seen, affected three million people, destroyed crops and swept away roads and bridges, causing over $10 billion in damage and wiping out about 2 percentage points of gross domestic product.

Washington has long pressed Pakistan to take on militants who have taken refuge in Pakistani border sanctuaries from where they attack Western forces in Afghanistan.

Shaikh, who attended weekend meetings of the World Bank and IMF, said Pakistan wanted trade, not aid.

“We’re saying let’s open our markets to each other,” he said, pointing to successful negotiations with the European Union that have expanded areas of trade.

He said the Kerry-Lugar-Berman Law was an important symbol of the US government and Congress’s commitment for a new democratic government in Pakistan.

“If it is disbursed in a proper way and implemented in a proper way, then it can have far-reaching consequences for the people of Pakistan,” he said. “It would alter some misperceptions that are there.” Pakistan is a heavily indebted country, with its external debt amounting to about $58 billion and domestic debt at 6 trillion rupee ($70 billion).

The country turned to the International Monetary Fund for an $11 billion emergency loan in 2008 to avoid an economic meltdown. Shaikh said the economy had shown signs of improvement although the government was still trying to broaden its tax base to include untaxed sectors, such as agriculture. – Reuters

Myth that Pakistan gets billions in US aid: Hafeez | Business | DAWN.COM

 

[Ammyy]

I think he is right

Aid as % of GDP by country. Definition, graph and map.

 

[waz]

I think he is right

Aid as % of GDP by country. Definition, graph and map.

Thank you for the statistics my friend, I was about to put that up. Some are under the illusion that the economy is being run with aid money.

It's good to see Pakistan and India both well down on the list. Nations should be self sufficient and learn to stand on their own two feet.

 

[Hulk]

that was surprising, if they have only paid 300 million or so, then no big amount by any means.

 

[SMC]

The only reason Pakistan gets called about aid is that it's related to WoT. 1.5 billion dollar per year for a 180 billion dollar economy is really not that much. And it's even worse when you think that only a fraction has been received so far. Certainly it's not the kind of money that the economy runs on or is dependent on. Some want to delude themselves into believing that since it suits their world view, but obviously they're believing myths.