ISLAMABAD — The U.S. should hold back much of its $7.5 billion aid package to Pakistan until it reforms dysfunctional policies related to energy, taxes and other areas, according to a new report that criticizes the American aid program’s focus in a country beset by corruption, poverty and militancy.
The 42-page report by the Washington, D.C.-based Center for Global Development is the culmination of months of research and interviews with aid and other experts in Pakistan and the United States. The report, titled “Beyond Bullets and Bombs: Fixing the U.S. Approach to Development in Pakistan,” also calls for focusing more on trade by giving Pakistani exports easier entry to U.S. markets.
U.S. financial assistance to Pakistan has come under renewed scrutiny since the May 2 raid that killed Osama bin Laden in Pakistan’s northwest and further damaged already uneasy Islamabad-Washington relations.
Although Pakistani leaders insist they had no idea the al-Qaida chief was hiding on their soil, some U.S. lawmakers are questioning if it’s worth giving billions to a nation long suspected of aiding some Islamist extremist groups. Others say the U.S. must not abandon such a strategic country, and that aid gives Pakistan more incentive to battle militants who use its soil to attack U.S. forces in Afghanistan.
According to the report, the U.S. Agency for International Development spent $275 million in 2009 and $676 million in 2010, the first year covered by the $7.5 billion package, which was approved in 2009.
Although the report largely supports long-term financial assistance to Pakistan, it notes that in certain sectors, spending the money now will do nothing more than provide superficial fixes that keep Pakistani leaders from having to make politically difficult decisions.
For instance, barely 2 percent of Pakistanis pay income tax, and yet the ruling party cannot push through tax reforms.
The country also suffers from severe electricity shortages, but it has been unable to reform its energy sector. Its tariffs and subsidies are still in place despite decades of pleas from international donors and lenders.
“To the extent that Pakistani leaders expect and assume disbursement of aid, it makes sense for them to push for that money rather than to work with their political rivals to move on key reforms,” the report said.
“We believe that the pure act of delaying disbursement in certain sectors will benefit both the Pakistani reform process and the ultimate effectiveness of U.S. aid,” it says.
The report acknowledges the difficulties of running an aid program in an insecure country where corruption is endemic, poverty is rampant, democratic institutions are weak and basic government services such as education and health care have long taken a back seat to military expenditures.
But it is critical of how the U.S. has approached the challenge.
The aid mission lacks clear goals — and some goals overlap with security and political aims that should be kept separate from the development mission, the report says.
The U.S. AID mission is understaffed, and many of its workers stay for just one year and don’t forge solid relationships with Pakistani counterparts, the reports says. It also says too many people are in charge, both in Islamabad and Washington, with no clear lines of authority.
Some of the report’s top recommendations are not about aid, but trade. The authors urge Congress and the White House to “extend duty-free, quota-free access to U.S. markets for all Pakistani exports from all of Pakistan for at least the next five years.”
That recommendation echoes the pleas of many Pakistani businessmen and political leaders, who say the best way to keep the huge numbers of young people in the nation of 180 million from turning to militancy is to improve the economy and give them jobs.
Textiles and apparel make up the majority of Pakistani exports. Giving them more favorable treatment in the U.S. market is unlikely to pose much competition to American manufacturers, but rather to other countries that export to the U.S., such as China, the report says.
The report’s authors are mystified about the difficulty of getting basic information about U.S. AID projects in Pakistan. They note that it took them “several months of persistent requests” to get basic data on how much of the aid money has been spent.
Pakistanis are largely in the dark about what the money is being spent on, so they focus mostly how much money in total is spent, which the report’s authors say offers little insight into the true impact of projects funded.
The authors stress that it is better to spend slowly and effectively than to waste money on projects with little long-term impact. Still, “because of a debilitating lack of transparency in the aid program, no one is even sure what the United States is doing,” they say.
In a written response to the report, the U.S. Embassy in Islamabad said many of its recommendations have been implemented over the past year.
“USAID is actively engaged in discussing with governmental and non-governmental leaders to assure that the programs meet Pakistani priorities, that adequate accountability and monitoring mechanisms are in place, and that program results match the level of resources being committed,” the embassy said.
Pakistan has received more than $100 billion in development assistance from outside donors since 1960, but it has failed to “secure the fundamental economic and political reforms that would foster self-sustaining progress,” the report says.
“Without exaggerating the importance of U.S. money or diplomatic leverage,” it says, “the United States should focus its development programs to support the many courageous Pakistanis working toward a better future for their own country.”
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