Tag Archives: economic aid

Democracy At Greatest Risk in Raymond Davis Affair

Anti-democratic groups protest in PakistanHeadlines across the world note that the diplomatic crisis resulting from Raymond Davis’s shooting of two men in Lahore last month is straining US-Pakistan ties. A month after the incident, a solution acceptable to both nations continues to be elusive. But something more fundamental than US-Pakistan relations is at great risk as positions harden – democracy in Pakistan.

Despite the nationalist sentiment surrounding the controversy, the fact is that US-Pakistan relations will only be affected at the political level. According to a report in Stars & Stripes, a Department of Defense-authorized daily newspaper, senior leaders of the US and Pakistani militaries held secret meetings at a secluded resort in Oman this week. The meetings were described by one attendee as “very candid and cordial, and very productive discussions.” Even a split between the CIA and the ISI would likely only temporary as all intelligence agencies must interact with each other in order to be effective. Regardless of popular political opinion, military and intelligence officials will continue to cooperate based on the nations’ mutual security interests.

But Pakistan’s civilian population, and the civilian government they elected, is far more vulnerable. The latest United Nations Human Development Report, released on Tuesday, found that 51 percent of Pakistanis are living in multidimensional poverty and 54 percent are suffering intense deprivation. Cutting aid to Pakistan would have devastating consequences, not for the entrenched military-intelligence establishment, but for the civilian government and the Pakistani people.

“There’s no choke on aid yet,” says a senior Pakistani official. But if the standoff continues, and especially if Davis is convicted, it could be reduced to a trickle. And that could have a potentially catastrophic impact on an economy threatened by hyperinflation and the devaluation of its currency in the coming months.

A civilian government unable to provide basic services, much less show an improvement in economic opportunity, would quickly find itself rejected by Pakistanis already frustrated with uncertain security and lagging economic progress. While it is unlikely that militant groups would have the resources or influence to fill the role of government nationwide, it could create an environment in which the military-intelligence establishment – until now content to sit on the sidelines – decides to intervene. Such an event would not only undo the progress towards a more just and democratic government made over the past three years, it could set back Pakistan’s democratic movement for a generation or more.

Thankfully, Assistant Secretary of State Philip Crowley reiterated the Obama administration’s long-term commitment to the people of Pakistan on Wednesday by insisting that the White House is not considering cuts to aid.

“We’re building a strategic partnership with Pakistan. It’s important to the future of the region. It’s also important to the security of the United States. We are engaging Pakistan in good faith. We want to see this resolved as soon as possible so it does not become an impediment in our relationship and it does not measurably interfere with the work we are doing together in fighting extremism that threatens Pakistan and threatens us,” he said. “We are not contemplating any actions along those lines,” Crowley said when asked if the US government is considering curtailing any of its military or economic assistance to Pakistan over the Davis row.

Whatever the outcome of the Raymond Davis affair, it is certain to have implications far beyond the short-term cooperation between the CIA and the ISI. As political leaders and intelligence officials work to find a solution, we should all remember that Pakistan’s fragile democratic government, and the Pakistani people, stand to lose the most from deteriorating relations between our two countries.

An Economic Task Force For Pakistan

Delivering aid in Pakistan faces several challenges including a lack of capacity among local Non-Governmental Organizations (NGOs) in some areas and critical perceptions of American intentions among the local population. While vital to laying the groundwork for economic development, aid is not enough. What Pakistan needs is greater access to world markets and increased foreign direct investment (FDI) to develop under-resourced sectors of its domestic economy. President Obama should facilitate this investment by convening a new economic task force for Pakistan.

Pakistan's under-resourced industries are an economic opportunity for American investment

“Trade, not aid” has been a consistent theme of Pakistan’s President Asif Ali Zardari. During last summer’s historic flooding, the Pakistani leader thanked the world’s nations for their generous assistance, but reminded them that what the country really needs is greater access to the global marketplace – a point reiterated by President Zardari during a visit to Washington earlier this month to honor the late Ambassador Richard Holbrooke.

An article by Muhammad Aftab, an Islamabad based journalist, in Monday’s Daily Times examines the current state of foreign direct investment in Pakistan, and identifies several opportunities for increased investment in Pakistan’s under-resourced energy sector including oil and natural gas exploration and production, hydro and thermal power, and enmerging sources of renewable energy.

To facilitate Pakistan’s domestic economic growth and advance our shared goal of a stable, prosperous and peaceful Pakistan, President Obama should convene a special task force similar to his recently announced Council On Jobs And Competitiveness headed by GE CEO Jeffery Immelt to develop a strategy for shifting from aid-based investment to private sector/FDI based development.

The task force should comprise a joint public-private venture of corporate executives and diplomats with experience in South Asia, and should be tasked with a mission to identify opportunities for American companies to invest in Pakistan and areas where the government can help facilitate such investment either through federal regulation or international diplomacy.

Unlike aid-based development, this approach would directly benefit both parties by opening a two-way path for economic expansion between US and Pakistani markets while simultaneously bolstering Pakistan’s developing economic sectors with much needed capital and expertise. Additionally, it will avoid past misunderstandings as the results of the task force will not be money ‘with strings attached’, but cooperative efforts between American and Pakistani industry.

In convening this task force, President Obama would also clearly demonstrate that the US is not repeating past mistakes by using aid as a temporary incentive for Pakistan’s support in Afghanistan, only to abandon the country when the fighting ceases. Such a move could have a significant impact in reducing anti-American sentiment once the Pakistani people see that the US is not a fair-weather friend, but a long time partner and ally with a long-term interest in Pakistan’s success.

According to Finance Minister Dr Hafeez Sheikh, “Pakistan has a very liberal investment regime. There are no restrictions on FDI and inflow of capital and outflow dividend income. The current investment policies are tailor-made to meet the investors’ needs.” Sheikh also said, “There is a great potential for investment in the fields of oil and gas, corporate faring, agriculture and infrastructure.”

China recognizes the untapped economic potential in Pakistan, which is why President Hu Jintao recently signed trade and investment deals with Pakistan worth $35 billion. The US would be remiss to pass up such an opportunity.

Put away the carrots and sticks to help Pakistan

Carrot and StickA key point of Bruce Riedel’s remarks on Tuesday was that attempts to ‘buy’ Pakistan’s cooperation will always fail. Pakistan cannot be bought, and attempts to persuade Pakistan’s leadership with monetary incentives only waste taxpayer money and distract Pakistan’s government from making reforms necessary to move the country forward.

During the course of the Q&A session following his remarks, Mr. Riedel told an anecdote about an exercise he conducted at the request of President Obama in which he and his colleagues considered ‘out of the box’ ways to influence Pakistan. During a brainstorm session, one of the approaches discussed was to buy Pakistan off with a civilian nuclear energy deal. The participants realized, however, that the likely outcome of such an attempt would be for Pakistan to say, “Thank you for giving us what you already owed. Now we’re even.” The US would have made a tremendous investment of political and financial capital, but would not have influenced any positive change in Pakistan’s domestic policy.

Following their brainstorm session, the group reached the obvious conclusion – instead of trying to buy or coerce the nation, the US should be looking to work constructively with Pakistan based on mutual goals and overlapping priorities.

So if you eliminate the extremes — buying them off, coercion, the out-of-the-box — you come back to what are basically relatively simple solutions and all of those involve working with Pakistan, not against it. Not trying to create an alliance against Pakistan, but trying to create an alliance with Pakistan.

Nancy Birdsall, Wren Elhai and Molly Kinder came to the same conclusion in a post for Foreign Policy’s AfPak Channel blog earlier today.

It’s true that Secretary Clinton and her diplomatic team have the ability to work with Pakistan’s good technocrats in nudging along economic policy conversations — including by getting the right political actors around the table. However, it is unrealistic and impolitic to expect officials in Pakistan to take often politically toxic actions in return for U.S. aid payments.  That is a hard reality increasingly understood by many in the administration and in Congress.  The question is whether aid money in some cases might help grease the wheels so that the Pakistani political process performs better.  Could U.S. aid to Pakistan sometimes support the difficult politics of economic reform — as opposed to mostly providing a short-term band-aid to help the country muddle through its current mess?

The key point is that certain aid projects can carry both direct benefits (better services and infrastructure for the people of Pakistan) and indirect benefits (incentives for the Pakistani political system to achieve greater results with their existing resources). Here are a few examples to consider: U.S. investments in energy generation and transmission capacity can be linked to public commitments to raise electricity tariffs  only when brownouts have been reduced below an announced benchmark. In this grand bargain, as service quality improves, tariffs would go up, and another round of aid investments would be delivered. In another case, U.S.-financed tools can be deployed to help Pakistani citizens hold their government accountable-with regular reports on simple indicators of development, for example, or an easily accessible database of all development projects funded from internal or external resources.  Or a pilot Cash on Delivery aid contract in one or more Pakistani provinces could put levers in the hands of education reformers and help their ideas gain traction.

This approach to development does not rely on economic coercion, the “carrots and sticks” approach but instead involves understanding and respecting the needs and priorities of the people of Pakistan and working to help them achieve their goals and, though this, achieving our own.

Nancy Birdsall is president of the Center for Global Development and chair of the CGD Study Group on a U.S. Development Strategy in Pakistan. Wren Elhai is a research and communications assistant and Molly Kinder is a senior policy analyst at the Center for Global Development.

White House Boosts Support For Pakistan

President Obama and President ZardariIn the wake of the tragic assassination of Governor Salmaan Taseer this week, the White House has signaled that it will increase support for Pakistan’s civilian government including military aid to strengthen its national security.

According to a Washington Post report on Saturday, “The Obama administration has decided to offer Pakistan more military, intelligence and economic support, and to intensify U.S. efforts to forge a regional peace”.

Vice President Joe Biden will travel to Pakistan next week to meet with government and military officials to discuss Pakistan’s needs and how the US can help.

In addition to providing additional economic and military support to Pakistan, the White House emphasized again the respect US has for Pakistan as a sovereign nation and a close ally.

The review resolved to “look hard” at what more could be done to improve economic stability, particularly on tax policy and Pakistan’s relations with international financial institutions. It directed administration and Pentagon officials to “make sure that our sizeable military assistance programs are properly tailored to what the Pakistanis need, and are targeted on units that will generate the most benefit” for U.S. objectives, said one senior administration official who participated in the review and was authorized to discuss it on condition of anonymity.

Any American policy will be developed with the intention of furthering American objectives. The fact that support for Pakistan is being “properly tailored to what the Pakistanis need” emphasizes not only American respect for Pakistan, but that American and Pakistani objectives have a clear point of convergence.

As the democratic government continues to build consensus around and implement important reforms such as the 18th Amendment and the Protection Against Harassment of Women at Workplace Bill, the US must continue to provide the economic, military and diplomatic assistance to help Pakistan succeed.