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Loose change

  • Published at 12:03 am October 29th, 2016
Loose change

After my deviation two weeks ago into the inhospitable subject of Pakistan-Indian relations, a deviation prompted by the spike in violence and inflammatory rhetoric in an already hostile relationship, I want to return to the less thorny, and quite frankly more hopeful subject of Pakistan-US relations.

I had written two articles on the nature of the relationship prior to that deviation. In one, I traced it through the prism of external assistance, and in the second, through the lens of Pakistan’s policy in the region, particularly its use of proxies (the latter, inevitably, dipped into the Pakistan-Indian morass.) This article is more abstract in that: While focusing on the Pakistan-US aid relationship, it covers questions and conundrums that all aid-giving countries face.

I start with the report by the USAID inspector general, released last month, which strongly criticised the program in Pakistan, since the inception of the much-heralded and often disappointing Kerry-Lugar-Berman Act (KLB) which authorised a five-year $7.5 billion assistance program for Pakistan.

I say “authorised” because in the mysterious ways of Congress, it authorises and then later it “appropriates,” and the appropriation is the real money that can be spent. The press reports indicate that $4.5bn was appropriated and $2.3bn has been disbursed.

KLB, which passed into law in October 2009, is almost a metaphor of Pakistan-US relations in the period 2010 to 2015. It passed in a euphoria of hope, on the assumption that the interests of both countries were similar, not only for the relationship, but for the region. Why did the US think this? Perhaps because Pakistan had finally, as the US saw it, begun to fight back against the Taliban in Swat, and we assumed this was a turning point in the fight against extremism in Pakistan.

The US named Pakistan a non-NATO ally, and clearly it foresaw an ever-expanding and commodious relationship. There was widespread support for the bill among the public and it passed in Congress easily. Its promise of grassroots programs and goal to improve institutions, on which Pakistanis rely, won public support.

The implementation of KLB had hardly begun when things went seriously wrong. The earliest episode of bad news was the political backlash in Pakistan, prompted by the army, asserting that KLB was an intrusion on Pakistani sovereignty. It included some conditions, one having to do with civilian control of the military.

Then, in rapid order came the bin Laden raid, Raymond Davis, Salala, visa cutoffs, closures of our transport routes, and the other things mentioned in the previous article.

The political context alone was enough to sink KLB, but inherent problems of such an ambitious aid program in a country in which governance functionality is questionable and often erratic, might have sunk KLB anyway.

I suspect that, lurking in the subconscious of American friends of Pakistan and leaders waging a “war on terror,” was always the belief that Pakistan was flirting with failure. It was definitely in American interest to help the country avoid that. In essence, KLB was meant, I think, to turn what had always been a transactional bilateral aid program into something more -- something that was transformational in nature.

This was a long shot stretch in any case, because transformational assistance programs have to be conditional in order help transformation. And I use the word “help” because transformation has to come from inside; donors can only help by providing resources (where they are scarce), technical advice, and incentives for better governance. But Pakistan is allergic to conditionality, as the IMF and World Bank have learned to their eternal sorrow, and perhaps allergic in the body politic to transformation itself. But in the political blowup of 2011, KLB was DOA (dead on arrival).

The USAID inspector general said, according to press reports, that KLB did not meet its long-run development objectives because of the short-term political objectives of the State Department.

Bangladesh has had the good fortune to have an unshackled and vigorous entrepreneurial class which has led in economic growth

What were those long-run development objectives?

The press reports were not clear, but health and education seem to have been among them. Experts believe that there are really two options for long-run development assistance in Pakistan: Mega-billion infrastructure projects such as dams, which take up to 10 years to complete and have to be ring-fenced to ensure completion, and which, while yielding some economic benefits to the economy and society, often have the effect of condoning poor governance and minimal transformational effects; and, second, projects which directly or indirectly require an improvement of governance and which often use conditionality as an incentive.

Health and education certainly would fall in this category. But when short-term political needs intervene, conditionality is usually eschewed.The press reports note that the State Department’s focus was on energy and stabilisation for short-term impact. Given the political situation in 2011 and 2012, one can understand the search for short-term positive impact.

One unusual part of this story is that the USAID Mission in Pakistan is disputing the inspector general’s report. The essence of its argument is that USAID and the State Department have worked in tandem in KLB to achieve both its long-term and the short-term objectives in Pakistan.

This argument is that the short-term and long-term do not conflict but complement each other. This is possible if the long-term programs will produce better governance in health and education (if those sectors are where they are focused). Reports from the field are not encouraging on this, but long-term means long-term -- they might not be apparent yet.

Of course, there is the larger problem of whether economic assistance works at all. There is a school of economists led probably by William Easterly who don’t say it won’t work, but do say that it hasn’t worked so far.

Since the 1960s, says Easterly, the West has spent somewhere around $3 trillion on economic assistance, and a billion people in the developing world still live in poverty. Over $600 million in assistance has been provided to Africa, and that continent remains mired in poverty, sickness, and misery. Easterly writes that the keys to making it work are feedback and accountability, but what we get (like the above) are the aid-givers evaluating themselves. And the other key is to help people help themselves.

That must be the objective of assistance programs.

There remains the question of the effect of aid programs on domestic political accountability as some political economists and political scientists believe that aid inhibits its recipients from being able to determine good from bad leaders. The only rigorous test of this that I know of was, believe it or not, in Bangladesh.

This test showed that the problem does not exist when there is no uncertainty as to the source of the assistance. Bangladesh may be a bad example, however, as it has been a field of aid innovation since the 1970s and the many indigenous NGOs provide a link to aid givers that is not present in countries in which the link is mostly with government. Bangladesh has had the good fortune to have an unshackled and vigorous entrepreneurial class which has led in economic growth, and a large NGO sector which provides the social services the government has no time for.

William Milam is a Senior Scholar at the Woodrow Wilson Center in Washington DC, and a former US diplomat who was Ambassador to Pakistan and Bangladesh. This article was previously published in The Friday Times.