Open Letter to Mosharraf Zaidi on foreign aid

Dear Mosharraf sahib,

On Wednesday, you wrote on Twitter that, “$127 million would have really transformed the Punjab. A whole dollar & forty one cents for each of its 90 million residents.” I agree that that giving 90 million people $1.40 each is not going to change anything. I am confused as to why you characterised aid this way, though, because that’s exactly why aid is not distributed this way.

If $127 million was simply being divided by the number of citizens and given in cash form, it would have very little utility. Rather, aid is distributed in a way that maximizes utility by investing in something like a $16 million grant to a hospital which will provide much more than $1.40 in value to the individuals it services. Those grants, unless I am mistaken, are not intended to constitute transformative change for the poor in Punjab, they are intended to increase the availability of medical care to the poor in Punjab. $16 million may not be sufficient, but it’s hard to argue that it’s not necessary.

According to an Associated Press report last week, the poor are suffering because of a political decision to refuse US aid.

U.S. aid could have transformed Pakistan’s largest maternity hospital, where rats run through the halls, patients sleep three to a bed, women who require C-sections aren’t getting them because only one operating room is functioning, and premature babies risk death because of a shortage of incubators.

That $16 million block grant may not have constituted transformative change for all the poor in Punjab, but it certainly would would have for the families of those who lost their babies due to lack of facilities.

The $16 million offered by the U.S. would have been used to purchase 10 incubators, build a new 100-bed ward and expand the nursery and emergency facilities, said Sharif, the hospital administrator.

I know this what not your intention, but I worry that sometimes we lose sight of the fact that frustration does not feed the hungry, and ghairat does not build hospitals. As easy as it is to say that we should sacrifice all to prove a point to the Americans, we are we really saying that we are willing to sacrifice ourselves? Or are we merely willing to sacrifice our poor?

Your other point is valid – that government inefficiencies result in a lower than optimal utility of aid dollars. But this is not unique to Punjab government, or even Pakistan government. All governments struggle to maximize returns on budget spending. The ‘Occupy Wall Street’ protests are, in part at least, a sign of Americans frustration with their own government having budget priorities that don’t maximize value.

Though incompetence and even corruption undoubtedly plays a role, there are certainly other factors that may play an even larger role. In energy and health care, are we using the most efficient technologies available? What is the impact of security concerns on investor decision-making? What is the impact of perceived political instability? Is corruption simply a matter of personal greed, or are there demographic and cultural characteristics that create inefficiencies in resource allocation and distribution?

Local, provincial and national governments all have certain challenges that they face, priorities that must be weighted, and interests that must be considered in determining how to allocate budgetary spending. It’s a complicated and thankless task, which I think you understand better than I. That’s why I get so disappointed by casually dismissive statements like this.

Rather than belittling the amount of aid or government incompetence, I would like to hear more discussion about specific ways to increase budgetary efficiencies and maximize utility so that what is presently merely necessary can move towards becoming sufficient. Providing actionable policy recommendations is much more likely to lead to transformative change than complaining about the status quo, and it will give those of us who look to experts like yourself for guidance a reason to look hopeful to the future.

Kindest Regards,

Mahmood Adeel

Economic Consequences

In its editorial of Wednesday, ‘Change of tone‘, Daily Times makes an important point that is not getting enough attention in the latest round of anti-American fist-waving. What is the economic impact of this behaviour?

The cost of the downward spiral in US-Pakistan relations has already sent shock waves through the economy. The stock exchange plunged amidst fears of a breakdown in relations, the rupee floated to around 90 to the dollar, partly because of the ‘dollarisation’ currently underway amidst fears for the future. These negative signals should give pause to all stakeholders to reconsider their fiercest belligerence against the US. We may not like much of what Washington does or even how it does it. But it is not only the US that has constraints so long as it is engaged in Afghanistan. We too have considerations to weigh, first and foremost the struggling economy and the future of a rescue sans US aid and goodwill.

Leaving aside for the moment the unquestionable foolishness of thinking we can defeat an American attack*, we need to consider what impact this anti-American drum beat is already having on our nation.

Yes, Hamid Gul and Ansar Abbasi are crowing about ‘national unity’ behind hating America; and Imran Khan calls for officials to refuse US aid from his sprawling Bani Gala mansion; and self-appointed patriots blog from their AC apartments in Dubai about how cutting ties with the Americans will magically revive the Mughal Empire.

But let’s set aside fantasy fiction and for a moment. Even if Pakistan refuses the billions in aid provided by the US, what about the $5 billion in trade between the US and Pakistan? Are we ready to give that up as well? What about the $1.8 billion in remittances that were received from Pakistanis working in America? Do we expect American companies to look kindly on Pakistani job applicants if we declare war on them? American aid might be ‘peanuts’, but a billion here, a billion there – pretty soon you’re talking about real money!

I know, I know. The cost of war greatly outweighs the meager sum we receive from the Americans. The security situation in Pakistan now is scaring away investors. Who is going to invest in Pakistan once the Americans are gone? Oh, yes, China. But actually, China only accounted for 4.4 per cent of exports last year compared to America’s 15.9 per cent. And even though American aid to Pakistan is ‘peanuts’, Chinese aid amounts to only 3 per cent of those peanuts. Just shells, really.

I know that we are all frustrated. We’re sick of the bloody war and would like an easy solution with a clear villain to blame. But the situation is much more complex than that, and we need to be realistic about the consequences of our actions. The Daily Times is spot on:

Emotion may be cathartic, but it is rarely a good substitute for calm, considered policy, especially in the delicate position Pakistan is placed in, and the fact that the country the gung-ho amongst us want to take on is the sole superpower in today’s world. Not only should the current furore be cooled, diplomatic efforts must find ways to continue to enjoy, if not the goodwill and friendship, at least the tolerance of the US. Any other path will damage Pakistan immeasurably.

If you want to know the alternative, just look at how Afghanistan ended up.

*Spare me the comparisons of an American-Pakistani stand-off to Battle of Badr, please. I know my history, and I also know that the kafirs in 7th century Arabia did not have F-117A Nighthawk stealth aircraft armed with GBU-27 laser guided bunker buster bombs and submarine launched inter-continental ballistic missiles.

US not cutting aid – Another non-story

US not cutting aid

If your rich uncle offers to pay your school fees and you tell him that you want to take some time off, he’s not going to send you the money anyway. It doesn’t mean you are abandoned to your own fate, it just means that the money is for school fees, not a gift for you to spend as you please. Such a scenario happens every day, and no one is surprised. So why is it that we act surprised when the US says that its not going to pay for certain anti-terrorism operations if the military isn’t ready to carry them out?

This latest chapter in the drama started when The New York Times reported that the US is deferring millions in aid to Pakistan. Immediately I began to hear reactions about how the US is abandoning us just as they always do. But look at what the report actually said.

This aid includes about $300 million to reimburse Pakistan for some of the costs of deploying more than 100,000 soldiers along the Afghan border to combat terrorism, as well as hundreds of millions of dollars in training assistance and military hardware, according to half a dozen Congressional, Pentagon and other administration officials who were granted anonymity to discuss the politically delicate matter.

Some of the curtailed aid is equipment that the United States wants to send but Pakistan now refuses to accept, like rifles, ammunition, body armor and bomb-disposal gear that were withdrawn or held up after Pakistan ordered more than 100 Army Special Forces trainers to leave the country in recent weeks.

Some is equipment, such as radios, night-vision goggles and helicopter spare parts, which cannot be set up, certified or used for training because Pakistan has denied visas to the American personnel needed to operate the equipment, two senior Pentagon officials said.

And some is assistance like the reimbursements for troop costs, which is being reviewed in light of questions about Pakistan’s commitment to carry out counterterrorism operations. For example, the United States recently provided Pakistan with information about suspected bomb-making factories, only to have the insurgents vanish before Pakistani security forces arrived a few days later.

In other words, the aid isn’t being cut. The generals have made a decision that it is in the national interest not to carry out certain operations at this time. Maybe this is because the military is stretched too thin, maybe the generals believe there is not enough popular support. Either way, the result is that American funds that were tied to these operations will be put on hold also. But the money isn’t being “cut” and it isn’t going away.

White House Chief of Staff Bill Daley told ABC TV that the money was only being held back until the two nations could come to agreements about operations that the funds can be used for, even praising Pakistan’s sacrifice and saying that the money has been “committed”.

Speaking on ABC’s This Week programme, Mr Daley accepted that Pakistan had been “an important ally in the fight on terrorism. They’ve been the victim of enormous amounts of terrorism”.

He added: “It’s a complicated relationship in a very difficult, complicated part of the world. Obviously, there’s still lot of pain that the political system in Pakistan is feeling by virtue of the raid that we did to get Osama Bin Laden, something that the president felt strongly about and we have no regrets over.

“Until we get through these difficulties, we will hold back some of the money that the American taxpayers have committed to give them.”

More importantly, and this seems to be getting completely lost in the discussion, is the fact that this announcement affects no civilian aid. Regardless, I continue to hear that the US is cutting one-third of its aid to Pakistan. That is not true. The funds being discussed are actually only specific military aid as is clear from the original report in the New York Times.

Army spokesman Gen Abbas issued a statement that the military is capably of fighting without American assistance. Of course it is. The American assistance is helpful in off setting costs associated with joint anti-terrorism operations on the Afghan border, but it is only a drop in the bucket of the full $6.41 Billion military budget.

Pakistan has plenty of resources to defend its borders. Now, I might argue that this money can be better spent by re-focusing on immediate rather than hypothetical threats, but that is for another post. The point is that the national security will be looked after. And neither is the US abandoning Pakistan – far from it. No cut has been made to the civilian aid package which is arguably far more important as it can be used to improve the lives of ordinary Pakistanis. And military aid that is not related to the operations that are on hold is still flowing.

Officers and officials of both countries should be able to make decisions based on their own national interests and legal requirements of their own countries. This doesn’t mean that relations are falling apart or that worst fears are being realised. We have to stop evaluating everything with emotions and use reason instead. Doing so in this case will save a lot of heartburn.

China, a friend, shouldn’t be our fantasy

The fanfare over PM’s visit to Beijing comes as little surprise. Frustrated with our most allied ally in the West, there is understandable reason for people to see some hope in the East. But I worry that we are making the same mistake with China that we make with US – expecting a benefactor and not a friend.

Our relations with the US go up and down as the US grants aid or assistance and expects something in return. We look to China which seems to expect less – but gives less also. But there is another point that must be examined more closely which is whether China really expects less in return for its friendship.

Consider the recent US raid over our borders. Many people are furious at the US for this unilateral action, but China also praised the US operation that killed Osama bin Laden.

“We have noted the announcement and believe that this is a major event and a positive development in the international struggle against terrorism,” Foreign Ministry spokeswoman Jiang Yu said about the White House’s announcement that bin Laden, the al Qaeda leader who orchestrated the September 11 attacks, was killed in a U.S. raid, Chinese newspapers reported on Tuesday.

This is no surprise. China’s position on terrorism is basically same as US.

In the eyes of the Chinese government and people, bin Laden was a terrorist ringleader,” said Guo. “But I do think we have to understand that his death does not mean the death of al Qaeda — there’s still the real risk of counter-attacks.”

China is a member of the 15-nation U.N. Security Council that on Monday welcomed the news “that Osama bin Laden will never again be able to perpetrate such acts of terrorism”.

“China has always opposed all forms of terrorism,” said Jiang. “China advocates that the international community enhance international anti-terror cooperation and adopt comprehensive steps to treat both the symptoms and the root causes of terrorism.”

Actually, China – an athiest nation – has been concerned with the Muslims community of Uighurs in Xinjiang, many of which are training with Taliban and other militant groups. We can help China to suppress these groups, but at some point we will be faced with the same problem as we are with the US – our “ally” requesting us to “do more” while militant groups attack us demanding that we do less. This is something that journalist Huma Yusuf has warned about for years.

Uighur extremists and members of the outlawed East Turkestan Islamic Movement have already been blamed for sporadic terrorist activities. But if a militant movement that can trace its roots to Pakistan gains momentum in Xinjiang, the ire that Beijing is currently venting on the Uighurs – by detaining 1,400 of them, closing down mosques and upholding economically repressive policies – could be unleashed on Islamabad instead.

Will be then be complaining about Chinese requests to “do more”? Or will we see dark clouds gathering on our “all weather friendship”?

And it’s not only security matters that we need to be realistic about. We also need to recognize that the reality of our economic friendship with China is not going to be radically different from our economic ties to any other power. Farrukh Saleem explains perfectly that China is a friend, not a benefactor.

Gilani is in Beijing with the biggest begging bowl Jiabao has ever seen in his sixty-eight years. Historically, the highest grant assistance that comes to Pakistan comes from the US that contributes around 38 percent of our entire grant pool. Next comes Saudi Arabia that donates 19 percent followed by the UK at 18 percent and Japan at 8 percent.

Jiabao will not give what Gilani wants — budgetary support. China has foreign exchange reserves of over $3 trillion and Gilani is asking for only a couple of billions but China, as a matter of policy, does not dole out dollars for budgetary support.

China built the 1,300 kilometres Karakoram Highway and China doled out $198 million for the Gwadar Port. Jiabao is willing to invest even more in Pakistan’s infrastructure but Jiabao will not give what Gilani is asking for.

Gilani has air defence equipment — especially for our western borders — on his agenda as well. To be certain, Pakistan is critically short on modern air defence systems. Our man-portable air defence systems, like FIM-92 Stinger and FIM-43 Redeye, depend on the US manufacturers. Our Oerlikon 35mm twin cannons have an effective range of only 4,000 meters.

Since 2004, Uncle Sam’s MQ-1 Predators and MQ-9 Reapers have been raining hellfire missiles into Pakistan’s wild west. So far, there have been a total of 241 strikes and some of those strikes have killed IMU (Islamic Movement of Uzbekistan) fighters along with Uighur militants. Would Jiabao help Pakistan down a drone? Would Jiabao go against the rest of world to help us out?

PM’s mission in Beijing is to secure important agreements to aid our economic and military needs. This is a vital task. But we should not mistake our friend China for our fantasy China. Pakistan should be working to make agreements with all the world powers so that we can increase trade and improve our security. This idea that China will replace the US is basically Cold War thinking in which there are two sides to play against each other. But the Cold War is over. In the post-Cold War world China and the US are friends despite their differences, and we need to have good relations with both. Pakistan needs strong ties with China and strong ties with the US also. What we don’t need is another fantasy setting us up for a future in which we find ourselves left with no friends left at all.

Comprehensive Economic Package for NWFP, FATA

Prime Minister Yousef Raza Gilani has unveiled a plan for economic revival for the long-suffering NorthWest Frontier Province and nearby tribal areas.

The package is divided into three components — fiscal, banking and insurance — for businessmen, traders and farmers of the NWFP, Fata and Pata (Provincially Administered Tribal Areas).

The comprehensive aid package illustrates the following:

  • The government fully understands the economies of these regions have been prevented from progressing in positive directions due to the violence and militancy of extremist groups.
  • There can be no doubt that this is truly a package that recognizes how to work with the local economies. Relief measures in the package include exemptions from different taxes, reduction in mark-up rates on small loans and writing off agricultural loans.
  • The government hopes to revitalize the nation’s economy whilst also working towards anti-terrorism. Providing such a well-conceptualized and pragmatic economic package will do tremendous good in the coming years, as it will open the doors to opportunity for many Pakistanis.

The sheer necessity of such a policy, and the long-term hopes for development of these areas makes this a very promising package.