Aid to Pakistan: Advocacy or Analysis?

By Anjum Altaf

Beyond Bullets and Bombs is the title of the latest report on aid to Pakistan from the Center for Global Development in Washington, DC. In light of the increasingly anti-Pakistan sentiment in the U.S., the report, addressed to decision and policy makers in Washington, takes on the brief to make the best possible case for the continuation of aid. Hence the subtitle: Fixing the U.S. Approach to Development in Pakistan. The report is a revealing illustration of advocacy over analysis; a more open examination would have begun by questioning the impacts of U.S. aid to Pakistan, before deciding if the total benefits of “fixing” it exceeded the total cost to both sides.

It is to the report’s credit that it is forthright and includes all the relevant pieces of information, but the way it uses that information is determined by the choice it makes. What is highlighted or slighted is entirely a function of the case that is to be advocated, and all the evidence in the report could be interpreted quite differently in order to support quite different conclusions.

The point of departure, based on a review of the history of development assistance to Pakistan, is an uncontested matter of fact: “Since 1960, all OECD and multilateral creditors have given an inflation-adjusted total of over $100 billion in development assistance to Pakistan.” The report goes on to note that there is precious little to show for this assistance, mentions all the problems of the moment, and concludes: “None of these problems—in the power, education, and water sectors, or on the fiscal front—will be resolved unless Pakistan’s political institutions and leaders can tackle them head on.”

It would seem that the obvious question to ask would be, have Pakistan’s political institutions and leaders decided, now or ever, to tackle these problems head on? Take illiteracy as an example, half the population being presently illiterate in the country. Has there been strong political or social opposition standing in the way of its elimination? Could it really be claimed that lack of funds has been the obstacle in the way? Are there not countries at the same level of development where illiteracy has been all but removed? Does it really need foreign aid to remove this blight?

The answer is clear, and the question that ought to follow should be equally so. If Pakistan’s political institutions and leaders have not accorded any importance to this goal, seen either as a basic human right or a prudent leveraging of its human capital, how is more aid going to change this attitude? The report does not ask the question that it itself posits as central to the effective utilization of aid.

The report lists another lesson from experience: “No matter what Pakistan’s international donors do—or how much aid money they spend—it is Pakistan’s own political leaders and citizens who will determine whether their country succeeds.” This is an eminently sensible observation. It follows that in making the case for aid, the report should demonstrate how aid would make Pakistan’s political leaders and citizens invested in the success of the country. This dimension is also left unexplored.

Yet another lesson: “[Aid] money has built dams, roads, and schools, has trained teachers, farmers, and nurses, but it has failed to secure the fundamental economic and political reforms that would foster self-sustaining progress. The lesson is about lack of leverage: aid has not and will not buy the United States or other outside supporters the ability to dictate the outcomes of Pakistan’s political process.” The fact that without fundamental reforms much that was done with aid has become undone illustrates well the conundrum. If Pakistan’s problems cannot be solved unless its political institutions and leaders tackle them head on, if no amount of money can serve as a substitute for fundamental reforms, and if aid has no impact on the outcomes of the political process, what remains of the case for aid?

This becomes especially important in light of the report’s frank acknowledgement of aid’s downsides:  “[it] can directly fuel corruption and create new flashpoints for conflict” and “aid spending can, by plugging fiscal and other holes in the short run for Pakistan, make it too easy for Pakistan’s own policymakers to put off tough decisions.” Looking at the history of foreign aid since 1960, it is hard not to acknowledge that Pakistani citizens have derived none of the purported benefits but suffered all the real negatives of foreign aid. The report does not address how this is going to change in the future.

Having brushed aside the hard evidence without pursuing its implications, the report builds the case for aid on much less convincing arguments: “The underlying premise of the United States’ renewed focus on economic and political development in Pakistan makes sense. A weak state, lackluster growth, and a profound sense of injustice among the people of Pakistan put at risk the legitimacy of the democratic government and undermine its ability to combat extremism and terrorism.” True enough, but what exactly is the relationship of the latter with aid?

The report is left with little to clutch except weak straws and ephemeral arguments based more on hopes than verifiable evidence. Three quotes should suffice as examples. First: “Without exaggerating the importance of U.S. money or diplomatic leverage the United States should focus its development programs to support the many courageous Pakistanis working toward a better future for their own country.”

Second: “Pakistan’s most important resource is its large, highly competent, and well educated middle class that can provide the drive for private-sector growth and policy reform. That group comprises millions of Pakistanis working in the media, academia, public service, and civil society organizations who are dedicated to the idea of a more just and democratic system.”

Third: “At a less visible level, the United States should support the unglamorous but important projects that maintain the machinery of Pakistan’s democracy. Providing, for example, financial and technical support to conduct a technically sound and transparent national census could yield benefits down the road by producing a more representative balance of political power.”

These are desperate arguments. Providing financial and technical support for a census is hardly a credible justification for foreign assistance, nor is the identification and support of courageous Pakistanis a vehicle that can absorb the quantum of aid under discussion. The report is generally lax on exploring the incentive implications of its proposals, but one really has to wonder how it would be any more possible to separate the courageous from the not-so-courageous Pakistanis than it is to separate the real from the not-so-real NGOs that have mushroomed to vie for aid funding.

The assumptions about the middle class themselves remain open to challenge. Quite apart from its characterization as “well educated,” given the curriculum on which it has been nurtured, it cannot be taken for granted as being so dedicated to a more just and democratic system. It has often been argued, on the basis of the Indian experience, that the middle class is in fact authoritarian in its political preferences, while it is the marginalized majority for whom democracy promises to be the vehicle for upward mobility.

The report glosses over many of the generic failings of aid in Pakistan by conflating them with the developments of the very recent past and the emergence of the Af-Pak paradigm: “the integration of development, diplomacy, and defense has muddled the development mission and left the program without a clear, focused mandate.” This may have exacerbated the problems, but the report ignores its own reading of the efficacy of aid at least since 1960. Even when there were no such over-riding issues of security, the utilization of aid remained extremely problematic.

In its eagerness to make the case for aid, it could be argued that the report exploits a similar conflation, this time linking trade with aid. These are separate issues with no necessary linkage. The case for trade has been made many times before and can stand on its own. It addresses a different set of imperatives, and more trade will not solve many of the problems to which aid is directed.

Not surprisingly, the report eschews the critical component of any convincing analysis – a counterfactual, which in this case would be the absence of U.S. aid, against which the benefits of the recommendations could be measured. In lieu of a hard analysis, the report merely mentions the following: “In the case of the U.S. aid program, the $1.5 billion per year in pledged assistance is not an unprecedented aid investment in Pakistan—two multilateral donors have current programs that are larger. It is not a large sum when compared to the size of Pakistan’s economy or its population, translating to roughly $8 per Pakistani per year. In 2010, it would have constituted approximately 5 percent of total federal expenditures. And it is far less than the estimated $11 billion that Pakistanis will send home from abroad as remittances this fiscal year.”

The report then reaches the following conclusion: “To withdraw aid now has its own cost; it would undermine in many Pakistanis’ eyes the legitimacy of their fragile democratic system, and it would deepen their sense that America’s single motive for any kind of assistance or engagement is to forestall its own immediate security risks.”

This can hardly be taken as a convincing argument. In the perception of many Pakistanis, the legitimacy of governance in the country, democratic or otherwise, is positively compromised by the dependence on aid and the implications of that dependence. It is no surprise that political leaders themselves have felt it necessary in recent days to take a position against bilateral aid. Pakistanis also do not subscribe to the presumed absence of linkage between aid and the outcomes of the political process in the country. After WikiLeaks, there remains little doubt that political outcomes can indeed be dictated with or without development assistance.

Both home remittances and foreign direct investment into Pakistan would be much larger if citizens and investors had as much faith in the capabilities of Pakistani governments as articulated by the report. The fact that this is not the case takes one back to the critical importance of the observation in the report that it is Pakistan’s political leaders who have to address these issues. It has to be admitted that they have not made any effort to do so and the report does not posit any reason to expect a change.

Could it be they feel no need to do so because they believe the aid lifeline will never be turned off, a belief that is strengthened by the type of report under discussion? The report is conscious of this downside and struggles with its implications. After all its arguments, it cannot quite recommend business as usual. Instead, it acknowledges the danger and  proposes a half-way solution: “By funding Band-Aid fixes that delay outright crisis and make it easier to avoid necessary but difficult solutions, even well-implemented aid can delay enduring solutions to Pakistan’s most serious problems. 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. For these reasons we recommend that much of the $7.5 billion Kerry-Lugar-Berman aid package not be disbursed immediately. Especially in sectors where serious flaws in public administration are the binding constraints to success, it would be better to backload the bulk of this extraordinary aid investment, to wait until critical policy questions are resolved.”

The report states: “[W]e 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.”  As one mechanism, it suggests “the administration could work with Congress to build a fund (at the World Bank, for example) to finance long-term development programs in Pakistan only when they can be executed well. The United States would continue to supervise the money and retain decision-making power over how and where to spend the aid resources, but could sequester funding that cannot currently be spent well. In the case of energy, for instance, this would mean waiting for the process of reforms to governance and pricing to run its course.”

This makes sense, but it ignores the moral hazard inherent in the suggestion. As long as Pakistani leaders believe that Pakistan is too big to be allowed to fail, it would be in their interest to create situations that would increase pressure to release the aid and speed up its disbursements. This has happened often enough in the past and it remains to be proven that this does not expose Pakistanis citizens to risks graver than those arising from the actual suspension of aid.

But even here, the report manages to suggest a way around its own recommendation: “There is also an exception to our general note of caution—we believe that, even in a sector as difficult as energy, the United States could safely proceed with one or two very large, very long-term infrastructure projects without endangering the current opportunity for reform. A megaproject like the long-delayed Diamer-Basha dam will take an estimated seven to ten years to be completed. In that period of time, Pakistani advocates for a better-governed, better-performing energy sector can be afforded the space they need to finally secure the common-sense reforms that have eluded Pakistan for decades.”

This could be read as an argument for continuing assistance while buying another seven to ten years of continuity. What justifies the hope that Pakistani advocates for the elusive common-sense reforms would succeed this time when they cannot even get a competent professional to head the energy program? After all, Diamer-Basha is not the first dam to be built in Pakistan. If reforms could not be secured in the last ten years, what is there to give confidence that they would be secured in the next ten?

It is hard not to conclude that the report wishes to help Pakistan despite Pakistan because “[i]nstability in Pakistan is both an immediate and long-term threat to Americans’ security.” It has convinced itself, and desires others to be equally convinced, that this time it would be different. In this, it is of a piece with the new aid-funded strategy for the reform of education that it cites with approval: “Education Reform in Pakistan: This Time It’s Going to Be Different.” We have to take their word for it and soldier on, but Pakistanis have heard this phrase several times before.

An alternative reading of the report would suggest that the problem is not with aid in general, but with governance in Pakistan. It is not aid that needs to be fixed, but the governance of the country. The report makes it quite clear that it is not aid that will do so and acknowledges it may be worsening the problem. Yet it proceeds to make the case for aid. And that is what makes Beyond Bullets and Bombs almost beyond belief as well.

The CGD report can be accessed here. Our three-part primer on foreign aid begins here.

With regards to the middle class, a recent survey report (Poverty and Support for Militant Politics: Evidence from Pakistan) provides more details. One of its main conclusions is that “contrary to conventional expectations poor Pakistanis dislike militant groups more than middle-class citizens.”

Aid to Pakistan: Advocacy or Analysis? has been cross-posted on 3 Quarks Daily, Brown Pundits and Asian Window.

CGD acknowledged our critique and responded to it. Our rejoinder is here: US Aid to Pakistan: Response to CGD


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8 Responses to “Aid to Pakistan: Advocacy or Analysis?”

  1. { Brown Pundits } » Aid to Pakistan: Advocacy or Analysis? « TheSouthAsianIdea Weblog Says:

    [...] Aid to Pakistan: Advocacy or Analysis? « TheSouthAsianIdea Weblog. [...]

  2. Aid to Pakistan: Advocacy or analysis? « Asian Window Says:

    [...] The point of departure, based on a review of the history of development assistance to Pakistan, is an uncontested matter of fact: “Since 1960, all OECD and multilateral creditors have given an inflation-adjusted total of over $100 billion in development assistance to Pakistan.” The report goes on to note that there is precious little to show for this assistance, mentions all the problems of the moment, and concludes: “None of these problems—in the power, education, and water sectors, or on the fiscal front—will be resolved unless Pakistan’s political institutions and leaders can tackle them head on.” More: [...]

  3. Given Aid’s Track Record in Pakistan, Why Shouldn’t the United States Scrap It? | Wren Elhai | Rethinking U.S. Foreign Assistance Blog Says:

    [...] the U.S. Approach to Development in Pakistan, comes from Anjum Altaf, a Pakistani academic who represents this viewpoint well. He commends us for observing the poor track record donors have of pushing reform in Pakistan and [...]

  4. Bettina Robotka Says:

    I share your opinion that Pakistan can well do and should do without any aid. This is based on two factors first, the opinion of Pakistani economists like Akbar Zaidi, Musharraf Zaidi and Noor Fatima that Pakistani economy creates enough money and has enough means to develop on its own given the internal circumstances are changed (which can’t be done through foreigners) and second, the opinion of many analysts that aid as such aids the donor countries first and the receiver country last if at all. Therefore I would advise to try without aid and prefer investment and trade instead. On this account we can say that that US is not offering anything like this while China for instance has invested $20 billion in Pakistan in various projects during the last 15 years.

    But I am not an economist; I look at this from the political point of view. And here if we want aid at all we have to acknowledge that any aid in this world is never given without a purpose in the donor’s mind, it has a price tag on it. That is so in case of US who bluntly talk about it, of Germany who are shy to admit it (our previous President had to step down after he had said openly that Germany is securing its economic interest in Afghanistan) and in the case of China who is our ‘best friend’. If we really want aid we then should consider the various price tags and conditions attached and choose those which hurt us least or which match our national interest most. And that is certainly not US aid which admittedly always in all situations serves its own interest first: that is securing and extending their economic, political and military domination in the world and in our case in our part of the world. I don’t think that this is good for anyone except the US itself. Their strategic interest in our region is NOT matching Pakistan’s interest. We do not need them to sort out our relationship with India and even with US help we will not be able to fight and defeat India militarily nor would that solve any of our problems. US presence in Pakistan and Afghanistan is not desirable for us under any circumstances. They should leave Afghanistan and I hope and pray that Afghan Taleban don’t allow them to stay in their country. US interest in Pakistan is just to keep a foot in the door of the region. By sending their aid agencies they will (apart from stealing and cheating like USAID in FATA) do the CIA job. Is that a price worth paying? Can you avoid this happening if you let them (or keep them) in?

    If we really need aid it is better to keep to China and may be diversify by adding contacts with regional neighbors like Iran and Russia but first and foremost sort out relations with India. I know that this is not easy but I think it would pay to invest much more effort into this than we are ready to do right now.

  5. Rug Pundits | SufiLore #9 – exchange rate: $ to PKR Says:

    [...] are for the bin. Earlier mentions of reports on Aid to Pakistan are found here and here. [Blog] Aid to Pakistan: Advocacy or Analysis, SouthAsianIdea, June 9, 2011 Anjum Altaf puts the criticism of the report more bluntly and [...]

  6. Two Small Signs of Progress in Pakistan | Daniel Cutherell | Rethinking U.S. Foreign Assistance Blog Says:

    [...] Easterly and (current CGD’er)  Charles Kenny. However, the sound question that analysts like Anjum Altaf have raised is whether aid is helpful when the question of Pakistani governance reforms remain [...]

    • Anjum Altaf Says:

      Daniel: This argument can be turned on its head. It is hard constraints that force the Pakistani government to initiate reforms. The flow of soft money takes the bite out of the constraints. Any signal that there is desperation to continue the financial transfers would weaken the will to deepen the reforms.

      The case that needs to be made is that it is possible to use aid to further reforms. If there is a convincing blueprint I would buy it. But the case remains to be made. It is far from adequate to pick a few promising signs and use them as justification for the continuation of an aid program.

      I am arguing is that there is need for specific and transparent qualification requirements that would trigger the flow of aid into any particular sector. Is that unreasonable? Should the eligibility be left ambiguous or based on optimistic reading of random signals? We have to ask what keeps the Pakistani government, with or without aid, from taking steps that are clearly in the general interest? And if the government is not prepared to take those steps to qualify for soft money, what is the basis for hoping that unconditional transfers would make a difference?

      Since our earlier exchange with CGD we have posted some further thoughts on this subject:

      http://thesouthasianidea.wordpress.com/2011/07/21/more-ideas-on-aid-to-pakistan/

    • Anjum Altaf Says:

      Daniel: Here are three big and more recent unpromising signs from Pakistan:

      “The government’s inability to implement three major economic policy commitments — limiting fiscal deficit to 4.7 per cent of GDP, introducing integrated value added tax (VAT) and power sector reforms — will lead to technical completion of an unsuccessful $11.3 billion programme with the International Monetary Fund (IMF) on September 30.”

      http://www.dawn.com/2011/09/17/pakistan-to-end-imf-programme.html

      Since this is happening concurrently with development programming, should one walk away from the latter?

      This just reiterates the point that the link between assistance and reforms has to be demonstrated not presumed.

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