The South Asia Channel

Building a marriage: Beyond economic aid in Pakistan

Building a marriage: Beyond economic aid in Pakistan

Last week, Pakistani Prime Minister Nawaz Sharif made his first official visit to the United States since being elected by a strong majority to serve his third term in office.  The word from the White House is that the bilateral relationship is back on track, and the Prime Minister’s public address supports that conclusion.  While Sharif continued to condemn U.S. drone strikes in Pakistan’s tribal regions — remarks that may have prompted the leak to the Washington Post of documents implicating at least some Pakistan government officials in secretly endorsing the program — he also expressed a desire for cooperation on critical issues such as increased trade and foreign investment in Pakistan, cooperation with India, and a willingness to pursue difficult reforms outlined in the recent loan package from the International Monetary Fund.  In exchange for the Prime Minister’s willingness to play nice, the United States government released $1.6 billion in military assistance to Pakistan that had been held up since 2011. 

A renewal of military aid will, for the time being, shore up the relations between Washington and Islamabad.  But military aid will not help Pakistan deal with the daunting development challenges it faces: the loss of its territorial integrity to the Taliban and other groups; the rise of sectarian conflict; high youth unemployment; ongoing power blackouts; underfunded health and schooling services; potentially catastrophic water problems and agricultural losses to soil salinization; and a hopelessly low level of tax revenue for the state to address these challenges.

So what about economic development aid, which continued to flow over the last two years as envisioned in the Enhanced Partnership with Pakistan Act (better known as the Kerry-Lugar-Berman bill)?  Washington reported real progress in the aid program toward achieving important medium term goals, but U.S. economic aid, even at 10 times the current levels, cannot serve as a substitute for the decisions and political will the civilian government of Pakistan needs to provide — whether increasing energy tariffs to attract desperately needed investment in the power sector, or raising and collecting taxes on the country’s small but powerful elite.

One point of economic aid is to enable the United States to work alongside Pakistan’s civilian government in tackling its considerable challenges, working as a partner and building the sense of shared understanding and trust that can spill over into cooperation on more sensitive security and anti-terrorism issues.  That is the vision Richard Holbrooke, the first Special Representative for Afghanistan and Pakistan had, and we believe it is a vision that can still animate the U.S. approach. 

Though the current aid program is handicapped by U.S. government mandates to track money instead of results, red tape, security constraints on U.S. staff working in Pakistan, and the difficulty of shifting management of programs from U.S. contractors to local Pakistani institutions, it can be fixed. At least equally, if not more, important, the United States has other tools in its development toolbox beyond traditional aid.  These include mechanisms that facilitate trade, such as providing duty-free, quota-free access to U.S. markets, and unleashing the Overseas Private Investment Corporation to encourage private investment in the country’s small and medium-sized enterprise sector and its beleaguered energy sector

U.S. officials are already deploying some of these tools, but to ensure they constitute a coherent development program rather than a haphazard set of projects, we recommend that the State Department and the government of Pakistan establish a formalized Development Dialogue.  This should be a discrete component of the Strategic Dialogue Secretary of State John Kerry has agreed to host by March 2014.  Discussions could focus on ways to forge a long-term partnership between Pakistan’s civilian government and the U.S. government, including but going well beyond traditional aid. 

To use the marriage metaphor often invoked to describe the relationship between the United States and Pakistan, a Development Dialogue could help build the resilience that any healthy marriage needs to withstand life’s trials and tribulations.  It could bolster the countries’ vows to work together in good times and in bad by insulating the development agenda from often competing security and diplomatic objectives.  And if successful, it could lead to more times of health and fewer times of sickness — both for the U.S.-Pakistan relationship, and the people of Pakistan.

Nancy Birdsall is the founding president of the Center for Global Development. From 1993 to 1998, she was executive vice president of the Inter-American Development Bank and previously served 14 years in research, policy, and management positions, including director of the Policy Research Department, at the World Bank.

Alexis Sowa is a senior policy analyst at the Center for Global Development focused on the organization’s ongoing work on Pakistan and contributing to the Oil-to-Cash initiative. She has worked as a governance advisor in Liberia with the Africa Governance Initiative and as a program and policy manager at Malaria No More UK where she identified, developed, and managed investments in sub-Saharan Africa.