The Cable

Kerry and Lugar introduce new investment fund for Pakistan

Senate Foreign Relations heads John Kerry and Richard Lugar have put forth a bill that would create a new fund to lure private enterprise to Pakistan, using funds out of their own aid bill. The idea is to use money to help drive capital and foreign direct investment into Pakistan. It’s based on similar programs ...

Senate Foreign Relations heads John Kerry and Richard Lugar have put forth a bill that would create a new fund to lure private enterprise to Pakistan, using funds out of their own aid bill.

The idea is to use money to help drive capital and foreign direct investment into Pakistan. It’s based on similar programs Congress has funded in other parts of the world, such as the Support for East European Development (SEED) Act and the Freedom Support Act (FSA), which authorized nearly $1.2 billion for USAID to establish funds throughout Central and Eastern Europe and the former Soviet Union.

"The United States can help the Pakistani private sector provide jobs, opportunity, and hope to Pakistanis using creative tools such as this Enterprise Fund," Kerry said in a statement July 30. "It’s a clear example of how the Kerry-Lugar-Berman aid package can help make a real difference in stimulating growth in Pakistan based on the remarkable results we have had with similar funds in Eastern Europe and elsewhere."

Last Friday, The Cable reported that the fund was outside of the administration’s plan for the Kerry-Lugar aid money. But several administration officials told The Cable that the fund was something the administration has been working on for months and that they completely endorse Congress’s efforts to pass legislation to support it.

"Creating an enterprise fund for Pakistan has been a priority for months in the administration and big part of our strategic dialogue with Pakistan," said Vikram Singh, a top advisor to Special Representative Richard Holbrooke. "We have had very productive consultations with Congress on the legislative framework that would be required for such a fund. We are grateful to Senator Kerry and Senator Lugar for their leadership with this bill and hope the House will also support such a fund to help build Pakistan’s vibrant private sector."

On her recent trip to Pakistan, Secretary of State Hillary Clinton announced a set of big projects focused on building up Pakistan’s ailing energy, water, and agriculture sectors. The administration’s idea is that focusing on large infrastructure investments is the best way to have regular Pakistanis notice the U.S. assistance and therefore provides the best chance of winning over the country writ large.

According to the original bill, the money was to be spent primarily in five areas: building democratic institutions, expanding the rule of law, promoting economic development, investing in education, and strengthening public diplomacy. These are admittedly difficult and ambitious goals, but the administration’s focus on infrastructure doesn’t really get at them at all, some on the Hill are saying.

A committee staffer wouldn’t comment on the Senate’s position regarding the projects already announced, but said the committee sees the enterprise fund as something that can go alongside the administration’s initiatives.

"This is another tool for them to consider how to spend the funds, it’s not meant to micromanage the process in any way or to show umbrage at what the administration is doing," a committee staffer told The Cable.

Another committee aide who worked on the bill said that some in Congress are opposed to the kind of big infrastructure projects that the administration has been rolling out and sees the enterprise fund and other coming congressional initiatives as a way for lawmakers to reassert their influence over how the money is being spent.

Mary Beth Goodman, Holbrooke’s top economic advisor, who has taken the lead in the enterprise effort, said that the administration needed congressional authorization because it was a multi-year program. The goal is to put $60 million per year for five years into the fund, she said.

"Pakistan needs the up-front risk capital to spur investment, and we hope to use the enterprise funds in a variety of sectors to facilitate that effort," she said, adding that the Pakistani finance ministry was also on board.

 Twitter: @joshrogin

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