Last week, the Government of Pakistan hosted officials from the United States and more than 30 donor countries and multilateral agencies in Islamabad for the Pakistan Development Forum.  The big news from the two-day event was the announcement that the United States would  accelerate disbursement of $500 million in previously committed aid to help Pakistan meet its flood rebuilding needs.  (This pledge is above and beyond the more than $500 million the United States had previously committed to the immediate humanitarian needs from the flood.)  What officials did not announces is what the US flood aid will be used for.  My CGD colleagues Alan Gelb and Caroline Decker have recommended one proposal that the U.S. policymakers are currently considering: directing up to $500 million to finance a housing capitalization fund for flood-affected households.

The costs of the floods are enormous.  According to the World Bank and Asian Development Bank’s assessment, overall losses top $10 billion, with reconstruction needs for public infrastructure alone costing some $3 billion.   In response to these needs and to help flood victims rebuild, Ambassador Richard Holbrooke, the U.S. Special Representative for Afghanistan and Pakistan, announced that the United States will accelerate disbursement of up to $500 million of the $1.5 billion in Kerry-Lugar-Berman funds already committed for this year.  Along with Senator John Kerry, we applaud the administration’s decision.  As we explained with Nancy Birdsall in a special Foreign Policy feature last month, this flood-damaged infrastructure is now the main constraint to long-term economic growth, stability and poverty reduction in Pakistan.  We called for the bulk of the already appropriated (but mostly still unspent)  Kerry-Lugar-Berman aid to be repurposed to meet the flood rebuilding needs — spending that we consider a smart, long-term development investment.

How best can the U.S. special commitment of $500 million support a swift, effective recovery for the flood-affected victims who need it most?    At the forum, Ambassador Holbrooke did not specify how the U.S. aid money will be used, noting only that the administration will work in “close consultation with Congress” “to ensure that U.S. assistance is aligned to Pakistani priorities.”

Our colleagues Alan Gelb and Caroline Decker have recommended one idea that the Congress and the Obama administration are carefully considering.  In the Hill’s Congress blog two weeks ago, they write that the United States could usefully provide up to $500 million to finance direct payments to the millions of flood-affected households through a housing capitalization fund.  The government of Pakistan is already distributing machine-readable, biometric smartcards called “Watan Cards” to flood-affected households—with U.S. financial support, these households could be given enough to begin to rebuild their homes, replace lost property, and recapitalize their farms. The United States is notoriously slow in moving money for traditional projects, such as rebuilding public infrastructure like roads, bridges, and electricity. Since these investments take time, the Obama administration should move quickly to finance the housing capitalization fund, which would put households’ recovery in their own hands with little delay. Gelb and Decker point out that similar systems have been used successfully in a number of developing country contexts, even in extremely difficult conditions.

The housing capitalization fund idea reflects good development practice.  It also reflects the first priority of Pakistani Finance Minister Abdul Hafeez Sheikh, as delineated in his plenary speech at the development forum last week:

“The government has approved a programme… first and foremost to get money into the hands of our citizens who have lost their livelihoods, who have lost their homes, who wish to get started.  Rebuilding their lives must become the first priority, and they have become the first priority.  The government has decided to allocate 100,000 rupees (approximately $1,200) for every family that has been affected and the amount of 160 billion rupees would be required for that, 40 billion have been allocated, and are being distributed in a transparent, fair and rigorous method.”

There is one last feature of the proposed fund that merits attention.  Were the United States to want to “brand” its aid to ensure that its support is clearly identified, the U.S.-funded cards could easily be marked with an American flag.  We can think of few aid investments better suited to the “hearts and minds” mission — and, importantly, this approach would avoid risking the safety of U.S. aid workers.

In his statement responding to the announcement of redirected funds, Senator Kerry urged the Obama administration to “be as bold and creative as possible in responding to the needs on the ground.”  An announcement of a major U.S. financial contribution to a housing capitalization fund would be just that sort of bold, creative response.

This post also appeared in the Guardian’s Development Network blog.

Five years ago this week, I arrived in Islamabad with a team of donors.  A deadly 7.6 magnitude earthquake had just struck Pakistan, claiming more than 70,000 lives and leaving nearly 2.5 million people homeless.  The international response that I witnessed was swift, and impressive.  Islamabad’s hotels were quickly filled to capacity, as a veritable “Benetton ad” of relief workers, helicopter pilots, aid officials and journalists from across the globe traveled to the earthquake-affected areas.  The United States in particular stepped up in a big way, committing more to the quake relief than any other bilateral donor and earning a temporary boost in popularity as a result.  Today, Pakistan is reeling from yet another natural disaster: flooding so catastrophic that the UN has dubbed it the single worst natural disaster in the institution’s history.   Once again, the United States has led the international relief efforts. Touting the mantra “the first with the most,” U.S. officials have pointed out that the United States has given more to the flood relief efforts than any other single donor country.

Can the post-floods generosity help the U.S. improve its image in Pakistan once again, for any sustained amount of time? Based on the findings of their timely new study, Jishnu Das (World Bank) and Tahir Andrabi (Pomona College) contend that it can. They conclude that such assistance could make an “overwhelming” difference in swaying public opinion in Pakistan. I am less optimistic, for two reasons.  First, conditions in Pakistan today are much less hospitable to the public opinion boost that the authors found after the 2005 earthquake. And second, because the authors asked Pakistanis if they trust foreign people, the study’s policy implications are limited by the reality that trust in foreign people does not necessarily equate to trust in U.S. policy.

The Obama administration’s aspirations of winning the “hearts and minds” of the Pakistani public is well documented.  Today, no other country in the world has a worse opinion of the United States than Pakistan, where anti-American sentiment is fuelled by conspiracy theories and widespread opposition to U.S. drone strikes and American troop presence in Afghanistan. The United States’ dismally low approval rating (recently measured at just 16 percent) limits the political space for Pakistani leaders to implement what is perceived as an American agenda of rooting out Al Qaeda and other extremist groups.

The one exception to this staunchly anti-American narrative in Pakistan is that 6-month period following the October 8, 2005 earthquake in Pakistan’s Kashmir region. Within 48 hours, the first of 24 U.S. Chinook helicopters arrived to deliver food and relief supplies to the mountainous terrain and to transport the injured to medical facilities. As relief arrived, U.S. popularity soared. One poll showed a doubling of U.S. popularity, from 23 percent approval in May 2005 to a striking 46 percent in November 2006, one month after the earthquake.  Newspapers heralded the impact of what they termed “Chinook diplomacy” as one of the “most significant hearts and minds successes so far in the Muslim world.” In fact, the very premise of the Kerry-Lugar-Berman legislation which authorized a tripling of economic assistance to Pakistan was to recreate this same post-earthquake popularity boost, “ without waiting for a natural (or man-made) disaster.”

Alas, this popularity proved fleeting.  U.S. approval ratings across Pakistan plummeted in a short time – from a high of 46 percent in November, just after the earthquake, to 26 percent six months later. The lesson that the international community drew from the 2005 earthquake seemed to be that humanitarian aid can improve U.S. public opinion across Pakistan for a brief time, but those improvements will not be sustained.

Surveying the damage to homes in the earthquake-affected region

Das and Andrabi’s study, entitled “In Aid We Trust: Hearts and Minds and the Pakistan Earthquake of 2005,” asks a different question: what about the public opinion of those directly affected by the 2005 earthquake and the subsequent relief efforts? Did the humanitarian response of the U.S. and other donors make a sustained difference in their opinion, long after the fact? To answer this question, the researchers went back to the earthquake-affected area in the spring of 2009, four years after the quake struck. They surveyed 126 randomly selected villages in the region, asking detailed questions about trust and the kindness of strangers and of western foreigners.  Their questions included: ‘If you dropped a rupee note equivalent to $12, would (__ group) return it to you?’ ‘How helpful and kind was (__ group) after the earthquake?’ The authors concluded that trust in foreigners went up dramatically as they moved closer to the fault line, where the concentration of foreign relief workers was greatest.  At the fault line, 70 percent expressed trust in foreigners four years after the quake; 40 kilometers away, just 30 percent did. The authors attribute this sustained, long-lasting increase in foreign trust to the “boots on the ground” presence of relief workers.

Writing on Foreignpolicy.com, Das elaborates on what the study’s findings mean for the U.S. assistance program in Pakistan:

The results suggest Pakistan’s “trust deficit” is less caused by deep-rooted beliefs and preferences, nonlocal events such as drone attacks on the Afghan border, or U.S. policy toward Israel. It’s human interactions that change attitudes, and their effects are long term.

While these findings are powerful, the weakness in the authors’ conclusion is that trusting Western people is not the same as trusting U.S. policy and motives. A villager closest to the earthquake fault line may trust an American or Western relief worker who comes to his or her village, for instance, but may still vehemently object to U.S. drone strikes and oppose military action in the FATA region. Yet the survey questions did not ask whether the villagers trusted American policy – an omission that significantly limits the policy implications of the study. Das and Andrabi’s primary policy implication is that exposure to people matter more for attitudes toward people than does broader policy. But since it is attitudes towards policy that matter most to U.S. interests, perhaps the more pertinent question is: does the trust of a western person make any difference in a person’s trust of U.S. policy?  Without clarity on this question, the study’s findings should be interpreted with some degree of caution.

Still, the study’s finding that “humanitarian assistance can change the Pakistani population’s attitude toward foreigners” is encouraging, if not the exact objective of U.S. policy.  Yet even along this metric of trust in foreigners (and not trust in policy), there are at least three reasons why I am skeptical that U.S. humanitarian relief today will have the same public opinion effect as it did five years ago. First, the authors’ key finding is that direct interaction with aid workers is the key to changed attitudes.  Their findings suggested that even moving out ten kilometers from the fault line diminished the impact on trust of foreigners – in their study, by 6 percentage points.  Today, with more than twenty percent of Pakistan under water, the geographic scope of the disaster is simply too great for relief workers to have substantial interactions with the vast majority of those affected. Second, as the authors note and as Andrew Wilder documented in his definitive 2005 study, the humanitarian response to the earthquake was widely regarded as “one of the largest and most effective responses to a natural disaster to date.”  It is hard to imagine that the authors would have found this same sustained positive impression of foreigners had the earthquake relief efforts not been so effective.  Today, given the “clumsy response” of the Pakistan government to the floods and the enormity of the relief challenge, it is not clear that the humanitarian response to the floods will be perceived by Pakistanis as positively as the 2005 earthquake response.

Third, and perhaps most important, in 2005 the widespread perception among Pakistanis was that the earthquake relief efforts were genuine and not motivated by “hidden agendas.” Today, Pakistanis are far more mistrustful of U.S. motives for giving aid.  Consider, for instance, these quite typical newspaper headlines in Pakistan: “U.S. pilots fly Pakistan flood aid to win hearts and minds,” reported the Dawn newspaper on August 10^th.  “$224 million pledged to win ‘hearts, minds” said the Nation’s headline on August 24^th.   Rarely is U.S. aid mentioned in a newspaper article without the term “hearts and minds” right alongside it.  On this point, I wholeheartedly agree with the study’s authors: the more the United States seeks out a public relations boost from its aid, the less likely it is that this will materialize In this context, the “first with the most” posturing of U.S. officials may in fact be counterproductive: the more the United States tries to take credit for their aid and aims to improve its image, the less genuine their motivation will be perceived.  (A Pakistani journalist recently captured this sentiment rather bluntly.  After I reported on the large relief pledge of the United States, he said to me: “Yes, but isn’t it all just too contrived?”)

Das concludes his essay on Foreign Policy’s website with the following insight:

Perhaps, then, the truth about the West’s relationship to the Pakistani people is at root paradoxical: Namely, that it’s easiest for Westerners to win hearts and minds only when that’s not what they’re explicitly setting out to do.

To that I would add a second conclusion.  The only way for the United States to win hearts and minds is to explicitly set out to make real, meaningful change in the welfare of Pakistani people, with clear objectives for results – and then to actually achieve it.

If only that were easy.

It is little wonder that the United States has prioritized education in its aid program in Pakistan.  Pakistan is sitting on a ticking “population bomb,” with a youth population that is unusually large compared to its South Asian neighbors, and growing.  Half of Pakistan’s 185 million-strong population is under the age of 17.   By 2050, conservative estimates predict that Pakistan’s population will grow to 335 million, which would make Pakistan the world’s fourth largest country.  How well Pakistan’s education system prepares its millions of young people for a productive future will profoundly impact the country’s internal stability, security and prosperity.

The status quo, however, foretells a dismal future. By all counts, Pakistan has one of the worst performing education systems in the world.  On the United Nation’s education rankings, Pakistan scored an abysmal 163rd out of 177 countries.  Pakistan has a net primary enrollment rate of just 66 percent – significantly lower than India’s 90 percent and lower even than (much poorer) Bangladesh’s rate of 88 percent. Consider these three startling facts from a superb paper by Sir Michael Barber:

• For each 100 children that begin kindergarten in Pakistan, only one will make it to 12th grade
• Each day, a quarter of Pakistan’s teachers simply do not show up to school
• Over a quarter of Karachi’s 4 million children of school age are not in school at all, which makes Karachi arguably the worst educated megacity in the world

Donor attention to Pakistan’s failing education system is not new.  In fact, as my colleagues and I documented in a recent CGD analysis, the World Bank and other donors spent hundreds of millions of aid dollars to improve Pakistan’s education system and other social sectors in the 1990s.  The results were deeply disappointing. During the decade when the program was implemented, school-enrollment rates stagnated, while enrollment for boys and children in public schools actually declined. Some of the reasons were frustratingly clear: teachers were not hired on the basis of merit,  were frequently transferred from one school to another, and were often simply not present.

Despite this uneven donor track record, today there are several promising trends in Pakistan’s education sector that might provide a window of opportunity for the U.S. aid program.  The first is the success of several recent donor efforts in mobilizing political will in the Pakistani government.  The newly formed Pakistan Education Task Force — co-led by the United Kingdom, the United States, and the Government of Pakistan — is leading the charge on policy and curriculum reforms. At the provincial level in Punjab and beyond, the World Bank has collaborated with provincial ministries to craft effective education sector reform programs.

The second opportunity is the clear parental demand for a good, quality primary education for their children – a demand so great that millions of Pakistani parents are willing to pay for it.  In recent years, Pakistan has witnessed an explosive growth of its secular private schools.  Some estimates suggest that as many as 75 percent of school-attending children in Karachi alone are enrolled in private schools.   Even with less qualified and lower paid teachers, one influential study in Punjab found these private schools in at least this area are on average three times as efficient as public schools from the perspective of cost and learning outcomes.

In her open letter, Nancy delivers five recommendations for what U.S. policies and aid programs would be most effective in strengthening Pakistan’s education sector:

• Improving Pakistan’s education system and learning outcomes depends on how well aid money is spent more than how much the United States spends.  Money alone won’t solve Pakistan’s education problems.  A big push on innovation, transparency, and accountability is key, especially as some portion of the education budget is likely to be redirected for school reconstruction in the flood-affected communities.
• Earlier, we put forth the idea for U.S. and Pakistani policymakers to agree upon a small set of simple indicators to serve as the benchmarks for the success of development programs. As part of this exercise, U.S. and Pakistani leaders should identify and track a single, simple measure of national education attainment to serve as the benchmark of success. For instance, they might choose to track the primary school completion rate or the percentage of children that enter secondary school.
• To build on the positive momentum around private schools and to empower parents to hold schools accountable for results, the United States should consider financing a massive effort to provide information to parents about the availability and quality of both private and public schools. For instance, U.S. assistance could help Pakistan’s federal government finance nationwide student testing.  U.S. aid could also fund other accountability and transparency initiatives that provide parents with information about teacher attendance, school funding, learning outcomes, and other school characteristics.
• The United States could build on the successful efforts of other donors, including by co-financing the World Bank’s provincial-level education programs in Punjab and beyond.  The United States could announce a major U.S.-U.K. partnership on education in Pakistan over the next five years.  This partnership could introduce outcome-based assessments at the district and provincial levels, with an emphasis on school quality and learning results.  Some portion of aid could be used to provide incentives for governments that are willing to make these issues a priority.  One such aid model is a “cash on delivery” arrangement, whereby a provincial-level government in Pakistan would be given a flexible stream of aid based on incremental progress on a fundamental education indicator.  The United States could also consider contributing $50 million to a new innovation fund established by the United Kingdom.  As in the U.S. Race to the Top model, this fund could provide financial incentives to districts or provinces that administer tests and publicize the results.
• The United States should leverage its comparative advantage in higher education to finance investments in advanced training and science and technology education, which equip Pakistanis with skills needed to put the country on a more stable economic path.

Read Nancy’s full open letter here. Thanks to the members of CGD’s Study Group on a U.S. Development Strategy in Pakistan for their suggestions and feedback. What do you think of these recommendations? Leave your comments below or send me an email.

“Heart-wrenching,” said U.N. Secretary General Ban Ki-Moon Sunday upon surveying Pakistan’s ongoing floods.  The U.N. chief called the floods “the worst natural disaster” he said he had ever seen.  The numbers explain why.  More people have been affected by Pakistan’s catastrophic floods than any other natural disaster on record — over 20 million and counting. That’s more than were affected by the 2005 Pakistan earthquake, the 2004 Asian tsunami, and this year’s earthquake in Haiti combined.  As millions of dislocated Pakistanis search for shelter and food and as health conditions deteriorate and disease spreads, the need for an immediate, large-scale humanitarian response is urgent.  And this is just the beginning.  Once the floodwaters subside from Pakistan’s swollen rivers, the task of rebuilding will be staggering – with a price tag in the billions, and lasting for years to come.  The effectiveness of the response to these relief and rebuilding challenges will have serious implications for the wellbeing of the country’s citizens, for the peace and stability of Pakistan and the entire South Asian region, and for U.S. national security.

Despite the enormous scale of the disaster, not enough help for Pakistan’s flood victims is on the way.  The government of Pakistan, completely overwhelmed by the disaster, has been widely criticized for its woefully inadequate relief operations.  Meanwhile, the response from the international community has been stunningly anemic.  Donors’ pledged commitments amount to less than half of the U.N.’s urgent appeal for $459 million in humanitarian relief. In contrast, more than $1 billion was pledged for the Haiti earthquake in the first few weeks after the quake.

Given its national security and foreign policy interests in the region, the United States has the greatest stake in Pakistan’s success, and is responding to the floods with the largest commitment of any donor.  But the United States can and should do more.   President Obama instructed his administration to “lean forward” to support Pakistan.   The United States should do more than lean; it should lead the international community with a majority stake in Pakistan’s relief and recovery.  So far, the U.S. has pledged just $90 million for immediate humanitarian relief.  These pledges have come in bits and pieces-$10 million dollars here, another $30 million there, a shipment of emergency bridges there.  There is no doubt that this funding has provided relief to thousands of displaced Pakistani citizens.  But the total amount is a paltry sum compared to the needs in Pakistan, amounts pledged for other (less catastrophic) disasters, and what’s at stake for the U.S.-Pakistan relations. (For another comparison:$90 million is about what pop singer Madonna paid last year in a divorce settlement with her ex-husband Guy Ritchie.)  This modest response to such massive destruction is unlikely to convince Pakistanis that the United States is standing shoulder to shoulder with them in the face of an unprecedented disaster.

What would a majority stake commitment cost?  If the United States were to commit to funding half of the U.N.’s appeal for immediate humanitarian relief, the bill would be just under $230 million dollars — less than one sixth of the $1.5 billion in economic assistance to Pakistan the U.S. has already committed for this year alone.  To avoid trade-offs between immediate humanitarian needs and the enormous reconstruction and rebuilding needs over the medium to long term, this $230 million commitment for immediate relief should be supplementary funding, above and beyond the $1.5 billion already committed for Pakistan’s long-term development.  Beyond the relief efforts, the United States, like the World Bank, should commit to reprogram at least half ($750 million) in already committed aid to projects directly related to long-term recovery and reconstruction from flood damage.

Why would such a large commitment be in the U.S. interest?  First, because an effective, large-scale humanitarian response could help demonstrate U.S. goodwill to the Pakistan public.  In the aftermath of the 2005 earthquake in Pakistan, when the United States responded swiftly with Chinook helicopters and millions of dollars in relief supplies, Pakistani public opinion toward the United States showed significant improvement, if only briefly.  On the flip side, anything short of a swift, large-scale U.S. response runs the risk of feeding into the narrative in Pakistan that U.S. aid is slow to arrive and does not benefit the country’s people. A recent Pew poll found that 16 percent of Pakistanis don’t believe the United States is giving any aid at all, while another 33 percent thinks the United States gives only a little or hardly any aid. If that $1.5 billion per year commitment cannot be mobilized to bring relief to the millions now in need, Pakistanis might well wonder, then what is it for?

A decisive response would not be simply a public relations gambit. All the reasons the United States had for tripling development assistance to Pakistan through the Kerry-Lugar-Berman bill are now magnified ten-fold, including buttressing Pakistan’s civilian government, improving Pakistan public opinion, enhancing stability, and mitigating Pakistan’s extremist threat. Today, the floods are eroding public confidence in Pakistan’s civilian government, providing an opening for extremist groups, and building an ever-increasing cohort of disaffected citizens. In the Swat valley, many of the families who are now displaced by floodwaters were only last year displaced by fighting between the Pakistani military and the Taliban. Economic assistance was meant to demonstrate to these people that their government is a better partner than the Taliban or other Islamist groups. Those plans are now in jeopardy.

There are few countries in the world that matter more to the security of the United States than Pakistan, and few moments when so many compelling interests — moral, security, strategic, and humanitarian — point as clearly to the need for decisive action and bold U.S. leadership.  An announcement by Secretary Clinton, perhaps at the U.N. conference for Pakistan relief that is scheduled to be held later this week, that the United States will take a majority stake in Pakistan’s immediate humanitarian response would be a powerful signal of this leadership.  And, we hope, such an announcement would be a first step in a long-term investment not only in Pakistan’s peaceful and stable recovery but also in Americans’ safety at home.

A frustrated David Ignatius chided Congress in yesterday’s Washington Post  for its dithering in passing legislation that would create “Reconstruction Opportunity Zones” (ROZs) in Pakistan’s Federally Administered Tribal Areas (FATA).  Ignatius calls the ROZ initiative a “modest boost for the good guys” and laments that it is caught up in a partisan food fight in the Senate.  We share his frustration over the Senate’s inaction, but we are less optimistic about the bill’s potential impact.   In the legislation’s current form (details below), ROZs would at best be a token gesture that would be well received in Pakistan; at worst, they risk having little (if any) economic impact and creating expectations that cannot be met.   If Senators are serious about promoting U.S. national security interests through economic progress in Pakistan, they should be prepared to go to the mat for something that will actually make a difference.  Expanded trade access for all Pakistani exports from all of Pakistan is the best way to ensure a meaningful economic boost to Pakistan’s “good guys.”

If finally passed, the current version of the bipartisan ROZ legislation would expand duty-free access for certain textile and apparel exports from Pakistan’s troubled border region with Afghanistan, as well as areas affected by the 2005 earthquake.  With support from the Obama administration, the legislation passed the House in June 2009.  More than a year later, the Senate has yet to vote on its version.   According to Ignatius, this delay is because of a dispute over labor protection standards that were included in the House bill.  He writes:

“It’s incredible – sickening is a better word, actually – that a parochial business-labor dispute is blocking a measure that is so obviously in America’s national security interest.” 

Ignatius has a point: it is indeed in the security interest of the Unites States to help create economic opportunities in the FATA region – a region that President Obama deemed “the most dangerous place in the world for the American people.”  And, due to the hard reality that FATA is one of the most difficult places on earth to spend aid money well, it is even more important for the United States to look beyond aid for ways to help the Pakistani private sector create new jobs.  From this perspective, trade is one of the most powerful weapons in the U.S. policy arsenal.

However, as our colleague Kim Elliott points out in a CGD note, the ROZ legislation in its current form would have relatively little economic impact in the FATA region.  The bill’s product restrictions, meant to avoid opposition from the U.S. textile industry, exclude half of Pakistani exports, including many in the highest tariff categories.  (Unfortunately, these restrictions are not limited to Pakistani products—U.S. trade policies regularly exclude or heavily tax imports from poor countries.) Kim writes that the proposed tariff reduction is “unlikely to be sufficient to overcome the competitive disadvantages of having to produce in Pakistan’s remote and often insecure border regions.”  She also notes that the legislation fails to exploit the considerable potential for economic growth in Punjab, Sindh and other more urbanized areas of Pakistan. 

CGD president Nancy Birdsall suggests a better plan in her second open letter to Ambassador Holbrooke.  She encourages Congress and the administration to work together to develop and pass legislation for duty free, quota-free access to U.S. markets for all Pakistani exports from all of Pakistan for at least the next five years.  She writes that offering broader access to U.S markets would have a greater economic effect, encouraging diversification and increasing the potential development dividends from trade.

When we mention this proposal, we often hear:  “You’re right, that would be great, but the U.S. textile industry will never let that happen.” However, the beauty of this proposal is that expanding duty-free, quota-free access to all Pakistani exports would have just a “vanishingly small” impact on U.S. producers, according to Kim’s analysis.  Together with colleagues, she has simulated the effects of extending duty free, quota-free access to all 49 least developed countries plus a set of additional countries that includes Pakistan and Vietnam.  The net impact on U.S. textile production for all of these countries is less than a 1 percent reduction; Pakistan’s share is considerably smaller.  This gives us some glimmer of optimism that if Congress were to get serious about the national security implications of expanded economic opportunities for Pakistanis, the negligible impact on U.S. producers would be a hollow excuse not to act. 

So, Congress, we echo Ignatius’s plea to cut through the partisan gridlock and resolve the wrangling over labor issues that are stalling the passage of ROZ legislation.  But if you are going to the effort to do that, why not ensure that the legislation can actually achieve its intended effect, by expanding market access to all products from all of Pakistan?  Without these changes, the Reconstruction Opportunity Zones will be a very nice diplomatic gesture, but don’t count on real development benefits. 

I was pleased to see the following points in Holbrooke’s letter:

1. A commitment to be more transparent. Both Senator Kerry and CGD president Nancy Birdsall called for the creation of an “easy-to-navigate” public website that provides “detailed planning, objectives, and disbursement information.” Holbrooke says “your suggestion of providing more information about our efforts on the Internet is a good one, and we plan on putting more information on the USAID and embassy websites as our plans become more concrete.”  What might a new, improved and more transparent website look like? My colleague Wren Elhai and I have a few suggestions here.
2. The centrality of policy reforms.  Holbrooke states unequivocally that structural and policy reforms in Pakistan (including implementation of a value-added tax and reforms in the energy and education sectors) are paramount to the long-term success of our aid program. It’s clear from donor experience that politically sensitive economy-wide economic reforms are critical. Of course the most pressing question is not whether policy reforms are needed, but how to make those happen. The past experience of the United States and other donors is that outside leverage on domestic policies in a country like Pakistan is limited, even when large sums of money are involved and especially when donors are unwilling to exit, as is almost surely the case for the United States in Pakistan. As just one example, see the dismal tale of donors’ failed attempts to encourage the government of Pakistan to implement urgently needed energy reforms.  The enormity of the challenge suggests that the United States should be modest in its expectations of the leverage it has, and collaborative with other major donors in efforts to engage the government of Pakistan on politically difficult policy reforms.
3. Collaborating with, and learning from, other donors: Senator Kerry urged Holbrooke to work closely with and through the lead donors in Pakistan.  Holbrooke cites multiple examples of U.S. collaboration with Pakistan’s main multilateral partners.  In the energy sector, he points to the U.S. involvement in the Asian Development Bank’s Energy Taskforce and cites the administration’s plans to “pool our resources with the IFIs to the extent possible and appropriate to leverage more reform and more investment in the sector.”  He also references the U.S. collaboration in the UK- and government of Pakistan- led Pakistan Education Task Force. This emphasis on collaboration with other donors is very encouraging.  What remains to be seen is whether the United States will truly work in concert with them, in integrated processes, or whether the sense of urgency on the U.S. side will limit patience for donor coordination, and instead result in the establishment of separate (and possibly duplicative) U.S. processes and policy dialogues in Pakistan.

Here are a few areas where Holbrooke’s letter fell short of what I had hoped to see:

1. Unclear commitment to a long-term focus: Senator Kerry says the U.S. aid program in Pakistan is intended to have a long-term development focus (describing this approach as, “the best investment in the long-term security of the United States and Pakistan”).  Conspicuously, Holbrooke’s response did not.  This omission fuels my concerns about the balance between short- and long-term pressures on the U.S. assistance program in Pakistan. I am eager to hear a strong and unambiguous statement from Ambassador Holbrooke on the priority of long-term development in Pakistan.Beyond words, Holbrooke and his team could further signal this long-term objective by setting a small number of clear, measurable development indicators for the next five years — such as girls entering secondary schools, for instance, or tube wells restored – and goals for annual progress against them.  The message would be clear: the investment of $7.5 billion in U.S. aid in Pakistan is about improving the welfare of the Pakistan population and building a more capable and responsive Pakistani state.
2. Dialogue with the U.S. policy community: Holbrooke reaffirms his commitment to better communicate with the Pakistan public.  Aside from his note about better explaining the U.S. aid program to the American taxpayer, he does not respond to Senator Kerry’s suggestion to reach out to the U.S. policy community with more regular information sharing.  I was disappointed to see this, not just because it makes my job more challenging, but because there is experience and expertise across the development community that could help inform and strengthen our efforts in Pakistan. As we’ve suggested, Holbrooke and his team could host regular forums on U.S. policy in Pakistan, with time carved out specifically on the long-term development strategy for Pakistan.

My ultimate takeaway on this letter: it’s great to see Holbrooke thinking through some of the key challenges to development in Pakistan. It would be reassuring to know that he believes that development is in fact the goal!

Everyone (John Kerry, Richard Lugar, Richard Holbrooke, and, yes, CGD’s own Nancy Birdsall) agrees our aid program in Pakistan needs to be more transparent. Transparent aid can help to counter the widespread mistrust and misinformation about U.S. practices, and could also allow Pakistani civil society to play a role in monitoring how governments and NGOs spend money.  On the other hand, the status quo—a dearth of publicly accessible information on program objectives and spending — “creates confusion and unnecessary speculation in Pakistan,” as Senator Kerry put it, “and limits the potential of the policy community and allies at home.”

In March, CGD President Nancy Birdsall sent an open letter to Ambassador Holbrooke urging the administration to share more complete and timely information about program plans, commitments and actual disbursements.  One specific idea she highlighted was the creation of a public website with ongoing and detailed reporting on the plans, commitments, and disbursements of U.S. aid resources.  Senator Kerry, in a recent letter to Ambassador Holbrooke, suggested much the same thing.

In his response to Kerry, Holbrooke endorsed that idea, writing, “Your suggestion of providing more information about our efforts on the Internet is a good one, and we plan on putting more information on the USAID and embassy websites as our plans become more concrete.”

So, what would a more transparent website look like?

It’s great to see Holbrooke thinking along these lines—and we should give credit to the staff of USAID’s Islamabad mission who have indeed started to put more information on their website. But much work remains. Compare the main information page of the USAID Pakistan website (above) with the Millennium Challenge Corporation’s site on aid to Benin (at right).

The MCC website is one Nancy Birdsall mentioned in her letter as a possible model (along with the Recovery.gov website set up to track stimulus spending here in the United States). While the MCC site isn’t perfect, it does a lot right:

• It is crystal clear about what the program is trying to achieve, who will benefit, when the results are expected, and how much progress has been made thus far.
• It is concise and comprehensive. Without needing to click around and dig through documents, any viewer can get a quick and clear bird’s eye view of the most important information about the aid program – in one webpage.
• It is candid about how much money has been obligated, committed and disbursed.
• The country page includes the name and contact information for the national coordinator in charge, including a phone number and e-mail address.  (While this approach may not be practical in Pakistan, moving towards a more customer service-oriented approach that encourages direct communication between USAID staff and the Pakistani public might help ease the widespread suspicions of the U.S. aid program in Pakistan)

How is this different from the current USAID/Pakistan website?  Here are a few of our concerns about what we see now:

• The current USAID/Pakistan website features the stories of various projects, but lacks a clear narrative about the overarching goals for U.S. aid in each of the key sectors.  Right now the sectoral descriptions read like a laundry list of disconnected projects—and there is no page that gives an overview of the entire U.S. aid program.
• The site lacks up-to-date information on aid disbursements and spending.  For instance on the page “Pre-Service Teachers Education Program (Pre-STEP),” the short description gives no indication of how much money has already been spent, nor whether the program is on track.
• Also, the website fails to clearly identify the intended beneficiaries of the programs, including the numbers and characteristics of those who will be served by the program.
• In a very positive step towards greater transparency, the USAID Pakistan website now posts in depth project documents, budget plans, quarterly progress reports, and longer program evaluations.  However, the documents – which are in PDF form and linked in one long list under “publications” – are not as user friendly as we would like to see.  We imagine simple charts and tables, as on the MCC page above, for the aid program as a whole and for each sectoral program.

It is heartening that USAID and the State Department are striving to improve how they explain U.S. aid spending to Americans and Pakistanis alike. As they do so, however, they ought to think hard about what their audience is looking for. Some viewers may benefit from stories and images of specific beneficiaries of aid programs (heavily represented on the current site). Others may want a good overview of how USAID is planning to spend its aid dollars. Others still may want detailed information on the implementation of specific projects (or information on how they might apply to participate in certain programs). The USAID site would ideally cater to each of these audiences, allowing each visitor to quickly find what he or she is looking for.

What else would you like to see on such a website? What advice would you have for USAID as it revamps and upgrades its Pakistan page?

Senator Kerry’s letter (originally reported by Farah Stockman in the Boston Globe) highlights five areas I hope Ambassador Holbrooke will pay particularly close attention to:

1. Prioritize long-term progress, beyond short-term fixes. Senator Kerry emphasizes long-term development progress in Pakistan:

At the same time, we want to underscore that the (Enhanced Partnership with Pakistan) Act was passed by Congress to support Pakistan’s long-term development progress, on the grounds that doing so is the best investment in the long-term security of the United States and Pakistan.

I have worried aloud in previous posts about the short-term pressures on the U.S. assistance program in Pakistan.  Will the urgency of better U.S.-Pakistan diplomatic relations today compel the administration to go for quick wins, with little lasting impact?  Would this short-term emphasis come at the expense of progress towards a more developed Pakistan two, three, even ten years from now?  In light of this real tension, Senator Kerry’s strong endorsement of the long-term objective of the U.S. aid program is very encouraging.

2. Learn from past donor experience. Senator Kerry repeatedly calls for the administration to learn from past donor experience in Pakistan.   Our own analysis of donor disappointments in the energy sector as well as in health and education suggest it is just plain hard for donors to spend aid money well in Pakistan.  With so much attention and U.S. aid money flowing to Pakistan today, it is easy to forget that the United States had virtually no development presence whatsoever during the entire decade leading up to 9/11.  (See here for a vivid illustration of the dramatic ebbs and flows of past U.S. assistance to Pakistan).   In fact, until only this past fiscal year, the scale of the U.S. aid program even since 2001 was very modest, averaging less than $500 million per year (compared to $1.5 billion/year today).  In the meantime, the main multilateral donors such as the Asian Development Bank and the World Bank have maintained a consistently robust lending portfolio in Pakistan for several decades worth several billions of dollars.  Much can be learned from their experience and on-the-ground perspective.

3.  Be smart on energy.  Pakistan’s energy crisis is a top priority of the U.S. assistance program.  Kerry says:

We must pay careful attention to sequencing: if we have not first tackled these critical policy issues, we dramatically decrease the long-term effectiveness of our larger energy infrastructure investments. Going forward, we should examine previous donor efforts to avoid past pitfalls, understand political limits on the group, and add value to existing reform efforts on the ground.  We hope the Administration will build on the long-standing leadership and work of the major multilateral partners like ADB and the World Bank to have a coordinated approach that better leverages our collective resources with the Pakistani government.  The Pakistani government will also need to take advantage of the domestic energy crisis and calls from its own people for relief to find the political will necessary to resolve the energy crisis if we are to make any real progress.

CGD president Nancy Birdsall recommended similar collaboration between the U.S. and multilateral partners on key policy and institutional reforms in Pakistan’s energy sector.

4. To foster lasting change in Pakistan, press for policy and institutional reforms. Kerry hits the nail on the head: long-term development progress in Pakistan requires greatly needed policy and institutional reforms.  He says:

To achieve long-term progress instead of short-term fixes, we encourage the Administration to think strategically about how we can best encourage policy and institutional reforms across each sector so that Pakistanis see long-term and sustainable benefits as a result of U.S. assistance.

As Nancy Birdsall and I have said before, incremental programs alone—whether for microfinance or other social services—can help people in Pakistan, but will not make a sustainable difference without politically sensitive economy-wide economic reforms and a focus on making government more accountable to people.

5.  Be more transparent. Senator Kerry urges Ambassador Holbrooke to be more transparent about the administration’s objectives, plans and disbursements in Pakistan – a plea that Nancy has also made repeatedly.  Kerry says:

We urge the Administration to build on this approach by being more proactive and transparent with the broader public – both in the United States and Pakistan – on how funds will be spent annually by providing program descriptions and plans and sharing commitments and actual disbursements.  This transparency has been lacking so far.  Much has been made here and in Pakistan about the impact the Act could have on the bilateral relationship.  Yet today, the public has little access to detailed planning on how the funds will be spent.  This creates confusion and unnecessary speculation in Pakistan, and limits the potential of the policy community and allies at home.  The Administration should be fully transparent about how it will spend funds in Pakistan.  Given this Act is the centerpiece of our civilian engagement with Pakistan, without greater transparency, this valuable policy tool could lose much of its impact.

Kerry goes on to suggest the creation of an “easy-to-navigate website that provides detailed planning, objectives, and disbursement information.”  Nancy Birdsall put forth this idea in March in her first open letter to Ambassador Holbrooke, in which she cites the example of the MCC website as a possible model.  As Kerry points out, this level of transparency is important not only for a Pakistani audience, but also for those of us working in the policy community at home.  As my colleagues and I have struggled to obtain accurate information about U.S. assistance in Pakistan, we couldn’t agree more!

Kudos to Senator Kerry and his staff for sending exactly the right message on our aid program. We’ll be waiting eagerly to see if his suggestions are put into place.

As the United States tries to contribute to a solution to Pakistan’s energy crisis, it’s worth looking at what others have done. Not one of the hurdles to a sustainable energy policy is new—and in fact other donors have spent years engaging in this arena. What is new is a sense of urgency within Pakistan, as street protests erupt over rolling blackouts and Prime Minister Gilani calls resolving the energy shortage his top priority.  As Nancy Birdsall wrote in her third open letter to Ambassador Holbrooke, now is an opportune moment to put Pakistan’s energy sector on a solid foundation. As the administration pours in U.S. aid dollars and engages in dialogue with Pakistani policymakers, there is much that the team can learn from the failures of past attempts to reform Pakistan’s energy sector.

We looked back through World Bank and ADB project documents, where the gory details of their (often unsuccessful) efforts are laid out in black and white.  Reading through these documents is an exercise in déjà vu.  Time and again, the documents cite the same problems, the donors recommend the same solutions, the government of Pakistan promises to implement the same reform, the government breaks (and donors lament) the same promises.  And the cycle repeats.  (To experience this “groundhog day” dynamic for yourself, see selected quotes in our background note on multilateral donors’ experience in Pakistan).

Take for instance the critical issue of pricing reform.  Over and over, donors have stressed the need for rationalization of Pakistan’s energy tariff prices.  The Government of Pakistan’s long-standing policy of heavily subsidizing the price that users pay for electricity has proven financially ruinous to the sector and has thwarted greatly-needed private investment. Very roughly, what happens is this: users pay too little (compared to the actual cost) for their electricity usage.  The distribution companies that supply that power are thus unable to pay their bills, including to the central power authority and to power producers and oil importers and refiners. The total debt overhang makes it impossible to buy sufficient fuel oil to run thermal power plants and to attract investment to build new generating capacity. Today, the Government of Pakistan reports nearly $2 billion in unpaid debts within the power sector. Meanwhile, the same users who pay too little are also getting far too little power as brown-outs persist.

To close this yawning gap, donors for years have urged the Government of Pakistan to finally reduce the price subsidies on electricity.  Time and again, donor documents cite Government of Pakistan pledges to do just that.  The problem, though, is that the while the solution is well known to Pakistani policymakers, implementing it is politically very difficult. So despite all of the lip service to reform, the government of Pakistan has simply not been able to muster the political will to follow through and raise the tariff rates to a sufficient level—especially when consumers feel they aren’t getting service that warrants paying more (another vicious cycle).

Over the years, the ADB and the World Bank have made progress in (slowly and painfully) beginning to privatize Pakistan’s major state owned power sector companies and in creating an independent regulatory body (unfortunately often ignored) responsible for setting tariff levels. However, for every victory, there are a handful of defeats to point to.  Read our background note for several specific examples—here is just one short excerpt:

In the early 1990s, the World Bank tried an innovative approach to attract private investment in Pakistan’s power sector. (See here for the full case study). WAPDA (Pakistan’s water and power authority) agreed to be unbundled and eventually privatized, and massive (greater than $1 billion) private power projects were established. The first of these projects – a $1.62 billion power project – won an award for “Deal of the Decade.” The privatization strategy was deemed the “best energy policy in the whole world” by the then US Secretary of Energy. The success was clear: Pakistan was able to attract significant amounts of private capital quickly and efficiently. (This was due in part to incentives: a bulk tariff ceiling was established, a “one stop shop” for investors, fiscal incentives, etc). By 1998, just four years later, the Government of Pakistan was threatening to terminate nearly a dozen independent private power projects and the program was in shambles.

…

Lessons identified by the World Bank from its privatization program in the 1990s:

(a) The failure of the Government of Pakistan to pursue needed policy reforms and structural changes undermined the program.

(b) The World Bank concluded in 2005 that: “there is a strong consensus that private investment is not a substitute for reform, and that significant private investment in generation should not take place in front of reforms which at a minimum address efficiency and tariff policies.”

In 2006, the ADB reached a similar conclusion when examining lessons from its experience encouraging reforms in Pakistan’s energy sector over the past 15 years:

“The reforms, while complex, do not require such long periods to complete.  The means to reduce technical losses and improve financial performances are well understood.  Hence, the outcomes must be viewed more as a failure of implementation of government policy than of ADB strategy….It is clear that the commitment to reform and performance improvement of those working in the power sector has been neither complete nor consistent.”

Is the United States destined to repeat the cycle of dashed hopes and broken promises? We hope this time will be different—that mounting internal pressure from frustrated Pakistani citizens might finally create the political will for the government of Pakistan to act.

For more ideas for how the United States might support a lasting fix to Pakistan’s energy woes, please see Nancy’s third letter to Ambassador Holbrooke. ]]> http://blogs.cgdev.org/mca-monitor/2010/06/pakistan%e2%80%99s-energy-sector-groundhog-day-for-usa.php/feed 1 http://blogs.cgdev.org/mca-monitor/2010/05/a-long-term-fix-for-pakistan%e2%80%99s-energy-woes.php http://blogs.cgdev.org/mca-monitor/2010/05/a-long-term-fix-for-pakistan%e2%80%99s-energy-woes.php#comments Fri, 28 May 2010 16:26:53 +0000 Molly Kinder http://blogs.cgdev.org/mca-monitor/?p=948 This is a joint post with Wren Elhai.

It is little wonder the Obama Administration has prioritized Pakistan’s energy sector in its  $1.5 billion aid program this year.  Pakistan is gripped by a very serious energy crisis.  Daily black-outs in major Pakistan cities sometimes exceed 12 hours.  Businesses are suffering, jobs have disappeared, and quality of life has plummeted.  Frustrated Pakistanis are taking to the streets, and the political turmoil threatens to further destabilize the country and weaken the (already fragile) central government.   Pakistani citizens and policymakers have turned to the United States for help.  The United States sees an opportunity both to improve its public image, shore up a friendly government, and remove a key bottleneck to economic growth. Ultimately, fixing the Pakistani energy sector would go a long way towards stabilizing a critical state and benefiting U.S. national security interests.

However, the ever-present danger in jumping into a crisis situation with wallet in hand is that the desire to make progress quickly can overshadow the need to fix the longer-term problems that caused this crisis and, if not dealt with, will cause others in the future. Later this week, we’ll put out a blog laying out the sad tale of power sector reform in Pakistan over the past couple of decades. Suffice it to say, however, that despite billions of dollars in donor funding and decades of external pressure for reform, the core problems in Pakistan’s energy sector remain more or less the same as twenty years ago—byzantine governance and tariffs that don’t cover the cost of producing power.  In her third open letter to Ambassador Holbrooke, released this week, CGD President Nancy Birdsall urges the administration to learn from past donor missteps and work with interested Pakistani stakeholders to confront the institutional and financial problems in the sector once and for all.  Absent this forward-looking approach, the United States risks making short-term fixes that fall short of lasting change.

Read the full letter here. Nancy’s four main recommendations are as follows:

1. Work with the government of Pakistan on the institutional and pricing reforms that will ensure that the power sector does not constrain Pakistan’s growth over the medium to long term.  To put the sector on firmer financial footing, the government of Pakistan needs to resolve the circular debt problem and overcome political resistance to increasing power tariffs to adequate levels to spur private investment.  (One way this might be done is an announcement by the government of Pakistan that any future tariff increases will occur only if and when brown-outs have been reduced to pre-specified levels).   In addition, further governance and institutional reforms are needed to address the corruption and patronage behind some of the fragmentation and lack of coordination that hamper the sector.  Without progress led by the government of Pakistan itself on these institutional reforms, U.S. and other outsider spending on Pakistan’s energy infrastructure will never be sufficient to make lasting change.
2. The United States need not be out front in pressing for key institutional and governance reforms, but should work with and through the other major multilateral partners.  We are concerned that the U.S. team is not taking full advantage of the experience, the ground capacity of the World Bank and the Asian Development Bank in Pakistan’s energy sector, and the broad interest in the donor consortium on Pakistan’s energy needs.
3. Beyond the $125 million already promised for repairs and upgrades to Pakistan’s energy infrastructure, we encourage the administration to commit more U.S. funds on Pakistan’s energy infrastructure only as and when the government of Pakistan is able to show progress on the tough financial and political reforms critical to attracting private investment to the sector. We say this not because the United States might have influence on what is a sensitive internal political issue – it probably does not – but because without home-grown and politically sustainable reforms, short-term fixes now can be easily reversed.
4. The administration and the government of Pakistan should be transparent about the approach to the energy crisis and to better educate the Pakistani public about the need for it.  For example, we urge the administration to agree with the government of Pakistan on simple and transparent benchmarks for progress on the fundamental institutional and pricing reforms, and to make these clear to the Pakistani and American public.

As Nancy points out, this is a critical and perhaps opportune moment for fixing the longstanding weaknesses in Pakistan’s energy sector. Past donor efforts have been defeated by a lack of political will in the government of Pakistan to implement key reforms.  Today, however, Pakistanis from Karachi to Islamabad are fed up with the state of things. The depth of the current crisis have given rise to growing internal pressures within Pakistan that might finally be able to break through the impasse on reform that external pressure has to date been unable to overcome.  Instead of funding short-term band-aids that might allow Pakistan to just get by for another year or two, the United States and its Pakistani partners should work to create a system that will contribute to a healthy long-term solution. Getting through the power crisis of 2010 is important—making sure such crises become a thing of the past is essential.