Foreign aid is not the answer

Foreign aid is not a solution to poverty, dealing with issues, such as tax evasion, corruption, money laundering can.

Should Pakistan get aid and assistance from foreign sources? Living in Islamabad, it is almost impossible to imagine life without foreign aid, be it government projects, educational institutions, non-profit organisations or theatre productions, all are assisted by bilateral or multilateral support of one kind or another. Pakistan has done pretty well for itself in the aid stakes; it is the third largest recipient of British aid after India and Ethiopia and it is also the third largest beneficiary of US aid after Afghanistan and Israel. There is the European Union, the Japan International Cooperation Agency, other smaller European nations and multilateral organisations willing to lend a helping hand.

But if taxpayers of the donor countries are asked, the majority of them would consider it absurd to hand out the money to a country like ours for multiple reasons. For starters, we do not do the job for which we take money (such as counterinsurgency operations or universal primary education) well; secondly, we may not be a growing economy like India and Bangladesh but we are still considered a middle-income nation. If we have enough money to start our own drone development programme and hold arms expos, then people from donor countries are not that far off the mark when they call for a stop or reduction in aid.

But this is not the entire truth. Despite being a not-so-poor nation, we are home to some of the poorest and most malnourished people on the planet. The government has the capacity and resources to tackle extreme poverty, which makes it is less of a foreign aid issue and more of a domestic inequality and misallocation of resources problem. In Pakistan, the richest people are going home with a bigger share of national wealth than ever before, while the poor end up with even less; the taxation system is such that the poor — through indirect taxes — are subsidising the lifestyle of the rich, who do not pay direct taxes on their assets. Any efforts to restructure the tax system fail because of political expediency in a fragmented parliament.

If we do not really need the aid, then why do Western governments provide it? Foreign aid is not really driven by dreams of salvation and by the desire of politicians to appear compassionate, though that makes for excellent PR. It is generally driven by political interests and the desire to influence policies in recipient countries by bankrolling the projects for the government and by creating a favourable voice among other sectors.

The problem associated with the aid industry is that at times it forgets the very people it is supposed to target. It also focuses more on intangible skills rather than physical structural changes (there are more takers for gender-focused soft skills trainings than for a project supplying clean water to impoverished women). In addition, it makes recipient countries more reliant on aid, preventing them from working out their own country-specific answers.

For a country like Pakistan, seeking funding is not the solution; dealing with issues, such as tax evasion, corruption and money laundering can help deal with poverty. In any case, foreign aid makes up for a very small part of the national budget and generally benefits those who are associated with the programmes; maybe it is time to lose the support wheels and try riding the bicycle without them.

Published in The Express Tribune, November 20^th, 2012.