Foreign aid is not the answer
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 20th, 2012.
COMMENTS (31)
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@Kamran Naqvi "We must break the begging bowl !"..same statements we heard during all governments like in 1995 by Benazir bhutto, 1998 by nawaz sahrif, 2005 by sahukat aziz, and later on by Yousaf raza gillani sahib...but alas ! when we actually see this moment..
The learned author wrote "But if taxpayers of the donor countries are asked." The information that I have is that throughout the world and more so in the donor countries e.g. the USA or the UK, the taxpayers are never asked as to how their hard earned tax money is to be spent. In those countries the purpose of the taxpayer is to pay the demanded tax and then go to sleep. Some of the US taxpayers' hard earned money is stolen and then used to launch "Campaigns of terror" in selected countries every few years. The slected countries were mostly in Central and South Americas in the past and now it is Iraq and Afghanistan. The taxpayers in Western countries in common with taxpayers elsewhere, have not organised themselves to be in a position of power to be able to question anyone of those responsible for the use and abuse of their hard earned tax dollars. In other words they do not have democracy. The democracy, the leaders of those country always talk about. In the US and the UK there are just too many murderers who go about Scott free just because they wear police uniform. When in Mexico some police men murdered a female Judge who had sent just too many policemen to prison for corruption and lawlessness, someone commented that in Canada no Judge would dare to send a single policeman to prison. Such is the state of lawlessness in these countries whose leaders never tire of lecturing others of democracy.
@Observer:
@Malik: “China did not get any aid and it is a rising economic superpower !” Wrong. China got “aid” in the indirect sense. It lured western corporations to invest and establish local manufacturing facilities that provided jobs and export of their products abroad. It is an indirect form of aid and development assistance.
What bogus argument is that? In that case, all countries trading with each other are giving aid to each other. According to your definition, I am confident to say that what you often say in these forums is an indirect from of reflexive drivel!
@Falcon: Shush!!!!! That's a secret.
@ Sabi What about the default situation on repayment of foreign loans which was a likely economic scenario in the last two years of second tenure of NS government. The slogan of making the country world tiger by political gimmicks of Qarz Otaro Malk sawnaro does not lead the foreign aid addicted economy to self reliance unless the prevailing structural imbalances are removed through workable fiscal and monetary reforms.
@ Kamaran Naqvi. A wishful thinking. How can we break the begging bowl when the ruling elite and influential wealthy people are either exempted from paying personal and corporate income tax or allowed to evade that. Merely over and over burdening the common man by indirect taxes will not help in breaking the so called begging bowl.
Such general 'gup shup' about the drawbacks of foreign aid and the importance of self-reliance sounds good in drawing rooms, not the opinion page of a national newspaper. Writer implies that foreign aid stops Pakistan from being self-reliant, but has no evidence to back her argument. On the contrary, numerous examples can be quoted where foreign aid has helped us achieve self-reliance. The little energy security we have today owes a lot to the Tarbela Dam which was built with the technical and financial assistance of the World Bank. Go to any office of FBR across Pakistan and see how the UK/World Bank funded Tax Administration Reform Program has built capacity of the organization for improved tax collection. If it still doesn't work efficiently, it's our own failure.
"The government has the capacity and resources to tackle extreme poverty". I wish the writer could elaborate the point she is trying to make so that we also come to know where the government has hidden all these resources that can get 50 million people out of poverty.
@Falcon: "The underlying assumption is that once we get less aid, there will be significant build up of political steam due to short-term economic challenges, which in return will put downward pressure on defense spending".
Thanks. I now understand where you are coming for. You are more optimistic than I am and I hope that what you say comes true. My observation (not just for Pakistan but also India) is that widespread ongoing distress of common man does not result in policy change or India would not have stuck to its socialistic policies for 41 years. IT is either some external stimulus or the elite being impacted results in notice being taken.
@Malik:
"China did not get any aid and it is a rising economic superpower !"
Wrong. China got "aid" in the indirect sense. It lured western corporations to invest and establish local manufacturing facilities that provided jobs and export of their products abroad. It is an indirect form of aid and development assistance.
World Bank, IMF, Europe, United State, Japan, UK, China, ADB, UN, Australia, New Zealand, France, NATO, ISAF, Scandinavia, Saudi Arabia, UAE, Germany, are donors to Pakistan. We should not be Taxing common Pakistanis as Islamabad quite comfortable being recipient.
@Falcon:
"The underlying assumption is that once we get less aid, there will be significant build up of political steam due to short-term economic challenges, which in return will put downward pressure on defense spending."
That is highly wishful thinking. Unless and until the Pakistani paradigm of a security state is dropped in favor of a welfare state, defense spending will continue to swallow a lion's share of national resources. Bangladesh would be a good case study for Pakistan. The reason Bangladesh is moving ahead of Pakistan, at least under Hasina, is their rejection of the security state model there. As a result, they have as their national priority the social and economic upliftment of their citizen.
One difference between Pakistan and India is that while Indians are grateful for the help they received before from donor countries and have good relations with them, Pakistan seems to be ungrateful. Especially US which has literally bankrolled Pakistan ever since its birth.
@gp65: The underlying assumption is that once we get less aid, there will be significant build up of political steam due to short-term economic challenges, which in return will put downward pressure on defense spending.
China did not get any aid and it is a rising economic superpower !
There should be no cash foreign aid as we are not a beggar but a nuclear power with a huge army and new programs for future armaments. The cash aid did not help the suffering public anyway and was a big waste in non productive activities. All foreign aid should be in the form of goods and services with full oversight. The aid should be directed toward education, healthcare and other basic civic needs only in the form of goods not cash. Unless the public sees and experiences the fruits of aid they would continue to hate the donor countries. The aid must be targeted toward human development and publicized. An example is free high nutrition food in school lunches and free books for kids. Most poor people send their kids to madarsa because of free food for their starving children.
@gp65fan: You are very kind. But I do not blog elsewhere.
@Kamran Naqvi:
Good fighting words; until the next balance of payments crisis!
@author,
"dealing with issues, such as tax evasion, corruption and money laundering can help deal with poverty."
With due respect, that is very naive and uninformed view. The main reason for Pakistan's poverty is its security state paradigm in perpetual conflict with a country 10 times larger. As a result of this paradigm, Pakistan spends over 65% of its national budget (10 -12% of GDP) on the military, military pensions, military perks, debt servicing of debts accumulated for past military purchases. The result is that not much funds are going to social welfare, education and development.
@Falcon: "Based on what I understand, a lot of foreign aid (specially from U.S) has traditionally gone back to donor countries because of weapon purchases, so the net impact on Foreign reserves has not been that significant"
PErhaps I did not fully understand. Are you saying that the weapons purchase is contingent upon the aid and would not have occurred anyway? For, if weapons purchase are to be done independently any way, then that outflow will occur regardless but you have turned off the inflow - so there would be the negative impact I had referred to.
Ofcourse I have no interest or desire to advocate aid dependancy but wanted to make sure I correctly understood your argument.
@Maula Jut: True, but we Indians consider the aid from Brits as a repayment mechanism for all that the Brits looted from us pre-1947. Our economy is not dependent on the Brits aid.
@gp65: Good point. One thing to take note is that Israel too is aid recipient from USA. However, it is on par, if not ahead of West, progress wise and technology wise. Also, at one point, Germany and Japan too were aid recipient from USA. What could be the reasons? Misplaced priorities?
@gp65: Based on what I understand, a lot of foreign aid (specially from U.S) has traditionally gone back to donor countries because of weapon purchases, so the net impact on Foreign reserves has not been that significant. However, to your point, I agree that remittances are plateauing and exports are shrinking. This means that the only non-aid route is to raise enough local revenue to reduce costs of economic inputs which can facilitate expansion of the export base (energy and law & order being the key ones). Furthermore, reduced fiscal deficits and better business environment will also attract additional FDI flows and reduce capital flight, which in return will stabilize Forex reserves.
Certainly agree. Foreign aid almost always delays the needed reforms. It is like kicking the can down the road. But out of curiosity, doesn't that put the author in the same bucket as IK?
The author makes some good points and clearly the decisions on this front would have to be made by Pakistanis. I did want to point out one aspect that this write-up does not cover i.e. foreign aid comes in foreign currency and foreign currency reserves are dwindling in Pakistan. Thus there has to be some other mechanism for obtaining FC, if aid is forsaken, if a default on internatal debt payment is to be avoided. http://tribune.com.pk/story/454598/living-from-loan-cheque-to-loan-cheque-govt-scrambles-for-funds-before-next-imf-repayment/
The remittances from Pakistanis are already very high and exports are shrinking - so this factor does need to be taken into consideration.
pakistan is the largest begging bowl of the world............pakistan has been using aid against india.....so i would definitely demand a cut in aid to pakistan..........NRIs have been demanding usa to cut aid to pakistan as well.................
In nineties door were closed on Pakistan for aid and sanction imposed.We had then ppp and NS league.Farmer draged Pakistan further towards poverty and chaos while later put Pakistan on fast treck of progress under the same circumstances.It depends clearly on the intent and capabilities of leadership which way it can take the country.NS showed us that Pakistan could developed far better without depending on foreign aid.He broke the begging bowl.People have short memories and passion so high to become rich over night and this becomes a powerful weapon for politicle actors.
It seems the author has ignored the disquiet in India over Britain's decision to cut off development aid to India. Her prescription is totally unrealistic. If Bill Gates and others want o share their bounty, where is the problem? If we want self-reliance, it is better to reduce our birth rate rather than denying financial and technical assistance. My fear is the author is not serious.
We are proud of our bums and missiles! Shed tears for soldiers, but wont pay taxes to pay for them!
No worries. Imran is coming to shut off this pipeline of milk and honey. Then, we will have to live within our means and that will force change. Bring it on Imran Khan!
We must break the begging bowl !