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US Development Policy

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This is a joint post with Nancy Birdsall.

In a recent interview with the Associated Press, USAID Administrator Rajiv Shah stated that the United States will be working to significantly decrease the number of development projects it is currently supporting in Pakistan, from the current 140 to 35 by the end of September 2012.  In Dr. Shah’s words, “If we [the U.S.] are trying to do 140 different things, we are unlikely to do things at scale in a way that an entire country of 185 million people can see and value and appreciate.  We are just far more effective and we deliver much more value to American taxpayers when we concentrate and focus and deliver results.”  Shah goes on to clarify that the United States will not be cutting back on the overall amount of assistance it provides: it plans to adhere to the Kerry-Lugar-Berman framework of $7.5 billion over 5 years.

I applaud Administrator Shah’s call for greater focus in the U.S. assistance portfolio and his explicit emphasis on “results.”  After all, as my colleague Connie Veillette has pointed out, the Obama Administration’s Presidential Policy Directive (PPD) on global development explicitly called for greater emphasis on “selectivity” and “results” in U.S. development assistance.

While the U.S. government has not yet elaborated how it will implement such drastic changes, this recent announcement raises five questions in my mind.

  1. Will the paring down of projects simply be an exercise of putting small projects under larger headings – to avoid hard choices?  Assuming the actual number of projects will be cut from 140 to 35, but the total quantum of funds remains constant (as Dr. Shah stated in the interview), simple math tells us the U.S. government plans to spend a good deal more per project compared to the status quo (although a colleague in the administration reminds me that this paring down process has been underway for several months).  This either implies an administrative reshuffling or a move toward fewer but larger, more visible projects.  In a June 2011 CGD report, my colleagues worried about the difficulty of putting big aid money into energy projects – which are justifiably a priority for Pakistan – because a weak civilian government cannot, despite its best intentions, push through critical pricing and other reforms needed to attract private investment (more on this below).
  2. If the overall amount of assistance stays constant, can the U.S. actually spend this money productively?  After all, the U.S. government’s own December 2011 audit report on civilian assistance to Pakistan documented massive sums of unobligated aid money (not to mention money that had been obligated but not spent).  This most likely has to do with hurdles on both sides: for the U.S., contracting, project design and oversight delays; and for Pakistan, issues with capacity, uneven commitment to reform, failure to meet benchmarks, etc.  In short there are real questions about America’s ability to wisely spend its aid money on big projects in Pakistan.
  3. Will the U.S. consider co-financing projects with other donors, or simply transferring funds to (and through) other donors, in a kind of sensible free-riding on those donors’ administrative costs (and less toxic political presence)?  According to the AP article, while USAID will slash the overall number of projects, it still plans to focus on its five priority sectors: energy, economic growth, health, education and “stabilization” in the restive, tribal areas.  Yet, there is an argument to be made that the U.S. can be involved in all five sectors without actually implementing projects in each.  For instance, CGD’s June report (and this open letter from Nancy Birdsall) recommended that the U.S. co-finance education projects with donors such as the World Bank and the United Kingdom’s Department for International Development (DFID), who are collaborating on impressive reform programs in the large provinces of Punjab and Sindh.  The World Bank, in particular, has been engaged in a provincial-wide education reform program in Punjab since 2003.  Rather than implementing its own education projects in these provinces, the U.S. could consider stepping back and pooling its funds and influence with these two key reform allies.
  4. One of Shah’s justifications for scaling down the number of U.S.-funded projects is to give the U.S. greater leverage in pressuring the Pakistani government to enact key reforms, like those in the energy sector.  My colleagues and I have written previously about the elusive quest of leverage in providing aid to Pakistan: the bottom line is that the US (or any other donor, for that matter) is not likely to have very much.  After all, Pakistan walked away from nearly $3 billion in future loans when it decided to abandon its IMF program late last year.  In energy specifically, the U.S. has been focused (not unwisely, in our view) on going after low-hanging fruit related to the renovation and modernization of dams and related infrastructure.  Yet once this first phase of energy projects comes to a close, it is not clear how the United States can continue to spend large amounts of money in the sector without undermining incentives for Pakistan to undertake essential reforms on tariffs, governance and cost recovery.  We encourage the US to continue its policy dialogue with the government on badly needed energy reforms, in collaboration with other donors and partners.  U.S. technical input combined with its convening power are its assets; the U.S. should resist the temptation to put big money into energy except in the context of the Pakistani government making progress on its own key reform targets.
  5. Finally, as part of a broader rationalization of aid projects, will the U.S. government sit down with its Pakistani counterparts to develop a framework of measuring progress?  One of Dr. Shah’s legacies will be leaving behind a USAID that pays more attention to issues of measurement and evaluation, and the Pakistan aid program is a case where both are needed.  As my CGD colleagues have written elsewhere, the U.S. and Pakistani authorities should sit down and decide on a small number of mutually agreed upon indicators that can capture Pakistan’s overall development progress.  That is the way to signal a real sense of partnership between the two governments on development challenges.  Moreover the agreed indicators could help re-orient the U.S. assistance program by focusing its efforts on improving outcomes, rather than expanding the number of inputs.

Disclaimer

CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.