Ideas to Action:

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US Development Policy


As Congress returns to DC from its summer recess, it comes back to a long “to do” list.  On the foreign policy front, one pressing item is what to do with our Pakistan assistance program. And from where things stand now, it looks like the funds appropriated for Pakistan this year under the Enhanced Partnership with Pakistan Act (aka the Kerry-Lugar-Berman Bill) may be both reduced in volume and tied to security conditions.

There appear to be two basic arguments for this course of action. The first is that aid should be withheld because the government of Pakistan has been at best insufficiently helpful, and at worst, actively undermining our counter-terrorism efforts in country. If we tie development funds to security outcomes, (the argument goes) we can put the Pakistani military establishment under enough pressure to make them change their ways. My colleague Wren wrote about this last month. It’s a terrible idea. It won’t change the Pakistanis’ strategic calculus, but it will serve to convince the Pakistani people that we’re not serious about partnering with them, promoting reform, or supporting the democratically elected civilian government.

A second line of argument -- for either cutting aid to Pakistan or making it more conditional -- is somewhat more convincing. It claims that until Pakistan gets its house in order, aid will not help the country, and it might make things worse. There is a larger question here of whether aid works at all, which I’ll leave to the likes of (former CGD’er) William Easterly and (current CGD’er)  Charles Kenny. However, the sound question that analysts like Anjum Altaf have raised is whether aid is helpful when the question of Pakistani governance reforms remain unaddressed. Anjum feels that aid should be withheld until reforms have been made. In contrast, I believe that good development projects (both aid and non-aid) can happen simultaneously with local reform efforts, and even support them.

So it is encouraging to see two recent stories coming out of Pakistan that demonstrate small steps towards governance reform. These stories did not receive much attention in the Western press, but they are important.  Although the reforms are tentative, subject to reversal, and limited in scope, they also have the potential to be down payments on larger governance reforms lawmakers in the United States (and some folks at CGD) would like to see.

The first is that on August 12, President Zardari signed into law an amendment to the Frontier Crimes Regulation that substantially increases the rights of residents of the Federally Administered Tribal Areas (FATA). It “softens” some of the harsher punishments that can be meted out under the FCR, and provides a greater degree of oversight for the political agents who are both the executive and judiciary in the tribal areas. Most importantly, it extends the 2002 Political Party Order to FATA, meaning that the 20 legislative seats based there now have political significance. This is good for FATA, since it will give Pakistan’s political parties a stake in bringing the agencies into the political mainstream. It’s also good for the Pakistani parliament, since FATA’s legislators no longer run as independents and are thus less likely be bought by the highest bidder, as has previously been alleged. This is a significant first step towards bringing a greater degree of stability to this extremely unstable area through better governance.

The second piece of news comes by way of the World Bank, which recently released a report on the impact of changes to Pakistan’s national electricity tariffs. Their analysis shows that given the current cost of electricity supply, the March 2011 tariff structure “would improve the benefit incidence of electricity subsidies for residential users and reduce fiscal burden significantly in comparison to March 2008.” The tariff adjustment has meant that the government of Pakistan is making initial steps towards recovering its outlays for power generation and distribution.  In addition, the new tariffs are progressive, meaning that wealthier, higher-volume users pay more, and the poor pay less. If this trend continues, the hope is that the country will eventually be less reliant on massive electricity subsidies which currently cause a substantial drain on the country’s budget. The report is quick to point out that even with the new tariff structure, “less than 10% of consumers pay [for electricity] at cost recovery level.” There is clearly a long way to go. But it is important to recognize that any move to reduce subsidies and increase tariffs on a public service like electricity is a politically difficult one. The fact that the government has made these initial steps is therefore quite encouraging.

By themselves, neither of these recent reforms will convince Congress to follow through on America’s commitments to Pakistan’s civilian government. But they do serve as evidence that some incremental progress is being made towards reform in Pakistan, and that it is happening concurrently with development programming. The U.S. government and the development community should invest in this process, not walk away from it.


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.