Aid versus Trade, Investments, Remittances

Relief organizations have calculated that as much as 75% of foreign aid by industrialized nations is directly tied to promoting exports of goods and services that support jobs in donor nations, achieving greater trade access in receiving countries or other economic and political strategies. Some of the aid comes with so many strings attached, including preferential tendering on contracts and the hiring of expensive consultants, that only 30-40% of dollar value is ever realized for the intended recipients. Then the rampant official corruption in the developing world further eats away at a big chunk of what is left. To make matters worse, the increasing percentages of budgets and GDP claimed by debt repayments take away money needed for basic human development needs, such as education and healthcare, in the developing world.



In the United States for example, most of the food aid, including the additional $770m food aid last year, for the poor countries requires the aid recipients to purchase food from the US agribusiness. These funds do not help the farmers in the poor nations grow food for the countries to become less dependent on foreign help. The US farm lobby continues to flex its muscle and enrich itself, without regard for the severity of the hunger crisis in the poor nations resulting from sharp increase in food prices. Three years ago, farmers and their allies in Congress effectively destroyed an effort by the Bush administration to begin the switch to untied food aid. The current composition of US Congress is no different, as far as the overwhelming power of the farm lobby is concerned.

European governments switched to giving all-cash donations for food in the mid-1990s, arguing that cash allows more flexibility in responding to crises and that the U.S. uses its food aid as a form of farm subsidy. But the Europeans also continue to erect various barriers to food imports from poor nations that could improve the viability of agriculture in many Asian and African countries.

Private donations abroad by Americans, including pledges to charities and churches and disbursements from corporate foundations, now are three times as large as America's official development assistance of $20 billion, and there is every indication this trend will continue. Washington's contribution looks even more miserly when the ODA data are broken down. Here are some basic facts about US foreign assistance:

1. Less than half of aid from the United States goes to the poorest countries.

2. The largest recipients are strategic allies such as Egypt, Israel, Russia, Pakistan, Afghanistan and Iraq.

3. Israel is the richest country to receive the highest per capita U.S. assistance ($77 per Israeli compared to $3 per person in poor countries).

4. Even after the planned tripling of the US aid to $1.5 billion a year to Pakistan, it still amounts to about $8 per Pakistani.



According to Asia Times, last year only five of the 22 countries considered industrialized - Norway, Denmark, the Netherlands, Luxembourg and Sweden - achieved the donor benchmark of allocating 0.7% of GNP to ODA. The benchmark was adopted at the Earth Summit in Rio de Janeiro in 1992 under the UN Agenda 21 program for eradicating poverty through development assistance. No other countries have even come close to meeting the target.

France managed 0.41% of GNP last year, the United Kingdom 0.34%, Germany 0.28%, Canada 0.26%, Spain 0.25% and Australia 0.25%. Japan, the only Asian participant, came in a lowly 19th with a paltry 0.2%, maintaining a reduced ODA commitment that dates back to 2001.

Dambisa Moyo, a former economist at Goldman Sachs, and the author of "Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa.", recently argued in a Wall Street Journal OpEd that "money from rich countries has trapped many African nations in a cycle of corruption, slower economic growth and poverty. Cutting off the flow would be far more beneficial."

She goes on to say, "Giving alms to Africa remains one of the biggest ideas of our time -- millions march for it, governments are judged by it, celebrities proselytize the need for it. Calls for more aid to Africa are growing louder, with advocates pushing for doubling the roughly $50 billion of international assistance that already goes to Africa each year.

Yet evidence overwhelmingly demonstrates that aid to Africa has made the poor poorer, and the growth slower. The insidious aid culture has left African countries more debt-laden, more inflation-prone, more vulnerable to the vagaries of the currency markets and more unattractive to higher-quality investment. It's increased the risk of civil conflict and unrest (the fact that over 60% of sub-Saharan Africa's population is under the age of 24 with few economic prospects is a cause for worry). Aid is an unmitigated political, economic and humanitarian disaster."

Last year, remittances to developing nations grew by 8.8% to $305 billion, more than three times the official development aid, according to World Bank.



Official development assistance received by Pakistan has not been particularly effective, according to media reports attributed to UN findings. A United Nations report titled "U.N. reforms and civil society engagements" in 2008 claimed that Pakistan has received 58 billion dollars in foreign aid from 1950 to 1999, however it systematically underperformed on most of the social and political indicators. The report further added, "If Pakistan had invested all the ODA (official development assistance) during this period at a real rate of six percent, it would have a stock of assets equal to 239 billion dollars in 1998, many times the current external debt."



At the end of calender year 2008 in Pakistan, remittances topped 7 billion dollars, an increase of 17 per cent year over year, led by higher remittances from oil-rich GCC countries, which grew by 30 per cent year on year. Similarly, FDI inflows jumped 100 per cent year over year to 708 million dollars in December, 2008, as the telecom, oil and gas, and financial-services sectors continued to attract foreign inventors, according a report in the Nation newspaper. Annual cash remittances from overseas Pakistanis and foreign direct investments (FDI) in Pakistan earlier this decade have been far larger and much more significant in its rapid growth than all of the foreign aid put together.


Last year, remittances to various other Asian countries were as follows: $8.9 billion for Bangladesh, $27 billion for China, $30 billion for India, $6.5 billion for Indonesia, $2.2 billion for Nepal, $1.8 billion for Malaysia, $16.4 billion for the Philippines, $2.7 billion for Sri Lanka, $5.5 billion for Vietnam and $1.8 billion for Thailand, according to International Labour Organization estimates.

While recognizing that there is no one silver bullet to alleviate poverty, microfinancing, along with social entrepreneurship, is becoming an essential component of non-government efforts in Pakistan and other developing nations to empower ordinary people toward self-reliance by lifting them out of poverty and teaching them the right skills to help themselves. “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” This proverb has guided the efforts of late Dr. Akhtar Hameed Khan, acclaimed Pakistani social scientist and founder of Orangi Pilot Project. Supported by private foundations working in Pakistan, all efforts at alleviating poverty should be guided by this proverb that captures the essence of self-reliance.

While government and multilateral financial institutional programs do help to some extent, it is the privatization of aid, trade, remittances and investments for the poor through various investors and donors, such as private corporation, foundations and the immigrants working in the rich countries, that provides the best hope to ensure that the funds and the practical benefits reach the intended recipients. Such a strategy minimizes the role of the politicians and the corrupt officials in both the donor and the recipient nations.

Related Links:

Microfinance in Pakistan

PIDE Report on FDI in Pakistan

Foreign Remittances Help Developing World
Foreign Aid Continues to Pour in Resurgent India
US Food Aid and the Farm Lobby

Dambisa Moyo: Aid to Africa

Rampant Corruption in Construction Industry

Obama's Farm Subsidy Cuts Meet Stiff Resistance

Global Slowdown Hits Foreign Workers

Comments

Unknown said…
Another couple of articles that make the case that developmental aid serves to weaken local markets and dampen the spirit of entrepreneurship.

http://yoonhe.wordpress.com/2009/04/08/for-gods-sake-please-stop-the-aid/
Riaz Haq said…
One of the ways Pakistani economy manages to stay afloat is by increasing remittances coming from overseas Pakistanis.

According to the Nation newspaper, Pakistan received the highest-ever amount of over $7.811 billion as expatriate’s remittances in the recently concluded 2008-09 fiscal year (FY09), beating the previous record of $6.451 billion received in the preceding 2007-08 fiscal year (FY08).
In FY09 workers’ remittances showed an increase of 21.08 percent, or $1.36 billion, when compared with FY08. The amount of $7.811 billion includes $0.48 million received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs).
The monthly average remittances in the period from July 2008 to June 2009 comes out to $650.95 million as compared to $537.60 million during the same corresponding period of the 2007-08 fiscal year, registering an increase of 21.08 percent.
The inflow of remittances in the July 2008 to June 2009 period from USA, UAE, Saudi Arabia, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $1,735.87 million, $1,688.59 million, $1,559.56 million, $1,202.65 million, $605.69 million and $247.66 million respectively, as compared to $1,762.03 million, $1,090.30 million, $1,251.32 million, $983.39 million, $458.87 million and $176.64 million respectively, in the July 2007 to June 2008 period. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during FY09 amounted to $771.03 million as against $726.29 million in FY08.
During the last month (June 2009), Pakistani workers remitted an amount of $735.17 million, up $187.76 million or 34.30 percent when compared with an amount of $547.41 million sent home in June 2008. The amount remitted in June 2009 is the second-highest received in a single month after $739.43 million sent home in March 2009.
The inflow of remittances into Pakistan from most of the countries of the world increased last month as compared to June, 2008. According to the break up, remittances from UAE, USA, Saudi Arabia, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $164.70 million, $154.39 million, $152.33 million, $108.11 million, $68.48 million and $22.95m respectively, as compared to corresponding receipts from the respective countries during June, 2008 i.e. $88.29m, $143.57m, $123.67 million, $90.98m, $38.08m and $13.98m. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during June 2009 amounted to $64.19m compared to $48.80m during June 2008.

http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/Business/11-Jul-2009/Pakistan-received-record-7811b-remittances--in-FY09
Riaz Haq said…
The Development Set

By Ross Coggins

Excuse me friends, I must catch my jet,
I’m off to join the Development Set.
My bags are packed and I’ve had all my shots;
I have travelers checks and pills for the trots.

The Development Set is bright and noble.
Our thoughts are deep and our vision global.
Although we move with the better classes,
Our thoughts are always with the masses.

In Sheraton Hotels in scattered nations,
We damn multi-national corporations.
Injustice seems easy to protest,
In such seething hotbeds of social unrest.

We discuss malnutrition over steaks
And plan hunger talks over coffee breaks.
Whether Asian flood or African drought
We face each issue with open mouth.

We bring in consultants whose circumlocution
Raises difficulties for every solution,
Thus guaranteeing good eating
By showing the need for another meeting.

The language of the Development Set
Stretches the English alphabet.
We use swell words like “epigenetic”
“Micro”, macro and logarithmatic.

It pleasures us to be esoteric—
It’s so intellectually atmospheric!
And though establishments may be unmoved,
Our vocabularies are much improved.

When the talk gets deep and you’re feeling dumb,
You can keep your shame to a minimum.
To show that you, too, are intelligent,
Simply ask, “Is it really development?”

Or say, “That’s fine in practice, but don’t you see,
It doesn’t really work in theory.”
A few may find this incomprehensible,
But most will admire you as deep and sensible.

Development Set homes are extremely chic,
Full of carvings, curios and draped with batik.
Eye-level photos subtly assure
That your host is at home with the great and the poor.

Enough of these verses—on with the mission!
Our task is as broad as the human condition.
Just pray God the biblical promise is true,
The poor ye shall always have with you.
Riaz Haq said…
A recent ODI report highlighting India's progress toward MDGs and putting India in the top 20.

Looking at the detailed report, however, it clearly highlights Pakistan along with China in the top 10 in achieving poverty reduction goal MDG1, the most important of MDGs. There is no mention of India on this list in table 4.

http://www.odi.org.uk/resources/download/4908.pdf
Riaz Haq said…
British Prime Minister David Cameron, now on a visit to Pakistan, has offered about $1 billion in aid for education, according to Financial Times:

Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article - http://www.ft.com/cms/s/0/cc68ce4c-5f91-11e0-bd1b-00144feab49a.html#ixzz1IfKt9DJ6

David Cameron offered Pakistan’s leaders up to £650m ($1,055m) of aid for schools and heaped praise on their “huge fight” against terrorism in a diplomatic gamble to end years of mutual mistrust with a gesture of goodwill.

During a confidence-building visit to Islamabad with an entourage of his most senior security advisers, Mr Cameron jettisoned the usual list of UK demands and instead gave Pakistan the benefit of the doubt over Afghanistan and its support for militant groups.

Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article - http://www.ft.com/cms/s/0/cc68ce4c-5f91-11e0-bd1b-00144feab49a.html#ixzz1IfLC3dkM

Such optimism over Islamabad’s intentions marks a big break in British diplomacy, making a stark contrast with Mr Cameron’s description of Pakistan “looking both ways” on terrorism, a remark that triggered a serious diplomatic incident last year.

Rather than regarding Pakistan as a country that “can do more”, particularly on curbing Taliban activities, the British assumption is now that Islamabad’s security agencies have limited control over militant groups they once helped to create.

The big test for Mr Cameron is whether his expression of trust can generate better results than the more transactional approach adopted in the past. British officials say they are already seeing tangible improvements in intelligence co-operation and a greater willingness to discuss a political peace deal in Afghanistan.

Mr Cameron sought to demonstrate the breadth of the new partnership by offering funds for up to 4m school places by 2015. “I struggle to find a country that’s more in our interest to progress and succeed than Pakistan,” Mr Cameron said after a meeting with Yusuf Raza Gilani, Pakistan’s prime minister.

“If Pakistan succeeds then we will have a good story ... if it fails we will have all the problems of migration and extremism, all the problems.”

The package of up to £650m, which more than doubles previous education funding, forms part of an aid programme that is set to become Britain’s biggest.
----------
The centrepiece of Mr Cameron’s visit was a security round-table with Pakistan’s civilian leadership and General Ashfaq Kayani, its military chief. Sir John Sawers, head of the Secret Intelligence Service, MI6, and General Sir David Richards, chief of the defence staff, also attended, in their second visit to Islamabad in less than a month.

Mr Gilani later brushed aside questions over Pakistan’s willingness to combat terrorism. “We’ve the ability and we have the resolve and we are fighting and we’ve paid a very heavy price for that,” he said, citing the 30,000 casualties in Pakistan’s effort to quell an internal insurgency.

One senior Pakistani government official speaking after Mr Cameron’s meetings said closer security ties would take some more time to develop. “Clearly, the UK wants Pakistan to extend help to combat militant plots on British soil,” he said. “But the UK will also need to be much more forthcoming on helping Pakistan to go after members of its own militant groups from places like Baluchistan who have taken refuge in Britain.”
Riaz Haq said…
Here's an excerpt from a Time magazine story on NGO spending in India:

With 3.3 million registered NGOs, India's nonprofit sector raises between $8 billion and $16 billion in funding every year. According to Home Ministry statistics, foreign funding to Indian NGOs saw a 56% increase in the 2005-06 and 2006-07 fiscal years. In 2008, the latest available data, the total official foreign aid to India was $2.15 billion.

Read more: http://www.time.com/time/world/article/0,8599,2036307,00.html#ixzz1SfGSmZ8T
Riaz Haq said…
Here's an interesting News International story on Pakistan as an international aid donor:

Pakistan’s contributions to mitigate the suffering of the countries hit by natural calamities are not only commendable but also helped Islamabad a lot to safeguard its economic interests. Sri Lanka, China, Iran, Nepal, Maldives and Afghanistan are the countries where Pakistan did a lot on humanitarian front and also managed to keep its say in the said countries.

As far as Afghanistan is concerned, Pakistan during the Musharraf regime announced the $300 million (over Rs 25.5 billion) grant for various projects out of which Pakistan has so far doled out $ 175 million (Rs 12 billion) since the announcement of the then President Pervez Musharraf during his visit to Kabul.

However, in 2009-10, according to Additional Secretary at Finance Ministry Mr Rana Asad Amin, Pakistan provided Rs 2 billion to Afghanistan to complete the various projects. Likewise, Rs 2.5 billion each allocated to Afghanistan in 2010-11 and current financial year 2011-12.

And in the future Pakistan will keep on doling out the amount to Afghanistan under the pledged $ 300 million grant. The Emergency Relief Fund Data is an eye opener for those who deem Pakistan did not play its role on the humanitarian front which is vital to keep its economic interests intact.

According to Emergency Relief Fund data, Pakistan in 2003 donated Rs 53.9 million in the shape of kind in to to to four countries that include Rs 1.72 million to Sri Lanka for flood victims, Rs 10.9 million to Algeria for earthquake victims and Rs 2.6 million to China for fight against sars and Rs 38.7 million to Iraq for war victims.

In 2004, Pakistan again donated Rs 171 million in kinds to four countries that include Rs 140.8 million go Iran for earthquake victims, Rs 3 million for Sri Lanka for drought victims, Rs 9.8 million to Afghanistan for food shortage and Rs 18.2 million to Bangladesh for flood victims.

However, when catastrophic tsunami badly hit Sri Lanka, Indonesia and Maldives in 2005, Pakistan came up with a bang and helped the said countries on big way and donated Rs 668 million for the said three countries. In addition Pakistan also extended the donation of Rs 26.3 million in kind to Comoros in the head od food assistance.

In 2006, Pakistan bequeathed Rs197.8 million to three countries including Rs 7.7 million in kind to Iran for earthquake victims, Rs 92.2 million to Indonesia also for earthquake victims and Rs 97.9 million to Lebanon for war affected people.

In 2007, China was provided Rs 1.875 million in kind for flood affected people, Bangladesh given Rs 72.19 million for cyclone affected people. However, Pakistan in 2008 donated Rs 5 million to Myanmar for cyclone affected people, and Rs 160.503 million to China for earthquake affected people and Rs 1.153 million to Nepal for flood victims.

And in 2009, Pakistan provided Rs 33.338 million in kind to Palestinians of Gaza. In addition, in 2008, Pakistan also provided Rs 81 million in kind to Cuba for hurricane affected people. As far as Pakistan’s authorities are concerned, they managed to ink trade deals with China and Sri Lanka with which Pakistan also possess the in-depth strategic relations.


http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=61681&Cat=2
Riaz Haq said…
Here's Dambisa Moyo's interview on China's relationship with Africa:



A: There’s nothing wrong about China going around the world making resource deals to support its growing population. What it’s doing makes a lot of sense. Yes, my concern is that other countries will not catch on until it is too late. In a zero-sum world, what will happen if China wins the race for resources? Other countries seem to be asleep while China is making a concerted effort. Some 24 ongoing wars and violent conflicts have their origins in commodities, and this trend is poised to continue. China is befriending what I call “the Axis of the Unloved”—countries and regions such as Africa, Brazil, Colombia, Argentina and parts of Eastern Europe that have been basically ignored by the Western economies. China is the leading trading partner and foreign investor in many of these countries—a very different approach to the West’s largely aid-based model.

Q: The Chinese economic edge in this is that its state capitalism offers advantages that the Western laissez-faire model does not.

A: Favoured Chinese companies have a zero or near-zero cost of capital. State-owned banks provide highly concessional credit lines, in the form of government grants or low-interest loans. Favoured companies also benefit from tax breaks and the preferential allocation of key contracts. Like the US$12-billion credit line extended to Wuhan Iron and Steel, a major steel producer, by the state-owned China Development Bank, for ļ¬nancing “overseas resource base construction.” And of course it helps to have a war chest of over US$3 trillion, while Western economies are struggling with cash constraints.

Q: The Chinese political edge is that it’s famously untroubled by governance issues in the countries it deals with.

A: Well frankly, in practice there is little to distinguish between the commodity counterparts of Western nations and those of China. U.S. and European countries are just as happy as China to strike deals with countries with less than pristine reputations—whether it’s Saudi Arabia, Venezuela or Russia. Two wrongs don’t make a right, but in this narrow sense, it’s unfair to constantly point fingers at China.

Q: So you think that criticism of China on both scores—cheating, so to speak, economically and being too comfortable with dictators politically—is often unfair and wrong?

A: Cheating is one thing, meddling in the markets is a whole other thing. Virtually all governments meddle in the commodities markets. Western governments are particularly egregious in this respect. The United States paid US$6 billion in commodity subsidies in 2010. OECD countries spend a total of US$226 billion on agricultural subsidies yearly. And in the EU, the Common Agricultural Policy sees some 40 billion euros spent on direct farm subsidies. So if meddling in the market is “cheating,” China has a lot of company. And the West has never had much of a problem dealing with despots and dictators if there is a benefit to be gained.
-------------
A: I think the reasons are quite clear. China pursues strictly business, symbiotic relationships, trading access to commodities for infrastructure, employment and other economic benefits. Take employment. The construction of the Imboulou Dam in [the Republic of the] Congo in 2010 employed 2,000 locals (compared to 400 Chinese). Survey results indicate that Africans much prefer to deal with the Chinese than with Westerners. In Ivory Coast, Mali, and Kenya, more than 90 per cent of respondents see China’s economic growth as “a good thing.” In Tanzania, 78 per cent agree, but only 36 per cent feel the same way about American influence. The difference is stark. Across the developing world, people want jobs, infrastructure and investment and the Chinese engagement does exactly that. ....


http://www2.macleans.ca/2012/06/04/dambisa-moyo-on-resource-scarcity-and-chinas-race-for-deals
Riaz Haq said…
Here's an ET report on record high remittances from Pakistani diaspora:

With an impressive 17.7% annual growth, remittances sent home by overseas Pakistanis surged to a record high and crossed the psychological mark of $13 billion in the previous fiscal year 2011-12, the State Bank of Pakistan (SBP) announced on Tuesday.

Continuous growth in remittances is being billed as a lifeline for Pakistan’s economy, especially when energy shortages and high inflation have hurt gross domestic product (GDP) growth.

“Remittances have been playing a key role in the country’s economic performance,” said Muzammil Aslam, Managing Director of Emerging Economics Consultancy.

“One can safely say that the continuous rise in remittances in the last few years has saved Pakistan from serious economic problems including default on debt repayments.”

Aslam suggested that the government can further increase the flow of remittances if it reduces the difference between interbank and open market exchange rates for the US dollar from the present one rupee to 10 to 15 paisa. “This will encourage overseas workers to send more and more dollars through banking channels instead of illegal means.”

Invest Capital Markets analyst Khurram Schehzad commented that the continuous rise in remittances is significantly positive for the country as the money supported the economy in different forms. Overseas Pakistani workers remitted a record amount of $13.186 billion in the last fiscal year ended June 30, 2012, compared with $11.201 billion received a year earlier, the SBP said.

Except for September ($890.42 million) and November ($924.92 million), Pakistanis remitted more than $1 billion in each of the remaining 10 months.

Monthly average of remittances rose 17.73% to $1.099 billion compared with $933.41 million a year earlier.

In June overseas Pakistanis sent home $1.117 billion compared to $1.104 billion received in the same month of 2010-11.

In the same month, remittances from Saudi Arabia, UAE, USA, UK, GCC countries and EU countries amounted to $333.68 million, $219.14 million, $206.60 million, $128.12 million, $126.72 million and $29.24 million respectively. In comparison, remittances from these countries were $291.55 million, $270.04 million, $204.64 million, $121.35 million, $106.20 million and $33.83 million respectively in June 2011.

Analysts believe that the SBP’s initiative for facilitation of remittances, called the Pakistan Remittance Initiative (PRI), has significantly contributed to the growth of remittances.

Since its inception in April 2009, PRI has taken a number of steps to enhance the flow of remittances through legal channels. These include preparation of strategies on remittances, taking all necessary steps to implement the overall strategy, playing an advisory role for the financial sector in terms of preparing a business case, relationship building with overseas correspondents, creating separate and efficient remittance payment highways and becoming a national focal point for overseas Pakistanis through a round-the-clock call centre.


http://tribune.com.pk/story/406343/remittances-surge-to-record-high/
Riaz Haq said…
Here's a Dawn Op Ed by Sakib Sherani:

As a result of the agreement on reopening Nato’s ground routes, it has been reported that Pakistan will receive around $1.2bn of unpaid arrears pertaining to the Coalition Support Funds (CSF). This money is reimbursement for costs already incurred by Pakistan in military operations in the northwest in support of Nato/Isaf’s Afghanistan campaign, and not assistance.

Nonetheless, it represents a not insignificant potential reduction of the fiscal deficit (by 0.5 per cent of GDP) and the need to borrow by government. More importantly, it has the potential to calm the financial markets that are nervous about depleting forex reserves in the context of large debt repayments due this fiscal year.

However, beyond this the CSF inflow will have a limited effect. To put this money into context, $1.2bn is roughly the equivalent of 0.5 per cent of GDP, 2.5 per cent of Pakistan’s annual foreign exchange earnings and 2.7 per cent of projected imports this year. More importantly, for the benefit of friends who celebrate the arrival of each $1bn of foreign taxpayer money as if it was ‘manna from heaven’, this inflow (or the elusive Kerry-Lugar money for that matter) is the equivalent of a miniscule 2.9 per cent of potential tax revenue that Pakistan can collect — but chooses not to.

In terms of overall US assistance, Pakistan has been a recipient of substantial inflows from the US in fits and starts over the years, with the bulk being in the realm of military aid. In terms of US economic assistance to Pakistan, the defining features since inception appear to have been:

— It has not been enduring, but spasmodic;

— The US has invariably followed a short-sighted, ‘transactional’ approach in its relationship with Pakistan, and continues to do so despite a strong case having been made at the start of the Pakistan-US strategic dialogue for a ‘transformational’ relationship;

— Assistance has peaked in non-democratic set-ups;

— US aid has generally been pro-cyclical, reinforcing upturns in the economy, rather than supporting Pakistan’s economy in a downturn (as currently). As a result, the impact has not been ‘visible’.

— US programmes are mired in bureaucracy, with large ‘lags’ and high transactional costs (to be fair, the latter is pretty much the case with all aid programmes across the board);

— Spending has, until now, either ignored areas deemed high-impact by the Pakistan side (agriculture, water, market access, for example) or, has been spread too thin over a large number of projects. As a result, the impact has been diffused, denying the US visibility for the taxpayer dollars it has spent in Pakistan.

The most potent form of economic assistance the US can provide to Pakistan, one with the greatest externality, is allowing preferential market access to the country’s textile and clothing (T&C) exports. If focused on the right products, such as garments (labour-intensive and value-added), the US intervention has the potential to create hundreds of thousands of additional direct and indirect jobs, carving a powerful urban, educated (and possibly currently unemployed) constituency comprising the country’s youth.

This will also be the ‘lowest cost’ in terms of US taxpayer dollars, since the additional exports from Pakistan will most likely displace existing imports into the US from some other producer.

Strangely, this is proving to be the second hardest legislation to bring to Congress after domestic gun control. Pursued actively by Pakistan since 2004, this request has routinely met the same response: Congress will not sacrifice the interest of its states with a large textiles constituency. Since then, however, Congress has allowed duty-free access for textiles and clothing to large regional blocs in Central America, the Andean states, and a number of African countries....


http://dawn.com/2012/07/13/pakistan-the-us/
Riaz Haq said…
Pakistan's remittances of $18.4 billion nearly made up for the trade deficit of $19.8 billion over 11 months ending in May 2015:

Pakistan's trade deficit widened by 11.73 percent to $19.735 billion for the July 2014 to May 2015 period, compared with a deficit of $17.663 billion for the same period last year, according to the Pakistan Bureau of Statistics.

Exports declined to $21.875 billion in the eleven month period from $23.092 billion the previous year. Imports rose to $41.610 billion from $40.755 billion.

The Pakistan financial year begins in July.

On a monthly basis, the trade deficit rose to $1.894 billion in May from $1.795 billion the previous month.

Exports totalled $1.953 billion in May and imports were worth $3.847 billion.

http://in.reuters.com/article/2015/06/16/pakistan-trade-idINL4N0XH4J720150616
Riaz Haq said…
#India biggest recipient of #America's economic aid over 66-year period: USAID; #Israel 2nd. #Pakistan 5th. http://www.dawn.com/news/1194228

The data, which is inflation adjusted, shows India received approximately $65.1bn in economic assistance from 1946 until 2012, followed closely by Israel, which was given $65bn.

With $44.4bn received as economic assistance from the US, Pakistan is also among the top five countries to receive economic assistance out of a total of 200 countries and regions.

Top 10 countries receiving US economic assistance from 1946-2012

India: $65.1bn
Israel: $65bn
United Kingdom: $63.6bn
Egypt: $59.6bn
Pakistan: $44.4bn
Vietnam: $41bn
Iraq: $39.7bn
South Korea: $36.5bn
Germany: $33.3bn
France: $31bn
Indian economic aid is spread out over various sectors and programs, including child survival and health, development assistance, HIV/AIDS initiatives, migration and refugee assistance, food aid, and narcotics control. The bulk of this aid ($26bn) is provided to various USAID programmes.

A majority of Israel's $65bn economic assistance was given to its Economic Support Fund and Security Support Assistance, with $56.5bn alone attributed to these programmes.

In comparison, of the $44.4bn provided to Pakistan in economic assistance, $13.8bn is given to USAID programmes, while $13.7bn is attributed to the Economic Support Fund and Security Support Assistance.


Israel received $134bn in military assistance over 1946-2012 ─ a figure which far outnumbers military assistance provided to the the second entrant on the list, Vietnam, at $77.9bn.

Read: Pakistan 3rd biggest recipients of US aid

Top 10 countries receiving US military assistance from 1946-2012

Israel: $134bn
Vietnam: $77.9bn
Egypt: $62bn
Afghanistan: $48.3bn
Turkey: $42.2bn
South Korea: $41.1bn
France: $33bn
Greece: $29.5bn
China: $26.3bn
Iraq: $24.7bn
Pakistan just misses being on the top 10 list, coming in at twelfth place with $12.9bn in military assistance from the US. India, however, is placed at 47 out of a list of 193 countries, receiving $897 million in military assistance.

It is pertinent to mention here that Pakistan received most of the military assistance from the US during the superpower's involvement in Afghanistan during the 1980s and then after 2001.

The US non-military aid to Pakistan for the period 1991-2001 averaged just $75 million per year, while the total military aid during the eleven-year period was a paltry $7 million.
Riaz Haq said…
"It sounds kind of crazy to say that foreign aid often hurts, rather than helps, poor people in poor countries. Yet that is what Angus Deaton, the newest winner of the Nobel Prize in economics, has argued.
Deaton, an economist at Princeton University who studied poverty in India and South Africa and spent decades working at the World Bank, won his prize for studying how the poor decide to save or spend money. But his ideas about foreign aid are particularly provocative. Deaton argues that, by trying to help poor people in developing countries, the rich world may actually be corrupting those nations' governments and slowing their growth. According to Deaton, and the economists who agree with him, much of the $135 billion that the world’s most developed countries spent on official aid in 2014 may not have ended up helping the poor."


The idea of wealthier countries giving away aid blossomed in the late 1960s, as the first humanitarian crises reached mass audiences on television. Americans watched through their TV sets as children starved to death in Biafra, an oil-rich area that had seceded from Nigeria and was now being blockaded by the Nigerian government, as Philip Gourevitch recalled in a 2010 story in the New Yorker. Protesters called on the Nixon administration for action so loudly that they ended up galvanizing the largest nonmilitary airlift the world had ever seen. Only a quarter-century after Auschwitz, humanitarian aid seemed to offer the world a new hope for fighting evil without fighting a war.

There was a strong economic and political argument for helping poor countries, too. In the mid-20th century, economists widely believed that the key to triggering growth -- whether in an already well-off country or one hoping to get richer -- was pumping money into a country’s factories, roads and other infrastructure. So in the hopes of spreading the Western model of democracy and market-based economies, the United States and Western European powers encouraged foreign aid to smaller and poorer countries that could fall under the influence of the Soviet Union and China.

The level of foreign aid distributed around the world soared from the 1960s, peaking at the end of the Cold War, then dipping before rising again. Live Aid music concerts raised public awareness about challenges like starvation in Africa, while the United States launched major, multibillion-dollar aid initiatives. And the World Bank and advocates of aid aggressively seized on research that claimed that foreign aid led to economic development.

Deaton wasn’t the first economist to challenge these assumptions, but over the past two decades his arguments began to receive a great deal of attention. And he made them with perhaps a better understanding of the data than anyone had before. Deaton’s skepticism about the benefits of foreign aid grew out of his research, which involved looking in detail at households in the developing world, where he could see the effects of foreign aid intervention.

“I think his understanding of how the world worked at the micro level made him extremely suspicious of these get-rich-quick schemes that some people peddled at the development level,” says Daron Acemoglu, an economist at MIT.

----
Instead, many of the positive things that are happening in Africa – the huge adoption in cell phones over the past decade, for example – are totally homegrown. He points out that, while the world has made huge strides in reducing poverty in recent decades, almost none of this has been due to aid. Most has been due to development in countries like China, which have received very little aid as a proportion of gross domestic product and have "had to work it out for themselves."


http://www.washingtonpost.com/news/wonkblog/wp/2015/10/13/why-trying-to-help-poor-countries-might-actually-hurt-them/

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