“Broaden tax-net, manage subsidies properly for economic growth”: Adnan Mazarei

Mr. Adnan Mazarei, an Iranian-American, is currently serving as Assistant Director of the Middle East and Central Asia Department at the International Monetary Fund (IMF) headquarters in Washington, DC. Mr. Mazarei holds a PHD in Economics from the University of California.Prior to joining the Fund in 1993, he worked as a lecturer at the University of California and a consultant at the World Bank. Mr. Mazarei is also the mission chief for Pakistan at IMF for over two and half years now, where he is closely monitoring the issues related to Pakistani economy and the efforts underway to resurrect it. In an exclusive interview with Dunya News, he answered question regarding Pakistan s programme with IMF, need to increase the tax-net and manage subsidies properly as well as the possibilities for future outlook of Pakistani economy.

Question: Mr. Mazarei, thanks for talking to us. Let s start with the recent meetings that the Pakistani delegation, led by Finance Minister Dr. Abdul HafeezShaikh, has recently held with IMF. Can you inform us what was discussed in these meetings?

Answer: First of all, thank you very much for visiting. We have had very good meetings with the mister finance and acting governor of the central bank. The range of issues involved the issues that the Pakistani economy faces including budgetary pressures, issues related to energy subsidies, and also performance under the programme (IMF s loan for Pakistan) that ended at the end of September. It has been made clear that they would like to continue their relationship with IMF, both in terms of seeking advice and working together on a common agenda. We will soon be having our Article-IV mission (to Pakistan), which is our annual visit to all member countries, in November. During the visit, we ll discuss a range of issues and do a general check of Pakistani economy, discuss pressures on the global economy affecting all our membership including Pakistan. We have also discussed ways that Pakistan could re-engage with IMF in another programme down the line. As of right now, Pakistani external situation is fine, external reserves are in good shape, remittances have been high and exports have been quite good, so there is not any immediate pressure on the balance of payments. However, there are issues related to the budget and overall budgetary management needs to be improved, subsidies need to be better controlled and the authorities (in Pakistan) are aware of this. Things are fine right now, but down the line, whenever the Pakistani authorities wish, we ll be very happy to discuss another engagement with them.

Question: You have mentioned Article-IV consultation. Can you explain what it means and what kind of economic indicators you will be looking at during the November visit to Pakistan?

Answer: Sure. An Article-IV consultation is basically a check-up of the issues that an economy faces. We discuss both the policy-making institutions and the policies themselves and the overall economic situation; issues related to budget, issues related to monetary policy, the state of the banking system, unemployment and poverty, besides any other specific issues that any government faces. With the Pakistani authorities, a key issue of interest will be the decentralization of fiscal system. You are aware that under 18th amendment and the National Finance Commission (NFC) award, greater amounts of resources have been allocated to the provinces. Greater responsibilities in terms of expenditures are pushed to the provinces but the “rules of the game”, for instance, need to be better defined. Our particular interest during discussions with Pakistan will be subsidies and the general state of the public expenditure system. As you know, Pakistan spends a considerable amount of resources on electricity subsidies. These subsidies are quite large and some would argue that these need to be better targeted towards those who need it. In many other countries, the resources allocated to these subsidies are often used by those who don t need it the most. It is good to have subsidies but those that are directed towards the people who are in need of it the most. There are other issues that we need to deal with, for instance the banking system. The banking system in Pakistan is relatively good but, like other places, we need to do a health check, and if there are issues to be erased, we ll be happy to do so. At the same time, the social safety net; how the unemployed are doing; how the poor are doing, especially in the context of floods, these are issues we need to follow-on with.

Question: Talking of policy advice for Pakistan, you have mentioned some critical issues in your conversation, i.e. subsidies, increasing tax collection in Pakistan and financial reforms like state borrowing and controlling inflation etc, Have the Pakistani authorities discussed with you what plan they have to tackle these issues considering the political climate and the expected backlash and what advice have you given them?

Answer: Look, we have had a running dialogue with Pakistan for many years on some of these issues and the issues are relatively well known. The authorities are very good in Pakistan in terms of knowing what the problem is, for instance they all know that public enterprises in Pakistan take-up a huge amount of resources and something needs to be done. They know that electricity system is a major source of a problem and it hinders growth. Of course, they are also aware that electricity is not something that you solve simply by raising tariffs. All of these areas require changes in management, like public enterprises and electricity system. These require a new vision with regards to management and price system or tariff increases are only a part of it. Some people who make the mistake of thinking that problems of electricity will only be solved by forever raising tariffs. That is not the issue. Rather the main problem in the public enterprise and electricity sector is management. The authorities are aware of the political and social difficulties of undergoing reforms and these reforms to succeed, frankly, require not only political will but also greater social debate. On the issue of subsidies for electricity, for example, you need in Pakistan a real debate that who are the beneficiaries of these large electricity subsidies. As I mentioned, it is very good to have electricity subsidies for these who need, people who use small amounts, but large and commercial users, it is better if they paid their (entire) electricity tariffs. The same is with taxation. Poor should be saved from taxes, but there are a lot of people in Pakistan who can afford to pay taxes. There are large segments of the population; large components of the economy that are not in the tax net. Tax system needs to be clear, the burden needs to be equitable and for people to pay taxes, they need to know that their taxes are well spent. So we need a very good, clear and credible expenditure system. The main thing that we bring to Pakistan is the advantage of having experience in these issues in a number of countries. You (Pakistani authorities) know your country and your political and social constraints better; what we bring is technical expertise and with the merger of these, I hope we can move forward.

Question: What are your views on the current financial situation in Pakistan and do you think there are enough indicators in place to hope that these can lead towards an economic revival of sorts?

Answer: The brighter spot in Pakistan right now is the external situation in the following way; last year you had a current account surplus because of high remittances and high exports, and going into this year, you are still in a good position. The level of reserves is high, remittances are fine, exports are fine, but we are worried, not just for Pakistan but the whole world, moving into a very uncertain and risky period. It is very important to maintain good policies. Now the part that needs to be addressed is primarily the fiscal situation and the budget. There was a large budget deficit last year, which was financed through borrowing from the banking system and it led to the diversion of credit from the private sector, and growth and job creation (consequently was left) to the government. If the government keeps taking more and more resources from the banking system, including for circular debt and for commodity operations, there will be less left for the private sector and growth. What we need in the coming period, very quickly and very clearly, is a strengthening of the budgetary position. This means improving the revenue situation through more equitable and better taxation and revenue mobilization and at the same time, better control of resources and expenditures, including, as I mentioned and I repeat, on targeted subsidies, resources to public enterprises and other wasteful areas.

Question: What are your views on Pakistan s programme with the IMF that terminated on September 30th. Are you satisfied with the way it progressed because Pakistan could not get the last tranche of $ 3.3 billion and how much of it will have a bearing when Pakistan comes to IMF for a new programme in future?

Answer: The programme (overall) has had good success in stabilizing the economy. Remember in 2008, we had a very large budget deficit and external imbalance while the inflation was about 25 percent. In the past two and a half years, the authorities have had a good degree of success in stabilizing the economy, but for these successes to become durable and for Pakistan to be able to meet the needs of the people in terms of the spending that is needed, and at the same time to protect itself better against the risks rising globally, it needs to do considerably more on structural reforms. There have been some structural reforms and the government has taken some steps, but much more is needed. Particularly what is needed is better management of the budget. Pakistan has proven to be quite resilient against a background of the globally difficult situation, a very difficult security situation, tragic floods and a lot of other things have gone wrong exogenously for Pakistan, but the economy has weathered well and the policy-makers have been able to work through it. But the agenda of what needs to be done is still quite important, especially structural reforms; allowing the private sector to have clear incentives, to have much better resources from the banking system, and much more certainty in terms of provision of electricity and power supply.

Question: In your interaction with the Pakistani financial managers, looking from outside at the country s economy and all the measures that you just talked about, how confident are you that these goals are achievable? Because the people in Pakistan would like to know if there is going to be any economic revival at any point in future?

Answer: These goals are achievable, but these goals are to be achieved by Pakistanis, for Pakistanis. This has to be done by the Pakistani authorities, by the Pakistani public sector, and various components of the Pakistani society. It requires concerted debate, concrete political action, and firm efforts (for these things to happen).

Dunya News: Thank you Mr. Mazarei. Thanks for sparing time for Dunya News.

Adnan Mazarei: Thanks. It was a pleasure.


Hina Rabbani Khar’s: ‘Hostile US policy counterproductive’

Foreign Minister Hina Rabbani Khar says the US hostile policy towards Pakistan is counterproductive.

Given the recent tensions and a spate of hostile statements from senior American officials against Pakistan, Ms. Khar indeed has a tough task on her shoulders to convey the Pakistani viewpoint. She, nonetheless, is trying to put up a brave front in various bilateral meetings in her bid to lobby for Pakistan and is being sought after by the media as well (thankfully it is not about her Birkin bag this time round).

Despite her hectic schedule, she managed to spare time to talk one-on-one with Dunya News about the US accusations against Pakistan of aiding Haqqani network, Pakistan s frustration with the US and her interaction with other foreign leaders during the UN session amongst other related issues.

Question: The narrative in United States about Pakistan seems to be turning hostile. Following Admiral Mike Mullen and Secretary Defense Leon Panetta yesterday, White House has also openly accused Pakistan of having links with militant organisations. What s your reaction to that?

Answer: Look Pakistan s stance has always been that we don t want to do diplomacy through public statements and media and we have been consistent with it. And we have given the same message to US during our engagements, which they have reciprocated. Despite that, if there s a tendency from them to overlook all the commitments which have been made, and to overlook the pre-requisites and the norms of a decent relationship, Pakistan would still choose to do what it thinks is in its interest. And we think that as a responsible and mature country, it is neither in our interest nor it is our policy to run our foreign policy through public statements. In our deep and intensive engagement with US, in which we have always addressed their issues and concerns. And we have repeatedly stated this that if you ll continue this (aggressive) trend, then we ll have the right to choose or exercise, you know, our options. Because it is important for them to be able to address our concerns and it is important that the US does not seem to want to aggressively, or on purpose, want to alienate the people of Pakistan who are the ones who have sacrificed.

Question: At the moment, the biggest threat to the deep engagement between Pakistan and US, which you just referred to, is Haqqani network and other terrorist organizations targeted by the Americans. It has reached a point where the US is asking Pakistan that it would take action on its own against these groups if Pakistan does not act?

Answer: Well, they might be saying it but when they interact with us and say something, that s more important instead of doing it through public statements and media. We have said it quite often that terrorist organizations and terrorist elements in all their forms are not something that we want to support or that we are supporting. Any allegations that are made on the state of Pakistan are taken very very seriously, and we expect serious answers from them (US) and we are looking for these answers from them. This has been conveyed to them unequivocally. I wanted to be very clear that this has been conveyed to them in the terms that I am saying, if not worse, because we have been very mature. I think our maturity should not be taken for granted.

Question: Do you think that the United States at this point is even discrediting the sacrifices given by Pakistan in the war against terror and is trying to pressurize and marginalize Pakistan unduly?

Answer: I have even used the word “alienation”, which is stronger than marginalizing, and I hope this is not a policy decision. I have so far not been told that it is and have been told categorically that it is not a policy decision; it is not their intention etc etc. If the impression that comes through time and time again that if is almost a policy decision, and if the same policy (towards Pakistan) continues, it will not be in the interest of the US.

Question: Does the Pakistan government or the Foreign Office intend to formally lodge a protest with US on such statements and direct accusations?

Answer: See I have said earlier and I ll repeat that we don t do our diplomacy through public statements and media. This is our strength and not our weakness and should not be considered our weakness at all. Because we are engaging with them (US) in a mature manner, have been doing it, and want that they do the same. The messages we needed to convey to them have been conveyed in unequivocal terms.

Question: Lastly, you have said that Pakistan has the right to exercise its options, if US resorts to taking more unilateral actions like the Abbottabad raid in the Pakistani territory, which it has been threatening between the lines for a while, then what kind of option does Pakistan have?

Answer: Pakistan has said that very clearly that there are certain red lines which have to be respected and we have said this categorically. Your top leadership, including President and Prime Minister, conveyed this to the US team that visited Islamabad after the US raid and even the parliament raised its concern loud and clear. If the US will not take all this into account, and even decides to ignore the Pakistani parliament s resolution to take such a course of action, I would not like to engage in such a possibility right now; in line with our policy of not doing diplomacy through the media.

Question: You are attending the UN session in New York at such a crucial juncture and holding several bilateral meetings on the sidelines as well, how difficult it is to lobby for Pakistan when such statements are coming from the US administration?

Answers: It rather seems quite easy for me and I sometimes feel quite surprised because each country, Europeans, UK, Japan, Canadians, Bahrain, Italian and so many other foreign ministers, whom we have been meeting, all of them have said that they understand and they recognize Pakistan s (problems and) sacrifices in this war. So I want to tell you that Pakistan is not isolated at this point, the entire world is standing besides Pakistan. These statements are only coming from one country (US) which are counter-productive, and if these continue, we will all be losers.

Thank you very much for talking to Dunya News.

Thank You.

Sports can break barriers and bring people together: Amir Khan

Amir Khan, the new sensation in the boxing world, has achieved several noteworthy feats at a young age of 25. He was the youngest British boxer to compete in Olympics in 2004 at the age of 17. Currently, he is the world champion in light welterweight category. His parents migrated to Britain from a small village near the town of Kahuta in Rawapindi district. Although born and raised in Britain, he is very deeply attached to his Pakistani and Muslim links. Amir was recently in United States on an invitation of US government to recognize his contributions, along with a group of 10 Muslim-American athletes, in promoting peace and harmony through sports. He took out time to speak exclusively with Dunya News about his biggest inspirations in life and how sports can be used to bring people together.

Question: You are a Muslim as well as of Pakistani origin where millions of youngsters idealize you. How difficult it was for you initially to achieve success in a challenging mainstream sport like boxing?

Answer: It has been very hard journey for me and it’s very hard for everyone. If you want to be successful in sport and you are young too, you need to try twice as hard. When I was 17 years of age, England did not want to send me to Olympic games, and I had a chance to go via Pakistan. But then England kind of said to me, look, we want you to go through us and we apologize. To be honest with you, I think now I see it quite different because you don’t really see the racism, you don’t really see the stereotypes and everything in sports. Sport is brilliant because everyone is treated equally and that s the way it should be.

Question: You are a Pakistani-Muslim youth icon known and admired allover the world at a time when there are a lot of misconceptions about Pakistan as well as Islamic religion. How these misgivings can be removed in your opinion?

Answer: There are a handful of bad people around but there are a lot of good people and I think sports breaks that barrier. Sport in a way brings everyone together. If you look at any of my fights and the crowd, you ll see English, Americans, Pakistanis, Indian, you ll see everyone watching me and supporting me., even though I might be fighting a British boxer. I think more sporting events around the world will break the racial barriers. There are 10 other Muslim athletes with me here including those of Pakistani origin and that s good because we promoting this sport for Pakistan and for the Muslims. I think we need more such events to promote sports.

Question: You are obviously very deeply tied to your oots and your religion and you recently performed Umrah as well. What role does religion play in your success as a professional sportsman?

Answer: Definitely, faith is a big thing in my career. That s the reason that has got me so far. All my success comes from Allah, who has put me in this position. I have to work hard and I always thank Allah for all the success. I went to perform Umrah recently with my whole family and my brother Haroon Khan, who is also a boxer and will be representing Pakistan in the next Olympics in 2012. Both of us always pray before the fight and faith is very close to our hearts. We believe in it big time because it keeps my feet on the ground. You have your own natural talent but you also need the divine blessings to achieve success. Without believing in religion, it is easy to get bigheaded but faith has kept me really down to earth.

Question: Amir, you are also involved in a lot of charity work. What s the motivation behind that?

Answer: That s one thing which I love doing to help the less fortunate people and that s the reason I do a lot of charity work for poor people like Pakistan earthquake and floods, Tsunami and my next project is to get involved in the charity work in the horn of Africa who are suffering without food, shelter and clothing. The message it gives to others is that the people who don t have food at the end of the day also deserve attention of others who are in a position to do so.

Question: What message you want to give to your fans in Pakistan?

Answer: My message to all my fans is that my next trip will be to Pakistan very soon and I look forward to see all my fan-base there like elsewhere in the world. Another message I want to send across to young kids out there is that if you want to achieve something in life, you have to work hard towards it. You might not achieve it in one year and may have to work for five years but as long as you keep working hard and pray to Allah, I am sure you ll be able to achieve it one day.

Thank You Mr. Amir Khan For Speaking To Dunya News.

Thank you. I Really Appreciate The Opportunity.

Power Projects & Economic Revival Priority In Pakistan: USAID Official


David McCloud is the Deputy Director and the Deputy Assistant to the Administrator for USAID s Office of Afghanistan and Pakistan Affairs, where he focuses on USAID s extensive portfolio of activities in Pakistan. A career USAID Senior Foreign Service Officer, McCloud joined the U.S. Foreign Service in 1988. He previously served as the acting Deputy Assistant Administrator in the Asia and Near East Bureau of the United States Agency for International Development (USAID/ANE), and the director of the Office for Middle East Affairs. Previous assignments included positions in USAID missions in Egypt, Malawi and Kenya, as well as in the Africa and Management Bureaus in Washington. He holds a BA degree from Trinity College and two MA degrees from University of California at Los Angeles (UCLA), and completed coursework, exams and research for a PhD in Development Studies from University of Wisconsin at Madison. He was a Fulbright Scholar in 1983/84, conducting research in Tanzania on agricultural production, and a Peace Corps volunteer 1977-80 working as a budget analyst in the Ministry of Finance in Fiji. Here he answers questions about the working of development agencies in Pakistan, projects being undertaken by USAID in Pakistan, controversies and credibility issues attached to this and security concerns amongst other related issues in a detailed interview with Dunya News at the USAID head-offices in Washington, DC.  

Question: Mr. McCloud, let s start with an overview of the USAID programmes in Pakistan. Which areas are you working in and what s the priority considering the requirements of Pakistan?  

Answer: The USAID, rather US government has been working with Pakistan in development areas for a very long time, even prior to the establishment of our organization USAID. We helped establish the Institute of Business Administration (IBA) back in 1950 s, Lahore University of Management Sciences (LUMS) in 1980 s as well as some other very large projects like financing part of Tarbela Dam. More recently, we have enhanced the Pakistan Development Assistance Act, or the Kerry-Lugar-Berman Bill (KLB) as it is known, that focuses for us now on five sectors. We are looking at assistance primarily in energy, in economic growth, in stabilization (of infrastructure), in health and in education. We are focused in these areas. It s a national programme and we are working in all parts of Pakistan. In energy, we are doing work primarily to increase power generation in ways that have other kinds f benefits to the country. For example, in the Gomal Zam dam, we are also setting-up irrigation facilities as part of using reservoir that s created by the dam. This is going to irrigate over 200,000 acres of land that will provide significant employment in that area and increase the ability of Pakistan to produce agricultural yield. We are also working on rehabilitating and rejuvenating other kinds of power generating facilities, so that in total over the next couple of years, we ll have helped Pakistan increase its power generation by over 500 million mega watts. This will actually help provide consistent sources of energy of power to about a million households. It ll also help industry do job creation and basically help the economy overall.

Question: What s the timeline and budgetary details for these projects?  

Answer: Well, energy is where we are putting most of our resources. We do our budgeting on an annual basis. So for the beginning of KLB programme, I guess we put something like 500 million dollars or so into energy production. It s the largest part of our programme. But when we do that, it does not mean that all this is spent in one year. That s something we are going to be programming through about a 3-4 year period considering that construction projects are always very time consuming and will take a while for us to complete. That s why I am saying that over the next couple of years because we have started these programmes about two years ago. It ll take us 2-5 years to complete them and that s why we can get to a fairly large impact, but it does take a while to do that.

Question: There are also reports that US is also going to help Pakistan in the construction of Diamer Bhasha dam with a reported sum of one billion US dollars and the experts from both sides are already discussing these possibilities. Can you give us some details of that?  

Answer: Sure. The Pakistani government has approached us as it has different multilateral banks and other donors to assist with Diamer Bhasha dam project. You know this is a project that has been under discussion in Pakistan for about 15 years now. We have made no commitments of the funding yet. I saw reports of a billion dollars as well. We honestly don t know where that number came from because that did not come from a US government source. What we are doing right now is talking to the government about what its needs are generally in energy. We understand that s probably its highest priority to construct this dam. We have not made any decisions yet as to how we might assist. That was surely a topic of discussion during the recent bilateral energy conference but you would not hear a final decision from our side for a while yet.

Question: Are you confident that given the commitment both sides have shown to this sector of high priority for Pakistan, there will be some headway eventually and US will be able to help Pakistan in the Diamer Bhasha dam?  

Answer:We are certainly supportive of Pakistan make some decisions as to what direction it is going to go in and how it might do that. But again, we do our budgeting on an annual basis, so it s very difficult for us, say this year, to commit funds that are going to be necessary in the future. What we ll be doing is talking to the government, trying to understand what its needs are, seeing in what ways we may be able to help but there are a lot of steps that still need to take place before any decision is made.       Answer:As far as I know they have not. I would not call them demands anyway. These are requests. That have not come to us and said this is a specific amount that s is necessary. I think they are still in the process of estimating the final cost and putting together some sort of a financial plan to make judgments as to where they might be able to get funding. But you probably need to talk to WAPDA (Water and Power Development Authority in Pakistan) about that.

Question: Moving on from energy sector, what other sectors are you focusing on?  

Answer: Economic growth is a sort of second priority to us. I would not say second in terms of less important than energy but we have to prioritize how we use our funds. So what we are doing in economic growth is a variety of activities. We focused to a large extent on agriculture and on making farming industry more efficient, looking for export opportunities etc. We have quite a successful programme in mangoes right now. We are also going to be looking for ways of supporting the growth of small & medium businesses in Pakistan because they often provide some of the best opportunities for us and for the country to do job creation. We are looking at that more or less for the future what kinds of programmes we would like to be able to talk about that we can do in the future. We have a goal of helping Pakistan establish two million new jobs over the next few years. That s very ambitious but given the nature of Pakistan s economy, of its population growth and the need for employment opportunities, we think that would be an important goal to try to achieve.

Question: Will these two million jobs be spread-out across all the different sectors or there are certain sectors that you ll be focusing on?  

Answer: Agriculture is one of our focal points. Otherwise, I am not sure we are doing a sectoral focus as such. Instead what we ll look to do is support the growth of small & medium industries. There may be ways in which we can support larger ones as well or help establish systems in Pakistan where may be financing is more readily available. Often financing especially for smaller businesses is a very difficult thing to get. There are various ways in which we have had experiences in other countries that actually bring about greater opportunities for financing.

Question: What have the Pakistani authorities told you that in small & medium enterprises, which sectors could be more helpful where these businesses could start?  

Answer: These are discussions that are just being initiated. This is not a programme that is in place yet, so I think of discussion we will have as we move further towards the development of this programme.

Question: As you work with Pakistan for economic stability and KLB programme has also been in place for about a couple of years now, are you satisfied with the indicators that are there for the economic revival and stability of Pakistan in whatever areas you are working in?  

Answer: Let me say this about our assistance and the time period in which we have provided it, the KLB bill was actually passed about two years ago, roughly September-October 2009, but the funding under that bill did not become available to us until a year ago. So roughly the October of 2010 is when the funding became available and since then we have been putting programmes in place. What happened of course during that time period include the epic floods that Pakistan experienced during 2010. That required us to rethink how we were spending funds we had available and we worked with the Pakistani government what immediate needs they had and how we could meet those with the resources available. That resulted in us spending close to a billion dollars in flood recovery and relief; about 500 million dollars of that came from other sources, in addition to the amounts that we already had available under the KLB legislation. But it also meant that we had to reframe some of the work that we were doing and to postpone some of it to sort of emphasize some of the work like rebuilding schools, helping to rebuild roads and bridges, and bringing back agriculture capability of production. We had to sort of re-programme a lot of funds. So what we have been doing would not necessarily have such a direct impact on the overall economic stability or growth of Pakistan in such a short period of time. I think generally speaking, and we are fully supportive of the international organizations that are working with Pakistan to try to determine what kinds of reforms are necessary there in order to stimulate economic growth, we think there s a lot of potential and I think we do have some expertise to help Pakistan realize that potential.

Question: The social sector, health and education, needs a lot of improvement in Pakistan. What kind of work you are doing in this regard?  

Answer: In education, there are other donors who are doing quite a bit of work. The British aid organization for example is quite active. And we are working together with other donors in Pakistan. To a large extent, we are focused on schools construction and reconstruction, we already were doing that prior to the floods, and re-emphasized certain areas after that but we are continuing to do that. Again we have a goal that we have set of two million additional children in school by 2012. We are working on improving community involvement in the management of schools, and teacher training as well. In health, we do a lot of work in vaccinations and polio eradication. Pakistan is one of the few countries where polio remains in existence and it would be tremendously important not just for the country, but for the whole world, if we can help eradicate polio. We have other kinds of vaccination programmes and we are also working with different ministries of health to improve their service delivery and how they are providing health services to the population.

Question: You have mentioned that the funding under Kerry-Lugar bill was not available till October 2010. And even after that, the Pakistani government has been complaining that 1.5 billion US dollars a year were promised but they have hardly received 300 million dollars last year. Do you think this delay and non-disbursement of funds has in a way affected your programmes on-ground?

Answer: I guess I have to explain how the situation came about and what our understanding of it is. The way we work in any country, it ll take us about 18-20 months to spend the money that we get in any one year because of what we have to go through in order to do contracting, to put money in place and to get programmes initiated. So in this instance, over the last two years, we have actually spent two billion dollars of resources in Pakistan of assistance. Part of that has come from KLB and part of that came from previous years  resources. So I think on the KLB side, it s probably close to 600 million dollars that we have actually spent over the last year or so. We have put a lot more in place. The way our system works is that we will do agreements, we put money in place and then it start being spent, but it often means that we are reimbursing the government concerned for expenditures. So they have actually done a lot of work and then we provide funding for that work, so the pace of implementation does not disturb me too much. It is not an easy environment that we are working in as there are a lot of security issues that we face. We are trying to focus on working with Pakistani entities to a large extent, not bringing in international contractors, that means that we have to be assured ourselves that the funding that we provide is used in a way that it was expected to be used. And we are monitoring the results that we are getting. I know there s been some discussion about the pace of funding, and the pace of implementation. I think there was some slowness in the beginning, as we were putting together new programmes, and getting them in place. We have seen that pace speed up substantially overtime. And as I said, over that two-year period, we have spent a lot more on the programming than we were actually planning under the KLB.

Question: There have also been questions in Pakistan that most of the money is being spent through American contractors, who take almost half of that back to US one way or the other. And then there are also issues of accountability of the funds spent through Pakistani organizations and complaints of corruption etc. How do you deal with it?  

Answer: On your first point about international contractors and organisations, one thing that often does not make it into that debate is what the money is being used for. So it s not just the financial transfer of funds but what we are buying in that instance. Pakistan is buying is expertise, ideas and experience through this. So when we bring in people to do work from outside, we are trying to bring in new ideas and bring in a level of expertise that we have not found available within country. If it is available in the country where we are working, that s what we focus on first and use that expertise. But we often find that new ideas have to come in. People often focus on the financial transfers but we focus on what the country is benefitting from by bringing in these international experts. There was a point in time when there was a decision made that we were possibly using international organizations and consulting firms to a larger extent than we should be, especially in the Pakistan environment, and there was a shift at that point. We then said ok we are going to spend at least 50 percent of the funding on Pakistani entities to get the work done and that s what we have done now. For our resources in 2010, probably more than fifty % is going through some form of Pakistani entity, so there s been some shift to that. That then leads to the second issue that you raised and that is how do we ensure that the way we are spending the money, it is actually being used where it was intended; whether it is going through the government or a non-governmental organisation. We have a variety of safeguards in place that at least helped us be assured ourselves that our funds are being used appropriately. We have auditors that look at these instances. In the very first instance, we have agreements with the entities that we work with, typically these are entities that are known to us and if they are not, we then do assessments of them to understand what their weaknesses might be, and then we able to actually able to provide assistance to strengthen institutions that we want to work with, in order that they can use our funds appropriately.

Question: On a scale of say 1 to 10, what is your satisfaction level that money is being spent judiciously and there is no corruption or things like that?  

Answer: I ll probably stay away from numbers on a scale because someone somewhere will criticize me for some number but we are confident that our funds are being used appropriately. The effectiveness can always be debated because there ll always be a debate as to whether something could have been accomplished differently and more effectively. We feel that we do studies that lead us to think that what we are doing is effective. But one other mechanism we have put into place is a hotline through Transparency International (TI) and through that mechanism, we can hear and the government can hear from anyone who has any concern that some programme that we are funding is operating in some inappropriate way. We have received a number of calls; they have been investigated and have actually led to some more formal investigations. So our view is we first of all put safeguards in place.

Question: How much of these complaints, leading into formal investigations, have actually been found true?  

Answer: I don t have the number that how many of these (complaints) actually led to those formal investigations but I do know that it has led to some. So it s not as though people are just making up reasons to make phone calls. We actually do hear some things that then lead us to discover there has been some wrongdoing.

Question: You have also mentioned security concerns in your conversation. Now security in Pakistan has been a concern for everybody, particularly for the foreign agencies working in Pakistan. How badly has it affected the working of USAID? Have you had to alter your plans or you have to put in place extra security measures?  

Answer: Probably yes to all of this. It is a serious issue in Pakistan. Security always is an issue to us anywhere in the world. But in an area where there s a lot of instability, and is not really just in Pakistan, but in the region, we have an even greater concern on the security side. So it does mean that it may increase our expenses a little bit because we have to have some protection unit that would help secure our facilities and secure the workers that we have. It will slow us down at times and will make it difficult for our staff to monitor progress and just to be able to confirm that the money we are spending is actually reaching the results that we are after. So it definitely has that kind of affect but it is one that we accept and we are able to manage nonetheless getting work done even though that we have this issue.

Question: You are working in a country (Pakistan) where there is a lot of anti-Americanism and there are a lot of misconceptions about each other on both sides. There were stories of a fake vaccination campaign run by CIA in Abbottabad (to reach Osama bin Laden s hideout) that raises credibility issues for other development agencies. What are your views on that?  

Answer: Again, we face a number of problems wherever we work. Some of the problems in Pakistan seem to be a little unique to me and I have been around for a little while, but nonetheless, these are issues that we have to face. We certainly would like that we get the message across to the Pakistani people that the US is providing us assistance that we are working well with the Pakistani entities, with government, with NGOs, with private sector and that we are putting programmes into place that are generating power, creating jobs, providing schools. All these things we think are quite positive and they are not things that we are doing just for the benefit of the US. To us, having a strong, secure and stable Pakistan is in our interest. And the things that we doing are the ones that we think are in Pakistani interest, in terms of building its economy and providing services for its people. If we face different stumbling blocks and face different constraints that we have to overcome, that s basically part of our job.

Question: And how confident are you that in all this talk of cutting-off aid to Pakistan, severing ties with Pakistan, despite the commitment shown by both sides, these programmes will continue?  

Answer: Clearly, we are hopeful. Part of our job is to make sure that the stakeholders, all those people whom we reply on for support and resources, here in US understand what we are doing and that we are being successful. If we have problems, why we are having those and how we are trying to overcome those problems. The level of funding is not in our control, Congress has this power in our system, and the administration that we work with, goes to Congress to explain how we are going to use those funds. That s basically our job and I think we basically do as well as we can on that front.

Question: Talking of floods, you mentioned that during last year s floods, US was the single largest donor. All those affected people have not been rehabilitated yet, they are still homeless and still in need of assistance. This year, floods have affected millions in Pakistan again. What kind of programmes you are thinking about putting in place to meet this new challenge?  

Answer: It is unfortunate that flooding is happening again. We certainly feel that we made a good contribution last year to the flood relief. We are open to providing the assistance required and have already provided some assistance actually that we had remaining from last year. We already are talking to National Disaster Management Authority (NDMA) in Pakistan and other Pakistani officials on this front on what kind of assistance is necessary. We deal with disaster situations frequently and have a whole division here within USAID that s very familiar with how to deal with such conditions. We end-up responding to needs worldwide and so it s not just one country that we focus on, so we just need to look at what our budget is and what assistance we can provide. But I know we are prepared to come in and help (in this time of need for Pakistan).

Thank You David McCloud For Speaking To Dunya News.

Thank you. I Really Appreciate The Opportunity.

US wary of Pak N-programme, terrorism: Stephen Cohen

Says drones, unilateral hits in Pakistan to teach lessons to other states too

Dr. Stephen P. Cohen is one of the best-known American writers and intellectuals in and outside United States. A former academic and an acclaimed researcher, he is an expert on South Asia and takes a keen interest in Pakistan. He has travelled extensively to Pakistan and has written three books on the state of affairs in Pakistan and its institutions. His forthcoming book “Future of Pakistan” also looks at the challenges confronting the country. Currently associated with the think-tank Brookings Institute in Washington, DC, he sat down with Dunya News for an interview in which he responded to an array of questions on Pak-US relations and other wide-ranging issues in a candid manner.

Question: Dr. Stephen, thanks for talking to Dunya News. The United States and Pakistan have had a troubled relationship over the years. The tensions peaked after the Raymond Davis case and the Abbottabad raid to kill Osama bin Laden. What in your opinion are the reasons for this mistrust?

Answer: Let me first of all say that there is very little communication between our countries and a lot of that is of course misinformation. So I am happy to do this interview with the Pakistani media. In terms of what happened in Abbottabad, I think the whole US-Pakistan relationship is characterized by deep mistrust. There is suspicion on both sides. I talk to Americans and they are very concerned what is happening to Pakistan and what the Pakistanis are telling them. Of course the Pakistani view is that Americans can’t be trusted at all. There is a trust-deficit. We can’t trust each other because we don’t know that what we say is what we mean. I think that applies to both sides.

Question: In the war on terror, Americans have accused Pakistan of not cooperating fully. Pakistanis obviously think that the US left us after the Soviet war, what are we going to do if they leave us again? With this kind of differences, do you think it is possible for both countries to find common grounds?

Answer: Well, there are difference of interests between US and Pakistan, we may have common grounds but we also have common differences. Above all, from the American point of view, two issues are prime. One is the nuclear issue and the other is terrorism. The nuclear issue here is seen as a problematic issue for all of Asia. I can speak for myself and not for other Americans. I think Pakistan’s nuclear programme was justified. There was a state under threat. India was getting a nuclear programme and Pakistani nuclear weapons presented an equalizer to Indian nuclear capability. But beyond that Pakistanis have to think what kind of nuclear state they are going to be. Second issue is terrorism. There is deep concern whether Pakistan has control over these groups, now that they’re attacking Pakistan itself, there’s even greater concern about the integrity of Pakistani state in fighting these groups.

Question: The US administration does concede that Pakistan has been the biggest victim of terrorism. Pakistani military has lost something like 5000 lives in this war. There is no city in Pakistan that has escaped terrorism. Still, what’s the reason for the US to think that Pakistan is not going all out in this war?

Answer: Well, I can’t speak for the government at all, but my own view is that we know that there are groups walking around and operating in Pakistan who have been involved in these terrorist attacks. I hear from Pakistanis that they are afraid to deal with these groups because they are afraid of backlash from these groups. So may be the state is too weak to take them on. In some cases, these groups have attacked the Pakistani state itself. Now other countries have had this problem too. We had this problem in the case of Cuba and elsewhere as all intelligence agencies are afraid of backlash. So this is not a problem that is unique to Pakistan.

Question: Talking of these groups, US has had a long-standing demand from Pakistan of launching an action against Haqqani network in North Waziristan and also crackdown on the IED factories in tribal areas. Both governments seem to have reached an agreement on this crackdown on IEDs and Pakistan has also launched a military offensive in parts of North Waziristan. Do you think these actions are in line with the demands of US and these could lead to more trust?

Answer: I would not answer that question that way. I would say whether these actions are in line with Pakistani interests. It is in Pakistan’s own interest to re-establish control of the parts of the frontier region, which have sort of ceded to these groups completely. Yet Pakistan has legitimate interests in the future of Afghanistan. I think Americans should understand that and see this in a larger context. How can we stabilize Afghanistan so that it does not become a threat to Pakistan or to other neighbors, for example Iran? My own view has been that there should be an active American attempt to coordinate Iran, India and Pakistan in Afghan developments as well as the Europeans so we have India Pakistan working together in Afghanistan, not against each other.

Question: So you are a supporter of the view that US should play an active role to get Pakistan and India work together in Afghanistan and for resolving their own differences?

Answer: Absolutely. I think that’s far easier than talking about Kashmir. Because both India and Pakistan see a neutral, non-aligned Afghanistan, which is not extremist, one way or the other, in their interest. And also in a sense Afghanistan could be a useful economic transit point for the whole of central Asia, from Iran, through Afghanistan and to India. The Americans have opposed that at times and I think that’s a bad policy on our part but clearly the Indians and the Pakistanis and the Afghans should be sitting down and talking about the conditions under which any Indian presence in Afghanistan, and any Pakistan presence in Afghanistan, should be complimentary and not competitive.

Question: For the countries bordering Afghanistan, all kinds of scenarios are being predicted in wake of the decision to drawdown US troops and make the transition to Afghan forces. What is your opinion on the decision to drawdown and do you think that Afghan forces and economy will be able to sustain once the US troops pull out?

Answer: I don’t think we are going to pull out completely. We will keep a small force there because we want to make sure that no terrorist groups operate from Afghan territory and I think that’s a legitimate American concern and the Afghans seem to agree with that. There is still a question of capability on Afghan National Army. But I think the Pakistanis have to decide how much of American presence they could tolerate, how much would be useful for Pakistan to prevent groups from going back and forth across the border. I don’t disagree with the idea that Taliban should be part of the process but the Taliban who are willing to work with other countries and other forces in Afghanistan. The Indians have an interest in Afghanistan too and they don’t want to see Afghanistan Talibanised because they are afraid that Pakistan will be Talibanised and I don’t think many Pakistanis want to be Talibanised either.

Question: There has been an effort by the US to establish contacts with Taliban. Do you think such an effort can lead to eventual success particularly when Pakistan tried this in Swat and Waziristan but could not succeed with it?

Answer: Well, we’ll see. I can’t predict that one way or the other. But I think the effort has to be made because in the end political solution is what’s necessary but groups that want to adhere to a political solution have to be complemented by other means. They want to Talibanise all of Afghanistan and turn it back into a medieval barbaric state again. But then Pakistan does not want to be involved with that, as I think will threaten the very existence of Pakistan itself.

Question: Admiral Mike Mullen has made a statement recently raising suspicions about the killing of journalist Saleem Shahzad. Now when there are efforts underway to normalize the relationship and get the Pakistani military do what the US wants, do you think this kind of statement could again infuriate the Pakistani military and put a dampener on these efforts?

Answer: I don’t know what he is saying to them privately and I don’t know what we are doing privately. In these cases, I would rather see us do private diplomacy rather than public diplomacy because all this does, these statements, to strengthen a paranoia in Pakistan that we are out to get the Pakistan nuclear programme, the Pakistan army and the Pakistani ISI. I don’t think we are out to get any of them. Mullen’s statement was more anger and grief than anything else but clearly I would advise him not to have said it.

Question: Over the last couple of months, there has been a lot of talk about aid to Pakistan and to withhold it, cut-off altogether or attach conditionalities to it. Do you think the aid being given to Pakistan is being put to good use and if that is so, what the future course should be vis-a-vis this aid and its accountability?

Answer: I would like us to reach a point where Pakistan would say that it does not need aid. Where it can manage to raise the money for development projects itself, but right now the Pakistani financial situation is in peril. They are on the verge of going bankrupt and defaulting on all kinds of loans. So in a sense it is to keep the Pakistan government afloat. We need to see Pakistan doing all this effort internally before we can talk about a developing and modern Pakistan. I would rather see the aid programme abandon completely because I know it is not that effective but on the other hand, it is the first time the Americans committed themselves to a long-term support for Pakistan’s economic and internal growth. But to see Pakistan turn against that the way they did in the Kerry-Lugar bill in a sense made Americans drop that off completely because if nobody wants the money, we won’t give it to them. And if the money is not spent properly, we should not give it to them. In terms of quality and the performance, there are problems on both American side and the Pakistani side. They are complicated and detailed but clearly the larger strategic issue is whether we want to help Pakistan domestically, its economic reforms, its educational reforms, its internal reforms, and the answer is yes but Pakistan has to show that it is willing to tax its own people before we go much further with this.

Question: If officials from both countries were to sit across the table to resolve the differences that have cropped up recently, what would be the three top advices that you’ll give to them regarding issues that need to be resolved first in your opinion?

Answer: First thing I would advise them is to develop a track-two dialogue. What seems to be astonishing in this time, in this place is that there is no serious dialogue between Americans and Pakistanis on a whole range of issues. I tell the officials there are issues, which are very sensitive that you cannot talk to the other side about but a non-official dialogue could do that. So get a track-two going, get non-official group going, get parliamentarians talking to each other, get retired officials talking to each other, get academics talking to each other. We did this during the time of the Soviet invasion of Afghanistan. I was involved in a number of track-two dialogues between Americans and Pakistanis. I have not seen any of that this time around and I think it is more necessary now. When it came to giving the negotiators advice, I would say to both of them, trust but verify. There’s any agreement you reach, whether it is on military or economic or other assistance, intelligence sharing, you have to have clear benchmarks, what is good performance and what is bad performance, and in a sense both sides should state clearly what they expect from the other side and they should keep a record of that to know exactly when the other side is fulfilling the commitment and when they are not fulfilling the commitment.

Question: Now these are two, one is “track-two’ and other is “trust but verify’. What could be the third?

Answer: Ahh, I learnt from George Shultz (former US Secretary of State in President Ronald Reagan’s regime), when I worked for him that “hope is not a policy”. But I also learnt from a Pakistani diplomat on my last trip to Pakistan that ‘despair is not a policy either”. So somewhere between hope and despair, the relationship can be brought to a normal level. We are not hopeless and Pakistan is not hopeless in a sense. Somewhere between hope and despair there are practical policy suggestions both sides can follow.

Question: The strategic dialogue that was put in place as a proof of the commitment of both countries to this relationship has been delayed for quite a while now. What do you think are the reasons for that and if that is held at all now, do you think that can help in putting this relationship back on track?

Answer: Not unless the dialogue is prepared for and the ground is prepared beforehand. The United States and India have a strategic dialogue. Every year before that dialogue, we have a track-two dialogue to discuss a whole range of issues. We share the conclusions with officials on both sides. So in a sense both sides know pretty much where the other side is coming from and there are no surprises. So a strategic dialogue without this preparation is not likely to be very useful.

Question: You must have seen the new counter-terrorism policy of the US that was unveiled recently and it has a lot of obvious implications for Pakistan. It tells of increase in drone attacks, hints at more actions like the Abbottabad raid within Pakistani territory etc. What do you make of this policy?

Answer: I think that’s a good policy because it will force countries around the world, not simply Pakistan, to look inwards to make sure that they have got their own terrorist groups under control and if a country can manage its own internal terrorist problem, it should have nothing to fear at all. So I think the lesson for Pakistan is we are going to be tougher on these issues. If it worries Pakistan, it has to shape up its own treatment of terrorist groups.

Question:There is another issue of drone attacks in tribal areas. The Pakistani leadership has been raising it for quite a while now and has clearly said that these are counter-productive and should be stopped. What’s your opinion on that?

Answer: What I have learnt from Wikileaks is that some of them were carried out on behalf of the Pakistan government. For all I know there may be joint targeting of some of these terrorist groups because the Pakistani government is unable to deal with them themselves. I think you have to distinguish between the CIA’s drone attacks which are primarily directed against al-Qaeda, the US air force’s drone attacks which are in support of American forces in Afghanistan and perhaps other drone attacks. There are several categories of this but clearly Pakistan should have the capability of using drones against their own bad guys. But can they be trusted to do that? Will they carry these out? I think the Chinese are providing some drone technology to Pakistan and I think that’s a good thing as long as the Pakistanis see this as a way of defending the state against groups that are trying to destabilize the Pakistani state. So in a sense I have no problem with drones in principle, but when you go across the border in another country, it does raise big issues but that country should be capable enough to guard its own territory so that drone attacks are not necessary.

Question: Given this troubled relationship over the years, how do you see it panning out now? Are you hopeful that military and civilian governments from both sides will be able to resolve these differences?

Answer: As I have said there’s always hope. I don’t despair easily. But I think the American withdrawal from Afghanistan should make things a little bit easier. The real issue I think is the instability within Pakistan, which is not just caused by the Americans in Afghanistan but by mismanagement of the Pakistani economy, by tolerance of radical groups that are trying to destabilize the Pakistani state. In a sense it’s a long-term process. Pakistan has to rebuild and re-balance its civil-military relationship. There has to be a degree of trust between the military and civilians and the civilians have to learn how to be competent politicians. They will make mistakes, but you have to let the Pakistani people decide when to throw them out, not the army.

Question: Leaving US-Pakistan relationship aside, you are obviously one of the best know Americans in Pakistan. You have studied Pakistan’s history and Pakistan’s civil and military institutions a lot besides writing about it. Do you think there are still indicators for Pakistan and Pakistanis to sort of get out of this mess?

Answers: Well, a friend of Pakistan does not simply praise Pakistan without being critical. It also points out the problems. In the case of Pakistan, there are a lot of institutions not functioning properly, there are some that are functioning at half speed, there are some that are doing very very well, I think the press and the media are doing very well. And I think the political parties are slowly coming around to learning how to be political parties in Pakistan. They are learning by mistake. They make lots of mistakes. They seem to be learning by some of these mistakes. The real problem is the economy and here Pakistan has sort of missed the boat of globalization. It has got to do a lot of things and whether it can do that or not is a big question. Here I think the Americans are eager to help. I know the Chinese are eager to help also as China is one of the most productive countries in the world. But the Pakistan economy won’t grow until it becomes linked to the whole South Asian economy as well. I think that requires roads, railways for travel and trade between all the South Asian countries.

Question: There are a lot of other conspiracy theories in Pakistan, even if you leave US and anti-American sentiment in Pakistan aside. Do you subscribe to the views that Pakistan is going to become a failed state or it is going to disintegrate or it does not have a future on the map of the world?

Answer: Well, it does not have a future unless it gets its act together. I mean no country has a future unless it pays attention to doing business. But in the beginning of the Pakistan book (Idea of Pakistan), you’ll see there is a whole section on failure. And Pakistan has not failed comprehensively. It has failed in bits and pieces. Everything has failed, economy has failed, religious tolerance has failed, but not all comprehensively. There has been ethnic violence and so forth but you know Pakistan has to manage these problems and take it more seriously. It can do that and conduct a global diplomacy but at the same time, I think the Pakistani army and the Pakistanis are too distracted by these other events. They need to have support of their neighbours, the Afghans and the Indians, to come out of this. The South Koreans did this and the Indonesians did. When Indonesia banned the policy of confrontation, then it became a normal and developed country and began to become friends with its neighbours.

Question: Do you think the US administration and the media have made a mistake at times to equate anti-Americanism in some segments in Pakistan with pro-radicalism?

Answer. Yes that’s a good way of putting it. Because burning a flag does not make you a radical I know after 9/11, there were American flags being burnt in Pakistan and some of these were staged by the networks just for the TV appeal. My impression is that Pakistanis are deeply suspicious of the US and also my judgment is that there are good reasons to be suspicious of the US. I wrote an article and it is on the Brookings webpage, “The way in which we have let down Pakistan”. So I think much of the Pakistani criticism is justified but Pakistanis have to look inward and look at what they have done themselves to themselves and to their neighbours. And come up with a more truthful and balanced assessment of where they are, what responsibility is at the Americans and what responsibility is their own because clearly nobody is blameless in this.

Thank you Dr. Stephen Cohen for speaking to Dunya News.

Thank you. I really appreciate the opportunity.