Lodhi says trade is transformative, aid is not

LONDON: Former Pakistani high commissioner to the UK Dr Maleeha Lodhi has urged the West to grant market access and eliminate discriminatory tariffs on Pakistani goods, saying it will be the best international help for Pakistan.
Lodhi, who has also served as Pakistan’s ambassador to the US, said that a different kind of economic engagement was needed between Pakistan and America to reflect the reset in relations. “Trade is transformative, aid is not,” she told a panel of economic experts at the London School of Economics (LSE) on Thursday, where she was a keynote speaker on the topic “Civilian Assistance to Pakistan—Cure or Curse?”
The discussion was organised to assess whether civilian assistance to Pakistan over the past three decades had assisted the country with development and improvements in living standards, or become a hindrance.
Other speakers in the evening were Dr Ehtisham Ahmad, a visiting senior fellow at the LSE’s Asia Research Centre; Shahid Kardar, a former governor of the State Bank of Pakistan; Rachid Benmassoud, the World Bank country director for Pakistan; Kashif Zafar, director of the British Pakistan Foundation; Prof Lord Nicholas Stern, Chairman of the Asia Research Centre; and Dr Robert Hathaway, Director of the Asia Programme at the Woodrow Wilson Center, who joined live by tele-conference from Washington.
Dr Lodhi said the foreign assistance had been a result of the foreign policy needs of the donor countries rather than the needs of Pakistan, adding that this produced a deep-rooted public suspicion in Pakistan about the purposes and aims of Western assistance.
In Pakistan’s case, she went on, external assistance had been used by the elite to postpone and avoid domestic reform. “It has created a culture of dependency and contributed to an unsustainable debt burden. While ruling elites continue to solicit aid, the public is wary as they see little benefit to them,” she said.
During the question-answer session, she was asked by the audience about the situation in Afghanistan and whether Pakistan would cooperate with Western countries in their plan for the drawdown.
She replied: “Ten years ago Pakistan urged the US not to wage war in Afghanistan, to distinguish between al-Qaeda and the Taliban and insisted that the conflict was unwinnable. It took Western countries over a decade to come to the same conclusion.”
Dr Lodhi said that a different kind of economic engagement was needed between the US and Pakistan to reflect the reset in their relations. She admitted that US aid to Pakistan had now become another source of tension in a turbulent relationship instead of being a symbol of friendship.
She said in the past half century, the Western assistance had reflected changing US strategic priorities, lurching between cut-offs in economic assistance (in the 1990’s) and enhanced aid.
Speaking on the occasion, Shahid Kardar gave an alarming view of Pakistan’s economic situation, focusing on the population time-bomb, a “completely bankrupt” tax collection system, inability of the economic structure to sustain the burden, power theft and an economically-divided society pulling in different directions.
He claimed Pakistan’s economy had been in intensive care unit (ICU) for a long time and not showing any signs of coming out. He concluded that foreign aid had been a curse to Pakistan and stressed that Pakistan would have been better off today had it been left to fend for itself.
Dr Ehtisham Ahmad said the current government had done well with establishing the Financial Commission and passing the 18th Amendment, but its failure on tax reforms had jeopardised its achievements. Successive governments had failed to reform the tax system and no serious attempt was made towards institution building of the same, he said, adding that this failure was also reflected in areas of public policy, health and education sector, which were in dire shape.
Dr Robert Hathaway, the author of a recent Woodrow Wilson Center report “Aiding without abetting: making US civilian assistance to Pakistan work for both sides,” said the Pak-US relations were not working but the US could not walk away from Pakistan. Therefore, he said, the relations needed to be reset.
Rachid Benmassoud said Pakistan had an exceptionally large population of the productive age- almost 8,000 people come to the labour market every day.
Moazzam Malik from the Department for International Development (DFID) questioned why aid had not worked for Pakistan in the way it should. He said the average aid totals £1.50 per person, which is quite generous in terms of UK standards.
Lord Stern hoped vested interest would not dominate indefinitely and called for working on educating the masses. “This is not a one- or two-year thing but a long game simply because it has been a long story too.”