Who cares about "Billions" in Aid!

One of the most obvious and disturbing disconnect right now between Americans and Pakistanis is the "Billions" USA gives in aid to Pakistan.

From USA's perspective its really a big deal. US congressmen seem to believe that Pakistanis will wither in fear on threats of disconnection of this aid. Within three days of Osama bin Laden's death and farcical theories about Pakistani's knowing about it, there was an actual bill on table in Congress about cutting aid to Pakistan. Similarly, during Raymond Davis saga a visiting congressman to Pakistan openly threatened his hosts with cutting down of this aid.

Also, from US perspective the expectations from this aid are mind boggling. It is as if they have actually rented out a country of 160 million people, 800,000 square KMs and 5th largest army for US$ 1.5 billion per year! These expectations ask Pakistanis to open their roads for war goods transit, override their judicial system, forget their sovereign borders, ignore their interests in Afghanistan, make their security and intelligence setup subservient to US command and all in all be a good loyal servant.

From Pakistani perspective the aid problem simply doesn't exist. Pakistanis on street debate all the time if we should be ally's in this war or not, but that debate is always on the principles or Pakistan's interest. I haven't met a single Pakistani in last ten years who have shown any concern on what will happen if USA cuts down the money it gives us. If anything the general consensus is that Pakistan is better off without receiving this aid.

When we look at the actual picture it turns out general Pakistani street opinion is quite logical. Lets look at some quick facts:

1. There are no billions: Total social and economic aid given to Pakistan by USA last year amounted to US$ 179 million. Thats roughly one thousandth of Pakistan's GDP! If we add flood relief and other tit bits here and there number starts touching 500 million, which would make it 3 parts of a thousand in the GDP (or 0.3%). Worldbank's assessment is even lower than this. Worldbank says impact of complete US aid withdrawal from Pakistan will impact Pakistani GDP by 0.14%.

Sure the promised amount was US$ 1.5 billion and sure its still committed but it will never be spent as explained further below.

2. Its spent wrong - Intentionally: You don't need Einstein to calculate where Pakistan needs help. US cant help Pakistan in major dams because India has a non-specific issue with it (an exception of Gomal Zam dam exists, but its smallest of the dams in Pakistan plans and was going ahead with or without USAID). US cant help Pakistan with coal power generation because of "carbon concerns", even when Pakistan's total annual carbon footprint is equal to USA's ten days carbon generation and these coal projects are negligible in comparison with USA's own thermal projects. US cant help Pakistan with Iran gas pipeline because of axis of evil story. US can't help Pakistan with Gawadar or development of road network in Baluchistan because {insert your own conspiracy theory here}. Ultimately USAID gets down to providing training to lady health workers or upgrading parks in the cities. These efforts, while admirable, do not help mitigate whats eating Pakistan's industry and do not constitute as anything vital that Pakistan can't live without.

3. Pakistan wont go bankrupt without it: US spends its money directly, not helping Pakistan with its budget deficit. Removal of this aid does nothing to Pakistan's budget or Pakistan's negotiations with IMF. Sure there is this theory of USA's behind doors manipulation of IMF to put Pakistan in trouble, but frankly only one who would loose out today if Pakistan defaults is IMF itself. Given current debt servicing amounts, bankruptcy looks like a pretty attractive scenario from Pakistan's perspective. IMF would have a real tough time following US line here.

4. We have been there before: There was a genuine fear of US support going away in 1998, after Pakistan's response to India's nuclear tests. Such was the fear of total collapse that government ended up doing the super stupid foreign account freezing move. What Pakistan learnt than, was that getting rid of support for setting up chicken farms and training lady health workers really didn't impact anyone in the country. In fact a reasonable freedom in making your own economic decisions and resulting financial discipline actually made life easier for the country.

4. Kerry-Lugar is a new spelling for Pressler: Onus of proving otherwise was on US and they have failed, terribly. Its obvious now to every one that this aid is considered as an evil necessity of Afghan War by USA and is there only till USA is in Afghanistan. It is also obvious that they aren't around for long now. Does it matter if this aid stops in 2013 or 2011? not exactly.

5. Military Aid? No one knows much about it but again, if we can live through 1990s when conventional weaponry was all we had to live on, then we can probably make do without it today also. Lets not forget that current military leadership publicly disagreed with the political government only once, and that was on Kerry-Lugar bill issue.

6. US could have created dependency: But they didn't. A trade incentive in worlds largest consumer economy, however small it may be from USA's perspective, could have engaged enough manufacturing and trading bodies in Pakistan to develop a lobby that would have been threatened by a decline in this relationship. However USA did exact opposite, it's share in Pakistan's total trade is declining.

On the other hand, if we disengage from this increasingly meaningless war, economic returns are pretty obvious. Lets face it, militants never had any issue with us. It was dissident Arabs vs Americans and we just got dragged in. Iran decided to stay neutral and guess what, they aren't getting any suicide bombings in their country and they aren't getting Talibanized either. We need to clean our land of extremists but that would be an infinitely easy task if extremists don't have the rally call of "US ally" against Pakistan.

Imagine the other avenues that open immediately once we are out of the "ally curse". Our role in ECO, our increased interaction with Iran and China, China-Turkey corridor, China-Gawadar corridor... US$ 1.5 billion is probably the weekly potential from these new initiatives.

Of course it translates in an impossible situation for USA as they can't continue this war without Pakistan's land access (see a world map to understand how stupid proposed alternatives are), but I think we shouldn't give this any more consideration then USA gave to Pakistan's reputation and pride last week.