Wednesday, October 14, 2015

Is US Aid Good or Bad For Pakistan?

This year's Nobel Prize winning economist Angus Deaton of Princeton University considers foreign aid to developing nations a curse like the oft-mentioned resource curse of energy and mineral-rich nations of Africa and the Middle East.

Deaton has studied poverty in India and Africa and spent many decades working at the World Bank whose charter it is to fight poverty. He 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 and hurting the poor in the process. Prof William Easterly of New York University has published a paper titled "Can Foreign Aid Buy Growth?" that supports the view that increase in foreign aid has reduced economic growth in Africa.

Source: William Easterly of NYU


In addition to being recipients of foreign aid, most African countries are also rich in resources ranging from oil and gas to diamonds and metals. Yet, their people are among the poorest in the world.  Why is it? The biggest reason appears to be their corrupt leaders who pocket most of the proceeds from mining. They also siphon off a big chuck of foreign aid left after paying the expensive western consultants employed by aid agencies.



So where does Pakistan stand in this mix? Charts published by Washington Post show that Pakistan, in spite of not being a major exporter of minerals, enjoyed an average economic growth rate of about 5% from 1970 to 2008.  This is about the same as India's but higher than Brazil's and Turkey's GDP growth rates. The economic growth rates for China and Korea are much higher than Pakistan's in this period.

Foreign aid to Pakistan has also been more effective in promoting economic growth than much of Africa. Even Dambisa Moyo, author of "Dead Aid" and a critic of western aid, acknowledges that the US aid for "the Green Revolution in India (and Pakistan) played vital roles in economic (re)construction" of the South Asian nations in 1960s and 1970s. The South Asian subcontinent could have faced starvation without this aid.

One of the key reasons for the success of Green Revolution was the ability of the human capital in India and Pakistan to absorb the technological knowhow that it brought along with money. Ms. Moyo offers the same reason for the success of Marshall Plan aid in Europe.

Foreign Aid to Pakistan as Percent of GDP Source: World Bank 


US aid to Pakistan after the Green Revolution has been much smaller as percentage of the nation's GDP and much less effective.  Total foreign aid to Pakistan has dramatically declined from a peak of over10% of GDP to less than 2% of GDP now, too little to impact economic growth even if it is utilized better.

The expected size and speed of the Chinese FDI of $46 billion in energy and infrastructure is much more likely to spur Pakistan's economic growth than the western aid has been in the recent past. It will put Pakistan on a path to rely much more on investment and trade than on aid or debt for its foreign exchange earnings.

Related Links:

Haq's Musings

Aid, Investment, Trade and Remittances for Pakistan

Declining Investment Hurting Pakistan's Economic Growth

Pak-China Industrial Corridor to Boost Investment and Trade

Pak Army Completes Over Half of CPEC Western Corridor

Pakistan Economic History 1947-2010

Top Global Fund Investor Bullish on Pakistan

Culture of Corruption in Pakistan

Labels: ,

4 Comments:

Blogger Riaz Haq said...

University of #California #Davis, #Pakistan launch $17M food,agriculture Center For Advanced Studies at #Faisalabad

http://www.davisenterprise.com/local-news/ucd/ucd-pakistan-launch-17m-food-ag-partnership/ …


The launch of a $17 million collaborative project linking UC Davis and Pakistan’s leading agricultural university was celebrated today at UCD, which will receive $10 million of the funds.

The new U.S.-Pakistan Center for Advanced Studies in Agriculture and Food Security, funded by the U.S. Agency for International Development, will make it possible for faculty members and graduate students from both countries to study and do research at each other’s campuses. The project also is designed to update curriculum and technical resources at Pakistan’s University of Agriculture, Faisalabad.

Present for today’s ceremonial launch were dignitaries from Pakistan, USAID and UCD.

“UC Davis has been partnering with colleagues in Pakistan since 2009, sharing expertise in agriculture from crop production to post-harvest handling,” said James Hill, associate dean emeritus of International Programs for the College of Agricultural and Environmental Sciences at UCD.

“Establishment of this new center will allow us to build on those efforts, with a renewed emphasis on an exchange of faculty and graduate students,” he said.

During its first year of funding, the center will plan several workshops to assist the University of Agriculture, Faisalabad, with technology transfer and entrepreneurship to strengthen its connections to the private sector. UCD also will initiate programs in both research and curriculum development to improve graduate studies.

Hill noted that two other Pakistan-focused projects are already underway through the International Programs office, primarily in the area of horticultural crops and agricultural extension activities.

Agriculture is the largest sector of Pakistan’s economy, providing jobs for half of that country’s labor force. Some of the traditionally important crops in Pakistan are wheat, cotton, rice, sugar cane and maize. In recent years, crops like beans, peas, lentils, onions, potatoes, chilies and tomatoes also have increased in importance, along with fruit crops such as citrus and mangoes.


The newly funded center at UCD is the most recent of several partnerships of the U.S.-Pakistan Centers for Advanced Studies, a $127 million investment from USAID, linking universities in the two countries and using applied research to solve Pakistan’s challenges in energy, water and food security.

The overall program includes construction of laboratories, research facilities and libraries in Pakistan. Other participating U.S. universities include the University of Utah and Arizona State University, focusing on water and energy, respectively.

October 28, 2015 at 8:36 PM  
Blogger Riaz Haq said...

#India's #poverty is understated and its #GDP is exaggerated, says #Nobel Prize winner Angus Deaton. #BJP #Modi http://www.ibtimes.co.in/indias-poverty-understated-says-nobel-prize-winner-angus-deaton-652120 …

Deaton, however, believes that the poverty rates could be even higher. There is surely some omission in the surveys, which would mean that poverty is understated", Deaton told Hindustan Times in an interview.
He also said that the economic growth in India is not as high as the government presents it to be. India is said to be world's fastest-growing economy at 7 per cent growth rate.
"Everyone's data can be improved. I think it is widely recognized that the national accounts in India are relatively weak. So what I am most worried about is that growth is not as high as the accounts show. Revisions that increase growth are more readily accepted than revisions that reduce growth. So I am more worried about growth being overstated than poverty being understated," he added.
According to Deaton, the Indian government needs to invest more in nutrition, health and education of the young generation of the nation if it wants to overcome the growing poverty rate.
"Yes, though there are organizational and capacity problems that need to be overcome. In places where services don't work, for example, because of absenteeism, putting in more money is unlikely to help. But if other states can emulate the better services in the south, with more people demanding health and education, then we can make progress, and to do that, we will eventually need more money," he said.
Deaton, the Princeton University Professor, has done a thorough analysis of consumption and poverty in India. He contributed majorly to estimating India's poverty rate in 1990s with his work on India's malnutrition.

November 24, 2015 at 4:13 PM  
Blogger Riaz Haq said...

#EU to provide €653m to #Pakistan for uplift projects in rural areas to cut #poverty. http://www.dailytimes.com.pk/business/15-Dec-2015/eu-to-provide-653m-to-pakistan-for-uplift-projects …

European Union will provide assistance of six hundred and fifty three million euros to Pakistan for rural development and reduction of poverty.

A memorandum of understanding for the EU’s Multi Indicative Programme (2014-2020) with a commitment of €653 million was signed between the government of Pakistan and European Union. The signing of the agreement was witnessed by Minister for Finance and Economic Affairs Senator Ishaq Dar and ambassadors and representatives from EU member states.

The minister on this occasion said that the government appreciates the development assistance being given to Pakistan by EU. He appreciated the fact that the new MIP was almost double the amount of the previous programme. He said that building a stable, democratic and economically vibrant Pakistan was the aim of the government.

He said that the government was committed to achieving this objective and called upon the EU and its member countries to support Pakistan in this regard.

EU Ambassador Jean-Francois Cautain said that the €653 million EU multiannual indicative programme for Pakistan set out the EU’s development strategic objectives in support of a stable and democratic Pakistan, in line with the EU-Pakistan five years engagement plan 2012-2017, which framed the relationship between the two sides.

December 15, 2015 at 4:21 PM  
Blogger Riaz Haq said...

Japanese Envoy to Pakistan Takashi Kurai on Saturday said his country is Pakistan’s third largest donor.

He was speaking at the 65th anniversary of diplomatic relations between Japan-Pakistan. The event was organised by the English Speaking Union of Pakistan.

Kurai said that in the 90s Japan was the biggest donor of Pakistan. He said Japanese companies want a more stable environment in Pakistan for more investment. He said that the Prime Ministers of both countries had not visited each other’s countries for a long time. He hoped that these visits would take place in the near future. He said Japan supported Pakistan in healthcare, education, infrastructure development and other fields.

The envoy also said that both countries established diplomatic relations in 1952 and since then they have enjoyed excellent relations.

He said Japan is the only country that faced the horrors and destruction of the atomic bombs during WW2, but the Japanese showed resilience and patience and made the country’s economy stable.

Khalid Malik, president of the English Speaking Union of Pakistan and secretary general Muzafar Qureshi thanked the Japanese ambassador for attending the ceremony. They also praised his efforts for further boosting bilateral relations.

http://dailytimes.com.pk/pakistan/21-Jan-17/japan-is-pakistans-third-largest-donor

January 21, 2017 at 10:09 PM  

Post a Comment

Subscribe to Post Comments [Atom]

<< Home