WASHINGTON DIARY: Not so helpful, this aid!
by Dr Manzur Ejaz
Courtesy: Wichaar.com, October 13th, 2009
Given how a big chunk of the aid money goes back to American, the US needs a new approach if it really means to change the economic situation in this troubled region. No project will become feasible if it is managed by US NGOs.
A US newspaper, USA Today, has disclosed that the State Department is divided over the contracting process for the newly approved aid to Pakistan. Apparently, Ambassador Richard Holbrooke, changing the past practices, is reportedly intent on giving project contracts to ‘Pakistani government and local organisations’. An economist with the US Agency for International Development (USAID) has opposed the new approach giving various reasons.
Ambassador Holbrooke has been compelled to change the practice because of protests from the Pakistan and Afghanistan governments and also looking at the concrete evidence from the past. It would be instructive to examine the ongoing practices of the way the aid money has been spent in the past.
Our investigation shows that, presently, a small percentage of the aid amount reaches Pakistan. After the Pakistani elites take their own cut from the small amount, not much is left. Therefore, as far as Pakistani masses are concerned, US aid is irrelevant: its continuation or termination does not make an iota of difference.
Courtesy of an economist friend I have seen a list of organisations or NGOs through which the aid money is channelled into Pakistan. Most of these organisations have their head offices in Washington and they claim expertise in solving the economic problems facing developing countries like Pakistan.
It should be interesting to mention a few names of NGOs through which the projects worth USD1192 million aid for Pakistan are being implemented. The largest receiver of funds are NGOs like CDM construction, Winrock International, Care International, Chemonics, US Educational Foundation in Pakistan (USEFP), American Institutes for Research (AIR), Academy for Educational Development (AED), John Snow Research and Training Institute Inc. (Prime) and Population council. Even the recipient of smaller amounts is 99% US NGOs like Urban Institute, Asia Foundation, Democracy International ET ell.
In Washington such organisations, wrongly or rightly, are sometimes known by the nickname, Beltway Bandits. The key persons in these organisations gain influence on the Hill and in the White House through massive lobbying or through networking with Republican and Democrat parties. There are reports that they play some role in pushing aid to needy countries for their own gains.
To start with, the cost of implementing an aid project in a country like Pakistan is inherently expensive. The employees at these organisations, from the lower to the highest levels, are paid salaries and benefits according to the US standards. For example, office assistance will be paid around $40,000 annually, which in Pakistani currency denomination would amount to 3,240,000. In Pakistan, similar personnel will get around Rs144,000 to 240,000 on an annual basis.
The market price or salary of Pakistani personnel is what that country’s economic system can afford. Anything paid beyond that is uneconomical and unsustainable. In our hypothetical example the US personnel are paid 135 times more for working on projects implemented in Pakistan. Logically, Pakistan’s net gains of such projects, run by officials being paid US-level salaries, are going to be minimal.
This example is about Pakistani projects run by US-based personnel and targets salaries and benefits at the low levels. Yet, it clearly shows that such an approach is absolutely infeasible. But, if one includes the middle and higher level US experts, working in these organisations for projects in countries like Pakistan, it is easy to see that the recipient countries get almost nothing.
Not only are these experts paid very high US salaries (USD100,000-500,000 annually) they also travel in business class and stay in five star hotels when they visit the recipient countries. The business class air fares are about four to five times more expensive than economy class tickets that a common passenger uses. Similarly, five star hotel costs are so high that even a higher Pakistani official cannot afford staying in them if he uses funds from his own salary.
To cut it short, the salaries and expenses of the US NGO personnel end up consuming the better part of the aid money. Consequently, at the most, 20-30 percent of the aid money is actually spent on the projects undertaken in Pakistan.
Just like Pakistan, the US aid to Afghanistan has not done much because of the reasons mentioned above. Afghanistan’s foreign minister, Rangeen Dadfar Spanta, told the Chronicle, that in his estimates only “USD10 or 20” of every USD100 reaches its intended recipients.
According to the US government sources, “USAID awards more than half of its Afghan aid to just five US private contractors with close political ties in Washington: KBR, the Louis Berger Group, Bearing Point, DynCorp International and Chemonics International.” Furthermore, USAID allows contractors to budget USD500,000 annual salaries and benefits for high-ranking employees and USD200,000 for lower-ranking administrators.
Pakistan’s story is not different from Afghanistan. Therefore, the US needs a new approach if it really means to change the economic situation in this troubled region. No project will become feasible if it is managed by US NGOs.
The writer can be reached at email@example.com