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PakGov: Admin Costs Consume 50-55% of U.S. Aid
Shaukat Tarin, Pakistan’s finance minister, has urged the US to channel its assistance through Pakistani agencies instead to save on high intermediation costs incurred by US counterparts. ...
“Whatever aid [the US is] giving must have full impact on the ground which is why they should route as much of this aid through our agencies than their own agencies,” Mr Tarin said in an interview with the Financial Times. “Frankly, we only receive almost 50-55 per cent of the aid, 40-45 per cent becomes expenses [because of intermediation costs by the US].”
On the one hand, I have a great deal of sympathy for the Pakistani finance minister. There can be no question that much Western aid to the developing world is eaten up by administrative costs or goes back into the pockets of well-meaning but highly-paid Western aid workers (and by "highly paid" I mean in comparison to most local hires). On the other hand, that same aid Shaukat Tarin is talking about was not generated by black magick. It is provided by U.S. tax-payers, all of whom have the right to know how their aid is being spent.* Between corruption and a difference in U.S. and Pakistani threat perceptions, the United States is understandably wary about where, exactly, all that money is going. Quite often this blog just poses questions unsure of the answer, and this is one of those times. So I look forward to hearing from the readership on this one.
*Tax-payers, and our Chinese creditors.
Now obviously this pertains
Now obviously this pertains to Afghanistan rather than Pakistan, but here's what you wrote in Triage about a related subject:
“[I]nternational development should be less about building schools and other infrastructure than about the process by which international donors partner with local governments and institutions. Accordingly, international aid to Afghanistan should privilege those programs… that emphasize local actors and local solutions. International aid and development workers should be less concerned with running their own projects — the overhead costs of which often outweigh the projects themselves — than with strengthening Afghanistan’s weak bureaucracies to function by themselves.
And here's what I wrote two months ago after reading it:
Which is all well and good, and I think we can all agree that strengthening the Afghan government is essential to this whole process. Having said that, a focus on local programs will often mean that resources are wasted on ineffective implementation, not to mention the fact that aid agencies and NGOs are bound to have concerns about accountability.
Reading this suggestion, I couldn’t help but think of Secretary Rumsfeld and GEN Casey in the period immediately preceding the Surge in Iraq, consistently and insistently reminding everyone that the mission was to focus on making Iraqi security forces capable of providing for the country’s security. Which, again, was all well and good except that circumstances simply weren’t right for such a transformation to take place: the operating environment was not permissive, to say the least, and the competence of the ISF was eroded by sectarian strife and political turmoil.
All of which by way of saying that the development of host nation capacity is the absolute sine qua non of COIN, but you can’t just wake up one day and say “well, we’ll develop HN capacity by letting them do stuff for themselves.” Sure, good idea, but there’s got to be an implementable plan to make this happen, and I don’t see it here.
Pakistan is even a step further in this equation: not only do we have to worry about the efficacy of implementation efforts, but we have to wonder whether those efforts are even the right ones. In the case of Afghanistan, one can generally assume that -- apart from that portion of aid and other resources that is diverted by corruption or extortion by the enemy -- money going in is being spent on development or building governance capacity, or at least on improving the lives of Afghans.
In the case of Pakistan, we have no such assurances. Money is fungible: once it goes into Pakistani accounts, it could be used on F-16s or sterling silver toilet seats at the Lal Masjid -- we have no idea. And that's the problem that Congress faces when they try to build in accountability measures on the Pakistani Counterinsurgency Capability Fund and other aid mechanisms.
The only solution is to build a trusting, mutually beneficial relationship in which Pakistan interprets its own interests in similar ways to us, or at least in which it gives our own interests pride of place when accepting our money. Of course, this doesn't happen overnight, and it's complicated further by the specifics of recent American interest in Pakistan: that the Pak army is being viewed as the hammer with which to bang on the Taliban and other varied insurgents. So long as the Pakistani government recognizes that Americans view them as a tool, as a means to an end, and not as a real partner, we're always going to have this problem.
Demanding accountability for development aid has mixed results; see the Millennium Challenge Corporation.
What is the current ratio of
What is the current ratio of money-left-behind to money-recycled-in-the-west in Afghnistan these days....)
That sounds like a valid metric to me. Harumph.
*Tax-payers, and our Chinese
*Tax-payers, and our Chinese creditors.
Andrew - thank you for pointing to the self placed IED in the Nation's security. An empire running on debt that can't control its General, Admirals and Civil Service financial proclivities for lethal toys or imperial training exercises can not sustain its power to prevail even til closing hour at The Blue Dolphin.
On topic, coincidentally, NPR's show Speaking of Faith is doing a replay this weekend on the results of foreign aid in Africa. It is an ethical challenge. Even if 90% of the aid made it thru USAID, Cheney friends and family or the Pakistani patron system to the end user..what are the results..long term. CPA Iraq lost billions...bags of money direct in the Awakening ...results..a well finance insurrection...better quality IEDs...improved Baathist command and control....Iranian street money? Benefits to Iraq or US?
We seem to run from place not looking back. All while our enemies happily watch the our blood and treasury drain like the turkey's in Sarah Palin's famous video.
If my recent history serves
If my recent history serves me correctly, we just approved a Kerry-Lugar bill for Pakistan aid amounting to 7.5 billion over 5 years...and we pushed out another billion at the Tokyo conference in April. So, out of the $2.5 billion pushed out in the past few months, is the U.S. citizen to expect only $1.5 bil to reach the mark? Did the billion dollars at the donor conference just grease the treds? The Finance minister was pleading for a Dawes styled bailout of 30 billion dollars before the conference...his hopes were about 25 billion dollars short of fulfillment. If we had accepted his plea, and invested in the relatively failed state, would we have lost $15 billion in the timewarp? You mention corruption, but you do not mention the plummeting rupee. Is this not a factor? It is as if you are fishing for an answer that you want - so here it is, your trophy bass: we can't do this from the top down, we have to do it from the ground up, without oversight, expecting to lose money. Is this not the expectation of USAID? Afterall, we are about to be sending more and more civilian workers to Afghanistan...will we not be in an even more lopsided aid situation in this case? In 3 or 7 years are you to ask the same vexing question about the massive expansion of well paid and well meaning civilians in Afghanistan?
But seriously, drop the fishing pole. You ask a simple question - what are we to do about it? Work with the reality. If we need ten billion dollars, then damnit...demand 20 billion from Congress, but get the job done. Show some initiative and drive toward success and break the dole mentality. We have given 2.5 billion dollars to Pakistan - the average wage in the region is what - $3 per day or less? Are not Taliban poppy farmers and smugglers called ten dollar a day talibs? Here is the thing - you must defeat the Taliban in the wallet and drain their treasury - if they pay ten dollars a day to their hired labor and guns, we must pay 30 dollars a day... One man, working for 30 dollars a day for 300 days of the year with full vacation for Ramadan and one day a week off to devote to faith will earn a grand total of 9,000 dollars. Men operate on incentive, not hope. We must win the self-esteem of the Paki and Afghani men and women we work with - it must be seen as a profitable venture to do business and learn from us and our well paid workers - who are drawing down salaries of 40 and 50 and 100 thousand a year for their civilian expertise and training power. The aid we send must be earmarked for tax purposes - we provide a salary, the government taxes the salary legitimately at an agreed percentage, earning their funds to shore up their banks, their rupee and their flagging economy. The purpose of the aid we have sent was supposed to be for building roads and hospitals and schools and libraries to open up the way for progress and an evxpanding middle class. If the materials cost 1/3, the labor costs 1/3 and the administration costs 1/3...and a tax is levied, yearly for 1/3 of the income...in 3 years the government has earned a third, legitimately. How many man hours can 833 million dollars pay for? 1 man is - let's call it 10,000 per year. 10 men is 100,000. 100 men is 1 million. 10000 men is 100 million...if 1/3 is guaranteed for labor, 83,333 men can be hired for a full year. 833 million dollars worth of material and supplies can be purchased, and 833 million can go for administration costs, and facilitation/transport if necessary. Putting 83,000 men to work in Pakistan at 10 times the average daily wage would wipe out the Taliban incentive, create a productive workforce, increase legal markets and feed untold hundreds of thousands in the market runoff, not to mention supply the government with 275 million taxable dollars to work with for every 2.5 billion we invest in the merit and spirit of the Paki people.
I know this is a simplistic picture, but if we are aiming for transparency, why would anything but simplicity be the aim? We would be providing 833 million directly to the economy in purchasing building supplies - divided over 12 months in supply and delivery, that is about 70 million a month worth of supplies and shipping, which can be regulated and taxed as income - another 275 million would flow into the government coffers legally, not to mention spur development, increase entrepreneurship and incentivize American interaction. A Pakistan government would be able to have a baseline of 550 million in taxes and could rebuild its infrastructure and its peoples' self-esteem over say a ten year period with a matching tax grant as a gift from the American people to begin the gear down in investment as the Paki government assumes control, dropping our need for administration and manpower...and all we would ask in return is that all Talibani radicals and Al Qaeda be killed or captured - that we might earn a taste of satisfaction for our material injuries. Only by simplifying the mechanism can we find out where the syphons of corruption lie, and the Paki, and eventually the Afghani self-starters of a new age will hand them to us on a silver platter for prosecution that their self-esteem and sense of accomplishment might not be jaded by the accommodations of criminal intent. Only competition and incentive will defeat piracy's wiles. And though the technocrats at the IMF and World Bank will disagree, our representatives should ask America's founders if they doubt the supremacy of incentive.
What is the alternative - a virtual riot of NGO and technocrats and corrupt ministers and intelligence officials in a frenzy to get their perceived fair share of the pie, while a tenth of the material necessary to complete every project is purchased, a tenth of the manpower to complete every project is hired, and a tenth of the improvements promised by politicians of all stripes is completed - what then?
What is necessary in the AfPak, if it is to recover from the scourge of Terror as two respectable states, is twenty years of relative stability. Work with that as your goal when you seek to answer the simple question - what is the quickest route to that point? The fact is, when the War on Terror moniker was stripped from the effort, victory was the first casualty. So, in terms of overseas contingency operations, when considering the coming plans of the QDDR, realize for yourself that the definition of success is what is at stake...not victory. 20 years of stability has Islamic backing...that is your common goal...earn a hudna as an exit strategy.
" *Tax-payers, and our
" *Tax-payers, and our Chinese creditors."
Um, no, not really ... Cf. M. Pettis' blog ...
The USG doesn’t need foreigners to finance the US fiscal deficit? Who knew?
As long as China’s trade surplus directly or indirectly is connected to the US trade deficit, China will have to recycle the surplus into the dollar pool that ultimately funds the US fiscal deficit, and it is in the best interest of the US that the US trade deficit decline smoothly, which means that it is also in the best interest of the US that foreigners, including the Chinese, buy fewer US dollar assets.
http://mpettis.com/2009/08/the-usg-doesn%e2%80%99t-need-foreigners-to-fi...
Now, please don't ask me any questions on this - my last economics class was years ago ...
"On the other hand, that
"On the other hand, that same aid Shaukat Tarin is talking about was not generated by black magick. It is provided by U.S. tax-payers, all of whom have the right to know how their aid is being spent."
He just said where half of it was going. I wouldn't be answering any questions unless they were phrased in a way that suggested the questioner knew this. "Where is half of my money going?"
"As long as China’s trade
"As long as China’s trade surplus directly or indirectly is connected to the US trade deficit, China will have to recycle the surplus into the dollar pool that ultimately funds the US fiscal deficit"
That sounds like a long way to describe "our Chinese creditors".
Title of your post: PakGov:
Title of your post: PakGov: Admin Costs Consume 50-55% of U.S. Aid
Quote from the post: “Frankly, we only receive almost 50-55 per cent of the aid, 40-45 per cent becomes expenses"
Discrepency? Is it not the admin costs that consume 40-45%, not 50-55%?
On a more serious note, I would suggest that a 25-30% cut is probably much more the norm for admin fees that are accrued in fed govt grants to external organizations.
I feel sympathy for the
I feel sympathy for the Pakistani finance minister, too, because I wouldn't want to be in charge of any of that stuff.
Abu M, I know CNAS lot understand this stuff already, but I found the following NYT review of Military Inc (Ayesha Siddiqa) from 2007 interesting:
From the article: "A military industrial complex can form a part of a regular economy, as in the United States or Britain, she says, but in some places, like Indonesia or Pakistan, military business operates in the shadows, broadly distorting values. Ms. Siddiqa uses the term “Milbus” to refer to “military capital that is used for the personal benefit of the military fraternity, especially the officer cadre, but is neither recorded nor part of the defense budget.”
http://www.nytimes.com/2007/11/04/business/04shelf.html
So, some of the desi blogs I read are questioning the very concept that you can give aid and somehow build in corruption policing. When the military is so intermixed with the civilian sector any money 'pumped' into the economy will go in some way toward the military, so who knows what we are funding? (or as Gulliver so colorfully put it: 'Money is fungible: once it goes into Pakistani accounts, it could be used on F-16s or sterling silver toilet seats at the Lal Masjid -- we have no idea.')
I think we are fooling ourselves into thinking the US can build anything into the likes of the Kerry-Lugar bill to make sure the aid is spent appropriately. I think we shouldn't give as much aid, it might force some better decision making amongs the aid recepients, but what do I know? Easy to be a blowhard on the internet, tough to make the actual call......
Oh, I also wanted to
Oh, I also wanted to highlight the following from the NYT article:
"Economic predation by the Pakistani military, she writes, finds an enabler in the nation’s alliance with Washington, lately in the name of the war on terror. But she directs her deepest ire at Pakistan’s civilian politicians, many of whom, she writes, have colluded in Milbus, profiting politically and commercially."
(So, I am going waaaaay off topic here, but the above is sort of why I don't like HR3200 - the proposed healthcare bill - because I think it creates a weird dynamic where crony capitalism in the health care industry is more likely to exist......sorry, but I *had* to go there :) What good is the internet if you can't be an anonymous blowhard-y commenting pain? I mean, really, if this was 2005 I could put in a joke about how the terrorists will have won, or something.)
Andrew / Any of you guys get
Andrew / Any of you guys get exposed to the work of the Aga Khan Development Network in Afghanistan ? They tend to pride themselves on keeping programme money in-country
So where is our aid to
So where is our aid to Israel going? I am an American taxpayer and would also like to know. Are there any accountability measures in place?
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