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Aid fuels corruption

December 19, 2012

DRIVING down Maulvi Tamizuddin Khan Road towards the city centre in Karachi, one cannot miss the huge billboard that announces in chaste Urdu, “If you have knowledge of any fraud in a USAID-funded project, you may lodge a complaint in the following ways…” The host is the USAID’s anti-fraud hotline.

This unpretentious signboard comes as a reminder that corruption continues to be rife in this country and Big Brother is watching. This also helps us recall, in case we have forgotten, that we continue to live on US handouts.

Many of our own men of wisdom have warned us against the flipside of foreign aid. Unfortunately, our governments — past and present — have unabashedly regarded the quantum of aid they manage to attract as a yardstick to measure the success of their foreign policy.

What is painful is that no government has ever shown any embarrassment in terms of loss of dignity and self-esteem that accepting aid from foreign quarters entails. Self-reliance and simple living are not virtues that have been admired in this country. For instance, the above notice should really shame us, but can we blame USAID for trying to track down the corrupt because we know corruption is rampant.

Even in the purely utilitarian context it has been inarguably established that no country has progressed by latching on to a foreign patron. Two of our own intellectuals pronounced their cynicism on this issue so categorically that it should leave no one in doubt about the fate of a country that is not wary of accepting foreign assistance. It always comes with strings attached. There are no free lunches.

Describing US aid as a “burden”, the late Hamza Alavi, an anthropologist of world standing, wrote in 1961: “It is not difficult to see that the central point — the development of a balanced economy — becomes distorted by the pressures which are brought to bear upon the planners.” He goes on to observe, “Contradicting textbook theories, foreign investment, instead of producing a catalysis of Pakistani development, brings about instead a paralysis of our business enterprise in the most profitable areas of investment.”

Another legendary expert, the late Akhter Hameed Khan, the founder of the Orangi Pilot Project, put it very succinctly: “Using foreign aid you can create a colossus with the feet of clay.” A number of people who have taken the trouble to study the impact of foreign assistance, such as Arif Hasan, have cited examples to show that foreign assistance has not produced the results it was ostensibly intended to produce. In the process it has just added to our debt burden, and also distorted our economic development. Many projects funded by foreign agencies turned out to be ill-suited to our needs or the people’s temperament. Then there is the corruption factor that has increased as the cash inflow has been stepped up.

I would concede that at times a basket case economy needs aid to help it turn the corner. But any country that has to accept aid must direct it towards the goal of developing self-reliance and should stipulate a timeframe for accepting aid that must be phased out as soon as possible. It is poor economic planning to rely permanently on foreign economic assistance.

Another anomaly makes the situation rather bizarre. On the one hand, there is a lot of quibbling over aid and its terms — we obviously don’t want to be restricted in any way. On the other hand, a lot of this money is squandered by way of embezzlement and corruption in the upper echelons of power.

Last week we had the chief of the National Accountability Bureau informing us that the country is losing Rs13bn per day due to corruption, nearly half of which is through tax evasion. A day earlier, two NGOs made public their report Representation without Taxation that showed that many of the heavyweights from the ruling party — the president and 34 out of 54 ministers — did not even file tax returns in 2011.

Another related development was the Public Accounts Committee’s advice to the government for a detailed response on the working of foreign-funded NGOs without any effective official control, especially with regard to their source of funds. It was implied that no monitoring mechanism was in place.

Although in principle this concern is valid — one cannot vouch for the integrity of each and every NGO — one would expect the government to put its own house in order on a priority basis. It is also strange that no one has demanded that the madressahs disclose their source of funding. Their refusal to do so has stalled the madressah reform programme.

How do we resolve these dilemmas? We seem to have contradictory concerns. We do not like foreign meddling, yet we run to foreign donors to support a pampered and humungous administration that does little work. If the corruption leak could be checked and the working of the government streamlined, we could generate enough funds to run the country as we see fit without the begging bowl syndrome. As for the NGOs operating without any reins, one must look into the factors that enabled them to become so strong when this was never the case before. They were encouraged to deal directly with foreign aid givers who had stopped trusting the government. This is the first sign of the government losing grip over the country.