Friends of Pakistan Donor Conference: Perceptions and Realities 1


Mehmood-Ul-Hassan Khan
The government of Japan and the World Bank were the co-host of a Pakistan Donors Conference held in Tokyo. Friends of Democratic Pakistan Group Ministerial Meeting was chaired by Makhdoom Shah Mehmood Qureshi the foreign minister of Pakistan. He said that Friends of Pakistan (FoDP) have pledged up to 5.28 billion US dollars to help stabilise Pakistan in Tokyo ministerial meeting. He thanked all donor countries who extended their support to Pakistan to meet country’s economic challenges and effectively address the issue of terrorism. Qureshi also thanked the government of Japan in organising the donors’ conference. He said Iranian foreign minister announced to launch Iran-Pakistan gas pipeline project and promised 330 million dollars which would help Pakistan meet its energy requirements.

The pledged aid of five billion US dollars will be financed over the next two years. During the one-day conference it was declared that the funds would provide additional support to social safety nets, human development and pro-poor development expenditures in Pakistan. The FoDP meeting was chaired by President Asif Ali Zardari.

Details of Pledges

Japan and the World Bank were expected aid pledges in the range of 6-7 billion US dollars. Pakistan was hoping for $4 billion to fill a financing gap with the aid to be focused on poverty alleviation, education and health. Those sectors have suffered under efforts to cut the fiscal deficit.

(a) The United State of America promised to give one billion US dollars. US regional envoy Richard Holbrooke announced the United State’ intent to provide support, totaling one billion dollars over a two year period. He called it a down payment on President Obama’s commitment to support a bill to pump 1.5 billion dollars a year into Pakistan for at least five years to build schools and infrastructure that can nurture democracy. Pakistan is central to US President Barack Obama’s plan for South Asia, which includes trying to stabilise Afghanistan. The newly announced Afghan policy also verifies the geo-political and geo-strategic importance of Pakistan. The recent pledge seemed to be continuation of the US policy towards Pakistan.
(b) Japan also pledged one billion dollars over two years. Earlier, Japanese Prime Minister Taro Aso said his country would provide up to $1 billion to Pakistan to support its economic reforms and counter-terrorism efforts. Japan can help Pakistan with its assistance and expertise, particularly in the fields of energy, infrastructure and science & technology.
(c) The European Union promised 640 million dollars over four years.
(d) Saudi Arabia had committed 700 million dollars

Joint statement

The group, which includes Australia, Britain, Canada, China, France, Germany, Italy, Japan, Saudi Arabia, Turkey, United Arab Emirates, United States, United Nations and European Union, was set up in New York last September on the sidelines of the UN summit with the support of the United States which wanted to marshal political and economic support to promote stability in Pakistan. The group wants to help Pakistan foster economic development and fight terrorism. Pakistan was also expecting strong political support from the ‘friends’ at the Tokyo meeting.

According to the joint statement of the conference the 40 countries and groups attended the friends of Pakistan donor conference and reaffirmed their commitment to existing programmes worth more than 15 billion US dollars for ongoing and medium-term development initiatives. The friends of Pakistan will provide extra financial support. They will also extend cooperation and collaboration for maintain development and stability in the region too especially in Afghanistan. Before the FoDP, it was decided that the government of Pakistan would propose at the FoDP meeting 61 projects of $30 billion in five agreed areas of stability, development, Afghan border areas, energy and institution building. These include dams and roads and projects aimed at improving security to be implemented over 10 years.

Willingness of Pakistan

During his speech at the conference the president Asif Ali Zardari showed his strong commitment to fight against terrorism. He stressed the need to have greater aid from the world community in order to fight against tremendous challenge of terrorism. He wished to have Marshall Plan style aid drive for Pakistan’s economy. Japanese Prime Minister Taro Aso, was impressed by our president’s resolve. I am convinced that the strong commitment by Pakistan itself will strengthen the resolve of the international community to support the government of Pakistan, which continues to face difficulties. According to Japanese prime minister we can not stabilise Afghanistan without stabilising Pakistan. Iranian Foreign Minister Manouchehr Mottak also acknowledged the efforts of Pakistan towards war against terrorism and shared same views. According to him we feel and we believe that Pakistan is serious to combatting against terrorism.

IMF statement

The one day conference was held to increase Pakistan’s capacity and strengths. From onwards, Pakistan needs to focus on controlling its budget deficit in the short-term with tax reforms and securing revenues so government could then focus on longer-term macro-economy problems such as reducing poverty and inflation.

Perceptions

Before the one day conference Pakistan was keen to get firm commitments from different development partners and aid organizations which are given below as:

(a) Market access (USA, EU and Japan)

Pakistan would try to get firm commitment from the USA to initiate Free Trade Agreement (FTA) negotiations. It would also seek early finalisation of Bilateral Investment Treaty (BIT) on mutually agreed terms. Second demand that Pakistan would place before the US authorities is to ensure investment with buy back arrangements to promote private investment from US companies. Pakistan would also request the US authorities to allow industrial units to be set up Balochistan eligible for incentives of Reconstruction Opportunity Zones (ROZs) package. The bilateral negotiations are going on but still no confirmed policy is defined yet.

Pakistan would also pursue the EU to agree on initiation of FTA negotiations. As an interim arrangement until the finalisation of FTA, Pakistan has already placed a demand before the European Commission (EC) to include Pakistan in Generalized System of Preferences, GSP+ scheme for next few years. In the conference the European Union promised 640 million dollars over four years. But the desired market access is a far cry.

In the area of market access and economic cooperation, Pakistan would seek market access for its agriculture commodities in the Japanese market by entering in to a preferential trading arrangement for Pakistan. The government of Japan has already obliged Pakistan and lifted the embargo on our agricultural products. The Japanese trade minister told that the Japanese government would facilitate the import of mangoes from Pakistan by the private sector, and a delegation of mango experts would visit Pakistan soon to remove all hurdles in this respect. President Zardari said Pakistan would establish a special economic zone for the Japanese companies and investors in Karachi on an area, covering 2,500 acres of land.

(b) Supply of oil on deferred payment basis

Pakistan had been enjoying for years the Saudi Oil Facility (SOF) in the recent past and was trying to convince Saudi authorities to restore it for the next 2 years at a level of $5 billion oil facility on deferred payment basis. Pakistan had plans to hold talks with UAE authorities for provision of oil worth $2 billion on deferred payment for next two years to ease out its balance of payment difficulties. During the conference the Saudi Arabia at least had committed 700 million dollars.

(c) Securitization of remittances

Pakistan was expecting $7 billion remittances in the current fiscal year from overseas Pakistanis mainly from Saudia Arabia and UAE and had plans to securitise it. This facility would help Pakistan enhance its foreign exchange reserves at a comfortable level as well as improve its credit rating.

(d) Debt swap

Pakistan would also get initial feed back on its request relating to debt swap of $10.8 billion from Paris Club member countries. Debt Swap would be sought for conversion of debt in to development aid for social sector education, health and other basic facilities for the population in rural areas. The outcome of this plan is not yet cleared.

Concluding Remarks

Although the commitments/promises/pledges are not up to the expectations of the government of Pakistan but in the time of ongoing global economic recession and financial crunch still the pledged aid is considered to be blessing from heavens. The proper utilization of it would bring desired dividends of socio-economic prosperity in the country. Moreover, it is unconditional pledges.

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