No Strings At­tached?

The World Bank may have in­vested in a num­ber of projects in Pak­istan but lend­ing poli­cies of­ten come with strings at­tached.

Southasia - - Cover story - By Mo­hi­ud­din Aazim

In the 1990s, the World Bank played a key role in as­sist­ing the es­tab­lish­ment of the Hub Power project in Pak­istan. The Hub Power Com­pany or HUBCO emerged as a cat­a­lyst for en­ergy de­vel­op­ment and con­tin­ues to play that role even to­day. Pak­istan’s eco­nomic growth in the sec­ond half of the 90s and in the first half of 2000s can be at- tributed to the de­vel­op­ment and sta­bil­ity of its en­ergy sec­tor. HUBCO’s stel­lar per­for­mance and con­sis­tent and ad­e­quate power sup­ply en­cour­aged oth­ers to in­vest in the en­ergy sec­tor, lead­ing to sub­se­quent pri­vate power plants and cap­tive power plants.

The World Bank also ini­ti­ated bank­ing sec­tor re­forms in the mid-90s, ren- de­r­ing thou­sands of bank em­ploy­ees job­less. But the re­forms gave birth to a sound bank­ing sys­tem that helped in mod­est-to-high eco­nomic growth till 2007. Had those re­forms not taken place, Pak­istan’s bank­ing sys­tem would have been painfully sus­cep­ti­ble to the global fi­nan­cial cri­sis of 2007-2008.

Apart from these two ma­jor projects,

the Bank is ac­tively en­gaged, mostly as a co-fi­nancier, in a num­ber of projects throughout Pak­istan. A se­nior of­fi­cial of the Min­istry of Fi­nance claims that some 30 plus projects have been ap­proved by WB dur­ing the present PPP-led coali­tion gov­ern­ment. These projects are di­verse in na­ture; some are aimed at en­hanc­ing power pro­jec­tion ca­pac­ity and strength­en­ing the fi­nan­cial and in­fra­struc­ture sec­tors, while oth­ers tar­get up­lift­ing so­cially dis­ad­van­taged sec­tions of the pop­u­la­tion and promis­ing bet­ter de­liv­ery of health and ed­u­ca­tion ser­vices. The Bank has played a crit­i­cal role in in­tro­duc­ing the con­cept of mi­cro-fi­nanc­ing in Pak­istan as well. Most im­por­tantly, all projects are ge­o­graph­i­cally spread over a large part of Pak­istan cov­er­ing all four prov­inces.

Pak­istan be­came a mem­ber of the World Bank in 1950 and be­gan bor­row­ing from it in 1952. The coun­try also started bor­row­ing from IDA since its in­cep­tion in 1962. There­fore, the Pak­istan-World Bank re­la­tion­ship spans over half a cen­tury and has sur­vived both dic­ta­to­rial and demo­cratic regimes in Is­lam­abad.

Pak­istan has also re­mained in the list of the top ten re­cip­i­ents of WB fi­nanc­ing and its econ­omy has ben­e­fited in more ways than meets the eye. When­ever there is a qual­i­ta­tive change in the na­ture of Pak­istan’s re­la­tion­ship with the US (the largest spon­sor of the WB), the per­cep­tion about the util­ity and real mo­tives of WB pro­grams comes into ques­tion. It is im­per­a­tive that bor­row­ing mem­ber coun­tries fo­cus on how they can strike an ac­cept­able bal­ance be­tween the na­ture of their bor­row­ing needs and the WB pro­gram. Pak­istan is no ex­cep­tion.

Pak­istan’s re­la­tion­ship with the World Bank span­ning over five decades of­fers im­por­tant lessons. Whether it is a change of regime in Is­lam­abad or a change of heart in Pak­istan’s re­la­tion­ship with Amer­ica, the coun­try has of­ten amended the orig­i­nal fea­tures of its bor­row­ing pro­grams from WB and other mul­ti­lat­eral lend­ing agen­cies and ca­su­ally ap­proved them af­ter some read­just­ments. The lack of con­sis­tency leads to one WB project con­tin­u­ing peace­fully while the next may find it­self in a sham­bles. Pak­istan’s in­abil­ity to se­cure enough fi­nan­cial sup­port from the WB for its en­ergy sec­tor af­ter the turn of the cen­tury is an ob­vi­ous ex­am­ple.

But this is only one side of the coin. The other side, equally im­por­tant, is whether the World Bank and other IFIs have re­mained faith­ful in fi­nanc­ing de­vel­op­ment projects in Pak­istan. Most in­ter­na­tional de­vel­op­ment projects come with strings at­tached and of­ten try to influence a coun­try’s eco­nomic de­ci­sion­mak­ing to the point that its eco­nomic man­agers grow frus­trated and want to aban­don the project. The World Bank, un­for­tu­nately, has a healthy his­tory of en­gag­ing in such prac­tices.

De­spite this, it is heart­en­ing to see that the WB has it­self in­tro­duced an in­de­pen­dent eval­u­a­tion of its lend­ing pro­grams and the eval­u­a­tors, drawn from both pub­lic and pri­vate sec­tors of the bor­row­ing coun­try and se­nior of­fi­cials of the WB, plainly point out weak­nesses in the phi­los­o­phy, man­age­ment and op­er­a­tional de­tails of WB ac­tiv­i­ties. One such re­port com­piled in mid-2000s makes a can­did ob­ser­va­tion “Be­yond prob­lems in the over­all strate­gic thrust of the Bank’s pro­gram, the Bank failed to de­sign a pro­gram that was re­al­is­tic. The SAP (struc­tural ad­just­ment pro­gram) projects were the most ex­treme exam- ples of this fail­ure, but the prob­lems can be seen in other projects (as well).”

Three ba­sic things that can de­fine the scope of a fu­ture re­la­tion­ship be­tween Pak­istan and the Bank are Pak­istan’s in­ter­nal pol­i­tics, the World Bank’s new strat­egy to­ward Asian economies and the over­all global eco­nomic sce­nario.

Pak­istan’s in­ter­nal pol­i­tics will de­ter­mine, in large part, the coun­try’s col­lec­tive will to tap its own re­sources for ex­pand­ing its econ­omy. The World Bank’s strat­egy for de­vel­op­ment lend­ing in Asia will cer­tainly as­cer­tain fu­ture vol­umes of lend­ing to Pak­istan and the over­all global eco­nomic sce­nario can cause the di­rec­tion-set­ting process both for bor­row­ing coun­tries and for the World Bank.

If judged by the cur­rent wave of na­tion­al­ist and for­ward-look­ing pol­i­tics of Pak­istan, it can be as­sumed that the coun­try will un­der­take se­ri­ous mea­sures to tap its do­mes­tic re­sources for growth. Any twist in its on­go­ing war on ter­ror may change the qual­ity of the ef­forts that would be made to achieve this goal, but the goal it­self would re­main un­changed in the fore­see­able fu­ture. In re­turn, the World Bank will have to pro­vide in­creased vol­umes of lend­ing to the Asian re­gion and make it po­lit­i­cally less painful for them to bor­row.

Source: World Bank. (Fig­ures rounded off)

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.