How Critical is American Assistance?
I WELCOME your editorial (April 23) on my article (April 16) as it triggers a debate on this important subject. Let me make three submissions. First, my article was an analytical research piece and not intended as advocacy for policy change. I am no longer a policymaker but a humble student of economic development, who believes that we should inform and educate the public at large about the facts and analysis rather than confuse them with subjective opinions.
Our intelligentsia has the perception that we owe everything to the US largesse and the moment it is withdrawn we would be in deep trouble. I wanted to disabuse them of this widely-held notion with the help of objective facts and analysis. I realise that policy formulation is a more complex process that takes into account many factors and interests into consideration but the data and analysis are the staples for this process. I am not for the moment advocating any change in our policy but presenting the costs and benefits of this policy.
Second, there are many countries in the world which have excellent economic and political relationship with the US without receiving any official assistance that is tied to the narrow political interests of the US. I believe that we should decouple our official assistance and strengthen other economic relationships with the US on the pattern of these countries.
I argue that we should intensify our trade, investment and technology transfer with this superpower without being constantly threatened by the editorial writers, think tanks and congressmen. I am a great believer that we can benefit from this kind of relationship. The US administration and the people have been more than helpful to us and we should continue to reciprocate with warmth and friendship.
Third, I do not foresee any downgrading of our credit rating or any other adverse impact if we decide at any point of time that we would unilaterally, respectfully and politely forgo the $750 million of Congressionally-appropriated aid. The international financial markets and domestic investors would consider this as a sign of strength of the economy as the uncertainty and unpredictability associated with this aid will no longer be an issue in their minds.
Our external debt ratios are projected to come down further despite the trade and current account deficits (these are by no means worst: we had much larger deficits in the 1970s, 1980s and 1990s) and the Gulf states have excess liquidity looking for higher returns. There are very few countries that can provide 20-25 per cent annual returns with four-year payback period. If the economy continues to be stable and growing, the foreign direct investment flows and international financial market access will not be much of a problem. I hope that this letter will help to further advance the debate on the issue.
DR ISHRAT HUSSAIN
Former Governor, State Bank of Pakistan, Karachi
http://www.dawn.com/2007/04/27/letted.htm#1