The United States Agency for International Development (USAID) supported Competitive Support Fund (CSF) has not yet realised any impact because implementation of its studies and recommendations is just beginning, according to the latest May 2008 report on evaluation of CSF available here.
The USAID had signed a Limited Scope Grant Agreement (LSGA) with the Pakistan's Ministry of Finance (MoF) in January 2006 to support an organisation charged with supporting technology, innovation, and regulatory reform to increase the competitiveness of Pakistan's industries. The Competitive Support Fund was, thus, created and funded through a LSGA signed by USAID/Pakistan and the MoF.
The project, which went into implementation in March 2006, would come to an end in December 2008. A total of $36.8 million was budgeted for the project in which the Government of Pakistan's (GoP) share was $25 million for five years and USAID's share was $11.8 million for three years.
The report said that Pakistan's economy has featured boom and bust episodes with a significant downturn occurring during the period of 1990s. This slowdown in economic growth was the key factor in increasing poverty during this period. In fiscal 2001, the growth rate was below 2 percent. A lack of competitiveness in international markets, low technology and labour productivity as well as protected and inefficient manufacturing sectors led the list of causes.
"Governments the world over are notoriously slow, and the MoF official responsible for oversight of the CSF project expressed dissatisfaction to the evaluation team with the GoP's input so far regarding CSF projects. It also observed that the projects CSF and MoF have been working on mega projects that require time to be implemented and demonstrate impact."
The only impact to date, according to the report is qualitative since none of the studies, plans, matching grants, or business incubators have been implemented yet, though some are in progress. Nonetheless, because of CSF's Karachi Fisheries, Fish Harbour Action Plan, the Government of Balochistan requested that GoP and CSF writes a similar plan for Pasni and Gwadar fisheries harbours.
USAID's support to CSF is scheduled to end in December 2008, which means that this evaluation took place approximately two years into this three-year project. Since impact is by definition long-term in nature and impacts are not normally expected until after (sometimes well after) a project has been completed, it is not expected that there would be any impact from the Competitive Support Fund at this stage, the report said.
It went on to say that traditionally, Pakistan's political and macro-economic instability had hindered the development of competitiveness-building initiatives. A weak legal framework led to conditions that included poor dialogue on policy and reform issues, lack of innovative approaches, lack of linkages between the academic community and the industry, and slow commercialisation of innovation.
Such broad economic constraints lead to unemployment and pay decreases, which contribute to poverty and a vicious downward economic cycle. According to Asian Development Bank (ADB), in 1990s, poverty in Pakistan increased significantly from 26.1 percent in 1991 to 32.1 percent in 2001. During 1990-2001, the economic growth in Pakistan averaged only 3.7 percent and was less than that of most other countries in South Asia.
By 2004, Pakistan ranked in the bottom 15 percent of the countries surveyed for the World Economic Forum (WEF) Global Competitiveness Report, and placed 91 out of 104 countries measured in the growth competitiveness index. Without the conditions and institutions that support enterprises' response to the challenges and opportunities of a global, knowledge-based economy, Pakistan cannot achieve meaningful job and income creation and sustained poverty alleviation.
USAID had been funding the Pakistan Initiative for Strategic Development and Competitiveness (Pisdac) project, which had been working with a number of Sector Working Groups (SWOGs), composed of leaders from the private and public sectors, as well as academia, whose purpose is to develop strategies for expanding their sectors. These SWOGs determined that they could raise their industries' competitiveness by conducting pilot projects using new technologies and approaches. The GoP agreed to create a fund especially for these projects and match a $10 million USAID investment.
The USAID-funded CSF to boost enterprise competitiveness based on strategy and innovation, finance pilot projects to demonstrate the impact of improved strategy, technology, human resources, and management can have on profits, support SME incubation and 'knowledge-based enterprise development', and co-ordination initiatives to promote competitiveness.
While USAID's primary intent was to provide CSF with funds to provide matching grants to support the sector strategies developed under Pisdac, it also co-funded CSF's establishment and administration, as well as a portion of the design and administration of technical assistance.
The LSGA describes the scope of USAID's assistance through the following three activities: provide technical assistance to establish and administer the CSF, design and administer technical assistance, including public awareness initiatives, and establish the financial facilities of CSF and administer the matchmaking grants facility.
In late 2007, the USAID/Pakistan legal officer and contract officer determined that the Mission cannot support sub-host country grants and, therefore, the matching grants component was not implemented until early in 2008, when the MoF agreed to fund the grants.