Outlining a multi-pronged agenda towards Pakistan for 2010, the US on Wednesday said that Islamabad, with one of the lowest tax-to-GDP ratios, must begin to raise more revenue through bringing the "entire areas" of its economy into the tax net to balance its budget.
The US also chided its non-Nato ally, Pakistan, for missing foreign direct investment (FDI) of $3.5 billion by scrapping a long-negotiated deal with two major international mining firms to build a copper and gold mine under Reko Diq project in Chaghai district.
Also, Washington has warned Pakistan of shrinking or lapsing this year the US-funded Secure Freight Initiative (SFI) at Port Qasim because of the latter's failure to approve long-pending visas for a "handful of American inspectors", who would have come here to train the PQA employees.
The Americans are also critical of the local government or port officials for their failure to set aside required land for the "container security" program, SFI, and have warned that the delays would cost exporters of the crises-hit country millions of dollars.
Further, Washington plans to embark upon a "major initiative" to support reforms for the agriculture sector to increase crop yield, household incomes, and decrease the cost of agriculture inputs in Pakistan. The United States is also underwriting several significant "quick impact energy projects" which would improve energy availability across Pakistan that has constrained the country's economic growth. This was stated by US Ambassador Anne Patterson while outlining the US' political, economic and security agenda towards Pakistan for 2010 on "Moving Forward: US & Pakistan in 2010" at the Overseas Investors' Chamber of Commerce and Industry (OICCI).
She led a delegation comprising Stephen Fakan, US Consul General in Karachi, Mary Elizabeth Madden, Economic Officer, Consulate General Karachi and others. About the Pak-US economic relations, the American ambassador said: "Although the crises were averted by the government of Pakistan and its exceptional economic team, the country's growth remained slow, ranging from 2 to 3 percent."
"To bring its budget into balance and to invest for the future, Pakistan must begin to raise more revenue from its own citizens. At nine percent, Pakistan has one of the lowest tax-to-GDP ratios in the world. Entire areas of Pakistan's economy are off limits to the tax collector and compliance is spotty," she said.
She said Pakistan could not continue to ask the international donors and its established business sector for support unless all citizens support the government with tax revenue. She said despite facing budget deficit and 9.5 percent unemployment at home, the American business remained Pakistan's closest international partner and the number one source of foreign investment.
"Over the past two years, US businesses invested $1.2 billion in this country; more than a quarter of all such investment... nearly one-fifth of Pakistan's total exports go to the United States some $3.5 billion of sales. Of these exports, 74 percent were from Pakistan's textile industry," she said. According to Patterson, Washington after opening its new Consulate in Karachi, would start providing "full range of normal visa services" to Pakistanis wishing to visit the US for business, pleasure, study or see the family.
Urging Islamabad and the provincial governments to stand behind their agreements with international companies, the US envoy said: "Multinational corporations will not invest in a country where deals are cancelled in the 1 hour... two major international mining companies were recently burned when the Balochistan provincial government recently announced the cancellation of their long-negotiated contract to build a copper and gold mine in Reko Diq (the mountain of sand)".
She said the cancellation had cost Pakistan a loss of $3.5 billion investment for one of its least developed regions. "President Obama has chosen a clearly new path that is worthy of your serious attention... for the US, 2009 was a year of great drama and much heartbreak, but we wish to see the New Year through to greater successes; our governments will need to focus intently on our priorities, make some critical decisions and take action," the US envoy said.
She said that having a "complicated" relationship in recent years, the US and Pakistan needed to overcome what US Secretary of State Hillary Clinton called "a trust deficit" on both sides and recognising their shared interests and concerns Islamabad and Washington had proclaimed a desire to build a balanced, deep and broad partnership.
"The decisions and actions we take this year will have long-lasting implications for the future of this partnership," she said. She said that genuinely interested in Pakistan, President Obama was clearly of the opinion that the US had not done "enough" in recent years to help Islamabad find its way back more quickly to democracy.
She said for Pakistan, which has a democratic government capable of taking charge of its own security and guiding the development of this nation, America's vision is simply that: "Partnership across the range of your domestic and international concerns".
According to the ambassador, the US has a plan for this year to contribute substantial sums to fight poverty, which over 60 percent of Pakistanis are suffering from, through Benazir Income Support Program, to support reconstruction in Malakand and South Waziristan and to undertake community development projects through Pakistan Poverty Alleviation Fund.
She said the US had a plan to continue its support in the fields of health and education, particularly in vulnerable and disadvantaged areas of the country. Patterson also underlined her government's plan to embark upon a major initiative to support agriculture reform in the agrarian Pakistan to increase crop yield, household incomes and decrease the cost of agriculture inputs. On the energy front, she said her country was underwriting several significant "quick impact energy projects" that would improve energy availability across Pakistan. Washington has already begun work to upgrade the generation efficiency at Tarbela, Muzaffargarh, Guddu and Jamshoro power plants which would expectedly add over 350MW to the national grid, she said.
Also, the US was working with farmers on a cost-sharing basis to replace or repair up to 11,000 inefficient or poorly functioning tube wells across the country, a step that would conserve substantial amounts of electricity during peak demand hours that could be used more effectively elsewhere.
Patterson said the US would also work with the government to improve the performance of four public distribution companies, which annually lose between 30 to 50 percent electricity they purchase. She said to ensure transparency the US would be placing every new partnership agreement transferring significant funds up on its website so that everyone could see what the two countries were achieving together and where the money was going.
"For all of these important initiatives, Americans and Pakistanis both want to know how this assistance works and how funds are being used," she said. About "Pakistan's Fight against Terrorism", Patterson, terming the plan for entente with terrorists in Swat as "ill-advised", said during their current offensive against terrorists in South Waziristan, the Pakistan Army had earned the respect of the Pakistani people and of the US.
"The attack here in Karachi last week was clear evidence of terrorists' desire to seek out and exploit any fissures in Pakistani society, and to undermine your democracy," the US envoy said. She said everywhere her government was finding that there was so much to do to address the long-delayed aspirations of the Pakistani people for development and prosperity.
Critical of Islamabad for delaying visas to its officials due to visit Port Qasim to train its staff for the 'Secure Freight Initiative' under which some 46,000 US-bound containers were screened in 2009, the US envoy warned that Washington may shrink, or even lapse, this program this year. "Our proposals to expand this program to Karachi have also gone nowhere, as government and port officials here have not set aside land for the program," she complained.
Urging the need to connect the region's growing road network from oil-rich and trade-starved Central Asia to large port of Karachi through the Afghanistan Pakistan Transit Trade Agreement, Patterson said "decisive action" this year to implement the APTTA would pay dividends to both countries for years to come.
"Afghanistan and Pakistan also need to work on means to reduce smuggling and improve border crossing procedures. Yet we assess that the losses to Pakistan will be negligible compared with the prospect of greater trade that will start slowly and build over the next decades," she said.
Reiterating the resolve of the US and international community to decisively end the al Qaeda's reign of terror across the globe, Patterson said the vicious attacks on a volleyball tournament near Peshawar last Friday and on an army barracks in Rawalkot earlier on Wednesday were self-evident that 2010 would be a "hard year". In his address, President of OICCI, Farrukh H Khan, welcomed the guests, and said.
"The Chamber, which is the premier body of top multinationals in the country, can play a significant role in increasing investment and economic growth despite the challenging times, and is keen on providing all possible assistance in this regard to make the country an investment-friendly destination." The members of OICCI also discussed their concerns with the US envoy regarding the current climate.