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Pakistan aid package set to focus on water, power

By Sue Pleming

WASHINGTON (Reuters) - Electricity and water projects will be an early priority for nearly $1.5 billion a year in new U.S. nonmilitary aid for Pakistan approved by Congress on Sunday, senior U.S. officials said.

The aid is part of a $7.5 billion, five-year package proposed by President Barack Obama as one tool to combat extremism in Pakistan. He has called the region the "epicenter" of violence and Pakistan is seen as critical to U.S. efforts to fight the Taliban in neighboring Afghanistan.

The first year's portion of the aid, which some critics in Pakistan see as infringing on the country's sovereignty, was approved by the Senate as part of a larger spending bill on Sunday. The House of Representatives passed the bill last week; the measure now goes to Obama for signing into law.

The funds will be handled differently from previous U.S. civilian aid to Pakistan, with most of it channeled via government and local groups rather than U.S. contractors and humanitarian bodies. That shift has raised concerns among U.S. lawmakers who fear taxpayer dollars may be lost to corruption.

Congress has pushed for strict safeguards for the money and the State Department is due to file a report on Monday to key committees on Capitol Hill, outlining how the aid will be spent and detailing controls to curb wastage.

"The strategy is to work more through Pakistani organizations and try to support the Pakistani government's efforts to deliver services to its people," a senior U.S. official said on condition of anonymity.

The official said Pakistani and international auditors had been sent into about 50 Pakistani government offices, civil society groups and other bodies to conduct "pre-award audits," checking that personnel systems, bookkeeping and other controls were in place before they could apply for U.S. aid.

CAUTION OVER NEW APPROACH

Several Pakistan experts voiced strong caution over the new approach, pointing to the fragile civilian government.

"The Obama administration must recognize the pitfalls of working primarily through a civil bureaucracy, which is as averse to democratic reform as its military counterpart," Samina Ahmed of the International Crisis Group told Congress last week at a hearing to discuss the aid program.

There are also worries about whether the U.S. government's development agency, USAID, can cope with the new aid program.

"Serious concerns remain regarding the ability of USAID and the State Department to effectively and efficiently manage and account for such a massive increase in assistance," said Massachusetts Representative John Tierney.

However a senior Obama administration official said there were plans over the next year to double the number of USAID workers in Pakistan from the current 80 people and to do the same with local staff too.

In addition, USAID intends to open new offices in Lahore and Karachi to provide broader oversight on the aid.

The exact mix of aid projects is still under discussion.

Pakistan suffers from rolling power blackouts and a priority will be on boosting electricity and water supplies, with a particular focus on the dilapidated canal system.

Other programs will include health and education as well as improving local and provincial governance and rule of law.

The Obama administration hopes giving more control to local NGOs and provincial and government offices over the money, will build up local capacity while easing anti-U.S. sentiment.

"We seek not to impose our preferences on Pakistan, override the government's judgments or subvert the people's will. Instead, we want to create an enduring partnership based on mutual respect and shared responsibility," Secretary of State Hillary Clinton said at a dinner of the American Pakistan Foundation on Friday. "We come as a partner, not a patron."

When the aid was first announced, it was broadly criticized in Pakistan by the media as well as the military, which complained too many conditions were attached to the funds and that it compromised the country's sovereignty.

When the money starts trickling in over the coming months, U.S. officials hope that anger will have subsided and the new funds will start to mend a decades-long trust deficit.

"It would be disappointing if there were a lot of ire around a program that is meant to support Pakistani priorities, working in partnership with Pakistan," said one U.S. official.

(Editing by Chris Wilson)

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