[Senate Hearing 110-564]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-564
 
                  U.S. FOREIGN ASSISTANCE TO PAKISTAN

=======================================================================

                                HEARING

                               BEFORE THE

             SUBCOMMITTEE ON INTERNATIONAL DEVELOPMENT AND
               FOREIGN ASSISTANCE, ECONOMIC AFFAIRS, AND
                 INTERNATIONAL ENVIRONMENTAL PROTECTION

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 6, 2007

                               __________

       Printed for the use of the Committee on Foreign Relations


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html

                     U.S. GOVERNMENT PRINTING OFFICE
45-127 PDF                 WASHINGTON DC:  2008
---------------------------------------------------------------------
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092104 Mail: Stop IDCC, Washington, DC 20402ï¿½090001


                     COMMITTEE ON FOREIGN RELATIONS

                JOSEPH R. BIDEN, Jr., Delaware, Chairman
CHRISTOPHER J. DODD, Connecticut     RICHARD G. LUGAR, Indiana
JOHN F. KERRY, Massachusetts         CHUCK HAGEL, Nebraska
RUSSELL D. FEINGOLD, Wisconsin       NORM COLEMAN, Minnesota
BARBARA BOXER, California            BOB CORKER, Tennessee
BILL NELSON, Florida                 JOHN E. SUNUNU, New Hampshire
BARACK OBAMA, Illinois               GEORGE V. VOINOVICH, Ohio
ROBERT MENENDEZ, New Jersey          LISA MURKOWSKI, Alaska
BENJAMIN L. CARDIN, Maryland         JIM DeMINT, South Carolina
ROBERT P. CASEY, Jr., Pennsylvania   JOHNNY ISAKSON, Georgia
JIM WEBB, Virginia                   DAVID VITTER, Louisiana
                   Antony J. Blinken, Staff Director
            Kenneth A. Myers, Jr., Republican Staff Director

                                 ------                                

   SUBCOMMITTEE ON INTERNATIONAL DEVELOPMENT AND FOREIGN ASSISTANCE, 
      ECONOMIC AFFAIRS, AND INTERNATIONAL ENVIRONMENTAL PROTECTION

                 ROBERT MENENDEZ, New Jersey, Chairman

JOHN F. KERRY, Massachusetts         CHUCK HAGEL, Nebraska
BARBARA BOXER, California            BOB CORKER, Tennessee
BARACK OBAMA, Illinois               LISA MURKOWSKI, Alaska
ROBERT P. CASEY, Jr., Pennsylvania   JIM DeMINT, South Carolina

                                  (ii)

  


                            C O N T E N T S

                              ----------                              
                                                                   Page

Boucher, Hon. Richard A., Assistant Secretary of State for South 
  and Central Asian Affairs, Department of State, Washington, DC.     5
    Prepared statement...........................................     8
    Responses to questions submitted for the record by Senator 
      Joseph Biden...............................................    64
    Responses to questions submitted for the record by Senator 
      Robert Menendez............................................    67
Corker, Hon. Bob, U.S. Senator from Tennessee....................     4
Hagel, Hon. Chuck, U.S. Senator from Nebraska, prepared statement     3
Hathaway, Dr. Robert, Asia Program Director, the Woodrow Wilson 
  International Center for Scholars, Washington, DC..............    49
    Prepared statement...........................................    52
Korb, Dr. Lawrence J., senior fellow, Center for American 
  Progress, Washington, DC.......................................    42
    Prepared statement...........................................    43
Kunder, Hon. James R., Acting Deputy Administrator, U.S. Agency 
  for International Development, Washington, DC..................    12
    Prepared statement...........................................    13
    Responses to questions submitted for the record by Senator 
      Robert Menendez............................................    69
Menendez, Hon. Robert, U.S. Senator from New Jersey, opening 
  statement......................................................     1
Schaffer, Hon. Teresita C., director, South Asia Program, Center 
  for Strategic and International Studies, Washington, DC........    37
    Prepared statement...........................................    40

                                 (iii)

  


                  U.S. FOREIGN ASSISTANCE TO PAKISTAN

                              ----------                              


                       THURSDAY, DECEMBER 6, 2007

        U.S. Senate, Committee on Foreign Affairs, 
            Subcommittee on International Development and 
            Foreign Assistant, Economic Affairs, and 
            International Environmental Protection,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:30 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Robert 
Menendez, chairman of the subcommittee, presiding.
    Present: Senators Menendez, Feingold, Casey, Lugar, Hagel, 
and Corker.

 OPENING STATEMENT OF HON. ROBERT MENENDEZ, U.S. SENATOR FROM 
                           NEW JERSEY

    Senator Menendez. This hearing will come to order. I want 
to express from the outset that we're a strong believer in 
democracy and free speech but we are also a believer in order. 
So, we expect our audience to act accordingly within that 
context.
    Pakistan is currently in the midst of its worst political 
crisis since the October 1999 military coup when then-Army 
Chief General Pervez Musharraf overthrew the democratically 
elected government. After September 11, our relationship with 
Pakistan became more complex and urgent. As has become all too 
clear, the U.S. policies and assistance toward Pakistan since 
September 11, while not without some successes, have failed to 
neutralize western militants or reduce religious extremism. 
These policies have failed to contribute sufficiently to the 
stabilization of neighboring Afghanistan and failed to secure 
civilian governance and rule of law in Pakistan.
    This subcommittee's intention is to conduct a broad 
reevaluation of the policies that are shaped by the U.S. 
assistance package to this important ally. Since our policies 
are often best understood by following the numbers, we are here 
today, in part, to look at those numbers.
    The United States has provided about $10 billion in 
financial assistance to Pakistan since 2001. In spite of that 
$10 billion, al-Qaeda and the Taliban have a safe haven in the 
FATA region. Osama bin Laden is still on the loose in the 
region. Anti-Americanism remains high and Pakistan's President 
has repeatedly exercised the powers of a dictator. Do we dare 
call our policies in that respect a success?
    What I want to discuss today is how we should be using our 
assistance to develop and support a moderate center in 
Pakistan. My concern is that we may be spending this money to 
simply prop up a dictatorial ruler with a poor and worsening 
record and in so doing, we may be alienating a large and 
important moderate center.
    I understand President Bush doesn't think that President 
Musharraf crossed the line on November 3, when he instituted 
emergency rule and then simultaneously arrested thousands of 
political opposition figures, human rights activists and 
lawyers. But in my judgment, he did cross the line. President 
Bush even characterized Musharraf as someone who truly believes 
in democracy. But even his own Department of State had the 
wherewithal to say that they were, ``deeply disturbed'' by the 
events in Pakistan.
    So what does the Department of State do in response? As a 
start, Secretary Rice announced that they were conducting a 
``review'' of the assistance to Pakistan. I was encouraged to 
hear that this review was taking place and sent a letter to 
Secretary Rice requesting that the review be completed promptly 
and that she report back to this subcommittee. However, it 
turned out that what I assumed to be a careful and 
comprehensive strategic and programmatic review might have 
instead been simply a statutory review of any legal triggers 
that might restrict the flow of U.S. assistance; legal triggers 
that the administration largely opposed in the first place and 
largely do not exist.
    So I look forward to hearing more about this today since 
the subcommittee still has not received any details of this 
review. Now, we all have a lot of questions to answer today. As 
the chair of the subcommittee, I am constantly looking at how 
our foreign assistance resources can be spent more effectively 
and Pakistan is no exception, especially in light of the fact 
that a significant segment of the Pakistani population views 
U.S. support for the Musharraf government as being an 
impediment to, rather than a facilitator of, the process of 
democratization. In addition, the recent political turmoil 
provides an even greater justification for careful review of 
our assistance program, the strategy behind the assistance and 
the progress being made.
    Now, since the Coalition Support Funds comprise about 60 
percent of the overall assistance package to Pakistan, it's 
hard to have a serious discussion about U.S. assistance to 
Pakistan without also discussing the Coalition Support Funds. 
It's like trying to read a book when 60 percent of the lines in 
the text have been redacted. I invited Secretary of Defense 
Gates to come and testify or to send those who could testify 
and not only did he decline but he couldn't find anyone on his 
staff who could speak knowledgeably about the Coalition Support 
Funds for this hearing. Apparently, the only two individuals 
that have any knowledge about this are out of town for this 
hearing. I hope this doesn't mean that there are only two 
people in the entire Department of Defense who have substantive 
knowledge of the $6 billion that we have provided to Pakistan 
in Coalition Support Funds since 2001.
    I'm aware of the jurisdictional designations regarding 
these funds but I believe that the administration needs to work 
together so that the American people can trust that their 
government has a clear picture, a clear strategy, and a clear 
path toward progress.
    So here's the first question. Are we getting the most bang 
for our buck? What happens if Pervez Musharraf is suddenly no 
longer the leader of Pakistan? Have we put too much emphasis on 
individuals at the expense of institutions? Have we engaged a 
few Pakistanis at the top while simultaneously alienating tens 
of millions of others? Have we compromised the long-term 
structural progress because we have been distracted by a short-
term security imperative?
    Now let me be clear. I do believe we have a short-term 
security imperative. Pakistan's support to help root out 
terrorists is very important for the security of our country 
and the stability of the region. I don't believe, however, that 
we need to sacrifice democracy and the road toward democracy in 
order to achieve our national security.
    Last month's events in Pakistan have highlighted the 
concern that we have. We have to ask if our assistance programs 
are achieving the goals that we have set and after $10 billion, 
have we really improved our security?
    I look forward to the testimony of our witnesses. I want to 
welcome particularly Ambassador Boucher, who has been, as a 
result of his service, ill for a while and is coming, I guess, 
to one of his first public appearances. You look great, 
Ambassador. It's a hard way to lose weight but we're glad 
you're back with us, and of course, Mr. Kunder, and before we 
hear from you, I want to turn to the distinguished ranking 
member of the subcommittee, Senator Hagel.

   STATEMENT OF HON. CHUCK HAGEL, U.S. SENATOR FROM NEBRASKA

    Senator Hagel. Mr. Chairman, thank you and I, too, add my 
welcome to our witnesses as well as our second panel of 
witnesses that will follow the administration testimony. I have 
a prepared statement that I would ask be included for the 
record.
    Senator Menendez. Without objection.
    Senator Hagel. And would leave any further comments I have 
to the time we have for questions.
    Mr. Chairman, thank you.
    [The prepared statement of Senator Hagel follows:]

   Prepared Statement of Hon. Chuck Hagel, U.S. Senator From Nebraska

    Mr. Chairman, thank you for convening this important hearing 
regarding Pakistan and U.S. assistance. I want to join you in welcoming 
Assistant Secretary Richard Boucher, Acting Deputy Administrator Jim 
Kunder, and the second panel of distinguished experts.
    Pakistan today is in the middle of its most significant domestic 
political crisis in nearly a decade. At the same time, Pakistani 
politicians are confronted with an unyielding threat of Islamic 
extremism. The outcomes of these events in Pakistan remain unclear--and 
undetermined--but carry significant implications for regional stability 
and security--and America's interests.
    The United States would welcome a more stable political process in 
Pakistan, where leading opposition figures and parties can openly and 
fairly compete for political office. We would welcome further education 
and economic reforms. We would welcome having Pakistan-Afghanistan 
relations that are framed not by tension and difference, but by common 
interests. We would welcome joint United States-Pakistan-Afghanistan 
efforts in the border regions that would begin to chip away at this 
stronghold of extremism: Al-Qaeda and the Taliban. And, of course, 
sustained progress toward improved relations between India and 
Pakistan--two nuclear powers--would carry significant regional security 
implications.
    In all, this region represents one of the most geostrategically 
significant areas of the world for the United States. America's 
interests in Pakistan are framed by Pakistan as a country--and go well 
beyond any one man. And, since 2001, Pakistan has been one of our most 
important and significant partners across nearly all of our interests 
in that region. And, the nearly $10 billion in U.S. assistance to 
Pakistan since 2001 reflects this reality.
    In the last several months, we have watched as the political crisis 
in Pakistan has deepened with setbacks in democratic reform, and 
extremist forces have sought to exploit the situation with gains 
against any and all Pakistani politicians--and in Afghanistan.
    Yet, the U.S. must recognize that our influence in Pakistan is 
limited. We do not have the capability to control the course of events 
there--as is the case with nearly every other country around the world. 
We must take great care not to overextend--overreach--in an attempt to 
push, or force, Musharraf too far, too fast. He has taken off the 
uniform. He has pledged to end emergency rule on December 16. He has 
pledged to hold free and fair parliamentary elections.
    The United States should continue its quiet, firm diplomatic 
engagement with President Musharraf and all elements of Pakistani 
politics. Our objective should be to help move Pakistan toward some 
level of political consensus, rather than a deepening of the political 
crisis that will only work in the favor of the extremists.
    Public admonishments, punitive conditions, and absolute demands are 
unlikely to be productive. That is particularly the case now, when the 
situation in Pakistan remains fluid.
    At a time when global opinion of the United States is at an all-
time low, we must take care to avoid creating a situation in Pakistan 
where going down the right path is seen as doing America's bidding.
    Today's hearing is focused on understanding the scope, breadth, and 
objectives of U.S. assistance to Pakistan. Is direct budgetary support 
an effective use of assistance? What is the administration's assessment 
of the $5.7 billion in direct assistance to the Pakistani military? How 
effective has U.S. assistance been in meeting the long-term economic, 
educational, and health needs of Pakistani society? How does the 
administration evaluate the results of spending on International 
Military and Education Training (IMET)? Is the administration 
considering any changes to military or economic assistance to Pakistan?
    Mr. Chairman, thank you, again, for holding this important hearing.

    Senator Menendez. Thank you.
    Senator Lugar.
    Senator Lugar. I'm waiting.
    Senator Menendez. Waiting for questions. Senator Casey, do 
you have any opening statement?
    Senator Casey. No.
    Senator Menendez. Senator Corker.

   STATEMENT OF HON. BOB CORKER, U.S. SENATOR FROM TENNESSEE

    Senator Corker. Thank you, Mr. Chairman. I was--last week 
sat down with President Musharraf and former Prime Minister 
Bhutto and I have a slightly different perspective than what 
you just laid out but I think I'll wait until we have a little 
discussion and talk about that but I appreciate you having this 
hearing. I think it's always healthy to review our aid and to 
look and make sure that we're getting our money's worth, if you 
will, through the aid that we supply. I think it's also helpful 
to sort of understand the circumstances on the ground and some 
of the things that are actually taking place there. But I 
appreciate you chairing this meeting and I hope that we can 
approach this in a way that's not partisan but really looks 
after our country's interests and I'm sure that's what you 
intend to do.
    Senator Menendez. With that, Ambassador Boucher, thank you 
for coming. It's great to see you and in the interests of time, 
we'd ask you to try to summarize your testimony in about 7 
minutes. Of course, your full testimony will be included in the 
record.

 STATEMENT OF HON. RICHARD A. BOUCHER, ASSISTANT SECRETARY OF 
 STATE FOR SOUTH AND CENTRAL ASIAN AFFAIRS, U.S. DEPARTMENT OF 
                     STATE, WASHINGTON, DC

    Mr. Boucher. Thank you very much, Senator. It's a pleasure 
to be here and this is one of the first public things that I've 
done since I've come back to work about 10 days ago. A lot has 
happened in Pakistan in the last few months and what I'd like 
to do is talk a little bit about the questions you raised about 
our aid program; how is it spent, where does it go, and what 
does it do and then talk a little bit about our main focus 
right now. I think we have to start from the premise that 
Pakistan's success as a nation, as a stable, moderate, 
prosperous and democratic nation, is really essential to our 
security and our future as well as the security and future of 
166 million people. It's a key ally in a key region for the war 
on terror. Stabilizing Pakistan is essential in stabilizing 
Afghanistan but also in the broader Muslim world in showing 
what can be done in a stable, prosperous Muslin democracy. It 
can be an anchor of achievement or an impossible obstacle to 
success and we're determined to keep working at it to make it a 
success and to give the people of Pakistan a success.
    Over the last--let's say since 9/11, I think, you have to 
look at the big picture first, I guess, and say that Pakistan 
has actually moved forward considerably. Its growth of the 
media has been enormous and almost all the ones that were shut 
down are back on the air. The growth of civil society has been 
spectacular. There is strong support for the judiciary although 
the judiciary, as in previous periods, has had problems. There 
have been reforms in education. There has been enormous 
economic growth that has doubled the GDP and opened up economic 
opportunity to many, many more of the citizens. And they've 
carried forward on the fight against extremists and terrorists, 
both in the border area and also in the maritime sphere, where 
for the second time, Pakistan is now heading up the taskforce 
that patrols the seas near Pakistan and in that area.
    Despite many, many difficulties, some--many of them self-
imposed, Pakistan is making a historic transition at this time. 
They now do have a civilian President. The political party 
leaders are back and they are moving toward the election of a 
civilian Prime Minister. United States assistance to Pakistan 
is designed to help them to deal with these problems and 
overcome the challenges that they face.
    If you look at it in general terms this year, the biggest 
categories would be dealing with the terrorist threat and 
security threats and narcotics problems. That's about $338 
million this year in our assistance program. Expanding health 
and education is about $257 million this year. Making a 
successful transition to democracy is about $55 million. 
Providing economic opportunities to the citizens of Pakistan is 
about $87 million and there's about $100 million still in 
earthquake relief out of the money that was pledged a couple of 
years ago after the earthquake.
    I think we should also note that this year is marked by the 
startup of some programs, special programs for the tribal and 
border areas of Pakistan where the terrorists and extremist 
problem has been most acute. We are supporting a tribal area 
development strategy that was developed by the Pakistanis in 
conjunction with AID and I'm sure Mr. Kunder can talk more 
about that. But that will be about $750 million spread over 5 
years so we've gotten close to $150 million for that this year.
    We're also starting to support the transformation to the 
Frontier Corp, which is the local armed force in that area. 
There are actually three armed forces that are local. So 
supporting the conversion of local armed forces into a capable 
fighting force so that the army doesn't have to come in from 
outside to maintain security in that area and that's starting 
up this year with some funds but they are requesting a 
supplemental in future budgets to try to continue that process.
    Third of all, we're looking to help create reconstruction 
opportunity zones that we've been working on since the 
President announced them in March 2006 and we have legislation 
that we hope to see presented to the Congress and hopefully 
passed by the Congress in the near future that would allow 
duty-free entry into the United States of products that are 
made in the border areas of Pakistan and in Afghanistan. The 
economic feasibility studies say that this could help with 
economic growth and job creation in these areas so that people 
go to work in regular enterprises instead of pickup ones.
    The goal, I think that we share with the Pakistani 
Government, the Pakistani people, is to achieve a stable 
transition right now to civilian rule. It hasn't gone the way 
we would have liked. There have been plenty of bumps in the 
road and we've spoken out, as you know, about some of those 
things that have happened. And we have reviewed our assistance 
programs, especially after the imposition of emergency law in 
early November.
    First, from a legal standpoint, as you noted, but second, 
also from a policy standpoint. We do share your interest in 
knowing that our aid is effective and that our aid goes to the 
people that it is intended for. In keeping with that, we have 
decided to make some changes in the way we spend a good chunk 
of our budget, which is the $200 million that's heretofore been 
spent through the Pakistani budget, as shared objectives. It 
had macroeconomic goals as well as specific goals in education, 
health, and other areas. But we've decided at this point that 
we'll take that $200 million this year and spend it directly 
through aid projects and contracts and we will define those 
projects and supervise those contracts through the regular aid 
mechanisms so that we know exactly how the money is being spent 
and exactly who it is going to so it does reach the children of 
Pakistan who need education, the mothers and children and 
others who need the health care and the people who need jobs 
and job training. So that is one of the changes that we've 
decided to make after our consideration and frankly, after 
consulting with a number of people up here on the Hill.
    The other, I think, is a determination on our part and on 
their part to support the fight against extremism and 
terrorism. And you know, I think you've watched the news. You 
see there is a major military operation going on in the Swat 
Valley right now where the Pakistani Army is going up to try to 
rid that area of the al-Qaeda, Taliban, and other terrorists 
who have taken refuge up there and who have been broadcasting 
antigovernment, anti-Western, antieverybody propaganda in 
trying to instill their kind of governance in that area. So 
that's been going on.
    You mentioned the Coalition Support Funds and I'll make a 
point now that perhaps we'll differ on again and again 
throughout the hearing but we--those are reimbursements. We 
don't see those as assistance. We don't lump them in with the 
other categories of assistance. It's about $5.3 billion since 
9/11. It's a program that was authorized by the Congress to 
reimburse allies and friends in the war on terror for their 
expenses and that money goes to reimburse the Pakistanis for 
the expenses that they incur in terms of food, ammunition, 
operating expenses, fuel--all those things that they incur in 
terms of fighting the war on terror. It's the money that 
supports the Pakistani men and women who are fighting and dying 
in the war on terror. And indeed, Pakistan has lost as many as 
1,000 members of their armed forces security services in the 
war on terror, including 250 people since July. So they've 
incurred expenses, which we try to reimburse for and 
unfortunately, they've incurred loss of life as well, which 
nobody can reimburse them for.
    Our goal at this point is to keep working with Pakistan, to 
keep working especially on the transition and ensuring a 
credible election. We've had democracy and election programs 
going for a number of years. We've bought transparent ballot 
boxes. We've helped with computerizing the voter lists. We've 
helped with training electors and voters and election 
observers. We're going to field an observer team. We have 
about, I think it's 45 people from the International Republican 
Institute and about 25 more from AID, 40 observers from the 
Republican Institute and about 25 more that AID is financing. 
The Embassy is going to field teams. They have a whole plan to 
go out and cover as many as they can of 84 districts that they 
feel are the most critical ones and we've been encouraging 
other governments working with people like the British, who are 
sending observers, encouraging people like the Europeans and 
the Japanese to send observers as well.
    So we have a very comprehensive program that has been going 
on for some time, to try to make this election as credible, as 
transparent as possible. The government has pledged to a 
transparent election. They've pledged to keep the military and 
the intelligence services out of it. They've pledged to have 
transparent counting.
    There are going to be a lot of charges in Pakistan after 
the election. It's never--not going to be perfect. But we want 
to see an election that represents the will of the Pakistani 
people and gives them real choice over their leaders.
    Finally, sir, let me just say, there are other 
institutions, there are a number of institutions in Pakistan 
that it's important for us to work with. With the government 
and a newly elected Prime Minister, whoever that may be; with 
the army, which is a vital institution for securing and 
stabilizing the nation and they have a new chief there; with 
the new civilian----
    Senator Menendez. Excuse me. I would just advise members of 
the audience that we all might have comments to make. But we're 
not going to have them here in this setting. We appreciate your 
opportunity to be in a public setting to hear what witnesses 
are saying but we are not going to allow commentary on them.
    The committee will be in order. The gentleman will be 
seated. I would ask the officer to have the person be removed.
    Ambassador.
    Mr. Boucher. Thank you. In addition, we do have a new 
civilian President, President Musharraf, as a civilian and 
exactly how he is--what his role is going to be, how he is 
going to interact with the political parties. It is going to be 
interesting to see how that evolves in the Pakistani system. 
Then you have civil society, business, political actors, 
media--really, I think, a new environment there and so we hope 
in January to see a credible election. We think making this 
successful transition to civilian leadership is the best and 
most solid basis for the nation to go forward, including 
ridding itself from the threats and terrorism and extremism and 
we think the United States should continue to support that 
process of change in Pakistan and we'll work with you and them 
to make sure that we support that in the best way possible.
    Thank you, sir.
    [The prepared statement of Mr. Boucher follows:]

 Prepared Statement of Hon. Richard A. Boucher, Assistant Secretary of 
     State for South and Central Asian Affairs, State Department, 
                             Washington, DC

    Mr. Chairman and members of the committee, I would like to thank 
you for the opportunity to be here today to discuss developments in 
Pakistan and U.S. assistance to this critical country. As I'm sure you 
can imagine, no other policy priority has consumed more of my attention 
over the past several months. The United States wants to see Pakistan 
succeed in its transition to an elected civilian-led democracy, to 
become a moderate, democratic, Muslim nation committed to human rights 
and the rule of law. All of our assistance programs are directed toward 
helping Pakistan achieve these goals. This is a long-term undertaking 
that will require years to accomplish. There will be obstacles in the 
road.
    President Musharraf's November 3 imposition of a state of 
emergency--including reshuffling the Supreme Court, curtailment of 
press freedom, and arrests and detention of journalists, lawyers, human 
rights advocates, political activists and party leaders--was a setback. 
His subsequent retirement as Army Chief of Staff on November 28, his 
inauguration for a second term as President on November 29 and his 
commitment to lift the State of Emergency on December 16 represent the 
most recent developments in this long, sometimes troubling and 
sometimes encouraging, chain of events. While we had hoped to see this 
transition unfold differently, we are encouraged that at the end of 
this chain will be parliamentary elections, currently scheduled for 
January 8, that we hope will lead to the formation of a civilian-led 
government, under a civilian President for the first time since 1999. 
This would indeed be a significant step forward for Pakistani democracy 
and a major accomplishment for the Pakistani people.
    These results seemed unlikely a month ago, and are owed primarily 
to the Pakistani people's demand for democracy, evidenced by the 
resilient and steadfast commitment of the democratic supporters in 
Pakistan, and the constant pressure from the international community, 
especially the United States. However, this progress does not mean that 
democratic success is yet fully assured. The upcoming parliamentary 
election will be the next big step along Pakistan's bumpy path toward 
democracy. I should also note that Members of the Senate have recently 
visited Pakistan to reiterate the message of the importance of a 
restoration of democracy to that country. Senators Bennett and Corker, 
in their meetings with President Musharraf and other political leaders, 
made an important contribution to our shared efforts, and I thank them 
for that.
    It is our fervent hope that these elections will be free, fair, 
transparent, and credible. We are working closely with Pakistani 
officials and U.S., Pakistani, and international civil society 
organizations to ensure that these elections are as transparent as 
possible. The U.S. has provided significant assistance over the past 
several months in support of democracy and voter education programs in 
the runup to what will hopefully be a free and fair election. Do we 
expect the election will be flawless? No. In any general election in a 
nation with 166 million people and a checkered history of democracy, 
there are going to be problems. Our hope is that with all the 
preelectoral spadework that has been done by the International 
Republican Institute, the National Democratic Institute, by Embassy 
Islamabad, and with the large international and domestic monitoring 
teams funded by the U.S., and hopefully the EU, Pakistan will be able 
to avoid the large-scale and systematic distortions that have marred 
elections in the past.
    But elections are not the only measure of democracy. Democracy 
requires accountable government institutions, including an independent 
judiciary, protection of individual human rights, a free and dynamic 
press, an atmosphere promoting open debate, and a vibrant civil 
society. Pakistan is making progress toward these goals. Democracy also 
requires freedom from the violent extremism that operates outside of 
the rule of law. Unfortunately, violent extremist groups have expanded 
their influence in the border area between Pakistan and Afghanistan. 
From there these groups threaten not only the nascent democracies in 
Pakistan and Afghanistan, but also security in the wider region and the 
world. Denying these groups safe-haven and ousting them from Pakistani 
territory is central to our conduct of the war on terrorism. And, as 
the Pakistanis clearly recognize, ending extremism is essential to the 
future success and stability of their nation.
    Pakistan is, of course, our indispensable ally in that struggle. 
The Government of Pakistan is at war with a violent minority that is 
seeking to undermine a largely peaceful, law-abiding Pakistani 
citizenry deserving of the freedoms their country heralded at its 
inception. In many ways, it is the indispensable partner in our 
worldwide struggle against violent extremism. Pakistan shares a 1,600-
kilometer border with Afghanistan and is a key factor in the success or 
failure of the Afghan and international effort there. With 166 million 
people, Pakistan is a leading Muslim country whose future will help 
determine the future stability and prosperity of the region--a region 
of increasing importance to the United States. It can also serve as a 
potential model for our relationships with the Islamic world.
    Pakistan is a nation facing enormous challenges, and it is clearly 
in our interest to help Pakistan to meet those challenges. Despite 
averaging 7 percent annual growth in their Gross Domestic Product over 
the last 5 years, many parts of the country remain desperately poor. 
This is especially true in the areas along the border with Afghanistan 
and in no place more so than in the Federally Administered Tribal 
Areas. These areas have the worst social and economic conditions in all 
of Pakistan. In some parts of the tribal areas, 135 of every 1,000 
children under the age of 5 die early, often due to treatable ailments. 
The female literacy rate is as low as 3 percent in some areas. There is 
little access to safe drinking water or to even rudimentary health 
care, and public education is largely nonexistent.
    One reason for these calamitous social indicators is that the writ 
of the central government in the underdeveloped tribal areas is, as it 
has been throughout history, marginal at best. These areas are remote 
and isolated. This isolation, coupled with social and economic 
deprivation, makes them particularly attractive ``targets of 
opportunity'' for violent extremists. Al-Qaeda, Taliban, and other 
violent extremists have exploited these populations and the areas that 
they inhabit as hideouts and safe havens. The lack of adequate 
educational infrastructure makes traditional madrassah schools and 
other unregulated private schools the only alternative. Worse, a small 
but nonetheless worrisome number of these schools serve as 
indoctrination centers for extremist combatants and would-be suicide 
bombers. The area's proximity to Afghanistan makes it an ideal 
recruiting ground and a staging area for cross-border operations by 
Taliban and other violent extremist groups operating against Afghan and 
NATO forces in southern and eastern Afghanistan. Past efforts by the 
Pakistani Government to establish a presence or exert its control in 
these areas have met significant resistance. Al-Qaeda has used the 
absence of a military presence to increase its training, planning, and 
recruiting capacity in hideouts in these undergoverned parts of 
Pakistan.
    Though the Pakistani Government has generally remained firm in its 
resolve to confront the violent extremist forces in the tribal areas 
militarily, it has become clear to Islamabad, as it has to America, 
that a purely military solution will not work. What is required is a 
comprehensive ``frontier strategy'' consisting of military and civilian 
security, social and economic development, and political engagement in 
these ungoverned areas. And that means nothing less than bringing the 
frontier areas, traditionally undergoverned and underdeveloped, into 
the mainstream of the Pakistani body politic.

              U.S. ASSISTANCE: MONEY BEHIND OUR PRIORITIES

    The United States is seeking to help Pakistanis build an 
economically healthy, stable, and democratic Pakistan. To this end, 
since 2002 we have provided economic assistance totaling $2.4 billion. 
These funds have supported education reform, including training teacher 
in modern teaching techniques, building schools in the tribal areas, 
providing scholarships and fostering science and technology cooperation 
between the U.S. and Pakistan. We have also funded governance programs 
designed to assist independent radio, reform political parties, train 
Parliament members in drafting laws, strengthen Pakistan's Election 
Commission, promoted grassroots service delivery and reduce gender-
based violence. U.S.-funded economic growth programs have, among other 
things, worked to improve the competitiveness of Pakistani businesses, 
provided microfinance and encouraged more effective agriculture 
techniques. We have also supported refugee programs and funded 
rebuilding efforts following the 2005 earthquake.
    Fighting terrorism is, of course, a preeminent goal of U.S. policy 
in Pakistan. In support of that goal, since 2002 the United States has 
provided security assistance to Pakistan totaling $1.9 billion. This 
has included $1.2 billion in Foreign Military Financing, $244 million 
in Department of State counternarcotics funding and $87 million in 
Department of Defense counternarcotics funding and $37.2 million in 
section 1206 counterterrorism funding. These funds have been used to 
help Pakistan prosecute the war on terror along the Pakistan-Afghan 
border. This money has gone to purchase tactical radios, TOW missiles, 
Bell 412 and COBRA helicopters, and night-vision goggles. In addition, 
we provide counterinsurgency training, improve counterinsurgency strike 
capability and train more effective Pakistani military leaders. Another 
purchase under Foreign Military Financing--P-C3C Orion aircraft--is 
crucial for maritime surveillance and Pakistan's participation in and 
leadership of Combined Task Force-150 patrolling the Horn of Africa and 
the Arabian Sea. In addition, we have provided $5.3 billion in 
Coalition Support Funds to reimburse Pakistan for expenses incurred in 
the war on terror.
    The United States has also recently begun to implement a 5-year, 
$750 million development strategy for Pakistan's frontier region that 
supports the Government of Pakistan's 9-year, $2 billion program for 
the tribal areas' sustainable development. The people of the tribal 
areas need to have a stronger connection to their central government if 
they are to resist violent extremism effectively and over the long 
term. The plan seeks to develop the capacity of tribal area authorities 
and local leaders to plan, administer, implement, and monitor 
development assistance programs; to strengthen the strategic 
communication capacity of civilian administration bodies; and to 
improve planning and coordination between civilian and security 
organizations.
    In addition, the plan seeks to more effectively address security 
concerns in the tribal areas, which is a prerequisite for a successful 
development strategy. To accomplish this, we have been working with and 
will continue to work with the Pakistani Government to increase the 
size and enhance the capabilities of the three law enforcement entities 
that have a traditional presence in the tribal areas and whose ranks 
are filled with predominantly locally recruited ethnic Pashtuns. I 
believe these pieces of our assistance to Pakistan are some of the most 
crucial elements of the war on terror. These forces are doing much of 
the fighting against the Taliban, al-Qaeda, and other violent extremist 
groups in the tribal areas and elsewhere in the Northwest Frontier 
Province, such as Swat.

                       REVIEWING U.S. ASSISTANCE

    When the State of Emergency was announced on November 3, the 
Department of State examined our assistance programs to determine 
whether the Emergency would negatively impact our ability to continue 
assistance. We concluded that imposition of a state of emergency did 
not at that time trigger any automatic aid cutoffs. However, it was 
also clear that taking a thorough look at our assistance programs 
across the board was warranted.
    Barring further setbacks, we have come to some important 
conclusions. We believe that maintaining funding levels for Economic 
Support Funds and Foreign Military Financing is crucial. Doing 
otherwise would not further our interests with Pakistan at a time when 
Pakistan plays a critical role in the war on terrorism and is about to 
have elections that need to be free, fair, and credible. As you in the 
Congress do, we would want to be quite clear on what our money 
supports. Thus, we've made the decision that the $200 million in Fiscal 
Year 2008 Economic Support Funds used for budget support will be 
projectized to ensure money is targeted at the most urgent priorities. 
We believe these funds can be most productively used for programs that 
directly benefit the Pakistani people and will make Pakistan a stronger 
and more secure ally in the war against terrorism. We have the capacity 
to do so, as proved during the October 2005 earthquake. Foreign 
Military Financing to the Government of Pakistan's counterterrorism 
program is another area we could not want to cut, as cuts would be 
counterproductive to military-to-military programs and could affect 
Pakistan's willingness to continue to support coalition access to 
Afghanistan.
    Our $300 million per year in Economic Support Funds and $300 
million in Foreign Military Financing for Pakistan are part of a 5-
year, $6 billion Presidential commitment made by President Bush in 
2004, with funding to be provided from fiscal year 2005 to fiscal year 
2009. This commitment supports our long-term, broad-based strategic 
partnership with Pakistan. Programs like these I've just outlined, 
combined with complementary projects that create jobs, help address the 
fundamental economic problems that block Pakistan's progress and 
stability. It is the people of Pakistan to whom we want to demonstrate 
our long-term commitment--and the Department of State believes firmly 
that now is not the time to cut assistance levels.

                               OVERSIGHT

    Our strategic goals in Pakistan are broad and our programs will 
require strong oversight to ensure that our assistance is accomplishing 
our foreign policy goals. We have been clear with the Government of 
Pakistan in our conversations on development cooperation that we would 
need to work closely with one another in monitoring and accounting for 
the use of our assistance. The bulk of U.S. assistance to this region 
will be implemented through contractors and grantees, and will be 
monitored per standard USAID and inspector general oversight 
guidelines. I will defer to my colleague from USAID, whose 
understanding of these mechanisms is much greater than my own.
    Security assistance is typically subject to even more stringent 
monitoring and evaluation requirements than other foreign assistance 
programs. The Government of Pakistan has entered into an agreement 
regarding end-use and retransfer and security of defense articles 
provided on a grant basis. Each Letter of Offer and Acceptance pursuant 
to the Foreign Military Sales program contains end-use, retransfer, and 
security obligations.
    Coalition Support Funds are a Department of Defense program to 
reimburse war-on-terrorism partners for logistic, military, and other 
expenses incurred in supporting U.S. operations. Pakistan's Coalition 
Support Fund claims are validated by the U.S. Embassy in Islamabad and 
by U.S. Central Command. The Department of Defense's Office of 
Comptroller further evaluates each claim to ensure that the costs are 
reasonable and credible. After this validation, the Department of State 
must concur on the reimbursement and the Office of Management and 
Budget must be consulted. The Office of the Secretary of Defense 
(Comptroller) then prepares a determination for the Deputy Secretary of 
Defense to sign, as well as a formal notification to Congress. Only 
after a 15-day notification period expires are funds released to the 
Defense Security Cooperation Agency for repayment to Pakistan. Embassy 
Islamabad is working with the Department of Defense and the Government 
of Pakistan to make the Coalition Support Funds reimbursement process 
more supportive of U.S. policy goals and to ensure that we get maximum 
value for the money expended. Embassy Islamabad has, on more than one 
occasion, denied or sent claims back to the Government of Pakistan for 
further clarification.

                               CONCLUSION

    The United States assistance policy in Pakistan is a multifaceted 
and strongly monitored array of programs, ranging from support for 
Pakistani military efforts to oust militant extremists from the border 
area with Afghanistan, to on-going support for rebuilding following the 
2005 earthquake, to working with Pakistani civil society organizations 
to train election monitors to ensure credible elections. U.S. 
engagement with Pakistan is a centerpiece in our efforts to combat 
extremism worldwide and of our work with the developing countries in 
advancing economic and social development and promoting the growth of 
democracy. All of our efforts in Pakistan are geared toward creating 
the vibrant, modernizing, and democratic state that Pakistanis desire 
and U.S. policy envisions as a partner in advancing stability and 
development in a key region of the world.
    Mr. Chairman, thank you again for inviting me today. I look forward 
to taking your questions.

    Senator Menendez. Thank you.
    Mr. Kunder.

STATEMENT OF HON. JAMES R. KUNDER, ACTING DEPUTY ADMINISTRATOR, 
   U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT, WASHINGTON, DC

    Mr. Kunder. Thank you, Mr. Chairman. In my written 
statement, I've tried to answer in detail each of the questions 
the committee asked about the expenditure of approximately $2.1 
billion of U.S. foreign assistance since 2000, by USAID and 
what I would like to do, just very briefly highlight items I've 
included in this chart in front of the committee and in each of 
the statements. What this chart attempts to address, Mr. 
Chairman, is your fundamental questions about whether we're 
trying to take on the long-term development issues facing 
Pakistan.
    Essentially, this tries to lay out what we believe to be 
some of the critical development challenges in our four major 
areas of U.S. foreign assistance, which are education, health 
care, governance, and economic growth. For example, education 
is our largest single sector of assistance to the Pakistani 
people. We have looked at data like the ones I've listed there, 
5 to 6 million school-age children out of school, increased 
enrollments in madrassas and we've designed our program around 
the kinds of issues that will address the specific development 
challenge. For example, building more schools, training more 
teachers, working with administrators, assisting the Pakistani 
Government in developing a more modern curriculum, awarding 
higher education scholarships within the country and then also 
post-graduate training in education in the United States.
    I won't go through each one of these, but what we believe 
we're doing, sir, is to try to take on the critical development 
challenges identified by our staff on the ground, by the World 
Bank, and certainly by the Pakistani Government itself. There 
are some very profound development challenges in this country 
of 160 million people and I throw that out because some of the 
numbers are, in fact, large for assistance numbers but Pakistan 
is one of the 10 largest countries in the world, and across 
that very large country, we've got data that indicates, for 
example, that less than half of the primary age cohort of 
children is currently enrolled in school. I'm not talking about 
junior high school, high school students. If we just look at 
the primary school cohort, grades 1 to 6, fewer than half of 
Pakistani children are actually in a school setting, and those 
kinds of numbers indicate that we've made some very serious 
advances, very significant advances, and I completely agree 
with what Richard said about those.
    We have seen a substantial increase in the economic growth 
rate in the country. We have seen increases in primary school 
enrollment. We've seen increases in the literacy rate. We've 
seen increases in child survival rates but we have very 
profound development challenges still facing us and facing the 
Pakistani Government.
    In addition to answering the committee's questions in my 
written statement, I would just like to emphasize two other 
areas where there is going to be dramatic change or new 
direction in our program. One is, as Richard mentioned, we are 
planning to increase dramatically our assistance in the 
Federally Administered Tribal Areas (FATA). The Government of 
Pakistan has a very comprehensive and, we believe, well-
designed development plan to address the root causes of 
extremism in the FATA region. We plan to be major supporters of 
that effort. That is an area where we can provoke a reaction, 
if we don't proceed in a measured and analytical and thorough 
fashion. But we believe there are real development 
opportunities in the northwest and we plan to increase 
dramatically our support to that region.
    The second is--I would emphasize what Richard just 
mentioned about the ``projectization,'' as we would call it, of 
the $200 million per year that we have been providing in cash 
transfers to the Pakistani Government. That $200 million was 
carefully monitored in terms of what the outcomes were. We had 
agreed with the Pakistani Government on what we expected the 
money to be spent for in education, health care, and so forth 
and then we tracked whether they were actually expending the 
money in those areas. But what Richard has announced here today 
is another step toward increased engagement directly by moving 
that from a cash transfer into projects that we will manage on 
the ground in these four critical areas of education, health 
care, governance, and economic growth.
    As Richard mentioned, we are heavily engaged. I just spoke 
with our staff in Islamabad in the last couple of days about 
our preparations for upcoming elections. We intend to use every 
tool in our toolkit to ensure that those elections are free, 
open, and transparent, and if the Chair would just allow me 30 
more seconds, I would like to introduce, seated two chairs 
behind me, Mr. Agha Mohammad Asim, a member of our Pakistani 
staff from Islamabad who happens to be in town for training. We 
invited him to come here today so he could see American 
democracy in action.
    Mr. Asim is one of the ways we reach out to the broader 
Pakistani public. Mr. Chairman, to answer your question, our 
staffing ratio in Islamabad is probably pretty typical. We have 
10 American Foreign Service officers on the ground and 44 
Pakistani professionals. This is one of the best ways that the 
United States gets its message across and we wanted to invite 
Mr. Asim to join us here today. I'm pleased to answer any 
questions that the committee has, sir.
    Thank you.
    [The prepared statement of Mr. Kunder follows:]

       Prepared Statement of Hon. James R. Kunder, Acting Deputy 
   Administrator, U.S. Agency for International Development (USAID), 
                             Washington, DC

    Mr. Chairman, other distinguished members of the committee, thank 
you for inviting me to appear before you today to discuss the 
critically important topic of ``U.S. Assistance to Pakistan.''
    I would like to incorporate your questions and structure my 
testimony around three core themes today, laying out USAID's strategy 
for Pakistan, the impact that USAID has achieved, and the support that 
we provide to priorities of both the U.S. Government, and the Pakistani 
people.
                           the usaid strategy
    In discussing strategy, it may be useful to provide some historic 
context. United States foreign assistance to Pakistan began in 1948 
with education as one of our major priorities. This has included 
programming in partnership with Pakistanis at both the national and 
local levels. In 1987 we funded the establishment of the Lahore 
University of Management Sciences (LUMS)--now the premier institution 
of higher education in Pakistan. USAID's support to higher education 
also helped to build a cadre of expertise and leadership in the areas 
of public administration, education, health, and business. In the 
health sector, USAID's support for childhood mortality has contributed 
to a one-third reduction over the last four decades.
    Our relationship with Pakistan changed abruptly in the 1990s when 
USAID halted its assistance to Pakistan due to the Pressler amendment. 
Enacted in 1985, the Pressler amendment specifically prohibited U.S. 
assistance or military sales to Pakistan unless annual Presidential 
certification was issued that Pakistan did not possess a nuclear 
explosive device. This certification was denied in October 1990, 
triggering wide-ranging sanctions against Pakistan. In 1995, USAID 
closed its mission and pulled out of Pakistan.
    In early 2001, USAID received specific legislative authority to 
work directly with the Government of Pakistan in education, which was 
the precursor to the current program. Post 9/11, the U.S. again 
redefined its relationship with Pakistan. In 2002, USAID came back to 
reengage our Pakistani allies in the war on terror to deal with issues 
of poverty, lack of access to a quality education, and substandard 
health care alternatives for their children.
What is USAID's strategy and objective in Pakistan?
    USAID's strategy and objective is to help Pakistan develop into a 
moderate, prosperous, and democratic nation by addressing some of the 
most pressing needs of the Pakistani people: Education for their 
children; health care, especially for mothers and children; economic 
opportunities, particularly jobs for young people; and building 
democratic institutions and practices to help the Pakistani people gain 
a voice in their government.
How has this strategy been translated into specific programs?
    Pakistan needs to respond to the urgent problems facing its 
children and youth by providing a quality basic and higher education 
program which will give them the skills to find jobs in the modern 
economy. The U.S. is helping upgrade public education, placing emphasis 
on improving the quality and affordability of Pakistan's public 
schools. This allows parents of limited means to pursue educational 
opportunities for their children beyond religiously oriented 
madrassahs. At the same time, we are aware that an educated population 
will pave the way for long-term and lasting benefits for all 
Pakistanis--economically, socially, and politically.
    USAID also recognizes that the level of health in Pakistan, 
particularly maternal and child health is among the worst in the world. 
USAID's program is helping save the lives of thousands of Pakistani 
mothers and children from illnesses which can be prevented--such as 
polio and tuberculosis.
    USAID developed a program to promote democracy and governance in 
Pakistan in order to help the Pakistani people develop more responsive 
political parties, and the legislative, civil, and legal institutions 
needed to change this status quo.
    Economic recovery and growth has begun, but is not yet providing 
the rural poor opportunities to improve their livelihoods, nor is it 
producing enough jobs to keep pace with Pakistan's burgeoning 
population. USAID has undertaken activities to help Pakistan compete in 
the world arena--by providing microfinance and larger loans for small- 
and medium-sized business and boosting the competitiveness of 
industries such as furniture, marble, and granite that can potentially 
be exported.

What is the strategy driving the various components of this support? 
        What are the goals?
    USAID's strategy in Pakistan addresses four major development 
areas: Education; maternal and child mortality; democratic institutions 
and civil society; rates of poverty and unemployment. Components of the 
program give particular attention to relieving these constraints in the 
earthquake-affected areas and in the FATA.
    Pakistan's education sector faces immense challenges. Of 22 million 
children between the ages of 5 and 9, only 42 percent attend school. 
Historically, less than half of Pakistani children who enroll in school 
complete 5 years of schooling; for every 100 children beginning first 
grade, only 6 complete grade 12. Poor teaching and learning results in 
students leaving the system with no capacity for critical thinking, or 
much worse, remain illiterate. Male literacy (65 percent) is much 
higher than adult female literacy (40 percent); the disparity is more 
pronounced in rural areas (58 percent for men and 29 percent for 
women). Teacher absenteeism is high and many schools are in disrepair. 
Pakistan has several excellent universities, but social and economic 
costs place higher education beyond the reach of most poor students, 
especially women.
    USAID's education goal is, ``Increase Knowledge, Training, and 
Infrastructure to Develop High Quality Education Programs.'' USAID's 
existing education strategy supports basic and higher education. USAID 
has supported the following components of the Government of Pakistan's 
education reform strategy: Improving education policies and 
administrative and management capacity; providing support to teacher 
education and professional development; improving access to education 
by building and upgrading schools; and addressing special needs in the 
FATA and the earthquake-affected areas. The current program increases 
access to higher education by providing needs or merit-based 
scholarships to Pakistani students and by supporting the world's 
largest Fulbright scholarship program.
    Health indicators in Pakistan continue to be among the worst in the 
world. Seventy-eight of every 1,000 live births result in infant deaths 
and 350-500 mothers per 100,000 die every year from pregnancy and 
delivery complications. Other health problems afflict thousands more; 
these include malaria, communicable diseases including tuberculosis and 
acute respiratory infections. Pakistan remains one of only four 
countries worldwide that suffer from endemic polio.
    Pakistan's unhealthy population puts a huge burden on national 
resources and stifles economic growth. Good health improves learning 
and increases labor productivity, leading to improvement in other 
crucial indicators such as literacy and economic growth. Healthier 
people can contribute economically and are less likely to lose hope and 
turn to extremism. USAID's maternal and child health program has 
already produced tangible improvements in the lives of Pakistanis, a 
major objective of the USG's Muslim Outreach Initiative.
    USAID has adopted several approaches to improve democracy and 
governance in Pakistan.
    One of the goals of U.S. foreign policy in Pakistan is to 
strengthen the country's democratic institutions and practices. 
Legislatures, in particular, can play a strong and positive role in 
governance. USAID efforts to strengthen democracy support: (1) Improved 
representation and responsiveness of national and provincial 
legislatures; (2) greater civil society, media, and political party 
engagement in policy dialog; (3) devolution of authority and operation 
to local government institutions, making them more responsive to the 
public; and (4) strengthening the electoral system and public oversight 
of the election process.
    In the long term, USAID's work to strengthen democratic 
institutions will help establish a stable and democratic future for the 
people of Pakistan. In the immediate future, this work will encourage 
Pakistan to hold free, fair, and credible elections in early January 
2008. USAID provides assistance to Pakistan for voter education, 
political party development, computerization of the voting rolls, 
training of political poll watchers, and domestic and international 
election observation missions to ensure that Pakistan follows a path of 
democratic change.
    Economic growth in Pakistan has averaged 7 percent over the past 5 
years, which has resulted in a decrease in the percentage of Pakistanis 
living below the poverty line from 33 percent at the end of the 1990s 
to around 25 percent today. However, not all Pakistanis have benefited 
from this sustained economic growth; income distribution particularly 
in the rural areas remains very unequal.
    The Government of Pakistan has made progress on major economic 
reforms, including restructuring the financial and telecommunications 
sectors; foreign and domestic investment; strengthening state 
regulatory entities; and devolving governance and fiscal management 
responsibilities to the local level. The multilateral development banks 
have played a substantial role in the reform effort, from technical 
advice to budget support. Positive impacts from these efforts include 
robust economic indicators, record levels of foreign investment, and 
the largest foreign reserve levels in Pakistan's history. These 
results, in combination with Pakistan's strong support for the war on 
terrorism, have led to increased donor investments in social sector 
support in recent years.
    Continued economic growth will produce more jobs, which can 
accelerate and thwart those who would recruit the unemployed for 
terrorism. Given Pakistan's demographic bulge (63 percent of the 
population is under age 24), job creation is paramount.
    USAID's programs support the Government of Pakistan's strategy to 
reduce poverty and encourage economic growth, and are helping create 
new employment opportunities for poor Pakistanis, especially in rural 
areas. USAID/Pakistan has increased economic opportunities for the poor 
by: (1) Increasing community development programs, especially small 
infrastructure projects; (2) increasing access to microfinance in rural 
and urban areas; and (3) assisting small and medium enterprises in key 
sectors, helping them to generate improved employment opportunities.
    Nonproject assistance provides cash to support mutually agreed upon 
objectives. Since September 11, the U.S. has provided very substantial 
nonproject assistance to the Government of Pakistan. A $600 million 
Economic Support Funds (ESF) grant in November 2001 (FY 2002) paid down 
debt owed to the U.S., the World Bank, and the Asian Development Bank. 
The Government agreed to disburse the equivalent amount of rupees to 
support a dozen social sector line items in the Federal budget. (In 
fact, the rupee disbursements for the agreed upon social sector 
programs far exceeded the equivalent of $600 million.) In FY 2003, 
approximately $186 million in ESF was used to fund the subsidy cost of 
debt relief for the Government of Pakistan and that forgave $1 billion 
in outstanding U.S. official debt, approximately one-third of its 
outstanding U.S. debt at that time. No conditionality was attached to 
the FY 2003 program.
    Beginning in FY 2005, the U.S. has been providing $200 million 
annually in nonproject assistance.* Dollars are exchanged for rupees, 
and the Government of Pakistan and the USG negotiate and agree on the 
purposes for which the Government of Pakistan will use those rupees.

[* This is part of a larger administration commitment to Pakistan that 
began in FY 2005 and continues through FY 2009 of $300 million per year 
in economic assistance and $300 million per year in military 
assistance.]

    Now, as Assistant Secretary Boucher has indicated, in FY 2008, the 
full $300 million in Economic Support Funds will be projectized. This 
additional project funding will be implemented through U.S. contractors 
and grantees who would work with provincial and local governments as 
well as Pakistani NGOs and private sector organizations. We are still 
developing the program plans but we expect that the additional 
programming will impact three program areas. The first is education, 
which we believe is fundamental to Pakistan's forward progress toward 
democracy, prosperity, and stability. Our approach to education 
assistance in Pakistan is comprehensive--training teachers, building 
schools, providing scholarships with the premise that these actions 
will reduce the number of children exposed to extremist teachings. 
Second, we will direct resources to improving child and maternal 
health, thereby allowing the U.S. to visibly touch the lives of 
millions of Pakistanis and fill a critical need. Third is an economic 
element--we want to expand job training for unemployed youth, generate 
jobs by building small infrastructure in communities, and help farmers 
get out of poverty.
    Earthquake reconstruction began after the devastating earthquake on 
October 8, 2005. The USG pledged to spend $200 million over 4 years on 
a wide range of activities to rebuild the area. Individual activities 
were undertaken to clear rubble, help the landless get housing, rebuild 
schools and health facilities, improve health conditions, and increase 
rural incomes. Systemic changes were also targeted to improve the 
capacity of the health and education systems, and to increase economic 
activity by helping important industries to expand and generate more 
jobs.
    Fiercely independent, some people in FATA do not want to be 
governed by the Government in Islamabad. Some feel alienated from the 
Government of Pakistan because they have received very little. Security 
concerns make it difficult for the government to provide social 
services, and the lack of social services make it more difficult for 
the Government of Pakistan to increase security in the FATA. USAID's 
strategy is to improve economic and social conditions in the FATA 
through a broad range of programs consistent with the Government of 
Pakistan's FATA Sustainable Development Program.
What is the detailed breakdown of all USAID support to Pakistan since 
        fiscal year 2000?
    The following table provides a breakdown of funding since 2000 per 
USAID sector.

Education...............................................    $256 million
Democracy and Governance................................      84 million
Emergency Economic Assistance...........................    1.6  billion
Economic Growth.........................................      70 million
Health..................................................     169 million
Earthquake and Reconstruction...........................     106 million
Program Support.........................................       9 million
FATA....................................................     105 million
                    --------------------------------------------------------
                    ____________________________________________________
    Total...............................................    2.4  billion

                    the impact of usaid in pakistan
Are these goals being achieved?
    Since 2002, USAID has achieved the following:

    In education:

   More than 400,000 children have benefited from USAID 
        education programs--resulting in a 15.5-percent increase in 
        student enrollment in USAID-supported school districts.
   USAID trained 45,600 teachers and administrators in improved 
        teaching techniques. These people were then observed to be 
        practicing what they had learned in the classroom setting. 
        These techniques positively affect student achievement and 
        educational advancement.
   USAID awarded 906 in-country higher education scholarships 
        since the program started in 2004. Since 2005, 235 Pakistanis 
        started master's or Ph.D. studies in the U.S.

    In health:

   USAID's support to the tuberculosis efforts in Pakistan 
        helped district governments improve diagnosis and treatment 
        quality, and provide better access to public care facilities 
        for TB patients. This has helped the case detection rate to 
        reach the WHO standard of 70 percent, and meet an 85-percent 
        treatment success rate.
   Since 2004, the number of children vaccinated during every 
        national immunization polio day campaign rose from 29.8 million 
        to 33.5 million. The number of polio cases dropped from 40 in 
        2006 to 18 in November 2007--with most areas not experiencing 
        an outbreak for over 2 years.
   USAID has trained 1,404 traditional birth attendants since 
        2004--preventing unnecessary deaths from obstetric 
        complications.

    In democracy:

   USAID has helped the Electoral Commission of Pakistan to 
        curb vote tampering by updating the national voter registration 
        list, computerizing electoral rolls, improving election 
        complaints, and providing transparent ballot boxes and security 
        seals for the January 8, 2008, elections. USAID has also 
        provided voter education, political party assistance, and 
        training and support of domestic and international observers.
   USAID trained 1,290 local leaders (including 283 women) in 
        budget oversight, leadership skills and participatory planning 
        for better service delivery. In one of the targeted six 
        districts, USAID-trained public health workers began to track 
        the usage of medicines in clinics, and have prevented stock 
        shortages using information technology.

    In economic growth:

   USAID provided over 350,000 microfinance loans in 25 rural 
        districts and periurban areas--generating business 
        opportunities for over 100,000 entrepreneurs.
   USAID's competitiveness program has brought together 
        businesspeople in six sectors. These business people developed 
        strategies to improve their industries' competitiveness in the 
        global marketplace. USAID's $11 million investment generated 
        over $50 million in new private investment and over $102 
        million in government support--creating more productive 
        businesses and employees.

What determined the mix of programs across sectors?
    USAID sectoral activities address the root causes of poverty and 
instability in Pakistan. Lack of education and poor health impede 
productivity. An absence of economic opportunity and political choice 
fuels frustration and violence.
    In the spring of 2001, USAID received specific legislative 
authority to work on education with the Government of Pakistan. USAID's 
Pakistan Planning Framework document of May 2001 states that USAID 
received this authority in response to ``the grave state of the public 
education systems and the belief that a poorly educated populace 
impedes economic development and more readily supports extremist 
actions.''
    Thus, from the beginning of USAID's reengagement with Pakistan, 
education has played the central role. When USAID reestablished a full 
mission presence in Pakistan in the wake of the September 11, 2001, 
attacks, programs to address needs in health, economic growth, and 
democracy were added creating the current robust assistance program. 
Administration commitments made in conjunction with high-level 
negotiations have played a role in further program selection, e.g., the 
commitments to provide $300 million per year from FY 2005-09 for 
economic aid ($100 million in project support and $200 million in 
nonproject or budget support), $50 million per year from FY 2007-09 for 
earthquake reconstruction, and $750 million over 5 years (FY 2007-2011) 
for sustainable development in the FATA. All these activities are 
directed toward the overarching goal of helping Pakistan develop into a 
moderate, prosperous, and democratic nation. These activities also 
complement existing programs of other donors in the country, such as 
the U.K.'s Department for International Development, or in other cases 
working jointly on programs such as with the Government of Japan in the 
FATA education response.
What oversight mechanisms are in place to ensure that this assistance 
        is being used for legitimate purposes?
    All USAID contracts and grants are supervised by trained personnel 
to ensure the activities spend resources in order to obtain the agreed-
upon objectives. Regular financial audits are performed. Evaluations of 
projects after they end--and in some cases earlier--are part of our 
business approach. USAID has been hiring additional staff to increase 
project monitoring.
                supporting usg and pakistani priorities
    To achieve the end-state of a prosperous, moderate, and stable 
country, the United States and the Government of Pakistan are working 
together very closely to strengthen opportunities for Pakistanis. USAID 
has been very responsive to the evolving situation in Pakistan--
supporting the earthquake relief efforts, assisting with Cyclone Yemyin 
this past summer, and in developing a long-term plan to address the 
needs of the tribal areas.
What proportion of USAID assistance is spent in the FATA region?
    We estimate that USAID allocated 6 percent of funds for FY 2002-07 
to activities in the FATA.
What are the goals for assistance in this region and are they being 
        achieved?
    The goals of USAID's assistance program to the FATA are to help the 
Government of Pakistan integrate the people of this strategically 
critical region into the rest of the country--economically, socially, 
and politically--to give the people of the FATA a stake in Pakistan's 
development and to help them experience the economic and social 
benefits and services that come with this integration. Most 
importantly, this program will work on strengthening the capacity of 
local government institutions in the FATA to address the needs of 
citizens there.
    USAID has designed a comprehensive program for the region that 
addresses the major constraints that impede development in the region, 
with a focus on promoting economic growth through development of small 
and medium enterprises, markets, education, job training, health care, 
and community development activities.
How is the civilian assistance coordinated with the U.S. support for 
        the Pakistani military?
    Coordination takes place at weekly FATA meetings which are chaired 
by the DCM and attended by representatives of the U.S. military, USAID, 
and all other members of the Embassy team that provide assistance to 
FATA. Similarly, thrice weekly country team meetings chaired by the 
Ambassador, address coordination issues. The U.S. Embassy has recently 
filled a FATA assistance coordinator position in Islamabad.
Does USAID have a strategy to sustain support for Pakistani 
        institutions over the long-term?
    USAID builds sustainability into the design of each program. The 
major role of USAID technical assistance is to undertake the training 
and capacity-building that will ensure we leave behind teams and 
institutions in place that have the skills and systems needed to keep 
programs operating after USAID projects end. These efforts form the 
heart of USAID activities worldwide. Thus, in earthquake 
reconstruction, we not only rebuild schools, but also work with 
communities and schools to improve the quality of classroom instruction 
and establish parent and teacher groups that will take responsibility 
for upkeep and maintenance of school buildings. In higher education, we 
have a long history of creating and sustaining high-quality schools 
that provide leadership for Pakistan. In health, USAID's work supports 
public and private institutions that provide services and strengthen 
human resources for health care. These include district-level 
governmental institutions as well as commercial institutions providing 
health care products to communities and individuals.
    In FATA, we face many development challenges. However, one of the 
largest components is capacity-building of the FATA government so that 
it can more effectively govern this territory.

                               CONCLUSION

    Mr. Chairman, although we have come a long way in Pakistan, no one 
seeks to underestimate the challenges ahead. Recent events have shown 
that the road back to democracy in Pakistan isn't as smooth as we would 
expect it to be. Our commitment is to the people of Pakistan, as they 
embark upon a long-term development course. The strong, long-term U.S. 
commitment that we display is making the difference, and it must 
continue with intensity.
    We at the U.S. Agency for International Development appreciate all 
that your committee does to support this most important endeavor. Thank 
you again for this opportunity to appear before this committee. I look 
forward to taking your questions.



    Senator Menendez. Thank you for your testimony. We'll start 
with 7-minute rounds and the Chair will recognize himself.
    You know, Mr. Secretary, I listened to your testimony. I 
read your testimony and it is fair to say we have no particular 
criticism. We're happy with Pakistan because all I heard 
verbally is that we're pretty much happy with the way things 
are.
    Mr. Boucher. No; I think we've been quite critical. We were 
quite critical with the state of emergency. We were very 
critical in the crackdown on the media. We've been critical of 
some of the arrangements made for the election. We just keep 
pushing and try to overcome these obstacles. I think in terms 
of our assistance programs, I think we can be quite proud of 
what we've done to help the education system, the health care 
system, things like that and economic growth.
    Senator Menendez. Why do we take 6 years to come to the 
conclusion that the $200 million that we are now providing was 
much better served in having it be programmatically delineated 
versus just giving it to the Pakistani Government?
    Mr. Boucher. This money was part of the Presidential 
commitment that started in 2004 and I think at that time, the 
decision to do it this way was in part based on the fact that 
we didn't think we had the ability at that point, to spend all 
$200 million on the economic side. Jim, you might been around 
and know that better than me. But I think also, as the 
situation evolves, as it develops and as there are concerns 
about sort of the gross, the general nature of some of the 
budgetary support, even though we know its goal is to increase 
spending in certain categories so they have increased health 
care spending by 59 percent in the last couple of years; 
education spending by 58 percent because in part of our 
support. But even though we know the macroeconomic effects and 
the budgetary effects, I think everybody with the state of 
emergency as with recent events felt they wanted more direct 
knowledge----
    Senator Menendez. Obviously, we are unhappy about something 
if we have come to the conclusion after this experiential 
factor that we as a government are better served, as are the 
Pakistani people, by having a programmatic designation of a 
significant amount of money, $200 million versus continuing to 
just have it flow. I heard Mr. Kunder try to suggest that 
everything was great with what we did and I heard you make a 
statement that you've made a major decision to move in a 
different direction. You know, it seems to me that we obviously 
have found some significant reason to change the course.
    Mr. Boucher. I think we heard a lot of concerns on the Hill 
and we shared those concerns, given the recent turmoil and the 
politics that we all wanted to know more specifically that our 
money was going to the kids who deserve a better education and 
the mothers and children who deserve better health care.
    So, it was--we had a discussion within the administration. 
The economists said no, you're better off doing it as budgetary 
and macroeconomic support because it serves both the economic 
benefit and an education and health care benefit. But I think 
we all kind of decided it was better at this juncture to make 
sure it was spent directly on the people we wanted to target 
with that money.
    Senator Menendez. Let me turn to the Coalition Support 
Funds. I know you want to distance yourself from it. The 
reality is that on November 5 of this year, the State 
Department Deputy spokesperson, Tom Casey, when asked about aid 
figures for Pakistan, gave a figure of $9.6 billion since 2001. 
Now, that obviously includes Coalition Support Funds. Otherwise 
he's way off base.
    But I'm sure he's not that off base so clearly. He was 
talking about the Coalition Support Funds as aid and I look in 
your testimony of today, on page 7 and you say in your 
testimony, ``The Department of State must concur on the 
reimbursement.'' We're speaking about Coalition Support Funds 
and the Office of Management and Budget must be consulted. 
Embassy Islamabad is working with the Department of Defense and 
the Government of Pakistan to make the Coalition Support Funds 
reimbursement process more supportive of U.S. policy goals and 
to ensure that we get maximum value for the money expended and 
Embassy Islamabad has, on more than one occasion, denied or 
sent claims back to the Government of Pakistan for further 
clarification.''
    So it seems to me that the State Department has a 
significant role to play here, even though you want to distance 
yourself from it. I would be interested in what is it that the 
Embassy has done when it has denied or sent claims back that it 
thought was not appropriate. What role is the Embassy playing 
in trying to make sure, quote from your words, ``that we get 
maximum value for the money expended?''
    Mr. Boucher. Sir, I'm glad to address these funds. Just try 
to remember, they have a slightly different character than the 
assistance money. This is not in general, adding to the money 
available----
    Senator Menendez. Well, it's all our citizens' money.
    Mr. Boucher. It's all our citizens' money and we want to 
make sure it pays--it goes to the ends that the Congress 
appropriated it for, frankly and that is to support the people 
who are fighting and dying in the war on terror.
    Our Embassy has a role. First they receive the receipts 
from the Pakistani Government. They review them. They ask 
questions about them. They try to identify the exact purposes, 
make sure that the receipts are well substantiated. Then they 
pass them on to the Central Command, which validates the link 
to our military operations so that it is seen clearly as a part 
of the war on terror. Then it goes to the Department of Defense 
Comptroller that evaluates to ensure the costs are reasonable 
and credible. Then they do a determination by the Deputy 
Secretary of State, send a notification to the Congress. It 
comes up here for 15 days and then the Comptroller releases 
funds to the Defense Security Corporation.
    Senator Menendez. Well, I appreciate you reading----
    Mr. Boucher. A lot of people go through them.
    Senator Menendez [continuing]. The procedure. That's not my 
question. Maybe let me try to synthesize it better since I know 
you were the Department spokesperson for one time and can deal 
very well in foiling with words.
    The question is, Does the Department of State and your 
Embassy, other than this perfunctory role you just described, 
do anything to ``make sure that we get the maximum value for 
the money expended''? Other than saying, yeah, this is 
appropriately in accordance and pass it on.
    Mr. Boucher. Yes; and I think the----
    Senator Menendez. What exactly is that?
    Mr. Boucher. I think the most direct way that takes place 
is at the interface between the Embassy and the Pakistanis. It 
is the Office of Defense cooperation the Embassy that does it 
but the Embassy Ambassador is responsible. They look at the 
receipts. They ask questions. They ask, you know, who is this 
fuel for? What's that--where has that road been built? And they 
look at it to make sure that in their mind, before it goes up 
this long chain of people to review, it really is directed at 
the ends it has been appropriated for; that is, fighting the 
war on terror.
    We are constantly working with the Pakistanis, sometimes 
holding up receipts, asking questions; sometimes rejecting 
them. But we're constantly working with them to make sure that 
they know that we want to spend our money, we want to reimburse 
them for real costs that they incur in fighting the war on 
terror and not for more general costs they might incur.
    Senator Menendez. Not for like putting the police and the 
military on the streets arresting lawyers and doing all of 
those activities that we just saw. So I hope we're not 
reimbursing them for that.
    Mr. Boucher. That's right.
    Senator Menendez. Because when they're doing that, they're 
obviously not fighting terrorism.
    Mr. Boucher. OK, exactly.
    Senator Menendez. I have more questions but I'll turn to 
the distinguished ranking member, Senator Hagel.
    Senator Hagel. Mr. Chairman, thank you. You, in your 
testimony, Secretary Boucher, noted a couple of times the state 
of emergency conditions in Pakistan emergency rule. My question 
is, If in fact, President Musharraf lifts the emergency rule on 
December 16--by December 16--do you believe then that--and you 
touched upon this to some extent in your comments--that there 
can be free, fair elections held in January or February of 
parliamentary and local elections?
    Mr. Boucher. I do think they can have a good election. They 
can have a credible election. They can have a transparent 
election and a fair election. It's not going to be a perfect 
election. One would not want to have such disruption with the 
media and the political parties this close to any election. 
That obviously changes the atmosphere a bit but I think 
particularly if we keep working at it and they keep working at 
it and they do what they've pledged, what President Musharraf 
and the political party leaders have pledged. They can have an 
election that really does reflect the choices made by the 
people of Pakistan.
    Senator Hagel. Do you believe that he, in fact, will lift 
the emergency rule by December 16?
    Mr. Boucher. I think he has made a very, very clear public 
statement that he will do so and whenever he has done something 
like that, for example, on taking off the uniform and becoming 
a civilian, he's carried through on it, at least in recent 
months. So yes; I do believe he will lift it on December 16.
    Senator Hagel. Mr. Kunder, do you wish to respond to this 
question?
    Mr. Kunder. We've put in place, working with the electoral 
commission, widespread distribution of transparent ballot 
boxes, building up the kinds of observer systems so with regard 
to technical support, I believe that many of the tools will be 
in place to guarantee a free and fair election.
    Senator Hagel. Mr. Secretary, what would be your analysis 
of former Prime Ministers Bhutto and Sharif's political impact 
on the elections and on politics in general and the direction 
of Pakistan as they have now returned?
    Mr. Boucher. Senator, I want to make sure you ask that 
question of some of the experts on Pakistan who are coming 
after me and I'll listen very intently to their answers because 
they really--they have probably a broader and longer 
perspective than I do.
    I do think it is important for the election that the major 
political party leaders are back. Each of them has faced 
different circumstances in being out of the country. Some of 
those were resolved and they were able to come back and I do 
think that given the nature of politics in Pakistan, where 
there is a lot of personality involved, there's a lot of sort 
of loyalty to parties based on families and leaders, that their 
return helps mobilize major political forces in Pakistan and 
that will lead to a better contest. So I think, in the end, 
it's a good thing for the election to have those people back in 
the country, leading their parties.
    Senator Hagel. So it's a positive effect?
    Mr. Boucher. Yes.
    Senator Hagel. Mr. Kunder, would you wish to respond?
    Mr. Kunder. Nothing on that one, sir.
    Senator Hagel. Let me turn to the IMET assistance. Could 
you explain a little bit how those IMET funds have been used, 
are being used, what you believe has been achieved through the 
IMET program?
    Mr. Boucher. Sir, I think around the world, IMET is one of 
the most important programs that we have. It's the way of 
connecting with military leaders in other countries, many of 
whom sometimes get involved with politics; but hopefully don't. 
But we also do a lot of professional training, not just in how 
to shoot guns and command units but how to act professionally, 
how to work with civilian authority, how to engage in the 
appropriate practices for an army, human rights practices, and 
things like that and I think the kind of training they get in 
the United States is very good.
    There was a period when we didn't do any training for the 
Pakistani Army so there is a group, a cohort of officers that 
have not had a lot of training and what we're trying to do with 
our IMET money now, is to continue the long-term engagement of 
the Pakistani Army and the training that we've done but also 
play a little catchup, too, and make sure that we are training 
and working with some of those officers who missed out on an 
experience in the United States.
    You talk to individuals in Pakistan, as in other places, 
and you find that the experience of getting military training 
in the United States, along with American military, not only 
improves them as officers, as officers in terms of their 
carrying forth the battle but also in terms of the way they 
respond to civilian authority, the way they respect the rights 
of civilians that they might encounter along the way and I 
think it is a positive impact. So we've had substantial 
programs these last few years and we want to continue that.
    Senator Hagel. Mr. Kunder, do you want to say anything?
    [No response.]
    Senator Hagel. Secretary, you testified and I think this is 
in your written testimony that the Embassy and DOD are working 
to make sure that Coalition Support Funds are, in your words, 
more supportive of U.S. policy goals and you, I think, noted 
this in your response to the chairman on a review of assistance 
programs recently. My question is, What are the concerns that 
have prompted this effort, this question about or assurance 
that these funds are more supportive of U.S. policy goals, the 
previous close to $6 billion. Have they not been supportive of 
U.S. policy goals or where have they not been supportive? Can 
you clarify that?
    Mr. Boucher. You know, I think--let me say, I do think it 
definitely has been supportive of U.S. policy goals and the 
number I have, I think, is $5.3 billion. But I understand also 
the committee just got today some information, some responses 
from the Defense Comptroller and they're the ultimate authority 
on these things.
    Looking through what they've got, I'm not sure I see a 
number but anyway, I guess the way I would characterize it is 
since this is a reimbursement, we look at receipts. I'd say for 
the last year or more, we've been asking more questions about 
those receipts to make absolutely sure they are for the things 
that they are intended for.
    Second of all, I would say we've had more of a dialog 
recently with the Pakistanis, saying hey, you know, what we 
want to do is pay for this, that, and the other. I've been out 
to the border. I've seen the fishing scouts who guard the 
border down near Quetta and they've got some things provided 
through our narcotics program but they're missing night vision 
equipment. There are a lot of guys out there that need various 
kinds of support and you do more border posts, we'll do more 
support for them.
    So more of a dialog in terms of saying, here's what we 
really want to reimburse you for. These are the kinds of things 
that we'd like to see you do and we'll be glad to reimburse you 
for them.
    Senator Hagel. Mr. Kunder, would you like to respond?
    Mr. Kunder. There has been, as Richard said earlier, 
frankly sir, a raging debate about the best way to do this. I 
mean, purely from a technical point, there are a lot of my 
colleagues who would say, if you really want to build the long-
term institutions of Pakistan, probably the best thing you can 
do is work in a cash transfer mechanism with the Ministry of 
Education, with the Ministry of Health instead of bringing in 
outside experts from the American consulting community and the 
American NGO community. So we've had a serious debate about 
this.
    Just to take a second to explain how this works--we have 
sat down with the Ministry of Education, for example, and if 
we've agreed that a certain portion of the cash transfer would 
go to that Ministry, we've worked out in pretty good detail 
whether that money would then generate more resources for 
teacher training academies and then we've tracked whether, in 
fact, the budget line item for that went up. So I believe there 
has been accountability and there has been impact.
    But now what we'd like to be able to say is, maybe there's 
a particularly innovative program in Sindh province or in a 
city somewhere that we really want to focus attention on, and 
that's the added value that you get for moving to a projectized 
system where we'll be more directly involved. From a technical 
point of view, it's been a pretty solid debate about what is 
the right way to get the kind of maximum systems impact you 
want to have in Pakistan.
    Senator Hagel. Thank you.
    Mr. Chairman, thank you.
    Senator Menendez. Thank you, Senator Hagel.
    Senator Feingold.
    Senator Feingold. Thank you very much, Mr. Chairman. I 
thank the witnesses. To begin, I'm very concerned that the 
administration support for President Musharraf is shortsighted 
and misguided. Obviously, serious questions remain about 
President Musharraf's assistance in fighting al-Qaeda, which 
has strengthened and reconstituted itself on the border between 
Pakistan and Afghanistan. Meanwhile, the extraordinary and 
antidemocratic measures President Musharraf has taken are 
inconsistent with American values and likely to increase the 
appeal of extremist groups in that country. So I'd like to 
have, at this point, each of you address the impact of our 
support for President Musharraf has had on stability and 
democracy in Pakistan.
    Mr. Boucher. I guess I would say that, I mean, first you 
have to understand. The man is the leader of Pakistan, 
Pakistan's key ally. We work with him and his government as a 
key ally in the war on terror and he is someone who has set 
broad strategic goals for the country that are indeed 
compatible with ours, of moving it away from extremism, of 
opening up the economy, of emphasizing better education and 
other services for the citizens.
    We've also worked, as you've noted, in our aid programs. 
We've spent a lot of money on education, a lot of money on 
health, a lot of money on economic growth, where they've 
achieved remarkable successes, which have benefited people 
throughout the country. We're now spending more money on 
developing the tribal areas, giving these people there an 
opportunity to find jobs, to get education, to get health care. 
And that goes along with the Pakistani program. We're putting 
in $750 million over 5 years. They're putting in $1 billion in 
the same timeframe. So their money is going in there, too. So 
we cooperate on these things.
    I think our assistance, frankly, in some of these areas 
that directly benefit the Pakistani people, is probably 
underappreciated for a variety of reasons. But we do work with 
the government and we look forward now to a democratic 
transition. We've seen bumps in the road, mistakes, setbacks, 
an emergency rule, which we thoroughly disagreed with, a 
crackdown on the media, we thoroughly disagreed with and then 
we've seen some of those things pulled off and for better or 
for worse, through all these problems, we're going to have a 
different situation in a couple months. We will have a civilian 
President. We will have a civilian elected Prime Minister. 
We'll have a different Chief of the Army and a different sort 
of political configuration in Pakistan between the different 
parties and the different people and the different centers of 
power. Power will be more dispersed and we'll work with that 
situation, too.
    Senator Feingold. I want a chance to follow up here. I 
listened to your answer. Bumps in the road? This is a lot more, 
Mr. Boucher, than bumps in the road. This is a frightful 
situation of an attack on a democracy and my question to you 
was regarding the impact our support for President Musharraf 
has had on stability and democracy in Pakistan, not how you can 
justify what he has done. What impact has our support had on 
stability and democracy in Pakistan? Are you saying it hasn't 
had any negative impact?
    Mr. Boucher. I think that our emphasis, our pressure on 
moving to a democratic transition has had an impact on 
President Musharraf. Part of the reason why we are in a period 
of transition to democracy right now, part of the reason why 
there are political leaders in Pakistan contesting elections 
that will be held in a month, part of the reason why the state 
of emergency, once imposed, is going to be lifted soon, is 
because of the role of the United States because we do--it 
works both ways. Yes; we support what the Pakistani Government 
is doing against terror but we also push very hard for the 
transition to democracy.
    Senator Feingold. Mr. Kunder, do you want to respond?
    Mr. Kunder. Just to supplement, sir, what I mentioned in my 
opening statement, is that the aid that has gone in has, in 
large part, gone to institutions of the Pakistani Government, 
like the Independent Electoral Commission or to strengthening 
the Parliament and, we believe, have continued to support the 
long-term growth of democracy or have gone directly to benefit 
the Pakistani people.
    Senator Feingold. Let me go to human rights. The State 
Department's 2007 Report on Human Rights gives Pakistan poor 
marks on human rights, citing police corruption, lack of 
judicial independence and serious gender discrimination. Can I 
ask you gentlemen how we're addressing these concerns in our 
aid programs?
    Mr. Boucher. Do you want to take that one?
    Mr. Kunder. Well, specifically sir, you mentioned the 
judicial sector. This is an area where we are, in fact, 
spending a large number of our democracy and governance funds 
to strengthen the independent judiciary, to strengthen the 
legislative functions of the government and so while I take 
your point, sir, my point is that we are, in fact, addressing 
those issues head on with our aid program.
    Senator Feingold. Well, give me more specifically, update 
me on how State and USAID development and application of 
conditions, benchmarks or goals is being done. What--give me a 
little more detail on what you're doing.
    Mr. Kunder. I have to say, I'd have to read it. I don't 
read the Human Rights Report every week, sir. But the judicial 
system is an area where, for example, what we've done is offer 
technical assistance to build up the judicial research 
capacity, to build up the institutions in the Parliament. I can 
tell you, specifically, there was not the kind of legislative 
recordkeeping, there was not the kind of staff support for the 
individual parliamentarians and what we looked at was a long-
term, institution-building perspective. We did not put 
conditions on the Parliament as part of receiving that aid but 
rather, we looked at what we thought were the underlying 
elements of fragility in the democracy and tried to design the 
programs around strengthening democracy in the long run.
    On the electoral commission side, we've tried to strengthen 
the Independent Electoral Commission as an institution and then 
put in place the--as I mentioned earlier, literally the 
transparent ballot boxes, the corps of election observers and 
then strengthening the political parties to become more issue 
oriented in their discussions. So what we tried to do is assess 
the underlying weaknesses in the system and then put some of 
the resources into those areas.
    Mr. Boucher. Well, if I could add something, sir?
    Senator Feingold. Yes, please.
    Mr. Boucher. A couple examples--$13 million of our money 
this year is for local government and decentralization. These 
are programs that work on a local level to develop 
representatives for the people, better local government systems 
and gender issues are always a part of those projects, as they 
are throughout our aid programs.
    In our education programs, one of the emphases is keeping 
girls in school and there are a variety of very innovative 
programs, reading programs and things, just building dorms near 
the schools. We're doing this up in the tribal areas so that 
the girls can be safe when they go to school and that's trying 
to redress gender issues, gender problems that have been 
throughout Pakistan.
    So better local governance in particular, is an area of 
emphasis as well as, as I say, gender issues permeate our aid 
programs throughout.
    Senator Feingold. I thank the witnesses. Thank you, Mr. 
Chairman.
    Senator Menendez. Senator Lugar.
    Senator Lugar. I'd like to inquire more about the election 
preparation. As your testimony points out, the state of 
emergency is to be lifted on December 16 and the election is 
scheduled for January 8. That is just 23 days after the 
emergency is lifted and although the Republican and Democratic 
institutes, the Embassy, others have been setting up the 
transparent election system and various other aspects, which 
you have experienced, a question arises. As you say, in a 
country of 160-some million people, a good many of them lacking 
literacy, the school children you pointed out and adults, 
certainly at this point, confusion as to who the competitors 
are, who in fact, will be running in this election? The 
communication to a country this large and this diverse or the 
alternatives, is to say the least, daunting.
    Now, it's a Pakistani decision. I'd assume we'd take that 
for granted and try to do the best that we can to be helpful. 
But at the same time the undercurrents, at least of accusations 
in Pakistan, are that President Musharraf, fearing that the 
supreme court was going to rule adversely on his election, 
displaced the supreme court and declared a state of emergency, 
claiming that he was fighting terrorism, while many in Pakistan 
would claim he was attempting to preserve his Presidency. Now 
he has appointed new judges who have ruled in his favor 
partially and he is President again while others remain 
displaced from the judiciary.
    Having been an observer of many elections in Latin America 
during a period, and all around the world, there was a fairly 
well developed system of electoral competition. There were 
parties. There were persons who could be identified as 
candidates, whether the people voting were literate or not, 
with symbols in nature utilized so that people could make 
choices, even if they could not identify names or words; and at 
this particular point, it's not clear any of the above is a 
part of this procedure in Pakistan. So I just inquire the two 
of you as experts on the ground, is it our hope that the two 
leaders that have returned, Mr. Sharif and Ms. Bhutto, will in 
fact be identified as two competitors? Will Pakistanis see that 
they have a choice between the two and that somehow a majority 
may form behind one or the other party and on the basis of 
this, some type of parliamentary majority might be formed that 
would be a check and balance with President Musharraf and/or 
the commander in chief of the armed forces or the courts; what 
is the most optimistic outcome of this scenario with the 
election on January 8?
    Mr. Boucher. Senator, you know from your experience 
observing elections that an election, a good election is not 
made on election day. It's made in the months that preceded it; 
in fact, in the years that preceded it and we've had a large 
number of political programs, election programs going since 
about 2004, most of them--big funding was in 2006-07. We've 
been working with the parties, with the election commission. 
We've worked on voter lists, ballot boxes, counting procedures, 
voter education--just a whole slew of things to try to prepare 
the field. Journalists--teaching journalists, getting American 
journalists to go over and talk to Pakistani journalists about 
how to report and cover an election and how to do--we're 
financing parallel counts.
    Senator Daschle has led two or three, several delegations 
going back months ago, way before the emergency, to go out and 
look at the election systems and look at what needed to be done 
to improve them. We've taken his recommendations. We've taken 
recommendations of political parties. We've taken 
recommendations of voting experts who have been out there 
working and tried to push on the things that we thought were 
most crucial, like having a good voter list, which there is a 
good voter list but probably--it was missing a lot of people 
and the court intervened and fixed it, perhaps in a way that 
may not have fixed it properly but we've pushed a lot on 
transparent counting so that every stage of the way, there is 
good count and numbers can't be inserted throughout there and 
indeed, President Musharraf and the election commission have 
promised a transparent vote count.
    Senator Lugar. Mr. Boucher, let me just say, I accept now 
the fact that you've done this technical work. Are we even 
assured the two leaders are going to run at all?
    Mr. Boucher. We--no, we don't know for sure. They have not 
declared for sure but the last part of the question I should 
answer is that there has been a lot of politicking in Pakistan 
throughout. These leaders have been exiled but their parties 
have remained strong and active within Pakistan. Their return, 
I think, gives them leadership in the election. They have a lot 
of automatic support from the faithful and they have the 
opportunity now to sort of go out and try to build that to a 
broader base. It makes it a better election. It's not 
necessarily going to make it as good as it should be.
    Senator Lugar. Well, who will people vote for if the two 
leaders do not run?
    Mr. Boucher. Who will they vote for?
    Senator Lugar. Yes. Who----
    Mr. Boucher. Well, because it's parliamentary, you have 
party candidates with symbols at each district level throughout 
the country. If the parties decide to boycott, I presume their 
people would not be on the ballot but I think, at least they're 
talking about the conditions under which they would 
participate. So we'll have to see. Certainly, we think that 
everybody--having everybody participate, having the leaders 
take an active role, would improve the quality of the election 
and improve the ability of the Pakistani people to see their 
choices reflected in the outcome.
    Senator Lugar. Let me just ask this. Regardless of who is 
elected, does the potential President or Prime Minister, 
Parliament or anyone else, share our fight against the Taliban 
and against 
al-Qaeda? Even after we see the parliamentary situation resolve 
itself, arise and come about, is there actually a sharing of 
our concerns? Is it not a fact that Pakistan has supported the 
Taliban historically?
    Mr. Boucher. They have and they changed that. I mean, that 
was a decision they made very shortly after 9/11. It was a big 
decision for them and what we've done since then is try to work 
with them to get them to carry that out. I would say--my basic 
answer would be yes. All the major political party leaders do 
share our goals and share the goal of ridding Pakistan of 
extremism and not having it be a haven for al-Qaeda and other 
extremists. Some would go about it perhaps in different ways. 
Some may share those goals more than others but I think our 
intention is to work with whoever is elected and work with all 
the institutions of society, from the army and the Presidency 
to the civil society and the business community, to try to help 
Pakistan with what we think the vast majority of the Pakistani 
people want and that's a stable, democratic, and prosperous 
society.
    Senator Lugar. Thank you.
    Thank you, Mr. Chairman.
    Senator Menendez. Thank you, Senator Lugar.
    Senator Casey.
    Senator Casey. Thank you, Mr. Chairman. I want to thank you 
both for your testimony today and your service to our 
government. Mr. Secretary, Secretary Boucher, I was struck by 
one of the first sentences in your testimony, your written 
testimony. At the beginning of the second paragraph, you state 
and I quote, ``President Musharraf's November 3rd imposition of 
a state of emergency, including reshuffling the supreme court, 
curtailment of press freedom and arrest and detention of 
journalists, lawyers, human rights advocates, political 
activists and party leaders, was a setback.''
    I have to tell you, I mean, part of what's in the room 
today is a real concern about credibility and a concern about 
how we present information. Now, there are a lot of ways to 
describe that list and I had an exhaustive list of problems and 
we could add to them. But I think to describe it as a 
``setback'' is really downplaying the grave concerns that we 
have and I think that people in Pakistan and human rights and 
legal experts the world over have concerns about. So you can 
address it or not but I think there are better ways to 
describe--that list of problems doesn't even begin to describe 
what's been happening there.
    Mr. Boucher. I take the point, sir. I don't think--I've 
never been given to dramatic terms of phrase. I do think, you 
know, we made very clear in public and in private, this was a 
very serious problem. It was a serious mistake and it created 
serious trouble for the elections. Thankfully, much of this has 
been reversed to some extent. Political party leaders and 
activists are back out of jail. Most--almost all, I think, all 
but GEOTV, the TV stations are back on the air. The radio 
stations are pretty much back. I heard today about one more 
that was back on the air. The lawyers are out there 
demonstrating. Human rights and civil society people have been 
released. We still do have a state of emergency, which is a 
serious--you know, it's a real distortion of the election 
process but despite all that, we seem to be heading back in the 
right direction and some of these serious mistakes are being 
reversed.
    Senator Casey. I take you at your word. I hope that your 
description reflects the reality on the ground. But let me move 
on to a related point. It's within that context of how we talk 
about this country but in particular, how we discuss the 
forthcoming election and I think there's a crisis of confidence 
there, too, that this election, no matter what you can put on a 
piece of paper as it pertains to changes that have been made or 
safeguards in place for the election, there is a real concern, 
I think, that even if you have--and I know that your colleague 
talks about USAID on page 8 of your testimony, sir, about the 
USAID help for the electoral commission and what's been 
happening there. But some have a real concern about the 
electoral commission, how it's put together and whether or not 
that commission can not only be independent but it can execute 
the way it has to execute to have a free and fair election. I'd 
ask each of you to comment, if you can, on how that commission 
was put together and whether or not you have concerns about the 
membership of it or the constitution of it or the methods or 
the methodology that was used to put it together. What can you 
tell us about that commission?
    Mr. Boucher. I guess what I'd start by saying is, I can 
come up with a long list of problems in this election. The 
voter lists still aren't completely straight. The counting 
process, we think has improved. We think there are plenty of 
safeguards. We're not clear it's going to be fully transparent. 
We certainly pressed and hoped for that and worked to that.
    The election commission has been, I would say, somewhat 
neutral but often ineffective. We've tried to get them to work 
with all the political parties and indeed; they've done that a 
little bit but not half as much as we think they should have. 
We think, throughout this process, they should have spent more 
time listening to the political parties and taking onboard 
their concerns and criticism and trying to fix those things. 
They've done a little bit of that but not enough.
    There are dozens more. We have experts in the election 
commission pushing on these things every day. The Embassy 
pushes on them. We're still pushing on them. The big think 
coming up is the election. We have to make it as good and as 
credible as possible.
    Senator Casey. Sir.
    Mr. Kunder. I take your point, sir. I would not say that I 
depend solely on the electoral commission to drive all these 
processes. That's why we're trying, and in response to your 
question and Senator Lugar's question, we've got some pretty 
smart, tough-minded people at State and USAID and the party 
institutes out there, thinking this through. We've been on the 
phone to them. We're trying to distill our lessons from what 
just happened in Venezuela with the referendum there. We 
learned some additional things, some lessons we're trying to 
apply, especially on, for example, critical linkages between 
observers and the media because if observers are getting 
certain election results at 11 p.m. and they can get that to 
the media and then you're announcing the results at 11 and 
midnight and 1 a.m., it's a little bit hard to change the 
election results at 8 o'clock in the morning. So we're trying 
to take our best lessons learned and try to build both on the 
civil society side and on the electoral commission side, the 
best tools we can to guarantee as free and fair an election as 
possible.
    Senator Casey. I've only got about a minute left. I want to 
get in one other major question. It pertains to their nuclear 
program and also the impact of potential terrorist activity as 
it pertains to their nuclear program. What can you tell us and 
I guess this is more directed to Mr. Boucher, what can you tell 
us, if anything, about whether or not--and I hope the answer to 
this is no--whether or not there has been any deterioration or 
weakening of their command and control infrastructure within 
their military or otherwise, as it pertains to their nuclear 
capability in the context of all this unrest?
    Mr. Boucher. We would answer no to that. We don't think 
there has been a weakening. They--we're, I think, fairly 
confident that they have the proper structures and safeguards 
in place to maintain the integrity of their nuclear forces and 
not to allow any compromise.
    Senator Casey. Thank you very much.
    Senator Menendez. Thank you.
    Senator Corker.
    Senator Corker. Mr. Chairman, thank you. I appreciate it 
and I appreciate both of you coming to testify today. I want to 
say to the Secretary that we had an excellent visit last 
Thursday with Ambassador Peterson and with former Prime 
Minister Bhutto and President Musharraf and I know that you 
used the word, a bump in the road and Senator Feingold took 
issue with that and I know that I would just say that none of 
us really look at it as just a bump in the road and I know you 
didn't mean that. It was obvious that your Ambassador there is 
taking very seriously some of the miscues that occurred before 
and is stressing heavily with all of us and certainly with 
them, as we did with them, the need for fair and free 
elections, transparent elections.
    I would say to Senator Lugar that I was struck in meeting 
with Ms. Bhutto at her home in the dining room, with her strong 
desire to counter terrorism and I think that sometimes we 
forget the fact that terrorism is a far greater threat to 
Pakistan itself internally than it is even to us today, here. 
So I think they do, in fact, take it very seriously.
    I was also struck by the--sort of the emotional impact, if 
you will, to President Musharraf in taking off his uniform. 
Somebody who had been in the military for 40 years and the 
impact on him and we remarked jokingly how good his suit looked 
on him instead of having the uniform and it actually did look 
sharp. But you know, I think he is very committed to being 
legitimate and trying to do those things to make him 
legitimate.
    I do have concerns, like everyone here, that the 
infrastructure is not in place for that to occur; that those 
underneath him, mayors at the local level, the transporting of 
ballets, all those things, can, in fact, cause the election 
certainly to not be viewed as legitimate and not happen as 
legitimate and we have stressed heavily with him the fact that 
international observers need to be allowed in the country; that 
no visas should be denied and I think that's one area that can 
greatly taint this process.
    I'd love for you to remark, if you might, about anything 
you're doing to ensure that international observers are allowed 
in the country and that no one in that regard is barred.
    Mr. Boucher. Sir, let me, Senator, if I can, just start by 
thanking you for going to Pakistan and for what you did there. 
It's very, very strong supporters of congressional travel and I 
read the cables on your meetings and I think you really helped 
us advance the agenda and show that all Americans, from all 
parts of the government and throughout the body of politics in 
the United States want to push, want to see this to be a stable 
and safe transition and we want to see a result and a good 
election and an election that is free and fair and that they 
fix a lot of these real problems that they have created or 
allowed to persist, even at this late stage. There are many 
things they can do to help make the elections more free and 
more credible and that's what we are continuing to push for and 
you are.
    The terrorism directed against Mrs. Bhutto on her return; 
that the rallies that were held on her return is one of the 
most horrible acts of terrorism that has occurred in Pakistan 
in a long time and I think it just shows that the terrorists 
are as much against this election as anybody is. They want to 
stop political forces from coming in. They want to stop 
moderate political forces from coming in and they want to stop 
the Pakistani people from being able to choose their government 
because they certainly would not be chosen.
    On the observer question, we do think that having observers 
there, along with things like the parallel vote count and the 
transparent ballot boxes; all these things we've talked about 
but having observers is one of the most important, one of the 
best things we can do to help ensure a fair and free election. 
There are 20,000 domestic observers that we've helped train 
through a project with the--one of our cooperating partners--I 
can look it up but 20,000 domestic observers. They are the bulk 
in the eyes and ears at the polling places. In addition, there 
will be observers from the United States, Britain, other 
countries and as I said, we're encouraging Europeans and others 
to go as well. We've talked to the government. The government 
has said they welcome observers, that they will issue the 
visas, that they will facilitate the work of the observers as 
they go in and we'll hold them to that standard.
    Senator Corker. I think anything we might do to even help 
facilitate it and I think even in our government, which is 
very, very different, we have sometimes difficulty in calls and 
things to be carried out beneath, if you will, to the 
satisfaction that we'd like and I think that anything you might 
do through our offices there, really, to put the word out to 
international observers to facilitate even that visa process. I 
think that he was visibly stunned at some of those--you know, I 
hope this was the case. It appeared that it was sincere--
stunned that some of those visas had been denied and I think, 
wants to do what is necessary but I think we may need to help 
in that regard and I think a big outreach on our part would be 
very useful in this regard.
    Mr. Boucher. Absolutely, sir.
    Senator Corker. Let me just ask a couple questions. How 
long has it been since there has been a peaceful transition of 
power in Pakistan.
    Mr. Boucher. Let me commend the experts to you one more 
time. I don't think any of these previous transitions can be 
described as very smooth or peaceful. They were all the result 
of----
    Senator Corker. I think it's been about 60 years----
    Mr. Boucher. Since the beginning.
    Senator Corker. I think that--while certainly I think a 
hearing to justify the aid that we're spending and I think for 
us to constantly analyze, I think for us to actually see what 
occurs over the next couple months is maybe most appropriate 
for us and to actually do everything we can to ensure these 
elections are free and fair and transparent and to hold him at 
his word. I think we'll know very soon whether this is actually 
occurred or not and I do wonder whether that's not a better 
time to even look at where our aid is going and how it is being 
measured. I'd love to have any response you might give in that 
regard.
    Mr. Boucher. I think that's true. We will be working with a 
new situation in Pakistan, a new Government, a new Prime 
Minister as well as a civilian President Musharraf, a new head 
of the army and we'll, I think, continue to work with people 
and talk to them about their priorities and how we can help but 
also look at the situation and decide how to spend our money.
    Senator Corker. We've had a situation where we've had a 
leader who has acted as the political leader but also the 
military leader. I know that most people believe General Kiyani 
will be the new military leader there. My sense is that is 
something that could be very good for us; that we'd have one 
person totally focused on political issues. We then would have 
a military leader that is solely focused on terrorism and 
solely focused on military activities. I'd love for you to 
respond to that.
    Mr. Boucher. I think that's true. I think part of this 
transition is because of the strength, the growth of civil 
society, the strength of the democratic forums, the pressure 
from people like us from outside but part of it is also because 
the army was tired of being blamed for everything; tired of 
being blamed for university admissions and the price of sugar 
and everything else and wants to get back to their real job, 
their real work and so I think everybody felt it was time to 
make this transition in Pakistan.
    Senator Corker. So just to summarize this segment, I know 
my time is up. It seems that we actually have an opportunity 
over the next couple months, if we keep the pressure on and the 
partnership going, to actually have a peaceful transfer. We 
actually have an opportunity to potentially have a military 
leader that may even be stronger as a partner because of more 
full focus and I think that maybe it's good for our country to 
focus on trying to make sure this all occurs in an appropriate 
way over the next 60 days and then reassess how our aid levels 
ought to be, based on the situation at hand. Is that correct?
    Mr. Boucher. I do think that's true. I think however it 
turns out, it's very important for us to maintain a substantial 
level of assistance for Pakistan because we want them to be 
able to fight the war on terror. We want them to be able to 
develop their democracy. We want them to be able to educate 
their children, take care of the babies and the health care 
needs of the population and recover from the earthquake. Those 
fundamental interests of the United States in seeing success in 
Pakistan in developing as a nation and fighting the war on 
terror are not going to change too much but how we go about it, 
how we work with a new situation is going to change and we'll 
have to be open to making any adjustments that are appropriate 
in the way we spend our money.
    Senator Corker. Thank you and thank you, Mr. Chairman.
    Senator Menendez. Thank you. I do have one other set of 
questions, some of it is derived from what I've heard here, and 
I just have got to make sure I hear you right, Mr. Secretary.
    You know, in America, we have an election process that 
takes a year and a half to try to get to its ultimate 
conclusion. What you described as a bump in the road when 
people like Chavez do what they do in their country, we have 
much more specific language about that. So do you want to 
reiterate for me again that in response to Senator Lugar that 
when you take to these facts, you have the leaders of the 
opposition parties exiled from their country until recently? 
You have an emergency proclamation that is lifted 23 days 
before the election and you have the rest of the people who 
only just recently were released and all of those facts leads 
us to believe that the election is going to be, as you said, an 
election that is good, transparent, and fair. That's what 
you're telling the committee?
    Mr. Boucher. I think those were all very bad things. Those 
were all very negative for the process but they are reversible. 
The fact that there are the leaders back, that there is 
politicking going on means there is a chance and we all ought 
to work for it.
    Senator Menendez. And it will be good, transparent, and 
fair? Your words, not mine.
    Mr. Boucher. It can be good, transparent, and fair.
    Senator Menendez. Even with all of that as a background?
    Mr. Boucher. Even with all that----
    Senator Menendez. Even with 28 days to the election?
    Mr. Boucher. Even--because it wasn't just those 28 days.
    Senator Menendez. It's not just a question of 28 days. I 
can set a series of efforts to try to professionalize an 
election but if then I take the candidates and have them out of 
the country, if I then take my opponents and arrest them, if I 
shut down the press, if I ultimately don't lift the 
proclamation until less than a month before the election, I 
think that in other parts of the world, we'd have a much 
different view.
    Mr. Boucher. I think we were very clear, sir, on the 
emergency. We were very clear on the media. We've been very 
clear on the need for the political transition of the 
President. I don't--you know, I don't know what the proper 
metaphor is. We were heading toward a transition. We were 
working on all these issues to make the election free and fair. 
We got hit by a car along the way. It was a serious problem, 
made it much more difficult. We managed to reverse some of the 
effects of the declaration of emergency and we have a shot at 
doing a good election. I think you and others ought to try to 
make it that way.
    Senator Menendez. I want to look at the other comment you 
made that however it turns out, substantial funds have to 
continue to flow. That's the reality of what we're dealing with 
here in terms of the security equation to this and it's not an 
insignificant equation. But I think you pretty much said it. 
However it turns out, significant funds have to continue to 
flow so I think maybe we should be a little intellectually 
honest about this and say that that's really where our interest 
is but trying to move democracy down the road suggests that the 
framework that you describe can possibly be good, fair, and 
transparent is mind-boggling for me.
    But let me ask one other set of questions here. No. 1, yes 
or no, Did the strategic review that the Secretary of State 
announced as it relates to Pakistan funding, produce any change 
outside of the $200 million going to programmatic versus 
general support for ESF?
    Mr. Boucher. At this point, we haven't decided on any other 
changes.
    Senator Menendez. Is this review continuing?
    Mr. Boucher. We'll keep the situation under review because 
as we said, we're coming up on some big events.
    Senator Menendez. But does it----
    Mr. Boucher. And those will determine how we spend our 
money.
    Senator Menendez. Does it have an end to it? Is there going 
to be a report about what the strategic review provided?
    Mr. Boucher. I don't think there will be a formal report. 
We're glad if, you know, some time after the election, after we 
see how that turns out, we're glad to come back before the 
Congress and the committee and try to explain, if we have any 
further conclusions.
    Senator Menendez. It sounds to some of us that the 
strategic review was just to swage the bump in the road along 
the way.
    Mr. Boucher. Sir, I know I said bump in the road but I said 
a lot of other things, too, and I do agree with you, these were 
terrible events that shouldn't have happened.
    Senator Menendez. Let me ask one last set of questions. A 
witness on the next panel, who we'll hopefully have up shortly, 
paraphrased to some of the opinions that several of them have, 
says the following: ``The United States has made no effort to 
distinguish between military assistance, which is useful for 
our common counterterrorism efforts and aid with little or no 
connection to the war against al-Qaeda nor made provisions of 
the latter contingent upon cooperation with combating the 
extremists hiding in the FATA region and elsewhere in 
Pakistan.'' They also go on to say that the United States has 
``established economic and development programs that have 
frequently been unfocused, poorly conceived, or lacking in 
responsible oversight.'' How would you respond to that, Mr. 
Kunder?
    Mr. Kunder. I would respectfully disagree. I read the 
statement. I just saw that it was a stand-alone statement so 
I'd like to see what analysis--if I have time, I'll sit and 
listen to the next panel but I simply disagree with that. As I 
tried to lay out in my testimony, we think our development 
program has been very carefully focused on what we think are 
the long-term problems facing the Pakistani people.
    If I could just make one more comment, sir, I think this 
whole question about whether we review a program after an 
election and so forth is important. The Foreign Assistance Act, 
as you know, has not been rewritten in more than four decades 
now and buried in there is language that talks about how we're 
using foreign assistance to support our national security 
objectives and there's a lot of language in there that talks 
about how we're trying to advance human progress. I think the 
kinds of issues that Senator Corker raised are very profound 
issues because to some extent, numbers should vary as 
democratic performance varies but, it's a long-term process, 
and we should continue investing in the institutions in a big, 
poor country like Pakistan, to some extent, regardless of who 
the President or Prime Minister is, and I think it's on that 
issue that this debate turns because some of us think that 
regardless of who wins this election, the literacy of Pakistani 
citizens is critically important to our country in the long 
term.
    So, to some extent, yes, we need to be doing reviews and we 
need to be examining who wins or loses elections but I think 
also buried in the Foreign Assistance Act, for those of us who 
are trying to be guided by law, is a lot of language that tells 
us to stick with it and turn the country around. These are 
profound issues, which I suspect I will not resolve with this 
statement.
    Senator Menendez. I think that's why probably everybody 
universally wants to work to turn the country around. They want 
literacy for the Pakistani people. They want those things that 
would help strengthen civil society. I just question about the 
way we're going about it.
    Mr. Kunder. Yes, sir.
    Senator Menendez. Last, $10 billion later, Mr. Secretary, 
has the United States had access to A.Q. Khan, the Pakistani 
scientist who gave nuclear weapon----
    Mr. Boucher. We have not had direct access.
    Senator Menendez. $10 billion later? Do we not believe we 
should have access?
    Mr. Boucher. We've had good cooperation. We've had 
information. We've seen them provide information to the 
international community so they can follow up and destroy the 
network.
    Senator Menendez. $10 billion later, we have not had 
access.
    Mr. Boucher. We've had good cooperation in getting infor-
mation----
    Senator Menendez. But not direct access?
    Mr. Boucher. But not direct access, yes sir.
    Senator Menendez. Thank you.
    Mr. Boucher. Can I address the military side of your 
question? Because the FMF funds and you sort of made reference 
to them, they're very much focused on things that help in the 
war on terror--tow missiles, helicopters, P3s that help them do 
the maritime patrols that will help them support the maritime 
patrols that they're already doing. So very much a lot of 
those--that $300 million that goes to FMF annually is support 
for equipment and needs, training that will help them in the 
war on terror.
    Senator Menendez. It also gives them the ability to 
strengthen their military beyond on the war on terrorism, does 
it not?
    Mr. Boucher. I would say that it's not--if you think of it 
sort of as the old NATO and the Warsaw Pact, they've had an 
army that was designed to defend the Plains of Punjab. This is 
money that's more attuned to the kind of things you have to do 
against extremism and terrorism.
    Senator Menendez. Any other Senator? If not, thank you both 
for your testimony. We'll keep the record open for a few days 
and any questions that may be submitted to you, we'll ask for 
your expeditious response. Thank you for your testimony.
    Mr. Kunder. Thank you very much.
    Mr. Boucher. Thank you, sir.
    Senator Menendez. Let me welcome the second panel to our 
hearing today. We want to thank all of our witnesses for 
joining us: Ambassador Teresita Schaffer; the director of the 
South Asia Program at the Center for Strategic and 
International Studies; Dr. Lawrence Korb, the senior fellow at 
the Center for American Progress, and Dr. Robert Hathaway, the 
director of the Asia Program at the Woodrow Wilson 
International Center for Scholars. We're going to proceed to 
opening statements of all of our witnesses. Just as we had for 
our first panel, we ask you to synthesize it in approximately 7 
minutes and we will, of course, include your full statement for 
the record.
    With that, Ambassador Schaffer, it's good to hear from you.

 STATEMENT OF HON. TERESITA C. SCHAFFER, DIRECTOR, SOUTH ASIA 
   PROGRAM, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES, 
                         WASHINGTON, DC

    Ms. Schaffer. Thank you, Mr. Chairman, and thank you, 
Senator Hagel, for inviting me to share my thoughts this 
afternoon at a critical time in Pakistan's history and in the 
long and turbulent history of United States/Pakistan relations.
    Pakistan's location alone will guarantee that the United 
States needs to remain engaged with Pakistan over the long 
term. This is a hearing that I was told was about foreign 
assistance, which is not the only tool the United States brings 
to bear on this situation but it is a very important and highly 
visible one.
    I believe that the United States needs to use its aid to 
invest in Pakistan's future and in the long-term viability of a 
decently governed state. At the same time, we don't want to 
encourage policies we find perverse or at variance with U.S. 
interests. These principles are not as contradictory as they 
may sound and I think they give us a pretty good guide to 
structuring our assistance in the future.
    Let me start with U.S. economic assistance, which is our 
best instrument for investing in Pakistan's future. I believe 
we should shift the balance of our assistance toward economic 
aid and reduce the percentage of military assistance. I would 
suggest a ratio of about 2 to 1, between economic aid and 
security-related aid and I'm not including Coalition Support 
Funds in that calculus.
    Within the economic assistance portfolio, our assistance 
should all be given in the form of projects rather than cash or 
budget support and I was delighted to hear that the 
administration wants to move in this direction. I am much less 
sanguine that Mr. Kunder about how meaningful it is to do the 
accounting exercise involved in having the receiving government 
prove how they have spent our cash money. All too often, the 
needle doesn't move in terms of the percentage of GDP that's 
being devoted to these efforts, which is what ought to mean 
something to us.
    We need to invest in Pakistan's people, particularly 
education and health and I know those are important on AID's 
list. These sectors have been disastrously underfunded for over 
three decades and our aid should help redress that balance. But 
our investments also need to be visible to the people they are 
supposed to help. I actually agree with what Mr. Kunder said 
about institution-building but I think at a time when anti-
Americanism is at such a high point, that it's important to 
capture people's imagination. For example, we might want to 
encourage visits by Project HOPE and similar special teams and 
then try to use them to drain people who will continue to staff 
rural clinics after the big white bird has left.
    I'm not going to address Coalition Support Funds other than 
to say that I strongly support efforts to increase the 
accountability of how the money is spent.
    On military assistance, I think my colleagues may have more 
to say. My only point is that we need to give priority to those 
things that directly support counterterrorism and 
counterinsurgency and things like F-16s are hard to justify on 
that basis. I know that the F-16 transaction has a lot of 
emotional baggage in Pakistan so I'm not here recommending that 
we pull the plug on that. I'm only suggesting that it is 
possible within the category of military assistance, to be 
selective and to calibrate that to our larger foreign policy 
goals.
    You asked what impact U.S. assistance has on Pakistan's 
internal security and on its path toward democracy. The honest 
answer is, not very much. The United States, as you have just 
heard, has funded some valuable programs designed to improve 
election transparency and I certainly support those. I should 
say that I was a member of an NDI delegation that visited 
Pakistan in May and we spent a lot of time looking at the 
election procedures. We put out a very specific list of things 
that needed to change. I'm glad that the U.S. Government is now 
focusing on things like precinct by precinct announcements of 
election results. This was one of the things we picked up. 
There are lots of problems and they need to be dealt with.
    But overall, U.S. policy toward Pakistan, until very 
recently, gave no serious attention to encouraging democracy. 
In the past 6 months that has begun to change and Ambassador 
Patterson has undertaken a remarkable outreach campaign to show 
United States support for a free press and free and fair 
elections. Unfortunately, I think her efforts are undercut by 
broad statements from the White House and elsewhere, suggesting 
that Musharraf is indispensable.
    Mr. Chairman, I would suggest to you that working with 
Pakistan is indispensable but that no one leader merits that 
designation. What Pakistan needs to be able to work with us 
over the long term is a government that enjoys widely accepted 
legitimacy and is capable of pushing back against violent 
extremists that are challenging the writ of the state. I'm 
actually more concerned about the extremists' challenge in 
places that are within the settled areas of Pakistan, like the 
Swat Valley.
    Legitimacy was never President Musharraf's strong point and 
he has lost popularity, legitimacy and ultimately, much of his 
political strength during the 9 months since he first tried to 
fire the Chief Justice. To me, this means that the United 
States should now focus on the process of elections rather than 
picking a candidate. An ugly election, which is likely unless 
things get turned around very quickly, will not settle the 
issue of Pakistan's governance or of its ability to defend the 
legitimate authority of the state.
    Institution-building is absolutely vital, but I was 
distressed that the judiciary figured only very belatedly in 
the two previous witnesses' account of what institutions we 
need to support and when Mr. Kunder said we were supporting the 
judiciary, he was referring entirely to technical assistance at 
the lower levels. This is needed but there also needs to be an 
independent higher judiciary.
    Your final question deals with the proposed assistance 
package for the Federally Administered Tribal Areas known as 
FATA. I support a major U.S. assistance package. The stakes 
could not be higher, both for our efforts in Afghanistan and 
for Pakistan's future as a decently governed modernizing 
moderate state.
    Once the Pakistan Army went into FATA under heavy U.S. 
pressure, they started a process that they now have to finish, 
integrating this largely ungoverned region into the Pakistani 
state and society. This has involved, and will involve, heavy 
sacrifices for them. It requires a three-pronged strategy: 
Military, political, and economic. The part that we can help 
with is the third prong or the economic one.
    Let's be clear. There is no school solution to the economic 
problems of the region. The social structures that once ran it 
are problematic and now largely destroyed without a good 
substitute in place. Whatever we do will involve risks, risks 
that it won't work and high risks that some of the money will 
go astray.
    I think we need to try anyway, in spite of these risks, but 
we need to be both strategic and flexible in our funding. The 
two key objectives are job creation and popular impact, and the 
popular impact needs to be structured so that both Pakistan and 
the United States are seen in a favorable light. We need to 
gain the support of tribal leaders to the extent that they are 
still in place. In the short term, this probably means an 
emphasis on public works, especially for roads and 
infrastructure and on health.
    I wouldn't start with education, though. That's a cause 
I've been pushing passionately for decades. However, it is not 
welcomed by tribal leaders and an effective program desperately 
needs their buy-in. I think that will work better on the second 
wave rather than the first.
    But we also ought to experiment and encourage the Pakistan 
Government to experiment with ways of encouraging job creation 
through business development. Reconstruction opportunity zones 
are a great idea but right now, this region doesn't produce 
anything exportable.
    Why? The entrepreneurial talent is there. Part of what's 
missing is capital, not just microcredit but financing for 
small- and medium-sized businesses that can employ people. Part 
of what's missing is equipment, not necessarily complex and 
fragile equipment but tools that will permit those with some 
skill--marble cutting, furniture-making or some similar craft--
to get greater economic benefit from it. Part of what's missing 
is infrastructure, especially roads and electricity. It's not 
just a question of building more. It may also be necessary to 
set up the system so that potential employers can access it and 
pay for it without the distribution lines having to go through 
nonpaying customers first.
    We should encourage the agencies and the U.S. Government, 
whose expertise lies in encouraging business in tough places 
and here, I'm thinking particularly of OPIC, to go in there and 
try out a few things. Some of them may fail. That's what 
happens if you try something tough but if some succeed, we may 
sow the seeds of progress in the most demanding and most 
important challenge facing Pakistan.
    Thank you.
    [The prepared statement of Ms. Schaffer follows:]

 Prepared Statement of Hon. Teresita C. Schaffer, Director, South Asia 
Program, Center for Strategic and International Studies, Washington, DC

    Mr. Chairman, Senator Hagel, thank you for inviting me to share my 
thoughts with you at a critical time in Pakistan's history and in U.S.-
Pakistan relations.
    United States ties with Pakistan have had a long history of 
turbulence and of contradictions. That is still true today: Pakistan is 
a critical partner in our struggle to keep terrorists out of South and 
Central Asia. It is also a troubled country, struggling to fulfill the 
people's desire for democracy and for good governance. Pakistan's 
location next to Afghanistan, where the United States has a major 
military presence and where a Taliban-led insurgency is under way, and 
next to India, with whom Pakistan has a major unresolved dispute, 
guarantees that we will need to remain involved for many years to come. 
Assistance is not the only tool that the United States brings to bear 
on this situation, but it is a very important one, and a highly visible 
one.
    I believe that the United States needs to use its aid to invest in 
Pakistan's future and in the long-term viability of a decently governed 
state. At the same time, we don't want to encourage policies we find 
perverse or at variance with U.S. interests. These principles are not 
as contradictory as they sound, and I think they give us a pretty good 
guide to structuring our assistance in the future.
    U.S. economic assistance is our best instrument for investing in 
Pakistan's future. We should shift the balance of our assistance toward 
economic aid, and reduce the percentage of military assistance. I would 
suggest a ratio of about 2:1 between economic aid and security-related 
aid (not including Coalition Support Funds).
    Within the economic assistance portfolio, our assistance should all 
be given in the form of projects rather than cash or budget support. 
This is more labor-intensive for AID, but it is the only way to ensure 
that our money is supporting what we want it to. Dispensing cash in 
return for a statement that the receiving government has spent the 
equivalent amount on agreed development objectives is usually an 
accounting exercise that glosses over the fact that the government is 
not spending its own resources on these objectives.
    We should invest in Pakistan's people--primarily education and 
health. These sectors have been disastrously underfunded for over three 
decades. We need to help redress that balance. Our investments need to 
be visible to the people they are supposed to help. The only recent 
time when U.S. assistance boosted people's attitudes toward the U.S. 
was 2 years ago, when the U.S. military provided such effective 
earthquake relief. Health spending could have some of the same effect. 
Together with the policy-related programs that we usually do, for 
example, we could capture people's imaginations by encouraging visits 
by Project Hope and similar special teams--and then using them to train 
people who will continue to staff rural clinics after the special teams 
have left.
    The largest single expenditure in our assistance profile is 
Coalition Support Funds. Technically, it's not assistance but 
reimbursement, but it is a major part of our budget. I support the 
calls for greater accountability of how this money is spent.
    Others plan to address how our military assistance funds are spent, 
so I will not get into detail on this subject, except to say that the 
most important part of our military assistance is the part that 
directly supports counterterrorism and counterinsurgency operations. 
That needs to be the priority.
    You asked what impact U.S. assistance has on Pakistan's internal 
security and on its path toward democracy. The honest answer is, not 
very much. The U.S. has funded some valuable programs designed to 
improve election transparency, and I certainly support those. But 
overall U.S. policy toward Pakistan until very recently gave no serious 
attention to encouraging democracy in Pakistan. In the past 6 months, 
that has begun to change, and Ambassador Patterson has undertaken a 
remarkable outreach campaign to show U.S. support for a free press and 
free and fair elections. Her efforts are, alas, undercut by broad 
statements from the White House and elsewhere suggesting that Musharraf 
is ``indispensable.''
    Mr. Chairman, I would suggest to you that working with Pakistan is 
indispensable, but that no one leader merits this designation. What 
Pakistan needs,
to be able to work with us over the long term, is a government that 
enjoys widely accepted legitimacy and is capable of pushing back 
against violent extremists that are challenging the writ of the state. 
Legitimacy was never President Musharraf's strong point, and he has 
lost popularity, legitimacy, and ultimately much of his political 
strength during the 9 months since he first tried to fire the Chief 
Justice. To me, this means that we ought to focus on the process of 
elections rather than picking a candidate. An ugly election--which is 
likely unless things get turned around quickly--will not settle the 
issue of Pakistan's governance or of its ability to defend the 
legitimate authority of the state. That goes beyond the scope of this 
hearing, but will profoundly affect the effectiveness of our 
assistance.
    Your final question deals with the proposed assistance package to 
the Federally Administered Tribal Areas (FATA). I support a major U.S. 
assistance package for this area. The stakes could not be higher, both 
for our efforts in Afghanistan and for Pakistan's future as a decently 
governed, modernizing, moderate state.
    Once the Pakistan Army went into FATA, under heavy pressure from 
the U.S., they started a process that they are now obliged to finish--
integrating this largely ungoverned region into the Pakistani state and 
society. It has involved, and will involve, heavy sacrifices for them. 
Accomplishing this task requires a three-pronged strategy: Military, 
political, and economic. Our package can help with the economic 
program; the Pakistan military will need to develop a more effective 
military approach; and the political part of the puzzle is largely 
lacking.
    So our aid package contributes to only one of the three key 
ingredients in a FATA strategy. Let's be clear: There is no ``school 
solution'' to the economic problems of the region. The social 
structures that once ran the region are problematic, and are now 
largely destroyed, without a good substitute in place. So whatever we 
do will involve risks--risks that it won't work, and high risks that 
some of the money will go astray.
    This has led some people I respect to recommend that we stay away 
from funding development in FATA. I disagree: I think we need to try, 
and we need to accept those risks. But we need to be both strategic and 
flexible in our funding. The two most important objectives are job 
creation and popular impact; and the popular impact needs to be 
structured so that both Pakistan and the United States are seen in a 
favorable light. We need to operate in ways that will gain the support 
of the tribal leaders, to the extent they are still in place. In the 
short term, this probably means an emphasis on public works (especially 
for roads and other infrastructure) and on health. I wouldn't start 
with education, though that's a cause I've been pushing passionately 
for decades. However, it is not welcomed by tribal leaders, and an 
effective program needs their buy-in. We will, therefore, be more 
effective if we make education an issue for the ``second wave'' rather 
than the first.
    But we ought also experiment, and encourage the Pakistan Government 
to experiment, with ways of encouraging job creation through business 
development. The Reconstruction Opportunity Zones that the 
administration supports are a great idea in principle, but right now, 
this region produces little or nothing that's exportable. Why? 
Entrepreneurial talent is there. Part of what's missing is capital--not 
just microcredit, but financing for small- and medium-sized businesses 
that can employ people. Part of what's missing is equipment, not 
necessarily complex and fragile equipment but tools that will permit 
those with some skill in marble-cutting, furniture-making, or some 
similar craft to get greater economic gain from it. Equipment leasing 
might be a good way to fill this gap. Part of what's missing is 
infrastructure, especially roads and electricity. It's not just a 
question of building more, there may also be a need to set up the 
system so that potential employers can access it (and pay for it) 
without the distribution lines having to go through nonpaying customers 
first.
    We should encourage the agencies in the U.S. Government whose 
expertise lies in encouraging business in tough places--I'm thinking 
especially of OPIC--to go in there and try out a few things. Some of 
them may fail--that's what happens if you try something tough. But if 
some succeed, we may sow the seeds of progress in the most demanding 
and most important challenge facing Pakistan.

    Senator Menendez. Thank you.
    Dr. Korb.

 STATEMENT OF DR. LAWRENCE J. KORB, SENIOR FELLOW, CENTER FOR 
               AMERICAN PROGRESS, WASHINGTON, DC

    Dr. Korb. Thank you very much, Chairman Menendez, Ranking 
Member Hagel, Senator Lugar. I appreciate the opportunity to 
appear before you today. I can't think of a more critical issue 
facing the country than our relationships with Pakistan and 
obviously foreign assistance plays a key role in our ability to 
influence events there.
    There's no doubt about the fact that Pakistan is a 
difficult ally. It has nuclear weapons, as you pointed out 
before. It's a nuclear proliferator and it has allowed the 
Taliban and al-Qaeda to reconstitute itself on its borderlands 
from which they are causing us problems in Afghanistan and 
could be a potential for launching attacks around the world.
    I believe that our current foreign assistance strategy no 
longer serves U.S. national interest nor is aligned with the 
values our country stands for and I think we must rethink our 
aid package. It's important to keep in mind that we've had an 
on-again, off-again relationship with Pakistan in the aid area. 
If you go back and you take a look going back to the beginning 
of the cold war up until 2001, it's been--we've changed several 
times but one thing becomes clear. During that period, if you 
take a look, there was more economic aid than military aid. 
Since 2001, we've tilted the balance the other way and 
emphasized much more in military assistance than the economic 
assistance.
    Now as was pointed out here earlier that if you take a look 
at the--about, somewhere between $10 and $11 billion in foreign 
assistance to Pakistan since 9/11, about 60 percent goes to the 
Coalition Support Funds. I think it's unfortunate that people 
from the Department of Defense are not here to talk about that 
but if you take a look at that, you'll find out that while we 
consider it a form of repayment rather than assistance, it's 
very hard to tell where all of that money is going.
    Another 15 percent has been spent on security assistance 
and again, as has been pointed out here, a lot of that goes to 
purchase major weapon systems such as F-16s, which would be 
certainly more applicable for a conventional war with what the 
Pakistanis perceive as their major rival, India.
    Fifteen percent has gone toward budget support or direct 
cash transfers to the Government of Pakistan and only 10 
percent has been used specifically for development and 
humanitarian assistance. I believe that this has got to change 
and I've got a couple of recommendations that I'd like to put 
forward.
    First of all, when giving our aid, we need to develop a 
relationship with the people of Pakistan. We need to focus on 
institutions not individuals and we cannot let particular 
changes of government or particular leaders influence our 
relationship with the Pakistan people. And in order to maintain 
our influence with Pakistan, we must engage with all of 
Pakistan's institutions and promote--place a greater emphasis 
on promoting democracy, economic development and education, 
which leads to my second recommendation.
    We need to expand nonmilitary aid. As has been pointed out 
already, the best we can calculate and this is one of the other 
things that's very frustrating. It's hard to find out how much 
aid is going and who is in charge of it in terms of the 
coordination but it seems about 75 percent has gone to 
security-related assistance. I support Senator Biden's proposal 
to guarantee approximately $1.5 billion as a baseline for 
nonsecurity-related aid as a sound recommendation. He says 
unconditional but I don't think unconditional should mean 
unmonitored or unaudited, which leads to my third 
recommendation.
    I think we need to increase the transparency and 
coordination of our aid. As you've seen with the Special 
Inspector General for Iraq, we instructed you many times that 
the aid doesn't get to where it's supposed to and I think what 
we need to have is the same level of scrutiny with our 
relationship with the money we give to Pakistan.
    There should be conditions on the aid. I agree there should 
be a baseline but over and above that, there should be 
conditions and one of them--and I've been urging this before 
the Congress and publicly for the last 2 years, is on the 
debriefing of A.Q. Khan. I think that is very, very critical 
that we find out because the proliferation of weapons, of 
nuclear weapons and them possibly falling into the wrong hands 
is a tremendous threat to our security.
    I think we also need to maintain a continuing relationship 
with the Pakistani military. As my colleague will point out, 
everybody knows that the new Army Chief of Staff went to 
Leavenworth. We don't want to publicize that too much because 
we don't want him to be seen as a tool of the United States. 
But if you take a look at the number of military officers from 
countries around the world, Pakistan is not near where it needs 
to be. It's below countries such as Egypt and Jordan and we 
need to increase that number.
    Then finally, we need a regional approach. As we've seen in 
so many conflicts around the world, we can't do it by 
ourselves. We need to reengage with all the countries in the 
region, including China, India, and Saudi Arabia.
    In the final analysis, a stable and friendly Pakistan is 
critical to our interests in South Asia as well as the Middle 
East but our aid policy has to ensure that we maintain that 
stability and the good relations and I hope that this hearing 
is the beginning of a renewal of that process.
    Thank you.
    [The prepared statement of Dr. Korb follows:]

 Prepared Statement of Dr. Lawrence J. Korb, Senior Fellow, Center for 
                   American Progress, Washington, DC

    Chairman Menendez, Ranking Member Hagel, and members of the Senate 
Foreign Relations Subcommittee on International Development and Foreign 
Assistance, I appreciate the opportunity to appear before you with 
these distinguished experts to discuss the critical subject of 
reassessing our foreign assistance to Pakistan. I cannot think of any 
issue more important to our future security and I commend you for 
holding this hearing.
    Recent developments in Pakistan are deeply troubling to U.S. 
interests both in the country and in the region. Without question, 
Pakistan is at best a difficult ally and poses some of the most complex 
and dangerous challenges to the security of the United States. Not only 
is it a nuclear-armed state and a nuclear proliferator, but it has 
allowed al-Qaeda and the Taliban to establish safe havens in its 
territory from which it is able to conduct terrorist operations in 
Afghanistan, Pakistan, and around the world. Furthermore, Pakistan 
faces growing instability as extremist elements have gained control in 
the border regions and as democratic forces finally begin to challenge 
President Musharraf's increasingly autocratic rule.
    The Bush administration has been a steadfast supporter of President 
Musharraf since he said he would help the United States in our war 
against the Taliban and al-Qaeda following the September 11 attacks. 
Since that time, the United States has provided nearly $11 billion in 
aid to Pakistan, mostly to the Pakistani military to support what can 
only be described as a discombobulated policy.
    I believe that the policy of the Bush administration toward 
Pakistan is no longer serving U.S. national security interests; nor is 
it aligned with the values that our country stands for. Part of the 
problem with our policy is how we, and ultimately the Pakistanis, allow 
our aid to be allocated. Congress must rethink its U.S. aid package. 
While not the only factor, this aid gives us some leverage to influence 
events in Pakistan and enhance our security interests.
    Before providing a short list of recommendations on future foreign 
assistance, I will outline briefly the history of U.S. aid to Pakistan, 
and analyze current aid levels to Pakistan. This will place these 
recommendations in their proper context.
                    history of u.s. aid to pakistan
    Over the past half century, the United States assistance to 
Pakistan has been intermittent. As a result of a 1954 mutual defense 
assistance agreement, the United States provided nearly $2.5 billion in 
economic aid and nearly $700 million military aid to Pakistan between 
1954 and 1964. (Since the United States first began its aid program to 
Pakistan, our assistance has come in many forms from a number of 
different agencies. Throughout the report, I have broken down our aid 
assistance into two broad categories: Wide-ranging economic aid and 
purely military aid. It is important to note that the category of 
economic aid includes large amounts of Security Support Assistance 
(SSA) as well as other security-related loans and grants.)
    The Indo-Pakistani conflicts of 1965-1971 led the United States to 
suspend nearly all aid to Pakistan (as well as to India) assisting them 
almost exclusively with economic aid for the next 15 years ($1.45 
billion in economic aid, $26 million in military assistance from 1965-
1971; $1.1 billion in economic aid, $2.9 million in military assistance 
from 1972-79).
    In 1979, the Carter administration suspended all aid to Pakistan 
(except for food aid) because of Pakistan's development of a uranium 
enrichment facility. With the invasion of Afghanistan by the Soviet 
Union, U.S. assistance again increased dramatically, and this high 
level of aid continued throughout the 1980s as Pakistan became the 
intermediary and central staging ground for covert U.S. support to 
anti-Soviet forces in Afghanistan. Aid rose from around $60 million in 
economic and development assistance in 1979 to more than $600 million 
per year in the mid-1980s. In total, the U.S. gave $3.1 billion in 
economic assistance and $2.19 billion in military assistance from 1980 
until 1990.
    Even while the U.S. was pumping large amounts of aid into Pakistan 
and Afghanistan to help defeat the Soviets, concern within the U.S. 
about Pakistan's nuclear ambitions led Congress in 1985 to pass the 
Pressler amendment to the Foreign Assistance Act. The Pressler 
amendment required the President to certify that Pakistan did not have 
a nuclear weapon for the fiscal year in which aid is to be provided. 
Throughout the 1980s, President Reagan and George H.W. Bush certified 
that Pakistan did not; however in 1990 the elder President Bush refused 
to confirm that Pakistan did not have nuclear technology, and as a 
result most economic and all military aid was cut off. Aid to Pakistan 
dropped dramatically from 1991 to 2000 to a mere $429 million in 
economic assistance and $5.2 million in military assistance. The U.S. 
blocked delivery of major military equipment, including approximately 
28 F-16 jets that Pakistan had already paid for. Pakistan continued to 
receive only a small amount of economic assistance, mostly in the form 
of food aid and counternarcotics support. Aid to Pakistan was further 
restricted after its 1998 nuclear tests and General Musharraf's 1999 
coup.
    Not surprisingly, this on-again, off-again history of U.S. 
assistance has left the people of Pakistan and its leaders with serious 
concerns about the depth and reliability of the U.S. commitment to 
their well-being. This was especially true after the withdrawal of the 
Soviet Union from Afghanistan in 1988 and the end of the cold war when 
many leaders in this country mistakenly concluded that Pakistan had 
lost much of its strategic and geopolitical value. Aid levels reflected 
this belief, they dropped from $726 million in 1988 to $24 million 4 
years later (after President George H.W. Bush refused to certify 
Pakistan did not possess a nuclear weapon). This has led many 
Pakistanis to conclude that they could not count on us and that the 
U.S. is an unreliable ally at best.


    Squares= Economic Aid        Triangles= Military Aid

    USAID Greenbook of Foreign Assistance. All figures are in millions 
of dollars. All figures are in historic dollars. http://qesdb.cdie.org/
gbk/index.html.
                      current u.s. aid to pakistan
    Our current aid to Pakistan has been characterized by a lack of 
accountability, transparency, coordination, and shortsightedness. 
Immediate U.S. security-related goals, while critical in our efforts in 
the current fight against radical extremism, undermine and are often 
contradictory to our long-term strategic objectives for the country and 
the region. An analysis of where current U.S. assistance is going is an 
indication of our priorities and our long-term challenge in Pakistan.
    The best estimate is that since 2001, the United States has given 
about $10.6 billion in foreign assistance to Pakistan. It appears to be 
distributed as follows:

   Sixty percent of U.S. aid has gone toward Coalition Support 
        Funds (CSF). These funds are given to reimburse the Government 
        of Pakistan for its efforts in what the Bush administration 
        labels the ``Global War on Terrorism'' (GWOT). They are 
        considered by the U.S. administration to be a repayment rather 
        than assistance. However, since there has been little 
        accountability or transparency of this funding, it is uncertain 
        if in fact these funds are being used to fight the GWOT.
   Fifteen percent, or close to $1.6 billion, has been spent on 
        security assistance. The Pakistanis have used the majority of 
        these funds to purchase major weapons systems, such as F-16s, 
        for possible use in a conventional war with India, the country 
        they perceive as their major strategic threat.
   Another 15 percent has gone toward budget support or direct 
        cash transfers to the Government of Pakistan. This money is 
        supposed to provide macroeconomic stability and to free up 
        funds for social spending, but few transparent accountability 
        mechanisms are built in.
   The remaining 10 percent has been used specifically for 
        development and humanitarian assistance.

    This breakdown makes it clear that the vast majority of current 
U.S. assistance goes to the Pakistani military. This is exactly the 
opposite of our aid policy prior to 2001, where military aid was the 
smaller portion. Comparatively little has gone toward economic 
development, institution building, or education assistance despite the 
fact that improvements in these fields are central to eradicating 
extremism, which thrives in the absence of development. The areas of 
most concern to the United States, the borderlands of Pakistan--where 
al-Qaeda and the Taliban thrive--have some of the lowest human 
development indicators in the world. Approximately 60 percent of the 
population lives below the national poverty line and female literacy is 
3 percent in this area, among the lowest in the world. People's 
livelihoods in this area depend on subsistence agriculture and 
smuggling of items, such as opium and weapons.
    It is also important to note that because of a lack of 
transparency, the exact amount of total aid to Pakistan is unknown. 
This lack of transparency is an enormous impediment to understanding 
not only our aid's ultimate destination but also its effectiveness. 
Furthermore, there is little coordination among the various agencies of 
the U.S. Government which disperse aid to Pakistan. The various 
departments and agencies responsible for allocating aid to Pakistan are 
each responsible for only one aspect of the total program in Pakistan 
and oversee fragmented pieces of the overall assistance picture. While 
this practice is not limited to our aid to Pakistan, it is a part of a 
much larger problem which will be discussed later on in the 
recommendations section.
    These problems notwithstanding, the magnitude of U.S. aid to 
Pakistan and the importance of Pakistan to U.S. national security 
demand that Congress answer the question: Is this aid advancing our 
long-term goals both within Pakistan in particular and the region in 
general?
    To answer this question, it is important first to define current 
objectives for U.S. aid to Pakistan. The Bush administration's primary 
focus is on short-term military objectives, specifically 
counterterrorism measures. These include the killing, capturing, and 
detaining of domestic and international terrorists. The priority given 
to this goal is reflected in the distribution of the aid package. As 
noted above, the vast majority of assistance is directed toward 
coalition-related activities in fighting terrorism, benefits to the 
Pakistani military in the form of security assistance, and direct cash 
transfers, to be used essentially at the government's discretion. In 
all, this represents an overwhelming proportion of the aid given since 
9/11, 75 percent or some $7.5 billion.
    While the Pakistani security forces have provided some assistance 
in the killing and capturing of a number of high-profile al-Qaeda 
terrorists and other militants, this purely militaristic approach has 
not been effective in defeating the extremists. In fact, as last 
summer's National Intelligence Estimate revealed, in the Pakistani 
borderlands al-Qaeda and the Taliban have reestablished their command 
and control and have reconstituted their training camps for suicide 
bombers and other extremists. Cross-border attacks into Afghanistan 
from Pakistan have increased dramatically in the last year. Moreover 
Talibanization is increasing all throughout Pakistan, as members of the 
Taliban have gained control in the Northwest Frontier Province and 
increased suicide attacks throughout the country.
    The allocation of military aid by the Musharraf government has only 
compounded the problem. It has committed an overwhelming portion of 
security-related aid to noncounterterrorism related programs and 
weaponry, which have little to do with U.S. national security. For 
example, instead of Pakistan spending the bulk of U.S. assistance on 
counterterrorism measures (such as training, hardware, and equipment) 
for regular and irregular Pakistani military forces, the vast majority 
of our foreign military financing (FMF) has gone toward the purchase of 
major weapons systems such as F-16 fighters and other aircraft, 
antiship, and antimissile capabilities. In FY 2006, Musharraf's 
government signed an arms deal with the U.S. for $3.5 billion, making 
Pakistan the largest recipient of U.S. arms in the world in that year; 
this amount nearly matches the total value of all Foreign Military 
Sales (FMS) program purchases by Pakistan from the United States for 
the entire period from 1950 to 2001 (in current dollars). These systems 
have no role in counterterrorism missions against al-Qaeda and the 
Taliban but are geared primarily to fight India, which Pakistan sees as 
its major conventional rival.
    Apart from killing and capturing some key leaders, the Pakistani 
military has been very ineffective at meeting U.S. goals. In fact, on 
September 6, 2006, it actually signed a deal with tribal leaders in 
North Waziristan to withdraw the Army and leave the area under the 
control of the militants. Three months later, al-Qaeda and the Taliban 
used this deal to consolidate their control over the tribal regions on 
the border with Afghanistan. It is only now, more than 6 years after 
the September 11 attacks, that the Bush administration, in 
collaboration with the Pakistani Government, has finally begun working 
on a counterinsurgency strategy along the borderlands of Pakistan to 
address the safe havens for al-Qaeda and the Taliban and the growing 
extremism.
    Recently, the administration has outlined a plan to enlist tribal 
leaders to fight against al-Qaeda and the Taliban. The primary 
objective of this plan will be training, equipping, and financing a 
tribal paramilitary force, the Frontier Corps. The proposal is modeled 
on the U.S. success in allying with local Sunnis against al-Qaeda in Al 
Anbar province in Iraq. However, the circumstances in Pakistan are 
fundamentally different from Iraq. The conditions, which caused Iraqi 
Sunnis to turn against a foreign al-Qaeda presence, do not exist in the 
Federally Administered Tribal Areas (FATA). The Taliban is an 
indigenous force with deep roots in the area, and it is supported by 
many of the tribes that this plan would attempt to enlist. In the 
absence of reliable allies or a coherent strategy, flooding an 
unstable, hostile region with money and arms is a recipe for disaster. 
The last thing that Pakistan needs is more unaccountable, 
unconstitutional, and uncontrollable militias. We should rather give 
priority to the political and administrative integration of FATA and 
the extension to this area of constitutional, legal, and other public 
services.
    Combating extremism and terrorism in Pakistan will require much 
more than military solutions. The Bush administration has almost 
exclusively focused on these elements, despite the recognition in its 
own National Security Strategy of 2006 that democratic forces are in 
fact the real antidotes to terrorism.
    The U.S. Agency for International Development's (USAID) plan to 
provide $750 million in economic assistance to the Federally 
Administered Tribal Areas (FATA) is a move in the right direction. 
While this may be a good start, it is late in the game. Furthermore, it 
is unclear what the strategy is, or whether realistic accountability 
mechanisms can be put in place in such an unstable area. Moreover, 
given that the region is openly hostile to foreign influence, the U.S. 
must be cautious about putting a ``Made in America'' stamp on our 
assistance. In many of the programs already in place in FATA, aid is 
delivered anonymously to avoid the complications of association with 
the U.S. Government.
                            recommendations
    In considering the configuration of aid to Pakistan, it is 
important to keep in mind the warning of Defense Secretary Donald 
Rumsfeld, ``Are we capturing, killing, or deterring and dissuading more 
terrorists every day than the madrassas and the radical clerics are 
recruiting, training, and deploying against us?''
    In analyzing the current structure of U.S. assistance to Pakistan, 
I am convinced this is not the case. Battling extremism and terrorism 
in the long term in Pakistan will require a shift in U.S. aid toward 
Pakistan. I recommend the following actions to bring about this shift:
Developing a relationship with the people of Pakistan
    In order to effectively battle extremism and terrorism in Pakistan, 
the U.S. must shift from an aid policy centered in short-term military 
cooperation with an individual leader to one focused on developing a 
long-term relationship with Pakistan and its people. In order to 
maintain our influence in Pakistan, we must engage with all of 
Pakistan's institutions and place a much greater emphasis on promoting 
democracy, economic development, and education. Throughout the country, 
ties to the Pakistani military will continue to be important, but the 
U.S. must balance support for the military with support for democratic 
development.
Expand nonmilitary aid
    The United States should expand aid toward nonmilitary elements in 
Pakistan, addressing the roots of the growing threats of extremism and 
terrorism and supporting democratic forces in Pakistan. As noted above, 
75 percent of our current aid (more than $7 billion since September 11, 
2001) has gone to security-related assistance. This must change. 
Nonmilitary aid should be increased and directed toward strengthening 
governmental institutions, moderate education, economic development and 
civil society. As part of this, we must be careful about how we provide 
aid, as assistance from the United States will be looked on with 
suspicion. We must be wary of a ``Made in America'' tag. Senator 
Biden's proposal to guarantee approximately $1.5 billion as a baseline 
for nonsecurity-related aid unconditionally is a sound recommendation 
and should be supported. But unconditional cannot mean unmonitored or 
unaudited.
Increase transparency and coordination
    U.S. aid toward Pakistan must be more transparent and coordinated. 
There has been insufficient oversight of how U.S. taxpayer dollars have 
been spent in Pakistan and insufficient coordination within the U.S. 
Government. The Special Inspector General for Iraqi Reconstruction 
(SIGIR) has been a critical tool in determining the impact and efficacy 
of billions of dollars in reconstruction money to Iraq. The 
overwhelming financial burden to the United States, not to mention the 
stakes of the effort in Pakistan, call for the same level of financial 
oversight in Pakistan. Similarly, the National Security advisor and his 
staff should ensure that all U.S. agencies are on the same page.
Condition Aid
    Congress should condition some portion of the military aid on 
future political developments in Pakistan's transition to a more 
democratic future. While this is not feasible for all military 
assistance, Congress should put conditions on aid for big-ticket weapon 
systems. Conditions should have performance criteria including: 
Ensuring that the State of Emergency is lifted as planned; releasing 
political prisoners; restoring of the constitution (including 
restoration of the rights of assembly, free speech, and other civil 
liberties); and restoring civilian rule of law and an independent 
judiciary. In addition, the U.S. must insist on debriefing A.Q. Khan to 
learn the full extent of his proliferation activities. The ability of 
Saudi Arabia to get Musharraf to allow former Prime Minister Sharif to 
return from exile demonstrates that outsiders can influence the 
Pakistanis.
Maintain a relationship with the Pakistani military
    Conditioning aid on political developments is obviously a difficult 
balancing act. The military has been and will remain a major force in 
uniting the country, and its cooperation is essential to the fight 
against al-Qaeda and by extension, our efforts to stabilize Pakistan. 
The United States needs to maintain its military-to-military contacts, 
even while threatening a withdrawal of some aid from the military if it 
refuses to give more priority to counterinsurgency operations.
                               conclusion
    These recommendations should not and cannot occur within a vacuum. 
Several diplomatic, political, and military steps are also necessary to 
achieve an enduring relationship with Pakistan. Our aid must move 
beyond a largely transactional relationship between the United States 
and Pakistani leaders toward addressing the country's main drivers of 
instability and extremism. Our aid must empower the secular, civilian, 
democratic political leaders to bring real improvements in the lives of 
everyday Pakistanis.
    Pakistan has a strong and influential moderate majority. If that 
majority is not allowed to express itself and voice its grievances with 
the government, this group will build an alliance of convenience with 
Muslim extremists who, today, are still in the minority. To prevent 
this, we must move away from a personal relationship with whoever is 
controlling Pakistan at a particular time to a long-term relationship 
with Pakistan's people and institutions. To put it bluntly, the U.S. 
must engage the Pakistani people, not just its rulers.
    The U.S. should also adopt a regional approach. This will include 
reengaging with all the countries in the region including China and 
India, renewing our focus in Afghanistan, and beginning a phased U.S. 
troop withdrawal from Iraq in order to provide more forces for 
Afghanistan, the real central front in the GWOT.
    This will allow the U.S. to address core issues that are relevant 
to the Pakistani people. These include existential concerns with India, 
the occupation of Iraq, core Palestinian issues as well as our 
inconsistent policies on human rights and nuclear weapons.
    A stable and friendly Pakistan is critical to the United States 
interests in South Asia as well as the Middle East. While our continued 
relationship and vast foreign assistance gives us leverage in Pakistan, 
we must begin to reassess our current aid policy as well as our overall 
strategy toward Pakistan and with its people in order to maintain our 
influence in the country over the long term. I hope that this hearing 
will be the beginning of this process.

    Senator Menendez. Thank you.
    Dr. Hathaway.

 STATEMENT OF DR. ROBERT HATHAWAY, ASIA PROGRAM DIRECTOR, THE 
 WOODROW WILSON INTERNATIONAL CENTER FOR SCHOLARS, WASHINGTON, 
                               DC

    Dr. Hathaway. Thank you, Mr. Chairman. I appreciate being 
asked to testify today. Thank you, Senator Hagel and Senator 
Lugar, for being here. I need to say that I speak just for 
myself and certainly not for my institution, the Woodrow Wilson 
Center.
    Mr. Chairman, I want to applaud you for your lead on this 
issue, your leadership, for your interest in the issue. I noted 
in the letter that you wrote to Secretary Rice last month, to 
which you referred, that you had raised sweeping questions 
about whether we were getting good value for the $10-plus 
billion we've spent in Pakistan since 2002. You didn't remark 
publicly today but I think it's worth pointing out that you 
also, in this letter, took pains to emphasize that you value 
Pakistan as a strategic ally and that your concerns about the 
purposes to which United States assistance is being put and 
about its effectiveness don't in any way suggest that you have 
doubts about whether or not this is an important relationship 
for us.
    To the contrary, I take your interest in this issue as a 
signal that you believe this is a very important relationship 
and that's why we have to make it work. I'd like to simply 
concur in that judgment and if I have critical things to say 
today, it certainly doesn't suggest that I in any way think we 
can afford to, or ought to, abandon Pakistan.
    I'd like to touch--I'd planned to spend all my time talking 
about aid but I would like to shorten what I planned to say 
because I'd like to respond to a couple of other things that 
have come up. First of all, I want to associate myself with 
what my two colleagues here have said. I think their advice is 
very well taken. I think all of us agree that we have not 
gotten good value for the money we have spent in Pakistan. I 
say this as someone who cares about Pakistan, who thinks that 
Pakistan is going to play a large role, for good or ill, in the 
coming years. I think this is really a wasted opportunity on 
our part. As a taxpayer, I also resent that we have not gotten 
better value for our money. I think we can do better but 
equally important, I think we have to do better.
    Given the modest record we have compiled with our aid 
program in recent years, I'm pleased to hear that a review of 
the aid program is underway, but I would like to join you, Mr. 
Chairman--and I really am emphasizing one thing and then 
raising a second point. You cannot have a serious review of the 
aid program if you simply fence off the three quarters of that 
aid which goes through the Department of Defense. Now, I know 
this raises certain jurisdictional questions for this 
committee, but I would urge you, Mr. Chairman, and the other 
members of the committee, to perhaps think about joining forces 
with other committees to do a thorough going top-to-bottom 
review of the entire package of aid and other transfers to 
Pakistan in recent years. Otherwise, I don't think we're going 
to get very far.
    The other thing I would like to say about this review is 
that I'm extremely troubled by the notion that it's going to be 
carried out exclusively by agencies in the executive branch. 
I'm not sure you're going to get the level of thoroughness or 
incisiveness if you ask those who are responsible for the 
program themselves, to then give you a critical assessment of 
it, and I would urge you to go to another independent body--
maybe the GAO, maybe an ad hoc congressional group. I'll leave 
that to you but if we're going to have a serious review of what 
I think is an important issue, then I think it has to be done 
correctly.
    Another point, I think it's important to reiterate that 
despite our rather indifferent record in Pakistan in recent 
years, American aid can make a difference. There has been a 
reference, I think several times already today, to the timely 
American response and the generous response in the aftermath of 
the horrific Kashmir earthquake 2 years ago. Clearly, we saved 
lives and clearly we made friends. Pakistanis even 2 years 
later, continually make a point of thanking Americans who visit 
their country, for the American response.
    This episode, to me, underscores the fact that aid can be 
effective; that aid can win friends for the United States. But 
it also serves to highlight the missed opportunities that 
characterize, I think, so much of the rest of our program.
    If I may now, I'd like to skip away from aid a bit and 
refer to a couple of other things that have been said. A 
sense--some in this discussion, some outside this room, a sense 
that some people feel that things have turned a corner; that 
things are now heading in a better direction in Pakistan. They 
refer, for instance, to President Musharraf's resignation from 
the army, the fact that you now have a firm date for the 
election, the fact that Musharraf has promised to lift the 
state of emergency in 10 days, to the fact that the two most 
prominent opposition politicians have returned to the country.
    Mr. Chairman, this represents a fundamental 
misrepresentation of the actual situation in Pakistan. Things 
are not getting markedly better. Pakistan still faces a very 
real and indeed, even a growing crisis. Just this week, 
professors and students at one of Pakistan's most prestigious 
universities were arrested for doing nothing more than 
criticizing the imposition of the state of emergency. Just this 
week, new blows were struck against the judiciary in what 
appears to be an effort to impinge upon the independence of the 
judiciary. Just this week, it was ruled that Nawaz Sharif was 
ineligible to run in the elections next month.
    A great deal of stock has been placed on the fact that 
emergency rule is to be lifted in 10 days but this is not going 
to return us to the status quo ante. You will still have 
restrictions on the media. Someone earlier today talked about 
virtually all the radio and television stations are back on the 
air, but only those who have signed a pledge not to ridicule 
the government, not to criticize the government, in fact, are 
back on the air. Restrictions even after the end of emergency 
rule will be placed on politicians and on political assembly. 
The charges that have been lodged against the lawyers will 
remain in place. The judges that were fired will still be 
fired. It will still be permissible for civilians to be tried 
by military tribunals.
    So, I don't think that we can assume that things will 
simply be grand once the emergency rule is lifted. I would 
remind you what also has been referred to, that serious 
observers, both inside Pakistan and outside observers, have 
been talking for well over a year about the difficulties of 
having genuinely free and fair elections. One of your 
colleagues, former Senator Daschle, went to Pakistan in 
October, before the imposition of emergency rule, and he came 
back and issued a report expressing very grave concern whether 
or not there was a possibility of having genuinely free 
elections. Those concerns have not yet been adequately 
addressed.
    So, I would simply suggest that one of my nightmares is 
that we wake up on the 9th of January, the day after the 
elections, and we find ourselves faced with a new Parliament, 
which has been selected by patently fraudulent means; that has 
no credibility, that has no legitimacy in the eyes of the vast 
majority of the Pakistani people and then what do we do?
    Rather than finding ourselves in that position, and here 
I'd like to associate myself with something that Senator Corker 
said, rather than finding ourselves in that position, I hope 
very much that we put a great deal of pressure on the Pakistani 
Government at this point. Now, I think I would disagree with 
Senator Corker's assessment that we are putting pressure. I 
don't think we're putting nearly as much pressure as we ought 
to. I would refer you to President Bush's ABC interview just a 
couple weeks ago, where he praised Musharraf--this is after the 
imposition of emergency rule, where he praised Musharraf for 
his democratic credentials. I would refer you, as Ambassador 
Schaffer mentioned a moment ago, to the repeated references by 
senior American officials to Musharraf as ``indispensable.'' I 
think these types of messages simply send the wrong signals to 
the Pakistanis, including to our friends or those who should be 
our natural allies in Pakistan. They feel betrayed by us and I 
would hope that between now and January 8 as well as afterward, 
we would make it clear that Americans stand not with an 
individual--or not, frankly, with a political party, but with 
the country and with the people of Pakistan.
    Last, if I may, simply address--because, Mr. Chairman, you 
read two statements from my testimony and our previous panel 
took issue with them. If I might simply address both of those 
issues very briefly.
    You first of all read my passage saying the United States 
has made no effort to distinguish between military assistance 
useful for our counterterrorism efforts and that which has 
little use in combating al-Qaeda. I, in fact, had in mind 
things like F-16s, like air-to-air missiles. To the best of my 
knowledge, al-Qaeda has neither a navy nor an air force. One 
can, I think, perhaps make a minimal argument that in a broad, 
generalized way, this may help the Pakistani Army, maybe 
confidence, maybe something else. But the troops on the ground, 
particularly the paramilitary forces in the tribal areas, they 
don't have night vision goggles, we just heard. They don't have 
protective vests. In some cases, they apparently don't even 
have proper boots. If we're providing or making available these 
other types of major systems and simultaneously not providing 
the things that are clearly and directly related to 
counterterrorism, then I think perhaps we're making a wrong 
judgment.
    My last point, Mr. Chairman, you read my comment about 
economic and development programs that frequently have been 
unfocused, poorly conceived or lacking in responsible 
oversight. Let me just give you two examples so you'll know 
what I had in mind. Two examples don't prove the case but I do 
think they're illustrative.
    I think it's well documented. In fact, I've gotten this 
from a very senior AID official that we have provided hospitals 
and clinics in Pakistan with these very fancy surgical lights 
which don't cast a shadow, and with autoclaves and other 
equipment that requires electricity, only to find that these 
hospitals don't have electricity and that moreover, there are 
no plans to hook them into the electrical grid. So I asked, how 
is this possible? And I was told, we signed a contract with a 
firm who provides this equipment. We go back and ask the firm, 
how come this is the case and the firm, the contractor says, 
it's not our business. We didn't sign a contract to provide 
electricity or to make sure this equipment was used. We simply 
signed the contract to provide the equipment.
    A different case, again, a story I've heard from a senior 
AID official. We are giving scholarships to young Pakistanis to 
study in the United States and I absolutely applaud this, but 
I'm also aware of a particular instance where we awarded a 
scholarship to a young man from the tribal area who spoke no 
English, who speaks no Urdu. He speaks Baluch. So he was asked, 
through a translator, so how is he going to benefit from this 
experience? And after further questions, it turned out, in 
fact, there was no possibility of him benefiting and in fact, 
all his family had been killed in the tribal areas and the 
chances of him even going to school were very minimal. The 
chances of him then returning to Pakistan were virtually 
nonexistent.
    Again, two examples don't prove a case but they are the 
types of things I had in mind. I could go on at greater length. 
I'm not going to try your patience.
    Thank you for your interest in this.
    [The prepared statement of Dr. Hathaway follows:]

 Prepared Statement of Dr. Robert M. Hathaway, Asia Program Director, 
    Woodrow Wilson International Center for Scholars, Washington, DC


                           EXECUTIVE SUMMARY

   U.S. assistance to Pakistan since 2002 has been far too 
        heavily weighted in favor of military assistance, without 
        requiring or even expecting commensurate results in the 
        struggle against extremism.
   We have made no effort to distinguish between military 
        assistance useful for our common counterterrorism efforts, and 
        aid with little or no connection to the war against al-Qaeda, 
        nor made provision of the latter contingent upon cooperation in 
        combating the extremists hiding in FATA and elsewhere in 
        Pakistan.
   We have allowed a blanket justification of counterinsurgency 
        to be used to rationalize assistance programs and arms sales 
        with minimum or nonexistent connection to that objective.
   America's seemingly open-ended largesse to the Pakistani 
        military has encouraged the widespread belief in Pakistan that 
        the United States sides with that country's dictators rather 
        than its democrats. In this fashion, we have alienated 
        potential friends and embittered those Pakistanis who share our 
        values and our vision for their country.
   We have established economic and development programs that 
        have frequently been unfocused, poorly conceived, or lacking in 
        responsible oversight.
   We have required neither stringent accountability mechanisms 
        for our aid,
        nor the sorts of performance benchmarks we routinely impose on 
        other aid recipients.

General precepts for thinking about American assistance to Pakistan:
1. American aid as a two-way bargain
    American assistance, to Pakistan as to all recipients, is not 
simply an act of altruism. The United States has every right to expect 
something in return for U.S. aid. Administration officials have never 
adequately explained why Washington should not require that vigorous 
U.S. support requires vigorous Pakistani support in return.
2. Failure to balance U.S. objectives
    The administration has allowed its understandable preoccupation 
with punishing those responsible for 9/11 to obscure other equally 
important priorities--combating domestic extremism within Pakistan; 
building strong political institutions; supporting constitutionalism 
and the rule of law; stopping the leakage of dangerous nuclear 
technology.
3. Beware of a counterterrorism justification that justifies all
    The administration has justified virtually all U.S. assistance to 
Pakistan in terms of counterterrorism. To the extent that the Pakistani 
security apparatus has been employed since November 3 in rounding up 
lawyers, opposition politicians, journalists, and human rights 
activists, it is difficult to argue that unconditional backing for 
Pakistan's military supports the war against terrorism.
4. Inaction conveys messages just as forcefully as action
    Pakistanis will draw conclusions about Washington's position and 
preferences regardless of whether the White House or Congress endorses 
or condemns, issues tepid equivocations, or remains absolutely silent. 
Under these circumstances, it behooves us to stand with those who 
should be our natural friends in Pakistan.
5. Be mindful of history, but not bullied by it
    If the United States and Pakistan are to build a successful 
partnership for the long haul, the stripping away of the mythology 
behind this relationship--of which the narrative of American perfidy is 
a prime example--must be a priority.
6. Be sensitive to Pakistani political realities
    It will be extremely difficult, if not impossible, to obtain 
Pakistani cooperation for any U.S. action that suggests American 
dictation. This is especially true in the field of counterterrorism.
7. Be modest in our expectations
    We should be very careful not to overestimate the amount of 
influence U.S. aid gives us. The United States has very little ability 
to force Musharraf--or any other Pakistani leader--to act contrary to 
what he believes his interests are, or to compel Pakistan to do what it 
would not otherwise do. As an instrument of coercion, U.S. aid is an 
exceedingly blunt weapon.
8. Build for the future
    American assistance, if employed deftly, gives the United States 
tools with which to nudge Pakistan in desired directions. At a minimum, 
we can do a better job of laying the groundwork for a post-Musharraf 
United States-Pakistan partnership that would enjoy broad popular 
support in both countries. By supporting those Pakistanis whose values 
parallel our own, U.S. aid can help prepare the way for a more 
sustainable relationship in the long run.
    Finally, Congress should insist upon a thorough review of U.S. 
assistance to Pakistan since 2001, including assistance funneled 
through the Department of Defense. This review ought to be conducted by 
a fully independent body, and not simply by the Department of State.
                                 ______
                                 
    Pakistan's post-9/11 partnership with the United States has brought 
Islamabad diplomatic support, political protection, international 
legitimacy, and immense sums of aid. Yet, Pakistan is a huge 
disappointment to many Americans. In their eyes, there exists a gaping 
disconnect between the strong backing and abundant assistance 
Washington has provided Islamabad over the past half dozen years, and 
what the United States has received from Pakistan in return.
     Notwithstanding the close official partnership between Washington 
and Islamabad that has developed since 2001, Pakistan today is a scary 
place for Americans. Polls suggest that it is one of the most anti-
American countries in the world. Since 9/11, Islamist political parties 
harboring a vision for Pakistan, that produces nightmares for 
Americans, have achieved unprecedented prominence. Pakistan's Federally 
Administered Tribal Areas (FATA) along the Pakistan-Afghanistan border 
provide a safe haven for the al-Qaeda terrorists responsible for the 
September 11, 2001, attacks on the United States, as well as for 
Taliban insurgents battling U.S. and NATO forces in neighboring 
Afghanistan. Suicide bombings and wanton violence are increasingly 
common in the settled areas of Pakistan, provoking warnings of a 
``creeping Talibanization'' of the country. Many informed analysts 
worry that Pakistan is in danger of becoming the center of global 
Islamic terrorism. Rather than close relations producing a Pakistan 
comfortable for Americans, the post-9/11 partnership between the two 
seems to have tied the United States to a Pakistan inimical to American 
interests and American values.
     I appear before this committee today as a firm supporter of the 
United States-Pakistan partnership. I believe that American national 
interests require a cooperative and mutually supportive relationship 
with Pakistan. I salute the courage and leadership displayed by 
President Musharraf in the days after 9/11, when he aligned his country 
with the United States in the effort to punish those responsible for 
the horrific attacks on New York and Washington. And I am a strong 
advocate of a robust U.S. assistance program for Pakistan.
     Indeed, it is for these very reasons that I am troubled by the 
nature of the American assistance program to Pakistan in recent years, 
and most especially by the failure of this program to bring the results 
we had hoped for.

   In my judgment, U.S. assistance to Pakistan since 2002 has 
        been far too heavily weighted in favor of military assistance, 
        without requiring or even expecting commensurate results in the 
        struggle against extremism.
   We have made no effort to distinguish between military 
        assistance useful for our common counterterrorism efforts, and 
        aid with little or no connection to the war against al-Qaeda, 
        nor made provision of the latter contingent upon cooperation in 
        combating the extremists hiding in FATA and elsewhere in 
        Pakistan.
   We have allowed a blanket justification of counterinsurgency 
        to be used to rationalize assistance programs and arms sales 
        with minimum or nonexistent connection to that objective.
   We have largely ignored the impact that America's seemingly 
        open-ended largesse to the Pakistani military has had in 
        encouraging the widespread belief in Pakistan that the United 
        States sides with that country's dictators rather than its 
        democrats. In this fashion, we have alienated potential friends 
        and embittered those Pakistanis who share our values and our 
        vision for their country.
   We have established economic and development programs that 
        have frequently been unfocused, poorly conceived, or lacking in 
        responsible oversight.
   We have required neither stringent accountability mechanisms 
        for our aid, nor the sorts of performance benchmarks we 
        routinely impose on other aid recipients. Indeed, in our 
        eagerness to solidify our post-9/11 partnership with Islamabad, 
        it has sometimes seemed as if we were simply throwing money at 
        Pakistan, without asking whether it was being used in ways that 
        would promote American objectives.

    But most troubling of all, we do not seem to have accomplished very 
much with the more than $10 billion we have provided Pakistan since 
2001.

   Clearly this assistance has not enabled the Pakistan 
        military to eliminate the safe havens on Pakistani soil enjoyed 
        by al-Qaeda and the Taliban.
   It has not prevented militants based in Pakistan from 
        slipping across the border into Afghanistan and attacking 
        American and NATO forces, as well as Afghan civilians loyal to 
        President Karzai.
   It does not seem to have assisted in bringing internal 
        stability to Pakistan.
   It manifestly has not promoted either democracy or a respect 
        for human rights and the rule of law in Pakistan.
   It has not given us a Pakistani leadership prepared to do 
        American bidding--though certainly this is not the intent of 
        U.S. assistance, nor should we ever expect that U.S. aid will 
        produce a compliant recipient government.
   While U.S. assistance has played a useful role in addressing 
        the basic human needs of some Pakistanis, Pakistan's 
        deficiencies in this area are so great that American aid has 
        been little more than a drop in the bucket.
   And obviously, if the polls about anti-Americanism in 
        Pakistan are to be believed, this $10 billion has not won many 
        friends for the United States.

    And indeed, this $10 billion figure that is customarily mentioned 
represents only part of the story. The size of the classified transfers 
from Washington to Islamabad can only be guessed at. Some analysts 
suggest covert payments may have exceeded $10 billion, raising the 
total U.S. assistance package to Pakistan over the past 6 years to 
something approaching $20 billion.
    There is, fortunately, one significant exception to this otherwise 
discouraging record. Pakistanis of all political persuasions 
acknowledge the importance of U.S. aid in the immediate aftermath of 
the October 2005 Kashmir earthquake. Without a doubt, there are people 
alive today only because of the timeliness and generosity of the 
American response. More than 2 years later, Pakistanis still make a 
point of thanking Americans for their help in the days and weeks 
following the earthquake. This episode underscores the fact that aid 
can be effective, and thus serves to highlight the missed opportunities 
that characterize much of the rest of the U.S. assistance program to 
Pakistan since 2001.
    Those who believe in the importance of the United States-Pakistan 
partnership, and all those concerned that taxpayer money be spent 
wisely, need to ask why, given the magnitude of American assistance to 
Pakistan over the past 6 years, and given the commitment and good 
intentions of countless hard-working American officials and their 
Pakistani colleagues, the U.S. assistance program has produced such 
indifferent results. There are, I believe, a number of explanations:

   First, the sheer size of the problem presented by Pakistan. 
        With 160 or more million people and woefully low rankings on 
        virtually all measures of human security, Pakistan presents 
        monumental development challenges. Its political and 
        educational institutions are similarly deficient. Patience and 
        a long-term vision are absolutely essential when considering 
        assistance to Pakistan. Progress is unlikely to come quickly, 
        or cheaply.
   Also handicapping American assistance efforts was the 
        absence of a U.S. aid infrastructure in Pakistan, because of 
        the termination of virtually all U.S. assistance programs in 
        that country in the 1990s, as a result of the Pressler 
        amendment.
   Washington's preoccupation with the war on terrorism, as the 
        United States has defined that war, has given the U.S. 
        Department of Defense an insurmountable advantage in shaping 
        the American aid program for Pakistan. This has ensured that 
        the bulk of U.S. assistance would be military in nature, and 
        would be directed toward the Pakistani military. As important 
        as the security dimension of our relationship with Pakistan is, 
        this heavily military tint to U.S. aid has served to limit its 
        long-term effectiveness.
   The U.S. aid effort in Pakistan has also been skewed by the 
        ease of working with the Pakistani military, in some respects 
        the only functioning institution in the country. This too has 
        encouraged an approach in Washington that gives precedence to 
        the security component of the relationship.
   And finally, the political reality in Washington is that it 
        is infinitely easier for the Pentagon to secure congressional 
        approval for large sums of money to be spent overseas than for 
        the State Department and its aid arm. This is a political fact 
        of life at any time, but the shock of 9/11 tilted the political 
        balance in Washington even further toward the Pentagon.

    Given the modest record of the American aid program in Pakistan in 
recent years, I am pleased that a review of the U.S. assistance program 
to Islamabad is now under way. However, I am troubled that Congress 
apparently intends that this review should be carried out primarily by 
the executive branch. I would suggest that the historical record of 
such reviews over the years raises questions whether a study conducted 
by the agencies, and perhaps even the same individuals, responsible for 
the program in the first place will meet the level of independence, 
thoroughness, and incisiveness Congress expects.
    In addition, I am even more concerned by indications that moneys 
funneled to Pakistan through the U.S. Department of Defense will fall 
outside the purview of this review. Inasmuch as the great majority of 
U.S. assistance to Pakistan in recent years has come from the 
Pentagon--most notably, Coalition Support Funds (CSF)--I cannot 
conceive of any serious review that ignores DOD funding. I recognize 
that CSF is not customarily considered foreign assistance, but is 
ostensibly to reimburse the Pakistani military for expenses incurred in 
the joint fight against terrorists. But accounting procedures for these 
transfers appear so lax that it is impossible to say with any 
confidence how much of the CSF spigot actually reimburses Pakistan for 
counterterrorism operations. I would urge this committee, Mr. Chairman, 
perhaps working with other Senate committees, to provide for a 
thorough-going review of all U.S. aid and other transfers to Pakistan 
since 2001 by a fully independent body.

          U.S. ASSISTANCE AND THE POLITICAL CRISIS IN PAKISTAN

    Since the imposition of emergency rule in Pakistan last month, 
Washington has seen considerable discussion concerning how the United 
States should react to this unfortunate development. Some of this 
discussion has featured calls for the suspension of some or all of the 
U.S. assistance program to Pakistan. Other analyses have viewed the 
declaration of emergency rule as a further indication that U.S. policy 
in Pakistan has failed, and called for a rethinking of the entire U.S. 
aid program. With this as the context, I offer a handful of general 
observations that ought to guide U.S. decisionmakers in thinking about 
American assistance, both between now and the Pakistani parliamentary 
elections announced for January 8, 2008, and beyond that point as well.
1. American aid as a two-way bargain
    Some analysts argue that since supporting Pakistan at this crucial 
time is so clearly in the U.S. interest, this should be sufficient 
justification for the Pakistan aid program. We should not, so this 
argument goes, expect anything specific from Pakistan in return.
    I reject this argument. American assistance, to Pakistan as to all 
recipients, should be thought of as a two-way bargain, not simply an 
act of altruism. The United States has every right to expect something 
in return for U.S. aid. It is not unreasonable, for instance, to demand 
that U.S. assistance be spent and managed efficiently, honestly, and 
only for the purposes for which it is intended. It is not unreasonable 
to insist that U.S. aid not be used to undermine other important U.S. 
objectives. These expectations apply to all recipients of American 
assistance.
    In the case of Pakistan, administration officials have never 
adequately explained why Washington should not expect that vigorous 
U.S. support requires vigorous Pakistani support in return. At no 
point, so far as I know, has a senior American official made the 
commonsense observation that a Pakistani failure to live up to its 
commitments in our joint enterprise will lessen U.S. obligations in 
this mutual partnership. Nor has the administration ever spelled out at 
what point Pakistani misbehavior would cause Washington to rethink the 
virtues of the blank check. It is little wonder, then, that the results 
of America's support for Pakistan have been so meager.
2. Failure to balance U.S. objectives
    The United States has a long history of failing to calibrate its 
objectives for Pakistan in a balanced fashion. The national priorities 
of the two countries have seldom lined up precisely, although neither 
has been eager to draw attention to this disconnect. In the early 
decades of the cold war, Washington allowed its desire for a staunch 
anti-Communist ally in South Asia to blind it to the fact that for 
Pakistan, India was the real enemy. As a consequence, American 
officialdom was also largely oblivious to the impact its military 
assistance to Islamabad was having in New Delhi--a shortsightedness 
that greatly handicapped America's relations with the region's largest 
power.
    Following Moscow's invasion of Afghanistan in 1979, U.S. 
policymakers eager to arm Afghan opponents of the Soviet occupiers paid 
scant attention to the extremist views of the Afghan jihadis their 
Pakistani friends were recruiting with CIA funds. Many of those whom we 
are fighting today first honed their insurgent skills with American 
guns and moneys.
    In the aftermath of the September 11th horror, the administration 
has allowed its understandable preoccupation with punishing those 
responsible for the attacks to obscure other equally important 
priorities--combating domestic extremism within Pakistan, building 
strong political institutions, supporting constitutionalism and the 
rule of law, stopping the leakage of dangerous nuclear technology. 
This, too, has skewed the overall U.S. assistance program to Pakistan 
by channeling the overwhelming preponderance of U.S. assistance to 
institutions and personnel who are frequently least sympathetic to the 
progressive, moderate Pakistan we wish to see established.
3. Beware of a counterterrorism justification that justifies all
    A senior administration official in the immediate aftermath of 
Musharraf's November 3 imposition of emergency rule stated that while 
all U.S. aid to Pakistan would be reviewed, Washington would be 
``mindful not to do anything that would undermine ongoing 
counterterrorism efforts.'' Such a declaration would seem to make 
eminently good sense, were it not for the fact that the administration 
has tended to explain and defend virtually all U.S. assistance to 
Pakistan in terms of counterterrorism. One wonders whether Musharraf 
did not read this official's remarks to mean that he could safely 
ignore calls from the administration to restore constitutional rule.
    Of course we must avoid any action that disrupts military 
operations against our enemies. But to the extent that the Pakistani 
security apparatus has been employed since November 3 in rounding up 
lawyers, opposition politicians, journalists, and human rights 
activists--people who should be America's natural allies and best 
friends--it is difficult to argue that unqualified backing for 
Pakistan's military supports the war against terrorism.
4. U.S. inaction conveys messages just as forcefully as action
    Well-intentioned persons will warn against appearing to meddle in 
Pakistani affairs by threatening to suspend, pare, reprogram, or 
otherwise alter the U.S. assistance package at a sensitive moment in 
Pakistan's political life. Given the present unpopularity of the United 
States in Pakistan, this is not advice to be dismissed. But it ignores 
the reality of American power.
    In fact, U.S. influence in Pakistan is so pervasive that silence or 
inaction on Washington's part constitutes meddling just as much as 
blustery rhetoric or coercive legislation. Pakistanis will draw 
conclusions about Washington's position and preferences regardless of 
whether the White House or Congress endorses or condemns, issues tepid 
equivocations, or remains absolutely silent. These conclusions will not 
simply influence the actions of Pakistan's central actors. They will 
also further the perception in Pakistan that the United States is 
trying to manipulate political events in that country.
    In other words, given America's power and influence, it is 
literally impossible to avoid meddling, ever if that is Washington's 
intent. Counsel to stay out of affairs we do not fully understand, no 
matter how wise in theory, does not provide adequate guidance to 
policymakers.
    Under these circumstances, it behooves us to stand with those who 
should be our natural friends in Pakistan--small ``d'' democrats, human 
rights activists, civil society, the media, and the lawyers who have 
led the protests against the government's attack on judicial 
independence. Doing so not only supports our values, it also helps lay 
the groundwork for an enduring United States-Pakistan partnership once, 
as is inevitable, Musharraf passes from the scene. And--although this 
is not guaranteed--it may also help garner public support in Pakistan 
for a serious fight against extremism.
    Congressional actions taken, or not taken, with respect to the aid 
program in Pakistan, either before the January 8 polling or after that 
election, should reflect an awareness that Washington's every step will 
be closely scrutinized in Pakistan. Congress should not hesitate to 
act, if action becomes appropriate, for fear of appearing to manipulate 
or meddle in Pakistani events.
5. Be mindful of history, but not bullied by it
    Administration officials are rightly sensitive to the widespread 
perception in Pakistan that the United States is an unreliable ally, 
that Washington uses Pakistan for its own purposes and then walks away, 
and therefore that Pakistani decisionmakers ought not put all their 
eggs into the American basket. This at times has produced an American 
approach that subordinates contentious issues for fear of exacerbating 
Pakistani distrust or apprehensions of abandonment.
    This narrative of American ``betrayal''--widely endorsed in the 
United States as well as in Pakistan--points to the termination of most 
U.S. assistance to Pakistan in 1990 (pursuant to the Pressler 
amendment) as a result of Pakistan's nuclear weapons program as exhibit 
No. 1. It is something of a mystery why this historical memory 
emphasizes only the American half of the ``betrayal,'' while ignoring 
the fact that Pakistan repeatedly lied to the United States about its 
nuclear activities over a period of many years, even though Islamabad 
knew full well that U.S. law required invocation of the Pressler 
amendment unless Washington could certify that Pakistan's nuclear 
program was exclusively peaceful in nature.
    If the United States and Pakistan are to build a successful 
partnership for the long haul, the stripping away of the mythology 
behind this relationship--of which this narrative of American perfidy 
is a prime example--must be a priority. In considering possible action 
on the U.S. aid program to Pakistan, American policymakers must take 
Pakistani sensibilities into account. But U.S. officials should not be 
cowed by a distorted mythology of American betrayal.
6. Be sensitive to Pakistani political realities
    American officials must accept the fact that both the Musharraf 
government and any likely successor government will be constrained in 
what it feels able to do by Pakistani public opinion. While Musharraf 
is sometimes viewed as a military dictator, in fact his freedom of 
action is determined in part by what he believes the public will 
tolerate. And one factor in his current low standing among the Pakistan 
public today--though by no means the only one--is the widespread 
perception that he has sacrificed Pakistani interests in order to cozy 
up to the Americans. ``Busharraf'' is a widely used term of derision 
for the Pakistani President.
    Under these circumstances, it will be extremely difficult, if not 
impossible, to obtain Pakistani cooperation for any U.S. action that 
suggests American dictation. And this is undoubtedly how many 
Pakistanis would interpret any effort to create benchmarks or impose 
conditions on future U.S. assistance. This is not an argument against 
congressional action of this sort; under many circumstances, such 
action may make eminent good sense. But American decisionmakers should 
not move in this direction without being mindful of the probable 
reaction in Pakistan.
    This warning against actions that might be perceived as American 
bullying or coercion will be equally valid for any government that may 
be formed following next month's elections, and especially should that 
government be headed by Benazir Bhutto, who already seems to have lost 
support in Pakistan because of the perception that she is America's 
preferred candidate.
    Such cautions against the perception of American dictation pertain 
particularly to counterterrorism. The war in Afghanistan, so utterly 
justified in American eyes, is hugely unpopular among Pakistanis. 
Expecting Pakistanis to demonstrate their gratitude for American 
assistance by working closely with the United States against Taliban 
and al-Qaeda fighters in FATA or elsewhere in Pakistan is to court 
disappointment.
7. Be modest in our expectations
    We should be very careful not to overestimate the amount of 
influence over Pakistan U.S. aid gives us. Many Americans assume, 
without much reflection or analysis, that Washington's lavish aid to 
Islamabad affords the United States immense political leverage over 
Pakistan. Other analysts point to America's vastly superior strength 
vis-a-vis Pakistan as the source for this supposed leverage. In either 
case, so the argument goes, the United States should be able to use 
this leverage to persuade, entice, or coerce Pakistan into a more 
effective counterterrorism partnership and/or a more democratic 
political system.
    It is, however, no easy matter to translate great power into 
influence. Members of this committee will surely recall that neither 
the threat (in the 1980s) nor the imposition (in the 1990s) of U.S. 
sanctions terminating American assistance was sufficient to persuade 
Islamabad to toe the American line on its nuclear program. The 
difficulty of leveraging even a huge aid program into political clout 
was once again illustrated last month by the administration's inability 
to dissuade President Musharraf from declaring emergency rule.
    In reality, the United States has very little ability to force 
Musharraf--or any other Pakistani leader--to act contrary to what he 
believes his interests are, or to compel Pakistan to do what it would 
not otherwise do. While American assistance serves a variety of U.S. 
interests, its utility as leverage is highly overvalued. As an 
instrument of coercion, U.S. aid is an exceedingly blunt weapon.
    Unfortunately, the administration has gone to the other extreme, 
and in essence given Pakistan a free hand, no matter how half-hearted 
or incomplete its collaboration with the United States. Not only has 
this approach eliminated whatever modest leverage our aid program might 
have given us. In the eyes of many Pakistanis, it has also placed the 
United States on the wrong side in Pakistan's domestic political 
struggle for a more democratic government.
8. Build for the future
    In fact, American assistance, if employed deftly, can give the 
United States tools with which to nudge Pakistan in desired directions. 
The U.S. Congress could lay out political or economic benchmarks in 
return for the continuation of certain forms of U.S. assistance, 
especially that unrelated to the battle against extremism or designed 
to meet basic human needs. Assistance to meet basic human needs, such 
as medical care, clean water, and schools, should in my judgment never 
be held hostage to the performance of a particular Pakistani 
Government; it constitutes one of the most tangible signs of a U.S. 
commitment to a long-term partnership with the Pakistani people.
    What of using the American aid program now either to punish 
Musharraf for his declaration of emergency rule, or to pressure him to 
open up the system and permit genuinely free and fair elections in the 
near future? In truth, the likelihood of successfully pushing Musharraf 
to embrace the sorts of democratic reforms that might well end his hold 
on power is not very great.
    Nonetheless, actions that bear no fruit in the near-term may 
produce significant results in the longer term. Ronald Reagan's 
denunciations of the ``evil empire'' did not cause the Soviet Union to 
collapse, but his words inspired hope and courage throughout the former 
Soviet bloc, and won countless friends for the United States.
    And so it might be in Pakistan. At a minimum--and perhaps this is 
the most that one can reasonably expect--we might do a better job of 
laying the groundwork for a post-Musharraf United States-Pakistan 
partnership that would enjoy broad popular support in both countries. 
Using the U.S. assistance program as a form of coercion may not bring 
short-term gains. But by speaking out on behalf of what we call 
American values, and by supporting those Pakistanis whose values 
parallel our own, U.S. aid may help prepare the way for a more 
sustainable relationship in the long run.

                       MUSHARRAF IS NOT PAKISTAN

    Pakistanis are fond of saying that events in their country are 
determined by the three As: Allah, the army, and America. Though 
frequently uttered in jest, the adage also captures an underlying 
fatalism and willingness to avoid blame that is endemic to Pakistan. 
Only Pakistanis can write the history of their country. Only Pakistanis 
can determine whether Musharraf's avowed goal of a moderate, 
progressive Pakistan will be achieved.
    But as they take up this task in the months and years ahead, the 
United States owes it to its Pakistani friends to remember that support 
for a particular Pakistani leader is not the same as supporting 
Pakistan. We have seen too much of the former in recent years. It is 
high time that we renew our commitment to the country and its people, 
who, after all, will remain long after Musharraf passes from the scene.

    Senator Menendez. Thank you all for your testimony. We'll 
go through a round of questions and the Chair recognizes 
himself.
    Dr. Hathaway, I just wanted to pick up from some of your 
observations a little earlier in your testimony. You heard me 
ask the Secretary to give him another shot about making the 
record pretty clear. Do you believe that the course that we're 
on, 28 days before the election, which is the date in which the 
emergency decree is going to be lifted, that we can really 
consider the elections good, transparent, and fair at the end 
of the day? And if so, what has to happen from here to then to 
make that all happen?
    Dr. Hathaway. I think all of us are hesitant to prejudge it 
but what I will tell you, Mr. Chairman, is this: I've been in 
close contact, including trips to Pakistan, but I've been in 
close contact with Pakistanis who have been warning me for well 
over a year now, under current conditions, there's no chance in 
the world that we can have free and fair elections.
    I don't think any of the concerns that have been raised and 
Secretary Boucher mentioned a number of them, I don't think any 
of those concerns have been adequately addressed. It has not 
yet been mentioned but it frequently is mentioned, including in 
Senator Daschle's report: Intimidation and harassment by the 
Pakistani intelligence services. The fact that polling places--
there's a likelihood that the polling places will not be 
clearly designated. The fact--and this took place in an 
election not long ago, maybe a local election. Women were 
simply excluded, were not allowed to vote, even though legally, 
they had every right to vote.
    What has to be done? I think there is a whole host of 
things. A necessary though not a sufficient step is to 
immediately lift the emergency rule. We have to give all 
parties and all politicians' equal access to the media and it's 
not at all clear that that's going to happen. You have to have 
a real electoral commission. Again, what others who are far 
better informed than I have told me is that no one believes in 
the current electoral commission.
    Senator Menendez. That's a lot in a little over a month.
    Dr. Hathaway. And that's only the beginning of my list but, 
yes, sir; it is.
    Senator Menendez. Dr. Korb, $10 billion. Do you think we 
should be talking to A.Q. Khan?
    Dr. Korb. Very definitely. I mean, again, if you go back to 
the 2004 campaign, the one thing Senator Kerry and President 
Bush agreed on was that a nuclear weapon or nuclear technology 
falling into the hands of a terrorist group of a global reach 
was the greatest threat to the United States and here is the 
person who can tell us more about where that is than anybody 
else. So if the fact that we haven't used that leverage up to 
now, I think it's high time that we did this, particularly the 
military. Now, the military wants to buy a lot of this 
equipment and things and they're the ones, I think, that can 
lean on the government and if you do have a different 
government there, a government that is not under the control of 
President Musharraf, they may be more willing to do that. But I 
think some part of the aid has got to be conditioned on.
    Senator Menendez. Why do you think we haven't used our 
leverage in that respect and why do you think there is 
resistance to give us access to him?
    Dr. Korb. Well, I think that people are concerned that we 
will not get the help we want from Pakistan. They overemphasize 
the help they've actually given us in terms of fighting the war 
on terror and I think there is also a legitimate concern that a 
lot of our effort in Afghanistan, supplies have to move through 
Pakistan. So I think that's a reason why people have been 
somewhat unwilling to do that. But I think it's clear we do 
have some leverage. I don't say use all the aid but I think 
that some portion of it, particularly the military aid, has to 
be conditioned on that.
    Senator Menendez. Finally, let me ask you about some 
statements both in your written testimony as well as in the 
report you coauthored. You call it the Forgotten Front and 
while it was focused primarily on Afghanistan, it did talk 
about Pakistan as well. You particularly mention there that 
there is very little United States support for Pakistan's civil 
society or moderate political forces. You also mention that 
there are many who believe that military aid is finding its way 
back to the Taliban because of linkages between certain groups 
in Pakistan's security forces. Do you want to comment on that 
for us?
    Dr. Korb. Well again, because we don't have any 
transparency or accountability, we're not quite sure what 
they're doing with that money. Some of it, probably because of 
lack of control, some sympathies, particularly among the so-
called ISI there, toward the Taliban would go there. Remember 
that many people in Pakistan perceive the Taliban as a check on 
what they see as India's influence in Afghanistan. So they're 
not completely unhappy with the Taliban's partial reemergence 
there.
    Senator Menendez. Finally, Ambassador Schaffer, I heard 
your testimony and I know you testified before this committee a 
little over 2 years ago about our strategy. Then, you 
recommended that focusing on counterterrorism alone is a false 
choice and the United States should use assistance in three 
different ways and you reiterated one of those today again, the 
economic assistance. You talked about rebuilding institutions 
in that testimony. I think you mentioned that today again. How 
would you prioritize the institutions that we pursue trying to 
help rebuild directly?
    Ms. Schaffer. I would certainly put the judiciary very high 
on the list. Now, when you're talking about assistance, what 
you are talking about is what I believe Mr. Kunder referred to 
before, assistance to help in the functioning of the judiciary, 
and I think that is an appropriate thing for us to be doing 
with our assistance. It doesn't solve all the problems with it 
but it's one of the things you can do with aid.
    I would also say that it's very important to continue with 
technical assistance for a smoother functioning Parliament 
although I suspect that countries with a parliamentary system 
may be better placed to do that than we are, because a lot of 
the traditions that are so important in the United States 
Congress hinge on separation of powers and that doesn't exist 
in Pakistan. So it really is a different political environment.
    The other one is the civil service, which may sound odd 
because the Pakistani Government has always had a very strong 
civil service, but it has been much hollowed out through the 
years. There was a brave but ultimately not very successful 
attempt at reforming the income tax service to increase 
professionalism and reduce the temptation to be corrupt. I 
would love to see that picked up again but if you're talking 
about institutions, these are the ones that are where I think 
the United States can make some kind of a difference.
    Senator Menendez. Thank you.
    Senator Lugar.
    Ms. Schaffer. Could I say one word about A.Q. Khan, though?
    Senator Menendez. Surely.
    Ms. Schaffer. At the risk of being out of step with my 
colleagues with whom I basically agree, yeah, we certainly 
should get access to A.Q. Kahn. But before we start thinking 
about what kind of heavy artillery we're going to deploy in the 
attempt, I think we also ought to think about how much we are 
likely to learn 5 years later.
    Benazir Bhutto, when she spoke in Washington just before 
she went back, was asked the same question and she said, no; 
she wouldn't make him available to the United States but she 
would make him available to the IAEA and she was absolutely 
pilloried for it. This is something that any government of 
Pakistan will find very difficult and the fact that it's been 5 
years actually makes it harder.
    Senator Menendez. I respect that. I'd still like to know.
    Ms. Schaffer. Right. So would I.
    Senator Menendez. Who he sold to and what he sold because 
that would give us a network to pursue. And I find it very 
difficult to understand $10 billion later why--whatever 
information that would be of value at this point could not be 
deduced by having the opportunity to have access to him.
    Senator Lugar.
    Senator Lugar. Thank you, Mr. Chairman. I understand the 
panel has stated in one form or another that President 
Musharraf is not indispensable. Despite all of the thought that 
had been given by some of the administration that he was 
indispensable, but I just want to try to trace through the 
testimony we've had, who we anticipate will perform various 
functions. Specifically, if our Government is looking to 
Pakistan to be an ally against terrorism in the form of al-
Qaeda and/or the Taliban, who, in fact, do we look to, to be 
responsible for those results?
    Ms. Schaffer. I think that what you're likely to get after 
the election is a situation where you will have at least two 
and possibly three people who are involved in power. The two 
will be Musharraf and the Chief of Army Staff. The maybe third 
will be the Prime Minister. If it's a Prime Minister from 
Musharraf's party, this isn't going to be somebody who counts 
for very much.
    Ultimately, what you need to have in order to have an 
effective cooperation with the Pakistan Government, is not just 
the military but the political legitimacy that goes with an 
elected government moving the political needle and mobilizing 
more of the Pakistan people behind the kinds of things that we 
both agree need to be done, which very much includes defending 
the state of Pakistan against violent attack.
    Senator Lugar. Well, we've received testimony to that 
effect for several years but what is being described today is 
the reality; namely these 23 days before an election January 8, 
for which our Government has offered some technical assistance 
and yet we're not certain who the competitors may be and what 
sort of knowledge the voters will have of this election process 
and, therefore, what emerges is something short, obviously, of 
that hoped for ideal.
    Now, we can indicate that we require more but we're not in 
a position, nor is it our nature, to direct Pakistanis to in 
fact affect the kind of democracy that we believe they ought to 
have in order to have the basis for effective government. So I 
get back to the realities of the current predicament, and 
you've answered that in a sense that there may be three persons 
who we look to for performance here, because this is critical 
for our troops, especially for the areas next to Afghanistan in 
the immediate future as opposed to the evolution of Pakistan 
down the trail.
    Ms. Schaffer. Senator, we faced a very similar situation in 
the 1990s. It was referred to at the time as the Troika, first 
with Benazir Bhutto and then with Nawaz Sharif as Prime 
Minister and in each case, they shared power with the 
President, who was a strong figure although he did not come out 
of the military, and with the Chief of Army Staff. It wasn't 
the most comfortable organization to work with. I was in 
government at the time and was on this beat. It was something 
we were able to cope with.
    You expressed concern about whether the people of Pakistan 
would be able to figure out what their choices were. That's 
actually something I'm not particularly worried about. The 
strength and weakness of the political system is that they've 
got these parties, which have, I think, quite good brand 
identity. The bad news is that they're also wholly owned 
possessions of one person or one family.
    So I think people will perceive that in voting for a PPP 
candidate for Parliament or a Muslin League candidate for 
Parliament, they are supporting whoever the leader is and they 
will perceive that in spite of the fact that Nawaz Sharif is 
unlikely to be eligible to run himself.
    Making the whole system work may be a bit of a challenge 
but it is worth that extra challenge if you get an increase in 
political legitimacy. My worry is that we may not see that.
    Senator Lugar. We're all worried about that.
    Dr. Hathaway. May I add something to that, Senator? The 
Pakistani Army is a professional, highly disciplined army. They 
have, for the last 8 years, for reasons that we're aware, been 
distracted by all sorts of other responsibilities that are not 
necessarily their principal responsibility. I think if the army 
can step back from the job of running the country and devote 
full time to the job of maintaining the security of Pakistan, 
it may well be that they will be able to have greater success 
than they've had to date, in defeating what I think most of the 
senior people in the army understand, is a tremendous threat to 
Pakistan's integrity and Pakistan's security.
    Now, what you need and what you haven't had, particularly 
over the last year, is a political leadership who has 
legitimacy and who is supported in a country, who can then go 
to the people and convincingly make the case that this battle 
against domestic extremists is a battle for Pakistan, for the 
future of your children. This is not a battle that has been 
foisted upon us by Washington. This is something that we have a 
direct and immediate stake in. If you have a government who has 
legitimacy because it's popularly elected, then perhaps that 
government will be better able to make that case while 
simultaneously, you will have a professional army not 
distracted by all these other responsibilities unrelated to 
security.
    Senator Lugar. In the short time I have, let me just follow 
on that. What if the army or the military take the position 
that in fact, this democracy is not particularly legitimate; 
that about 30 percent happen to participate in this election or 
maybe less than that and you say they value the fact they've 
got to fight for the Pakistani people. They feel that very 
strongly. So perhaps in the tradition of some countries we've 
seen in our hemisphere, the military decides that all things 
considered, in order to further Pakistan quite apart from the 
war against terrorism, the military ought to be in charge. In 
other words, we're sort of back to ground zero again. Mr. 
Musharraf is no longer in uniform but somebody else is and, as 
a matter of fact, the people of Pakistan may feel the stability 
and the confidence that comes from all of this although 
temporary, all things considered, is the way they ought to go. 
What are the possibilities of that being the evolution of this 
current scene?
    Dr. Hathaway. You can't rule it out but at the same time, 
Pakistan is not a Banana Republic and I believe--I'll let my 
other colleagues speak for themselves, but I believe very 
strongly that the Pakistani Army wants to get out of the 
business of running the country; that they do see this as a 
distraction and as something which has an adverse impact on 
their professionalism. So I certainly am not going to tell you 
that it's not possible, but I think if the army has its choice, 
it will gladly hand at least the appearance of power over to a 
civilian Prime Minister. Obviously the army is going to retain 
a very important role, particularly on security issues. But I 
think they're eager to get out of the business of running all 
aspects of the country.
    Ms. Schaffer. But the army's interest in making some kind 
of a move is going to depend critically on whether they think 
their former Chief Musharraf can still hack it.
    Senator Lugar. Thank you, Mr. Chairman.
    Senator Menendez. Thank you, Senator Lugar. Well, let me 
thank our witnesses for their testimony today and for their 
insights. The record will remain open for 2 days so that 
committee members may submit additional questions to the 
witnesses and we would ask that----
    Dr. Korb. Mr. Chairman, may I--since you referred to our 
report on Afghanistan----
    Senator Menendez. If you'd just give me one moment so that 
we may ask the witnesses to respond expeditiously to these 
questions.
    Dr. Korb.
    Dr. Korb. Yes, since you referred to our report on 
Afghanistan, may I enter that into the record?
    Senator Menendez. Without objection.

[Editor's note.--The report ``The Forgotten Front'' submitted 
for the record by Dr. Korb was too voluminous to be printed in 
this hearing. It will be maintained in the permanent record of 
the committee.]

    Senator Menendez. And with that, the hearing is adjourned.
    [Whereupon, at 4:47 p.m., the hearing was adjourned.]
                              ----------                              


       Additional Questions and Answers Submitted for the Record


Responses of Assistant Secretary Richard Boucher to Questions Submitted 
                 for the Record by Senator Joseph Biden

    Question. You testified that the Department of State ``must concur 
on the reimbursement'' of all claims for Coalition Support Funds 
submitted by the Government of Pakistan, and that ``Embassy Islamabad 
is working with the Department of Defense and the Government of 
Pakistan to make the Coalition Support Funds reimbursement process more 
supportive of U.S. policy goals and to ensure that we get maximum value 
for the money expended.''
    Please provide the committee with a complete list, preferably in 
electronic format, of all claims in excess of $1 million submitted 
since September 11, 2001, by the Government of Pakistan for 
reimbursement from Coalition Support Funds.
    Please provide the committee with the total number of requests for 
reimbursement from Coalition Support Funds made by the Government of 
Pakistan, and the total number of such requests that have been denied 
or sent back for clarification. Of those denied or sent back for 
clarification, please provide details on the request, and on any 
subsequent action (i.e., which of these requests were resubmitted and 
eventually granted).

    Answer. Claims are submitted through the U.S. Embassy where they 
are reviewed for completeness and accuracy and then endorsed. They are 
then reviewed by U.S. Central Command which validates the link to U.S. 
military operations. The Office of the Secretary of Defense 
(Comptroller) evaluates the claims to ensure costs are reasonable and 
credible based on the documentation provided, obtains concurrence from 
the Department of State, and then prepares a determination for the 
Deputy Secretary of Defense to sign a notification to Congress. Once 
the 15-day congressional notification period expires, the Comptroller 
releases funds to the Defense Security Cooperation Agency for payment 
to Pakistan.
    The State and Defense Departments work closely together on the 
consideration of reimbursement claims and each claim is examined 
closely by both Departments. Any decision to reject a claim or send it 
back for clarification is made jointly by both Departments. As the 
Defense Department is responsible for oversight of Coalition Support 
Funds, reimbursements, it maintains the records necessary to provide 
the details requested here. Consequently, for further details on 
Coalition Support Funds and a list of claims, we would refer you to the 
Department of Defense.

    Question. Please provide a list of all weapons systems primarily 
designed for purposes of external security currently scheduled for sale 
or transfer to Pakistan, with dates of scheduled transfer and dollar 
value of the transaction. A weapons system primarily designed for 
external security (for the purpose of this question) may be informally 
defined as one primarily designed for conventional combat against a 
rival state, rather than one principally intended for counterterrorism 
or counterinsurgency.

    Answer. Pakistan remains one of the most active countries in 
supporting U.S. efforts in the war on terror. While most of the 
``conventional'' weapons listed below may have been designed primarily 
for external security, Pakistan has dedicated many of these weapons to 
support its counterterrorism efforts. The Government of Pakistan's use 
of TOW 2A missiles in the Federally Administered Tribal Areas and its 
F-16 sorties along the border region, to cite two examples, exemplify 
how ``conventional'' weapons can be effectively used in 
counterterrorism operations. In fact, much of the equipment procured by 
the Government of Pakistan has been used in its counterterrorism 
efforts along the border and in the tribal areas at some point during 
the past 6 years.
    The items below, with dates of scheduled transfer and dollar value, 
are currently on case as ``conventional'' weapons systems for transfer 
to Pakistan. Some are being purchased with Pakistan's own funds, while 
others may involve funds from Foreign Military Financing account.

   AN/TPS-77 Radars:

     Cost: $100 million
     Schedule: All six already in country; first turnover will be 
            February 2008

   Phalanx CIWS x 6:

     Cost: $79.7 million
     Schedule:
        Phalanx 1: Scheduled for September 2008
        Phalanx 2: Scheduled for October 2008
        Phalanx 3: Scheduled for November 2008
        Phalanx 4: Scheduled for December 2008
        Phalanx 5: Scheduled for January 2009
        Phalanx 6: Scheduled for February 2009

   Tow 2A Missiles x 2014:

     Cost: $65.4 million
     Schedule: Earliest delivery January 2008

   P-3C Aircraft x 8:

     Cost: $295.33 million
     Schedule:
        P-3C 1: Delivered January 2007
        P-3C 2: Delivered February 2007
        P-3C 3-7: In refurbishment and update; delivery date unknown
        P-3C 8: Logistics spare aircraft

   Harpoon Missile x 100:

     Cost: $297.823 million
     Schedule:
        40 Air-launched: Delivered September 2006
        10 Ship-launched: Delivered September 2006
        10 Ship-launched: Delivered June 2007
        10 Ship-launched: Delivered September 2007
        30 Encapsulated: Still in production

   AIM-9M Missiles x 300:

     Cost: $47.548 million
     Schedule:
        44 Delivered June 2007
        36 Delivered January 2008
        Remaining 220 waiting for shipment

   F-16 C/D Aircraft x 18:

     Cost: $1.433 billion
     Schedule: Earliest delivery 2010

   Mid-Life Update (MLU) for F-16 A/B x 60:

      Cost: $890.954 million
      Schedule: Earliest delivery 2010

   F-16 A/B Modification of Excess Defense Article (EDA) 
        Aircraft x 12:

     Cost: $11.084 million
     Schedule:
        EDA 1,2: Delivered July 2007
        EDA 3-6: To be delivered in June 2008
        EDA 7-10: To be delivered in July 2008
        EDA 11-12: To be delivered in 2011

   M-109 Howitzers x 115:

     Cost: $86.442 million
     Schedule: 115 to be delivered from March 2008-March 2009

   AMRAAM x 500, AIM-9M x 200, JDAM x 500, BLU-109 x 700, MK-
        82/84 x 800:

     Cost: $666.507 million
     Schedule: Earliest delivery 2010

    Question. You have testified that ``Democracy requires accountable 
government institutions, including an independent judiciary, protection 
of individual human rights, a free and dynamic press, an atmosphere 
promoting open debate, and a vibrant civil society.''
    3a. Given that this sentence contains the sole mention of the 
judiciary in your testimony as prepared, please outline what specific 
benchmarks the administration will use to assess the extent to which 
President Musharraf has restored independence to the Pakistani judicial 
system.
    3b. Given that all judges and Supreme Court Justices unwilling to 
swear an oath to uphold edicts issued during the suspension of the 
Pakistani Constitution were forcibly retired and replaced with 
candidates willing to take such an oath, can the judiciary as currently 
structured truly be deemed ``independent''?
    3c. What specific benchmarks will the administration use to assess 
the degree to which President Musharraf has restored accountable 
government institutions, protected individual liberties, permitted the 
operation of a free and dynamic press, and restored an atmosphere 
promoting open debate and a vibrant civil society?

    Answer. There has historically been great tension between the 
executive and judicial branches of government in Pakistan, under 
civilian and military governments alike, causing similar periods of 
political uncertainty. A long-term solution is required and will take 
the energies and attention of the political parties and the government. 
Given the proximity of parliamentary elections in Pakistan and the 
political sensitivity of the specific issue of reinstating the deposed 
justices, we doubt that Pakistan can productively address this issue at 
this time. But addressing independence of the judiciary--a key pillar 
of democracy--will be incumbent upon the new Pakistani Government that 
emerges post-election.
    We leave the question on the status of the court for Pakistani 
legal authorities to determine and for the Pakistani people to decide. 
The U.S. supports a vibrant and independent judiciary and will continue 
to urge Pakistan to respect the rule of law as it transitions to a new 
civilian democratic government.
    Our benchmarks for democracy, government accountability, protection 
of individual civil liberties, and freedom of the press in Pakistan are 
the same benchmarks that we use with any other country. Specifically, 
we have asked the Government of Pakistan to ease restrictions on the 
media, lift the media code of conduct, and release remaining prisoners, 
including Aitzaz Ahsan and former Chief Justice Chaudhary. The ``Annual 
Country Reports on Human Rights Practices'' published annually by the 
Department of State documents a range of issues including the rule of 
law, civil liberties, and press freedoms.

    Question. You testified that, even after the unconstitutional and 
destabilizing actions taken by President Musharraf since November 3, 
``We believe that maintaining funding levels for Economic Support Funds 
and Foreign Military Financing is crucial.'' You also testified the 
modest steps back from full martial law announced by Musharraf over the 
past 2 weeks are due in part to ``the constant pressure from the 
international community, especially the United States.''
    4a. If maintaining current funding levels of aid to Pakistan is 
publicly declared to be ``crucial,'' what sort of pressure--other than 
mere rhetoric--has the administration applied to President Musharraf?
    4b. If financial levers are taken off the table, what possible 
``pressure'' would the administration consider applying if Musharraf 
stages a flawed election (as you testify you believe to be likely), or 
if he fails to take the other steps you describe as necessary to return 
Pakistan to the democratic path?

    Answer. Throughout the state of emergency, we had an ongoing dialog 
with President Musharraf in which we urged him to end emergency rule. 
We have seen progress, and President Musharraf has taken promising 
steps to advance Pakistani democracy. He resigned as Chief of Army 
Staff on November 28, 2007, and restored the constitution by lifting 
the emergency on December 15. Led by Ambassador Patterson, the U.S. 
Embassy in Pakistan has been very active meeting with parties across 
the political spectrum, encouraging their participation in the February 
18 vote and stressing to the Pakistani Government publicly and 
privately that we expect the election to be free, fair, credible, and 
transparent.
    The U.S. Government will continue to engage in an active dialog 
with the Pakistan Government emphasizing the need to create the 
conditions for free, fair, credible, and transparent elections--
including the need to lift remaining media restrictions and release all 
political prisoners. We have already urged the government to prevent 
interference by state agencies, clarify election observer guidelines, 
restore media freedoms, and release prisoners who remain under house 
arrest.
    Maintaining our close relationship with the Pakistanis, especially 
with regard to assistance, actually furthers our own national interest. 
It also allows us to remain influential. Disengagement is not a 
realistic or productive option, as demonstrated by the years during 
which assistance to Pakistan was cut off. Pakistan is too critical to 
our national security. We ``lost'' a generation of Pakistanis when we 
halted much of our assistance during the 1990s. Neither Pakistan nor 
the United States can afford to go down that path again.

    Question. You have announced plans to projectize $200 million in 
ESF funds for FY 2008. Are there any plans to projectize ESF funds in 
future years?

    Answer. In years past, direct budget support has been successful in 
helping the Government of Pakistan to not only increase spending on 
education and health expenditures but also improve delivery of those 
services. As I said during my testimony, we will use a new approach for 
FY 2008. ``Projectizing'' will seek to more efficiently use Economic 
Support Funds for programs that directly benefit the Pakistani people 
in areas of health, education, and job training. Although a final 
decision has not been made, we are working to ``projectize'' Economic 
Support Funds in 2009.
                                 ______
                                 

Responses of Assistant Secretary Richard Boucher to Questions Submitted 
               for the Record by Senator Robert Menendez

    Question. Military-Civilian Coordination: Please outline the 
management mechanisms and the reporting chain with respect to any 
military-civilian coordination in the design, planning, or 
implementation of assistance programs in Pakistan. Which programs are 
operated solely by one agency and which ones are implemented jointly?

    Answer. The Department of State's Director of Foreign Assistance is 
ultimately responsible for all assistance programs to Pakistan. Given 
that the vast majority of our security assistance funding is 
traditionally implemented by the Department of Defense, Defense will 
continue to play an important advisory role in security assistance 
policy. However, security assistance policy, as an integral element of 
U.S. foreign policy, remains the responsibility of the Secretary of 
State. As the primary interface between the Defense and State 
Departments, the Bureau of Political-Military Affairs manages the 
overall Foreign Military Financing and International Military Education 
and Training programs, while working with the regional bureaus within 
the new foreign assistance process run by the Director of Foreign 
Assistance.
    U.S. Ambassadors have an important role to play in making 
recommendations as to which countries should receive military 
assistance as well as providing oversight over the execution of 
programs, end-use monitoring and human rights vetting.
    Although 1206-funded programs draw on Defense Department resources, 
funding the programs requires the Secretary of State's full 
concurrence. This requirement ensures the programs' complete fidelity 
to U.S. foreign policy objectives. In practice, this has meant close 
coordination between U.S. Ambassadors and Combatant Commanders in the 
field, as well as between the Departments of State and Defense in 
Washington. This collaboration has produced programs that closely match 
the military needs of our partners to the overarching goals of U.S. 
foreign policy.
    Working closely with State's Bureau of Political-Military Affairs, 
the Department of Defense's Defense Security Cooperation Agency 
implements the Foreign Military Financing, International Military 
Education and Training, and 1206 programs. Each provision of military 
equipment provided to Pakistan is carefully reviewed by the Department 
of State to ensure that it will not fuel an arms race in the region and 
is monitored by the Defense Security Cooperation Agency to ensure 
proper end-use and compliance with the Arms Export and Control Act and 
the Foreign Assistance Act.
    The U.S. Agency for International Development does not implement 
any programs with the military. The only exception was the case of 
humanitarian relief following the 2005 Kashmir earthquake, where the 
support of the U.S. Armed Forces was vital in providing life-saving 
logistical support.

    Question. Oversight: Please describe the steps the Department of 
State and USAID will take to provide effective oversight of all the 
assistance programs in Pakistan to ensure that all the resources are 
used for their intended purpose. What legal and administrative 
oversight mechanisms exist?

    Answer. Assistance funds disbursed by the U.S. Agency for 
International Development are subject to that agency's audit 
requirements. With the exception of $200 million in annual budget 
support which is audited by the U.S. Agency for International 
Development and an independent audit agency and guided by mutually 
agreed ``Shared Objectives'' most funds pass through U.S. partner 
grantees and contractors. We have clear, established controls and 
financial records for this portion of our assistance program. All U.S. 
Agency for International Development contracts and grants are 
supervised by trained personnel to ensure the activities expend 
resources to obtain the agreed-upon objectives. Regular financial 
audits are performed. Evaluations of projects occur after they end, 
and, in some cases, there are mid-term evaluations. In addition, the 
U.S. Agency for International Development has hired additional staff to 
increase project monitoring.
    In particular, the annual $200 million budget support funds are 
managed by the Government of Pakistan through the Ministry of Finance 
and the Accountant General of Pakistan/Revenue. The U.S. Agency for 
International Development Mission in Pakistan monitors these funds at 
the national budget level to assure that the U.S. Government 
contributions are used in accordance with the agreements. The 
Department of State, the Agency for International Development, and 
Treasury meet annually with Pakistan's Ministry of Finance counterparts 
(most recently in April 2007) to review Pakistan's progress in 
achieving our ``Shared Objectives'' before the grant is disbursed. To 
ensure greater efficiency of use, the U.S. Government in 2008 plans to 
end the direct cash transfer and instead will fund projects through the 
U.S. Agency for International Development.

    Question. FATA Strategy: Provide a comprehensive strategy and 
program description of at least the first 2 years of the $750 million 
program for the FATA region. How was this mix of programs determined? 
Which agencies were involved in the strategy development? Provide an 
illustrative list of potential U.S. Government partners who may have 
the capacity to implement such programs.

    Answer. The Tribal Area Strategy was created to advance our 
objectives in the Global War on Terror. The United States will help the 
Government of Pakistan recast its relationship with the country's 
Federally Administered Tribal Areas and work to alter the economic and 
development landscape. The U.S. and Pakistan agree there can be no 
purely military solution to the problem of violent extremism in the 
tribal areas. Weak economic fundamentals, rampant unemployment, a lack 
of social services (including education and health care), and an 
inadequate government presence breed social and political instability 
in the border region. Countering extremist influences in tribal areas 
will require a robust multiyear program that will address not only 
security concerns, but economic, developmental, and governance 
problems.
    The U.S. Agency for International Development and the U.S. 
Department of State prepared a 5-year, $750 million Tribal Areas 
Strategy that supports the Government of Pakistan's 10-year, $2 billion 
Federally Administered Tribal Area Sustainable Development Plan. The 
three-pronged Tribal Areas Strategy has economic, development, and 
governance components. The programs provided through the U.S. Agency 
for International Development support short- and medium-term service 
delivery, while addressing the capacity constraints of government 
agencies to deliver essential services with speed and effectiveness. 
The Tribal Areas Strategy strengthens and expands ongoing U.S. efforts 
in infrastructure improvement, education, health, and economic growth. 
In addition the strategy will support Pakistani efforts to improve 
livelihoods, which has been identified as the tribal areas' principal 
immediate need. Community participation and buy-in as well as building 
the capacity of government agencies to deal effectively with 
communities is critical to long-term success.
    In November 2007, the U.S. Agency for International Development's 
Office of Transition Initiatives launched its portion of the Tribal 
Areas Strategy, focused on building confidence and trust between the 
Pakistan Government and tribal area communities through a consultative 
approach that identifies and implements small community-improvement 
projects.

    Question. Coalition Support Funds (CSF): How do the Department of 
State and the Department of Defense coordinate on the use of Coalition 
Support Funds (CSF)? What formal and informal coordination mechanisms 
exist? What is the step-by-step process for approval of the receipts 
for reimbursement for the Coalition Support Funds?

    Answer. The Department of Defense is responsible for oversight of 
Coalition Support Funds reimbursements. Claims are submitted through 
the U.S. Embassy where they are reviewed for completeness and accuracy 
and then endorsed. They are then reviewed by U.S. Central Command which 
validates the link to U.S. military operations. The Office of the 
Secretary of Defense (Comptroller) evaluates the claims to ensure costs 
are reasonable and credible based on the documentation provided, 
obtains concurrence from the Department of State, and then prepares a 
determination for the Deputy Secretary of Defense to sign a 
notification to Congress. Once the 15-day congressional notification 
period expires, the Comptroller releases funds to the Defense Security 
Cooperation Agency for payment to Pakistan. For further details on 
Coalition Support Funds, we would refer you to the Department of 
Defense.
                                 ______
                                 

  Responses of Acting Deputy Administrator James Kunder to Questions 
           Submitted to the Record by Senator Robert Menendez

    Question. Military-Civilian Coordination: Please outline the 
management mechanisms and the reporting chain with respect to any 
military-civilian coordination in the design, planning, or 
implementation of assistance programs in Pakistan. Which programs are 
operated solely by one agency and which ones are implemented jointly?

    Answer. USAID does not implement any programs with the military. 
The only exception was in the case of humanitarian relief following the 
earthquake, where the support of the U.S. Armed Forces was vital in 
providing life-saving logistical support.

    Question. Oversight: Please describe the steps the Department of 
State and USAID take to provide effective oversight of all the 
assistance programs in Pakistan to ensure that all the resources are 
used for their intended purpose. What legal and administrative 
oversight mechanisms exist?

    Answer. All USAID contracts and grants are supervised by trained 
personnel to ensure the activities spend resources in order to obtain 
the agreed upon objectives. Regular financial audits are performed. 
Evaluations of projects after they end--and in some cases earlier for a 
mid-term evaluation--are part of our business approach. USAID has been 
hiring additional staff to increase project monitoring.
    The $200 million budget support funds are managed by the Government 
of Pakistan (GOP), through the Ministry of Finance and the Accountant 
General of Pakistan/Revenue. The USAID Mission in Pakistan monitors 
these funds at the national budget level to assure that the USG 
contributions are used in accordance with the agreements. The 
Department of State, USAID, and Treasury meet annually with Pakistan's 
Ministry of Finance counterparts (most recently in April 2007) to 
review Pakistan's progress in achieving the ``Shared Objectives'' 
before the grant is disbursed.
    In addition, USAID's Regional Inspector General/Manila has done an 
assessment of the capacity of the Auditor General of Pakistan (the 
Supreme Audit Institution of Pakistan) and found them capable of 
performing audits at acceptable levels of quality. USAID's Regional 
Inspector General has asked the Supreme Audit Institution to perform 
the audit of the Cash Transfer. USAID's Regional Inspector General/
Manila will approve the scope of work for the audit and the audit 
reporting package. The Regional Inspector General also conducts quality 
control reviews of the working papers onsite to ensure quality.

    Question. FATA Strategy: Provide a comprehensive strategy and 
program description of at least the first 2 years of the $750 million 
program for the FATA region. How was this mix of programs determined? 
Which agencies were involved in the strategy development? Provide an 
illustrative list of potential U.S. Government partners who may have 
the capacity implement such programs.

    Answer. The FATA Development Program was created to help win the 
Global War on Terror. In order to do this the United States must help 
the Government of Pakistan recast its relationship with the country's 
Federally Administered Tribal Areas (FATA).
    Since late 2001, Taliban and al-Qaeda elements have exploited 
FATA's loosely governed and impoverished environment to plan and launch 
attacks on Afghan, Pakistani, United States, and NATO forces in 
Afghanistan and Pakistan. Despite successes in the Pakistan military's 
campaign against terrorists and militants in FATA, the U.S. and 
Pakistan agree there can be no purely military solution to the problem. 
Factors such as a weak economy, rampant unemployment, a lack of social 
services, and an inadequate government presence breed social and 
political instability in the region. Countering extremist influences in 
FATA will require, among other approaches, a robust economic 
development program implemented with the support and assistance of the 
U.S. and the international community.
    In response to these issues, the U.S. Agency for International 
Development and the U.S. Department of State prepared a 5-year, $750 
million development strategy for FATA that supports the Government of 
Pakistan's 10-year, $2 billion FATA Sustainable Development Plan. The 
strategy supports short- and medium-term service delivery, while 
addressing the capacity constraints of government agencies to deliver 
essential services with speed and effectiveness.
    The FATA development strategy strengthens and expands ongoing U.S. 
efforts in infrastructure improvement, education, health, and economic 
growth. In addition the strategy will support Pakistani efforts to 
improve livelihoods/jobs, which has been identified as the principal 
immediate need in FATA. Community participation and building the 
capacity of government agencies to deal effectively with communities 
will be critical to long-term success.
Long-Term Goals
    1. Improve economic and social conditions in FATA communities: The 
people of FATA currently lack the most basic of economic opportunities 
and social services. There are few employment opportunities and a 
woefully inadequate number of functional hospitals and schools. U.S. 
support of Pakistani objectives will focus on employment generation and 
skills development, basic education, primary health care, 
infrastructure and agriculture, and media and public outreach. A key 
programmatic area of U.S. assistance in the short term will be the 
establishment of employment generation programs that will provide 
thousands of unskilled laborers in FATA with opportunities to build 
their communities while gaining market-applicable skills.
    2. Enhance the legitimacy and writ of the Government of Pakistan in 
FATA: Taliban and al-Qaeda elements are able to become established and 
successfully operate in FATA largely because the Government of 
Pakistan's writ does not extend into most of the region. Generally, 
people in FATA live in remote, impoverished conditions, abide by tribal 
codes rather than Pakistani law, and do not benefit from Pakistani 
Government services. A major goal of the U.S. development strategy in 
FATA will be enhancing the Government of Pakistan's capacity to deliver 
essential services in FATA, including water and sanitation, health 
care, education, and road repair. Improved government access and 
delivery of services will help extend the influence and writ of the 
government in FATA.
    3. Support permanent, sustainable change: It is ultimately the 
responsibility of local inhabitants, civil society, government and the 
private sector to permanently transform FATA from an impoverished, 
ungoverned space into an economically productive and politically stable 
region of Pakistan. Therefore, throughout program implementation, the 
USG will be mindful that its aim is to leave in place the essential 
mechanisms--local institutions, governance structures, and economic 
models--that FATA residents can use to sustain economic growth, social 
service improvements and political stability.
    The FATA Development Program was designed in consultation with the 
U.S. Country Team (Office of the Defense Representative-Pakistan and 
Department of State-Narcotic Affairs Section (NAS)), USAID/Washington 
and other major bilateral and multilateral donors in Pakistan, 
including from Britain, Japan, Norway, and the Asian Development Bank.
Implementation Arrangements
    Both USAID and the Department of State have done extensive planning 
for implementing the FATA Development Program.
    NAS will utilize its existing implementation arrangements in 
expanding its road program. NAS is planning to assist with the 
establishment of an infrastructure unit within the FATA Secretariat to 
expedite implementation of its infrastructure activity. Preparations 
for a levy training center (local law enforcement) are well advanced 
and NAS will be in a position to begin contracting as soon as funds 
become available.
    USAID will utilize a number of implementation arrangements to 
operate its capacity-building, livelihoods development, and service 
delivery programming. Implementing partners will include a mix of U.S. 
development firms, nongovernmental organizations, community-based 
organizations and public international organizations. Agreements will 
be through competitive procurements, grants, and indefinite-quantity 
contract mechanisms.

Capacity Building: USAID is in the concluding phase of the award of a 
Capacity Building Development Program under an existing indefinite 
quantity contract mechanism to accelerate the implementation of 
activities in the second quarter of FY 2007 in the following areas:

   Develop operational plans for each agency and frontier 
        region;
   Establish monitoring and reporting systems;
   Improve capacity of government agencies to develop implement 
        and manage development programs at the agency and community 
        level;
   Improve the capacity of FATA NGOs to develop, implement, and 
        manage development programs;
   Develop media strategies for government institutions;
   Improve coordination of civil/military activities;
   Identify long-term capacity, organizational, and policy 
        issues for Government agencies.

Livelihoods Development: USAID has initiated the procurement of a 
Livelihoods Development Program through full and open competitive 
applications directed at establishing a community-based program 
implementing activities in the second quarter of FY 2007 in the 
following areas:

   Creating jobs, increasing incomes and teaching employable 
        skills with a focus on unemployed youth;
   Revitalizing community infrastructure and essential 
        services;
   Supporting established businesses and developing new 
        sustainable businesses.

Service Delivery: USAID's Office of Transition Initiatives (OTI) has 
conducted a FATA assessment and is now operational, having awarded 
grants to Creative Associates and IOM to engage in community 
mobilization (small infrastructure projects) and a media campaign to 
support/publicize community activities. OTI will work in four 
agencies--Orakzai, Kurram, Mohmand, and Khyber. USAID is also amending 
its current contracts and grants in health, water and sanitation, HIV/
AIDS, education and economic growth to include work in the FATA.

                                  
