U.S. Ambassador Anne W. Patterson Discusses The Future Of U.S.-Pakistan Relations

Karachi, January 6, 2010 - U.S. Ambassador to Pakistan, Anne W. Patterson, receives momento-shield from President of Overseas Investors Chambers of Commerce and Industry in Karachi. Ambassador Patterson addressed the members of the OICCI during her visit.

January 06, 2010

Karachi - In a speech to the Overseas Investors Chamber of Commerce and Industry in Karachi, U.S. Ambassador to Pakistan Anne W. Patterson called on Pakistan's business community to join with government in its partnership with the United States.  She asked the business sector to take action that will help bring to address what she called "the long-delayed aspirations of the Pakistani people for development and prosperity."

Lead quotes include:

"...recognizing our shared interests and concerns, our two governments have proclaimed a desire, at the very highest levels, to build a balanced, deep, and broad partnership.  The decisions and actions we take this year will have long-lasting implications for the future of this partnership - and we need help from you, the business community, and everyone else in Pakistan if we are to succeed."

"For you, the business leaders of Karachi, it has become abundantly clear that you must not remain on the sidelines.  In this new democratic framework, Pakistan's business leaders need to speak up and vigorously engage with government.  If you seek broader trade partnerships and engagement with the United States you have to make that clear to your government and to broader civil society as well.  Given the challenges Pakistan faces, the price of silence and inaction is high."

The full text of the speech follows below.

"Moving Forward: the U.S. and Pakistan in 2010"
Remarks Delivered By U.S. Ambassador to Pakistan Anne M. Patterson at OICCI, Karachi - January 6, 2009

Mr. Farrukh Khan, the OICCI President.  Members of the OICCI Managing Committee.  Ladies and Gentlemen.  Good morning and Happy New Year.

Thanks for your warm welcome today.  It's always a pleasure to be back in Karachi, this vibrant metropolis and business capital of Pakistan.  At the same time, I am deeply saddened by the recent terrorist violence that has rocked your city, leaving so many people dead and injured, and so much destruction.

For the United States, 2009 was a year marked by major changes in our approach to this region and, specifically, our way of engaging Pakistan.  President Barack Obama has personally taken a great deal of interest in Pakistan, and he has clearly chosen a new path that is worthy of your serious attention.

Here in Pakistan, 2009 was a year of great drama and also much heartbreak - but it also involved real changes and gave us hope for progress.  However, if we wish to see this New Year through to greater successes, our governments will need to focus intently on our priorities, make some critical decisions and take action.

The U.S. and Pakistan have had a complicated relationship in recent years.  We need to overcome what U.S. Secretary of State Hillary Clinton called "a trust deficit" on both sides.  Yet, recognizing our shared interests and concerns, our two governments have proclaimed a desire, at the very highest levels, to build a balanced, deep, and broad partnership.  The decisions and actions we take this year will have long-lasting implications for the future of this partnership - and we need help from you, the business community, and everyone else in Pakistan if we are to succeed.

Some of the work we must do will be difficult for people on both sides.  Yet, for America's part, President Obama has decided that the United States must commit both substantial funds and our influence in the international community to a renewed partnership with Pakistan.  The President's vision for this new partnership is based on his trust in your democratically elected government's ability to deliver much-needed services to the Pakistani people.  I am convinced that President Zardari and Prime Minister Gilani are committed to strengthening Pakistan's democratic governance, economy and civil society - but our government-to-government partnership will need the advice and expertise of Pakistan's business community and other NGOs to succeed.

Political Context

Let's take a look at our bilateral relationship.  Foreign policy and development assistance are complex matters - but in these areas, as in business, effective leadership is indispensable.

Last year at this time, Pakistan was marking the first anniversary of Benazir Bhutto's assassination and the period of uncertainty that preceded and followed the reestablishment of democratic governance.  During that period, America went through our own political transition - and I would like to briefly revisit the series of events that bring us to today.

The inauguration of Barack Obama as President of the United States was a remarkable turning point for the United States - for many reasons -- and his Administration has fundamentally recast America's relationship with Pakistan.

Although quickly clear to those of us who work in foreign policy, the changes promised by the President to the American people and to the world have only recently begun to manifest themselves.

President Obama famously recounts his youthful visit to Pakistan.  I know for a fact that he is genuinely interested in the country and its welfare.  The President clearly believes the U.S. did not do enough in recent years to help Pakistan find its way back more quickly to democracy - and he took early action to initiate policy changes.

The Administration appointed Richard Holbrooke as Special Representative for Afghanistan and Pakistan, reflecting the desire of both the President and Secretary of State to provide leadership for the diplomatic and civilian elements of our policy, which many felt had been too heavily tilted toward military engagement.

Working closely with senior members of the Congress, the Administration immediately endorsed a large assistance package to help Pakistan strengthen its energy, education, health, and agricultural sectors.  The Kerry-Lugar Bill, as its come to be known, promised $1.5 billion per year for five years - $7.5 billion total - for civilian assistance to Pakistan, beyond the approximately $2 billion provided for military assistance in separate legislation and authorizations.

For a new American government to make such an extraordinary commitment while our citizens are still suffering from a very serious recession reflects the strength of our vision.  We see the success of Pakistan, its economy, its civil society and its democratic institutions as important for ourselves, for this region and for the world.

Many of you will recall Secretary Clinton's visit here in October during which she conducted an extraordinary set of public meetings, interviews and outreach events over a four day period that really had people in Pakistan talking.

Secretary Clinton told it like it is:  We must overcome the "trust deficit" between the U.S. and Pakistan on some matters in the interests of both nations; and, the U.S. is committed to building a broad and deep strategic partnership with democratic Pakistan, reflecting our desire to see your country's institutions renewed on your own terms.

The announcement by President Obama of his new Afghanistan policy in December marked a change in the direction of our military and civilian engagement in that country, with important consequences for Pakistan.  I personally participated in many of the President's meetings.  He clearly articulated for the American people and for the world in his December 1 speech - and later upon receiving the Nobel Prize for Peace - the need to oppose evil in the world, specifically al-Qaeda terrorists - but also pointed out that we do not believe in, or desire, war without end.

President Obama also strongly underscored the importance that the U.S. attaches to its relationship with Pakistan.  He sent his National Security Advisor, General Jim Jones, here to brief your leaders with a clear message that the United States is prepared to help Pakistan meet all of its legitimate security concerns.

Pakistan already has a democratic government capable of taking charge of its own security and guiding the development of this nation.  It has a strong and vibrant civil society and an energetic business sector.  For Pakistan, America's vision is simply this:  a genuine partnership across the range of your domestic and international concerns.

Implementation of our Policy

For an open and transparent society like the United States, the announcement of policy is but the first step in seeing change of action on the ground - and our government has been hard at work to get funds moving and programs underway.

As a measure of trust in your government's commitment to benefit the Pakistani people to the maximum extent possible, we are now working more closely than ever to coordinate closely on development assistance.  We intend to channel as much of our assistance as possible through Pakistani institutions.  There is much work to be done:

Poverty remains a serious problem for this country - with 100 million Pakistani citizens, over 60% percent of the population -- living on less than Rs 165/day ($2/day).  This year, we plan to contribute substantial sums to fight poverty through the Benazir Income Support Program; to support reconstruction in Malakand and South Waziristan; and to undertake community development projects through the Pakistan Poverty Alleviation Fund.

Pakistan faces many health challenges.  We plan to continue our support to programs that will reduce this country's high incidence of child and infant mortality; prevent life-threatening diseases like polio through vaccination; and assist the government's efforts to provide access to clean drinking water in both urban and rural areas.

We share your deep commitment to education.  All of our aspirations for our children and the world they will inherit depend upon their abilities to obtain an adequate education.  The United States will be expanding our efforts to assist your institutions of higher education and to support expanded access to high-quality public primary and secondary education in vulnerable and disadvantaged areas of the country.

Pakistan's economy relies heavily on agriculture.  We plan to embark on major initiatives to support reforms for the agricultural sector to increase crop yields, household incomes and decrease the cost of agricultural inputs.

Power shortages continue to constrain Pakistan's economic growth.  Currently, the United States is underwriting several significant "quick impact" energy projects that will improve the energy availability across the country and help to alleviate the load shedding that cripples commerce and is the source of suffering to millions of Pakistanis. 

• We have already begun work to upgrade the generation efficiency at four power plants -- Tarbela, Muzaffargah, Guddu, and Jamshoro - that are expected to add over 350 MW to the national grid; 
• We are working with farmers, on a cost-sharing basis, to replace or repair up to 11,000 inefficient or poorly functioning tubewells across the country - a step that will conserve electricity during peak demand hours; and 
• We will work with the government to improve the performance of four public distribution companies that annually lose between 30 to 50 percent of the electricity they purchase - a massive waste of energy and money.

For all of these important initiatives, Americans and Pakistanis want to know how this assistance works and how funds are being used.  For our part, we plan to be as transparent as possible - we will be placing every new partnership agreement transferring significant funds up on our web site so that everyone can see what our countries are achieving together and where the money is going.

Pakistan's Fight against Terrorism

Although our broad civilian engagement is taking center stage, the security dimension of our partnership cannot be overlooked.  The ill-advised plan for entente with the terrorists who took control of Swat last summer was a wakeup call for us all.  Once they took over Swat, the terrorists showed no mercy to those who opposed them and swiftly began the implementation of their own vision for Pakistan - a place where girls cannot attend school and people live in constant fear. 

Fortunately, the Pakistan Army moved in - to the cheers of the Nation - and after cleaning up Swat has moved on to the FATA.

During their current offensive against terrorists in South Waziristan, the Pakistan Army has earned the respect of the Pakistani people, and of the United States.  Although there have been many terrible losses along the way, the Army has shown that Pakistan has the will to defend its territory against those who wish to live free of the law.

This has not been without consequences, as the terrorists - deprived of their safe havens - have attacked civilians in every corner of Pakistan.  The terrorists who attack and kill innocent people at busy intersections, at the courts, at press clubs or in solemn prayer do not care about anything but power - and their ability to gain power by terrorizing this country.  The attack here in Karachi last week was clear evidence of terrorists' desire to seek out and exploit any fissures in Pakistani society, and to undermine your democracy.

As promised by President Obama, Pakistan deserves the support of the international community in its fight against terrorism.  The U.S. has pledged to assist Pakistan's military for the extraordinary burden it is bearing in the fight against extremists.

Economic Relations

Let's take a look at our business relationship in the global economic context.  At this time last year the global economy was in deep recession.  The crises that began in the U.S. banking sector spread throughout the world and both investor and consumer confidence fell dramatically, resulting in what we all have come to see was a huge and near-catastrophic series of events in financial markets.

At the same time, the government's mounting deficits, declining foreign reserves, and soaring inflation brought Pakistan to the verge of default.  However, in cooperation with the International Monetary Fund, the Government of Pakistan -- and its exceptional economic team -- has done a commendable job of stabilizing the economy this year.

Although crises have been averted, Pakistan's growth has remained slow -- in the 2-3% range.  With so much to do, the government's budget remains constrained.  Pakistan will require support from the United States and your other friends around the world to keep afloat while the economy recovers.  Fortunately, Pakistanis abroad continue to send money to their families here - and the United States is the second largest source of remittances to Pakistan, bringing in nearly $2 billion annually.

To bring its budget into balance and to invest for the future, Pakistan must begin to raise more revenue from its own citizens.  At nine percent, Pakistan has one of the lowest tax-to-GDP ratios in the world.   Entire areas of Pakistan's economy are off limits to the tax collector and tax compliance is spotty.  As a result, businesses like yours pay 33% of all the nation's taxes. Pakistan cannot continue to ask international donors and its established business sector for support unless Pakistani citizens support the government with tax revenue.

Last year, the U.S. economy, one of the principal drivers of the global economy declined as orders for goods and service evaporated.  Unemployment in the United States has climbed to 9.4 percent and our own budget deficits have soared.

But even during these tough times, American business remains Pakistan's closest international partner.  The U.S. remains the number one source of foreign investment in Pakistan.  Over the past two years, U.S. businesses invested $1.2 billion in this country, more than a quarter of all such investment.  Our Mission has been organizing Pakistani business delegations to highlight for American investors the promising opportunities for investment in, and partnership with, Pakistani business.

Though global trading has slowed, our trading relationship remains robust.  Nearly one fifth of Pakistan's total exports go to the United States, some $3.5 billion of sales.  Of these exports, 74 percent were from Pakistan's textile industry.

The U.S. has made its choice - our belief in trade with Pakistan and this country's importance for the future is reflected in the new Consulate building we will open here in Karachi later this year.  We are also planning to build a new Embassy in Islamabad to replace our existing, aging facility - a seven year project will generate 20,000 construction jobs and hundreds of permanent positions.  Here in Karachi, we have already resumed issuing visas for business travel to the U.S.  When we open the new Consulate, staff will begin providing the full range of normal visa services to Pakistanis wishing to visit the United States for business or pleasure, to study or to see family.

Pakistan's Economic Policy Choices

As we saw, strong leadership by government economic policymakers in the U.S. and around the world had a huge impact on stabilizing the world's financial markets.

We also know that in the emerging global economy it is more important than ever before that governments must actively support important trade relationships - doing more to build stronger economies and nations than assistance programs could ever hope to achieve.

The Taliban-perpetrated violence that took place here in Karachi during Ashura was a terrible tragedy.  The rioting and destruction that took place in the days after the attack multiplied that tragedy many times as the businesses and livelihoods and savings of so many people were destroyed.  Some of these small businesses will have difficulty obtaining access to credit in the amounts that they require to start anew.

The long-delayed aspirations of the Pakistani people for development and prosperity need to be addressed.  We can no longer say that it's someone else's job - because in democracies the people are both in charge and responsible. There are a few outstanding economic choices that need to be addressed here in this part of Pakistan.  It's time to roll up our sleeves and get to work:

Container Security

To shield Pakistani exporters from the growing delays and associated costs resulting from greater security requirements in U.S. ports, our governments launched the Secure Freight Initiative in Port Qasim to provide Pakistan-based pre-screening for cargo headed to U.S. ports.  Our government is paying for this program to secure our ports and to facilitate Pakistan trade.  In 2009, 46,000 containers were screened at Port Qasim, saving Pakistani exporters millions of dollars.  That is because ships arriving in U.S. ports today are subject to delays while their cargo awaits screening, and the exporters are expected to pay the security screening costs.  

Because of this program's success, we are hoping this year to expand it to Karachi Port's two container terminals where we could check up to 100,000 containers each year.

Yet the Government of Pakistan has not approved long-pending visas for the handful of American inspectors who train the Pakistani employees working at Port Qasim.  So this program may shrink or even lapse this year.  Our proposals to expand this program to Karachi have also gone nowhere, as Government and port officials here have not set aside land for the program - delays that will cost Pakistan's exporters millions of dollars.

Copper and Gold Mining in Baluchistan

Foreign direct investment depends on the ability of the Government of Pakistan and the provincial governments to stand behind their agreements with international business partners.  Multinational corporations will not invest in a country where deals are cancelled in the 11^th hour.  Two major international mining companies were recently burned when the Baluchistan Provincial Government announced the cancellation of their long-negotiated contract to build a copper and gold mine in Reko Diq.  The result:  Pakistan has lost a $3.5 billion investment for one of its least developed regions, and the international business community grows increasingly wary of doing business here.

Afghanistan Transit Trade

Karachi will benefit greatly when, through the Afghanistan Pakistan Transit Trade Agreement, the region's growing network of roads from oil-rich and trade-starved Central Asia are connected to this city's large port through Afghanistan.

Formal trade between Pakistan and Afghanistan is $1.5 billion per year; the informal trade may be just as large.  There are people, especially those engaged in the transportation business, who fear the expanded access of Afghan trucks through Pakistan.  Afghanistan and Pakistan also need to work on means to reduce smuggling and improve border crossing procedures.  Yet we assess that the losses to Pakistan will be negligible, compared with the prospect of greater trade that will start slowly and build over the next decades.  Decisive action this year by to implement the Afghanistan-Pakistan Transit Trade Agreement will pay dividends to both countries for years to come.

Conclusion

If we had any doubt at all, the vicious attacks on a volleyball tournament near Peshawar last Friday and on an army barracks in Rawalkot earlier today assure us that 2010 will be a hard year.

A military buildup is underway in Afghanistan as the United States and the international community stand determined to decisively end al-Qaeda's reign of terror, not only in Afghanistan but elsewhere in the world.  There will, no doubt, be more attacks both here and abroad as the terrorists and their advocates seek power - and try to separate the people of Pakistan from the rest of the world.

For you, the business leaders of Karachi, it has become abundantly clear that you must not remain on the sidelines.  In this new democratic framework, Pakistan's business leaders need to speak up and vigorously engage with government.  If you seek broader trade partnerships and engagement with the United States you have to make that clear to your government and to broader civil society as well.  Given the challenges facing Pakistan, the price of silence and inaction is high.

As we stand together against extremist violence, our governments will be investing in the future by working together to strengthen Pakistan's schools and hospitals and agriculture and energy systems.  We will need support and engagement from this country's active business and civil society groups - because governments can't do it all.  I hope we can count on you to join us.