Bush promotes debt cancellation in return for Pakistan's support

According to US Treasury Secretary Paul O'Neill, President Bush is trying to arrange for USD1 milliard in foreign debt owed by Pakistan to be forgiven as a "thank you" for assistance in combating terrorism and money laundering as well as increased trade and investment opportunities. In Karachi yesterday, Pakistan Finance Minister Shaukat Aziz: Bismillahir Rehmanir Raheem said "As you all know, the United States is the largest investor in Pakistan. Last year 67% of the foreign direct investment we had in Pakistan came from the U.S. -- over three hundred million dollars." Aziz went on to say that Pakistan was looking for USD1 milliard in foreign investment this year, and hoped that the lion's share would come from the USA.

But the USA's attitude to visitors from Asia remains problematic: Aziz was diplomatic in his speech but the frustration was clear: "we talked to the Secretary about availability of visas for our businessmen, and they were sure that is being looked at and the situation is getting better." Again, diplomatic language disguised the frustration with the USA's protectionist trade policies: "We've also discussed market access, and there are some tactical issues, and there are some longer-term issues, particularly for textiles. And on the tactical side, we will hope to get some response from the United States fairly soon, so that our goods can move freely into the U.S. Naturally there are bigger issues on tariffs, etc., which will be dealt with."

But the "biggy" so far as the USA is concerned is the issue of money laundering - Pakistan's efforts to deal with this have been at best a mess. Aziz is confident things are getting better: "I informed the Secretary that now in the Ministry of Finance, we have set up a single window to coordinate anti-money laundering policies, because many agencies of the government are involved: the State Bank, ICCP, the NAB, the law-enforcement agencies, Ministry of Interior, Ministry of Foreign Affairs. So we have tried to put everything together in one policy unit."

This was no surprise to O'Neill who had been able to tell Aziz that the USA has a measure before Congress to forgive Pakistan USD1 milliard in debt. But whether the measure is within the power of the USA to deliver is questionable. Only if the measure is to forgive money owed by the USA itself will it be effective. Debt owed to third parties may not be so easily forgiven where the beneficiary of any quid pro quo is the USA itself. But the measure is, in part, in recognition of Pakistan's efforts in denying comfort to terrorists who plan to attack the USA.