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Wajiha Ahmed

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Pakistan's Post-Floods Reconstruction: Doing It Right

Posted: 10/21/10 12:27 PM ET

More than two months have passed since devastating floods -- larger in scale than hurricane Katrina, the Asian Tsunami, and the Kashmir earthquake combined -- first hit Pakistan, killing over 1,500 people and destroying the homes and livelihoods of one out of every nine Pakistanis, more than 20 million people. In its destructive path, the deluge swept away thousands of schools, hospitals, dams, and kilometers of road -- in short, over one-third of the country's infrastructure. While the emergency response is on-going, Pakistan and the international donor community face the daunting task of the reconstruction that lies ahead in the coming months and years.

Ordinarily, a natural disaster of this magnitude should elicit an overflow of aid money, but donors concerned about corruption in Pakistan may be hesitant to give. Giving money is the easy part, however. It is not unreasonable for countries, donors and aid agencies to be reluctant to provide funds when there is a real fear that much of the money could be misused and, therefore, not achieve the intended results

But Pakistan, like many nations in the global south, has its own grievances against the foreign aid machine. While we cannot blame all of Pakistan's woes on its long and complicated relationship with foreign aid, the fact is that despite billions of dollars in development assistance from the US and other bilateral and multilateral donors, poverty levels have not abated. Much of the American aid Pakistan has received has been targeted at the military, helping to entrench an already unbalanced Pakistani civil-military relationship.

Clearly, traditional aid has not always delivered desired development outcomes in Pakistan. It's time to try something new. Reconstruction has to happen, and the damage done by the floods is too big to ignore. The traditional aid model of paying for inputs upfront, and lending money to governments with the promise that certain results will be achieved, is simply too risky for the challenge ahead. Billions of dollars injected into an environment of corruption, lack of political will, and political instability, can often merely reinforce underlying structural problems instead of reducing poverty or building-up infrastructure.

If every cloud has a silver lining, then this disaster presents an opportunity for the aid community to take a critical look at past aid paradigms and reflect on how it can deliver better results for the people of Pakistan. As the World Bank's Vice President for South Asia Isabel Guerrero emphasized, accountability and transparency in post-floods reconstruction will be key to attracting finance and assuring donors that aid will reach the people who need it most.

One strategy to help reduce corruption and ensure that reconstruction funds reach targeted beneficiaries is to pay on outputs or results. Output-based aid (OBA) or results-based financing (RBF) mechanisms - in which governments, businesses or NGOs are paid after they achieve pre- agreed results - have gained currency in development circles. Results-based approaches have been piloted in many of the sectors that will be high-priority for reconstruction. For example, in energy output-based aid has successfully delivered off-grid technologies, such as solar home systems, helping to reduce persistent lack of rural access in Bangladesh, Sri Lanka, and other countries. These technologies can help Pakistan, a country already facing a severe energy crisis, recover from fresh flood damage to its electricity and power grids. Pakistan can also pilot performance-based contracts for road and highway construction, which have become mainstreamed in parts of Latin America. These strategies can be leveraged in additional high priority sectors, building on the experience of current and past results-based interventions in water and sanitation, telecommunications, and health.

Results-based approaches are not a silver bullet: experience shows that they are more effective in some contexts than in others, and that they rely on an enabling environment to succeed. Nevertheless, they present several advantages. Since donors have minimal input on project design or technology choice, results-based approaches promote local solutions, offering a workable compromise at a time when many Pakistanis are wary of foreign interference. Further, they can help to assure donors that funds will be used as intended. A core component of output-based aid, for example, is the independent verification of outputs before payment to the service provider is made. Essentially, this approach places the risk of non-delivery on the service provider, not on donors or governments as has traditionally been the case.

Donor communities can't afford to repeat the aid mistakes of the past as Pakistan faces enormous challenges ahead. One-third of the country needs to be rebuilt and every effort must be made to circumvent Pakistan's structural problems, and encourage associated macro reforms. New and innovative aid strategies must be tested, and while results-based mechanisms are not a panacea, they do offer a potentially transformative tool to help rebuild Pakistan at this time.