THE US secretary of state, Hillary Clinton, has urged wealthy Pakistanis to pay a higher share of taxes to reduce the country's dependence on foreign aid.

She especially pointed to the health and education sectors, which, as her administration is now realising, are in very poor shape in spite of the nearly $6bn aid provided by the US to Pakistan since 9/11 for civilian projects.

Obviously the expected impact is not being created and Ms Clinton now wants rich Pakistanis to shoulder their responsibility and pay more taxes. This should have been done much earlier. Economists in Pakistan have been pointing out for years that our tax to GDP ratio is dismal, our indirect taxation that hits the poor is exorbitantly high and tax exemptions on lucrative sectors like agriculture and real estate deprive the treasury of Rs400bn or so every year.

What Ms Clinton needs to ask is if all our problems will be resolved simply by reforming the tax structure and investing the funds generated in education. If investment is all that is needed, why haven't the billions of foreign dollars poured into various educational projects brought about some change? If America's greatest worry is the rise of extremism and militancy in Pakistan, it should understand that cosmetic reforms in education will make no difference whatsoever.

The fact is that a lot of damage has already been done, much of it caused by the policies of western donors. While pumping in official development assistance (ODA) worth $31.8bn in 1999-2009 into Pakistan, the donors — mainly the World Bank and the Asian Development Bank — imposed on us structural re-adjustment conditions. These demanded reduction in subsidies, imposition of charges on services provided by the state and promotion of privatisation. As a result the gap between the haves and the have-nots widened. Since ODA was mainly in the form of loans (only 14 per cent comprised grants) debt servicing took up as much as 75 to 80 per cent of the funds disbursed every year.

This had a direct impact on the education sector. Those who benefited from this unfortunate situation — the wealthy — did not have to worry about public-sector education that supposedly caters to the needs of the poor. That would explain the sudden surge in private educational institutions in the country in the last two decades. But not all these private schools are capable of imparting high quality education — many are no better than government schools with the exception that they actually function.

The Pakistan Coalition for Education (PCE), a research-based advocacy group comprising civil society organisations working for quality education for all, gives the data for the aid channelled into education in 2007 and 2008. The amount is quoted as being $652m out of the total ODA of $8bn that was disbursed. Mercifully only 33.4 per cent of this was in the form of loans that have to be repaid.

With Pakistan's education budget in this period standing at Rs549.2bn, the ODA amounted to more than 10 per cent of our education spending. Thus foreign donors acquired an extraordinary leverage in influencing the direction of our education policy.Hence the most obvious advantage that Ms Clinton's suggestion offers is that the government in Islamabad can, by lowering its dependence on ODA, hopefully regain its autonomy in policymaking in education. This should at least help it correct the distortions brought about by the massive influx of ODA. Of course, we presume that the government has the will and the foresight to rectify earlier mistakes.

The PCE document, the product of a diligent exercise, is a clear indication of how our policy has been influenced by foreign donors. In 2007, 74 per cent of ODA went to the category termed 'others' and primary education received only 13.4 per cent. The following year this trend was suddenly reversed and 51 per cent went towards funding primary education, with 'others' receiving seven per cent. This erratic pattern was also demonstrated in the ODA allocation for education. It dropped by 40 per cent in 2008 over the preceding year.

Where is this assistance going? The Fulbright scholarship programme for consultants/contractors for doubtful research and for support to the private sector since it was believed to be capable of delivering. But can this ad hoc approach catering to projects of short-term duration and having minimum financial commitment from the government's own budget work?

It is not even clear how much ODA is going into capacity-building and teachers-training that is needed for public-sector and low-fee schools where the children of the poor study. Today we hear of massive sums being spent on research and surveys of dubious quality with consultants being paid as much as $500 a day to traverse an already trodden ground.

Educating Pakistan's children is a permanent job and the policies adopted must be enduring, sustainable and self-reliant. But the ODA inflow has changed the scene. In a paper he presented at a symposium in Istanbul in October 2009, noted architect and social planner Arif Hasan shed light on the policy of aid donors and how it was affecting the Third World. He pointed out, “IFIs [have] promoted the concept of safety nets for the poor [who are victims of their aid policies] for which loans are provided and the role of NGOs in these programmes is being encouraged. Safety nets are serving a very small percentage of the affected population and NGO involvement with big funds available to them is adversely affecting NGO culture and its relationship with development policies and poor communities.”

In the case of education, many NGOs which were performing a useful service in providing training and support to small low-fee schools at nominal charges are now pulling out. Once organisations are flooded with easy money, the spirit of volunteerism recedes. Money is like seawater. The more you drink it the thirstier you get and the more you want.

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