ignated by USOM, with a view to maximizing the training and assistance benefits of this contract to Pakistan.”

The several university contracts are designed to enable American university personnel to work directly with corresponding faculty members of specific Pakistan universities in the general fields of education, agriculture, engineering, business administration, and home economics.

Despite this stated policy of close working arrangements, the actual contracts are drawn between FOA and the American university, neither the host university nor the Pakistan Government being a party. The contracts call for the American universities to render services "under the general direction of the Director of the United States Operations Mission, pursuant to work plans agreed to by FOA, the (host) university, and the contractor."

The lack of contract provision for a direct and close relationship between the American institution and the Pakistan institution may put the USOM in the position of a constant intermediary and cloud the desired close and direct cooperation. In similar cases elsewhere, it has been found that the lack of a direct relationship between the United States and local institutions made the effective operation of the project more difficult.

In a broader context, the use of contracts with both private and public groups by FOA, in carrying out the technical cooperation and economic development program, seems to be an admirable way of securing high-caliber personnel and furthering a direct person-toperson relationship and generally advancing United States objectives.

In a major sense, the use of contractors in Pakistan may be likened to what in this country is called on-the-job training for the personnel in Pakistan. In view of the great need in Pakistan for both economic development and trained personnel, it has been the view of FOA that rather than putting large numbers of Pakistan personnel through training programs and then turning them loose on development projects which might be financed, as far as foreign exchange is concerned, by FOA, the better course is to bring in a qualified, competent firm to guide the construction of the development project and at the same time train the Pakistan personnel.

Internal disagreement within the Pakistan Government has apparently had its impact on some phases of the United States program, as is seen from an examination of the program expansion and modernization of a commercial fishing harbor at Karachi. Plans for. development of the harbor were worked out in 1952-53 by TCA and the Government of Pakistan, with an estimated total cost of $2.2 million, of which $0.78 million was the estimated external cost. FOA committed $0.75 million for the project out of fiscal year 1953 funds, but it appears that an actual start on the project was long delayed

1

because of a dispute between the Karachi Port Trust and the Pakistan Ministry of Agriculture over the location of the harbor. This disagreement is apparently moving toward a solution, but several years have elapsed since the project was first approved on a Federal level in Pakistan.

The fact that Pakistan is a Federal Republic has also had an important bearing on some phases of the program. The bilateral agreements are between the United States Government (FOA) and the Government of Pakistan, but in a number of cases they cover projects and undertakings which in Pakistan fall under the jurisdiction of the states or provinces. The East Pakistan road development training project is an example of this type of case, since the responsibilities for highways are split between the Federal and the State Governments in Pakistan, as it is in the United States, and a number of bureaucratic and administrative delays arose, not all of which were confined to the Pakistan Government. This kind of difficulty, which has affected a number of the projects, may, in part at least, be attributed to the lack of trained personnel in the Pakistan Government.

Wheat Programs

A lack of rainfall in the 1951-52 growing season caused poor harvests and a shortage of wheat in Pakistan. In order to meet the needs of its people, the Pakistan Government drew on its foreignexchange reserves to purchase wheat for import into the country and, as a part of this, secured a $15 million loan from the ExportImport Bank of the United States.

Again, in 1953, a more serious drought occurred and, because of a lack of foreign exchange, the Pakistan Government could not afford to import wheat. Under these circumstances, it appealed to the United States for emergency aid. After a survey mission verified the need for the grain, Congress approved (Public Law 77, 83d Cong.) a $70 million grant of wheat from the stocks of the Commodity Credit Corporation for Pakistan, plus loan of an additional $25 million, if needed, for 700,000 long tons of wheat for shipment to Pakistan. The first shipment was actually at sea within 24 hours of the time the law was signed, and a total of 610,000 tons of wheat, with a value of about $68 million, was actually shipped to Pakistan. In Pakistan, the wheat was sold to those who could afford to pay and given away to those who could not afford to buy it.

There may be room for some criticism of the program, inasmuch as only 61,000 tons were given away and 209,000 tons sold. The remainder, 338,000 tons, was placed in storage in Pakistan and appears to have been surplus to the immediate urgent needs of the

nation. The General Accounting Office has made an audit of this program, but the results of its review were not available as of February 28, 1955.

Whatever the shortcomings of the wheat program, it apparently generated a great deal of good feeling for the United States in Pakistan and is credited with playing a major role in preventing widespread starvation. The United States officials who worked in harness to get the program rolling and ship the first boatload, within hours after enactment of legislation, deserve praise. Government seldom moves this rapidly.

The emergency flood relief programs of 1954, amounting to about $10 million, fall in somewhat the same category. United States aid to flood victims in East Bengal and in Punjab was apparently timely and very well received by the people in Pakistan.

Commodity Aid Program

Aimed at easing the current economic situation of the country rather than at improving its long-range development, the commodity aid program in Pakistan is designed to supply those consumer goods and industrial raw materials which can make the greatest impact on the economic situation in Pakistan. At the same time, the availability of surplus commodities in the inventory of the Commodity Credit Corporation in this country is an important factor.

This type of aid apparently is computed by FOA as $45,500,000 for fiscal year 1955 ($5.5 million of the flood relief program and $40 million of the emergency commodity aid program).

Counterpart funds generated by this aid will be used for United States administrative costs, and for the economic development program of Pakistan.

Investment and Trade

Pakistan has now embarked on a full-scale, serious program to attract and encourage private investment and private industry, both internal and external, to aid the economic development of the nation.

Internally, in order to break the deadlock caused by the low rate of capital formation and the urgent need for development in diverse fields, the Government organized the Pakistan Industrial Development Corporation. This is a Government-financed corporation set up to initiate and encourage industrial development. Its main task is to see that important industries (such as chemicals, fertilizers, cement, sugar, iron and steel, and paper) are financed and started. It tries to encourage as much private capital as possible to participate, but, where

necessary, the corporation provides the entire investment. Then its objective is to dispose of the going concern to public subscription as soon as possible. Pakistan has also granted tax concessions to stimulate private industrial development.

Pakistan, in the words of the Prime Minister, also "appreciates that the realities of sound business practice require that we offer special inducements to foreign capital." These inducements include (1) no restrictions on repatriation of profits; (2) guarantee of repatriation of capital, capital gains, and reinvested profits in foreign investments made after September 1, 1954; (3) permission for foreign investors to hold up to 60 percent of the capital of a new industry, except public utilities.

The Department of State is now in the process of negotiating a treaty of friendship, commerce, and navigation with Pakistan, with high hopes for early success. Steps for elimination of double taxation have also reached an advanced stage of negotiation.

On the other side of the coin, Pakistan pursues a protective tariff policy with regard to infant industry (and almost every industry in Pakistan is infant).