Pakistan’s State Minister for Economic Affairs.

Hina Rabbani Khar

Hina Rabbani Khar is Pakistan’s State Minister for Economic Affairs. The State Ministers report directly to the Prime Minister and hold specific portfolios. In Hina’s case, she is responsible for international (multilateral and bilateral) grants and loans. Her Ministry is the official signatory for any project that is launched in Pakistan with foreign financial assistance. Her father, Ghulam Rabbani Khar, drove Hina’s entry into politics, setting her on a different path from the hotel management career she had been pursuing with great zeal. A graduate from the Lahore University of Management Sciences, Hina also holds a Masters from the University of Massachusetts. She is also one of the owners of the Polo Lounge, an upscale, popular restaurant located on the Lahore Polo Grounds. Meeting Hina was a refreshing experience on many levels: she is articulate, brilliant, enterprising, and very far-sighted for her age (not even 30 yet!). Moreover, she is humble, approachable, professional, and knows her job very well. We were able to call her on her cell phone and set up a meeting directly without having to go through her administrative staff, and she was there before we reached our meeting venue. At the end of the day, if we have more people like her in our government, perhaps Pakistan’s positive image won’t need any marketing beyond simply introducing them to the world!

Hina Rabbani Khar State Minister for Economic Affairs, Pakistan

Tell us about your official role and responsibilities in the Government of Pakistan...

Economic Affairs is the external arm of the Ministry of Finance; we manage Pakistan’s multilateral and bilateral economic relationships. On the multilateral side it includes the World Bank, the Asian Development Bank, and the Islamic Development Bank, primarily for Pakistan. On the bilateral side of course you have a host of countries. Basically I’m responsible for both the multilateral and bilateral economic relationships. Now within that paradigm, we are both givers and takers of any aid that comes into Pakistan. Givers and takers of aid both have their interests and striking a balance between their priorities and interests is the most important thing. We are also the official signatories to any project that will be launched in Pakistan with foreign assistance.

What is your Ministry’s main focus at present?

Prior to the earthquake Pakistan was becoming increasingly less of an aid taker. Over the last few years it has become very focused on the softer development side like education as well as hard-core infrastructure. With the earthquake everything changed. It is safe to say that in the last few months, our focus has been on the efficient utilization of the reconstruction funds, where my Ministry is extremely involved. We were on the table with all our requirements within a few days of the earthquake, and we knew what kind of assistance we would need, and also the kind of terms that would be viable for us. As such, the first thing to do was determine which of the pledges we wanted to convert to commitments. The second was to ensure there was very little red tape involved, which required knowing exactly what we were looking for and lay down the rules of accepting pledges and converting them into commitments.

With the earthquake everything changed. It is safe to say that in the last few months, our focus has been on the efficient utilization of the reconstruction funds

How do you feel about the pledges and commitments made for the earthquake, and the terms on which we got them?

Before and during the International Donor’s Conference on November 19, 2005, we had total pledges adding up to $6.2 billion. Of this, about $2.4 billion is in grants so there is no question about converting that. Out of the $4 billion loans, approximately $1 billion is from ADB, another $1 billion from the World Bank, a few from bilateral donors (e.g. Japan) and about $500 million from the Islamic Development Bank. We have negotiated about $3 billion and have commitments for $1 billion. A lot of pledges were not converted to commitments because of unfavorable terms or high interest rates. To preserve our national interest, we’ve kept this process demand-driven, not supply-driven. So at the end, I feel we have done really well. Everything is foretold in the multilateral loans and we can easily decide which ones are viable for us or not. In the bilateral arena, we are being very careful and not accepting any loans that have a commercial element. With the grant giving agencies, it’s just a matter of really choosing the areas in which they are giving grants. We are being very careful that there should be no duplication and that they are working specifically on the directions given by the Pakistani Government.

To preserve our national interest, we’ve kept this process demand-driven, not supply-driven.  In the bilateral arena, we are being very careful and not accepting any loans that have a commercial element. With the grant giving agencies, we are being very careful that there should be no duplication.

What about some public cynicism that donors weren’t as generous to the earthquake as they were to the Tsunami?

There is a fundamental and important difference between this disaster and the Tsunami. We did an analysis of the official pledges (excluding private pledges which cannot be fully quantified). Indonesia was the worst hit by the Tsunami and the total pledges (loans plus grants) were just above $5 billion, while the same figure for Pakistan was $6.2 billion. We get overawed by the Tsunami figures but forget that it was for five countries, while this disaster hit primarily a single country. Having said that, we did well on grants as well. In the Tsunami, five countries together got $1.2 billion from the US and we got $500 million just for Pakistan, which is very comparable. Other countries have given us a lot of significant grants. Saudi Arabia gave us $253 million. For one, a lot of grant assistance was going into the relief phase. Secondly, you have to remember that there was tremendous donor fatigue after the Tsunami and Hurricane Katrina. Then the earthquake hit at the end of the year (which is also the end of the fiscal year for most European countries), when donors were fairly empty-pocketed

Why take loans, and not work towards more grants?

When you are taking a loan, you are in a position to put your foot down and say where you want the funds to be used. When a grant giving agency comes in and says that we want to do a particular thing in a particular way, we can’t really say no to them and we have to adjust to their terms and conditions to quite an extent. The application of loan funds is entirely driven by the Government and we can take the responsibility for implementing the projects. This is in line with the Paris Declaration for Aid Effectiveness, which encourages donors and lenders to work through the Government and increase its capacity to do what is necessary for the country’s development. Grant giving agencies may not do that and they prefer to go through NGOs, which is great, but then who will take the responsibility for making sure that the reconstruction and rehabilitation happen according to plan and in order of priority? So the more influence and involvement the Government has in understanding and applying the disaster-impact knowledge to conduct the reconstruction and rehabilitation, and the more funding it has available to quickly and efficiently enable the effort, the sooner we will succeed in getting things back to normal. At the end of they day it’s our country and we don’t have to follow anyone else’s priorities but our own.

The application of loan funds is entirely driven by the Government and we can take the responsibility for implementing the projects. This is in line with the Paris Declaration for Aid Effectiveness.  At the end of they day it’s our country and we don’t have to follow anyone else’s priorities but our own.

What safeguards has the government built into the loan terms?

We are extremely careful not to take anything that is commercial credit. There are very clear criteria that we are stringently following, and only accepting those loans that have a clear and significant grant element due to the concessional terms and conditions. As an example, the World Bank has two windows of financing; there is the IDA financing and LIBOR based financing. IDA has no interest rate at all, a 0.75% commitment charge, and a 35-year repayment period with a 10-year grace period. If you take the NPV of this amount, and consider the concessions, it has a grant element of about 40%. The other is the LIBOR based loan, which is also really soft compared to other market alternatives, but we refused to take anything which was LIBOR based. With the other donors as well, they have gone out of their way to offer extremely concessional terms over and above their normal development assistance terms, which are already very soft. We are also being very careful that these funds are not used for consumptive purposes but are going entirely towards the reconstruction and rehabilitation efforts.

We are only accepting those loans that have a clear and significant grant element due to the concessional terms and conditions.

Is there any process in place for expediting the earthquake reconstruction efforts?

Normally, projects are initiated at the district or provincial level. Depending on their value, they are either approved at the provincial level by the Provincial Development Working Party (PDWP) or the Executive Committee of National Economic Council (ECNEC) which is chaired by the Prime Minister and meets once every 2-3 months. If there is a foreign donor involved, then the project is reviewed and processed by the Ministry of Economic Affairs, after which it can be financed. So the whole process takes few months. The government made a policy decision to cut this process really short and enable fast action for the earthquake reconstruction effort. We set up the Earthquake Reconstruction and Rehabilitation Authority, which is chaired by the Prime Minister, and its executive council is comprised of a representative of the Ministry of Finance, the President of Azad Jammu & Kashmir, the Chief Minister of NWFP, the Federal Minister for Northern Areas, and the Deputy Chairman of the Planning Commission. Basically it’s a heavily representative body, and every project above a certain amount has to be approved by this council. So the whole process has been cut short tremendously, because you can go straight from the District Level to the ERRA Council.

Establishment of the Earthquake Reconstruction and Rehabilitation Authority (ERRA) has [reduced] the process tremendously, because you can go straight from the District Level to the ERRA Council.

You recently made a statement on the need for fashion designers to innovate the rural textile industry, while speaking about the Aik Hunar Aik Nagar project. What prompted this interest on your part?

Yes, that is a project that has nothing to do with our Ministry but very close to my heart. We call it AHANG (Aik Hunar, Aik Nagar). It is financed by the ADB. It follows the Thai model of One Village, One Product. I had recommended it in a planning session and it got the approval of the Prime Minister and the Minister for Industries, Jehangir Tareen. It is his Ministry that launched a pilot with a clear goal, i.e. increase the returns for non-agricultural rural workers and craftsmen. The pilot areas are pottery, textiles, carpets, and silver jewelry. We picked small villages or small towns next to villages, and developed a different strategy for each pilot, based on the ground realities. We got the top designers involved (Rizwan Beyg, Noorjehan Bilgrami), to develop prototypes with the local craftsmen, giving them input and monitoring the quality, etc. while we provide the other resources. On the other hand, we have a design cell, where designers go through different prototypes and decide how to improve and market them. I must say I am very impressed with how forthcoming the designers were and how much commitment they have shown to this project. I keep telling them that we can have these fashion weeks and all, but we have to work on this project until I can quantify the returns that it is giving to the local craftsmen. I’m very excited about this. We have exceeded the five pre-requisites for turning this into a full-blown pilot. We still need to decide whether to help people help themselves or be more involved in the entire work-stream. We don’t have any preconceived notions. We have given ourselves till the middle of 2006 to have fully functional pilots. Let’s see how it goes!

Aik Hunar, Aik Nagar (AHANG): Goal: Increase the returns for non-agricultural rural workers and craftsmen Pilot underway in pottery, textiles, carpets, and silver jewelry. Leading designers working with local craftsmen to improve quality and designs.

In your opinion, what other initiatives do we need put Pakistan into high gear as far as economic growth is concerned?

Globally speaking, there has to be an emphasis on education, technological advancement, and science. Domestically, I feel, there are two things we need to focus on at the macro level – infrastructure and core competencies – in order to be a notable player in our region. Recently, I was in Kabul on a regional conference, attended by member countries from the OECD, ECO, and China was there too. It was extremely gratifying to see that in every other statement about regional connectivity, Pakistan was always mentioned as a key. So Pakistan should look at its strategic importance, because we really have that advantage. But, unless you have the infrastructure you can’t really take advantage of these regional opportunities. It’s not just about building roads; it has to be a full spectrum effort with trucking facilities, ports, etc. If you look at the ports in Karachi, we really lag behind international standards. This entire chain has to work. The second thing is our core competencies. Since 1999 we have almost doubled our exports. We need to move into value added items in our major areas like textiles. We need to diversify as well, for example like Sri Lanka's done with its gems and jewels trade.

Infrastructure: It’s not just about building roads; it has to be a full spectrum effort with trucking facilities, ports, etc. Core Competencies: We need to move into value added items in our major areas like textiles, and diversify like Sri Lanka's done with gems and jewels.

What is it like to be a young female working for the Pakistan Government, being that Pakistan is a male dominated society, with all these misgivings about our bureaucratic and administrative culture?

Being in the Federal Government is as good as it can get. There are no issues whatsoever with being a woman. It’s more positive than negative. In fact, I feel you get a lot more recognition and opportunities, and a lot of it has to do with how professional you are. Age does matter at times, because by any standard, I’m quite young to be in such a position. But there’s been a lot of on-the-job training and if you take yourself seriously, people will do the same. I have no complaints on either on the government or the donor side. Having said that, I don’t know if I can say that things would be the same with a different President and Prime Minister. Both our leaders are highly educated and professional and it makes a huge difference in the way the administration works.

In your opinion, what do you consider the positives and negatives about Pakistani society?

There’s been a revolution in the last few years. I graduated in 1999 from LUMS. In six years, there’s been a paradigm shift. It’s a move towards modernization and westernization, and I don’t just mean in the way we dress. I mean in the way we conduct ourselves and carry on our business. It's hard to distinguish Pakistan's urban citizens from the West. I still feel though that there is something left to be desired. We could do it a bit more sophisticatedly. I cannot stand people who are not proud to be Pakistanis, whether they are here in Pakistan or settled abroad. I don't like it when people change their names to be ‘vilayati’ (foreign) and acquired accents and all. You have to understand and accept the culture you're living in and be proud of it to really stand out on your own. Emulating selective aspects of another culture doesn't really translate into true social progress.

What makes you proud to be a Pakistani?

I guess it’s a personal thing and it's different for those of us who have grown up here. I'm the kind of person who really feels proud of whatever God has given me, my family, my village, my background, and everything. But just look at what Pakistan has to offer. I’m a trekking freak and at LUMS, I went to Nanga Parbat and K2 with the Adventure Society, and just the diversity of the landscape and the hospitality of people is enough to warm your heart towards this country. You can go anywhere in Pakistan and you’ll feel welcome. It is also a very open society regardless of what people say. In the remotest areas, you can sit at a railway station to have tea with the porters and have a real conversation with them. Then, through the elections process, when you visit your constituents, they are so hospitable within their limited means. A guy earning Rs.3000 a month will lay out a feast for you. It all speaks to the generous and warm nature of our culture, which is definitely something we should be proud of!

You can go anywhere in Pakistan and you'll feel welcome. It is also a very open society regardless of what people say.

How has politics turned out as a career and what would you say to young Pakistanis with political aspirations?

I consider myself extremely lucky. The kind of opportunities I’ve got and the way my mind is constantly challenged in terms of working hours, the changes you can make, the room for innovation is just tremendous. We’ve been able to make some changes that aren’t very popular, but in the long term they are great for Pakistan, e.g. in the telecommunications and banking sectors. On the flip side, there are no guarantees in the political field, so I can’t say how much control one has over making it a lifelong career. In the current setup, the opportunities are brilliant. I’ve interacted with the leadership of other countries and it actually makes you proud to be accompanying a President or Prime Minister who truly knows what he is talking about, compared to the leaders of some other countries. There's a difference between someone reading off a typed transcript and someone who can spontaneously address every point from memory. It indicates how committed and professional you are. You asked about what makes me proud to be a Pakistani, I'd say that within the realm of my political career, working with the current Prime Minister and President is one of the biggest factors in my sense of pride for Pakistan.

The kind of opportunities I’ve got and the way my mind is constantly challenged in terms of working hours, the changes you can make, the room for innovation is just tremendous. I'd say that within the realm of my political career, working with the current Prime Minister and President is one of the biggest factors in my sense of pride for Pakistan.