Thursday, May 26, 2011

Civil-military tensions over US funding for army

Civil-military tensions over US funding for army


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shaukat tarin, shaukat tareen

"Promising that he would not reduce the military's budget based on US assistance flows, Tarin said that the finance ministry needs to be kept aware for overall budgeting purposes. Army Chief of Staff General Kayani does not pass on this information." - Photo by Reuters (Thumbnail illustration by Hasaan Haider/Dawn.com)





KARACHI: The Pakistani government had complained to the US about being unaware of American funding provided directly to the Pakistan military, reveal previously unpublished American diplomatic cables. The reports also disclose tensions between the civilian government and the army over the use funds provided for counterinsurgency operations.
In a November 2009 meeting with former US Ambassador Anne Patterson, then Finance Minister Shaukat Tarin "appealed to the ambassador to keep him informed of funds the US directs to the Pakistani military.
"Promising that he would not reduce the military's budget based on US assistance flows, Tarin said that the finance ministry needs to be kept aware for overall budgeting purposes. Army Chief of Staff General Kayani does not pass on this information."
In an earlier meeting in September, "the Ambassador said the USG had purchased $370m in equipment for the military through FY09 Pakistan Counterinsurgency Capability Fund (PCCF) supplemental funds. Tarin said he was unaware of this."
At the time the finance minister added that he "would work to see that the purchases of these items were removed from the army's capital budget."
In the November 2009 meeting Tarin also provided numbers to prove that the vast majority of Coalition Support Funds (CSF) given to Gen Pervez Musharraf's government — money provided as reimbursements for expenses incurred to support America's efforts against Al Qaeda and the Taliban — had not been used for counterinsurgency purposes, or even for the military.
According to Tarin, the finance ministry "had done a detailed analysis and concluded that, of the total of $6.6bn the US had provided to Pakistan under the Coalition Support Fund, only some $250m had actually gone to the Pakistani army under (then) President Musharraf; the rest had gone into the regular budget, protestations by the then-government to the contrary notwithstanding."
While previously published cables have revealed US concerns about possibly inflated CSF claims by the army, a new cable reveals that America also feared the civilian government that succeeded Gen Musharraf would continue to use the CSF for budgetary support.
"The temptation for the new coalition government to tap CSF for non-military purposes will be high; if we are going to consider ways to improve the implementing mechanisms of CSF, the time to act is now," noted a cable from March 2008.
"The new coalition government will be seeking new sources of revenue to pay for social programs promised in the campaign; the large military budget and the CSF payments will be a tempting target to mine."
The civilian government, in turn, expressed mistrust about the army's use of CSF funds. "The Pakistan People's Party (PPP) finance expert, Syed Naveed Qamar … expressed skepticism of the military's CSF claims and asked the US to increase oversight and ensure that 'claims were not over-inflated or siphoned off into private coffers.'
"The presumptive Pakistan Muslim League-N (PML-N) finance minister also expressed his conviction that the military budget should be more transparent and subject to parliamentary scrutiny."
These statements only buttress American claims that the army has inflated CSF claims; one previously published cable, for example, has mentioned a $26m claim for barbed wire and a $70m claim for radar maintenance against an enemy that does not pose an air threat.
On the other hand, in another previously published cable Gen Kayani had claimed to then CENTCOM commander Gen David Petraeus in January 2009 that "only 40 per cent of the money had been returned to military coffers in the past. Kayani said the money had mostly supported the federal government's budget."
The comment ending the March 2008 took note of this mistrust on both sides. "If CSF is going to be reformed it must be done soon. Delaying much longer threatens to create tension between a civilian government we are eager to support and a military that plays a vital role in the fight against extremism. It is time to manage expectations on both sides."
Cables referenced:



2009: Tarin asks Patterson to keep him informed of US funds to Pakistani military

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SIPDIS

E.O. 12958: DECL: 11/01/2019
TAGS: ECON, EFIN, EAID, MOPS, PGOV, PREL, PK
SUBJECT: FINANCE MINISTER TARIN ON BUDGETS, CSF DOLLAR
FUND, AND PAKISTAN'S IMPROVING ECONOMIC OUTLOOK

Classified By: Ambassador Anne W. Patterson, reasons 1.4 (b) and (d).

1. (C) Summary: Minister of Finance Shaukat Tarin told the
Ambassador that he is ""cautiously optimistic"" about the
Pakistani economy and expressed GOP gratitude that the USG
would begin to move gradually towards greater use of
Pakistani platforms to channel U.S. assistance. Tarin
requested that an additional $500 million of U.S. assistance
flow through the GOP – in addition to the $174 million
already committed to the Benazir Income Support Fund, the
Higher Education Committee and the Pakistan Poverty
Alleviation Fund – to bolster GOP credibility and allow the
GOP to more adequately support its priorities. Tarin said he
supported the World Bank Trust Fund and agreed with the
Ambassador that an advisory group made up of Americans and
expatriate Pakistanis could help direct U.S. assistance
efforts, provided such a group was not too large. Tarin
appealed to the Ambassador to keep him informed of U.S.
assistance to the Pakistani military, and said he was willing
to establish a U.S. dollar account on behalf of the PakMil if
Army Chief of Staff Kayani would work with the Finance
Ministry to streamline and rationalize PakMil budget
planning. End Summary.

2. (SBU) In a late October meeting, Finance Minister Shaukat
Tarin and Minister of State for Economic Affairs Hina Rabbani
Khar discussed agreements signed with USAID totaling $174
million that would be channeled through three agreed funding
platforms: Benazir Income Support (BISP), the Higher
Education Committee (HEC) and the Pakistan Poverty
Alleviation Fund. (Note: USAID signed these agreements with
the GOP on September 30, for purposes as submitted in a
Congressional Notification prior to that. End Note). Action
was now with the GOP; Tarin and Khar assured the Ambassador
that the Prime Minister would sign the agreements without
sending them forward to the cabinet for approval. Khar said
that another six projects totaling $478 million already had
detailed agreements, which both the federal and provincial
authorities had endorsed.

Bolstering GOP Credibility



3. (SBU) Tarin told the Ambassador that he needs an
additional $500 million of assistance to flow through the
GOP. The U.S. could use existing platforms, such as BISP or
HEC, to ensure that USG funds bolster the GOP's ability to
meet budget targets. Tarin asked that the U.S. look into
more work with microfinance with the State Bank of Pakistan
(SBP), and also emphasized the World Bank Trust Fund as an
option; money into this fund will help offset GOP
requirements to support Malakand/NWFP and FATA reconstruction
and to care for internally displaced persons (IDPs). Tarin
said he was unaware of the status of a reported offer by
Saudi Arabia to donate $100 million to the Trust Fund. The
Ambassador said the U.S. is considering a $30 million
donation, and that the EU and Japan are also considering
donating funds.

4. (SBU) The Ambassador said that setting up a group of
Pakistani and American advisors, such as were in place for
the Defense Advisory Board, would help both to guide U.S.
assistance. Tarin said that the U.S. and the GOP must work
to close what he called a credibility gap: both sides must
show they are implementing what they say they are. The
Ambassador said that the advisory board could help with this.
Tarin said the GOP has a clear plan to ensure that funds are
used transparently and for maximum benefit, and cautioned
against making the advisory group so large that it becomes
unwieldy. Tarin reiterated the GOP's need for an additional
$500 million to come through the budget to help the GOP meet
the people's expectations.


""We Want a Win-Win""




ISLAMABAD 00002698 002 OF 003


5. (SBU) Khar said that her office is working intensively
with USAID to identify specific needs in various sectors. To
address his concern that the United States does not get
credit with the Pakistani people for its assistance to
Pakistan, Tarin pointed out that BISP has a broader reach
than a new turbine at Tarbela. The Pakistani intelligentsia
would appreciate new scholarships through the HEC, Tarin said.


Coalition Support Fund and Foreign Currency Account




6. (C) Tarin said the Finance Ministry had done a detailed
analysis and concluded that, of the total of $6.6 billion the
U.S. had provided to Pakistan under the Coalition Support
Fund (CSF), only some $250 million had actually gone to the
Pakistani army under (then) President Musharraf; the rest had
gone into the regular budget, protestations by the
then-government to the contrary notwithstanding. Tarin
stressed that CSF funding counts as income in the budget,
positively affecting the fiscal deficit.

7. (C) On improvements the GOP has made to address the
accounting issues that have delayed CSF payments over the
past 18 months, Tarin said the GOP needs to have backup staff
for those individuals trained to prepare the paperwork
required by the U.S. military. It is essential that billing
and paperwork preparations be standardized to avoid delaying
payments. Tarin appealed to the Ambassador to keep him
informed of funds the U.S. directs to the Pakistani military.
Promising that he would not reduce the military's budget
based on U.S. assistance flows, Tarin said that the Finance
Ministry needs to be kept aware for overall budgeting
purposes. Army Chief of Staff General Kayani does not pass
on this information.

8. (SBU) Tarin opined that the Pakistani military should
decide rationally (in light of Pakistan's nuclear capability)
how many divisions the army requires, and then conduct a gap
analysis to identify specific needs to meet that requirement.
It would likely take three to five years to fill the army's
needs once identified, he said. Tarin said that Kayani was
""open to help"" and that he (Tarin) would like to co-locate
Finance Ministry personnel with the army to assist in this
exercise. Tarin said he is willing to open a hard currency
account for the military if Kayani agrees to this approach;
the account will be an incentive, Tarin said, as many of the
military's purchases require dollars in any case. The
Pakistan Counterinsurgency Capability Fund (PCCF) would
remain separate, Tarin said. The Ambassador pointed out that
the Pakistani military receives equipment rather than cash
under the Foreign Military Finance (FMF) program.


Economic Outlook Getting Brighter?



9. (SBU) Tarin told the Ambassador that Pakistan's economic
fundamentals are improving and that large-scale manufacturing
output had improved for the first time in 13 months.
Pakistan is exceeding its foreign exchange targets in the
first quarter FY 2009-2010 and would also more or less meet
the IMF target of 10.5 percent for the budget deficit.
Remittances were over $1 billion, and inflation is expected
to drop below 10 percent ""in the next three months."" Tarin
called revenue results ""better than expected,"" and said that
he had put out the word that people should pay their taxes by
November 15 ""or ""I'll go after you."" (Note: Pakistani income
taxes are due annually on September 30; because the due date
this year fell during Ramazan, the GOP authorized an
extension until November 20. End Note). He said that rating
agencies Moody's and Standard and Poor's expressed their
confidence in Pakistan's economic outlook when they upgraded
Pakistan's debt rating. Another positive indicator was the
influx of some $300 million of foreign investment to the
Karachi Stock exchange.

10. (C) While Tarin's assessment of the Pakistani economy is

ISLAMABAD 00002698 003 OF 003


decidedly upbeat, Pakistan's review by the International
Monetary Fund (IMF) is still expected to be difficult, due to
lower-than-expected revenue collection and lagging fiscal and
tax reforms (septel). The rating agencies based a large part
of their upgrade on the completion of Pakistan's second IMF
review and the simultaneous decision to increase Pakistan's
quota in August. We will explore the possibility of using
the State Bank of Pakistan as a vehicle for microfinance, but
must be cautious in light of its role as a regulator.
PATTERSON

http://www.dawn.com/2011/05/26/2009-tarin-asks-patterson-to-keep-him-informed-of-us-funds-to-pakistani-military.html




2009: No CSF disbursement until Pakistani military accounts for expenditure

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223755 9/4/2009 11:11 09ISLAMABAD2139 Embassy Islamabad CONFIDENTIAL 09ISLAMABAD2115 "VZCZCXRO8783
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RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL PRIORITY" "C O N F I D E N T I A L SECTION 01 OF 03 ISLAMABAD 002139

SIPDIS

E.O. 12958: DECL: 09/03/2019
TAGS: PGOV, EFIN, ECON, EAID, ENRG, PK
SUBJECT: FINANCE MINISTER ON PAKISTAN'S BUDGET WOES, TOKYO
PLEDGES, AND U.S. ASSISTANCE

REF: ISLAMABAD 2115

Classified By: Ambassador Anne W. Patterson for reasons 1.4 (b, d).

1. (SBU) Summary: In a September 3 meeting with the
Ambassador, Finance Minister Shaukat Tarin said the GOP had
included $2 billion in Tokyo Pledges in its budget but was
grappling with a shortfall in actual donor assistance. He
asked that the USG provide $650 million in cash through the
GOP to cover the budget gap. The Ambassador said that $174
million in budget support would be forthcoming in September,
if approved by the Congress, and that the USG would look at
how to funnel additional cash into projects that supported
GOP social safety net programs.

2. (C) In addition, Tarin said the GOP was waiting on a $500
million CSF transfer. The Ambassador explained that the
funds could not be disbursed until the Pakistani military had
properly accounted for its expenditures. Tarin said falling
profits in the energy and banking sector brought revenue
collection down and welcomed U.S. technical support for the
FBR and the development of a VAT. He said that the GOP had
agreed with the World Bank on the structure of a Border Trust
Fund that included accountability mechanisms. The World Bank
was now sending the proposal to its board for final approval.
He welcomed the October 21-22 U.S.-Pakistan energy dialogue
and suggested that the Energy Expert Group head preparations
for the summit on the Pakistani side. End Summary.


GOP budget shortfall and cash transfers from Tokyo Pledges



3. (SBU) Of the $5.3 billion in Tokyo Pledges, Tarin said he
had budgeted $4 billion over the next two fiscal years (Note:
Pakistan's fiscal year is July 1-June 30. End Note.). For
FY10 he believed donors other than the USG would provide as
much as $1.35 billion in cash transfers for budget support
and GOP social safety net programs. He asked for the USG to
fill the $650 million balance. He said the GOP had already
secured $702 million in Tokyo Pledges for budget support and
was working with donors to reallocate other pledges to budget
support and social programs. He said the United Arab
Emirates had promised to reprogram $110 million; Saudi Arabia
$200 to $250 million; Japan $200 million for social programs
and $135 million for IDPs; and Turkey and Germany some
additional funds as well.

4. (SBU) The Ambassador said the United States recognized
the importance of building the capacity of the GOP to deliver
social services. Pending Congressional approval, the USG
planned to provide a $174 million cash transfer to the GOP in
September through support for the Benazir Income Support
Program (BISP), Higher Education Commission (HEC), and IDP
Income Support. The Ambassador agreed to investigate how
additional funds could be directed through the GOP in U.S.
FY10. Tarin suggested the USG target poverty reduction and
an electricity subsidy for the poor through the Benazir
Income Support Program, an accountable and transparent fund
with a $500 million shortfall. He also welcomed additional
support to the Higher Education Commission, Border Trust
Fund, National Rural Support Network, and the Pakistan
Poverty Alleviation Fund.

5. (SBU) Tarin expressed concern that funds to Malakand
reconstruction and a large energy infrastructure project
could divert funds from the Benazir Income Support Program
and other programs. But at least in the case of the energy
project, much of the capital investment would come in later
years, freeing money to support GOP programs in FY10 and
FY11.

6. (SBU) Tarin also recommended the USG contribute to the
State Bank of Pakistan's (SBP) microfinance window, a credit
facility to 23 microfinance concerns that effectively bring
banking services to the poor and rural areas. He said future

ISLAMABAD 00002139 002 OF 003


donor pledges should be made in a forum separate from the
Friends of Democratic Pakistan.


Status of military assistance funds


7. (C) Tarin said that the GOP was still waiting for $500
million in Coalition Support Funds (CSF). He said ODRP had
sent a technical team to work with the Pakistani military to
ensure proper accounting for CSF monies. The Ambassador
explained that the Pakistani military still fell short of
properly accounting for its CSF expenditures, one aspect of
which was its continuing inability to provide receipts.
(Note: Tarin's staff has not kept him sufficiently updated
on CSF. Post will provide Tarin a briefing on the status of
CSF and procedures for proper accounting. End Note.)

8. (C) The Ambassador said the USG had purchased $370
million in equipment for the military through FY09 Pakistan
Counterinsurgency Capability Fund (PCCF) supplemental funds.
Tarin said he was unaware of this and would work to see that
the purchases of these items were removed from the army's
capital budget.


Tax Reform, Border Trust Fund and Energy Sector Reform


9. (SBU) Tarin said that lower than forecasted banking and
energy sector profits in the latter half of FY09 had led to
an unexpected decrease in tax collection. He welcomed the
proposal from NSC Senior International Economist Lipton for
the U.S. Treasury Department to provide two technical experts
to assist Pakistan's Federal Board of Revenue (FBR) to
implement tax policy reform and introduce a value-added tax
(VAT). (Note: Post will coordinate with Treasury on
implementing this technical assistance project. End note.)

10. (SBU) The Ambassador said the USG wanted to have the
Border Trust Fund instituted and some donor pledges to it in
place before the September 24 summit meeting of POTUS,
British Prime Minister Brown and President Zardari. Tarin
said that the GOP and World Bank had agreed on a structure
for the Border Trust Fund with mechanisms to ensure
accountability and transparency. He said the World Bank had
forwarded the proposal to its board for approval.

11. (SBU) Tarin said the same group that prepared Pakistan's
integrated energy plan in March 2009 should take the lead in
preparing for the October 21-22 U.S.-Pakistan strategic
energy dialogue. He suggested that the Chairman of the
Energy Expert Group Farooq Rahmattulah head the talks.

12. (SBU) Comment: The Congressional Notification for the
$174 million cash transfer is on hold until Congress resumes
September 8. The funds would come from the FY09 Supplemental
Appropriations Spending Plan, which includes $85 million for
the Benazir Income Support Plan, $45 million for the Higher
Education Commission, and $44 million for IDP Income Support.
USAID lawyers and legislative affairs staff will arrange the
required consultations with congressional appropriations
staff to explain the cash transfer process, especially
terrorist financing controls. USAID has contracted two
accounting firms to document the cash flow process and is
prepared to send USAID as well as GOP representatives to
Washington to provide additional information on the program.
If we can get this budget support obligated in FY09, and it
proves we can effectively program funds to specific line
items, track our funds, and have a social and economic
impact, then the groundwork will be laid for future cash
transfers. End comment.

13. (U) Participants:

Ambassador Patterson
USAID Director Bob Wilson

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ECON Robbie Marks (note taker)

Finance Minister Shaukat Tarin
Minister of State for Economic Affairs Hina Rabbani Khar
Senator Shanaz Wazir Ali
Advisor to the Finance Minister Sakib Sherani
Joint Secretary Finance Abdur Rauf Khan
Joint Secretary Finance Asif Bajwa




PATTERSON

http://www.dawn.com/2011/05/26/2009-no-csf-disbursement-until-pakistani-military-accounts-for-expenditure.html



2008: Civilian-military tensions over Coalition Support Funds

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SIPDIS

NOFORN
SIPDIS

E.O. 12958: DECL: 03/24/2028
TAGS: PREL, PGOV, MASS, MARR, PK
SUBJECT: CSF AND THE POTENTIAL FOR CIVIL-MILITARY TENSION

REF: A. ISLAMABAD 105
B. ISLAMABAD 191
C. ISLAMABAD 228
D. ISLAMABAD 288
E. ISLAMABAD 392
F. ISLAMABAD 924
G. 07 ISLAMABAD 2873
H. 07 ISLAMABAD 3694
I. 07 ISLAMABAD 4817
J. 07 ISLAMABAD 5328

1. (C) Summary: Coaliton Support Fund (CSF) reimbursements
are a major political and economic factor in our bilateral
relations with Pakistan. On the military side, the recent
publicity about CSF claims, largely resulting from
congressional hearings, has prompted concern that
reimbursements will be more closely reviewed and therefore
decline. Meanwhile, an increase in operational tempo and the
military's belief that it should receive higher
reimbursements for what one officer called ""the cost to
Pakistan of doing business with the U.S."" is creating
record-level claims that threaten to exceed authorization
limits. Indeed the monthly claim for January 2008 exceeds
$200 million-a rate that if annualized would be more than
double CSF's authorization for FY 2008. On the
political/economic side, a new civilian government we want to
succeed is taking over. It is facing both the need to
deliver on campaign promises to increase social spending and
a cash crunch. The temptation for the new coalition
government to tap CSF for non-military purposes will be high;
if we are going to consider ways to improve the implementing
mechanisms of CSF, the time to act is now. End Summary.

A STRUGGLING ECONOMY AND A NEW GOVERNMENT

2. (C) Over time, Pakistan's government has become
increasingly dependent on the nearly $1 billion per year in
CSF reimbursements. Greater scrutiny of CSF payments has
coincided with a GOP cash crunch. This is largely a result
of the government's unwillingness to adequately raise fuel
prices and cut energy subsidies while increasing
infrastructure spending. For the first quarter of Pakistan's
current fiscal year (July-September), Pakistan's fiscal
deficit was $2.53 billion, of which Pakistan funded $589
million through loans, grants and other financial sources
outside Pakistan. CSF claims as submitted are equivalent to
48 percent of the externally-financed portion of the budget
shortfall and 11 percent of the total budget shortfall.

3. (C) Because of greater scrutiny, the delay in
reimbursing the March – June 2007 CSF claims, paid on
February 25, 2008, combined with the projectization of the
$200 million budget support payment has exacerbated
Pakistan's fiscal straits. As a result, the GOP is
increasingly concerned about its ability to meet its
budgetary obligations. The GOP raised fuel and electricity
prices on March 1 for the first time in over a year in an
attempt to reduce the growing cost of energy subsidies.
However, the GOP is increasing food subsidies and facing a $1
billion revenue shortfall.

4. (C) Pakistan is undergoing a transition from a
government controlled by the military – through
President/General Musharaff and his hand-picked Prime
Minister – to one where Musharraf is a civilian president,
the PPP controls the prime ministry, and the military has
promised to recede from politics. The new coalition
government will be seeking new sources of revenue to pay for
social programs promised in the campaign; the large military
budget and the CSF payments will be a tempting target to mine.

5. (C) The Pakistan People's Party (PPP) finance expert,
Syed Naveed Qamar, has been briefed on CSF reimbursements and
asked Ambassador (Ref F) if the U.S. could ""give the
government the money by June 30 so that the new civilian
government would have the funds by the end of its current
fiscal year and thus avoid additional borrowing to balance
its books."" Qamar expressed skepticism of the military's CSF
claims and asked the U.S. to increase oversight and ensure
that ""claims were not over-inflated or siphoned off into
private coffers."" The presumptive Pakistan Muslim League-N
(PML-N) Finance Minister also expressed his conviction that

ISLAMABAD 00001269 002 OF 002


the military budget should be more transparent and subject to
parliamentary scrutiny.

GROWING PRESSURE ON THE MILITARY

6. (C) At the same time the Pakistani military has become
increasingly anxious about the long-term viability of CSF.
They are aware of the scrutiny CSF faces in the U.S. Congress
and the possibility that civilian officials in the incoming
Pakistani government may want to divert CSF funds for
non-military purposes.

7. (C) During recent high level exchanges senior Pakistani
military officials expressed concern about the future of CSF,
arguing that it would not be possible to sustain the current
force levels and operational tempo in the FATA without it.
Post received a record CSF claim for December of $155 million
which projects to an annual rate of $1.8 billion, a level
which would exceed the legislative authority. The January
2008 claim exceeded $200 million.

8. (C) The Pakistanis argue that the increase in tempo
should be accompanied by corresponding increases in the value
of reimbursements. The risk of ""hollowing out"" the Pakistani
military by failing to ensure units conducting combat
operations are recapitalized is a growing concern.
Additionally, the Pakistanis have continued to argue that CSF
should be used to pay a subsidy for basic soldier
compensation as well as for benefits for deaths and injuries.
They cite the recent assassination of the Army's Surgeon
General as further evidence of the increased costs associated
with partnering with the U.S. in the War on Terror.
According to them, the loss of yet another senior officer has
resulted in a new requirement to purchase armored cars to
protect all of its general officers.

9. (C) Comment: If CSF is going to be reformed it must be
done soon. Delaying much longer threatens to create tension
between a civilian government we are eager to support and a
military that plays a vital role in the fight against
extremism. It is time to manage expectations on both sides
and update implementing mechanisms for CSF. Embassy has
already written the major political parties offering
briefings on our assistance programs, and will brief the new
government in detail on CSF as soon as it comes into office.
End Comment.


BODDE

http://www.dawn.com/2011/05/26/2008-civilian-military-tensions-over-coalition-support-funds.html



2007: US concerned about inflated claims for Coalition Support Fund

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134295 12/14/2007 4:56 07ISLAMABAD5266 Embassy Islamabad CONFIDENTIAL 07ISLAMABAD4369|07ISLAMABAD4817 "VZCZCXRO1556
PP RUEHLH RUEHPW
DE RUEHIL #5266/01 3480456
ZNY CCCCC ZZH
P 140456Z DEC 07
FM AMEMBASSY ISLAMABAD
TO RHMFISS/CDR USCENTCOM MACDILL AFB FL PRIORITY
RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 3837
INFO RUEHBUL/AMEMBASSY KABUL PRIORITY 7916
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 2462
RUEHKP/AMCONSUL KARACHI PRIORITY 8395
RUEHLH/AMCONSUL LAHORE PRIORITY 4336
RUEHPW/AMCONSUL PESHAWAR PRIORITY 2959
RUEHNO/USMISSION USNATO PRIORITY 3379
RUEAIIA/CIA WASHDC PRIORITY" "C O N F I D E N T I A L SECTION 01 OF 02 ISLAMABAD 005266

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/14/2017
TAGS: PINR, PK, PREL, PTER
SUBJECT: PAKISTAN: FIXING COALITION SUPPORT FUNDING

REF: A. ISLAMABAD 4817
B. ISLAMABAD 4369

Classified By: Anne W. Patterson, Reasons 1.4 (b), (d)

1. (U) This is an action request, see Para 12.

2. (C) SUMMARY. Since 2002, the USG has reimbursed Pakistan
over 5.3 billion USD for support to U.S. operations using
Coalition Support Funds (CSF). When pending claims are
processed, that figure will likely exceed 5.6 billion USD.
The CSF authorizing legislation was written soon after 9/11;
six years down the road, we need Pakistan to more vigorously
engage in the war on terror, but CSF is not working the way
it should. CSF is not reaching those parts of the GoP that
are shouldering the load in GWOT operations. Two clear
examples of the problem are helicopter readiness and medical
support to the Frontier Corps. The readiness of Pakistan's
helicopter fleet is poor. Despite giving the GoP 55 USD
million for helicopter operations over seven months, only 2
to 6 Pakistani Cobras are fully mission capable at a time
they desperately need air power to fight spreading militancy.
Additionally, we have processed or will process
reimbursement requests for 100 million USD over the year to
support medical operations, but the Frontier Corps still does
not receive basic medevac support. Another consequence of
the current system is political. It fuels the internal
argument that the USG is ""paying"" Pakistan to fight a U.S.
war – this at a time when the Pakistanis need to accept the
direct threat to their own security and sovereignty posed by
al-Qaida, Taliban and extremist forces.

3. (C) Post has worked extensively with the GoP to increase
GoP transparency and accountability. What we have discovered
is that we are receiving reimbursement requests for barbed
wire and air defense radar systems that have no or marginal
impact on the GWOT. We recognize the legal and political
sensitivities involved in developing a new approach, but the
program, as it is currently being implemented, simply is not
meeting U.S. or Pakistan counter-terrorism objectives. This
message outlines several ways forward. In the meantime, DOD
or CENTCOM should undertake an audit or program review of
CSF. END SUMMARY.

TARGETING CSF FUNDING TOWARD PAKISTAN AND U.S. STRATEGIC GOALS

4. (C) U.S. Public Law 109-289 (2206) authorizes CSF to
reimburse Pakistan for logistical, military and other support
provided to U.S. military operations. Under this
authorization, the U.S. has reimbursed Pakistan 5.3 billion
USD since 2002. When pending claims are processed, the total
CSF reimbursement to Pakistan will exceed 5.6 billion USD.
Pakistan receives nearly 90 percent of total CSF worldwide.
While the December 8, 2003 guidance provided by the Office of
the Secretary of Defense (OSD) on parameters for
reimbursements is broad, there have been multiple instances
in which Post is confident funds have been diverted and that
reimbursed claims figures have been seriously inflated. A
few examples:



HELICOPTER READINESS. Pakistan received 55 million USD
for helicopter operations from July 2006 to February 2007;
however, Post estimates that as few as 3 Cobra Helicopters
were fully mission capable as recently as 10 weeks ago. Post
is confident Army Aviation Command never received the 55
million.



MEDEVAC ASSISTANCE TO FRONTIER CORPS. The Pakistan Army
claimed 99 million USD over past 12 months for medical
operations and the U.S. has paid or is in process of paying
all/all submitted medical claims. Yet, despite providing
this plus fully funding 235 million USD CSF lease assistance
for 26 new Bell 412 helicopters, the Inspector General of the
Frontier Corps has repeatedly requested U.S. assistance in
providing assets for medevac, obviously unaware of the
resources the U.S. has provided.



RADAR MAINTENANCE: Between August 2006 and July 2007,
Pakistan submitted claims for almost 70 million USD in ADA
Radar Maintenance, although there is no enemy air threat
related to the war on terror.



BARBED WIRE: Between August 2006 and July 2007, we

ISLAMABAD 00005266 002 OF 002


received a claim for 26 million USD in barbed wire and
pickets. While these items are no doubt helpful in
protecting outposts, the claim figures are highly suspect.

5. (C) Ambassador, the Office of Defense Representative and
DOD officials have repeatedly raised CSF disbursement and
other problems with the Prime Minister, Ministry of Finance
and key military officials but have not received satisfactory
responses. In fact, recent correspondence from Pakistan
leadership argues for additional funding to support increased
operations.

6. (C) CSF reimbursement funds go directly into Pakistan,s
general treasury — from there we have no visibility on their
final destination or application. And we are not alone -
based on our conversations with GoP officials, from President
Musharraf down to the average Pakistani private, no one in
Pakistan seems to have a clear grasp of the amount of US
military reimbursement assistance actually provided.

7. (C) The CSF authorization legislation was drafted soon
after 9/11. Six years down the road, we still need Pakistan
to engage more vigorously in the fight against extremism, but
it is clear we also need to do a better job of making sure
our monies are targeted to meet our counter-terrorism
objectives.


POTENTIAL APPROACHES TO CSF REFORM


8. (C) Potential options to address CSF issues include the
following:

(1) Stop approving Pakistan's CSF reimbursement requests
until we receive adequate assurances on disbursement;
(2) Earmark CSF monies for specific areas: maintenance,
support, etc.;
(3) Create a CSF ""trust fund"" that would allow the USG to
control reimbursement and to obligate some funds for specific
needs; or
(4) Convert CSF into a direct cash transfer program.

9. (C) Option 1 would lead to a major political clash and
damage our military to military relationship, just as we have
the potential for greater cooperation under Chief of Army
Staff General Kayani's leadership. This would undermine the
very purpose of CSF–to encourage the GoP to continue
fighting militant extremism. The Taliban, al Qaida and
Islamic extremists represent a clear and growing danger to
U.S. and Pakistani security and to regional stability. As
allies with forces in the region, we have a responsibility to
strengthen and focus our assistance to improve their security
forces' capabilities.

10. (C) We understand DOD has determined Options 2, 3 and 4
would require asking Congress to amend the authorizing
legislation. Post could attempt to persuade Pakistan to
concur with establishment of some form of ""trust"" mechanism -
pointing out the alternative may be a severe reduction or
loss of funding if Congress continues to see insufficient
transparency and accountability. In any event, a new
approach is urgently required. We believe some variation of
Options 3 and 4, which allow the USG to earmark at least some
CSF monies for those Pakistani military elements of vital
interest to us (helicopters, special forces and Frontier
Corps), is the most logical and efficient approach.

CSF AUDIT/PROGRAM REVIEW

11. (C) Post repeats that we do not have visibility over the
destination of CSF funds. Accordingly, Post would welcome an
audit or program review of the CSF process by CENTCOM or by
DOD.

ACTION REQUEST

12. (C) Action Request: Post would appreciate a
front-channel response to the options proposed in para 8 and
the proposal for an audit/review.
PATTERSON

http://www.dawn.com/2011/05/26/2007-us-concerned-about-inflated-claims-for-coalition-support-fund.html




2009: Kayani and Petraeus discuss politics, aid, military operations

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188670 1/24/2009 12:28 09ISLAMABAD155 Embassy Islamabad CONFIDENTIAL "VZCZCXRO4323
OO RUEHLH RUEHPW
DE RUEHIL #0155/01 0241228
ZNY CCCCC ZZH
O 241228Z JAN 09
FM AMEMBASSY ISLAMABAD
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1144
INFO RUEHKP/AMCONSUL KARACHI IMMEDIATE 0919
RUEHLH/AMCONSUL LAHORE IMMEDIATE 6641
RUEHPW/AMCONSUL PESHAWAR IMMEDIATE 5519
RUEHBUL/AMEMBASSY KABUL PRIORITY 9686
RUEHLO/AMEMBASSY LONDON PRIORITY 9477
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 4323
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
RUMICEA/USCENTCOM INTEL CEN MACDILL AFB FL PRIORITY
RHWSMRC/USCINCCENT MACDILL AFB FL PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHINGTON DC PRIORITY" "C O N F I D E N T I A L SECTION 01 OF 03 ISLAMABAD 000155

SIPDIS

E.O. 12958: DECL: 01/23/2019
TAGS: PREL, PGOV, PTER, MAR, MOPS, PK
SUBJECT: CENTCOM GENERAL PETRAEUS MEETS WITH PAKISTAN COAS
KAYANI

Classified By: Ambassador Anne W. Patterson for reasons 1.4 (b) and (d)

Summary: (C) In a January 20 meeting with U.S. CENTCOM
Commander General David Petraeus, Pakistan Chief of the Army
Staff General Ashfaq Kayani reiterated his need for support
and asked for changes in the Coalition Support Fund process
to allow for more rapid reimbursement. Kayani repeated his
concerns about Pakistan's IDP situation, which was
undermining military operations, and described candidly the
deterioration in Swat and his ongoing operations in Bajaur
and Mohmand agencies. Kayani repeatedly expressed concern
about the inability of the GOP to ""hold and build,"" which
General Petraeus described as the ""always unsuccessful clear
and leave"" strategy. Kayani said he was going to exercise
restraint with India, but would respond to an Indian attack.
General Petraeus raised the likelihood of an alternative
shipment route for NATO through central Asia, stressed the
continued need for the route through Khyber, and expressed
appreciation for increased cooperation on the border with
ISAF forces. General Petraeus indicated that he thought
increased measures to control population movements would have
to be put in place and assured Kayani of his commitment to
support Pakistan military development. Petraeus made clear
that the Pakistan military needed to focus on the extremists
on the western border, instead of the Indian threat. End
summary.

1. (C) U.S. CENTCOM Commander General David Petraeus,
accompanied by the Ambassador, J5 Major General Robert
Allardice and POLAD Michael Gfoeller, met with Pakistan Chief
of the Army Staff (COAS) General Ashfaq Kayani on January 20.
Kayani was accompanied by his Director General Military
Operations, Major General Javed Iqbal, his Chief of Staff,
Lieutenant General Muhammad Mustafa Khan, and his Senior
Aide, Brigadier Zubeir.


Musharraf's Situation


2. (C) In opening remarks regarding General Kayani,s likely
move into the official COAS residence, Kayani observed that
former President Musharraf,s situation seemed to be fine,
even though he had been concerned earlier about Zardari,s
failure to grant amnesty to Musharraf. Kayani observed that
amnesty should have been granted immediately when Zardari
assumed office, but it seemed as if the situation had settled
down and he was no longer as concerned about President
Musharraf,s legal situation. (Comment: Former President
Musharraf is visiting his family in the U.S. and also
undertaking speaking engagements. The construction of
Musharraf's house near Islamabad is well advanced, so he may
be able to move out of the COAS house in the next few weeks.
End Comment)



Coalition Support Funds


3. (C) Kayani spoke candidly about the process of
reimbursement of Coalition Support Funds (CSF). He said it
was important to avoid the impression that the Pakistan
military is ""for hire."" Still, the military had little
incentive to provide the copious documentation, since only 40
percent of the money had been returned to military coffers in
the past. Kayani said the money had mostly supported the
federal government's budget. The typical breakdown had been
about 60 percent to the federal government, 40 percent to the
military, but President Zardari had told him recently that
the entire amount would be reimbursed to the military. Kayani
suggested that the CSF reimbursement amount ""mirror"" the
system used for the UN's reimbursement of peacekeeping
expenses or establish a base period and estimate the increase
in military activity from that base. Petraeus indicated that
he believed that the prospects for the ""Enhanced Partnership
with Pakistan Act"" also known as the Biden-Lugar legislation,
which would provide $1.5 billion for development activities,
were positive, and there were plans underway to fund
Pakistan,s military needs.



IDPs: Humanitarian and Strategic Issue



ISLAMABAD 00000155 002 OF 003


4. (C) Kayani explained that his military budget had been
flat lined, and therefore had dropped sharply in real terms;
military spending now represented only 16 percent of the
government's budget. He said the Pakistan military needed
basic equipment like helmets, protective gear, and personnel
carriers. Kayani was particularly concerned about the status
of internally displaced persons (IDPs), who were displaced
from their homes by fighting. This was not only a
humanitarian problem, but also a strategic one. Kayani said
he had no capacity to compensate civilians who had been
injured or whose property had been destroyed. ""If we don,t
do that,"" Kayani said, ""we will lose the battle for public
opinion."" Kayani said that the provincial government lacks
the capacity to help the IDPs. He emphasized the importance
of carrying forward the Bajaur operation. Kayani noted that
at first he had thought the army ""should stay out of
politics,"" but it was increasingly obvious that the military
would have to become involved in the IDP situation.
Ambassador noted that the international community had also
dropped the ball on providing relief for the IDPs and was now
rushing to catch up.


Swat Valley


5. (C) Kayani was clear that the GOP had lost control of the
Swat valley. He said the police had no ability to come in
after the army to ""hold"" territory. He recounted that half of
the 600 police officers, supposedly from the NWFP's elite
police units, destined for Swat had deserted, largely because
there was no command structure. Petraeus replied that the
U.S. had confronted this same issue in Iraq, describing it as
a ""clear and leave"" strategy, requiring the retaking of the
same ground multiple times. Petraeus observed that the police
are the most vulnerable, since they are exposed in
communities. Petraeus noted that increased measures to
control population movements would probably have to be put in
place throughout the country, which would require
considerable manpower.


Frontier Corps


6. (C) Petraeus said that the Frontier Corps (FC) was working
well with Special Operations Forces, largely because of the
leadership of the Frontier Corps Inspector General Major
General Tariq Khan. Petraeus noted that the 11th Corps
Chief of Staff Brigadier Amir was less cooperative with U.S.
forces, and Kayani took note of that. Kayani said he had
concentrated on improving the Frontier Corps and brought
salaries and rations on a par with the regular army. He had
also extended to the FC a benefit package for the families of
those killed in the line of duty. Kayani added that FC
successes in combat had understandably increased morale.
Kayani mused about the ""glorification of terrorism""
(particularly the pictures of dead combatants in the press)
and said Pakistan needed press laws similar to those in the
UK.

7. (C) Kayani and Petraeus agreed that some of the
civilian/military projects, which had been impeded at the
11th Corps, needed to be speeded up. Petraeus had given
instructions that Special Operations Forces would be deployed
regularly and constantly, and the U.S. ""needed to move their
soldiers in here, so they could engage productively with the
FC.""


Pakistan/India



8. (C) Petraeus said the most important threat to Pakistan
was on the western border and internally. Terrorists were an
existential threat to Pakistan. Kayani agreed. However,
Kayani observed that he had postponed a missile test. The
Indians, he said, in contrast, had conducted one just a few
hours before. Kayani said he had no intention to resume
missile testing as long as the current tensions persisted.
He promised to be transparent with allies about his plans and
had briefed us about his move of 6000 troops to the Indian
border. Kayani said he was determined to exercise restraint
in his actions with India. He recounted that he had taken no

ISLAMABAD 00000155 003 OF 003


action the evening that Indian External Affairs Minister
Pranab Mukherjee had supposedly called President Zardari and
threatened to declare war. Kayani asked to be alerted if the
U.S. had any warning of another attack – he understood that
the Indians had been warned about the Mumbai attack. He
mentioned that discussion of the consequences of a follow-on
attack made both India and Pakistan hostage to extremists and
increased the likelihood of an attack. ""If there is any clue
about another attack,"" he said, ""please share it with us.""


Next Steps


9. (C) Kayani returned to the issue of CSF at the conclusion
of the conversation, saying that he hoped to have the May CSF
submission soon, but we needed to develop a simpler way of
handling CSF claims. Petraeus said he would look at options
quickly. Kayani and Petraeus agreed that progress had been
made on the Border Coordination centers and that additional
communications capacity needed to be added. Petraeus pressed
Kayani on moving forward with setting up the additional
facilities inside of Pakistan.

10. (C) Petraeus said he was looking forward to welcoming
Kayani to Tampa during his February 2009 counterpart visit.
Kayani said he hoped, after consultation with the Prime
Minister and the President, to bring a roadmap for
consideration by U.S. officials.

11. (U) This cable has been cleared by CENTCOM.
PATTERSON


http://www.dawn.com/2011/05/26/2009-kayani-and-petraeus-discuss-politics-aid-military-operations.html






WikiLeaks # 134295, 146991, 188670, 223755, 233602




 
 
 
 
 
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