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Washington File

19 November 2002

Transcript: Bush Administration Working for Major Debt Cancellation for Pakistan

(Treasury Secretary O'Neill, Pakistan Finance Minister Aziz conclude
talks) (2770)
U.S. Treasury Secretary Paul O'Neill said the Bush administration is
working to have $1 billion in Pakistani debts cancelled, as Pakistan
and the United States work for closer cooperation in trade,
investment, and anti-money laundering.
"President Bush has indicated that he would seek action by the
Congress in order to provide debt relief and there are no ifs, ands or
conditions. The President made a commitment and he will pursue it,"
O'Neill said in a press conference with Pakistan Finance Minister
Shaukat Aziz in Islamabad November 19, after the close of the
U.S.-Pakistan Joint Economic Forum.
"[T]he U.S. is looking at a billion dollars of debt cancellation. That
is in Congress at the moment," Aziz said. He added that he hopes
Congress will respond positively in the next several months.
O'Neill praised the Pakistani government's economic reforms aimed at
invigorating the private sector, saying the results have been "really
quite impressive." He said the reforms will attract more foreign
direct investment and lead to greater trade. Aziz said two-thirds of
Pakistan's foreign direct investment, amounting to more than $300
million in 2001, comes from the United States.
O'Neill said with the passage of the Trade Promotion Authority by
Congress in August, the Bush administration is working to reduce
tariffs and other trade barriers.
Aziz said the Pakistani government urged the United States to increase
market access and to take steps to facilitate the free movement of
Pakistani goods into the United States. He added that at the next
session of the Joint Economic Forum, to be held in Washington in 2003,
private sector representatives will be invited to participate.
Following is the transcript of the O'Neill-Aziz press conference:
(begin transcript)
U.S. EMBASSY ISLAMABAD
Office of Public Affairs
For Immediate Release November 19, 2002
PRESS AVAILABILITY 
FOLLOWING THE U.S.-PAKISTAN JOINT ECONOMIC FORUM  
 U.S. SECRETARY OF THE TREASURY 
PAUL H. O'NEILL
November 19, 2002
Islamabad, Pakistan
12:30 p.m. Pakistan Time
Pakistan Finance Minister Shaukat Aziz:  Bismillahir Rehmanir Raheem
Ladies and gentlemen of the press, good afternoon. We have just
finished the second session of the U.S.- Pakistan Joint Economic
Forum, which covered a wide array of subjects, which I will share with
you. After the press conference there will be a press release from our
side telling you what was discussed, but essentially, we talked about,
first, the reforms -- economic reforms -- in Pakistan and how the
economy has done, updated the Secretary and his delegation on where we
are in terms of macroeconomic performance. And as you know, the U.S.
has an active economic assistance program for Pakistan and is also
very helpful with the international financial institutions -- World
Bank, IMF, ADB -- so we covered a detailed discussion of those various
programs. In addition, we talked about our privatization programs,
updated the Secretary on where we are on that, particularly because
foreign direct investment is a major priority of the Government.
As you all know, the United States is the largest investor in
Pakistan. Last year 67% of the foreign direct investment we had in
Pakistan came from the U.S. -- over three hundred million dollars. And
this year, as you know, our target is a billion dollars from foreign
investment worldwide, and we are hoping that the United States will be
a major contributor. In Pakistan, the U.S. companies are quite active
in several areas, like oil and gas, beverages, pharmaceuticals and
services. So we were trying to use this forum to see how we can expand
the private-sector relationships. We've agreed that at the next forum
meeting in Washington sometime next year, the private-sector
representatives from both countries would participate. Also, we talked
to the Secretary about availability of visas for our businessmen, and
they were sure that is being looked at and the situation is getting
better. We've also discussed market access, and there are some
tactical issues, and there are some longer-term issues, particularly
for textiles. And on the tactical side, we will hope to get some
response from the United States fairly soon, so that our goods can
move freely into the U.S. Naturally there are bigger issues on
tariffs, etc., which will be dealt with.
We updated the Secretary on our anti-money laundering efforts, and I
informed the Secretary that now in the Ministry of Finance, we have
set up a single window to coordinate anti-money laundering policies,
because many agencies of the government are involved: the State Bank,
ICCP, the NAB, the law-enforcement agencies, Ministry of Interior,
Ministry of Foreign Affairs. So we have tried to put everything
together in one policy unit.
In addition, we discussed the poverty reduction programs and the USAID
programs being conducted in Pakistan. The Secretary was kind enough to
visit Khushali Bank this morning, and he met some of the borrowers
himself of micro finance and we updated him on what we are doing on
micro finance in Pakistan. He also visited a school today and saw the
education programs going on, and we hope that the assistance we get
from the U.S. on education will continue at the same level. Naturally
during the day we've also talked about debt relief, and this came up
last night also: that the U.S. is looking at a billion dollars of debt
cancellation. That is in Congress at the moment, and I think Congress
will soon be back, if it's not back already, so we hope in the next
few months we get some positive reaction. But I understand it's in the
process, as they say. So that's all brief opening statement. I request
the Secretary to give his remarks and then we'll take four or five
questions. Thank you very much.
Treasury Secretary O'Neill: Thank you. The Minister has done a perfect
job of capturing the essence of our conversations, which I found very
good in reinforcing in my own mind, the value of this Joint Forum that
we began a year ago. I must say I'm very impressed with what the
Minister and the President have been able to accomplish. When one
looks at the progress, as captured by the economic indicators of
change in the fiscal position of the government, and the progress
that's being made, it's really quite impressive. And the clear
commitment to keep going and to persevere in poverty reduction and
opportunity creation for the people of Pakistan is very clear and
expressed by many of the different people we were able to hear from in
the Forum conversation this morning. And I think with that, then,
maybe we can take a few questions.
Q. This is Hanif Khalid. My question is that, Mr. Secretary, don't you
think 143 million dollars market access to Pakistan is not
significant, especially for a country who is an economic giant and who
is also the leader of the international coalition against terrorism
while Pakistan has played the role of a front-line state in this
campaign? Moreover, the list you have finalized about the exports
includes those items which are not frequently tradable with America.
My question is: will you agree, or will you review this list, and will
America will increase the market access amount for Pakistan? Thank
you.
A. Well, as the Minister indicated to you, there's a conversation
going on, there's a consideration right now in Washington of quota
limits, and I indicated to the Minister that we would, on our return
to Washington, do what we can to hasten these conversations so that an
answer can be provided to Pakistan as soon as possible. But I think in
the broader sense, again, these forums are an indication of the
dedication on both sides to furthering the economic relationship
between the United States and Pakistan. And as the Minister indicated,
it's true that the U.S. is already a substantial economic investor in
Pakistan. And I think we need to work in both directions at the same
time. In a broader sense President Bush and I, as well, are committed
to the idea that in the best of possible worlds there are no trade and
tariff barriers at all -- not some narrow limits on individual goods,
but none at all. And with the enactment, last August now, of the
so-called Trade Promotion Authority, we are, in the United States, in
the process of working to give life to this idea that trade and tariff
barriers should disappear. So we're working on an even bigger agenda
than the one you suggest in your question.
Q: Yesterday you referred to the anti-terrorism efforts and any assets
of the money, if involved in Pakistan, so how do you see the efforts
of the Government of Pakistan, and your efforts, because a number of
your agencies are working in Pakistan? How do you see that there is
some money or some assets in Pakistan regarding that terrorism money?
Secretary O'Neill: Well, first let me show you a book; I think this
may be the first copy. This is a book called "Anti-Money-Laundering
Measures: A Guide for Bankers," and it's published by the Institute of
Bankers in Pakistan. You know, it's the first one that I have seen
here in Pakistan. I have to tell you, it's the first one I've seen
around the world. So I think maybe Pakistan is leading the world in
talking internally to its own institutions about the importance of
finding and confiscating tainted money. And I was really quite taken
with the fact that the Central Bank Governor was able to give me this
booklet and then talked in some depth this morning about the efforts
that are being made. I think Pakistan has been doing a great job in
this work, and it's very much appreciated.
Minister Aziz: Let me just add here that we are getting assistance
from the U.S. and other friendly countries on capacity-building, for
upgrading our anti-money-laundering efforts. As I've said, we have
this special unit, now created, which I announced today. And another
area where we hope to get assistance from the United States, where the
Secretary has been very kind, is Customs collaboration. We want to
work to see what the latest techniques are in getting our Customs
procedures better, and especially as it pertains to exports, because
we ship lot of containers to the U.S. If we can do some screening in
Karachi, then it will make our clearance of containers back in the US
hopefully much faster. Now these have to be explored. Similarly for
incoming goods: if we get the right equipment, these containers can
then be x-rayed without opening them, so you know exactly what's
inside, so: no mis-declaration of goods and all the other implications
which follow from that. So in capacity-building and technical
assistance from the United States, in Customs and in
anti-money-laundering and many other fields, we've already received
and we hope to receive more.
Q: A question for Secretary O'Neill to which Mr.Aziz may also wish to
respond: in this broad discussion on economic issues, can you say to
what extent a theme might have been that Pakistan's continued
cooperation in curbing the flow of terror finances is having an effect
and will have an effect on its economic future?
Secretary O'Neill: Well, I honestly don't think these are the same
subject at all. I think on the one hand, identifying tainted money and
capturing it is a subject to itself. But the broader theme of economic
growth and development, I think, is in good hands here in Pakistan. I
think with the President's encouragement, and with the Minister's
obvious knowledge and standing in world as one of the front-rank
financial people of our time, there's a dedication to establishing the
framework and the goals for the public sector which will permit the
private sector to thrive that is as good and strong as any that I know
in the world. And I think real progress is being made in everything
from improving the operation of the Securities and Exchange Commission
to strengthening the financial systems and people that are working on
financial issues in the country. So I think it's a very positive,
growth-oriented story here in Pakistan, aimed at improving the
circumstances of everyone in the country.
Minister Aziz: Let me just add that the dependence of Pakistan on
remittances is quite significant. Three years ago we used to get a
billion dollars a year. Then they doubled to two billion . Last year
they were three billion and this year, if we are lucky, we could hit
four billion. In the first quarter alone we got over a billion dollars
in remittances from Pakistanis outside. So any effort, any global
effort, which puts more money into official channels through the
banking system rather than unofficial channels is music to our ears,
because it benefits the economy of Pakistan; it benefits the people of
Pakistan. And that is why we are very supportive of this effort. And
there are other reasons, of course: we are part of the global effort
against bad money finding a home, and Pakistan's economic benefit of
getting our whole remittance business and funds flows into official
channels is enormous. That's why it has extra significance to Pakistan
and perhaps other countries. Let me also mention here that we have
extensive reform, under the State Bank of Pakistan, of our exchange
companies, which will also help direct money through official
channels. So this is an important issue for all of us.
Q: Did you find any clue of the terrorist funding source, and how is
Pakistan is helping in this regard?
Secretary O Neill: I think we have just said that there is a major
effort underway and continuing in Pakistan to go after tainted money.
And again, let me show you: here's a piece of evidence that is a
home-grown effort but being made in collaboration with nations around
the world who are all dedicated, I think now, to dealing with the
issue of tainted money, finding bad people and capturing their money.
Q: You have talked about the funding for the terrorists, the tainted
money which is in Pakistan. But a lot of tainted money from Pakistan
has been going to the western countries in the form of bribes taken by
officials; the politicians have a lot of money in western banks. And
Pakistan wants all this tainted money back. So how can the
international community help Pakistan in bringing back this money?
Secretary O'Neill: I don't know.
Minister Aziz: There are a lot of initiatives globally, and Pakistan
is bilaterally exploring it.
Q: I would like to follow it with the setting up of the Financial
Action Task Force which was operating out of France. So that task
force has been dealing with all these aspects, and there are reports
that the task force has now reduced its emphasis on the other forms of
money laundered except for terrorism.
Secretary O'Neill: No, I think that is absolutely not true. As a
matter of fact, I think these are all, in a way, one subject, and bad
people who are breaking the law and doing evil things are evil for
whatever reason. And I'm confident, from my own involvement in this
work around the world, that people have a relentless attitude and
thoroughness in what they're doing that didn't exist two years ago.
And I think it is moving forward quite well. And I think it is moving
forward quite well. You know, I gave you a sharp answer to your
previous question. Let me tell you: money had been confiscated or
actually frozen in the banks in New York and other places around the
world related to the activity of the Taliban, and one of the things
that it was possible to do after the Taliban was removed was to
provide those frozen moneys to the provisional government of President
Karzai, and now to President Karzai the elected President. And I think
there is a similar dedication that where money is found and if it's
due and owing to a legitimate government, nations of the world are
committed to doing that.
Q: Secretary O'Neill, as you consult with Congress over the issue of
debt relief for Pakistan, is the country's cooperation in the war on
terrorism sufficient to warrant US support for more debt relief or, if
not, what conditions would you like to see met before you would agree
to offer more on debt relief?
Secretary O Neill: I don't think these are connected subjects.
President Bush has indicated that he would seek action by the Congress
in order to provide debt relief and there are no ifs, ands or
conditions: the President made a commitment and he will pursue it.
Minister Aziz:  Thank you, Mr. Secretary.
Secretary O'Neill:  Thank you.
(end transcript)
(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: http://usinfo.state.gov)