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                                                      Calendar No. 1093
110th Congress                                                   Report
                                 SENATE
 2d Session                                                     110-510

======================================================================



 
             ENHANCED PARTNERSHIP WITH PAKISTAN ACT OF 2008

                                _______
                                

  September 26 (legislative day, September 17), 2007.--Ordered to be 
                                printed

           Mr. Dodd, from the Committee on Foreign Relations,
                        submitted the following

                                 REPORT

                         [To accompany S. 3263]

    The Committee on Foreign Relations, having had under 
consideration the bill S. 3263, to authorize appropriations for 
fiscal years 2009 through 2013 to promote an enhanced strategic 
partnership with Pakistan and its people, and for other 
purposes, reports favorably thereon and recommends that the 
bill do pass.

                                CONTENTS

                                                                   Page

  I. Purpose..........................................................1
 II. Committee Action.................................................1
III. Discussion.......................................................1
 IV. Cost Estimate....................................................3
  V. Evaluation of Regulatory Impact..................................6
 VI. Changes in Existing Law..........................................6

                               I. Purpose

    The purpose of this legislation is to authorize 
appropriations for fiscal years 2009 through 2013 to promote an 
enhanced strategic partnership with Pakistan and its people.

                          II. Committee Action

    S. 3263 was introduced on July 15, 2008 by Senators Biden 
and Lugar. At a meeting on July 29, 2008, by unanimous voice 
vote, the committee ordered the bill favorably reported, 
without amendment.

                            III. Discussion

    S. 3263, the Enhanced Partnership with Pakistan Act of 
2008, seeks to transform the relationship between the United 
States and Pakistan from a transactional, tactically-driven set 
of short-term exercises in crisis-management, into a deeper, 
broader, long-term strategic engagement. The legislation aims 
to properly balance the relationship between United States and 
Pakistan by acknowledging and supporting the national security 
interests of the United States as well as the economic and geo-
political interests. United States economic and military 
assistance for Pakistan enhances our mutual security while 
helping to build a more economically and politically stable 
country important in a regional and strategic sense. Economic 
assistance is as critical an element as strengthening the 
capacity of the Pakistan military to counter terrorism, 
especially for projects that provide direct and concrete 
benefit to Pakistani citizens as a whole. The overall level of 
economic assistance authorized would be raised substantially, 
with the bulk of this aid intended for projects such as 
schools, roads, medical clinics, and infrastructure 
development.
    The significant increase in assistance authorized by this 
legislation is intended to broaden and deepen non-military 
programs across a country of some 170 million people, where 
less than 50 percent of the population can read and write and 
whose Global Hunger Index ranking is nearly on par with that of 
North Korea. The legislation highlights the essential economic 
assistance pillar to achieve mutual goals of improved human 
security through basic services, education, economic 
opportunity, political participation and human rights. The 
legislation contains Sense of Congress language urging that 
security-related assistance be provided in close coordination 
with the Government of Pakistan, designed to improve the 
Government's capabilities in areas of mutual concern, and 
maintained at a level that will bring significant gains in 
counterterrorism, counterinsurgency, and regional harmony. The 
legislation does not preclude an increase or a decrease in the 
level of security-related aid.
    The legislation mandates that funds appropriated or 
otherwise made available to carry out section 5 shall be 
utilized to the maximum extent possible as direct expenditures 
for projects and programs. It does not preclude the use of some 
portion of the authorized funds for temporary budgetary support 
(for example, in order to help the Government of Pakistan deal 
with economic crises resulting from sudden increases in the 
price of food and fuel), but the intent of the legislation is 
to shift most Economic Support Funds from budgetary support to 
direct expenditures for projects and programs with effective 
United States oversight of such assistance.
    The legislation permits up to 7 percent of the funds 
authorized to be used for administrative expenses of Federal 
departments and agencies in connection with the provision of 
assistance authorized by this section, or to be made available 
to the Inspector General of the United States Agency for 
International Development to provide audits and program reviews 
of projects funded pursuant to this section. It is the intent 
of this legislation that this provision provides important 
flexibility to the U.S. Agency for International Development, 
which has a limited overall budget for operational expenses. 
Given the magnitude of the assistance and the critical nature 
of the purpose of such funds, the Committee expects that the 
Agency will, however, endeavor to keep administrative expenses 
to a minimum, while at the same time, the Committee also 
expects that sufficient program funds will be made available, 
pursuant to subsection (f)(2), to the Office of Inspector 
General (OIG) to ensure adequate oversight of all programs. The 
significant growth of economic assistance contemplated by this 
Act warrants close oversight, by the Agency and by OIG.
          Specifically, the legislation:

          Authorizes $7.5 billion over the next 5 fiscal years 
        ($1.5 billion annually) under the Foreign Assistance 
        Act. Advocates an additional $7.5 billion over the 
        subsequent 5 years, subject to improvements in the 
        political and economic climate; and

          Conditions military grant assistance and Foreign 
        Military Financing assistance beginning in 2010, and 
        new military sales beginning in 2012, on certification 
        by Secretary of State that Pakistani security forces:

                  are making concerted efforts to prevent al 
                Qaeda and associated terrorist groups from 
                operating in the territory of Pakistan;

                  are making concerted efforts to prevent the 
                Taliban from using the territory of Pakistan as 
                a sanctuary from which to launch attacks within 
                Afghanistan;

                  are not materially interfering in the 
                political or judicial processes of Pakistan.

          Urges a reorientation of engagement towards the 
        Pakistani people rather than merely towards the 
        Pakistani government (civilian or military).

          Urges accountability and transparent reporting of 
        Coalition Support Funds.

          Directs the Secretary of State (in consultation with 
        other officials) to develop a comprehensive strategy 
        for the Afghan-Pakistan border area.


    A premise for this plan is a simple thought-exercise: 
Following the earthquake in Kashmir in 2005, the United States 
devoted nearly $1 billion to relief efforts, and reaped a 
greater reward in popular support than any amount of public 
diplomacy could generate. The sight of American servicemen and 
women saving the lives of Pakistani citizens was worth ten 
times the cost of operating the Chinook helicopters. For a 
brief period, America was challenging the terrorists in a true 
battle of hearts and minds-and winning. S. 3263 seeks to 
recreate such conditions--to materially and powerfully 
demonstrate the true friendship of the American people for the 
Pakistani people--without waiting for a natural (or man-made) 
disaster.

                           IV. Cost Estimate

    In accordance with Rule XXVI, paragraph 11(a) of the 
Standing Rules of the Senate, the committee provides this 
estimate of the costs of this legislation prepared by the 
Congressional Budget Office.


                            United States Congress,
                               Congressional Budget Office,
                                 Washington, DC, September 26, 2008

Hon. Joseph R. Biden, Jr.,
Chairman, Committee on Foreign Relations,
U.S. Senate, Washington, DC.

    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 3263, the Enhanced 
Partnership with Pakistan Act of 2008.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is John Chin.
          Sincerely,
                                           Peter R. Orszag.

                                ------                                


               Congressional Budget Office Cost Estimate

                                                September 26, 2008.

                                S. 3263


             Enhanced Partnership With Pakistan Act of 2008


  AS ORDERED REPORTED BY THE SENATE COMMITTEE ON FOREIGN RELATIONS ON 
                             JULY 29, 2008.

                                SUMMARY

    S. 3263 would authorize the appropriation of up to $1.5 
billion a year over the 2009-2013 period-a total of up to $7.5 
billion over five years-for nonsecurity assistance to Pakistan. 
CBO estimates that implementing S. 3263 would cost $344 million 
in 2009 and about $5 billion over the 2009-2013 period, 
assuming appropriation of the authorized amounts. (Additional 
spending over the 2014-2018 period would total about $2.5 
billion, CBO estimates.) Enacting the bill would not affect 
direct spending or revenues.
    S. 3263 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would not affect 
the budgets of state, local, or tribal governments.
    S. 3263 could impose a private-sector mandate, as defined 
in UMRA, on exporters of major defense equipment. If the 
Secretary does not certify that the security forces of Pakistan 
have met certain security standards by 2012 or does not waive 
the requirement for such certification, the bill would prohibit 
the export of major defense equipment to Pakistan. CBO cannot 
determine whether the cost of the mandate, if imposed, would 
exceed the annual threshold established in UMRA for private-
sector mandates ($136 million in 2008, adjusted annually for 
inflation).

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    The estimated budgetary impact of S. 3263 is shown in the 
following table. The costs of this legislation fall within 
budget function 150 (international affairs).

                             Changes in Spending Subject to Appropriation by S. 3263
                                     By Fiscal Year, in Millions of Dollars
----------------------------------------------------------------------------------------------------------------
                                                       2009      2010      2011      2012      2013    2009-2013
----------------------------------------------------------------------------------------------------------------
Authorization Level................................    1,500     1,500     1,500     1,500     1,500      7,500
Estimated Outlays..................................      344       854     1,098     1,296     1,401      4,993
----------------------------------------------------------------------------------------------------------------

                           BASIS OF ESTIMATE

    For this estimate, CBO assumes that S. 3263 will be enacted 
near the start of fiscal year 2009, that the authorized amounts 
will be provided in annual appropriation acts each year, and 
that outlays will follow historical spending patterns for 
existing programs.

Assistance to Pakistan

    Section 5 would authorize the appropriation of up to $1.5 
billion a year over the 2009-2013 period for assistance 
programs in Pakistan and would require the administration to 
prepare annual reports on the implementation of those programs. 
Those funds would be used for projects that promote democratic 
governance and private-sector growth, and for education, 
construction of physical infrastructure, and other programs 
intended to benefit the people of Pakistan. Consistent with the 
bill's provisions on use of funds, CBO assumes that 
appropriations would be made through Economic Support Funds. 
Assuming appropriation of the authorized amounts, CBO estimates 
that implementing this provision would cost about $5 billion 
over the 2009-2013 period.

Limitations on Security Assistance

    Section 6 would limit certain military assistance after 
2010 and arms transfers after 2012 to Pakistan unless the 
Secretary of State certifies that Pakistani security forces are 
not materially interfering in their country's judicial or 
political processes and that they are making concerted efforts 
to prevent terrorists from operating in Pakistan or using it as 
a sanctuary. The bill would allow the Secretary to waive those 
certification requirements in the interests of national 
security. CBO expects that the Secretary would exercise the 
waiver authority if she were unable to make the necessary 
certification, and thus, that implementing that section would 
have no significant effect on spending subject to 
appropriation.

        ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

    S. 3263 contains no intergovernmental mandates as defined 
in UMRA and would not affect the budgets of state, local, or 
tribal governments.

                 ESTIMATED IMPACT ON THE PRIVATE SECTOR

    S. 3263 could impose a private-sector mandate, as defined 
in UMRA, on exporters of major defense equipment to Pakistan if 
the Secretary of State does not certify that the security 
forces of Pakistan have met certain security standards by 2012. 
If the Secretary does not issue such certification, the bill 
would prohibit the necessary licenses and programs for private 
entities to export major defense equipment to Pakistan. The 
bill would, however, allow the Secretary of State to waive the 
prohibition of exports of major defense equipment if the 
Secretary determines it is in the national security interest of 
the United States to provide such waiver. CBO assumes that the 
Secretary would exercise such a waiver. In the event that such 
exports are prohibited, the cost to comply with the mandate 
would be the forgone net income attributed to the sale of major 
defense equipment to Pakistan. According to industry experts 
and the Defense Security Cooperation Agency, the value of major 
defense equipment exported to Pakistan has varied from hundreds 
of millions of dollars per year to billions of dollars per 
year. Because of this variation, CBO cannot determine whether 
the cost of the mandate, if imposed, would exceed the annual 
threshold established in UMRA for private-sector mandates ($136 
million in 2008, adjusted annually for inflation).

Estimate Prepared By:

    Federal Costs: John Chin.

    Impact on State, Local, and Tribal Governments Melissa 
Merrell.

    Impact on the Private Sector: Jacob Kuipers.

Estimate Approved By:

    Theresa Gullo, Deputy Assistant Director for Budget 
Analysis

                   V. Evaluation of Regulatory Impact

    Pursuant to Rule XXVI, paragraph 11(b) of the Standing 
Rules of the Senate, the committee has determined that there is 
no regulatory impact as a result of this legislation.

                      VI. Changes in Existing Law

    In compliance with Rule XXVI, paragraph 12 of the Standing 
Rules of the Senate, the committee has determined that there 
are no changes in existing legislation as a result of this 
legislation.