ANALYSIS-U.S. assesses own plans after Pakistan floods

Sun Aug 8, 2010 9:36am EDT

* Washington considering adjustments to aid projects

* US concerned over Pakistan govt's weak flood response

* Worry extremists raising public standing with aid effort

By Sue Pleming

WASHINGTON, Aug 8 (Reuters) - As flood waters rise in Pakistan, so does U.S. concern over the impact of the disaster on an already fragile economy and how Washington's robust development plan may be slowed down to deal with the crisis.

Another source of unease, say officials and experts, is fallout from the weak response of the civilian government and to what extent the Pakistani military's attention is being diverted from its fight against militants in the border areas with Afghanistan where U.S. troops are fighting the Taliban.

"The financial and other implications of this will be huge and it will slow down our development efforts which are already facing gargantuan uphill battles," said Pakistan expert Brian Katulis of the Center for American Progress, a liberal think tank in Washington.

Crops and livestock have been destroyed by the raging waters that have killed at least 1,600 people and disrupted the lives of 12 million -- and more rain is forecast.

"This will add to budgetary strains as so much infrastructure has been destroyed," said a senior U.S. official, who asked not to be named. "But we really don't know the full impact of this or the ramifications yet."

Pakistan, which joined the U.S.-led fight against militancy in 2001, says the campaign has cost $35 billion over the last eight years and almost paralyzed its economy. Its problems are aggravated by power shortages, inflation and low investment.

Pakistan turned to the International Monetary Fund in November 2008 to avert a balance of payments crisis and has been struggling to meet the conditions of that $10.66 billion emergency loan plan.

For its part, the Obama administration has its own ambitious non-military aid program in Pakistan, with plans to spend $7.5 billion over the next five years.

The State Department has been negotiating for months with the Pakistanis over which projects should be done first, with a major focus on water and boosting electricity as well as agriculture, the backbone of the economy.

Some money could be reprogrammed to deal with the current emergency although Washington will be coordinating with other major aid donors when Pakistan's government has drawn up a full tally of its rebuilding needs.

"We can be flexible in being responsive to the needs as articulated by Pakistan," said Rajiv Shah, who heads the U.S. Agency for International Development.

"It makes it harder to have large-scale progress when you have these kinds of natural disasters," he told Reuters in an interview on Friday.

POLITICAL DAMAGE

U.S. officials, while refusing to discuss this publicly, are also assessing damage caused by the weak response from Pakistan's civilian government to the floods and mounting hostility toward President Asif Ali Zardari, who stuck to a European trip while waters raged back home.

"Where we have seen a challenge, is in the civilian political leadership and getting it to step up to the plate," said a U.S. official, who declined to be named as his comments were critical of Zardari.

U.S. officials repeatedly implored Zardari to return home, telling him this was his "Katrina," a reference to the devastating 2005 hurricane in New Orleans which affected the political fortunes of former U.S. President George W. Bush.

Charities with links to militants have taken advantage of the vacuum left in Pakistan and delivered aid to thousands stranded by the floods, possibly boosting their own standing among those communities.

"A big problem is that while the Zardari government and the international community struggle to get their act together the Islamist militants are already on the ground providing relief," said Pakistan expert Bruce Riedel of the Brookings Institution, a Washington think tank.

The biggest supplier of relief among those groups, he said, was Jamaat-ud-Dawa, a group with links to militant group Lashkar-e-Taiba which it blamed for the 2008 attacks against Mumbai. It has had "thousands" of relief workers going into villages and towns with cash and assistance, said Riedel.

USAID's Shah sought to play down the impact of militants filling the gap left by government in tackling the floods, saying a suicide attack in northern Peshawar last week showed the "true colors" of those groups.

"That contrast could not be more stark between legitimate government mobilizing the international community to respond to people's needs," said Shah.

Coinciding with the floods has been a spike of violence in Karachi, the commercial hub of Pakistan to where some Taliban have fled in recent months following army offensives against their strongholds in the northwest.

While the immediate focus is on saving lives in Pakistan, the United States hopes one result of its rapid and generous response to the floods will be to help improve America's dismal approval ratings in the country.

But Riedel was doubtful of this.

"There is no silver lining just misery for many and an increasingly weaker civilian government," he said. (Editing by Eric Beech)