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This is an archived USAID document retained on this web site as a matter of public record.
Administrator J. Brian Atwood
Testimony before the Subcommittee on Foreign Operations of the House Appropriations Committee
Washington, D.C., March 19, 1997
U.S. Agency for International DevelopmentChairman Callahan, Congresswoman Pelosi and other members of the subcommittee, it is a pleasure to be here today to defend the President's budget request for the U.S. Agency for International Development's (USAID's) fiscal year 1998 economic assistance request. I look forward to working closely with the subcommittee during the second Clinton Administration. It is my belief that we are entering a new and positive era in our international relations, and that our policies will be significantly strengthened if we adopt a spirit of constructive bipartisanship.
Recently, Secretary Albright noted, "In our democracy, we cannot pursue policies abroad that are not understood and supported here at home." I am sure you agree. We need to work with Congress to cause that to happen. I look forward to sharing with you today the reasons why USAID's programs directly advance America's interests.
President Clinton's budget request for fiscal year 1998 includes $19.4 billion for programs in international affairs. This request includes a modest increase from the previous year, and is just slightly over 1 percent of the federal budget. More importantly, this budget reverses the downward trend in funding for foreign affairs. USAID will manage $7.158 billion, or 37.5 percent, of those funds, including both USAID programs and programs administered by USAID in cooperation with other agencies.
Our request for discretionary funding in the Foreign Operations appropriations bill includes $998 million for Development Assistance, $700 million for the Development Fund for Africa, $190 million for International Disaster Assistance, $11 million for credit programs, $473 million for operating expenses, $29 million for Inspector General operating expenses, $2.498 billion for the Economic Support Fund, $492 million for programs in Central and Eastern Europe and $900 million for programs in the New Independent States. USAID also requests $44.2 million for the fiscal year 1998 mandatory contribution to the Foreign Service Retirement and Disability Fund. In addition, USAID will administer $867 million in P.L. 480 funds, although this funding is not under the jurisdiction of this subcommittee.
The total request for fiscal year 1998 USAID-managed programs represents an increase of $476 million over fiscal year 1997. This increase includes:
* An additional $292 million for programs in Central and Eastern Europe and the New Independent States. These transitional programs are designed to aid Central and Eastern European countries and the New Independent States through their difficult passage to democracy and market economies. I know this subcommittee understands both the importance and challenges inherent in securing lasting change in these nations. Helping to secure free societies in this region remains one of America's highest foreign policy and national security priorities. This increased funding demonstrates the Administration's commitment to helping these nations move through this turbulent time and reflects a realization that such sweeping change has also been characterized by uneven political and economic progress. In Central and Eastern Europe support for Bosnian reconstruction and reform and efforts in the Southern Tier countries will be given special emphasis. In the New Independent States, the Partnership for Freedom effort will build on our achievements to date and refocus our assistance program -- primarily in Russia but over time also in the other New Independent States -- toward more cooperative activities to spur economic growth and develop lasting links between our peoples.
* $135 million more for the Economic Support Fund. Economic Support Funds (ESF) advance key economic and political foreign policy interests of the United States by providing economic assistance to countries in transition to democracy, supporting the Middle East peace process and financing economic stabilization programs. The largest share of ESF will continue to go to supporting the Middle East peace process, including $52.5 million to be transferred to the Middle East Development Bank. The Latin America region will receive ESF funding vital to support the democratic transition in Haiti and the breakthrough peace accords in Guatemala. ESF will also support programs in "fledgling democracies" such as Cambodia and Mongolia. Finally, ESF will be used for assistance in sub-Saharan Africa for elections, political party building and legislative training for countries in transition such as Angola.
* An increase of $65.5 million in Sustainable Development Assistance. These funds will support USAID's development goals by encouraging broad-based economic growth, protecting human health, slowing population growth, encouraging environmental protection and advancing democracy. By fostering free markets and open political systems, USAID's development programs are helping to shape a world that is more stable and open to U.S. trade and leadership. Specifically, the "Promoting Food Security" pilot initiative, aimed at improving food security in Africa, will in its first year target $30 million to five nations -- Ethiopia, Uganda, Mali, Malawi and Mozambique -- and to U.S. universities and international agricultural research centers. This initiative will support policy reform and a range of agricultural research that will benefit not only Africa, but other developing nations as well. By modernizing agriculture, the cornerstone of the economy in most developing nations, the initiative increases incomes of rural people, lowers the cost of food for the urban poor and conserves the environment. By furthering agricultural and, thus, economic growth in these countries, the initiative has the potential to both spark U.S. exports and save this country significant emergency relief food costs.
These modest increases in spending are all vital to helping secure a more prosperous and stable world during the next century.
I would also note that our operating expense request is $15.3 million lower than the new budget authority level we expect to use in fiscal year 1997. At this reduced level we will absorb increased costs associated with Federal pay raises and general inflation. Operating at the reduced level will be possible because of economies achieved by reengineering and the restructuring of our overseas operations. It is critical that we obtain the requested funds -- any further staff reductions would seriously endanger our ability to manage our programs.
Recognizing the importance of USAID's unique mission, we have dramatically improved the management of the agency to make it the most effective foreign assistance agency in the world. We have overhauled USAID from top to bottom -- its strategic approach, organization and management. We have demanded that our programs produce demonstrable results. Since 1993, we have reduced staff by over 2,700, a reduction of more than 25 percent. We have cut senior management by 38 percent. We have reduced project design time by 75 percent. We have reduced our regulations by 55 percent. We have closed 26 overseas missions and will close six more by the end of fiscal year 1998. Further, USAID is one of the pioneering agencies in implementing the Government Performance and Results Act. All of these actions are designed to ensure that every dollar appropriated to the agency will bring taxpayers the best possible return on their investment.
We know you have questions about our new management systems (NMS). Let me try to give you my perspective on what we are doing. Our new management systems are not just designed to replace existing financial and procurement systems. We will indeed replace those systems but NMS is much more than computers or software. Our new management systems are a new way of doing business. As you know, we have redesigned our old project design system to make it faster, simpler and more customer-oriented. We have also redesigned our foreign missions to empower employees, to create strategic objective teams and to make our programs more results-driven. The new computer system will facilitate these improvements. It is a management tool created to allow us to manage more effectively the other reforms we have adopted.
As we implement the computer portion of NMS, we are bringing the agency's technology to the forefront of any used in government. We are in the process of deploying a management system that fully integrates project planning, budgeting, a single-entry financial system, a simplified procurement system, and our evaluation system. In the next few years, we will add workforce planning, personnel management and a training module to our current capabilities. All of this will be available to every USAID office worldwide. Deploying such a system in a worldwide operation is not easy, but we have made great progress.
Let me give you a brief status report.
As you know, we activated the NMS computer system worldwide on October 1, 1996. Since then we have been using a combination of NMS and the old legacy systems to process transactions. To date we have processed contracts and grants in NMS totaling about $288 million and have paid approximately $48 million in invoices plus the $1.2 billion cash transfer to Israel.
Since bringing the system up worldwide, we have been addressing two major challenges. One relates to the need to migrate consistent and accurate data from the old systems into the new. The NMS will not allow us to process any inconsistent or inaccurate data. This forces us to clean up and reconcile data and incorporate it into the new system. We have found this to be a more labor-intensive process than we imagined because the level of inaccuracy in the old systems was even greater than anticipated. Nonetheless, we have made great progress. We have migrated all 8,000 records from the old Financial Accounting Control System (FACS) and the 6,500 records from the Contract Information Management System (CIMS). We still have to reconcile this data and reconcile it with the data from the field Mission Accounting Systems (MACS), but we expect to finish that process by this summer.
Could we have waited until all this data was reconciled before we activated NMS? Could we have phased in the new system one module at a time? We considered both of these options. We rejected them because the integration process would have taken years, and we would still be using the old legacy systems and accumulating additional data of questionable accuracy that would have to be migrated later in a reconciled form. Activating NMS has forced us to migrate the data more expeditiously and, in the long run, it will save us time and tax dollars.
The second challenge has been the need to create a worldwide, high-speed communications system. We have encountered problems with the two separate telecommunications systems we have been using, but we are making real progress in overcoming these problems. The time needed for transactions has been reduced, and we have several actions we are taking to further reduce this timeframe.
Mr. Chairman, when I came to USAID in 1993, the need for an integrated management system had already been identified. A plan developed in 1992 called for a fully integrated financial management, procurement and budget system but one that did not integrate operations or allow us to integrate field and headquarters capabilities. This much less ambitious system was estimated to cost approximately $100 million. Our judgment was that that plan would not have given the Agency what it needed in a reasonable timeframe and that the cost estimate would most likely have been exceeded.
What we have created is the full-fledged integrated management system I have described. We have consciously sought to deploy this system using state-of-the-art approaches. Each step of the way we have consulted with systems experts at OMB, GAO and the private sector, and we have been encouraged to move forward. My own Inspector General has offered superb advice on which we have acted to correct problems. He has also pointed out that our systems development approach is an unconventional one. He is correct in terms of government systems, and that does create testing and certification dilemmas. But we are breaking new ground that will benefit government if we succeed.
I want you to know that I understand the risks, and I believe that our approach will pay off. It reflects the latest thinking in systems development. I also understand there are risks in adopting conventional approaches as well. As business executive Hank Delevati of Quantum Corporation said recently, "The phased approach is longer -- and I contend riskier -- because you won't get everyone involved and coordinated." Quantum Corporation was one of many large organizations that has successfully deployed a new integrated management system using the "all at once" approach.
Last month we had our systems coordinators into Washington from around the world. We want them to know we understand the problems they are having and the solutions we are devising. They now have a better appreciation of the effort we are making. They and we are confident that we will accomplish what other government agencies have not.
In response to our NMS growing-pains, I have approved a delegation of authority that allows our Assistant Administrators to use a waiver process for critical agency business that cannot currently be transacted in a reasonable time within NMS. The process I have approved stipulates that any exceptions eventually must be entered in NMS.
Mr. Chairman, we do not seek to mask the difficulties we face in making NMS fully operational, but we are on the right track. This system will not only revolutionize the way we do business at USAID, it will lead the way for the development of similar systems in the U.S. Government. We have been pleased that so many Congressional staff have sat through detailed briefings on NMS. We welcome your vigorous oversight. We welcome it because we know that together we can vastly improve our capacity to fulfill our mission.
In short, we are doing everything possible on the management side to make America's international programs cost-effective. We want to achieve results that serve America's interests. Let me describe how we believe we serve those interests in today's world.
America's Stake in the World
The United States has a vital interest in maintaining a leadership role in the international community, and in seeing that the international community cooperates on the basis of shared values. Nowhere is this more true than in promoting development in poor nations and countries emerging from the long shadows of communism and totalitarianism. Why is this important to Americans?
It is important because we live in a world where trends toward globalization and increased interdependence are powerful and accelerating. This means international cooperation is increasingly important -- in areas as diverse as promoting trade, protecting the environment, fostering democratic governments, reducing rapid population growth rates, establishing market-based economies, stemming the flow of narcotics, slowing the spread of infectious diseases, coping with migration and protecting human rights. In all of these areas, the benefits of fruitful cooperation are significant and lasting, while the failure to work together will be increasingly costly and immediate.
During the Cold War, U.S. leadership was central and unmistakable as the protector of the free world against the threat of communist expansion. U.S. military power and economic dynamism were seen as essential to resisting that threat. But America's leadership then, as now, had a foundation stronger than our Army or our economy. The United States projected a compelling, and widely shared, vision of a world order where democracy and open systems were respected. Our vision of political and economic freedom, of social justice and respect for the individual was as powerful as any missile or any defense system. The United States offered the world not only security, but a better alternative to the Communist vision.
The Cold War is over. We still have the strongest military and the strongest economy in the world. But strength alone is not a substitute for leadership. America's position in the 21st century will depend more and more on the quality of our leadership; on the perception that we understand and appreciate the broad interests of the international community, and that we act with these interests in mind; and on the perception that we still have the best, most compelling vision of a global world order. Equally important, America's domestic interests are now, more than ever before, inexorably linked to events that take place far from our own shores.
Our modest and well-targeted foreign assistance programs directly advance America's interests -- your constituents' interests -- in three direct ways: by helping to prevent crises; by generating dynamic opportunities for expanded trade; and by providing protection from specific global health and environmental threats.
A Diplomacy of Crisis Prevention
One of the most profound areas of concern for the United States and its allies is the growing phenomena of failed states. One need only open a newspaper on any given day to see the perilous state in which many nations now find themselves. Whether it is rebels fighting in eastern Zaire, hostage-taking in Tajikistan, street protests in Belgrade, Bulgaria and Albania or the constitutional crisis in Ecuador, we are confronted by potentially explosive situations with the potential to trigger conflict or economic collapse.
Since the mid-1980s, the number of man-made emergencies requiring a U.S. Government response has doubled. The staggering human, financial and political cost of these conflicts is reflected in the increasing scope and complexity of peacekeeping operations, the loss of human life and the exploding numbers of refugees around the globe. Since the Gulf War, the United States has mounted 27 military operations as a result of ethnic conflicts and failed states. Up to 1 million people lost their lives through genocide in just one year in Rwanda, and the number of refugees and displaced persons in the world now numbers close to 50 million.
In the former Yugoslavia, where the loss of human life in less than four years was the greatest in Europe's post-World War II history, USAID has helped to jump-start the Bosnian economy, and our fiscal year 1996 funds for enterprise development and infrastructure projects have been fully committed. Over 60 loans for small and medium sized businesses have created over 6,500 new jobs. We have helped rebuild power grids and provide light and heat to the city of Sarajevo, rebuild water systems and rail bridges, and have rehabilitated war-damaged buildings.
For the average citizen in Bosnia, the situation is decidedly better today than a year ago, and I am proud of the role USAID has played. However, full economic recovery requires political integration between the entities and this requires political will. USAID has been working in close collaboration with the IMF to provide technical assistance on major macroeconomic issues such as the enactment of a central banking law and the adoption of a currency board as mandated by Dayton. USAID sent the world's leading expert in currency boards to Bosnia to explain the technical details to all officials. In addition, USAID experts have helped to harmonize banking legislation in both entities to promote a unified banking system. However, the major institutions and symbols of state sovereignty, such as a central bank, a unified currency and an ability to collect revenues, have yet to be resolved.
As a nation, we know that we ignore the warning signs of crises only at our own peril. When potential crises erupt into genuine emergencies, it is the U.S. military most likely to be put in harm's way, it is U.S. economic interests that suffer and it is this nation that ends up providing the lion's share of humanitarian assistance to the victims of war and social collapse. It is abundantly clear: The United States has a compelling national interest in preventing and averting crises before they occur. Practicing a diplomacy of crisis prevention is one of our greatest challenges in this new era, and development programs have a lead role to play in these efforts.
As we know from our own daily experience, every country is subject to the internal pressures to some degree of stress from ethnic, religious, economic and other deep-seated conflicts among their own citizens. What distinguishes a country that can endure these internal tensions from one that cannot is the relative strength of its domestic institutions. By institutions, I mean not just government and political organizations, but also tradition, culture, social practices, religion and the depth of human capital. In many cases, conflict is a result of a failure to give people a stake in their own society.
The reality is that most nations in conflict simply lacked the institutional capacity to avoid escalating violence. We see prime examples of this in the former communist world. When communist institutions collapsed, and no strong institutions replaced them, conflict became commonplace. We obviously do not wish to see a return to totalitarian methods, so it is essential that we help these countries put democratic institutions and social conditions in place.
A second category of countries that fall into crisis include nations such as Rwanda, Somalia, Sudan, Zaire, Afghanistan and Liberia. What these countries have in common is that they are among the least developed countries in the world. And, by "least developed" we mean they have the weakest institutions and least developed human resources.
The findings of a recent CIA study of failed states confirm the role of underdevelopment in crises. The study attempted to find the indicators most commonly associated with a vulnerability to crisis. The three leading factors shared among nations that have succumbed to crisis were high infant mortality rates, a lack of openness to trade, and weak democratic institutions. Does this mean that if we simply promote trade, strengthen democracy and provide child health programs that crises would disappear? The study doesn't say that. What it does say is that these variables are reasonable proxies for a nation's relative level of overall development, including a country's willingness to invest in its own people, to concern itself with lower consumer prices and to create institutions to enable the people to participate in the development of their own society.
The implications of this analysis for our foreign policy are profound. Development programs are aimed at enriching human resources, strengthening open institutions, and supporting political and economic reform. By fostering stronger institutions, a richer human resource base and economic and social progress, countries are better able to manage conflict and avoid the dangerous descent into war. Development programs give us the tools we need to deal with the uncertain world around us. I am not here today to say that development programs are an ironclad guarantee against crisis and collapse. But it is entirely fair to say that successful development and transitions out of closed systems vastly improve the capabilities of a country to manage division and conflict. This is clearly in the best interests of the United States.
The challenge of crisis prevention is, in many respects, the logical successor to the paradigm of the Cold War. Through our democracy and governance programs, USAID seeks to strengthen the political, social and economic institutions on which management of conflict directly depends. Our efforts at promoting economic growth also encourage economic freedom. Our efforts at human resource development -- in education and health -- ensure that an increasing percentage of the population can take advantage of economic opportunity, social progress and political freedom. Our efforts to protect the environment and to give families the capacity to space their children help ensure that development progress is sustainable.
And there is strong evidence that U.S. foreign assistance programs have successfully helped develop functioning stable democracies. Political freedoms have increased significantly in the countries where development activities have been most focused. Between 1982 and 1996, Freedom House data demonstrates that political freedom improved in 48 countries and grew worse in 30. Of the 29 countries showing the most dramatic improvements in political freedoms, most were significant recipients of U.S. aid over the period. U.S. efforts helped nations such as the Philippines, South Africa, Jordan, Haiti, Bangladesh, Guatemala, Mozambique, Nicaragua, Uruguay and Malawi realize the dream of more open societies.
We have also adopted the policy that nations that do not embrace democracy, and that turn their backs on their citizens, will not receive U.S. assistance. We cannot achieve development results if we have poor partners. We will not work with governments that exclude their people from the development process.
International development cooperation works. In developing countries during the past 35 years, infant mortality has fallen from 162 to 69 per thousand; life expectancy has risen from 50 to 65 years; and literacy has climbed from 35 to 67 percent.
We cannot prevent every crisis, but we can avert many. Investing in these efforts is a small price to pay for a foreign policy that advances our interests in a more stable world.
Advancing U.S. Economic Interests
Let me turn now to the role development programs play in directly supporting U.S. economic interests. For both trade and investment, developing countries provide the most dynamic and rapidly expanding markets for U.S. goods and services. U.S. exports to developing countries in the 1990s have expanded at 12 percent annually, more than double the export growth to industrial countries. This is not just a short- term phenomenon, but reflects a trend that began emerging in the mid-1980s.
Between 1990 and 1995, annual American exports to transition and developing countries increased by $102.9 billion, and now stand at over $240 billion a year. This growth supported roughly 1.9 million jobs in the United States. Work in agriculture has a particularly high return. Forty-three of the 50 largest importers of American agricultural goods formerly received food aid from the United States -- current agricultural exports to these former food-aid recipients exceeds $40 billion a year. A recent study by the International Food Policy Research Institute found that for every dollar invested in agricultural research in developing countries, four dollars is returned to the donor country in the form of export purchases, of which more than one dollar is for agricultural commodities.
The bottom line is that by the year 2000 -- three short years from now -- four out of five consumers will live in the developing world. USAID's programs are helping these people become America's next generation of customers.
As Asian and Latin American economies have prospered, so have U.S. exports and jobs. These regions are the fastest-growing markets for U.S. exports of goods and services, and among the largest.
In 1995, the Latin American and Caribbean region accounted for more than 70 percent of all U.S. exports to USAID-assisted countries. Exports of goods to all countries in the region reached $95 billion in 1995, more than three times the level 10 years ago. And this is at a time when 40 percent of the population in Latin America and the Caribbean is still living in poverty. The potential for further growth of U.S. exports is enormous if our development efforts can include the region's poor in Latin America's mainstream market economies. Our development is also critical to help consolidate the still fragile democratic tradition in the hemisphere.
U.S. total trade with USAID-presence countries in Asia is growing even faster than with those in Latin America and the Caribbean (1990-95). Asia and Near East USAID recipients also had the largest relative increase in U.S. merchandise exports between 1990 and 1995 (from $35 billion to $63 billion). South Asia's GDP has grown at an annual rate on average of 5.2 percent in recent years, fueling the region's increased demand for U.S. exports. This economic growth also has implications for reducing poverty globally, since South Asia region accounts for two thirds of global poverty.
Africa, despite very uneven development, represents a major economic opportunity. USAID has been helping committed African nations become full partner's in the world's economy by providing support for policy and regulatory reform, particularly in the areas of trade regulation, financial market development, investment policy, privatization, export promotion and sectoral policy reform. If we continue our commitment to the continent, I believe Africa will be the next great market for the U.S. Africa is not significantly behind where the "New Asian Tigers" were in 1960.
USAID is also playing a major role in helping countries in Eastern Europe and the New Independent States move from command economies to private sector-oriented, market-driven ones. The importance of these transitions is difficult to overstate. Russia, Ukraine and Kazakistan -- to name the most obvious examples -- represent enormous opportunities in terms of the security, foreign policy and trade and investment interests of the United States. Our relatively minor investments in foreign assistance funding to forge new partnerships with the countries of Central Europe and the NIS represent a major foreign policy initiative to help ensure that these nations make a permanent transition to free markets and open political systems.
Creating the enabling environment for markets is a principal focus of USAID's programs. The connection with development programs, and USAID in particular, is quite significant. U.S. exports are growing much more rapidly to some developing countries than to others. What accounts for these differences? The major portion of the variation is explained by progress in terms of improved policies and institutions -- i.e., the enabling environment for trade and investment.
USAID's efforts to effect reform and boost demand for U.S. goods is clearly in America's economic self-interest. Our economic growth programs, however, have unfortunately been squeezed by the combination of USAID's recent budget cuts and our need to balance Hill directives, Administration priorities and our own concerns. In fiscal year 1990, 56 percent of our DA and DFA budget was devoted to economic growth. In our 1998 request, economic growth -- including support for agriculture, economic policy reform, privatization, microenterprise and basic education -- accounts for only 30 percent of the DA and DFA total.
Much has been accomplished through USAID's economic growth programs. USAID-assisted countries have been among those that have made the greatest progress in policy and institutional reform over the past decade, including Thailand, Jamaica, Bolivia, El Salvador, Guatemala, Peru, Ghana, Costa Rica, the Philippines, Morocco, Sri Lanka, Belize, Panama, Tanzania, Tunisia, Indonesia, Mali, Botswana, and Uganda. Because of our field presence, technical expertise and experience, USAID can have significant influence in encouraging economic policy reform.
The international financial institutions have also played a vital role in supporting economic reform and restructuring weak economies, especially in countries in transition from authoritarian regimes or from conflict. In response to effective U.S. leadership within the donor community, they have increasingly put their weight behind governance reform, investment in social capital, and environmental sustainability -- significantly complementing U.S. bilateral efforts. U.S. investments in both bilateral and multilateral assistance programs are fundamental to maintaining U.S. leadership within the donor community and to strengthening this complementarity.
There are some who have argued that private capital flows can simply replace the need for foreign assistance programs. However, it is important to remember that foreign assistance and private investments are complements -- not alternatives. By and large, private investment is flowing today into the emerged markets of the developing world, not into countries where there is no rule of law, no financial institutions, no private sector and no predictability. It is only when the enabling environment for markets has been well established -- by recipient self-help efforts often supported by foreign aid -- that private flows begin to accelerate. Eventually private investment and trade will replace foreign aid, and this is what a development program should strive to achieve. But the issue for most of the developing world countries is not best captured by the phrase "trade, not aid." The phrase "aid, then trade" is closer to their reality.
Our development efforts have contributed to economic freedom worldwide. Of the 27 countries with large improvements in economic freedom between 1975 and 1995 (as measured by an index from the Fraser Institute), 22 have been major recipients of U.S. foreign aid. Continued Clinton Administration efforts to promote U.S. job creation through trade and investment abroad must focus on emerging markets in Asia, Latin America, Eastern Europe, the New Independent States and Africa. Hastening the fuller emergence of these dynamic new markets is an essential element of a long-term U.S. economic and foreign policy strategy for the United States. Private capital will play the largest role in bringing the markets of developing nations into the mainstream of trade and investment, but some of the most promising developing markets are still hampered by trade barriers, other policy distortions and human capacity constraints that discourage trade and private capital flows.
U.S. development assistance is useful in removing these structural and policy barriers. By reducing barriers that keep out foreign trade, by fostering fair and transparent regulatory and legal regimes, and by building capital markets, USAID has been at the cutting-edge of the continued steady growth of America's economy.
Finally, I would like to point out that the U.S. receives almost $1 billion a year in repayments of past USAID loans, and I would like to remind the subcommittee, as Secretary Albright did last month, that close to 80 percent of USAID's contracts and grants are awarded to American firms, supporting thousands of jobs across the nation.
Child Survival
Mr. Chairman, I am aware of the strength of your commitment to our most important resource, the children of the world. On behalf of all of us at USAID, I would like to take this opportunity to thank you for your tireless advocacy and leadership in Child Survival. Last week I appeared with you and UNICEF Director Carol Bellamy to announce the release of a report that outlines the progress we have made in Child Survival, along with the challenges that remain. Since 1985, with solid bipartisan support from Congress, USAID has invested more than two and a half billion dollars in Child Survival programs. As you know, the basic principle underlying USAID's Child Survival effort is that no family should suffer the death of a child. As the report we released highlighted, this commitment has paid enormous dividends in reducing the toll of child deaths around the world.
USAID's efforts to decrease child mortality and improve the conditions of children's lives are not limited to the Child Survival programs. For example, our considerable investments in food security and agriculture have had an enormous impact on reducing levels of child malnutrition and its associated mortality, especially in Asia and Latin America, and we are looking to do more, especially in sub-Saharan Africa. Similarly, our efforts to assure that couples around the world have the ability to determine for themselves the number and spacing of their children through family planning have themselves resulted in a substantial reduction in high risk births, estimated to be responsible for at least twenty percent of the drop we have experienced in child mortality rates. Our programs in basic education, particularly among girls, have demonstrated a direct impact on young mothers' ability to care for their children and on these children's chances for survival. And of course our programs in preventing AIDS have at long last begun to turn the tide on the leading cause of orphancy in Africa and large portions of Asia and Latin America.
The heart of USAID's effort continues to be our focused approach to Child Survival interventions that save lives and build the local health systems that will carry this critical task forward. But there is much more in our budget request that directly impacts on children, their survival, their educational development, their safety, their health and their prospects for a satisfying and productive adulthood.
Mr. Chairman, I also would like to mention that since 1985, while we have learned that survival is essential, we have also learned that the conditions of survival are just as important to assure that every child can fulfill her or his potential. We have discovered what are by now well-established interventions to address specific diseases that are the major killers of young children. But we have also learned that the circumstances these children are born into have enormous influence over their likelihood of survival. We have learned that how children grow to adulthood will determine whether they will have the capacity and tools to join our global economy.
Protecting America Against Global Threats
Foreign assistance programs are vital in protecting the United States against many dangers that are global in scope. By taking on the challenging task of preventing and controlling infectious diseases like AIDS, polio, and emerging viruses like Ebola before they reach our shores, USAID lowers health costs here at home. Our environmental programs help protect the air and water that Americans share with the rest of the world. Our family planning programs help slow rapid population growth and make for healthier and better-cared-for families around the globe, ultimately reducing instability, migration and refugee flows.
Let me give you several specific examples of how all Americans can benefit from our development efforts abroad. USAID has long been the leader in the battle to eradicate polio around the globe. Working with our neighbors, the Pan American Health Organization, American organizations like Rotary International and many others, we successfully wiped out polio in the Americas. But U.S. taxpayers still spend $230 million a year to immunize our own children against the threat of polio reoccurring on this continent.
USAID, working with a rich variety of partners, is helping to lead the effort to eradicate polio globally by the year 2000. This is an ambitious goal, but an achievable one. So by making modest resources available for foreign assistance, the United States stands to save $230 million a year in domestic immunization costs. This is clearly a case where foreign assistance is an investment in our own self-interest. Mr. Chairman, I know you have taken a personal interest in this effort, and I would like to congratulate you and the subcommittee for your leadership and vision in promoting global polio eradication.
Consider also that USAID has reached more than 3.2 million people with HIV prevention education and trained more than 58,000 people to serve as counselors and health providers in the developing world. Recent computer modeling shows that USAID helped Kenya avert over 110,000 HIV infections in just three years. Ultimately, our HIV/AIDS programs result in fewer Americans exposed to the virus, and lower health care costs for American families.
By preventing crises, by boosting America's economy, and by protecting the United States from truly global threats, we are working abroad to keep America strong at home and abroad.
Building the Institutions that Serve Us Well
In closing, I would say to this subcommittee that today we have the chance to shape the international institutions and programs that will protect America's prosperity, security and stability for years to come. This includes not only bilateral
institutions such as USAID, but equally vital multilateral mechanisms such as the United Nations, the World Bank and other international financial institutions.
It is fitting that this year we will celebrate the 50th anniversary of the commencement of the Marshall Plan. All now agree that the Marshall Plan was a stunning, unprecedented example of enlightened leadership. The United States understood the benefits to the United States of economic recovery in Europe and Japan, and the threats in terms of crisis and instability that would result from economic stagnation in these regions.
During the Marshall Plan, foreign economic aid amounted to more than 1.5 percent of U.S. gross national product. Now, foreign aid is about one-tenth of 1 percent of our gross national product, and well below one-half of 1 percent of federal expenditures. Fortunately, and precisely because the Marshall Plan was such a success, there are many other nations to help us carry the mutual burden of international leadership. But we should still do better if we want to maintain our leadership role and defend our interests.
Development cooperation, including support for countries making the transition from communism, and humanitarian assistance for countries in crisis, remains an essential part of a credible and compelling vision of how the international community should function. A lead role for the United States in development cooperation is a vital part of American leadership in the post-Cold War era, arguably more important now than ever.
I urge your support for the President's budget request, and I look forward to working with you to strengthen our nation's foreign policy capacity.
Thank you.
U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT
FY 1998 Congressional Presentation
Summary
"Every dollar we devote to preventing conflicts, to promoting democracy, to stopping the spread of disease and starvation brings a sure return in security and savings."
President William Jefferson Clinton
State of the Union Address February 4, 1997
The president's Budget Request for FY 1998 includes $19.4 billion for programs in international affairs. The U.S. Agency for International Development will manage $7.2 billion (37.5%) of those funds, which includes both USAID programs and programs administered by USAID in cooperation with other agencies. USAID works with developing nations and countries in transition to support viable democracies and market economies. America's fastest growing export markets are in developing countries -- U.S. exports to countries receiving USAID assistance grew by $98.7 billion from 1990 to 1995, supporting roughly 1.9 million jobs in the U.S. By the year 2000, four out of five consumers in the world will live in developing nations.
USAID's programs advance both our foreign policy goals and the well-being of some of the world's neediest people. The FY-1998 funds will:
* Help eradicate polio globally by the year 2000, saving American taxpayers $230 million a year in domestic immunization costs;
* Save more than 3 million lives through immunization programs;
* Help developing nations build their capacity to open their markets and tear down barriers to U.S. trade;
* Extend family planning services to more than 19 million couples around the world who could not otherwise afford them, thus averting thousands of needless deaths of mothers and children;
* Provide assistance to millions of victims of flood, famine, conflict and other crises around the globe.
* Combat worldwide environmental degradation, including global climate change, biodiversity loss and natural resource depletion; and,
* Provide credit to hundreds of thousands women "microentrepreneurs" starting small businesses.
The request for FY 1998 USAID managed programs represents an increase of $476 million over FY 1997 -- including, principally:
*An additional $292 million for programs in Central and Eastern Europe and the NIS;
*$135 million more for the Economic Support Fund; and
* An increase of $65.5 million in USAID's Sustainable Development Assistance.
* The FY 1998 request also includes economic growth activities aimed at improving food security in Africa to help feed the hungry and support for agricultural research through the agency's central Global Bureau.
The request also includes a decrease of $15.3 million in the agency's operating expenses.
The FY 1998 USAID request reverses the agency's downward budget trend of the last several years, and represents the minimum level necessary to implement a balanced program of sustainable development and humanitarian assistance that will significantly contribute to achieving the administration's foreign policy objectives in the post-Cold War era. USAID is now at a point where after four years of implementing a comprehensive set of management reforms, the Agency's program quality has greatly improved; is increasingly concentrated on results, improved efficiencies and more effective programming; and is more focused in defining its goals and objectives.
USAID BUDGET FY 1996 -- FY 1998
(Discretionary Budget Authority -- $ Millions)
Development Assistance (DA) Child Survival and Disease ProgramSee footnote 1 Development Fund for Africa (DFA) International Disaster Assistance Credit Programs: Micro and Small Enterprise Development Urban and Environmental Credit Operating Expenses -- USAIDSee footnote 3 Operating Expenses -- USAID IG Subtotal -- Development Assistance Economic Support Fund Eastern Europe New Independent States Subtotal -- USAID Appropriated PL 480 through USDA Title II Title III TOTAL USAID-Administered
USAID Development and Humanitarian Programs ($2.445B)
This request includes funding for bilateral Sustainable Development which is funded out of the Agency's Development Assistance (DA) and the Development Fund for Africa (DFA). In addition, USAID requests funding for the International Disaster Assistance account; USAID's credit, guaranty subsidy and administration programs; food assistance under Titles II and III of Public Law 480; USAID's and the Inspector General's Operating Expenses; and a mandatory payment to the Foreign Service Retirement and Disability Fund.
Sustainable Development ($1.698B):
This request, which compares to an FY 1997 level of $1,632B (after transfers to UNICEF, the IAF, ADF and USAID's OE account), is the core of USAID's program. It is funded from the DA ($998M) and DFA ($700M) accounts.
Sustainable Development is based on four integrated, interrelated and mutually reinforcing goals that are aimed at addressing the long-term economic interests of the United States. (The fifth goal, Humanitarian Assistance, is part of the programs described under USAID's request for the International Disaster Assistance and Food for Peace accounts.)
-- Encouraging Broad Based Economic Growth ($507.5M): This goal is centered around improving market efficiency and performance, expanding access and opportunity for the poor including food security, and ensuring that young women and men enter adulthood with basic education skills. Within the overall allocation for this goal $90.7M will support basic education for children. (FY 1997 funding is $517.7M for this goal).
-- Stabilizing world population and protecting human health ($765M): This goal is centered around four objectives: reducing unintended pregnancies through increased use of family planning ($400M), reducing child mortality (220.5M), reducing the spread of HIV/AIDS ($117.5M) and for a variety of other activities to help reduce maternal mortality and the effects of other infectious diseases ($27M.) (FY 1997 funding is $764.6M for this goal)
-- Protection of the environment ($290M): This goal centers on reducing threats to the global environment, particularly conservation of biodiversity, reduction of threats to global climate change, reduction of pollution and promotion of sustainable urbanization, provision of environmentally sound energy activities and sustainable natural resource management. (FY 1997 funding is $227.6M for this goal).
-- The increase in environment funding in FY 1998 reflects support of important activities in Africa, Latin America and the Asia and Near East (ANE) Bureaus.
-- Funds will be provided to Guinea's Fouta Djallon Highlands program to support environmental aspects of the Greater Horn of Africa work on related food security issues; assist community-based wildlife management initiatives in Southern Africa; biodiversity conservation in Madagascar, and provide additional funds to better service existing activities in countries serviced by REDSO/WCA.
-- In Latin America additional monies will be used to make up for deferred environmental funding in El Salvador, Jamaica and Peru as well as for a program expansion in Guatemala into the Maya forest areas; the result of the peace accords.
-- In ANE the increase in environmental funding will be used to make up for deferred funding in FY 1997.
-- Supporting democratic participation ($135.5M): This goal is achieved through strengthening rule of law and respect for human rights, fostering more genuine and competitive political processes, increasing the development of politically active civil society, and supporting the establishment of more transparent and accountable government institutions. (FY 1997 funding is $122.5M for this goal)
Other Development Assistance Programs
Credit programs:
-- USAID believes that there are significant instances in which U.S. development priorities can be best funded through credit, especially in emerging market countries and in countries moving toward graduation status.
-- Credit resources permit the leveraging of important amounts of private sector resources to support sustainable development. Credit programs also enable USAID to reach large populations that it would not otherwise be able to reach.
-- Important beneficiaries of credit programs are the "poorest of the poor" in both urban and rural areas.
-- Urban and Environment program: USAID requests a total of $9M for this program. This includes $3M for subsidies and $6M for program administration. (This compares to the FY 1997 appropriated level of $9.5M.)
-- The subsidies will leverage approximately $45M in loan guaranties to help credit worthy borrowers to address pressing urban and environmental problems.
-- Emphasis is placed on addressing urban and environmental problems that impair human health, decrease child survival rates and prevent economic progress.
-- Micro and Small Enterprise Credit program: USAID requests a total of $2M for this program including $1.5M for credit subsidies and $500,000 for program administration. (The same amount was appropriated in FY 1997.)
-- The program uses loans and guarantees to encourage financial institutions to extend and expand credit to microentrepreneurs and small businesses.
-- The primary financial instrument is the Micro and Small Business Loan Portfolio Guarantee (LPG).
-- Enhanced Credit Authority: As part of USAID's FY 1998 request, the Agency seeks the use of up-to $10M in Sustainable Development funds (including up to $1.5M for administrative expenses).
-- The ECA will provide USAID with an important tool to leverage its limited resources more effectively to pursue its global development priorities.
International Disaster Assistance (IDA):
-- USAID requests $190M for this program including $165M for disaster relief managed by the U.S. Office of Foreign Disaster Assistance and $25M for programs managed by the Agency's Office of Transition Initiatives. (The IDA request is the same as the FY 1997 level.)
-- OFDA funds support emergency relief for natural and man-made disasters, and disaster preparedness, mitigation and prevention.
-- OTI activities address the head-line grabbing crises of failed states as they attempt to reconstitute social and political structures.
USAID Operating Expenses (OE):
USAID requests $473M to cover the salaries and other support costs of USAID operations in Washington and at overseas locations. This compares to an FY 1997 level of $488.5M (including $17.5M transferred from the DA account), or a reduction of $15.5M.
-- This decrease is due to a reduction in overall OE funded staffing levels combined with the completion of the move of the Agency headquarters, with associated one-time cost savings.
-- The savings are offset, in part, by increases associated with worldwide inflation and the impact of pay raises for both U.S. and foreign national staff.
Inspector General (IG) Operating Expenses:
USAID requests $29.047M for the IG operating expenses to cover the costs of domestic and overseas operations of the Agency's Inspector General. This compares to an FY 1997 level of $30M.
Foreign Service Retirement and Disability Fund (FSRDF):
These funds are not included in USAID's tables on discretionary funding because it is a mandatory appropriation (required as a result of the inclusion in FY 1974 of USAID career foreign service employees in this fund), and it is set at $44.208M for FY 1998 to cover associated costs of that fund. This compares to the FY 1997 level of $43.826M.
Other USAID-Managed Programs ($4,756.5B)
Economic Support Fund (ESF) ($2,497.6B):
The ESF account addresses economic and political foreign policy interests of the United States by providing economic assistance to allies and countries in transition to democracy, supporting the Middle East peace process and financing economic stabilization programs, frequently in a multi-donor context.
The largest share of these funds will go to supporting the Middle East Peace Process ($1.2B for Israel, $815M for Egypt, $75M for the West Bank Gaza, $25M for Jordan, $12M for Lebanon and $52M for transfer to the Middle East Development Bank) and $17M to assist other non-peace process countries and programs in that region.
The Latin America region will receive $116M, with the largest share of those funds going to Haiti ($70M), Guatemala ($20M), and $10M for the ICITAP program that funds administration of Justice and police training programs in that region.
ESF will be used to fund continued support of programs for "fledgling democracies" in Cambodia ($37M) and Mongolia ($7M) as well as provide on-going assistance to the International Fund for Ireland (19.6M).
$25M of ESF will be used for assistance in Sub-Saharan Africa for elections, political party building and legislative training for countries in transition such as Angola, the Congo and Sierra Leone, as well as support for U.S. NGOs to provide assistance in training local human rights and civil society networks in Cameroon, Rwanda and the Seychelles.
(The ESF request compares an FY 1997 level of $2.363B.)
Assistance for East Europe (SEED): ($492M):
This is a transitional program designed to aid Central and Eastern European countries through their difficult passage to democracy and market economies. As countries consolidate their political and economic transitions they will be graduated from the assistance category and funding for bilateral SEED programs will be phased out. However, the program will remain flexible to accommodate uneven political and economic progress.
The broad objectives of this program are to build market economies and strong private sectors, consolidate democracy, and improve the basic quality of life throughout the region.
-- Of the amount requested, $225M will be allocated for Bosnia reconstruction and reform programs including activities associated with the Dayton Peace Accords.
-- Of the non-Bosnian resources, 45% will go to Southern Tier countries, which have gotten off to a slower start then countries in the Northern Tier, and which up to now received a much smaller share of resources.
(This request compares to an FY 1997 level of $475M).
Assistance for the New Independent States of the Former Soviet Union ($900M):
-- Funds under this request will be used to support these countries as they make the transition to market economies and democracies as responsible members of the international community.
-- In FY 1998 a new initiative will be undertaken, Partnership for Freedom, that will build on achievements to date, reorient our assistance program, first to Russia and then for the other NIS countries, towards longer-term and more cooperative activities to spur economic growth and develop lasting links between our peoples.
(This compares to an FY 1997 level of $625M.)
P.L. 480 Food for Peace Titles II and III ($867M):
-- Title II: USAID requests $837M (the same as the FY 1997 level) to address food insecurity through emergency response, increased agricultural productivity and increased household nutrition activities.
-- Title III: USAID requests $30M (compared to $29.5M in FY 1997) to fund food aid to low-income, food-deficit counties to encourage policy reforms aimed at achieving long-term food security.
# # #
Country level detail for all USAID administered programs will be presented in USAID's FY 1998 Congressional Presentation to be submitted to the Congress in late February/early March.
Footnote: 1 These Programs are funded under DA in FY 1996 and DA/DFA in FY 1998
Footnote: 2 Africa program funding included in DA in 1996 and 1997
Footnote: 3 Operating Expenses includes use of DA funds in 1996 and 1997
Footnote: 4 ESF includes $52.5 million requested for the Middle East Development Bank in FY 1998This is an archived USAID document retained on this web site as a matter of public record.
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