HEADLINE: HEARING OF THE FOREIGN OPERATIONS SUBCOMMITTEE OF THE SENATE APPROPRIATIONS COMMITTEE
SUBJECT: THE PRESIDENT'S FISCAL YEAR 2004 BUDGET REQUEST FOR THE AGENCY FOR INTERNATIONAL DEVELOPMENT
CHAIRED BY: SENATOR MITCH MCCONNELL (R-KY)
WITNESSES: ANDREW S. NATSIOS, ADMINISTRATOR, UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT
SEN. MITCH McCONNELL (R-KY): The hearing of the Foreign Operations Subcommittee will come to order. I want to now welcome Administrator Natsios. It's always happy to have you before this subcommittee. And let me begin by acknowledging the difficult task you and your agency have faced in a post 9/11 world. With the welcomed liberation of Iraq and Afghanistan comes the need for immediate and significant relief and reconstruction programs. These activities are often conducted in dangerous and dynamic environments and your courageous field staff, NGO partners and contractors should be recognized for the risk they're willing to assume in coming to the aid of the Afghan and the Iraqi people.
Emerging from decades of repression, these countries require the full gamut of U.S. assistance programs from food to water and health care to governance, economic development and the rule of law programs. Concurrent with addressing the needs of newly liberated countries, USAID must keep an eye on those at risk nations such as Pakistan, the Philippines and Indonesia where threats from terrorism have yet to subside. Again a broad range of development programs are required to deny the breeding grounds such as poverty, illiteracy and lack of economic opportunities for extremist ideologies and terrorism.
Finally, no less pressing or deserving of attention are USAID programs and activities conducted in developing countries in Africa, Southeast Asia and elsewhere. There seems to be no shortage of global crises where the human catastrophes caused by corrupt governments or health emergencies fueled by expanding HIV AIDS infection rates. A business as usual approach is no longer adequate in meeting new and pressing demands on our foreign assistance.
While the Fiscal Year 2004 Foreign Operations budget request is $2.7 billion above Fiscal '03 level, the majority of this increase is targeted toward new presidential initiatives that appear at first glance to maximize and make more efficient the delivery of U.S. foreign assistance. For example, the Millennium Challenge Account proposes increased assistance to those countries meeting certain eligibility requirements including a government's commitment to ruling justly, meaning a country's leadership has the political will to respect and enforce the rule of law, protect freedoms and liberties and crack down on corruption. Many nations currently receiving U.S. foreign aid will not qualify for MCA funds because of this requirement. To maximize the impact of our foreign aid dollars, perhaps we should consider expanding the ruling justly requirement to our more traditional bilateral assistance programs.
Let me just close with a few comments on the reconstruction of Iraq. First, the subcommittee would appreciate your assessment of how programs are proceeding on the ground and an analysis of those obstacles and challenges the coalition will face in the weeks and months ahead.
Second, many of our colleagues and I have been contacted by American companies eager to assist in the reconstruction of that country and today's hearing affords you an opportunity to clarify how contracts are being awarded and where those companies can turn for information and assistance. Finally, it would be useful to articulate what you believe the long and short term expectations of the Iraqi people are in terms of reconstruction and democratic governance. With that, let me call on my friend and colleague, Senator Leahy, for his opening statement.
SEN. McCONNELL: I thank you, Senator Leahy.
Mr. Natsios, we'll put your full statement in the record and if you could summarize that, that would be good and then we'll maximize the opportunity for questions.
MR. NATSIOS: Thank you very much, Senator, and I want to thank the committee, both parties for the strong support that our agency has received from you, senators, as well as from your staff. Tim Reiser and Paul Grove have been extraordinarily helpful and cooperative with us. We don't always agree on everything but we appreciate the cooperative and open spirit that we have in dealing with the staff of the committee.
The last year has seen changes that none of us, at least I certainly didn't anticipate, in many areas of the world and we have begun a number of major new activities that I would like to talk about.
Last fall, we issued a set of papers called "The Foreign Aid in the National Interest" report that tracks where we expect foreign assistance to go, broadly speaking, over the next decade. It's on our website, we've widely distributed it. It is done by some of the pre- eminent scholars and development assistance and humanitarian relief in the country. Larry Diamond, for example, wrote the first chapter. He is one of the two great democracy scholars in the United States. But it is a roadmap, it is a direction for where we need to go, what's worked and what hasn't worked.
We've begun new initiatives in agriculture, in basic education, in trade capacity building. In the budget that you have before us, all of these will show increases in funding. Basic education goes up by over $45 million, agriculture goes up by about $10 million.
In addition, we have funded both in the state budget and the AID budget, a line item, should there be a peace settlement in Sudan, and we are the closest we've been in 20 years to a peace agreement in Sudan that is just inequitable. We're not quite there yet, but I don't want to go through the amount of money -- I keep getting asked by both sides, "How much money are you going to give us to help reconstruct the country, if there's a peace settlement?" And I said, "We'll tell you after the peace agreement is signed." It's in here, we'd be glad to discuss it with your staff. I'd rather not go over the figures publicly because it won't have the right affect from a diplomatic standpoint.
There is, I think, great excitement in the agency because of the enormous potential for the expansion of the foreign assistance program of the U.S. government. The president has proposed essentially, a 70 percent increase in the budget for foreign assistance over the next three years through the Millennium Challenge Account and the HIV-AIDS Account. We're already spending about a billion dollars, all spickets, on HIV-AIDS. The president has proposed an additional $2 billion dollars and, of course, the Millennium Challenge Account is a $5 billion dollar increase, the first installment of which, $1.3 billion, is in the fiscal '04 budget.
You ask, Mr. Chairman, about the Iraq and Afghanistan reconstruction. We would be glad to send you a detailed account of what's going on in both those budgets but in the budget for '04 between State and AID, in all spickets for our two budgets, the 150 Account, we've proposed $657 million in the '04 budget for reconstructing Afghanistan, not Iraq, Afghanistan. It's the largest amount we've ever proposed in a budget and that's through a whole series of different accounts.
This year, AID is spending, because of your appropriation, $350 million just alone, ourselves, in five major initiatives in Afghanistan. One is a major new agriculture initiative of $150 million over three years. A health initiative to extend health care across the country, 400 new health clinics of the 1,100 we believe need to be put in place to serve the country. A 300 mile road which is critically important to tying the Pashtun south Kandahar with Kabul which will be completed by December of this year. Imagine building a road from Boston -- I come from New England -- to Washington in eight months in an area that is the most insecure in the country. We are progressing though, substantially.
We have Democracy in Governments programs. We are helping the national government with advice on options they have for writing their new constitution, which is a process that's ongoing now. We also have an economic governance package that went into effect in September of last year, October of last year, which helps with the selling off of state run enterprises, all of which are bankrupt. A new budgeting system for the national government, a new Customs collection system, a new uniform commercial code.
We helped create the currency for the country that was issued last fall, working with the central bank. And a new education initiative, where we will build 1,200 schools across the country and double the number of textbooks. We've printed 12 to 15 million. We're going to print another 15 million, for a total of 30 million. We are the source of textbooks for the public education system in Afghanistan.
In Iraq, we have spent $450 million on the humanitarian relief side, mostly on food aid to make sure there is a bridge between now and the time the Oil for Food program goes into effect later this summer. And we've spent $98 million so far of the reconstruction money and another $234 million has been released by Congress and by the OMB that will be shortly put into the construction accounts. We have an elaborate plan for how to spend that money. I can only speak for what I do.
We have a plan for spending $1.1 billion in reconstruction and $600 million for humanitarian relief. We just started designing that last October with 200 staff from AID. There are 100 AID staff now in Iraq or in Kuwait City where some of our offices are working.
Finally, I would to mention the question that you brought up, Senator, on the procurement system.
We indeed have a new procurement software system which we hope to install but we cannot install it until after the new Phoenix system for our financial management has been installed in the field. It's been installed in Washington and beginning actually last week, we have a 25-month plan to install Phoenix in the missions, in 79 missions around the world. Actually it will be in a reduced number of missions because we're collapsing the number of accounting stations but it will serve the field.
Once that's in place, there are two things we can attach to it. One is this new procurement system which will make much more efficient the way in which we do our procurements. And the second thing we'll be able to do is an information warehouse software package which will allow information for questions you give us now that we must manually calculate because we do not have and have not had for 25 years a unified financial management system worldwide. We will have that within 25 months in the plan that is now in place in AID. So the business systems reforms are 50 percent there but they're not finished yet and until they are, I will not be satisfied. But we do appreciate very strongly support of the committee in this.
I just end by making a comment about extending the MCA standards which you, Mr. Chairman, very thoughtfully brought up as an option for our regular program, not for the $5 billion increase but for the $10 billion that AID will spend this year and next year. And we have proposed, in fact, to the White House and to the Congress a package that seeks to restructure AID not from a statutory standpoint but we will look at countries and divide them specifically into the following categories. Countries that just barely missed being eligible for MCA status but want to make it and they will require heavy reforms and focus on the areas that they failed to meet the standards in. And so we will direct our resources in those countries in the areas where they were failing.
Second, are countries that are failed and failing states. We have a bureau -- it's not new anymore, it's two years old -- but we've reorganized. Roger Winter heads that bureau. It's widely known in the NGO community and the human rights community. It is a bureau that deals with failed and failing states called the Democracy Conflict Humanitarian Assistance. That bureau has more money in it than ever in AID history. It's up to almost $2 billion this year for failed and failing states, for countries that are not even remotely in the chart for MCA but that we don't want to forget.
The third category of countries that are in our geo-strategic interest, Egypt, Jordan, Pakistan are three ESF countries. They are in a separate category. We must make those countries programs be geared to the geo-strategic national security interest narrowly defined in the United States government. We need to treat them in that category.
And finally, there are countries that just are not close to making it. We need to ascertain in those countries whether there is a will to reform and if there is a will to reform, we'll help them toward MCA status but it will take a while to get there. And if there is no will and if the country is really stuck and there's no chance of it getting out because of the absence of political leadership, we will work exclusively through the NGO community and the university community and not deal with the government.
Senator, I know you have a lot of concerns about several countries in Asia in that category which we would very much agree with you on. But we need to think clearly about which countries fit into which categories and restructure our program along those lines.
I would like to submit my written testimony which is much more lengthy for the record.
SEN. McCONNELL: As I indicated earlier, that will be made a part of the record. Since we have a number of Senators here, I am not even going to take my full five minutes but I do want to begin by getting you to focus on another part of the world that's been very much in the news this past week and that's Burma. I introduced yesterday along with Senator Feinstein and a number of co-sponsors including my friend and colleague next to me, Senator Leahy, a bill that would impose sanctions on Burma including a ban on exports and restrictions on visas and the like.
And I've had an opportunity to speak with Richard Armitage and Paul Wolfowitz and Condee Rice who was on the plane on the way back from the trip she is currently on with the president. And I'm hopeful that the administration will support the bill as well and that we can get it through here in short order. But I want to focus on Burma and USAID.
Last year, the current year in which we're operating, we put $1 million in our budget for HIV-AIDS programs in Burma with the stipulation, given the fact that this military regime that runs the country has no interest in the people there, with the caveat that this relief would be administered through international non-governmental organizations in consultation with Suu Kyi. So I'm curious, given the fact that she has for the most of the last 13 years been under house arrest and not that easy to get to from time to time how closely USAID and its contractor have been able to deal with her in coordinating the HIV-AIDS programs in Burma.
MR. NATSIOS: Senator, I do not know specifically our conversation with her but I will get back to you on the question. I do know that we have initiated the HIV-AIDS program through the NGO community. There's also $500,000, I believe, the Congress has appropriated in the budget for '03 for democracy programs which we're also supposed to and will consult with her as to how that money should be spent.
We are all appalled by what's happened the last few weeks. It appears that the regime has moved 10 years back in time. She is, as you know, under much more constrained circumstances. She appears to have been physically harmed in the latest attacks and we are extremely disturbed by the course of events. So we'll work very closely with your staff to see to it that we structure our program, however modest it may be, along the lines of what you've suggested in your remarks.
SEN. McCONNELL: Well, we're hoping the U.N. representative, Mr. Razali, will be able to see her tomorrow when he is in the country. Somebody needs to see her to verify that she is still alive and well, given the fact that she has obviously been attacked, at the very least injured to some extent. How do you -- I guess it's a rephrasing in some ways of the same question -- how do you provide any kind of oversight for these funds in Burma?
MR. NATSIOS: We have opened a office in, I believe it was Bangkok, for the region because we're doing increasing programs in countries in which we cannot have an AID presence. And so that new office is to provide oversight for the programs we run in Laos and the programs that we run, limited ones, in Burma. And so the NGO community that we work with has programs in other countries in those areas and they have offices in Thailand. That's how we provide some of the oversight over the programs.
SEN. McCONNELL: Given the difficulty of carrying out of these functions, since you have to do it basically by working around and not through the regime, if we were to enhance our willingness to spend funds there, could you handle it even?
MR. NATSIOS: Yes, we could.
SEN. McCONNELL: You could.
MR. NATSIOS: We work in countries in the middle of civil wars with extraordinarily repressive regimes, Sudan, North Korea, we've worked in before. I can give you a list of countries --
SEN. McCONNELL: Does the regime actively interfere with the NGOs inside Burma trying to help on this issue?
MR. NATSIOS: I think in the health sector, they do not. It depends whether or not the regime believes that the activities are threatening in a direct sense and health is an area where the program tends to not be as threatening as some other kinds of programs.
SEN. McCONNELL: Well, I'd be interested in any thoughts you might have before we start drafting this year's legislation as to how we might enhance the opportunity to deal through her and the NGOs to improve the situation in Burma.
MR. NATSIOS: We will get back to you, Senator, on that.
SEN. McCONNELL: Okay. I'm going to cut short my round and then go to Senator Leahy and Senator DeWine.
SEN. MCCONNELL: Glad to have you here, Senator Burns. Let me just mention this hearing is going to end no later than 3:30. It may end sooner, but we'll leave the record open for whatever questions any members want to add. And let me take another round here, Mr. Natsios.
Shifting to the place the president just left, the Middle East and the roadmap between the Palestinians and the Israelis, tell me how USAID is going to be utilized to support the roadmap. And I'm also interested in what you've been able to do there in the past and how you were able to implement and monitor programs, particularly on the Palestinian side, to ensure that funds don't end up in the hands of those who are engaged in homicide bombings.
MR. NATSIOS: Thank you, Senator. We, of course, have a heavy presence in the West Bank and Gaza. But since the Second Intifada began we have altered our program and much of it now is humanitarian assistance because we simply cannot continue under these circumstances, some of the programs. Although, I have to tell you an interesting story.
Two days before I was sworn in as Administrator I met the Foreign Minister of Israel at a reception, Mr. Peres, in Washington. And the first he said, before I could introduce myself, "I know you're Andres Natsios. You're about to be sworn in as the Administrator. Do not touch the water programs, please." I said, "Yes sir."
And I met him later at a dinner in the evening and he said exactly the same thing. He said, "I know I said this to you once before, let me say it to you once again. Do not touch the water programs." And I said, "Yes sir." There is common interest in some things that cut across the conflict and the acrimony and water is one of them because it's so scarce. The water programs AID was running, these huge water purification plants, will rationalize the water system in the West Bank and Gaza. But of course they all get their water from the same place Israel does, which is the underground aquifers or from desalinization plants which we are also constructing, I think one of, in Gaza.
And so, to the extent that we've been allowed by the violence we have continued that part of it. We've done it. We do not go through the PA for any of the work we do. We don't transfer any money.
SEN. MCCONNELL: It's 100 percent NGO, right?
MR. NATSIOS: That's correct. There is one project that we are working on now and this was at the request of both the Israeli and the Palestinian Authority. And that is on training the Finance Ministry in modern systems of accounting and accountability in auditing to ensure in the future that they have the skill set to monitor how money is spent by some of the ministries.
And we have a major international accounting firm that is providing this training and it's connected to the whole question of revenues being collected by the PA, by the Israeli government. So there was an agreement struck and AID is playing a role in making -- in implementing one of the few agreements that was made prior to this past week. It was at a mundane level, but both sides agreed to it. We were asked to do it, and we've done it and it's working, I am told, quite well. It's capacity building, there's no money changing hands in terms of being moved. But there is a training program, a capacity building program which we believe will be very useful over the longer term.
We are looking to the future and we have been asked to begin gearing up for changes to the reconstruction -- or the development program we had that we had to really suspend when the Second Intifada began, because we believe that the peace process that the president has begun is going to be a success. And AID needs to be ready as soon as an agreement is reached to give legs to the peace accords, from our perspective. I mean, we have a limited role in this but we do have a role. And we have to act quickly because the longer you wait the more risk there is in terms of the peace settlement coming undone. This happens in conflicts all over the world where if you don't act quickly following a peace settlement, things deteriorate.
SEN. MCCONNELL: So you're not expected to be asked to do anything different, just more of the same and quicker?
MR. NATSIOS: Well, we may be asked. There may be things in the peace accords, Senator, that are different than they have been in the past. So I don't want to presume what we'll be doing because it may be that they actually negotiate some of these things.
SEN. MCCONNELL: Senator DeWine.
MR. NATSIOS: I just want to say I work for Colin Powell. I go to the morning meeting every morning at 8:30 and this is an issue of intense interest to he and Secretary Grossman and Rich Armitage, my good friend. And we do what they ask us to enthusiastically and energetically and we will continue to do that.
SEN. MCCONNELL: Well I have a number of other questions about various parts of the world but I'm going to restrain myself and thank you for coming, and end by just telling you I ran into a young friend of mine at the airport in Louisville on the way back up here last Sunday. He was on his way to Bosnia. He works for the World Bank.
And he was extremely complimentary of your efforts, the efforts of your agency in Bosnia where he's already been doing other things. He was extremely complimentary of the USAID effort in Bosnia and I thought at the time that I would pass that along to you because you probably don't hear as many compliments as you do criticisms from members of Congress.
MR. NATSIOS: Senator, if you could give me his name so I can take him out to dinner the next time I visit Bosnia I would appreciate it.
SEN. MCCONNELL: I'll do that. We thank you very much for being here today and we'll look forward to drafting your budget for next year.
MR. NATSIOS: Thank you, Senator, for your support. We do appreciate it.
SEN. MCCONNELL: The hearing is completed.