[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
      FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS 
                        APPROPRIATIONS FOR 1999

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

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             SECOND SESSION
                                ________

SUBCOMMITTEE ON FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS

                    SONNY CALLAHAN, Alabama, Chairman

JOHN EDWARD PORTER, Illinois         NANCY PELOSI, California
FRANK R. WOLF, Virginia              SIDNEY R. YATES, Illinois
RON PACKARD, California              NITA M. LOWEY, New York
JOE KNOLLENBERG, Michigan            ESTEBAN EDWARD TORRES, California
MICHAEL P. FORBES, New York          MARCY KAPTUR, Ohio
JACK KINGSTON, Georgia               
RODNEY P. FRELINGHUYSEN, New Jersey  

NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.

 Charles Flickner, William B. Inglee, and John Shank, Staff Assistants,
                     Lori Maes, Administrative Aide
                                ________

                                 PART 3
                                                                   Page
 Export and Investment Assistance.................................    1
 AID Administrator................................................  107
 Human Rights.....................................................  421

                              

                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
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                       COMMITTEE ON APPROPRIATIONS                      

                   BOB LIVINGSTON, Louisiana, Chairman                  

JOSEPH M. McDADE, Pennsylvania         DAVID R. OBEY, Wisconsin            
C. W. BILL YOUNG, Florida              SIDNEY R. YATES, Illinois           
RALPH REGULA, Ohio                     LOUIS STOKES, Ohio                  
JERRY LEWIS, California                JOHN P. MURTHA, Pennsylvania        
JOHN EDWARD PORTER, Illinois           NORMAN D. DICKS, Washington         
HAROLD ROGERS, Kentucky                MARTIN OLAV SABO, Minnesota         
JOE SKEEN, New Mexico                  JULIAN C. DIXON, California         
FRANK R. WOLF, Virginia                VIC FAZIO, California               
TOM DeLAY, Texas                       W. G. (BILL) HEFNER, North Carolina 
JIM KOLBE, Arizona                     STENY H. HOYER, Maryland            
RON PACKARD, California                ALAN B. MOLLOHAN, West Virginia     
SONNY CALLAHAN, Alabama                MARCY KAPTUR, Ohio                  
JAMES T. WALSH, New York               DAVID E. SKAGGS, Colorado           
CHARLES H. TAYLOR, North Carolina      NANCY PELOSI, California            
DAVID L. HOBSON, Ohio                  PETER J. VISCLOSKY, Indiana         
ERNEST J. ISTOOK, Jr., Oklahoma        ESTEBAN EDWARD TORRES, California   
HENRY BONILLA, Texas                   NITA M. LOWEY, New York             
JOE KNOLLENBERG, Michigan              JOSE E. SERRANO, New York           
DAN MILLER, Florida                    ROSA L. DeLAURO, Connecticut        
JAY DICKEY, Arkansas                   JAMES P. MORAN, Virginia            
JACK KINGSTON, Georgia                 JOHN W. OLVER, Massachusetts        
MIKE PARKER, Mississippi               ED PASTOR, Arizona                  
RODNEY P. FRELINGHUYSEN, New Jersey    CARRIE P. MEEK, Florida             
ROGER F. WICKER, Mississippi           DAVID E. PRICE, North Carolina      
MICHAEL P. FORBES, New York            CHET EDWARDS, Texas                 
GEORGE R. NETHERCUTT, Jr., Washington  ROBERT E. (BUD) CRAMER, Jr., Alabama
MARK W. NEUMANN, Wisconsin             
RANDY ``DUKE'' CUNNINGHAM, California  
TODD TIAHRT, Kansas                    
ZACH WAMP, Tennessee                   
TOM LATHAM, Iowa                       
ANNE M. NORTHUP, Kentucky              
ROBERT B. ADERHOLT, Alabama            

                 James W. Dyer, Clerk and Staff Director














      FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS 
                  APPROPRIATIONS FOR FISCAL YEAR 1999

                              ----------                              

                                         Wednesday, March 11, 1998.

                    EXPORT AND INVESTMENT ASSISTANCE

                               WITNESSES

JAMES A. HARMON, PRESIDENT AND CHAIRMAN, EX-IM BANK
GEORGE MUNOZ, PRESIDENT AND CHIEF EXECUTIVE OFFICER, OPIC
J. JOSEPH GRANDMAISON, DIRECTOR, TDA

                    Mr. Callahan's Opening Statement

    Mr. Callahan. The committee will come to order.
    I have an opening statement, but I am going to just submit 
it to each of you, and for the record. Each of your agencies 
are very familiar to the Members of this committee, so we do 
not need a long explanation of what you do, or how well you do 
it. So I am not going to have an opening statement, and I will 
yield to the gentlelady from California for a very brief 
statement, and we will also take her testimony and submit it 
for the record.
    Mrs. Pelosi.
    [The information follows:]


[Pages 2 - 3--The official Committee record contains additional material here.]



                     Ms. Pelosi's Opening Statement

    Ms. Pelosi. Thank you very much, Mr. Chairman.
    I want to join you in welcoming our witnesses, and heeding 
your admonition, once again, I will be brief.
    For both Mr. Harmon and Mr. Munoz, from Ex-Im Bank and 
OPIC, this is their first appearance before the subcommittee, 
and I extend a warm welcome and congratulations to them for 
taking on the difficult and challenging tasks that the 
administration has assigned to them, and welcome back to Mr. 
Grandmaison from the Trade and Development Agency. Once again, 
we welcome you.
    Last year, Congress put both the Ex-Im Bank and OPIC under 
heavy scrutiny, as you know, and in both cases Congress 
ultimately decided to continue to reauthorize these programs 
for the foreseeable future.
    The need to provide American companies a hand in their 
desire to increase exports won out over the skeptics, those who 
thought this assistance might be corporate welfare and who had 
other concerns.
    I have always supported funding for these agencies, 
however, with appropriate qualifications of putting in place 
strong environmental and labor conditions on loan guarantees 
and insurance. I also want to stress the importance of 
preserving strong American content requirements.
    This year, with the impact of the Asian crisis becoming 
more clear, the Congress faces new challenges. The increased 
demand by American companies for help with their exports has to 
be balanced with the increased risk posed in countries in 
economic crisis. In addition, the increased demand for Ex-Im 
loans and guarantees in Russia will present unique challenges.
    I also have concerns about OPIC's plan to implement new 
environmental regulations, particularly the period for public 
availability of environmental assessments, and documents, needs 
to be extended from the proposed 60 days to 120 days, but I 
have made those thoughts known to Mr. Munoz.
    I look forward to discussing these matters as we get into 
the question period this morning. Once again, thank you.
    I read my statement, Mr. Chairman, because that would be 
shorter than if I just talked about these things.
    Mr. Callahan. I very much appreciate that.
    Ms. Pelosi. Thank you, Mr. Chairman.
    Mr. Callahan. I want to recognize you in the order in which 
you appear in this program, so Mr. Harmon, we will hear from 
you first.
    Mr. Harmon. Thank you.
    Mr. Callahan. Excuse me. Did you have something?

                     Mr. Torres' Opening Statement

    Mr. Torres. Mr. Chairman, I would like to make a unanimous 
consent request. Obviously, I am not in line for a statement or 
anything, but I would like to enter one into the record, and 
some questions, as well, in that I have to leave early.
    Mr. Callahan. Certainly granted, and all Members will have 
whatever time they need to submit questions to any or all three 
of our witnesses.
    Mr. Torres. Thank you. Thank you, Mr. Chairman.
    Mr. Callahan. Without objection.
    [Mr. Torres' written statement follows:]


[Page 6--The official Committee record contains additional material here.]



    Mr. Callahan. Mr. Harmon.

                     Mr. Harmon's Opening Statement

    Mr. Harmon. Thank you, Mr. Chairman, Representative Pelosi, 
Members of the Subcommittee.
    I am pleased to be here for my first opportunity to testify 
before this Subcommittee to explain the fiscal 1999 budget 
request for Ex-Im Bank.
    Before I review our request for fiscal 1999, let me begin 
by reviewing where we stand for fiscal 1998. For the current 
fiscal year, the Congress appropriated a program budget 
totaling $683 million. Our most recent estimates indicate that 
we will run out of funds for medium and long-term loans, and 
guarantees, in June or July.
    When fiscal 1998 funds are expended, we will carry over to 
fiscal 1999 cases requiring an estimated $200 million in 
program budget, and supporting an approximate $1.5 billion in 
U.S. exports. This carryover does not include cases which may 
come into the Bank in the next few months and be approved 
before September 30th.
    You should be aware that we have taken steps to protect our 
small business programs when our funds are expended, and I 
anticipate that we will once again exceed the congressional 
mandate to support small business.
    For fiscal 1999, Ex-Im Bank's demands for program budget 
will total approximately $1.3 billion. We will meet the bulk of 
that demand through an $808 million request for program budget.
    In addition, the Office of Management and Budget has 
recalibrated on a Government-wide basis the method by which we 
determine how much program budget must be set aside to cover 
the risk for the transactions.
    This adds buying power to our program budget. In addition, 
adjustments involving such program changes as risk-sharing and 
fee increases will move us closer to meeting demand. Finally, 
some funds set aside for tied aid will have to be used for non-
tied aid transactions.
    In my 30-plus years in the private sector, I have never 
found making financial projections to be an easy task, but 
after a careful review of all of our markets, we have concluded 
that our demand for financing exports in fiscal 1999 will 
approach $16.7 billion, compared to $15 billion in the current 
fiscal year.
    We believe that this will support more than 1 million U.S. 
jobs, directly and indirectly.
    Now, let me discuss two important regions from the 
standpoint of demand, Russia and the NIS, and Asia.
    In Russia and the NIS, which are becoming very active but 
still challenging markets for our exporters, demand will 
increase across the board. The energy and agricultural sectors 
account for much of this increase. So we are carefully 
monitoring developments in these important markets.
    In Asia, we expect a decrease in demand for medium and 
long-term transactions but greater program budget charges for 
the transactions completed. Regarding our short-term program, 
we are being asked to assist exporters in markets that had 
previously not needed Ex-Im financing.
    Thus far, in 1998, we have seen a significant increase in 
demand for short-term trade finance in Korea. During a 7-week 
period which ended January 20th, 1998, we approved 200 short-
term transactions for that country as compared with four for 
the comparable period the prior year.
    On January 29th, upon my return from Asia, our Board of 
Directors decided to significantly increase the ceiling for 
short-term transactions in Korea. Without this, a large amount 
of U.S. exports would not have been completed.
    We expect demand for our small business programs to 
increase, but this is one area where we can do better. In 
fiscal 1996, small business represented 20 percent of our 
financing and 81 percent of our transactions.
    In fiscal 1997, the percent of total dollar amount of 
financings fell to 15 percent, though the percent of total 
number of transactions remained at about 80 percent. As to the 
reason for this drop, there are some indications that the 
private market absorbed some of this business.
    Since I have dealt with small companies for much of my 
professional career, a major focus of my administration will be 
an expansion of the Bank's small business program. Part of this 
effort will include expanding our contacts with rural business.
    I also ask for your support of our request, that our 
program budget funds remain available until expended. This ``no 
year'' money will help us smooth out the difficulties of 
estimating caused by business cycles.
    Mr. Chairman, I could not complete the testimony without 
mentioning our administrative budget. We are requesting $51.9 
million as opposed to $48.6 million for the current fiscal 
year. However, $2 million of this increase is set aside for 
renovation of our present building. This leaves the increase 
for recurring administrative expenses at less than 3 percent.
    I will be pleased to answer questions. Thank you.
    [The written statement of Mr. Harmon follows:]


[Pages 9 - 24--The official Committee record contains additional material here.]



    Mr. Callahan. Mr. Munoz, OPIC is next in our book, so go 
ahead. Wednesday, March 11, 1998

                      Mr. Munoz' Opening Statement

    Mr. Munoz. Thank you, Mr. Chairman.
    I would ask that my full statement be submitted for the 
record, and I will briefly summarize my comments in order to 
get to your questions.
    Mr. Callahan. Without objection.
    Mr. Munoz. Mr. Chairman, I first want to start off by 
thanking you and Congresswoman Pelosi, as well as Chairman 
Livingston, and your whole subcommittee staff for the 
outstanding leadership in helping OPIC be reauthorized for two 
more years.
    We know that your championing this cause will benefit 
America's economic and foreign policy interests.
    It is a special privilege also to appear with my 
colleagues, Jim Harmon of the Export-Import Bank, and Joe 
Grandmaison of the Trade Development Agency. We have developed 
a strong working relationship which we believe yields a better 
return to the taxpayer and the American businesses in the 
global marketplace.
    My background as a CPA, attorney, and formerly the CFO of 
the U.S. Treasury Department, leads me to scrutinize our budget 
and our operations very carefully. One of our highest 
priorities is to make sure that we manage our portfolio in the 
best possible way and to make sure that we fully protect the 
full faith and credit of the U.S. Government.
    1997 was a very successful year for OPIC. We produced a 
record net income and put more money in the U.S. Treasury than 
ever before. Our net income reached $212 million.
    More importantly, through our financing and political risk 
insurance programs, we are helping U.S. companies invest in 
projects in more than 90 developing countries and in markets 
that are in transition from Government control, like those in 
the former Soviet Union.
    OPIC support to America's private sector remains essential. 
We know that in the debate last year, questions were being 
raised as to whether OPIC was still needed or not. As a result, 
the GAO was asked last year to take a look at whether or not 
OPIC was still required.
    GAO concluded, just this past September of 1997, that 
``markets still exist where U.S. firms are unable to obtain 
private finance or insurance services. As a consequence, they 
seek public support from OPIC or multilateral agencies.'' And 
that is a quote from that report. So we urge that the public be 
made aware of that.
    With respect to our budget, we are requesting less money 
this year than we did last year. Our FY 1999 budget request 
proposes $8 million less. The most significant part of the 
request is a modest increase in administrative expenses, most 
of which is needed to cover the additional cost of prudent 
management of the growing number of OPIC-supported projects, 
particularly the expansion of OPIC's project monitoring 
efforts.
    OPIC's administrative budget expense saw no increase 
between 1997 to 1998, so therefore, the increase for the 
administrative budget averages to 3 percent per year, which 
would be the rate of inflation.
    In my view, strong and responsible financial management 
must remain one of OPIC's most important objectives. Portfolio 
management issues are a key focus, even though OPIC's existing 
book of business is healthy and well-diversified by region and 
sector.
    We have a $3 billion reserve backing up our outstanding 
liabilities, which is a record high. The high level of reserves 
is evidence of OPIC's outstanding record of recovery on claims. 
Through fiscal year 1997, OPIC's gross claims paid or settled 
over its history, have totaled a little over $500 million, yet 
all but $13 million of that has been recovered, resulting in an 
overall 97 percent claims recovery rate.
    In conclusion, I can report that OPIC, as a self-sustaining 
program, is prepared to meet the challenges that promote 
development and assist U.S. businesses as partners in 
international investment and trade.
    Also, I would like to say thank you to those Members of 
this committee who have indicated they are retiring, and who 
have dedicated tremendous efforts to the mission of this 
committee starting off with Sidney Yates, a gentleman who I 
know from Illinois, myself being from Chicago. Certainly, I 
would like to give great gratitude for his service to the whole 
foreign operations area. He is a gentleman without match. 
Having served 24 terms is quite a commitment to public service, 
that I know all of us salute.
    If I may also point out that Congressman Esteban Torres, 
who has been a champion and a leader in domestic and 
international affairs, has also announced his retirement and we 
very much appreciate his efforts at OPIC, and I know I speak 
for all of us that are testifying today in thanking him, for 
his commitment.
    I would like to suggest to Congressman Torres, and perhaps 
to Congressman Yates also, that when Congressman Livingston 
announced he was considering leaving, but after he saw that 
OPIC was requesting less money and was making more money, we 
know that he changed his mind. We do not know if that was the 
reason for changing his mind, but we know that information was 
disclosed to him. [Laughter.]
    So we are hopeful that this testimony will encourage your 
reconsideration. If not, sir, we thank you very much for your 
service.
    [The statement of Mr. Munoz follows:]


[Pages 27 - 46--The official Committee record contains additional material here.]



    Mr. Torres. Thank you, sir. I am glad I did not leave 
early.
    Mr. Callahan. George, we will join you with respect to 
encouraging us to want to stay, and Sid Yates as well. But with 
all due respect, I do not think that the reason----
    [Laughter.]
    Mr. Callahan. He was afraid to leave me in charge. 
[Laughter.]
    Mr. Grandmaison.

                  Mr. Grandmaison's Opening Statement

    Mr. Grandmaison. Mr. Chairman, Members of the committee, I 
also would like to submit written testimony and just speak, and 
say a few words, if you will, reporting back to you on TDA and 
our year.
    We believe we have had a good year. As you know TDA tracks 
every single investment that we make, so that we can quantify 
what the result has been, and we are pleased to report to you 
that exports that were identified, this year, amounted to $1.5 
billion, which brings the grand total up to $11.5 billion worth 
of exports, that were facilitated through a TDA investment.
    Now that takes the multiplier from 31 to 1, to 33 to 1 from 
our program dollars. So we are very, very proud of that record, 
and our commitment is, as we move forward, to do even better 
than that.
    Now, there is an explanation for it. First, we think we are 
doing a good job, with all due modesty; but also, there are an 
increasing number of U.S. firms, small and medium size firms, 
especially, who are desiring to get into that international 
marketplace.
    So the types of services, the information that we provide 
is that much more valuable to them. A good example is in the 
environmental sector.
    The environmental sector, in our country, after the growth 
in the 1980's, is pretty stagnant as of the moment. So 
therefore, if you are in the environmental business, you have a 
need, if you want to grow your company, to look 
internationally.
    We have been doing an ever-increasing amount of investments 
in that area, an example being that in fiscal year 1996 we 
spent less than 10 percent of our budget there, whereas in 
fiscal year 1997 it was 15 percent.
    We believe that is going to continue. And that is just an 
example. And in that case, most of the companies you are 
dealing with are small companies.
    Second, we are changing the tools as to how we use the 
resources that you provide us. Our basic product, as you know, 
is our feasibility studies, the development of the business 
plan, but we are trying to use it with more imagination, more 
creativity, because in all cases what you are trying to do is 
influence the procurement decision.
    Often, we are providing information and, if you will, 
stepping away from the transaction, having put U.S. business 
directly in touch with a prospective project sponsor.
    Now, additionally, we are paying even more attention as to 
what we can do to help countries as their economic dynamic 
changes in their country, meaning more of our investments are 
in the private sector.
    A good example is working with the country of Poland on the 
privatization of its telecom industry--very important, big 
dollars at stake, heavy international competition. Providing 
them the resources for them to contract with U.S. technical 
experts to help them become more confident and move in that 
direction is very, very vital to what we believe, as a country, 
they should be ascribing to.
    Now, additionally, our small business, as an example. A 
third of our program dollars--a third of our program dollars go 
to small business. 62 percent of the companies we work with 
happen to be small business.
    Now there is an explanation for that--and that is a 
dramatic change over, we will say, five years ago. An 
explanation has everything to do with the outreach effort, it 
is that you can be sitting in any one city or town making your 
marketing decision, but if nobody makes themself known to you 
as to what you are as a resource, then obviously, you do not 
take advantage of it.
    So we have aggressively reached out. We were once described 
as the ``best kept secret'' in Washington--something we are 
proud of--but the fact of the matter is there is no reason to 
keep it a secret. We should make it more available, and we have 
done that through a very aggressive marketing effort, including 
16 conferences in the last fiscal year, and 45 orientation 
visits. That is bringing people from a host country, who more 
often than not have a tender out, who actually meet with the 
individuals who have equipment and services to sell them.
    I believe our most exciting event, looking forward, is 
going to be May 27, 28, and 29 in Istanbul, and this is our 
Crossroads of the World conference at which both of my two 
colleagues will be participating.
    Here is a major area of territory, the 13 countries around 
the Black Sea, the Caspian Sea, up through Central and East 
Asia. Bringing them together, we have identified 70 project 
sponsors who will be brought to Istanbul, as our guests, 
matched with U.S. companies who are interested in working with 
them in four sectors. Power, oil and gas, mining and minerals, 
and transportation.
    Now we all read in the paper, constantly, about the quote, 
``politics'' of this region of the world, but putting that 
aside, what we have to do is we have to take our U.S. business 
community and match them, as best we can, with those project 
sponsors.
    We have also just had a tremendous success in Argentina, 
where a U.S. company won the concession for the privatization 
of the 33 airports, the company being the Ogden Corporation 
from New York.
    And what we did in that case--it was fascinating, we 
think--with the help of Commerce and the FAA--we have been 
tracking this project for two years. We have brought the 
Argentines to the United States to present their package to the 
American aviation community. We had this at the Argentine 
embassy. We had 150 people in attendance. That was the first 
time, we are told, that Ogden was aware of this particular 
project happening.
    Well, about three weeks before the decision was made on 
which company to select for the privatization, the court in 
Argentina ruled that President Menem could not proceed with the 
privatization until he had established a regulatory authority 
to determine what the public and private interests were.
    We made an offer to them that said, if you select the U.S. 
company we will provide you up to a million dollars, you, the 
Argentine Government, so that the FAA can go in and work with 
you, and the U.S. private sector, in developing the regulatory 
authority, so that you can proceed with the privatization.
    So even though we helped Ogden, a company that in the next 
three years will be buying about $200 million worth of U.S. 
exports to satisfy their commitments to the Argentines--and 
Ogden is the beneficiary--the Argentines are the ones who will 
then develop the technical assistance package with us, to meet, 
in that case, the court challenge, and other issues that result 
because of the privatization.
    What we are learning, Mr. Chairman, is how to use our 
money, if you will, with more imagination. How to be more 
creative and get the results that you expect of us, that being 
U.S. exports.
    Now we have asked for your consideration and the 
administration has recommended an increase in our program 
budget.
    We would point out to you, if you will, Mr. Chairman, that 
our core budget has remained basically the same since 1993. We 
are being asked to invest in new areas of the world, some by 
this Congress, in terms of countries where we are now open.
    We would hope that you would look kindly upon our request, 
notwithstanding the fact that we are appreciative that there 
are always many, many demands placed upon you.
    We have had a good year, we appreciate the input we have 
received by you and other members of Congress, and hope to be 
able to continue looking at the fiscal year 1999. Thank you.
    [The statement of Mr. Grandmaison follows:]


[Pages 50 - 56--The official Committee record contains additional material here.]



    Mr. Callahan. Thank you.
    I am going to deviate just a little bit, with the 
indulgence of my Ranking Member. Just three years and two 
months ago, I was the most junior Member on this committee, and 
I can recall sitting there, Nancy, and waiting and listening to 
Obey and Livingston, and everybody else talk, number one, they 
asked all the questions, and most of the time I did not even 
get to talk to them.
    So I am going to take my seven minutes of opening 
statement, and then I am going to yield to you. But first, I am 
going to yield three and a half of my seven to Ron, and then 
three and a half to Rodney, and then you can take seven and do 
what you want to do. [Laughter.]
    Then we can come back and start the regular five minute 
process.
    Ms. Pelosi. Thank you, Mr. Chairman.
    Mr. Callahan. Mr. Packard.
    Mr. Packard. I do not know what I have done to deserve 
this. Thank you, Mr. Chairman.
    It is a pleasure to have each of you here and to hear your 
testimony.

                      u.s. investments in ukraine

    Mrs. Albright, the Secretary of State, just returned from 
Ukraine, and she persuaded the Ukrainian Government to 
relinquish the sale of nuclear turbines to Iran, and, in 
exchange, she promised Ex-Im Bank loan guarantees and some 
``other investments.''
    How do the Ex-Im Bank guarantees affect your budget 
submission? Was that included in your budget, how will that be 
scored, and how will that affect your budget?
    Mr. Harmon. I am not certain whether or not that may have 
been factored in. However, I do not believe that it was.
    Mr. Packard. I would doubt it.
    Mr. Harmon. I doubt it very much. For the balance of this 
year, and for next year, we have closely looked at all of the 
areas, and we have not included items such as this. So I do not 
believe that it is included in any of the numbers.
    Mr. Packard. All right. You might submit for the record 
just how that might affect your budget and how much we are 
talking about in terms of those guarantees, and how it will be 
scored.
    [The information follows:]
                          Ex-Im Bank Response
    Ex-Im Bank is not aware of what Secretary Albright was suggesting, 
and we did not include in our Fiscal Year 1999 budget request any 
specific financing for a separate program of this nature.
                              TDA Response
    It is my understanding that Secretary Albright agreed to organize a 
trade mission to the Kharkiv region in Ukraine and to work to establish 
a program to support small businesses and create jobs in that region. 
The Secretary's agreement did not imply a commitment of any TDA 
assistance. TDA will consider projects in Kharkiv and elsewhere in 
Ukraine as long as they meet the criteria we apply to a proposal from 
any part of the world.

    Mr. Packard. Also, Mr. Grandmaison, she referred to ``other 
investments.'' Do you know what those are and how much they 
would come to?
    She indicated that there would be Ex-Im Bank guarantees, 
small business loans and other investments into the Kharkov 
region.
    Mr. Grandmaison. Congressman, I am not aware as to what the 
Secretary was specifically referring to. As for TDA, we have 
candidly moved with great caution in Ukraine. As I recall, our 
first two investments were less than successful, given the 
influence of the French at the last moment.
    Since then, we learned our lesson, we are moving very 
cautiously, but we have had successes. My recollection is that 
we have done about 12 investments in Ukraine, of which four 
have moved on to actually be purchasing U.S. goods and 
services, and three continue, whereas the others were not 
successful.
    It is a very, very difficult and tough market. Companies 
come to us often, and candidly, we express caution to them.
    Mr. Packard. Well, she did promise some TDA money and I was 
wondering if it is the same monies that you are now speaking 
of, or if that is additional TDA monies in terms of feasibility 
studies, and so forth. Would you----
    Mr. Grandmaison. If she promised it, I assume it is from 
her budget. [Laughter.]
    Mr. Packard. Would you submit for the record what those 
are.
    Mr. Grandmaison. We had no contact with the State 
Department relative to Ukraine.
    Mr. Packard. Please, please do some research and, for the 
record, let the committee know what we are talking about.
    [The information follows:]

    It is my understanding that Secretary Albright agreed to 
organize a trade mission to the Kharkiv region in Ukraine and 
to work to establish a program to support small businesses and 
create jobs in that region. The Secretary's agreement did not 
imply a commitment of any TDA assistance. TDA will consider 
projects in Kharkiv and elsewhere in Ukraine as long as they 
meet the criteria we apply to a proposal from any part of the 
world.

    Mr. Callahan. Mr. Frelinghuysen.
    Mr. Frelinghuysen. Thank you, Mr. Chairman.

                         asian financial crises

    Gentlemen, I have looked over your remarks pretty 
carefully. I would like to just get your reaction. In all of 
our comments, you talk about the Asia situation, the Asian 
financial crisis, the economic turmoil and political turmoil in 
Asia.
    I would like to know: Did any of you anticipate this 
financial meltdown in this part of the world?
    I know in your statements you are reacting to the 
situation. Mr. Grandmaison, in your comments, you say here, and 
I quote: ``We are also being challenged by the Asian financial 
crisis.''
    Mr. Munoz says in his comments--hopefully not taking these 
comments out of context: ``We are actively managing our 
existing portfolio in the region.''
    Mr. Harmon of the Ex-Im Bank has come up with an immediate 
plan to stabilize the Asian markets, as listed on page seven.
    I am more interested in knowing where you were as this 
situation was developing, because of, you know, we hold you in 
high esteem, you do some tremendous work around the world, but 
was this meltdown on your radar screen, and at what point in 
time? Either and all of you.
    Mr. Harmon. Let me respond first.
    I was not confirmed until June, and it was in July that the 
currency in Thailand had its first decline. It is very easy to 
look back and say, ``Why did the world not see this crisis 
coming?'', but I can assure you that no one in the investment 
banking area in New York, or any of the firms I know predict 
the dramatic decline that we have had there.
    There may have been some warning signs, here and there. 
But, I saw very little in the way of outstanding statements by 
the private sector, that this situation was about to fall 
apart. Furthermore, everybody likes to look back--I am talking 
now about the private sector--and say they said this and they 
said that.
    Now, as far as the public sector is concerned, I cannot 
speak to that because I was not here.
    Mr. Frelinghuysen. Yes. I am not trying to be adversarial, 
but it does seem to me that, by nature, all of you manage risk 
here. You are risk managers. You are investing here on our 
behalf, and I am not being critical--that somehow, I would 
think that somebody might have been sort of taking the 
temperature. I just wondered whether there was any sort of 
early warning signs that any of you----
    Mr. Harmon. Of course, as the world looks back on it now, 
we all see things. But, I have lived through eight bear markets 
and seven recessions, and believe that there will be downturns, 
because the business cycle is still with us. It is always the 
same. People get caught up in the enthusiasm of new business, 
whether it is real estate in New England or savings and loan--
whatever it may be--they throw more money than they should at 
different parts of the world. Clearly that happened here, 
except they did not have the regulatory bodies in order to 
manage it.
    And so when you look back on it, yes, we should have seen 
it, but I do not think a lot of people saw it coming this way, 
myself.
    Mr. Munoz. I would like to add--you are absolutely right, 
Congressman. OPIC is in the risk management business and 
because we are doing that, we did not give any special 
treatment to that part of Asia. In fact all over the world, the 
emerging markets have different elements of controversy and 
risk. As a result, the projects that OPIC has in that part of 
the world, when we say we are actively managing it, we might 
require more collateral in project finances, we might look for 
contracts that are tied into the U.S. dollar as opposed to 
local currency.
    Those kinds of measures are taken into account. As a 
result, to date, we have not had any claims made against OPIC, 
and as we look at our portfolio, we think it is manageable. We 
know that many of our mechanisms for payment are not if a 
crisis like this hits, there is a time for which resolution can 
take place, and normally it does.
    In those few instances where a claim has to be paid by 
OPIC, as I said in my opening statement, we have an outstanding 
track record in that we recover 97 percent of the claims that 
are paid.
    Mr. Callahan. Mr. Grandmaison, do you have a brief response 
to that?
    Mr. Grandmaison. I would love to be able to say yes. 
Regrettably, that is not the case because we operate on a 
project by project basis. If there was anything that we should 
have noticed, it was that the investments in the infrastructure 
area were not moving as quickly as they should have from public 
sector to private sector, and that meant, obviously, the 
Governments were willing to carry more debt than A, they 
should, or B, than conceivably, they had to.
    But there was no additional notice, more than that, on our 
part.
    Mr. Callahan. Mrs. Pelosi.
    Ms. Pelosi. Thank you, Mr. Chairman.
    Following your lead, I offered the seven and a half minutes 
to Mrs. Lowey, but she has graciously yielded them back. 
[Laughter.]
    That level of cooperation is on both sides of the aisle.
    Well, thank you, Mrs. Lowey. Thank you, Mr. Chairman.
    I want to thank our ``witnesses,'' and that, these days, 
sounds like an ominous word, but our leaders in the export 
area, for their testimony, for their leadership, for their hard 
work. I reiterate some of what I heard from you, that you will 
always hear from me about, I hope you will put a stronger 
emphasis on small and moderate size businesses, on women and 
minority-owned businesses.
    Mr. Packard can attest to the fact that we have been busily 
meeting with our State legislators from California the last 
couple of days you know how important exports are to our State.
    But they of course keep saying to us, ``We need more, more, 
more of communications.'' So I would hope that your outreach, 
as you have described into other countries, will continue.
    I know you have said that you would be available for these 
meetings. I know that if Californians want more, other States 
would benefit also from being made aware of what opportunities 
there are for moderate and small size businesses.

                         environmental concerns

    On OPIC, Mr. Munoz, as you know, I commended you when you 
came to my office, and I want to publicly commend OPIC, for 
proposing to expand the list of projects that you will not 
finance because of environmental and social issues, and I 
commend OPIC for proposing to require Forest Stewardship 
Council certification for all timber projects that you fund. I 
commend you for that.
    On the other side of it, I mentioned in my statement as a 
very high priority, my concern about the proposed 60-day in 
advance disclosure policy, which I strenuously object to as 
insufficient. I also want to go on to mention that at the 
anniversary of the Earth Summit, as many of us remember, 
President Clinton committed OPIC to environmental policies that 
abided by the World Bank standards, U.S. Federal standards, or 
host country law, whichever is the higher standard.
    Unfortunately, I am not absolutely certain that OPIC is 
going down that path. I am concerned that OPIC has narrowed 
which World Bank standards it will adhere to as far as 
pollution abatement guidelines, as opposed to the operational 
guidelines which would commit OPIC to adopting operating 
guidelines which were more environmentally and culturally 
sound, and that OPIC is saying it will only use U.S. Federal 
law if there is no World Bank standard to follow, and that you 
will not commit to using U.S. Federal law on issues that would 
fall under the operating guidelines, such as resettlement 
policy, indigenous people, and wild lands.
    Having said that, I do appreciate that you put together the 
OPIC environmental handbook, and all of the work that that 
implies and entails, but I, again, have these concerns that I 
wanted to put forth to you. Anything that I say about the 
environment, of course is for all our financial institutions.
    Mr. Munoz. Yes, Congresswoman, we have looked at the 
concerns that you have raised, and have gone back to review 
this since our meeting. We are still in the process of having 
that handbook be open to questions, concerns, and comments, 
during this 120 day comment period. That comment period will 
still go on four months, and as we accumulate all these 
comments, we are accumulating them from both sides--the 
environmental groups as well as the business group.
    We will certainly try to weigh through them. Because of 
your very important interest in this, we will not make any 
conclusions on them without making contact with you again in 
terms of how these things are to be resolved. We know that it 
is an important matter to you. It is certainly an important 
matter to global economics. So we will take those into account.
    Ms. Pelosi. Thank you, Mr. Munoz.
    I remind you that the 120 days is a compromise, at that.
    Mr. Munoz. Yes.
    Ms. Pelosi. And that non-governmental organizations, the 
indigenous people, and all of those who are interested in this 
issue, believe that that was----
    Mr. Munoz. Compromised already.
    Ms. Pelosi. That was the least that we could live with in 
terms of the 120 days. Thank you, Mr. Munoz.

                         asian financial crises

    Mr. Harmon, welcome. Recently, the export credit agencies 
of the G-7 got together to attempt to work together in response 
to the Asian crisis, and particularly to respond to the need 
for short-term credit insurance and guarantees.
    Your statement indicates that you could commit up to $3 
billion in short-term financing for Korea, Thailand, and 
Indonesia. When do you anticipate securing sovereign guarantees 
from Thailand and Korea to do this short-term business, and 
will you extend this financing without such guarantees?
    Mr. Harmon. When I came back from Asia in the middle of 
January, we made the decision to increase our support for trade 
with Korea, first. This was not such a difficult decision. 
Korea had been making all the right moves. Although the next 
year, or two will be a difficult time for Korea, it is moving 
well in its recovery program.
    As you may know, the private commercial banks in the United 
States had stopped confirming letters of credit, and very few 
exports had been completed. Were we not to step up and do this 
exports would continue to decrease. In fact in your area, if 
you look at California port numbers, you will see there is even 
a slow-down right now.
    This was a very creditworthy type of transaction for us 
because of our long-term relationship--we have been in Korea 47 
years and our short-term insurance experience in support of 
trade was very good. In fact, fewer than 1 percent have 
resulted in claims.
    So I thought it was a relatively easy decision to move up 
without a sovereign guarantee. Consequently, the Board of 
Directors approved the transaction and stated that it would 
provide up to $750 million in short-term insurance. We are 
about at $500 million now. This financing actually rolls over 
about three or four times a year, so that it actually supports 
exports of somewhere between $2 and $2.5 million in Korea 
alone. All of this is without sovereign guarantees.
    It is also interesting to note that much of this financing 
is helping small companies in the United States export. These 
are small companies that could not get financing to export to 
these markets. Some of the bigger companies can step in and 
take their own credit risk. So this very creditworthy financing 
is good for small business, and good for our exporters.
    When the Bank was asked to go up higher, because demand was 
there and the private banks were not going in, we decided that 
we would go up if we got a sovereign guarantee. We have asked 
Korea for this sovereign guarantee and they are currently 
reflecting upon it. They have, however, indicated a willingness 
to provide it. But, it will be another few weeks before this is 
completed.
    In Thailand, it was a little different. These countries 
have graduated from Ex-Im. They were so creditworthy and doing 
so well. So they did not need any official kind of credit 
support. Consequently, we had not been active in a short-term 
program in Thailand nor had we been active in Indonesia, for 
the same very reason.
    We have had a very modest amount of activity in Korea. In 
Thailand, it has started to pick up, but it is much smaller 
than Korea, and we have asked for a sovereign guarantee. This 
week we expect to sign a Memorandum of Understanding with the 
Prime Minister, or the Minister of Finance in Washington, which 
describes the outline of what we would do.
    Again, I feel quite comfortable with the creditworthiness 
and the support we are doing for exporters. Some day the 
private sector, including private banks, will come back, and do 
this, and we will be out of it.
    But for the meantime, this financing will result in a very 
significant increase of exports to two countries, Korea and 
Thailand. We are treading water in Indonesia right now.
    Ms. Pelosi. But could you expand on your statement that 
adjustments in payment schedules for Ex-Im's exposure of $3.7 
billion in Indonesia may be required? Can you comment on the 
outright losses, or defaults that are anticipated, following up 
on Mr. Frelinghuysen's question?
    Mr. Harmon. Yes; an important question. We have not 
experienced any losses yet. So it is almost as if it is 
business as usual, but, of course, we know it is not business 
as usual. We know there will be a requirement, in time, to 
reschedule. That does not mean we have done a net reduction in 
debt, but a rescheduling. Sooner or later there will be 
negotiations on some matters that we have, such as deferring 
amortization of debt. However, I do not believe that it will 
necessarily result in losses. Although we expect losses, as we 
always have--we have reserves to cover any expected losses.
    But, we are monitoring it very closely. We expect the next 
year or two will be a difficult time for Indonesia.
    Ms. Pelosi. How does what you are doing compare with the 
export credit agencies of Japan and our European allies in this 
area, right now?
    Mr. Harmon. Can I come back for one minute to what you just 
asked on environment, because it an interesting note. We are 
the only export credit agency in the world, I mean, of the G-7, 
that have any environmental guidelines. It is my hope--and I am 
working with others in Government--to try to bring the other G-
7 countries up to our level. This would be a wonderful 
achievement. If I could do it in the next few years, I would be 
extremely pleased.
    Ms. Pelosi. I agree; it would be.
    Mr. Harmon. It is really a disadvantage for our exports; 
however, we are hurting the world by not requiring the other G-
7 export credit agencies to have similar criteria. These 
criteria are not so extraordinary. It is the World Bank's 
criteria. Right now, we are going through a whole reappraisal 
of our environmental guidelines with the environmental groups.
    This is a very worthy goal. But, we have not gotten there 
yet however, we are starting to make a little bit of progress. 
Now, on the other question.
    It was clear to me that we could coordinate an effort with 
the G-7 countries where each of us supports our own exporters, 
without changing the competitive nature that we have with the 
others. They were very responsive, and we did have an extensive 
meeting where they brought along what they call their guardian 
authorities.
    I think that the other countries--France, Germany, and 
Japan--will step up and be more supportive of their own 
exporters in the Asian region. This will be very constructive 
since the Asian market is important to the U.S. as well as to 
the rest of the world. All the countries in the G-7 have to 
support the markets in order to keep them available for us and 
everyone else to sell their products and services.
    Ms. Pelosi. Thank you.
    Thank you, Mr. Chairman.
    Mr. Callahan. Mr. Kingston.
    Mr. Kingston. Thank you, Mr. Chairman.

                          tda project criteria

    Let me ask a question of the Trade Development Agency, 
first, in terms of the congressional presentation that outlined 
the criteria you use to assess potential projects.
    How tightly are the criteria followed when applied in the 
field and how are they enforced?
    Mr. Grandmaison. I am sorry, sir. If you could repeat.
    Mr. Kingston. Well, in your congressional presentation you 
mentioned the criteria that you use to assess potential 
projects. How tightly is that monitored?
    Mr. Grandmaison. The answer is there are rare exceptions to 
the criteria. All right. The criteria being that the project 
must be a priority of the host country, that the potential for 
U.S. exports must be considerable, and that there has to be a 
likelihood of financing. The fourth is that we prefer 
investment--and this is where it is a little looser--we prefer 
to invest where our economic competitors are competing in the 
same market.
    When, as an example, we invest in Russia, often we would 
invest in that case even though there is not a direct 
competitor for the market. Though we are aware that Germany--if 
they were interested, German companies can be as competitive as 
those U.S. companies.
    But other than that latitude, in certain situations, the 
criteria are quite strict.
    Mr. Kingston. So generally speaking, if a project does not 
meet the four criteria, then it probably will not get granted, 
is that correct?
    Mr. Grandmaison. That is correct.
    Mr. Kingston. And you have statistics on that, that show 
that?
    Mr. Grandmaison. Yes.
    Mr. Kingston. Okay. Also, after a feasibility study, what 
portion of the value of the following development projects, and 
all that later flows from them have generally and historically 
been directed to the United States? I guess in terms of, you 
know, what is our gain from it?
    Mr. Grandmaison. One in three of our investments pay export 
dividends. Now, what we are not able to ascertain with 
certainty is that if we were not there, would it be absolutely 
that those exports would not have come, irrespective of our 
involvement? That is an intangible. We cannot ascertain that.
    What we do know, however, is that if the criteria as to 
competition from other countries for that project is 
maintained, that whenever the French or the Japanese or the 
Germans invest in a feasibility study, our companies are almost 
categorically ruled out of competition. So that it does not 
necessarily get you the project, because you then have to 
compete; but the only way your U.S. company can compete for 
those exports is if we had been able to massage, if you will, 
the technical requirements.
    Mr. Kingston. So it is an inexact science in knowing what a 
U.S. company would have gotten anyhow?
    Mr. Grandmaison. Yes, sir. If I would suggest otherwise, I 
would not be honest. What we do know is that without that 
investment, we would be out of the ball game, but it does not 
guarantee you the export.
    Mr. Kingston. Yes; okay.
    All right. Thank you very much.

                     u.s. capital investment danger

    George, let me ask you a question, a softball question. 
Some U.S. companies have contacted our office about fear of 
being nationalized in Asian marketplace, and so forth, and you 
are probably the foremost world expert on nationalization, or 
political risk, or you certainly study it.
    What is the danger of the U.S. capital investment in 
countries such as Indonesia, being lost to nationalization at 
the present time, with the financial climate being where it is?
    Mr. Munoz. Well, today, it is certainly higher in terms of 
nationalization, and Indonesia is going through some very, very 
difficult times right now. As you know the IMF has put in some 
requirements for reform. One of them, which is very important 
to us, is transparency in Government contracting, and in all 
its dealings. So in these kinds of instances, if an American 
investor were saying we want political insurance against 
nationalization, or expropriation. We consider the sector is, 
because not all sectors are as subject to Government take over.
    Oil and gas, or things of a critical infrastructure are 
more sensitive, because Governments have shown, through 
history, those sectors are the ones that they will take over. 
Other types of investments, consumer products for example, are 
less exposed.
    So to answer your question, the risk would be dependent on 
sector site, and the type of experience an investor has in 
relationships with that country.
    Mr. Kingston. Let me ask you a specific in our hemisphere. 
In Ecuador, right now, oil prices are down and the economy is 
hurting. We have a huge American oil company presence there. 
Are they in any kind of danger, in your opinion?
    Mr. Munoz. When a Government has its back to the wall, 
these are the kinds of things that we look at. But we have no 
indication, right now, that the danger is any greater right 
now.
    Mr. Kingston. Okay. Mr. Grandmaison, let me ask you this. 
We had some--and I cannot remember what the group was, it was a 
chemical manufacturers coalition, pushing for more U.S. 
Government involvement in R&D, because they say that overseas 
their competitors are getting a tremendous amount of it.
    Are you guys involved in something like that? Do you guys 
come into anything like that? I mean, they were really looking 
for new authorization, and so forth. But does TDA have anything 
that would maybe diminish the need for more appropriations and 
more authorizations?
    Mr. Grandmaison. Specifically, we do not, and we work with 
that sort of a group in that sector, when there is a decision 
that has been made to develop a chemical manufacturing facility 
overseas, And what we want to do is facilitate that foreign 
project sponsor's likelihood of purchasing U.S. goods and 
services in developing that facility, a good example being in 
the Czech Republic.
    In Central Europe it is obvious that the Czech Republic is 
going to wind up being the powerhouse in the area in the 
chemical sector.
    They were searching for prospective partners. It was to our 
advantage to move them towards bringing U.S. companies to work 
with them on that. But strictly in the R&D effort, we do not.
    Mr. Kingston. Okay; thank you.
    Mr. Callahan. Mrs. Lowey.
    Mrs. Lowey. Thank you, Mr. Chairman, and I welcome you 
gentlemen, and I thank you for your important work.
    I will close, depending on the generosity of the Chairman, 
by asking you to expand your answers on your outreach to small 
businesses, because I have been particularly impressed with 
your responsiveness to this committee. But in case there is no 
time, I will save that question for the record.
    Mr. Callahan. The gentlelady is recognized for as much time 
as she would like.
    Mrs. Lowey. Oh, you are so gracious.

                           RUSSIA AND THE NIS

    But I want to begin, first of all, with Mr. Harmon, New 
York's gift to Government. We thank you for coming here and for 
the great job you are doing.
    I have been particularly concerned about investments in 
Russia and the Newly Independent States. I think it is very 
important, and you mention this in your statement, that you 
expect that demand for loan guarantees will increase in Russia. 
But I have also been very concerned with the increase in 
corruption in Russia, and that our assistance may not always be 
going in the most positive direction.
    Could you discuss with us what actions Ex-Im is taking to 
insure that this corruption does not negatively impact Ex-Im's 
activity in the region.
    Mr. Harmon. Thank you. It is true that our business in 
Russia is growing. It has been averaging about 20 to 25 percent 
of our program budget for the last two years, and probably will 
go up as high as 30 percent next year.
    We worry, as you can imagine, about all the concerns you 
have in Russia and the NIS. It is a challenging market. I was 
there in November, and we were well-informed of the concern 
about corruption. For several years, we have had requirements 
that exporters must confirm to us in the form of supplier 
certificates, that there have been no payments made, and no 
other kinds of financial transfers that could lead us to 
believe that there would be some corruption on that 
transaction.
    And we try to monitor it as best we can. I believe that we 
are fairly careful in this area, and we are working with, of 
course, some of the larger entities in Russia.
    We are now making a effort to reach out beyond just the 
sovereign guarantee area into an area, where we will take some 
bank risks.
    We have a responsible team working on this area that is 
very much aware of the concern regarding corruption, and looks 
into the background of everybody that we are dealing with, when 
a transaction is brought to our Board of Directors.
    While doing this review, staff looks at a transaction in 
terms of the history of the people involved, how the 
transaction was created, and every detail that could lead us to 
some concern on this question. There are times when we do 
decide to defer action on something because we are concerned 
about any possibility of corruption.
    At the moment I think we are very cautious, and 
conscientious in this area. But it does not mean that you could 
not have a problem. However, we are very good on the way we 
have analyzed it, and the way we have followed up in 
determining who is involved, what they are doing, and how we 
get the final certificate from all the parties involved, that 
gives us the comfort that at least we have done due diligence 
in this area.
    Mrs. Lowey. That is amazing. So you are saying that Ex-Im 
is working with entities that may or may not have partners in 
Russia, that are conducting business successfully. You feel 
relatively confident, based upon the investigation, that there 
is not corruption involved in that particular business?
    Mr. Harmon. I think we are doing what we should be doing in 
analyzing both the creditworthiness of the transaction, and 
that we are not involved with people who, quote, are engaged in 
corrupt activities.
    So I have looked at that closely, since I came in, and I 
think we are doing pretty much what we can do. The people we 
are dealing with are as responsible as you could find in the 
developing world. All over the developing world, you worry 
about this. It is not just Russia.
    Mrs. Lowey. That is right.
    Mr. Harmon. It is a concern that you have, whenever you 
finance anything in the developing world, whether it is the 
Caribbean, Africa, India, or wherever. It is not just Russia. 
We have to be comfortable that the parties that we are engaged 
with, that is, on the U.S. side, give us their confirmation 
that they know of nothing that would lead us to that 
conclusion.
    Then we have to be reasonably comfortable with the history 
and background of the people that we are in business with, and 
the banks that we are dealing with. Of course, when it is some 
of the very largest companies, it is a little bit easier than 
the smaller companies. So far, we have not done too much in the 
smaller companies area. But, we are monitoring it as best it 
can be done.
    Mrs. Lowey. I would be interested in further discussions on 
this, because having visited Russia a few times, this has been 
a great concern of mine as we have seen the whole climate there 
change. I am glad you said ``reasonably comfortable,'' or ``as 
best as it can be done,'' because I think that is really the 
question. And the impact of our dollars, and where they are 
going, given the situation in Russia, has been of great 
concern.
    I think in this committee we are always balanced. We have 
expressed our concern about the assistance we are giving. On 
the other hand, we realize that Russia is destined to be a 
great nation again. The economy is booming, although it may be 
less than equal for all parties, and we have to be there as a 
part of it. It is important that we support growth and trade, 
in Russia and the Newly Independent States.
    But we still have very serious concerns. So I would, at 
some point, like to get a more in-depth briefing.
    Mr. Harmon. If I could just add something, and not that we 
are all not responsible for our respective agencies nor am I 
trying to shift responsibility, but, the embassy is invaluable 
in situations of this nature. They are the people on the 
ground, and, candidly, it is not unusual to get an off-the-
record call from the embassy, that basically says, ``This is 
not a prudent investment for you to make.''
    Now they are not required to give you chapter and verse as 
to why they believe that is the case, but they warn you, ahead 
of time, that this is just something that you would be better 
served not getting involved in, and our belief is that if the 
embassy is not supportive of our investment, then we just 
should not be doing it.
    Mrs. Lowey. My overall question, which I would like to 
discuss further, is to what extent can the American business 
community, working with Ex-Im, TDA, and OPIC, encourage 
American style business practices as opposed to the kind of 
corrupt practices that we see are so rampant in Russia?
    That is really my question. Have we seen a change? 
Recently, Mr. Chairman, I saw an article about the fact that 
anyone with a kiosk in Russia has to hire a security guard to 
protect it. One gentleman has gotten a good reputation--almost 
the Good Housekeeping seal of approval--and he is making 
millions and millions of dollars.
    This gentleman is going into so many different areas, a 
multi-million dollar business, because of the great skepticism 
and concern on the part of the public. His face and his name 
are providing some security to the people, that the peas they 
are buying, the coats they are buying, the cribs they are 
buying, are good, and solid.
    So I think it is a concern and I am interested to know to 
what extent Ex-IM, TDA, and OPIC, can foster good business 
practices in that region.

                              middle east

    I appreciate it, Mr. Grandmaison, that you provided to us a 
list of projects in the Middle East. I have always felt, given 
the sometimes intractable nature of the problems in that 
region, that people do not have to love each other. But through 
investing together and building strength and economic 
development, perhaps they can learn to live together by raising 
the living standard for all.
    So in looking at these projects, perhaps you can give me 
just a status report on where some of these projects have gone. 
The fiberglass plant, the food processing facility, the Gaza 
hotel. I think these are very important and the work that you 
are doing is essential in terms of the whole region.
    Could you give us some status report.
    Mr. Grandmaison. Congresswoman, if you would allow me, I 
would like to provide you, in writing, a report on that.
    Mrs. Lowey. Fine.
    [The information follows:]

    TDA activities in the Middle East have played an important role in 
demonstrating that peace can help lead to economic growth and social 
development in the region, while at the same time generating new 
business opportunities for U.S. firms. The following highlights our 
efforts.
    Jordan: In April, 1995, just six months after signature of the 
Jordan/Israel peace treaty, TDA sponsored a symposium on infrastructure 
development in the Jordan Rift Valley. Attending the conference were 
200 firms from Jordan, Israel and the U.S. together with senior 
officials from the three countries, including Jordan's Crown Prince 
Hassan and Israel's Prime Minister Shimon Peres.
    TDA signed a grant at the conference which funded a feasibility 
study of the Aqaba-Eilat Airport. The objective of the study was to 
allow the two airports in Aqaba, Jordan and Eilat, Israel to expand 
jointly and serve international traffic to both Jordan and Israel. 
There are now three Israeli flights a week which land in Jordan and 
transfer passengers to Israel. This number is increasing. As airport 
development continues, Jordan will have to invest in new air traffic 
control equipment. TDA is helping develop this important binational 
transportation link and also working to ensure U.S. firms have the 
opportunity to win new export business.
    Since April, 1995, TDA has invested in a total of nine feasibility 
studies and two orientation visits in Jordan. Most of those studies 
were recently completed or are still ongoing, so the projects are still 
in the early planning phase. EBA Waste Technologies of Santa Rosa, 
California, for example, recently completed a $525,000 feasibility 
study of a hazardous waste management project in Aqaba, Jordan. The 
firm is now working through negotiations with the government of Jordan 
to establish the first private waste handling facility in the country. 
Another TDA-funded feasibility study has enabled Mercury International 
Ventures of Jackson, Mississippi to begin negotiating with the 
Jordanian government to establish a VSAT telecommunications network 
service for the Jordanian banking sector. Together these two projects 
represent more than $27 million in potential exports for U.S. firms.
    Egypt: TDA has invested in two major projects in Egypt since 1992. 
An $800,000 TDA training grant in 1992 helped Parsons Brinkerhoff 
International of New York City win a $34 million contract to develop 
Cairo's metro system. TDA provided $300,000 in technical assistance in 
1996 to the Egyptian Ministry of Maritime Transport which helped 
Lockheed Martin of Syracuse, New York win a $40 million contract to 
provide a vessel traffic system for the Gulf of Suez. We are optimistic 
that two upcoming grants to the Egyptian Civil Aviation Administration 
to support airport development will be equally successful.
    Gaza and the West Bank: The Declaration of Principles between 
Israel and the Palestinians was signed in September, 1993. A TDA 
project identification team was on the ground four months later. The 
U.S. group Builders for Peace also helped identify projects for 
potential TDA consideration. Though the commercial success of these 
projects has been limited, we have made important progress in laying 
the groundwork for projects which may be successful down the road. 
Construction of a hotel project we supported began, but is now on hold. 
The potato processing factory, olive oil processing plant, fuel 
refinery and fiberglass pultrusion plant have all stalled due to the 
challenges of doing business in this unstable environment. Developing 
successful businesses in Gaza and the West Bank is little easier than 
making progress in the peace talks, but TDA is committed to doing 
everything we responsibly can to make a positive contribution. We will 
continue to press for successful implementation of these and other 
projects as the business climate allows.
    Lebanon: After the travel ban to Lebanon was lifted, TDA's staff 
scouting trip to that nation marked the first time U.S. government 
employees were able to land at the Beirut International Airport. TDA is 
already providing technical assistance to help evaluate proposals to 
modernize two other Lebanese airports. We believe Lebanon can be a 
valuable market for U.S. companies and are considering supporting other 
projects in the near future.

    Mr. Grandmaison. Your point is well-taken, that that is a 
particularly sensitive and difficult area of the world to 
necessarily get the results that we would normally expect. 
However, we would argue that the development mission of TDA is 
key here, though we are a trade agency, and yes, export 
promotion is a key facet of why we are in business.
    But the development mission of our agency must equally be 
serviced. In some of those cases, when you look at that area of 
the world, it may have been better, arguably, to invest in 
Brazil, as an example. But you still have a need to try to move 
the peace forward from a broader foreign policy perspective.
    But let me give you a listing of where we are on that, and 
I would be happy to. In that particular case, we happened to 
work very closely with Builders For Peace, at the time, in 
trying to make sure that they had some resources to be able to 
fulfill their mission.

                               azerbaijan

    Mrs. Lowey. I thank you, and Mr. Munoz, in another troubled 
part of the world it seemed to me, in Azerbaijan, there seems 
to be millions of dollars flowing into that region, and the 
Government somehow manages to get a good part of those millions 
of dollars.
    Mr. Callahan. Did you say Azerbaijan?
    Mrs. Lowey. Azerbaijan. Remember that?
    Mr. Callahan. No. I remember Georgia.
    Mrs. Lowey. Well, I do remember in Azerbaijan, somehow, 
Aliyev's son and relatives all seemed to be very involved in 
economic development in that region of the world.
    Mr. Callahan. You are talking nonofficial.
    Mrs. Lowey. Yes; yes. Excuse me.
    In any event, in the FY 1998 bill, there was specific 
language clarifying that section 907 does not apply to OPIC, 
giving OPIC the green light to enter Azerbaijan.
    If you could comment, Mr. Munoz, on what OPIC's plans are, 
if any, to support projects in Azerbaijan. Have you been 
involved there at all?
    Mr. Munoz. Yes. First, I just wanted to just point out we 
see 907 as applying to OPIC. However, the language in the FY 
1998 Conference Report, which we very much appreciated, 
clarified that in fact OPIC's support of U.S. private investors 
would not be subject to 907. That clarification was very 
helpful to us, since there is a lot of interest in that region 
of the world, and the primary interest, as you mentioned, is in 
the oil and gas field, although it is not limited to that.
    Mrs. Lowey. I just want to say that many of us have been 
concerned that investments there should not negatively impact a 
solution to the Azerbaijan/Armenia Nagorno-Karabakh situation.
    Mr. Munoz. I am glad you point that out because, clearly, 
at OPIC, we have an understanding, as we work in that region, 
that we are not to, as a Government agency, not to upset any 
balances, and not to show any favoritism to one country or the 
other, but, rather, that it is a region.
    It is certainly a region in need for development and our 
approach will be very even-handed, making sure that we approach 
it in ways that do not disadvantage one country over the other.
    So now that we have this clarification, I will be going to 
that region soon. We have not yet scheduled anything, but we 
will clearly make contacts with all the appropriate officials 
there. But in all our activities, we want to make sure that we 
are balanced, and not all of a sudden just paying attention to 
one country.
    Mrs. Lowey. So at this point there really are no plans?
    Mr. Munoz. Well, our plans are in fact to now make sure 
that we are active and that we are responsive. We have a lot of 
inquiries from U.S. investors who wanted to know when we were 
going to be open and what kind of activities we would be doing. 
So we can now be more responsive, now that the language has 
made it clear, that covering U.S. investors is not going to be 
a problem with 907.
    So our plan is to move ahead, but now we can move ahead in 
a more balanced way.
    Mrs. Lowey. I thank you, and depending on the Chairman's 
time schedule, if either of you or any of you would like to 
just comment on my first question about small business--do we 
have time, Mr. Chairman? Would you like to hear about that?
    Mr. Callahan. I would like to hear about that, if you want 
to hear about that.

                    small and medium-size businesses

    Mrs. Lowey. Okay. If any of you would comment on what you 
are doing to aggressively reach out to small and medium size 
businesses and define for us, again, what do we really mean by 
a small business.
    Because what I see, certainly in my district, the large 
corporations function very well. Whether it is GE or Pepsico, 
Citibank or PaineWebber. They do not need us. They know exactly 
how to find you.
    What about the small and middle size businesses?
    Mr. Harmon. First, I would like to say what I have said 
before to many people, and that is, many of the larger 
companies in the United States that do use us have many 
subcontractors and subdivisions, and are buying products from 
all sorts of people. We know, in fact, how many small companies 
participate in some of the large company transactions that we 
are financing.
    But coming specifically to the small companies that we are 
dealing with, we have not done as much as we can do. We have 
made some progress. This year again we will exceed our mandated 
percentage of volume which is 10 percent.
    We will be at about 15 percent of the money and about 80 
percent of the transactions in the current year. We should be 
higher since there are over 100,000 small companies that 
export. However, we are dealing with about 2,000 a year and we 
have an active list of about 10,000.
    It will be difficult, as we look ahead, with 426 people at 
the Ex-Im Bank, to find a way to reach, quote, thousands of 
small businesses. It will only come, in my opinion, from some 
kind of a structural change. That means more delegated 
authority.
    We have about 80 banks that are under what we call 
delegated authority. These banks can act for us in their 
region. Through those banks we will probably be able to reach 
out to more. In addition, we need to do a number of things. We 
feel we have to make our programs a little simpler, and we are 
trying to do it. In fact, we will probably announce these 
changes next month. These changes will make our programs more 
user friendly, and people will be able to understand what it is 
we are doing.
    Clearly, we will have to be able to respond quicker and we 
can with a simpler program. Furthermore, we are going to have 
to use our delegated authority to leverage our resources so 
that we can reach out to all these many small companies.
    In the next few years, I am determined to find a way to get 
us to the next level of small business support, which will 
involve a significantly larger number of small companies all 
over the country.
    I wish I could do it just by conferences, and by going out 
and talking in the country. But, you never seem to be able to 
cover enough, and you have to be able to do that. So we will 
continue to reach out whenever possible. For example, I was 
just in New York last Friday, at our New York regional office, 
talking to them. I am in Dallas on Monday and then in 
California.
    Mrs. Lowey. I am sure Mobile, Alabama, right?
    Mr. Harmon. Of course.
    Mrs. Lowey. You want to take care of those small 
businesses.
    Mr. Harmon. Any time that you wish me to be there, I will 
be delighted to be there.
    Mr. Callahan. Well, you are welcome.
    Mr. Harmon. There are small companies that we are dealing 
with all over the country so we will not do it by just my 
directives and our traveling around. It will come only by some 
significant structural change, and I call that using delegated 
authority.
    Some day we will have the banks in this country working to 
explain our program, to market our program on some kind of a 
basis which is almost a joint venture. Then we will get to the 
thousands that we should get to.
    Because if those small companies do not participate in the 
global economy, then it is a great loss for American 
businesses. We know 50 percent of our clients are small 
businesses, so we have got to find a way to get them involved 
in the global economy. One very interesting comment on our 
Korean experience is that it has resulted in us expanding our 
small business activity. We have been reaching out more to 
small businesses because they could not get the exports to 
Korea.
    So sometimes a crisis enables you to suddenly reach a new 
market. But we have got to have--and we are studying it right 
now--a program which will be able to reach all those small 
companies.
    Mrs. Lowey. Is there a level at which a business is too 
small? What are you talking about in terms of assets?
    Mr. Harmon. No level is too small. We work with companies 
that have 25 employees. So I think that many, many very small 
companies could utilize our financing structure.
    Mr. Callahan. How do you distinguish a small company from a 
large company?
    Mr. Harmon. We use the SBA calculation. Most people refer 
to numbers of employees.
    Mrs. Lowey. What about assets? I mean, you can have 25 
employees with----
    Mr. Harmon. We look at a number of criteria. What we use is 
the SBA guidelines and that uses the number of employees for 
manufacturing companies and sales/revenues for service 
companies. However, I am glad to get back to you to give you a 
more thorough answer on that question.
    [The information follows:]

                  Ex-Im Bank Small Business Definition

    As stated in Ex-Im Bank's charter, Section 2(b)(1)(E)(v), we are 
required to use SBA guidelines to establish whether a company fits the 
description of a small business. SBA's guidelines establish small 
business standards on an industry-by-industry basis. Small business 
standards are determined by classifying a product produced in or a 
service being acquired from the industry, as found in the Standard 
Industrial Classification Manual. For most industries other than 
construction and services, a company is considered a small business if 
it has no more than 500 employees.

    Mr. Harmon. But you are right--it could be a very large 
company with 25 employees. It is possible. But there are some 
limitations on that and we will come back and give you a more 
specific answer on that.
    Mrs. Lowey. Thank you.

                            sub-contracting

    Mr. Munoz. I would just like to expand a little bit on 
small business, repeating what Mr. Harmon said with respect to 
sub-contracting. We try to find out from our transactions who 
is actually getting all of the business and we also have 
discovered that over 50 percent of the suppliers to our deals 
are small businesses, even though the actual sponsor of a 
project may be a large business. Eventually it farms out so 
that U.S. small businesses are participating in this 
globalization, some of them, without even knowing it. I think 
that is an important element.
    Secondly, last year, we had 24 percent of our projects were 
for small business----
    Mrs. Lowey. SBA criteria, again?
    Mr. Munoz. We use--it is multiple criteria. We will also 
provide you with that.
    [The information follows:]

    OPIC's small business definition includes industrial 
companies with annual sales of less than $198 million or non-
industrial businesses with stockholders' equity of less than 
$67 million.

    Mr. Munoz. One of the four priorities that I set out for 
myself when I was confirmed was to facilitate the small 
business investors in the globalization effort. As a result, we 
established a task force, immediately, to look at our product 
lines because the procedures we go through can be quite 
lengthy. They are quite costly also. That larger businesses can 
easily cope but small businesses not as well.
    Our offices are only located in Washington. So when you get 
a small business from New York or California or Alabama, it is 
not that easy for them to deal with us. So we are trying to use 
technology and trying to use a streamlined process to reach 
this important group.
    We will also announce, very shortly, the results of that 
task force which has already been speaking to banks and 
speaking to intermediaries that are working with small 
businesses, and we think we will be successful in coming out 
with good product lines.
    We also think small business is the future, and that timing 
is everything. Small business has certainly shown to be the 
backbone of our economy here, and responsible for much of the 
growth in our economy. It will also, in its due course, become 
a backbone for the globalization taking effect.
    We would love to be part of the pushing of that process a 
little quicker and safer, but I believe all of us are trying to 
make that as rapidly as possible.
    Mr. Grandmaison. I agree with the points made by both of my 
colleagues. I think one of the first things that, when I first 
appeared before this committee or during an early meeting with 
Mr. Flickner--actually, not the first thing. The first thing 
was he mentioned my party registration, as I recall. 
[Laughter.]
    But quickly, quickly, after mentioning that, was concern 
that our agency tended to deal exclusively with a certain cadre 
of companies, year after year after year. I think that we have 
acted on that very constructive and proper criticism, by going 
out and by working hard at bringing our program, making it 
known to small businesses.
    It is not easy; all right. Part of what we have tried to 
do, internally, is to be able to wholesale through State trade 
offices, through trade associations, candidly, through Members 
of Congress who are willing to pull together the right 
companies in their district and go down and make a 
presentation. We have been successful.
    A third of our program dollars go to small business. We 
would like to see that increase, and it will increase. Whereas 
you love to get a ``big win''--the Ogden Corporation--is a 
``big win.'' It means a lot of small businesses and others will 
be selling products.
    But the fact of the matter is maybe it is because we are a 
small agency, when you work with a small business and you are 
successful, candidly, at the most human level, it just tastes 
better, it is sweeter. I mean, you get more personal 
satisfaction from that.
    So I think that is part of it--it is for our own staff, it 
is that much more exciting. But the moment you take your eye 
away from it, human nature being what it is, you then begin to 
do what is easier.
    It is easier to work with the large companies because all 
of the information comes in exactly how you want it. What you 
have to do as management is reflect, continue to reflect and 
put pressure, that people will be judged on their ability to 
perform, small business being a very important asset. You have 
got to keep the pressure on.
    Mrs. Lowey. Mr. Chairman, you have been very generous. I 
thank you so much, and I thank you, gentlemen, and I look 
forward to a continuing dialogue because I think your work is 
so very important.
    Mr. Callahan. Following up on the small business, you 
mentioned in your statement that 62 percent of your activities, 
I guess you said were small businesses, and yet I think you 
just said that 33 percent of your money that is advanced and 
spent goes to small business. It is my understanding that the 
real purpose of your agency should be almost exclusively small 
business.
    When you say ``small business,'' I mean, we are not talking 
about building dams for big companies. What is a ``big 
business''? What ``big event'' did you handle, or did you 
finance in the past year? What's big?
    Mr. Grandmaison. Well, we do not finance. What we will do 
is provide grant assistance for the feasibility----
    Mr. Callahan. Right. Well, what grants did you give to big 
businesses?
    Mr. Grandmaison. Well, normally, we do not select the U.S. 
company that the foreign project sponsor chooses to work with, 
meaning, if we make an offer to the Ministry of Energy in 
Brazil, that is then--that feasibility study grant is then 
advertised in Commerce Business Daily. U.S. companies submit 
their qualifications, in this case to the Ministry of Energy in 
Brazil, and they select the U.S. company that they work with.
    Now, often, there will be--it is a consortium, more often 
than not, and there will be a large company in the lead, but 
they will employ several smaller businesses to work with them 
in terms of the subsector specialties necessary to fulfill the 
scope of services.
    Now the reason for this discrepancy in terms of a third of 
our program dollars, and yet 62 percent in terms of the number 
of companies, is that we have programs that are reserved 
exclusively for small business. All of our desk studies must be 
done by small business. All of our definitional missions must 
be done by small business. When it comes to the feasibility 
studies, however, it's the grant recipient that selects the 
company that they work with.
    The primary beneficiary, I would argue, of our orientation 
visits, bringing people here, are small business, because they 
would not necessarily get on a plane to go down to South 
America to meet with 40 project sponsors.
    Mr. Callahan. The subcommittee, a great many of us are 
going to, we know at this point, Argentina, Bolivia, and Costa 
Rica. If you have any projects ongoing, any of you, we would 
like to visit those. I would like to see, firsthand, what you 
are talking about, and we do not want you to be able to select 
and choose which ones you want us to see. So why don't you just 
provide us with a list of all of your activities in Argentina 
and Bolivia and Costa Rica, and let us select what we would 
like to visit.
    [The information follows:]


[Pages 76 - 78--The official Committee record contains additional material here.]



                          currency devaluation

    Mr. Callahan. Somebody asked, this morning, about the 
problem with respect to the dollar valuation in Indonesia, and 
you mentioned that you do not have anything--I think you did, 
George--tied to their currency. It is all tied to our currency. 
Do any of you have any investments, anywhere, tied to any other 
currency other than ours?
    Mr. Munoz. Well, if I may. Yes. I mean, outside of 
Indonesia, just any----
    Mr. Callahan. Well, any.
    Mr. Munoz. Oh, sure.
    Mr. Callahan. I do not know why we would be tying, or 
making an investment with any country that is tied to another 
currency, other than our own. I do not know why you would be 
guaranteeing a project based upon someone else's valuation of a 
dollar. And I hope you are not.
    Mr. Munoz. No. We do not do currency devaluation insurance, 
as an example, and whenever we have projects, dollars is the 
mechanism by which we operate.
    But you can have a project whose main source of income, for 
example, even a utility project, is in local currency. They may 
get paid in local currency but you still have to pay back the 
debt in dollars, the same fashion that we lent.
    Mr. Callahan. So then when you go and invest, or guarantee 
an investment in Indonesia, you do not even take into 
consideration the potential--I know it is hard to project, all 
of you said that--what might happen. How do you protect from 
the devaluation?
    Mr. Munoz. You cannot protect a 100 percent, but one way to 
do it is the contracts, the guaranteed take or pay contracts, 
that some of these power projects would have, and you would 
have it with a credible source who is committed to either 
taking it or paying for it, and in doing it in a way that 
translates itself into the right amount of dollars regardless 
of devaluation of the local currency.
    The collateral that you ask for--if you are feeling that 
there is only local currency being brought into a project you 
look for more collateral. So I think there are ways to mitigate 
the risk. You cannot eliminate the----
    Mr. Callahan. Do any of you have any risk? What about your 
currency situation? Do you, in any of your loans----
    Mr. Harmon. All of our transactions are dollar-based.
    Mr. Callahan. U.S. dollar.
    Mr. Harmon. But, what Mr. Munoz has just said was very 
important and accurate. That is, if you are lending, let us 
say, to a project in Indonesia, and they have to service your 
debt over a period of years, in dollars, and as has happened--
the rupiah has declined 75 percent--then they cannot receive 
enough revenue from any of their business--especially if it is 
tariffs relative to a utility. They cannot generate enough even 
to service the debt, which leads one to the conclusion that 
there will eventually be some kind of a ``rescheduling'' for 
all of Indonesia. This ``rescheduling'' is necessary so that 
the country can pay its external debt. Because unless there is 
a massive change in the value of their currency, or they go to 
a currency board that might have some impact, it is highly 
unlikely that Indonesia will be able to service the dollar 
obligations that they have. Therefore, some rescheduling, not 
necessarily a loss, but some rescheduling will take place in 
the future.

                               indonesia

    Mr. Callahan. How much exposure do either of you have in 
Indonesia?
    Mr. Harmon. We have $3.8 billion.
    Mr. Callahan. Million?
    Mr. Harmon. Billion.
    Mr. Callahan. Billion.
    Mr. Harmon. $3.8 billion, which is out of $60 billion in 
our portfolio. So approximately 6 percent of our portfolio is 
in Indonesia, and there is no short term, it is all medium and 
long-term obligations, and a good portion of it is sovereign 
obligations. But even with a country guarantee, there are risks 
involved in Indonesia.
    Mr. Callahan. Do you have any risks, George?
    Mr. Munoz. Yes, we do. For Indonesia, the best measure of 
what is really at stake, if things get worse, is what we have 
as our actual current coverage. You can have a company that can 
sign up for a high maximum potential insurance, but never 
really call on that insurance. They may only be covered for 
what they pay for as current coverage, and for the assets they 
have in place.
    Even using that amount which is your least amount, it is 
approximately $475 million, or approximately $500 million of 
exposure, of current exposure.
    Mr. Callahan. Which represents what percent of your worth?
    Mr. Munoz. Well, that number represents a small percentage. 
If I look at the total liability, potential liability for 
Indonesia, it is about 5 percent.
    Mr. Callahan. 5 percent?
    Mr. Munoz. 5 percent; yes.
    Mr. Callahan. I want to yield, immediately, but I want to 
ask one more question, to Congressman Yates.
    Mr. Yates. Well, I want to ask the same questions you are 
asking, Mr. Chairman.
    Mr. Callahan. Well, I understand that but you do it more 
eloquently than I do.
    Mr. Yates. No, I do not. [Laughter.]
    Mr. Callahan. So much more eloquent.
    Ms. Pelosi. Oh, my goodness.
    Mr. Callahan. Without putting you on the spot, can 
Indonesia make it? [Laughter.]
    I mean, you have got to look at it. I do not know what the 
President Suharto said yesterday about the cartel his family 
owns, and the indication that he is giving. I know nothing 
about international finance, and I do not really want to know, 
but I mean anybody can look at the situation there and see it 
is insoluble, and so I mean, you might as well go ahead and 
say--not publicly, if you do not want to--I do not want to 
cause the stock market to go down, not that they pay any 
attention to what I say, but they do pay attention to what you 
say.
    But it is insoluble, and they are not willing to make the 
necessary reforms. Basically, maybe he can. He has just been 
reelected for five years. But I think his family is going to 
stop him from making the decisions he has to make in order to 
resolve his problems.
    Can Indonesia make it? Is this 5 percent, and this 6 
percent of your portfolio--is it at serious risk?
    Mr. Munoz. Well, since Mr. Harmon went first in the 
testimony, I think it is----
    [Laughter.]
    Mr. Munoz [continuing]. It is protocol.
    Mr. Harmon. Well, I would say thank you. I thought 
everybody was so courteous on your side, yielding. I was 
waiting for the opportunity to yield myself, but it does not 
look like I can do it now. [Laughter.]
    I would start with a positive statement. Indonesia will 
survive. I am confident, that in the years ahead we will do 
business in Indonesia. Indonesia has 204 million people. It is 
not an easy country since it is composed of 13,500 islands and 
26 provinces. This is a difficult country, young country, but 
it has enormous advantages. It has an extraordinary--excellent, 
technology base because they have brought in so much equipment 
in the last five years. They have made great progress over the 
last 32 years in economics alone.
    So what do I really think? I think it is the darkest 
moment. It will be difficult for the next few years, but five 
years from now people will do business with Indonesia. It is 
too important a part of Asia, and it will be a market that the 
United States will sell to in the future.
    It is today more a political problem than it is an economic 
problem, in many respects. If there are some changes there, I 
believe that there would be a lot of support inAsia for 
survival of Indonesia. When I say survival, I mean the viability of 
Indonesia.
    So I expect some rescheduling of debt. I fully expect a 
very troubled economy with high inflation, high unemployment, 
and all sorts of potential political problems.
    Mr. Callahan. You are from the banking community. If you 
were filling out a balance sheet like you did when you were in 
the banking community, how would you rate this 6 percent of 
your portfolio?
    I mean, would you say it is at risk?
    Mr. Munoz. Yes.
    Mr. Harmon. I think much of our portfolio is at risk.
    Mr. Callahan. Would you go ahead and write it off your 
taxes this year?
    Mr. Harmon. No. Oh, no. I think we have adequately 
reserved, by reason of our requirements under credit reform. 
Each year we review our reserves based upon country lists. So 
we are adequately reserved in each of the countries.
    I predict that there will not be massive losses--this will 
be a rescheduling problem where you will defer the amortization 
and we will get paid, in my opinion, a significant part, and 
therefore, the reserves that we have now are very adequate.
    I do not think that this country is going to implode into a 
total collapse.
    Mr. Callahan. Well, I see some financial institutions are 
writing them off and maybe that is for some tax advantage or 
something, in their own country. Maybe it is something that----
    Mr. Harmon. In the private sector we commonly would write 
off, because, usually, if we took an extreme position, the 
stock of our company would go up in fact, and then we would 
have written it off to a level that allowed us to have some 
accounting advantages when profits came in.
    So there is a real reason for the private sector to do 
that. We are obligated to review the risk each year, and 
determine the country risk, and to come up with a calculation 
which takes into consideration any changes. That is why our 
reserves are self-adjusting each year and are appropriate under 
the circumstances.
    The private sector has a completely different reason for 
doing that.
    Mr. Munoz. I would like to add that right now no claims 
have been made against our projects in Indonesia, and I am not 
sure that we foresee any, and only because when you look at the 
details of it, we have one financing project there, and again, 
it is a project finance. It is pretty much already operational, 
and the kind of danger it would face is the one that Mr. Harmon 
referred to, where there may be some restructuring.
    But we do not see that as going into a loss. As we look at 
the rest of our portfolio there, of the different stages in 
development that they are in, at the end of the day we are not 
anticipating that we are going to have any losses.
    If we were to have losses, we do not think it would be 
anywhere close to our exposure, and we have good reserves.
    I also want to underscore what Mr. Harmon said, which is 
Indonesia's survival is important, not only for the U.S. 
economy, but I believe for the global economy and how these 
things are treated. So I think everybody is working toward 
making sure that a disaster case does not occur.
    Mr. Callahan. I want to yield now to Mr. Yates.
    Mr. Yates. Thank you, Mr. Chairman.
    Indonesia, you say your loans are about 5 percent, and at 
risk. Where else are you at risk with your loans?
    Mr. Harmon. Are you referring to the percentage of our 
portfolio. If, so, it represents about 6 percent of our total 
portfolio.
    Mr. Yates. Yes.
    Mr. Harmon. What we do each year, now, under the Federal 
Credit Reform Act of 1990, is determine, based upon the so-
called risk rating, which is established largely by interagency 
process, the amount of reserves needed to cover any anticipated 
losses. Each year, this is adjusted.
    Indonesia is one of a number of countries where the risk 
rating is such that we have got to consider this to be in the, 
quote, higher risk area. Russia and the NIS is in the higher 
risk area. Africa is a higher risk area.
    Clearly--I am probably missing some, right now, as I think 
about the higher risks--but Indonesia was downgraded by the 
interagency process a number of times since the crisis 
occurred.
    The interagency process lowers or raises the risk factor, 
so it now is at a level of risk which reflects some of the 
higher risk markets. But the highest risk markets would be in 
the NIS, Africa, and even Russia has been upgraded a bit.
    Mr. Yates. Are you required to go into higher risk markets 
because of international relations?
    Mr. Harmon. No; we are not. Two things. We follow the 
exporter market, where there is demand, and most important, we 
are required to make sure it is creditworthy. So we have to 
believe that we are going to be repaid. That is the most 
important thing, putting aside environmental consideration, 
which is very important.
    Mr. Yates. Are your standards the equivalent of private 
banks?
    Mr. Harmon. That's a complicated question.
    Mr. Yates. An interesting question.
    Mr. Harmon. I will only say one thing to you, which is 
interesting, but it does not exactly answer the question. Our 
loss experience in the last 15 years is probably better than 
private commercial banks. Now, when people ask me why, 
especially my friends in the commercial banking world, my 
response is people do not default on the United States 
Government very easily. People are very concerned about that. 
So that is a major reason why we have as low a loss experience 
as we do have.
    Now, if you go back to the Latin American crisis, at the 
time of the early 1980's, it does change a little bit. Then we 
were in line with the other private sector banks.
    But, we are probably as good as anybody at analyzing risks. 
I have spent--I hate to say how long, because no one in 
Government has spent as many years as I have in that sector--38 
years in the private sector banking world. I would say that we 
are probably as good at analyzing the transactions as the 
private sector. We have as good a caliber of people analyzing 
the risk factors, and as good determining what is creditworthy.
    Mr. Yates. You spoke of losses over the last 15 years. How 
much have you lost?
    Mr. Harmon. Our loss experience is about 2 percent over 
that period of time. But, I do not have the exact dollar number 
for you.
    Mr. Yates. Is that considered a good loss ratio for a 
private bank as well?
    Mr. Harmon. Yes.
    Mr. Yates. It is?
    Mr. Harmon. Yes. They would clearly be higher. However, our 
loss experience would compare favorably, if you took the last 5 
to 10 years, with the private sector banking world.
    Mr. Yates. Do you have a feeling that you should pull back 
now, or that you should expand.
    Mr. Harmon. I have a feeling that in most of my life, when 
times were difficult, my competitors shied away.
    Mr. Yates. Is that the situation now?
    Mr. Harmon. Yes. In Asia, it is; probably in the developing 
world it is. I think it is somewhat more difficult now. Most of 
my life, my competitors shied away and did not call on 
customers, did not make calls, and did not find out how they 
could be helpful, which is the reason that I went to Korea in 
the beginning of January, because I felt I should look in and 
assess what our problems were. This was also the case when I 
went to Indonesia to assess what our problems were, and Asia, 
generally.
    I believe that our competition, the other export credit 
agencies, will shy away a little bit. Therefore, I think it is 
a time where we can help the American exporter by staying in 
the markets where we do not take undue risk. By being 
``aggressively smart'' we are doing our job.
    ``Aggressively smart'' is the word I use in my office. It 
means to be tough but smart, make sure we do it the right way, 
and do not take great risks but be there in the market to help 
the exporter. That is what our job is and it is what we are 
doing in Korea now.
    I do not think we are going to lose much money, if any, in 
Korea.
    Mr. Yates. Thank you, Mr. Chairman.
    Mr. Callahan. Let me ask a couple of questions, and then 
talk somewhat about the budget, which is the real reason you 
are here. You have the management system in place in each of 
your agencies for the year 2000 problem. Are each of you fully 
satisfied that your agencies are ready for that event?
    Mr. Munoz. Yes.
    Mr. Harmon. Yes.
    Mr. Grandmaison. Yes.
    Mr. Callahan. You are. Fine.
    Okay. Let's just go, briefly, to the budget request. Each 
of you go through. We will take TDA first. The historical 
record. In 1997, you have $40 million.
    Mr. Grandmaison. Yes.
    Mr. Callahan. In 1998, you were granted $41 million. In 
1999, you are requesting $50 million.
    Now that is roughly a 20 percent increase. You know how 
strained we are with respect to our allocations this year. We 
are not going to have an increase; we are going to have a 
decrease. So do not get too overly optimistic about the 
possibility of that $50 million.
    I know in your statement you testified, but I want to tell 
you, we are going to have some very, very serious problems 
coming up with an allocation sufficient to fund a 20 percent 
increase to anybody.
    With the Ex-Im Bank, these figures are somewhat distorted, 
because in 1997, you had $758 million. You requested, I think, 
in 1998, about $600 million. What was the number they 
requested?
    Mr. Harmon. $632.
    Mr. Callahan. $632. We gave you more than that, because you 
actually testified that you needed more, and you know, we 
violated the President's request. We gave you more because we 
had faith in your agency.
    Now you are coming with an $824 million request, which is 
$200 million more than your request for last year. That is a 
huge increase. I mean, that is a 30 percent increase, if I am 
not mistaken.
    Mr. Harmon. Can I respond?
    Mr. Callahan. Yes.
    Mr. Harmon. We appreciated the fact that you did give us 
more last year, which I am informed, even though I was not 
here, that it was somewhat unusual to receive a greater amount.
    As a result of being short last year, we deferred a little 
bit more than 200 million to this year.
    Mr. Callahan. We do not show it. I mean, the executive 
branch came to the Congress and requested $620 million. Are you 
saying they were irresponsible in their request?
    Mr. Harmon. I would rather rephrase it more diplomatically, 
and say that, in hindsight, I look back on the people who made 
the estimate, and they were off the mark, by a fair amount. As 
a result, we could not complete all the business that we had in 
hand, and we were forced to defer a little bit more than $200 
million of program budget into this year, because we did not 
have adequate funds.
    Mr. Callahan. So you are going to run out of money this 
year?
    Mr. Harmon. Yes.
    Mr. Callahan. When?
    Mr. Harmon. Probably July.
    Mr. Callahan. So then you are going to start spending 
October monies, or committing them as early as July.
    Mr. Harmon. What we will do is, one, we are going to 
protect small business and those programs we have to protect. 
They will not be harmed. We will however, have to defer other 
longer-term credits until October or November. And there are 
ways to do that without harming the exporter.
    Mr. Callahan. Well, how much did you ask the administration 
for? What was your request to your immediate chain of command 
with respect to the budget request?
    Mr. Harmon. For which year?
    Mr. Callahan. This year. I mean, 1999. What did you ask 
for?
    Mr. Harmon. $808 million.
    Mr. Callahan. You asked for $808 million and they raised 
your increase?
    Mr. Yates. Mr. Chairman, they are not asking for anything 
in the supplemental, are they?
    Mr. Callahan. I do not know. They might.
    Mr. Harmon. No.
    Mr. Callahan. No, they are not.
    Mr. Harmon. I have to go back for a moment because the 
numbers are confusing to get to. But the budget request and the 
demand that we see requires a program budget of $1.3 billion.
    Mr. Callahan. So you asked for $1.3 billion this year, and 
they cut you down----
    Mr. Harmon. For 1999. Fiscal year 1999.
    Mr. Callahan. That is what I am talking about. For 1999. So 
they cut you significantly. So they do not have the same faith 
in you that we had.
    Well, then why does the administration continue to request 
such a huge percentage number under what you tell them you 
need?
    Mr. Harmon. Well, I think there are several reasons. 
Although we are at $808 million now, the difference between 
$808 million and the requested $1.3 billion has to be filled. 
In our mind, this can be filled in several different ways.
    One comes about because the Office of Management and Budget 
has done a recalibration, which will allow us to have buying 
power of another $230 million.
    Mr. Callahan. So you are saying--do you want us to 
appropriate the 824 you have asked, or do you want us to 
appropriate more, or less?
    Mr. Harmon. One always can use more.
    Mr. Callahan. I mean, last year your predecessor requested 
more and we gave him more. Are you asking for more?
    Mr. Harmon. We can however, do the job that we need to do 
for the exporters on the amount that we now have in front of 
us, that the administration has recommended. But, to do it we 
will have to make several different program changes. In 
addition, we will have to possibly use some of the Tied Aid 
Fund.
    Now, I could never refuse an offer of some additional 
funding because then I would not have to use the tied aid 
portion, and we would not have to change the program budget 
around a little bit.
    But, in order to meet the demand that we believe is there, 
the $1.3 billion, some of it is coming about through the 
recalibration--the calculation was done by OMB--and some will 
come about because of the estimated cancellations that we have.
    Mr. Callahan. Let me just interrupt you here and tell you 
that our allocations are going to be tight this year, and we 
are not going to be able to just arbitrarily increase you. When 
you start telling these businesses that you do not have enough 
money, you tell them it is because you did not request enough 
money.
    Do not blame it on the Congress of the United States. And I 
want to tell you, if I hear one businessman come to me, and 
they tell me you or some of your employees indicated that the 
reason they cannot do anything between July and September 30th, 
or during the next fiscal year is because Congress did not give 
them enough money, which is what they have been telling them, 
we are going to have some problems.
    We are going to give you a reason, and I hope you hear that 
message loud and clear. You tell them that you requested from 
the OMB, the President of the United States, $1.3 billion, and 
they refused to follow up on that request, and as a result you 
did not get the money you needed. It is not Congress's fault.
    The administration is asking for this money. You, as 
President, are the one who is asking for this money. So do not 
ever let me hear one more time that the reason there is an 
inability for Ex-Im Bank to have a sufficient amount of money 
is because of a shortage caused by the Congress, the Republican 
Congress of the United States. They do not even blame it on 
Nancy, and I was the one that got you the increase.
    So, you know, I am concerned about that, and I do not want 
to hear that, and I want that message conveyed to your staff.
    Now with respect to OPIC, your profit, and we are happy 
that you are still making a profit, went from 112 to 175, 
between 1997 and 1998. But you are projecting only 176, or a 
minute increase in 1999. Why is that?
    Mr. Munoz. We are expecting a $1 million increase. A lot of 
it has to do with 1997. While we had record income from our 
portfolio, 1997, this last fiscal year, was a difficult year.
    The way our staff analyzed it, there were two components. 
One of them was uncertainty since 1996 and 1997, as to whether 
OPIC was going to be reauthorized or not. This caused some 
retrenchment in terms of some of the investors.
    That also slowed down a little bit of the pipeline, of 
which you are seeing the effects. We think it will go back up.
    The good news is that we are now seeing our registrations 
go up and there is a lot more interest at our door. I do not 
blame the private sector. The private sector, when they come to 
us know that no project gets done immediately. Unlike Ex-Im 
which has thousands of transactions, we will have less than a 
hundred. In some cases, in finance, for example, a project may 
take six months, four months, or the like, to work out.
    Mr. Callahan. Ms. Pelosi.
    Ms. Pelosi. Thank you, Mr. Chairman.
    I know we have a vote so I will just make a few comments, 
as briefly as possible.
    Just on the environment, Mr. Harmon, you mentioned that you 
were talking with some environmental groups about your 
environmental standards.
    I remember when your predecessor came to my office and 
announced, with great pride, that you were following The World 
Bank standards, and of course I am not thrilled with those 
either, so I thought, no, we have got to have a higher 
standard. But at least it was a change from the past and 
represented some greening of the Ex-Im Bank.
    If you are meeting with groups--not now, but if you can get 
back to me about who those groups are--I want to make sure that 
it is inclusive of some of the organizations that have been 
active in international environmental issues.
    [The information follows:]


[Page 88--The official Committee record contains additional material here.]



    Mr. Callahan. Just a brief question on Indonesia. You said 
it was 6 percent, your----
    Mr. Harmon. Approximately 6 percent of our outstanding 
exposure is in Indonesia.
    Ms. Pelosi. Is in Indonesia. And of that 6 percent, do you 
have any--I may have missed it--any rate of default that----
    Mr. Harmon. No, we have not had any experience, to date, of 
any losses, or even claims, right now, on the $3.720 billion we 
have outstanding.
    Ms. Pelosi. Okay. Just a closing point, and that is the 
argument that we make to justify this funding for the Ex-Im 
Bank with our colleagues, when they think that the free 
enterprise system should be just that, not with Uncle Sam 
holding your hand, is that this creates U.S. jobs.
    As you talk about your portfolio and what you are doing in 
different parts of the world, I would hope that there would be 
some balance in terms of creating these jobs in different parts 
of the world, and to create markets also for U.S. products. 
That is always part of it.
    But the concern that I have at the Ex-Im is the rumor that 
you hear from time to time about reducing the amount of 
domestic content required.
    There was at one point the notion--and I will not say 
elevated to the level of idea--the notion that the domestic 
content would be changed. Overseas content now is allowed as 15 
percent, Mr. Chairman, and that meant that 85 percent of the 
content would be made in the USA, therefore promoting U.S. 
jobs.
    There was one thought of raising that to, guess how much? 
100 percent content could be foreign-made, and that still was 
going to, supposedly, create U.S. jobs. That is very 
sophisticated thinking; maybe too sophisticated for some of us. 
I would caution you that that is something that would never fly 
around here, and in fact would do a great deal to undermine the 
Ex-Im.
    So, again, as you look at your portfolio, I do not know how 
you compare infrastructure projects, or exporting of U.S.-
manufactured goods abroad in determining how you decide on a 
loan, but it seems to me that the ones that are goods 
manufactured in the U.S. for export, to finance the loans on 
those creates many more U.S. jobs than an infrastructure 
project in another country.
    I just bring up this issue because to the extent that you 
justify the creation of U.S. jobs, I think that the Ex-Im will 
enjoy a great deal of support and popularity here. But I hope 
that you would not get ensnared in this movement to diminish 
the number of jobs created, while still trying to justify the 
reason why we have the Ex-Im Bank. That is really all that I 
have to say, Mr. Chairman, unless Chairman Harmon would like to 
respond to that.
    Mr. Harmon. I give you my assurances that there is nothing 
pending right now, nor are there any discussions that I am 
aware of to change the content question.
    Also I want to give my assurances to the Chairman, that in 
no way will anybody allude to, should we run short of funds, 
that there is any fault of Congress, although we are talking 
about 1999. In 1998, I was not here.
    Mr. Callahan. And I mentioned your predecessor.
    Mr. Harmon. I do appreciate your comment.
    Mr. Callahan. Well, I want your employees to understand, 
too, that Congress did not cut you.
    Ms. Pelosi. Mr. Chairman, I would like to say that I think 
we are very well served by the people in these positions, and 
thank them. I join you in thanking them.
    Mr. Callahan. Yes. Thank you.
    Mr. Munoz. Mr. Chairman, could I just add to my last 
question in terms of how much was being contributed to negative 
outlay. Again, I want to say OPIC is positively contributing. 
But one other reason for the smaller number is we and our 
accountants, look at our reserves and our allocations, and 
determined this would be an appropriate time to allocate a 
greater percentage of income to reserves.
    Mr. Callahan. I understand that, but if you were a public 
company you know that would make your stock go down, do you 
not? The value of your stock, if, indeed, your projected 
profits, which were going up, suddenly leveled off?
    Mr. Munoz. It depends on what the reason is. If they look 
at our portfolio, actually our asset strength and equity is 
strong, so that will also----
    Mr. Callahan. Right. Our stockholders are out there on the 
floor of the House. We have been arguing all this time that 
this is a good investment. We are getting a return. Look at 
this. We came from $100 million to $175 million. We are doing 
great, and all of a sudden it stops. After we get you more 
money or more authority, it stops. Now we do not have as great 
a message as I would like to give to the House. Plus, it costs 
me money.
    Mr. Munoz. Right.
    Mr. Callahan. You see? Because I was counting on that 
additional $75 million to give to the Ex-Im Bank.
    Mr. Munoz. You were counting on the extra growth; right. 
[Laughter.]
    With the two year reauthorization, we will make you proud.
    Mr. Callahan. Thank you very much.
    [Questions and answers for the record follow:]

               Submitted to Trade and Development Agency

                Questions for the Record by Mr. Kingston

    Question. I was impressed by criteria outlined in the Congressional 
Presentation that TDA uses to assess potential projects. I am 
interested to get an idea of how tight these criteria actually are when 
applied in the field and how strictly they are enforced. About what 
proportion or percentage of potential projects which are considered 
under these criteria are actually awarded grants?
    Answer. Of the formal proposals TDA considers, about one in five 
ultimately receives TDA grant assistance. Many potential projects are 
screened out before they ever reach the proposal stage, however. As you 
know, TDA does an extraordinary amount of outreach. We make our 
selection criteria clear in all our materials and presentations. This 
discourages many inappropriate projects before their proponents bring 
them to us. In addition, the informality of our application process in 
the early stages--a phone call is usually all that is needed--also 
allows many projects to be culled out before we receive an actual 
proposal.
    TDA's criteria are applied strictly, though they are not 
inflexible. It is sometimes difficult, for example, to demonstrate with 
certainty the degree of foreign competition U.S. companies face on a 
particular project. In addition, where a small U.S. company is the 
chief proponent of a project, we might be more flexible on the required 
level of potential U.S. exports. These exceptions aside, if a project 
does not meet our criteria, it will not receive TDA assistance.
    Question. After a TDA feasibility study, what proportion of the 
value of the following development projects and all that later flows 
from them have generally/historically been directed to U.S. companies?
    Answer. About one-third of TDA projects ultimately result in U.S. 
exports. On average, every dollar TDA invests is associated with $33 in 
U.S. exports.
    Question. The Congressional Presentation says that exports 
generated by TDA is a primary reflection of TDA performance. By what 
measure does TDA develop a sense of the difference between exports its 
efforts generate and those that U.S. firms would have won anyway on 
their own merits? How is that difference assessed? Is that difference 
an official factor in its results indicators?
    Answer. We can rarely say with absolute certainty that a company 
would not have been successful without TDA's participation. We do know, 
however, that if the French or the Japanese control a project from the 
beginning, U.S. firms are generally locked out of that project.
    TDA only takes credit for facilitating U.S. exports when a TDA 
activity has made a ``significant contribution'' to a company's 
success. Our evaluations staff bases this judgment on conversations 
with the companies, host country project sponsors, officials at 
multilateral development banks, and others. We attempt to be as 
conservative as possible in order to allow realistic judgments of TDA's 
export success.
    Question. I think your initiative to expand private partnerships by 
cost-sharing on preliminary studies and assessing ``success fees'' is 
excellent. Private investment in the risk is obviously good business 
and could increase success rates. I also gather from your material that 
it could effectively result in up to a 33 percent increase in the 
feasibility study budget (if an extra $.51 is leveraged on each $1 put 
forward by TDA). How has this been factored into your budget request 
for Fiscal 1999? Could that increase alone bring your funding power up 
to $50 million?
    Answer. U.S. company demand for feasibility study assistance always 
exceeds our available resources, even with the expanded impact we 
achieve through cost sharing. In addition, total U.S. government 
support for feasibility studies on behalf of U.S. firms is still far 
smaller than that of our competitor nations. Leveraging our budget 
through cost sharing is one of the few ways we are able to meet that 
competition, though it does not make up the shortfall with other 
nations.
    The expanding ``funding power'' of TDA's budget has been considered 
implicitly in the FY 1999 budget request. Cost sharing allowed TDA to 
support $47.6 million worth of feasibility studies during 1997 with 
just $31.5 million in tax payer-funded feasibility study investments. 
The FY 1999 request of $50 million, of which roughly $39 million would 
probably fund feasibility studies, implies a request for $59 million in 
feasibility study ``funding power.''

                Questions for the Record From Ms. Kaptur

    Question. Each of you lead an organization dedicated to the 
facilitation of exports from the United States. One thing that 
continues to disturb me is our predilection for quantifying our exports 
and imports solely on the basis of gross value rather than looking more 
carefully at the quality of our exports and imports. I would be 
interested in knowing whether your organizations keep track of what 
kinds of exports your projects generate for the U.S. Particularly, I 
would like to know if you can distinguish between capital good and 
commodity exports so generated and in the case of capital goods, 
whether the commodities produced through the employment of those goods 
are sold in developing markets or are exported back to the U.S. or 
other industrialized countries?
    Answer. TDA's core objective is to help create jobs for Americans. 
We would oppose any investment of TDA funds in a project that would 
hurt U.S. workers. This position is at the heart of every decision the 
agency makes.
    TDA keeps careful track of the exports associated with our 
activities. Our evaluations office tracks each and every investment we 
make and records U.S. companies sales to TDA-supported projects. Since 
we focus on infrastructure projects, exports associated with TDA 
activities are almost exclusively capital goods. Infrastructure 
projects in areas such as transportation, power generation and 
transmission, water and wastewater, or telecommunications require 
substantial capital goods imports, but do not generally involve 
production for export to other markets. We have also supported some 
projects that require U.S. manufacturing machinery. TDA supports local 
manufacturing projects, however, only in cases when the manufactured 
products supply an exclusively local or regional market where U.S. 
exporters are not active.

                  Questions for the Record by Mr. Obey

                             caspian region
    Question. TDA will hold a conference in May to bring together oil, 
gas, power, mining and transportation companies with the goal of 
strengthening US business opportunities in the Caspian Sea region. Can 
you expand on this and explain why these sectors need TDA's help?
    Answer. TDA's upcoming Crossroads of the World conference will 
target 65 projects in, power, transportation, mining and oil & gas 
which are slated for near-term development in the 13 nations of the 
Black Sea, Caucasus and Central Asia regions. Together, these projects 
represent more than $20 billion in export opportunities for U.S. firms. 
The host country sponsors of each project will attend the conference to 
make public presentations and be available to meet one-on-one with the 
roughly 200 U.S. executives participating.
    TDA is highlighting these four sectors at the conference because 
they represent enormous business opportunities for U.S. firms and 
because our competitor governments are working actively on behalf of 
their firms in these areas. We also believe that these sectors are the 
most crucial to these Central Asian nations' current development needs. 
Some of the projects presented at the conference may also be 
appropriate for future TDA feasibility study support. Should we receive 
any such proposals, we will review the merits of each one on an 
individual basis.
    Question. Mr. Grandmaison, your statement indicates that you 
anticipate at some future time the payment by private companies of 
success fees to TDA. How much in potential fees do you anticipate 
eventually from the 37 projects from which potential fees may be 
collected?
    Answer. We do not as yet have precise estimates of success fee 
receipts. The program is new and the nature of the projects we support 
under this program is different from TDA's traditional public sector 
projects. Of the 37 projects included in our first review, for example, 
the vast majority are still in the early planning phases. In the past, 
a third of our feasibility studies have produced U.S. exports. Whether 
the success fee projects will follow past patterns is unclear. We 
continue to fine tune the program to make reporting requirements 
clearer and the success fee criteria stricter. These changes too will 
impact anticipated receipts. We do understand the importance of being 
able to make estimates of future receipts, at some point, and look 
forward to working with the Committee as the success fee program 
matures into the fee recovery stage.
    Will we continue to require success fees, cost sharing and many 
other cost-conscious measures in every possible case to reap the 
maximum benefit for U.S. exporters from the funds the Congress has 
entrusted to us.

                        Submitted to Ex-Im Bank

                Questions for the Record by Mr. Kingston

    Question. Mr. Packard asked an excellent question at our hearing 
regarding Secretary's promise of increased Ex-Im Bank activity to 
assist trade with Ukraine in return in part for their cancellation of a 
deal to provide turbines for nuclear reactors in Iran. He asked how 
this promise figured into budget planning for Fiscal 1999. I would like 
to follow up on that question. I would like to know how it would be 
technically possible to fulfill a commitment like this on the part of 
Export-Import Bank, because I understand your assistance to be 
generated by demand. In other words, you have little or no ability/
authority to direct your assistance because you deal with each project 
as it walks in the door and evaluate it based on established criteria. 
Can you explain how a commitment like this could be engineered?
    Answer. Ex-Im Bank follows market demand and considers the 
creditworthiness of transactions, as well as our environmental 
guidelines, as the application are submitted. Ex-Im Bank funding is not 
delegated in advance to certain countries or sectors, except that 10% 
must be set aside for small business transactions. We are currently 
open in Ukraine for short and medium-term business in the public 
sector.

                  Questions for the Record by Mr. Obey

                              asia crisis
    Question. Given the postponement of the next tranche of IMF funds 
for Indonesia, and the likely adjustment in payment schedules for 
existing Ex-Im projects in Indonesia, how can you justify additional 
short-term financing for them. Will sovereign guarantees be necessary 
and can they do that under the current plan.
    Answer. Ex-Im Bank intends to provide additional short-term 
financing support only with a sovereign guarantee from the Government 
of Indonesia. Should we receive a sovereign guarantee, representing the 
``full faith and credit'' of the country, it will be to insure only 
short term letters of credit. This would enable the country to import 
essential basic materials required from the U.S., which at present they 
are unable to do as the private sector is not willing to accept Letter 
of Credit's without Ex-Im Bank. These short-term transactions are low 
risk and would enable Indonesia to continue to buy from the United 
States.
    Question. In the long term doing business in Asia becomes more 
difficult. As demand for imports within these countries decreases and 
the currencies weaken, the pressure to export to the U.S. increases 
dramatically. How does Ex-Im intend to accomplish its main objectives--
preserving and strengthening U.S. jobs--and at the same time continue 
to expand its programs in Asia.
    Answer. In previous economic downturns in various regions, Ex-Im 
Bank has generally experienced the following pattern: initially an 
increase in short-term business occurs, which is subsequently followed 
with a higher level of medium-term activity and then, lastly, the 
return of long-term financing requests. For any request, Ex-Im Bank 
will undertake its due diligence and closely analyze the financial 
statements as well as the intrinsic fundamentals of the borrower, such 
as: whether the company is a foreign exchange earner vs. an earner of 
local currency, details of the company's foreign currency assets/
liabilities, the company's strategy for mitigating foreign exchange 
losses etc., as well as closely examining the company's cashflow 
projections and its underlying assumptions. Such thorough analysis 
enables Ex-Im Bank to make sound credit judgements so that credit 
worthy projects can continue to be financed by the Bank in support of 
U.S. exporters and U.S. jobs.
    Ex-Im Bank understands that there may be pressure by Asian 
companies to increase their exports to the U.S. However, in reviewing 
transactions at Ex-Im Bank, we assess whether any loans or guarantees 
are likely to cause substantial direct injury to U.S. industry, and do 
not extend such support if it would have a net adverse economic impact 
on U.S. production and employment.
                                 china
    Question. Ex-Im Bank's total exposure in Asia exceeds $13 billion 
with the largest exposure being China at $4.8 billion. How do you 
assess the effects of the Asian financial crisis on China, and will Ex-
Im programs in China continue to grow or will they contract.
    How will China maintain the 8% annual growth rate in their economy 
(that being the rate of growth they specify as necessary to maintain 
social stability and job growth) in the face of shrinking economies in 
all surrounding countries.
    Answer. Despite its size and its position, China is affected by the 
current Asian crisis. Our analysis shows that lower GDP growth is 
anticipated for the immediate future due largely to overproduction and 
a slowdown in exports and foreign direct investment inflows. The 
government hopes to stimulate GDP growth by encouraging domestic 
demand. To that end, the government has lowered interest rates to spur 
investment and is initiating a mortgage banking system to encourage 
borrowing for home ownership.
    Still, the government has said that it will not attempt to spur 
exports and GDP growth by engineering a sharp devaluation of the 
renminbi. While perhaps stimulating exports, a devaluation could 
further dampen foreign investment inflows, raise inflationary 
pressures, make the Hong Kong dollar peg more vulnerable and cause new 
friction with the U.S. over a ballooning bilateral trade imbalance.
    Based upon information provided by U.S. exporters, there continues 
to be strong demand in China for U.S. goods, particularly aircraft.
                                 russia
    Question. A considerable portion of the interest in demand for Ex-
Im Bank's resources comes from new opportunities in Russia. This 
increase has occurred despite the volatility of this market and the 
fact that Gazprom does not intend to utilize the Memorandum of 
Understanding for financing. Explain first what happened with Gazprom, 
and how their actions relate to U.S. laws regarding their work in Iran.
    Answer. Gazprom was concerned over the prospects of becoming a 
sanctionable party under ILSA because of its activities in the energy 
sector in Iran. One of the possible sanctions under that act would be a 
prohibition on Ex-Im Bank financing. Instead of running the risk of 
becoming subject to possible sanctions, Gazprom chose to act 
unilaterally and advised the Bank that it did not intend to utilize the 
financing that has been contemplated under a Memorandum of 
Understanding signed between Gazprom and Ex-Im Bank in November 1994.
    Question. Expand on what the new areas of demand are in Russia for 
Ex-Im resources, and the factors that make this market volatile. Why do 
you feel more confident about the business climate there for American 
investors.
    Answer. Since dissolution of the Soviet Union in 1991, Russia has 
enjoyed a remarkable period of political stability that has allowed 
market forces to operate for the first time in more than seventy years. 
The economic and legal conditions in Russia also appear to have settled 
down and a real private sector has emerged. Moreover, privatization has 
spread to most sectors of the Russian economy, and has, in turn, 
generated Russian interest in playing more-or-less by the same rules as 
the West. These developments are encouraging Russia to become more 
deeply integrated into the global economy. Consequently, Ex-Im Bank 
staff believe this trend will continue since both government and 
business leaders are intending on pursuing this course, particularly in 
view of the Asian financial crisis.
    To encourage further privatization, Ex-Im Bank is using its 
programs to target the Russian private sector in two ways--first, by 
working with Russian commercial banks to meet the needs of their 
clients to purchase U.S. goods and services and second, through the use 
of project finance and project finance-type structures on projects in 
the energy, mining and other sectors which can generate the revenues 
needed to repay the financing, without the need to rely on government 
guarantees. Without neglecting Moscow and other centers, Ex-Im Bank is 
reaching out to the regions as well where there is strong demand for 
U.S. goods and services. Another area of strong demand has opened up in 
the aircraft sector, after trade and market accords were negotiated 
between the U.S. and Russia. Ex-Im Bank is now in a position to support 
both the export of engines and avionics to be incorporated in the IL-96 
aircraft manufactured in Russia, and the export of U.S. aircraft 
urgently needed to upgrade and modernize the Aeroflot fleet.
                            tied aid credits
    Question. Mr. Harmon your testimony indicates the intention to use 
funds from the Tied Aid Capital Fund, or ``warchest'' as it is known, 
for non-tied air transactions. That action combined with other possible 
tied aid cases may bring the fund down from $326 million to $200 
million. Activating this fund also poses the risk of inviting other 
countries to resume predatory trade practices. Given the pressures of 
the Asian crisis on Japanese and European banks that pressure is likely 
to increase. Why have you chosen this path rather increasing fees for 
US companies, or some other alternative.
    Answer. Ex-Im Bank prefers activation of the Tied Aid Capital 
Projects Fund for non-tied aid cases for the following reasons:
    Given Ex-Im Bank experience and expectations, the remaining amount 
should be sufficient to support a competitive and aggressive tied aid 
matching strategy for the foreseeable future.
    While the risk of inviting other countries to resume predatory 
trade practices is not insignificant, that risk is only possibly an 
indirect threat to the competitiveness of a HANDFUL of exporters a 
year. All other options imply a certain and direct reduction in 
competitiveness to hundreds of exporters each year.
    The Board considered a number of options including raising fees to 
meet exporters' demand for scarce resources for FY '98. It decided that 
because of the economic crisis in Asia, this was the wrong time to take 
an action that could further compromise the ability of U.S. exporters 
to finance exports to Asia.
    Question. What tied aid cases are you anticipating.
    Answer. For FY 1998, estimated projections under the Tied Aid 
Capital Project Fund total less than $25 million in authorizations.
    Question. When do you anticipate revisiting the increase in fee 
issue.
    Answer. The issue of what steps (if any) Ex-Im Bank should take to 
best match the competitiveness mandate with available resources will 
next be reviewed in July of this year.
                     small and medium-size business
    Question. Given the increasing demand for small and medium size 
business loans and guarantees, should Ex-Im expand its current 10% 
minimum target for small business.
    Your testimony indicates a $200 million level for small business 
and ever increasing demand. What were actual demand figures for small 
business this year and where do you anticipate them going in the 
future.
    Answer. There must be some confusion in the numbers because the 
$200 million you cited in your question is incorrect. In Fiscal Year 
1997, Ex-Im Bank authorized almost $1.8 billion in support of small 
business exports under our loan, guarantee and insurance programs. 
Small business transactions represented 15% of all authorizations and 
82% of the number of transactions. As of March 1, we appear to be 
leaping ahead with small business authorizations at 21% or $566.4 
million and 81% of the number of transactions.
    At present, we expect that Ex-Im Bank's small business support will 
equal last year's almost $1.8 billion. However, it is too soon to 
predict other variables that may affect Ex-Im Bank's numbers, most 
importantly, the demand for Ex-Im Bank insurance coverage for exports 
to Thailand and Indonesia. This is particularly relevant since small 
businesses are heavy users of Ex-Im Bank's insurance program.
                     risk versus new credit scoring
    Question. Mr. Harmon, according to your testimony the Ex-Im Bank 
intends to do a number of things in Asia that will increase your 
exposure for what you admit are riskier transactions. At the same time, 
OMB is planning to implement a new system of assessing transaction risk 
which will result in lower subsidy amounts being set aside to cover 
risk. Explain why these two actions are not contradictory.
    Answer. OMB has updated the risk premia used in subsidy 
calculations to better reflect the market spreads on developing country 
debt. Some of the risk classifications will have increased risk premia, 
whereas some will have somewhat lower risk premia. The updating of the 
risk premia to better reflect the market improves the quality of the 
subsidy estimates.
    The transactions that we do in Asia and elsewhere have the amount 
of program budget set aside to cover risk commensurate with the 
specific risk category of the transaction and the fees the Bank 
charges. The new risk premia calculated by OMB should improve our 
estimates of the amount of program budget necessary for any given risk 
category. Therefore, it is not at all contradictory to approve 
transactions in markets which are more risky today than they were in 
the past, and to use the best available information to estimate the 
program budget impact of those transactions.
    Question. When will this new system be implemented, during FY 1998 
or 1999.
    Answer. The new risk premia will be implemented for transactions 
approved in FY 1999.
    Question. It appears that the new system of assessing risk is based 
on the difference between interest expense of U.S. Treasury securities 
and the debt of equivalent term on the countries in the risk category 
in question. This appears to have taken any U.S. corporate sector 
assessment of risk out of the calculation. Why is the new system a more 
accurate method of assessing transaction risk.
    Answer. The appropriate spreads to use for the risk categories are 
the ones based on actual issues of the countries in those risk 
categories. However, evaluations by bond rating agencies of the 
relative riskiness of various countries is taken into account in 
assigning risk classification to countries and transactions.
    Question. Can this new system of risk assessment be implemented 
without Congressional approval.
    Answer. The updated risk premia are part of the technical 
parameters for the calculation of specific amounts of program budget 
needed for specific transactions, and does not need Congressional 
approval.

                 Questions for the Record by Ms. Kaptur

    Question. I am concerned about some of your testimony relating to 
the Export-Import Bank's response to the current Asian financial 
crisis. In particular, you indicate that the Ex-Im Bank will now do 
over $750 million in short-term insurance in Korea and say that the 
Bank could commit up to $3 billion in short-term financing in Korea, 
Thailand, and Indonesia.
    Respected economists have told us that an over-reliance on short-
term, foreign denominated loans played a significant role in 
precipitating the Asian crisis. What assurances do we have that 
providing new short-term, dollar denominated loans is not just 
reinitiating the same cycle?
    You state that ``what Korea needs, as well as Indonesia and 
Thailand, is access to short-term trade finance so they can continue to 
import goods and services. Without this access, these markets could 
grind to a halt, to the detriment of U.S. exporters with a resulting 
loss in U.S. jobs.'' I certainly am dedicated to the creation and 
preservation of American jobs, but I ask, is your prescription for the 
Asian economies based on what is best for those countries or what is 
best for the U.S.? I would suggest that we are all better served by 
developing strong internal economies in these countries rather than 
leaving them vulnerable to the vicissitudes fickle international 
capital movements and short-term investments.
    Answer. Ex-Im Bank would be prepared to consider additional amounts 
in South Korea above the $750 million for short-term insurance with a 
sovereign guarantee. We are having discussions with the Government of 
Thailand as to an appropriate structure so that we can support short-
term insurance activity in that market. For short-term insurance in 
Indonesia, we are considering various options based on a possible 
agreement on policies that could be supported by IMF funds.
    Ex-Im Bank, as well as other ECA's, have a unique role in 
international trade and are well positioned to support and supplement 
the financing of trade in the Asian region, recognizing that a lack of 
financing restricts trade flows in the various Asian economies, has a 
detrimental effect on the local Asian economies, and limits the export 
of goods and services to these key markets. If Asian companies are 
unable to obtain short-term financing for the much needed imports of 
goods and services to keep their companies going, then these entities 
are very likely to experience further deterioration in their financial 
condition from their present circumstances. Consequently, such support 
from Ex-Im Bank is mutually beneficial to the Asian economies and to 
U.S. exporters--the Asian private sector needs raw materials and other 
inputs to produce goods for domestic and foreign sales. However, if Ex-
Im Bank does not provide short-term financing support in a prudent 
manner, then the Asian economies will purchase these essential goods 
from other countries supported by their ECA's, to the detriment of U.S. 
exports and U.S. jobs.
    Question. Each of you lead an organization dedicated to the 
facilitation of exports from the United States. One thing that 
continues to disturb me is our predilection for quantifying our exports 
and imports solely on the basis of gross value rather than looking more 
carefully at the quality of our exports and imports. I would be 
interested in knowing whether your organizations keep track of what 
kinds of exports your projects generate for the U.S. Particularly, I 
would like to know if you can distinguish between capital good and 
commodity exports so generated and in the case of capital goods, 
whether the commodities produced through the employment of those goods 
are sold in developing markets or are exported back to the U.S. or 
other industrialized countries?
    Answer. Ex-Im Bank does track the exports it supports and 
particularly investigates where the output of capital goods may be 
sold. We address this issue under our ``Economic Impact procedure'' 
whereby we screen all capital goods transactions for the possibility of 
a negative impact on U.S. industry.

                           Submitted to OPIC

                 Questions for the Record by Mr. Porter

                              environment
    Question. Why has OPIC decided to reduce the period of time the 
public has to review Environmental Impact Assessments to 60 days, given 
that the US federal standard is 90 days?
    Answer. We would like to clear up any confusion that might exist, 
especially since OPIC has taken a progressive position on environmental 
matters. OPIC is the first government-backed political risk insurer, 
bilateral or multilateral, to require public disclosure for EIAs. OPIC 
has actually increased the time period for public disclosure of 
Environmental Impact Assessments (EIAs) from a previous policy of 30 
days to 60 days.
    OPIC is subject to the EIA requirements of Section 117 of the 
Foreign Assistance Act and Executive Order 12114 and operates its 
programs in full compliance with the provisions of the legislation and 
Executive Order.
    Question. Since OPIC is a US Government agency which extends 
financial backing for these Investment Funds, why does it not employ 
the standard US federal practice to require advance disclosure of EIA?
    Answer. The capitalization of an Investment Fund per se does not 
have any environmental impacts. It is not until a Fund begins 
identifying investments that prospective Fund investments in 
environmentally sensitive projects require Fund Managers to submit EIAs 
to OPIC.
    OPIC-supported funds make equity investments in companies in 
emerging markets. These investments are subject to the same 
environmental rules as direct loans or insurance projects, and each 
proposed investment to be made by the fund must be approved by OPIC in 
advance. The fund proposing an investment must submit to OPIC an EIA on 
any project which has a certain level of environmental risk, and this 
is used by OPIC's compliance department as a basis for its 
determination that the investment is or is not acceptable.
    OPIC does post country and sector information on pending Investment 
Fund projects requiring an EIA on its Website. However, the identity of 
proposed investments is consider business confidential by the Funds and 
by OPIC. The disclosure to other potential investors would allow 
competing investors to know that the fund proposes to invest. Further, 
the timetable of investment usually is too short to allow for a 
disclosure period.
                        greenhouse gas emissions
    Question. Given that the Administration and Congress are seeking to 
reduce greenhouse gas emissions from developing countries, why is OPIC 
financing an ever increasing number of fossil fuel projects in these 
same countries?
    Answer. OPIC has supported a significant number of electric power 
projects during the last few years. These projects are designed to meet 
the increasing demand for electricity in developing and emerging 
markets. Helping these countries increase public access to electricity 
is consistent with OPIC's primary development mandate.
    A large majority of these projects use natural gas or hydro-power 
as their primary fuel source. Depending on the technology involved, 
natural gas emits between 30 and 60 percent fewer greenhouse gases 
(GHGs) than coal and oil-based fuels, and hydro produces no GHG 
emissions. Where coal or oil is involved, OPIC considers the project in 
the context of the country's overall energy supply and demand balance, 
along with other factors such as the combustion technology used in the 
project. In all current projects, OPIC is applying the Administration's 
draft Action Framework for Mitigating Greenhouse Gas Emissions in 
Developing Countries. OPIC would of course implement whatever more 
specific policy Congress and the Administration may agree on with 
respect GHG emissions in developing countries.
       extractive and infrastructure projects in primary forests
    Question. OPIC will not back extractive and infrastructure projects 
in primary tropical forests. While this is responsible policy that I 
commend, why does OPIC not extend it to other forest ecosystems, such 
as boreal forests of Russia?
    Answer. OPIC's decision to refrain from supporting extractive and 
infrastructure projects in primary tropical forests is motivated by 
three factors. These factors include: (1) the unsurpassed degree of 
biodiversity to be found in primary tropical forest ecosystems; (2) the 
rapid degradation and disappearance of such ecosystems due to 
population and commercial pressures in developing countries; and (3) 
consistency with the policies of multilateral institutions such as the 
World Bank.
    None of these factors apply to other forest ecosystems (such as 
Russian boreal forests) to the same extent as to tropical primary 
forests. The diversity and abundance of species is considerably less in 
boreal forests than in tropical forests. Primary boreal forest 
ecosystems remain vast and are not under population pressure. The 
Majority of the Russian land mass consists of such forests, much of 
which remains inaccessible to commercial harvesting. Finally, 
prohibitions on extractive and infrastructure projects in such forests 
are not in effect, nor are they being contemplated, in any multilateral 
institution with activity in these regions.

                Question for the Record by Mr. Kingston

                            nationalization
    Question. I have been approached by U.S. company representatives 
who are very concerned about potential nationalization of their 
investments in certain Asian countries as a result of the current 
financial crisis there. Because OPIC studies political risk very 
closely, I am interested in your assessments of the danger of U.S. 
capital investments in countries such as Indonesia for example being 
lost to nationalization. Are the risks in some areas becoming too great 
for even OPIC to insure against?
    Answer. In the wake of the Asian financial crisis, the risks facing 
U.S. investors have increased on several fronts. Various factors have 
contributed to this change, including economic decline throughout the 
region and the increased potential for political and social 
instability. Moreover, uncertain legal and regulatory frameworks have 
increased concerns about potential protection and remedies and 
heightened fears of government intervention. While outright 
nationalization remains unlikely given the Asian countries integration 
into the world economic system and their need for Western support, 
government actions to rescue the economy could have unintended adverse 
effects on some projects.
    Each project underwritten by OPIC is carefully reviewed and the 
risk attendant to that project is rigorously analyzed. In addition, 
throughout OPIC's history, careful portfolio management has been a 
hallmark of OPIC operations. OPIC protects its portfolio by maintaining 
a diversified balance of projects based on investments in various 
regions, countries and business sectors. Because of our 
diversification, problems that arise from time to time in specific 
regions where we do business do not threaten our overall portfolio or 
financial health. OPIC's combined Insurance and Finance current 
exposure in all of Asia is $1.8 billion, or roughly 19 percent of the 
total portfolio. In Indonesia, our combined current exposure is $475 
million, representing only 5 percent of our total portfolio. And even 
this amount overstates the actual OPIC risk since OPIC would only cover 
the actual investment made, which currently is substantially less than 
the $475 million.

                  Questions for the Record by Mr. Obey

                                 africa
    Question. Mr. Munoz, OPIC is assessing the possibility of new 
programs in several countries in Africa. How will the passage of the 
Africa Growth and Opportunity Act enhance OPIC's ability to operate in 
Africa.
    Answer. OPIC, as an instrument of U.S. foreign policy, looks to the 
priorities of the U.S. government in focusing its attention and 
efforts. With support from the Administration as well as broad support 
from Congress for promoting economic development of Sub-Saharan Africa, 
OPIC will launch its largest concentrated fund(s) yet. In addition, we 
maintain a portfolio of nearly $750 million in 15 different countries 
in the region. We have financed and insured everything from a small 
ecotourism project in Botswana to a telecommunications project in 
Tanzania. The Africa Growth and Opportunity Act calls on OPIC to 
``exercise the authorities it has to initiate 2 or more funds in 
support of projects in the countries in sub-Saharan Africa.'' 
Consistent with the intent of the legislation, we launched the $150 
million Modern Africa Growth and Investment Company fund last fall. In 
South Africa, on March 28, President Clinton announced OPIC's intent to 
solicit and review qualified applications for fund managers to fulfill 
the second half of the initiative called for in the African Growth and 
Opportunity Act. This initiative will likely yield an additional fund 
or funds for sub-Saharan Africa in the area of infrastructure.
    Question. Could you update the Committee on the status of the 
placement of investments from the New Africa Opportunity Fund ($120 
million from private and OPIC sources).
    Answer. The New Africa Opportunity Fund is a $120 million fund 
capitalized with private equity and OPIC-guaranteed debt that will 
invest primarily in Southern Africa focusing on South Africa, Zimbabwe, 
Namibia, Mauritius and Botswana. This fund has raised all its committed 
capital, and is investing. It has made two investments so far, totaling 
$19.5 million, both in South Africa companies. The fund has assembled a 
strong staff in Johannesburg, under the supervision of an Affiliate of 
the Sloan Financial Group of Durham, N.C.
    New Africa's portfolio include a $5 million investment in a 
Johannesburg-based company which assembles light commercial buses to 
provide more efficient and less costly transportation for thousands of 
people in South Africa, where more than 90 percent of the black 
population now uses taxis to commute to work.
    Question. Could you also update us on the status of raising private 
capital for the proposed $150 million Modern Africa Growth and 
Investment Fund.
    Answer. The Modern Africa Growth and Investment Fund was created in 
1997 and is eligible to invest in 29 sub-Saharan African countries, 
ranging from Senegal to Mozambique. This fund will mobilize $150 
million in private sector resources and OPIC support to invest in 
infrastructure and market development in Africa.
    The Fund will be managed by Modern Africa Fund Managers, L.L.C. of 
Washington, D.C. and Johannesburg, South Africa, a management group 
that has extensive experience in Africa's banking and investment 
markets. The Fund is expected to focus on deals in the natural 
resources, telecommunications and manufacturing sectors.
    The fund now has received commitment indications sufficient to 
anticipate that firm commitments will be signed within a few weeks, 
covering most of the $150 million. Once capitalized, the Fund plans to 
invest in companies that have proven track records and are in need of 
equity capital to expand, to regionalize their operations or to 
participate in privatization programs.
    Question. How is OPIC ensuring compliance with statutory policy 
criteria on environmental and worker rights with the individual 
investments of these funds in Africa and around the world.
    Answer. Each proposed investment of any OPIC-supported fund must be 
approved by OPIC for compliance with environmental and worker rights 
requirements before the investment can be made. The standards and 
personnel used in reviewing these investments are the same as those 
used for OPIC insurance and project finance projects. OPIC follows up 
with selected field investigations to confirm compliance with the terms 
of its consent.
               compliance with statutory policy criteria
    Question. How is OPIC ensuring compliance with statutory policy 
criteria on environmental and worker rights with the individual 
investments of these funds in Africa and around the world?
    Answer. OPIC monitors compliance with statutory policy criteria for 
individual fund investments through reporting requirements, site visits 
and third party audits for environmentally sensitive projects.
                                colombia
    Question. Last year during discussions of the decertification of 
Colombia for lack of cooperation in the war on drugs the State 
Department proposed that OPIC programs be initiated in that country. 
Can you comment on that proposal? Is it still being considered? How 
would OPIC monitor companies activities in Colombia to ensure that drug 
money was not involved in companies with OPIC insurance?
    Answer. On March 1, 1998, the President determined that resumption 
of assistance to Colombia is in the U.S. vital national interest, 
notwithstanding any shortcomings in Colombia's cooperation in the war 
on drugs. Therefore, the Congressional notification period having 
expired, OPIC is now again open to consideration of eligible projects 
in Colombia.
    The procedure that OPIC follows before deciding to support any 
project includes a review of the sponsors' business reputation, as well 
as their financial and technical capacity to complete the project. 
Also, OPIC obtains comments from the U.S. Embassy on each project 
before providing support. These measures provide reasonable assurance 
that OPIC will not find itself supporting a project in which drug money 
is known to be involved.
                harmonization of environmental standards
    Question. Your statement suggests that other OECD countries apply 
only limited standards and conditions to their bilateral investment 
insurance and finance organizations, and that OPIC is working to 
``harmonize environmental standards'' because our companies deserve ``a 
level playing field.'' Can you expand on these efforts? Does this mean 
US standards are being weakened to be more consistent with other 
countries? Which countries in particular have weaker standards?
    Answer. There is no intention of weakening OPIC standards as part 
of a process of harmonizing environmental standards among OECD 
bilateral investment insurance and finance organizations. Since very 
few of OPIC's counterpart bilateral agencies have any environmental 
standards and none that we are aware of perform systematic monitoring 
of the impacts of the projects they support, almost any effort to adopt 
and implement standards on the part of such counterparts would 
constitute progress towards harmonization. OPIC has begun to exchange 
information on environmental policy matters with its counterparts and 
is aware that the OECD has also focused attention recently on the 
environmental practices of its member countries.
        opic turn down of environmentally unacceptable projects
    Question. Your statement indicates that OPIC has turned down 
projects because they were determined to be environmentally 
unacceptable. Can you give us examples of such projects and some idea 
of how many were actually turned down?
    Answer. In the majority of cases, applications for projects 
determined by OPIC to be ineligible for OPIC assistance on 
environmental grounds are withdrawn by the sponsor prior to formal 
rejection by OPIC. Examples of projects recently rejected or otherwise 
discouraged by OPIC include: A mining project adjacent to a World 
Heritage Site; a mining project using submarine tailings disposal; 
factory fishing for over-harvested species; geothermal energy 
extraction adjacent to an internationally designated nature reserve; 
and oilfield development and pipeline construction in primary tropical 
rainforest.
    Since OPIC's environmental mandate was adopted by Congress in 1985, 
OPIC estimates that one or two projects a year have been formally 
rejected with many, many others being discouraged from applying for 
OPIC support or withdrawn by the sponsor after informal discussion of 
OPIC's environmental standards.

                 Questions for the Record by Mr. Torres

                                 mexico
    Question. What efforts are being made to work with the Mexican 
government to secure the necessary agreements for U.S. investors in 
that country to obtain OPIC political risk insurance?
    Answer. Mexico remains one of the most significant destinations for 
U.S. foreign direct investment where U.S. investors are unable to take 
advantage of OPIC political risk insurance and project financing. 
Apparently, even after conclusion of NAFTA, the subrogation provisions 
of the standard OPIC agreement are difficult for the Mexican side to 
accept from a constitutional and political perspective. Making OPIC 
programs available for suitable projects in Mexico remains an objective 
of OPIC Management, and OPIC has continued to hold discussions with 
counterpart agencies of the Mexican government to see if a mutually 
acceptable arrangement can be found under which OPIC could operate in 
Mexico.
                             small business
    Question. What new products and services is OPIC developing to meet 
the special requirements of small businesses?
    Answer. Led by a small working group drawn from each OPIC 
department, the Corporation has explored ways to build on our success 
with small business. We have investigated ways to streamline the 
application process, customize pricing and processes, and aggressively 
work to market opportunities for small business. We are very encouraged 
that these steps will yield continued increases in the area of small 
business. The Small Business Task Force will soon be making final 
recommendations to the Executive Staff based on their findings. I look 
forward to reporting to you when these findings are completed.
    Question. Can you give me a status report on the ``Small Business 
Fund'' managed by Allied Capital Corporation; its capitalization and 
what countries and projects it is investing in?
    Answer. OPIC has committed to loan up to $20 million to Allied 
Capital Corporation for investment in companies in emerging markets 
which are linked in some way to small businesses in the U.S. The Fund 
so far has made two investments, totaling approximately $10 million. 
One is a paging company in Brazil that purchases its equipment from a 
Chicago company; the other is a food products company in Hungary that 
is affiliated with a small U.S. company.

                 Questions For the Record by Ms. Kaptur

                               financing
    Question. Can you explain to the committee how OPIC's project 
financing program differs from programs offered by the Export-Import 
bank? Are these programs in any way duplicative or overlapping, and if 
so, why should we support such similar programs through two 
institutions?
    Answer. It is useful to first review the different mandates of each 
organization.
    OPIC is a U.S. Government corporation created under the Foreign 
Assistance Act of 1961, as amended, to facilitate U.S. private 
investment in developing countries and emerging market economies by 
offering political risk insurance, investment guaranties, and direct 
loans. Most frequently, OPIC has made its guaranties and loans 
available through project financings.
    OPIC is financially self-sustaining, and has reported a positive 
net income for every year of its operation.
    Ex-Im Bank is by definition an export-import credit agency (ECA), 
and its historic mission has been to facilitate export trade finance by 
providing export credits. In this regard, Ex-Im Bank is subject to the 
OECD guidelines with respect to its activities.
    OPIC is not an ECA, and is not subject to OECD (Organization for 
Economic Cooperation and Development) guidelines with respect to its 
activities. While factors such as the level of U.S. procurement, and 
net financial flows are carefully considered, and OPIC will not support 
any project which causes loss of U.S. jobs, OPIC financings are not 
limited solely to U.S. content. OPIC's statutory mandate includes the 
requirement that projects are supported which are responsive to the 
development needs of the host country.
    Project Financing describes the structure of a financing in which 
repayment of the loaned amount is limited to the cash flows and 
collateral of the project itself, with limited recourse to the sponsor. 
These financings tend to be relatively large, complicated, and unique. 
OPIC underwrites and accepts certain construction risks in projects 
which it supports, while Ex-Im generally does not. This difference may 
also lead to different informational and underwriting requirements for 
OPIC on such projects.
    OPIC has been providing project financing for U.S. investors since 
1971, and has a staff of 50 experienced project finance specialists, 
who work with an additional 23 in-house attorneys in connection with 
structuring, documenting, and monitoring these transactions.
    At OPIC, all elements of the application for financing are handled 
internally: this includes all discussions with the sponsor and with 
other parties related to the transaction, financial review of the 
application, financial modeling and analysis, structuring, negotiating, 
and documentation. Control of all aspects of the application is 
maintained within the agency. At Ex-Im, third party vendors are used 
for much of the financial analysis, structuring, and negotiation. OPIC 
has a legislative mandate to be self-sustaining. In practice, it is 
OPIC's policy to seek to do commercially reasonable transactions. OPIC 
does not provide concessional terms either on rate or credit.
    The agencies will differ in certain markets because of their 
different missions. OPIC and Ex-Im will not always be consistent in 
which markets they are open in: OPIC is currently closed in China by 
act of Congress, but open in Angola, where Ex-Im is closed. OPIC is not 
an export credit agency, and is not subject to OECD guidelines. OPIC's 
loans are not tied to U.S. exports, nor are they tied to Ex-Im Bank 
loans. At the same time, OPIC requires that a project be significantly 
owned by U.S. investors in order to qualify for OPIC support. While 
OPIC and Ex-Im utilize a similar lending technique, namely project 
finance, it does not follow that any project financing is an export 
credit as such credits are defined by the OECD guidelines.
    U.S. exporters and U.S. capital investors benefit greatly from the 
existence of both OPIC and Ex-Im.
                            investment funds
    Question. Your budget request describes OPIC's Investment Fund 
program as a public-private initiative utilizing OPIC loan guaranties 
to mobilize U.S. private equity investment. Each of these funds target 
a specific country, region, or industry. Can you explain further to the 
committee how these ``funds'' operate?
    Answer. The Investment Fund program is a public-private initiative 
utilizing OPIC loan guaranties to mobilize U.S. private equity 
investment in high priority developing markets. The OPIC-supported 
investment funds make equity investments in companies located in 
emerging markets, for the purpose of privatizing state-owned 
businesses, encouraging economic development, and supporting linkages 
with U.S. companies. Each investment fund targets a country, region, or 
industry and is managed by a private fund manager, and is capitalized 
with equity capital raised from private investors. OPIC makes loans or 
guaranties loans to these funds on a senior, secured basis, i.e. the 
interest and principal on the debt must be repaid before any money is 
returned to the equity investors, and all assets of the fund are 
pledged to OPIC as collateral for the loan. The availability of this 
OPIC debt enhances the potential investment return to the equity 
investors, which induces them to invest in the regions or sectors 
approved by OPIC for the fund's operations.
    As a whole, these funds have mobilized in excess of $1 billion in 
private equity capital worldwide. Moreover, the funds serve as the 
pioneering vehicle for responsible investment that is expected to have 
a substantial multiplier effect in these developing markets. OPIC has 
guaranteed loans of approximately $2 billion to these funds, on a 
senior, secured basis. In addition to monitoring each fund's financial 
performance, OPIC reviews every investment made by each fund to ensure 
compliance with OPIC's statutory and policy criteria, including the 
environmental impact, worker rights and U.S. economic effects of each 
investment.
    One recent area of focus of OPIC funds is in Africa, an 
Administration and Congressional priority. In 1996 OPIC supported 
creation of the New Africa Opportunity Fund, a $120 millionfund 
capitalized with private equity and OPIC-guaranteed debt that will 
invest primarily in Southern Africa focusing on South Africa, Zimbabwe, 
Namibia, Mauritius and Botswana. New Africa's portfolio include a $5 
million investment in a Johannesburg-based company which assembles 
light commercial buses to provide more efficient and less costly 
transportation for thousands of people in South Africa, where more than 
90 percent of the black population now uses taxis to commute to work.
    The OPIC supported Africa Growth Fund has invested in a soft drink 
bottling project in Ghana. This project also involved the building of 
new water pipelines that now bring clean water not only to the bottling 
facility located in a rural community 30-40 miles outside the capitol 
of Accra, but also to the growing number of new manufacturers and local 
residents. The Africa Growth Fund also has made a $1.5 million 
investment in GAPCO Uganda that provides gasoline sales and 
distribution services. This Fund also made a $542,869 investment in 
Wilken Afsat, a satellite network.
    Another OPIC supported fund, the Global Environmental Emerging 
Markets Fund, is supporting a series of water treatment projects 
associated with bottling plants throughout Africa, including one 
operation in South Africa. This investment will total up to $10 million 
in investments, which is expected to result in significant exports from 
the U.S. The fund has also invested in a project which joined forces 
with local Ugandan entrepreneurs who acquired privatized bottling 
plants to finance capital improvements and the purchase of water and 
wastewater treatment equipment.
    To further promote small business, OPIC has committed to loan up to 
$20 million to Allied Capital Corporation for investment in companies 
in emerging markets which are linked in some way to small businesses in 
the U.S. The Fund so far has made two investments, totaling 
approximately $10 million. One is a paging company in Brazil that 
purchases its equipment from a Chicago company; the other is a food 
products company in Hungary that is affiliated with a small U.S. 
company.
                             worker rights
    Question. OPIC takes some pride in its projects' compliance with 
environmental and worker rights. I understand that recently OPIC has 
changed its approach to apply these criteria not only to country 
eligibility but to specific OPIC projects as well. Can you tell us how 
this new approach is working, and can you describe to us any specific 
enforcement actions taken by OPIC in regard to worker rights compliance 
by particular projects?
    Answer. With respect to worker rights compliance of specific 
projects, OPIC supplements contract language mandated in its statute 
with contract language designed to address weaknesses in host country 
labor laws that are within the capability of the project sponsor to 
address. These typically include issues involving child labor, hours of 
work and occupational health and safety. Although this supplementary 
language is not mandated by OPIC's statute, OPIC has received excellent 
cooperation from project sponsors in incorporating such language into 
OPIC insurance contracts, loan agreements and approvals for Investment 
Fund projects. Based on our monitoring of such projects thus far OPIC 
has not had to resort to enforcement actions with respect to worker 
rights. OPIC has cancelled one insurance contract on environmental 
grounds.


[Pages 103 - 105--The official Committee record contains additional material here.]



                                         Wednesday, March 18, 1998.

                  AGENCY FOR INTERNATIONAL DEVELOPMENT

                                WITNESS

BRIAN ATWOOD, ADMINISTRATOR

                 Chairman Callahan's Opening Statement

    Mr. Callahan. Well, Brian, this is the fourth time you have 
been before our committee, and I have learned in the last four 
years that reading opening statements does not make a whole lot 
of sense to me. And, thus, I am going to forego the reading of 
my statement and suggest that you abbreviate yours.
    But this is the fourth trip. We have been very generous I 
think to your efforts for USAID, and we intend to be as 
generous as we can this year, but we are going to have extreme 
limitations.
    You have requested a pretty healthy increase--I think $900 
million. As best we can ascertain through the rumor mill, the 
602 allocations are going to be probably reduced from last 
year. We do not know that for sure, but that is the rumor I am 
getting. I think we are going to consider the IMF monies and 
all of that and have to rescind 1998 appropriations. But for 
1999, in order to comply with the budget resolution, we are 
going to have to experience some cuts, whether we like it or 
not.
    The President's budget, in defense of the administration, 
was balanced. However, he used a lot of tobacco smoke and 
mirrors to reach that balanced stage. This Congress, I do not 
think, is going to impose any new taxes. That trend is 
prevalent throughout the entire budget submission.
    I know in my Subcommittee on Transportation the only way we 
can get money for drug interdiction, according to the 
President's request, is to impose new fees, and we are not 
going to do that either.
    The bottom line is we are going to receive lower 602 
allocation and, thus, we are not going to be able to come up 
with the $900 million. We are going to have to do everything we 
can to maintain the status quo.
    We continue to be concerned about the computer problems, 
the new management system. There is no need for me to go in-
depth, again, with you. I went in-depth with you in a private 
meeting, and this committee does not want to be embarrassed by 
the management system failures, especially with the expenditure 
that has been made. So we are very concerned about that.
    We are pleased that you included the child survival account 
this year. That was very smart of you, Mr. Atwood, to recognize 
the importance of that, and I, personally, appreciate it. I am 
going to fulfill your request. In fact, in that particular 
area, we are going to give you more than you asked, in order 
that we can comply with your request, and that is to give the 
same treatment to Ms. Pelosi's concerns that I have about 
USAID's involvement in the HIV program.
    So we are going to treat you well in some respects and not 
give you everything you asked for in other respects.
    With that, I am going to submit a statement for the record, 
and then I invite you to address the committee.
    [The statement of Chairman Callahan follows:]


[Pages 109 - 110--The official Committee record contains additional material here.]



                     Mr. Atwood's Opening Statement

    Mr. Atwood. Thank you very, very much, Mr. Chairman. I will 
summarize my statement and also offer some personal 
observations to you.
    The first one I want to offer is that I want to thank you 
for your leadership on this committee. We have talked many 
times privately, including just recently, and I know that a few 
years ago you did not seek to be in this position, but it seems 
to me that that makes your achievements as chairman even more 
impressive, at least that is my observation.
    When the Foreign Operations Bill passed last year with 376 
votes, the highest number ever, I believe your colleagues gave 
you their highest compliment, Mr. Chairman. They gave you their 
trust.
    I want to thank you and your staff for the very 
professional manner in which you conduct your oversight of our 
programs. You challenge us to be better. You make us aware of 
the political issues that you face in the House of 
Representatives. You let us know when we are at risk and always 
your oversight respects the separation of powers. You have said 
many times to me, Mr. Chairman, that you do not want to run 
USAID and, frankly, having done it for a while, I do not blame 
you. [Laughter.]
    But I thank you for your support and for your leadership, 
and I will do that, personally, when Ms. Pelosi comes in later 
because I appreciated very much our long friendship there as 
well.
    But today, Mr. Chairman, I want to acknowledge the very 
special contribution that two members of the Minority of this 
committee have made over the years.
    This may be the last time that I appear before Mr. Yates 
and Mr. Torres, as they both announced their intention to 
retire from Congress.
    As my good friend, Esteban, is here, I would ask him to 
reconsider, but I am sure many have done that already. 
Congressman Torres and I served together in the Carter 
administration, when he was ambassador to UNESCO, and he was a 
fellow member of the board of the National Democratic Institute 
with me. So I know this man well, and I know that we are going 
to miss his strong advocacy of our programs here, and his 
strong advocacy of engagement for the United States in the 
international arena, his deep knowledge of international 
affairs, and some would have me say Latin America more than 
other regions. Obviously, he does know Latin America well, but 
he knows every region of the world.
    In the case of Congressman Yates, I think it is just as 
important, even though he is not here now, and I will say this 
later to him, to recognize that he has been a member of this 
committee for almost 50 years. It is interesting, in 
contrasting what we said the other day about your having no 
intention of serving on this committee, that he has been here 
for 50 years from the time that it was known as the Marshall 
Plan Subcommittee. I was not even aware of that until someone 
did a little bit of history, but that is a very glorious past. 
We all think the Marshall Plan was a big success.
    I had the privilege of working closely with Mr. Yates, 
especially during the Carter administration, and he has always, 
of course, been a strong advocate of American leadership 
abroad. I know that he will be missed here. He embodies a great 
deal of history.
    I see that Ms. Pelosi has come into the room, and I want to 
thank her, as well, for her leadership on the Democratic side. 
We have known each other long before she even became a member 
of Congress, but she is someone whom I admire for her political 
skills and for her knowledge of our programs, and I really 
appreciate very much her support.
    I want to wish Esteban Torres well and Sid Yates, as well.
    Mr. Chairman, the budget the President has submitted for 
Fiscal Year 1999 has this subcommittee's imprint. For the past 
two fiscal years, you have insisted on a special child survival 
and diseases account.
    The Executive Branch in the past had preferred to include 
child survival funding in its regular development assistance 
accounts, and so I say, Mr. Chairman, as you have already 
indicated, you have won. I would only say that anyone who can 
attract 376 votes on final passage deserves to get his way.
    The President's budget contains more for children than is 
in the child survival account. The development assistance 
account, for example, contains resources that address other 
underlying social and economic conditions that impact directly 
on children's lives.
    So we were looking at numbers here. I just want to make 
that point clear; that there are other aspects of this bill 
that also deal with children and their lives beyond what is in 
the child survival account.
    Mr. Chairman, this weekend I had an opportunity to read the 
draft peer review that has been done on the American foreign 
aid program conducted this year by the Development Assistance 
Committee of the OECD.
    The review this year was conducted by Denmark and Germany, 
two very strong members of the donor community. The thrust of 
the report is that the effort we have undertaken to become more 
results oriented, more defined by strategic goals, is 
influencing the entire donor community to adopt the same 
approach.
    I want to quote a few sentences from this draft report.

    Within the framework of a governmentwide campaign to 
improve public management, USAID has sought to be a leader in 
these areas, while simultaneously working toward best practices 
to improve the quality and impact of the programs themselves. A 
highly ambitious campaign for change has attempted to link 
reforms in USAID management with setting clearer goals for 
USAID, establishing stronger partnerships, building more 
developing country capacity, promoting attention to gender 
issues, and seeking better ways to help developing countries to 
enter the world economy through a range of policies alongside 
development assistance.

    Perhaps that is best demonstrated by the bill that was 
passed here in the House of Representatives last week on trade 
and investment in Africa. Clearly, that bill endorsed the 
concept that there should be a continuum; that, indeed, aid, if 
it is spent well, can produce trade and investment and that 
there is, in fact, a great deal to be done to produce that kind 
of result in Africa.
    In that sense, there is a very dramatic change in our 
approach. We see the end game of what we do as trade and 
investment that can sustain economic growth in these countries, 
and we see the end gain as producing both democracies and 
market economies.
    So there may have been debates over these issues over the 
years--there were--and they were mostly ideological, and they 
were mostly a reflection of the ideological debates that occur 
here in our country between liberals and conservatives.
    But what we advocate now is something I think is very much 
in the center of American political and economic thought. We 
believe governments should interfere in economies as little as 
possible. We believe that tax rates are, generally, to be 
lowered, but revenues are needed in order to provide social 
services to people, so that people can receive education and 
health care that would enable them to be productive members of 
the society.
    Perhaps I am on very dangerous ground in talking about 
these issues in a more domestic context, but, basically, our 
development plans nowadays reflect the notion that strong 
democracies, accountable government, systems that allow people 
to participate, and systems that allow transparency in the way 
economic transactions are undertaken are what we are striving 
for in our USAID program.
    If we can achieve that, then countries can join the global 
economy. They do not need us any longer.
    One of the things that we have said in our formal testimony 
here today is that by the end of 1999 we will have departed 
from 30 countries. I have some reservations about that, but, on 
the other hand, a lot of it is because we can stand back and 
say that countries have graduated from our program, that they 
do not need aid any longer.
    We have always said, I think, in the last 40 years of doing 
this business, that we want to work ourselves out of a job. 
Perhaps, for the first time in American history, we are 
basically saying we have done that, in some cases.
    In other cases, we are saying we are not going to work with 
governments that do not hold our views as to what development 
should be. We are not going to work with governments that say 
that people should not participate in the development process; 
governments that abuse human rights; governments that will not, 
themselves, care as much about development as we do; because we 
have wasted a lot of money in the past in doing that.
    I am going to be discussing, in early April, this draft 
assessment that we have received from the DAC with the members 
of the Development Assistance Committee. But what I am 
satisfied about most is that we have managed to maintain our 
leadership in the development community, influence the way they 
spend their money, even though our budget has been reduced.
    And we, of course, continue to receive criticism from these 
countries because, as a percentage of our GDP, we provide less 
foreign aid than any other country, but, despite the fact that 
I have to listen to this at every meeting, I always remind them 
that, in terms of our overall international commitments, that 
we provide a great deal on the military side that they do not 
provide.
    But I do not accept criticism easily in these meetings. I 
come back at them. But the fact of the matter is that, even 
despite that criticism, we have been a more innovative leader 
in the development community, and that is not an insignificant 
achievement.
    Today we are a largely reinvented agency. Our procedures 
have been refined to reflect results. We are more strategic in 
our thinking. We even developed a strategic plan long before it 
was required by the Government Performance and Results Act.
    We have re-engineered to create new partnerships with those 
with whom we work to establish strategic objective teams in our 
missions overseas and to encourage the real participation of 
those whom we are trying to help.
    The one area where we have fallen short, you have already 
mentioned, Mr. Chairman, is our own ambitious goal to develop a 
new information technology system that would support the other 
management changes.
    The problems we have had in developing the software for our 
new management system is certainly my biggest headache and I 
think yours as well.
    I believe we are now on the right track. We have received 
an independent validation and verification report from IBM 
Federal Systems and Coopers & Lybrand, a group that was 
recommended by GSA's Federal Systems Integration and Management 
Center. This group has examined our software in-depth and has 
given us excellent recommendations for fixing the system.
    With the perfect vision of hindsight, we were clearly too 
ambitious in what we attempted to do. We knew we had to move 
quickly because our old systems were producing inconsistent 
data, and we did not have the tools and skills to manage a very 
large and complex agency.
    Our decision to become operational in October 1996 before 
the system was fully tested was motivated by a desire to force 
the reconciliation of the old data that was coming to us from 
different and very inconsistent sources and an effort to sort 
of force this through.
    Had we gone in another direction in October 1996 and said 
we are going to do testing, and then we are going to do a 
contract so that we can fix whatever we find in the testing, it 
would have been two years before we could have designed the RFP 
necessary for the contract. We were confronted with that. We 
said let us take a chance. We took that chance. We, after seven 
months, closed down the overseas operations of this system 
because it was becoming too burdensome for our people.
    But we are now back on track and, frankly, we have not lost 
that much time, if you assume that we had to take two years. We have 
spent $76 million on developing a system. We have three of the modules, 
and we have another system--the financial system--that is working, but 
it is working poorly. There is a 27 percent error rate in the software, 
and we know we have to fix it and, indeed, this IBM group has 
recommended that we get an entirely new financial system from 
commercial sources.
    I would only say in that regard, Mr. Chairman, that I wish 
that those commercial systems had been available a few years 
ago when we were making these decisions. These are systems that 
are now approved by the Government testing system, so that they 
can be used in Federal Government agencies.
    We will probably move in the direction of using 
commercially available financial management software as we have 
discussed privately. Our No. 1 priority now is to identify and 
provide the critical functions our missions and Washington 
staff need to operate, including the correction of any 
remaining Year 2000 problems.
    The second priority is to have a functioning agencywide 
integrated accounting system that will enable USAID to produce 
auditable and timely financial statements. I want to reassure 
people on this panel that we can produce financial statements, 
that our AWACS system provides us with data that we then 
probably have to check. But it is clear that we can manually 
produce all of the statements. We can track U.S. taxpayers' 
money. It just takes us a lot longer to do it, but that is no 
different than it was in 1993, in that sense.
    In fact, there are some that say that the system we have 
now is better than the multitude of systems that we had then.
    So we have got problems. We have had them since 1980. We 
still have the same problems, but we are confident that we are 
on the right path to solving them.
    As you know, every corporation in America and every 
Government agency has the same problems with the Year 2000 
implementation, and we are just going to have to continue to 
work, according to the plan that has now been given us by the 
real experts, and to compensate for, frankly, a Government 
agency that has not, in the past, had the talent in-house to do 
this. We have had to contract out. We are going to do that, 
again, with a single prime contractor, but we now know enough 
about what we need to get the job done.
    I hate to spend as much time as I am on this, but what I 
want to emphasize is that we are not asking for any additional 
money. We had projected the overall cost of the system to be 
$109 million last year through the life cycle. We probably will 
have to spend over the next 2-3 years $10 to $20 million to fix 
the system.
    As we bring this system on-line, we will probably add 
functions, and that will cost us a little more money, but we 
are not going to be spending more money on information systems 
than we had in the past.
    In fact, in 1993, we were spending somewhere near $50 
million a year on our information technology systems, and 
supporting about 60 separate systems that did not talk to one 
another. What we are trying to do is to create a system that 
will give us what we all want which is a capacity to manage the 
agency and to know on a minute-by-minute basis where our 
pipelines are and what are in our pipelines.
    We are going to continue to consult with you on this. I 
have to, as I did privately with you, commend your staff. They 
have been the most interested--I am sure I will get into 
trouble for saying this--as to the details of this, more than 
any other staff of the four committees that undertake oversight 
over us. They have gotten into great detail on this, and, 
frankly, by asking questions they make us better in the 
process.
    So we do not want to throw the baby out with the bath 
water. We have made a great deal of progress. We were too 
ambitious. If responsibility needs to be taken for that, I will 
take full responsibility for that. But I am also aware that you 
can only do that once with respect to a particular problem. If 
I have to say the same thing a year from now, I am in real 
trouble. So I assure you, Mr. Chairman, that I will benefit 
from hindsight.
    Let me conclude, Mr. Chairman, by suggesting that the 
resources that we are requesting are really investments in our 
children's lives. The benefits we are deriving today, in terms 
of increased trade and the expansion of democracy, are the 
result of the investments that our predecessors made 30 years 
ago.
    What is significant is that we are able to expand markets, 
lower infant mortality, increase literacy, and feed the world, 
even though that 30-year period was characterized by a lot of 
experimentation in the development field. It was characterized 
by inadequate coordination among donors, by excessive 
paternalism toward recipient countries, by a highly stovepipe 
approach to development, and a constant Cold War ideological 
struggle that led many poor countries to adopt statist economic 
policies, nonmarket economic policies.
    Today, Mr. Chairman, I think all of the members of this 
committee can assure your colleagues that we have a strong 
consensus on our common goals among the donors. There is more 
effective coordination than ever before. There is more burden 
sharing than ever before. We only provide about 15 percent of 
all of the foreign aid in the world now. We are working with 
more governments that believe in democracy and market 
economics. There is more private capital flowing to augment the 
development process at the end of the continuum.
    There are more developing country governments that reject 
aid dependency, and you are going to hear a lot about that 
during the President's trip to Africa--people like President 
Museveni who say we do not want to be aid-dependent. We want 
trade and investment. They are not saying that they want to 
abandon aid now, but they are saying that they do not want to 
become aid dependent and that their policies will reflect that 
desire.
    Our watch word on this trip will be that aid creates trade 
and economic activity, and I believe that sincerely.
    All of that adds up to a better deal for the investment we 
make in foreign assistance, and the American taxpayer will 
benefit through growing exports, more protection from 
environmental and disease threats, more stability for global 
economic growth, and more democracies who resolve problems 
peacefully.
    In my opinion, Mr. Chairman, that is not a bad deal. That 
is not a bad record to take to the floor of the House of 
Representatives. Even though this is an election year, I feel 
confident that you can receive those same 376 votes this year.
    Thank you, Mr. Chairman.
    [The statement of Mr. Atwood follows:]



[Pages 117 - 136--The official Committee record contains additional material here.]



    Mr. Callahan. I probably will, but my problem is not on the 
floor. My problem is in the leadership meeting when they divide 
up the monies.
    Mr. Atwood. I understand.
    Mr. Callahan. I now recognize the gentlelady from 
California until 10:05 a.m. [Laughter.]

                     Ms. Pelosi's Opening Statement

    Ms. Pelosi. I will most certainly heed the gracious 
admonition of my chairman and join him in welcoming Mr. Atwood 
here. Please forgive me, I did not know what room we were in, 
Mr. Chairman.
    I will get right to the questions because I know the 
Chairman asked us to get a first round out of everyone very 
quickly.
    Mr. Atwood, suffice it to say that I admire the work that 
you are doing. The difference between USAID today and when you 
took over I think has quite dramatically improved. I commend 
you to the leadership in meeting that significant challenge.
    You spent a good deal of time in your statement on Africa 
and the President's trip, which certainly focuses the attention 
of the country on that continent. I understand that AID has 
recently undergone a reassessment of its strategies in Africa. 
These discussions have identified a series of needs that 
involve the strengthening of Africa's economic and cultural 
links to the world. Can you discuss this new assessment?
    Also, I will telescope this question. OPIC and Ex-Im have 
new credit initiatives to expand African programs. How is 
USAID's new development strategy integrated with those 
agencies? Why don't we start with that? Thank you.

                                 africa

    Mr. Atwood. Thank you, Ms. Pelosi.
    Again, I think that the philosophy reflected in the bill 
that was passed recently, the Ways and Means bill on trade and 
investment in Africa, encapsulates the lessons that we have 
learned.
    I mentioned before that we believe that there is a 
continuum here. We want these governments to continue with 
economic reform. Many of them have to shed many publicly run 
enterprises. So we have to be helpful to them in privatizing 
their economies, cutting back on the huge patronage that 
influences them, the huge government budgets that they have, 
and they need help in doing that, obviously.

                    sustainable economic development

    Ms. Pelosi. Excuse me, Mr. Administrator. AID's strategy 
identifies sustainable economic development growth with its 
keys to success as part of that strategy. I think you are 
beginning to touch on that.
    So if you could focus on that. Meanwhile, can you explain 
the concept of nonproject assistance and identify countries 
where this has worked successfully to achieve economic----
    Mr. Atwood. All right. I will do that. Nonproject 
assistance is when we provide aid in a particular sector to a 
country to encourage the country to reform its system. If it is 
the agriculture system or education, for example, we have had a 
lot of success in doing this.
    We will negotiate reforms in a sector, we will coordinate 
with other donors as to what they are providing in that sector; 
and we will provide the government with much needed revenue in 
order, for example, to pay school teachers or whatever for that 
particular sector.
    Under the Development Fund for Africa, the authorization 
for our work in Africa, which was passed some ten years ago, it 
was anticipated that about 20 percent of the resources we would 
use would be for this kind of nonproject sector assistance. 
Some call this cash transfers.
    It is controversial because of that, and we really push our 
people to justify these transfers, making sure that the 
transfers are taking place in a sector where we have a lot of 
project activity at the same time.
    So this has been very successful because, again, many of 
these governments do not have the revenue. They need the 
revenue. They are the poorest countries on the Earth. They need 
that revenue, and we work with them very closely as we develop 
that particular sector and we are able, in doing this, to 
attract other donors to come into that sector to work together 
with the government itself.
    It is always controversial because we do not really like 
transferring money unless there is a real people-level impact. 
We have actually reduced, from the 20 percent that Congress 
envisioned we would be using, down to less than 10 percent now 
of our overall resources for Africa are used for this purpose.
    But that works very well with the new philosophy that we 
should be working to give these African governments that do not 
want to be aid-dependent a little more say as to how they would 
spend the money themselves, as long as it is spent in that 
sector and to improve that particular sector.
    Ms. Pelosi. Thank you, Mr. Administrator. I believe my time 
has expired.
    Mr. Callahan. I might just follow-up with one comment on 
that, Brian, on the cash transfers to governments, and that is 
the use of Child Survival monies for that program does not sit 
well with this Chairman.
    Mr. Frelinghuysen?
    Mr. Frelinghuysen. Good morning. Thank you, Mr. Chairman.
    Mr. Administrator, I want to thank you for coming into my 
district last year, highlighting the need for more work and 
support for AID's private/public partnerships, particularly 
visiting a company that creates vaccine vial monitors with 
heat-sensitive tags that save us a lot of money because then 
those vaccines, we can determine whether, in fact, they are 
usable.
    You, in your testimony last year, I asked you to sort of 
use your bully pulpit. Indeed, you came to my state to do 
exactly that. But it does seem that despite your good 
intentions and that of Secretary Albright, there continues to 
be a real disconnect between many Americans and the need for 
foreign assistance, foreign aid. I think a lot of what we are 
suffering with in terms of the IMF debate and obviously some 
controversial rider issues there, there seems to be that 
continual disconnect.
    I know you are heading off to Africa with the President and 
I commend you for that. You have good reason to be 
enthusiastic. But on the domestic front, what are you doing to 
focus public attention around the country on the need for 
congressional support for being in the marketplace--fast track, 
IMF, these basic support programs?
    Mr. Atwood. Thank you, Mr. Frelinghuysen and thank you for 
inviting me to your district. I think that showed a great deal 
of courage on your part, to invite the head of the foreign aid 
program to your district.
    Mr. Frelinghuysen. No one held it against me. I think they 
appreciated what you are doing.

                     public support for foreign aid

    Mr. Atwood. I try to travel about once a month domestically 
to talk about our program and most recently I was in Houston 
and Austin, Texas and had the opportunity in Houston to meet, 
as I do everywhere I go, with the editorial staff of the 
newspaper there and also in Austin.
    I also met with President George Bush, who has always been 
a strong supporter of foreign aid, and I obviously asked him to 
be publicly supportive, as he has in the past, and wanted just 
simply to brief him on a recent trip that I had taken to 
Bosnia.
    There are two programs that we have financed with private 
money, for the most part. We have about one staff person that 
works on these programs. One is called Lessons Without Borders, 
which we have taken to a number of cities and rural areas, most 
recently to Knoxville, Tennessee, where a good friend of the 
Chairman, Congressman Duncan, hosted us, where we took people 
that we worked with overseas to talk to local people who are 
doing development work and shared information about what works.
    One is the microenterprise program which I am sure will 
come uplater in this hearing, an idea that came from 
Bangladesh. We have done so well to improve the immunization of 
children overseas we have come back to help improve the immunization 
rates in cities in the United States through this Lessons Without 
Borders program. We have done a whole variety of things through this 
program.
    One of the reasons I visited with President Bush was to 
talk to him about using his Points of Light Foundation to help 
us with a program we have also launched, called Operation Day's 
Work, wherein high school students will select a developing 
country, study it for a week and then will go out and work for 
a day in their local community and raise money to invest in a 
particular project--usually it is an education project--in a 
country overseas.
    This is an idea that worked very well in Norway and in 
Denmark and some of the other Scandinavian countries where they 
now have 80 percent plus support for foreign aid as a result of 
about 30 years of investment in this program. Every year at the 
same time high school students in Norway are going through this 
program and trying to raise money for poor people in another 
part of the world.
    So that is, I think, something that we hope will catch on. 
We have announced it here. Actually, the Norwegian government 
gave us $20,000 so that we could work on this project and we 
will be seeking private funding support.
    So we are excited about that. We are going to do it next 
spring in at least five different cities around the country. 
President Bush was very interested in it, as was Colin Powell 
and a number of others who run organizations that encourage 
volunteerism.
    So those are some of the things that we are trying to do.
    Mr. Frelinghuysen. Thank you.
    Mr. Callahan. The gentlelady from New York is recognized 
for five minutes.
    Mrs. Lowey. Thank you, Mr. Chairman.
    And I want to thank you, Administrator Atwood, for your 
important leadership with USAID. I just want to express to my 
empathy, and I share your frustration and I feel very sad that 
you have to spend so much time on a computer program.
    Ms. Pelosi and I, Mr. Chairman, are on the Labor-HHS 
Committee and in every department they have the same thing.
    I was involved in some oversight of the air traffic 
controller issue in New York where I won't even mention the 
name of the contractor. They had spent $3.6 billion and the 
price has doubled to $7.4 billion--is that double?--something 
like that, $7.4 billion, and then they had to let a new 
contract.
    So I really believe that the computer problems in this 
government are just overwhelming. And somehow people other than 
yourself that should be focussing on our programs that are so 
critical can straighten this out. There are programs in every 
department that just don't talk to each other.
    So I commend you on your focus on this and I share your 
frustration and I hope, with your leadership, it can get 
resolved with a consultant out there who knows what they are 
doing. This is the problem we have been seeing everywhere in 
government and you should be able to focus on the substance and 
not on the computers.
    But I thank you because I just think the work you are doing 
is so very vital. What it is doing is really giving people in 
their own country a sense of responsibility and helping them be 
part of a democracy that we hope will share our values. So I 
want to thank you for that.

                          microcredit programs

    Quickly, because the Chairman is being tough on time this 
morning, I want to commend you at the beginning for being a 
very strong supporter of microcredit. As you know, many of us 
feel this is a very important program. Low interest loans to 
millions of low income entrepreneurs around the world would be 
a major step toward the eradication of poverty. And when you 
think that these loans are under $300, they are paid back and, 
in many cases, women have an opportunity to stand tall and feed 
their families and play an important role of leadership in 
their community.
    Of course, I believe we can do more. The FY98 foreign 
operations bill allocated $135 million for microcredit 
programs, including language indicating that half of that total 
should go to poverty lending programs providing loans of $300 
or less. Could you tell me if you plan to spend that?
    And I am also very interested in the coordination with the 
World Bank. Again when many of us met with Jim Wolfenson he had 
expressed his frustration that he couldn't get enough money out 
there, that there was more money to get out there. And I would 
be interested to know to what extent you are working with the 
World Bank, the NGO community and others to make new inroads in 
micro lending around the world.
    So first, are you going to spend what has been 
appropriated? What more are you doing? And what kind of 
coordination is in place?
    Mr. Atwood. Thank you. Well, it is an extremely important 
program. As I mentioned before, this is an idea that we got 
from Bangladesh and the Grameen Bank. We are actually applying 
it here in our own country now and to good effect in dealing 
with areas where unemployment we thought was chronic, but this 
is a way of providing opportunity to people who haven't had it.
    I want to make it very clear that while we have proposed 
the $135 million level, that this is not a ceiling and we would 
hope to exceed this amount. Last year we found that after a 
final look at what we did in fiscal '97 that we spent almost 
$161 million on microenterprise, microcredit programs of 
various types. That number includes resources that we spend 
under our Title II P.L. 480 program for development aid that we 
can't anticipate in the budget itself at the beginning of the 
year.
    So we think that perhaps we will be spending some $30 
million on microcredit programs in that, as well, but that is 
the kind of program that responds to proposals that are made 
through the year.
    We have increased the number of countries in which we are 
applying microcredit programs by 30 percent, so we really feel 
as though we have mainstreamed this. Our missions now are 
looking for opportunities.
    But I have to express the same concern that Jim Wolfenson 
had about absorptive capacity here. We don't clearly want to 
push money out the door to organizations that cannot handle it 
well because there are a lot of very traditional bankers that 
would like to discredit these programs if they are not run 
properly.
    We all brag about the fact that there is a 98 percent 
return on the loans. We want to maintain that level of return. 
And when we put money into these programs we are creating 
capital through the interest that is earned. Take, for example, 
Banco Sol in Bolivia. We started that program 10 years ago with 
a $4 million contribution. Today they have $60 million in 
capital available for poverty lending.
    Now, that is the same story in a number of other countries. 
I haven't studied this--I can get more information if you wish. 
In Bolivia itself my imagination tells me that there would not 
be a lot of other opportunities to put more money into small 
businesses in Bolivia.
    So as we succeed, it is much more difficult to find 
opportunities in some of these countries. That is not to say 
that we have in any way reached the maximum. We have a long way 
to go, especially if we are going to meet the commitments that 
were made at the Microcredit Summit that was held last year.
    Mr. Callahan. The gentleman from Virginia is recognized for 
five minutes.
    Mr. Wolf. Thank you, Mr. Chairman.
    Mr. Atwood, I welcome you to the committee and I appreciate 
the good job that you do. I would say more but since we are on 
a five-minute clock, I don't want to congratulate you too much.
    Mr. Atwood. I will try to keep my answers brief, Mr. Wolf.

                           operation lifeline

    Mr. Wolf. Yes, if you would keep them brief.
    Sudan, the development assistance, how successful has that 
been, Operation Lifeline? Is it being manipulated by the 
Sudanese government and have you made any special efforts 
particularly with the increased refugees and the bombing that 
took place last week, two weeks ago in Yei? Could you bring us 
up to speed on that?
    Mr. Atwood. Yes, Mr. Wolf. The development aspect of this, 
we are being very cautious about. The idea here is to use 
approximately $3 million.
    Mr. Wolf. $3 million?
    Mr. Atwood. $1 to $3 million to improve the capacity of 
those groups who are in opposition-held areas to govern their 
own areas. This situation has gone on for so long that we have 
to understand that the humanitarian problems are going to be 
even greater if the leaders of these groups are ignorant of the 
needs of their own people.
    So capacity-building is what we are attempting to do. We 
may well see a resolution of this, a victory by one side or the 
other, hopefully in the near future, but in that case this 
capacity-building training will be useful if these people 
actually take over the government one day--we will have to 
see--or if they receive autonomy, which is another possibility, 
in a peace agreement.
    So we think it is important to do this. We haven't yet 
started. We have been studying how to do it but we want to be 
cautious about how we proceed.
    The Operation Lifeline continues to be successful. I can't 
give you the information about what happened last week yet to 
know whether or not this has had an impact on our ability to 
deliver humanitarian assistance, but I will provide that for 
you for the record. That is just something that has come up 
more recently. But it is a good program and it has saved a lot 
of lives over the years.
    [The information follows:]
                      Government of Sudan Bombing
    On March 5, a Government of Sudan (GOS) plane dropped 13 bombs on a 
hospital in Yei, of which five hit the hospital directly, destroying 
the operating theater and an evacuation bunker in the hospital grounds. 
Fifteen people working in the hospital were killed and another 40 were 
seriously injured. The 100-bed hospital, run by Norwegian People's Aid 
(NPA), treats civilians, Sudan People's Liberation Army (SPLA) 
soldiers, and GOS prisoners of war. NPA was renovating the hospital 
with a grant of over $100,000 from USAID's Office of Foreign Disaster 
Assistance prior to the attack. Services at the hospital were brought 
to a standstill by the air raid. GOS planes have carried out around 12 
bombing raids on Yei based in Juba since the SPLA captured the town in 
March of 1997. Five people, including a nurse, were killed during the 
bombing.

                                 Sudan

    Mr. Wolf. On the issue of Sudan, I appreciate the sanctions 
the Administration put on Sudan. I now understand there are 
major efforts by business interests to weaken those sanctions. 
Of course, these business interests have political action 
committees which have an inordinate impact up here on Capitol 
Hill and the poor people of Sudan, many of whom are being 
enslaved, many of whom are Christians who are being persecuted 
for their faith, really don't have any representation.
    Are you being asked by the Administration or do you agree 
that we should not have any waiver of the sanctions that have 
been put on Sudan, particularly with regard to gum and those 
other extracts?
    Mr. Atwood. This is a matter that may be being considered 
and obviously a decision that would be taken above my pay 
grade, but I personally feel very strongly that these sanctions 
are appropriate and that the Sudanese government sponsors 
terrorism and therefore should suffer the consequences.
    Mr. Wolf. I appreciate that and I hope you will let 
Secretary Albright know.

                               East Timor

    East Timor, are you helping a little bit more there with 
regard to some AID money? Could you give us a sentence or two 
and then, for the record, supply what you are doing out there?
    Mr. Atwood. Yes, I will do that. I visited East Timor about 
a year ago and we have some very successful programs, one that 
I am very proud of that I talk about a lot.
    The military in East Timor, which was seen as the occupying 
force----
    Mr. Wolf. Still are, I think, seen by the East Timorese.
    Mr. Atwood. They had managed to get themselves into the 
coffee business, Mr. Wolf, and I found that to be fascinating. 
They were making a lot of money off of the coffee business and 
we managed to get the government in Jakarta to agree that we 
would be able to open a coffee coop there.
    Mr. Wolf. I visited the coffee co-op. Do you have other 
things going on? There is the Salesian mission there, the 
school.
    Mr. Atwood. There is the Salesian mission. We are 
attempting to help educate children. There is one very 
important program there to help make people aware of their 
rights and to give them legal assistance in dealing with the 
government.
    Mr. Wolf. Could you just summarize that and give us maybe a 
letter for the record, for the Chairman, and then something 
that I could see?
    [The information follows:]


[Pages 144 - 146--The official Committee record contains additional material here.]



    Mr. Atwood. I would be happy to.

                            tibetan refugees

    Mr. Wolf. One last question. Is there any need to put a 
little more money in to help the Tibetan refugees who are 
leaving at an increasing number from Tibet coming into Nepal 
and coming into India? How much do you give for that now? And 
do you think that should be increased a little bit?
    Mr. Callahan. Thirty seconds.
    Mr. Atwood. That is handled by the Refugee Office at the 
State Department but I will get you an answer for the record. 
That is not in my purview but I will be happy to.
    [The information follows:]
                     Assistance to Tibetan Refugees
    The State Department's Bureau for Population, Refugees and 
Migration reports that, although the numbers have not increased, 
approximately 3,000-3,500 refugees cross the border from Tibet to Nepal 
every year. The State Department is considering increasing its funding 
based on a request from the Tibet Fund. The increase being considered 
is from $1.1 million ($900,000 to the Tibet Fund, $200,000 to the 
UNHCR) in FY 97 to $1.8 million in FY 98. A decision on the increase 
will be made by the State Department before the end of May, 1998.

    Mr. Wolf. Thank you very much.
    Mr. Callahan. Mr. Torres.
    Mr. Torres. Thank you, Mr. Chairman.

                    latin america and the caribbean

    Thank you, Mr. Administrator, for your very kind comments 
about me and Mr. Yates. For me, too, it has been very 
gratifying working with you over the years and certainly I want 
to commend you if we are passing out kudos here this morning, 
commend you for the strong leadership that you have shown 
during your tenure at USAID. You have done really fine work and 
I am very supportive of your programs, especially investment in 
the area of microcredit. As my colleague, Mrs. Lowey, has 
indicated, many of us have a special interest in that area.
    I think there is widespread support in the U.S. Congress 
for microcredit because of its effectiveness and the cost 
efficiency in giving the poorest people the means to help 
themselves out of poverty. Obviously your agency has done 
tremendous work in that.
    Let me shift quickly to Latin America and other areas that 
I have a great interest in. The President has sent a clear 
signal about the importance of Latin America through his two 
trips last year and, of course, his forthcoming one next month. 
This committee, under Chairman Callahan's leadership on the 
issue, has also sent a very clear signal about the importance 
of Latin America, as indicated in our bill last year.
    I, for one, welcome the renewed attention to developments 
in this hemisphere and believe that it must be matched by the 
commitment of resources sufficient to the critical U.S. 
interests that are involved.
    The decline in development assistance to Latin America and 
to the Caribbean has been far too dramatic and the 
Administration should really take steps to reverse this trend. 
Latin America and the Caribbean was the only region of the 
world that was not slated for an increase in development 
assistance in the President's request last year.
    Mr. Atwood, I would ask you what are AID's priorities for 
the region this year and where do we stand with the resource 
demands for these programs?
    Mr. Atwood. Mr. Torres, it is obviously an important region 
and one that has generally benefitted greatly from investments 
in the past. There is a great deal more trade, a great deal 
more investment, but that doesn't mean that the development 
challenge is over. We still have over 40 percent of the people 
of Latin America living in poverty, according to the 
statistics, and this is a serious challenge.
    We have asked for a slight increase in assistance to Latin 
America under the Development Assistance account of, I believe, 
a $4 million increase, but we are going to generally be looking 
at reprogramming money to deal with problems of infectious 
diseases, in particular cholera, malaria, dengue fever, chagas 
and measles. We are going to be dedicating more money to the 
health sectors of these countries.
    We hope to provide resources under the development credit 
authority to improve and strengthen U.S. commercial 
partnerships, to improve water and environmental quality.
    There is a list of things that I will be able to provide 
you for the record on this question, Mr. Torres, but we believe 
that a number of the issues that will be coming up at the 
Summit of the Americas will deal with development issues. The 
agenda for the leaders of Latin America is a development 
agenda. It involves education; it deals with poverty 
eradication. They know that unless they can stabilize these 
countries, unless they can deal with poverty, they will not be 
able to stabilize these countries and we will not receive the 
benefits that we are receiving now.
    Current trade--we are exporting about $125 billion of 
American products to Latin America. In 1983 that was $25 
billion. So you see that by the year 2005 we will trade more 
with Latin America than with all of the rest of the regions of 
the world combined if everything continues to go positively, 
but we need to, I think, continue to invest in stability, in 
peace, in democracy and open market systems in Latin America.
    Mr. Torres. Thank you. Thank you, sir.

                                 haiti

    Mr. Callahan. I just might remind the administrator that 
Latin America is not defined only as Haiti, that there are 
other countries in Latin and South America and the Caribbean 
other than Haiti and the only request that I can see is a $70 
million increase for Haiti. I hate to put a cap on the amount 
of money you are going to spend in Haiti but we don't have the 
resources to provide that type of increase for Haiti, where we 
are making zero progress and, at the same time, have so many 
countries, as Esteban has indicated, that have such great 
needs.
    Mr. Knollenberg.
    Mr. Atwood. Mr. Chairman, sometime later in the hearing may 
I have an opportunity to respond to that? I think I really need 
to make a case for Haiti here. Thank you.
    Mr. Knollenberg. Mr. Chairman, thank you very much. And 
Administrator Atwood, welcome.
    Mr. Atwood. Thank you, Mr. Knollenberg.

                              kyoto accord

    Mr. Knollenberg. I have a concern about one item that I see 
relates to climate control and Kyoto, the emissions standards 
which, in fact, impact the U.S. most greatly of all of the 
nations. In fact, we have to, as you well know, get 7 percent 
below 1990 levels, which means that is a huge step. No other 
country, including 80 percent of the world, has anything like 
this. The 80% have nothing to do.
    I noticed that AID has stated that it will devote at least 
$150 million in noncredit assistance per year. It says ``at 
least,'' which means it could be more. And they are going to do 
this for at least five years to climate-related programs. I 
presume that would be--it emphasizes energy and land use 
sectors. It could be irrigation. I don't know what it is for 
and you can respond to that.
    But having been an attendee at that conference in Kyoto in 
December, along with 13 others, I find it, number one, a huge 
burden on the U.S. to be faced with a 7 percent reduction from 
1990; secondly, to have the developing nations be exempt or 
given a free ride. And now I notice that AID is involved in 
spending money for what presumably would be climate-friendly 
development activities, which is an additional burden on the 
U.S., this time in the form of foreign aid.
    You stated at least $150 million would be devoted to these 
programs this year. ``At least'' bothers me because is it going 
to be more? And, if so, how much more? And where is this money 
coming from? What other accounts, what other reprogramming 
would have to go on to find this amount of money to presumably 
reduce emissions around the globe? I don't know what specific 
countries might be involved in this. You might comment about 
that, as well.
    But it seems to me that these efforts could be viewed as a 
way to implement the Kyoto Accord. They are not certainly done 
with Senate approval and no treaty has been ratified, so I 
would like to have your comments on those questions.
    Mr. Atwood. Thank you, Mr. Knollenberg. I think I can avoid 
getting into the debate over the Kyoto Accord in answering your 
question because whether or not you agree that that is a good 
thing to do on the international scene, one of the criticisms 
is that the developing countries did not agree in Kyoto to the 
same kind of regime that we have agreed to.

                         global climate change

    What we are attempting to do with the developing countries 
is to help them maintain the same level of economic growth, 
which will obviously lead to a good deal more of American 
exports in the global economy, but to do it more efficiently 
and to do it in a way that doesn't pollute the atmosphere any 
more than they have to.
    A lot of what we do in the global climate change area is 
energy efficiency--power plants that have the most modern 
devices. We have one program where we have utilities from the 
United States who partner with utilities in other countries to 
teach them how to more efficiently produce energy.
    We obviously do a lot of work in the area of protecting 
forests, which absorb a lot of the greenhouse gases, 
CO2 in particular, which benefits everybody, 
including Americans. And all of that is work that we have done 
under our environmental section of our budget for the last 
several years. We are not increasing, in other words, at all 
the amount----
    Mr. Knollenberg. So you are maintaining the same programs 
that you have had in place?
    Mr. Atwood. That is right.
    Mr. Knollenberg. This is nothing new?
    Mr. Atwood. That is right.
    Mr. Knollenberg. Is at least $150 million new? Is the 
amount of money new?
    Mr. Atwood. No, it is not new. It is what we have been 
spending for the last three or four years on these kinds of 
programs. And the benefits may not--we perhaps tied them more 
to an effort to try to gain the developing world's compliance 
with an international regime on climate change. There is no 
question that we have done that in identifying these programs 
in that way, but it is not new from what we have done before 
because it is just generally a good thing to do.
    Mr. Knollenberg. There is a certain sum of money, a global 
pot, that comes obviously with the foreign aid bill. Do you see 
any specific monies being taken from other areas? Has it been 
taken from other areas or has it always been tied up with 
specifically the environmental account?
    Mr. Atwood. It has always been specifically tied into the 
environmental activities, which do two things: global climate 
change-related work and biodiversity, protecting biodiversity. 
Those two things will not change. We don't need to change our 
budget; nor do we need to take it from other parts of the 
budget.
    Mr. Knollenberg. I believe my time has expired.
    Mr. Callahan. Mr. Kingston is recognized.
    Mr. Kingston. Thank you, Mr. Chairman.
    Mr. Atwood, you are familiar with the results, correct?
    Mr. Atwood. Yes, I hope so.
    Mr. Kingston. What were your results scores, your 
percentages?
    Mr. Atwood. Results scores? It depends on the area that you 
are talking about.

                              results act

    Mr. Kingston. Why don't you tell us as many as you know.
    Mr. Atwood. What we are attempting to do, of course, is in 
each of the areas that we have as strategic objectives--let's 
say it is in our family planning programs--we have very 
specific indicators as to whether or not we are succeeding. For 
example, we can tell you per country, if you wish. In the 
country of Kenya, where the fertility rates five years ago for 
women were 5.7 children per woman, we have reduced those 
fertility rates down to below 3 now in Kenya, a very dramatic 
example of results from our programs.
    We could do the same thing in other areas. If you were to 
take an environmental area where our main concern was 
protecting rain forests, we would look at the amount of rain 
forest in a particular country that was protected by our 
programs. That would be a particular result and an indicator 
that we would use for that.
    Mr. Kingston. What I really meant, and I appreciate that 
answer because I am glad that you are looking at those, and 
that is an internal thing, but the Results Act--
    Mr. Atwood. The Government Performance and Results Act, 
yes.
    Mr. Kingston. Do you have a performance review under that?
    Mr. Atwood. Yes, we have an annual review of our programs. 
We call that an R4 process where we look at results that have 
been achieved and, of course, attempt to relate the budget to 
the programs that are producing the best results.
    Mr. Kingston. And where were the results of your reviews?
    Mr. Atwood. What I could do for you for the record would be 
to give you results from a particular R4 review and tell you 
exactly in that case. I don't keep all of these in my head, 
unfortunately.
    [The information follows:]

    The attached results information has been extracted from the FY 
1999 Results Review and Resource Request (R4) for USAID/Poland.


[Pages 152 - 205--The official Committee record contains additional material here.]



    Mr. Kingston. That would be good because, as you probably 
know, many of the Results Act's indicators that came in were 
spotty, at best. And one of the things that has been 
disappointing to me, as an appropriator, is that in the last 
year or so we kind of moved away from really focussing on the 
best utilization of taxpayer monies and so forth.
    I am glad to see that, for example, you all are only asking 
for a modest increase, but it is an increase and we are still 
$5.4 trillion in debt, which we, in Washington, seem to 
constantly ignore and forget.
    So I think it is important for us to really get back to the 
basics. And I know that a lot of the agencies and bureaucracies 
do not like the Results Act, do not like the fact that last 
week we took another swing at it in terms of legislation, but 
it is something that businesses have to do every year and we 
are spending money that is not our own money and we have to be 
very careful and mindful of it.
    Mr. Atwood. Absolutely.
    Mr. Kingston. So what I will do is submit some questions 
for the record on that and would urge you to follow up on them 
and make sure that we are moving in the right direction.
    You are going to Africa next week, or tomorrow, is it?
    Mr. Atwood. I am going on Sunday, Mr. Kingston.
    Mr. Kingston. You have mentioned that in a couple of places 
in your testimony. What are your prime goals in terms of 
African trade and your trip in general? Two or three points.

                                 africa

    Mr. Atwood. I think what the President's trip is designed 
to do is to show the American people that there is more to 
Africa than just crises, that there are many governments there 
that are doing extraordinarily well in terms of achieving 
democracy and market economies and the countries that he is 
visiting underscore that point in particular, that if we 
provide the right kind of assistance, we can encourage these 
countries to trade and invest and sustain economic growth 
without our development assistance over the long run but that 
they need it now. And that aid can create trade, and these 
countries can enter the global economy, and we can benefit from 
it, as well.
    Mr. Kingston. Now, I cannot remember, and if you don't know 
the answer yourself or don't want to discuss it, there is no 
problem--did the Administration have a position on the bill 
last week about African trade?
    Mr. Atwood. Yes, sir. We supported that bill.
    Mr. Kingston. You supported it. And do you anticipate it 
being passed as is in the Senate?
    Mr. Atwood. We certainly hope so, Mr. Kingston. I 
understand that it is not likely that it will pass the Senate 
before the President leaves on Sunday because of the schedule 
over there, but I think the prospects are good that it will 
pass.
    Mr. Kingston. And it is complementing what you are doing, 
then.
    Mr. Atwood. It very much complements what we are doing. It 
provides an incentive to African countries to continue 
reforming their economies and their political systems so that 
they will then have more access to the American markets in 
certain areas.
    Mr. Kingston. Thank you, Mr. Atwood.
    Thank you, Mr. Chairman.
    Mr. Callahan. I will just remind you, Mr. Administrator, 
while you are flying to Africa with the President you might 
remind him that this committee does not consider a toast an 
obligation of this country. In the past, not only with 
President Clinton but other presidents, including first ladies, 
have gone to these foreign countries and obligated the United 
States for huge amounts of money.
    So whatever the President wants to obligate, tell him to 
take it out of your '98 appropriations level if, indeed, it is 
going to come from your agency. Do not obligate this committee 
to fulfill a promise made by toasting a leader of any country.
    Mr. Packard. Thank you, Mr. Chairman. I apologize for not 
being able to be here for your testimony. It is often that we 
have other committee assignments and that makes it difficult 
sometimes.

                                ukraine

    On Monday the IMF suspended its $542 million loan agreement 
with the Ukraine. Then just yesterday the World Bank suspended 
$600 million in loans to the Ukraine. This has been reported 
that the reason was their failure to meet the conditions and 
their lack of economic reforms.
    Could you address those issues briefly for the committee?
    Mr. Atwood. Yes, Mr. Packard, and thank you for asking the 
question. We have a situation in Ukraine which is probably the 
case in a lot of new democracies where we have an executive we 
have worked with, President Kuchma, who is very much dedicated 
to a reform process and we have, in the case of the parliament, 
the congress there called the Duma, a lot of resistance to 
economic reform and change. And we are trying, through our own 
aid program, to influence the process by working with 
nongovernmental groups, if necessary, or working with the 
government when we can, such as in the effort to privatize the 
economy, to influence them by providing information as to why 
this is good for the Ukraine, to engage with the Ukraine to try 
to change the circumstances that caused the IMF to make the 
decision that it made.
    We are also, because of congressional constraints, going to 
have to make a decision by April 30 as to whether or not 
Ukraine is complying with the requirement that it solve 
disputes with American companies and the like. Otherwise they 
will suffer a cut of one-half in the aid program, and we are 
watching that very closely and will make that decision on that 
date.
    Mr. Packard. The Secretary of State just returned from 
there or just recently went to the Ukraine and that was one of 
her specific items of agenda, the corruption and the conditions 
on the funding that was to pass through and withholding part of 
it.
    Did she give a report to you or are you aware of what the 
outcome of her visit was?
    Mr. Atwood. I understand that she has testified up here on 
it, that it was a mixed result. She clearly made her views 
known and reminded people that she has to make a decision by 
April 30.
    At this juncture I don't believe that all of the changes 
have been made and I think she has also said that publicly. But 
we are hopeful that we will see some change before April 30.
    Mr. Packard. We know of no better way to put pressure on 
the Ukraine to make these economic reforms and, of course, to 
clear up the corruption than to tie it to the assistance that 
they receive. That country has received more assistance than 
any other country, other than the Middle East countries, in the 
world. And I think that the effort that we are making to force 
those changes or to certainly give strong encouragement by 
economic withholding of funds is the best approach.
    Are you in agreement that that is probably the best way to 
deal with them or there is a better way?
    Mr. Atwood. Well, Mr. Packard, I am glad you asked the 
question because this isn't just a transfer of money to the 
Ukraine. What we are attempting to do is to help them create 
economic systems that would make corruption much more 
difficult.
    So to the extent that we have cooperation to do that, and 
we do from the executive branch if not from the parliament, 
then I think that engagement is a better way to deal with the 
corruption problem over time. But frankly, we have our laws and 
we will follow them and, if necessary, we will cut off 
assistance. I hope that it will not be in areas where we are 
actively working to get them to change their system.
    The biggest advantage to those who are corrupt in Ukraine 
is the activities that occur in the so-called informal economy, 
under the table. And what we want to do is to make those 
economic systems so open and transparent that they will not 
have that advantage, and they know that. So some of the most 
corrupt individuals in all of the Ukraine may hope that some of 
those programs that we have under way would be cut.
    Mr. Packard. Thank you, Mr. Chairman.

                    cash grants to african countries

    Mr. Callahan. Just briefly, before we go to the second 
round, Mr. Administrator, two or three things. One, the cash 
grants to African countries. We touched on that but I might 
forewarn you that if we see a cash grant to a foreign 
government, this has not worked in the past and I don't know 
why we think it will work this year or any other year. We are 
going to look at that very carefully, to the extent of possibly 
placing a hold until we can further review the transfer because 
that is not the intent of the USAID program, to give cash 
grants to governments. And I really don't think we ought to 
move back in that direction again. Maybe you should leave that 
type of activity to the Treasury Department; let them transfer 
cash to any government, whether it be in Africa or anywhere 
else.

                                 haiti

    The Haiti situation, once again, Brian, we do not want to 
run your agency. We appreciate your professionalism and that of 
your staff, but we are not going to give a $70 million increase 
to Haiti unless you can find room to increase percentage-wise 
that amount of money to other nations in Latin and South 
America and the Caribbean.
    Once again, we are going to have to put a percentage factor 
there. We do not want that percentage factor of money spent in 
this hemisphere violated. If you want to work with us to try to 
take money from other areas of the world, we would be happy to 
work with you because all of us agree that Central and South 
America especially and the Caribbean need assistance.
    But we are not going to provide you just with money 
increases to satisfy the black hole that we are dumping the 
money in in Haiti. They are making zero progress. They are not 
privatizing. They are not doing anything. The only economy they 
have is our military aid and our assistance. And you still have 
a government that is less than transparent in their activities 
and I don't think we ought to be rewarding that type of 
activity. So Haiti is going to be a big, big problem, at least 
with me.
    I will let you respond to all of those things but I want to 
get to the second round.

                            pipeline reserve

    The third thing I want to get to today is the inspector 
general, in a draft report, indicated that you had a couple of 
hundred million dollars in a pipeline, about $400 million, I 
think, $264 million excess, not needed, as defined by forward 
funding guidelines, and also $148 million which was unspent 
after all required goods and services were delivered and the 
activities have been completed.
    I realize this is a draft report but briefly, can you give 
us any indication as to whether or not that is factual or 
whether or not there is an answer to that pipeline reserve?
    Mr. Atwood. Yes, Mr. Chairman. The IG did a spot check to 
look at the pipeline and came up with this number. We are now 
looking at it very closely. When we talk about overobligating 
funds, we are looking at several possibilities for what may 
have occurred here.
    One possibility is that people have taken to obligating all 
at once, as opposed to waiting, as they have, because we have 
had some very serious staffing problems and they may want to 
take fewer actions along the way. Another possibility is that 
we have had, for example, a commitment of funds to the Egypt 
program to try to convince them to privatize and we would then 
disburse after they have privatized, but they have been moving 
more slowly than we would have hoped.
    Mr. Callahan. There is no time for an in-depth analysis of 
it. I guess, if you will, get someone to provide us, hopefully 
this week, an explanation of it.
    Mr. Atwood. Absolutely.
    Mr. Callahan. We can go into it country by country, program 
by program, but I would violate my five-minute rule.
    Ms. Pelosi.
    Ms. Pelosi. I thought, Mr. Chairman, you were going to give 
Mr. Atwood an opportunity to respond on the Haiti question on 
your time.
    Mr. Callahan. He can respond on your time.
    Ms. Pelosi. Oh, I hope we have a third round.
    In that case, I want to associate myself with the interest 
expressed by my colleague, Congresswoman Lowey, and others on 
microlending. I am glad to hear you emphasize that $135 million 
is the floor, that funding is at least $135 million.
    I agree with our Chairman and Mr. Torres that we should 
have increased interest in Latin America. I don't share the 
Chairman's view, however, on the Haiti situation. I do 
thinkthere is progress to show and I will get back to that in a moment.
    I associate myself with Mr. Wolf's concerns about the 
Sudan, and East Timor, and Tibetan refugees. I know you will 
get back to us from the State Department on the refugee issue. 
I am going to submit for the record, in the interest of time, 
my question on Bosnian war criminals. I just want to ensure 
that U.S. tax dollars are not going to go to those who are 
either indicted themselves or who are protecting the indicted, 
who are allied with those who are obstacles to the 
implementation of the Dayton Agreement.
    I do want to get to two budget questions. One is, and if 
you could respond briefly in the interest of time, it is my 
understanding from this morning that staff has suggested that 
the supplemental bill may contain an offset of as much as $250 
million from USAID's development assistance pipeline. If that 
is so, could you tell me what the impact of that cut would be?
    Mr. Chairman, can you confirm that?
    Mr. Callahan. I don't have a number yet but I don't think 
it would be that much.
    Mr. Atwood. The problem is, of course, that the pipeline 
represents a commitment of funds, usually to an American 
contractor, to do work for us, and that would cause a great 
disruption in our work and cause a lot of people probably to 
take us to court in the process. So it has to be done very 
carefully, I think.

                             child survival

    Ms. Pelosi. I was concerned about the President's budget 
request calling for a 10 percent cut in USAID's child survival 
and infectious diseases account, including for health. I hope 
that that will not be the case. With the leadership of our 
Chairman, we have been able to sustain a reasonable level of 
funding for the AIDS program and other infectious diseases of 
importance to our committee, as well.
    My question would be if you want to comment on that, fine, 
but I want to frame the question a little bit differently. As 
you know, the President and many Members of Congress have been 
calling for a drastic and sustained increase in funding for the 
National Institutes of Health. On my other subcommittee we fund 
the NIH and I have asked in that committee Secretary Shalala, 
as well as Director Varmus, about their international 
initiatives.
    So I am going to ask you from this side, can you tell us 
what areas of research might most benefit USAID's health and 
development efforts and how the agency has made its priorities 
clear to NIH?
    Mr. Atwood. We have developed a strategy, Ms. Pelosi, to 
spend the $50 million that you have added to the budget last 
year. The emphasis there is on research on anti-microbial 
resistance. This is a big problem for some of the malaria and 
other diseases that are becoming more resistant to the drugs 
that we are using and we need to know more about how to do this 
and how we can avoid that problem.
    We are going to be doing research and doing application 
programs in malaria and in tuberculosis and in attempting to 
set up an international surveillance system. That means that 
national surveillance systems have to work well, as well.
    So those are all areas that are part of our strategy and I 
will be happy to provide the detailed strategy to you for the 
record if you would like.
    [The information follows:]

                      Infectious Disease Strategy

    Attached is a copy of the Infectious Disease Strategy, 
``REDUCING THE THREAT OF INFECTIOUS DISEASES OF MAJOR PUBLIC 
HEALTH IMPORTANCE: USAID's Initiative to Prevent and Control 
Infectious Diseases,'' to which Mr. Atwood referred in his 
testimony.


[Pages 212 - 240--The official Committee record contains additional material here.]



    Ms. Pelosi. I appreciate that. I would like that.

                            nagorno-karabakh

    I understand that AID's assessment team has recently 
returned from Azerbaijan, from Nagorno-Karabakh, where they 
looked into a series of programs involving immunization, 
medical training and assessments, small-scale enterprise and 
agricultural production. What is the status of the 
implementation of these aid programs and when will activity on 
the ground actually begin? I have expressed to you in our own 
meetings our interest in helping Nagorno-Karabakh so they can 
help the Minsk process along more quickly.
    Mr. Atwood. We have had a team out there that has 
identified some areas. We are about to sign a contract soon, 
this week or next week, on a health program, immunization 
program for children. We are looking at the shelter program. We 
have a team in Nagorno-Karabakh right now looking at a possible 
shelter repair program.
    I did discuss this with you yesterday in private. Obviously 
what we do in this region is being watched very carefully by 
all of the parties to the Minsk Accords. There is hope and our 
negotiators are working assiduously on this to try to reach a 
peace agreement by the 30th of May.
    Every one of the parties, whether it is the government of 
Azerbaijan, the people in Nagorno-Karabakh, the government in 
Armenia, where there is now an election and there is apparently 
going to be a run-off, are all watching carefully to see what 
the United States does.
    I know what your intention was in hoping that generosity 
would prove to people that it is worth their while to enter 
into these peace accords. All I can say is that if you feel we 
are being extra cautious with respect to how we move on this, 
we are. But we do have some programs in mind and will begin 
signing contracts to get those programs under way but, at the 
same time, watching very carefully to see what reactions are 
and how it impacts on the peace process during this very 
sensitive period.
    Mr. Callahan. The problem in the Caucuses with Azerbaijan 
and Armenia Congressman Knollenberg has been my House expert on 
that region and I would invite you, Mr. Administrator, to 
utilize his knowledge of the problems there, especially with 
Nagorno-Karabakh and Armenia and the division between Armenia 
and Azerbaijan. He is very knowledgeable on that and I lean 
heavily upon him for his advice and I would suggest you do the 
same thing because he is very familiar with it.

                                 Haiti

    Do you want to respond to Haiti? I didn't give you the 
opportunity.
    Mr. Atwood. Thank you, I would, to make a few points, Mr. 
Chairman, just so that people downtown know I am fighting for 
this increase, because I think it is worthwhile.
    We were spending in 1992, 1993 and 1994 approximately $400 
million a year for the naval and Coast Guard blockade of this 
place so that we could both rescue boat people coming out of 
there and to try to avoid their coming to our shores to apply 
for immigrant status. That is a lot of money. We were spending 
a lot more money on humanitarian assistance during that period.
    We believe we have made a lot of progress in this country. 
We don't have a lot of boat people today. We don't have riots 
in the streets, despite the continued political crisis that we 
are very frustrated about, as well.
    But there have been significant results. The government-
sponsored paramilitary units have been disbanded. Illegal 
immigrants are no longer flooding our shores. Since 1994 
inflation has been cut by more than a half. Price controls have 
been abolished and the exchange rate has been liberalized.
    750,000 people are using our improved farm practices and 
our microenterprise programs. 2.3 million people are receiving 
health services through our NGO programs. Infant mortality has 
dropped by 25 percent. 7,000 school teachers and administrators 
have been trained. The 5,200-member civilian Haitian national 
police force now exists and more than 700 judges and 
prosecutors have been trained. Today I think Haitians enjoy 
more freedom of expression and association than they have ever 
experienced.
    We have major progress being made on the privatization 
front. The flour mill has now been privatized and Seaboard 
Continental Grant Unit Finance Consortium has taken it over. 
The cement plant has been awarded to Holder Bank, a 
conglomerate that is going to take over the cement plant, and 
the contract-signing is pending.
    USAID is financing privatization transactions for the 
airport, the port, the telephone companies, and all of this is 
also being worked on by the World Bank. The telephone company 
transaction has received three responses.
    I think a lot of progress has been made. One may wonder. We 
obviously are very critical of the government for having this 
political crisis. They can't get a prime minister named for the 
last seven months. They haven't been able to dothis. But the 
government is running. The president is still making decisions. There 
are ministries that are operating.
    It is a problem of a new democracy where you have a battle 
between the two major political parties of the country. I 
absolutely expect that this will be resolved by the time this 
money is appropriated but in the meantime, I think we should be 
looking at this $140 million request in the context of having 
to spend huge amounts of money to keep people from our shores, 
the $400 million a year that we were spending previously and 
all of the money that we were spending for humanitarian 
assistance.
    We are making this contribution, outside of Port-au-Prince. 
We are going to increasingly be moving our program away from 
the sort of political contenders in Port-au-Prince to the local 
mayors and NGOs that operate in the countryside to try to 
alleviate the conditions that people have to live under there. 
That, I think, will bring stability over the long run, but this 
is a long-term project that is, in my opinion, in American's 
interest to try to resolve.
    Mr. Callahan. I don't want to debate that. You certainly 
know more about it than I would know. That is an awful lot of 
progress to have taken place in one week, and that is when all 
that privatization evidently took place because when we met 
with the new ambassador, it had not taken place 10 days ago. 
The privatization is not privatization just because they say it 
is privatized. If the same people are running the flour mill, 
that is not a change. That is the subterfuge to give some 
indication that progress is being made.
    The government is the problem and when you have the lack of 
transparency, when you have a government being controlled by a 
former government, when investors are afraid to go in there 
because of the corruption. To improve things for Haitians, then 
there is never going to be any progress made. We can keep 
pumping in dollar after dollar.
    You mention the immigration problem. We have an immigration 
problem with Mexico, but we are not pumping millions of dollars 
into Mexico to stop the immigration problem. You can't reward a 
country or its people for violating U.S. law, and that seems to 
be what we are doing. I mean, all we are doing is saying let's 
give them money and they will stay there and we will save money 
by not having to appropriate money to the Coast Guard in order 
to interdict the activities.
    But it is a serious problem, Brian. It is like the naked 
king. We just refuse to look at it as a problem. All we want to 
talk about is progress. In our trip down there and all of the 
interviews we have made we have seen zero progress.
    So maybe you are right. I hope you are right. I hope we are 
making some progress, but I can't see it. As of 10 days ago, 
the privatization was zero, whereas we met last spring with the 
Privatization Committee in Haiti and they told us it would be 
imminent in a couple of weeks. Now they are saying it has all 
been done in the last 10 days.
    In any event, if you want a $200 million increase in Haiti, 
that is fine with me, as long as it maintains a percentage of 
what else you are going to spend in this hemisphere. We are 
neglecting countries that are making positive progress and 
neglecting human rights, health, and educational problems that 
we could resolve in countries that are doing the right thing. 
Instead, we are saying we are going to give all of our 
resources to Haiti.
    Now, if you want to spend $100 million, $200 million more 
in Haiti, that is fine with me, except increase the percentages 
that you spend in other areas, in other countries in this 
hemisphere; increase them accordingly. That is our charge.
    So we are not earmarking. We are not unearmarking. We are 
telling you that whatever you spend in Haiti, whatever increase 
you have there, you are going to have the same increase in some 
other area of this hemisphere.
    So that is not earmarking. I don't think it is 
micromanaging. It is just a point that I personally disagree 
with you on as to progress.
    Ms. Pelosi. Mr. Chairman, if I may have 10 seconds.
    Perhaps it is time for us to go back to Haiti so we can see 
what the progress is, since there is a disagreement as to what 
it may be. Perhaps we can go on our way to Chiapas.
    Mr. Atwood. I would encourage that, Mr. Chairman.
    Mr. Callahan. I will remind you that since that time they 
have a very, very severe problem in Haiti with cows grazing on 
the runway. It is not even safe. I am serious. It is not even 
safe to land in a commercial plane, if you could get a 
commercial plane to go in there.
    But I wouldn't subject our U.S. Air Force pilots to that 
danger, much less my committee.
    Mr. Atwood. If you will go, Mr. Chairman, I personally will 
go down and get the cows off the runway so you can land.
    Ms. Pelosi. Thank you, Mr. Chairman.
    Mr. Callahan. Rather than recognizing, if anyone has second 
round questions, why don't you so request?
    Mr. Wolf. Mr. Chairman.
    Mr. Callahan. Mr. Wolf.

                                 Russia

    Mr. Wolf. Mr. Atwood, two questions on Russia. Congressman 
Smith and Congress Hall and I met with a number of groups who 
maintain that there is implementation enforcement of the 
religion law in the Soviet Union, that mayors are enforcing it 
and people are being forced out of churches.
    What is your position or the State Department's position 
with regard to cutting off aid, carrying the language that the 
committee passed last year that says, ``If implementation''?
    Mr. Atwood. Well, we are obviously watching this very 
closely, Mr. Wolf. I think it is important that you included 
the word ``implementation'' in this. Clearly there is a law 
that has been passed but they are well aware of what the 
consequences would be if it were fully implemented.
    I think that there was obviously, initially, at least, a 
dispute between the branches of government there over this law, 
but politics is funny in countries like this. There is then the 
question as to whether or not they will implement it in a way 
that would cause them to violate our own law with respect to 
this issue.
    We are watching it closely. I think probably it is not wise 
for me to publicly say more but I would be happy to meet with 
you privately and with some of the experts that are watching it 
on our behalf.
    Mr. Wolf. Why don't we do that? If you would call my office 
and maybe involve Mr. Hall and Mr. Smith, too, at the same 
time.
    Mr. Atwood. I would be happy to.
    Mr. Wolf. The other issue, on aid to the Soviet Union or 
former Soviet Union, Russia, would it not be more effective, 
not with additional funds, but to take some of the funds that 
we now use, particularly because of the corruption and 
problems, and bring young Russians, aged 30 to 40, to the 
United States to spend perhaps three months working in a 
corporation or working in a university or working in our 
system, perhaps living with an American family, perhaps develop 
a relationship with the airlines at a discount to bring these 
people over? Most of the money would then be spent in the 
United States.
    Secondly, they would then see our values. They would then 
see hope that if they do certain things, these are the 
potential possibilities. Might it not be good to develop a 
program like that, even within the budget restraints, to bring 
perhaps 5,000 or 10,000 over and only spend three months? I am 
not talking about spending a year or anything like that.
    Mr. Atwood. Well, there is a program that is part of the 
larger program called the Bradley Program, wherein we do bring 
people over----
    Mr. Wolf. How many of them----
    Mr. Atwood. High school age.
    Mr. Wolf. Well, high school? I am really talking about 25, 
30, 35.
    Mr. Atwood. Some of our programs have that as part of the 
training that would be done in terms of, for example, creating 
an entrepreneur class in Russia but again, I would have to look 
at those programs in detail to give you a fuller answer.
    [The information follows:]
                     Russia Training and Exchanges
    As you have indicated, despite the importance of the U.S. 
government's program of bolstering democratic and economic reform in 
the Russian Federation, we are operating there under serious budget 
constraints. As a consequence, we have necessarily focused the USAID 
program in a few key areas; support for reform of tax policies and 
systems, support for the development of a civil society, assistance for 
small businesses and entrepreneurs, environmental protection, and 
health sector reform. Much of our assistance in these areas features 
the development of partnerships and community linkages between the 
United States and Russia.
    I am pleased to note that training of managers and small business 
persons has been and continues to be an important element of our Russia 
program. Thousands of Russians have been trained in-country and sent to 
the United States for a variety of internships, primarily in the 
business area. Since assistance to Russia started in 1992, USAID had 
trained over 200,000 Russians in the area of business and management 
skills and has sent an additional 3,000 Russians to the United States 
for training and internships.
    As you point out, we have found young Russians with whom we have 
worked to be particularly eager and energetic proponents of market 
reform in their country. In addition to working with active 
entrepreneurs, we have helped train a future generation of leaders by 
supporting Junior Achievement Russia, which is increasing the awareness 
of Russian high school students about the benefits of market economy 
through training and hands-on business competitions. USAID efforts have 
helped Junior Achievement Russia expose more than 500,000 Russian high 
school students to this market-oriented training. In fact, Junior 
Achievement Russia is so successful that it is second only to the 
United States in the worldwide Junior Achievement Program.
    Under the Presidential Management Training Initiative, an 
additional 500 Russians will be sent to the U.S. for 3 month 
internships this year, with a possibility of increased numbers in the 
years to come. Given the importance President Yelstin places on this 
area, the Russian government has committed to fund the air travel of 
the participants selected for the U.S. internships. USAID's Community 
Connections Program has since 1994 funded a total of over 3,300 
internships for Russians in the area of business, economic development 
and educational administration. The Department of Commerce's SABIT 
Program has successfully trained over 726 Russian managers and 
scientists in a range of industries.
    Even these programs are running into obstacles which a much larger 
program might find difficult, if not impossible, to overcome, 
specifically, there is a shortage of American businesses willing and 
able to absorb interns and teach them substantive skills; there are a 
shortage of English speaking Russians who can benefit from these types 
of programs; many qualified Russians cannot get 3 months leave from 
their companies.
    Yet in spite of these obstacles and the budget constraints you 
noted, training of Russians in management and business will continue to 
be an important element of our assistance in the future.

    Mr. Wolf. If you could, you could use 1,000 Points of 
Light. You could use the private sector. You could use the 
universities. Certainly they could come and fly at a discount 
rate through Delta or whatever airlines, stay in a private 
home, work in Dow Chemical or work in Mobile or work in Coca-
Cola for three months and then go back.
    I think there is a greater opportunity of them catching the 
vision as to why it is important for them to do the right thing 
if they can see what the end results are rather than us sending 
people over there to try to teach them.
    Mr. Atwood. I think that is an important part of our 
program. I am not sure it goes as far as you would like it to 
go but I think you are right about exposing people to our 
values and to any society that is more stable and more value-
oriented than the new democracy that exists there, where there 
are major gaps, major problems, major mafia groups that are 
creating problems in Russia, major problems of understanding 
moral issues. For example, the churches are still weak in 
Russia and we would like to think that with democracy and 
freedom of expression, that those religious values would come 
back into that society where they existed before.
    Mr. Wolf. I think individuals are more likely to do what 
they have to do, be bold, be courageous, be heroic, whatever, 
if they can see what the potential is. And you can read about 
it but if you come to America and see it, I think you are 
willing to go back and work harder for it.
    Mr. Callahan. Mrs. Lowey.
    Mrs. Lowey. Thank you, Mr. Chairman.
    I just want to associate myself first with a few of my 
colleagues; first of all, my colleague Congressman Wolf. When I 
was there with Speaker Gingrich--I think it was '93, '92--the 
only thing we could agree on, coming back, was that money 
should be put in exchange programs. So I certainly would like 
to associate myself with my colleagues and get a report as to 
the status of those exchange programs.

                            nagorno karabakh

    Secondly, I want to associate myself with my colleagues 
regarding Nagorno Karabakh and make it clear that those of us 
who have been in that region with the Chairman are cautiously 
optimistic, very hopeful that perhaps the Minsk group can come 
up with an agreement to solve problems in that region. But I 
also want to caution that by being overly cautious, I am 
concerned about the dire needs in Nagorno Karabakh and would 
hope that we can respond with assistance now. So I understand 
there has to be a carefulbalance but we can't ignore the dire 
needs of people in that region.

                        basic education funding

    Thirdly, I just wanted to mention that I share your views 
regarding education, making it a prime mission of AID because 
we have seen the statistics that if a family is educated, this 
directly impacts child survival. And I believe you said 
someplace in your statement--I am not turned to it right now--
that we know it increases the quality of life of a child in a 
family that is educated.
    And with regard to that, despite progress, despite 
investments over the last 30 years, about 1.4 billion adults in 
the developing world, as we know, are illiterate. Only half of 
the world's children attend primary school. There are great 
disparities between the proportion of boys and girls attending 
school.
    Given these realities, education and training must be a 
priority of the United States foreign assistance. 
Unfortunately, basic education funding has decreased, to my 
amazement, in recent years from $135 million to $98 million in 
the last two years, which is very disturbing to me. Could you 
discuss your efforts to increase our commitment to basic 
education funding and let us know if USAID did spend the fully 
allocated $98 million in basic education funding in FY97?
    I ask this because I feel so strongly that we have to 
increase our investment in basic education funding and I would 
like to get as much information as possible to bolster that 
case.
    Mr. Atwood. We made a decision back in '93 that perhaps in 
hindsight wasn't a good one, but that education was so 
important that it ought to be a crucial part of every one of 
the other strategic objectives of the agency. I have recently 
revisited that issue and have made education one of the six 
strategic goals of the agency itself.
    I think the message that sends, at least I hope the message 
that sends, is that people in our missions will be actively 
looking for opportunities because it is clear that education is 
so important.
    We had a rather dramatic manifestation of that when 
President Konare, who is arguably the most democratic of all 
African leaders, visited President Clinton recently and said, 
``I believe in democracy. We have a democracy in Mali but I 
cannot sustain it if only half of my children are receiving an 
education.''
    I think the consequence of that is that the President will 
be spending a lot of time discussing education on his trip to 
Africa and you will be hearing in one of his toasts, with 
always the caveat that Congress has to approve the funding, the 
footnote in every toast that he gives, that, in fact, he is not 
only going to help Africans but is urging Africans to invest 
more in education themselves.
    Basic education being the most important, this goes to the 
literacy issue that you raised, but we also need to be thinking 
about secondary and tertiary education because these countries 
have to be able to sustain what it is we help them with in 
terms of basic education.
    Mr. Callahan. We might give Mrs. Kaptur the chance to ask 
her first question. Your six minutes have expired.
    I might just comment on that, Brian. I know the 
Administration goes over there and they make all these pledges 
and agreements to assist, provided Congress will give them the 
money.
    Then we go over there and what we have been doing is taking 
a member of the Ways and Means Committee with us and telling 
these leaders, ``Well, if the Ways and Means Committee will 
raise more taxes, we will give you more money.'' So I don't 
know what the Ways and Means Committee is going to do.
    Ms. Kaptur.
    Ms. Kaptur. Mr. Chairman, I want to thank you very much and 
Congresswoman Pelosi this morning for your courtesy.
    We want to welcome Mr. Atwood. Sorry I had to go to a 
ceremony over in the Capitol for the return of a replica of the 
crown of St. Stephens to the United States from the nation of 
Hungary after 20 years of the crown having been moved from Fort 
Knox to Budapest. So I apologize for having to step out.
    Mr. Atwood, I will only focus on one area of questioning 
directly to you today at this point. I will submit questions 
for the record on the progress AID is making on the 
implementation of language included in last year's 
appropriation bills on a medical exchange program between the 
American College of Physicians and physicians in the NIS. I 
will be submitting questions on credit unions and cooperatives 
and the extent to which you are encouraging those in your work.
    I will also submit questions on whether your definition of 
microenterprise includes farmers and farm production, as well 
as merchant and trade and investment activities. How are you 
implementing the P.L. 480 Title II to accomplish feeding 
programs for the poorest of the poor around the world. I will 
be asking many, many questions on agriculture in our submission 
to you for various parts of the world.

                              aid staffing

    Today, I wanted to ask you what are your total full-time 
staff equivalency (FTEs)? I couldn't find in the little blue 
book.
    Mr. Atwood. I can't give you the exact detail but it is 
about 7,000 now, including Foreign Service national employees 
overseas, as well as direct hire Americans.
    Ms. Kaptur. All right. Can you give us aballpark, how many 
consultants are hired through those 7,000 persons? What would you guess 
in terms of the numbers of persons that work under contract to USAID in 
any given year?
    Mr. Atwood. I will tell you, I have this chart which has 
print that is so small I can hardly read it but it does provide 
you with each of the categories. We do now have, unlike what we 
had when I came in '93, we have a good fix on all categories. I 
am trying to give you a ballpark.

                              agriculture

    Ms. Kaptur. My bottom line question really is what 
percentage of either the consultants or those who are FTE full-
time USAID people are actually people who have hands-on farm 
experience at the local level, people who can do everything 
from read the markets to grease a disk?
    Mr. Atwood. Well, I am not going to be able to give you a 
specific now but I am glad you asked the question because we 
have had to reduce the number of people that have agricultural 
skills because our overall budget for agriculture has gone down 
so significantly in the last 20 years, not just the last few 
years.
    But also, when we had to accommodate our staff to the 
operating expense resources that we had, we had a RIF, a 
reduction in force. And one of the categories of people that we 
had to reduce were agricultural experts. I can tell you that we 
have 61 U.S. direct hire staff serving as agricultural officers 
and a few other U.S. staff with an agricultural background that 
serve as general development officers. We are currently unable 
to tally the number of contractors, consultants or RSSAs that 
provide technical assistance in this area.
    Now we are beginning to build back up our agriculture 
budget and I know my good friend Peter McPherson and a group of 
university presidents have called for a $500 million a year 
agriculture----
    Ms. Kaptur. I guess as I look at the NIS, what scares me 
the most, especially in the villages where most people live, is 
the ability of people to weather the transition and feed 
themselves. And to the extent, at a policy level, you can have 
any influence on the type of individuals who are hired directly 
by USAID and the type of consultants that are out there, I 
think page 14 of your testimony in many ways leads me to this 
observation. I congratulate you on whatever you are doing with 
Rockefeller Brothers, Ford, Soros, Mott to create evenly 
matched public/private endowment to encourage a range of 
economic think-tanks.
    What I have noted is there are lots of people dealing with 
the upper strata, and that is very important because you have 
to have an intellectual lead in any country. On the other hand, 
you have to look down the chain to where people actually live. 
And where I have found U.S. programs in general to be very lean 
is in finding practical ways for people to survive the 
transition.
    In many, many of these countries, including Russia itself, 
agriculture is absolutely key and I am fearful that we, as a 
world, are not meeting that need at ground level.
    Mr. Atwood. We have a number of programs. I am trying to 
remember the names of them specifically, like Farmer-to-Farmer 
of America, Volunteer Farmers of America and the like, where we 
actually put real farmers on the ground to help teach people 
techniques that we have learned over the years.
    Perhaps we don't do enough of that but I know those 
programs are effective where they are. I have seen them in both 
Russia and the Ukraine, in fact, on the ground.
    Ms. Kaptur. I would encourage you to look at the short-term 
nature of many of those exchanges, and the rather sporadic way 
in which these institutions relate to entities on the ground. 
If you are really going to make progress, I would suggest 
working more closely with our land grant institutions. If we 
are going to have a more continuing, sophisticated agricultural 
presence, where people are not just constantly rolled with the 
dice every six months or one year, where institutions and 
individuals are changing you have to have a more continuous 
developmental process that goes on in terms of rural 
development or we are not really going to make a significant 
difference in the amount of time that we have to help these 
folks transition.
    I know we are working at the highest levels trying to get 
the grain elevators privately purchased. Someone has to look at 
this at the grassroots level and I would hope that the 
cooperative and credit union mechanisms we have in place could 
be helpful for that, as well.
    I wanted to ask a question about the P.L. 480 Title II, and 
I realize that that money comes through another appropriation 
but how do you actually encourage feeding programs for the 
poorest of the poor under that title? I understand that many of 
those have been cut back because they are harder to measure.
    Mr. Atwood. I don't believe that is correct and if people 
believe that is correct, we either have a perception problem or 
we have a real problem that we need to get to the bottom of.
    There are development programs that are undertaken under 
P.L. 480. There is clearly a desire that we focus on 
agriculture-related, food security-related issues in that Title 
II program. We also want to focus on the poorest countries. But 
a lot of the Title II program in recent years has gone to 
emergencies and that, of course, is a controversy within the 
PVO community because we are living with more emergencies than 
ever before, so more of Title II is now used for emergency 
purposes.
    But we have a few PL 480 development programs even in 
places where AID has no field missions; we have made some 
exceptions and allowed people to work in nonpresence countries. 
I think of Burkina Faso and the Gambia, for example, where the 
Catholic Relief Service wanted to continue programs in those 
countries.
    That has not been affected by our effort to emphasize 
results. What we have insisted on when they have proposed to 
work in those countries is that they tell us what results they 
would achieve with the resources that we provide. But we have 
gone ahead in the case of Burkina Faso and the Gambia, making 
exceptions to our general desire to have people working in 
countries where we have a presence, and allowed that to happen.
    So I don't believe that the results criteria have stopped 
these programs if they are worthwhile and if they can 
demonstrate that they do achieve results.
    Ms. Kaptur. I thank you. My time has expired but we will 
submit additional questions on that for the record.
    Mr. Packard [presiding]. You may either do that or we will 
reconvene after the votes. There are two votes on. We would 
like to have Mr. Knollenberg address his questions before we 
adjourn for the votes.

                            nagorno karabakh

    Mr. Knollenberg. Thank you, Mr. Chairman.
    By the way, I wanted to associate myself with my colleagues 
regarding Nagorno Karabakh. I know that first tranche of $2.3 
million is on its way. I recognize it does not touch into the 
infrastructure but I hope, by the needs assessment that will be 
forthcoming, that something will be done in the very near 
future on that.
    Also I wanted to comment on microcredit programs as well, 
and I would like to see these programs help the very poor with 
loans under $300.
    I want to get back, though, to the question, because I am 
bothered a little bit about this and I am not trying to turn it 
into any kind of debate, but this business about environmental 
programs and climate change. According to information I have 
here, the environment did go up by $46 million.

                            credit authority

    Mr. Atwood. In our request. That is right.
    Mr. Knollenberg. In the request, yes, and the $150 million 
I was talking about, which was a program that was the noncredit 
category. Now I want to talk about the credit programs.
    Mr. Atwood. Yes.
    Mr. Knollenberg. I understand that--and by the way, the 
House opposed this last fall in conference but it was tucked 
back in. Development credit authority can create and provide 
loan subsidies which, when factored, can amount to five times 
whatever the amount might be, which could be close to $1 
billion.
    My question is how much of this money is going specifically 
to climate activities. My concern is that money is fungible. If 
you increase the environment category, which you have done, by 
some $46 million, I believe we have to pass authority 
orjudgment on whether you can increase that for climate change; is that 
not true?
    Mr. Atwood. Yes. You obviously----
    Mr. Knollenberg. How much freedom do you have in that? You 
can't just interchange, can you? What I am trying to do is get 
to an accounting of just how much money goes to climated 
related activities. And the credit authority program could be a 
substantial amount of money that would go for these purposes 
entirely. I would like to know if you can tell me what amount 
of the credit authority is potentiality going for climate 
programs.
    Mr. Atwood. The honest answer is that nothing yet is going. 
We have received authority from this committee, reluctantly, to 
have a direct credit authority, but there has been a great deal 
of skepticism, because of past performance, whether we could 
manage such a program.
    We have now reached an agreement with OMB on a seven-point 
plan to give us the capacity to manage the DCA program and 
expect by the end of this fiscal year that we will receive a 
certification from them based on out-sourcing our accounting of 
that program and based on what we expect will be the conclusion 
that our analysis of credit-worthiness, our capacity to do that 
is very good inside AID.
    But the preponderance of those resources--again, you are 
right. For each dollar, and I think we have asked for $15 
million of the direct credit authority in this budget--that 
could leverage as much as 10 times in terms of the country, 
depending on the credit-worthiness of the country. That is why 
it is so valuable to us.
    That would be, for the most part, funding energy efficiency 
programs, infrastructure that could relate to global climate 
change. You may agree that these are things that we should do, 
whether or not we label them as global climate change, because 
energy efficiency programs are both advantageous to the country 
and to our own people who are working in this area.
    Mr. Knollenberg. I understand the advantages but I think we 
also have to get a fix on the cost, just how much money is 
being spent on climate programs, because in this country there 
could be regulation via the EPA or executive order in attempts 
to regulate into effect part of the Kyoto Accord. And I am 
trying to determine just how much money within the foreign aid 
budget could find its way into climate-related activities 
toward this end.
    Mr. Atwood. Our hope is that we will be able to find $150 
million per year out of our regular development assistance 
account that would go to those kinds of activities, plus 
getting the direct credit authority in order to spend, say, $15 
million by whatever the leveraged multiple is on those kinds of 
activities, as well.
    Mr. Knollenberg. So it could be a fairly decent sum that 
would be spent.
    Mr. Atwood. Well, the actual impact on the budget wouldn't 
be any more than $15 million for the GC----
    Mr. Knollenberg. I understand that but I am just saying how 
much goes into the GCC budget or pot and I guess you are saying 
that we don't know that yet.
    Mr. Atwood. Right.
    Mr. Knollenberg. We need to be very watchful of that 
because frankly, it isn't that we are for or against clean air, 
et cetera, but when the foreign aid budget is utilized for that 
purpose, then maybe something should give over here. That is 
why we want to know.
    I yield back to the Chairman. Thank you.
    Mr. Packard. There is a vote on now and it will go for 
another seven minutes, then a five-minute vote, as I understand 
it.
    We will reconvene somewhere near five minutes to 12:00. 
Perhaps Mr. Frelinghuysen or one other member of the committee 
will be presiding.
    Mr. Callahan [presiding]. Mr. Administrator, let me also 
add that I know Mr. Packard and I have a meeting with the 
Speaker to discuss the supplemental at 12:00, so we are not 
going to be here. Mr. Frelinghuysen and maybe Nancy, some on 
your side might have some additional questions.
    Mr. Atwood has another meeting at 12:15 that he has to get 
to so if you will, Brian, just stick by and we are going to ask 
Mr. Frelinghuysen to come back and even preside in order to get 
you out of here in a timely fashion at 12:15.

                                 haiti

    We appreciate your coming. When we attacked you with 
respect to concern about countries like Haiti, it certainly is 
no reflection upon you personally. These are serious concerns 
that we have and we appreciate your cooperation and sharing our 
concerns, even sometimes if we have different philosophies. All 
of us are always trying to get to the same corner of the room. 
You want to go to the left because you are a Democrat and I 
want to go to the right to get there because I am a Republican.
    Mr. Atwood. I want to go straight to Haiti with you, Mr. 
Chairman, any time.
    Mr. Callahan. That is the first invitation I have had of 
that. I have had some similar ones. They didn't mention Haiti 
but it was awful close, and people suggested that I go by 
myself. [Laughter.]
    In any event, Brian, I will not be back but if you would, 
just stick around and as quickly as they come back, just ask 
Mr. Frelinghuysen to preside. And if anyone would like--in 
fact, we will go ahead, without objection, and give the 
authorization to any member of the subcommittee to submit their 
questions in writing within five days and we would appreciate 
your expeditious response to those questions.
    Ms. Pelosi. Mr. Chairman, if I may, and maybe you don't 
have to be here for me to do this. I hope to come back in a 
timely fashion but depending on how many of our colleagues have 
questions, I may be submitting for the record or presenting to 
the administrator a question about the Democratic Republic of 
the Congo. I am concerned about the status of the 
Administration's intentions regarding a Section 614 waiver with 
respect to the Congo.
    I also had some questions about the $925 million to Russia, 
increased from $770 million this year. And I had some questions 
about AID's programs to be altered and expanded to ensure that 
new investments in Russia and other republics are 
environmentally sound. And if I come back, I will ask my war 
criminals questions but those are ones that I just want you to 
know, Mr. Chairman, are areas of interest either in real life, 
in real time or for the record.
    I, too, want to join you in thanking Brian for his 
leadership and for making himself available for such a long 
time today. And I think we should go to Haiti.
    Thank you, Mr. Chairman.
    Mr. Callahan. The committee will recess until Mr. 
Frelinghuysen or Mr. Knollenberg get back to preside.
    [Recess.]
    Mr. Frelinghuysen [presiding]. Mr. Atwood, I would like to 
reconvene the hearing. I am not sure how many of my colleagues 
will be back but in their absence, since I am the chair, I have 
the ability to ask any questions I would like.
    Mr. Atwood. That is great.
    Mr. Frelinghuysen. Let me echo, since I don't want it to 
appear that Chairman isn't the only person that has concerns 
about Haiti, while our trip there was relatively short, it is 
one that anyone who participated in will remember for a long 
time. And that is not to say that we shouldn't go back, but I 
personally was appalled by what I saw.
    I could admire those who work there on our nation's behalf 
and other nations but it seems to me when you don't have such 
things as a potable water supply, garbage collection, it really 
makes you wonder what sort of regime we are supporting. Maybe 
the alternative is, as you say, even more frightening, but you 
would have to convince me a great deal, since we have already 
spent over $3 billion in Haiti, that all those dollars have 
been well spent, since it appears that a lot of basic services 
are not evident.
    I would think without those basic services, and this leads 
into my line of questioning, you would have rampant infectious 
diseases.
    I would like to talk about that account for a minute. Mrs. 
Pelosi said last year we provided $50 million for the 
infectious diseases initiative. You have $30 million in this 
year's budget.
    The first question is is this enough?

                     infectious diseases initiative

    Mr. Atwood. Mr. Chairman, I don't think that any of the 
categories of our budget have enough. What we hope we can do is 
to, with the $50 million, to put forth a strategy wherein we 
can attract contributions and involvement from others.
    I just had a note from Dr. Varmus of NIH. They want to send 
someone over to work with us on malaria. I have a note from 
someone from CDC. They want to send a person up to work with us 
on this infectious diseases business. The World Health 
Organization--there are a lot of organizations that have their 
own resources that if they feel as though they have contributed 
to the overall development of the strategy, will put their own 
resources into implementing it. And that is what we have sought 
to do.
    So my answer is that if we were to do it all ourselves, it 
wouldn't be enough, but we think that in relation to the other 
needs we have in the budget, that it is an adequate request.
    Mr. Frelinghuysen. Specifically to your tuberculosis 
initiative, I have a concern about recent reports 
abouttuberculosis hot zones around the world. The numbers are simply 
staggering. One hot zone alone, Siberia, there will be an estimated 1.5 
million deaths over the next three years. Worldwide I have seen figures 
as high as 30 million deaths from TB over the next three years. I am 
not sure where they measure out against the AIDS epidemic which, of 
course, is another critical area both, I assume, in Russia as well as 
the continent of Africa. We also face the additional problem of more 
virulent strains of TB.
    I would like to know what we are doing specifically 
relative to tuberculosis.
    Mr. Atwood. A major part of the strategy is to concentrate 
on tuberculosis, not only to do the traditional treatment 
process that works very well but also to do some research to 
see what can be done in this area.
    We have been strongly supported by a group from Princeton, 
which is in your home state, which has been very helpful to us 
in developing the strategy. They have come down and consulted 
with us, so we appreciate that very much.
    But in terms of getting into a medical area that I would 
find difficult to discuss with you, I think I would prefer to 
give you a full and complete answer as part of the record. We 
have some medical doctors who work at AID who are really 
outstanding and I would rather have them come here and answer 
those questions. They will be able to provide you with an 
answer for the record.
    Mr. Frelinghuysen. So we are doing some domestic 
partnering.
    Mr. Atwood. Yes, indeed.
    Mr. Frelinghuysen. And what about working with the program 
that is being funded by George Soros in Russia? The objectives 
seem to be somewhat parallel. If we were to work together, and 
perhaps we are, could we do more?
    Mr. Atwood. Yes. It is a good program. We have had a 
medical partnerships program in Russia that addressed systemic 
health issues. We have attempted to modernize medical and 
nursing curricula, work on health management training, 
workforce planning, infection control and health promotion. In 
some of these areas the Soros Foundation is also working.
    I can't say that in the case of the NIS that as large a 
portion of the budget goes into health as it perhaps should, 
given the conditions there, but we made a major commitment to 
transforming those societies in terms of their governance, 
democratic governance, and the market economies. So most of the 
resources go into trying to implement that strategy and if we 
succeed there, they will have more of their own resources to 
put into the health area.
    Mr. Frelinghuysen. Shifting gears, I would like to get some 
further comment from you from that portion of your prepared 
remarks entitled ``The Budget Squeeze'' category.
    You have in your remarks here, ``When overall budgets are 
cut and earmarked items remain intact and when earmarks 
increase faster than overall budget increases, important 
development programs are jeopardized.''

                               indonesia

    You raise here, and I quote, ``A case in point is 
Indonesia, where beginning in 1995, the combination of 
decreasing operating expense funds and the scarcity of program 
funds for economic growth activities led to the decision to 
curtail USAID's large and diverse policy and institutional 
reform programs.''
    Well, I am not intimately knowledgeable about what you were 
doing in 1995 and prior to 1995. You did say in your statement 
that you were advising the Securities and Exchange Commission, 
you were advising the Ministries of Plan and Finance. I assume 
you weren't alone in those types of advisory positions. I am 
surprised by how many groups are in that part of the world. You 
have TDA. You have OPIC. You have the Ex-Im Bank. I assume they 
all have players cross-pollinating and supporting in one way or 
the other the financial and planning apparatus. Would that be 
your assumption, as well?
    Mr. Atwood. Yes, but they have a different function. Their 
main goal and mission as agencies is to promote American trade, 
and that is a very worthy goal, but when people from, for 
example, the Indonesian government look at people representing 
trade promotion agencies, they say, well, there is a more 
narrow national interest that is being pursued here rather than 
the development of our economy.
    So I think the fact that we have been on the ground for so 
many years and have helped train so many of the economic team 
in Indonesia, one could suggest that perhaps the training 
didn't go far enough.
    Mr. Frelinghuysen. That was going to be the next question. 
With all these high-powered groups in there, some with 
particularly financial objectives in terms of cash flow and 
capital investment and opening markets for American companies 
and investments, you had a particular role with the Ministries 
of Plan and Finance and certainly your people and others must 
have been aware that there was a huge amount of corruption, 
nepotism, cronyism, financial mismanagement. Did we miss 
something along the road here?
    Mr. Atwood. No. We saw it. We saw the vulnerabilities of 
the system. We attempted obviously to work with people that 
were attempting to clean up the system. It is obviously 
delicate to talk about publicly but I think it is fairly 
obvious what has been happening. There is a good dose of crony 
capitalism that has occurred as that country has grown up over 
the years and the people who practice this for their own 
benefit, to establish a power base in the country, have 
resisted the kinds of reforms that we have been promoting.
    But I do think if we can work with a finance minister or a 
minister of plan that is a reformer and put an adviser in their 
office, if we have that much trust, this is a good thing. But 
what we had to do because of the squeeze that you allude to was 
to reduce our staff considerably and take these advisers out 
and we basically negotiated to put World Bank advisers in, 
people from other countries that might have had other motives 
into these ministries--not motives of maintaining corruption 
but motives that would have served their own countries' 
interests more than ours.
    So that is what I mean by the squeeze. I want to make it 
clear, Mr. Chairman, I am not blaming the Congress for the 
squeeze alone. The executive branch has its own priorities. We 
say we want, as someone said here earlier, $46 million more for 
the environment, we look at our budget carefully to decide what 
is the right kind of balance. We send it up here, recognizing 
that you have a right, under our system, to make your own 
judgments about what should be here.
    The combination of the two, though, does reduce the 
flexibility that we have and when you do have a budget crunch, 
then some things get left out. In the case of Asia and perhaps 
because it is so remote--maybe if you were from the West Coast 
you wouldn't say that, but because it has beendoing relatively 
well recently, up until the crisis, we say, ``All right, we can protect 
Africa, we can protect Latin America, but we didn't protect Asia.'' The 
consequence is that we don't have the monies to move in when we face 
the kind of crisis that we faced recently.
    Mr. Frelinghuysen. Would you talk for a minute about what 
reports you received from your AID personnel on the ground in 
Indonesia and some of these other countries--Thailand, South 
Korea, and so forth? Would you comment on what you hear?
    Mr. Atwood. Basically what we have known, that some out 
there would prefer perhaps to characterize as cultural 
differences. The fact of the matter is that they have had very 
weak banking supervision and standards. They have been 
overextended with respect to loans that the governments out 
there have guaranteed.
    This obviously has collapsed all at once and the problem 
that everyone worries about now is the contagion problem, 
whether or not lack of confidence in one country will impact on 
that of another.
    I do think Korea and Thailand have done extraordinarily 
well in responding and I think it is to some extent the 
strength of their democracy that has helped--Kim Dae Jung may 
be perfectly positioned to deal with labor unions, for example, 
given his past record, and he has just been elected and seems 
to be doing a good job. The Thai government has, as well.
    We still are struggling with the Indonesian government and 
hope that they will implement the IMF agreement.
    Mr. Frelinghuysen. I looked at your blue book on what we 
give to Indonesia. Would you just tell us for the record what 
our annual contribution is? It didn't seem to be in a 
multiprogram category.
    Mr. Atwood. It has been reduced considerably.
    Mr. Frelinghuysen. And while you are looking for that 
material, is it true that the Treasury Department is asking for 
$5 million for a technical assistance program, a new program 
outside of AID? Are you aware of such a proposal and do you 
support it? This is a technical assistance program.
    Mr. Atwood. In the fiscal '99 budget request I believe in 
the President's budget the Treasury Department has requested $5 
million to provide assistance to finance ministries who request 
that type of assistance.
    And the number for Indonesia for fiscal '98 is $43.8 
million. And for the FY 1999 USAID request that you have before 
you, it is $38.4 million.

                          international trade

    Mr. Frelinghuysen. Shifting to another part of the world, 
to Africa, you are off to Africa Sunday and you said the theme 
of your trip is aid creates trade.
    Mr. Atwood. That is my theme. The President may have 
broader themes.
    Mr. Frelinghuysen. Well, just taking your theme----
    Mr. Atwood. He wouldn't disagree, however, with that.
    Mr. Frelinghuysen. I will just take your theme because you 
are in front of us, before the committee. When you say aid 
creates trade, the subtitles may be aid creates fair trade, 
free trade, honest trade, open markets, these types of programs 
and attitudes and ways of dealing.
    Our battle in Congress these days is working towards doing 
something relative to the International Monetary Fund. Many 
members of Congress would like to see included in supporting 
IMF a lot of the provisions that I am somewhat alluding to here 
under your title, ``aid creates trade.''
    I would like to know what your feelings are. I know the 
House and Senate are looking at a lot of provisions which sort 
of incorporate these goals and objectives. Some might call them 
conditions, provisions. There is a certification issue.
    I was just wondering how you weigh in on what the House and 
Senate feel are very important aspects of international trade, 
most particularly our government's positions.
    Mr. Atwood. I will respond to that by pointing out an irony 
in my own mind. That is, many developing countries really don't 
want to reform their economies and create economic systems that 
are open and transparent and with whom we can deal and create a 
level playing field for us, versus their normal relationships 
in some cases with former colonial partners, they see the IMF 
as a tool of the United States almost exclusively.
    In their minds it is a very tough tool sometimes. We tell 
them that they can't keep spending so much money on patronage, 
that they have to raise more revenues so that they can pay for 
social sectors, that they have to stop taxing trade to the 
extent they do. There is a whole series of things the IMF does 
and it is always bitter medicine. The usual, at least behind-
the-scenes, talk is this is just the United States exercising 
its influence over us.
    The irony up here, of course, is that the worry is that the 
IMF somehow is in someone else's hands, that they are not 
operating in our interest.
    Well, they very much are in the context of a global economy 
wherein we have to have a mechanism such as this to protect 
ourselves against the problems that now are created by the 
collapse of some of these economies in Asia.
    So I find some of the concerns somewhat mystifying. I think 
any IMF agreement--you could take Indonesia and analyze it 
carefully--you could pick apart pieces of it and say, ``Well, 
this isn't the way I would proceed,'' but frankly, I think that 
the IMF agreement is the only hope that Indonesia has to get 
out of the problem that they have and that is also in our 
interest.
    It was brought home when I met with Chairman Callahan last 
week when he said a company in his district is impacted by not 
having a supplier in Indonesia able to deliver the goods. I 
think increasingly, districts around the country are being 
faced with this.
    So I think it is very dangerous to flirt with the 
possibility of not approving the IMF support that we have 
requested.
    Mr. Frelinghuysen. I agree with you but my question really 
had to do with some of the conditions that both House and 
Senate members would like to see included, and I think if you 
could just briefly comment on that, then the good gentleman 
from Georgia has some comments.
    Let me recognize Congressman Kingston.
    Mr. Kingston. I know that when the Chairman gets interested 
in IMF and Indonesia and so forth, he has an intense knowledge 
of it, so it is a passion with him.

                           save the children

    My question is, Mr. Atwood, I read with shock and 
disappointment the story about the Chicago Tribune sponsoring 
children through Save the Children and some other well 
respected international groups getting letters from 10-year-
olds about how much their aid and support meant and how much it 
had changed their lives and how these kids, in reality, were 
already dead or some of them gone and lost to the winds or 
whatever.
    You are not in an enforcement position but you run in the 
international circles. You have a lot of care and worry and 
spend a lot of your time and mission providing for children. 
What was your reaction to this and what are you hearing in the 
international community?
    Mr. Atwood. I am not exactly sure what you are referring to 
and I am not sure on the basis of this note, either, what you 
are referring to.
    Mr. Kingston. Well, I tell you what I could do. I could 
send you some information on it. It was a cover story in our 
Savannah Morning newspaper on Sunday, how basically these 
children and their photos and so forth were used for a 
marketing tool, not really to help children.
    You know, these are people that we all respect and love and 
organizations that we have a lot of compassion for but may be 
near fraud on what they were doing.
    Again I know you are not in enforcement but you run in the 
circles. If you had anything to say on it, I would be 
interested in your comments.
    Mr. Atwood. It is the worse kind of abuse. A lot of NGOs in 
this country who are basically humanitarian NGOs, 99 percent of 
them are just what they say they are and truth in packaging. If 
you make a contribution to them, you are making a contribution 
to children or to people who need that help.
    But there is that 1 percent who will take advantage of the 
goodwill of the American people and appeal to you with 
wonderful pictures of children in need, and the American people 
will respond to that. It has been seen time and time again. And 
I think those people ought to be put away and someone should 
throw the key away. That is just a horrible abuse of 
advertising, if you will.
    Mr. Kingston. One of the sad parts about the article in 
terms of where do we go from here, it said that there is really 
not much regulation or enforcement and it did not even say who 
should be doing something about it. Should Congress do it? Is 
this mail order fraud? I am not really sure where to go on it.
    Mr. Atwood. It is an interesting thought. The problem is, 
of course, they are exploiting situations outside our borders 
and usually outside our law enforcement capacity.
    Mr. Kingston. I appreciate it and if there is anything that 
you come up with along the way, we would love to hear from you 
on it.
    Mr. Atwood. Great, okay.
    Mr. Frelinghuysen. Thank you, Mr. Kingston.
    Administrator Atwood, thank you very much for your 
testimony this morning. There will be a number of questions 
that will come to you as a result of this hearing. We would 
appreciate your prompt reply.
    We stand adjourned. Thank you very much.
    Mr. Atwood. Thank you, Mr. Frelinghuysen.
    [Questions and answers for the record follow:]

         Question for the Record Submitted by Chairman Callahan

                                 bosnia
    Question. Two years ago I led a Congressional Delegation to Bosnia 
to review the prospects for peace in the nation, and to determine 
whether we should support an economic reconstruction effort.
    In the past two years, I have met my commitment to the President, 
and more. Not only have we appropriated every penny of the $600 million 
for economic reconstruction, we've provided funding for police 
training, assistance to refugees, contributions for elections, and 
contributions to the war crimes tribunal. From 1995 through 1998, the 
Administration has received approximately $1.1 billion from the Foreign 
Operations Subcommittee for all aspects of the Dayton Peace Accords.
    For 1999, you are asking for an additional $225 million for Bosnia, 
including $200 million for economic reconstruction, despite earlier 
assurances that $600 million would be our total commitment.
    a. Will other nations, especially European nations, be making 
additional contributions as well? How much has been pledged by these 
nations for 1999?
    Answer. Presently, the European states, like the U.S., are 
undergoing their own budget processes. But when the issue of future 
funding levels for Bosnia has been raised with officials of the 
European Union and a number of the significant European bilateral 
donors, they indicate that their intentions are similar to ours: to 
maintain 1999 levels of assistance for Bosnia at roughly 1998 levels. 
The EU has expressed its long-term commitment to Bosnia.
    The United States, with its combined 1996-97 commitments of $469.3 
million, was the third largest donor after the European Commission's 
$649.9 million and the World Bank's $517.6 million. As a group, 
European donors committed 49.9% of the committed funds and the United 
States committed 15.2%.
    Question. What is the ``exit strategy'' for the phase-out of our 
economic reconstruction program, and when will this termination occur?
    Answer. Within two years, USAID expects that other donors will 
assume responsibility for remaining infrastructure repair. However, 
USAID anticipates continued work in Bosnia for ourselves and our 
partners to foster the emergence of a private sector; to develop joint 
institutions needed for inter-entity cooperation; to continue technical 
assistance to further needed economic reforms; to create a conducive 
legal/regulatory environment for business and investment; and to 
strengthen democratic institutions and principles. These are the same 
objectives as in other countries in the SEED program. We and other 
donors have made it clear to both Federation Republika Srpska leaders 
that donor engagement and generosity is not indefinite and that further 
assistance depends on their commitment to real economic reform and 
democratic progress, including human rights.
                             usaid staffing
    Question. According to information received by the Committee, at 
the end of fiscal year 1997, USAID had a total of 6,933 staff; by the 
end of this fiscal year, you estimate you will have 7,464 staff; the 
fiscal year 1999 budget assumes a staffing level of 7,425. That would 
be a seven percent increase over two years.
    Even if you exclude foreign nationals and contract staff, U.S. 
direct-hires would increase from 2,218 at the end of fiscal year 1997 
to 2,242 at the end of 1999.
    Why are your staffing levels increasing this fiscal year and in 
1999 over 1997 levels? Why is USAID increasing staff when you 
implemented a Reduction-in-Force in 1996 of almost 200 positions in 
order to adjust to lower staff levels for the future?
    Answer. Let me answer the question relating to U.S. direct hire 
first. Yes, we plan a slight increase in our FY 1999 U.S. direct hire 
workforce levels, 24 employees or about a 1 percent increase, over the 
end-of-year FY 1997 levels. Even with this slight increase, which is 
primarily for the International Development Intern (IDI) program, the 
estimate for U.S. direct hire levels by the end of FY 1999 is still 120 
below the actual on-board level at the end of FY 1996--post RIF.
    The increase in other staffing categories is primarily related to 
program funded staff, 450 of the total increase of 468. There are 
legitimate needs for program-funded staff to help us deliver 
assistance, to provide state-of-the-art expertise we need in areas like 
AIDS, global climate change, and financial markets. It should also be 
noted that the end of FY 1997 levels are actual people on-board, and 
the FY 1998 and FY 1999 levels are projections, which always exceed 
``actuals''. Nonetheless, I do find the sharply increased projected 
levels of concern. Therefore, will be asking each regional bureau, in 
coordination with the Management Bureau, to review the issue of 
expanded program-funded staff as we review each mission program over 
the next four months with a view to eliminate those which are not 
considered essential to the Agency in terms of delivering results.
                        reagan building security
    Question. The Summary Report of IG/SEC Activities (4/1/97--9/30/97) 
of the USAID Inspector General notes on page 10 that most of the Reagan 
Building's ``security features have yet to be completed.'' The report 
then lists 7 security problems, including vehicle barriers, shatter 
resistant window film, the access control system, guards, intelligence 
sharing and security training. Please provide a status report on each 
problem identified in the report, and plans USAID has to address these 
problems if they had yet to be resolved at this point. Please indicate 
whether the USAID Inspector General agrees that these problems have 
been resolved, if USAID believes they have been resolved.
    Answer. The status of the seven security problems listed in the 
Summary Report of IG/SEC Activities (4/1/97--9/30/97) of the USAID 
Inspector General is as follows:
    (1) Vehicle barriers: This matter is best answered by the General 
Services Administration (GSA); however the following information can be 
provided: hydraulic bollards have been installed in two of the three 
building vehicle entrance/exit ramps. Installation in the third 
entrance/exit ramp is currently underway. The Federal Protective 
Service (FPS) of GSA will train the guard force on the operation of the 
bollards after all three sets are tested and fully operational. The 
projected operational date for the bollards is late spring, 1998. 
Entrance ramp guards currently perform a cursory inspection of vehicles 
belonging to the public by using Berringer devices to detect explosive 
residue.
    (2) Shatter resistant window film: A USAID funded window hazard 
assessment study recommended application of shatter resistant window 
film in the building. GSA has given USAID authorization to proceed with 
having protective window film applied to exterior building windows 
adjacent to USAID-occupied space. Requests for price quotations have 
been sent out by USAID and one vendor has replied to-date (4/3/98). 
USAID plans to award a contract and have the film installed by the end 
of FY 1998.
    (3) Access control system--GSA portion of the building: This matter 
is best answered by GSA. From the USAID perspective, there appears to 
be virtually no change in status on this item, i.e., the building 
access control systems are not in operation. Members of the public have 
unrestricted access to the garage as well as to the government office 
space in the basement levels of the building.
    (4) Access control system--USAID portion of the building: Over 95% 
of the system is installed. Acceptance testing by USAID has been 
refused as of 4/3/98 due to frequent system-wide failures and 
unexplained shutdowns. There continue to be problems with the 
turnstiles at the main USAID entrances. A number of contractor 
companies continue to require entry into the USAID-occupied portion of 
the building to complete construction or make repairs.
    (5) Guards: FPS identified July 1, 1998, as the start date for the 
permanent guard contract. Guards provided by the temporary guard 
contractor will remain until that time.
    (6) Intelligence sharing: Beginning March 30, 1998, FPS began 
providing USAID and other federal tenants reports of incidents 
occurring in the building. Intelligence and threat-related information 
has not been made available.
    (7) Security training: There has been no change in the status of 
this item. FPS has not advised USAID of any plans to provide the 
promised briefings in the areas of crime prevention, handling bomb 
threats, recognizing suspicious packages, and anti-terrorism.
    USAID is working with GSA to remedy and bring closure to the above 
noted problem areas.
    The USAID Inspector General agrees with the assessment of the 
problems as stated by USAID.
              usaid inspector general on usaid management
    Question. In December of last year the USAID Inspector General 
responded to a request from the Majority Leader, Mr. Armey, for 
information on the most serious management problems facing the Agency 
for International Development. The Inspector General responded with a 
list of ten significant problems for USAID management, all involving; 
financial management; information resources management; human resources 
capabilities; and program management. For the record, could you respond 
to each of the ten issues raised by the Inspector General; indicate 
whether these problems were present at the beginning of 1993; provide 
information on steps you have taken since that time to deal with these 
problems; and provide information on how you intend to resolve these 
problems in the future, including a schedule for ending each problem 
and, for each, the milestones you intend to reach as the agency works 
to resolve them.
    Answer. Four of the ten management problems identified by the 
Inspector General relate to deficiencies in USAID's financial 
management systems--the primary accounting system, data 
reconciliations, accounts receivable and the direct loan program. USAID 
has identified the lack of effective, integrated financial management 
systems as a material weakness under the Federal Managers' Financial 
Integrity Act (FMFIA) since 1988. A number of actions have been taken 
since that time to address this deficiency, including the development 
of the Worldwide Accounting and Control System (AWACS). An independent 
verification and validation (IV&V) of USAID's New Management System 
(NMS) was recently conducted by IBM and Coopers & Lybrand under the 
oversight of GSA's Federal Systems Integration and Management (FEDSIM) 
Center. AWACS, a component of NMS, was evaluated as a part of this 
process.
    The IV&V confirmed many issues identified by the Inspector General 
and recommended the replacement of AWACS with a commercial off-the-
shelf (COTS) system. In consultation with OMB, USAID has concluded that 
there is substantial cost, schedule and organizational risk in trying 
to implement a COTS accounting system by October 1, 1999. We need to 
lower our risks and examine alternatives that may also include longer 
range plans for using a combination of outsourcing, cross-servicing and 
COTS packages to meet the financial management requirements. We have 
already decided to outsource the loan servicing function. A Request for 
Proposals (RFP) has been issued and we expect to have a contract 
operation in place by the end of the fiscal year. Coopers & Lybrand 
will also assist us with financial management business process 
improvement, requirements analysis, and an investment analysis on other 
possible options for out-sourcing, cross-servicing and COTS solutions. 
This work commenced in mid-April and will be completed by October 1998. 
USAID will select a prime contractor with substantial software 
development experience to implement the new accounting system and 
modify other components of NMS. Once the Coopers & Lybrand work is 
completed and a prime contractor selected, we will be in a better 
position to provide more detailed information on milestones and 
timeframes for resolving the deficiency.
    The lack of comprehensive and fully documented financial management 
policies and procedures has been identified as a material weakness in 
USAID's FMFIA report since FY 1993. Financial management policies 
formerly contained in a USAID handbook must be rewritten as a part of 
the Agency's Automated Directives System (ADS). This has been a slow 
process, partially due to the problems experienced in implementing an 
integrated financial management system. While we are completing 
chapters for the ADS, we have established a formal means of 
communicating financial management guidance. We expect that this 
deficiency will be fully corrected in FY 1999.
    The reporting and resource management capabilities of NMS were 
identified as material weaknesses for the Agency in FY 1997. As a 
follow-on to recommendations from the IV&V, USAID will also perform an 
investment analysis on the proposed renovations for the remaining 
components of NMS (Operations, Budget, Acquisition and Assistance) to 
determine if the cost to repair is less than the cost of replacing 
components with available COTS packages where they exist. Timeframes 
for correcting the deficiencies can be developed when this work is 
completed.
    The lack of effective information resources management (IRM) 
processes and the overall computer security program were also 
identified as material weaknesses in FY 1997. USAID has taken a number 
of actions to address these deficiencies. A new Director of the Office 
of Information Resources Management was appointed and is focusing 
exclusively on managing the Agency's information resources activities. 
In accordance with the Clinger-Cohen Act, we have also established a 
Capital Investment Review Board (CIRB) to provide broad management 
oversight for investments in information technology. We recently 
contracted with a consulting firm to analyze existing capital 
investment review and management processes and to recommend a process 
that meets the requirements of the Clinger-Cohen Act. The contractor 
has completed a description of the current process and identified gaps 
between the current investment review process and that required by 
legislation. The report also provided recommendations for improvements 
in the five key investment areas--strategic planning, systems, project 
planning and control, organization and process. The contractor is 
scheduled to complete a revised information technology investment 
process in May 1998.
    A senior manager was also appointed to implement an effective 
computer security program.
    An information systems security program plan has been developed and 
is now being reviewed. The plan outlines the program elements and 
resources required to implement an effective program. We expect to 
fully implement the plan and have a comprehensive computer security 
program in place by FY 2000.
    The Inspector General expressed concern that USAID has lowered the 
level of in-house technical expertise to a point that raises serious 
questions as to whether we have the proper mix of technical skills 
necessary to manage/monitor the development assistance programs. The 
cut in technical staff since the beginning of FY 1993 has not been 
disproportionate to overall staff cuts. The Foreign Service (FS) 
workforce overall has reduced by over 33 percent since the beginning of 
FY 1993 with an almost equal reduction in FS technical staff. Over the 
same period, the Civil Service overall has reduced by more than 27 
percent, with a reduction in technical staff of just under 18 percent. 
(All numbers exclude the Office of the Inspector General.)
    At the beginning of FY 1993, the technical staff represented nearly 
40 percent of the FS and 10 percent of the Civil Service workforce. As 
of March 31, 1998, technical staff continues to represent 40 percent 
and 10 percent of the FS and Civil Service workforce, respectively. Of 
the 27 International Development Interns (IDIs) on board as of March 
1998, 15 (or 55.5 percent) will graduate into the technical 
specialties. In addition, a number of non-direct mechanisms for 
acquiring technical expertise are used to complement the direct-hire 
expertise and to maximize flexibility.
    We will launch a study in April 1998 to define the technical 
staffing needs and functions for the entire workforce and propose 
optimal distribution by sector and among missions and bureaus in 
Washington.
    The Inspector General also expressed concern that USAID's program 
mandate is still too broad to manage with its existing financial and 
human resources. Every year that we go through a budget cycle, as we 
struggle to match directives, earmarks and priorities with need and 
resource levels, we are reminded that the expectations others have for 
us are, indeed, broad and multi-faceted. There is nothing new about 
this problem; it has been documented in several studies, most recently 
the Wharton Task Force Report of 1993. However, the environment in 
which we can address it has changed for the better, we believe, as a 
result of the Government Performance and Results Act (GPRA).
    Partly in response to GPRA and partly in response to the end of the 
Cold War, the Secretary of State, in cooperation with the heads of 
other U.S. international affairs agencies, including USAID, has acted 
to more clearly and precisely define U.S. national interests at stake 
in the world and strategies through which the U.S. expects to pursue 
its national interests. These are laid out in the U.S. Strategic Plan 
for International Affairs.
    In response to these same factors, USAID has also prepared a 
longer-term strategic plan which identifies those key U.S. national 
interests to which USAID contributes and the performance goals to which 
it expects to contribute over a ten-year period. USAID's Strategic Plan 
is directly linked to the U.S. Strategic Plan for International 
Affairs. This will give us a more solid base for discussions with 
Congress about whether USAID's mandate is too broad.
    We believe there are broad areas of agreement between Congress and 
the Administration on what we should be accomplishing through our 
sustainable development resources, including those provided through the 
Support for East European Democracy (SEED) Act and the FREEDOM Support 
Act, and that portion of economic support funds USAID administers 
directly. We fully expect our continuing discussions with Members of 
Congress and Congressional Staff will add to our areas of agreement 
and, thereby, narrow USAID's mandate to initiatives linked to critical 
U.S. national interests.
    We are concerned, however, that our efforts to manage for results 
are being confused with the ``breadth'' of our mandate. For example, it 
has been said that the indicators we use to manage at the mission level 
number in the hundreds. This is true, because our managers, at this 
level, need this detail to make appropriate implementation decisions. 
We do not, however, aggregate all of this information at the Agency 
level. At the Agency level, we will be using approximately 35 
indicators to report performance. We do not believe this number is 
excessive.
                          african initiatives
    Question. The 1999 budget includes a number of initiatives for Sub-
Saharan Africa, including:
    $30 million for a trade and investment initiative for Africa;
    $25 million for an Africa great lakes initiative;
    $2 million for a South Africa Development Community Initiative;
    $21 million for a food security initiative;
    $26 million for an education initiative; and
    $35 million for the Treasury Department to fully forgive debt owed 
by African nations to U.S. government agencies, including loans made by 
USAID.
    You add these initiatives up and you reach $139 million--and we may 
have missed a few in our initial review of your budget request. While 
some of these are to be funded from within base levels, $107 million 
represents an increase above last year's level.
    What is the relationship between these requests? What are they 
designed to achieve? How are they different from on-going or past 
activities?
    Answer. All of these initiatives emerge from the changing 
development reality in Africa, what some have called the ``African 
Renaissance,'' and the new partnership between the United States and 
Africa. Development assistance for the Food Security Initiative ($21 
million) and the Education Initiative ($26 million) falls within base 
levels. Only the $30 million in development assistance for the Trade 
and Investment Initiative is above the base level and represents an 
increase over last year's request. Economic Support Funds for the South 
Africa Development Community Initiative ($2 million), the Great Lakes 
Initiative ($25 million) and the Education Initiative ($10 million) as 
well as $35 million for the Treasury Department for debt forgiveness 
also represent an increase over last year, bringing the total increase 
over last year to $102 million.
    These initiatives center on two of the Administration's major 
foreign policy goals for Africa--bringing Africa into the global 
economy and reducing the incidence of violence. Four of the initiatives 
mentioned--trade and investment, food security, SADC and debt relief--
are connected to the President's Partnership for Growth and Opportunity 
launched in 1997. Opening American markets to African exports and 
creating a new Forum for high level discussion of these issues between 
the United States and reforming states of Africa, are the major 
elements of this new partnership.
    The Education for Development and Democracy Initiative is built on 
the recognition that for the fragile political and economic 
transformations taking place in Africa to be sustained, much more 
attention has to be paid to African education. Finally, the Africa 
Great Lakes Initiative is designed to create some of the conditions for 
a return to the rule of law in the area and to end the cycle of 
bloodshed which the President spoke so eloquently about in Rwanda.
    For the most part, these initiatives allow the United States to 
promote these objectives more fully by expending more resources in a 
concerted way. In the area of food security, for example, USAID intends 
to expand its programs in agricultural technology development and 
agricultural marketing in five countries. The initiative resources 
enable us to increase our level of effort. Similarly, in the case of 
the education initiative, we will be building on past successes, 
particularly in the area of university partnerships, but we will be 
trying some new ideas as well. In the case of the Africa Great Lakes 
Initiative we will be doing something completely new in this part of 
Africa, although we have had experience in rule of law programs in 
other parts of the world.
                         child survival account
    Question. This year the Administration finally included a child 
survival account in the President's request. However, the budget for 
child survival and diseases would be cut by $47 million. Although the 
bulk of this reduction is in disease programs, HIV/AIDS funding is 
exempt from the cut.
    Your budget request indicates the reason for the cut is ``to 
provide funds to broader activities such as those which provide 
economic opportunities for families to better support themselves and 
their children as they move from childhood into . . . adulthood.''
    In other words, did you fund Administration priorities at the 
expense of child survival programs?
    Funding for most of the major sectors of AID's activities would be 
increased in 1999 over 1998; family planning would increase by $32 
million; environment programs would increase by $46 million; economic 
growth activities would increase by $38 million. On the other hand, 
child survival and disease programs would decline by $47 million. 
Aren't child survival and disease programs at least as important as the 
other programs I've mentioned?
    Answer. I fully agree that child survival and disease programs are 
extremely important. Our request for FY 1999 is not meant to signal a 
reduction in the importance we attach to these programs. The very fact 
that we have requested a separate account, including a separate 
category for the new disease initiative, demonstrates the importance we 
give to these programs and activities.
    Our approach is based on the realization that work to reduce the 
threat of infectious diseases and to children's survival is integrally 
linked to, and must be supported by the Agency's efforts in other 
areas.
    Social and economic conditions such as poverty, malnutrition, lack 
of education, poor sanitation, overcrowding, environmental degradation 
and rapid population growth all allow infectious diseases to flourish 
and spread and have a very detrimental effect on the lives of children. 
Our efforts in the area of child survival and disease are made all the 
more effective when these other issues are adequately addressed. To 
this end, USAID's FY 1999 request increases funding for a number of 
sectors that we believe have in the past been under-funded. They 
address some of the underlying social and economic conditions that 
impact on health and disease.
    The funding choices we have made have been very difficult. But, 
they do not in any way reflect a decision on the part of USAID that 
child survival and disease activities and programs are of secondary 
importance. We believe the investments we make in these other areas are 
critical complements to USAID's work to address infectious diseases and 
improve child survival.
                 usaid missions in vietnam and pakistan
    Question. I understand the Administration and USAID are looking at 
the possibility of opening USAID missions in Vietnam and Pakistan.
    a. Is that true?
    b. If so, do you intend that the funds currently allocated through 
USAID for East Asia will be reallocated to pay for these assistance 
programs, or will funds for Latin America and Africa be cut?
    c. Without expressing any opinion about the desirability of 
providing assistance to these particular countries, can we open new 
missions in the current budget environment?
    Answer. USAID is not looking into the possibility of opening a 
USAID mission in Pakistan. However, USAID does assist U.S. non-
governmental organizations (NGOs) working in Pakistan with direct 
grants from USAID Washington. These grants are supporting NGO 
activities in Pakistan's social sector (e.g. maternal and child health, 
literacy and basic education) and will be continued this year with ESF 
resources.
    USAID is looking at the possibility of opening a small 
representative office (not a full mission) in Vietnam in FY 1999. FY 
1998 funding for the Vietnam program consists primarily of ongoing NGO 
projects in prosthetics, orthotics, rehabilitation, orphans and 
displaced children. We are also continuing the advisory activity in 
commercial law and trade reform authorized by the Congress last year, 
and we are including Vietnam in an Asian regional HIV/AIDS activity. 
These activities may be expanded modestly as funding and management 
capacity permit.
    FY 1999 management arrangements, funding and programming for 
Vietnam will depend upon overall resource availabilities and 
priorities. Our FY 1999 request does not identify funding specifically 
for Vietnam. We would, of course, expect to consult with the Congress 
on any changes in our Vietnam activities in FY 1999.
                    usaid accounting system changes
    Question. IBM recently completed a study that indicates there are 
extremely serious problems with the $100 million computerized New 
Management System of AID. This Subcommittee and the AID Inspector 
General have been raising concerns about the system for several years.
    The accounting subsystem, which is the most important part of the 
financial controls of the agency, does not work. As a result, we cannot 
obtain accurate information on assistance pipelines and on other 
financial data.
    It is difficult to defend the operations of the agency when we do 
not have accurate financial information about the taxpayer funds that 
are provided to AID.
    What management changes have you made or will you make, to ensure 
that AID can obtain an accurate accounting system?
    Answer. USAID has designated an Acting Chief Information Officer 
(CIO) and an Acting Chief Financial Officer (CFO) to provide essential 
leadership and oversight to the NMS program and implementation of 
reliable accounting system. The CIO is applying industry best practices 
by establishing integrated product teams working with a prime 
contractor under a performance-based contract to oversee the work 
required to fix the NMS and implement a quality financial management 
system. The overarching integrated product team is headed up by the 
Acting CIO with the Acting CFO and other senior managers overseeing the 
efforts of NMS program teams to assure coordination and accountability 
for delivery of quality products within cost and on schedule. USAID 
recognized that it does not have the capacity to do software 
development. USAID will select a prime contractor with substantial 
software development experience and mature processes to bring industry 
best practices to implement a commercial off-the-shelf accounting 
system and examine cross-servicing and out-sourcing options, as well as 
fix other components of NMS. USAID management is enhancing its 
organizational capability to be a first-class software acquisition 
organization focusing on performance based contracting, requirements 
management, project monitoring, and contractor evaluation. The NMS 
full-time project manager will monitor the work of the prime contractor 
and work with an owners group, composed of USAID employees 
knowledgeable on the requirements of each of the system components, to 
develop requirements and evaluate the quality of the products 
delivered. Formally chartered integrated product teams with clear 
performance goals will partner with the prime contractor to plan, 
implement, monitor and evaluate for program success. This management 
approach will address the deficiencies of past management practices.
    Question. What management changes have you made or will you make, 
to ensure that the agency does not make the same management mistakes 
again?
    Answer. USAID management has recognized the critical role that 
regular independent assessments must play in its software quality 
assurance plan to insure that both management and the IG have access to 
timely and accurate information about software development problems 
early on in the requirements analysis, planning and design phase. USAID 
has developed a software acquisition strategy that includes a number of 
best practices to enhance management control over the NMS program. The 
prime contractor will have highly qualified program management staff 
partnered with USAID NMS program management staff to provide accurate 
and timely reporting to USAID senior management on the progress, issues 
and risks associated with the NMS program. Greater attention will be 
placed on requirements analysis and planning to identify and correct 
problems early in the project life cycle when they are relatively easy 
to address. The prime contractor will be expected to maintain a 
rigorous software quality assurance plan. Through regular independent 
assessments of contractor performance combined with more rigorous 
contract monitoring and evaluation, USAID will also identify 
deficiencies early and place the responsibility on the contractor to 
address them. This will provide USAID management with more reliable and 
predictable data on product quality, costs and schedules.
    Question. Why should the Subcommittee consider funding for the new 
initiatives in the President's budget when we cannot account for how 
funds are currently being used? Isn't your first priority the 
correction of your financial management system?
    Answer. Achieving Year 2000 compliance in mission-critical 
information systems and implementing an integrated accounting system 
that is compliant with federal fianncial management requirements are 
among the highest priorities within the Agency. The resources needed to 
successfully complete these efforts have been allocated. USAID will 
continue to rely on its multiple accounting systems, making 
improvements as needed to strengthen management controls and deliver 
more reliable financial reports. The Agency has sufficient capacity to 
manage these new initiatives while making incremental improvements in 
its accounting systems to better track how funding is being used.
    Question. In a Semiannual Report to Congress (April 1, 1997-
September 30, 1997), the Inspector General reported that ``the failure 
to follow accepted systems development practices [for the New 
Management System] was due to underlying organizational and management 
deficiencies that allowed substandard information resources management 
practices to continue despite high risks of adverse consequences''. Do 
you agree? What steps has AID taken to rectify these problems?
    Answer. USAID did not have the expertise to manage a software 
development project of this complexity. As a result, it did not have 
the essential project management information to inform senior managers 
regularly of the risk, quality problems, cost overruns and schedule 
slippages that were occurring. Senior managers incorrectly believed 
that incremental improvements could be made and were being made to 
remedy these problems and bring the system to full functionality.
    The IG recognized key indicators of software problems but also 
lacked sufficiently detailed information on the full extent of the 
problems to inform senior managers about the steps needed to correct 
them. At the time the Semiannual Report to Congress was made, our 
mutual concerns did indicate that an independent assessment was needed 
to examine the software, organizational and management deficiencies.
    The independent assessment was delivered at the end of January 
1998, and USAID management and the IG for the most part agree on the 
deficiencies and the next steps the Agency must take. This is reflected 
in the IG's Audit Report on the New Management System Status dated 
March 31, 1998. The IG highlights areas that still need further 
analysis, which the Agency will address once it has selected a prime 
contractor with the requisite technical skills to perform that 
analysis.
                    unicef assistance to north korea
    Question. The Agency for International Development has $190 million 
to respond with humanitarian and other assistance when disasters strike 
around the world. During the current year, the Agency provided $5 
million for a UNICEF program in North Korea.
    I don't want to debate whether we should be providing North Korea 
assistance or not. There are some in Congress who argue that any money 
going to that country indirectly subsidizes the current regime, which 
is probably the most repressive in the world.
    However, in providing the assistance to North Korea we want to 
ensure that it is going directly for humanitarian assistance, and not 
being redirected to the government or for any other activity.
    I understand the UNICEF, with AID's concurrence, agreed to North 
Korean demands that no Americans be allowed to monitor these funds 
beyond a two week period at the beginning of the program.
    Is that true? Why would we agree to something like this, when we 
threatened to bomb Saddam Hussein when he attempted to keep American 
inspectors out of Iraq?
    Answer. U.S. agreements with UNICEF and North Korea provide for 
U.S. citizens to monitor the program over extended periods. Individual 
U.S. monitors are limited to two week periods but since the monitoring 
visits are co-ordinated with an anticipated three separate deliveries 
of medical supplies for mothers and children, there will be 
considerable U.S. monitoring coverage during the implementation of the 
grant. In addition, international monitors approved by the U.S. will 
monitor the UNICEF program. Together, while not representing the U.S.'s 
preferred arrangement, we believe this monitoring agreement will ensure 
that our aid reaches the intended recipients. North Korea is not Iraq 
and we are dealing with monitoring the flow of humanitarian aid to 
destitute people not the existence of lethal weapons of mass 
destruction.
    The United States has negotiated long and hard with the North 
Koreans to ensure adequate monitoring of this grant. The North Koreans 
were reluctant to issue visas for U.S. monitors without a bilateral 
assistance agreement. The United States was unwilling to pursue such an 
agreement at this time. In addition to our insistence that American 
monitoring be allowed, we secured special monitoring arrangements for 
this grant, requesting that UNICEF negotiate additional coverage with 
the North Koreans. We could have relied simply on UNICEF's own capacity 
to handle the monitoring. UNICEF is a very capable organization, there 
is a system in place to distribute supplies to hospitals and pediatric 
centers, and the commodities, such as therapeutic foods for severely 
malnourished children, are not likely to be diverted to other uses.
    However, knowing that Congress was concerned about monitoring, we 
wanted to find a way to ensure continued presence for representatives 
of U.S. private voluntary organizations in North Korea. We, therefore, 
asked UNICEF to negotiate additional coverage, which they succeeded in 
doing. International staff from the U.S. PVOs have been assigned 
directly to UNICEF in North Korea for the duration of the current 
UNICEF appeal. In addition, U.S. staff from these same PVOs will also 
monitor the actual distribution of U.S. medicines and other 
commodities. These U.S. citizens are currently expected to be in North 
Korea on three separate visits, each of which will last approximately 
two weeks.
    Unlike in Iraq, where we seek compliance with arrangements on 
weapons, in North Korea we are attempting to assist people in desperate 
need with U.S. humanitarian assistance. The arrangements we have agreed 
to are adequate to the task of monitoring this aid. We are confident 
that the people who are delivering this assistance--UNICEF and the U.S. 
PVOs with the support from us that they fully deserve--will ensure that 
the program implementation and monitoring are effective.
             usaid ig draft audit report on usaid pipeline
    Question. The Inspector General of USAID has completed a draft 
report on the results of his audit of USAID's unliquidated obligations, 
or pipeline. He has concluded that $495 million of USAID funds in the 
pipeline as of the end of fiscal year 1996 was in excess of current 
program requirements: (a) $264.6 million was considered excess because 
it was not expected to be needed within a reasonable future period, as 
defined by forward funding guidelines; and (b) $148.9 million was 
unspent after all required goods and services were delivered and 
activities had been completed. Although this is a draft report, and not 
final, have you had a chance to review the Inspector General's 
conclusions? Do you agree with his findings? For the record, please 
provide your analysis of USAID's pipeline through the first quarter of 
fiscal year 1998 for all accounts and activities, and indicate what you 
believe to be obligations in excess of program needs.
    Answer. USAID agrees that some portion of the unliquidated 
obligations as of September 30, 1996, included funding which extended 
beyond the forward funding guidelines or was unspent after activities 
had been completed. In the absence of readily available information on 
the actual status of the obligations at that point in time, USAID is 
unable to express an opinion on the validity of the IG's statistical 
projection of $495 million, or 5% of the total unliquidated 
obligations.
    We do not conclude that amounts that may have exceeded forward 
funding guidelines were in excess of current requirements or no longer 
needed. The forward funding guidelines are parameters which may be 
exceeded where justified or reasonable. In most instances, the funding 
will be needed for planned program activities. While at any point in 
time there may be some amount of funding that exceeds the forward 
funding guidelines, adjustments will generally be made in the course of 
annual program reviews. Programs with relatively large pipelines 
receive less funding in a fiscal year than those with smaller 
pipelines, resulting in effective portfolio management. As indicated in 
the IG report, the balances for many of the obligations identified in 
the audit had been reduced to amounts that were no longer considered 
excessive when the audits were conducted.
    The IG projected that approximately 1.5% of the unliquidated 
obligations remained after activities were completed. Some level of 
funding must be retained after activities have ended in order to 
complete the close-out process. The close-out process is the Agency's 
method for ensuring that final amounts claimed are appropriate given 
certain possible contingencies, such as the impact of audited final 
indirect cost rates, questioned direct costs resulting from external 
audit exceptions, and other amended claims for mistakes in billings. 
Some degree of close-out backlog will occur due to delays in receiving 
final vouchers from vendors, awaiting final payment confirmation, and 
receipt of audited final indirect cost rates and audit reports.
    USAID agrees with the IG that clarified procedures related to 
forward funding guidelines and more timely action on contract close-out 
would lead to more efficient resource management. A management study 
will be conducted to identify ways to improve the management of an 
obligation from award through the close-out process. Following the 
review, comprehensive policies and procedures will be developed to 
implement improvements.
    USAID is unable to provide an analysis of the pipeline at this time 
because data, particularly for accruals and programs obligated in 
Washington, is not yet fully recorded. Such data may not be fully 
retrievable until the end of FY 1998. However, during the upcoming 
budget reviews to be conducted at the mission and program level, 
pipeline management will continue to be factored in before considering 
additional funding for any program. The soon to be published FY 1998 
Statistical Annex to the Congressional Presentation will cover both 
estimated obligations and expenditures by activity for all Agency 
programs, albeit with some qualifications stated.
                population: peru family planning program
    Question. We have been informed that the Peruvian family planning 
program, to which USAID has provided funds in the past, may be involved 
in involuntary sterilization activities. The allegation is that doctors 
have been given quotas by the Health Ministry, and that they pressure 
poor Peruvian women to be sterilized.
    The interesting thing about the program is that it has occurred 
primarily among poor, illiterate women in rural areas; there have been 
very few vasectomies.
    Although USAID has raised concerns about the program with the 
Peruvian government and has not directly funded government programs in 
the recent past, it has been involved in joint promotions of family 
planning activities in Peru. In the past, it has also provided training 
in voluntary sterilization techniques to the Peruvian health ministry.
    What is the current status of Peru's family planning program, 
including allegations that involuntary sterilizations have occurred?
    Answer. The Peruvian Ombudsman's Office has investigated complaints 
from nine women who were sterilized. It issued a report that reveals 
four problem areas:
    1. A lack of guarantees to ensure unencumbered decision-making, 
including insufficient counseling prior to the operation; the absence 
of a waiting period between making the decision to have a tubal 
ligation and the actual operation; and the offer of food as an 
incentive to accept a tubal ligation.
    2. Campaigns dedicated exclusively to tubal ligation and vasectomy.
    3. Lack of follow-up after surgery.
    4. Numerical targets regarding methods of family planning.
    As was made public during the February 25 hearing of the 
Subcommittee on International Operations and Human Rights, the 
Government of Peru (GoP) recently announced a series of key procedural 
changes in its family planning program that are responsive to the 
aforementioned problems. These changes are in large part the result of 
USAID's negotiations with the GoP over the past 18 months. They are:
    Every person requesting a tubal ligation or a vasectomy will 
undergo one counseling session on the full range of contraceptive 
choices and a second session on possible complications and the 
irreversible nature of surgical contraception, including pre-operative 
and post-operative care.
    After the second counseling session for voluntary sterilization, a 
72-hour waiting period will necessarily ensue before the operation can 
take place.
    Tubal ligation and vasectomy will only be provided in hospitals and 
health centers that are certified as meeting standards for those types 
of operations.
    The GoP will make clear to health workers that there are no 
provider targets for tubal ligation or vasectomy or any other method of 
family planning, nor any method-specific targets at the regional or 
local levels.
    On March 6 and 19, 1998, the Peruvian Ministry of Health issued 
other communications that announced further measures to improve the 
quality of its program. Chief among them:
    Potential clients of tubal ligation and vasectomy will be given a 
brochure that explains the operation and the risks involved.
    A progressive process will be established to certify surgeons as 
competent to performs these operations.
    Regarding post-operative care, patients from areas that do not have 
easy access to health services must remain hospitalized for 24 hours.
    Patients should make two follow-up visits to health services: one 
3-7 days after the operation, and another 30 days after the operation.
    When patients do not show up for post-operative visits, health 
workers should seek them out through home visits. USAID continues to 
monitor the implementation of these new procedures.
                       population: sterilization
    Question. Due to the potential for abuse among poor women in 
particular, do you believe USAID should promote or provide 
sterilization through its family planning programs?
    Answer. As the global leader in family planning, USAID needs to 
continue to support voluntary sterilization through its family planning 
programs. USAID is committed to providing a wide range of safe and 
effective contraceptive choices including voluntary sterilization. 
Voluntary female sterilization is an important part of method choice 
and is in great demand with more than 150 million users worldwide. Male 
sterilization is becoming increasingly popular in some countries. 
Currently, about 45 million couples worldwide rely on vasectomy for 
contraception. USAID supports the provision of this method as well.
    Among currently married reproductive-age women in developing 
countries, over 50% report that they want no more children. For many of 
them, sterilization is an appropriate, effective and desired method of 
family planning. An estimated 16% of these women have already chosen 
sterilization and another 14% report that they want to use 
sterilization in the future. This 16% translates to 42% of all 
contraceptive users, making sterilization the single most widely used 
method of family planning in developing countries. Sterilization is 
also the most widely used contraceptive method in the United States, 
where 18% of all women use this method.
    The underlying principles of USAID's family planning programs are 
voluntarism and informed choice. USAID's approach focuses quality in 
all aspects of service delivery. This includes the use of counselling 
and informed consent procedures and forms; specialized training in 
family planning methods; and strict monitoring and evaluation 
procedures to ensure compliance with USAID policy guidelines and 
contract provisions on informed consent and voluntary sterilization.
    Voluntary sterilization is readily available to women who can 
afford it in the United States and in developing countries. Poor women 
should not be denied access to this method as a means to achieving and 
maintaining their desired family size and averting unwanted pregnancies 
and abortion. If USAID stopped supporting voluntary sterilization 
through its programs, hundreds of thousands of poor women would be 
denied access to the high quality services they want and need to attain 
their childbearing aspirations.
              population: review of sterilization policies
    Question. Is USAID aware of other countries in which the agency has 
provided family planning assistance that may have problems with 
involuntary sterilization? Has the agency reviewed the family planning 
policies and practices of each country in which it operates a family 
planning program to ensure that involuntary sterilization is not 
occurring?
    Answer. In each country in which USAID provides family planning 
assistance, the field mission is in regular contact with government 
officials and NGOs implementing those activities directly supported by 
USAID. This regular monitoring by missions helps ensure that USAID 
funding is used to provide as wide a choice of family planning methods 
as possible and that activities are in full compliance with USAID 
policy guidelines and contract provisions on informed consent and 
voluntary sterilization. In addition, regular independent audits are 
conducted of programs supported by U.S.-based cooperating agencies of 
USAID to determine compliance with these provisions.
    USAID/W is in the process of reconfirming that USAID-funded 
activities involving voluntary sterilization fully respect principles 
of voluntarism and informed choice and are in compliance with the 
Agency's requirements. The overall policies and practices of countries 
in which we operate are also monitored by missions as well as by U.S. 
embassy officials responsible for human rights reporting. USAID/W is in 
the process of reminding all missions that if host government policies 
or activities conflict with USAID principles or polices, missions 
should work with host country partners to change these policies or 
activities as well as to distance USAID from them. USAID/W is also 
currently seeking to determine what countries if any have problems with 
the implementation of sterilization programs and the nature and extent 
of the problems.
              support for small holder farming operations
    Question. In House Report No. 105-176 the Appropriations Committee 
indicated support for including small holder farming operations among 
its other criteria for microenterprise lending programs. What is the 
status of this recommendation?
    Answer. USAID's Microenterprise Development Policy Paper, which 
sets the guidelines for the Agency's work in the microenterprise field, 
defines Microenterprises as ``tiny, informally organized business 
activities other than crop production.'' While this definition does not 
include farm production, it does not, however, discriminate against 
farmers, as many farmers operate microenterprises as sidelines during 
the off-season. In fact, the most successful microfinance institutions 
do not attempt to restrict the uses of funds by borrowers. As a result, 
microloans can be and are channeled to crop production activities to 
the extent that they are for short periods of time.
    The Agency is presently exploring direct linkages between 
microfinance and rural finance in its broad sense. We are looking at 
the provision of credit and savings services in rural areas through 
financially sustainable institutions which is a priority of the 
agency's microenterprise effort.
               cooperatives and microenterprise programs
    Question. What plans does AID have to better integrate cooperatives 
into its microenterprise programs?
    Answer. Savings and loan cooperatives (commonly called ``credit 
unions'') have long been supported by USAID because (1) they are owned 
and capitalized by their members, and (2) they often target broad 
financial service delivery to low-income clients. In addition, the fact 
that they are permitted to capture and use member savings as their 
primary source of lending capital makes them less dependent upon donor 
capital or guarantee programs, and thus an excellent development 
investment. The World Council of Credits Union ranked in the top five 
recipients of USAID microenterprise funding in 1996.
    We consider credit unions an extremely important mechanism for 
delivering financial services to microentrepeneurs and poor people in 
general. For this reason, USAID is supporting credit union movements in 
various countries in Africa, Asia and Latin America.
                          agriculture funding
    Question. The strategic objective for broad-based economic growth 
includes agriculture. How many missions, and which missions, have 
changed or are changing their plans to include agricultural programs as 
part of this strategic objective?
    Answer. USAID missions in many of the Agency's recipient countries 
are by and large working in agriculturally-based economies. The 
missions have recognized over the years that successful programs in 
economic growth must include agriculture.
    Our agricultural programs have declined in size with the reduction 
in overall resources in the early to mid 1990s. During this period 
Congressional priorities for child survival, diseases, and basic 
education programs have become major funding priorities within the 
overall Development Assistance account. At the same time there have 
been a number of Administration priorities for population and 
environmental programs, non-traditional export promotion, 
privatization, rural infrastructure, and market reform as well as joint 
interest between the Administration and Congress for increased funding 
of microenterprise programs. Despite this contraction of and increased 
competition for funds, any of our missions continue to have agriculture 
programs as a major priority.
    However, USAID's agriculture programs can be greatlyexpanded only 
if additional funding becomes available for economic growth programs in 
general and agricultural programs more specifically.
    In Africa, the Administration has recognized this problem, and the 
President's Africa Food Security Initiative (AFSI), announced in his 
recent speech in Uganda, will provide resources for USAID missions in 
five countries to add new agricultural activities or expand existing 
ones beginning this year. These countries are Uganda, Mali, Malawi, 
Mozambique, and Ethiopia. A higher resources level in AFSI would permit 
expansion of agricultural activities in other countries.
    In Asia and the Near East, it is premature to anticipate what 
changes, if any, may occur. Many missions are involved in agriculture, 
including research, policy reform, enabling environments, tariffs, 
technical assistance, agro-business, and high-value cropping. As the 
Agency proceeds with preparation of its FY 2000 budget submission, we 
will be exploring in tandem with our field missions additional 
opportunities for involvement in this area.
    The Latin America and Caribbean Bureau has seven economic growth 
strategic objectives that include agricultural programs. At this time, 
increased emphasis on agriculture in this region is being addressed 
through existing programs as opposed to new initiatives which would 
require additional economic growth allocations.
           private and voluntary cooperation fy 1999 funding
    Question. How much funding is assumed for the Office of Private and 
Voluntary Cooperation in fiscal year 1999, and how much of this will 
support cooperative programs?
    Answer. USAID's budget submission for FY 1999 requests funding for 
the Office of Private and Voluntary Cooperation at a level of 
$46,827,000 for the year. Of this amount, $6 million is planned for 
cooperative programs.
                             credit unions
    Question. Please provide the committee with an update on credit 
union programs in Eastern Europe and the New Independent States of the 
former Soviet Union.
    Answer. USAID is currently funding five credit union development 
projects in Eastern Europe and one in the New Independent States 
through the World Council of Credit Unions (WOCCU). These six programs 
are in Latvia, Lithuania, Macedonia, Poland, Romania and Ukraine.
    The first and most successful credit union program began in Poland 
in 1992. The program has achieved self-sustainability, with all the 
components of a fully operational system including appropriate 
legislation, successful credit unions, a national association, a 
central finance facility, audit and supervision within a self-
regulatory system, computerization of operations, a training center and 
a credit union foundation that provides assistance to other movements 
in the region.
    The WOCCU project in Latvia and Lithuania, which began in 1994, has 
also been successful, particularly in lobbying the adoption of 
amendments on credit union legislation, and in fostering the growth of 
credit unions by reducing the initial capitalization requirement to an 
acceptable level.
    The WOCCU project in Romania, initiated in October 1995, has been 
successful in fostering the partnership with a Romanian association of 
savings and credit unions. The credit unions within this association 
have been converted to competitive, market-driven organizations. To 
date, 14 have been converted, with a total of 4,637 members.
    The WOCCU project in Macedonia was initiated in October 1995, but 
has encountered some difficulties in securing the appropriate 
legislative base for credit union development. WOCCU believes these 
problems will be resolved within the coming months, and that credit 
union operations will restart this year.
    The WOCCU project in Ukraine began in 1993 and focuses on the 
building of an effective financial infrastructure to provide savings 
and credit services. To date, WOCCU works with 60 institutional members 
and over 12,000 members in Ukraine. The project continues to focus on 
training of credit union leadership, computerization and 
institutionalizing better financial discipline.
                          georgia agriculture
    Question. Please provide the Committee with an update on its 
agriculture and cooperatives programs in Georgia.
    Answer. USAID is endeavoring to expand its activities in 
agriculture throughout the Caucasus region. Georgia, in particular, 
appears to have significant agricultural potential. The mission is 
currently supporting a private seed industry development activity, 
which is being implemented by ACDI/VOCA, concentrating on improving the 
genetic material and then commercializing production and marketing for 
potato, maize, sunflower and wheat seed. A new project, currently in 
the final design stages, would complement this activity by working to 
develop a network of private agricultural input dealers, using 
fertilizer supply as a catalyst. This new project would work in all 
three countries in the Caucasus region, with Georgia as the main 
country of emphasis.
    There is no direct USAID support to agricultural cooperatives as 
such in Georgia. The USDA, through its commodity monitization 
activities, is providing some resources to support the provision of 
rural credit through rural cooperative banks in a program being 
administered by ACDI/VOCA.
                renewable energy for african development
    Question. In House Report No. 105-176 the Appropriations Committee 
indicated support for programs of the organization ``Renewable Energy 
for African Development'' (REFAD). What is the status of USAID efforts 
to continue support for REFAD? What plans does the Agency have for the 
remainder of this fiscal year and in fiscal year 1999?
    Answer. Renewable Energy for African Development is a program of 
the U.S. Export Council for Renewable Energy (US/ECRE). USAID has had a 
series of cooperative agreements with US/ECRE since 1990, and has been 
supporting REFAD under that agreement since REFAD was initiated in 
1993. The current agreement with US/ECRE expires on April 30, 1998. Two 
factors may affect the potential of future cooperative agreements with 
US/ECRE: (1) USAID is currently reviewing documents submitted by US/
ECRE to determine the allowability of approximately $1 million in 
questioned costs by the Inspector General's Office; and (2) USAID has 
identified this agreement as one that should be competed in the future 
and not awarded on a sole-source basis.
                          tuberculosis control
    Question. In House Report No. 105-176 the Appropriations Committee 
recommended funding for a tuberculosis control project in Latin America 
and Southeast Asia proposed by Gorgas Memorial Institute. Please 
provide an update on the status of this project, and on the funding 
levels proposed by AID for fiscal years 1998 and 1999.
    Answer. USAID and members of the Gorgas Memorial Institute are 
finalizing designs for sustainable tuberculosis programs in developing 
countries which will build on the expertise and strengths of the 
academic institutions (Johns Hopkins University and the University of 
Alabama) affiliated with the Institute. The strategy will focus on the 
development of model centers of excellence which will function as 
regional resources for training of laboratory personnel, health care 
providers, and local experts as well as centers for operational 
research designed to identify innovative approaches to diagnosis, 
treatment, and control of the disease. The budget for these activities 
in 1998 will be two million dollars; proposed funding for 1999 is to be 
determined.
                      credit resources milestones
    Question. On page 27 of the Congressional Presentation, AID 
indicates that it has agreed upon a series of milestones with the 
Office of Management and Budget to correct identified problems with the 
management of credit resources. a. What are these ``identified 
problems''? b. What are these milestones? c. Are current milestones 
being met? If not, why not?
    Answer. The problems identified with the management of USAID's 
credit programs were primarily related to the accuracy and reliability 
of the budget and accounting data for the various credit programs as 
well as timeliness in the Agency's responses to central agencies' 
requests for credit data. In order to address these problems, USAID 
established a Credit Review Board (CRB) to advise the Agency Chief 
Financial Officer (CFO) on policies and procedures for the financing 
and financial management of the credit programs. The CRB is chaired by 
the CFO. Its membership consists of officials from the Office of the 
General Counsel, Bureau of Policy and Program Coordination, Office of 
Budget, the Regional Bureaus and a representative from the Global 
Bureau for each credit program. A representative of the Office of the 
Inspector General also participates as a non-voting advisory member.
    The milestones which were agreed to with the Office of Management 
and Budget (OMB) cover the full range of credit management activities. 
Specifically, the areas covered are credit budgeting; credit management 
staffing and outsourcing; procedures manuals for the Micro and Small 
Enterprise Development Program and the Direct Loan collections and 
follow-up; responding to requests from Treasury, State and OMB for 
direct loan and guaranty loan information; additional credit management 
staff in the Global Bureau credit program offices; and changes in the 
non-sovereign risk assessment methodology.
    At present, all necessary actions on the milestones have been or 
are being taken. The only critical action which is somewhat behind the 
original schedule is the outsourcing of credit servicing functions. 
However, the Request for Proposals for these services was issued on 
March 9, 1998, and closes on April 20, 1998. We expect to finalize the 
selection and award the contract before the end of July 1998. 
Implementation of the contract will begin immediately afterwards.
                      development credit authority
    Question. In the Congressional Presentation, the agency devotes 
less than a full page to a description of the proposed Development 
Credit Authority. Please provide additional details about this program, 
including: a. Whether AID expects to receive a certification from the 
Office of Management and Budget to allow for the obligation of funds 
during fiscal year 1998 using the authority provided in Public Law 105-
118; b. whether financial statements for the existing loan portfolio of 
AID can meet the standards under section 205 of the Chief Financial 
Officers Act regarding agency accounting and financial management 
systems, the form and content requirements of OMB Bulletin No. 94-01, 
and the requirements of OMB Circular A-127 (Note: please provide an 
explanation of the standards and requirements in each case, and a 
description of why the agency cannot meet these standards); c. how the 
agency can manage this new program given its inability to account for 
existing grant and loan balances, and the lack of an adequate 
accounting system for the agency as a whole.
    Answer. The most important point to underscore is that Development 
Credit Authority (DCA) is not a new ``program''. Rather, it is an 
alternative financing tool that will give the Agency greater 
flexibility and increased financial leverage in using market-rate loans 
and guarantees to promote its development priorities where they can be 
achieved with credit authority in lieu of grants, and where the risks 
can be reasonably estimated and managed. Under DCA, borrowers can be 
sovereign nations, private enterprises, or joint public/private 
ventures. To comply with OMB Circular A-129 (which applies to credit 
funded activities), we expect that the majority of DCA-financed 
activities will be non-sovereign.
    The Agency has established: (i) a DCA Coordinating Committee, 
consisting of five senior members of the Agency, which now regularly 
reports to the Deputy Administrator on progress in implementing DCA, 
and (ii) a DCA technical working group with representatives from all 
regional bureaus and operating units involved in credit. The technical 
working group is now actively involved in developing potential DCA 
transactions, with a particular focus on the Russian Far East, Poland 
and Latin America at this early stage. Many of these projects will 
likely involve partial guarantees of loans extended by local 
intermediate financial institutions to targeted sectors. For example, 
in the Russian Far East, we are working to involve local and U.S. banks 
in lending activities targeting energy, telecommunications and 
infrastructure.
    USAID is working closely with OMB to establish a system capable of 
effectively managing credit programs, which the statute requires in 
order to satisfy the requirements for certification. We are meeting 
each milestone as set out by our agreed upon action plan. We are making 
every effort to ensure that the progress to date continues and results 
in a fully compliantestablished credit management system by the end of 
this year. We will keep the Committee informed in a timely manner on 
our progress with respect to certification.
    The Government Management and Reform Act of 1994 required that 
USAID prepare consolidated fiscal year end financial statements and 
that these statements be audited. USAID's credit programs are included 
in the consolidated financial statements, and, therefore, separate 
audited financial statements for the individual credit programs are no 
longer issued. The consolidated financial statements are contained in 
the USAID Office of the Inspector General's Report No. 0-000-98-001-F, 
``Reports on USAID's Financial Statements, Internal Controls, and 
Compliance for Fiscal Years 1996 and 1997'', dated March 2, 1998.
    Section 205 of the Chief Financial Officers Act establishes the 
Chief Financial Officer (CFO) in several departments and agencies, 
including USAID. The Act specifies among other things that the CFO will 
develop and maintain an integrated agency accounting and financial 
management system, including financial reporting and internal controls. 
This system is to comply with applicable accounting principals and 
standards, including policies and requirements prescribed by the 
Director of the Office of Management and Budget (OMB). The Director of 
OMB has issued OMB Circular A-127, which prescribes the policies and 
standards to be followed in developing, operating, evaluating, and 
reporting on financial management systems. OMB also issued OMB Bulletin 
No. 94-01, which specifies the form and content of Executive Branch 
departments' and agencies' financial statements requirements.
    The Agency recognizes that its accounting and financial management 
systems are not in full compliance with the applicable standards and 
regulations (including the requirement for an integrated financial 
management system) and that there are significant material weaknesses 
in the core accounting system. At this time we are in the middle of a 
multi-year effort to improve our financial management processes and 
systems that will correct these material weaknesses. We believe that, 
through the use of legacy (pre-NMS) systems and our enhanced financial 
management team, our FY 97 financial statements reflect the financial 
condition of the Agency and that the core financial management systems 
maintain adequate controls over all funds entrusted to the Agency.
    The fact that we have not been able to obtain a clean opinion on 
our financial statements should not impair the Agency's ability to 
manage DCA. Most of USAID's credit programs' financial management 
problems have related to the back-end processes (i.e., loan servicing 
and financial reporting) and not to the front-end process of extending 
credit and accounting for the utilization of appropriated funds in 
accordance with the Credit Reform Act. We believe that the outsourcing 
of certain loan servicing, accounting and financial reporting functions 
will address the back-end financial management issues which could have 
negatively impacted DCA and that we will be able to maintain proper 
accounting control over DCA funds.


[Pages 275 - 276--The official Committee record contains additional material here.]



                           year 2000 software

    Question. On page 132 of the Congressional Presentation, it is 
indicated that during fiscal year 1998 $7,700,000 is being spent on 
software related to the year 2000 problem. a. Specifically, how are 
these funds being used? b. Provide the names of the contractors 
receiving these funds; the amount of each contract; and the purpose of 
each contract.
    Answer. The $7,700,000 is to be obligated, under several contracts, 
for the purpose of upgrading USAID legacy and New Management System 
(NMS) software to be Year 2000 compliant. The Year 2000 renovation 
efforts will involve use of standard date/time logic, code analyzers to 
identify date/time code, renovation, validation, and implementation of 
the new systems. This amount does not cover the infrastructure costs 
necessary to make our desktops, servers, and networks Year 2000 
compliant. These were budgeted separately.
    A large portion of the $7,700,000 is currently being awarded by the 
General Services Administration (GSA) to contractors performing 
Information Technology services under the direction of their Federal 
Systems Integration and Management Center (FEDSIM). Specific contractor 
awards have not yet been finalized.
    Other expenditures related to the funding in question include the 
following:
    $400,000 has been awarded to Data Base Platforms under a USIA 
contract to develop, document, and test standard date/time processing 
routines.
    $100,000 is being awarded to a not-for-profit public administration 
consulting firm, Mitretek Systems, to support planning of the Year 2000 
program in preparation for the arrival of the key contractors.
                   deobligations of prior year funds
    Question. For all applicable accounts under the jurisdiction of the 
Agency for International Development, please provide an annual 
accounting of funds deobligated from prior years; and the amount of 
such deobligated funds reobligated in the year in which the 
deobligations occurred. Please provide this information for fiscal 
years 1989 through 1997, as well as estimates for fiscal years 1998 and 
1999. Please provide the information on an account level basis.
    Answer. The attached table reflects deobligations for fiscal years 
1989 through 1997 under the authority of both sections 510 and 511, 
formerly 515 and 517, of the annual appropriations acts. The figures 
for FY 1997 are based on data from the overseas missions only. A final 
reconciliation of the FY 1997 Washington data in the New Management 
System (NMS) is currently underway.
    As a result of the manner in which USAID has accounted for and 
programmed its no-year funds prior to FY 1998, the reobligated amounts 
cannot be reported by the fiscal year in which deobligated. Thus, the 
reobligated amounts reflected in the table include both funds 
deobligated in that particular fiscal year as well as any funds carried 
over from the previous fiscal year.
    Due to the variability from year to year, prior year data cannot be 
used to project deobligations for the next two years at the 
appropriation level. One of the factors influencing this variability is 
the rescission of funds such as those experienced in fiscal years 1992 
through 1995.


[Page 278--The official Committee record contains additional material here.]



                           object class 25.2

    Question. On page 138 of the Congressional Presentation the object 
class breakdown for operating expenses indicates that spending under 
object class 25.2 ``other miscellaneous costs'' increased from 
$5,787,000 in fiscal year 1997 for headquarters, to $12,630,000 in 
1998, and an estimated $9,876,000 in 1999. What are these costs? Why is 
there such a dramatic increase in fiscal year 1998 and 1999?
    Answer. The increase in costs in FY 1998 reflects requirements to 
do major work related to year 2000 problems throughout the Agency, 
correct some of the problems with the New Management Systems, and 
improve the Agency's credit management capabilities. This will include 
having experts do detailed analyses in FY 1998 to specifically identify 
the most critical areas needing attention. These efforts will continue 
into FY 1999, although at a lower cost reflecting the completion of the 
analytical efforts in FY 1998.
               recovery of prior year operating expenses
    Question. For operating expenses, please provide the actual and 
projected annual recovery of prior year obligations (section 509) used 
as a funding source for the account from fiscal years 1989 through 
1999. Explain why the estimates for 1998 and 1999 are historically 
lower than average.
    Answer. Your question cites section 509, which relates to 
appropriation transfers. I assume you meant to refer to Section 511, 
which relates to recoveries. The following table contains the 
information on recoveries, together with information as to actual 
obligations against recoveries in their first year of availability. 
Please note that the column on obligations refers to the amount 
obligated in the first year of availability. For example, the amounts 
recovered in FY 1992 were planned for initial obligation in FY 1993, 
amounts recovered in FY 1993 were planned for initial obligation in FY 
1994, etc.
    While our initial estimates of recoveries have been lower than 
final recoveries, the Agency has tried to be prudent in the use of 
these funds, as shown by the fact that most of these funds have, to 
date, been held to cover future year requirements. By FY 1999, however, 
it is anticipated that recoveries will be fully obligated in their 
initial year of being reported in the Congressional Presentation (CP)--
that is, the fiscal year following the year of recovery.
    The Agency makes its best estimate, based on information available 
at the time the CP is prepared. However, many of these recoveries are 
related to overseas activities, particularly changes in dollar exchange 
rates from the time obligations are recorded to the time final bills 
are received and paid. This makes it difficult to come up with fully 
accurate estimates. Further, the large increase in FY 1996 was due to 
an in-depth review of obligated balances by the Inspector General which 
led to many deobligations. Recoveries in FY 1997 were less than half 
the FY 1996 level.
    During the period from FY 1992 through FY 1997, annual recoveries 
have averaged $12.9 million. While our estimate for FY 1999 is $10 
million, the same as our revised estimate for FY 1998, this is due to 
the large reduction in actual recoveries from FY 1995 and FY 1996 to FY 
1997.

                                                  OE RECOVERIES                                                 
                                            [In thousands of dollars]                                           
----------------------------------------------------------------------------------------------------------------
                                                                CP estimate                      Obligations in 
                      Fiscal year                       --------------------------    Actual      first year of 
                                                           Initial      Revised                 ``Availability''
----------------------------------------------------------------------------------------------------------------
1989...................................................        (\4\)        (\4\)        (\4\)           (\1\)  
1990...................................................        (\4\)        (\4\)        (\4\)           (\1\)  
1991...................................................        (\4\)        (\4\)        (\4\)           (\1\)  
1992...................................................        (\4\)        (\4\)        2,810           (\1\)  
1993...................................................        (\4\)        1,750        8,651       \2\ 2,810  
1994...................................................        (\4\)        8,857       11,573           \2\ 0  
1995...................................................        6,000        9,000       16,086         \2\ 655  
1996...................................................        9,000        9,000       25,939       \2\ 2,090  
1997...................................................        9,000       14,000       12,044       \2\ 5,845  
1998...................................................       12,000       10,000  ...........       \3\ 3,138  
1999...................................................       10,000  ...........  ...........      \3\ 10,000  
----------------------------------------------------------------------------------------------------------------
\1\ This authority did not become applicable for Operating Expenses until FY 1991--the time of the preparation  
  of the FY 1993 Congressional Presentation.    \2\ As recoveries are held for use in the subsequent fiscal     
  year, these amounts represent ``current year'' obligations of the recoveries generated in the immediate prior 
  year. For example the actual obligations of FY 1993 recoveries occurred in FY 1994 and subsequent years.      
  \3\ Estimate.    \4\ Not applicable.                                                                          

                       ig semiannual report--nms
    Question. In the transmittal letter to Administrator Atwood for the 
Semiannual Report to Congress (April 1, 1997-September 30, 1997), the 
Inspector General states: ``In my last two Semiannual Reports, I formed 
the Congress of the serious deficiencies in the U.S. Agency for 
international Development's (USAID) information management and 
financial management systems. During this reporting period little 
progress was made to correct these deficiencies.'' Do you agree with 
the Inspector General's comment? If not, what steps have you taken or 
will you take to deal with these deficiencies?
    Answer. USAID did not have the expertise to manage a software 
development project of this complexity. As a result, it did not have 
the essential project management information to inform senior managers 
regularly of the risks, quality problems, cost overruns and schedule 
slippages that were occurring. Senior managers incorrectly believed 
that incremental improvements could be made and were being made to 
remedy these problems and bring the system to full functionality.
    The IG recognized key indicators of software problems but also 
lacked sufficiently detailed information on the full extent of the 
problems to inform senior managers about the steps needed to correct 
them. At the time the Semiannual Report to Congress was made, our 
mutual concerns did indicate that an independent assessment was needed 
to examine the software, organizational and management deficiencies.
    The independent assessment was delivered at the end of January 
1998, and USAID management and the IG for the most part agree on the 
deficiencies and that next steps the Agency must take. This is 
reflected in the IG's Audit Report on the New Management System Status 
dated March 31, 1998. The IG highlights areas that still need further 
analysis, which the Agency will address once it has selected a prime 
contractor with the requisite technical skills to perform that 
analysis.
                         nms contractor status
    Question. What is the status of the NMS contractor development 
payments for fiscal years 1997 and 1998? How much was paid to such 
contractors in 1997 and through the first quarter of 1998?
    Answer. Much of the NMS contractor development effort in fiscal 
year 1997 was devoted to developing essential functionality to support 
the Agency's core business requirements. The competing demands to 
maintain an operational system while developing new functionality 
reduced the overall quality of the deliverables.
    In October 1997, USAID suspended new NMS development efforts to 
focus contractor resources on maintaining the operational system, 
correcting deficiencies and addressing certain high-management risk-
requirements that were impairing the Agency's financial and procurement 
reporting requirements. This was responsive to an IG recommendation 
while awaiting the outcome of the independent assessment initiated in 
November 1997. USAID extended one contract in January 1998 for six 
months and exercised the option on two other contracts to provide an 
adequate transition-out plan to support NMS operations until a prime 
contractor could be hired under a performance based contract. The 
transition-out plan includes reductions in the contractor workforce 
assigned to NMS reflecting the suspension of the development efforts 
and a need to conserve funds to implement recommendations arising from 
the independent assessment.
    The four NMS contractors were paid $11.8 million in FY 1997 and 
$3.6 million during the first quarter of FY 1998. Substantial 
reductions are expected in the second and third quarters of FY 1998 
reflecting the transition-out plan.
                 treasury technical assistance program
    Question. The President's budget request for fiscal year 1999 
includes $5,000,000 for a overseas technical assistance program through 
the Department of Treasury. Do you support this request?
    Answer. Yes, we support the President's budget request.
    The limited Treasury technical assistance program is a valuable 
complement to the broader USAID technical assistance effort in selected 
countries where Treasury expertise is useful in dealing with host 
governments on matters involving fiscal and financial policy reform.
                  population: funding levels, fy89-99
    Question. Of the funds obligated for family planning activities 
from fiscal years 1989 through 1999, please indicate funding levels (on 
an annual basis) for the following areas:
    a. research and development;
    b. studies;
    c. conferences, meetings, and seminars;
    d. contractor, grant, or cooperative agreement overhead;
    e. reviews or audits of ongoing programs or projects;
    f. commodities;
    g. grants, contracts, or cooperative agreements with foreign 
governments or foreign government institutions; and
    h. service delivery directly to individuals in need of family 
planning assistance.
    Answer. Attached are two tables which provide expenditures for 
family planning activities for fiscal years 1992 through 1996. USAID 
has only collected these data by activity since fiscal year 1992, and 
reporting for fiscal year 1997 through 1999 is not yet available. 
Expenditure data are provided instead of obligation data as these data 
track more closely with the activities requested here than the data 
collected for population obligations.
    Table 1 provides the total expenditures in family planning broken 
down by research and development (including studies), and service 
delivery. Expenditures categorized as ``service delivery'' include 
contraceptive commodities as well as technical assistance and training 
in the medical aspects of provision of contraceptives; in information, 
education and communications for family planning; and in management and 
evaluation of family planning programs. While direct financing of 
services to individuals is also included, USAID's impact is 
increasingly through technical assistance activities to enable host 
country providers to expand and improve the services they provide with 
local resources. Expenditures categorized as ``research and 
development'', which include primarily biomedical, social science and 
operations research, are also in most cases closely related to 
strengthening the capacity of family planning programs to expand and 
improve services.
    Table 2 provides reporting on expenditures for commodities, and 
expenditures through agreements or contracts with foreign governments 
or foreign government (parastatal) institutions. Expenditure data in 
Table 2 is inclusive to reporting in Table 1. The expenditures reported 
here through foreign government organizations do not include in country 
expenditures through host country non-governmental organizations.
    Conferences, meetings and seminars which are either organized by 
USAID's cooperating agencies, or attended by staff of USAID or our 
cooperating agencies, are part and parcel of our programs. For these 
activities, neither detailed costs nor total costs across all contracts 
and grants are available. Also not available are aggregate data on 
overhead costs for the numerous contractors, grantees and cooperating 
agencies who implement family planning activities in partnership with 
USAID. These data are highly variable amongst contractors and 
cooperating agencies and can potentially change on an annual basis, 
therefore, USAID does not routinely collect these data in a central 
location. Per standard practice, USAID negotiates the lowest possible 
overhead rates. Reviews and audits, including evaluations and routine 
monitoring, continue throughout the life of our programs and costs for 
these activities are subsumed within the total cost of the programs. 
Detailed expenditure data are also not available for these costs.


[Page 282--The official Committee record contains additional material here.]



           costs incurred by usaid in responding to the gpra

    Question. How much has USAID spent on implementing the Government 
Performance and Results Act (GPRA)? How much was obligated to 
contractors associated with GPRA development and implementation 
(including development and implementation of the ``R4'' process) in 
1996, and how much is expected to be obligated in 1998 and 1999.
    Answer. We estimate that USAID spent between $1.5 and $2.5 million 
for activities related to implementing the GPRA. However, since 
strategic planning, performance monitoring, evaluation and results 
reporting are an integral part of the way USAID manages its programs 
and its resources under reengineering, this estimate includes costs we 
would have incurred without the GPRA to manage our resources 
responsibly. This estimate includes specific operational planning, 
monitoring and management costs.
    For example, we developed four important products whose importance 
to and use within the Agency go well beyond meeting GPRA requirements. 
These included the Agency Strategic Plan which we developed in 
consultation with the Department of State and other partners, 
stakeholders and customers; the Annual Performance Plan; the Agency's 
program performance data base; and the Annual Agency Performance 
Report. We estimate that these activities took approximately six person 
years of direct-hire time or approximately $600,000 in direct-hire 
costs and up to $1,000,000 in contractor costs. Again, most of these 
are costs associated with USAID's managing for results, and would be 
incurred even in the absence of GPRA.
    USAID's Results Reporting and Resource Requests, R4's, are part of 
our overall management system. We expect every manager in USAID to 
focus on, monitor and report on results and to use this information in 
his or her daily work or in other words to ``manage for results''. This 
makes it impossible to develop a separate cost estimate for R4s. In 
general, in accordance with best practice in U.S. business, we 
recommend that bureaus and individual operating units allocate between 
3 to 10% of their resources to strategic planning, performance 
measurement and analysis and evaluation. USAID's guidance is that costs 
must be justified by the management value of the information to be 
generated. We also recommend that managers consider alternatives such 
as low cost methods and narrowing the scope of the requirement 
information. We believe that actual spending is on the low end of that 
spectrum.
    We expect that our costs for strategic planning, performance 
monitoring, and results reporting will remain at similar levels in 1998 
and 1999. How much we obligate and spend will depend on how issues on 
the timeliness of data and the extent to which output data ought to be 
submitted along with outcome information are addressed. Efforts to 
accelerate data collection and analysis could profoundly increase 
requirements for OE staff and resources and decrease the amount 
available for program implementation. Such options must be weighed 
against expected improvements in either the information available or 
the management of the programs. In any case, the options chosen must 
reflect the diversity of our programs, our world-wide engagement and 
the level of effort required to collect, analyze and generalize in a 
way that is useful to high level decision makers.
                          cdie program budget
    Question. What was the budget (including buy-ins) for the Center 
for Development Information and Evaluation (CDIE) for fiscal years 
1993-1997, and the anticipated obligations for fiscal years 1998 and 
1999? Please display buy-in separately.
    Answer. The following is the program budget, including buy-ins, for 
the Center for Development Information and Evaluation (CDIE) for the 
fiscal years 1993-1997 with anticipated obligations for fiscal years 
1998 and 1999.

                                               cdie program budget                                              
                                               [$000 in thousands]                                              
----------------------------------------------------------------------------------------------------------------
                           Fiscal year                                 Core           Buy-ins          Total    
----------------------------------------------------------------------------------------------------------------
1993............................................................         $12,173          $2,825         $14,998
1994............................................................           7,185           3,050          10,235
1995............................................................           8,049           5,554          13,603
1996............................................................           6,513           6,125          12,638
1997............................................................           6,272           6,038          12,310
1998*...........................................................           5,834           5,366          11,200
1999*...........................................................           5,900           5,450          11,350
----------------------------------------------------------------------------------------------------------------
Note: *Planned.                                                                                                 

 democratic transition funds for belarus and local government in russia
    Question. Belarus is not budgeted to receive any Democratic 
Transition funds in fiscal year 1999, and Russia is not budgeted to 
receive ``Local government'' support funds. Does this indicate that 
USAID is satisfied that further U.S. government democratic transition 
assistance in these countries is not appropriate or necessary? If not, 
what is the significance of this lack of funding?
    Answer. No. In Belarus, because the budget level is modest and 
USAID's activities encompass several sectors, democracy assistance 
activities are included under Special Initiatives/Crosscutting 
Programs. USAID's priorities in Belarus are to promote democratic and 
economic reform, as well as to provide humanitarian and health sector 
assistance.
    Of the $6.3 million requested for USAID activities for Belarus in 
FY 1999, over $2.5 million is projected to fund democracy-related 
activities. These activities consist of strengthening non-governmental 
organizations (NGO), independent media, local institutions dedicated to 
changing Belarus' legal culture, and developing respect for the rule of 
law at the grassroots level. Specifically, USAID assistance supports 
legal education seminars for lawyers, judges and students; encourages 
citizen participation in political decision-making; strengthens the 
ability of independent media to objectively report the news; and 
provides seed grants to NGOs and Belarussian organizations to promote 
political and economic reform.
    For Russia much of the FY 1999 assistance program is targeted at 
the grassroots level and $20.9 million for democratic transition 
assistance. While the specific activity entitled ``Municipal Finance 
and Management'' (which targeted three Russian cities) ended in October 
1997, support for local government is an integral part of USAID's 
Russia program. Historically, over 70% of USAID's activities have been 
outside Moscow, including significant work at the oblast and municipal 
level in areas such as housing, small business development, health care 
reform, and NGO development.
    One of the premises of the Regional Investment Initiative is to 
assist specific oblast and municipal governments reduce the barriers to 
foreign and domestic trade and investment and stimulate the private 
sector to become the engine of true economic growth. The goal is to 
create working models for other oblasts and municipalities to use in 
their own reform efforts. One of the major innovations in USAID's tax 
reform program is to work not only at the central level but also to 
work with regional and local governments to develop the legal and 
regulatory framework for a fair and transparent tax system.
                 cross-cutting and special initiatives
    Question. Please breakdown the request for cross-cutting and 
special initiatives, by country, for eastern Europe (total of 
$94,205,000) into the major programs with additional information as 
necessary.
    Answer. The attached table presents an estimated breakdown of 
cross-cutting and special initiatives programs by country for FY 1999 
for both SEED and ESF funds. The SEED funded programs either fall 
outside the strategic framework of a country program, or are cross-
cutting in nature, supporting more than one strategic objective.
    Training and exchanges include USAID participant training programs 
through World Learning, and USIA exchange programs such as Ron Brown 
Scholarships and Freedom Grants. They support more than one strategic 
objective in most countries.
    Peace Corps Small Projects Assistance falls outside the strategic 
framework of three missions. The American Bar Association--Central and 
Eastern Europe Legal Initiative program supports several strategic 
objectives in Bulgaria, Croatia and Poland. The Democracy Commission is 
considered a special initiative in Poland, since Poland does not have 
the citizens' participation strategic objective within its strategic 
framework.
    Enterprise Funds in Bulgaria and support to rural financial 
institutions in Macedonia fall outside the strategic objective 
framework of the respective countries. Macedonia's current strategic 
framework does not include strengthening the financial sector. Bulgaria 
considers the Enterprise Fund to be outside its manageable interest.
    Southern Tier regional includes the South Balkan Development 
Initiative which is improving links among the South Balkan nations, and 
the Southeast Europe Cooperation Initiative which is encouraging 
regional cooperation in a number of areas including customs and energy 
efficiency.
    In Bulgaria, the transfer to the Department of Treasury program 
supports government debt management and tax administration, while funds 
for labor support American labor's international programs. In Romania, 
the Treasury transfer program includes assistance to the Government in 
budget, debt and tax administration.
    Evaluations across countries, program management, monitoring and 
support both in Washington and overseas are cross-cutting. Performance 
funds are set aside for new or accelerating reform or superior 
performance in key sectors, such as occurred in the Romania capital 
markets sector during FY 1997.
    ESF funds will be used for balance of payments support in Albania; 
to fund the International Fund for Ireland; and for the bicommunal 
development and scholarship projects in Cyprus which encourage 
participation from both communities.


[Page 286--The official Committee record contains additional material here.]



                           independent media
    Question. The Committee notes that significant funds have been 
expended on the development of independent media in Eastern Europe and 
the NIS by Internews, RAPIC, the now defunct International Media Fund, 
the ProMedia program, and others. The Committee requests copies of 
independent evaluations which have been conducted of all USAID-funded 
media support programs in Eastern Europe and the NIS since 1995.
    Answer. In May 1995, USAID conducted an independent evaluation of 
the International Media Center in Ukraine. Within the next six months, 
USAID plans to initiate independent evaluations of Internews' programs 
in Central Asia and the Caucasus, and of the ProMedia program in 
Central and Eastern Europe.
    [Clerk's note.--The Committee records contain the Evaluation of 
International Media Center in Ukraine.]
                     citizen participation programs
    Question. In light of the current social unrest in Albania, the 
Committee is concerned that the Albania Democratic Transition budget is 
excessive--especially the Citizen Participation programs--and that the 
country cannot absorb these funds without excessive waste. The 
Committee requests that USAID provide it with the independent 
evaluation (with recommendations) made of USAID-funded programs in 
Citizen Participation.
    Answer. USAID recently carried out an independent evaluation of its 
two regional programs under Democracy Network (DemNet) Program, a 
Presidential initiative for Eastern Europe which began implementation 
in 1994. The two implementors are the International Center for Not-for-
Profit Law (ICNL), which supports strengthening of the legal 
environment for NGOs, and Freedom House (formerly National Forum 
Foundation), which fosters CEE regional networking for NGOs. Albania 
was one of the countries covered in the evaluation. Attached you will 
find a copy of this evaluation, with Albania-specific observations 
found in Appendix 3A.
    With respect to the ability of Albania to absorb US assistance 
monies, the Citizen Participation programs by and large emphasize 
technical assistance and training, with subgrants to local 
organizations playing a relatively small role. Specifically, ORT, the 
bilateral Democracy Network implementor for Albania, has distributed 
only $360,000 of its $1.75 million budget in subgrants. Of the $20,000 
that Freedom House has provided for regional activities involving 
Albania, a relatively small amount has gone directly to Albanians. 
Finally, ICNL solely provides direct technical assistance to Albanian 
lawmakers and NGOs, and therefore has no subgrant activities.


[Pages 288 - 363--The official Committee record contains additional material here.]



    Question. Romania has the second-largest population in central 
Europe. However, the Democratic Transition budget is low compared to 
other countries in the region particularly if a comparison is made of 
funding on a per capita basis. Why is that?
    Answer. According to Freedom House data, Romania has evidenced the 
greatest increase in democratic freedoms from 1934 to 1997 of all 
countries in Central and Eastern Europe, currently ranking just behind 
the most advanced northern tier countries. Nevertheless, Romania's 
democracy budget has increased from $4.7 million in FY98 to $5.5 
million in FY99. Most of the increase will go to local government, but 
all democracy programs will benefit including NGOs and independent 
media. We believe that this continues to constitute a significant level 
of support for democracy-building programs, even in comparison with the 
other country programs in Central and Eastern Europe (CEE).
    In reviewing FY99 ``democracy transition'' funding plans, Romania 
ranks fifth in dollar terms of the ten SEED-financed country programs. 
In terms of both actual dollar level and per capita commitments, two 
country programs which clearly exceed Romania's planning level are 
Serbia and Montenegro, and Albania. It is clear that these levels of 
support are appropriate. A true democratic transition has not yet begun 
in Serbia and Montenegro, and the fragility of Albania's slow progress 
in establishing stable democratic processes and institutions was 
highlighted by the political and social upheaval just one year ago.
    In comparison with both Albania and Serbia and Montenegro, Romania 
has progressed much farther on the path of democratic transition. The 
Romanian people have enjoyed steady progress since 1990 in both the 
development of political rights and civil liberties. The November 1996 
presidential election demonstrated that Romania was committee to 
democracy, an open electoral system, and a pluralistic political party 
structure. The election sent the signal, both to the Romanian people 
and to those outside Romania, that the country was wedded to a modern, 
western oriented, and stabilizing political process.
    In addition to progress on the political front there are numerous 
NGOs in Romania, many of which attempt to influence public policy, seek 
to represent special interests, or try to improve local communities. 
Elected city mayors throughout Romania are showing themselves to be 
capable leaders and are making effective efforts in providing their 
residents with good public service and responsible fiscal management.
    With regard to the two other country programs whose democracy 
support plans exceed the planned budget in Romania, we believe that 
factors specific to those countries' transition strategies have 
enhanced the apparent emphasis on overall democracy assistance. In 
Poland, with approximately twice the population and a bit more than 
twice the planned budget level, planned commitments for democracy 
transition assistance are fairly similar in per capita terms. In 
Bulgaria, with roughly half the population of Romania, planned 
commitments clearly exceed those of the Romania program. In both Poland 
and Bulgaria, however, local government and regional development 
initiatives constitute a major element in the economic and democratic 
transition strategies. These commitments, which grew from assistance 
needs and opportunities which were specific to these two countries, 
serve to enhance the apparent importance of democracy sector funding 
within the overall country program. In Poland, which is reaching the 
end of its program of SEED Act assistance, the local government 
initiative is the single largest remaining activity.
                     democratic transitions budget
    Question. The current ``Democratic Transitions'' section of the 
fiscal year 1998 and 1999 Congressional Presentations divides 
individual country budget requests into the following three categories; 
(1) citizen participation; (2) legal systems; and (3) local government. 
These breakdowns are not specific enough for the Committee to determine 
the purposes and objectives of the programs being funded, and the 
funding priority that USAID has assigned to the objectives. The 
Committee requests that USAID resubmit the Democratic Transition budget 
of the 1999 Congressional Presentation, breaking down the expenditures 
on a country-by-country basis, into six categories as follows:
    a. National governance--programs that strengthen national 
governance, including civil service reform, public administration, 
leadership and management training, structures, systems, and process in 
legislative and executive capacity;
    b. Local governance--programs that strengthen local governance, 
including public administration leadership and management training, 
structures, systems and process in legislative and executive capacity;
    c. Independent media--programs that strengthen the quality of news 
reporting and media management capacity of independent press to ensure 
multiple and commercially viable media outlets, including journalistic 
and management training;
    d. Democratic electoral practices--programs that ensure free and 
fair elections, including electoral rule of law and systems, and 
strengthened multiple party systems;
    e. Rule of law/legal reform--programs that strengthen 
constitutional democracy, individual, human, and minority rights, 
transparency, and an independent judiciary;
    f. Citizen participation--programs that strengthen participatory 
democracy or two-way communications between government and its citizens 
(between elections), particularly NGO development, including training, 
grant making, legal support, and volunteerism.
    Answer. A revised Democratic Transitions budget for 1999 is 
provided in the attached table. The following explanatory notes 
identify and elaborate on important aspects of the budget:
    The disaggregation of the Democratic Transitions budget into six 
categories represents the ENI Bureau's best estimate. Some activities 
contribute to more than one category, hence our disaggregation may not 
completely capture the full level of effort in a given category.
    The budgetary information in the Congressional Presentation is 
based on the Strategic Objectives (SOs) developed by the ENI Bureau. 
The SOs provide the framework for USAID programs; however, because of 
differing circumstances in each country they are not, and are not 
expected to be applied uniformly by each Mission.
    The different applications of the SOs create some anomalies in 
reporting on planned budget levels by the categories requested. In 
particular, the Citizen Participation category is probably overstated. 
For example:
    The Croatia, Macedonia and Serbia programs include local governance 
activities but, because those Missions have organized theirdemocracy 
portfolios around a single SO, those activities are included in citizen 
participation and not local governance.
    Assistance in areas such as strengthening national level public 
administration and legislative capacity is being provided in countries 
such as Romania and Ukraine, but those activities are also being 
captured under citizen participation as a consequence of the framework 
chosen by the respective Missions.
    In Central Asia, the portfolio includes activities focused on rule 
of law, but the Mission determined that they are not of sufficient 
magnitude to support a SO dedicated to rule of law; instead, those 
activities are captured under citizen participation.
    In Bosnia, Belarus, and Turkmenistan democracy-related activities 
are planned for FY 1999, but the nature of the overall programs in 
those countries resulted in a limited number of Strategic Objectives 
being chosen, none of which are associated with democratic transitions. 
We have added these countries' budget information on their democracy 
programs to our table in order to reflect total funding planned for 
democracy transitions.
    For Central Europe, the Citizen Participation category is higher 
than in previous years because:
    The Serbia program ($15 million) is in its start-up phase and the 
principal objective is to support grass roots, local level 
organizations that generate increased citizen participation in shaping 
the changes occurring in that country.
    The Regional program includes the first increment of funding for 
the USG contribution to the endowment for the CEE Trust for Civil 
Society ($12.5 million).
    In addition, also attached are tables providing a country-by-
country breakout of the six categories for the years 1996-1998. As 
shown in the summary table, the total budget for the four-year period 
1996-1999 is estimated to be slightly over $500 million. Of that 
amount, approximately $324 million correspond to the three categories 
which conform to the ENI Bureau's Strategic Objective (SO) related to 
increased citizen participation in the democratic process: democratic 
electoral process, media and citizen participation (specifically 
through support to NGO development). When the SO budget is broken out 
among these categories, the amount that directly corresponds to NGO 
development is approximately $166 million, or slightly more than half 
of the budget associated with this Strategic Objective and about one-
third of the total democratic transition budget. In FY 1999, the 
planned amount for Citizen Participation/NGO Support jumps 
substantially and is the result of increased funding for Serbia (where 
civil society development is the focus of the program), the initial 
increment of funding for the CEE Trust, and an increased NGO budget in 
Russia.


[Pages 366 - 370--The official Committee record contains additional material here.]



                              ngo support

    Question. For fiscal year 1999, USAID is proposing that U.S. 
government funds continue to support non-governmental organizations. In 
addition, it proposes to restructure the means by which this support is 
provided. USAID has proposed that special trusts, or endowments, with 
relatively large budgets, be formed to become the new grant-making 
vehicles through which U.S. government funds would support indigenous 
NGO's in eastern Europe and the new independent states of the former 
Soviet Union for up to 10 years. It is the committee's understanding 
that these trusts will be public-private partnerships.
    USAID has supported NGO development in the emerging democracies in 
recent years through different grant and cooperative agreement 
programs, such as the Counterparts program in Belarus, Moldova, and 
Ukraine; the Democracy Network Program in central Europe; and the Save 
the Children program in Russia.
    Prior to initiating new programs, it would be desirable to assess 
these and other major NGO-support initiatives and their results. In 
that regard, the Committee requests that USAID provide:
    a. a country-by-country breakdown of the NGO-support budget 
contained in the 1999 Congressional Presentation for central Europe and 
the NIS, and the approximate funding priority (by percentage or amount) 
that will be assigned to: training, sub-grants, program management and 
other important categories of expenditures.
    Answer. The attached table provides the planned FY 1999 budget 
levels for all NGO-support activities in eastern European and the NIS. 
Typically, budgets for NGO support activities finance technical 
assistance, training, workshops, limited amounts of equipment, sub-
grants, and program management costs. The amounts dedicated to each of 
these can vary substantially depending on the specific focus of the NGO 
activity. In the case of program management, however, USAID experience 
is that direct costs (i.e., staff, travel, etc.) plus indirect costs 
(overhead) generally average between 40% and 50% of the total budget.
    For all proposed special trusts or endowments, USAID plans to 
undertake separate briefings for Committee members and staff.


[Page 372--The official Committee record contains additional material here.]



                 ngo-support initiatives in cee and nis

    Question. The Committee requests that AID provide:
    c. a list and brief description of AID's major NGO-support 
initiatives in central Europe and the NIS since 1995, including the 
kinds of NGOs supported and the priority that different sectors 
(economy, environment, democracy, and social safety net) have received 
(as defined in the DemNet program which defines public policy-oriented 
NGOs active in these four sectors).
    Answer. To develop and strengthen civil society in Central and 
Eastern Europe (CEE) and the New Independent States (NIS), USAID has 
awarded cooperative agreements to US PVOs on a country-by-country basis 
to respond to specific needs. Additionally, in the CEE, USAID has 
awarded one cooperative agreement for regional activities. A brief 
listing of these initiatives follows:
                       central and eastern europe
Albania
    The Organization for Educational Resources and Technological 
Training (ORT) provides training and small grants to Albanian NGOs. The 
program strongly emphasizes capacity building and working with NGO 
leaders to improve their managerial abilities. This effort includes 
strengthening lead organizations, a program of training for trainers, 
and the design and implementation of a comprehensive leadership 
development for stafffrom a core group of grant recipients. ORT awards 
small grants to public policy-oriented NGOs primarily in the democracy 
sector.
Bulgaria
    The Institute for Sustainable Communities (ISC) is working to 
support and strengthen a critical mass of NGOs that will be able to 
have an impact on building civil society in Bulgaria by engaging 
citizen participation in public policy debate and advocating for policy 
change. To achieve this goal, ISC is helping to improve the image of 
the NGO sector by assisting NGOs to: carry out their missions and 
activities effectively, improve their public accountability and to 
increase their ability to mobilize citizen participation for policy 
formation and advocacy. To achieve its results, ISC provides training 
and technical assistance, networking and partnership promotion, and 
publicizes its successes. ISC awards small grants to public policy-
oriented NGOs primarily in the democracy and environment sectors.
Czech Republic
    The Foundation for Civil Society's (FCS) program had three parts: a 
small grants program, training assistance, and a journalism assistance 
program.
    Under the small grants program, FCS provided funds to NGOs to cover 
program costs, operation expenses, and training. For the training, FCS 
partnered with several Czech organizations (Partners for Democratic 
Change-Czech, the Lotus Foundation, and Places in the Heart 
Foundation). Training included workshops on topics such as fund-
raising, NGO management, communication with the general public, and 
public relations, as well as one-on-one assistance in areas such as 
proposal writing and financial and technical report writing. FCS also 
created a Journalism School Internship Program at three Czech 
universities that placed journalism students in NGOs to write press 
releases and work with the media. FCS awarded small grants to public 
policy-oriented NGOs primarily in the democracy and social safety net 
sectors.
Estonia
    The U.S. Baltic Foundation (USBF) provided training and small 
grants to Estonian NGOs. The training sessions focused on the roles 
that NGOs could play in the democratic process, as well as giving NGOs 
the tools necessary to become self-sustaining, effective participants 
in local and national decision-making. USBF supported public policy-
oriented NGOs that was primarily focused upon the democracy sector, but 
with a secondary emphasis on the social safety net and environmental 
sectors.
Hungary
    United Way International (UWI) provides training and small grants 
to Hungarian NGOs. Training includes sessions on public-private 
partnerships, local economic development, and joint project 
development. UWI also helped to establish a network in five hub cities 
with important ties in each community to both NGO and local government 
leaders. UWI awards small grants to public policy-oriented NGOs, 
primarily in the social safety net and democracy sectors.
Latvia/Lithuania
    USBF provides training and small grants to Latvian and Lithuanian 
NGOs. The training program has helped these NGOs to become strong, 
effective, and self-sufficient. Initially the training provides 
targeted NGOs with basic growth tools, and then concentrates specific 
training activities to a small number of NGO professionals who will 
serve as future trainers for the entire NGO sector. Training topics 
include fundraising, sustainability, and organization building. USBF 
has awarded subgrants to public policy-oriented NGOs in all sectors, 
but predominantly in the areas of democracy and social safety net 
restructuring.
Macedonia
    ISC strengthens public policy-oriented NGOs in the environment and 
democracy sectors in Macedonia to enable the citizens they represent to 
participate more actively and effectively in the political and economic 
life of Macedonia. ISC is working with a core group of Macedonian NGOs 
which receive targeted training and technical assistance in 
organization management, external relations, and developing advocacy 
skills. ISC also awards small grants to Macedonian NGOs.
Poland
    The Academy for Education Development (AFD) works with public 
advocacy NGOs to help them become financially and organizationally 
sustainable with a demonstrated ability to cooperate and influence 
local government. AED provides intensive training and technical 
assistance to its grantees to improve their knowledge and skill in 
organizational development and management. AEDalso supports a 
consortium of six Polish NGOs to develop the capacity of the consortium 
to assist other Polish NGOs in issues such as registration, legal and 
accounting issues, proposal writing, fund raising, developing 
coalitions, managing staff and volunteers, planning, and public 
relations. AED has worked closely with NGOs to develop NGO-local 
government relations. Since 1995 there have been seven local government 
supported grant programs established by virtue of local ordinances 
passed by city councils, and an additional four are under 
consideration. AED has provided subgrants to advocacy NGOs in 
democracy, economic restructuring, environment, and social safety net, 
although about half of the financial support has gone to democracy 
NGOs.
Romania
    World Learning has provided training, technical assistance, and 
grants to Romanian NGOs to help support the institutional 
sustainability of the sector as a whole. The World Learning approach to 
NGO strengthening: precipitates the organizational development 
necessary to lead to sustainability of Romanian NGOs; develops the 
capacity of existing NGO support structures to provide necessary and 
desirable information to the NGO community that they serve directly; 
and lays the groundwork for the creation of a permanent, sustainable 
and indigenous network of NGO support institutions and professional 
development capacity for NGO leaders. Topics for training include 
financial management, institutional development, and external 
relations. World Learning awards grants to public policy-oriented NGOs 
primarily in the democracy and economic development sectors.
Slovakia
    The Foundation for Civil Society (FCC) is working with indigenous 
NGOs to provide them with skills and expertise in the area of public 
policy advocacy. To implement this, FCC awards subgrants and provides 
training and technical assistance. Training is provided through three 
Slovak partners: the Slovak Academic Information Agency, partners for 
Democratic Change-Slovakia, and the Center for Independent Journalism. 
Training topics include human resources development, communications 
skills, and organization development. Individual consultations are 
provided in proposal writing, application preparation, and volunteer 
management. Subgrant recipients also receive assistance in media 
relations and presentation of information to the press. FCS awards 
subgrants to public policy-oriented NGOs primarily in the democracy 
sector.
CEE Regional
    Freedom House (FH) provides information, communications, and 
coordination support to the 11 individual country programs implemented 
under the Democracy Network program. This support includes CEE regional 
networking, regional exchanges and grants (East-East) within the CEE, a 
regional NGO newsletter and financial support for issue-oriented 
conferences and cooperative research. Freedom House support NGOs in all 
sectors, but with primary emphasis on democracy and economic 
development.
                  new independent states--the caucasus
Armenia
    The Armenian Assembly of America's NGO Resource and Training Center 
(NGOC) provides support, with resources, training and information 
services, to a diverse group of indigenous NGOs, aimed at developing 
their capacity to respond effectively to short-term emergency and long 
term development needs in Armenia. Through training and public 
education, the NGOC promotes an increase in the number of active 
registered indigenous NGOs providing services heretofore provided by 
the government (pre-national independence) and/or international donor 
organizations, to speed the process of transition from post-Soviet 
crisis, to stable independence. While the NGOC training is focusing on 
providing assistance to all public policy-oriented NGOs, priority areas 
to date have been environment and social safety net.
Azerbaijan
    ISAR (formerly Institute of Soviet American Relations) is working 
to increase the number and to improve the organizational sophistication 
of Azerbaijani NGOs, through training, small grants, and information 
distribution/outreach. ISARtraining offers basic advice on creating 
NGOs to individuals and members of initiative groups, provides 
individual consulting to targeted NGOs, and conducts a series of NGO 
management and development for NGO representatives. ISAR translates and 
distributes training materials for Azerbaijani NGOs. ISAR supports 
advocacy NGOs, primarily in the environment and social safety net 
sectors.
Georgia
    ISAR is working to support and solidify the long-term 
sustainability of the NGO sector through a training program, small 
grants, and the information distribution/outreach program. ISAR helped 
to establish Horizonti, a Georgian foundation, to continue ISAR's 
activities after it phases out its program in Georgia. ISAR conducts 
basic management courses for new NGOs and conducts specialized 
workshops for more advanced NGOs. ISAR has also developed and published 
a Georgian-language NGO Management and Development training book. ISAR 
awards small grants to advocacy NGOs, primarily in the environment and 
social safety net sectors.
Central Asia
    In Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, and 
Turkmenistan, the Counterpart Consortium supports the creation of 
democratic and sustainable NGOs that make a difference in people's 
lives by representing citizens' interests, providing services to 
vulnerable groups within the population, and supporting NGOs in four 
sectors: economic development, democracy, environment, and social 
safety net--with the ultimate goal always to increase democratic 
participation. To accomplish this goal, Counterpart provides training, 
grants, and partnership development programs to advocacy NGOs to help 
them strengthen their organizational, management, advocacy, coalition-
building, and service delivery skills. Individual country highlights 
follow:
Kazakhstan
    With most government agencies now relocated to Akmola, the new 
Kazakh capitol, the Counterpart Consortium helps NGOs continue to home 
strategies for engaging government.
Kyrgyzstan
    Taking advantage of a government relatively open to citizen 
involvement and NGO activity, Counterpart Consortium assists Kyrgyz 
NGOs initiate additional legal, civil and education reform and develop 
strong collaborative relationships with all levels of government.
Tajikistan
    In a country that is facing continual strife and increasing 
economic vulnerability, Counterpart Consortium has focused its support 
on NGOs providing relief for displaced persons and promoting conflict 
resolution.
Turkmenistan
    In a society with little experience in non-traditional NGO 
activity, the Counterpart Consortium is assisting NGOs gain strength 
and a foothold in Turkmen society--despite centralized government 
control.
Uzbekistan
    In a country facing increasing economic hardship due to currency 
controls, Counterpart Consortium is assisting NGOs implement new 
strategies for survival and localized impact.
                                 russia
    The Civic Initiative Program (CIP) in Russia, administered by Save 
the Children, focuses on improving the external operating environment 
for NGOs (i.e. the legal and regulatory environment, public attitudes 
towards NGOs, and support from the government and private sectors); 
promoting the establishment of action-oriented networks of NGOs with 
members who represent a broad, diverse constituency; and developing a 
target group of NGOs who manage themselves efficiently, act effectively 
on behalf of constituents, and serve as a model for the sector. To 
implement this program, CIP has conducted training sessions on topics 
such as NGO management, social marketing, and computer skills. CIP also 
established regional centers in Siberia and southern Russia which have 
transitioned to Russian management. CIP has supported public policy 
NGOs in the economy, environment, democracy, and social safety net 
sectors.
                                west nis
Belarus/Ukraine
    The Counterpart Alliance is providing support for the birth and 
growth of effective, sustainable NGOs which are capable of providing 
needed social services to vulnerable groups within Belarus and Ukraine, 
expressing and protecting citizens' interests in dialogue with 
governments, and promoting continued democratic and economic reform. 
Counterpart provides technical assistance and training, as well as 
small grants, to implement this program. Counterpart is focused on 
giving assistance to social safety net and advocacy NGOs.
                      ngo program support budgets
    Question. The Committee requests that AID provide:
    d. a brief summary of the NGO-support program budgets (by country) 
of each of AID's major subgrant programs that support NGO's through the 
SEED Act and the Freedom Support Act, specifying the name of the U.S. 
program manager, including (1) the country program's total budget (with 
amendments), (2) the program's start and end date, (3) the total 
amounts of funds awarded to indigenous NGO's through the individual 
subgrant programs; and (4) any notes needed for clarification.
    Answer. Attached are two tables which summarize USAID's major NGO 
support program budgets under the SEED and Freedom Support Acts. It 
should be noted that the difference between the total obligations and 
subgrants is comprised of a bundle of costs including: training, 
technical assistance, workshops, equipment provision, as well as 
program management.
    Since USAID's NGO programs maintain a systematic emphasis on 
capacity building and accountability, often NGOs receive substantial 
training and technical assistance both before and after being awarded a 
grant to ensure that they are able to manage the funds responsibly and 
transparently. Therefore, subgrant figures alone do not adequately 
measure the full range of initiatives that USAID implements to support 
the development of the NGO community.


[Pages 377 - 378--The official Committee record contains additional material here.]



         assessing the need for u.s. support to the ngo sector

    Question. In determining the continuing need, and possible future 
role for U.S. support of NGO's in emerging democracies, the overall 
needs of the region's NGO sector, along with the needs of competing 
sectors (independent media, for example) that also strengthen the 
democratic transition.''
    Answer. In countries with passive or authoritarian governments, 
USAID's Bureau for Europe and the New Independent States considers its 
``citizen participation'' strategic objective as the foundation for 
initiating reform across the spectrum of democratic needs. USAID 
reevaluates its funding priorities in countries when the advent of more 
reform-minded governments creates greater opportunity for reforms 
requiring government cooperation, such as strengthening the rule of law 
or local governance. This assessment of opportunities and realignment 
of priorities within the democracy sector occurs--at the latest--over 
the course of USAID's annual Results Review and Resources Request (R4). 
For example, USAID recently added a separate Rule of Law objective to 
its Albania and Bulgaria democracy programs and increased funding under 
the local government strategic objective in its Romania program.
    Of the elements crucial to facilitating citizen participation--
independent media, a free and fair electoral process, competitive and 
representative political parties or an active network of advocacy 
NGOs--USAID's Bureau for Europe and the N.I.S. has given special 
attention to assessing the progress and the existing needs of the not-
for-profit sector. USAID views the not-for-profit sector, in 
particular, advocacy NGOs, as an essential vehicle for promoting and 
sustaining reforms both democratic and economic reforms. Within the 
democracy program it often falls on advocacy NGOs to lead the charge 
for greater adherence to the rule of law, advocate for electoral reform 
or decentralization, or speak up for the rights of journalists. In this 
sense, NGO support programs are the means to broader ends.
    USAID considers the needs of the NGO sector to be greater than that 
of most other democracy sectors and more conducive to change. Limited 
assistance dollars have a far greater impact on the nascent NGO sector 
than, for instance, on civil service reform at the central government 
level. Generally, USAID missions in the Balkans, Caucasus and Central 
Asia continue to report a need for capacity building training and 
technical assistance in areas as diverse and basic as organizational 
development, financial management, and governance issues, such as 
defining the role of the board of directors. USAID's strategy is to 
nurture a core of model NGOs which other NGOs in a given country can 
emulate, while simultaneously developing local NGO resource centers 
which can provide the training and technical assistance currently 
provided by U.S. implementors.
    This strategy has for the most part already been implemented 
successfully in the northern tier countries of Central Europe, but is 
only in the early phase of implementation in the southern tier 
countries. Advocacy NGO's throughout the region, however, face an 
uphill battle in securing the financial footing that will allow them to 
be both politically independent and have adequate resources to do their 
work in a professional and competent manner. USAID is therefore 
collaborating with private U.S. foundations to create a special trust/
endowment that will provide a stable funding base for the next ten to 
fifteen years while promoting financial sustainability for the NGO 
sector through indigenous philanthropy and other revenue raising 
mechanisms. The initial focus of the trust/endowment will be in the 
northern tier countries and will shift to the southern tier over a five 
to seven year period.
    The essential contribution of the independent media in facilitating 
citizen participation is indisputable. As economies begin to recover 
and independent media is liberalized in a country, however, its ability 
to fend for itself increases. Unlike NGOs' independent media outlets 
are businesses that are well-positioned to raise revenues. Some 
private, nationwide media outlets attract the attention of and benefit 
technically as well as financially from business partnerships with 
international media companies. Therefore, USAID's media activities 
focus particularly on countries in which liberalization has not yet 
taken place.
                  non-u.s. government support to ngos
    Question. Please provide the current levels of NGO support in 
eastern Europe and the NIS provided by non-U.S. and foreign foundations 
and foreign governments (e.g., Ford, Soros, NED, Mott, RBF, GMF, EU/
Phare and TACIS, British Know How Fund, as well as other private 
foreign groups and governments in Canada, Holland, Germany, Great 
Britain, Japan, etc.)
    Answer. While USAID/Washington coordinates with other donors at the 
broad policy level, USAID/Washington neither routinely nor 
systematically collects public or private donor funding information 
related to donor support of the NGO sector in individual CEE and NIS 
countries. Rather, USAID field missions coordinate as needed with other 
donors in-country to develop NGO programs. In this way, our field 
staffs are able to develop USAID NGO country programs which reduce 
duplication and improve compatibility of effort without the 
administrative burden of tracking the expenditures of myriad financing 
sources.
    Selected examples of donor coordination are Russia, Bulgaria, and 
Croatia:
    1. Through coordination efforts, the USAID mission in Moscow has 
developed a clear understanding of the activities of the various donors 
in the NGO sector in Russia. It also tracks the funding allocated to 
the sector. For example, in 1997, Soros' Open Society Institute 
provided $35 million, the Eurasia Foundation $6.3 million, the Mott 
Foundation $6 million, TACIS $5.5 million, and the MacArthur and Ford 
Foundations and British Know How Fund together provided a total of 
approximately $8.5 million.
    2. The USAID mission in Sofia holds monthly meetings with the 
donors working in the NGO sector to discuss programs and coordinate 
efforts. This has led to improvements in resource allocation and 
harmonization of effort. For example, the mission assisted the EU to 
design its NGO grant program in Bulgaria, thereby assuring that no 
duplication of effort took place and improving synergies among the two 
programs. Through its coordination efforts, the mission was able to 
convince the Council of Europe, British, Dutch, Danes, and Swiss to 
fund specific projects, developed by a local foundation established by 
the mission, aimed at municipal reform and thereby assuring greater 
impact in the area.
    3. The USAID mission in Zagreb found through its coordination 
efforts that the other donors were slow to identify priority needs and 
had only limited capacity to develop new projects. In recognition, the 
mission worked with the Norwegians to expand a USAID program aimed at 
providing people resident in Eastern Slavonia with legal services 
needed to obtain documentation allowing them to remain in Croatia. This 
resulted in an about $1.0 million of Norwegian funding being channeled 
into this USAID effort and enabled over 200,000 Croatians to obtain 
documentation that may enable them to return to their communities of 
origin. Through donor coordination, the mission was also able to shift 
from providing humanitarian assistance to other areas in need of 
support. This was accomplished by convincing ECHO, EU, UNHCR, and 
several NGOs to take up the task.
              unique aspects of usaid assistance to ngo's
    Question. Anticipating that significant non-U.S. government funds 
are already being spent to support NGO's in central Europe and the NIS, 
the Committee is concerned that limited U.S. government funds could be 
better spent elsewhere, or that other sectors are being short-changed. 
The Committee requests that AID discuss how U.S. government funds will 
be differentiated and targeted to achieve specific objectives. What is 
unique about U.S. government support for NGO's? What unique strategies 
and priorities has AID developed to make a contribution to increasing 
NGO effectiveness and influence to advance political, economic, and 
social reform in emerging democracies?
    Answer. While there is considerable donor activity in this sector, 
USG support stands out in several respects:
    1. USAID's systematic emphasis on capacity building and 
accountability. EU Phare and private funding typically put less 
emphasis on training and technical assistance. USAID implementors 
typically work more intensively with a local grantee before and after a 
sub-grant is made. USAID implementors expect prospective grantees to 
apply what they have learned in training with regard to narrowing their 
focus to achievable objectives, developing realistic budgets and 
management plans, for instance, in the proposal writing process. After 
a grant is made, USAID implementors follow up by monitoring performance 
and enforcing more stringent reporting requirements than is typically 
the case. Thus subgrants become a tool for promoting organizational 
development and for demonstrating just what is meant by abstract terms 
such as accountability. SAID believes that this emphasis on 
transparency and accountability ultimately benefits the recipient NGO 
and the NGO community as a whole because it protects them from the 
suspicion with which NGOs are typically viewed in their home societies.
    2. Scale and the implementation of a sector- and region-wide 
strategy. USAID's funding of this sector has been long-term and 
substantial enough to allow USAID to develop sector-wide strategies in 
the individual countries, encompassing targeted interventions 
addressing the legal environment, the organizational development of 
individual NGOs and the supporting infrastructure, financial 
sustainability defined broadly, and the public understanding of the 
sector. The regional networking activity, coupled with the presence of 
NGO support activities in every country in the region, has allowed 
USAID to disseminate lessons learned in one country to others with 
relative ease as well as allowed all countries to benefit from highly 
specialized expertise, such as in corporate philanthropy, in an 
efficient manner.
    3. Advocacy. Initially through the Democracy Network program in 
CEE, but increasingly in the NIS as well, USAID has placed special 
emphasis on advocacy NGOs. This has given the USAID program focus and 
has the added benefit of building up the demand for continued and 
sustained reforms in all aspects of the transition. Initially the 
emphasis on advocacy meant that communications skills, policy analysis 
and political presentation skills were taught to NGO activists. 
Increasingly, the programs are linked to other initiatives in a given 
country program, such as local government programs so that the 
political process in a given city is strengthened by working 
intensively with both local government officials and institutions and 
the local NGO community. In this way, institution building serves as 
preparation for a second stage in which two actors in the democratic 
process are literally coached in how to interact more constructively 
and effectively with each other.
                 transregional democratization programs
    Question. At a recent Capitol Hill forum on U.S. democratization 
programs, Administrator Atwood was urged to increase USAID's support 
for transregional democratization programs between the NIS and central 
Europe. The Committee requests the USAID provide information on current 
programs; on the need for additional transregional programs; and on the 
plans to increase such activities.
    Answer. USAID is implementing a series of transregional networking 
activities that promote information and professional exchanges on the 
subject of good governance at the local level throughout Eastern Europe 
and the New Independent States. The goal is to create regional and sub-
regional networks--formal and informal--in Europe and the NIS which 
provide experience-based information to local government officials, 
municipal association members, and relevant national officials, who can 
then use this information to improve their responsiveness to citizen 
needs and solve municipal problems. Activities thus far have included a 
major conference in December 1996 in Sofia on the role of local 
government in transition countries, targeted technical seminars and 
workshops, and the compilation of a ``best practices'' guide. The guide 
provides brief descriptions and analysis of successful solutions to 
common problems faced by cities in transition countries. It has been 
widely distributed in the ENI region and is available on a local 
government website.
    A second major regional conference, to be held in November, also in 
southern Europe, will address the theme of mobilizing community 
resources for local economic development and will bring together 
representatives of local and national governments, the NGO community 
and the private sector.
    USAID's media assistance portfolio includes transregional training 
for journalists from NIS countries and Eastern Europe in such areas as 
television/radio station management, ethics training, investigative 
reporting, etc. In the future, USAID plans to introduce transregional 
journalism exchanges, whereby journalists from Eastern Europe will 
visit television/radio stations and newspapers in the former Soviet 
Union, to impart more modern techniques of station and newspaper 
management.
    In the near future, USAID also plans to initiate a pilot 
transregional program linking NGOs in Belarus and Ukraine with 
counterparts in Poland and Lithuania. Through small grants to NGOs and 
exchanges of NGO personnel, USAID will promote information and skills-
sharing among NGOs working on such issues as ethnic tolerance, minority 
rights, conflict resolution, and local government reform.
    USAID recognizes that corruption remains a significant impediment 
to the full and effective transition of ENI countries to market 
economies and participatory democracies. Many aspects of the problem, 
such as trafficking in women, are regional in nature and, therefore, 
demand regional solutions. Because of some basic commonalities in the 
nature of corruption wherever it occurs, countries can benefit from the 
experiences of others. Whether they are sharing data collection and 
analysis techniques, anti-corruption institution building techniques, 
or law enforcement strategies, cross-border and transregional 
collaboration have the potential to provide significant benefits. In 
recognition of the complexity of the problem and the potential gains 
from collaboration, USAID's ENI Bureau has established an Anti-
Corruption Working Group, whose role is to provide the regional 
coordination, conceptual development, and inter-agency liaison work 
that an effective effort to combat corruption requires. A major part of 
the Bureau program will involve transreginal activities that will 
provide opportunities for the countries of Central and Eastern Europe 
and those of the former Soviet Union to learn from each other and to 
share experiences. These will include convening a donor coordination 
working group, sponsoring regional workshops that will serve as a 
transregional forum to examine the problem and its solutions, and 
information dissemination among all the countries of ENI to facilitate 
corruption fighting strategies.
                        ngo program evaluations
    Question. The Committee requests that AID provide: b. copies of 
independent evaluations that have been conducted of AID's major NGO 
support initiatives in Central Europe and the NIS since 1995 (including 
Counterparts, DemNet, Save the Children, and other major initiatives);
    Answer. USAID has conducted independent evaluations of numerous NGO 
Programs in Central Europe and the NIS. Attached please find copies of 
the following evaluations:
    Central Europe Programs:
    Audit Evaluation and Project Support Fund--Independent Mid-Term 
Evaluation of the Democracy Network Program (Bulgaria)
    The Regional Components of the Democracy Network Program--
Evaluation of Performance and Potential Report
    A Mid Term Evaluation of the Democracy Network Project in the 
Baltics
    NIS Programs:
    Civic Initiatives Program for Democratic and Economic Reform in 
Russia (CIP)--Mid-Term Evaluation Final Report
    Participatory Evaluation of the Counterpart Consortium Cooperative 
Agreement
    Evaluation Report of the NGO Training and Resource Center (NGOC), 
Yerevan, Armenia, A Project of the Armenia Assembly of America

    [Clerks note.--These reports are available in the 
Subcommittee.]
                              cash grants
    Question. Over the years Congress and the Administration 
collectively have reduced the amount of foreign assistance that is 
provided as cash grants to governments. There are a few exceptions; 
balance of payments support for countries emerging from civil wars or 
other conflicts, or assistance specifically designed to provide a 
bridge to economic self-sufficiency.
    Within the funds for development assistance, funds are not 
authorized as cash grants except to countries in Sub-Saharan Africa. 
These cash grants are not provided for projects, as are the grants to 
the International Fund for Ireland or for our Bosnia program. They are 
used to support government operations or to pay off loans to 
multilateral development banks.
    The concept is to reward governments for good policy in the areas 
of population control, education, health systems, etc.
    However, hasn't it been proven over and over again that cash grants 
to governments are a dead end, since they become an entitlement; they 
reinforce dependency on foreign aid; and they assist the least 
efficient, lease responsive, least free market-driven institutions in 
Africa? Why would we want to provide $53.5 million in cash grants to 
African governments in 1999. Do you intend to use Child Survival money 
for any of these grants?
    Answer. The issue of project versus program aid (of which cash 
grants are a prime example) is a long-standing one. Each form of 
assistance has advantages and disadvantages. USAID knows of no credible 
analysis that demonstrates that cash grants or other forms of program 
aid are inherently ineffective, or inherently effective. Nor does USAID 
know of any analysis that establishes that one form of aid (e.g., 
project aid) is inherently superior to another (e.g., program aid).
    On the other hand, there is widespread acceptance throughout the 
world, gained from practical experience, that policies, institutions, 
and sound investments in human resources and infrastructure are 
critical to development success, because they create the enabling 
environment that allows the private sector to grow and thrive. 
Inevitably, it is largely public sector performance that determines the 
quality of policies, institutions, and investments in vital public 
services such as basic education and health. Therefore, most aid, in 
one way or another, aims to improve public sector performance.
    At the same time, there is mounting evidence that sound policies 
and institutions are critical to the effectiveness of aid, both project 
aid and program aid. Aid that helps developing countries improve 
policies, strengthen institutions, and undertake sound investments in 
human resources in likely to make a substantial contribution to 
successful development--today and in the future.
    Decisions about USAID's non-project assistance (NPA) programs in 
sub-Saharan Africa are not based on rewards or incentives for good 
policies, but to help governments already demonstrably committed to 
policy reform to overcome the short-term budgetary gaps that limit 
effective policy implementation. NPA is designed and provided in ways 
that support improved policies, strengthen institutional capacity, and 
avoid aid dependency. NPA enhances African capacity to lead and manage 
Africa's development; strengthens the policy and institutional 
framework for systemic change and reform of entire sectors, such as 
health, education, and agriculture; and thereby achieves improved 
sector performance and sustained results. It is provided only to the 
best performing African governments (those with more efficient, market-
oriented, policies, such as freely convertible foreign exchange 
regimes), all with the aim of increasing sustainability and reducing 
aid dependency.
    USAID expects NPA activities in Africa covering basic education and 
health to have major positive systemic effects in terms of improved 
child survival, resulting in reduced aid dependency and increased 
sustainability. Therefore, the Agency will consider using some Child 
Survival resources, as appropriate, for NPA that helps accomplish 
crucial systemic improvements leading to self-sustaining increases in 
child survival rates.

           Questions for the Record Submitted by Mr. Kingston

                               corruption
    Question. I am very interested in your efforts to help increase 
respect the human rights, to strengthen rule of law, and to strengthen 
institutions that are critical to success in these areas in developing 
countries. I would like to ask several questions relating to this 
general goal:
    What accomplishments/progress has been made since last year in the 
former Soviet Union to help reduce corruption within governmental, 
judicial and business sectors? How has U.S. assistance played a role in 
that? How is that measured?
    Answer. Reducing crime and corruption in the countries of the 
former Soviet Union is a serious priority for USAID. During the last 
year USAID has engaged in policy dialogue related to a broad range of 
anti-corruption issues in a number of countries, including Russia, 
Ukraine, Bulgaria, Albania and Georgia. This has resulted in increased 
support to the judiciary and to in-country anti-corruption NGOs, such 
as Transparency International, in several of these countries. 
Additional anti-corruption program related to issues such as regulatory 
reform, public procurement and ethics reform have also been launched or 
are currently under consideration in these countries. Dialogue on a 
range of related issues is also underway.
    In addition, during this time-frame USAID has also established a 
close partnership with the World Bank and the OECD in this area. 
Through joint programs with our partners, countries throughout the 
region will be offered technical assistance and international 
comparative information. While many of these efforts are long-term 
undertakings that make it difficult to measure short-term success, 
already USAID assistance in Ukraine helped push through legislation 
needed to undertake regulatory reform.
    Measuring success on anti-corruption reforms related to 
institutions, such as the judiciary, will necessarily have to be done 
over a several year period. Ultimately, successes on this front will be 
measured, in large part, by the number of property disputes resolved by 
the courts in a timely, fair and effective manner. However, it may be 
possible to measure success on certain micro-economic reforms, such as 
streamlined licensing procedures, more quickly. In this case, success 
will be measured, in large part, by the amount of time and money saved 
by entrepreneurs and the business community as a result of less 
government regulation.
                 us programs to strengthen rule of law
    Question. I understand that one of USAID's goals in the Palestinian 
areas of the West Bank and Gaza is to help build up institutions of 
democracy (such as the legislature) and strengthen their legitimacy in 
an effort to combat corruption and cronyism, and increase governmental 
accountability. Can you describe this program (if my understanding is 
correct), how it is being implemented, what your expectations are, and 
its results.
    Answer. One of USAID's objectives in the West Bank and GAZA is to 
support more responsive and accountable governance through four inter-
related components: (1) Increasing the participation of civil society 
organizations in public decision-making and government oversight; (2) 
enhancing the capability of the recently elected Palestinian 
Legislative Council to perform its legislative, oversight and 
representative functions; (3) improving the executive's legislative and 
public policy capacity through the development of a transparent and 
consultative policy-making process; and (4) establishing the foundation 
for decentralized local government. Programs are underway for the first 
three components; local government programs are currently being 
designed.
    Civil Society: USAID leads other donors in supporting the 
development of an active civil society, and in increasing citizen 
participation, through civil society organizations, in the development 
of responsive public sector policies and laws. Results to date include: 
Over 30,000 Palestinians participated in civic education programs; 
4,000 citizens attended town hall meetings with legislative and 
executive representatives to express their opinions; a citizen's rights 
center established and has addressed more than 100 citizen complaints; 
information disseminated on draft laws and governance issues; civil 
society leaders trained on policy analysis; and news production skills 
of independent television broadcasters have been strengthened.
    Legislative Council: USAID's support is critical in assisting the 
Legislative Council play a strong role in overseeing and reviewing 
executive actions and in fulfilling its legislative function. With 
USAID's support, the Council has made substantive changes in the 
executive's budget which were accepted by the executive; modified the 
majority of laws drafted by the executive; instituted a regular 
``question time'' for government ministers; addressed allegations of 
government corruption and mismanagement through its own investigations 
and reports; established a parliamentary research unit that provides 
the Council objective technical analysis of draft legislation and 
policy issues; developed record-keeping procedures; drafted action 
plans to build up executive oversight skills and; trained legal and 
committee staff.
    USAID has also helped the Council by providing technical assistance 
for drafting the constitution and reviewing the executive budget and; 
drafting manuals on constituency relations.
    Executive: USAID's support is enhancing the transparency, quality 
and consultative nature of the overall policy and legislative process 
within the executive, and is contributing to the creation of a uniform 
and updated legal framework. Procedures for the development and review 
of legislation within the executive have been drafted and are being 
tested, and a new unit has been established to review the technical 
quality of draft legislation.
    USAID's programs are implemented through competitively selected 
U.S. contractors, U.S. and Palestinian grantees, and an interagency 
agreement with USIS.
             usaid indicators--rule of law and human rights
    Question. I am concerned about the indicators USAID is using to 
measure success/results in all of its worldwide programs. Here I'd like 
to ask about those intended to strengthen rule of law and human rights. 
For example, on page 97 of the Congressional Presentation, the 
indicators do not seem to reflect the purpose of the program funding or 
substantively evaluate the advancement of our goals in this area. While 
the purpose is to help legal systems operate more effectively to embody 
democratic principles and protect human rights, the indicators only 
evaluate these goals by noting the number of countries we try to help 
improve judicial administration and access.
    These two factors themselves are not only inadequate to evaluate 
the purpose, but they only address the number of countries we try to 
assist. Can you explain how the Agency can evaluate its progress toward 
these goals based solely on the number of countries we target using 
only two ambiguous frames of reference?
    Answer. Generally, indicators are proxy measures of the results we 
seek to achieve. Some are better proxies than others, and our choice of 
indicators is limited by several factors, including the cost of 
collecting data.
    At the Agency level, as reflected in our Strategic Plan and Annual 
Performance Plan for FY 1999, we are using the Freedom House Index to 
assess progress in political rights and civil liberties which cover 
important rule of law and human rights issues. At the country level, 
individual missions with rule of law programs are using more specific 
indicators to assess progress against the particular objectives they 
have established. These indicators might include the time it takes to 
reach judgments in different types of cases or a measure of the 
confidence citizens have in judicial processes.
    However, to make the best available expertise available to our 
missions for both research and program management we have established a 
series of central programs which support the efforts of our field 
missions to achieve results in a number of areas including rule of law 
and human rights. The worldwide program to which your question refers 
is one of these support programs. It does contribute to improved legal 
systems, but the direct impact of its assistance is captured in the 
reporting done by the field missions which it helps support. What we 
are trying to capture in this program description, therefore, is now 
effective this central program is in supporting the efforts of our 
field missions to achieve their objectives. We do not yet have 
indicators which capture this contribution effectively. We are aware of 
the problem; it is a difficult one. We have offered a proxy measure, 
number of countries, which assesses field demand for the program's 
services, a rough assessment of its perceived value to the field 
missions in achieving their results.
                              rule of law
    Question. What is your evaluation of the effectiveness of the 
program to improve judicial function, including by implementation of 
computerized case tracking system developed with USAID assistance in 
Ecuador described on page 56 of Annex 4 of the CP? What else has USAID 
done to assist Ecuador to effectively implement laws protecting rule of 
law and due process? What problems remain? How can we address these?
Background
    Answer. The present Ecuadorian situation is an extremely difficult 
one. Most observers agree that no rule of law culture exists in the 
sense that the political elite, by and large, do not accept the 
principle that for a credible justice system it is necessary that 
members of their class should be prosecuted and sentenced if they 
violate the law and their public trust. Ecuador is also living in a 
moment of political transition, marked by the adoption of 
Constitutional reforms that will redefine state institutions. Some of 
these reforms are directly related to the administration of justice, 
and as a result, the judicial apparatus will have to face a period of 
transition and adjustment which could impact the reform process.
    In addition, there is a growing interest on the part of civil 
society and some circles in government to demand, and participate in 
the process of, reform. USAID isworking with Civil Society 
Organizations (CSOs) in order to promote their participation as key 
actors in the reform process and has been able to achieve significant 
progress in developing these activities.
General activities
    Overall progress of the activities met Mission expectations. 
Partner organizations active in the justice sector are Ecuadorian Non-
Governmental Organizations (NGOs)--Corporacion Latinoamericana para el 
Desarrollo (CLD) Centro Sobre Derecho y Sociedad (CIDES), and Centro 
Ecuatoriano para la Promocion y Accion de la Mujer (CEPAM)--and the 
GOE's ProJusticia. To date these organizations have:
    Greatly increased their service to a wider universe of individual 
beneficiaries, i.e., Alternative Dispute Resolution (ADR) and legal 
services to indigenous communities and legal education and services to 
women.
    Improved their capacity and extended their efforts to obtain 
support from outside sources. All of them are seeking funding from 
World Bank and Interamerican Development Bank (IDB) judicial reform 
projects, and they have created strategic alliances with universities 
and other entities.
    Promoted formulation and enactment of important legislation, i.e., 
Arbitration and Mediation Law (enacted), National Judiciary Council 
(enacted), draft of the new Criminal Procedures Code (in Congress), 
Constitutional Tribunal Law (enacted), Ombudsman Law--Defensor del 
Pueblo (enacted), Family Courts Law (enacted), and guarantee of 
constitutional rights--i.e., Amparo (enacted).
Computerized case tracking system (Prisoner Data Base)
    The data base is providing accurate information which assists 
defense attorneys and the judicial branch to monitor the status of 
detained individuals. The data base has approximately 9000 cases of 
prisoners who have not been sentenced. (A recently approved drug law 
will release approximately 2500 prisoners.) Nonetheless, the system has 
helped in improving the average time an inmate is held without a 
sentence. (In Guayaquil, the average in 1994-1995 was seven years, now 
it is three years. In Quito, the average is now less than two years). 
Higher court judges use the system to monitor the performance of lower 
courts, identifying those that are a bottleneck during the sentencing 
stage. Once these courts are identified, they receive a warning; if 
they do not correct the situation, they are then sanctioned. At this 
time, some judges in Quito, Guayaquil, Santa Rosa en El Oro, Bahia and 
Otavalo are being sanctioned (with suspension or a fine) in accordance 
with Article 71 of the Organic Law of theJudiciary. Most of the 
prisoners are awaiting sentencing for crimes against property or for 
drug-related crimes.
USAID assistance to effectively implement laws protecting rule of law 
        and due process
    The Constitution is presently being revised by the National 
Assembly. USAID partners are providing technical assistance and are 
monitoring the process to ensure that Assembly members consider the 
following issues: internationally accepted due process standards, 
gender issues, indigenous communities' concerns, and human rights 
protection. Some of the proposed constitutional changes that will 
directly affect the judicial system are specified below:
    Criminal procedures will become accusatory in nature.
    Due process principles will be clearly defined.\1\
---------------------------------------------------------------------------
    \1\ The present Constitution limits these principles to criminal 
cases only.
---------------------------------------------------------------------------
    All legal proceedings (criminal and civil) will be oral.
    The Constitutional Tribunal will be strengthened and 
professionalized.
    Constitutional Guarantees will be clarified, including a 
redefinition of Habeas Corpus and Habeas Data, and introduction of 
Amparo.
Problems that remain--and what can be done
    Despite these initial efforts, additional reforms and implementing 
legislation are necessary to complete modernization of the judicial 
system. However, some important actors do not recognize these needs, 
and thus we must also increase awareness among practitioners.
    ProJusticia: USAID is considering the expansion of its strategy to 
encourage broader-based CSO participation. ProJusticia will play a 
leading role in the development and strengthening of NGO networks and 
linking them to government justice institutions. USAID will provide 
technical assistance to conduct activities which would allow NGOS to 
organize their work and develop network connections to achieve 
collective empowerment.\2\
---------------------------------------------------------------------------
    \2\ The media has demonstrated an interest in justice reform. 
According to CLD's tracking system, in 1992 there were only 450 
articles related to the judicial reform per year. Presently, 
approximately 8000 articles are written per year. Journalists 
interviewed believe the progress is due to continuous pressure from 
CSO.
---------------------------------------------------------------------------
    Criminal Procedures Code: This draft law is presently in Congress 
awaiting debate (presented on Dec. 10, 1997). USAID will be working to 
promote the passage and implementation of this proposed new Code. Under 
current law, the judiciary manages the investigation stage; the 
proposed new Code would establish a strong independent prosecutor's 
office. If enacted, the implementation of the new Code would require 
consensus building, further technical studies, work with affected 
agencies, planning, and an analysis of costs.
    Organic Law of the Public Ministry: Has to be revamped in order to 
include all the aspects they will oversee by assuming the leadership 
position in the accusatory system. USAID will assist by providing 
technical assistance.
    Communication Strategy: Priorities and practical steps to achieve 
judicial reform need to be imparted to the public and shared with 
donors in order to gain support. Those who will have to implement the 
reforms (attorneys, judicial workers, judges, CSO, GOE, academia, etc.) 
must be included both as targets of the awareness campaigns and in the 
process of planning for the implementation.
    Question. What steps does USAID take to insure that its ``Good 
Governance'' (518-SpO3) program is consistent with the ``Civil Society 
Strengthening'' (518-SO03) program? In other words, how do you insure 
that the beneficiary country is able to prosecute crime with our 
assistance more effectively while at the same time maintaining proper 
respect for the legal process (also with our assistance) when this area 
is also recognized as being very problematic?
    Answer. USAID/Ecuador is taking steps to ensure that the Good 
Governance Special Objective (SpO-3) and the Civil Society 
Strengthening Strategic Objective (SO-3) are consistent, i.e., that 
Ecuador is better able to prosecute crime while maintaining respect for 
due process.
    The content of the respective programs is the primary measure. 
USAID/Ecuador supports some activities which will improve the 
capability of the GOE to prosecute corruption and at the same time 
funds other activities which promote respect for due process and 
respect for human rights.
    For example, under the Good Governance Special Objective (SpO-3), 
USAID/Ecuador with the GOE is designing a program which will establish 
a new pilot prosecutorial unit specializing in investigation and 
prosecution of corruption cases, particularly tax and customs evasion, 
misuse of public funds, and kickbacks in public contracting. Training 
provided under this activity will also emphasize the need to respect 
due process and human rights in carrying out investigations and in 
prosecuting cases. When operational, this unit will increase the number 
of corruption cases prosecuted. The unit will thus help Ecuador lessen 
the impunity of corrupt officials which so undermines public confidence 
in civilian democratic government. Another example is that Ecuador's 
congress is now considering a law developed with USAID technical 
assistance which would criminalize customs evasion for the first time.
    Simultaneously, under the Strengthening Civil Society Strategic 
Objective (SO-3), USAID/Ecuador supports initiatives which strengthen 
the rights of accused persons. For example, a USAID-funded local 
nongovernmental organization (NGO) has successfully engineered passage 
of a new ``amparo'' law which gives prisoners a legal remedy when their 
constitutional rights are violated. This same NGO has also prepared and 
promoted a proposed new code of criminal procedure which, when approved 
and implemented, will give accused prisoners the right to an oral 
hearing in which an accused can confront his or her accusers. Finally 
as noted in the answer to the companion question, USAID/Ecuador funded 
the development of a prisoner data base system which enables 
supervisory court officials to monitor the status of the cases of every 
person incarcerated in Ecuador and force judges to move languishing 
cases.
    A second step for helping ensure consistency between the SpO-3 and 
SO-3 is that the same USAID/Ecuador officer serves as team leader for 
both objectives. Under this officer's guidance, both the SpO-3 and SO-3 
teams design and implement each activity with a view toward harmonizing 
USAID's efforts to assist Ecuador in promoting a more effective, 
fairer, and more equitable administration of justice for all its 
people.
    Question. What else has USAID done to assist Latin American 
countries to effectively implement laws protection rule of law and due 
process? What problems remain? How can we address these?
    Answer. One of USAID's overall program objectives is to encourage 
respect for rule and democratic development throughout the hemisphere. 
Our programs focus on criminal justice systems, increase efficacy and 
efficiency of basic justice institutions (i.e., courts, prosecutors, 
public defense, police, private bar associations, and advocacy groups); 
and increase access to justice for all citizens.
    Our programs achieve these objectives by supporting: law reform, 
including code reforms; development of professional staff, training and 
on-site technical assistance; administrative modernization of courts 
and other institutions; judicial independence, separate budgets for the 
judicial branch, career ladders for judges, and selection of judges on 
merit; and development of reform constituencies inside and outside of 
government.
    USAID has major administration of justice (AOJ) and rule of law 
programs operating in El Salvador, Guatemala, Colombia, Haiti, Bolivia, 
Honduras, Dominican Republic, and Nicaragua. There are smaller programs 
in Peru, Mexico, Ecuador, Brazil, Paraguay, and Guyana. USAID's AOJ and 
rule of law programs in Panama, Chile, Argentina, Venezuela, the 
Eastern Caribbean, and Costa Rica are completed.
    Over the years, USAID has learned that: AOJ programs are long-term 
and need sustained financial and human resources; programs need 
political commitment, which requires policy dialogue, and working with 
national commissions and advocacy groups to build that commitment when 
it does not already exist; reform should be addressed on an integrated 
basis; independence of the judiciary needs to be preserved, and, if it 
does not exist, it needs to be established; programs require sustained 
technical assistance, training, and on-site mentoring; the full range 
of AOJ and rule of law components are critical for transitions from war 
to peace; judges are key to sustainability of reforms.
                        partnership for freedom
    Question. As I expressed last year, I am supportive of your 
decision to begin to shift the focus on our aid to the New Independent 
States as represented by the new Partnership for Freedom. How far have 
you gone this year in implementing this transition?
    Answer. The Partnership for Freedom (PFF) was initiated on a pilot 
basis last summer in Russia with the start of the first Regional 
Investment Initiative (RII) in Novgorod. Strategic emphasis is on trade 
& investment and democracy, with a tactical emphasis on partnership 
relationships among a wide range of U.S. and indigenous grassroots 
organizations--businesses, universities, hospitals, NGOs, professional 
associations. Two other such RII sites have been initiated in 1998.
    Also in Russia, the PFF is funding the Presidential Management 
Training Initiative, PMTI. This program will have a major impact on 
business management skills through partnerships between U.S. and 
Russian business schools, expanded university scholarships, business 
internships and business training.
    In Ukraine, major PFF efforts include expanded small and micro 
business credit, expanded health and energy partnerships. Support for 
development of loans by International Financial Institutions will 
facilitate major lending which is important to economic growth 
prospects.
    Throughout the NIS, USAID has supported 44 medical partnerships and 
we are reforming health care processes to improve care delivery, 
patient outcomes, and consumer choice.
    In FY 1999, we are requesting an increase in FREEDOM Support Act 
funds of $155 million above the FY 1998 level to:
    Support the Partnership for Freedom at the level necessary to 
achieve its objectives in Russia and to expand it across the NIS. We 
expect to expand the Regional Investment Initiative to at least four 
sites in Russia, and to carry this concept into other countries.
    The PMTI concept will expand to other countries.
    Endowment mechanisms will be used to create a long term ability to 
continue support of democracy, civil society and nongovernmental 
entities.
    In Central Asia, PFF programs will be geared to elimination of 
trade impediments. Other key areas include a proposed partnership to 
establish an oil spill response network for the Caspian Sea and the 
development of environmental policies to address the potential effects 
of Caspian oil and gas development.
    In the Caucasus, a variety of PFF partnerships will receive funding 
including medical, power utilities, and agriculture partnerships, as 
well as expanded funding for small and medium enterprises.
    Throughout the region, USAID is continuing to expand the medical 
partnerships program beyond individual institutions to address systemic 
health issues, such as modernizing medical and nursing curricula, 
health management training, work force planning, infection control, and 
health promotion.
    The following figures show the percentage of PFF-related 
obligations as a share of all obligations planned for the two fiscal 
years. (These percentages reflect only that part of the FREEDOM Support 
Act that is managed by USAID.)

------------------------------------------------------------------------
                                                     FY 1998    FY 1999 
------------------------------------------------------------------------
Total.............................................         54         70
Russia............................................         96         98
Ukraine...........................................         72         78
Central Asia......................................         59         76
Caucasus..........................................         30         45
------------------------------------------------------------------------

                        privatization in the nis
    Question. I also commend your effort to help privatize 26,000 
state-owned enterprises in the NIS. Is this a result of your effort to 
reform the legal system or a program specifically targeted at 
privatization? How do most of these transitions of ownership take 
place? Are they corporatized through the stock market? How do we seek 
to avoid inappropriate transfers of ownership based on political 
corruption, cronyism, or pressure from organized crime?
    Answer. Privatization is not merely a goal in itself, it is a part 
of our effort to bring about market reform and thus create a market 
economy by expanding private ownership. The principal components of 
market reform are: (1) private ownership, (2) functioning markets and 
banks, (3) a fair and conducive business environment, and (4) property 
rights and rule of law.
    Privatization contributes to systemic change and is interwoven with 
legal reform in several areas, e.g., the creation of new legal concepts 
surrounding property rights and responsibilities, the creation of 
financial markets, bankruptcy laws, and accounting reform.
    Most of the transfers of state owned assets occur through mass 
privatization programs typically involving auction systems. The larger 
enterprise transfers of ownership often involve either negotiated sales 
following open or short list tenders, public placements through a 
market intermediary like a stock market, or acombination of these and 
other mechanisms.
    Corporatization precedes the ownership transfer as the enterprise 
must be made a defined legal entity before ownership can be 
transferred. The ownership record (e.g., stock certificate) may 
eventually be transferred through a stock market. The reason for this 
is that typically initial transfers, if not achieved through private 
placements, are accomplished through voucher auction mechanisms, 
allocations and/or sales to employees or pension funds or similar 
mechanisms. Each of these, in turn, looks to a stock market for 
subsequent liquidity. There are instances where corporatization does 
not occur at all, such as when assets owned by a government enterprise 
are sold to another legal entity, which may be a corporation, 
partnership, or sole proprietorship.
    To minimize outside influences on transfers of privatizing assets 
USAID demands that asset transfers take place using transparent and 
open rules (e.g., open auctions, tenders under internationally accepted 
rules, etc). Also, legal systems advocated by USAID institute 
regulations and norms that require openness and transparency in 
privatization and procurement related activity and, thus, reduce the 
possibilities for political corruption, cronyism, and criminal 
manipulation of transfers.
                population: family planning saves lives
    Question. You stated in your testimony that hundreds of thousands 
of women and children are alive because of AID's family planning 
programs. Please define the link between family planning and the lives 
of hundreds of thousands of women and children. Would that many people 
really not be alive today without family planning?
    Answer. Without family planning programs, it is estimated that 
635,000 women would die of causes related to pregnancy and childbirth--
50,000 more than the 585,000 who currently do die each year of maternal 
causes. Similarly, without family planning, 7.6 million infants would 
die annually--600,000 more than the current total of 7 million who do 
die.
    Use of family planning in the developing world (excluding China), 
estimated at 36% of married women of reproductive age, is about half of 
developed country levels. An additional 600,000 infant deaths and 
50,000 maternal deaths could be prevented each year if family planning 
use were doubled to developed country levels, reducing global mortality 
totals to 6.4 million infant deaths and 535,000 maternal deaths each 
year. Of course, the cumulative impacts of family planning programs on 
infant and maternal mortality are much greater than any single year 
impact.
    Family planning can prevent at least 25 percent of all maternal 
deaths by allowing women to delay motherhood, prevent unintended 
pregnancies and unsafe abortions, protect themselves from sexually 
transmitted infections and HIV/AIDS, and stop childbearing when they 
have reached their reproductive goals.
    Babies born less than two years after their next oldest sibling are 
twice as likely to die in the first year of life than those born after 
an interval of at least two years. Children born to mothers under age 
20 are more likely to die before their first birthday--one and one-half 
times more likely in many countries--than those born to mothers ages 20 
to 29. Children born to mothers over age 40 and fourth-born or later 
children are also more likely to die. Family planning makes important 
contributions to infant survival by helping women space births at least 
two years apart, bear children during their healthiest reproductive 
years, and have only the number of children they want. Through its 
effects on birth spacing alone, family planning can prevent 25% of 
these deaths.
                child survival account vs. aids funding
    Question. Of the $503 million designated for the child survival 
account, you propose to use $121 million to combat AIDS with only $30 
million to use against infectious diseases in general. When looking at 
the number of people who die or are at a higher degree of risk of 
contracting AIDS versus infectious diseases in general, its seems that 
our priorities are reversed. It seems like the funding outlines are 
disproportionate with the needs in this area. Can you please address 
this concern?
    Answer. Of the approximately 55 million individuals worldwide who 
die each year, about one-third die from infectious diseases. Most of 
these infectious disease deaths occur in the first five years of life. 
Of the $503 million designated for the Child Survival Account, $121 
million is allocated for HIV/AIDS and another $150 million for 
interventions to reduce childhood infectious diseases. This includes 
funding to reduce respiratory infections, immunizations for infectious 
diseases, diarrheal disease control, and childhood malaria control. The 
$30 million referred to in the question is for ``additional'' 
infectious disease interventions. These encompass increased emphasis on 
malaria, expanding tuberculosis control, establishing global infectious 
disease surveillance systems, and dealing with the ever growing problem 
of antimicrobial drug resistance.
    It is important to note that the hard-won gains in infant and child 
mortality in Africa are being reversed by the HIV/AIDS pandemic. HIV/
AIDS has doubled infant mortality and quadrupled under-five mortality 
in the most severely affected countries in east Africa.
    In adults 15 to 50 years of age, the two leading causes of death 
that are attributable to infectious diseases are tuberculosis 
(approximately 3 million deaths per year) and AIDS (2.3 million deaths 
per year). In fact, in Africa, AIDS is the single leading cause of 
death in adults under 60 years of age, and contributes to about 10% of 
the tuberculosis deaths. The number of AIDS deaths per year is steadily 
increasing and in Africa will surpass the number of deaths from TB 
within 3 to 4 years. We estimate that by the year 2002, the annual 
mortality from AIDS will be nearly 5 million.
    Prevention efforts of the HIV/AIDS pandemic in the developing world 
are woefully underfunded. The $121 million per year that is spent on 
the global AIDS epidemic must cover some 75 countries in order to try 
to prevent over 6 million new infections per year. Half of these new 
infections occur in women. In addition, 750,000 infants are infected 
with HIV per year through mother to infant transmission. In comparison, 
the United States spends $700 million annually for HIV prevention in 
the U.S. where about 45,000 new infections occur per year.
         social structure impact of fathers or male involvement
    Question. I agree with you that it is important to address social 
structure in developing countries as a means to help prevent spread of 
disease, etc. One of these ways you choose to exemplify this point, 
however, raises serious concerns to me about the predisposed 
``mindset'' under which we may go about this. Your testimony states 
that ``research shows that the children of a mother who has even a 
single year of education has a 9 percentage percent better chance to 
live to the age of five''. I certainly do not question the importance 
of education to successful families, but I am shocked that the study, 
with its implied importance to the Agency's approach to improving 
``social conditions'', would not also address the impact of fathers or 
male involvement. I understand the reality that many or even most 
children are not blessed with two parents, but why then must the 
parent's gender be an issue? It seems we should be pointing out the 
importance of both mothers and fathers to children's well being.
    Answer. USAID fully agrees that both parents are important to the 
well being of children. The point which was made on the importance of 
educating women and the impact this has on the welfare of children was 
not intended to suggest a diminished role for the male parent. The 
purpose was rather to emphasize the need to give women an opportunity 
for a complete and high quality education which often in the third 
world is afforded only to men. Hence the research cited demonstrates 
not a particular bent toward women but rather one that addresses the 
positive impact on children resulting from reducing the inequality of 
educational opportunity for girl children in many nations.

       Questions for the Record Submitted by Congresswoman Pelosi

                      democratic republic of congo
    Question. USAID recently notified the Committee of its intention to 
develop and expand its aid program in the Democratic Republic of the 
Congo. Also, the Administration is considering the use of a Section 614 
waiver with respect to the restrictions in the FY 1998 bill that 
prohibit aid to the central government until the President certifies 
that they are cooperating fully with the UN investigation of human 
rights abuses.
    (a) Explain your strategy for working with the central government, 
why this proposed project does not violate the aid restrictions, and 
the status of the Congo's cooperation with the UN investigation.
    (b) What is the status of the Administration's intention regarding 
the 614 waiver with respect to the Congo?
    (c) What do you envision in dollar terms for aid to DROC and how 
does it fit with USAID's new strategy in Africa?
    Answer. (a) The USAID strategy for working with the central 
government is one of cautious engagement, consistent with overall U.S. 
Government policy for the DROC. Due to the legislative restrictions on 
aid to the central government, we are not providing assistance to the 
central government at this time. However, we do believe that it is in 
the interests of the United States to look for targets of opportunity 
to work with reformist elements of the DROC government now to attempt 
to improve the quality of life for the people of the DROC. We will 
consult closely with the Congress on how best to move forward with 
assistance to the government in critical areas, such as democracy 
promotion and to provide technical assistance for key sectors such as 
health, justice and/or finance. We also have been working with the 
World Bank to design a Trust Fund that will provide assistance 
complementary to ours, through the government and NGOs in social 
sectors such as health and education, and to support employment 
opportunities through small public works.
    The UN has suspended its human rights investigation. We are 
disappointed with the suspension and hope that the current problems 
that led to the suspension can be resolved quickly and that the team 
will be able to resume its work.
    (b) The Administration intends to work closely with Congress to 
look for the most appropriate means to provide targeted aid to the 
central government of the DROC. We intend to begin consulting in April 
with key Congressional committees.
    (c) As Secretary Albright announced in December, our intention is 
to work with Congress to provide $35-$40 million in bilateral aid and 
to contribute $10 million to the World Bank Trust Fund for the Congo in 
FY 1998. We envision providing a similar amount of bilateral aid in FY 
99. Our assistance strategy for the Congo potentially will focus on 
democracy/governance, health/child survival, private enterprise 
development and the environment. All of these areas are consistent with 
USAID's overall strategy for Africa. Democracy/governance and promotion 
of private enterprise will be especially important for laying the basis 
for broad-based economic growth in the DROC.
                    fixing the new management system
    Question. AID is currently assessing the impacts of the failure of 
the new management system. Can you comment on how much will be required 
to make the current system workable, and what confidence you have that 
the current effort will actually fix the system?
    Answer. The recently completed independent assessment conducted by 
IBM and Coopers & Lybrand under the oversight of the GSA estimated the 
USAID would have to spend up to $20 million to fix the system. We 
estimate that this cost will be spent within the next three years. This 
does not include day-to-day NMS operation costs. It is essentially a 
rough order estimate of the costs to replace the NMS financial 
management system (i.e. AWACS) with a commercial off-the-shelf package 
and correct the other deficiencies in NMS. Further analysis will be 
required to refine those costs.
    In consultation with OMB, USAID has concluded that there is 
substantial cost, schedule and organizational risk in trying to 
implement a commercial off-the-shelf accounting system by October 1, 
1999. We need to lower our risks and examine alternatives that may also 
include longer range plans for using a combination of out-sourcing and 
cross-servicing and commercial off-the-shelf packages to meet our 
financial management requirements.
    Coopers & Lybrand is assisting USAID in financial management 
business process improvement, requirements analysis, and an investment 
analysis on out-sourcing and cross-servicing and commercial off-the-
shelf options for financial management processes. They will assist us 
in simplifying our processes and make it easier to implement the 
selected options. This work will be finished in October 1998. Also, the 
prime contractor, when selected and mobilized, will perform a similar 
effort on the Operations, Budget and A&A components of NMS.
    Once Coopers & Lybrand's work is completed and a prime contractor 
is selected and completes its analysis, we will be in a better position 
to provide a detailed cost and schedule for fixing NMS.
    Question. When this effort is finished what advantages will the new 
system give AID from an operational standpoint?
    Answer. When this effort is finished, USAID will have a world-wide 
integrated accounting system that can provide timely and accurate 
reporting on its programs in every country and associate costs with 
results achieved. USAID expects that implementing a commercial off-the-
shelf financial management package with minimal customization and 
applying best financial practices will reduce the overall life cycle 
costs of the system, increase the quality of reporting and decision 
support tools for Agency managers, and provide the essential 
productivity gains that NMS was originally intended to produce. USAID 
will be performing an investment analysis on the proposed renovations 
for the Operations, Budget and A&A portions of NMS, as well to 
determine if the life cycle costs to repair are less than the life 
cycle costs to replace components with available commercial off-the-
shelf packages where they exist to achieve comparable benefits. A fully 
integrated suite of administrative and financial application systems 
will provide the greatest assurance of quality program design and 
implementation world-wide.
    Question. Has the shutdown of the system caused any difficulties 
with respect to monitoring and or auditing of program funds?
    Answer. The documented deficiencies in NMS caused difficulties in 
meeting some USAID reporting requirements. USAID has had successive 
years of negative audit reports associated with the precursor financial 
management systems. Through reengineered processes and NMS, USAID has 
made significant strides in managing its program resources. Where 
deficiencies have been identified and effective short-term corrections 
can be made, they are being implemented. Only the financial management 
and procurement components of NMS have been shutdown in our 39 overseas 
missions, which continue to use the program and budge portions of NMS. 
A legacy financial management system still remains operational in the 
field and effectively monitors program resources. An on-line 
procurement system for the field did not exist before NMS and while not 
having the procurement module operational in the field creates 
reporting challenges for USAID, our field missions are still able to 
implement their contracting actions. All four modules of NMS remain 
fully operational in Washington.
    Question. Are you now working cooperatively with AID's inspector 
general on the fixing of this system? What role does he have in the 
process?
    Answer. The goal of both USAID management and the IG has been to 
reach consensus on the facts regarding the deficiencies of NMS. 
Substantial progress has been made on this effort, which is reflected 
in recent communications issued both by USAID and the IG. The IG 
continues to fulfill a very useful role in focusing management 
attention at all levels within USAID on our management control 
weaknesses and areas in which federal government best practices can be 
applied to address organizational and process deficiencies.
                   usaid's climate change initiative
    Question. USAID has been given the lead to implement the 
President's Climate Change Plan for developing countries. $1 billion 
will be spent over 5 years in grants and loan guarantees. Can you 
expand on this initiative and explain how it will address mitigating 
greenhouse gas emissions and support the efforts of the UN Framework 
Convention on Climate Change?
    Answer. USAID was given the lead on behalf of the Federal 
Government to implement the President's commitment to assist developing 
and transition countries reduce the threat of climate change and 
achieve the goals of the U.N. Framework Convention on Climate Change 
(UNFCCC). In response to this commitment, USAID, through a highly 
participatory process that involved technical, regional, and policy 
experts from throughout the Agency, Federal Government, and private and 
nongovernmental sectors, has developed the Climate Change Initiative. 
This Initiative provides a solid framework for assisting developing and 
transition countries to build the technical and institutional capacity 
to make meaningful commitments to reducing emissions of greenhouse 
gases.
    The primary objective of the Initiative is to promote sustainable 
development that minimizes the associated growth in greenhouse gas 
emissions and reduces vulnerability to climate change. The Agency is 
focusing its efforts on ``win-win'' activities-those that 
simultaneously promote sustainable development while combating climate 
change. Using the Initiative as a starting point, USAID will strive to 
integrate climate change into all of the Agency's relevant programs and 
activities to increase awareness of how development impacts climate 
change.
    Specifically the Initiative will:
    Ensure a substantial U.S. Government financial commitment to 
climate change-related programs in developing and transition nations 
over the next five years (a minimum of $750 million in grant 
assistance); develop credit instruments to leverage $250 million in 
``climate-friendly'' investment in developing and transition countries; 
foster a broader vision of development assistance that recognizes that 
reducing the threat of climate change is central to global sustainable 
development; enhance U.S. leadership of the donor community to work 
with developing nations to address climate change; and fulfill existing 
U.S. obligations under the UNFCCC to assist developing nations address 
their emissions of greenhouse gases.
    In addition to the Initiative's main focus on grant assistance and 
credit authority, USAID will participate in the development of an 
inter-agency climate change program. USAID will concentrate resources 
and attention on a set of ``key'' countries and regions selected 
because of their contribution (and predicted future contribution) to 
net global greenhouse gas emissions and/or their government's 
receptivity to taking concrete action. Nine countries and three regions 
will receive priority: Brazil, Central Africa (Cameroon, the Central 
African Republic, the Republic of Congo, the Democratic Republic of 
Congo, Equatorial Guinea and Gabon), Central America (Belize, Costa 
Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama), Central 
Asia (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan), 
India, Indonesia, Mexico, Philippines, Poland, Russia, South Africa and 
Ukraine.
    Through the Initiative, USAID will highlight several new areas of 
emphasis including the following:
    Quantifying the health and productivity costs associated with local 
air pollution that fossilfuel combustion generates in an effort to 
expand the definition of ``win-win'' efforts to decrease greenhouse gas 
emissions;
    Analyzing the specific regional and local vulnerabilities to 
climate change in order to identify particular areas that USAID should 
address;
    Facilitating private sector transfer of clean energy technology to 
key countries and regions; a first step in this direction is the 
promulgation of model ``Global Climate Change Technology Cooperation 
Agreements'' with key countries;
    Reducing the vulnerability of urban populations, property, and 
infrastructure to the threats posed by climate change;
    Enhancing environmental education and outreach to involve non-
governmental organizations, the private sector and governments in 
efforts to promote development while reducing the rate of growth in net 
greenhouse gas emissions; and
    Working with the donor community to more effectively promote 
development that minimizes the growth in greenhouse gas emissions.
    While the commitment of $1 billion over five years is significant 
for the U.S. Government, it is a small share of the resources necessary 
to minimize the threats climate change poses to developing and 
transition countries. A concerted global effort will be required. The 
creation of close partnerships with a variety of partners will be a 
critical to the success of the Global Climate Change Initiative. USAID 
will work with multilateral and bilateral donors, international 
organizations, the private sector, and other agencies and departments 
of the U.S. Government. By intensifying coordination, USAID will 
multiply the impact of its programs, and increase the pace and 
durability of reforms in partner nations.
    USAID's Initiative, with the exception of the credit provisions, 
will be funded and staffed using existing authority.
                          nis funding increase
    Question. The FY 1999 request increases aid to the New Independent 
States from $770 million to $925 million. Most of the increase would go 
to Russia as levels of assistance to other republics has stabilized. 
What factors warrant this magnitude of increase, and what is the 
strategy for spending these funds.
    Answer. The Administration's request level for FY 1999, 20% above 
the FY 1998 level, would increase not only Russia programs (by 75%, or 
about $95 million), but also programs in the important Central Asian 
Republics (by about 60%, or $55 million). Although the FY 1998 level's 
final outcome is frequently seen as having hit the Russia program the 
hardest, the lower-than-requested level also impacted Central Asia, 
which saw a minuscule increase (in FY 1998) compared with the remainder 
of the New Independent States.
    Congress has already recognized the wisdom in continuing assistance 
to the former Soviet Union. From the FY 1994 peak of $2.4 billion in 
assistance in 1994, funds steadily declined each year until this fiscal 
year when Congress reversed course and increased our funding. Congress 
recognized both the progress to date and the unmet needs still facing 
the region. We are asking for an increase in the next fiscal year as 
well, from our current budget of $770 million to $925 million, so that 
the Partnership for Freedom may succeed and Congressional mandates be 
fulfilled.
                  health, population, and environment
    Question. The FY 1998 bill called for more resources to be devoted 
to the areas of health, population, and environment. While I am 
grateful that some increases for those programs have been increased, 
more can be done. In the area of women's health in particular USAID has 
achieved dramatic reductions in abortion rates in areas where family 
planning and women's health funds have been made available. The 
programs USAID has in many republics to address these needs are small 
or just beginning in some cases. What can you tell us about your future 
plans for family planning and women's health initiatives in the New 
Independent States.
    Answer. In accordance with congressional recommendations and 
earmarks to reduce reliance on abortion as a fertility control method, 
USAID will build upon its family planning/women's reproductive health 
programs in ten countries of the NIS. The Women's Reproductive Health 
Initiative in the NIS has shown impressive results to date.
    The family planning/women's health program in the NIS will continue 
to focus on three priority areas: policy development, capacity 
building, and patient and provider education. These will be addressed 
through a variety of programmatic initiatives which include: designing 
a new public information campaign in the Caucasus fashioned after 
programs in Russia and Ukraine that promote the health benefits and 
safety of modern contraceptive methods; expanding the number of oblasts 
with model family planning centers from six to fourteen in Russia; and 
continuing a $4 million effort directed at areas affected by Chernobyl 
in Ukraine to screen and diagnose for breast cancer and treat women 
afflicted by the disease.
    USAID will ensure that women's health-related activities continue 
to be a priority under the follow-on hospital and healthcare 
partnerships program. To address the problem of gender-based violence, 
USAID will continue to coordinate with the Department of State's 
International Narcotics and Legal Enforcement (INL) to develop a 
multisectoral approach, involving law enforcement, social workers, 
NGOs, and health care providers.
    As part of a hospital partnership program linking U.S. and NIS 
facilities, Women's Wellness Centers in seven NIS countries will 
continue to offer ``one-stop shopping'' consisting of primary care and 
educational and counseling services. Wellness Centers address a range 
of psychological issues which affect women's health, including domestic 
violence, healthy lifestyles, reproductive health, parenting skills and 
substance abuse prevention.
    USAID will also continue to build upon the Health Sector Reform 
program by supporting health system restructuring in Central Asia and 
Ukraine in order to expand primary care and integrate services for 
women and children, including family planning, into independent family 
group practices and out-patient facilities.
    Finally, USAID programs will promote the provision of 
contraceptives through private sector social marketing initiatives.
                            republika srpska
    Question. As you know, I have been supportive of efforts to ensure 
that U.S. bilateral and multilateral assistance to Bosnia does not 
inadvertently redound to the political or economic benefit of persons 
who have been indicted by the War Crimes Tribunal or those who are 
protecting them. I am disturbed that last year millions of dollars of 
U.S. bilateral aid assistance for infrastructure projects in a number 
of communities in Republika Srpska which local officials have made it 
comfortable enough for indicted persons that they still feel 
comfortable enough to walk around openly. (Aid to BOSANSKI SAMAC is 
best example.) Can you assure us that U.S. assistance will not in the 
future go to communities in which local officials are failing to meet 
their obligations to arrest or assist the surrender of indicted 
persons, and, further, will not go to companies in which indicted 
persons have financial interests? What mechanisms are in place to 
ensure that does not happen?
    Answer. The program slated for Bosanski Samac was canceled due to 
the presence of war criminals in the municipality. Communities that 
openly fail to meet their obligations to arrest or assist the surrender 
of indicted persons do not and will not receive U.S. assistance.
    The mechanisms that have been put in place for the Bosnia 
Reconstruction Finance Facility program include screening all principal 
officers of each company that has applied to receive a loan via a 
formal interagency review prior to the loan disbursement to ensure that 
no indicted criminals will benefit from the loan or will benefit from 
the planned assistance. USAID maintains direct control over the loan 
funds which are disbursed to the recipient through Bosnian agent banks 
in tranches. The entire lending process is monitored by a hierarchy of 
American and Bosnian audit, banking and project management 
professionals.
                        vetting bosnia projects
    Question. How do you vet projects to ensure that U.S. tax dollars 
are not going to those who are either indicted themselves or who are 
protecting the indicted or who are allied with those--specifically 
Radovan Karadzic or Razko Mladic--who are obstacles to implementation 
of the Dayton Agreement and threats to U.S. troops and peace?
    Answer. USAID consults with all government agencies active in 
Bosnia prior to deciding on projects to see if they have relevant 
information concerning the presence and activities of publicly indicted 
war criminals so as to block them from benefiting from any USG 
financial or technical assistance or grants. These consultations take 
place in Bosnia and Washington in addition to meetings with human 
rights organizations.
               yugoslavia sanctions and bosnia assistance
    Question. What mechanisms are in place to ensure that when you are 
working, as USAID is now, with public companies or banks in Republika 
Srpska that are closely associated with the Milosovic regime in 
Belgrade, that you are not violating the outer wall of sanctions 
against the Federal Republic of Yugoslavia (Serbia and Montenegro)? 
This is obviously even a greater concern than it had been before given 
the Milosovic regimes' responsibility for the murder of civilians in 
Kosovo over the last two weeks.
    Answer. USAID has not worked with public companies in the two 
entities since May 1997, when they were declared ineligible for USAID 
business loans.
    USAID has set up an effective system to ensure that USAID funds do 
not violate the outer wall of sanctions against the Federal Republic of 
Yugoslavia (Serbia and Montenegro). To reinforce its system, USAID is 
in the process of subjecting each of its agent banks in the Federation 
and the Republika Srpska to the same agency checks we apply to each of 
the borrowers; the names of the principal officers of the banks are 
being submitted to undergo an interagency vetting process to see if 
there is relevant information concerning the presence and activities of 
publicly indicted war criminals not only in the Federation and the 
Republika Srpska but also in the Federal Republic of Yugoslavia (Serbia 
and Montenegro) so as to block them from benefiting from any USG 
financial or technical assistance or grants.
            proposed decrease for infectious disease funding
    Question. As you know there is growing concern among many Americans 
about the global threats from infectious diseases. Given this and the 
increasing spread of several diseases, including HIV and tuberculosis, 
how is it that the administration is proposing to decrease funding for 
infectious diseases next year? Don't you in fact need more funds in the 
Child Survival and Infectious Diseases Account, not less?
    Answer. I fully agree that child survival and disease programs are 
extremely important. Our request for FY 1999 is not meant to signal a 
reduction in the importance we attach to these programs. The very fact 
that we have requested a separate account, including a separate 
category for the new disease initiative, demonstrates the importance we 
give to these programs and activities. We also believe our approach is 
based on the realization that work to reduce the threat of infectious 
diseases and to children's survival is integrally linked to, and must 
be supported by the Agency's efforts in other areas.
    Social and economic conditions such as poverty, malnutrition, lack 
of education, poor sanitation, overcrowding, environmental degradation 
and rapid population growth all allow infectious diseases to flourish 
and spread and have a very detrimental effect on the lives of children. 
Our efforts in the area of child survival and disease are made all the 
more effective when these other issues are adequately addressed.
    USAID's FY 1999 request, as you point out, does increase funding 
for a number of sectors that we believe have in the past been 
underfunded. They address some of the underlying social and economic 
conditions that impact on health and disease. The funding choices we 
have made have been very difficult. But, they do not in any way reflect 
a decision on the part of USAID that child survival and disease 
activities and programs are of secondary importance. We believe the 
investments we make in these other areas are critical complements to 
USAID's work to address infectious diseases and improve child survival.
       usaid health research priorities & communication with nih
    Question. Can you tell us what areas of research might most benefit 
USAID's health and development efforts and how the agency has made its 
priorities clear to NIH?
    Answer. Much of NIH's research agenda addresses fundamental 
research rather than the applied research USAID needs to improve health 
interventions. However, NIH's fundamental research program provides 
information on which USAID's applied research can build. Research on 
the pathogenesis, immunology, and molecular biology of the diseases of 
major public health importance (diarrheal diseases, acute respiratory 
infections, HIV/AIDS, tuberculosis, malaria, and malnutrition) feeds 
directly into USAID's programs.
    In addition, there are many areas in which NIH research more 
directly supports USAID needs. For example, NIH has recently begun a 
malaria vaccine development program which promises to accelerate 
progress in this underfunded area. NIH has collaborated with the USAID 
Malaria Vaccine Development Program for several years by enabling 
access to NIH contracted vaccine testing facilities; perhaps now, with 
new funding, NIH can continue this collaboration while requiring lower 
levels of monetary support from USAID. USAID meets regularly with NIH 
and other federal agencies through the Federal Malaria Vaccine 
Coordinating Committee (FMVCC) to discuss this subject.
    NIH is also a key player in research trials on mother to child HIV 
transmission, an area on which we will be meeting to coordinate future 
activities.
    Similar liaison between USAID and NIH occurs in a number of other 
health areas of the developing world, including anti-microbial 
resistance and AIDS vaccine development.
               reduction of hiv transmission to children
    Question. In recent weeks there seemed to emerge a hopeful 
development regarding the AIDS pandemic, which as you know, continues 
to spread at an alarming rate. I am referring to the research that 
seems to demonstrate a new method of reducing perinatal transmission 
that has potential to cut by 50% the number of children born with HIV 
in developing nations. Given that hundreds of thousands of children are 
born with HIV each year this obviously could be a very important 
breakthrough.
    Do you believe that this research is as hopeful as press reports 
have indicated and if so, how will USAID incorporate this new method 
into its existing global AIDS efforts?
    Answer. The results of the study conducted in Thailand, are an 
exciting advance in the prevention of mother to child transmission of 
HIV in developing countries. On March 23, UNAIDS, UNICEF, and WHO held 
a meeting to review research on mother to child transmission and define 
next steps. USAID played a major role in convening this meeting and was 
an active participant. At present, additional issues need to be 
addressed in order to implement transmission interventions. These 
include providing voluntary HIV counseling and testing, strengthening 
health care infrastructures, and providing safe alternatives to breast-
feeding. USAID expects to be involved in pilot projects and will 
continue its dialogue with UNAIDS, UNICEF, and WHO to coordinate these 
efforts. At the same time USAID remains committed to its efforts to 
prevent the sexual transmission of HIV among adults.

        Questions for the Record Submitted by Congressman Yates

                    population effect of funding cut
    Question. Family Planning services, health service for women and 
implementation of population programs are important features to our 
bill. The opponents of these programs as well intentioned, but is it 
safe to say that those who oppose international family planning and 
support a decrease in funding will lead to an increase in unintended 
pregnancies, abortions, and the deaths of mothers and children?
    Answer. Yes, a decrease in funding for international family 
planning programs will lead to an increase in unintended pregnancies, 
abortions, and the deaths of mothers and children. In 1996, a 
consortium of experts produced estimates of the impact of a 35% cut in 
USAID's population funding. Based on these estimates, each 10 
percentage point cut in population funding can be expected to result in 
approximately 1.1 million additional unwanted pregnancies; 453,000 
additional abortions; 532,000 additional unwanted births; 2,000 
additional maternal deaths; and 38,000 additional infant deaths.
                  population: administration position
    Question. I have received a number of letters from my constituents 
and organizations opposed to the state department authorization bill. 
My read of the conference report is that once again it contains 
``Mexico City'' language that bans United States fund to any family 
planning organization or its grantee that engages overseas in a 
democratic process that would be protected by the constitution in the 
United States. This is unacceptable to this side of the family planning 
debate. What is the Administration's and your position on the 
authorization conference report?
    Answer. In a March 26, 1998 letter to Representative Pelosi, Larry 
Stein, Assistant to the President and Director for Legislative Affairs 
stated the Administration position that ``if HR 1757, the Conference 
Report on State Department Authorization, were presented to the 
President, he would veto the bill.'' While the bill contains a number 
of desirable authorities, other foreign policy constraints and 
reductions in funding authorizations for key programs would undercut 
the conduct of diplomacy to achieve important goals.
    The Administration strongly opposes the conference bill's 
restrictions on international family planning programs that go far 
beyond those contained in current law, which already preclude the use 
of appropriated funds for abortion or abortion-related lobbying. The 
conference report imposes in statute, limitations on international 
family planning that were rejected by the Administration when it 
overturned the so-called Mexico City policy. While the bill allows the 
President to waive one aspect of those restrictions, it imposes a 
punitive ceiling on spending for population activities if the waiver is 
expected. The conference report also imposes a global ``gag'' rule on 
foreign non-governmental organizations (NG0s) by prohibiting funding 
for those NGOs that engage in the democratic process in their own 
countries and conduct legal advocacy activities with their own funds. 
The restrictions put in jeopardy funding for the most experienced and 
qualified family planning and maternal-child health care providers 
working at the grassroots level to meet the growing demand for family 
planning and other critical health services in developing countries. If 
HR 1757 were to become law, the consequences would include an increased 
number of unintended pregnancies, unsafe abortions, and maternal and 
child deaths.
    The Administration considers HR 1757 unacceptable. A funding cap of 
$356 million and sweeping restrictions on free speech make this version 
as restrictive, if not more so, than previous formulations.
                     population: effect of metering
    Question. What has been the effect of onerous funding formula 
restrictions, i.e. metering and other restrictions being placed on 
international family planning funding?
    Answer. Over the past three years, USAID's international family 
planning program has faced a 30 percent cut in funding combined with 
unprecedented metering of funds under various combinations of delays 
and incremental monthly allotments. The impacts of metering would have 
been far worse had it not been for the Presidential Determination and 
resolutions passed by both Houses of Congress last February that 
enabled population programs to receive funding in March 1997. The 
following are some of the impacts of the restrictions.
    Freezing or reducing bilateral commitments: In Bolivia and Ukraine, 
key USAID-funded service delivery activities were reduced or frozen in 
place because of the delay in funding and monthly metering.
    Reducing support for service delivery: Pathfinder and AVSC, 
worldwide agencies involved in family planning service delivery and the 
two largest recipients of USAID central funds, have cut back 
substantially on long-term agreements with host country partners over 
this period. Access to family planning and other related health 
services in areas served by these partner institutions have diminished 
as a result.
    Reducing pursuit of contraceptive research leads: The core funds 
for two key USAID cooperative agreements for contraceptive research, 
Family Health International and the Population Council, were reduced by 
approximately 27% and 38% respectively. As a result, the cooperators 
reduced the number of contraceptive research leads and the number and 
scope of important studies and publications.
    Responding to requests outside the metered funding schedule: The 
delayed availability and monthly metering of funds has impaired USAID's 
ability to respond quickly to changing field needs. For example, USAID 
was unable to take advantage of success and respond to pressing funding 
needs in Bolivia and Ukraine, where progress on planned family planning 
activities has been more rapid than anticipated.
    Allocating more funds to meet increased management and unit costs: 
All programs have had to allocate more funds to management of metering, 
thereby reducing funds available for family planning services. Bulk 
purchases of commodities, equipment, and materials have been reduced, 
with attendant higher unit costs for the U.S. government. At AVSC, for 
example, such costs are estimated to have increased by approximately a 
quarter of a million dollars last year. For USAID itself, additional 
administrative costs associated with managing metered funds have 
exceeded $1 million.
    Overall, the population program has lost a great deal of momentum 
and has had to struggle to maintain the flow of funding to critical 
programs which are providing vitally needed and desired services in 
developing countries.
                     c.i.t.e.s. and the ivory trade
    Question. I am supportive of USAID's CAMPFIRE program in Zimbabwe. 
I feel that they have had great success in developing a model for 
balancing rural empowerment, sustainable development, and wildlife 
conservation. But I do feel there are some concerns we need to address.
    As you may know, I do not support the use of funds appropriated by 
this committee to be used for any activity which is in contravention to 
the convention on International Trade in Endangered Species of Flora 
and Fauna (CITES) or enable or promote the international trade of 
ivory.
    Answer. CAMPFIRE activities do not contravene the terms of the 
CITES Convention. In June 1997 the member nations of the conference, 
considering the effective conservation measures taken by Zimbabwe and 
two other Southern African states to protect the elephant and the 
robust state of the present elephant population, downlisted elephants 
from Appendix 1 to Appendix 2 of the convention, allowing limited 
hunting and limited trade in related products under controlled 
conditions. It also permitted a one-time sale of the ivory in already-
existing stocks to one buyer (Japan) which cannot re-export. This sale 
can be approved by the CITES Standing Committee after they have 
determined compliance with a number of conditions. Currently the U.S. 
is not a member of the Standing Committee. These CITES resolutions do 
not affect the safeguards against international trade in ivory provided 
by the U.S. Endangered Species Act, 4(d) (Special Rule for Threatened 
African Elephants).
                      duration of campfire funding
    Question. With respect to the CAMPFIRE program in Zimbabwe, it is 
my understanding that FY 98 was to be the tenth and final year of USAID 
funding for that program. Is that the case?
    Answer. The Natural Resources Management project, of which CAMPFIRE 
is a part, was begun in FY 94 and FY 98 is the last year of obligation. 
However, an evaluation is currently under way to assess, among other 
things, future USAID support for CAMPFIRE and the options for 
diversification of the program after U.S. funding ends.
                     extension of campfire program
    Question. Has there been a suggestion or proposal to extend the 
term of USAID contributions to the [CAMPFIRE] program?
    Answer. Yes, such a proposal has been made. Currently an appraisal 
of CAMPFIRE is under way; its findings will help determine the nature 
of further support to CAMPFIRE and whether diversification or other 
changes are called for.
                 recommendation for campfire extension?
    Question. If so, who suggested it and what is USAID's position in 
regard to a possible extension?
    Answer. The proposal originated with the CAMPFIRE Collaborative 
Group. This Group comprises representatives of: member villages; Rural 
District Councils having member villages; the Department of National 
Parks and Wildlife; the Ministry of Local Government; Zimbabwe Trust 
(ZIMTRUST); the Centre for Applied Social Sciences; the World Wide Fund 
for Nature; and the Africa Resources Trust. USAID is reviewing their 
proposal at this time.
                distancing from trophy hunting programs
    Question. I understand that CAMPFIRE is a good example of a 
sustainable development program based on the natural resources of an 
indigenous area. Yet, the perception is that we are funding the trophy 
hunting of elephants and dealing in the international sale of ivory. 
Although my investigation of this program leads me to the conclusion 
that we are not doing such horrible acts, unfortunately perception is 
nine-tenths of reality. With this in mind, what steps, if any, has 
USAID taken to lessen its involvement in trophy hunting based foreign 
assistance programs? Have you tried to distance yourself from this 
perception?
    Answer. USAID does not, and will not, directly finance hunting 
activities. An extensive correspondence with the U.S. and Zimbabwean 
publics has gone on for the past two years in an effort to correct the 
misstatements which have been made about CAMPFIRE. It is our hope that 
a steady policy of correcting these misstatements will bear fruit.
               trophy hunting programs in other countries
    Question. Is USAID currently funding similar programs in other 
countries?
    Answer. USAID is funding community-based natural resources 
management programs in a number of countries worldwide.
                     programs not involving hunting
    Question. Do you intend [to] sponsor programs that do not involve 
the hunting of animals, endangered or otherwise?
    Answer. As you know, USAID does not finance hunting programs. We--
and many well respected mainstream environmental organizations--support 
community based efforts to manage natural resources, including 
wildlife. Other activities include forestry, indigenous plants, and 
eco-tourism.
               oversight over implementing organizations
    Question. In a September, 1997 letter from Acting Administrator 
Jill Buckley to Senator Boxer, Ms. Buckley writes: ``. . . We began 
taking steps to exercise greater oversight over the organizations that 
implement the program [referring to CAMPFIRE]. These and other steps we 
have taken will ensure that the funds obligated to the program will 
only be used to maximize the benefits to rural people while 
strengthening natural resources management in Zimbabwe.'' What 
``steps'' has USAID taken in this regard?
    Answer. We share your concern over maximizing the impact of this 
highly successful program on the rural poor in Zimbabwe. In response to 
concerns raised last year, USAID eliminated funding for activities not 
directly related to the rural areas, such as international outreach 
efforts.
    USAID has also changed the language to the Zimbabwe Trust grant 
restricting program-funded international activities and participation 
in international events, and imposing greater USAID control over 
program-funded international participation.
                      promised report on campfire
    Question. The letter also states, ``We will provide a report to 
oversight committee members no later than March, 1998, describing how 
funds are to be used and alternatives to trophy hunting as a means for 
generating income for CAMPFIRE districts.'' I have not seen that 
report. I assume this Subcommittee is considered to have oversight of 
this program. Is the report finished? Is that report available today?
    Answer. Congress has extended the delivery date for this report to 
May, 1998.
                      neotropical migratory birds
    Question. I would like to express my continued support for funding 
of the Neotropical Migratory Bird Conservation Program of the National 
Fish and Wildlife foundation through the United States Agency for 
International Development. The Foundation has forged a partnership to 
work cooperatively on conservation of these Neotropical migratory 
birds. USAID's continued participation is essential as the only source 
dedicated to conservation of Neotropical migratory birds in Latin 
America.
    The domestic benefits to this program are witnessed in every 
American's backyard. At some point during the year, Neotropical 
migrants are seen and heard in virtually every corner of the country. 
In the Chairman's own district, for example, the Bon Secour National 
Wildlife Refuge hosts thousands of visitors who are attracted by the 
opportunity to see a wide variety of birds, especially Neotropical 
migrants. I would like to urge you, Mr. Atwood, and USAID to make this 
program and the $750,000 part of your baseline budget request to 
provide the year-to-year continuity required to fully implement this 
program.
    I understand that OMB wanted the President to use his line item 
veto authority to remove this from our bill. I was very disappointed to 
learn this and pleased that you did not recommend the President line 
this important project out.
    Does USAID have mechanisms in place to ensure the protection of 
these sites? What type of follow on monitoring does USAID do?
    Answer. USAID shares your concern and commitment to the 
conservation of Neotropical Migratory Birds. A 1995 Department of 
Interior survey reveals that more than 52 million Americans enjoy 
watching and feeding birds, and that each year more than 17 million 
Americans take birdwatching trips. In the United States, birding 
contributes an estimated $25 billion to our local economies each year 
and supports 190,000 jobs. Initially, USAID funded this program 
annually in response to a series of Congressional earmarks. However, 
both USAID and the National Fish and Wildlife Foundation agreed that to 
allow for longer-term planning, we needed a longer agreement. 
Therefore, in 1997 USAID signed a new $3 million, 5 year agreement with 
the Foundation to extend the effort through the year 2002. USAID 
provides additional funding to conserve Neotropical migratory birds 
through several other programs, including the Biodiversity Support 
Program and Parks in Peril.
    USAID and the Foundation are working closely together to ensure the 
sustainable protection of important Neotropical migratory bird sites. 
For example, we have recently extended the maximum length of award for 
a single grant from one year to two years. In addition, we give 
priority to grant applications working cooperatively with other 
initiatives, such as other USAID programs. USAID has placed great 
emphasis in recent years on increasing the sustainability of its 
investments. As a result, the Neotropical Migratory Bird Conservation 
Program has emphasized strengthening partnerships with the private 
sector, developing ecotourism potential, and other ways of increasing 
income to important sites. Finally, the program focuses on 
strengthening the capacity of local organizations to efficiently manage 
and coordinate their activities.
    USAID and the Foundation have initiated two new monitoring systems 
for the program in the past three years. First, as a part of USAID's 
re-engineering effort, the program has developed a detailed system for 
tracking results of grants under the program. Second, we have increased 
the frequency of visits to field sites by Foundation and USAID staff 
significantly in the past two years. The Foundation has also posted a 
field representative in Guatemala City, who is responsible for new 
program development and monitoring the progress of current and past 
grantees.
    As a result of these site visits, we have identified new 
opportunities for collaboration among partners, and have identified 
areas where specific grants needed improvement. Our results monitoring 
program has documented many of the program successes. With USAID 
support, the Foundation has supported 46 environmental education, 
applied research, and habitat conservation projects in 11 Latin 
American countries. The program has been very successful, providing 
small catalytic grants to individuals and organizations poised to make 
a difference. It has brought a tremendous amount of cooperation among 
U.S. public and private groups working in Latin America, and every $1 
spent by the Foundation and USAID has been matched by $1.54 from 
private sources. The result has been the effective conservation of 
165,000 acres of forests this past year alone.
    Despite the best efforts of this and other USAID programs, habitat 
losses continue, and potential stresses related to human population 
growth and climate change make these investments more critical and 
timely than ever.
                      usaid biodiversity programs
    Question. I would like to commend USAID for its work in integrating 
the conservation of biological diversity in its development assistance 
programs. I strongly support the continuation of USAID funding for 
biodiversity conservation and tropical forest protection in developing 
countries. The protection of global biodiversity is critical to our 
security and economic prosperity.
    What plans does USAID have with regard to the future of 
biodiversity programs?
    What global programs, field support and research does USAID plan to 
ensure the continued successful discourse it has achieved in addressing 
environmental problems throughout the world?
    Is it USAID's intention to continue to use NGOs as a cost-effective 
means of delivering development assistance?
    Does USAID intend to continue adequately funding programs promoting 
biodiversity especially in situations where lack of participation would 
undermine the success of a regional strategy?
    Answer. USAID plans to continue its support for biodiversity 
conservation as a critical component in promoting sustainable economic 
development. USAID plans to spend over $50 million in FY98 on 
biodiversity conservation activities.
    USAID is committed to conserving biologically important habitat, 
both within and outside of protected areas. USAID's efforts focus on 
achieving effective management of habitat, as well as improving 
biodiversity conservation through strengthened policies and practices. 
An important aspect of our work is to document on-the-ground 
conservation results, and to identify and broadly disseminate lessons 
learned. We plan to increase our support for community-based approaches 
to conserve biodiversity, including the participation of indigenous 
people. We will also strengthen USAID's technical expertise in 
biodiversity conservation and natural resource management through 
training and staff development.
    USAID intends to continue to expand our emphasis on partnerships 
with conservation organizations. We plan to develop new partnerships 
with conservation organizations through which USAID can expand 
conservation programs consistent with USAID's biodiversity conservation 
objectives. Expanding the programs of conservation organizations can be 
a cost-effective mechanism to promote biodiversity conservation and the 
sustainability of development efforts.
    USAID places a strong emphasis on promoting participation 
throughout our portfolio of development assistance. USAID intends to 
continue to contribute to important regional strategies and 
initiatives, such as the Summit for the Americas, through its 
biodiversity conservation programs.
                             parks in peril
    Question. The Parks in Peril program, another program I have 
followed for a number of years, is a partnership with the private 
sector to promote biodiversity conservation in critically imperiled 
ecosystems throughout Latin America and the Caribbean. The Chairman has 
stated that he wants to increase the amount of the foreign aid pie that 
goes to Latin America. Over the past seven years, Parks in Peril has 
been extremely successful in providing assistance to local non-
governmental organizations in the protection and management of parks 
and reserves, and in integrating these areas into the economic and 
cultural livelihoods of the communities that live in and around them. 
Parks in Peril has enhanced the development of enterprise and democracy 
in the region, through its support of private organizations and local 
communities.
    I would like to note that USAID has made significant progress 
turning ``paper parks'' into genuine protected areas. What is the exact 
number of genuine protected areas?
    Answer. The USAID-supported Parks in Peril program has helped turn 
twenty-eight ``paper parks'' into genuine protected areas.
    Question. In what countries are they located?
    Answer. The twenty-eight genuine protected areas are located in 
Belize, Bolivia, Colombia, Costa Rica, Dominica, the Dominican 
Republic, Ecuador, Guatemala, Mexico, Panama, Paraguay, and Peru. In 
addition, within the last nine months, the program has initiated park 
management activities at five new sites (one each in Jamaica, Brazil, 
the Dominican Republic, Honduras, and Paraguay).
    Question. How much land has been protected under the program?
    Answer. The USAID-supported Parks in Peril program has protected 
almost 22 million acres of land.
    Question. How many of the sites have graduated from the program?
    Answer. Thirteen sites have graduated from the program.
    Question. Does USAID have mechanisms in place to ensure the 
protection of graduated sites?
    Answer. Although protection of graduated sites cannot be guaranteed 
over the long-term, the Parks in Peril program emphasizes interventions 
which are essential for continued park protection once USAID assistance 
ends. Key interventions include: (a) strengthening local institutions, 
especially NGOs, who will bear the primary responsibility for protected 
area management; (b) increasing environmental education in communities 
around protected areas to promote local support of conservation; (c) 
providing tangible economic benefits to people living around protected 
areas; (d) improving the local policy environment for conservation to 
remove incentives which degrade resources in and around protected 
areas; and (e) securing long-term financing for protected areas to 
support continuing conservation efforts well into the future. Once 
sites have graduated, USAID continues to support additional policy 
efforts for improved park protection, and coordinates with other donors 
(e.g., GEF, Japanese, Germans, Dutch) regarding financing park 
protection. In addition, The Nature Conservancy, the U.S. PVO that 
implements the Parks in Peril program, has an institutional commitment 
to maintain its strong relationships with partner, in-country NGOs to 
assist them in securing sustainable park protection of graduated sites.
    Question. What types of follow-on monitoring does USAID do to 
ensure the sites are perpetually protected?
    Answer. All Parks in Peril sites, including those that have 
graduated, are evaluated annually to monitor progress. One of the key 
tools for this annual evaluation is a ``Consolidation Scorecard'' which 
highlights sixteen indicators essential for long-term park protection 
(e.g., on-site infrastructure, number of park guards, completion of 
management plans and long-term financial plans, environmental education 
and compatible development activities with local communities, etc.). 
The Nature Conservancy and local NGOs conduct these yearly evaluations 
and report the results to USAID/W and local Missions. In addition, the 
Parks in Peril program is currently being evaluated by a team of 
external experts.
                          general foreign aid
    Question. The purpose of American foreign policy and the purpose of 
our investments in USAID programs is to keep America strong and 
respected. Our goal is to protect the interests of our citizens in an 
age when national borders are porous, markets are global, and many of 
the threats to our security cannot be dealt with by any one nation 
acting alone.
    How have USAIS's programs improved the security of our allies, our 
partners in the Middle East Peace Process, and our friends in the 
states of Eastern Europe and throughout the world?
    In general, how do USAID programs support freedom, security and 
strengthen the security of the United States of America?
    How have USAID programs improved our ability to function in the 
world?
    Answer. Deadly conflict and crisis within countries represent the 
main threats to security in the post Cold War era. Foreign aid programs 
have improved security by successfully addressing some of the factors 
that increase the likelihood of deadly conflict and crisis. Aid 
programs have promoted economic, social, and political progress. They 
have attempted to strengthen institutions and enhance human resources, 
so that countries can better manage and accommodate internal conflicts 
without falling into crisis and deadly conflict.
    Even if these efforts are successful in achieving such goals, they 
cannot guarantee security. Some conflicts are too deep-seated and 
bitter. Ireland is an example of economic, social and political 
progress, and relatively strong institutions and human resources. 
Nonetheless, deadly conflict has persisted.
    While successful development does not guarantee security, it 
significantly improves the odds of avoiding deadly conflict and crisis. 
Within the traditional developing world over the past decade, almost 
all of the countries that have fallen into crisis are least-developed 
countries where development progress has been at best sporadic and 
uneven (e.g. Somalia, Sudan, Zaire, Burma, Liberia, Rwanda, Haiti, and 
Ethiopia). Conversely, almost all of the countries that have reached 
middle-income or advanced status, as well as most poor countries that 
are making steady progress (e.g. India, Bangladesh, Ghana and Uganda 
since the late 1980's) have largely avoided crisis and deadly conflict.
    A well-publicized study of failed states sponsored by the CIA 
reported that high infant mortality and low levels of openness to 
foreign trade were the most reliable predictors of state failure. We 
believe that these indicators are best seen as proxies for low levels 
of development. The implication is that with broad economic and social 
progress, the odds of state failure diminish.
    In the Middle East, where conflicts are indeed deep-seated and 
bitter, our aid has contributed to significant economic, social, and 
political progress. For instance:
    According to the Fraser Institute, economic freedom increased 
between 1975 and 1995 in Israel (an increase in the index from 2.2 to 
4.2); in Egypt (2.7 to 4.4); and in Jordan (4.3 to 4.8). The 
improvements for Israel and Egypt were relatively large compared with 
other countries. These represent significant strengthening of policies 
and institutions, in many cases supported by foreign aid.
    Both Israel and Egypt achieved clearly positive average annual 
growth in real per capita income over the 1985-95 period (2.5% and 
1.1%, respectively). While per capita income growth for Jordan was 
negative over the same period, real gross domestic product has 
increased at a rapid rate (8% annually) since the Gulf War. This sort 
of economic progress does not guarantee security and stability, but it 
surely helps.
    On the social side, there have been major improvements in life 
expectancy, and sharp declines in infant mortality and fertility in 
Egypt, Israel, and Jordan. More generally, people's well-being in terms 
of health,education, status of women, and other social dimensions has 
clearly improved on average in each of these countries.
    On the political side, Israel has long been classified as ``Free'' 
by Freedom House, and its ratings within that category have improved. 
Jordan has made significant progress, from ``Not Free'' to ``Partially 
Free''. Egypt has remained classified as ``Not Free''. For Jordan and 
Egypt, internal threats posed by fundamentalists have undoubtedly 
contributed to limits on political freedom.
    Similarly, in Eastern Europe foreign aid is supporting economic, 
political, and social progress, including more effective institutions. 
While most Eastern European aid recipients are relatively advanced by 
development standards (looking at per capita income and social 
indicators), they are undergoing a profound institutional transition, 
which challenges their capacity to manage conflict. In most cases we 
are seeing significant improvements in economic growth performance, 
democracy, and in the performance of underlying institutions.
    In some cases, particularly parts of the former Yugoslavia, 
avoiding deadly conflict and crisis will take considerably more than 
the economic, social, and political progress that foreign aid aims to 
support. Nonetheless, there and elsewhere this sort of progress will 
enhance security by improving the odds that conflict and crisis can be 
avoided.
    USAID foreign aid programs have improved the U.S. ability to 
function in the world by promoting economic and political freedom; by 
supporting economic and social progress, and by helping to foster a 
more cooperative global order.
    First, USAID and other foreign aid programs have successfully 
promoted economic and political freedom. Of sixty-six aid recipient 
countries covered by the Fraser Institute survey of economic freedom 
for 1975 and 1995, economic freedom clearly improved in fifty 
countries; was substantially unchanged in six; and clearly declined in 
only ten. Of eight-six aid recipient countries covered by the Freedom 
House surveys of political freedom for 1975 and 1996, freedom clearly 
improved in forty; was substantially unchanged in twenty-three; and 
clearly declined in only thirteen. For both economic and political 
freedom, the average change over all of the countries surveyed has been 
significantly positive.
    These sorts of improvements mean that the global community in which 
the U.S. operates is increasingly one of shared values where private 
markets and democracy are concerned.
    Second, USAID and other foreign aid programs have successfully 
promoted economic and social progress. USAID recently reviewed the 
development performance of ninety aid recipients, a group that absorbed 
the bulk of U.S. (and other) foreign aid over the 1965-90 period and 
which today includes over 3 billion people. Forty-one countries, 
accounting for over two-thirds of the group population, achieved 
significantly positive economic growth over the 1965-90 period. 
(Looking at the more recent 1985-95 period, another sixteen countries 
join that group.) Progress in terms of social indicators (infant 
mortality, life expectancy, literacy, and fertility) has been nearly 
universal.
    These sorts of improvements mean that the global community in which 
the U.S. functions is significantly healthier and better educated, with 
higher incomes and less widespread poverty.
    Finally, U.S. foreign aid programs are part of a larger donor 
effort that developed under U.S. leadership, and has represented a 
major, unprecedented example of voluntary global cooperation. The idea 
that rich countries as a group would provide aid to poor countries 
represented a major step forward for the global community. While the 
Cold War helped stimulate and justify development cooperation in the 
early 1960's, President Kennedy made it clear that the U.S. was 
providing aid (and was encouraging other countries to do the same) 
because it was the right thing to do.
    Since then, the number of donors has increased rapidly as has the 
share of overall aid provided by donors other than the U.S. This 
unprecedented example of voluntary cooperation under enlightened U.S. 
leadership (including aid to formerly communist countries) has surely 
made an important contribution to a global order that functions 
increasingly as a cooperative community of nations. It has enhanced the 
ability of the U.S. to function in the world as a global leader. 
Returning to the premise of the question, foreign aid has helped build 
a more cooperative international order under U.S. leadership.
                         economic support fund
    Question. I think it is important to the overall Middle East Peace 
Process that we continue to support those nations who are working for 
peace. Although the Peace Process has seen some setbacks in the past 
year, I believe the United States must continue to stand firmly behind 
the process as a guarantor of peace and security.
    I support providing the full budget request for assistance to the 
West Bank and Gaza. I continue to believe that support by the United 
States for the economic and social development of Palestinians is an 
important contribution to the Peace Process.
    My question is in regard to where the Administration intends to 
take the $52 million for the MED Bank from? Since the Chairman has made 
it clear he is opposed to increasing the total USAID amount for the 
Middle East where is the Administration taking the money from? Will it 
effect your programs in Egypt? Jordan? Israel? the West Bank and Gaza?
    Answer. In FY 1997, Congress authorized U.S. participation in the 
Bank for Economic Cooperation and Development in the Middle East and 
North Africa (MENABANK) but did not provide funds. The President's FY 
1999 budget submission includes a request for $52 million from Economic 
Support Funds within the Middle East cap to cover the paid-in portion 
of our first-year share subscription. Key appropriators in Congress 
have indicated that they believe funding for the Bank should come from 
existing Middle East monies and that is the Administration's intent. 
While Ambassador to the UN, Secretary Albright signed the Bank Charter 
for the U.S. (11/28/96); ratification will await funding. The 
Administration will be working with Congress in the coming weeks to 
develop an acceptable funding formula for the MENABANK that also meets 
our regional priorities.
                         success of cdr and cdp
    Question. Do you think the United States-Israel Cooperative 
Research (CDR) and the United States-Israel Cooperative Program (CDP), 
established by the Congress in 1985, continues to be successful in 
helping countries alleviate some of their agricultural and health 
problems?
    Answer. The CDR Program provides U.S. funding for cooperative 
applied research involving Israeli scientists and their counterparts in 
USAID countries, allowing them to work together on significant 
development problems. CDR focuses on areas in which Israeli research 
interests and expertise are particularly valuable to the other 
countries. There have been many significant research results to date, 
including advances in saline and dry-land agriculture, improved 
agricultural water management technology, improved biopesticides, 
livestock vaccines, and added understanding of diseases such as 
leishmaniasis and leprosy.
    Developing country researchers who have participated in the program 
praise it because it gives them an opportunity to do meaningful work 
with world-class scientists, use decent equipment, and benefit from 
training abroad. While the research linkages created usually do not 
have an immediate impact on our strategic objectives in a given target 
country, we believe that with a relatively small amount of funding the 
program can positively impact long-term economic growth and 
development.
    The CDP Program provides U.S. funding for the Government of Israel 
to conduct technical training in Israel and abroad and to promote model 
farms which demonstrate Israeli agricultural technology in less 
developed countries. CDP also emphasizes the application of Israeli 
technology, and the training of target-country personnel is primarily 
focused on modern sustainable agricultural practices. CDP activities 
are managed under MASHAV, a branch of the Israeli Foreign Ministry, 
with the technical assistance of CINADCO (Ministry of Agriculture).
    Our hope is that eventually Israel will be able to sustain both of 
these programs with its own resources.
                          cdr and cdp funding
    Question. Does USAID intend to fully fund its portion of the CDR 
and CDP Programs?
    Answer. In FY 99, USAID intends to fully fund its portion of the 
combined CDR and CDP line item at $5.5 million from the Development 
Assistance (DA) Account. This amount is separate from any New 
Independent States (NIS) funds which might be committed under the 
guidance of the State Department Coordinator for that region.
                         cdp and foreign policy
    Question. Does CDP continue to be an important foreign policy 
objective of the United States?
    Answer. The CDP program was created in the 1980's at a time when 
the State of Israel was not readily accepted in many areas of the 
developing world. Sub-Saharan Africa was one classic example in which 
CDP activity coincided with a positive change in attitudes and 
policies. Again, in the early 1990's, CDP was quickly introduced into 
the historically Muslim New Independent States of former Soviet Central 
Asia. In addition to training assistance, this Government of Israel 
program has provided valuable links of goodwill between people in the 
developing world to the people and government of Israel through 
activities such as the ``Shalom Club'' and trips to Israel for training 
courses.
    Today the State of Israel enjoys relatively better diplomatic and 
economic relations with the developing world and the independent states 
of the former Soviet Union. Thus, this program's relative importance in 
meeting U.S. foreign policy objectives has diminished.
                          women in development
    Question. I support efforts to better integrate the concerns of 
women into USAID's programs and policies. I encourage USAID to 
undertake the institutional changes needed to support Women in 
Development. Investing in women is crucial to reducing hunger and 
poverty worldwide, increasing family well-being and to achieving 
sustainable economic growth.
    Does USAID intend to fully fund and provide for the Office of Women 
in Development? Can you detail for the record that policies you have 
already undertaken?
    Answer. USAID will continue to fully fund and provide for the 
Office of Women in Development. Despite constrained resources, the 
Office's budget has been increased every year: from $8 million in FY 
96, to $9 million in FY 97, and to $10 million in FY 98, an 11% 
increase over last year.
    USAID is making remarkable progress in insuring that gender is 
integrated throughout the work of the Agency. USAID's commitment to 
gender integration is evident at several levels:
    The technical capacity of the Office of Women in Development has 
been strengthened to provide significant levels of technical support 
for our missions worldwide as they endeavor to fully integrate women 
into our assistance programs. Two positions in the WID office which had 
been temporary positions have just been converted to career positions.
    The Gender Plan of Action, which was adopted in March 1996, with 
additional actions put in place in June 1996, is being aggressively 
implemented. We have revised USAID's Strategic Plan to better reflect 
our commitment to addressing gender issues; procurement guidance on 
competitive grants and cooperative agreements now highlights the 
importance of addressing gender in all USAID agreements, and similar 
guidance is being drafted for contracts; and position descriptions for 
program officers are being amended to reflect greater accountability 
for gender considerations.
    We have a number of initiatives that recognize that investing in 
women is crucial to reducing hunger and poverty worldwide, increasing 
family well-being, promoting democracy, and achieving sustainable 
economic growth. These include a Political Participation and Legal 
Rights Initiative, and a Girls' and Women's Education Initiative. We 
also have in place several program activities that address gender-based 
violence, trafficking in women, and female genital mutilation.
         programs for children and aids prevention and control
    Question. I have supported, and will continue to support programs 
for children like child survival, basic education, Vitamin A and other 
micronutrient programs. In addition, I support the continuation of the 
AIDS Prevention and Control Program and request that USAID maintain the 
program's funding.
    Answer. We appreciate the continued support for USAID's HIV/AIDS 
prevention and mitigation efforts. USAID is acknowledged as the major 
funder and global leader in the response to the HIV/AIDS pandemic in 
the developing world. Over the past two years, we have seen evidence of 
national program impact in at least two emphasis countries. In 
Thailand, through increased condom use, HIV prevalence in young men has 
dropped from 3.6% in 1993 to 2.0% in 1997. In Uganda, behavior change 
communications programs have contributed to a 35% reduction in HIV 
prevalence in young women aged 15-24. However, recent global data show 
that more than 30 million adults and children are now HIV-infected. 
This is one-third more than had been reported in 1996 and represents 
5.8 million new infections in 1997 alone. We have requested $129 
million for FY 1999, in order to respond more effectively to this 
global pandemic.
                palestinian-israeli cooperation program
    Question. Last year I authored report language on the Palestinian-
Israeli Cooperation Program. I would urge USAID to make this program 
part of its base budget to ensure that this type of grass roots 
cooperation continues promoting a better understanding and mutual 
respect between the Israelis and Palestinians living in the West Bank 
and Gaza.
    Does USAID intend to fund this program?
    Answer. The Department of State is currently reviewing program 
requirements against budget availability. While no final decisions have 
been made, we anticipate funding for this program will be at least at 
the FY 1996 level.

       Questions for the Record Submitted by Congresswoman Lowey

                              microcredit
    Question. USAID's December 1997 report on microcredit included a 
break-out of what you committed to microcredit programs in FY 96. I'm 
concerned that of the $111 million that was allocated to these programs 
in FY 96, one-third of that went to non-credit activities. I understand 
that some of these activities, including training of microcredit 
funding recipients, are an important part of a successful microcredit 
program, but I remain concerned about how high a percentage of the 
overall microcredit account went to these activities. What are you 
doing to ensure that a higher percentage of the microcredit account is 
actually spent on microcredit lending? To what extent are these non-
credit activities focused on increasing our investment in poverty?
    Answer. USAID's microenterprise work includes microcredit, but also 
microsavings and non-financial programs. These latter programs include 
support for policy and regulatory reform; training programs and 
business services for microentrepreneurs; research on both the nature 
of microentrepreneurial realities in LDCs and on the actual effects of 
service delivery on microbusinesses and their owners and employees; 
and, the delivery of financial services. All of these programs are 
geared to eradicate poverty and most of them are intended to work 
synergistically with lending programs.
    Significantly, in many cases, microentrepreneurs identify 
marketing, input supply and other similar items as more pressing 
constraints to their businesses than is the availability of credit. In 
other cases, training and regulatory issues (such as discriminatory 
licensing and zoning regulations) are also more pressing than credit. 
As a result, most donors see the need to address both credit and non-
credit constraints.
                population: family planning saves lives
    Question. Very simply, access to family planning services saves 
lives. It is so critical that we continue to support this assistance, 
but I think that we have a responsibility to educate members of 
Congress and the public about what exactly this assistance 
accomplishes. Could you please tell us a little about how U.S. 
international family planning assistance improves the health and well-
being of women, children, and families around the world?
    Answer. U.S. international family planning assistance is recognized 
for its contribution to helping couples plan their families, 
stabilizing world population, and improving quality of life. Family 
planning--through better spacing and timing of births--also plays a 
vital role in maternal and child health.
    Each year, 585,000 women die of cause related to pregnancy and 
childbirth. Family planning can prevent at least 25 percent of all 
maternal deaths by allowing women to delay motherhood, prevent 
unintended pregnancies and unsafe abortions, protect themselves from 
sexually transmitted infections and HIV/AIDS, and stop childbearing 
when they have reached their individual reproductive goals.
    Over 7 million infants die annually despite dramatic improvements 
in infant and child survival. Babies born less than two years after 
their next oldest sibling are twice as likely to die in the first year 
of life than those born after an interval of at least two years.
    Children born to mothers under age 20 are more likely to die before 
their first birthday--one and one-half times more likely in many 
countries--than those born to mothers ages 20 to 29. Children born to 
mothers over age 40 and fourth-born or later children are also more 
likely to die. Family planning makes important contributions to infant 
survival by helping women space births at least two years apart, bear 
children during their healthiest reproductive years, and have only the 
number of children they want. Through its effects on birth spacing 
alone, family planning can prevent 25% of these deaths.
    Adequate birthspacing also can improve the survival of the next 
older brother or sister. If the mother of an infant avoids becoming 
pregnant again too soon, she may find it easier to continue 
breastfeeding, putting her infant at less risk of illness and death. 
Diseases spread less easily in households with fewer children, and 
better spacing of children results in less competition for scarce 
household resources, including food, clothing, and living space.
    The health of mothers and children is intertwined. If a woman dies 
during childbirth or soon after, her infant and other young children 
are less likely to survive. Motherhood and childhood can be made safer 
byproviding family planning services along with quality prenatal care, 
clean and safe delivery, and access to essential obstetric care. 
According to UNICEF, ``The first and most obvious step towards reducing 
the toll of maternal mortality and morbidity is to make high quality 
family planning services available to all who need them.''
    Current use of family planning in the developing world (excluding 
China), estimated at 36% of married women of reproductive age, is about 
half of developed country levels and can be estimated as preventing 
600,000 infant deaths and 50,000 maternal deaths annually. An 
additional 600,000 infant deaths and 50,000 maternal deaths could be 
prevented each year if family planning use were doubled to developed 
country levels, reducing global mortality totals to 6.4 million infant 
deaths and 535,000 maternal deaths each year. Of course, the cumulative 
impacts of family planning programs on infant and maternal mortality 
are much greater than any single year impact.
              population: impact of the mexico city policy
    Question. There is a misunderstanding among many of our colleagues 
about the nature of our international family planning programs. Many 
proponents of the Mexico City policy believe that our population 
programs support abortion services. In fact, family planning programs 
actually reduce the incidence of abortion services around the world. 
Could you clarify for us existing law regarding the use of U.S. 
population assistance funds for abortion services? And could you also 
discuss the impact Mexico City policy would have on our international 
family planning programs?
    Answer. Current law provides a ``wall of separation'' between 
family planning and abortion in USAID programs. Since the enactment of 
the Helms Amendment in 1973, the USAID population program has been 
legally proscribed from supporting or encouraging abortion as a method 
of family planning. Specifically, as a matter of longstanding law and 
policy of this and previous Administrations, USAID funds cannot be used 
to pay for the performance of abortions as a method of family planning; 
to motivate or coerce any person to have an abortion; to lobby for or 
against abortion; to purchase or distribute commodities or equipment 
for the purpose of inducing abortions as a method of family planning; 
or to support any biomedical research which relates, in whole, or in 
part, to methods of, or the performance of abortions as a method of 
family planning.
    The current version of the Mexico City policy contained in the 
conference report of the State Department Authorization bill imposes in 
statute, limitations on international family planning that were 
rejected by the Administration when it overturned the so-called Mexico 
City policy. While the bill allows the President to waive one aspect of 
those restrictions, it imposes a punitive ceiling on spending for 
population activities if the waiver is exercised. The conference report 
also imposes a global ``gag'' rule on foreign non-governmental 
organizations (NGOs) by prohibiting funding for those NGOs that engage 
in the democratic process in their own countries and conduct legal 
advocacy activities with their own funds. The restrictions put in 
jeopardy funding for the most experienced and qualified family planning 
and maternal-child health care providers working at the grassroots 
level to meet the growing demand for family planning and other critical 
health services in developing countries. For instance, the restrictions 
would most likely end funding to key private family planning groups in 
Russia, where assistance from USAID has helped increase the use of 
contraception, contributing to a more than one-third decline in 
abortions. If HR 1757 were to become law, the consequences would 
include an increased number of unintended pregnancies, unsafe 
abortions, and maternal and child deaths.
    The Administration considers HR 1757 unacceptable. A funding cap of 
$356 million and sweeping restrictions on free speech make this version 
as restrictive, if not more so, than previous formulations.
                     population: fy98 request level
    Question. I was very concerned to see that the Administration's 
FY99 request for international family planning programs is $50 million 
lower than its FY98 request. I hope this is not indicative of a 
decreased commitment to international family planning. Could you please 
comment?
    Answer. The Administration's FY99 request of $375 million in 
Development Assistance (DA) funds does not represent a declining 
commitment to international family planning. While this level is $25 
million lower than last year's DA request, it is $33 million higher 
than the $342 million in DA funding available for international family 
planning in FY98. In addition to DA funds, the Administration expects 
to devote $25 million in FY99 funds for international family planning 
from other funding accounts, including ESF, FSA and SEED accounts.
                         education and training
    Question. An important part of expanding our commitment to basic 
education funding is ensuring that USAID has the technical capacity to 
do so. Could you discuss what you are doing to increase the number of 
individuals at USAID missions around the world who are experts in 
development education?
    Answer. USAID has undertaken two recent actions to meet increasing 
needs for professional personnel that are emanating from the 
maintenance and expansion of its basic education programs. First, USAID 
requested the inclusion of basic education advisors under section 523 
of last year's Foreign Operations Appropriation Act (H.R. 2159). This 
section addresses the TAACS Program (Technical Advisors in AIDS, Child 
Survival and Population) which has been extremely successful in 
assisting USAID to incorporate high quality technical advisors in these 
areas. The request was incorporated in last year's Act and, as a 
result, in FY 1998 USAID began the recruitment and placement of basic 
education advisors in field missions and bureaus with urgent priority 
needs for education support. In addition to the TAACS Program, a USAID 
Workforce Planning Task Force, which completed work last October, has 
laid the basis for systematically improving USAID's capability to match 
its longer term needs and operational capacity with technical personnel 
resources, including direct hires in education.
                  infectious disease funding decrease
    Question. I am very concerned about the low request level for 
infectious disease funding. You have requested $30 million for these 
critical programs--down from $54 million in FY 98. This funding is 
helping us work toward global eradication of diseases like 
tuberculosis, which most of us probably thought was long gone, but is, 
in fact, the number one killer of adults from a single infectious 
disease. TB kills more people around the world than all other 
infectious diseases combined. And this funding is also critical to our 
fight against polio, malaria, yellow fever, and other diseases that are 
ravaging the developing world and continuing to threaten Americans 
living in and out of the United States. Could you explain this 
decrease?
    Answer. Our request for FY 1999 of $30 million for the infectious 
disease initiative is not meant to signal a reduction in the importance 
USAID places on these programs. The fact that we have requested a 
separate account in FY 1999 for Child Survival/Diseases and Basic 
Education, including a separate category for the new initiative, 
demonstrates the importance that we give to these programs and 
activities.
    Rather, our approach is based on the realization that work to 
reduce the threat of infectious diseases is integrally linked to, and 
must be supported by USAID's efforts in other areas.
    Social and economic conditions such as poverty, malnutrition, lack 
of education, poor sanitation, overcrowding and environmental 
degradation, and rapidpopulation growth allow infectious diseases to 
flourish and spread. Our direct efforts to reduce the threat of 
infectious diseases are made much more effective when these other 
issues are adequately addressed.
    For the past several years, work in these broader development 
issues that affect social and economic conditions has been increasingly 
underfunded. To develop a more balanced approach to USAID's goals and 
objectives, in the FY 1999 request, USAID has requested funding for 
activities that in part address some of the underlying social and 
economic conditions that impact on health and diseases, including 
education, poverty, and malnutrition. This has necessitated making 
difficult choices, but in the long run, USAID believes that investments 
in these other areas are critical components to sustain USAID's work to 
address infectious diseases and improve child survival.
    While addressing issues such as poverty, malnutrition, and 
education will not have an immediate impact on infectious diseases and 
child survival, serious gaps in these area make it difficult to address 
the spread of infectious diseases and improve child survival most 
effectively. These issues must be adequately addressed, in addition to 
investments in the focussed set of priorities directly addressing 
infectious diseases, in order to assure that our gains in the health 
and child survival areas are sustained the long-term.
                   importance of cdr and cdp funding
    Question. For the last decade, the CDR (U.S.-Israel Cooperative 
Development Research) and CDP (Cooperative Development Program) 
programs have funded cooperative research and training between American 
and Israeli scientists, health care workers and others as they work on 
critical development issues in Africa, Latin America, and the former 
Soviet Union. These programs have helped provide economic development 
and stability in areas of strategic importance to the United States. In 
fact, these programs have been a key part of our attempt to stop 
Iranian influence in the Islamic Asian Republics of the former Soviet 
Union. Could you discuss the importance of these programs and tell us 
if you plan to fully fund them in FY 98?
    Answer. The CDR Program provides U.S. funding for cooperative 
applied research involving Israeli scientists and their counterparts in 
USAID countries of interest, allowing them to work on significant 
development programs. CDR emphasizes areas in which Israeli research 
interests and expertise are particularly valuable to the other 
countries. There have been many significant research results to date, 
including advances in saline and dryland agriculture, improved 
agricultural water management technology, improved biopesticides, 
livestock vaccines, and added understanding of diseases such as 
leishmaniasis and leprosy.
    Practically speaking, the CDR program is doing good work that 
otherwise would not be done. Developing country researchers who have 
participated in the program praise it because it gives them an 
opportunity to do meaningful work with world-class scientists, use 
decent equipment, and benefit from training abroad. While the research 
linkages created usually do not have an immediate impact on our 
strategic objectives in a given target country, we believe that with a 
relatively small amount of funding the program can positively impact 
long-term economic growth and development.
    The CDP Program provides U.S. funding for the Government of Israel 
to conduct technical training in Israel and abroad, and to promote 
model farms which demonstrate Israeli agricultural technology in less 
developed countries. CDP also emphasizes the application of Israeli 
technology, and the training of target-country personnel is primarily 
focused on modern sustainable agricultural practices. CDP activities 
are managed under MASHAV, a branch of the Israeli Foreign Ministry, 
with the technical assistance of CINADCO (Ministry of Agriculture).
    In addition to training assistance, the CDP program has provided 
valuable links of goodwill between people in the developing world to 
the people and government of Israel through activities such as the 
``Shalom Club'' and trips to Israel for training courses.
    The components of both programs in the Central AsianRepublics have 
been effective in that they have promoted useful research linkages and 
people-to-people contacts, thus achieving our foreign policy objective 
of facilitating the development of ties between Israel and the 
historically Muslim former Soviet Republics in Central Asia. CDR 
provides a vehicle for funding and promoting applied civilian research 
in the region, and the program hopes to further emphasize its defense 
conversion potential. CDP introduced the Israeli Government in the very 
positive role of a sponsor of technical participant training at a time 
when it was unclear whether the new states of the region would continue 
the economic ties and diplomatic recognition of Israel forged in the 
last days of the old Soviet Union.
    CDR and CDP will be fully funded in FY 98. In FY 99, USAID intends 
to fully fund its portion of the combined CDR and CDP line item at $5.5 
million from the Development Assistance (DA) Account. This amount is 
separate from any New Independent States (NIS) funds which might be 
committed under the guidance of the State Department Coordinator for 
that region.

        Questions for the Record Submitted by Congressman Torres

           usaid's commitment to an enhanced vitamin a effort
    Question. Could you tell this committee about USAID's vitamin A 
initiative and whether or not you anticipate expanding this to a multi-
year effort with expanded funding, because I think you would have some 
strong support from Congress if you did.
    Answer. We are very proud of USAID's commitment and leading role in 
vitamin A research and program development over the last 15 years. 
Vitamin A is a critical element of USAID's current child survival and 
nutrition strategy to reduce infant and child mortality in developing 
countries. Our Agency-wide Enhanced Vitamin A Effort (VITA) represents 
a child survival priority over the next 5-10 years for USAID. We are 
today devoting over $12 million dollars a year to enhancing the 
delivery of vitamin A, and plan to expand our efforts in the coming 
years. I have encouraged our missions to incorporate the expanded 
delivery of Vitamin A into all USAID child survival programs.
    The increased delivery of vitamin A focuses on three major 
approaches, namely supplementation, food fortification and nutrition 
education. Specific results over the next 5-7 year timeframe are: 
significant progress towards the World Summit for Children goal of 
eliminating vitamin A deficiency; and 80 percent reduction in the 
number of vitamin A deficient children in target countries; and up to a 
30 percent decrease in child deaths in target countries. Potential 
target countries include but are not limited to Bangladesh, India, 
Indonesia, Nepal, Ethiopia, South Africa, Tanzania, Uganda, Zambia, 
Nicaragua and a Central American network.
    However, USAID cannot achieve these goals alone. We are catalyzing 
strategic partnerships with host governments and other donors along 
with creating a Domestic Alliance comprised of the private sector, such 
a food and pharmaceutical companies, civic organizations, institutions, 
private voluntary organizations (PVOs) and multilateral organizations 
to help mobilize this important international effort. Major donor 
colleagues include UNICEF and Canada.
    USAID will maintain support for key applied research efforts, such 
as validating the positive impact of vitamin A on maternal survival, 
and further contributing to global standard of vitamin A and other 
micronutrient delivery.
    We would be pleased to provide you with a briefing on the VITA 
Enhanced Effort at your convenience.

       Questions for the Record Submitted by Congresswoman Kaptur

                           p.l. 480 title ii
    Question. The poorest of the poor or ``ultra poor'' are estimated 
to comprise an average of 20% of the population in developing 
countries. Feeding programs to assist these people are difficult to 
quantify or measure in the short run beyond the amount of food 
delivered, the number of meals prepared and the number of people 
served. What level of funding does USAID provide to assist these 
individuals through PL 480--Title II?
    Answer. P.L. 480 Title II funding is divided between emergency and 
non-emergency food aid programs. All of our emergency funding is 
``relief'' feeding programs to populations in crisis. $500 million has 
been budgeted in FY 1998 to meet our emergency needs. USAID does have a 
policy to give Title II funding priority to programs where the 
recipient will eventually be able to make self-sustaining progress 
toward food security. We have concluded this is most likely to occur 
with ``developmental'' activities which improve household nutrition or 
enhance agricultural productivity. Notwithstanding this policy focus 
for non-emergency Title II activities, USAID does support a large 
number of traditional ``relief'' programs in both its non-emergency and 
emergency Title II activities at approximately $15.7 million. In all 
cases, resources are focused on the neediest countries and within those 
countries on the most vulnerable.
    With emergency Title II programs, the U.S. feeds the starving women 
and children we all see on CNN. Recent crises in Bosnia, Rwanda, and 
North Korea are examples of where Title II resources have supported 
traditional relief feeding activities to maintain the health of the 
most vulnerable groups in those societies.
    In non-emergency Title II feeding programs, U.S. commodities are 
often used in maternal/child health activities and food-for-education 
activities benefiting vulnerable groups of women and children. In many 
cases, these traditional feeding activities have been integrated with 
other developmental resources to increase the likelihood of sustainable 
improvements in the health and nutrition of these groups. This category 
also finances food-for-work programs for poor farmers and landless 
laborers in countries like Bangladesh. The beneficiaries of these 
programs are also vulnerable.
    USAID also allocates Title II resources to the sorts of welfare 
feeding programs which Mother Theresa's Missionaries of Charity manage. 
We will continue to do so and have told cooperating sponsors we will 
consider modest expansion of these activities. However, the 
beneficiaries of emergency programs and of non-emergency programs such 
as maternal/child health are also vulnerable and we believe warrant 
continued priority.
    Question. I am concerned with reports that USAID is cutting back on 
assistance to the poorest of the poor in favor of funding assistance 
where results can be quantified and thus comply with the Government 
Performance and Results Act of 1994. What level of funding was provided 
in these programs for each of the past 3 fiscal years? Has all of this 
money been spent?
    Answer. The overall focus of our food aid programs has not changed. 
Our annual guidance to the PVO community continues to give emphasis to 
food insecure areas and the poor, as in previous years, in addition to 
focusing our programs where the recipient will be able to make self-
sustaining progress toward food security. These foci will only be 
strengthened as we apply performance-based management principles to 
U.S. food aid programs. The Government Performance and Results Act of 
1994 provides us a powerful framework for ensuring that our programs 
and resources are appropriately focused on the poor. Our goal remains 
development; the measurement of development change is a means to this 
end, not an end in itself. We are working with the PVO community, which 
implements the food aid program, to improve upon program monitoring in 
order to strengthen program management and, in turn, increase program 
results. Such monitoring allows us to focus and improve project 
management, eliminate poorer performing projects and expand upon 
projects achieving desired results.
    For fiscal years 1995, 1996 and 1997 Title II funding totaling 
$821.1 million, $821.1 million and $837.0 million, respectively, was 
appropriated. We estimate that Title II programming goes almost 
exclusively to the very poor, however, ``relief feeding'' programs were 
funding at $34 million in FY 1995, $25 million in FY 1996, and $15.3 
million in FY 1997. We are currently considering expanding funding for 
this type of feeding program. Over $20 million in previous year funding 
was carried over into FY 1998, however, we expect all of this money to 
be expended by the end of the fiscal year.
                       micro-enterprise programs
    Question. In last year's House Appropriations report, we included 
language to make sure farmers and farm production were included in 
activities under micro-enterprise programs. We do not believe the 
program should discriminate against farmers in favor of merchants or 
others.
    Would you please send to the Committee the latest definition you 
use for micro-enterprise and how you are implementing this change?
    Answer. USAID's Microenterprise Development Policy Paper, which 
sets the guidelines for USAID's work in the microenterprise field, 
defines microenterprises as ``tiny, informally organized business 
activities other than crop production.'' While this definition does not 
include farm production, it does not, however, discriminate against 
farmers, as many farmers operate microenterprises as sidelines during 
the off-season. In fact, the most successful microfinance institutions 
do not attempt to restrict the uses of funds by borrowers. As a result, 
microloans can be and are channeled to crop production activities to 
the extent that they are for short periods of time. Neither financing 
for long-term investments in the agricultural sector, nor investments 
in housing qualify for these loans.
    USAID is presently exploring direct linkages between microfinance 
and rural finance in its broad sense. We are looking at the provision 
of credit and savings services in rural areas through financially 
sustainable institutions which is a priority item in USAID's 
microenterprise effort.
                        agricultural development
    Question. USAID has modified its broad-based economic growth 
strategic objective to include agricultural development. Can you tell 
us how missions are changing their strategic objectives to include 
agriculture? Which missions plan to increase agricultural development 
programs as a result of this renewed emphasis on agriculture?
    Answer. USAID missions in many of the Agency's recipient countries 
are by and large working in agriculturally-based economies. The 
missions have recognized over the years that successful programs in 
economic growth must include agriculture.
    Our agricultural programs declined in size with the reduction in 
overall resources in the early to mid 1990s. During this period 
Congressional priorities for child survival, diseases and basic 
education programs have become major funding priorities within the 
overall Development Assistance account. At the same time there have 
been a number of Administration priorities for population and 
environmental programs, non-traditional export promotion, 
privatization, rural infrastructure, and market reform as well as joint 
interest between the Administration and Congress for increased funding 
of microenterprise programs. Despite this contraction of, and increased 
competition for, funds, many of our missions continue to have 
agriculture programs as a major priority.
    However, USAID's agriculture programs can be greatly expanded only 
if additional funding becomes available for economic growth programs in 
general and agricultural programs more specifically.
    In Africa, the Administration has recognized this problem, and the 
President's Africa Food Security Initiative (AFSI), announced in his 
recent speech in Uganda, will provide resources for USAID missions in 
five countries to add new agricultural activities or expand existing 
ones beginning this year. These countries are Uganda, Mali, Malawi, 
Mozambique, and Ethiopia. A higher resource level in AFSI would permit 
expansion of agricultural activities in other countries.
    In the case of Asia Near East, it is premature to anticipate what 
changes, if any, may occur. Many missions are involved in agriculture, 
including research, policy reform, enabling environments, tariffs, 
technical assistance, agro-business, high-value cropping, etc. As the 
Agency proceeds with preparation of its FY 2000 budget submission we 
will be exploring in tandem with our field missions additional 
opportunities for involvement in this area.
    The Latin America and Caribbean Bureau has seven economic growth 
strategic objectives that include agricultural programs. At this time 
increased emphasis on agriculture in this region is being addressed 
through existing programs as opposed to new initiatives which would 
require additional economic growth allocations.
                         agriculture in georgia
    Question. Does the Georgia mission in the former Soviet Union plan 
to increase its programs in agriculture? Can you give us details on 
missions plans concerning agriculture?
    Answer. The USAID Mission for the Caucasus believes that 
agricultural and agribusiness growth and modernization are very 
important to the development and stability of the region as a whole. 
Georgia, in particular, appears to have significant agricultural 
potential. The mission is currently supporting a private seed industry 
development activity, which is being implemented by ACDI/VOCA, 
concentrating on improving the genetic material and then 
commercializing production and marketing for potato, maize, sunflower 
and wheat seed. A planned new project would complement this activity by 
working to develop a network of private agricultural input dealers, 
using fertilizer supply as a catalyst. This new project would work in 
all three countries in the Caucasus region, with Georgia as the main 
country of emphasis.
    A second new activity under consideration would concentrate on 
facilitating trade linkages among the three countries in the region, 
both for inputs and outputs, through information dissemination and 
harmonization of standards and procedures.
    These planned or ongoing activities are complemented by volunteer 
technical assistance provided through the NIS regional Farmer-to-Farmer 
program, and by USDA commodity monitization activities that concentrate 
on rural credit.
    rural electric cooperatives and electric power reform in georgia
    Question. Can you give us a status report on how USAID plans to use 
U.S. rural electric cooperatives to help improve the collection systems 
and reduce losses for distribution companies in Georgia?
    Answer. USAID is currently providing the Government of Georgia with 
assistance in energy sector restructuring, regulatory reform, 
commercialization, and privatization of state-owned power distribution 
companies. This assistance, which is being provided through Hagler 
Bailly, a firm highly experienced in the NIS region and a contractor 
selected through normal competitive procurement processes required by 
Federal Acquisition Regulations, is helping improve the collection 
systems and reduce losses for distribution companies in Georgia. 
Additional privatization support is being provided by an investment 
banking firm hired by the Government of Georgia with World Bank funds.
    Recently, the National Rural Electric Cooperative Association 
(NRECA) submitted an unsolicited proposal to work in this sector in 
Georgia. USAID has had favorable experiences working with NRECA around 
the world, particularly in Kyrgyzstan. USAID has evaluated the Georgia 
proposal for technical merit. The proposal was for $12 Million and 
covered two areas of assistance to the power section in Georgia: (1) 
Distribution metering and billing, and (2) Hydro-power privatization. 
USAID is unable to fund the unsolicited NRECA proposal on a non-
competitive basis because USAID has already made an openly competed 
award to provide this type of technical assistance.
                  private and voluntary organizations
    Question. The Committee strongly supports the Office of Private and 
Voluntary Cooperation including programs for cooperatives. Would you 
provide information on how much will be provided for this office and 
its cooperative programs in FY99?
    Answer. FY 1999 funding for the Office of Private and Voluntary 
Cooperation of $46,827,000 has been requested. Support for cooperative 
programs is planned at $6 million.
    Question. USAID is turning to larger and larger contracts to do its 
work. How do you reconcile large contracts with the Private and 
Voluntary Organizations (PVOs) partnership? Private and Voluntary 
Organizations are usually specialized and unable to bid on large 
contracts.
    Answer. The community of private and voluntary organizations is 
extremely diverse and comprised of small and large organizations 
covering a wide spectrum of sectoral activities. Of the 430 PVOs 
registered with USAID, some organizations maintain a narrow focus while 
others carry out interested activities across one or more of the 
following sectors: health, microenterprise, agriculture, environment 
and humanitarian aid. While the primary funding mechanism to USAID's 
PVO partners continue to be grants and cooperative agreements, the 
increasing sophistication of a growing of PVOs is resulting in their 
successful competition for contracts as well as cooperative agreements.
    The Agency's allocation of development assistance to PVOs has been 
gradually increasing; the most recent data we have shows over 30% of 
development assistance being channeled through PVOs. There has been no 
dramatic change in the size of contracts that would affect the USAID/
PVO partnership. In fact, large cooperative agreements are increasingly 
being awarded to private and voluntary organizations with 
subcontracting elements to other PVOs. We are monitoring the level of 
contracts versus cooperative agreements and grants as well as the level 
of development assistance funds flowing to the PVO community.
                             credit unions
    Question. Since credit unions and cooperatives provide more micro-
enterprises loans than all other micro-enterprise institutions combined 
in the world, why are they integrated into these types of programs? 
What plans do you have to better use cooperatives in micro-enterprise 
programs?
    Answer. Credit unions, generally through national and international 
credit union movements, have long been supported by USAID because (1) 
they are owned and capitalized by their members, and (2) they target 
broad financial service delivery to low-income clients. In addition, 
the fact that they are permitted to capture and use member savings as 
their primary source of lending capital makes them less dependent upon 
donor capital or guarantee programs, and thus an excellent development 
investment. The World Council of Credit Unions ranked in the top five 
recipients of microenterprise funding in FY 1996.
    We do consider credit unions an extremely important mechanism for 
delivering financial services to microentrepreneurs and poor people in 
general. However, credit unions do not specifically focus on 
``microenterprise'' borrowers; their clientele is broader and their 
average loan is above the ``poverty lending'' mark of $300 which the 
Congress requires us to track. We are working with credit unions 
through many of our grants to PVOs. In Africa and the Philippines, for 
example, we are doing some exciting work in integrating or linking 
village banking and group guarantee lending with credit unions and/or 
cooperative movements. Similarly, in Latin America, we are expanding 
linkages between mature village banks and local credit unions.
    Question. Please give us an update on credit union programs in the 
ENI Bureau, specifically in the Ukraine.
    Answer. USAID is currently funding six credit union development 
projects in Eastern Europe and the New Independent States through the 
World Council of Credit Unions (WOCCU). These six programs are in 
Latvia, Lithuania, Macedonia, Poland, Romania and Ukraine.
    The credit union movement in Ukraine re-emerged with the help of a 
USAID-funded WOCCU project in 1993. The WOCCU project focuses on 
building an effective financial infrastructure to provide savings and 
credit financial services. The project helped to form the Ukrainian 
credit union association (UNASCU) which has some 60 institutional 
members, over 12,000 members and assets over $1 million. The project 
works with seven model credit unions in Ukraine, has established a 
credit union training center, and is computerizing its systems. The 
project has put much effort into training credit union leaders, 
particularly through regional training sessions and meetings including 
some in Poland. In turn, interested groups from various NIS countries 
have visited the offices of UNASCU and WOCCU in Ukraine to obtain 
information on starting credit unions--a nice demonstration effect of 
the Ukraine project.
    The first and most successful credit union program began in Poland 
in 1992. The program has achieved self-sustainability, with all the 
components of a fully operational system including appropriate 
legislation, successful credit unions, a national association, a 
central finance facility, audit and supervision within a self-
regulatory system, computerization of operations, a training center and 
a credit union foundation that provide assistance to other movements in 
the region.
    The WOCCU project in Latvia and Lithuania, which began in 1994 has 
also been successful, particularly in pushing through amendments on 
credit union legislation, in fostering the growth of credit unions by 
reducing the initial capitalization requirement to an acceptable level.
    The WOCCU project in Romania, initiated in October 1995, has been 
successful in fostering the partnership with a Romanian association of 
savings and credit unions. The credit unions within this association 
have been converted to competitive, market-driven organizations. To 
date, 14 have been converted, with a total of 4,637 members.
    The WOCCU project in Macedonia was initiated in October 1995, but 
has encountered some difficulties in securing the appropriate 
legislative base for credit union development. WOCCU believes these 
problems will be resolved within the coming months, and that credit 
union operations will restart this year.
                    freedom of the press in ukraine
    Question. How effective do you feel that USAID has been in 
assisting radio, television and newspapers to achieve freedom of the 
press in Ukraine?
    Answer. Although freedom of the press in Ukraine has suffered 
significant setbacks over the past year or two, there also has been 
progress in achieving greater press freedoms and plurality in Ukraine 
since independence, and USAID has been quite effective in assisting 
this process.
    The recent election campaign in Ukraine highlighted the major 
obstacles that remain to achieving a level of press freedom considered 
acceptable by Western standards, including: government control of the 
national TV channels, closure of opposition newspapers and TV stations, 
self-censorship, intimidation and murder of journalists, and 
unobjective reporting by non-state media, much of which is funded by 
political-economic interest groups.
    Nonetheless, there is a corresponding increase in hard-hitting 
reporting by the pluralistic, non-state mass media which has been 
increasingly bold in reporting corruption by government officials.
    USAID's success in assisting independent, non-state media achieve 
greater press freedom can be measured in part by the increase in the 
number, quality, and financial self-sustainability of non-state media. 
For example:
    19 of Ukraine's 24 largest cities now have locally produced, non-
state daily TV news programs, many of which credit USAID with providing 
invaluable assistance.
    80 percent of the participants in USAID-funded TV and radio 
training programs have started their own production of new 
informational programs directly as a result of USAID training, while 8 
percent started their own TV companies.
    By implementing recommendations made during USAID training 
programs, newspapers around the country have benefited, as indicated by 
increases in circulation and subscription rates.
    A recent monitoring report by a USAID grantee noted that a majority 
of the TV and radio stations supported by the grantee claim to be 
fully-sustained by advertising revenue, affording them greater (though 
not unlimited) opportunities to assert their editorial independence.
    USAID contributed to freedom of speech during the recent 
parliamentary election campaign by supporting independent media 
organizations that monitored compliance with provisions of the election 
law related to media coverage, conducted and publicized public opinion 
polls (including Ukraine's first-ever exit poll), compiled and 
disseminated news stories for regional press, and produced 
informational TV programs. The highlight of this assistance was an 
election night program that broadcast preliminary election results, 
analysis by independent experts, and the results of the exit poll.
    USAID programs continued to target regional media to improve the 
quality and objectivity of news reporting while increasing financial 
self-sustainability through small grants; loans; in-house consultancies 
and training for managers, editors, and advertising departments; 
operation of press centers--accessible by E-mail to journalists 
nationwide--that provide free access to Internet, wire and photo 
services, and other resources; production and free distribution of news 
programs for radio stations; support to journalist associations and 
press clubs; and advice to universities on reform of journalism 
curriculum.
    USAID also assists those who seek to improve the enabling 
environment for independent media in Ukraine by supporting NGOs and 
associations that monitor press freedoms, and providing advice and 
support to working groups drafting improved legislation. In addition, a 
new media law initiative trains lawyers specializing in media law, 
disseminates information on rights and restrictions of the press under 
the law, and operates a legal support hotline for journalists and 
media.
    The USAID-funded media center that produced the ground breaking 
``Vikna'' daily news program has now graduated from USAID assistance 
and is the center of a financially self-sustaining network of non-state 
regional TV stations which reaches more than half the population and 
continues to produce quality independent news and informational 
programs.
    Prior to graduating from USAID, the media center trained many of 
Ukraine's current top TV journalists and technicians, and provided--
free of charge--weekly news programs to scores of independent stations 
throughout Ukraine that couldn't afford to produce their own news 
programs.
                                ukraine
    Question. As was noted with Secretary of State Madeleine Albright 
just two weeks ago before this Committee, there are reports that the 
USAID approach of the use of highly paid consultants is not appropriate 
or effective.
    Answer. USAID uses institutional contractors (for-profit firms or 
institutions) and Private and Voluntary Organization (PVOs) to 
implement its assistance program in Ukraine, which is potentially a 
very powerful ally of key strategic importance to the US. I am 
convinced that our USAID program in Ukraine has been instrumental in 
helping to lay the groundwork for a lasting relationship with that 
government based on market-oriented principles and democratic 
pluralism. Our program has achieved impressive results in selected 
sectors due, in part, to the acknowledged excellence of expertise 
available from the US private sector.
    As an example, USAID has been very successful in ready companies 
for privatization in Ukraine, and has exceeded its planned target of 
7,000 medium and large enterprises. This was made possible by highly 
specialized technical assistance from US consultants to assist in the 
development of policies, laws and regulations governing privatization. 
In another sector, commercial banker training provided by seasoned, 
experienced US commercial bankers has resulted in increased assets of 
private sector banks, quantitative and qualitative improvement of bank 
examinations, and the development of a national registry, all of which 
are essential to improve the investment climate. Such achievements are 
partly the product of unique US technical expertise which commands 
salaries far higher than US government scale on the commercial market. 
Despite the slower-than-desired reforms in some areas in Ukraine, there 
are numerous similar examples which demonstrate the effectiveness of 
such US expertise.
    The following five questions address USAID's use of consultants in 
the administration and implementation of one of our largest assistance 
programs. Contractual mechanisms which may be used to acquire 
consultant services are covered in the Federal Acquisitions Regulations 
(FAR) and USAID Acquisition Regulations (AIDAR). Where appropriate, I 
will reference specific examples which I believe characterize the 
program. Generally, though, USAID consultant services are acquired 
through competitive procedures. Competition is widely acknowledged as 
the best way to encourage firms to offer quality personnel at a 
reasonable price. This allows the Government to attract competitive 
offers from the best firms, in terms of their track records for 
pricing, and quality of individuals offered. Competition stimulates 
contractors to price their proposal as low as possible, in part because 
the solicitation reflects the Government's minimum need.
    Salaries paid to consultants hired under institutional contracts 
are based upon contractors' internal procedures (Personnel 
Classification System). The position classification for the proposed 
labor must be consistent with the tasks to be performed and the 
procedures must meet the criteria under the Federal Acquisition 
Regulations (FAR) related to reasonable and equitable payment. 
Reasonableness is determined based upon the performance requirements 
and upon the law of prudent behavior--``that which would be incurred by 
a prudent person under the circumstances prevailing at the time the 
decision was made to incur the costs.''
    USAID has gone a step further and placed salary cap limitations on 
contractors in order to encourage cost containment by implementing 
partners. However, negotiated salaries are driven by the competitive 
process in the market place, and USAID reinforces this through 
competing the majority of the awards made.
    Occasionally, salary caps are waived, by only under unusual 
circumstances. In such cases, the Contracting Official analyzes the 
offeror's personnel classification data and makes comparisons with 
compensation paid by other firms using similar labor and prevailing 
labor rates for the specific technical category. USAID negotiators also 
verify the proposed costs for fairness and reasonableness through cost 
evaluation used by the Government. Waivers are approved by the Mission 
Director or Assistant Administrator only after careful consideration by 
the appropriate procurement officials and prior to award of the 
contract.
                         consultants in ukraine
    Question. How many consultants are working for USAID in Ukraine?
    Answer. Although the number fluctuates in response to program 
implementation requirements, USAID presently finances approximately 160 
long-term (more than 12 months) consultants resident in Ukraine under 
approximately 60 grants and contracts.
                   ukraine: consultants' compensation
    Question. What is the average level of compensation for consultants 
administrating USAID programs?
    Answer. USAID consultants' compensation levels are negotiated based 
on standard US government procedures. It is very difficult to determine 
an ``average'' level of compensation for consultants given the wide 
range of skills and expertise used, which includes former Peace Corps 
Volunteers with limited professional experience and Wall Street bankers 
with highly-specialized expertise. However, the maximum annual salary 
under U.S. Government contracts is $455.36/day or $118,393 annually. 
Most consultants are considerably below the threshold.
    Contracts are ordinarily awarded competitively to ensure that USAID 
obtains the highest quality services at the most reasonable cost. 
Compensation levels for USAID consultant services are established based 
on a determination of market value (salary range) by the contracting 
officer and the technical officer. The market value reflects the value, 
in the United States, of the position being recruited; the scope of 
work; and a determination of Salary Class. The market value of the 
position becomes the basis for a salary determination along with the 
applicants' certified salary history. The key factor in the 
determination of appropriate compensation levels is the establishment 
of a realistic and reasonable market value.
    There are occasions where the technical skills and experience 
required to implement the USAID program in Ukraine result in 
compensation levels at a higher rate than expected. If approved in 
writing by the Mission Director or the cognizant Assistant 
Administrator, based on written justification, a salary may be 
negotiated based on the applicant's current earnings and adjusted in 
accordance with specific USAID guidelines. The waiver establishes 
initial salaries, not subsequent increases, for the same contractor 
performing the same function.
                       ukraine consultancy length
    Question. What is the average length of a contract for a 
consultant?
    Answer. USAID contracts are typically written for a period of two 
years with the option for renewal subject to satisfactory performance, 
the continued need for the services and the availability of funds.
                       ukraine: contracts renewal
    Question. How often are these contracts renewed?
    Answer. USAID consultant contracts in Ukraine, and elsewhere, are 
generally written for not more than two years. However, depending on 
the time needed to complete the objectives of the activity under which 
the contract is funded, many contracts carry an option to renew. Such 
renewals are always subject to the availability of funding and 
satisfactory performance on the part of the contractor. USAID will not 
ordinarily renew a contract beyond a total period of five years except 
in unusual circumstances. When the need for consultant services extends 
beyond this five limitation, USAID's general practice is to resubmit 
the contract for competitive bidding.
                   ukraine: agricultural consultants
    Question. Do any of them specialize in agriculture?
    Answer. Yes, USAID funds agricultural consultant services in 
Ukraine. Currently, USAID has contracts with six institutions in the 
agriculture sector, listed below, under which approximately 20 long-
term expatriate consultants are employed.
    USAID has programmed approximately $20 million in the agriculture 
sector for FY 1998. Most of this investment is at the grassroots levels 
where organizations such as Citizens Network for Foreign Affairs 
(CNFA), Land O'Lakes/Agricultural Cooperative Development International 
(ACDI) and the US Department of Agriculture (USDA) work with private 
producers, agribusinesses and associations of producers or processors. 
This is supplemented by complementary activities in land tenure and 
commodity markets/exchanges.
                     ukraine: administrative costs
    Question. How much of Ukraine's program funds go to the 
administration costs of the program?
    Answer. A small portion of the Ukraine program budget is used to 
fund administrative costs through the employment of Personal Services 
Contractors (PSCs). USAID/Ukraine has a planned program budget of $225 
million for each of the fiscal years 1996, 1997 and 1998. The Mission 
employs approximately 15 U.S. and 30 Ukrainian program-funded PSCs to 
assist in the administration and management of the program. This 
constitutes approximately $5.3 million, or less than 2.5% of its 
program Operating Year Budget for administration of its program by 
these consultants. These employees possess specific technical skills 
which are essential in order to provide adequate management and 
oversight of our assistance program.
               effectiveness of usaid program in ukraine
    Question. Do you feel that our aid has been effective in Ukraine 
based on the recent suspensions of the IMF and World Bank loans based 
on the lack of economic reforms?
    Answer. Let me start by saying that USAID, too,is very concerned 
about the pace and progress of key structural reforms. We are closely 
monitoring this issue and have and will adjust our program as needed to 
ensure that our efforts reinforce Ukraine's ability to come into 
compliance with IFI programs, and that our resources are applied to 
areas where they can be effective even in the current climate for 
reform.
    Despite the fact that Ukraine has yet to make some key structural 
reforms, thus delaying IMF and World Bank loan agreements, significant 
reform is taking place in a number of sectors with USAID support. In 
many cases, these USAID-supported activities are assisting Ukraine to 
meet IMF and World Bank loan conditions, with the objective of enabling 
these structural reforms to proceed. While reform is not moving forward 
apace in all sectors--macroeconomic reform is lagging, as are reforms 
in agriculture and energy--in some, such as mass and case-by-case 
privatization, adoption of international accounting standards, 
regulation of capital markets, land titling, and targeted subsidies, 
Ukraine is ahead of or among the most advanced of NIS countries.
    A few examples of areas where significant results have been 
achieved over the past year with USAID support include:
    The macroeconomic policy working group is operational, with daily 
monitoring of critical indicators and policy analysis support that is 
helping the GOU to avert a financial crisis and improve economic 
management.
    A 1998 budget was adopted on time in accordance with international 
methodology.
    A GOU decree restricting government expenditures, more tightly 
controlling spending, and requiring cash payment of taxes was enacted.
    The GOU will meet its privatization target this year. To date, 
about 7,500 medium and large enterprises have been at least 70% 
privatized, with over half of these enterprises 100% sold. 155 of 
Ukraine's very largest enterprises have been privatized, including 13 
``giant'' enterprises. The revenues of top privatizable companies equal 
49% of GNP, in addition to those of already privatized companies.
    The Entrepreneurship Law was amended to decrease the number of 
business activities requiring licenses from 102 to 42.
    New tax and banking laws with wide-ranging implications were passed 
and are beginning to be implemented.
    Commercial banks have converted to international accounting 
standards, and there are strict new regulations for loan loss.
    The GOU is following up on its commitment to break up and privatize 
the grain monopoly.
    Farm restructuring and land titling have been accelerating since 
last summer, with about 150 farms restructured and 4,000 titles issued 
to individual Ukranian farmers.
    In 1997, seven USAID-supported business service centers provided 
training and technical assistance to over 6,000 entrepreneurs.
    In Lviv, USAID assistance for improved water pumping and storage 
has resulted in 30,000 people having water 10 hours a day instead of 0-
3 hours a day. By next year, they are expected to have water 24 hours a 
day.
    Private farmers and their associations in five oblasts are now 
receiving agricultural inputs from and/or marketing produce through 
private farm service centers.
    Since 1994, USAID's humanitarian assistance program has provided 
more than $45 million to assist the most needy citizens of Ukraine, 
including orphans, the elderly and the disabled.
    Over five million low-income families have received housing 
subsidies, while funds have been directed away from families who can 
afford to pay the full costs of housing, resulting in a $1 billion 
annual budget savings.
          improving the business and legal climate in ukraine
    Question. What has USAID done specifically in the Ukraine to 
improve the legal environment and has the USAID program assisted any of 
US companies in resolving their problems with the Ukrainian government?
    Answer. USAID's commercial law program is aimed at improving the 
investment climate in Ukraine. It currently has six elements: reform of 
the bankruptcy system to permit enterprise restructuring and increase 
transparency; development of a collateral registry for movable property 
to facilitate commercial lending; strengthening the ability of the 
legal system to enforce judgments in order to add predictability to 
economic decision-making; elimination of barriers to business and 
investment in Ukraine imposed by overregulation and control of market 
participants by governmental institutions; enactment of a new civil 
code and elaboration of Ukraine's commercial laws to conform with the 
civil code; and assisting Ukraine's accession to the World Trade 
Organization (WTO) and implementation of commercial laws conforming 
with WTO standards.
    Three of these areas--bankruptcy, collateral and deregulation--have 
shown remarkable progress. As a result of USAID's work with the Highest 
Arbitration Court, Ukraine now has the legal basis for financial 
restructuring of enterprises, not just their liquidation. This change 
in Ukraine's bankruptcy practice satisfied most of the World Bank's 
proposed bankruptcy conditionality for its second Enterprise Adjustment 
loan. Also with the assistance of USAID, Ukraine amended its pledge law 
to provide for a collateral registry for pledges of movable property. 
USAID is now assisting with the implementation of the pledge registry, 
which will provide a firm basis for secured lending in Ukraine because 
it will permit lenders to determine easily the existence of prior 
pledges. USAID's transparency initiative and the working group on 
shareholders' rights are working to conform Ukrainian procedures to 
standard international business practices.
    USAID's recently begun assistance with deregulation has resulted in 
important initial achievements: passage of a law reducing the number of 
business activities requiring licenses from 102 to 42 and setting the 
stage for the creation of one-stop business registration centers; and 
the signing of a Presidential decree giving the reformist State 
Committee on Entrepreneurial Development powers to review existing and 
proposed regulations and recommend their elimination, as well as to 
audit the regulatory and licensing practices of central and local units 
of government. The enforceability of contracts and predictability in 
economic decision-making are other important issues for the investment 
climate in Ukraine. USAID is assisting Ukraine to strengthen 
enforcement processes through legislative changes and institutional 
development.
    USAID has assisted Ukraine in the adoption of a new civil code, 
which has had its first reading in the Parliament. USAID will soon 
begin to assist in the drafting and revising of a number of other 
commercial laws in a comprehensive approach to bringing them into 
conformity with the new civil code as well as with international 
standards applicable in market economies.
    Ukraine's process of accession to the WTO is well advanced. USAID 
continues its role as the principal donor assisting Ukraine in 
accession, as well as in bringing its legislation and practices into 
substantial conformity with the international standards required by the 
WTO agreements.
    Although USAID is not the U.S. agency responsible for resolution of 
business problems, USAID is part of the U.S. Government team working 
with Ukraine and U.S. businesses to resolve specific U.S. investor 
disputes through the Gore-Kuchma Commission and working directly with 
the Government of Ukraine. USAID also maintains an active relationship 
with the American Chamber of Commerce in Ukraine (AmCham) and through 
it, attempts to assist in resolving business and investment issues. For 
example, USAID is taking the lead in establishing a mechanism for an 
on-going dialogue between AmCham members and senior officials of the 
Government of Ukraine. Moreover, USAID technical assistance programs 
help Ukraine to improve the overall environment for business and 
investment without reference to specific businesses.
        impact on non-certification on usaid program in ukraine
    Question. If Secretary Albright does not certify Ukraine on April 
30th, how will this affect your program in the Ukraine and your FY99 
request for $223.5 million?
    Answer. Should USAID's FY 1998 budget for Ukraine be cut in half, 
it would severely hamper the achievement of the objectives of the U.S. 
foreign assistance program. These include assisting Ukraine to put in 
place the basic building blocks of a market-oriented economy, promote 
the development of small business, improve the climate for investment, 
promote development of democracy and civil society and soften the 
impact of economic decline on the people of Ukraine by strengthening 
NGOs and grassroots organizations which serve Ukraine's most vulnerable 
citizens and assisting with Ukraine's social transition. To date, USAID 
has programmed half of the FY 1998 budget, with funds allocated to high 
priority activities such as small business development, democracy 
building, environment, energy efficiency and health care finance 
reform. Activities for which funding has been greatly reduced include 
agriculture, energy, privatization, fiscal and financial reform, social 
sector restructuring and training. Should half of FY 1998 resources be 
withheld, USAID would have to reexamine the proposed resource 
allocation for FY 1999 to ensure that funds are directed to a way which 
best addresses priorities and funding requirements.
                          lebanon agriculture
    Question. Can you tell us about USAID activities in Lebanon, 
particularly as it relates to agriculture?
    Answer. The largest portion of USAID/Lebanon's program is the rural 
development clusters activity in areas that have suffered war damage or 
government neglect. USAID has funded five U.S. non-governmental 
organizations (NGOs) to provide assistance to thirty ``clusters'' 
involving approximately 220 rural communities over a five year period. 
This assistance concentrates on returning the affected communities to 
economic and social viability through support for basic infrastructure, 
civic participation, income generation, and environmental protection. 
In each cluster a number of agriculture-related efforts are under way. 
These include restoring fallow land to orchards and crops; introducing 
new high-value crops such as fruits, vegetables and nuts; setting up 
processing and storage facilities for better marketing; and training 
farmers in new production techniques for their traditional crops and 
livestock. In a related activity, the American University of Beirut 
(AUB) has responsibility for an activity designed to help rebuild the 
Lebanese dairy industry. This supports a $6 million U.S. Department of 
Agriculture GSM103 program to import 3,000 pregnant dairy cows.
                 infectious disease funding in the nis
    Question. Last December, USAID announced a $50 million foreign aid 
initiative to fight the spread of infectious diseases. Will any of that 
money be used in the NIS countries?
    Answer. None of the $50 million provided to the new Infectious 
Diseases Initiative is being allocated for the New Independent States 
(NIS). In FY 1998, USAID will, however, obligate over $6.5 million in 
Freedom Support Act (FSA) funds to support infectious disease 
activities in the NIS region, including initiatives in HIV/AIDS, 
sexually transmitted disease and tuberculosis. In addition, 
approximately $1 million of the Agency's HIV/AIDS funding supports work 
in Russia to prevent HIV infections.
    NIS initiatives in infectious diseases include:
    Diphtheria: USAID has been a major funder of technical assistance, 
immunization support and vaccines, resulting in a 60% decline in 
diphtheria cases throughout the region in 1997 versus 1996.
    Polio: USAID has supported polio eradication efforts resulting in 
coverage rates for oral polio vaccine of greater than 90%. Two high 
quality polio reference laboratories are operating in Kazakhstan and 
Uzbekistan. USAID (Global Bureau) has committed $1 million to the 
improvement of polio surveillance systems in the Central Asian 
Republics (CAR).
    Viral Hepatitis, Acute Respiratory Infections (ARI) and Diarrheal 
Disease: USAID is providing assistance to improve the treatment and 
prevention of these diseases. In Kazakhstan, Kyrgyzstan and Uzbekistan, 
a program to improve the quality of the ARI and diarrheal disease 
management has resulted in a 93% decrease in deaths in one public 
district.
    Malaria and Typhoid: USAID is funding the Centers for Disease 
Control and Prevention (CDC) to develop malaria surveillance capacity 
in CAR; and UNICEF to assist with malaria epidemics in Azerbaijan. 
USAID has provided emergency assistance to International Federation of 
the Red Cross (IFRC), United Nations Development Program (UNDP) and CDC 
to control and prevent further spread of typhoid in Tajikistan.
    Tuberculosis (TB): USAID is focusing activities on TB and 
antibiotic resistance in Russia, the Caucasus and CAR. An innovative 
public/private TB initiative in Kazakhstan and Kyrgyzstan partnering 
CDC, Project HOPE, Abt Associates and Chevron Muniaigas will change TB 
prevention and treatment practices by: introducing the WHO protocol of 
Directly Observed Therapy (DOTS); strengthening epidemiological 
monitoring and surveillance; and by rationalizing pharmaceutical 
management to counteract increasing antibiotic resistance.
                     american college of physicians
    Question: What is the status of the implementation of the American 
College of Physicians exchange program encouraged by last year's 
Foreign Operations Bill?
    Answer. USAID is providing up to $300,000 in 1998 to the American 
College of Physicians, in collaboration with its designated 
representative, the Institute for Health Policy Analysis (IHPA). Funds 
will be used for continuing medical education in Russia, and are to be 
provided through a USAID/Russia agreement with the Academy for 
Educational Development. This agreement is designed to meet a broad 
range of training needs throughout Russia. To release funds, AED 
requires a USAID-approved training plan. AED is now working with IHPA 
on that plan.
    In an effort to better link this activity with related health 
initiatives in the country, USAID/Russia has put IHPA in touch with the 
Administrator of the Agency for Health Care Policy and Research of the 
Department of Health and Human Services, who is the U.S. lead on the 
initiative to improve the quality of health services in Russia launched 
at the Gore-Chernomyrdin Commission's Tenth meeting in March 1998. The 
training by ACP members would complement the policy development, 
research and dissemination aspects of the joint U.S.-Russia program, 
and USAID hopes ACP agrees to join in this important effort.
                                          Wednesday, April 1, 1998.

                              HUMAN RIGHTS

                               WITNESSES

JOHN SHATTUCK, ASSISTANT SECRETARY OF STATE FOR DEMOCRACY, HUMAN RIGHTS 
    AND LABOR
KENNETH ROTH, EXECUTIVE DIRECTOR, HUMAN RIGHTS WATCH
MIRA BARATTA, VICE PRESIDENT FOR PROGRAMS, FREEDOM HOUSE
CARLOS SALINAS, DIRECTOR OF LATIN AMERICAN AFFAIRS, AMNESTY 
    INTERNATIONAL
MIKE JENDRZENJCZYK, HUMAN RIGHTS WATCH (ASIA)
ROBIN WILLIAMS, U.S. CITIZEN



Chairman Callahan's Opening Statement

    Mr. Callahan. Good morning. Now, this morning the 
subcommittee will have a hearing on human rights. We have one 
person on our subcommittee, Ms. Pelosi, who is very sincerely 
interested in human rights problems throughout the world and 
she requested this special hearing which I think is very, very 
timely. We have the Assistant Secretary for Human Rights, Mr. 
Shattuck, with us today. And he will present the administration 
views elaborating on the earlier testimony of Secretary 
Albright.
    We do not expect to keep you, Mr. Shattuck, much beyond 11 
o'clock, but following his testimony we will receive testimony 
from representatives of two major nongovernmental 
organizations, the Freedom House and Human Rights Watch. They 
will respond to Mr. Shattuck's testimony and present a global 
overview from the organization's point of view.
    Our third panel will cover regional issues. At the request 
of Mr. Kingston we will hear from a private citizen, a member 
of the family of an American detained in Ecuador. And then we 
will hear from a representative of Amnesty International, who 
specializes in Latin America, and then from a representative of 
Human Rights Watch on Asia.
    The National Security Subcommittee would like to reclaim 
this room by 1 o'clock and we have to accommodate them. At that 
time we will either be finished or we will adjourn to the hall.
    This, I think, is the last subcommittee hearing we are 
going to have this year. I think we have performed all of our 
work in a very timely fashion because we are pressed for time 
and as soon as we get our 602(b) allocation we will be marking 
up our bill for Fiscal Year 1999. But before we begin the 
meeting and certainly before we end it today, I want to pay 
tribute to one of my colleagues, Representative Sid Yates.
    This is his 50th year, I think, of hearings such as this 
and I thought we ought to this morning tell you, Sid, that you 
know more about the process of the entire Congress and 
especially the appropriation process than probably any other 
member of Congress.
    Mr. Yates. Well, thank you, Mr. Chairman.
    Mr. Callahan. And your service to this country and 
especially your assistance to me during my tenure as chairman 
is something that I am very, very grateful for.
    So, the country is proud of you and should be and I know 
that you have sat through more of these hearings than any of 
the rest of us or probably all of the rest of us combined but 
it does mark a very significant time in history for you 
reaching this stage of your political career. So, we appreciate 
everything you have done for us and all the courtesies you have 
extended to me. The country is greatly indebted for all of your 
service.
    Mr. Yates. Mr. Chairman, you have swept me off of my feet. 
[Laughter.]

                      Mr. Yates' Opening Statement

    I know we have a fine relationship, warm friendly 
relationship. Whatever help I have given you has been edited 
with the great talent that you, yourself, have. I have known a 
number of chairmen of this committee. As a matter of fact, I 
have known every chairman of this committee since it was first 
organized by the Marshall Plan dating back to 1949.
    And you are as able, or abler, than any single member, any 
single chairman and I say that not because you said the nice 
things that you said about me, but because I sincerely believe 
that you are a very able person and an outstanding member of 
Congress. All that leading up to the fact that I am very 
grateful for your very kind words, Mr. Chairman, thank you.
    Mr. Callahan. Well, naturally I enjoyed that response. 
[Laughter.]
    More than any response I have ever had since I have been in 
Congress. But I thank you, Sid.
    Ms. Pelosi.

                     Ms. Pelosi's Opening Statement

    Ms. Pelosi. Thank you very much, Mr. Chairman.
    I thank you for holding this hearing. I think that it is a 
very important one. Indeed, I think it is central to what we do 
on this committee because our actionsin the area of human 
rights and promoting democratic freedoms is about who we are as a 
country. I, too, Mr. Chairman, want to join you in commending the 
leadership of our very distinguished colleague, Mr. Yates. I know for 
every person who has ever served with him, one of the great honors we 
will have in our lives is to call him colleague or to be his colleague. 
Mr. Yates has taught us all a great deal substantively about what we 
are dealing with and how to deal with issues in a very dignified way.
    But, Mr. Chairman, I have to make one further point which 
may or may not make you happy and that is, as you know, Mr. 
Yates is the senior Democrat on this Committee and he is the 
Democrat of longest standing on this Committee and but for his 
commitment to his original Interior Subcommittee, chairman and 
ranking membership, he would be the ranking member and the 
chair of this committee. It is through his largesse that we 
serve together in this relationship and I know you are very 
grateful to him for that. [Laughter.]
    Mr. Callahan. You know, it is not too late. [Laughter.]
    Well, if at this stage of his career he wants to switch 
parties, I will jump down and give him a go.
    Mr. Yates. Well, Mr. Chairman, will you permit me to reply 
to that? Mr. Shattuck, I am sorry, you will have to wait. 
[Laughter.]
    But, you know, there is nobody that I admire more greatly 
than Nancy Pelosi. I have served with her, I forget how many 
terms now, and my esteem----
    Ms. Pelosi. Six terms.
    Mr. Yates. Is it six terms?
    Ms. Pelosi. Yes.
    Mr. Yates. My esteem and admiration and respect for her has 
continued to grow with every single day. You know, I was 
reading in Roll Call about the possibility that the lady from 
Oregon or Washington, Mrs. Dunn, may be considered for Speaker 
by the Republicans if that occasion arises. I have been 
advertising Ms. Pelosi for speaker on the Democratic side for 
so many years. There is nobody, nobody in the House who has 
more ability than Ms. Pelosi and handles it in a nicer way than 
she does. And I consider it not only a privilege but an honor 
to serve with her and an honor also to receive the very kind 
words that she gave me.
    Thank you, Mr. Chairman.
    Ms. Pelosi. You can kiss him, too.
    Mr. Yates. Did the court reporter get that kiss? 
[Laughter.]
    Mr. Callahan. I will just briefly respond. If, indeed, the 
Democrats do reclaim a majority I hope that Nancy Pelosi is the 
Speaker of the House and----
    Mr. Yates. She would be a good one.
    Mr. Callahan [continuing]. And with respect to Mrs. Dunn, 
if Mr. Livingston drops out of his race for the speakership she 
would make a good speaker.
    Mr. Yates. I do not happen to know Mrs. Dunn. [Laughter.]
    Mr. Callahan. Anyway, Mr. Shattuck, we have used up about 
50 percent of your time. We have your written statement. We 
will accept it for the record. Keep in mind that in 50 years of 
hearings, Congressman Yates has heard everything at least once 
and probably 10 times that you are going to say. But, in any 
event, we would welcome your testimony at this time.
    Mr. Yates. Mr. Chairman, I just have one last statement.
    Mr. Callahan. Yes.
    Mr. Yates. I remember Paul--oh, my goodness, I do not 
remember, the names go first and then the knees go. [Laughter.]
    But Paul who was the head of the Studebaker Corporation at 
that time left his job as chairman of Studebaker to become the 
head of the AID program. And he persuaded Congress to help in 
the AID program with a statement more than anything else by 
saying, well, we are going to try as quickly as we can to get 
Europe off our back and on its feet. And I suppose we have been 
trying to do that with every country of the world since that 
time, Mr. Chairman.
    I do not know what that has to do with human rights but I 
thought it would be an interesting footnote.
    Ms. Pelosi. Very nice.
    Mr. Callahan. Mr. Shattuck?
    Mr. Shattuck. Thank you very much, Mr. Chairman. I cannot 
resist just one sentence about Mr. Yates. I admire not only his 
human rights advocacy, but also his role in the arts and 
sciences, building up the great cultural capacity of our 
country. It is a privilege to be here.
    Mr. Yates. Well, you know, I am very glad I came to this 
hearing. [Laughter.]

                    Mr. Shattuck's Opening Statement

    Mr. Shattuck. Mr. Chairman, I will be extremely brief. You 
do have a lengthy statement from me, and I do not want to take 
away from your opportunity to question me. Let me just make a 
few thematic opening points, then I can go back into any aspect 
of the statement that you may wish.
    I am here this morning to expand and answer questions on 
the Secretary's earlier testimony concerning the promotion of 
human rights, particularly through our foreign assistance 
programs. That is really what my testimony focuses on, not some 
of the broader aspects of our diplomatic work. But I am 
certainly prepared to talk about that as well.
    We all know that the world is very different today from 
what it was a decade ago before the end of the Cold War. It is 
really not possible any longer to look at the world in old 
East-West, North-South orientations. I think the kinds of 
categories of countries that Secretary Albright focused on 
really give us a much better picture of what we are looking at.
    There are those who are full members of the international 
system. There are those who reject the rules upon which the 
international system is based and are considered rogue States 
in our policy. There are those that are in transition from 
authoritarian rule. Many of them are still very much under that 
system, and we want to try to move them out of that because 
there is some evidence that they are seeking fuller 
participation. And, finally, there are those that are unable 
because of terrible conflict--often human rights catastrophes, 
such as happened in Bosnia or Rwanda--which are unable to enjoy 
the benefits and the responsibilities of membership in the 
international community.
    It is those last two categories of countries, Mr. Chairman, 
on which the future so heavily depends, and which will affect 
whether Americans are going to be able to live in a world that 
is peaceful, prosperous, free and relatively stable or not. And 
it is important to encourage those countries moving out of 
transition from authoritarian rule or from terrible conflict to 
become fuller participants. Those are the countries that are 
the focus of our assistance efforts.
    And we have developed in recent years a number of new 
mechanisms for making decisions about the disposition of our 
assistance. We have a new human rights and democracy core group 
which draws together, under the leadership of the Secretary of 
State, AID, USIA the regional bureaus in State, and my bureau 
which chairs these meetings. We look at particular cases of 
countries in crisis, those emerging from crisis.
    Recently we have addressed Albania, Bosnia, the Great Lakes 
region of Central Africa, Cambodia, Burma, and we are deeply 
concerned about Nigeria.
    A second instrument is an initiative growing out of the 
Denver Summit that the United States chaired. The Group of 
Eight countries all came together and for the very first time, 
under U.S. leadership, began to work with those countries on 
issues of human rights and democracy. They established a human 
rights working group, which I chaired, and which had meetings 
in Washington. The working group will have anunprecedented 
meeting next month in Bamako, Mali, where G-8 countries and African 
countries will work in partnership to develop democracy assistance 
programs in countries which are in transition, particularly Mali, 
Uganda, other countries that are in that category in Africa.
    A third very new mechanism that we have, Mr. Chairman, and 
one which the Congress has taken great interest in, is our work 
on religious freedom and the Advisory Committee on Religious 
Freedom Abroad, which I chair. The Advisory Committee has 
recently recommended to the Secretary of State the 
establishment of a high-level religious freedom coordinator in 
the State Department. We are very close to being able to 
announce the establishment of that position fully and the 
person who will occupy it.
    This gives us a window into the problems of religious 
persecution that are plaguing many parts of the world, and also 
means by which conflicts can be resolved with the help of 
religious organizations. There are 20 distinguished religious 
leaders from the United States on the Advisory Committee.
    Finally, we are beginning to do much more work in 
coordinating our assistance to develop the rule of law in 
countries around the world. This is really becoming more and 
more of a theme of our overall foreign policy. It is not only a 
concern of human rights and democracy building but it is a 
basic element in stability. The ability of economic development 
to occur and the rule of law has become, I think, in many ways 
a major rubric of all of our work.
    Through the work of the appropriations committee, we have 
two sets of funds which have made it possible to develop 
activities and programs in all of these areas. First, the Human 
Rights and Democracy Fund, which was established two years ago 
rather and funded last year for the first time. It basically is 
the programmatic complement to the Human Rights and Democracy 
Policy Group that I mentioned before; and it has begun to 
provide funds for countries in crisis and in transition. We 
have used it particularly in Bosnia and Rwanda, with 
international institutions like the International Commission on 
Missing Persons chaired by Senator Bob Dole which was created 
by the United States, and also the International Criminal 
Tribunal for the Former Yugoslavia and the same tribunal for 
Rwanda. These are major focal points of our work.
    We have recently extended funds to the criminal tribunal 
for Yugoslavia to conduct investigations in Kosovo, to make it 
very clear that the ongoing atrocities being conducted in 
Kosovo, particularly by the Serbian forces, are subject to 
investigation and prosecution under international law as war 
crimes and crimes against humanity.
    We have also a set of regional human rights and democracy 
funds that are established in each of the regions and they 
provide funding in small amounts for countries that are in more 
regular transition, including countries that are in virtually 
all of the continents of the world. There are many examples 
that I have provided in the testimony from various regions of 
the world, and I will not go into them unless you want to ask 
me questions about them in detail.
    Certainly the crisis in the Great Lakes region of Central 
Africa, along with the crisis in the Former Yugoslavia, are 
serious problems that we are trying to address through our 
assistance programs.
    When the President was in Rwanda he announced the creation 
of a Great Lakes Justice Initiative, and also additional 
assistance to the UN High Commissioner for Human Rights. The 
goal is to establish stronger human rights monitoring 
operations and Justice programs, to help Rwanda emerge from 
genocide and deal with the terrible crisis of prison 
overcrowding and the breakdown of the court systems.
    There are other more general examples of the kind of 
funding that we have done. We are working to try to help Asian 
NGOs establish a human rights network in Asia under the general 
auspices of the ASEAN Human Rights Network. This would be 
comparable to what other regions have. There is, of course, an 
OSCE in Eastern Europe, there is the OAS in Latin America, 
there is the OAU in Africa but there is no human rights 
regional network in Asia and we want to try and assist the 
development of that.
    Finally, there are three--I will just mention them as 
examples--three authoritarian countries where we are seeking to 
provide some forms of assistance to help those nongovernmental 
organizations and institutions of the rule of law to try to 
move those countries out of the authoritarian tyrannies in 
which they exist.
    In Cuba, we are providing assistance to U.S.-based NGOs to 
disseminate information to the Cuban people to support the 
development of civil society and assist human rights groups.
    In Burma, with the assistance of the Congressional earmark, 
we are engaged in democracy building assistance. We provide a 
grant to the National Endowment for Democracy to aid groups 
outside of Burma support Aung San Suu Kyi and her democratic 
movement and seek to bring about democratic peaceful change in 
Burma. We also provide humanitarian assistance through the 
International Rescue Committee.
    Finally, in China, where there is a significant set of 
obstacles to the development of anything remotely resembling a 
human rights protection system, there is, nonetheless, evidence 
that China is beginning to revise its legal system.
    At the October summit between President Jiang Zemin and 
President Clinton there was a decision by the Presidents to 
cooperate in the field of the rule of law. And we believe that 
it is possible to try to move China in that direction by 
providing some assistance to U.S. nongovernmental organizations 
and legal experts to engage in exchanges with China.
    This is not, by any means, a replacement for human rights 
diplomacy and human rights policy. But, it is something that 
draws broad support from many sectors of our society. We think 
would be well worth accomplishing, and we are in the process of 
consulting with Congress on this.
    Let me just stop at that, Mr. Chairman, even though there 
are many more topics that could be taken up. There are 
certainly many other aspects of our human rights work, 
including arms sales restrictions, visa restrictions, trade 
sanctions and other kinds of negative measures that are used. 
There is also diplomatic work on behalf of free trade unions, 
and the support of business principles by companies that are 
operating overseas consistent with human rights considerations. 
But I will not go into any of those in detail, other than to 
draw your attention to what I have said about them in the 
testimony, and to answer any questions.
    Thank you very much, Mr. Chairman. I do welcome the chance 
to have this kind of exchange with you. This is an area of our 
foreign policy where often the programmatic and appropriations 
side does not get as much attention and I am very pleased to 
see that you and Ms. Pelosi and Mr. Yates are giving it the 
attention that it deserves.
    Thank you.
    [The written statement of Mr. Shattuck follows:]


[Pages 428 - 451--The official Committee record contains additional material here.]



    Mr. Callahan. Well, we thank you, Mr. Secretary.
    And certainly in human rights violations we want to join 
every organization and do everything we can and appropriate as 
much money as we possibly can towards the elimination of human 
rights abuses worldwide.
    Certainly, we are concerned about the people in Kosovo and 
in Bosnia and in Cuba and in China, but these are rather 
generic in the problems of the world. Yes, who would not be 
concerned about human rights violations.
    But I think the thing that gives us the most heartache are 
the individual cases that happen to come before us. This 
afternoon Ms. Williams, wife of Jim Williams, who is in prison 
in Ecuador, is going to testify. I am sorry you will not be 
able to be here to hear her testimony. The same with a Mr. 
Valle, who is in prison in Honduras. You know, that situation 
is the thing that we need some immediate and direct attention 
given to.
    When Secretary Albright came before our committee, 
Congressman Kingston of Georgia mentioned this problem to her 
in great depth. When Congressman Kingston finished, I brought 
up the Valle case and we asked for some immediate response from 
the Secretary about both of these cases and have not yet heard 
from them.
    So, I do not know what we do about this but I know that the 
State Department has been involved. But this is a human rights 
violation at its maximum. The fact that American people are 
having their human rights violated by the governments of these 
countries, who are supposed to be in a sense allied with us and 
who come to us for assistance, have got to recognize that we 
are not going to tolerate that. And that we are going to use 
our every effort to make certain that they understand how 
serious we are especially about cases such as the Williams case 
and the Valle case.
    So, if you can respond. I know that Mr. Kingston is not 
here now, but if you could give us some response to the Valle 
case and to the Williams case we would appreciate it at this 
time.
    Mr. Shattuck. Mr. Chairman, I am very familiar with both of 
those cases. And, incidentally, I will be represented here when 
Ms. Williams testifies this afternoon. So, we look forward to 
an exchange with her, and we will make sure that we follow-up 
directly with her.
    In the middle of March, I think it was March 12th, we were 
in touch with Mr. Kingston. We sent him a letter outlining the 
various actions that the U.S. Government has taken to try to 
address the problem, the basic denials of due process in Mr. 
Williams' case.
    The Ambassador and many other officials within the Embassy 
have repeatedly raised this case with the government of 
Ecuador. And we have urged expeditious processing of his case. 
He is, of course, charged under Ecuadoran law, so we cannot get 
his immediate release. But, we have urged this case be tried 
expeditiously, and that he get a full opportunity under 
international standards to provide evidence of his defense and 
all the elements that he might want to present.
    We are going to be looking at his trial and attending the 
trial. You know, U.S. law enforcement authorities are very much 
in touch with the government of Ecuador on this case. So, I 
think that as far as our engagement on behalf of Mr. Williams 
as an American citizen--who you rightly say is caught up in a 
justice system which has serious due process problems--we are 
very, very active.
    We are very active in that same fashion in the Valle case 
in Honduras. I think both of these cases illustrate the crisis 
of the rule of law in countries that are developing from a 
very, very troubled and authoritarian past. They need to be 
changed. And these changes in their legal system need to be 
encouraged. But certainly in both cases the advocacy on behalf 
of these two American citizens through our Embassy and through 
the monitoring of the legal process in their cases is 
continuing. And I can give you every assurance that we will do 
all that we possibly can to get the kind of fair trial that 
they both deserve.
    Mr. Callahan. Thank you. I appreciate that. But that is 
still not sufficient. You know, the very fact that an American 
citizen is being held in a foreign prison for five years 
without a trial, without being given the opportunity to be 
heard is unacceptable.
    I do not care what the justice system is in Ecuador, I do 
not care what the justice system is in Honduras, this committee 
is requested each year to provide the State Department with 
money to handle foreign affairs.
    We do not want to dictate to the State Department how to 
spend that money but we are going to be forced in these two 
cases to put an absolute hold on any assistance, whether it be 
humanitarian assistance or anything else if, indeed, American 
citizens are being treated in this manner.
    If they are guilty of a crime, then they are entitled to an 
expeditious hearing and they cannot be imprisoned. We cannot 
sit here as Americans, when they are dependent upon us for 
trade and other activities, and be told they have a justice 
system that will not provide for an expeditious hearing. We 
cannot accept that. Already some holds have been put on monies 
going to Ecuador and Honduras. More and more of that effort is 
going to take place even though that creates some type of human 
rights abuse in a sense because we are not providing medicine, 
we are not providing food. But we must send them a message. 
Either the gentleman is entitled to due process or he is not.
    And we are not going to tolerate the lack of due process. 
We do not want to run the judicial system in any country, 
Honduras or Ecuador or any other country, but we just cannot 
continue to say, well, we have a problem. We cannot tell the 
families of these victims that there is a different situation, 
a different judicial system in Ecuador or a different judicial 
system in Honduras and we must respect that. We cannot respect 
that and we are not going to respect that.
    And I am going to charge you and Madeleine Albright, as 
well, we have requested politely a response from her. We have 
not gotten that. She is going to be calling me because she 
wants my help on the IMF and all these other problems. She is 
going to be calling upon me in the next few weeks to make 
certain that she has adequate money to run the State Department 
for the next Fiscal Year. But I am not going to receive her 
calls unless I get some response on these two cases.
    And I am very serious about this, Mr. Secretary. And I know 
that you would do everything in your power if you could wave a 
wand and get these two people out of prison. We are not 
prejudging guilt or innocence. We are simply saying that we, as 
a country, cannot and will not tolerate these human rights 
abuses to our own citizens. Now, we have to have some more 
concrete answers.
    We expect you to do that in your position and we expect 
Madeleine Albright to back you 100 percent to see if we cannot 
get some immediate response to these two particular cases.
    Mr. Shattuck. Well, Mr. Chairman, I will go back and do 
even more than we did in the response to Mr. Kingston. I 
appreciate the urgency that you see, and that we all see, in 
having American citizens be treated under international 
standards with fairness in any court anywhere in the world.
    And we will take this up again in our embassies. We 
certainly will make it clear that this is a matter that has to 
be resolved very, very expeditiously because of--not because of 
anything beyond the international standards that should apply 
in this case. So, I appreciate that and we will get you a 
further response.
    Mr. Callahan. Keep in mind, Mr. Secretary, that these men 
have been in prison longer than Harry Wu was in China and all 
of the efforts and all of the attention we gave to that 
particular case and all the members of Congress who went over 
to China to try to get him out of prison because they felt his 
human rights were being violated. He is not even an American 
citizen. I guess he is now. That is part of the reason he was 
imprisoned.
    But all of the attention that was given to that one manand 
no attention on a national level has been given to these two gentlemen 
and we think this is more important than the Harry Wu situation. Even 
though I went to China and talked to the Chinese officials about his 
case. I did not go specifically for that, but while Chairman Livingston 
and I were in China we did discuss this with the political leadership 
of China.
    But we have got to focus a spotlight on these two cases. If 
they are guilty, if they are tried in a fair and impartial 
manner, that is one thing, but to sit there five years in 
inhumane conditions is just absolutely unforgivable.
    Mr. Yates.
    Mr. Yates. Thank you, Mr. Chairman.
    I would like to follow-up on the Chairman's emphasis on 
getting something done for Americans who are in trouble in 
foreign countries. And let me ask again about the Williams case 
by asking you what do you do in those cases? I would have 
thought that you would have had somebody camping on that almost 
night and day in order to make sure that Mr. Williams gets out 
of the spot that he is in or else has a trial or else is moved. 
What is being done to help Mr. Williams?
    Mr. Shattuck. Mr. Yates, in cases such as this--and this is 
not the only example that comes before us, sadly--it is 
immediately an issue for our embassy. The embassies receive 
instructions from Washington to go in at the highest levels of 
the government in question--in this case the Ecuadoran 
government--and make very clear that the United States does not 
accept the delays in the justice system that are being imposed 
on an American citizen.
    We obviously can go further, if Congress wanted to do that, 
and threaten particular kinds of actions vis-a-vis the 
government in question.
    Mr. Yates. Five years. And is this going on for another 
five years? From what your testimony indicates and the facts as 
I have been able to get them is that no progress is being made.
    Mr. Shattuck. Well, that is not actually true. The trial is 
in process. The first phase of the trial lasted 13 months, due, 
in part, to extensions that were sought by both sides for 
additional evidentiary presentation and arguments. So, the 
trial went on for a long period of time. The trial is in 
process. And on October 13th of last fall, 1997, the trial 
judge, based on the findings that he had received to that date, 
recommended a finding of guilty for Mr. Williams and several of 
his defendants.
    Mr. Yates. What is the offense, the charge?
    Mr. Shattuck. The case is now on appeal.
    The offense is a narcotics related offense. I wish could 
give you the precise citation but it is a narcotics related 
offense.
    Mr. Yates. Would you put in into the record, please?
    Mr. Shattuck. Yes, I will.
    [The information follows:]

                           Jim Williams Case

    Mr. Williams 17 Ecuadoran co-defendants were charged with illicit 
association involving laundry of drug money. He was arrested in Ecuador 
on September 18, 1996. Mr. Williams had been under investigation in the 
U.S. but had not been indicted.
    Ecuadoran authorities did not notify the U.S. Consulate General in 
Guayaquil of Mr. Williams' arrest for four days. Our Embassy in Quito 
lodged a protest with Ministry of Foreign Affairs over the lack of 
prompt notification.
    Officials from our Consulate in Guayaquil visit Mr. Williams 
regularly. Judicial proceedings are still ongoing in his case. His 
trial lasted 13 months, due in part to several extensions as the judge 
asked for additional evidentiary presentations as well as arguments by 
both the prosecution and defense counsel. During that period Embassy 
and Consulate officials met with Ecuadoran officials at all levels to 
urge the fair and expeditious processing of Mr. Williams' case.
    On October 13, 1997 the trial judge recommended a finding of guilty 
for Mr. Williams and several co-defendants. The case then proceeded to 
appellate review by a three-judge superior court. On May 6, 1998 the 
Guayaquil superior court confirmed the lower court's finding against 
Mr. Williams and eight co-defendants. Mr. Williams' case will now enter 
the plenary phase, in which a penal tribunal composed of three judges 
will review the case and then grant a public audience to each of the 
defendants before handing down a verdict and sentences. This process 
usually takes four to five months. If Mr. Williams is convicted, he 
would be able to appeal to Supreme Court in Quito.
    Our Embassy in Quito continues to monitor the case closely, and 
will contact the tribunal to find out when Mr. Williams will have his 
public audience with the highest court panel. An Embassy officer will 
attend that hearing, and will encourage a prompt final decision in Mr. 
Williams' case.

    Mr. Shattuck. And the case is now on appeal. It is in an 
appellate review by a three judge superior court. The court has 
not yet ruled on the case. And if this court concurs with the 
lower court's recommendation there will be a sentencing. If the 
court overturns the lower court's recommendation it will go 
back to the lower court with instructions that Mr. Williams be 
released.
    So, in that sense it is comparable to our own proceedings. 
But, it is--I would agree with you--it is going on much too 
long. And we have called upon the government to expedite the 
appeal.
    Mr. Yates. We, being who? Who is it?
    Mr. Shattuck. The Ambassador. The U.S. Ambassador in 
Ecuador.
    Mr. Yates. Mr. Shattuck, what is the role of your office in 
an activity of this kind?
    Mr. Shattuck. Primarily to bring it to the strong attention 
of the embassy and have the embassy take the case up. That is 
what we do in cases of this kind. That is why we have the 
Ambassadors in the countries.
    Mr. Yates. Well, I can understand that. Do you have 
representatives or are the ambassadors charged with carrying 
out whatever instructions you may bring to their attention?
    Mr. Shattuck. In every embassy under the instructions of 
the Secretary of State, we have a human rights officer who is 
primarily responsible for working with the Ambassador to act in 
cases such as this, and also on the many other activities that 
go on in the human rights area.
    Mr. Yates. Is that human rights officer affiliated with 
your office and under your direction?
    Mr. Shattuck. That human rights officer is a Foreign 
Service Officer assigned to the embassy, and is the officer who 
will work very closely with our office in preparing the annual 
country human rights reports, in receiving the instructions we 
send to embassies to take up these kinds of cases, and other 
actions of that kind. They do not report specifically to me. 
They report to the Ambassador.
    Mr. Yates. Well, then, how do you know about what is going 
on? If he reports directly to the ambassador, how is your 
office aware of what is going on?
    Mr. Shattuck. Well, when I say, report, I mean the formal 
employment relationship, if you will. The supervisory 
relationship is to the Ambassador. But the reports that are 
sent to Washington, the daily cables that are sent by our 
embassies give us the information. We can also conduct 
telephone conversations. But, most often, information about 
precisely what is occurring, the kind of information that I 
have just given you here, would come from reporting that is 
sent through cables to Washington on a daily basis.
    Mr. Yates. Well, how would a person have a complaint about 
the treatment accorded to some people in a foreign country, how 
would that person best handle that complaint, by going to your 
office or going straight to the State Department or to the 
ambassador's office?
    Mr. Shattuck. There are three places which have action 
responsibility here. The primary place, of course, is in the 
embassy, itself. But then in Washington, there is my office and 
there is the regional Assistant Secretary. The Assistant 
Secretary for Latin American Affairs, who has overall 
responsibility for all the embassies in the Latin American 
region, and the consular affairs officers, would be engaged 
most intensively on behalf of American citizens. So, it is not 
just the human rights officers, it is also those whose sole 
function in an embassy is to work either on behalf of American 
citizens or process people who want to come to the United 
States.
    Mr. Yates. Do you have to go through official channels to 
the ambassador or can you go directly, officially, to the 
ambassador, as the human rights officer?
    Mr. Shattuck. No. I can certainly go directly to the 
ambassador, yes.
    Mr. Yates. Do you?
    Mr. Shattuck. Sure.
    Mr. Yates. What have you done in the Williams case?
    Mr. Shattuck. Well, the Williams case we have instructed 
our embassy to continue to press the Ecuadoran government for 
progress in the case. And I frankly, think that the trial 
proceedings that have been underway for the last year have 
resulted in----
    Mr. Yates. When you say, instructed, are they required to 
follow your instructions or would a more proper word be we 
suggest to the embassy?
    Mr. Shattuck. Well, Washington can send what is called 
instructions to embassies.
    Mr. Yates. I mean, you, your office.
    Mr. Shattuck. Well, obviously, I would do this together 
with my colleague in the Latin American Bureau, and when we 
agree on that, we would send an instruction.
    Mr. Yates. That, the instructions then go from the official 
State Department?
    Mr. Shattuck. Correct.
    Mr. Yates. Okay. Do you know of the case of Laurie Berenson 
in Peru?
    Mr. Shattuck. Oh, the Berenson case. Yes, yes, I do. Yes, 
sir.
    Mr. Yates. What is being done in that case, please?
    Mr. Shattuck. Very similar to what we are talking about 
here. That case has been a top priority for our embassy in 
Peru, and for both our Latin American Bureau and our Human 
Rights Bureau in Washington. We have sought the release of 
Laurie Berenson under the new amnesty provisions of Peruvian 
law. She, at this point, is considering, but I think has so far 
declined to participate in the amnesty approach because she 
would prefer to contest her basic innocence from her point of 
view.
    But we are seeking her release and we have visited her, I 
think, about every six weeks to two months recently, in the 
prison in which she is being held.
    Mr. Yates. We visit her, who visits her?
    Mr. Shattuck. The State Department consular officer in the 
embassy in Lima.
    Mr. Yates. Okay. You indicated in your general statement 
that you are trying to protect the human rights of those in 
Cuba. How are you able to do that or how do you try to do that?
    You said through NGOs.
    Mr. Shattuck. Well, yes.
    Mr. Yates. What is it that you can do?
    Mr. Shattuck. In this case supporting those who are looking 
at the human rights situation in Cuba. We support 
nongovernmental organizations, some of them based in this 
country, but we are also providing assistance to 
nongovernmental organizations, where possible, in Cuba.
    Mr. Yates. What activities are they engaged in?
    Mr. Shattuck. And then, of course, the other work that is 
being done there is through our interest section which is the 
lower level, non-embassy level section that we have, to gather 
information about cases of people who have been in prison for 
political or religious reasons, of which there are many. We 
also work with other governments to put pressure on Cuba for 
their release.
    We also worked very closely with the Vatican in, of course, 
the latest trip of the Pope.
    Mr. Yates. Thank you, Mr. Chairman.
    Thank you, Mr. Shattuck.
    Mr. Callahan. Mr. Wolf?
    Mr. Wolf. Thank you, Mr. Chairman.
    Before I ask you a couple of questions--and I have to 
testify at 11:05, so, if I leave that is the reason I am 
leaving and I will try to come back. I do share the feelings of 
the other members. Sometimes our embassies do get clientitis, 
where they have an obligation it seems to represent the country 
that they are in more than our own people. And I do think they 
should be representing our interests and not the interests of 
the countries they are in.
    Secondly, I would hope now that there have been some 
fundamental changes, additional changes made in the bill that 
we have with regard to freedom from religious persecution, that 
the administration will support it. It was reported out of the 
House International Relations Committee last week by a vote of 
31 to 5.I called Erskine Bowles, the night before, and 
expressed concern that the administration was opposed to it. Quite 
frankly, and I am not going to share his conversation, but he did not 
seem to be that opposed to it. So, you might want to chat with him on 
it.
    What are your feelings about this now that we have reported 
it out and have made these changes?
    Mr. Shattuck. Well, first of all, Mr. Wolf, let me commend 
you, as I have done in private, but also I will do now in 
public, for your tremendous leadership in this field of 
religious freedom. Your work, and the work of other members of 
Congress, has done a tremendous amount to put this issue right 
front and center into the framework of our human rights policy, 
as I reported before you came in.
    When I was making my opening comments, I cited the issues 
of religious freedom, and the new establishment of a high-level 
coordinating office in the State Department. This as an example 
of how this issue needs to be addressed much more, including 
where necessary and appropriate, through sanctions of the kind 
that are under consideration in the Congress.
    I will say that there have been changes in the bill. We are 
looking very closely at them. The central feature of the bill, 
which is the continued automatic sanctions upon a finding of 
religious persecution as defined by the bill, is a serious 
problem. The automatic sanction imposition, under circumstances 
where there may be other much more effective ways to address 
the problem of persecution, is something that the 
administration cannot support. There are many elements of the 
bill that we can.
    And, as I have told you in private as well as in public, we 
want to continue to work with you and other Members on this 
issue. I have no doubt that there can be some form of 
appropriate legislation on this. But the automatic imposition 
of sanctions, based upon a finding of persecution as defined in 
the bill, in some instances would do more harm than good.
    And, in fact, I think there are those who the bill would 
seek to protect who would say the same thing.
    Mr. Wolf. But you have total and complete waiver authority 
under the bill. Absolutely, total complete. We have given the 
President total waiver authority.
    It sounds like you have come around a good bit. I would 
hope that you would come the additional way because this bill 
will institionalize the process long after you have left, long 
after Mr. Clinton has left, long after I have left and whether 
it be a Republican or a Democratic administration there will be 
a formal process.
    And I would ask you, respectfully, to come up and embrace 
this bill and support this bill. I spoke to Mr. Bowles and my 
sense is that he did. Now, I cannot say that he did because it 
was a telephone conversation but we have really reached out and 
made significant changes by not trying to tie your hands and 
have given you total and complete waiver authority which would 
be helpful in all of the cases that have been mentioned and all 
of the issues that are going to be addressed by different 
people here, would help us with regard to that.
    Mr. Shattuck. If I could, Mr. Wolf, respond to the waiver 
point because I think in many ways that goes to the heart of 
our continuing concern about the bill. The waiver authority, we 
believe, would send a very bad signal, particularly in those 
instances where it is exercised. In one case it is exercised 
and in another case it is not.
    The distinctions are going to be lost on both foreign 
governments and the victims of persecution if in the case of 
country X for various reasons the President waives the 
sanctions, and in country Y they get imposed. You know, that 
sends a signal that the most drastic kind of remedy can be 
imposed in one country and not in another.
    You know, in addition, I think it puts the President in the 
position of constantly second-guessing, on a finding of fact, 
the question of whether sanctions should be imposed.
    Let me be very clear, we are not imposed to sanctions in 
cases where they can now be imposed under current law. And, as 
you well know, there are a number of instances around the world 
in which sanctions have been imposed for human rights reasons, 
and there are a lot of factors that went into those sanction 
decisions. We could make even clearer in the legislation that 
religious persecution should be one of those factors. But the 
automatic imposition and the waiver approach we do not think is 
the right way to go. But we do want to work with you, I want to 
make that very clear.
    Mr. Wolf. Okay. East Timor, American military are training 
Indonesian military. I plan on offering an amendment to strike, 
to prohibit that. The violence continues on the island. With us 
bailing Indonesia out, here is an opportunity to really work 
with the Indonesian military in a positive way. I mean if they 
were to draw down the military on the island to 10,000 or 5,000 
the message that that would send with regard to the IMF and so 
many others would be so positive.
    Why can't you use this opportunity that is taking place 
with regard to the bailout to encourage the Indonesian 
government to be more sympathetic to stopping what is taking 
place on East Timor and draw down the garrison?
    Mr. Shattuck. Well, the East Timor issue is one that you 
and I have both worked a great deal on. I cannot remember which 
of us was there most recently, but I was there about 10 months 
ago and had a chance to talk with East Timorese leaders, 
including Bishop Bellow. I also had discussions with the 
Indonesian military. I made very clear the point you just made, 
which is the United States believes that a reduction in troops 
would be a significant sign that a process of getting this 
thing from such a repressive situation to a more----
    Mr. Wolf. But they have not been--I want to cover one other 
subject before my time runs out--but they have not been drawn 
down. You have sent former Vice President Mondale out there to 
speak to them. We are bailing them out with American taxpayer 
money; 200,000 people out of 750,000 have been killed in the 
last 20 years. Bishop Belo got the Nobel Peace Prize. It is on 
everyone's mind.
    If you can never get them to draw the garrison down now 
they will never draw the garrison down. And I think it is 
important for this administration to make that case. Quite 
frankly, it would help the administration in passing IMF. It 
would help the Indonesian government and it would help, 
obviously, the people on the island who are--there is reign of 
terror and it has not ceased since you have gone on.
    The other issue that I would like to briefly discuss and if 
you could comment on both at once. One is the missionaries in 
Colombia that have been kidnapped, that have been missing for 
five years. And, quite frankly, I do not think that this 
administration has done a very good job of articulating 
publicly to show the interests that it has let alone in the 
case of Ecuador. I mean it has done almost nothing publicly. 
There may be a lot of activity privately but I think by 
speaking out publicly--and after you cover that, if you would 
tell us what you plan with regard to Algeria with 80-to-100,000 
people who have been slaughtered. So, if you would cover these 
two issues for me.
    Mr. Shattuck. Well, you have touched on two of the toughest 
accounts in the world, Colombia and Algeria. But let me speak 
very briefly to both of them because I know you have to leave.
    In the case of Colombia, and specifically in the case of 
the American missionaries who have been missing now for up to 
five years, I have personally met three times with the families 
of those missionaries. This is a case, again, where a great 
deal of intensive work has been done through our embassy. This 
is probably even harder, much harder than the Williams and the 
Valle cases because these people, sadly, are in the hands of 
the guerrillas somewhere out in the jungle. And, of course, the 
government is not the best source to get to those guerrillas.
    We are also working behind the scenes to try to find other 
governments that have contact with those guerrillas, and we 
have. And we have raised the cases through third partiesthat 
way. We have, as a result of this work, over the last two years in 
particular, had information more recent than was the case of sightings 
of at least one of the individuals who is missing. That information is 
now about 12 to 14 months old, but it was information that we got as a 
result of that kind of third-party pressure.
    I do not have an easy answer to this. I wish I did, Mr. 
Wolf. I mean I do not know how one can reclaim American 
citizens who have been captured by guerrillas. But we have got 
to keep the focus up on this. I do not think it necessarily 
helps to put the public spotlight on that because then you do 
not get the third countries going in and doing what I am 
talking about.
    In the cases of Algeria----
    Mr. Wolf. Do you plan on going there?
    Mr. Shattuck. To Algeria?
    Mr. Wolf. Yes.
    Mr. Shattuck. I may. But I----
    Mr. Wolf. Would it not be healthy if you did?
    Mr. Shattuck. Well, I tell you what I would prefer--and I 
would like to get your view on this--I would prefer to the UN 
mechanisms in there and that is what we are pressing to do.
    The UN investigation----
    Mr. Wolf. I do not think that would--you know, the UN 
turnover in Srebenica, turned over hundreds of people who were 
slaughtered. We now know they were slaughtered. The confidence 
level in the UN is not very, very high.
    I would urge you to go to Algeria. If you go to Algeria, I 
will go with you, but I would urge you to go because then you 
go as a representative of the President of the United States. 
So, I think we should have less conversation with the UN on 
this and more conversation within the Clinton Administration.
    Mr. Shattuck. I appreciate that. And, frankly, I think I am 
very likely to. Right now we are focusing on it in the UN Human 
Rights Commission, trying to get the UN Special Rapporteurs in 
there, as well as putting a spotlight on it through the 
Commission.
    But, you know, we had an American visit there just two 
weeks ago, very unsatisfactory one I might add, in terms of the 
transparency question. This, too, is as complicated an issue as 
Colombia because you have got massive violence being conducted 
outside of the government context. You have got various 
terrorists groups that are going after each other. You have 
certainly got a government that is not doing enough to stop 
that. You have got a lack of focus in terms of transparency. 
You have the inability of international human rights 
organizations, some of whom are represented in this room, to 
get into Algeria. We have been trying to assist to get them in 
as well.
    The issue is getting in, getting the facts and then trying 
to draw attention to who is really responsible here. There is 
no question about it. The violence, particularly the violence 
against women is horrendous. The numbers are staggering, as you 
say. But let us discuss that further.
    Mr. Yates. Would the gentleman yield?
    Mr. Wolf. I will yield, yes.
    Mr. Yates. What is the role of France in all of this?
    Mr. Shattuck. Well, France, of course, has historically had 
a very close association with Algeria. And that does not make 
it a particularly effective source of support to try to put 
pressure on Algeria. The French/Algerian relationship is not a 
good one. And the French government, I think, is concerned 
themselves about possible terrorism in France.
    Mr. Wolf. I have no further questions.
    Thank you, Mr. Chairman.
    Mr. Callahan. Ms. Pelosi?
    Ms. Pelosi. Thank you very much, Mr. Chairman.
    Mr. Secretary, welcome. I thank the Secretary for the work 
that he has done and the reputation that he brings to the 
position that he holds. He knows that I have a high regard for 
him and a low regard for the Administration's policy on human 
rights, particularly, in China. I say a low regard for human 
rights in general because just quoting you as to whether if you 
are going to exercise it one place, you have to exercise it in 
another place. The selective application of standards for human 
rights is, I think, what part of the problem is here.
    I say with great regret and great sadness that I think it 
would be hard to think of any other entity or any other 
administration or person or committee you could name that has 
done more to set back human rights in China than the Clinton 
Administration. I say that because the Administration is never 
where you left them. They come in and say we are going to link 
trade and human rights. Whether you agree with the policy or 
not, it is what they said. Then they turned their back on their 
own policy.
    In doing so, they said we are going to press for a 
resolution at the UN, it is appropriate to do this in a 
multilateral forum, one that is dedicated to promoting human 
rights. And then they renege on that, turn their back on that.
    That particular reneging was a slap in the face to those 
who sacrificed their lives and risked their personal security 
in China and those who worked throughout the world promoting 
human rights in China. It was a grave disappointment. I think 
it undermines the work of the UN Human Rights Commission and I 
do not know why we would even fund such an organization because 
it is just a tool of whoever can buy the votes. I say that and 
I can document that.
    I also think that the President's contention that economic 
reform will lead to political reform has been proven false. 
Indeed, the economic growth that China enjoys is mostly on the 
backs of exports to the U.S. Nearly 40 percent of China's 
exports come into the United States. This past year, 1997, the 
US deficit with China was $50 billion. When we first started 
this debate, Mr. Chairman, it was $3 billion at the time of 
Tiananmen Square. Now it is $50 billion.
    And that money, because of a lack of market access for most 
products made in America, I might add, those unfair trade 
practices give the regime the money that they then spend in 
Europe to buy from our competitors. They buy not only Airbuses, 
but they also buy silence at the UN Commission. Offers of trade 
and aid to other members of the Commission make it a non-
starter in terms of trying to do anything at the UN Commission.
    But the United States turning its back on its leadership 
role to promote human rights in a human rights forum is very 
hard to explain to anyone.
    I understand there is a report in today's South China 
Morning Post that Secretary Albright may be going to China 
later this month to prepare for the President's upcoming visit. 
Is this report true? What human rights issues do you think she 
will raise with her Chinese counterpart? What action does the 
Administration expect China's government to take on human 
rights in order to smooth the way for the President's visit? I 
have a couple of other questions related to that but if you 
could just start with that, Mr. Secretary?
    Mr. Shattuck. I think the Secretary is very actively 
considering a trip to Asia in the very near future, probably in 
the next several weeks. I do not believe that has been 
announced, so I will not announce it here. And of course her 
travel is almost always dependent upon major events going on in 
various parts of the world.
    I really appreciate, as I have said to you on many 
occasions, that your own leadership here is towering on the 
subject of China. I know that you disagree with the 
administration on these issues and I respect that disagreement.
    I believe that what we are doing, and what the Secretary's 
possible trip to China illustrates, is using as points of 
leverage, major events in our relations with China, under the 
overall approach which the President has set of engaging with 
China. We engage in many different dimensions, but very 
intensively on the issue of human rights.
    Specifically, the three events that I am referring to are 
the summit in the fall, the Human Rights Commission, and the 
summit that is upcoming, and all the discussions with the 
Chinese around that.
    The human rights abuses in China are major, and the changes 
that have occurred are nonsystemic. That is a very basic point 
that I will put out there, to begin with.
    But we have used the leverage of these events, I think 
effectively, much more effectively, frankly, than some of the 
leverage that we tried to use earlier, which did not succeed.
    Certainly, the process of getting China's attention to the 
signature and ratification of a major international covenant on 
civil and political rights is one aspect of that. It is not an 
overwhelming aspect, but it is a very important aspect of it.
    The Secretary goes to China, and certainly, when the 
President goes to China, there will be some more systemic 
issues that will be pursued. For example, the release of 
prisoners who have been imprisoned under the counter-
revolutionary crimes that have been changed under Chinese law. 
We will, and are continuing to press China to review all of the 
sentences of persons who have been sentenced under the counter-
revolutionary crimes approach.
    That would involve a systemic change and the release of a 
large number of prisoners, not just individuals on medical 
parole. These are the pressures that we have brought to bear 
recently. Also the issue of Tibet.
    I believe that Tibet has shown no progress. In fact, 
significant additional problems have been documented in our 
human rights report this year. The Secretary has taken a very 
strong stand on this by appointing one of her highest 
officials, the policy planning director, Greg Craig, to be the 
Secretary's special coordinator on Tibetan issues.
    Ms. Pelosi. Will he be going with the President to China?
    Mr. Shattuck. I do not know the answer to that. I would 
certainly hope so.
    Ms. Pelosi. Well, that would speak more loudly than 
anything--
    Mr. Shattuck. Right. I appreciate that.
    The issue of religious freedom and the release of jailed 
persons, particularly Catholic and Protestant figures, but also 
Buddhist figures, particularly in Tibet, is going to be on the 
agenda of the Secretary's trip.
    We expect additional releases to occur in the period 
leading up to the President's trip. In any event, this is the 
method we are using. I believe that by my bureau holding out as 
long as it did to pursue the human rights resolution in the 
Human Rights Commission, we were able to deploy the leverage of 
the Human Rights Commission much more effectively than we would 
have if we had dropped it earlier some people within our 
administration wanted. We pressed it all the way up, making 
clear throughout that our position was going to depend on the 
situation at the time the commission met, and consultations on 
the commission beforehand. Again, I can appreciate that you 
certainly would have liked us to go through with it, no matter 
what. But we wanted to use this process to get some 
developments in China.
    Ms. Pelosi. Frankly, Mr. Chairman, I know that in the 
interest of time we will not have more opportunity to pursue 
many other avenues with Mr. Shattuck, but I would just say that 
the Chinese have refused to meet with the Special Coordinator 
on Tibet, that you got nothing but a signature on the covenant, 
and that is not the ratification or implementation of the 
covenant, and indeed, there are at least a half a dozen or more 
countries, which have signed the covenant, and we have dropped 
pressing the resolution at the U.N. Commission. It is 
disingenuous for us to say we did not want to press for this 
because we got a signature on a covenant.
    Indeed, we have said all along the guarantees contained in 
the Chinese constitution are what we want the Chinese 
Government to give their people. Even that would go a long way, 
but that is not happening either.
    It is a conversation that goes on and on, Mr. Chairman, but 
I want to associate myself with your concerns that you 
expressed at the beginning of your remarks about the treatment 
of Americans in other countries. You can just imagine how they 
treat their own people, if they treat a person with the full 
force of America behind them in that way. I know we will hear 
from Mrs. Williams later on this. I also want to associate 
myself with some of the remarks made by Mr. Wolf about 
Indonesia. It is just appalling that this committee has voted, 
over and over again, about not allowing IMET for Indonesia and 
the Administration persists in doing training in urban warfare 
techniques to troops in the Jakarta Regional Command, when this 
committee has acted specifically, because of what is happening 
in East Timor against the people there. IMET is our way of 
speaking to the Indonesians about it.
    But they can just go around restrictions, as everybody else 
can just go around them.
    I associate myself also with Mr. Wolf's concerns about 
religious persecution. I mean, we have come down to a discrete, 
finite issue, and to argue that a way for which we give the 
President discretion to use his judgment on when it would be 
useful to exercise it or not, seems hypocritical in light of 
the fact that we are selective in how we promote human rights, 
one place or another, depending on how much money is coming in 
and who is on the receiving end of that money.
    But Mr. Secretary, I do want to commend you for the Clinton 
administration policy in Bosnia. I think the latitude that you 
have been given there, the work, the commitment that you have 
made there, has really paid off. I know there are larger 
geopolitical issues at stake or we would not care about the 
Bosnians either.
    I am talking about the Administration bolstering NATO after 
its failure to deal with Bosnia at its own doorstep, and we had 
to do that and contain the conflagration that was possible 
there.
    But, as I said at the beginning of my remarks, I have a 
high regard for you, and for what you have done, and I think 
that the Bosnia situation is one that you can be proud of.
    Thank you, Mr. Secretary.
    Mr. Callahan. Thank you very much.
    Mr. Packard.
    Mr. Packard. Thank you, Mr. Chairman, and I will be brief 
because I know that time is short. I have two questions. I will 
only ask one and ask you to respond to the second, perhaps in 
writing to the committee.
    The one that I would like you to respond to because it may 
be of more length than what we would like to discuss, I would 
like to know exactly what the policy of the administration is 
in reference to the linkage between economic foreign policy and 
our foreign policy on human rights, how those interplay.
    Obviously, when we discuss IMF and a variety of other 
funding and programs and agencies, I want to know how much this 
administration takes into account human rights issues and 
violations as they develop their economic recommendations and 
policies to the Congress. And if you would respond to that, in 
writing, I would appreciate it.
    [The information follows:]


[Pages 466 - 470--The official Committee record contains additional material here.]



    Mr. Packard. This question should require just a simple 
answer.
    Since the hand-over of Hong Kong, which took place last 
July 1, has there been any indication of a transfer of human 
rights violations into Hong Kong from the Chinese mainland?
    Mr. Shattuck. I visited Hong Kong in December. I would say, 
very cautiously, so far, so good. There are certainly things to 
watch for, particularly some of the new legislation that may be 
coming down the pipe to implement some of the treason laws, and 
other issues that could cause serious problems for human 
rights. But by and large, Hong Kong has continued to permit 
basic demonstrations, basic freedom of speech. I think some of 
the press may be engaging in self-censorship but we have not 
had any examples of individuals who have been muzzled in Hong 
Kong.
    I should say that my friend, Hong Dong Fong, continues to 
be able to operate out of Hong Kong and into China effectively. 
He is a very active person in the field of human rights, as you 
may know.
    I think we are watching very closely to make sure that this 
turnover actually continues to provide the basic guarantees of 
the law and the constitution of Hong Kong that existed before 
the turnover.
    Ms. Pelosi. Mr. Packard, would you yield on that point.
    I wanted to call to your attention, because the Secretary 
had spent some time talking about the development of the rule 
of law in China, the report that was in the paper yesterday. It 
says, ``Hong Kong Ruling Stir Fears Over Law System'' and the 
point in the article is that a series of Government rulings in 
recent weeks have stirred fears that the rule of law is being 
eroded as Hong Kong is being absorbed into China, and it goes 
into the particulars.
    I thought you might be interested in that, because there is 
grave concern over that, and for those of us who watch Hong 
Kong, this would have a terrible impact also on the economy of 
Hong Kong, and its success.
    Mr. Packard. Thank you.
    I was there at the hand-over, and the one country, two 
policies concept, in my judgment simply cannot work, not on a 
long-term basis. It cannot work, it will fail, and I would be 
interested in knowing, as time progresses, how that failure is 
unfolding.
    Either Hong Kong is going to have to submit to China's 
policies, or other provinces in China are going to rise up and 
say we want what Hong Kong has, in terms of freedoms and basic 
human rights.
    One or the other has got to happen. They are not going to 
allow two systems. It is a house divided against itself. It 
cannot succeed. It sounds good in theory, but it just cannot 
succeed, and I think that the thing that we would be most 
concerned is if Hong Kong deteriorated into a typical province 
of China, rather than the other way around.
    Mr. Shattuck. Well, Mr. Packard, I know time is short. If I 
could just make a couple of quick points on that because it 
does go to the longer term issues in China. Whatever 
differences we may have over how to go about the situation, I 
think that the prospect that provinces in China are going to 
want what Hong Kong has, as you put it, are greater than the 
other way around.
    An article appearing in yesterday's Wall Street Journal 
points out that economic reform is seen as the wedge to open 
politics by a number of Chinese dissidents who are now more 
active in China than they have been previously. By no means 
active in the sense that we look at it in the West, or outside 
of China. There is a lot of restriction, to be sure. But the 
forces of legal reform, the forces of economic reform, and the 
forces of political reform, are going to begin to converge. 
Now, I do not want to make any rosy predictions. I am not doing 
that. I am just saying that there are some very powerful forces 
at work. Let me talk about some of this in response to the 
question you have put to me about human rights and economic 
policy.
    We do not believe that economic forces bring about 
political change, by definition, or automatically. There is a 
lot more that needs to be done. But they can in fact cause some 
conditions which can help produce political change. I think in 
the example of Hong Kong to the rest of Southern China is a 
very strong one. Its economic power is well-known, and 
certainly the legal reforms which we want to stimulate further 
in China could bring about these kinds of changes. That is why 
we are proposing some additional programs to do that.
    Mr. Packard. Thank you, Mr. Chairman.
    Mr. Callahan. Mr. Secretary, we thank you for your 
testimony, and I might suggest that what you do is establish a 
chair in your Department to respond to individual cases that 
Members of Congress have.
    It is too broad, and we are told to go to the State 
Department, we are told to go to the embassy, but we need a 
human rights advocate to protect American citizens' interests. 
There are many other cases as well. You have the Davis case and 
the Barnes case in Peru, that Members of Congress are trying to 
get answers to, and we can no longer hide behind this veil of 
some complexity of judicial law in foreign countries.
    We have to have an advocate. We should have an advocate 
visiting the prison site, at least once a week, of every 
American in jail, to make certain that his human rights are not 
being violated. We are talking about human rights. We are not 
talking about law violations, and we need someone visiting 
these people.
    Just the very fact that we are visiting them, weekly, would 
give an indication to the Government of whatever country, that 
America is looking at this and that we are not going to 
tolerate it.
    So I would suggest, due to your busy schedule, due to the 
busy schedule of the Secretary, so we do not have to call you 
every week every time we find out a little something, that you 
designate a human rights advocate for American citizens 
imprisoned in foreign countries.
    So we will have someone we can call, who will know 
everything about that case, who can visit, who can pressure the 
embassy in these various countries, to visit these prisoners. 
We do not want to coddle felons. We do not want to prejudge 
guilt or innocence. But when you have laws in countries such as 
Honduras, where it requires a response to an inmate's plea in 
30 days, and they wait 18 months or two years to respond, we 
have to have an advocate.
    So we cannot resolve this today, but you can resolve our 
problems, and eliminate a lot of human misery, if we have a 
human rights advocate for Americans in prison in foreign 
countries, where these people and these families can call them 
every week, where they can have someone they know is on their 
side.
    You say the FBI says do not get involved, there might be 
some problems here, and then you have the embassy saying we do 
not want to cause an international incident.
    We need someone we can call every day, who knows what we 
are talking about, and who can give us an immediate response.
    But if you would consider that, we appreciate very much 
your testimony and we look forward to a continued working 
relationship.
    Mr. Shattuck. Mr. Chairman, just one quick comment on the 
last point because it is a very important one to you, and to 
me. I appreciate it.
    I just want to put on the record the fact that there is 
that point of contact right now. We can step it up through more 
personal involvement by myself and others. But it is the Office 
of Emergency Services of the Bureau of Consular Affairs in 
Washington. Its sole function is address problems of American 
citizens overseas, who are in emergencies such as judicial 
emergencies or car accidents, or any number of other kinds of 
problems. That is the place where families can take their 
cases. They are advocates.
    Now we will do more. We will do more.
    Mr. Callahan. We cannot debate that today.
    Mr. Shattuck. Sure.
    Mr. Callahan. I am saying I know that, and that is good, 
and I know if someone gets a speeding ticket in France, we 
ought to have someone they can call.
    We are talking about human rights violations, and we are 
talking about someone with compassion, that the families of 
these victims can call, who can give them immediate attention.
    But we are not asking that you spend $100 million. We are 
asking for one desk that simply handles human rights problems 
for American citizens in prisons in foreign countries. That 
will not take a full week of everybody's time. That will not 
take a million dollars a year. It will just give us an 
immediate ear to someone who understands particular problems 
and who we know is an advocate of the abolition of these human 
rights violations, rather than to go through the normal 
bureaucracy, or the Office of Legislative Affairs who are more 
concerned about some Congressman's daughter not being able to 
catch an airplane in France.
    You know, we are concerned about that, but this needs 
serious, direct attention, that you can simply solve with a 
small amount of taxpayers' dollars.
    Mr. Shattuck. No, I appreciate that and my answer was not 
intended to mean we will not do that. I guarantee we will do 
that. We will also work within and strengthen the current 
system that we have, because, frankly, we need all these people 
to engage. It cannot just be one person in terms of observing 
trials, and the kinds of things that you are talking about. But 
we will do that, and I appreciate that that has been a good 
focus, from my point of view, of this hearing. It certainly has 
raised my awareness of the concerns that you have about this. 
Thank you very much.
    Mr. Callahan. Thank you, sir.
    Mr. Packard. Mr. Chairman, may I make one comment.
    I want to thank the State Department for their efforts in 
Russia on the recent kidnapping of missionaries there, and 
their release.
    Mr. Shattuck. Thank you very much.
    Mr. Callahan. All right.
    Kenneth Roth and Mira Baratta.
    Mr. Roth, we will receive your testimony, and we will 
accept a written statement, if you have one, for the record, 
for both of you, if you have it, and recognize that we are kind 
of pressed for time, and abbreviate your opening statement to 
the committee. Mr. Roth.

                      Mr. Roth's Opening Statement

    Mr. Roth. Thank you very much, Mr. Chairman.
    I appreciate your holding this hearing today. We, at Human 
Rights Watch, believe that the work of this committee has a 
very important and positive influence on human rights.
    Obviously, U.S. aid can be directed to support positive 
initiatives around the world. Conditionality on that aid can 
also be very important, both as a lever to promote positive 
change by abusive Governments around the world, and perhaps 
most important, to make sure that American tax dollars not made 
complicit in human rights abuses by supporting abusive forces.
    So we appreciate the work that this committee has done. I 
understand the press of time, so I will simply summarize my 
remarks by first making a few brief, general comments, and then 
raising a number of particular countries that may be of 
interest to the committee.
    First, at a general level, I thought that I would begin by 
commenting on the President's trip to Africa, since that has 
had both some positive and negative dimensions to it.
    On the positive side, I think that his speech in the Kigali 
Airport broke some very important new ground by first stressing 
that U.S. justice assistance, that is to say, U.S. efforts to 
build a justice program in Rwanda, in Central Africa as a 
whole, as well as related assistance to human rights 
monitoring, would focus not only on past abuses, but also by 
current abuses.
    That is to say, not only abuses by rebel forces today, but 
also abuses by Government forces, and that even-handed 
application of justice funds is very important if we are going 
to break out of the cycle of violence and retribution that is 
currently plaguing Rwanda.
    The focus on the Rwandan genocide during his remarks was 
also important in stressing his acknowledgement that the United 
States and the international community failed the Rwandan 
people when hundreds of thousands were being slaughtered, and I 
hope that his remarks will serve as a spur to more aggressive 
action, should genocide or comparable killing break out 
elsewhere in the future, with perhaps Kosovo today the greatest 
immediate threat.
    The Entebbe Summit of Central African leaders was also 
useful, on the one hand, because it stressed the commitment of 
those leaders, in broad terms, to human rights and the rule of 
law.
    There was an unfortunate statement in that summit final 
document which suggested that the United States countenanced 
various paths to democracy, which while it may sound fine in 
the abstract if you are only talking about the differences 
between Westminster democratic systems and a presidential 
system, or something of that sort.
    In Uganda, it was understood as permitting President 
Museveni's nonparty movement system of so-called democracy, 
which is a sham, which is clearly below international human 
rights standards, and unfortunately, the President did not find 
an opportunity to make U.S. disapproval with that pseudo-
democracy clear.
    The President also made an unfortunate statement reversing 
an excellent speech that had been given by Assistant Secretary 
of State for African Affairs, Susan Rice, on Nigeria, in which 
she had said just two weeks ago, that the United States would 
not tolerate General Abacha simply removing his uniform and 
running for office, and the President, in South Africa, 
indicated the U.S. Government policy might be the contrary.
    I saw his aides quickly scrambling to undo the damage, and 
I hope that there can be a reassertion of the Susan Rice 
position as soon as the President gets back.
    On China, and I want to second Ms. Pelosi's remarks earlier 
in the day, and simply add one more point in that regard.
    I mean, I think China is very much a defining factor in 
administration human rights policy.
    Secretary Shattuck, as well as the administration as a 
whole, have a tendency to put a Pollyannish spin on 
developments in China, to portray them as better than they are, 
and I think that that extends to U.S. policy as well.
    The administration has touted the benefits of its 
engagement with the Chinese Government, but I think in fact, if 
you go back and look at even the small concessions that have 
been secured, it has never been engagement alone that has been 
responsible. It has been engagement coupled with pressure.
    My concern is that the administration is in the process of 
giving away its every source of pressure, by abandoning the 
resolution before the U.N. Human Rights Commission in Geneva, 
by announcing the presidential visit to Beijing without getting 
any human rights preconditions.
    It is doing all of this in return for simply empty 
promises. Yes, it is nice that the Chinese Government has 
promised to sign the covenant. It will be better, still, when 
it actually does so.
    But there has been no indication that the Chinese 
Government has been willing to move from the level of rhetoric 
to that of conduct.
    At best, we get the release of a hostage here or there, 
usually kicked into exile, but we do not have anything 
approaching the kind of systematic change that would justify 
the abandonment of pressure that the Clinton administration is 
so willingly casting aboard.
    The kinds of things we need to look for are things like the 
release of, or the review and the release of most of the 
counter-revolutionary prisoners, those who are serving prison 
terms for a crime that no longer exists.
    We need an improvement in respect for human rights and 
religious freedom in Tibet, not the worsening of conditions 
that we currently witness.
    We need greater respect for religious freedom and political 
freedoms across the board in China, rather than just the status 
quo, empty promises that are not matched by action on the 
ground.
    And my question to the administration is, What is it going 
to do, having abandoned the various sources of pressure to move 
the Chinese Government from empty promises into actual changes 
in their conduct?
    I do not know the answer to that. I have a hard time 
figuring out what the administration is going to accomplish, 
and I urge this committee to do what it can to put more muscle 
into the engagement with the Chinese Government.
    Let me just quickly run through a few particular countries 
of concern to the committee, that I think are relevant to the 
bill that it is considering to this year's appropriations 
process.
    First, with respect to the Democratic Republic of Congo, 
the Faircloth amendment, last year, prohibited aid to the 
Congolese Government unless it cooperated with the U.N. 
investigation. And I note that just over the course of the last 
week, in a country that does not permit autonomous 
demonstrations, a crowd came and threatened a U.N. 
investigative team in the town of Mbandaka, where it had come 
across a mass grave of victims, that is to say, refugees from 
Rwanda who had been slaughtered by forces operating with the 
connivance of the Congolese Government, and under the 
allegation that this was supposedly a sacred burial ground, the 
investigators were literally chased from Mbandaka.
    That is hardly the kind of cooperation with the U.N. that 
would be respected.
    Human Rights Watch has insisted that before aid go forward, 
that there should be demonstrable progress in meeting certain 
minimal conditions, including genuine cooperation with the 
U.N., lifting of the ban on opposition political activity, and 
an end to the harassment of civil society, and that until these 
kinds of conditions are met, we should be looking to channel 
much-needed aid to the Congolese people, that is to say, 
through NGOs or through local Government, but not through the 
central authorities who are responsible for this oppressive 
conduct.
    In the case of Rwanda, I already mentioned the broad 
approach to justice that the President outlined in his Kigali 
Airport speech.
    On the question of military aid--and I fear a press for 
military aid as the threat on the part of the rebels, the Hutu 
rebels who were responsible for the past genocide--as that 
threat increases I fear that the U.S. is going to be pushing 
for military aid, and we believe that that would be 
inappropriate so long as the Rwandan army continues to pursue 
its counter-insurgency strategy through the indiscriminate 
slaughter of people simply because they happen to be of the 
Hutu ethnicity.
    We believe it is essential that the Rwandan Government halt 
this kind of slaughter and that it begin actively to bring to 
justice those who have been responsible for it.
    The U.S. embassy has been far from helpful in this regard, 
in that it tends to portray itself as the public relations 
department of the Rwandan Government rather than as 
representatives of a Government that is committed to ending 
this kind of indiscriminate slaughter.
    In the case of Bosnia, we note that last year's 
appropriations act prohibited assistance to communities that 
harbored war criminals.
    As you undoubtedly know, the administration has waived 
this, and instead has said it will simply vet the recipients of 
U.S. aid to make sure that it only goes to the so-called 
moderates, that it does not go to people who are themselves 
complicit in war crimes or in harboring war criminals.
    Unfortunately, there are still some 40 indicted war 
criminals who remain at large in the Republic of Srbska, the 
Bosnian Serb sections of Bosnia, and as we follow the 
administration's effort to conduct vetting of the recipients of 
the aid, we find it to be wholly inadequate.
    We thus would urge that this restriction be reinstated in 
this next year's appropriations bill, and that at the same time 
the committee put what pressure it can on the administration to 
move forward with efforts to arrest those indicted war 
criminals who remain at large.
    In the case of Turkey, we note that persistent torture, 
curbs on free expression, and indiscriminate warfare in the 
southeast remain quite serious problems.
    We have noted that this year, the administration is not 
asking for either economic support funds or foreign military 
financing for fiscal year 1999, and we welcome this as at least 
consistent with section 502(b) of the Foreign Assistance Act, 
even if it was not officially inspired by those restrictions.
    We believe, however, that the same logic, that is to say, 
the logic that would restrict military assistance or economic 
support funds from going to a systematically abusive Government 
like Turkey, should also bar the military transfer that is 
currently pending, of 145 attack helicopters, that is to say, 
the same kinds of helicopters that are used to level village in 
southeastern Turkey and that have been responsible for so much 
of the suffering and slaughter in that part of the world.
    In the case of Colombia, we note that serious abuses 
persist not only by rebels but also by the Colombian military 
and its paramilitary allies, and that perhaps the chief reason 
for these atrocities are the continuing impunity that members 
of the military and their allies enjoy.
    The army continues to ignore the dictates of the 
constitutional court that situations of abusive military 
officials be considered by the civilian courts, rather than the 
military courts which have, to this stage, served as a 
guarantor of impunity rather than of justice.
    We also believe that the Colombian Government is subverting 
the intent of the Leahy Amendment. As you know, the Leahy 
Amendment would prohibit the delivery of military aid to any 
unit that is involved in abuses, and given the Colombian 
Government's inability to demonstrate that its existing 
military units were free of abusive conduct and of abusive 
officials, it simply created two brand-new units, and the aid 
has been funneled to these units instead.
    Unfortunately these units have been created under 
conditions of complete secrecy. We have no idea what they are, 
where they are, what their name is, what their membership is, 
and this is a sham that is subverting the intent of the Leahy 
Amendment, since we have no possibility of monitoring 
compliance with it.
    We would urge that next year's language in the 
appropriations bill address this kind of subterfuge, so that we 
can, if we are going to be giving aid to the Colombian 
military, that it be done in situations of complete 
transparency, so we can make sure that American taxpayers are 
not subsidizing indiscriminate killers.
    I note that our opposition does not extend to aid to the 
Colombian police, which as far as we know remains relatively 
free of abuse but our concern is aid to the Colombian army.
    With respect to Mexico----
    Mr. Callahan. Mr. Roth, let me just interrupt you and tell 
you that we have read your opening statement. We have that. We 
cannot go through these problems country by country. I know you 
still have concerns in Mexico and Egypt, and Israel. You have 
concerns about women issues, discriminatory policies against 
women. We cannot go through this entire statement. Time will 
not permit it.
    So if you would just generalize the theme, worldwide, of 
the needs of your organization, and we will have time to hear 
everybody, because we have to be out of here at 1:00 o'clock.
    Mr. Roth. Fair enough. Let me just then, since you 
obviously have read carefully my statement, I will simply 
mention one thing that I neglected to put in it, and should 
have, and that is our strong endorsement of the continued 
provision of funds, if not an increase in funds for 
international justice efforts. The Secretary talked about the 
very effective delivery of $1 million of U.S. aid to the 
International Criminal Tribunal for the former Yugoslavia, to 
investigate the killings in Kosovo.
    It is that kind of flexibility and active support for 
international justice, that I think it is essential for the 
U.S. to be behind, and appropriations from this committee are 
obviously a key part of that.
    Thank you very much.
    [The written statement of Mr. Roth follows:]


[Pages 479 - 489--The official Committee record contains additional material here.]



    Mr. Callahan. Well, we hate to cut you off short, and I 
know your passion, and I know your sincerity and your concern. 
We know the great things that your organization does, but time 
is of the essence.
    Ms. Baratta.

                    Ms. Baratta's Opening Statement

    Ms. Baratta. Thank you, Mr. Chairman, Members of the 
committee.
    I appreciate the opportunity to testify on behalf of 
Freedom House, and I will be brief, and unfortunately, to be 
brief, I am going to focus on some of the negative trends that 
we have found in our annual survey, Freedom In The World, that 
we have published for the past 25 years. In going through those 
trends, I will just make a few comments on what we think may be 
solutions, or ways to achieve some progress in these areas.
    The first negative trend that we have seen is the 
continuing spread of what we refer to as ``the virus of 
ultranationalism.'' No country in Central and Eastern Europe, 
or the former Soviet Union is immune. Collectively, 
ultranationalism constitutes the gravest threat to democracy 
since the death of communism, and the poster boy for that type 
of ultranationalism is Slobodan Milosevic, whose ethnic 
supremacist, and, indeed, genocidal policies led to the death 
of hundreds of thousands in Bosnia, the displacement of 2 
million people, and who is, at present, firmly entrenched in 
power and heightening repression and ethnic cleansing in the 
former autonomous province of Kosovo.
    This region, where there are 2 million ethnic Albanians, 
has been under martial law for nearly a decade and we need to 
watch it closely. If the situation is not resolved there, we 
could see not only more deaths, another war, but the 
involvement of our NATO allies on separate sides.
    The second negative trend related to that is the 
balkanization of democracy in Central and Eastern Europe. What 
we are seeing is the development of two tiers of democracies, 
electoral democracies that are true democracies, such as 
Hungary, Poland, and the Czech Republic, and then Albania, 
Bosnia, Croatia, Montenegro, and Serbia lagging far behind them 
in terms of democratization.
    The third negative trend is really the abrupt setbacks to 
democracy in Africa set against the genocide in Rwanda. This 
continent's democracies are generally weak and under attack. 
Tragically, while some of the Governments have changed in 
Africa, they are often replaced by regimes which are not 
demonstrably better.
    For example, President Mobuto's dictatorship collapsed, but 
under Laurent Kabila, the Democratic Republic of Congo has not 
seen any real improvement in civil liberties.
    Moreover, as I think Ken Roth rightfully pointed to, he's 
thumbed his nose at international efforts to investigate war 
crimes.
    And let us not forget that some of the most egregious 
violations of religious freedom can be found in Africa and 
countries like Sudan.
    The fourth negative trend I would like to call to the 
committee's attention is the absence of improvements in the 
People's Republic of China's human rights record, the continued 
repression of Tibet, widespread religious persecution of 
Christians, Muslims and Buddhists, flourishing slave labor 
camps, and the erosion of representative governance following 
the transfer of Hong Kong, mark the most disturbing aspects of 
China's human rights policies.
    While the administration's red carpet treatment for China 
has clearly yielded business deals for American firms, it has 
not yielded any demonstrable improvement in the area of human 
rights. The question is how to try to reverse these trends.
    U.S. leadership is absolutely dispensable. The U.S. must 
launch a sustained effort to provide support to the world's 
fragile new democracies, and democratic forces, in undemocratic 
countries. What do I mean by support? Foreign assistance. Of 
course, the purview of this committee, leaps to mind. The U.S. 
should continue to provide democratization assistance to 
opposition groups, nongovernmental organizations, and 
independent media.
    It is even possible and advisable to provide such 
assistance in countries like Serbia, if it is strategically 
targeted and does not serve to bolster corrupt nondemocratic 
elites. Should Ukraine's foreign aid be cut by 50 percent? I 
would hope that democracy assistance is spared the ax.
    The administration and Congress should also consider howto 
condition the other non-democratization assistance that is being 
provided to countries that we rate in our survey as partly free, or not 
free at all.
    However, foreign aid is not enough. Visible, meaningful 
political support is critical as well. The United States can 
send powerful signals through its diplomacy. Even photo ops can 
have an enormous impact under certain conditions.
    For example, in Africa, this means that the Secretary of 
State must ensure that her future tours of the continent are 
dominated not by visits to countries led by strong men, but to 
genuine democracies with legitimately elected leaders.
    It also means that while it may be acceptable for President 
Clinton to express regret for slavery in the United States, 
more than a century ago, it is also incumbent upon him to 
criticize and enact policies that punish those nations that 
still engage directly in or tolerate such practices today, 
particularly against women and children.
    In the Balkans, that means not certifying unfree or unfair 
elections, not making empty threats, not backing off from 
previous warnings such as the so-called Christmas warning, 
which we have not heard since the situation in Kosovo has so 
dramatically deteriorated, and it means promoting genuinely 
democratic forces in Serbia, in Croatia, and Bosnia.
    In China, that means not sugar-coating China's deplorable 
human rights record. It means meeting with pro democracy 
leaders in Hong Kong, and according His Holiness, the Dali 
Lama, the appropriate respect and recognition.
    It also means meeting with communist Chinese officials in a 
business-like setting, without the pomp and circumstance we 
accord our friends and allies, and placing human rights high on 
the agenda.
    The task is not easy but it must be done, if we are to have 
any hope of changing the situation around the world. Thank you.
    [The statement of Ms. Baratta follows:]


[Pages 493 - 496--The official Committee record contains additional material here.]



    Mr. Packard [presiding]. We want to thank you for your 
testimony, both of you.
    Nancy, while the Chairman is out voting, I will turn to you 
for your questions.
    Ms. Pelosi. Thank you very much, Mr. Packard.
    I know that the Chairman is concerned about time, and I, 
too, want to thank our witnesses for their very excellent 
testimony, and more importantly, that that is a representation 
of the very excellent work that they do.
    Rather than going in country by country, I thought I would 
ask an overall question. In your remarks there is an implied 
criticism of how the Administration has approached human rights 
in some parts of the world, and I certainly did not pull my 
punch when the Secretary was here.
    If I had more time, I would have had more complaints. One 
of them was that I would have said to him--and I will write to 
him to this effect--that I have no confidence in the structure 
that the Administration has set up to deal with these issues.
    Frankly, it scares me to death that they have a core 
working group on encouraging democracy, because to me it sounds 
like a group that comes together where other departments of 
Government water down the human rights and promoting democratic 
freedom initiative that should be going in there very strongly.
    It will be more clearly demonstrated when the President 
will meet with a President, be it the President of Turkey or 
another country, and say, John Shattuck will be talking to his 
counterpart about human rights. They relate, and then they 
neutralize, and I think, as I say, they do more harm than good. 
I have not seen much of the good, but generally speaking, they 
do more harm than good, in my view.
    Could you comment on how the structure of how human rights 
is considered as an issue, really sort of following up on a 
question that Mr. Packard had earlier.
    How could this Administration set itself up better to 
implement promoting human rights and democratic freedom policy?
    Mr. Roth. Well, I think that there are two dimensions to a 
very broad problem that you rightfully identify. One is the 
fact that within the State Department, Secretary Shattuck's 
bureau is completely understaffed, compared to those who might 
have other interests in mind, and so when these bureaucratic 
battles are fought out, even within State, John Shattuck just 
does not have the resources, frequently, to stand up to the 
regional bureaus, in particular.
    One thing that could be done would be to try to bolster the 
standing, and particularly the personnel of his bureau, because 
I think that that is, in a sense, the best guarantor to 
actually have the manpower, the people power, to push that 
forward.
    A second problem which I think often arises is that the 
State Department, and particularly with Secretary Albright at 
its head, does frequently come out with relatively pro human 
rights policies, that then tend to be watered down in the 
interdepartmental struggles, that it is ultimately up to the 
White House or the National Security Council to mediate.
    What we have found, over and over, is that the State 
Department may be pushing for a very positive stance, but that 
is watered down by the Pentagon or it is watered down by the 
Commerce Department.
    I am not sure that there is a structural solution to that, 
so much as the need for much firmer political will on the part 
of the President and his chief advisers, where so many times 
pro human rights policies have been watered down.
    I think a good example is what he did on Nigeria over this 
last week, where a very strong State Department statement got 
watered down by the White House.
    I do not know what, short of continued pressure by you and 
your colleagues, will rectify that.
    Ms. Baratta. Yes. I would agree, that I do not think there 
is a structural fix that is apparent. Also, there is always 
value to--I think other countries look to see who is making the 
human rights statements. Is it the President? Is it the 
Secretary of State? Is it just the Assistant Secretary of State 
for Human Rights? So I think it is really incumbent upon the 
administration, if it is going to stick by its policies, to 
make sure that the same message is being sent at all three 
levels, because where there is discrepancy, other foreign 
leaders will see it and seek to try to manipulate it or exploit 
it, and these interagency processes are very cumbersome.
    I was in the executive branch once, and you can get lost in 
that, but if there is someone at the top who really believes 
strongly in the policies, and is vocal about it, it makes a lot 
of difference.
    Ms. Pelosi. So we will have to depend upon the leadership 
of the President of the United States and his commitment to 
human rights, to keep it at least on a par with the other 
issues that are pillars of our foreign policy.
    I firmly believe that in order to be consistent, that it 
would be a tragedy; but I think that the Administration should 
stop saying that promoting democratic freedoms and human rights 
is a pillar of our foreign policy. It is a farce. We want it to 
be a pillar, we hope it is, but if that is what a pillar is, 
that is a crumbling mess, and, you know, I would hate to think 
that our foreign policy would be bolstered by such a feeble 
attempt.
    As far as Nigeria is concerned, I do not understand. I 
think that those statements were completely 
contradictory,although they tried to smooth it over by saying they were 
completely compatible or something. Maybe it was a mistake, which would 
be unfortunate, but at least that is the most benign interpretation.
    I do appreciate what you have had to say, and we have to 
just keep convincing people at the top that statements are one 
thing, but real leadership on the issue is another.
    When I look at the people who come to the Labor, Health and 
Human Services and Education Subcommittee, who head up the 
National Institutes of Health, I say to them you are the 
luckiest people in the world, you have the best jobs in the 
world, because everybody wants you to succeed. Everybody on the 
committee and in the Administration, you know, wants these 
people to succeed, to find the cures and do the research, and 
involve young people, and the rest.
    I look at John Shattuck, who brings a lot to the 
Administration and I respect him, enormously, but I do not know 
how he drives to work in the morning. In any event, I made that 
clear when he was here.
    I thank you for your observations about how we can do this 
better, and I have no other questions. I have many, but in the 
interest of time, I will not pursue them.
    Mr. Packard. Thank you.
    Would you have some recommendations for the administration 
on how to balance out the human rights issue on our economic 
policies?
    Ms. Baratta. Yes. I mean, it is difficult to do that 
overall, but if you take a situation like China, where I think 
it is perceived as being most in conflict, I would argue that 
it should not be seen as in conflict. That yes, we can be 
promoting engagement through long-term trade, but that is not a 
substitute for dealing with the immediate problems today, and 
that if there is any lesson to be drawn from the economic 
crisis that is now plaguing much of Asia, it is that it is bad 
for business to ignore human rights.
    It is precisely the lack of human rights in places like 
Indonesia, the lack of respect for the rule of law, the lack of 
accountable Government, that both leads to the political 
suffering of the Indonesian people, but has also made it 
possible for a corrupt Government to make the kind of poor 
economic choices that has led Indonesia into the hole that it 
is in today, which in turn is going to be hurting American 
business.
    So I think there is a much greater compatibility between 
the promotion of human rights and the promotion of our Nation's 
economic interests than is generally perceived.
    I think that we were perhaps at loggerheads over the MFN 
debate, which is unfortunate, but there is no reason for us to 
be at loggerheads today, and I would hope that more and more 
people can see the compatibility, that certainly the crisis in 
Asia is underscoring.
    Mr. Callahan. Thank you.
    Mr. Kingston, do you have questions?
    Mr. Kingston. I regret I did not get your name.
    Ms. Baratta. Mira Baratta.
    Mr. Kingston. My question was you mentioned about the 
President not--I want to try to paraphrase you accurately--but 
you said while he expressed regret about slavery of 100 years 
ago, he did not mention current--and you fell short of saying 
current slavery, but you said similar practices.
    Ms. Baratta. Right.
    Mr. Kingston. What and where?
    Ms. Baratta. Uganda is an example. Unfortunately, I do not 
have the latest issue, 1998, which will be more up to date. But 
Uganda, Sudan, children being abducted, women being basically 
sold as not more than chattel. We could get back to you with 
the latest cases. I can give you, you know, last year's, but 
the latest cases, when we get our report. I think he made those 
remarks in Uganda, and even if it is not Government policy, it 
is tolerated by some of the regimes in Africa.
    Mr. Kingston. Well, one of the criticisms of his trip, that 
I read, was that a lot of the problems with some of the African 
nations that he was visiting, you know, was not that, you know, 
we do not have trade opportunities already. It is that the 
regimes are bad.
    Was he embracing some bad regimes, in your opinion, and if 
so, which?
    Ms. Baratta. Well, I think we would have, Freedom House 
would have some concern about his visit with President Kabila. 
I think that, as I mention in my testimony, the record of 
rights in that country has not improved since the fall of 
Mobuto. The lack of cooperation. In fact the defiant treatment 
of international investigators of the War Crimes Tribunal for 
Rwanda, is another example of basically a regime that does not 
respect political and civil liberties the way we would expect 
them to.
    I think that kind of message does not mean he should not 
meet with some of these leaders, but he should put human rights 
and political and civil liberties high on the agenda, and not 
ignore those issues.
    Mr. Roth. If I could just elaborate on that a little bit. 
The administration seems to be looking at this new generation 
of African leaders in places like Rwanda, Uganda, Ethiopia, 
Eritrea, perhaps Congo, as so much better than what preceded 
them, that it is willing to embrace them, and they clearly are 
better.
    I mean, you take somebody like Museveni in Uganda. Of 
course he is better than Idi Amin or Milton Obote. But that is 
not justification to uncritically embrace the problems that 
they currently entail, and if you take, for example, this 
Museveni idea of nonparty democracy, which is a very 
influential idea in that part of the world, and for the 
President to not only sign a document that seemed to tacitly 
endorse that, but to fail to speak out and make clear, that 
this is not just the difference between, you know, 
parliamentary and presidential democratic systems, this is a 
substandard system, one that violates international human 
rights. That was a real error because it sends the signal, that 
under this guise of African solutions to African problems, we 
are willing to countenance something that we should not be 
tolerating at all.
    Ms. Baratta. Can I just add one other thing. I mean, you 
will find that in some of these countries the economies are 
actually quite free. I mean, that is not the problem. The 
problem is in the judiciary system, in the political, and 
electoral process.
    The trade issue is not a question. The economies are free. 
It is on the political and judicial side.
    Mr. Kingston. Thank you.
    Mr. Packard. Thank you, and thank you very much.
    We will dismiss this panel and we appreciate very much your 
contribution to the hearing.
    We would ask for the third panel, Ms. Robin Williams, to 
joint us at the desk, Mr. Carlos Salinas, and Mr. Mike 
Jendrzenjczyk.
    We will proceed with Mr. Carlos Salinas. We will wait for a 
Member of Congress who wishes to introduce Ms. Robin Williams. 
So we will wait for that introduction and have Mr. Carlos 
Salinas proceed with his testimony. We have a copy of your 
statement. We would appreciate you summarizing.

                     Mr. Salinas' Opening Statement

    Mr. Salinas. Thank you very much, Mr. Chairman, 
distinguished Members and staff. We are pleased to present our 
thoughts on human rights in Latin America and the Caribbean as 
they pertain to the administration's fiscal year 1999 foreign 
operations request, and we recognize that time is limited, and 
thus, thank you for holding this important hearing.
    Amnesty International derives its evolving mandate from the 
Universal Declaration of Human Rights whose 50th anniversary is 
this year. We seek to prevent and denounce illegal killings, 
executions, ``disappearances,'' torture, and ill treatment.
    There are acute problems with illegal killings and 
``disappearances'' in Mexico, Colombia and Brazil. While 
outstanding ``disappearances'' are recorded in most of the 
region, equally widespread are torture and ill-treatment. In 
most cases, the perpetrators escape punishment while the 
survivors receive no redress.
    We also seek the liberation of prisoners of conscience and 
the prompt and fair trial of political prisoners. We note large 
numbers of prisoners of conscience in Mexico, Cuba, and Peru, 
and these often result from unfair trials.
    While Amnesty concentrates mainly on State actors since 
States are the signatories to the Universal Declaration and 
other human rights treaties, we do oppose human rights abuses 
by armed opposition groups. We condemn abuses by insurgencies 
such as the Revolutionary Armed Forces of Colombia who hold 
hostages, mainly Colombian nationals, but also three U.S. 
missionaries, and recently, more U.S. nationals, and they also 
engage in illegal killings.
    Because of the time, I would like to concentrate on some 
general provisions that apply to most if not all countries of 
the region, and address any country-specific concerns in the 
question and answer.
    While reviewing the foreign aid request, we ask whether the 
proposals will hurt or help human rights. Obviously, no one 
sets out in these programs to hurt human rights, and no one in 
Washington would say they are for human rights violations. Yet 
programs do end up eroding rights.
    The reason we believe this happens is through 
overzealousness and lack of clarity. Two key areas where this 
is a concern is military training and arms transfers. Both are 
plagued by a chronic lack of transparency, and what appear to 
be frequent failures in oversight by the administration.
    Various parties argue that military training programs are 
important and useful because they increase U.S influence, and 
are a vehicle for human rights training. We do not believe 
these assertions have been rigorously tested through a detailed 
program for monitoring and follow-up. Absent such evidence to 
support these assertions, we remain concerned about the 
training of militaries deeply implicated in human rights 
violations. We have just issued a report on military training 
which we would like to submit for the record.
    One of the more controversial training programs this 
committee has examined is that of the U.S. Army School of the 
Americas.
    One of the committee's most vocal Members on this issue has 
been Congressman Torres, and I would like to take a moment to 
say that we join in the general mourning for his decision to 
leave office as he has been a true friend, and a human rights 
champion, and we will miss him. But of course we look forward 
to another great year.
    The lightning rod for criticism of military training that 
has been the School of the Americas involves allegations 
concerning the school, yet we are convinced that some of the 
school's fundamental problems apply to all U.S. military 
training programs.
    We note that unanswered questions keep piling up while 
mounting evidence points to a systemic problem and climate that 
encourage violations. We are troubled, not only by the record 
of some of the school's graduates, but also by the seven 
training manuals used by the school which clearly encouraged 
human rights violations.
    Some have asserted that the problem with the manuals was 
restricted to a few passages, and while the passages were 
indeed abhorrent, the focus on these passages obscures the 
point that these manuals, from beginning to end, treat civil 
society voices and dissenters independent of the Government as 
potential enemies.
    Is it any surprise, then, that taking such assumptions to 
their logical conclusion would lead to the ``scorched earth'' 
strategies which have left hundreds of thousands of non-
combatants dead or ``disappeared'' in Latin America?
    These training manuals were also used by Mobile Training 
Teams, presumably Special Forces, and we have heard about their 
training in Indonesia, and also, recently, about their training 
in Colombia. These manuals were distributed in several 
countries.
    The role of the Special Forces does need to be examined 
closer. The GAO reported that according to the United States 
Southern Command, the Southern Theater was made for Special 
Forces, and that Special Forces are involved in ``training 
foreign military officials, counternarcotics operations, and 
miscellaneous other-than-war operations.''
    This report also mentions the training of paramilitaries. 
Intrigued, we wrote the GAO in January but have received no 
reply.
    In the area of security assistance transfers, we would like 
to thank you for your support for section 570 of last year's 
Foreign Operations bill. Many Members of this committee, 
including the Ranking Member, fought vigorously for and 
supported this provision.
    Known as the Leahy Amendment, this provision avoids an all-
or-nothing choice regarding aid by approaching human rights 
violations on a unit-by-unit basis. However, as you all well 
know, it is only worth the paper it is on. Your constant 
vigilance for its thorough implementation is necessary, and of 
course we will be glad to help.
    A closer look at how well the first Leahy Amendment, 
approved in 1996, was implemented in Bolivia is important, 
given reports of violations that do not seem to have been fully 
investigated by the U.S. embassy in La Paz.
    This provision was also made very relevant when Amnesty 
International received answers to questions raised in this very 
committee by Congresswoman Lowey.
    Back in 1994, Amnesty issued a report which detailed 
violations committed by 14 Colombia military units. At a 
hearing, Congresswoman Lowey asked to what extent has the 
United States Government funded Colombian units implicated in 
violations. A State Department official replied, and I quote: 
``The military units that generally are mentioned by those who 
are criticizing human rights performance of the Colombian armed 
forces are not ones that receive any assistance from the United 
States.''
    We now know that the U.S. embassy identified 13 of the 14 
units accused by Amnesty as being recipients of lethal U.S. 
aid. I do not think the State Department ever publicly 
corrected the record.
    This ongoing controversy over aid to Colombia is being 
addressed at a conference on Colombia at Johns Hopkins 
University at this very moment, and I would like to take a 
moment to say that one of the keys to this issue is ensuring 
that section 570, the Leahy Amendment, is thoroughly 
implemented, and that any aid, including to the Colombian 
police, be carefully screened to ensure that any human rights 
violations that are currently being addressed as having been 
committed, or involved by the Colombian national police are 
thoroughly investigated, and we know of such reports.
    In the meantime, we are curious about press accounts 
indicating that Colombia wants to purchase some Cobra 
helicopters, and that a brigade of the Colombian armed forces 
may be cleared to receive aid.
    We are disturbed by a report that the transfer of a few 
offending individuals is expected to clear the way for another 
brigade to receive aid.
    Obviously, this does not meet the law's requirement that a 
country needs to take ``effective measures to bring the 
responsible members of the security forces unit to justice.''
    End-use monitoring of U.S. security assistance, which can 
also prevent the defrauding of the U.S. taxpayer still has a 
long way to go. For instance, a very recent GAO study found 
that ``oversight and accountability of counternarcotics 
assistance [to Mexico] continues to be a problem.'' This, 
despite the fact that in 1996 Congress expressed concern about 
a similar GAO finding at that time with regard to Mexico. Two 
years later, we seem to be at the same place.
    Reporting on end-use monitoring also continues to lag, 
again, despite congressional urging that this be remedied.
    The State Department's End Use Monitoring Report detailing 
calendar year 1995 was released last year. At this pace, this 
year's report will be released in the year 2000, not 
necessarily the bridge to the 21st Century that I want to be 
on.
    Before I conclude, I would like to commend this committee 
for its role in obtaining support for the Clarification 
Commission in Guatemala, and we hope this support extends, so 
that all of you become co-sponsors and supporters of the Human 
Rights Information Act, H.R. 2635, introduced by Congressman 
Lantos, and several others here in the House. This initiative 
would release records about violations in Guatemala and 
Honduras, go a long way to strengthen the rule of law, protect 
democracy, and achieve closure for families that are trying to 
find out what happened to their loved ones in these tragedies. 
Thank you very much.
    [The written statement of Mr. Salinas follows:]


[Pages 504 - 515--The official Committee record contains additional material here.]



    Mr. Callahan [presiding]. Mr. Jendrzenjczyk?

                 Mr. Jendrzenjczyk's Opening Statement

    Mr. Jendrzenjczyk. Thank you, Mr. Chairman. In the interest 
of time, I do not want to summarize my statement. In fact, I 
would like to just very briefly make some remarks responding to 
some of Mr. Shattuck's comments earlier.
    First of all, I very much would want to echo what Mr. Ken 
Roth and what Congresswoman Pelosi said earlier about the 
administration's abandonment of any effective policy on China. 
But I think it is also incumbent upon us in the human rights 
movement and you as Members of Congress to do more than 
criticize, but to come up with some constructive proposals. And 
I would like to just mention three or four possibilities for 
your consideration.
    One, the President will be going to China in late June or 
early July. This visit is of enormous importance to the 
Chinese. The administration is on the verge of possibly lifting 
some of the few remaining post-Tiananmen sanctions. Some of 
them, in fact, this committee has jurisdiction over, such as 
Overseas Private Investment Corporation loans and guarantees. I 
think it would be very helpful if this committee signaled its 
strong concern that the President should go to China, but only 
on the condition that certain very specific human rights 
improvements take place; and, secondly, that he should not be 
offering as further carrots or sweeteners for his trip the 
lifting of the very few remaining sanctions left from the 1989 
period that also still have some bite and weight to them.
    Secondly, there is a lot of speculation in Hong Kong that 
the President will visit Hong Kong in the course of this trip, 
and I certainly share the concerns voiced by some of those here 
and by friends and colleagues in Hong Kong that there is the 
beginning of the erosion of the rule of law which many have 
feared in Hong Kong. There have also been recent threats to the 
press. A new law that has just been introduced in the 
provisional legislature that would exempt all Chinese 
Government offices from Hong Kong Law, this is in direct 
violation to the basic law, which is supposed to be Hong Kong's 
Constitution, as well as rather disturbing comments by Mr. C.H. 
Tung, the chief executive, that Hong Kong should not be allowed 
to become a ``base for subversion'' against China.
    I hope Members of Congress will visit Hong Kong, especially 
between now and the legislative elections in late May. It is 
very important that the congressional scrutiny of the annual 
report under the Hong Kong-U.S. Policy Act, which I should note 
was due last night but has yet to be delivered to Congress, 
provide you with a platform to continue your very active 
concern about the development and maintenance of the rule of 
law and human rights for the people of Hong Kong.
    Finally, there is the overarching issue which will be on 
the President's agenda of China's entry into the World Trade 
Organization. I believe it is in U.S. interest for China to 
become a member if it is willing to play by the rules. But 
let's face it. China does not have a very good track record 
playing by the rules in virtually any area dealing with trade 
and non-proliferation of human rights. And I think Congress as 
a minimum should insist on having a vote, a vote before the 
President can decide that China can, in fact, accede to the 
WTO. That puts you in the picture as players in the policy 
debate that otherwise will take place only between the White 
House and Charlene Barshefsky's office across the street at the 
U.S. Trade Representative's Office.
    Moving on from China, one last comment. I cannot help but 
comment just briefly on Secretary Shattuck's pathetic defense 
of the administration's decision to drop a resolution in 
Geneva. Once again, China is making promises of commitments 
that they may or may not ever abide by, and I would just remind 
you that in 1986, China ratified a U.N. convention against 
torture, and yet torture is as rampant throughout China as it 
has ever been, and confessions extracted under torture are 
still accepted under Chinese courts. So even if China did live 
up to these promises, I think the prospects for implementation 
would be far greater if the United States maintained its 
position pushing for a debate annually at the U.N. Human Rights 
Commission. It means very little to us. It costs very little to 
us. It means a hell of a lot to the Chinese, which is why they 
lobby so hard to prevent it. And, once again, the United States 
has thrown this away.
    Two very brief final comments. I mentioned in my statement 
the situation in Cambodia, and we have all watched with great 
concern the return of Prince Ranariddh to Phnom Penh earlier 
this week. The United States, along with other countries, has 
invested billions of dollars and countless lives in trying to 
help bring human rights, democracy, and the rule of law to the 
people of Cambodia. This is not the time to abandon them. But I 
would urge you to be very vigilant in overseeing the 
administration's decisions about aid after the elections in 
late July, because there is a trend among some of the Asian 
countries, including Australia, Japan, and certainly ASEAN, to 
recognize the results of these elections even if they are not 
free and fair. And I think it would be a pity if the United 
States were to join in that decision. And you can help prevent 
that by ensuring that aid does not go forward.
    Finally, with regard to Vietnam, I have noted in my 
testimony a recent decision by the Overseas Private Investment 
Corporation to begin programs in Vietnam, and I want to 
emphasize my organization has been neutral on the question of 
normalization of trade and economic relationswith Vietnam. 
However, we think the American law, as it pertains to trade and 
economic relations, should be obeyed. And one of the provisions in the 
statute governing OPIC is that worker rights must be respected. OPIC 
has done three trips to Vietnam in the last 2 years. If you read their 
own report, they acknowledge the very serious systemic worker rights 
problems, and yet an OPIC program is about to begin there. And I would 
just urge the committee to once again use its oversight over OPIC's 
budget to ensure that, in fact, Vietnam does respect basic worker 
rights such as freedom of association before OPIC begins handing out 
loans and risk insurance.
    Thank you very much, Mr. Chairman.
    [The written statement of Mr. Jendrzejczyk follows:]


[Pages 518 - 527--The official Committee record contains additional material here.]



    Mr. Callahan. Thank you. Before we go to our next panelist, 
I thought we might have a couple of questions for the first 
two.
    Let me just start it off by saying I do not know what the 
President's plans are with respect to his visit to China or 
Hong Kong. I do not know what he expects. The only thing we can 
do is gauge it upon what he is doing in Africa.
    I am not a Clinton basher, and I never have been, and I 
certainly am not bashing President Clinton. But I have not read 
too very much about the activities during his visit to Africa 
where he has mentioned human rights. And I do not know what 
your organization--I know your jurisdiction is Asia, but I have 
not seen very much attention given to the tremendous human 
rights violations that are taking place in Africa, in Rwanda. 
You know, the only thing I have seen, which I forewarned the 
President before he went, through an emissary that the Congress 
or this committee was not going to consider any grant or any 
promises that he makes to any country other than for monies we 
have already appropriated. We are not going to consider them an 
obligation of this country, so do not go over there and promise 
them the moon and expect this committee to fund it.
    I do not know what the total amount of money the President 
has promised is yet. I was told before his visit that it would 
not exceed $60 million, but I think it is----
    Mr. Jendrzenjczyk. Watch out.
    Mr. Callahan. And I think maybe the person who told me that 
meant per hour. But the President is promising something 
everywhere he goes, and he is not making many statements with 
respect to human rights violations in Africa, of all continents 
where this should be the emphasis. To be over there apologizing 
for history and the past history of our country in Africa is 
one thing. And maybe he is right and maybe he is wrong. But to 
go there and not to mention the atrocities that are taking 
place ought to have your organization up in arms. You ought to 
be on TV every night saying, Wait a minute, why are we 
apologizing? We should be chastising those countries in Africa 
that are still committing such serious human rights violations.
    Just a brief comment from either of you with respect to the 
President's visit. Is this an indication of what we can expect 
in China?
    Mr. Jendrzenjczyk. Thank you, Mr. Chairman. Well, talk is 
cheap, as you know, and you have to foot the bill, and the 
taxpayers, for what the President promises.
    On the one hand, as Mr. Roth, our executive director, said 
when you had to vote, Mr. Chairman, we welcome the President 
acknowledging that the international community reacted far too 
slowly in 1994 to the genocide in Rwanda. But now we have the 
opportunity at the United Nations, with the creation of an 
international criminal court, to provide a mechanism where 
crimes of genocide perhaps can be dealt with. But I also am 
worried that when the President goes to China we are going to 
hear a lot of verbiage about the rule of law. Mr. Shattuck has 
already mentioned rule of law programs funded by the United 
States.
    These programs are fine, but I think we should have no 
illusion that they are worth investing a great deal of time and 
resources in. When the Chinese Government itself controls the 
judiciary, there is no independent judiciary, when the World 
Bank in its most recent study of Chinese economic and legal 
system noted that it may take decades before the rule of law 
can establish any kind of foothold in China, I think that we 
should be wary of the President overstating the interest on the 
part of some of the Chinese Government bureaucracy in providing 
minimal kinds of laws that would help encourage greater foreign 
investment.
    Mr. Callahan. The reason I brought this up was to--I do not 
know. Maybe I am wrong. I certainly have not read every account 
of what the President has said during his visit to Africa. But 
to the best of my knowledge or at least I have not read where 
he has mentioned anything, and the point being if he didn't 
mention anything in Africa, what makes you optimistic that he 
is going to go to China and say straighten up your act?
    Mr. Jendrzenjczyk. I think the President recognizes that 
his reputation and credibility would suffer enormously. If he 
is the first President to walk in Tiananmen Square since the 
1989 massacre, and he does not utter a word about human 
rights----
    Mr. Callahan. But his reputation ought to be tarnished if 
indeed he goes to Africa--I mean, I think the human rights 
violations in Africa far surpass the problems in China with 
respect to the genocide that takes place there. And certainly 
this is something that should have been the theme of his visit. 
And your organization should emphasize to the administration 
that this ought to be the theme of his visit to China.
    Mr. Jendrzenjczyk. Exactly, Mr. Chairman.
    Mr. Callahan. It ought to be a human rights mission, not a 
trade mission, even though that is very important and important 
to me. This should be the reason for his visit, to address the 
human rights violations. And unless you make some effort prior 
to his visit--fortunately, I do not think he is going to 
promise China any money. At least I hope not. But certainly 
there is no need to promise money. They do not need money at 
this point.
    But your organization should be addressing the potential 
visit of the President now to make it a human rights discussion 
while he is there rather than an economic one.
    Mr. Jendrzenjczyk. Yes, Mr. Chairman, we have been talking 
to the White House and the State Department, in fact, for 
months about the President's visit, long before it was even 
officially announced. Frankly, our voice would be greatly 
amplified if this subcommittee were to write a letter to the 
White House and the Secretary of State spelling out the kinds 
of human rights steps that you believe--and we have recommended 
a few in our testimony--should be taken, that these steps 
should be, in fact, strict preconditions before the President 
sets foot in China. I think that would help enormously, and we 
did, in fact, do much the same with regard to the President's 
trip to Africa. We were in touch with the State Department and 
the White House long in advance of the trip. We were supportive 
of some of the things the President said and did, and as Mr. 
Roth indicated earlier, we were critical of opportunities the 
President missed on this trip.
    But I certainly agree that the trip to Beijing has enormous 
symbolic and political importance, and the President should not 
squander that and the leverage that it provides simply in 
exchange for a few promises.
    Mr. Callahan. I do not think that we should be as deeply 
into the policy of the executive branch of government by 
instructing the President about policy. I am talking about 
themes.
    Mr. Jendrzenjczyk. Right.
    Mr. Callahan. Certainly this committee can suggest to the 
President themes, and that theme ought to be that the primary 
mission to China will be to discuss human rights. But I do not 
think we ought to tie the President's hands to any designated 
instruction from Congress of what you can say and what you 
cannot say. I just think that it should be spotlighted that 
even above the economic impact--trade issues no doubt will be 
discussed with China--that the theme of his mission ought to be 
human rights; whereas, in Africa, it was seldom even mentioned.
    If you allow the President to leave here saying, well, you 
went to Africa and you did not mention human rights, it is all 
right to go to China and not mention human rights. So I think 
that individual members can express what organizations such as 
yours can address the President--you write the letter. If you 
want to tie his hands to policy, that is fine. The committee 
should not do that. And we are not going to do that. But at the 
same time, let him adopt the theme and let him adopt a program 
to make certain that human rights are addressed, and then the 
Congress can respond to those suggestions. But they are the 
professional policymakers, not the Congress.
    Mr. Salinas. The problem, Mr. Chairman, is that we are 
talking to the administration, we are trying everything we can 
to get this message across in the media. I do not know how many 
meetings my counterpart for Africa from our office attended 
with the National Security Council, with the State Department, 
with other NGOs, with the media, to make sure that they 
understood that just going to Africa was not the end of the 
visit, that that was not the whole goal. But the administration 
is still acting as if it was a success because they went there.
    So, in a way, obviously we are not suggesting that you tie 
anyone's hands, but even when Congress expresses its concerns 
to the administration, the administration looks the other way. 
For instance, on Mexico there have been several letters before 
the President's trip to Mexico and when he met with the 
President of Mexico, urging him to raise these issues in a 
public manner. The President did not. So we can only go so far.
    I think certainly your leadership and your involvement is 
one of the key ingredients for this to work.
    Mr. Callahan. Right. Mrs. Pelosi, in your absence, I have 
taken up your cause.
    Ms. Pelosi. Thank you, Mr. Chairman.
    Mr. Callahan. We have got to move on to the next witness, 
and certainly these two gentlemen will stay. But I did want to 
get the point in that--two points: one, that the President was 
almost silent on human rights problems in Africa during his 
visit, and, indeed, what this organization, Human Rights Watch, 
ought to be doing is focusing now on forcing the President to 
go to China with a theme of human rights rather than trade so 
it will be discussed more in depth than it was discussed in 
Africa.
    Ms. Pelosi. Thank you, Mr. Chairman. Again, thank you for 
holding this important hearing, because it will accomplish 
something, I believe.
    I just want to say one thing. When Mr. Roth was on earlier, 
representing Human Rights Watch, the general umbrella 
organization, he did spend some time talking about the Congo 
and Rwanda. And, the representative of Freedom House also 
mentioned the fact that it would be better when Secretary 
Albright goes to Africa another time to go to some of the 
striving democracies there rather than just to those countries 
where she was being photographed with the strong men of Africa. 
But this is a very important issue.
    Many of our colleagues were just on the trip with the 
President, and I know they will have some input for our 
committee. I would like to yield to our colleague, 
Representative Brown, if she could have----
    Mr. Callahan. I want to first--oh, you mean on----
    Ms. Pelosi. On the Africa trip.
    Ms. Brown. I just want to speak just a word on Africa. Mr. 
Chairman, you know as well as I do that the media choose what 
they are going to report to the American people. One of the 
things that will happen is that BET is airing the meetings and 
what went on, and I want to assure you that human rights were 
definitely raised in Africa. Some of the things that were 
brought up, included was the discussion about Uganda and the 
children. So those issues were definitely raised and discussed, 
and you will get a full report on that.
    Mr. Callahan. I very carefully predicated my remarks based 
upon news reports.
    Ms. Brown. Yes, and you are correct.
    Mr. Callahan. That is the essence of my discussion here 
today. Those of us who are concerned about human rights ought 
to force the President to share with the media and force the 
media to say this is a human rights mission.
    Ms. Brown. That is true, but the question is how do you get 
the media to focus on what we view as important.
    Mr. Callahan. I cannot answer that.
    Mr. Wolf?
    Ms. Pelosi. Excuse me, Mr. Chairman. It is still my time, I 
think.
    Mr. Callahan. Okay.
    Ms. Pelosi. I think that what we are trying to say here, 
with all due respect to the mention of it, is that the 
leadership in the White House has to elevate this issue of such 
consequence that that is the story of the day, of the trip. I 
am pleased to yield to----
    Mr. Wolf. I did not want the Africa issue to go without--I 
am going to ask questions in the next panel, as the chairman 
wants to do, but I did not hear the administration--and if I am 
wrong, I would like to see it submitted for the record so the 
committee staff could see what the President did say.
    With regard to Uganda, the Lord's Army. If you looked at 
``60 Minutes,'' Christiane Amanpour, where she did the report 
of the cutting off of the lips and the ears, the Lord's Army is 
being supported by the Sudanese Government, and there has been 
a lot of activity with regard to them coming into the villages 
and taking young kids away, cutting off their ears, cutting off 
their lips. And I think as the administration speaks out on 
behalf of the children, as they should, they should also be 
condemning the Sudanese Government that has been partially 
responsible for aiding the Lord's Army, which is coming in and 
doing this. And I cannot be critical to say if they have spoken 
out or they have not. But I think publicly they have got to be 
talking about this, particularly as they talk about Uganda and 
Sudan.
    I yield back.
    Mr. Callahan. Thank you.
    Ms. Pelosi. Mr. Chairman, if I may, if it is still my time, 
I did have a question for Mr. Salinas, but I am very eager for 
Ms. Williams to have her appropriate time, so I will submit it 
for the record. It is in regards to the training manuals of the 
School of the Americas, and you can respond to me on that.
    Thank you very much, Mr. Chairman.
    Mr. Callahan. Thank you.
    At this time, we welcome to our committee Congresswoman 
Brown, who, along with Congressman Kingston, have one of their 
constituents with us today. So at this time we will yield to 
the gentlelady, Mrs. Brown, to introduce our panelist.

                   Ms. Brown's Introductory Statement

    Ms. Brown. Thank you, Mr. Chairman. It was almost one year 
ago today that I first met Mrs. Williams and the family in my 
Jacksonville office. Since that time, I have had three trips to 
Ecuador to visit with her husband. One thing I want to say--and 
I want to make it real clear--that I have been an elected 
official for 16 years and I am not a Government basher. I am 
one that supports the Government. But I can tell you in this 
particular case--and I want you to listen very closely to Mrs. 
Williams--I think our State Department, in particular our 
embassy, has been very insensitive to this family, and I would 
just like for the committee to listen very closely to her 
story.
    I would like to submit my entire statement for the record.
    [The information follows:]


[Pages 533 - 536--The official Committee record contains additional material here.]



                 Mr. Kingston's Introductory Statement

    Mr. Kingston. Mr. Chairman, I am not sure when I first met 
the Williams family, but I know that this came to our office as 
routine casework, and we in our offices, like everyone else, do 
all kinds of routine casework. Frankly, it would not go away. 
It could not be resolved, and it wound its way to Washington. 
And I quickly found that it was not an easy call. I had kind of 
gone--maybe entered it a little bit hesitant--with a lot of 
hesitation, but now I do believe that Mr. Jim Williams is being 
held overseas not because of the action of our Government, but 
certainly the neglect of our Government has been a contributing 
factor in his not being brought to justice. And I appreciate 
the work that you have done, Ms. Pelosi, Ms. Brown, and the 
members of this committee in terms of trying to help resolve 
this matter, because we have not been able to get straight 
answers from the various Government agencies.
    I greatly appreciate the action and the questions that you 
asked, Mr. Chairman, this morning.
    Mr. Callahan. Mrs. Williams, for your information, this 
morning we discussed your particular case in great depth with 
Secretary Shattuck, and we expressed, I think, your views as to 
what the United States' responsibility is here, possible 
suggestions or possible steps this administration could take in 
your husband's defense, or in defense of any American 
imprisoned anywhere. We have requested that the Secretary 
establish a special desk because they have an office where they 
discuss all types of problems with Americans in foreign 
countries. But we have requested that the administration 
establish immediately a special desk that will deal solely with 
Americans imprisoned in foreign countries.
    So we really pressured the Secretary this morning to give 
us some immediate answers. We still have not received a 
response from Madeleine Albright with respect to Congressman 
Kingston's questions when she appeared before our committee. 
But I can assure you that you have the support of this 
committee, and anything that we can do to assist you towards 
justice being rendered to your husband, the committee will be 
willing to do. So we will offer you the opportunity now to 
submit your testimony.

                    Ms. Williams' Opening Statement

    Ms. Williams. Thank you. I would like to begin by thanking 
you, Chairman Callahan, for your support and your interest in 
Jim's plight. I would also like to thank Ms. Pelosi and, in 
general, Congressman Kingston and Congresswoman Brown for their 
continued efforts also. This has just been a non-stop, you 
know, process for your staff, and I am very grateful for that.
    I have to read my testimony because I have never done this 
before, but I would be willing to answer any questions 
afterwards. But I do ask for everyone in the room to listen to 
this story. It has been a nightmare that I am ready to bring 
closure to.
    My husband, Jim Williams, was the owner and president of 
Caribbean Fisheries of Jacksonville Beach, Florida, for 12 
years. This was a four-employee business, myself included, 
which imported fresh seafood and provided technical consulting 
services for its international customers. In that regard, Jim 
was retained by a South American company to assist in the 
planning and construction of a tuna-processing plant. Our 
nightmare began in April 1996 when Jose Castrillon, a principal 
of one of these companies in Ecuador, was arrested in Panama 
through cooperative efforts with the United States. Newspaper 
articles reported that Mr. Castrillon was considered a high-
ranking member of the Cali Cartel. At that point, FBI and DEA 
agents visited my husbandand me at our home in Jacksonville 
Beach, the evening of April 23rd, to discuss Jim's relationship with 
Mr. Castrillon.
    Jim assured the FBI that all of the business he had done 
with Mr. Castrillon was documented and legitimate. The agents 
who came to our home that evening said that if Jim did not 
cooperate with him, they would ``ruin our lives.'' Jim 
maintained his innocence, and naively thought that justice 
would prevail. Jim and our attorney, Isaac Mitrani, met twice 
with the FBI in order to convince the FBI that at no time was 
Jim Williams a knowing participant in any wrongdoing by 
Castrillon.
    As far as Jim knew, Mr. Castrillon was what he purported to 
be: a principal in a fishing concern in South America. But the 
FBI remained unconvinced as to Jim's innocence. The FBI agents 
told Jim and our attorney that they could be ``quite helpful'' 
to Jim, but Jim would have to implicate Mr. Castrillon as a 
drug trafficker and tie Mr. Castrillon to the importation of 
drugs to the United States. Jim could not support these 
allegations because he had never witnessed any such activity.
    After these interviews, our attorney advised the FBI in 
writing of Jim's plans to continue to travel and do business 
with his customers in South America. The FBI voiced no 
objection to Jim's continued traveling. Because the FBI did not 
object to his continued traveling, Jim, Mr. Mitrani, and myself 
had the impression that Jim was in no danger, despite his 
inability to implicate Mr. Castrillon.
    On September 18, 1996, Jim was arrested by the Ecuadoran 
National Police in his hotel in Guayaquil, Ecuador, at 10:30 
p.m. He was arrested without a warrant, nor was he in the 
process of committing a crime. Jim's room was searched without 
a search warrant, and there was no incriminating evidence found 
during that search. Jim was not presented to a judicial officer 
after his arrest. He was held in solitary confinement with very 
little food or water, was deprived of sleep for six days, was 
denied his request to call an attorney, and had a list of 
attorneys, which was outdated, but provided by the U.S. 
Embassy, taken away from him.
    The warrant for Jim's arrest was provided one week after he 
was thrown in jail, and he was charged with money laundering, 
even though the law clearly states in Ecuador that in order to 
charge someone with money laundering, there must be a prior 
drug-trafficking conviction. There was no drug conviction in my 
husband's case. Shortly after my husband was arrested, the FBI 
began to contact Isaac Mitrani and asked if Jim was finally 
ready to testify against Mr. Castrillon.
    One important thing to know about Ecuador is that they have 
one of the strictest drug laws in the world. This is a direct 
result of pressure by the United States for Ecuador to comply 
with the war on drugs. But the problem is that this is a Third 
World country with a corrupt justice system, and the result is 
thousands of people are put in jail and left there without ever 
receiving a trial. One of the provisions of this law is called 
preventive detention, and basically it means that all suspected 
drug offenders are held without bail. Fewer than 40 percent of 
all prisoners in Ecuador have actually been sentenced, and 
still the real drug traffickers are buying their way out of 
jail because it is so corrupt. Jim has refused to pay any 
bribes even though he has been approached several times.
    I know that both Human Rights Watch and Amnesty 
International, as well as the State Department, have all 
acknowledged the extreme violations of due process in this 
country. In fact, the Supreme Court of Ecuador has actually 
ruled that some provisions of this drug law are 
unconstitutional, but there is no one enforcing this.
    My husband has been held for 18 months now, and every phase 
of his prosecution has been absurd. There is no end in sight. 
He has filed habeas corpus appeals, but habeas corpus is never 
granted in narcotics cases. From the beginning, my husband's 
rights to due process have been violated. But the most 
troubling aspect of this whole situation is the United States 
Government involvement.
    We uncovered a letter in court documents written by a DEA 
agent, acting out of the Guayaquil office in Ecuador, addressed 
to the Ecuadoran police one month before my husband's arrest, 
stating that Jim was a member of Castrillon's international 
organization. They requested that the Ecuadoran police do what 
they can to ``disarm'' this organization. And in Ecuador, a 
police report serves as sufficient evidence to detain a 
prisoner--many times for years. It is very clear that it was 
the United States involvement that led to my husband's arrest. 
But the DEA has since recanted, and wrote a letter to 
Congressman Kingston and Congresswoman Brown that there are no 
charges or pending indictments against my husband.
    A Member of Congress in Ecuador has acknowledged the idiocy 
of their court system and agreed to sponsor amnesty legislation 
to release Jim, as long as the United States Embassy does not 
oppose this method. And this is our biggest problem. The Deputy 
Chief of Mission at the U.S. Embassy has told many people that 
my husband is a guilty man. Congresswoman Brown has heard from 
many high-level government officials in Ecuador that it is 
because of pressure from the United States Embassy that Jim 
remains in jail.
    On December 2nd of last year, 14 Members of Congress wrote 
to the Secretary of State and asked for an investigation of how 
the agency handled this matter. On March 4, 1998, Madeleine 
Albright promised members of this subcommittee that she would 
investigate the situation. And once again, the response came 
from Ms. Barbara Larkin that embassy officials had done 
everything in their power to help Jim. I can tell you--and 
Congresswoman Brown and Congressman Kingston can verify--that 
the United States Embassy has been my husband's biggest enemy.
    At this point I have done everything I can. As 
Congresswoman Corrine Brown stated to a news reporter, 
``American citizens incarcerated abroad should not have to be 
fighting their own government.'' My husband's detainment has 
been a gross violation of due process and international 
standards of human rights. I hope that you on this subcommittee 
can help me end this nightmare.
    I thank you for the opportunity to hear my story.
    [The statement of Ms. Williams follows:]


[Pages 541 - 543--The official Committee record contains additional material here.]



    Mr. Callahan. Thank you.
    Mrs. Brown, do you have any questions?
    Ms. Brown. Do I have any questions? I just want to say that 
I have spoken with the Congress there, and they were willing, 
just before Christmas, to just grant amnesty if we could get 
letters saying that we would not object. And we got letters 
from the DEA, and we got letters from the FBI, but we could not 
get a letter from the State Department. And it is hard for us 
to believe that they personally feel that their visas would be 
taken if they do what in their opinion they feel is right. And 
there have been several articles in their paper stating that 
our Government would take their visas if they let this person 
go. It is just ludicrous.
    Let me tell you, just as far as human rights, those 
conditions in the prisons are the worst conditions in the 
world. I have been working with this for over a year, and one 
person, a young man, 16 years old--when he was arrested for one 
stick of marijuana, he had served four years in prison in the 
worst conditions in the world. I was able to get that person 
released, and I have been able to get some of the Ecuadoran 
prisoners released. We are talking about when they go in and 
raid, they arrest everybody in the room because you associate 
with someone, for instance or we are sitting here at the table 
and Jack has one stick of marijuana, they arrest all of us, or 
they go to the home, they take the entire family.
    So the conditions, you talk about human rights violations, 
the conditions in the prison are the worst. Since I have been 
working with them, they have declared their prison in a state 
of emergency, and they are trying to work to clean it up. And 
we have gotten some assistance from, I think, the World Bank as 
far as giving them some assistance to try to set up a judicial 
system that is operational. Presently, it is not functioning.
    Mr. Callahan. Mr. Kingston?
    Mr. Kingston. Mr. Callahan, I want members of the committee 
to go back to one thing that Ms. Williams said about that the 
threat, which apparently came from our Government, the FBI to 
be specific, that they would ruin the Williams' life.
    Now, I know this is tender, but, Ms. Williams, you have 
lost a business.
    Ms. Williams. Yes.
    Mr. Kingston. You have no health care.
    Ms. Williams. Total financial destruction for Jim and I. We 
have been married for 8 years, and the only thing I have right 
now left is my home, and my family is financially supporting me 
in that they know I am lobbying for Jim's release. And Jim and 
I lost everything.
    Mr. Kingston. And you were working for a bank and went to 
work with your seafood company as a partner, and now that is 
gone. And your brother-in-law, who runs a restaurant, is 
footing many of your expenditures.
    Ms. Williams. That is true also.
    Mr. Kingston. So, indeed, your life has been ruined.
    Ms. Williams. My life is totally ruined, and I know that 
Jim's health is in jeopardy. My health is now in jeopardy 
because of the stress that I have gone through, the emotional 
roller coaster of thinking Jim is coming home. You know, I live 
my life not knowing when I am going to have Jim back home in 
the United States.
    I honestly put full blame of Jim's arrest on the United 
States Government, and now I am asking the United States 
Government to help me bring Jim home.
    Mr. Kingston. And I know, Mr. Chairman and members of the 
committee, she only makes that statement after a year and a 
half of this seemingly endless runaround. And what Mrs. Brown 
and I have found as we have tried to take this on is that the 
Government agencies that we are working with are clearly not 
trying to help Jim Williams. And I would not have said that 6 
months ago, but they are clearly not trying to help him. And it 
reminds me of Kenneth Starr versus Bob Bennett. It is really 
more of this legal--``well, let's split this sentence and just 
change it a little bit here and let's do this.'' They are 
splitting hairs rather than saying you have got an American 
citizen in a foreign jail that needs justice. And we have said 
repeatedly he may be innocent, he may be guilty, but he is not 
getting due process. We know that for a fact.
    Ms. Williams. One other point, just real quick, is that we 
have said all along that if our Government thinks Jim is this 
bad guy, then indict him and bring him back to the United 
States, because Jim and I would welcome a court of law in the 
United States to face the accuser, being the DEA. I mean, all 
of our records are in the United States, and yet he has been 
charged with money laundering in a foreign country where he 
owns nothing.
    Mr. Callahan. Mrs. Pelosi?
    Ms. Pelosi. Thank you, Mr. Chairman.
    Thank you, Mrs. Williams. I know it was difficult to share 
your story with us, to revisit all of this over again. I was 
taken by the interest of my colleagues, Mr. Kingston and Ms. 
Brown, and the fact that they believe that all remedies have 
been exhausted as far as the U.S. Government trying to help. 
But the question is: What has been the effort? Has it been a 
good effort?
    I imagine you must have some legal fees along the way here.
    Ms. Williams. I have quite a bill sitting on my desk at 
home. We just had a fund-raiser on St. Simon's Island to pay 
legal fees. I mean, Jim and I will be paying legal fees for the 
rest of our lives.
    Ms. Pelosi. Mr. Chairman, I just wonder, there have been 
situations where if we can document that the FBI and the U.S. 
Government were complicit in Jim being arrested without a 
warrant and charged with a charge that has no predicate--it is 
supposed to be predicated on his having been--you cannot be 
charged with money laundering unless you have been found guilty 
of drug trafficking.
    If the U.S. Government had any role in that, I just wonder 
if there is not some way to recapture at least the legal fees 
for the Williams family. If this is as it is described--and I 
believe that it is. But if we can prove the case that this is 
the case, that at least there could be that.
    Clearly, your family, it will be a long time before you 
will be made whole from this. You have suffered so much 
already. They cannot give you the last 2 years back. But there 
should be at least some attempt at some sense of justice about 
it. And I don't know what the recourse is that we have. Do you 
know, Mr. Wolf?
    Mr. Wolf. Would the gentle lady yield? Yes, there is a 
recourse. This is on your time because I do want to ask some 
questions. We put a provision in the transportation 
appropriations bill several years ago to reimburse those in the 
White HouseTravel Office that had been unfairly fired by the 
Clinton administration. I put it in the transportation appropriations 
bill on the House side, Senator Dole put it in on the Senate side, 
reimbursing them for their costs.
    Also, in the last Congress, we put in--and I offered the 
amendment--in the Treasury appropriations bill to reimburse 
Secret Service agents who had been involved in the same 
activity, again, by the Clinton administration, and they were 
reimbursed with regard to their legal fees. My staff will share 
with your staff both of those. So there is precedent in the 
Appropriation Committee. One we did in transportation 
appropriations for the White House Travel Office, and one we 
did in Treasury appropriations. But we will share that with 
you.
    Ms. Pelosi. That sounds like a good model. I do not mean to 
say that this in any way would compensate for what you have 
been through, but I do think that, first and foremost, we have 
got to get your husband back.
    Ms. Williams. Jim home.
    Ms. Pelosi. First and foremost. But in the course of that, 
it will probably involve more legal fees in the meantime, and 
you certainly have to have the wherewithal to do that. I do not 
know if it is possible to put something in our bill, Mr. 
Chairman, or whatever, but I certainly hope that we can find 
some way to mitigate the suffering that Mrs. Williams and her 
family have suffered so far.
    Thank you again. Thank you, Mr. Chairman.
    Mr. Callahan. Well, you know, I am not an attorney, and I 
do not even want to be an attorney. I do not apologize for 
that, incidentally, but, you know, under current law here in 
this United States of America, if Jim Williams was a mass 
murderer sitting in prison, the United States would furnish him 
an attorney, and regardless of the evidence. And certainly 
because he is incarcerated in a foreign prison, an American 
family and citizen is being bankrupted simply because the 
United States of America apparently made some accusations that 
led to his arrest.
    So, with respect to an appropriation, that would be no 
problem, but that will not resolve this situation. We can 
resolve those problems after we have proper judicial procedures 
followed. I understand that the Ecuadoran Government will 
indeed release him if the United States of America would 
recommend it. So, obviously, there must be a problem. The FBI 
tells us, all of the agencies tell us, that they have nothing 
on Jim Williams concrete or definite. And so the Ecuadoran 
Congress says, If you will write us a letter to that effect, we 
will let him go.
    Ms. Williams. Right.
    Mr. Callahan. So they tell us there is nothing there. They 
tell the Williams family there is nothing there. And yet they 
refuse to write a letter to allow him to come here.
    If he is dealing in drugs that were coming to the United 
States, which obviously if he were--I mean, he wouldn't be 
shipping them to France--then he would be in violation of U.S. 
law, and the U.S. Government could indict him if that were the 
case.
    So I do not know what else we can do, Ms. Williams. We have 
limited authority even under our judicial system. But I think 
what we did this morning by almost demanding that Secretary 
Shattuck create an international Americans in prison desk that 
is an advocate of the Americans, not an advocate of the FBI, 
not an advocate of the State Department, not an advocate of 
anything, but an advocate of justice for American people being 
punished in foreign jails. So, I mean, we have dozens of these 
cases that need the same attention.
    Ms. Williams. Right.
    Mr. Callahan. And we probably have dozens of cases that we 
are unaware of because the families of the inmates in a foreign 
country have not come to us. But I do not know what we can do 
to further insist that justice prevail, if I could wave a wand, 
if I could pass a law, if I could do anything, I would. We 
tried to, I think, come forth with a resolution and expression 
of Congress to give some support to the Ecuadoran Congress, and 
we have written letters to them. But now, as I am told, if the 
State Department would simply write a letter indicating that 
they have no reason to believe that he is involved in this 
conspiracy that they contend he is, they will let him go.
    So why does the State Department--what do they tell you is 
their reason? Why not? When you ask this question, what do they 
say?
    Ms. Williams. They are basically saying we do not have the 
authority or the expertise to look into the evidence in this 
case and that we only ask that Jim be allowed due process.
    Ms. Brown. Mr. Chairman, would you yield for a second?
    Mr. Callahan. Yes.
    Ms. Brown. The Ecuadoran officials have conveyed to me if 
they had something with the sense of the Congress, some 
statement that they had some support from the Congress, they 
would be willing to release him, because we have not been able 
to get a statement from the State Department or the Embassy. We 
have gotten it from the other agencies involved.
    Basically, all we are saying is if he is guilty, then try 
him here. But we just have not been able to get any kind of 
positive response from the United States Embassy in Ecuador.
    Mr. Callahan. Congressman Wolf?
    Mr. Wolf. Thank you. That is a terrible story. I almost 
cannot believe it. It is like a nightmare that your own 
Government would be working against you.
    One, I think the committee--I think Mr. Kingston should 
offer the amendment. The committee should put language in the 
committee report asking--again, the committee has stated 
clearly that they do not know his guilt or innocence, but 
asking, one, that in the record, show a letter from DEA--I 
assume you have that letter. Do you also have a letter from the 
FBI?
    Ms. Williams. The FBI.
    Mr. Wolf. Also a letter from the FBI, also doing a letter 
to Director Freeh verifying so there is no doubt, and then, 
thirdly, let the committee report language state that it is the 
position of this committee that--and the chairman and Mr. 
Kingston could work it out--Mr. Williams ought to be permitted 
to come home. If he is guilty, let them charge him here. If he 
is not--but it is the position, and then we will have a roll 
call vote. When this comes up, it will be in the committee 
report. That may give you enough to go with.
    I will work with Mr. Kingston. I will be glad to do 
anything that we can to help. Also, this is a case where the 
State Department gets clientitis. They begin to think in terms 
more of the country that they are in than of the people that 
they represent.
    Ms. Williams. Exactly.
    Mr. Wolf. To me, if the DEA says he is not, the FBI sayshe 
is not, then I think the committee ought to just put that in a report. 
That would give you enough to go back, you and Jack to go back to the 
Ecuadoran Government and say here you have an Act of Congress, which 
this administration will have to sign because they will not have their 
appropriations bill.
    Lastly, though, I think the committee should also put 
language in there or send a letter by everyone insisting that 
Mrs. Albright either send a letter saying that they have 
information on Mr. Williams, that he has been involved, or they 
do not have information that he has been involved. I mean, it 
is crazy. They are taxpaying people and they have their own 
Government working against them. And I have not been in this 
prison, but I have been in prisons in China and others, and I 
watched that movie ``Midnight Express.'' And who knows what 
goes on in some of those places? The thought of an American 
citizen there in this kind of catch-22 situation is crazy.
    So I would hope--and I would offer this motion or do 
whatever we have to do so we can do that. My office will also 
share with Mr. Kingston and the committee the language that we 
used in the transportation appropriations bill for the White 
House Travel Office where the Clinton administration illegally 
fired these people, and we paid their legal fees, and also the 
language that we used on the two Secret Service agents that 
were involved. I think if we combined those two, and this bill 
may be one of the first--
    Mr. Callahan. If the gentleman would yield, maybe we could 
go one step further, too, during this process, and I certainly 
would have no objection to inserting language in our bill. But, 
you know, if the FBI is telling us one thing publicly and 
another thing privately, maybe we ought to go into executive 
session and to get the FBI here.
    Mr. Wolf. I think that is a great idea.
    Mr. Callahan. As well as the DEA, as well as the State 
Department, in here to tell us if there is something we should 
know, we ought to be aware of it. If they have absolute 
evidence of Mr. Williams' guilt, then we ought not be defending 
him. But they do not have that. So if they want to hide under 
the cloak of privacy and under the veil of confidential 
information that may impede the ability of them to eradicate 
drugs worldwide, that is fine. Maybe we ought to bring them 
into executive session.
    Mr. Wolf. I think that would be an excellent idea. I think 
the chairman has--bring Mr. Freeh and the head of the DEA in 
and just ask them.
    Mr. Callahan. Let's bring them all in at one time because 
the Ambassador tells us one thing, the FBI tells us another, 
DEA tells us another, the Secretary of State says she will look 
into it. The Assistant Secretary for Human Rights said he is 
going to do something about it. But what we need to do is to 
get them all in one room in a closed session and have them tell 
us why not. If there is something we do not know, then we ought 
to be told as Members of Congress. But we will entertain both 
the possibility of bringing Mr. Freeh here. This is the time of 
year, as you well know, when they need us. It is appropriation 
time. But we will bring them all into one room and go into 
executive session and find out if there is something they can 
tell us in executive session. And if they cannot tell us 
anything, then force them to assist Mr. Williams in getting out 
of prison.
    Mr. Wolf. If the gentleman would yield for a second, I 
think that is a great idea. Louis Freeh is a constituent of 
mine. He lives in my congressional district. When I go back to 
my office, I will call Mr. Freeh myself and ask him, and tell 
him that the chairman is going to do this, and ask Mr. Freeh to 
tell me one way or the other.
    I would just end with anything we can do working with the 
chairman and Mr. Kingston, Ms. Brown, and Ms. Pelosi, I would 
be willing to do that.
    Ms. Williams. Thank you.
    Mr. Wolf. Thank you.
    Mr. Callahan. Mr. Kingston?
    Mr. Kingston. Mr. Chairman, I certainly appreciate that, 
Mr. Wolf, and I appreciate the interest and the earnestness of 
this committee.
    To give you just one little vignette--and I can say this: 
that Ms. Brown and I can just tell you stories upon stories. 
Each week, you know, this has a new turn. But at one point--I 
am not sure which enforcement agency it was, but they said, 
well, yes, we know he is guilty. They said we believe he is 
guilty, you know, this kind of get Ms. Williams out of the room 
so she will quit crying in front of us, and we will tell you he 
is guilty. Then, you know, they will say something like, for 
example, ``phone calls from the boat,'' you know, ``lots and 
lots of phone calls.'' And those have already--that is last 
year's news. He made lots and lots and lots, an inordinate 
amount of phone calls from his boat. But he was working with 
them as a legitimate customer.
    I do think that what probably happens, when Jose Castrillon 
brought him in, he was using him and was using his company as a 
fence, and he brought in Jim Williams and other people to do 
legitimate business functions, and they do not know the guy's 
whole story.
    But what would happen is Ms. Brown and I would talk to our 
agencies to really try to determine if they felt he was guilty. 
They would say yes, because of so-and-so. And then we would 
check that out and find out, well, that wasn't the case at all. 
That was a half truth or a half story, and then we would get 
the full story and find out that there is nothing to it. And it 
is very difficult to bring this group into a room without Ms. 
Williams or her lawyer in there because I have found them to be 
less than forthcoming to our office in terms of really trying 
to resolve the matter, as much as they have been very 
forthcoming in trying to cover themselves. It is just so hard 
to find the head of the snake.
    Then you have a middle-class businesswoman who is going 
broke, and you have got a Government agency that can play this 
game all day long: I will write you a letter, I will give you a 
response, the meeting is postponed until next week, that sort 
of thing. And that is where we have been for a year.
    I can say this, that if they wanted to get Jim Williams 
out, he would have been home for Christmas in 1996. They do not 
want to, and I cannot quite figure out why. It might be face-
saving. It might be international poker. I do not know what it 
is. But the man is not getting justice.
    Mr. Callahan. In any event, we appreciate the three of you 
appearing before the committee. I think Ms. Pelosi has some 
questions to some of the other panelists, or if any other 
member has questions to any of the panelists. Keep in mind that 
we have to vacate this room at 1 o'clock and it is 1:05.
    Ms. Pelosi. Thank you, Mr. Chairman. I will be 30 seconds.
    I look forward to working with Representatives Brown and 
Kingston on the Williams case. But to get back to the point of 
whatever assistance we can provide, there are other cases as 
well, the Laurie Berenson case and others, where this is an 
example. I am so glad you made the point so forcefully this 
morning, so as we resolve this one, hopefully we will be able 
to resolve others, because guilty or innocent, the U.S. citizen 
deserves due process wherever. And I think that there can be no 
argument against that, no matter what the State Department has, 
there can be no argument against that.
    I do want to thank Mr. Jendrzenjczyk and Mr. Salinas for 
their very fine testimony and for their strong leadership on 
these issues and for the constructive nature of their 
testimony. The 12-point program, Mr. Salinas, and the 
suggestion you made about the President were very useful. I do 
still say that every time the Administration makes or states a 
policy and we say okay, then they turn around and they are not 
there again. And it is hard not to be critical, but the 
constructive nature, I think, of your testimony will be very, 
very useful, and I thank you for what you have done.
    Mr. Jendrzenjczyk. Thank you, Ms. Pelosi. I just would make 
one other suggestion, Mr. Chairman, and that is, after the 
President's trip to China, you might ask Mr. Shattuck to come 
back and give you the kind of detailed report that I think he 
would be delighted to provide on all the things the President 
did, especially on the issue of human rights.
    Thank you.
    Ms. Pelosi. I think that is very important, and this is 
going to sound unpleasant, but this is an unpleasant subject. I 
do not see how we can go to Robbins Island and say, oh, my, 
Nelson Mandela was here for 18 years--and Wi Jingsheng was in 
prison for most of his adult life, at least 19 years. Nelson 
Mandela was in prison longer than he was at Robbins Island. 
Honoring human rights by going after the fact and then ignoring 
the violations that are occurring in another part of the world, 
apologizing for not doing more on Rwanda, oh, that is great. I 
am sorry. It is inadequate. What should we have been doing? 
Maybe we couldn't do anything. But it should be a decision as 
to whether to do something or not, rather than to not do 
anything and then apologize for not doing it and think that 
balances the scale, if indeed these are supposed to be 
important priorities.
    So I think the suggestion that Mr. Jendrzenjczyk made is 
very good.
    Mr. Callahan. Thank you.
    Ms. Pelosi. Excuse me. I just want to commend our chairman 
because I think it is just great that you had this hearing, and 
the fact that you fully attended it and were very involved in 
all of it, it sends a very clear message about its importance, 
and I would like to thank you, Mr. Chairman.
    Mr. Wolf. I would like to second that, Mr. Chairman. I 
appreciate you having the hearing.
    Two points. One, I think you should urge and we should urge 
that the President submit a list of prisoners when he goes to 
China. He should have a firm list, the way that Reagan and 
other people had. There must be. And I would urge you to speak 
out asking that there be a list, that the committee ask that 
there be a list. I think the least we can do for particularly 
the Catholic bishops and the priests and some of the pastors 
and evangelicals and some of the Muslims, even, and certainly a 
number of the Buddhists in Tibet. There ought to be a sacred 
list that everyone says this is a valid list that these people 
have gone through literal hell, and we should ask that they be 
released.
    I urge you to keep speaking out on the Indonesia thing. I 
read your statement. I think we are ready. I believe 
fundamentally this administration is ready to switch its 
position on Indonesia. I think they are feeling--they know they 
have the ability to change conditions for people in Indonesia, 
and because of the oppressive nature of that government, it has 
caused much of this problem that they currently have. And so 
just keep pushing and pushing on Indonesia, and I think maybe 
they have the ability--they know they have the ability. I sense 
they may be ready to actually use that ability. So I would just 
encourage you to do that.
    Thank you very much, Mr. Chairman. I have no other 
questions.
    Mr. Callahan. The meeting is adjourned.
    [Questions and answers for the record follow:]

               Submitted to Assistant Secretary Shattuck

        Questions for the Record Submitted by Congressman Porter

                                 turkey
    Question. You and I have had several discussions recently about 
human rights in Turkey. These discussions have centered around the 
Yilmaz government's human rights initiative and a proposed helicopter 
purchase by the Turkish government. It seemed to me earlier this year 
that the Administration was beginning to take a tougher stand on human 
rights. However, I was dismayed to learn last week that Istanbul will 
be the site of the next OSCE Summit, a decision that could have only 
been reached with US support. Given the fact that there has so far been 
no meaningful progress on human rights by the Turkish government--in 
fact, the recent public spat between the civilian government and the 
military could reasonably be seen as a step backwards--how do we 
reconcile supporting this decision with our efforts to move the human 
rights ball forward?
    Answer. When I traveled to Turkey this past February and met with 
leading Turkish government officials, I stressed the need for the 
Turkish Government to take concrete, significant steps to address its 
torture problem, decriminalize freedom of expression, and lift 
restrictions in the Southeast.
    Secretary of Defense Cohen reinforced this message when he traveled 
to Turkey this past April.
    The administration's decision to support an OSCE Summit in Istanbul 
will help focus international scrutiny on Turkey's human rights record.
    When viewed in the context of our strong support for holding the 
OSCE's Implementation Review Meeting in Istanbul, at which Turkey 
itself would be in the spotlight, the Summit will provide a platform 
for a discussion of human rights and democracy.
    It will also provide leverage to those officials in the Turkish 
Government and those civil society representatives who seek to advance 
reforms of Turkish human rights policy and practice.
    The prospect of a Summit of 54 world leaders will also provide 
Turkish authorities with an added incentive to live up to their human 
rights commitments.
                                nigeria
    Question. A couple of week ago, Pope John Paul visited Nigeria. He 
called on General Sani Abacha to release political prisoners and make 
substantial improvements in the human rights situation there. Is our 
government doing anything to follow up on the Pope's call for action?
    Answer. The United States Government monitors closely the human 
rights situation in Nigeria, and has long made clear its opposition to 
the Nigerian Government's suppression of democracy and fundamental 
rights. The USG has consistently called on the Nigerian Government to 
release political prisoners, and to allow all prisoners access to legal 
counsel, family visits, and medical care. We have also called on the 
Abacha regime to either release detainees to their families, or try 
them expeditiously, in full accordance with international standards of 
due process. We have done this in a variety of fora; at the UN General 
Assembly, at the Human Rights Commission in Geneva, in meetings between 
Nigerian officials and State Department officials in Washington, and in 
Lagos, in meetings between embassy personnel, including the ambassador, 
and regime officials. We also meet regularly with members of Nigerian 
human rights organizations here in the U.S. and in Nigeria. As you 
know, the United States maintains a range of sanctions against the 
Nigerian Government, including the banning of military sales and 
services, a visa ban on military officers and civilian officials who 
formulate, implement or benefit from policies that impede Nigeria's 
transition to democracy, and travel restrictions on Nigerian officials 
visiting international organizations in the United States. We welcome 
the additional authority of the Pope's call for action.
                                 kosovo
    Question. I am increasingly concerned about the situation in Kosovo 
and about the growing intransigence of Slobodan Milosevic in the face 
of an inconsistent international posture. It is my understanding that 
Serbian forces in Kosovo are fortifying their positions and that the 
rhetoric out of Belgrade has reached a level comparable to that of the 
conflict with Croatia. What are we doing to ensure the protection of 
the civilian population in Kosovo and prevent further atrocities from 
occurring?
    Answer. The U.S. condemns violence from all sides in Kosovo, but 
recognizes that the Serbian authorities are responsible for the 
majority of the incidents. Slobodan Milosevic's intransigence and 
policy of repression have been the major obstacles to beginning 
negotiations with the Albanians, which is the only way to end the 
violence.
    We have been working with both sides, in coordination with our 
allies, to get negotiations started. After intense diplomatic efforts 
by special Representative Gelbard and Ambassador Holbrooke, the two 
parties agreed to begin direct talks on May 15.
    We will continue our diplomatic efforts to support a successful 
conclusion to the negotiations.
                                 tibet
    Question. I have recently seen several reports from different 
sources indicating that the human rights situation in Tibet is at its 
worst point in years. Among the most impressive and thorough is the 
International Commission of Jurists' report that documents a 
comprehensive campaign of abuse and repression in Tibet. The President 
will be traveling to China later this year, presenting an historic 
opportunity to raise this and other important human rights issues with 
the Chinese government at the highest level. Are these plans for him to 
raise the Tibet issue with the Chinese during his visit? Will he visit 
Tibet during this trip? Is there any plan at this time for Gregory 
Craig, the Special Coordinator for Tibetan Issues, to accompany the 
President on this trip?
    Answer. Human rights issues in China, including Tibet, will be 
squarely on the agenda for the June summit in Beijing. The President 
will continue discussions begun at the October 1997 summit on key human 
rights issues and press for progress in core areas such as Chinese 
cooperation with the international human rights regime, the release of 
political and religious prisoners and greater respect for Tibet's 
unique religious, cultural and linguistic heritage and the importance 
of resuming dialogue with the Dalai Lama.
    Secretary of State Albright raised the issue of Tibet in her high-
level meetings during her trip to Beijing in May, clearly signaling the 
importance the President attaches to the issue of Tibet. She 
underscored that we strongly believe that resumption of dialogue with 
the Dalai Lama would be an extremely positive step that China could 
take in the area of human rights.
    The President is planning to travel to Beijing, Shanghai, Xian, and 
Hong Kong. He will raise human rights issues of concern including the 
human rights situation in Tibet at the highest levels and in a variety 
of fora.
    Gregory Craig accompanied the Secretary of State on her recent 
visit to China. Final decisions have not yet been made about who will 
accompany the President on his trip to China.
                                 burma
    Question. Your bureau has been administering the Burma refugee and 
democracy money for several years now. Every year there have been 
extreme delays in processing the funds. In earlier years, State claimed 
that they were working out the logistics of administering a new program 
but it was our understanding that last year you had worked out the 
problems. However, as of yesterday, the grantees still had not received 
a Request for Applications for the Burma program. This is an 
unacceptable delay and is causing serious problems in the field. 
Moreover, State again did not request any money for Burma in their 
Congressional Presentation document for FY 99, despite the worsening 
human rights and refugee situation there. When can we expect to see an 
RFA for the FY 98 Burma money sent to applicants? After an RFA is sent, 
what is the timeline for distributing this funding? What are the 
reasons for the continued annual delays in running this program?
    Answer. We would like to first note that the FY 1998 budget was 
adopted only last December, making that month the effective starting 
date of our program year. Since all assistance money is initially 
appropriated to AID, it must then be transferred or allocated to state 
for those programs, such as the Burma Earmark, which we administer. 
This fiscal year, however, there were a couple of new steps in the 
process, one of which is that AID legal offices have been reviewing the 
provisions of the memoranda of agreement under which they allocate 
money to state to ensure that these provisions fully conform to the 
Government Performance and Results Act.
    The department prefers not to cite specific countries in its 
congressional presentation budget requests since there are many demands 
on our very scarce regional democracy funds, and we want to avoid 
creating expectations that we cannot meet. Instead, we try to maintain 
flexibility by asking for regional democracy funds that can be used to 
respond to human rights and democratization needs that arise anywhere 
in the region.
    We now have out for clearances the draft request for applications 
(RFA) for the FY 98 Burma program, and the congressional notification 
has gone to the hill. We expect to send the RFA to applicants next 
week. Competition regulations require us to give applicants a 
reasonable time to respond, after which we will evaluate proposals for 
their merit. Given the time required for each of these steps, we expect 
to take our first decisions on awards sometime in July.
                                  iraq
    Question. It is our understanding that during Kofi Annan's last 
visit to Washington, President Clinton showed the Secretary General the 
op-ed page from the Washington Post which commemorated the Halabja 
massacre, in which Saddam Hussein killed over 5,000 Iraqi Kurdish 
civilians with chemical weapons. Although we have moved away from an 
immediate military confrontation with Saddam, I believe that the US 
must continue to lead the world in confronting Saddam for his 
atrocities and crimes against humanity. What is the Administration's 
plan to keep human rights as a focus in our dealing with Saddam 
Hussein? How will we keep this issue in the forefront at the UN and in 
the minds of our allies, particularly those who have been quick to 
advocate a rapprochement with Saddam?
    What actions will your bureau and others in the State Department 
take to support the international campaign to indict Saddam Hussein and 
his henchmen as war criminals?
    Answer. We condemn the Government of Iraq's human rights abuses of 
the Iraqi people. The international community must exert pressure on 
the Iraqi regime to accept and comply fully with all relevant UNSC 
resolutions, including those calling for the end of the repression of 
the Iraqi people. Sanctions must not be lifted until all resolutions 
have been complied with fully.
    At the recent U.N. Human Rights Commission in Geneva, the United 
States co-sponsored a resolution that called upon Iraq to, inter alia, 
cease the repression of its own people, cease all acts of torture, 
including the amputation of hands and feet, cease all acts of internal 
and external terrorism, cease all actions which have the effect of 
denying food, medicine and other humanitarian goods to vulnerable 
populations, and allow human rights monitors throughout Iraq as 
requested by the Special Rapporteur. The resolution, which passed 35-0, 
extended the Special Rapporteur's mandate and took note of the Special 
Rapporteur's conclusions that human rights violations in Iraq are 
systemic and that--absent a change in the political-legal system--these 
human rights violations can be expected to continue.
    We have long supported the dedicated efforts of human rights 
organizations and Iraqi opposition groups who demand an accounting of 
the Iraqi regime's atrocious record on human rights and its possible 
war crimes, including possible genocide. These groups have been gaining 
strength. With the funds Congress has just appropriated, we will be 
able to give them financial as well as moral support.
    Making a case for a war crimes indictment of Saddam Hussein and key 
members of his regime is the role for an internationally constituted 
investigation leading to an international tribunal. With the successes 
of the Bosnia and Rwanda war crimes tribunals, it has become 
increasingly clear that such tribunals are a viable international 
response to the types of crimes which Saddam and his regime are alleged 
to have committed.
    The U.S. Ambassador-at-Large for War Crimes Issues, David Scheffer, 
recently visited Kuwait to consult with the Government of Kuwait and 
non-governmental organizations concerning war crimes alleged to have 
been committed by the Iraqi regime.
                               indonesia
    Question. I have not supported efforts to tie explicit conditions 
on human rights to the US contribution to the International Monetary 
Fund, but I do believe that we must take this opportunity to increase 
pressure on the Soeharto regime to make political changes and to 
improve the human rights climate in Indonesia, particularly in East 
Timor. I also believe the US governors at various multi-lateral lending 
institutions must take more seriously the current US laws that instruct 
them to take human rights--particularly political rights, labor rights 
and environmental concerns into account in making lending decisions.
    What specific steps is the Administration taking to increase 
pressure on Indonesia to reform its political and human rights 
situation? With respect to East Timor, are we discussing the need to 
allow a referendum there with the Indonesian government? What is your 
Bureau doing to educate and assist US governors at the international 
financial institutions on fulfilling their statutory obligation to 
factor human rights, labor rights and environmental concerns into their 
voting? Are you aware of any work by other Administration actors on 
this front?
    Answer. You have seen the statements from the White House and the 
Secretary over the past days, calling for political reform and urging 
the government to enter into a dialogue with the people voicing 
opposition to the current government. The US was the first country to 
support publicly the calls for political reform in Indonesia, and we 
are continuing to look for ways to encourage restraint on the part of 
the armed forces. We have taken a firm stand opposing the use of 
excessive force by the military. Permitting peaceful protest, 
restraining the military, and beginning a dialogue to promote reform 
are the key elements needed now to avert more violence and the 
resulting political and economic turmoil; the Indonesian authorities 
are well aware of our views. All decisions on further lending by the 
IMF, World Bank and ADB are on hold, and we will be evaluating further 
decisions based on our commitment to help the Indonesian people.
    We take the legislation regarding the need to factor human rights, 
labor rights and environmental concerns into the decisions made by the 
international financial institutions seriously. We believe that part of 
our Bureau's role is to provide correct and objective information about 
the human rights situation in each country, which we do through the 
Country Reports, through consultations within the Department and, at 
times, with the officials from these institutions directly. For 
example, Department officials, including DRL, have met recently with 
representatives of the US Executive Director's office at the IMF. We 
work together with the regional bureaus and other agencies to ensure 
that human rights issues are considered in each decision regarding 
assistance.
    We continue to support the UN mediated negotiations as the best 
forum for progress on the situation in East Timor. We have stayed in 
close touch with Ambassador Jamsheed Marker, the Secretary General's 
personal representative, and have encouraged the Portuguese and 
Indonesian participants to increase their efforts to reach consensus on 
steps that would lead to real improvements on the ground for the East 
Timorese. We have also urged the government of Indonesia to reduce 
troop levels and ensure that abuses by military forces in East Timor 
are punished. We are working to ensure that the problem of East Timor 
is not overlooked in the more general concerns about the deteriorating 
situation in Indonesia.

                   Submitted to Amnesty International

            Questions for the Record Submitted by Mr. Torres

    Question. Since you were asked questions about Africa and you made 
clear that you do not focus on Africa, is there any Africa material 
Amnesty International USA would like to include for the record which 
pertains to US policy towards Africa?
    Answer. Yes, I include a briefing paper entitled ``Civil Society 
and the African Renaissance'' and a March 1998 document entitled 
``Africa: Recommendations to the US government for the promotion of 
human rights in Africa.''



[Pages 556 - 572--The official Committee record contains additional material here.]















                           W I T N E S S E S

                                                                   Page
Atwood, Brian....................................................   107
Baratta, Mira....................................................   421
Grandmaison, J.J.................................................     1
Harmon, J.A......................................................     1
Jendrzenjczyk, Mike..............................................   421
Munoz, George....................................................     1
Roth, Kenneth....................................................   421
Salinas, Carlos..................................................   421
Shattuck, John...................................................   421
Williams, Robin..................................................   421














                               I N D E X

                              ----------                              


                  Agency for International Development

                     (Brian Atwood, Administrator)

                                                                   Page
Accounting System Changes........................................   265
Africa...............................................137, 206, 263, 298
Agriculture...............................................248, 270, 411
AID Staffing...................................................248, 260
AIDS.............................................................   396
Basic Education..................................................   246
Biodiversity Programs............................................   400
Bosnia.........................................................259, 394
Campfire Funding.................................................   398
Cash Grants......................................................   382
Central and Eastern Europe.......................................   373
Chairman Callahan's Opening Statement............................   107
Child Survival............................................210, 264, 389
Citizen Participation Programs...................................   287
Climate Change Initiative........................................   392
Corruption.......................................................   383
Credit Authority.................................................   250
Democrat Transitions Budget......................................   364
Democratic Republic of Congo.....................................   390
Development Credit Authority.....................................   272
East Timor.......................................................   143
Economic Support Fund............................................   403
Family Planning Program..........................................   268
Global Climate Change............................................   149
Haiti................................................148, 208, 241, 252
Independent Media................................................   287
Indonesia........................................................   255
Infections Disease Funding................................211, 395, 406
Inspector General................................................   261
International Trade..............................................   257
Kyoto Accord.....................................................   149
Latin America....................................................   147
Lebanon..........................................................   418
Microcredit..........................................140, 270, 405, 410
Mr. Atwood's Opening Statement...................................   111
Ms. Pelosi's Opening Statement...................................   137
Nagorno Karabakh..........................................241, 246, 250
New Independent States.........................................375, 393
NGO Support Initiatives....................371, 373, 376, 379, 380, 382
Operation Lifeline...............................................   142
Pakistan.........................................................   264
Partnership for Freedom..........................................   387
Pipeline.......................................................209, 267
Population...........................................281, 389, 396, 406
Private and voluntary Organizations..............................   412
Privatization....................................................   388
Public Support for Foreign Aid...................................   139
Reagan Building Security.........................................   260
Renewable Energy.................................................   271
Results Act......................................................   150
Rule of Law....................................................383, 385
Russia.........................................................244, 376
Social Structure Impact of Fathers...............................   390
Sudan..........................................................142, 143
Sustainable Economic Development.................................   137
Tibetan Refugees.................................................   147
Transregional Democratization Programs...........................   381
Treasury Technical Assistance Program............................   280
Tuberculosis Control.............................................   272
Ukraine........................................................207, 413
UNICEF Aid to North Korea........................................   266
Vietnam..........................................................   264
Women in Development.............................................   404

                    Export and Investment Assistance

   (James A. Harmon, President & Chairman, Ex-Im Bank; George Munoz, 
      President & CEO, OPIC; J. Joseph Grandmaison, Director, TDA)

Africa...........................................................    98
Asian Financial Crises.......................................58, 61, 92
Azerbaijan.......................................................    69
China............................................................    93
Colombia.........................................................    99
Currency Devaluation.............................................    79
Environment..................................................60, 96, 99
Financing........................................................   100
Indonesia........................................................    80
Investment Funds.................................................   101
Mexico...........................................................   100
Middle East......................................................    68
Mr. Callahan's Opening Statement.................................     1
Mr. Grandmaison's Opening Statement..............................    47
Mr. Harmon's Opening Statement...................................     7
Mr. Munoz' Opening Statement.....................................    25
Mr. Torres' Opening Statement....................................     4
Ms. Pelosi's Opening Statement...................................     4
Nationalization..................................................    97
New Independent States...........................................    66
Risk Versus New Credit Scording..................................    95
Russia...........................................................66, 93
Small- and Middle-Size Businesses...........................71, 94, 100
Sub-Contracting..................................................    73
TDA Project Criteria.............................................    63
Tied Aid Credits.................................................    94
Ukraine..........................................................    57
US Capital Investment Danger.....................................    64
Worker Rights....................................................   102

                              Human Rights

   (John Shattuck, Assistant Secretary of State for Democracy, Human 
Rights and Labor; Kenneth Roth, Executive Director, Human Rights Watch; 
   Mira Baratta, Vice President for Programs, Freedom House; Carlos 
  Salinas, Director of Latin American Affairs, Amnesty International; 
  Mike Jendrzenjczyk, Human Rights Watch; Robin Williams, US Citizen)

Chairman Callahan's Opening Statement............................   421
Mr. Jendrzenjczk's Opening Statement.............................   516
Mr. Kingston's Introductory Statement............................   537
Mr. Roth's Opening Statement.....................................   474
Mr. Salinas' Opening Statement...................................   501
Mr. Shattuck's Opening Statement.................................   424
Mr. Yates' Opening Statement.....................................   422
Ms. Barrata's Opening Statement..................................   490
Ms. Brown's Introductory Statement...............................   532
Ms. Pelosi's Opening Statement...................................   422
Ms. Williams Opening Statement...................................   537