[Senate Hearing 105-809]
[From the U.S. Government Publishing Office]
S. Hrg. 105-809
FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS
APPROPRIATIONS FOR FISCAL YEAR 1999
=======================================================================
HEARINGS
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED FIFTH CONGRESS
SECOND SESSION
on
H.R. 4569/S. 2334
AN ACT MAKING APPROPRIATIONS FOR FOREIGN OPERATIONS, EXPORT FINANCING,
AND RELATED PROGRAMS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1999, AND
FOR OTHER PURPOSES
__________
Part 2 (Pages 1-113)
Agency for International Development
Department of Health and Human Services
Department of Justice
Department of State
Department of the Treasury
Nondepartmental witnesses
Executive Office of the President
Overseas Private Investment Corporation
Export-Import Bank
U.S. Trade and Development Program
__________
Printed for the use of the Committee on Appropriations
Available via the World Wide Web: http://www.access.gpo.gov/congress/
senate
U.S. GOVERNMENT PRINTING OFFICE
46-099 cc WASHINGTON : 1999
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
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ISBN 0-16-057972-4
COMMITTEE ON APPROPRIATIONS
TED STEVENS, Alaska, Chairman
THAD COCHRAN, Mississippi ROBERT C. BYRD, West Virginia
ARLEN SPECTER, Pennsylvania DANIEL K. INOUYE, Hawaii
PETE V. DOMENICI, New Mexico ERNEST F. HOLLINGS, South Carolina
CHRISTOPHER S. BOND, Missouri PATRICK J. LEAHY, Vermont
SLADE GORTON, Washington DALE BUMPERS, Arkansas
MITCH McCONNELL, Kentucky FRANK R. LAUTENBERG, New Jersey
CONRAD BURNS, Montana TOM HARKIN, Iowa
RICHARD C. SHELBY, Alabama BARBARA A. MIKULSKI, Maryland
JUDD GREGG, New Hampshire HARRY REID, Nevada
ROBERT F. BENNETT, Utah HERB KOHL, Wisconsin
BEN NIGHTHORSE CAMPBELL, Colorado PATTY MURRAY, Washington
LARRY CRAIG, Idaho BYRON DORGAN, North Dakota
LAUCH FAIRCLOTH, North Carolina BARBARA BOXER, California
KAY BAILEY HUTCHISON, Texas
Steven J. Cortese, Staff Director
Lisa Sutherland, Deputy Staff Director
James H. English, Minority Staff Director
------
Subcommittee on Foreign Operations, Export Financing, and Related
Programs
MITCH McCONNELL, Kentucky, Chairman
ARLEN SPECTER, Pennsylvania PATRICK J. LEAHY, Vermont
JUDD GREGG, New Hampshire DANIEL K. INOUYE, Hawaii
RICHARD C. SHELBY, Alabama FRANK R. LAUTENBERG, New Jersey
ROBERT F. BENNETT, Utah TOM HARKIN, Iowa
BEN NIGHTHORSE CAMPBELL, Colorado BARBARA A. MIKULSKI, Maryland
TED STEVENS, Alaska PATTY MURRAY, Washington
ROBERT C. BYRD, West Virginia
(Ex officio)
Professional Staff
Robin Cleveland
Jennifer Chartrand
Tim Rieser (Minority)
C O N T E N T S
----------
Tuesday, March 3, 1998
Page
Department of the Treasury: International Monetary Fund.......... 1
Tuesday, March 31, 1998
Department of State.............................................. 43
Tuesday, April 21, 1998
Department of Justice: Federal Bureau of Investigation........... 69
Thursday, April 23, 1998
Agency for International Development............................. 95
Department of Health and Human Services: Centers for Disease
Control and Prevention......................................... 95
Tuesday, June 9, 1998
Agency for International Development............................. 141
Tuesday, June 16, 1998
Department of State: Office of the Secretary..................... 173
Nondepartmental witnesses........................................ 219
FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS
APPROPRIATIONS FOR FISCAL YEAR 1999
----------
TUESDAY, MARCH 3, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:32 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Mitch McConnell (chairman)
presiding.
Present: Senators McConnell, Specter, Bennett, Stevens,
Leahy, and Mikulski.
Also present: Senator Faircloth.
DEPARTMENT OF THE TREASURY
International Monetary Fund
STATEMENTS OF:
HON. ALAN GREENSPAN, CHAIRMAN, BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
HON. ROBERT E. RUBIN, SECRETARY OF THE TREASURY
ACCOMPANIED BY LAWRENCE H. SUMMERS, DEPUTY SECRETARY OF THE TREASURY
opening remarks of senator mitch mc connell
Senator McConnell. The hearing will come to order.
We are pleased to have Secretary Rubin, Chairman Greenspan,
and Mr. Summers with us today as well as the chairman of our
full committee, Senator Stevens.
As early as next week, the committee may consider the
administration's two requests for the IMF: a $3.4 billion
contribution to the new arrangements to borrow [NAB] and a
$14.5 billion quota increase.
In both instances, there is no budget outlay nor will the
commitment increase the deficit because the transfer is
considered an exchange of assets. In return for our commitment,
we receive a liquid, interest bearing claim against IMF
holdings.
There are three points I would like to make regarding the
request.
First, current conditions warrant prompt action on the NAB,
but the quota should be considered as part of the fiscal year
1999 bill.
Second, Congress must have the time and opportunity to
evaluate both IMF enforcement and recipient compliance with the
largest loan agreements recently negotiated.
Third, the rapid and dangerous spread of this crisis
suggests we should consider appropriate and real reforms in the
lending and management practices of the IMF and sister
institutions.
Let me review each point briefly.
As you know, the administration requested and the Senate
passed the NAB last year. Unfortunately, White House
negotiators decided a few million for population programs was
more important than a few billion for this IMF emergency
reserve. Despite the best efforts of many, including Chairman
Stevens and my colleague, Senator Leahy, who will be here
shortly, agreement could not be reached and the new
arrangements to borrow was deleted from the bill.
We should be able to move promptly on the NAB given the
Senate's prior support.
In addition to renewing the NAB request, the administration
has now asked to accelerate consideration of the quota as part
of the supplemental bill. Inclusion of the quota as a
supplemental request in some ways comes as something of a
surprise.
The administration had advised us late last year to expect
a quota due to Asian pressures combined with historical or
cyclical lending patterns.
While I appreciate the administration's desire to avoid
having two votes on IMF loans, the urgency of the case for the
quota, in my view, has not been made. In fact, all of the
documents I have been provided by Treasury make clear that the
IMF's liquidity ratio exceeds 50 percent, even taking the loans
into consideration.
The NAB, combined with prior appropriations for the general
arrangements to borrow, would make another $48 billion
available in the unlikely event that the Asian contagion
continues to spread.
The IMF's lending has been measured, producing a steady
decline in liquid assets. This argues for congressional
consideration of a request to replenish its resource base.
Now I have been a strong and consistent supporter of this
and related multilateral institutions and I certainly recognize
their importance to U.S. exports and to U.S. growth. It is with
a clear commitment to our mutual goal of sustaining this growth
that I would urge a careful and thorough review of IMF and
recipient country performance, not a rush to judgment which
might be misunderstood as an attempt to avoid this important
debate.
Secretary Rubin, you have never had a ``Chicken Little''
complex. In the interest of market stability, I think we all
need to exercise some restraint and avoid the urge to declare
that the sky is falling.
To put the issue in perspective, during the Bush
administration, when the Congress considered the last quota
request, it took 20 months to pass that because the debate was
mired in the unrelated issue of Israeli housing loan
guarantees. The 1983 quota request took 8 months, even though
IMF liquidity had fallen below 35 percent.
We need to take time to build confidence in the IMF and
that will be directly affected by my second concern, which
relates to the details of the stand-by agreements which have
been negotiated.
There are critics who oppose the agreements reached in Asia
as a formula response, raising taxes and interest rates and
cutting spending. While aspects of the criticism may be
justified, it seems the agreements in Asia reach far beyond the
formula and address the systemic distortions and problems in
banking, trade, and investment regulations and the practices
which caused these economies to collapse.
If Korea fulfills its obligations--and I have confidence
that the new government is on the right track--we can expect
dramatic changes which strike to the core infection of crony
capitalism. Insolvent banks owned by good friends rather than
good bankers will no longer be protected by government
subsidies.
Bankruptcy proceedings will operate independently of
government interference. Foreign ownership, direct investment
opportunity, and market access will expand significantly.
International accounting and capitalization ratio standards
will be enforced, and key data on foreign exchange debt and
financial holdings of banks will be a matter of public record.
Had some of these conditions been in place last year, Korea
might not have suffered such an enormous shock.
Support for the NAB and the quota will depend on full
compliance with the agreements. Of the four largest loan
programs, it seems that Korea and Thailand have worked quickly
and effectively to meet their obligations. Unfortunately, I do
not see the same progress in Indonesia or in Russia.
Faced with the probability that Russia, once again, could
not meet the IMF's targets, last week Mr. Camdessus announced
plans to relax the terms of Russia's agreement and extend the
length of the loan. The clear message here is: if you don't
perform, don't worry. That is precisely the wrong message to
send, I think, at least as far as I am concerned.
Similarly, there appears to be little progress in
implementing the reforms required of the Suharto government.
With an additional disbursement of more than $3 billion
anticipated in mid-March, I know many of us will be interested
in your assessment of the concrete steps the government has
taken to meet IMF conditions, including the elimination of
trade barriers which have protected preferred enterprises, an
end to the marketing and distribution monopolies tied to the
Suharto family, and moving more than 3,000 off-budget revenue
accounts into the State budget.
As you both know better than any of us up here, compliance
with loan agreements is essential. If the terms are not met,
the Fund's long-term solvency can be put at risk.
Finally, I hope the hearing today begins a serious debate
about reforms in management and lending practices needed at the
IMF and related international financial institutions. I am not
sure how many people realize that many of the ideas and
legislation circulating are already a part of the Bretton Woods
Agreement authorizing our participation in international
institutions.
Just as a few examples, section 14 of the act says that it
is U.S. policy to promote the removal of trade restrictions.
Sections 44 and 49 tell our directors to work to eliminate
agricultural subsidies. Section 42 instructs our directors to
initiate discussions to gather information on the extension of
credit by private banks and nonbank institutions to borrowers
and make that information available to the public.
There is no shortage of policy guidance. The problem is we
are the only contributor paying any attention.
This agreements and its standards are not binding on the
IMF, its boards or its activities. We do not need to pass more
legislation urging the administration to use our voice and vote
to assure a loan meets congressional mandate. Instead, we need
to see the IMF Executive Board or the Board of Governors pass
and implement resolutions agreeing to standards already
enunciated in U.S. law.
Today I hope to review and discuss several specific items
the IMF could take up to improve lending and management.
Before action on the quota, I hope to achieve a consensus
working with both of you toward real reform and not just more
bland recommendations in order to assure our continued
participation in these institutions.
As a personal comment, let me thank both of our witnesses
and Mr. Summers as well and their staffs for providing
information and cooperating so fully with the subcommittee. As
events in Asia developed, you and your staff have provided
prompt and thorough information which has made an important
difference in my level of confidence in this undertaking.
We have an ambitious agenda for today, so we will start
momentarily.
Let me see if the chairman of the committee would like to
make any observations.
opening remarks of senator ted stevens
Senator Stevens. Thank you very much, Mr. Chairman. I
welcome our two witnesses--three witnesses. I am sorry I will
have to leave here and meet with Senator Byrd to discuss the
timing for consideration of the supplemental. It is my feeling
we will start hearings on Friday morning on the supplemental if
it is received on Thursday afternoon, as we expect.
I congratulate you for moving forward on this portion.
My comment would be that I am one who believes that we
should get the Senate on record again--we are on record
already--as supporting these concepts that are in the
supplemental request. I do believe that there should be
delineation of the reforms that we expect and that we should
find some way to assure that that will be accomplished,
particularly with regard to the quota.
But after just one trip to my home this last week, I found
people who are dealing in the Pacific rim, many of them
involved in fulfilling substantial contracts out there who are
very worried about being paid for the deliveries that are being
made right now.
I think this is a virus and if we do not really demonstrate
our willingness to help the IMF put it right, we could very
well see some of this come back.
I think we will hear today from some of the people from the
Midwest and in the Grain Belt who are facing similar problems
now with regard to payment for some of the deliveries that are
expected to be made of our grain in the Far East this summer.
This is not something that I think we can pass by, and I
hope the Senate will go on record. I am not in disagreement
with what the chairman of the subcommittee has said about the
necessity for reforms. That is where we will have to rely on
you gentlemen, to help us delineate what those reforms can be
within a reasonable period of time. At least I hope we will
have an opportunity to consider them on the floor when the time
comes.
I hope you will excuse me. I look forward to reading this
record.
Thank you.
Senator McConnell. Thank you, Mr. Chairman.
It has been the policy of this subcommittee to limit
opening statements by members to the chairman of the
subcommittee and the ranking member, that is, unless the
chairman of the full committee shows up, in which case he can
do anything he wants to.
Senator Leahy will be here in a little while.
I understand that Chairman Greenspan has to leave at 11:30
a.m. I am completely open to which of you goes first. It is
your call.
Mr. Greenspan. I will be delighted to start, Mr. Chairman.
I have a statement which I would like to read into the record
and then at some point I would answer whatever questions I can
in the timeframe that I have available.
Senator McConnell. Your full statement will be made a part
of the record, Mr. Chairman.
summary statement of hon. alan greenspan
Mr. Greenspan. Thank you very much, Mr. Chairman.
The global financial system has been evolving rapidly in
recent years. New technology has radically reduced the costs of
borrowing and lending across traditional national borders,
facilitating the development of new instruments and drawing in
new players.
Information is transmitted instantaneously around the
world, and huge shifts in the supply and demand for funds
naturally follow, resulting in a massive increase in capital
flows.
This burgeoning global system has been demonstrated to be a
highly efficient structure that has significantly facilitated
cross border trade in goods and services and, accordingly, has
made a substantial contribution to standards of living
worldwide.
Its efficiency exposes and punishes underlying economic
imprudence swiftly and decisively. Regrettably, it also appears
to have facilitated the transmission of financial disturbances
far more effectively than ever before.
Some 3 years ago, the Mexican crisis was the first such
episode associated with our new high-tech international
financial system. The current Asian crisis is the second.
We do not as yet fully understand the new system's
dynamics. We are learning fast and we need to update and modify
our institutions and practices to reduce the risks inherent in
the new regime. Meanwhile, we have to confront the current
crisis with the institutions and techniques that we have.
Many argue that the current crisis should be allowed to run
its course without support from the International Monetary Fund
or the bilateral financial backing of other nations. They
assert that allowing this crisis to play out, while doubtless
having additional negative effects on growth in Asia and
engendering greater spill-overs onto the rest of the world, is
not likely to have a large or lasting impact on the United
States and the world economy.
They may well be correct in their judgment.
There is, however, a small, but not negligible, probability
that the upset in East Asia could have unexpectedly large
negative effects on Japan, Latin America, and Eastern and
central Europe that, in turn, could have repercussions
elsewhere, including the United States.
Thus, while the probability of such an outcome may be
small, its consequences, in my judgment, should not be left
solely to chance. We have observed that global financial
markets as currently organized do not always achieve an
appropriate equilibrium or at least require time to stabilize.
Opponents of IMF support for member countries facing
international financial difficulties also argue that such
substantial financial backing, by cushioning the losses of
imprudent investors, could encourage excessive risk taking.
There doubtless is some truth in that although, arguably, it
has been the expectation of government support of their
financial systems that has been the more obvious culprit, at
least in the Asian case.
In any event, any expectations of broad bailouts have
turned out to have been disappointed. Many, if not most,
investors in Asian economies have, to date, suffered
substantial losses. Asian equity losses, excluding Japanese
companies, since June 1997 worldwide are estimated to have
exceeded $700 billion at the end of January, of which more than
$30 billion have been lost by U.S. investors.
Substantial further losses have been recorded in bonds and
real estate.
Moreover, the policy conditionality, associated principally
with IMF lending, which dictates economic and financial
discipline and structural change, helps to mitigate some of the
inappropriate risk taking. Such conditionality is also critical
to the success of the overall stabilization effort. At the root
of the problems is poor public policy that has resulted in
misguided investments and very weak financial sectors.
Convincing a sovereign nation to alter destructive policies
that impair its own performance and threaten contagion to its
neighbors is best handled by an international financial
institution, such as the IMF.
What we have in place today to respond to crises should be
supported even as we work to improve those mechanisms and
institutions.
Some observers have also expressed concern about whether we
can be confident that IMF programs for countries, in particular
the countries of East Asia, are likely to alter their economies
significantly and permanently. My sense is that one consequence
of this Asian crisis is an increasing awareness in the region
that market capitalism, as practiced in the West, especially in
the United States, is the superior model; that is, it provides
greater promise of producing rising standards of living and
continuous growth.
Although East Asian economies have exhibited considerable
adherence to many aspects of free market capitalism, there has,
nonetheless, been a pronounced tendency toward government
directed investment using the banking system to finance that
investment.
Given a record of real growth rates of close to 10 percent
per annum over an extended period of time, it is not surprising
that it has been difficult to convince anyone that the economic
system practiced in East Asia could not continue to produce
positive results indefinitely.
Following the breakdown, an increasing awareness bordering
in some cases on shock that their economic model was incomplete
or worse has, arguably, emerged in the region. As a
consequence, many of the leaders of these countries and their
economic advisors are endeavoring to move their economies much
more rapidly toward the type of economic system that we have in
the United States.
The IMF, whatever one may say about its policy advice in
the past, is trying to play a critical role in this process,
providing advice and incentives that promote sound money and
long-term stability.
The IMF's current approach in Asia is fully supportive of
the views of those in the West who understand the importance of
greater reliance on market forces, reduced government controls,
scaling back of government directed investment, and embracing
greater transparency--the publication of all data that are
relevant to the activities of the central bank, the government,
financial institutions, and private companies.
It is a reasonable question to ask how long this conversion
to embracing market capitalism in all its details will last in
the countries once temporary IMF support is no longer
necessary. We are, after all, dealing with sovereign Nations
with long traditions not always consonant with market
capitalism. There can be no guarantees. But my sense is that
there is a growing understanding and appreciation of the
benefits of market capitalism, as we practice it, that what is
being prescribed in the IMF programs fosters their own
interests.
The just-inaugurated President of Korea, from what I can
judge, is unquestionably aware of the faults of the Korean
system that contributed to his country's crisis. He appears to
be very strenuously endeavoring to move his economy and society
in the direction of freer markets and a more flexible economy.
In these efforts, he and other leaders in the region with
similar views, have the support of many younger people, a large
proportion educated in the West, who see the advantages of
market capitalism and who will soon assume the mantle of
leadership.
prepared statement
Accordingly, Mr. Chairman, I fully back the
administration's request to augment the financial resources of
the IMF by approving as quickly as possible U.S. participation
in the new arrangements to borrow and an increase in the U.S.
quota in the IMF. Hopefully, neither will turn out to be needed
and no funds will be drawn. But it is better to have it
available if that turns out not to be the case and quick
response to a pending crisis is essential.
Thank you very much, Mr. Chairman.
Senator McConnell. Thank you very much, Mr. Chairman.
[The statement follows:]
Prepared Statement of Hon. Alan Greenspan
The global financial system has been evolving rapidly in
recent years. New technology has radically reduced the costs of
borrowing and lending across traditional national borders,
facilitating the development of new instruments and drawing in
new players. Information is transmitted instantaneously around
the world, and huge shifts in the supply and demand for funds
naturally follow, resulting in a massive increase in capital
flows.
This burgeoning global system has been demonstrated to be a
highly efficient structure that has significantly facilitated
cross-border trade in goods and services and, accordingly, has
made a substantial contribution to standards of living
worldwide. Its efficiency exposes and punishes underlying
economic imprudence swiftly and decisively. Regrettably, it
also appears to have facilitated the transmission of financial
disturbances far more effectively than ever before.
Three years ago, the Mexican crisis was the first such
episode associated with our new high-tech international
financial system. The current Asian crisis is the second.
We do not as yet fully understand the new system's
dynamics. We are learning fast, and need to update and modify
our institutions and practices to reduce the risks inherent in
the new regime. Meanwhile, we have to confront the current
crisis with the institutions and techniques we have.
Many argue that the current crisis should be allowed to run
its course without support from the International Monetary Fund
or the bilateral financial backing of other nations. They
assert that allowing this crisis to play out, while doubtless
having additional negative effects on growth in Asia, and
engendering greater spill-overs onto the rest of the world, is
not likely to have a large or lasting impact on the United
States and the world economy.
They may well be correct in their judgment. There is,
however, a small but not negligible probability that the upset
in East Asia could have unexpectedly large negative effects on
Japan, Latin America, and eastern and central Europe that, in
turn, could have repercussions elsewhere, including the United
States. Thus, while the probability of such an outcome may be
small, its consequences, in my judgment, should not be left
solely to chance. We have observed that global financial
markets, as currently organized, do not always achieve an
appropriate equilibrium, or at least require time to stabilize.
Opponents of IMF support for member countries facing
international financial difficulties also argue that such
substantial financial backing, by cushioning the losses of
imprudent investors, could encourage excessive risk-taking.
There doubtless is some truth in that, though arguably it has
been the expectation of governments' support of their financial
systems that has been the more obvious culprit, at least in the
Asian case. In any event, any expectations of broad bailouts
have turned out to have been disappointed. Many if not most
investors in Asian economies have to date suffered substantial
losses. Asian equity losses, excluding Japanese companies,
since June 1997, worldwide, are estimated to have exceeded $700
billion, at the end of January, of which more than $30 billion
had been lost by U.S. investors. Substantial further losses
have been recorded in bonds and real estate.
Moreover, the policy conditionality, associated principally
with IMF lending, which dictates economic and financial
discipline and structural change, helps to mitigate some of the
inappropriate risk-taking. Such conditionality is also critical
to the success of the overall stabilization effort. At the root
of the problems is poor public policy that has resulted in
misguided investments and very weak financial sectors.
Convincing a sovereign nation to alter destructive policies
that impair its own performance and threaten contagion to its
neighbors is best handled by an international financial
institution, such as the IMF. What we have in place today to
respond to crises should be supported even as we work to
improve those mechanisms and institutions.
Some observers have also expressed concern about whether we
can be confident that IMF programs for countries, in particular
the countries of East Asia, are likely to alter their economies
significantly and permanently. My sense is that one consequence
of this Asian crisis is an increasing awareness in the region
that market capitalism, as practiced in the West, especially in
the United States, is the superior model; that is, it provides
greater promise of producing rising standards of living and
continuous growth.
Although East Asian economies have exhibited considerable
adherence to many aspects of free-market capitalism, there has,
nonetheless, been a pronounced tendency toward government-
directed investment, using the banking system to finance that
investment. Given a record of real growth rates of close to 10
percent per annum over an extended period of time, it is not
surprising that it has been difficult to convince anyone that
the economic system practiced in East Asia could not continue
to produce positive results indefinitely. Following the
breakdown, an increasing awareness, bordering in some cases on
shock, that their economic model was incomplete, or worse, has
arguably emerged in the region.
As a consequence, many of the leaders of these countries
and their economic advisors are endeavoring to move their
economies much more rapidly toward the type of economic system
that we have in the United States. The IMF, whatever one might
say about its policy advice in the past, is trying to play a
critical role in this process, providing advice and incentives
that promote sound money and long-term stability. The IMF's
current approach in Asia is fully supportive of the views of
those in the West who understand the importance of greater
reliance on market forces, reduced government controls, scaling
back of government-directed investment, and embracing greater
transparency--the publication of all the data that are relevant
to the activities of the central bank, the government,
financial institutions, and private companies.
It is a reasonable question to ask how long this conversion
to embracing market capitalism in all its details will last in
countries once temporary IMF support is no longer necessary. We
are, after all, dealing with sovereign nations with long
traditions, not always consonant with market capitalism. There
can be no guarantees, but my sense is that there is a growing
understanding and appreciation of the benefits of market
capitalism as we practice it--that what is being prescribed in
IMF programs fosters their own interests.
The just-inaugurated president of Korea, from what I can
judge, is unquestionably aware of the faults of the Korean
system that contributed to his country's crisis; he appears to
be very strenuously endeavoring to move his economy and society
in the direction of freer markets and a more flexible economy.
In these efforts, he and other leaders in the region with
similar views, have the support of many younger people, a large
proportion educated in the West, that see the advantages of
market capitalism and who will soon assume the mantle of
leadership.
Accordingly, I fully back the Administration's request to
augment the financial resources of the IMF by approving as
quickly as possible U.S. participation in the New Arrangements
to Borrow and an increase in the U.S. quota in the IMF.
Hopefully, neither will turn out to be needed, and no funds
will be drawn. But it is better to have it available if that
turns out not to be the case and quick response to a pending
crisis is essential.
summary statement of hon. robert e. rubin
Senator McConnell. Secretary Rubin, do you want to go ahead
with your statement?
Secretary Rubin. Thank you, Mr. Chairman.
Let me say that I, too, regret that the NAB did not pass at
the end of the last year, although our analysis of the cause
might differ a little bit. In any event, it is a pleasure to be
with you and to discuss funding for the IMF.
I would like to do that, if I may, in the context of
American leadership with respect to the global economy, the
situation in Asia, and also briefly bring you up to date on the
international response in the crisis and our efforts to
modernize the architecture for the financial markets.
As you well know, Mr. Chairman, because you have been very
much involved in these issues, there is truly a new era. I
lived it when I was in the private sector before coming into
government. It is a new era of the global financial markets and
a global economy--20 years ago, most of our businesses in this
country were predominantly domestic. Today the large businesses
are predominantly global entities--20 years ago, developing
countries accounted for virtually none of our exports. Today
they account for something over 40 percent of our exports.
Moreover, our leadership in the international financial
institutions, including the IMF, have contributed enormously to
the economic wellbeing of our workers, our farmers, and our
businesses. But, as Chairman Greenspan said, with these
opportunities have come risks.
I do not think there is any question but, if we are going
to deal with these risks, we are going to have to have a strong
and effective American leadership. In that way we can try to
make the most of the opportunities while, at the same time,
effectively manage the risks.
Whether or not we provide that leadership will, in my
judgment, profoundly affect our economic and national security
interests in the years to come.
This need for American leadership has been brought home by
the recent crisis in Asia. We have critical economic and
national security interests in Asia.
Chairman Stevens said before he left that we have very
substantial exports to Asia. They are now something like 30
percent of our total exports, and we export more to Asia than
we do to Europe. In States like California, Oregon, and
Washington, exports to Asia represent over 50 percent of each
State's exports.
Financial instability, economic distress, and depreciating
currencies all have direct effects on the pace of our exports
to the region and on the competitiveness of our goods and
services in world markets as a consequence of the depreciation
of the currencies of the affected countries in that region.
Moreover, if the problem were to spread to developing
countries around the globe, as Chairman Greenspan mentioned,
the potential impact to our economy could be severe. By doing
everything sensible to help these Asian countries get back on
track, we support our exports to the region and help strengthen
their currencies, which, in turn, helps the competitiveness of
our goods in world markets, and we reduce the risk that the
financial instability will spread to other developing
countries.
While this particular crisis is in Asia, I think its
characteristics are the kind of characteristics we may see in
similar sorts of events in the future. It is precisely in order
to protect our economic interests against the possibilities
that exist in these kinds of crises that, in our judgment, we
need to have a capacity, an IMF with the capacity to deal with
a major world crisis should it occur, however low the
probability of such a crisis may be.
The United States has exercised strong leadership
throughout this situation in Asia. In Thailand, we saw the
possibility of problems early. We went to the government to try
to obtain reforms. We went to the government with the IMF to
try to obtain reforms. Then, when problems did develop, we
worked with the IMF to develop a strong program.
In Korea, the situation had deteriorated very rapidly by
this past Christmas, and I think it would be fair to say that
the Korean banking system was on the verge of systemic default
which, had it occurred, could have created the risk of the kind
of contagion that Chairman Greenspan referred to.
The Treasury and the Federal Reserve Board worked together
over a very few days to catalyze the participation of banks on
three continents to refinance short-term loans in order to give
Korea breathing room to address its economic problems.
In Indonesia, just this week, former Vice President
Mondale, as a personal representative of the President, has met
with President Suharto to encourage Indonesia to make the
critical reforms necessary to get back on the right track.
More broadly, we have been part of an international effort,
again working through the IMF, to encourage countries outside
of the region to put policies in place to limit their
vulnerability to crisis.
Through all of this, the United States has strongly
supported the IMF as the central institution in the effort to
resolve financial crises such as exist in Asia.
The IMF programs have been focused predominantly on
structural reforms to address the specific causes of the crisis
in each nation. These reforms include, as Chairman McConnell
said, reshaping the relationship between banks, the government,
and commercial entities, financial sector regulations and trade
liberalization. These are not--I repeat, these are not--
austerity programs, though they do involve macroeconomic policy
regimes necessary to regain financial market confidence.
In our view, the IMF is, without question, the right
institution to be at the center of this effort for three
important reasons. First, it has the expertise to shape
effective reform programs. Second, it has the ability to
require a country to accept conditions that, for political
reasons, no assisting Nation could require bilaterally on its
own. Finally, it internationalizes the burden.
Moreover, as Chairman McConnell discussed in his opening
remarks, funding for the IMF has not cost the taxpayer one dime
in 50 years. When the IMF draws on our commitments, we receive
an interest bearing, offsetting claim on the IMF of equal
value. There are no budget outlays under CBO scoring, no
increase in the deficit, nor reductions in resources for other
spending priorities.
Today, we ask you to support two critical requests--an
increase in our IMF quota subscription and American
participation in an augmented backup facility, the new
arrangements to borrow, to supplement the IMF's regular
resources, if needed, to deal with systemic crisis.
We need this money as quickly as possible because right now
the IMF does not have sufficient funds to deal with a truly
major crisis, though we believe the probability of such a major
crisis is low. It is in our economic interest to have that
vulnerability exist for as little time as possible.
At the moment, the IMF has about $45 billion in uncommitted
resources, but only $10 billion to $15 billion is available
because an amount that we estimate at $30 billion to $35
billion must be held in reserve to accommodate withdrawal by
members.
In addition, the IMF has access to roughly $23 billion in
the general arrangements to borrow, for a total of roughly $33
billion to $38 billion of lending capacity.
To give you a sense of how inadequate that amount could be,
in the last 6 months alone, the IMF's commitment to these Asian
programs amounted to some $35 billion. The IMF could well not
have the capacity to respond effectively if that crisis were to
deepen and to spread to developing countries throughout the
globe or a new crisis were to develop in the near-term--low
probability events, in our judgment, but events whose
occurrence could have severe effects on the American economy.
It is not sensible for us to remain vulnerable and
unprotected with respect to such possibilities. Even if the
$3.5 billion for the NAB alone is approved, we still remain
exposed, with the IMF not having sufficient resources to deal
with a truly major crisis.
The $3.5 billion would become an additional, roughly, $21
billion with the contributions by all others who are members.
The U.S. contribution, totaling $18 billion, will leverage
to a total of about $90 billion in usable resources. If we do
not act, neither the quota nor the NAB will come into effect.
On the other hand, once we act, the rest of the world will
act very quickly.
At the last IMF replenishment in 1992, all of the other
countries acted within 6 days of action by the U.S. Congress.
Moreover, failure to fully support the IMF now could adversely
affect confidence in American leadership in the global economy
just at a time when confidence in American leadership is so
important in reestablishing stability in Asia.
Mr. Chairman, you have suggested and many others have as
well that, in consideration of providing new moneys to the IMF,
we should also consider conditions with respect to the IMF and
its reform programs. We agree with the importance of many of
these objectives, and I believe that we can work out
constructive approaches to deal with these purposes.
However, there are practical limits on what can be done
while also still accomplishing our overall objectives of
protecting the American economy by dealing effectively with
financial instability in other parts of the world.
As we work to secure this funding and also to deal with the
critical problems in Asia, we are, at the same time, working to
strengthen the architecture of the international financial
system. As Chairman Greenspan said, the global economy and the
global financial markets have grown very rapidly and the
institutions have not changed accordingly.
At Treasury, we have been working with the Federal Reserve
Board on these enormously complex issues and we are working to
develop consensus around the world. But these are deeply
complicated issues and major steps forward will take time.
One criticism that has arisen with respect to the
international response is the so-called ``moral hazard'' issue.
Chairman Greenspan dealt with that fully. Let me just say that
we are in total accord with Chairman Greenspan, and trying
substantially to improve the international architecture is very
high on our list of priorities as we deal with both the Federal
Reserve Board and other Nations around the world toward
advancing in significant ways this architecture.
Mr. Chairman, before I conclude, let me say a few words
about the status of the situation in Asia.
As a result, in our view, of American leadership and prompt
action by the IMF and other international organizations, the
spread of instability to other developing nations was limited
after an initial burst. In the countries where instability has
occurred, there was a long way to go and a great deal to do
before we could feel secure that the period of instability is
over, that these countries are back on a path of solid growth.
The countries in the region have great underlying
strengths--a commitment to education, a strong work ethic, and
high savings rates--and those, combined with strong reform
programs, should provide the basis for a successful resolution
over time.
Thailand and Korea are in a constructive path of reform,
though there are certainly great challenges ahead. Such a path
is most certainly the best path for Indonesia as well.
prepared statement
Mr. Chairman, to conclude, as I said at the beginning of my
remarks, we live in an era of global financial markets and a
global economy which present enormous opportunities for
American workers, farmers, and businessmen but also new risks.
Within that context, to come again to the point of this
hearing, in our judgment we cannot afford to take the risk,
however small the probability, that a major crisis develop
while the IMF is without the capacity to respond. So we
strongly recommend providing the full $18 billion funding
request that we have submitted to this Congress.
Thank you very much.
We would be delighted to respond to your questions.
[The statement follows:]
Prepared Statement of Hon. Robert E. Rubin
Mr. Chairman, members of this Committee, it is a pleasure
to appear before you today to discuss funding for the
International Monetary Fund in the context of U.S. leadership
in the global economy and the situation in Asia. I would also
like to bring you up to date on the international response to
the crisis and our efforts to modernize the architecture of the
international financial markets to better prevent financial
crises, or better manage them should they occur.
Mr. Chairman, as you well know, we live in a new era of the
global economy and global financial markets. Twenty years ago,
the vast majority of our businesses were predominantly
domestic. Now many are global entities. Developing countries
have gone from having little impact on our economic well being
to absorbing over 40 percent of our exports. Our leadership in
international financial institutions such as the IMF has played
a key role in these developments that have contributed so much
to the economic well being of our workers, farmers, and
businesses.
But with the opportunities have come risks. Strong and
effective U.S. leadership on the issues of the global economy
is essential if we are to make the most of these opportunities,
and effectively manage the risks; and whether or not we provide
that leadership will profoundly affect our national economic
and security interests in the years ahead.
The need to exercise U.S. leadership in the global economy
to protect and promote our interests has been brought home by
the recent situation in Asia. We have critical economic and
national security interests in Asia. Thirty percent of U.S.
exports go to Asia, supporting millions of U.S. jobs, and we
now export more to Asia than Europe. In States like California,
Oregon, and Washington, exports to Asia account for more than
half of each state's total exports. Financial instability,
economic distress, and depreciating currencies all have direct
effects on the pace of our exports to the region, the
competitiveness of our goods and services in world markets, the
growth of our economy and, ultimately, the well-being of
American workers. Moreover, if the problem were to spread to
developing countries around the globe, the potential impact to
our economy could be severe. By doing everything sensible to
help these Asian countries get back on track, we support our
exports to the region and help strengthen their currencies,
which helps the competitiveness of our goods in world markets
and we reduce the risk that financial instability will spread
to other developing countries.
In addition, the United States also has critical national
security interests in seeing a restoration of financial
stability in the region. We have 100,000 troops based in Asia,
37,000 on the Korean peninsula alone. As the members of this
committee know well, financial stability and prosperity
promotes social stability and peace--both in Asia and
throughout the globe.
The United States has exercised very strong leadership
throughout this situation to help resolve the Asian crises. In
Thailand, we saw the signs of problems early on and we moved
with the IMF to put into place a reform program which the Thai
government is currently implementing. In Korea, the situation
deteriorated very rapidly and by Christmas the Korean banking
sector was on the verge of systematic default. Treasury and the
Fed worked together over a very few days to catalyze the
participation of banks on three continents to refinance short
term loans in order to give Korea breathing room to address its
economic problems. In Indonesia, just this week President
Clinton has sent former Vice-President Mondale as a personal
representative to encourage Indonesia to make the critical
reforms necessary to succeed. More broadly, we also have been
part of an important international effort to encourage
countries outside of the region to put policies in place to
limit their vulnerability to crises.
Through all of this, the United States has strongly
supported the IMF, as the central institution in the effort to
resolve the financial crises in Asia. The IMF programs have
been focused predominantly on structural reforms, to address
the specific causes of the crisis in each nation. These reforms
include reshaping the relationships between banks, the
government, and commercial entities; financial sector
regulations; trade liberalization; and appropriate monetary and
fiscal policies. These are not austerity programs, though they
do involve macro-economic policy regimes necessary to regain
financial market confidence.
The IMF is the right institution to be at the center of
this effort for three important reasons. First, it has the
expertise to shape effective reform programs. Second, it has
the leverage to require a country to accept conditions that no
assisting nation could require on its own. Finally, it
internationalizes the burden. Moreover, our contributions to
the IMF have not cost the taxpayer one dime in fifty years.
When the IMF draws on our commitments, we receive an interest
bearing offsetting claim on the IMF of equal value. There are
no budget outlays under CBO scoring and no increase in the
deficit, or reduction in resources for other spending
priorities.
Today we ask you to support two critical requests: an
increase in our IMF quota subscription, and U.S. participation
in an augmented back-up facility, the New Arrangements to
Borrow, to supplement the IMF's resources, if needed, to deal
with crises such as this one.
We need this money as quickly as possible, because right
now the IMF does not have sufficient funds to deal with a truly
major crisis and it is in our economic interest to have that
vulnerability exist for as little time as possible. As a result
of the recent situation in Asia, the IMF's normal financial
resources are approaching a historically low level. At the
moment, the IMF has about $45 billion in uncommitted resources,
but only $10-15 billion is available because an amount we
estimate at $30-35 billion must be held in reserve to
accommodate withdrawals by members. In addition, the IMF has
access to roughly $23 billion in the General Arrangements to
Borrow, for a total of $33 to $38 billion of total lending
capacity. To give you a sense of how inadequate that amount
could be, in the last six months alone the IMF's commitment in
these Asia programs amounted to some $35 billion. The IMF might
not have the capacity to respond effectively if that crisis
were to deepen, spread to developing countries throughout the
globe, or a new crisis were to develop in the near term. Even
if the $3.5 billion for the NAB alone is approved, we still
remain exposed with the IMF not having sufficient resources to
deal with a truly major crisis. The U.S. contribution totaling
$18 billion will leverage a total amount of about $90 billion
in usable resources. If we don't act, neither the quota nor the
NAB will come into effect. However, once we act the rest of the
world will act very quickly. At the last IMF replenishment, in
1992, all of the other countries acted within six days of
action by the U.S. Congress.
The probability of a serious reversal in the Asia situation
and contagion to developing countries around the world, or of a
new crisis in the short term, may be small. But, these
occurrences are possible and the consequences could be immense.
We cannot afford to take the risk that such events could start
to unfold and the IMF not have the capacity to try to cope
effectively. Again, the full IMF funding is needed now, to
protect our interests. Moreover, failure to support fully the
IMF now could shake confidence in American leadership in the
global economy just at a time when confidence and American
leadership are so important in re-establishing stability in
Asia.
Some have suggested that we should not advance new monies
to the IMF unless it agrees to attach certain conditions to its
reform programs. We agree with the importance of many of their
objectives, and I believe we can work out constructive measures
responsive to them. However, there are also practical
limitations on what can be done while still accomplishing the
overall objective of protecting the American economy as fully
as possible from the effects of financial instability in other
parts of the world.
Mr. Chairman, even as we work to secure this funding and to
solve the immediate problems in Asia, we are working to
strengthen the architecture for the international financial
system. While the global economy and the global financial
markets have grown very rapidly and become very sophisticated
in recent years, the institutions for preventing and dealing
with these crisis has changed far less. We need to make that
architecture as modern as the markets. At Treasury, we have
been working with the Federal Reserve Board on these enormously
complex issues. And we are working to develop international
consensus. But, these are deeply complicated problems and major
steps forward will take time.
One criticism that has arisen with respect to the
international response to the situation is that providing
financial assistance to these countries shields investors from
the consequences of bad decisions. This, the so-called moral
hazard issue, concerns us as well. We do not believe that
international efforts to resolve financial crises should
protect investors or creditors from the consequences of their
actions and as you know numerous banks, investors and creditors
have taken or will take huge losses in Asia. However, a
byproduct of the international assistance effort may be that
some creditors will be shielded from the full consequences of
their actions. Addressing this issue is a high priority for us
as we work to strengthen the international architecture, but is
also extremely complicated.
Mr. Chairman, before I conclude, let me say a few words
about the status of the situation in Asia. As a result of U.S.
leadership and prompt action by the IMF and other international
organizations, the spread of instability to other developing
nations was limited after an initial burst. In the countries
where instability has occurred, there is a long way to go and a
great deal to do before we can feel secure that the period of
instability is over and these countries are back on a path of
solid growth. The countries in the region have great underlying
strengths, such as high savings rates, a strong work ethic, and
a commitment to education and that combined with strong reform
programs, should provide the basis for a successful resolution
over time. Thailand and Korea are on a constructive path of
reform--though there are great challenges ahead--and that is
the best path for Indonesia as well. In the meantime, it is
critical that we have an IMF with the capacity to respond
further--or in other developing countries--if necessary.
Mr. Chairman, as I said earlier, we live in an era of
global financial markets and a global economy which presents
both opportunities and risks for American workers, farmers and
businessmen. Within that context, and to come again to the
point of this hearing, we cannot afford to take the risk--
however small the probability--that a major crisis develops
while the IMF is without the capacity to respond, and so we
should provide the full $18 billion IMF funding requested now.
recovery in asia
Senator McConnell. Thank you. What I would like to do, in
order to give all four of us an opportunity to question
Chairman Greenspan before he leaves is limit the first round of
questioning to 5 minutes each. This should give everybody an
opportunity to interact with Chairman Greenspan before he
leaves. Then subsequent rounds will be 10 minutes.
Chairman Greenspan, it seems that there are two
components--maybe many more--but at least two components,
central to a regional recovery in Asia: a Japanese budget
stimulus package enabling absorption of more exports and China
maintaining its pledge not to devalue its currency.
What are the implications for the latter if the Japanese do
not move swiftly to stimulate their economy?
Mr. Greenspan. Do you mean what are the implications to
China if the Japanese do not do so?
Senator McConnell. Yes.
Mr. Greenspan. I think, as the Deputy Secretary, who met
with Zhu Rongji and publicly discussed the strong commitment to
hold the exchange rate can testify, all of our contacts have
indicated that they recognize that sustaining their exchange
rate is important both to them and to the region generally. I
see no reason that any significant pressures will emerge in the
near-term to break them off that path.
I would suspect that, even were the Japanese not to engage
in some strong fiscal expansion, the Chinese would respond in a
negative way to that.
Having said that, however, I want to emphasize that Japan
is a very large player in the Asian system and, indeed,
dominates virtually all aspects of it. A necessary condition
for the stability of East Asia is the restabilization and
growth of Japan.
Japan has two problems, as I see it. One, they have a
financial system which is bloated with nonperforming loans and,
unless and until those are excised from the system, it is going
to be difficult to expand, even with significant fiscal
actions. So there is, essentially, a two-stage issue, which I
have discussed elsewhere, with respect to Japanese recovery.
One is the rectification of the financial imbalances which they
are now finally beginning to address after a long number of
years of poor financial performance. Second is to come to grips
with what I suspect is going to be significant further
financial impetus from the tax side.
Senator McConnell. Senator Mikulski, I am going to hold my
questions to one and would see if you would like to ask
Chairman Greenspan a question.
Senator Mikulski. Thank you, Mr. Chairman.
First, to both Mr. Greenspan and Mr. Rubin, we normally
would be inclined to take your advice. Mr. Greenspan, you have
presided and led over a monetary policy that has helped create
a tremendous, robust economy in the United States of America.
Mr. Rubin, you, through being Secretary of the Treasury and
your advice to the President and the Congress, helped us arrive
at a balanced budget, helped us get through a Mexico crisis
that was fiscally sound and that enhanced the dignity of both
Nations in the way it was handled. So we would normally be
inclined to take your advice.
But there are a couple of yellow, flashing lights. This,
then, goes to you, Mr. Greenspan, and perhaps the Secretary
could comment.
crony capitalism
We have nations that are in difficulty because they
practiced crony capitalism, and there was no push for reform
until Western financial institutions started to take
significant and large losses. Then they cried out for help and
went to the IMF, which has been a stabilizer and a leader in
reform.
So, then, this takes me to the question. Everybody was
content with crony capitalism as long as the banks did not take
a hit, nor did any Western financial institution that was
making very heavy investments in East Asia.
So here is the question. With asking the American people to
do this, many of whom have lost their jobs to Asia,
particularly in shipbuilding, garments, steel--my core
constituency--what, then, can we say to them if we follow the
two requests being made under your advice, Mr. Greenspan and
the Secretary, for coming in with the supplemental, raising the
quota, and supporting IMF? How do you really think we could go
back to our constituents and say, No. 1, we are going to clean
up crony capitalism so that it not only does not happen here
but is it in a lot of the other aspects of the world? Second is
that the banks or financial institutions do have to eat a
substantial amount of their loss, the so-called moral hazard.
Third is in doing this, we continue to enhance jobs in their
countries even though we have had irrevocable losses in
manufacturing such as shipbuilding and steel over here.
Mr. Greenspan. Senator, the problem that I think we had is
not the issue of nobody getting losses. Rather, it was very
difficult to look at what seemed to be a very odd form of
economic organization in East Asia prospering or ostensibly
prospering as strongly as it was for so many years.
I can sit and look at that phenomenon as an economist and
say I don't know what the levitation is that is keeping it
going. I think we do know in retrospect how it was done. But it
is very difficult to argue against the economic policies of
sovereign nations which have engendered near 10 percent growth
for two or three decades and say that you are doing it wrong.
What has happened is that that system inevitably broke
down, and what we are now beginning to see is a really
extraordinary comparison between the types of institutions that
we have in the West and they had in the East, and we can see
why it doesn't work. Far more importantly they are beginning to
see that as well.
Senator Mikulski. That is what I was going to say. Do they
have a sense of urgency?
Mr. Greenspan. Yes; but not fully.
Senator Mikulski. I know that Indonesia is separate.
Mr. Greenspan. I do not think that one can realistically
expect that you can have regimes, which have been very
successful for a very long period of time, run into one serious
crisis and all of a sudden their whole sense of what makes the
world run gets changed.
I do think, however, that what we are seeing, for example,
in Korea is a very major change because the new incoming
government has always been very questioning of the stability of
what that regime was.
I do think that is true increasingly in Thailand. I cannot
say to you it is evidently true in Indonesia. Nor can I say
with any degree of certainty that it will continue.
All I am saying is that there is a very dramatic shock that
has occurred. It is having a significant impact on the views of
the people, especially the younger people who are coming up in
the ranks and who have been largely educated in the West.
There are no guarantees. But I would say that I am far more
encouraged now, that they are going to restructure their
systems in a far more viable, open manner, which will be far
more beneficial to the world trading system than it has been in
the past. Certainly our assistance and the assistance of the
IMF are crucial players in making certain that occurs.
Senator Mikulski. Thank you.
Senator McConnell. Senator Faircloth.
Senator Faircloth. Thank you, Mr. Chairman.
Chairman Greenspan, thank you again for being before the
Congress.
As you say, the systems were doing well there for a good
while, the Asian systems. Plonsit did well for a while.
Mr. Greenspan. I said ``ostensibly well.'' I think I did. I
hope I said that.
global markets
Senator Faircloth. They appeared to be.
I have a couple of questions. First, we have global
markets, as you said. It is a very global market. And we have
very, very global banking with all sorts of potential for
information and insight as to what is happening.
Why did we not suspect or see? The IMF wrote a great report
on how wonderful things were in South Korea just moments before
the collapse. It was somewhat like playing tennis before the
Khymer Rouge took the club.
Would you explain why we knew so little?
Mr. Greenspan. That is a very important point, Senator. I
think the answer to that is in the nature of these apparently
newly developing types of financial crises which are associated
with this new, high tech financial structure.
I look at these various, different episodes which nobody
forecast--we had some general views of excess flows of funds
into these countries; we had concerns about very large current
account deficits in Thailand--and a lot of people in retrospect
are saying well, you know, we saw it coming. The truth of the
matter is nobody saw the virulence of what this is.
The reason why not, is there is something that is extremely
difficult to forecast, and that is the onset of a vicious
cycle. It is almost a type of phenomenon which, so long as
confidence seems to be in place, even with distorted and not
terribly well functioning economies, you do have equilibrium.
You have balance. The system does not break apart.
But there comes a point every once in a while when you go
over the edge, and it is like breaching a dam. All of a sudden
the confidence just flows out radically and everything turns
180 degrees in a very short period of time.
I think we know the necessary conditions for that type of
phenomenon occurring. We do not know the sufficient conditions.
In other words, I do not believe that we will ever be in a
position where we can effectively forecast in advance those
types of crises. What we can do is put into place a series of
preventive measures which lowers the probability that that type
of event will occur.
But I do not believe we can ever reduce that probability to
zero nor have any technical capability through some
sophisticated set of indicators or some great financial insight
in being able to predict those things in advance.
So I fully agree with you. I think if you go back and read
that South Korean report, you have characterized it exactly
right. What they should not have done is make the presumption,
which was implicit in that report, that, therefore, everything
is fine.
It is one thing to report what is happening; it is another
thing to say what you think is going to happen all the time in
the future.
Senator Faircloth. Thank you, Mr. Chairman.
Senator McConnell. Senator Bennett.
Senator Bennett. Thank you, Mr. Chairman.
Senator Faircloth asked the question I wanted to ask.
Senator Faircloth. You can ask it again. [Laughter.]
Senator Bennett. No; no; you have made your point. It leads
to the next question, though, dealing with the IMF itself.
I can accept that no one has a crystal ball that is
infallible and we can, with hindsight, say well, they have
missed it. Now we are talking about the IMF playing a very
significant role in making policy in these countries. They come
in with a very big stick and they say you do as we tell you or
we will beat you with our stick.
The question of the personnel of the IMF, how many and how
good in the face of this crisis, becomes a question we have to
ask ourselves.
I have information--I am not sure that it is correct--that
the IMF personnel with any degree of expertise in these areas
is stretched pretty thin over the Asian crisis; that the number
available for any one particular country of people who really
know what they are doing is relatively small. Also I hear that
they are harried and they are driven.
We speak of the IMF as if it were a monolithic entity
capable of doing all of these things and producing all of these
reforms. It's kind of the way we speak of the U.S. military.
Well, the U.S. military breaks down into commanders and
divisions, and sometimes we have good commanders and sometimes
we have bad ones.
Can any of you speak to this issue of the capability and
size, the numbers, of the IMF personnel to carry on this
particular challenge, particularly back to the comments of
Senator Mikulski, with respect to Indonesia? I mean, we have a
glowing IMF report about Indonesia, too, about how wonderful it
is. It was not quite as current as the one in Korea. But that
is the area where I am most concerned about crony capitalism.
I have asked the question is any of this money going to go
to the Lippo Group. Going back to my other incarnation, knowing
what I now know about the Lippo Group, I get very, very
concerned about that. Do the IMF people care about these kinds
of things?
Can we address this whole general area?
Mr. Greenspan. Let me start off, Senator, but first with
the very important stipulation that this new, high tech
international financial system is qualitatively different from
what existed before we had this huge proliferation of various
different types of financial products and extraordinary
expansion in cross border finance and trade.
We do not have enough in the way of observation to really
fully sense that we know exactly how it works--the dynamics of
it. We are beginning to get a sense, having enough examples and
seeing what happened in Mexico, Thailand, Indonesia, and Korea.
We are beginning to learn what the mechanisms are and,
consequently, to what extent an international organization with
liquidity, which I presume, Senator, is not browbeating the
individual nations but is merely saying if you want our help,
you do X, Y, and Z. I presume there is a voluntary aspect in
there. Sometimes I grant you that it does not appear that way.
The major issue is that we are all groping along our way to
learn as quickly as we can from these experiences, and I think
the IMF is, also. In other words, the IMF has been functioning
in a manner to try to understand what is going on, clearly more
intensively than we who have other things to do as well.
Are they fully successful? I think not. I think we are not
fully successful, either. Are we more positive than negative? I
would say yes to that. I think that the situation is improving,
our knowledge is improving, the techniques of handling these
situations are improving. But there is a long way to go, and I
do suspect that you are probably right that resources are
stretched thin.
I don't know of any organization whose resources would not
be stretched thin confronting this size problem.
I would like to say to you that everything is in great
shape, that everyone knows exactly what they are doing, that
nobody has made any mistakes. That would be false.
Senator Bennett. That would be false in any organization I
can think of.
Mr. Greenspan. It would be false of any organization and
particularly when confronted with something as difficult to
handle as this particular problem.
Senator McConnell. Senator Specter, we are having a 5-
minute round here because Chairman Greenspan needs to leave.
You lucked out. It looks to me like you may get the last 5
minutes.
Senator Specter. Thank you very much, Mr. Chairman.
Dr. Greenspan, when you were in the Republican caucus some
time ago, I had asked you about the U.S. contribution compared
to our voting shares and you commented that we had an 18-
percent voting interest and we would be contributing 18 percent
of the funding.
Secretary Rubin, although this is not your round of
questions, I had written to you on February 12 inquiring about
that and a number of other matters.
Secretary Rubin. We have responded. I don't know if you got
the letter yet, but I signed it, I think yesterday.
Senator Specter. When did you respond?
Secretary Rubin. When?
Senator Specter. Yes.
Secretary Rubin. Senator, it was in the last couple of
days. I remember signing the letter.
Senator Specter. Well, the mails are slow, I guess.
Secretary Rubin. The mails are slow or whatever.
Senator Specter. Are the contributions being made by others
proportionate to their shares so that we are contributing 18
percent, which is our voting interest, and others are carrying
their proportionate share of the burden?
Mr. Greenspan. That is my understanding.
new arrangements
Secretary Rubin. I can give you a very quick answer,
Senator.
We expect, my recollection is that in the new arrangements
we will have a 17.5 percent, or thereabouts, voting share, and
we will be contributing about 21 percent or something like
that. So it is roughly equivalent.
The reason for the differential is there is a whole host of
member countries who cannot afford to contribute funds and who
yet have a vote. There is a rough correspondence, though not
exact.
Senator Specter. Well, there are a lot of dollars between
17.5 percent and 21 percent. Why isn't it adjusted on the basis
of what people contribute financially?
Secretary Rubin. Because the judgment was made when the IMF
was set up at Bretton Woods 50 years ago that there should be a
much broader membership than just those who could afford to
contribute. There are estimated to be about 35 countries who
can afford to contribute of the 182 members. So, as I say, the
difference is between--I won't swear to these numbers--but I
think it is roughly 17.5 and 21 percent, something like that.
Mr. Greenspan. The crucial issue, Senator, is the fact that
there are a number of policy questions which come before the
IMF which require 85 percent majorities. We, therefore, have a
veto, and the veto would exist whether it were 17 or 20
percent.
Senator Specter. We would still have the veto at 17.5
percent and might have to contribute less money if the
proportions were identical.
Mr. Summers. Senator Specter?
Senator Specter. I only have 5 minutes. But I will let you
comment on the chairman's time.
There is an enormous problem, obviously, with markets being
closed to the United States, the issue of reciprocity, and that
comes up with a great many of the countries where the IMF is
helping them.
Dr. Greenspan, is it realistic to try to use this
situation, which might be to their benefit economically, to say
that a condition is that there is reciprocity on markets being
opened where we are helping to bail out these countries, that
they should at least open their markets to the extent our
markets are open to them?
Mr. Greenspan. Well, I would not even say whether it
reflects the fact of whether our markets are open to them. It
is a question of whether it is to their advantage to have open
markets. I would say one of the important aspects of a full,
free market system is that the real beneficiaries of open
markets are those who open their own markets first.
But in answer to your question, I would prefer to let the
Secretary answer that specifically because that gets into
conditionality questions with respect to this legislation.
Senator Specter. How about the Deputy Secretary.
Mr. Greenspan. Or the Deputy Secretary.
Senator Specter. I'll give you some speaking room, Mr.
Summers.
Mr. Summers. On the trade question, I think there is no
question that it is appropriate, as the chairman's reference to
the Bretton Woods legislation suggested, for the IMF to impose
conditions directed at broad liberalization because that is
very much in these countries' interests. It is very much in the
interests of all the IMF members to avoid, for example, the
kind of distortion you have seen of, to take two examples, the
world's semiconductor and the world's chemical markets because
of subsidized credits in these countries.
Senator Specter. Could we use this occasion of the bailout
to have access to their markets one way or another?
Mr. Summers. The Korean program, for example, involved
significant reductions in Korean tariffs and also, and I think
very significantly, involved a commitment by the Korean
Government which will be monitored closely by the IMF going
forward to end the practice of subsidized credits. Subsidized
credits have led Korean firms to get cheap access to capital
and build very large excess capacity which in steel,
semiconductors, and a number of other industries has quite
significantly distorted world markets and put our firms at a
very substantial competitive disadvantage.
Senator Specter. But that does not go directly to the issue
of our having access to their markets. How about that issue
head-on?
tariff reductions
Mr. Summers. Tariff reductions I think do go directly to
that, tariff reductions and reductions in quotas. For example,
in Indonesia there were significant reductions in the quotas
that were put on a number of agricultural products, which I
think goes very directly to the question of market access.
Senator Specter. My yellow light is still on, Mr. Summers.
Would you care to make a comment about our percentage of voting
compared to our percentage of contributions?
Mr. Summers. Thank you. Thank you, Senator Specter.
I just wanted to make the point that countries can all
contribute, and they all do contribute their own currencies.
Some countries' currencies are more suitable to provide a loan
in than other countries' currencies.
For example, when we contribute dollars, those dollars can
then be lent. Other countries, who are not in the kind of
strong financial position we are, are not able to provide a
currency which is suitable for lending.
Senator Specter. Why not? Their currencies, whatever they
are, have some value, don't they?
Mr. Summers. Well, in many cases they are not freely
convertible on international markets or those countries
themselves are facing a balance of payments crisis.
Senator McConnell. You need to wrap it up, Secretary
Summers. We will be coming back on this I am sure.
Thank you, Senator Specter.
Thank you, Chairman Greenspan. We appreciate your being
here.
Mr. Greenspan. Thank you, Mr. Chairman, Senators.
Senator McConnell. I think we all know what the real nub of
the issue is here in the Senate. I am unaware of anyone--there
may be someone, but I am unaware of anyone--at least on the
Republican side of the aisle--who is not willing to go along
with the new arrangements to borrow, which passed the Senate
last year and was lost in the course of discussions between the
House and the administration toward the end of the year.
So, fundamentally, the question is what kind of conditions,
if any, would the Congress hope the administration could
deliver as a condition for the $14.5 billion quota.
Mr. Secretary, it is my understanding that important
reforms can be implemented at the IMF by a vote of the
Executive Board of the Board of Governors on a resolution. As
we have discussed over the last couple of months and as I have
just said, I believe the Congress expects explicit action like
this, rather than, once again, sort of bland policy statements
urging the administration to make its best effort to use the
voice and vote to change policy.
The basic question affecting support for the quota is what
reforms can you support and secure in the IMF and when can you
get them? In other words, what can you get and when can you get
it?
imf
Secretary Rubin. Well, as you and I have discussed, Mr.
Chairman, I think that there are many reforms that people have
focused on. I know that transparency, transparency with respect
to the IMF operations themselves, has gotten a lot of focus. I
might add that there is a great deal more IMF transparency, I
think, than most people realize. They have an audited financial
statement each year of their financial condition. We are now
encouraging countries to put out their letters of intent. In
the case of Korea, Thailand, and Indonesia, they all did put
out their letters of intent.
I think once a year now, the IMF puts out a statement on
about 45 countries with respect to their economic conditions.
These are called PINS.
With respect to ESAF, the IMF has now agreed to have, and,
in fact, at the present time does have an outside board
reviewing their operations. So there has been a lot of progress
in this area.
Having said that, we are clearly prepared to support
additional progress.
As you may know, the Senate Foreign Relations Committee has
raised the question of a possible GAO review with respect to
the IMF and we are in the process of seeing what can be
arranged in that regard right now.
I think the question is what mechanisms we can develop to
try to create measures that meet the various kinds of concerns
that people have as they talk about conditions. Many of those
concerns are concerns that we share, and many of those
objectives are objectives that we share. But at the same time,
they are practical to get done in a very short, a reasonable
period of time.
We have some thoughts on this. We are in the process of
trying to develop them to see whether they are practical or
not. Whether it is possible to get Executive Board votes or
Board of Governors votes in a relatively brief period of time I
would tend to doubt. The problem with that is that you have to
work your way through the countries that are members.
I will tell you, having worked in these international
organizations, these international fora, is a very time
consuming process because every country has its own parliament,
has its own concerns, its own interests, and its own views.
But, having said that, we are attempting to work with
members who have expressed these concerns and who are deeply
involved in these issues in trying to see what we can do to
provide measures responsive to these concerns in ways that are
practical in the context of the organization we are dealing
with.
Let me add, in fairness I think I should add one more
thing.
Michel Camdessus, who is the Managing Director of the IMF,
is also very much committed, I think, to trying to work with us
to see what is the maximum that we can do to meet the kinds of
concerns that have been raised.
Senator McConnell. Let me make another run at it.
Section 42 requires you to work with the IMF to establish
procedures for the public dissemination of information. Do you
believe either board would support a resolution--and you were
talking earlier about transparency--to create transparency by
requiring that a full-disclosure clause be included in all loan
agreements?
What is your assessment of the prospects for a resolution
that would make it a matter of IMF policy not to lend to
countries in which governments have established trade and
investment barriers inconsistent with open markets and free
competition? That is another question. Those are really two
questions.
Secretary Rubin. Well, every country has trade
restrictions. The United States, for example, although we have
a very open market, and I totally agree with Chairman Greenspan
that the primary beneficiary of having open markets is the
country that has the open market. But all countries have trade
restrictions of one sort or another.
So I think that, as you framed it, at least, would not be
answerable.
Senator McConnell. Well what about the full-disclosure
clause being required in all loan agreements?
Secretary Rubin. And that is full disclosure of what?
Senator McConnell. Of the loan agreement.
Secretary Rubin. Oh, do you mean disclosure of the letter
of intent?
Senator McConnell. Yes; my understanding is that this
happens now only if the recipient agrees to public disclosure.
Is that right?
Secretary Rubin. Yes; and in the case of the three--we are
in favor of disclosing letters of intent. I think you are going
to see that become more and more the practice.
Now what you are asking me is can we get an Executive Board
or Board of Governors approval within some reasonable period of
time.
Larry, do you have a view on that?
Mr. Summers. I don't know whether it is possible.
Secretary Rubin. I'll tell you where you might run into
trouble.
Senator McConnell. You know, there are a lot of us who
really would like to help you on this.
Secretary Rubin. Oh, Mr. Chairman, you are not helping us.
We all agree the United States has some very substantial
economic interests at stake here. This is not helping us. I
think the problem, though, is like anything else. The question
is what is practical in the context of the organization you are
dealing with.
If somebody comes to the United States and says we want you
to do certain things, they have to deal with the context of the
realities of our administration, our Congress, and all the
other ways in which we function. We have exactly the same
problem with respect to the IMF. What is the most that we can
accomplish in the context of an organization of 182 member
countries, each of which has its own parliament, its own
administration, and all the rest?
I think you are going to find that we will do everything
possible to try to accomplish these purposes within those
limits.
Larry, do you have anything to add to that?
Mr. Summers. I think it is the right thing to do. I think
we have achieved very substantial increases in transparency
with many of the letters of intent now being published, with
many countries making available the IMF's annual surveillance
report with much freer dissemination of IMF views on countries.
We would support publication of letters of intent. Whether
it is possible that there is an international consensus on
that, given that the content of letters of intent in many cases
goes to questions about executive branch strategies for seeking
to pass legislation, for example, or subsequent activities of
central banks, or possible future changes in exchange rate
regimes, whether we could get a vote in favor of full
transparency with respect to letters of intent I am not
entirely certain. I am not certain whether that could happen.
Senator McConnell. Let me come at it another way.
What kind of latitude does Mr. Camdessus have? I am just
thinking that consistency may be the hobgoblin of little minds.
We have heard that all of our lives. But I think, for example,
of the approach in Russia.
Some 2 weeks ago, Yeltsin urged the Duma to pass his budget
or face suspension of the IMF loans. They did not pass the
budget. Mr. Camdessus arrived and announced the terms would be
relaxed and the length of the loan extended by at least a year.
Some would argue that this might have been a largely
political decision. But it illustrates what I am trying to get
at. How much latitude does he have? Could he just unilaterally
adopt, as a practical matter, an operational matter, the kinds
of reforms that we are suggesting here? Then that would short-
circuit this 18 months, 2 years, all of this other elaborate
procedure that you are suggesting we would have to go through
in order to--I mean, could he just say that henceforth this is
the way we are going to operate?
russia
Secretary Rubin. One of the issues we are exploring, Mr.
Chairman--I would like, if I may, to have Larry Summers respond
on Russia because I think it is a very important issue--but one
of the issues we are exploring is how much the managing
director can do on his own volition within the context of the
bylaws and the founding agreement of the IMF. That is an issue
that we are exploring right now.
Larry, do you want to respond on Russia?
Mr. Summers. Mr. Chairman, in Russia, the Russians had not
met the conditions for the disbursement of a tranche at the end
of the fourth quarter, and the managing director did not
indicate that those conditions had been met or authorize a
disbursement of that tranche.
That would depend upon a subsequent, thorough review by the
IMF staff of the situation in Russia which, in turn, would
require board approval before any action could be taken; nor
was he able to make any absolute commitment to the Fund because
that also depends on board approval.
What he did indicate was, assuming Russia comes back into
compliance--a judgment he did not make as to whether they had
come back into compliance or not--he would be prepared to call
for Russia to be in an IMF program continuing into 1999. He
didn't indicate that any money that was owed could be deferred
in its repayment. He only held open the prospect of an IMF
program being continued into 1999.
Senator McConnell. So he didn't have the authority to say
what he said? Or he was misquoted? Or what?
Mr. Summers. Of course he had the authority to say what he
said. But I think what he said in each case referenced the
recommendations he would make to the board, the suggestions he
would make to the board. But it was all contingent upon board
approval.
Senator McConnell. All right. I am about to run out of time
on this round. But I will get back to this question. Would it
be possible to get certain kinds of unilateral assurances, Mr.
Secretary? If so, how enforceable are those if they are from
the Director himself?
Secretary Rubin. I understand. I think the answer to the
question, Mr. Chairman, is, given the enormous influence that
we have, which we do have, and given the managing director's
position, and I don't know what the managing director would be
prepared to do in these areas because he has 182 members--we
are not the only members and we have about 18 percent of the
votes, as indicated before--I think we could probably create a
situation that is not legally binding but that practically has
a very substantial effect, that is, if the managing director
felt comfortable--and I don't know whether he would or would
not because he has a lot of other constituencies to worry
about--but if he felt comfortable in certain areas--and whether
this area would be one of them or not, I don't know--if he felt
comfortable issuing a policy statement.
Senator McConnell. We need to keep exploring, as you and I
have been before today, ways in which we might raise the
comfort level of the Senate----
Secretary Rubin. Correct.
Senator McConnell [continuing]. As a precondition for us
supporting the quota.
Secretary Rubin. As I say, I have tried to be very careful
in the way I have responded. We are exploring this and as we
get greater definition, we will obviously share that with you.
We will try to get the greatest comfort that we can within the
practicalities that we have.
Senator McConnell. The ranking member of the subcommittee
has arrived.
I would just say, Senator Leahy, that we are having 10
minute rounds. You are welcome to do your 10 minutes and then
we will come back to the Republican side.
Senator Leahy. Thank you, Mr. Chairman. I appreciate that
offer. Unfortunately, as often happens, I am in another hearing
upstairs with members of the computer industry from Microsoft,
Netscape, and so on.
I did want to come here to say that I know what the
Secretary and Mr. Summers are speaking about is primarily the
IMF. There are a lot of other things, and I will submit my
questions for the record, from the global environment facility
to the World Bank's support for family planning and health.
I have discussed the IMF situation with the Secretary and
with Mr. Summers. I do feel, with the Asian financial crisis
threatening to spread to China, Russia, and even this
hemisphere, these are two people in the government that we need
to hear from I am sorry I missed Mr. Greenspan.
The $3.5 billion request for the new arrangements to borrow
will be in the supplemental. The real question, of course, is
the IMF quota increase.
In a perfect world, I would say let's just put it in right
now. In fact, that is what I would like to see. I think the
difficulty is going to be what happens with the IMF and people
there who are seen as being too stuck in their ways, who seem
to feel what we don't know won't hurt us. I know that the
Secretary and the Deputy Secretary have been working hard to
get them to open up.
I also know that there is a limit to what kind of
conditionality we can impose on a multilateral institution. But
I think we are going to have to work a lot closer both in the
Congress and with the administration to find out what is
possible--policy directives on the environment, on information
disclosure, rights of workers, and so on. These are already in
U.S. law. We have to see how they get adopted by the IMF Board.
One part of me, I must admit, finds it very easy to say the
heck with them, we'll hold back the money, just straighten it
out--to make sure they know we are serious. But I have come to
the conclusion that is not the responsible way. It would be
gratifying but it is not the responsible thing to do.
I would like to see us go with the full amount of money now
with a very, very strong message about what changes we expect
to see. I take that position, Mr. Chairman, partly as an ad
hominem because of my respect for the Secretary and the Deputy
Secretary, and knowing that they will work hard to get some of
the changes made.
I think the IMF is important. I think that we have to have
the ability to move far more quickly than sometimes we can move
here with congressional actions in a world where trillions of
dollars can be literally moved around over a weekend just by
keystrokes.
So that is where I am, Mr. Chairman. It is not so much to
ask questions. I know that you have taken one of the most
responsible views on these issues of anyone I have worked with
and I would suggest that perhaps prior to the markup we may
want to meet together, as we always do anyway, perhaps to
discuss these issues further with the Secretary.
That is not a question. [Laughter.]
Secretary Rubin. I wasn't going to respond to it.
Senator Leahy. But feel free if you want to say anything.
Secretary Rubin. Oh, no. Senator, we had a little
discussion before you came in and Chairman Greenspan was here
as well. We all feel that there are changes that could be made.
I happen to think the IMF does a very good job in a very
difficult situation. And, as Chairman Greenspan said, this is a
new world. This is a new era. I have been, as you know, in
investment banking for 26 years. The issues that we are dealing
with now are not issues that I saw back then. I think they
actually do a very good job.
Having said that, these are new issues. This is a
pioneering world that we are in right now. I think all of us
can look to areas where we wished, or thought that the IMF
should perhaps function differently. I think transparency, for
example, Mr. Chairman, is one place where I think the more the
better up to the point where it perhaps has its
disfunctionalities.
But we will need to work with this committee and with
others to see what we can accomplish in these areas.
Senator Leahy. The IMF can try the patience of a saint,
and, with the exception of the chairman, there are not many
saints in the Senate. [Laughter.]
Senator McConnell. Thank you, Senator Leahy. I will
certainly agree with that observation.
Secretary Rubin. We will stipulate as to the chairman.
[Laughter.]
Senator McConnell. Senator Faircloth.
Senator Faircloth. Thank you, Mr. Chairman and also, Mr.
Secretary, thank you. I have not been, to put it mildly,
supportive of the IMF. But in no way does that lessen the
admiration I have for the job you have done and that you do. We
don't agree on everything, but I have the greatest respect for
the job that you have done and the position you have.
Let me ask you this. As has been mentioned here, we all
have very good hindsight. But in the bailout in Mexico, if we
had left it alone and allowed the private sector to function,
which we really did, would it not have worked itself out? No.
2, right after going into Mexico as quickly as we did, and then
almost immediately coming with the new arrangements to borrow,
did that send the wrong signal to the lenders around the world
that we will, to get with it, boys, we are going to jump in?
Secretary Rubin. Let me try to answer the questions in the
order you posed them.
My view on Mexico, Senator, and reasonable people can
disagree on this, is I feel very strongly, and I think this is,
far and away, the predominant view, that Mexico was probably
days away from default when we announced our support plan with
the IMF. I think, had we not gotten involved, Mexico almost
surely would have gone into some form of default, whether
technical default I am not sure, but some form of default.
Senator Faircloth. I'm sorry. What was that?
Secretary Rubin. That if we had not gotten involved with a
support plan, I think Mexico almost surely would have gone into
a default. Whether it would have been technical default or not,
I don't know, but it would have been at least a de facto
default. I think, had they done that, not only would they have
been mired in a far deeper recession for a vastly longer period
of time than they wound up being involved in, but, as you may
remember, at the time, the Argentinean markets, the Brazilian
markets, even markets in central Europe were being affected by
what was happening in Mexico.
So I think for a brief period of time there, there was a
real risk. That is what animated a lot of the work that the
chairman, that Larry Summers and I did. There was a real risk
that this could have spread around the globe and had enormous
impacts on other countries and on us.
Senator Faircloth. I think we encouraged more risky
lending. I have heard the term and words get flipped around,
but would you tell me what ``moral hazard'' means?
Secretary Rubin. Sure. Moral hazard is a concern--and it is
a concern we share. I might add this. Could I just say one
thing before that, though, on moral hazard?
I speak to an awful lot of people involved in credit
markets, investors, and the like, and I have heard the chairman
say the same thing, but I do not believe what we did in Mexico
had an effect when creditors and investors decided to function
in Asia. I do think people over-invested and over-extended
credit in Asia, but I don't think it was affected by what
happened in Mexico. I think it was affected by the kinds of
things that always affect markets when they go to extremes, and
in my judgment they always do.
Moral hazard is, basically, the notion that if undesirable
behavior, one way of looking at it is if undesirable behavior
is not punished, or, to put it differently, is rewarded, then
it is likely to repeat itself.
Senator Faircloth. I'm sorry. Say that again.
Secretary Rubin. If creditors lend into a country, as an
example, and those credits would have gone bad but for, say,
the help of the IMF, then, because of the help of the IMF and
the fact the people were made whole on loans that otherwise
would not otherwise been made whole on, they will be encouraged
to worry less about risk than they should in the future.
asian situation
Mr. Fisher. All right.
Secretary Rubin. I don't think in the Asian situation,
however--as I say, I speak to an awful lot of people and I
don't believe that what happened in Mexico did influence people
in Asia. But, having said that, we share the moral hazard
concern. I think one can feel, if one wants to feel good about
losses, I think--not I think--there have been huge losses in
Asia and I think an awful lot of creditors and investors found
out what it means not to take appropriate cognizance of risk
when they lend.
Senator Faircloth. It's what we used to call cold comfort.
We have been talking about opening the trade doors. I have
been hearing it for 50-good odd years, and we have scarcely
cracked more than one or two.
The IMF and Mr. Camdessus talk about changing the
government, the problems that were created by the collusion and
cronyism between government and the opaqueness of any sort of
financial institution and our inabilities, and the trade
problems just simply mount. They go on and on.
Mr. Camdessus tells us what is going to happen, and if the
company does not do this, it changes. In Peru, he has changed
it 17 times; in Russia, 2 or 3 times. If you don't do this--in
other words, whatever they do, he moves to it.
Take Suharto. What are his options? You cannot spank him.
[Laughter.]
You cannot take his dating privileges away. I mean, what do
you do if he does not comply? What do we do?
Secretary Rubin. Leaving aside those two possibilities--
which I think I will leave to the chairman or others--Indonesia
is a very complicated situation. I think in South Korea to a
far greater degree it has been the key country in this whole
thing. It is the 11th largest country in the world. I will tell
you that around Christmastime it was very troubling. It really
was for reasons I said in my remarks.
Had South Korea gone into default in the private banking
sector, we might have had a crisis on our hands of a dimension
far greater than anything we have ever seen. Fortunately, South
Korea is back on a constructive path and, hopefully, the
probability of that sort of thing is very low now.
Indonesia is a very complicated situation. The reason I
contrast it is in South Korea I think there are a lot of
reasons to feel good about what is happening. This is not to
say that there are not a lot of problems ahead, though. But I
think Indonesia is a very troubling and very complicated
situation. I do not have great wisdom for you at this moment,
Senator, about that. We are waiting for Mr. Mondale to come
back. I have seen his report from his visit, obviously, but we
have not had a chance to speak to him yet.
I do think that Deputy Secretary Summers spoke to Under
Secretary Lipton, who was with Mr. Mondale and he may have
something to add to this. But the general principle is that the
IMF provides resources to countries that implement the kinds of
strong reform programs that the IMF and the rest of us working
together construct. I think that the IMF is going to have to
make a very difficult judgment when it comes to the middle of
March. I do not want to try to foretell what that might be. But
I think Indonesia is a very difficult situation. But it is one
that is of great consequence both economically and sort of
geopolitically, if you will. It is the reason, or it is one of
the reasons that Secretary Cohen went and briefed the
Republican House leadership on these issues and testified
before the House Banking Committee.
We have enormous stakes there. But having said that, I
think it is a very difficult and very complicated situation.
You are very right to raise it as a focus of concern.
Larry.
Mr. Summers. Senator Faircloth, I think you do raise the
critical question of is there really conditionality or does the
IMF just follow what the countries do.
My own reading is that there are a number of examples in
which IMF conditionality has been quite effective.
Senator Faircloth. Give them to me.
Mr. Summers. I will give you a couple. In Russia, at
several points in the last 4 years the IMF has cut Russia off
and has said that until they come back on track, there would be
no further disbursements. There is a great deal of problems
that remain in Russia. The fact is in a way that looked
extraordinarily unlikely 3 years ago Russia has now achieved a
stable currency.
Senator Faircloth. Excuse me. You say Russia is safe and
stable now?
Mr. Summers. No, Senator.
Senator Faircloth. What did you say?
Mr. Summers. I said that Russia has had a stable currency
for the last 2 years and I think that is in substantial part
because of the kick they received from conditionality.
Senator Faircloth. One quick question while we are on
Russia. What would you say the likelihood of a financial
problem is there--I mean like big time?
Mr. Summers. Those kinds of questions are awkward to answer
in this kind of session about any country.
Senator Faircloth. All right. But I want to talk to you
further about that.
Mr. Summers. Senator Faircloth, may I just make two other
points very quickly?
One is that I think the IMF's conditions and the possibly
of a withdrawal of IMF funds had a great deal to do with a
rather sharp turn in the direction of Thai policy that took
place in late October that has brought about a situation with
the new government in Thailand where Thailand is moving back
toward making very substantial progress. I think it is also
important to emphasize, as the Secretary did, that the IMF has
not made any disbursement to Indonesia since the first
disbursement that was made at the time the program was agreed
nearly 4 months ago. And any subsequent disbursement would be
based on a very careful review.
There are other examples in Kenya, in Egypt, where you have
seen countries that have fallen off IMF programs. The IMF has
recognized that until they, the country, wanted to do what it
had to do, there was no way in which financial support could be
useful and that served as an important spur to reform.
Senator McConnell. Senator Bennett.
Senator Bennett. Thank you, Mr. Chairman.
Mr. Rubin, I am sure you have seen the Wall Street Journal
editorial about you and the rupiah.
Secretary Rubin. I noticed it.
mexican issue
Senator Bennett. We have been through this before in the
Mexican issue. I disagree with my friend from North Carolina
and agree more with you that the Mexican experience was a
productive one. It was, for me, a very instructive one.
As the leader, Senator Dole, for whatever reason, gave me
the assignment to handle that on his behalf. I found out more
about tesobonos and pesos than I ever thought I wanted to know.
I find that this is a similar kind of experience. And yet,
there are significant differences. I want to outline some of
both of those to help you understand why I am having some
trouble going beyond the $3.5 billion that the chairman
referred to.
In the difference category, with Mexico we knew who was
going to get the money. We knew where it was going to go and we
knew what Mexico was going to do. Mexican officials were here
often. I remember meetings in Senate Dole's office with the
Finance Minister, with the Foreign Minister, meetings in
Speaker Gingrich's office with Mexican officials--not once but
several times. We could tell them directly how we felt about
the reforms that had to take place in Mexico before we would
get involved with American money.
When I finally recommended to the Speaker and the leader
that they move ahead in the direction in which we all
ultimately moved, it was from that basis of direct information,
not necessarily just to me but to the other participants in the
meeting--I do not want to imply in any sense that I was alone
on that. There were members of the House Banking Committee,
Chairman Leach and others, heavily involved in all of those
discussions.
Necessarily in this situation we do not have that. I have
never met anybody from the Indonesian Government other than
when Senator Specter and I were with President Suharto down
there and that was in the period when everything was going
wonderfully well and they were instructing us as to how we
should handle our economy.
I do not have a sense of where the money is going to go. I
get questions. Secretary Summers, you and I talked about this
in my office. I get questions from constituents who are saying
we don't want American money to bail out our competitors. We
have been facing a tough competitive situation in the
international market with people who have been State
subsidized. Now they have gone under and you are going to take
our tax money and spend it to put our competitors back on their
feet. We absolutely are not going to stand for that.
That is a simplified and perhaps erroneous view, but it is
certainly out there because we don't know where the money is
going to go.
I have raised the question here: Is the Lippo Group going
to get any of this money? This comes out of my experience in
the Governmental Affairs Committee of who the Lippo Group is
and what they do.
So the thing of concern about the IMF in this situation, as
with respect to the Mexican situation, is that they stand
almost as a shield between American policymakers and the people
who are going to get the money whereas in Mexico that was not
the case. There was no shield. The IMF was off to the side. We
were dealing directly with the Mexicans and we knew exactly
what we were getting when we took the steps that we took.
So until that greater sense of comfort that we really know
what is going on and that it is not being filtered through a
shield can take place, you are going to have problems up here
with the request.
Now, over on the side of similarities, the reference that
you made, Secretary Summers, to Senator Faircloth about Russia
and the stable currency there is the best touchpoint to talk
about similarities.
One thing that I was very, very insistent on in the Mexican
situation--and you will recall all of the telephone
conversations we had about this plus some face to face
meetings--was that the Mexicans focus on a stable currency;
that the Mexican Central Bank should do whatever they could to
see to it that there was a stable currency. That comes back to
the Wall Street Journal piece, Mr. Secretary. They are in favor
of a Currency Board. I am perfectly willing to suggest that the
Currency Board may not be the best way to get a stable currency
and give you the benefit of the doubt that there are other ways
to do that.
But I think the issue of saying that we have to fix the
money at the same time as we concentrate on fixing the banking
system is an issue we have to address. If the Currency Board is
not the way to do it--and it was not in Mexico; we used the
Central Bank and our power to get at them directly to make that
point--it is, nonetheless, for me an overriding factor here.
My experience with the IMF is that they are not as
dedicated to a stable currency as certainly I am. They didn't
seem to be in Mexico, but it didn't matter in Mexico because we
were able to make our points directly.
They do not seem to be here. They seem to put the stable
currency far down the list of things that they are after. They
pay lip service to it, but they have a bunch of other things
that they want first.
With that background of the differences and the
similarities, can you give an old Mexican warrior a little bit
of comfort as to where we are going here because at the moment,
I do not have it?
Secretary Rubin. Let me, if I may, Senator, take a first
shot at this. Then, if I could, I would ask Deputy Secretary
Summers to do the same.
There are differences and similarities, as you say, and we
have been struck a little bit by the same thing. We are dealing
now with a number of countries, not just one country. We are
dealing even beyond the numbers that are involved in the crisis
because we have been very concerned about the possibility of
contagion, about the possibility of this becoming a worldwide
problem. So we actually have been focused on and involved with
the countries way beyond the ones that are just involved here.
I do not think, though--at least I will speak for myself--I
do not feel as if we are shielded by the IMF. We at Treasury
and the people at the Federal Reserve Board as well have a
constant interaction with the troubled countries, certainly
with South Korea and Thailand, though to a somewhat lesser
extent with Indonesia, but with South Korea and Thailand.
I spoke to the Finance Minister of Thailand at 9 o'clock
last night our time. So I would say that we have a great deal
of interaction and also have a great deal of impact on the IMF,
although they have many other members and we are only one, as I
mentioned before.
In terms of where the money goes and all the rest, I
think----
Senator Bennett. Let's focus on Indonesia because that is
one I am very concerned about.
Secretary Rubin. It is worth both focusing on but also
distinguishing Indonesia.
We are very troubled about Indonesia as well, Senator. I
would say that with South Korea and Thailand, at least in our
view, you have governments--and it so happens in both cases new
governments--that, in our judgment, are very carefully focused
on the structural issues, on the crony capitalism, on a lot of
the issues that have created the subsidized trade problems that
you are worried about.
On Indonesia, I think we have a very complicated situation.
As I say, I would like to wait for Mr. Mondale to come back to
have a more fully developed view. But as Larry Summers said,
the IMF has not disbursed to them since, I guess it was early
November. I think on the money, so far you can feel
comfortable.
My recollection--you can check me, but I think I am right
on this--is that we disbursed, the IMF disbursed a little over
$3 billion and Indonesia spent well over $5 billion on
interventions. So they spent more than was disbursed. In fact,
I remember you and I discussed this before. They spent far more
than was disbursed.
Money is fungible. But I would say that in excess of what
has been disbursed has been used on intervention.
central bank
The money does go to the Central Bank. Then it is supposed
to be used from the Central Bank in ways that are consistent
with the IMF program.
I think with Korea and Thailand, although we do not have
the constant interaction there that we had with the Mexican
Government, the IMF has resident people certainly in South
Korea and I think they have them in both countries. We have a
lot of contact with both the officials of the countries and the
IMF.
In terms of stability of currency, you have an interesting
thing here. We are very focused on stability of currency and I
think it would be fair to say that the IMF is very focused. The
idea, the notion is that as long as these countries are
suffering financial instability, the currencies are going to
continue to depreciate and that affects us around the world. It
is very bad for them and it is very bad for us. So if we could
reestablish financial stability, we could reestablish stable
currencies, and you can see that the baht and some of these
other currencies have come back a fair bit.
There is a conflict, though, in this Congress between the
kinds of monetary policy that we believe in and that you need
if you are going to provide support to the currency and the
criticism that these are austerity programs. I do not believe
they are austerity programs. I think they are structural
programs. But they are very much focused on reestablishing
financial stability, and, by reestablishing financial
stability, establishing stable currencies and having associated
with them a disciplined monetary and fiscal regime.
Is there time, Mr. Chairman, for Deputy Secretary Summers
to respond as well?
Senator McConnell. Yes; go ahead.
Mr. Summers. Thank you. Thank you very much.
Senator Bennett, let me focus on the situation in
Indonesia.
The first keystone Secretary Rubin laid down with respect
to our policy with respect to all of these countries is we
cannot want them to reform their economies more than they want
to reform their economies, and support cannot flow unless they
are doing the right things.
Obviously, since we were putting up a large part of the
money in the Mexican thing, the situation was different than it
is in Indonesia. But, as I speak to you, there are a number of
people from the Treasury who are in Indonesia right now who
have been there speaking with Indonesian economic officials and
reporting back to us with great frequency.
My children have been awakened often enough at 1 a.m., to
provide testament to the fact that we do speak very frequently
with senior Indonesian economic officials and that takes place
at all levels within our Government.
I do not think there is any disagreement on the question of
a stable currency just as in Mexico. There is no possible
success in Indonesia without a stable currency.
But what I think is also true, is that, in order to achieve
a stable currency, it is necessary to credibly attack some of
the problems of crony capitalism that Senator Faircloth
referred to in his question.
So, as we speak about the approach, the approach is an
approach that has a number of elements. But the other elements
can all be thought of as necessary preconditions for achieving
a currency that is stable in the same sense that currency
stability was achieved in Mexico.
But what is ultimately decisive and what we are watching
for very carefully, and what will determine our response is the
kind of policy commitment there is to doing the things that are
necessary to make a stable currency possible. At a certain
stage, that commitment became very clear in Mexico. It was on
the basis of that commitment that we were in a position to
provide support.
There were periods when that commitment was not there,
frankly, at the very beginning in Mexico. But when that
commitment was there and when we could monitor it, that is when
support was able to flow.
There has not been, as I mentioned, a flow of support since
November and what will happen going forward depends on what
happens in Indonesia.
Senator McConnell. Let me, if I may, just pick right up on
where we are.
It is my understanding that $3 billion is scheduled for
release March 15. What criteria are you looking to be met, or
is IMF looking to be met? Even though there has been no
disbursement since November, there is supposed to be one next
week. So, the question is, ``What are you looking for? What is
IMF looking for? What do you expect to hear from Vice President
Mondale that is going to make you comfortable about releasing
this $3 billion next week?''
budget policies
Mr. Summers. The IMF will review compliance with the
program. That will include at least four areas, Mr. Chairman.
First, it will include compliance with certain key provisions
having to do with structural policy, monopolies of various
kinds, where there was a commitment that those monopolies would
be broken up.
Second is budget policies. A number of indications
suggested that, for example, certain off-budget funds were
being used in ways that were hidden and were not part of the
budget. They will be looking for clear evidence that all of
those funds have been fully accounted for.
Senator McConnell. Could I interrupt you?
What I suspect will happen is that, having raised the straw
man of the Currency Board, Suharto just gives up on the
Currency Board and IMF says gee, that's great, and just goes
ahead.
What do you think is the likelihood of that?
Mr. Summers. It will not go ahead with American support,
support of the American executive branch, unless it is possible
to demonstrate much more than that the Currency Board is not
there, but that it is also possible to demonstrate a
satisfactory position with respect to the issues that I was
outlining--monopolies, subsidies, monetary policies and
approach to the financial system. Appropriate progress in those
things would be prerequisite for our support.
This is not different in Indonesia, by the way, than in
other countries where the IMF completes a review. It has to
make a report on the progress under the program and that forms
the basis for judgments about what will happen.
Senator McConnell. So the release of funds is not going to
be in any way connected to the Currency Board decision?
Secretary Rubin. Let me just comment. Maybe this is adding
too much or repeating. I am not sure which.
The Currency Board issue is one issue. That is here. Then
there are the criteria which the Deputy Secretary outlined and
the IMF is going to make a very difficult judgment.
Mr. Mondale's coming back is yet a third factor. But he is
not going to be able to give us, I don't think--well, we will
see what he says when he comes back. I just saw a cable this
morning. But, basically, it is the IMF that is going to have to
try to make a judgment on what is going on there.
It is an interesting problem, Mr. Chairman. The IMF faces a
very difficult issue. On the one hand, it seems to me that you
do have to have compliance with their conditions if they are
going to release. On the other hand, I don't think any of us
should have illusions about the seriousness of this decision
because Indonesia is in a very difficult situation and there
are all sorts of very serious consequences that can come from
that situation.
So this is a very complex situation, a very great moment in
terms of its possible consequences. But, having said that, I
will go back to what I said before. The Currency Board is one
issue and then the criteria they need to meet is a separate
issue.
Had they done the Currency Board on their own--this was not
a U.S. situation. Theo Waigel, the Finance Minister of West
Germany, now Germany, said that that was not something they
should do and many other countries have similar views.
Senator Bennett. Mr. Chairman?
Senator McConnell. Yes, Senator Bennett.
Senator Bennett. I have just one summary point here.
The Currency Board to me is not the issue because the
Currency Board is simply a means to an end. I am perfectly
willing to reach that end by some other means. But I do not
want us to lose sight of the end, which is fix the currency.
I think you have to fix the currency now. I don't think you
can wait for a stable currency being a by-product of other
things because, if you don't fix the currency, the riots, the
killings that occurred the last time the currency went crazy,
will happen again.
I made this point to the Mexican minister who said: ``Oh,
with our devaluation, we are now more competitive in the
world.'' I said you have never run a business because when your
employees cannot pay their bills, they come home to wives who
are upset because they are going to lose their homes because
they cannot pay their mortgages. The middle class is wiped out
because the money is worthless. Such workers are not
automatically more productive.
That is the human toll here if we don't get the currency
stable. That is the only point I want to make. Forget whether
it is a Currency Board or anything else. A stable currency is
the end that we should be focusing on as one of our major,
first, up-front kind of challenges in Indonesia.
I hope you tell the IMF that.
Secretary Rubin. Senator, we agree with that. I still think
Indonesia is a very special case because of all the problems.
But it is worth talking about. I know we have had this
discussion many times in the Mexican context and others.
There are only two ways--no, three ways--to try to create a
stable currency. I think there are three. Maybe there are
others, but three come to my mind, forgetting the Currency
Board for a moment. One is to reestablish financial stability.
Another is to intervene, but I, at least, think that has its
limits because the global market is going to overwhelm your
intervention. The third is to have very tight money and
extremely high interest rates.
As you know, we were very strong proponents in the Mexican
context of high interest rates. But as you also remember, there
was always the threat that if you had them too high for too
long, they could overwhelm the economy.
So, we agree with your purpose. But these are very
complicated balances we all have to make.
Senator Bennett. I just wanted to make the point one more
time.
Senator McConnell. Secretary Summers mentioned four things:
structural, budgetary, monetary, and financial. They are not
anywhere near in compliance on any of these yet, right? Are
they on any of the four?
Mr. Summers. I would not, until the IMF team has completed
its review, want to pass judgment on this. I don't think it
would be appropriate for me to pass judgment on where they are
with respect to each of those issues.
Certainly there have been a number of troubling reports and
we are concerned about the situation.
Senator McConnell. And so, what you are saying, I gather,
is that you do not expect this $3 billion release to go forward
unless all four of these are met? In a week?
Mr. Summers. I think, Mr. Chairman, what I said was that,
unless there was adequate progress with respect to each of
those----
Senator McConnell. Is that one of them, two of them, three
of them? How many?
Mr. Summers [continuing]. Adequate progress with respect to
each of, within each of the four areas. I could not imagine a
program going forward with a totally unsuitable structural
policy, or a totally unsuitable banking policy.
Senator McConnell. So a little bit of progress in each of
the four categories?
Mr. Summers. Adequate progress.
Secretary Rubin. Mr. Chairman, let me say that I think the
IMF is going to have to make a judgment as to what constitutes
adequate progress with respect to the totality and each
individually. That is the what they are working, will be doing
between now and March 15.
Senator McConnell. That gets back to the point we were
discussing earlier about the latitude of the Director. He seems
to have been rather flexible, shall we say, in Russia.
Secretary Rubin. Well, no.
Senator McConnell. And should we anticipate the same degree
of flexibility here?
Secretary Rubin. First, as Deputy Secretary Summers said,
in a number of instances he actually has discontinued a program
in Russia and I think with good effect.
Mr. Summers. He did not disburse a penny on his recent trip
to Russia, Mr. Chairman.
Secretary Rubin. I think in this situation, Mr. Chairman,
he is facing an extremely difficult judgment. We all remember
the circumstances in the history of Indonesia that have
occurred. I think that he just has a very difficult set of
judgments to make and that is what he has to do.
Senator McConnell. At the risk of being redundant, then, if
he has that kind of latitude, we may be looking forward to
having a number of our requirements for passing the quota
addressed by the Director himself. Is that something we are
going to explore?
Secretary Rubin. I think, as you suggested, and as----
Senator McConnell. He seems to have a good deal more power
here.
Secretary Rubin. Well, let me respond in two respects.
First, I think that, as you and I discussed yesterday, we
have to discuss this with the managing director because he has
a lot of other members, as I said before. But I think one
possibility is to work with him in terms of policy statements
he would be prepared to make.
Second, we have enormous influence at the IMF, Mr.
Chairman, and I think it would be fair to say that we and a
number of other countries, who are the principal providers of
resource, will express some views on these subjects.
Mr. Summers. Mr. Chairman, may I be clear on one point?
Senator McConnell. Yes.
Mr. Summers. Any recommendation that the managing director
would make with respect to completion of a review or financial
support to any country would, to be operative, require approval
by the Board. He has no capacity to make a unilateral
commitment on his own of financial resources. Any such
commitment, or any judgment about a review, or any waiver of a
condition, all of that requires the approval of the Board.
Senator McConnell. I want to switch to one other country
very quickly and Senator Faircloth and Senator Bennett are
still here.
Senator Faircloth. That's all right. I'm in no hurry.
Senator McConnell. I want to just switch to Burma for 1
minute. This has probably not been on your radar screen lately.
It is not on anybody's radar screen except it is an outrageous
military junta that exploits its own people and nobody seems to
care.
This week, Japan announced plans to restore bilateral aid
to Burma. I am concerned about bank assistance to the junta in
Rangoon.
I see blank faces back there, so I am not sure anybody has
been following this.
Mr. Summers. Not only is it not on our radar screen, it is
not in our briefing book.
Senator McConnell. Oh, then you are in deep trouble.
[Laughter.]
Well, let me just tell you the question I want to ask and
you all can get me an answer when you can.
We have just been spending an enormous amount of time
talking about the struggling economies in Asia. Aung San Suu
Kyi, who some of you may remember is the Nobel Prize winning
duly elected leader of Burma who was cooling her heels in jail
for 6 years, is more adamant than ever that now is not the time
to relax pressure on the regime in Burma. What I am seeking--
and you don't have to answer this today since it is not in the
briefing book, as you indicated--is your commitment to sustain
the multilateral ban that has been in existence on bank loans
to the junta in Rangoon.
If you would take a look at that, I would appreciate it.
Senator Faircloth.
Senator Faircloth. Thank you, Mr. Chairman. I will be very
brief.
As we so often do, I have more of a statement than a
question.
We have been talking about Mr. Camdessus and I have looked
at what the IMF and particularly under him how it has wavered
and vacillated around the world. I somewhat feel that to
compare him and Suharto is like putting a boa constrictor and a
rabbit in a battle. I think we are going to wind up with
Suharto coming right back to where we are. He will make some
little minor change. He is going to get the money and will move
on.
That has somewhat been the history of many, many IMF
bailouts around the world. I read of 30 or 40 of them where
they get the money and then do not make the change. I think
that is exactly what we are looking at in Indonesia.
I don't think there is any reason for us to think it is
going to be different. That is the problem that you are having,
that the IMF or whatever is having, the money. It is that we
don't have confidence in the IMF.
Now I saw that they had the French at the G-7 meeting.
Mr. Dominic Strauss-Kahn said, and the Japanese are saying
the same thing, that we need to increase international
regulations of cross border bank lending and slow the flow of
capital into developing countries until they have the financial
and regulatory structure to handle it.
Now what we have done is flowed the money in and hoped that
the financial and regulatory structure would be put in place to
handle it. Almost without exception, it has not. Some 40
countries that IMF has loaned to, roughly one-half of the
countries, are in worse shape, in worse debt, than they were
when they started.
Now the French Finance Minister says that: ``It is our
responsibility to invent a new system for international
regulations.'' Strauss-Kahn wrote that in a letter to the other
ministers that provided a framework for the discussion.
As long as we keep sending the money first, the reforms are
not going to happen.
Secretary Rubin. Senator, his comments with respect to the
money were not flows of IMF money. What he was saying was--and
this, I think, is an issue that needs to be very carefully
discussed and analyzed; I am not sure what we think about it,
frankly--his view was that there are vast flows in the global
financial markets--which is true--which are going into
developing countries that have immature financial sectors. What
the IMF has been doing is focusing on trying to make those
financial sectors better and stronger so that they can absorb
these flows of capital.
What he was saying, and I think someone else said it as
well--it may have been the Japanese; I don't remember--was that
it may be that we need to have some kind of restraints on these
flows of private sector capital until these systems become
strong enough to absorb them.
We happen to be great believers in freedom of flows of
capital. So we have, I would say, a rebuttal presumption
against that. But, nevertheless, we are not opposed to it
dispositively. We have to analyze it.
In terms of his comment with respect to the financial
structure and architecture and so forth, we are all--Chairman
Greenspan, Secretary Summers, and myself--all of us are
convinced that there have to be major steps forward. That is
not going to happen quickly. These are enormously complex
issues.
We are spending a tremendous amount of time on it and so is
the Fed, so is the group of countries called the G-10. We have
a meeting of finance ministers here sometime in the spring to
attempt to carry this forward.
There is a tremendous focus on this and a tremendous energy
around it around the world.
Senator Faircloth. Mr. Secretary, I understand exactly
what you are saying. I know what you are saying. But the
Congress needs to hold the money until it is done. If we do
not, it will never be done.
We talk about it. We have been talking about better, you
know, access to foreign markets. A little here, a little there,
but it's all very little. What we are saying here is--and the
same thing the IMF to the countries--is give us the money and
then we'll reform. The IMF says to this country give us the
money and we are going to change the rules.
But once the money is gone, the countries go back to where
they were, and once we send the money to the IMF, it changes
nothing, just maybe something cosmetic.
That is the reason I am not for sending the money until
reforms are in place--at least a structure for them to be in
place so we know where we are going.
Thank you.
Senator McConnell. Thank you, Senator Faircloth.
Secretary Rubin has already stayed a good deal beyond where
he indicated he was going to earlier.
Senator Bennett, do you have any sort of closing thoughts?
Then we will let the Secretary go.
Senator Bennett. I have made my points, none of which will
surprise the Secretary.
Thank you.
Senator McConnell. Mr. Secretary, we would like to figure
out a way to help you, and I think you now know what we are
looking for.
We thank you very much for coming up here and you, too,
Secretary Summers.
Thank you very much.
subcommittee recess
The subcommittee will stand in recess until 3:30 p.m., on
Tuesday March 31, when we will hear from Hon. Strobe Talbott,
Deputy Secretary of State and Hon. Stuart Eizenstat, Under
Secretary For Economic, Business, and Agricultural Affairs.
[Whereupon, at 12:35 p.m., Tuesday, March 3, the
subcommittee was recessed, to reconvene at 3:30 p.m., Tuesday,
March 31.]
FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS
APPROPRIATIONS FOR FISCAL YEAR 1999
----------
TUESDAY, MARCH 31, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 3:30 p.m., in room SD-192, Dirksen
Senate Office Building, Hon. Mitch McConnell (chairman)
presiding.
Present: Senators McConnell, Gregg, Campbell, and Leahy.
DEPARTMENT OF STATE
Caucasus and Caspian: Economic and Political Security
STATEMENTS OF:
HON. STROBE TALBOTT, DEPUTY SECRETARY OF STATE
HON. STUART EIZENSTAT, UNDER SECRETARY FOR ECONOMIC, BUSINESS,
AND AGRICULTURAL AFFAIRS
opening remarks of senator mitch mc connell
Senator McConnell. Good afternoon everyone. I want to thank
Secretary Talbott and Ambassador Eizenstat for accommodating a
problem we had this morning and for rescheduling to the
afternoon. Welcome to you both.
Mr. Talbott, as cochair of the Minsk Group, I thought it
would be helpful to the subcommittee to hear your view on the
status of that effort as well as gain your sense of regional
stability, particularly in light of the recent Armenian and
Ukrainian elections--actually, you may be able to give us an
update on those--the assassination attempt on President
Shevardnadze, and the dramatic shakeup of the Russian
Government. In short, lots has been happening in your area of
responsibility.
There is an old saying that the more things change, the
more they stay the same.
When you appeared before the committee in 1995 to offer the
Department's perspective on the New Independent States, NATO
expansion was center stage and the disaster in Chechnya was
causing considerable unease throughout the Caucasus, the
Kremlin had just experienced a personnel shakeup, leaving
doubts about the fate of reformers and reforms, the head of the
Russian Security Services was arguing against foreign ownership
or access to oil pipelines, and George Soros was accused of
being a spy.
Here we are, 3 years later, and the debate over NATO
expansion is on the Senate's agenda shortly. There is quiet,
but not peace, in the Caucasus. We have just witnessed an even
more dramatic shakeup at the Kremlin, and the question of
pipeline routes, ownership, and access is the issue of the day.
I guess we can take comfort that Mr. Soros' status has
changed.
Russia's role, for better or for worse, continues to
dominate regional developments. Each leader in the area with
whom I talk attached great significance to President Yeltsin's
statement, issued in the wake of Ter-Petrossian's resignation.
He said:
New leaders will walk on to the scene which everyone must
take into account. They may be tough, but everyone understands
that they must deal with and maintain friendly relations with
Russia. Armenia is in the field of Russia's strategic interest.
It is an orthodox State and we cannot and will not lose it.
That is a quote from President Yeltsin.
I am not sure Georgia, Ukraine, Armenia, or any other
nation believes that they should be cast as Russia's to lose.
To the extent that this attitude plays out in the Minsk
process, I question the possibility of ever achieving a
permanent and peaceful settlement between Armenia and
Azerbaijan.
With the elections behind Yerevan, there is obviously a new
opportunity to settle issues surrounding the conflict. However,
it is my sense that a settlement and stability may not serve
Russian interests of maintaining exclusive control over
pipeline transportation of Caspian oil.
Uncertainty over Nagorno-Karabakh yields to Russian
interests and dominance, but it is a formula that also holds
true in Georgia. Although the assassins in the most recent
attempt on President Shevardnadze's life claimed allegiance to
his old rival, I understand they carried Russian passports and
those who managed to escape, fled to a Russian base.
As we all know, the criminal guilty of the last attempt on
his life continues to live in Russia free from the fear of
extradition.
As energy fields are developed and transportation routes
negotiated, regional politics are bound to become more complex.
It is important for us to understand how you define United
States interests separate and apart from Russian ambitions.
There is one other problem I want to address before turning
to your comments. The most troubling issue, which has
implications far beyond the region, is Iran's aggressive plans
to acquire a nuclear weapons capability. It took enormous
courage for President Kuchma to withstand the considerable
pressure from Moscow to provide a turbine for the Iranian
reactor, especially in view of the employment impact on the
factory which lost its business.
Unfortunately, the Russian-Iranian relationship has
expanded substantially over the past several years. Press
reports suggest Iran may be able to conduct test flights on a
missile launcher later this year, thanks to extensive
cooperation between Russian and Iranian nuclear engineers as
well as the transfer of equipment and technology.
This program directly undermines American security
interests. While Ambassador Wisner succeeded in focusing
Moscow's attention on this problem, real, permanent results are
slim.
It strikes me that the Gazprom/Total/Petronas investment in
Iran only serves to finance this lethal effort, which is
precisely why the sanctions legislation was passed. This is one
of several areas in which I hope you may be able to clarify the
administration's position.
We have a great deal of ground we want to cover here this
afternoon. So why don't we go to your statement, Mr. Talbott
and to yours as well, Mr. Eizenstat, if you have one.
summary statement of hon. strobe talbott
Mr. Talbott. Thank you, Mr. Chairman. I hope it is in the
spirit of this event for me to begin by congratulating you for
the second time today on a great occurrence for the State of
Kentucky last night.
Senator McConnell. Yes; it was a marvelous ballgame. It is
getting to be something we are used to every year, being No. 1.
I can't wait till next year. [Laughter.]
Mr. Talbott. Some of my colleagues will be distressed to
hear that. [Laughter.]
Mr. Chairman, I truly do welcome the opportunity to meet
with you and any of your colleagues who can be present this
afternoon for a chance to talk about the administration's
strategy toward the Caucasus and the Caspian Basin. I am
joined, as you have already noted, by my friend and colleague,
Stu Eizenstat, and in my opening statement, which will be, by
the way, an abbreviation of what I am submitting for the
record, I will focus on the American determination to help
bring peace to the South Caucasus and then Secretary Eizenstat
will address American efforts to insure that the vast energy
resources of the Caspian Basin are developed and transported in
a way that conforms with U.S. strategic and commercial
interests.
introduction of Associates
Let me also, if I may, introduce two other colleagues who
are here today: Lynn Pascoe, who is the special negotiator for
Nagorno-Karabakh and regional conflicts in the New Independent
States, and Bill Taylor, Deputy Coordinator for U.S. Assistance
to the NIS. They are available to answer in detail any
questions that you, Senator Campbell, and any of your other
colleagues may have about our diplomatic and assistance
efforts.
In our view, the South Caucasus, by which I mean the area
covered by Armenia, Georgia, and Azerbaijan, has the potential
to become one of the real success stories of the next century.
As you know, Mr. Chairman, from your own visit to the area last
year--and we talked about it immediately after your return--
these countries are blessed with both human and natural
resources. However, history has not been so kind.
While the people of the region have gained, or in some
cases regained, their freedom, they are struggling against what
might be called the opportunity cost of a lost century--that
is, the inadequacy of the social, political, and economic
institutions that they inherited and the difficulty of building
new ones that will allow them to develop as modern states.
Seeing that the ranking member has joined the subcommittee,
Mr. Chairman, I had complimented the chairman, Senator Leahy,
on an event last night and I congratulate you on a great
birthday for your State today.
Senator Leahy. Now that I have reached the ripe old age of
58, Mr. Secretary, I want to be reminded of past birthdays not
current ones. But thank you, though. [Laughter.]
Mr. Talbott. The chairman has asked me to look to the
future, but I will certainly pay obeisance to the past, as
well.
The United States has made it a priority to help these
three countries--Armenia, Azerbaijan, and Georgia--overcome the
burdens that I just described. Our assistance programs support
democratic institution building, economic reforms, and numerous
programs that are aimed at strengthening the rule of law and
civil society.
It is against that backdrop that, with the leadership of
Stu Eizenstat and also the extensive work and participation of
the Departments of Commerce and Energy, the United States is
promoting an East-West Eurasian Transportation Corridor for the
export of Caspian energy resources.
Azerbaijan, a Caspian littoral State, will profit from
development of its oil reserves. Georgia and Armenia, even
though they are not, as the journalistic cliche would have it,
``oil rich,'' do stand to benefit from being part of a robust
economic hub fueled by the petroleum of their neighbors.
But none of those objectives stands a chance if the people
of the Caucasus are living and, too often, dying in a state of
hostility. That is why our efforts on behalf of regional peace
are so essential.
Let me concentrate on the enterprise to which we have
devoted the most energy, Nagorno-Karabakh. This is not just a
dangerous and potentially contagious conflict in its own right.
It is also emblematic of one of the most vexing challenges of
the post-cold-war world. From Slovenia, on the border of Italy,
to Kyrgyzstan on the border of China, the 1990's have seen the
eruption of ethnic and religious animosities that had been
mostly dormant during the ice age of Communist rule.
Another manifestation of this threat to international peace
requires the presence today of approximately 8,000 American
troops helping to keep the peace in Bosnia and another threat
still imperils Europe anew in Kosovo.
We have been involved in the quest for a negotiated
settlement to the Nagorno-Karabakh conflict since 1992. Today,
the United States is working with France and Russia, under the
auspices of the Organization for Security and Cooperation in
Europe to help the parties negotiate a settlement.
I serve as the American cochair of the so-called Minsk
Conference and I rely heavily on Ambassador Pascoe, who works
full-time on this immensely thorny and important problem.
He and his Russian and French partners worked especially
hard last summer and fall to develop a sound and promising
approach that concentrated on the security aspects of ending
the armed conflict in the first place with talks on status
issues to follow.
President Aliyev of Azerbaijan and then President Ter-
Petrossian of Armenia agreed to this approach. But the Nagorno-
Karabakh authorities refused to participate in negotiations on
the basis of this proposal.
The resignation of President Ter-Petrossian on February 3
and the Armenian presidential elections, the second round of
which were held yesterday, have forced a pause in the peace
process. But a pause does not mean a halt. We are not giving
up. We owe it to ourselves and to the parties to persist.
We have made clear that we hope and expect the new Armenian
Government to take a serious approach to negotiations aimed at
achieving real progress toward a lasting, fair settlement.
We are also actively engaged in the quest for a solution to
another nearby dispute, and that is the one in Georgia--the
simmering on again/off again conflict in Abkhazia. The effort
is under the auspices of the United Nations and Ambassador
Pascoe is hard at work on this project as well.
Mr. Chairman, Senators, I would like to stress that our
assistance programs are an important component of our diplomacy
in the Caucasus. The $12.5 million earmarked by Congress for
the victims of the Nagorno-Karabakh conflict and the $5 million
appropriated for the relief of victims of the Abkhazia conflict
are both welcome and useful.
United States assistance also contributed to the monitoring
of yesterday's elections in Armenia. There is, however, one
congressionally imposed obstacle to our diplomacy and that is
section 907 of the Freedom Support Act, which prohibits certain
assistance to the Government of Azerbaijan.
I would only reiterate Secretary Albright's urging before
the Foreign Relations Committee on February 10 to lift legal
restrictions on nonmilitary assistance to Azerbaijan while
maintaining support for aid to Armenia. But I would also say
that, thanks to the further loosening of 907 restrictions
contained in the fiscal year 1998 Foreign Operations
Appropriations legislation, we will have the means to work with
the Azerbaijanis to make sure that this fall's presidential
elections are as free and fair as possible.
Let me now turn to the question that you stressed in your
opening comments, Mr. Chairman, about other States that have an
active interest in the region.
We believe that the zero-sum rivalries among large powers
trying to impose their will on smaller States are or at least
should be a relic of history. There is more than enough wealth
and economic opportunity in the Caspian Basin to go around if
all the States of the region, large and small, cooperate in an
open, mutually beneficial and mutually respectful manner, and
if they play by today's rules of international life. That
principle applies particularly to Russia.
We believe it is in everyone's interest for Russia to build
strong relations with its neighbors so long as those relations
are founded on respect for the rights, the sovereignty, and the
independence of all concerned.
Since the breakup of the U.S.S.R. 7 years ago, Russia has
demonstrated what I would call strategic ambivalence about the
region that we are discussing here today. Some forces in that
country are nostalgic for the Soviet and Russian empires. But
there are also other forces at play in the great drama of
Russian politics today--and, as you noted, they have been
particularly dramatic in recent days--that want to see their
country adapt itself to the challenges and opportunities of the
21st century rather than replaying the ``Great Game'' of the
19th.
In our own policy toward the Caucasus and Central Asia, as
well as in every other aspect of our policy toward the former
Soviet Union, we are doing what we can to create conditions in
which those committed to Russia's transformation into a normal,
modern State will prevail over those that are bucking the tide
of history.
With respect to the conflicts that are roiling in the South
Caucasus, Russia has, over the past several years, been both
part of the problem and, more recently, part of the solution.
Earlier Russian attempts to exploit the indigenous trouble in
the region not only failed to enhance Russia's security along
its southern flank, they may even have contributed to the
outbreak of Russia's single greatest trauma within its own
borders--the devastating war in Chechnya.
Today, as I indicated earlier, Russia is working
cooperatively with the OSCE on Nagorno-Karabakh and with the
U.N. in Georgia.
Let me say a final word, if I could, about another regional
power, Iran.
We continue to caution nations throughout the region about
the development of close relations with Iran. We will continue
to work with all the States of the Caucasus to thwart the
growth of Iran's influence in the region while those States
strengthen their ties to Europe and the transAtlantic
community.
prepared statement
Secretary Eizenstat has been the administration's point man
in maximizing cooperation between the United States and its
friends and allies with regard to Iran. So I think this would
be a good point for me to turn the microphone over to him.
[The statement follows:]
Prepared Statement of Strobe Talbott
Thank you, Mr. Chairman, for the opportunity to discuss with you
and your subcommittee the Administration's strategy toward the Caucasus
and the Caspian Basin. I am joined by my friend and colleague, Stuart
Eizenstat, Under Secretary of State for Economic, Business, and
Agricultural Affairs.
In my opening statement, I will focus on the American determination
to help bring peace to the Caucasus; then Secretary Eizenstat will
address American efforts to ensure that the vast energy resources of
the Caspian Basin are developed and transported in ways that serve U.S.
strategic and commercial interests.
Let me first introduce two other colleagues with us here today:
Lynn Pascoe, Special Negotiator for Nagorno-Karabakh and Regional
Conflicts in the New Independent States; and Bill Taylor, Deputy
Coordinator for U.S. Assistance to the NIS. They are available to
answer in detail any questions you may have about our diplomatic and
assistance efforts.
Since the collapse of the U.S.S.R. 7 years ago and the birth of
independent states where before there had been Soviet republics, the
U.S. has worked aggressively to foster peace, prosperity, democracy,
and respect for human rights.
In 1992, within months of the Soviet Union's collapse, the United
States, under the Bush Administration, opened embassies in all 11 non-
Russian New Independent States, including the eight of Central Asia and
the Caucasus. Since then, under President Clinton, our engagement in
the region has intensified.
Let me concentrate on three of those states in particular: Armenia,
Georgia, and Azerbaijan. In our view, the South Caucasus has the
potential to become one of the real success stories of the next
century. The area is blessed with both human and natural resources.
History, however, has not been so kind. In the 19th century, the region
was a battleground for Great Powers encroaching from all points of the
compass. And, of course, for most of the 20th century, Armenians,
Georgians, and Azerbaijanis labored under a stultifying and repressive
Soviet Communist system imposed by Moscow. Today, while they have
gained--or in some cases, regained--their freedom, they are struggling
against what might be called the opportunity cost of a lost century--
the inadequacy of the social, political, and economic institutions they
inherited and the difficulty of building new ones that will allow them
to develop as modern states.
The United States has made it a priority to help these three
countries overcome those burdens. Our assistance programs support
democratic institution-building, economic reforms, and numerous
programs aimed at strengthening the rule of law and civil society.
It is against this backdrop that, with leadership from Stu
Eizenstat and the Departments of Commerce and Energy, the U.S. is also
promoting an east-west Eurasian transportation corridor for the export
of Caspian energy resources. This commitment is a vital element in
promoting the prosperity of the Caucasus, as it is for central Asia.
Azerbaijan, a Caspian littoral state, will profit from development of
its oil reserves. Georgia and Armenia, while not, in the journalistic
cliche, ``oil-rich,'' will benefit from being part of a robust economic
hub fueled by the petroleum of their neighbors.
The political and economic dimensions of our policy are mutually
reinforcing; they are integral to a single strategy. The nations of the
South Caucasus can achieve their potential only if democracy and civil
society thrive and only if their physical and economic
infrastructures--that is, their pipelines and their markets, their oil
fields and their legal and regulatory structures--open them to the
outside world.
But none of those objectives stands a chance if the people of the
Caucasus are living and too often dying in a state of hostility. That's
why our efforts on behalf of regional peace are so essential.
Let me concentrate on the enterprise to which we have devoted the
most energy: Nagorno-Karabakh. This is not just a dangerous,
potentially contagious conflict in its own right. It is also emblematic
of one of the most vexing challenges of the post-Cold War world: From
Slovenia on the border of Italy to Kyrgyzstan on the border of China,
the 1990's have seen the eruption of ethnic and religious animosities
that had been mostly dormant during the ice age of communist rule.
Another manifestation of this threat to international peace requires
the presence of approximately 8,000 American troops to help keep the
peace in Bosnia today, and another still imperils Europe anew in
Kosovo.
We have been involved in the quest for a negotiated settlement to
the Nagorno-Karabakh conflict since 1992, when the Organization for
Security and Cooperation in Europe (then known as the CSCE) called for
a peace conference to take place in Minsk. The conference never took
place, but the Minsk Group has become a standing body, including the
U.S., seeking a negotiated peace in the conflict.
In early 1997, we strengthened our direct involvement by becoming a
co-chair of the OSCE process, along with Russia and France. I serve as
the American co-chair of the Minsk Conference, and Ambassador Pascoe is
co-chair of the Minsk Group, which works full-time on this immensely
thorny and important problem. He and his Russian and French partners
worked especially hard last summer and fall to develop a sound and
promising approach that concentrated on the security aspects of ending
the armed conflict in the first phase, with talks on status issues to
follow.
The rationale was this: At present, there is no status for Nagorno-
Karabakh that would be acceptable to all sides. Short of imposing a
solution on one side or another--something we have vowed not to do--
discussion of status could take many years. During that time, the life
of the region would be disrupted and the threat of war ever-present.
The stunted economic development, especially of Armenia, would continue
to deprive the people of the Caucasus of the well-being and stability
we seek and they deserve.
President Aliyev of Azerbaijan and then-President Ter-Petrossian of
Armenia had hoped to sign a first-phase agreement that would have done
the following: Ended the threat of renewed fighting and allowed
hundreds of thousands of refugees to go home; returned to each side
much of the territory occupied by the other; opened up borders and
lines of communication and trade; lifted all embargoes; left the land
connection between Nagorno-Karabakh and Armenia intact and secure; and
provided international peacekeeping forces and security guarantees.
This security would allow Azerbaijan and Nagorno-Karabakh to
discuss status issues without preconditions, free of any military,
political, or economic pressure to sign a deal until both sides found a
settlement on which they could agree.
Unfortunately, the Nagorno-Karabakh authorities refused to
participate in negotiations on this proposal. They insist on discussing
status from the beginning. Our concern is that concentrating on status
first would return the talks to the endless exchanges of maximalist
positions that characterized the negotiations before we became co-
chairs. Meanwhile, the vast number of displaced persons would remain in
camps, miserable and increasingly radicalized. Neither Russia, France,
nor the U.S. is willing to sponsor such negotiations. This is not out
of impatience--we are prepared to be patient. But we are only prepared
to sponsor negotiations seriously aimed at achieving a settlement, not
an exercise in futility.
As I said, Presidents Aliyev and Ter-Petrossian were prepared to
proceed on what we regarded as a constructive and promising basis. The
Nagorno-Karabakh authorities were not.
The resignation of President Ter-Petrossian on February 3 and the
Armenian presidential elections--the second round was held yesterday--
have forced a pause in the peace process.
But a pause does not mean a halt. We are not giving up. We owe it
to ourselves and to the parties to persist. The co-chairs plan to
return to the region in April. We have made clear that we hope and
expect the new Armenian Government to take a serious approach to
negotiations aimed at achieving real progress toward a lasting, fair
settlement.
The quest for a solution to another dispute nearby, in Georgia,
also has our active support and participation. This is the simmering,
on-again/off-again conflict in Abkhazia. In the last year we have
worked hard to open up the negotiating process so that U.N.-sponsored
talks might be more successful than the stalled Russian-led effort.
Frustrated by lack of progress, Russia has also recently welcomed an
increased role for the U.N. in peace negotiations. Ambassador Pascoe is
hard at work on this project as well.
The U.S., as one of the so-called Friends of the Secretary General
on this issue, has become more directly involved in efforts toward an
international settlement, led by the U.N. Secretary General's Special
Representative, Liviu Bota. The most recent round of negotiations, in
Geneva last November, produced a series of working groups that have
begun to address the pressing problems of economic and humanitarian
cooperation, refugee return and security issues. Ambassador Bota and
the Friends are meeting today in Sukhumi with representatives of the
parties to assess the progress of the working groups and to set
concrete goals for another Geneva meeting later this spring.
The U.S. also contributes observers to the U.N. peacekeeping
mission in Abkhazia--UNOMIG. In the wake of recent violence, including
the attempted assassination of President Shevardnadze on February 9, we
have decided to pull back our presence from Abkhazia itself. We now
have two U.S. military observers in Tbilisi. Two other American
military observers will be redeployed to Abkhazia once we are confident
that the security arrangements for UNOMIG are adequate. The U.N. is
currently working on a proposal to provide adequate force protection
for the U.N. observers that would allow the United States to resume
full participation in UNOMIG.
Mr. Chairman, I would like to stress that our assistance programs
are an important component of our diplomacy in the Caucasus. We are
moving forthwith to utilize the $12.5 million earmarked by Congress for
the victims of the Nagorno-Karabakh conflict and the $5 million
Congress has appropriated for the relief of victims of the Abkhazia
conflict.
This contribution on the part of the U.S. has been a key tool in
inducing the Abkhaz to participate in a broader, multilateral effort on
peace negotiations. USAID and our embassy in Tbilisi have sent an
assessment team to Abkhazia to determine how best to use this
assistance. Spurred on by our efforts, the U.N. and international
financial institutions have sent teams of their own in to work on post-
conflict reconstruction.
In addition to these high-profile humanitarian assistance programs,
American funds have helped make it possible for reformers in Armenia
and Georgia to institute judicial reform and to draft economic
legislation and electoral laws. U.S. assistance contributed to the
monitoring of yesterday's election in Armenia. Overall, U.S. assistance
to Armenia and Georgia is among the highest in the world on a per
capita basis.
There is, however, one congressionally imposed obstacle to our
diplomacy. That is Section 907 of the FREEDOM Support Act, which
prohibits certain assistance to the Government of Azerbaijan. I would
only reiterate Secretary Albright's urging before the Foreign Relations
Committee on February 10 to lift legal restrictions on non-military
assistance to Azerbaijan while maintaining support for aid to Armenia.
But I would also say that, thanks to the further loosening of Section
907 restrictions contained in the fiscal year 1998 foreign operations
appropriations legislation, we will have the means to work with the
Azerbaijanis to make sure that this fall's presidential elections there
are free and fair.
Let me now turn to the question of other states that have an active
interest in the region. We believe that the zero-sum rivalries among
large powers trying to impose their will on smaller states are--or at
least should be--a relic of history. There is more than enough wealth
and economic opportunity in the Caspian Basin to go around if all the
states of the region, large and small, cooperate in an open, mutually
beneficial and mutually respectful manner and if they play by today's
rules of international life.
That principle particularly applies to Russia. We believe it is in
everyone's interest for Russia to build strong relations with its
neighbors--so long as those relations are founded on respect for the
rights of sovereignty and independence of all concerned.
Since the breakup of the U.S.S.R. 7 years ago, Russia has
demonstrated what I would call strategic ambivalence about the region
we are discussing. Some forces in that country are nostalgic for the
Soviet and Russian empires. But there are also other forces at play in
the great drama of Russian politics today that want to see their
country adapt itself to the challenges and opportunities of the 21st
century rather than replay the ``Great Game'' of the 19th.
In our own policy toward the Caucasus and Central Asia, as well as
in every other respect of our policy toward the former Soviet Union, we
are doing what we can to create conditions in which those committed to
Russia's transformation into a normal, modern state prevail over those
that are bucking the tide of history.
With respect to the conflicts roiling in the South Caucasus, Russia
has, over the past several years, been both part of the problem and
part of the solution. Earlier Russian attempts to exploit the
indigenous trouble in the region not only failed to enhance Russia's
security along its southern flank, they may even have contributed to
the outbreak of Russia's single greatest trauma within its own
borders--the devastating war in Chechnya.
Today, as I indicated earlier, Russia is working cooperatively with
the OSCE on Nagorno-Karabakh and with the U.N. in Georgia.
A final word, if I might, about another regional power: Iran. We
continue to caution nations throughout the region about the development
of close relations with Iran. As a state-sponsor of terrorism and a
nation bent on the development of weapons of mass destruction, Iran
still poses a threat to all its neighbors.
Moreover, we are against any state in the region being allowed to
dominate the region, politically or economically. We will continue to
work with all the states of the Caucasus to thwart the growth of Iran's
influence in the region while those states strengthen their ties to
Europe and the Trans-Atlantic Community.
Secretary Eizenstat has been the Administration's point man in
maximizing cooperation between the United States and its friends and
Allies with regard to Iran. So this, I think, is a good point to turn
the microphone over to him.
Thank you.
summary statement of hon. stuart eizenstat
Senator McConnell. Go right ahead, Secretary Eizenstat.
Ambassador Eizenstat. Thank you, Mr. Chairman, members of
the committee. With your permission, I would like to
concentrate my testimony on energy issues in the Caspian region
that have a profound impact on the long-term economic
development and political stability of the States in the
region.
As a key element of our broader foreign policy objectives
in the Caucasus and Central Asia, the United States is actively
promoting the establishment of an East-West or Eurasian transit
corridor for the export of oil and gas resources from the
Caspian region.
Realization of such a corridor will support our strategic
and economic interests. We have three strategic concerns.
First, it is essential to the independence and sovereignty of
the New Independent States to avoid a monopoly on export routes
from the region. We have supported a policy of multiple
pipelines from the region so that Caspian oil and gas resources
can enjoy unfettered access to world markets, not subject to
undue influence by other exporters or any other country.
Second, we want Caspian energy to diversify world energy
supplies. The United States, as a matter of policy, strongly
opposes any pipeline across Iran due to Iran's support for
terrorism and its drive to acquire weapons of mass destruction
and missile technology.
Third, we want to avoid creating a bottleneck in the
Bosporus in terms of getting Caspian energy out. We share
Turkey's concerns about the environmental and safety impact of
putting large volumes of oil through the Bosporus Straits. It
is, therefore, important to find long-term solutions that avoid
the Bosporus.
To address these three concerns, the United States has
supported the development of an east-west, or Eurasian, energy
transportation corridor for export of the region's oil and gas.
A key element of this corridor is an oil pipeline from Baku, in
Azerbaijan, to Ceyhan, on Turkey's Mediterranean coast. A Baku-
Ceyhan pipeline will promote a diversification of export
routes, will allow Caspian oil to get to world markets without
transiting Iran, and will avoid putting more oil through the
Bosporus.
A second key element of our strategy is Trans-Caspian gas
and oil pipelines, which will link together the states on both
sides of the Caspian. In particular, we believe that a gas
pipeline across the Caspian Sea and through the Caucasus to
Turkey will provide a much needed outlet for Turkmenistan's
energy. Ultimately, it could also accommodate gas from
Uzbekistan, Kazakhstan, Azerbaijan, and Russia.
In recent months, with the very strong leadership of the
Vice President's office and an interagency group, we have made
significant progress in promoting this east-west corridor. We
have been working with Turkey, for example, to make this Baku-
Ceyhan pipeline a commercially attractive option for private
companies. Turkey has embraced taking a leading role in
promoting this pipeline. It is finishing its own feasibility
study and our own Export-Import Bank and OPIC are actively
considering their appropriate role in financing such a
pipeline.
We have also urged the countries of the region to increase
their levels of regional cooperation. We are very pleased that
recently the foreign ministers of Turkey, Kazakhstan,
Azerbaijan, Turkmenistan, and Georgia met in Istanbul and
issued a communique supporting an east-west corridor.
We also have urged the littoral States surrounding the
Caspian to adopt a legal regime conducive to the investment
which will be required for energy development. Our efforts to
help resolve the Turkmenistan-Azerbaijan border dispute,
including sending a team of experts to the region, is beginning
to bear fruit. We are also encouraged by efforts between
Kazakhstan and Russia to delimit their Caspian boundary.
We are also continuing to work with Russia to find common
ground on Caspian energy development. Our strategy is not
intended to exclude Russia. We support, for example, the
Caspian Pipeline Consortium project through Russia.
Finally, we have had a number of discussions with our
allies in Europe and Japan regarding the Caspian and, based on
these discussions, I believe that our allies understand our
shared interests in this important part of the world to insure
Caspian resources which will enhance world energy security.
prepared statement
In closing, Mr. Chairman and members of the committee, we
appreciate the support Congress has provided to us in this
region. We welcome the fact that congressional delegations are
scheduled to visit the region over the Easter recess, and we
look forward to working with you.
Senator McConnell. Thank you, Mr. Secretary.
[The statement follows:]
Prepared Statement of Stuart Eizenstat
Thank you, Mr. Chairman, for inviting me to testify before the
Subcommittee. Secretary Talbott has laid out the Administration's broad
views on political developments in the Caucasus and Central Asia. I
thought it might be helpful to concentrate my testimony on energy
issues in the Caspian region since they have such a profound impact on
the long-term economic development and political stability of these
states--and will thus directly affect important American interests that
Secretary Talbott just discussed.
As a key element of our broader foreign policy objectives in the
Caucasus and Central Asia, the United States is actively promoting the
establishment of an East-West, or Eurasian, transit corridor for the
export of oil and gas resources from the Caspian region. We believe
that the realization of such a corridor will support our strategic and
economic interests in the region if it is done in the right way. In
this regard, while we do not want to intervene in the commercial
decisions of private companies, we have three strategic concerns with
respect to the routing of pipelines.
First, it is essential to the independence and sovereignty of the
newly independent states of the Caucasus and Central Asia to avoid a
monopoly on export routes from the region. For several years now, we
have supported a policy of multiple pipelines from the region so that
Caspian oil and gas resources can enjoy unfettered access to world
markets, not subject to undue influence from or commercial
vulnerabilities to other exporters.
Second, we want Caspian energy to diversify world energy supplies.
The United States, as a matter of policy, strongly opposes any
pipelines across Iran due to Iran's support for terrorism and drive to
acquire weapons of mass destruction and missile technology. It would be
important to avoid pipelines across Iran from an energy security
standpoint--we simply do not need a greater share of the world's oil to
transit the Straits of Hormuz.
Third, we want to avoid creating a bottleneck in the Bosporus.
Moving Caspian oil to the Black Sea and then by tanker through the
Turkish Straits is a commercially attractive option. We share Turkey's
concern, however, about the environmental and safety impact of putting
large volumes of oil through the Bosporus Straits. We think it is
important, therefore, to find long-term solutions that avoid the
Bosporus altogether.
In order to address these three concerns, the United States has
supported the development of an East-West, or Eurasian, energy
transportation corridor for export of the region's oil and gas. A key
element of this corridor is an oil pipeline from Baku, Azerbaijan, to
Ceyhan, on Turkey's Mediterranean coast. A Baku-Ceyhan pipeline will
provide a diversification of export routes, will allow Caspian oil to
get to world markets without transiting Iran and will avoid putting
more oil through the Bosporus.
A second key element of our strategy are Trans-Caspian gas and oil
pipelines, which can link together the states on both sides of the
Caspian. We believe, in particular, that a gas pipeline across the
Caspian and through the Caucasus to Turkey would provide a much-needed
outlet for Turkmenistan's energy. Ultimately, it could also accommodate
gas from Uzbekistan, Kazakhstan, Azerbaijan and Russia. Moving Caspian
and Russian gas through the Caucasus could help address the energy
shortages that have plagued Georgia and Armenia and give all the states
in the region a stake in pipeline security, for both oil and gas
pipelines.
The State Department has been working, in a coordinated effort with
several other agencies led by the Vice President's Office, to implement
this strategy. In recent months, we have made significant progress.
--We have been working with Turkey to make a Baku-Ceyhan pipeline a
commercially attractive option for private companies. Turkey
has embraced taking a leading role in promoting this pipeline.
Turkey is finishing a comprehensive feasibility study for this
pipeline and EXIM and OPIC are actively considering what role
they might play in financing such a pipeline.
--We have urged the countries of the region to increase their levels
of regional cooperation with one another. We were pleased to
see that the foreign ministers of Turkey, Kazakhstan,
Azerbaijan, Turkmenistan and Georgia met earlier this month in
Istanbul and issued a communique supporting an east-west
corridor. They also scheduled a follow-on meeting to be held in
Tbilisi in May.
--We have urged the littoral states surrounding the Caspian to adopt
a legal regime that is conducive to the investment, which will
be required for energy development. Our efforts to help resolve
the Turkmenistan-Azerbaijan border dispute, including sending a
team of experts to the region, is beginning to bear fruit. We
have seen some signs that Azerbaijan and Turkmenistan are
moving toward resolution of their boundary dispute and are also
encouraged by efforts between Kazakhstan and Russia to delimit
their Caspian boundary.
--We are continuing to work with Russia to find common ground on
Caspian energy development. Let me emphasize that our strategy
is not intended to exclude Russia. We support the Caspian
Pipeline Consortium project through Russia, and USAID has even
funded a study that looks at ways to move more Caspian oil
through Russia's existing pipeline network. Caspian issues were
discussed at the most recent Gore-Chernomyrdin Commission
meetings and the G-8 energy ministerial, which is currently
taking place in Moscow, will provide other opportunities for
dialogue.
--Finally, we have had a number of discussions with our allies in
Europe and Japan regarding the Caspian and, based on those
discussions, I believe our allies understand our shared
interests in this important part of the world, including a
desire for peace and stability in the region and ensuring that
Caspian resources enhance world energy security.
In closing, we appreciate the support that Congress has provided
the Administration's policy in this region; we welcome the
congressional delegations that are scheduled to visit the region over
the Easter recess.
Finally, let me reiterate the point made by Secretary Talbott
regarding Section 907 of the Freedom Support Act. We need your help in
lifting legal restrictions on non-military assistance to Azerbaijan so
that we can continue to make progress in this region.
remarks of senator patrick leahy
Senator McConnell. Senator Leahy has an opening statement
and then we have two votes beginning at 4 o'clock. What I think
we will do is try to catch them at the end of the first 15
minutes and at the beginning of the second, which would require
just a brief recess, sometime like around 4:10 to 4:20 p.m.
Senator Leahy.
Senator Leahy. Thank you, Mr. Chairman. Most Americans have
not heard of the countries that surround the Caspian Sea and I
don't think too many are aware of the conflict in Nagorno-
Karabakh. But, as you both said, the Caucasus region is an area
of rapidly growing economic and strategic importance. We see
this in all of our briefings.
Mr. Secretary, you have done as much as anyone to shape
policy in the administration, but, Mr. Chairman, you have done
an enormous amount to shape our policy here in the Congress in
a way that emphasizes our national interests. I commend you for
that.
Senator McConnell. Thank you.
Senator Leahy. The problem we have is these newly
independent countries face every kind of problem there is. The
situation changes so rapidly that nobody in this room is going
to try to predict where it is going to be a year or two year
from now.
We have strong ties to Armenia. We have broad interests in
promoting prosperity and democracy throughout the Caucasus and
Central Asia. We obviously have an interest in the cooperative
development of the vast oil and gas reserves in the area.
But look at the obstacles. There are unresolved conflicts
in Nagorno-Karabakh, Abkhazia, and Tajikistan. These threaten
the stability of the entire region.
Last year, Ambassador Eizenstat described how in another
century Central Asia and the Caucasus were the subject of the
``Great Game,'' where, as I recall you saying, Russia and Great
Britain vied to see who could have the most control over some
weak, local regimes.
I think that kind of external manipulation and dominance is
still a threat. There are maybe different parties, but it is
still a threat.
Russia still continues to meddle in the affairs of former
territories. Perhaps that is predictable, but, unfortunately,
it is a reality.
There is the proximity of Iran and I suspect their motives.
We continue to have very serious concerns about Russia's
support for Iran's nuclear and ballistic missile progress. At
the same time, as Secretary Talbott knows, there are examples
of how we are working cooperatively with Russia, sometimes in
ways that we probably had not foreseen but are very happy to
have.
But you see corruption and organized crime flourishing
throughout the region. That makes it very difficult for our own
companies to compete fairly. There is a history of
environmental neglect. In fact, if you want to increase oil
production, you could almost guarantee if the past is any
prologue, it could be an environmental disaster that is going
to happen. It is going to be worse than our own gold rush of a
century ago.
Section 907 you have already talked about. It has become a
rallying cry for people on both sides of the Armenia-Azerbaijan
debate. I am sympathetic to the arguments of the Armenians, but
we have been very generous in our aid to them. I think it is
the second highest per capita aid we give to any country, even
though elections there have been marred by fraud.
I also strongly support helping the victims of the Nagorno-
Karabakh conflict, although it does not appear the situation
there amounts to the humanitarian emergency that some have
described.
But I also know that section 907 has impeded our ability to
pursue our own interests in the region.
The administration's goals are such that you could not
disagree with them: to support market economies, democratic
reform, resolve regional conflicts, cooperative development of
Caspian energy resources, strengthening the stakes for Russia
and Turkey to cooperate. Less obvious is how effective we are
in pursuing these goals.
I don't think the Minsk Group negotiation on Nagorno-
Karabakh is really going much of anywhere. The Caucasus are a
turning point. They have weak, authoritarian, corrupt
governments. They seem quite capable of squandering what could
be a great opportunity to those who show more enlightened
views.
I think we have to treat them with a lot more attention and
assertiveness because, unfortunately, some of the people there
are not doing it.
Thank you, Mr. Chairman.
Senator McConnell. Thank you, Senator Leahy.
It has been the policy of the subcommittee to have opening
statements only from the chairman and the ranking member. I see
Senator Gregg here as well. But in order to try to accommodate
those who have questions, we will limit our questions to 10
minutes each and, hopefully, that will give everybody a chance
to ask both of you questions.
We all referred to the elections. I gather in Armenia
Kocharian won roughly 59 to 41 percent. Is that accurate? If it
is, do we have any early reports from the international
monitors as to whether or not this election is going to, shall
we say, pass the smell test?
elections in armenia
Mr. Talbott. The vote counting does continue. The results I
have show 72 percent of the precincts counted with Mr.
Kocharian at 60 percent, as you say, and Mr. Demergian at 40
percent.
The elections are being very thoroughly monitored by the
international community. There are 160 OSCE monitors there, and
90 of those are Americans, by the way.
I would be loath, Mr. Chairman, to prejudge or predict the
ruling that the monitors will make. I think it is fair to say,
though, that we have seen an improvement in Armenia's ability
to carry out elections since the 1996 presidential elections
where there were some serious troubles. There were still some
difficulties in the first round of this election. But let's
hope that the trend continues in the right direction.
Senator McConnell. And over in Ukraine, can you give us an
evaluation of the Rada elections?
Mr. Talbott. Well, again, the results are still coming in.
Here one has to be particularly careful. But there are some
preliminary indications that those parties which the Ukrainians
themselves describe as leftist are doing somewhat better than
in the last election, which is to say in 1994.
But it is certainly impossible to predict at this point
what kind of a new Rada the executive branch of the Ukrainian
Government will be dealing with.
The turn-out, by the way, so far has been 70 percent. That
is down a bit from 1994, when it was 74 percent.
Once again, the Ukrainian authorities are to be
congratulated for allowing a very high and intense degree of
international monitoring. The OSCE, once again, which had the
largest number of international observers on the ground, has
issued a positive preliminary assessment of the conduct of the
voting while, at the same time, noting that there were some
fairly serious shortcomings and deficiencies in the conduct of
the campaign itself.
But once again, I think we need to watch and wait.
section 907
Senator McConnell. Shifting back to Armenia, you mentioned
section 907 and Senator Leahy did as well.
Administration officials have always come up to the Hill
and complained about 907, and you did not disappoint me today
by failing to do that. I am curious as to how much of a
handicap it really is. Why haven't you just simply waived the
restrictions?
What would you think would amount to demonstrable steps by
Baku to qualify to lift the blockade?
Mr. Talbott. We never complain, of course, Mr. Chairman. We
suggest and consult with you and work together to bring our
positions as close together as possible.
Senator McConnell. Well, whining is actually the word I
would have used. [Laughter.]
Mr. Talbott. Never that. Never that. [Laughter.]
As somebody who has been involved, myself, in the diplomacy
there, I can tell you that the continuation of 907 is something
of a handicap for us. It undercuts us, by no means
devastatingly, but nonetheless in a way that is discernible as
Ambassador Pascoe and I go about our business in that part of
the world. It undercuts our claim and conviction that we are
using our good offices and we are doing so in a way that is
fair to all parties.
Senator McConnell. That is my question: why have you not
waived it? Could it not be argued that Aliyev's willingness to
sign an agreement last year was a demonstrable step under the
bill that would have given you the ability to waive 907 had you
wished to?
Mr. Talbott. Our feeling is that the right thing to do is
to repeal it and to take it off of the books altogether.
Now the most trenchant issue here, of course, is the
continuation of the Azerbaijani embargo against Armenia. We
have made some progress in that regard, which is to say when
President Aliyev was in Washington last year, he did indicate,
as he put it, that his government would be prepared to
normalize all relations, including commerce, with Armenia, with
the successful conclusion of the first stage of the Nagorno-
Karabakh negotiations that we are now trying to get started
again once the Armenian elections are behind us.
But let me, in a spirit of comity here, say that the
alleviation of the stringency in 907, which has now taken place
2 years in a row, has definitely helped, not least in that it
has allowed us to address the problem of humanitarian needs
within Azerbaijan and also to provide assistance to
nongovernmental organizations that are working within
Azerbaijan to promote democracy. That I think will be
particularly useful to us as we approach an election in
Azerbaijan itself.
Senator McConnell. I listened to your answer, but it seems
to me that 907 must be useful to you or you would have waived
it because of the efforts by Aliyev to enter into the peace
agreement last year.
Mr. Talbott. The Azerbaijanis, quite simply, under the
terms of the legislation, have not met the conditions for a
waiver.
Senator McConnell. So, obviously, the answer to my question
is you don't think Aliyev's step in the direction of peace last
year was a demonstrable step under the legislation?
Mr. Talbott. We think 907 is a mistake and is not a useful
tool for trying to move the parties forward. We feel that,
until the pause that I mentioned earlier, because of the
workings of Armenian democracy, we were making some progress
toward a comprehensive settlement of the Nagorno-Karabakh
conflict. Both President Aliyev and former President Ter-
Petrossian had agreed to proceed on the basis of the proposal
that the Minsk Group had put forward.
Now we have to see if we can't get back to that now that
there is a new leadership in Yerevan.
Senator McConnell. So is this a sort of general reluctance
to use waivers? Is that what you are suggesting?
Mr. Talbott. I think it is a preference on our part to
persuade you and your colleagues of the lack of wisdom of this
particular piece of legislation and to take it off the books.
Senator McConnell. So you don't have any problem between
your decision not to waive here and your decision to waive
restrictions we had on Russia regarding nuclear cooperation
with Iran?
Mr. Talbott. Are you referring to the issue of
sanctionability?
Senator McConnell. Yes.
Mr. Talbott. Could you be a little more specific with your
question?
Senator McConnell. Well, you did exercise a waiver to
override restrictions we have had in previous bills on Russian
assistance if they continued nuclear cooperation with Iran. I
gather that must have been a 614 waiver that you used in that
situation?
Mr. Talbott. I'm sorry, Senator.
Senator McConnell. We have had in this bill in previous
years restrictions against aid to Russia related to Russia's
cooperation with Iran in the area of nuclear power. You have
exercised a waiver to get around that restriction so that
Russian aid could continue to flow.
Admittedly, a 614 waiver may be different from a waiver of
907. But I am just trying to get a sense of what is waivable
here and what is not. In that particular instance, you did not
seem to be troubled by exercising the waiver.
Mr. Talbott. We felt in that particular instance that the
activity, the pattern of activity, the direction of Russian
behavior met the terms of a waiver, which we do not feel is the
case under the terms of 907 with respect to Azerbaijan.
Senator McConnell. So in that particular instance, you used
a 614 national interest waiver, is that right?
[Pause.]
Senator McConnell. I am told by staff that it was actually
built into the legislation.
Ambassador Eizenstat. May I just mention----
Senator McConnell. Yes.
Ambassador Eizenstat [continuing]. On the 907 that there
are two conditions that Azerbaijan has to meet. They have to
take demonstrable steps to cease offensive uses of force and
lift their embargoes. While they have made significant strides
in the first condition, that is not the case with the second.
So, as Secretary Talbott was saying, it is a question of
simply not meeting the statutory requirements.
Senator McConnell. We are getting close to when Senator
Leahy and I need to run to cast two votes. But let me try to
get in one more question.
In a recent staff briefing, Ambassador Pascoe could not
recall whether we had suggested, encouraged, or agreed formally
or informally to a Russian leadership role in a peacekeeping
force related to settlement of the Nagorno-Karabakh dispute.
How do you envision this peacekeeping force? What do you
envision the composition of this peacekeeping force should we
get a deal on the Nagorno-Karabakh between the Azeris and the
Armenians?
peacekeeping force
Mr. Talbott. Well, first, it will have to be a genuine
peacekeeping force, which is to say there must be a peace to
keep.
Senator McConnell. Obviously I am assuming there is a peace
to keep. I am asking you about the composition of some
peacekeeping force in the wake of such an agreement----
Mr. Talbott. I understand.
Senator McConnell [continuing]. That would be mutually
comforting to the Azeris and the Armenians.
Mr. Talbott. From my own dealings with the three parties to
this conflict, I think one of the requirements would be that it
be genuinely international. This is to say that the composition
of the peacekeeping force include representatives of
significant diversity of countries.
Senator McConnell. Would it be a majority Russian?
Mr. Talbott. I would think not because that would raise
concerns on the part of those in the area who are worried about
excessive Russian influence.
Senator McConnell. Would it include Americans?
Mr. Talbott. We do not foresee that it would involve any
American combat forces.
Senator McConnell. Combat forces.
Mr. Talbott. In Georgia, for example, in Abkhazia, we have
a strong number of American officers there in a monitoring
capacity. We are nowhere near the point of deciding on the
composition of a peacekeeping force for Nagorno-Karabakh. But
soldiers, I think, would not be envisioned.
Senator McConnell. Senator Leahy, I think I am going to go
and vote. I don't know whether you would like to go now and
come back.
Senator Leahy. I will stay for a couple of minutes and then
will leave, too.
Senator McConnell. I am going to let Senator Leahy take
over for a while.
Senator Leahy. Do you want me to just recess the hearing
when I am through if you have not returned?
Senator McConnell. Yes; and I will then come right back.
Senator Leahy [presiding]. Let me follow up a little bit on
this because I know on the law, in the 1998 foreign operations
bill we withheld 50 percent of the assistance to the Government
of Russia unless the President certified that they had
terminated their support for the development of Iran's nuclear
ballistic missile program. You also had some other ways you
could do that.
I assume Russia has not ended its support completely for
these programs. I now see that the Minsk Group made a proposal
for an interim settlement for Nagorno-Karabakh. The Azerbaijan
and Armenian Governments, at least their former governments,
said they would accept it, but Nagorno-Karabakh has not. So I
am wondering if that means it is not settled and, if it is not,
our law provides up to $43 million in assistance for the
Caucasus region may be shifted to other areas in the former
Soviet Union if the settlement proposed is not agreed to by May
1998.
It appears that will not happen. Do we shift the money?
Mr. Talbott. You ask would we shift the money elsewhere in
the NIS?
Senator Leahy. Yes.
Mr. Talbott. I think the short answer is that would
probably be the best use of the money. We have until the end of
May. The Secretary of State specifically has until the end of
May.
Senator Leahy. That is just 2 months away.
Mr. Talbott. Pardon?
Senator Leahy. That's 2 months away.
Mr. Talbott. Well, the Armenians have now had their
election and soon we will know who the next President of
Armenia is going to be. Ambassador Pascoe and his colleagues
from the Minsk Group will be returning to the area quite soon--
I would guess probably after the inauguration of the new
president. They will make the case, which we find to be very
compelling, that we should get these negotiations going again.
So I would certainly not rule out that the Secretary might
be in a position to decide that this earmarked money could go
forward.
Senator Leahy. Well we say that you have to agree to it by
May 1998. Can Nagorno-Karabakh block a settlement? They are not
a country, but can they block a settlement?
Mr. Talbott. It is difficult to see how there can be
progress in these negotiations if all three parties are not
agreed on the basis for the ongoing negotiations. The essence
of the problem to date has been that two of the parties, the
Governments of Armenia and Azerbaijan, have been prepared to
negotiate on the basis of the suggestions that the Minsk Group
made. But the Nagorno-Karabakh authorities were not.
We think that this is contrary to their own interests and
now we have to see how the equation will change with a new
president in Armenia and without wanting to prejudge.
Senator Leahy. But Kocharian has already said that there is
no compromise on Nagorno-Karabakh.
Mr. Talbott. But, Senator, the last votes are not in. So
pardon me if I do more than just stand on a formality here.
Senator Leahy. I understand. I am just thinking out loud.
Mr. Talbott. As a general rule, as you know from our past
conversations, I try to avoid hypotheticals. But I think it is
safe to say if the next President of Armenia is Mr. Kocharian,
he knows the Nagorno-Karabakh issue very, very well. He was, of
course, the principal leader in Nagorno-Karabakh.
Senator Leahy. We will wait for those elections.
I have only saved in 30 years in office three items from
the press about me. I actually liked them enough to frame them.
Two are a pair of headlines that appeared 5 days apart, the
first time I ran for the Senate. The first one said, in huge
type--it was the State's largest newspaper--``Poll Dooms
Leahy.'' The next one, 5 days later, same sized type, same
placement, said, ``Leahy Wins Senate Seat.'' The other article
is a family item. Everything else got trashed, which is
probably just as well.
So I always wait until the final results are in.
I am going to recess and go to vote. The chairman or I will
return very briefly.
It is good to have you both here.
[A brief recess was taken.]
Senator McConnell [presiding]. The hearing will resume. I
apologize for the delay, but these things do happen. We have to
vote once in a while.
Let me go back, if I could--not to keep you all much
longer--to the possibility of a peacekeeping force. Let me just
say, as someone you might expect to be unalterably opposed to
any kind of American participation in a peacekeeping force of
some size in that area, I am not opposed to that, assuming, as
you indicated, Secretary Talbott, that there was a peace
agreement worth keeping.
On that assumption, if a small complement of Americans in
the multinational force were sufficiently reassuring to the
parties, I, for one, would not object to that. This comes from
somebody who is, frankly, a little bit jaded at this point
about the Bosnia deployment given how expensive it is and the
fact that it may seem to last into the next millennium.
I do not envision the size deployment in and around
Nagorno-Karabakh that we have had in Bosnia. Therefore, from a
cost point of view, presumably this would be a smaller force.
Let me ask you about cost. What would be sufficient, do you
think, to reassure both sides in terms of the numbers of
personnel involved?
Mr. Talbott. In conferring, I am cheating ever so slightly.
Senator McConnell. That's fine. I confer occasionally
myself.
Mr. Talbott. Ambassador Pascoe says that it is notional at
this stage, as you have already made very clear, Senator. It is
no more than 1,000 troops, a maximum of 1,500 observers on the
ground.
But may I respond a bit to the general proposition you have
put forward?
Senator McConnell. Yes.
Mr. Talbott. First of all, when I started to answer your
question earlier, I didn't mean to seem to be belaboring the
obvious. We have had cases where peacekeeping missions, and the
environment of the circumstances of the peacekeeping missions
have deteriorated so that peacekeepers are in harm's way.
Senator McConnell. Yes.
Mr. Talbott. We have had that in Georgia.
Now the situation in Georgia has returned to a condition of
normal and calm. But as I indicated earlier, we have an over-
arching responsibility to the protection of our own forces,
whether it is four officers or considerably more than that.
Therefore, one of the points that we are making to the parties
in the Nagorno-Karabakh conflict is that they must undertake
steps that will insure the international community that they,
the parties, are committed to a peaceful environment into which
the peacekeeping force will then go.
This sounds self-evident as an abstraction, but in practice
it can be one of the toughest issues facing us in the period
ahead.
I am very interested, obviously, to hear what you say,
Senator, on the subject of your own willingness to consider
American participation. We have simply come nowhere near that
point.
Senator McConnell. Yes; I understand that. We can stipulate
that we are not to that point.
Mr. Talbott. But one of the reasons that Secretary
Eizenstat and I welcomed your invitation to appear here today
is that it is very important for everybody who hears the
proceedings here today to understand that the United States
does have a very real stake in peace and security in that
region. This is a case that we need to make over time, and we
do not want to introduce the subject of Nagorno-Karabakh for
the first time to the attention of the American people some
point down the road. That is one of the reasons we are glad to
have a chance to talk about it today.
Senator McConnell. As you know or may recall, because we
have had this conversation before though it has been some
months, my own personal view is that we have considerably more
interest in the Caucasus than we do in Bosnia, for example.
Certainly our NATO allies have a consuming interest in Bosnia,
and, now we do as a result of the administration's commitment
to it.
But, when I think of the Caucasus and the economic impact
on the world of that region developing successfully and,
hopefully, independently, it seems to me that the United States
has a good deal more interest in that, than it does in Bosnia.
So, therefore, I wanted to make sure that you knew that there
were at least some of us who were open to some kind of American
participation, particularly now that we are talking about the
size of the force being about what I had anticipated. This is
not, I would think, a hugely expensive proposition.
I understand, as you indicated, that any time you use
American troops in any deployment anywhere, we are all equally
concerned about their wellbeing. But we have a significant
number still in Bosnia.
How many do we have in Bosnia now?
Mr. Talbott. It's 8,000, I think.
Senator McConnell. Yes, 8,000. And here we would be talking
about some percentage of that, roughly 1,500.
Finally, let me say with regard to such a peacekeeping
force, am I correct in saying that the United States would not
be interested--I asked this earlier but I don't think I asked
it the way I want to ask it now--that it is not envisioned that
a majority of that force would be Russian? Is that correct?
Mr. Talbott. That is correct. Our strong feeling is that it
would be to the wishes and in the interests of the parties that
it be a genuinely international force and that it not be like
any other aspect of policy or events in this region,
monopolized by one country.
Senator McConnell. Let me shift in our remaining moments to
Iran.
Over the past several months, the administration has been
reviewing Total's investment in Iran's oilfields to determine
if it should be subject to the Iran/Libya Sanctions Act [ILSA],
typically referred to as ILSA.
Given ILSA requirements, why is there any question about
whether this investment is sanctionable and when can we expect
a decision?
sanctions
Ambassador Eizenstat. We have done a very thorough
investigation according to both the spirit and the letter of
the law, and within the next couple of weeks, Deputy Assistant
Secretary of State Ramsey will be going back to Asia to look at
the issue of how far the Asian partners in two deals, Mr.
Chairman--the Bow Valley-Bakrie deal, which involves an
Indonesian company and a Canadian company, and the Malaysian
company Petronas, which is involved in the Gazprom/Total deal--
the extent to which the Asian financial crisis may have
affected the terms of that contract and their capacity to go
forward.
We think it is prudent to do that before any decisions are
made.
We continue to make progress on this. It is a difficult
decision and we would expect that there will be decisions made
sometime in the near future.
Senator McConnell. News accounts last week quoted the
Deputy National Security Advisor as stating you are rethinking
sanctions on Iran, which I gather is what you are saying right
now.
I noticed on the maps that you provided there is an Iranian
oil pipeline route. Yet your statement, Secretary Eizenstat,
appears to oppose such an option.
I understand you are now considering waiving the sanctions
on Russia and may leave open the question of sanctions on other
partners. There seems to be a lot of confusion with the
perverse impact of such a kind of half-sanctions decision being
that hard currency would flow to a terrorist State and the only
penalty would fall on American companies keeping them out of
the region.
Maybe you feel like you have said all you can say on this
issue, but I guess I am groping for more.
Ambassador Eizenstat. No, sir; I would be glad to address
that.
First, I have talked to Mr. Steinberg, the Deputy National
Security Adviser. The headline in the paper said that we were
rethinking sanctions, not Mr. Steinberg. He made it very clear
that we were continuing to hold out sanctions as a very real
option.
Under the statute as Congress passed it, if a particular
transaction is viewed as covered by the act, the Secretary of
State then has three options. She can either sanction
immediately, waive immediately, or begin a 90-day consultative
period.
Since we have not made a decision about whether these
transactions are subject to the act and will go forward, we
have obviously not made a decision with respect to which of
those options.
But I can tell you, Senator, that sanctions remain as they
have from the beginning, a very real option under the statute
and as a practical matter, and Mr. Steinberg said nothing to
the contrary.
Senator McConnell. And you expect a decision when?
Ambassador Eizenstat. Well, we first have to make a
decision about whether or not this is covered and that will be
made as quickly as we can.
Senator McConnell. A recent Post article, datelined Moscow,
indicated Russian intelligence agents have recruited scientists
to go to Iran to teach missile technology. Moscow denies any
formal role, suggesting government funded engineers are
freelancing.
I frankly share the view expressed by a diplomat in a Post
article that, if it was not government policy before, how can
they stop it, and if it was a government effort, someone is not
telling the truth. So why should we now believe they would
really stop this program?
Ambassador Eizenstat. First, may I say that the Iran/Libya
Sanctions Act is not only an act imposing sanctions. It
specifically and directly admonishes the administration to do
precisely what we are now doing and have been doing for some
many months, and that is to try to build a multilateral regime
which will deny Iran the capacity to develop weapons of mass
destruction and the missile systems to deliver those weapons of
mass destruction. That is built into the statute and that is
what we are trying to do both with respect to Russia and the
European Union.
With respect to Russia, there have been, obviously,
concerns that private scientists or institutes may have been
engaged in that kind of activity. That is why Secretary
Talbott, the Secretary of State, Vice President Gore in his
meetings with former Prime Minister Chernomyrdin, the President
in direct contacts with President Yeltsin, the Wisner-Koptev
and now the Gallucci-Koptev follow-up meetings--all of these
have been directed toward making sure that the Russian
Government took additional steps.
Now a very important step forward was made on January 22,
and that is when the Prime Minister signed an executive order
at the direction of President Yeltsin which will require
Russian exporters to seek an export license before exporting
any goods or technology which they have reason to believe could
be transferred to a ballistic missile program or a program
involving weapons of mass destruction.
This decree is similar to catch-all legislation which this
country has had in place since 1991 and is precisely what we
wanted the Russian Government to do.
Now what is key now, Mr. Chairman, is clearly the
implementation of that. We now have a legally binding
obligation and, even with the change in government in terms of
the prime minister, we have had a reassurance by Foreign
Minister Primakov to the Secretary of State and at other very
high levels. This was something that was specifically endorsed
by the President, who very much remains in office, that this
policy will continue.
So what we want to see now is effective implementation. But
this catch-all decree is a very significant step forward, a
very real breakthrough, and if it is implemented, as we have
been assured it will be, we will have been following precisely
what ILSA requires, that is, building this multilateral regime
and making it much more difficult for Iran to acquire weapons
of mass destruction.
Senator McConnell. Has the Russian Government directly or
indirectly supported the Iranian nuclear and ballistic missile
program?
Ambassador Eizenstat. We do not believe that the Russian
Government is directly doing so, that these are private
interests. There is a question of the enforcement by the
Russian Government. We believe now, as a result of the decree,
which came from very intensive discussions that our
administration had--and, if I may say so, also interventions by
the European Union, which was very helpful, at very senior
levels in European Governments--they have turned a corner in
terms of their willingness to enforce a law that will make it
more difficult.
Senator McConnell. How many Russian scientists are involved
in this undertaking, do you think?
Ambassador Eizenstat. Well, I think that if we wanted to
get into those details, perhaps we ought to have a private
briefing.
Senator McConnell. In concluding, I want to go back to the
pipeline issue for a minute.
When I was in the Caucasus last summer--and Secretary
Talbott and I talked about this, I think, after I got back--of
course there is the very real danger that Armenia will be left
out entirely if there is not some peace agreement sometime in
the near future. I think that would be clearly a step back for
the Armenian people, to miss out on whatever prosperity might
be forthcoming as a result of having a pipeline come through
your country.
This raises the question: how many pipelines are there
going to be? I gather there is one that will go into Russia
through Chechnya--is that correct; one that will go from
Azerbaijan through Georgia to the Black Sea; and then there is
a third, which is the one I think you were speaking about,
Secretary Eizenstat----
Ambassador Eizenstat. Yes, sir.
Senator McConnell [continuing]. That I gather would end up
at Ceyhan. But as to how it gets there is an open question.
That actually would be a shorter route, to go through Armenia,
wouldn't it, to come out in the Mediterranean at Ceyhan? And
how do you pronounce that?
pipeline
Ambassador Eizenstat. It's ``jay-han.''
There are several planned, and ultimately the number of
pipelines will depend purely on market driven demand. The more
oil and gas that can be produced from the Caspian region which,
in turn, will increase the independence and viability of the
Caucasus and Central Asian States, the more oil and gas that
can be produced, the more pipelines there will be.
Senator McConnell. I understand that. But assuming there is
enough demand and the Turks are certainly correct in that they
do not want even more tankers going through the Bosporus than
they are going to have in any event----
Ambassador Eizenstat. That is correct.
Senator McConnell [continuing]. And that it is desirable
from an environmental point of view to have one of those come
out in the Mediterranean across Turkey, is it not actually
closer to go through Armenia?
Ambassador Eizenstat. On technical grounds, a pipeline from
Azerbaijan to the West that transits Armenia could be a viable
option. There are other routes, as well.
You could go, for example, through Azerbaijan and Georgia,
and then down, but also going through Armenia to Ceyhan is
certainly a very real possibility.
This is one of the reasons why it is so important to
resolve this conflict, because, as you say so accurately, this
would give Armenia the capacity to get transit fees and it
would be a very important part of their own economic viability.
Senator McConnell. That is certainly the message that I
tried to carry and that I hope you are carrying as well, that
peace brings not only the absence of loss of life----
Ambassador Eizenstat. Absolutely.
Senator McConnell [continuing]. But more widely disbursed
prosperity for everyone. And, hopefully, the new President in
Armenia will have the authority and the legitimacy as a result
of the election, which we hope will be certified by
international observers as at least as clean as elections in
Eastern Kentucky. [Laughter.]
Ambassador Eizenstat. But the other thing we are trying to
avoid, of course, is not only to be able to help countries like
this but to avoid the alternative of a pipeline which transits
through Iran and gives Iran greater control.
Senator McConnell. Yes; of course.
Finally, in conclusion, if I could, I will ask Secretary
Talbott to just give us a few of his thoughts on the recent
shakeup in the Kremlin. We don't expect too high a level of
candor here. [Laughter.]
Mr. Talbott. Oh, you know what the most candid of all
answers would be, I think.
Senator McConnell. That you don't know. [Laughter.]
Mr. Talbott. In your opening remarks, you recalled our
conversations back in 1995 and how much things change and yet
how much they stay the same.
You could have recalled our conversations back in 1993, at
the beginning of our association.
The evolution of Russian democracy is full of surprises.
Obviously, we have seen one of those recently. I think the key
point here, that is, what can be said on the basis of what has
already happened, is that the Russian President and the Russian
body politic are playing by constitutional rules.
That is quite something given where that country was not
that long ago.
As for what happens next, all parties to this, again, seem
to be committed to following the construction and the rules of
the checks and balances relationship between the executive
branch and the legislative branch.
As you know, President Yeltsin has decided to submit Acting
Prime Minister Kiriyenko's name to the parliament. There is, as
there always is with the Russian Parliament, a lot of vigorous
debate and quite open criticism. It is, basically, a three
strikes and the Parliament is out ruled.
We have no such mechanism, of course, in our own system.
Senator McConnell. It does have some appeal to you, doesn't
it?
Mr. Talbott. It is interesting to ponder, though.
[Laughter.]
Senator McConnell. From time to time you have thought, no
doubt, what a great idea. [Laughter.]
Mr. Talbott. Obviously, it is not appropriate for any
official of the American Government to get too deep into
commenting on personalities or, indeed, on the dynamics of
Russian politics. But I will make an observation.
Mr. Kiriyenko is not totally unknown to us, even though he
is, as has been pointed out, a relative newcomer to the power
structure in Moscow. He was in Washington not long ago as an
important part of the Russian delegation to the most recent
Gore-Chernomyrdin Commission meetings--I guess it is the last
of the Gore-Chernomyrdin Commission meetings, by definition.
But we hope the institution will certainly continue.
He is somebody of very real and proven reformist
credentials. I would point out something else.
He is young and that has been much commented on, not always
favorably, either in Russia or abroad. But going back to some
of the conversations you and I have had, Senator, I have felt
for a very long time that a key factor in the continuing
transformation of Russia is the changing of generations.
I do think it is of some significance that President
Yeltsin would turn for this critical job to somebody who was a
very young man, indeed, when the Soviet Union and the Communist
Party of the Soviet Union ceased to exist. Yes, he is not,
obviously, objectively anywhere near as seasoned as many of the
more familiar figures. But in the context of Russia as it tries
to put behind it the past and move on to the future, I am not
sure that is entirely a bad thing.
subcommittee recess
Senator McConnell. Thank you both very much for your time.
The subcommittee will stand in recess until 3:30 p.m., on
Tuesday, April 21, when we will hear from Hon. Louis Freeh,
Director, Federal Bureau of Investigation, and Gen. Ihor
Smeshko, director, Center for Strategic Studies and Analysis,
Ukrainian National Security and Defense Council.
[Whereupon, at 4:58 p.m., Tuesday, March 31, the
subcommittee was recessed, to reconvene at 3:30 p.m., Tuesday,
April 21.]
FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS
APPROPRIATIONS FOR FISCAL YEAR 1999
----------
TUESDAY, APRIL 21, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 3:38 p.m., in room SD-116, Dirksen
Senate Office Building, Hon. Mitch McConnell (chairman)
presiding.
Present: Senators McConnell and Leahy.
DEPARTMENT OF JUSTICE
Federal Bureau of Investigation
STATEMENT OF LOUIS J. FREEH, DIRECTOR
ACCOMPANIED BY:
IHOR SMESHKO, DIRECTOR, CENTER FOR STRATEGIC STUDIES AND
ANALYSIS, UKRAINIAN NATIONAL SECURITY AND DEFENSE COUNCIL
EVGEN KOSTYUCHENCKO, COUNCIL MEMBER
MICHAEL PYSZCZYMUKA, SPECIAL AGENT
opening statement of senator mitch mc connell
Senator McConnell. I want to apologize not only to the
witnesses but to the others who may be interested in today's
topic. We were originally going to have the hearing this
morning, and all of a sudden we had votes at precisely the time
we were going to go. And then, this afternoon, we shifted it
only to end up with votes scheduled for that time, too. So I
apologize, particularly to our out-of-town guests, for the
delay.
Judge Freeh, we welcome you and General Smeshko before the
subcommittee today to discuss the coordination of efforts to
combat international crime. Judge Freeh, you have appeared
twice before this subcommittee, and always have been frank in
your assessment of the threat our Nation faces as criminal
enterprises, largely based in Russia, have expanded their
lethal reach. Your testimony has prompted an increase in
support for law enforcement initiatives around the world, most
notably the International Law Enforcement Academy in Budapest,
which I have had the pleasure to visit and found very
impressive.
One of the hallmarks of your tenure as Director is a
commitment to improve and expand the working relationships
between the FBI and its foreign counterpart agencies. Today
Judge Freeh is joined by one of his partners, General Smeshko,
Ukraine's director for both the military intelligence agency
and for strategic planning and analysis on the National
Security Council.
General, we are glad to have you. Your reputation and your
portfolio of responsibilities are impressive. I appreciate your
participation today and want to note how remarkable it is that
you are here to discuss your concerns about international crime
and joint law enforcement efforts.
Who could have imagined such a session a mere 10 years ago?
It is a tribute to the strength of the relationship between the
FBI and your agency, and, for that matter, the United States
and Ukraine. Your efforts are vital to Ukraine's future, as
well as to U.S. interests.
Judge, over the past 2 years, you have drawn attention to
the growing threat of Russian criminal organizations operating
here in the United States, which are engaged in fraud and money
laundering, murder, extortion, drug trafficking, and related
offenses. What we have not focused as much time on is the fact
that these enterprises have developed regional partners and
networks, which pose a direct threat to the survival of the
fragile new democracies.
It is my sense that the explosion of criminal enterprises
has given democracy in the New Independent States a bad name.
The fear of corruption, harassment and extortion, which
characterized life under Communist regimes, has new masters,
but the experience for the average citizen unfortunately
remains largely the same. Little else that we do matters as
much as combating crime and supporting the legal, judicial and
law enforcement reform efforts which are the lifeblood of
democracy. If these criminal enterprises are allowed to expand
and take greater control, every other development initiative we
have invested in will have been a waste of resources.
Privatization of State-owned enterprises is pointless if
the Mafia is buying up the nation's assets. Agricultural
programs, transferring land ownership to individuals makes no
sense if corrupt officials are seizing harvests and profits.
Tackling these problems now is the only way to give supporters
of democratic and free market principles the opportunity to
build nations which share our values and our goals.
To address these issues, we must deepen and strengthen ties
with law enforcement agencies in the New Independent States.
Cooperation and coordination clearly serves our interests and
theirs. It is obviously in our interest to have the strongest
first line of defense deployed in countries where these
criminal organizations are based. If we can work with agencies
in the NIS to destroy the root of these enterprises, the
branches here hopefully will wither.
The New Independent States have a great deal at stake, as
well. Democracy is under siege from ruthless, well financed,
well organized criminal organizations. To sustain support for
crucial political and economic reforms, individuals and
communities must be convinced that their government works well
and can protect their property, their assets and their families
from crime and from the Mafia.
I hope today's session gives us a better sense of how we
are coordinating this important international effort and, more
specifically, what we can do to help support key friends and
allies, such as Ukraine, in carrying out its law enforcement
activities. General Smeshko, your work is vital to Ukraine's
security and United States interests, and we are looking
forward to what you have to say.
We have been joined by my good friend and colleague, the
ranking member of the subcommittee, Senator Leahy. And I would
like to call on him now for whatever observations he would like
to make, and then, Judge Freeh, we will go to you.
opening remarks of senator patrick j. leahy
Senator Leahy. I thank you, Mr. Chairman. I will make a
brief statement and put my full statement in the record.
You are to be commended, Mr. Chairman, for using the
subcommittee to discuss the problem issues of organized crime
in the former Soviet Union. Obviously we are not going to see
real democratic development in any of these countries if
bribery and intimidation are the rule rather than courts and
the rule of law. We know what can happen when organized crime
corrupts governments. And here we are talking about even lapses
of security at civilian nuclear facilities.
Director Freeh and General Smeshko, I am delighted to have
you here.
prepared statement
Rather than go on at length, as I said, I will put my
statement in the record. I think it is important that we are
having this hearing and important to see how we can help, and
how the dollars that we have set aside for this are being
spent.
Thank you.
Senator McConnell. Thank you, Senator Leahy.
[The statement follows:]
Prepared Statement of Senator Patrick Leahy
Mr. Chairman, I want to commend you for consistently using
this subcommittee to focus attention and resources on the
extremely serious problem of organized crime in the former
Soviet republics.
These are issues that go to the heart of the development of
democratic government and the rule of law. They also bear
enormously on the ability of American companies to do business
in these countries, where bribery and intimidation are rampant.
Frankly, if this subcommittee had not made these issues a
priority I am not sure anyone would have.
We know a lot about international criminal organizations.
They have huge amounts of cash, sophisticated weapons, state-
of-the art communications technology, and a global workforce.
Corruption of government officials, money laundering,
counterfeiting, and drug trafficking are all commonplace. The
possibility of nuclear material falling into the hands of
terrorists strikes me as one of the most frightening threats we
face, especially when we hear of the lapses in security at
civilian nuclear facilities.
Hundreds of foreign gangs are operating in this country. It
is staggering to think of the amount of resources, manpower and
ingenuity it will take to counter this threat.
It has been two years since our last hearing on this
subject, and I am very pleased to see Director Freeh and
General Ihor Smeshko here together. We do not stand a chance of
solving problems as serious and complicated as this unless we
cooperate closely. I was a prosecutor for eight years and I
know how difficult it can be to work together with law
enforcement officers of another state, not to mention another
country with different languages, different laws and
traditions. The United States has a lot to offer, but we also
have a lot to learn from countries like Ukraine. This needs to
be a partnership. We both have everything to gain by working
together.
In our Fiscal 1998 legislation, we directed that not less
than $9 million be made available for law enforcement training,
and not less than $20 million be made available for anti-crime
programs. We also earmarked $5 million for the Western
Hemisphere Law Enforcement Academy. These are small amounts,
but we count on you to make the most of it.
Mr. Chairman, I will wait until it is my time to ask
questions to get into the specifics about what we have
accomplished in the past two years and where we go from here.
summary statement of hon. louis j. freeh
Senator McConnell. Judge, do you want to lead off?
Judge Freeh. Thank you, Mr. Chairman and Senator Leahy. It
is always a pleasure to be back before this committee. Let me
also commend you, Mr. Chairman, on your leadership with respect
to the work that has been done in this area, but particularly
the oversight and the support that we have received from you,
Senator Leahy, and many others. I think it is really
significant and needs to be highlighted.
I am very honored to be with my friend and colleague,
General Smeshko, whom I have known for several years. I would
like to talk a little bit, if I might, about some of the
progress that has been made with respect to this very important
bilateral relationship. I would also like to introduce, on my
left, Mike Pyszczymuka, who is the FBI legal attache in Kiev.
He spends much of his time doing the things that I am going to
talk about and certainly not take credit for.
The significance of the relationship established by Agent
Pyszczymuka, who speaks fluent Ukraine, with not only General
Smeshko, but his colleagues, is that it has given us the basic
building blocks for a law enforcement structure not just to
help General Smeshko, which is important, as you both noted,
for the protection of democratic institutions in the Ukraine,
but the impact that this has on the United States.
Most of the cases that Agent Pyszczymuka works have a
direct impact here in the United States. About 80 percent of
his work is in direct support of cases which are in FBI offices
around the country. Captain Kostyuchencko is also a critical
part of that relationship. After he leaves the hearing today he
is on his way to Los Angeles, to participate further in what we
have developed as practical case training initiatives. These
are actual joint case working assignments by FBI agents here in
the United States and their counterparts, such as Captain
Kostyuchencko, in the Ukraine, where we work on cases that have
significance in both countries, which includes agents working
in the Ukraine; it includes our colleagues coming here,
interviewing witnesses and testifying in the grand jury.
These are the kinds of relationships that not only help to
solve our cases, but build the relationships that will enable
our partners to be more successful. We also want to note, as we
begin the appreciation we have for our Department of State
colleagues. Ambassador Pieffer, for instance, and his staff, in
our Embassy in Kiev have been critical, including the regional
security officer, the chief of station, the military attaches,
in allowing Agent Pyszczymuka and General Smeshko's colleagues
to do the work that needs to be done.
Just to give you a quick example and an overview, we have
got about 95 pending investigations relating to the Ukraine at
this time in our Kiev office. Many of these cases directly
affect U.S. investigations--approximately 65 pending
investigations in the United States--encompassing organized
crime, white collar crime, violent crime, and one case of a
weapons of mass destruction, they are directly supported by the
assistance we receive from General Smeshko.
To give you a couple of examples of that relationship, we
have been working a case out of our Newark office called the
Red Daisy case. It involves approximately $500 million of oil
and gas reserves and proceeds being diverted illegally from
Russia. One of the main defendants in that case, an individual
named Broner, was a fugitive in the United States since 1993.
Through General Smeshko and Agent Pyszczymuka's efforts, he was
not only identified and located in the Ukraine, but he
surrendered to Agent Pyszczymuka in the Ukraine and made
arrangements to come back here to the United States.
The Scherban case is another example. It deals with not
only the assassination of a People's Deputy in the Ukraine, but
allegations of $50 million of government fraud. Our
cooperatioin gives us the ability to investigate in a way which
we do not have without that.
We do not want to underestimate the significance of the
Russian organized crime groups and, their relationships to, as
you pointed out, Mr. Chairman, the regional governments. There
are approximately 54 countries around the world that now have
active Russian organized crime presences, including of course
the United States where approximately 25 of these groups
operate. Thirty-four of our field offices are actively
conducting cases that involve Russian organized crime groups;
about 70 percent of the groups operating in the United States
have connections to the Ukraine, which makes this relationship
so critically important.
The diversity of these cases is very sophisticated. They
are not all doing what some of the earlier, traditional
organized crime groups were known to do in the United States.
Although 71 percent of them are organized crime-type cases, 20
percent of them are white collar-type cases. Not only the case
that I mentioned, but other cases--for instance, $250 million
in diamonds taken illegally from Russia to the United States--
are part of the portfolio of cases on which our Legal Attache
Office in Moscow regularly works.
Some 55 percent of the violations have to do with fraud
cases; 22 percent money laundering cases. And the remainder
murder, extortion and drug trafficking-type cases. As I
mentioned before, we are directly affected in the United States
by these cases, which is why the relationships are so
important.
There are approximately 8,000 Russian/Eastern European
groups that have been identified by the Russia Minister of the
Interior. Many of them involve very powerful and high-ranking
organized crime members. As you know, Mr. Chairman, one of
them, a man named Ivankov, was arrested, convicted and
sentenced here in the United States. But without the support
and the cooperation of the Russian MVD authorities, that case,
like many others, might not have been possible.
The FBI, as you well know, has three general tools that we
use to not only support these relationships, but work these
cases. The first one is our Legal Attache Program. We have got
approximately 32 offices now open around the world, including
Kiev and Moscow. We have new offices in Tallinn, Warsaw, and
many of the other countries where, as you noted before, we
formerly had no relationships whatsoever. Again, 80 percent of
the work of these legal attaches is in direct support of FBI
field cases back in the United States. The significance of the
relationship controls the success of the case.
About 1 month ago, two 20-year-old American Mormon
missionaries in Russia were kidnapped. We had to respond very
quickly in what was a life-threatening situation to see if we
could resolve that matter. Four years ago, we would not have
had any capability to effect the successful outcome of that
case.
In this particular case, which occurred in a town south of
Moscow named Sorotov, an FBI instructor had recently instructed
the police on hostage negotiations and kidnapping. He was on a
plane within hours, on the ground in Moscow, and our MVD
counterparts brought him and his colleagues right down to the
command post. There, they gave input into what in this case was
a fortunate rescue and apprehension of the subjects by the
Russian MVD.
That would have been impossible a short time ago. But those
are the relationships upon which we now depend. We have such a
relationship in the Ukraine, particularly with General Smeshko,
which means not only United States lives, but United States
interests, can quickly be protected in a manner that would have
been impossible even a very short time ago.
The other methodology which we use is the training programs
that have been very successful, including as you mentioned, Mr.
Chairman, the International Training Academy in Budapest, which
you visited in January 1997. The success is not only the 630
police officers from 20 countries who have trained there, it is
the bilateral relationships which that academy is now
fostering.
For instance, the Ukraine and Hungary have established a
close working relationship on their border as a result of
student participation in the Budapest Academy. An other example
in the Baltic region is between the Hungarians and the
Rumanians. These are relationships which are being fostered
because of the importance of that particular academy.
In terms of international training, very briefly I alluded
earlier to practical case training. We have done about 40 of
these sessions since 1996. These are cases where our
colleagues, not just in the Ukraine but other countries, work
hand-in-hand with the FBI to investigate and solve cases. We
have examples of cases from Russia, from Kazakstan, from
Uzbekistan, from the Ukraine, and from the Czech Republic.
These are very, very important and, we believe, successful
endeavors that not only enhance our relationships, but actually
solve cases and, in many cases, save lives.
With respect to the overall international training, during
the past 3 years the FBI has been directly involved in training
over 18,000 foreign law enforcement officers in 60 different
countries. This is an enormous network, not only for training
purposes, but for the liaison that we need to perform our job.
Many of the cases which are now regularly worked with our
foreign police partners are done only by virtue of the training
which your committee has supported through the SEED funding,
through the FSA funding, through the antiterrorism training,
and certainly the academy in Budapest.
These are the building blocks of relationships that not
only help preserve democracy, particularly in the Newly
Independent States, but protect Americans and American
interests. It is a very well and wise investment of resources
for which we are very thankful to you both, and particularly to
the committee here.
I think I will just rely on the rest of my statement, Mr.
Chairman, which I will submit for the record. Let me make just
one final point, if I may. And that is the appreciation that we
have here for the leadership and the dedication of our foreign
partners and, in particular, since he is with me, today,
General Smeshko. The leadership and the courage which he has
shown--and he is a very modest man--but the leadership and the
courage that he has shown in dealing with a very difficult and
life-threatening set of circumstances--not just for him and his
colleagues, but his family--is really a noteworthy achievement.
The circumstances under which he operates we would not even
contemplate operating under here in the United States. He has
shown, through very, very difficult times, and very dangerous
times, incredible courage and leadership. We are very proud to
be his partner and we look for many, many ways to support him.
prepared statement
He has dedicated himself to the things that we believe in
here in the United States. He is practicing those techniques
and leadership and protocols in the Ukraine at great sacrifice,
and we are very thankful to him for that.
Senator McConnell. Well, thank you, Judge. We will make
your full statement a part of the record.
[The statement follows:]
Prepared Statement of Hon. Louis J. Freeh
Good morning, Chairman McConnell and members of the Subcommittee. I
am honored to appear before you this morning and to be accompanied by
General Ihor Smeshko who leads the Center for Strategic Studies and
Analysis of the Ukrainian National Security and Defense Council and
Captain Evgen Kostyuchencko, also of the Council. General Smeshko and
his agency are one of the several organizations in Ukraine that are
direct beneficiaries of the training and institution building programs
that are the focus of this hearing and which the FBI is proud to
present on behalf of the United States Government. Their presence here
today stands as a testimony to the commitment by the Government of
Ukraine to develop modern law enforcement agencies that are based upon
the rule of law. These two individuals are representative of the
partnerships that the FBI is developing through its international
crime, international training, and overseas expansion initiatives,
partnerships that are of enormous benefit to the FBI and other U.S. law
enforcement in our collective effort to enforce U.S. law and protect
American citizens.
Mr. Chairman, I would like to thank you and the members of the
Subcommittee for the opportunity to discuss the threat posed to the
United States by international crime, including that from Russian and
Eastern European crime groups, and the international law enforcement
initiative and programs developed by the FBI. I would also like to
thank you for your long-standing interest and support of law
enforcement training world-wide, especially in Eastern Europe and the
countries of the former Soviet Union. I know you have taken a personal
interest in Ukraine, and I am pleased to tell you about the continued
cooperation we have received from Ukrainian officials through our Legal
Attache office in Kiev.
Through our office in Kiev, the FBI has a number of ongoing money
laundering and financial fraud cases. In addition, this joint
cooperation led to the extradition of a United States Federal fugitive,
despite the absence of an Extradition Treaty. Jeffrey Broner, a
fugitive since 1993, was the only remaining defendant originally
charged in a New York gasoline bootlegging investigation who had not
been convicted in Federal Court. Broner is alleged to have played a
part in a significant tax evasion scam from the late 1980s and early
1990s. He fled the United States shortly after a warrant was issued for
his arrest and had remained in Ukraine since that time. Thanks to the
developing relationships with Ukrainian officials, we were able to
bring Broner back to the United States to face this charge.
the need for international cooperation
In recent years, the FBI's domestic law enforcement and national
security missions have expanded and changed. In the first half of this
century, the FBI earned its reputation as a preeminent law enforcement
agency because of our success in response to the advent of interstate
crime that swept the United States. As we approach the beginning of the
21st Century, the United States now faces the increasing globalization
of crime and criminal organizations. This growth of transnational
crimes has been aided by the explosion in computer and
telecommunications technology.
In a global economy, the United States is increasingly affected by
crime originating in other countries. Criminal activities ranging from
telemarketing fraud and financial institution fraud, to the more
traditional drug and organized crime, come regularly to our shores.
Sadly, terrorism has come as well. The international exporters of crime
and terrorism, who seek to capitalize on vulnerabilities in free
societies and open markets, include South American drug cartels,
terrorists from the Middle East, and an array of organized crime groups
from Europe, the former Soviet Republics and Asia. Regardless of
origin, these and other international crimes impact directly on our
citizens, often violently, and on our economy.
One of the most difficult challenges facing law enforcement is how
rapidly criminals and terrorists--both domestic and international--
adopt advanced technologies to thwart the ability of law enforcement to
investigate those who wish to do harm to our Nation and its citizens.
That is why encryption has become the most important technology issue
confronting law enforcement.
Widespread use of robust non-recoverable encryption is beginning to
devastate our ability to fight crime and terrorism. Uncrackable
encryption allows drug lords, terrorists, and even violent gangs to
communicate about their criminal intentions without fear of outside
intrusion. This type of encryption also allows these same people to
maintain electronically stored evidence of their crimes beyond the
reach of law enforcement.
For example, convicted spy Aldrich Ames was instructed by his
Soviet handlers to encrypt computer file information that was to be
passed to them. Ramzi Yousef, convicted with others for plotting to
blow up between five and twelve United States owned commercial
airliners in the far east, used encryption to protect criminal
information on his laptop computer. Major international drug
traffickers are increasingly using telephone encryption devices to
frustrate court-authorized electronic surveillance. Unfortunately,
these types of situations will occur with more frequency as inexpensive
encryption becomes more readily available to the public.
Developing a balanced approach to robust encryption is an extremely
serious public policy issue. The Administration has launched a focused
initiative to work closely with the information technology industry to
develop technical and policy solutions that represent balanced
approaches to strong encryption. However, we need the cooperation of
all affected parties--law enforcement, private industry, government
officials, members of Congress, and the American public--to create a
solution which can protect individual privacy rights and permit law
enforcement to fulfill its duties to protect the people from illegal
and unlawful activities.
international organized crime threat
International organized crime is an immediate and increasing
concern not only for United States law enforcement, but also for the
worldwide law enforcement community. International organized crime
groups are engaged in a myriad of criminal activities that include:
murder; extortion; corruption of public officials; bribery; drug
trafficking; money laundering; financial fraud; kidnaping;
prostitution; arms smuggling; and alien smuggling.
The widespread political, economic, social and technological
changes and advances occurring within the last two decades have allowed
these groups to become increasingly active worldwide. These criminal
organizations are exploiting the increased ease of international
travel, liberalization of emigration policies, expansion of free trade,
high technology communications and sophisticated money laundering
techniques to further their criminal efforts. The ability of
international organized crime groups to adapt to these changes has
hindered law enforcement efforts against them.
Russian, Eastern European, and Eurasian criminal groups will pose a
significant domestic problem for the U.S. in the future if they are not
checked by law enforcement efforts. Russian Federation Ministry of
Interior (MVD), Organized Crime Control Department officials report the
existence of over 8,000 Russian/Eastern European/Eurasian criminal
groups. There are allegedly over 150 ethnic-oriented criminal groups,
including the Chechens, Georgians, Armenians and Russian-ethnic
Koreans, of which 25 are active in the United States. Russian
authorities also report the existence of some 750-800 so-called
``Thieves-in-law'', the Godfathers of the ``Russian Mafia.''
To date, Russian/Eastern European/Eurasian criminal groups in the
U.S. have shown an ability to work closely with established American
criminal elements, including the American La Cosa Nostra (LCN), Italian
organized crime groups, and drug trafficking organizations. For
instance, ties with the LCN date to at least 1983, when the head of the
Organizatsiya in New York forged an agreement with the Colombo,
Gambino, Luchese, and Genovese New York LCN families. The business
relationship was centered on gasoline excise tax schemes and a payment
by these groups of a per-gallon ``mob tax'' for gasoline sold in LCN-
controlled areas. In return, LCN families would settle disputes,
provide protection, and provide stability to the ``bootleg'' fuel
market. As law enforcement efforts against established organized crime
groups in the U.S. has become increasingly successful, Russian/Eastern
European/Eurasian criminal elements are moving to fill the voids left
by the other criminal groups.
Unlike some of the other ethnically-oriented organized crime groups
in this country, the Russian/Eastern European/Eurasian criminal groups
appear to gravitate at an earlier stage toward complex criminal
activities, such as gasoline tax frauds, cyber security, bankruptcy
fraud, insurance frauds, and health care industry frauds. That level of
sophistication, coupled with a documented tendency toward violence,
indicates that these criminal groups are becoming a significant
criminal elements in the U.S.
Russian/Eastern European/Eurasian criminal groups in the United
States are most visibly organized in the major metropolitan areas of
Los Angeles, San Francisco, Philadelphia, New York, Newark, Boston and
Miami. Factions of these criminal groups have aligned themselves with
the New York La Cosa Nostra families in certain criminal activities.
While the so-called ``Russian Mafia'' appears to prefer economic crimes
such as credit card, insurance, and gas excise and other tax fraud for
larger schemes, they also engage in extortion, robbery, theft, murder,
and drug trafficking.
Vyacheslav Kirillovich Ivankov is a high-level Russian organized
crime leader known to have taken up residence in the United States.
Ivankov arrived in the United States in March 1992, reportedly to
establish control of and direct Russian/Eurasian organized crime
activities in this country. In 1995, Ivankov and five of his associates
were arrested by the FBI in New York on federal charges of conspiracy
to commit extortion. Much of the predication for this investigation was
provided by the Russian MVD and the Canadian RCMP. In 1996, Ivankov was
convicted and sentenced to a 9-year and 7-month term of incarceration.
Ivankov was clearly one of the most notorious Russian organized crime
figures operating at that time. Although he was based in New York, his
criminal enterprise was truly global and posed serious threats to a
number of countries.
elements of the fbi's response to international crime
There are three key elements to the FBI's international law
enforcement initiative. First, the FBI must have an active overseas
presence that fosters the establishment of effective working
relationships with foreign law enforcement agencies. There is already a
well-documented history of our Legal Attaches who have drawn upon their
investigative experiences and backgrounds and enlisted the cooperation
of foreign law enforcement on innumerable cases enabling the arrest of
many U.S. fugitives and solving serious U.S. crimes.
Second, training foreign law enforcement officers in both basic and
advanced investigative techniques and principles is a powerful tool for
promoting cooperation. We use the FBI's National Academy program as our
model. For decades it has fostered comity with state and local law
enforcement agencies.
Finally, institution building is necessary to help establish and
foster the rule of law in newly democratic republics. Establishing rule
of law will promote greater confidence and stability in these new
governments by their citizens. Fostering the development of democratic
principles in these countries will not only protect United States'
interests and citizens in those countries, but also bring stability to
a region which has been fraught with strife throughout its history.
These three elements draw upon my own experiences with the Italian-
American Working Group (IAWG) when I served as an agent and a federal
prosecutor. This group continues to show how effective the cooperative
effort between United States and Italian law enforcement is. The IAWG
mounted a coordinated and sustained attack against the Sicilian mafia.
The success of the IAWG framework resulted from developing cop-to-cop
partnerships and focusing upon a common and agreed upon strategy.
We are working with our law enforcement partners in Central Europe
and elsewhere to replicate this framework. The Central European Working
Group, sponsored by the FBI, consists of 13 nations focused on the
identification of common law enforcement threats and the establishment
of lines of communication among partners. Through the working group, we
are strengthening working relationships and leveraging resources
against organized crime groups and individuals involved in
transnational criminal activities.
I firmly believe the FBI's initiatives in response to the problem
of international crime are based upon sound and proven approaches that
have been successfully used here and abroad. This approach must now be
extended to other partners in the international arena.
legal attache program
The first element of the FBI's international law enforcement
initiative is our Legal Attache program. The FBI has long recognized
the need for assigning personnel to American embassies abroad, and
first began assigning personnel abroad during World War II. Agents who
serve as Legal Attaches are among our most experienced investigators.
They possess appropriate security clearances, and, with very few
exceptions, are fluent in the language of the country to which they are
posted.
Legal Attaches are the FBI's first line of defense beyond our
borders. They are part of a permanent presence that is alert to the
potential perils around the world. Their goals are simple--to keep
foreign crime as far from American shores as possible and to help solve
as rapidly as possible those international crimes that do occur.
Finally, it is important to emphasize that FBI Agents stationed
overseas are not intelligence officers or shadow intelligence officers.
They do not engage in espionage. FBI Legal Attaches are in place to
facilitate the international battle against crime and terrorism by
establishing operational links with foreign law enforcement and
security agencies.
At the present time, the FBI operates 32 Legal Attache offices
around the world, staffed by 82 agents and 61 support employees. During
1997, these employees handled over 19,200 investigative matters,
ranging from kidnaping to drug trafficking, from terrorism to money
laundering, from financial fraud to extortion. These agents and support
staff serve as the conduit through which law enforcement information
and cooperation flow between the United States and its foreign
partners.
All FBI field offices have sought Legal Attache assistance in
covering leads, with the largest portion coming from major metropolitan
offices. More than 80 percent of the current case load handled by Legal
Attache offices is in direct support of domestic FBI investigation not
only covering leads, but organizing the arrest and extradition to the
United States of wanted criminals.
The Legal Attache office in Moscow--opened in July 1994 as part of
our expansion plan--provides an excellent example of the success of our
overseas program. When our office in Moscow opened, it started with a
caseload of approximately 35 cases; three years later, that caseload
has grown to 185, covering some 660 leads from domestic FBI
investigations. We opened the Moscow office after we found Russian-
related crimes were increasing in certain United States cities. We
quickly learned, as a result of increased inquiries from FBI field
offices and growing cooperation with Russian authorities, that the
problem was more extensive than we had thought.
The cooperative professional relationships which we have worked to
develop recently proved their worth. On March 18, two twenty-year old
Americans serving as missionaries for the Mormon Church in Saratov,
Russia, were assaulted and kidnaped. The victims were lured to an
apartment by individuals posing as potential converts. After being
assaulted, the victims were bound, gagged and blindfolded. They were
held hostage for five days while their captors demanded $300,000 ransom
from the Mormon Church. The Moscow Legal Attache office, in conjunction
with the Regional Security Office of the U.S. Embassy, began
coordinating with Russian law enforcement officials immediately. The
FBI dispatched a Russian speaking Special Agent who was trained in
hostage negotiations and was familiar with the Saratov area and local
Russian law enforcement personnel to Moscow. Within hours after his
arrival, the victims were released without any ransom being paid. Three
days later, the Russian Federal Security Service arrested the
kidnappers.
In 1997, an employee of a Jacksonville, Florida, armored car
company perpetrated a robbery of almost $19 million in cash. This
individual was arrested crossing the Mexican border back into the
United States. Investigation conducted by our Legal Attache in Mexico
City identified the hiding place for the stolen money in North
Carolina. As a direct result of the Legal Attaches efforts, 99.4
percent of the stolen money was recovered. In this one case alone, an
FBI Legal Attache contributed to a recovery of $19 million, almost two-
thirds of the FBI's 1997 operating budget of $28.7 million for its
overseas offices.
This past December, FBI Top Ten Fugitive Thang Thanh Nguyen was
arrested by the People's Police of Vietnam. After his arrest, Nguyen
was transported to Bangkok, Thailand, by the People's Police, where he
was turned over to a team of FBI Agents and then escorted back to the
United States. Nguyen was being sought on murder charges stemming from
a 1992 New York home invasion robbery during which he allegedly shot a
victim in the stomach and the head.
This arrest came about as a result of close cooperation between the
Government of Vietnam, the United States Ambassador to Vietnam, the
United States Ambassador to Thailand, the Diplomatic Security Service
of the Department of State, the FBI Legal Attache in Bangkok, the
Monroe County District Attorney's Office and Irondequoit Police
Department in New York, and the FBI's Buffalo Field Division.
These case examples, of which there are many more, represent a very
sound return on Congress' confidence and investment in our Legal
Attache Expansion Program. Legal Attaches need to be stationed where
they can have access to information in a timely fashion, where other
foreign law enforcement colleagues can provide this information in an
arms-length fashion. Even if we cannot prevent a Khobar Towers bombing,
we need the capability to respond without delay. The FBI is currently
completing a threat-based assessment for existing and proposed Legal
Attache offices. We hope to submit our findings to the Congress in the
next few months.
international training programs
The second element of the FBI's international law enforcement
initiative is training. Training of foreign law enforcement officers is
particularly critical to combating international crime. In addition,
citizen confidence in law enforcement agencies depends upon the
development of professional law enforcement officers who understand and
operate under the rule of law. In return for this investment in
training programs, the FBI is able to work cooperatively with foreign
law enforcement agencies that share a common perspective and
understanding of investigative procedures. During the past three years,
the FBI has provided training for over 13,000 foreign law enforcement
personnel from over 60 countries.
Through a program of in-country training, the FBI conducts one and
two-week schools which are designed to meet a country's particular
training needs. The schools concentrate on subjects such as basic and
advanced police operations, technical skills, ethics, and internal
police controls. Senior FBI agents serve as instructors, bringing their
knowledge and expertise to these programs. Their credibility is not
only essential for effective instruction, but also very effective for
building the cop-to-cop bridges that we so critically need.
Practical Case Training (PCT) is also an important part of the
FBI's international training program. Practical Case Training is an on-
the-job training program that enables foreign police entities and FBI
agents to work together on actual investigations of mutual interest,
such as money laundering, bombings, bank fraud, fugitives, drug
trafficking, and crime scene investigation. In 1997, the FBI conducted
14 Practical Case Training initiatives.
This program has resulted in a number of successful investigations.
For example, under this program, Russian Federation Ministry of the
Interior (MVD) officers traveled to the FBI's New York field office to
participate in an unprecedented cooperative investigation targeting the
aforementioned Russian organized crime figure Yvacheslov Kirillovich
Ivankov. Russian MVD officers working side-by-side with FBI Agents were
able to recognize and decipher codes used by the Ivankov organized
crime group. This cooperation immeasurably aided the investigation and
directly led to the conviction of Ivankov and his associates.
Under the auspices of the Department of State's Antiterrorism
Training Assistance program, and working with the Department of
Defense, the FBI has also developed three training courses which
attempt to counter threats of concern to the United States. These three
courses include: Major Case Management, Terrorism Crime Scene
Management, and the Criminal Justice Executive Forum. Each two-week
course provides senior level law enforcement officials with leadership,
management, and organizational concepts and experiences that are
critical to the direction of national law enforcement agencies and to
the coordination of multi-agency crisis management policy and strategy.
In 1997, the FBI taught six courses for six countries under this
program. We plan to conduct eight courses for eight countries during
1998.
international law enforcement academy
The third element of the FBI's international law enforcement
initiative is the International Law Enforcement Academy, or ILEA, in
Budapest, Hungary, which opened in April 1995. The FBI serves as the
lead agency for coordinating activities at the ILEA in Budapest.
Operating funds for the Academy are provided by the Department of
State.
The ILEA in Budapest serves as a law enforcement training center
for officers from Eastern Europe, Russia, Ukraine and the Baltic
states. The Academy is currently hosting its fifteenth session. After
that class graduates in May 1998, 632 students from 20 countries will
have completed the eight-week program at ILEA.
Instructors at the Academy represent a true cross-section of
federal law enforcement agencies, including subject experts from the
FBI, Drug Enforcement Administration, Bureau of Alcohol, Tobacco, and
Firearms, United States Customs Service, and the Federal Law
Enforcement Training Center. We have also used law enforcement
instructors from other countries and the European Law Enforcement
College.
Training at the Academy can also be customized to meet the needs of
participating countries. In 1997, 19 specialized courses were conducted
by 6 different United States Government Agencies. For example,
--The FBI and the Department of Defense provided counter-
proliferation training to law enforcement officers from the
nations of Kazakhstan and Kyrgyzstan. This training is of
international importance in preventing hostile nations from
obtaining nuclear weapons capabilities and in preventing
terrorist groups from obtaining nuclear materials that could be
used against the United States.
--An FBI course on organized crime was attended by 22 students from
Austria, England, Hungary, Israel, Romania, Slovenia, and the
United States; and,
--The United States Secret Service taught a counterfeiting course for
53 students from Belarus, Ukraine, Russia, the Czech Republic,
Slovakia, and Estonia.
Through the Academy we are building cop-to-cop relationships not
only between law enforcement from the United States and participating
countries, but also between officers from participating countries
themselves. For example,
--Hungarians and Romanians have executed various memorandums of
understanding (MOU's) because of their introduction to various
officials while attending ILEA. These law enforcement MOU's
were the foundation for national treaties between the countries
regarding human rights and minority issues;
--Ukraine and Hungary have established a close working relationship
on their border as a result of their students attending the
Academy. Together, they have apprehended organized crime
members that have ties to the United States;
--Baltic countries have sought FBI assistance on organized crime
matters that directly affect United States national security.
It was former ILEA graduates who spearheaded the contacts with
United States law enforcement; and,
--Polish students used techniques learned at the Academy to detect
and subsequently dismantle a clandestine drug laboratory. Some
of these drugs were destined for the United States.
The immense success of the ILEA in Budapest demonstrates the need
for additional training academies. For example, the establishment of an
ILEA to serve Asia is being negotiated with the Royal Thai Government.
The FBI looks forward to joining the Drug Enforcement Administration in
the leadership of ILEA Asia.
summary
We are confronted on a daily basis with the reality that the safety
and security of American citizens is increasingly threatened here and
abroad by criminals who know no boundaries. The only way to reduce that
threat is to create and develop substantive international links--
personal networks of law enforcement professionals dedicated to
bringing these criminals to justice. The FBI is addressing the threat
of international organized crime and terrorism through the
international law enforcement initiatives that I have just described.
The overseas program of the FBI is the most effective tool available in
protecting our Nation from the threat of international organized crime
and global terrorism. Increasingly, crime in the United States is
influenced from outside our borders. It is essential that we have
experienced FBI personnel posted in foreign countries to enable us to
get the information we need to accomplish our domestic mission.
The funding that Congress provides under the auspices of the
Department of State's International Narcotics and Law Enforcement, the
Freedom Support Act, the Support for Eastern European Democracies, and
the Antiterrorism Training Assistance programs is absolutely critical
for the FBI and other federal law enforcement agencies to provide
necessary training and institution building support to our colleagues
from Eastern Europe and around the world. These programs allow United
States law enforcement to build bridges of cooperation and
understanding with their foreign counterparts at the investigator
level. Such bridges and relationships are among the most positive steps
the United States Government can take to keep foreign crime problems
from reaching the shores of America.
In just a few, short months from today--in July--the FBI will
celebrate its 90th birthday. Since its beginning in 1908, the FBI has
built a distinguished record of serving the American people by
effectively recognizing and responding to the crime and national
security challenges of our times. As I look ahead toward the challenges
that will face the FBI as it approaches the 21st Century, I am
confident that the FBI's international perspective and the support of
this Committee and Congress have given our international efforts will
serve as major factors in our Country's ability to address the
globalization of crime and terrorism.
summary statement of gen. ihor smeshko
Senator McConnell. General, do you have some opening
observations you would like to share with us?
General Smeshko. Thank you, Mr. Chairman.
Dear Mr. Chairman, Senator Leahy, ladies and gentlemen,
first of all, I would like to express my appreciation to thank
you very much for this kind opportunity to be together with one
of the most respected professionals in his area in the world,
Director Freeh, and to participate in the discussion.
The subject of the discussion has a great deal of
importance for my country. My country earned its newly
independent position only 6 years ago. And the country, of
course, right now is in a very difficult situation of
transition to a free market economy and to democracy. This is
integration in a civilized world. And all this is in the
situation with change in the system of property, converting
state property into private property, with an enormous
explosion unfortunately of organized crime and corruption
activity.
My President described organized crime and corruption as
one of the main national security issues. Right now Ukraine
does not face any kind of military threat abroad. The main
threat is right inside the country. If we will fulfill the task
for transition, the country will be a free market. And if we
will raise the level of life of our people, we will have our
independence, and we will find at last our place with the
civilized world.
But to achieve this result without inviting international
organized crime and corruption, it is impossible. I remember
when I first heard the words mentioned by Director Freeh in
1995 in Washington, that one of the national security
priorities of the United States is also to combat international
organized crime. I was struck, and right now, being in my
position, I would say that Director Freeh was one of the first
in the United States, one of the first who really recognized
this new situation in the world.
Free democracy, I would say was not prepared for the
development in this area after the end of the cold war. All
benefits of democracy, the possibility to freely travel around
the country, possess a great deal of danger because crooked
people with enormous resources of money and the criminal
mentality can penetrate free, democratic societies. This is
just like a cancer which might really infect, in many cases,
the capability to expand democracy and prosperity all around
the world.
Unfortunately, by my experience I would say that right now
the main organized crime group in the Ukraine and their leaders
already have the ability to receive very easily green cards or
citizenship in some Western countries. This is my personal
opinion, but I think it is not very wise to have laws in which
individuals who have made an investment in a country can get a
green card.
It only costs $500,000 for some mobsters. This is just like
having lunch downtown in Washington, DC.
Senator McConnell. Well, that is true. I have been in some
of those restaurants. That is just about what the bill is, too.
[Laughter.]
General Smeshko. And unfortunately they are much faster
than us. They have more resources. And they do not have the
restriction of the parliaments to change information. Facing
this threat is possible only with the international cooperation
of the law enforcement and intelligence communities. And I am
very proud and glad that the FBI, with Director Freeh, was the
first service which basically gave us a hand in this area.
Once again, I would like to thank you very much for this
kind opportunity. This is a great honor for me to be with you.
And I would like to assure you that my country will do its best
to be not only a recipient of the security which is from the
West, but a contributor to the security.
Thank you so much, Mr. Chairman.
counterterrorism activities
Senator McConnell. Thank you, General Smeshko. Again, we
are really pleased that you are here today.
Let me lead off, Judge Freeh, before turning to the working
relationship with Ukraine, I wanted to ask your thoughts on
news accounts which suggest that the National Security Council
will have greater operational and budgetary control over
counterterrorism activities. While I see some merit in
improving coordination, I am troubled by the notion that White
House staffers may become involved in decisions best left to
law enforcement professionals.
As we have discussed in this subcommittee before, the White
House staff already has a questionable track record on
personnel file searches and inappropriate requests for
information on current FBI investigations. I for one would
strongly oppose expanding the staff's involvement or control
over activities such as wiretapping.
So I am just wondering if you have any reaction to these
news accounts?
Judge Freeh. Senator, with respect to the issue at large,
we have been in discussions, not only myself but the Attorney
General, with the NSC, as well as the Department of the
Treasury, to improve what would be the appropriate coordinating
role that the NSC should certainly play in matters of national
security. I have taken the position that under the existing
authorities, particularly PDD-39--in which the FBI is
designated as the lead U.S. agency for counterterrorism, in
terms of operational control and decisionmaking--ought to be
maintained because of the importance of keeping that kind of
responsibility on an operational level as opposed to a policy
level.
We have some other matters that need to be resolved. We
are, I can assure you, pursuing those matters with the National
Security Advisor, as well as the other departments that are
affected. And we are hopeful that the end result will be more
coordination without diluting the operational responsibilities
that I believe should stay where they are under PDD-39.
Senator McConnell. OK, well, thank you for your
observations about that. Now, let us turn to the subject at
hand.
General Smeshko, what kinds of crime are you seeing emerge
today in Ukraine compared with, for example, 5 years ago? Are
we seeing more violent crime, for example, compared with fraud?
Or, is there growth in every area? Also, have you seen an
increase in cases involving illegal smuggling of conventional
or nuclear weapons or material?
General Smeshko. Thank you, Mr. Chairman. As my best
knowledge, really, the level of crime in Ukraine is increasing,
unfortunately. Mostly this is connected with the money
laundering issue. This is just like a vacuum cleaner, which is
taking the money from the country. Some people have access to
the privatization of the state enterprises, using this
possibility to get the energy and other resources for much less
than world prices and resell them for much higher prices
abroad.
criminal activities
All this combined together with unfortunately the criminal
activities of just average criminals. This mixture together
gives quite a lot of problem to the country, in which there is
not established proper legislation to combat this crime. And
the level of corruption in some government bodies is very high.
Senator McConnell. This includes, I assume, the judiciary?
In other words, even if you were able to apprehend these
people, what are the chances of your getting a conviction and a
sentence of some consequence?
General Smeshko. In my country, there was not a revolution,
which is just great. We are very proud that Ukraine had not a
single drop of blood. And we are evolutionary. From 1991, we
have developed a democratic society. We peacefully adopted the
constitution. We peacefully changed the second president. We
have now the third parliament. But still it gives us a great
deal of burden on establishing a real democratic tradition.
And the struggle for power in the country between the left
and right side, I would say, combined together with the
struggle and access to privatization of the hugest enterprises,
creates a very difficult situation. We have the problem with
the proper training on the personnel side, especially the
youngest generation of law enforcement. The judicial system
also is not prepared properly for acting in the free market
economy, and with the many cases which simply were not even
predictable in previous years.
All this together results in a very, very difficult
transition and distrust. For example, the National Bureau of
Investigation was created in my country by the executive order
of the President. Right now, the Parliament thinks that this is
not a constitutional body. We have the second chairman, but a
National Bureau of Investigation has not been adopted by the
Parliament into law. And it is very difficult right now for
many even to understand who is right. Because by the
Constitution, the President has the right to create the
governmental body, fulfilling the national security priority
for the President.
The Parliament thinks that this is supposed to be adopted
by the Parliament. And in the Parliament you have one-half of
the Parliament on the left side, which simply thinks about the
new state. It is all very painful and reflects the struggle
with organized crime and corruption.
Senator McConnell. Is crime and corruption worse now than
it was under the Soviet system, or is it just more apparent
now?
General Smeshko. During the Soviet period, there was
corruption also. But it was not in the media. It is very
difficult to compare. Who knows? Maybe in those days it was
even more huge.
I think right now the level of corruption in the government
is really high. But I would not say that this is the red line
under which it just might be the crisis for all governmental
bodies.
Senator McConnell. It certainly runs the risk of giving
democracy a bad name, does it not?
General Smeshko. Yes; exactly. It is very difficult to
maintain a democratic way of development of the country, and at
the same time to have the hard hand to fight these things. But
right now my President is really very committed to proceeding
with the democratic, evolutionary way of developing this. And,
by the way, that is why he thinks that the creation of the
National Bureau of Investigation, which would be the new
organization taking the best professionals from other law
enforcement and, on the new base, struggle with this evil,
might be very beneficial to the country.
We hope that the next Parliament, which will be elected in
March, will adopt the law of the National Bureau of
Investigation and will proceed with the jurisdictional reform
in the country.
illegal smuggling
Senator McConnell. Let me just turn to some specific areas
of crime. What about illegal smuggling of conventional or
nuclear weapons?
General Smeshko. Sir, with the smuggling of, let us say,
fissionable material, I would assure that Ukraine right now has
a very good record on this. First of all, right now in the
territory of Ukraine, there is not a single nuclear charge. We
have fulfilled all our obligations of the START I treaty, and
we did get rid of the third nuclear arsenal in the world.
Right now it might deal only with fissionable material in
the nuclear reactors. But protection is very good. And we had a
single case in the country in which it might be a real threat.
We had information, criminal intelligence information, that
there was negotiations with some organized crime group just to
know the price and possibility of distributing these
fissionable materials to some foreign organized crime group.
But our investigation did show that it was not originated
with the Ukrainian fissionable materials. And until now I would
not say that it would be the biggest problem or the real
problem.
Senator McConnell. How about conventional weapons?
General Smeshko. Conventional weapons, this is really the
question of a great deal of concern for all law enforcement and
intelligence agencies of my country. Ukraine used to have a
huge stockpile of the armaments which was left after the
collapse of the former Soviet Union. And a few days ago there
was a change of the chairman of the Opraspetz Export, the state
enterprise which run the selling of these arms. I would say
this is one of my priorities in my job, to check those people
who did not have authorization to sell conventional arms to
foreign countries.
Right now we have had a single case in which we would
prosecute crooked people who did a great deal of business in
this area. But we have stopped a lot of attention by some
businessmen, by some persons, which had negotiations in this
area. But I can assure you, sir, that this is one of the
highest priorities for the intelligence community and law
enforcement. And right now, the export control system in my
country, with the help, by the way, of the United States, I
would say has a very good level of protection.
Senator McConnell. At various times in this country, auto
theft has been a big problem. What about auto theft in Ukraine,
is that a big problem?
General Smeshko. Yes; unfortunately, yes. You see, Ukraine
is in the center of Europe. And we are a transit point for cars
which might be stolen in Germany, Poland and other countries.
Our Minister of Interior Affairs made a great deal of
efforts right now to track the things. And, by the way, we have
good cooperation in this area with the German police, with the
Polish police. We recognize this problem and are trying to work
hard. I think in the last 5 to 6 months especially, there is
improvement in combating this kind of crime.
sophistication of criminals
Senator McConnell. One final question before turning it
over to Senator Leahy. And that is, how would you describe the
criminals themselves these days in Ukraine? How sophisticated
are they? Are these people talking in phone booths, using
passwords, or do they have encryption devices for
telecommunications and computers? Just how sophisticated are
the criminals you are dealing with in Ukraine these days?
General Smeshko. I see, sir. I see. You see, right now the
criminals are becoming richer, wiser, and especially the first
level of the real criminals which are right now, I would say,
the mobs of the organized crime groups. They are trying to be
more engaged not in the criminal activities just like the
murder of other real villains, they try to buy state
enterprises. They try to be engaged in investment in profitable
enterprises. They are using very sophisticated equipment.
Senator McConnell. Are they connected to organizations in
Russia? Is there an interconnectivity between these people?
General Smeshko. In Ukraine we have an organized crime
group which is connected with all our neighbors and even with
your country. And I could not right now name a single real
organized crime group in my country which did not have a
connection with your country or just simply did not travel here
and have negotiations with your gangsters.
Senator McConnell. So they are not connected with the
United States or they are connected with the United States?
General Smeshko. They are connected, yes.
Senator McConnell. And with Russia?
General Smeshko. Yes, sir; of course. There are clear
connections between them.
And, last, they are using more and more sophisticated
equipment. I am personally a doctor of cybernetics. And I would
tell you this is a great deal of danger additionally, because
we have a very highly trained population, especially in the
technical area. We had some information a few months ago that
two students of the highest 5-year term at university were
requested to make a quite sophisticated encryption device for
the laptop. And they made this encryption program on a CD-ROM,
a very sophisticated program, which was requested from one of
the chiefs of the organized crime groups.
And that is a real threat. I think in this case your
country also was supposed to have the lead to fight this area.
Because in the future, if they will start to use the real
encryption devices, it would be very difficult to track and to
prosecute this activity. They have enormous money. For them
$100,000 is nothing to buy equipment from Motorola and Matra,
Sejam, satellite communication, good laptop computers, or
equipment for encryption or good-brained guys who might just do
for them things like an encryption program.
Senator McConnell. Senator Leahy.
nuclear materials
Senator Leahy. Thank you, Mr. Chairman. I may want to
follow up on that, too, but first I will follow up on another
question of Chairman McConnell's on the issue of nuclear
material. I understand the situation in your country. And
incidentally I have been to Kiev and I have traveled in that
area. I worry about the lack of safeguards on nuclear material.
As I understand it, you could make a fairly crude nuclear
bomb with only this much plutonium. It would be hundreds of
times more powerful than the bomb that destroyed our Federal
building in Oklahoma City, which caused tremendous loss of
life. And Senator Nunn, a former member of this body, called
this the No. 1 national security challenge we face, the fact
that terrorists might get nuclear material.
I wonder if I could ask you both, General, both you and
Director Freeh, which of the former Soviet Republics, besides
Russia, currently possess highly enriched uranium and how much
are we talking about?
Judge Freeh. Yes; there are a number of countries, Senator.
And I think most of that material, as far as we are privy to
it, is confirmed by the Department of Energy as well as other
U.S. program identification. I can harken back to your
reference to Senator Nunn. The Nunn-Lugar funding, which the
Senate and the House have provided, has been directed toward
the countries where the material is available and also where
security controls are issues to be resolved and hardened.
For instance, that funding has been used to train police
officers in Kazakhstan, Uzbekistan and Kyrgyzstan. In fact,
Uzbekistan police officials are in the United States this week
to receive Nunn-Lugar nonproliferation training. This is law
enforcement/security-type training to not only harden and
solidify the storage of these materials, but also to develop
intelligence networks and protocols for investigating what I am
sure General Smeshko could tell you about in great detail,
which is the offering for sale of what sometimes purports to be
fissionable material and which in most cases thankfully has
been bogus material.
The counterproliferation assistance program, which has been
funded under the Nunn-Lugar program, has been made available to
the countries, as I mentioned, where we think there is some
jointly agreed upon need and vulnerability. As to the
particular materials in the various countries, I would have to
get back to you with the amounts.
Senator Leahy. Well, in fact, one of the things to be
concerned about is some of the lower-grade material in civilian
nuclear plants. Some of the reports I have read describe very
limited amount of security, perimeter defenses and checking. In
fact, somebody suggested that some of the nightclubs in Moscow
have stronger security than some of the places where the
nuclear material is, some of the civilian nuclear powerplants.
If you have got a bank in Moscow or a nightclub in Moscow
that is better protected than a nuclear powerplant, you have to
worry. Is it a problem? Maybe a better way of putting it, one
of the biggest threats we could face would be nuclear blackmail
or nuclear terrorism. And my concern is how vulnerable we are.
Now, you have mentioned, Director Freeh, sometimes there
are bogus sales being made, and we have heard of those. But do
we have the kind of cooperation necessary that if any one of
these countries gets a report that real nuclear material,
fissionable material, is missing, can we start tracking it from
the highest levels from country to country?
sharing intelligence information
Judge Freeh. Well, that is a very poignant question. And
those are exactly the relationships that everything we have
discussed here are designed to foster. And I met with the head
of the Federal Security Service [FSB] in November in Moscow,
Director Kovalev. One of the things we discussed over a series
of meetings was the cooperation that would be required if
somewhere in Russia, for instance, we developed information or
they developed information that fissionable was going to be
sold or smuggled not only into the United States but into some
other country. And we talked about some structures and some
cooperative meetings by which we could react to that jointly
and share information, particularly intelligence.
The relationships that have been established here are
stronger in some places than others. Part of the Nunn-Lugar
training is to reach those countries where we do not have the
relationship that we have, for instance, with General Smeshko,
and even the MVD in Russia. I think, to answer your question
precisely, the relationship is really critical in ensuring any
kind of cooperation in those matters.
In some countries we have developed it to a finer point. In
other countries it is much more fluid at this point. And that
is the whole purpose of this training initiative and the
liaison and the extensions of cooperation that we have made
here.
Senator Leahy. General Smeshko, do you fear that some of
this material might get stolen, for example, in Russia and then
that it might be taken through your country and on to other
areas?
General Smeshko. Mr. Senator, first of all, I would
completely agree with you that in the future it might be a real
for the world. Because sooner or later--but unfortunately, with
all our efforts to protect the proliferation of the knowledge,
this is really the threat which we can face only with
international exchange, international cooperation between the
intelligence services and law enforcement.
First of all, I would like to answer your question. You
asked how many countries might have the nuclear materials.
Every country of the former Soviet Union which has a nuclear
civilian plant basically has materials which might be used in
some way as a base for the development of a device.
In my country, the Security Service of Ukraine has the main
priority to work to protect any kind of leaking of any possible
materials from these plants. That is one of the priorities. Of
course, I could not argue with you about the protection of, let
us say, the banks and nightclubs. Unfortunately, on payment, we
have a severe budget problem. I think many banks are protected
better.
Senator Leahy. They have got more money to pay for the
protection.
General Smeshko. Yes; exactly. Exactly.
But a crucial thing is cooperation and the fast exchange
especially with the intelligence information. By my experience,
we had twice with our foreign Western intelligence services the
cases in which we, in a very fast manner, checked the
information in this area. And this is very crucial to fast
reaction on the possible threat.
Thank you.
Senator Leahy. And, General, my last question to you, and
if I have questions for Director Freeh, I will submit them. I
am told by some companies that want to go into Ukraine that
they face so many problems--bribery, corruption, redtape,
bureaucracy--that if they want to invest somewhere, they go to
a different country to invest their money.
On the other hand, when I talk to some of the leaders from
Ukraine, they say they want investment to come to Ukraine, to
create jobs, to help. Are we at an impasse here?
Because I know most American companies are not going to go
and put significant investment in a country where they face
that. Among other things, our laws are so strict that they are
going to get into trouble back here in the United States if
they do.
bribes
General Smeshko. Yes, sure, sir, you are right. American
businessmen, in some way, are not in an equal position. There
are several countries in which you just give a bribe. Even if
we would pass this information to the friendly service abroad,
he would not be prosecuted. In that country, this is a
violation. In my country this is not a violation. For the
American businessman, this is another case. And we are very
fortunate.
This problem exists. And believe me, right now this
administration is trying to do their best to improve the
situation. Unfortunately, it is a 6-year-old democracy, which
is only trying to establish itself.
I would like to just take a few seconds just to tell some
good words I had with Dr. Zbigniew Brzezinski in a conference,
American, Polish, German, and Ukrainian in January 1997. My
German colleagues talked about a great deal of frustration with
the speed of the reform in Ukraine. And Dr. Brzezinski made
this remark. He said, ``Listen, there is not another person who
might be more frustrated if the Ukrainians did less than I
would like in advancing the reforms.''
But I would like to defend them before you. Just remember
after 1945 your country started the transition. But what would
it be if you did not have the Marshall plan, the strong
American presence, which helped enhance the democratic
institutions. But, moreover, what would it be if in all key
positions there had been the old hard-liners and the center of
the capital was the mausoleum of Hitler.
This is not the case with Ukraine. But this is a
transition, a transition in which old and new live together.
Ukraine is the second largest territory in Europe on state
property. And the government and servicemen receive salaries
which unfortunately are not enough. All in transition, but in a
democratic way.
We are supposed to live through this. And we are trying to
do our best. But sometimes, unfortunately, there is also fraud,
believe me, and from the American side, businessmen. Not in
every case is the fault of the bureaucrats and corruption only
from the Ukrainian side. But we are trying our best, believe
me. And we are facing this problem. We will do our best to
improve the situation.
Thank you.
Judge Freeh. Senator, if I could just answer that very,
very briefly, with your permission. I think the notion really
to emphasize is the idea of change and transition. A democracy
which is not only newly established but where everything is
changing. The economy is changing. The notions of property are
changing. A civil justice system is not quite in place, which
would give not just foreign but Ukrainian business people
rights and protections.
One interesting note, again, just to emphasize the change.
When I was in Moscow in 1994, which was my first visit, we met
a number of American business representatives who were talking
about whether they would invest in Russia or South Africa
because of the dangers and threats both propertywise and
safetywise in Russia. When I was there in November, the last
meeting I had was with 50 members of the American Chamber of
Commerce. And they said two things.
One, the situation had dramatically improved, because the
police, the MVD, was much more responsive to threats,
particularly extortion threats. They also felt that the
presence of the FBI agents and their liaison had facilitated
that. I think the same situation is really developing in the
Ukraine.
foreign investment
And to go back to my opening statement, which is why your
support is so important. In a region such as the Ukraine, not
just the 52 million people who live there, but the enormous
resources in the Caspian Basin, not just the ones that will
transit there but the ones that are deposited there, will bring
the foreign investment, particularly American investment. What
we have to assure them, and what this committee has supported,
is a law enforcement network where the American business
interests have General Smeshko and myself to rely upon to deal
with some of these threats. And that is the key piece in this
that I think we are putting in place.
Senator Leahy. I may have some more questions for the
Director.
Senator McConnell. Those will be submitted.
I do think we have a tendency to be more impatient, and I
am sure you are more impatient, than we should be. I have been
reading a marvelous history of the United States by Paul
Johnson, basically called ``A History of the American People.''
And he points out that, contrary to everything that we think,
in many ways the American Revolution did not bring about all
that much of a change. We had been evolving in this country for
150 years a system that involved the rule of law and
essentially democracy in every one of the Colonies.
So even as we think of the American Revolution, and
certainly it was an important event--I do not mean to diminish
the importance of it--it was not as big a change for us from
the period before the revolution until the period after it.
Whereas what you all are trying to achieve is a dramatic change
in every way: economically and in terms of the rule of law. So
I just make that point, because we all wish things were going
faster, and I know you wish things were going faster, but it is
not as easy when you are trying to change literally everything.
Judge, you mentioned practical case training in your
statement, in which you bring officers or agents over here to
work side-by-side on specific cases with U.S. law enforcement
officers. Tell us a little bit about how that works. How long
are they typically here? What do you do with them?
Judge Freeh. It depends on the case. I will give you one
example which was actually the first one that we did with the
MVD in Russia. It was the Ivankov case. Ivankov was identified
as a top thief-in-law, as the term would be, a Mafia-type
godfather, Russian in this case, who came to the United States
to not only commit crimes on an organized basis, but to
organize some of the disparate organized crime figures,
particularly in the New York City region.
He was identified to us by our Russian counterparts. And
then, in the course of the investigation, which resulted in his
conviction and sentencing, MVD officers from Russia came to the
United States. They assisted us in analyzing tape recordings,
identifying photographs. They went out into the street with FBI
agents because they could recognize some of the associates and
confederates from Russia that we did not know--people who were
here illegally in some cases.
We have done very well with respect to the practical case
initiatives with Russia. We are doing one now with our
counterparts in the Ukraine, which is the one that the Captain
will work on later this week in Los Angeles.
Senator McConnell. Where does the funding come from for
this?
Judge Freeh. That funding has come primarily from the
Department of State INL funds. We have expended approximately
$352,000 since 1996. That represents about 40 total sessions or
events where that initiative has been practiced.
Senator McConnell. So are you all requesting an increase
this year in that?
Judge Freeh. We proposed, for 1998, 12 sessions, at a cost
of about $120,000. It is not an increase over 1997. And, again,
those are funds that we think are put to very good use.
Senator McConnell. Is that about all you can handle, then,
the request?
Judge Freeh. We would like to make sure that we have
funding left to do some of the other training that I alluded
to. The proposed training for the FBI courses, which are all of
course approved by the State Department and the Embassy, have
been reduced in 1998 because of lack of State funding. Those
are issues which we are certainly concerned about, because we
want to maintain at least the level of training that we have
already exercised.
Senator McConnell. How many investigative leads generated
in the United States are pending in Ukraine? Is that a figure
you might have?
Judge Freeh. With respect to the actual cases, we have a
total of 95--we call them pending investigations; 30 of those
are investigations where General Smeshko and his colleagues
have asked for our assistance. The other 65 are pending
investigations around the United States, and they involve
organized crime, violent crime, white collar crime. And those
are just the actual cases. I may ask Agent Pyszczymuka if he
wants to comment on the leads, because he has got the personal
experience.
law enforcement liaison
Senator McConnell. Right. And also how many agents do we
have in Ukraine? And are they covering other countries as well
as Ukraine?
Mr. Pyszczymuka. There are two agents assigned to the Legal
Attache Office in Kiev, Ukraine. The office is a regional
office and, in addition to Ukraine, we also provide coverage
and law enforcement liaison with Georgia, Azerbaijan and
Armenia.
In regard to the caseload, there are approximately 60 to 65
leads still pending in all the critical violations: organized
crime, white collar crime, violent crimes. For example, I have
two pending leads out of the Los Angeles division in Armenia
for homicide subjects that local police officers in the
Glendale Police Department believe are now secreted in Yetevan,
Armenia.
As the Director earlier mentioned in his testimony, we were
instrumental--that is, myself and my partner in Kiev--in
convincing the surrender of Mr. Jeffrey Broner, who was a
fugitive hiding out in the Ukraine for approximately 4 years.
We were able to engineer that successful surrender, and he is
facing prosecution now in New Jersey.
In regard to organized crime, the Director has been very
omniscient in predicting the problems years ago. We presently
have, I believe, four Russian organized crime squads in the
continental United States: New York, Miami, Los Angeles, San
Francisco, I might have missed something, because I have been
out of the country for 14 months. But they have been extremely
active in developing criminal intelligence.
This criminal intelligence that they develop on the
different clans that control Ukraine is passed to me and, in
turn, I refer that information to people like General Smeshko,
to individuals and contacts in the Security Service of Ukraine,
which is the followup agency to the KGB, to the Procuracy
Office, border guards, Customs, and other interested entities.
Like I said, the cases cover the entire gamut of violations
that are worked out of the States. The investigation that
Captain Kostyuchencko will be heading out to is a significant
money laundering investigation that was initiated by Los
Angeles FBI agents and men and women of the San Francisco
division also. It has connections to high-level officials back
in the Ukraine. We have been able to track tremendous amounts
of money being laundered through countries such as Switzerland
and offshore sites, into San Francisco.
Senator McConnell. I understand we have 600 leads pending
in Russia. Does that sound like a familiar number?
Judge Freeh. Yes, sir; in terms of leads and the explosion
of the caseload there from----
Senator McConnell. So you have a manpower problem there,
too, I guess?
Judge Freeh. We have just added third agent, with the
approval of the Department of State. But that is just enough to
meet what is a growing caseload.
Senator McConnell. Is the State Department generally open
to these larger legal attache offices when the caseload appears
to warrant it?
Judge Freeh. We have to go through a justifiable and
important authorization process, the NSDD-38 process as we call
it. They are generally supportive of it, particularly on the
Ambassador level, with rare exception. They understand the need
and the importance of having that law enforcement capability
and liaison.
We have generally enjoyed very, very good support in terms
of expansion. It is a lengthy process. And the process has been
further lengthened by congressional requirements for an
additional threat assessment--the process which we are going
through now, particularly with the House committee.
Senator McConnell. Thinking back to the academy in
Budapest, which I visited as you indicated, Judge Freeh, how
many Ukrainians have been through that program?
General Smeshko. About 20, sir.
Senator McConnell. Twenty.
General Smeshko. Yes.
Senator McConnell. And do we keep in contact with them
after they leave?
General Smeshko. Yes.
Senator McConnell. And when they graduate from there, do we
have an ongoing, sort of, alumni relations effort here?
Judge Freeh. Yes, sir; there is.
We have a National Academy Associates Program, but we also
have developed, through the academy in Budapest, an alumni
networker association. The purpose of that is to maintain the
contacts because these young officers will become the
commandants and the generals 10, 20 years from now. And that is
the benefit that we all get from that.
prosecutions
Senator McConnell. General Smeshko, my notes indicate that
we have a serious issue in your country with regard to
prosecutions. I am told there has not been a single major case
prosecuted in the last few years involving corruption. Is that
the case, not a single one, or is that an exaggeration?
General Smeshko. Right now we have adopted by the
Parliament a law on corruption. But, unfortunately, to the best
of my knowledge, there was not a single case when this law was
really used.
Senator McConnell. So the law is not adequate or the will
to prosecute is not there, or both?
General Smeshko. The law was adopted by the Parliament, a
special law on corruption. But the chapter which defines
corruption is very difficult to use for the prosecution. This
is left with the law and the real jurisdictional system which
might use this law. Unfortunately, to the best of my knowledge,
there were about 400 cases when there was open charges on
corruption, but I honestly do not remember when there was a
successful story in the court.
Judge Freeh. Mr. Chairman, I would mention just--and
General Smeshko is aware of this--there is a case that we are
working with the Ukrainians--in fact, it is part of the
practical case initiative effort. It is called the Kirichenko
case. And it does involve an individual who was a high-ranking
Ministry of Foreign Affairs official in the Ukraine, who is
being investigated. He probably will be prosecuted for
corruption charges. And it is a case we have worked through our
San Francisco office.
Senator McConnell. Well, good luck. Because in the absence
of any prosecutions at all, that sends a discouraging message
to foreign investors. Particularly, United States investors I
think find that very depressing.
That one bell that went off means that we are having a
vote. I think we are about to the end of the session anyway. I
am going to see if either of you would like to make kind of a
final observation, rather briefly. Either of you have anything
you want to add here at the end of our hearing?
corruption
General Smeshko. Thank you so much. Thank you, once again,
Mr. Chairman, for this kind opportunity, really, to be here for
this discussion and to present the point of view of my country.
Really, many things are not so encouraging right now. And it is
a very difficult area for my country. We are combatting the
corruption, especially at the highest level of the government
and the organized crime.
But, still, even if there was not a successful story in the
court against corruption in the government, there are already a
lot of examples where corrupt persons were fired from their
position, from the highest level of positions. And every week
you might see in the newspapers that regional level,
administration minister level, administration, are removed from
their positions by executive order of the President.
Unfortunately, the jurisdictional system is not robust
enough right now to face this new challenge--even to just
enforce the law which was already adopted by the Parliament.
Still, believe me, the leadership of my country does recognize
this problem.
Senator McConnell. Yes; I was in Ukraine last summer. I met
with President Kuchma down in Sevastopol and I went up to Kiev
briefly. My view is that we need to continue to try to do the
very best that we can. We need to stay engaged. We need to
understand what a difficult transition this is going to be.
And I particularly think that what you are doing, Judge
Freeh, is making an important contribution not only at the
academy in Budapest, which I think is a spectacular example of
international cooperation, but I think we all just need to stay
the course. I know you would agree, Judge Freeh, to find
someone like General Smeshko in an important position, that is
encouraging in itself. I think the United States has a
longstanding and a long-range interest in the success of
Ukraine. And as far as this subcommittee is concerned, we are
going to stick with you.
Thank you very much.
Judge Freeh. Thank you very much, Mr. Chairman.
subcommittee recess
Senator McConnell. The subcommittee will stand in recess
until 10:30 a.m., on Thursday April 23, when we will hear
testimony from Dr. James Hughes, of the Centers for Disease
Control; Dr. David Heyman, World Health Organization; Dr. Nils
Daulaire, Agency for International Development; and Dr. Gail
Cassell, Eli Lilly, Inc.
[Whereupon, at 4:53 p.m., Tuesday, April 21, the
subcommittee, was recessed, to reconvene at 10:30 p.m.,
Thursday, April 23.]
FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS
APPROPRIATIONS FOR FISCAL YEAR 1999
----------
THURSDAY, APRIL 23, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 11:13 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Mitch McConnell (chairman)
presiding.
Present: Senators McConnell, Campbell, and Leahy.
AGENCY FOR INTERNATIONAL DEVELOPMENT
STATEMENT OF HON. NILS M.P. DAULAIRE, M.D., M.P.H.,
SENIOR HEALTH ADVISER
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Disease Control and Prevention
STATEMENT OF HON. JAMES M. HUGHES, M.D., DIRECTOR,
NATIONAL CENTER FOR INFECTIOUS DISEASES
NONDEPARTMENTAL WITNESSES
STATEMENTS OF:
DAVID L. HEYMANN, M.D., DIRECTOR, EMERGING AND OTHER
COMMUNICABLE DISEASES, SURVEILLANCE AND CONTROL, WORLD
HEALTH ORGANIZATION
GAIL H. CASSELL, Ph.D., VICE PRESIDENT, INFECTIOUS DISEASE
DISCOVERY RESEARCH AND CLINICAL INVESTIGATION, ELI LILLY
CO.
opening remarks of senator mitch mc connell
Senator McConnell. Good morning, everyone. Thank you for
being here.
This hearing is being held largely at the request of my
senior colleague, Senator Leahy, who has been very active in
the field over the years.
Over the past couple of years, outbreaks of mad cow
disease, Ebola, Asian avian flu, and human monkeypox have
captured headlines and raised the public interest in the global
resurgence of life-threatening infectious diseases. While these
outbreaks have been serious, they have been effectively
contained by the rapid reaction of the international health
community.
Unfortunately, these exotic sounding, unusual incidents
have eclipsed the public's concern or interest in the real
killers; 17 million people die of common diseases, most of
which could be prevented or effectively treated. Malaria, TB,
cholera, and measles still prematurely rob far too many people
of life.
Lest anyone believe this is a threat confined to some
remote island in a distant hemisphere, these diseases have come
home to kill. Potent new strains of TB have been detected in
the Commonwealth of Kentucky; 10 years ago, I doubt five adults
knew what E. coli was. Today young parents are ever alert to
symptoms, given the toll it has taken on our children and the
elderly.
Last year, the subcommittee recognized the time had come to
invest in a serious and sustained global commitment to combat
the spread of infectious disease. To fulfill this commitment,
there are two tracks which are mutually reinforcing, which we
must proceed along.
First, we should set up monitoring and detection of disease
to contain outbreaks before they become epidemic. This requires
developing and putting in place a comprehensive global
information system to afford specialists early warning and the
opportunity to respond quickly and effectively to problems.
Although this has been discussed for the last 2 years, I do not
have the sense that a global, or even regional, electronic
network is up and operating. I will be interested in hearing
current and future plans to address this issue.
Early warning and detection must be complemented by
effective treatment. The second track represents real
challenges, as microbes have mutated and become resistant to
the available drug therapies. Fortunately, the revolution in
technology and genetic research have opened new avenues for
solving microbial medicine mysteries. However, high-tech
solutions must be enhanced by basic education.
The international health community must develop a strategy
to educate and address the resistant problems, exacerbated by
the over-prescription of antibiotics and their extensive use to
produce animal growth. We need to be confident that what seems
to be modern medical miracles are not in fact sowing the seeds
of our own destruction.
I think everyone here will agree on the scope of the
problem and the general outlines of a solution. However, I am
concerned that current planning is not keeping pace with the
explosive growth in the problem. I think we would all agree on
a strategy which improves information sharing, coordination of
international response mechanisms, and our understanding of
drug-resistant viruses and bacteria.
But I think we must also accelerate the process of testing
and introducing effective drugs and vaccines. My staff was
recently on a trip to the Thai-Burma border, visiting refugee
camps where malaria is a serious problem. Virtually all cases--
Thai, Burmese, and American alike--were being treated with a
wonder drug from China, which everyone acknowledged was
unlikely to see market shelves anywhere outside the region.
Clearly we must take public safety into account when
considering new products. But it seems we must increase
emphasis on reducing barriers which have impeded the timely
availability of successful drug therapies.
We have a number of witnesses and only an hour and a half
to cover the ground, so I am going to turn this over to Senator
Leahy, who will preside for the balance of the time. And I
thank him very much for his interest and commitment to this
issue over the years. And I welcome all of you to the committee
today.
opening remarks of senator patrick j. LEAHY
Senator Leahy [presiding]. I want to thank Senator
McConnell for scheduling this hearing. It is the second hearing
he has scheduled this week. It has been a very busy week, and I
do appreciate it.
In a way, we are picking up where we left off almost 1 year
ago when we had a hearing on the same subject. The interest
since then on the threat posed by infectious disease has grown
dramatically. Two months ago, the Centers for Disease Control
and Prevention [CDC] held their first international conference
on emerging infectious diseases, and by all accounts it was a
resounding success. And yesterday, the judiciary and the
intelligence committees held a joint hearing on biological
terrorism, which pose many of the same challenges.
Other committees have focused on other aspects of it. I do
not think we can take sole credit for the surge in interest.
The Hong Kong flu and Iraq's biological warfare program both
had something to do with it. But there is no question that this
subcommittee had a part in this as have all of you here.
Last year, we wanted to call attention to the fact that
despite numerous studies that have identified serious
weaknesses in the way we and other countries respond to
infectious disease, and despite many recommendations for
strengthening and coordinating our response, little had been
done. There are too few resources, too little coordination and
not nearly enough trained people in the developing countries,
where epidemics often originate.
With the exception of childhood diseases and HIV/AIDS, the
Agency for International Development was spending a pittance to
combat other infectious diseases. The CDC has only a few
million dollars to spend on international activities. But all
of you, and certainly our witnesses testifying here today, know
that infectious diseases know no boundaries. The Hong Kong flu
is just an airplane's flight away from Los Angeles or
Burlington, VT.
The resurgence of tuberculosis a few years ago is a
textbook example of how easily diseases, once thought to be
under control, can reemerge if public health systems
deteriorate and if drug resistance spreads. And as the latest
confrontation with Iraq reminds us, deadly microbes could be
intentionally spread. If that were to happen the results could
be catastrophic. At least nine other countries are suspected of
having biological warfare programs. A handful of anthrax could
wipe out a city of millions.
To make a long story short, we recognize the threat to the
American public from microbes that are transported here from
abroad. We saw the need for stronger U.S. support for a global
response. And it was time to stop talking and do something.
That is why we decided to appropriate an additional $50
million as a first installment in a multiyear U.S. strategy to
combat infectious disease. Now, that strategy, which was
publicly released by AID 6 weeks ago at the CDC conference in
Atlanta, is why we are having this hearing. We want to focus on
building the human capacity and the public health
infrastructure in the developing countries so they are capable
of conducting proper surveillance. We want them to be able to
respond effectively to infectious disease. The goal is an
integrated set of global networks that work.
We recognize this is an immense task. We are not going to
do it this month or next month. It will take years. But at
least we are letting everybody know it is needed, and we are
starting to do it.
So we are going to look at what we have done in the past
year. We want to know how the strategy was developed, what it
consists of, and then if each of you could tell us what you see
as the greatest challenges and opportunities for your agencies.
There is only so much government can do. The private sector
is at least as important. That is why we have invited and we
are privileged to have as one of our witnesses Dr. Gail
Cassell. She is vice president for infectious disease research
at Eli Lilly. Dr. Cassell will discuss some of the impediments
to the development of new drugs and vaccines for use in the
developing countries. There may some ways we can help get rid
of those impediments.
We are also fortunate to have my good friend Dr. Nils
Daulaire. He is a fellow Vermonter. Nils is one of our
Government's most effective advocates for international health
programs. And we have Dr. David Heymann, from WHO, sitting
beside him. He is responsible for surveillance and control of
emerging and other communicable diseases anywhere WHO operates,
which is just about everywhere. They have both been enormously
helpful in advising the subcommittee.
And Dr. Jim Hughes, of the CDC, who knows as much as anyone
in the world about infectious diseases.
What we know is this: 50,000 people die every day of
infectious diseases. Let me repeat that. Every day, 50,000
people die of infectious diseases. To put that in context, the
largest city in my home State of Vermont is about 40,000
people. That is 17 million people each year. It is 1,500 times
the number of people that were killed by landmines last year--
an issue that we have had great concern about.
I have spent the past 8 years trying to ban landmines, and
I do not plan to stop. They are hideous. They are
indiscriminate weapons. They maim and kill innocents. They
disrupt whole societies. But this number puts things in
perspective. We have another landmine out there, only 1,500
times more lethal.
And the irony is that many of these infectious diseases
could be prevented or cured, often for as little as $1 per
person. But millions of people die because they cannot afford
the cost of the drugs or vaccines, or there is not the public
health system to deliver them.
We want to change that. I want to end with a quote by
Laurie Garrett, the Pulitzer Prize-winning author of ``The
Coming Plague.'' She wrote:
As the world approaches the millennium, it seems, from the
microbes' point of view, as if the entire planet, occupied by
nearly 6 billion mostly impoverished people, is like Rome in 5
BC. Our tolerance of disease in any place in the world is at
our peril. While the human race battles itself--the advantage
moves to the microbes' court. They are our predators and they
will be victorious if we do not learn to live in a rational
world that affords the microbes few opportunities. It's either
that or we brace ourselves for the coming plague.
That probably says it as well as anyone could.
summary statement of dr. nils daulaire
So if we might start, Dr. Daulaire, with you. I am
delighted to have you here. I would note for the record that
you have advised this subcommittee on many occasions, and I
have appreciated it.
Dr. Daulaire. Thank you very much, Senator.
As you have asked, what I would like to do in a few minutes
today is to run through some of the major things that have
developed since last year's hearing, put a few things in
context, and then move to my colleagues, so that we can get
into a useful exchange. My extended testimony is available at
the back of the room.
As this committee's chairman is well aware, the United
States, four decades ago, led the world community in starting
the process to deal with a scourge of terrifying proportions
here in the United States and elsewhere, which was polio. And
we are now only a few short years away from the final
eradication of the polio virus from the face of the Earth. This
is a case of real U.S. leadership, carried out over the course
of nearly half a century.
Today, thanks to the vision of this committee, particularly
your leadership, Senator Leahy, and the commitment of President
Clinton's administration, to addressing global problems, we are
again helping to lead the world in a struggle of enormous
importance to humanity--the war against infectious diseases--
which, as Laurie Garrett points out, is in fact the true
biological war that we all face.
Now, you made the decision in the appropriations process
last year that USAID would be the appropriate vehicle for this
appropriation and that we would serve as a coordinating body,
with many other institutions, several of them seated here,
particularly my colleagues from WHO and CDC, who have been very
active in this.
We recognized from the beginning what you made note of.
Every 2 seconds a man, woman or child dies of an infectious
disease. And for the most part, those who die are the young and
the poor, the hungry, the powerless, the people whom this
committee has taken as their special charge. But beyond those
outside our borders who are at risk, Americans themselves are
at enormous risk. And we will be talking about that this
morning.
Now, USAID, as you well know, is an agency that has as its
foremost task building sustainable development in the poorest
countries of this world. And we have taken this initiative
within the context of this charge of sustainable development.
What we see as our fundamental task is to build the capacity of
people and societies to address their own problems. We
recognize the problems. We have enormous expertise in this
country.
But American physicians cannot treat every case of disease
around the world. American public health workers cannot
immunize every child, cannot run every health program. And the
only way that these issues are going to be resolved for the
long term is going to be by building the lasting capacity of
the countries that we assist to do this on their own.
You gave us the mandate. You gave us the funding, which was
of critical importance, back in the fall of last year. And I
would like to tell you what we did. Within a month of this
appropriation being signed into law, we had called together a
meeting of the world's leading experts on infectious diseases,
several of my colleagues here at the table with me, but close
to 100 others who came to Washington for a remarkable 2-day
conference, which you addressed, Senator Leahy, to look at what
has been accomplished and, more importantly, what is still
needed to address the problem of infectious diseases.
And I would like to address your attention to the chart
over here. We know that there are slightly over 17 million
infectious disease deaths in the world, the leading cause of
death in the developing world and a growing cause of death in
this world. When we reviewed at this meeting what had been done
and what needed to be done, I would like to point out that this
circle would have been considerably larger before USAID's
programs, particularly in child survival, began 15 years ago.
The pink triangle, for diarrhea, would have been between 4
million and 5 million deaths. The green triangle, for
pneumonia, would have been around 4.5 million deaths. The red
triangle, for immunizable diseases, would have been between 3
million and 4 million deaths. So even with past activities,
what we can point to with considerable pride is the fact that
there are probably 4 million or more fewer deaths today, each
year, from infectious diseases than there would have been
without these very effective and important programs.
But, obviously, we are left with some enormous problems.
And 4 million lives saved is one thing, the 17 million lives
that are still being lost are our major concern.
Now, as you well know, we continue our programs in
diarrheal disease and pneumonia, for childhood illness, in
immunizable diseases and of course in HIV/AIDS prevention. But
as we reviewed, as a group, these major causes of illness and
death, some big pieces are obvious: Tuberculosis, which
currently kills 3 million people a year and infects one-third
of the world's population; malaria, which kills over 2 million
people a year and is the single largest cause of death and
disability in Africa. Those are enormous issues.
Antimicrobial resistance
On top of that, we recognize that even within the programs
and activities that we already have underway for pneumonia and
for certain kinds of diarrheal diseases, we are facing a major
new problem, which is the growth of antimicrobial resistance.
The tools that we have had for the last 30 years to deal with
these enormous problems are gradually wearing away. And so the
focus on antimicrobial resistance, in addition to tuberculosis
and malaria, was judged by this expert group to be a very
important part of an USAID strategy.
The fourth part which was decided on is one which you have
already cited, which is the importance of surveillance, and
particularly for USAID, with our work at country level,
improving the capacity of countries to obtain and use good
information to understand and respond to the spread of disease.
Now, these are important issues. The numbers are huge. But
they are not abstract. And I would like to just address some of
the pictures that we have here, some of which I have taken
myself. This first picture of the young child, that is Lakmi.
She is a 3-year-old girl, or she was a 3-year-old girl when I
met her in a remote, rural village of Nepal. She had had
pneumonia for the past 10 days.
We had an effective program going on to treat these
children with antibiotics in the community, but she lived 18
hours' walk from the nearest hospital or clinic. And the
antibiotic just was not working. She was a case of
antimicrobial resistance. Everything was done right. And when I
came and found her, I made sure that she was getting everything
that we had on hand in terms of appropriate drugs at that
level. Yet 2 hours after I took this picture, she died.
These are real problems, with real people.
Tuberculosis
Next to her are two photographs concerning tuberculosis.
Amadou is a young man from Mali. He has what is called
scrofula, which is a TB infection in the nodes of his neck,
which eventually erode and continue to ooze out into the open.
These people are virtually unable to work or carry out
productive lives.
To his right is Meena, from the Bihar District of India, a
woman who has had TB for a number of years, has infected every
single member of her family and is herself unable to work or
carry on because of the severity of her illness.
And, finally, at the very end there, the black-and-white
picture is a picture of Leah, from Kenya, who suffers from
malaria, who has lost two children in pregnancy because of the
consequences of malarial infection, and who is again totally
devastated in terms of her ability to work.
These are real people and real problems.
Now, we recognize that USAID and our $50 million is a small
piece of a very large puzzle and that we cannot do this alone.
We do not expect to do it alone. There are key partners. And
particularly I would like to highlight, and we will be hearing
more from, the World Health Organization and the Centers for
Disease Control. And I would like to point out the growing role
of the private sector in this area.
We are in a world of a global economy. And we have seen an
enormous growth of interest and capacity on the part of the
private sector, in part, out of enlightened self-interest,
recognizing that a majority of the world's consumers and
economies will be in the developing world over the next 20 to
30 years, and also that a large proportion of the world's work
force will be there. A healthy work force is a far more
productive work force. So we very much welcome them to this
effort.
We have, over the past 6 months, since the appropriation,
already moved very rapidly. After the consultation we held, we
were able--have been able as of today--to program almost $45
million of the $50 million that you appropriated, Senator. And
we will have the remaining $5 million wrapped up over the next
several weeks. So we feel that we are in very good shape. It is
quite unusual for a Government agency to be able to move this
quickly, but we have gotten good prodding from the Hill, and we
are very interested in this ourselves.
Let me just say what we can expect, with a sustained
commitment over the next 10 years. We do not intend to throw
money at this problem. We intend to build capacity in a
thoughtful way. We intend to have a global strategy for dealing
with antimicrobial resistance and an armory of effective
interventions in place. We expect to have a set of centers of
excellence in TB, and effective programs in a small number of
key countries for TB.
We expect to have programs in a number of African countries
dealing with malaria, both in prevention and treatment at the
household level and at the health facility level. And we expect
to have assisted our colleagues here in laying the basis for a
global surveillance system, with our focus being on local
capacity. I compare this to the phone system. These colleagues
are building the fiber optic network to tie the whole thing
together. We are working on installing the jacks and the
telephones in the individual countries.
Now, I know that there has been concern about our budget
request, the administration's budget request, for fiscal year
1999. And it is slightly lower than the 1998 appropriated
levels.
Senator Leahy. Slightly? It has gone from $50 million to
$30 million.
Dr. Daulaire. Well, I would like to lay that out in a
broader context, if I may, Senator.
We also note that the Senate mark for the 150 account, the
foreign affairs account, was $800 million less than what the
administration has requested. And as you know, we have a
difficult task always in balancing the needs of a variety of
development activities. As you well know, it is not just our
health programs, but a whole series of interventions that are
important for infectious diseases. And we had to look for
increased funding for the environment, for poverty reduction
and for agriculture, which were a key issue in terms of this
broad-based approach.
I would also point out, Senator, that we have not used a
penny of this special appropriation for work in the former
Soviet Union and the New Independent States. But this year we
are devoting $9 million beyond the $50 million to that. And
next year we are expecting to devote $22 million. So the figure
that you see in the budget is not the full story.
prepared statement
Mr. Chairman, this initiative, I believe, represents the
best of America. It represents enlightened self-interest, as
you have very eloquently laid out over many occasions in the
past. It represents an American know-how tradition and a can-do
approach. We are taking this from a very practical standpoint
and trying to move forward. And it also represents our
commitment to helping people to help themselves. This is where
we are headed in the long run, and we are very pleased with the
assistance, support and encouragement that you have given us.
Thank you.
Senator Leahy. Thank you.
[The statement follows:]
Prepared Statement of Nils M.P. Daulaire, M.D., M.P.H.
Thank you Mr. Chairman for giving me an opportunity to present to
this committee an update on the progress the U.S. Agency for
International Development (USAID) has made in launching a new
initiative aimed at reducing the global threat of infectious diseases.
This new initiative reflects and furthers the Administration's 1996
policy on Emerging Infectious Diseases. I would like to describe our
new strategy, including how our key partners have participated in its
development; summarize how we see this vital initiative fitting in with
our on-going activities in infectious diseases and the important
connections to overall development efforts; and outline our key next
steps, including accelerating the engagement of new partners, including
the private sector, foundations, and other important actors.
We at USAID would also like to thank you, Mr. Chairman and this
subcommittee for your leadership in providing the funding to USAID last
year which enabled us to launch this new initiative. This has given us
the opportunity to address a huge and growing problem that not only
causes millions of deaths each year in the developing world, but
threatens the health and safety of Americans as well. By following the
strategy I would like to describe to you today, and working closely
with our partners in this effort, we will reduce deaths due to
infectious disease and strengthen public health systems that have
broken down throughout the developing world, giving these countries the
capacity to protect their citizens from infectious diseases, and stop
the global spread of these diseases.
These are not quick and easy interventions, but over the next ten
years, with concerted effort and effective collaboration with our
partners, and commitments and resources from new partners, we can make
a real difference and have a significant impact on global health.
usaid's strategy and progress to date
Over the past six months, USAID has been heavily engaged in
developing a strategy for this new initiative on infectious diseases.
We have been very fortunate to have benefitted from extensive
consultations with many of USAID's key partners, including Dr. David
Heymann and his colleagues at WHO; Dr. Jim Hughes and his colleagues at
CDC; the National Institutes of Health; the Department of Defense;
UNICEF; a number of universities and research institutions; private
sector companies; and a wide range of organizations engaged in
implementing programs in the field.
As a result of these consultations, we have developed a consensus
on the most appropriate focus for USAID and the new resources with
which you have provided us, and a strategy that clearly articulates
USAID's role and how it fits with other donors and actors. This
strategy identifies specific results for each of the four components
which have been agreed on.
As part of USAID's ten year strategic plan, our objective in
infectious diseases is designed to reduce the threat of infectious
diseases of major public health importance, contributing to a 10
percent decline in the number of deaths due to infectious diseases
(excluding AIDS) in the developing world by 2007.
USAID's new initiative has four key components: Develop strategies
and interventions to understand, contain and respond to the development
and spread of antimicrobial resistance; reduce the spread of
tuberculosis and morbidity and mortality associated with the disease
among key populations; decrease deaths due to malaria and other
infectious diseases of major public health importance in selected
countries; and improve the capacity of countries to obtain and use good
quality data for surveillance and effective response to infectious
diseases.
This strategy focuses on the primary infectious causes of mortality
in the developing world: of the 17 million deaths due to infectious
causes each year, 75 percent (or about 13 million) are due to just five
diseases: acute respiratory infections (most commonly pneumonia),
tuberculosis, diarrhea, malaria, and HIV/AIDS. Almost all of these
deaths are in the developing world. The high incidence and rapid spread
of these diseases is to a large degree due to the breakdown, or lack
of, effective primary health care and limited or poor prevention
measures. It is also due to increasing incidence of drug resistant
strains of these diseases. These problems are exacerbated by poverty,
poor nutrition, high rates of population growth and high population
densities, poor water and sanitation systems, and low levels of
literacy.
Prior to this new initiative, USAID had over the last several years
invested more than $300 million annually in combatting infectious
diseases through: our child survival programs, including significant
efforts aimed at addressing acute respiratory infections and diarrheal
disease control, and some work in malaria; our HIV/AIDS work, where
USAID is the single largest bilateral donor for HIV/AIDS programs in
the developing world; and through our assistance in building robust
health systems in developing countries.
This initiative will be implemented in developing countries in
Africa, Asia and the Near East, and Latin America and the Caribbean,
and in transition countries of the Newly Independent States (NIS).
USAID has been advised to avoid spreading these resources too thinly.
Focus countries will be selected based on a combination of factors:
impact on worldwide disease patterns, the severity of disease within
particular countries, potential for learning lessons which can be
widely generalized, complementary programs of other partners and
donors, and the capacity and opportunities at specific USAID missions.
Over the next ten years, we expect to put in place a coordinated
global strategy and action plan for slowing the spread of antimicrobial
resistance and an armory of effective interventions for addressing the
problem. We will support several centers of excellence for controlling
TB around the world, and effective intervention programs in some of the
countries where the TB burden is greatest. We will build and strengthen
programs throughout Africa that manage and prevent malaria at the
health facility and in the home--where most of the deaths occur--and
will help to develop more powerful weapons in the fight against
malaria, including, we hope, a vaccine. Finally, we will be well on our
way to having a global disease surveillance system by establishing the
capacity to collect, use, report and respond to appropriate and
accurate data at the country level. Until surveillance capacity is
built at the country level, we cannot have a global surveillance
system, and we cannot have global security from the threat of
infectious diseases.
Antimicrobial resistance
Over the past half century, antimicrobial therapies (antibiotics
and anti-parasitics) have been our most important weapons against
infectious microbes. However, the wide-spread, often indiscriminate,
use of these drugs has contributed to the emergence of drug resistant
strains of infectious organisms.
Inappropriate use of antibiotics selects resistant strains for
survival. In developing countries, such inappropriate use is often the
result of poor access to appropriate drugs, inadequate national drug
policies and information, poorly trained pharmacists and doctors, and
poor patient compliance with drug treatment. Changing common practices
among both providers and patients to decrease the inappropriate use of
antimicrobials is the principal challenge. Also essential is the
capacity to monitor antimicrobial resistance and susceptibility of the
major human disease organisms. This requires well-trained laboratory
personnel and clinicians, essential supplies and equipment, and
effective use of data.
USAID, in collaboration with WHO and other partners, has a unique
opportunity to help bring about a comprehensive global strategy on
antimicrobial resistance. The strategy will be used as a road map and
advocacy tool, and serve to target resources. We will give special
attention to diseases for which antimicrobial resistance poses a major
threat in developing countries because of high mortality and incidence,
and for which antimicrobial treatment remains the most effective
control strategy, including dysenteric diarrhea, pneumonia and
gonorrhea.
In addition to working with our partners to establish a global
strategy and action plan for antimicrobial resistance, USAID will
invest in improving the understanding of and disseminate information
about drug resistance, including the epidemiology, public health impact
and contributing risk factors. We will invest in research to develop
methods to detect resistance, including, for example, laboratory
assays; tools for population based surveys; and clinical methodologies
to detect resistance based on treatment failure. We will also support
behavioral research to increase the rational use of drugs, and support
research on improved treatment regimens to prevent the spread of
resistance. We will work with countries to strengthen the capacity to
respond to drug use and drug resistance information to close the gap
between data collection and decision making. Lastly, USAID will promote
the implementation of interventions to slow the spread of antimicrobial
resistance, including activities such as improved management of
pharmaceuticals, strengthening drug policy analysis and regulatory
mechanisms as well as improving the availability and use of unbiased
drug information, and curriculum reform for rational use of
antimicrobials.
Tuberculosis
After years of declining visibility, tuberculosis is again being
recognized as a leading cause of adult deaths and illness. About three
million TB-related deaths occurred in 1997, and one-third of the
world's people have been infected with the TB bacillus. The
debilitation caused by TB is a leading cause of work loss around the
world.
In the developing world, increasingly more crowded cities,
inadequate health care, and the complicated nature of managing TB have
contributed to an ever-worsening problem. Inadequate treatment and poor
compliance have led to the emergence and spread of multi-drug resistant
strains of TB which are virtually untreatable, given current resources.
Furthermore, the decreased immune response resulting from HIV infection
has led to a rekindling of TB in its most infectious form among
millions in whom the disease had been dormant.
The success of a new strategy, Directly Observed Treatment, Short-
Course (DOTS), has created optimism that the disease can be more
effectively controlled on a much broader scale. However, DOTS requires
multiple contacts between a treatment supervisor and TB patient over a
period of six to eight months and can only be carried out in situations
where effective program management can be assured. In the context of
poorly-managed programs with frequent drug shortages, there is
considerable risk that poorly run TB control programs can lead to the
emergence of more widespread multi-drug resistance, which must be
avoided at all cost.
Existing health service delivery systems in developing countries
are generally not well prepared to address TB on the scale which is
required. In some transition countries, extensive systems are in place
dedicated to TB, but are costly, inefficient and ineffective.
One of USAID's first priorities is to work with our partners,
including WHO, CDC, the International Union, and others to develop a
comprehensive global TB control plan and strategy to become the basis
for coordinated action and for building political consensus and
support. USAID also plans to establish 3-5 major field sites to serve
as models for innovative wide-scale TB surveillance and control, and
support the implementation of TB control programs in several other
countries. We will invest in research to investigate technologies for
TB prophylaxis, diagnosis and treatment, and support surveillance to
monitor TB trends and to identify multi-drug resistant TB strains
before they become widespread.
Malaria and other infectious diseases
While malaria is a global problem, it poses a particular challenge
to public health and economic development in Africa, where 85 percent
of the world's total malaria clinical cases and 90 percent of the
malaria deaths occur. Infants, young children and pregnant women are
especially vulnerable. Each year malaria causes more than two million
deaths and half a billion debilitating cases, accounting for the single
largest cause of labor loss in Africa.
Latin America and southern and central Asia also have extensive
areas with malaria transmission. Outbreaks of malaria of epidemic
proportions have also occurred in the southern part of the NIS and are
spreading to surrounding countries in the region.
USAID's recent malaria activities have focused on the development
of new technologies, including development of a malaria vaccine, and
pilot testing options for practical prevention and control of malaria
in Africa. With the lessons learned from these programs, we will scale-
up from earlier pilot studies in Africa and extend our malaria efforts
into selected countries of Latin America, south Asia, and possibly the
NIS. A package of health interventions which focus on improved
management and prevention of malaria at the health facility and
community levels is at the core of our expanded malaria program. USAID
will also support an Africa regional insecticide treated bed net
program. Research to improve the understanding of the immunology,
epidemiology and transmission of malaria and to develop improved
approaches and technologies for prevention and control of malaria will
also be supported, as well as further investments in developing and
field testing malaria vaccines. Finally, USAID will support activities
to address the development and spread of parasite resistance to
existing antimalarial drugs, including strengthening country-level
capacity to conduct routine mapping of antimalarial drug sensitivity;
promoting national level adoption and implementation of drug policies
consistent with effective treatment and promoting the development of
alternative malaria drug therapies.
Other infectious diseases, such as dengue, yellow fever,
meningitis, and chagas are also re-emerging as public health threats.
These are often epidemic in nature, and many are transmitted by insect
vectors. Even though their global burden is less than our priority
diseases, investments in their prevention and control in a particular
country may sometimes be warranted due to high case fatality, the
potential for rapid spread, economic disruption, impact on highly
vulnerable populations, and cross-border transmission.
Surveillance and response
The ability to detect disease and to access data is essential for
establishing timely responses to infectious diseases. However, health
systems in many developing countries lack the necessary capacity for
routine and sentinel disease monitoring. Surveillance and response
capability is impeded by decision-making divorced from accurate
information, incompatibility of disease reporting with information
systems, lack of commitment, limited expertise, insufficient laboratory
capacity, and poor coordination. We cannot have an effective, reliable
global disease surveillance system unless there is adequate capacity at
the country level.
For countries with difficulties in implementing routine basic
surveillance, the challenge of detecting and responding to the
appearance of new organisms, disease outbreaks, and antimicrobial
resistance often presents an impossible challenge. To be effective,
surveillance and response must be an accepted national and local
responsibility. International response to all but the most dramatic
outbreaks relies on this local capacity.
USAID will focus our resources primarily on building improved
national capacity in the countries we assist for surveillance and
response. Emphasis will be on using data for action and ensuring that
there are feedback loops throughout the data system. As has been done
in the Americas for polio and measles, disease-specific surveillance
activities can help create a foundation for more sensitive and
sustainable systems to track a broad range of infectious diseases of
public health importance. USAID's efforts in this area will be targeted
at improving the ability of public and private health system staff to
obtain and use good quality data for the surveillance of, and response
to, infectious diseases. We will support the development of improved
technical and laboratory capacity. We will explore innovative
technologies such as geographic information systems mapping, and help
to improve laboratory management and basic epidemiological training.
Success of this effort will be judged not by the collection of data,
but by its routine and appropriate use to control disease.
infectious diseases in the development context
We are also grateful to this subcommittee for helping to stem the
downward spiral of development assistance funding. Funding for
development assistance has declined significantly in recent years, most
dramatically in fiscal year 1996 which saw a $400 million decline over
the fiscal year 1995 level of $2.1 billion. This decline was stopped
last year with the fiscal year 1998 appropriation, in large part thanks
to this Subcommittee. As this subcommittee is well aware, addressing
infectious diseases effectively is not only a health issue, but also
requires investments in education, poverty reduction, food and
nutrition, environment, and family planning.
At USAID, we have become increasingly concerned about scarcity of
resources available for important other areas, such as agriculture and
food security, and reductions in population funding. As a result, our
fiscal year 1999 budget request includes more funding for environment,
economic growth and agriculture over the fiscal year 1998 enacted
levels. Increases in these areas will help fund two initiatives that
have great potential. The $30 million Africa Trade and Investment
Policy Initiative is designed to reinforce and give practical
assistance to the growing number of countries in Africa interested in
reducing barriers to foreign trade investment. The $20 million Latin
America Summit Initiative is designed to eradicate poverty and
discrimination through trade reforms and increased economic integration
as well as improve education in the region.
These unique opportunities have forced us to make some difficult
choices. As a result, we have requested fewer resources for infectious
diseases and child survival than the Agency received in fiscal year
1998.
I want to underscore that this in no way reflects a reduced
priority for infectious diseases or child survival. As Administrator
Atwood has stated, we have learned that our efforts to combat infant
and child mortality and the spread of infectious diseases are more
effective when we are also able to address some of the underlying
social and economic conditions that allow these diseases to flourish,
including poverty, malnutrition, illiteracy, poor sanitation,
overcrowding, and environmental degradation. Addressing these
underlying conditions is also critical for making sure that our
investments in building effective health systems are sustainable for
the long run.
Another resource constraint is the Agency's operating expense
resources, which overall, are decreasing, rather than increasing. USAID
is exploring options for restructuring the portfolio of existing staff
to effectively implement this new infectious disease initiative,
without jeopardizing our ability to adequately manage on-going
programs. We are exploring options to bring into the Agency specialized
technical expertise in areas such as tuberculosis. We also hope to work
with other U.S. government agencies and private partners to bring their
technical expertise to bear on the strategy I have outlined today.
The problems of infectious diseases are much greater than what the
U.S. government can take on entirely by itself. We will need to work
with our public and private sector partners to leverage and increase
resources targeted at these issues.
new partnerships
USAID has chosen to focus on a relatively few areas in infectious
diseases, but even within these areas the task before us is enormous,
and far exceeds the resources the U.S. can put forward. We must work
together to identify new partners and bring them to the table. I am
very pleased to see the private sector represented here today; it is
clear that effectively addressing infectious diseases is very much in
the interests of all of us, including the private sector.
We have the obvious representatives here--the drug companies and
those who deal directly with health issues. But there are many more
companies that for philanthropic and other reasons may be willing to
participate. For example, Coca Cola helped support a National
Immunization Days campaign for polio in Zambia, providing transport for
health workers and volunteers. USAID is working closely with the U.S.
food industry to expand the intake of vitamin A for children at risk in
developing countries, employing this powerful new weapon for child
survival. Decreasing vitamin A deficiency through fortified foods and
supplements, and increased use of vitamin A rich foods, can reduce
child deaths by as much as a quarter, by directly enhancing children's
resistance to the infections we are discussing today. While USAID's
vitamin A initiative is separate from our infectious disease
initiative, it is a critical complementary strategy.
When asked, U.S. private sector companies and international
corporations have again and again demonstrated a willingness to engage
in programs that do good works. We all need to move much more
proactively to engage the private sector in the fight to address
infectious diseases. I invite my partners here today to join with USAID
in more aggressively bringing the private sector to the table and help
bring their tremendous resources to bear on this immense problem.
Foundations are also a significant resource. Some foundations such
as Rockefeller, Ford, Thrasher, and Pew have been heavily engaged in
international health issues and we have all seen the remarkable and
ground-breaking programs they have supported. However, there are other
foundations that are not working in international health as yet. We
need to join with our foundation colleagues and others to encourage
wider participation from others in efforts to improve international
health.
Civic organizations are already involved in a variety of
international programs. When polio is eradicated in the next several
years, Rotary International can rightly take a great deal of credit for
making it happen. The Lions Club's support for International Sight and
Life has made a tremendous difference in the lives of children all over
the world. Here too, we can work together to encourage further
participation from other civic organizations. As we have seen with
Rotary, civic organizations cannot only help mobilize financial
resources, but they often have member networks in countries all over
the world that can be tremendously powerful partners in mobilizing
local resources, getting work done, and building sustainable systems.
The World Bank is devoting enormous resources to bear on infectious
diseases, notably TB and malaria. While coordination often occurs at
the country level, we need to be much more systematic about
collaborating closely with our World Bank colleagues to get the most
out of our investments.
The President has proposed an increase for the NIH budget,
including increased support for vaccine research. Investments in
research now cannot be oversold, and will be critical for our success
in fighting infectious diseases for the long run. Vaccines are
tremendously powerful weapons in the fight against infectious diseases,
and must be supported. We hope to closely coordinate with NIH, to make
the most of our combined resources.
The Centers for Disease Control and Prevention (CDC) continues to
be an important partner in international health in areas such as
developing methods to monitor antimicrobial resistance, especially
pneumonia and malaria, as well as providing expertise in field
epidemiology. We have been in discussions with CDC about the important
role they will play in USAID's strategy, and are jointly seeking ways
that we can maximize the impact not only of the resources USAID gives
CDC for work in developing countries, but look for opportunities for
combining our resources for greater impact.
The World Health Organization (WHO) is already one of our major
partners; this partnership will be enhanced through our infectious
disease initiative as we engage multiple divisions within that
organization. We are very enthusiastic about the nomination of Dr. Gro
Brundtland as Director General of WHO. Dr. Brundtland's stated
priorities of strengthening health systems and health and development
will help to maximize the synergy and effectiveness of our combined
resources.
UNICEF has also been an important partner for USAID for many years
in child survival and health programs. Because so much of the
infectious disease work I have described today dovetails with these
programs, we will be working with UNICEF to look for more opportunities
to collaborate.
USAID's programs have been working successfully to engage local
private and public sector resources. Given the scarcity of resources at
the local levels, this is often a great challenge, but it has
tremendous payoffs by making programs more effective, more acceptable
and accountable to local people, and more sustainable for the long
term. For example, in India, 10 million volunteers helped make the 1997
and 1998 National Immunization Days for polio a remarkable success.
Thanks in no small measure to these volunteers, 130 million children
were immunized in one day. This kind of effort will make polio
eradication happen.
conclusion
The burden and growing threat of infectious diseases is enormous.
Millions of people die every year from these diseases, and most of
these deaths are preventable. As we near the end of the century, there
is a deepening collaboration and growing consensus among political
leaders, international organizations, health agencies and communities
that by working together, we can curb the threat of infectious
diseases. Building the systems to prevent, control and detect diseases
is possible.
Thanks in large part to the vision of this subcommittee, the U.S.
has now taken a leadership position. By maintaining our course,
encouraging the participation of new actors and bringing new resources
to the table from other quarters, we can over the next decade make even
greater headway in addressing this problem.
Foreign policy
Senator Leahy. I look at the fact that we can spend
millions of dollars, for example, as part of our foreign
policy, to send an aircraft carrier task force into an area,
just to show the flag. And here we are talking about saving
lives for the cost of $1 a person, or $2 a person. When you are
a nation with 5 percent of the world's population using one-
quarter of the world's resources, the humanitarian obligation
is there to do more.
But also, if you want to just look at it as a matter of
pure self-interest, we have a great interest here. These
diseases come to our shores. We are not isolated from them.
My wife is a nurse and she sees more and more patients with
TB. And I also understand that is not unusual around the
country.
When you only know about faraway countries by reading
National Geographic as I did as a child, today people leave
here on Monday for a conference on the other side of the world,
and they are back at their desk by late in the week.
But I state the obvious here, and I do want to hear from
Dr. Heymann.
It is good to have you with us again.
summary statement of dr. david l. heymann
Dr. Heymann. Thank you very much, Senator Leahy.
I am very pleased to represent the World Health
Organization at this second hearing that you are conducting on
infectious diseases. And I would like to call your attention to
some charts which we will be showing at my right.
This first chart follows up on what Nils has said
previously. If you focus on the purple wedge, that is the 17
million infectious diseases which are occurring in 1995, and a
similar number is occurring--slightly more--this year. If you
look at this in comparison to the total number of deaths in the
world in 1995, you will see that that represents a third of all
deaths.
This is unacceptable today, in a world where the tools are
there to control infectious diseases. And as is true with
infectious diseases, it affects mainly the poor in developing
countries.
The next overhead shows the infectious diseases which have
been recently imported into the United States. And these
diseases are imported in food, such as cyclospora. They are
imported in laboratory animals, such as Ebola. And they are
imported in people, as is shown with cholera, yellow fever,
dengue, malaria, and polio.
Now, I would like you to focus, Senator, if you would, on
the three diseases on the right: yellow fever, malaria, and
dengue. These diseases are all carried by mosquitoes. And on
the next chart you will see the States in the United States
which were reporting malaria in 1949. These States had the
mosquito vectors which would transport or transmit malaria.
These States also had the disease mosquitoes which would
transmit yellow fever.
Today those mosquitoes are still present in these States.
And it suffices for a letdown in vigilance--which CDC will
never do--but if a letdown in vigilance occurs, there will be
an increase in transmission of these diseases, yellow fever,
dengue, and malaria, in the United States.
Senator Leahy. What you are saying is if you were to look
for where the mosquitoes are, and to change that from 1949 to
1999, for example, it would be basically the same?
Dr. Heymann. That is correct. They are the same. But in the
summertime, they can spread up to the metropolitan areas of New
York and Boston.
The next shows the concerns in globalization and health,
which you have alluded to, this rapid transportation of
commerce and also of people. In the North, the issue and the
concern is one of international public health security, making
sure that these organisms do not come in, in food, or that they
do not come in, in people, either returning tourists or
immigrants.
In the South, the issue is early detection and containment,
being sure that these diseases are detected early and stopped,
so that they do not cause high mortality, and so that they do
not decrease trade and tourism, which is always a result of an
infectious disease in developing countries.
But there is hope, because there is a common concern for
both the North and the South, a common interest. And that is to
strengthen both global detection systems for infectious
diseases and also national surveillance and control in
countries, including developing countries.
Now, this overhead, this chart, shows a disease called
monkeypox. Human monkeypox is a disease which occasionally
occurs in humans, and it comes from animals living in the rain
forest in West and Central Africa. This disease, in the past,
has not spread further than five people within the same
outbreak. And it is a disease which does not kill to the same
extent as smallpox, but does kill 10 percent of those infected.
Smallpox vaccination protected against human monkeypox. Today,
smallpox vaccination is no longer given anywhere in the world,
so it is a concern when a disease such as this strikes the
human population.
And I would like to just show you how a response is mounted
to a disease such as monkeypox, to show you, first of all, the
sequence of events, and then some of the problems. Now, the
first case of monkeypox in this outbreak, which at that time
already numbered 90 cases, came to WHO through its global
network of disease detection. This is a system which receives
rumors of infectious, unconfirmed infectious diseases, from
NGO's, from governments and from technical agencies such as CDC
and USAID.
The report came to WHO. WHO mounted an investigation
locally, with its local WHO epidemiologist, Medicine sans
Frontiere, which is Doctors Without Borders, and the national
investigation team, and specimens were obtained and sent to
CDC. CDC, in September, diagnosed human monkeypox, confirmed
the diagnosis. It took us from September until January to get
an investigation started, because we had to stop and raise the
funds necessary. We had to raise funds to transport the team
into a remote area of the former Zaire. We had to set up the
logistics. And it took us 3 months before we could send a team
from Geneva, from CDC, from the European Epidemiology Training
Program, and nationals into the site.
They got to the site at very heavy expense, but 10 days
later, civil war came through, the investigation was
interrupted, and we had to start over again in September. But,
by September, we had been able to broaden the response to the
PHLS, which is the Public Health Laboratory in London. So we
broadened the response, so that no one country had to bear all
the burden.
And now we are in the process of developing strong
surveillance in the area, to make sure that the disease does
not occur again, because the outbreak was successfully
investigated. Over 300 cases have occurred. Analysis is now
being done, and an expert group will be formed, to see what the
implications of this are. But we now have a system in place to
make sure that if more monkeypox occurs, it will be detected.
But, again, there was a gap from September to January. That
gap was again due to the need to go out and raise more
resources. We need a fund of money available internationally
when these outbreaks occur.
Senator Leahy. Doctor, could we stop there for a moment.
I understand the delays when there is a war going on. But
what you are saying is that everything is in place but you do
not have the fare, you do not have the money?
Dr. Heymann. That is right. It has been a major effort of
ours to broaden the response, to include groups like EPIET, the
European Field Epidemiology Training Program, and the Public
Health Laboratory in London. Through talks with their
governments, their governments have put more funding into these
programs, so that they can respond at no cost to us.
Previously, it was only CDC which could do this. So we have
to broaden the response. But no one person can support the
logistics, an airplane charter to take the teams in. This must
be an international fund of some type.
Now, it is not enough just to strengthen disease
surveillance, detection and control, we also must have the
products necessary to prevent disease and to cure them. This
shows you the vaccines which have been licensed since 1900, a
total of 42 of them. And you can see that there were 12
licensed between 1900 and 1950. And since 1951, there have been
30 licensed, which is quite impressive.
The problem remains, however, that the major killers, which
Nils has shown on his overhead, many of those still do not have
a vaccine: AIDS. Tuberculosis has no effective vaccine. A
vaccine for other infectious diseases do not exist. And those
that do exist, many times, are too expensive.
Right now there is a safe and effective vaccine for yellow
fever, and another safe and effective vaccine for other
diseases in Africa, yet the countries cannot afford to put
these vaccines into their programs, and international donors do
not buy them. So, as a result, populations are remaining
unvaccinated, with products which are already available. So
that we have made progress in development of vaccines, there
remain many diseases elusive to vaccination, and at the same
time we are seeing that they are unaffordable in many
countries.
The next shows you the discovery of antibiotics. And you
can see that from 1940 to 1950, it was the golden age of
antibiotic development. There were 10 antibiotics developed or
discovered. If you look progressively, you will see that in
1961 to 1970, that had decreased to 10. And if you look from
1971 to 1990, that still remained at five. So a decrease from
10 to 5 to 5. And in 1990, there are only three.
Now, resistance is developing very rapidly to these
antibiotics, and it is a risk to develop a new antibiotic
because of that. But I would just like to signal some of the
problems now, in the next, with developing new vaccines and new
drugs for use in developing countries.
Now, this is not only an issue of scientific research and
development, it is also an issue of economics and patents.
Industry has to recoup the cost that they spend on research and
development of new product. It is a justifiable need. They also
have to recoup the costs on all the other investments they made
on products which never made it to market. So they need to get
a profit. And they need to get that profit rapidly because they
have a patent limitation of a maximum 20 years.
Now, some of the obstacles along the way to develop
products for developing countries are that there is a variation
in the industry's distribution. The rich markets which could
buy many of the products do not have many of the diseases. So
developing countries, which have a soft currency market and a
limited affordability of new vaccines and drugs, are not a
target of industry, and rightfully so.
There is also a long interval to licensing many times. The
patent may be 10 years down the way before a drug is already
licensed. And then that 10 years is the only time they have to
recoup the money on a guaranteed basis. So there are many
obstacles to developing products for developing countries. And
what is needed is a better environment in industrialized
countries, so that pharmaceutical companies will be willing to
invest in development of vaccines and drugs for developing
countries to sustain all the efforts that WHO, USAID, CDC, and
others are doing in making an infrastructure to support disease
detection and control.
So, finally, I would just show you a list of the WHO, or a
map of the WHO collaborating laboratories, which are one of our
global surveillance systems. These are being hooked up
electronically. But as you can see, there are gaps in the
South, in Africa, in Latin America and in Asia, there are a
decreased number of centers. And these must be strengthen, and
Nils alluded to that, in the activities that USAID will be
doing bilaterally.
prepared statement
So I would like to just close by saying that the funding
has been very crucial to USAID to strengthen global
surveillance and monitoring and control of infectious diseases,
and it is very important that those products continue to be
produced, which will permit successful disease control and
prevention. So a new environment for the pharmaceutical
industry, to encourage that, and increased or sustained funding
to USAID will move us greatly ahead in solving the problem of
infectious diseases in the world.
Thank you very much.
Senator Leahy. Thank you, Doctor.
[The statement follows:]
Prepared Statement of Dr. David L. Heymann
infectious diseases: the continuing challenge
Infectious diseases are dynamic, resilient and remarkably
persistent over time. They have caused fear and horror for millennia.
The suffering and losses they have inflicted have been described
throughout recorded history and have dramatically shaped human destiny.
Twentieth-century medicine has reduced their toll, but not their
number. The number of such diseases is actually growing, in part
because microbes that live in animals increasingly find conditions
right to jump the species barrier and infect humans. The list of
threatening diseases is longer now than it was 75 or 50 or even 25
years ago. Some infectious diseases, quiet for decades, are nonetheless
still with us and roar back with a vengeance wherever public health,
sanitation and other control measures fall into decay. And increasingly
there is a fear of intentional use and spread of microbes, including
genetically-modified versions, as weapons of war or terrorism.
One-third of the 52 million deaths which occurred in the world in
1995 were due to infectious diseases, and this ratio has remained the
same in 1996 and 1997. These diseases killed 17 million persons in 1995
and disabled hundreds of millions of others. The majority of these
diseases, including tuberculosis, pneumonia, hepatitis, measles and
AIDS, are transmitted directly from person to person. Others are spread
by food, water or soil and include diarrheal diseases, cholera,
neonatal tetanus, and intestinal parasites. Some are insect-borne such
as malaria and dengue fever. Others, such as rabies, are spread
directly from animals to humans.
Advances in public health and medicine, sanitation and pest control
have led to the prevention and control of infectious diseases in many
countries but have had minimal impact in others. Worldwide, centuries
of progress have been undermined to various degrees by deteriorating
public health infrastructure, inadequate resources for health care
services, and the rise of new and multi-drug-resistant organisms. There
continue to be enormous disparities in mortality, disability and
exposure to infectious diseases among social classes, with the poor
still suffering extremes of ill health in all societies. When adequate
financial and human resources are not devoted to infectious disease
control, whether due to poverty or to competing priorities, the result
is a predictable increase in infectious disease.
In spite of huge steps forward in controlling infectious diseases,
from the research laboratory to the hospital bedside to the village
health center, there have been huge setbacks too. The resurgence of
diseases once thought conquered is taking a rising toll in human lives.
The assumption that antibiotics would forever cure many infectious
diseases has been proved disastrously false by the evolution in the
last few decades of drug-resistant bacteria, viruses and parasites. And
in the late twentieth century, expanding global travel and trade have
made an infectious disease in one country become a concern for all. As
we enter the 21st century no country in the world is safe from
infectious diseases.
infectious diseases: recent experience
During 1997 the world experienced over 60 internationally-
significant infectious disease outbreaks of both ``classic'' infectious
diseases and new, unfamiliar diseases. Other familiar infectious
diseases continued to gain ground in new and often disadvantaged
populations. Many of these disease have crossed, or threatened to
cross, international borders, menacing international public health
security. Though none of these outbreaks appear to have been
intentionally caused, the fear of intentional use of infectious agents
remains. For example, during 1997:
Major cholera epidemics spread throughout eastern Africa, affecting
hundreds of thousands of people in more than ten countries over several
months. Trade sanctions were unnecessarily placed on fish exports from
these countries resulting in severe economic impact on their fragile
economies.
Yellow fever fatalities were reported in seven countries in Africa
and South America.
Meningitis caused major epidemics in Africa, with over 70,000 cases
reported in the 1996-97 season, over half of which are feared to have
resulted in permanent brain damage or death.
Over 15,000 cases of typhoid fever with resistance to first-line
antibiotics occurred in Tadjikistan.
Epidemic typhus resurged in Burundi with over 30,000 cases and
untold deaths.
An avian influenza virus emerged in humans in Hong Kong, killing 6
out of the 18 people who became ill. It is being carefully monitored
for its potential to become the next worldwide pandemic influenza
threat.
Rift Valley fever afflicted thousands of people, killing hundreds
of people and many livestock in Kenya and Somalia.
The prevalence of hepatitis C continued to increase in countries
where blood is not screened prior to use and sterilization of medical
equipment is faulty.
Lassa fever, with high mortality, re-emerged in Sierra Leone.
An outbreak of dengue fever occurred in Cuba for the first time
since the 1981 epidemic.
The investigation of an unexpectedly large human monkeypox outbreak
in the former Zaire raised troubling new issues about this disease and
about the safety of smallpox vaccination in the era of AIDS.
The number of cases of new variant Creutzfeldt-Jakob Disease
reached 24 in the United Kingdom and France, combined with the
continuing threat of bovine spongiform encephalopathy (BSE or mad cow
disease). The United Kingdom's economic loss from BSE was estimated to
have reached $5.7 billion U.S. dollars.
Escherichia coli 0157 continued to surface in industrialized
countries including Japan and the United States.
Vancomycin-resistant Staphylococcus aureus was identified in Japan
for the first time, and later in the United States.
Sporadic infectious disease outbreaks and epidemics such as these
are costly to the economies of countries in which they occur. Epidemics
often divert resources from the ongoing control of important endemic
infectious diseases such as tuberculosis, AIDS, malaria, pneumonia and
diarrheal diseases. As a result endemic diseases continue to increase.
For example, the number of new HIV infections in Eastern Europe tripled
during 1997, and with it there was an increase in tuberculosis, while
funding for control efforts failed to keep pace.
infectious diseases: building a global framework to strengthen
surveillance and control
During the 50 years since the World Health Organization (WHO) was
created we have learned that there is a complex network of ecological,
social, political and economic factors that must be addressed to solve
most public health problems. We must be alert to and fashion our
response to infectious diseases to reflect the diversity of experience
as well as inequities within and between populations. Despite the
existence of vaccines, drugs, and laboratory tests which have helped to
decrease infectious diseases to low levels in many countries, success
in the control of infectious diseases in other countries remains
elusive. Poor progress is partly due to lack of appropriate
technologies that can easily be applied to overcome disease in
developing countries, and partly to the inability of those parts of the
world with the most infectious disease to finance the necessary
interventions on a sustainable basis. The experience of WHO during this
half a century has shown over and over again that controlling
infectious diseases is a global challenge requiring a sustained,
committed effort and partnerships among and between governments, non-
governmental, and multinational organizations.
The concern of industrialized countries such as the United States,
where prevention and control efforts have dramatically decreased
infectious disease mortality, is international public health security:
ensuring that infectious diseases which are occurring elsewhere do not
spread internationally across their borders. The concern of developing
countries is to detect and stop infectious diseases early: avoiding
high mortality and negative impacts on tourism and trade. Peru
estimates that when cholera re-surfaced there in 1991 over 3,000
persons died, and that the national economy lost over $770 million U.S.
dollars because of decreased tourism and embargoes on seafood trade.
The estimated loss because of mad cow disease in the United Kingdom is
$5.7 billion U.S. dollars.
Both industrialized and developing countries can address their
concerns by working together to strengthen detection and control of
infectious diseases. The WHO framework for the surveillance and control
of emerging and other infectious diseases takes this common interest
into account. This framework has been developed together with Member
States and other partners, including the EU-US Task Force on Emerging
Infectious Diseases and the US-Japan Common Agenda, and has been cited
as an area of collaboration by the G-8 Member Countries at both the
Lyon (1996) and the Denver (1997) Summit meetings.
There are three major components to the WHO global framework for
the prevention and control of infectious diseases:
1. Strong global and national epidemiological surveillance and
public health laboratories to detect infectious diseases, to provide
data for analyzing and prioritizing health services, and to monitor and
evaluate the impact of control efforts.
2. Sustainable and well-managed infectious disease control programs
which effectively diagnose infectious diseases and administer vaccines
and curative drugs where and when they are needed.
3. Continuing research and development of simple-to-use and robust
vaccines, antimicrobial drugs, and laboratory tests for surveillance,
prevention and control.
Surveillance and control of infectious diseases are being
strengthened by WHO and its partners, including USAID and CDC. During
the 1998 fiscal year the U.S. Congress provided $50 million to USAID
for timely participation in this global effort. This has permitted
USAID to add an objective to its strategic framework for population,
health and nutrition to reduce the threat of infectious diseases of
major public health importance. USAID consulted with many partners,
including WHO, in the process of developing this strategy and its four
principal areas of programmatic emphasis: anti-microbial resistance,
tuberculosis, malaria, and surveillance and response capabilities. WHO
believes USAID's activities will make a major contribution to putting
in place cost-effective and non-duplicative investments to rebuild and
strengthen capacity to detect and control infectious diseases,
particularly in developing countries. WHO is collaborating very closely
with USAID and other partners in all four of the programmatic areas.
Active discussions are underway and field activities will be expanded
as fast as final funding decisions are made.
Continued funding to USAID at this level or higher, targeted at
strengthening surveillance and control, will permit the U.S. Government
through USAID to continue its support to this important global
partnership. The long-term result will be that developing countries are
able to detect and contain infectious diseases where they are
occurring. This will minimize their impact locally and ensure that they
do not become threats to international public health security.
During the past twelve months, in part supported by funding and
technical support made available through CDC and USAID, WHO has
reinforced global laboratory-based surveillance by providing training
and support to existing WHO Collaborating Centers and laboratories, by
giving seed funding for development and distribution of diagnostic
reagents, and by designating new centers and laboratories to fill
geographical gaps. Fifty-two additional national laboratories, for
example, have been strengthened through training and provision of
supplies to participate in the WHO antibiotic resistance monitoring
networks. Plans are underway, in collaboration with USAID, for
intensification of this work and additional initiatives directed
specifically at understanding the magnitude and causes of antimicrobial
resistance, and developing and applying containment strategies. Other
laboratory networks to monitor viral, bacterial and zoonotic (human
infections of animal origin) diseases have similarly been strengthened.
Sustained or increased funding to USAID would permit the pace of these
activities to increase.
WHO has improved global epidemiological surveillance through the
revision of the International Health Regulations to facilitate rapid
reporting of and response to infectious diseases of international
public health importance. Revision has specifically focused on
developing a system which is sensitive enough to detect both naturally
occurring and intentionally caused infectious disease outbreaks. The
revised system emphasizes communication through electronic links
between WHO Member States and WHO's network of regional offices,
country representatives, and technical partners such as USAID and CDC
for verification and response. The response mechanism permits rapid and
coordinated international investigation and containment of infectious
disease outbreaks of international importance. Examples during 1997
include investigation and containment of outbreaks of human monkeypox
in the Democratic Republic of Congo, avian influenza in Hong Kong, and
Rift Valley fever in Kenya. In each instance the WHO-coordinated
international response, in which CDC played a major role, broadened
international cooperation so that no one country was required to
shoulder the entire burden. Without such a coordinated international
response each of these outbreaks could have resulted in extensive
international spread.
At the same time WHO has also expanded its priority routine
surveillance systems for diseases such as influenza, HIV/AIDS,
hepatitis C, rabies, hemorrhagic fevers, and Creutzfeldt-Jakob Disease.
Furthermore, to ensure an international environment which facilitates
effective global surveillance and response, WHO has continued to
develop standards and strategies for infectious disease surveillance
and control, promoted and conducted basic and operational research, and
evaluated laboratory diagnostic tests and epidemiological approaches to
surveillance. For these activities as well, intensified collaboration
with USAID would permit WHO to increase the pace of implementation,
enabling WHO to continue to provide clear, reliable and 24-hour-
accessible information on infectious diseases to public health
professionals and the general public throughout the world.
With continued or increased support for the WHO-USAID partnership,
the rate at which CDC, USAID, and WHO are strengthening and reinforcing
developing country infrastructure and networks in national surveillance
and control activities would be increased, permitting those countries
to have a clear picture of the infectious disease situation in the
country as a whole and in populations at special risk. Activities
include assessment of existing systems with refocusing and replanning
as necessary, technical assistance, and training of trainers in
infectious disease surveillance and control. Continued and increased
effort in these activities will permit developing countries to detect
and contain unusual diseases or outbreaks when and where they occur.
infectious diseases: need for new vaccines, drugs and laboratory tests
for developing countries
Strong surveillance and disease control without the necessary tools
for diagnosis, treatment and prevention are futile goals. Continued
research and development are required to produce simple-to-use and
robust vaccines, drugs and laboratory tests. There is a particular need
for continued development of vaccines, drugs, and laboratory tests for
developing country markets.
At the same time these tools for surveillance and control must be
widely available and used. We are regularly reminded that infectious
diseases require constant and sustained attention. Two recent examples
are the resurgence of diphtheria in the newly independent states of
eastern Europe and the Russian Federation when vaccination programs
became underfunded, and the continued mortality from influenza in the
United States where each year the influenza virus infects and often
kills those elderly persons who have not been vaccinated.
On the surface, vaccine development appears to be satisfying the
needs. From 1900 to 1950, 12 vaccines were licensed for human use, and
30 new vaccines have been developed and licensed since 1950. Many of
these newer vaccines are more stable under tropical conditions. But
vaccines continue to require vigilant and uninterrupted cold storage
until use, and development of vaccines for major killer infectious
diseases--tuberculosis, AIDS and malaria--has been elusive. Those new
vaccines which have been licensed have proven costly and not
immediately available in many developing countries. For example, there
is an effective vaccine for hepatitis B and another for yellow fever,
but inclusion of these vaccines in childhood immunization programs in
countries where the diseases are most prevalent has too often not been
a national budgetary priority, and donors have not been willing to pay
the price necessary to ensure their availability.
At the same time, development of new classes of antibiotics has
slowed partly due to the costs and risks associated with their
development. In fact, since the early 1960's no new class of
antibiotics has been developed, and resistance of microbes to existing
drugs continues to increase relentlessly within antibiotic classes. As
is true for vaccines, new antimicrobial drugs, which are a necessity
since resistance makes older ones ineffective, are not affordable by
many developing countries. The cost of treating gonorrhea--a sexually
transmitted infection which if left untreated facilitates the
transmission of HIV--has increased from approximately 40 U.S. cents 20
years ago (cost-adjusted figures to 1998) when penicillin was 100
percent effective, to over $5 U.S. dollars today when penicillin and
other less costly antibiotics are no longer effective. Such costs are
prohibitive in most countries where the problem of HIV is greatest.
The development of simple-to-use and robust laboratory tests has
also lagged. Tests of a type which can be used and sustained in
developing countries do not exist for most infectious diseases, and for
all but a minority of diseases many developing countries are required
to depend on regional or international laboratories for final
diagnosis. The delays thus caused often result in inappropriate and
unnecessary treatment and increased cost for patient management.
The issue of continued research and development and widespread
availability of vaccines, drugs, and laboratory tests for surveillance
and control involves not just research and development, but also
economics and patents. New vaccines, antibiotics, and diagnostic tests
come from the research-based pharmaceutical and diagnostics industry.
Development is costly, and patents are involved. Industry depends on
sales to recoup its high investments in research and development, both
for successful products and those that never make it to the market.
Sometimes it takes 10 years of the product's twenty year patent life
before a new drug or vaccine is licensed and on the market. With
limited guaranteed time to recover large investments, high-profit,
hard-currency markets are sought to maximize cost recovery. Industry
points to these economic and patent issues as reasons that they are not
able to develop products for high volume, low profit developing country
markets where affordability for the general population would require a
longer time to recover costs. Furthermore, the profits earned in soft
currencies may be small when converted into dollars.
Compounding the risk of investing in development of a new
antibiotic is the risk that the product will become ineffective due to
antibiotic resistance. For laboratory tests one of the major risks is
that of liability. Whereas simpler and more robust tests may be useful
in developing countries where other tests are not available, there may
be a liability risk associated with use in industrialized countries
where other available tests may be more sensitive.
An environment which favors research and development of vaccines,
drugs and laboratory tests suitable for developing countries must be
created to ensure strong and sustainable surveillance and control.
Measures which have been tried in the past include.
1. Two-tiered pricing. This provides a public sector price in
parallel to the price on the open market. Problems with this policy
have been that it often affords an opportunity for black market sales
and parallel export of products which impact negatively on the large,
hard-currency industrialized country markets.
2. Donation of drugs and vaccines by industry. This has been
especially important for the success of such programs as the control of
onchocerciasis (river blindness) in western Africa, and the current
efforts to eliminate lymphatic filariasis (elephantiasis). Problems are
that sustainability depends on the continued ability of the industry
which produces these products to provide them at no cost.
3. Co-development of a drug or vaccine with WHO and guaranteed
preferential pricing to WHO once development is complete. Co-
development permits more rapid testing of new products in areas where
disease is highly prevalent, but it requires a guarantee that studies
are conducted with the standards required for licensing by regulatory
authorities, which is sometimes difficult to accomplish in the
countries with high prevalence.
4. Donation of patents to WHO. This makes it possible for many
manufacturers to produce the same product, thus creating competition
which will eventually lead to lower pricing. (Albert Sabin chose this
measure to develop the oral polio vaccine.) Potential problems include
ensuring uniform quality of the final product.
5. Government regulation to enable licensing of products aimed at
low volume, or low profit/high volume markets. The United States has
pioneered a system through its Orphan Drug Act (1983) aimed at drugs
which are scientifically but not economically viable (either because
the number of patients who might benefit is too small or because the
populations concerned are too poor to afford the drugs). Under this
act, industry is entitled to a tax credit for the cost of clinical
trials conducted with the ``orphan'' drug and other substantial
benefits.
6. Creative financing mechanisms to provide increased funding to
the pharmaceutical and diagnostics industry for research and
development of products for developing country markets. The AIDS
Vaccine Initiative, supported initially by the Rockefeller Foundation
is an example of this type of mechanism which provides grants to the
research-based pharmaceutical industry for research and development of
AIDS vaccines.
These examples of measures to improve availability of existing
products, and research and development of new ones aimed at low profit,
high volume developing country markets each results in an increase in
the availability of products in developing countries, but they vary in
their sustainability. Consideration of how these and other mechanisms
might be advantageously used in the United States to promote
development and/or availability of vaccines, antimicrobial drugs and
laboratory tests for developing countries deserves further
investigation and action. Coupled with continued and increased funding
to USAID, CDC and WHO for strengthening surveillance and control, a
creative environment which permits the research-based pharmaceutical
and diagnostics industry to develop new products for developing country
markets could provide the synergy needed for long-term and sustainable
success.
summary comments
The $50 million provided by Congress to USAID in fiscal year 1998
will permit a more rapid pace of strengthening international and
developing country infrastructure for surveillance and control of
infectious diseases that threaten us all. Sustained funding in fiscal
year 1999 and beyond would permit USAID to continue to support valuable
partnerships among USAID, CDC, and WHO and lead to more timely
detection and containment of infectious diseases when and where they
occur. An increase in funding to USAID would permit this to be done
more rapidly. At the same time a creative environment which would
permit research-based pharmaceutical and diagnostics companies to
afford to develop new vaccines, drugs, and diagnostics for developing
country markets could dramatically speed up the rate of progress in
combating infectious diseases worldwide.
Deaths due to infectious diseases, 1995 estimates
Millions
Infectious diseases (33 percent).................................. 17.3
Other causes (67 percent)......................................... 34.6
-----------------------------------------------------------------
________________________________________________
Total deaths................................................ 51.9
infectious diseases recently imported to the united states
Cyclospora, Montana.
Ebola, Arkansas, and West Virginia.
Cholera, Florida, and Arkansas.
Yellow fever, Texas.
Polio, West Virginia.
Malaria, Georgia, and Connecticut.
Dengue, Pennsylvania, and Texas.
states reporting malaria, 1949, united states of america
Texas, Oklahoma, Missouri, Arkansas, Louisiana, Mississippi,
Tennessee, Kentucky, Alabama, Georgia, Florida, South Carolina, and
North Carolina.
globalization and health: the concerns
North: International public health security.
South: Early detection and containment.
Common interest: Strong global and national surveillance and
control.
human monkeypox: democratic republic of congo 1996-98
August 1996--Report to WHO (MSF).
September 1996--WHO/MSF/National Investigation.
January 1997--WHO/National/CDC/EPIET Investigation.
September 1997--WHO/National/CDC/EPIET/PHLS Investigation.
January 1998 to present--WHO/National Intensified training in
surveillance and control.
Vaccines licensed since 1900 (n = 42)--number of new vaccines licensed
Years:
1900-50....................................................... 12
1951-60....................................................... 4
1961-70....................................................... 6
1971-80....................................................... 8
1981-90....................................................... 7
1991-98....................................................... 5
Source: Mandell, Principals and Practice of Infectious Diseases.
DISCOVERY OF ANTIBIOTICS
----------------------------------------------------------------------------------------------------------------
1940-50 1951-60 1961-70 1971-90 >1990
----------------------------------------------------------------------------------------------------------------
Sulphonamide Erythromycin Spectinomycin Trimethoprim Macrolides
Penicillin Spiramycin Lincomycin Clindamycin Quinolones
Streptomycin Novobiocin Gentamicin Aztreonam Beta-lactams
Bacitracin Cycloserine Tobramycin Ciprofloxacin
Chloramphemicol Vancomycin Nalidixic acid Imipenem
Polymyxin Rifampicin
Framycetin Kanamycin
Tetracycline Fusidic acid
Cephalosporin
Neomycin
----------------------------------------------------------------------------------------------------------------
development of vaccines and drugs for use in developing countries--some
hurdles along the road
Research-based pharmaceutical industry.
Variation in disease distribution.
Long interval to licensing.
High costs of research and development.
Limited patent duration.
Soft currency markets.
Market size limited by affordability.
summary statement of hon. james m. hughes
Senator Leahy. Dr. Hughes, before you begin--you may have
heard those buzzers in the background--I have got about 6
minutes to get to the floor to cast a vote. I will do that and
come back. We will not start without you--or me either, for
that matter. [Laughter.]
[A brief recess was taken.]
Senator Leahy. I apologize for that delay. There was a
rollcall vote. Then I thought we were going to have a second
one, and so I was staying for that, and it turned out we did
not. One of the problems here is that there are always 10
things going on at once.
Dr. Hughes, I am delighted to have you here, and please go
ahead, sir.
Dr. Hughes. Good afternoon, Senator. It is a pleasure to be
here to represent the Centers for Disease Control and
Prevention, our Nation's prevention agency. And it is a
particular pleasure to be here with Dr. Daulaire, Dr. Heymann,
and Dr. Cassell.
I would like to briefly discuss CDC capabilities as they
relate to surveillance, applied research and diagnostics, and
illustrate some ways that we can assist USAID and WHO in
addressing these urgent threats to health in our global
village. I would like to share with you one brief quotation
from a recent Institute of Medicine report, ``America's Vital
Interest in Global Health.''
``Distinctions between domestic and international health
problems are losing their usefulness and often are
misleading.''
Another point to emphasize is how critically important
partnerships are in addressing these issues. I think that has
already been a recurring theme.
By way of background, CDC issued an emerging infections
plan in 1994. This plan has primarily a domestic focus. It
contains four goals that are relevant: surveillance and
response, meeting applied research needs, strengthening
prevention and control programs, and meeting infrastructure
development and training needs.
CDC and USAID participated with nearly 20 other Federal
agencies in the development of the CISET report on emerging
infections that was published in 1995. This report found that
the national and global capacity were inadequate to address
these threats. It identified ways in which Federal agencies
could collaborate more effectively and work together. This
report, as you know, served as the basis of the Presidential
decision directive on emerging infections.
Historically, we have a long history of collaboration with
USAID, particularly in malaria and AIDS and in tuberculosis.
Senator Leahy. Is that collaboration from Atlanta or do you
also go out into the field?
Dr. Hughes. Well, as one specific example, we have a field
station in Kenya that is focused on malaria. USAID has provided
some of the funding support for that over the years. So we
actually have had a very close collaboration.
Senator Leahy. And you would be in contact with people from
Dr. Heymann's organization, too?
Dr. Hughes. Frequent contact, yes.
And recently, we have experienced an increase in requests
to assist ministries of health and WHO in investigating
outbreaks in many settings, particularly outbreaks with high
mortality rates and those that have the potential to spread
across national boundaries, and even globally.
Now, in addition, we are often asked to assist in dealing
with problems in countries in which USAID does not have
missions. China is an example of that. We have worked with WHO
to increase the number of influenza surveillance sites in China
that have been key in monitoring influenza strains circulating,
and came into play in assessing the extent of the avian
influenza outbreak that occurred in Hong Kong. We deployed a
large team of CDC staff to work with WHO and others to
investigate and control that problem.
In terms of the USAID strategy, I would like to
congratulate the agency for developing this global strategy.
CDC has consulted extensively with USAID in development of this
strategy. CDC has unique expertise in surveillance
epidemiology, diagnostics, strain fingerprinting, and training
that we can apply to its implementation.
In terms of challenges, we have recently received a number
of very prominent wakeup calls. Several have been mentioned.
One is the problem with drug resistance in staphylococcus
aureus, this strain that was reported from Japan last year,
with partial resistance to a drug called vancomycin, which is
often the last available drug to treat staphylococcal
infections. Within a few weeks of that case being reported, we
identified two cases in the United States, one in Michigan and
one in New Jersey, caused by similar strains. It shows how
problems far away are directly relevant to problems here.
Other examples, in terms of the critical importance of
surveillance and rapid epidemiologic investigation, are of the
outbreaks of viral hemorrhagic fevers in central Africa, and
the national and international food-borne disease outbreaks
that we seem to be encountering with increasing frequency. One
recent example is salmonella agona outbreak related to a
product produced in Israel that caused infections in Israel, in
England, and in the United States. Additionally, an organism
that is a problem even closer to home, of course, is the E.
coli. 0157, which caused the enormous outbreak in Japan, and
more recently, last year, the outbreak in Colorado that led to
a nationwide recall.
That particular outbreak illustrates the critical
importance of public health laboratory capacity. Other recent
episodes that emphasize that are the outbreak of plague in
India and the Rift Valley fever outbreak in Kenya and Somalia.
In terms of opportunities and how we can help increase
capacity, the CDC plan that I mentioned called for the
establishment of emerging infections programs. And I think
there are some principles on which these programs are based
that can be applied to help USAID build national and regional
center networks. These programs exist now in seven States.
They stimulate partnerships between the public health
system, academic institutions, and other local organizations
and agencies. They focus on some core projects that deal with
high-priority emerging infections, including drug resistance,
the causes of severe unexplained illnesses and deaths, and
then, finally and importantly, food-borne diseases. They also
give the State health departments the flexibility to deal with
problems of local priority, which vary considerably across the
country, and they provide the flexibility to assess new
problems.
For example, when questions were raised about, are we
seeing cases of new variant Creutzfeldt-Jakob disease in the
United States, this mad cow disease that has been such a
problem in England, the emerging infections programs conducted
surveillance activities.
But other opportunities relate to some of the networks that
we have been talking about. For example, we have been working
with PAHO and with WHO, involving countries in the Amazon
basin, another in the southern cone, and another in Africa, in
the meningitis belt. There are opportunities to strengthen
partnerships with the field epidemiology training programs
located in 17 countries around the world that are modeled to
some extent on the CDC Epidemic Intelligence Service Program.
Those programs need to be more closely linked, I think, to
local laboratory capacity, which would make them even more
effective.
We are committed to assisting WHO in strengthening existing
collaborating centers that Dr. Heymann mentioned, and also
helping them to develop new ones. And then, finally, this issue
of training. We have developed an Emerging Infectious Diseases
Laboratory Fellowship Program, which we instituted 2 years ago
in the United States. Recently, we have been able to expand
that, with some financial support from Eli Lilly, to develop an
international track, so that we will be able to bring people
from other countries in for training in public health
laboratory science.
Communications, we cannot underestimate the importance of
that. CDC has a journal, Emerging Infectious Diseases, that can
be used to help to get the word out to the scientific community
around the world.
And, finally, the importance of public education is
absolutely critical, particularly in the area of antimicrobial
resistance and how drugs can be more appropriately used.
Senator Leahy. To go back to something that was said
earlier, let me make sure I understand it so we will have it
for the record. What is your budget for international
activities as opposed to domestic programs? And is there a
portion of it that comes from USAID?
Dr. Hughes. Yes; any money that we would get from USAID
would be used internationally.
For implementation of the CDC emerging infections plan, we
have received appropriations totaling $59 million; $3.5 million
of that, or about 6 percent, goes for international projects
and in part to support one of our people who is assigned to Dr.
Heymann's group in Geneva, and another person assigned with
PAHO in Washington. In addition, we put $2.5 million into
strengthening our own WHO collaborative centers. So that total
is $6 million. It is roughly 10 percent of the emerging
infections budget.
I was asked to speak for just a moment about what does the
future hold. This is hard to predict, but we can be pretty sure
we are going to see more problems with drug resistance. We are
overdue for the next influenza pandemic. We may have escaped
the Hong Kong threat, although the jury is still a bit out on
that.
The thing that I worry most about is when the next pandemic
occurs, not only will we be dealing with influenza, but we will
be dealing with bacterial pneumonias and other complications
that will be caused by multiple drug resistant bacteria. So, in
some ways, we will not be too far from where we were in 1918
and 1919.
Senator Leahy. Yes; and that $6 million or so you have for
the world out there is not an awful lot of money. I can say
that. You might not be able to say it. I can say it.
[Laughter.]
Go ahead.
Dr. Hughes. I will not argue. [Laughter.]
Senator Leahy. I did not think you would.
Dr. Hughes. We are going to see more of these international
food-borne disease outbreaks. We are going to continue to be
surprised at the role that microbes play in causing chronic
diseases, peptic ulcer disease being an excellent recent
example. And we know we are going to continue to have to
confront the unexpected. These microbes are going to continue
to evolve in response to selective pressures. And then we are
all concerned about the threats posed by bioterrorism.
prepared statement
So, in conclusion, I am confident that the funds that USAID
has received will be used to strengthen this global capacity. I
think it is urgent that we all work together to do that. We
need full partnerships and long-term collaboration and
commitment.
Thank you very much for your attention.
Senator Leahy. Thank you very much, Doctor. And I am
delighted you are here.
[The statement follows:]
Prepared Statement of James M. Hughes, M.D.
Good morning. I am Dr. James Hughes, Director, National Center for
Infectious Diseases, Centers for Disease Control and Prevention. I am
pleased to be here with my colleagues from the U.S. Agency for
International Development (USAID), the World Health Organization (WHO),
and Eli Lilly and Company to discuss an important issue: the need to
strengthen U.S. support for global infectious disease surveillance and
response capacity. I will review the current situation and consider how
CDC can use its unique capabilities in epidemiology, outbreak
investigations, and diagnostics to assist USAID in making the best
possible use of foreign assistance funds appropriated for this purpose.
The Global Implications of Emerging Infectious Diseases
For fiscal year 1998, USAID has received $50 million to strengthen
global surveillance and control of infectious diseases. This
appropriation reflects a recognition on the part of Congress and the
public of the urgency and global implications of the emerging
infectious disease issue.
The urgency of the situation is illustrated by the long list of
unforeseen infectious disease problems that have emerged in recent
years. To give a few examples: in 1997, an avian strain of influenza
that had never before attacked humans began to kill previously healthy
people in Hong Kong. This crisis raised the specter of an influenza
pandemic similar to the one that killed more than 20 million people
worldwide in 1918-1919. In 1997, we learned that vancomycin an
antibiotic of last resort--has begun to lose its power to cure
infections caused by Staphylococcus aureus, a common bacterium that can
cause life-threatening illness. This is a frightening example of how
the emergence of drug resistance is reversing the miracles of the last
fifty years. In addition, there is increasing concern that an
infectious agent may be released deliberately in a U.S. city by a
terrorist group or as a weapon of war.
There can also be disastrous consequences when two infectious
disease epidemics afflict the same population. For example, the
resurgence of tuberculosis in U.S. cities during the late 1980's and
early 1990's was exacerbated by the presence of a large population of
people whose immune systems had been impaired by infection with HIV/
AIDS. Another example concerns influenza patients, who are especially
vulnerable to bacterial pneumonia, a disease that in the past has been
treatable by certain antibiotics. By the time the next flu pandemic
hits, those antibiotics may no longer be effective, and pneumonia may
again become a serious health complication.
The global dimensions of infectious disease problems are evident.
Infectious microbes can quickly travel from country to country within
hours, and new diseases like HIV/AIDS and new forms of old diseases--
like multi-drug-resistant tuberculosis--can emerge in one region and
spread throughout the world. Today, when an outbreak of plague occurs
in India, or an outbreak of Ebola hemorrhagic fever is reported in
central Africa, the whole world takes notice. An outbreak is no longer
viewed as a local tragedy that cannot affect us here in the United
States, because the world has truly become a global village.
The challenge to the United States, and specifically to CDC as the
nation's prevention agency, is to contain these outbreaks before they
become international crises. When HIV/AIDS first emerged, there was no
international disease surveillance and response system to detect it.
Similarly, when a cluster of cases of Ebola hemorrhagic fever occurred
in the city of Kikwit, in the Democratic Republic of the Congo (then
Zaire) in 1995, it was months before the disease was identified and
control measures were put in place. By that time, the already fragile
health care infrastructure in Kikwit had deteriorated even further,
numerous health care workers had died, and hospitals had become places
of contagion.
Foreign Assistance to Address Emerging Infectious Diseases
It is imperative that emerging infectious disease issues be
considered when making decisions about providing foreign aid to
underdeveloped countries. It is in the best interest of the United
States to help developing countries participate in national and
international surveillance and response efforts. While the primary
gains will be in health, secondary benefits will include improved
economic productivity and increased political stability. A recent
report from the Institute of Medicine, America's Vital Interests in
Public Health: Protecting Our People, Enhancing our Economy, and
Advancing our International Interests, stated that ``the direct
interests of the American people are best served when the U.S. acts
decisively to promote health around the world.'' In the area of
emerging infectious diseases, the United States can lead from its
strengths in science and technology to protect American and global
health while projecting U.S. influence internationally.
Collaboration and Partnerships
The challenge ahead outstrips the means available to any one
agency, organization, or country. U.S. agencies like CDC and USAID are
making every effort to maximize their resources by pooling their ideas
and talents and by linking and strengthening existing programs and
institutions. The principles of interagency coordination and
collaboration are being applied both at home, where U.S. agencies are
addressing emerging infectious diseases at state and local levels, and
overseas, where U.S. agencies are working with the WHO and other
international partners to improve global health communications, set
standards for global surveillance of antimicrobial resistance, and
share experience and training on disease prevention and control on a
regional basis. An excellent example of a successful global partnership
is the collaboration among CDC, USAID, Rotary International, WHO,
UNICEF, and other international groups to eradicate polio worldwide.
The importance of partnerships cannot be over-emphasized. This idea
was stressed in CDC's 1994 plan, Addressing Emerging Infectious Disease
Threats: a Prevention Strategy for the United States, which launched a
major domestic effort to rebuild the component of the U.S. public
health infrastructure that protects U.S. citizens against infectious
diseases. Copies of the plan have been provided to the Subcommittee.
CDC is preparing an updated version which has been reviewed by many
partners, including colleagues from USAID, WHO, and the U.S.
pharmaceutical industry. We anticipate that the plan will be finalized
in a few months and will include a strong global emphasis.
The theme of partnerships was also stressed at last month's
International Conference on Emerging Diseases in Atlanta, which was
sponsored by CDC. Approximately 2,650 representatives from various
scientific and public health disciplines--from government, academia,
non-profit agencies, and the private sector and from all 50 states and
96 countries--participated in sessions that covered such topics as
antimicrobial resistance; tuberculosis; international cooperation;
perinatal transmission of HIV/AIDS; the detection of novel disease
agents; traveler's health; bioterrorism; and the formal release of
USAID's strategy on infectious diseases.
CDC and USAID are longstanding partners in the effort to combat
emerging diseases overseas. CDC is the lead domestic agency for disease
surveillance and prevention and has a strong scientific focus in areas
that have useful applications overseas as well as at home. In many
cases, CDC serves as a technical consultant to USAID, WHO, and
ministries of health on overseas projects that involve epidemiological
or diagnostic research or the investigation and control of infectious
disease problems related to wars, famines, or other disasters.
Twenty years ago, CDC and USAID collaborated with WHO and other
partners to eradicate smallpox. They are now working together to
achieve the goals of polio and Guinea worm eradication. In recent
years, CDC has extended U.S. assistance overseas by pursuing U.S.
interests in countries that do not host USAID missions, such as China,
where CDC supports twelve influenza surveillance sites; Hong Kong,
where CDC assisted the Ministry of Health and WHO to contain the recent
outbreak of avian influenza; the Sudan, where CDC has helped document
epidemic levels of African trypanosomiasis (African sleeping sickness)
and design control programs, as well as eliminate Guinea worm disease;
and Vietnam, where CDC is initiating a variety of joint programs.
USAID and CDC have worked as partners to develop U.S. policy on
emerging infectious diseases. In 1995, the two agencies participated in
a government-wide review of our nation's ability to protect our
citizens from emerging infectious diseases. The review concluded that
existing mechanisms for surveillance, response, and prevention of
outbreaks of emerging infectious diseases were inadequate, both at home
and abroad. Copies of the report (Infectious Disease A Global Health
Threat, Working Group on Emerging and Re-emerging Infectious Diseases,
Committee on International Science, Engineering, and Technology
(CISET), National Science and Technology Council (NSTC)) have been
provided to the Subcommittee.
The recommendations derived from this report became the basis of a
1996 Presidential Decision Directive that established a new national
policy to address the growing health and national security threat posed
by infectious diseases, including the potential threat posed by
bioterrorism. This directive calls for action in four key areas:
strengthening the global surveillance and response system; supporting
research and training as the key to the prevention and control of
outbreaks; creating partnerships with the private sector to ensure the
availability of drugs, vaccines, and emergency medical supplies; and
encouraging other nations to make infectious disease control a national
priority. NSTC has created an interagency task force to implement this
policy. CDC and USAID are among the lead agency members.
CDC's Role in International Infectious Disease Issues
CDC's role in international health has become more prominent in
recent years, as CDC has received an increasing number of requests for
assistance from foreign governments and WHO. CDC is often asked for
help when local health authorities respond to outbreaks that have high
fatality rates or the potential to spread internationally. CDC's
assistance may also be requested when the cause of an outbreak is
unknown, or when it involves a highly dangerous microbe that must be
handled under the most stringent laboratory biocontainment conditions.
In 1997, CDC sent personnel to 145 countries for scientific exchange
and technical assistance and provided diagnostic support for hundreds
of local investigations around the globe.
Over the past few years, CDC has responded to several
extraordinarily serious situations that required large numbers of
personnel over extended periods of time. These included the 1995
outbreak of Ebola hemorrhagic fever in the Democratic Republic of the
Congo; the 1997 outbreak of avian influenza in Hong Kong; and the 1998
outbreak of Rift Valley Fever in Kenya.
After an outbreak has been contained, part of CDC's overseas job is
to provide the affected population with tools to prevent or control
recurrences of the disease. For example, since the 1995 Ebola fever
outbreak, CDC staff have helped the local community maintain
improvements in hospital infrastructure and hospital nursing practices.
In coordination with WHO, CDC has also remained involved in on-going
efforts to develop long-term surveillance of hemorrhagic fever
outbreaks in the region.
CDC's increasing presence in overseas investigations and research
and training activities is due in part to the re-emergence of
infectious diseases as a major health threat in developed as well as
developing countries. It is also partly due to changing expectations at
home and abroad.
Factors that Favor the Emergence and Spread of Emerging Infectious
Diseases
Although we usually think of modern advances as helping to reduce
the incidence of infectious illnesses, some modern demographic and
environmental trends actually favor the emergence and spread of certain
diseases. These factors include the ease and frequency of modern
travel, the globalization of the food supply, and dramatic population
growth causing sanitation problems and overcrowding in cities all over
the world. Other concerns are population movements due to economic
factors, and migrations caused by civil wars, famines, and other man-
made or natural disasters. There has also been an increase in
development projects involving irrigation, deforestation, and
reforestation, which can alter the habitats of disease-carrying insects
and animals. Finally, our increased use of antibiotics and other
antimicrobial drugs has hastened the evolution of drug-resistant
microbes.
New Expectations
At the same time, there are new expectations, both domestic and
international, that favor increased CDC participation in international
outbreak investigations. During the last few years, the issue of
emerging infectious diseases has moved beyond the public health
community to engage the community at large. The American public has
become better informed on the dangers of microbial epidemics, and there
is widespread understanding that a disease which originates in one
continent can easily spread to another. The national and international
press has educated the public by focusing on some of the more dramatic
outbreaks. Furthermore, because of modern communications and
international public health reporting, diseases that emerge in remote
areas are less commonly overlooked.
Internationally, there has been an outpouring of interest in
emerging infectious disease issues both in the developed and the
developing world. In 1997, at the Denver Summit, the Group of Eight
industrialized nations, including the United States, pledged to protect
the health of the international community by developing a global
disease surveillance network; coordinating international response to
outbreaks of infectious disease; and helping to build worldwide
capacity to prevent, detect, and control emerging infectious diseases.
International projects to improve global surveillance and response to
infectious diseases have been initiated through several major bilateral
meetings, including the Common Agenda with Japan, the Transatlantic
Agenda with the European Union, the U.S.-South Africa Binational
Commission, and the U.S.-Russia Commission on Economic and
Technological Cooperation. Emerging infections are also on the agenda
of the Asian-Pacific Economic Cooperation (APEC), which includes
eighteen developed and developing countries.
WHO has made a major effort to provide international leadership in
this area, especially among developing countries. In association with
its Division of Emergency and Humanitarian Action, WHO's new Division
of Emerging and Other Communicable Diseases Surveillance and Control is
focusing on the containment of epidemics all over the world. CDC is
prepared to assist WHO in accomplishing this goal.
USAID's Strategic Plan
The increased interest in emerging infectious diseases among other
nations presents us with an important opportunity for building a global
network for disease surveillance and response and bodes well for the
success of USAID's new initiative on emerging infectious diseases.
CDC applauds USAID's effort to develop a global strategy for
strengthening national and regional capacities for addressing emerging
diseases, and we concur with their key priority areas: antimicrobial
resistance, tuberculosis, malaria, and surveillance and response. These
are critical areas that developing countries must address in their
efforts to monitor and contain emerging diseases. The spread of
antimicrobial resistance presents a particularly difficult challenge.
Tuberculosis is the leading cause of infectious disease deaths in the
world and is the most common opportunistic infection among HIV-infected
persons. Malaria kills more than one million African children every
year, and there is still no vaccine to prevent it. Surveillance systems
and response capabilities need to be strengthened throughout the world
so that known diseases can be identified and treated and new diseases
can be recognized and contained. Success in each of these areas over
the next 5 to 10 years will be crucial to improving global health.
Implementation
In response to language in the fiscal year 1998 Senate Foreign
Operations Subcommittee report, CDC has been pleased to consult with
USAID on the development of the strategy and has outlined approaches
for working with USAID and other partners to help ensure its
implementation. CDC is eager to make contributions in each of the
priority areas, particularly in the fourth--enhancing surveillance and
response capacity--an area in which CDC has unique expertise.
CDC can help build surveillance and response capacity in two
related areas: epidemiology and laboratory diagnostics, the two basic
and interdependent components of an effective surveillance and response
system. Epidemiologic capacity includes the ability to monitor the
occurrence of infectious diseases and to conduct outbreak
investigations, using modern analytic tools. Laboratory capacity
involves the ability to diagnose diseases and track the source of
epidemics, using a variety of approaches, including molecular
``fingerprinting.'' Research on emerging pathogens is also critical for
the invention of better tools to diagnose, monitor, and prevent
emerging infectious diseases.
Building Regional Capacity in Epidemiology
First, I will use a successful domestic program as a model to
illustrate the principles on which CDC might help USAID build regional
centers for epidemiological research and outbreak investigations. I
refer to CDC's Emerging Infections Programs, or EIP's, which provide a
regional resource on infectious diseases within the United States.
The seven current EIP sites conduct population-based surveillance
and research that go beyond the routine functions of state and local
health departments to address important issues in infectious diseases
and public health. They invest in cutting edge research, assist state
and local health departments in emergency outbreak responses, and
provide a flexible infrastructure for responding to new problems
whenever they arise. (For example, the EIP's established population-
based surveillance for new variant Creutzfeldt-Jakob Disease, an
invariably fatal neurological disease, immediately after this disease
was reported in the United Kingdom as a possible consequence of eating
beef from animals afflicted with ``mad-cow disease.'') Moreover, the
EIP sites are the backbone of the Active Surveillance Network for
Foodborne Diseases, or FoodNet, which is a collaborative effort
involving the Food and Drug Administration, the Department of
Agriculture, and CDC.
The EIP's, which are based in state health departments, demonstrate
the importance of institutionalized, on-going epidemiological research
that fills both regional and national needs. They also illustrate the
benefits of maintaining a regional resource for providing technical and
financial assistance during infectious disease emergencies. Finally,
they demonstrate the importance of partnerships between public health
authorities and other agencies. Each EIP involves collaborations among
state and local health departments, academic medical centers, and other
local organizations and institutions.
These general principles can be applied by CDC and USAID in
building an international network of regional centers that integrate
surveillance, applied research, and prevention activities. Like the
domestic EIP Program, such a network could incorporate pre-existing
sites (e.g., public health agencies, research institutions, private
companies, and non-governmental organizations); use the sites in an
integrated fashion; and establish an international steering committee
to provide assistance for specific projects conducted at one or more
sites. Some sites could partner with, or build upon, existing Field
Epidemiology Training Programs, which CDC has helped established in 14
foreign countries. Areas in which these sites might play an especially
important role are in surveillance for drug-resistant forms of malaria,
tuberculosis, pneumonia, and dysentery. All of the sites would be
linked by electronic communications to keep health experts around the
world in close contact with one another.
Building Regional Capacity for Laboratory Diagnostics
CDC and USAID could also help develop a complementary network of
regional diagnostic laboratories. This might be accomplished most
readily by building on WHO's existing network of more than 200
Collaborating Centres and Reference Laboratories worldwide. The
laboratories specialize in particular areas of diagnostics and
laboratory research, including foodborne diseases, respiratory
diseases, diarrheal diseases, drug-resistant diseases, and many others.
They are an important source of high quality diagnostic reagents, and
they can provide international training opportunities in their
specialty areas. For example, after the 1994 plague outbreak in India,
the CDC-based WHO Collaborating Centre for Reference and Research on
Plague Control provided diagnostic reagents and educational materials
to Indian health authorities.
Wherever there are gaps in global capacity to recognize certain
diseases, CDC could help USAID improve the diagnostic capacity of
appropriate WHO Collaborating Centres. In some cases, CDC would work
with WHO to evaluate and strengthen local laboratories for eventual
designation as new Collaborating Centres. This project would be in good
accord with WHO's plan to expand the number of Collaborating Centres in
developing countries, and it would further USAID's strategy for
developing in-country expertise in specific disease areas.
A recent example illustrates the potential benefits of expanding
the Collaborating Centre network to fill gaps in regional capacity.
During the winter of 1996-97, WHO and CDC spearheaded a successful
international effort to help prevent a seasonal recurrence of
meningitis in sub-Saharan Africa. The winter before, the disease burden
had been unusually high, with over 200,000 cases and 20,000 deaths.
Three WHO Collaborating Centres--one in Marseilles, one in Oslo, and
one at CDC in Atlanta--supplied diagnostic reagents, laboratory
assessments, and diagnostic training in the affected countries. After
the outbreak was over, the three Centres worked together to continue
training activities in the affected countries and to strengthen
regional facilities that might become permanent reference laboratories
for meningitis. At the present time, laboratories in Ghana and in Mali
have been recommended for possible designation as new WHO Collaborating
Centre reference laboratories.
Training in Disease Surveillance, Outbreak Response, and Laboratory
Diagnostics
The success of the regional networks I have described ultimately
depends on the efforts and abilities of the people who operate them. A
major component of the effort to implement USAID's strategy will be to
train an international cadre of epidemiologists and laboratorians who
are prepared to respond to emerging infectious disease threats,
whenever and wherever they arise.
This year, CDC is expanding its Laboratory Fellowship Program in
Emerging Infectious Diseases to include a track for foreign students.
The Laboratory Fellowship Program trains medical microbiologists in
public health approaches to diagnosis and molecular epidemiology. Its
graduates are qualified to operate and lead public health laboratories.
CDC also trains foreign students to become epidemiologists (``disease
detectives'') through its Epidemic Intelligence Service, which has
served as the model for Field Epidemiology Training Programs in many
countries throughout the world. It is interesting to remember that EIS
was founded with global problems in mind; in fact, it was established
during the cold war in response to the threat of biological warfare.
Conclusions
CDC is proud of its accomplishments in the area of global health.
We are confident that the funds provided by Congress will be used
effectively to strengthen global capacity to combat emerging diseases.
We appreciate the efforts USAID has made to involve CDC scientists in
discussions and decision-making related to developing its strategy for
addressing emerging infections. CDC strongly supports USAID's expanded
activities on emerging infectious diseases, and we look forward to
working in full partnership on this important endeavor.
Thank you very much for your time and attention. I will be happy to
answer any questions you may have.
summary statement of gail h. cassell
Senator Leahy. Dr. Cassell, I am very happy that you are
here, because I know, among other things, you are going to talk
about the impediments to the research and development of drugs
for use in high volume, low profit developing countries that
Dr. Daulaire and Dr. Heymann and Dr. Hughes have mentioned at
one point or another. So I am delighted to have you here.
Dr. Cassell. Well, thank you. I really appreciate the
opportunity to be here.
I have to tell you that I am here today not only on behalf
of Eli Lilly, but also as a past president and the current
chairman of the Board of Public and Scientific Affairs of the
American Society for Microbiology. This is an organization of
over 42,000 members, 20 percent of whom are international. Our
organization, I think, has a strong history in being very
concerned about issues related to emerging infections and
trying to bring this to the attention of policymakers like
yourself.
And I would just like to thank you on behalf of ASM, and
all of us actually, for your having taken the initiative to
provide for this $50 million appropriation last year, through
USAID, for WHO, and CDC.
I would also like to say that we very much were encouraged
by your language, which also stated that USAID should work
closely in collaboration with NIH with respect to these
initiatives, not necessarily because NIH is directly funded by
your committee, but rather because NIH, as you know, is the
Nation's leading institute with regard to biomedical research.
And because of legislation in the sixties, they do provide
funding for international research. And we think research plays
a critical role in these issues that we are trying to address
related to emerging infections.
Now, I would like to turn your attention to the issue that
I was asked to address. And that is the issue of antimicrobial
resistance. You obviously have a good appreciation for the
magnitude of the problem.
Senator Leahy. I am getting a better one. I have a long way
to go, but I am getting a better one.
Dr. Cassell. Well, I am sure your wife has helped educate
you a lot in that regard. She probably is confronted by it.
I would just like to point out something that I am not sure
that we have made clear, and the real problem with respect to
antimicrobial resistance is that the problem is the greatest in
the four biggest categories, or killers, with respect to
infectious diseases. One of the chief organisms causing
pneumonia, for example, the pneumococcus resistance, multidrug
resistant malaria, multidrug resistant TB, and also with
respect to the diarrheal diseases, many of these organisms that
cause the food-borne diseases that you have mentioned are
resistant to multiple antibiotics.
And then last, of course, the hospital environment, both in
this country and other countries is a major source of
antibiotic resistant organisms.
We believe, as I think others do, that we need new classes
of antibiotics, as you have heard Dr. Heymann discuss this
morning. We believe the only way to accomplish that is through
true innovative research. And I think that it is very exciting
that because of the new technologies that you mentioned this
morning, particularly our ability to sequence the entire genome
of these disease-producing organisms, there is a lot of hope
and optimism that new drug targets can be developed.
But, unfortunately, as is often the case, the new
technology is expensive. Due to this expense, the cost of
registering new drugs, plus the lack of what we believe to be
adequate protection of intellectual property in many countries,
U.S. pharmaceutical companies and other pharmaceutical
companies have reduced their investment in the area of
infectious diseases overall, at a time when, in fact, we should
be increasing that investment.
I think few people realize that it is estimated that to
develop a new anti-infective today would cost over
approximately $500 million. And what really is behind the
scenes is that you do not appreciate that, in fact, millions
may have been spent on compounds, investigating compounds that
never make it into humans. In fact, it is estimated that only 1
out of 5,000 to 10,000 drugs actually are a commercial success.
This past summer, I was fortunate to participate in an
Institute of Medicine forum. Dr. Hughes has referred to other
important IOM forums related to emerging infections. But this
particular forum, actually composed of representatives from
academic institutions, scientific societies, including ASM and
the pharmaceutical companies and the Federal agencies, was
asked to specifically address what are the barriers to
development of products, vaccines, and antibiotics, to address
the problem of emerging infections.
Now, I will not take time to summarize each of those that
were outlined by that forum, although there was a high degree
of consensus, I have provided you with a copy of the IOM forum
report, and also provided copies for each of the members of
your subcommittee.
I would just like to highlight three areas, in fact, in
which we felt there was agreement as far as needs. One was the
need for better information to identify and characterize
potential markets. This information actually will come from the
epidemiological and surveillance data gathered by the
infrastructure that USAID, WHO, and CDC are putting in place,
this global surveillance network. So this is an extremely
important component of being able to more predictably define
the market for a new product in some of these countries.
We believe that harmonization of international regulatory
issues would be a big step in the right direction, in terms of
more predictability, greater predictability, with regard to
development of drugs to be used worldwide.
And last and perhaps most importantly is the area of the
need for more sharing of costs and risks, or greater
partnerships. One of these would be illustrated by bulk
procurement, or guaranteed procurement, that often comes with
either governments and/or agencies. And I will not take time to
detail those, but we can discuss them in questions if you like.
Other initiatives would be related to the ability to
perform clinical trials much more efficiently in these
developing countries by having the adequate infrastructure in
place, much of which will be accomplished by putting the
infrastructure in place that Dr. Hughes and Dr. Heymann have
alluded to this morning, plus by increased training.
I would like to just very quickly mention one other area
that has been highlighted to some extent this morning, but I
think needs maybe greater attention, especially from the drug
and vaccine development standpoint. And that is that within
these countries, it is critical that you have the appropriate
infrastructure in place so that new drugs can be appropriately
used. It is not often a matter of not having drugs available in
these countries, but even in countries where they are
available, they are misused or abused, often, in fact, being
taken or being available over the counter, not being
subscribed, and, therefore, not under medical supervision in
terms of insuring that the appropriate dosage as well as
completion of therapy.
We know that these conditions actually can rapidly lead to
antibiotic resistance. Therefore, one is hesitant to put a new
product in that kind of environment, where you get rapid
development of resistance, because, therefore, it would have a
much shorter half-life and the reduced ability then to
recuperate the investment in the development of that new
product.
Mr. Chairman, I think that if you will look, and certainly
I am sure others would agree, that the pharmaceutical sciences
and scientists have a long history of being innovative in
addressing the challenges that we face in medicine, both today
and in the past. And one such example is the new drug that has
been recently discussed with respect to the potential ability
to protect, actually protect against, breast cancer, which may
actually revolutionize our management of the devastating
diseases of cancer.
But I have to tell you that in order to put that kind of
innovative effort toward development of new compounds for
treatment of infectious diseases and prevention of new
infectious diseases, we must protect intellectual property
worldwide. And, in fact, I can promise you that without
adequate protection of intellectual property, there will
probably be no innovation.
Completion of TRIPS, or the trade-related intellectual
property issues associated with GATT, certainly was a step in
the right direction. But as you well know, implementation of
these has been rather slow. You probably are also aware that in
developing countries and least developed countries, in fact,
they have an extension of 5 to 10 years to put these TRIPS in
place. We believe the United States should be very vigilant in
terms of trying to provide technical cooperation and advice, so
that, in fact, we can accelerate that implementation of TRIPS
in those countries.
In the end, if this is not accomplished, it will be the
patients who suffer, because the new drugs will not get to
those patients the innovation that is needed. Microorganisms,
as you have said and as others have said this morning, are a
lot more innovative than humans. And they very rapidly develop
resistance. We do not have time to waste. It is urgent that we
try to get this protection of intellectual property in place so
that we can begin to get the new drugs to these areas where
they are desperately needed, including the United States.
In closing, again, I would just like to thank you for your
personal efforts on behalf of infectious diseases, and to say
that we certainly believe in partnerships. And I would just say
that the pharmaceutical industry has contributed and will
continue to contribute financially to the antibiotic resistance
monitoring and surveillance, because this is an area of great
need and concern to us. I would also say that we believe that
industry should be a partner, as far as training, and helping
to provide the infrastructure that I have alluded to this
morning.
prepared statement
And as Dr. Hughes has mentioned, I am pleased to say that
Eli Lilly has funded the newly established International
Training Program for Laboratories in the area of emerging
infections.
Again, thank you.
Senator Leahy. Thank you.
[The statement follows:]
Prepared Statement of Gail H. Cassell, Ph.D.
Mr. Chairman, members of the Subcommittee, I am grateful for the
opportunity to appear before you today to present my views regarding a
U.S. strategy for combating infectious diseases and the impediments to
the development, marketing and distribution of drugs for the treatment
of infectious diseases in developing countries. I appear before you
today wearing at least three hats. As of November 1, 1997 I am the Vice
President for Infectious Disease Drug Discovery and Clinical
Investigation for Eli Lilly and Company, a world wide pharmaceutical
company with a very rich and important history in the development of
products related to the treatment and prevention of infectious disease.
Prior to joining this company I had spent 30 years in basic and
clinical research in infectious diseases at the University of Alabama
of Birmingham where I continue to maintain my faculty appointment. I am
also appearing before you today as a past president and as a current
chair of the Board of Public and Scientific Affairs of the American
Society for Microbiology (ASM). The ASM is the largest single life
sciences organization composed of over 42,000 academic and industrial
scientists, physicians, and health professionals. Our membership is
greatly concerned about the increased threat from emerging infections.
This morning I would like to begin by making some general
statements concerning the U.S. Strategy for addressing emerging
infections. First and foremost, a strong public health infrastructure
provided by the Centers for Disease Control and Prevention with regards
to both its domestic and international programs is absolutely essential
to address the threat of infectious diseases. Because infectious
diseases respect no borders, international collaboration and
coordination of efforts are essential. The World Health Organization
can play an important role in this regard.
We applaud this Subcommittee's support for the Communicable Disease
Initiative last year and the provision of $50 million additional funds
to strengthen global surveillance and control of infectious diseases.
We also strongly supported your recommendation that the U.S. Agency for
International Development (USAID) work closely with, the World Health
Organization (WHO), the Centers for Disease Control and Prevention
(CDC), the National Institutes of Health (NIH), and the National
Institute of Allergy and Infectious Disease (NIAID). As emphasized and
delineated in the recent report of the Committee on International
Science, Engineering, and Technology (CISET) of the President's
National Science and Technology Council, each of these has a unique and
vital role to play in surveillance and response to infectious diseases.
Therefore, we would urge you to continue your support of the CDC's
Field Epidemiology Training Program and the WHO/Division of Emerging
and other Communicable Diseases Surveillance and Control. While direct
funding for NIH comes from another Subcommittee, close consultations
with NIAID and NIH should remain a high priority for international
programs for control of infectious diseases. NIAID is the Federal
government's lead agency for funding for scientific research on
infectious diseases. In 1960, passage of the International Health Act
gave the NIAID the authority to conduct research outside the United
States. NIAID provides major support for scientists conducting research
to control emerging infectious diseases worldwide. The role of research
cannot be overemphasized. In view of both the critical role of research
and infectious disease surveillance and the unique expertise of the NIH
and the CDC, respectively, in these areas, we recommend that these
agencies be considered as full partners with USAID in the U.S. strategy
to address emerging infections.
Now I would like to turn your attention to the greatest challenge
related to emerging infections--that is the rapid increase in drug
resistant pathogens. Unfortunately, increases in resistance is greatest
in those organisms responsible for the four leading causes of death
worldwide including: acute respiratory infections, tuberculosis,
diarrheal diseases, and malaria. New products are desperately needed.
Innovative drug discovery is the only solution which will lead to
completely new classes of antibiotics. The explosion of new technology
and the ability to determine the entire genetic code of infectious
agents offer great promise. Unfortunately, because of the new
technology drug discovery is more costly than ever before in history.
For example, it is now estimated that development of a single anti-
infective will cost in excess of a half billion dollars. What is not
apparent is that prior to achieving one success millions are invested
in discovery of compounds that never make it into humans. Only one in
5,000 to 10,000 compounds are a commercial success. The increased costs
of developing and registering pharmaceutical products, coupled with the
lack of adequate intellectual property protection in many countries,
has resulted in substantial dimunition of R and D investment in this
area. In the summer of 1997 I was a member of the National Academy of
Sciences, Institute of Medicine (IOM) Forum which thoughtfully
considered these issues.
The deliberations and recommendations of the IOM forum have been
published in a report titled ``Orphans and Incentives: Developing
Technologies to Address Emerging Infections.'' I have elected to spend
most of my allocated time this morning summarizing the highlights of
this report. In so doing it is important for you to note that this body
was composed of representatives from the federal government (including
the FDA, NIH, and CDC), relevant scientific societies, academic
institutions, and the pharmaceutical industry, including representation
from PhRMA.
The purpose of the forum was to learn from experience what has been
done and what is needed for the public and private sectors to
collaborate effectively and productively for the health of the public.
The emphasis was on cooperation in those product areas where returns
from the market might be perceived as too complicated by other factors
to compete in industrial portfolios with other demands for investment.
If the requirements for products for emerging infectious diseases are
to be satisfied, there was agreement with regards to the need for: (1)
more information; (2) more predictability; and (3) more sharing of
costs and risks. Actions which were viewed as critical for advancing
the infectious disease enterprise as a whole are summarized in the
attached Table which is taken directly from the IOM Report. Exact
reproduction was felt to be important because of the wide input sought
in its development and because of the widespread consensus of the
barriers and incentives related to product development. With permission
from the IOM I have provided each of the members of the Subcommittee
with a full copy of the IOM report. To my knowledge this provides one
of the most comprehensive and up-to-date analyses. A synopsis of the
recommendations follows.
More information is needed on market identification based upon
comprehensive and accessible surveillance data and well-articulated,
consensus-based public health agendas. There should be clear portrayals
of specific disease priorities. More predictability is needed in market
assessment (early forecasting of demand based on epidemiologic
criteria; segmentation by size, ability to pay, disease profile). There
is need for more predictability which can be brought about by
international regulatory harmonization.
There is need for more cost-risk-sharing which can be brought about
by market creation (i.e. procurement guarantees via: high-volume bulk
orders, extended contracts, product ``bundling'' subsidies for poorest
countries; revolving funds for national and/or regional purchasing and
official development assistance for health infrastructure and education
and drug logistics). Accelerated regulatory approval could be achieved
by accelerated enrollment in trials with aggregation of efficacy data
from multiple sources. Clinical trials of new drugs could also be
greatly facilitated by building of contract research organization
capability in developing countries to reduce costs and enhance
infrastructure for clinical trials. The international clinical research
centers of NIAID could serve as a model. An incentive could be provided
by provision of a financial subsidy for phase II/III clinical trials
with a potential payback on success, if and when it is appropriate.
There are several other considerations related to antimicrobial
resistance and drug development that I would like to bring to the
attention of this Subcommittee. As we all know, the availability of
necessary antibiotics is limited in many developing countries. An
important issue not often addressed is that where they are available,
their use is often inappropriate and poorly controlled, which only
contributes to development of antimicrobial resistance. We know many of
the causes of early resistance-use in trivial conditions with or
without medical supervision, inadequate treatment, especially failure
to take the full therapeutic or preventive course, substandard products
sold without adequate controls by unqualified vendors, and so on. Thus,
irresponsible use of every new antibiotic which comes along may also
lead rapidly to resistance with little possibility of developing
further new products as quickly as they are needed.
Part of the problem is the lack of skilled professionals--
physicians, pharmacists, laboratorians who determine antibiotic
susceptibility of the disease causing organisms--in developing world,
along with a poor distribution system. This results in failure to take
maximum advantage of effective therapies, which in turn promotes growth
of antibiotic resistance in a shorter period of time.
The necessary drugs should be made available but, in addition, a
system should be put in place for getting the best therapies in the
hands of professionals who will be able to utilize them appropriately.
A percentage of money spent in this way can help ensure that the
overall investment is effective, and that it does not simply exacerbate
the problem of resistance. This is precisely why the international
training programs of the CDC, WHO, and NIH are so critical. Industry
should be an active partner in training. Informed consumers would help
prolong the life newly developed antibiotics.
Pharmaceutical science and innovation has a tremendous track record
of coming up with solutions for today's disease challenges. For
example, we have all seen recently news on compounds that may prevent
breast cancer. This same innovation can be applied to the challenges of
infectious diseases that have been highlighted in this hearing. Of all
the barriers to U.S. pharmaceutical companies related to drug
development and marketing in other nations, inadequate intellectual
property protection may be the greatest. Without protection of
intellectual property there will be no innovation.
Completion of the Agreement on Trade-Related Aspects of
Intellectual Property (TRIPS) as part of the General Agreement on
Tariffs and Trade (GATT) marked a positive step forward in reinforcing
the importance of intellectual property rights. For some countries,
however, implementation progress has been slow. While developing and
least developed countries have the option to extend five or ten years
their full TRIPS compliance deadline, the U.S. government must remain
vigilant in providing technical assistance and cooperation to move
these countries toward this goal and in encouraging them to accelerate
their implementation whenever possible. The United States should take
action against those countries that do not implement their immediate
obligations to protect patents, confidential data and trade secrets.
Ultimately, it would be the patients that suffer as the innovations
that are so sorely needed to fight infectious disease would not be
turned into useful products that are developed and marketed. Infectious
agents are far more innovative than humans. They have the capacity to
develop resistance at alarming rates. New drugs are urgently needed in
all countries.
In closing, I would like to emphasize that the ASM has played an
active role in communicating the need for a rapid and appropriate
response to emerging infections to policy makers and the public. The
pharmaceutical industry has also played an active role in responding to
the threat by financial support of the antibiotic resistance
surveillance network of the WHO. With the strong belief that we need to
provide more resources to train the leadership in health in developing
countries to enable the development of public health infrastructure, I
am pleased to say that through an educational grant to the Centers for
Disease Control Foundation Eli Lilly has provided sponsorship for the
newly established laboratory fellowship training program in emerging
infections. We would pleased to continue to work with you Mr. Chairman
and this Subcommittee in your efforts to address the threats from
emerging infections.
Orphan Drug Act
Senator Leahy. Doctor, when you talk about intellectual
property you preach to the converted. I wear another hat as
ranking member of the Judiciary Committee. I have handled a lot
of the intellectual property issues over the years. In fact, we
are dealing--I was dividing my time earlier today with WIPO
there. I agree with you. It is important.
It made me think of another issue. We have the Orphan Drug
Act, as you know, with the tax incentives to spur development
of drugs. It might be for a very rare disease when obviously
you are never going to recoup your costs by selling the drug,
but I think the law may have helped.
What about an orphan drug designation that might deal with
emerging infections in developing countries?
Dr. Cassell. I think that would be fantastic. And as a
matter of fact, as you probably know, a step in the right
direction was taken recently, I think in association with FDA
reform, where, in fact, the tax credits associated with that
Orphan Drug Act were put in place so that they would be
permanent rather than being approved only at short intervals or
for short intervals. So I think that this was also a step in
the right direction.
And if, in fact, reagents, drugs, vaccines, perhaps
diagnostic reagents, could be incorporated into something like
an Orphan Drug Act, I think that this would actually provide a
great incentive.
Senator Leahy. You have talked about clinical trials and
what could be done there. What about extended patent protection
for drugs aimed at not here but aimed at particular areas? It
may be an infectious disease that is mostly found in another
part of the world, but a part of the world that may have a per
capita income of only $300 a year.
Dr. Cassell. Yes; I think that that certainly would help to
provide an incentive. I think there is somewhat of a delicate
balance that one would have to play there. Because what you
would hope would not happen is that people would become
complacent, because you have this extended patent, so that you
prevent innovation, competition, and discovery of new and
better products.
Senator Leahy. And we also have the Institute of Medicine
report that discusses multitiered pricing. We hear that the
problem with multitiered pricing is that some of these drugs
come back into the United States via the black market. I do not
know the answer to that one.
Dr. Cassell. I think that is very unfortunate. Because I
believe, in fact, the IOM report pointed out that--and I do not
know, David, you probably know a lot more about this than I--
but that actually, in many cases, it has been an incentive and
has been beneficial, particularly in the area of vaccines, I
believe. But clearly these latest incidents provided a
disincentive for companies to participate in that multitier
pricing.
Senator Leahy. You know, I look at some of the things
coming here and I--and anybody who wants to can jump in here--
but when I was a kid, growing up in Vermont--and for the
record, I just turned 58 last month, so that will put it in the
proper time period--but when I was a youngster, the municipal
swimming pool would close at certain times in the summer
because of polio scares.
My wife and I had our first grandchild a couple of months
ago. He will never have to worry about polio. Our kids never
faced it. They just got a polio vaccine and that is the way it
goes. Although we see that it is not yet eradicated. I visited
a place where we use the Leahy war victims fund, in an African
country where one of the people in the clinic was a badly
crippled little boy. My wife was there, and she was helping
somebody bathe and dress this child, and she asked what kind of
an injury, because she saw no scars or marks or anything on
him. They said polio.
And in that particular case the polio vaccine could not get
to the village because of the threat of landmines. And I know
you all agree with me on the issue of landmines. I am not
trying to make converts here. But when you think of something
like polio, it should be relatively easy to eradicate. We did
it with smallpox. Is this what we should be doing? Look at
guinea worm. Should we target these diseases, one by one, and
eradicate them if they can be?
Dr. Daulaire. Let me start with that, Senator.
There are some diseases--and you have touched on a number
of the key diseases--that are actually potentially eradicable.
Senator Leahy. Measles is another one.
Dr. Daulaire. Yes, measles, that is right. But one of the
things we have learned in the smallpox eradication effort and
in the guinea worm eradication effort, which is still going on,
is that there is a curve. And controlling the disease and
bringing it down to fairly low levels can be done generally
fairly cost effectively. But when you are searching out those
last cases, when you are trying to wipe out the disease from
the face of the Earth, at that point you are in a very steep
part of the curve.
And we are at that stage right now in polio and in guinea
worm eradication. So our problem in the world of global health
is--it is like when I used to be an emergency room physician,
we were trained in triage.
Senator Leahy. Triage, yes.
Dr. Daulaire. And you have to figure out, with very limited
resources and limited time, how you are going to get your best
overall effect in health. In some cases it is going to be
eradication. In some cases it is going to be just bringing the
level of an important disease down to manageable levels.
Because then your next dollar is probably better spent on
turning to another disease rather than trying to wipe out that
very last vestige.
Senator Leahy. And it is not a case where you are being
inhumane by saying that. I mean you are being more humane
actually by saying OK, we can only go so far in here, but are
we going to take money away from river blindness?
Dr. Daulaire. That is right.
If you can save 10 lives for the cost of one more disease
prevented, then maybe that is not a good tradeoff.
Senator Leahy. Dr. Heymann, did you want to comment?
Dr. Heymann. Yes; I think elimination and eradication
programs are very important, because they develop an
international solidarity and they develop an infrastructure to
make sure that those diseases are eradicated.
But if you look at the graph over on the side there, with
17.3 million deaths due to infectious diseases, if you
eradicate or eliminate the seven diseases that are targeted
now, infectious diseases will only decrease from 33 percent of
all deaths to 31 percent of all deaths.
Senator Leahy. I see.
Dr. Heymann. So the major diseases remain: tuberculosis,
AIDS, and other diseases.
But what is important about elimination and eradication is
that this solidarity can be used to build the infrastructure
for all infectious disease detection and control. Detection is
very important in elimination and eradication. We must find
that last case.
So those systems in place can then be used for other
diseases, and will strengthen overall infectious disease
control.
Senator Leahy. This solidarity--for example, take an area
like Africa, where you have countries that may be contiguous
but greatly different in their social, political or economic
circumstances--if you can develop a regional program in an area
like that you have accomplished something.
Dr. Heymann. Yes. Rotary International, for example, in all
countries, including African countries, has been a very active
supporter, financially and advocacywise, for polio eradication.
Those countries are now developing laboratory networks
among themselves for polio virus, which can be expanded to many
other viral diseases. So, yes, what is being done with polio,
as an example in Africa, will strengthen the infrastructure for
all viral diseases, detection, and control.
Dr. Daulaire. Let me stress that also, Senator. When we
started to engage in this last phase of the polio eradication
effort, we took as a prime cause making sure that on the day
that polio was finally eradicated that the countries that we
had helped would have workable health systems left behind so
that we would not have to start from scratch again on day two.
There are different ways of going about eradication. And
doing it through a developmentally oriented approach may
sometimes take a bit longer, but ultimately it leaves far more
behind.
Senator Leahy. Dr. Hughes, did you want to comment?
Dr. Hughes. Yes, just briefly. I think the polio experience
does show what is possible for some infectious diseases, when
you have the tools, the resources, the commitment, and the
public/private sector partnership, which have been really
important. As Dr. Heymann also said, the public health
laboratory has played a critically important role, particularly
as we move closer and closer to true eradication. The molecular
techniques that are really needed to characterize polio virus
isolates are absolutely critical, and will be able to be
applied to measles, which looks to be one of the next best
candidates.
Senator Leahy. Yes; measles I find amazing. I mean, the
same with our kids. One would just get over measles and the
next one would start. And then as soon as that one is over the
next one. And you knew, with three children, you are in for a
long, long siege of measles.
Now, when my grandson gets inoculated for measles it is
kind of impressive. But we also have--it is interesting, Dr.
D.A. Henderson, who led the campaign on smallpox, he said
recently that we ought to start making the smallpox vaccine
again because of the threat of biological warfare or terrorism.
And yesterday the Judiciary Committee and the Intelligence
Committee had a hearing with Director Freeh and Attorney
General Reno there, about what happens if terrorists do that.
You know, if smallpox were spread through the U.S.
population, it could be sometime before you detected it, if I
am understanding this correctly. And by the time it was
detected, we would not necessarily have the ability to get the
vaccinations out.
Dr. Hughes, you must look at threats like that.
Dr. Hughes. Well, this is certainly one of the issues that
we worry considerably about. We feel that it is part of the
rationale for strengthening infectious disease surveillance and
response capacity nationally and internationally.
And an episode, were it to occur, that was not associated
with a threat could be very insidious, could be very difficult
to recognize. Exposed people could be widely dispersed
nationally or even internationally before they become ill
because of the concept of the incubation period, which, as you
know, is the time from exposure to the microbe until the
disease develops. And that is why you can, as you mention, get
on a plane in Hong Kong and arrive in the United States
perfectly well, and a day later perhaps develop an illness
acquired in a faraway place.
So we have concerns about it. There is a broad range of
diseases that are candidates for use by terrorists. As you
know, many of them are not important clinical or public health
problems in this country, so there is often very limited
epidemiological, clinical, and laboratory capacity available to
deal with them. In addition, some of the tools you need to
either treat or prevent these diseases are not widely
available. So this is a legitimate concern.
Senator Leahy. Well, smallpox is not available, is it?
Dr. Hughes. Well, there is smallpox vaccine in storage. It
is a vaccinia virus. It is available.
Senator Leahy. Yes, but very much?
Dr. Hughes. Well, there are roughly 15 million doses in the
United States that are available. But that is obviously not
enough to reach the whole population.
Senator Leahy. I love having these hearings, so everybody
can go home and be terrified. [Laughter.]
But maybe that is what is needed.
Nils, did you want to comment?
Dr. Daulaire. I think one of the issues that we have talked
about in this is the importance not only of dealing with the
well-recognized threats--the anthrax, the smallpox--but also
the recognition that with the evolution of biotechnology we
cannot stockpile everything against everything. Part of this
has got to be an ability to identify and react quickly, because
chances are, if there is an attack, chances are it is going to
be something we are not expecting.
Senator Leahy. Yes; you know, I do not envy you, any of the
four of you or those you work with, trying to look at this on
an international scale. Look what happens in our own hospitals.
We pride ourselves on having the best medical care in the
world, but 2 million Americans pick up infections in hospitals;
70 percent of them I am told are from drug-resistant microbes.
Now, the cost is anywhere from $4 to $5 billion just from
that alone. Better hygiene by hospital personnel would help
with a lot of that. And yet it happens.
What do you do when you are dealing in impoverished Third
World countries? You have got one heck of a job ahead of you.
I mention that only to suggest that I will probably be in
favor of increasing the budget over what the administration has
asked for.
I have to go back to another hearing. We have kept you here
longer than we said we would.
Would any of you like to add anything else?
Dr. Cassell.
Dr. Cassell. Yes; I would just like to close again by
thanking you and your staff, who I think did an excellent job
in putting together a very thoughtful hearing, and certainly
for you for taking time to take the interest.
Senator Leahy. Well, it is a real interest. I mean this is
not the sort of thing that makes headlines, but it could saves
lives.
Dr. Hughes.
Dr. Hughes. Yes; in our experience, actually press interest
in a lot of these issues is often inversely proportional to the
true magnitude of the problem.
Senator Leahy. Yes.
Dr. Hughes. I think it is important to keep that in mind.
I would just leave you with the thoughts that surveillance
capacity, epidemiologic capacity, laboratory capacity,
communications systems, and partnerships are critical elements
that we worry about. And Dr. Cassell was whispering very
importantly training. Training to maintain that epidemiologic
capacity, the laboratory capacity and to educate people,
frankly, about some of these uncommon illnesses that might be
threats associated with bioterrorism.
Senator Leahy. NIH has the Fogarty International Center.
How does that vary from--you have your own training, of course,
your own training programs--are these complementary?
Dr. Hughes. Yes; I would say that they are complementary.
And Dr. Cassell may want to elaborate on this. But the Fogarty
is interested in increasing research capacity, which is the
other thing that is absolutely critical to addressing these
issues.
Senator Leahy. Yes.
Dr. Hughes. They are working to expand training
internationally in research related to emerging infectious
diseases.
Senator Leahy. But they are also small.
Dr. Hughes. Quite small.
Senator Leahy. Yes.
And, Dr. Heymann, I would think that--I mean you have to go
across borders and you have to deal with so many different
countries and political systems and all that, would it be naive
to think that the more we get these kinds of systems in place
the more we get the research capacity, the treatment capacity
and all, the more that may at least help to break down, in that
area, break down some of the political barriers?
Dr. Heymann. I think it already is doing that, Senator. I
think, in one country recently, on the national immunization
day for polio, which is when every child was to be vaccinated,
there was actually a temporary cease fire in a civil fire in
order that that could be done. And I think that what you have
done in providing funding to USAID has helped our groups--CDC
and USAID--form a very strong partnership, which will continue
to work above politics, to try to straighten the infectious
disease situation in the world.
And what is even more important is that this has been an
example to other donor countries. The United Kingdom and Japan
have both increased dramatically their funding for infectious
disease activities in support of international response and
detection of epidemics. So I think what you have done has not
only been good for the United States, but good for the world.
And I thank you very much.
Senator Leahy. Well, thank you. No; you are the ones who
are out doing the work. We can try to get you money, but you
are the ones doing the work.
Dr. Daulaire, you get the last word.
Dr. Daulaire. Well, Senator, as we know in Vermont, there
are a lot of clouds that pass by, but not all of them produce
rain. [Laughter.]
And we also know that it takes a certain nucleus to pull
that supersaturated water together to produce droplets. What
you did last year, in holding your hearing and in working
through the appropriation with your colleague, Senator
McConnell and the rest of the committee, has really produced
that nucleus.
As we heard from Dr. Heymann and Dr. Hughes, we have had a
collaboration over the past 7 months that we have never seen
before. And having the money and the mandate was key to doing
that. I see a very important business going on, and it would
not have happened without your leadership. And we are very
grateful.
Senator Leahy. Well, I have often said that the Senators
are merely constitutional pediments of their staff. And with
Tim Rieser and Robin Cleveland sitting here, I am delighted
that they are here and keep moving us forward, too. Some of the
reports that Tim has brought me back from some of the places he
has visited keeps me going.
I thank you all for being here, and we will keep in touch.
And you should feel free to pass on ideas. I will also raise
the intellectual property question in the Judiciary Committee,
Dr. Cassell.
Thank you very much.
subcommittee recess
The subcommittee will stand in recess until 2:30 p.m.,
Tuesday, June 9 when we will receive testimony from Brian
Atwood, Administrator, U.S. Agency for International
Development.
[Whereupon, at 1 p.m., Thursday, April 23, the subcommittee
was recessed, to reconvene at 2:30 p.m., Tuesday, June 9.]
FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS
APPROPRIATIONS FOR FISCAL YEAR 1999
----------
TUESDAY, JUNE 9, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 2:45 p.m., in room SD-192, Dirksen
Senate Office Building, Hon. Mitch McConnell (chairman)
presiding.
Present: Senators McConnell, Bennett, Campbell, Stevens,
Leahy, and Lautenberg.
AGENCY FOR INTERNATIONAL DEVELOPMENT
STATEMENT OF J. BRIAN ATWOOD, ADMINISTRATOR
opening remarks of senator mc connell
Senator McConnell. The hearing will come to order. I want
to welcome, Mr. Atwood. I appreciate your being here, Brian.
In fiscal year 1998, the 150 account enjoyed a unique
increase of nearly $1 billion. This year, unfortunately, we
face exactly the opposite situation. For 1999, the subcommittee
will need to meet our global commitments in the context of an
allocation that is nearly $1 billion below the request. I am
confident that Senator Stevens has been fair and done the best
he could with all the subcommittee allocations including ours.
He had a very difficult set of choices to make, and now we have
to function within that allocation.
Before we suffer a great deal of hand wringing about this
allocation, I want to make two points. First, we met our
international obligations in fiscal year 1996 with a similar
allocation. Second, this task should be considered an
opportunity to cut programs which do not meet standards for
performance or relevance to our national interests. We do not
have the option to finance failures or finance interminable,
ambiguous programs which have a marginal impact on a minority
of people.
During my tenure as chairman, I have seen little
improvement in the definition of concrete goals nor have I
observed reforms, revisions, or progress in measuring success.
Over the past 6 months, either my subcommittee staff or I have
visited six countries reviewing your administration of
programs. With the exception of projects or activities which we
earmarked or pushed the Agency to fund, the representatives of
nongovernment organizations and grant recipients were uniformly
critical of the AID's management of foreign assistance
resources. At best, they would give AID a C minus, and I must
admit that is a somewhat generous observation.
Let me relate some of what I learned. In Asia, one of the
largest most effective global refugee support organizations
understood I was considering shifting administration of a
program from the State Department to AID. A seasoned
professional warned that as slow as State was, AID was worse--
he characterized your agency as overwhelmed by bureaucratic,
incompetent managers who were so slow that by the time funds
were available, the problems had either been solved or changed
so dramatically that new proposals needed to be drafted.
In Latin America, I met with representatives of an
environmental group who had been approached by AID to support
an important conservation program. AID told them they would be
provided $300,000, but first they had to hire an Agency-
designated participatory management consultant. They
reluctantly hired the consultant then spent months negotiating
over the terms of the $300,000 contract. After more than 1
year, they were told only $170,000 would be made available, but
even those resources had been suspended because they had
improperly retained a participatory management consultant.
In central Europe, one of our Ambassadors asked for NGO
help and training for parliamentary elections. AID asked the
organization to use internal funds for 1 month until a funding
stream could be worked out. The group agreed with the
understanding they could only carry the burden for 1 month.
Needless to say, 1 month passed, then 2 months and the NGO had
to suspend the program for lack of resources. AID had offered
no reimbursement, no plan, and no explanation.
Finally, and perhaps most disappointing is the Agency's
failure in Indonesia. Just before the Government removed key
subsidies in April, AID deployed a team to conduct a national
needs assessment. I had hoped that this would be a forward-
leaning, comprehensive exercise designed to deal with the
unraveling crisis of a country of tremendous importance to the
United States.
In early May, the AID team briefed the committee. Their
report was shortsighted, uninformed, and off target. They were
able to speak only in vague terms about food implications of
drought-afflicted areas in the eastern islands. They did not
anticipate and had no strategy prepared to assist with acute
nationwide requirements resulting from the ongoing economic
implosion and the IMF-mandated price hikes. They could not
forecast the number of communities, let alone individuals,
crushed by this emerging humanitarian crisis. They had no
thoughts on how to expand the means to deliver assistance. They
had not met with nor taken advantage of the offer by the two
largest Moslem organizations to deliver food and medical
relief. In a country of 200 million Moslems, they indicated
they would use a Catholic organization with very limited access
to communities in need of aid.
Riots and demonstrations and even Suharto's departure has
produced no change in AID's approach or thinking. In the May
briefing, the mission director and the deputy director for the
Asian bureau echoed a briefing paper sent to the subcommittee
yesterday--other than drought victims, there is no plan to
increase assistance for Indonesia. The only new requirement
will be with existing resources and will fund support for
technical consultants to work with the IMF on economic,
financial, and banking reform.
In sum, at a time when the United States could have,
indeed, should have sent a strong signal of support to
Indonesia, AID was unprepared, unwilling, or unable to develop
a relevant rapid response and deliver crucial relief.
This crisis did not erupt overnight. It was as predictable
as the IMF's public schedule for the implementation of key
reforms. Failure to prepare for the consequences of a 70-
percent rise in the price of commodities is incomprehensible, a
problem only compounded by the fact that we still have no
strategy to help Indonesians address the immediate and future
impact of reforms.
Mr. Atwood, these examples illustrate that the problems AID
suffers are not just incidental or anecdotal, but they are
systemic and widespread, afflicting virtually every sector and
every geographic corner of AID's world. In 6 months, in six
countries, I have heard appalling accounts of mismanagement and
ineptitude in the administration of the Agency's humanitarian,
democracy, economic, and environmental programs.
You have had 5 years to fix these problems and I see little
progress. Your computers do not work, your contracting system
is a mess, your goals continue to be vague, so your results are
fuzzy. The problems are grave and demand your immediate
personal attention. There are many hard working, dedicated
professionals who work at AID who are as discouraged as I am
about the weak leadership they are being offered. They deserve
your full attention and commitment. I urge you to take this
criticism of one of your supporters seriously, because with or
without the State Department reorganization bill, I want you to
know we cannot continue with business as usual.
I now turn to my friend and colleague Senator Leahy.
opening remarks of senator PATRICK J. LEAHY
Senator Leahy. Thank you, Mr. Chairman.
Mr. Atwood, I know you are delighted to be here. We are
glad to have you here. I have been a member of this
subcommittee for close to 20 years now, and I have never been
as concerned about our budget situation as I am today. Last
month, we received a budget authority allocation of $12.6
billion for fiscal year 1999. That is $200 million below the
current level and would require cuts in many programs that have
bipartisan support in the Congress. But that is only part of
the problem.
Our outlay allocation is $12.4 billion. The effect of that
I am told is that we will be able to use at most $11.8 billion
in budget authority. Since some programs cannot be cut under
any circumstances, our budget authority could probably be
closer to $11.4 billion with AID absorbing some of the deepest
cuts. That would mean cutting a lot of programs Congress
supports. Any cut below the current level, which is already far
below what our budget was just a few years ago, makes no sense.
I have not even mentioned the President's request. He asked for
a $1 billion increase for foreign operations, and we are
talking about as much as a $2 billion cut from the request.
Now, Mr. Chairman, you have been one of the strongest
voices for support for foreign operations and for what we do
abroad. You have expressed a true internationalist attitude in
this. But I look at where we are. The situation today is a lot
different than when we reached the budget agreement. We have a
surplus, not a deficit. The United States today is by far the
world's strongest, largest economy, the stock market is booming
and unemployment is the lowest in years. Yet, while one-quarter
of the population of the world lives in squalor, we are cutting
foreign aid even though it accounts for only 1 percent of our
budget or one-tenth of 1 percent of GNP. We spend a lot less
per capita than most other countries do, even though with about
5 percent of the world's population we are consuming as much as
25 percent of the world's resources.
I know of no explanation for this. Maybe it is that people
do not think our foreign aid programs matter. The irony is that
the American people support foreign aid and key members on this
committee on both sides of the aisle understand the real need
for foreign aid. They understand that the United States needs
to play a major role in protecting the environment and public
health, combating poverty, helping refugees, supporting
democracy and free markets if for no other reason than a
selfish one. It helps us in the long run.
The problem is the American people have been led to believe
that foreign aid accounts for about 20 percent of the Federal
budget when it actually accounts for only 1 percent and too
many Members go back home and say, ``If we just do away with
foreign aid, why we would have plenty of money for,'' and then
just fill in the blank.
When Members think they are doing voters a favor by cutting
foreign aid, we are hurting ourselves and our future. It is
self-defeating. I too have concerns about the way AID is doing
its job. I know how difficult it is to get results in many of
the places around the world where you work. But sometimes AID
can be its own worst enemy. There are some very talented and
dedicated people at AID, but the Agency itself remains a
cautious bureaucracy.
Too many times here in Congress we feel it is more
concerned about appearances than results. And then when things
go wrong, instead of just saying, ``Look, they went wrong, it
didn't work,'' AID often says things are better than they are.
You have lost some of your best people because they have been
passed over by political appointees, although I know that is
outside of your control. Having said that, I cannot think of
anything that is going to hurt more than to cut AID's budget,
which translates into real lives and opportunities lost.
The chairman and I have tried hard to protect this budget
in the past. We have not always agreed with the administration
on how to spend it, but I think we both recognize, as does
Chairman Stevens, that the United States has a wide range of
interests around the world. It is a global economy.
prepared statement
With all the instability from Nigeria to Indonesia to
Colombia, these interests are growing, not shrinking. We can
afford to do more. It would be money well spent. If it means
adjusting our budget agreement, then we should do that. The
United States is the only superpower left in the world. We are
the leader of the democratic world, and we ought to act like we
are the leader of the democratic world and not act like we are
an isolationist, uncaring Nation.
Mr. Chairman, I appreciate what you have done on this and I
look forward to working with you on this budget.
Thank you, Mr. Chairman.
[The statement follows:]
Prepared Statement of Senator Patrick J. Leahy
Brian, it is good to have you here.
I have been a member of this subcommittee for a long time.
Never have I been as concerned about our budget situation as I
am today.
Last month, we received a budget authority allocation of
$12.6 billion for fiscal year 1999. That is $200 million below
the current level. It would require cuts in many programs that
have strong, bipartisan support in the Congress. But that is
only part of the problem.
Our outlay allocation is $12.4 billion. The effect of that,
I am told, is that we will be able to use at most $11.8 billion
in budget authority. Since some programs would not be cut under
any circumstances, our budget authority would probably be
closer to $11.4 billion, with AID absorbing some of the deepest
cuts.
That would be devastating for many programs the Congress
supports. Any cut below the current level, which is already far
below what our budget was just a few years ago, makes
absolutely no sense.
I have not even mentioned the President's request. He asked
for a billion dollar increase for Foreign Operations. So we are
talking about as much as a two and a half billion cut from the
request.
Mr. Chairman, I am not blaming anyone for this, but the
situation today is different from when we reached the budget
agreement. We have a surplus, not a deficit. The United States
today has by far the world's strongest, biggest economy. The
stock market is booming. Unemployment is the lowest in years.
Yet while a quarter of the population of the world lives in
squalor, we are cutting foreign aid even though it only
accounts for 1 percent of our budget, or one-tenth of one
percent of GNP.
Can someone explain this to me? Is it that people don't
think our foreign aid programs matter?
The irony is that the American people support foreign aid.
They understand that the United States needs to play a major
role in protecting the environment and public health, combating
poverty, helping refugees, supporting democracy and free
markets, because it helps us.
The problem is the American people have been led to believe
that foreign aid accounts for about 20 percent of the federal
budget, when it actually accounts for only 1 percent. So
Members of Congress think they are doing the voters a favor by
cutting foreign aid.
It is self-defeating. We are hurting ourselves, and our
future.
Frankly, I am not satisfied with the way AID is doing its
job. I know how difficult it is to get results in the places
you work. But like Chairman McConnell I sometimes see AID as
its own worst enemy.
You have some very talented, dedicated people, but AID
remains a cautious bureaucracy, often more concerned about
appearances than results. Then when things go wrong, AID says
things are better than they are.
You have also lost some of your best people, because they
have been passed over by political appointees.
Having said that, I can think of nothing worse than to cut
AID's budget. That translates into real lives and opportunities
lost.
Mr. Chairman, you and I have tried hard to protect this
budget in the past. We have not always agreed with the
Administration on how to spend it, but I think we both
recognize--as does Chairman Stevens--that the United States has
a wide range of interests around the world. In a global
economy, and with so much instability from Nigeria to Indonesia
to Colombia, those interests are growing, not shrinking.
We can afford to do more and it would be money well spent.
If it means adjusting the budget agreement, then that is what
we should do.
summary statement of Hon. Brian Atwood
Senator McConnell. Mr. Atwood, it is time for you to have
your say. Go right ahead.
Mr. Atwood. Thank you, Mr. Chairman. I detect that the
honeymoon may be over based on your statement.
Let me say in response to the chairman's opening statement,
I really do believe it was an overly harsh statement. I believe
it was unfair. As a matter of fact, I can even agree with some
aspects of what you say. I am just as frustrated when I run
across some of the situations that you point out, and we try to
deal with them, of course, but you know it is difficult in any
country to run a development agency. I have certainly detected
that.
I do not know that anyone could do the job and be void of
enemies. Just think about every time you put out a competitive
contract bid you are probably going to make one contractor
happy and two or three very unhappy. Many of them choose to go
through the process of challenging the choice itself, and we
end up either in court or at the GAO. Certainly, the same thing
is true in terms of our grant process itself. People are not
happy.
I would imagine, Mr. Chairman, that given where you sit you
probably hear a lot of those complaints because there is the
perception and the reality that you can have a lot of influence
over the Agency. I am not trying to make excuses, but I think
that if there are negative things that are heard about USAID
you probably hear more of them than anyone other than myself.
What I think is ironic is that we just have been through
our peer review by the other donor agencies, all 21 of the
other donors that sit on the Development Assistance Committee
of the OECD. I sat for a full day in a hearing in Paris, where
the OECD is, and heard people ask questions about our program
and basically the peer review came out saying that the United
States continues to have the best development program in the
world. The most efficient, the one that is struggling more with
the cutting edge in terms of reforms and the like, I might add.
With respect to some of the complaints that you hear and that I
hear as well, they relate to the reform process that you have
underway now.
We never did measure results very well. We are trying to do
that now, and we have a lot of people who think that we are
trying to put them in a little box or that we are trying to
somehow force them to give us results that they were not asked
to report on previously. It seems to me that we have an
obligation under the Government Performance Results Act but
also a general obligation to the American taxpayers to report
those results and to develop indicators that would indicate
whether or not we are successful in what we are doing.
I think there are a lot of legitimate complaints. There are
a lot of frustrations in working with the Government
bureaucracy that has to operate under rules, but I honestly
believe that no one does it better, no other organization in
the world does it better. I think that has been indicated as we
have responded in particular to contingencies that have arisen
such as Bosnia. Every development agency in the world, whether
it is the World Bank or the European Union, knows that USAID
has been out ahead of everyone. The same is true in the West
Bank and Gaza and the same is true in a lot of other
transitional situations.
I do not want to be overly defensive. There is no way that
I am going to reach nirvana or perfection in this job, but I do
believe, Mr. Chairman, that given your general support over the
years--and it has been very strong and I have appreciated it
very much--that your statement today was a bit harsh. But we
can debate that.
You and Senator Leahy have been leaders in the Senate in
calling for a higher level of funding for the 150 account, and
I have very much appreciated that as well. You have understood
the connection between the programs that are funded in that
account and our U.S. national interests. You have understood,
for example, that U.S. exports, which have been on the rise in
recent years, have been partially the result of past
investments in economic development. You have understood that
American farmers benefit directly from agricultural research in
the development of the farm sectors of developing countries.
You have understood that our efforts to preserve the world's
biodiversity helps Americans find cures for diseases and the
importance of family planning programs in terms of improving
the lives of children and saving mothers' lives and in reducing
abortions. You have understood that infectious diseases must be
countered at the source if we are going to protect Americans.
Most importantly, Mr. Chairman, you and Senator Leahy
understand the connection between this budget and American
foreign policy. This budget funds the mitigation of the world's
crises, the transition from postconflict situations and the
prevention of future crises. You know that; that is why you
fought for more resources in the 150 account.
In that regard, Mr. Chairman, with respect to your comments
about Indonesia, I have been very proud of the way we have
responded in a very difficult situation. Obviously, when you
get into an immediate crisis that has occurred in a place like
Indonesia, it is not simply USAID making decisions about what
to do; it is the entire Government. We have what we call
principals meetings where everyone sits around and attempts to
develop a strategy.
But we have responded well in three different ways. We have
responded through our humanitarian efforts. We have at the
first part of the crisis increased our title II food for peace
resources by $25 million. The assessment team, to which you
referred, was there to look out into the future to project what
the needs would be if this situation got worse, the economic
situation. They did that limited job well. They were not going
to do a survey of the fourth largest country in the world in
just 1 week, but we needed the information that they gathered,
and they gathered it well.
We have also tried to help the Indonesians set up a social
safety net. We negotiated immediately within 1 week after the
IMF imposed its own criteria. We negotiated a framework
agreement wherein we could provide technical assistance to the
Indonesian Government, a $23 million program which was
basically a reorientation of our original program, and now we
are in a new situation, where there seems to be a legitimate
transition to a democracy, of trying once again to take our
program and reorient it to the needs that apply there, which,
of course, adds a third leg to this humanitarian economic
reform. Now we have a democracy governance challenge that we
have to meet. I think our people, in light of the fact that all
of them but one were evacuated from Indonesia, did a good job
in responding and I think they will continue to respond now
that we are putting our people back into Indonesia.
I have come here to defend the President's fiscal 1999
request for $14.1 billion in the foreign operations budget.
This is a modest increase of about $856 million over last
year's enacted level. Yet, because of the budget resolution
passed in the House and proposed in the Senate and because of
the allocation your subcommittee has received under the 302(b)
procedure, we are looking at the possibility of a $960 million
cut below the President's request and a $200 million cut below
last year's spending level. This is, however, a budget
authority ceiling. The cap on outlays reduces this budget by as
much as an additional $1 billion. Frankly, Mr. Chairman, with
these caps the President's request is dead on arrival.
I have now been in this job, as you have indicated, for 5
very long years. For most of that time, I have been fighting
for survival here in Washington while trying to maintain
American leadership abroad in the development field. That
leadership in a broad range of technical areas has helped us to
leverage funding from other donors and it has reduced the
burden for the American taxpayer.
I have explained our reductions in these overseas meetings
in official development assistance as necessary as we have
sought to balance our budget. I have argued that our defense
expenditures far surpass those of other countries. I have
expressed optimism that as soon as our budget was balanced we
would begin to build back our program. Last year, we took the
first small step along that path.
Mr. Chairman, I simply cannot explain the numbers you have
been given this year for foreign operations to a foreign
audience. This is nothing short of devastating. If this budget
passes, we might as well shut our doors--and we will in most of
our overseas missions. Our struggle to maintain American
leadership and development will be over and our ability to
preserve our national security through diplomacy and
development will be severely damaged.
I know that you and Senator Leahy and Senator Stevens are
familiar with the impact of past years' budget cuts on our
program, but I have brought some charts here today to try to
underscore our problem. Now this first chart illustrates the
staff reductions we have taken since fiscal 1993. The total
reduction is 30 percent. Our staff is what made USAID the best
development agency in the world.
Now let me illustrate that point by quoting from this peer
review I mentioned before of the American aid program. This
review is done every 4 or 5 years by other donors, and we
respect what they say. This is what those donors said about our
cutbacks overseas: ``The extent of cutbacks of USAID's overseas
presence diminished two of its most prized assets, an
experienced strong field staff close to the action and the
unique scope of the U.S. program in line with America's global
capabilities.''
These reductions included a very painful reduction in force
of more than 160 employees in 1996. Fortunately, Senator
Stevens helped us by providing buyout authorities or these
numbers would have been even higher. As these staffing levels
have declined, we, in turn, have been asked to take on new
programs in the former Soviet Union, Bosnia, and the West Bank
and Gaza.
Now the second chart shows the reduction in our overseas
missions since 1993. We have left 28 countries in the past 5
years and we have 5 more we are planning to close by the end of
this fiscal year. Now what worries me is the extent to which we
have had to cut back in Africa, Asia, and Latin America. We
have, in fact, opened nine offices in Bosnia, the West Bank, in
Gaza, and the former Soviet Union. But we are in 19 fewer
places than we were in 1993, and most of these places are in
the developing world.
Mr. Chairman, I don't regret some of these closures. We
should not be working in countries where the government is not
a good partner. But overall these closures have hurt us. As our
DAC, as our Development Assistance Committee, peers have told
us, they have diminished our influence. And they have been
driven mostly by budget considerations.
A third chart shows the President's budget request. This
request provided a modest increase in USAID managed funds of
some $300 million. The request I would add fell within the
parameters of the balanced budget agreement as scored by the
administration. However, as you see, the Senate 302(b)
allocation was almost $1 billion below the administration's
request and I am told that the outlay makes the budget
authority allocation also a dead letter. That outlay cap,
depending on how it is calculated, would drive this
appropriation down an additional $1 billion. These numbers mean
a 9.4-percent overall cut in our budget from fiscal 1998
levels, and that is very severe.
The cuts in unprotected development assistance would be
even greater, assuming, for example, that Congress continues to
protect the ``Child survival and diseases'' account as would
appear likely. If that happens, we could be talking about a 20-
to 30-percent cut in our other development programs. Let me
give you some indication of what that would mean.
These cuts would require shutting down any number of
current programs. We would be forced, for example, to take deep
cuts in agricultural research programs conducted by U.S.
universities. We would have to cut back sharply on
microenterprise programs that have a proven track record in
giving poor people their first opportunity at starting their
own business.
A cut of this size would mean the elimination of all new
initiatives including those recently announced at the summit of
the Americas as well as the African trade and investment policy
initiative, both programs aimed directly at improving the lives
of the poor. We would have to further reduce our family
planning programs, our democracy efforts, and our environmental
programs. In effect, a 20- to 30-percent cut in the unprotected
portions of our ``Development assistance'' account would be the
equivalent of this year's DA budget for all of Latin America or
all of Asia and the Near East. It would mean eliminating an
amount equal to all of our global bureau--all that our global
bureau spends out of Washington on agriculture, population,
environment, and microenterprise.
prepared statement
Finally, Mr. Chairman, it is obvious that fast spending
accounts would be the hardest hit under the outlay cap. This
chart shows how we have reduced our operating expense budget
over the years. As you know, our operating expense budget is a
fast spending account that would be very hard hit by the outlay
cap. One calculation I saw indicated that under the cap our OE
could be cut by almost $100 million. This is why I said we
would have to shut down our operations. Ironically, however, we
would not even be able to afford to shut down some of our
overseas missions because it costs money to buy out contracts
and the like, and yet we would have to. That is our dilemma,
Mr. Chairman. I hope we can work together to fix this
predicament. Somehow, I do not believe that Congress really
intended these dire consequences.
Thank you, Mr. Chairman.
[The statement follows:]
Prepared Statement of J. Brian Atwood
Chairman McConnell, Senator Leahy, and other members of the
subcommittee, I am pleased to be here today to present President
Clinton's budget request for foreign assistance programs for fiscal
year 1999. Certainly, the last several weeks have offered Americans a
stark reminder of the importance of international affairs to this
nation.
From the testing of nuclear weapons on the sub-continent, to the
still precarious situation in Indonesia, to flaring ethnic violence in
Kosovo, to the volatile situation in the Middle East, we have seen
powerful reminders that the United States has a real stake in our
ability to promote peace and stability. America's continuing security,
economic prosperity and public health clearly demand we exercise our
international leadership on distant shores. The members of this
committee have long understood the indispensable nature of America's
international engagement, and I applaud your efforts to support U.S.
assistance programs.
However, as I appear before this committee today, I must say that I
am gravely concerned. The current allocations of budget authority and
outlays to this subcommittee, and the low levels given to your
counterparts in the House of Representatives, would have a devastating
impact on our ability to keep the United States engaged internationally
during this perilous period.
As you are aware Mr. Chairman, unless budget allocations for
Foreign Operations are raised, the line items in the foreign operations
bill will have to be cut significantly below this year's funding
levels. Moreover, if the programs protected under last year's
legislation continue to be protected, the cuts in the rest of the bill
will be even more drastic.
These cuts would come at a time when our international affairs
programs are operating at historically lean levels. If we continue to
allow this downward slide in our capacity to conduct diplomacy and
development, we will be sacrificing our long-term national interests.
Few areas of government have already done more to downsize and more
efficiently conduct their operations. We have cut all the fat, now we
are looking at bone. Between 1993 and 1998, the U.S. Agency for
International Development (USAID) reduced its total staff by more than
3,300. This cut of more than 30 percent included a painful 1996
reduction in force of more than 160 employees.
USAID's number of field missions and offices has also shrunk, going
down from 97 in 1993, to 78 currently. This overall reduction is even
more pronounced when one considers that it has occurred during a time
when we opened a number of new missions in Eastern Europe and the New
Independent States at the end of the Cold War. Mission closings would
have to accelerate dramatically under the budget scenarios that we
currently face. It has been field presence that has made USAID a global
leader in development. There is no substitute for on-the-ground
presence in designing and implementing effective assistance programs.
Ironically, the agency has been called on to do more and more, with
less and less, in a series of very high-profile foreign policy
settings. We were the first on the ground to get reconstruction
programs up and running in Bosnia. In Guatemala, we moved quickly to
help secure that nation's historic peace accords. In the New
Independent States, we have been on the cutting edge of helping secure
a truly historic transformation toward democracy and free markets. In
Latin America we are translating the vision of the Summit of the
Americas into a reality. In Africa we are helping that continent seize
the opportunity of a new generation of leadership.
I am extremely proud that USAID and its excellent employees have
risen to every challenge that they have encountered. In the face of
tremendous adversity and continual duress over the last several years,
they have responded with professionalism and an unflinching ability to
get the job done. But now, we are again faced with the prospect of a
budget that will mean fewer vital programs, fewer overseas missions,
fewer employees and a squandered opportunity for America to invest in
her own future.
The President requested $20.1 billion for programs in international
affairs, of which the U.S. Agency for International Development (USAID)
would manage $7.3 billion. That figure represents 36 percent of the
international affairs account and includes both USAID programs and
programs which our agency administers in cooperation with other
agencies. This request is within the parameters of the balanced budget
plan as agreed to by Congress and the Administration last year.
President Clinton's request for fiscal year 1999 programs managed
by USAID provides a very modest $300 million increase over fiscal year
1998 funding. The funding requested, however, is critical to our
future. It is crucial to promoting American interests in developing
countries, and in nations making the transition to democracy and free
markets around the globe. Highlights of this request include:
--Three new initiatives, the Africa Trade Reform and Growth
Initiative and the Americas Summit Initiative, for which the
Administration is requesting $30 million and $20 million
respectively under the Development Assistance and Child
Survival accounts, and the African Great Lakes Justice
Initiative, for which the Administration is requesting $30
million under the Economic Support Fund. In addition, we are
asking for an additional $1 million to our food security
initiative for Africa, bringing those funds to $31 million for
fiscal year 1999.
--An additional $155 million for programs in the New Independent
States of the former Soviet Union;
--$94 million more for the Economic Support Fund, which includes the
aforementioned Great Lakes Initiative;
--A separate request of $503 million for the Child Survival and
Disease Program;
--A $15 million increase in International Disaster Assistance for
transition initiatives for countries coming out of crisis; and,
--Economic growth activities aimed at improving food security in
Africa to help feed the hungry and support for agricultural
research through the agency's central Global Bureau.
On balance, the USAID budget represents less than one-half of one
percent of the federal budget. This is a bare-boned and balanced
approach to development and humanitarian programs that will
significantly contribute to achieving the administration's foreign
policy objectives.
However, the initial budget numbers we have seen in the Senate
would not allow us to effectively carry out our development and
humanitarian assistance programs. The total budget allocation for
Foreign Operations, as it currently stands for budget authority, is
nearly one billion dollars below the President's request. Even worse,
because of subcommittee's outlay cap, our preliminary estimates are
that actual budget authority permitted by the outlay ceiling could be
on the order of $2 billion below the President's request in Foreign
Operations alone. This is a nearly 15 percent cut across the board in
Foreign Operations.
The impact of cuts of this magnitude would devastate any number of
programs. Because we expect that those accounts that enjoy wide
Congressional support would likely be held largely protected from cuts,
the impact on non-protected accounts would be even more severe, and I
would find myself faced with the devil's dilemma of having to choose
which vital programs to deeply cut.
To illustrate the severity of this dilemma, we need to appreciate
the magnitude of these cuts. A $2 billion cut is larger than our entire
Development Assistance request for 1999. This figure is about 40
percent of all the activities managed by USAID. This cut represents
about a ten percent cut from the President's entire request for all of
international affairs. Such a cut alone could fund the entire Peace
Corps for more than seven years at current levels.
These deep cuts would devastate our international operations at the
program level. These cuts would also require shutting down current
programs which address poverty and hunger. We would be forced to make
see deep cuts in agricultural research programs conducted by U.S.
universities that are helping develop better crop varieties to combat
hunger abroad. Over the long term, this would mean losing ground in the
fight to battle malnutrition, and increased global tension over food
insecurity and increased needs for emergency assistance. This would
also mean American universities would lose much of their capacity to
conduct this vital agricultural research.
We would have to cut back sharply on microenterprise programs that
have a proven track record in giving poor people their first
opportunity at starting their own businesses and working their way out
of poverty. More than a 100,000 people would lose access to small loans
because of these cuts.
Cuts in family planning would result in increasing numbers of
unwanted pregnancies and fuel a dangerous spiral of additional deaths
of both mothers and children. Cuts in disaster assistance would deny
assistance to the most vulnerable victims of war, famine and other
disasters. Efforts to prevent regional and civil conflicts through
democracy programs would be delayed or terminated. Cuts in
environmental programs would limit our ability to deal with the
underlying causes of ecological crises such as the vast fires we have
seen in Mexico in recent months.
Economic growth programs in Latin America and Asia, already
severely limited, would be cut further. Efforts to integrate Africa
into the world economy would also suffer funding cuts. America's
economy, American exporters and American consumers would ultimately pay
the price for our collective failure to open new markets and promote
international trade.
Cuts in Economic Support Funds, an account already $1 billion less
than 10 years ago, would probably mean no funding for economic
stabilization programs in Latin America. Lower levels of funding for
our programs in the New Independent States and SEED countries would put
at risk vital progress in strengthening democracy and free markets in
key strategic areas like Bosnia-Herzegovinia and Russia.
Such a large cut would mean the elimination of all new initiatives,
including those recently announced at the Summit of the Americas as
well as the African Trade and Investment Policy Initiative--both
programs aimed directly at improving the lives of the poor.
USAID operations worldwide would have to be scaled back,
terminating the successful efforts of the United States to encourage
other donor nations to share the burden of development.
If the Operating Expense account is reduced below the President's
request, the impact on overall agency operations and ability to provide
oversight of foreign assistance programs would be severe, as that
budget has already been cut severely in past years. From fiscal year
1993 to fiscal year 1997, operating expense-funded staff levels were
cut by 34 percent, which included a very difficult reduction-in-force
of 164 U.S. direct hire staff, early-outs, and buy-outs. We were able
to plan an orderly process to achieve much of these reductions,
including orderly closing of missions. Such orderly processes would be
impossible with sharp fiscal year 1999 operating expense reductions. In
order to absorb the high costs of shutting down missions--including
severance pay for foreign service nationals, contract termination
costs, relocation costs and other factors--the cuts would have to be
completed very early in fiscal year 1999. We are to far into the
calendar year to make such reductions in an orderly way. Leading up to
fiscal year 1997, the GAO confirmed that the agency could not operate
at a level of $465 million without immediate large-scale cost-cutting
early in the calendar year, including increasing the size of the
Reduction in Force that had been planned at that time.
These cuts in operating expenses would come at a time when the
costs of doing business abroad are going up, not coming down. The
agency is facing continuing cost increases due to the impact of
inflation on foreign national pay, office and residential rents,
utilities, and other overseas costs as well as federal pay raises and
the impact of general inflation in the United States on Washington
costs. Given that the operating expense account is driven by workforce
levels, sharp workforce reductions would become necessary. Fewer people
would make it impossible to manage existing programs, and would force
the early termination of some activities. Operating expense cuts would
also make it more difficult to keep the agency's information technology
up and running, and would force us to sharply reduce many critical
activities, such as training.
We need to remember that these are not abstract cuts we are talking
about. Our programs have a demonstrated track record in making a real
difference around the world--from saving lives to building more
prosperous societies to creating jobs for the American people. USAID
emergency relief programs provided food and other assistance to more
than 28 million disaster victims in 1996. Our health and child survival
programs, which you have so strongly championed, helped to save more
than five million lives last year alone. Severe food shortages were
averted in seven African countries, thanks to USAID efforts to
establish regional capacities to anticipate and prevent famine.
Our programs in Eastern Europe and the New Independent States
helped privatize more than 26,000 state-owned enterprises in 1996
alone. In addition, we supported free and fair elections in 14
countries around the globe and assisted in the drafting and adoption of
new constitutions in three countries. More than a million people
received USAID microenterprise loans last year, and more than half of
those clients were women. We helped farmers in Latin America choose
alternatives to growing drugs, and cut the acreage in Peru devoted to
coca production by 27 percent. USAID also contributed significantly to
improving conservation on over 21,000 square miles of land in 14
different countries.
We took a major step toward the worldwide eradication of polio with
our support for national immunization days in Africa and Asia. The
agency continued to help finance innovative public-private
partnerships, such as the one that helped create vaccine vial
monitors--simple heat-sensitive tags that indicate when vaccines have
become unusable, resulting in health savings in excess of $10 million a
year.
The Congress and the American taxpayer have every right to demand
results for the dollars they put into foreign assistance, and I feel
USAID is doing a better job than ever before in producing results that
make a difference in today's world. The Administration is eager to work
with you to improve this situation, and I hope that we can do so in the
weeks and months ahead. I would also like to point out some particular
issues from this year's budget request that I know are of particular
interest.
Account Structure
The fiscal year 1999 budget request brings with it a slightly
different account structure. USAID is requesting 1999 funding for a
separate Child Survival and Diseases account at a level of $502.8
million, which reflects strong support both within the Administration
and this Subcommittee. The account includes $226 million for child
survival activities, $121 million to combat AIDS, $30 million for other
infectious diseases and $27 million for related health activities that
complement our activities in child survival and infectious disease.
Also included is $98.2 million in basic education programs. Education
programs are one of the most powerful means we possess to promote
lasting social and economic progress in the developing world.
While this request of $502.8 million compares to a 1998
appropriated level of $550 million, I want to make one thing absolutely
clear: this is not meant to signal a reduction in the importance USAID
places on child survival programs. It has been our experience that to
effectively combat both infant mortality and the spread of disease, we
also need to address the underlying social and economic conditions that
allow child mortality and infectious diseases to flourish, such as
poverty, malnutrition, illiteracy, poor sanitation, overcrowding and
environmental degradation. We use other portions of our budget to
attack these problems.
Just to cite one example, our urban programs that work in some of
the worlds' largest and increasingly crowded mega-cities are not
considered part of the child survival account. Yet these programs are
helping to provide clean water and waste treatment facilities to
millions of poor families, an effort that clearly improves the lives of
children and reduces the spread of disease. Or consider education
programs that appear in this account but do not fall under a strict
definition of child survival programs: research shows that the child of
a mother who has even a single year of education, has a 9 percent
better chance to live to the age of five. Gains increase substantially
with each additional year of schooling. So when you look at our
programs in terms of child survival, I think we need to focus on their
broad impact.
The Development Assistance Account: The Africa Trade and Investment
Initiative and the Summit of the Americas
President Clinton's trip to Africa, in which I participated, was an
excellent opportunity for the world to focus on the immense potential
and considerable challenges on the continent. I believe the trip will
go a long way toward invigorating trade and development in Africa. I
know that USAID will have its work cut out in responding and following
up on the tremendous excitement generated by the trip. This trip
offered ample evidence of what I have long argued--that Africa is the
world's last great developing market. As part of the Partnership for
Economic Growth and Opportunity in Africa, announced in June 1997,
USAID will help Africa integrate into the world markets through
increased openness to international trade and investment. This type of
reform and assistance program has already been proven to be a major
ingredient in the recipe for economic progress and growth in other
parts of the developing world. We hope the bill will pass the Senate
and be enacted into law as soon as possible.
The Partnership includes the following USAID components:
--Technical assistance to help African governments liberalize trade
and improve the investment environment for the private sector;
--Assistance to catalyze relationships between U.S. and African firms
through a variety of business associations and networks; and,
--Funding of non-project assistance in conjunction with other
bilateral and multilateral donors to help encourage aggressive
economic reforms.
The second regional initiative included in the Development
Assistance account focuses on Latin America. As part of our effort to
capitalize on regional cooperation, the budget proposal includes funds
to support the initiatives and was endorsed at the second Summit of the
Americas. USAID helped to define the agenda for the Summit, where the
region's 35 presidents focussed on regional challenges, including
economic integration, education, democratic institution building and
poverty alleviation through microenterprise activities. USAID is
requesting $20 million to support initiatives aimed at achieving these
goals which will help remove the barriers to the participation of the
poor in the national life of the 34 democracies represented at the
second Summit of the Americas.
An Increased Emphasis on Agriculture and Education
The Agency has intensified our strategic focus during the last year
on two important areas of development: agriculture and education.
Agriculture is now being pursued as a part of USAID's economic growth
goal by refocusing on the links between agriculture, economic growth
and food security. As part of this effort, USAID, at the World Food
Summit in November 1996, highlighted the continuing food security
issues of the over 800 million chronically undernourished people in the
developing world. The proposed budget allocations for food aid are part
of this Administration focus. Education has been promoted to the level
of one of the agency's primary goals. USAID is working to improve basic
education for both girls and boys, particularly in the poorer countries
of sub-Saharan Africa. An important part of this effort is our
continued focus on advocating that no children should be denied access
to an education because of their gender, ethnicity or social status.
Increased Transition Activities
Within USAID's 1999 budget is a $15 million increase to the
International Disaster Assistance Account for Office of Transition
Initiatives (OTI) efforts. This will increase the U.S. government's
capacity to bring fast, direct, flexible assistance to priority
countries in their transition from conflict, by addressing urgent
needs. The United States continues to face the challenge of responding
to increasing numbers of countries with complex emergencies. Many of
these complex emergencies have come to be high priority foreign policy
concerns of this Administration, such as those in Haiti, Bosnia, Congo,
Liberia and Angola. Although relatively new and with limited resources
to date, OTI has demonstrated a successful track record in assisting
transitional countries: disbanding 200,000 paramilitary troops in
Guatemala and demobilizing and resettling nearly 3,000 guerrillas;
reaching 1.9 million people with mine awareness and helping create 590
projects in 270 villages in Angola; and implementing 650 grants in
Bosnia to promote independent media and democratic reconciliation.
We have learned from experience how valuable it is to have the
resources and the flexibility of the International Disaster Assistance
account in place to deal with these crises. It is an invaluable,
innovative and cost-effective means to advance U.S. interests in these
very dynamic settings. I also want to assure the Subcommittee that by
increasing the funding for OTI, we in no way, shape or form are
lessening the ability of our agency to provide immediate life-saving
humanitarian relief through our Office of Foreign Disaster Assistance--
still one of the world's premier organizations for providing such
assistance on the ground.
Infectious Diseases
For fiscal year 1998, Congress, under this subcommittee's
leadership, provided funding for USAID to take part in a global
initiative to combat infectious diseases, joining with other U.S.
Government agencies in this effort. USAID has developed a strategy for
the initiative as an important complement to the other four objectives
leading to USAID's goal to stabilize world population and protect human
health, particularly efforts in child survival, maternal health and
AIDS prevention. USAID's strategy has been developed in consultation
with a wide cross section of global health experts, including staff
from other U.S. government agencies, UNICEF, the World Health
Organization, non-governmental organizations, academia and the private
sector. In the spirit of true collaboration, these discussions created
a strong consensus as to the strategy we would adopt, and clarification
about USAID's role.
USAID's strategy has four technical elements:
--Slowing the emergence and spread of antimicrobial resistance,
targeted at the principal microbial threats in the developing
world: pneumonia, diarrhea, sexually transmitted diseases,
tuberculosis and malaria.
--Testing, improving and implementing options for tuberculosis
control.
--Implementing new and effective disease prevention and treatment
strategies focused on malaria and other infectious diseases of
major public health importance.
--Strengthening health surveillance systems by building capacity at
the country level to help create a global early warning system
for disease.
Programming of the funds into specific activities will follow
shortly. The Centers for Disease Control and Prevention, the World
Health Organization and UNICEF, among others, will certainly play key
roles in our program, and a new Infectious Diseases objective has been
included in the health portion of our request.
A Historic Transformation Continues
The historic transformations occurring in Central and Eastern
Europe and the former Soviet Union remain critical to U.S. national
interests, and our requests for the Support for East European Democracy
(SEED) and FREEDOM Support Act accounts reflect this high priority.
These nations with whom we were once in a dangerous, expensive and
ever-escalating arms race, are now emerging partners in the global
economy. In Central Europe, we are seeing some of our allies
successfully make the transition toward membership in NATO and the
European Union. Across the region we are helping these nations create
democratic societies and market economies which are increasingly based
on Western values, and linked to us through trade and investment and
through people-to-people, grassroots relationships.
I know the situation in Ukraine is of particular interest to you,
Mr. Chairman. As you know, Secretary Albright certified that Ukraine
has made significant progress toward resolving longstanding U.S.
investor disputes, having determined that seven of the twelve disputes
in question had either been resolved or significant progress had been
made toward resolving them. The Secretary made that determination after
close scrutiny of these cases, as well as numerous consultations with
the U.S. business community in Ukraine and with top Ukrainian
Government officials.
Having made this certification, the Secretary remains seriously
concerned about the lack of improvement in Ukraine's investment climate
and limited progress toward economic reform. Therefore, she has decided
to temporarily withhold funds amounting to about $25 million for
assistance in areas where lack of reform would make U.S. assistance
ineffective. These funds will be reprogrammed to more productive uses
within Ukraine if after several months' time the government does not
implement the necessary reforms and take additional steps to resolve
outstanding U.S. business cases in Ukraine.
A great deal depends on the willingness of the Ukrainian government
to move forward with reform. Our assistance can only be effective if
there is real commitment in a host country to embrace change. To date,
we have seen a number of promising steps toward comprehensive reform,
including good progress in areas such as privatization, land titling
and the means-testing of housing subsidies. The challenge now is for
Ukraine's leadership to ensure that the momentum generated by these
incremental reforms can be translated into widespread improvements in
the lives of the Ukrainian people.
In Central and Eastern Europe, the SEED request is focused on
continuing our commitment to support the Dayton Peace Accords in Bosnia
and Croatia. We are promoting reconciliation on the ground through
economic revitalization efforts, job creation and democracy building
efforts. It will take time to deepen and solidify this process. We are
also supporting police monitors and police reform in Bosnia, a program
critical to our ability to facilitate the return and reintegration of
refugees and displaced persons into their communities. The U.S.
military presence and economic assistance programs have been highly
complementary, with peacekeeping troops assuring a sufficiently stable
environment for recovery to take root. In turn, economic recovery is
helping to bring about conditions that will make it possible for
American troops to come home.
In partnership with a number of pre-eminent American foundations,
we are proposing to begin in the next fiscal year a $100 million
trust--with half, or $50 million, to be funded over four years by the
U.S. government--to promote deeper and more enduring civil societies in
Eastern and Central Europe. We are joining with Rockefeller Brothers,
Ford, Soros, Mott and others to create an evenly matched public-private
endowment to encourage a range of economic think tanks, professional
societies, chambers of commerce, interest groups and the like to be
focussed and self-sustaining. Our goal ultimately is to stimulate an
educated, activist citizenry that demands accountability and value from
its government. Also, by breathing life and vibrancy into these new
democracies, we can more readily count on their durability. With
Congressional concurrence, our initial contribution would be $12.5
million from SEED funds, and we will be consulting with you on the best
mechanisms for Congressional oversight of this process.
In the New Independent States, we are requesting an increase in
FREEDOM Support Act funds of $155 million above the 1998 level to
expand the Partnership for Freedom initiative in Russia and across the
New Independent States. In the 1998 budget, Congress endorsed the
Partnership for Freedom's new focus on economic growth, civil society,
and partnerships which create bonds between non-governmental
organizations, businesses, universities, hospitals, professional
associations and a myriad of grassroots organizations in the United
States and in the region.
FREEDOM Support Act funds will also help us redouble our efforts in
Central Asia to further develop the business, legal and regulatory
environment necessary to underpin the massive oil and gas investment
which is likely over the next decade. As this Subcommittee saw during
its trip to the Caucasus last summer, Central Asia and the Caucasus are
critical to U.S. strategic interests and world energy supplies. We will
continue supporting the Administration's TransCaspian initiative to
facilitate East-West transport routes and environmentally sustainable
approaches to energy development through bilateral and regional
technical assistance.
An important part of our work throughout Central and Eastern Europe
and the New Independent States will be our anti-corruption efforts.
USAID's assistance in the area of crime and corruption addresses the
underlying causes of corruption, and complements the efforts of U.S.
law enforcement agencies--the Federal Bureau of Investigation and the
Departments of State, Treasury and Justice--to address specific crime
and law enforcement needs. USAID helps set the rules of the road for
business, and opens up to public scrutiny government's regulatory
processes and businesses' decision-making. This means reducing
inappropriate discretion exercised by government, so that opportunities
for arbitrary, capricious or corrupt government actions are reduced.
This also means improving the transparency of commercial transactions
so corporate decisions are open to stockholder and public oversight and
helping to foster an independent media to inform public decision-
making.
USAID Management
The Government Performance and Results Act directed that the
foreign assistance program be driven by strategic focus and by results.
At USAID, we have embraced this emphasis on results. USAID continues to
introduce management reforms designed to deliver assistance faster and
achieve results more cost-effectively. I want to underscore the
importance that USAID has been placing on managing for results and
improving program effectiveness. We were committed to this performance-
based budgeting long before Congress passed the Government Performance
and Results Act (GPRA) in 1993, reflecting our belief that Congress and
the American people must see the specific results of our programs if
these activities are to continue to receive your support. Some of
USAID's activities--such as reducing the spread of infectious diseases
in developing countries--are easier to quantify. Other equally
important interventions--such as assisting host governments to take
steps to move toward a stable, market-based economy--take more time to
achieve. We are committed, however, to measuring, assessing, and
reporting to Congress on the results of all of our program activities.
During this last year, we have also continued to improve our
working relationships with the Department of State. Foreign policy and
development strategy are better coordinated at the policy level than
ever before. USAID's Strategic Plan supports specific U.S. national
interests as defined in the International Affairs Strategic Plan--a
document which the Department of State and USAID worked in close
cooperation to prepare. USAID and the Department of State have also
agreed upon ways to streamline and better align operations ranging from
how we manage facilities to how we coalesce around specific country
objectives.
The cooperation between USAID and the Department of State is
particularly close in the area of democracy and governance assistance.
The Department of State's regional bureaus and its Bureau of Democracy,
Human Rights and Labor (DRL) consult with USAID in programming the ESF
regional democracy funds. USAID plays a prominent role in the DRL-
chaired Democracy Core Group, an inter-agency council that ensures the
tight coordination of policy and programs in key transition countries.
And our two agencies work together in the annual reviews of USAID's
country programs to further strengthen the coherence of our diplomacy
and assistance.
We recently submitted to Congress the initial version of USAID's
fiscal year 1999 Annual Performance Plan. This plan provides specific
benchmarks against which our performance can be assessed at the end of
fiscal year 1999. We will also submit our self-assessment of
performance through fiscal year 1999 at the end of March 2000 through
our Annual Performance Report. Our Performance Report will comment on
why we think our approaches did or did not work and what we will do to
improve our performance. These plans and reports are important tools
for helping our agency, and you, to determine the degree to which we
have achieved the results that we had set out for ourselves. We look
forward to consulting with you on our performance measuring and
planning efforts.
In conjunction with the Department of State and other agencies
having an overseas presence, USAID implemented the International
Cooperative Support Services, or ICASS, system effective October 1,
1997. Under this system, administrative support services at overseas
posts will be provided by the agency best able to provide effective
service at a reasonable cost. While any major change such as this is
likely to face problems in the first year of implementation, the
changeover from the old Foreign Affairs Administrative Support system
to ICASS appears to be going very smoothly. All agencies, including
USAID, are working to ensure that this new system is a success and that
it will result in the end in better administrative support for all
agencies at a lower cost.
In other areas of management, two USAID task forces identified ways
to streamline procurement processes and to better align our workforce
to projected needs in developing countries. Our workforce planning task
force recommended reducing the Washington staff over the next three
years to meet tight Operating Expense levels while protecting the USAID
field presence and permitting expanded staff training. These moves
would not entail a reduction in force, but it is clear that managing
Washington with a reduced staff will require streamlined processes and
greater efficiency. The task force recommended that USAID field staff
not be cut any further, and that staffing remain at approximately 700
U.S. direct hires in the field. However, we will be looking at how to
more effectively manage our field presence.
The initial action plan on procurement addresses three areas:
strengthened teamwork, operational goals and administrative
streamlining. We are reestablishing the Procurement Policy Advisory
Panel which will provide for a wider vetting and understanding of
procurement and assistance policies. Our operational goals are intended
to establish benchmark time periods for effecting actions, such as
procurement planning and operational year budget allocation and
distribution which will hopefully stimulate earlier action on
procurement and assistance actions, and even out the workload over the
fiscal year.
Completing the move of USAID headquarters to the Ronald Reagan
International Trade Center last year was a sizable logistical
challenge, but having all our agency's Washington staff together in one
building--for the first time in our history--has greatly improved
teamwork and collaboration among employees.
Over the coming year, we will seek to further improve USAID's
unique comparative advantage to rapidly and innovatively respond to
diverse development and humanitarian needs. A further streamlining of
USAID work processes could increase the amount of time available to
build and nurture partnerships and coalitions with those willing to
collaborate on development problems. It will also ensure that USAID
maintains the technical breadth and on-the-ground developing country
expertise in preparing responses closely attuned to local conditions.
USAID's recognized excellence as a pre-eminent bilateral
development organization will serve the United States well as we
continue to lead other development organizations. U.S. leadership helps
create a shared vision on development goals and approaches across the
U.S. government, among donors, within the nongovernmental and business
communities and with the countries in which we work. As hosts of the
upcoming 30th anniversary Tidewater meeting of development ministers,
we now turn our energies to jointly implementing the Development
Assistance Committee 21st Century Strategy. Similarly, as part of the
New Transatlantic Agenda of the European Union and the United States,
USAID is now working closely with the European Commission on more than
60 joint development activities.
The New Management System
I also must address an issue that has been of particular concern,
the agency's New Management System (NMS). Last April, I made the
difficult decision to suspend overseas operations of two modules of the
New Management System. Communications problems, difficulties in
transferring data and system problems, particularly with the USAID
Worldwide Accounting and Control System (AWACS) financial management
module, were forcing the agency to expend an inordinate amount of time
responding to problems, particularly at our overseas missions.
USAID contracted in the fall with a top-notch consulting team
recommended by the General Services Administration, and led by IBM, to
conduct a thorough assessment of the NMS. This independent assessment
by the consulting team was completed in January and has been shared
with Committee staff. This analysis identified the software flaws that
have plagued NMS, particularly the AWACS module, and also identified
areas where we could strengthen the management of our information
systems.
The report also carefully assessed the options for delivering the
necessary business functionality in NMS for the agency to comply with
the Government Performance and Results Act and other government-wide
standards. The report recommended options for modifications of the
operations, budget and assistance and acquisition modules, and
replacement of the financial management module with one of the now-
available commercial off-the-shelf financial packages that would be
integrated with the other modules.
Our agency staff has put a lot of work into making the NMS system
function and I deeply appreciate their labors. This was not a wasted
effort. The business area analysis process established a solid base for
the development of each of the NMS modules. The vision of an integrated
financial and information management system that would meet our needs
into the 21st Century was, and remains, the correct vision. It is now
clear, however, with the advantage of hindsight, that we were too
ambitious. We knew that our old systems were inadequate so we rushed
the effort to reach full compliance with government standards and with
the business needs identified in the business area analysis. Basically,
we were too ambitious; we felt we could not achieve the changes we
wanted without activating the system prior to testing it on a smaller-
scale basis.
I must also point out that, when we began this process in 1993 at
the start of the Administration, everyone from the Office of Management
and Budget to Congress agreed that the agency's financial information
systems were badly flawed and that immediate action needed to be taken.
At that time, no commercial off-the-shelf packages existed that would
meet our financial information systems needs. Our intentions were good
in overhauling the agency's financial information systems, but with the
benefit of hindsight, our method was flawed. For that I accept
responsibility.
What are our next steps? We have completed our assessment of the
consultant's report and are defining a comprehensive plan that will
assure us that the mission critical systems will meet the year 2000
compliance standards. The second priority is to have in place a
financial management system that complies with federal standards that
can produce an auditable consolidated financial statement. Third, we
must deliver the basic business functionality and data integration
planned for NMS.
Our Management Bureau, in collaboration with the Capital Investment
Review Board, has laid out internal management and external contracting
strategy to achieve these goals. We are in the process of sharing that
approach with this Committee and our other oversight Committees. We
have invested significant resources in NMS development, and it is
disappointing that we are not where we had hoped to be. The independent
assessment, however, provides an invaluable analysis of our current
situation and a clear description of the steps that we must take to
achieve the original vision of the NMS. We now find ourselves with the
opportunity to resolve our difficulties with the NMS and create a
system that will allow you the transparency and accountability that
should be the standard for government operations.
In Conclusion
We know that the United States cannot fulfill its leadership
responsibilities or pursue our values as a nation without an effective
international cooperation program. Ultimately, development assistance
administered by USAID improves the lives of people in developing
countries and helps to strengthen their capacity to mobilize local
resources and take ever greater responsibility for their own destinies.
Foreign assistance is one of America's best and most cost-effective
tools for building relationships among peoples and institutions that
can endure and advance our interests.
The lines between domestic and foreign affairs are increasingly
blurred. USAID bolsters America's domestic and foreign policy interests
by capitalizing on the challenges and opportunities that are inherent
in increased globalization and interdependence. When we look at the
causes of the Asian financial crisis, we see how important USAID's
development work is. A number of Asian countries embraced aggressive
economic reforms, but were slower to embrace the open and transparent
governance which is also essential for long-term economic growth and
foreign investment. USAID is investing in the institutional structures,
market reforms and grassroots development programs that lead to long-
term stability and growth. These programs are even more critical to
America's future now than during the Cold War.
Referring to USAID's programs as foreign aid is increasingly
anachronistic in this kind of environment. Neither the world's problems
nor America's economic opportunities stop at our borders. Exports
accounted for over one-third of America's growth during the past four
years. Developing and emerging market countries accounted for more than
half of that growth in exports. All spheres of activity in the United
States demand an international reach, whether it be health, crime-
prevention, environmental protection or job creation. The benefits of
international cooperation are obvious--the dangers of not cooperating
to help other nations meet these challenges are too great to risk.
I am eager to work with this committee to restore a budget that
will accurately reflect our national interest in promoting development
overseas. The stakes are simply too high for us to accept any other
alternative. Again, I appreciate the opportunity to appear here today,
and I look forward to working with you to help preserve America's
international leadership.
Thank you.
remarks of senator ted stevens
Senator McConnell. Mr. Atwood, I see the chairman of our
full committee is here. I do not know whether he would want to
make an observation or whether he is just joining us.
Senator Stevens. Well, I came because, Mr. Chairman, I was
told that Mr. Atwood would raise the question of the
reallocations that we have made. We were forced to make severe
reductions in many of the accounts under the 602(b) allocations
because the administration had submitted a budget that is based
to a great extent upon approval of new taxes, new user charges,
additional revenue streams that are just not there.
We are not allowed to allocate money based upon a
prospective action by Congress and the President in agreeing to
additional revenue streams. We can only allocate the money that
is there now. As a consequence, we had the difficulty of really
severe difficulty meeting the Health and Human Services' budget
that is still almost $1 billion less than the current year.
On defense, the President asked for $1.9 billion additional
money for the Bosnia operation starting in 1999 on an emergency
basis, which we had already told the President that we would
not grant an emergency for the fifth of Bosnia operations. It
is no longer an emergency, and understand the circumstances
there just was no more money. I have done the best that I can
under the circumstances of allocating the money that is
available. If there are additional revenue streams that come
along, of course, this subcommittee along with others would get
consideration again.
At the present time, Mr. Atwood, there is just no
possibility that we can change the allocations to this
subcommittee. I think anyone that reviews the money we have got
right now I hope will agree we have done the best we can under
the circumstances. I understand your appeal, but it just cannot
be met.
Beyond that, I want to say I was chairman of the Government
Affairs Committee at the time we went into the problem of the
Internal Revenue Service modernization of its computer systems
and found to our regret that after spending $4 billion they
still didn't have a system that they could install and we had
to abandon that, despite the estimate that it was going to cost
us $20 billion totally.
Now I am very worried about the report that we have gotten
with regard to your computer system, and I do think that that
ought to be one of the areas that is really an exception to
this problem. We ought to get you the money you need to
modernize that system. And I hope that you will take the
direction of the outside organization that has been contracted
for by GSA to redesign your systems.
Thank you, Mr. Chairman.
Senator Lautenberg has promised that he will only take 30
seconds, so we are going to let him take his 30 seconds.
remarks of senator frank r. lautenberg
Senator Lautenberg. I thank you, Mr. Chairman. I have used
up 7 of those seconds already, and I will do the rest in 23,
and that is: I just want to raise questions, Mr. Chairman, the
questions for Mr. Atwood related to harboring, communities
harboring, war criminals, and the assistance coming from this
country. Mr. Atwood is aware of my concerns. I will submit my
questions in writing. But I would hope that our Government is
not going to permit opportunities for investment to be made in
these communities while they flout the law.
Senator McConnell. Thank you, Senator Lautenberg.
Senator Lautenberg. Thank you.
peace process in Bosnia
Mr. Atwood. We know of your concern in the amendment that
was passed with your name on it. We have been, I think, very
meticulous in trying to use all sources of information--human
rights groups, our own intelligence community and the like--to
try to assure that we do not get into that kind of a problem. I
think we have taken risks, I think we have advanced the peace
process in Bosnia, but we do not want to get caught working
with war criminals or people who have been indicted.
Thank you, Senator Lautenberg.
Indonesia
Senator McConnell. Mr. Atwood, Indonesia would be a good
place to start. You said that AID had increased food aid by $25
million. It is my understanding from the staff it was only one-
half that, because one-half went to shipping costs. These were
funds for El Nino drought victims in the East, not a response
to the 1998 economic meltdown. Apparently AID now has
reoriented, whatever that means, $23 million in crisis
response, but this is for the IMF technical consultants, not an
initiative to ease through the economic transition--just some
of my random observations about some of your comments about
Indonesia.
Mr. Atwood. Well, first, let me say that obviously the
crisis is both political and economic. We renegotiated with the
Indonesia Government, the Suharto government, to provide
resources that we had allocated for different purposes
originally to a new sort of economic reform program, provide
technical advice and individual economists to the Indonesia
Government.
The economic team over there everyone would concede is on
the right reform wicket. They are people for the most part
educated in the United States and they are reformers, and so we
wanted to provide them with the assistance they needed so they
could implement the IMF agreement. We had to take money from
other resources that we had allocated during calmer times and
reorient it. I think that was quite a feat in a very short
period of time. We were able within a 2-week period to sign
contracts to get about six experts, professors, in there to
help them with their own reform efforts.
The $25 million was made available. You are not, I am sure,
complaining about the procedures we have to use American
shipping and American grain for these things, because we could
talk about that. We are required to do that.
Under title II we also have to respond to proposals. That
is the way that law is written. That does not have anything to
do with this subcommittee; this is handled by the Agriculture
Committee. Still, we operate within United States law with
respect to the title II program, and we are preparing to
provide more title II resources to Indonesia, given the problem
as it evolves.
We are now having to look at our entire program again and
reorient it once again because we have a political transition
in place. These things don't happen overnight, especially when
your entire staff is evacuated out of Indonesia. I think we
have under the circumstances done a good job in this situation.
Senator McConnell. It seems to me, staying with Indonesia,
that it is going to be difficult for that country to return to
the road of economic reform and remove subsidies for key
commodities, unless there is some kind of transitional support
program in place. This might include job training, food for
work initiatives in urban areas, and expanded maternal and
child support initiatives. Can you give me any detail on USAID
plans to address national transition needs, particularly in the
hardest hit urban areas.
Mr. Atwood. We have been able thus far to locate about $134
million that will be applied to this. We, of course, are
awaiting now the new IMF plan that has recently been presented
to the Indonesia Government, which may mean that we will have
to readjust our own technical assistance package. We have
programmed the $25 million for food for work, which would
create jobs and for emergency feeding programs for very
vulnerable groups, children under five and pregnant and
lactating women. We have also supplied emergency relief such as
water sanitation, seed distribution and medical supplies.
Our population health and nutrition resources are directed
to maintain the availability of basic health and family
planning commodities and services and make sectoral reforms of
both health and family planning to improve the efficiency and
cost effectiveness of the Indonesia Government's health
programs.
We have also looked at programming money for elections
assistance and democratization as they move through this
transition period. I think that it is not inconsiderable.
However, we obviously will join with other donors including the
World Bank. Our program of $134 million is probably more than
any government other than Japan is doing in this situation, but
we do not match on a bilateral basis the resources that the
World Bank can bring to bear on this problem.
Senator McConnell. Is your assistance mostly targeted at
Jakarta; and if not, what part of it is heading in that
direction?
Mr. Atwood. A lot of it is because that seems, was at least
during the student uprisings, the center of all of the problems
but also the center where the opportunities can be found. But
our program has been very active around the country. I mean, a
lot of our family planning programs were in parts of the
country that were far from Jakarta, Bali, and other parts of
Java, and some programming in East Timor as well.
Moslem organizations
Senator McConnell. I mentioned in the opening statement the
Jakarta mission's apparent reluctance to work with Moslem
organizations. Could you give me an explanation of that?
Mr. Atwood. Well, we would be more than happy to work with
those organizations. At the time, you see the urgency is to let
the United States show that we care. We wanted to announce a
$25 million program, but we did not even have a proposal at the
outset of this. We received a proposal from the Christian group
you mentioned, the Catholic Relief Service, and so we were then
able to announce something that had a political impact. We did
not have a proposal from the Moslem groups. We are working with
those groups and hope that we will be able to do that. We also
have to assure that they can carry out the program.
I think that in light of the urgency of responding, at
least letting the Indonesian people know that the American
people cared about the situation, we responded very quickly and
used the organization that we could under the circumstances.
Senator McConnell. A recent Washington Post article
commended your Agency for spending $26 million supporting
opposition groups. The article was clearly written in
Washington because many of the organizations mentioned have
been deeply critical of AID's limited role and support which
leads me to ask you, how would you describe AID's current
planning regarding these opposition groups? And, what lies
ahead?
Mr. Atwood. Well, I think that it is probably fair to say
that the groups have been critical generally, but I am not sure
they have been critical of USAID. These are groups that have
been basically a part of a new civil society in Indonesia. They
have been environmental groups, they have been health-oriented
groups, they have been other groups that have taken on an
advocacy role. This is the first part of a democracy.
They were not allowed under the Suharto regime to play more
of a role than that. As you know, political parties were not
allowed to play any active role as well at the time, so these
groups have received support over the years from USAID. Again,
I do not know whether some of them were disappointed that they
did not get more support from the United States during this
troubled time or not. The fact of the matter is I think that
they formed, these groups that we have been supporting, a basis
for a smooth transition to a different, more democratic era in
Indonesia. I am very proud of what we have done to help those
groups in that country.
Senator McConnell. As the students were demonstrating and
being gunned down by the military and police, it is my
understanding the administration requested $2 million to train
the military to fight fires. In terms of the priority, is that
a decision you were involved in? And, did you think it was more
important to fight fires at that particular moment than to deal
with the other problems?
Mr. Atwood. This request was made well before the students
were in the streets, but the request came up here at the time
that they were in the streets. The administration, after
hearing from your very efficient staff people, realized that
this was not the time to continue to pursue the notion that it
would be better to have military people fighting fires than
fighting students in the street. Perhaps that was a motivation
behind the original request, that if we can get the military
focusing on issues that would help the general welfare of the
country, then it might be better to divert them into the forest
fire fighting area.
Senator McConnell. During the first week of May, your
Indonesia mission director and the deputy in your Asia bureau
briefed the subcommittee staff and indicated that the only new
initiative under consideration at that point was funding for
consultants implementing the IMF package. They were asked to
provide details on the consultants, which we have not seen.
What is the status of implementation of the IMF reforms and
hiring more consultants? Is that in a state of suspension, or
just what?
Mr. Atwood. Yes, sir; it has been. This is the $23 million
package that I mentioned before. We did send one-half dozen
people over right away, after that package was negotiated,
within 2 weeks. Then, however, Suharto fell and the whole IMF
program was put under suspension, and it has been redrafted and
represented now. We will see whether or not the original
consultants are appropriate for the new program. Certainly, the
reason we have not provided you with that is because everything
has been in suspension. We would certainly be happy to provide
you with all of that information.
[The information follows:]
IMF Reform Package
The IMF reform package can be divided into a series of
major topics for action, which include: (1) resolution of the
banking and finance crisis; (2) restoration of macroeconomic
stability through reforms in fiscal and monetary policy: (3)
structural reforms designed to strengthen the efficiency of the
domestic economy by: increasing transparency, removing barriers
to competition and, removing opportunities for corruption; and
(4) improvements in the legal/regulatory structure designed to
support the entire reform program.
USAID/Indonesia is providing technical assistance in
support of all of these areas, and will continue to expand its
work, as shown below. These efforts are being undertaken in
close coordination with other donors, particularly the major
international financial organizations who are playing a leading
policy and financing role in the reform efforts now underway,
namely the IMF, the World Bank, and the Asian Development Bank.
Banking and Finance.--To date USAID has provided short-term
experts to support bank restructuring, including the closure of
some of the most troubled banks in the system, and the
development of pricing models for use by the private debt
repayment facility known as INDRA. Long-term technical services
are being arranged to support the work of the Indonesian Bank
Restructuring Agency (IBRA) and its Asset Management Unit, and
Bank Indonesia's bank supervision unit.
Macroeconomic Policy Reform.--USAID is providing long-term
technical support to the Government of Indonesia to improve its
understanding of the impact of the crisis on the public budget
and in adjusting its fiscal policy to meet prevailing crisis
conditions. USAID has financed short-term services to
strengthen monetary policy at the central bank, launch the
first direct open market sale of bonds by Bank Indonesia, and
to strengthen Bank Indonesia's understanding of inflation and
demand for money. We are arranging to supplement this work by
provision of a long-term advisor to Bank Indonesia who will
focus on monetary and exchange rate policy issues.
Structural Policy Reform.--USAID is providing long-term
technical support to the Government of Indonesia to assist in
the elimination of barriers to domestic economic competition as
specified in the IMF agreement such as inter-regional taxes,
fees, and other restrictions on the free movement of raw
materials and finished products. This includes work on vital
items in the forestry sector such as logs and rattan. Long-term
support is also being provided to assist Indonesia in meeting
its obligations to the IMF to reduce tariff barriers, non-
tariff barriers and export restrictions. Through a grant to the
Asia Foundation, barriers to fair competition for small
businesses are being investigated and proposals for policy
reform are being made to the Government of Indonesia. Not only
do these actions improve economic efficiency and performance;
they also will eliminate many of the most significant
opportunities for corrupt practices. USAID is moving to further
support fair competition for small and micro-businesses by
providing a long-term expert on small business finance policy
to Bank Indonesia, and a long-term specialist who will work
with the GOI on small business development policy. The work on
strengthening the general domestic competitive environment will
be supported by additional long-term advisors in the Planning
Agency (BAPPENAS) and at the Ministry of Industry and Trade.
Economic Law.--USAID is providing short-term support to
Indonesia to revise or replace many of its laws which are
critical to the success of the IMF reform package and the
efficient operation of the Indonesian economy. These laws
include: bankruptcy, secured transactions (a system of
registration of loan collateral), competition law, and
arbitration. Arrangements are being made to continue this
short-term support and to provide an additional long-term
advisor to the Ministry of Justice to support this work.
Other Actions.--Indonesia is now taking steps to move
toward a more democratic form of governance. Not only is there
need for greater fairness and transparency on the part of
government, as embodied in the IMF-sponsored reforms; there is
also greater need for involvement of non-governmental actors in
the development of public policy. USAID is therefore organizing
a series of partnerships between U.S. and Indonesian
universities, think tanks and research organizations designed
to strengthen the ability of Indonesian non-governmental
institutions to participate in an informed manner in economic
policy debates and in shaping the future structure of the
Indonesian economy. Greater public participation in such
debates will not only strengthen the economic policy framework
of the country, it will also contribute to improved governance.
The first four grants under this partnership arrangement are
expected to be made by the end of September if not earlier.
Mission
Senator McConnell. You have not decided what the
consultants will be doing and how much it will cost?
Mr. Atwood. I think most of it, yes, we have identified the
government ministries where they would be working and the
banks, the central bank, and the like. For the most part, I
think it is not going to change the location, but their mission
will undoubtedly change, which means that we will have to
redraft their terms of reference.
Senator McConnell. Senator Leahy.
Senator Leahy. Thank you, Mr. Chairman.
We have talked about the budget allocation, the fact that
it is significantly below the 1998 level. You discuss it, of
course, in your written testimony. Is there some kind of a
strategy the administration has in working with Congress on
this?
Mr. Atwood. Yes; I am sure there is, Senator, but it has
not been successful to date. I think it is very, very important
that we call attention to the 150 account. I have a great deal
of respect for Senator Stevens, since I worked here in the
Senate. He was a good friend of my boss, Senator Eagleton, at
the time. I know he is a fair man. But I know it is necessary
to cut budgets in the 302(b) allocation process, but to cut the
150 account, which is really our national security and our
foreign policy, is a very serious matter. I think even if the
outlay issue that has come up which I think was not fully
understood initially, what the impact would be on the budget,
to reduce below 1998 levels the budget authority for this
particular foreign operations budget is very, very serious
business in terms of our ability to influence all of these
crises that are going on around the world.
Senator Leahy. That is why I asked about the strategy and
why I would hope that the administration will take time to
share it with some of us up here prior to the final
appropriations bill being signed into law. I would suggest to
the people at the White House, the State Department, and
elsewhere, that it would be a nice change in procedure and
might actually help them in getting their budget through.
Because if we have the best circumstances, that is probably a
freeze at the current level of $12.8 billion. If you have a
3.6-percent cut from fiscal year 1998, that is a budget of
$12.6 billion. If you get no relief, then you have to cut AID
operating budgets by as much as 20 percent. Let's take the 20
percent, what does that mean? What would get cut?
closing Missions
Mr. Atwood. Well, back to give you some idea, I mean, we
would obviously have to close more missions, but it takes about
3 years before you an recoup the benefits of closing missions.
Initially, it costs money to close missions overseas. You have
to buy out the contracts of your FSN's, pay severance pay, buy
out rental agreements and everything else. It costs a good deal
of money, and it takes about 3 years before you realize the
benefits. The reason that our OE budget has been going down
steadily is because we have closed 28 missions overseas. That
is the only way we could do it.
To be hit with a 20-percent cut in 1 year would mean--I do
not know how we would handle it. We have a dilemma there. When
this was proposed in fiscal 1996, when we had such a severe
cut, GAO did a study and indicated that we simply would have to
close our doors if we were cut below a certain level. I believe
it was $465 million at that point. That was before we had the
reduction in force. It is that kind of severity that would
really mean tripling----
Senator Leahy. The reduction in force was about 160
employees, was it not?
Mr. Atwood. It was 164 to be exact, yes, Senator.
Senator Leahy. Well, on top of the new management system
and going into a new building which cost more.
Mr. Atwood. Yes; that is right.
Senator Leahy. What is the level of morale now as compared
to what it was before you had the RIF, the new building, the
new management system, and so on?
Mr. Atwood. Well, I think----
Senator Leahy. Everybody is sitting behind you listening.
Morale
Mr. Atwood. I realize that. I think actually, Senator, the
morale has come back very well after the reduction in force,
which has got to be a low point in the history of USAID. It was
the first time that that had been done in over 20 years. If we
had not done it, frankly, we would be in a lot worse shape
today. We would have had to have had a much deeper RIF. We had
to do it, and we had to do it quickly. Because if you do not
get people off the rolls, then you have more expenses later and
it would have been worse. The new management system was simply
something we had to do to be compliant with the law. Our
financial management systems need to be straightened out, but
we think we are on the right track there.
Moving into the new building is simply something, again, we
had to do because the State Department was going to renovate
the portion of the building that we were in and we were in 11
different buildings with commercial rates going up, up, up. We
are now at least in a much more predictable situation being in
the Ronald Reagan Building, which is a Government building, and
where the rental rates are predictable at least.
Senator Leahy. Well, let us talk about the NMS, the new
management system. It cost money to get it going. You are
saying it is not working yet?
Mr. Atwood. No; it is working. We are actually using it. It
has a software coding error rate in the financial portion of
the system that is too high, and we are going to have to make
fixes there.
Senator Leahy. How much has it cost so far to get where it
is?
Year 2000 problem
Mr. Atwood. We have spent $84 million on it to date and we
have four modules, three of which are working reasonably well
and two of which are working overseas. The financial module has
got a software coding error rate of about 25 percent, which is
unacceptable. We are going to have to correct that, and, of
course, modify all of our systems for the year 2000 problem.
Senator Leahy. When do you expect the system to be fully
operational?
Mr. Atwood. Fully operational? It depends on how you define
that. We think it is operational now. We want to correct the
problems that exist. Whether we can provide timely, accurate,
and complete reports so that we can have better information
about our pipeline, we believe we can do that by the year
fiscal 2000.
Senator Leahy. If it is a new system, why does it have a
year 2000 problem?
Mr. Atwood. It has made all of the provisions for the year
2000 issue. All of the references to years in that system are
on the four digit basis, and simply that is not the problem
that we have with the year 2000. We have six critical corporate
systems that need the year 2000 repair. We have indicated to
OMB our schedule for making those repairs; they are satisfied
with that. We have just announced a new contract with Computer
Sciences Corp. that will be working with us on a 5-year basis
to fix all of these problems.
Senator Leahy. Yes; on top of the $84 million already
spent.
Mr. Atwood. Well, the $84 million has produced a better
system than we had when we started, Senator. That is not the
problem.
Senator Leahy. It does not sound it. I mean, you have got
25--well, what was your error rate before? You have got a 25-
percent error rate now. What was it before?
Mr. Atwood. Well, we did not even have a system before. I
mean, we had a multitude of systems and we were spending as
much money as we are spending on this new system every year for
about 50-plus systems. It simply was unacceptable for a modern
agency to operate that way, so we had to make the effort to do
this. We, clearly, tried to push this much too fast to get it
into operation, which is why we have the software coding error
rate problem that we have.
I certainly concede that that was a problem, but we do have
a better system now than we had in 1993 when we started. It is
not acceptable. We need to improve it, and we will. We did not
have--in those days, there were no commercial, off-the-shelf
alternatives. We had to try to build this in house. We are not
a software company. We are not obviously talented in that
direction. I think we have learned more about our weaknesses in
the last 5 years.
Senator Leahy. Do not feel bad about that. The U.S. Senate
touts what they have done. They are up to about 1980 and
closing fast on 1983. You know, it is a place where they
finally get around to putting a computer in your office and
they charge you full price for what it, but it has been
obsolete for 6 years. You could spend millions and millions of
dollars to put fiberoptics through the walls and then end up
feeding it all into something that is so antiquated everything
comes to a stop. Maybe we never should have let the Government
get involved with this.
Mr. Atwood. I would be happy to consult with you.
Senator Leahy. The Senate has probably done as bad a job as
anybody in the country in getting a working computer system in
place. I have often suggested they fire everybody and hire a
couple of smart 12 year olds and we would save a lot of money.
Infectious diseases
One area, infectious disease, and I know you have worked
very hard on this as have Nils Daulaire, Dennis Carroll, and
others, trying to put together a U.S. strategy on infectious
diseases. It is something that has been a great interest of
mine. I think we have made some good progress since last year,
but it is a multiyear effort. This year the President has
requested a $48 million cut in the ``Child survival and
diseases'' account, which includes the funding for the
infectious disease strategy.
Let us assume we gave you at least the same amount of
funding for these programs as last year. Can you use that
effectively?
Mr. Atwood. You gave us a good head start last year, and I
think we have developed a good strategy. We believe we can
maintain the same level of impact with the budget request that
we have made. Obviously, we can use it. Then the question
becomes, Where does it come from? I mean, in light of the kind
of budget cuts that we are seeing here, it is a problem.
Senator Leahy. Well, my question is if you get it, could
you use it effectively?
Mr. Atwood. I think we have demonstrated that, Senator, in
terms of the way we put the strategy together.
Senator Leahy. I realize it is a zero sum game. If you give
something to one, you take it from someone else. Let us go to
microcredit. AID and the Congress have supported microcredit
programs. In 1994, AID set the goal that by 1996 one-half of
all AID microcredit funding would be directed to the poorest
people for loans of under $300. AID did not meet that target.
In 1996, a percentage of the funds going to the poorest people
was 38 percent. We want at least 50 percent of the funds spent
on the poorest people. Can AID reach that point?
Mr. Atwood. Yes; I believe we can. To the extent that that
is relevant, to the extent that the $300 goal is relevant. We
are spending money on our microenterprise programs also to
support the institutionalization of microcredit programs in
other places, helping governments to set the right policy
environment so that they can create the kind of banks that
would do this kind of lending.
Every year because of the interest that is collected on the
loans that we provide we are adding to the amount of capital
that is available for poor people. We cannot under the rules
count that as aid to poor people, but it is, in fact, aid to
poor people. I really believe that our program has been very
successful, and that if you take away the support that we have
to provide to run the program and these policy aspects of the
program, that over 50 percent of what we actually loan does go
to poor people and over 50 percent is under $300.
Senator Leahy. I am going to have further questions for the
record. I see Senator Bennett here, and I do not want to take
up his time. I am going to have one on IFAD that I would like
you to take a very close look at and I will put the rest in the
record.
Senator McConnell. Thank you, Senator Leahy. I appreciate
that. If we have anybody in the Senate who understands the year
2000 problem, it is the distinguished Senator from Utah who is
with us today. Now I yield to him.
Senator Bennett. Thank you, Mr. Chairman. I will surprise
you by not asking about year 2000 in this instance.
I will just comment, Mr. Atwood, your description of your
problems--changing your systems, moving to a new system and
then running into the year 2000 problem on top of it--is very,
very typical. I can list a whole series of organizations who
have had the same kinds of problems. Do not beat yourself up
too badly for saying, ``Gee, we did not do it right.'' I know
very, very few people who have been able to do it right. It
just seems to be the nature of the beast to create the kinds of
difficulties you have run into.
I want to switch to another area which I understand has not
been talked about. I think perhaps I can also qualify as one of
the strongest Members of the Senate in support of microcredit.
I would like to find out what the impact of the Glenn sanctions
have with respect to India and Pakistan on microcredit in those
two countries.
Humanitarian exceptions
Mr. Atwood. As yet to be determined, Senator. As you know,
there are humanitarian exceptions to the program. We have
submitted some suggestions as to what would qualify as
humanitarian to the administration, to the President, to make
decisions on this matter. He has not made those decisions yet.
Once a program under the Glenn amendment is determined to be
ineligible for the exceptions that are listed, the humanitarian
exception in this case, and you basically cut it, it is cut
forever unless the law is changed. It is a pretty rigid
standard, so we are struggling with this issue of defining what
would qualify as humanitarian.
Senator Bennett. Let us talk about both India and Pakistan
under the Glenn sanctions and go beyond microcredit. What
programs do you have going in those countries which under the
sanctions you are going to have to cut? What is the total
dollar amount? And, will that money in anyway be available to
alleviate some of your budget pressures in other areas?
Mr. Atwood. Yes; we have programs, first, in India that are
in the family planning area in the state of Uttar Praddesh, a
very large program there. Obviously, there is a question as to
whether that qualifies as a humanitarian program. My own belief
is that it does because it is helping women and families and
children. We have a title II food aid program of about $91
million in India. Obviously, I think that is a humanitarian
program. It feeds 6 or 7 million of the poorest women and
children in the world. The program to counter the AIDS epidemic
in one of the southern states of India is a humanitarian
program in my opinion.
Again, it is not only lawyers, but it is policymakers that
have to look at these questions to make these determinations. I
think clearly there are programs that would not qualify. We
have been doing a good job, I think, in trying to help the
Indians create a stock market and a regulatory system in
Bombay. One of the needs of this country is to attract foreign
investment. When you have a stock market that people have some
confidence in, indirect foreign investment is much more likely.
I cannot imagine that that will qualify as a humanitarian
program.
We also have a very large energy efficiency program in
India. There is an exception written in the appropriations act
that any program that would contribute to the lowering of
greenhouse gas emissions would be excepted from provisions of
law otherwise barring that aid. Again, we have suspended that
program and all programs right now in India awaiting a decision
as to what would qualify under these exceptions.
In terms of Pakistan, we terminated our bilateral program
under the Pressler amendment in 1995. We have undertaken a 4-
year, $9 million activity in Pakistan through a nongovernmental
organization to improve basic education and strengthen
literacy, to improve mother and child health, and to strengthen
income generation opportunities especially for women. That
program is, again, suspended until we can get a decision as to
whether or not that would qualify as a humanitarian program.
Senator Bennett. Do you have a dollar figure, total for
India and Pakistan, the dollar amount that presumably is in
your budget that might have to come out as a result of the
Glenn sanctions? I do not need you to be exact. But, can you
give me a ballpark figure as to how much money we are talking
about?
Mr. Atwood. We are talking--we are thinking that based on
our, again, preliminary assessment and our recommendations
within the administration that we would have to terminate $12
million of development assistance funds for economic growth
activities and approximately $9 million in housing guarantee
authority in India. Again, that is under the assumption that
the remaining part of what we are doing is humanitarian
exception. In Pakistan, it is approximately $10 million we are
spending. That would appear that that would qualify as a
humanitarian exception.
Senator Bennett. Do you have any plans for the Baltic
States in the next fiscal year?
Mr. Atwood. Yes; we still have programs in I believe two
out of the three Baltic States. I do not have the details with
me, but perhaps someone will come up with that before we are
finished here. I will provide it for the record.
Senator Bennett. Yes; they can furnish that for the record.
Mr. Atwood. All right.
[The information follows:]
USAID's Fiscal Year 1999 Budget Request for the Baltic Republics
USAID has on-going bilateral technical assistance programs
in Latvia and Lithuania. In September 1996, Estonia became the
first country to graduate from SEED Act assistance.
Latvia.--Fiscal year 1998 will be the final year of funding
for bilateral USAID programs in Latvia. Current programs in the
areas of capital markets, collateral law, and energy are
expected to end by Latvia's graduation date in September 1999.
Lithuania.--Until Lithuania's expected graduation in fiscal
year 2000, USAID's bilateral technical assistance programs will
focus on economic restructuring and include activities in
banking and capital markets reforms, bank supervision,
privatization and enterprise restructuring. USAID assistance to
the Bank of Lithuania will facilitate efforts to peg the
country's currency, the Litas, to the Euro.
Regional programs.--Funding for regional programs in energy
as well as those implemented under the Baltic American
Enterprise Fund and the Baltic American Partnership Fund will,
however, continue in all three Baltic republics over the next
several years.
Haiti
Senator Bennett. I have no further questions, Mr. Chairman.
Thank you.
Senator McConnell. Thank you, Senator Bennett. Mr. Atwood
had a choice between coming up here today and going to the
dentist, and I am sure he has decided he made the wrong
decision. [Laughter.]
We want to try to wrap up by 4 o'clock, but I do want to go
to one more area of some controversy, Mr. Atwood, and that is
Haiti. A recent news article pointed out that Haiti has
received $1.4 billion in international aid in the last 4 years,
and yet 80 percent of the rural population continues to live in
abject poverty on less than $250 a year, the lowest per capita
in the world. The article quoted a World Bank report which
stated: ``The political crisis jeopardized foreign aid, delayed
implementation of public sector reforms, derailed
privatization, discouraged private sector investment, and
ultimately aborted economic recovery.''
Haiti's last prime minister resigned in June, and the
parliament has rejected three of the president's candidates. I
am interested in determining whether you can describe the state
of play between the president and the party holding the
majority known as the People's Organization of Struggle. And,
can you explain why the administration has doubled the request
for Haiti from $70 million to $140 million, given the fact that
any objective analysis would suggest that all of our efforts
there have been a total failure?
Mr. Atwood. I would not accept the last statement.
Senator McConnell. Why not?
Mr. Atwood. I think there has been a lot of progress that
has been made in Haiti. In fact, a good deal of progress in
terms of privatization. We have been making progress in
privatizing nine of the state enterprises there, the flour mill
and the cement mill and there are different activities, the
port, the telephone company, the airport. They have not
privatized them yet, but the progress toward that is very
significant. We have seen a great deal of change in the
internal situation. There are still human rights abuses, but
nowhere near what they were.
We have set up a national police force that has 5,200
members. We have trained 700 judges and prosecutors. Over 2.3
million people are receiving health services through NGO
programs there. Infant mortality rates have dropped by 25
percent; 7,000 primary schoolteachers have been trained. Price
controls have been abolished. The exchange rate has been
liberalized.
Illegal immigrants, the most significant thing I guess and
the reason we got into this in the first place, are not
flooding our shores and costing our Federal, State, and local
governments millions of dollars. We were spending billions of
dollars with a cordon of the Navy and Coast Guard ships trying
to pick up people leaving that island before, and that is not
happening any longer.
It is not all a bad picture. But we are very upset, as you
are, with the impasse, the political impasse, and the inability
to name a prime minister. We have been working behind the
scenes in trying to resolve that problem. We have made some
progress. I do not think it would be wise for me to talk about
it in an open hearing because there are some delicate
agreements that have been reached. We hope that we will see
that becoming public soon, at which time we will be able to
reveal more of what we have been doing behind the scenes.
The impasse which was precipitated by a controversial
election, two senate seats in particular, and the role of the
election commission down there has been very, very difficult,
the struggle between two relatively new political parties in a
very new democracy, people have not yet learned the art of
compromise. It is a little bit like dealing with the Mexico
City population issue here. It has not been easy to resolve
that impasse. I have no excuses for that. I think it has been
an embarrassment to the administration. It has certainly been
an embarrassment to President Preval and to the Haitians as
well because it has been holding up about 250 million dollars'
worth of international financial institution support for that
country. The poor people are suffering because the politicians
in Port-au-Prince cannot reach agreement.
Senator McConnell. Well, thank you very much, Mr. Atwood.
It is not going to be an easy year, as we can all certainly
agree. I appreciate your time, and we look forward to working
with you in the coming months.
Mr. Atwood. Thank you, Senator.
subcommittee recess
Senator McConnell. That concludes our hearing. The
subcommittee will stand in recess until 10:30 a.m., Tuesday,
June 16, when we will receive testimony from the Secretary of
State, the Honorable Madeleine Albright.
[Whereupon, at 3:55 p.m., Tuesday, June 9, the subcommittee
was recessed, to reconvene at 10:30 a.m., Tuesday, June 16.]
FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS
APPROPRIATIONS FOR FISCAL YEAR 1999
----------
TUESDAY, JUNE 16, 1998
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:37 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Mitch McConnell (chairman)
presiding.
Present: Senators McConnell, Gregg, Bennett, Campbell,
Stevens, Leahy, Lautenberg, Mikulski, and Murray.
DEPARTMENT OF STATE
Office of the Secretary
STATEMENT OF HON. MADELEINE ALBRIGHT, SECRETARY OF
STATE
opening remarks of senator mitch mc connell
Senator McConnell. The hearing will come to order.
We have excellent attendance this morning. We must have
somebody of high rank before us.
I would remind all the subcommittee members that it has
been the tradition of this subcommittee for opening statements
only to be made by the chairman and the ranking member, so that
we can get on to our witnesses, and we will stick with that
pattern. I expect Senator Leahy here shortly.
Secretary Albright, much has changed since your appearance
here last year; unfortunately, little for the better. There are
a few bright, hopeful spots, such as the settlement in Ireland,
but there are many more flash points challenging United States
resolve, resources and interests. There are no shortages of
difficulties. There are threats to political stability and
security in Kosovo, Cambodia, Nagorno-Karabakh, Cyprus,
Colombia, India, Pakistan, North Korea, Iraq, Iran, Indonesia,
and Burma.
The economies of Indonesia, Thailand, Korea, Burma, and
Japan are in deep trouble, with the prospects of a devaluation
in China more real and disturbing by the day. And now Russia
has been added to the list of countries in economic peril.
Let me comment on a few areas which I find especially
troubling, both because of the serious impact of the problems
and how the administration has chosen to respond. In our own
backyard, I am concerned that Colombia is entering a dangerous
period in which the future of a democratic government is very
much at stake. The immediate threat is the emerging
relationship between major narcotics traffickers and
terrorists, which is compounded by the relationship between
traffickers and well-armed, well-financed paramilitary
organizations.
There is clearly a crisis of leadership in Colombia. But,
this problem seems to be exacerbated by ambiguities and
inconsistencies in our policy. We cannot seem to decide who to
support and what we should be doing from one day to the next.
Is the target of U.S. aid traffickers, terrorists, both, or
neither?
Just as one example of the confusion, in January, the
Department sent a letter supporting the acquisition of
Blackhawk helicopters for the Colombian counternarcotics
police. In May, a letter arrived reversing that decision.
Without commenting on the merits of such a program, I can say
that the decisionmaking process caused real alarm in the
region, needlessly compromising confidence in our commitment.
I am similarly mystified by our response to the crisis in
India and Pakistan. Given the close relationship between the
People's Republic of China [PRC], and Pakistan and, conversely,
India's strained ties with both, I was surprised Beijing was
not engaged in the effort to reduce tensions after New Delhi
detonated.
Similarly, I was disappointed in the decision to send a
State Department team to Pakistan to discuss economic relief at
a time when Islamabad was seized with the security implications
of the threat. Pakistan's detonation may have been inevitable.
However, they needed, and we apparently did not offer, any
assurances that the United States would not let stand an Indian
threat to Pakistan's existence.
The circumstances seemed to call for a senior Defense
Department representative clarifying our security interests in
stability rather than an offer of potential economic relief. If
there is good news about the detonations, it is the revival of
interest in the pending emergency on the Korean Peninsula.
After the blast, the prospects of two regional nuclear crises
called attention to a North Korean letter threatening to
withdraw from the agreed framework because the United States
has failed to fulfill obligations to provide fuel.
This accusation, this problem, is astonishing, since
Congress not only fully funded the $30 million request for
KEDO, but also provided an additional $10 million as a down
payment to leverage contributions to cover $44 million in debt.
What I find hard to understand is the fact that even if you
solve the immediate shortfall, which will require using any
number of special legal authorities, the administration has
already determined that the $35 million request for 1999 is
inadequate to meet the needs. When you are asking for a billion
increase in the foreign aid budget, how can we come up short in
this account?
Korea is not the only Asian problem. In a hearing last
week, I expressed my continued frustration with the
administration's approach in Indonesia. No doubt you have heard
reports, but let me offer one example of a relatively minor
policy decision pushed specifically by the East Asia Bureau,
which I consider counter to our long-term interests. As the
military was engaged in an effort to repress Suharto's
opponents, the administration requested $2 million to train the
Army in firefighting tactics.
Like Colombia, this decision was immediately reversed in
the face of strong congressional opposition. Nonetheless, with
urgent unmet humanitarian needs, this request sent a chilling
message to democratic activists.
While I welcomed your call for Suharto to step aside, there
has been little since that message reflecting our commitment to
accelerating the election timetable or for political or
economic support for the opposition.
We seem to be in similar drift with regard to the elections
in Cambodia. There appears to be little stomach to call Hun
Sen's bluff and support the democratic opposition's call to
delay the elections, even though they are being denied full and
free participation.
The final region I want to discuss is perhaps the most
widely and deeply afflicted with problems: Europe and the NIS.
Most immediately, many are questioning whether we learned any
lessons in Bosnia. From one day to the next, from one official
to the next, we are sending very mixed messages to Milosevic,
to Kosovo and to other key regional players. Your call for
sanctions, followed by Ambassador Holbrooke's request for
sanctions relief, followed by air exercises and threats of air
raids--all while the Serbs gut yet another village--
communicates confusion and yields to the savagery of more
ethnic cleansing.
While I questioned our major commitment of resources in
Bosnia, I have no doubt of our interest in this area. I am
convinced that the Bush administration got it right in Kosovo,
with the 1992 Christmas warning to Serbia. As the President and
Brent Scowcroft spelled out to Milosevic, the United States had
and has clear interest in preventing the spread of this
conflict. Milosevic understood the United States was willing to
take unilateral military action if needed, to avoid a conflict
with the potential to suck in Greece, Macedonia, Turkey, and
Albania, and strike at the heart of NATO unity.
But the Balkans are not the only serious European problem.
For the past 5 years, Senator Leahy and I have called attention
to the need to restructure, implement and enforce changes in
the commercial, tax and banking systems in Russia. Each year,
we have been assured that the billions of dollars in bilateral
and multilateral aid were making this happen. Now, senior IMF
officials are warning that Russia is on the brink of a full-
fledged crisis. Spending excessively outpaces tax collection, a
system crippled as we all know by corruption. The immediate
risk of hyperinflation is real and requires urgent correction,
not another bilateral bailout.
I do not want to recite the many failed attempts Congress
has made to attach conditions or constraints to aid to Russia.
Not only are there severe immediate economic consequences to
the administration's reluctance to challenge Moscow, I fear we
will pay a heavy price in future security interests with the
possibility of a nuclear-armed Iran. Every year, the
administration has opposed our efforts to link aid to the end
of Russia's transfer of nuclear technology and equipment to
Iran. Every year, cooperation between Tehran and Moscow has
expanded.
Russia's neighbors also pay a price for our approach.
Nowhere is this more evident than in Nagorno-Karabakh, where a
consistent United States-led initiative could produce a
breakthrough. Unfortunately, after extensive conversation with
leaders in the region, it is clear to me that the Russians are
not interested in a settlement. If we do not elevate this issue
and proceed with or without the Russians or the Minsk Group, we
compromise our interests in a coherent Caspian energy security
policy.
Speaking of energy, let me conclude with the observation
that problems in the Persian Gulf and the Middle East remain
contentious and potentially destabilizing. In this context, I
was concerned by confusion recently generated over prospects of
United States support for the costs of the next stages of
Israeli redeployment. At a time when Israel has proposed the
elimination of ESF, I am caught somewhat by surprise by
representations that to secure an agreement the administration
has suggested that we might be prepared to provide up to $1
billion for redeployment. I hope these promises are not being
made, because many people will be very disappointed.
Secretary Albright, you have a full plate obviously. What
concerns me, both as the chairman of the subcommittee and as a
Senator deeply interested in the course of our Nation's foreign
policy, is the preservation of American credibility and
interests. That credibility is damaged by reversals,
inconsistencies and inattention. Small as some decisions may
seem in the global context, there is a cumulative and negative
impact of the administration calling for sanctions in the face
of Kosovo ethnic cleansing, then, 1 week later, reversing the
decision; calling for Suharto to step down, but offering no
meaningful followup or economic or political support to the
opposition; and calling Iran a terrorist state, but failing to
impose even the weakest of restrictions on Tehran or its
nuclear partners in Moscow.
Each decision contributes to creating an impression of
American weakness and a sense of hollow diplomacy. There is a
mismatch between rhetoric and real requirements, a disconnect
between diplomacy and the credible threat and use of force. In
an effort to get a crisis off the front page, there is an
inevitable push toward expedient solutions. While this approach
may relieve immediate pressure, it will only make your future
tasks more difficult.
You clearly have a sense of purpose and of the direction
the country must go. In the face of the problems, shortfalls,
reversals, and ambiguities I have reviewed, the question is:
Who is following?
prepared statement
Much is at stake. Much more is expected from you and your
team in the months and years ahead. Unfortunately, you face
more challenges with fewer resources. The hard-won increase in
foreign assistance which you, Senator Leahy, Senator Stevens
and I fought to secure last year has been unfortunately
substantially reduced by the pressures of balancing the budget
and other discretionary spending priorities. I am hopeful that
by delaying our markup as late as possible, the subcommittee
may benefit from unused budget authority and outlays, as well
as the chairman's good judgment, generosity and shared
commitment to the 150 account.
[The statement follows:]
Prepared Statement of Senator Mitch McConnell
Secretary Albright, much has changed since your appearance
here last year, unfortunately, little for the better. There are
a few bright, hopeful spots such as the settlement in Ireland,
but there are many more flashpoints challenging U.S. resolve,
resources and interests.
There is no shortage of difficulties--there are threats to
political stability and security in Kosova, Cambodia, Nagorno-
Karabakh, Cyprus, Colombia, India, Pakistan, North Korea, Iraq,
Iran, Indonesia and Burma. The economies of Indonesia,
Thailand, Korea, Burma and Japan are in deep trouble with the
prospects of a devaluation in China more real and disturbing by
the day. And, now Russia has been added to the list of
countries in economic peril.
Let me comment on a few areas which I find especially
troubling both because of the serious impact of the problems
and how the Administration has chosen to respond.
In our own back yard, I am concerned that Colombia is
entering a dangerous period in which the future of a democratic
government is very much at stake. The immediate threat is the
emerging relationship between major narcotics traffickers and
terrorists which is compounded by the relationship between
traffickers and well armed, well financed paramilitary
organizations. There is clearly a crisis of leadership in
Colombia, but this problem seems to be exacerbated by
ambiguities and inconsistencies in our policy. We can't seem to
decide who to support and what we should be doing from one day
to the next. Is the target of U.S. aid traffickers, terrorists,
both or neither?
Just as one example of the confusion, in January the
Department sent a letter supporting the acquisition of
Blackhawk helicopters for the Colombian counter-narcotics
police. In May a letter arrived reversing that decision.
Without commenting on the merits of such a program, I can say
that the decision making process caused real alarm in the
region, needlessly compromising confidence in our commitment.
I was similarly mystified by our response to the crisis in
India and Pakistan. Given the close relationship between the
PRC and Pakistan and conversely India's strained ties with
both, I was surprised Beijing was not engaged in the effort to
reduce tensions after New Delhi detonated. Similarly, I was
disappointed in the decision to send a State Department team to
Pakistan to discuss economic relief at a time when Islamabad
was seized with the security implications of the threat.
Pakistan's detonation may have been inevitable, however they
needed, and we did not offer, any assurances that the United
States would not let stand an Indian threat to Pakistan's
existence. The circumstances seemed to call for a senior
defense department representative clarifying our security
interests in stability rather than an offer of potential
economic relief.
If there is good news about the detonations, it is the
revival of interest in the pending emergency on the Korean
peninsula. After the blasts, the prospects of two regional
nuclear crises called attention to a North Korean letter
threatening to withdraw from the Agreed Framework because the
United States has failed to fulfill obligations to provide
fuel.
This accusation--this problem--is astonishing since
Congress not only fully funded the $30 million request for
KEDO, but also provided an additional $10 million as a down
payment to leverage contributions to cover $44 million in debt.
What I find hard to understand is the fact that even if you
solve the immediate shortfall which will require using any
number of special legal authorities, the Administration has
already determined that the $35 million request for 1999 is
inadequate to meet needs. When you are asking for a $1 billion
increase in the foreign aid budget, how can you come up short
in this account?
Korea is not the only Asian problem. In a hearing last week
I expressed my continued frustration with the Administration's
approach in Indonesia. No doubt you have heard reports, but let
me offer one example of a relatively minor policy decision
pushed specifically by the East Asia Bureau which I consider
counter to our long term interests. As the military was engaged
in an effort to repress Suharto's opponents, the Administration
requested $2 million to train the army in firefighting tactics.
Like Colombia, this decision was immediately reversed in the
face of strong congressional opposition. Nonetheless, with
urgent, unmet humanitarian needs, this request sent a chilling
message to democratic activists. While I welcomed your call for
Suharto to step aside, there has been little since that message
reflecting our commitment to accelerating the election
timetable or for political or economic support for the
opposition.
We seem to be in similar drift with regard to the elections
in Cambodia. There appears to be little stomach to call Hun
Sen's bluff and support the democratic opposition's call to
delay the elections even though they are being denied full and
free participation.
The final region I want to discuss is perhaps the most
widely and deeply afflicted with problems: Europe and the NIS.
Most immediately, many are questioning whether we learned any
lessons in Bosnia. From one day to the next, from one official
to the next, we are sending very mixed messages to Milosevic,
to Kosova, and to other key regional players. Your call for
sanctions, followed by Ambassador Holbrooke's request for
sanctions relief, followed by air exercises and threats of air
raids--all while the Serbs gut yet another village--
communicates confusion and yields to the savagery of more
ethnic cleansing. While I questioned our major commitment of
resources in Bosnia, I have no doubt of our interests in this
area. I am convinced that the Bush Administration got it right
in Kosova with the 1992 Christmas warning to Serbia. As the
President and Brent Scowcroft spelled out to Milosevic, the
United States had and has clear interests in preventing the
spread of this conflict. Milosevic understood the U.S. was
willing to take unilateral military action if needed to avoid a
conflict with the potential to suck in Greece, Macedonia,
Turkey and Albania and strike at the heart of NATO unity.
But, the Balkans are not the only serious European problem.
For the last five years, Senator Leahy and I have called
attention to the need to restructure, implement and enforce
changes in the commercial, tax and banking systems in Russia.
Each year, we have been assured that the billions of dollars in
bilateral and multilateral aid were making this happen. Now,
senior IMF officials are warning Russia is on the brink of a
full fledged crisis. Spending excessively outpaces tax
collection, a system crippled by corruption. The immediate
risks of hyperinflation are real and require urgent correction,
not another bilateral bail-out.
I do not want to recite the many failed attempts congress
has made to attach conditions or constraints on aid to Russia.
Not only are there severe immediate economic consequences to
the Administration's reluctance to challenge Moscow, I fear we
will pay a heavy price in future security interests with the
possibility of a nuclear armed Iran. Every year the
Administration has opposed our efforts to link aid to the end
of Russia's transfer of nuclear technology and equipment to
Iran; every year cooperation between Tehran-Moscow has
expanded.
Russia's neighbors also pay a price for our approach.
Nowhere is this more evident than Nagorno-Karabakh where a
consistent, U.S. led initiative could produce a break-through.
Unfortunately, after extensive conversation with leaders in the
region, it is clear to me that the Russians are not interested
in a settlement. If we do not elevate this issue, and proceed
with or without the Russians or the Minsk Group, we compromise
our interests in a coherent Caspian energy security policy.
Speaking of energy, let me conclude with the observation
that problems in the Persian Gulf and the Middle East remain
contentious and potentially destabilizing. In this context, I
was concerned by confusion recently generated over prospects of
U.S. support for the costs of the next stages of Israeli
redeployment. At a time when Israel has proposed the
elimination of ESF, I am caught somewhat by surprise by
representations that to secure an agreement the Administration
has suggested we are prepared to provide up to $1 billion for
redeployment. I hope these promises are not being made because
many people will be very disappointed.
Secretary Albright, you have a full plate. What concerns me
both as the Chairman of this subcommittee and as a senator
deeply interested in the course of our nation's foreign policy
is the preservation of American credibility and interests. That
credibility is damaged by reversals, inconsistencies and
inattention. Small as some decisions may seem in a global
context, there is a cumulative and negative impact of the
Administration calling for sanctions in the face of Kosova
ethnic cleansing, then a week later reversing the decision;
calling for Suharto to step down, but offering no meaningful
follow up economic or political support to the opposition; and
calling Iran a terrorist state but failing to impose even the
weakest of restrictions on Tehran or its nuclear partners in
Moscow.
Each decision contributes to create an impression of
American weakness, a sense of hollow diplomacy. There is a mis-
match between rhetoric and real requirements--a disconnect
between diplomacy and the credible threat and use of force. In
an effort to get a crisis off the front page, there is an
inevitable push toward expedient solutions. While this approach
may relieve immediate pressure, it will only make your future
tasks more difficult. You clearly have a sense of purpose and
of the direction the country must go. In the face of the
problems, shortfalls, reversals and ambiguities I have
reviewed, the question is who is following?
Much is at stake--much more is expected from you and your
team in the months and years ahead. Unfortunately, you face
more challenges with fewer resources. The hard won increase in
foreign assistance which you, Senator Leahy, Senator Stevens
and I fought to secure last year has been substantially reduced
by the pressures of balancing the budget and other
discretionary spending priorities. I am hopeful that by
delaying our mark up as late as possible, the Subcommittee may
benefit from unused budget authority and outlays as well as the
Chairman's good judgment, generosity and shared commitment to
the 150 account.
opening remarks of senator patrick j. leahy
Senator McConnell. Let me now call on Senator Leahy.
Senator Leahy. Thank you very much, Mr. Chairman.
Madam Secretary, it is good to have you here and I hope you
feel the same way. Because this subcommittee, both under the
chairmanship of Senator McConnell and, prior to that, under my
chairmanship, has been very supportive of the budget you are
testifying about.
Anyone who thought the world would become a calm and
peaceful place after the cold war obviously does not think that
any longer. There are major security challenges and crises
today practically everywhere you look. And to your credit,
Madam Secretary, you are one who, from the first day of your
time as Secretary of State, warned us that could be the
situation, just as you said so very clearly and very
emphatically at the United Nations.
Before we get to that, I do want to congratulate you on the
vote to admit Poland, Hungary, and the Czech Republic to NATO.
I know this was extremely important to you personally. You
deserve a lot of credit for the overwhelming vote in the
Senate.
As you know, I reached a different conclusion, but I
genuinely hope I am proven wrong, and that the decision to
enlarge NATO turns out to be the right one. Now that we have
voted for enlargement, now that it is the position of the
United States, I believe the Congress should give both the
administration and NATO strong support and that we are
obligated to do everything possible to make it work.
We have cast our vote on both sides of the issue, but now
we should be united as a country and as a Congress in giving
that support. And I, for one, will pledge to do that.
Now, lately, you have been to Japan, China, South Korea,
and Mongolia. You were in Ukraine a few months ago, in Africa
before that. And then you spent an afternoon in Burlington, VT,
which some people may think is a foreign country.
Only the people in the eastern States, like New Hampshire,
feel that way, I would say to my friend from New Hampshire.
And I would thank you for that. Because the reaction of the
people in Vermont, I think, in their questions to you, reflects
the fact that, contrary to what some may think, most people in
this country really do care what our foreign relations are and
really do have strong opinions, and you found that. I think we
are fortunate to have a Secretary of State who knows that a
successful foreign policy needs the public's support.
And while you can sit across the table from Foreign
Minister Primakov or President Jiang Zemin and speak
passionately and forcefully about the world as we want it to
be, you also go out to the country and talk to those who make
up this wonderful country and hear their views.
But you only have to drive a mile from the State Department
to find one of your most difficult and urgent challenges. It is
not as dangerous as a nuclear arms race between Pakistan and
India, or Russia selling nuclear technology to Iran, but it is
just as deserving of your attention. Despite the strong
bipartisan vote to enlarge NATO, the Congress has virtually
ground to a halt over foreign policy.
The impasse over family planning is only one aspect of it.
It is at least as much a reflection of widely differing views
about how the United States can best achieve its foreign policy
goals and the appropriate role of the Congress in that process.
Now, some of your predecessors made the fateful mistake of
spending a lot of time building relations with foreign
governments and trying to promote policies without first
building the relationships and the support needed here. Then,
when they needed Congress to back them up, the Congress was not
willing to give them the political support or the resources
they needed. Without that, you cannot do very much in foreign
policy.
Over the past 2 years, I believe you tried hard to avoid
that trap. I think we have made real progress in reversing the
decline in the foreign operations budget.
But today I am afraid that we are on the verge of losing
everything we have gained. You know as well as anyone that
dealing with the Congress is not easy. Some here in this body
and some in the House made commitments and then they broke
them, like funding for the United Nations.
I come from the old school that if you make a commitment
you ought to stick with it. Some did not.
Sometimes, no matter how hard you try, you cannot convince
people to agree with you, even if it is in the national
interest, especially if there are political points to be made
by disagreeing.
Last month, we received our 1999 budget allocation. In the
best of circumstances, it amounts to a $200 million cut below
the current level. Not only will you not get the increases the
President requested, but many foreign operations programs,
except for--or because of--the Middle East, will be cut
sharply.
I think that would be foolhardy, and it would nullify all
that you, Chairman Stevens, Chairman McConnell, and I have done
to protect this budget in the past year. And I would compliment
Senator Stevens and Senator McConnell, who have put as their
mantra and as their lode stone ``bipartisanship'' in trying to
get this through.
Your written testimony lays out an extremely ambitious
foreign policy agenda. Frankly, I do not think a superpower can
have it any other way. And I am one of those Americans who want
us to be a superpower because of our democratic ideals. And I
think that being able to promote those democratic ideals is the
greatest way to have peace.
prepared statement
I do not want to see the United States become Fortress
America, and shirk from the rest of the world. I think for our
children and our grandchildren, it is important that we
maintain, and expand, our role in the world. But I urge you,
during the coming weeks and months, to devote as much time as
possible to our budget situation. Because, otherwise, we are
not going to be able to do the things that a great nation
should and can and will do if we have the tools to do it.
Thank you, Mr. Chairman.
Senator McConnell. Thank you, Senator Leahy.
[The statement follows:]
Prepared Statement of Senator Patrick Leahy
Madam Secretary, it is good to have you here.
Anyone who thought the world would become a calm and
peaceful place after the Cold War obviously does not think that
any longer. There are major security challenges and crises
today practically everywhere you look.
But before we get to that I want to congratulate you on the
vote to admit Poland, Hungary, and the Czech Republic to NATO.
I know this was extremely important to you personally and you
deserve a lot of the credit for it.
As you know, I reached a different conclusion, but I
genuinely hope I am proven wrong and that the decision to
enlarge NATO turns out to have been the right one.
You have been to Japan and China, South Korea and Mongolia.
You were in Ukraine a few months ago, and Africa before that.
And you spent an afternoon in Burlington, Vermont, which to
some people here can seem like a foreign country.
The American people are fortunate to have a Secretary of
State who knows that a successful foreign policy needs the
public's support, and who can sit across the table from Foreign
Minister Primakov or President Jiang Zemin and speak
passionately and forcefully about the world as we want it to
be.
That is the job of a Secretary of State. But you need only
drive a mile from the State Department to find one of your most
difficult and urgent challenges. It is not as dangerous as a
nuclear arms race between Pakistan and India, or Russia selling
nuclear technology to Iran. But it is no less deserving or in
need of your attention.
Despite the strong, bipartisan vote to enlarge NATO, the
Congress has virtually ground to a halt over foreign policy.
The impasse over family planning is only one aspect of it. It
is at least as much a reflection of widely differing views
about how the United States can best achieve its foreign policy
goals and the appropriate role of Congress in that process.
Some of your predecessors made the fateful mistake of
spending a lot of time building relationships with foreign
governments and trying to promote policies without first
building the relationships and a base of support here.
Then when they needed Congress to back them up the Congress
was not willing to give them the political support or the
resources they needed. Without those two things you cannot do
much in foreign policy.
Over the past two years you tried hard to avoid that trap,
and together we made real progress in reversing the decline in
the Foreign Operations budget.
But today we are on the verge of losing everything we have
gained. You know as well as anyone that dealing with the
Congress is not easy. Some here made commitments and broke
them, like funding for the United Nations.
And sometimes no matter how hard you try you cannot
convince people to agree with you even if it is in the national
interest, especially if there are political points to be made
by disagreeing.
Last month we received our 1999 budget allocation, and in
the best of circumstances it amounts to a $200 million cut
below the current level. Not only will you not get any of the
increases the President requested, but many Foreign Operations
programs, except for--or because of--the Middle East, will be
cut sharply.
That would be foolhardy, and it would nullify all that you,
Chairman Stevens, Senator McConnell and I have done to protect
this budget in past years.
Your written testimony lays out an extremely ambitious
foreign policy agenda. I don't think a superpower can have it
any other way. But I urge you during the coming weeks and
months to devote as much time as possible to our budget
situation, because otherwise you are not going to be able to do
many of the things you need to do.
summary statement of hon. madeleine albright
Senator McConnell. Thank you, Madam Secretary, for being
here. I gather you have a lengthy statement. We will put that
in the record, and I ask you to proceed with your oral
presentation.
Secretary Albright. Thank you very much, Mr. Chairman.
I am very pleased to be here. I feel that both of your
opening statements have raised many questions, which I will be
happy to address. But I first thought that maybe I should give
some of my oral statement.
I want to thank you and the subcommittee for accommodating
my schedule. I was supposed to testify last month, but talks on
the Middle East intervened. And certainly the past 5 weeks have
given us even more to talk about, as you have listed so
eloquently. But they have not altered my fundamental mission in
coming here, which is to ask for money. In so doing, I will be
brief.
You have my written statement, which is not so brief, and I
hope that you will review it, nevertheless, because it covers
many of the subjects that you have raised, and parts of the
world I would not be able to include in my oral remarks and
still honor your time for questions.
peace, prosperity, and freedom
Mr. Chairman and members of the committee, we Americans
want to live and we want our children to live in peace,
prosperity, and freedom. But it is becoming increasingly clear
that we cannot guarantee those blessings for ourselves if
others do not have them as well.
Events of the past few months, especially in South Asia,
the Far East, the Balkans, and the gulf, illustrate the range
of perils that exist as we approach the new century. I come to
this subcommittee in search of the resources and tools we need
to respond to those perils, and to seize opportunities for
strengthening democracy, promoting open markets and upholding
American values. I realize that this subcommittee has been a
champion of adequate funding for international programs. I
consider our work together and our cooperation a model in
trying to achieve what we can for the American people. And I
salute you for the help and the work that you do.
However, this year, we have, together, been given an
unacceptably low allocation, a full $900 million below the
President's request. I hope very much that we can work together
this year to adequately fund this account so that we can
provide the kind of leadership our interests require and our
citizens expect and deserve.
Mr. Chairman, despite recent setbacks, the Middle East
remains an area where U.S. leadership is both needed and
desired. The current deadlock in the peace process endangers
historic gains and threatens our own interests. And for that
reason we have been working patiently to help Israelis and
Palestinians overcome their crisis of confidence.
During the past several months, we have sought to create an
environment that would trigger accelerated permanent status
negotiations. Chairman Arafat has accepted in principle our
ideas for doing so, and we are now working with Prime Minister
Netanyahu to see whether there is a way for Israel to accept
them as well. I believe there is a possibility to reach
agreement, and we will continue our efforts as long as we
believe that Israelis and Palestinians are serious about doing
so.
As we persist in our diplomacy, I hope that we have this
subcommittee's support for our request for assistance to our
partners in peace, including Israel, Egypt, Jordan, and the
areas under Palestinian self-rule. Your help will contribute to
stability, while providing a foundation for future diplomatic
efforts.
In another long-troubled region, the Balkans, the cause of
reconciliation is confronted simultaneously with new
opportunities and resurgent danger. In Bosnia, serious
challenges remain, but the prospects for an enduring peace have
brightened. Our budget request, when combined with the larger
amounts provided by our allies, will help keep Bosnia on the
upward road to permanent peace, and will help ensure that when
our Armed Forces do leave that country, they leave for good.
Unfortunately, the outlook in Kosovo is far more clouded.
There, Serb repression has spurred a cycle of violence that has
caused great suffering and has the potential to draw
neighboring countries into conflict. The United States has
joined other leading nations in sending a strong message to
President Milosevic. He must end the excessive use of force
against civilians, enter a serious dialog with the leaders of
the Albanian-Kosovar community, cooperate in the safe return of
refugees, and take steps to see that the legitimate rights of
all the people of Kosovo will be respected.
To encourage a positive Serb response, NATO leaders have
not ruled out the use of force if the violence in Kosovo
continues. And yesterday we conducted air exercises.
Contingency planning is underway.
Obviously our strong preference is for a diplomatic outcome
that restores peace and respects rights. We condemn acts of
violence by all sides, including the Kosovar Liberation Army.
But we must also oppose as strongly and effectively as we can
the campaign of terror and depopulation being waged by Serb
forces.
As we look ahead, we know that the prospects for long-term
peace in Europe depend, as well, on the success of democracy in
the Baltics, Ukraine, Russia, the Caucasus, and Central Asia.
For this reason, I strongly urge your support for SEED and for
the Partnership for Freedom.
These democracy-building, prosperity-creating, law-
strengthening programs are blue chip investments. Already a
number of countries have graduated and no longer need our aid.
But the region is vast, and the dangers posed by criminals and
backsliders are many.
In Russia, we have a vital interest in seeing that nuclear
weapons technology and expertise is controlled, not put up for
sale. We need your help in funding these initiatives fully and
flexibly, so that the forces of democracy may be bolstered and
their enemies held at bay.
Our efforts to promote lasting stability across Europe are
mirrored in Asia, which I visited early last month. During that
trip, I had the opportunity to sign an agreement creating
important new defense cooperation arrangements with our close
ally, Japan. I met with Korea's courageous new President Kim
Dae Jung, who came to Washington last week.
In that connection, let me emphasize the value of funding
in full our contributions to the Korean Peninsula Energy
Development Organization [KEDO]. Mr. Chairman, you have helped
on KEDO funding before, and we will continue to work closely
with the subcommittee on this. This is a line item that is
truly vital to our national security and to the safety of a key
ally.
During my Asia trip, I also met with senior Chinese
officials to prepare for the upcoming summit in Beijing. Now I
know that some say that the President should not go to China.
But I believe it is right for the leader of the world's
greatest democracy to bring a message of democracy to the
world's largest nation.
While in Beijing, the President will have a chance to say
things that the people of China cannot say and have not heard.
And his presence in Tiananmen Square will ensure that the world
does not forget, as it must not forget, the outrages
perpetrated there.
Moreover, the President's visit will create an opportunity
to look to the future, a chance to make further progress in our
relationship with China, to cooperate in halting the spread of
nuclear weapons, to maintain stability on the Korean Peninsula,
to coordinate in responding to the regional financial crisis,
to join in fighting global threats, and to express our concern
about freedom of religion, human rights, and Tibet.
As I have said many times, Mr. Chairman, engagement is not
endorsement. We continue to have sharp differences with China.
But we are also developing more and more areas of common
ground. And this is important to both countries, and vital to
the future stability and prosperity of all Asia.
In Indonesia, there is an opportunity now to move from an
era of stability without freedom to an era of stability and
freedom. The challenges, however, are great. They include
economic recovery under very difficult circumstances, an end to
ethnic intolerance and scapegoating, and the construction
almost from scratch of genuinely representative institutions.
At this difficult time, America's place is by the side of the
Indonesian people. Accordingly, we will continue to provide
humanitarian and development assistance, and aid to civil
society. And we will continue to urge the authorities in
Jakarta to make good on their pledge to open up the political
process so that the future of Indonesia will be determined as
it should be--by the people of Indonesia.
In South Asia, our challenge, in partnership with others,
is to minimize the adverse consequences to international
security and peace of recent nuclear tests. During the past few
days, we have seen a willingness both in New Delhi and
Islamabad, to try to bring tensions under control, resume
bilateral dialog and respond to international concerns. We
welcome this, and urge both countries to resolve their
differences peacefully and to avoid stumbling further into an
arms race they cannot afford and might not survive.
More broadly, we believe there are a number of steps we can
take to renew the strength of the nuclear nonproliferation
regime, and that it is very much in our security interest to do
so. This morning, I want to highlight one step of particular
importance. That is Senate approval of the Comprehensive Test
Ban Treaty [CTBT]. Now, more than ever, it is important to get
the CTBT's monitoring and detection system up and running, to
reinforce the principle that nuclear testing is not acceptable,
and to dissuade other countries from following India and
Pakistan's example.
Accordingly, I urge members of the subcommittee to
encourage your colleagues on the Senate Foreign Relations
Committee to schedule hearings on the CTBT, and to approve it
as soon as possible. There could be no greater gift to the
future.
Mr. Chairman, our efforts to build security through
democracy and greater participation in the global economy are
also very much in evidence among our hemispheric neighbors and
in Africa. In Santiago in April, the elected leaders of 34
nations came together to support democracy and prosperity at
the Summit of the Americas. Of course, one of the great
challenges we face in this hemisphere is Haiti. As a champion
of freedom, a neighbor and a friend, we have a compelling
interest in helping Haitian democracy to succeed. That is why
the President has proposed an increase in our assistance.
Although the ongoing political stalemate is frustrating,
Haiti is a place where every dollar of our aid helps people
move a little further from their terror-ridden past and a
little closer to the goal of true democracy. With the memories
still fresh of thousands of immigrants fleeing to our shores,
we know that helping Haiti is the smart thing to do. It is also
the right thing to do.
During his historic visit to Africa this past March,
President Clinton issued an inspiring call for a new American
partnership with the people of that continent. To launch our
initiative, I urge the subcommittee's support for funds to
build democracy, promote justice, spur investment, and create
incentives in the form of debt relief for nations undertaking
needed economic reforms.
I also urge your support for the Africa Growth and
Opportunity Act. This measure embodies our belief that trade,
even more than aid, will prove the engine of African growth.
Mr. Chairman, I began my statement this morning by saying
that the purpose of our foreign policy is to help build a world
that is increasingly peaceful, prosperous and free. As
appropriators, you can help by approving the President's
request for funds to respond to global problems.
For example, you can help children and empower women by
supporting the U.N. Development Program and UNICEF. You can
help safeguard nuclear programs and materials worldwide by
approving funds for the IAEA. You can promote the use of clean
technologies by meeting our commitments to the Global
Environment Fund. You can help protect our families by backing
the President's request for funds to fight the war against
international drug trafficking and crime. You can support our
global demining initiative, which was inspired by Senator
Leahy, and which aims to end the threat posed to civilians by
land mines in every country on every continent by the end of
the next decade.
And, finally, you can renew your approval of funds to pay
our share of financial backing to the International Monetary
Fund [IMF]. These funds are critical to demonstrate American
support for the IMF's effort to restore financial confidence
and stability in East Asia, and to prevent the problems there
from spreading to other regions. Because of the way the IMF is
set up, these contributions will not cost U.S. taxpayers a
dime, but they will help ensure the health of the global
financial system in which America and your constituents have
the largest stake.
Unfortunately, through no fault of this subcommittee, the
President's request both for the IMF and the United Nations
have become embroiled in an unrelated disagreement over
international family planning. I ask your help to resolve this
deadlock on the basis of what is best for America and for our
ability to promote U.S. interests. I urge you to vote yes on
the IMF, without regard to any unrelated issue.
Mr. Chairman, half a century ago, a democratic President
and a Republican Congress worked together to help forge the
institutions that have shaped our foreign policy and defined
the history of our age--institutions that proved instrumental
in the defense of freedom, the growth of prosperity, the defeat
of Communism, and the confirmation of America's standing as the
world's leading force for justice and law. Our predecessors
were not prophets. But because they stood tall, they were
perhaps able to see a little bit further into the future than
others. And they had faith in our people and in the principles
upon which our Nation was founded.
prepared statement
Today we have a responsibility to honor their faith, to
reject the temptation of complacency, and to assume, not with
complaint, but welcome the leader's role established by our
forbearers. Only by living up to the heritage of our past can
we fulfill the promise of our future, and enter the new century
free and respected, prosperous and at peace.
Mr. Chairman and members of the subcommittee, I thank you
very much, and I now will be very pleased to respond to your
questions.
Senator McConnell. Thank you, Madam Secretary.
[The statement follows:]
Prepared Statement of Hon. Madeleine K. Albright
Mr. Chairman and members of the subcommittee, good morning. I am
pleased to be here to seek your support for the President's request for
funds for the foreign operations programs of the United States.
I want to acknowledge at the outset that this Subcommittee and its
members have been leaders in supporting a principled and purposeful
U.S. foreign policy. We have not always agreed on all subjects, but the
disagreements have almost always been on tactics, not goals. We all
agree that the United States is, and should remain, vigilant in
protecting its interests, careful and reliable in its commitments and a
forceful advocate for freedom, human rights, open markets and the rule
of law.
The budget request before you seeks to ensure that we have the
foreign policy tools we need to sustain our leadership.
It includes funds for programs that help us promote peace and
maintain our security; safeguard our people from the continuing threat
posed by weapons of mass destruction; build prosperity for Americans at
home by opening new markets overseas; promote democratic values and
strengthen democratic institutions; respond to the global threats of
international terrorism, crime, drugs and pollution; and care for those
who are in desperate need of humanitarian aid.
Given the scope of American interests, the range of threats to our
security, the connections between our prosperity and that of others,
and America's role as a champion of freedom and defender of human
rights, we need the full measure of U.S. influence and leadership at
this critical time. I urge you to help us, as you have in the past, to
obtain the resources we need to conduct our foreign policy in the way
our interests demand and our citizens deserve.
I would like to begin my discussion here this morning with our
programs for maintaining the security and safety of our people.
i. peace and security
The Middle East
One region that is central to maintaining international security
and peace is the crescent of land bridging Asia and Europe, including
the Gulf and Middle East.
Here, American policy is designed to strengthen the forces of
peace, encourage regional economic integration, marginalize extremists,
and defeat terror.
In Iraq, our primary purpose remains what it has been since the
Gulf War ended seven years ago. We are determined to prevent Saddam
Hussein from ever again threatening Iraq's neighbors or the world. And
we want to do all we can to ease the hardships faced by the Iraqi
people as a result of his misrule.
Since 1991, Iraq's path to renewed respectability has been open
through compliance with all relevant Security Council resolutions. But
in spite of the strong incentive provided by sanctions, Iraq has not
been willing to take this road. Instead, its leaders have lied and
concealed information, and harassed and blocked UN weapons inspectors.
As a result, a journey that could have been completed in a matter of
months remains far from finished. And Saddam's intransigence has
deprived the Iraqi people of over $100 billion in oil revenue.
Under its February agreement with the UN, Iraq is obliged to
provide UN inspectors with full access to all sites, including those
from which they were previously barred. To date inspections under this
agreement have gone smoothly.
But UNSCOM must continue to test Iraq's promises.
The Security Council must be rigorous in judging Iraq's actions not
according to some artificial timetable, but according to the quality of
information received and actions taken.
The United States will continue to insist on Iraqi cooperation that
satisfies not just the letter, but the spirit of Security Council
resolutions. And unless that occurs, sanctions will remain.
And to keep a lid on Saddam's military options, we will continue to
enforce the no-fly and no-drive zones.
Although our military is returning to its prior force levels in the
Gulf, our troops there remain strong, versatile, well led and well
equipped. If the need should arise, they can and will be promptly
reinforced. As always, the United States will not make a decision to
take military action lightly, but we are prepared to do so if that is
required to protect our interests and our friends.
In the meantime, we will do all we can through the United Nations
to ease the hardships faced by the Iraqi people.
Across the border from Iraq in Iran, there are signs that popular
support is building for a more open and less confrontational approach
to the world. The United States would welcome that. An Iran that
accepts and adheres to global norms on terrorism, proliferation and
human rights could be a significant contributor to the security and
prosperity of the entire region.
Iran's President Khatemi has called for a dialogue between our two
peoples. There is merit in this, for we have much to learn from each
other. But the issues and deeds that have divided us these past two
decades are not matters of respect between our two peoples, but matters
of policy that ultimately must be addressed by governments.
Elsewhere in the region, America's interests are best served when
we help meet the challenge of building peace--for peace creates a
climate friendly to economic growth and democracy, which leads, in
turn, to greater stability. This is true, for example, in the Caucasus
and Cyprus.
It is also true in the Middle East, where we continue to strive
with our Israeli, Palestinian and Arab partners to make progress
towards a just, lasting and comprehensive peace.
Unfortunately, the Arab-Israeli peace process remains stalled.
Historic accomplishments and future hopes are both at risk.
Indeed, the longer the present stalemate continues, the greater the
chance the momentum that had been built in the direction of peace will
snap back and begin to run in reverse. If that happens, we may see a
future in the Middle East that mirrors the grim and conflict-ridden
past. That would not be in the interest of the United States, our
Israeli allies and friends, the Palestinians or anyone but the forces
of extremism and terror.
For that reason, the United States has been working patiently to
help Israelis and Palestinians overcome their crisis of confidence and
put the process back on track.
Over the past several months, we have sought to create an
environment that would trigger accelerate permanent status
negotiations. Chairman Arafat has accepted in principle our ideas for
doing so. We are now working with Prime Minister Netanyahu to see
whether there is a way for Israel to accept them as well.
I believe there is a possibility to reach agreement, and we will
continue our efforts as long as we believe that Israelis and
Palestinians are serious about doing so.
At the same time, we cannot make the parties agree. Nor would it be
appropriate for us to try. For just as the credit for opportunities
opened by peace would belong to Israeli and Palestinian leaders, so
would responsibility for the consequences of failure rest with those
who make progress towards peace impossible to achieve.
As we continue our diplomatic efforts, I hope that I can count on
your support to fund the programs that help make the peace process
possible, such as our requests for Economic Support Funds and Foreign
Military Financing to our partners in peace--Israel, Egypt, Jordan and
the areas under Palestinian self-rule.
We have requested that aggregate assistance for the region remain
at the same level as in previous years. Within that total, I hope we
can work together to find appropriate funding for all our concerns in
the Middle East.
Over the years, the level of assistance provided to this region has
been the subject of increasing scrutiny as foreign aid budgets have
decreased and dollars are more carefully allocated than ever. We
welcome the initiative of the Israeli Government in beginning
discussions with the Executive Branch and Congress on a gradual
reduction, and eventual phase-out, of economic support funds, coupled
with a proposed increase in military assistance. I look forward to
working closely with you as we move discussions forward on this
subject.
Europe
In Europe, we have two strategic goals. We work with our allies and
partners across the Atlantic to respond to the global challenges no
nation can meet alone. And we work together to build a Europe that is
itself peaceful, undivided and free.
The Senate's vote this spring to enlarge and strengthen NATO has
sent a message to our old and new allies that America will continue to
defend its interest in the peace and security of Europe. It has made it
clear to Europe's new democracies that we are not going to treat them
as second-class citizens in the future simply because they were
subjugated in the past. And it is a resounding bipartisan signal that
America will defend its values, protect its interests, stand by its
allies, and keep its word.
I congratulate members of this Subcommittee for their roles in this
historic decision, whether as supporters or as thoughtful skeptics who
demanded that hard questions get sound answers.
In the quest for a peaceful, undivided Europe, our efforts in
support of the peace process in Northern Ireland also have borne fruit.
The ``Good Friday'' agreement, approved by sizeable majorities in the
North and South last month, marks a turning point in the history of
that troubled province.
I thank this Subcommittee for its support for the annual U.S.
contribution to the International Fund for Ireland, which serves as a
tangible expression of our support for peace in Northern Ireland.
Two years ago, also in support of a Europe at peace, the United
States led the effort to stop the war in Bosnia. We recognized that it
did not serve American interests to see aggression undeterred, hatred
unleashed, and genocide unchecked and unpunished in the heart of
Europe. Now, we must finish what we started and continue helping the
parties to implement the Dayton Accords.
Bosnia today remains deeply divided. But multi-ethnic institutions
are once again beginning to function. Economic growth is accelerating.
Air and train links are being restored. Despite troubling violence,
more refugees are returning. And more indicted war criminals are facing
trial. Since I appeared before this Subcommittee last year--and with
your strong support for our renewed emphasis on apprehending war
criminals--more than 30 people indicted as war criminals have
surrendered or been turned over to the International Criminal Tribunal
for the former Yugoslavia in The Hague.
Perhaps most importantly, a new Bosnian Serb government has turned
its commitment to implementing Dayton into action--encouraging minority
returns, enacting a program of privatization, taking an active part in
Bosnia's national institutions.
We must make good on our pledge to support the new Bosnian Serb
leaders as they work toward these goals. That is why I have waived
restrictions on our assistance to help rebuild infrastructure and
revitalize private business--when and where Serbs are ready to work
with their neighbors.
Our aid to Serb regions--as to others--is strictly conditioned on
progress in implementing Dayton. It will support those who seek to
build peace, not those who would undermine it.
Overall, we are requesting $225 million for Bosnia in fiscal year
1999, primarily from the Support for Eastern European Democracy (SEED)
program. These resources will support economic reconstruction,
humanitarian assistance, democratic development, and physical
rebuilding, as well as U.S. police monitors and reform of Bosnian
police forces. These programs are designed to continue and make
irreversible the progress that Bosnian communities are finally
beginning to see.
The United States should continue to play an appropriate role in
Bosnia as long as our help is needed, our allies and friends do their
share, and most importantly, the Bosnian people are striving to help
themselves. That is the right thing to do. And it is the smart thing--
for it is the only way to ensure that when our troops do leave Bosnia,
they leave for good.
Today, the international community faces a second challenge in the
Balkans--preventing the escalation of violence and helping the parties
find the path to peace in Kosovo.
There, Serb repression has spurred a cycle of violence that has
killed hundreds of civilians, left dozens of villages in ruins, and
sent thousands of refugees into neighboring Albania and the Former
Yugoslav Republic of Macedonia. Without international involvement, Mr.
Chairman, there is no natural endpoint to the conflict unleashed by
President Milosevic. There is a growing risk that fighting will spill
across the border and draw in neighboring countries.
Last Friday, in London, leading nations agreed on a strong message
to President Milosevic to cease his brutal and provocative military
campaign; enter a serious dialogue with leaders of the Kosovar Albanian
community; and take steps to see that the legitimate rights of all the
people of Kosovo will be respected.
To encourage a positive Serb response, NATO leaders, including the
United States, have not ruled out the use of force if the violence in
Kosovo continues. In preparation, the alliance has decided to move
forward with air exercises in Albania and the FYROM. Further
contingency planning is underway. The United States would strongly
prefer a diplomatic outcome that restores peace to Kosovo based on
respect for the rights of all. We condemn acts of violence by all
sides, including the Kosovar Liberation Army. But we must also oppose
as strongly and effectively as we can the campaign of terror and de-
population being waged by Serb forces.
The expansion of NATO and the effort to build and maintain peace in
the Balkans are important parts of our effort to build a Europe that is
wholly democratic and stable. But there are a number of other
initiatives, as well.
For example, we are encouraging integration among nations of the
Nordic and Baltic region, and helping strengthen their ties with us,
their neighbors, and European and transatlantic institutions.
We strongly support the expansion of the EU into central and
eastern Europe, and Turkey's desire to be part of that process.
We are working hard to achieve a settlement in Cyprus that respects
the rights and needs of both communities.
We are putting in place a new Southeast Europe strategy to help
integrate countries in that region into western institutions.
We are leading the transformation of the OSCE into an organization
that produces not just reports, but results. The funding we have
requested for the OSCE helps support human rights and elections
monitoring in Bosnia and Croatia; special arms control regimes across
the former Yugoslavia; and conflict resolution missions elsewhere in
eastern Europe.
Finally, we are once again asking your help in funding the Support
for East European Democracy (SEED) programs. As two more states,
Hungary and Latvia, conclude their use of SEED programs this year, we
are shifting our focus to the countries of southeastern Europe, whose
political and economic transformations are more slow and uncertain. In
addition to our efforts in Bosnia, we will be supporting economic
stabilization in Bulgaria and Romania, to help reforms begun in good
faith generate positive results. And we will be promoting regional
partnerships to use the region's own resources to stimulate growth.
Although a great deal of the world's attention has been focused
elsewhere, Mr. Chairman, our efforts to build security and democracy
continue in the New Independent States (NIS).
We were pleased to see President Yeltsin's new Prime Minister,
Sergei Kiriyenko, confirmed by the Duma in April and look forward to
working with him to build on the past accomplishments of the U.S.-
Russia Bilateral Commission.
Unfortunately, Russia faces an even more difficult economic
environment than it did just a year ago. The Asian financial crisis, a
substantial decline in world oil prices and insufficient implementation
of fiscal and other reforms have darkened the economic outlook
considerably.
President Clinton has made clear, as have our G-7 partners, that
there should be additional, conditional support from international
financial institutions in the context of a strong Russian reform
program, if that support proves necessary.
Meanwhile, the United States and Russia continue to work together
on a broad range of issues from peace building in Bosnia to
proliferation in South Asia to dealing with Saddam Hussein.
During the many times I have seen Foreign Minister Primakov in
recent weeks, I have raised American concerns about Russian cooperation
with Iran's nuclear and missile programs, as well as related matters,
including President Yeltsin's effort to gain Duma ratification of START
II. And I have urged the Foreign Minister to recognize the depth and
seriousness of American opposition to religious discrimination in
Russia, and our concerns about Russia's new religion law.
Mr. Chairman, we agree that an independent, democratic and
prosperous Ukraine can be a keystone in the archway to the new Europe.
Our efforts to build a strong relationship with Ukraine have led to
better cooperation in the area of non-proliferation, including an
express commitment by its government to cancel participation in the
Bushehr nuclear reactor project.
In April, I certified that Ukraine has made significant progress
toward resolving the concerns of the dozen U.S. businesses that have
faced extraordinary obstacles in operating and investing there.
But this is by no means a clean bill of health. For as you know,
Mr. Chairman, I was barely able to certify. And we are withholding a
portion of our assistance to the Ukrainian government pending progress
on reform.
Ukraine's friends abroad and the international business community
are watching closely. Ukraine has no margin for error. It is our strong
hope that President Kuchma will demonstrate the leadership, and the new
Rada the wisdom, to press ahead quickly with overdue reforms.
Throughout the NIS, a great deal of work remains to be done to
build stable democratic governments and functioning, transparent market
economies. In this connection, the Administration continues to seek
repeal of Section 907 of the Freedom Support Act. This would restore
balance in our policy toward Azerbaijan and Armenia, and reinforce our
role as an honest broker in the peace process.
In the coming year, we will continue to promote peaceful solutions
to regional disputes in the Caucasus. We will work to support and
strengthen democratic institutions. And we will continue to foster
regional cooperation in Caspian energy development and transportation
infrastructure. I know these issues are of great interest to many in
Congress, and I welcome your support in providing the tools we need to
make progress.
Our contributions to democracy building through the Partnership for
Freedom will not re-make the region overnight, but they can help those
in the region who are helping themselves to move in the right
direction.
For example, our support fosters economic development by
encouraging investment in small businesses; promotes tax reform and
transparent and effective regulation of industry; helps to build
accountable democratic institutions; and fights the crime and illicit
dealing that have shadowed emerging markets.
We fund these NIS programs neither as a favor to governments in the
region nor as a stamp of approval of all their policies, but because
they serve American interests. And frankly, we need to do more. These
priority programs were funded well below our request last year. So I
urge you to back our full request for $925 million this year. And I ask
that you grant the flexibility we need to support democratic and market
reforms wherever in the region they flower--and whenever our support
will best serve America's interests.
Asia
In Asia, we are working to maintain stability by solidifying our
key alliances with Australia, Japan, the Republic of Korea, the
Philippines and Thailand.
I had the great pleasure of visiting Japan last month to reaffirm
the strength and breadth of our bilateral relationship. The U.S.-Japan
security alliance is a foundation of Asian stability. I took the
opportunity, while in Tokyo, to express U.S. concerns about Japan's
economic situation and the need for efforts to promote domestic-led
growth and deregulation.
I also had a chance in May to visit Korea, whose new President Kim
Dae Jung was in Washington for a state visit just last week.
During that visit, President Clinton made it clear that the United
States remains committed to South Korea's security and supports
President Kim's bold program of economic reform. We are also
coordinating efforts to facilitate a lasting peace on the Korean
Peninsula, to be achieved through a process of dialogue between North
and South.
Obviously, the past twelve months have been difficult for many
parts of Asia. Our policy has been to promote economic and political
reforms that are essential to prosperity and human dignity from Bangkok
to Beijing.
In Korea, the Philippines and Thailand, for example, democratic
governments have made progress in overcoming the Asian economic crisis
in part because their people were able to elect new governments, which
started work in a climate of openness and trust, and with the moral
legitimacy to call for shared sacrifice.
Indonesia now has a chance to achieve both democracy and stability,
but it also faces immense challenges--from restoring growth, to
preserving religious tolerance, to building truly representative
institutions.
Democracy can only be built by the people of Indonesia. But what
America says and does will matter, as it has in other critical periods
in Indonesia's history.
Our message is simple. America's interest lies not in who rules
Indonesia, but in how that immense and important country is ruled:
whether it ends up with a legitimate democratic government, or an
unrepresentative, unaccountable and therefore unstable regime.
The key is credible progress toward open, accountable government.
Free elections must be held in a timeframe and under rules acceptable
to the Indonesian people. Political parties and labor unions must be
allowed to form. Press freedoms must be respected. Political prisoners
must be released.
America's interest also lies in standing by the Indonesian people
now. We will continue to provide humanitarian and development
assistance and aid to civil society. And if and when elections are
held, we will stand ready to help in any way we can.
As the world well knows, Mr. Chairman, President Clinton will leave
next week for a visit to China.
Although some have suggested that the President not make this trip,
I cannot imagine anything more consistent with his responsibilities as
President. For the President's purpose is to promote the security,
political and economic interests of the United States and to bring to
China a message of support for democracy, the rule of law and human
rights.
Although the space for political discussion in China has clearly
expanded in recent times, the President will have the opportunity to
say things that the people of China cannot say, and have not heard. And
the President's presence in Tiananmen Square will ensure that the world
does not forget, as it must not forget, the terrible suppression of
peaceful political expression that occurred there.
Moreover, the President's visit will create the chance for
additional progress towards a more constructive overall relationship
with China. Mr. Chairman, that process of engagement is not the same as
endorsement. We continue to have sharp differences with China on human
rights, Tibet and other issues, but we also believe that the best way
to narrow those differences is to encourage China to become a full and
responsible participant in the international system.
Steps in the right direction include China's security cooperation
on the Korean peninsula and very recently in South Asia, its commitment
to strictly control nuclear exports, its assurances on nuclear
cooperation with Iran, its continued economic liberalization, its
positive role in responding to the East Asian economic crisis, its
agreement to pursue cooperative activities with us to strengthen the
rule of law, the release of Wei Jingsheng and the remarkable Wang Dan,
and its announced intention to sign the International Covenant on Civil
and Political Rights.
In Cambodia, we are deeply engaged in a diplomatic effort to press
the Government to hold free and fair elections in which all elements of
the opposition can participate without fear of intimidation or threat.
In Burma, we are deeply troubled by the military's regime's refusal
to enter a dialogue with its democratic opposition, its continued
repression of dissent, and by its ties to leading drug traffickers.
I know that you are deeply concerned as well, Mr. Chairman. Indeed,
it seems we are both members of the ``international colonialist gang''
that the regime's propaganda machine loves to complain about, since we
both believe that the Burmese people should have a say in running their
country. I want to thank you for helping develop a range of measures to
ensure that Burma's generals cannot realize their economic ambitions
without heeding the aspirations of their people.
As you know, Mr. Chairman we also have a small humanitarian aid
program designed to help the Burmese people survive without helping
their government endure. The people who receive our support realize
that it comes from the friends of Burmese democracy abroad, not from
the junta that is the cause of their suffering. Their needs are
staggering; years of government neglect and denial, for example, have
left Burma with the highest rate of AIDS infection in all of East Asia.
Let me assure you, Mr. Chairman, that we will not move forward in
this area--or in the area of counternarcotics--without consulting with
the Congress. And any efforts we undertake will only be designed with
the support and involvement of Burma's legitimate elected leaders.
South Asia
There is no question that the recent Indian and Pakistani nuclear
tests endanger international security and peace and dealt a blow to the
nuclear nonproliferation regime. Working with other members of the UN
Security Council, the G-8, and nations from around the world, we are
striving to minimize the adverse consequences of those ill-considered
tests.
During the past few days, we have seen a willingness in both New
Delhi and Islamabad to try to bring their bilateral tensions under
control, resume dialogue and begin to respond to international
concerns. We welcome this and urge both countries to resolve their
differences peacefully, and to avoid stumbling further into an arms
race they cannot afford and might not survive.
More specifically, we have called upon both countries to join the
Comprehensive Test Ban Treaty (CTBT), without conditions; to stop
producing fissile material; to refrain from deploying nuclear weapons
and from testing or deploying missiles capable of delivering them; and
to formalize their pledges not to export any materials or technology
that could be used to build nuclear weapons.
India and Pakistan should take such measures not as a favor to the
world community, but because it is in the security interests of each to
do so.
And in considering their next steps, they should realize that the
Non-Proliferation Treaty (NPT) will not be amended to include them as
nuclear weapon states.
This is fundamental--for the NPT is fundamental to nuclear
nonproliferation. A generation ago it was predicted the world would
have twenty to thirty nuclear states. No measure has done more than the
NPT to prevent that. If we were to allow India and Pakistan to test
their way to nuclear status under that agreement, we would create an
incentive for others to follow their example.
The nuclear tests in South Asia present us with an historic choice.
Some now say that nuclear nonproliferation is doomed, and the sooner we
accept that, the better off we'll be. The Clinton Administration does
not share that view.
We believe there are a number of steps we can take to renew the
strength of the nonproliferation regime, and that it is very much in
the security interests of America to do so. Last week, I outlined those
measures in a speech sponsored by the Stimson Center, and I will not
repeat that discussion now. I do, however, want to highlight one step
of particular importance, and that is Senate approval of the CTBT. For
despite the South Asia tests, the CTBT remains essential to our
strategy to reduce the nuclear danger.
This Treaty has been a goal of U.S. Presidents since Dwight
Eisenhower and John Kennedy. If approved and enforced, it will arrest
both the development and the spread of new and more dangerous weapons.
It has been widely endorsed by our military and scientific leaders. And
it has consistently commanded the support of no less than seventy
percent of the American people.
Now more than ever, it is important to get the CTBT's monitoring
and detection system up and running; to reinforce the principle that
nuclear testing is not acceptable, and to dissuade other countries from
following India and Pakistan's example.
Accordingly, I urge Members of the Subcommittee to encourage your
colleagues on the Senate Foreign Relations Committee to schedule
hearings on the CTBT, to examine its merits and to approve it as soon
as possible.
The Americas
In our own hemisphere, we have important interests dictated not
only by proximity of geography, but by proximity of values. As
President Clinton said in April at the Santiago Summit, ``never have we
had such an opportunity to build a true community of the Americas.''
With one lonely exception, every government in the hemisphere is
freely elected. Every major economy has liberalized its system for
investment and trade. With war in Guatemala ended, Central America is
at peace for the first time in decades. Ecuador and Peru have made real
progress toward resolving their long-standing border dispute. From pole
to pole, it would seem, our nations are determined to live in security
and peace.
But the region still faces serious challenges, which can affect us
as well. For many, the dividends of economic reform are not yet
visible, but the costs of accompanying austerity measures are. Growing
populations put pressure on natural resources, spark large-scale
migration, and make it harder to translate macroeconomic growth into
higher standards of living. The building of democracy remains in all
countries a work in progress, with stronger, more independent legal
systems an urgent need in most. And narcotics trafficking and crime
still tear at the fabric of our societies.
In Santiago, President Clinton and the other 33 democratic leaders
of our hemisphere set an agenda for meeting those challenges together.
We agreed to boost investment in education as a foundation for success
in the next century, and to fight poverty and discrimination to make
sure that success is shared by all. We established new programs to
protect freedom of the press, strengthen judicial systems, and improve
local government--all pillars of the kind of strong democracies we want
as our neighbors. And we agreed to work together to assess and improve
our efforts in the war on drugs.
Finally, we all reaffirmed our commitment to free and fair trade
and economic integration. To reach that goal, we will soon begin
negotiations for a Free Trade Area of the Americas. We also will do
more to ensure that basic worker rights are secure throughout the
hemisphere, so that prosperity for some does not come at the cost of
suffering for others. And we will work together to develop clean energy
sources and protect our environment as we grow.
This new quality of partnership means that the United States is not
supporting all these projects alone. Several South American countries
have joined us as major donors for education, democracy and anti-
poverty projects. Many nations from this hemisphere contribute to UN
peacekeeping operations and play important roles in mediating regional
conflicts.
We can count on strong support from our neighbors--but where our
interests are at stake, we cannot fail to lead.
That is why it is vital that we remain engaged in Haiti's
democratic transition--and why we have requested a substantial increase
in assistance for that country this year.
The job of creating a democratic culture and market economy in
Haiti, where none has ever existed, is daunting. For months, the
government has been mired in a stalemate, while efforts to restructure
the economy have lagged. For millions of impoverished Haitians,
democracy has not yet delivered on the hope of prosperity.
When I visited Haiti in April, I was reminded again how much
Haitians desire change. I had the chance to meet many dedicated people
who are using our assistance programs, and their own ingenuity and
drive, to vaccinate children, open schools, and fight drugs. They have
a vision of a better future, and we are supporting it through programs
that create jobs, lay the foundation for sustained economic growth, and
professionalize Haitian law enforcement.
We cannot turn our backs on Haiti at this critical stage. To do so
would risk creating a future there that mirrors the past: an
undemocratic country that serves as a safe haven for criminals and drug
traffickers--and from which thousands of would-be migrants are driven
to seek refuge on our shores.
Helping democracy put down roots in Haiti serves U.S. interests.
The same is true in Cuba. Over the past two decades, the Americas
have been transformed from a hemisphere dense with dictators to one in
which every single country but one has an elected government. We
believe the Cuban people deserve the same rights and liberties as their
counterparts from Argentina to Alaska.
With that goal in mind--and taking advantage of the opportunities
presented by the Pope's historic visit--the President in March decided
to take four actions to reach out to the people of Cuba to make their
lives more tolerable, while maintaining the Helms-Burton Act and the
embargo and other pressures for change on the Castro regime.
We are working with leaders in the Senate and the other body to
develop bipartisan legislation to meet humanitarian food needs on the
island. We are streamlining and expediting the issuance of licenses for
the sale of medical supplies to Cuba. We are resuming licensing direct
humanitarian charter flights. And we are restoring arrangements to
permit Cuban-American families to send remittances to their relatives
in Cuba.
We know that in expectation of the Pope's visit, Christmas Day had
special meaning in Cuba this year. We will not rest until another day--
Election Day--has real meaning there, as well.
Africa
As the world saw when President Clinton visited Africa earlier this
year, this is a continent whose problems remain deeply-rooted, but
whose potential is great. More and more, countries are modernizing.
Centralized economies are giving way to open markets seeking new
investment. And civil society is starting to take root.
Accordingly, we have a good opportunity now to engage and enlist
Africa in the fight against terror, narcotics trafficking, crime,
environmental degradation and other global problems before they spill
over into other parts of the world--including America.
As the President's visit reflects, we have been according a high
priority to events in Africa.
Recently, for example, Assistant Secretary Susan Rice has played a
lead role in diplomatic efforts to end the senseless and destructive
fighting between Ethiopia and Eritrea. We are exploring every option
for encouraging the new leaders in Nigeria to respect human rights and
to move down the path towards real democracy. And we have tried hard to
persuade the leaders of the Democratic Republic of Congo to permit
opposition political activity and to take steps that would enable that
vast and strategic country to get back on its feet economically.
Although these diplomatic initiatives have not yet succeeded, we
retain our faith in the promise of Africa, and are determined to
persist in our efforts throughout the continent.
Let me highlight three important initiatives that can have real
benefits for Africans--and for us:
The Great Lakes Justice Initiative will help prevent violence and
bring justice to Africa's heart. We have requested $30 million for this
urgent initiative, that can help save lives directly and soon.
For the Education for Development and Democracy Initiative, which
will build civil society and fuel economic growth, we seek $66 million
in new funding.
The Trade and Investment Initiative will stimulate African economic
reform and domestic and international trade. It involves $30 million
for technical assistance and $35 million of special debt relief for
poor countries that are taking the right steps toward reform.
I also urge the Senate to act this year to approve the Africa
Growth and Opportunities Act, to spur trade between the United States
and Africa's most forward-looking economies. This is a Capitol Hill
initiative, on which I will testify tomorrow before the Senate Finance
Committee. The bill is strongly supported by the Administration; it was
approved on a bipartisan basis by the House of Representatives; and is
designed to frame a new American approach to the new Africa.
We believe that the African countries that most deserve our help
are those that are doing the most to help themselves. And that the most
useful help we can provide is the kind that will enable economies to
stand on their own feet--through open markets, greater investment,
increased trade and the development among their peoples of 21st century
skills. These programs deserve your support.
Promoting our security through arms control
When we help ease conflicts in regions important to the United
States, we advance the long-term interests and safety of Americans. The
same is true of our support for arms control and anti-terrorism efforts
around the world.
The South Asia nuclear tests have complicated, but not altered, the
nature of the twin imperative our diplomats face: sustaining a global
full-court press to keep biological, chemical and nuclear weapons, and
the missiles to deliver them, from falling into the wrong hands; and
achieving further progress with Russia and others so that the American
people never again face the costs and dangers of a nuclear arms race.
Toward these goals, we ask your support.
This year, we are requesting $28.9 million to fund the CTBT
Preparatory Commission, which is laying the human and technical
foundation for the Treaty's entry into force. Whether or not the test
ban treaty is in force, we need to do the best job we can to detect and
monitor any explosive testing of nuclear weapons around the world.
These funds will help build the international verification system that
will help us to accomplish those tasks.
I also ask your support for our proposed $40 million voluntary
contribution to the International Atomic Energy Agency (IAEA). These
funds will help the Agency continue strengthening the safeguards system
that helps deter and detect cheating on NPT obligations in such
countries as North Korea, Iraq and Iran.
Our request this year includes $35 million for the Korean Energy
Development Organization (KEDO). The Agreed Framework has succeeded in
freezing North Korea's dangerous nuclear program. And it has secured,
under international safeguards, all of that program's spent fuel rods--
which once could have been reprocessed into several bombs' worth of
weapons-grade plutonium.
Our own spending on KEDO is needed to leverage contributions from
our Asian allies that will ultimately dwarf our own. More importantly,
it is a national security bargain--spending that has helped to
stabilize a volatile peninsula, support a close ally, and make our
37,000 troops in Korea safer.
Finally, our Nonproliferation and Disarmament Fund lets us move
quickly to destroy or remove dangerous weapons or poorly protected
nuclear materials from NIS countries. And the International Science
Centers in Kiev and Moscow address the human side of the proliferation
threat, helping to prevent a perilous brain drain of scientists with
special weapons expertise to rogue states.
Fighting terrorism
We also have a critical national interest in fighting international
terror and helping others to do the same.
This year, we are requesting $21 million for our anti-terrorism
programs. These programs enhance the skills of police and security
officials in selected countries so that they may be more effective
partners in preventing and punishing terrorist acts. The $2 million
increase over last year's funding level will help fund training in
terrorist interdiction and explosives detection and investigation, and
will allow us to beef up our programs in the Middle East and Asia.
Anti-personnel landmines
This year we seek a major increase in funding, from $20 million to
$50 million, to support the Administration's Demining 2010 initiative.
With strong support from Senator Leahy and other Senators from both
parties, America leads the world in humanitarian demining--and we are
determined to do even more.
President Clinton has pledged that the United States will
substantially increase America's support for de-mining programs. The
resources we have requested from you will help persuade other countries
to increase their own contributions as well. And that will help us meet
our larger goal: to free civilians everywhere from the threat of
landmines by the year 2010.
The security-related programs I have been discussing fall within
the Non-Proliferation, Antiterrorism, Demining, and Related Programs,
or ``NADR'' Account, which was created in the fiscal year 1997 Foreign
Operations Appropriation Act to consolidate in one account a number of
related programs previously funded separately. This year our NADR
request includes funding for the CTBT PrepCom previously funded through
ACDA and the CJS Appropriation, funding for the Science Centers
previously included in the NIS account, and our first request for
export control assistance as a separately funded activity.
Fighting drugs and crime
Last week at the UN Special Summit on Drugs, President Clinton re-
stated America's strong commitment to the international war against
illegal trafficking in narcotics.
In that war, we have moved aggressively and with results. This past
year, our support for eradication and interdiction helped trigger the
largest decline ever in Latin American coca production. For the second
year in a row, production fell in every Latin American country--except
Colombia, where traffickers moved when denied the freedom to operate
elsewhere. In Peru, coca cultivation is at its lowest level in a
decade.
Although drug-related corruption remains a very serious problem in
Mexico, official cooperation and support for anti-drug initiatives has
been substantial. Last week in New York, Presidents Clinton and Zedillo
reaffirmed that policy of cooperation, notwithstanding the recent
controversy surrounding the drug money laundering investigation
Operation Casablanca.
Over the past year, Mexico has enacted legal reforms to combat drug
trafficking, organized crime and money laundering. It has formed
specialized investigative units, sought out and punished official
malfeasance, and passed a comprehensive chemical control law. Drug
seizures, arrests and extraditions are up.
We ask your support for our request for $275 million to continue
the fight against international narcotics and crime. In addition to
other anti-crime initiatives, these funds support our source country
narcotics eradication and alternative development programs--following
up on our progress in the Andes and transferring that approach to new
projects elsewhere in Latin America and in Africa and Asia.
These funds support police and military counter-narcotics forces as
they uncover and block new smuggling routes and methods.
They will bolster eradication and interdiction programs in Laos,
Colombia, Peru, and elsewhere.
They fund a comprehensive, international heroin control strategy.
And they support carefully-monitored multilateral narcotics efforts
in Afghanistan and Burma--where success is critical but our access is
limited.
Our request also includes $20 million for worldwide anti-crime
programs. This training and technical assistance helps fight money
laundering, trafficking in women and girls, alien smuggling, and other
crimes which, although they begin far from our shores, often put
Americans at risk. We are depending on these funds as we work to
bolster anti-crime initiatives with our partners in the New Independent
States. And these same resources support the International Law
Enforcement Academy in Budapest, and similar academies slated to open
elsewhere.
ii. promoting economic growth and sustainable development
Mr. Chairman, peace and security are paramount goals of our
international programs, but promoting economic prosperity is another
top priority.
International trade is twice as important to our domestic economy
as it was twenty-five years ago. Strong trade-building policies and
healthy trading partners are essential--for increased trade is
responsible for fully one third of our economic growth over the last
five years.
The Clinton Administration is committed to seeing that American
companies, workers and farmers have a level playing field on which to
compete.
That means being a global leader for trade agreements that help
open markets and create jobs for Americans.
It means using the expertise and contacts of our embassies to
provide all appropriate help to American firms.
It means sustaining the Export-Import Bank, the Trade and
Development Agency, and the Overseas Private Investment Corporation,
which help our business people find new markets overseas.
And it means putting our full weight behind better enforcement of
intellectual property standards, and improved observance of core labor
rights, from the halls of the World Trade Organization and the
International Labor Organization to our assistance programs and to my
dealings with other world leaders.
But our diplomats and our business people need your commitment as
well, and your support for the resources that make these efforts
possible.
The first place we need your support is for our leadership at the
international financial institutions, such as the IMF and the World
Bank. They provide money--far more than we ever could--not just to help
countries develop, but to head off crises in some of our key trading
partners and friends.
This is important because, in a globalized economy, trade is not a
zero-sum game. When the economies of our trading partners falter, we
risk slipping as well.
East Asia, for example, is home to some of our closest allies and
friends--and some of the best customers for U.S. products and services.
More than one third of our nation's exports go there. As much as half
of some states' exports, and thousands of good jobs, depend on the
economic vigor of such places as Bangkok and Seoul.
The IMF is not perfect. No international organization, or
government, can make that claim. But its programs have helped restore
financial stability, and promote better governance, in East Asia.
But we are far from out of the woods yet. Financial markets are
watching for signs of relapse, of contagion in regions such as Central
Europe and Latin America--or for signs that the international
community, beginning with the United States, will not supply the IMF
with the resources it needs to support countries in difficulty.
We can choose to be leaders at these institutions, by paying our
full share and staying heavily involved in their decisionmaking; or we
can forfeit our involvement by not paying, and thus lose our influence.
Simply put, the IMF's programs are a hand up, not a hand-out. They
won't cost U.S. taxpayers a dime--they are a loan that will be repaid
with interest as our financial markets stay strong and our trade with
the Asia-Pacific recovers and grows.
With members of this Subcommittee providing leadership and insight,
the Senate took early, bipartisan action to fully fund our emergency
supplemental request. I deeply regret that the Senate position was not
retained in Conference, and that no action was taken on our urgent
request for UN arrears and IMF funding. But I hope we can work together
to fund these requests soon. By paying our full share of the IMF's
quota increase, we will spur economic recovery in East Asia and help
limit similar crises in the future.
Our supplemental request would also provide our contribution to a
line of credit for the IMF to use if a crisis threatens the world
financial system. Both of these requests are for budget authority
only--they involve no outlay of funds and have no effect on
calculations of government spending.
The choice to support the IMF is a choice between shaping the
global economy, or allowing ourselves to be buffeted by it; between
sustaining America's leadership, or abdicating it.
Our support for the World Bank and the five regional development
banks also works to build healthier economies and strengthen societies
in countries which are already our partners in diplomacy and trade, as
well as in those which are unable to participate fully in the
international system but seek to do so.
Our total request for multilateral development banks includes $502
million in arrears payments, for the second year of a three-year plan
to clear our debts to these institutions.
With the support of this Subcommittee, we have begun to make catch-
up payments this year--and have been able to negotiate substantial
reductions in our contributions to these organizations. Our campaign
for transparency and accountability has helped open Bank activities,
especially in East Asia, to greater public scrutiny. But we cannot
sustain our influence in these areas unless we sustain our funding as
well.
Let me also emphasize the work of the Global Environment Facility
(GEF), which mobilizes the resources of developed and developing
nations to protect the environment. Our contributions to the GEF help
protect our fisheries and our climate by cutting pollution of the
world's oceans. Already, GEF programs are working to reduce emissions
in developing nations. Making sure that all nations do their part in
slowing global warming is a critical part of our strategy; through the
GEF, those efforts have already begun. And we know they work.
But it is difficult, to say the least, to obtain more cooperation
from our partners on these matters so long as we are failing to fund
our pledged share of the GEF's expenses--as has been the case for the
past three years. I urge you to fund our $300 million request fully--of
which almost $193 million is for arrears payments--both to meet these
important objectives and to work toward keeping our promises and
sustaining our influence on behalf of sound and sensible environmental
protection.
Similarly, I ask your support for activities under the Montreal
Protocol, to help address the critical issue of ozone depletion.
When we contribute to multilateral efforts promoting sustainable
development, we leverage as much as eight or ten times our national
contribution to support goals we share.
This year, we have requested a modest $7 million increase in our
contributions to the United Nations Development Program (UNDP), a body
which has to date always been headed by an American.
For years, UNDP has been at the forefront of helping developing
countries establish democratic institutions, market economies and basic
human rights. It supports free elections from Yemen to Mexico City;
establishes credit arrangements for small enterprises in Ghana,
Mongolia and Romania; and coordinates de-mining programs from
Mozambique to Cambodia.
The need for UNDP's work remains especially strong among African
countries emerging from war and hunger with great aspirations--and
serious reform plans; and among Asia's poorer nations, trying to catch
up with their neighbors. It also plays a major role in supporting women
worldwide as they work to gain more equal access to the levers of
political and economic power.
Like UNDP, UNICEF plays an important role in countries suffering or
recovering from the devastation caused by civil or international
conflict. Around the world, UNICEF helps protect children--a society's
most vulnerable members and its hope for the future. We have maintained
our request for funding for UNICEF at $100 million for fiscal year
1999.
Mr. Chairman, one of the most inspiring ways this account helps
make a difference in the lives of men and women in this country and
around the world is through its support for the Peace Corps. The Peace
Corps has been one of this country's most successful programs
overseas--both in bringing skills and knowledge to those who
desperately need them, and in bringing great respect and admiration to
America and Americans.
President Clinton's request for $270 million in funding will put us
well along the path to having 10,000 volunteers serving overseas by the
year 2000.
Mr. Chairman, we also ask your support for our population and
health programs, which help developing nations devote more of their
scarce resources to building a better future for their citizens.
Our voluntary family planning programs serve our broader interests
as well. When women and families can choose the number and timing of
their children, population growth rates stabilize. Maternal and infant
mortality decline--as does the demand for abortions. In Russia alone,
for example, AID's support for voluntary birth control has helped
reduce the abortion rate by a reported thirty percent over five years.
iii. promoting democracy, human rights and the rule of law
Mr. Chairman, America's global leadership is derived not only from
our economic and military power, but from the power of our ideals. And
fundamental to American ideals is our commitment to democracy, human
rights and the rule of law.
To millions around the world, the United States represents the
potential of democracy. Wherever we are visibly present and engaged, we
give hope to people who are struggling to secure their human rights and
to build democracy.
By building partnerships with other freedom-loving peoples, we
extend the spread of democracy and open markets that has enhanced our
own security and prosperity and been the signature element of our age.
The State Department's Democracy, Human Rights and Labor Bureau and
USAID's Democracy and Governance Center work together to consolidate
democracy where it has taken root and to support nations seeking paths
to democratic rule.
USAID's democracy and governance funds have helped nearly double
women's participation in Bangladesh elections and encourage greater
accountability within the Palestinian Authority. For many years, USAID
programs quietly provided the sole source of outside support for NGOs
and human rights groups in Indonesia--groups that today have emerged to
help shape their country's future. I know you have heard separately
from Brian Atwood about USAID's request, but let me take this
opportunity to indicate my strong support for it, and for the work
USAID is doing around the world.
We also bolster democracy through our economic support and
development assistance programs in selected countries. For example, the
economic support funds we request will help improve judicial systems in
Africa and Latin America; work to sustain peace and democracy in
Guatemala; and contribute to the work of the War Crimes Tribunals for
Rwanda and the former Yugoslavia.
Whether through the SEED and Partnership for Freedom programs, the
President's Africa Great Lakes Initiative, or USAID's Office of
Transition Initiatives, when we support human rights and democracy we
are supporting our natural partners--and our natural interests.
iv. providing humanitarian assistance
This year, we have requested $670 million for Migration and Refugee
Assistance and for our emergency funds in this area. That is the amount
we need to do our part in international relief for victims of
persecution or armed conflict. The request also includes funding for
new initiatives to assist and protect refugee children.
We have also requested funds for international disaster assistance,
including programs to respond to the ever-present risk of biological,
chemical or nuclear disasters abroad.
v. conclusion
As always, Mr. Chairman, I come before you with my mind focused on
the present and future, but conscious, also, of past events that have
shaped our lives and that of our nation.
Fifty years ago, a Communist coup in my native Czechoslovakia
altered forever the course of my life and prompted, as well, an urgent
rethinking by the west of what was needed to defend freedom in Europe.
In that defining year, a Democratic President and a Republican
Congress approved the Marshall Plan, laid the groundwork for NATO,
helped create the Organization of American States, established the
Voice of America, recognized the infant state of Israel, airlifted
life-sustaining aid to a blockaded Berlin and helped an embattled
Turkey and Greece remain on freedom's side of the Iron Curtain.
Secretary of State George Marshall called this record ``a brilliant
demonstration of the ability of the American people to meet the great
responsibilities of their new world position.''
There are those who say that Americans have changed and that we are
now too inward-looking and complacent to shoulder comparable
responsibilities. This year, we have the opportunity to prove the
cynics wrong. And Mr. Chairman and members of the Subcommittee, I
believe we will.
From the streets of Belfast and Sarajevo to classrooms in Africa
and South America to boardrooms in Asia and courtrooms at The Hague,
America's influence and leadership is as beneficial and as deeply felt
in the world today as it has ever been.
That is not the result of some foreign policy theory. It is a
reflection of American character.
We Americans have an enormous advantage over many other countries
because we know who we are and what we believe. We have a purpose. And
like the farmer's faith that seeds and sweat and rain will cause crops
to grow, it is our faith that if we are true to our principles, we will
succeed.
Let us, then, live up to the heritage of our past, and together
fulfill the promise of our future--and so enter the new century free
and respected, prosperous and at peace.
Mr. Chairman, Members of the Subcommittee, thank you very much. And
now, I would be pleased to respond to your questions.
remarks of senator ted stevens
Senator McConnell. The chairman of the full committee has
stopped by, and I want to give him an opportunity to make a few
observations before we go to our questions. We are going to
have a 5-minute rule on questioning which will give everybody a
maximum opportunity to have an exchange with the Secretary.
Mr. Chairman.
Senator Stevens. Thank you very much, Mr. Chairman.
I am sorry I was a little bit late and could not hear your
full statement, but we had talked about it on the phone before,
so I am sure that you said what you said you were going to say.
But I have to say what I said to you before. We deal with
hard dollars that are in the bank. We cannot deal with
prospective streams of revenue that are based on increased
revenue charges, increased taxes and further acts of Congress
that appear dubious as far as being passed in time to have them
spendable by October 1.
As a consequence, it is my sad duty to tell you that there
just is no more money. We just have come across an additional
$900 million out of approximately out of the highway bill
passage, but it is unfortunately claimed--I do not see the
people here who put down the claim--for Amtrak already. And I
do not see, really, how we can relieve the stress that you, I
think, so rightly point out in time to give this subcommittee
any additional moneys by the time the markup will come about.
It may be possible, by the time we get to conference, that
we can have a further allocation for Senator McConnell and his
colleagues on this subcommittee. I would hope that it will. I
join you in hoping that we can untie the problems of Mexico
City from the problems of some of the very pressing needs that
we have, particularly I believe we made a commitment on the
U.N. arrears, and I think we have got other commitments we have
to meet. And as far as this Senator is concerned, the IMF
situation is getting more and more acute daily. But those are
other issues to deal with.
But if you want that money, you are going to have to help
us find it. We have not allocated the money to other
subcommittees. To the contrary, they have the same problems.
So, I welcome you here. But these are the days of very
tight purse strings. And I do not see any way to open the purse
any further in this climate that we have right now.
Thank you, Mr. Chairman.
Senator McConnell. Thank you, Mr. Chairman, for stopping
by, even though the news is not great. This is an issue upon
which all of us agree.
We used up a good deal of political capital last year, both
the Secretary, with the administration, and myself and Senator
Stevens and Senator Leahy up here, to get the increase that we
all thought was necessary. And, unfortunately, we find
ourselves in this situation this year. We are not happy about
it.
Madam Secretary, let me lead off with my 5-minute round.
You touched on Kosovo, which is certainly the big news of the
moment. In the Financial Times today, the headline is: ``Serbs
Ignore NATO Exercise to Continue Kosovo Attacks.'' And Mr.
Solana, the NATO Secretary-General, warned that his
organization was, ``preparing to go further, if required, to
halt the violence and protect the civilian population.''
As I mentioned in my opening statement, in the so-called
Christmas warning of December 1992, the Bush administration,
warned Milosevic that the United States would use unilateral
force if ethnic cleansing was carried out in Kosovo. As a CRS
issue brief points out, President Clinton reiterated that
policy when he took office in early 1993.
However, in congressional hearings and statements of
policy, CRS notes, ``administration officials have declined to
confirm or deny the continued validity of the warning.''
So, I guess I would like to start, Madam Secretary, by
asking, is the warning still valid?
Secretary Albright. Well, let me, Mr. Chairman, if I might
just take a minute because you had mentioned some other issues
on Kosovo that I would like to respond to. We are obviously
very concerned about the Kosovo situation. I have also just
gotten a report on President Yeltsin's meeting with President
Milosevic, in which I would say there was some progress, but
did not meet our primary points that the contact group raised,
which was for Milosevic to pull back his security forces.
He said he would do so only in the context of a halt of the
Kosovar Liberation Army terrorist activities, which is clearly
unacceptable to us, because we believe that Milosevic has the
primary responsibility here to halt the repression and stop
making excuses for the repression. There is an offer, again, of
dialog, which is something that we do want, because we believe
that this can ultimately only be resolved through a political
solution.
But, at the same time, it is insufficient to say that
dialog could go forward if the killing of civilians and
depopulating of villages continues. We will continue to press
on this issue.
Let me speak more specifically now to what you have said.
The Kosovo situation is, frankly, more complicated than was
Bosnia at the time of 1991, primarily because of two issues.
First of all, Bosnia was an autonomous country, recognized by
the international community, and the ethnic cleansing that was
going on there was clearly unacceptable to the international
community. I do not have to recount all the actions that we
have taken to reverse that.
Kosovo has been a part of the Federal Republic of
Yugoslavia. What happened was that this whole mess began when
Milosevic took away the autonomy that it had and created a
problem, I think, in radicalizing the Kosovar population. The
best recruiters for the Kosovar Liberation Army are the Serbs,
who are out there torching various populations.
So, we are doing everything we can, through NATO, to plan
for various options that involve the use of force. And as the
President and I have said, and Secretary Cohen has said, all
options are on the table in terms of the use of military force.
That is our position, that we are prepared to use force. We
would prefer, as I am sure you would, that the situation be
resolved through talks, peaceful dialog, and the NATO planning
is done in support of forceful diplomacy.
One of the problems, I have to say and I think that you
would also see this, is that the Kosovar Liberation Army and
some of the tactics they are using are also not the kind that
help the peaceful dialog go forward. And we support President
Rugova and his colleagues in trying to get substantive dialog
going.
Senator McConnell. The Bush letter said: ``In the event of
conflict in Kosovo caused by Serbian action, the United States
will be prepared to employ military force against the Serbians
in Kosovo and in Serbia proper.''
Maybe you do not want to answer it, but I want to ask one
more time, is the warning still valid?
Secretary Albright. Mr. Chairman, the Christmas warning has
never been made public, specifically. And it is a private
diplomatic conversation. And my answer to you is that all
options are on the table. Nothing has been removed from the
table.
Senator McConnell. In response to the Kosovo crisis, you
worked successfully to secure a ban on investments in Serbia.
Can you explain the thinking behind the reversal of that
position a week later in the negotiations involving Ambassadors
Holbrooke and Gelbard? My understanding is the reversal secured
talks between Milosevic and Rugova. What results have those
talks produced, and at what price, in terms of offering more
time for more Serbian violence?
Secretary Albright. Mr. Chairman, we have had a number of
contact group meetings. You correctly say that in the first one
we were able to get a series of sanctions, an investment ban
and a freeze on assets. As a part of those contact group talks,
there was also a desire to develop a way to get dialog between
Milosevic and Rugova. That was part of what the contact group
wanted.
There was a proliferation of envoys to Belgrade. We then
took the issue up and Ambassador Gelbard and Ambassador
Holbrooke went there. There was not a reversal. There was a
suspension of the execution of those sanctions. And we thought
that there was value in getting this dialog going. As soon as
we saw that the dialog was not going anywhere because of the
lack of credibility in terms of it becoming a process dialog
rather than a substantive dialog, we did in fact then impose
those sanctions. And last Thursday, when the contact group met,
we also added a sanction of Yugoslav Airline flights.
So, it was not a reversal; it was a tactical suspension
because we thought it was worth trying to see if we could get
the dialog--a good dialog or a useful dialog going.
Senator McConnell. I am going to stick to my own imposed
time limit here. If the other questions on Kosovo do not answer
all of mine, I will come back to it on the next round.
Senator Leahy.
Senator Leahy. Thank you, Mr. Chairman.
Madam Secretary, I was glad to hear what you said about the
President's upcoming trip to China. I am not one of those who
feel he should not go to China. Just as I strongly urged each
of the five Presidents I have served with to go to the then-
Soviet Union at the height of the cold war and hoped that there
would be return visits here. I urged that because I felt it was
most important that our leaders meet and discuss our
differences.
By the same token, with China as important a country as it
is, I think it is important for the President to go there. That
does not signify that the American people agree with the
Chinese on human rights. There are many issues on which we
disagree with them very strongly. What is most important is
what the President says when he is there.
President Tiang Zemin did not hesitate to express his views
when he was here in the United States. And he heard us speak
right back to him. And we both gained by that. And President
Clinton, I think, needs to speak publicly and forcefully about
human rights, Tibet and so forth, as I know he has in private
conversations with Tiang Zemin.
So, I think it is important for the United States that our
President go there. It does not condone improper activities by
the Chinese any more than we condoned the activities of the
Soviet Union when a number of President's, Democratic and
Republican alike, went there.
Yesterday's New York Times reported that Iraq and the
United Nations have agreed on a 2-month schedule for completing
the program to monitor Iraq's destruction of its chemical and
biological weapons. Has the administration been consulted about
that agreement? And do we agree with it?
Secretary Albright. Well, first of all, let me just say, in
terms of what you said about China, I think a motto here is
that we engage but do not endorse. And we have said very
clearly that we can never have a completely normal relationship
with China unless their human rights record is one that is
quite different from the one they have now.
On Iraq, let me just say this. We obviously are in very
close consultation with the United Nations. The problem
according to the people involved in all of this, is that there
has not been a very good road map--or the Iraqis have said--
that they have not had a road map about what they have to do,
when.
I think that what has happened now is that we have taken
that excuse away from the Iraqis, because Chairman Butler has
indicated to them what they have to do and by when they need to
do it. He will be checking up on this road map. And then, in
August, he will give some discussion of that. But, then again,
in October, when there are sanctions reviews, he will then make
clear to the Security Council whether they have in fact come
clean on the various files, the nuclear, chemical and
biological.
So, this does not in any way prejudge the effects, but
does, in my opinion, basically take away an excuse from the
Iraqis, as well as those who support them, who say, well, you
never really tell them what they have to do; you are always
adding things. And this really is a road map, a work plan
basically, in terms of what they have to do.
Senator Leahy. We will watch carefully, all of us, to see
how well we do, as well will you all.
Secretary Albright. Well, we will. And we are not going to
give them a passing grade on a work plan that is not carried
out properly.
Senator Leahy. The negotiations on the International
Criminal Court have begun in Rome. You have been perhaps more
outspoken than anyone in support of the War Crimes Tribunal at
The Hague. I notice in Rome one proposal is that any country
whose citizens are charged with war crimes would have to
consent before a trial takes place. Well, Saddam Hussein or
President Milosevic or others are not going to consent.
And if a Security Council veto could block prosecution,
don't we run the risk of China, for example, blocking
prosecution of the Khmer-Rouge? And if there were not already
the Bosnia War Crimes Tribunal, then Russia possibly blocking
prosecution of Serbian war criminals? Wouldn't that court
become as ineffective, actually, as the United Nations has been
at times when strong action is needed?
Secretary Albright. Well, I think that we have, in
principle, backed an international criminal court because we
think that there continue to be serious violations of the core
crimes of genocide, war crimes and crimes against humanity. We
support a practical court that reinforces these institutions
charged with maintaining international peace and security. What
we desire is for the court to have a proper relationship with
the Security Council. And we are looking forward to working for
a positive outcome of the Rome conference.
I think that what is very important, Senator Leahy--because
there have been questions about this--is that we want to
develop a comprehensive approach to the court that advances the
cause of justice and protects American citizens from
unwarranted action from a court. So, we have the goal of trying
to develop a functioning, good court, but also make sure that
our citizens are protected and also that it does fulfill the
responsibilities of international institutions.
Senator Leahy. I hope you follow carefully on that. Because
I read that the Chief Prosecutor of the War Crimes Tribunal
recently dismissed charges against 14 Bosnian Serbs because she
does not have money to prosecute them. I want to see an
effective War Crimes Tribunal. But that means that the nations
who support it have got to fund it, too. And to have 14 people
go free simply because the money is not there should be a
matter of grave concern to all of us.
Secretary Albright. I agree with that. And I think that
what is interesting is that the record of the War Crimes
Tribunal now has gotten quite good in terms of the number of
indictees and those who really have come to trial. I think that
one of the reasons we want to have a permanent international
court is that there is some fatigue, I think, in terms of
funding ad hoc war crimes tribunals, and this is a more
efficient way.
I definitely agree that we need to fund the War Crimes
Tribunal now. I think it is doing a great job. And, ultimately,
the only way that there can be a real reconciliation in Bosnia
is if individual guilt is assigned and collected guilt is
removed.
Senator McConnell. Thank you, Senator Leahy.
Senator Gregg.
Senator Gregg. Thank you.
Madam Secretary, it has been reported that missile
technology was sold to China by a United States company that
has the capacity to allow the Chinese to target their missiles
on the United States--not necessarily that they are, but it
gives them that type of technical capacity. It was also
reported that that decision was taken after the State
Department--and I presume yourself--had the good sense to
advise the administration not to allow that sale to go forward.
My question is, is that correct? Did the State Department
advise the administration not to approve that sale?
Secretary Albright. Senator, there are really two parts to
this question. First of all, there was the whole issue as to
how commercial sales of satellites should be handled. Since
these are commercial satellites, after a great deal of
discussion, it was determined that it was appropriate for the
Commerce Department to handle this issue, with the State
Department always having the ability to be a part of the
decisionmaking process on this. And we continue to do that.
We look at each of these sales in a way to make sure that
our national interests are protected. And we look to make sure
that the recommendations are appropriate. This justification
for commercial satellites to be launched by the Chinese is
something that goes back two administrations. It is done
basically in order for competitiveness, because we are the ones
that are leaders in the satellite technology; for openness,
CNN, et cetera--to be able to beam into China; for
nonproliferation reasons.
And so we consider it something in the national interest.
And the State Department has its review process, and we did not
recommend against it.
Senator Gregg. You did not recommend against selling this
technology to China?
Secretary Albright. No.
Senator Gregg. So, those reports are inaccurate,
representing that you did?
Secretary Albright. It is a complicated inner process. And
I think that we believed that this was in the national
interest. There were other departments that made their
recommendations.
Senator Gregg. There is a bit of irony, though, isn't
there, when we go to China and ask them not to sell technology
to Iran and to potentially Pakistan that is missile technology,
when we are selling China missile technology which may give
them the capability of targeting the United States should they
decide to use it that way?
Secretary Albright. Senator, we are not selling them the
kind of technology that allows them to target the United
States. These are commercial satellites that are used for the
purposes that I described. We certainly would not be involved
in any kind of sale that in any way jeopardized our national
interest.
We have been concerned about Chinese missiles, as well as
nuclear proliferation. They have systematically, I think, come
within international regimes that limit any country's ability
to sell or transfer weapons. It is a subject of discussion that
we have them, and will continue to be a subject of discussion
as we go into the Beijing summit.
Senator Gregg. So, basically, the reports that represent
that this technology gave them guidance systems which could
give them the capacity to target America if they decided to do
so--with adjustments, obviously, to these systems--target the
United States with their missiles, you believe that is
inaccurate?
Secretary Albright. My understanding, Senator, is that that
is inaccurate and this is not that kind of technology.
Senator Gregg. I am interested also in this India/Pakistan
situation. Why is it that the European nations have been so
reticent to participate in pursuing whether, under our
statutes, required sanctions relative to India? Why have our
European allies been so reticent to pursue sanctions and been
unwilling, especially France, to do anything in the area of
limiting or putting pressure on the Indians in the area of
nuclear proliferation?
Secretary Albright. Senator, I think we have all kind of
had this discussion before. I think that other countries view
sanctions, the use of sanctions or the imposition of sanctions,
in quite a different way than we do. We have seen sanctions--
depending upon how they are used and what the flexibility
associated with the piece of legislation is--as a useful tool
of foreign policy. There are times--and I hope that we can all
have a broader discussion of this--when sanctions are more
sledgehammers than scapels that allow some surgical activity to
take place and actually limit the American ability to carry out
our policy.
The Glenn amendment is probably the strongest sanctions
resolution that has existed. We had hoped that it would deter
India and Pakistan. It clearly did not, even though they are
going to, I believe, suffer economically. And they certainly
have become less secure as a result of these bomb blasts, or
tests.
I discussed this issue when we had a Permanent Five meeting
in Geneva. And I said, you know that the Americans have a very
strong sanctions resolution. We would like you all to join us.
But certainly what we do not want is, while we are being firm,
for you all to go in and pick up the contracts. I think that we
have to work more closely with our allies. And I must say that
our meeting of the Permanent Five was very good. We were also
able to get condemnation of India and Pakistan by NATO, by the
NATO Joint Council, with the Russians, by the Euro-Atlantic
Partnership Council, by the OAS General Assembly.
And so, within a matter of 4 or 5 days, we had 80 countries
that had made quite clear their condemnation of what India and
Pakistan had done. And there are numbers of countries that have
joined us in the sanctions, just not the ones that you
mentioned.
Senator McConnell. Thank you, Senator Gregg.
Senator Murray.
Senator Murray. Thank you, Mr. Chairman.
And I welcome Secretary Albright. It is good to have you
before this committee. I appreciate your testimony and your
work for all of us around the world.
Secretary Albright, you know, as you were just discussing,
the administration has moved to implement the mandatory
sanctions against India and Pakistan for their nuclear weapons
tests. The law does exempt food and humanitarian aid from the
sanctions. However, the Justice Department recently concluded
that agricultural credits for the purpose of purchasing food
were not exempt from those sanctions.
Last week, in the Appropriations Committee, on an amendment
to the agricultural appropriations bill, I offered an amendment
that would exempt those agricultural credits from the
sanctions. And it was accepted with a lot of bipartisan support
in the Senate. I would like to know what your view is of that
issue, and if you will support the Murray amendment to exempt
agricultural credits for food purchases from those sanctions.
Secretary Albright. Yes; thank you very much, Senator. And
the administration very much thanks you for your leadership in
addressing this question. We would support your amendment. We
think that it is useful, because it does in fact allow for an
exception for credit, credit guarantees and other financial
assistance provided by the Department of Agriculture for the
purchase or the provision of food or other agricultural
commodities. And so we support your efforts on this and do in
fact believe that it is important to go forward with
humanitarian assistance.
I think this is a point that needs to be made, generally,
about the fact that we are not trying to punish the people of
India or Pakistan, and we do not wish to create major
instability. Therefore, this, I think, is very useful. Thank
you for offering it.
Senator Murray. Thank you. And I will look forward to
working with you. It is important to my State and my region,
and we appreciate your support.
Secretary Albright. And we look forward to working with
you, Senator.
Senator Murray. I also want to ask you about the IMF fund.
You mentioned it in your comments, as well. But that too, the
Asian currency crisis, is dramatically affecting the Pacific
Northwest, our farmers as well as our exporters. And I note
that the United States, in the last week, has once again seen
that it is a serious and long-term problem. Our own stock
market has dropped by 6 percent recently as a result of the
fears that are generated by Asia's situation.
Could you expand on your comments, and tell us what the
administration is doing to encourage Congress to fund the IMF
request? And in your opinion, what are the risks to the United
States if Congress refuses to act?
Secretary Albright. Well, I think that we have all been
kind of talking about the Asian financial crisis for some time.
I think Americans are becoming more and more aware of it. I
think that with each passing day it becomes evident that this
is not something that is just happening in Asia that has no
effect upon us.
The Japan stock market declined slightly today, and we
continue to be concerned about the fluctuation. And we are
concerned, deeply concerned, about the prolonged weakness of
the Japanese economy.
We feel that there are any number of ways that we can be
helpful as far as the Asia financial crisis is concerned. But
the IMF is the major tool here because it allows for or directs
that there be transparency, open markets, business practices
and procedures that provide a certain level of confidence. They
are the international way of letting the leaders of countries
know the direction that they can take to dig themselves out of
a hole.
Our problem is that with our lack of funding for it, we are
in effect weakening that particular tool. And as I explained in
my testimony, it is basically an international credit union, so
that it does not cost the American taxpayer. On the other hand,
it provides the kind of security that allows the leaders to
take steps in terms of reforming their economies.
We will continue to press to try to get full IMF funding,
and also to get the arrears. Because, again, that is a problem
that we have talked about, vis-a-vis the U.N. It is very hard
for us to keep exercising the leadership role and at the same
time put ourselves in a position where other countries
criticize us for not fulfilling our obligations.
So, we consider this very important, and we must separate
it from the family planning issues. Because while I think that
there are really good folks on both sides of that issue--and I
know that we all have different views on it--it is an important
issue that should be discussed separately and not attached to a
national security issue. Funding the IMF at this point is a
national security issue.
Senator Murray. Thank you. I look forward to working with
you on that, as well.
Secretary Albright. Thank you.
Senator Murray. And, finally, Secretary Albright, I
recently sent you a letter with a set of questions on Guatemala
and the release of documents pertaining to human rights
violations. Our staffs have been speaking about this letter. I
just simply wanted to ask that you ensure a timely response to
that, with as much information as possible.
Secretary Albright. Absolutely, yes. And we are. I have had
a beginning discussion with some of the Guatemalan officials
that I have just seen recently at the OAS General Assembly. So,
we will follow up on that.
Senator Murray. Thank you very much. I look forward to
that.
Senator McConnell. Thank you, Senator Murray.
Senator Bennett.
Senator Bennett. Thank you very much, Mr. Chairman.
Madam Secretary, when you were confirmed last year, I sent
you some written questions. And in your responses, you revealed
that Chinese military companies were selling germ warfare
equipment to Iran. And last year, in this place, you confirmed,
in response to my questions, Chinese sales of poison gas
equipment to Iran.
And by coincidence, this morning, Bill Gertz, in the
Washington Times, says that the Chinese are assisting the
Iranians and the Libyans in purchasing missile equipment.
Are we ever going to get a handle on Chinese arms
smuggling?
Secretary Albright. There does seem to be an odd
coincidence.
Senator Bennett. Every time you come, I seem to have these
questions. But it continues.
Secretary Albright. Let me go through this, if I might, in
a little bit of detail because there is no question that we
have been concerned about issues that deal with
nonproliferation and China. And as a major producer of nuclear-
, chemical-, and missile-related equipment, China does have a
responsibility to meet internationally accepted
nonproliferation standards. This is a subject that comes up all
the time with the Chinese as we meet with them.
I think that it is worth detailing for you the extent to
which China has become increasingly a part of the international
norms that are so essential to all of us. On nonproliferation,
there has been a sea change, particularly in the nuclear area.
They have joined the NPT, the CTBT, the Biological Weapons
Convention, the Chemical Weapons Convention, and they have
committed to no nuclear cooperation with Iran, joined a major
international nuclear suppliers group--the Zanger Committee,
and instituted comprehensive nuclear export controls.
They have, and they do, also cooperate with us in our
efforts to maintain stability on the Korean Peninsula. When I
was in China the last time and also when I met with the Chinese
Foreign Minister again 4 or 5 days ago, in Geneva--we talked on
a regular basis about their necessity to fulfill their
obligations and to make sure that they expand their control
over dual-use chemicals and refrain from any arms transfers.
This is very much a part of our ongoing dialog.
They have improved. I think the record will show it. They
still need to improve. And we will continue to press that. The
President is going to raise all these issues when he is in
Beijing.
Also, we have expert-level talks. Acting Under Secretary
Hollum has met with senior visiting Chinese officials. And
Assistant Secretary Einhorn continues to have expert-level
talks.
On the subject of today's article, I think that it is very
important that it be clear that we strongly oppose any missile
cooperation with Iran. We have repeatedly made that clear to
China at senior levels, our concerns about reports of Chinese
exports of missile-related equipment and technology to Tehran.
We have said that and we will continue to do so, as I have
stated.
I think that this is an important problem, and we continue
to deal with it. Engaging China on nonproliferation has been a
top priority of this administration for several years. And it
will continue to be so.
I think that I need to also make very clear to you that we
still have important concerns about China's missile-related
exports. It is, as I have said, very much on our agenda.
Senator Bennett. You are talking about having a strategic
partnership with China. Maybe words do not mean too much,
although I think very often the choice of words is perhaps the
No. 1 challenge of a diplomat. The word ``partnership'' is the
word that comes out of this that I would like to pursue.
And in light of what we have just been discussing, how can
we have a strategic partnership--not a relationship, not a
dialog, but a partnership with a country that is involved in
this kind of activity and proliferation of weapons of mass
destruction--germ warfare, poison gas, and now missile
technology to Iran? How do you explain this strategic
partnership with China to our Asian allies? And what is their
reaction to the idea that the United States is going to be
partners with someone who is exporting this kind of technology
around the world?
Secretary Albright. Senator, let me again put this into
some context. I think Senator Leahy spoke about the President's
trip. And I had some comments in my opening testimony.
Senator Bennett. I am not saying the President should not
go.
Secretary Albright. No; but let me comment. I think that we
have many challenges as we look at the world of the 21st
century. And I do not want to make this answer too broad, but
the questions and points that Chairman McConnell raised are
part of a very complex world that we are looking at as we move
into the 21st century.
I think there is no argument about the fact that China is
the largest country in the world in terms of its population and
also in terms of its economic possibilities. I think you could
rightfully haul us all up here and get us on incompetence if we
were not having some kind of a relationship with China that
engaged them and that did not isolate them.
Senator Bennett. I agree with that. I am focusing on the
idea of creating a partnership with a Communist country that is
involved in exportation of weapons of mass destruction. We did
not have a partnership with the Soviet Union. We had
engagement. The President, whoever he was, went to Moscow
regularly. I am not talking about that.
I am talking about this concept of a strategic partnership.
Do we view the future as a joint China-American relationship in
Asia?
Secretary Albright. Well, let me say that we are looking
toward the future of having a relationship with China, and who
knows what they are going to look like in the 21st century.
Plus, maybe I had this wrong, but I think one can be partners
with more than one country, and it does not exclude other
countries from having a partnership or relationship with us.
I can tell you now that, while we clearly disagree with the
form of government in China and, as I just explained, we also
are taking very active steps to have them improve and change
their proliferation relationship, they have in fact been quite
helpful in a number of issues of strategic importance. That is,
in terms of stabilization on the Korean Peninsula and their
support for what we are doing there.
And I might add that the Chinese were in the chair of
Permanent Five members of the Security Council who met last
week in Geneva, the chairmanship of that rotates. The Chinese
did the formal part of the meeting and then turned it over to
me. And we were able to get a statement out of the Permanent
Five that was condemnatory of India and Pakistan that I think
we could not have occurred had we not worked on having a
strategic relationship or one where we are increasingly
engaging China.
I think, sir, that perhaps you are reading too much into
the word ``partnership.'' But it is an effort, I think
ultimately, because we are hoping that China will in fact play
an increasingly responsible role in Asia, and we want to engage
it across the board. And I think there is evidence that there
is some good coming out of it. Though, clearly, there are
problems, whether they be in human rights or in the
proliferation area or in other ways that they run their
country.
Senator McConnell. Madam Secretary, shifting back to the
Middle East for a moment. There has been some controversy
surrounding the views of the administration related to the
status of Jerusalem. The Vice President recently made a speech
on the occasion of the 50th anniversary of the State of Israel,
and he made that speech in Jerusalem.
In your view, when he made that speech, was he in Israel?
Secretary Albright. Jerusalem is a final status issue. I
think that both Israel and the Palestinians have agreed that
Jerusalem is one of the issues to be addressed in permanent
status negotiations. And, clearly, no issue in the Middle East
peace process is more volatile than Jerusalem. I think it is
not appropriate for us to offer our views. This is going to be
a permanent status issue.
I think that what is important here is that we get to
permanent status, so that we can actually deal with that and
the other very complex issues.
Senator McConnell. Staying in that part of the world, as I
mentioned this in my opening remarks I am curious as to whether
there have been additional financial commitments made with
reference to the peace process?
Secretary Albright. No, sir; there have not been. There
have been feelers as to whether there could be. But there have
not been any additional commitments. Obviously, if there were,
we would be discussing them with you.
Senator McConnell. Moving to Cambodia, we all have watched
with disappointment over the past 11 months as the situation in
Cambodia has deteriorated, reaching what by any standard would
have to be agreed were unacceptable levels of corruption. The
Hun Sen government has relied on tactics of murder, extortion
and military intimidation to maintain power. The world
community publicly condemns the practices, but remains largely
disengaged. And no effort seems to be underway to ensure that
the July 1998 elections are legitimate.
Now, Assistant Secretary Roth was up before the Foreign
Relations Committee recently. He said that a framework ``exists
in which free and fair elections could conceivably be held.''
Do you share that optimism?
Secretary Albright. Well, Mr. Chairman, this has been very
much on my mind. We have worked very closely with the ASEAN
troika on this, as well as created a Friends of ASEAN group. I
think that we have done what we can to try to give the
Cambodian people a chance at these elections. There are going
to be observers. The opposition leaders are back. There is
access to the media. And there has been a drop-off in the
violence.
I go back to how we all talked about the first Cambodian
elections, when people thought that nothing would happen in
them and that the people would not really have an opportunity
to voice their views. I went to Cambodia shortly after those
elections. People had flocked to the polls in record numbers
and stated their views.
And so I think that I agree with Assistant Secretary Roth,
or he agrees with me----
Senator McConnell. How surprising. [Laughter.]
Secretary Albright [continuing]. I think there is a chance
here, and we ought to make sure that we are able to get the
NGO's and various observers in their and give the Cambodian
people a chance.
In the meantime, we will also continue to press, with ASEAN
again and through our Friends of Cambodia group.
Senator McConnell. Well, you are familiar with the concern
expressed most recently just this morning in the Washington
Post, which I will quote. It says: ``Unfortunately, the Clinton
administration is giving hints of leading toward a third even
less attractive option--accepting the election results without
much of a fuss.''
I gather what I hear you saying is that you think they are
on track to having a relatively free and fair election?
Secretary Albright. What I am saying is I guess there is
not--I do not always agree with every editorial. But I think
that we have at least provided a framework for them to have a
chance to do that--not a guarantee, but a chance. And we will
continue to do that.
And if the election is not free and fair, we will so
declare. But we have set up a process whereby there should be
enough observers in there in order for us to be able to make
the judgment.
Senator McConnell. So, you are still optimistic that this
may pass the international smell test when it occurs in July?
Secretary Albright. Mildly optimistic, yes.
Senator McConnell. Mildly optimistic.
In terms of Cambodia, let me just ask this, finally, before
going to Senator Leahy for a second round; does the
administration have a plan in place to deal with the more than
75,000 Cambodian refugees along the Thai border?
Secretary Albright. Well, we generally have been looking
very carefully at this vast increase of refugees all over the
world. One of the things that we are asking is for increased
funding in the refugee accounts. I will have to get back to you
with a specific plan for those on the Thai border. But it is
something that we have discussed a great deal. I have also had
discussion with the Thai authorities. And also it is a subject
that I am sure will come up again as we meet with the ASEAN
group later this summer.
Senator McConnell. Senator Leahy, do you want to have a
second round?
Senator Leahy. Thank you. Briefly, and then I will put my
other questions in the record.
One thing I would like to ask about, Madam Secretary, our
law prohibits aid to any unit of a security force of a foreign
government if that unit has been implicated in gross violations
of human rights unless the foreign government is taking
effective measures to bring the individuals responsible to
justice--the so-called Leahy Law. I believe it is common sense.
And I appreciate that you and others in the State Department
have seen this law as an opportunity to support human rights.
And you and others from the Department have been very strong in
their support in your testimony on the Hill.
The Pentagon has said that it also adheres to this
standard, but I have received reports that make me wonder if
that is so. Can I assume that it is the administration's
policy, regardless of which budget the funds come from they
will follow the Leahy Law?
Secretary Albright. Well, first of all, let me just tell
you what we do to let people know about the Leahy Law. In
March, we sent out a cable to all diplomatic posts, informing
them of the new requirements, and instructing them to formulate
action plans to implement the legislation. And before
disbursing any funds to foreign security forces units, our
Embassies vet the proposed recipients to ensure no human rights
abusers are among them. We are working with DOD to make sure
that the law is properly implemented.
We also have human rights officers at each of our
diplomatic posts, and they routinely gather information on
human rights violations. And we are working very assiduously to
make sure that the law is implemented, as I said, working with
DOD also.
Senator Leahy. Thank you.
I have been watching the growing civil unrest in Mexico, as
I know you have. There are some 70,000 soldiers in Chiapas,
about one-third of the Mexican armed forces. And there has been
clashes between rebel groups and soldiers in several other
states. And while we would all like to think of Mexico as being
different than a lot of the countries in Central America, it
has many of the same problems. And I worry about what happens
in Mexico.
Despite President Zedillo's statements to the contrary,
every indication is that the government is trying to solve
these problems with force. A lot of people are being killed in
Chiapas. The negotiations on a peace agreement have broken
down. The Bishop who headed the negotiations quit in disgust
last week.
Is this situation just going to become worse and worse?
Secretary Albright. Senator, President Zedillo did move
very quickly to have his Attorney General investigate some of
the December massacres and to really try to get the situation
dealt with in a negotiated way. I have now met with the Mexican
Foreign Minister a number of times on a number of issues
recently, in a number of places--whether in Santiago or Caracas
or in Washington last week. I can assure you that the
Government of Mexico knows of our concern, in terms of what is
happening in Chiapas--massacres--and trying to make sure that
there is a very thorough investigation.
We are following the investigation very closely, and have
told the Government of Mexico that we will be doing so. We are
also working generally with the Mexican Government to try to
make sure that there is timely notification of detention and
counsel access to United States citizens that are in Chiapas.
So, I think, on the whole, Senator, we are pressing them to
resolve the Chiapas situation and, at the same time, pressing
them to deal with what we consider issues that need to be
investigated thoroughly.
Senator Leahy. The reason I ask is we license a lot of
sales of military equipment to Mexico--lethal equipment,
helicopters, and so forth. And I worry, as many others in my
own State of Vermont worry, that a lot of that equipment is
being used in Chiapas in a way that would go beyond anything we
have licensed or would condone. And I would hope that we are
following that very, very closely, so it is not being done.
I have further questions, but I will submit those for the
record, Mr. Chairman.
Secretary Albright. Senator, if I might just say, that was
a question asked of me at St. Michael's College.
Senator Leahy. I just thought I would throw it in again.
Secretary Albright. I came back and specifically asked
whether there was any evidence of American equipment being
used, and was told that there was not. I said I was asked this
by a very smart young woman in Vermont, and I needed an answer.
Senator Leahy. Well, I expect that she is probably going to
stop me on the street while I am up there and ask me again. So,
I just want to make sure.
Senator McConnell. Thank you, Senator Leahy.
Senator Bennett.
Senator Bennett. Thank you, Mr. Chairman.
We will undoubtedly be pursuing the question of United
States-China relations for a long time as this subcommittee
goes forward. I simply note that Secretary Christopher did not
want to use the word ``partnership'' in his relationship with
the Chinese. It is Secretary Albright who agreed to the phrase
during her April meeting.
That is why I raised it here. Because I think words do have
meanings, and I want to pursue that, not for the point of
splitting semantic hairs but to go back to a strategic
statement that I got out of my last visit to China, when the
U.N. Ambassador told us that China's long-term goal was to get
the United States out of Asia and become the only significant
power in that part of the world, and that our other allies'
long-term goal was to make sure we did not get out of Asia,
because they did not like the idea of having China as the only
superpower in Asia.
And it is against that background that I raised the
questions in the first round. We will undoubtedly have some
more.
Let me go to another quick issue that I would like to give
the Secretary an opportunity to respond to. The CIA now admits
that it was surprised by the Indian nuclear tests last month. I
would be interested in knowing if the State Department was also
caught unawares by the Indian actions?
Secretary Albright. Senator, let me, if I might, just go
back to the previous question. I think that there is a dynamic
relationship between us and the Chinese, and we are moving in a
positive direction with them, which would allow us to have the
kind of relationship that I discussed. But things have moved
and changed quite dramatically on a number of issues,
especially on some of the nonproliferation issues which we
discussed.
Also, I think that we cannot and should not operate on the
premise that China is trying to keep us out of Asia. It is
impossible to keep the United States out of Asia. We are a
Pacific power. We have interests there. It is very evident in
the meeting with President Kim Dae Jung, for instance, just now
that we are viewed as a major Pacific and Asian power. There is
no way that anybody can keep us out.
I think what we need to clarify is that our policy is not
one of containing China, but of engaging China, and that we
need to work systematically to have regular summits with them,
to engage in a dialog that goes beyond just United States-
Chinese relations, but talks about what they see in the Asian
subcontinent, et cetera.
So, we will probably have a lot of opportunity to discuss
that.
Senator Bennett. Yes; and I do not mind engaging. I voted
for MFN, and have done the other things that have brought some
political heat on me with respect to China. But it is true, in
my view, that the PRC has signed a number of arms control
agreements. And the problem is they do not seem to live up to
them. And the administration has had a lot of meetings with the
Chinese on arms sales, and the problem is that nothing seems to
come of these meetings long term.
So, that is why I continue to pick away at the sore.
Secretary Albright. Well, I would respectfully disagree
about the fact that nothing comes of them in the long term. I
think there is progress to be made, and progress has been made.
I think if you believe that the word ``partnership'' means that
we are not friends or partners with anybody else, then it is
the wrong word. But if you see it as a possibility of engaging
with them on a series of issues where we can press them or
cooperate with them, then I think maybe we could agree.
But let me just say, on the Indian issue, we have known,
obviously, all of us, for some time that the Indians and the
Pakistanis were capable of having these kinds of tests. And we
have raised the subject of proliferation with them every time
that we have met with them. I did so when I was in India. We do
so when we meet with the Indians and Pakistanis.
What happened here was that a party in which the testing of
nuclear weapons was part of their party platform got elected.
Their people were here, and simply denied the fact that they
were going to happen at that particular moment. But we knew
that the possibility existed. Yes, we were all surprised by the
fact that the tests took place when they did. And I think that
the CIA has said that this was a problem, and they have had an
investigation looking into it.
The Glenn amendment was supposed to hold all this back. But
we clearly all knew about the fact that it was a long-term
possibility. We were surprised by the moment.
Senator Bennett. Thank you, Mr. Chairman.
Senator McConnell. Madam Secretary, I want to close with
the Caucasus. When you were here last year, you indicated your
belief that the Russians were as anxious as we were--as we
are--to see a settlement of the Azeri-Armenian dispute. I was
there last August, which does not in any way make me an expert,
but I have had a chance to meet with the players. In Armenia,
since last August, the principal player has changed, with the
resignation of President Ter-Pertrossian and the new election
of Mr. Kocharian.
I am deeply skeptical that the Minsk Group, as a process
for resolving this dispute, can work. And as I look out at the
places around the world where we have clear interests, it seems
to me, Madam Secretary, one could argue that we have a good
deal more interest in the Caucasus, particularly given the
involvement of many of our energy companies in the Caspian Sea
development, than we do in the Balkans. Yet, we are intensely
involved in the Balkans, and while I am not arguing necessarily
that we should not be, it seems to me, in looking at
priorities, by any standard, we have huge interests in the
Caucasus.
Do you have any optimism--or anything that could illustrate
a reason for optimism I guess would be a better way to put it--
that a settlement of the Armenia-Azeri dispute is someplace in
the near future? And if you are optimistic about the Minsk
Group as a framework for achieving a peace, tell me why.
Secretary Albright. Mr. Chairman, I looked at the subject
even before I got to the United Nations. But the issue, when I
was Ambassador at the United Nations, was very much on our
agenda. I went to both Armenia and Azerbaijan to talk about
this. At that stage, I talked a great deal about my own sense
that the Minsk Group was not really moving. In fact, I
discussed it also within OSCE circles, and tried to really
press it.
I think that you made a statement as part of your opening
remarks about trying to do this without Russia. I think I heard
that right. I think it is very hard to see about some kind of
settlement in Nagorno-Karabakh without having Russian
involvement in the discussions of it.
Senator McConnell. I did not mean to say that they would
not be involved at all. After all, it is on their doorstep. But
do you see any evidence that you can cite that the Russians are
interested in a settlement of this dispute.
Secretary Albright. Frankly, I believe that in the long run
they would like to have the various disputes on their borders
settled, because they create a series of problems for them.
Senator McConnell. My question is about the short run. Can
you cite any evidence that they would like to see this settled?
Secretary Albright. Well, the last evidence that I had was
that we discussed this in the tripartite talks--with the French
and the Russians.
I must agree with you that I would like to see more steam
put behind this, and that, to some extent, it is in one of
those categories that you just let it bubble along, I think,
without enough action to it.
Senator McConnell. Are you willing to make it a higher
priority? I know Strobe Talbott is, at least ostensibly, the
point person on this for you. How frequently is he dealing with
this? Does he go to the meetings, or is it instead passed down
to somebody below him?
Secretary Albright. He goes to a number of them. But there
is somebody who does this on a full-time basis, because it
requires constant following.
I am taking what you are saying very seriously, and I will
make a point of making sure that we rev it up a bit. It is one
of those situations that is--having dealt with this myself
previously--there is no quick and easy solution to it. And if
the parties do not want to talk to each other about it, and if
changes in government make it difficult for the various
problems, in terms of the corridors and the blockages to be
resolved, it is very hard to push.
I agree with you on the general point that the Caucasus are
an area of major importance to us. We spend quite a lot of
time, in terms of dealing with general issues in the Caucasus
and in Central Asia--and even more, I think, with the whole
issue, obviously, of their strategic importance and the issue
of Caspian oil, and, generally, the whole area.
When I testified before the Foreign Relations Committee, I
brought my globe, and I showed that we basically look at the
world always through the prism of the Western Hemisphere. Then
I turned it around and I showed how much of Eurasia there was.
And there are the Caucasus, central to all that. So, it is one
of the areas that we are trying to spend more time on, in terms
of its overall importance to us.
Senator McConnell. Well, I know you have a lot of trouble
spots. I appreciate what you said about giving this more
personal priority, in terms of your own time, because I frankly
think, Madam Secretary, that unless this is escalated on the
priority list in your shop, the chances are it is just going to
drift along with this Minsk Group, where nothing ever happens.
In the meantime, I believe you visited the refugee camps as I
have, there is a desperate situation.
Wholly aside from the oil interests, which are apparent,
the humanitarian side of this is very bleak. And if CNN had
spent any time in the refugee camps in either Armenia or
Azerbaijan, I think we would have a lot more interest in this
issue in this country. And I hope you will in fact take a
greater interest in it.
Secretary Albright. Mr. Chairman, just now and also in your
opening statement, you really had a long list of the various
issues that we have to deal with. And as I have said to all my
political friends, every county has been heard from. I mean,
there is not a problem anywhere that somehow is not out there
for us.
And I think we need to have more discussions about
generally how we proceed into the 21st century. With the kind
of statement that Chairman Stevens made, you know, I would like
to see the money. I think we all would like to see the money.
We also would like to have the ability to deal with the
Nagorno-Karabakhs and the various other issues that have come
up here today.
I think we need to understand what our role is; that the
United States cannot lead without the resources. We talked
about sanctions----
Senator McConnell. Can I interrupt you on that point,
though?
Secretary Albright. Yes.
Senator McConnell. I think the money would follow the
success. I mean, what happened after Camp David is that the
Congress made a very generous commitment, which it is still
keeping 20 years later. I think if there is a success that
requires some American commitment, you will find people in
Congress on both sides trying to figure out a way to do our
part.
Secretary Albright. Well, I hope that we have that
opportunity. And I also hope that we have an ability to work on
something that is tying our hands. That is the whole issue of
sanctions policy that we have talked about, that came up here
today. I would welcome very much a much broader discussion of
the various issues that we have to deal with, because they are
bubbling everywhere, and we need to work together on it.
I would like to correct something, though, Mr. Chairman,
that I said on the refugees. We have not requested an overall
increase, but we have changed some of the allocations. And we
will get back to you on that.
Senator McConnell. Thank you very much, Madam Secretary. We
wish you well.
Senator Bennett. Mr. Chairman, may have one last shot at a
totally unrelated issue?
Senator McConnell. All right, Senator Bennett.
Senator Bennett. Wearing my hat as chair of the Senate
Special Committee on Y2K, may I ask, Madam Secretary, that you
continue to press on the initiative that I understand you have
from John Koskinen, to see that every U.S. Ambassador raises
the year 2,000 [Y2K] issue with every country vigorously?
Because I think the evidence is now coming through that while
we will have problems in this country, we are now close enough
to the possibility that we will get most of our Y2K problems
under control in this country, the evidence indicates that it
will be a disaster in many parts of the world, with serious
economic consequences. And I would hope you would continue to
press forward on that issue.
I would be derelict, as you know, Mr. Chairman, if I did
not take every opportunity to raise this.
Secretary Albright. I have to say, Senator, that you remind
me of me on this. Because in every meeting that I have with a
foreign minister, after we have finished with everything, I
say--we have had a meeting of the Cabinet, and the President
has made very clear that we are all responsible for our sectors
in terms of letting them know that they have to do something
about the Y2K problem. And so the Transportation Department has
to deal with local police stations, et cetera.
I consider that my sector is the world, and, therefore,
every time I meet with a foreign minister, I say, you have to
do something about this. Some of them think I am a techie
because I even raise it, but I am telling them that we are not
going to be able to talk to each other. So, I promise you that
that is very high on my agenda.
Senator Bennett. Thank you.
Senator Leahy. I am not planning on traveling on the day we
change over. I also want to emphasize that I agree with what
Senator McConnell said on the refugee issue. This is something
that I think you will find strong, total agreement on.
Thank you.
Secretary Albright. Thank you very much.
Senator McConnell. Thank you, Madam Secretary.
conclusion of hearings
Senator McConnell. The concludes our hearings, the
subcommittee will stand in recess subject to the call of the
Chair.
[Whereupon, at 12:22 p.m., Tuesday, June 16, the hearings
were concluded, and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]
FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS
APPROPRIATIONS FOR FISCAL YEAR 1999
----------
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
NONDEPARTMENTAL WITNESSES
[Clerk's note.--The subcommittee was unable to hold
hearings on nondepartmental witnesses, the statements and
letters of those submitting written testimony are as follows:]
Environment
Prepared Statement of Scott Sklar, Executive Director, Solar Unity
Network
introduction
The U.S. Export Council for Renewable Energy (US/ECRE), the trade
consortium of the six renewable energy and energy efficiency industry
associations, urges the Subcommittee on Foreign Operations to stick
with its strong guidance to the Agency for International Development
(AID) to integrate renewable energy applications in our bilateral
programs. Renewable energy can significantly enhance the child
survival, environmental, agricultural, healthcare, development and
infrastructure programs in a meaningful way.
Our recommendations for fiscal year 1999 are for $20 million for
AID's Office of Energy, Environment and Technology within the Center
for Environment as well as level funding for the Center's other
programs. These recommendations mirror the previous guidance of this
Subcommittee, as well as the growth in opportunities of the U.S.
renewable energy industries in an era of reprioritization of AID's
programs, and the implementation of sustainable private sector projects
in the developing world.
The Subcommittee should realize that developing country activities
to promote renewable energy have increased significantly where 2
billion people still have no access to electricity. India represents
the largest short-term market and Mexico is electrifying nearly 60,000
villages beyond the existing electric utility grid. The renewable
energy options, in this case, micro-hydropower, photovoltaics and wind,
are the least-cost options to provide electricity to a population that
would otherwise be unserved for generations. Similar efforts have been
initiated in Indonesia (48,000 villages), Sri Lanka (20,000 villages),
South Africa (35,000 villages) and Brazil (22,000 villages). The real
issue is whether the United States or our competitors will garner the
dominant marketshare of these new and emerging markets.
These immense impending market and development opportunities, which
will surpass $4 billion in aggregate by the year 2000, require an
unusual focus and resolve of the United States' development and export
agencies to work hand-in-hand with the U.S. renewable energy
industries. Therefore, recommendations will effectively promote
environmentally benign U.S. technologies, principally biomass, energy
efficiency, geothermal energy, hydropower, photovoltaics, solar
thermal, and wind energy.
In photovoltaics for instance, the developing world markets with
the help of AID's Center for Environment, specifically the Office of
Energy, Environment and Technology have contributed to the increase of
U.S. solar manufacturing capacity. The following manufacturing facility
openings represent this increase from last year's testimony:
--January 1998, British Petroleum Solar, this country's fourth
largest photovoltaic manufacturer, ribbon-cut a new state-of-
the-art automated manufacturing facility in California.
--December 1997, ASE Americas ribbon-cut its new photovoltaics
manufacturing plant in Massachusetts.
--March 1998, Tucson Electric announced its intention to ribbon-cut
its U.S. photovoltaic manufacturing plant for exports geared to
Latin America.
--April 1998, Solarex Corporation, a business unit of Amoco/Enron
Solar will hold its ribbon-cutting for a new state-of-the-art,
10 megawatt per year amorphous silicon photovoltaics plant in
James City County, Virginia.
The failure of the United States to position itself as a market
leader on the range of emerging energy technologies hinders not only
our competitive position, but also encourages dependency by the poorest
countries of the world to export their precious resources and foreign
exchange in order to import energy. This encouragement of fossil fuel
dependence insures that these developing countries will be unable to
grow out of debt, leaving them with fewer resources to acquire a broad
range of U.S. produced goods and services.
The U.S. renewable energy industries are asking the Subcommittee to
adopt and maintain clear, consistent, and determined mandates for the
Agency for International Development. The goal would be to implement a
strategic development plan in cooperation with the U.S. renewable
energy industries and the AID Mission Directors to promote these
technologies in a cost-effective and systemic way to promote
sustainable development.
fiscal year 1999 appropriations and directives
The U.S. Export Council for Renewable Energy asserts that an
essential ingredient for increased Third World democratization must be
a substantial increase in the utilization of renewable energy. If
sustainable development by the Third World is to be ultimately
achieved, it must rely on the use of renewable indigenous resources to
build worldwide economic growth. And finally, the only way to
significantly achieve the kind of world market penetration needed to
accomplish these goals is to develop policies and create new financing
tools to aggregate markets which will significantly lower the costs of
renewable energy to make these technologies accessible to the world's
peoples.
The renewable energy and energy efficiency industries want to bring
to your attention one of the most successful private sector-driven
programs within the Agency for International Development through its
Office of Energy, Environment and Technology.
Over the last five years, this subcommittee with bipartisan
support, has consistently supported funding for AID's Energy Office at
a consistent level of $20 million for innovative replicable renewable
energy and efficiency projects.
AID's Office of Energy, Environment and Technology has worked
collaboratively with industry to leverage global renewable energy
markets in order to provide electricity and thermal energy not only to
the 2 billion people without access to energy, but to the other billion
people who have access to electricity for less than ten hours per day.
Over 70 percent of U.S. photovoltaic technology is exported to Third
World countries and several new U.S. automated manufacturing plants are
to be built in the U.S. to meet global demand, which is increasing at a
rate of 30 percent per year. Nearly 1,300 megawatts of wind capacity
has been installed worldwide as have been over 85 megawatts of
geothermal in 1995. Over 3,000 megawatts of geothermal are now under
contract in Indonesia and the Philippines by U.S. companies. A multi-
billion dollar market exists worldwide for U.S. energy efficiency
technologies and services with over $500 million in sales ranging from
Mexico, Russia, India, Thailand, and Indonesia.
The AID industry-driven program has created new multilateral
financing programs and U.S. industry cost-shared prefeasibility
programs with over $2.5 billion in short term sales opportunities in
Mexico, Chile, Central America, India, Indonesia, Philippines, South
Africa, Zimbabwe, Brazil, and Russia.
We have been very concerned that AID not only enhance AID's Office
of Energy, Environment and Technology and related programs working
through existing NGO's and industry consortia as earlier directed to
do.
Our industries urge you to nurture these demonstrated successful
industry-driven programs at the high level and spirit first achieved in
the Bush Administration. There is no reason that international
development programs must build U.S. jobs and strengthen U.S.
industry's global market advantage, but to establish working groups to
further AID's goals.
Renewable energy and energy efficiency technologies support viable
development worldwide. Our industries lead the world technologically
and thanks to our strong partnership with USAID, have begun to
penetrate multi-billion dollar overseas markets.
Can the United States foster sustainable development and increase
U.S. business opportunities simultaneously? Yes, but only if AID's
programs are reinforced toward a collaborative effort with the private
sector. The directives this Subcommittee has given in the last few
years has surely helped (AID would have done nothing otherwise). But
unless funding priorities are explicit in the fiscal year 1999
appropriations which do not count in-kind AID Missions contributions
which cannot be guaranteed or relied upon towards renewable energy and
energy efficiency, we will be unable to achieve an even modest advance.
The Subcommittee should be reminded that promises by AID to use
mission buy-ins to meet appropriations report directives are not
substantial.
In addition, the US/ECRE consortium wishes to have the additional
$5 million historically directed toward AID Mission buy-ins transferred
under the federal interagency board, (the Committee on Renewable Energy
Commerce and Trade (CORECT)), of which AID is a member and which AID
should become the administering agency to drive village power programs.
conclusion
The United States must come to terms with how best to utilize its
development programs. The current AID programs must be enhanced through
new credit and technology transfer options. However, the Congress must
begin to set development priorities now, to integrate renewables in the
Subcommittee's priorities including child survival, democratization and
health to name a few. By sending a new set of signals, the United
States can leverage an impressive set of global activities.
The world is moving towards renewable energy and the United States
holds the lead in almost all these technologies. The United States also
holds a lead in services including the development of Energy Service
Companies (ESCO's) and packaging and system design, maintenance, and
deployment services.
While over 50 percent of renewable energy equipment and services
are exported, the U.S. cannot sustain our markets globally without a
pragmatic U.S. development program committed to renewable energy. The
global renewable energy market should grow nearly 30 percent per year
and the U.S. could garner over half of that expanding market with a
minimal investment. Our industries ask you to join with us to take
advantage of this unprecedented opportunity.
Thank you.
______
Prepared Statement of Alexander F. Watson, Vice President and Executive
Director, Latin American and Caribbean Division, The Nature Conservancy
The Nature Conservancy appreciates this opportunity to submit
testimony for the record concerning our views on foreign assistance
appropriations for fiscal year 1999.
summary
The Nature Conservancy's mission is the protection of the plants
and animals that make up the natural world, primarily through
protection of their habitat. We work mainly through private means. The
generosity of our members during the last fifty years has enabled us to
purchase, using private funds and exclusively from voluntary sellers,
the 1.2 million acres that we now preserve in the United States, making
up the world's largest system of private nature preserves. The
Conservancy also works in 24 countries in Latin America, the Caribbean,
and the Asia/Pacific region; abroad, we help local organizations
improve the effective level of protection to biodiversity, mainly in
existing parks and protected areas, by strengthening local
institutional capacities, building infrastructure, and involving local
people in community-based conservation. Since the beginning of our
international program in 1981, we have helped protect more than 74
million acres of biologically significant land in the Western
Hemisphere alone, as well as critically important marine and forest
conservation sites in Pacific island countries. Economic implications
for forest and soil conservation, watershed and fisheries protection,
for instance, are enormous.
Parks in Peril (PiP), the flagship of our Latin American and
Caribbean efforts, turns ``paper parks'' into genuinely protected
areas. The Agency for International Development (AID) has been vital to
our international efforts by its support to global biodiversity
protection and, especially, through its funding of Parks in Peril. Our
partnership with AID is managed under an innovative multi-year
cooperative agreement that minimizes administrative burdens and
expenses while maximizing return on taxpayers' dollars. AID's growing
commitment to helping international conservation, using assistance
instruments, leverages resources from non-AID sources. For example, the
$27.5 million PiP has received from AID since 1990 has been formally
matched by more than $10 million from The Nature Conservancy, local in-
country partners, and governments. However, that total greatly
understates the real multiplier. Local partners and governments have
thus far attracted approximately $180 million of non-AID funding; this
includes debt-for-nature swaps, carbon sequestration projects with
major U.S. utility and oil companies and partners in developing
countries, grants from the Global Environment Facility (GEF) and
foreign governments including Japan, the Netherlands, and the European
Union.
This Committee in previous years has explicitly recognized the
importance of defending biodiversity through public-private
partnerships. The Nature Conservancy appreciates that support very much
and urges that the Subcommittee once again strongly support continued
funding for Parks in Peril, as well as the rest of AID's biodiversity
programs in the fiscal year 1999 appropriations process. We also
endorse appropriations for two other activities with great potential
impact on international conservation. First, we support full funding at
the Administration's $300 million request level for the Global
Environment Facility (GEF), which includes biodiversity among its
concerns. There is just no substitute for the GEF in dealing with the
global environmental problems. Second, we support the Tropical Forest
Conservation Act, originally cosponsored in the House by Congressmen
Portman, Kasich, and Hamilton, which was approved on the House floor
March 19 and is pending before the Senate as S. 1758. If it becomes
law, appropriations will be needed. We hope that Members then will look
to all possible sources to support this worthy measure--outside
Function 150, but also within it, and hence that this Committee's
report will create space for this measure. We have appended to my
written statement language regarding PiP, the GEF, and the Tropical
Forest Conservation Act, which we hope the Committee will find useful
in preparing its report accompanying the appropriation legislation it
is considering.
importance of international biodiversity
People in developing countries rely on living natural resources for
a multitude of economic and social benefits, and the rest of the world,
including the United States, also benefits from them. Biodiversity is
critical for the pharmaceutical industry, agriculture and a wide
variety of other industrial processes. According to the World Resources
Institute, 4.5 percent of the U.S. Gross Domestic Product is due to
economic benefits from wild species. Genetic diversity used in plant
breeding accounted for about one-half of all the gains in agricultural
yields in the U.S. between 1930 and 1980. Major U.S. crops now depend
on infusions of new genes from other countries. One-quarter to one-
third of all the prescriptions drugs in the U.S. contain compounds
derived from wild species. 120 prescription drugs currently come from
about 95 species of plants; of these, 39 grow in tropical forests.
Botanists believe that more than 35,000 plant species (mostly drawn
from tropical forests) provide traditional medicines to local peoples
and, hence, are good candidates for future pharmaceutical research.
Recently, the Abbott Laboratories company announced the development of
a new drug that reportedly uses an entirely new mechanism to block pain
with few of the side effects of existing drugs; the active compound was
originally found in the skin of a frog living in the tropical forests
of Ecuador. Only about 2 percent of plants have been examined for
medicinal properties. There is no way to know what new cures we may be
losing with each species that goes extinct or what the health care
costs can be of remedies never developed.
Moreover, the destruction of natural ecosystems in the developing
world is now widely viewed as a major threat to social and economic
stability. The true economic value of biological, and other
``renewable'' resources such as water, may at times be difficult to
measure. After all, aren't biological resources and water, by
definition, renewable? They can be, but not if species become extinct.
Not if watersheds are destroyed. Not if coral reefs are killed. Not if
topsoil is blown or washed away. Not if interlocking communities of
living organisms are disrupted.
The developing world's economic development (and, ultimately, the
health of much of our environment here) is unquestionably tied to the
protection of its natural resources. Coastal wetlands, mangrove forests
and off-shore reefs, for example, are essential for healthy fish
populations--and fish is currently the leading source of animal protein
in the human diet worldwide. Forests serve as ``carbon sinks'' to help
control carbon dioxide buildup in the atmosphere. Forests also promote
the retention of water and keep soil from blowing away and eroding into
critical waterways--waterways that provide drinking water, hydropower,
irrigation and transportation to millions of people. Biodiversity
enables the recycling of essential elements, such as carbon, oxygen and
nitrogen. Parks and protected areas are critical to conserving
biodiversity, and they have the added benefit of attracting tourists
which generate income and employment. Nature tourism alone already
generates $12 billion annually.
By contrast, the degradation of natural and biological resources
leads to poverty, hunger, disease and civil unrest. Massive shifts in
population density may occur when affected peoples migrate from areas
that once were productive but now cannot support them. The linkages
between natural resource depletion in developing countries, and the
national security of the United States, are real.
usaid's commitment to biodiversity protection/the example of parks in
peril
The Foreign Assistance Act states that the protection of tropical
forests and biological diversity is a goal of U.S. foreign policy. AID
is active in implementing this goal, and its biodiversity conservation
activities reach more than 60 countries. These programs focus on
developing sustainable economic uses of biological resources; building
local capacity for the management of biologically diverse areas,
including parks, protected areas and buffer zones; supporting
innovative programs for non-governmental organizations in conservation
and resource use; encouraging participation of stakeholders, including
women, indigenous peoples, and local communities at every stage of
decision making; and facilitating the setting of conservation
priorities at the local, national and regional level.
The Nature Conservancy strongly believes that the U.S. Government
should continue to devote significant resources to the protection of
biodiversity. Administrator Brian Atwood has indicated that AID will
look to partnerships with NGO's in order to achieve AID's goals in the
most cost-effective manner possible. Parks in Peril (PiP) has been a
model of long-term cooperation.
Over the course of recent decades, many nations of Latin America
and the Caribbean took important initial steps to conserve their living
resources by establishing protected area systems to safeguard critical
watersheds, coastal and marine ecosystems, wildlife, scenic
attractions, and other areas of significance. Unfortunately, these
nations often had not succeeded in managing these areas so as to truly
protect them--they remained ``paper parks.''
To address this serious problem, in fiscal year 1990 AID began
supporting The Nature Conservancy's Parks in Peril (PiP) program, a
public-private partnership that seeks to protect the most threatened
national parks and reserves in this hemisphere. Parks in Peril was
designed to secure minimum critical management for a series of sites,
transforming them into functional protected areas. Parks in Peril is
administered by The Nature Conservancy and its Latin American and
Caribbean partners, under a series of multi-year cooperative agreements
with AID. The program builds collaborative partnerships among national,
international, public and private organizations. It has become the
largest in-situ biodiversity conservation project in the tropical world
and has drawn wide support from other governmental and non-governmental
constituencies in the region and around the globe.
Parks in Peril works to achieve four objective goals: (1) To build
on-site protection and management infrastructure; (2) to integrate the
protected areas with the human societies inhabiting their surrounding
regions; (3) to create long-term funding and policy mechanisms to
sustain the local management of the Parks in Peril sites; and (4) to
use PiP's activities to influence conservation in other sites in the
region's most imperiled ecosystems.
AID and the Conservancy have designed a scorecard to measure how
well particular sites meet these goals. As they do so, they are
``consolidated''--having achieved the program's original goals, they
are phased out from receiving direct assistance from the centralized
AID program. This transition to long-term sustainability has been from
the outset a goal of the program.
Here is a ``scorecard'' for the program as a whole: to date, AID
LAC Bureau funds have supported conservation efforts at 29 PiP sites,
comprising over 22 million acres in 12 countries. (Parenthetically, I
would note that the Conservancy also works at more than 30 additional
PiP sites, totaling another 50-plus million acres.) Of those 29 sites,
14 have been ``consolidated.'' We are working with AID to extend the
PiP model to 8 new sites. Four of the new sites are in countries
(Brazil, Honduras and Jamaica) where PiP has not operated before. PiP
has provided exceptional leverage for the American taxpayer: the $27.5
million PiP has received from AID since its inception in fiscal year
1990 has been formally matched by more than $10 million from The Nature
Conservancy, local in-country partners, and governments, but that total
greatly understates the real multiplier. Local PiP partners and
governments have thus far attracted approximately $180 million of non-
AID funding. This includes debt-for-nature swaps, carbon sequestration
projects with major U.S. utility companies and partners in developing
countries, grants from the Global Environment Facility (GEF) and
foreign governments including Japan, the Netherlands, and the European
Union.
PiP has worked to protect cloud forests, coral reefs, tropical
forests, and savannas. PiP funding has supported efforts to demarcate
critical boundaries; recruit, train and equip rangers and community
extensionists; build protection infrastructure and provide
transportation and communication technology; promote compatible
natural-resource use in local communities; carry out baseline studies
and biodiversity monitoring; and establish sources of long-term
financing for reserve operations. At all PiP sites, local peoples'
involvement is stressed, including measures to involve them in
management decisions, creation of local opportunities for compatible
resource uses and tangible economic benefits from the park. Parks will
not ultimately survive unless local people value them and take pride in
the their preservation. Parks in Peril is, thus, fundamentally
different from one-time grant programs for park protection, and its
methodology has become a model toward which the rest of the world is
looking.
In concluding the portion of my statement concerning AID's efforts
in support of protection of biodiversity, I would note with approval
the important cooperative activities of its non-PiP programs. The
Biodiversity Support Program (BSP) operates globally to promote
biodiversity protection by integrating conservation with on-the-ground
development, research, and information exchange. The Biodiversity
Conservation Network (BCN) promotes and measures the effectiveness of
enterprise-oriented conservation at sites in Asia and the Pacific
islands. Both these initiatives have been assistance instruments with
The Nature Conservancy, World Wildlife Fund, and World Resources
Institute, and have done excellent work.
Before closing, I will briefly touch upon two other topics with
great potential for boosting international biodiversity conservation:
the Global Environment Facility (GEF) and the Tropical Forest
Conservation Act.
The Global Environment Facility (GEF)
The Nature Conservancy supports the proposed appropriation of $300
million to the GEF--enough, if approved, to fund the current U.S.
pledge level of $107 million and pay off $193 million of arrears. The
GEF, supported by 120 members, is an essential financial mechanism.
There is just no substitute for the GEF in dealing with the major
global environmental issues. Grants from many other countries leverage
the U.S. share. The GEF had teething problems early on, but has now
largely worked through them. It has committed $1.3 billion for over 200
large projects in more than 80 countries, plus 300 smaller projects
funded through its successful Small Grants Program. The GEF is
potentially a strategic mechanism to assist countries to develop
innovative and effective means to deal with environmental threats,
especially as the GEF involves a broader array of stakeholders, such as
through its new Medium Sized (up to $750,000) Grants Program. We urge
the Subcommittee to fund GEF at the full request level.
The Tropical Forest Conservation Act of 1998
H.R. 2870, the Tropical Forest Conservation Act of 1998, passed the
House on March 19 with overwhelming support and is pending before the
Senate as S. 1758. It has more than twenty Senate cosponsors, broadly
bipartisan. It is based firmly on the precedents and administrative
structure of the ``debt-for-environment'' provisions of the Bush
Administration's Enterprise for the Americas Initiative (EAI). Under
EAI, Western Hemisphere governments could restructure some of their
official debt to the United States. They can pay, in local currency to
national funds, the money that would otherwise have gone to pay the
debts. The funds use the stream of income for environmental protection
and child survival. There have been seven EAI trust funds created so
far and their funds will receive a total of at least $154 million from
local currency payments. The Funds proposed under the Tropical Forest
Conservation Act would operate under rules similar to EAI's as they
promote debt reduction, swaps and buybacks, but would focus on tropical
forest conservation and extend eligibility to include countries in
Africa and Asia. The Nature Conservancy welcomes and supports this
initiative; so do the World Wildlife Fund, Sierra Club, Environmental
Defense Fund, and Conservation International.
The new Act has great potential to boost forest protection. The
current status of the world's tropical forests is alarming. Within 25
years, half of all the remaining tropical rain forests are projected to
be gone; with them will disappear about 10 percent of all the species
currently alive on the Earth. This has implications for the countries
where the forests are located, and also for the people of the United
States. More needs to be done to protect and preserve the tropical
forests, by private and official U.S. action and, especially, by the
governments where the forests are located.
The Tropical Forest Conservation Act will, if passed and
appropriated, represent an investment by the American people in the
survival of forests that have great economic, environmental and moral
value. This is the sort of sensible, results-oriented effort with
staying-power that The Nature Conservancy likes. We thank the
Congressmen and Senators who have brought it forward and urge that
space be found for an appropriation. The bill would authorize $50
million in fiscal year 1999 to pay Treasury's costs under the rules for
``scoring'' such debt reductions and swaps. The Administration's
position toward this legislation, as affirmed by Congressmen Gilman and
Hamilton during the House floor debate, is that it supports its passage
but has expressed concern about where to find financing. We urge that
the Members and Leadership of the Congress look imaginatively within
Function 150, but also at other areas of the Federal budget, for
possible sources of appropriations.
Thank you for this opportunity to submit to the Subcommittee The
Nature Conservancy's views on these important international
conservation issues.
appendix to testimony by the nature conservancy suggested language for
fiscal year 1999 foreign operations report
Parks in Peril
The Committee notes its strong support for the existing AID Parks
in Peril program, a partnership with the private sector to promote
biodiversity conservation in imperiled ecosystems throughout Latin
America and the Caribbean. AID/Parks in Peril has worked at 29 sites in
twelve different countries. It has made significant progress at turning
``paper parks'' into genuine protected areas, to the extent that 14
sites have been ``consolidated'' from the program; central AID funding
are being phased out to those sites, and the program is shifting its
successful methodology to 8 new locations. Since its inception, Parks
in Peril has received $27.5 million from central AID funds, formally
matched by more than $10 million from The Nature Conservancy, foreign
partners, and foreign governments, and has indirectly leveraged more
than $180 million from non-AID sources.
Global Environment Facility
The Committee believes that the GEF should play a critical role in
addressing global environmental problems. As bilateral sources of
assistance decline, it will be increasingly important for the U.S. to
leverage its contributions through multilateral institutions such as
the GEF, an institution that supports a broad range of globally-
significant environmental programs. The Committee further notes that,
in many developing countries, NGO's have superior capacity and
expertise to implement biodiversity conservation projects, and
therefore the U.S. should continue to press for improved access for
NGO's to GEF funding, such as through active implementation and funding
of its new Medium-Sized Grants window with simplified application and
accounting procedures.
Tropical Forest Conservation Act of 1998
The Committee endorses this measure, which has the potential to
protect threatened tropical forests of global significance.
______
Prepared Statement of the World Wildlife Fund
On behalf of World Wildlife Fund's 1.2 million members, we welcome
this opportunity to submit written testimony on the prospective fiscal
year 1999 Foreign Operations Appropriations bill. Known worldwide by
its panda logo, WWF is the largest international conservation
organization working in over 100 countries to protect the rich
biological diversity necessary to save life on Earth.
WWF supports the administration's proposed fiscal year 1999 budget
increases for bilateral and multilateral assistance programs in the
Department of State, U.S. Agency for International Development, and
Department of Treasury. These modest increases will help ensure the
effectiveness of key international environmental programs essential to
protect U.S. national interests.
This statement highlights programs that are important to WWF's
goals of conserving global biodiversity by recovering endangered
species, effectively addressing global threats--overfishing, toxic
chemicals, climate change and unsustainable logging--and ecoregion-
based conservation.
bilateral assistance
U.S. Agency for International Development
WWF strongly supports the President's proposed $1.769 billion for
USAID's development assistance funds, of which $290 million--an
increase of $46 million over fiscal year 1998--is proposed for global
environmental programs. USAID's integrated approach to biodiversity
conservation and sustainable use recognizes the interdependency of
humans, wildlife, and their environment. USAID provides technical and
financial support for conservation projects around the world that
emphasize community-based conservation of natural resources.
WWF applauds the administration's proposal to devote $730 million
in development assistance to the Development Fund for Africa (DFA).
This fund assures U.S. commitment to help the countries in Africa
achieve broad-based, sustainable economic growth. Given the acute
environmental problems in many African nations, biodiversity
conservation has long been an integral part of the DFA's goals. For
example, the Rwenzori Mountains Conservation Development Project, co-
funded by WWF and the DFA, straddles the Uganda-Zaire border and
encompasses some of the highest peaks and richest biodiversity in
Africa. The project, through collaboration with Rwenzori Mountains
National Park staff, is developing a park management plan. Cooperation
with local communities emphasizing sustainable forest use and
agricultural activities, such as tree planting and bee keeping, help
reduce human pressure on the park.
WWF also supports USAID's integration of biodiversity conservation
in development assistance programs in other regions of the world. For
example:
--In Bolivia, WWF and its conservation partners have played a key
role in the creation of two new protected areas, the Otuquis
National Park and the San Matia Integrated Management Area, in
the Bolivian Pantanal. The Pantanal represents one of the
world's largest wetland complexes and supports abundant
populations of wildlife, including several endangered or
threatened species--jaguar, giant anteater and anaconda. The
Pantanal is under assault from an increasing demand for its
resources. Forests are being cleared for agriculture and
timber, rivers are threatened by toxic chemical pollution, gold
mining is crippling the river ecosystems. With USAID funds,
management plans are being developed and implemented for these
two protected areas.
--In Nepal, USAID funds a project to conserve biodiversity in the
Shey Phoksundo National Park. Shey, covering over 3,500 sq.
km., was set aside to protect one of the last habitats for the
endangered snow leopard, blue sheep, wild yak and other
wildlife. Communities living adjacent to the protected areas
depend heavily on forests and rangelands for energy, fodder and
timber. The USAID-funded program strengthens the conservation
and resource management capacities of local people and promotes
sustainable enterprises to raise rural incomes.
USAID'S Climate Change Action Plan
Climate change issues have been an important and long-standing part
of the USAID's environmental agenda. For several years, USAID has
actively funded conservation projects that have reduced greenhouse gas
emissions.
WWF is encouraged by USAID's proposed Climate Change Action Plan,
which reflects a renewed effort to facilitate technology transfer and
collaborate with developing and Central and Eastern European countries
to achieve the goals of the U.N. Framework Convention on Climate
Change. The use of credit mechanisms, such as development credit
authority to leverage funds for climate friendly investments, are vital
to breakdown barriers to energy efficiency and renewable energy. WWF
believes that win-win strategies are available that simultaneously
promote sustainable development and combat climate change by reducing
emissions. Furthermore, these strategies can be carried out through
projects which advance development priorities of both the developing
countries and the United States.
Tropical Forest Conservation Act
WWF enthusiastically supports the Tropical Forest Conservation Act
(S. 1758), introduced by Senator Lugar on March 13. Similar legislation
passed the House of Representatives on March 19. The legislation will
protect the world's dwindling tropical forests by providing urgently
needed resources for forest conservation. When the bill is enacted, we
urge the Subcommittee to appropriate the authorized level of $325
million over three years, beginning with $50 million for fiscal year
1999.
Intact forests are essential to global biodiversity conservation.
However, there is a severe crisis in many parts of the world resulting
from forest destruction. An estimated 40 million acres, more than one
percent of total forest land, disappear every year. The woeful lack of
resources in many countries to stem this destruction is equally
alarming. The severe forest fires burning in Brazil and Indonesia
dramatically underline the seriousness of the problem.
The Tropical Forest Conservation Act authorizes ``debt-for-nature
swaps,'' whereby outstanding bilateral government debt owed to the
United States is reduced. In exchange, the eligible developing country
places local currencies in a tropical forest fund to finance
preservation, restoration, and maintenance of its tropical forests. The
appropriation compensates the U.S. Treasury for any revenues lost due
to the restructuring of outstanding debt. For several years, the U.S.
government has been involved in debt-for-nature swaps, the most well-
known being the Enterprise for the Americas Initiative established
under the Bush administration.
In addition to the bill's important contribution to financing
forest conservation, H.R. 2870 offers other benefits:
--U.S. contributions by means of debt restructuring can serve as a
model for European and Asian nations to do the same with debt
owed them by some of the world's poorest countries.
--Establishing environmental funds in developing countries helps
strengthen democracy and nongovernmental organizations.
Environmental funds promote accountability and consensus-
building and often bring together governments and non-
governmental organizations for the first time.
--Delivering U.S. international assistance via trust funds for the
purpose of tropical forest conservation is an issue Americans
care about.
--Offering an opportunity for the U.S. to encourage other bilateral
creditors, the IMF, and the World Bank to actively pursue
opportunities to apply the debt-for-nature mechanism to many
poorer countries that will participate in the World Bank's
Highly Indebted Poor Country (HIPC) Initiative.
multilateral assistance
Department of State
WWF supports the administration's fiscal year 1999 request for $6
million for the International Conservation Programs of the Department
of State's International Organizations and Programs account. This
amount will finance crucial conservation programs such as the
Convention on International Trade in Endangered Species of Wild Fauna
and Flora (CITES), Ramsar Convention on Wetlands of International
Importance, and the World Conservation Union (IUCN).
We urge the Subcommittee to direct the Secretary of State to meet
the U.S. commitment of $1.123 million to the core budget of the CITES
Secretariat. It is especially important to provide full funding for
CITES in light of decisions made at the 1997 Conference of Parties
adding significant new responsibilities to the Secretariat for
monitoring threatened and endangered species such as the African
elephant.
WWF supports an increase of $250,000 over the fiscal year 1998
level of $750,000 for the U.S. contribution to the Ramsar Convention on
Wetlands of International Importance. This increase would fund the new
``Wetlands for the Future'' program in Africa. Successfully piloted in
Latin America over the past four years, the ``Wetlands for the Future''
concept provides funding directly to local groups for wetlands
conservation. We believe the program should be expanded to Africa in
order to provide habitat for a wide range of animals as well as natural
resources for people.
In addition, we support an increase over the fiscal year 1998 level
of funding for the World Conservation Union (IUCN). IUCN has been
instrumental in implementing the important international agreements
such as CITES, the Biological Diversity Convention, and the Ramsar
Convention. IUCN, a union of 70 governments, 100 government agencies,
700 non-governmental organizations (NGO's) and over 8,500 volunteer
experts operating in more than 180 countries, has been recognized by
the U.S. government as a unique forum that strengthens cooperation
among international programs, national and local governments and the
private sector, and in translating global policy into practical action.
International Development Association (IDA)
WWF supports the administration's fiscal year 1999 request for $800
million for full payment to the twelfth International Development
Association (IDA) replenishment.
IDA, the concessional window of the World Bank, is the single most
important source of development finance for the world's poorest
countries. Through investment in specific projects and economy-wide or
sector-specific reform programs, IDA can address the root causes of
political and economic instability such as extreme poverty,
environmental degradation, and weak institutions of government and
civil society.
IDA also is cost-effective--every U.S. dollar contribution
leverages several additional dollars from other donors. Finally, IDA is
responsive to U.S. leadership, which has been responsible for recent
reforms to make the institution more transparent and accountable.
While IDA and the World Bank have been criticized for failing to
pay adequate attention to poverty reduction and to the environment in
its policies and loan-funded operations, WWF believes that U.S.-led
progress toward reform is sufficient to justify continued support.
Moreover, prospects for continued reform are strong--the World Bank's
Board of Executive Directors last year approved a ``Strategic Compact''
with bank management to invest resources in improving the bank's
efficiency and effectiveness as well as to focus its efforts in such
critical areas as social analysis, rural development, and capacity-
building in Africa.
From WWF's perspective, there is unexploited potential for IDA and
the World Bank Group to play a more proactive role in promoting
environmental sustainability in the context of individual borrower
countries and the global community as a whole. Indications that the
bank is moving in this direction are the recent global alliance between
the World Bank and WWF for forest conservation and sustainable use.
WWF believes that meeting the administration's request for IDA
funding this year would provide a signal of support for such
initiatives and for the important new direction the institution has
taken.
The Global Environmental Facility
WWF endorses the administration's fiscal year 1999 request for $300
million for the Global Environmental Facility (GEF) to pay the
accumulated arrears ($192.5 million) as well as the current U.S.
contribution ($107.5 million). While this amount is a substantial
increase over the fiscal year 1998 appropriated level, WWF believes the
GEF is the only international financial institution dedicated solely to
assisting qualified countries in addressing critical environmental
threats--biodiversity loss, degradation of international waters,
climate change, and the thinning of the ozone layer. U.S. national
interests require that these environmental threats be addressed on a
global scale.
We urge the Subcommittee to examine the GEF's strengths, its
untapped potential and its receptivity to reform. Specifically, we urge
the Subcommittee to consider the following examples of success:
--``A learning institution''.--The GEF, only in its third year of
full scale operation, considers itself a ``learning
institution,'' committed to incorporating into the future,
lessons from the past. A recently released independent
performance study commissioned by the GEF Council recommended a
number of ways the GEF could be strengthened. The council has
adopted them.
--A catalyst for reform.--The GEF has been a catalyst for
environmental reform in the policies and operations of its
implementing agencies--the World Bank, United Nations
Development Program (UNDP), and United Nations Environment
Program (UNEP). The GEF's operating principle of
``mainstreaming'' (i.e., integrating global environmental
concerns into the non-GEF operations) has led to closer
scrutiny of the World Bank's commitment to integrating
environmental concerns into its core projects.
--A good record, the small grants program.--The GEF's small grants
program, by which GEF funding effectively reaches the field
level, has been widely viewed as a success story. Some 300
smaller local projects have been established under this
program.
--Leveraging power.--Every dollar from GEF leverages an additional $4
from the private sector, recipient countries and bilateral
donors, thus ensuring funding for full-scale projects.
--Direct American benefit.--Last year, U.S. companies were the
largest beneficiary of GEF procurement, receiving $48 million
(16 percent of total procurement and 30 percent of contracts to
industrialized countries).
--Problem solving.--The GEF deserves credit for successfully
addressing problems such as slow disbursement of funds hampered
by insufficient strategies and project criteria and cumbersome
procedures for NGO access to the fund. These issues have been
largely resolved, including the establishing of new procedures
to streamline NGO access.
The staff at WWF can personally attest to productive NGO and GEF
cooperation in furthering biodiversity conservation. For example:
--Galapagos project.--Through its mid-size grant program, the GEF is
funding a project jointly managed by its Ecuadorian associate
Fundacion Natura and WWF to help conserve the world famous
archipelago, the Galapagos Islands. While the Galapagos have so
far survived major human incursions, the islands face
significant threats, including overfishing due to heavy
external demand for certain marine products, increasing impacts
from tourism, and increasing immigration from mainland Ecuador
for jobs in tourism and fishing industries.
The Galapagos project will establish information systems to
monitor the environmental impact of policy decisions and the
conservation status of the Galapagos. The systems will, for
example, monitor the impact the fishing industry is having on
the ecosystem, monitor the status of introduced species to the
islands, and the impacts of tourism. Compiling this information
is important in order to better evaluate the threats to the
islands, and serve as an important basis for policy decisions.
--Caribbean of Central America and Mexico.--With GEF funding, the
regionally-based Central American Commission for Environment
and Development is mobilizing conservation efforts on an
ecoregional scale in the Meso-American Caribbean Reef. The
Meso-American Caribbean Reef is the fourth longest barrier reef
in the Western Hemisphere and contains the most diverse coral
reefs in the western Atlantic. It is located along the coast of
four countries--Belize, Mexico, Guatemala, and Honduras. In
1997, these countries signed the Tulum Declaration to establish
political guidelines and principles for the reef's
preservation. There are significant pressures on the reef
system--overfishing, water quality degradation due to municipal
waste, ocean-going vessels, and banana plantations, and
development for tourism. The Central American Commission will
establish and improve management of protected areas and
strengthen regional development to support conservation of this
important natural system.
--Bhutan Trust Fund for Environmental Conservation.--The BTF
currently has assets of approximately $30 million, including
grants from WWF and the Global Environment Facility. Founded in
1991, the trust fund has financed a number of major activities,
revised a national protected areas system, developed a
management plan for the Royal Manas National Park which hosts
an astounding variety of rare and endangered species, and
developed a biodiversity information system. The World Bank
supervised the implementation of BTF's benchmark activities,
accomplished well ahead of schedule. The bank, when it ended
its supervisory role last year, noted in its final report, ``a
fund such as the BTF probably has better prospects for serving
the long-term conservation objectives of the (Royal Government)
than any other financial device.''
Ultimately, GEF must be judged by its track record on improving the
environment. There are hopeful signs that GEF projects are making a
real difference on the ground. WWF urges the Subcommittee to
appropriate the administration's requested level, to give the GEF the
opportunity to achieve more and reach its full potential. The U.S.'s
continued underfunding of the facility at this early stage in its
development undermines the GEF's full effectiveness and undercuts U.S.
influence in shaping the facility's direction.
Finally, the success of U.S. domestic environmental policy
ultimately depends on effective global collaboration. The GEF provides
the forum for such collaboration.
conclusion
For more than three decades, the United States has been a key
participant and catalyst in global efforts to protect endangered and
threatened wildlife, to promote international cooperation on
environment and science, and to support community-based efforts in
conservation and biodiversity. WWF urges the Subcommittee to support
the administration's efforts to restore much of past years' budget
loss, thereby helping to regain U.S. prominence in global environmental
programs.
World Wildlife Fund looks forward to working with the Subcommittee
on the Foreign Operations bill. Thank you again for the opportunity to
present our views.
______
Infectious Diseases
Prepared Statement of the Pan American Health Organization
The Pan American Health Organization (PAHO) would like to thank the
members of the Subcommittee on Foreign Operations for the opportunity
of presenting this statement.
The Pan American Health Organization is the oldest continuing
health agency in the world. It was founded in Washington, D.C. in 1902.
It has 35 Member States from the Americas, three Participating
Governments, and one Associate Member Government. The United States was
one of its original founders. PAHO cooperates with its Member States,
individually and collectively, in designing and implementing measures
to improve the health of their populations.
antibiotic resistance
In the Region of the Americas, as in the rest of the world,
antimicrobial resistance poses a major and growing threat to public
health. Drug-resistant strains of microbes are having a deadly impact
on the fight against tuberculosis, malaria, cholera, diarrhea and
pneumonia, major diseases that together kill more than 10 million
people worldwide each year. Disastrously, this is happening at a time
when too few new drugs are being developed to replace those that have
lost their effectiveness.
Many of our most powerful antibiotics have been rendered impotent.
The two most common bacteria that are the major cause of death in
children through acute respiratory infections, particularly pneumonia,
are becoming more and more resistant to drugs. Antibiotic resistance in
hospitals throughout the Region threatens to leave medical and public
health workers virtually helpless in the prevention or treatment of
many infections. Antibiotic resistant bacteria are responsible for up
to 60 percent of hospital acquired infections in the United States, for
example. Resistance means that people with infections are ill for
longer periods, and are at greater risk of dying. Disease epidemic are
prolonged, as well. Moreover, with the enormous increase in the
frequency and speed of international travel, individuals infected by
resistant pathogens during travel abroad may introduce those pathogens
into other countries where resistance can spread. Tourism alone
mobilizes over 110 million people per year in the Region of the
Americas.
Major factors that contribute to antibiotic resistance are the
uncontrolled and inappropriate use of antibiotics. There is a need to
prevent the improper prescription of these drugs by the medical
community, and their non-prescription use by the population at large.
In addition, implementation of legal and policy guidelines that mandate
the rational use of antibiotics must be promoted.
An additional constraint in this area is the lack of reliable data
to determine the real magnitude of antibiotic resistance in the Region
and to provide baseline information for planning interventions. In
order to address this situation and the misuse of antibiotics, PAHO
feels that it is necessary to collaborate with the best and most
influential individuals working in the countries on the issue,
especially if changes in policy and health care practices are to be
promoted in the near future. Some work is already in progress with
organizations in the United States, including collaboration with the
Centers for Disease Control and Prevention (CDC), the Agency for
International Development, the National Institutes of Health, other
research institutions, national and regional professional associations,
pharmaceutical companies and others.
PAHO, together with the World Health Organization, the Ministry of
Health of Venezuela, and the Pan American Society of Infectology will
cosponsor the Pan American Conference on Antibiotic Resistance, to be
held in Venezuela in November 1998. During this event, information will
be gathered on the current situation of antibiotic use and resistance
in the Region, especially in regard to public policy, health care
practices, economics, quality control, surveillance and training. A
series of group discussions will also take place, and it is expected
that a product of the discussions will be a sound plan of activities
for the next five years, aimed at strengthening surveillance and
promoting policy formulation. Also invited are technical experts form
the CDC, participants from four major drug companies and other
international experts.
infectious diseases surveillance
Today communicable diseases continue to be the major source of
illness and death in developing countries, but industrialized countries
are becoming increasingly aware that they too are at risk from many new
and reemerging diseases. Infectious diseases today affect us all in
many spheres of life. The socioeconomic development of many nations is
being crippled by the burden of these diseases, which cause huge losses
in foreign currency and income from food trade and tourism as a result
of epidemics of diseases such as cholera, plague and other diseases.
Another case in point is dengue, which in recent decades has reemerged
with dramatic force and is now endemic in most of the Americas. During
1997 alone, 387,000 cases were reported with the consequent losses in
productivity and impact on health services.
The problem of emerging and reemerging diseases must be approached
from a regional perspective, since it does not affect countries in
isolation any longer. For example, with the enormous increase in the
frequency and speed of international travel, individuals infected
during travel abroad may introduce a given disease into a previously
unaffected area in a matter of hours.
Infectious diseases are not only a health issue. They have become a
social problem with tremendous consequences for the well being of the
individual and the world in which we live. In order to control these
diseases, we need to have strengthened epidemiological surveillance
systems nationally and internationally to detect infectious diseases
and, particularly, drug-resistant forms.
PAHO is currently working very closely with the CDC, the U.S.
Department of Defense, national research institutes, ministries of
health and other partners to develop a regional surveillance system for
infectious diseases, as well as to strengthen existing antimicrobial
surveillance programs for selected pathogens.
In order to strengthen the regional capability for emerging and
reemerging diseases surveillance in the public health sector, effective
plans for data collection, analysis, investigation and prompt
intervention are being prepared with the following objectives: (a)
strengthening regional infectious disease surveillance networks as well
as the capacity to implement effective prevention and control
strategies; and (b) developing the national and regional infrastructure
for early warning of and rapid response to the threat of diseases.
Once in place, the new surveillance system will make use of
available Internet technology to build e-mail and Intranet systems
(closed access) for communications. Access to the system will be
granted to ministries of health and PAHO/WHO Country Representative
Offices in each country; the Canadian Laboratory Centers for Disease
Control (LCDC), and the U.S. Centers for Disease Control and Prevention
(CDC) and the Department of Defense. All participants will have equal
access to the common database for analysis. Once the project is
finalized, surveillance systems and corresponding infrastructures will
be in place which are capable of monitoring emerging pathogens and
diseases for the confirmation of current epidemics; assessment of
health and socioeconomic impact and likely evolution of the problem;
and determination of local response capacity, identification of most
effective control measures, and assessment of additional immediate
needs.
tuberculosis
Tuberculosis, a curable and preventable disease, remains a major
public health threat in the Region, with an estimated 400,000 new cases
occurring each year. Each case is at risk of death without proper
treatment. Each year 60,000 to 75,000 persons die, the majority of them
in their most productive adult years. An estimated 3-5 percent of all
new cases in the Region are attributable to co-infection with the human
immunodeficiency virus (HIV). Fewer than two-thirds of all new cases
are reported, and most that go unreported will receive inadequate
treatment or no treatment. As a result of poor treatment, some patients
may develop and spread drug-resistant strains.
To confront what the World Health Organization has declared a
``Global Health Emergency,'' the World Health Assembly has adopted two
objectives for tuberculosis control for the year 2000 which will
diminish morbidity, mortality and transmission of the disease: cure of
85 percent of all detected pulmonary smear-positive (infectious) cases;
and detection of 70 percent of these incident cases. WHO has just
announced that due to the slow pace of many large, high TB incidence
countries, the global targets will not be met. Many of the countries of
the Americas could still meet these targets, but only if we intensify
our actions and find additional resources.
The global strategy for control of the disease is based on the
implementation of a strategy call Directly-Observed Treatment Short-
course (``DOTS''). It is among the most cost-effective health
interventions available, and is included in the World Bank's proposed
``essential package of health services.'' The five elements of the
global control strategy are: government commitment to a TB program;
case detection through predominantly passive case-finding; standardized
and directly-observed short-course chemotherapy for all pulmonary
smear-positive cases; regular drug supply; and a program monitoring and
evaluation system.
The DOTS strategy makes a difference in the American countries.
Countries that have applied it are doing far better in curing cases and
in evaluating their work. For the 10 countries and two territories
applying DOTS in 1995, 76 percent of patients were successfully
treated, compared to only 30 percent in the 13 non-DOTS countries who
reported to PAHO/WHO. In 1995, DOTS countries reported results for 91
percent of their patients vs. 41 percent for non-DOTS countries. Of
patients successfully treated, 89 percent were lab-confirmed cured in
DOTS countries. In non-DOTS countries, only 40 percent were confirmed.
Still too many countries have not begun to use the DOTS strategy or
are applying it incompletely. More support is needed to purchase drugs,
train and supervise health workers, equip labs and motivate the public
to help find and cure patients.
Recent national surveys show that multidrug resistant TB is present
and poses a real threat to the public and to disease control programs.
Treatment of these patients is often too costly for public health
systems. They are less likely to be cured and are more likely to die,
even with treatment. Drug-resistant TB can develop as a result of poor
prescribing and treatment monitoring, drug supply problems, and poor
patient compliance. The DOTS strategy addresses each of these problems.
PAHO seeks to improve awareness of the TB epidemic and of the DOTS
strategy. It works with Member countries and partner agencies in
training health personnel, building inter-country collaboration,
developing tools to facilitate the application of the DOTS strategy,
mobilizing resources for effective and sustainable programs, and
encouraging investigation of new interventions.
The main international agencies and non governmental organizations
working with PAHO in different countries are: World Bank (Haiti,
Venezuela); International Union Against Tuberculosis and Lung Disease
(Central America, Cuba, Bolivia, Peru); United States Centers for
Disease Control and Prevention (Mexico, CAREC, Argentina, Peru); Royal
Netherlands Tuberculosis Association (Bolivia, Central America); U.S.
Agency for International Development (Bolivia, Honduras, El Salvador,
Mexico); Canadian International Development Agency (Ecuador, Peru);
Laboratory Centers for Disease Control, Canada (Supra national
reference laboratory for the countries in the Region); Damien
Foundation, Belgium (Guatemala, Panama); German Leprosy Relief
Association (Colombia, Ecuador, Brazil, Bolivia, Paraguay); and German
Federal Ministry of Economic Cooperation (Ecuador).
malaria
Epidemiological Surveillance for Malaria Control
PAHO has been monitoring and advising on epidemiological activities
of malaria eradication and control programs in the Region for at least
44 years. Standard malariometric indices and operational indicators are
calculated in order to measure the impact of control activities and to
assess the adequacy of intervention efforts. Surveillance data,
including trend analysis and epidemiological situation assessment in
each endemic country, are reported annually in a document on the
``Status of Malaria in the Americas.''
These data are used as follows: to define and classify endemic
areas according to levels of transmission risk; to classify
geographical areas by operational phase of intervention and
surveillance activities; to measure specific indicators of disease
incidence according to parasite species; to analyze epidemiological
trends, identifying key factors associated with the trends; to extend
the knowledge of biology and vectorial capacity of anophelines; to
estimate coverage of population in endemic areas according to different
case-finding strategies; to adjust the different surveillance
strategies according to endemic level; to assess coverage rates of
insecticide spraying for vector control; to evaluate availability of
antimalarial drugs and their distribution; to identify social and
economic risk factors associated with transmission in areas of recent
colonization, deforestation and mining; to predict epidemics based on
population movements in the endemic area; to assess the onset and map
malaria drug resistance and advise on antimalarial drug policy; to
identify structural and functional deficiencies in the control
programs; to implement a strategy for control based on a stratification
of rates defined for each locality; to perform cost-effectiveness
analysis of control programs; to promote decentralization as the
appropriate strategy to increase coverage for diagnosis and treatment,
as defined in the Global Strategy for Malaria Control.
Current situation of P. falciparum resistance:
P. falciparum resistance in the Americas is highly variable as is
the ability of the health services to provide prompt diagnosis and
proper treatment for malaria. Although this variability is related to
the parasite reservoir movement (population), special groups of people
are more affected by the parasite resistant strains than the population
as a whole, mainly those who live in primitive organized social
communities (indigenous peoples, hunters and gatherers) and those with
high risk behaviors, such as those seeking the extraction of natural
resources utilizing low technological means (subsistence agriculture,
gold/gem mining and lumber).
From the population exposed to highest risk of transmission in the
Americas (46.3 million persons or 5.9 percent of the total population),
between 1994 and 1996 there was an increase from 9.8 to 12.1 million
exposed to high P. falciparum transmission, resulting in a very high
incidence rate (> 1,900 cases per 100,000 exposed population). This
spread of P. falciparum exposure is particularly severe in the Andean
Countries' rain forests.
Major challenges and constraints
There are three major challenges to malaria control in the
Americas; one is related to the need for a change in the public health
perception that ``malaria control is obtained by insecticide spraying
and this can only be done by a major operational institution.'' Major
advances in the implementation of new concepts and expansion of
coverage have been achieved in Bolivia, Brazil, Colombia, El Salvador,
Guatemala, Honduras, Nicaragua, Panama, and Peru and somewhat in
Venezuela.
The second and third major constraints are related: drastic
budgetary reduction, and major administrative processes of
decentralization of health services.
______
Prepared Statement of the University Heights Science Park
Infectious diseases now pose a profound threat to national and
international security. Changing international conditions, post-Cold
War deployment of U.S. troops in new geographic areas, and an
increasingly global economy have contributed to a resurgence of
infectious microbes. The rapid and repeated exposure to diseases
arising in any part of the world is now a reality for military men and
women as well as our citizens at home. In 1980, there were 280 million
international travelers, including military personnel. By the year 2000
there will be 400-600 million international travelers. In response,
many federal agencies are developing infectious disease initiatives to
address the emergence of new infectious agents as well as the re-
emergence of known infectious agents in drug resistant form. The
creation of the International Center for Public Health is a direct
response to this emerging public health crisis.
The International Center for Public Health is a strategic
initiative that will create a world class, infectious disease research
and treatment complex in University Heights Science Park, Newark, New
Jersey. Science Park is located in a Federal Enterprise Community
neighborhood. The International Center will have substantial local,
regional, national and international impact as it addresses many
critical social, economic, political and health related issues. The
Center is a $78 million anchor project that will launch the second
phase of a fifty-acre, $350 million mixed-use urban redevelopment
initiative, University Heights Science Park. The facility will total
161,600 square feet and house three tenants: The Public Health Research
Institute (PHRI), the University of Medicine and Dentistry of New
Jersey's (UMDNJ) National Tuberculosis Center, one of three Federally
funded TB centers, and the UMDNJ New Jersey Medical School Department
of Microbiology & Molecular Genetics. The International Center for
Public Health is a priority project for UMDNJ, Rutgers Newark, the New
Jersey Institute of Technology, Essex County College and the City of
Newark.
The core private tenant for the International Center is PHRI. PHRI
is an internationally prestigious, 57-year-old biomedical research
institute that conducts a broad range of infectious disease and public
health research. A major PHRI research focus is the study of antibiotic
resistance to life threatening bacterial organisms, and the development
of new antibiotics. Among its many accomplishments over the years, PHRI
has contributed to the development of smallpox vaccine, developed a new
diagnostic assay for influenza, conducted early experiments on
oncogenes, cloned the gene responsible for toxic shock syndrome, and
identified the multi-drug resistant TB strain ``W''. PHRI's current
research centers on molecular pathogenicity, drug discovery, drug
resistance, diagnostic and vaccine development, and gene expression.
Scientific disciplines include virology, immunology, biochemistry,
genetics, cell and structural biology, and regulation of cell
development. Presently, PHRI supports a staff of 110, including 20
Principal Investigators. These numbers will double in the move to the
International Center.
UMDNJ will be the primary medical center linkage and academic
affiliation for the Public Health Research Institute. The New Jersey
Medical School National Tuberculosis Center at UMDNJ, one of only three
model Tuberculosis Prevention and Control Centers in the United States
funded by the CDC, will add an important clinical, epidemiological and
training component to the International Center, since many TB patients
also manifest other infectious diseases, and knowledge and strategies
to deal with the world wide epidemic are seriously deficient. The TB
Center was founded in 1993 as a response to the national resurgence of
antibiotic resistant tuberculosis strains. At the time, Newark had the
nation's second highest rate of TB cases for a major city.
Rounding out the International Center's initial tenants will be the
New Jersey Medical School's Department of Microbiology & Molecular
Genetics. The Department's relocation will add a staff of 100 to the
Center's critical mass of microbiology research. Currently the
seventeen-member faculty conducts research in control of cell
proliferation; cellular aging; transcriptional, post-transcriptional,
and transcriptional regulation; mutagenis; DNA replication and
recombination; chromosome structure and segregation; human molecular
genetics; and molecular pathogenesis of viruses, bacteria and
parasites.
Together PHRI, the National TB Center and the Department of
Microbiology & Molecular Genetics will create a world class research
and treatment complex having substantial local, regional, national and
international impact.
Other collaborators in the development of the International Center
include the New Jersey Department of Health & Senior Services (NJDHSS)
and the pharmaceutical industry. Responsible for overseeing all
statewide public health initiatives, NJDHSS will contract with the
International Center to have cutting edge molecular epidemiology
services provided to the State of New Jersey. Expanding the strategic
use of molecular epidemiology to direct public health activities will
facilitate prompt identification and containment of emerging and re-
emerging pathogens. New Jersey's major biomedical companies will also
participate in the International Center. An infectious disease
consortium will be developed to serve as a forum for disseminating
fundamental research on the underlying molecular processes of
infectious disease organisms. This research will contribute to
pharmaceutical industry development of new drug therapies for
antibiotic resistant microorganisms. Private industry R&D facilities
contiguous to the International Center are also being explored.
The International Center for Public Health will be located in
University Heights Science Park (UHSP). UHSP is a collaborative venture
of Newark's four higher education institutions, the City and Community
of Newark, and private industry designed to harness university science
and technology research as a force for urban and regional economic and
community development. The university sponsors, New Jersey Institute of
Technology (NJIT), The University of Medicine & Dentistry of New Jersey
(UMDNJ) and Rutgers University at Newark, annually conduct nearly $100
million of research in Newark, much of it federally funded. Essex
County College trains technicians in eleven science and technology
fields, and prepares Newark residents for employment with Science Park
technology companies. Four Newark based companies also sponsor the
Park: Public Service Electric & Gas, The Prudential Insurance Company,
First Union National Bank and Bell Atlantic of New Jersey.
Located in a Federal Enterprise Community neighborhood, UHSP is a
50-acre, mixed-use, science and technology park in Newark's Central
Ward, adjacent to its higher education sponsors. At buildout UHSP will
include one million square feet of technology commercial space, 75,000
square feet of technology incubator space, up to 20,000 square feet of
retail business opportunities, an 800 student technology high school,
two blocks of new and rehabilitated housing and a community day care
center. The $10 million first phase of Science Park is complete and
includes the NJIT Enterprise Development Center 2 (a technology
business incubator), a 100 child day care center and the CHEN Building
(housing the industrial laboratories for the Center for Biomaterials
and Medical Devices). CHEN is the acronym for the Council for Higher
Education in Newark, the four universities who founded Science Park.
For almost two decades CHEN has jointly sponsored educational, housing,
and retail/commercial projects in Newark's public schools and the
neighborhoods of University Heights. The NJIT technology incubator was
completed in fall 1996, and is now 100 percent leased. Nearly half of
the 17 incubator companies are MBE/WBE's. In addition, over half of the
children in the Science Park day care center are from the surrounding
community, and the majority of day care center staff are from Newark.
The construction of the International Center will anchor the second
phase of Science Park, and serve as a magnet to attract pharmaceutical,
diagnostic and other biomedical companies to Science Park. The Center
will have the same impact on the Park as an anchor store does in a
retail shopping mall.
How the International Center for Public Health Addresses Foreign
Operations Objectives
The United States is vitally concerned with the impact of
infectious diseases on individuals in foreign countries, both because
of the health impact on the citizens of those nations, as well as the
threat posed by exposure to diseases as the result of increased world
travel resulting from an ever-expanding global economy. Individuals
traveling to new geographic areas always encounter new infectious
disease threats. Of particular concern are new and re-emerging
diseases, food-borne diseases, and drug resistant organisms.
USAID recognizes that disease and endemic ailments often overwhelm
and disrupt developing countries, posing a strategic challenge to the
U.S. The spread of HIV/AIDS, drug resistant tuberculosis, and other
infectious diseases consumes resources needed for long-term
investments. Without long-term investments, long-term stability cannot
be achieved. USAID is actively seeking to implement health related
programs it considers vital through partnerships with non-governmental
and private organizations. The International Center will contribute to
the achievement of these objectives in the following ways:
--The Center will develop cooperative programs with foreign
governments to implement molecular epidemiology techniques as a
means of focusing public health priorities and programs in
those counties. PHRI is presently engaged in a 13-nation
European Economic Community DNA TB fingerprinting project, and
is in discussions with Egypt, Indonesia, and Russia to provide
similar and expanded infectious disease services. UMDNJ's
National Tuberculosis Center is currently consulting with the
Singapore government to develop a TB Elimination Plan, with the
Center's Executive Director chairing an international advisory
panel. Staff training is currently being provided during the
implementation phase of the Elimination Plan. The National
Tuberculosis Center, through its International Scholars
Program, is currently training physicians and other staff from
China, India, the Netherlands, Singapore and Japan.
--Last summer, PHRI received a $12 million grant from Mr. George
Soros to implement infection control laboratories and programs
in Russia. This grant was the result of an earlier successful
collaboration between Mr. Soros and PHRI, in which PHRI
administered the distribution of $130 million of Soros funds to
Russian research scientists following the end of the Cold War
in an attempt to prevent a mass scientific community exodus
from Russia. On March 5, 1998 PHRI, representing the
International Center for Public Health, presented the Russian
Infectious Disease Program to the Medical Committee of the
Gore/Chernomyrdin Commission in Washington, D.C. Attached is a
progress report on the implementation of the Russian program.
--The most notable part of the collaboration between UMDNJ's TB
Center and PHRI is the fact that for several years, the WHO and
CDC have been unsuccessful in convincing Russia with its
monumental TB problem to adapt the DOTS strategy (Directly
Observed Therapy Short course) even though the DOTS program is
the WHO's global tuberculosis programme's standard of care, and
its implementation is their highest priority worldwide. Last
July, A PHRI/National TB Center site visit team analyzed the
PHRI/Soros program and recommended that it not be carried out
unless the Russian ministry of health adopted the DOTS
strategy. In September, 1997, U.S. Secretary of Health and
Human Services, Donna Shalala, announced at the Gore-
Chernomyrdin Commission meeting in Russia that the Russian
Ministry of Health would be using the DOTS strategy. This
decision was further reiterated at the Gore-Chernomyrdin
Commission meeting held in Washington, D.C. earlier this month.
--A mission of the International Center is the establishment of
molecular epidemiology laboratories in foreign countries. PHRI
just signed an agreement with Egypt to establish elements of
the Russian program in that mid-eastern country.
--The National TB Center currently collaborates with the
International Union Against Tuberculosis and Lung Disease
(IUATLD, an NGO) and WHO, providing them with ongoing
consultations and TB staff training. On March 18-19, I was the
only non-U.S. government representative from North America
among the 17 member WHO Ad Hoc Committee on the Global
Tuberculosis Epidemic.
--The International Center will raise private funding to supplement
governmental funding for these programs.
Request For Assistance
Through the leadership and direction of the Governor Christine Todd
Whitman, a Memorandum of Understanding (MOU) was signed between the
State of New Jersey, UHSP, UMDNJ and PHRI in October 1997. The MOU
commits $60 million of State loan and grant funds toward development of
the $78 million International Center for Public Health. Science Park is
working closely with the New Jersey Economic Development Authority,
through whom project bonds will be issued and 14-acres of land
acquired. Presently the Science Park partners and International Center
for Public Health tenants are seeking the remaining $16 million from
Federal and private sources during 1998. Groundbreaking is scheduled
for March 1999.
University Heights Science Park is requesting $5 million from the
United States House Appropriations Subcommittee on Foreign Operations
for fiscal year 1999 to support the International Center for Public
Health. On behalf of the University of Medicine and Dentistry, I want
to thank the Committee for the opportunity to present this request. We
appreciate your consideration of our proposal, and hope to receive your
support for the creation of the International Center for Public Health
at University Heights Science Park, Newark, NJ. This project is a top
priority for UMDNJ, Rutgers Newark, the New Jersey Institute of
Technology, Essex County College and the City of Newark.
phri/soros russian infectious disease program, an initiative of the
international center for public health extracts from progress report of
dr. alexander goldfarb, phri project director--january 29, 1998
Introduction
This program is carried out by the Public Health Research Institute
(PHRI) under a $12.3 million grant from the Open Society Institute
(Soros Foundation). The program is part of the $500 million pledge of
aid to Russia made by Mr. Soros last October. The aim of this program
is to combat emerging infectious diseases in Russia, with special
emphasis on TB and hospital infections. This extract covers the period
from project inception in October 1997 through the end of January 1998.
Highlights
The groundwork for Clinical Microbiology Laboratory at the Moscow
Medical Academy has been completed with regard to space preparation,
personnel recruitment, purchase of equipment and supplies. The first
Russian team begins training in Canada in February.
A full TB control program is under way in Tomsk. This includes a
comprehensive reform of the regional TB service and provision of TB
care in the prison system. The program is the prototype for similar
programs to be implemented in other regions.
TB control programs are in the development stage in Ivanovo, Marii
El, Nizhniy Novgorod and Leningrad oblasts.
Tuberculosis
Four specific problems are addressed by our TB program: (1) The
catastrophic rise of TB within the Russian prison system; (2) The
presumed high incidence of multiple drug resistant TB, particularly
among inmates, compounded by general lack of reliable specific
information on this subject; (3) The resistance to the World Health
Organization (WHO) recommended Directly Observed Therapy--Short Course
(DOTS) approach from the old-school Soviet TB establishment; and (4)
Waste and inefficiency in the regional TB control services; need for
health care management reform.
Tomsk Regional Government
We have chosen to first tackle these issues in a single regional
demonstration project (Tomsk), and then expand to other regions. Tomsk
was chosen because of its relatively advanced status due to the prior
work of the British medical group MERLIN. Tomsk is fairly typical for
Russia, and MERLIN's work provided specific and detailed insights into
the situation.
We succeeded in bringing the issues of TB control to the personal
attention of the Tomsk Governor. The approach that we offered was for
PHRI/Soros to provide bridge financing for TB service reform in
exchange for binding guarantees of long-term funding from the local
government and political support of the restructuring.
A working group was set up that included representatives of PHRI,
MERLIN, Tomsk Regional TB service, Tomsk Regional Department of Health,
the Governors office, the Ministry of Health in Moscow and the Moscow
Research Institute of TB.
As the result, an agreement between PHRI and the local government
of Tomsk was reached on a three-year plan which includes the following
components:
--cuts and reductions in the inefficient parts of TB service that
will lead to savings of $2 million a year. This includes
reduction of the number of TB hospital beds, reduction of the
number of x-ray examinations and closing of TB sanatorium for
children--within a period of one year.
--the savings generated by these cuts will be used for enhancement of
outpatient services, building of TB hospice, payment of
salaries, and support of DOTS infrastructure for three years
--during the first year, we will purchase drugs, pay salaries,
install new equipment, train personnel and create region-wide
DOTS network, including a bacteriological laboratory for
monitoring of drug resistance.
Tomsk Prison System
The Tomsk prison system includes a special TB colony (1,300
patients), a jail (estimated 50-100 TB cases) and five regular prisons.
An agreement has been signed with the Tomsk Department of
Corrections to fully implement DOTS in the prison system. The plan
includes training of medical officers, provision of drugs and vitamin
supplements for all TB patients, setting of a bacteriology field lab in
the main TB prison, improvement of TB diagnostics among general prison
population, identification and isolation of patients with multiple
drug-resistant TB, and an extensive system of oversight and control by
the regional TB service, Moscow Institute of TB, and our own
representatives.
Other Oblasts
Similar agreements for regional TB service reform and for prison
DOTS programs have been signed with the government and prison
authorities of Marii El, a small ethnic region in central Russia.
Negotiations are in progress with the authorities of Ivanovo and
Leningrad oblasts, and with the prison administration of Nizhniy
Novgorod.
The precedent of Tomsk facilitates negotiations with other regions,
and we expect to commit all available funds by mid-1999. Our current
funding will permit support of regional TB reform in four regions
(Tomsk, Marii El, Ivanovo, Leningrad oblasts), and prison program in 7-
8 regions.
Additional Resources
The Central Research Institute of TB has been chosen by WHO as the
site of a national DOTS center. We have committed funds and are
providing technical assistance for the establishment of National
Bacteriological TB Reference Lab that will provide training and quality
control to regional laboratories (e.g. in Tomsk). The Moscow laboratory
will work together with the Massachusetts State TB lab in Boston (run
by a Russian expatriate).
The molecular analysis of bacterial strains collected in Moscow
will be carried out at PHRI laboratories in New York. This network is
the first systematic effort to monitor drug resistant TB in Russia and
make information on this subject available to international health
agencies. A grant application, for funding beyond that available from
the Soros grant, to expand the understanding of MDRTB in Russia and to
use this information in both patient treatment and TB control, is
currently being prepared.
The Central Research Institute of TB will serve as the national
training center for regional TB services. A first group of six medical
officers from the Tomsk prison will start training these in mid-
February.
We are setting up the TB Information Center at the Moscow Medical
Academy. It will provide informational backup to the program, maintain
a data base of patients involved in DOTS treatment, monitor and process
the results, publish training materials, carry out information
campaigns, etc. The center will utilize resources of the Academy
(particularly students) and will in turn aid the teaching process.
Publicity and Relationships
The PHRI/Soros program was highly praised in a cover story in the
Russian national newsmagazine ITOGI and several newspaper publications.
It has also been attacked as a foreign plot to ``destroy'' the Russian
TB service.
In addition to cooperation with MERLIN in Tomsk, we are negotiating
a collaboration with Doctors Without Borders to provide bacteriology
support to their project in Mariinsk prison in Kemerovo.
The implementation of the PHRI/Soros Russian TB program is being
carried out in consultation with the WHO Global TB Program in Geneva,
the U.S. Centers for Disease Control and Prevention (CDC) in Atlanta,
and National Institutes of Health (NIH) in Bethesda.
Hospital Infections
This project is aimed at establishing a state-of-the-art clinical
microbiology laboratory at the Ob/Gyn hospital at the Moscow Medical
Academy, which is a major teaching hospital in Russia. The need for
such laboratory stems from general absence of microbiology in Russian
clinical practice, a major problem of the Russian health care system.
The laboratory is designed to become a teaching resource and reference
center on a national scale.
During the past period, the following steps were implemented:
--A team of U.S./Canadian experts visited Moscow in October. As the
result, a specific action plan was designed, including
requirements and specifications for lab space, equipment,
supplies, personnel, job descriptions, and training goals.
--Adequate space has been allocated and renovated by MMA at its own
expense.
--Russian project participants have been identified. The first
Russian group has been scheduled for training at the Mt. Sinai
Hospital in Toronto.
--The list of needed equipment and supplies has been compiled. The
equipment is currently in various stages of purchase/delivery.
--A Russian expatriate U.S. trained MD specializing in Ob/Gyn and
pediatrics infections has been retained to oversee the project
on a day-to-day basis and provide specific guidance to the
Russian team via regular video/audio conferences over the
Internet.
______
International Agencies
Prepared Statement of Michael D. Barnes, Esq., Co-Chair, U.S. Committee
for the United Nations Development Programme
Thank you for providing the opportunity for me to submit this
testimony to the Senate Foreign Operations Subcommittee. My name is
Michael Barnes and I am a former Member of Congress from the 8th
Congressional District of Maryland. I represent the U.S. Committee for
UNDP which I Co-Chair. My testimony represents my views not just as a
former Member of Congress, but as an American citizen, a businessman
and a lawyer committed to a strong U.S. foreign policy and strong U.S.
leadership in international affairs.
With the support of this Subcommittee, the United States returned
to the position as the number one donor to UNDP last year. As a Member
of the U.S. Committee for UNDP, I would like to thank the Subcommittee
for that strong support for and their endorsement of American
leadership of this agency.
My testimony contains good news.
First, UNDP has made real progress in implementing a far-reaching
internal reform process with stronger accountability, a culture of
cost-consciousness and a sharper focus on country operations. The
increase that the U.S. Government provided to UNDP last year helped to
make that reform possible. The Subcommittee should be proud of the work
that has been done. In recognizing these remarkable changes, I believe
UNDP deserves an increase in the contribution this year. I am proud to
represent an organization that the United States heads and through
which it has been able to implement these reforms.
Second, this new Committee, which has been in operation for about a
year now, has begun to reach out to the private sector to establish a
base of support around the country, and to bring in private sector
contributions so Americans can begin to make their own contributions to
this organization. Clearly this is an idea whose time has come. It has
been shown that Americans will support the United Nations when the need
is clear and this is something this Committee is helping to do, to show
a clear need for support of poverty eradication, protection of the
environment, promoting women and good governance in the developing
world so we can have true partnerships with the countries around the
world. This is the role of UNDP.
In my work, I travel all over the world, and I have witnessed the
progress made by developing countries in recent years in their move
toward establishing more democratic institutions, market economies, and
greater protection of human rights. UNDP has played a significant role
in promoting this positive change. Having had the privilege of serving
as Chairman of the Subcommittee on Western Hemisphere Affairs, I am
very familiar with all the countries in Latin America and the Caribbean
and U.S. relations with them. I would thus like especially to
acknowledge the role of UNDP in assisting the impoverished and war-torn
countries of Central America in their transition to stable and
democratic societies with market-oriented economies.
The President has requested an increase of $7 million for UNDP for
next year, raising the U.S. contribution to UNDP to $105 million. If
that level is met, there is a very good chance the U.S. will retain its
position as the leading donor to the organization. There are four
reasons why it is important for the U.S. to maintain its position as
top donor and these are as follows:
First, it will help the U.S. retain the position of UNDP
Administrator. This is the highest post held by an American in the
entire U.N. system. Starting with the first UNDP Administrator and
veteran Marshall Plan Administrator Paul Hoffman, this post has always
been held by an American, including a former friend and colleague who
served with distinction in the U.S. House of Representatives, Bradford
Morse, (R-MA). Thirty years ago, the United States contributed more
than 40 percent of total core resources of UNDP. But today, thanks to
greater burden-sharing by the other donor countries, the U.S. share is
down to approximately 10 percent. However, the competition with other
countries to retain the top job is much more intense today.
Second, as a result of reforms undertaken in recent years, UNDP has
become a lean, cost-effective and country-focused organization. Since
1992, UNDP has reduced its administrative budget by 19 percent in real
terms and decreased total regular staff by nearly 15 percent.
Headquarters staff has been reduced by 31 percent. Further
administrative budget reductions are planned in 1998-99 and a policy of
cost containment will then go into effect. UNDP is a hands-on
organization with 85 percent of its staff in the countries it serves.
At the field level, UNDP helps the United Nations as a whole to
succeed. The 132 UNDP Resident Representatives normally serve as
Resident Coordinators of the United Nations System, reporting to the
Secretary-General through the UNDP Administrator. Resident Coordinators
constitute a global network for coherent and cohesive United Nations
action. They are the U.N.'s main agents of reform around the world,
helping to establish common program frameworks, common premises and
common services. That network is funded and managed by UNDP under a
decision of the General Assembly. A summary of the reform effort is
attached.
Third, UNDP promotes the interests and values of the United States
of America. For every dollar invested by the U.S. in UNDP, the U.S.
receives a return of more than 2 to 1 in the procurement of American
goods and services. Americans constitute the largest pool of talent
selected to advise governments, non-governmental organizations, and the
private sector in developing countries throughout the world through
UNDP. Last year, the General Accounting Office published a report on
UNDP. Chapter 7 of that report described the ways in which the work of
UNDP is consistent with basic U.S. foreign policy objectives.
Fourth, UNDP is the U.N.'s largest and most influential
multilateral development organization and has a positive global impact
on the lives of billions of people throughout the world. UNDP
concentrates its efforts in the poorest countries and in countries in
crisis. Ninety percent of UNDP core resources go to 66 low-income
countries that are home to ninety percent of the world's people living
in extreme poverty.
In the distribution of UNDP core resources, 45 percent goes
directly to good governance; 24 percent to environment, and 31 percent
to poverty eradication and family livelihoods.
UNDP's overriding goal is poverty eradication and its priorities
include job creation, instituting the rule of law, establishing systems
of accountable governance, promoting democratic institutions,
regenerating and protecting the environment and empowering women.
Since much of my law practice focuses on Latin America, let me
point out how the countries in that region which formerly were such
trouble spots for the United States have today come to embrace
democratic institutions and have opened up their societies and their
economies through the assistance of UNDP. One of UNDP's key functions
is to provide technical assistance to developing countries to hold fair
and free elections. It has done so in Guatemala, Nicaragua and El
Salvador. UNDP has helped each of these countries move from
humanitarian relief programs to long-term development strategies by
establishing the infrastructure for the executive, legislative and
judicial branches of government and by assisting with the establishment
of the legal foundation to promote foreign direct investment.
For example, in Nicaragua, UNDP is strengthening the National
Assembly and the Supreme Court to make them more effective in
supporting the political and economic reform processes. UNDP is also
working with the Ministry of Finance to help bring final resolution to
the thorny property settlement issue.
From my own personal perspective, and speaking as a businessman,
let me clearly acknowledge how important UNDP's role in setting up the
infrastructure for democratization, promoting the framework for solid
economic growth and supporting the advancement of good government in
this particular region also serves American values and our interests
abroad.
In summary, Mr. Chairman, an appropriation of $105 million for UNDP
in fiscal year 1999 will help ensure American leadership of this vital
U.N. organization which is effectively and efficiently carrying out its
global mission while promoting American interests and values abroad.
______
Universities
Prepared Statement of Dr. Raymond E. Bye, Jr., Associate Vice President
for Research, Florida State University
Thank you, Mr. Chairman, and the Members of the Subcommittee, for
this opportunity to present testimony. I would like to take a moment to
acquaint you with Florida State University. Located in the state
capital of Tallahassee, we have been a university since 1947; prior to
that, we had a long and proud history as a seminary, a college, and a
women's college. While widely known for our athletics teams, we have a
rapidly emerging reputation as one of the Nation's top public
universities. Having been designated as a Carnegie Research I
University several years ago, Florida State University currently
exceeds $100 million per year in research expenditures. With no
agricultural or medical school, few institutions can boast of that kind
of success. We are strong in both the sciences and the arts. We have
high quality students; we rank in the top 25 among U.S. colleges and
universities in attracting National Merit Scholars. Our scientists and
engineers do excellent research, and they work closely with industry to
commercialize those results. Florida State ranks seventh this year
among all U.S. universities in royalties collected from its patents and
licenses. In short, Florida State University is an exciting and rapidly
changing institution.
I want to express my appreciation to the Subcommittee for its
support in fiscal year 1998 for the activities of the Caribbean Law
Institute (CLI), which is housed at Florida State University. That
Institute, a joint endeavor between FSU and the University of the West
Indies, was formed to promote the reform and harmonization of
commercial laws in the Commonwealth Caribbean. Projects have included a
wide range of commercial statutes including company law, insurance law,
insolvency banking, and arbitration. Legislation has been passed in
several countries as a result of the CLI's efforts in Trinidad and
Tobago, St. Vincent, Grenada, Antigua, Dominican, and St. Lucia.
The recent effort, which focuses on alternative dispute resolution,
environmental law, and fair competition legislation, is just beginning,
and I look forward to providing this Subcommittee with progress reports
periodically. I should add, however, that if the United States is to
genuinely make progress in this and other regions around the world, one
way of doing so is to undertake efforts that allow for the economic
development of those nations. That can often be done through providing
assistance to nations that would result in laws and legal frameworks
that allow for trading and other means of economic commerce to take
place more effectively. Corporations in the U.S. and in other nations
as well will more likely embark on economic activities with developing
nations if the legal framework allowing for routine economic activity
is in place and functioning. Here is where an organization like the
Caribbean Law Institute is invaluable. With its ties into an academic
institution within the Caribbean region, the CLI can assist with
expertise but without the outsider's presence.
The Caribbean Law Institute proposes to expand its focus for fiscal
year 1999 and seeks to provide an array of activities around the broad
topic of criminal justice legislation. Such areas as money laundering,
for example, can have substantial impacts on trade and other
relationships between nations. Working closely with legal practitioners
and criminal justice experts, the CLI and other experts from Florida
State University and the University of the West Indies will continue
discussions with officials at USAID on this effort. We envision
utilizing the CLI model of working closely with the Attorneys-General
in each of the Caribbean states, along with appropriate criminal
justice officials, to identify legislative areas in need of redress,
work to draft such changes, and assist where appropriate in their
legislative approval. The effort will build upon the successes of the
past and present activities of the CLI. The estimated costs for this
effort will be approximately $2 million in fiscal year 1999.
I appreciate the past support this Subcommittee has provided the
Caribbean Law Institute (CLI) at Florida State University and look
forward to your continued support for this effort.
______
Prepared Statement of Georgetown University
Mr. Chairman and Members of the Subcommittee: We are Father Julio
Giulietti, S.J., Director of Georgetown University's Center for
Intercultural Education and Development (CIED), and Father William
George, S.J, Assistant to the President of Georgetown University. We
appreciate the opportunity to testify before this Subcommittee on the
Cooperative Association of States for Scholarships (CASS) Program and
the East Central European Scholarship Program (ECESP).
We would like to thank you and your Subcommittee for your generous
support of the cost-sharing program, the Cooperative Association of
States for Scholarships (CASS). We would also like to thank you for
your encouragement to the East Central European Scholarship Program
(ECESP) which provides scholarships for Poland, Hungary, the Czech
Republic and Slovakia.
We are grateful to the Subcommittee for its support of $13.75
million for Central America and the Caribbean and $2.75 million for
East Central Europe. We would ask the Subcommittee to continue its
support in fiscal year 1999 as we have had very productive negotiations
with USAID.
Cooperative Association of States for Scholarships (CASS)
Under a Cooperative Agreement with USAID, Georgetown University
administers CASS. The University's mission in fulfilling the will of
Congress is to provide peace scholarships to capable, economically
disadvantaged students from Central America and the Caribbean who
attend United States community-based institutions for academic
education and technical training.
CASS has been designed to contribute to the formation of more
effective work force resources and to foster the leadership and
technical skills required to meet social, economic, and democratic
needs in Central America and the Caribbean. CASS works closely with in-
country experts, support network members, United States PVO's, USAID
Missions and USAID Washington to determine which fields of study can
best support strategic objectives and contribute to the economies of
participating countries.
United States community-based institutions then develop or adapt
programs to provide students with the technical skills and experience
that are in demand in the region. Needs analysis and follow-up studies
of alumni are conducted periodically to modify course offerings based
on current and projected economic realities in the region.
``Experience America'' is an essential phase of the program. Its
three major components--academic training, experiential opportunities,
and personal and professional development--reinforce self-reliance,
self-responsibility, and commitment. Living with American families and
studying at community-based institutions, peace scholars develop an
understanding of U.S. culture and values, and our democratic processes.
These students in turn have a positive impact on their host
communities, heightening cultural awareness, geographical knowledge,
and political and personal insights about the Americas. The result is
the formation of lasting social, economic, and cultural links between
the United States and future leaders of Central America and the
Caribbean.
In 1991, 179 CASS participants arrived to begin two-year programs
of study. Eighty-five percent (85 percent) of these students
successfully completed their program and returned to their home
countries in 1993. The uncertain situation in Haiti had a direct impact
on our success with scholars from that nation. CASS' successful
completion rate in 1993 for non-Haitian CASS students is ninety-two
percent (92 percent).
In 1992, 311 CASS participants arrived in the U.S. to begin two-
year programs of study. Ninety-one percent (91 percent) of these
students (284) successfully completed their program and returned to
their home countries in 1994. This is a six percent (6 percent)
improvement over the previous year.
In 1993, 325 CASS participants came to the U.S. for two years of
technical training. Eighty-seven percent (87 percent) of these students
(285) graduated and returned to their home countries in 1995.
In 1994, 305 CASS participants arrived in the U.S. for two-year
training programs. 91.8 percent successfully completed their program of
study and returned home in 1996. It was the most successful of the
seven CASS cycles since 1989. We have generally defined ``success'' as
having completed the degree, or target objective (it might be a
certificate) and returned home at the end of training.
In 1995, 253 CASS participants arrived in the U.S. for two-year
training programs. Ninety-four percent (94 percent) returned home, 90
percent having graduated with an associate degree.
Today, 469 CASS participants in Cycles 96 and 97 are enrolled at 20
community-based institutions in 14 states. An additional 18
participants from Central America and the Dominican Republic arrived in
the U.S. in January, 1998, for a special six-month program for
strengthening the skills of math and science teachers.
In 1998, 257 students will begin training in CASS programs. 227
participants will begin two years of study at 14 U.S. community-based
institutions, leading to associate degrees in 14 fields of study. In
addition, 30 CASS students from Haiti will come to the U.S. for 6-month
programs in the fields of health and education administration.
In Nicaragua, CASS designed the Nicaragua Peace Scholarship Program
(NPSP). NPSP is an innovative program designed to teach young adults
who, because of social and/or economic circumstances, could not
complete secondary school educations during the past decade of civil
strife in Nicaragua. A small number of veterans from both sides of the
conflict are included in the target population. Training is focused to
equip Nicaraguan youth with technical and democratic leadership skills
so that they may increase their opportunities to be productive in their
communities upon return.
Today a total of 105 NPSP participants are in the U.S. studying
English as a Second Language, courses leading to the GED, and technical
courses in public health, computer repair, business management,
industrial manufacturing management, and electronic communication
technology. They are placed at three community-based institutions in
three states.
Prior to U.S. studies, a three-month Academic Upgrading program is
conducted in Nicaragua emphasizing not only basic math and Spanish
skills, but personal development, self-esteem enhancement, leadership
practice and practice to participate in a culture of peace rather than
a culture of war. Two hundred seventy-one (271) NPSP graduates returned
home between 1992 and 1997. Fifty-seven (57) Cycle 97 NPSP participants
initiated their 18-month technical training in January 1998 and 48
Cycle 96 participants will complete studies and return home in June
1998.
It is noteworthy that in 1997, CASS had a total of 82 participants
in programs at Historically Black Colleges and Universities (HBCU's),
namely Harris-Stowe State College in St. Louis, Missouri and Kentucky
State University in Frankfort, Kentucky.
Federal funds for CASS are being supplemented by states and private
sector contributions, increasing the total number of students served.
After an intensive effort in the first two years of CASS to identify a
model for cost-sharing funds to maximize the federal dollars allocated
to the program, we learned that no one policy or plan for state or
regional support of the program will evolve. Each participating CASS
state has its own funding formula for higher education which simply
means no one legislative approach can be applied to all states.
Colleges in our network are effective partners in providing significant
cost-sharing resources for CASS. We require all participating colleges
to contribute twenty-five percent (25 percent) of the total costs of
the program. Colleges are exceeding this goal. From 1990 through
September 1997, we have received $25 million (40 percent) cost-sharing
from our colleges in the form of tuition waivers, indirect cost
waivers, and the funding of other program components. The program has
also received over $451,000 of in-kind support from private donors in
the countries in which CASS operates.
Follow-up surveys of alumni activities solidly demonstrate the
success of the CASS program through sustainable employment levels,
continuance of education in-country and community service. Data
collected over the last several years show that between ninety-one
percent (91 percent) and ninety-two percent (92 percent) of all CASS
alumni in the 8 participating Central American and Caribbean countries
are employed in their countries. This figure is in stark contrast to
the massive unemployment in the region. One in ten CASS graduates owns
his or her own business. As of December, 1997, ninety-seven percent (97
percent) of the 271 NPSP alumni is occupied as mid-level technicians
and managers and/or is studying in a national economy where over 50
percent of the working population is unemployed.
CASS has pioneered training opportunities for economically
disadvantaged disabled persons and is achieving impressive results. In
1990, CASS began a pilot program to offer computer business
applications training to hearing impaired students from Central America
and the Caribbean. Seventy-six percent (76 percent) of the CASS deaf
alumni are employed in their countries. Twenty-six percent (26 percent)
of the deaf alumni continues their studies; seventy-three percent (73
percent) are involved in community service activities.
Since 1990, CASS has negotiated 20 credit transfer agreements for
CASS alumni with universities in Central America and the Dominican
Republic. Last year, twenty-three percent (23 percent) of CASS alumni
reported they are currently continuing their studies, most working
full-time and studying concurrently. Sixty-five percent (65 percent) of
all CASS alumni responded that in addition to their work and/or
studies, they continue to actively participate in community leadership
and service activities.
georgetown cass distance education
The Cooperative Association of States for Scholars (CASS) delivered
an innovative international distance education business program via the
Internet in 1996. Designed in 1995, the results of this creative
application of Internet technologies to education and training has been
a catalyst for providing continuing professional and personal
development opportunities to large numbers of people who because of
their employment, economic, or geographic location in Central America
do not have access to traditional classes. The program is called
Tecnicas en Soluciones Empresariales (TSE).
The TSE program is offered to companies and organizations in
Central America who are employers of CASS graduates. Participants do
not have to leave the workplace to go to a classroom or university;
instead, they access class lectures and group discussions from their
computers at work. In 1996, the TSE course in business solution
techniques targeted mid-level managers and technicians to solve chronic
problems in real time. In 1997, the target was expanded to include
their supervisors. These new work groups, incorporating supervisors,
more effectively implement quality management strategies in the work
place.
Georgetown University administers TSE in Guatemala, Nicaragua, El
Salvador, and Panama. In 1996, forty-four companies and 88 students
received 9-month training in Guatemala, Panama, and Nicaragua. In 1997,
TSE trained 150 participants, expanded to El Salvador and lengthened
the training period to twelve months. In 1998, TSE will train 177
participants from 59 companies in four countries. The new 12-month TSE
program comprises three modules. Employers have input into the training
and a clearly defined responsibility to work with students to ensure
that training is applicable to their jobs. In addition to theory,
students are required to select topics for study and solution from
among chronic job-related issues that impact their performance as
employees and supervisors as well as the achievement of company goals.
Each project team is responsible for defining and researching the
selected project, recommending the solution and leading it's
implementation.
Instruction is delivered through the Internet, written books and
publications. It is supported by local instruction teams. Students
access class lectures and assignments from the Internet and use
ListServes for group discussions among participants in the four
countries. E-mail is the primary vehicle of communication between TSE
teams and participants.
Administered by Georgetown University and funded by the U.S. Agency
for International Development, CASS is now among the first to combine
training and Internet technologies, having devoted eleven years to the
invention and successful conduct of traditionally-managed technical and
leadership training for thousands of disadvantaged Central American and
Caribbean young adults.
The East Central European Scholarship Program (ECESP)
The East Central European Scholarship Program (ECESP) was founded
at Georgetown University to address the rapid political, social, and
economic changes in post-communist European countries. It was the first
education and training program to be funded and implemented under a
1989 initiative of the U.S. Congress to support democratization and
privatization in East Central Europe.
The goal of the program is to educate a core group of public
administrators and experts in public administration and policy,
management, finances, banking, health care administration, regional/
rural development, and education. Over the past years, these experts
have included administrators of central institutions (high ranking
civil servants from the Ministry of Finance, Privatization,
Agriculture, Health, Environment, and Labor/Social Services, and from
State Property Agencies); members of provincial and local self
governments (governors, council members, as well as mayors and vice-
mayors); administrators of key state and private sector financial
institutions; managers and administrators of non-government and non-
profit institutions, including institutions of higher education;
educators involved in educational reform and planning, curriculum
evaluation, teacher training, minority and disability education; and
faculty from universities, colleges, and professional schools working
to introduce new courses into the curriculum of their institutions. In
an effort to meet the ever-changing needs of the participating
countries, ECESP introduced in 1995 a health care policy and
administration program designed to aid the processes of privatizing and
reforming the health care and insurance sector. In 1996, ECESP
initiated a short term, specially designed program of training for the
National Bank of Poland with the aim of building a stronger and more
transparent banking industry in Poland. Today, that program also
encompasses the National Banks of Hungary and Slovakia, as well as the
Polish Bank Guarantee Fund, the Bank of Economic Union, and the
regional banks. The program cooperates with the U.S. Federal Reserve,
the Office of the Comptroller of Currency, and the Federal Deposit
Insurance Corporation.
ECESP hopes that the education and training it provides will allow
the participating countries to reap the benefits of a more open and
structured policy-making process, an increased number of civic-minded
citizens, a better educated and skilled democratic leadership and
administration, and a more evolved pattern of cooperation between civil
society and government in solving key social, political and economic
problems.
Since its founding in 1990, ECESP has sponsored 609 Czech,
Hungarian, Polish and Slovak participants. An additional 40
participants are scheduled to arrive shortly. As programs in Hungary
and Slovakia close in 1999, ECESP will shift its main focus to southern
tier countries, as approved by the U.S. Congress. In fiscal year 1998,
ECESP will complete its training in Poland (centered on final programs
for the Ministry of Finance and the National Bank, the Bank Guarantee
Fund, the European Union Bank and the regional and cooperative banks).
It will also prepare programs for Albania, Macedonia and Romania.
Discussions on the scope of those programs are currently under way with
USAID. Finally, ECESP will address the training requests from the
Governor of the National Bank of Croatia and the Ministry of Health in
Bulgaria. ECESP anticipates selecting approximately 100 new
participants for training under fiscal year 1998 funds.
Georgetown University, with the assistance of this Committee, has
agreed with USAID to negotiate a new cooperative agreement to cover
five years; that is fiscal year 1998 through fiscal year 1902. Funding
has been set for $53 million over five years. Beginning in fiscal year
1999, Georgetown will apply $6 million to the traditional CASS
technical program; $2 million to infectious disease control and
prevention; and $2 million to educational administration and training
of primary school teachers. The Georgetown CASS program will continue
to focus its resources on the same population this Committee is
concerned about: socio-economically disadvantaged men and women from
the region of Central America and the Caribbean.
We thank the Committee for its support in the past and for its
assistance in the negotiations for a new Cooperative Agreement.
participating institutions by state
cooperative association of states for scholarships (cass) including
nicaragua peace scholarship program (npsp)
California.--Kings River Community College; and Modesto Junior
College.
Florida.--Florida Community College at Jacksonville; Santa Fe
Community College; and St. Petersburg Junior College.
Iowa.--Iowa Western Community College; Kirkwood Community College;
and Scott Community College.
Kansas.--Coffeyville Community College; and Hesston College.
Kentucky.--Kentucky State University (HBCU).\1\
---------------------------------------------------------------------------
\1\ (HBCU) Historically Black College/University.
---------------------------------------------------------------------------
Massachusetts.--Berkshire Community College.
Missouri.--Harris-Stowe State College (HBCU) \1\; and St. Louis
Community College.
New York.--Broome Community College.
Ohio.--Hocking Technical College.
Oregon.--Mt. Hood Community College.
Pennsylvania.--Mount Aloysius College.
South Carolina.--University of South Carolina at Sumter.
Texas.--Alamo Community College District with St. Philip's College
(HBCU).\1\
Utah.--Utah Valley State College.
Wisconsin.--Fox Valley Technical College; Northcentral Technical
College; and University of Wisconsin Center-Marinette County.
Washington.--Edmonds Community College.
east central european scholarship program (ecesp)
Kentucky.--University of Kentucky; and Eastern Kentucky University.
Wisconsin.--University of Wisconsin (La Crosse); and University of
Wisconsin (River Falls).
New York.--Rensselaer Polytechnic Institute; and State University
of New York (Syracuse).
Washington, D.C.--George Washington University; and Georgetown
University.
______
Prepared Statement of Cyrus M. Jollivette, Vice President for
Government Relations, University of Miami
Mr. Chairman and Members of the Subcommittee, on behalf of the
University of Miami, I would like to present testimony on two important
nationally recognized centers located on our campus, the North-South
Center and the International Center for Health Research.
north-south center
The mission of the North-South Center is to promote better
relations and to serve as a catalyst for change among the United
States, Canada, and the nations of Latin America and the Caribbean. The
North-South Center conducts programs of research, public outreach,
education, training, and cooperative study. It publishes and
disseminates policy-relevant information on the Americas. Its programs
and activities also foster linkages among academic and research
institutions, NGO's, governmental institutions both civilian and
military, and philanthropic and private sectors throughout the
Americas.
We are convinced that such a mission is fundamental to the national
interests of this country. Informed and balanced analysis and improved
understanding of our neighbors in the Western Hemisphere provide us
great opportunities to enhance our economy, expand our jobs, and learn
of risks before they reach threatening proportions. The United States
has long equated stability in the region with its own security
interest. The maintenance of that stability today requires a
sophisticated partnership among the countries of the Hemisphere. It
also demands continually new approaches in U.S. policy. Fulfilling a
singular role in inter-American affairs, the Center's programs produce
nonpartisan, policy-relevant analysis and discussion of key issues
directly affecting the lives and well-being of citizens of the United
States. Unlike partisan institutes and advocacy groups, the North-South
Center engages vital inter-American issues such as trade, investment,
competitiveness, security, corruption, civil-military relations,
institutional reform, drug trafficking, immigration, and the
environment from the perspective of the public good. The Center devotes
its efforts toward publishing analyses that are accessible and relevant
for diverse audiences, including legislators, government officials,
nongovernmental organizations, and the private sector.
The North-South Center is a reflection of the belief that the
nation benefits when the great issues of the Western Hemisphere are
analyzed and debated by private sector and nongovernmental groups under
the auspices of a neutral forum. Governments cannot successfully
convoke and organize nongovernmental opinion, and academic institutions
have a different mandate. As a respected, independent, public policy
institution--fully cognizant of the special responsibilities attached
to its federal funding--the Center has served this function
successfully. Most notably, the Center has established a unique
capacity to serve as a forum and facilitator for civil society input in
the far-reaching inter-American policy negotiations that seek to build
upon the Miami Summit of the Americas. These negotiations are creating
the underlying architecture of inter-American relations for decades to
come.
Hemispheric Security Issues
The Center has been deeply engaged in promoting and sponsoring
research and dialogue on inter-American security issues, especially
since the onset of federal funding support in 1991. Among other issues,
the Center has conducted an extensive research program on drug
trafficking in the Hemisphere. It has studied and promoted dialogue on
the crises in Cuba, Panama, and Haiti. The Center has engaged in
research in civil-military relations, conflict resolution, and security
cooperation, and it has followed closely the Peru-Ecuador border
conflict, in which the United States has acted as one of the primary
``guarantor'' powers. The Center hosted, in December 1996, an
international conference attended by 58 scholars and government
officials from eight countries in the Americas to assess the impact of
that conflict on inter-American relations.
The Center founded its own inter-American security program in April
1997, headed by Dr. Richard Downes, a former officer in the U.S. Air
Force. The program focuses on ways to improve Hemispheric collaboration
on control of illegal drug trafficking, improving civil-military
relations, initiating and sustaining efforts at conflict resolution in
the Americas, exchange of information on arms proliferation in the
Americas, and exploring systematic ways to improve cooperative security
in the region. The focus of the program and the Center's
accomplishments in the security area were recognized in a letter to the
Center's director from General Wesley K. Clark, USA, the then Commander
in Chief, United States Southern Command, in March 1997.
The relocation of the U.S. Southern Command to Miami in late 1997
has afforded an enhanced role for the Center in security issues. The
Center figured prominently in discussions on the future of civil-
military relations in the Hemisphere at a recent conference with key
Latin American military officials sponsored by the U.S. Southern
Command and the U.S. Army War College. In December 1997, the Center
founded the ``Miami Security Roundtable'' with the cooperation of the
University of Miami School of International Studies, the Latin American
and Caribbean Center of Florida International University, and the U.S.
Southern Command headquarters in Miami. Three meetings of the
Roundtable held thus far have brought together, in an informal setting,
thirty or more academic experts and staff members of the U.S. Southern
Command to discuss the latest security issues in the Americas,
including drug trafficking and transnational crime. The Center's Issues
report on inter-American security cooperation has been well-received in
academic and professional circles. We are currently preparing a
monograph in the Center's Agenda paper series entitled ``Building New
Security Relationships in the Americas: The Critical Next Steps'' for
release in mid-May 1998 and a new Issues report on environmental
security in the Americas, to be published in June 1998. We are in close
consultation with the newly established Center for Hemispheric Defense
Studies at the National Defense University at Ft. McNair, Washington,
D.C. We anticipate that cooperative programs will result this year from
our discussions.
The Center's director serves on the Board of Visitors of the U.S.
Army School of the Americas in Ft. Benning, Georgia. In that capacity,
he has been engaged in reviewing the curriculum of the school and
sharing perspectives with a senior officer from U.S. Southern Command
headquarters who acts as the Command's liaison with the school. The
Center's director also has a Presidential appointment to the Panama
Canal Consultative Committee, a body charged with making
recommendations in connection with the operation and future of the
Panama Canal. The Center looks forward to enhancing its contributions
in the security field. We have applied for sponsorship from a major
foundation for a grant to conduct a security review of an increasingly
turbulent region of the Hemisphere--the Amazon Basin. The Center is
prepared to collaborate with the Department of State and the Office of
National Drug Control Policy to conduct a series of seminars on
conflict resolution, civil-military relations, and drug control
strategies with civil society experts.
In summary, the Center is committed to advancing the state of
security cooperation in the Americas. It serves as a bridge between
government officials dedicated to enhancing regional security and
academic and other civil society experts who have devoted their
professional lives to analyzing the Hemisphere's critical security
issues. We believe that Hemispheric cooperation on security issues can
multiply the impact of United States policy initiatives generally and
overcome historically profound cultural and political gaps between
North and South.
The Overall Agenda: Economic Growth and Sustainable Development
In a broader context, the Center's research programs are framed in
a manner which recognizes the imperatives for the development of the
economies of the Latin American and Caribbean countries and for the
extension and deepening of the region's democratic practices. These are
seen as crucial for the long-term prosperity of the United States, and
as a means by which to address the human problems that result from
poverty and under development, such as environmental degradation,
uncontrolled migration, narcotics production, and political and social
instability. The programs under this thematic include research and
outreach in the Inter-American Business and Labor Program, Summit of
the Americas working groups on trade and the environment, the above-
mentioned research activities on the emerging agenda of inter-American
security issues, analysis of immigration problems in a multilateral
context, studies on institutions and democratic governance, and
training and education seminars. A special regional emphasis is given
to the wider Caribbean through the Caribbean Studies Program. Small-
scale studies on discreet research topics that fall within the scope of
the overall research theme are carried out through the Adjunct Senior
Research Associate Program.
Accomplishments Toward Meeting Objectives in Fiscal Year 1997 and
Fiscal Year 1998
In April 1997, the Center participated in a trade and investment
seminar on Trinidad and Tobago, which featured the Prime Minister,
Baseo Panday. In May 1997, the Fifth Annual Reuters Seminar for
economic and financial journalists in Latin America was designed by and
held at the Center under the title of ``The Challenge of Hemispheric
Integration: Economic Alliances and National Realities.'' Another
Reuters seminar is planned for May 1998. In February and June 1997,
sessions were held at the Center's Washington office for civil society
consultation with Timothy Wirth, Under-Secretary of State for Global
Affairs, and representatives of U.S. civil society on follow-up and
implementation of the agreements from the December 1996 Santa Cruz
Summit on Sustainable Development. In February, the Center hosted the
OAS Coordination Group for the ``Inter-American Strategy for
Participation (ISP): Strengthening Public Participation in Environment
and Sustainable Development Policy Making in the Americas.'' Later in
the year, the Center participated in a meeting of the OAS Inter-
American Commission on Sustainable Development, which also sought to
follow up on the Santa Cruz Summit. In April 1997, Ambassador Richard
Brown, Senior Coordinator, Summit of the Americas, U.S. Department of
State, visited the Center for a discussion with some 30 invited
participants on ``Developing the Hemispheric Agenda for the 1998 Summit
of the Americas.''
Toward a Better Hemisphere
To summarize, the North-South Center's work unfolds against a
backdrop of auspicious changes and urgent concerns. The Center
addresses these issues, as it has for more than ten years, influencing
positive change throughout the Western Hemisphere in several
distinctive ways:
--Supporting economic growth, competitiveness, jobs, and regional
trade integration;
--Serving as a catalyst to promote solutions for pressing regional
security problems, including regional conflicts;
--Promoting democratic governance and social change with equity;
--Providing a forum for the study of environmental policies that
promote sustainable development;
--Developing research and training programs that foster the exchange
of ideas and analysis of critical hemispheric issues;
--Promoting technical and scholarly interchange and productive
networks among scholars and throughout the private and public
sectors;
--Producing policy-relevant books and reports.
The Summit of the Americas process offers the best hope for
creating a secure, durable and beneficial framework for inter-American
relations. Yet, the promises of summitry only become significant in
their implementation. No other independent body has been as active as
the Center in monitoring progress on the commitments made at the Miami
Summit. As the Summit of the Americas II in Santiago, Chile fast
approaches, this function will only take on added importance for U.S.
policy interests. We fully realize that the Congress always faces many
difficult funding decisions. In an age of deepening interdependence in
the Americas, and with great opportunities for regional economic growth
before us, the North-South Center provides a value-added return on U.S.
taxpayer dollars. As a national resource in the public interest
providing informed analysis of issues whose effects reach into every
American home, the North-South Center represents an investment in our
citizens' future and well-being.
international center for health research
I would especially like to commend this Subcommittee for its
significant and invaluable efforts in providing $50 million for the
``Communicable Diseases Initiative'' at USAID in fiscal year 1998. Like
the Subcommittee, we believe that it is imperative that the United
States address the threat of infectious diseases by responding to the
dramatic increase in, and resurgence of, communicable diseases
affecting children and adults, assisting developing countries to
strengthen their ability to protect and care for their people, and
stopping the spread of these communicable diseases in developing
countries. Emerging infections have been defined as those diseases
whose incidence has increased in the past two decades, or threatens to
increase in the near future. Re-emergence is the resurgence of known
infections after declines in incidence. Emerging and re-emerging
diseases, once thought to be under control, have sharply increased in
recent years around the world. The reasons are multidimensional,
including population growth and increased mobility, environmental and
climate changes, urbanization, the evolution of microbes, drug
resistant organisms, and modern travel and trade. International
commerce, travel, and migration within the Americas are creating new
opportunities for disease re-emergence and greater spread, particularly
when the movement of people and products is from developing to
industrialized nations.
Infectious diseases are the leading cause of death worldwide,
causing 17 million of the 52 million deaths each year. The U.S. has
also been adversely impacted by emerging infectious diseases. This is
evidenced by the fact that the death rate from infectious diseases in
the U.S. has increased more than 50 percent since 1980 and in 1996,
infectious diseases in the United States were ranked as the third
leading cause of death. This trend will continue in the future since
infectious microbes can easily travel across borders from other parts
of the world and be introduced into the United States, threatening our
national health and security. Controlling disease outbreaks and factors
promoting them in other countries is important not only for
humanitarian reasons, but also to prevent those diseases from entering
the United States. Moreover, U.S. supported research in other countries
provides American investigators with the opportunity and capacity to
determine the causes, patterns of spread, factors that promote
infectivity, and strategies for prevention and control of these
diseases in the United States. Emerging infections are particularly
serious in individuals with impaired immune systems, including
malnourished children and adults. Even subclinical malnutrition or
deficiency of individual vitamins and minerals that can only be
detected by laboratory means, may predispose populations to infectious
diseases. Poor nutritional status has been shown to influence all
aspects of the humoral and cell mediated immune responses.
The synergistic interaction of malnutrition and infection has long
been recognized. Infectious illness influences nutritional status
which, in turn, affects host susceptibility to infection. The
interrelationships between infection, nutritional status and immune
function are especially apparent in individuals infected with the HIV
virus, who exhibit impaired immune function and altered nutritional
status. The international dimensions of emerging, and re-emerging
infectious diseases are a continuous challenge that call for concerted
efforts of the American countries. For example, in 1993 a new
hantaviral illness, hantavirus pulmonary syndrome (HPS) was identified
in the southwestern region of the United States (CDC, MMWR, 1993). This
disease is characterized by a febrile prodrome in young, healthy adults
and disease progression can lead to respiratory failure. This virus has
now been identified from cases around the world.
Cholera, has also returned in epidemic proportions. In the United
States, more cases occurred in 1992 than in any other year since
cholera surveillance began in 1962. Since 1991, over 1 million cases
and 9,000 deaths have occurred in Latin America, and the disease is
showing a tendency to become endemic in areas in which basic sanitation
is deficient and the educational level of the population is low.
Although cholera initially reemerged in Peru, the disease has occurred
throughout Latin America. The most profound problem associated with the
reemergence of cholera has been the rapid emergence of multi-drug
resistant strains. For example, Honduras witnessed its first case of
cholera from the new pandemic in October, 1991. Within five years,
antimicrobial-resistant V. cholera strains appeared in this country
(Dubon, et.al. 1997). This may be due to the overuse of antibiotics in
this area of the world or may indicate that drug-resistant cholera is
becoming the dominant infecting form of the organism. International
commerce may play a role in the redistribution of multi-drug resistant
Vibrio cholera strains to the United States and other Latin American
countries. The cholera problem illustrates how factors in one continent
interact with global health by facilitating increased microbial traffic
to distant regions. The re-emergence of dengue and dengue hemorrhagic
fever (DHF) has been dramatic in the Americas. During the last ten
years, five countries in South America have experienced major
epidemics, for the first time in over 50 years. In the United States,
the first indigenous transmission of dengue after 35 years of absence
occurred in Texas in 1980. Between 1986 and 1992, the Centers for
Disease Control and Prevention (CDC) diagnosed 157 cases of dengue. In
1994, 37 laboratory-confirmed cases were reported, doubling the annual
average from the previous years (1987-1993). From 1977 to 1994, a total
of 2,248 suspected cases of imported dengue fever were reported in the
United States. Both mosquito vectors, Aedes aegypti and Aedes
albopictus, are present in the southeastern part of the United States
(8 states) permitting rapid transmission of the virus throughout this
region. More recently, a major outbreak of dengue fever and DHF was
reported from Cuba. Nearly 3,000 cases of confirmed dengue fever
(including 12 fatalities) were reported during 1997 by the Cuban
Ministry of Health (Kouri et.al., 1998). Since asymptomatic and
subclinical dengue cases frequently occur, the number of people
infected with dengue virus was probably much higher. There are strong
indications that dengue virus infections are currently increasing in
several other Caribbean countries as well in several countries in
Central America. Thus, there is a compelling need to increase
surveillance activities to track the movement of dengue fever and DHF
throughout the Americas.
Tuberculosis (TB) appears to be on the rebound. In the United
States, TB incidence rose from 22,210 to 25,313 between 1985-1993, with
60 percent of the excess cases attributed to disease in foreign-born
individuals. From 1986 to 1993, 40 percent of foreign-born cases were
from Latin America. Between 200,000 and 250,000 cases have been
reported annually in the Americas since 1980. Eight countries face very
severe problems, with incidence rates estimated at over 80 per 100,000:
Bolivia, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Paraguay and
Peru. There are four factors that seem to contribute to such a
resurgence of TB: the HIV/AIDS epidemic, drug resistance, an increase
in marginalized populations, and neglect of public health TB control
programs. According to the PanAmerican Health Organization (PAHO)
estimates, 3.5 percent of TB cases in the Region were associated with
HIV infection in 1990 and 15 percent will be linked to HIV infection in
the year 2000. In several countries of the Americas, including the
United States, the emergence of multi-drug resistant TB (MDR-TB) has
been also intimately related to the HIV epidemic. Thus, drug resistance
surveillance can be an important program indicator for policy makers.
Support of laboratories for international drug resistance monitoring
needs to be considered.
Malaria has had a resurgence in many tropical areas. The disease
now occurs in more than 90 countries worldwide and it is estimated that
there are over 500 million clinical cases and 2.7 million malaria-
caused deaths per year. A multitude of factors have contributed to the
reemergence of malaria, including (1) insecticide resistance in the
Anopheles mosquito (2) social instability resulting in movements of
unexposed nonimmune individuals into areas where malaria is endemic and
(3) the failure to develop an effective malaria vaccine. Compounding
the problems of malaria's geographical expansion and of increasing
morbidity and mortality are the emergence and rapid spread of
antimalaria-drug resistance which necessitate the use of more expensive
and sometimes toxic antimalaria drugs and longer treatment course. In
various parts of the United States, concomitance of competent vectors,
suitable weather conditions, and malaria-infecting carriers entering
the country have caused isolated cases or small outbreaks of
``autochthonous malaria''. In the past, these cases were limited to
rural settings, but since 1990, indigenous malaria has been reported in
urban areas as well. Plasmodium falciparum, the hemoparasite which
causes the most severe form of the disease, has become even more
resistant to commonly used antimalarial drugs. Resistant falciparum
malaria is now present throughout malaria endemic areas of South
America.
Antimicrobial drug resistance is perhaps one of the most alarming
threats among the problems presented by emerging and re-emerging
infections. The problem is well documented in the United States where
increasing levels of drug resistance in both community-acquired (e.g.
MDR Streptococus pneumonia) and nosocomial infections (resistant
enterococci) have led infectious disease experts to declare the
situation a crisis that could lead to a ``post-antibiotic'' era.
Although less well-documented, the threat of antimicrobial resistance
in the developing nations of the Western Hemisphere appears to outweigh
that present in the United States and Canada. Most of the Latin
American countries have conditions that facilitate antimicrobial drug
resistance: uncontrolled sale of antibiotics, frequent self-medication,
overcrowding and lack of adequate nosocomial infection control programs
in many hospitals, along with almost nonexistent surveillance and
reporting of antimicrobial resistance patterns.
The HIV/AIDS pandemic continues to increase exponentially. Reports
from the World Health Organization (WHO), the Joint United Nations
Programme on HIV/AID (UNAIDS), and the World Bank (WB) predict dramatic
increases in worldwide HIV infections, particularly in developing
nations. Dr. Piot, executive director of UNAIDS recently announced that
``We are now realizing that rates of HIV transmission have been grossly
underestimated--particularly in sub-Saharan Africa''. The WHO has
stated that ``The growing global HIV/AIDS crises is reversing decade of
progress toward improving the quality of life in developing
countries.'' It is now estimated that more than 30 million individuals
are infected with HIV worldwide with as many as 16,000 new individuals
becoming infected each during 1997. Nearly 90 percent of all people
infected with HIV live in developing countries (Fox, 1998). Clearly,
major research efforts need to be focused on the development of HIV
prevention programs and more importantly, into the development of an
effective vaccine.
The HIV/AIDS epidemic has also refocusing the attention of public
health experts on the problem of emerging and re-emerging infectious
diseases. HIV/AIDS and other sexually transmitted diseases (STD's)
illustrate the impact of changes in demographic conditions, social
standards, modification of the global environment, and the mutability
of microorganisms. The impact of HIV/AIDS on public health is due in
large part to the multiple opportunistic infections that develop in
association with this condition (e.g. Mycobacterium complex,
Pneumocistis carinni, Toxoplasma goondii, Cryptosporidium, etc.). In
1993, the United States experienced the largest waterborne disease
outbreak ever registered. The source was the urban municipal water
supply contaminated with Cryptosporidium, an intestinal parasite that
causes prolonged diarrheal illness, and severe disease in the
immunosuppresed individuals. In addition, HIV infection interacts in
complex ways with other tropical infectious diseases endemic in Latin
America, such as Chagas' disease and leishmaniasis, which are occurring
with varied and unusual clinical manifestations in persons infected
with HIV.
The magnitude and gravity of the current emerging and re-emerging
infectious disease situation in the region of the Americas is of
critical concern. In order to develop an effective system for disease
surveillance control and prevention, a strong and stable research
infrastructure and close cooperation between scientists of United
States and Latin America and Caribbean countries are essential.
Enhanced research and training efforts need to be established in the
areas involving the most prevalent infectious diseases including TB,
malaria, dengue, cholera, and HIV. The complex interaction between
nutritional status and susceptibility, as well as disease progression,
and control of these infections needs to be investigated along with
basic research on all aspects of disease processes and public health
strategies.
The University of Miami, International Center for Health Research
is located in Miami, Florida, the major gateway city to Latin America
and the Caribbean. The major goals of the Center are to investigate
biological characteristics of causative microbial agents, to study the
risk factors related to the spread of these infections, including
interactions between nutritional status and susceptibility, as well as
to develop innovative preventive strategies. An important role of the
Center involves collaborative infectious disease control and prevention
efforts to broaden expertise of indigenous Latin American and Caribbean
health professionals, and link laboratory science and epidemiology with
public health strategies and policy making processes. The Center's
priority is to strengthen programs for the control of major infectious
diseases, particularly malaria, dengue, TB and cholera. Emphasis is
also placed on programs aimed at preventing the spread and reducing the
impact of HIV infection and other sexually transmitted diseases. There
is an urgent need to strengthen the existing research infrastructure
and a close collaboration between U.S. and Latin American and Caribbean
scientists and policy makers. This enhanced research will lead to
development of new effective strategies for control and prevention of
these emerging and re-emerging diseases in the Americas. We
respectfully seek the Subcommittee's support for $2 million for the
International Center for Health Research at the University of Miami to
strengthen and expand its research and prevention efforts in Central
America and The Caribbean. Once again, thank you for your critical
support for USAID's efforts in infectious diseases.
On the occasion of submitting testimony for the record to the
Foreign Operations Subcommittee, Committee on Appropriations, U.S.
Senate, regarding the fiscal year 1999 Budget for the United States
Agency for International Development (USAID).
I, Cyrus M. Jollivette, Vice President for Government Relations of
the University of Miami, located in Coral Gables, Florida, state the
following:
According to the two most recent audits of the University of Miami
performed in accordance with provisions of Office of Management and
Budget (OMB) circular A-133 (``Audits of Institutions of Higher
Learning and other Non-profit institutions'') for the fiscal years
ending May 31, 1996 and May 31, 1997, federal awards received by the
University of Miami for all activities (including research and
development, student financial aid, extension education, public
service, academic support, enterprise/institutional/plant support, and
scholarships and fellowships) totaled $121,562,876 and $122,601,809
respectively.
Should the Subcommittee require further details of federal support
received at the University of Miami, or copies of the audits as
produced by Arthur Anderson LLP (for fiscal year 1996 and fiscal year
1997), the University's independent auditors, I will make every effort
to see that they are provided.
______
Prepared Statement of Dr. Richard L. Bernala, Jamaica's Ambassador to
the United States and Permanent Representative to the Organization of
American States
Thank you for providing this opportunity to submit testimony
highlighting Jamaica's views on the Clinton Administration's fiscal
year 1999 Request for Latin America and the Caribbean.
introduction
Over the years, U.S. assistance and trade programs have fostered an
important economic partnership between the United States and the
countries of the Caribbean Basin. Since the 1980's, U.S. foreign aid to
the region has averaged about $200 million. At the same time, during
this period, U.S. exports to the Caribbean have expanded by more than
200 percent and Caribbean exports to the United States have climbed by
nearly 170 percent. The Caribbean Basin now comprises the tenth largest
market for the United States, and it is one of the few regions where
the United States consistently posts a trade surplus. With combined
trade exceeding $36 billion in 1997, U.S./Caribbean commercial links
support more than 360,000 jobs in the United States and countless more
throughout the Caribbean and Central America.
For Jamaica, the United States is an important economic partner and
supporter of its development program. Indeed, over the past decade,
Jamaica has been a major recipient of U.S. foreign aid to the Caribbean
region. The United States has been a vital source of funding for the
following programs: facilitating economic liberalization and private
sector-led growth; promoting institution-building and public sector
efficiency; supporting debt reduction; providing assistance to the
social sectors to cushion the effects of economic adjustment on the
poor; improving natural resource management; assisting in efforts to
combat the international narcotics trade; and funding environmental
protection.
Ultimately, Jamaica is seeking to reduce its traditional reliance
on official assistance and to finance development through a combination
of domestic and foreign private capital flows. However, this long-term
goal can only be achieved with continued United States support for
Jamaica's comprehensive economic reform and development programs.
Jamaica is acutely aware of the budgetary constraints in the United
States. Furthermore, given the end of the Cold War and pressing
domestic concerns, Congress and the American public opinion favor a
reduction in foreign assistance programs. The Government of Jamaica
welcomes the refocusing of the U.S. aid program towards sustainable
development, with an emphasis on entrepreneurial development,
assistance to the social sectors, and popular participation in the
development process. Nevertheless, while the rationale for this new
approach is clearly understood, a reduction in assistance resources to
be a phased process which is sensitive to Jamaica's development needs.
Sudden and drastic foreign aid cuts would adversely affect Jamaica's
structural transformation efforts.
supporting sustainable economic growth
Since 1990, the Jamaican Government has been implementing a
comprehensive and uncompromising economic program which has brought
positive results and which has supported private sector-led, market-
driven economic growth. The Government is now working vigorously to
maintain and strengthen confidence in its financial sector while
engaging in wide-ranging activities to promote consumer rights,
dismantle government regulations, and encourage private sector
development. The U.S. Government has supported this process of economic
reform and trade liberalization by providing balance of payments
support, in addition to traditional development assistance funding (DA)
for specific projects and programmes to support overall growth targets.
Development Assistance (DA) has helped Jamaica undertake critical
social programmes in areas such as education and public health, and
economic programs, through the promotion of micro-enterprise
development. In fiscal year 1999, USAID is proposing to allocate $11
million to Jamaica to stimulate micro-entrepreneurial activity; to
increase employment in small, niche export industries; to promote
environmentally sustainable policies, especially in the tourist areas,
to raise educational standards of elementary school children; and to
encourage effective family planning techniques.
Such programs are clearly in the U.S. interest, particularly since
Jamaica is in such close proximity to the United States. It should be
noted that, as the economy has expanded, so too has our ability to
import from the United States, our largest trading partner. Jamaica
currently imports about 70 percent of its goods and services from the
United States and since 1985, annual growth of U.S. exports to Jamaica
has averaged 12 percent. Moreover, the accomplishment of social,
health, and educational goals contribute to overall stability, which
have a dampening effect on migration and narcotics trafficking through
U.S. borders.
supporting private sector development: the multilateral investment fund
The United States has also supported private sector development via
the Inter-American Development Bank's Multilateral Investment Fund
(MIF). In fact, Jamaica was the first country to receive funding from
the MIF. This $1.5 billion development facility is being used to
support micro-enterprise and human resource development and strengthen
private sector activities in Jamaica and other activities throughout
the region. In fact, the first MIF project provided $1.8 million to
support the establishment of an Employee Share Ownership Plan (ESOP) to
expand the participation of Jamaica's labor unions in Jamaica's
privatization program. Additional projects in Jamaica have included:
--$1.27 million to establish an Office of Utilities Regulation;
--$3.5 million to fund a human resource development pilot project--a
unique collaboration between organized labor and employers to
expand private sector capacity to retrain displaced workers and
improve labor market exchange mechanisms;
--$1.9 million for institutional strengthening of the Jamaican
Cooperative Credit Union League;
--$1 million for computer-aided technology and training in rural
Jamaica--an extension of a private sector initiative: Jamaica
2000; and most recently; and
--$1.5 million in institutional support for the Financial Sector
Adjustment Company (FINSAC), which was created by the
government to facilitate the restructuring of the financial
sector.
Cumulatively, Jamaica has received $11.7 million in grants from the
MIF through December 1997. U.S. leadership in the MIF has played an
important role in guaranteeing matching contributions from other donor
governments, including the Japanese, thereby ensuring the success of
this program. The Government of Jamaica supports the President's
commitment to request continued U.S. contributions to the MIF.
supporting private sector development: private sector investment funds
In the face of aid cuts, the government is also looking to private
sector sources and foreign direct investment to generate additional
capital to finance Jamaica's development needs.
U.S. Government support has been instrumental in facilitating
private investment in Jamaica, strengthening a complementary
partnership that ultimately generates U.S. jobs and exports. The
Overseas Private Investment Corporation has supported dozens of
projects in Jamaica--to the amount of $835 million--since it opened for
business there in 1963. OPIC provided more than $40 million in
political risk insurance during 1996 alone. Moreover, over the past ten
years, the Section 936 program generated more than $2 billion in
investment throughout the Caribbean, one-quarter of which was in
Jamaica. Combined, these programs have supported much of the foreign
direct investment targeted for Jamaica over the past decade.
Regrettably, however, the Congress closed the Section 936 window in
1996.
Several programs may provide a mechanism to help the Caribbean fill
this funding gap. First, OPIC itself may provide a solution through the
creation of an OPIC Equity Fund for the Caribbean Basin. OPIC currently
supports 4 sector-specific funds as well as 24 regional funds operating
in virtually every region of the world. Conspicuously absent is an
OPIC-supported regional fund for the countries of Central America and
the Caribbean Basin. Several investor groups are already petitioning
for the creation of such a fund as a way to help accumulate sufficient
capital to invest in the region. This fund would help attract the risk-
averse investors to the Caribbean Basin economies while strengthening
OPIC's portfolio in the region--a fact that may also benefit OPIC,
given the widespread constituency of support for regional trade links.
A related concept is the creation of an Enterprise Fund, which has
recently been suggested by House Foreign Operations Subcommittee
Chairman Sonny Callahan (R-AL). Although enterprise funds have posted
mixed records in Eastern Europe, they have provided an important
mechanism to encourage the development of a viable private sector in
the former communist countries. Such a model could be replicated in
Jamaica to encourage the development of a vibrant private sector among
micro-entrepreneurs and the sectors of society traditionally overlooked
by other development programs. Moreover, an enterprise fund could
provide a structured way for Jamaicans living throughout the United
States to participate in the development of their homeland.
promoting trade expansion
In the context of the foreign aid debate, Congress should also give
due consideration to the strengthening of our mutually beneficial
trading partnership. In the long-term, as foreign aid is phased out, it
can only be replaced by a sound, and commercially viable, trade and
investment relationship. Jamaica has long recognized the importance of
such a relationship with the United States. Bilateral trade flows have
expanded by more than 10 percent a year since the mid-1980's. Moreover,
U.S. investors are playing an active role in Jamaica's growing private
sector.
The Caribbean Basin Initiative (CBI) has formed an important basis
for the U.S./Jamaican and U.S./Caribbean partnership to flourish. The
Administration has recently developed a proposal to strengthen this CBI
framework to help CBI countries cope with trade and investment
diversion from Mexico under the NAFTA. Such diversion has already begun
to distort trade and investment flows with the Caribbean country. In
1997, for example, contractions in the Jamaica textile and apparel
sector led to a decline in both exports to, and imports from, the
United States. We are hopeful that this situation can be remedied
through the enactment of pending legislation during the 105th Congress.
Jamaica was an active participant in the preliminary discussions
and summits leading toward the Free Trade Area of the Americas (FTAA).
Jamaica chaired the Working Group on Smaller Economies, calling
attention to the needs of the smaller economies in the FTAA framework.
The size and trade profile of many of these countries--which by some
estimates account for about two-thirds of the FTAA participants--makes
them particularly vulnerable to the shocks of external events. While
they all want to embrace the path of trade liberalization, they are
often not capable of implementing steps on the same timetable as their
more developed neighbors.
facilitating debt reduction
Jamaica continues to face heavy debt service obligations. Recently,
the United States has made valuable concessions which have provided
important debt relief to support reform efforts. This debt relief frees
scarce foreign exchange resources for crucial imports and reduced debt
servicing helps to lower fiscal expenditure, thereby contributing to
Jamaica's growth. The program has also channeled local currency debt
repayments into environmental management funds, building a sustainable
environmental framework for development. Ultimately, because of debt
relief, Jamaica has been one of the few countries to reduce its stock
of external debt and debt servicing. The stock of public debt currently
totals approximately $5.23 billion, more than half of which is external
debt.
Nevertheless, debt service obligations remain high and currently
absorb approximately 45 percent of the Government's annual budget. By
comparison, in the United States, where public debate has highlighted
the burden of the U.S. Government budget deficit, debt service is
roughly 14 percent. As Jamaica allocates such a high percentage of the
public sector budget for debt servicing, it is unable to pursue other
on-going development priorities. In this regard, Jamaica welcomes the
approval in recent appropriations and authorizations bills of new
mechanisms to effect debt reduction for environmental programs, based
on the Enterprise for the Americas Initiative (EAI). Jamaica endorses
efforts to renew this program for fiscal year 1999, and has engaged in
discussions with the Administration about how this program can be
deployed to assist in reducing Jamaica's debt burden while providing
the mechanisms to sustain the mutual development efforts of both
Jamaica and the United States.
supporting counter-narcotics activities
The Jamaican government is irrevocably committed to maintaining a
comprehensive anti-drug campaign based upon a two-pronged approach,
focusing both on supply and demand reduction. To curtail the supply of
drugs, the government is engaged in a campaign to eradicate marijuana
growing in the remote mountainous regions of the country and to
strengthen capabilities to interdict and punish drug offenders. Already
Jamaica has succeeded in reducing marijuana production substantially
since 1990. Jamaica has also recently passed legislation on asset
forfeiture and money laundering, implemented a Mutual Legal Assistance
Treaty (MLAT) and a new shiprider agreement with the United States, and
is now preparing to consider legislation to prevent trade in pre-cursor
chemicals. The United States has made an important contribution through
the support of economic and security assistance, training, and other
material and assets, and we are actively working with U.S. government
agencies to strengthen cooperation across a range of activities.
Jamaica also recognizes that without a demand for illegal drugs,
there would be no industry. To stem demand for drugs in Jamaica,
critically acclaimed programs are being funded that focus on
rehabilitating former drug addicts and on providing drug education to
vulnerable groups. These supply and demand-related programs place
considerable pressure on the Jamaican government's budget, particularly
at a time when there is considerable effort to fund other social
programs while curtailing the growth of fiscal expenditure. With
continued U.S. assistance, Jamaica can maintain its aggressive efforts,
both to stop the harmful flow of drugs into the United States and to
provide viable alternatives for Jamaicans to induce them out of illegal
narcotics activities.
While we understand the U.S. domestic debate regarding counter-
narcotics assistance, our fear is that reduced counter-narcotics
funding may be interpreted as a signal to international drug cartels
that Jamaica has a reduced capability to effectively engage in
international narcotics interdiction. Similarly, such reductions would
put additional financial burdens on the Jamaican Government at a time
when it is undertaking critical economic reforms. U.S. assistance
sustains an important partnership in the effort to combat international
narcotics trafficking.
conclusion
Jamaica is now moving decisively to promote economic growth--both
by attracting foreign investment and mobilizing domestic savings. In
March 1996, the Jamaican Government finalized and issued a National
Industrial Policy that outlines a framework under which different
sectors of the economy--government, private firms, and organized
labor--can work together to ensure growth and prosperity in Jamaica
through the 21st century. This policy provides an important long-term
blueprint for Jamaica's economic development, focusing on growth
through investment and export promotion. During that same month,
Jamaica successfully completed an IMF extended funds facility
agreement, bringing to an end Jamaica's long borrowing relationship
with the Fund, and setting the stage for current government economic
policies.
U.S. assistance is making an important contribution to Jamaica's
development. USAID-Jamaica has been particularly effective at the
grassroots level, funding programs that seek to incorporate the poor
into the economic growth process. This is crucial for sustainable
development, which in turn will further stimulate trade and investment
with the United States. The U.S. foreign assistance program in Jamaica,
should be viewed as an investment in the economic well-being of the
United States, not as outflows of money. The mutual benefits of foreign
assistance are well-documented and need to be clearly recognized.
Strengthening our common economic relationship will provide an
additional framework through which aid flows can be replaced by
advantageous commercial linkages.
U.S./CBI TRADE STATISTICS (1985-96)
[Millions of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Annual export
Year U.S. imports U.S. exports growth Trade balance
(percent)
----------------------------------------------------------------------------------------------------------------
1985............................................ 6,687 5,942 .............. -745
1986............................................ 6,065 6,362 7.1 297
1987............................................ 6,039 6,906 8.6 867
1988............................................ 6,061 7,690 11.4 1,629
1989............................................ 6,637 8,290 7.8 1,653
1990............................................ 7,525 9,569 15.4 2,044
1991............................................ 8,372 10,013 4.6 1,641
1992............................................ 9,627 11,263 12.5 1,636
1993............................................ 10,378 12,428 10.3 2,050
1994............................................ 11,495 13,441 8.1 1,946
1995............................................ 12,673 15,306 13.8 2,633
1996............................................ 14,469 15,870 3.7 1,401
1997............................................ 17,740 18,431 16.1 692
Average annual U.S. export growth............... .............. .............. 9.95 ..............
----------------------------------------------------------------------------------------------------------------
Note: 1997 marked the 12th straight year of U.S. trade surpluses.
Source: U.S. Department of Commerce and U.S. International Trade Commission.
NUMBER OF U.S. WORKERS DEPENDENT ON TRADE WITH THE CARIBBEAN BASIN
NATIONS
------------------------------------------------------------------------
Number of new
Year Total number of U.S. jobs
U.S. workers \1\ created per year
------------------------------------------------------------------------
1985................................ 118,840 ................
1986................................ 127,240 8,400
1987................................ 138,120 10,880
1988................................ 153,800 15,680
1989................................ 165,800 12,000
1990................................ 191,380 25,580
1991................................ 200,260 8,880
1992................................ 225,262 25,002
1993................................ 248,552 23,290
1994................................ 268,814 20,292
1995................................ 306,120 37,306
1996................................ 317,400 11,280
1997................................ 368,600 51,200
Average annual job creation......... ................ 20,813
------------------------------------------------------------------------
\1\ Assuming that $1 billion in U.S. exports creates 20,000 U.S. trade-
related jobs.
Source: U.S. Department of Commerce and U.S. International Trade
Commission.
U.S./JAMAICAN TRADE STATISTICS (1985-97)
[Millions of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Annual U.S. Annual U.S. Export growth
Year imports exports (percent) Trade balance
----------------------------------------------------------------------------------------------------------------
1985............................................ 267 404 .............. 137
1986............................................ 298 457 13.1 159
1987............................................ 394 601 31.5 207
1988............................................ 441 762 26.8 321
1989............................................ 527 1,006 32.0 479
1990............................................ 564 943 -6.3 379
1991............................................ 576 963 2.1 387
1992............................................ 599 938 -2.6 339
1993............................................ 720 1,113 18.7 393
1994............................................ 747 1,066 -4.2 319
1995............................................ 847 1,421 33.3 574
1996............................................ 839 1,491 4.9 652
1997............................................ 738 1,417 -5.0 679
Average annual U.S. export growth............... .............. .............. 12.0 ..............
----------------------------------------------------------------------------------------------------------------
Note: U.S. trade surplus in 1997 is the 13th straight year of trade surpluses.
Source: U.S. Department of Commerce and U.S. International Trade Commission.
U.S. FOREIGN ASSISTANCE TO JAMAICA (FISCAL 1985-99) \1\
[Millions of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Peace
Year \2\ ESF DA Public MIL Corps Prog Total
Law 480 Narc
----------------------------------------------------------------------------------------------------------------
1985...................................... 81.0 34.3 40.1 7.6 ........ 2.4 165.6
1986...................................... 58.6 26.1 37.6 8.0 1.5 2.6 134.3
1987...................................... 26.0 18.1 39.9 3.4 3.3 2.5 93.1
1988...................................... .5 39.2 35.7 .3 1.9 3.0 80.7
1989...................................... 12.9 51.8 47.1 3.8 1.0 3.0 119.6
1990...................................... 13.2 14.0 44.2 1.3 1.0 2.3 76.6
1991...................................... 10.0 17.2 44.7 1.9 1.4 2.4 77.6
1992...................................... 15.9 22.3 32.6 3.2 1.0 2.1 77.0
1993...................................... 2.0 13.7 30.0 .4 1.3 2.3 49.7
1994...................................... ........ 8.9 14.0 .5 .6 2.2 26.2
1995...................................... ........ 10.5 ........ .2 .6 1.9 13.2
1996...................................... ........ 7.8 2.2 .5 .7 1.9 13.1
1997...................................... ........ 11.2 ........ .5 .7 1.9 14.3
1998...................................... ........ 11.0 ........ .5 .6 2.0 14.1
1999...................................... ........ 10.9 ........ .5 .8 2.0 14.2
----------------------------------------------------------------------------------------------------------------
\1\ Fiscal year 1999 request levels equal 8.6 percent of fiscal year 1985 actual levels.
\2\ Figures for fiscal years 1997 and 1998 represent actual appropriations. Figures for fiscal year 1999 are
based on request levels.
Note: Figures may not total exactly due to rounding.
Source: USAID, Obligations and Loan Authorizations Fiscal Year 1946-Fiscal Year 1992. USAID Congressional
Presentation, fiscal years 1995-99.
______
Assistance to Greece, Cyprus, and Turkey
Prepared Statement of Andrew E. Manatos, President, National
Coordinated Effort of Hellenes
I and the national Greek-American organizations on whose boards I
serve value this opportunity to participate in our country's democratic
process. What follows are our recommendations for foreign assistance
levels for and American policies toward the countries of Greece, Cyprus
and Turkey in fiscal year 1999. We believe that these recommendations
will significantly benefit our country's short term and long term
interests.
As this committee knows, this year the United States, the European
Union and the United Nations have intensified their efforts to bring
about a just and viable Cyprus settlement as well as greater stability
in the Eastern Mediterranean. The success of these important and
unprecedented efforts will be significantly advanced if the government
of Turkey continues to receive the proper message from our government
and the international community.
The Turkish government must understand that the path to Turkish
advancement requires adherence to today's rules of a civilized world
order, including a respect for human rights, intentional law and
sovereignty, and the non-use of force or threat of force. The
traditional American message sent to Turkey (through our previously
routine and presently sporadic practice of ignoring Turkish wrongdoing)
has given legitimate standing and credence to a group in Turkey who
advocate that Turkey can advance by saying the ``right'' things and
doing the ``wrong'' things. In today's world, whether in the EU or the
U.S., leaders will no longer accept the ``right'' words followed by the
``wrong'' actions. There are a significant number of journalists,
government officials and business people in Turkey who understand that
the best interests of the Turkish people lay in their government
adhering to standards of modern civilization. They will be strengthened
if America's message on this subject is correct.
Mr. Chairman, we urge you and your subcommittee to do whatever you
can in this year's legislation to help Turkey understand that in
today's world, whether in the European Union or the United States,
leaders will no longer accept ``right'' words followed by ``wrong''
actions. Please help reinforce, as the E.U. reinforced, the evidence to
which enlightened people in Turkey can point to show the direction
their country must go.
president's requested aid levels
With regard of the specific aid levels that President Bill Clinton
requested of the Congress for Greece, Cyprus and Turkey, we strongly
support these levels and encourage the Congress to adopt them. The
President's budget asks the Congress to send no military aid to Turkey
and Greece, no economic aid to Turkey, and the full 15 million in aid
to Cyprus.
It is time to end U.S. military aid to Turkey, a country which has
been using U.S. military equipment to violate internationally accepted
standards of conduct, including threatening U.S. allies, Greece and
Cyprus, and illegally occupying Cyprus. It would mark the end of a
process started by the U.S. Congress 6 years ago to graduate Turkey and
Greece from the annual U.S. foreign military financing program. The
primary reason Greece and Cyprus need military equipment is to defend
themselves against U.S arms and Turkish hands.
With regard to Turkey's economic aid, each year since 1994 the U.S.
Congress has cut or conditioned a portion of this aid in the attempt to
send a message of U.S. disapproval of Turkish actions with regard to
Greece, Cyprus, Armenia, and its Kurdish population. Ending this aid
sends the strongest message.
With regard to the traditional $15 million earmark in economic aid
for Cyprus adopted in the final foreign operations appropriations bill
each year, it is important that the Congress maintain this
demonstration of support for a peaceful reunification of the island. An
appropriation of anything less would send the people of Cyprus the
wrong message at perhaps the most crucial time for settlement efforts
in the nearly 24 years since the Turkish invasion and occupation of
Cyprus.
important issues
Mr. Chairman, I would like to take the remainder of my testimony to
highlight for you some important developments that have taken place
with regard to the countries of Greece, Cyprus and Turkey since I
testified before your committee a year ago.
Relations between Greece and Turkey
On July 8, 1997, U.S. Secretary of State Madeleine Albright hosted
a meeting at the NATO summit in Madrid between the Foreign Ministers of
Greece and Turkey. At this meeting the two countries agreed to abide by
a set of important, internationally recognized standards of conduct
including: Respect for the principals of international law and
international agreements; Respect for each other's sovereignty;
Commitment to settle disputes by peaceful means based on mutual consent
and without use of force or threat of force; and A mutual commitment to
peace, security and the continuing development of good neighborly
relations.
Turkey must abide by these agree-to principles to the letter. If
Turkey challenges Greece's sovereign rights, it should take such a
challenge to the International Court of Justice at the Hague or other
appropriate legal forum.
Turkish Provocations Continue
Unfortunately, the Turkish government continued its aggressive acts
against Greece and Cyprus, violating the internationally accepted
standards of conduct to which it agreed in Madrid. Attached is a
detailed list of such acts.
Sending Turkey the Proper Message
The administration has begun sending Turkey the proper message when
such aggressive acts occur--that Turkish advancement requires adherence
to today's rules of a civilized world. Two such examples follow:
--When four Turkish F-16 fighters buzzed the military transport plane
carrying Greece's defense minister from Cyprus to Greece (on
October 16, 1997), coming close enough to make the plane rock,
the Turkish government denied the incident. The President's
Special Envoy for Cyprus, Richard Holbrooke, stated publicly,
``I have no doubt that the provocative action--indeed
happened,'' and ``it is an unacceptable action which does not
at all help defusing tensions between Greece and Turkey.''
--When Turkish warplanes flew near Thessaloniki, Greece (on December
11, 1997), the State Department spokesman called such flights,
``needlessly provocative and totally unnecessary,'' stating
clearly that the United States believes that, ``military
activity of this kind undermines confidence and needlessly
exacerbates tensions between our NATO allies.''
The traditional American message sent to Turkey (through our
previously routine and presently sporadic practice of ignoring Turkish
wrong doing) has given legitimate standing and credence to a group in
Turkey who advocate that Turkey can advance by saying the ``right''
things in doing ``wrong'' things. The administration was the victim of
those advocates following its hard work, which secured for Turkey in
1995 the European Union's Custom Union. Turkey's ``wrong'' actions
subsequently stopped the cold the completion of the Customs Union
benefits for Turkey. Again, in August of 1997, following Turkey's
``right'' words in Madrid, Spain, the administration released $150
million worth of frigates and $113 million in Seahawk Helicopters.
Turkey's ``wrong'' actions following the arms transfer that they
wanted, played a significant role in the European Union's finding
Turkey's conduct as a nation unacceptable for accession.
The more enlightened individuals in Turkey have prevailed only when
the message Turkey received suggested that only the ``right'' words and
actions together would produce the most for Turkey. The only time
Turkey announced troop withdrawals from Cyprus was during the American
arms embargo against Turkey and again when the embargo was nearly
reimposed.
The European Union's Message to Turkey
On December 13, 1997 the European Union (EU) rejected Turkey's bid
to become a member of the EU. Statements by EU officials and others
(below) sent Turkey a clear message:
--EU term president and prime minister of Luxembourg, Jean-Claude
Juncker, said (on December 17) that, ``Turkey must understand
that we are not just a Christian club, but a club with
principles and rules which it has to respect if it wishes to
become a member * * * The EU has asked Turkey to recognize the
competence of the International Court of Justice at the Hauge,
to show respect for the rules of good neighborliness and to
support the efforts for a solution of the Cyprus issue and the
island republic's accession to the EU.''
--European Parliament president, Jose Maria Gils-Robels, said (on
December 12) that to begin EU negotiations with Turkey, ``it is
necessary [for Turkey] to end the occupation of Cyprus, to make
big steps ahead concerning the treatment of the Kurdish
minority and to respect human rights.'' Danish prime minister
Poul Nyrup Rasmussen added (December 11) that, ``a country
wishing to be considered as a candidate for EU membership
cannot have territorial designs against another member-state of
the Union.''
--The Jerusalem Post (on December 14) noted that, ``There are several
reasons why Turkey does not qualify [for EU membership], apart
from economics. In no country in the EU, or among the aspiring
members, are citizens tortured. In Turkey they are. No EU state
has 30,000 occupation troops in a neighboring country, propping
up a puppet government. In Cyprus, Turkey does. Turkey's
treatment of its Kurdish minority is beneath contempt * * * It
is true that Turkey is generally admired as the only successful
secular democratic Moslem state in the Middle East, but that is
a long way from saying it is a fit candidate for European Union
membership.''
Turkey's Path to the EU
The EU noted (on December 13) that if Turkey wishes to join the
European Conference (which will bring together EU member states and
states aspiring to accede to the EU) it must prove, as other members
have, that it, ``shares a common commitment to peace, security and good
neighborliness, respect for other countries' sovereignty * * * and the
commitment to settlement of disputes by peaceful means.''
Greece's Prime Minister Constantine Simitis stated (on December 16)
that Greece is not opposed to Turkey's European vocation and, on the
contrary, would support it if Turkey ``played by the rules of the game
which are accepted by all countries and pertain to values, the rule of
law and in general all those principles which consolidate peaceful
cooperation.''
Turkey's Reaction
Turkish Prime Minister Yilmaz said (on December 15) that his
government will sever its political ties to the EU and threatened to
derail U.S.-led Cyprus settlement efforts.
Turkish-Cypriot leader Rauf Denktash announced that, ``as a result
of the EU decision, the intercommunal talks have been terminated and
from now on Turkish-Cypriots will sit at the negotiating table only as
a state.''
Cyprus Settlement Efforts
On July 23, 1997 the House (by a vote of 417 for and only four
against) and the Senate (by unanimous consent) overwhelmingly adopted
legislation calling for a U.S. initiative seeking a just and peaceful
resolution of the Cyprus problem. Through this resolution, the U.S.
Congress stated that: ``the status quo on Cyprus * * * is an
unacceptable violation of international law and fundamental human
rights * * * and undermines significant U.S. interests.''
It also emphasized that a peaceful, just and lasting solution to
the Cyprus problem would: serve important interests in the United
States; strengthen peace and stability in the Eastern Mediterranean;
contribute to improved relations between Greece and Turkey; and greatly
benefit the security and the political, economic and social well being
of all Cypriots.
Cyprus Settlement Timetable:
The next year and-a-half offer what many consider to be the
greatest opportunity, in the over 23 and-a-half years since the
division of Cyprus, to find a just and viable settlement. Following the
presidential elections in Cyprus in February, the United States, the
United Nations, and the European Union, launched an intensified effort
to bring about a just and viable Cyprus settlement. Two clocks are
ticking that require significant progress in a short period of time.
Today (March 31) the European Union formally begins accession talks
with Cyprus. Turkey has threatened that if such talks take place
without a united Cyprus, it will integrate the occupied areas of Cyprus
into Turkey. Turkish-Cypriot leader Rauf Denktash stated that if such
talks with the EU take place before a Cyprus solution, he would boycott
all settlement efforts.
In addition, this summer Russia will deliver to Cyprus S-300
defensive ground-to-air missiles. The Turkish government, from its
prime minister and president to its foreign and defense ministers, has
clearly and repeatedly stated that if such a delivery occurs, Turkey
will strike militarily. Greece has stated that such a strike against
the relatively defenseless Cyprus would bring a counter attack from
Greece. The government of Cyprus, which has for many years has
advocated a complete demilitarization of the island, says that these
defensive missiles are only necessary if the 30,000 Turkish troops
remain. A Cyprus solution in the near future could become a necessity
to keep NATO allies Greece and Turkey, and possibly Russia, from going
to war.
The U.S., the U.N. and the EU must not broker just any solution,
but one that is viable and just. A solution must be based on
international law, the provisions of relevant U.N. Security Council
resolutions, democratic principles, including respect for human rights,
and in accordance with the norms and requirements for accession to the
European Union.
Greeks and Turks want to live together again on Cyprus. The United
States wants peace in the Eastern Mediterranean, beginning with Cyprus.
Now is the time, and perhaps the best and final opportunity, to make
this happen.
Progress on an Important Humanitarian Issue--the Missing in
Cyprus
On March 5, 1998, the over 23 years of suffering by the Costas
Kassapis family of Detroit, Michigan was finally brought to closure.
The Kassapis family was informed by the U.S. State Department that
through the use of highly sophisticated DNA testing, they believe that
they have found the remains of their son and brother, Andrew Kassapis,
in Cyprus. The last time the Kassapis family saw Andrew alive was in
the summer of 1974 when the then 17-year-old was taken from their home
in Cyprus by Turkish troops.
We hope that this case is just the first of many more to come. We
are encouraged by recent efforts to bring an end to this tragic,
humanitarian issue. The July 31, 1997, agreement to immediately and
simultaneously exchange all information on the missing and the January,
1998, exchange of this information were major steps forward. We pray
that the families of the other 1,618 missing in Cyprus, including four
other Americans, also will be able to end their years of suffering
soon.
The U.S. Congress should take great pride in this major development
on this important issue. In 1994 the Congress passed and the President
signed into law legislation directing the President to undertake this
thorough investigation of the missing in Cyprus. We regret that such a
law was necessary. However, years of efforts by the United Nations
investigatory committee on the missing and previous U.S. State
Department policies were unable to produce evidence for even a single
case.
The Ecumenical Patriarchate
The Ecumenical Patriarchate, located in Istanbul, Turkey, is the
spiritual center for more than 300 million Orthodox Christians
worldwide, including approximately five million in the United States.
There are several major concerns regarding the Turkish Government's
treatment of this center of worldwide Orthodoxy:
Attacks on the Patriarchate
In recent years, the Ecumenical Patriarchate has experienced a
number of security threats:
--On December 3, 1997, an explosive device was thrown over the wall
of the Patriarchate, seriously injuring a clergyman and
severely damaging the roof of the Patriarchal Cathedral and the
offices of the Patriarch.
--The year before, in September, the Patriarchate came under grenade
and machine gun fire attack. The explosion tore off a corner of
the roof of the Patriarchal Cathedral and blew the windows out
of the sleeping quarters.
--In May of 1994, three powerful bombs linked to a timing device were
found and diffused only minutes before they were to detonate.
Had they exploded the Patriarchate and everything within its
walls would have been destroyed.
--Just two months prior to the discovery of these bombs, two
firebombs were hurled into the Patriarchate.
--His All Holiness Ecumenical Patriarch Bartholomew and those
associated with the Ecumenical Patriarchate are Turkish
citizens and have the full protection of Turkish law.
Reopening the Halki School of Theology
The reopening of the Halki Patriarchal School of Theology, the only
educational institution for Orthodox Christian leaders in Turkey, is
vital for the long-term viability of the Ecumenical Patriarchate. The
Turkish government arbitrarily closed the Halki School in 1971. Turkish
law requires that the Ecumenical Patriarch, as well as all of the
clergy, faculty and students, to be citizens of Turkey. The Halki
School is the only educational institution in Turkey for the Orthodox
Christian leadership. The closing of the Halki School is in violation
of international treaties to which Turkey has been a signatory,
including, but not limited to the Treaty of Laussane, the 1968
Protocol, the Helsinki Final Act (1975) and the Charter of Paris.
Significance of the Patriarchate
The government of Turkey does not recognize the Ecumenical
Patriarchate as the spiritual center for worldwide Orthodoxy, but only
as the head of the Greek Orthodox Church in Turkey. However, the
Ecumenical Patriarchate, founded in 38 AD, is a locale where the new
testament was codified and the Nicene Creed was first written. It was
under the leadership and guidance of the Ecumenical Patriarchate that
the constitutional and dogmatic framework of the Christian Church was
formulated. Ecumenical Patriarch Bartholomew is the 270th successor of
the nearly 2,000 year old Christian center, founded by the apostle
Andrew, the first-called Disciple of Jesus Christ.
U.S. Congress Honors Ecumenical Patriarch Bartholomew
On October 12, 1997, the U.S. Congress honored His All Holiness
Ecumenical Patriarch Bartholomew with the highest recognition it can
bestow--the Congressional Gold Medal. He is only the fifth religious
figure in America's history to receive this award, an honor first
bestowed on George Washington in 1776 and subsequently to such
significant people as Thomas Edison, Winston Churchill and Mother
Teresa. The legislation bestowing this award on the Ecumenical
Patriarch received more cosponsors (327) than any bill in recent
memory.
aggressive acts by turkey against greece and cyprus--march 31, 1998
March 14, 1998.--Turkish troops open fire on and capture two Greek-
Cypriot fishermen who were fishing in the territorial waters of the
free area of Cyprus. They are held in custody in the occupied area of
Cyprus for six days.
Jan. 13, 1998.--Turkey announces, during time of heightened U.S.,
U.N. and E.U. efforts for a Cyprus settlement, that Turkey's embassies
around the world will now also represent the occupied area of Cyprus,
in a step toward integrating the occupied area with Turkey. Turkey also
announces its plan to open three new naval and air bases in the
occupied area of Cyprus.
Jan. 6, 1998 and Dec. 25, 1998.--Turkish warplanes overfly Greek
territory on two of Greece's most holy religious holidays. Planned
Turkish overflihgts of the the Greek islet of Kalogiri are prevented by
U.S. intervention.
Dec. 11, 1997.--U.S. State Department spokesman calls flights by
Turkish warplanes near Thessaloniki ``needlessly provocative and
totally unnecessary,'' stating that, ``military activity of this kind
undermines confidence and needlessly exacerbates tensions between our
NATO allies.''
Oct. 16, 1997.--Four Turkish F-16 fighters buzz the military
transport plane carrying Greece's defense minister from Cyprus to
Greece, coming close enough to make the plane rock.
Oct. 14, 1997.--Turkish F-16 jets with rockets and warheads fly
over Cyprus.
Oct. 13, 1997.--Two Turkish F-16 fighters buzz the military
transport plane carrying Greece's defense minister to Cyprus.
Oct. 12, 1997.--Turkish planes harass two Greek Air Force bombers
over Cyprus--the first such confrontation over Cyprus.
Sept. 19, 1997.--Turkish Prime Minister Mesut Yilmaz announces that
his government has asked the Turkish military to ``plan and propose
additional military measures'' to address the planned delivery of
defensive surface-to-air missiles to Cyprus. U.S. State Department
spokesman clarifies that the U.S. is, ``firmly opposed to threats to
address the missile question militarily.''
August 6, 1997.--Just five days before the start of the second
round of U.N.-sponsored Cyprus settlement talks, Turkey signs an
agreement calling for the partial economic and defense integration of
Turkey with the occupied areas of Cyprus.
July 15-21, 1997.--Just days after the first U.N.-sponsored Cyprus
settlement talks in three years: Turkey's deputy prime minister Bulent
Ecevit and Turkish-Cypriot leader Rauf Denktash issue a joint
declaration regarding the gradual integration of the occupied areas of
Cyprus with Turkey; and Turkish war ships dock at ports in the occupied
area.
July 7-8, 1997.--While the prime ministers of Greece and Turkey
meet in Greece (the first official visit by a Turkish leader in 36
years), Turkish armed forces hold their largest ever military maneuvers
in and around Cyprus. These amphibious and airborne operations were the
first of their kind in the 23 years of the occupation of Cyprus.
April 7, 1997.--Turkish air force planes fly over the occupied area
of Cyprus.
April 1, 1997.--On this national day for Cyprus, four Turkish
Phantoms follow the previous day's pattern of violations.
March 31, 1997.--Four Turkish F-4 Phantoms fly over the Turkish-
occupied area of Cyprus in staged mock attacks.
Feb. 5, 1997.--Turkey dramatically escalates in 1996 its misuse of
U.S.-supplied warplanes to overfly Greek sovereign territory--from 73
times in 1995 to 538 times in 1996.
Jan. 21, 1997.--Turkish Prime Minister Necmettin Erbakan joins
Turkey's President, Foreign Minister and Defense Minister in
threatening war against Cyprus following announcement of the Cyprus
government's plans to acquire defensive surface-to-air missiles in 16
months. Erbakan states, ``We are not going to wait passively for 16
months * * * If it is not declared within a certain time that the
missiles will not be coming, we will definitely not hesitate to take
the steps required * * * We will take the initiative.''
Oct. 13, 1996.--Turkish troops kill an unarmed 58 year-old Greek-
Cypriot who mistakenly wandered into the occupied area. Petros
Kakoullis, who was snail gathering with his son-in-law, was shot twice
while his hands were raised above his head and a third time at close
range while on the ground. United Nations officials were not permitted
to approach the body for over four hours.
Aug. 9-15, 1996.--Turkish Foreign Minister Tansu Ciller diverts
thousands of dollars in government funds to send over 3,000 members of
the ``Grey Wolves'' terrorist group from Turkey into occupied Cyprus
for purposes of turning a peaceful Greek-Cypriot protest demonstration
into a violent confrontation.
Turks savagely beat to death, with rocks and iron poles, unarmed 24
year-old Greek-Cypriot Tassos Isaac and seriously injure 41 other
Greek-Cypriot demonstrators in the United Nations buffer zone. Greek-
Cypriots were protesting Turkey's continuing illegal military
occupation of Cyprus.
Three days later, Turkish troops open fire on a group of unarmed
mourners in the U.N. buffer zone. Turks kill an unarmed 26 year-old
cousin of Isaac, Solomos Solomou, who was climbing a flag pole, and
injure 11 others, including two U.N. peace-keepers, two Cypriot police
officers and a 59 year-old woman.
Turkish Foreign Minister Ciller flies to occupied Cyprus to show
support for the murders, publicly stating that Turkey will ``break the
hands of anyone who lays a finger on the Turkish flag.''
June 18, 1996.--The Foreign Minister of Turkey [a non-European
Union (EU) member] asks the EU President not to adopt the principle of
protecting the external borders of EU countries.
June 5, 1996.--Turkey disputes Greek sovereignty over Greek Island
of Gavdos inhabited by over 300 Greeks.
June 3, 1996.--Turkish troops murder unarmed 19 year-old Greek-
Cypriot National Guardsman in U.N. buffer zone on Cyprus. U.N. rescue
team is pinned down by Turkish gunfire while boy dies from loss of
blood.
April 9, 1996.--On the day that Greek Prime Minister Simitis meets
with U.S. President Clinton in Washington, D.C., Turkish warplanes
escalate violations of Greek air space to a record 48 times in one day.
Feb. 3, 1996.--Turkey claims sovereignty of 1,000 Greek isles and
threatens war if Greece doesn't recognize that sovereignty.
Jan. 31, 1996.--Turkey moves 100 more U.S. battle tanks to occupied
Cyprus, during height of near war in the Aegean, giving Turkish forces
on Cyprus night fighting capability for the first time.
Jan. 30, 1996.--Turkish plan to invade Greek isle of Imia
containing Greek personnel averted by U.S. presidential intervention.
Invade instead Greek isle containing no Greek personnel.
June, 1995.--Turkish Prime Minister threatens war against Greece.
June 8, 1995.--Turkish Parliament adopts resolution authorizing war
against Greece.
______
Prepared Statement of Eugene T. Rossides, General Counsel, Senior
Counsel, Rogers & Wells on behalf of the American Hellenic Institute,
Inc.
Chairman McConnell, Senator Leahy and Members of the Subcommittee:
I am pleased to present testimony to the Subcommittee on behalf of the
following organizations: the American Hellenic Institute Public Affairs
Committee, Inc., the Hellenic American National Council, the Hellenic
American Women's Council, the Cyprus Federation of America, the Pan
Laconian Federation of U.S.A. and Canada, the Pan Cretan Association of
America, and the Pan Karpathian Educational Progressive Association on
the Administration's foreign aid proposals.
In the Administration's budgetary proposals for fiscal year 1999
military assistance and economic grant aid for Turkey are eliminated.
We congratulate the 104th Congress and the 105th Congress for their
important role in the Administration's decision to eliminate military
and economic aid for Turkey for fiscal year 1999. We particularly
congratulate this Subcommittee for its leadership role. The decision of
the Administration this year to eliminate military and economic aid to
Turkey was due, I am convinced, in substantial part because of the
policy role of the Congress and this Subcommittee.
The American Hellenic Institute Public Affairs Committee (AHIPAC)
welcomes the elimination of military and economic aid for Turkey. For
many years AHIPAC has argued that U.S. military and economic support
for Turkey has rendered our country an accessory to Turkey's violations
of international law, aggression, massive ethnic cleansing and
genocidal-like actions against its 20 percent Kurdish minority and
human rights abuses generally against its citizens, including
widespread torture. AHIPAC is very pleased that with regard to aid
policy this sad chapter in U.S. relations with Turkey is at long last
coming to an end.
However, the Administration's proposals are inadequate. In the
interests of the U.S., far-reaching changes in U.S. policy toward
Turkey are needed, including a halt to all arms sales and transfers to
Turkey. The budget does not effect these changes. Indeed, the
Administration is actively contemplating such sales. Turkey's
continuing violations of the norms of international behavior, as set
out in the 1997 State Department Human Rights report, issued January
30, reinforce the need for a fresh U.S. approach.
The European Union leaders in their statement of December 14, 1997,
declining to accept Turkey as a candidate for early accession to the
EU, cited similar concerns about Turkey's adherence to democracy, human
rights, and respect for the territorial integrity of its neighbors. The
EU leaders made specific mention of Turkey's continuing illegal
occupation of Cyprus and of its destabilizing claims to Greek sovereign
territory in the Aegean.
The elimination of military and economic aid to Turkey provides an
opportunity to review U.S. policy toward Turkey. So long as Turkey
persists in its human rights abuses and threats to its neighbors, the
U.S. should not maintain a normal relationship with Turkey. All U.S.
arms sales and transfers to Turkey should be halted. Further, the U.S.
should instruct its representatives in the international financial
institutions to vote against any multilateral aid to Turkey.
Important U.S. interests are at stake in Southeastern Europe and
the Eastern Mediterranean. To date, our policy toward Turkey has not
reflected these interests. I hope that a review can put U.S. policy on
a sounder footing.
In my letter of March 9, 1998 to President Clinton I discuss these
matters in greater detail. (See Exhibit 1 to this testimony.)
The letter conveys a strong sense of opportunity. In both Greece
and Cyprus there are vigorous democracies drawing on a broad-based
political consensus about the national agenda. The result is that in
Athens and Nicosia sensible, moderate governments are combining with
business and civic leaders to pursue policies designed to lower
regional tensions, consolidate stability, foster regional development,
and to reach out to their neighbors. AHIPAC hopes that the
Administration will make the most of this constructive spirit on the
Greek and Cypriot sides and increase American participation in the
region's political and commercial revitalization.
For this to happen, AHIPAC advocates a change in U.S. policy toward
Turkey. AHIPAC urges that U.S. policy toward Turkey should give less
weight to the views of the Turkish general staff and more to the more
open-minded and forward-thinking elements within Turkish opinion.
We stand at a diplomatic crossroads in the Aegean and Eastern
Mediterranean. It is past time for the United States to reevaluate its
policies in the region. The United States must now ensure that the
policies it follows will advance American interests. Specifically, the
U.S. should work with the sensible, moderate, pro-American governments
of Greece and Cyprus to promote its regional interests.
Greece is the strategic and economic key for the U.S. in the
Balkans and Eastern Mediterranean to bring peace, stability, economic
progress and democracy to the region. Our Ambassador to Greece,
Nicholas Burns, spoke enthusiastically about Greece's role and actions
in Southeastern Europe in a speech on March 30, 1998 in Thessaloniki.
In the interests of the United States:
1. We support the amount of $15 million in humanitarian aid for
Cyprus and the demilitarization of Cyprus. We are dismayed at the
Clinton Administration's condemnation of the purchase by the government
of Cyprus of anti-aircraft defensive missiles, the refusal of the U.S.
to sell such equipment to Cyprus, and the Administration's refusal to
support the immediate demilitarization of Cyprus. The coddling and
appeasement of Turkey by the White House and the State and Defense
Departments is the main obstacle to the settlement of the Cyprus
problem.
2. We support military aid for Greece as long as Turkey keeps its
illegal 35,000 man army of occupation and its 80,000 illegal colonists/
settlers in the occupied territory of Cyprus, and maintains its 125,000
man Army of the Aegean aimed at Greece's Aegean islands.
We condemn Turkey's threats on Greece's national sovereignty over
the islets of Imia in the Aegean, Turkey's threats of war against
Greece in the Aegean regarding Greece's internationally recognized
right to extend its territorial waters from 6 to 12 miles and Turkey's
threats of military action against Cyprus regarding the purchase by
Cyprus of defensive anti-aircraft missiles. These threats are in
violation of the U.N. Charter Preamble and Article 2(4).
Turkey is the main security threat to Greece. For the White House
and career officials in the State Department and Defense Department to
deny this is to deny reality.
3. We oppose any sale or transfer of U.S. weapons to Turkey as
contrary to the best interests of the U.S.
4. We believe the Congress should eliminate any trade preferences
for Turkey and should consider economic sanctions against Turkey.
5. We support the brave Turkish citizens struggling for human
rights and the rule of law. Our dispute is not with the Turkish people,
but with the Turkish military and its domination of the Turkish
government.
Exhibit 2 to my testimony is a memorandum titled 1998 Greek
American Policy Statements. These policy statements were prepared by
the American Hellenic Institute and approved by the Order of AHEPA, the
Hellenic American National Council and the Hellenic American Women's
Council. These organizations are the major Greek American membership
organizations.
The Clinton Administration's failure to apply the rule of law in
international relations to Turkey will come back to haunt us elsewhere
in the world. Instead of supporting the basic American values of
democracy, the rule of law, protection of minority and human rights,
the Clinton Administration is supporting the law of the jungle by
Turkey.
We urge the Congress to investigate the failure of Administration
officials to apply the rule of law in international matters regarding
Turkey.
The following are several examples of the United States not
applying the rule of law to Turkey, all to the detriment of U.S.
interests: (1) the failure to apply U.S. and international law to
Turkey's ethnic cleansing and genocidal war against its 20 percent
Kurdish minority; (2) the failure to apply U.S. law and international
law to Turkey's several invasions of northern Iraq, for military
actions against Kurds in northern Iraq, including a massive invasion
with 35,000 troops; (3) the periodic bombing of Kurds in Iraq; (4) the
failure to apply international law to the Aegean Imia islets crisis;
(5) the failure to apply the D'Amato Act to Turkey's deals with Iran
and Libya; (6) the failure to apply U.S. and international law to
Turkey's violations of religious freedom against Christians and Jews in
Turkey, including the illegal closing of the Halki Patriarchal School
of Theology; (7) the failure to apply international law to Turkey's
illegal embargo on Armenia; (8) the failure to apply U.S. and
international law to Turkey's continuing occupation of 37.3 percent of
Cyprus with 35,000 troops; (9) the failure to apply the Geneva
Convention of 1949 to Turkey's 80,000 illegal settlers; (10) the
failure to apply the terms of the NATO Treaty to Turkey for its
invasion of Cyprus; and (11) the failure to condemn Turkey's violation
of the U.N. Charter by Turkey's threats of war against Greece in the
Aegean regarding Greece's internationally recognized right to extend
its territorial waters from 6 to 12 miles.
Ms. Elaine Sciolino, the distinguished diplomatic correspondent of
The New York Times and former chief of its United Nations bureau,
authored The Outlaw State, Saddam Hussein's Quest for Power and the
Gulf Crisis (1991) stemming from Hussein's invasion of Kuwait and the
conflict that followed. Ms. Sciolino could just as easily have written
a book titled Turkey-The Outlaw State dealing with Turkey's invasion of
Cyprus and violations of law and human rights in Turkey. Turkey's
violations of law exceed those of Iraq under Saddam Hussein.
Thank you Mr. Chairman.
[Note.--The exhibits can be found on the institute's website at:
http:ahiworld.com.]
______
Miscellaneous
Prepared Statement of the American Bar Association
Mr. Chairman and members of the Subcommittee, the American Bar
Association (ABA) appreciates the opportunity to present testimony on
the fiscal year 1999 Foreign Operations Appropriations budget.
This testimony describes the many programs spearheaded by the ABA
to promote the rule of law and democracy around the world. The ABA with
over 391,000 members is the world's largest professional voluntary
organization. It should be noted that our democratization efforts have,
in large part, depended on this volunteer network of lawyers, judges,
law professors, and sister institutions. The results have been
extraordinary, and the ABA has been able to play a crucial role in
ensuring that the U.S. maintain its commitment to engagement and
leadership in the international arena in a very cost-effective manner.
We, therefore, hope that these programs continue to receive U.S.
contributions.
background
The increasingly changing world offers new challenges and
opportunities for the U.S. to assist transitional countries in adopting
the rule of law through legal reforms and legal institutions. The only
issue here is whether the U.S. will continue its leadership role in the
international community.
An important aspect of any democracy is the commitment to credible
legal systems and institutions anchored in the rule of law. The
creation of governments founded on the rule of law is a key element in
fostering democracy and a successful market-based economy. Many U.S.
foreign policy goals have been realized through the support of
democratization projects. To the extent that U.S. businesses can depend
on a country's legal system, foreign markets become a much more
attractive export opportunity.
The ABA's international Rule of Law projects have been instrumental
in protecting fundamental freedoms, human rights, and liberties in
addition to promoting trade and investment opportunities.
Notwithstanding, there are many more opportunities throughout the world
for us to be effective. In many instances these legal infrastructures
have been the foundation for the rule of law in emerging democracies.
Mr. Chairman, these are the goals to which ABA projects are committed.
aba projects
All ABA democratization projects have been guided by three
principles. First, these projects are designed to be responsive to the
needs and priorities of the host countries; the countries, not the ABA,
define the need. Second, the design of these programs recognizes that
U.S. legal experience and traditions offer only one approach that
participating countries may wish to consider. Third, these projects are
public service endeavors, not devices for developing business
opportunities. The result of these programs has always been to take a
modest grant and leverage those sums to yield a much larger benefit for
the host governments and people.
The Central and East European Law Initiative (``CEELI'')
The most comprehensive technical legal assistance project of the
ABA is the Central and East European Law Initiative, or ``CEELI''.
Shortly after the fall of the Berlin Wall in 1990, CEELI was organized
by the ABA International Law and Practice Section to provide technical
legal assistance to the emerging democracies in Central and Eastern
Europe. By 1992, CEELI began to provide assistance to the Newly
Independent States of the former Soviet Union (``NIS'').
Through a variety of program components, CEELI is making available
U.S. legal expertise to assist countries that are in the process of
modifying or restructuring their laws and legal systems. CEELI has
focused on work in several critical priority areas: constitutional
reform; judicial restructuring; bar reform; criminal law and procedure
reform; commercial law; legal education reform; and has helped develop
and/or institutionalized self-sustaining indigenous non-governmental
organizations (NGO's) in more than 22 countries.
Designed to respond to the needs of the countries, CEELI has
emphasized long-term engagement and nurtured projects that facilitate
extensive consultations with policy makers, legal scholars, judges, and
attorneys in each country. Accordingly, CEELI has developed individual
country plans that address the particularized circumstances of each
locale. CEELI accomplishes its work primarily through resident liaisons
and legal specialists, working pro bono, who spend one to two years
working on a daily and continuous basis with local partners. CEELI
liaisons often live and work in places where the comforts of life that
you and I often take for granted do not exist.
Over the course of the past four years, CEELI has established
itself as a fundamental force for law reform in Central and Eastern
Europe and the NIS. To date, CEELI has conducted 282 Technical Legal
Assistance Workshops; assessed over 323 draft laws; placed 147 long-
term liaisons and 168 legal specialists in the region; hosted 47
Central and Eastern European law school deans; sent dozens of U.S.
legal reform experts to assist in law school reform; and has placed
over 50 students from the NIS in LLM programs throughout the United
States. The credit for this remarkable achievement goes to the over
5,000 American attorneys, judges, legal scholars, and private
practitioners, who have, as acts of public service, given their time
and expertise to make this project successful.
When calculating the in-kind contributions of volunteer legal
professionals at an understated rate of $150 per hour, CEELI has
yielded over $55 million of pro bono service. Considering the modest
CEELI budget in comparison to funding allocated to consulting firms,
the exceptional programmatic impact and financial leverage that an NGO
can achieve by using qualified volunteer professionals in a public
service project is indisputable. This model of a volunteer professional
assistance project is a viable and cost-effective alternative to other
uses of U.S. government funding by, for example, for-profit firms.
Congress has voiced strong support for CEELI and its ability to
leverage U.S. taxpayer dollars (H.R. Rep. No. 524, 1030 Cong., 2d
Sess., 82 (1994); S. Rep. No. 287, 103 Cong., 2d Sess., 76 (1994); H.R.
Rep. No. 128, 104 Cong., 1st Sess., 80 (1995); H.R. Rep. No. 143, 104th
Cong., 1st Sess., 31 (1995); S. Rep. No. 143, 104th Cong., 1st Sess.,
42 (1995); S. Rep. No. 000, 104th Cong., 1st Sess., 40 (1995); H.R.
Rep. No. 600, 104th Cong., 2d Sess., 31 (1996); S.Rep. No.35, 105th
Cong., 1st Sess., 25 (1977); H.R. Rep. No. 176, 105th Cong., 1st Sess.,
32 (1977)).
The ABA Cambodia Democracy and Law Project
The Cambodia Law and Democracy Project (``Cambodia Project'') was
launched by the ABA Section of International Law and Practice during
1992 at the request of Cambodian institutions seeking assistance with
Cambodia's law modernization process. The principal purpose of the
Cambodia Project is to assist Cambodia in planning and implementing
legal and judicial reforms to promote democracy, a market economy, and
the rule of law.
Under a grant from the Asia Foundation in 1993, the Cambodia
Project provided a collection of legal materials in Phnom Penh
principally through ABA donations. In late 1996, the Cambodia Project
established a Legal Research and Documentation Center at the Bar
Association of the Kingdom of Cambodia (BAKC) which has now secured
over 1,800 donated books and publications, which include Khmer laws and
selected translations, the Official Journal of the Kingdom of Cambodia,
and foreign and American legal materials. Since its official opening in
March of 1997, the Center has been fulfilling requests for information
from lawyers, law students, NGO's, and the National Assembly Legal
Research and Documentation Center.
During 1993-94, the ABA Constitutional Law Advisors assisted in
drafting the new Constitution, and legal education advisors provided a
needs assessment of Cambodia's legal education programs and
institutions. Short-term advisors traveled to Cambodia to assist in the
areas of foreign investment, contract law, and commercial arbitration.
U.S. legal experts provided commentary in the areas of border
disputes, intellectual property, penal code issues, environmental law,
family law, and bar association development. During this period, an ABA
resident legal advisor was placed in Phnom Penh to oversee all ABA and
Asia Foundation legal initiatives. This action led to a request from
USAID that the ABA take on a larger role in the law development process
in Cambodia, which resulted in a cooperative agreement between USAID/
Cambodia and the ABA in 1995.
Until July 1997 the Cambodia Project had three long-term resident
advisors in Cambodia. They assisted the Ministry of Commerce and the
BAKC, providing institution-building, teaching, and legal drafting
assistance. By working in close coordination with the Ministry of
Commerce, the Cambodia Project effectively extended efforts to improve
Cambodia's legal system into Cambodia's market economy. The completion
of Cambodia's Bankruptcy Law, Business Organizations and Contract Law,
Products Liability Law, and Contracts Law is evidence of the project's
successful advancement. In addition to their roles in law drafting, the
advisors conducted classes at a local university, seminars in the
provinces, and daily discussion and training sessions at the Ministry
of Commerce. The purpose of these events were to train Cambodian
officials and lawyers to understand and utilize the laws created to
advance the rule of law and foster Cambodian social and economic
prosperity.
In late July 1997 the Cambodia Project was placed on hold by USAID
due to the political developments that occurred in Cambodia in early
July. The project continues on a suspension status. The ABA expects to
resume full project operations no later than September 1998.
As with all legal technical assistance programs, the ABA Cambodia
Law and Democracy Project develops all program components at the
request of, and in close consultation with, participating country
institutions. The bulk of the assistance continues to be provided by
U.S. lawyers on a pro bono basis utilizing donated materials, allowing
a small grant to be leveraged for the benefit of democracy in the host
country. The Cambodia Project has received $1,780,679 over the last
four years, and the ABA has contributed an additional $1,033,360 to
this project.
African Law Initiative Legal Education Program
With funding from the United States Information Agency Office of
Citizen Exchanges, the African Law Initiative Legal Education Program
continues to assist twelve law schools in eight African countries:
Eritrea, Ethiopia, Ghana, Kenya, Malawi, Tanzania, Uganda, and Zambia.
Over thirty United States law schools have been involved with this
program, which was initiated at a major meeting of African and American
law school deans in Nairobi in 1994. The program has created and
supported links between U.S. and African law schools and helped to
improve the capacity of the African law schools to train lawyers who
are responsive to the new needs and opportunities brought about by
democratic and free-market reforms in their countries. Solid links have
emerged over the course of the program. In addition to bringing African
and American law school professors and deans together to lay the
groundwork for linkages, the program has assisted with faculty training
and curriculum development, with an important focus on clinical legal
education. The program has shipped or facilitated the shipment of many
law books and journals, helping to update the collections at the law
libraries.
Curriculum development continues to be the focus of the program.
Over the past several months, professors from United States law schools
have traveled to Africa to work on the development areas of the
curriculum identified by the Africans. The newest USIA grant will
enable us to continue to work on curriculum development. We anticipate
that another group of Africans will travel to the United States in fall
1998 for study tours to U.S. law schools and that we will hold
workshops in Africa toward the end of 1998 focusing on environmental
law curriculum, commercial law curriculum and human rights law
curriculum. U.S. law schools have been generous with their time and
resources, with professors and deans participating on a pro bono basis,
so that the project has had significantly wider impact than would be
possible only with the USIA funds.
Arab Legal Institute
Last year we reported the organization of the Arab Legal Institute
which, in view of current Middle East events, is a project of immediate
consequence. Initiated and organized by the ABA's Section of
International Law and Practice and its Standing Committee on World
Order Under Law, the Arab Legal Institute (``ALI'') is the first pan-
Arab effort to promote the rule of law in the Arab states of the Middle
East and North Africa, to train Arab lawyers, to train judges as
independent adjudicators, and to promote human rights. Since the
Institute itself is led by the Arab Lawyers Union (which includes a
number of Arabs of high standing) its significance will be substantial.
While technical assistance to the Palestinians will be offered,
what is most important is that the Arab Lawyers Union (representing the
legal profession in the Middle East and North Africa) is leading this
pan-Arab project designed to educate and to consider reforms conforming
to internationally accepted standards. Such a program is critical to
creating conditions for economic stability and opportunity and respect
for the rule of law, principal ingredients for regional development and
civil society. The strong pan-Arab support is exemplified in ALI's
board which is made up of members of the Arab Lawyers Union. We are
confident that such strong Arab involvement means that the project will
have a sustained and continuously substantial regional effect.
The Arab Lawyers Union's leadership of ALI is supported by a
coalition of international bar associations. Since this is the first
Arab-directed rule of law project, it is almost certain to have a
positive impact. In fact, our Arab partners are so committed to this
effort that they and several of their governments have offered material
assistance regardless of current events in the region.
ALI's headquarters are in Cairo with additional planned facilities
in Tunis, Amman and perhaps elsewhere. Rather than restricting itself
solely to Gaza and the West Bank, the Institute is concerned with all
Arab states of the Middle East and North Africa. It is agreed, however,
that the West Bank and Gaza will be among the Institute's first
projects. This early attention to a particularly sensitive region will
contribute to the success of other U.S. initiatives directed toward
stabilizing the Palestinian economy and promoting investment. It will
also furnish essential support to our Government's program to provide
for duty-free treatment to products of the West Bank and Gaza and
qualifying industrial zones.
The Arab Legal Institute has united the legal profession in the
Arab states of the Middle East and North Africa in a common effort to
upgrade the legal education of the profession and the judiciary, and to
conduct research and to provide counseling on different aspects of the
law and legal systems prevailing in the Arab states. The underlying
premise is the common recognition that regional peace and prosperity
depend in part on educating those who develop the laws and administer
the legal system and on looking at ways to improve the legal structure.
The Arab Lawyers Union has invited the U.N. High Commissioner for
Human Rights to participate in the project. The International Bar
Association, the Law Society of England and Wales and the Paris Bar
have also joined with the ABA to provide technical assistance and to
secure financial support.
Our Arab colleagues believe this project will enable them to
address fundamental problems existing throughout the Arab world. In
varying degrees from state to state, their history and contemporary
concerns have left Arab states with legal systems and institutions that
cannot cope effectively with some important problems and that cannot
take advantage of opportunities, particularly in areas of economic
development. Progress is inhibited by the lack of a legal profession
equipped to deal with trade, economic development, privatization and
capital market issues as well as insufficient acceptance of the role of
a judiciary in enforcing legal rights and in settling public and
private disputes. The Institute will contribute to the prospects for
fundamental reform by equipping the Arab legal profession with critical
resources to pursue its own agenda and at its own pace. The functions
of the Institute are educational and not political.
According to the agreed Constitution, the Board of Directors'
members are from Arab states, and the Board of Trustees is composed of
Arab and non-Arab representatives of the supporting bar associations.
We have established an Academic Advisory Committee composed of Arab and
non-Arab lawyers, judges, law professors, and others with relevant
experience of high standing and expertise. The Academic Advisory
Committee is responsible for advising on matters relating to the
academic programs, including the appointment of lecturers and
professors, the establishment of courses, and more generally to
facilitate the development of rule of law programs in the Arab states.
Funds or services have already been donated by several of the
collaborating bar associations. The ABA has dedicated a portion of its
staff time and resources to seeking grant funds in the U.S. for this
important endeavor. Most recently, the International Bar Association
(``IBA'') has developed a list of projects which it is committed to
undertake to support the Arab Legal Institute. Among the initiatives
proposed by the IBA are a series of workshops addressing the
independence of the judiciary, of the bar association and of legal
practitioners; translation into Arabic of the IBA International Code of
Ethics, IBA General Principles of Ethics, and other similar documents;
and articles on selected human rights issues written for insertion into
Arab journals and newspapers.
The European Union recently made a substantial grant to the Law
Society of England and Wales for projects in Lebanon, Jordan and Egypt.
Thus far, the U.S. government has not committed any funding.
We estimate that the value of the facilities offered by the Arab
states is in excess of one million dollars. Pro bono time and expense
outlays by representatives of the American Bar Association have already
exceeded $200,000. For every dollar dedicated to the project's support,
approximately $3 in pro bono time can be expected to be contributed.
The Association anticipates that this initiative, which unites
Arab, European and American lawyers in shared principles of
professionalism and respect for the rule of law, will advance our
mutual interests. We are looking forward to the commencement of the
initial programs, the first of many we expect will flourish under the
aegis of the Arab Legal Institute. We believe that this effort will
positively affect the present dynamics in the Arab states and will
contribute to a future based on accepted rule of law principles.
We hope the U.S. government will join with other governments and
financial sponsors to support ALI's courageous Arab leaders and this
ABA-initiated rule of law program.
United Nations Development Programme
The ABA and the United Nations Development Programme (UNDP) have
reached an agreement and expect to sign a Memorandum of Understanding
(MOU) on May 1, 1998 to establish an ABA/UNDP Legal Resource Unit (LRU)
to be housed within the ABA, and administered by, the ABA's Section of
International Law and Practice. The MOU will establish a framework for
a cooperative working partnership between the ABA and UNDP, thereby
helping both organizations accomplish their mutual goals of supporting
international development, good governance and strengthening of
democratic institutions.
The purpose of the LRU will be to enable the United Nations
Development Programme, with ABA support services, to deliver high-
quality legal assistance to UNDP countries, in an effort to strengthen
the legal institutions and processes that foster sustainable democratic
development and an environment conducive to free market economies.
Initially, the LRU will focus on providing ABA-identified advisors
for United Nations Office of Project Services (UNOPS) and U.N. Economic
and Social Department (DESD)-executed projects particularly in UNDP
programme countries which are either in crisis or post-crisis
situations. In addition, the LRU will work with UNDP to conduct
training for UNDP Headquarters and field office staff in designated
areas.
The LRU will work with UNDP to address new projects submitted to
both entities, and support on-going projects in mutually agreed upon
areas of interest. New project proposals dealing with the legal
dimensions of good governance should ideally be initiated and submitted
by UNDP programme country governments and/or civil society.
An LRU Steering Committee will provide hands-on oversight and LRU
Advisory Committee will provide additional substantive and sourcing
capability. All ABA entities will be invited to participate. CEELI will
be asked to participate in all requests emanating from Central and
Eastern Europe and the CIS.
Cooperation in the Field of Law: China
On May 5-6 , 1998, ABA President Jerome J. Shestack will lead a
delegation composed of members of both the ABA Section of International
Law and Practice, including the Section's Chair, Timothy L. Dickinson,
and of the ABA Section of Business Law to explore possible legal
exchanges and other forms of legal cooperation between the ABA and
China. In the Joint U.S.-China Statement of October 29, 1997,
Presidents Clinton and Jiang agreed to pursue cooperative activities in
the following legal areas: Exchange of legal experts; Training of
judges and lawyers; Strengthening legal information systems and the
exchange of legal materials; Sharing ideas about legal assistance
programs; Consulting on administrative procedures; and Strengthening
commercial law and arbitration.
The American Bar Association is prepared to cooperate with
appropriate Chinese institutions in each of these areas.
Among the ABA's most fundamental policies is the promotion of
understanding and cooperation in the field of law throughout the world.
In furtherance of this policy, the ABA has developed special expertise
in working with lawyers around the world, especially in those countries
moving from planned to market economies.
The ABA already has a long history of cooperating with Chinese
institutions in the field of law. Over a period of twenty years, the
ABA has hosted numerous delegations of Chinese lawyers, judges, and bar
leaders, and two ABA Presidents have made trips to China. The ABA's
Section of International Law and Practice has hosted many delegations
from China and has published The China Law Reporter for many years. The
ABA's Business Law Section has likewise collaborated with Chinese
colleagues in various programs, including teaching a course to Chinese
commercial law judges, working on the development of capital markets,
and in 1997, at the invitation of the Chinese Government, providing
consultant services in the drafting of the Chinese Securities Law.
In order to address the six areas of legal cooperation identified
in the October 1997 Joint Communique, the ABA is prepared, upon request
by Chinese institutions participating in the law development and
modernization process in China, to make available the following kinds
of exchanges and cooperation: Assessment of mutual tasks; Task forces
to facilitate cross-cultural dialogue on legal reform issues; Working
groups to address immediate and long-term legal issues; Long term
experts working with advisors to Chinese institutions; Short term
advisors and experts to focus on specific legal issues; Judicial and
lawyer training programs; Commercial and trade law cooperation; Legal
aid in the U.S. and Asia developmentl Bar association development;
Court administration; Legislative drafting and parliamentary procedure;
Law school and law curriculum development; Legal resource center
development and provision of legal materials; Continuing legal
education; Legal exchange programs; and Expert legal commentary and
review of draft legislation, regulations, documents and implementation
procedures.
conclusion
The vast majority of Americans believe that the U.S. must maintain
its leadership role in the international community. As an organization
which has adopted the promotion of the ``rule of law-international'' as
a priority, the ABA fully recognizes the importance of strong U.S.
leadership in the advancement of human rights and economic prosperity.
Foreign aid has often been criticized and misinterpreted, in large
measure because its benefits are not always apparent. The ABA
appreciates the difficult task your Subcommittee has in grappling with
the fiscal year 1999 Foreign Operations Appropriations bill. However,
Mr. Chairman, we trust that you will be persuaded by the vital American
interests that are at stake.
We all agree that the United States is the one country capable of
providing effective global leadership. It is more important now than it
ever was, and in our own self-interest, to accept this challenge.
Therefore, Mr. Chairman, the U.S. must lead by example in accepting the
myriad of challenges and opportunities offered by world globalization
through engagement and the commitment of increased foreign assistance.
Only one percent of the federal budget is devoted to foreign
assistance, to programs which yield an enormous return for American
taxpayers. These programs foster democracy, build free markets and free
trade, and promote sustainable development. Here at home, U.S. foreign
assistance leads to increased exports, high quality American jobs, and
greater economic and national security.
The ABA contends that its democratization projects yield a
tremendous return to U.S. citizens on a modest financial investment.
Again, these programs are primarily supported by the enormous amount of
free legal technical assistance contributed by ABA volunteers. A strong
commitment to legal and commercial infrastructures supports the ability
of emerging markets to purchase U.S. products.
Mr. Chairman, let me conclude by reiterating how important foreign
assistance is to America's success. Our national interests are
increasingly becoming more intertwined with the political stability of
other nations, whose policies can promote or disrupt the free flow of
goods and services. In that regard, countless American workers and
businesses depend on trade and a thriving global economy for their
livelihoods, which is fostered by the support of rule of law projects.
There has been a tremendous movement in recent years toward economic
and political openness. We cannot afford to reverse the tremendous
gains that rule of law democracy projects have made in fostering growth
in the global economy. As stated above, we respectfully urge the
Committee to continue to support for the ABA's technical legal
assistance programs through the appropriations process.
As provided by the House Rules requiring disclosure of relevant
grants, the ABA received the following grants for International
Programs: Armenian Prosecutor Program (Academy for Educational
Development/U.S. Agency for International Development, $30,985);
Bosnian Court Training Project (World Learning, Inc./U.S. Agency for
International Development, $29,716); Rules of the Road Program with the
War Crimes Tribunal Phase II (U.S. Department of State, $49,086); Court
Administration Technology Training (World Learning Institute/U.S.
Agency for International Development, $25,760); African Judicial
Exchange Program Phase II (U.S. Information Agency, $135,000); Russia
Training for Development: Legal Education (Academy for Educational
Development/U.S. Agency for International Development, $43,434); Rules
of the Road Project for the War Crimes Tribunal (U.S. Agency for
International Development, $135,803); African Law Initiative Sister Law
School Faculty Training Program (U.S. Information Agency, $134,603);
Georgian Constitutional Court Training Project (Academy for Educational
Development/U.S. Agency for International Development, $57,620);
Cambodia Legal Assistance (U.S. Agency for International Development,
$731,503); Central and East European Law Initiative Regional Anti-Drug
Assistance Project (U.S. Department of State, $549,998); Russia Rule of
Law Program (Agency for International Development/Moscow Office,
$2,600,000); Russia Trial Advocacy Training Program (Academy for
Educational Development/U.S. Agency for International Development,
$75,420); African Law Initiative Clinical Partnerships (U.S.
Information Agency, $134,819); Strengthening the Moldovan Bar
Association (ARD/Checchi/U.S. Agency for International Development,
$99,732); Belarusian Legislative Draft Training (Academy for
Educational Development/U.S. Agency for International Development,
$81,682); Ukrainian Law Student Association Development (ARD/Checchi/
U.S. Agency for International Development, $100,000); Environmental
Priorities in Asia Conference (U.S. Agency for International
Development/Environmental Assistance Program, $25,000); Bar Development
Training for Central and Eastern Europe (Academy for Educational
Development/U.S. Agency for International Development, $86,118);
Russian Defender Training Program (Academy for Educational Development/
U.S. Agency for International Development, $106,341); Russian Criminal
Justice Project (U.S. Department of Justice, $2,144,182); Poland and
Central Europe Criminal Justice Project (U.S. Department of Justice,
$1,551,454); Russia Jury Trial Follow-on Training (Academy for
Educational Development/U.S. Agency for International Development,
$34,337); Internship Program for New Independent States Law Teachers
(U.S. Information Agency, $200,000); Moldovan Lawyers Project (Academy
for Educational Development/U.S. Agency for International Development,
$100,124); Legal Assistance in Cambodia (U.S. Agency for International
Development, $1,094,155); African Judicial Exchange Program (U.S.
Information Agency, $250,000); African Sister Law School Program (U.S.
Information Agency, $204,071); Commonwealth of Independent States Rule
of Law Program (U.S. Information Agency, $12,225,000); New Independent
States Law Teacher Program (U.S. Information Agency, $168,927); Sister
Law School Program in Central and Eastern Europe (U.S. Information
Agency, $206,061); Rule of Law & Commercial Law Program in Central and
Eastern Europe (U.S. Agency for International Development,
$16,361,643).
______
Prepared Statement of Robert Karl Manoff, Director, Center for War,
Peace, and the News Media, Department of Journalism and Mass
Communication, New York University
Mr. Chairman and Members of the Committee, on behalf of New York
University and the National Press Institute of Russia (NPI), NYU's
major initiative in that country, I would like to take this opportunity
to thank you for your previous support for our work.
Formerly known as the Russian-American Press and Information Center
(RAPIC), NPI was gratified by the Conference Report on H.R. 2159--which
encouraged the Coordinator ``to continue support for the long-term
development of an independent print media in Russia'' using
``organizations with demonstrated experience in working with print
media in countries of the region'' (see H. Rept. 105-401). The Report
has proved to be extraordinarily helpful to NPI as we continue to build
on RAPIC's accomplishments as the most comprehensive media assistance
program in the region.
I very much appreciate the opportunity to provide testimony to this
Subcommittee today, and would like to offer the following comments as a
journalist, an academic, and the founder and director of an NGO that
has been providing media assistance in the former Soviet Union and
Central and Eastern Europe since 1985--longer than any other
organization operating in the region.
Having recently returned from Russia, where I met with the
directors of our seven regional offices, some of our dozens of Russian
staff members, and members of our nationwide Media Assistance Network,
I would like to speak to four issues in my testimony: First, the
continuing importance of a free and independent news media to Russia
and a stable international system; second, the continuing need for U.S.
assistance to create a free press in Russia; third, the critical
importance of the print media (especially newspapers) at this moment of
political and economic transition in the county; and, finally, the
approach that the National Press Institute has adopted with these
issues in mind, NPI's accomplishments to date, and its vision for the
future.
importance of the russian media to american policy interests
Americans take it for granted that a free press is essential for
the functioning of democratic systems and free markets, and our own
history provides abundant evidence that we are right to do so. Yet this
assumption has been under attack from many quarters around the world,
with the so-called ``Asian model'' of authoritarian capitalism
constituting only the most fully articulated rejection of the political
and economic transparency that a free press provides. The recent
collapse of some Asian economies has led to calls for greater
transparency in many quarters, but there are signs that few understand
the role that a free press must play in the future.
In Russia itself, a free press in the sense that our own
Constitutional Framers understood it--a press playing a central role in
the unfettered exchange of vital political and economic opinion and
information--is still more of a dream than a reality. Years after the
fall of Communism and the disappearance of official censorship, for
example, most Russian newspapers still exist on the basis of official
state subsidies, and these subsidies, in turn, are always fraught with
political and even commercial conditionalities. Local editors know
which side their bread is buttered on, and behave accordingly. Those
who fail to do so pay the price: Russia, for the second consecutive
year, has been named by the International Federation of Journalists as
``the most dangerous country for journalists.''
Moreover, having only recently thrown off a system under which the
press was required to be the ``mass organizer'' and ``mass
propagandist'' for the Party and the government, many Russian
journalists are implacably hostile to the idea that they have
responsibilities other than to themselves. The conception of the press
as a ``public good'' that both makes money for its owners and serves
the public interest is an alien one, and one that is often greeted with
hostility by journalists who are intent on maximizing their own return
(all too often by selling their news columns to the highest bidders).
In Russia, the country of the Potemkin Village, appearances have
always been deceiving. And, right now, the appearance of thousands of
newspapers in a daily torrent can deceive us into believing that the
Russian media are performing well the function of informing the Russian
public, policy elites, and business community. They are not, however,
and are many years, and perhaps decades, away from being able to do so
successfully.
Helping the Russian press achieve maturity as a political and
economic force has already been recognized by this Subcommittee, by the
Coordinator, and by USAID and USIA as a significant American priority,
and we believe it must continue to be a top priority because of the
role the free press plays in advancing key American interests in the
country and the region:
--A free press is a key agent of economic transformation, providing
investors with vital information on business activity,
corporate actions, and general business conditions throughout
the country's many far-flung regions.
--A free press is a vital force for the creation of a civil society,
providing non-governmental organizations with the means to
reach the public with their issues, experts, and concerns, and
a means by which the public, in turn, can communicate with
itself and with organizations in the independent sector.
--A free press that performs its watchdog role responsibly is
essential to achieve full government accountability, something
that exists hardly at all in Russia at this time, either in
theory or in practice. Government accountability is the
ultimate guarantor of the rule of law, the sine qua non of
democratic politics.
--A free press committed to airing a diversity of opinion can provide
outlets for views supporting American policy interests, ranging
from nuclear and missile proliferation, to NATO expansion, to
policy for the Balkans, the Persian Gulf, and the Middle East.
--A free press is essential to the success of the next rounds of
parliamentary and presidential elections, which together will
determine the direction of the country's domestic and foreign
policies for years to come.
--As it did in the case of Chechnya, a free press can moderate the
adventurism of the Russian government, and can contribute to
the reduction of dangerous ethnonational tensions throughout
the Russian Federation and the entire region.
For reasons such as these, we believe that the American stake in
the future development of a truly free press in Russia is enormous, and
continuing media assistance must continue to be an important thrust of
American policy in the country.
why the russian press needs american assistance
The American interest in a free press in Russia is direct and
substantial. But significant obstacles remain to be overcome before
these interests can be realized. Specifically, critical obstacles to
the development of the Russian media include the following:
--Governments continue to exert control over the media, largely
through economic levers, especially at the regional level;
--Investment and capital resources are scarce, except for
politically-motivated investments;
--Most media managers have little or no training or business
experience;
--Newspaper advertising revenue remains tiny and three-quarters of it
flows just to publications in Moscow and St. Petersburg;
--Virtual monopolies at key nodes of the media sector--from printing
presses to newspaper distribution--handicap development;
--The media sector has not yet effectively organized in defense of
its interests;
--State and, increasingly, corporate subsidies maintain an unlevel
playing field and encourage dependency--currently approximately
85 percent of Russian newspapers receive some form of subsidy;
--The unstable and underdeveloped legal environment surrounding the
media inhibits innovation, risk-taking, and sustainability;
--Information access remains restricted, despite freedom of
information laws;
--A public cynical about the quality of the press makes it
increasingly difficult for media institutions to sell their
products.
Most media organizations do not now possess the resources
(financial, professional, and organizational) to surmount these
obstacles on their own, and it is not in the American interest to wait
until they do in order to address them. In the interim, American
assistance will be vital.
American assistance will be all the more important given the
decision of Russia's major financial and industrial groups to buy up
the country's media. The so-called ``oligarchs'' now control, through
various mechanisms of ownership and subsidies, the editorial policies
of nine out of Russia's ten leading non-official daily newspapers. On
the national level, most of the principal fora for public discussion
and information are therefore under the control of forces bent on
advancing their own interests before all else. These same oligarchs are
now beginning to assemble nationwide media empires (Gazprom already
owns more than 100 regional publications).
In contrast, American non-media corporations that have acquired
media properties have done so many years after traditions of editorial
and journalistic independence were well established. This is not the
case in Russia, where editorial control is now being wielded as a
blatant commercial and political weapon.
Moreover, with the exception of the National Press Institute and
less than a handful of other media NGO's, there are no institutions
able to articulate a vision of media independence and public service,
and capable of working to establish the economic, professional and
legal conditions necessary to make it a reality. Such NGO's exist in
the United States, and they are supported by American corporations that
recognize the important service they provide. Russia, however, has
little by way of a philanthropic sector, and it will be many years
before Russian corporations recognize the value of supporting media-
sector NGO's. Until such time, continuing American assistance will be
an absolutely critical resource for the NGO's within the Russian media
sector.
why the u.s. should focus on the russian print media
It is our view, moreover, that U.S. policy should focus
particularly on the print media, notably newspapers. This is so because
of the especially important economic and political role they play, and
also because of their particularly difficult economic circumstances.
--Studies have repeatedly shown that most Russians get their local
news primarily from newspapers and that they trust local
newspapers more than any other source of information.
--As the economic and political decentralization of Russia continues,
local newspapers have become the locus of key economic, social,
political, and other information necessary for the grassroots
development on which Russia's future depends. The mayor of
Rezh, a small town outside of Yekaterinburg, told a colleague
that the purchase of a printing press by the local newspaper,
with which NPI worked closely, served to jump-start the local
economy.
--As the only significant source of in-depth news and analysis for
Russia's political, business, and intellectual elites, the
print media facilitate public policy debates. As noted by
Assistant Secretary of State for Democracy, Human Rights, and
Labor John Shattuck: ``[W]hile the print media lack the
intimacy of television, they can stimulate debate because print
is a medium especially well suited to convey context and
meaning and to explore ranges of options. In the post-Cold War
era it has been largely print articles that have set the agenda
for serious policy discussion and fundamental changes in public
thinking.''
--Given the increasing control of Russian television by a handful of
elites, only newspapers support the pluralism of views and
diverse viewpoints that are essential for informed decision-
making. Newspapers at both the national and local level present
a far wider spectrum of views than television.
--In Russia, as elsewhere, television take its cue from print
coverage. The print media set the news agenda. In fact, local
Russian television news broadcasting often consists of an
announcer reading selections from the local press.
--The quantity and quality of television news and public affairs
programming will continue to decline as television is
integrated into the market (as has been the case in every major
democratic market economy). Already, according to Radio Free
Europe/Radio Liberty Russia analyst Laura Belin, ``most private
television networks and radio stations focus on entertainment
programming, not news.''
--Finally, an authoritative American study has demonstrated that
local newspapers are the essential medium for informing voters
in local and regional elections and for analyzing the local
angle of national politics. Because the upcoming elections in
2000 will shape Russia's future in a profound way, the burden
on Russia's local newspapers is immense.
national press institute: a sectoral approach to print media assistance
Institutional Transformation.--Since I last submitted testimony to
this Committee in April of last year, several dramatic developments
have made the National Press Institute even more central to the mission
of establishing a free press in Russia.
Most important, last summer NPI registered as an independent, not-
for-profit Russian organization, thereby transforming the Russian-
American Press and Information Center, an American media-assistance
project, into a permanent, Russian, media-sector NGO institution. Also
at about this time, USAID made the decision to begin funding NPI
directly, and it is now supporting work to strengthen the institutional
structure of NPI, even as it is also underwritting a major new
initiative to assist regional newspapers develop access to capital
markets and loan funds. With continuing support from USAID (and with an
ongoing relationship with USIA), NPI is now poised to become an
important legacy of the American assistance effort as this effort
evolves into a framework for meaningful, sustained, and mutually
beneficial bi-national cooperation.
NPI continues to apply the sectoral approach that makes it unique
among all media assistance organizations in the world. It works through
a complex of economic, political, professional, and legal initiatives
that together promote the political and economic independence of the
entire media sector. To implement its sectoral approach, NPI has
established the following operating divisions that build upon and
consolidate NPI's core programming agenda:
--The Business Development Service will provide consulting and other
services and support to media organizations seeking to attract
financing, develop business plans, improve their management, or
in other ways improve their financial viability and attract
capital;
--The Center for Cyberjournalism will provide a range of training and
consulting in new technology applications for the media; it
will also develop an Internet Media Service as a prime delivery
vehicle for a spectrum of informational and assistance services
and resources;
--The School of Media Management and Journalism will be Russia's
major mid-career training institute for the print media;
--Special Projects will be undertaken to respond to particular needs
or opportunities in the Russian media sector, such as preparing
the media for the 2000 presidential campaign, promoting freedom
of information legislation and norms, or working to ensure
improved coverage of nuclear issues;
--The Press Center will continue to organize its famous briefings,
press conferences, and roundtables at all NPI centers;
--The Research Center will monitor, study, and publicize economic,
political, and journalistic issues and trends affecting the
Russian media sector for the international investment community
and other constituencies.
Accomplishments.--NPI's sectoral approach has made possible some
major accomplishments. For example:
--To counteract the media's over-reliance on official sources of
information, NPI has organized over 2,000 briefings around the
country, in which over 5,000 U.S. and Russian experts have
taken part, with an aggregate participation of over 80,000
journalists.
--To combat restrictions on information access, NPI established the
Freedom of Information Commission, Russia's only organization
dedicated to promoting access to government information and to
educating journalists on exercising their legal rights to it.
The Commission has helped to shape a national FOI legislative
agenda, its members have been invited to participate in a
number of expert groups advising the Duma, and it has
influenced the Yeltsin Administration's approach to this issue.
--To overcome the woeful lack of management experience among
publishers, NPI has organized training programs for
representatives of over 800 newspapers, often with spectacular
results. Last year I reported that Gubernskie Vedomosti in
Stavropol, like many participating newspapers, had increased
its advertising revenue by 30 percent after NPI consulting;
last week editor Aleksandr Yemtsov dropped by NPI to announce
that his paper has begun to make a profit, ``in large part
thanks to NPI.'' The editor of Rezhevskaya Vest cited an NPI
seminar as the turning point in the paper's remarkable
transformation from a heavily subsidized local mouthpiece to a
dynamic and fully independent news organization.
--To promote capitalization and investment, NPI has begun, with the
support of USAID, a Newspaper Financial-Strengthening Program.
The program is helping regional newspapers develop business
plans and loan applications to access capital markets, and is
promoting alternative capitalization schemes such as equipment
leasing.
--As a pilot project in response to the near-monopoly of printing
presses in Russia by the government, NPI installed the first
modern printing press to be owned and managed by a group of
independent Russian newspapers. This landmark project was
hailed by USAID as ``historic.'' The Gorodskie Vesti concern is
now printing 19 different titles from as far away as Saratov
and Astrakhan, and the press is in the black.
--NPI has been in the forefront of improving coverage of political
campaigns during each of Russia's national election campaigns.
NPI has held workshops on coverage around the country,
published a handbook on election coverage for journalists, and
published a news bulletin with news of regional media coverage
of campaign issues.
--NPI took the initiative in establishing the independent Moscow
Media Law and Policy Institute, in order to promote a free and
independent press through research and education on the rule of
law as it applies to media. MMLPI is now the leading
institution of its kind in the region, a major resource for
research, commentary, legislative advice, postgraduate
teaching, and publishing on media law and related subjects.
--NPI is the leading regional authority on the use of the Internet by
the media for both publishing purposes and computer-assisted
reporting. NPI's annual New Media for New World conference on
Internet use by the media is the leading forum of its kind.
NPI's Center for Cyberjournalism has trained hundreds of
reporters in the use of the Internet for reporting, and it
pioneered Web publishing consulting for newspapers, many of
which are now publish on-line editions.
--NPI has worked with hundreds of American community-based
organizations, commercial enterprises, experts, and citizens.
For example, it has established partnerships between Russian
and American newspapers to promote improved management and
profitability of papers in Russia. One NPI project included 14
publications in Alaska, Arkansas, California, Florida, Indiana,
Michigan, North Carolina, Pennsylvania, and Washington.
--NPI paired Moscow's Skate Press with the American financial news
organization Bloomberg LP to create a Russian news service
devoted to providing the first detailed corporate profiles of
publicly traded Russian companies--a significant contribution
to the transparency which is essential to the creation of free
markets. By now, companies which had been loathe to provide
information on themselves have seen the benefits of doing so
and are contributing information of their own accord,
recognizing that transparency is essential in order to access
the capital markets.
--NPI's Nuclear Security Programs provide a web of mutually
reinforcing activities to promote more in-depth, sophisticated
coverage. Through major conferences in Minsk, St. Petersburg,
and Moscow for journalists reporting on nuclear issues, regular
briefings, a bimonthly bulletin, and a program of targeted
outreach and consultation, NPI has developed a core group of
journalists covering nuclear security who now have world-class
expertise in their beat and are committed to providing all
points of view when it comes to nuclear questions.
--Through its Media and Conflict Program, NPI has helped to develop
the power of the media to contribute to the prevention of
conflict and the reduction of ethnonational tensions. For
example, NPI published a study of media coverage of the war in
Chechnya, the first of its kind in Soviet and Russian history.
It also organized a pioneering television project involving the
first joint professional work between Ingushetian and Northern
Ossetian journalists since that conflict began--a jointly
produced feature broadcast simultaneously on the television
networks of both republics.
Sectoral Agenda.--Over the next few years, in accordance with its
sectoral approach, NPI will pursue projects in a range of critical
sectoral issues:
--Promoting Financing and Capitalization.--Through its newly
organized Business Development Service, NPI will help
newspapers access investment and debt capital, it will promote
equipment leasing and other alternative means of capital
improvement, and it will continue to provide direct consulting
and problem-solving support to newspapers throughout Russia.
--Developing Media Management Capacity.--Through its School of Media
Management and Journalism, NPI will train newspaper managers
from around Russia in key areas such as advertising sales,
distribution, readership surveys, marketing, and newsroom
management.
--Participating in the Development of the Legal and Administrative
Infrastructure.--Legal barriers to media independence and
sustainability include lack of access to information,
legislative obstacles to business development, the violation of
civil rights, and ignorance or unwillingness to enforce the
rule of law when it comes to the mass media. NPI will continue
to work aggressively in all of these areas.
--Fostering the Development of a Mature Information Culture.--Through
its Center for Cyberjournalism, NPI will continue to train
journalists in the use of new media technology, both in Moscow
and throughout the country, and its Internet Media Service will
provide a range of critical services and resources to
journalists and media managers.
--Promoting Industry-Wide Trade Organizations and Professional
Associations.--Mindful of the weakness of national-level
organizations in Russia today, NPI will work to promote the
development of regional newspaper associations, with the
ultimate goal of building a national association to defend the
common interests of the media.
--Overcoming Government Domination of Information.--Through its
Freedom of Information Commission, NPI will continue to promote
improved FOI legislation and enforcement and educate
journalists in exercising their rights. NPI will also continue
to promote civil society and non-governmental actors through
its wide-ranging Press Center activities at all of its regional
centers.
--Raising the level of Journalistic Professionalism.--Without a
marketable product, news organizations cannot survive. NPI will
continue, through its School of Media Management and
Journalism, to provide mid-career training on journalistic
techniques and on the coverage of specific beats, such as
business and economics.
conclusion
The burden on the media is great in a country where democracy is
yet so fragile. The euphoria produced by the fall of Communism has long
faded, and the tedious and thankless work of building democracy
remains. Desmond Tutu, addressing the South African media in 1996,
said, ``The media have an incredible calling--you were the midwife of
democracy, now you must be the watchdog to ensure that this beautiful
thing is not corrupted.''
For the media in Russia, too, to play this critical role, they
continue need our help--and badly. Failure to act decisively during
these critical years could have profound consequences not only for the
future of democracy and markets in Russia, but also for the entire
international system, in which the actions of Russia can yet carry
immense weight and produce fateful consequences for us all.
______
Prepared Statement of Hobart C. Gardiner, President and CEO,
International Executive Service Corps
International Executive Service Corps (IESC) is the most effective
not-for-profit business development organization of its kind in the
world. Since 1965, IESC has provided affordable expert assistance to
entrepreneurs, small and medium-sized enterprises, non-profit
organizations and governments in more than 120 countries. We currently
operate programs in over 50 countries in the developing world and the
emerging democracies of the former Soviet bloc.
IESC exemplifies the successful public/private partnership. We
combine the knowledge and mentoring skills of industry and professional
experts who donate their time with the financial support of private
donors, clients who contribute fees for service, and grants from the
United States Agency for International Development (USAID) and other
government agencies.
IESC focuses on small and medium-sized private enterprises because
they are the engines driving economic growth and job creation around
the world. By giving them the tools for success, we create prosperity,
foster conditions conducive to democratic governance, and end the cycle
of dependency. Our goals parallel similar foreign assistance objectives
of the United States government.
President Clinton recently underscored the value of volunteer
service in his call for increased funding of an enlarged Peace Corps.
We applaud the call for increased funding, and the recognition given to
the work of the many young men and women who have changed their lives
and the lives of others through their service in the Peace Corps.
Our work complements that of the Peace Corps. IESC's senior-level
executive volunteers focus on improving the business sector. They
donate their time and the accumulated experience of successful careers.
Thus they work with their hearts as well as their heads, making friends
while making change.
IESC documents the value of its work through a rigorous evaluation
process. Over the past 33 years, we have demonstrated outstanding
results for our clients and a solid return on investment for our
funders.
jobs
Over the past 33 years, IESC programs have created almost a quarter
of a million jobs worldwide. These new jobs have been at all skill
levels, and have been created in areas of significant unemployment or
under-employment. We are particularly proud of our efforts to create
employment opportunities for women.
--In Cairo and Alexandria, Egypt, IESC created Centers for Quality
Assurance to assist various Egyptian businesses in meeting ISO
9000 quality standards and thereby increase their productivity
and competitiveness. In two and a half years, the Centers have
worked with over 200 clients; already approximately 40 clients
have received ISO certification. These Centers themselves have
employed over 20 Egyptian nationals. Among our staff is the
first woman in the Arab world to qualify as an ISO 9000 lead
assessor.
--In Southern Russia, IESC provided production and marketing
assistance to Gloria Jeans. Company management was restructured
and decentralized. As a result, sales have doubled and the
European Bank for Reconstruction and Development made a $3
million investment in Gloria Jeans. The transformation of
Gloria Jeans created 500 jobs, all of them for women, which has
helped provide economic stability to the region.
--Selyn Exporters, in Sri Lanka, which manufactures and exports table
linens and soft toys to Europe, North America, and parts of
Asia, provides employment for over 150 rural men and women. The
majority of the workers are women who were either widowed or
abandoned by their husbands, left to fend for themselves and
their children. IESC provided funds to Selyn to design and
print a promotional brochure and exhibit at successive American
International Toy Fairs in New York. Linkages from these three
shows have resulted in $200,000 in initial and repeat orders
from the United States, Canada, and Europe.
--In Ghana, IESC was a primary supporter of the Ghana Association of
Women Entrepreneurs, helping it present an eight-day First
Global Fair and Investment Forum for Women Entrepreneurs. The
fair drew thousands of participants from 35 African countries,
in addition to North American, Asian, and Caribbean business
and trade organizations.
--In Zambia, IESC infused life into the promising tourism industry by
aiding more than a dozen small to medium-sized hotels in the
capital city of Lusaka and in rural towns and villages--
redesigning kitchens, training housekeeping and kitchen staff,
advising on all business aspects from accounting to promotion,
and even helping one couple complete the renovation of their
hotel.
Increased sales and investment.--In 1996 alone, IESC programs
increased sales for client companies by over $224 million. The total
cost of our program that year was only $33 million. This means that for
every dollar we spent, our clients achieved almost $7 in increased
sales in the first year alone. At the same time, our clients were able
to reduce costs by $18 million (a 2.5 to 1 leverage) and attract
capital investments in the amount of $11 million (a 1.5 to 1 ratio)--
for a total impact of $11 for every dollar invested in our programs.
--JVC Baterias Record S.A., Peru's leading manufacturer of auto
batteries, faced increased competition from imports. With IESC
help, JVD developed a new stationary battery, which is
essential in the poorly-lit areas of Peru's cities. This new
line of batteries produced sales of more than $1 million in the
first year.
--IESC improved cash flow for PMO Shatura, a Moscow-area furniture
manufacturer, by restructuring the company's financial
management systems. We trained an expanded sales staff,
creating a network of regional sales managers and a motivated
sales force. As a result, the company has increased sales by $8
million and achieved two joint ventures worth $7 million.
--Frima, S.A., a Chilean meat processor, improved sanitation
techniques, learned new methods of cutting meat to enhance
quality, and restructured the by-products division, leading to
greater productivity and efficiency. As a result of IESC's
innovations, Frima increased sales by $10 million, introduced
four new products, made capital investments valued at $2
million, and generated 15 new jobs.
--For a processor of food and juices in Kazakhstan (one of the first
private companies there), IESC developed a business plan that
led to a joint venture. As a result of the favorable forecasts
in that plan, the client received more than $1.5 million in
financing from the Asia Development Bank and Centrekredit. With
this financing it developed a new product line that is expected
to double its profits.
--IESC evaluated the master plan for the El Salvador airport and
prepared technical terms of reference to solicit international
consulting support, leading to direct investment by the United
States Trade and Development Agency.
--IESC prepared an electric light company in Kyrgyzstan for
privatization, increasing its sales by 25 percent and obtaining
$400,000 in new funding from the World Bank.
--In Panama, IESC worked with an importer/exporter of tableware to
increase sales. As a result of IESC's help in upgrading
software programs and implementing long-term strategies to
coordinate manufacturing and sales, the client increased
exports to Central and South American markets by $2 million.
--In Indonesia, IESC expertise improved quality control and
productivity for a paper-making plant in Java. As a result,
production increased by 50 percent, costs were reduced by
$100,000 and sales increased by $500,000 in just one year.
--A chemical plant in Calcutta, India, with 700 employees, wanted to
reduce electrical and mercury consumption and introduce a
pollution control system. IESC initiatives led to $25,000 in
energy savings and increased annual sales by $1.5 million.
--In Georgia, IESC assisted a design studio for printing, advertising
and publishing. The studio improved quality and efficiency,
reduced production time, and increased sales by $140,000.
--In Armenia, IESC assisted Arax, a business support company in
Yerevan. As a result of enlarging its production capacity,
training staff, and improving services, sales increased by
$250,000.
purchases from u.s. companies
The United States Agency for International Development has invested
just over $296 million in IESC programs since our first operations in
1965. The cumulative value of purchases made by our clients from U.S.
companies exceeds $2 billion. This seven to one return is only a small
indicator of the enormous impact IESC has had worldwide.
--Linza, a Yerevan vision care company, received months of assistance
from an IESC expert, an opthamologist who dramatically improved
the company's operations. To upgrade its inventory, Linza
imported almost $40,000 worth of frames and lenses from U.S.
suppliers. In the course of aiding the company and 20 other
associated optical enterprises to reach world standards of eye
care, IESC improved vision care throughout Armenia.
--An IESC automotive client in Estonia, Baltic American Car Company,
has imported approximately $17.5 million worth of Chrysler and
Jeep Eagle products, and $3.5 million worth of First Brands
automotive products during the last five years, with obvious
benefits to the U.S. economy.
--Alchem International, in India, sought IESC guidance in producing
plant extracts and derivatives meeting international
specifications. IESC recommended improvements in quality
control, research and development processes, and plant
operations and maintenance. As a result, Alchem developed seven
new products, installed $50,000 of U.S. technology, achieved a
99 percent purity level in their products, and increased
exports by $1 million.
--In Sri Lanka, a nation struggling with a profound internal
conflict, IESC manages a large program called Technology
Initiative for the Private Sector. The IESC program oversees
grants, and monitors stipends to local companies that partially
offset the costs of upgrading technology and expanding their
markets.
Joint ventures.--In 1996 alone, IESC activities produced joint
ventures valued at over $3 million for our clients. Many of these
linked U.S. firms with our clients overseas.
--In Egypt, our Manufacturing Technology Centers (MTC) link Egyptian
businesses with American suppliers, customers, and partners.
With MTC assistance, the Fogarty International Center in Cairo
recently convened a workshop on Investing in Biotechnology.
Attending were 18 American and 100 Egyptian investors and
company representatives. Several joint ventures resulted,
involving purchases of U.S. pathogen-free seed potatoes and
biotechnology equipment. The field of biotechnology has
potential for the Egyptian economy in the areas of health,
agriculture, industry, and the environment.
--In Bulgaria, IESC assistance to Samex, a food service client, led
to linkages with KFC and Dunkin' Donuts, benefiting business in
the United States with franchise fees and equipment purchases,
while increasing sales for the Bulgarian client and creating
more than 300 jobs in just two years.
--In Czech Republic, an IESC expert spent several months assisting
the young management team at Janka, a manufacturer of air
conditioning units, in cutting costs, improving safety,
training staff, and promoting their product. He also guided
them in forming their first joint venture (valued at over $8
million) with a subsidiary of an American company.
--In St. Petersburg, Russia, IESC helped a prosthetics manufacturer
become a distributor for a U.S. company, thus raising the
quality of prosthetics available in Russia, in high demand by
young soldiers wounded in the war in Chechnya.
--In the city of Ussuriysk in the Russian Far East, IESC is assisting
in the conversion of an airport from military to civilian
traffic, stimulating development of the region, and opening a
new air route to the area for foreign airlines.
innovation
At its founding, in 1963, IESC was an innovative idea: to capture
the generosity and good will of American business people to provide the
expertise needed by struggling businesses in the developing world. In
the past 33 years IESC industry experts have volunteered over one
million days of service, conservatively valued at over $514 million. We
continue to rely on this extraordinary pool of expertise: today we have
more than 13,000 experts registered with us, available to go any where
their skills, talent and coaching are needed.
Innovation did not stop with the concept however. We have
continually created innovative programs to meet new challenges and take
advantage of new opportunities.
--Working with USAID's Global Technology Network, we now help small
and medium-sized American companies enter the global
marketplace, increasing the number of transactions between U.S.
companies and companies in developing countries and emerging
democracies. Through this program, IESC experts mentor American
companies, coaching them through the often confusing and
difficult process of finding and following up on trade leads.
--In Brazil, an innovative approach to solving ATM fraud was designed
by an IESC expert. He evaluated present and future risks to the
client's operations, to the supplier of ATM equipment, and set
up defensive protocols to reduce the incidence of bank fraud in
Brazil, estimated at $600 million annually.
--In Lithuania, IESC is creating the Lithuanian-American Business
Network (LABnet), with the cooperation of the U.S. Ambassador,
Keith Smith, and the USAID mission there. The program is
designed to accelerate U.S. investment in Lithuanian small and
medium-sized enterprises. In the United States, four IESC
experts will support the Lithuanian local consulting company by
researching potential partnerships between American and
Lithuanian businesses.
--In another project there, an IESC expert spent two months training
sixty brokerage employees in portfolio management, educating
them about U.S. funds, and facilitating contacts with several
American funds. As a result, two investors have already entered
the Lithuanian securities market.
--The Lithuanian president recognized IESC's contribution to
Lithuania's economic revival by conferring full Lithuanian
citizenship on our Country Director couple there, George and
Mai Gray. Mr. Gray had been in charge of economic development
as assistant city manager in his hometown of Tucson, Arizona,
and brought the same sensitivities and skills to his work in
Lithuania.
--As new opportunities occur, IESC continues to implement innovative
services in other areas, such as assisting in legal and
regulatory reform, training insurance regulators and initiating
distance learning and other virtual business support services.
With IESC assistance, for example, a Boston-based publishing
company, International Data Group, has recently launched PC
World Lithuania magazine, stimulating the development of
information technology in Lithuania.
Alliances.--IESC recognizes that we can often accomplish our
objectives more efficiently through associations with other
organizations.
--IESC has formed new development partnerships in Latin America. In
Panama, we are helping the Interoceanic Region Authority manage
the reversion of United States military bases to Panama by the
end of the decade. More than 20 IESC experts have developed
marketing strategy, provided technical assistance, and promoted
investment and joint ventures. We are also working with the
Panama Canal Authority to protect the Panama Canal Watershed
area, aiding in the formation of an inter-institutional
commission protecting natural water supplies to the Canal, and
training administrative staff.
--We have formed a partnership with Programa Bolivar, based in
Caracas, Venezuela to create joint ventures and other strategic
alliances between U.S. companies and small to medium-sized
enterprises in Latin America. IESC experts provide on-site
assistance or research within the United States.
--In Ukraine, IESC has pooled resources with Agricultural Cooperative
Development International/Volunteers in Overseas Cooperative
Assistance, MBA Enterprise Corps, and Citizens Democracy Corps
to create ``The Alliance.'' Recently, the Alliance assisted
Korop Agrotechservice, a conglomerate of eight privatized
businesses founded in 1996. Part of the conglomerate, a former
collective farm, had a cash flow crisis. To save the farm and
the jobs of its 90 employees, IESC assigned an expert in
agricultural management. His recommendations led to improved
management and marketing practices, and new cattle-breeding
methods. The Alliance next called in an ACDI/VOCA volunteer, a
cattle breeding expert. By October, 1997 the farm's cash flow
had improved so much that it paid all employees their back
wages. By February, 1998, still implementing the IESC business
plan, the farm settled a substantial portion of its outstanding
debts.
--The Alliance has helped build a strong, stable investment banking
sector, a priority for business growth. An IESC banking
executive, formerly with Merrill Lynch, helped First Investment
Bank of Ukraine improve its investment capabilities. The
Ukrainian bank eventually signed an agreement with the National
Bank of Paris that strengthened First Investment's ability to
market and participate in Ukrainian Euro-Bond issues. In
February 1998, the First Investment co-led, with Merrill Lynch
and Commerzbank, a successful DM 750 million Euro-Bond issue.
First Investment credited IESC's assistance with substantially
improving the bank's abilities, ensuring its participation in
future large securities issues.
--In Bulgaria, IESC is part of the Firm Level Assistance Group (FLAG)
a consortium also including Agricultural Cooperative
Development International/Volunteers in Overseas Cooperative
Assistance, MBA Enterprise Corps, Citizens Democracy Corps, the
University of Delaware, Land O'Lakes and World Learning. IESC
assisted the management-employee team of Riviera Holiday Resort
in Varna in acquiring the hotel complex. An IESC expert
assessed investment alternatives, then guided the team in
winning the right to purchase 60 percent of the resort at a
cost of $11 million, with further investments of $4 million to
improve services, and renovate the facility. FLAG, with the
involvement of IESC, will continue to back the team in its
ambitious business endeavor.
--The Business Development Services (BDS) division of IESC is
currently active in Romania through a partnership agreement
with the USAID-funded Romanian American Enterprise Fund and the
International Center for Entrepreneurial Studies. This two-year
program, known as ``ACCESS for Business uses IESC industry
experts to assess a company's business potential, and prepare
it for investment and further growth.
--The results are exciting and encouraging. As of December 1997 (less
than half way through the program), the ACCESS team has
reviewed over 300 companies, 125 of which were referred to the
Romanian American Enterprise Fund for financing and/or
technical assistance services. BDS has used the donated
services of more than 150 IESC industry experts operating
within the U.S. to assist participating Romanian companies.
Sustainability.--IESC designs programs for both immediate and long-
term impact. Before the need for our direct services end in a country,
IESC is already preparing the local citizens to continue business-
strengthening programs. For example:
--In the Slovak Republic and Lithuania, IESC's funding from USAID
will end for both countries on September 30, 1998. However,
with current support from USAID, we are training local staff
and transforming our offices in both countries into self-
sustainable, indigenous consulting companies. These new 100
percent locally-owned firms will continue management consulting
to businesses in transition in these countries.
--Our Russia program also works to build the capacity of indigenous
consulting firms. Through staff training, seminars, and
cooperation on projects, IESC leads consulting firms towards
self-sustainability. Developing a market presence, increasing a
client base, establishing a reputation, broadening an array of
services, and increasing financial stability--all these require
substantial resources and evolve over time. IESC must maintain
present funding levels to continue meeting these very
challenging and worthy goals.
Building the supporting structure.--Business does not operate in a
vacuum. Government policies and procedures, educational facilities,
social services--all impact business operations. Therefore, IESC
dedicates part of its resources to addressing needs in the public
sector.
--IESC's public administration program works with public officials in
the New Independent States to increase their understanding of
representative government and its role in fostering a healthy
economy. Because the program involves governments, it can
ultimately have enormous impact on many millions of people.
--In Kazakhstan, more than 300 officials have participated in this
program. Fifty have been selected to study government
operations at various levels in the United States.
Representative Christopher Shays has become an integral part of
this program, meeting with these officials and sharing his
insights as a member of the House of Representatives. One
official concluded: The most valued part of this program was
meeting with various government and business people, learning
from them how they interact with one another, and how they
organize work.
--Many of these Kazakh officials have subsequently been promoted to
senior levels. One is now Chief of Staff to the President of
Kazakhstan. Previous participants have also started an alumni
association, serving as mentors to newly-elected Kazakh
officials.
--In Orenburg, IESC worked with the Russian Privatization Center, the
city administration, and social service managers on the
privatization process for 28 kindergartens. Our expert met with
staff in all affected institutions, arranged for staff
retraining, and developed alternative plans for school use to
reduce expenses while maintaining the quality of education.
Recently an IESC staff member was invited to South Africa, Zambia,
and Botswana to meet with officials and representatives of businesses,
funding groups and non-governmental agencies to assess needs and
opportunities for development in those countries. One immediate result
is IESC's participation in the Bi-National Commission Grant from the
Department of Commerce to the South African Centre for Scientific and
Industrial Research.
conclusion
These highlights of IESC's achievements are but a sampling of the
change we have accomplished over the past 33 years with funding from
the U.S. government. We have leveraged the taxpayers' dollars
effectively. To continue our superb record, however, we must rely on
continued funding for our effective programs. We believe what we have
accomplished for America and for clients around the world is a
significant chapter in a book that is still being written, with your
help.
Question. If AID invests $24 million with you, what kind of a
return on investment do you get?
Answer. A great return on investment For $24 million we got:
--clients who increased their sales by $224 million;
--clients whose exports increased by $34 million;
--clients who reinvested capital in their companies by $69 million
(compared to a time when money was fleeing to Swiss Bank
accounts);
--clients who purchased $13 million from U.S. companies in just one
year--the first year after the project. We expect their
purchases to continue year after year.
--the investment helped break the cycle of dependency in over 25
countries.
19 other countries now also think it's a good investment.
Lee Hamilton said, and I quote: ``In this time of tough budget
restraint, we must be looking for the most efficient and cost-effective
ways of providing support for our development goals. IESC is efficient.
Not only do the executives volunteer their time but clients contribute
to further offset costs. IESC is effective. Fully 40 percent of the
projects undertaken are follow-on endeavors building on initial
activities. IESC supports U.S. trade interests. 43 percent of clients
purchase goods and services from the United States.''
We note that the Peace Corps got an increase of $40 million to help
with private enterprise. We admire the Peace Corps, but for building
business, we have a bank of talent and a 33-year track record.
Question. Do you undertake projects in any countries where you
don't get funding from AID?
Answer. Yes sir, we work in several countries where AID funding is
no longer available and the clients pay all our expenses. Several such
countries are in Latin American and Asia. The clients tend to be large
rather than small. Not large by American standards, but still
significant to the growth of the economy.
Question. Why do retired executives leave comfortable conditions to
work unpaid overseas in developing countries?
Answer. I think there are several reasons:
--They want to be of service where help is needed
--They want to pay back in some way. Feeling that this country, its
customs and ideals, from the founding fathers on, has been good
to them, they want to pass it on.
--They are used to working their butts off. Retirement and golf are
not enough to satisfy their need to be busy usefully.
--They are believers in private enterprise and the market economy.
Question. How are you funded?
Answer. Principally through AID. We get $24 million from AID or 74
percent. The amount of work we do is directly related to AID funding.
If AID were to double the funding, we would do twice as much work.
Next to AID in size are our clients. They contribute 19 percent or
$6,400,000. The Department of Defense contributes nearly one million.
USIA, $150,000.
Contributions and grants from other private sources are about
$1,100,000.
CONTRIBUTIONS AND GRANTS
------------------------------------------------------------------------
1997 Percent
------------------------------------------------------------------------
USAID missions.................................... 21,386 .........
AID--core grant................................... 3,031 .........
---------------------
Total....................................... 24,417 73.8
=====================
Clients........................................... 6,395 19.3
DOD............................................... 968 3.1
USIA.............................................. 151 .5
Other Grants for specific reason like Chase Bank
Johnson Foundation (nothing from offsets in 1997) 553 1.7
Contributions (corporations, foundations,
individuals)..................................... 597 1.8
---------------------
Total....................................... 33,081 \1\ 100.0
------------------------------------------------------------------------
\1\ May not add to 100 due to rounding.
______
Prepared Statement of Rotary International
Chairman McConnell, members of the Subcommittee, Rotary
International appreciates this opportunity to submit written testimony
in support of the polio eradication activities of the U.S. Agency for
International Development. Rotary International is a global association
of nearly 29,000 Rotary clubs, with a membership of over 1.2 million
business and professional leaders in 158 countries. In the United
States today there are some 7,500 Rotary clubs with over 400,000
members. All of our clubs work to promote humanitarian service, high
ethical standards in all vocations, and international understanding.
Rotary is submitting this testimony on behalf of a broad coalition
of child health advocates, including the March of Dimes Birth Defects
Foundation, the American Academy of Pediatrics, the Task Force for
Child Survival and Development, and the U.S. Committee for UNICEF, to
seek your continued support for the global program to eradicate polio.
Firstly, Rotary International and our coalition would like to express
our sincere gratitude. In fiscal years 1997 and 1998, you recommended
that $25 million be allocated for the polio eradication activities of
the Agency for International Development, and the full Congress
ratified your recommendation in both years.
This investment has helped to make the United States the leader
among donor nations in the drive to eradicate this crippling disease.
The target year is 2000 for eradication, with certification by 2005. A
thousand days remain to defeat this disease in the 60 nations where the
polio virus still causes death and disability. The eradication of
polio, achieved through your leadership, will not only save lives, but
will also save our financial resources.
eradicating polio will save the united states at least $230 million
annually
Although polio-free since 1979, the United States currently spends
at least $230 million annually to protect its newborns against the
threat of importation of the polio virus. Globally, over 1.5 billion
U.S. dollars are spent annually to immunize children against polio.
This figure does not even include the cost of treatment and
rehabilitation of polio victims, nor the immeasurable toll in human
suffering which polio exacts from its victims and their families. Once
polio is eradicated, tremendous resources will be unfettered to focus
on other health priorities.
progress in the global program to eradicate polio
Thanks to your appropriations, the international effort to
eradicate polio has made tremendous progress during the past two years.
For 1997, it is expected that only about 3,600 polio cases will be
reported, one-half the number of cases reported only two years ago.
This dramatic decline is due to the tremendous success of National
Immunization Days (NID's) in South Asia and Africa. Worldwide, reported
cases have decreased from over 38,000 cases in 1985--a decline of over
ninety percent. Acute Flaccid Paralysis (AFP) surveillance, which is
critical to the process of certification of a polio-free world, is
improving, and health authorities in polio-endemic countries are better
able to assess the challenges remaining to eradication.
In 1996, 154 countries reported no polio. That number is expected
to rise in 1997. About 60 countries, however, remain polio-endemic.
The global eradication strategy is working. Seventy-five countries
conducted NID's in 1997, protecting 450 million children against
polio--more than one-half of the world's children under the age of
five.
During its third year of NID's, India was able to immunize 130
million children on January 18, 1998--the largest public health event
in history. Pakistan, Bangladesh, and six other countries coordinated
their NID's with India's to achieve the maximum effect over the entire
region.
Despite economic difficulties, more than 40 African countries
conducted National or Sub-National Immunization Days during 1996/1997,
as part of the continent-wide ``Kick Polio Out of Africa'' campaign
championed by South African President Nelson Mandela, reaching nearly
70 million children. Forty-nine African countries are undertaking NID's
in 1997-98. Polio-free zones are emerging in both Northern and Southern
Africa.
The three-year ``Operation MECACAR'' (Middle East, Caucasus,
Central Asian Republics) immunization campaign has been deemed a
success, virtually eliminating polio from 19 contiguous countries
stretching from the Middle East to Russia. For 1997, polio cases
reported from WHO's European region have been confined to Tadjikistan
and Turkey.
As a result of three years of successful NID's, China has reported
no laboratory-confirmed indigenous polio cases in 1996 or 1997. In
1997, reported polio cases in the Western Pacific were confined to the
Mekong Delta of Cambodia and Viet Nam, with no cases reported for more
than a year. We are hopeful that the entire Western Pacific is now
polio-free, although continued vigilance is necessary to confirm this.
The entire region has started on the process of certifying polio
eradication.
the role of the u.s. agency for international development
USAID was one of the driving forces behind the eradication of polio
in Latin America and the Caribbean. Since the certification of polio
eradication in the Americas in 1994, AID has turned its attention to
the polio-endemic countries of Africa and Asia, and to finding ways to
use American expertise to enhance immunization services globally. A
major breakthrough was the development of the heat-sensitive vaccine
vial monitor, which will save $10 million annually by reducing vaccine
wastage. AID developed the monitor in conjunction with a private U.S.
firm, at the request of the World Health Organization and UNICEF, and
it is now in place on every vial of oral polio vaccine produced world-
wide.
In April 1996, with the support of the 104th Congress and in
response to the strong urging of your Subcommittee, AID launched its
own Polio Eradication Initiative, to coordinate agency-wide efforts to
help eradicate polio by the year 2000. Congress directed $20 million
for AID's polio eradication efforts in fiscal year 1996, and increased
that amount to $25 million for fiscal year 1997 and fiscal year 1998.
We are advised by AID that their planned Polio Eradication Initiative
activities in 1998 will include:
--As in fiscal year 1997, AID's Africa Bureau will provide $16
million for the Polio Eradication Initiative in Africa. These
funds will flow through WHO, UNICEF, and BASICS for NID
operational support, surveillance, communication, social
mobilization, planning, training, evaluation and cold chain in
approximately 23 countries. In 1997, special attention was
given to the Democratic Republic of the Congo (former Zaire).
--As in 1997, AID will designate nearly $4 million to support India's
NID's and strengthen nationwide surveillance. AID's technical
and programmatic expertise have been critical to the success of
India's three years of National Immunization Days to date. AID,
through grants to UNICEF, WHO, and Rotary, has helped support
India's cold chain, surveillance, training, and social
mobilization efforts.
--An additional $5 million will again be programmed through AID's
Center for Population, Health and Nutrition. These funds will
be used for surveillance and training in 4 South Asian and 10
European countries, through the WHO Regional Offices, and to
support communication and research concerning vaccination
issues. Support is also being provided to the Voice of America
for broadcasting on polio eradication, surveillance, and other
immunization topics, and some funds are also earmarked for
emergency vaccine transport.
the benefits of polio eradication
Increased political and financial support for childhood
immunization has many documented long-term benefits. Polio eradication
is helping countries to develop public health and disease surveillance
systems useful in the control of other vaccine-preventable infectious
diseases. Already, much of Latin America is free of measles, due in
part to improvements in the public health infrastructure implemented
during the war on polio. As a result of this success, measles has been
targeted for eradication in the Americas by the year 2000. The disease
surveillance system--the network of laboratories, computers and trained
personnel built up during the Polio Eradication Initiative--is now
being used to track measles, Chagas, neonatal tetanus, and other deadly
infectious diseases. The campaign to eliminate polio from communities
has led to increased public awareness of the benefits of immunization,
creating a ``culture of immunization'' and resulting in increased usage
of primary health care and higher immunization rates for other
vaccines. It has improved public health communications and taught
nations important lessons about vaccine storage and distribution, and
the logistics of organizing nation-wide health programs. Lastly, the
unprecedented cooperation between the public and private sectors serves
as a model for other public health initiatives.
resources needed to finish the job of polio eradication
The World Health Organization now estimates that in 1998
approximately $220 million in external funds is needed to help polio-
endemic countries carry out the polio eradication strategy. For 1999,
an estimated $248 million will be needed. To date, however, only $160
million has been committed by external donors for 1998, leaving an
estimated shortfall of $60 million. In the Americas, some 80 percent of
the cost of polio eradication efforts was borne by the national
governments themselves. In Africa, many nations can contribute only a
small percentage of the needed funds, meaning that foreign donors must
meet up to 100 percent of the polio eradication costs. We are asking
that the United States continue to take the leadership role in meeting
this shortfall.
The United States' commitment to polio eradication has stimulated
other countries to increase their support. Belgium, Canada, Finland,
France, Italy, Korea, Norway, Sweden and Switzerland are among those
countries which have followed America's lead and have recently
announced special grants for the global Polio Eradication Initiative.
Japan and Australia are major donors in Asia and the Western Pacific,
and Japan has recently expanded its support to polio eradication
efforts in Africa. And both Denmark and the United Kingdom have made
major grants that will help ensure that India eradicates polio by the
target year 2000.
By the time polio is certified as eradicated, hopefully by 2005,
Rotary International will have expended well over $400 million on the
effort--the largest private contribution to a public health initiative
ever. Of this, $304 million has already been allocated for polio
vaccine, operational costs, laboratory surveillance, cold chain,
training and social mobilization in 119 countries. In 1997, realizing
the increased role which external donors need to play in order to
ensure that polio eradication is not jeopardized due to lack of
resources, The Rotary Foundation committed an additional $34 million to
its PolioPlus Fund. More importantly, we have mobilized tens thousands
of Rotarians to work together with their national ministries of health,
UNICEF and WHO, and with health providers at the grassroots level in
thousands of communities.
fiscal year 1999 budget request
For fiscal year 1999, we are again requesting a $25 million earmark
for global polio eradication in USAID's budget, through their Polio
Eradication Initiative, for the delivery of vaccine and the development
of the infrastructure necessary to implement the program. This would
maintain funding at the fiscal year 1998 level, and ensure that the USA
remains the decisive factor in the success of the global initiative. In
addition, we are seeking report language similar to that included in
the fiscal year 1998 Committee report, specifying that this funding is
meant to be in addition to the resources for the regular immunization
program of AID, and is intended to supplement other related activities.
Lastly, we would ask that the Committee again request a report, by
December 1 1998, on AID's plans to fully implement this program.
Humankind is on the threshold of victory against polio, and we must
not miss this window of opportunity. Poliomyelitis will be the second
major disease in history to be eradicated. The world celebrated the
eradication of smallpox in 1979, and no child anywhere in the world
will ever suffer from smallpox again. The annual global savings of
nearly $1 billion per year in smallpox immunization and control costs
far exceed the approximately $300 million that was spent over ten years
to eradicate the disease. The United States was a major force behind
the successful eradication of the smallpox virus, and has recouped its
entire investment in smallpox eradication every 2\1/2\ months since
1971. Even greater benefits will result from the eradication of polio.
Polio eradication is an investment, but few investments are as
risk-free or can guarantee such an immense return. The world will begin
to ``break even'' on its investment in polio eradication only two years
after the virus has been vanquished. The financial and humanitarian
benefits of polio eradication will accrue forever. This will be our
gift to the children of the twenty-first century.
Thank you for this opportunity to testify.
the rotary foundation of rotary international
The mission of The Rotary Foundation is to support the efforts of
Rotary International to achieve world understanding and peace through
international humanitarian, educational and cultural exchange programs.
The Rotary Foundation of Rotary International was the recipient of
one Federal grant in recent years: a U.S. Agency for International
Development Child Survival (CSVIII) grant, for the period 1 October
1992 to 30 September 1996. This grant, in the amount of $2,650,200, was
for polio immunization projects in India and Nigeria, as well as
administrative expenses, and is now closed.
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
----------
Page
Albright, Hon. Madeleine, Secretary of State, Office of the
Secretary, Department of State................................. 173
Prepared statement........................................... 186
American Bar Association, prepared statement..................... 263
Atwood, J. Brian, Administrator, Agency for International
Development.................................................... 141
Prepared statement........................................... 150
Barnes, Michael D., Esq., cochair, U.S. Committee for the United
Nations Development Programme, prepared statement.............. 238
Bernala, Dr. Richard L., Jamaica's Ambassador to the United
States and Permanent Representative to the Organization of
American States, prepared statement............................ 250
Bye, Dr. Raymond E., Jr., associate vice president for research,
Florida State University, prepared statement................... 239
Cassell, Gail H., Ph.D., vice president, infectious disease
discovery research and clinical investigation, Eli Lilly Co.... 95
Prepared statement........................................... 130
Daulaire, Hon. Nils M.P., M.D., M.P.H., senior health adviser,
Agency for International Development........................... 95
Prepared statement........................................... 103
Eizenstat, Hon. Stuart, Under Secretary for Economic, Business,
and Agricultural Affairs, Department of State.................. 43
Prepared statement........................................... 53
Freeh, Louis J., Director, Federal Bureau of Investigation,
Department of Justice.......................................... 69
Prepared statement........................................... 75
Gardiner, Hobart C., president and CEO, International Executive
Service Corps, prepared statement.............................. 275
Georgetown University, prepared statement........................ 240
Greenspan, Hon. Alan, Chairman, Board of Governors of the Federal
Reserve System, Department of the Treasury..................... 1
Prepared statement........................................... 8
Heymann, David L., M.D., Director, Emerging and Other
Communicable Diseases, Surveillance and Control, World Health
Organization................................................... 95
Prepared statement........................................... 112
Hughes, Hon. James M., M.D., Director, National Center for
Infectious Diseases, Centers for Disease Control and
Prevention, Department of Health and Human Services............ 95
Prepared statement........................................... 122
Jollivette, Cyrus M., vice president for government relations,
University of Miami, prepared statement........................ 244
Kostyuchencko, Evgen, council member, Center for Strategic
Studies and Analysis, Ukrainian National Security and Defense
Council........................................................ 69
Lautenberg, Hon. Frank, U.S. Senator from New Jersey............. 160
Leahy, Hon. Patrick, U.S. Senator from Vermont.....54, 71, 97, 143, 179
Prepared statements....................................71, 145, 181
Manatos, Andrew E., president, National Coordinated Effort of
Hellenes, prepared statement................................... 255
Manoff, Robert Karl, director, Center for War, Peace, and the
News Media, Department of Journalism and Mass Communication,
New York University, prepared statement........................ 270
McConnell, Hon. Mitch, U.S. Senator from Kentuck1, 43, 69, 95, 141, 173
Prepared statement........................................... 177
Pan American Health Organization, prepared statement............. 229
Pyszczymuka, Michael, special agent, Federal Bureau of
Investigation, Department of Justice........................... 69
Rossides, Eugene T., general counsel, senior counsel, Rogers &
Wells on behalf of the American Hellenic Institute, Inc.,
prepared statement............................................. 261
Rotary International, prepared statement......................... 281
Rubin, Hon. Robert E., Secretary of the Treasury, Department of
the Treasury................................................... 1
Prepared statement........................................... 13
Sklar, Scott, executive director, Solar Unity Network, prepared
statement...................................................... 219
Smeshko, Ihor, director, Center for Strategic Studies and
Analysis, Ukrainian National Security and Defense Council...... 69
Stevens, Hon. Ted, U.S. Senator from Alaska.................4, 159, 199
Summers, Lawrence H., Deputy Secretary of the Treasury,
Department of the Treasury..................................... 1
Talbott, Hon. Strobe, Deputy Secretary of State, Department of
State.......................................................... 43
Prepared statement........................................... 48
University Heights Science Park, prepared statement.............. 233
Watson, Alexander F., vice president and executive director,
Latin American and Caribbean Division, The Nature Conservancy,
prepared statement............................................. 221
World Wildlife Fund, prepared statement.......................... 225
SUBJECT INDEX
----------
AGENCY FOR INTERNATIONAL DEVELOPMENT
Page
Antimicrobial resistance......................................... 102
Closing missions................................................. 165
Foreign policy................................................... 108
Haiti............................................................ 170
Humanitarian exceptions.......................................... 168
Indonesia........................................................ 160
Infectious diseases.............................................. 167
Mission.......................................................... 164
Morale........................................................... 165
Moslem organizations............................................. 162
Peace process in Bosnia.......................................... 160
Tuberculosis..................................................... 101
Year 2000 problem................................................ 166
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Disease Control and Prevention
Orphan Drug Act.................................................. 133
DEPARTMENT OF JUSTICE
Federal Bureau of Investigation
Bribes........................................................... 89
Corruption....................................................... 94
Counterterrorism activities...................................... 82
Criminal activities.............................................. 83
Foreign investment............................................... 90
Illegal smuggling................................................ 84
Law enforcement liaison.......................................... 91
Nuclear materials................................................ 86
Prosecutions..................................................... 93
Sharing intelligence information................................. 87
Sophistication of criminals...................................... 85
DEPARTMENT OF STATE
Caucasus and Caspian: Economic and Political Security
Elections in Armenia............................................. 56
Peacekeeping force............................................... 59
Pipeline......................................................... 65
Sanctions........................................................ 63
Section 907...................................................... 56
Office of the Secretary
Peace, prosperity, and freedom................................... 182
DEPARTMENT OF THE TREASURY
International Monetary Fund
Asian situation.................................................. 29
Budget policies.................................................. 35
Central bank..................................................... 34
Crony capitalism................................................. 16
Global markets................................................... 18
IMF.............................................................. 23
Mexican issue.................................................... 31
New arrangements................................................. 20
Recovery in Asia................................................. 15
Russia........................................................... 25
Tariff reductions................................................ 22