[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
      FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS 
                        APPROPRIATIONS FOR 2000

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS
                              FIRST SESSION
                                ________
   SUBCOMMITTEE ON FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED 
                                PROGRAMS

                    SONNY CALLAHAN, Alabama, Chairman
 JOHN EDWARD PORTER, Illinois     NANCY PELOSI, California
 FRANK R. WOLF, Virginia          NITA M. LOWEY, New York
 RON PACKARD, California          JESSE L. JACKSON, Jr., Illinois
 JOE KNOLLENBERG, Michigan        CAROLYN C. KILPATRICK, Michigan
 MICHAEL P. FORBES, New York      MARTIN OLAV SABO, Minnesota
 JACK KINGSTON, Georgia
 JERRY LEWIS, California            
                                    

 NOTE: Under Committee Rules, Mr. Young, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
     
     Charles Flickner, John Shank, and Christopher J. Walker, Staff 
                              Assistants,
                     Lori Maes, Administrative Aide
                                ________
                                 PART 3
                                                                   Page
 Export and Investment Assistance.................................    1
 AID Administrator................................................  115
 FY 1999 Emergency Supplemental Request for Central America and 
the Caribbean.....................................................  217

                              

                                ________
         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
57-468                      WASHINGTON : 1999


                        COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio                    DAVID R. OBEY, Wisconsin
 JERRY LEWIS, California               JOHN P. MURTHA, Pennsylvania
 JOHN EDWARD PORTER, Illinois          NORMAN D. DICKS, Washington
 HAROLD ROGERS, Kentucky               MARTIN OLAV SABO, Minnesota
 JOE SKEEN, New Mexico                 JULIAN C. DIXON, California
 FRANK R. WOLF, Virginia               STENY H. HOYER, Maryland
 TOM DeLAY, Texas                      ALAN B. MOLLOHAN, West Virginia
 JIM KOLBE, Arizona                    MARCY KAPTUR, Ohio
 RON PACKARD, California               NANCY PELOSI, California
 SONNY CALLAHAN, Alabama               PETER J. VISCLOSKY, Indiana
 JAMES T. WALSH, New York              NITA M. LOWEY, New York
 CHARLES H. TAYLOR, North Carolina     JOSE E. SERRANO, New York
 DAVID L. HOBSON, Ohio                 ROSA L. DeLAURO, Connecticut
 ERNEST J. ISTOOK, Jr., Oklahoma       JAMES P. MORAN, Virginia
 HENRY BONILLA, Texas                  JOHN W. OLVER, Massachusetts
 JOE KNOLLENBERG, Michigan             ED PASTOR, Arizona
 DAN MILLER, Florida                   CARRIE P. MEEK, Florida
 JAY DICKEY, Arkansas                  DAVID E. PRICE, North Carolina
 JACK KINGSTON, Georgia                CHET EDWARDS, Texas
 RODNEY P. FRELINGHUYSEN, New Jersey   ROBERT E. ``BUD'' CRAMER, Jr.,
 ROGER F. WICKER, Mississippi            Alabama
 MICHAEL P. FORBES, New York           JAMES E. CLYBURN, South Carolina
 GEORGE R. NETHERCUTT, Jr.,            MAURICE D. HINCHEY, New York
Washington                             LUCILLE ROYBAL-ALLARD, California
 RANDY ``DUKE'' CUNNINGHAM,            SAM FARR, California
California                             JESSE L. JACKSON, Jr., Illinois
 TODD TIAHRT, Kansas                   CAROLYN C. KILPATRICK, Michigan
 ZACH WAMP, Tennessee                  ALLEN BOYD, Florida
 TOM LATHAM, Iowa
 ANNE M. NORTHUP, Kentucky
 ROBERT B. ADERHOLT, Alabama
 JO ANN EMERSON, Missouri
 JOHN E. SUNUNU, New Hampshire
 KAY GRANGER, Texas
 JOHN E. PETERSON, Pennsylvania     
                                    

                 James W. Dyer, Clerk and Staff Director

                                  (ii)


      FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS 
                        APPROPRIATIONS FOR 2000

                              ----------                              

                                       Thursday, February 11, 1999.

                    EXPORT AND INVESTMENT ASSISTANCE

                               WITNESSES

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

                 Chairman Callahan's Opening Statement

    Mr. Callahan. We are going to go ahead and get started even 
though many of the members are not here yet, but we want to 
finish this thing as expeditiously as we can.
    I would like to compliment Mr. Knollenberg and two of our 
newer members for being prompt, Ms. Kilpatrick and Mr. Jackson. 
We hope you will set an example for the other members of the 
committee that when we say 10 o'clock, we mean 10 o'clock. Good 
morning.
    Before turning to my statement, I do want to introduce Ms. 
Kilpatrick of Michigan. We are happy to have you on our 
subcommittee and we know you are going to enjoy it. We try not 
to work too hard, but we have a lot of serious work to do and 
we do it for the most part in a very nonpartisan fashion. I 
think you will thoroughly enjoy our committee. We certainly 
welcome you here, as well as Mr. Jackson of Illinois.
    We are happy to have you as well on our committee. You will 
notice some of the beautiful paintings here in this room. 
Brumidi frescoes. It is very historical. We will certainly have 
our staff brief you on this, because it is a great place to 
show off to constituents when they come to Washington.
    Good morning, Ms. Pelosi.
    Ms. Pelosi. Good morning, Mr. Chairman.
    Mr. Callahan. It is 10:04.
    Ms. Pelosi. We won't take it out of your time.
    Mr. Callahan. In any event, I was just introducing two of 
our new members----
    Ms. Pelosi. Isn't that wonderful? Bravo.
    Mr. Callahan [continuing]. Welcoming them here and telling 
them we don't have the bells and the buzzers and the red lights 
and the green lights. We are very generous. But we do have a 
silent timer, and we try to have the 5-minute rule on our 
testimonies anyway. But we don't try to cut you off, and we 
certainly don't try to distract you with all those bells and 
lights, because we want to hear from you. We want your input.
    We have other new members coming on our subcommittee. Jerry 
Lewis used to be on this subcommittee. He is not here yet. 
Martin Sabo is coming to our committee. We are anxious to have 
them back here.
    We have lost one on our side; Mr. Frelinghuysen left and 
went to another subcommittee.
    In any event, our witnesses today are Jim Harmon, Chairman 
and President of the Ex-Im Bank; George Munoz, Chairman and 
Chief Executive Officer of the Overseas Private Investment 
Corporation; and Joseph Grandmaison, Director of the U.S. Trade 
and Development Agency. These three agencies are funded in the 
first title of our bill, the Export and Investment Assistance 
title.
    Although our American economy has remained healthy for a 
record length of time, many of our trading partners are not 
doing as well. Maintaining export markets in Asia, East Asia, 
Brazil, and the former Soviet Union is a major challenge for 
all of these agencies.
    Risk management is particularly the focus of the Ex-Im Bank 
and to a lesser extent for OPIC. I would like both agencies to 
report on any potential claims they are facing and the impact 
of the financial crisis on your profits and reserves, if any.
    All of you are working to expand trade and investment in 
Africa and this committee supports you in that effort. It will 
not be easy. The resumption of fighting between Ethiopia and 
Eritrea and the involvement of so many of its neighboring 
armies in the Congo make your task even more difficult.
    Closer to home, the nations of Latin America and the 
Caribbean have been our major trade and investment partners 
and, in my opinion, still are the greatest potential we have 
for trade and development. We in the last 4 years have been 
somewhat critical of the administration for not placing a 
sufficient emphasis on Central and South America, and we want 
to encourage you all to continue your efforts in that 
direction.
    For years, the administration seemed to have been of the 
opinion that there is only one country in this hemisphere that 
needs help and that is Haiti, and this committee has been to 
Haiti twice. While we recognize the importance of trying to 
assist the people of Haiti, the progress has been almost nil 
with respect to them having some semblance of a democracy and 
providing something for their very needy citizens.
    The Caspian Sea energy development is an administration 
priority. We support that. This committee has also visited that 
region. We spent a lot of time in the Caucasus region. But 
there, too, you have a political and economic situation that is 
rather unstable. Russia seems to be making trouble as it seeks 
to control the export routes for oil and gas in the Caspian 
Sea.
    I would like for TDA, when you come, Mr. Grandmaison, to 
give us some of your thoughts on the opportunities and risks 
there.
    Mr. Lewis, thank you very much for coming. I know you have 
another subcommittee meeting and you are going to have to leave 
in a short time. But I have already welcomed Ms. Kilpatrick and 
Mr. Jackson, the new members of our committee. And to Mr. Sabo 
and to you for coming to our committee, thank you. We are happy 
also to have you here.
    We start very promptly at 10 o'clock, and you are expected 
to be here when I say 10 o'clock.
    Mr. Lewis. I went next door for coffee. I thought the door 
was locked.
    Mr. Callahan. We apologize for the compactness of this 
room. There was a lot of talk about me possibly changing 
committees and other committees were offered to me, but I 
thought with the problems that we have facing us with foreign 
policy and foreign operations that I would stay here, because 
that is probably where I could best serve. But the commitment 
that was given to me when I agreed to stay on this committee is 
that we would be given a permanent, larger hearing facility. I 
am sure it is forthcoming; I think it is that park out there.
    But we are still insisting that we be given a permanent 
hearing room, Jerry. We even tried to confiscate your old 
headquarters next door. But so far we have not gotten that.
    In any event, we welcome the three of you before our 
committee today. At this time, I would like to yield to Ms. 
Pelosi, who is the ranking Democrat on our committee.
    Ms. Pelosi. Thank you very much, Mr. Chairman. Nobody is 
happier than I that you did not change committees. I think we 
have a good working relationship on this committee, and I know 
that our new members will find that soon.
    I want to join you in welcoming Mr. Jackson, in seniority, 
and Ms. Kilpatrick to our committee. They will be wonderful 
additions in joining our fight to have greater recognition for 
the needs of the Southern Hemisphere and what we are doing in 
terms of export finance, bilateral assistance and multilateral 
assistance.
    It seems silly for me to be welcoming Mr. Lewis. He is such 
a distinguished and senior member on the Appropriations 
Committee, but it will be an honor to serve with him on this 
subcommittee.
    We will miss Mr. Frelinghuysen, but I am glad to see most 
of our folks are back. I look forward to working with you. We 
work in a bipartisan way when we can on this committee.
    Mr. Chairman pointed out that I was a few minutes late, and 
I was going to use those minutes to praise him, so I will put 
those remarks in the record.
    Mr. Callahan. I would like to have them in writing anyway.
    Ms. Pelosi. You didn't tell me, Mr. Chairman, that they 
were tearing down this wall. In any event, on our side, we are 
also joined by a very distinguished and more senior member, Mr. 
Sabo, on our committee, and I hope that he enjoys his 
participation and will stay with us for years to come on this 
subcommittee.
    Thank you, Mr. Sabo. I know you had your choice of 
anything. We are very delighted that you chose to come to this 
committee.
    Mr. Sabo. Happy to be here.

                     Ms. Pelosi's Opening Statement

    Ms. Pelosi. Today, I am pleased to welcome Mr. Harmon, Mr. 
Munoz and Mr. Grandmaison to our hearing on export financing 
and related programs. However, again I want to say how 
important it is for us to work together on these issues of 
export finance, and I know that our new members will add a 
great deal to that debate.
    The subcommittee, under Chairman Callahan's leadership, has 
acted in a bipartisan manner and produced foreign aid bills 
which reflect the wide range of views of the subcommittee 
members, and which enable the U.S. to meet vital national 
security needs around the world. Not that I always agree with 
his bills, not that I even always vote for them, but he does 
give us the opportunity to have our say. I look forward to 
working with him and with all of you.
    I am pleased again to welcome the representatives of the 
three export-related agencies funded in our Foreign Operations 
bill to this hearing. These agencies provide direct support to 
the U.S. economy by easing the way for American exports. Their 
importance grows as exports account for a larger and larger 
share of America's jobs growth. As the budget request for these 
agencies grows accordingly, we must ensure that the terms and 
the conditions of our assistance are consistent and responsive 
to the need to preserve the world's environment, the respect 
for human and labor rights, the need to promote small and 
women-owned and minority-owned businesses, access for the 
diverse and expanding array of export-related companies, and 
finally that the credits and loans are extended with an 
appropriate assessment of risk to the U.S. taxpayers.
    Again, I want to say that our committee has emphasized over 
and over again the important focus on the Southern Hemisphere, 
on Africa and Latin America, where we must do much more; and of 
course that will come out in our questions. I won't take any 
more time except to again say what a pleasure it is to serve 
with Mr. Callahan as our chairman.
    I welcome the witnesses and look forward to their 
testimony.
    Thank you, Mr. Chairman.
    Mr. Callahan. Thank you, Ms. Pelosi. It is not normal, but 
since we have four, some returning, some new members to our 
committee, I would like to express to you all that if you have 
anything you would like to say, we will welcome your comments 
at this time. Any of the four of you that might want to 
comment?
    Ms. Kilpatrick. Thank you, Mr. Chairman and Ranking Member 
Pelosi for the opportunity to serve with you. I have been very 
interested in foreign affairs for a long time. That the 
chairman took the personal time to call and welcome me, I think 
that is extra special. I look forward to working with you.
    Thank you.
    Mr. Jackson. Let me just associate myself with everything 
that Congresswoman Kilpatrick said and also thank the chairman 
for his earlier admonishment to be on time.
    Mr. Callahan. I would like to compliment the two of you for 
being on time.
    Jerry.
    Mr. Lewis. Mr. Chairman, as you know, it was my privilege 
to serve on this committee for almost a decade. I only left it 
because there was an opportunity to go to the Defense 
Subcommittee, and I couldn't stay here and do that, too. I must 
say it is a great honor for me to be able to return.
    I feel strongly, Mr. Chairman, that America's role in the 
world is fundamental. It is why we should have a Congress in 
the first place. I really feel that foreign affairs issues 
ought to be nonpartisan. They should end at the water's edge. 
If we work at that, we can have a huge impact on the world. I 
am pleased, under your leadership, to try to make a 
contribution.
    Mr. Callahan. We thank you. We will tell you, all of you--
of course, you and Martin certainly know, but we haven't had a 
foreign relations authorization bill that has passed in the 
last decade or so.
    A lot of the authorization problems theadministration has 
have come through this committee. For example, OPIC and all of your 
agencies that are testifying today must be reauthorized every 5 years. 
But it becomes a responsibility of this committee to authorize as well 
as to appropriate because the Foreign Relations Committee hasn't been 
real successful in passing legislation. It is not any disrespect to any 
members of the Foreign Relations Committee.
    I thought it was interesting last weekend, Jerry, you and I 
talked about going to Jordan to the King's funeral. Well, 
neither of us could make the connections to get over there 
since we had so little notice to go, but the chairman of the 
Foreign Relations Committee went with the President at the 
President's invitation. Ironically, from Air Force One they 
called back, wanting us to handle legislation to give Jordan 
some money. My thoughts were, why don't you get the Foreign 
Relations Committee to do it?
    In any event, you will learn that.
    Ms. Pelosi. They are the ceremonial committee.
    Mr. Sabo. Mr. Chairman, to all the members as it relates to 
your time for meetings, I advise them to ask you whether it is 
a.m. or p.m. and if anybody is interested, I will tell them the 
story.
    Mr. Callahan. One night we had a conference committee 
meeting, and Martin wasn't on the committee, but they needed 
some additional appropriators to serve out the balance on the 
conference committee and we were in heated session. In any 
event, about 7:30 we decided to break for dinner and go to have 
dinner and then come back at 9 o'clock. I walk out, I run into 
Martin in the parking lot. I say, we have recessed until 9. So 
he got in his car, went home and went to bed.
    Mr. Harmon, good morning to you. We will submit your entire 
statement into the record. We welcome you to the committee this 
morning.

                     Mr. Harmon's Opening Statement

    Mr. Harmon. Thank you very much, Mr. Chairman. I sense the 
cordiality of the committee members and the intimacy of this 
room where we can have even a closer relationship between the 
witnesses and the members of the committee.
    Mr. Chairman, Congresswoman Pelosi and other members of the 
subcommittee, Ex-Im Bank is requesting $839 million for program 
budget and $57 million for the administrative budget. 
Comparable levels of fiscal year 1999 are $765 million and $50 
million, respectively.
    I have presented some charts here. If you look at them, I 
will try to go as quickly as I can. The first chart shows a 
very stable program budget for a period of time. For example, 
over a 5-year period, from 1995 to the year 2000, the increase 
in program budget is less than 10 percent.
    With the fiscal year 2000 budget request, we estimate the 
Bank will be able to facilitate nearly $20 billion in exports, 
which is almost four times what it was 12 years ago as 
illustrated in chart number 2. Chart number 2 shows significant 
growth in Ex-Im Bank support of exports from 1988 all the way 
to the year 2000. This growth was interrupted slightly last 
year because of financing exports to higher risk countries that 
required more funds from our program budget. As a result, we 
could not do all the business the Bank had in-house.
    In any case, for fiscal year 2000, we project that the Bank 
will support the largest amount of exports in any single year 
of its 65-year history.
    Ex-Im Bank's mission is to support American exports and 
thereby sustain U.S. jobs. This mission may be more important 
today than at any time in the past several years. First, the 
global financial crisis has caused a dramatic retrenchment in 
private capital flows, impacting trade, economic well-being and 
jobs in both the developing world and in the United States.
    Second, trade has never been more important to our economy, 
with exports accounting for approximately one-third of American 
job growth in the last 5 years. In this difficult environment, 
Ex-Im Bank last year directly supported more than 2,000 U.S. 
exporters, 80 percent were small businesses, and 20 percent 
were new customers.
    Moreover, Ex-Im Bank indirectly benefited tens of thousands 
of other businesses. Last year, as the private sector banks 
withdrew, we moved decisively to assist U.S. exporters, thereby 
protecting U.S. jobs.
    In considering Ex-Im Bank's program budget, it is important 
to reflect on experience. Based upon my 38 years in the 
investment banking world and living through eight bear markets, 
I am confident there will be a recovery in the developing world 
and these countries will re-emerge as important markets for 
U.S. exports.
    The global financial crisis has resulted in an 
unprecedented credit crunch in the developing world. This is 
the major factor preventing recovery. In 1996, nearly $200 
billion in loans were made to developing countries. Most were 
initiated by private financial institutions. This year, it is 
projected to be about $17 billion. This extraordinary decline 
has made it very difficult for developing countries to purchase 
U.S. goods. While Ex-Im Bank can never replace the private 
sector, we can play a critical role in keeping trade flowing 
and encourage private lenders to remain engaged. Ex-Im Bank was 
able to fill some of this gap.
    If you look at the last chart, chart number 3, for just a 
brief moment, you will see what is a major theme throughout our 
presentation, and that is the private sector credit flows to 
the developing world dropping from $200 billion down to about 
$17 billion. At the same time, our authorizations went from a 
little bit less than $12 billion up to a little bit more than 
$14 billion from 1996 through 1999. As you can see, Ex-Im Bank 
was able to fill some of the gap.
    Much of our success comes from short-term programs for 
small business, export credit insurance and working capital 
guarantees to help produce exports. For fiscal 2000, we 
estimate these two programs will total respectively about $4.7 
billion and $850 million compared to $4.1 billion and $650 
million in fiscal 1999.
    Ex-Im Bank is playing a critical role in Asia and 
throughout the world. It is worth taking a moment to look at 
what we did in Korea last year. In 1997 Korea purchased $33 
billion in goods and services from the United States. Last 
year, purchases declined to approximately $15 billion.
    When Korea's economy started to collapse, Ex-Im Bank 
responded effectively with a short-term insurance program 
thatfacilitated more than 2,400 transactions in an 8-month period 
compared to barely 50 transactions in all the prior year. This support 
also encouraged the private sector to maintain at least a modest 
presence during this difficult period.
    In Brazil, which I visited in November, Ex-Im Bank reopened 
in the public sector; and recently, we offered a $1 billion 
short-term insurance program.
    In Russia and the New Independent States, Ex-Im Bank has 
been a pioneer in helping open markets for U.S. goods. Since 
August we have not approved any new transactions in Russia, but 
despite current economic difficulties, we are cautiously 
hopeful that there will be opportunities for American exporters 
in the future.
    Sub-Saharan Africa is another region that holds 
opportunities. Last year, I was the first Ex-Im Bank chairman 
ever to visit sub-Saharan Africa. With the help of our African 
Advisory Committee, chaired by former Representative Floyd 
Flake, we are determined to increase exports to Africa.
    The global crisis has impacted Ex-Im Bank's portfolio. We 
have approximately $1.1 billion in workouts. Fortunately, there 
is significant collateral and we are very closely monitoring 
these loans to eliminate or minimize losses.
    In order to achieve our program objectives, it is critical 
to increase the Bank's administrative budget to support four 
areas crucial to our mission: one, redeploying staff in key 
countries so that Ex-Im Bank can compete with other nation's 
export credit agencies and help U.S. exporters meet foreign 
competition; two, staff training; three, expanding outreach to 
small and rural enterprises in keeping with our congressional 
mandate; and four, improving technology to automate our short-
term insurance program to streamline case processing. This 
budget is essential to accomplish what the Congress has asked 
us to do, to keep American exporters competitive.
    To do this, we must be more responsive to our customers. At 
the Bank we often say we not only have to sell the buyers, but 
we also have to sell the sellers. Internationally, we must make 
our programs known to more potential buyers and domestically we 
must make more businesses, banks and other lenders aware of our 
programs. Although the U.S. economy is strong, one of our weak 
links is exports to the developing world.
    Finally, I must acknowledge how well Ex-Im Bank's talented 
staff is responding to challenges in formulating new ways for 
the Bank's programs to sustain U.S. jobs.
    I am pleased to answer any questions. Thank you.
    Mr. Callahan. We thank you, Mr. Harmon. With your 
indulgence we are going to hear from all three of our panelists 
today and then permit questions.
    [The statement of Mr. Harmon follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Callahan. We will next hear from Mr. George Munoz.
    George, if you would take this seat. Mr. Grandmaison, you 
can come on and sit at the table, too.
    This is George Munoz, the President and CEO of OPIC, the 
Overseas Private Investment Corporation. George, we will submit 
your entire statement for the record and ask you to abbreviate 
it if possible.

                     Mr. Munoz's Opening Statement

    Mr. Munoz. I will, Mr. Chairman. Thank you so much, 
Congresswoman Pelosi and members of this subcommittee; I am 
very pleased to be here.
    I am happy to report, Mr. Chairman, that OPIC is working 
very closely with of TDA, with Jim Harmon of Ex-Im and Joe 
Grandmaison TDA. We have a strong working relationship of which 
I am very proud. Because I am interested in addressing any 
issues or questions you may have, I will take only a few 
minutes to highlight the points in my written statement that 
are worthy of special note.
    Mr. Chairman, I set out four priorities for our agency. 
High among them was being prudent with our exercise of the full 
faith and credit of the U.S. Government. Second, we want to 
respond to the needs of the American business community as it 
attempts to bring capital and skills to developing countries 
and emerging economies, primarily when it is in the interest of 
the U.S. Government to bring development and stability to 
strategic regions of the world.
    Thirdly, we want to expand our reach to the U.S. small 
business community. Lastly, we want to remain self-sustaining 
and relevant by being a high-performance organization striving 
to have the best in people, products and our systems.
    Mr. Chairman, I would like to touch upon five points which 
will help this committee continue its support of OPIC. First, I 
can confirm that the agency for the 27th consecutive year 
operated at no net cost to the taxpayer, where our revenues 
were greater than our expenditures, including our setting aside 
of reserves against any potential claims or losses.
    Second, for this year and for the coming year, with your 
help, we will respond to the special areas of needs, including 
those in Africa, Central America, and the Caspian Sea energy 
development, and, throughout all this assistance, we will do it 
in a manner that supports environmentally sensitive 
development.
    Thirdly, Mr. Chairman, this committee and other members of 
the Congress have asked us to demonstrate the positive impact 
of our agency and programs, not only on the developing 
countries but the impact on our own country. The most recent 
review of actual performance verifies OPIC's expectations of 
the positive impact on the U.S. economy.
    To more fully understand how many U.S. businesses are 
indirectly participating in the global economy because of 
OPIC's support, we have been working to help identify for 
public release suppliers from all 50 States to OPIC-supported 
projects. We have identified over 1,000 suppliers in the past 
few months alone that have sold over $1.7 billion in goods and 
services in a single year to 125 OPIC-supported projects. 
Nearly two-thirds of these suppliers were U.S. small 
businesses.
    In the written testimony, I give several examples of the 
multiplier benefit associated with OPIC projects. One of these 
examples is in Baton Rouge, Louisiana, where a company has 
identified more than $83 million in goods and services 
purchased in 1 year to support the agribusiness project in 
Ethiopia. These goods and services came from 264 different 
companies in 32 different States of this country, of America.
    As you know, Mr. Chairman, OPIC does not support any 
project that might harm the U.S. economy or will result in a 
loss of the U.S. jobs. OPIC collects and analyzes, both 
geographically and sectorally, the projected U.S. employment 
and associated economic benefits of the projects it assists.
    We have also received State and local endorsement for OPIC 
programs. Recently we received the endorsement of the 
Agricultural and International Trade Committee of the National 
Conference of State Legislatures and also the National 
Association of Counties and U.S. Conference of Mayors.
    I am pleased to report that we are making progress in our 
reaching out to small business. We have developed a system to 
expedite the processing of small business loans and insurance 
requests and have decreased the fees associated with direct 
loans and insurance retainers. Furthermore, it is estimated 
that approximately two-thirds of identified suppliers of OPIC-
backed projects around the world are U.S. small businesses 
according to newly collected data.
    Fourth, Mr. Chairman, if there ever was a year in which 
OPIC was put to the test as, I am sure, were Ex-Im and TDA, it 
was 1998. As Treasury Secretary Robert Rubin noted just 
recently, the financial crisis of the last 18 months has often 
been referred to in some ways as the most significant financial 
crisis of the last 50 years. And Federal Reserve Board Chairman 
Alan Greenspan also noted the storm coming our way as a result 
of weaknesses in many foreign economies.
    As I have consistently stated, my highest priority for OPIC 
is to have prudent financial management of our portfolio and 
activities. I am happy to report that despite the turmoil in 
the emerging markets, OPIC has stood solid in this midst.
    First, we have just received a clean audited opinion from 
our outside independent auditors. Second, this year I have 
asked, in consultation with our independent auditors, that we 
increase our general reserves so as to lessen any risk of loss 
beyond our reserves in future years. I did this because we can 
afford to.
    Our revenues are up, and I want to make sure that our 
reserves are also up. Yet, our recovery rates remain high and 
our portfolio is performing well.
    I know you and your staff are interested in OPIC assessment 
and exposure in certain countries of the world including 
Russia, Indonesia and Brazil. My written testimony touches upon 
these countries. Briefly, I can assure this committee that our 
portfolio remains strong in each of these countries. There are 
some potential claims, but there may be ways to limit or 
eliminate them.
    Last, but certainly not least, Mr. Chairman, I would like 
to formally request that Congress authorize OPIC to use $35 
million from its user fees to cover administrative expenses and 
$24 million, also from OPIC's own funds, to finance its credit-
related programs. OPIC collections in fiscal year 2000 will 
continue to exceed uses and will result in a net budget 
contribution of $204 million.
    I would like to make note, Mr. Chairman, that this is the 
first time we have broken over $200 million in negative budget 
authority and negative budget outlays, which will help this 
committee fund other important programs.
    OPIC's overall budget request is down. For fiscal year 
2000, the $24 million request for credit programs and $35 
million for administrative expenses represents a decrease of 
more than $25 million, or approximately 30 percent, from the 
amount approved just last year. The decrease really is 
attributable to the decrease in credit, funding. Part of this 
reason for this is because we have perfected and fine-tuned our 
credit funding mechanism and we have found some efficiencies 
there.
    Our administrative budget is going up by $2.5 million 
compared to last year. But in reality, when you look at how 
much we received this year with the additional $2.1 million we 
received for Y2K, with the support of this committee and its 
staff, we really are operating this year with approximately 
$34.6 million. So by asking for $35 million, our increase is 
quite small.
    In conclusion, I would like to say that the Overseas 
Private Investment Corporation has fulfilled its statutory 
requirement to operate on a self-sustaining basis despite the 
challenging global financial conditions. We look forward to 
continuing to help American companies compete in the global 
economy while supporting development and economic stability in 
areas of strategic U.S. interest.
    Thank you, Mr. Chairman and members of the subcommittee for 
your support of OPIC. We look forward to answering any of your 
questions.
    Mr. Callahan. Thank you, George.
    [The statement of Mr. Munoz follows:]

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    Mr. Callahan. Mr. Grandmaison, the Director of the U.S. 
Trade and Development Agency.

                  Mr. Grandmaison's Opening Statement

    Mr. Grandmaison. Mr. Chairman, thank you for the 
opportunity to be with you. I would ask that my remarks be 
submitted for the record. I might make just a few points, 
taking your lead, to get to as many questions as possible.
    As you know, TDA's role is to provide early project 
planning assistance money for capital infrastructure projects. 
How are we doing is the question. To answer that question, I 
would like to refer you to the performance goals and 
measurements that our agency has adopted. The most important 
one is the export multiplier, that is, for the amount of money 
that we invest, how many exports do we facilitate?
    In 1993, the ratio was 25 to 1. For every dollar, $25 
facilitated exports. In 1998, I am pleased to report it is now 
32-to-1, a sizable increase. We have now been able to identify, 
since the agency began, $12.3 billion worth of exports we have 
facilitated. A good example, as my colleague George Munoz 
mentioned, is a project that involved a Baton Rouge company. In 
that case, TDA had made an early cost-share investment with 
that company to develop that particular project.
    The hit rate is the second measurement that we use. In 
private industry they say that when they do feasibility 
studies, if they get 1 or 2 successes out of 10 attempts, that 
is considered good. We are pleased to say that we are 
maintaining our 1 in 3 average.
    We also don't invest in projects that will go forward 
irrespective of our involvement. It doesn't make any sense. If 
a project is going to go American, regardless, then we 
shouldn't be putting taxpayers' money into it.
    What we do is, we invest in projects that, by 
participating, by providing that U.S. Government endorsement, 
of a project, brings additionality and makes it more likely 
that that project becomes successful.
    Small business is one of our primary targets; 60 percent of 
the companies we work with are small. One-third of the budget 
that we have allocated to companies goes to small businesses. 
The only way to maintain those averages is by continually doing 
outreach as much as you possibly can.
    You have to keep in mind, we are a 41-person agency. But we 
do everything we possibly can to do what you all challenged us 
to do, and that is, to take the program out of the Beltway and 
bring it to wherever we possibly can, involving more companies 
around the country.
    A good example of that is, the beginning of next month, we 
are doing a Southeast regional outreach seminar in Florida. 
Normally, we have done that here in Washington. We decided that 
did not make sense; so we are trying to do it on a regional 
basis. If that is as successful as it appears it is going to 
be, we hope to continue doing that.
    Targeting sectors. A couple of the points that we have 
learned is that in the feasibility studies that we finance, we 
are trying to aim at the high-tech end of any of the projects 
we are involved in. The reason is that in today's world, as it 
becomes increasingly competitive, i.e., where the products are 
manufactured, if there is a high-tech piece to a project, then 
we know it is going to go American. It is that simple. Whether 
it is the WAAS technology, having to do with satellite-based 
technology, or SCADA systems for an energy project, it doesn't 
make any difference. If you can move it up so it is more high 
tech, then we are going to get exports from it.
    Congressman, you mentioned the Caspian region. We are very 
pleased and proud with what we have been able to do. It all 
began with a major conference last May in Istanbul where we had 
700 attendees. We have invested in five pipelines in the 
region. We continue to work with all of the governments in the 
Caucasus.
    The next step is, our three agencies, for the first time 
have developed a business development team, working out of 
Turkey, aimed especially at the Caucasus region.
    One of the things we are trying to do is not to aim our 
efforts exclusively at the question of pipelines, but on making 
U.S. companies more aware of the opportunities that will come 
about because of the pipelines, whether it be wastewater 
treatment facilities, airports, or highways.
    Now, towards that end, once again our three agencies are 
cooperating on a U.S.-Caspian ambassadors mission to the United 
States. We are going to use our U.S. ambassadors to bring U.S. 
companies together to explain that this is a region that is 
beginning to happen, and they have to get in on the ground 
floor. If they don't, by the time they pay attention to it, 
when they go to the caspian region, people will be speaking 
French and German. So it makes a lot more sense for them to get 
involved now.
    Perhaps the most dynamic change in our program has been the 
change from working on public sector projects almost 
exclusively 10 years ago to private sector projects now. In 
1990, only 10 percent of our projects were private sector 
projects. Because of the changing dynamics around the world, I 
am pleased to say that in 1998, almost 50 percent of the 
projects we invested in were private sector projects. This is a 
major dynamic that has changed, and we are attempting correctly 
to do whatever we can to further facilitate it.
    In terms of regions, Africa has been mentioned several 
times. If you will forgive me, I think TDA has an exceptional 
program in Africa. It is the region of the world that, for us, 
is growing most quickly.
    Once again, our three agencies cooperated in financing a 
country manager from TDA who, for 90 days, went to 
Johannesburg, and worked out of the Department of Commerce's 
office. He conducted business development efforts in the sub-
Saharan countries, something we had not done before. It was 
cost effective because, rather than going in and just talking 
about TDA, he could also talk about OPIC and Ex-Im.
    As a result, whereas last year the regional allocation for 
Africa, was invested by the end of June, this year by the end 
of March our regional allocation will have been invested. But 
that is good. We are finding good projects, a great deal of 
U.S. interest and we are obviously doing everything we can to 
follow through.
    In conclusion, Mr. Chairman, the recommendation from the 
administration is that we get a modest increase that will bring 
us up to $48 million. We realize there are always a great many 
pressures on the committee in terms of the decisions it has to 
make. We respectfully make the commitment to you, as I have 
each year that I have been here, that whatever the funds are 
that you allocate to TDA, I promise you, with the quality staff 
that we enjoy, we will do everything we can to meet your 
continued confidence.
    I thank you.
    Mr. Callahan. Thank you, Mr. Grandmaison.
    [The statement of Mr. Grandmaison follows:]

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                            REAUTHORIZATION

    Mr. Callahan. One thing I guess we should ask all three of 
you with respect to reauthorization problems. I have forgotten 
what we did last year with respect to--I know we reauthorized a 
2-year period for OPIC. I am told, for TDA, 5 years; and Ex-Im 
Bank, 4 years. I guess we could look at OPIC.
    Mr. Munoz. Mr. Chairman, we are asking for a 4-year 
reauthorization. We are very hopeful that the Congress will see 
that that is a good time frame for us.
    Mr. Callahan. I don't know if we can go 4. I certainly 
would support it. I don't think, however, we can risk the 
International Relations Committee bringing this issue to the 
floor. It has been tried in past years and put us in a very 
difficult position, having to reauthorize against the wishes of 
the House. We don't want to go through that again.
    I don't know if we can go 4, but I will talk to Ben Gilman 
and see.
    I think we ought to at least get you past the election year 
cycle of having to go to the floor and argue all of these 
things about corporate welfare and argue against Ralph Nader, 
and some in the House who are running for President who have 
been so vocal against your agencies. So we want to get 
everybody past the presidential and congressional elections. We 
will take a look at that; four years is, I guess, all right for 
you.
    I am also pleased to hear indications of your efforts of 
trying to utilize some of your resources in smaller ventures. 
Four or 5 years ago we saw an indication that some of your 
agencies thought the only thing you were supposed to do was to 
facilitate the building of dams or facilitate airplanes, 
Boeing, for example.
    I am real happy, especially with your numbers, Joe, 
increasing from 10 percent to 50 percent. That is a great 
direction. I shall continue to encourage all of you to utilize 
some of your resources to assist small businesses to expand 
their opportunities overseas and to help the countries actually 
through the small business thing.
    I know in insurance--most people in small business, George, 
don't even think about trying to do business with another 
country because they are so concerned about--they don't 
understand the falling dollars, they don't understand the 
international monetary system, and they are afraid they are not 
going to get their money.
    Mr. Munoz. That is correct.
    Mr. Callahan. If there is an opportunity for you all to 
really expand, even further, into these small projects, 
assisting small American businesses in overseas opportunities, 
I would like to see continued progress in that respect.
    The third question I have today is, briefly, the Y2K 
problem. Do all your agencies feel comfortable with where you 
are and that you will not be experiencing any major problems 
come 2000?
    Mr. Munoz. Mr. Chairman, there are two areas to look at. 
One is just our own operations, and thanks to the support of 
this committee, yourself personally, for our Y2K funding, we 
can report that we are going to be making the time lines that 
OMB has set out. There are going to be some possible phase 
differentials, but we are pretty much on line there.
    The second way to look at it, of course, is our customers 
in our overseas operations and how much that will be affected; 
that is pretty much outside our control. I think there are some 
good efforts being made by the World Bank, IMF and other 
international bodies, to bring attention to this issue. But we 
are in touch with all of our clients to make sure that that is 
a high priority that they are looking at.
    At this stage they are aware of it. A lot of it is outside 
of people's control.
    Mr. Callahan. Mr. Harmon.
    Mr. Harmon. I think we are in okay shape. But we worry 
about the same thing George has said in terms of the developing 
world getting up to speed. That will be a challenge; it will be 
a challenge for us, too. Everyone who is dealing with it, 
whether its Indonesia, Russia, or Brazil and so forth will run 
some risk.
    Mr. Callahan. But in your own agencies you feel 
comfortable?
    Mr. Harmon. Yes.
    Mr. Callahan. Joe.

                         COMMERCIAL OPPORTUNITY

    Mr. Grandmaison. We are fine. For every challenge overseas, 
the door opens for a commercial opportunity. Hence, in Bangkok 
on March 29, we will be having 50 U.S. companies meeting with 
banking sector project sponsors so that they can help solve 
their problem by buying U.S. equipment.
    I don't want to seem tawdry about identifying the 
commercial side of that, but for every challenge, there is 
obviously a commercial opportunity, and we would like to try to 
maximize it.
    Mr. Callahan. Ms. Pelosi.
    Ms. Pelosi. Thank you, Mr. Chairman. Mr. Chairman, in my 
remarks, saying how much I was looking forward to working with 
everyone today, I neglected my sister Nita. We spend so much 
time working together. But how pleased I am that she has chosen 
to stay on our committee where she had plenty of opportunity as 
well. She is a great leader on all of these issues.
    And how blessed we are to have our three witnesses heading 
up these important agencies. You know so much, you bring so 
much experience and interest, and reputation. I think that 
those of us who are concerned about increasing U.S. exports 
abroad and creating more opportunities have to recognize how 
fortunate we are to have the three of you where you are.
    My first question will be to Mr. Harmon, in friendship. As 
you know, we have an overlay. All of my questions to all of you 
will relate to the others. I will take off on a point that Mr. 
Munoz said.

                                us jobs

    He said OPIC does not support any project that will result 
in the loss of U.S. jobs. Since this is supposed to be about 
the creation of U.S. jobs, I have serious concerns about some 
work that Ex-Im may be doing that may result in, not 
intentionally, the transfer of technology. You don't have to 
answer that right now, but we have talked about it, and I hope 
that we can get some kind of a report back about--especially in 
aircraft financing, that we were not financing the transfer of 
U.S. technology abroad for cheaper labor.

                  AUTHORIZATION TO FINANCE HELICOPTERS

    My first question isn't about that; it is about Turkey. In 
1990, Congress extended Ex-Im Bank a limited authority for 
credits for the sale of helicopters to Turkey and Greece. My 
question relates to that.
    Do you think that the 10-year implementation period for 
this sale and the use of a multiple export license to implement 
it is consistent with congressional intent?
    More generally, do you think the Ex-Im Bank should be 
involved in the sale of military equipment?
    Mr. Harmon. Well, thank you very much.
    In 1990, Congress enacted very special legislation 
authorizing this specific sale. The legislation provided Ex-Im 
Bank with the authority to approve it. This approval expires in 
July of 2001, so the support is available for almost 11 years. 
Ex-Im Bank authorized slightly over $1.1 billion to support the 
sale of helicopters to Turkey. To date about $350 million of 
those helicopters have now been sold.
    Your question is, did I think that it was the right thing 
to do back in 1990.
    It is hard for me to say since I was not at the Bank when 
this particular decision was made.
    Ms. Pelosi. No, no, no. Do you feel that the ongoing 
implementation of this sale is consistent with Congressional 
intent?
    Mr. Harmon. We were for a time not authorized to finance 
military equipment with only one exception, anti-narcotics 
exports. Some years later, as you know, there was a dual-use 
provision that allowed Ex-Im Bank, with the scrutiny of the 
State Department to finance some equipment that might have 
dual-use capability. Since 1990, however, Ex-Im Bank has not 
financed the sale of military equipment.
    Ms. Pelosi. You are saying now since 1994 Ex-Im has had the 
authority to finance so-called ``dual-use items,'' that is, 
defense articles and services authorized, so long as they are 
nonlethal and primarily used for civilian use.
    Mr. Harmon. That is correct.
    Ms. Pelosi. In 1996, using this authority, Ex-Im authorized 
the sale of helicopters to the Indonesian army for its supposed 
role in helping develop Indonesia's rural areas. No deliveries 
have taken place to date for financial reasons, but it has been 
authorized by Ex-Im.
    Can you tell us how the use of this authority was justified 
in this case and what role the Indonesian army will have in 
rural development? How do you justify that?
    Mr. Harmon. This particular authorization also took place 
prior to when I arrived at the Bank. However, all dual-use 
decisions are reviewed by the State Department. We look to the 
State Department for their consent and comment on financing any 
such items.
    So I think, as we did last year in the vehicles that were 
sold to Turkey, they very carefully reviewed it and came to the 
agreement that the color coding some vehicles they could 
identify the use for civilian purposes as opposed to military 
purposes.
    The helicopters, back in 1996, were obviously reviewed by 
the State Department. It was approved, it was authorized; no 
action has been taken since that time. I would have to go back 
and look at the State Department's comments to us back in 1996 
to give you any further comment on that.
    Ms. Pelosi. Thank you. I am concerned about this high 
concentration on aircraft and perhaps military, albeit dual 
use. If we are increasing funding in those areas, how would we 
be able to increase funding in emerging areas like Latin 
America and Africa, if we are diverting money to these other, 
not original intentions of the Ex-Im Bank's charter?
    Mr. Harmon. I will have to come back to you with a number, 
but I believe that the percentage of funding for these dual-use 
transactions has been very small. I cannot remember more than 
two dual-use cases in the past year and a half that I have been 
there. Maybe I have missed one or so, but I will come back with 
some numbers.
    It is relatively modest in comparison to our overall 
program funding, in fact, less than one percent. As I said, 
these cases are very carefully reviewed by us and by the State 
Department. In fact, when we have questions ourselves, we pass 
it back to the State Department to ask about it.
    [Clerk's note.--See attached for list of all dual-use cases 
authorized since the program's inception.]

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    Ms. Pelosi. I have so many questions, Mr. Chairman, but 
since I have gone down this path, I will just finish because I 
think my time is up.
    How would you describe the utility of State Department 
assessments? Would you describe them as thorough and adequate?
    Mr. Harmon. Yes. I feel the State Department does a very 
satisfactory job in reviewing these matters and responding to 
us. They attend every one of our board meetings; and in 
preparation for these meetings, they review every single matter 
and ask questions whenever necessary. In addition, they are 
constantly following up and reviewing matters with us, and we 
are discussing it with them.
    So we have very close coordination with the State 
Department. I cannot remember a board meeting, and we have them 
every week, where they have missed. In fact, over the year and 
a half that I have been there, I don't believe they have missed 
one.
    Ms. Pelosi. So many questions, so little time. We will have 
another round I hope.
    I do want to say that most of my other questions relate to 
questions we have talked about before. We don't want to lose 
U.S. jobs, we don't want to degrade the environment, we don't 
want to violate people's human rights, we don't want to equip 
countries with so-called dual use or other military equipment 
to develop rural areas that they are actually using to violate 
the human rights of their people, be it Turkey, Indonesia or 
wherever.
    I will submit questions to that effect for the record if we 
don't have another round. Thank you again, Mr. Munoz, Mr. 
Harmon and Mr. Grandmaison.
    Mr. Callahan. Mr. Packard.

                           program evaluation

    Mr. Packard. Thank you. I appreciate your appearing before 
this subcommittee.
    There is a lot of money that flows through agencies like 
yours to a variety of countries. We see too many instances 
where it goes to the wrong people and to the wrong places and 
doesn't get to the projects and the programs it is designed to 
do. They are good programs, we support them, we support what 
you are doing. What have you done or what is your mechanism to 
make certain or to evaluate whether the money is reaching the 
places that you want it to reach and not going into the 
corruption, graft and other problems that we see in some of the 
countries that we are trying to serve?
    Mr. Harmon. Who are you directing the question to, sir?
    Mr. Packard. I would like to hear from the Ex-Im Bank 
particularly, but maybe OPIC as well.
    The Ukraine is a good example. Russia is a good example of 
my concerns. We want to support the programs that you are 
sponsoring, but we want it to get to where it is doing what you 
want and we intend it to do.
    A good example are the tractors in the Ukraine and so 
forth.
    Mr. Harmon. I will start. Firstly, it is important to note, 
that the money never leaves the United States. Most people 
don't realize that. The money never leaves the United States; 
equipment leaves the United States. So what we are doing is 
either guaranteeing a U.S. bank, which in turn makes a loan to 
the foreign buyer. This loan then pays the U.S. exporter that 
advances the equipment. Ex-Im Bank then guarantees to the U.S. 
bank that the foreign buyer will pay. If the foreign buyer 
defaults at any point in time, we would have to make payment to 
the U.S. bank. Ex-Im Bank can also make a loan to a foreign 
buyer, which then pays the U.S. exporter for the product being 
shipped.
    But, I cannot emphasize enough that the money never leaves 
the United States. It is just the product that is ordered and 
financed under our short, medium-, and longer-term programs.
    Now, on Ukraine, there is a problem for us. Clearly, we 
have supported increased use of some financing for agricultural 
equipment for farming. We are well aware that there have been 
some questions. However, prior to approval of this transaction, 
we discussed, with the State Department the proposed use of the 
equipment by, quote, ``government-owned farming.''
    Where we could, we have tried to encourage the people in 
the Ukraine, as well as other countries, to try to get the 
private sector involved. However, in the Ukraine, there is very 
little private-sector activity so access to that equipment by 
the private sector is very limited.
    Secondly, we were able to persuade certain U.S. 
manufacturers in this case to create a distributor network in 
the Ukraine that would be privately owned. As a result, there 
is no so-called ``public ownership'' there.
    Finally, in conjunction with the State Department we are 
constantly pressing these issues of greater privatization, and 
private sector involvement in many areas in the Ukraine, 
including state-owned farming.
    But, there is a problem; and we are trying to do what we 
can to encourage privatization. In the end, however, we have to 
make decisions based on the creditworthiness of the 
transaction, assuming it doesn't violate our environmental 
policy. Because if we don't support the U.S. exporter's sale, 
it will go forward from a foreign competitor in another 
country.
    Mr. Munoz. OPIC has several mechanisms in place to avoid 
even the risk of having money being leaked out from the project 
into the wrong hands or someone OPIC has not already reviewed 
and done some due diligence.
    First, we only deal with the private sector. We team up 
with American companies in order for them to come into these 
countries. Secondly, our financing projects, where we are 
lending money, we do project-finance. That is, we are not 
lending money to parties; we are lending money to a project. 
And we must first see and review and approve the use of funds, 
and all of those funds must in fact be put in the project.
    We also require everyone to sign on to the Foreign Corrupt 
Practices Act, making sure there is no funding of money on the 
corruption side. We make heavy use of the U.S. agencies, 
including our U.S. embassy, CIA, Treasury Department and others 
to help in our due diligence for a specific project.
    Because we deal with the private sector in these project-
finance deals, there are many safeguards to avoid having money 
go to the wronghands, or for the wrong reasons, that we are not 
aware of.
    Mr. Packard. I think the committee would be just as anxious 
that the private sector company not be bilked in their 
involvement either, and I don't know what you are able to do to 
protect the private sector. We offer our vehicle which brings 
the private sector into this whole process, and then to walk 
away and leave the burden upon them to absorb any corruption 
problems that result is not a good idea either.
    Mr. Munoz. I agree, Congressman. The reason why, and I am 
sure this is true for Ex-Im and TDA, is when we put on our 
stamp of approval and team up with the private sector, we do 
not do so automatically. We do so after doing due diligence and 
assuring ourselves that the project and the sponsor are doing 
the right thing.
    Mr. Packard. 2 or 3 years ago we brought this up and have 
discussed this almost annually. I am not sure it has gotten any 
better, and that is the reason for the question. And I hope you 
are alerted to the fact and are always aware of the fact of 
that scenario where we want the money to do what it is intended 
to do and not get sideways into someplace else.
    Mr. Callahan. Mrs. Lowey.

                         world bank activities

    Mrs. Lowey. Thank you, Mr. Chairman. I too welcome this 
distinguished panel. And I wanted to follow up on Mr. Packard's 
statement.
    We are very concerned about reports in the New York Times 
and elsewhere that the World Bank has really faulted itself on 
its lack of due diligence with regard to cronyism, political 
repression, et cetera, in Indonesia. I appreciate Mr. Munoz's 
comments on the matter, and I won't pursue that question 
further.
    I just want you to know that, from my perspective, this is 
a really key issue. Although I have been a very strong 
supporter of investments in Russia and in developing nations--
we talk about going back into Russia again, and I am not 
convinced that is the right thing to do now. As much as I 
support strengthening the economy and strengthening the lives 
of the people, I haven't been convinced that we have been able 
to deal with the rampant corruption that is there. So I would 
just like to mention that as a general statement.
    Secondly, there have been some comments on the Caucasus. We 
went to Azerbaijan and Armenia and traveled in the Caucasus, 
and I have been concerned, frankly that even though we talk 
about helping small businesses, and there have been increasing 
activities with small businesses certainly in the Caucasus and 
Azerbaijan, I am not convinced that the large oil companies 
need our help. But they seem to get it all the time.
    I remember my discussion with Conoco when we were in 
Russia--they get our help. And, yes, I know the arguments that 
if we don't do it, someone else will. But I just want to 
emphasize again that the small businesses that come to me in my 
office don't have the foggiest notion of how to get involved 
with most of our export agencies. And this is absolutely 
critical because, frankly, the Texacos and other oil companies 
will do well without us. They are in my district, and I support 
all of their good work and their exports. So I want to 
emphasize again what our chairman has said.
    I want to emphasize to Mr. Harmon, a good friend from New 
York, that I would be interested in following up in 
conversations with you about what you see as the importance of 
going into Indonesia and making sure that market survives.
    But how do you do that and avoid the pitfalls that the 
World Bank has found? Mr. Munoz has commented on that. I think 
this is really so key, because although we are assisting the 
private sector, we need to ensure that this private sector 
doesn't contribute to the repression in East Timor, and the 
corruption. Although our companies may have the transparency we 
require, it is very difficult to ensure that the Indonesian 
government and companies follow suit.
    Perhaps you can comment on that.

                               indonesia

    Mr. Harmon. Yes, thank you very much. I do follow Indonesia 
very closely. I have just recently returned from Indonesia 
where I visited several of our buyers as well as government 
officials.
    We have also talked to the World Bank as well as met 
several times with IFC and World Bank officials on Indonesia. 
It is a subject of concern. We are monitoring it closely. In 
fact, we are sending a team there next week to look at a number 
of things.
    One of the things we are trying to do is to push very hard 
to get a restructuring or rescheduling of Indonesian debt that 
existed in some of the troubled private sector companies. We 
are seeking a fair and equitable resolution of this debt. So 
far, we have yet to see that progress.
    Debt problems all over the developing world concern me. 
But, I think with the World Bank and IMF efforts, as well as 
our work and the work of the other export credit agencies, we 
have brought to bear in Indonesia that a new program may well 
work better in terms of treating contractors fairly. That is 
the first step in the local recovery program. Once you treat 
contractors fairly in a restructuring or rescheduling, you will 
find that new capital will come back into Indonesia someday.
    We have carefully reviewed the pending Indonesian elections 
with the State Department, and we are cautiously hopeful. In 
fact, we asked the State Department toorganize an interagency 
meeting to review the Indonesia situation. At this meeting, which took 
place 2 or 3 weeks ago and consisted of at least 20 people, they 
reviewed the elections coming up in June, the spin-off of East Timor, 
as well as the whole business sector, and the country's overall 
economic situation.
    Therefore, the Indonesian situation is being very closely 
monitored. It doesn't mean that we have solved all the 
problems. Ex-Im Bank has some significant exposure long term in 
Indonesia, which we follow very closely and are looking at.
    We have not done anything for a year, but I would guess 
that we would gradually start to do new business in Indonesia 
in the months or in the year ahead, because I think they will 
recover in spite of those problems. But, again this situation 
is being very closely monitored, not only interdepartmentally 
in the United States government, but also by the World Bank, 
IMF, and IFC.
    Mrs. Lowey. Thank you. Do I have time for a question on 
OPIC?
    Mr. Callahan. You can have time for anything you want.

                         ENVIRONMENT COMMITMENT

    Mrs. Lowey. I just want to thank you, Mr. Munoz, for your 
commitment to projects that have been very sensitive to the 
environment, and we have noticed the progress on that.
    I have been interested in how you would encourage your 
counterparts in other countries to make the same commitment to 
the environment that you have. And I am also very interested in 
how OPIC monitors compliance with worker rights standards in 
the project it supports.
    Mr. Munoz. Thank you.
    First, because part of OPIC's mission is to make sure that 
we help America compete and bring development to important 
strategic places in the world, we want to make sure that that 
is done in the standard that this Congress sets out as 
appropriate.
    I know that my friend, Jim Harmon here, has espoused 
harmonization as one of the priorities for Ex-Im Bank, and we 
are in line with that. We feel that the rest of the 
multilaterals----
    Mrs. Lowey. Did you say the ``Harmon'ization''?
    Mr. Munoz. Which means it has been Jim ``Harmon'ized''--
otherwise we would not fulfill our mission to help America 
compete. If we were the only ones looking out for a sensitivity 
to environment and no one else were, then, in fact, Americans 
would be at a disadvantage and we don't want that to occur. We 
believe, and we know that Ex-Im is in line with this, that all 
the agencies, multilateral public agencies, our counterparts in 
Germany, France, are sensitized to the same needs as 
development takes place.
    The bottom line is that the development that needs to be 
taking place in many of these regions of the world, including 
Africa, Central America and the Caucasus, can take place on a 
very environmentally sound basis.
    Mrs. Lowey. I pushed it, so I will wait till the next 
round.
    Mr. Callahan. Mr. Knollenberg.
    Mr. Knollenberg. Mr. Chairman, thank you very much.
    Welcome gentlemen. I appreciate the job that you all are 
doing and the role that is played by each of the groups.
    By the way, let me first of all take a moment just to 
welcome my colleague, Ms. Kilpatrick from Michigan, and then 
also Mr. Jackson from Illinois. Mr. Sabo was on this committee 
before, so he is a returnee. And, anyhow, welcome.

                        CASPIAN SEA DEVELOPMENT

    I want to ask a question about report language that was 
included in last year's bill having to do with Caspian Sea 
development as it applies to pipeline projects. I don't have to 
read that. I am sure you are familiar with the report language.
    But the managers strongly support the efforts of the 
Overseas Private Investment Corporation to encourage 
development of the Caspian oil and gas pipelines as key 
components of an east-west transport corridor, and it goes on. 
What steps has OPIC taken to live up to the language of that 
report at this point, or through the last few months?
    Mr. Munoz. Thank you, Mr. Congressman.
    OPIC has actually joined TDA and Ex-Im in putting together 
a working group and being responsive to the needs of the 
Caspian Sea development. We know that there is discussion of 
not only one pipeline, but multiple pipelines, and OPIC has 
been involved in the working group that the Administration has 
put together to address the needs.
    Just this week, as one example, we had a meeting with 
Ambassador Morningstar, whose job it is to oversee this area. 
Morningstar brought OPIC together with the American contenders 
for building the pipe, and we had discussions at OPIC about 
what possible insurance or financing vehicles that we have in 
place that might be of assistance to them.
    So far we have not enlisted any projects. We are waiting 
until the private sector has thought enough about what their 
needs are, and if there is no other assistance from the private 
sector, but only through our agency, then we would be able to 
be helpful.
    Mr. Knollenberg. Let me jump in there and just express some 
concerns that others have raised about the whole idea of the 
Caspian oil basin being that rich, fertile resource that it was 
early on claimed to be. I know originally it was something like 
200 billion barrels. Now they are talking about maybe 50 
billion barrels. And I am just going torelate some results or 
some information that has come to my attention, and obviously, I am 
sure, to yours.
    Number one, the price of oil. The price of oil obviously is 
not where it was. That may put a little damper on some of the 
enthusiasm. Number two, poor drilling results. This is 
information received from a German newspaper, but this is all 
very recent, too. It says after 9 years of feverish activity, 
the only oil that is being produced onshore and offshore in 
Azerbaijan and Kazakhstan is the oil that has already been 
discovered before the breakup of the Soviet Union. So these 
multiple pipelines might be a great idea, but maybe they are 
out there a way.
    Adding to that you have a leading oil consortium who is 
cutting personnel and deferring development. Pennzoil, I have 
been told, has moved out of the area. I have met with a variety 
of people who have given me the expectancy of what could 
happen, but in light of that, I am wondering do these reports 
coming out as they are, does that change your perspective on 
what kind of involvement that you want to make? You have got 
scarce resources. How far can you go? How far do you want to 
go?
    And, admittedly, we gave you that push last year. But I am 
asking you as a group, and I think, Mr. Munoz, most of this 
goes to your attention, what would you reflect on now after 
looking at some of the more recent information to come out?

                               PIPELINES

    Mr. Munoz. Congressman, I think those are fair points and 
fair observations. You can be assured that because of the 
reasons you stated, OPIC has made no commitments on insuring or 
financing yet because it cannot. The private sector actually 
has to determine that it will put its money down, that it will 
make the investment, that it will build the pipelines. And once 
the private sector has made that decision on its own, no public 
influence, no money comes into play except the private sector's 
money, then we look at the viability of it, and if it is 
commercially viable, and speaking for all three of us, our 
agency will then be involved. Certainly OPIC has to be self-
sustaining.
    I can also say that we are not just waiting for the 
pipelines. So far we have not done anything on the pipelines 
other than have very private dialogue with the people involved. 
Based on our broader interests in the region, Azerbaijan, 
Armenia, Georgia, we will address the developmental needs of 
those countries for infrastructure and other projects. We are 
very much involved with that. On that front, I think we are 
making some progress. On the pipeline, for reasons that you 
have stated, no private sector interest has yet stepped up and 
put money on the table.
    Mr. Knollenberg. I think the AOIC, I think that is what it 
is called----
    Mr. Grandmaison. Yes.
    Mr. Knollenberg. I think they have suggested that they 
don't need multiple pipelines; that they could use the one that 
they have got or expand that. That is the one that runs up to 
Russia; is that right?
    Mr. Munoz. Yes, sir.
    Mr. Knollenberg. Would you believe that that is the case? 
Is that a statement that maybe could be challenged?
    Mr. Munoz. I believe everything is still fluid. I believe 
for all the reasons you just stated there are still a lot of 
routes, different economics to it. I think there is still a lot 
depending on more exploration taking place.
    Mr. Knollenberg. I appreciate your response to that, 
because I think that we would say that it should be kind of a 
go-slow approach right now, with conditions being what they 
are.
    There is a Baku-Ceyhan feasibility study. Is that ongoing?
    Mr. Munoz. Yes. Not part of OPIC.
    Mr. Grandmaison. There are actually two studies, neither of 
which TDA was directly involved in.
    Mr. Knollenberg. So TDA has no involvement in that?
    Mr. Grandmaison. In those two studies themselves, we do 
not. What we are doing is working with those countries. 
Interestingly enough, perhaps the most important way we are 
trying to be helpful is to provide them the technical guidance, 
the legal and financial-type advice they need to make some of 
the decisions internally as to how to proceed.
    We are involved in five pipelines in terms of feasibility 
studies. It happens we are not involved in the Baku-Ceyhan 
feasibility studies. There were major differences in the cost 
estimate between those two studies. A great deal of effort has 
been made to bring into accord what was most reasonable. As an 
example, we are working closely with BOTAS, the Turkish entity 
who would be a prime participant in that sort of venture.
    George makes a valid point. We can't cause anything to 
happen, nor should we, in the private sector. It is their 
making profitable business decisions. What we can do and try to 
do is lend assistance and guidance, less so to the oil 
companies, quote-unquote, and far more to the companies who 
have a need to make some very basic investment decisions.
    Mr. Knollenberg. Baku-Ceyhan was just one question, but 
thank you. I think you have answered that in a spirit that 
suggested to me that you are not going to make any commitment 
that goes beyond what you have mentioned, commercial viability. 
Sometimes it goes beyond that. It has to also be politically 
viable, as you well know in that area. But Ithank you all for 
your comments.
    Mr. Harmon. The one thing I would add is that all of us 
believe that there will be some pipelines.
    Mr. Knollenberg. Some?
    Mr. Harmon. There is always a period of time when 
discoveries take place and everybody gets overly enthusiastic. 
As the price declines, it would be natural to get more 
conservative. But as recent as yesterday they announced that 
they awarded two U.S. companies much of the work on a gas 
pipeline.
    Mr. Knollenberg. Gas?
    Mr. Harmon. Gas. This is different. But by being present, 
the work that TDA did in organizing this conference assisted 
the U.S. producers or exporters in a way that they are more 
likely to get the business if it ever takes place. That is 
really what we are there for.
    Mr. Knollenberg. Thank you, gentlemen.
    Mr. Callahan. I have heard the same rumor, Joe, about the 
disappointing initial finding of resources in the Caspian Sea, 
even though they pointed out that the two wells that had the 
most promise turned out dry. I questioned some Azeris on this, 
and they denied that, which naturally they would.
    But we have been hearing about this potential here, and we 
have been hearing the need for this pipeline to transport oil 
out of there, and yet to the best of my knowledge, and, Joe, 
you seem to have confirmed that, there is not any new oil need 
at this point. It is speculation that there is oil there, and 
that the current pipelines through Russia--which we would like 
to see the new pipeline built if there is oil there--that the 
current pipelines are sufficient to handle what oil is there.
    Now, section 907, you all don't have any problem now? We 
have corrected that to the point where you are, all three, 
comfortably operating that?
    Mr. Munoz. That is right.
    Mr. Callahan. Mr. Jackson.
    Mr. Jackson. Let me first begin, Mr. Chairman, by thanking 
you for the very kind words at the beginning of the hearing 
with respect to my service on this committee. I have long 
wanted to serve on this committee and have the opportunity to 
have some impact domestically as well as internationally.
    Let me also take this opportunity to thank the 
representatives from the administration for their testimonies 
today, and I look forward to working with you over the course 
of negotiations to help make your budgets a reality.
    I don't have any prepared questions, Mr. Chairman, but I do 
have a couple of concerns that could lead to questions.

                           Sub-Saharan Africa

    The only new initiative that the President spoke of in his 
State of the Union Address was the possibility for an enhanced 
partnership and trading relationship with Africa, I assume Sub-
Saharan Africa, since the past Congress passed an African 
Growth and Opportunity Act.
    The greatest barrier to Sub-Saharan African growth and 
opportunity is the enormous external debt that many of the Sub-
Saharan nations do their very best to make interest payments 
on. I say it is the greatest barrier for Sub-Saharan Africa 
because without their governments' and their ability to make 
investments in their people and in their infrastructure, the 
end result is that they only search for economic and business 
opportunities wherever they can find them. I often argue that 
from my perspective that is the impetus behind the Africa 
Growth and Opportunity Act, which I voted against in the last 
Congress.
    For example, not long from now, the President of Ghana, 
President Rawlings, is coming to the United States on a special 
mission to meet with President Clinton. There is no doubt in my 
mind that over the course of his visit, he will probably seek 
meetings with the three of you to discuss growth and 
opportunity, opportunities for Ghana.
    Ghana, however, is laboring under $7 billion in external 
debt. That is more debt that the private and public sectors 
earn in salaries per year for the entire country. Their entire 
earnings in terms of salary for an entire year doesn't equal 
one interest payment, not one interest payment on that debt. 
And so the President of Ghana comes to the United States in 
that context, seeking opportunities in part to export their way 
out of that dilemma.
    I guess my question is this: If there is going to be 
genuine growth and opportunity for Sub-Saharan Africa, 
obviously the $230 billion debt that many of the poorest 
Nations in the world are laboring under creates an imbalance in 
the negotiations. Some countries where per capita earnings are 
only $500 per year, obviously the burden of that large external 
debt should not fall on some child who cannot find water or 
cannot eat, or whose family lacks basic health care needs as 
well as opportunities to become educated.
    I have a map that I took off of the Internet about a week 
ago. In 1997, it shows enormous growth as a result of our 
government's investment with respect to people, with respect to 
the Internet, and hosting on line. You can see the only 
continent that is not participating in the information age is 
Africa, and mostly Sub-Saharan Africa; 750 million people. And 
if you did a World Wide Web search for Internet sites on 
Africa, particularly those based in Africa, very, very 
difficult to find. It is clear that South Africa is the 
networking capital of the entire continent.
    My concern is this: If Ghana's debt, $7 billion, or 
Mozambique's debt of $10 billion ever ended up on the privateor 
open market and were purchased for pennies on the dollar, it is quite 
possible that, A, a stock owner in New York, a multinational somewhere 
in the world or an institution could end up owning a significant amount 
of a country's debt and therefore most of its vital resources, if it is 
indeed unable to service the debt in the future.
    I am very concerned about what the administration is doing 
to help lift that debt burden off of Sub-Saharan African 
nations and what roles you guys are playing in obviously 
advocating or not advocating the relieving of that debt burden.
    Thank you, Mr. Chairman. Thank you gentlemen.
    Mr. Harmon. I will start on it. Congressman Jackson, this 
is a very good question. It is a concern because you are right 
when you say that with the size of the debt, it is very hard to 
recover.
    In addition, when you have a country like Ghana with its 
debt, the IMF places a restriction on the ability of Ghana to 
borrow additional money to buy U.S. goods and services unless 
it is concessionary, which is a tough restriction on Ghana. In 
spite of that, we have been able to do almost $400 million in 
financing Ghana's purchase of U.S. equipment. As late as 
yesterday, we approved a transaction.
    Ghana is a bit of a bright spot for us in all of Africa 
because of all the business we have been able to do. But, it 
does operate under a tough set of circumstances with the IMF 
agreement as well as with the amount of debt that you referred 
to.
    It is not within Ex-Im Bank's activities to comment on 
this, so to speak. The Treasury Department, and clearly certain 
people at the Treasury Department who work the Paris Club 
restructurings, live with this. We often deal with them 
relative to specific countries and loans that we have made, but 
in terms of recommending what debt forgiveness there may be or 
what reschedulings may take place, it is really the Treasury 
Department that leads the team that goes into those 
negotiations.
    I am somewhat sympathetic personally with the statements 
that you made. As the committee may know, Congress mandated us 
to have an African advisory committee that has worked very 
successfully, in my judgment. It has worked so well that we are 
going to announce an expansion of it from five people to eight 
people.
    This advisory group recommended that the three agencies, 
team together to place someone for a short period of time, 3 
months, specifically over there and he just came back. He is a 
TDA representative who knew both the OPIC's and Ex-Im's 
programs well. It really was a lesson that we, Ex-Im Bank, 
needed to have so that we would put someone in Africa full 
time. This is one of my concerns about our administrative 
budget, because without someone there all the time, we cannot 
do what needs to be done in Africa in terms of the business and 
the support that has to be done.
    So we will find a way to put people there and spend some 
money to help to do more trade with Africa, because of the 
African advisory committee and our internal task force as well 
as our own drive and desire to do it.
    But the big question which you have raised, which is how do 
you arrive at debt forgiveness or even reschedulings, also 
falls within Treasury's area of negotiations. It is a very 
complicated area with a lot of people that have very strong 
feelings on the subject going back a long period of time.
    Mr. Jackson. I accept that, and I have specific provisions 
in my bill that give specific instructions to the Secretary of 
the Treasury to pursue that. My concern is that you provide 
incentives for exports, and you also provide opportunities for 
U.S. corporations to do business in Sub-Saharan Africa. 
Essentially, multinationals are purchasing those countries' 
debt on the open market because they are trying to reduce it 
for pennies on the dollar. Who is then to stand between that 
company and their influence on local politics in any of those 
countries, enforcing labor laws, enforcing environmental 
standards--many of the values that we would like to export as 
well to these nations--in light of the fact that they are 
laboring under this enormous international obligation?
    Mr. Harmon. I don't know myself how much secondary trading 
there is in sovereign debt of these countries, so I am not sure 
how much private sector buying there may be of that debt. 
However, Ex-Im Bank would not be involved in that. All of our 
financing relates to specific exports.
    But, I would add only one thing, and that is we are not 
just in business with the larger entities there. We created a 
very important new effort to try to reach the smaller companies 
there, and I believe we have found one way in South Africa to 
do that, which we will be announcing in a month or so.
    It is not just the larger companies that could be buying 
the debt. I am not aware of how it could be done or how much is 
being done on it, nor am I sure that a lot may be done, but you 
could probably buy some of the debt at discounts. I am not sure 
how much can be purchased, but I am guessing that it is a 
possibility.
    Mr. Munoz. I would just like to comment, Congressman, that 
as the President from Ghana comes over, and as we have heard 
from many of these countries, their number one priority 
interest is to bring about development in their countries, to 
create jobs and opportunities within their own countries. I am 
proud to say that at OPIC approximately $900 million worth of 
investments are taking place and creating jobs, and many of 
these are actually being driven by small business.
    In my written testimony I give an example of how in Uganda 
there is a small farmer producing a natural nontoxic 
insecticide that is working together with a California company 
and a Minnesota company and making profits for all three 
entities, and these are small businesses.
    For the most part, I think some of these countries are 
looking for development and job creation. Our agency only works 
with that aspect of bringing about private sector development.

                               MOZAMBIQUE

    Mr. Jackson. I respect that, Mr. President, but let me just 
add that, for example, the country of Mozambique spends 20 
percent of its export earnings on debt service, and, therefore, 
the country of Mozambique can't even afford to invest in its 
own health care or its own education system for its people. 
And, therefore, since the per capita earning power of a family 
in Mozambique is $200 a year, when will that family be able to 
buy a United States product? You can't buy a pair of gym shoes 
and a jacket for 200 bucks.
    It is clear that their health care systems and education 
systems are lagging behind, and unless their export earnings 
are also being reinvested in their people, just as our earnings 
are being reinvested in our people--I think the President gave 
a speech a year ago that he wants to put a computer in every 
classroom and computer in every library. I would like to see 
other Presidents of other countries say they want to put 
computers in every classroom and every library, that one day we 
might be able to do business and help facilitate jobs and 
domestic growth here as well as have customers abroad who are 
in a position to buy that.
    And I might add, Mr. Chairman, I am very concerned about 
this, because as I have introduced the Hope for Africa Act, 
which takes on some of these more fundamental problems in Sub-
Saharan Africa, I have been expecting calls from the White 
House's Congressional Affairs Office with respect to my bill. I 
received none. I have expected calls from a series of agencies. 
I have received none.
    All the calls that I have received are from National 
Security, and they are upset with my bill in part because I am 
beginning to think that once our interests, what these 
gentlemen represent, end up in my Sub-Saharan countries, and 
the families that cannot feed their children or provide their 
family with health care, when they begin to fight against these 
interests or nationalize them, then we have a national security 
problem because the domestic issues were not sufficiently 
resolved, and then we have troop commitment in Sub-Saharan 
Africa.
    That is what the cycle has been historically, and we have 
the opportunity to make a significant change in our approach, 
and I am going to be very sensitive to that in the course of 
our deliberations, and I would like you guys to play some role 
in helping to relieve that debt burden.
    Thank you, Mr. Chairman.
    Mr. Callahan. If I might respond, your map here indicates 
zip codes and IP paths, but if you had a similar chart for 
assistance, and especially for increased assistance to the 
areas of concern you have in Africa, and you specifically 
looked at the Child Survival Fund, you would see this map is 
quite different because we are channeling millions of dollars 
into Africa to eliminate some of the human suffering.

                            DEBT FORGIVENESS

    With respect to debt forgiveness from you guys, I want to 
discourage your involvement in that because we don't want to 
get that started. If Jim Wolfensohn and the World Bank want to 
forgive debt, that is fine, but not in your agencies. Because 
once you start that, you are going to cause the demise of your 
agency. You ought not be advancing money to projects that are 
any risk anyway.
    Mr. Jackson. Absolutely. We are saying the same thing. That 
is not the debt forgiveness that I am talking about.
    Mr. Callahan. And I don't know what the administration may 
approach you on with respect to this year 2000 worldwide debt 
forgiveness, but I think you guys should recognize that your 
agencies are not agencies that should be considering any debt 
relief, because that is not the design. I don't know why some 
of the loans the World Bank and other agencies give to 
countries are even called loans. There is no way they can be 
repaid. They ought to go ahead and call them grants and forget 
about this.
    Ms. Kilpatrick.
    Ms. Kilpatrick. Thank you, Mr. Chairman, for your comments. 
One thing about being the last person is that you have the 
benefit from all that has been said, and I appreciate that.
    I first want to commend OPIC for their negative $204 
million budget authority that makes it possible to do projects 
here. I think that is significant, and I look forward to 
working with you on that.

                        AFRICAN DEVELOPMENT FUND

    Last year OPIC led a proposal for an African development 
fund. What stage is it in? Where are you now, a year later?
    Mr. Munoz. That was done in response to the legislation, 
the bipartisan legislation, that we saw coming out of Congress 
asking that we be more active in Sub-Saharan Africa, in 
particular bringing about some infrastructure development. As a 
result, we initiated a fund using some new procedures that are 
working well.
    We wanted to be very transparent and very straightforward 
as to how we approached it. We advertised with wide media 
distribution that we were taking proposals for anyone who could 
be able to run such a fund or funds for Sub-Saharan Africa; 
that we would commit up to $500 million in the total fund. That 
would notbe all OPIC. We would leverage some amount. We wanted 
the private sector as much as possible to put up that $500 million, and 
less so OPIC, but we would work with the private sector on that.
    I am pleased to say that we received 17 good proposals. We 
set up an internal working committee at OPIC that is primarily 
driven by career employees. They, I know, are concluding their 
work, and I will be receiving the recommendation from that 
committee very shortly. It then goes to our board of directors 
for final approval. So I expect that by this spring we should 
be able to announce the response to that fund for Sub-Saharan 
Africa.
    Ms. Kilpatrick. I have been following it closely from the 
17 proposals down to the 3, and who was in the final search. I 
am very interested in and look forward to working with you on 
that.
    You have an Executive Vice President. I see here Mr. Kirk 
Robertson. I had a chance in December to go on a congressional 
mission, and OPIC was very well represented. I think the 
businesspeople that we took along on that mission under Kirk's 
leadership certainly made your organization fare well, and I 
want you to know that as you send staff out, they represent our 
country. Mr. Robertson did a very fine job for you.
    Mr. Munoz. Thank you.
    Ms. Kilpatrick. And the TDA representative--I don't want to 
mispronounce your name. Say it for me.
    Mr. Grandmaison. Grandmaison.
    Ms. Kilpatrick. I was going to say that. That is just what 
I was going to say.
    Again, I appreciate the work of the TDA as well. I have had 
your people in my office as well, and they represented the 
agency well.
    I am concerned that, as my briefing papers state, your 
budget will meet only one-third of the need, whereas last year 
it met two-thirds. Why that difference today?
    Mr. Grandmaison. Specifically about our Africa region?
    Ms. Kilpatrick. Yes.

                                 AFRICA

    Mr. Grandmaison. Well, if you are successful in your 
business development efforts, then there should be no surprise 
that you then get more requests for funding. And of all of our 
regions, I would suggest that the African region is growing 
more quickly than any other.
    All three of us were very pleased with Michael Newell's 
work on behalf of the three agencies there. Part of the 
success, I think, is that we actually have a better program 
outside of South Africa than in South Africa, to be honest with 
you.
    Ms. Kilpatrick. And you have been there longer.
    Mr. Grandmaison. Yes, but also to a great extent, the South 
African economy is so sophisticated that they are competitors 
for a lot of the things that we would like to be involved with. 
But when you go out and you market aggressively, whether it be 
here domestically or overseas, the net result is that you get 
more requests. And as it happened this year, that particular 
region, by the end of March, all of its resources for this 
current fiscal year will be reserved and/or obligated.
    Ms. Kilpatrick. So it is not to be looked at as negative. 
It is a helpful position to be in from your agency's 
standpoint?
    Mr. Grandmaison. It is a great position to be in because 
what it allows you to do is be more critical, if you will, as 
to the projects you invest in. We begin with the belief that 
the job we have is not to shovel out money. It is to invest it 
wisely. And when you get more and better projects from a 
region, that is what you get.
    A good example, as Congressman Jackson mentioned, is the 
Internet question. We had a conference in South Africa recently 
where we identified the 40 best telecommunications information 
technology projects in the 18 countries surrounding South 
Africa, including South Africa. We brought those project 
sponsors as our guests to South Africa to meet with American 
companies to begin working with them on projects to increase 
their level of sophistication when it comes to IT and 
telecommunication projects.
    From that conference we have made six investments already. 
So as you point out, it is a good sign that we are getting that 
demand.

                        LARGE/SMALL INVESTMENTS

    Ms. Kilpatrick. Finally, the Chairman mentioned large 
business and small business ventures in your three agencies, in 
his opening remarks. What percent of your budget goes to larger 
as opposed to smaller ventures?
    Mr. Munoz. We have a direct lending program where 100 
percent of the loans are for small businesses, generally 
anything that is $10 million or less.
    Within our portfolio, we took a screening of all of the 
benefactors for OPIC-supported projects, and two-thirds of the 
suppliers to OPIC-supported projects are small business. Of all 
of our 1998 projects that we did directly, 28 percent are small 
business--that includes if we throw in all of the big 
companies.
    Ms. Kilpatrick. And I can use your definition, $10 million 
or under?
    Mr. Munoz. No. The $10 million and under is for the amount 
of the loans. If they were asking for loans, it was less than 
$10 million. One hundred percent of those who have asked for 
that are small business.
    Ms. Kilpatrick. And that is $10 million and under?
    Mr. Munoz. Yes, sir.
    Mr. Harmon. In the case of Ex-Im Bank, I will start with 
the positive and then the negative. The positive is that 80 
percent of all our transactions are with small businesses; 80 
percent. The negative is that it equals only 20 percent of our 
budget. This is because some of the large transactions involve 
major plants and equipment that are obviously done with large 
companies. Therefore, it will be very difficult to bring the 
dollar figure amount comparable to the amount of the larger 
projects that we finance.
    Ms. Kilpatrick. That is understandable because they are 
large versus small ventures.
    Mr. Harmon. We are growing in our small business efforts. 
But, I will be much happier when it goes beyond where we are 
since we have more room to improve.
    Ms. Kilpatrick. Mr. Harmon, he and I did have a chance to 
meet. I have a constituent who has a plant in Namibia taking 
General Motors trucks. I have a lot of those businesses who 
want to do maybe not that large, but other kinds of things 
involved in that kind of production.
    Mr. Harmon. It is a good plant. I visited it, and they did 
a good job. I hope he is going to do something else. As you may 
know, we talked about it, he is a very imaginative entrepreneur 
who, my guess, will be very successful there.
    We are trying to grow the business there, but we haven't 
done as much as we can. That is why we really need to have 
someone on the ground covering those countries every day.
    Ms. Kilpatrick. And that is what the Congressman and I are 
here for. Thank you very much. Appreciate your assistance.

                            HURRICANE MITCH

    Mr. Callahan. I want to ask a couple of questions. We don't 
need long answers. But OPIC, with respect to Honduras and the 
other countries, the victims of Hurricane Mitch, I don't know 
why OMB has not submitted to us a request for additional 
assistance. The First Lady has been down there, and they talk 
about how horrible it is. The other agencies have been down 
there, and OMB has not requested a cent, and I cannot 
understand why not.
    But I do see that OMB, in the absence of a formal request, 
the staff was recently informed that OPIC would require in 
excess of $2 million for the Central American reconstruction. I 
don't quite understand OPIC's guarantee of reconstruction for 
governmental projects. Just briefly tell me.
    Mr. Munoz. Yes, sir, any additional dollars requested would 
be for our administrative budget to carry out more activities 
and outreach. We would do no government financed infrastructure 
projects. We would work with the private sector that would want 
to do things. Take, for example, the banana plantations that 
were wiped out in Honduras and Guatemala. They are American 
companies, and they are talking to us about what can we do to 
help them redo the plantation and do it on an environmentally 
safe basis and upgrade their standards as long as they do that.
    So OPIC's additional dollar request would not be to 
actually make those loans, and, of course, we don't do any 
grants. It would be to make sure we have sufficient staff 
attention to the demand that would be created for those 
countries.
    Mr. Callahan. Well, for the committee's benefit we haven't 
received any request from the administration for any assistance 
to Central America because of Hurricane Mitch, although there 
has been a lot of talk about it, a lot of hyperbole about it. I 
think the President is planning on going back down there, and I 
think the First Lady is going back again after the Mexico visit 
by the President.
    They have given us indication, as I expressed earlier, that 
they are going to request a supplemental advance payment for 
Jordan in deference to the King, although nothing has come 
forward in the form of an official request. I was of the 
impression last weekend that they were going to request it this 
week. Didn't come, as far as I know.
    But I am really disappointed that our efforts in Central 
America are not getting started, and I think the administration 
should come forward and at least request some partial monies, 
which, it is my understanding, they are going to ask for about 
$900 million. But if they know they are going to need $900 
million, why don't they come forward and ask for $250 million 
in an emergency supplemental now and get started on it? I don't 
understand that.
    But I am sure they have their reasons, but they have not 
yet seen fit to contact me. Maybe Mr. Gilman can enlighten us 
on that before it is over with. I just want to warn you that we 
are probably going to have a bill which they have requested 
that the Jordanian aid, in deference to the King, be handled, 
which is fine with me if that is what they want to do. But I 
don't know why they wouldn't send the request for assistance to 
Central America at the same time. Why give us two bills? And we 
are going to have to offset for all of this stuff anyway. To 
let you know that we are probably going to have some bill that 
at least requests aid for Jordan, and that I am insisting to 
our leadership here in the House that if that is the case, that 
we include the assistance for Central America as well.
    I noticed that there was some reprogramming. I had a 
question in here someplace on reprogramming, the extra TDA 
money, $6 million that was reprogrammed to give you $6 million 
additional authority.
    Mr. Grandmaison. The transfer?
    Mr. Callahan. Yes, the transfer.

                           TRANSFER AUTHORITY

    Mr. Grandmaison. The money has come recently from three 
sources. The Freedom Support money has been as high as $17 
million, where this year we anticipate receiving 6 million, 
``this year'' meaning fiscal year 1999. I don't want to suggest 
that that is a complaint on my part, the fact is that we are a 
market-driven agency. If we need more, we would go to the State 
Department and make our case and explain how we would invest 
it, and they would try to be supportive.
    In addition to that, we have received money from the SEED 
program for the South Balkan Development Initiative. That ends 
in fiscal year 1999, so in the budget year we are talking 
about, we don't anticipate receiving any transfer money in that 
area.
    And the last one is Bosnia, and once again, thatcommitted 
transfer money ends this current fiscal year, so in fiscal year 2000, 
there may be no commitment and no overall discussion whether any 
additional funds will be transferred to us.
    So that the budget that you have, and the recommended level 
is 48----
    Mr. Callahan. We are going to appropriate a designated 
amount of money. We do that with good deliberations. Now, if 
USAID or someone else is going to start transferring additional 
authority or additional monies to your agency, we would feel a 
little violated by that.
    I will get back with you on that, but we received 
notification of it, but I won't interfere with operations of 
the State Department. But at the same time, if USAID or some 
other agency tells us that they need these billions of dollars, 
and we give it to them, and you tell us that we need these 
billions of dollars, and we give it to you, we give it to you 
and then suddenly they say, we don't need this anymore, they 
are the appropriators. And we want to be flexible, we want to 
work with the administration, but we think you ought to operate 
within the jurisdiction of the monies we gave you.
    Mr. Grandmaison. I can't disagree with that, Mr. Chairman, 
and I can assure you that there is nothing as frustrating as 
trying to get any money from the AID.
    Mr. Callahan. I am sure that USAID would say that there is 
nothing as frustrating as getting money from this committee.
    Mrs. Pelosi I am going to try to wind this thing up in 
time. These people have to have a lunch at the appropriate 
hour.
    Ms. Pelosi. I know they don't like to eat before the stock 
market closes. The 1 o'clock lunch is a great thing.
    Mr. Chairman, unless USAID wants something for the Callahan 
Child Survival Fund, then in that case they have a better case. 
I have a number of questions, and I am trying to put them in 
categories because I am heeding the admonition of my Chairman, 
but I also want to make some acknowledgments of what our two 
new colleagues have said today. I am so glad you are here, our 
fresh recruits, because on this issue of Africa, you said that 
is why we are here----
    Ms. Kilpatrick. Not just why we are here.
    Ms. Pelosi. But in relation to one question, your brief is 
the whole world, but we have certain concerns about areas that 
have not received what we think is what the American people 
would like us to do to help alleviate poverty, create markets 
for our products, promote our values, all in the interest of 
international security.
    And so I am delighted that you are here to ask questions 
about how some of these initiatives that many of us have been 
pushing are working, and so it is, as I said, music to my ears 
to hear this focus. The Chairman, one of his special focuses 
has been Latin America, and that is important to our country, 
too. The Southern Hemisphere, in my view, is by and large 
bearing the economic brunt of the boom that is going on in the 
world and not sharing in the benefits. When you talk about 
Hurricane Mitch, we can talk about debt forgiveness, too, 
because in trying to dig out of the debt, there was a 
catastrophe before the natural disaster.
    These are some issues that while, rightfully so, our 
witnesses testified are not their responsibility, however we 
would hope that nothing that we do loses American jobs, 
degrades the environment, harms the human rights and workers' 
rights of people in those countries, or contributes to the 
exploitation of the people in the region by relocation, again, 
not honoring their workers' rights or the air they breathe or 
the water they drink. These things are all connected. Someplace 
in the administration, such as when Secretary Rubin comes in, I 
am sure we will have a fuller discussion about it.

                                  IMF

    I do want to get back to this labor rights point in some 
specific ways. Again, I will throw into that the IMF as well. 
In here we talk about the IMF and multilateral development 
banks and export finance and bilateral assistance, and we would 
hope that there would be some coordination so that at the end 
of the day we are helping to alleviate poverty not only for the 
well-being of those people, but also because it is in our 
national interest.

                            INVESTMENT FUNDS

    In terms of OPIC, for example, over the past several years, 
OPIC has guaranteed 2 billion in 26 privately run investment 
funds. These funds pay fees and a risk premium. Their rules of 
operation and investment are particularly unknown to Congress. 
What assurances can you give us that these private investment 
operations finance projects in a manner that is consistent with 
OPIC's policies on the environment and labor rights?
    Mr. Munoz. Thank you very much, Congresswoman. That gives 
me an opportunity to state for this committee that we put 
procedures in place so that we are very consistent within OPIC 
that whether it is funds or our insurance or project financing 
that is taking place, that, in fact, they comply with all of 
the worker rights requirements, the human rights requirements, 
as well as the statutory requirements on the environment.
    We wanted to make sure that all those are taking place. We 
have established procedures to ensure that. We are working with 
some funds that have contractual arrangements that were done in 
the past that had not specified full compliance with some 
elements of that. But today, because we are working with those 
funds on a day-to-day basis, we are confident that we are able 
to make sure that they do, and certainly any new funds that 
come forward would have those as a requirement.
    Ms. Pelosi. Could you give us any example of a country 
where OPIC shut down a relationship due to labor rights 
violations?
    Mr. Munoz. Yes, in Korea, for example. Now, we are reopened 
in Korea now, but before we did that, we analyzed all of the 
progress that they have made, and so after assuring ourselves 
that the right steps were being done----
    Ms. Pelosi. That was my next question, about Korea, to the 
extent that the government's commitment was being honored.
    And do you have an assessment of labor rights in Indonesia?
    Mr. Munoz. Some of these countries are difficult. Right now 
in Indonesia, in terms of labor rights, we follow the USTR and 
their determinations.
    Ms. Pelosi. That is another off the USTR.
    Mr. Munoz. They have given Indonesia GSP status. If we are 
assisting a private sector project, we make sure that the 
project adheres to the highest international----
    Ms. Pelosi. So I understand what your standard is. We may 
not agree with it, but in other words you are following the 
GSP. Let me just----
    Mr. Callahan. Let me just let Mr. Knollenberg ask his 
question. Then you can have a third run.
    Ms. Pelosi. Okay.
    Mr. Knollenberg. I will be very brief. All I wanted to do 
is to thank the gentlemen again from OPIC, Ex-Im and TDA. If 
anybody can figure all that out, I am not aware of it. But I 
thank you all for your appearance and your responses.
    I do want to submit some questions for the record relating 
primarily to Michigan and some of your successes there. I would 
like your evaluations of that. Thank you, Mr. Chairman.
    Ms. Pelosi. Mr. Knollenberg, if I may just ask you a 
question. You asked about the Caucasus before. Did the point 
come up that----
    Mr. Knollenberg. Am I on the spot here?
    Ms. Pelosi. Did you raise impact of the price of oil on our 
attitudes there? In other words, I had heard the President say 
because the price of oil has gone down, the leverage that we 
may have had to try to bring Armenia and Azerbaijan together, 
has diminished. Did we talk about the price of oil's impact on 
policy here?
    Mr. Callahan. We talked about it.
    Ms. Pelosi. We did. I will just see the record on that. 
Thank you, Mr. Knollenberg.
    Mr. Callahan. Mr. Jackson, any more questions?
    Mr. Jackson. Mr. Chairman, I don't have any more questions 
at this time.
    Mr. Callahan. Ms. Kilpatrick.
    Ms. Kilpatrick. I reserve the right to submit questions.
    Mr. Callahan. Yes. That is welcome at any time to submit 
questions. We will give you a couple of days to submit 
questions, and we would ask for your immediate response there.
    Ms. Pelosi for the third round.
    Ms. Pelosi. We have three witnesses at once in this little 
bit of time.

                                 China

    Following up on my line of questioning before in terms of 
OPIC, human rights and workers rights, I understand that 
Secretary Albright is going to Beijing on March 1 and 2 and 
that China may be interested in getting OPIC restored when Zhu 
Rongji comes to Washington in April. Is the administration 
considering issuing a Presidential waiver to allow OPIC 
assistance in China? Isn't OPIC still constrained from 
operating in China by section 231 of the Foreign Assistance Act 
prohibiting OPIC assistance to countries not respecting 
workers' rights?
    Mr. Munoz. That is correct, Congresswoman, and we have not 
received any indication. We know that China would like to have 
OPIC open and available in China, but we have received no 
indication that that is being promoted by the Administration.
    If I could supplement my last answer when you asked about 
Indonesia, not only do we make sure that they adhere to 
international workers' rights, specific contract language is 
included by OPIC for the project so that the project actually 
goes beyond even the workers rights that may be recognized 
nationally in that country or the like. We would be happy to 
share the kinds of language that we provide in those contracts, 
but we believe that the projects themselves live up to the 
highest standards.
    Ms. Pelosi. Thank you.

                              Environment

    Mr. Harmon knows the importance I place on the intersection 
of commerce and the environment. We talked a great deal in the 
hearings and in our office about that. I want to commend at 
this time President Munoz for his work in strengthening 
environmental protection and express my belief that OPIC is 
still not going far enough.
    I am concerned that OPIC's board of directors regularly 
approves projects prior to completion of OPIC's environmental 
assessment and prior to the agency receiving comments from 
NGOs. The public may not provide comments at board meetings and 
is not allowed to attend project discussions and meetings and 
to review the minutes of the board discussion of specific 
projects.
    I want to encourage the track that you are on. I know that 
you are making progress. I want to encourage the development of 
the ideas, mechanisms to allow the public access to the board 
of directors meetings on project specific concerns before the 
vote. Would you consider making available to the interested 
public the minutes to board meetings?
    Mr. Munoz. We would take it under advisement, as long as we 
are in compliance with the rights from the business 
confidentiality aspect.

                                Vietnam

    Ms. Pelosi. Do you know anything about progress in terms of 
respect for basic workers' rights in Vietnam over the past 
year? Do you have plans?
    Mr. Munoz. We have taken an extensive review of the 
workers' rights in Vietnam. We believe that they have taken 
steps forward to comply with the internationally recognized 
worker rights. So we are open in that country.
    Ms. Pelosi. Mr. Grandmaison, I don't want you to feel 
neglected. It is just that I don't have any problems with what 
you are doing. I would, heeding the Chairman's admonition, 
submit most of my other questions for the record.

                            Hurricane Mitch

    Following up, though, on what the Chairman asked about 
Hurricane Mitch, OPIC has initiated a $200 million facility for 
Central America through a U.S. bank.
    Mr. Munoz. Yes, Congresswoman
    Ms. Pelosi. Can you explain why OPIC is required to use a 
financial institution?
    Mr. Munoz. OPIC wanted to do exactly what Chairman Callahan 
said--act right now. We need to hit the ground running. 
Citibank is an organization that has 1,100 personnel serving 
the Caribbean and Central America region. They have been there 
for literally generations. They are more familiar with the 
abilities of the private sector to generate regrowth, so we 
teamed up with them because of their strength in the region, 
their knowledge of the region. But before we did that, we did a 
due diligence review of what kind of projects they would do. 
They agreed to adhere to the same standards that we would 
require for all the projects that are there, and we are 
basically a partnership, we are teamed up with them. We are not 
leaving them alone in the region.
    We think they will hit the ground running. We think that 
will produce the quickest results and leverage the private 
sector money.
    Ms. Pelosi. That is interesting. I happen to think, having 
visited disasters even before I was in Congress, that one of 
the things we have to do is encourage the private sector to 
have market opportunities there. Debt relief, of course, is 
also part of the economic health of those countries, but to the 
extent that, for example, U.S. companies are going back to 
rebuild their own facilities, I would hope that we are applying 
still the same workers' rights.
    I have met with the banana workers in Guatemala, not on a 
visit with you, Mr. Chairman, but on another separate visit. I 
know some of the problems there. I hope in our assistance to 
these countries and their rebuilding, you mentioned 
environmental sensitivity, but that we would have workers' 
rights considered in there, too.
    I am going to say this honestly, my final question, and I 
will submit the rest for the record. Mr. Harmon, in keeping 
with the thrust that I have had on workers' rights and human 
rights and environment, I again wanted to ask about the Dahbol 
project in India. This project raised a number of concerns 
about human rights abuses associated with projects receiving 
U.S. taxpayers' funds. Another region where this is likely to 
be a growing issue is the Caucasus.

                         Trans-Caspian Pipeline

    I have a little different question than was asked before. 
In light of the oil companies' interest in the Trans-Caspian 
pipeline, it is my understanding that in April of last year, 
Ex-Im approved a $96 million credit for the sale of gas 
compression equipment in Turkmenistan. Then in October another 
10 million from Ex-Im, OPIC, TDA and USAID was approved. The 
Government of Turkmenistan is one of the most repressive 
governments in the world. There is no political opposition, no 
freedom of assembly, no opportunity for public debate. How does 
Ex-Im intend to address human rights abuses in Turkmenistan and 
other countries in the region in light of Ambassador 
Morningstar's promise of U.S. financing for what is expected to 
be a $2 billion Trans-Caspian pipeline?
    Mr. Harmon. I always worry about the last question. But 
before I answer that, if I may have the floor for a minute to 
assure the Chairman that we are very concerned about debt 
forgiveness. We do not offer that. It is essential to us that 
we manage our own portfolio, including debt.
    Mr. Callahan. But a lot of times in Washington, strange 
things can begin to happen, and strange things are beginning to 
take place about the year 2000 the debt forgiveness year. I 
just didn't want you all to dragged into something that would 
not set well with this committee.
    Mr. Harmon. I understand. I just wanted to go on record 
having said how strongly I feel about that subject.
    Mr. Callahan. You tell OMB that, and you tell the Treasury 
Department, too.
    Mr. Harmon. I do, often.
    Congresswoman, I have visited Turkmenistan myself. We have 
had numbers of conversations with them. I am familiar with the 
transactions. I believe the transactions are creditworthy.
    As you and I have talked many times before, the whole 
question of human rights is a foreign policy question so we 
turn to the State Department for handling. We have enough 
difficulty trying to determine what is creditworthy and 
environmentally beneficial. We think they do a very good job in 
terms of communicating with us when they think it is necessary 
for us to do it. We do follow it, as you referred to in the 
India Dahbol project but we rely upon the State Department to 
act on such matters. It is neither part of our charter or 
within our mission to evaluate them, but that doesn't mean I am 
not very concerned about it.
    Ms. Pelosi. I understand. You are telling me what the 
process is, and that is the answer to the question. You have 
your charge, and it spells out certain considerations in terms 
of the creditworthiness and the environment, not human rights. 
You depend on the State Department for that, and that is the 
issue.
    I do want to raise this issue, because I think it is one 
that obviously we will have to talk to the State Department 
about, but it relates to what you do.
    Again, I told the Chairman it was the last question, so I 
will resist every temptation that I have and thank you again 
for appearing.
    Mr. Callahan. The purpose of this hearing today was really 
for them to submit their budget request to us and for us to 
respond accordingly, or for you all to give us justification 
for your request, which you did in your statements. I am sorry 
we had to spend so much time talking about other issues of our 
concern rather than the budget requests.
    Your administrative cost increases are going to be 
difficult. We don't yet have the numbers that are going to be 
allocated to us as a subcommittee, so it is a little premature 
for us to be able to tell you what we are going to be able to 
do. But we certainly will look at your submissions, and we will 
do everything we can to comply at least partially with your 
request.
    We thank you for coming. The meeting is adjourned.
    [Questions and answers for the record follow:]

                        Submitted to Ex-Im Bank

                 Questions for the Record by Mr. Porter

       overseas private investment corporation/export-import bank
    Question. We have heard much about the need for ``meaningful 
participation'' by developing countries prior to ratification of the 
climate change treaty. Disturbingly, I note the continuing growth of 
OPIC and Ex-Im's portfolios not only in thermal power plant projects, 
but also in fossil fuel extraction projects such as oil and gas--
thereby compromising ``meaningful participation'' by developing 
countries in the short and long term in helping solve the climate 
change problem:
    OPIC and Ex-Im Bank have agreed to release annual greenhouse gas 
emission reporting, but only for thermal power plants. Why do you not 
consider greenhouse gas emissions for other projects.
    Answer. The April 2, 1998 revision to Ex-Im Bank's Environmental 
Procedures and Guidelines states that the Bank is committed to 
increasing its support for projects and products that are 
environmentally beneficial, including those which result in the 
reduction of greenhouse gases. In addition, the Bank's Environmental 
Procedures set forth an initiative whereby it will track the estimated 
amount of carbon dioxide emissions from projects it supports in the 
power sector and, to the extent practical, from projects in other 
sectors that may cause significant production of CO2.
    Thermal power plants were targeted because, by their nature, plants 
that convert energy from carbon based fuels to heat and electricity 
represent the sector that constitutes the main contributors, by far, of 
global greenhouse gas emissions within the set of projects that Ex-Im 
Bank would ordinarily be requested to support. In addition to thermal 
plants, however, Ex-Im Bank's Engineering and Environment Division will 
include the reporting of greenhouse gas emissions from certain projects 
in other sectors, such as cement plants or certain oil field projects 
that flare excessive gas, which inherently produce amounts of 
greenhouse gases that may be significant. Projects in many industrial 
sectors supported by Ex-Im Bank inherently produce relatively small 
amounts of CO2, and Ex-Im Bank's Engineering and Environment 
Division determined that at this time, the tracking and reporting of 
the greenhouse gas emissions from these projects would not be practical 
in that the results would not significantly impact the management of 
global greenhouse gas emissions.
    Question. Will there be a commitment to investment in renewable 
energy to help further the goals of meaningful participation in the 
context of the climate treaty?
    Answer. To underscore our commitment to supporting renewable 
energy, Ex-Im Bank offers an incentive to exporters and buyers of 
renewable energy projects under its Environmental Exports Program. 
Under the Bank's Environmental Exports Program, renewable energy 
projects, as well as thermal power projects which produce less than 400 
grams of CO2 per kilowatt hour of energy produced, receive 
extended repayment terms, capitalization of interest and local cost 
support totaling up to 15% of the U.S. contract price. Ex-Im Bank 
believes, moreover, that it remains the only export credit agency to 
have taken an initiative of this nature to encourage exports of 
renewable energy technology and projects.

                 Questions for the Record by Mr. Forbes

    Question. Can you comment on the impact of the Asian financial 
crisis on the volume of activity at each institution? Has this crisis 
increased costs for US businesses and driven up the amount of 
assistance, advisory and financial, delivered to customers by your 
agency?
    Answer. Short-term.
    As a result of the Asia crisis, demand for short term financing 
support for Asia through Ex-Im Bank's export credit insurance program 
reached unprecedented levels. Specifically, Ex-Im Bank's short-term 
insurance support for U.S. exports to Korea increased from 
approximately $30 million during FY'97 to just over $1 billion during 
FY'98. During 1998, Ex-Im Bank received more than 2,400 applications 
for short-term insurance on U.S. exports to Korea, compared to less 
than 100 applications during 1997.
    The number of inquiries from U.S. businesses regarding the 
availability of Ex-Im Bank support for exports to Asia also spiked 
dramatically in the Insurance Division and in Business Development. The 
demand for this type of information increased so much that Ex-Im Bank 
developed specific fact sheets and created an Asia Hotline to handle 
the volume. In addition, the programs created by Ex-Im Bank for 
specific Asian markets were designed to accommodate a high volume of 
demand for Bank financing in an expeditious manner. The cost associated 
with the creation of these tools were absorbed by Ex-Im Bank (mainly in 
the form of additional staff hours) entirely and were not passed on to 
the customers.
                     medium and long-term financing
    The Asian currency crisis and resulting recession in Asia have 
served to increase Ex-Im Bank activity for term financing in certain 
markets while decreasing activity in other primary Ex-Im Bank markets. 
For instance, Ex-Im Bank activity in Korea prior to December 1997 (when 
the Asian currency crisis engulfed the Korean won) had been generally 
limited to the financing of aircraft as commercial lenders were 
generally willing to provide term financing for U.S. exports of other 
big ticket items. Since December 1997, however, Korean buyers have 
generally been unable to attract funding from commercial sources and 
therefore have turned to Ex-Im Bank funding.
    The situation is the reverse for other major Ex-Im Bank markets 
such as Thailand and Indonesia where the economic recession is much 
more severe and signs of recovery have not yet materialized. In these 
cases, businesses are struggling to stay afloat and are refraining from 
embarking on expansion of manufacturing capacity. Businesses therefore 
have less need for exports of U.S. capital equipment. As a result, 
demand for Ex-Im Bank financing in such markets has declined 
considerably and is not expected to recover until the economies 
recover.
    The crisis increased the cost of doing business in Asia for U.S. 
companies because Ex-Im Bank charges an exposure fee or risk premium in 
order to provide risk cover. Moreover, private sector banks probably 
increased their pricing in response to the higher risks involved. 
However, U.S. exporters presumably passed these additional costs on to 
their foreign buyers. Further, the additional costs incurred also were 
considered to be necessary in making the difference to many U.S. 
companies that would not have been able to conclude these sales without 
Ex-Im Bank support.
    Question. What plans does your agencies have for Russia? Have you 
written off any or all activities with Russia due to its insolvency and 
rampant crime? What might your agency do to assist US companies to help 
lift Russia out of its quagmire? Or, should we force Russia to fend for 
itself?
    Answer. Ex-Im Bank has not publicly changed its policy in Russia 
since the August 1998 financial crisis. The Bank's stated cover policy 
is: open for short-, medium- and long-term public sector transactions 
and for short- and medium-term private sector transactions. In the 
aftermath of the financial crisis, however, Ex-Im Bank has not been 
prepared to consider new sovereign risk or other unsecured exposure 
(and has not, so far, approved new transactions of any kind). This 
policy is consistent with that of the other major export credit 
agencies and is unlikely to change until Russia establishes an economic 
program acceptable to the IMF and G-7, and the economic outlook 
improves sufficiently to warrant considering new business on an 
unsecured basis. The Bank continues to honor existing commitments to 
U.S. exporters by permitting disbursements to continue for transactions 
which had already been approved and documented prior to the crisis.
    Ex-Im Bank has $2.4 billion in exposure in Russia: $1.2 billion in 
outstanding (disbursements less repayments), $739 million is yet to be 
disbursed on approved transactions, and $455 million has been 
authorized but not yet made operative. Almost $1.5 billion in exposure 
is secured by oil and diamond export sales, or under asset-based 
aircraft financing. Virtually all exposure is under the medium- and 
long-term guarantee programs.
    Delinquencies and claims paid to date have been limited to the 
commercial banking sector. Two claims totaling $12 million were paid as 
a result of one bank's failure to pay the guaranteed lenders. Efforts 
to collect from the bank are underway and prospects for recovery appear 
encouraging. Another bank made a partial payment on a November 1998 
installment, and is likely to seek rescheduling of the balance 
outstanding. A third bank was late but ultimately paid a December 1999 
installment. The total outstanding debt involving these three banks 
amounts to $24 million. The remaining $12 million in debt owned 
directly by or guaranteed by five other Russian commercial banks is 
current.
    Prospects for Renewing Ex-Im Bank Activity: Once economic 
conditions warrant, Ex-Im Bank could again move forward with sovereign 
risk lending. The prospects with regard to the commercial banking 
sector are less clear and consequently, it will take longer to 
determine which of the surveying banks in Russia represent acceptable 
credit risk. The demand for Ex-Im Bank financing in the energy sector 
could increase in the future, as a number of Russian oil companies have 
inquired concerning financing under the Oil and Gas Framework 
Agreement. The actual timing and need for Ex-Im Bank financing will 
depend on a recovery of the demand for and price of crude oil. 
Inquiries have been received involving other sectors as well, such as 
diamonds, forestry, and agricultural equipment.
    Question. Could you comment on how your activities in Brazil might 
be impacted if the local economy and currency continue to slide 
downward?
    Answer. As a result of the devaluation of Brazil's currency, the 
``real'', U.S. products are significantly more expensive. A devaluation 
of 40%, approximately the current level, means an increase in the cost 
of U.S. products in Brazil of more than 65% from its pre-devaluation 
level. The direct effect is reduced Brazilian demand for U.S. products, 
with certain industries, such as the automotive industry, being 
affected more than others. However, this does not necessarily mean 
reduced Ex-Im Bank activity in Brazil. An argument can be made that Ex-
Im Bank, as a ``lender of last resort'', may see its export financing 
actually increase in terms of U.S. dollar volume. Inherent In this 
argument is lack of availability of export financing for Brazil. 
Brazilian banks and the capital markets are currently not an option, 
and foreign financial institutions only finance the largest and best 
Brazilian companies. The result is a liquidity crisis, and among the 
few financing alternatives are the official export credit agencies of 
the industrial world that may be understandably reluctant to take 
Brazilian risk.
    Ex-Im Bank believes that if there was ever a time to be active in 
Brazil, it is now. Abandoning Brazil may have longer term implications 
on the competitiveness of U.S. exporters in the market. On the other 
hand, staying active in providing credit to Brazilian buyers would 
likely result in increasing our market share. Moreover, tightening up 
on our lending practices would adversely affect liquidity with negative 
ramifications for the rest of Latin America, mainly Argentina, Uruguay 
and Paraguay; Brazil's major trading partners. It also does not help 
global emerging markets. Ex-Im Bank believes that in the long run the 
benefits of staying active significantly outweigh the risks, especially 
given the Bank's expertise in analyzing foreign credit and political 
risk. The Bank will support transactions only if reasonable assurance 
of repayment does exist. At the same time, it is clear that 
continuation of the current slide in the value of the real will result 
in an increased number of defaults. In our view, this will be far 
outweighed by the improvement in our exporters' competitive capacity in 
the lucrative Brazilian and Latin American markets, which carries 
positive implications for U.S. employment and global stability. This 
belief is evident in Ex-Im Bank's recent decision to ``open'' for 
public sector financing in Brazil, which could translate into as much 
as $2 billion in additional U.S. exports; and Ex-Im Bank's increase in 
the credit limit for six highly creditworthy Brazilian banks, five of 
them private, to $1 billion.
    Ex-Im Bank would expect to see an increase in demand for medium-
term cover (1-5 year repayment terms) but the composition of that 
demand would likely change. Specifically, we would expect to see demand 
coming from the stronger Brazilian companies, particularly those with 
foreign currency (dollars in particular) earnings or multinationals, 
and Brazilian banks on behalf of their Brazilian corporate. Indications 
from the private sector suggest that private capacity, in terms of 
lenders and insurers, is quite limited in Brazil and especially for 
medium-term cover. Moreover, financing may be available but a very 
costly interest rates. Thus, Ex-Im Bank will be an available source of 
funding. Conversely, we would expect a downturn in activity involving 
small and medium-sized Brazilian buyers and U.S. exporters which have 
traditionally accounted for a large portion of our medium-term 
business. Demand for short-term cover would depend on whether the 
Brazilian government decides to lift the current restrictions on goods 
sold on terms of 360 days or less. Until such time as these 
restrictions are lifted, we would not expect to see any appreciable 
activity or demand.
    Question. There is a great deal of concern in Congress right now 
that some countries suffering in the financial crisis are dumping cheap 
products in the US to escape their economic problems. What role, if 
any, does your agency have in causing this problem?
    Answer. Ex-Im Bank does not play a role in causing foreign 
countries to dump their products in the U.S. market. Rather, Ex-Im Bank 
explicitly opposes the practice of illegal dumping and unfair 
subsidization by withholding financing from buyers known to have dumped 
or to have unfairly subsidized their products in the U.S. market.
    Question. Will you curtail your export or direct investment 
assistance to halt such dumping of products?
    Answer. Yes Ex-Im Bank policy is to withhold official export credit 
support from buyers that have been sanctioned by the U.S. government 
for dumping their products in the United States. Exceptions to this 
policy are possible, but only if there are dramatic consequences 
created by the lack of Ex-Im Bank financing for a transaction. (For 
example, if the export sale were critical to the financial viability of 
the U.S. exporter, Ex-Im Bank management may consider extending 
financing. Such exceptions are expected to be extremely rare.)
    Question. Is greater financing of your agencies warranted if this 
problem persists?
    Answer. In light of current Ex-Im Bank policy to withhold financing 
from foreign buyers that engage in unfair trade practices such as 
dumping products in the U.S. market, limitations on Ex-Im Bank funding 
would not likely contribute to a reduction in unfair trade practices by 
foreign parties.

              Questions for the Record by Mr. Knollenberg

    Question. In the past five years, Ex-Im activities have resulted in 
$82.2 million of exports in my District alone. What does that do for 
job creation in MI-11? How does that compare to figures that would 
exist if we did not have an independent agency such as Ex-Im assisting 
American companies to compete against the aggressive financing 
practices of major foreign governments?
    Answer. It is estimated that the $82.2 million of exports supported 
by Ex-Im Bank financing created/sustained approximately 1,069 U.S. 
jobs. The basic premise of Ex-Im Bank financing is that it is a 
supplement to, and not a replacement for, private sector financing. 
These are exports that most likely not would have gone forward because 
of lack of financing. As a result, the companies that received these 
orders would have found it necessary to find other orders for their 
employees to work on or reduce employment.
    Question. Ex-Im is requesting $839 for its FY 2000 program budget--
an increase of $74 million over last year. To what do you attribute 
this increase? How much financing support will your FY 2000 budget 
request allow?
    Answer. The increase in program budget in FY 2000 will help support 
an expected increase in demand for U.S. in Asia/Africa and Latin 
America. At this time, Ex-Im Bank financing in FY 2000 is projected to 
increase almost 70% over FY 1999. Also, additional program budget is 
needed to help support exports to higher risk markets.
    Question. What amount of exports will it support? How many U.S. 
jobs does that represent?
    Answer. In total, $839 million in program budget is expected to 
provide $16.8 billion in Ex-Im Bank financing, which will support 
approximately $20 billion in exports. This will support an estimated 
320 thousand U.S. jobs.

            Questions for the Record Submitted by Ms. Pelosi

                              environment
    Question. I am pleased to note that Ex-Im has agreed to the release 
of Environmental Impact Statements, but concerned to find out that you 
are providing no minimum time period for disclosure before you commit 
to a project. Even OPIC has agreed to a 60-day review period, which as 
President Munoz knows I think is insufficient. Will Ex-Im agree to 
implementing a minimum time period for release of environmental impact 
statements before you commit to a project?
    Answer. The April 1998 revision to Ex-Im Bank's Environmental 
Procedures and Guidelines initiated a procedure whereby Environmental 
Assessments of final applications for those projects categorized as 
having potentially significant environmental effects, will be made 
available to interested parties. Ex-Im Bank is the only major export 
credit agency that has published environmental procedures and 
guidelines. The decision to make environmental assessments of certain 
projects available to interested parties was a milestone in that for 
the first time, participants of projects seeking Ex-Im Bank support 
would now have to provide environmental information about the project 
not only to Ex-Im Bank's Engineering and Environment Division, but also 
to interested parties in the public sector, including environmental 
groups and NGOs.
    In its role as an Export Credit Agency, Ex-Im Bank remains 
sensitive to the competitive needs of exporters of U.S. goods and 
services, notwithstanding the Bank's commitment to the environment. In 
light of the fact that competing ECAs do not undertake environmental 
evaluations of applications for projects they are asked to support, 
much less require that an environmental assessment be prepared and then 
made available to interested parties, Ex-Im Bank concluded that at that 
time, any requirement that the Environmental Assessment be made 
available for a fixed period pending final action by the Bank, would be 
unduly detrimental to the competitiveness of U.S. exporters. We note, 
however, that in fact, transactions for which environmental assessments 
are required by Ex-Im Bank generally require a period of at least two 
months to review, since these projects tend to be inherently more 
complex than simple product sale type transactions. Hence, the de facto 
period during which the environmental assessments submitted to Ex-Im 
Bank are made available for comment by interested parties should 
average greater than 60 days.
    Question. Similary, I am disappointed that Ex-Im has not adopted 
categorical prohibitions on environmentally destructive projects, as 
OPIC has. Why has Ex-Im refused to implement categorical prohibitions 
on destructive projects?
    Answer. Ex-Im Bank's Environmental Procedures and Guidelines state 
that commercial logging in primary tropical forests will not be 
supported. Although Ex-Im Bank has not adopted other ``categorical 
prohibitions'' for various types of projects, it will not provide 
financial support for a project that, upon review by the Engineering 
and Environment Division, is determined to be ``environmentally 
destructive.'' For example, while some hydroelectric projects could 
cause irreversible damage to the environment, others, which address 
measures to adequately mitigate any adverse environmental effects are 
viewed by Ex-Im Bank as having a potential beneficial environmental 
effect.
    Question. I have heard reports that Ex-Im may be being pressured to 
loosen its standards applied to the Illisu Dam in Turkey. Is that the 
case? Will Ex-Im agree to standards lower than those in place now? Will 
Ex-Im support the Ilisu Dam if it is found to disrupt natural 
ecosystems or the livelihoods of local inhabitants?
    Answer. Any ``pressure'' from exporters or project participants to 
relax the environmental review standards associated with the Ilisu 
project is being categorically ignored by Ex-Im Bank's Engineering and 
Environment Division. In 1998, the Swiss government realized that the 
issue associated with the proposed resettlement of 12,000 inhabitants 
around the region of the proposed reservoir would be better addressed 
if all participating ECAs agreed to a common approach. Ex-Im Bank 
subsequently seized upon the opportunity to broaden the scope of 
discussion among the ECAs to other elements of the project that raised 
serious environmental concerns. Recognizing the opportunity afforded 
Ex-Im Bank to further its objective of achieving common environmental 
guidelines among all Export Credit Agencies, the Bank, through its 
Engineering and Environment Division, have assumed a leadership role 
among the ECAs in the environmental review of the project.
    Following a review of the environmental information available to 
date on the proposed Ilisu project, Ex-Im Bank, on January 21, 1999, 
issued a preliminary commitment covering U.S. goods and services for 
the project that was heavily conditioned with numerous information 
requirements addressing various environmental aspects of the project, 
in areas ranging from the project's socioeconomic impact (especially 
relating to resettlement), to the quality of the water both downstream 
of the project and within its proposed reservoir. Ex-Im Bank is also 
requiring critical information regarding measures to be taken to 
mitigate the potential adverse environmental effects of the project. To 
date, Ex-Im Bank appears to have convinced other ECAs to join in a 
united front with respect to the resolution of these identified 
environmental concerns. Any recommendation for final approval of 
support for the project will be predicated on the project meeting the 
requirements set forth by Ex-Im Bank, requirements that are 
consistentwith its environmental objectives and guidelines. 
Furthermore, consistent with its revised Environmental Procedures and 
Guidelines, the project's environmental assessment will be made 
available to interested parties for their review and comment when and 
if an applicant for a final commitment, complete with the information 
required as a condition to its Preliminary Commitment, is received by 
Ex-Im Bank. The Engineering and Environment Division has expressed 
assurance that any application for a final commitment will be the 
subject of a complete and thorough environmental evaluation, consistent 
with that undertaken for hydroelectric projects worldwide.
                           ex-im bank--china
    Question. What was the level of funding for Ex-Im Bank activities 
in China in 1998 and how does that compare to 1997? What are your plans 
for China activities in 1999?
    Answer. Ex-Im Bank is open under all its programs in China. In 
fiscal years 1997 and 1998, Ex-Im Bank provided financing support in 
the form of loans and guarantees for approximately $1.5 billion in U.S. 
exports to China. For Fiscal year 1999, it is projected that the Bank's 
financing will support $1.0 to 1.5 billion in U.S. exports to China. 
However, this number may be affected by changing market conditions, as 
Ex-Im Bank is requested to match officially supported competitive 
offers.
    Question. Is Ex-Im reconsidering applications from Caterpillar and 
others for participation in the Three Gorges Dam project? If so, what 
would be the process, given the earlier NSC review that recommended 
against funding the dam?
    Answer: Ex-Im Bank decided in May 1996 not to issue letters of 
interest related to the Three Gorges dam project in China. Since that 
time the Bank periodically has received additional environmental 
information relating to the Three Gorges dam project. To date, this 
additional data has been insufficient in addressing the information 
requested.
    Question. Do you have any plans to visit China this year? If you 
plan to go, will you coordinate your visit with others in the 
Administration so that your meetings with Chinese government officials 
reflect the full range of U.S. government's concerns with China, 
including human rights, good governance, corruption, etc?
    Answer. While specific plans for visiting China this year have not 
been finalized, in recent years there have been one or more business 
trips to China led by various Ex-Im Bank divisions. All trips to China 
are closely coordinated with other departments of the government, 
including the State Department as regards country and cable clearances. 
When appropriate to an Ex-Im Bank delegation and mission, other U.S. 
government concerns can be conveyed to our Chinese counterparts.
                    ex-im bank--enron india project
    Question. Human Rights Watch has just released a comprehensive 
report investigating Enron Corporation's possible complicity in serious 
human rights abuses associated with the Dabhol project in India. Ex-Im 
participated in the financing of this project. At any point, did Ex-Im 
raise the issue of human rights with Enron? Was Ex-Im aware that the 
company was paying the costs of police who subsequently committed human 
rights violation? Was Ex-Im aware that contractors to the company were 
alleged to have attacked, harassed and threatened demonstrators against 
the project? Does Ex-Im have a policy in conjunction with the State 
Department or otherwise to ensure that human rights are monitored 
during the financial package's life span? Are there any steps being 
taken to implement such a policy?
    Answer. In order to address the above-referenced questions, 
background information should be provided regarding certain legislation 
which relates to human rights and other foreign policy consideration 
and its impact upon Ex-Im Bank. Since passage of the 1978 amendments to 
the Export-Import Bank Act of 1945, as amended, Ex-Im Bank can deny its 
financing for human rights reasons only if the President determines 
that such a denial would be in the national interest (this legislation 
is also referred to as the Chafee Amendment). The Chafee Amendment, 
which was amended in 1997, states that Ex-Im Bank should not deny 
applications for non-financial or non-commercial reasons (i.e., for 
policy reasons) unless the President of the United States determines 
that the denial is in the national interest. Interest areas on which a 
particular transaction or a given country may receive a denial include 
international terrorism, nuclear proliferation, environmental 
protection and human rights, including child labor.
    Ex-Im Bank authorized financing for the Dabhol project in September 
1994. Ex-Im Bank followed the standard procedures regarding human 
rights and other foreign policy considerations in processing the 
subject transaction. Such procedures were developed by Ex-Im Bank with 
the State Department, particularly with the Bureau of Human Rights and 
Humanitarian Affairs, to ensure a smooth flow of information to Ex-Im 
Bank regarding human rights. Transactions over $10 million are 
generally subject to specific human rights review by the State 
Department. Such a review by the State Department would determine if a 
transaction may give rise to significant human rights concerns. These 
procedures undertaken by the State Department would examine both the 
general status of human rights and the effect of exports on human 
rights in each country. Such a review is completed by the State 
Department prior to Ex-Im Bank's consideration of the transaction. 
These procedures were followed in the processing of the Dabhol 
transaction.
    As described above, Ex-Im Bank does not conduct the human rights 
review--it is the State Department which undertakes the review due to 
such foreign policy considerations as well as the Department's 
expertise in these matters. Any specific issues related to such an 
examination should be referred to the appropriate official at the State 
Department.
                            dual-use exports
Background
    Since 1994, Ex-Im Bank has had the authority to finance so called 
dual use items, that is defense articles and services are authorized as 
long as they are nonlethal and primarily used for civilian use. In 
1996, using this authority Ex-Im authorized the sale of helicopters to 
the Indonesian Army for its supposed role in helping to develop 
Indonesia's rural areas.
    No deliveries have taken place to date for financial reasons, yet 
this sale has been authorized by Ex-Im Bank.
    Question. Can you tell us how the use of this authority was 
justified in this case, and what role the Indonesian Army will have in 
rural development?
    Answer. In early 1996, Ex-Im Bank authorized support for the sale 
of 21 refurbished ``Bell--205'' helicopters to the Indonesia's Ministry 
of Defense. The Engineering and Environment Division conducted a 
thorough evaluation of the transaction, focusing on the proposed uses 
of the helicopters, and it determined that, in accordance with P.L. 
103-428, the items qualified as nonlethal defense items, the primary 
use of which would be for civilian purposes.
    In the course of conducting its evaluation, the Engineering and 
Environment Division contacted the U.S. Embassy in Indonesia, which 
reported that the Indonesian Army utilizes helicopters of this type in 
support of ``territorial development'' with activities in this area 
constituting approximately 70% of the usage of these helicopters. Other 
information received indicated that the helicopters would be used for 
activities such as the transport of food, water and emergency medical 
supplies to remote areas, the combating of forest fires, mosquito 
control, the conducting of search and rescue missions, and maritime 
pollution surveillance.
    Based on the information received and gathered by the Engineering 
and Environment Division, including the information about the end user 
of the helicopters from the U.S. Embassy in Indonesia, Ex-Im Bank 
determined that there was clear and convincing evidence that expected 
usage of the proposed helicopters would indeed be primarily civilian in 
nature. Certificates were obtained from the Indonesian Ministry of 
Defense and from the Indonesian Army veryfing that the proposed usage 
of the helicopters would be ``primarily civilian'' in nature. Ex-Im 
Bank's Engineering and Environment Division subsequently determined 
that the transaction was eligible for financial support, in accordance 
with the exceptions to the law prohibiting sales of Defense Articles, 
afforded by P.L. 103-428, otherwise referred to as Ex-Im Bank's ``Dual 
Use'' policy.
                            budget increase
    Question. The request for an additional $74 million in subsidy 
appropriations and an additional $7 million in operating expenses is 
one of the few areas of increase in the entire International Budget 
function. The limited material available to the Committee to date does 
not illustrate how such an increase will be used. What are your 
specific priorities for your program budget increase? How much will go 
to increase financing in the emerging areas of new business such as 
Africa and Latin America.
    Answer. The increase in program budget will be used to finance 
increased financing activity in Asia/Africa and Latin America. Ex-Im 
Bank financing in FY 2000 is projected to increase to almost 70% over 
FY 1999 in these regions. Financing in Asia/Africa is projected to 
increase 65%, from $938 million in FY 1999 to $1.55 billion in FY 2000. 
Financing in Latin America is projected to increase over 70% from $1.2 
billion in FY 1999 to $2.1 billion in FY 2000.
    The $7 million increase in the administrative budget is necessary 
for the training, personnel, and equipment upgrade necessary for the 
Bank to fulfill its mandate of protecting U.S. jobs by financing 
exports to developing countries. Ex-Im Bank needs sufficient funds to 
hire and train personnel to staff divisions which are processing 
complicated transactions, and it needs new funds to update a computer 
system which does not match those used by competing export credit 
agencies. The Bank will need modernization if it is to reduce case 
processing time and reach out to the thousands of small businesses 
which have not availed themselves of the Bank's services and if it is 
to defend U.S. jobs by keeping exporters competitive in a very 
difficult international market.
    In addition, some of the funds will be used to modernize Ex-Im 
Bank's headquarters, which was built in 1940 and is in dire need of 
renovation. GSA currently plans ``life safety upgrades'' to the 
building beginning in FY 1999. These upgrades include installation of 
sprinklers and lights throughout the building followed by upgrades to 
the electrical systems. The upgrade of computer equipment is dependent 
on demolition work done by GSA, which will provide an opportunity for 
the Bank to upgrade the telecommunications system and network cabling 
as well as to improve the security of the building.
    Question. On the administrative side, your request calls for 
deploying additional personnel around the world. The Commerce 
Department does have significant numbers of personnel deployed through 
the Foreign Commercial Service to promote U.S. business interests. 
Explain why Ex-Im Bank needs its own additional personnel.
    Answer. While we are fully aware of the services provided by the 
Department of Commerce through the U.S. Foreign and Commercial Service, 
we have learned through experience that there is just no substitute for 
having a representative of Ex-Im Bank directly involved when the Bank 
is trying to open or expand business in key markets. These 
representatives will be knowledgeable knowledgeable about the Bank's 
programs, many of which are very detailed. They will also be 
knowledgeable about the special circumstances surrounding local 
economies as well as the political considerations which might be 
involved. In volatile yet potentially profitable markets, such as sub-
Saharan Africa, Turkey, and East Asia, it is vitally important to have 
such a representative present, personnel who know the market and who 
can help the Bank compete against the representatives of competing 
export credit agencies. This is one of the best ways the Bank can level 
the playing field for U.S. exporters and preserve U.S. jobs.
    Question. Justify the $1 million requested for pay raises.
    Answer. For FY 1999, Ex-Im Bank will be operating below its 
approved FTE level of 427 at about 420 FTE. Approximately half of the 
increase in personnel compensation from FY 1999 to FY 2000 is to bring 
the number of Bank personnel up to the 427 FTE approved level. The 
remaining amount is to cover cost of living and locality pay increases.
                       helicopter sales to turkey
Background
    In 1990, Congress extended to Ex-Im Bank a limited authority to use 
credits for the sale of helicopters to Turkey and Greece. This to my 
knowledge is the one and only time Congress has allowed the use of Ex-
Im Bank credits for a military sale. Report language in the conference 
bill stated that this authority was granted ``on a one time basis only, 
for a period of one year only''.
    Pursuant to this authority Ex-Im's board chose to authorize the 
sale of 200 UH-60L (Blackhawk) helicopters to Turkey, and to allow the 
implementation of that sale to extend through the year 2001. A contract 
for the sale of 150 helicopters to Turkey was signed in 1992, and, as I 
understand it, only a portion of those helicopters have been delivered 
to date. Efforts are now underway at Ex-Im Bank to use this authority 
to execute the sale of additional Blackhawk helicopters to Turkey. 
Additionally, we have heard that other companies (Boeing/Textron/Bell) 
are pursuing the sale of up to 50 additional attack helicopters to 
Turkey using the same authority.
    Question. Do you feel that the 10-year implementation period for 
this sale, and the use [of] multiple export licenses to implement it, 
is consistent with congressional intent?
    Answer. Title IV of the Foreign Operations, Export Financing, and 
Related Programs Appropriations Act, 1990 (``FY 1990 Appropriations 
Act'') contained the authority for Ex-Im Bank to finance the sale of 
Sikorsky helicopters, spare parts and related equipment. This authority 
allowed Ex-Im Bank to use its loan guarantee program to finance the 
commercial sales of defense articles and services destined for Greece 
and Turkey, ``notwithstanding any other provision of law,'' provided 
such authority is not used for the procurement of defense articles or 
services for use on Cyprus. On September 27, 1990, near the end of FY 
1990, pursuant to this authority, the Board of Directors authorized a 
loan guarantee in the amount of $1,366,279,271 to support the financing 
of 200 helicopters to the Turkish Ministry of National Defense. The 
helicopters were projected to be delivered over the period 1992 to 
2000, and the loan was to be disbursed in related tranches, each 
repayable in 20 semiannual installments.
    Prior to final approval, in accordance with the procedures set 
forth in Section 2(b)(3) of the Export-Import Bank Act of 1945, as 
amended, Ex-Im Bank, on August 16, 1990, notified Congress that Ex-Im 
Bank was prepared to authorize the subject financing. These 
Congressional notifications cited the FY 1990 Appropriations Act as the 
legal authority for Ex-Im Bank support and also indicated that the 
``200 helicopter kits will be delivered incrementally in a series of 
annual deliveries between 1992 and 2000.'' After expiration of the 
required period for Congressional review, the Board of Directors 
authorized the subject financing.
    At the time of final approval on September 27, 1990, Ex-Im Bank 
charged the entire amount of the commitment, $1,366,279,271, against 
the limitation on guarantee commitments for fiscal year 1990 set forth 
in the FY 1990 Appropriations Act.
    [Note.--Because Ex-Im Bank does not issue export licenses, the 
clause referring to ``use of multiple export licenses'' was not 
addressed.]
    Question. How can this authority be legitimately used for the sale 
of an additional 50 attack helicopters, given that Congress was 
officially notified of the sale of UH-60L (Blackhawk) helicopters in 
August of 1990.
    Answer. The sale of an additional 50 Blackhawk helicopters would 
fall within the scope of the transaction authorized by Ex-Im Bank in 
September 1990. As set forth in Ex-Im Bank's notification to Congress 
in August of 1990, the subject transaction was authorized to support 
the sale of 200 helicopters to be used in utility, reconnaissance, 
medical evacuation and search and rescue roles. The helicopters were 
projected to be delivered between the period 1992 and 2000, with the 
guaranteed loan to be disbursed in related tranches. The fact that the 
subject transaction was approved in 1990 pursuant to FY 1990 authority 
does not affect the duration of the disbursement schedule. Ex-Im Bank 
routinely approves transactions involving disbursement schedules 
spanning several years to cover construction and other delivery 
periods. Since the additional helicopters are within the number 
originally authorized, this authority can be used for the sale of an 
additional 50 Blackhawk helicopters.
    However, this authority has not been, and Ex-Im Bank believes it 
cannot be, used for attack helicopters.
    Question. Do the terms of the so-called Leahy amendment on 
provision of U.S. funded equipment to security units alleged to be 
involved in human rights abuses apply to these sales. If not, why not.
    Answer. The so-called Leahy amendment does not apply to this 
transaction. The amendment, which is contained in section 570 of the 
Foreign Operations, Export Financing, and RelatedPrograms 
Appropriations Act, 1998 (``FY 1998 Appropriations Act'') and Section 
568 of the Foreign Operations, Export Financing, and Related Programs 
Appropriations Act, 1999 (``FY 1999 Appropriations Act'') provides, in 
relevant part:

          None of the funds made available by this Act may be provided 
        to any unit of the security forces of a foreign country if the 
        Secretary of State has credible evidence that such unit has 
        committed gross violations of human rights, unless the 
        Secretary determines and reports to the Committees on 
        Appropriations that the government of such country is taking 
        effective measures to bring the responsible members of the 
        security forces unit to justice....
          [Emphasis added]

    The Leahy amendment applies to ``funds made available by [the FY 
1998 Appropriations Act and the FY 1999 Appropriations Act].'' However, 
the entire amount of Ex-Im Bank's support for the financing of the 
subject transaction was charged against the Bank's limitation on 
guarantee commitments for fiscal year 1990 set forth in the FY 1990 
Appropriations Act. None of the funds made available to Ex-Im Bank by 
the FY 1998 or FY 1999 Appropriations Acts have been used or obligated 
for the subject transaction. And, thus, the Leahy amendment does not 
apply to this transaction.
                      status of program in russia
    Question. Ex-Im has not approved any new applications since August 
of 1998 in Russia according to your statement. They are, however, still 
disbursing against transactions previously approved. What is the status 
of claims or potential losses in your Russian transactions?
    Answer. Ex-Im Bank currently has two outstanding private sector 
guarantee claims totaling $11,979,000 against INKOMBANK, a Russian 
borrower. While Ex-Im Bank does have $1,655,000 in commitment fee 
arrears, we expect repayment.
    Question. What are the prospects for renewing new Ex-Im 
transactions in Russia?
    Answer. Ex-Im Bank has not publicly changed its policy in Russia 
since the August 1998 financial crisis. The Bank's stated cover policy 
is: open for short-, medium- and long-term public sector transactions 
and for short- and medium-term private sector transactions. In the 
aftermath of the financial crisis, however, Ex-Im Bank has not been 
prepared to consider new sovereign risk or other unsecured exposure. To 
date, Ex-Im Bank has not approved any new transactions under its 
programs. The Bank continues to honor existing commitments to U.S. 
exporters by permitting disbursements to continue for transactions 
which had already been approved and documented prior to the crisis. (In 
connection with one such prior transaction, secured by hard currency 
oil export earnings held in offshore escrow accounts, Ex-Im Bank did 
approve an increase of $6.3 million for additional U.S. supply.) This 
policy is consistent with that of the other major export credit 
agencies and is unlikely to change until Russia establishes an economic 
program acceptable to the IMF and G-7, and the economic outlook 
improves sufficiently to warrant considering new business on an 
unsecured basis.
    Exposure as of December 31, 1998 and Repayment Experience to Date: 
Ex-Im Bank has $2.4 billion in exposure in Russia, of which $1.2 
billion is outstanding (disbursements less repayments), $739 million is 
yet to be disbursed on approved transactions, and $455 million has been 
authorized but not yet made operative. Almost $1.5 billion in exposure 
is secured by oil and diamond export sales, or under asset-based 
aircraft financing. Virtually all exposure is under the medium-term and 
long-term guarantee programs. Delinquencies and claims paid to date 
have been limited to the commercial banking sector. Ex-Im Bank's 
exposure breaks down as follows:

                          (Dollars in millions)
------------------------------------------------------------------------
                                                  Exposure   Outstanding
------------------------------------------------------------------------
Sovereign risk (Vnesheconombank)..............         $922         $610
Secured by oil exports under the Oil and Gas          1,092          298
 Framework Agreement (OGFA)...................
Secured by the sale of diamonds Almazy Rossii            62           58
 Sakha (Diamonds of Russia)...................
Asset-based aircraft (Aeroflot)...............          301          203
Commercial banking sector (eight banks):
    Short-term insurance......................            0            0
    Medium-term insurance.....................           14           14
    Medium-term guarantees....................           22           22
    Claims paid on bank transactions..........           12          N/A
                                               -------------------------
        Subtotal commercial banking sector....           48           36
                                               =========================
            Total.............................        2,425        1,205
------------------------------------------------------------------------


    Under Ex-Im Bank's short-term insurance program, transactions 
totaling $28.7 million were approved, and fully utilized. Payments were 
made on time and there is nothing outstanding under the program.
    Two claims totaling $12 million were paid as a result of one bank's 
failure to pay the insured lenders. Efforts to collect from the bank 
are underway and prospects for recovery appear encouraging. Another 
bank made a partial payment on a November 1998 installment, and is 
likely to seek rescheduling of the balance outstanding. A third bank 
was late but ultimately paid a December 1999 installment. The total 
outstanding debt involving these three banks amounts to $24 million. 
The remaining $12 million in debt owned directly by or guaranteed by 
five other Russian commercial banks is current at present.
    Question: What are the prospects for renewing new Ex-Im 
transactions in Russia?
    Answer. Once economic conditions warrant, Ex-Im Bank could again 
move forward with sovereign risk lending. The prospects with regard to 
the commercial banking sector are less clear and consequently, it will 
take longer to determine which of the surviving banks in Russia 
represent acceptable credit risk. The demand for Ex-Im Bank financing 
in the energy sector could increase in the future, as a number of 
Russian oil companies have inquired concerning financing under the Oil 
and Gas Framework Agreement. The actual timing and need for Ex-Im Bank 
financing will depend on a recovery of the demand for and price of 
crude oil. Inquiries have been received involving other sectors as 
well, such as diamonds, forestry, and agricultural equipment.
    Question: What is the status of demand for Ex-Im involvement in the 
energy sector in Russia?
    Answer. Gazprom: No business has been conducted with Gazprom under 
the Memorandum of Understanding which was signed in November 1994. 
However, Gazprom has recently indicated a renewed interest in utilizing 
Ex-Im financing, and the Bank is prepared to consider requests on a 
case-by-case basis. The structure, terms, and conditions of the 
financing would be consistent with the Memorandum of Understanding of 
November 1994, including the dedication of proceeds from long-term 
sales contracts of natural gas or other products as a back-up for 
repayment of the financing. The potential amount of financing would to 
an extent depend, therefore, on the revenues available for allocation 
under such long-term sales contracts.
    Question: To what extent are Ex-Im transactions in Russia tied to 
IMF conditionality or disbursement schedules in Russia?
    Answer. As indicated above, Ex-Im Bank's current policy of not 
considering new sovereign risk or other unsecured exposure, while 
continuing to permit disbursements on existing operative transactions, 
which is consistent with the approach of other major export credit 
agencies, is unlikely to change until Russia establishes an economic 
program acceptable to the IMF and G-7, and the economic outlook 
improves sufficiently to warrant considering new business on an 
unsecured basis. In high-risk situations in general, the presence or 
absence of an IMF program, i.e., a standby arrangement, and a degree of 
compliance with the program, is an important, though certainly not the 
only, factor in establishing Ex-Im Bank's cover policy.
    Obviously, simply having an IMF program does not constitute 
assurance of credit worthiness in and of itself. But, such a program is 
generally regarded as offering greater assurance of an improvement in 
economic conditions, in part because it establishes various targets, 
conditions, and limitations consistent with economic stabilization and 
growth. Furthermore, it offers greater prospects of restoring 
international capital flows, both official multilateral and bilateral 
financing and private credit, and also foreign investment, which is 
also of great importance in contributing to a significant improvement 
in economic conditions.

                Questions for the Record by Mr. Kingston

    Question: The economic turmoil has continued in Asia now for over a 
year. I think by now you have a better idea of its impact on 
transaction demand. I know that demand spiked early in SE Asia. Will 
you describe that a little more for Fiscal 99 and what its extended 
impacts may be into FY 2000?
    Answer. Below is a breakdown of Ex-Im Bank's insurance and longer 
term financing programs.
                               insurance
    Demand for Ex-Im Bank short term (up to 180 days and on an 
exceptional basis, up to one year) financing support in Southeast Asia 
jumped dramatically during FY 1998 to record levels. In response to 
this demand, Ex-Im Bank provided over $1 billion in short-term 
insurance support for the sale of raw materials, spare parts, and other 
consumables and materials from U.S. exporters to Korea on letter of 
credit (L/C) payment terms in 1998. Looking ahead, Ex-Im Bank 
anticipates that the demand for cover on short term L/C's issued by 
Korean banks will continue; however, demand should begin to eventually 
taper off, assuming the Korean economy improves and the private market 
can once again assume the short term risks on its own. In addition, we 
would also anticipate an increase in demand for medium term support (1-
5 year repayment) for Korean corporates. All medium term requests are 
being channeled to Ex-Im Bank's medium-term program for Korea which 
carries the sovereign guarantee of the Korean government.
    Demand for Ex-Im short term support in other Asian markets is 
expected to grow overall (compared to FY 1998 levels). Most of that 
increase will be attributable to usage of the Indonesia letter of 
credit program. While the region is beginning to show signs of 
recovery, economic conditions continue to constrain the availability of 
private sector financing. Therefore, overall demand for Ex-Im Bank 
short term financing is expected to remain strong during FY 1999.
                          long-term financing
    Ex-Im Bank projects higher demand levels for medium and long-term 
financing in certain markets/sectors for Asia in FY 1999 and FY 2000, 
which would counterbalance the decline in term financing for Ex-Im Bank 
public sector/corporate risk activity in such Asian markets as 
Indonesia and Thailand. These estimates are based on pending power 
transactions for Korea totaling approximately $1.2 billion as well as 
power sector project finance transactions in China, Thailand and the 
Philippines totaling $380 million. Also, aircraft financing will 
experience its greatest increase in Asia is FY 1999. Aircraft 
authorizations for Asia could reach $3.5 billion for this fiscal year. 
The latter is due to the adverse effects of the Asian economic scenario 
and the associated capital markets withdrawal from Asian aircraft 
finance, which have caused these airlines that have historically 
obtained financing in the capital markets to pursue Ex-Im Bank support 
for their 1999 aircraft deliveries. Such activity levels in these 
markets/sectors are likely to continue into FY 2000.
    Question: How much of FY 1999 carryover business do you expect to 
bring into FY 2000?
    Answer. We do not expect to carryover any business from FY 1999 
into FY 2000. However, the Bank may have to use up to $35 million of 
tied aid funds for non-tied aid cases. Should this become necessary, 
the Bank will notify Congress through normal notification procedures.
    Question: Please describe your outreach efforts to small business. 
You obviously meet the statutory percentage threshold for assisting 
small business, but how does the Bank go about ``advertising'' its 
services to them to make them aware of assistance they may not even 
know exist?
    Answer. Ex-Im Bank has relied on intermediaries to be the main 
engine of market promotion for its programs. The thinking has been that 
if we can educate distributors such as banks, brokers, states, etc., 
they will sell the products to the exporters. Given the lack of budget 
resources for a large field force or advertising, Ex-Im Bank has 
historically not been able to directly approach exporters in a 
significant way.
                        history of field offices
    Ex-Im Bank began to market its small business programs and 
innovations, the Working Capital Guarantee (WCGP) and Small Business 
Policies, in 1984 in the Midwest. We quickly realized that providing 
information about the programs did not provide access. Local 
representation and distributors were a must. Because Ex-Im Bank had no 
field offices the traditional distributors had been banks and insurance 
brokers, but something else was needed to help small businesses.
    To obtain a field presence, we attempted to use the field offices 
of the U.S. Department of Commerce and the Small Business 
Administration in four mid-western states. This approach was not 
successful because the responsibilities for Ex-Im Bank outreach were 
never incorporated into the other agencies' job descriptions. For 
selling insurance policies, Ex-Im Bank worked very closely with the 
field offices of the Foreign Credit Insurance Association (FCIA) with 
which we had a reinsurance agreement. In the late 1980's, we also had a 
one-person office in Los Angeles for a short period.
    In late 1992 with the federalization of the FCIA, Ex-Im Bank 
inherited five field offices now located in New York City, Miami, 
Chicago, Houston and Long Beach. At first these offices wee primarily 
marketing the insurance policies, but they developed into full-service 
offices marketing all of Ex-Im Bank's programs. Their new focus is on 
selling directly to small business exporters, and their performance 
will be measured against sales goals. We have alsoestablished our sixth 
regional office, which is the Mid-Atlantic office that services 
Maryland, West Virginia, North Carolina and Washington, D.C.
                     outreach to brokers and banks
    The insurance program has traditionally relied on insurance brokers 
to sell the policies. Much time and effort has been put into 
cultivating this relationship. In order to make the sale of the Small 
Business Policy more attractive to the brokers, we increased our 
commission scale to 40% in 1994. Most brokers, however, still do not 
make a great effort to sell this policy.
    We have periodically done major outreaches to promote the Bank or 
inform customers of programmatic changes. One such outreach, in 1992, 
was undertaken to reach small banks that had typically not used Ex-Im 
Bank. These banks were targeted because they served small businesses. 
In 1994, there was a joint outreach between SBA and Ex-Im Bank for the 
harmonization of the WCGP.
    We have been successful in bringing in regional banks and some 
community banks to distribute the programs. One problem that remains 
with us today in the banking area is the lack of communication between 
the international officers knowledge in Ex-Im Bank and the domestic 
calling officers who seek out small businesses and would benefit from 
having information on Ex-Im Bank. With the recent bank mergers, we are 
now facing the problem of fewer banks willing to do small business and 
small transactions.
                       other outreach activities
    Since 1985, Ex-Im Bank has been conducting various training 
seminars in order to attract banks which had small business customers. 
We are continuing to do these seminars both in Washington and in cities 
around the country.
    In 1988, Ex-Im Bank began the City/State Program as a major tool to 
reach small businesses. The idea of that program was simple: Ex-Im Bank 
had the funding but few local contacts, and the states had the contacts 
without much money. Thus, the Bank married the two and trained local 
government people already in the business of promoting trade from their 
areas in Ex-Im Bank programs. There are currently 35 partners in the 
program.
    At this time, the Bank has a major outreach to trade associations 
through which we hope to increase their membership. In fact, Ex-Im Bank 
has placed a priority on those associations that have many small 
members. Early indications are that many will decide to partner with 
us.
                        more aggressive outreach
    Ex-Im Bank has entered a new aggressive outreach program aimed 
directly at exporters, something that we have not tried in many years. 
Our field offices will be the main engine driving this effort, which 
will be supported with qualified leaders from headquarters.
    Our WCGP and insurance programs have been modified to make them 
more user friendly and attractive to small businesses. We will 
continually review our products to meet the changing needs of the 
market place to make them more user friendly.
    For the first time, a person will be assigned full time to small 
business product development. Ex-Im Bank will also track our outreach 
efforts so that we will have a history of our calling efforts with each 
customer. To do this, the Bank has purchased a contact management 
system.
    We will also continue to look for additional distributors of the 
programs. One exciting area is the asset-based lenders to which Ex-Im 
Bank will be making a market drive to develop their interest in 
utilizing the WCGP. In addition, the Bank will continue our efforts to 
interest more localities in joining the City/State Program. Ex-Im bank 
is also reaching out to minority and woman-owned businesses and to 
companies in rural and economically depressed urban areas. Finally, the 
Bank is looking at the possibility of working with a private company 
that will put on seminars to get more smaller banks interested in 
export finance. Ex-Im Bank's role will be to help market that program 
and supply materials.
    Obviously, Ex-Im Bank hopes these efforts to reach more small 
businesses will increase small business exports. The Bank also sees our 
outreach as a learning experience both in terms of how to sell our 
products and how the products can be improved to meet the needs of the 
market place.
    The success of these efforts will largely depend on the 
availability of resources through our administrative budget.
    Question. Also, while the percentage of small business transactions 
has held steady or increased, the dollar amount has dropped lately. Has 
that continued? Can you provide a chart for the last five to ten years 
showing the trend of small business transactions both as a percentage 
of the whole and in dollars?
    Answer. Over the past five years, the number of small transactions 
has remained fairly constant with two exceptions, 1995 and 1998. In 
1995, Ex-Im Bank dramatically increased its small business 
authorizations. The Bank went from 1,576 authorizations in 1994 to 
1,910 in 1995, a 21% increase. However, the Bank experienced a drop in 
the number of transactions from 1,935 in fiscal year 1997 to 1,864 in 
1998, a 4% decrease. At the same time, the actual authorization amount 
increased from $1,777 million in 1997 to $2,229 million in 1998, a 25% 
increase.
    For your further information, we have attached several charts. One 
chart shows Ex-Im Bank's small business statistics in terms of the 
number and amount of small business transactions from fiscal year 1994 
to 1998. Chart 2 shows small business trends in terms of percentage of 
overall transactions submitted and authorized also from fiscal year 
1994 to 1998. Lastly, Chart 3 shows the percentage of small business 
support under all of Ex-Im Bank's financing programs over the past five 
fiscal years.
    Question. We learned last year that no business was expected from 
Ex-Im's memorandum of understanding with GAZPROM in Russia. Has that 
changed? Are you still conducting dialogue of any kind or business with 
GAZPROM?
    Answer. No business has been conducted with Gazprom under the 
Memorandum of Understanding which was signed in November 1994. However, 
Gazprom has recently indicated a renewed interest in utilizing Ex-Im 
financing, and the Bank is prepared to consider requests on a case-by-
case basis. The structure, terms, and conditions of the financing would 
be consistent with the Memorandum of Understanding of November 1994, 
including the dedication of proceeds from long-term sales contracts of 
natural gas or other products as a back-up for repayment of the 
financing. The potential amount of financing would to an extent depend, 
therefore, on the revenues available for allocation under such long-
term sales contracts.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                           Submitted to OPIC

                 Questions for the Record by Mr. Porter

                             climate change
    Question. We have heard much about the need for ``meaningful 
participation'' by developing countries prior to ratification of the 
climate change treaty. Disturbingly, I note the continuing growth of 
OPIC and Exim's portfolios not only in thermal power plant projects, 
but also in fossil fuel extraction projects such as oil and gas--
thereby compromising ``meaningful participation'' by developing 
countries in the short and long term in helping solve the climate 
change problem:
          (A) OPIC and Exim have agreed to release annual greenhouse 
        gas emissions reporting, but only for thermal power plants. Why 
        do you not consider greenhouse gas emissions for other 
        projects?
          (B) Will there be a commitment to investment in renewable 
        energy to help further the goals of meaningful participation in 
        the context of the climate treaty?
    Answer. (A) The vast majority of greenhouse gas emissions occur 
when fuels containing such greenhouse gases are combusted to provide 
power for electricity, transportation, heating or other end-uses. 
Therefore, the exploration and extraction of fossil fuels, such as oil 
and gas, does not in itself result in substantial emissions. Since the 
amount of greenhouse gas emissions is related to the type of end-use, 
and oil and gas can be processed and consumed in a variety of ways, 
there is no way to predict at the extraction stage, how the fuels will 
ultimately be used and the volume of emissions that will subsequently 
occur. For example, natural gas may be used to fuel a power plant, in 
which case all carbon dioxide contained in the gas will be released 
into the atmosphere. Alternatively, if the gas is used as a feedstock 
to produce fertilizer, most of the carbon dioxide will be sequestered 
in the final product and will not contribute to greenhouse gas 
emissions.
    (B) OPIC has and will continue to support investments in renewable 
energy projects. For example, OPIC has recently supported low impact 
hydroelectric projects in Costa Rica, India and the Philippines. OPIC 
is also investigating opportunities to support commercial projects 
using solar and wind energy in cooperation with multilateral financial 
institutions such as the Global Environmental Facility and the United 
Nations Environment Program.

                Questions for the Record by Mr. Kingston

                    opic outreach to small business
    Question. How have the number and size of OPIC's direct loans to 
small business changed over the last five years? Can you submit that on 
a chart for us? Will you please also describe your outreach program to 
inform small businesses of the opportunities you provide?
    Answer. During fiscal years 1994 through 1998, 100 percent of OPIC 
direct loans, totaling $238 million, went to projects involving U.S. 
small businesses, and 29 percent of the projects receiving OPIC loan 
guaranties ($1.6 billion) involved small businesses. Smaller businesses 
or cooperatives were involved in 13 out of 47, or 28 percent, of all 
OPIC-assisted projects in fiscal 1998.
    The following chart shows the direct loans committed to small 
business over the past five years.

             FINANCE SMALL BUSINESS DIRECT LOAN COMMITMENTS
                         FY 1994 THROUGH FY 1998
------------------------------------------------------------------------
                                            Number of
                                              small
               Fiscal year                   business   Amount committed
                                              loans
------------------------------------------------------------------------
1994.....................................            6       $76,300,000
1995.....................................            3        31,500,000
1996.....................................            3        36,400,000
1997.....................................            2        17,428,000
1998.....................................            8        76,754,500
                                          ------------------------------
    Total................................           22       238,382,500
------------------------------------------------------------------------

    It is often a challenge for small business to find the financial 
and personnel resources to make an overseas investment on their own. 
But many benefit as suppliers to investments by larger U.S. firms 
supported by OPIC. OPIC's survey of its projects found that 
approximately two-thirds of identified suppliers to OPIC-backed 
projects are U.S. small businesses. For example, larger companies often 
turn to small U.S. businesses for products and services to support an 
overseas project. The projects OPIC assisted in fiscal 1998 are 
expected to procure, during their first five years of operations, at 
least $204.8 million from U.S. small businesses located in 37 states 
and the District of Columbia which will support 576 U.S. jobs. 
According to the data collected for fiscal years 1994 through 1998, 
OPIC has identified the specific suppliers for nearly $9 billion in 
expected procurement for OPIC-assisted projects.
    An important component in OPIC's small business outreach program is 
to identify the small business suppliers who are contributing to OPIC-
assisted projects throughout the world. This outreach provides 
suppliers with an opportunity to learn more about their contribution to 
OPIC's projects and to utilize this opportunity to provide information 
about OPIC's products.
    In addition, OPIC is reaching out to small and medium-size 
businesses that are seeking to invest overseas for the first time but 
need help with political risk insurance or to cross the key financial 
threshold. OPIC's award winning website contains a user-friendly small 
business page. We also have a special streamlined process for small 
business including a shorter, simplified application form.
    OPIC works with the other trade agencies, small business 
organizations, and state and local trade and commerce officials to 
ensure that small businesses are aware of the products, service and 
advice available at OPIC. OPIC sponsors and participates in seminars, 
forums, and conferences throughout the U.S. which are focused on 
increasing awareness of small and medium-sized businesses of the 
opportunities for overseas investment and how OPIC can assist them.
                        opic and small business
    Question. What proposals have been presented by your new small 
business task force, and what changes have come about as a result of 
its recommendations?
    Answer. OPIC has a long-standing commitment to help small and 
medium-sized businesses participate in the opportunities offered by 
overseas investment. This commitment includes extensive outreach to 
small and medium-sized businesses as well as an effort to increase 
small business use of OPIC products. In fiscal year 1998, almost 30 
percent of OPIC assisted projects were small businesses.
    But OPIC is moving forward to enhance these efforts. 1999 is the 
OPIC ``Year of Small Business'' which will help to focus attention on 
building on OPIC's solid record of helping small businesses. Following 
on the efforts of the Small Business Task Force, a Small Business 
Action Team was created to implement a series of action steps to expand 
small business outreach and to serve as advocates within OPIC. OPIC's 
award winning website includes a user friendly small business page. 
OPIC has sponsored or participated in small business meetings and 
seminars in eleven states and launched a California State Small 
Business Pilot Program. OPIC's exporter program is reaching out to 
small businesses who are serving as suppliers to OPIC-assisted 
projects.
    In the finance area, OPIC has implemented new small business loan 
structures. The minimum loan size has been reduced from $2 million to 
$250,000 to address the needs of small business. We have also created a 
streamlined small business finance agreement. In addition, we have 
expedited the credit analysis process for small businesses.
    To encourage small business use of OPIC's political risk insurance, 
we have created a special simplified insurance application for small 
businesses which reduces the paperwork burden. OPIC also offers special 
pricing for insurance for small business and provides limited brokerage 
fees for brokers helping small business.
                     corruption and organized crime
    Question. How does OPIC measure and account for the impact of 
official corruption and organized crime in the New Independent States 
and Eastern Europe? To what extent/how directly to these factors impact 
your assessment of political risk in those regions?
    Answer. OPIC has extensive due diligence procedures in place to 
detect corruption before we agree to support a project, as well as 
standard requirements that our customers certify that they have not and 
are not engaged in corrupt practices. If we discover corrupt practices 
once support has been issued, we have significant remedies, including 
terminating OPIC support, seeking damages, and pursuing criminal 
penalties.
    OPIC takes special care in underwriting projects in the NIS due to 
concerns over corruption and organized crime. In screening projects, in 
addition to the standard questions relating to Foreign Corrupt 
Practices Act compliance in the OPIC application, OPIC may request 
information from the investor regarding the identity of local partners 
and any relationship they may have with the host government. OPIC has 
also relied on information provided by the U.S. Embassy in the host 
country, and has enlisted the assistance of the CIA in making inquiries 
regarding local partners.
                                  asia
    Question. Can you comment on the impact of the Asian financial 
crisis on the volume of activity at each institution? Has this crisis 
increased costs for U.S. businesses and driven up the amount of 
assistance, advisory and financial, delivered to customers by your 
agency?
    Answer. The Asian financial crisis has had two countervailing 
effects on the level of political risk insurance and financing issued 
by OPIC although, overall, the level of activity is down. As a result 
of the crisis, the level of activity by U.S. investors, both direct 
equity investors and lenders, has declined. The combination of 
increased risk and shrinking demand has caused investors to reconsider 
and/or scale down their investment plans. However, to the extent that 
U.S. businesses are still investing, there is an increased interest in 
OPIC programs. Lenders to projects that 18 months ago would have made 
loans without political risk insurance are now requiring it as a 
condition to provide financing. Similarly, project sponsors who in the 
past may have been comfortable assuming host country political risk are 
increasingly seeking coverage.
    The crisis has increased the cost for U.S. businesses operating in 
Asia in a number of ways including the following (in no particular 
order):
          Higher interest rates by lenders to reflect higher risk and 
        reduced capacity
          The increased risk has also limited the tenor of debt 
        available to project sponsors which has the effect of 
        increasing the cost of doing business
          Higher rate of return required by equity investors to reflect 
        increased risk
          Additional costs associated with restructuring charges (legal 
        and advisory fees)
          Requirements to contribute additional equity and/or debt due 
        to shortfalls by local partners affected by the crisis
          Direct and indirect costs associated with renegotiation of 
        project agreements and, in particular, tariffs adjustments 
        required by government purchasers of services or products (e.g. 
        power projects)
          Added cost of political risk insurance where it may not have 
        been required before
          Higher premium rates for political risk insurance.
    The current global economic downturn requires OPIC to protect its 
portfolio in a prudent and proactive manner. Additional resources are 
needed for screening, due diligence, monitoring and advocacy. Towards 
this end, the Administration requests that OPIC be authorized to spend 
$35 million from its own earned resources for administrative expenses. 
The need for advocacy, claims-related negotiations, and workout are 
likely to increase if countries in affected parts of the globe fail to 
free themselves from the economic downturn. Full funding of OPIC's 
administrative expenses request will enhance OPIC's ability to manage 
its portfolio in a manner that protects the U.S. government and the 
American taxpayer.
                                 russia
    Question. What plans does your agency have for Russia? have you 
written off any or all activities with Russia due to its insolvency and 
rampant crime? What might your agency do to assist U.S. companies to 
help lift Russia out of its quagmire? Or, should we force Russia to 
fend for itself.
    Answer. OPIC has seen a sharp increase in interest in its programs 
from U.S. companies still interested in Russia after the August crisis. 
OPIC has established a task force to closely monitor its portfolio in 
Russia.
    OPIC staff has traveled to Russia to consult with Russian 
government officials, clients and the business community, and have 
followed up with visits targeted at assisting specific clients with 
problems. OPIC has not suffered any losses due to insolvency or crime. 
Consistent with its prudent approach to its portfolio, this year OPIC 
set aside additional country specific reserves for exposure to Russia, 
Georgia, the Ukraine, Moldova and Kazakhstan. OPIC believes that it has 
an important role to play in assisting U.S. investors with strategic 
projects that support the development of emerging markets such as 
Russia. We continue to be concerned by the economic situation and the 
difficulties that investors face in protecting their legal rights. 
However, we believe that we can proceed prudently with commercially 
strong projects with significant risk mitigants. In particular, OPIC 
will finance only those projects whose sponsors have the financial and 
managerial wherewithal to operate in this difficult climate and whose 
cashflow will be adequate to enable the project to sustain itself and 
repay debt in a timely manner.
    If the economic turmoil in Russia continues, it will become more 
critical for OPIC to protect its portfolio, and the interests of the 
U.S. taxpayer, through increased screening, due diligence, monitoring, 
and advocacy. To support such increased activity, the Administration 
has requested that OPIC be authorized to spend $35 million from its own 
earned resources on administrative expenses in FY 2000.
                                 brazil
    Question. Could you comment on how your activities in Brazil might 
be impacted if the local economy and currency continue to slide 
downward?
    Answer. In the past five years, Brazil has made remarkable progress 
in opening its economy to foreign investors. During this time, U.S. 
investors have found attractive long-term investment opportunities 
through Brazil's multi-sector privatization program and growing 
consumer market possibilities. As a result, OPIC has experienced 
growing demand from U.S. investors in Brazil, particularly with regard 
to insurance coverage for inconvertibility risk. Recently, Brazil has 
experienced economic turmoil due to the effects of the Asian and 
Russian crises, as well as the devaluation of its own currency. While 
these events may have deterred short-term investors, long-term 
investors remain committed to this important emerging market.
    OPIC's largest exposure in Brazil is under the political risk 
insurance program. As mentioned in the testimony, there has been no 
notification of pending insurance claims as a result of Brazil's 
current economic difficulties. Because OPIC Insurance does not cover 
commercial risks or losses due to devaluation, the effect on OPIC 
Insurance of such indirect impacts is likely to be minimal.
    With regard to the potential for future direct impacts of economic 
turmoil on OPIC-supported projects, OPIC is carefully monitoring the 
situation in Brazil. While OPIC support for certain types of risk is 
limited, OPIC continues to insure and finance in Brazil projects that 
meet OPIC eligibility and underwriting criteria. As part of the 
management of its insurance portfolio in Brazil, OPIC rations the 
amount of coverage offered to individual projects, uses underwriting 
tools, such as claims caps and waiting periods, to mitigate risk, 
charges higher premiums based on risk and demand, and promotes 
portfolio diversification across sectors. There is no evidence at this 
time to suggest that the Brazil situation will deteriorate to a point 
that will generate significant losses for OPIC.
    Question. There is a great deal of concern in Congress right now 
that some countries suffering in the financial crisis are dumping cheap 
products in the U.S. to escape their economic problems. What role, if 
any, does your agency have in causing this problem? Will you curtail 
your export or direct investment assistance to halt such dumping of 
products? Is greater financing of your agencies warranted if this 
problem persists?
    Answer. OPIC does not support projects that contribute to the 
dumping of cheap products in the United States. All projects seeking 
OPIC assistance are carefully screened. In accord with its statutory 
mandate, OPIC declines to assist those projects with the potential for 
an adverse effect on the U.S. economy and employment. Furthermore, OPIC 
operates a comprehensive monitoring program to evaluate the actual 
impact of OPIC-assisted projects on the U.S. economy and employment.
    Each project seeking OPIC assistance is carefully screened on a 
case-by-case basis to estimate its U.S. employment impact. OPIC does 
not support any projects that might harm the U.S. economy or that will 
result in a loss of U.S. jobs. OPIC collects and analyzes, both 
geographically and sectorally, the projected U.S. employment and 
associated economic effects of the projects it assists. Even before 
taking into account their positive U.S. employment impacts, none of the 
fiscal 1998 projects are expected to result in any U.S. job loss.
    OPIC's monitoring program has found that no projects have 
negatively affected U.S. employment. This outcome demonstrates the 
effectiveness of the economic evaluation and screening procedures used 
by OPIC in determining the eligibility of project. Monitoring confirms 
that OPIC-assisted projects provide substantial benefits to both the 
U.S. and host country economies by stimulating exports, creating jobs, 
and fostering growth and development. On the contrary, OPIC projects 
have generated 237,000 American jobs and $58 billion in U.S. exports.

                 Questions for the Record by Mr. Lewis

                          opic reauthorization
    Question. Mr. Munoz, your Annual Performance Plan for FY 2000 stats 
that the Administration will seek a four year reauthorization of OPIC 
programs.
    Has the Administration sent legislative language to the Hill yet? 
What type of changes would you like to see in reauthorization bill? 
What do you think the likelihood is that the authorizing committee will 
move a reauthorization bill?
    Answer. The Administration sent to the Congress on February 5, 
1999, a legislative proposal with bill language seeking a four-year 
reauthorization of OPIC. No increase in the current liability ceiling 
is required this time. A copy of the OPIC legislative proposal as 
submitted to the House of Representatives follows.
    Reauthorization of OPIC will help America compete and support 
development and stability in strategic regions, all at no net cost to 
the taxpayer. We are hopeful the Congress will take prompt action to 
enact a reauthorization bill. We have had initial discussions with the 
authorizing committees in the House and Senate and we will continue to 
work with all of the key committees to reauthorize OPIC and ensure 
continued availability of OPIC programs and services.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

             caspian oil and gas pipelines; kyoto protocol
    Question. The FY 1999 House Report expressed strong support for 
OPIC's role in the development of Caspian oil and gas pipelines and 
your own statement even highlights this issue.
    What is the status of this project? When OPIC states its support 
for ``environmentally sensitive development,'' what do you mean? Is 
OPIC involved with the Kyoto protocol?
    Answer. OPIC has not yet received any applications for projects 
involving the construction of oil and gas pipelines in the Caspian 
region, however, we have been involved in discussions with several 
companies and anticipate that we will be asked to support one or more 
such projects in the future.
    OPIC's policy regarding ``Environmentally sensitive development'' 
is articulated in OPIC's Environmental Handbook issued in draft form on 
February 25, 1998, in the Federal Register and on OPIC's website. The 
Handbook, which is in the process of being finalized, stipulates the 
environmental policies, criteria and procedures that OPIC will use to 
determine the projects it can support, and the conditions it will apply 
to such support, consistent with its statutory mandates. As applied to 
large-scale oil and gas pipelines, siting must take into account OPIC's 
Categorical Prohibitions as described in Appendix F of the Handbook, 
which references certain internationally protected areas as well as 
practices involving human resettlement.
    All large-scale oil and gas pipeline projects must submit 
Environmental Impact Assessments, which are made public by OPIC subject 
to a 60-day public comment period. The project must meet standards for 
pipelines included in the 1998 World Bank Pollution Prevention and 
Abatement Handbook. In addition, OPIC support of such a project would 
require an independent third-party audit within the first three years 
of project operation.
    OPIC has not been involved in the negotiations of the Kyoto 
protocol, but is aware of the protocol and its provisions. The Kyoto 
protocol was negotiated and signed by the Administration and remains to 
be submitted to the Senate for ratification once certain conditions are 
met. OPIC has taken no actions as a response to Kyoto; it does carry 
out the environmental mandate in its statute.
       impact of economic situation in brazil on opic's projects
    Question. Your written testimony states that the current economic 
situation in Brazil has had no direct impact on OPIC projects. Have 
there been indirect impacts on OPIC's projects in Brazil? Do you 
envision any direct impacts on OPIC's activities in Brazil in the near 
future?
    Answer. By ``direct impact'' we mean that, to date, OPIC has not 
sustained any losses, nor are any anticipated, in the near future. 
There has been no indirect impact, but we are monitoring projects in 
the portfolio that could be adversely impacted if the current economic 
situation were to continue for some time.
                utilization of y2k supplemental funding
    Question. Would you please describe how you have/or plan to utilize 
the $2.1 million OPIC received in Y2K supplemental funding? Has 
Congressman Horn's Subcommittee on Government Management, Information 
and Technology rated OPIC? If so, do you agree with the grade you 
received?
    Answer. The answer to the second question concerning Congressman 
Horn's subcommittee is no. OPIC, because of its size, has not been 
graded. OPIC provides quarterly Y2K progress reports to the Office of 
Management and Budget (OMB). Organizational Information Requirements 
Analysis (OIRA) and the Office of Management and Budget (OMB) are 
satisfied with the progress that OPIC is making to ensure that OPIC 
will fully function in January 2000.
    Following is an outline of how OPIC plans to utilize the $2.1 
million.
          1. Independent Verification and Validation of the ``Wang'' 
        systems: The ``Wang'' systems are the core proprietary 
        applications supporting our Finance and Insurance business 
        units. This request is to conduct an Independent Verification 
        and Validation (IV&V) of the remediation effort. OPIC operates 
        in the same manner as a lending and insurance institution. 
        Contracting for an IV&V of core business processes is in line 
        with OMB guidelines, and also with financial industry 
        standards.
          2. Hardware & Software Inventory: OPIC does not have an 
        automated inventory system. As part of the Y2K effort, a 
        complete inventory is required before assessing where the non-
        compliant parts are.
          3. Adjustments to custom software programs: Over the years, 
        numerous Access systems have been built as tools for the 
        Business Units. In particular are the Finance Portfolio 
        Tracking System (tracking the status of all Finance projects), 
        the Finance Tracking System (for monitoring the compliance of 
        finance projects), and the Insurance Forecasting System 
        (forecasting exposure), among others. Most of these are 
        affected with the millennium bug for two reasons. The first is 
        that most are built in Access 2.0 that is a non-Y2K compliant 
        version of Access, the second is the effect of the change in 
        Wang data that is downloaded and entered into these systems on 
        a nightly basis.
          4. Ancillary affects of changes to corporate systems: 
        Changing date fields in the ``Wang'' systems will have 
        significant downstream effects. Wang data is loaded not only 
        into the Access databases mentioned above, but also feeds into 
        a process that manipulates data before feeding it into the 
        accounting system. In addition, numerous end-user management 
        reports are created using this data download. All of these 
        downstream effects need to be addressed before the remediated 
        Wang code is implemented into production.
          5. Replacement of non-Compliant Personal Computers: OPIC has 
        completed the inventory of desktop hardware.
          6. Backfill of core systems support personnel: OPIC 
        reassigned one of its top Computer Specialists, formerly in 
        charge of all Wang software and hardware to lead its Y2K 
        effort. However, his responsibilities for administration, 
        hardware and software support for the Wang production code 
        needed to be covered to allow him to concentrate fully on his 
        new Y2K responsibilities. In today's market, IRM quickly 
        discovered that his broad skill set could not be found in one 
        individual and two contractors were required to adequately 
        backfill his position.
          7. Architectural Upgrades: At the end of FY 1998 end, OPIC 
        had 23 servers in the computer room supporting a wide variety 
        of functions. OPIC estimates that 18 of these 23 are not Y2K 
        compliant. Instead of renovating each separate server, OPIC is 
        taking a strategic approach to solving the problem.
                      potential for opic services
    Question. What regions of the world do you believe that OPIC has 
the greatest potential to positively assist host countries as well as 
U.S. businesses? Are there additional steps that we should be taking to 
help these countries and businesses?
    Answer. Throughout OPIC's history, the agency has helped America 
compete while supporting development and stability in strategic 
regions. All of this has been done at no cost to the U.S. taxpayer.
    The projects assisted by OPIC in fiscal year 1998 will provide 
significant economic and social benefits for developing host countries 
as well as produce thousands of U.S. jobs.
    The FY 1998 projects will generate 12,830 jobs in developing 
countries directly, of which 4,840 will be management and professional 
positions. It is estimated that the annual net effect on the host 
countries' balance of payments will be a positive $47 million. The 
foreign enterprises will generate $788 million annually in taxes and 
duties for the host countries. Once in operation, the projects will 
generate an estimated $1.2 billion in annual export earnings for the 
host countries.
    In the U.S., the 1998 fiscal year portfolio of projects assisted by 
OPIC will result in significant economic benefits to the U.S. economy. 
A substantial portion of the initial procurement for OPIC projects will 
be supplied by American firms, resulting in an estimated $2.3 billion 
in U.S. exports of capital goods and services. In addition, the value 
of American materials and equipment required for ongoing operations is 
estimated at $500 million during the next five years. As a result of 
this level of initial and operational procurement from the United 
States, the projects will generate an estimated 34,459 person-years of 
direct and indirect employment for U.S. workers.
    Looking ahead, we feel that OPIC will continue to play a strong and 
valuable role in mobilizing and facilitating the participation of U.S. 
private capital and skills in the economic and social development of 
less developed countries and areas, and countries in transition from 
nonmarket to market economies, thereby complementing the development 
assistance objectives of the United States.
    We are particularly focused on providing assistance to those 
businesses eager to enter the Central American and African 
marketplaces.
    Working closely with business leaders and Central American 
governments, we are aggressively targeting project opportunities in the 
Hurricane Mitch impacted countries of Central America. Not only is this 
an important economic market for our businesses, it is critically 
important to provide capital to these countries so that they can 
rebuild their lives and economy.
    Another important market is sub-Saharan Africa. Building on the 
leadership of the Congress and the Administration, OPIC has sought to 
open new markets for U.S. business while strengthening markets where we 
historically have been strong.
    Passage of the African Growth and Opportunity Act by Congress would 
send a strong message to African leaders and citizens that Africa is an 
important partner for American business.
    Likewise, quick enactment of the President's Central America 
supplemental will help lay a firm foundation for going forward in that 
troubled region.

                 Questions for the Record by Ms. Pelosi

                                vietnam
    Question. When OPIC began programs in Vietnam last year, despite 
the serious worker rights problems there which OPIC acknowledged in its 
report of March 1998, you stated that covenants in OPIC insurance 
contracts and loan guarantees would include specific reference to 
issues such as the rights of association and collective bargaining and 
prohibition on forced or compulsory labor, etc. To date, how many 
contracts and guarantees have included these covenants? Does OPIC have 
plans this year to evaluate and monitor how these covenants are being 
enforced by U.S. companies in Vietnam? Do you plan to send OPIC staff 
to Vietnam to undertake these activities? Will you be obtaining input 
from outside agencies and NGOs?
    Answer. OPIC has not yet issued any final contracts for projects in 
Vietnam, but two projects are under active consideration. Should OPIC 
enter into any final contracts, all of them will include covenants to 
ensure that the projects do not contribute to worker rights violations 
in Vietnam, as required by OPIC's statute. OPIC staff will monitor the 
projects when they are operational and will do so in consultation with 
outside agencies and NGOs with expertise in matters involving worker 
rights in Vietnam.
                            investment funds
    Question. How were these funds initiated? Did OPIC respond to 
unsolicited proposals, or was there a competitive bidding process?
    Answer. OPIC's investment funds program was created in 1987, as 
part of a Reagan Administration foreign policy initiative, to respond 
to the need for equity capital in regions or sectors in emerging 
markets and developing countries identified as U.S. foreign policy 
priorities.
    OPIC's recent funds have been created in direct repsonse to 
Congressional mandates regarding Sub-Saharan Africa and the Caucasus 
region. If and when OPIC determines as a policy matter that a new OPIC-
supported fund should be created, OPIC will select a fund manager in an 
open and competitive process. OPIC has established, and continues to 
refine, an open and transparent competitive selection process for fund 
proposals and fund managers. OPIC publishes a call for proposals for a 
specific kind of fund in a variety of business and trade publications 
and on the Internet. The call asks for proposals for fund management 
and fund strategy to address the priorities identified by OPIC. 
Proposers are required to submit a complete package of information that 
is then examined and considered by an evaluation panel.
    OPIC's goal is to maintain a fair, unbiased process open to all 
qualified applicants that produces quality fund proposals with 
competent, experienced management.
    Question. Does OPIC have a consistent policy on the degree of 
profit sharing each of the funds is required to return to OPIC?
    Answer. OPIC's profit participation is an integral component of the 
fund structure and has evolved as structuring components have evolved. 
As the major components of structure of the funds program have become 
standardized so has the degree of profit participation. Presently the 
degree of profit participation varies between 4% to 6%, depending upon 
the level of OPIC's guarantee of debt used for leverage in the fund.
    Question. During 1998 OPIC invested $60 million in a new private 
investment fund for the Caucasus to support free enterprise in Armenia, 
Georgia, and Azerbaijan. What is the status of investment in each of 
the countries from this fund? Is it aimed at any one sector? How can 
one fund operate in both Armenia and Azerbaijan simultaneously given 
the ongoing conflict there?
    Answer. Originally, the responsibility for organizing an investment 
fund for the Caucasus was given to U.S.A.I.D.
    In FY 1997, U.S.A.I.D. transferred to OPIC the funding resources to 
support this fund and asked OPIC to undertake the creation of such a 
fund. In response to Congressional priorities, OPIC increased the size 
of its commitment to the Caucasus Fund from $30 million to $60 million. 
On December 3, 1998 OPIC executed a finance agreement with the fund. 
The management of the fund has identified key personnel to staff their 
efforts in all three countries. Two offices have been opened in Tblisi, 
Georgia and Baku, Azerbaijan, and the management intends to open an 
office in Armenia shortly after they complete the raising of the equity 
capital and are in a position to begin investing.
    The Caucasus Fund intends to focus on three primary sectors--
agriculture, transportation, and real estate. The agribusiness sector 
will target projects in food processing and distribution--areas 
expressly encouraged by Congressional Committees. Other sectors of 
interest may include financial services and telecommunications. The 
fund already has several potential investments under consideration in 
the agribusiness and real estate/services sectors.
    The fund has committed to invest a minimum of 20 percent of its 
total capitalization in each country. Each country will have its own 
office and professional staff. Where possible, the fund will seek 
investments with growth potential across industry sectors and 
geographic scope. Although this might be difficult initially, both 
governments have implemented fiscal and monetary reforms, are on record 
as favoring market-oriented economic reforms, and are expected to be 
supportive of private investment. Economicdevelopment and regional 
economic integration can help create common goals and provide 
incentives for cooperation at a political level.
    Question. Where do you anticipate the new fund initiated in 1999 
will be centered? What is the status of private investment funds in 
Africa?
    Answer. The final selection of a fund manager for the new Africa 
infrastructure fund will be made in the next 2-3 months. The fund 
manager will determine where the fund's offices will be located.
    OPIC has three existing private investment funds focused on Africa 
with $295 million in total capital. They are: Africa Growth Fund--$25 
million; New Africa Opportunity Fund--$120 million; Modern Africa 
Growth and Investment Fund--$150 million.
    The Africa Growth Fund has completed its investment phase and is 
now seeking to realize values through normal divestment of the 
portfolio.
    The New Africa Opportunity Fund has made four investments totaling 
approximately $31 million out of its available $125 million of capital. 
New Africa is still in the early phase of the investment cycle.
    The Modern Africa Growth and Investment Fund has committed to one 
project and has several in the due diligence stage. It is in the very 
earliest stage of the investment cycle.
                 new countries--pakistan and azerbaijan
    Question. Update the Committee on the status of new countries of 
operation this year--Pakistan and Azerbaijan.
    Answer. OPIC programs opened in Pakistan in March, 1998, after 
having been closed since 1990 due to nuclear non-proliferation 
sanctions. OPIC closed again following the Pakistani nuclear tests in 
May, 1998, and re-opened again in the fall of 1998, when the President 
exercised new legislative authority to grant a one-year waiver. Since 
re-opening in March 1998, OPIC has not provided any support for 
investment projects in Pakistan.
    OPIC programs became available in Azerbaijan in 1995. The FY 1999 
Foreign Operations Appropriations Bill provides that ``Section 907 of 
the FREEDOM Support Act shall not apply to . . . any insurance, 
reinsurance, guarantee, or other assistance provided by the Overseas 
Private Investment Corporation. . . .'' OPIC in March 1999 approved its 
first project in Azerbaijan, consisting of political risk insurance for 
small business investors in an environment cleanup project in areas 
polluted by oil production.
    Question. Explain how OPIC can enter into multiyear commitments in 
Pakistan given that legislative exemptions from sanctions was granted 
for only one year.
    Answer. The nature of the OPIC programs is that they support long-
term direct investment by making relatively long-term commitments. OPIC 
insurance contracts, for example, often extend for up to 20 years, and 
OPIC loan agreements often provide for loan disbursements over a period 
of several years, with repayments for up to 15 years thereafter. While 
OPIC has the authority to provide these kinds of commitments for 
Pakistan during the current one-year waiver period, OPIC will not enter 
into such commitments after the waiver period expires unless proper 
authority is in place.
    In addition, OPIC will not enter into any commitments to support 
investment in Pakistan unless the normal worker rights, human rights, 
and environmental criteria are met that apply to every OPIC project. 
OPIC has not actually provided any commitments in support of investment 
in Pakistan in over eight years.
    Question. What is the nature of demand in Azerbaijan? Are American 
oil companies depending on OPIC to finance the pipeline construction, 
or only selected elements?
    Answer. OPIC has 14 projects registered for political risk 
insurance in Azerbaijan and six projects have expressed interest in 
obtaining OPIC financing, in the services, food processing, 
telecommunications and energy sectors. As the pipelines necessary to 
transport oil and gas out of the Caspian region will cost billions of 
dollars, OPIC insurance and financing are a key element in structuring 
financing for these projects, but OPIC will be one among many 
institutions participating in the financing and the provision of 
political risk insurance for these projects. OPIC financing can be used 
for all phases of the pipeline, not just construction.

                 Questions for the Record by Ms. Lowey

                        opic and small business
    Question. I am very interested in what OPIC is doing to help small 
businesses gain access to emerging markets, and I hope that your small 
business initiatives will have demonstrable results. Could you expand 
upon what you are doing to reach out to small businesses and let them 
know how OPIC can help them? I frequently receive calls from the owners 
of small businesses in New York who are looking for assistance in 
breaking into international markets. And too often, when I suggest they 
talk to OPIC, they weren't aware that OPIC was a potential resource.
    Answer. 1999 is the ``Year of Small Business'' at OPIC and a top 
priority is to expand outreach efforts. A Small Business Action Team 
was formed to implement a series of action steps to expand small 
business outreach and to serve as advocates within OPIC.
    OPIC is reaching out to small and medium-size businesses that are 
seeking to invest overseas, but need help with political risk insurance 
or to cross the key-financing threshold. OPIC's award winning website 
contains a user-friendly small business page which is accessible to 
small businesses throughout the country.
    OPIC also works with the other U.S. Government agencies, small 
business organizations, and state and local trade and commerce 
officials to ensure that small businesses are aware of the products, 
service and advice available at OPIC. OPIC sponsors and participates in 
seminars, forums, and conferences throughout the U.S. which are focused 
on increasing awareness of small and medium-sized businesses of the 
opportunities for overseas investment and how OPIC can assist them.
    An important component in OPIC's small business outreach program is 
to identify the small business suppliers who are contributing to OPIC-
assisted projects throughout the world. This outreach provides 
suppliers with an opportunity to learn more about their contribution to 
OPIC's projects and to utilize this opportunity to provide information 
about OPIC's products.
    OPIC has a long-standing commitment to help small and medium-sized 
businesses participate in the opportunities offered by overseas 
investment. This commitment includes extensive outreach to small and 
medium-sized business as well as an effort to increase small business 
use of OPIC products. In fiscal year 1998, almost 30% of OPIC assisted 
projects were small businesses.
                               azerbaijan
    Question. Can you update us on OPIC's activities in Azerbaijan? To 
what extent will you ensure that these projects are not supporting 
partners in Azerbaijan that have been obstacles to a resolution of the 
dispute between Azerbaijan, Armenia, and Nagorno-Karabakh?
    Answer. OPIC's Caucasus Fund is in the process of raising capital 
in order to begin investing. On March 9, 1999 the OPIC Board of 
Directors approved a proposal to provide political risk insurance to 
its first project in Azerbaijan. The project is sponsored by a U.S. 
small business which will be engaged in environmental cleanup. OPIC 
supports U.S. private investment in commercially viable projects that 
contribute to the development of the host country and would not support 
a project that actively worked against a resolution of the Nagorno-
Karabakh dispute.

                            Submitted to TDA

                 Questions for the Record by Mr. Lewis

    Question. Mr. Grandmaison, while I am a strong proponent of 
overseas investment, U.S. business promotion and international trade, 
it appears that the U.S. Trade and Development agency, OPIC and Ex-Im 
Bank all have a very similar mission.
    Am I correct in my assumption that all three agencies work closely 
together? Do the three agencies perform redundant functions? Do you 
believe that the Federal Government needs three separate agencies that 
perform similar functions? Is it feasible to collapse these three 
agencies into one? If not, why?
    Answer. Without question, the three trade finance agencies work 
closely and cooperatively on a variety of initiatives and projects. 
Therefore, it is not inappropriate to examine whether consolidation 
could make them more effective. We have considered this issue several 
times, however, and continue to reach the conclusion that consolidation 
would not be feasible or desirable.
    The primary policy rationale for consolidation is that a single 
entity would be more efficient and effective in providing government 
support to assist U.S. companies investing or exporting overseas. We 
believe that with one agency closely coordinating U.S. trade promotion 
efforts, there is a danger that the agency's mission would evolve into 
providing ``cradle-to-grave'' project support from feasibility study to 
project financing to trade financing to insurance. We believe that this 
would be a step in the wrong direction. Although a ``one-stop financing 
shop'' approach may appeal to some of the U.S. businesses seeking 
assistance, a closer look at the end result of such an approach reveals 
a fundamental philosophical defect. If the government attempted to 
provide such comprehensive assistance to U.S. companies, then companies 
need apply less of their own resources--both time and money--to 
pursuing overseas business. Currently, these programs leverage private 
sector resources; as a consolidated agency they might very well 
displace private sector resources. The overall strength of the programs 
would be reduced and the government would be providing precisely the 
type of ``corporate welfare'' to which both the Administration and the 
Congress are adamantly opposed.
    In the case of TDA, for instance, rather than providing a small 
amount of money to fund a feasibility study that will better position 
an American company on a project to be financed by a multilateral 
development bank or the host country, a consolidated entity might be 
expected to provide not only the feasibility study grant but also the 
project financing, regardless of other available financing sources. 
Unless the budget for trade promotion activities grows dramatically, 
this approach would result in fewer U.S. companies having access to the 
available government assistance. Though the benefits for some would be 
more complete, those benefits would be monopolized by the few. The new 
entity could find itself in the unenviable position of picking 
relatively few overseas projects to support, start to finish, and 
relatively few U.S. firms to undertake these projects. Understandably, 
U.S. companies chosen as recipients of seamless government support from 
the beginning to the end of the project would find this approach more 
attractive--but from a government policy perspective, we do not believe 
this is the direction to go to maximize the impact of public 
expenditures in the export promotion field.
    As the TDA program currently operates, government funds are able to 
leverage private sector resources in winning overseas contracts. 
Assistance is targeted to business opportunities where it can make a 
difference for U.S. firms in beating the competition. In the proposed 
arrangement, the government's ability to leverage additional non-
government resources would be impaired. The emphasis would shift from 
providing a critical intervention to hand-holding throughout the entire 
process.
    We also seriously doubt that consolidation would in fact create a 
more efficient and cost-effective agency. Among the assumptions that 
have led to consideration of a proposed consolidation are: the three 
agencies have similar mandates, the agencies duplicate functions, the 
same companies work with all three agencies, and that current levels of 
coordination among the agencies do not meet the needs of U.S. 
companies. In fact, the mandates of the agencies differ significantly: 
Ex-Im finances U.S. exports; OPIC helps U.S. investors; and TDA gets 
U.S. companies into infrastructure projects. Also, in practice, few 
companies work with all three agencies as each agency provides a 
specialized service that benefits a distinct constituency. As a result, 
the constituencies, the approach, and the organizational culture of 
these agencies differ. Forcing them to merge together would result only 
in confusion and inefficiencies. Therefore, consolidation would only 
work if the agencies' mandates were drastically changed, and we do not 
believe that is warranted.
    Nor would a proposed consolidation result in significant 
administrative savings by staff reductions or combining certain 
functions. We do not believe that the staff of any of these three 
agencies is currently underutilized or that redundancies in fact exist. 
To the extent that staff in each agency can take on entirely new 
functions and operate more effectively, those positions should be 
eliminated or changed for the sake of good government regardless of 
whether the agencies were consolidated. With respect to TDA in 
particular, we believe that our 41-person staff is already operating 
efficiently and would not achieve any perceived savings by joining the 
other two agencies. In fact, one area inwhich there would be a clear 
cost increase for TDA would be in relocation; any physical move from 
its economical Rosslyn office space would be costly for TDA.
    Finally, pulling TDA under the umbrella of a larger bureaucracy 
would inevitably result in the loss of decision-making flexibility and 
the loss of autonomy and ability to respond quickly (which is what we 
believe gives the program its edge). In practice, getting a feasibility 
study grant could be perceived as the first step to getting a foot in 
the door for further government financing, placing more pressure on TDA 
to approve funding requests from companies which now currently pay for 
their own feasibility studies and diverting funds from projects where 
it could make the difference for U.S. involvement. Ultimately, as a 
grant-making entity within a consolidated operation, TDA's 
effectiveness would be diminished and would become a service bureau for 
the newly created Ex-Im-OPIC hybrid.
    As currently structured, TDA's strength lies in its ability to 
provide foreign project sponsors with U.S. engineering expertise, and 
to leverage often non-U.S. sources of financing (World Bank, regional 
banks, country's own resources) for implementing the project and 
procuring goods and services from U.S. companies. Therefore, we do not 
believe that any real savings would be realized from a consolidation, 
nor do there appear to be any specific policy reasons warranting such 
an action.
    It is important to note, however, that a high level of cooperation 
exists--not only between the three trade finance agencies, but also 
with the Departments of State, Commerce, Energy, and Transportation. We 
believe that the benefits derived from these relationships are the 
result of the fact that our specialized staffs complement each other, 
offering different perspectives and information, rather than redundant 
viewpoints.
    A clear example of the cooperation between the trade finance 
agencies is the new Caspian Finance Office established by the three 
agencies and operated out of our Embassy in Turkey to promote 
development associated with the oil and gas industry in the region. 
Despite our close relationship, however, the agencies found it 
necessary to send staff representing each agency to pursue each 
agency's unique mission.
    In some instances, however, closer collaboration does make sense, 
and the three agencies are open to combining resources and efforts when 
they do. For example, the three agencies developed an outreach program 
in Africa this past year in which a TDA staff member was trained in the 
Ex-Im and OPIC programs so that he could promote all three agencies 
during a three month business development mission in Southern Africa. 
This individual's job was to meet with as many U.S. and African project 
sponsors as possible, present the programs of the three agencies, and 
be available to support agency-specific activities being led from the 
U.S. Each of our agencies generally relies heavily on our Embassies and 
the Foreign Commercial Service for this type of marketing, but in this 
case it was worthwhile to have a more knowledgeable program officer in 
the field. So, while this was an extremely effective marketing tool, 
there was never any consideration given to consolidating all of our 
activities in South Africa because each of our objectives in the 
country--and the process of reaching those objectives--is so different.
    Question. How much of TDA's core budget was augmented through 
transfer of funds from the Freedom Support Act, the Support for East 
European Democracy Act, and other sources in FY 1998? What do you 
project these transfers will total in FY 1999 and what do you expect 
for FY 2000?
    Answer. In FY 1998, TDA received $18,521,000 in transfer funds. In 
FY 1999, we anticipate receiving $17,083,000. With the completion of 
the South Balkan Development Initiative (SBDI) and the originally 
committed funding for the TDA effort in Bosnia, the only possible SEED 
Act transfer in FY 2000 might be up to $2 million to continue 
investments in Bosnia, although there has been no decision on this 
issue. As a result, the only significant transfer we currently 
anticipate for FY 2000 is approximately $6 million in Freedom Support 
Act transfers.
    The transfers are broken down as follows:


------------------------------------------------------------------------
                                               Fiscal year
                                ----------------------------------------
                                                                2000
                                     1998         1999     (anticipated)
------------------------------------------------------------------------
Freedom Support Act............    6,000,000    7,800,000     6,000,000
SEED-SBDI......................    8,000,000    8,000,000             0
SEED-Bosnia....................    4,000,000    1,000,000             ?
Other..........................  \1\ 536,000  \2\ 283,000             ?
------------------------------------------------------------------------
\1\ FY98 Other included $521,000 for Egypt Business Outreach and $15,000
  for Europe/NIS Multi-Agency Training Program in Istanbul (OPIC).
\2\ FY99 Other included $273,000 for Caspian Finance Center and $10,000
  for Europe/NIS Multi-Agency Training Program in Istanbul (Ex-Im Bank).


    Question. Your FY 2000 presentation describes ``Seizing Regional 
Opportunities'' and TDA's ability to help U.S. businesses capture 
market share in Africa, Europe and Asia but does not mention Latin 
America. Why isn't Latin America part of the Seizing Regional 
Opportunities program?
    Answer. The discussion of ``Seizing Regional Opportunities'' was 
included to show that TDA is a nimble and dynamic agency, capable of 
quick responses to changing realities in the global economy. ``Seizing 
Regional Opportunities'' is not a formal program, but rather an overall 
TDA strategy. The descriptions of current activities in Africa, Asia, 
and Europe show how TDA is responding creatively to the varying 
economic challenges presented by these regions.
    Our use of these illustrative examples, therefore, is not 
indicative of major shifts in funding for these regions away from other 
regions, such as Latin America, the Middle East, the Caspian Region or 
the New Independent States. TDA is structured regionally, and the 
efforts of our Latin America team have led to a particularly robust 
program in that region. Because of the rising level of demand for our 
program in Latin America, our budget for the region increased roughly 
$1 million in FY 98, and is expected to increase another $1 million in 
FY 99. In fact, our Latin America program receives more funding from 
our core budget than any other single region.
    Question. I note that in 1998 TDA invested $10 million in Latin 
America and the Caribbean. What do we have to show for this investment? 
What does TDA plan to invest in this region for 1999 and 2000? Does it 
make sense to focus more of our resources in this region?
    Answer. TDA's program is inherently one of long-term investment. 
Because we are involved at the earliest planning stages of a major 
infrastructure project, it frequently takes years to determine whether 
a particular investment is going to pay off in follow-on exports. We 
do, however, have an example of a FY98 investment of $1 million that is 
already paying off handsomely.
    In FY98, TDA invested $1 million in Argentina in support of a 
consortium led by the New York-based Odgen Corporation in a competition 
to become part owner and operator of 33 airports in Argentina'a 
national airport system. The Ogden-led consortium was successful in 
winning this heavily fought battle, and their implementation of this 
project could prove to be one of TDA's most important success stories 
ever: the capital improvements of the airports could represent more 
than $1 billion in potential exports over the next 30 years. In the 
first 30 months of the concession, U.S. exports could reach $200 
million. Without TDA's participation, it is possible that these exports 
would have been won by our foreign competitors.
    Another FY98 investment that we expect will generate new projects 
was a TDA conference in Atlanta focused on Latin American projects. At 
this conference, 600 registered participants from the United States and 
South America discussed the 128 Latin America projects presented. These 
projects represented an export potential of $20 billion. The conference 
culminated in the scheduling of 1,200 one-on-one meetings between the 
U.S. companies and the project sponsors. Overall evaluations by the 
participants indicate that this conference was a resounding success, 
and has led to an untold number of potentially lucrative business 
connections. TDA's evaluation team will continue to track the results 
of this conference to determine the value of exports generated from the 
conference, although, again, most will not be quantifiable at this 
early stage.
    As a demand-driven agency, TDA roughly allocates its budget along 
regional lines, while retaining the flexibility to shift resources to 
and from regions to reflect current demand levels. FY98 saw an increase 
of over $1 million over the FY97 level for Latin America. In FY98, we 
allocated $10 million, whereas the funding level in FY97 was just under 
$9 million. We are currently projecting an increase in FY99 to $11 
million, and expect a roughly consistent allocation for FY 2000.
    Our program in general is results-oriented, with concrete 
measurements to demonstrate our success. The best indicator of our 
success is the export multiplier, the amount of exports facilitated by 
every dollar TDA invests. In 1993, our export multiplier was 25:1, in 
FY98 that number had risen to 32:1. Increases in our investment in the 
Latin American region demonstrate that we believe that the tremendous 
level of infrastructure investment occurring in Latin America has 
provided and will continue to provide excellent opportunities for U.S. 
exporters.

                Questions for the Record by Mr. Kingston

    Question. Can you comment on the impact of the Asian financial 
crisis on the volume of activity at TDA? Has this crisis increased 
costs for U.S. businesses and driven up the amount of assistance, 
advisory and financial, delivered to customers by your agency?
    Answer. The volume of requests for TDA's assistance has not been 
significantly affected by the Asian financial crisis that began in July 
1997. Our activities in Indonesia, Thailand and Malaysia decreased some 
as these governments put many public sector investments in 
transportation and energy on hold. However, TDA's increased activities 
in the Philippines and Vietnam have offset much of this decline. At the 
same time we witnessed an increase by the governments to transfer the 
rights to develop and finance water and waste water projects to the 
private sector. As a result, we are now investing more in the private 
sector than in years past. We also have been supporting more World Bank 
and Asian Development Bank projects to ensure that U.S. companies win 
their share of export opportunities during this time period.
    We are helping to design several information system projects that 
will lend support to the financial recovery process. In Vietnam, for 
example, we have approved grants to help improve the financial sector. 
We are also seeking to position U.S. companies in helping to modernize 
Asia's banking and financial sector, which currently utilizes badly 
outdated methods for tracking financial transactions. Towards this end, 
we are hosting a regional conference on bank automation in March to 
enable top U.S. information management specialists to meet directly 
with Asian banking and financial officials. American businesses are 
well-positioned to offer both consulting services and information 
management equipment to help Asia address its problems in the banking 
and financial sector with high-tech solutions, thus contributing to the 
recovery of Asia's economy.
    Question. What plans does your agency have for Russia? Have you 
written off any or all activities with Russia due to its insolvency and 
rampant crime? What might your agency do to assist U.S. companies to 
help lift Russia out of its quagmire? Or, should we force Russia to 
fend for itself?
    Answer. Since we initiated our program in Russia in 1991, TDA has 
adhered to the approach of being demand-driven in our support of 
project opportunities. Consistent with this philosophy, we will 
continue to support commercial initiatives in Russia as long as U.S. 
companies are willing to pursue feasible business endeavors. Changes in 
demand in Russia for TDA funding during FY98 provide clues as to how 
the U.S. business community is responding to recent events there, which 
is a good indicator as to the level of support we will commit to 
Russia. While the beginning of FY98 saw a steady increase in demand for 
TDA funding, the deteriorating economic situation in mid-summer led to 
a slowdown in demand. Towards the close of FY98, however, immediate 
concern over the recent economic crisis appeared to have lessened 
somewhat, and TDA witnessed a moderate increase in proposal 
submissions. We have seen a clear trend towards submissions from medium 
and large U.S. companies which have adopted a long-term investment 
strategy and have the determination and resources to weather Russia's 
political and economic fluctuations. Therefore, despite recent events, 
TDA anticipates that it will continue to share the risk with U.S. 
companies as long as there is demand for our assistance in Russia.
    Question. Could you comment on how your activities in Brazil might 
be impacted if the local economy and currency continue to slide 
downward?
    Answer. In FY98, TDA's activities in Brazil represented 
approximately one-third of its investments in Latin America. TDA 
expects to invest a similar amount in Brazil in FY99 in spite of the 
economic downturn. Many Brazilian analysts predict that it will take at 
least six months for the Brazilian currency to stablize as the 
necessary reforms are implemented by the government and the current 
account balance improves. It is difficult to predict at this stage 
whether there will be a significant worsening of the Brazilian economy. 
However, if this were to occur, due to the nature of TDA's program, TDA 
projects would probably primarily be affected by delays, with no 
significant overall decline in TDA activity in Brazil.
    Brazil is the largest market in Latin America and has a tremendous 
demand for investments in new infrastructure, including power, 
transportation, water and sanitation, and telecommunications. 
Infrastructure projects are typically implemented for use over the long 
term (20+ years), and are therefore not affected in the same way as 
product sales of consumable goods. Although some projects may be 
vulnerable to delays or cancellation due to investors' concerns about 
the market, overall viability for most projects will not be permanently 
affected. Given TDA's involvement in the early stage of the project 
cycle, it is expected that there will be a continued demand for TDA 
funding for priority projects, the planning of which must move forward 
in spite of the economic slowdown.
    Question. There is a great deal of concern in Congress right now 
that some countries suffering in the financial crisis are dumping cheap 
products in the U.S. to escape their economic problems. What role, if 
any, does your agency have in causing this problem? Will you curtail 
your export or direct investment to halt such dumping of products? Is 
greater financing of your agencies warranted if this problem persists?
    Answer. The goal of TDA is solely to promote the export of U.S. 
goods and services to major infrastructure projects in the developing 
world, thereby creating jobs in the U.S. Therefore, our program is 
unrelated to the trade practices described. In fact, the recent decline 
in exports and the growing trade imbalance caused, in large part, by 
the global financial crisis provide a clear rationale for increased 
funding for TDA and the other trade finance agencies whose goal it is 
to promote U.S. exports. TDA's success in promoting exports is 
demonstrated by its export multiplier. This statistic shows that since 
TDA's inception, every dollar invested by TDA has spurred $32 worth of 
exports. Therefore, programs such as TDA's are part of the solution, 
not the problem, of the trade imbalance.

                 Questions for the Record by Ms. Pelosi

    Question. TDA has requested an increase of $4 million from $44 to 
$48 million. Can you comment more specifically on which regions of the 
world would benefit from such an increase?
    Answer. TDA is a demand-driven agency. Although we are organized by 
region, and allocate our budget on this basis, funding decisions remain 
fluid so that we can respond to economic events as they unfold. 
Patterns of growth in some regions, countered by financial 
uncertainties in other areas, can give early indications of where extra 
resources might be devoted.
    Africa, for example, is experiencing a period of rapid development. 
Our budget for Africa for FY99 has been entirely reserved or obligated 
only one third the way through the fiscal year, whereas last year's 
budget continued to meet demand two-thirds the way through the fiscal 
year. Though this is not a scientific measure, it does provide a rough 
idea of the level of demand we are trying to meet with a limited 
budget.
    While at first glance one might think that extra resources for 
Africa could be easily shifted from our Asia program due to the Asian 
financial crisis, this does not hold up to closer scrutiny. While there 
was a decrease in demand for our activities in Indonesia, Thailand and 
Malaysia, it was largely offset by increased activities in the 
Philippines and Vietnam. Furthermore, much of the infrastructure 
investment originally contemplated by the public sector in Asia has 
simply shifted instead to the private sector, a trend toward 
privatization that TDA encourages.
    Latin America presents a similar situation. There is tremendous 
demand for new infrastructure projects in the region. Although 
financial uncertainty in Brazil, the largest recipient country in the 
region, may cause investors to take a slower approach, we do not 
predict any significant decline in demand. In fact, because 
infrastructure projects are both long term and necessary components of 
development, they can typically proceed in a financial environment that 
would be more hostile to other types of exports.
    Therefore, because there is increasing demand for our programs in 
the southern hemisphere, particularly, and no lessening of demand for 
our activities in Asia and elsewhere, TDA currently has no choice but 
to turn down viable projects when confronted with budget limitations. A 
funding increase for FY 2000, however, would allow us to meet some of 
this increasing demand, thereby taking early steps to level the playing 
field in these hotly contested emerging markets against our foreign 
competition.
    Question. Describe the level of demand for programs in Africa, and 
how an increase in funding would affect projects in that region.
    Answer. Demand for TDA's programs in Africa has been growing 
rapidly, both in terms of the number of countries where TDA is 
encountering requests for support and in the types of projects for 
which support has been requested. In fact, only one-third the way 
through this fiscal year, TDA had already reserved and obligated 100% 
of its allocated budget for Africa, whereas our budget in FY98 was not 
obligated until June last year.
    Some of the increase in requests for TDA support are certainly due 
to an aggressive marketing campaign in key countries in the region. 
These marketing efforts were highlighted by the temporary assignment of 
a TDA Country Manager to Southern Africa for three months last fall, in 
addition to the Agency's Director and Africa Regional Director both 
traveling to Africa twice in the last year. Largely through these 
efforts, TDA has been successful in expanding our Africa program beyond 
just South Africa--which is some cases is now a competitor for projects 
in the region. In the last few years, TDA has worked with 15 African 
countries in addition to South Africa, and also with the Southern 
Africa Development Community (SADC).
    Apart from TDA's efforts to promote an expanded program in the 
region, the rise in requests for support is also a natural offshoot of 
expanding stability and market-based reforms throughout the region, and 
a growing resolve on the part of African public and private sector 
officials to find a way to move their priority projects forward. The 
American business community has also become more aware of the 
opportunities this market represents, while at the same time the 
financial community is becoming better equipped to evaluate and approve 
investments in infrastructure and industrial projects in Africa.
    This last point is key to the appropriateness of TDA funding for 
the region. While traditional government and multilateral development 
bank projects continue to account of the bulk of Africa's 
infrastructure programs, more and more privately-driven projects are 
being considered. This trend toward private sector projects and away 
from public sector projects is consistent with the significant 
worldwide shift towards the private sector that TDA has been 
encouraging in recent years. As African and U.S. companies and private 
financial institutions consider new ventures, the availability of TDA 
support may play a crucial role in their successful development by U.S. 
firms. Additional TDA resources in Africa would therefore likely be 
absorbed by strong new growth in privately financed projects.
    Question. Does TDA have any role in the rebuilding efforts from the 
devastation of Hurricane Mitch in Honduras and Nicaragua? If not, why 
not?
    Answer. TDA expects to become increasingly involved in evaluating 
infrastructure projects in Central America necessitated by the effects 
of Hurricane Mitch. While we do not have adequate personnel or 
resources to devote to the type of sweeping review that is required at 
this stage of a situation of such massive proportions, we will rely 
heavily on the findings from work performed at this early stage by the 
Department of Commerce, the Agency for International Development, the 
World Bank, the Inter-American Development Bank, and others to help us 
identify projects, particularly ones in which we could facilitate U.S. 
corporate participation. Once leads have been identified, we will work 
expeditiously to ascertain which ones might benefit from TDA and U.S. 
business involvement.

                 Questions for the Record By Mrs. Lowey

    Question. As you know, I strongly believe that projects that bring 
governments and people together in the Middle East are the key to real 
peace in that region. I know that TDA has been involved in several 
Jordanian-Israeli projects. Last year, we spoke about a TDA feasibility 
study for a fiber-optic telecommunications network. I also understand 
that TDA has worked on a cooperative airport project between the 
Jordanians and the Israelis. Could you talk a little bit about Middle 
East regional projects with which TDA has been involved and how these 
projects promote economic cooperation in the region?
    Answer. The examples which you raised, the fiber-optics and airport 
projects, are good examples of regional feasibility study projects 
funded by TDA. Although, TDA-funded grants are typically aimed at 
specific projects in a country, both the fiber optics project and the 
airport project were conducted through grants to Jordan with 
requirements for equal Israeli participation. By assisting in the 
development of a country's infrastructure, TDA helps make the country 
more capable of participating in the regional efforts described in your 
question. The Jordan Civil Aviation Authority, for example, is 
committed to improving air safety, ground efficiency, and security at 
the Aqaba International Airport. Reaching the most recent ICAO-level 
safety standards will allow the airport to receive larger planes, thus 
increasing the influx of foreign tourists and tourism income. As 
designed by the TDA study, the joint use airport will enable the use of 
wide body jets, the deliver business and tourist passengers to both 
countries. The improvements will also demonstrate to the Israelis, 
Jordan's partner in the ``Aqaba-Eilat Peace Airport'' project, Jordan's 
commitment to the safety of Israeli-bound passengers traveling through 
Jordanian airports. The TDA-funded ``Jordan Border Security 
Modernization Feasibility Study'' is another project supporting that 
objective.
    The airport project is an excellent illustration of your view that 
Middle East projects which bring government and people together are the 
key to real peace in the region. As a partner in this project, TDA has 
participated at a number of levels: funding the feasibility study 
conducted by Lockheed-Martin, sponsoring reverse-trade missions to the 
United States and conferences introducing the civil aviation 
authorities to U.S. technology, and, most recently, providing technical 
assistance in the development of a financial and legal joint management 
plan for the implementation of the pilot project. While there have been 
delays, the project has moved forward, and over the past year, the 
Israelis have allowed an increasing number of Israeli bound fights to 
land at Aqaba's airport under the control of Jordanian air traffic 
controllers. This leap of faith on the part of both governments was 
perhaps unimaginable only a few years back. The goal of the ongoing 
financial project, which will establish the guidelines for management 
and revenue-sharing, is to secure permanent status for this pilot 
project. Additionally, the continued involvement of TDA and the U.S. 
State Department (which transferred Peace Process funds to TDA for this 
project) keeps both parties at the table, communicating about the 
relationship. For political and economic reasons, we are still a long 
way from achieving our goal, but every step gets us a little closer.
    TDA is always open to new projects which present opportunities not 
only for U.S. commercial success but also to those which have a 
positive impact on the Middle East Peace Process. The urgent need for 
the development of the water sector (clean water supply for both 
residential and commercial use) is an example of a common thread 
running across all of the countries in the region. While TDA is not a 
policy-making agency, it is clear that assistance in this sector could 
advance the goal of economic cooperation in the region. Recognizing 
this, last year, the U.S. Congress allocated $50 million earmarked for 
water projects in Jordan. Similar funds have flowed from multi-national 
institutions.
    For its part, TDA is pursuing a number of Middle East/North Africa-
regional water-related projects: We recently, for example, signed a 
grant with the Jordan Phosphate Mining Company for a feasibility study 
for a $15 million project which will help to reduce the Eshidiya mine's 
demand on groundwater resources and limit its impact on the country's 
water system. Conferences are another example of TDA's regional 
efforts, both in the Middle East and elsewhere. TDA will host an Africa 
and Middle East regional water projects conference in Fall, 1999, to 
promote U.S. company involvement in the development of these important 
projects. The heads of the water authorities of most of the Middle 
East/North Africa region countries will be invited to present their 
priority water-sector projects to the U.S. firms which can move their 
projects towards implementation.
                                          Thursday, March 25, 1999.

                  AGENCY FOR INTERNATIONAL DEVELOPMENT

                                WITNESS

BRIAN ATWOOD, AID ADMINISTRATOR

                    Mr. Callahan's Opening Statement

    Mr. Callahan. Good morning. Today the committee will hear 
from Mr. Brian Atwood, Administrator of the Agency for 
International Development, about the President's, and I assume 
his, request for fiscal year 2000 for development and 
humanitarian programs.
    Brian, we welcome you once again before this committee. We 
know that you have been nominated by the President to serve as 
the U.S. Ambassador to Brazil. So this in all likelihood, if 
the Senate has any wisdom, which they do, may be your last 
appearance before this committee as AID Administrator. From now 
on you will be lobbying to Chairman Rogers trying to get some 
money to improve your embassy, which he probably will give to 
you.
    Mr. Atwood. Right.
    Mr. Callahan. We have always been very open and direct with 
each other. That is why we can have this frank dialogue this 
year about your budget request. For your programs under the 
jurisdiction of this subcommittee, the President is seeking 
more than an $800 million increase, increasing it to $14.5 
billion. Within this total, AID development programs would 
increase more than $238 million above our fiscal year 1999 
bill.
    It appears that a good deal of this increase is to honor 
commitments made by the President and others during this past 
year's globetrotting. I remind you that this committee's 
responsibility is not to fund every promise made to foreign 
leaders by senior administration officials. It is not 
necessarily what this committee might intend to do.
    I do not understand how the President expects Congress to 
fund this overall budget increase. The Budget Committee last 
week proposed slashing international affairs spending to about 
16.4 billion. I understand that during the past few days they 
have even suggested that we cut it another billion, which is 
going to put it, if that is the case, about $3 billion below 
last year's level.
    As you know, foreign aid is not very popular in Mobile, 
Alabama, or many other places. So it is unlikely there will be 
an outpouring of opposition to the budget caps that exist in 
current law. And since saving Social Security first is a mantra 
being chanted at both ends of Pennsylvania Avenue right now, 
this subcommittee will likely be required to recommend a bill 
that is considerably less than current year levels of spending. 
Therefore, the administration had better let this committee 
know what its true international spending priorities are; 
otherwise it will become our responsibility to pick and choose 
where to make the necessary cuts to meet the appropriation 
allocation which will be given to us by the full committee.
    We don't want to do that. So we are going to ask the 
administration to assist us, which is basically what we are 
doing during the 5 years that I have been Chairman of this 
committee, providing you with as much flexibility as we 
possibly can, yet still having to live within the caps that 
will be allocated to us.
    I note that in reviewing the fiscal year 2000 request, it 
appears the White House has sought to increase just about every 
foreign account, with one rare exception, UNICEF. I am 
astonished that the President has selected this program, which 
has done great things for suffering children worldwide and 
which enjoys broad bipartisan support here on Capitol Hill. 
That is the only program in our jurisdiction that he is 
proposing to cut.
    You and I have worked well together during the past 5 
years. We have cooperated to create a Child Survival Account 
and have dedicated sufficient resources for the needs of 
children worldwide. We have joined the fight against polio and 
other infectious diseases. We have both opposed earmarking in 
the bill, so you have had, as I said, much more flexibility. 
And while I have every confidence in your personal good 
intentions, significant management problems still persist 
within AID.
    According to your inspector general, AID's new management 
system still cannot account for most of the Agency spending. 
This failure has prevented this committee from receiving 
accurate or timely information regarding AID obligations, 
making it nearly impossible for us to track the expenditure of 
billions of dollars in taxpayer funds. Further, AID lags behind 
most other Federal agencies in achieving Y2K compliance. Until 
these problems are resolved, this committee will view with 
skepticism the accounting and budgeting information received 
from USAID.
    I want to touch on one final point before I recognize Ms. 
Pelosi for her opening remarks. Last week Treasury Secretary 
Rubin dedicated much of his testimony before this committee to 
the issue of unserviceable debt incurred by Third World 
governments and the urgent need to write-down these bad loans. 
In essence, the Secretary's remarks call into question the 
entire mechanism of foreign aid lending for the past 40 years.
    I agree that many developing nations, through a combination 
of corrupt practices, incompetence and mismanagement, are 
teetering on bankruptcy. Yet today you will present AID's plan 
to launch a new loan program. It makes no sense to me, while 
the White House and Treasury argue that these poor countries 
must be rescued from the brink of bankruptcy due to decades of 
unsound lending, and meanwhile AID hopes to extend new loans to 
developing companies whose ability to repay is in doubt.
    We have an uphill battle, Brian, as you and I have 
discussed privately, convincing me of the need for USAID to 
become a participant in this type of new activity.
    [The statement of Mr. Callahan follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Callahan. Now I will recognize Mrs. Pelosi.

                     Ms. Pelosi's Opening Statement

    Ms. Pelosi. Thank you very much, Mr. Chairman. I, too, am 
pleased to welcome Mr. Atwood here today, which we have said--I 
have thought this before, but I think it is real now--may be 
his last appearance before this subcommittee and will probably 
be his last appearance as AID Administrator, in any case.
    I want to compliment Mr. Atwood both for the job that he 
has done at USAID and on his perseverance in staying on the job 
for as long as he has in this time of difficult fiscal 
challenges. I know he has had many opportunities to leave 
before, but I think he recognizes, as do the rest of us, that 
his leadership was necessary at USAID.
    Everyone has benefitted from his service. I am grateful he 
has remained as long as he has, and I know that he will be a 
great Ambassador to Brazil. And we certainly look forward to 
visiting him there, don't we, Mr. Chairman?
    Mr. Callahan. We certainly do.
    Ms. Pelosi. As we all know, AID manages over $7 billion in 
foreign aid funding, which includes everything from ESF to 
Israel and Egypt, to providing medicines to starving children, 
or developing solutions to the global crisis in HIV/AIDS. With 
such a vast mission, it is remarkable that any one agency can 
manage it. It takes great leadership, and Mr. Atwood has 
provided that.
    In our travels, Mr. Chairman, and in my travels in other 
committees, I have seen AID in action in the field. I have to 
say that its employees are extremely dedicated, hard-working, 
and trailblazers in development work throughout the world.
    With the end of the Cold War, AID's challenge expanded 
first into Eastern Europe and then into the former Soviet 
Union. As the demands, Mr. Atwood, on your mission continue to 
expand, in fact become more complex, it is my hope that we can 
preserve AID as the premier development agency in the world.
    Few people realize the fact that AID has paved the way 
throughout the world in developing on-the-ground solutions to 
seemingly intractable problems. Other donors can in some cases 
make the case that they do more financially in relation to 
their populations. They may say the U.S. does not contribute 
its fair share. The fact is that no other country even comes 
close to the U.S. in terms of putting well-trained, dedicated 
people on the ground in developing countries to solve problems 
working hand-in-hand with the people of these countries.
    That is why in my questioning I am going to have some 
questions about cuts in administrative funding for AID, because 
I think that we have to have appropriate and adequate 
administration from here to be able to exploit in positive ways 
the many talents of our people out there.
    As the international financial institutions increase their 
role in financing projects focused on poverty alleviation, they 
are increasingly looking to AID for models and lessons learned. 
In many countries, AID personnel are the only force taking 
pains to coordinate assistance programs among donors.
    I have taken the time to bring this out today, Mr. 
Chairman, because it is often an aspect of our foreign aid 
program that is overlooked. In addition, and more to the point 
of budgets, AID's viability is threatened today by the 
continued downward pressure on foreign aid budgets, and 
specifically more downward pressures on AID's operating budget. 
As I mentioned, it is my hope that we can work this year to 
find a solution to this problem. Without a viable delivery 
capability, all assistance we provide could be wasted.
    Finally, Mr. Chairman, while I am confident the 
Appropriations Committee will make up its own mind on 
allocation for foreign assistance, I fear the budget resolution 
under consideration today, if realized, would devastate foreign 
aid programs. If the numbers contained in the Republicans' 
budget resolution become reality, AID's budget in particular 
would be devastated.
    I will pursue this in detail in my questions today and 
attempt to get a clear illustration of how such a scenario 
would affect how we handle child survival, infectious diseases, 
education and environment programs, and I look forward to 
hearing our witnesses.
    But I want to make a comment following up on something you 
said, Mr. Chairman, when you mentioned the unpopularity, the 
supposed unpopularity, of foreign aid. I know you speak with 
great authority for your own district, and I am sure that that 
is the case, but that being the case there, I think it behooves 
the President to inform the public in a more direct way, and 
not in a time of crisis, about why it is important for us to 
have the financial resources to match our leadership role in 
the world.
    Many of us are very sad, I am sure everyone is, that our 
young people are in harm's way now because of the situation in 
Kosovo. I support the President's decision. I think it was a 
courageous one, because it is not going to be an overwhelmingly 
popular one. But these situations hopefully could be avoided if 
we had a better appreciation, even in our own country, of 
earlier, earlier, earlier interventions into these situations.
    I think that NATO needed to be rescued once again, but in 
any case, the role of the United States is preeminent, and we 
have to face that reality. I am a broken record on this 
subject, but I was there as a student hearing President 
Kennedy's inaugural address when he made his famous statement, 
``Citizen's of America, ask not what your country can do for 
you, but what you can do for your country.'' Everybody knows 
that statement. But I don't know that everybody knows the very 
next sentence, but I know you do, Mr. Chairman, because I say 
it every time our bill comes to the floor. The very next 
sentence is, ``Citizens of the world, ask not what America can 
do for you, but what we can do, working together, for the 
freedom of man.'' And in my view, that should be as prominent a 
statement as the first.
    They certainly are related, because we reap the benefit in 
our own country of what we do internationally. I am very 
disappointed in the numbers that we are talking about as far as 
the budget is concerned, and I hope that at the end of the day, 
we will have at least enough money to modestly live up to our 
international role.
    But I think it is going to take a great deal of leadership 
on the part of the President to educate the American people 
more fully on why this foreign assistance is so necessary, why 
it is in our national interest, and to put it in some 
perspective, that it is less than 1 percent of our Federal 
budget.
    And with that, I join you, Mr. Chairman, in welcoming Mr. 
Atwood and again thank him for his leadership and welcome his 
testimony. Thanks, Mr. Chairman.
    Mr. Callahan. We thank you.
    [The statement of Ms. Pelosi follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Callahan. You mentioned a possible CODEL to Brazil. 
Mrs. Kilpatrick and I yesterday on the floor discussed this 
CODEL to South America, and especially to Brazil, and she and I 
discussed the possibility that we ought not invite those of you 
who chose to speak against the proposal I had on the floor 
yesterday about callable capital. So Mrs. Kilpatrick is in; you 
and Mr. Sabo are not.
    Ms. Pelosi. I hope you don't go--even if I am not on the 
trip--before Brian is down there.
    Mr. Callahan. I am not going to go before Brian is down 
there.
    Brian.

                     Mr. Atwood's Opening Statement

    Mr. Atwood. Thank you, Mr. Chairman. And I thank you very, 
very much for your kind words and those of Ms. Pelosi. I think 
both of you know that the feelings are mutual. I have been very 
fortunate in the past 6 years. First, the people of USAID 
themselves have been through a lot, but they continued through 
all of the changes that we put them through to produce 
excellent work. They made me a credible witness when I claimed 
that our Agency was absolutely essential to our national 
security.
    I was also very, very lucky here on Capitol Hill. Little 
did I know that a Congressman from Alabama who never voted for 
foreign aid would become such an effective chairman. Your 
colleagues trusted you so much, and they passed your bill a few 
years ago by the largest margin ever. Even more important than 
that, Mr. Chairman, you have listened to my problems privately, 
you have given me good advice, and you have helped me when 
there was no gain for you in doing so. So I thank you very much 
for your support and for your friendship.
    I was always blessed to have the support and friendship of 
Nancy Pelosi. She is an important voice in this Congress, and 
when she speaks out on human rights in China, or HIV/AIDS, or 
the Central American tragedy, as she did yesterday, or women's 
rights, or other issues, people on both side of the aisle 
listen.
    I was also very fortunate as well to have had had the 
leadership of Bob Livingston and Dave Obey. To me they 
represent the best of Congress. They came at politics and at 
issues from the opposite ends of the spectrum, but they came 
together to legislate, and they came together as personal 
friends. Both served as Chair of this subcommittee, and both 
understood why the foreign operations appropriation was so 
important to our country.
    I will personally miss Bob Livingston a great deal, and I 
told him so in a letter when he left the House. He would have 
had made a fine Speaker.
    Mr. Chairman, it seems like ancient history now, but USAID 
was a management nightmare when I started back in 1993. The 
Bush administration appointed a commission, the Ferris 
Commission, that virtually called USAID a basket case and made 
dozens of recommendations for change. I used that report as a 
blueprint, and in the first 2 years we reorganized, reoriented 
the people in the systems of USAID, and made the organization 
focus on results. When we briefed the Ferris Commission on the 
changes a few years later, they were impressed and said so 
publicly.
    I believe then, and I believe now, a badly managed foreign 
aid program gives too many people an excuse to vote against us. 
We haven't entirely eliminated that excuse, I admit, but we are 
no way near as vulnerable today as we were 6 years ago. Six 
years ago we couldn't tell you how many people we had working 
for us. We couldn't produce an annual financial statement. You 
wouldn't have even asked us for this information back then 
because you knew we couldn't give it to you.
    Today we can respond to your requests, but it still takes 
us much too much time, as you indicated in your opening 
statement. We made a good faith effort to create out of whole 
cloth literally a single new management system that would 
enable us to track financial, budget, results and procurement 
data. That system is in use today in Washington. It has 
replaced one of our old, inaccurate legacy systems. It is 
better than what we had, but it is not accurate enough and fast 
enough to spare us the work of having to check what it tells 
us, which is why you have such a hard time getting information 
on a timely basis from us.
    Still it was not a waste of time or money. We would have 
continued to waste taxpayers dollars if we had not tried to 
change the old systems. We are today building on what we have 
learned, and we are on the right course to achieve the system 
we need. My successor will be able to take credit for finally 
fixing the problem that has plagued us for years, so good for 
him.
    Mr. Chairman, when I started this job, I said that if I 
couldn't convince my mother to support foreign aid, I would 
have failed. I am pleased to report to you today that thanks in 
part to you, my mother is now actively defending the foreign 
aid program. Six years ago I am sure I was an embarrassment to 
my mother. She never told me that, but she would tell me about 
her friends' sons and daughters, they were in business, they 
were doctors, they were lawyers, they were teachers. I would 
just imagine how she was describing me: Well, my son gives away 
our tax dollars to foreigners.
    Today, she proudly tells her friends that her son's Agency 
saves millions of children a year with the Child Survival 
Account Congress gives him. She tells them that I am fighting 
against diseases like AIDS and TB and polio.
    My mother lives in Florida in the winter, and she and her 
friends have become very worried about the increase in 
hurricanes and tornadoes and forest fires that Florida has 
experienced. She doesn't really believe there is a 
scientifically proven connection between this bad weather and 
global warming, but she reassures her friends that USAID is 
doing something to help.
    My mother is still a bit skeptical about our population 
work, but she does think that family planning makes sense. 
After all she had only two kids herself, and she still doesn't 
understand why poor people have so many children. And she tells 
her friends that family planning has had a bigger impact in 
reducing abortions in the world than anything else.
    My mother doesn't know a lot about economics, but she 
supports our microenterprise programs. It seems that about 15 
years ago, she watched 60 Minutes and was impressed by a 
segment on the Grameen Bank in Bangladesh. She was really 
impressed when I told her I had actually met Muhammed Yunus.
    She also likes the fact that USAID is helping other 
countries keep the same standards as we have to keep on the 
environment and on labor issues and banking rules and 
protecting patents and copyrights. She has a simple but very 
wise philosophy: If we are going to trade and compete andinvest 
in these countries, it is in our interest to help them improve their 
standards.
    And, of course, my mother gives me full credit for all the 
new democracies in the world.
    So, Mr. Chairman, I have made some progress with my mother, 
and she feels better talking about my job with her friends. 
Every once in a while, though, we have a problem. Last weekend 
I got home, and there was a message from her on my recorder. 
She had to talk to me right away. It seems that my name was in 
the Palm Beach newspaper in connection with a story about 
Haiti. I could just imagine what she was thinking: How am I 
going to explain this to my friends?
    I called her, and she read me parts of the story. The 
essence of it was that the political crisis continues in Haiti, 
and people are still poor; foreign aid hasn't worked. I said, 
here are some of the facts you can use with your friends. USAID 
programs provided health services to 4.7 million Haitians, 
about 56 percent of the population. We have doubled our 
coverage and increased immunizations to 74 percent in the past 
few years.
    USAID agriculture programs reach 166,000 families, or 20 
percent of the farm families in Haiti, and they increased their 
income by 17 percent last year.
    USAID has trained 11,000 teachers, and kids in USAID-
sponsored schools are passing at a rate of 68 percent.
    We have made loans to 9,200 Haitians under our 
microenterprise programs.
    The government is still in crisis, I said, but the police 
and the judicial system are working better than ever.
    I told her to tell her friends that these programs have had 
an impact on illegal immigration, which was some 40,000 a year 
in the 1991-94 time frame. It is now down to a few hundred a 
year.
    She said, okay, okay, enough already. If you think I am 
going to talk to my friends about Haiti, you are crazy.
    Mr. Chairman, my mother hasn't heard about the budget 
resolution yet and the severe cut in the 150 Account, and when 
she finds out, I am sure she is going to say something like, 
what is that mean John Kasich trying to do to that nice Sonny 
Callahan? Doesn't he know that the kids are going to suffer, 
and all that good work you are doing will be lost? Maybe I 
should call him and give him a piece of my mind.
    Of course, I tell her not to bother, she won't be able to 
find him, he will be in Iowa or New Hampshire or somewhere.
    Seriously, Mr. Chairman, I don't know how our programs 
could survive if we have to take a cut in the 150 Account of 
3.2 billion below last year's appropriated levels. This would 
frankly compromise not only our viability as an agency, it 
would also, I believe, compromise our national security.
    Our budget, as you well know, enables our country to 
respond to natural and man-made disasters. It enables us to 
respond to postconflict situations, where the peace is still 
fragile. And it helps us to prevent crises where the developing 
process works.
    We are today using our military as a last resort against 
Serbia. No one wants to use our military forces in combat, but 
sometimes it is all that can be done. The first line of defense 
is our diplomacy and our development programs. These cuts will 
mean that we will see more crises requiring the expensive use 
of our military in the future.
    I sincerely hope we will be able to revisit these 
allocations by the end of the year and that we will begin to 
look at the budget surplus and maybe an increase in that 
surplus in the context of a broader view with national 
security.
    Mr. Chairman, I have obviously gone on too long. My written 
statement, which is boring, effectively, however, defends the 
President's budget request, and I hope that budget request is 
not a dead letter. I ask that that formal statement be made a 
part of the record.
    Again, Mr. Chairman, and Mrs. Pelosi and other members of 
the committee, I thank you for listening to me this morning and 
for the past 6 years.
    [The statement of Mr. Atwood follows:]

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    Mr. Callahan. Well, thank you, Brian, and I certainly 
enjoyed your testimony. For one thing, it gave me a great deal 
of encouragement, because I finally found out you and I have 
something in common, we both have a mother.
    Mr. Atwood. Is she embarrassed by your job, Mr. Chairman?

                               POPULATION

    Mr. Callahan. I wanted to tell you that I have not told my 
mother yet what I am doing up here. And if you happen to be 
flying through Mobile, Brian, please don't let the people of 
Mobile know what I am doing either.
    An interesting comparison, though, because you said that 
your mother had two children and believes in family planning. 
My mother had nine children. Guess who is going to win that 
battle with the Chairman? There are good points in having nine 
children. If your mother needs a new car, I am sure she has 
resources of her own that she can buy one, but if the kids had 
to buy it, you would have to come up with half the money. In 
our case I only have to come up with one-ninth of the money.
    So there are advantages to having children. My mother also 
gets a double shot, because I have a brother in the State 
Senate in Alabama, so the poor woman can't even go to the 
grocery store without receiving some degree of criticism about 
her political family.
    But, nevertheless, your mother is a very wise woman to 
recognize the value of the Child Survival Account. I am just 
amazed she didn't teach you that before I had to teach you.
    We are also pleased to have the Deputy Director here, 
Hattie Babbitt, today. Happy to have you with us today. Thank 
you for your testimony.
    Ms. Pelosi.
    Ms. Pelosi. Thank you, Mr. Chairman.
    Mr. Callahan. I am going to have some in a minute.
    Ms. Pelosi. Thank you very much. I was all already to 
applaud at the end of your testimony, and then I remembered we 
were in a hearing, and this was not comedy hour. That was 
really wonderful how you put that all into perspective for us. 
I hope that your mother will get a copy of your statement very 
soon, Brian.

                           OPERATING EXPENSES

    Mr. Chairman, I, too, want to join in welcoming Deputy 
Administrator Hattie Babbitt with us today. I wanted to follow 
up one point I made in my opening statement about USAID's 
request for operating expenses. Can you describe for us, Mr. 
Atwood, what would happen if you do not receive the full 
request?
    Mr. Atwood. Well, thank you, Ms. Pelosi, for asking that 
question, because we have had to ask for an increase this year 
in operating expenses. It is the first time in 3 years we have 
had to ask for this. But the increase will basicallykeep us 
where we are. We are trying to maintain the staff level overseas that 
we had at the end of fiscal 1998. It was about 650 people. Some people 
think we should go up higher, but we are trying to look at our work 
force to try to figure out how we can plan better, perhaps use 
regionally-based missions overseas a little more than we have in the 
past in order to get the work done, which continues to increase.
    In order to do that, and under the budget request that is 
before you, we will still have to cut in Washington in order to 
maintain the fiscal 1998 levels overseas. I am not sure exactly 
what that cut would be. I believe it is only about 4 percent of 
our work force in the fiscal year we are talking about, but 
that is significant. We know we can cover that by attrition, 
although we will use a number of ways in which we can actually 
focus on the work force we actually need, as opposed to 
allowing attrition to do it in an indiscriminate way.
    We do not expect to have to have a RIF, but what I am 
trying to say is that in order to maintain the technical 
competence and the support competence of our Agency, we need 
this operating expense request that we have made. It is about a 
$17 million increase over last year's level, but when you 
consider the pay raise, the 4.4 percent pay raise and other 
increases in expenses, it only represents about a 1 percent 
increase, which doesn't even cover the additional costs of 
doing business overseas and the inflation rate.
    So it is really vital. I think that we have cut much too 
far at USAID. We have a very talented staff, but there isn't a 
single person down there that isn't working around the clock in 
order to get the job done. So I am glad you asked this. This is 
a very important aspect of our work.
    Ms. Pelosi. I have become increasingly concerned about the 
ability of us to hold onto the talent that we have when the 
budgets are being cut the way they are. It does not allow us to 
maintain some certainty in terms of the professional 
relationship of these people who, because they are all 
talented, have other options. They are all providing a great 
service to our country.

                              BUDGET CUTS

    Speaking along the line of budget cuts, the number in the 
Republican budget resolution going to the floor today cut 
international spending, and we have talked about this earlier, 
from about $21 billion in 1999 to about $16 billion in 2000. It 
is the biggest cut in percentage terms by far to any budget 
function. The resolution being presented to the House contains 
no explanation about how these cuts should be realized and no 
explanation of how such cuts will affect our national security.
    If we assume that the $4 billion spent to run our embassies 
remains intact--and I know that you certainly hope that is the 
case now more than ever--and that aid to the Middle East will 
remain constant at $5 billion, the remaining foreign aid 
programs in that function would have to be cut almost in half; 
$7 billion would remain to fund international programs that 
were funded at $12 billion last year.
    Mr. Atwood, would you explain to us what would happen to 
our aid programs and to AID itself with these kinds of 
reductions?
    Mr. Atwood. Well, to be general at first, instead of 
specific, I would say that we would lose our viability as a 
leader in the development community. We have managed over the 
years through our leadership in various areas to lead other 
donors to contribute; using the same methods that we have used. 
We now only give about 10 percent of all development assistance 
in the world. The rest of the donor community provides the 90 
percent that we don't provide, but they follow our lead.
    They continue to follow our lead, and that is because of 
the technical expertise that we have as an agency, because of 
our ability to tap into the United States, the great 
universities, the PVOs, the think tanks and the like. Such a 
cut really would damage us. I have mentioned before the 
operating expense budget. If we don't have our presence 
overseas, we lose our leadership. I can't imagine how we can 
sustain that if we have these deep cuts.
    You mentioned before the problem that there are a lot of 
parts of this budget that really must be sacred. I can't 
imagine people talking about cutting the Middle East budget at 
a time when we are hoping to implement the Wye agreement; 
although, clearly that is out there as an option.
    I can't imagine seeing this subcommittee, in particular, 
cutting the Child Survival Account, because I think you know 
that it would make all of us vulnerable to the charge that we 
care less about children than obviously we do. That is a 
serious problem.
    I can't imagine how we can live with this $16 billion. The 
Secretary of State has already spoken on this issue. I wonder 
how much attention was given to this when these cuts were made, 
frankly. I am not challenging anyone's motives, but there are a 
lot of things that needed to be balanced when the budget 
resolution was sent out, and I think that, frankly, the 150 
Account became an afterthought. But it can't be an 
afterthought, and we have got the responsibility, I think, 
those of us who know about what is done with this money, to 
provide for our national security, and to provide for people 
around the world, and to maintain American leadership. We have 
got to make a case that this cannot be sustained; that this 
will not hold.
    Of course, it is a little premature before you even marked 
up a bill to suggest that that bill would be vetoed, but I 
think all bills in the 150 Account, if they come in with this 
kind of 25 percent cut, would be veto bait downtown, and it 
looks to me as though we are going to have to revisit these 
issues again.
    I realize the budget resolution is on a fast track, it is 
going to be accepted, but I also understand that the budget 
resolution is a congressional document. It doesn't get sent 
downtown for approval by the President. And so we are going to 
be in the battle, I think, all year round, and what I hope is 
that we don't lose sight of the 150 Account as we talk about a 
lot of other issues that relate to domestic programs and the 
like, because this is going to be a devastating, and I don't 
see how, frankly, this can be sustained.
    Ms. Pelosi. Thank you, Mr. Atwood.
    Thank you, Mr. Chairman.
    Mr. Callahan. Mr. Knollenberg.
    Mr. Knollenberg. Thank you, Mr. Chairman.
    Mr. Atwood, welcome.
    Mr. Atwood. Thank you, Mr. Knollenberg.
    Mr. Knollenberg. Good to see you again. And I, too, join my 
colleagues in extending congratulations in terms of some news 
about your future. And I would certainly support that 
happening.
    Mr. Atwood. Thank you, Mr. Knollenberg.

                      Armenia and Nagorno-Karabakh

    Mr. Knollenberg. First very quickly just a couple of 
questions, and I wanted to thank you for a couple of things. 
One is your availability in a number of cases on a number of 
issues. And, in particular, I want to talk now about Armenia 
and the Nagorno-Karabakh. You know well the initial 
difficulties we had with the distribution of the aid and 
implementing assistance projects in Nagorno-Karabakh. My belief 
is that that is being resolved now satisfactorily, and I think 
that would be a reflection of what you feel and what your staff 
believes as well.
    Could you confirm this, that we have reached a point where 
distribution is on target?
    Mr. Atwood. Yes, it is on target. We are going to be 
submitting a report momentarily to you to explain how we have 
complied. We have managed to disburse $12.5 million of the 
fiscal 1998 resources. We have had some problems inside 
Nagorno-Karabakh. There was an effort by the authorities there 
to try to tax the assistance. We have convinced them to change 
that.
    Mr. Knollenberg. That is right, that has been changed. What 
do you anticipate in expenditures for the balance of fiscal 
year 1999?
    Mr. Atwood. I will have to--I think that we have, according 
to the answer that I have been given here, we will be able to 
exceed the $12.5 million that you called for in the fiscal 1998 
legislation.
    Mr. Knollenberg. What about the focus of that spending?
    Mr. Atwood. Well, the focus is clearly humanitarian, and 
the vast bulk of it will be in Nagorno-Karabakh itself. Some 
will be spent in the immediate vicinity as was permitted by the 
legislation.
    Mr. Knollenberg. Right. And here is a question. What can 
USAID do to ensure that this Nagorno-Karabakh assistance gets 
to those in need, and without violating the existing ban in 
USAID on what they call green villages. You are familiar with 
the green villages, I am sure, or villages in which existing 
homes became available for the IDPs due to this displacement of 
their citizens?
    Mr. Atwood. Well, it is obviously a difficult region to 
work in. We don't have USAID mission there, but we do work 
through private voluntary organizations that do have access and 
do know what they are doing. And I don't believe that that is 
going to be a constraint, because what we are trying to find 
are legitimate humanitarian programs.

                              North Korea

    Mr. Knollenberg. Thank you for those responses. Let me go 
on to North Korea and the food assistance. There are periodic 
reports that North Korea regularly diverts international food 
aid to feed its military and elements of the Communist 
hierarchy. In the meantime, reports show that malnutrition and 
death due to famine run rampant through the North Korean 
countryside.
    In addition, I understand that the North Korean Government 
is undermining the existing monitoring program by rejecting 
spot inspections, unaccompanied visits and Korean-speaking 
monitors. I have strong concerns about the administration's 
apparent lack of commitment to monitoring this food aid 
program. In fact, it is my understanding that USAID is not even 
involved in the negotiating the Memorandum of Understanding, or 
the MOU, regarding the distribution of U.S. food aid, but 
instead gives that authority or responsibility to an NGO team. 
I don't know what NGO or NGOs those happen to be.
    But what steps can USAID, as a primary distributor of the 
food aid, take to minimize the diversion of vital food 
assistance away from the suffering civilians that need it most?
    Mr. Atwood. Mr. Knollenberg, we are deeply involved in 
monitoring this, the NGO group that is operating under the 
World Food Program, and the World Food Program itself 
negotiates the monitoring requirement. But we send USAID teams, 
including the Deputy Assistant Administrator for the Bureau of 
Humanitarian Relief, who has been in North Korea twice. The 
Assistant Administrator will be going soon in order to check on 
the monitoring system itself and to get firsthand reports from 
the NGOs that are doing the monitoring as well as the 
distribution of the food.
    We believe that the monitoring system is adequate, that 
there is not the kind of diversion that has been reported.
    Mr. Knollenberg. Do these monitors speak Korean?
    Mr. Atwood. That is a crucial issue, and I would only say 
to you that they have access to people who speak Korean. Each 
time that we propose to put a monitor in who speaks Korean, we 
get a rejection by the North Korean Government. I would tell 
you this is an extraordinarily difficult environment within 
which to work.
    The North Korean Government considers itself to be our 
enemy, and we their enemy. We are trying to respond to reports 
that as many as 3 million people may have died because of 
famine last year.
    Mr. Knollenberg. That is my concern, because, frankly, I 
wonder if, as qualified and as thoroughly embracing as these 
monitors might be of making sure that these things are done in 
the way that they were intended, there is no language connect. 
Without it, there might be a real problem in truly being able 
to evaluate and monitor where that food goes. We have had 
reports, as you know, that much of it doesn't get to those 
folks in the field.
    And some of it we have found comes back to us in the form 
of being on board ships allegedly belonging to the North Korean 
Navy, that is the U.S. food aid and, of course, the other 
countries that contribute as well.
    So I do think that language issue is a very large problem. 
And I don't know what you can suggest doing about that.
    Mr. Atwood. Let me just say that we have had absolutely no 
reports about food that has gone on ships. In fiscal 1998, the 
North Koreans agreed to allow the World Food Program to double 
its staff. It now consists of 46 international staff and over 
20 monitors. U.S. PVOs are currently monitoring food-for-work 
distribution as part of an agreement signed with the 
government, and we believe that the monitoring still is 
adequate.
    Yes, it would be nice if we could speak Korean, but what we 
have asked them to do is follow the food and make sure they 
know that it is getting to the children and the people that are 
sick that need it. And our belief is that this is an adequate 
system. Because of the skepticism about this government, I 
think we are always going to have rumors and reports and the 
like, and we will be just as concerned as you are about those 
reports, and we will follow up each and every one of them, I 
can assure you.
    Mr. Knollenberg. We will continue to do oversight on it, 
and I thank you.
    Mr. Callahan. Ms. Kilpatrick. I am sorry, Mr. Jackson, I 
didn't know you had come in.

                              Budget Cuts

    Mr. Jackson. Thank you, Mr. Chairman.
    I want to start by welcoming Administrator Atwood and thank 
him for his testimony. I also want to associate myself with the 
comments of Ms. Pelosi regarding Administrator Atwood and I 
wish him well in his future endeavors.
    Administrator Atwood, at this moment the House is debating 
which budget resolution to adopt, and according to the 
Republicans' budget resolution, international affairs 
discretionary spending would be $16.4 billion in budget 
authority, and $18.1 billion in outlays for fiscal year 2000.
    Compared to fiscal year 1999, the measure calls for 23 
million, that is 58 percent less than budget authority, and 600 
million, 3 percent less in outlays. Granted the fiscal year 
1999 levels include emergency funding as well as 17.9 billion 
of funding for the IMF.
    If this emergency appropriation for the IMF is removed from 
last year's appropriation, the calculation for this year's 
budget resolution is about 5.1 billion, or 24 percent less than 
the fiscal year 1999 level.
    Administrator, what would a cut like 24 percent of the 
function 150 budget do for USAID programs?
    Mr. Atwood. Well, it would be devastating, Mr. Jackson.As I 
have indicated before, I think it would reduce our leadership capacity, 
but I think it happens at a time when we have some really serious 
international issues and problems. The Asian financial crisis has now 
spread to Russia, and then to Brazil. We are trying to manage these 
problems. What the financial crisis has done is to thrust more people 
into poverty.
    There are people, some with political visibility, who are 
raising questions about whether this globalization is really a 
good thing. They are raising questions about whether it is a 
good thing to have democracy and open markets. They are raising 
questions about whether or not they should even participate in 
the international system. I think that is a national security 
issue. And our Agency, as well as the Treasury Department and 
the international financial institutions, are in place to try 
to manage the international system and to try to maintain 
stability, because it protects us, it protects our economy, it 
protects our dollar, it protects our financial status in the 
world.
    I can't think of a worse time to cut the 150 Account by 
this extent. And I really believe that when people start to 
reflect on this, that there will be a change in attitude as 
time goes on.

                      DEVELOPMENT FUND FOR AFRICA

    Mr. Jackson. Thank you for your answer.
    Mr. Administrator, I am pleased to see your budget once 
again includes the Development Fund for Africa. As you know, 
Africa has incredible potential, yet it suffers from armed 
conflict and HIV and the AIDS epidemic. Can you tell me why DFA 
was not appropriated last year, and what specifically would a 
24 percent cut in your budget do to your programs in Africa?
    Mr. Atwood. This year's budget not only includes the 
Development Fund for Africa, Mr. Jackson, but it also includes 
the President's commitment, when he went to Africa, to raise 
the development funds for Africa to their historic highs. This 
budget request not only includes the 500 or so million dollars 
for the DFA, it includes the amount that would go from the 
Child Survival Fund to Africa, as well as additional resources 
in the Economic Support Fund account. So the overall amount is 
going to be somewhere in the $810 million range, which is the 
historic high for Africa.
    Of course, the President's commitment was only to request 
this of Congress. As the Chairman indicated, this Congress 
isn't obliged to honor that request, but we think it is 
extremely important not only to follow up on the President's 
budget, but on the recent African U.S. ministerial meeting that 
was held in Washington last week.
    There is tremendous opportunity here in Africa. These 
countries are not directly affected by the financial crisis, 
and their currencies and financial systems are intact. They 
need obviously to be reformed, many of them, but they are not 
able to sell commodities to the extent they were, so the 
projected growth rates of these societies is going down.
    When you consider the battle that they are in to protect 
their societies against AIDS, to protect their societies 
against all of the elements of poverty, they can't afford to 
see their growth rates go from 4 percent to 2 percent. I mean, 
that means a lot of people out of work. It means a lot of 
people who are going to need food, aid or whatever.
    So we consider this request to be extremely important and 
certainly is something that has been welcomed not only by 
Africans, but by people all over the world.

                              DEBT RELIEF

    Mr. Jackson. And some sub-Saharan African countries' export 
earning potential, as much as 20 percent of it is going to 
servicing foreign debt. Do you have an opinion about that, Mr. 
Administrator?
    Mr. Atwood. Yes. I think it is horrendous that that is the 
case. Many of these countries are paying less for education and 
health care, the kinds of things that develop human capacity, 
that will enable them to compete in the global economy. They 
are paying less for that than they are in servicing debt. The 
President, at the U.S.-African ministerial, put forth the most 
far-reaching proposal for debt reduction and debt relief that 
any leader has thus far put forward.
    Now the President is going to go to the G-7 meeting in 
Cologne in, I believe, May and attempt to convince his fellow 
leaders to follow his line on debt reduction and debt relief. 
We are tying that debt reduction proposal to economic reform. 
We do that not because we want to condition it and sort of keep 
a hammer over the head of governments in countries, but to 
continue to push those governments in the direction that they 
are already heading. Many of them are already undertaking 
reforms and seeing the benefits of making those reforms. So it 
is important to keep this in mind.
    As Secretary Rubin said when he testified, I believe before 
this committee, it doesn't do any good to relieve debt to some 
countries that are already viable economically, because it 
simply raises the question as whether or not their own credit 
rating in the world system should be reduced. If a country 
needs total debt relief, then a country is usually a basket 
case. And many of the countries that are indeed basket cases, 
the most needy do need total debt relief, but not countries 
that are beginning to make it. What they need is to be able to 
attract investment. And investors are not going to go into 
countries that need debt relief.
    So we need a program much like the one the President 
proposed, which is a combination of debt relief for the 
neediest countries; debt reduction for other countries; making 
people more eligible more quickly for the HIPC program, the 
Highly Indebted Poorest Countries program; relieving bilateral 
assistance up to 90 percent; encouraging other countries to 
provide assistance on a grant basis, not a loan basis.
    We provide our assistance on a grant basis. Japan, France 
and other countries provide much of their aid on the basis of a 
loan. That doesn't help these countries at all.
    So I think the President's program is a good one, and I 
hope it will receive support in the international community.
    Mr. Jackson. Let me once again thank you for your service.
    And, Mr. Chairman, let me thank you for your indulgence.
    Mr. Callahan. Thank you, Mr. Jackson. Let me follow up on 
some of your comments.

                              SOUTH AFRICA

    In 1994, when we entered into our agreement to provide 
assistance to South Africa, we, as I recall, were going to try 
to wean South Africa by the year 2005. Since that time, we have 
provided more than $700 million in assistance to South Africa, 
a country which has great wealth of its own.
    And as Mr. Jackson indicated, our allocations this year are 
going to be severely hampered. It is going to hamper our 
ability to provide more money. Assuming that we have the same 
amount of money that we had last year, shouldn't our emphasis 
be with that money that is going to be available for Africa as 
a continent? Shouldn't that money be concentrated in sub-
Saharan Africa instead of continuing the programs in South 
Africa, a country whose wealth now and whose progress has, I 
think, graduated them to independency?
    Mr. Atwood. Mr. Chairman, the wealth of South Africa is in 
the hands of about 20 percent of the people who live there. It 
is really two countries. It is an underdeveloped country in one 
sense and a highly developed country in another sense. We have 
asked, I believe, in this budget for slightly less for South 
Africa, because progress is being made under the Mandela 
government, but we believe that the apartheid experience has 
really left South Africa with problems that are very, very 
difficult to surmount.
    We are trying to help introduce more people into the 
private sector. We are trying to help that country and that 
government privatize its economy, train more people so that 
they can participate in the wealthier side of the equation in 
South Africa. We are trying to provide health care to people 
that have not received it under apartheid. We believe it is 
important to keep our hand in in South Africa.
    Mr. Callahan. Brian, we are not questioning whether or not 
apartheid was right or wrong. We all know it was wrong. That 
was not the question. The question is, you are going to have a 
limited amount of money for the continent of Africa. Sub-
Saharan Africa has tremendous needs, and yet you are announcing 
an extension of the program in South Africa.
    I am sure there are some people who are still suffering 
from segregation here in this country, but you have to someday 
get past that, and I think as far as this country is concerned, 
we have made our contributions. But for us to continue to spend 
money regardless that the great wealth of the United States is 
in the hand of 20 percent of the people in this country--that 
is not uncommon--the fact is sub-Sahara has a great need for 
the type of assistance your Agency provides.
    We are providing you resources, as you mentioned, 
especially in child survival, but still you are advancing a 
program in a section of the country that has graduated, and I 
think we ought to recognize there should be higher priorities 
in Africa, and that higher priorities should be sub-Saharan 
Africa, rather than South Africa, rather than to announce an 
extension of a program that has been successful.
    That is just a thought I had, because many Members of 
Congress are insisting. And we want to assist them, and we want 
to assist the people in sub-Saharan Africa, but if the 
administration is going to say they are not that important, we 
have got to protect them or affluent people of South Africa 
first, it is just not, in my opinion, the right direction.
    Mr. Atwood. I always respect your opinion, Mr. Chairman. 
And clearly decisions have to be made if we have to live with 
budget cuts. But all I can say is that we made the announcement 
about the extension of the program because it was the opinion 
of both the Government of South Africa and ours that the 
development goals that we set for ourselves would not be met in 
the time frame that was earlier established.
    Mr. Callahan. Not too many Members of Congress come to me 
and say, give more assistance to South Africa, but a great many 
Members of Congress say, give more assistance to sub-Saharan 
Africa. So I try to give you and the administration 
flexibility. I say, here is the money; you spend it, you 
prioritize it, and yet you force us into saying that you are 
going to spend a greater percentage of your money in sub-
Saharan Africa.
    We know that there is going to be a pot of money for the 
continent of Africa, period. So do you want us to tell you to 
stop these programs, or do you want to do it yourself? That is, 
I guess, the question.
    Mr. Atwood. Mr. Chairman, as has been true every year since 
I started in this job, we would like you to give us a blank 
check is my answer.
    Mr. Callahan. You are making it very difficult.
    Mr. Forbes.
    Mr. Forbes. Thank you, Mr. Chairman.
    Thank you, Mr. Atwood. And I would like to align myself 
with the comments of my colleagues who appreciate your 
leadership at the Agency and wish you well in all future 
endeavors.

             Nations Graduating from Development Assistance

    I would like to just follow up on the Chairman's question 
in perhaps a little bit of a different way. Mr. Atwood, do you 
foresee some of the nations who are now the beneficiaries of 
our generosity and development assistance, do you see some 
nations graduating from development assistance any time soon, 
and if you do, could you name those nations?
    Mr. Atwood. It is a good question, Mr. Forbes, and many 
countries have graduated and have actually become donor nations 
themselves. There are about a half dozen countries now that are 
becoming active donors and are applying for membership in the 
OECD and the like.
    In the first 2 years of my tenure at USAID, we reduced our 
program by 21 nations, and since then we have increased that to 
28 nations. About half of those are countries that have 
graduated, or we thought had graduated.
    We had set dates for some, like Indonesia, which was doing 
so extraordinarily well economically that we thought it could 
graduate, I think, by the year 2002. It has now obviously been 
thrust into crisis as part of the financial crisis, and we have 
to rethink that date, and we evaluate these issues all of time. 
But Korea and Thailand and Taiwan were all countries or 
entities, Taiwan not being a country by our standards, I guess, 
that have done extraordinarily well under the USAID programs 
and are now actually donor countries.
    So, yes, there is a change in the amount of wealth in the 
world measured in real dollars since 1940--right after the war. 
In 1945 it was about $4.4 trillion; it is now something like 
$47 trillion. That wealth is a result not just of development 
assistance: it is a result of the world's economy growing, and 
many countries have become donor counties. We were the only one 
offering development aid 50 years ago.

                         New Management System

    Mr. Forbes. I note in your statement that you talked about 
a delay in the new management system, the NMS being fully 
implemented, citing obviously limited resources in the Agency's 
ability to get that NMS up and running to full mode. I think 
you mentioned in your statement that you didn't envision that 
we would have that system in place abroad till at least fiscal 
year 2002.
    Mr. Atwood. Right.
    Mr. Forbes. Could you speak a little bit about the 
perennial concern, on the Hill about fiscal oversight at the 
Agency, and our hope that more and more of these actual dollars 
get into the hands of the recipients, and fewer of those 
dollars falling to third party or intermediaries in what I will 
say is a goodwill effort to try to make these programs work?
    Mr. Atwood. Right. I am glad you asked that question, 
because when people hear about or talk about problems that we 
have with our NMS system, they make the leap that we, 
therefore, can't track the money. The fact is we can track the 
money very, very precisely. There are systems, there are 
regulatory systems and manual systems in many cases, that help 
us prevent the kind of fraud that affected this Agency 20 years 
ago.
    We had major problems back then. We had a lot more money 
then as well, and there is less now to track. The problem we 
have today is that we have new government requirements that we 
need to be providing in an annual financial statement, and we 
need to have systems that will allow us on a timely basis to 
find out exactly how much money is in that pipeline for that 
particular program in that particular country. And we can get 
that information, but it takes us sometimes a couple of weeks. 
We should be making decisions a lot faster than that. That is 
what the new system is intended to do.
    We tried to create a system using existing contractors that 
were on board when we got there. They clearly in retrospect 
were not capable of creating the software systemto do what we 
wanted it to do, and we have a system now that operates with an error 
rate that is much too high. So we have to go back in and check 
everything that comes out of the system.
    It takes too much time, but we inherited back in 1993 a 
lot, 50 or so, different systems people using ``cuff notes'' 
and everything else. That was unacceptable as well, and the IG 
in those days used to say this Agency can't audit what it is 
doing. It can't produce an auditable account of what it is 
doing on the financial side. We can do that today, but we can't 
do it easily, and we are working toward the creation of a new 
system.
    The Computer Sciences Corporation is a prime contractor, 
one of the best in the country. And we are working with them on 
the basis of a very specific timetable. I meet every month with 
our people to look at this. And we have confidence now, because 
there are now commercially available products that weren't 
available 4 years ago when we started this NMS system, that we 
can get a system in place and then deploy it internationally by 
the year 2002.

                              child labor

    Mr. Forbes. One final question. The administration, of 
course, has talked about a globalwide campaign against abusive 
child labor, and you have requested new money, $10 million to 
implement, I guess, the first part of that campaign. Could you 
speak about what the Agency believes it will be doing with the 
$10 million if they are fortunate enough to get that for the 
program?
    Mr. Atwood. Right. For the most part, we want to use the 
$10 million to encourage children to go to school. There are 
many inhibitions against families sending kids to school in 
these very poor countries. Either they are working on the farm, 
or they are working in a factory and bringing money into the 
family. If we can provide such things as an incentive to go to 
school, if we can take care of the costs of, in some cases, 
buying a uniform or buying the books for the kid, or we can 
provide a meal when the child doesn't get a meal, a meal at the 
school, I mean, we can, I think, bring a lot of children that 
are now working that shouldn't be working into school.
    That I think is the role for USAID. There are others that 
have other roles. The ILO, the International Labor 
Organization, is involved in a major campaign to try to stop 
child labor. And there are other ways we can do this through 
rhetoric and sanctions and the like to stop products from 
coming into our country that are produced by child labor.
    Mr. Forbes. If I may, I really would like to understand 
this. So the Agency, if it were fortunate enough to get this 
money, would set up a program where you would actually buy 
children's uniforms, buy them books, buy them meals? I mean, 
does USAID really have the ability to really micromanage that 
effort in that way?
    Mr. Atwood. What we would do would be to analyze the 
problem in each country and figure out exactly what 
intervention would help us to cut down on the number of kids 
that are going into child labor and the number of kids that are 
going to school. We think we can make an impact--I will be 
happy to discuss this with you more privately and give you our 
strategy paper for the child's labor----
    Mr. Forbes. I would appreciate that. And I would just note 
that I think where we see a lot of this abusive child labor, 
certainly it exists in a lot of friendly nations as well as 
those that are best described as totalitarian, but how does the 
United States of America, presume to be able to get in to 
totalitarian regimes there and do something about abusive child 
labor? I think it is going to be a yeoman's task. And I would 
just suggest that $10 million wouldn't even open the door.
    Mr. Atwood. No.
    Mr. Forbes. But I would really like to hear more about it, 
because I do think it is a very big concern, and I am sure many 
Members of Congress share my concern for abusive child labor 
around the world. So thank you.
    Mr. Atwood. Like everything we do, the $10 million, I 
think, can become models for what other donors can also do. It 
is a way of our leading the rest of the donor community to try 
and address this problem.
    Mr. Forbes. Thank you.
    Mr. Callahan. Ms. Kilpatrick.
    Ms. Kilpatrick. Thank you, Mr. Chairman. And let me, too, 
Mr. Atwood, offer you my congratulations as you move to Brazil. 
As the Chairman said, we shall see you soon. And I look forward 
to that.
    Mr. Atwood. Thank you.

                               aid budget

    Ms. Kilpatrick. Of the $21 billion budget that is in 
international relations, your Agency receives about one-third 
of it. You mentioned in your testimony earlier that some years 
ago it was quite a bit more when it was mismanaged and so 
forth. How high did the USAID budget get?
    Mr. Atwood. In 1985, it was approximately 40 percent higher 
than it is today.
    Ms. Kilpatrick. Seven million or 14--10, 12 million?
    Mr. Atwood. Eleven billion at the time.
    Ms. Kilpatrick. Billion. And in your good management style, 
6 years later we see you at $7 billion, just as effective and 
doing more than what was done in those earlier years. Is that 
right?
    Mr. Atwood. I don't know about that. We can use moremoney, 
but I don't want to compare. What I think is really significant to say 
about that, though, is that we had Cold War considerations. I am not 
saying that this is bad. It was supported by a bipartisan group up here 
that we had to give money to certain countries, because they were on 
our side in the Cold War.
    Many of those countries were not good partners of the 
United States in terms of development. They were simply wasting 
money.
    Ms. Kilpatrick. Still today?
    Mr. Atwood. Pardon me?
    Ms. Kilpatrick. And still today?

                                 reform

    Mr. Atwood. There are still countries like that. We believe 
that that is the most significant change we made in the foreign 
aid program. We don't work with those countries any longer. We 
work with countries that are committed to reform, committed to 
democracy and allowing their people to participate in the 
development programs themselves.
    Ms. Kilpatrick. The bells are ringing, so I want to get 
through this. Thank you, sir, for that.
    You mentioned the proposed funding cut quite extensively, 
and we are very concerned about them. You have also gone over 
how the cut would devastate certain programs that you 
administer. I will be going overseas on Saturday. South Africa 
will be one of the countries I am visiting. I am very concerned 
about the Child Survival and Disease Program, particularly 
regarding those three countries that we talked about before the 
meeting. If you will provide me with that information, I 
certainly would appreciate it. It would be very helpful.
    Mr. Atwood. Absolutely.

                         new independent states

    Ms. Kilpatrick. I did notice, too, in the Independent 
States line item that they are receiving an increase as so many 
other programs are being decreased. Why is that?
    Mr. Atwood. Most of the money for the increase for the NIS 
goes into a program that is designed to reduce stockpiles of 
weapons of mass destruction and take nuclear scientists and 
retrain them and put them in some other more helpful line of 
work. Obviously, this continues to be a danger for our country. 
This is more of a national security issue than it is an USAID 
issue or a development issue.
    We are not going to be managing that program, so the 
increase that is reflected is mostly for that program. I 
believe it is about $184 million that the Administration 
requested for that important program.
    Ms. Kilpatrick. And more for security in that part of the 
world that we are strategically concerned with. We will see the 
increase not in the specific interest of development, but more 
in the interest of security. Is that what I heard?
    Mr. Atwood. That is, I think, both a development issue and 
a security issue. It is more of a security issue because of the 
nuclear aspects of it. And we, of course, realize that we have 
a very tense relationship today with Russia because of Serbia.
    Ms. Kilpatrick. Today, of course.
    Mr. Atwood. And at any given time that relationship can 
change, and, of course, they still have nuclear warheads and a 
capability to produce a lot of very dangerous weapons of mass 
destruction.
    Ms. Kilpatrick. I should be asking you about what we did on 
the floor yesterday, then, as it relates to plutonium and some 
of the other things that were discussed. Are you prepared to 
comment on that?
    Mr. Atwood. I am only peripherally aware of that, but I 
understand that you took some money out of that particular 
program for offset. I probably shouldn't try to get into those 
kinds of issues here. I think that there is enough of a debate 
that was probably a good one that was on the floor.
    Ms. Kilpatrick. It was a good debate.
    On the one hand you talk about maintaining security. I 
believe that we must. On the other hand, the politics many 
times get into some of our decisions. We must make sure the 
world is secure, and certainly America is really our first 
thought here.
    Mr. Atwood. That is right.
    Ms. Kilpatrick. Let me go on. Earlier you mentioned the 
administrative costs. As I looked at the briefing papers last 
night, I see that as everything is being cut, not including the 
Newly Independent States, your administrative costs are 
continuing to escalate. You did speak a little on that this 
morning.
    Mr. Atwood. Right.
    Ms. Kilpatrick. Tell me again why are they escalating as we 
cut the programming?

                          additional expenses

    Mr. Atwood. There is a combination of additional expenses 
and a reduction. Our operating expenses are mostly appropriated 
by you on an annual basis, but also they come out of trust 
funds that have been created from prior year counterpart funds 
that were created in countries.
    Those trust funds are going down, because our program has 
been going down so significantly in many of those countries. So 
that is on the down side of the ledger. The other side is the 
expense side. We have a 4.4 percent pay raise for Federal 
employees, which we are all happy about, but it still is an 
expense for the Agency. We have other expenses, including 
expenses relating to where we operate in foreign countries 
which are difficult. So the overall impact is that we have had 
to ask for an increase in order to basically maintain the 
status quo. Even with this increase, we will still have to 
reduce our staff some in Washington in order to maintain our 
overseas presence.
    Ms. Kilpatrick. Thank you, Mr. Chairman. In the interest of 
time, I would like to submit further questions in writing, if I 
might.
    Mr. Callahan. All Members shall be permitted to submit 
questions.
    Ms. Kilpatrick. Thank you, Mr. Chairman.
    Mr. Callahan. I guess, Brian, we better recess here and go 
vote. We have two votes. So we will be 15, 20 minutes getting 
back, at which time we will then recognize Chairman Porter. 
Though, John, if you get back before I do, I will just give you 
the authority to open the meeting. You are a cardinal in your 
own right, and you know how to run them. So we will just recess 
until either some of the Members get back or Mr. Porter gets 
back.
    [Recess.]
    Mr. Porter [presiding]. The subcommittee will come to 
order.
    I understand, Mr. Atwood, that this is your last appearance 
as USAID Director, that you are about to embark on a further 
career as Ambassador to Brazil; is that correct?
    Mr. Atwood. If the Senate approves, that is right, Mr. 
Porter.
    Mr. Porter. That shouldn't be any problem, I wouldn't 
think. Well, we think you have done a wonderful job, and we 
want to wish you well in that position.
    I want to ask, because I wasn't able to be here for the 
beginning of this hearing, I want to ask you a kind of a 
macroquestion before I ask some microquestions. With the end of 
the Cold War 10 years ago, there was great hope that the values 
that the United States holds most dear, democracy, human rights 
and free enterprise economics that provides an opportunity for 
a better life for everyone, would wash across the world, and 
obviously a lot of that has actually occurred, but a lot of it 
hasn't.
    Do you think the United States has provided the kind of 
leadership and outreach to the rest of the world that we should 
to make that happen, or have we really not done nearly enough 
to bring about true change across the globe? What is your 
assessment of what has happened since the end of the Cold War 
in our leadership?

                            market economies

    Mr. Atwood. Well, I think the United States is largely 
responsible for the increase in the number of democracies in 
market economies. We have promoted it actively both 
diplomatically and rhetorically and through our programs. I 
think one of the best ways perhaps that we were able to promote 
it was that we were seen as the winners of the Cold War. I 
mean, our systems did prevail over the Communist system.
    I think that we have not always put our money where our 
mouth was, and when we go out and really promote, encourage 
countries to abandon old authoritarian or totalitarian systems, 
tell them that they should become democracies and free markets, 
we haven't often followed up with the kind of assistance they 
need in order to do that.
    You can't just give them Adam Smith's book on free markets 
and give them the Federalist Papers on democracy. There are a 
lot of nuts and bolt involved. And I think that some of the 
problems that we are seeing now from the world's financial 
crisis are the result of not getting it right, of not having 
banking systems that are well managed, not having free-market 
systems, financial systems that are open and transparent and 
accountable, not having governmental systems that operate very 
efficiently, nor are they understanding the concepts of checks 
and balances and the like that we accept as part of our 
democracy.
    That is a lot of hard work, and we, it seems to me, should 
be doing more to enhance their capacity to move in the 
direction that they now want to move in. And I think a lot of 
countries are disappointed that we haven't come forward a 
little more effectively on the aid side of that equation. But 
having said that, I don't think there is any country that is 
more responsible for the change in the world than we are right 
now. We have got this real questioning going on about 
globalization because people are suffering, and they are 
saying, you know, you wrote the rules, you are doing well, you 
in the United States, you are doing well in Europe, you are 
doing well in Japan, but we are still struggling. We are still 
operating under your rules, and we are suffering; are you going 
to help us so that we can meet the standards that will allow us 
to join the World Trade Organization and the like?
    All of those things, I think, are major factors in people's 
attitude, and what I fear is that if we, for example, cut this 
budget even more and don't help encourage the other donors to 
help, you are going to see people moving in the other 
direction. And I think that is wrong for their own interests. 
They shouldn't do it, but they will be more susceptible to 
demagogues and people who have extreme philosophies. That may 
be particularly the case in Russia, where it seems to me that 
the story of what is happening in Russia is not really well 
known by the American people at all, or what isn't happening, 
and the dangers of not so much a move away from democracy per 
se, but a desperation borne of a society that simply isn't 
working for its people, and that, I think, is a great worry for 
all of us.

                                outreach

    Mr. Porter. Would a lot more money do this? In other words, 
we are in a period of huge economic expansion, coming to grips 
with our own deficits and bringing them under control, and yet 
we are spending less and less on outreach to people we want to 
bring to our values and make allies, and trying to do it on 
less and less money; are we not?
    Mr. Atwood. We are, and I think at great cost over the long 
run. We are facing the kinds of problems that could really give 
people in future generations in our own country a major 
challenge, and they will look back on this era and say have we 
invested in the right way to protect their interests. We are 
now, for example, questioning the issue of universality.
    What that means in terms of our presence overseas is should 
we have an embassy in every country around the world. Obviously 
this security threat bears on that issue greatly. But if we are 
not present, and, you know, I am hopefully going to a country 
which is a very large country, Brazil, we now have three 
consulates in Brazil, we used to have five, we used to have 
representation up north and in Fortaleza as well. If you are 
not there, you don't know what you are missing. If you are not 
there, you don't know what Americans you can't help or what 
information you are not receiving about a very large country 
that is as large as the continental United States.
    That is true generally all over the world. If we have to 
cut back our diplomatic missions, then we just don't know what 
we are missing. And all of a sudden our leaders are going to be 
confronted with major surprises in the future, and we will be 
relegated to using the last resort, which is our military, 
which is well financed, and should continue to be well 
financed, and I don't think that is what the American people 
want.
    Mr. Porter. Well, it is not the jurisdiction of the 
subcommittee, but I think you are exactly right that we need to 
make our presence overseas much greater rather, not much less. 
We need to build the kind of diplomatic missions that reflect 
our country and its beliefs and do more outreach. And it seems 
to me, we are underfunding all of that.

                       family planning in turkey

    Let me ask you about family planning in Turkey. You are 
cutting in half family planning assistance to Turkey for this 
fiscal year and apparently zeroing it out for the following 
fiscal year. Why is that? Why are you doing that? Isn't this a 
place where money would be well spent?
    Mr. Atwood. Mr. Porter, it is the result of a success of 
the program. This is not as poor a country as many programs and 
many countries in which we work. This program has been in place 
since, I believe, 1977. The program has worked extraordinarily 
well. The coverage is extensive within Turkey. The economy of 
Turkey is not weak.
    You recall a few years ago when we tried to convert the 
Turkish cash grant program into a project-oriented program, and 
the Turkish Government said, we don't need that kind of help. I 
understand their reaction was as much political as it was based 
on a real assessment of need, but the fact is that we believe 
we can now successfully phase out this program and not have the 
negative impact on family planning programs, because it will be 
carried on, it is a sustainable program.

                           victims of torture

    Mr. Porter. The Congress and the President passed and 
signed into law the Torture Victims Relief Act, which called 
for an authorized level of $7.5 million for USAID to support 
the centers for treatment of victims of torture. What funding 
level will USAID propose for this purpose for the next year, 
and what plans does USAID have to implement the act? Will it be 
incorporated into the program of the Center for Democracy in 
Governance?
    Mr. Atwood. Mr. Porter, we have sent a report to the 
subcommittee earlier this week which indicates that our 
treatment and prevention programs and related activities are 
estimated in fiscal 1999 to be in the $5 million range. In 
fiscal 2000, we will continue to do more, the same types of 
activities dealing with victims of war and human rights abuses.
    In addition, the administration has requested a million 
dollars, which will be specifically targeted at victims of 
torture, and we are currently considering the most cost-
effective and efficient way of programming those funds.
    Mr. Callahan [presiding]. We need to recognize Mr. Sabo, 
and we will certainly come back to you.
    Mr. Porter. Thank you, Mr. Chairman.
    Thank you, Mr. Atwood.
    Mr. Callahan. Mr. Sabo.
    Mr. Sabo. Thank you, Mr. Chairman.
    Mr. Atwood, welcome. I am new to this committee, and so it 
is good to hear from you, and you made a most impressive 
presentation to us this morning. I am sorry you are leaving. I 
wish you well.
    Mr. Atwood. Mr. Sabo, I welcome you to the committee. I 
sometimes wish that you were chairing the Budget Committee, but 
thank you.
    Mr. Sabo. I am not sure I would in the current 
circumstance. But let me say, Mr. Atwood, let me share my 
concern over the victims of torture funding that Mr. Porter 
raised. And we appreciate the help your agency has provided, 
and I look forward to working with you. But let me just say in 
terms of where we are at, we are voting on a series of budget 
resolutions today. And I call it sort of a make-believe day. We 
are so totally removed from reality in what we are talking 
about in terms of what we are going to do with funding and 
discretionary programs, not only yours, but a whole series of 
others that impact day-to-day lives in this country.
    I think you are right. I think the recommendations for your 
function represent a totally distorted view of the future for 
this country and for the future of national security of this 
country. We are going to have significant increases in defense 
at the same time we are cutting your budget and everything else 
that relates to international relations. And clearly both in 
the short term and long term, it just simply doesn't make 
sense.
    So keep making the case, and maybe before this year is 
over, in some form, we will deal with reality. But we are 
acting like we are practically a developing country rather than 
a country in the midst of probably the greatest prosperity it 
has ever had, and somehow we have a view of ourselves as being 
poor, when, in fact, we are the richest country in the world. 
And I am not sure how we change that sensibility of how we deal 
with programs. There are always going to be tough choices to be 
made, but we aren't beginning to deal with real ones in the 
resolutions we are considering.

                        computer system problems

    Let me ask one other question that relates to your day-to-
day operations. I listened. I don't know what your 
administrative size is particularly, but you are having trouble 
dealing with computer systems, and for the life of me I don't 
understand what is going on with these systems. Every agency I 
deal with is having computer system problems. You know, I am on 
the Appropriations Transportation Subcommittee, and day in and 
day out we are having computer program problems at the FAA.
    But every agency of the Federal Government has this common 
problem. We can't figure out how to develop a computer system, 
large or simple. One understands the problem, you know, when it 
is large, it is new software, new things, why it should be 
complicated, but it is just systemic to our whole system, and 
my observation is I am not sure how we should handle it, but we 
expect operational agencies to handle major procurement, and it 
seems no agency can figure out how to do it.
    I keep wondering if the Office of Management and Budget 
should provide greater assistance. Most tell me from the 
experience they have of dealing with budgets with OMB, that we 
would be in big trouble if you get them involved in trying to 
figure out how to buy something. I am not sure whether it 
should be the General Service Administration. Boy, I think 
every administrator, should write someone, I don't know who, in 
the President's office. You just focus on this problem of how 
we handle procurement in the planning process for buying 
computer systems, because from large agencies to small ones, 
from complicated to uncomplicated, every agency has a problem 
doing it and having it come out right.
    Mr. Atwood. Should I comment?
    Mr. Sabo. Yes.
    Mr. Atwood. Obviously it has been the bane of my existence. 
We haven't enjoyed the problems we faced, but we have different 
requirements than private corporations. Private corporations 
seem to be able to buy packaged, commercial off-the-shelf 
products. There have now become some available for government, 
but when we purchase one, which we will by the end of this 
fiscal year, we may have to modify it because of all the needs 
we have here.
    I mean, we were just talking to the staff here earlier 
about all their needs for information about how we are spending 
the money. Those sort of bottom-line needs are not necessarily 
the same needs that a stockholder in a company would want, but 
it is complicated to accomplish. We compound the problem with 
this year's Y2K issue. We have five critical systems we are 
modifying Y2K. We went through and modified four of the systems 
and put them into testing.
    And there are interfaces between one system and another 
that we thought were passive interfaces. In fact, when the 
testing took place, we realized that there was computer 
processing going on and that there were dates in those 
interfaces, so we had to go all the way back and fix those. And 
we fixed them, and now we are testing those and we will have 
them done by May.
    But, you know, I was beating myself up a bit, being 
defensive about this on the Senate side last year. And Senator 
Bennett, who knows something about this stuff and is the author 
of the Y2K report on the Senate side, said, Mr. Atwood, stop 
beating yourself up; everyone is going through the same 
problems. I believe that one of the problems of government is 
that we can't compete with private industry and with what we 
can pay for experts in this area; we have a very thin staff.
    We have got really good people at USAID working on this, 
but if one of them is sick one day, we are going to be set back 
perhaps for 30 days in getting this work done. So it really is 
a problem. We have to go out and contract for it, but we can't 
pay top dollar, the way private sector companies can, and so as 
was the case in the early days, we had contractors that weren't 
up to the job.
    We think we have a contractor that is up to the job now, 
but I think those kinds of issues are important to acknowledge. 
Government is different, and we need perhaps the kind of 
support you are suggesting that we should get. I must say one 
thing for OMB, they have been very helpful to us on this. John 
Koskinen, who used to be with OMB and is now the Y2K czar, 
comes to our office every month for a meeting to get updated on 
the Y2K issue. He has been very helpful.
    So it is a struggle, but I think we need to realize that 
government is different from the private sector in trying to 
handle these issues.
    Mr. Sabo. I am just curious. You started the whole 
development process. Was there any centralized place you could 
go to say, How do we draft proposals? I know how to turn on the 
computer and that is about it.
    Mr. Atwood. The GSA has a facility they created for 
providing tests in the early days. We did not believe that even 
their testing facility could test an integrated system such as 
the type that we had. I think in retrospect we should have 
forced them to come up with a testing platform that would have 
worked with our system. We should have tested our system better 
before we actually deployed it.
    But we felt and made a judgment, and I think it was a 
correct one at the time, that the only way to work the bugs out 
was to deploy it. That, of course, raised the profile of what 
we were doing to such an extent that we had a hard time, 
frankly, coming up here every year and justifying getting more 
money for it. So you kind of work yourself into dynamics in 
this business.
    Mr. Sabo. Thank you.
    Mr. Callahan. Mr. Sabo, I agree with you. I am computer 
illiterate myself, and this might be some type of conspiracy 
that the computer industry has plagued us with. This problem 
might be solved for $10 instead of the trillion dollars that it 
is going to cost us. But on the other hand, with respect to our 
jurisdiction, the world is not going to come apart if the 
computer system of USAID doesn't work.
    There is going to be some discomfort. The world very likely 
could come apart, on the other hand, with the FAA if airplanes 
start falling out of the sky.
    Mr. Sabo. Mr. Chairman, what strikes me is that every 
agency I hear has just the same type of problem.
    Mr. Callahan. I know that.
    Mr. Sabo. And I gather it is not simply for dealing with 
the Y2K problem, it is for developing a system that can handle 
the day-to-day operations; and sometimes they are complicated 
and sometimes they aren't. You know, IRS, and just name it, 
every agency is going to have the same type of problem, and it 
just seems that it is governmentwide.
    Mr. Callahan. My wife has a company in Alabama and, you 
know, the computer experts and her employees are coming in and 
telling her, unless she spends a lot, thousands of dollars, the 
company will go to pot. And I am saying to my wife, Before 
computers, we did it by hand. All I need is the last month's 
statement and I can correct all of our problems by hand.
    And yet they are going to have to spend maybe in our case 
$100,000 to develop some kind of a system that will get our 
invoices out on time. So I am telling my wife, if worse comes 
to worst, we will go back to hand. All you need is the last 
year-end, monthly statement and the archives that are available 
and you can go in and correct it by hand.
    But all of these billions of dollars that are being spent 
and all of these indications of doomsday, the power is going to 
be off, and there is not going to be any Social Security checks 
or USAID can't operate. FAA, as computerized as they are, that 
is a serious problem. And our problem is serious, but hopefully 
the professionals will probably wake up in the year 2005, and 
we will find out all of this was a hoax that has been played 
upon us by the computer industry; that there was a simple chip 
that you could have inserted that would have eliminated all of 
this problem. I hope I am right.
    Ms. Pelosi. Mr. Chairman, if I may on that subject, as a 
person whose area is rich in intellectual resources in this 
regard, I must say that hopefully technology and the increases 
in literacy among even our children will supply us with enough 
people who are capable of doing this, so we will have many more 
talented people to choose from and not have to compete with 
them in the private sector. But with the advances of technology 
and the spread of literacy in it, I think that we should be 
hopeful about it.
    Mr. Callahan. I don't know if any of our customers would 
really complain if our invoices said 1901 instead of 2001. I am 
going to get my----
    Ms. Pelosi. We don't want to live this century over again, 
this is the worst.
    Mr. Callahan. I guarantee you my wife is going to get her 
invoices out. And they are going to be out in a timely fashion 
on the 1st of the month as they always have been, regardless of 
whether we spend the thousands of dollars they are talking 
about or not.
    Did Mr. Kingston leave? Mr. Knollenberg, do you have a 
second round of questions?

                            budget concerns

    Mr. Knollenberg. Mr. Chairman, thank you. I heard several 
members comment and obviously, Mr. Atwood, you have, too, about 
the budget, about the 150 account, and I share your concern 
about that. And I am going to work along with this committee 
and the Chairman to see that there is something righted about 
that. I want to talk at the same time, even though it lowers 
our budget, it doesn't mean that we don't have to spend all of 
our dollars efficiently. And I am sure you recognize this, too.

                           energy efficiency

    I wanted to just talk a little bit about climate change and 
energy efficiency. USAID has long been active in promoting 
cleaner and more efficient energy generation in the developing 
countries. These programs recognize that increased power 
generation is needed for economic growth. They have helped 
American producers of power generation equipment and have 
substantially reduced air pollution and promoted better health.
    Now, USAID's congressional presentation makes global 
climate change the focus of USAID's energy program. It almost 
ignores USAID's traditional strength in clean and efficient 
energy. I would like for you, if you could, to tell me how 
USAID's relatively small amount of money will materially affect 
global climate change and the amount of greenhouse gases, 
particularly, when you look at places where USAID has few or no 
programs, such as China and India?
    Mr. Atwood. No, we don't have any programs in China. And, 
obviously, China is a country that is the source of a lot of 
the problems in terms of greenhouse gas. And they are growing. 
We do have a program in India, and it is the same traditional 
program you are referring to. It is an energy efficiency 
program that is helping them save millions of dollars by 
introducing technology that we use here in the United States.
    In fact, we have the Utilities Partnership Program, which 
we are employing all over the world. American utilities partner 
with a power plant or a utility in places like India, but other 
places around the world as well. All we pay for, really, is the 
initial travel expenses and get this thing started. They have 
their own interest in having these kinds of relationships, and 
they share a lot of really good information.
    So I think that what we are talking about here is 
introducing energy efficiency techniques. We are talking about 
win-win propositions where you are basically lowering pollution 
rates in urban areas. In Cairo, for example, we have helped 
introduce compressed natural gas engines. It doesn't take a lot 
to convert a regular engine and we have really reduced the 
pollution in the city of Cairo significantly since that has 
happened.
    And they have a lot of access to natural gas. Now, there 
are a whole lot of reasons for doing this that don't really 
relate to climate change; but, on the other hand, they all 
potentially relate to climate change.
    Mr. Knollenberg. Let me kind of zero in on something that 
took place in the last week or so. A witness at our Treasury 
hearing responded to a question about the World Bank and the 
greenhouse gases, that successful energy policy doesn't reduce 
the amount of greenhouse gases below current levels; rather, a 
successful policy helps to ensure that needed increases of 
power generation produce the minimal amount of pollution in 
greenhouse gases.
    And the question, Mr. Atwood, is, do you agree that 
continued emphasis on clean and efficient energy is a top USAID 
priority and is one that holds down the increase in greenhouse 
gases but cannot reduce the overall level? There are two parts 
there.
    Mr. Atwood. The assumption on the latter part of what you 
said is that the economies of these countries are going to 
continue to grow and they are going to have even more need for 
energy. And so if you can introduce the technology that will 
keep the energy clean, it is going to keep the levels at where 
they are. I think it is even possible if you had sufficient 
assistance and the technology were transferred in a sufficient 
way, to actually lower greenhouse gas emissions while 
experiencing these same levels of economic growth. But that 
would require the use of a lot of renewable energy technology 
that is frankly at this stage just being developed. But it is 
available and we believe we can make a contribution.
    Mr. Knollenberg. I mean, the country that obviously you 
hope you will become the ambassador to, is a country that I was 
just reading goes through some difficulties in this arena. 
Brazil is an essential global climate change country. It says 
here that it produces--I really didn't know this, maybe you can 
describe it as it should be if it isn't right--it produces 
approximately 10 percent of the world's carbon dioxide, 10 
percent; is that right?
    And that is year in and year out, because--I know Brazil is 
a contributor in a great way to the carbon dioxide, but then 
you have other countries and the programs that you are focusing 
on here. It just seems to me--I know it is not a lot of money, 
but it seems the greater focus is on that issue of controlling 
the amount of greenhouse gases, and it would seem to me that 
that focus, whether it is done by USAID or whomever, ought to 
be utilizing those energy-producing sources that don't pollute, 
that don't cause carbon dioxide. I just wonder, this question 
which says, Don't you agree that the emphasis should be on 
efficient energy that is clean?
    Mr. Atwood. Absolutely. And I think that is what our 
emphasis is on. A country like Brazil has a lot of 
hydroelectric power. And so the figure that you use may be 
correct, I am not sure. But, obviously, what they do contribute 
comes from automobile exhausts more than anything else. But the 
challenge in a place like Brazil is also trying to help them 
maintain the forest cover that they have, the Amazon, which 
absorbs a lot of CO2 back into the----
    Mr. Knollenberg. It does say here it is 10 percent, but 
that primarily it comes from deforestation, habitat conversion 
and burning. Burning is the guide that gets----
    Mr. Atwood. There are some serious problems with that in 
Brazil.
    Mr. Knollenberg. Is 10 percent an accurate figure, though? 
You are going to determine that, or can you do that for the 
record?
    Mr. Atwood. I would do that for the record.
    [The information follows:]

    We are not able to identify an exact figure for Brazil's 
contribution to global carbon dioxide emissions. According to 
the Energy Information Administration, energy-related emissions 
in Brazil in 1996 were 71.2 million metric tons, which is 1.18 
percent of the world's carbon emissions. This does not include 
carbon emissions caused by clearing of forests for non-energy 
uses, which is the largest source of carbon emissions in 
Brazil. In order to answer your question, Brazil needs to 
document, sector by sector, greenhouse gas emissions, as called 
for under the United Nations Framework Convention on Climate 
Change (FCCC).
    To comply with the FCCC requirement, Brazil is expected to 
complete its national greenhouse gas emissions inventory that 
will report on its levels in late 1999. The study, supported 
with funding from the U.S. Country Studies Program, will report 
on emissions levels in the agriculture, forest, energy, and 
urban sanitation sectors. I hope we will be able to answer your 
question by this time next year.

    Mr. Knollenberg. It just seems to me that it is very high. 
If that is the case, my God, China, India, have got to be in 
there somewhere. There are a few more countries. First of all, 
I question the accuracy of that statement. If you can verify 
that.
    Mr. Atwood. I don't know if that is right, Mr. Knollenberg.
    Mr. Knollenberg. Thank you.

                         child survival account

    Mr. Callahan. Brian, the separate use of the Child Survival 
Account, we have been trying to find out exactly how the money 
is being spent. This account has universal support. Your 
mother, for example, likes this program. But if I were to run 
into your mother and tell her we are not really sure if it is 
being spent that way or not, we have been asking your son's 
agency to give us an explanation of these changes, and 
yesterday they finally came up with an explanation of them, 
which would appear like a bunch of gobbledegook, we couldn't 
tell anything from that report.
    Why is it so difficult for you all to account for this 
program? We want the money spent on child survival. We know 
what child survival is, and we don't want to spell it out. Why 
can't you give us an accurate description of the monies that 
have been spent?
    Mr. Atwood. Mr. Chairman, we can and we will. It is just a 
question of taking the time to put this together. But I mean 
just in asking the question, it is so obvious that we should 
have--our records should have been structured in a way to 
produce this kind of thing for you. Part of it is the NMS 
system not functioning properly and having to check everything, 
and part of it is having to go all the way down to the country 
level to find out the accurate information.
    Charlie was showing me some of the charts that we sent you 
over yesterday, and I couldn't interpret them. I think we need, 
obviously, people down here to work with you to interpret them. 
We have the information, it is just a question of getting it 
into a way that my mother would understand.
    Mr. Callahan. And me too, Brian. We need to justify it. I 
keep increasing this account every year. We keep getting awards 
from organizations and nice letters from people all over the 
world telling us what a wonderful program it is. Now the 
President of the United States and First Lady talk about the 
Child Survival Account. You put it in your budget.
    And, yet, from a fiscal responsibility point of view, here 
I am saying, What happened to the $600 million, and there is no 
real justification. We are not looking for how much of it was 
spent on planning, we are saying how was the money spent and in 
what areas, and was this money spent in family planning or how 
was the money spent? That is not a very difficult request. And 
yet we still have much difficulty in getting it.

                          tuberculosis program

    Last year, you and I talked about the tuberculosis problem 
in Mexico. I think we were of the impression that you were 
impressed with the Texas program and then we finally get 
notification from you all that you are going to spend a million 
dollars, but there is no mention of that Texas program. Is that 
million dollars to be spent on the Texas TB program or what?
    Mr. Atwood. It is going to be. That is right, that is 
right. It will be spent in the border area, and we have----
    Mr. Callahan. I know that. But is that cooperating--Texas 
already had a program.
    Mr. Atwood. Right.
    Mr. Callahan. And they were looking for assistance. Is that 
going to be----
    Mr. Atwood. Well, we obviously can use our foreign aid 
funds to work on the Mexico side of the border. HHS can work 
with Texas on the Texas side of the border. What we want to do 
is make sure that this program works to benefit the United 
States----
    Mr. Callahan. I mean Texas----
    Mr. Atwood [continuing]. As well as Mexico.
    Mr. Callahan [continuing]. Texas put their money up for the 
Texas side.
    Mr. Atwood. Right.
    Mr. Callahan. They need a million dollars for the Mexican 
side. That is what it is all about.
    Mr. Atwood. We met with U.S. State health officials, Texas 
health officials, and Mexico State and Federal health 
officials, and NGOs that are active on this TB issue, and 
believe that we have a good program. A team of internationally 
recognized experts went down there to develop the program over 
a multiyear period for tuberculosis control, and the team 
includes representatives of not only USAID, but the Centers for 
Disease Control and the Gorgas Memorial Institute.
    And they are working indeed in collaboration with the 
Government of Mexico's Health Secretariat and with the Texas 
officials as well. I would be happy to give you more 
information.
    Mr. Callahan. They are cooperating with the Texas officials 
with respect to the implementation of the program that they 
essentially had developed and they feel will work.
    Mr. Atwood. That is right.

                      development fund for africa

    Mr. Callahan. The Development Fund for Africa. Now, I have 
not been one to earmark monies, and you know my philosophy on 
that. And we have done everything, yet you are coming up and 
proposing this year that we earmark a Development Fund for 
Africa. Why would you want new earmarks? If we give you 
discretion, you can do it. And if you do want it earmarked for 
Africa--you know my feelings about Central and South America--
why wouldn't you have a similar program for something in this 
hemisphere?
    Mr. Atwood. Well, Mr. Chairman, the Development Fund for 
Africa was originally a congressional initiative, and it 
continues to be on the books in terms of the authorization side 
of this. So it is obviously that we want to focus on Africa, 
given the President's trip to Africa and given the importance 
that we continue to believe Africa has in terms of development. 
I think the reason is as much, frankly, political as anything. 
It sends a message to Africa that we are focusing on their 
interests, it sends a message to people who care deeply about 
Africa here, the same reason that you want to focus attention 
on the people who care about children.
    Mr. Callahan. I understand that. But we earmark for that a 
children's account, but we don't tell you to spend it on 
Africa. You do spend most of it in Africa, and I don't object 
to that, I don't really care. But I don't know why--I have been 
fighting to unearmark. I am not doing this for my benefit, I am 
doing it for the benefit of the administration. And then the 
administration comes back and tells me they want earmarking. 
You have got to make your mind up. Do you want flexibility or 
not?
    You just can't pick and choose. Now if you didn't request 
the earmark, and I give you flexibility, you can do it anyway. 
And I realize the political aspect of it, but this is a 
political body, too, and I am a politician. And I am real 
concerned about that.
    Mr. Atwood. Mr. Chairman, all I can say is that in any 
given year when I have to defend the President's budget, I am 
totally consistent in defending that budget each year.
    Mr. Callahan. I think that answers it. I think I know what 
you mean.
    Mr. Atwood. That is why you shouldn't stay in a job like 
this too long.
    Mr. Callahan. We run into the same problem with the Coast 
Guard and with the Navy and everyone else who comes up here and 
quietly comes behind the doors and tells us what they want to 
do. And then, being good soldiers, they stand up and tell us 
just the opposite. So I appreciate your position. But once 
again we believe, or I believe, that we ought to give the 
administration as much flexibility as we possibly can to make 
these vital decisions that are necessary for our contribution 
to the elimination of suffering worldwide.
    I don't think we ought to come up and be telling the 
administration where they are going to spend this, then. Ithink 
you are too professional to have this type of oversight coming from the 
Congress. But maybe I am wrong and maybe I will revisit that theory.
    Mr. Atwood. I hope you won't, Mr. Chairman.
    Mr. Callahan. Ms. Pelosi.
    Ms. Pelosi. Thank you very much, Mr. Chairman, I have a few 
questions, but first I wanted to say again how impressive the 
administrator's opening statement was, to use your expression 
from yesterday, with his eloquent and humorous presentation and 
explaining it to his mother. This is no reflection on anyone's 
mother; you were bringing the hay down to where the goats can 
get it. That was your expression on the floor yesterday. For 
the benefit of those who were not there, that is the Chairman's 
introduction to putting it into terms that normal people can 
understand .
    Mr. Atwood. My mother might take offense to that.
    Ms. Pelosi. Fair enough. I think in Alabama that is a 
compliment, but I am not absolutely sure. In any event, I 
didn't dare follow your good humor and the Chairman's, as 
always, humorous response, because you are in another league in 
the humor department. And I didn't say what I wanted to say at 
the time, because we were all in good spirits. But today is my 
mother's birthday, unfortunately I don't have her. So in that 
case, I am jealous of both of you. Usually it is just 
admiration that I have for you. Now, I have envy as well; you 
are so lucky.
    Mr. Atwell. That is right.

                                 brazil

    Ms. Pelosi. Our colleagues have talked about Brazil and the 
environment. And I had a question about Brazil maintaining 
spending from its own budget for environmental mitigation, 
given the financial crisis there. You can probably give this 
for the record, since you were going to get some other 
information for the record about Brazil; unless you want to 
make some observations about the challenge you face when you go 
there as to what the U.S. can do to help with the environmental 
mitigation program for Brazil.
    Mr. Atwood. It is a serious issue and a problem, and I 
think I probably shouldn't make statements about Brazil until 
my confirmation hearing.
    Ms. Pelosi. I don't have much time.
    Mr. Atwood. We would be happy as an agency to give you 
information.
    [The information follows:]

    The Government of Brazil (GOB) must make tough choices as 
it attempts to undertake budgetary belt tightening. 
Nonetheless, the Minister of Environment recently stated to 
USAID that GOB counterpart funding for the large international 
environmental program (PPG-7) will be available. USAID's 
commitment to the PPG-7 program (approximately $2.0 million 
annually) as well as its bilateral environmental activities in 
Brazil, supports implementation of environmental programs, 
largely through U.S. and local NGOs, thereby reducing the 
direct effects of possible fluctuations in GOB funding to this 
sector. Also, through USAID encouragement, the Minister of 
Environment will be recommending to the Minister of Finance 
that the GOB request debt relief from the U.S. Treasury under 
the FY 1999 Tropical Forest Conservation Act (TFCA). This will 
facilitate the achievement of the common objectives of 
decreasing deforestation and reducing green house gas emissions 
while generating local currency for the GOB's commitments to 
environmental actions.

                                hiv/aids

    Ms. Pelosi. I just wanted you to know it is an interest 
here. I wanted to talk a little bit about HIV/AIDS. You had 
talked about the President bringing the concerns of Africa and 
debt relief, et cetera, to the G-7 in Cologne. I hope as you 
consider the economic situation of Africa, especially Africa 
south of the Sahara, that you talk about the AIDS issue. 
Hopefully we can get the AIDS issue on the G-7 agenda in a very 
central way; because it does have a giant impact, not only from 
a humanitarian standpoint, but also on the economies of these 
developing countries as they are faced with this increased 
spread of the virus.
    Last year the number of HIV/AIDS cases around the world 
increased over 15 percent. With all that we know about 
prevention and the devastation of AIDS, it still increased by 
15 percent. The administration's fiscal year 2000 $127 million 
request for addressing the awareness represents less than a 2 
percent increase from last year's level. I was disappointed 
that it did not include a continuation of the $10 million 
included in the emergency supplemental to address children and 
HIV/AIDS. I recognize that was an emergency, but I know that 
you participated with great pride with the President and the 
Secretary of State in making that announcement. But now it is 
not here.
    Given the devastating impact of AIDS on the economies of 
Africa, isn't it possible for the administration to propose to 
do more?
    Mr. Atwood. Well, we are proposing to do more. The request 
is 2 million more than the request we made last year 
recognizing, of course, that there was a supplemental that gave 
us additional resources which we were very pleased about. But 
we do more than any other nation in the world, and I believe 
that the leverage we have as a result not only of the 
resources, but of the expertise, really is helping us try to 
get a handle on this.
    I wanted to mention that I was talking to Ms. Kilpatrick 
earlier. She is going to Africa.
    Ms. Pelosi. So is Carolyn. They are going Saturday.
    Mr. Atwood. Carolyn is as well, with Sandy Thurman the 
coordinator for AIDS programs out of the White House. I think 
that is very important. It has been only recently, for example, 
in South Africa that the government has really taken this issue 
on. A lot of governments prefer to keep their head in the sand 
on this kind of issue, but it is a major, major problem in that 
part of Africa.
    Ms. Pelosi. I have asked you in the past, as I have asked 
at Labor-HHS, Mr. Porter's subcommittee, when the CDC and the 
NIH come there, that I hope we will have as much collaboration 
as possible between our domestic agencies and USAID, because 
our interests intersect. I think it is obvious for humanitarian 
reasons, but the argument can be made strictly on self-interest 
reasons as well, especially for infectious diseases. By that, I 
am not just talking about AIDS, but the issue that the Chairman 
brought up of tuberculosis. It is in our self-interest to help 
stop the spread of TB before it crosses our borders any 
further.
    The Chairman has admonished that our hearing is about to 
end, so I will submit what other questions I have that have not 
been addressed for the record. I still think that we are 
thinking too incrementally about the infectious diseases.
    Ms. Pelosi. One question I will leave with, I want you to 
discuss, is, last time you spoke of USAID's inability to accept 
vaccine donations from the U.S. private sector for developing 
countries because of the need for strong health infrastructure 
in those countries. And I will submit a question to that 
effect. But I think we have got to stop thinking so 
incrementally about it and think in a greater way about the 
challenge that is there, and the tremendous resources that we 
do have from a standpoint of research, prevention, care, et 
cetera, in our country, but we have got to reach beyond our 
borders earlier and to intervene in all of those areas.
    I think that is why it would be appropriate to be a major 
topic of discussion. Again, I want to thank you for your 
leadership, for your service. And I wish you well. And I hope 
whatever it is that you are hoping for happens soon.
    Mr. Atwood. Thank you very, very much.
    Mr. Callahan. And I, too, want to thank you. I was 
especially impressed that Nancy mentioned on the floor 
yesterday, in explaining callable capital to the Congress, I 
referred to George Wallace. When he was Governor he used to 
say, We need to bring the hay down where the goats can get to 
it. What he meant by that was that he tried to explain the 
complicated or issue of the time in a manner that the people 
could understand.
    Your statement this morning was something that this 
Congress needs more of, a down-to-earth explanation of the 
needs and direction of your agency, in a statement without 
acronyms and a statement without all of the various things that 
we take so for granted on Capitol Hill here. You mentioned and 
I mentioned, too, the differences between my mom and your mom. 
And I got to thinking that your mom's view on family planning 
and mine might be different. But on the other hand, I may have 
told you this earlier, my mother tried to abort me; the 
difference is I was 14 at the time when she thought that might 
be a good idea.
    But I thank you, Brian, and any way we can be of any help 
to you in your new endeavor, we want to do that. But in the 
interim you still have a huge responsibility of the 
transferring of this gavel to someone else. So the best of 
everything to you, and thank you for your testimony.
    Mr. Atwood. Thank you very, very much, Mr. Chairman, and 
Ms. Pelosi.
    [Questions and answers for the record follow:]

        Questions for the Record Submitted by Chairman Callahan

                    evaluation of democracy programs
    Question. For 2000, the USAID budget calls for $150 million for 
Democracy and Governance programs worldwide. This is basically the same 
amount as USAID spent in 1999.
    One of the problems USAID has faced in recent years is attempting 
to evaluate the success or failure of its democracy programs under its 
new ``Results Based Budgeting'' and the Government Performance and 
Results Act.
    Let me cite a single example:
    USAID proposes to spend $15 million this year in South Africa on 
its democracy program. One of USAID's key performance measures with 
this spending is to seek a reduction of politically related deaths in a 
region of South Africa from 2,087 in 1994 to 700 in 2000. Perhaps this 
is success, but not if you are one of the 700 people that still gets 
killed.
    According to USAID, what constitutes ``success'' in a democracy 
program?
    Answer. Broadly speaking, USAID's democracy and governance 
activities seek to promote the rule of law, genuine and competitive 
political processes, an active civil society, and improved governance. 
Success can be defined through progress resulting in these areas. The 
extent of progress depends on political progress in individual 
countries as well as the quality of specific programs. Furthermore, our 
programs operate in the context of other donors, host country dynamics 
in both government and civil society, and constraints of funding and 
USAID staffing among other elements.
    Given the range and diversity of USAID's democracy/governance 
portfolio, the following represent some specific illustrative examples. 
Success in rule of law activities may include increased protection of 
human rights through legislation and/or effective advocacy efforts and 
expanded equal access to judicial protection through increased 
availability of legal services and legal information. More competitive 
political processes can be reflected by the development of impartial 
and credible elections administration mechanisms, more pluralism and 
more competitive political parties which reflect democratic political 
values. Success in the civil society area might include increased 
citizen participation and flow of information, and an improved legal 
framework for and institutional viability of NGOs (especially advocacy 
NGOs) or a freer more independent media. More effective governance can 
be reflected through more transparent, accountable and less corrupt 
governance. The specific targets achievable over the short-term, for 
annual reporting requirements, are at times difficult to establish and 
are being refined as we learn more about what can reasonably be 
achieved in fluid environments. Furthermore, democracy is multi-
dimensional and achieving progress on any of these indicators may be 
necessary but not sufficient for bringing about democratic change.
    In South Africa, one of the problems facing the country is 
political violence in KwaZulu Natal. One way to help address the 
problem is to support South Africa NGO conflict resolution programs 
that seek ultimately to reduce the level of political violence. We 
would like to see meaningful change as a result of the conflict 
resolution programs and a reduction in the number of political deaths 
is one measure of such change. Seven hundred politically-related deaths 
is 700 too many, which is why the reduction in such deaths from 2,087 
to 700 is progress but not total success. Total success would be having 
no politically-related deaths. Our job is to assist in the development 
of a rule of law that seeks to deter crimes and safeguard human rights 
and personal security.
         evaluation of democracy programs (prospective changes)
    Question. What changes are USAID making to its evaluation 
procedures to better determine the success or failure of its democracy 
programs?
    Answer. USAID is grappling with ways to evaluate programs to 
determine what is more successful, what is less so. Through the Center 
for Democracy and Governance, USAID is working to document and 
disseminate lessons learned, best practices and technical leadership to 
better inform democracy programming in the field. Democratization is a 
relatively new development field and the body of knowledge of 
operations to promote democracy has increased greatly over the last few 
years. USAID is tracking programs to make determinations about 
judgements made about programming directions and disseminating lessons 
learned to other practitioners in the field. For example, we have 
learned that election monitoring on election day may not capture the 
full picture in terms of free and fair elections. The period leading to 
elections may require more critical attention for monitoring of 
interference with meetings by opposition groups, biased reporting via 
control of the media by the government, etc.
    In addition, USAID has placed heightened emphasis on training its 
staff working in the democracy/governance field and implementing 
organization personnel on improved methods of measuring performance. 
Training has been provided thus far in three regions and twice in 
Washington. The Agency has also developed and last autumn widely 
disseminated a publication entitled ``Handbook of Democracy and 
Governance Program Indicators.'' Improved data on DG activity 
performance is increasingly becoming available, which is enabling the 
Agency to strengthen its capacity to assess the impact of related 
activities. Emphasis is also being placed on the development of 
mechanisms such as performance indices to better capture qualitative as 
well as quantitative results. USAID is also engaged in a dialogue with 
implementing organizations, end-users and other stakeholders on ways to 
further develop means to effectively gauge the impact of its activities 
in this area. Indeed, several implementing organizations attended the 
two Washington training programs.
                   security at ronald reagan building
    Question. Mr. Atwood, you no doubt saw the article in the 
Washington Post on March 8, 1999, regarding the lack of security at the 
Reagan Building. It concerns me very much that after all we have gone 
through regarding USAID's move to the Reagan building, there was 
apparently little consideration given by USAID and the General Services 
Administration to the building's overall security.
    Prior to agreeing to move into the Reagan Building in 1997, what 
assurances did USAID receive from the General Services Administration 
(GSA), that adequate security would be provided in the building?
    Answer. As USAID prepared for the move into the Reagan Building in 
1997, we worked closely with GSA to identify our security requirements. 
In addition, GSA provided USAID with a Pre-occupancy Survey Report that 
outlined all the security systems and procedures they planned to 
implement in the building. We are working closely with GSA to assist 
them in closing the remaining gaps between the planned security systems 
and procedures and what is the current reality.
    Question. As part of its FY 2000 budget, is USAID requesting any 
funding for security upgrades to the Reagan Building? How much and for 
what purpose?
    Answer. Mr. Chairman, we have made provisions in the FY 2000 budget 
for security upgrades to the Reagan Building. I respectfully request a 
session in camera to discuss the specific upgrades being requested.
    Question. What additional steps is the GSA making to ensure that 
the building is safe? How much will GSA spend in FY 2000 for additional 
security at the Reagan Building?
    Answer. GSA continues to work toward completion of the security 
systems originally designed for the Reagan Building. We have worked 
with GSA to develop an answer to this question Mr. Chairman, but I 
respectfully request an executive session to discuss the specific 
security plans GSA has for the Reagan Building.
                        usaid overseas security
    Question. Last year, in response to the tragic events in Kenya and 
Tanzania, Congress approved a $1.4 billion supplemental for security at 
U.S. embassies and other facilities overseas. Yet only a small portion 
of these funds will be used for USAID security.
    I understand that after the bombing, you ordered a team of USAID 
security specialists to review USAID security worldwide. The team 
concluded, I am told, that a significant number of USAID Missions lack 
adequate security.
    How much funding in the FY 99 security supplemental is allocated 
for USAID overseas security?
    Answer. Two and one half million dollars in Economic Support Funds 
were directly appropriated to USAID in the security supplemental. All 
of these funds will be used for critical overseas security 
enhancements. Twenty five million dollars were appropriated to the 
Department of State for allocation to USAID for security in the 
supplemental. When these funds are allocated, they will be applied 
exclusively toward overseas security.
    Question. It is my understanding that USAID's request for Fiscal 
Year 2000 contains no additional funds to pay for security upgrades at 
its missions overseas. Is that correct? Which USAID facilities overseas 
are in need of substantial security upgrades and what are the costs 
associated with these upgrades?
    Answer. USAID's FY 2000 OE budget request contains only funding for 
normal operational activities of the Office of Security.
    Nine overseas USAID facilities are in need of substantial security 
upgrades. The costs are estimated by the USAID Office of Security at 
approximately $2.4 million dollars. Replacement of all USAID overseas 
facilities with inadequate setback or other inability to achieve fully 
acceptable security would cost well in excess of $200 million.
    Mr. Chairman, for Security reasons I would prefer to respond to any 
request from the Committee for details about specific posts or specific 
vulnerabilities in a separate classified venue.
                              co-location
    Question. State Department guidelines regarding the co-location of 
U.S. government facilities overseas, which states:
    ``All U.S. Government offices and activities, subject to the 
authority of the chief of mission, are required to be co-located in 
chancery office buildings or on a chancery/consulate compound.''
    What is USAID's official agency-wide policy regarding co-location?
    Answer. It is the Administration's policy to co-locate all U.S. 
Government agencies overseas. Only where there are persuasive 
operational or security reasons for veering from that policy would a 
request of a co-location exception be sought or approved. Where new 
embassy facilities are being constructed and where USAID has a 
presence, plans should include office space for USAID personnel. The 
Department of State and USAID are working together to determine 
appropriate procedures to identify incremental costs occasioned by co-
location.
    Question. What is USAID's policy regarding co-location of its 
missions in Kenya and Tanzania?
    Answer. USAID has agreed and is committed to co-locate with the 
Department of State in the New Office Buildings (NOB) planned for both 
Nairobi and Dar es Salaam. USAID is working closely with A/FBO on the 
design phase through their respective NOB project teams. USAID is also 
committed to NOB co-location projects in Phnom Penh, Kampala, and 
Zagreb and is also represented on these project teams.
    Question. What is the total cost anticipated with the co-location 
in Kenya and Tanzania?
    Answer. A/FBO is currently estimating USAID's participation will 
cost approximately $25 million for Nairobi and $16 million for Dar es 
Salaam. A/FBO's efforts to develop the final cost figures for all NOBs 
are still ongoing. Cost figures are based on the construction of USAID 
buildings on land owned by the Department of State.
    Separate Interim Office Buildings (IOB) are planned for USAID and 
the Department of State in Nairobi until such time as the NOB can be 
completed. USAID costs for the IOB are included in the FY 1999 security 
supplemental.
                                ``y2k''
    Question. I guess it depends upon who we listen to when considering 
just how bad USAID's problems are in meeting OMB's requirements that 
Federal Agency computer systems be Y2K compliant by March 31.
    OMB paints a fairly bleak picture. At one point, OMB had certified 
that 5 of USAID's 7 computer systems were Y2K compliant. But in its 
March 18 report, it claims that USAID has actually backtracked and that 
today only 4 of 7 systems are compliant.
    Our colleague on the Government Reform Committee, Mr. Horn, gives 
USAID even worse marks. According to Mr. Horn's analysis, USAID is the 
only major federal agency to receive a failing grade on every Y2K 
report card in the past year.
    When can we realistically expect all of USAID's ``mission 
critical'' systems to be fully functioning?
    Answer. USAID has held itself to the highest possible standards on 
Y2K compliance, because of the significance of sustaining support for 
our program operations. On this basis we will only claim successful 
implementation of our mission critical systems when the Y2K compliant 
versions are fully installed at our overseas locations and ``end to 
end'' testing on all related components has been accomplished. The 
Agency has multiple teams verifying each aspect of our Agency systems 
is Y2K ready in its parts and working together.
    The Agency has a total of seven mission critical systems, two of 
which are being replaced. Of that number, five mission critical systems 
are being repaired for Y2K compliance including: personnel, time and 
attendance, payroll, field accounting and the New Management System 
(NMS). The largest, and most complicated of these mission critical 
applications is NMS, which supports headquarters financial management, 
acquisition & assistance, budget and operations.
    USAID plans to complete Y2K testing and implementation of NMS, its 
last mission critical system, at the end of July 1999.
    Question. Given that USAID operates in more than 80 countries, what 
happens if the host country is not prepared for Y2K--will that affect 
your overseas missions' ability to operate in the new year?
    Answer. USAID has sent technical teams to 50 countries to examine 
this question and better understand what the impact of Y2K will be on 
the work of the Agency abroad through its missions. The state of 
readiness differs for each country and sector we have studied. 
Unfortunately our studies and analyses of others cannot quantify how 
long and how widespread expected Y2K disruptions will be.
    The foreign affairs community has placed emphasis on dealing with 
the consequences of Y2K given the uncertainty about this problem and 
the fact that many of the potential causes of Y2K disruption affecting 
USAID program activities are beyond our control.
    Internal Agency Y2K business continuity planning for its mission 
critical systems focuses on three critical functions including 
payments, obligations and funds control which are important to sustain 
operations.
    USAID is also a member of Embassy Y2K Committees in each host 
nation where Agency missions are located. As the Secretary of State 
directed, our Agency officers are also joining with other federal 
managers to analyze the impact of Y2K readiness in countries where the 
U.S. government is present and to prepare contingency plans where 
appropriate.
    Question. Please explain USAID's 5 percent Y2K ``surcharge'' on 
USAID program activity. Which bureaus and programs are affected?
    Answer. USAID has set aside 5% of its development assistance funds 
in FY 1999 to ensure we deal with the Y2K-related issues within our 
development portfolio. Funds will be released when there is assurance 
that Y2K problems affecting critical development programs are being 
addressed in a prudent manner. Once we obtain assurances from the 
responsible Agency executives that all Y2K issues are being prudently 
addressed, the remaining Y2K set aside funds will be released. We are 
still conducting field assessments of the magnitude of potential Y2K 
problems and thus do not yet know how much of the Development 
Assistance Y2K resources that have been set aside will be needed for 
Y2K upgrades and contingency planning. We believe that in at least some 
cases the amount required will be substantially less than the amount 
set aside.
    Bureaus affected by the Y2K set aside include the Bureau for 
Africa, the Asia and the Near East Bureau, the Latin America and the 
Caribbean Bureau, the Global Bureau and the Bureau for Humanitarian 
Response.
                           operating expenses
    Question. USAID has requested $507,739,000 for its Operating 
Expenses for FY 00. In addition, USAID intends to have available more 
than $56 million from other sources, including $350,000 from so called 
``program funds used for OE'' (According to page 165 of USAID's CPD).
    For FY 99 USAID estimates more than $35 million, and for FY 00, 
USAID estimates more than $33 million. What does USAID estimate are the 
recurring amounts available in future years from local currency trust 
funds?
    Answer. It is anticipated that the availability of local currency 
trust funds will continue to decline by about $2 to $3 million per year 
during the next 3 to 4 years. Programs funded from Economic Support 
Funds (ESF) generate most of our local currency trust funds. As ESF 
funds for non Camp David countries continue to decline, local currency 
trust funds decline as well.
    Question. USAID is requesting $168,960,000 for ``compensation--
full-time permanent'' staff for FY 00. Will this amount avert the need 
for any reduction in force in FY 00?
    Answer. The costs referred to are just one element of the cost of 
maintaining the Agency's workforce. In addition to these costs there is 
the cost of part-time and temporary personnel, benefit costs such as 
retirement, rental of office and residential space, and other critical 
support costs. I can assure you that if our request, of which the $168 
million is a part, is approved, we will not have a reduction in force 
(RIF), even though we will continue to reduce staff.
                            staff reductions
    Question. Brian, in your testimony, you state that for a variety of 
reasons, it will be ``. . . necessary for us to reduce U.S. direct hire 
workforce levels'' this year. I note that your Operating Expense 
funding level is a 2 percent increase above the current level, which is 
not a great amount, but an increase nonetheless.
    Can you tell us exactly what this means? Do you intend to initiate 
a Reduction-in-Force (``RIF'') to meet your staff reduction targets?
    Answer. Out of this 2 percent increase we will have to fund the FY 
2000 impact of the 3.68 percent FY 1999 Federal pay raise and an 
anticipated 4.4 percent FY 2000 Federal pay raise. In addition, we will 
have to cover cost increases worldwide caused by inflation--which is 
much higher in the countries in which we operate than it is in the U.S. 
Because of the need to cover these types of cost increases, all of 
which are rising at higher than 2 percent annually, we will have to 
further reduce our staffing levels, even with a 2 percent increase in 
funding. Our plans do not include a reduction-in-force. We intend to 
handle necessary workforce reductions through managed attrition and 
staff reconfigurations.
    Question. Why didn't USAID request the Operating budget necessary 
to meet its anticipated needs?
    Answer. This request reflects the need to continue to keep the 
overall Federal budget under control and meet various Administration 
priorities in other areas. We are examining methods of operating which 
will enable us to provide essential oversight of Agency activities with 
the reduced workforce levels necessitated under this request.
    Question. What other options are available to you to meet your 
budget shortfall?
    Answer. The only other means of obtaining funding to meet Operating 
Expense requirements would be the use of appropriation transfer 
authority. However, this would be considered only if overall funding 
available to cover our operating costs were to be so low that the only 
alternative would be a RIF.
                      usaid new management system
    Question. Brian, we need not revisit the entire tortured history of 
your New Management System, except to say that you have spent $100 
million on the project and the system still does not work properly. In 
fact, USAID is not expected to be able to produce an unqualified audit 
of its books until 2003. Not surprisingly, there is not a lot of 
confidence on Capitol Hill in USAID's bookkeeping.
    Can you tell me when USAID will have an accounting and financial 
computer system functioning so that we can all be confident that our 
foreign aid program is not subject to widespread waste, fraud, or 
abuse?
    Answer. We have a clear vision of an integrated management 
information system that will meet our needs into the 21st 
century and improve compliance with financial management and other 
system requirements. The Chief Financial Officer is taking the lead in 
ensuring the successful planning, acquisition, and implementation of 
financial system investments, and is working closely with the Chief 
Information Officer to ensure that the new system meets information 
requirements and user needs. Our information technology resources for 
this year and next are largely focused on completing and maintaining 
current systems to support Agency operations until new systems are in 
place. We have a three-pronged strategy to correct the deficiencies. We 
are purchasing an off-the-shelf core accounting system, using services 
from other government agencies, and contracting some functions out to 
the private sector. We completed a business process improvement 
analysis, which is helping to define functional requirements for the 
accounting system. We expect to acquire the new system this fiscal 
year, and will implement it in Washington and in field missions during 
fiscal years 2000 through 2002. Also, an information technology 
architecture or blueprint will be completed in sufficient detail to 
ensure that the new accounting system will support the Agency's 
business needs and work properly with other components and systems that 
will be improved or replaced as necessary.
    Question. What will be the total cost to make this system 
operational?
    Answer. Estimated total cost of implementing the new financial 
system is $22.6 million exclusive of recurring maintenance costs. Of 
this estimated total, $2.9 million is required for analysis and 
planning, $3.5 million for acquisition, $10 million for USAID 
Washington implementation, and $6.2 million for overseas deployment.
    Question. What is the total amount USAID has spent so far on the 
NMS?
    Answer. Cumulative obligations for NMS stand at $104.7 million 
spanning seven fiscal years which comprises $75.8 million in 
development costs and $28.9 million in maintenance and operations 
costs. This includes $12.9 million in FY 1999 obligations to date for 
Y2K repairs, maintenance and operations.
                       child survival/child labor
    Question. Mr. Atwood, I am interested in the Administration's new 
campaign to fight child labor, which you call the ``No Sweat'' 
initiative. I applaud the goal, but I also remind you that this 
Committee last year directed USAID to undertake up to $5 million in 
anti-child labor programs within the Child Survival account. What 
programs is USAID implementing with FY 1999 Child Survival funds in 
this area?
    Answer. The term ``No Sweat'' has not generally been used to 
describe USAID's activities. Rather, it refers to the Department of 
Labor's domestic campaign to inform Americans about sweatshop issues in 
the United States, with such topics as employment of illegal immigrants 
and child labor.
    In FY 1999, in conjunction with the $98 million investment in Basic 
Education, USAID is also supporting programs totaling a projected $6 
million, to deal with child labor issues in five countries: Brazil, El 
Salvador, the Philippines, Bangladesh, and Nepal. USAID support in 
these five activities is through locally based Non-Governmental 
Organizations, supported by American Private Voluntary Organizations. 
These programs provide educational opportunities for out-of-school 
children.
    Details on these and other programs under consideration may be 
found in the ``Basic Education and Child Labor Report'' (see attached), 
a USAID Briefing Paper provided April 1, 1999 to the Senate 
Appropriations Committee, Foreign Operations Subcommittee.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                             child survival
    Question. How will the Administration's ``No Sweat'' initiative 
compliment the anti-child labor programs this Committee has already 
instructed USAID to undertake?
    Answer. The Department of Labor's ``No Sweat'' initiative is 
primarily a domestic campaign using a netsite to inform Americans about 
sweatshop issues in the United States, with such topics as employment 
of illegal immigrants and child labor. USAID's ``School Works!'' will 
focus on basic education as one strategy to battle abusive child labor 
in the developing world. USAID intends to review the ``No Sweat'' 
initiative to find out to what extent we might take advantage of their 
website to inform the American public on our complimentary work 
overseas.
                            maternal health
    Question. The fiscal year 1999 Senate Foreign Operations Committee 
report contained language recommending that not less than $50 million 
be spent on a maternal health initiative.
    How does USAID intend to respond to the Committee's direction for 
FY 99?
    Can USAID provide a geographic breakdown (by country and region) of 
how these funds are expected to be spent in FY99?
    What amount does USAID intend to spend on maternal health in FY00?
    Answer. In FY 1998, USAID spent approximately $50 million on 
activities funded through the Child Survival and Diseases Account that 
improve maternal health for child survival. Additionally, USAID spent 
approximately $7 million, through the same account, on activities that 
improve maternal survival. Also in 1998, USAID revised its strategy for 
reducing maternal and newborn mortality. USAID now focuses more 
attention on interventions that improve the survival of the mother-
infant pair, specifically the treatment of complications of pregnancy, 
safe delivery, postpartum and newborn care, maternal/newborn nutrition 
and birth preparedness. USAID expects to spend approximately the same 
overall amount in FY 1999, through the Child Survival and Disease 
Account, to improve the survival of mothers and newborns.
    In FY 1998, of the overall total ($57 million) spent for maternal/
newborn health and survival through the Child Survival and Disease 
Account, 39 percent was through the Africa Region (AFR), 47 percent was 
through the Asia and Near East Region (ANE), 9 percent was through the 
Latin America and Caribbean Region (LAC), and 5 percent was through the 
Global Bureau (G). In FY 1998, countries with major thrusts to reduce 
maternal mortality included: AFR--Zambia, Uganda, Mozambique; ANE--
Morocco, Egypt, Cambodia, India, Nepal, Indonesia; LAC--Nicaragua, 
Bolivia, Guatemala, El Salvador; plus regional activities in Latin 
America and Africa. In FY99, approximately the same geographic 
breakdowns for funding are anticipated.
    At this time, funding for maternal/newborn health and survival is 
anticipated at approximately the same levels for FY 2000.
                              biodiversity
    Question. Within its Development Assistance budget, USAID has 
reduced funding for biodiversity from $105 million in 1995 to about $55 
million in 1998. What has been the effect of this decline in spending 
on biodiversity and on USAID's ability to meet its strategic goal of 
``protecting the environment for long-term sustainability''?
    Answer. Biodiversity, like many other USAID development sectors, 
has suffered the consequences of the Agency's significantly reduced 
discretionary budget. The Agency maintains an important leadership role 
in biodiversity and continues to provide the intellectual direction 
that catalyzes other donors to adopt successful USAID conservation 
strategies and methodologies. However, the cumulative effects of 
budgetary declines will impact the Agency's ability to address threats 
to biological diversity. For example:
          From 1995 to 1997, the number of missions pursuing 
        biodiversity strategic objectives fell from 29 to 24 and 
        existing programs in biologically important countries and 
        regions have been scaled back due to declining budgets.
          Targets under a new global program designed to introduce 
        innovative techniques to conserve a representative array to the 
        world's ecosystems fell from 15 globally significant sites 
        scheduled to be placed under improved management to seven sites 
        following budget reductions.
    Question. How much does USAID plan to dedicate to biodiversity 
programs in fiscal year 1999? What is USAID's budget request for 
biodiversity for fiscal year 2000?
    Answer. In FY 1999, USAID has budgeted approximately $68.0 million 
in the Development Assistance account for biodiversity including 
funding for related directives such as neotropical birds, Parks in 
Peril, and the new McConnell Fund. The level for biodiversity in the 
other program appropriations will be available as soon as the Agency's 
emphasis area coding is complete.
    USAID's FY 2000 request did not establish a specific funding level 
for biodiversity--but we consider it an important component of our 
environment program, for which we have requested a level equal to our 
FY 1999 request of $290 million.
                  status of usaid's new coding system
    Question. What is the status of USAID's new coding system that is 
designed to better track exact spending levels within various sectors? 
Is USAID now able to code biodiversity spending? What is the Agency's 
definition of ``biodiversity'' for the purpose of coding?
    Answer. The new streamlined, PC-based, and much more user friendly 
coding system has been launched. Revised codes, definitions and 
software were provided to USAID missions and Washington offices at the 
end of January 1999. Missions and Washington offices are coding FY 1998 
obligations, FY 1999 allocations, and FY 2000 planned obligations into 
the system.
    Biodiversity is included as part of the codes. The definition that 
is being used is as follows: ``Activities designed to support the 
conservation and sustainable use of biological diversity (biomasses, 
ecosystems, species, or genetic diversity) by identifying needs; by 
designing, implementing and monitoring conservation and management 
actions; through research and training; or through institutional 
strengthening, policy interventions and program development.''
    biodiversity (reduced funding for environment/natural resources)
    Question. Why did USAID reduce funding for its Office of 
Environment and Natural Resources, within the Global Bureau, from more 
than $10 million to less than $7 million in FY 99?
    Answer. The Agency maintains a strong commitment to environment 
programs overall, including biodiversity programs. In FY 1999, we 
intend to commit a total of $248 million for environment programs. In 
FY 2000, our request includes $290 million for the environment.
    We agree that USAID central offices, such as the Office of 
Environment and Natural Resources, play a key role by designing and 
leveraging funds for projects and programs that USAID missions often 
adopt and help fund. Because of their past good work, this year we saw 
a major increase in bilateral programs in Africa and Latin America and 
the Caribbean funded by USAID missions. As part of a shift in 
programming priority from USAID headquarters to the missions, the 
Energy Office budget was reduced by 10% and both the Natural Resources 
and Urban Programs offices were reduced by approximately 30%.
    For FY 2000, $9 million has been requested for the Office of 
Environment and Natural Resources.
    Question. For FY 99, does USAID intend to reduce funding for 
environmental programs in Nepal below its FY 98 level? How much funding 
is USAID requesting for FY 00 for Nepal environmental programs?
    Answer. USAID requested $3 million for the environmental programs 
in Nepal in FY 99, $0.7 million above the FY 98 level. Since ANE's 
overall amount of FY 99 discretionary funding was limited and there 
were significant demands for these funds for Indonesia and the response 
to the Asian Financial Crisis, ANE was able to allocate only $1.2 
million for environmental programs in Nepal, a reduction from FY 98 
levels. Although ANE expects the availability of discretionary funds to 
be even more constrained in FY 00, USAID is requesting $1.5 million in 
environmental funding for FY 00 for the Nepal program.
                       centrally funded programs
    Question. The following Centrally Funded programs justified in 
USAID's fiscal year 2000 congressional presentation document appear 
more directed toward to the activities within USAID, rather than those 
designed to assist people in developing countries. These projects' 
goals include: Project 936-SS03 ($775,000 DA): Number of [USAID] field 
missions using improved management software; Number of [USAID] mission 
strategic objective teams applying technical assistance in training 
``best practices''.
    Why does USAID use more than $13 million of its program budget 
resources for projects that are designed primarily to benefit USAID as 
an organization rather than to assist directly those in need?
    What direct benefits do these projects provide to the people in 
developing countries?
    Answer. The Global Bureau activities cited in Project 936-SS03 
($775,000 of the $13 million under question) are designed to make 
highly decentralized training activities more effective. Training host 
country professionals is the key to sustaining the impact of USAID's 
fieldwork, and is undertaken in every field mission in almost every 
project. Training activities require some level of central monitoring 
and management for two reasons: (1) to provide accurate aggregate 
reporting on training to the U.S. Congress and to USAID's Executive 
Branch partner agencies via the Interagency Working Group on U.S. 
Government-sponsored International Exchanges and Training (IAWG); and 
(2) to assure the uniform application of optimum training practices in 
the interest of Agency-wide cost efficiency.
    Direct benefits to people in developing countries from the two 
cited activities of training management software (TraiNert) and 
technical assistance to field missions in training best practices 
include: (1) improving consistently the skills and knowledge of host 
country professionals sponsored by USAID for training, and (2) ensuring 
that trainees' performance back at the work-site is improved as 
planned.
    Question. The following Centrally Funded programs justified in 
USAID's fiscal year 2000 congressional presentation document appear 
more directed toward the activities within AID, rather than those 
designed to assist people in developing countries. These projects' 
goals include:
    Project 930-SS01 ($2,440,000 DA)
          ``Number of USAID operating units that address gender-based 
        constraints in economic growth strategies.''
    Project 930-SS04 ($2,700,000 for FY 00)
          ``Greater reflection of gender considerations in the Agencies 
        Work.''
          ``Improved Agency policies and organizational capacity to 
        address gender issues.''
          ``Improved incorporation of gender considerations in the 
        design and implementation of Washington-based programs.''
          ``Improved coordination of gender considerations in the 
        design and implementation of field programs.''
          `Improved coordination with international community.''
    1. Why does USAID use more than $13 million of its program budget 
resources for projects that are designed primarily to benefit USAID as 
an organization rather than to assist directly those in need?
    2. What direct benefits do these projects provide to people in 
developing countries?
    Answer. Two of the Centrally-funded programs in question (Project 
930-SS01 and 930-SS04) cover the work of USAID's Office of Women in 
Development (G/WID) and reflect the mandate of that Office to help 
integrate gender throughout USAID programs, rather than directly fund 
small women-focused projects. It is through mainstreaming of gender 
concerns in all our activities that we see direct and substantive 
impacts on women.
    USAID is making excellent progress in achieving such integration of 
gender concerns. In virtually all USAID field Missions there is a 
notable increase in the extent to which a main consideration in 
programming is whether and how programs will affect women. In each 
region of the world, we have seen positive impacts on the status of 
women. In Africa, for example, gender is well integrated into our 
economic growth and agricultural development programs and women 
comprise a substantial proportion of program beneficiaries. In Asia and 
the Near East, USAID basic education programs have helped reduce the 
difference between boys' and girls' enrollment rates. In Europe and the 
New Independent States, we are working in close collaboration with the 
Department of State to address the severe and widespread problem of 
domestic violence, and the growing phenomenon of trafficking in women. 
In Latin America, women constitute the majority of the beneficiaries of 
our judicial services centers.
    These are just a few examples of the many ways in which we are 
addressing gender throughout USAID programs. Moreover, we continue to 
move ahead in the implementation of our Gender Plan of Action. In the 
next several weeks, the USAID Office of Procurement will issue a 
contract information bulletin (CIB) to guide all contract officers as 
they work with technical officers in the implementation of the 
procurement related items in the Gender Plan. Through this and other 
actions, we are sending a strong message that our collaborators and 
contractors must improve their gender expertise in order to be 
responsive to USAID policy and programming procedures. Our success with 
the Gender Plan--and, more generally, our programming to improve the 
lives of women--is documented in a report that we recently submitted to 
the Congress. I would be pleased to make a copy available to you.
    Question. Why does USAID use more than $13 million of its program 
budget resources for projects that are designed primarily to benefit 
USAID as an organization rather than to assist directly those in need? 
What direct benefits do these projects provide to people in developing 
countries?
    Project 930-SS02 ``Managing for Results courses held to train 
Agency staff.''
    Answer. These courses were listed as an indicator of the success of 
our efforts to institutionalize managing for results systems in USAID. 
USAID does not use program funds to actually carry out the training. 
The courses are currently implemented with USDH trainers whose travel 
and other expenses are paid through the Agency's operating expense 
budget. PPC does use program funds to develop a coherent and effective 
Agency system for planning, measuring, evaluating and reporting 
results, which in turn assures better, stronger programs. To date, 
there have been six Managing for Results courses that have provided 
USAID staff the tools, skills, and knowledge to more effectively carry 
out programs that benefit the poor in developing countries.
    Question. Why does USAID use more than $13 million of its program 
budget resources for projects that are designed primarily to benefit 
USAID as an organization rather than to assist directly those in need? 
What direct benefits do these projects provide to people in developing 
countries?
    Project 930-SS02 Country impact evaluations completed
    Answer. Country impact evaluations are designed to directly improve 
the effectiveness of USAID programs in developing countries. They 
analyze program efficiency and effectiveness to identify which 
strategies, programs and activities work well and which don't. They are 
based on a broad retrospective of USAID's experience, rather than 
results from a single program or country. Impact evaluations directly 
improve the effectiveness of USAID programs in developing countries in 
the following three ways: (1) First, they inform and influence major 
Agency policy and programming decisions by drawing lessons from 
experience; (2) Second, they assist in shaping operational decisions at 
the individual activity level by assessing activity performance and 
effectiveness; (3) Finally, evaluations support the accountability of 
Agency management by documenting impact. Ultimately, they improve the 
quality and effectiveness of USAID programs in the field.
                      development credit authority
    Question. In its FY 2000 budget, USAID is requesting $15 million 
for its Development Credit Authority. This is in addition to the $7.5 
million Congress made available two years ago for this purpose. I am 
aware that prior to conducting any program, USAID must be certified by 
the Office of Management and Budget that it has met a number of 
accounting requirements.
    Now, I am skeptical of this entire scheme. I worry that while on 
one hand, the Administration is requesting funds to reduce or cancel 
debt owed to us by various foreign aid recipients, and on the other 
hand, USAID wants to begin new loan programs in countries like the 
Dominican Republic, Ethiopia, the Philippines and others.
    Can you give the Committee an update on the Office of Management 
and Budget's (OMB's) approval of the Development Credit Authority? Has 
OMB signed-off on USAID moving forward with this plan?
    Answer. On April 30, OMB notified USAID and Congress that the 
Agency had sufficiently addressed all outstanding issues related to its 
ability to issue and manage credit programs.
    During this process, USAID took a number of steps to ensure proper 
risk analysis and credit management. For example, USAID outsourced its 
loan servicing functions to Riggs Bank. Riggs, working with USAID 
staff, developed a loan servicing and tracking system, which OMB found 
more than satisfactory. USAID also created a DCA Team comprised of 
Agency experts in credit analysis and loan management. The Agency will 
bolster that team with new hires who have specific background in credit 
risk analysis and loan management. The DCA Team assists missions in 
their DCA-funded project development activities.
    One of the most important guiding principles on the use of DCA is 
that USAID will no longer assume most of the financial risk for credit 
activities. DCA requires sharing risk with other financial institutions 
that meet rigorous risk analysis criteria.
                development credit authority (new loans)
    Question. How does USAID justify extending new loans to certain 
developing countries, while the Administration is also seeking to 
forgive existing debt owed by other developing countries?
    Answer. DCA is intended for non-sovereign lending. Under the 
regulatory reforms that govern DCA, only a handful of USAID-assisted 
countries would be sufficiently creditworthy to qualify for sovereign 
risk credit assistance. Instead, DCA credit assistance is intended for 
credit enhancement purposes in cases where the borrowers are non-
sovereign entities and the lenders, with whom we partner, take more 
than 50% of the risk. Because they will not be 100% guarantees, USAID 
will not have any new assets to forgive.
    USAID is and will remain essentially a grant agency. However, we 
have found that credit enhancement can be a powerful and effective 
development tool. Our need for credit authority is driven solely by our 
successes in promoting private sector-led development principles and 
our need for a financial tool to encourage local credit markets and 
local lenders to participate in the development process.
    development credit authority (loans to countries receiving debt 
                              forgiveness)
    Question. Is USAID going to consider making loans to any country 
that has received debt forgiveness or reduction in the past 5 years?
    Answer. USAID does not intend to offer credit assistance to any 
country that has received USG debt forgiveness or reduction in the past 
five years.
    Question. How is the new loan program consistent with the plan just 
announced by the President to provide further debt reduction for poor 
countries?
    Answer. There is no relationship between our Development Credit 
Authority (DCA) request and the President's debt reduction initiative 
for the poorest countries. The risk assessment models that USAID now 
uses to determine the subsidy cost of each credit activity will tend to 
preclude the use of DCA credit assistance in the poorest countries even 
where the borrowers and lenders are wholly private sector entities. 
This is due to the heavy weight given to the overall credit worthiness 
of a country in our risk assessment models. Most DCA credit assistance 
will be in the form of partial loan guarantees (less than 50% risk 
sharing) of local currency loans made by private banks at market rates 
to private sector borrowers. DCA credit assistance will be directly in 
support of the strategic objectives of our country missions and are 
intended to support and reinforce specific grant-financed policy and 
institutional reforms.
         development credit authority (administrative expenses)
    Question. How will the proposed $2 million is administrative 
expenses be utilized?
    Answer. In order to comply with the Credit Reform Act we have 
requested this $2 million to be used for DCA administration related 
expenses. This includes, among other things, conducting credit risk 
analyses, financial monitoring, and providing expert credit staff 
assistance in the development of DCA funded projects to our overseas 
missions. In addition, these funds will be used to develop and conduct 
staff training programs on the prudent use of credit, and the 
contracting of industry and sector specific specialists to assist us in 
determining the financial viability of proposed projects.
                      development fund for africa
    Question. Since I became Chairman of this Subcommittee, I have 
consistently fought against the practice of ``earmarking'' funds. We 
even succeeded last year in eliminating from the House bill the 
decades-old earmarks for Israel and Egypt. I believe, Mr. Atwood, you 
too have generally been opposed to earmarks. After all, they reduce the 
Executive Branch's flexibility.
    That is why I am puzzled that USAID is this year proposing the re-
creation of its ``Development Fund for Africa'' to be funded at $512 
million.
         Given the severe funding restraints this year's bill will 
        likely face, why do you propose earmarking funds for Africa at 
        the expense of other regions of the world?
         Doesn't a regional account like DFA reduce your flexibility?
         Why are you not proposing a ``Development Fund for Latin 
        America'' to protect funding to this region?
    Answer. The Administration has asked for funding for the 
Development Fund for Africa in its FY 2000 request to signal the 
Administration's commitment to returning our funding for assistance to 
Africa to historic levels, as announced during the President's trip to 
Africa last year. The DFA symbolizes the importance of sub-Saharan 
Africa to U.S. National Interests. It builds on our past success in 
helping Africans to integrate into the global economy. In addition, it 
acknowledges the transnational threats emanating from countries that 
are wrestling with pandemics such as HIV/Aids, and other destabilizing 
forces. The DFA emerged from a strong consensus in the last decade that 
our relationship to Africa was changing as new leadership and new 
opportunities were manifested. The need is even more pressing today, as 
ethnic strife, global financial crises, and the burden of debt 
service--challenges throughout the developing and newly industrialized 
world--simply can't be ignored in Africa without long term risk to U.S. 
National Interests.
    USAID does not propose using a special fund to signal the 
Administration's commitment to Latin America. That has already been 
achieved through the Summit and post-Summit processes that have kept 
Latin America high on this Administration's agenda. The recent joint 
congressional and Administration effort to appropriate $621 million for 
disaster reconstruction further confirmed our strong support for the 
region. Finally, our partnership with Congress has ensured that during 
difficult budget times, Latin America received the necessary funding to 
continue our critical programs in the region.
                              south africa
    Question. When USAID began its programs in South Africa in 1994, 
the plan was to ``graduate'' South Africa from foreign aid by 2005. 
Since that time, USAID has provided more than $700 million in aid to 
South Africa. And since the overall Africa budget has not increased, 
many other less developed African countries have seen USAID funding 
reduced to pay for programs in South Africa.
    I understand that USAID has extended its programs in South Africa 
for several more years.
    What is USAID's justification for extending the program?
    Answer: During the first year of the Mandela administration, the 
Government of South Africa was deeply occupied by dismantling the 
apparatus of the apartheid regime, writing a new Constitution which 
emphasized the protection of individual rights and developing new 
departments and policies to assure non-discrimination and equal access 
to public services. A great deal was required, too, in assuring 
establishment of a viable, pluralistic democracy, in reducing political 
violence and in reconciliation of South Africa's multi-racial 
population.
    Since 1994, much has been accomplished. South Africa has introduced 
appropriate policies and legal frameworks and restructured the basic 
institutions of government. There has also been progress in making 
basic services available to people, but there is still a long way to 
go. And, South Africa's extraordinary development problems persist:
          75% of South Africans, the disadvantaged poor, do not have 
        access to adequate housing, basic services and economic 
        activity;
          Economic activity is insufficient to keep from losing ground; 
        growth slowed from 3.3% in 1994 to less than 1% in 1998: 
        500,000 jobs have been lost; unemployment is 23-24% (60-70% 
        among youth in townships);
          Education of South Africans for employment and opportunity is 
        slowed by the manpower constraints in education; and
          The rate of spread of HIV/AIDS may be the fastest in the 
        world (1500 new cases daily).
    South Africa's capacity to redress these problems has been 
overestimated.
    Ensuring successful transition to a pluralistic, market oriented, 
sustainable democracy in South Africa is in the U.S. interest--both to 
sustain the expansion of democracy in the region and because the region 
is so intimately linked with South Africa's economy. South Africa plays 
a unique role in fostering political and economic stability in Africa. 
The success or failure of its political transition and economic 
policies has a multiplier effect throughout the region. While 
continuing our support to South Africa means in the short-term there 
will be fewer resources for the rest of Africa, by targeting limited 
resources for the broadest impact, we are maximizing the benefits of 
U.S. dollars to the entire region.
    Question. Who in the Administration made this decision?
    Answer. The USAID program and continued presence in South Africa is 
strongly supported by both the Department of State and USAID. In 
January, 1999, U.S. Ambassador to South Africa James Joseph and USAID 
Assistant Administrator for Africa, Vivian Lowery-Derryck met with 
Deputy President Thabo Mbeki to discuss the future of the USAID program 
in South Africa. At that meeting there was a clear articulation of the 
need for USAID presence to continue beyond the end date of FY 2005. The 
Deputy President specifically mentioned priorities of state 
administration/governance, job creation, housing, education and rural 
development as needs to be addressed. It was further agreed that the 
program details of the extension would stem from joint consultative 
process between USAID and the Government of South Africa following 
consultation by USAID with other agencies of the Executive Branch and 
the Congress.
    Question. Given that USAID was planning to close out its program in 
2005, what is the new estimated date on which USAID [will cease] its 
program in South Africa?
    Answer. An extension of three to five years beyond the FY 2005 end 
date is contemplated, with a further evaluation to occur in FY 2005.
    Question. What impact will extending the South Africa program have 
on other USAID programs elsewhere in Africa?
    Answer. The potential impact of a stable and economically robust 
South Africa is enormous as is the negative impact that would result 
from a stagnant or failed economy and political instability. While 
South Africa is economically ahead of its neighbors, it still faces 
significant challenges. Because of protected industries and missed 
opportunities in the past, it has yet to be integrated into the global 
economy and is currently experiencing an economic recession. USAID 
assistance is building a cadre of capable economists and financial 
managers able to address these challenges. As a key partner, the U.S. 
has already invested heavily in the post transition era, and it is 
critical that we remain engaged in supporting South Africans to forge a 
model of economic growth, political participation and social well-being 
that will influence their neighbors in the region.
                          agriculture funding
    Question. This Subcommittee has been a long-standing proponent of 
agriculture development. We know how effective it is in helping the 
people of the developing world, as well as our farmers and 
agribusinessmen here in the United States. For the past two years, this 
Committee has included strong report language in support of increased 
funding for agriculture development. The Subcommittee is pleased to see 
agriculture development as one of USAID's primary goals in its work in 
developing countries.
    That being said, the Subcommittee is concerned that Agency has not 
specifically announced its proposed funding levels for agricultural 
development for FY 00. We understand that despite assurances otherwise 
from you, Mr. Atwood, the funding level this year will likely be lower 
than the $305 provided last year.
    What is USAID's specific budget request for agriculture development 
in FY 00?
    Answer. USAID's FY 99 Development Assistance budget for agriculture 
is expected to be $134,500,000. There are some accounts, such as 
Economic Support Funds (ESF), the Support for Eastern European 
Democracy Act (SEED) and support for the New Independent States (NIS), 
which are jointly managed with the Department of State. When these 
amounts are included, USAID, FY 99 budget for agricultural activities 
is estimated to be $339,400,000. This is greater than the $305 million, 
which we obligated in FY 98.
    USAID's Development Assistance request for agriculture development 
in FY 00 is $147.9 million. This reflects a $13.4 million increase over 
the FY 1999 level. Our FY 00 request level from all accounts for 
agriculture is $306,000,000. As Missions develop their programs, this 
amount is likely to be modified somewhat.
    Question. How does USAID intend to continue to provide funding to 
agriculture development programs that have traditionally received it?
    Answer. USAID will strive to maintain support to its traditional 
partners, e.g., the U.S. university community, the International 
Agricultural Research Centers, and the NGOs that emphasize the linkage 
between agriculture, economic growth and food security. USAID will 
continue to work closely with various U.S. private agricultural 
interests to develop stronger public-private partnerships that can 
increase the development impact of investment for both sides, and also 
gain access to markets for U.S. business. Our agricultural partners are 
also giving increased attention to the alleviation of malnutrition, the 
number one cause of early childhood mortality. Several innovative 
programs emphasizing sustainable food-based approaches to improved 
nutrition offer considerable potential to improve child survival.
                          oti funding increase
    Question. How do you justify this increase in OTI's portion of the 
Disaster Assistance Account?
    Answer. The proposed FY 2000 funding level for OTI is the same as 
the actual program appropriated by Congress in FY 1999. However, the FY 
1999 level was divided between International Disaster Assistance ($40 
million) and Development Assistance ($15 million). The same $55 million 
total is proposed for funding for FY 2000, entirely from the Disaster 
Assistance account. The Administration believes Disaster Assistance is 
the appropriate account for OTI.
    During this decade, there has been a seeming by steady growth in 
the number and humanitarian impact of man-made disasters. Somalia, 
Sudan, Congo, Rwanda, Bosnia, Sierra Leone, Liberia, Haiti, 
Afghanistan, Angola, North Korea, Indonesia, Ethiopia, Eritrea, and now 
Kosovo are examples. Some of the man-made disasters have been sparked 
by a natural disaster such as a drought or flood, but in all cases, 
some form of political or ethnic crisis has intensified the 
humanitarian impact of the disaster. Providing effective relief and 
assistance, which can help ensure a successful transition to sustained 
recovery in these complex disasters, often requires interventions 
different from traditional disaster relief. For example, demobilization 
of soldiers; demining of critical areas; assuring effective community 
participation in small-scale reconstruction projects; assistance to 
independent media and to civil society organizations to support 
peaceful, democratic transitions; and training of local officials and 
leaders in ethnic reconciliation are all examples of interventions 
which can be critical to successful disaster relief. Even in natural 
disasters such as Hurricane Mitch, there can be concerns, such as the 
potential for corruption, which can have a critical impact on the 
effectiveness of U.S. disaster response.
    There are many explanations for why there are now so many complex 
disasters. Some believe the end of the Cold War removed the discipline 
of super-power competition, freeing the eruption of ethnic and civil 
conflict. Some believe the competition for resources in a world of 
rapid population growth is the cause. Whatever the explanation, there 
does seem to be a growing number of these complex disasters. The Office 
of Transition Initiatives (OTI) was established to develop expertise in 
response to such disasters. OTI has been successful in many 
interventions, from Rwanda to Indonesia to Bosnia to Guatemala. As a 
result, the prospects of successful recovery in these complex disasters 
have improved greatly.
    The Administration believes the apparent need to deal effectively 
with complex disasters and the success of OTI's activities justify 
continuing activities at the $55 million level. At the same time, it is 
important to note that priority in use of funds from the International 
Disaster Assistance account will continue to go to life-saving disaster 
response. It is also important to note that this proposal does not 
reduce funding available for the Office of Foreign Disaster Assistance, 
which administraters more traditional disaster relief programs.
    Question. Given that some of OTI's projects are designed to 
continue for several years, they are increasingly inconsistent with 
traditional disaster assistance programs (which generally are to assist 
in urgent humanitarian or man-made disasters). Would USAID object to 
this committee separating out OTI from the regulatory international 
disaster assistance account?
    Answer. It is the opinion of USAID that OTI funding should continue 
to come from the International Disaster Assistance account. This will 
facilitate continued collaboration between the Office of Foreign 
Disaster Assistance (OFDA) and OTI; allow for better strategic 
planning; increase options for U.S. Government response to man-made 
disasters; improve efforts to link relief to development; and ensure 
that U.S. Government responses to man-made disasters are fast, 
flexible, and relevant.
    For example, after the Quatemalan peach accords were signed in 
December 1996, the U.S. Government was one of the first donors to 
support the demobilization and reintegration back into civilian society 
of rebel and military ex-combatants. OFDA initially assisted OTI to 
establish camps for the demobilization process of almost 3,000 rebel 
ex-combatants. OTI focused on literacy and civic education programs, 
vocational training, scholarships, and other integration-related 
activities for the ex-combatants. Without OTI's assistance, the 
demobilization process would have been delayed; missing the tight 
timeframes set by the peace accords.
    OTI has a defined, short-term target intervention timeframe. Both 
OTI and OFDA were created to respond quickly to urgent disasters, but 
at different phases in the evolution of the disasters and with 
different types of responses.
    Through the special authorities of the Disaster Assistance account, 
OTI can respond quickly, flexibly, and appropriately to man-made 
disasters. Because OTI's mandate is to focus on advancing peaceful 
democratic change, it usually become involved in a man-made disaster as 
OFDA begins to phase out its relief efforts in a country or an area. 
This phasing of International Disaster Assistance allows the U.S. 
Government to transition assistance to disaster assistance and then 
(where possible) utlimatelty from development assistance. In a number 
of cases (e.g.) Angola, Bosnia, Liberia, and Rwanda--OTI and OFDA have 
worked in countries where conflict has led to ``man-made'' disasters 
requiring years of humanitarian assistance. OTI can be instrumental in 
helping countries move away from dependence on traditional disaster 
assistance. OTI does not design projects to continue for several years. 
Rather, activities are planned with a definite exit strategy in mind, 
normally two years or less.
                         oti funding by country
    Question. Please provide the committee with a country-by-country 
breakdown of proposed OTI programs for fiscal years 1999 and 2000.
    Answer. As discussed, OTI's mandate is to engage countries for a 
relatively short period of time to address traditional opportunities 
and challenges. (USAID Mission strategies tend to be more long-term in 
focus.) As a result, OTI does not establish fixed budgets for its 
country activities. Instead, OTI operates with constantly changing 
budget ranges for a given country. This gives the Office maximum 
flexibility to shift resources to where they are needed most. OTI works 
in some of the toughest, most dynamic environments in the world and 
must downsize or close out activities quickly if a given situation 
deteriorates (e.g., Democratic Republic of the Congo) or if more 
promising opportunities emerge.
    OTI's budget for FY 1999 includes an additional allocation of $40 
million from the International Disaster Assistance account, a $15 
million Development Assistance earmark for Indonesia, and $1.2 million 
Disaster Assistance carryover from the previous year. Enclosed is OTI's 
most recent FY 1999 projection by country. Please note that there 
budget numbers continue to shift depending on changing worldwide 
conditions. For example, OTI's budget levels in Kosovo and Macedonia 
are uncertain this fiscal year, though the Office is intensely engaged 
in assisting the Office of Foreign Disaster Assistance with the 
humanitarian crisis and in helping the U.S. Government plan for crisis 
and post-crisis response.
    OTI's FY 2000 request for $55 million in IDA funding would 
essentially ``straightline'' its FY 1999 budget, and would not result 
in expansion of overall activity. Given current international 
conditions, OTI estimates it would operate in 12 to 15 countries with a 
$55 million budget. OTI anticipates that three or four of the highest 
priority countries would take up most of the FY 2000 budget, with 
approximately $8-$12 million in activities per country. Indonesia, 
Kosovo/Montenegro, and Nigeria could well be in that range next fiscal 
year.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Questions for the Record Submitted by Mr. Porter

                     armenia vs. azerbaijan funding
    Question. The Administration has requested a decrease in aid to 
Armenia, despite that country's acceptance of the current OSCE 
compromise peace proposal regarding the Nagorno Karabagh conflict. This 
decrease is unacceptable--this country has been working for stability 
and peace and a reduction in the assistance will send the wrong signal 
and be devastating to Armenia as it continues its long struggle toward 
stable, independent democracy.
    At the same time, the administration requested an increase in aid 
to Azerbaijan, which summarily rejected the current OSCE compromise 
peace proposal and at this time, is unwilling to even come to the 
table.
    Are we rewarding this behavior? Our whole strategy for this region 
has been to get the opposing sides to the table. Are we abandoning this 
strategy? With the current funding proposals, it appears the 
Administration is doing just this. I hope you can provide me with a 
little insight on this new approach and what the goals are now.
    Answer. There has been no change in U.S. Government strategy 
regarding Nagorno-Karabakh: we continue to focus on getting all parties 
to the conflict to the negotiating table.
    Regarding relative Armenia and Azerbaijan levels in the 
Administration's request for FY 2000 funding, Armenia and Azerbaijan 
are important foreign policy priorities for the U.S., both geo-
politically and in light of their potential roles in the Caspian energy 
equation. Maintaining adequate assistance support to both countries is 
an important factor in ensuring that U.S. priorities are met.
    FREEDOM Support Act funding for Armenia over each of the past 
several years has been over $20 on a per-capita basis, or five times 
the per-capita levels (just over $4) provided to Azerbaijan. Even with 
the proposed FY 2000 funding levels, this relationship is not going to 
change significantly, maintaining assistance to Armenia at almost five 
times the per-capita level provided to Azerbaijan.
                         mongolia: fy 1999 oyb
    Question. Throughout this current fiscal year, I have heard about 
many important programs that have been proposed for implementation in 
Mongolia. However, I am dismayed to learn that USAID may now only 
obligate $6 million for Mongolian assistance for FY99 and not the $12 
million supported by Congress. Why this reduction?
    Answer. In the allocation process, USAID and State sought to meet 
the request level supported by Congress, but due to many competing 
demands for FY 1999 ESF funds, only $6 million in NIS (FREEDOM Support 
Act) funds have been identified to date.
    USAID has a continuing commitment to promoting sustainable 
development in Mongolia, as demonstrated by our approval on October 30, 
1998, of a new, five-year Country Strategic Plan for Mongolia.
    The $6 million allocated thus far in FY 1999 will allow USAID 
Mongolia to initiate its new strategy but at a slower pace than at the 
$12 million level. At the $6 million level, USAID would have to scale 
back its planned assistance to the Government of Mongolia's economic 
reform efforts and its privatization program. At the lower level of 
support, we will run out of funds for these important programs by 
November 1999.
    We understand State, through its internal allocation process, 
continues to seek additional funds for Mongolia for this year. We will 
learn of the outcome of their efforts in a few weeks.
    In FY 2000, we anticipate that we will be able to provide a $12 
million funding level for the Mongolia program and we have requested 
that amount under the Economic Support Fund for FY 2000.
                              tuberculosis
    Question. I commend USAID in beginning the collaborative effort 
with other agencies, such as WHO, CDC and NIH in trying to prevent the 
spread of TB. I hope that USAID will be able to continue with this 
investment in FY2000 and work to limit the anti-microbial resistant 
strains of TB that are now developing, especially in the Russian prison 
system. Considering all that the U.S. has put forward in combating, at 
both the domestic and international levels, we must now make the most 
effective treatments global. At what level is USAID planning on funding 
the infectious disease program in FY 2000 and will this funding 
continue to be used in collaboration with CDC and NIH?
    Answer. In FY 1998, USAID received $50 million for infectious 
diseases as part of the Child Survival and Disease Fund. This funding 
enabled USAID to support awards to both CDC and NIH to assist in the 
implementation of activities in infectious diseases.
    The CDC component included an $8 million agreement between USAID 
and CDC to support work on malaria, surveillance, anti-microbial 
resistance, HIV-AIDS, and TB. The agreement included a $1 million award 
to provide worldwide technical assistance to identify national 
priorities, assess control efforts, and develop recommendations for 
effective and efficient use of resources to combat TB. This assistance 
will help tailor the use of the Directly Observed Treatment, Short-
course (DOTS) strategy to the needs of individual countries.
    The NIH component has resulted in a collaborative initiative 
between USAID and the Fogarty International Center at NIH. The 
initiative, funded at $375,000 per year, is designed to improve 
tuberculosis control through training, clinical and operational 
research, and innovative intervention studies in high incidence areas. 
The major priority of this initiative is to develop local strategies to 
improve TB control, which can be adapted in other high incidence areas.
    USAID intends to continue its collaborative relationship with both 
CDC and NIH, as well as with other governmental and non-governmental 
domestic and international organizations over the next several years. 
Funds for FY 1999 will be allocated similarly to those of FY 1998, and 
if USAID's FY 2000 request is granted, allocations will be continued 
through FY 2000.
    In addition to the Child Survival and Disease Funds, several 
million dollars from the NIS account in FY 1999 and 2000 will target 
infectious diseases, including the tuberculosis program in Russia. 
USAID/Russia is working closely with CDC to implement two DOTS pilot 
projects and an additional pilot project specifically targeting multi-
drug resistant TB (MDR-TB) in Russia. These pilot projects will be 
monitored to ensure the effectiveness of the DOTS methodology in the 
Russian context prior to replication in other parts of the country. 
While USAID does not work within the Russian prison system, our efforts 
in Russia are coordinated with those of our partners who focus on this 
area.
               tuberculosis--stop tuberculosis initiative
    Question. Yesterday was World TB Day. WHO proclaimed its commitment 
to the Stop TB Initiative. What is the role of USAID in the Stop TB 
Initiative?
    Answer. USAID was instrumental in the development of the STOP TB 
Initiative, coordinated by WHO both programmatically and financially. 
The Agency continues to be the largest financial contributor to the 
Initiative and works closely with the coordinating committee members in 
the strategic planning of future activities. The Initiative has four 
components: Global Charter, Global Action Plan, Global Drug Supply 
Facility and Global Research Agenda. Although USAID intends to 
participate in all four components of the Initiative, efforts will 
focus most heavily on support of (1) the Global Action Plan to analyze 
political and technical constraints to action, identify roles of 
different partners, and guide investors in TB control toward rational 
solutions, and (2) the Global Drug Supply Facility which will provide 
universal availability of TB drugs in improved forms. USAID is also 
working with other international partners to increase support for the 
Initiative so that it may be a truly global program involving both 
developed and developing countries in its design and implementation.
                 biodiversity (reduction for programs)
    Question. In late 1998, USAID proposed a 67% reduction in funding 
for biodiversity programs. However, after Congress and senior 
administration officials questioned this decision, the cut was reduced 
to 31%. In maintaining USAID's commitment to biodiversity conservation, 
the Office of Environment and Natural Resources plays a key role by 
designing and leveraging funds for projects and programs that the USAID 
missions often adopt and help fund.
    Why was the FY99 budget for Office for Environment and Natural 
Resources (in the Agency's Bureau for Global Programs, Field Support 
and Research) cut from $10.3 million to $6.9 million (a 31% cut)? What 
is the proposal for FY 2000?
    Answer. The Agency maintains a strong commitment to environment 
programs overall, including biodiversity programs. In FY 1999, we 
intend to commit a total of $248 million for environment programs. In 
FY 2000, our request includes $290 million for the environment.
    We agree that USAID central offices, such as the Office of 
Environment and Natural Resources, play a key role by designing and 
leveraging funds for projects and programs that USAID missions often 
adopt and help fund. Because of their past good work, this year we saw 
a major increase in bilateral programs in Africa and Latin America and 
the Caribbean funded by USAID missions. As part of a shift in 
programming priority from USAID headquarters to the missions, the 
Energy Office budget was reduced by 10% and both the Natural Resources 
and Urban Programs offices were reduced by approximately 30%.
    For FY 2000, $9 million has been requested for the Office of 
Environment and Natural Resources.
                       biodiversity (definitions)
    Question. How does the Agency define/delineate biodiversity 
programs as opposed to other environmental programs it undertakes? What 
is the status of the Agency's new coding system that will reportedly 
track what portion of environmentally funds are spent on biodiversity 
and resource management?
    Answer. The Agency recognizes that biodiversity activities and 
other types of environmental programs must often work together through 
an integrated approach to achieve their stated objectives. For the 
purpose of program management, though, the Agency defines biodiversity 
programs as those activities designed primarily to support the 
conservation and sustainable use of biological diversity, including 
biomass, ecosystems, species, and genetic resources.
    Other environmental programs are classified under sustainable 
natural resource management and have as their principal objectives 
activities that support: (i) the sustainable use of tree products and/
or non-timber forest products; (ii) management of ground and surface 
water resources, including watersheds; (iii) the productive capacity of 
natural resources of specific agro-ecosystems; and (iv) the management 
or protection of the coastal and marine environment.
    The Agency is currently collecting data for the coding system. The 
information is expected to be complete by the end of June, 1999.
                     biodiversity (funds declining)
    Question. In the Development Assistance budget, funding for 
biodiversity has declined steadily from $105.89 million in 1995, to 
$57.3 million in 1998. What has been the effect on USAID's biodiversity 
programs?
    Answer. Biodiversity, like many other USAID development sectors, 
has suffered the consequences of the Agency's significantly reduced 
discretionary budget. The Agency maintains an important leadership role 
in biodiversity and continues to provide the intellectual direction 
that catalyzes other donors to adopt successful USAID conservation 
strategies and methodologies. However, the cumulative effects of 
budgetary declines will impact the Agency's ability to address threats 
to biological diversity. For example:
          From 1995 to 1997, the number of missions pursuing 
        biodiversity strategic objectives fell from 29 to 24 and 
        existing programs in biologically important countries and 
        regions have been scaled back due to declining budgets.
          Targets under a new global program designed to introduce 
        innovative techniques to conserve a representative array of the 
        world's ecosystems fell from 15 globally significant sites 
        scheduled to be placed under improved management to seven sites 
        following budget reductions.
                          indonesian elections
    Question. Indonesia is scheduled to have historic parliamentary 
elections on June 7th, and it is my understanding that USAID has been 
providing assistance--through both Indonesian and U.S.-based non-
governmental organizations--to support preparations for these 
elections. Statements by Secretary of State Albright and other 
Administration officials indicate that the U.S. is planning to spend 
approximately $30,000,000 in support of the June elections, and 
organizations such as the International Republican Institute, the 
National Democratic Institute, Internews, the Asia Foundation and the 
Solidarity Center have been provided USAID funding to help Indonesians 
prepare for the upcoming vote. Recently, Dr. Amien Rais--a leading 
Indonesian opposition figure--visited the United States and commented 
on the need for the United States to send stronger messages in support 
of the democratic development process in Indonesia. He specifically 
mentioned international observers as an important message-sending 
device.
    Is USAID planning to fund U.S. observers for the Indonesian 
elections? If so, what type of observer mission does USAID foresee? If 
not, what is USAID's rationale for not utilizing this valuable means of 
expressing our support for and concern about the democratic development 
of Indonesia?
    Answer. Indonesia's national elections scheduled for June 7, 1999 
will be the country's first competitive elections in more than 40 
years. The challenges for the Indonesian Government and election 
administrators are daunting. USAID is pleased to be funding U.S. 
observers for this historic election. We believe that free and fair 
elections are of great significance for the political stability and 
economic recovery of Indonesia. USAID will be providing funding for the 
National Democratic Institute (NDI) to deploy about 80 U.S. observers. 
The International Republican Institute (IRI) has decided to fully 
engage their own internal staff on election day, as well as conduct 
pre-election assessments. Former President Carter will lead NDI's 
delegation.
                          women in development
    Question. In addition to the funds provided to the Women in 
Development Office, please detail any additional funds going to other 
parts of the Agency that are contributing to women's improvement. How 
do they fit into USAID's overall WID strategy?
    Answer. USAID's overall Women in Development (WID) strategy is to 
mainstream gender concerns into all of our programming to ensure the 
greatest impact on women. This means that the vast majority of funds 
directed to improving the status of women are programmed through USAID 
field Missions and central bureaus, not just through the Office of 
Women in Development.
    From FY 95 to FY 98, for example, we spent over $740 million per 
year, on average, in improving women's status through programs in 
health, nutrition, family planning, economic growth, education, 
democracy and governance, and the environment. This reflects the extent 
to which a main consideration in USAID programming is whether and how 
programs will affect women, and in each region of the world we have 
seen positive impacts on the status of women. I'm please to note that 
we have documented this significant Progress in a recent report to the 
Congress.

             Questions for the Record Submitted by Mr. Wolf

                          indonesian elections
    Question. Indonesia is scheduled to have historic parliamentary 
elections on June 7th, and it is my understanding that USAID has been 
providing assistance--through both Indonesian and U.S.-based non-
governmental organizations--to support preparations for these 
elections. Statements by Secretary of State Albright and other 
Administration officials indicate that the U.S. is planning to spend 
approximately $30,000,000 in support of the June elections, and 
organizations such as the International Republican Institute, the 
National Democratic Institute, Internews, the Asia Foundation and the 
Solidarity Center have been provided USAID funding to help Indonesians 
prepare for the upcoming vote. Recently, Dr. Amien Rais--a leading 
Indonesian opposition figure--visited the United States and commented 
on the need for the United States to send stronger messages in support 
of the democratic development process in Indonesia. He specifically 
mentioned international observers as an important message-sending 
device.
    Is USAID planning to fund U.S. observers for the Indonesian 
elections? If so, what type of observer mission does USAID foresee? If 
not, what is USAID's rationale for not utilizing this valuable means of 
expressing our support for and concern about the democratic development 
of Indonesia?
    Answer. Indonesia's national elections scheduled for June 7, 1999 
will be the country's first competitive elections in more than 40 
years. The challenges for the Indonesian Government and election 
administrators are daunting. USAID is pleased to be funding U.S. 
observers for this historic election. We believe that free and fair 
elections are of great significance for the political stability and 
economic recovery of Indonesia. USAID will be providing funding for the 
National Democratic Institute (NDI) to deploy about 80 U.S. observers. 
The International Republican Institute (IRI) has decided to fully 
engage their own internal staff on election day, as well as conduct 
pre-election assessments. Former President Carter will lead NDI's 
delegation.
                        operation lifeline sudan
    Question. As you know, many of us have been concerned for a number 
of years about the limitations imposed on Operation Lifeline Sudan by 
the Government of the Sudan. The GOS routinely and arbitrarily bans 
relief flights into Southern Sudan, thereby depriving some of the 
neediest people of critical life-saving aid. OLS has been able to 
overcome these obstacles somewhat, but it is not totally reliable. In 
the past, some of my colleagues and I have urged USAID to develop 
alternative mechanisms for delivering USAID to areas underserved by OLS 
and give greater priority to funding NGOs that operate outside the OLS 
framework. What progress has USAID made in this area?
    Answer. USAID has adopted a strategy of increased support to 
organizations that operate outside OLS. In fact, support to non-OLS, 
non-governmental organizations NGOs for disaster assistance and food 
USAID has more than doubled between FY 1998 and to date this fiscal 
year. In recognition of the constraints faced by OLS last year during 
the flight ban imposed by the GOS, USAID is prioritizing the increased 
movement of relief assistance overland. USAID is supporting road 
rehabilitation activities so that more relief can be moved overland. In 
1999, USAID is providing 36,000 metric tons of commodities to NGOs and 
the World Food Program that will be transported by road into Bahr el 
Ghazal.
                 sudan relief and rehabilitation agency
    Question. Would it not be useful for USAID to consider providing 
USAID directly to the Southern Sudan Relief and Rehabilitation Agency, 
an indigenous, community-based mechanism for delivering assistance and 
strengthening local capacity?
    Answer. USAID agrees that it is important and useful to involve 
community-based organizations in the delivery of relief assistance, and 
that there is value in strengthening the capacity of such local 
organizations. To this end, USAID supports several indigenous 
organizations that are directly implementing relief and rehabilitation 
activities. These include: SuprAid, Sudan Medical Care, Rainbow, and 
the Association of Napata volunteers. USAID continues to develop 
additional methods to fund local groups through its various NGO 
partners.
    USAID does not believe that the role of the Sudan Relief and 
Rehabilitation Agency (SRRA), which is the humanitarian arm of the 
SPLM/A, is to directly manage the delivery of assistance. The SRRA's 
role is to coordinate assistance and act as a link between communities 
and international relief organizations, implement SPLM/A policies 
regarding humanitarian assistance, collect data to identify needs and 
target assistance, and monitor and evaluate projects. USAID has 
supported in the past, and continues to support, capacity-building 
efforts designed to strengthen the SRRA in these key areas.

         Questions for the Record Submitted by Mr. Knollenberg

              american educational institutions in lebanon
    Question. The American educational institutions in Lebanon are 
considered by most Lebanese and Lebanese Americans as one of the most 
important components of the American assistance program in that 
country. They have produced the national, political and economic 
leadership for Lebanon and other countries in the region. In the past 
these institutions are supported using both the American Schools and 
Hospitals Abroad program (ASHA) and a portion of the ESF provided to 
Lebanon, primarily to provide scholarships for less fortunate Lebanese 
to attend these schools. How much of the FY 99 assistance package for 
Lebanon do you foresee going toward these valuable institutions? How 
much of the FY 2000 funds do you plan to use?
    Answer. USAID recognizes the important contributions that have been 
made by educational institutions in Lebanon. Since 1977, the ASHA 
program has provided a combined total of $191,262,000 to the American 
University of Beirut, the Lebanese American University and the 
International College of Beirut. ASHA grants are based on the results 
of an annual competitive process. The FY 1999 grant application review 
process has been completed and ASHA plans to make awards in the amount 
of $1,800,000 for the American University of Beirut (AUB); $200,000 for 
the Lebanese American University (LAU); and $300,000 for the 
International College of Beirut.
    The ASHA competitive process for FY 2000 begins on June 30, 1999 
with the submission of new grantapplications. Decisions regarding 
proposed awards cannot be made until the completion of that competitive 
review process.
    USAID agrees that the universities are among our important partners 
in working toward Lebanon's recovery from the war and future 
development. ESF funds were used briefly in he early 1990s for 
scholarships only at the Lebanese American University. In 1994, and 
again in 1997, USAID and the universities agreed to a partnership under 
which ESF funds would be provided in response to the universities' 
grant proposals for activities and equipment that enabled the 
universities to contribute to Lebanon's development in such areas as 
environment and economic development. USAID believes that this 
partnership has been very successful. Under this understanding, the two 
American universities have priority consideration of proposals, without 
the competition required of other grantees, so long as those proposals 
fit within the 1997-2000 strategy that was jointly prepared by USAID 
and the Lebanon partners, including the universities.
    USAID has granted almost $3.4 million of ESF to AUB since 1997, and 
almost $1 million to LAU. AUB currently manages three major activities 
that it designed and USAID funded. USAID is now exploring several new 
areas with the universities. AUB currently has a pipeline of over $1 
million, and the LAU has advised USAID that the LAU economic reform 
program does not require funding until early in FY 2000. USAID's 
programming for FY 1999 and FY 2000, as in other years, is based upon 
the needs of activities and proposals that support the program's 
strategic objectives. No specific funds are earmarked for any recipient 
in advance.

            Questions for the Record Submitted by Mr. Forbes

                     the future of u.s. foreign aid
    Question. Mr. Atwood, in the long run do you foresee the ability of 
the United States to gradually reduce the amount of development 
assistance that it provides around the world? If so, to what do you 
attribute this? If not, will there be an increased need for U.S. aid or 
will it stay the same? How might this impact future USAID budget 
requests? Should the international development banks assume a greater 
role in the development process? Might this harm America's diplomatic 
influence around the world?
    Answer. You have posed a number of interesting and challenging 
questions. In response. let me lay out the following key points.
    U.S. aid for development has diminished steadily over the past 
forty years in both nominal and real terms. It has diminished sharply 
relative to the U.S. budget, to less than \1/2\ per cent. (By 
comparison, the Marshall Plan, aimed mainly at reconstruction, consumed 
almost 10% of 1949-52 federal expenditures. ODA in 1960-61 amounted to 
about 3.1% of federal outlays). It has declined relative to U.S. 
national income (now around 0.1%, compared with 0.55% in the early 
1960's), and relative to aid provided by other countries. In the 1950's 
and early 1960's the U.S. provided around half of total Official 
Development Assistance. In 1996, the U.S. share of the total was 17%.
    To some extent these declines are justified both by greatly 
increased aid efforts by other donors, and by ``graduation'' of 
advanced developing countries from reliance on developmental foreign 
aid. Indeed, of some twenty-five development graduates, nine have 
become donors of foreign aid. These are welcome trends, and speak to 
the success of the international aid effort under U.S. leadership. We 
expect the ranks of development aid graduates to continue to increase, 
and we expect a substantial number of other developing countries to 
continue making significant progress.
    At the same time, the world is becoming increasingly interdependent 
at an accelerating pace. The U.S. has a clear stake and national 
interest in whether and how needy countries surmount problems such as 
transition from Communism, crisis prevention, and a host of global 
issues (environment, population, infectious diseases, peace, migration, 
narcotics) and other specific foreign policy concerns. Foreign 
assistance has played an important role in addressing these issues.They 
have created additional substantial demands on foreign aid beyond those 
of ``traditional'' third-world development.
    Our declining ODA levels are causing us to lose our world 
leadership role among donors, even as we are still clearly the richest 
country and a generous people. For instance, this year the U.S. lost 
chairmanship of the DAC and UNDP.
    Trends in U.S. foreign aid overall will depend on trends in these 
and other possible claims on foreign aid: and on continued U.S. 
willingness to play a lead role in the international community in 
responding to the sorts of problems mentioned above and protecting U.S. 
interests. Overall, requirements for U.S. foreign aid have clearly been 
increasing rather than subsiding. Diminishing resources for U.S. 
foreign aid is not supportive of U.S. global leadership.
    The international development banks are very important and we 
support their essential role. However, they are not a substitute for 
bilateral assistance, both because they are less flexible (e.g. in 
working with private and civil society organizations in addition to 
governments, and in quick responses to crisis situations) and because 
they are not as directly linked to U.S. foreign policy interests as is 
the bilateral aid program.
                            fiscal oversight
    Question. Mr. Atwood, there are many in Congress who wonder about 
USAID's ability to maintain adequate fiscal oversight over its many 
projects around the world. Can you comment on the status of fiscal 
management within USAID and offer a prognosis for future developments 
with respect to this topic? Is there some action that can be taken by 
Congress to ensure that more of our assistance dollars reach the 
intended recipients rather than Washington contractors? Does the rise 
of micro-enterprise projects bode well for the cause of financial 
oversight or could it cause more potential problems?
    Answer. With regard to fiscal management, we are taking every 
precaution to ensure that all funds for which we are responsible are 
properly used and accounted for. We determined that our current 
accounting system does not comply fully with federal accounting 
standards and, for that reason, we are replacing the system with a new 
off-the shelf system. In addition, we have made provision for cross-
servicing of financial record-keeping by other agencies where it is 
cost-effective to do so and for outsourcing to the private sector of 
certain other accounting functions. With these improvements, I believe 
we will be able to continue our prudent fiscal management and also 
achieve compliance with federal accounting standards.
    Benefits purchased with assistance dollars are provided to intended 
recipients of assistance. The contractors and private voluntary 
organizations paid with these funds are held responsible for producing 
demonstrable improvements for their intended recipients in accordance 
with strategic plans that are carefully thought out with the 
participation of the recipients.
    USAID-supported micro-enterprise projects have provided the first 
private sector opportunities for many thousands of individuals in all 
geographic regions. In FY 97, such programs had 1.4 million active 
borrowers and 2.1 million savers through hundreds of institutions. Such 
programs will become too great a management burden if cuts in technical 
staff continue. Decisions to increase these programs should therefore 
be left to individual Missions.

           Questions for the Record Submitted by Mr. Kingston

                  expanded threat reduction initiative
    Question. I would like to hear more abut the $241 million request 
for the Expanded Threat Reduction Assistance Initiative. If I 
understand them correctly, I am supportive of the goals of this 
initiative, but please clarify how USAID's portion of this general 
effort, which is now split among at least three cabinet departments is 
coordinated with Department of Defense and Department of Energy 
initiatives. Is there some kind of central administrative clearinghouse 
for all this? I hope we are able to avoid wasteful duplication of basic 
administrative functions that could result from splitting this 
responsibility among so many government entities.
    Answer. The State Department Office of the Coordinator for U.S. 
Assistance to the New Independent States (S/NISC) acts as a 
``clearinghouse'' for the multi-agency Expanded Threat Reduction (ETR) 
activities. S/NISC develops the final assistance budget for the region 
in coordination with the various USG entities. During the budget 
development process, S/NISC makes every effort to ensure that there is 
coordination, not duplication. USAID does not directly administer ETR 
funds. Where USAID activities can further the goals of ETR, these 
activities are coordinated with and complement other agencies' ETR 
efforts.
    The multi-agency ETR Initiative encompasses a number of U.S. 
assistance programs proposed for the Departments of State, Energy, and 
Defense. There is no duplication of functions, but a carefully 
targeted, coordinated, and complementary set of programs, run by 
different agencies, which are in U.S. national security interests.
    The economic crisis that affected Russia and the NIS region over 
the past year increased the risks of proliferation of weapons of mass 
destruction and weapons expertise.
    Building on existing programs sponsored and funded by the 
Departments of State, Defense, and Energy, the Administration is 
seeking $4.5 billion over the next five years for high priority 
security, arms control, and nonproliferation assistance funds to help 
Russia and the other NIS countries address the security implications of 
the economic crisis. We will also encourage other nations to provide 
complementary assistance.
    Each agency has separately included elements of the ETRI in its 
respective budget requests and would continue to implement programs 
separately, but in coordination with other related activities. In FY 
2000, the Department of State is requesting to administer $250 million 
in ETR funds. Of this amount, $241 million are from the FREEDOM Support 
Act account and $9.5 million are from the Nonproliferation, 
Antiterrorism, Demining, and Related Activities (NADR) account. The 
remainder of the FY 2000 FREEDOM Support Act account, at a request 
level of $782 million, will fund continuing programs of USAID and other 
agencies in support of the economic and democratic transitions in the 
NIS through exchanges, partnership, regional activities, support for 
non-governmental organizations, and small business development.
    The FY 2000 request of $241 million is for programs that address 
the security implications of the economic crisis that spread to the 
region last year. This includes funding for export control programs 
(also supported in the NADR account), the Science Centers, Civilian 
Research and Development Foundation and other science collaboration and 
military relocation related assistance. Although the State Department-
administered security efforts have been increased from $51 million in 
FY 1999 to $241 in FY 2000, this has not been at the expense of the 
economic and technical assistance programs, which will be funded at 
$791 million, about the same level as last year.
    While resources are always limited, we need to provide increased 
economic, technical, and security related assistance to Russia at this 
critical time and to provide substantial assistance to the other 
countries in the NIS. These programs are complementary and their 
prospects for success are interrelated.
                         asian financial crisis
    Question. You have requested $26.5 million in development 
assistance to mitigate the Asian financial crisis. How will DA be 
targeted and spent to alleviate the financial crisis? What will this 
money be spent on?
    Answer. USAID will use the funds to address four key constraints in 
Indonesia and the Philippines: help restart business and bank 
activities; strengthen both financial and capital markets governance; 
strengthen the governance of selected public sector operations; and 
finally, bridge a few critical gaps in funding to improve the 
targeting, coverage and availability of social programs to vulnerable 
populations. For example, in restarting bank and business activity, 
USAID will provide technical assistance and training to: help 
corporations restructure debt and work out problem loans; and 
facilitate debtor/creditor agreements.
    To improve financial and capital markets governance, USAID will 
provide technical assistance and training to: improve accounting 
practices and encourage the adoption of internationally accepted 
accounting standards; strengthen Central Bank supervision of member 
banks; improve bankers' skills in risk assessment and credit analysis; 
strengthen disclosure requirements enforcement by the stock exchange.
    To improve the governance of selected public sector operations, 
USAID will provide technical assistance and training to: develop more 
transparent and accountable public sector procurement practices; 
establish a national counter-corruption reform agenda; support the 
development of coalitions of business, media, and watchdog groups that 
analyze, identify, advocate for, and monitor, legislative and policy 
reforms.
    Finally, to improve the targeting, coverage and availability of 
social programs to vulnerable populations, USAID will fund activities 
to: expand micronutrient supplementation programs for children; expand 
multivitamin programs to reduce maternal micronutrient deficiencies; 
expand training programs for health care workers, and provide technical 
assistance to strength epidemic or nutritional surveillance systems and 
improved targeting of social safety net programs.
                    africa food security initiative
    Question. $45 million of the $512.6 million requested for African 
development is for the Food Security Initiative that President Clinton 
promised in his visit to Africa last year. I presume this is geared 
toward agricultural technical assistance, because a food USAID request 
would have gone through Agriculture. Can you elaborate a little on this 
particular portion? Is USAID attempting to develop bilateral private 
partnerships (that will have the side future benefit of providing a 
market for US agriculture inputs) as part of this initiative as it does 
in other regions?
    Answer. The Africa Food Security Initiative (AFSI) is part of a 
broad collaboration among African governments, the United States, and 
other donors to promote agriculture as a means to improve childhood 
nutrition, generate incomes for rural families, and combat hunger. The 
Initiative supports expanding existing USAID bilateral and regional 
programs, building on recent successes in forming public-private 
partnerships and creating positive policy environments. Three 
approaches are taken: increasing agriculture production, improving food 
market, efficiency and access, and increasing agriculture trade and 
investment.
    AFSI, implemented at a pilot level of $30 million in 1998 and $31 
million in 1999, is already producing results. A successful farmer 
demonstration activity in Uganda, one of five AFSI countries (Ethiopia, 
Malawi, Mali, Mozambique, and Uganda), was expanded in 1998 from 8 to 
16 districts. This program tripled the sales of improved maize and bean 
seed varieties over 1997 levels to these farmers, and will result in 
increased food security for many farm households.
    Through AFSI and other initiatives, USAID is promoting close 
partnerships with U.S. agribusinesses that work to the mutual benefit 
of the U.S. businesses and Africa's farmers as solutions to constraints 
to improved food and agriculture productivity are found. The cost of 
not acting in Africa is high as food USAID costs could soar to $900 
million annually by 2005 if current trends are not changed. On the 
other hand, there is good reason to believe that investments today are 
a win-win situation for both Africa and the U.S. economy. USAID is 
committed to achieving the objectives of AFSI, in a manner which is 
consistent with Congressional support and intent as recently passed in 
the Africa Seeds of Hope Act, Public Law 105-385.
                assistance to the new independent states
    Question. USAID has been in the process of shifting the weight of 
assistance from central governments to NGO's and the private sector for 
several years now. Please provide a chart for the subcommittee which 
shows the transition of proportions of aid going to each of these 
sectors over the years since Freedom Support was enacted.
    Answer. USAID has not tracked funding provided for assistance to 
central governments compared to local governments or to non-
governmental programs and we are therefore unfortunately not able to 
provide an exact historical chart that meets the Committee's request. 
However, we can give examples where precise data is available, namely 
for Russia and Ukraine.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    In these two countries, we have moved away from activities with the 
central government as initial policy and institution-building efforts 
have ended or, in some sectors, as less-hospitable environments for 
reform have developed. In Russia, assistance to the central government 
has declined from 18 percent to 5 percent between 1997 and 1999, 
reflecting completing of some reform programs such as privatization, 
and declining opportunity to have significant policy impact in other 
areas, such as agriculture. In Ukraine, we have similarly made a 
conscious, though less dramatic, shift away from support to the central 
government, as the opportunities for centrally led reforms are not as 
evident in all sectors as in the past.
    Across the NIS, we are increasingly mindful of the need to work 
with grassroots organizations to broaden support for reform and ensure 
that the benefits of our programs impact people directly. Consequently, 
there is a greater emphasis on non-governmental work across the region. 
In Armenia and Georgia, we have recently moved from predominantly 
humanitarian assistance programs (primarily implemented through the 
governments) to technical assistance programs which necessarily also 
involves work with the governments in fundamental legal and 
institutional reform, such as energy sector reform. In Central Asia, 
there also continues to be a need to work with central governments to 
implement basic reform measures in energy, environmental reform, and 
privatization. Nevertheless, USAID is also consciously balancing its 
legal, policy, and institutional reform work with support to grassroots 
organizations in the Caucasus and Central Asia, as we are mindful of 
the need to support systemic reform from the bottom up.
                 strengthening civil society in ecuador
    Question. Will you please update your answer to my question last 
year dealing with USAID's Strengthening Civil Society Strategic 
Objective in Ecuador (SO-3). At this time last year you informed me 
that a USAID-funded local NGO had successfully engineered passage of a 
new ``amparo'' law which gives prisoners a legal remedy when their 
constitutional rights are violated. I am very interested in knowing how 
effectively this law has been implemented over the last year, 
particularly in light of Ecuador's newly-ratified constitution.
    What exactly is the new legal remedy? Does it really just amount to 
an appeal process which is just as backed up in their judicial system 
as are the original judgments (prisoners are waiting on average 2-7 
years for trails)?
    Answer. The ``amparo'' is a recourse to a judge to protect a 
constitutionally or legally guaranteed right which either has been or 
is in danger of being violated. Any citizen can request this 
protection, not just prisoners. It differs from the appeal process 
which is a request to correct some defect in a judicial proceeding. The 
``amparo'' (protection) can be requested before any judicial proceeding 
or indeed any activity at all which may affect constitutional rights is 
initiated.
    The amparo recourse was first introduced in the Constitution of 
1996. It was not used because the Constitution did not specify which 
type of judge could receive and act on the request, nor was there any 
norm regulating the application of this recourse.
    The new Constitution of August 1998 rectified this situation by 
clarifying that any judge at all could receive the request for amparo. 
Also, the new constitution makes plain that no additional law or 
regulation is necessary for a request to be made and for a judge to act 
on the request. The constitutional article is applicable immediately, 
in and of itself, without the need of any additional norm.
    As a result of these clarifications, the recourse to amparo is 
being widely used in a variety of contexts by actors of all social 
strata. Indigenous groups have brought amparo against certain 
activities of oil companies thought to be harmful to the environment; 
middle class consumers have used amparo against cellular telephone 
companies who were rounding off time expenses; and private companies 
and banks have used amparo against the government concerning the 
freezing of bank accounts. Judges dislike the measure because it is 
adding to their work load (probably a sign of its success).
    Question. Also, what is the status if the proposed new law 
developed with USAID assistance you mentioned last year to give accused 
prisoners an opportunity to cross examine their accusers? I can tell 
you from experience of one of my constituents that if this is indeed 
law now, it is not being implemented.
    Answer. This question refers to the new Criminal Procedures Code 
being presently debated in Congress. The new Code is expected to be 
passed by August of this year. USAID is providing assistnace to the 
drafters of the Code through an NGO (Corporacion Latinoamericana de 
Desarrollo--CLD) to work with the Congressional Committee and other 
members of Congress to complete the second and final debate on the 
floor.
    Question. If it has not been enacted, what technical assistance is 
USAID providing now to get at this problem and what are the chances of 
enactment?
    Answer. Not applicable as it is expected to be passed. See above.
                              tuberculosis
    Question. Over the last two years, USAID has received approximately 
$12 million for TB through the Infectious Disease Initiative of the 
Child Survival account. What is your request for TB for FY 2000
    What percentage of the $12 million is actually getting to patients?
    Answer. In FY 2000, USAID's request for infectious diseases within 
the Child Survival and Disease Program Fund totals $50 million. We 
expect that roughly $12 million of that will be devoted to 
tuberculosis. The balance of the $50 million for infectious diseases 
supports our efforts to reduce malaria and the spread of antimicrobial 
resistance, and to strengthen capacity for surveillance and response. 
All of USAID's funds directly or indirectly benefit patients. Funds 
allocated to specific countries (e.g., India, Russia, Kazakhstan) 
directly benefit TB patients through the establishment and 
implementation of prevention and control efforts, specifically DOTS 
(Directly Observed Treatment, Short-course) programs. These programs, 
endorsed by international health experts and agencies, encompass a 
strategy of enhanced clinical and laboratory diagnostic and treatment 
practices, improved notification services, effective case management, 
health education, and monitoring and analysis of data, and result in 
improved cure rates. Other programs funded by USAID include evaluation 
of alternative treatment regimens, training of laboratory and clinical 
providers through the development of standardized guidelines, teaching 
materials, and courses, and support for the development of new 
diagnostic techniques appropriate for use in developing countries. 
Surveillance activities funded by USAID also benefit patients by 
indicating areas of highest disease prevalence and pockets of multi-
drug resistant disease, so that diagnostic and treatment activities can 
be tailored to local needs of communities and patients.
                        biotechnology assistance
    Question. It appears that there is a growing perception 
internationally that biotechnology and commercial products making use 
of biotechnology are solely benefiting the United States and are not 
beneficial to the developing world. Technological developments coming 
out of biotechnology research could provide more bountiful, 
environmentally sensitive food production in the 21st Century in the 
developing as well as the developed world. I assume USAID supports 
reaching out to the developing world through partnerships with U.S. 
universities and companies to bring the benefits of biotechnology to 
developing countries? Is that correct?
    Answer. Yes, that is correct. USAID has been supporting these kinds 
of partnerships, with total funding amounting to roughly $10 million 
over the past few years. In September 1991, USAID awarded a cooperative 
agreement to the Institute of International Agriculture at Michigan 
State University as the lead in a consortium of institutions to 
implement a new phase in its support of agricultural biotechnology. The 
Agricultural Biotechnology Support Project (ABSP) has taken an 
integrated approach, combining applied research, product development, 
and policy development--primarily biosafety and intellectual property 
rights (IPR)--to help developing countries use and manage 
biotechnology. This program was recently renewed through September 
2001.
    ABSP operates on the premise that, if developing countries are 
provided the tools, biotechnology offers new opportunity to realize the 
benefits from their diverse genetic resources. Those genetic resources 
serve as bargaining power in bringing in private sector investment and 
technology transfer.
    This is illustrated by the experience of the ABSP Project in Egypt 
where Pioneer Hi-Bred has a collaborative agreement with an Egyptian 
institution, exchanging training and technology transfer for the 
opportunity to license potentially important pest control genes from 
Egypt. Along similar lines, the INBIO-Merck Pharmaceutical agreement in 
Costa Rica and the International Consortium of Biodiversity Groups, a 
joint program of the NIH and NSF, have a struck deals between 
developing countries and the pharmaceutical industry to exchange 
technology transfer and biodiversity conservation funds for access to 
potentially profitable genetic resources.
    The ABSP project has research and product development 
collaborations with Costa Rica, Egypt, Morocco, Indonesia and Kenya 
focusing on the application of plant biotechnology to production 
constraints in food crops such as banana, maize, pineapple, potato, 
sweet potato, and tomato. Private sector partnerships are with DNA 
Plant Technology, Garst Seed Co., Pioneer Hi-Bred, Asgrow Seed Co., 
Monsanto Co., and the Biotechnology Industry Organization in the U.S., 
with Fitotek Unggul in Indonesia and with Agribiotecnologia de Costa 
Rica in Costa Rica. Collaboration and the flow of information is not 
unidirectional or confined to one sector.
    In addition to applied research and development, the ASBP project 
allocated significant resources to addressing policy issues which 
affect the adoption of biotechnology, particularly in the areas of 
biosafety and intellectual property.
      biotechnology assistance (working with u.s., based research 
                              competition)
    Question. Non-profit groups like the Consortium for Plant 
Biotechnology Research (CPBR) have had great success in bringing 
together university scientists, companies, and governmental agencies 
here in the U.S. to produce high quality, peer-reviewed, commercially-
relevant biotechnology research. CPBR has also been successful in 
achieving substantial private matching funds from companies for its 
U.S.-based research competitions. What is the Agency's view on the 
concept of working with the CPBR to undertake an international 
biotechnology research competition that would bring together academic, 
biotechnology companies from the U.S. and around the world, and 
governmental agencies from the U.S. and developing countries to work on 
pressing agricultural and related issues through biotechnology.
    Answer. USAID is supportive of competitive research and bringing 
the technical and financial resources of the U.S. private sector to 
bear in partnership with U.S. and developing country research 
institutions. USAID currently funds work in biotechnology research and 
development activities that engage U.S. universities, government 
agencies, and biotechnology companies in a research and policy 
development agenda. While USAID in principle welcomes the opportunity 
to expand partnerships and leverage the resources and expertise of such 
groups as the Consortium for Plant Biotechnology Research (CPBR), we 
would need to explore in more concrete detail with the group where 
there specific interests and expertise might be most usefully employed.

            Questions for the Record Submitted by Ms. Pelosi

                                hiv/aids
    Question. Last year the number of HIV/AIDS cases around the world 
increased by over 15%. The Administration's FY 2000 $127 million 
request for addressing this global crisis represents less than a 2% 
increase from last year's levels and does not include a continuation of 
the $10 million included in the emergency supplemental to address 
children and HIV/AIDS. Given the devastating impact of AIDS on the 
economies of Africa, why is the Administration not proposing to do 
more?
    Answer. USAID continues to be the major donor for the international 
response to the global AIDS pandemic. In fact, USG contributes nearly 
four times as much to HIV/AIDS in the developing world as the next 
bilateral donor (Netherlands). The USG cannot, should not, bear the 
entire burden for the response to the global pandemic. Currently, there 
are a number of initiatives underway to bring together other bilateral 
and multilateral donors, the World Bank, the private sector, 
foundations and most important, host country governments to increase 
the available resources. In fact, on April 23 there was a meeting of 
all of the major HIV/AIDS bilateral donors to address this critical 
issue of resources.
    It is also important to note that there is a myriad of demands on 
the limited development assistance budget. We must continue to assess 
these many competing issues to ensure that we have balanced programs in 
individual countries.
                       cross border tuberculosis
    Question. We understand that a USAID assessment team is conducting 
a study of Tuberculosis in Mexico this week at the request of this 
Committee. Based on preliminary information, do you see ways that 
domestic health agencies could contribute more directly to protecting 
American health from risks posed by cross border TB?
    Answer. Preliminary findings of the USAID assessment of Mexico's TB 
program indicate a number of areas in which domestic governmental and 
non-governmental agencies might collaborate on tuberculosis control 
activities which would help protect the American public. The primary 
focus of the newly developed strategy is to enhance tuberculosis 
prevention and control activities in Mexico to mitigate the disease 
within the country and thereby decrease the potential for cross border 
transmission. Agencies that have been identified which could contribute 
to this effort include the Centers for Disease Control and Prevention 
(CDC), The Gorgas Institute, Ten Against TB, Migrant Clinicians 
Network, and non-governmental organizations (NGOs) such as Project HOPE 
and Project Concern International.
    CDC currently supports border TB projects on the U.S. side through 
cooperative agreement funds awarded to Texas and California. These 
projects greatly assist efforts to implement effective diagnostic and 
treatment policies in these areas and also facilitate the transfer of 
patient data between countries to help ensure complete and timely 
follow up.
    Plans are already underway for the Gorgas Memorial Institute, with 
USAID support, to help strengthen Mexico's national TB control program 
performance through operational research on Directly Observed 
Treatment, Short-course (DOTS) and the prevention of drug resistance. 
This will include establishment of a center of excellence for 
operational research and training.
    Several NGOs (including Project HOPE and Project Concern 
International) are currently engaged in border projects, to assist TB 
prevention and control efforts by augmenting and expanding DOTS 
activities in Mexico.
    Ten Against TB is an organization comprised of TB representatives 
from each of the four American and six Mexican states on the border. 
This organization has the potential to play a key role in facilitating 
and coordinating activities, fostering communication, and identifying 
areas for future collaboration.
                             health systems
    Question. In your testimony, earlier this month before the House 
International Relations Committee, you spoke of USAID's inability to 
accept vaccine DONATIONS from the U.S. private sector for developing 
countries because of the need for a strong health infrastructure in 
these countries to be able to deliver the treatments. (I believe you 
cited tuberculosis as an example.) Please explain how proposed cuts in 
the FY 2000 budget to the ``other health'' line item reconciles with 
the need to strengthen the health infrastructure of our donor 
countries? What all is included in this budget line?
    Answer. Under the budget category for ``Other Health,'' (now called 
Health Promotion) funds are directed to the Agency's sustainability 
objective of assuring the long-term availability, efficiency, quality, 
and accessibility of health and nutrition programs and for some aspects 
of maternal health. Under the FY 2000 budget, ``Health Promotion'' was 
reduced from $36 million to $32 million to deal with the greater 
pressure and need for HIV/AIDS funding ($2 million) and Basic Education 
funding ($2 million).
    With limited overall resources, these allocations were made to 
cover high priority and urgent needs in the field. While having less 
money available in the Health Promotion category does reduce USAID's 
ability to support the health system strengthening activities which are 
so critical to sustaining programs like tuberculosis control, USAID is 
trying to balance competing needs within the overall Child Health 
Survival (CHS) account.
                      brazil environmental funding
    Question. A recent article in the Washington Post detailed the 
problems Brazil is having maintaining spending from its own budget for 
environmental mitigation given the financial crisis there. You will 
soon be faced directly with the challenge of helping Brazil meet many 
challenges. My question is what can the US do to help in the 
environmental mitigation programs.
    Answer. While it is true that the Government of Brazil (GOB) must 
make tough choices as it attempts to undertake budgetary belt 
tightening, in recent conversations with USAID, the Minister of 
Environment stated that the GOB counterpart support to the large 
international environmental program (PPG-7) will continue to be 
available. In anticipation of possible GOB budgetary constraints, 
USAID's commitment to the PPG-7 program (approximately $2.0 million 
annually, up to a total of $10.0 million), as well as its other 
environmental activities in Brazil, support U.S. and local NGO 
implementation of environmental programs, thereby reducing the direct 
effects of possible fluctuations in public sector funding to this 
sector. Also, through USAID encouragement, the Minister of Environment 
will be recommending to the Minister of Finance that the GOB request 
debt relief from the US Treasury under the FY1999 Tropical Forest 
Conservation Act (TFCA). This will assist in achieving common 
objectives on decreasing deforestation and reducing green house gases, 
with the added benefit of generating local currency to finance GOB's 
commitments to environmental actions.
                         child labor initiative
    Question. USAID is requesting $10 million as part of a three-year 
program to support several pilot projects in addressing the problem of 
child labor throughout the world. Can you detail the plans for this 
initiative and tell us where these pilot projects will take place.
    Answer. The proposed initiative named ``School Works!'' will 
provide an additional $10 million for a focused and coordinated effort 
to combat abusive child labor. USAID intends to maximize the impact of 
this effort by working with the Department of Labor (DOL) and the 
International Labor Organization's (ILO's) International Program for 
the Elimination of Child Labor (IPEC), as well as other donors such as 
UNESCO and the United Nations Children's Fund (UNICEF).
    School Works! is the first time that the U.S. Government has made 
the reduction of child labor through improved access to basic education 
a specific focus of U.S. development assistance. USAID already invests 
$100 million yearly in basic education activities that target 
underserved and poor children in the developing world--those most at 
risk of becoming involved in abusive and exploitative working 
situations.
    The initiative will complement current work of the DOL and IPEC. 
The USAID program will build on their work by focusing on enrolling and 
retaining high-risk children in effective basic education programs.
    ``School Works'' will work with IPEC to identify target locations, 
and to design and implement basic education demonstration projects 
appropriate to targeted situations. Programs might include incentives 
and basic education services to convince parents to enroll and keep 
children in school, and support for activities to implement policies 
for the welfare and protection of children. This program will also help 
to create a toolkit of effective educational innovations that reduce 
abusive child labor, and to widely share information and results among 
nations and agencies.
                             climate change
    Question. There has been and continues to be a considerable amount 
of misinformation about the President's Climate Change Initiative and 
its relationship (or lack thereof) to the Kyoto Protocol. Explain how 
the $290 million USAID will spend on environmental programs will help 
nations achieve economic growth while reducing greenhouse gases and 
cleaning up urban pollution.
    Answer. Of the $290 million of development assistance (DA) funds 
USAID will spend on environment programs in FY 2000, $112 million is 
attributed to activities that address climate change issues. An 
additional $38 million is anticipated from Economic Support Funds 
(ESF), and Support for East European Democracy (SEED) funds for 
climate-related activities. The total target for activities that 
address climate change is $150 million for FY 2000, as promised in 
President Clinton's commitment to developing countries through USAID's 
Climate Change Initiative.
    USAID has been working to combat the threat of climate change since 
1990. The Agency's strategy has targeted interventions in the 
agriculture, biodiversity, energy, forestry, and urban sectors, to 
decrease net emissions of greenhouse gases while meeting USAID's 
sustainable development objective. In addition, natural resource 
efforts, economic growth programs, and activities in the health sector 
have been implemented in developing countries to reduce vulnerability 
and increase the capacity to adapt to climate-induced change.
    USAID's climate change strategy, drafted in 1994 in response to 
Congressional request, and revised in 1997 to target twelve key 
countries and regions, implements a ``win-win'' approach to climate-
related intervention. The Agency's climate change activities are those 
that provide climate change benefits in addition to their primary 
objectives of increased energy efficiency, cleaner energy production, 
more effective natural resource management and reduced urban pollution. 
By working through existing land-use, energy and urban activities, 
USAID leverages existing resources to address climate change and 
assures a greater level of sustainability by addressing climate change 
in conjunction with economic development and sector-specific goals. 
There has been no reduction of other programs in order to fund climate 
change activities.
                         climate change (kyoto)
    Question. Explain how USAID's programs in this area support the 
goals of KYOTO, but have no direct relationship to the Protocol.
    Answer. The Kyoto Protocol to the United Nations Framework 
Convention on Climate Change (UNFCCC) proposed specific binding 
commitments to reduce greenhouse gas (GHG) emissions by developed 
countries as well as several market-based mechanisms to reduce GHG 
emissions and respond to the threat of climate change. The market-based 
mechanisms include emissions trading and joint implementation of 
emissions-reducing activities (JI) between countries that have agreed 
to emissions reduction commitments (Annex 1 countries), and engagement 
on emissions-reduction activities between Annex 1 countries and 
developing countries through a Clean Development Mechanism (CDM). It is 
not possible to implement the Kyoto protocol at this time because it 
has not been ratified and none of the mechanisms are operational. The 
CDM may be approved for implementation as early as 2000, but the first 
compliance period for meeting targets agreed to in Kyoto doesn't begin 
until 2008.
    USAID's climate change strategy was formulated before Kyoto and has 
not changed substantially since. The Agency remains committed to ``no 
regrets'' activities that provide climate benefits through energy, 
natural resource and urban activities that promote sustainable 
development. As part of that strategy, we are continuing to provide 
technical assistance and training to developing countries seeking to 
understand the scientific, environmental, and economic consequences of 
participation in the UNFCCC, which the U.S. has signed and ratified.
            climate change (international resource program)
    Question. Explain the International Resource program between U.S. 
cities and cities in developing and transitional countries.
    Answer. USAID's Resource Cities Partnership program, implemented in 
conjunction with the International City/County Management Association 
(ICMA), facilitates technical partnerships between U.S. cities and 
cities in developing and transitional countries to support improved 
urban management. Resource Cities facilitates the exchange of teams of 
local government officials--city managers, mayors, and department 
heads--who contribute their time pro bono between U.S. and overseas 
cities over a period of 18-24 months. The technical focus of each 
partnership is driven by the demands and needs of the target overseas 
cities, and in the past has addressed areas such as solid waste 
management, organizational development, revenue generation, budgeting, 
historic preservation, downtown revitalization, and water and 
wastewater treatment.
    Since the commencement of the program in May 1997, 31 partnerships 
have been formed to deliver ongoing technical assistance in a wide 
range of sectors. The program is expected to double in the next two 
years.
    The next round of Resource Cities partnerships, which will commence 
in July 1999, is expected to include partnerships that provide targeted 
assistance to support cities' efforts to achieve global climate change 
(GCC) objectives. Activities are likely to focus on ways in which 
cities can reduce urban pollution, improve air quality, and reduce 
greenhouse gas emissions.
    Past partnerships have led to significant changes in urban 
management overseas, such as the implementation of a new financial 
system in cities in Swaziland, the development of a walking tour for 
economic development in an historic port town in India, and the 
implementation of a long-term plan for integrated solid waste 
management in a city in Guatemala.
                office of transition initiatives funding
    Question. $55 million has been requested for the Office of 
Transition Initiatives, which is funded within the Disaster Assistance 
account. OTI focuses on special case recovery from disasters from 
political conflicts, and has been instrumental in transition programs 
in Guatemala, Bosnia and Rwanda.
    Explain why these funds are requested in the Disaster Assistance 
Account (which has the broad authorities necessary) for what could be 
termed non-traditional disaster assistance.
    Answer. The proposed FY 2000 funding level for OTI is the same as 
the actual program appropriated by Congress in FY 1999. However, the FY 
1999 level was divided between International Disaster Assistance ($40 
million) and Development Assistance ($15 million). The same $55 million 
total is proposed for funding for FY 2000, entirely from the Disaster 
Assistance account. The Administration believes Disaster Assistance is 
the appropriate account for funding OTI actitives.
    During this decade, there has been a seeming by steady growth in 
the number and humanitarian impact of man-made disasters. Some of the 
man-made disasters have been sparked by a natural disaster such as a 
drought or flood, but in all cases some form of political or ethnic 
crisis has intensified the humanitarian impact of the disaster. 
Providing effective relief and assistance which can help ensure a 
successful transition to sustained recovery in these complex disasters 
often requires interventions different from traditional disaster 
relief. For example demobilization of soldiers; demining of critical 
areas; assuring effective community participation in small-scale 
reconstruction projects; assistance to independent media and to civil 
society organizations to support peaceful, democratic transitions; and 
training of local officials and leaders in ethnic reconcilitation are 
all interventions which can be critical to successful disaster relief. 
Even in natural disasters such as Hurricane Mitch, there can be 
concerns, such as the potential for corruption, which can have a 
critical impact on the effectiveness of U.S. disaster response.
    There are many explanations for why there are now so many complex 
disasters. Some believe the end of the Cold War removed the discipline 
of super-power competition, freeing the eruption of ethnic and civil 
conflict. Some believe the competition for resources in a world of 
rapid population growth is the cause. Whatever the explanation, there 
does seem to be a growing number of these complex disasters. The Office 
of Transition Initiatives (OTI) was established to develop expertise in 
response to such disasters. OTI has been successful in many 
interventions, from Rwanda to Indonesia to Bosnia to Guatemala. As a 
result, the prospects of successful recovery in these complex disasters 
have improved greatly.
    The Administration believes the apparent need to deal effectively 
with complex disasters and the success of OTI's activities justify 
continuing activities at the $55 million level. At the same time, it is 
important to note that priority in use of funds from the International 
Disaster Assistance (IDA) account will continue to go to life-saving 
disaster response. It is also important to note that this proposal does 
not reduce funding available for the Office of Foreign Disaster 
Assistance, which administers more traditional disaster relief 
programs.
             transition from oti to regular usaid programs
    Question. Explain how programs in places such as Rwanda and Bosnia 
transition from OTI funded programs to regular USAID programs?
    Answer. In most countries, OTI usually defines an exit strategy at 
the start of its programs, but that strategy can evolve as the 
situation changes. When appropriate, OTI aggressively pursues hands-off 
plans, whereby critical elements of a program are picked up by other 
parts of the U.S. Government or are supported by other donors.
    OTI has learned that by focusing on coordination and partnerships 
with other donors and within USAID at the initial stages of a pilot 
program, the transition to regular USAID development programs is 
facilitated. Coordination has included occasions where OTI includes 
other partners on initial assessments of transition opportunities in 
countries; integrated strategic planning; co-funding of projects; 
sequencing of funding; and agreements to pick up the funding of 
successful and possibly sustainable transition activities.
    Examples of such coordination and partnership include the 
following: In Rwanda, OTI's pilot efforts with women's associations 
proved to be so successful that the USAID Mission co-funded some 
activities. As these activities continued to demonstrate significant 
impact in the lives of women and their families, the Mission has agreed 
to continue funding aspects of this project after OTI's funding ends. 
Also in Rwanda, the World Bank, United Nations Development Program and 
the USAID Mission will all support various elements of the local 
governance activity initiated by OTI.
    In Bosnia, OTI supports civil society organizations in their 
efforts to promote democratic change. Examples of such activities have 
included: organizing public forums, debates and peaceful 
demonstrations; and publishing and distributing pamphlets and other 
written materials. OTI has awarded grants to over 150 civil society 
groups within the former Yugoslavia. Some of OTI's civil society 
activities will be continued through the USAID Mission's democracy and 
governance portfolio.
    In Angola, USAID's Africa Bureau has agreed to pick up the OTI-
funded Voice of America (VOA) program. Because media can play a 
critical role in helping a culture of peace take root, OTI supported 
VOA radio programming. This has provided Angolans with objective news 
and programs focused on conflict resolution, local governance issues, 
and human rights information. A recent survey showed a listenorship of 
59%--making this one of the most listened to VOA programs in the world.
    And in Indonesia, OTI's media strategy has been adopted by the 
USAID Mission as part of the sustainable development programming. Thus, 
OTI has been able to provide initial critical support to local media 
outlets, in order to multiply the impact of reform messages and advance 
national debate on the transition process.
                           operating expenses
    Question. USAID's budget request for Operating Expenses of $507 
million is a slight increase of FY 1999, but does not begin to address 
the increasing costs it faces. The increased costs combined with static 
budgets have brought about the need for staff reductions. These will 
come on top of the 35% staff reductions that have occurred since 1992. 
Mr. Atwood can you discuss the staff and cost cutting measures you are 
contemplating and give us some idea of their effect.
    Answer. USAID can afford further staff reductions only where there 
is a reduction in the Agency's management burden, such as will occur 
from the closing of the bilateral program in Hungary this year and the 
programs in Lithuania, Poland, and Slovakia next year. We are also 
looking for ways to further increase management efficiencies in 
Washington and will examine the possibility of centralizing some 
program and administrative support functions into regional hubs. With 
these efforts, we believe a reduction in U.S. direct hire staff of 
about 70 should be possible without serious impacts on program delivery 
and oversight. We cannot, however, absorb additional unanticipated 
management demands without additional OE resources.
                          usaid security costs
    Question. Comment on your security costs and how this request 
addresses your needs. My impression is that State has not been 
cooperative or sensitive to your needs having received a huge 
supplemental last year to address security problems.
    Answer. It is true that USAID currently does not have the funding 
resources available to support all of the security needs envisioned 
worldwide, including USAID's full participation in the Nairobi and Dar 
es Salaam projects. New office building construction for USAID will be 
several hundred million dollars over the next five years. USAID is 
working with FBO and the State Department's Assistant Secretary for 
Administration's Office regarding inclusion of USAID in the 3 billion 
dollar (over 5 years) supplemental under discussion at the present 
time. It is USAID'S hope that this, or any future allocation of 
supplemental funds through FBO, will specifically identify USAID's 
requirements.

             Questions for the Record Submitted by Mr. Obey

                       dairy development programs
    Question. Please advise the committee on the status of the dairy 
development programs included in last year's Foreign Operations 
appropriations. Last year, this committee provided a directive for $8 
million in funding for dairy development in FY 1999. How has USAID 
implemented the directive, and what results are anticipated from the 
projects funded under this program?
    Answer. Funds for dairy development activities are awarded on a 
competitive basis following a review of proposals by an intra-agency 
committee including technical livestock and agribusiness specialists. 
Some of the criteria on which the committee evaluates the proposals 
include expected impact, integration with the Mission's strategic and 
policy objectives, experience of the proposer in dairy development 
overseas, the extent to which the activity meets the purpose of the 
directive, and the ability to leverage other funding.
    The process to allocate FY 1999 funds for the dairy directive has 
been initiated, but we are not yet at the point of reviewing proposals. 
In general, however, the activities are expected to meet the purpose of 
the directive while contributing to the Agency's agricultural strategy.
              cross border programs in europe and the nis
    Question. Congress also directed USAID to focus more of its 
training and technical assistance resources in the NIS and Eastern 
European countries on cross border programs in order to share 
successful development efforts. Would you please enumerate what cross 
border activities USAID is carrying out?
    Answer. USAID is placing increased emphasis on partnerships and 
``East-East'' linkages to promote the continued economic and democratic 
transformation of the region. USAID's assistance vision for 2000 and 
beyond views sustainable linkages--between the countries of Europe and 
the New Independent States (ENI) and the United States as well as 
between individual countries in the region--as a cost-effective means 
of sharing talents, responsibilities, costs, risks, and rewards in the 
reform of ENI societies.
    Our long-term efforts target the institutionalization of formal 
structures and processes to exchange knowledge and experience and to 
deliver assistance. A country-to-country example of this kind of 
mechanism is the Polish-American-Ukrainian Cooperation Initiative 
(PAUCI). This program was put into place to strengthen the emerging 
cooperative relationship between Ukraine and Poland and enable Ukraine 
to take advantage of lessons learned in Poland.
    An example of sector-based programs is the newly launched Local 
Government Information Network (LOGIN), which is a regional network 
that promotes the effectiveness of local governments through education 
and the exchange of information and experiences about successful and 
replicable local government practices.
    Short-term cross-border programs include consultancies, study 
tours, workshops, seminars, or conferences, such as the recent USAID-
sponsored regional Small and Medium Enterprise and local economic 
development ``summits'' held, respectively, in Sofia and Bucharest. 
These kinds of short-term activities create relationships between 
participants and lead to the increased flow of information and ideas 
between countries that persist long after the USAID-sponsored activity 
has ended. Under separate cover, USAID is submitting a detailed report 
on cross-border linkages in Europe and the NIS to Congress in response 
to House Report 105-719.
          utilization of partnerships in graduating countries
    Question. This year, the U.S. plans to graduate three countries 
from its foreign assistance program. In preparation for this, the 
Committee directed the Office of Private and Voluntary Cooperation to 
help USAID missions in the preparation of exit strategies for 
graduating countries to fully utilize the partnerships developed by its 
programs to assure sustainable and lasting impacts. Please advise us on 
how this effort is proceeding.
    Answer. The Office of Private and Voluntary Cooperation has been 
working on the issue of exit strategies through the Non-Presence 
Countries Subcommittee of the Advisory Committee on Voluntary Foreign 
USAID (ACVFA). this ACVFA Subcommittee has worked with PVC, USAID's 
regional bureaus, and the Bureau for Policy and Program Coordination to 
develop a set of recommendations pertaining to country graduation and 
exit strategies. The recommendations are based on subcommittee members' 
practical experience, extensive discussions with USAID staff, and a 
review of a recent study by the Center for Development Information and 
Evaluation that documents the lessons learned from the Agency's 
previous experience with country graduation.
    USAID is committed to ensuring that the Agency's policy framework 
for country graduation include the ACVFA Subcommittee's 
recommendations, which are, in brief:
          Graduation planning should be rooted in a positive approach 
        to protecting and extending the legacy of prior development 
        relationships and initiatives.
          USAID's partners should participate in planning for and 
        carrying out programs, whether USAID-supported or not, that 
        will maintain USAID's legacy after graduation.
          Whenever possible, adequate lead-time (two to three years) 
        should be allowed to plan for USAID's departure.
The Agency plans to work with the ACVFA on a test-case graduating 
country to develop an exit strategy model that will guide USAID 
Missions in using the partnerships they have already built to ensure 
lasting impacts of their programs.
                                      Wednesday, February 24, 1999.

       FY 1999 EMERGENCY SUPPLEMENTAL REQUEST FOR CENTRAL AMERICA

                               WITNESSES

J. BRIAN ATWOOD, ADMINISTRATOR, AGENCY FOR INTERNATIONAL DEVELOPMENT
PETER F. ROMERO, ACTING ASSISTANT SECRETARY OF STATE FOR INTER-AMERICAN 
    AFFAIRS

                 Chairman Callahan's Opening Statement

    Mr. Callahan. Good morning. Generally we always start on 
time, but we are five minutes late this morning, so we will 
just try to make it up somehow or another.
    We have to abandon this room by noon today in order for the 
Armed Services to hold a hearing, and therefore, we are going 
to be somewhat limited with time. So we want to go ahead and 
get started.
    Today we are holding a hearing on the President's 
supplemental budget request of 955.5 million dollars for 
emergency disaster and reconstruction assistance needed as a 
result of recent hurricanes in Central America and the 
Caribbean and the earthquake in Colombia. Of this amount, 687 
million dollars are for activities under the jurisdiction of 
this subcommittee. We will focus on these programs at this 
hearing.
    The request includes $621 million for economic support for 
reconstruction assistance; $41 million for debt relief and 
restructuring through the Treasury Department; and $25 million 
for the disaster relief account.
    On a bipartisan basis, this subcommittee has strongly 
supported increased assistance for Central America and the 
Caribbean for the past 4 years. Unfortunately, we have been 
unable to convince the administration of how important we think 
this area of the world is. But I think all of you here today 
who have attended hearings in this regard understand how 
important we feel protecting countries and assisting countries 
in this hemisphere is, and we are sorry that this disaster 
assistance is necessary. But, nevertheless, I think it follows 
the pattern and the philosophy of this committee in recognizing 
the importance and need of supporting our neighbors in this 
hemisphere.
    The State Department, USAID and the Defense Department are 
to be commended for the assistance they have already provided 
to the region in the wake of the natural disasters. In 
addition, the pending supplemental request is a thoughtful and 
comprehensive approach to reconstruction, particularly in 
Central America. I want to be helpful to the administration in 
this effort.
    Even more, I want to be helpful to the people of Latin 
America who have suffered so terribly in the past 6 months. 
This is a constructive request, and I believe it can be and it 
should be considered expeditiously by the Congress. I want to 
point out, however, that we still do not have much detail on 
how the funds will be used. We will need additional and 
detailed information in order to justify to our members on the 
Appropriations Committee and to the Congress of the almost $1 
billion in supplemental funds.
    We may consider this request in full committee as early as 
next Thursday. Due to time constraints, we do not intend to 
have a subcommittee markup. I will be making a recommendation 
based upon what I hear today and in consultation with Ms. 
Pelosi and Mr. Obey. Therefore, we must have questions for the 
record answered in the next 5 days so we can have a hearing 
record for floor consideration.
    I would ask that if members have questions for the record, 
they submit them to the subcommittee staff by the close of 
business today.
    We are pleased to have two distinguished members of the 
administration with us here today to explain the $687 million 
request. We have Brian Atwood, the Administrator for the Agency 
for International Development, and Peter Romero, the Acting 
Assistant Secretary for Inter-American Affairs. We welcome both 
of you.
    When you present your statements, we will accept your 
entire written statement for the record and we ask that you 
abbreviate your opening statements as best you can.
    Ms. Pelosi.

                     Ms. Pelosi's Opening Statement

    Ms. Pelosi. Thank you very much, Mr. Chairman. I want to 
join you in welcoming our distinguished witnesses here this 
morning. I am pleased to be able to work with you as you so 
positively suggested that you wanted to be helpful to the 
administration and as you said, more importantly, to the people 
of Central America who are suffering through this.
    I look forward today to hearing the testimony on the 
administration's request for 875 million, most of which comes 
from our subcommittee, for appropriations for emergency 
disaster and reconstruction assistance for Central America, the 
Caribbean and Colombia.
    As we have all heard, Mr. Chairman, Hurricane Mitch was the 
worst natural disaster to hit the Western Hemisphere in 
recorded history, causing an estimated $10 billion in damage, 
and thousands of people died and many more were left homeless. 
This event, along with the earlier Hurricane Georges in the 
Caribbean and the more recent earthquake in Colombia, have 
brought this request for emergency assistance before us.
    So we must act expeditiously, and we must act 
cooperatively. I am blessed in my district, Mr. Chairman, with 
many people from Central America, and the outpouring of support 
for them and from the population generally in our area and 
throughout the country, demonstrates very clearly that the vast 
majority of the American people support well directed 
humanitarian assistance.
    The American people's response to this disaster was truly 
heartening and indicative not only of the widespread sympathy 
and the support for the needs of our southern neighbors, but 
again, as I say, in a more general way for well-directed 
humanitarian assistance. In our area, we had such a tremendous 
outpouring of goods and money and resources for Central America 
that it presented some challenges in getting the donations 
there.
    I hope in the course of our hearing today, Mr. Atwood, we 
can talk about how we can send a signal to the American people 
that when disaster strikes, and God willing we won't have to 
deal with many more in the future, that there is a better way 
to help and that is sending money first, because it costs money 
to send something that came out of your closet, as generous as 
an offer as that might be.
    I understand that the President will be going in March to 
Central America, and I know he will bring the good wishes and 
hopefully the resources that we talk about today, to the people 
there. I hope that he will, when he visits Guatemala, also 
express the concern of many of us here about the unresolved 
mystery of the assassination of Bishop Gerardi, who died 
shortly after releasing the commission report on human rights 
in Guatemala.
    As the chairman indicated, the request includes not only 
needed funds for reconstruction in the countries in Central 
America, but also includes funds to expand debt relief 
packages, which I think is a very important element of this 
package, and to restore defense expenditures made to provide 
immediate assistance to the region in the wake of the disaster.
    I would hope that the funds of the recovery would recognize 
the important role that women will make in this recovery and 
make in the economy of these countries. As you know, Mr. 
Chairman, when we visited there, we did see many examples of 
successful microlending projects there. And I hope that the 
assistance will reinforce the role of women in this recovery 
and also that this assistance will help in the economic 
development of the region.
    Another reason why it is not necessary to send so many 
goods there is if it displaces the market opportunity in these 
areas. Sometimes our compassion is not as well directed as it 
should be.
    I join you, Mr. Chairman, in welcoming our witnesses today, 
Brian Atwood, the Administrator for USAID. I understand he is 
moving on to other things. I hope that we will have more 
occasions to recognize him and thank him for his great 
leadership, his effectiveness, and indeed his compassion. And I 
want to join you in welcoming Secretary Romero as well.
    We will move expeditiously on this request so the critical 
reconstruction efforts can begin before the onset again of the 
rainy season. Although Hurricane Mitch was a horrible disaster, 
it has brought about the return of consensus on the Hill to 
provide significant resources for the region. Our chairman has 
been a champion in that regard and in many other regards as 
well, Mr. Chairman, for Honduras and Nicaragua in particular.
    It is my hope that the provision of this assistance becomes 
the springboard for economic and social development which lifts 
these countries out of the grinding poverty they have suffered 
under for far too long.
    With that I look forward to your testimony, gentlemen. 
Thank you, Mr. Chairman.
    Mr. Callahan. That is Ms. Pelosi.
    Mr. Atwood.

                     Mr. Atwood's Opening Statement

    Mr. Atwood. Thank you very much, Mr. Chairman, and thank 
you, Congresswoman Pelosi, for your comments as well.
    Mr. Chairman, I know that you are very strongly supported 
by the people of your district, but it is indeed intimidating 
to see who is supporting you behind you today, you have the 
entire U.S. military. It is normally intimidating for an 
administration witness.
    But I am pleased to be here today with Ambassador Romero to 
discuss the President's request for an emergency supplemental 
for Central America to respond to the hurricane that did so 
much destruction in that region and in the Caribbean. Much has 
already been said and written about these hurricanes. Many of 
the grim details are covered in my formal written testimony, 
which I have submitted for the record.
    Our government and the American people have responded to 
the suffering in Central America with the largest relief 
operation we have ever directed at any natural disaster, an 
unprecedented response in which every American can take pride. 
Here in Washington we have seen a powerful and truly bipartisan 
response. Many Members of Congress from, both parties have gone 
to Central America for a firsthand look at the devastation and 
the relief program.
    The First Lady and Mrs. Gore have led bipartisan 
delegations, and the President, as you indicated, will soon 
visit the region. Mr. Chairman, you and Congresswoman Pelosi 
have always paid special attention to this region. You and I 
traveled together to Nicaragua. We visited the countryside 
outside Managua and we saw the great progress that country was 
making in developing its agricultural sector and its economy.
    I know that you appreciate the importance of this region to 
the United States and that you are aware of the terrible damage 
this hurricane has done. All the reports have indicated that 
these countries are in crisis and will remain in crisis for the 
foreseeable future. This situation remains an emergency and our 
request is for an emergency response. There have been more than 
9,000 reported deaths and another 9,000 men, women and children 
are missing in the four countries hit by Hurricane Mitch.
    At least 3 million people were either forced out of their 
homes or saw their homes destroyed. Total damages, direct and 
indirect, have been estimated at between $7.5 billion and $8.5 
billion. In some areas, entire crops were lost. In Nicaragua, 
losses in rice, corn, beans and coffee and vegetables range 
from one-third to one-half of the total crop and even higher.
    The region's social infrastructure suffered extensive 
damage, over one-third of Honduras' 10,000 schools were damaged 
or destroyed, hospitals and health clinics were hard hit, and 
due in large part to our interventions, we have not seen the 
epidemics we feared. The danger still exists, but thus far we 
have stopped what could have been a follow-on disaster in its 
tracks.
    In the aftermath of the tragedy, the United States launched 
a relief effort that has lived up to our highest standards of 
compassion and world leadership. At one point, we had over 
5,000 U.S. personnel, civilian and military on the ground in 
Central America providing relief, short-term rehabilitation and 
medical assistance. Even as the relief operation was getting 
started, we were working to involve the U.S. private sector in 
the reconstruction campaign.
    At a December conference hosted by USAID and the White 
House, seven members of the President's cabinet met with 
leaders of more than 400 U.S. companies to discuss ways our 
government, private companies and American citizens can work 
together in the relief effort. We are matching donations of 
goods and services from U.S. firms, more than 50 so far, 
with$8.5 billion. In some areas, entire crops were lost. In Nicaragua, 
losses in rice, corn, beans and coffee and vegetables range from one-
third to one-half of the total crop and even higher.
    The region's social infrastructure suffered extensive 
damage, over one-third of Honduras, 10,000 schools were damaged 
or destroyed, hospitals and health clinics were hard hit, and 
due, in large part to our interventions, we have not seen the 
epidemics we feared. The danger still exists, but thus far we 
have stopped what could have been a follow-on disaster in its 
tracks.
    In the aftermath of the tragedy, the United States launched 
a relief effort that has lived up to our highest standards of 
compassion and world leadership. At one point, we have over 
5,000 U.S. personnel, civilian and military on the ground in 
Central America providing relief, short-term rehabilitation and 
medical assistance. Even as the relief operation was getting 
started, we were working to involve the U.S. private sector in 
the reconstruction campaign.
    At a December conference hosted by USAID and the White 
House, seven members of the President's cabinet met with 
leaders of more than 400 U.S. companies to discuss ways our 
government, private companies and American citizens can work 
together in the relief effort. We are matching donations of 
goods and services from U.S. firms, more than 50 so far, with 
the needs in Central America.
    Moreover, we estimate that more than 11 million pounds of 
food, clothing and medical supplies valued at more than $28 
million have thus far been donated by individuals, schools, 
churches, civic organizations, as well as businesses and 
corporations. As Ms. Pelosi knows, we attempted, as best we 
could, to transport much of these goods to Central America 
under the Denton program, a special provision of law that 
allows military training flights and ships to transport donated 
goods to the region.
    There was at one point an expectation that everything that 
was donated would be transported. We couldn't obviously do 
that. Under the Denton program, we stretched the law to the 
limits to get this much to Central America, but did run into 
problems, with full warehouses where there was no inventory of 
the goods.

                       inter-american development

    At the Bank's Consultative Group meeting in December, the 
donor nations pledged $6.3 billion in emergency relief and 
reconstruction. We will meet again in Stockholm in May to 
solidify these commitments for the international effort in 
Central America. Today, thanks to this great international 
effort, most people in the affected areas have food, shelter 
and running water. And in Honduras, for example, an estimated 1 
million people were displaced in the immediate aftermath of the 
hurricane, but today all but 20,000 of them have housing, and 
those are now living in schools or shelters.
    With the region's life-threatening needs largely met by the 
initial relief effort, we have entered a second phase of 
recovery which we call rehabilitation. This is a transitional 
phase during which we want to help people return to normal 
lives with regard to such needs as education, transportation 
and public health.
    Looking ahead, our goal is a reconstruction that does more 
than replace what was blown or washed away. We want to see the 
countries of this region achieve even stronger, more prosperous 
and more sustainable democratic development. Less than a decade 
ago, as you well know, most of these countries were engaged in 
civil wars that lasted for years, even decades, but now peace 
has been achieved, and with it, democracy, free elections and 
open markets. It is upon this foundation we seek to restore and 
to build upon.
    Last week, the President submitted to Congress this 
proposal for $956 million for an emergency supplemental 
appropriation, with the funding to be used for the following 
specific purposes: $283 million to restart local economies by 
repairing more than 700 kilometers of rural roads, by providing 
70,000 microenterprise loans, by providing seeds, tools and 
fertilizer for almost 5 million farmers and by helping 65,000 
hillside farmers adopt sustainable production techniques;
    $136 million for public health programs to reconstruct or 
rehabilitate more than 750 health posts and clinics, to benefit 
at least 4 million people, to provide water and sanitation 
services for nearly 4 million people, and to provide disease 
controls, surveillance and prevention for more than 17 million 
people;
    $64 million to provide technical assistance for 
environmental management and disaster mitigation, including 
land use planning, resource management, protection of ecosytems 
and replacement of destroyed harbor navigation aids in 
Honduras, Nicaragua and El Salvador;
    $55 million to repair and reequip more than 1,700 schools, 
to establish more than 6,000 open air schools, to build more 
than 6,000 new housing units, and to provide school supplies to 
more than 200,000 children;
    $42 million for reconstruction assistance in the Dominican 
Republic and other Caribbean nations hit by Hurricane Georges 
to focus on health, housing and economic revitalization;
    $12 million to help local governments manage reconstruction 
assistance, including anticorruption training, designed to 
avoid diversion or scandal in the reconstruction program; also 
$10 million for law enforcement to develop anticorruption 
programs, including internal audit-oversight mechanisms and 
automated immigration records for border crossing points;
    $3 million to continue to work with the private sector in 
the United States by targeting additional U.S. private sector 
donors, by helping coordinate delivery of donations and by 
helping monitor distribution of donations in Central America;
    $10 million to help Colombia recover from its recent 
earthquake, focusing on health, housing and schools.
    The President's proposal also includes $41 million for debt 
restructuring and relief, including $16 million for the budget 
cost of reducing Honduras' bilateral debt with the United 
States and a $25 million contribution to a Central American 
Emergency Trust Fund to help cover the cost of debt service 
owed by these nations to the World Bank and other international 
financial institutions.
    The proposal additionally includes $25 million for USAID 
for international disaster assistance of which $20 million will 
partially replenish immediate disaster relief expenditures in 
the aftermath of Hurricane Mitch. The proposal includes $188.5 
million for the Department of Defense, $132.5 million to 
replenish accounts that were used during the U.S. military's 
superb response to this emergency and $56 million to fund 
expanded U.S. National Guard and Reserve ``New Horizons'' 
exercises in the four Central American nations and in the 
Dominican Republic.
    Finally $80 million will go to the Department of Justice's 
Immigration and Nationalization Service to deal with the 
increased number of illegal immigrants coming from Central 
America as a result of Hurricane Mitch.
    These are the major elements of the President's proposal, 
and I note that the total proposed U.S. assistance to Central 
America, although substantial, represents only an estimated 10 
to 12 percent of the total needs created by the disaster. The 
total, if this $956 million request were to be approved, would 
be $1.2 billion, if you add the $305 million that we have put 
into emergency relief.
    We truly are part of an unprecedented worldwide relief 
effort. Clearly since this is very much our neighborhood, we 
are in the lead. The President's upcoming visit to Central 
America will dramatize his personal commitment to the 
reconstruction. He shares my gratitude for the bipartisan 
support this effort has received, and he has instructed all 
elements of his administration to pursue a comprehensive 
approach that addresses such related issues as trade, debt 
relief, immigration and reconstruction assistance.
    If we are to help this region move from crisis to recovery, 
we need to use the mechanisms of open markets that foster 
expanded trade. The administration has long been committed to 
the Caribbean Basin Initiative Enhancement legislation, and the 
administration will soon send a proposal to enhance economic 
growth in the region by expanding the trade benefits of the 
Caribbean Basin Economic Recovery Act.
    This extraordinary disaster is also an extraordinary 
opportunity to assist our neighbor nations in Central America. 
Our goals should not be simply to replace what existed before, 
but to build back better. Such an ambitious undertaking imposes 
solemn obligations, both on us and on the nations we seek to 
assist.
    Mr. Chairman, we need to move quickly into the third phase, 
the reconstruction phase. We want to help provide people with 
hope for the future and help them stay in their homes. A recent 
New York Times article interviewed some of the refugees who are 
trying to make their way north to the United States. The 
article made clear that most of those people don't want to come 
here, but they are desperate to find work and to provide for 
their families.
    Our goal is to help those people stay in their native lands 
and return to the productive lives they led before the 
hurricane blew their world apart.
    Thank you very much, Mr. Chairman.
    [The statement of Mr. Atwood follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Callahan. Thank you, Mr. Atwood. I might just comment 
about your comment about the full faith of the military behind 
me. As you know, we will be having committee hearings here in 
just a few weeks on your request for the next fiscal year. And 
we may take this same room, except we are going to turn you 
around and let you look at the painting on the back wall----
    Mr. Atwood. I have seen it, Mr. Chairman.
    Mr. Callahan [continuing]. Which might give you the 
indication of what might happen if you do not obey the 
suggestions in our committee report.
    Mr. Atwood. Is there a weapon aimed at my back? I assume 
so.
    Mr. Callahan. Mr. Secretary.

                     Mr. Romero's Opening Statement

    Mr. Romero. Thank you. I will keep that in mind, Mr. 
Chairman, and also in terms of the brevity of my comments, I 
would hope that we would all use smart weapons in the future 
though.
    Thank you very much, Mr. Chairman, for the opportunity to 
appear before you. I think Brian Atwood, Administrator Atwood, 
has done a magnificent job of essentially focusing in on the 
reconstruction component, in particular. And what I would like 
to do is frame the policy parameters and some of the things 
that perhaps were not included in his excellent presentation.
    To say that Central America underwent or experienced a 
tragedy would be to understate the case.
    But what compounds this tragedy is that it came when the 
societies were emerging from the darkness of political 
divisiveness, internal struggle and Civil War. They were 
engaged in a process of profound transformation, a process in 
which the United States Government with congressional support 
has invested heavily. The countries of Central America and the 
United States are bound together geographically, politically, 
economically and socially.
    Americans in Congress, the executive branch and private 
citizens with NGOs all played very important roles in 
encouraging and supporting various peace processes in Central 
America. Through our political support, economic assistance and 
technical expertise we have worked together with our friends in 
Central America to end the conflicts, to bring political 
stability and democracy and to jump start economic regeneration 
in a once troubled region.
    But let us make no mistake about it, stability and growth 
in Central America don't only benefit the citizens of those 
countries. Our extensive training investment directly benefits 
U.S. companies which hold the lion's share of these fast-
growing markets. In fact, Central America's 30 million people 
buy more U.S. exports than the 1 billion people of India.
    It is clear that we should help Central America build 
because it is the right thing to do, but helping them helps the 
United States as well. Throughout the '80s many in Central 
America fled north in an attempt to find peace, security and 
economic opportunity, and to enable their families to rebuild 
shattered lives. But illegal immigration stretches the 
resources of the USG, while threatening the lives of the very 
people who attempt it.
    The potential for increased flows of Central Americans to 
the U.S. is great, and INS currently does not have adequate 
resources to properly detain and process large numbers of 
newly-arriving illegal immigrants. Only reconstruction and 
economic opportunity can provide the impetus to lessen the 
push-pull factors that cause central Americans to go to the 
U.S. The fight against the transnational crimes of drug and 
migrant trafficking is also a very high priority with this 
request, Mr. Chairman.
    The Department of State would like to significantly 
increase embassy budgets to effectively fight these crimes 
brought about by the increased vulnerabilities resulting from 
widespread damage and desperation.
    It is important to note that included in the supplemental 
is $80 million for INS towards additional detention space for 
illegal aliens.
    We have also included in the supplemental a request for 
hurricane recovery efforts in Haiti, the Dominican Republic, 
and the eastern Caribbean which were struck by HurricaneGeorges 
earlier last year. The economies of these countries particularly 
vulnerable to economic forces were dealt a body blow by Georges, 
leaving them more open to instability, narcotrafficking, international 
crime and the inevitable pressures to seek the avenue of illegal 
immigration to the United States.
    Also, included, Mr. Chairman, in the supplemental is a 
request for $10 million for Colombia for disaster relief for 
the recent earthquake that killed almost a thousand people and 
caused up to $1.5 billion in damage. There is an important need 
to address Colombia's most immediate relief needs, particularly 
in housing and in the medical areas.
    Returning to Central America, we have also proposed debt 
relief for Honduras and Nicaragua to permit them to harness 
their own resources in the recovery effort. Our package 
includes deferral by the U.S. of all bilateral debt obligations 
from these countries for the next 2 years, forgiveness of 90 
percent of Nicaraguan bilateral debt and two-thirds of Honduras 
debt.
    As all members of this committee are aware, encouraging 
prosperity through increasing foreign trade and investment is 
the cornerstone of U.S. policy.
    For Central American recovery, it will be necessary to 
attract capital investment to generate employment. We are 
Central America's main trading partner. In fact, U.S. exports 
to Central American regions exceed our support to all countries 
of the former Soviet Union and Eastern Europe combined. CBI has 
direct benefits to the U.S. private sector. For example, 
approximately 80 to 85 percent of apparel exported into the 
United States from Central America uses high-quality U.S. 
fabric and thread.
    We are convinced that CBI enhancement is a vital component 
to the recovery effort and one of the most effective means of 
promoting growth. The administration is working on a proposal 
to submit to you, Mr. Chairman, to enhance the Caribbean Basin 
Initiative that will provide significant benefits for the 
region. We greatly appreciate the efforts being made in 
Congress in support of CBI enhancement. And we take your point, 
Mr. Chairman, about the need for haste in working with you to 
secure early enactment of generous CBI enhancement legislation.
    Finally, we have and will continue to reach out to the 
private sector, to engage it in the reconstruction efforts. The 
Overseas Private Investment Corporation, or OPIC, has recently 
signed a partnership with Citicorp to make available over $200 
million in new financing to small- and medium-sized projects in 
the region. USAID sponsored an extremely successful conference 
last December involving seven cabinet members and hundreds of 
major U.S. corporations aimed at encouraging private aid and 
investment to the region.
    On migration we have responded to Central America concerned 
by granting temporary protected status to Hondurans and 
Nicaraguans, while providing more limited relief to Guatemala 
and El Salvador. Furthermore, the administration is committed 
to addressing disparities among different nationalities 
resulting from the Nicaraguan Adjustment and Central American 
Relief Act, also known as NACARA.
    Before closing, I would like to also reference the 
magnificent job that the U.S. Armed Forces has done in the 
region over the last couple of months. There were a total of 
about 5,000 U.S. military personnel in the region repairing 
roads, building critical infrastructure, meeting health needs, 
sanitation needs. The U.S. military delivered 9 million pounds 
of privately donated goods with an estimated $28 million in 
value.
    The U.S. Reserve and National Guard units, have begun a 
humanitarian and civil action program which will involve more 
than 20,000 U.S. servicemen over the next several months to 
build health clinics, schools, repair roads, bridges, drill 
water wells and conduct medical readiness training exercises.
    Mr. Chairman, we intend to work together with members of 
your committee and Members of Congress to help our Central 
American friends to ensure that they can continue their journey 
out of the turmoil and misery caused by this disaster.
    Thank you very much.
    [The statement of Mr. Romero follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                             accountability

    Mr. Callahan. Thank you, Mr. Secretary. I sense a great 
degree of compassion on the part on my colleagues and the 
Congress on both sides of the aisle to facilitate the 
suggestions of the administration with respect to assistance to 
this area of the world.
    At the same time, we have a tremendous responsibility here, 
because we are responsible to the American people for the 
monies that are spent in any area of the world. First of all, I 
think the American people agree with the Congress, that any 
time an American person sees someone suffering, with or without 
a disaster, they are very compassionate. And they don't object 
to the Congress providing food or medical services or 
educational opportunities to needy people.
    They do not like, however, to see the government or the 
Congress giving governments the authorization to forgive debt 
that has nothing to do with the national disaster. They do not 
like, to the best of my observation, seeing us give money to 
governments that can be taken and deposited in foreign banks.
    So as long as we are convinced, Mr. Secretary, and, Mr. 
Administrator, that this money is going to provide relief for 
the people suffering in Central America, you are not going to 
have any problem. But you are going to have some questions 
about debt forgiveness. I don't know how that is going to 
relieve suffering of these people. I don't know why if we want 
to go into some type of debt relief or forgiveness of debt that 
can't be handled in the regular appropriation process.
    That is not an emergency supplemental need or a justifiable 
need. So, I question that. Also we still do not have a full 
accountability of how this money is going to be spent. Say we 
are going to spend a couple of hundred millions in Honduras, 
that is good, and there is no question if you need a couple of 
hundred million dollars. I am certain this committee and the 
full committee will provide you those monies. But we have to 
have a little bit more than just a request to give you $200 
million, because that is what you think you need.
    So we are going to have to have a more detailed explanation 
and have to have it quickly before we are able to take this 
thing to the full committee or to the floor because someone has 
to justify it. It is going to be up to me and Ms. Pelosi to 
explain what the money is for. We just can't go say that 
Secretary Romero and Administrator Atwood said it was a good 
idea, we can't use that.

                            debt forgiveness

    We have to have more detailed explanation of the 
justification for such things as debt forgiveness. I for one am 
not going to agree to any type of an ability to give any of 
these countries monies to pay off other country's debts that 
they owe. If they owe money to Japan, let Japan forgive debt. 
We are not going to give monies to these countries, or at least 
I am not going to agree to give money to these countries to pay 
off debts to other countries, other than maybe the forgiveness 
of debt to the United States.
    I realize that there is very little possibility that we are 
going to collect the money that they owe us, which is not that 
much, and maybe we can look at that. But we must be absolutely 
certain that this money is not going to be used by the leaders 
of these two countries, especially Honduras and Nicaragua, to 
be placed in bank accounts or to pay off some debts to foreign 
countries. We are going to have to have a more detailed 
explanation with that regard.
    I have not been to Central America since the hurricane. I 
think that it probably would be in the best interests of this 
subcommittee to plan a CODEL between now and the conference. It 
gives us a very small amount of time.
    I know the President is planning on going. I know the First 
Lady has already been there. They don't seem to know that we 
are in existence when these trips come about, they might--they 
always go to the International Relations Committee and tell 
them to go look at the need. So maybe when they get back, they 
can get the International Relations Committee to appropriate 
them some money. But I have not been down there.
    But we need information from you to tell us what you need 
the money for in a detailed manner, so we can go down there and 
look at what you are talking about. So we can arrange a meeting 
to visit Honduras one day, maybe a Saturday and then Nicaragua 
maybe on a Sunday, during this process, but we need some more 
detailed explanation, other than just the total amounts that 
you have expressed here.

                           corps of engineers

    Mr. Atwood, over the last several years, the committee has 
included, and I know you have been cooperative with respect to 
negotiations with the U.S. Corps of Engineers about the 
utilization of the U.S. government engineering facility that we 
have, which is the Corps of Engineers. They have facilities 
there, and I hope that you certainly will take advantage of 
this asset and consider the utilization of the U.S. Corps of 
Engineers and engineering needs for reconstruction in this 
region.
    Mr. Atwood. Mr. Chairman, the answer to your question is we 
have been using the Corps of Engineers. They have done a 
complete assessment of the infrastructure damage in the region. 
I mentioned it in my open remarks. They have been vital to us 
in our work in assessing the damage, and they I think will 
support the request that is before us. We will continue to work 
with them. We will continue to transfer resources to them, 
because again their professional qualifications are superb for 
working with us on the particular types of challenges we face.
    I wanted to say one--just one brief word realizing, of 
course, that you are going to ask us a lot of questions for the 
written record. I very much appreciate the schedule that you 
indicated you were going to follow here in trying to get this 
before the full committee by next Thursday. I believe you said 
it is absolutely vital that we move quickly.
    While I mentioned that the United States will only be 
providing a small percentage of the resources needed for this 
reconstruction effort, the fact of the matter is, we can move 
faster than any other nation or any other international 
financial institution, and we need to show the people of this 
region that there is hope, that they are going to get their 
jobs back, that they are going to see their homes 
reconstructed. So it is really vital for us to move quickly.

                              debt relief

    The questions relating to debt relief, I couldn't agree 
more with you, that if there is a debt to Japan, Japan ought to 
forgive the debt. What we are asking for in this particular 
proposal is for an appropriation to cover the U.S. debt. We are 
also asking for a contribution to a trust fund so that they can 
help alleviate the pain of having to service debt to the 
international financial institutions--a contribution of only 
$25 million. Many other nations are also contributing to 
thattrust fund.
    We are also going to suspend debt payments for 2 years, and 
I want to try to illustrate why we are asking for these 
resources or to help them forgive their debt. They are going to 
have huge fiscal deficits. We know what those are. We haven't 
forgotten what those are in this country. But these are the 
results of this tragedy. These governments have been reforming 
their economies very, very well. But this has hit them very, 
very hard. In Honduras alone there is a $110 million deficit 
one year and a $109 million deficit the next year.
    If they have to continue to pay their debt servicing, that 
will even add to the deficit, so what we have proposed is this 
trust fund. We have also proposed in one case, in the case of 
Honduras, a very unique thing that I know you don't generally 
like, but I hope you will consider the special circumstances, 
which is a balance of payments relief. We would be putting 
money into a bank account which we will control. They will 
agree to produce local currency for projects to help in the 
reconstruction. So there is a double benefit for us. We help 
them with their fiscal deficit and their debt problem, and we 
also are able to produce local currency for actual 
reconstruction costs.
    I recognize we have had discussions about this, and I know 
where you stand generally on this kind of thing. But I hope you 
will look at this again. This is a unique situation.
    Thank you, Mr. Chairman.
    Mr. Callahan. It is unique, Brian, but at the same time it 
is not an emergency supplemental need. It is something that 
philosophically if you want to enter into in the future that 
could be addressed in your regular appropriation process. I 
don't think that this is of such a dire emergency that it would 
fall under the need of an emergency appropriation.
    I know it is part of a long-range solution to the problems 
of Nicaragua and Honduras, but at the same time, we are here 
discussing the need for an emergency supplemental bill, a bill 
that is going to count against the surplus we have created over 
the past few years. It is not going to be offset by reducing 
monies that we have already appropriated to other entities or 
agencies. It is an emergency supplemental request to provide 
relief to the people of Central America who are suffering.
    They are not suffering because of the debt they owe to some 
bank or to some other country. They are suffering because they 
need the humanitarian efforts that your agency is providing and 
will provide. And if we need to go into some long-range 
correction of the financial problems that will be facing them 
in the future, then maybe we ought to address that when we have 
time and in full committee.
    I am not saying absolutely no. I am saying let us not take 
advantage of the feeling and the compassion of this Congress 
with respect to wanting to help the suffering people of Central 
America.
    Mr. Romero. Mr. Chairman, if I might just add a little bit 
of background on the other creditors to both Honduras and 
Nicaragua. We have already been in touch with the Paris Club 
creditors, the major creditors for both of those countries. 
Essentially we have agreed to work together so all of the major 
creditors would reduce or forgive debt. It wouldn't be that we 
would forgive our bilateral debt so they could pay Japan, we 
would all bring it down together.
    Mr. Callahan. We would hope that would be the case. My five 
minutes is up. And we want to make certain that everyone has an 
opportunity to submit questions.
    So, Ms. Pelosi, your 5 minutes begins now.
    Ms. Pelosi. Is my 5 minutes equal to the chairman's 5 
minutes? No. Thank you very much, Mr. Chairman, I appreciate 
the direction that your line of questioning was going.
    Although we are not in complete agreement, I would say to 
our witnesses that I know of no chairman who has been more 
supportive of the discretion of the administration to make a 
plan in the interests of our national security and providing 
the assistance any place in the world, in this case, emergency 
assistance in Central America.
    I differ with him on the perspective on debt relief, 
however. In fact, I think the package should have more debt 
relief in it, because I see debt relief as central to the 
alleviation of poverty, which has been exacerbated by the 
hurricane and the other natural disasters. Both Honduras and 
Nicaragua were in the midst of debt relief negotiations when 
the hurricane struck.
    I believe there is consensus to provide these countries 
with significant additional debt relief beyond what was 
contemplated prior to the disaster and, indeed, the 
administration's request reflects that. You have explained a 
little bit what your intentions were in regard to the $41 
million specifically requested for debt relief. If you could 
quantify the benefits to both countries, in terms of changes in 
anticipated debt payment schedules, I would appreciate that.

                             honduras debt

    Let me just also add that I was interested in your 
explanation of the $30 million to Honduras, because I think 
that that did raise questions. That was going to be one of my 
questions to you, are these funds to be used to forgive debt of 
Honduras that they owe to other countries? My conclusion from 
your responses was that it would not be used for those 
purposes. Is that correct, forgiving the debts of other 
countries?
    Mr. Atwood. No, that is right. It would be used to deal 
with the international financial institution debt that Honduras 
faces.
    Ms. Pelosi. Or bilateral?
    Mr. Atwood. Multilateral, the World Bank and the IDB and 
other debts.
    Ms. Pelosi. I understand the multilateral side. All the 
debt forgiveness contained in this package is not only the 30, 
but all of it is either for bilateral forgiveness of U.S. 
debt----
    Mr. Atwood. That is right.
    Ms. Pelosi [continuing]. Or multilateral to the IFIs but 
not to assist a country in forgiving debt of another country?
    Mr. Atwood. That is right, Ms. Pelosi. And in the case of 
the $30 million, it would produce counterpart funds, local 
currency, that would be used for reconstruction.
    Ms. Pelosi. I understand.
    Mr. Atwood. That is what is the vital aspect of it, that is 
what I think makes it part of the emergency supplemental.
    Ms. Pelosi. But then because the chairman's leadership and 
support is essential to the success of this package, could you 
quantify the benefits to both countries, Honduras and 
Nicaragua, in terms of the changes in anticipatednear term debt 
payment schedules?
    Mr. Atwood. Forgiveness through the Paris Club of 
additional reductions beyond those already committed to by the 
United States of $19 million of Nicaragua's eligible bilateral 
debt for a total reduction of debt of $75 million, or 90 
percent of Nicaragua's debt, and $26 million of Honduras' 
bilateral debt for a total reduction of $103 million, or 66 
percent of that debt. The total previous bilateral debt to the 
United States for Nicaragua was $84 million and for Honduras 
$154.2 million.
    Ms. Pelosi. How will you monitor the $30 million that you 
are converting into local currency for development purposes in 
Honduras?
    Mr. Atwood. It is placed in a U.S. bank, and we control the 
use of the money. Then they agree to produce local currency to 
that level in Honduras, which is used for reconstruction. So it 
is kind of a double benefit. We help them with their fiscal 
crisis, and we also are able to do reconstruction aid.

                                  opic

    Ms. Pelosi. I have a couple more questions on debt, maybe I 
will have another round. But I did want to get to another 
subject. Secretary Romero mentioned OPIC, and I understand that 
OPIC may be considering guarantees to at least one banana 
company for their investment in Honduras.
    I hope that your efforts will ensure enforcement of workers 
rights provisions of OPIC and that those discussions include 
frank discussions with the Honduran banana workers. Will the 
U.S. be providing any assistance to support--I asked that 
question directly--the rehabilitation of the so-called 
independent plantations that supply, in this case Chiquita, 
Dole and DelMonte and, if so, what steps are being taken to 
ensure that these plantations are meeting acceptable standards 
with respect to environmental concerns and treatment of 
workers?
    Mr. Atwood. Those companies obviously can access the OPIC 
$200 million equity fund that is being put out there. But for 
the most part, they have also taken steps to replenish that 
land themselves. If they need loans or if they need the OPIC 
fund, they can access it. We are mostly using our 
reconstruction aid to help to reconstruct access roads so they 
can get those crops to markets.
    But I take it your point, and as chairman of the OPIC 
board, I will make sure that all of those fair labor provisions 
are respected, that OPIC is obliged to honor in any case.
    Ms. Pelosi. Thank you. Thank you very much, gentlemen. 
Thank you, Mr. Chairman.
    Mr. Callahan. Before we go to the chairman of our full 
committee, let me just ask a question. You said you are going 
to take $19 million and pay off a $75 million debt?
    Mr. Atwood. I'm sorry, I was referring to the amount that 
we would need to have appropriated in order to excuse that 
debt, the debt is discounted based on a formula that is used.
    Mr. Callahan. So Honduras owes $75 million and you are 
going to give them 19 million, and they are going to call it 
even? I would just like to know the name of the bank.
    Mr. Atwood. No. Pete Romero has reminded me we have a 
Treasury Department official here, if you would like to get 
into the detail of how debt is calculated.
    Mr. Callahan. Here we are going to give them $19 million to 
pay off a $75 million debt, because they are discounting.
    Mr. Atwood. We need to appropriate a certain amount. I 
understand your point.
    Mr. Callahan. Why don't we get it discounted down to $2 
million is what I am saying, while we are negotiating. In any 
event, Mr. Chairman, we are happy to have you with us today for 
your first subcommittee meeting, I think, with this 
subcommittee since you assumed the chairmanship. We welcome 
you, and the floor is yours.
    Mr. Young. Mr. Chairman, thank you very much. I appreciate 
the opportunity to have a few minutes this morning. Thank you 
very much.

                     supplemental account structure

    I am concerned about how we will structure this account for 
the supplemental for the reconstruction and rehabilitation 
activities. There is a request for $621 million from you as a 
supplemental appropriation to the Economic Support Fund. My 
understanding is that means they will be merged with other 
funds; am I correct in that understanding?
    Mr. Atwood. It will be handled separately, Mr. Young. It 
will not be merged. In other words, it won't be eligible for 
use in other parts of the world. It will be very much handled 
separately. Most of it will be transferred to USAID, and then 
if other government agencies are involved, we would then 
transfer support to them.
    Mr. Young. Because of the importance of responding to this 
great tragedy and the strong desire of this committee to keep 
track of all of these funds, how would you react to the 
creation of a special appropriations account for the 
reconstruction and rehabilitation account?
    Mr. Atwood. I think if we can use it for the purposes that 
the request indicates, then I am not sure. I think that is a 
matter for budgeters to discuss. I am not sure I understand the 
implications, Mr. Chairman. But I certainly would like to take 
that back to OMB, who are the experts on this at our end of 
town.
    [The information follows:]

      Special Appropriations Account For Hurricane Reconstruction

    The Administration would prefer using the existing account 
structure, augmented by additional reporting requirements rather than 
creating a new account structure. However, we are not strongly opposed 
to a new structure and will work with the House and Senate Committees 
on a structure that will allow us to move forward with this important 
funding.

    Mr. Young. Do that if you don't mind. We would be glad to 
hear from you on that. We are concerned about being able to 
provide the proper oversight and keep track of the money that 
we are appropriating.
    And then, Mr. Chairman, I would like to ask one general 
question that you may have already touched on, with regard to 
the commitments that are made and the offers that are made to 
help our friends and our neighbors in times of crisis that we 
are dealing with now. I don't know of anyone that objects to 
our coming forward to help.
    When a dollar amount is determined and a dollar amount is 
announced, someone says we are going to give you X number of 
dollars, how accurate is that estimate? Is it based on a 
specific documentation of damages inflicted or is it a guess? 
Realistically, where are we there?
    Mr. Atwood. Mr. Chairman, it is based on the best 
assessments we can come up with. I mentioned the Corps of 
Engineers earlier. They helped us make assessments. We have 
other assessments that we have used. The IDB has done 
assessments and other bilateral donors and the governments 
themselves. So, we know we have a good fix on what we have been 
asked to do and then we look at our comparative advantage. What 
should the United States be doing? What can we do to help these 
economies recover faster, so that the cost of this storm isn't 
even multiplied by lack of economic growth over the years?
    We know we can move faster than other countries to get some 
of these things repaired. So we look at our comparative 
advantage, and that is what makes up this particular request 
that is before you, Mr. Chairman.
    Mr. Young. Mr. Chairman, thank you very much.

                          full accountability

    Mr. Callahan. Thank you, Mr. Chairman. For your 
information, we did touch on your subject matter. And we have 
requested that the Administration provide us before next 
Thursday's markup out of full committee a full accountability 
of what they are going to use the money for, and also give the 
subcommittee between the markup, the floor and the conference 
report, an opportunity for maybe a two-day CODEL to go down 
there and actually look at some of the sites they are talking 
about. So we have requested that they submit this information 
in writing before next Thursday.
    [The information follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Wolf?

                               nicaragua

    Mr. Wolf. I thank you, Mr. Chairman. Welcome. A couple of 
issues. One, I think it is important that the committee do this 
and that the country do this, because there were a number of us 
who back in the '80s felt very strongly that we should defeat 
the Sandinistas. I was one who even voted to mine the harbors 
of Nicaragua. So we were helpful with regard to defeating 
Communism down there, the people in Nicaragua were very helpful 
allowing the Contras camps to operate, which I think was very 
important.

                          habitat for humanity

    So for those reasons and I had a daughter that was in a 
mission project down there for 2 years, up at the last year, 
and the poverty before this was so great. Two questions, one, 
the Habitat for Humanity people have come by. I think they made 
a very good presentation with regard to permanent housing that 
will last forever, and if a man or a woman owns their own home 
they are likely to stay there.
    And does this amount cover the Habitat for Humanity 
request? $50 million, 10 million a year for over 5 years 
homeownership?
    Mr. Atwood. We have been approached, as you have, by 
Habitat. They have made a very large request of $50 million for 
5 years. We want to work with Habitat. We have the same 
feelings towards them that you do. We want to use their 
expertise. We have a lot of private donations that are also 
coming in to build housing of various types. We also have to 
build houses fast. We are now in a transitional phase where we 
are trying to get people out of schools.
    We are using some Office of Foreign Disaster Assistance 
resources to make temporary shelter for those people so that we 
can reopen the schools. But then we are going to build under 
this proposal 6800 homes, and those will be permanent homes. 
Now, we are looking at Habitat's proposal. We are looking at 
other proposals by other nongovernmental organizations. And we 
are looking at private donations to try to do that. We want to 
do it as quickly as possible and for as little cost as 
possible, so all I can say to you right now is that Habitat has 
a wonderful reputation. And we are looking at that proposal and 
seeing how it fits with other proposals that we are receiving.
    Mr. Wolf. Good. I hope they will be included. They will 
leverage much more. They are also planning to bring a large 
number of American teams down there for a period of time. sweat 
equity.
    Mr. Atwood. Right.

                        mine detention dog teams

    Mr. Wolf. I am glad to hear that. Secondly, there was a 
request for 1.2 million for mine detention dog teams. The 
floods came and the water came and many of the mines have 
shifted and moved. And if you were in El Salvador during the 
'80s, you would see many young kids with arms off and legs off 
going down to the rivers and all. Is that part of this inquiry? 
Are you going to put that money in for mine detection dog 
teams?
    Mr. Atwood. We have done some of this work with the U.S. 
military that is on the ground. We don't have a specific item 
in this request for 1.2 million for mine removal, but we have 
this request for the New Horizons project where U.S. military 
will continue to work with us, mostly on infrastructure. But 
they will be in the region for some time to come and they have 
the best facilities I think for finding this.
    Mr. Wolf. You are going to be sending them to Kosovo and 
Macedonia, and I mean I think our military are so stretched 
that I really think the more we--if you would take a look at 
the requests with regard to the dog teams----
    Mr. Atwood. Right.

                         religious freedom act

    Mr. Wolf [continuing]. I think it would be helpful. Lastly, 
if you could take back or Secretary Romero, Mr. Secretary, this 
is a little off the subject, but I would like you to take this 
back, and give me an answer, if you can. Last year a group of 
us, the Congress, passed the religious freedom bill. There is 
persecution of people of faith in China, Tibet, and Sudan and 
many other places. The administration did everything they could 
to fight the bill. They fought it tooth and nail. They were up 
here lobbying against it. It passed. And the President made a 
statement about it and at the National Prayer Breakfast. He got 
up and said how wonderful it was that this bill had passed. 
There was no money in the budget request, the FY 2000 
appropriations request by the administration.
    Can you tell me why the administration did not request the 
money when the President got up before 3,500 people saying how 
wonderful this bill was, and it passed in October. November has 
gone by, December has gone by, January has gone by, February 
and no request?
    Mr. Romero. Mr. Wolf, I would like to be able to respond to 
that question, but I can't. I know about the bill and I know 
about the legislation. We have restructured ourselves to 
address the concerns of Members of Congress on religious 
persecution and religious freedom. But I can't tell you where 
we are.
    Mr. Wolf. Can you get--the President claimed credit for it 
and said how wonderful it was and announced that Bob Seiple had 
been hired to be there and then has put no money in the budget. 
It is sort of big hat, no cattle. You can't talk about 
something, one, oppose it, then take credit for it and now not 
put the money in.
    Could you get back and have somebody from the Department 
get back to me. We write letters, then I get letters from 
Barbara Larkin and different people, but never from the people 
I write to on this issue. So somebody get back and tell us when 
you will put the money in and come up and support it. Do you 
support it in the supplemental, because Christians are being 
persecuted today in China, Catholic priests are in jail, in 
Sudan we see what is going on. It should be part of the 
supplemental.
    So we want to get a letter from the Secretary saying, we 
want this in the supplemental. If you could do that, I would 
appreciate it.
    Mr. Romero. Okay.
    Mr. Wolf. Thank you very much.
    Mr. Callahan. Thank you.
    Mr. Jackson.

                      nicaragua and honduras debt

    Mr. Jackson. Thank you, Mr. Chairman. Let me thank you 
also, gentlemen, for your testimony. A number of countries have 
canceled their outstanding debts with Nicaragua and Honduras 
because these countries' economies have been devastated and 
their ability to pay is even less than before. In addition to 
granting a 3-year moratorium on debt service payments for 
Nicaragua and Honduras, the administration is requesting 16 
million in order to increase from 50 percent to 67 percent the 
amount of bilateral debt cancellation for Honduras.
    The U.S. has also announced, in accordance with the Paris 
Club Accords, that we are prepared to provide a 90 percent 
reduction of Nicaragua's bilateral debt. This is laudable. Yet 
according to Oxfam America, it would take approximately 25 
million to cancel the remaining debt owed to the U.S. by these 
countries.
    Religious and nongovernmental organizations have argued 
that cancelation of the remaining debt will not only free up 
resources for development, but would enable the U.S. to 
encourage similar action by creditors with far larger 
outstanding debts.
    Can you give us an explanation why the administration has 
not requested the additional funds to fully cancel the debt 
Honduras and Nicaragua owed to the U.S. and whether or not you 
see this as a worthy goal?
    Mr. Atwood. Mr. Jackson, we try on debt-related questions 
to work with the international community to which that debt is 
owed. I personally sympathize with the thrust of your question. 
We have, however, gained agreement within the international 
community to put in effect a program called the Highly Indebted 
Poor Countries initiative, wherein we would be able to forgive 
a great deal of debt in exchange for countries reforming their 
economies.
    We believe that a great deal of progress has been made in 
Nicaragua and Honduras and we, therefore, support review of 
their eligibility for this Highly Indebted Poor Countries 
initiative. But we try to do things in a coordinated fashion so 
we are not out there alone forgiving debt.
    We have tried to convince the international community to do 
as much as possible to reward economic reform, and that is our 
position. It is reflected in the requests that you have before 
you as well.

                             ACCOUNTABILITY

    Mr. Jackson. I have just another question, Mr. Chairman. On 
the issue of accountability, many people in the region are 
concerned that international assistance will either be misused 
for personal gain or the certain affected areas will not 
receive aid because they were affiliated with opposition 
parties.
    I wonder how these problems have been dealt with since the 
emergency and what mechanisms are in place or will USAID ensure 
that U.S. assistance is used in a transparent manner that 
reaches the populations in need regardless of their political 
alliances? Would you consider the information or the formation 
of a special multilateral commission including recipient and 
donor governments and members of national and international 
civil society groups that would monitor the distribution of 
resources and implementation of these reconstruction plans?
    Mr. Atwood. I would obviously have to study such a 
proposal. We would not like to see a lot of these resources 
deflected, but we agree with you, that the aid should not be 
politicized at all. And we have proposed to not only work with 
the comptroller generals of these countries, but with other 
nongovernmental organizations. In the case of Nicaragua, the 
President of Nicaragua, recognizing that there had been 
politicization of reconstruction aid in the past, has asked the 
Catholic Church to play a major role, and we will work with 
them as well.
    We also plan to put some resources into programs to create 
Inspectors General in these countries so that they can audit 
the resources that are going in. It is a serious problem and 
the worst thing that could happen would be for any of this aid 
to be diverted from the people who need it the most. I think 
the governments recognize that. But we are going to take extra 
steps to make sure that we can audit and monitor all of the aid 
that is going on.

                             small farmers

    Mr. Jackson. I have one final question, Mr. Chairman, I 
understand we have another round. But Hurricane Mitch 
disproportionately affected the most impoverished sectors of 
Central America and within that disproportionately affected 
small farmers. I am interested in what plans are in place to 
prioritize rural development and increase small farmers' access 
to land and to credit in light of the unfortunate events that 
have occurred there?
    Mr. Atwood. It's an absolutely crucial part of this. These 
are agricultural countries. Rural development is a crucial part 
of our proposal. We are going to create the capacity for 
providing for 70,000 microenterprise loans. A lot of that will 
go to agricultural people who need the resources to start their 
crops to begin, Mr. Jackson.
    Mr. Jackson. Thank you. Thank you, Mr. Chairman.
    Mr. Callahan. Mr. Packard.

                        army corps of engineers

    Mr. Packard. Thank you, Mr. Chairman. Let me ask a specific 
question, and then I will get into some general things that I 
would really like to have your response to. It is my 
understanding that AID has designated the Army Corps of 
Engineers to assist the Central American countries. What will 
be the role of the Corps in that calling?
    Mr. Atwood. They will continue to play a crucial advisory 
role in helping us assess the proposals that are made for 
infrastructure repair in the region, Mr. Packard.
    Mr. Packard. Are there private sector companies that are 
also sought for that kind of role?
    Mr. Atwood. Yes, right.
    Mr. Packard. How will the Corps interface with the private 
sector or are we asking government agencies to preclude the 
ability for private sector companies to be involved?
    Mr. Atwood. No. In fact, while we are asking for special 
authorities to move more quickly, what we have tried to do and 
what the Corps has helped us to do is to prequalify contractors 
that can work with us, people that have already done this type 
of work. We can move a lot more quickly if we do it that way. 
But we very much want not only to engage private contractors in 
this work, but also to receive their donations of free time and 
in-kind contributions to do this work as well.
    Mr. Packard. We hope that government doesn't look for ways 
to take what normally would be a private sector role.
    Mr. Atwood. In fact, we have $3 million in this request so 
that we can further exploit the private sector in terms of 
their willingness to give donations but also to participate 
with us generally in our projects and contracts.

                                 loans

    Mr. Packard. Do you have any idea, Mr. Atwood, what the 
total amount of the package, $956 million, I believe is the 
total package, close to a billion dollars, how much of that are 
loans, or categorized as loans, any of it?
    Mr. Atwood. No, all of the reconstruction assistance within 
it is grant assistance.
    Mr. Packard. Grant assistance.
    Mr. Atwood. That is right.
    Mr. Packard. None of that amount is planned for loans. How 
have the loans of the past, some of those which you wish to 
forgive, how have they been scored? Are they scored at the time 
the loans are made? How are they scored in reference to when 
they are made and when they are forgiven?
    Mr. Atwood. Well, this is a question that relates to the 
appropriations that we are asking for to provide for the debt 
relief. They are scored now as a result of the best assessment 
by the Treasury Department of what the repayment likelihood is. 
And we have a representative here if you would like to know 
more about the details. But for the most part, they are based 
on the economic situation of the country at the time when we 
want to provide the debt relief.
    They are scored on the basis of what the appropriations 
impact would be to forgive a certain level of debt. That is 
what the chairman and I were talking about when he said $19 
million to forgive $75 million of debt. That is our current 
calculation. Obviously, you have access to CBO's calculations 
as well. That is OMB's calculation and Treasury working with 
them on the debt question.
    Mr. Packard. How were they scored when the loans were made, 
say when the $75 million loan was made, how was that scored at 
the time it was made? Is it scored against that particular 
year's budget?
    Mr. Atwood. It was indeed at that time, yes.
    Mr. Packard. And is there any portion of that amount that 
is scored again when it is forgiven, except the $19 million of 
additional cost apparently used to process the forgiveness?
    Mr. Atwood. To offset the forgiveness, that is right.

                               corruption

    Mr. Packard. I am not thoroughly clear on just how it is 
done. But I will review it further with my own staff. The last 
item I would like to bring up, Mr. Chairman, is the corruption 
issue, and that has been an issue that I have been concerned 
about, not just in Central America, but around the world.
    You have significant funds in this proposal for corruption 
and crime activities and programs and training and the 
educational programs--it is anti-corruption activities. How 
much--has anyone ever done any estimates of how much of our aid 
packages over the past have been sucked up into corruption 
activities?
    Mr. Atwood. This is going to sound like a self-serving 
answer, but I think we do a better job because we have GAO and 
we have our own Inspectors General and the like following our 
money. The problem we have had in the past working in countries 
like Zaire is that they take our money, they spend it on what 
we want them to spend it for, health or education or whatever, 
and then it is fungible. And so what they then do is to take 
the receipts they got, for example, from the copper mines in 
Zaire, send that to the Swiss bank account of Mr. Mobutu.
    So if you are working in a country that has that kind of a 
cancer of corruption, while we can track our money pretty well, 
the fact of the matter is, you are not helping development, 
because the policies and the rule of law are not established 
and there is so much corruption that there is cynicism and an 
absence of development. That has been the problem.
    Mr. Packard. So, as we carefully monitored our particular 
aid money and actually can make fairly decent accountability, 
it does not prevent the corruption from taking place--from a 
more complex point of view?
    Mr. Atwood. That is right. And especially since the end of 
the Cold War, we try not to work with corrupt governments, and 
where there is corruption--and there always is some degree of 
corruption--we are trying to help strengthen institutions like 
the $400,000 agreement with the Comptroller General in Honduras 
to enable them to contract with an international accounting 
firm to enhance oversight and working to try to create 
Inspectors General and the like in these governments.
    Mr. Packard. You may be aware that 2 years ago this 
committee fenced a portion of the money with the aid that went 
to Russia and to the Ukraine----
    Mr. Atwood. Yes.
    Mr. Packard [continuing]. Until they certified by our 
Secretary of State that there was progress made in corruption 
and anti-corruption activities. I am aware that this is 
humanitarian--much more of a humanitarian effort. What kind of 
a problem would it create if we required from these Central 
American countries that progress be made on corruption before 
they would get all of the funds? Would that create serious 
problems?
    Mr. Atwood. Well, I have personally talked to each of the 
presidents in the four countries in Central America about this 
problem. They are fully aware that their future is going to 
depend on whether or not these funds are spent well and for the 
people. They have created comptroller generals offices. We are 
doing everything we can now to strengthen those capacities of 
those countries.
    I think the higher priority right now is making sure that 
the people of those countries have enough hope to stay home and 
work to reconstruct their countries. If we don't move fast on 
this, we are going to see a lot of them going to other places. 
I have heard of one story about several people, 40 young men 
from one village going across the border to Costa Rica because 
they were looking for work. Obviously a lot of them may be 
heading to this country.
    We have got an urgent problem we need to address. I do 
think that we are taking all of the steps necessary. I would 
think that what you are proposing would be something we might 
consider for the fiscal year 2000 regular appropriation. I hope 
we can move as quickly as possible with this emergency 
supplement.
    Mr. Packard. Our heart does go out to the people. It is the 
leaders that participate in corruption activities that siphon 
away these monies in many instances.
    Mr. Atwood. That is right.
    Mr. Packard. And, I would hope that your agencies would 
look for ways, appropriate ways, to put the pressure on the 
leaders, those that actually participate in the corrupt 
activities and thereby not allow these funds in total to filter 
through to where the need is the greatest.
    I will not let up on the corruption issue because I think 
it is such a widespread matter and for the American taxpayers 
to end up supporting corrupt activities in any country through 
our aid programs I think is an absolute tragedy. But hopefully 
you will be consistently aware of it. Thank you very much.
    Mr. Atwood. It is a cancer that affects development, 
negative development----
    Mr. Callahan. With his remark, it is my understanding 
Congressman Packard that only $30 million of these monies can 
be considered for cash grants anyway; is that correct?
    Mr. Atwood. That is right.
    Mr. Callahan. So only $30 million of this package can be 
utilized for cash grants to governments, which we want to 
protect the 30 million also. But there is a check and balance 
there, because the 30 million cannot be spent unless Brian 
Atwood signs a check, even by the Honduran government. And I 
see Mark Snider back there and----
    Mr. Atwood. That is right.
    Mr. Callahan [continuing]. We can't reform all of Central 
America in this package, but their judicial system leaves a lot 
to be desired, especially in Honduras. And they are very 
fortunate, incidentally, that Mr. Valle is out of jail down 
there or they would be having some problems with me. So it is 
very fortunate that--the fact the hurricane blew the jail down, 
maybe that had something to do with it.
    Ms. Kilpatrick.
    Ms. Kilpatrick. Thank you, Mr. Chairman. I first want to 
associate my remarks with your comments earlier in terms of 
detail. I asked my staff to give me detail or ask for it and 
there is none. It is quite a large sum of money here, even the 
30 million that you just mentioned, that is a lot of money. And 
there is very little detail and I hope we get more of that as 
we move through this process.
    I too am concerned, as Mr. Packard is, about the 
corruption. It bothers me that after an hour and a half talking 
about Central America that Mr. Atwood would go to Zaire and 
talk about its corruption, and it is corrupt with Mobutu and 
others and they are trying to correct that themselves. But we 
have major corruption in the countries where we are dealing 
this morning. Colombia, a major drug trafficker.
    I served on Banking last session and heard horrendous 
testimony from Colombian citizens, themselves in this country 
under protection. It bothers me that they are going to get 10 
million of our U.S. dollars, as devastated as the country is 
and as terrible as the tragedy was. They flood our streets of 
America with drugs, some 650 tons in 1996,Colombia, Mexico, 
Peru, Bolivia and a couple other countries. That we are now turning 
around and giving them our U.S. tax dollars when in fact they have 
money in their own coffers, much of it from the U.S. illegally, bothers 
me.
    Corruption, as Mr. Packard spoke of, bothers me. The 
natural devastation that these countries faced in Central 
America was a tragedy, and as you mentioned, there were 
approximately 9,000 lives lost and people missing. It is quite 
a tragedy.
    Mr. Packard. Would the gentle lady yield for just a 
moment----
    Ms. Kilpatrick. Certainly I will.

                               cash basis

    Mr. Packard [continuing]. As a follow-up. Do we deal with 
these projects, these assistance programs and projects in any 
country on a cash basis? Do we just give them the money and/or 
do we pay for the work after it is done?
    Mr. Atwood. Over 70 percent of all the work that we do at 
USAID is done through American contractors and nongovernmental 
organizations. So, no, we are doing this work with our 
contractors for the most part.
    Mr. Packard. Are they reliable? Does corruption stem from 
our own contractors?
    Mr. Atwood. We have got some ways to get at them if they 
are not reliable.
    Mr. Packard. Thank you. Thank you, ma'am, for yielding.
    Ms. Kilpatrick. You are welcome. Reclaiming my time, quite 
certainly I know that is elementary. I know that we deal with 
general contractors and others who are certified and citizens 
and all of that. That wasn't where I was going. I was going 
with the 3, 4 steps removed where that sometimes is turned 
around and gets into illegal market. But notwithstanding the 10 
million, the direct appropriation, which is a small amount in 
the total package that we are dealing with this morning, I am 
confident, Mr. Atwood, that your staff as well as the Secretary 
will see that these U.S. dollars are put to good use and 
rebuilding does actually go on. I just want to register my 
concern about what I see happening from Central American 
countries and others as it relates to our own U.S. economy.
    I want to talk just a little bit about the women. One-third 
of the households in the countries are headed by women, some of 
them in business with microloans and I am happy to hear that 
OPIC is going to be stimulating the economy and doing more of 
that.

                       women and microenterprise

    What exactly can you tell me that you have done that would 
address the needs of the women who many are heads of households 
raising children, who many times their businesses are on the 
back end of the farming process or planting season. They 
actually market after the crops are grown, I might add.
    What kind of special steps are being taken to address some 
of the problems that women in those countries are facing this 
tragedy occurred?
    Mr. Atwood. I agree with your analysis exactly. It is 
important that we are able to help, in particular, the women 
who are head of households. But they also are the backbone of 
these countries. The microenterprise loan program will provide 
some 70,000 loans. That is in this request. About 80 percent of 
those loans will be going to women. This will help people start 
up small businesses again.
    So we know that the women are playing a central role as 
community leaders. I have seen it with my own eyes as relief 
workers, as head of small and micro businesses and often 
obviously as the heads of families. We recognize that 
leadership role and want to see it continue in this 
reconstruction process. So it is very, very important. 80 to 90 
percent of our microenterprise loans will go to women.
    Mr. Romero. Let me also add, if I might----
    Ms. Kilpatrick. Yes, please.
    Mr. Romero [continuing]. The CBI enhancements, when that 
comes out, will directly benefit women, because you find that 
most of the employees in textile industries down in Central 
America are women and it does help.
    Ms. Kilpatrick. I was going to lead right into the CBI 
initiative that you mentioned without being specific about it. 
Are you able to share with us this morning some additional CBI 
initiatives that we will see come forward?
    Mr. Romero. I wish I could. Unfortunately, we are still 
engaged in looking at all the ramifications, including budget 
ramifications. I am just not in a position to be able to give 
you much more than that.
    Ms. Kilpatrick. How soon might we see some?
    Mr. Romero. I am told shortly, I am hoping within the next 
week.
    Ms. Kilpatrick. In government that is anywhere from 5 years 
to 10.
    Mr. Romero. We are talking a matter of days and weeks 
perhaps.
    Ms. Kilpatrick. Thank you. And then, finally, we mentioned 
Honduras, Nicaragua, Guatemala, El Salvador, the Dominican 
Republic and other Caribbean countries. What countries other 
than Haiti is in that Caribbean loop that would be considered 
for the assistance?
    Mr. Atwood. Haiti for sure and some of the eastern 
Caribbean nations. Do you have the list of those? I better not 
guess.
    Ms. Kilpatrick. If he can find that.
    Mr. Atwood. Saint Kitts and Nevis would be one.
    Ms. Kilpatrick. Saint Kitts.

                            separate account

    Ms. Kilpatrick. Finally, Mr. Chairman, as I was reading 
much of this last evening you mentioned about the appropriation 
that would go into one account and then money would be drawn 
down from it as needed. Tell us how would that operate. How 
does that accounting work? I like Mr. Young's suggestion about 
the separate account, and I heard you say you are going to look 
into that. I understand it has been done in the past. How does 
the money flow once it is appropriated?
    Mr. Atwood. This is the $30 million balance of payments 
support for Honduras. It would be placed in a bank account, and 
we would obviously be able to monitor the fact that it would 
only be used for payment against their debt with the 
international financial institutions. At the same time, they 
would agree to create an equal amount of local currency, $30 
million worth of local currency, which is quite a bit to do 
reconstruction projects in Honduras.
    Ms. Kilpatrick. That is on the 30 million that you 
mentioned. But of the 620-some million, a portion of it comes 
back to our Federal agencies, I understand that.
    Mr. Atwood. Yes.
    Ms. Kilpatrick. What is left, is it also put in an account 
as you mentioned?
    Mr. Atwood. No, the bulk of it would be managed by USAID. 
We will do competitions for projects, infrastructure projects, 
health, education or whatever. American NGOs will participate 
in this as well. We would manage theresources. If another 
government agency had a capacity that we didn't have to do this work, 
for example, HUD, to do some work in the housing area, we would 
transfer money to them under the provision of section 632 of the 
Foreign Assistance Act.
    Ms. Kilpatrick. I was thinking more of replenishing DOD, 
for example, who are already saying they didn't get enough.
    Mr. Atwood. There are resources that are being requested to 
replenish what DOD has expended under other accounts to help us 
in this crisis.
    Ms. Kilpatrick. DOD means the money we have appropriated or 
in this supplemental being appropriated to them is not enough 
they have spent more, but this is what we are asking for them; 
is that right?
    Mr. Atwood. They have drawn down on other accounts that 
weren't initially appropriated for the specific purpose of 
helping in an emergency in Central America, and we are asking 
for resources to replenish those accounts.
    Ms. Kilpatrick. Thank you. Thank you, Mr. Chairman.
    Mr. Callahan. Thank you.
    Mr. Knollenberg. Thank you, Mr. Chairman.
    Thank you, Mr. Atwood, and, Mr. Romero, for your testimony 
this morning. By the way let me just compliment the comments 
you made, Mr. Romero, regarding the administration's dedication 
to the enhanced CBI legislation.

                         microenterprise loans

    You mentioned CBI's impact on Women. I think that is 
significant. I also think that it can be beneficial for 
American workers and businesses as it opens up those new 
markets for American goods. I am glad to hear that.
    Let me direct my attention to the comments on the 
microcredit issue. I know, Mr. Atwood, in your testimony, you 
mentioned that there are some 70,000 microenterprise loans in 
your request. Half of all Microcredit money should be directed, 
as we indicated in the omnibus appropriations bill, to the 
poorest, particularly to women, and with loans under $300.
    When I look at the numbers in your statement, am I to 
presume that 70,000 microenterprise loans, if we average them 
out at around $300 a piece, and when I start doing the math on 
that, it looks like if it were as much as $300 per loan, it 
would still be about 21 million total.
    There is 283 million dedicated to roads, to infrastructure, 
to building the bricks and mortars, et cetera. And obviously, 
my understanding is that the economy down there has been 
devastated and that women, which has already been mentioned, 
suffer greatly, with over one-third of them as the head of the 
household. It seems to me that some attention ought to be 
riveted on getting the money into their hands.
    What can you tell me about rebuilding the marketplace? You 
have mentioned the bricks and mortar in depth, but I think you 
touched just briefly on the marketplace side of it. That must 
be rebuilt as well to bring it back to what it was and, as you 
want to do, build it and make it even better.
    Could you give us just a little breakdown of how much of 
that money will end up in the hands of those who nee it such as 
the women that traditionally have gotten loans of under $300 in 
the Microcredit program, what amount of money will really be 
dedicated to them?
    Mr. Atwood. Mr. Knollenberg, I will be very happy to 
provide for the written record a lot more detail, but let me 
just comment briefly on your question. A lot of small 
businesses were damaged or ruined and a lot of people are going 
around to banks in Honduras and Nicaragua and elsewhere that 
are experiencing major liquidity problems and would have even 
if this disaster hadn't occurred.
    So we are basically going to be working through those banks 
to try to help provide credit to these small businesses. That 
is one aspect of it. The other are the basically 
microbusinesses that where most of the women are participating 
in these businesses.
    They obviously need to get back on their feet and have 
credit so that they can begin their lives again. But the 
infrastructure is equally important, because they can't get 
their products to market in the agriculture sectors unless they 
can repair the bridges and the roads to get them to the ports. 
So all of this works together.
    Now, we are not doing this alone. We are trying to take 
advantage of our comparative advantage. We do microenterprise 
lending programs better than any other country, in my belief. 
There are a lot of others that are going to be participating. 
And we have already put $5 million in the microenterprise and 
encouraged the IDB to put up $12 million for a total of $17 
million so we could start this already. This is in addition to 
what we have already started.
    Mr. Knollenberg. Mr. Atwood, can you tell me, or provide 
for me in writing, how much of this money is going to be 
dedicated to the women? If we are talking about $70 million 
microenterprise loans, what number does that come to when you 
factor in the dollar amounts of those loans?
    Mr. Atwood. I will have to give you that for the record, 
Mr. Knollenberg.
    [The information follows:]

                   Microenterprise Funding for Women

    In all geographic regions of the world, women have comprised more 
than fifty percent of the clients receiving financial services from 
microfinance institutions. In Latin America two thirds of the clients 
receiving microfinance credit have been women; in individual 
microfinance institutions in Central America this percentage is often 
much higher. Moreover, women have traditionally comprised the majority 
of the people living under very poor conditions, who due to the 
precarious situation they were living under suffered the most loss due 
to Hurricane Mitch. Therefore, we anticipate that a similar proportion 
of the microentreprenuers receiving loans under $300 will be women.

    Mr. Knollenberg. I think it is important that we continue 
to stress that this money must go to women, through the 
microcredit program, which I think has been very effective. You 
certainly must dedicate resources to rebuild the bridges and 
the roads and the infrastructure. But you also have to 
literally rebuild the marketplace.
    Mr. Atwood. Absolutely.
    Mr. Knollenberg. And that is done by helping the people, 
and particularly the women. I would expect then to hear from 
you as to how much money will be targeted to that particular 
program.
    Mr. Atwood. Absolutely, Mr. Knollenberg.
    Mr. Romero. If I might just add, I have been chief 
administrator in El Salvador and I have seen how 
microenterprise in village banking works at the microlevel to 
really turn around the countryside and engage towns and rural 
development that just didn't exist before. But one of the 
target groups that probably is most at risk with respect to the 
likelihood of illegal immigration to the United States are 
young males and infrastructure projects that Brian was talking 
about beyond the ability to be able to move about to get 
emergency health care, to do the normal kinds of things that 
you need to do with respect to transportation, and the 
transportation network does provide income for that most at-
risk target group.
    Mr. Knollenberg. Thank you. Mr. Chairman, thank you.

                                  debt

    Mr. Callahan. Thank you, Mr. Knollenberg. I am still having 
difficulty with this $30 million. I know when we are talking in 
terms of almost a billion dollars, it doesn't sound like much. 
I just wonder, Brian, do you know or, Mr. Romero, any precedent 
to this? Do you ever recall any type of precedent whereby we 
have given this authority to anyone to pay debt owed by other 
countries to multilateral development banks or to the World 
Bank or to the IDB--has this ever been done, to your knowledge, 
in the past or are we establishing a precedent?
    Mr. Atwood. We did this right after the peace agreement was 
signed with Guatemala. They had some very serious fiscal 
problems. They satisfied serious commitments to use their own 
tax revenues in future years for paying to implement the peace 
accords. We managed to protect the money so that it was spent 
for what we intended it to be spent for. And it was a 
successful example, I think.
    Mr. Callahan. There is just something about it that doesn't 
pass the smell test. You know, I understand where you are 
coming from and I understand what your mission is. But we just 
forgave about 50 percent of Nicaragua's debt, I think a few 
months before the storm. So we are--we are forgiving debt. Is 
there going to be any moratorium placed upon the government to 
stop them from borrowing more money?
    I mean are they going to take a new financial statement to 
these same banks and say, now, our financial situation is so 
improved that we don't owe any money, will you give us some 
more money. Is there any moratorium placed on these governments 
to stop them from falling right back into the same economic 
situation?

                              eligibility

    Mr. Atwood. The Heavily Indebted Poorer Countries 
initiative issue that I raised before, neither of these 
countries has yet been declared eligible, though we strongly 
support them in their quest for eligibility and believe that 
there will be action taken soon on that question. That would 
get them into a situation where they have to, continue to show 
over the years that they are reforming their economies and 
making them more transparent and accountable so they wouldn't 
fall once again back into debt. That is crucial.
    I mean there is an emotional tug with a lot of people, 
including myself, that says why should these new democratic 
governments have to suffer through paying off the debt that the 
Sandinistas incurred, for example. And we all feel that. On the 
other hand, the international community has to have standards 
about these things. And we don't want to just forgive debt and 
then 10 years later have a big debt burden once again that has 
to be forgiven. So we are conditioning it on the basis of 
economic reform.

                               nicaragua

    Mr. Callahan. Well, our limited research into this matter, 
you know, this just came up with respect to this new request. 
But with respect to Nicaragua, it was the Sandinistas who 
borrowed this money, they cannot account for what they did with 
the money, they borrowed the money and it went to something, we 
don't know what, nor does the current government of Nicaragua 
know where it went.
    So we have to assume that there had to be some corruption 
involved there. So they took the money and they left or they 
put it in another bank. Now, we are going to come along and we 
are going to forgive this debt. And I know I am oversimplifying 
this, but we are going to forgive them their debt, give them a 
balance sheet that now says they are a solvent country, which 
permits them to go back and borrow more money.
    We are not giving them direct grants, but by paying off 
their debt, we are giving them the ability to go and borrow 
more money for which they would not have to be accountable to 
anybody but the people of their own country. They have not paid 
much attention to that type of accountability in previous 
years.
    I just want to tell you that the $30 million is still very 
much in question, that I am not totally sold on that. I know 
where you are coming from, and I certainly appreciate your 
motives. But I am just concerned about this precedent that we 
are beginning to establish by creating an ability of a nation 
that we are getting out of debt to go right back into debt.
    The assistance for Central America, Brian, we have talked 
about this and talked about this, we have harped on it, but put 
restrictions on you, we said you couldn't spend more than a 
certain percentage of your money in Haiti. I understand some of 
this money is going to Haiti, I hope there is an explanation of 
that in your explanation of the request.
    But I noticed for the fiscal year 2000, a reduction of $12 
million had been requested for Central America. And are we 
saying that this money that is going to be spent, which is 
going to be spent in the next 18 months, and I think it should, 
but why would the administration come along and say that this 
is all of the money we are ever going to need in Central 
America?
    Why wouldn't you recognize that if we are going to rebuild 
this area of the world, if we are going to build new roads, 
build the new schools, build the new homes, provide medical 
facilities, that we are not going to provide future assistance 
to help this country? Is it all of their woes are going to be 
over with in 18 months? Especially if you are going to South 
America, why is there a $12 million reduction in the assistance 
to Central America if, indeed, we have finally recognized how 
important this area of the world is.
    Mr. Atwood. Mr. Chairman, we would hope that we can 
disburse all of this money prior to the end of the fiscal 2000. 
That will be an awful lot of activity in this region. Then we 
would hope that we could continue the regular projects and 
programs that we have in place in the countries.
    Mr. Callahan. There was a reduction in the requests for the 
regular programs. That is my point, Brian.
    Mr. Atwood. I can't give you the details about Central 
America. But the overall request for Latin America is larger 
than it was in fiscal 1999. You did assure that there were more 
monies available for Latin America.
    Mr. Callahan. I can assure that there is going to be more--
--
    Mr. Atwood. It depends on what you are comparing it to.
    Mr. Callahan [continuing]. There will be more money.
    Mr. Atwood. Maybe perhaps you could consider Brazil as 
well, Mr. Chairman.
    Mr. Callahan. Yes, I understand that. I would have to go 
down there and look the place over before I give them any more. 
If you had an embassy down there as nice as the one in 
Argentina, I might spend a lot of time down there.
    Mr. Atwood. There is not such an embassy.
    Ms. Pelosi. Maybe it is finished.

                          Segregation of funds

    Mr. Callahan. Chairman Young expressed an interest in sort 
of segregating this fund, and while I have not put a lot of 
thought into it I like the idea. And I wish you would look at 
the possibility of that, of segregating these funds, because we 
want to make certain that the monies we appropriated last year 
for Central America were spent out of your regular 
appropriation.
    We want to make sure all of this money, and I certainly 
know that is your intent and the administration's intent, to 
spend it all out of this and there will be no reprogramming. 
And the more I think about the segregating of this account, the 
more I like it, and the more it will help the administration if 
we ever have to face this again, because it will prove that we 
took the entire money and we spent it for these good causes.
    So I know time is limited there, but I think we ought to 
look very closely at the segregation of this fund.
    Mr. Atwood. Mr. Chairman, it is our intent to have it 
segregated and if you can devise a way that would give you more 
reassurance, I think people downtown would be very sympathetic, 
but we would like to see what you want.
    Mr. Callahan. We do not want to make it cumbersome upon you 
all that this money has to be deposited in this bank and the 
check. We want to cooperate with you, but at the same time I 
think it would be great if we had total accountability of how 
this disaster money was being spent. It could be, Brian--and I 
doubt seriously--that maybe we have overestimated, maybe you 
have overestimated the needs and there could be a surplus. I am 
sure we could find ways to spend it.
    But I think it would be a good idea if you could give us 
some suggestions as to how we could put this into a disaster 
account and still give USAID total control. We are not trying 
to take any of that away from you, but just for accountability, 
bookkeeping reasons it will show.

                         Notwithstanding Clause

    Finally, let me on this request for the notwithstanding 
clause on the contract. I know where you are coming from there, 
and I know the need to expedite these contracts. But this 
waiver, I just wonder if we went along, would you object to a 
reporting requirement on the use of this authority? We need to 
keep track of this. And if you are not even going to be there 
probably through most of this contractual awarding, I think the 
Congress needs some indication of what you are doing.
    We don't want to just give carte blanche authority to 
anyone that--I know that the President wouldn't submit someone 
who might not take the same concerns with government monies as 
you do, they are going to have a very difficult time finding 
someone as qualified as you. But still I think that the 
Congress should have some voice or notification of these 
contracts especially when you are going to waive these things. 
So we need to look very closely at those two things along with 
the $30 million fund for debt restructuring or debt payment.
    Mr. Atwood. Mr. Chairman, we have no problem with reporting 
on what we are doing. Our main purpose in getting the 
notwithstanding clause is so that we can identify prequalified 
contractors rather than going through the whole nine yards of 
competition, opening it up to everybody in the country. We know 
who the people are.
    Mr. Callahan. I will let you know that we should give you 
that possibility.
    Mr. Atwood. Yes.
    Mr. Callahan. But at the same time, there should come 
accountability with that.
    Mr. Atwood. Absolutely.
    Mr. Callahan. We don't want one individual having the 
authority to waive all of these without some oversight, and I 
think the Congress should do the oversight.
    Mr. Atwood. We would be happy to do that.
    Ms. Pelosi. Thank you very much, Mr. Chairman. I have a 
number of questions so I am just going to sort of rattle them 
off quickly.
    Mr. Callahan. You can have them all now.

                          Women in Development

    Ms. Pelosi. Rattle them off quickly and submit some for the 
record. I want to return to my opening statement and commend my 
colleague for emphasizing, and Mr. Knollenberg, the issue of 
women in development and how important that emphasis is. The 
administration's proposal for humanitarian assistance for 
Hurricane Mitch, Hurricane Georges and the earthquake in 
Colombia is commendable, and I think in order for us to sell it 
to our colleagues it might be helpful if you could provide for 
the committee a list for the record of anticipated transfers of 
the 621 million requested for disaster relief actually in the 
full package. Because if we are not going to mark up in 
subcommittee, we will be addressing this as members of the full 
committee, so that would be from Commerce-Justice-State as well 
or any other----
    Mr. Atwood. Anticipated transfers of resources to other 
government agencies?
    Ms. Pelosi. Right. In other words, so when we are talking 
to our colleagues we know how much money is going to Latin 
America, in terms of how much of the assistance has already 
been provided or will be provided by Federal agencies. So what 
is at risk, because we all sharethe concern about corruption.
    And may I also say that I am pleased that Mr. Packard 
mentioned that corruption is not only an issue in Central 
America, and you pointed out, someone pointed out Zaire, but it 
is a worldwide deterrent to economic growth. We all share that 
concern, but in any event, so that members can see what money 
is at risk and what is really money that is being spent by the 
Federal government.
    As far as the CBI is concerned, Secretary Romero, you keep 
referring to it and what additional assistance it could provide 
in terms of economic growth, and I would just say to the 
administration you have a long way to go to get a majority of 
votes for CBI in the Congress. We put it up under suspension 
which was almost pathetic, ludicrous, because the groundwork 
was not laid for the CBI. I don't know whether they thought it 
would just slide by. But we do watch our votes.
    And I did happen to vote for it. So I am not saying this as 
one who opposed it, reluctantly, but nonetheless I think that 
that initiative needs work, and when it is ready, I will be 
very eager to see if the improvements are made that many of us 
had hoped would be there, but just tried to give you the chance 
to move forward with it in the past. To discuss that as part of 
this package when it isn't in reality enjoying a majority of 
support in the Congress yet I think you should take heed of.
    Notwithstanding your response, Mr. Atwood, to Mr. Jackson's 
question about the $25 million, I have suggested to the 
chairman earlier this morning, before we met in this public 
hearing, that I was contemplating an amendment to the bill for 
the $25 million and I hope that the administration would be 
receptive to that and not oppose that in terms of additional 
debt relief. I just want to give you heads up on that.

                                Colombia

    Regarding the $10 million for Colombia. Now, this is a 
question. There has been $10 million requested for earthquake 
assistance for Colombia. It is my understanding that there is 
little or no AID presence in that affected area and the needs 
there are vast. Our committee staff visited recently. Most of 
the housing and much of the infrastructure were destroyed and 
several towns also in the area have suffered a period of 
lawlessness in the immediate period after the quake.
    Given these challenges how do you intend to spend the $10 
million? And you can just give me a brief answer now and submit 
the rest for the record if you would like. Does that include a 
housing guarantee program to address the acute housing needs?
    Mr. Atwood. The $5 million--I am sorry, that is the regular 
program for Colombia. Let me see if I can answer.
    Mr. Romero. Let me, if I might, the earthquake hit an area 
that was probably one of the few tranquil areas left in 
Colombia where there was real economic activity going on with 
respect to coffee cultivation. And the President expressed his 
real concern to me that unless something was done that 
lawlessness----
    Ms. Pelosi. We are talking about President Pastrana.
    Mr. Romero. The President of Colombia, Pastrana.
    Unless something was done immediately to provide temporary 
housing and also medical care, that the situation could get out 
of hand. You saw on CNN the result of immediately afterward the 
looting and that sort of thing, the lawlessness. He is very 
concerned trying to keep this within the fabric of those areas 
of the country that are still peaceful.
    Ms. Pelosi. I share the frustration of my colleague about 
the experience with Colombia, but I am hopeful that President 
Pastrana's new administration is taking a different course of 
action.
    Mr. Atwood. Ms. Pelosi, I have the answer, and it is very 
brief. The $10 million in the supplemental will be used for the 
reconstruction of homes for the poorest groups affected, 1,150 
houses to be built and then, second, the reconstruction of six 
schools and eight health posts in this Armenia region.

                              El Salvador

    Ms. Pelosi. Very quickly in terms of El Salvador, in a 
forum on December 15th hosted by AID, which brought together 
the private sector to talk about Mitch reconstruction, the 
President of IDB said this reconstruction represents an 
opportunity to reduce the dependence on agriculture and shift 
to the maquila. Do you share this view for the long-term 
development for the region? What steps can be taken to increase 
food security in Central America and strengthen local 
production of basic grains? As you all know, I have a large El 
Salvadoran-American population in my area. I had the privilege 
of traveling with the administrator to El Salvador at the time 
of the elections at the end of Cristiani's term, and Mark 
Schneider and I visited a sister city relationship as we were 
observing the elections. And since it came up in the course of 
Hurricane Mitch, that forum, I thought maybe it would be 
appropriate to ask that question today.

                                  Jobs

    Mr. Atwood. I will answer and perhaps Ambassador Romero, 
who has been ambassador to that country, would also want to 
respond. But I think right now this emergency supplemental is 
to deal with the devastation and the loss of jobs and crops. 
These are highly agricultural countries. And we need to deal 
with that reality today. But leaving the word maquila out of 
this because it has other implications. I do think that these 
countries need to take the path that Costa Rica has taken, 
which is to develop industries and exports that find a real 
place for high-paying jobs in the global economy.
    We are talking about software and technological links and 
things and the like. As long as they abide by the WTO 
requirements on intellectual property rights, we think that is 
the right way to go developmentally. They will always have an 
agriculture sector but it perhaps should not be as dominant as 
it is today. I don't know if you agree with that.
    Mr. Romero. I agree. I think the key to Salvadoran 
development is diversification, and it was something that was 
begun before the civil conflict broke out in the late '70s to 
which the country is moving back towards now, and I think it 
holds the key.

                             Bishop Gerardi

    Ms. Pelosi. That is very interesting, I appreciate it. As I 
mentioned, again referring to my opening statement, I was 
hoping that the President will bring up the investigation of 
the murder of Bishop Gerardi. It remains stalled, as you know, 
with serious questions about the handling of the investigation.
    Do you know, Secretary Romero, how the President intends to 
signal U.S. recognition of the importance of resolving this 
case?
    Mr. Romero. The President has expressed his view onseveral 
occasions that justice be done in the case of Bishop Gerardi. Certainly 
we have aided or supported the investigation by the dispatching of FBI 
agents down to Guatemala and the assistance that we gave with respect 
to crime scene investigation and laboratory work and that sort of thing 
done by the FBI. And, unfortunately, it seems that the government of 
Guatemala several months later is no further along regarding who might 
have done this and what the motive might have been, but we will 
continue to press.

                               Guatemala

    Ms. Pelosi. Well, I visited Guatemala, separate from my 
trip with the CODEL, but for this specific purpose, and that 
was what, 7, 8 months ago in July, and the administration's 
contribution to this investigation was the same as you just 
suggested now, the FBI and the crime scene information. But the 
information we have been asking for for 8 months from the FBI 
to assist in has been withheld. So I hope that there would be 
more cooperation on our part to help them solve that crime.
    Many of us as Members of Congress have conveyed to 
President Arzu our serious concern about the message that this 
sends, that the chairman of the Guatemalan report on human 
rights abuses would be killed within 48 hours, of the release 
of that report and that this investigation would still be 
stalled all these many months later. So I would hope that the 
President would not miss the opportunity to do that.
    I have one more question, Mr. Chairman.
    Mr. Callahan. I will ask Ms. Kilpatrick if she has any more 
questions. We are running out of time.

                              Debt Relief

    Ms. Kilpatrick. Just briefly, on debt relief I think the 
chairman spoke to that earlier, debt relief and what is before 
us relieves U.S. debt only; is that right? Yes, or no.
    Mr. Atwood. I missed the question.
    Mr. Romero. There is a plan to work with the Paris Club and 
to get debt reduction across the board at the Paris Club. Both 
countries need to pass the test, and for Nicaragua it would be 
this highly indebted country test which comes with a lot of 
strictures in terms of money that they can borrow and balancing 
the budget in the future, and people particularly in Washington 
watch very closely as to what they do.
    So it is not a license to borrow more money freely. 
Honduras has to have an IMF agreement in order to qualify for 
Paris Club debt relief.
    Ms. Kilpatrick. But my point is, we are not--or can we 
actually mandate that any other countries relieve their debt 
with those countries, is this a U.S.-only and Honduras, U.S.-
only and Nicaragua, U.S.-only and the other countries; is that 
right? Is there anywhere in our structure where you may have 
cooperative agreements with other countries to relieve debt? Is 
there such a thing that exists?
    Mr. Atwood. It doesn't exist that we would mandate. But 
there is a tremendous amount of cooperation on this issue. 
There was a December meeting hosted by the IDB with other 
countries. There will be a Stockholm meeting in May and there 
will be a lot of pressure, just peer pressure, to forgive debt.
    Ms. Kilpatrick. Peer pressure to relieve the debt----
    Mr. Atwood. Bilateral debt.
    Ms. Kilpatrick. From the U.S.
    Mr. Atwood. Yes, absolutely, we are pushing for these 
countries to be eligible for the HIPC, the highly indebted.
    Ms. Kilpatrick. Yes. Highly indebted. Finally since it is 
on the fast track, once the legislation is to the President's 
desk for signature, how soon after that will it be in the 
Central American countries? How soon will they have access to 
it?
    Mr. Atwood. Well, we have already put in place a number of 
the mechanisms we need to get started. So we plan to move right 
away. It depends on what aspect of this program. There are some 
aspects we can move even more quickly than others. But still we 
are planning to have this activity started within days after 
the President signs this.
    Ms. Kilpatrick. I understand on Saint Kitts the only 
hospital has been leveled and I was happy to hear you say that 
Saint Kitts is one of the Caribbean countries that you are 
looking at. Thank you very much. Thank you, Mr. Chairman.
    Mr. Callahan. Ms. Pelosi.
    Ms. Pelosi. Mr. Packard.
    Mr. Packard. I had to come back. I had an 11:30 appointment 
and it was canceled. I wanted to come back and ask one more 
question. I didn't want to let them off the hook totally. Does 
the money flow that we send to the individual families that 
have had their homes destroyed and the properties, and 
businesses destroyed? Is that the intent?

                        Microenterprise Credits

    Mr. Atwood. It depends on the aspect of the program you are 
talking about. If it is the microenterprise credits that we 
provide, it goes directly. We set up an institution, whether it 
is a bank or a village banking system, and we provide the loan 
and then we help them to implement a business plan and the like 
and create a network.
    Mr. Packard. Is the money loaned to the victims or is it a 
grant to the victims?
    Mr. Atwood. Again, it depends.
    Mr. Packard. Ultimately it goes through the process from 
our place to the local distribution of the money.
    Mr. Atwood. We are talking about in this supplemental 
reconstruction aid and, of course, we work directly, if it is a 
question of building a house, we work directly with the family 
to make sure that they understand what all of the implications 
are and the like.

                                Housing

    Mr. Packard. I guess what I am getting at is are we using 
American taxpayer money to grant aid monies directly, that 
ultimately goes to rebuilding a person's home down there or a 
person's business that has been destroyed at no costs to that 
person? If that is what ultimately happens, then we treat 
foreign victims of disasters better than we treat American 
victims of disaster.
    Mr. Atwood. I see your point.
    Mr. Packard. We do not do that here in America. FEMA may 
make low interest loans to an individual who is affected by an 
earthquake, flood or hurricane, but we do not give them the 
money. They don't get to build and rebuild their home at no 
cost at the taxpayers' expense.
    Mr. Atwood. It is done the same way. There is, Mr. Wolf 
referred to the phrase ``sweat equity.'' Every one of the 
housing projects has a self-help aspect to it. So we are not 
just giving them the money and building the house for them. 
They have to participate in this and provide resources as well. 
We set up programs to make sure it is a self-help. We find 
frankly that is the only way that people will respect the 
property that they are given under these programs.
    Mr. Packard. I would hope that that would be your benchmark 
in all of these kinds of programs, is that we do not treat 
foreigners, even though they are victims of tragedy, that we do 
not treat them better than we do our own citizens that are also 
victims of tragedy with taxpayer money.
    Mr. Atwood. In fact, I think the people generally want to 
be treated with that kind of respect. The same way people here 
don't like to be on welfare necessarily. They want the self 
respect that comes from a self-help program.
    Mr. Packard. Thank you. Thank you, Mr. Chairman.
    Mr. Callahan. Mr. Secretary, Mr. Administrator, Mr. Future 
Ambassador, I thank you for your testimony this morning. Please 
get back to us as quickly as you can with these questions we 
posed to you, because we must move rapidly, and the quicker you 
get them back, the faster we will be able to move.
    Mr. Atwood. Thank you, Mr. Chairman.
    Mr. Callahan. Thank you.
    [Questions and answers for the record follow:]

           Submitted to Agency for International Development

        Questions for the Record Submitted by Chairman Callahan

    Question. According to USAID, the country-by-country breakdown 
includes $27 million for regional programs. What will these regional 
funds be used for? Will any of these funds be used for USAID operating 
expenses or salaries and overhead?
    Answer. The in-country reconstruction effort for Central America 
will be complemented by regional initiatives which address common 
problems in public health, trade enhancement, disaster mitigation, 
cross-border environmental management, and private sector outreach. In 
addition, operating expenses for USAID management of Hurricane Mitch 
activities is included in the regional funding category.
    The types of regional programs to be funded include the following:
         Establishing standardized surveillance systems which will be 
        crucial to effective management and control of disease 
        outbreaks.
         Assistance to small commercial producers which will have to 
        consider alternative crops. USAID will assist commercial 
        growers on a regional basis to explore alternative export 
        markets and identify regulatory requirements and the best way 
        of meeting them. Assistance will include technical assistance 
        on seasonality of demand, special shipping and handling, 
        particular sanitary and phytosanitary requirements, etc.
         Mitigation of a number of environmental and disaster issues 
        that can only effectively be addressed on a regional basis. 
        Examples includes the management of shared watersheds and reef 
        systems, in which Central America has past experience. In fact, 
        Central America has some of the strongest regional programs of 
        any group of countries in the world. While a lion's share of 
        funding for reconstruction will be provided by the multilateral 
        development banks, these banks have limited grant funds 
        available for the technical assistance required to develop 
        programs. By programming funds for use at the regional level, 
        USAID will ensure flexibility for increasing coordination among 
        the banks and our programs, and for making bank programs and 
        the reconstruction effort overall more successful. Regional 
        funds will be managed at both the LAC Bureau in Washington, and 
        by our regional mission, G-CAP, in the field.
    The budget for regional programs is as follows:

                                                                Millions
Public Health.....................................................  $2.0
Economic Reactivation.............................................   9.6
Housing...........................................................   1.7
Disaster Mitigation...............................................   5.0
U.S. Private Sector Outreach......................................   3.0
Overhead Costs...................................................\1\ 5.5
                    --------------------------------------------------------------
                    ____________________________________________________

    Total.........................................................  26.8

\1\ Does not include $0.5 million for Hurricane Georges overhead costs.

    Question. The President's request includes $3 million ``to reach 
out to the private sector in the United States * * *'' What is the 
purpose of this funding? To whom will these funds be provided? Will any 
of these funds be allocated for salaries and expenses of non-
governmental organizations or for USAID operating expenses?
    Answer. Given the outpouring of interest from the U.S. private 
sector to assist in the reconstruction of Central America, USAID is 
working to facilitate the targeting and channeling of donated goods and 
services from private donors, coordinate the delivery of donations, and 
help monitor their distribution in Central America.
    USAID is currently working with a U.S. contractor to track the 
universe of donations and serve as a clearinghouse/facilitator among 
donors, USAID field missions, NGOs and needs in the field. The $3 
million will be used to ship these donations from the U.S. to Central 
America. USAID has already received one unsolicited proposal from a 
U.S. NGO to undertake such an endeavor. Any grant provided to an NGO 
would be performance-based contract that would partially cover overhead 
costs, although no funds will be used for USAID operating expenses.
    Question. The President's request would provide the USAID 
administrator a broad waiver of existing contracting authority. 
Further, the supplemental request includes $1 million to employ 
personal service contractors to manage the program. Please justify the 
need for this broad waiver authority. Please provide a list of laws 
that USAID anticipates waiving with this authority.
    Answer. The Administration is requesting special authorities to 
expedite the procurement process in order to ensure that our assistance 
is provided as quickly as possible. Given the emergency nature of this 
supplemental, time is of the essence in helping the stricken areas. 
That is why the proposed supplemental establishes a September 30, 2000 
limit for obligation of these.
    Under the circumstances, we cannot afford to wait the normal 6 
month period for full and open competition. By prequalifying eligible 
bidders of goods and services, we expect that assistance can be 
provided in some cases in less than half the normal time, saving 
between 6 weeks and 3 months, depending on the complexity of the 
procurement. The major time savings would result from not adhering to 
the wide range of advertising provisions in the Federal Acquisition 
Regulations and not evaluating large numbers of firms which could 
respond to our procurement bulletins. It is not contemplated that 
implementation of the reconstruction program will require, nor do the 
special authorities provide for, a waiver of the Buy-America Act.
    The December 15 Call to Action Conference, hosted by USAID and the 
White House, included over 400 companies which gathered to discuss ways 
our government, the private sector, and American citizens can work 
together to assist generously with relief and reconstruction. Follow-up 
activities have served to identify the capabilities of these and other 
firms which have expressed interest in the reconstruction process. We 
intend to factor this information into the prequalification phase of 
the procurement process.
    As has been suggested by the Subcommittee, USAID is perfectly 
willing to advise Congress whenever these special authorities are 
invoked to expedite the procurement process.
    Question. Please describe previous occasions in which the Congress 
has provided USAID or the Department of State this type of waiver of 
existing contracting laws?
    Answer. USAID's Office of Foreign Disaster Assistance (OFDA) and 
Transitions Initiatives (OTI) operate under broad notwithstanding 
language on a regular basis. These authorities are not limited to 
procurement procedures as is the case for the proposed emergency 
supplemental for hurricane reconstruction. In addition, in every other 
supplemental appropriation enacted for disaster relief, rehabilitation 
and reconstruction this broad notwithstanding authority has been 
included. In addition, the Agency has had special authorities under the 
SEED Act for implementation of its programs in Eastern Europe and the 
New Independent States.
    Question. According to USAID, up to $30 million would be made 
available for balance of payments support to the Government of 
Honduras. These funds would be used by the Hondurans to pay bilateral 
and multilateral debt. How much does the government of Honduras owe to 
multilateral and bilateral creditors?
    Please list to whom these debts are owed and in what amount.
    Answer. As of the end of 1998, the Government of Honduras owed 
multilateral and bilateral official creditors a total of $3,518 
million, distributed as follows:

Multilateral:                                                 In million
    IMF...........................................................   $46
    World Bank....................................................   774
    IDB...........................................................   990
    Central American Bank for Economic Integration (CABEI)........   409
                    --------------------------------------------------------------
                    ____________________________________________________

        Total..................................................... 2,219
                    ==============================================================
                    ____________________________________________________
Bilateral:
    U.S. Government...............................................   154
    Other Paris Club..............................................   920
    Other bilateral...............................................   225
                    --------------------------------------------------------------
                    ____________________________________________________

        Total..................................................... 1,299

    Question. As requested in the supplemental, can any of the balance 
of payments support funds be used to pay debts owed to multilateral 
institutions or to other nations?
    Answer. In the administration's original request up to $30 million 
in balance of payments support to Honduras would be used to meet 
Hondurans debt payment commitments to multilateral institutions. This 
would provide Honduras needed external account relief and generated 
local currencies which would be jointly programmed for reconstruction 
activities. If Balance of Payment Support is not available, USAID will 
directly finance planned reconstruction activities which would have 
been funded by local currency generations.
    Question. To date, what is the total AID operating expense costs 
relating to Hurricane Mitch?
    Answer. To date, AID has incurred the additive cost of 
approximately $460,000 in operating expense costs related to Hurricane 
Mitch. The bulk of these expenses ($343,000) were incurred in Honduras 
for such items as for additional personnel costs to manage the 
reconstruction effort ($180,000), travel ($46,000), replace vehicles 
($67,000), overtime ($19,000), and other ($31,000). This is beyond the 
operational expenses incurred by the Missions which have, since 
October, been almost exclusively focused on responding to Hurricane 
Mitch.
    Question. How much of this funding will be made available to the 
AID Inspector General for performance and financial audits?
    Answer. The Inspector General estimates that $2 million is needed 
over the next four years for audit and investigations related to 
hurricane reconstruction activities. We have included an initial 
allocation of $400,000 for these purposes in our request, and will 
support the Inspector General's request for the balance of the funding 
as it is required.
    Question. According to President's official transmittal letter to 
Congress, of the $621 million in Economic Support Funds requested, in 
addition to AID, ``a number of other agencies will also play a role in 
the implementation of reconstruction and disaster mitigation 
activities.'' According to Administration documents, approximately $110 
million will be made available to these other federal agencies 
(excluding the Department of Defense).
    Please provide an illustrative list of other U.S. federal agencies 
(excluding the Department of Defense) and the types of programs that 
may be implemented with these funds.
    Answer. We understand that Office of Management and Budget provided 
this information to the Subcommittee on February 26, 1999. A copy is 
attached.
    Question. Please provide the Committee with a list of which federal 
agencies will implement programs and whether they will be through 
632(a) or 632(b) agreements with AID.
    Answer. The inter-agency working group on reconstruction, chaired 
by USAID, involves more than a dozen federal agencies. While we intend 
to use the Section 632 mechanism, at this time, no final decisions have 
been made concerning any individual agreements. As implementation 
planning progresses, we intend to keep the committee fully apprised of 
our work with other agencies and will provide the requested information 
as it becomes available.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Question. According to AID, the average size of micro-enterprise 
loans made available by this supplemental will be $300. What are the 
largest micro-enterprise loans AID anticipates making?
    Answer. In Latin America microenterprise loans tend to range from 
$100 to $1,000 generally. While we have not defined an upper and lower 
limit for the loans that will be funded with emergency supplemental 
funds, we expect to target at the very poor. The people that suffered 
the most from the devastation caused by Hurricane Mitch were very poor 
and lived under the most precarious conditions. They desperately need 
to get back on their feet, will tend to request loans in the lower end 
and under $300 to shore up their microenterprises.
    Question. According to the testimony of Acting Assistant Secretary 
Romero before the Committee, the administration package includes, ``* * 
* deferral by the USG of all bilateral obligations from these countries 
for the next two years.'' How much money will be freed up during this 
two-year period for Honduras and Nicaragua as a result of this debt 
repayment moratorium?
    Answer. In the wake of Hurricane Mitch, the major bilateral 
creditors of Honduras and Nicaragua, in the Paris Club, agreed to 
provide, as nearly as possible, 100 percent flow relief on service of 
official, bilateral debt during the recovery period. In the case of 
Nicaragua, there were no bilateral debt payments to the United States 
coming due to this period, due to earlier debt arrangements.
    For Honduras, a total of $205 million would have come due during 
the two-year period on loans from Paris Club countries. Of this, U.S. 
share is 41 million, $20 million in 1999 and $21 million in 2000.
    Question. The reconstruction and rehabilitation request of $621 
million is proposed as a supplemental appropriation to the Economic 
Support Fund. That means they will be merged with the other funds in 
the account. Given the importance of this funding, and Congressional 
desire to both track the use of these funds and account for their use, 
would you object to the creation of a special appropriations account 
for these funds? For reporting and accounting purposes, it would make 
it simpler for the Committee.
    Answer. The Administration would prefer using the existing account 
structure, augmented by additional reporting requirements rather than 
creating a new account structure. However, we are not strongly opposed 
to a new structure and will work with the House and Senate Committees 
on a structure that will allow us to move forward with this important 
funding.
    Question. For the last several years the Committee has included 
report language asking that USAID take advantage of the expertise and 
experience of the U.S. Army Corps of Engineers in Latin America. The 
Corps has a number of offices throughout the region, and is anxious to 
assist in the implementation of USAID programs. What plans do you have 
for using the Corps of Engineers to manage or implement portions of the 
supplemental funding for Central America and the Caribbean?
    Answer. We completely agree that the U.S. Army Corps of Engineers 
has special expertise which can be of tremendous value to the Central 
American Countries as they reconstruct after Hurricane Mitch. In fact, 
the Corps has been involved from the early days of the relief and 
recovery effort. They produced an assessment for the transportation, 
public utilities, social infrastructure and housing sectors which 
estimated $8.5 billion in damages. We have shared this assessment with 
numerous other countries and donors and it has been invaluable in 
assisting with planning for reconstruction activities. The Corps has 
also been assisting other U.S. government agencies in their proposed 
involvement in reconstruction. We expect that the Corps' unique 
capability in the areas of floodplain and landslide analysis, risk 
management and construction supervision will be particularly useful to 
the Central American Countries and that the Corps will, therefore, have 
a significant role in the reconstruction for which the supplemental 
funding is being sought.
    Question. The supplemental request focuses primarily on activities 
and programs that can be completed in the next 18 months. That is as it 
should be. However, it may be years before Central America is fully 
recovered from the effects of Hurricane Mitch. The fiscal year 2000 
budget request of USAID for development assistance in the Latin America 
region is $309 million, a reduction of $12 million from the 1999 
allocation of $320 million. That means the ongoing development 
activities in the region are declining. Can you explain why this is the 
case?
    Answer. The total DA request for the LAC region in the FY 1999 CP 
was 297.4 million. Thus the FY 2000 CP request level of $309 million 
actually represents an increase of approximately $12 million over the 
FY 99 request.
    The actual FY 1999 appropriation of $320 million reflects an 
increase of approximately $22 million over the CP request level. This 
is due primarily to the combination of $30 million in Emergency Child 
Survival Supplemental resources allocated to the countries affected by 
Hurricanes Mitch and Georges and a cut of $8 million in the proposed 
Presidential summit Initiative for Central American trade.
    Question. As part of the regular fiscal year 1999 appropriations 
act, the Congress provided an emergency supplemental of $50 million for 
the Child Survival and Disease Programs Fund. You already have those 
funds available for activities in Central America and the Caribbean. 
How are they being used? Are they being allocated for disaster relief 
and humanitarian assistance in the region right now?
    Answer. USAID is using $30 million of the $50 million of the 
Emergency Child Survival funds to address immediate and critical child 
survival and public health needs resulting from Hurricanes Mitch and 
Georges in Central America and the Caribbean. Of this amount, $24 
million is being used for Hurricane Mitch recovery in Central America 
and $6 million for Hurricane Georges reconstruction in the Dominican 
Republic. Funds will support vector control and disease surveillance to 
prevent outbreaks of infectious diseases, including cholera, dengue, 
malaria and leptospirosis; resupplying medicines and medical supplies; 
and rebuilding vaccination cold chains; intensive public health 
campaigns and community efforts to improve health conditions; public 
education efforts on good health and hygiene practices in shelters and 
other temporary facilities, and restoration/rebuilding of small-scale 
water distribution and; sewage systems to control the spread of water-
borne diseases. A country-by-country breakdown is attached.

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    Question. Approximately $40 million of the supplemental request is 
intended to deal with the effects of Hurricane Georges in the eastern 
Caribbean. How will these funds be used, and how much of the funds will 
be committed for Haiti?
    Answer. Dominican Republic: $29 million will be used to finance 
recovery and reconstruction in: health (immunization programs, primary 
health care, water/sanitation systems); shelter (building materials, 
housing credit); economic reactivation (microenterprise credit, 
rehabilitation assistance for small farmers, improvement of marketing 
systems, policy reform, soil erosion prevention); and disaster 
preparedness/mitigation.
    Haiti: $9.8 million will be used for: public health (rehabilitation 
of damaged health, water and sanitation infrastructure); economic 
reactivation (emergency seed crop program, reconstruction of small 
irrigation and drainage systems, construction of feeder roads); 
disaster mitigation/planning (identification of best management 
practices, including soil conservation techniques); and community self-
help programs (to enable local communities and governments to implement 
small projects designed to rehabilitate damaged infrastructure).
    Eastern Caribbean: $3 million will be used for: housing and school 
rehabilitation; disaster mitigation planning/implementation; and 
agricultural reactivation.
    Question. According to the information provided to the Committee, 
$291 million of the supplemental funds will be allocated for programs 
in Honduras and $94 million will be available for Nicaragua. Other 
countries would receive lesser amounts. How did you develop country 
allocations? Do these numbers represent all funds that might be 
provided for Honduras and Nicaragua?
    Answer. The funding allocations represent levels proposed by LAC 
field Missions, based upon each Mission's assessment of the damage in 
each country and the sectoral areas in which USAID has a comparative 
advantage or program in place that could easily be refocused to provide 
reconstruction support. Missions also assessed what other donors and 
host governments were proposing to do to ensure that USAID's work is 
complementary to and not duplicative of others.
    USAID proposes the following levels of hurricane reconstruction 
support per country:
Hurricane Mitch:                                             In millions
Honduras 1.............................................   291
Nicaragua 1............................................    94
El Salvador 1..........................................    21
Guatemala 1............................................    25
Regional 1.............................................    27
Hurricane Georges:
Dominican Republic 1...................................    29
Haiti 1................................................   9.8
Eastern Caribbean 1....................................   3.0
Colombia Earthquake...............................................    10
New Horizons......................................................    56
    Central America...............................................    48
    Dominican Republic............................................     8
                    --------------------------------------------------------------
                    ____________________________________________________

        Total assistance                                             677

1 (The above numbers do not include the $111 million in funds 
for programs to be implemented by agencies other than USAID. These 
agencies will make appropriate allocations as programs are further 
developed.)

    Question: Could you provide the Committee with a chart that 
displays the proposed allocation of all the funds in the supplemental 
request by country and by program area, including allocations that were 
provided out of existing funds?
    Answer. Please see the attached chart.

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    Question. One of the biggest issues of concerns for our members is 
the possibility of corruption in the use of our foreign assistance 
dollars. In that regard, we must be particularly careful that 
humanitarian and disaster assistance does not end up in the pockets of 
those for whom it is not intended. The supplemental request includes up 
to $10 million to design implement anti-corruption programs. In 
addition, $12 million is planned to help local governments manage 
reconstruction assistance, including anti-corruption training to avoid 
diversion of assistance. Training is fine; but just because someone is 
trained to be honest doesn't mean they will be honest.
    Can you explain the details of these requests?
    Answer. The transparent and effective use of funds is a top 
priority for USAID, other international donors, and the countries 
involved. We have created an inter-agency working group to coordinate 
donor efforts to guard against corruption and develop common solutions. 
The countries themselves have shown their commitment to these efforts 
to create strong accountability mechanisms. We are focusing on 
solutions that ensure both the proper use of funds and the quality of 
the reconstruction work itself.
    In Nicaragua, the IDB is funding an oversight committee to create a 
credible mechanism that will work both with the national ministries 
charged with the reconstruction process and will report directly to 
donors. In Honduras, the GOH has asked USAID to support an independent 
Inspector General to monitor the use of funds and conduct monitoring 
and oversight reviews of on-going reconstruction efforts. Currently, 
OTI has pledged $.5 million to this endeavor but it remains flexible if 
the need turns out to be greater. In addition, we recently signed a 
$400,000 agreement with the Comptroller General in Honduras to enable 
the GOH to contract an international accounting firm to enhance its 
auditing capabilities.
    The $12 million allocated to local governments will bolster their 
capacity to carry out public services pushed to the limit by the 
emergency circumstances. Ensuring the capacity of local governments to 
meet the needs of their citizens is a high USAID priority. We plan a 
multilevel approach to ensure the proper use of these funds. The first 
is training of local public officials in correct and effective 
financial and administrative management, including the introduction of 
financial systems that enhance transparency. The second tier of this 
anti-corruption approach is the function of the independent Inspector 
General (detailed above) that will monitor reconstruction efforts at 
the local level. Finally, we want to support civil society in its role 
as a watchdog and to encourage local citizens and businesses to fully 
participate in the reconstruction process, recognizing their stake in 
the proper and most efficient use of funds.
    In addition to the $12 million initiative described above, the 
Department of State will support law enforcement by designing and 
implementing anti-corruption programs, including the development of 
internal audit/oversight mechanisms and automated immigration records 
to facilitate information sharing at all border-crossing points.
    Question. Describe funding that will be provided to the USAID 
Inspector General to monitor and audit the use of taxpayer's funds?
    Specifically, how much will be provided to the Inspector General?
    Answer. The Inspector General estimates that $2 million is needed 
over the next four years for audit and investigations related to 
hurricane reconstruction activities. We intend to make an initial 
allocation of $400,000 from supplemental appropriation funds for these 
purposes. We intend to request an additional $1.6 million as part of 
the regular appropriation for the Inspector General in the third and 
fourth years following enactment of the supplemental in recognition of 
the fact that these audits cannot be conducted until these activities 
are actually carried out.

        Questions for the Record Submitted by Congressman Forbes

    Question. Could you please tell the subcommittee why efforts to 
help the survivors of Hurricane Mitch by the World Bank and the IMF are 
insufficient? What efforts are being made by the Europeans? Can't your 
existing programs cover this problem or be converted through a 
reprogramming to cover the costs you would like to pay?
    Answer: The estimated total reconstruction costs associated with 
Hurricanes Mitch and Georges approach $10 billion. To help address the 
approximately $8 billion of damage caused by Hurricane Mitch alone, the 
IDB has made the single largest pledge for reconstruction assistance to 
date; approximately $2.2 billion. The World Bank has pledged $1.2 
billion to address Hurricane Mitch reconstruction and the European 
Commission $285 million. All donor support for Hurricane Mitch to date 
totals approximately $6.3 billion.
    Although donor support has been significant, it is important to 
consider that of the $6.3 billion in pledges, approximately $4.4 
billion is for reconstruction support.
    The rest represents funds already approved for emergency and 
humanitarian relief, immediate rehabilitation activities, and debt 
relief. Moreover, of the IDB and World Bank pledges, a relatively small 
amount is available for concessional lending to Honduras and Nicaragua 
due to monetary limits on development bank concessional lending. The 
bulk of development bank support will be available for El Salvador and 
Guatemala because these countries are able to borrow on non-
concessional terms. Additionally, a significant level of IDB and World 
bank pledges represent reprogramming of planned and future loans rather 
than new lending.
    USAID has reprogrammed over $120 million of existing resources for 
Hurricane Mitch, which is allowing the Agency to address some immediate 
construction needs. Nonetheless, this level is woefully inadequate to 
provide the level of support required. Moreover, because economic 
losses in the countries of Central America and the Caribbean may 
increase without prompt action to reactivate these damaged economies, 
economic losses may be higher than originally anticipated. For these 
reasons, we believe that an emergency supplemental appropriation is 
necessary to allow the U.S. Government to contribute adequate and 
flexible grants for hurricane reconstruction in Central America and the 
Caribbean.
    Question. There is substantial evidence to suggest that the impact 
of the hurricane would have been much less if local farmers had 
employed different farming methods. USAID and other agencies and NGO's 
have been active in the region for decades, presumably teaching more 
beneficial farming methods, yet today it appears that these efforts 
failed. What assurances do we have that this money will prevent any 
future such occurrences?
    Question. USAID's programs show evidence that additional investment 
is required to reduce farmer's vulnerability to hurricanes of Mitch's 
magnitude. Many of Honduras' small farmers who carried out the improved 
watershed management programs funded by USAID, the German development 
organization and the UN's Food and Agriculture Organization weathered 
the storm extremely well.
    However, these programs have a limited reach throughout Honduras. 
Therefore, watershed degradation is outstripping the focus of these 
programs. This has the potential of increasing the intensity of 
flooding during the hurricanes.
    Once small farmers install improved watershed management 
techniques, they maintain them. However, it is difficult to get low-
income farmers who are outside of the project areas to acquire these 
improved practices because of funding limitations that restrict our 
ability to reach the majority of small farmers.
    These Supplemental resources are urgently needed to expand programs 
to improve watershed management and to protect the environment from the 
kind of damage that future hurricanes could cause.
    Question. Has your office registered a significant increase in the 
number of Central Americans trying to enter the U.S. legally or 
illegally? What are you doing to encourage these people to stay and 
rebuild their countries?
    Answer. We have checked with the U.S. Department of State and they 
inform us of the following:
    While a feared mass migration of refugees from the devastation of 
Hurricane Mitch has not materialized, there is a sustained and 
significant flow of ``Mitch'' migrants headed for the United States. 
The majority of the increase appears to be from Honduras, the country 
most devastated by the hurricane.
    The American Embassy in Teguciagalpa reports a 30 percent increase 
in applications for non-immigrant visas from November 1998 to January 
1999 (The refusal rate has increased from 25 to 46 percent during the 
same period.) The Honduran Passport Office reported an increase in 
passport issuance from 200 per day before the hurricane to 600 per day 
after the hurricane, attributing the increase to applicant's fears of 
job losses and economic breakdown.
    At one Honduran-Guatemalan border crossing, Honduran officials 
report the number of Hondurans travelling north has increased from 80 
to 300 per day since the hurricane. U.S. officials visiting this 
checkpoint report evidence of an additional steady flow of illegal 
crossings in the adjacent area.
    In spite of these indications of increased migration, the United 
States Border Patrol reports that, to date, the influx of ``Mitch'' 
migrants has been manageable. Hondurans have replaced Salvadorans as 
the highest other than Mexican group apprehended at the McAllen, Texas 
sector, for instance, but a total of only 287 Hondurans were 
apprehended in this sector in November. Although the percentage 
increase of ``other-than-Mexicans'' entering the country illegally may 
sound alarming, to date the absolute numbers do not support early fears 
of a wave of immigrants. For instance in Laredo, Texas, the number of 
detainees increased from 123 immigrants in December 1997 to 583 in 
December 1998. In Del Rio, Texas, the number of detainees increased 
from 45 to 221 in the same period.
    To discourage illegal migration, we have a strong public affairs 
strategy: (1) highlighting the perils, both natural and man-made of, 
illegal immigration; (2) clarifying that Immigration and 
Naturalizations Service's stay of removals for Guatemalans and 
Salvadorans and Temporary protected status for Hondurans and 
Nicaraguans only applies to those already in the United States as of 
December 31, 1998; and (3) ensuring good media coverage of U.S. 
reconstruction efforts in order to give those most affected by the 
hurricane hope that their lives might soon return to normal.

       Questions for the Record Submitted by Congresswoman Pelosi

    Question. Both Honduras and Nicaragua were in the midst of 
negotiations when the Hurricanes struck. I believe there is a consensus 
to provide both these countries with significant debt relief beyond 
what was contemplated prior to the disaster, and indeed the 
Administration's request reflects that. Explain your intentions with 
regard to the $41 million specifically for debt relief. Quantify the 
benefits to both countries in terms of changes in anticipated near term 
debt payment schedules.
    Answer. All of the $41 million in debt relief is for Honduras. In 
the wake of Hurricane Mitch, the major bilateral creditors of Honduras 
and Nicaragua, in the Paris Club, agreed to provide, as nearly as 
possible, 100 percent flow relief on service of official, bilateral 
debt during the recovery period (see attached table). In the case of 
Nicaragua, total Paris Club interest and amortization payments of $105 
million were to come due in this period, $51 million in 1999 and $54 
million in 2000. All of this has been postponed or forgiven. For the 
USG, however, there were no bilateral debt payments coming due in this 
period, due to earlier debt arrangements.
    For Honduras, a total of $205 million would have come due during 
the two year period on loans from Paris Club countries, $100 million in 
1999 and $105 million in 2000. Of this, the U.S. share is $41 million, 
$20 million in 1999 and $21 million in 2000.

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    Question. In addition to the $41 million requested for debt relief 
USAID plans to provide Honduras with another $30 million over two years 
to directly reduce debt payments owed to other countries and 
institutions. How will the provision of $30 million over two years to 
Honduras for the repayment of both bilateral and multilateral debt 
affect total payment streams during that period? What portion of their 
expected payments does $30 million represent?
    Answer. According to the most recent estimates of the IMF, Honduras 
faces an unfinanced foreign exchange requirement of $110 million in 
1999 and $109 million in 2000 even taking into account debt 
rescheduling and forgiveness and expected other donor disbursements. In 
addition, the Fund projects an unfinanced GOH fiscal gap of 1,271.5 
million Lempiras for FY 1999 (equivalent to US$91 million) as a result 
of reduced tax revenues and increased current and capital requirements 
(primarily the latter).
    A significant portion of this unfinanced balance of payments gap 
represents debt service payments to the World Bank and IDB which cannot 
be rescheduled and which will not be covered by the Central America 
Trust. Total debt service to the two institutions from Honduras amounts 
to $405 million, $207 million for 1999 and $198 million for 2000. To 
date, expected pledges to the trust fund for Honduras are estimated at 
$62 million. Thus the proposed $30 million is less than 10 percent of 
Honduras's remaining unfinanced debt service requirement to the two 
multilateral institutions.
    Question. On your intention to convert the $30 million into local 
currency for development purposes in Honduras, how do you intend to 
monitor the use of these funds, given the potential for misuse?
    Answer. Funds for this purpose would be disbursed by AID directly 
into a separate sub account of the Central Bank of Honduras in the 
Federal Reserve Bank of New York established for this purpose and could 
be disbursed only to the World Bank and IDB. A local currency deposit, 
equivalent to the dollars, would be created by the Central Bank of 
Honduras and would be jointly programmed by the two governments for 
high priority reconstruction purposes.
    The local currency account would be subject to audit by USAID and 
would, in fact, be audited on a regular basis. This mechanism has 
worked very well in the past in Honduras in preventing fraud and 
misuse. In addition, USAID is working closely with the Government of 
Honduras, at the latter's request, to establish mechanisms for 
concurrent audit of all relief and reconstruction operations to assure 
that funds are used efficiently, effectively, and for their intended 
purposes.
    Question. To what extent are other countries providing direct 
budget support for debt relief?
    Answer. To date, only the USG has proposed direct budget support 
for debt relief.
    Question. On the $25 million intended for the Central American 
Emergency Trust Fund, how will this be implemented? Are other countries 
contributing? To what extent are multilateral institutions deferring or 
forgiving the cost of debt service on outstanding loans in conjunction 
with this Trust Fund?
    Answer. Other countries-primarily European donors, without a 
presence in Managua and Tegucigalpa--have pledged contributions to the 
World Bank-managed Central American Trust Fund. This fund will disburse 
to the World Bank and the Inter-American Development Bank to cover 
debts coming due.
    It is our understanding that the World Bank and the Inter-American 
Development Bank are not themselves deferring or forgiving debt service 
obligations.
    Question. Reports of the environmental damages from Hurricane Mitch 
are frightening, in particular in Honduras which was suffering prior to 
the Hurricane from severe deforestation, and rapid uncontrolled urban 
growth. Your plans include funding for various assessments and for the 
significant involvement of the U.S. Geological Survey. How will assure 
that as we seek to restore the urban infrastructure and to rebuild the 
banana industry, the mistakes of the past will not be repeated?
    Answer. One of the guiding principles of the reconstruction effort 
has been to ensure environmental security and sustainability of what we 
intend to reconstruct. The work of the U.S. Geological Survey has been 
extremely helpful in identifying critical factors for application 
across several sectors, including agriculture, transportation, housing 
and disaster mitigation.
    In Honduras, the USGS and the Army Corps of Engineers have 
investigated a major landslide in Tegucigalpa that effectively dammed 
the river and created a pool of standing and stagnant water that became 
a public health issue. They provided recommendations on how to open up 
the channel to drain the stagnant water and recommended a program of 
dredging, levees, and dikes to control the river and prevent major 
flooding in future rainy seasons. At the same time, their hydrologic 
studies are providing the data needed by engineers to create the design 
specification for rebuilding major bridges over the river in 
Tegucigalpa.
    We will also be working through environmental NGOs to focus more 
attention and resources on watershed management, including forest 
management and possible reforestation, to prevent the kinds of 
landslides and erosion that contributed to damage and siltation 
downstream.
    In Nicaragua, the U.S. Geological Survey has been extremely helpful 
in identifying the immediate cause of the disastrous mudslide at 
Posoltega--and in assessing the likelihood of future slides. The USGS 
has also provided expert assistance to INETER, their Nicaraguan 
counterpart agency, in identifying areas at high risk of future slides.
    This information will be invaluable as one of the bases for the 
development of a coherent land-use policy, with application across 
several sectors, including agriculture, transportation, housing and 
disaster mitigation. For example, new settlements will not be 
established without certification that the proposed location is not in 
an area of high risk. Training materials and programs will be developed 
for existing towns and cities in areas of high risk.
    In addition, the U.S. Department of Agriculture is coordinating an 
Emergency Watershed Protection Program with USAID's Office of Disaster 
Assistance and the Nicaraguan Ministry of Agriculture and Forestry. 
This program will stabilize rivers and streambeds that were damaged 
during Mitch, and protect critical infrastructure that has already been 
re-built. This emergency program will serve as a building block for 
medium-term strategy to guide development in an environmentally sound 
manner, such as reduction of deforestation rates and implementing 
sustainable agricultural methods.
    Question. Your plan calls for the building of 6,400 new houses. How 
will this be accomplished, directly or through a loan guarantee 
program?
    Answer. Based on the limited availability of damage assessment 
information in early November, our initial estimate of beneficiaries of 
housing assistance was on the order of 6,400 units or families. USAID 
has subsequently conducted on-the-ground assessments in the Dominican 
Republic, Nicaragua and Honduras. After review of this work, it is now 
estimated that the target population for housing assistance in the 
Dominican Republic and Honduras will be on the order of 11,000 families 
or more. Reaching this target will depend not just on needs but also on 
the availability of resources, including the contribution of other 
donors and national governments (which is still uncertain).
    Implementaion is expected to be carried out by a combination of 
NGOs (both local and international), private developers, and national 
public housing and infrastructure institutions. The mix of implementing 
entities depends on country-specific conditions and the geographic 
location of targeted families. Given the indebtedness of the countries 
in question, it is not anticipated that loan guarantee resources will 
be used in the immediate reconstruction phase. USAID housing assistance 
is not expected to be primarily in the form of grants, but could 
possibly involve the use of small home improvement loans to facilitate 
progressive development of permanent housing units.
    Question. While the countries of Central America have made 
significant progress towards democratization on a national level, they 
still have not addressed the critical need to strengthen municipal 
governments. In most cases, municipalities in both Honduras and 
Nicaragua have no source of independent revenue, and are wholly 
dependent on national governments for resources. How does the package 
address this generic problem?
    Answer. In general, we believe municipalities have a critical role 
in the reconstruction process in determining local priorities, meeting 
the basic needs of local residents, and assuring that their 
constituents participate in the decisions that affect their lives. In 
Honduras, reconstruction and repair of local water and sanitation 
facilities will continue in partnership with the municipalities where 
involvement and employment of the local populace is critical to their 
physical reconstruction and ongoing maintenance. Similarly, Honduran 
municipalities have been charged with addressing the housing issue for 
those families displaced by the hurricane. USAID is already working 
directly with the municipalities and local NGOs to identify permanent 
housing solutions for those people now in temporary shelters. Finally, 
USAID will draw upon the experience of its ongoing municipal 
development program to provide direct technical assistance and training 
to municipal officials and staff in areas such as financial management 
and accountability, land use planning and disaster mitigation.
    In Nicaragua, where we already had relationships with local 
governments, USAID increased assistance to seven municipalities that 
were heavily affected by the Hurricane. USAID is strengthening local 
governments' capacity to handle the demands of reconstruction including 
developing multi-year investment programs, increasing citizen 
participation and improving basic services, particularly in the sectors 
of basic infrastructure, health and education. USAID is providing 
technical assistance to the association of Nicaraguan Municipalities to 
help assure that municipal priorities are reflected in the 
reconstruction agenda.
    Question. Will resources be provided directly to municipalities as 
they were during the reconstruction effort in El Salvador?
    Answer. Yes. USAID is making a deliberate effort to channel 
reconstruction assistance and the resources of its regular development 
program through local organizations and municipalities, and to regional 
units of government ministries. Municipalities will play an important 
role in setting priorities for reconstruction efforts, reviewing 
proposals, and overseeing the work by other national, NGO, or private 
sector entities who will handle the process of contracting with 
Honduran firms to undertake construction or rehabilitation tasks.
    Other donors have voiced their decision to similarly encourage a 
decentralized approach to reconstruction.
    Question. How will you force the national level governments to 
provide more resources directly to municipalities?
    Answer. We share the concern that municipalities need access to 
more resources and we recognize that the municipalities took on a huge 
financial burden during the emergency itself and now during the 
reconstruction phase, with very little outside assistance. Honduran 
municipalities have made significant progress in developing sources of 
financing outside of central government transfers, in part because the 
central government has provided only a small percentage of the 
resources they are required by law to transfer to municipalities. USAID 
has been actively assisting municipalities in their efforts to mobilize 
local resources, through collection of local taxes and fees, to cover 
their recurrent costs and to finance investments in services and 
infrastructure. USAID will also be looking at possible development of 
other municipal financing options to improve the ability of 
municipalities to access resources and respond to citizen needs. USAID 
is also supporting the Association of Honduran Municipalities (AMHON) 
which represents the interests of municipal governments in Honduras. 
This association of mayors and municipal officials has successfully 
lobbied for direct election of mayors and for other municipal 
interests. AMHON has also pressed the government to provide them with 
the full transfer of resources required by law (currently they receive 
1.5% of the national budget, when a 5% transfer is required).
    Similarly, in Nicaragua USAID's Municipal Autonomy and Development 
Program is working at the national level providing assistance to the 
Nicaraguan Association of Municipalities (AMUNIC) to increase the power 
of the local governments to influence central government policies and 
to their capacity to propose legislative reforms supportive of 
decentralization. USAID has provided technical assistance in the 
drafting of legislation to give more autonomy and resources to the 
municipalities. Addition USAID assistance will be aimed at passage of a 
national municipal transfer in order to implement the 3% national 
budget transfer to the municipalities.
    Question. In Nicaragua, the issue of land ownership and housing is 
particularly volatile due to the civil war and its aftermath. How will 
U.S. funds be used in Nicaragua, and how do the Nicaraguans themselves 
intend to address the ownership issues so that reconstruction can take 
place?
    Answer. USAID plans to fund construction of temporary shelters for 
4,000 families around the country, targeting the hard hit departments 
of Leon and Chinandega. The International Federal of REd Cross will 
implement this $1.5 million program to build temporary shelters on or 
near sites wit clear land titles selected for and guaranteed to receive 
permanent housing. Other donors and international institutions, 
including the Organization of American States, Taiwan, France, Germany, 
the International REd Cross, and the World Bank, are all working to 
assist Nicaragua to reconstruct homes damaged by Mitch and to build new 
permanent housing for families who lost their homes.
    The Government of Nicaragua clearly recognizes the importance of 
settling all land ownership issues before new housing is constructed. 
The Nicaraguan Social Action Secretariat has $1.2 million available to 
buy land for municipalities to do housing. In addition, some 
municipalities have received direct donations to purchase land for 
resettlement.

     Questions for the Record Submitted by Congresswoman Kilpatrick

    Question. What oversight will occur within each country receiving 
assistance and for the various assistance programs that USAID will 
administer to ensure that the likelihood of corruption will be severely 
reduced?
    Answer. All USAID assistance is subject to procedures already in 
place to ensure accountability of all U.S. funds. These measures 
include: Standard Agency audit procedures as set forth in the Inspector 
General's Audit Guidelines. Each Mission Controller is responsible for 
establishing specific internal controls within each project activity. 
Prior to disbursement of any U.S. funds, the Controller will review 
each implementing entity's accounting procedures and internal 
management controls to ensure their acceptability. At the end of every 
grant or contract, a certified audit by an independent public 
accounting firm is required.
    In Honduras and Nicaragua, we are also addressing the issue of 
other funds provided to those governments by strengthening the capacity 
of their Comptrollers-General to audit the activities of line 
ministries in delivery of reconstruction assistance. In Honduras, for 
example, we have provided funds for the Controller General to contract 
an international firm to assist them in carrying out their audit 
function. In Nicaragua, USAID and the World Bank have taken the lead in 
assisting the government to install an integrated financial management 
system. The system will standardize procedures in all government 
ministries, ensure transparency and strengthen the Comptroller-
General's capacity to review financial transactions government-wide, 
including uses of reconstruction assistance.
    In addition, we have joined the IDB, the World Bank and other 
bilateral donors in discussions with the Governments of Honduras over 
the creation of independent oversight mechanisms that would report to 
the donors and to the host governments on particular areas of 
vulnerability, such as contracting and procurement. Similar discussions 
have taken place in Nicaragua. President Aleman wrote to President 
Clinton in December 1998 to request assistance in developing such a 
mechanism. In the meantime, he has named a government Oversight 
Committee, composed of three prominent Nicaraguans with extensive 
experience in dealing with international financial institutions to 
develop a strategy in this area. We will keep the committee fully 
informed of these efforts and how we plan to support their development 
and operation.
    Question. In your testimony, you mentioned Honduras, Nicaragua, 
Guatemala and EL Salvador in Central America. You also mentioned the 
Dominican Republic and the Caribbean as areas that were affected by 
Hurricane Georges and as areas that will receive assistance from the 
U.S. Can you identify which areas or territories will receive U.S. 
assistance. How much assistance will each of these Caribbean areas 
receive?
    Answer. Countries receiving supplemental assistance for 
reconstruction from Hurriance Georges:

                                                             In millions
Dominican Republic................................................   $29
Haiti.............................................................   9.8
Eastern Caribbean \1\.............................................     3
\1\ Includes St. Kitts, Nevis, Antigua and Barbuda.

                                                                  ______
    Total.........................................................  41.8

    Question. We know that in most societies women and men play very 
different roles. Some anecdotal evidence from Honduras and Nicaragua 
shows some gender differences that should be taken into account when 
developing and delivering programs. Will there be assurance that the 
funds in this bill will be equitably distributed to the women of the 
region?
    Answer. In the reconstruction planning process, one of our guiding 
principles is the necessity of reaching out to historically 
marginalized actors: the poor, indigenous groups and women. We believe 
that the reconstruction planning and implementation process must take 
gender concerns into account. During the relief effort, we saw that 
women played a central role as community leaders, as relief workers, as 
the head of small and micro-businesses and often as the head of 
families. We recognize that leadership role and want to strengthen and 
support it in the reconstruction process.
    We also know that women play a critical role in implementing 
importing public health practices that prevent the spread of infectious 
diseases. USAID has long emphasized the importance of girls education 
and will work to assure that the disruptions caused by Hurricane Mitch 
do not disproportionately affect the ability of girls to have access to 
basic education.
    In the area of microenterprise, we know from our long track record 
in this area that 80% to 90% of the loans go to women. In Nicaragua, 
USPVO ProMujer is a key USAID partner delivering credit to women 
microentrepreneurs in Leon and Chinandega, two departments hard hit by 
Mitch. Before Mitch, USAID relied on partners like ProMujer as sources 
of information on our customers' real needs. Even more so after Mitch, 
ProMujer not only gave voice to the business needs of its members, but 
also helped define the broader needs of the community in distress.
    USAID will have expert advice on gender factors related to 
reconstruction from our Global Bureau's Women in Development (WID) 
office as we design activities in environmental management, community 
infrastructure rehabilitation, food-for-work and cash-for-work, 
agricultural recovery, microfinance, public health and education. In 
the aftermath of a disaster, the opening for women's participation 
enlarges simply because women's participation is essential for full 
recovery. USAID will take advantage of these special circumstances to 
increase women's participation across our programs.
    Question. Will the U.S. monies within the supplemental that are 
allocated for debt relief be used to assist in reducing the debt that 
Honduras and Nicaragua currently owe to other nations? Will the $25 
million in funds that are allocated for a contribution to a Central 
America Emergency Trust Fund to cover the cost of debt service owed by 
the affected Central American countries to the World Bank and 
International Financial Institutions be used to pay or service these 
debts these countries owe to other nations?
    Answer. No, monies within the supplemental that are allocated for 
debt relief will not be used to reduce the debt that Honduras and 
Nicaragua currently owe to other nations. Funds from the World Bank's 
Central America Trust Fund can only be used to pay debt obligations to 
the World Bank itself and the Inter-American Development Bank. In 
addition, the creditor countries of the Paris Club have agreed to 
provide as nearly as possible one hundred percent flow relief to 
Honduras and Nicaragua on debt service these two countries owe them. 
This means that each country has agreed to forgive or reschedule debts 
owed to it by whatever mechanism it uses in such circumstances. Other, 
non-Paris Club creditors are expected to provide similar treatment.

                    Submitted to Department of State

        Questions for the Record Submitted by Chairman Callahan

    Question. Is there a precedent of a United States contribution to a 
fund to pay debt owed by other countries to multilateral development 
banks, such as the World Bank and the Inter-American Development Bank?
    Answer. There is no direct precedent for such a contribution. 
However, the Administration has also requested funds from Congress for 
a U.S. contribution to the HIPC initiative, which would pay 
multilateral development bank debt for highly-indebted, poor countries 
that have implemented the appropriate policies to restore macroeconomic 
stability and investor confidence.
    Question. Haven't we helped create the enormous debt burden many of 
these countries face, by offering loans through development banks at 
deeply subsidized rates with delayed payments? Who could resist 
accepting such loans?
    Answer. Development bank loans are offered on concessional terms 
subject to a conditionality that requires the borrowing country to meet 
certain criteria intended to set it on the path to economic recovery 
and a sustainable macroeconomic policy framework. Project loans are 
intended to assist the borrowing country in developing needed 
infrastructure, which in turn should contribute to economic growth and 
enable it to repay the loans. In some cases, unforeseen circumstances 
have occurred that have limited the level of economic growth in 
borrower countries, making their debt burdens unsustainable.
    Question. Why are we being asked to cover the costs of payments to 
multilateral development banks? These banks carry reserves; they also 
retain earning as a result of repayments from borrowers who do pay 
their bills. Why shouldn't the banks assume the costs of debtors who 
are not current?
    Answer. The multilateral development banks have a limited ability 
to absorb the loss of income from loans that are not being serviced. 
Their funds are needed in order to preserve their preferred creditor 
status, which allows them to borrow at lower rates in the capital 
markets. In addition, repayments provide funds for future lending. Debt 
relief would cut the funds available for this purpose.
    Question. Will there be a debt moratorium on new lending to these 
nations? Are we forgiving debt only to allow these nations to pile it 
up again?
    Answer. To help recipients of Naples and HIPC debt relief avoid 
returning to unsustainable debt levels, the Administration favors 
shifting assistance from loans to grant aid to the extent possible. 
However, there are no legal or policy requirements preventing agencies 
from engaging in new lending to Nicaragua and Honduras solely because 
they have received debt reduction through the Paris Club. Anticipated 
debt reduction, together with deferral following Hurricane Mitch of 
debt service payments Nicaragua and Honduras would have made in the 
1999-2001 period, should help ensure that those countries' debt burden 
will be sustainable in the future.

        Questions for the Record Submitted by Congressman Forbes

    Question. Could you please tell the subcommittee why efforts to 
help the survivors of Hurricane Mitch by the World Bank and the IMF are 
insufficient? What efforts are being made by the Europeans? Can't your 
existing programs cover this problem or be converted through a 
reprogramming to cover the costs that you would like to pay?
    Answer. The estimated total reconstruction costs associated with 
Hurricanes Mitch and Georges approach $10 billion. To help address the 
approximately $8 billion of damage caused by Hurricane Mitch alone, the 
IDB has made the single largest pledge for reconstruction assistance to 
date: approximately $2.2 billion. The World Bank has pledged $1.2 
billion to address Hurricane Mitch reconstruction and the European 
Commission $285 million. All donor support for Hurricane Mitch to date 
totals approximately $6.3 billion.
    Although donor support has been significant, it is important to 
consider that of $6.3 billion in pledges, approximately $4.4 billion is 
for reconstruction support. The rest represents funds already approved 
for emergency and humanitarian relief, immediate rehabilitation 
activities, and debt relief. Moreover, of the IDB and World Bank 
pledges, a relatively small amount is available for concessional 
lending to Honduras and Nicaragua due tomonetary limits on development 
bank concessional lending. The bulk of development bank support will be 
available for El Salvador and Guatemala because these countries are 
able to borrow on non-concessional terms. Additionally, a significant 
level of IDB and World Bank pledges represent reprogramming of planned 
and future loans rather than new lending.
    USAID has reprogrammed over $161 million of existing resources, 
which is allowing the Agency to address some immediate reconstruction 
needs. Nonetheless, this level is woefully inadequate to provide the 
level of support required. moreover, because economic losses in the 
countries of Central America and the Caribbean may increase without 
prompt action to reactivate these damaged economies, economic losses 
may be higher than originally anticipated. For these reasons, we 
believe that an emergency supplemental appropriation is necessary to 
allow the U.S. Government to contribute adequate and flexible grants 
for hurricane reconstruction in Central America and the Caribbean.
    Question. There is substantial evidence to suggest that the impact 
of the hurricane would have been much less if local farmers had 
employed different farming methods. AID and other agencies and NGO's 
have been active in the region for decades, presumably teaching more 
beneficial farming methods, yet today it appears that these efforts 
failed. What assurances do we have that this money will prevent any 
future such occurrences?
    Answer. AID's programs show evidence that additional investment is 
required to reduce farmers' vulnerability to hurricanes of Mitch's 
magnitude. Many of Honduras' small farmers who carried out the improved 
watershed management programs funded by AID, the German development 
organization and the UN's Food and Agriculture Organization weathered 
the storm extremely well.
    However, these programs have a limited reach throughout Honduras. 
Therefore, watershed degradation is outstripping the focus of these 
programs. This has the potential of increasing the intensity of 
flooding during the hurricanes.
    Once small farmers install improved watershed management 
techniques, they maintain them. However, it is difficult to get low-
income farmers who are outside of the project areas to acquire these 
improved practices because they have competing needs for their scarce 
cash resources. During periods of non-agricultural labor needs, small 
farmers go off-site to earn additional income. Therefore, they do not 
start improved watershed programs on their own. In order to reduce the 
vulnerability to future hurricanes, the magnitude of these improved 
watershed management programs has to be increased. A part of the 
Supplemental's economic reactivation funds will be used for this 
purpose.
    Question. Has your office registered a significant increase in the 
number of Central Americans trying to enter the U.S. legally or 
illegally? What are you doing to encourage people to stay and rebuild 
their countries?
    Answer. While a feared sudden mass migration of refugees from the 
devastation of Hurricane Mitch has not materialized, there is a 
sustained and significant flow of ``Mitch'' migrants headed for the 
United States. The majority of the increase appears to be from 
Honduras, the country most devastated by the hurricane.
    The American Embassy in Tegucigalpa reports a 30 percent increase 
in applications for non-immigrant visas from November 1998 to January 
1999. (The refusal rate has increased from 25 to 46 percent during the 
same period.) The Honduran Passport Office reported an increase in 
passport issuances from 200 per day before the hurricane to 600 per day 
after the hurricane, attributing the increase to applicants' fears of 
job losses and economic breakdown.
    At one Honduran-Guatemalan border crossing, Honduran officials 
report that the number of Hondurans travelling north has increased from 
80 to 300 per day since the hurricane. U.S. officials visiting this 
checkpoint report evidence of an additional steady flow of illegal 
crossings in the adjacent area.
    In spite of these indications of increased migration, the United 
States Border patrol reports that, to date, the influx of ``Mitch'' 
migrants has been manageable. Hondurans have replaced Salvadorans as 
the highest other-than-Mexican group apprehended in the McAllen, Texas 
sector, for instance, but a total of only 287 Hondurans were 
apprehended in this sector in November. Although the percentage 
increase of ``other-than-Mexicans'' entering the country illegally may 
sound alarming, to date, the absolute numbers do not support early 
fears of a wave of immigrants. For instance, in Laredo, Texas, the 
number of detainees increased from 123 immigrants in December 1997 to 
583 in December 1998. In Del Rio, Texas, the number of detainees 
increased from 45 to 221 in the same period.
    To discourage illegal migration, we have a strong public affairs 
strategy: (1) highlighting the perils, both natural and man-made, of 
illegal immigration; (2) clarifying that Immigration and Naturalization 
Service's stay of removals for Guatemalans and Salavadorans and 
Temporary Protected Status for Hondurans and Nicaraguans only applies 
to those already in the United States as of December 31, 1998; and (3) 
ensuring good media coverage of U.S. reconstruction efforts in order to 
give those most affected by the hurricane hope that their lives might 
soon return to normal.

     Questions for the Record Submitted by Congresswoman Kilpatrick

    Question. What are our (U.S.) long-term plans to develop the 
infrastructure of the affected region?
    Answer. According to the Preliminary Damage Assessment Report 
prepared by the U.S. Army Corps of Engineers on November 23, 1998, the 
four countries most deeply affected by last year's hurricanes (El 
Salvador, Guatemala, Honduras and Nicaragua) sustained total 
infrastructure damages of $8.5 billion. This total includes damage of 
$5.2 billion to public utilities (water systems, power and 
telecommunications); $1.5 billion to housing stock; $1.2 billion to 
transportation infrastructure (roads, bridges, railways, seaports and 
airports), and $585 million to social infrastructure (hospitals, public 
buildings and schools).
    The global assumptions used by the U.S. Army Corps of Engineers are 
that the infrastructure will be replaced or repaired to the same 
quality as existed prior to the damage, but that pre-existing 
facilities which did not meet minimum acceptable international 
standards (such as for wastewater treatment) would be upgraded to 
international standards. It is important to mention that the definition 
of `minimum acceptable international standards' will be the product of 
discussions between the donor countries, host countries, and 
implementing organizations.
    The United States government is working closely with the host 
governments and the donor community to ensure that each country's 
comprehensive reconstruction plan:
          (a) ensures participation by end users in setting priorities;
          (b) incorporates disaster mitigation and preparedness;
          (c) is compatible with sound environmental practice;
          (d) is attentive to equity concerns;
          (e) incorporates local governments as key implementing 
        mechanisms, and
          (f) includes measures to ensure accountability and 
        transparency in the use of assistance funds.
    Question. What have the Central American nations contributed to 
their own infrastructure development?
    Answer. Since Hurricane Mitch, the Central American governments 
have devoted substantial resources to emergency infrastructure repair. 
Honduras and Nicaragua restored critical transportation and 
communication lines, repaired water and sewage lines, and organized 
volunteers to clean up after the disaster.
    Governments have also developed and are continuing to refine 
comprehensive long-run reconstruction and development plans. With 
regard to large infrastructure projects, it is expected that the Inter-
American Development Bank and the World Bank will provide a significant 
portion of their financing. Smaller reconstruction projects, which 
account for the majority of the needs, are primarily the responsibility 
of Central American governments and the private sector, with some 
assistance from international donors. This is especially the case for 
housing and numerous smaller transportation projects, local schools and 
local clinics.
    The Central American governments are also contributing to their 
reconstruction by reviewing and revising their laws and procedures to 
attract more private investment, such as new investment and 
privatization laws recently passed by Honduras.
    The U.S. Agency for International Development is assisting national 
and local entities develop community action plans, with strong 
participation of local governments and citizens, in order to help host 
governments develop local initiatives which will contribute to 
infrastructure repair and development.
    Question. Is there a role for the private sector in the 
reconstruction of Central America? Is there a role for the Overseas 
Private Investment Corporation (OPIC), the U.S. Trade Development 
Agency (TDA) or the Export-Import (Ex-Im) Bank?
    Answer. Well-focussed governmental efforts are a critical part of 
reconstruction but are expected to be dwarfed by the efforts and 
financing coming from the private sector, both local and foreign. The 
conference on Central American and Caribbean Reconstruction which was 
sponsored by the Administration in Washington on December 15, 1998, 
focussed not only on the contributions which the private sector could 
make to the region, but also on the opportunities for trade and 
investment which reconstruction offers to the private sector.
    Some of the initiatives taken or to be launched by the 
Administration in support of the private sector include: enhancement of 
the Caribbean Basin Initiative legislation to expand trade with the 
region, submission of Bilateral Investment Treaties (BITs) for Honduras 
and Nicaragua for Senate approval, and planned signature of a BIT with 
El Salvador, expansion of OPIC activities through a $200 million credit 
line in cooperation with US private banks for investment in the region, 
expansion of Export-Import Bank activities (including a $50 million 
Memorandum of Understanding signed on February 24 with the Banco 
Centralamericano de integracion Economica) to enable private businesses 
and government agencies to obtain critically needed financing for U.S. 
raw materials, spare parts, capital equipment, etc. TDA is ready to 
move quickly to assist potential U.S. investors in infrastructure 
projects as specific opportunities are identified.


                           W I T N E S S E S

                              ----------                              
                                                                   Page
Atwood, Brain..................................................115, 217
Grandmaison, J.J.................................................     1
Harmon, J.A......................................................     1
Munoz, George....................................................     1
Romero, P.F......................................................   217


                               I N D E X

                              ----------                              

                    Export and Investment Assistance
         (James A. Harman, President and Chairman, Ex-Im Bank)
      (George Munoz, President and Chief Executive Officer, OPIC)
                 (J. Joseph Grandmaison, Director, TDA)

                                                                   Page
African Development Fund.........................................    67
Asia.............................................................    95
Authorization to Finance Helicopters.............................    52
Azerbaijan.....................................................106, 107
Brazil..........................................................96, 103
Budget Increase..................................................    83
Caspian Oil and Gas Pipelines....................................   103
Caspian Sea Development..........................................    59
Chairman Callahan's Opening Statement............................     1
China............................................................    73
Climate Change...................................................    93
Commerical Opportunity...........................................    51
Corruption and Organized Crime...................................    94
Debt Forgiveness.................................................    66
Dual-Use Exports.................................................    82
Environment..................................................59, 74, 80
Ex-Im Bank--China............................................77, 81, 82
Helicopter Sales to Turkey.......................................    84
History of Field Offices.........................................    88
Hurricane Mitch..................................................69, 75
IMF..............................................................    72
Indonesia........................................................    58
Insurance........................................................    87
Investment Funds................................................72, 105
Large/Small Investments..........................................    68
Long-term Financing..............................................    87
Medium and Long Term Financing...................................    78
More Aggressive Outreach.........................................    89
Mozambique.......................................................    65
Mr. Grandmaison's Opening Statement..............................    40
Mr. Harmon's Opening Statement...................................     5
Mr. Munoz's Opening Statement....................................    21
Ms. Pelosi's Opening Statement...................................     3
OPIC....................................................77, 93, 97, 107
Outreach to Brokers and Banks....................................    88
Pakistan.........................................................   106
Pipelines........................................................    60
Potential for OPIC Services......................................   104
Reauthorization..................................................    50
Russia...........................................................    95
Status of Program in Russia......................................    85
Sub-Saharan Africa...............................................    63
Trans-Caspian Pipeline...........................................    75
Transfer Authority...............................................    70
Utilization of Y2K Supplemental Funding..........................   103
Vietnam.........................................................74, 105
World Bank Activities............................................    57

                  Agency for International Development
                   (Brian Atwood, AID Administrator)

Additional Expenses..............................................   158
Africa Food Security Initiative..................................   204
Agriculture Funding..............................................   193
AID Budget.......................................................   156
AID Security Costs...............................................   214
American Educational Institutions in Lebanon.....................   201
Armenia........................................................148, 197
Asian Financial Crisis...........................................   204
Azerbaijan.......................................................   197
Biodiversity.........................................187, 188, 198, 199
Biotechnology Assistance.........................................   208
Brazil.........................................................170, 210
Budget Concerns..................................................   165
Budget Cuts....................................................146, 150
Centrally Funded Programs........................................   188
Child Labor....................................................155, 210
Child Survival.................................................168, 187
Child Survival/Child Labor.......................................   178
Climate Change.................................................211, 212
Co-location......................................................   175
Computer System Problems.........................................   162
Cross Bordor Programs in Europe and the NIS......................   214
Dairy Development Programs.......................................   214
Debt Relief......................................................   151
Development Credit Authority...................................190, 191
Development Fund for Africa...............................150, 169, 191
Ecuador..........................................................   207
Energy Efficiency................................................   165
Evaluation of Democracy Programs.................................   173
Expanded Threat Reduction Initiative.............................   203
Family Planning in Turkey........................................   161
Fiscal Oversight.................................................   202
Future of US foreign Aid.........................................   202
Health Systems...................................................   210
HIV/AIDS.......................................................171, 209
Indonesian Elections...........................................199, 200
Market Economies.................................................   159
Maternal Health..................................................   187
Mongolia.........................................................   197
Mr. Atwood's Opening Statement...................................   126
Mr. Callahan's Opening Statement.................................   115
Ms. Pelosi's Opening Statement...................................   120
Nations Graduating from Developing Assistance....................   154
New Independent States.........................................157, 205
New Management System............................................   154
North Korea......................................................   148
Office of Transition Initiatives Funding.........................   212
Operating Expenses........................................145, 176, 213
Operation Lifeline Sudan.........................................   200
OTI Funding Increase.............................................   193
Outreach.........................................................   160
Population.......................................................   145
Reform...........................................................   157
Security at Ronald Reagan Building...............................   174
South Africa...................................................152, 192
Staff Reductions.................................................   177
Status of USAID's New Coding System..............................   188
Sudan Relief.....................................................   201
Transition from OTI to Regular USAID Programs....................   213
Tuberculosis....................................168, 197, 198, 208, 209
USAID New Management System......................................   177
USAID Overseas Security..........................................   174
Utilization of Partnerships in Graduating Countries..............   215
Victims of Torture...............................................   161
Women in Development.............................................   200
Y2K..............................................................   175

       FY 1999 Emergency Supplemental Request for Central America
                 (J. Brian Atwood, Administrator, AID)
    (Peter F. Romero, Acting Assistant Secretary of State for Inter-
                           American Affairs)

Accountabiity..................................................255, 265
Army Corps of Engineers..........................................   266
Bishop Gerardi...................................................   280
Cash Basis.......................................................   270
Chairman Callahan's Opening Statement............................   217
Colombia.........................................................   279
Corps of Engineers...............................................   256
Corruption.......................................................   267
Debt.................................................255, 257, 274, 281
El Salvador......................................................   280
Eligibility......................................................   275
Full Accountability..............................................   261
Guatemala........................................................   281
Habitat for Humanity.............................................   263
Honduras Debt....................................................   258
Housing..........................................................   281
Hurricane Reconstruction.........................................   261
Inter-American Development.......................................   221
Jobs.............................................................   280
Loans............................................................   267
Microenterprise Loans................................263, 273, 274, 281
Mine Detention Dog Teams.........................................   263
Mr. Atwood's Opening Statement...................................   220
Mr. Romero's Opening Statement...................................   240
Ms. Pelosi's Opening Statement...................................   218
Nicaragua.................................................263, 265, 275
Notwithstanding Clause...........................................   277
OPIC.............................................................   259
Religious Freedom Act............................................   264
Segregation of Funds.............................................   277
Separate Account.................................................   272
Small Farmers....................................................   266
Supplemental Account Structure...................................   260
Women and Microenterprise........................................   271
Women in Development.............................................   278

                                
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