[Senate Hearing 106-645]
[From the U.S. Government Printing Office]



                                                        S. Hrg. 106-645
 
        AN OVERVIEW OF USAID PROGRAMS AND PRIORITIES ON EAST ASIA

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

                                HEARING

                               BEFORE THE

             SUBCOMMITTEE ON EAST ASIAN AND PACIFIC AFFAIRS

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 25, 2000

                               __________

       Printed for the use of the Committee on Foreign Relations







 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 senate






                    U.S. GOVERNMENT PRINTING OFFICE
66-577 CC                   WASHINGTON : 2000




                     COMMITTEE ON FOREIGN RELATIONS

                 JESSE HELMS, North Carolina, Chairman
RICHARD G. LUGAR, Indiana            JOSEPH R. BIDEN, Jr., Delaware
CHUCK HAGEL, Nebraska                PAUL S. SARBANES, Maryland
GORDON H. SMITH, Oregon              CHRISTOPHER J. DODD, Connecticut
ROD GRAMS, Minnesota                 JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                RUSSELL D. FEINGOLD, Wisconsin
CRAIG THOMAS, Wyoming                PAUL D. WELLSTONE, Minnesota
JOHN ASHCROFT, Missouri              BARBARA BOXER, California
BILL FRIST, Tennessee                ROBERT G. TORRICELLI, New Jersey
LINCOLN D. CHAFEE, Rhode Island
                   Stephen E. Biegun, Staff Director
                 Edwin K. Hall, Minority Staff Director

                                 ------                                

             SUBCOMMITTEE ON EAST ASIAN AND PACIFIC AFFAIRS

                    CRAIG THOMAS, Wyoming, Chairman
JESSE HELMS, North Carolina          JOHN F. KERRY, Massachusetts
CHUCK HAGEL, Nebraska                RUSSELL D. FEINGOLD, Wisconsin
GORDON H. SMITH, Oregon              PAUL D. WELLSTONE, Minnesota
LINCOLN D. CHAFEE, Rhode Island      ROBERT G. TORRICELLI, New Jersey

                                  (ii)






                            C O N T E N T S

                              ----------                              
                                                                   Page

Randolph, Hon. Robert C., Assistant Administrator, Bureau for 
  Asia and the Near East, U.S. Agency for International 
  Development, Washington, DC....................................     2
    Prepared statement...........................................     6
Thomas, Hon. Craig, U.S. Senator from Wyoming, prepared statement     2

                                 (iii)




       AN OVERVIEW OF USAID PROGRAMS AND PRIORITIES ON EAST ASIA

                              ----------                              


                        TUESDAY, APRIL 25, 2000

                               U.S. Senate,
    Subcommittee on East Asian and Pacific Affairs,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:30 p.m. in 
room SD-419, Dirksen Senate Office Building, Hon. Craig Thomas 
(chairman of the subcommittee) presiding.
    Present: Senators Thomas and Feingold.
    Senator Thomas. I call the hearing to order. Thank you very 
much, Mr. Randolph, for being here. Sorry we are a little late. 
We were voting. It is kind of a surprise for us to have to do 
that, you know.
    In any event, this is the Subcommittee on East Asian and 
Pacific Affairs. We wanted to meet together today to have an 
overview hearing on the U.S. Agency for International 
Development, its programs and priorities, particularly for East 
Asia, in the coming year.
    As far as I can discover, this is probably the first time 
this subcommittee has had a hearing on USAID, at least over the 
last 5 years, which is a little unusual, I suppose, because 
after all in the totality of foreign relations USAID plays, of 
course, a vital and sometimes controversial role, so I am very 
pleased, and I hope that you can help talk a little bit about 
the basic mission of USAID, as to what it is designed to do; 
talk a little bit perhaps about the relationship in terms of 
this program and its activities relative to the totality of 
foreign policy; maybe a bit about when we have trade sanctions 
or restrictions with a country; whether or not you go ahead and 
participate in this Agency. I would be interested in knowing 
about the total dollars spent annually, perhaps some comment 
about the increase over the last few years.
    I suppose it is difficult to talk about the progress or the 
changes that have been brought about as a result of these 
activities, and I think one of the questions that we often ask 
ourselves and those of us out in the country when we go home 
is: how do you measure, and what constitutes the completion of 
your activity? Does it go on forever? Is there some sort of a 
measurement in terms of having completed? So I know those are 
broad topics, but I know those are the topics that people 
wonder about, people should have an opportunity to hear about, 
and I think it is our responsibility in the Congress to have 
some oversight in terms of those kinds of things.
    So in any event, thank you very much for being here, sir, 
and if you would care to go ahead, then perhaps we can have 
some questions and some dialog afterwards.
    [The prepared statement of Senator Thomas follows:]

               Prepared Statement of Senator Craig Thomas

    Today, the Subcommittee on East Asian and Pacific Affairs meets to 
conduct an overview hearing of U.S. Agency for International 
Development programs and priorities in East Asia for the coming year. 
I'll keep my comments brief so that we can get to our witness this 
afternoon.
    This is, as far as I can discover, the first Foreign Relations 
Committee regional area subcommittee hearing USAID in the past 5 years. 
That fact strikes me as somewhat unusual. After all, USAID plays a 
vital, if sometimes controversial, role in the projection of U.S. 
foreign policy objectives abroad; it is, in effect, the financial aid 
arm of the State Department. As such, it is the face of the United 
States seen most often by foreign individuals in recipient countries; 
and it is the arm of Government most often singled out when American 
citizens complain about spending too much of the taxpayers' money on 
aid to foreign countries.
    Yet I believe that USAID's role, its mission, is not well 
understood by many Americans, including many Members of Congress. I 
have to admit that I, personally, am not overly familiar with how USAID 
operates in General and in East Asia specifically. It is my intent that 
hearings such as this one begin to remedy that.
    While I believe that USAID programs abroad can and do play an 
important role in forwarding our policy interests abroad, I also 
believe that we in Congress need to focus a critical eye on the 
Agency--as we should with any government agency--to ensure that the 
funds it requests are funds it actually needs, and that once 
appropriated those funds are spent or utilized in the most cost-
effective way.
    With that, I would like to welcome to the committee Mr. Robert 
Randolph, Assistant Administrator of the Bureau for Asia and the Near 
East, U.S. Agency for International Development.

 STATEMENT OF HON. ROBERT C. RANDOLPH, ASSISTANT ADMINISTRATOR 
   FOR ASIA AND THE NEAR EAST, U.S. AGENCY FOR INTERNATIONAL 
                  DEVELOPMENT, WASHINGTON, DC

    Mr. Randolph. Thank you very much, Mr. Chairman. I would 
like to begin by thanking you and your staff and the other 
members of the committee who are able to make this hearing for 
the opportunity to testify before you today. I first met you 
about a year and a half ago, a little bit more than that, when 
I was coming around to meet Senators in preparation for my 
confirmation hearing, and I remember then that you really--you 
told me two things.
    You told me first you had never seen anybody from USAID 
before, and I feel very remiss that I waited a year and a half 
before seeing you again, so I hope to have some tolerance from 
you on that score. And second you reminded me that USAID 
follows the foreign policy directives of the Congress and the 
State Department, and you wanted to ensure that we were working 
very closely with the State Department.
    I worked with the Assistant Secretaries, the Near East 
Bureau, NEA, South Asia, Rick Inderfurth and East Asia Pacific, 
Stanley Roth, and I feel, and I hope that they would agree with 
me, that I have a very good working relationship with them, 
particularly Assistant Secretary Roth, who I will be going to 
see tomorrow afternoon to talk about issues relating to 
Indonesia and Vietnam, so I do feel that at the very least we 
have followed your lead in ensuring that we are working closely 
and adhering to the foreign policy directives of the State 
Department.
    I want to talk about our goals as a Bureau, the Bureau for 
Asia and Near East, and your part of the world, Asia Pacific, 
and those goals are threefold: first, to create prosperity both 
for the peoples of the region and for Americans, Americans who 
export and do business in the region, second to create security 
for America. We have a number of states, and I can mention 
China as one, who do not have democratic systems, who sometimes 
seem to be out of step with our notion of what constitute 
democratic norms, and we think that it is very, very important. 
We have worked with countries in the region, around China's 
periphery, to ensure that we are promoting transition to stable 
democracies, because we believe that stable democracies and 
countries in East Asia, such as Korea and Taiwan, countries 
that have graduated to the status of stable democracies are 
important for American security.
    Third, we are very concerned about disease in this era of 
globalization. Disease has no boundaries. Disease is 
transnational. Disease and infections, which have their start 
in other countries, such as HIV/AIDS, can very quickly migrate 
to the United States, so this health security is important both 
for the countries of your region and for the people of the 
United States.
    You asked me about our budget and the amount of money we 
spend in countries where we are doing business, or where we are 
working. On the first page of the testimony which I submitted, 
I set forth a sheet \1\--usually this is an attachment, but we 
thought that it would be important for you to be able to see 
exactly how much money we are spending in East Asia Pacific. 
This year it is $247 million. I think that is about 10 percent 
more than we spent in 1999. I am very pleased with that, 
actually, because one of my goals upon becoming Assistant 
Administrator of this Bureau was to increase the amount of 
attention and spending available to USAID to combat problems in 
Asia.
---------------------------------------------------------------------------
    \1\ See table entitled ``Program Resources for East Asia,'' on page 
11.
---------------------------------------------------------------------------
    Next year we have requested more than $300 million for the 
region, primarily to fund the amount of work we are doing in 
Indonesia, and we can talk about that later.
    I want to turn next to the first goal, which is increasing 
prosperity. As you know, in 1997 Asia was reeling from the 
effects of the Asia financial crisis, and this had a tremendous 
reverberating effect on this country. Fully 30 percent of our 
exports go to Asia. That is more exporting than we do to 
Europe, and for an agricultural state--and I am from Washington 
State, and I know you are from Wyoming--40 percent of our 
agricultural exports go to Asia, so Asia is very important to 
the United States economically, and the financial health of 
Asia is very important to us all.
    After the financial crisis we have reprogrammed our 
bilateral programs, particularly in Indonesia and the 
Philippines, and we created an initiative called Accelerated 
Economic Recovery in Asia [AERA] to work with Asian countries 
to get their financial houses in order, and I am glad to see 
that Asia is recovering, but my message here today is that we 
need to stay involved. We need to stay the course in Asia.
    In Thailand, as you know, the Asian financial crisis 
started with the failure of a bank in Thailand. Our AERA 
initiative in Thailand focuses on assisting Thai banks and 
banking associations raise their management capabilities to 
international standards.
    In Indonesia, where fully 70 percent of the economy is 
nonperforming, basically Indonesia is in bankruptcy, and 
billions of dollars are now held by the Indonesian Bank 
Restructuring Agency [IBRA], which is the equivalent of our 
Resolution Trust Corporation. We are assisting this entity, 
called IBRA, to sell off its assets, and it has got to sell off 
the assets to get the economy started again, and I am happy to 
say that with the assistance of our USAID mission and the able 
prodding of our Ambassador, Bob Gelbard, IBRA has now sold the 
largest State-owned asset, the Astra Company, to a single 
holding company, and we are seeing progress in Indonesia.
    In the Philippines, I am glad to state that the Philippines 
was just able to weather the Asian financial storm because of 
the work we had done there previously on economic reform, and 
we have concentrated on continued anticorruption and economic 
reform efforts.
    This year, we would like to add Vietnam to our reform 
program. With 80 million people, Vietnam is a potentially high 
value growth market for U.S. exports and it is a country that, 
once it sheds its totalitarian Communist system, will play a 
major role in the East Asia Pacific. Our goal is to identify 
reforms, particularly reforms relating to trade and financial 
sector management, which will help Vietnam make the transition 
to a free market economy, ultimately producing goods, and a 
free society.
    Let me go to the next goal of USAID programs, which is 
promoting democracy and freedom in East Asia. I think we have 
now realized that you cannot have economic freedom, you cannot 
have a free market, you cannot have an economy and a culture 
and a government that works without a governmental culture of 
openness, transparency, and accountability, and our programs in 
Asia on the democracy side are focused on promoting civil 
society, accountability, transparency, and open government.
    I want to talk very briefly about Indonesia, Cambodia, and 
Mongolia. Of these countries, Indonesia is by far the most 
important to the United States and to the security of the 
United States. It commands the major sea lanes between Europe 
and Asia, including the energy lifeline of Japan and Korea. It 
is a major supplier of Asia's natural resources, and an 
important emerging market for the United States.
    It is the world's fourth most populous country, the world's 
largest Muslim country and, after the recent elections it has 
become the world's third largest democracy. It is a key goal of 
United States foreign policy to ensure that Indonesia continue 
on a stable democratic course. The challenges are immense. The 
new President, President Wahid, governs a nation which 
stretches across 1,750 islands over a distance that covers the 
distance from Wyoming to the Bahamas. He has to deal with 350 
ethnic groups.
    He has inherited a country that was left in economic and 
political tatters by the Suharto regime. He has immense 
problems, even though he has got reformers in his cabinet, 
these reformers sit on top of a bureaucracy who are really 
products of the old regime, and are very much resistant to 
reform, and are waiting for the day when the reformers give up 
and leave.
    We think that it is very, very important that the United 
States stay the course in this important country, that we do 
everything that we can to support Indonesia's transition to 
democracy, that we in particular work on building up capability 
in the instruments of democratic Government, the parliaments, 
both national and local, the judiciary, and civil society.
    I think it is going to be a close-run thing. We may not 
succeed in building democracy in Indonesia, but if we do not 
make the effort, Indonesia will surely fail, and if Indonesia 
fails, it will have dramatic consequences for U.S. national 
security and for the security of the region.
    Let me move next to East Timor, where our goal is to 
promote a peaceful, stable government, both because it is 
important for humanitarian reasons and because it is important 
in the larger context of a stable Indonesia. I visited East 
Timor in February. I was shocked to find scores, hundreds of 
Timorese milling around the street corners with no work.
    They were getting very upset by the image that they had of 
people from the international community driving around in Range 
Rovers, commandeering the only available housing stock on the 
island, eating in good restaurants, in turn driving up the 
price of food and creating inflation, because the restaurants 
were competing with the locals for the only available food 
stocks.
    The international community--and I do not put USAID in this 
group--had begun paying locals hired as local staff five times 
the prevailing wage rate during Indonesian times, so it was a 
tremendously disruptive situation. People had high 
expectations, and those expectations were unfulfilled.
    Immediately after my visit I came back and I met with our 
Office of Transition Initiatives [OTI]. We have initiated a 
quick-starting employment program, the goal of which is to put 
East Timorese to work rebuilding their shattered communities, 
cleaning up the damage, rebuilding the housing stock, doing 
basic infrastructure projects such as roads, ditches, and 
sewers.
    First, we have allocated $10 million to OTI, the bulk of 
which will go into these quick employment projects.
    Second, we have had a coffee-growing project in East Timor 
for years. This has been really the major generator of 
employment in East Timor, the only generator of foreign 
currency. We are increasing the amount of money we put into 
this coffee project from $3 million to $8 million, which over 
the next 4 years will increase the number of families employed 
in the coffee industry from 17,000 to 40,000, so we fully 
expect that the coffee industry in 5 years will support 160,000 
East Timorese, about 25 percent of the population of East 
Timor.
    Cambodia is one of the poorest countries in the world. It 
has certainly disappointed us in terms of its peaceful 
transition to democracy. We primarily work there with NGO's to 
promote democracy, expose human rights abuses, and promote 
humanitarian activities. Human rights violations are now being 
reported and investigated. We think that we have begun creating 
a nascent civil society which will ultimately provide a 
foundation for democracy in Cambodia once the government 
becomes a bit more flexible in its views. We will look for 
signs of reform, and we hope to do more in Cambodia when we see 
more reform.
    The major issue that we have there is HIV/AIDS. Cambodia 
has the highest rate of HIV positive population in Asia, and 
the rate of growth is the highest in the world--it is about 70 
percent. We are working hand-in-glove with health authorities, 
NGO's, to contain the AIDS epidemic.
    Finally, I would like to just talk very briefly about our 
third major goal, which is containing transnational diseases. 
Globalization means jobs, it means migration of peoples and 
capital, but the dark side of globalization is the migration of 
diseases.
    We have 5 million people who travel between Asia and the 
U.S. every year. There is a lot of travel back and forth, and 
we are very concerned about three epidemics in Southeast Asia. 
The first is HIV/AIDS, which I mentioned. The second is TB. Of 
the 8 million TB sufferers in the world, 3 million are in 
Southeast Asia. And finally we are concerned about the 
emergence of a drug-resistant strain of malaria on the Thai-
Burma border.
    These transnational diseases know no boundaries. They 
require a regional solution, and we are accomplishing our goals 
to combat these diseases in Southeast Asia in the Mekong region 
with regional programs.
    I have given you an overview, Senator Thomas and Senator 
Feingold. It is my pleasure to be here. I look forward to 
having a conversation with you and hearing your views of what 
we should be doing at USAID.
    Thank you very much.
    [The prepared statement of Mr. Randolph follows:]

             Prepared Statement of Hon. Robert C. Randolph

    Mr. Chairman, I would like to begin by thanking the Committee for 
inviting me to discuss our programs in the East Asia region. I would 
like to emphasize that all of us at USAID look forward to working 
closely with you and the entire Committee.
    The challenges we face today in East Asia are daunting and hit the 
very core of key U.S. national and foreign policy interests. One is 
prosperity for both the American and East Asian peoples. The region is 
the largest developing market in the world for U.S. goods and services. 
Thirty percent of total U.S. exports go to East Asia--more than the 
value of our exports to Europe. Forty percent of these are 
agricultural, representing our largest overseas market. Together they 
support millions of U.S. jobs. Second and intimately linked to 
prosperity, is security, which depends in no small measure on East 
Asian economic health and political stability. A prosperous, healthy 
population able to participate in democratic processes reduces the risk 
of regional conflict, refugee flows, and the spread of infectious 
diseases that even now threaten the United States.
    My focus today is to show how USAID--by helping East Asia to grow 
economically, building democratic institutions, and to address social 
problems--is promoting these critical U.S. national and foreign policy 
interests.
    Less than three years ago, East Asia was overwhelmed by the 
financial crisis that started in Thailand. While the immediate effects 
were devastating, the crisis created opportunities for true economic 
and democratic reforms, underlining that sound and sustainable growth 
cannot occur without good governance and the rule of law. The outlook 
for the region is now cautiously optimistic, with many countries 
experiencing economic recovery and democratic transitions. But positive 
growth and low inflation in Thailand and Korea cannot overshadow the 
fact that unemployment is still higher than before the crisis, with 
many people earning far less and subject to precarious living 
standards. The United States and East Asia must ensure that the reform 
process proceeds to fruition--with an economic infrastructure that 
promotes growth and good governance, where investment can flourish in 
an environment of openness, transparency, and accountability.
    This is no time for complacency. To achieve lasting and broad-based 
economic growth, these countries need to press forward with reforms. 
This is particularly critical in Indonesia, where economic recovery is 
inextricably linked to democratic reform; and in East Timor, where 
devastation, upheaval, violence, poverty and independence are 
coalescing simultaneously. At the same time, burgeoning public health 
threats, such as the spread of HIV/AIDS and other infectious diseases, 
underscore the need for strong, stable governments that can control 
diseases at the source and provide adequate healthcare to their 
citizens. We all have a stake in the success of these transitions; 
their success is critical to our own security.
    In analyzing East Asia's challenges and opportunities, we will 
focus on three main priorities: promoting economic reform and growth, 
supporting and stabilizing democracies, and addressing public health 
and social safety net challenges.
                  promoting economic reform and growth
    Nearly three years after the onset of the financial crisis, 
countries in East Asia are experiencing macroeconomic stability (in 
terms of stable exchange rates and relatively low inflation), economic 
growth, and increased trade. These are all good signs, but the job is 
not done. Amidst this budding recovery, it is all too easy to forget 
the havoc wrought by the financial crisis, which drove millions of 
people out of work, put them and countless others in poverty, and 
increased pressures on an already fragile natural resource base. We 
must continue helping these countries push forward with reforms that in 
the end will provide the real underpinnings for sustainable growth. We 
must avoid declaring victory today, mistaking the immediate and 
relatively easy reforms for the more difficult and critical ones that 
still remain. Staying the course, and finishing the race, is what we 
must do if we are to avoid future financial crises.
    USAID has responded to the economic and social challenges of the 
financial crisis by reshaping its bilateral programs in Indonesia and 
the Philippines and launching a regional initiative, ``Accelerated 
Economic Recovery in Asia (AERA),'' to address the cross-border effects 
of the crisis. Working closely with other donors, USAID is helping 
countries in the region undertake difficult reforms, especially those 
that target the financial and business sectors, the banking and 
procurement systems, and small and medium enterprises.
    In Thailand, for example, where a bank failure triggered the 
crisis, we are providing training and technical assistance to Thai-
owned banks and banking associations to raise their management 
capabilities to international standards. In Indonesia, USAID is 
coordinating with the U.S. Treasury, the IMF, the World Bank, and the 
Asian Development Bank to help the Indonesian Bank Restructuring Agency 
(IBRA) restructure Indonesia's banking system. The significance of this 
operation is enormous, given that IBRA holds some seventy percent of 
Indonesia's corporate assets. While the going is still rough, the 
political will to revive bank lending and reinvigorate Indonesia's 
corporate sector is increasing. USAID is giving similar assistance in 
banking and financial sector reform to the Philippines which, while it 
withstood the crisis better than many of its neighbors (due to USAID-
assisted reform efforts), still needs to focus on anti-corruption 
programs and the government's procurement systems. All of these 
efforts, done in partnership with other donors, governments and the 
private sector, are designed to promote new standards of corporate and 
public behavior--standards which will hopefully create an environment 
where trade, investment, and growth will flourish under a rule of law.
    This year we will add Vietnam to our reform efforts, building on 
our previous efforts in facilitating Vietnam's understanding of the 
commitments and undertakings that would be required when it signs the 
Bilateral Trade Agreement (BTA). Vietnam, with 80 million people, is a 
potential growth market for U.S. exports and a country that can play a 
major role in the East Asian economy. Our goal is to identify reforms, 
particularly in the financial sector, that could accelerate greater 
openness in government institutions and procedures--critical building 
blocks for Vietnam's proposed entry into the WTO and the global 
economy.
    In East Asia, USAID has helped build the foundation not only for 
long-term and widespread economic growth, but for growth that is 
environmentally sustainable as well. In Indonesia and the Philippines, 
for example, our focus on partnering local authorities with local 
communities has lead to community-based management of natural resources 
that are far more efficient and sustainable than traditional ``top-
down'' public management approaches, or corrupt ``concessionary'' 
approaches. Empowering those closest to the resources, and giving them 
a real stake in managing them, has proven to be the strongest incentive 
in preventing the depletion of the resource base and protecting the 
region's rich biodiversity. Equally important, it has given people a 
livelihood and lifted many out of poverty. These approaches have had a 
national impact. For example, the government of the Philippines, with 
USAID assistance, has signed 80 agreements that transfer management 
control of approximately 535,000 hectares of land to 90 different 
upland communities. The government has also replicated this program in 
numerous other locations, so that overall some 2.9 million hectares, or 
50% of the Philippines' remaining forest, are under improved community 
management.
    Finally, through our US-Asia Environmental Partnership (US-AEP), we 
are promoting U.S. environmental technology and expertise in ways that 
improve industrial environmental management and public policy. To date 
48 states have participated in US-AEP programs, which collectively have 
contributed more than $1.1 billion worth of export sales of U.S. 
environmental technology services and products. We are particularly 
proud of US-AEP's partnership with the Commerce Department, and their 
active business counseling in Korea, Thailand, the Philippines and 
Vietnam--much of which had lead to contracts for U.S. firms and 
technology upgrades for their Asian counterparts. Developing these 
lasting business relationships, while promoting the use of clean 
technologies, puts US-AEP at the forefront of our efforts to foster 
U.S.-driven trade and investment, and to meld economic growth with 
environmentally sustainable technologies.
                 supporting and stabilizing democracies
    USAID recognizes that economic reform and recovery will not occur 
without addressing the development of responsive and accountable 
government in the region.
    USAID has been a leader among donors in advancing democratic reform 
throughout East Asia, especially in areas such as the rule of law, good 
governance, free and fair elections, and the development of civil 
society. The challenges facing the region's nascent democracies are 
very diverse, as illustrated in Indonesia, Cambodia and Mongolia.
    Indonesia, the world's fourth most populous country, has taken the 
first steps towards becoming the world's third largest democracy. The 
challenges to consolidating democracy and restoring economic growth in 
Indonesia are great. Indonesia encompasses 350 ethnic groups and 17,500 
islands extending over an area equivalent to the distance between 
Oregon and the Bahamas. The new Wahid government, elected in October 
1999, is engaged in an arduous political transformation, from military 
autocracy to democracy. His coalition cabinet includes a number of 
leading reformers who seek to curb corruption, increase competition, 
promote civilian control of the military, encourage reconciliation, and 
reformulate the balance between central power and local governments. 
However, some autocratic elements of the old system remain deeply 
rooted and will try to frustrate a complete transition to democracy. 
Separatist unrest, and religious and ethnic fighting, have the 
potential to destabilize the country. Targeted assistance from the 
international community, the United States, and USAID, can make a 
critical difference. Indeed, too much is at stake for us to fail.
    In the past, and as a lead-up to last year's elections, we focused 
our efforts on helping to build a vigorous civil society capable of 
advocating for change. We believe we were successful. Now the challenge 
that we and other donors face is how to best support critical 
institutional reform and ensure that these nascent democratic 
institutions can deliver the kinds of reforms that Indonesian society 
demands. While USAID will continue supporting civil society and broaden 
its capacity to advocate for human rights, judicial reform, free speech 
and religious tolerance, we will now concentrate our efforts in the 
coming year on working with national and local parliaments to build the 
legal framework for a new society; and helping the judiciary support a 
democratic environment built on the rule of law, transparency, and 
accountability.
    We will also intensify our conflict resolution and prevention 
programs that address the escalating conflicts in Aceh, Ambon, Papua 
(formerly Irian Jaya), and the Moluccas. By all accounts there has been 
no decrease--in fact, the opposite--in Aceh. We will continue these 
institutional-strengthening and awareness-building activities, 
particularly those that promote open dialogue on regional ethnic and 
religious conflicts that threaten the stability of Indonesia and the 
very fiber of its society.
    Promoting a peaceful transition in East Timor, and ensuring that 
recovery and reconstruction proceed smoothly, is critical to stability 
in the region. To this end there is no more pressing need or higher 
priority for USAID in Asia than revitalizing East Timor's economy and 
restoring employment both in rural communities and in the capitol of 
Dili. I visited East Timor in February and saw first-hand the 
conditions and challenges facing East Timorese as they seek to rebuild 
their communities. I am aware of the frustration that many face 
regarding the slow pace of rebuilding their lives. Jobs are desperately 
needed to stabilize urban and rural areas, and bring the purchasing 
power to jump-start the economy.
    Our foremost priority is to revive and expand our previously 
successful coffee project, which since 1994 has provided livelihood to 
some 17,000 families. Coffee is one of the few cash crops and foreign 
exchange earners in East Timor; it represents the primary source of 
income for many small farmers. We plan to expand the number of 
producers to 40,000 over the next four years, a critical step in 
reviving the economy and stabilizing East Timorese society and culture. 
Assuming an additional 20,000 people are employed seasonally in the 
coffee trade, we estimate that one-fourth of all East Timorese--170,000 
people--will benefit from this program.
    We will also work through our Office of Transition Initiatives 
(OTI) to provide support for community-led empowerment and development 
projects. OTI's on-the-ground presence and ability to ``jump-start'' 
various activities serve as both a catalyst for and a critical relay 
with other donor programs that are just getting underway. It is this 
fusion of sustained economic activity, job creation, and grassroots 
empowerment that will provide a strong foundation for East Timor's 
eventual transition to a nation state. What we must realize, as this 
program unfolds, is that the Timorese have high expectations for a 
better life, and that making good on these expectations is essential if 
East Timor is to achieve and maintain stability.
    Turning to Cambodia, we see one of the poorest countries in the 
world emerging from several decades of warfare and atrocity which have 
taken the lives of almost two million people. Infrastructure, trust in 
government, and civil society have all been destroyed. Given the 
complicated and troubled legacy of the past thirty years, we cannot 
expect either a seamless or linear transition to democracy--only small, 
deliberate steps. While there are signs of reform, some of which are 
nurtured by NGOs that USAID has supported, there are continued concerns 
within the international community about the overall pace of democratic 
reform and accountability for senior Khmer Rouge leaders for the crimes 
committed during their regime.
    As we look for positive signs of reform, we will continue helping 
NGOs provide humanitarian services and advocate for further reform. 
USAID assistance has been invaluable in supporting programs and 
organizations that protect human rights and strengthen civil society. 
In Cambodia, an NGO, for example, recently held a nationwide forum 
where Cambodians explored reconciliation and addressed the legacy of 
the genocide. Human rights violations are being reported and 
investigated. For the first time, USAID-supported NGOs are offering 
abused and trafficked women a place of safety and the possibility of 
redress. These are all major steps forward. Our hope for the future, 
however, rests with the young people of Cambodia. It is they who are 
the linchpin of transition and the ones who can ensure the prosperous 
and stable future of this country. We await the necessary reforms on 
the part of the Cambodian government, which will meet the preconditions 
for restarting our basic education program on a bilateral basis. This 
program is the key to progress, democracy, and nation-building in the 
truest sense of the word.
    Mongolia is also on the path to democratic reform and a market-
based economy. With five free and fair elections held since Mongolia's 
independence from Soviet rule in 1991, and a sixth expected in June, 
the key challenge today is building strong political parties and a 
legislature that can agree on much-needed reform. Success will depend 
on gaining experience with the fundamental tools of democracy. We want 
to help Mongolian society do this, focusing on strengthening rural 
civil society and improving the effectiveness of parliament and the 
judiciary.
    A final challenge that is taking on increasing importance for USAID 
is the humanitarian and democracy programs in Burma. Our challenge is 
how to support and influence an eventual peaceful transition to the 
growing number of refugees and displaced people living inside Burma and 
along Burma's borders. Over the past year, USAID and State Department 
colleagues have developed a coordinated approach focusing on (1) 
developing the capacity of the Burmese to manage the eventual 
transition to a democratic society; (2) increasing pressure on the 
ruling Burmese regime to improve its human rights record and engage in 
meaningful dialogue with the democratic opposition and ethnic 
minorities; and (3) providing humanitarian assistance to refugee 
populations in camps along the Thai-Burma border, and where possible to 
displaced Burmese outside the refugee camps.
       addressing public health and social safety net challenges
    Globalization has brought about potentially de-stabilizing forces. 
The increased flow of people and commerce has led to a burgeoning of 
health epidemics in East Asia, such as HIV, TB, and malaria. Between 
1988 and 1998, international air travel from the U.S. increased by 
almost sixty percent. Millions of people travel between the U.S. and 
Asia each year. We know that infectious diseases do not respect 
national boundaries, and that there is the potential for a real crisis 
and a genuine threat to the health of our own citizens. HIV infections 
in Asia increased by seventy percent between 1996 and 1998--the fastest 
rate of increase in the world. HIV/AIDS is not just a health crisis--it 
is a development crisis that threatens the social fabric of nations and 
communities. Unless we act quickly, countries in this region may soon 
be facing a situation comparable to what we see in Africa today, where 
HIV/AIDS is a root cause of social, economic and political crisis; and 
where more than 5,000 people die from AIDS each day.
    USAID recognizes the need to prevent the spread of the AIDS 
epidemic in Asia, which is driven by the sex trade, including the 
trafficking of women and young girls and intravenous drug use. High 
rates of migration within and across national boundaries are increasing 
the geographic scope and scale of the epidemic.
    Cambodia has the highest rate of HIV infection among adults in the 
region at 2.4 percent. While the epidemic is still concentrated in 
high-risk populations, such as commercial sex workers (43 percent HIV 
positive in 1998) and their clients, it is beginning to spread to the 
general population. This is a potential powder keg, especially when 
considering the region's porous borders and high incidence of 
trafficking. Our program focuses on changing behavior and on improving 
the quality of and access to sexually transmitted disease (STD) care. 
Police officers and military are especially important targets of our 
program because they serve as bridges between the high-risk groups and 
the general population.
    In addition to Cambodia, we are working in Laos, Vietnam, 
Indonesia, along the Burma border, and in the Philippines to increase 
disease surveillance capabilities and developing innovative approaches 
for changing behavior and stopping incipient HIV/AIDS epidemics in 
their tracks. Preventive and educational HIV/AIDS programs in 
individual countries in the region cannot easily reach highly mobile 
individuals who travel across borders on a regular basis. This 
transboundary problem requires a transboundary response. USAID 
developed an innovative cross-border HIV/AIDS program to promote 
awareness and reduce the infection rate of vulnerable refugee 
populations on the Thai-Vietnam, Thai-Burma, and Vietnam-Laos borders.
    The re-emergence of drug-resistant malaria and TB in the region 
also represents serious threats to these nations and to the United 
States. Of the seven to eight million people around the world who 
contract TB each year, nearly three million cases occurred in Southeast 
Asia. TB represents the number one cause of death among economically 
active Indonesians, and forty percent of the AIDS-related deaths across 
East Asia. In response, we are developing an aggressive regional 
program to diagnose, treat, and prevent the spread of TB across the 
region.
    Along Thailand's borders with Cambodia and Burma, a strain of 
malaria has emerged which is resistant to all known drugs except one. 
Displacement of people by war, increasing gem mining and logging 
activities in Cambodia are bringing more and more people into this 
area; increasing numbers of men and women are at risk of contracting 
this debilitating disease. Experts are very concerned that this strain 
of malaria is spreading throughout the region. USAID is working with 
local NGOs and the World Health Organization on surveillance in order 
to find out where the strain is and how it is spreading. We are 
training health workers on how to diagnose and treat the disease, and 
educating the public on how to prevent it.
                               conclusion
    Mr. Chairman, the East Asia that you and I are looking at today 
presents challenges that we would have found inconceivable only a few 
short years ago. While there was never any question about the 
importance of the region for key U.S. national interests, there was 
never so much widespread concern about security and stability beyond 
the borders of China and North Korea. And while the focus of this 
concern was once isolated to basic economic and politics, we now find 
that there are equally potent threats in diseases that we cannot easily 
control.
    The countries of this region are facing a number of complex 
challenges. Success in reviving economic growth, in building 
democracies to cement stable societies, and addressing social ills in 
East Asia is critical for America's continued prosperity and security. 
USAID is meeting this challenge--being responsive to congressional 
interests in the region, looking at ways we can enhance impact and 
achieve coherence with U.S. foreign policy interests. Without effective 
and adequately funded USAID programs, economic growth, democracy, and 
improved human welfare are much less likely to occur in East Asia.

                               Program Resources for East Asia--FY's 2000 and 2001
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                            Fiscal Year 2000              Fiscal Year 2001
                       Program                       -----------------------------------------------------------
                                                       DA & CS     ESF       ALL     DA & CS     ESF       ALL
----------------------------------------------------------------------------------------------------------------
Bilateral:
  Burma.............................................       3.0       3.5       6.5       3.0       3.5       6.5
  Cambodia..........................................       5.8      10.0  \1\ 20.5       0.0      20.0      20.0
  China.............................................       0.0       1.0       1.0       0.0      28.0      28.0
  East Timor........................................       0.0      24.0  \1\ 29.3       0.0      10.0      10.0
  Indonesia \2\.....................................      72.0      23.0  \1\ 108.      80.0      50.0  \1\ 135.
                                                                                 6                             0
  Mongolia \3\......................................       0.0       6.0      12.0       0.0      12.0      12.0
  Philippines.......................................      29.7       0.0      29.7      40.0       5.0      45.0
  Vietnam...........................................       2.7       0.0       2.7       2.0       0.0       2.0
Regional:
  AERA \4\..........................................      12.7       5.0      17.7      11.0       8.0      19.0
  Infectious Diseases & HIV/AIDS....................       5.0       0.0       5.0       8.6       0.0       8.6
  USAEP \5\.........................................       6.0       0.0       6.0       7.6       0.0       7.6
  E. Asia...........................................         0       3.5       3.5       0.0       6.0       6.0
  Environmental Initiative
  Regional Democracy................................       0.0       2.3       2.3       0.0       5.3       5.3
  Regional Women's Issues...........................       0.0       2.5       2.5       0.0       4.0       4.0
                                                     -----------------------------------------------------------
    TOTAL...........................................     136.9      86.8     247.3     152.2     151.8     309.0
----------------------------------------------------------------------------------------------------------------
\1\ Funding totals include PL 480 Title II in the amount of $6.9 million for Cambodia, $4.3 million for East
  Timor, and $13.6 million for Indonesia in FY 2000. Funding totals for FY 2001 include PL 480 Title II in the
  amount of $5 million for Indonesia.
\2\ Total amount of all program resources (including Office of Transition Initiatives and Global Bureau
  activities) is $125 million.
\3\ Funding for Mongolia includes $6 million for Freedom Support Act.
\4\ Accelerating Economic Recovery in Asia.
\5\ US Asia Environmental Partnership.


    Senator Thomas. Thank you. Senator, thank you for joining 
us. Do you have any opening comment?
    Senator Feingold. Really just questions, whenever you are 
ready, Mr. Chairman.
    Senator Thomas. All right. Let me have a couple, then we 
will scoot around here.
    What is the total budget for USAID?
    Mr. Randolph. The total budget, Senator, is about--I think 
it is $7 to $7.5 billion.
    Senator Thomas. That is roughly half the State Department?
    Mr. Randolph. I could not tell you what percentage of the 
State Department budget it is. Our budget for the Bureau of 
Asia and Near East is about $2.5 billion, so we are roughly a 
third of the USAID budget. We should probably take out the $900 
million Israeli cash transfer that goes to the Israelis in the 
form of a check, so I would say we are at $1.6 billion, which 
is probably 20, 25 percent of the USAID budget.
    Senator Thomas. As you enter into these activities, like 
Cambodia and other places, are you there at the request of the 
country? How do you choose which country to go to? What is the 
relationship? Did they ask you to come?
    Mr. Randolph. Normally a country would ask us to come and 
work in the country. We find that we can best accomplish our 
activities if the country has a government that desires to 
reform, desires to promote democracy, and desires to take the 
necessary steps to combat diseases which afflict its 
population.
    We do not work in Burma, but we are working in the border 
regions of Thailand, where we are doing humanitarian work, 
because we think it is important to work with Burmese groups 
who ultimately want to go back and create a civil society in 
Burma, and there are humanitarian reasons for taking care of 
the refugees who are congregating on the Thai border.
    Senator Thomas. Well, of course, you and I want that to 
happen, but it does not happen unless that country wants it to 
happen.
    In Cambodia, for example, you indicate that the United 
States and other countries imposed restrictions on direct aid, 
and your officials have urged Congress to lift those 
restrictions, stating that if they are not, then the Agency 
will be forced to cut back on its activities. Now, if we have 
restrictions on direct aid, why is USAID giving aid?
    Mr. Randolph. We have restrictions on direct aid to the 
Government of Cambodia. We do not have restrictions on actually 
doing work in Cambodia with NGO's on humanitarian and democracy 
issues, and we are giving aid because the State Department has 
determined that it is important for U.S. national interests to 
ensure that Cambodians, who were so traumatized during the Pol 
Pot years, have access to appropriate medical care and begin 
working with other countries who want to see the creation of a 
civil society in Cambodia.
    Senator Thomas. Is it not a little bit of a contradiction 
to restrict aid on the one hand and then say we are going to 
help you on the other?
    Mr. Randolph. No. It would not be a contradiction because 
we are working with the people. We are working with NGO's who 
want to promote democracy, in reaction to or in opposition to a 
government which wants to suppress democracy.
    Senator Thomas. You are working in opposition to the 
government?
    Mr. Randolph. Yes.
    Senator Thomas. They allow you to be there?
    Mr. Randolph. They allow us to be there.
    Senator Thomas. That is a little hard to understand. I 
think they must acknowledge that you are there and be willing 
to be there or you would not be there. Is that true?
    Mr. Randolph. I think that is the case. I do not think for 
that reason that we would be able to work successfully in 
Burma.
    Senator Thomas. Indonesia; how long has USAID been in 
Indonesia?
    Mr. Randolph. I am sure we have been there since the 
1970's, and we have had a very successful program which, in the 
early years of the Suharto regime was responsible for helping 
Indonesia achieve economic growth in the range of 6 percent, 
and helping Indonesia make tremendous strides in the fields of 
maternity and child health, family planning, and kind of 
economic development.
    When the Suharto regime went to rot in the 1990's we began 
curtailing our aid, and it is only then, during the last 2 
years, that our program in Indonesia has begun to increase 
again, primarily in response to the changed conditions.
    Senator Thomas. I guess if you measured your being there in 
terms of success, it would be hard to measure that you were 
successful during the Suharto days, would it not?
    Mr. Randolph. I think that is a true statement, and I think 
we understood from our failure in Indonesia, probably on the 
political and economic side, that working with authoritarian 
governments, hand-in-glove supporting authoritarian 
governments, does not ultimately produce freedom and 
prosperity. I think we have learned our lesson there, and it 
has caused us to reconfigure our program so that democracy and 
the promotion of free markets and free people are a paramount 
goal of USAID's programs around the world.
    Senator Thomas. I have used my time. Senator.
    Senator Feingold. Thank you, Mr. Chairman, for holding this 
hearing, and I want to thank Mr. Randolph for being here to 
testify.
    A stable and healthy East Asia in which prosperity is 
firmly grounded in freedom and respect for the rule of law is 
unquestionably in the United States interest, and I was pleased 
to hear your remarks. From addressing infectious diseases, 
including AIDS, to bolstering anticorruption efforts, 
responsible, well-monitored foreign assistance can be an 
important instrument helping to attain these goals, and I would 
like to ask just a couple of questions about East Timor at 
first.
    I appreciate your remarks about that situation. The 
administration's ESF request for East Timor is $15 million less 
than the year 2000 estimate of $25 million. To what extent are 
you able--if you could, to explain the rationale for this 
reduction at a time when East Timor's needs are obviously vast. 
Does it have something to do with the absorptive capacity of 
East Timor?
    Mr. Randolph. East Timor's needs are vast, and the amount 
of money pledged by the international community is even more 
vast, $522 million. The ultimate interim authority for running 
East Timor will be the United Nations, with the assistance of 
the World Bank. We see our role in East Timor as providing a 
temporary bridge to provide employment of the East Timorese, to 
begin undertaking the development of a civil society until the 
U.N. and World Bank get their programs going.
    We believe that $10 million ought to be sufficient for East 
Timor next year, provided that the $520 million that will be 
administered by the World Bank and the U.N. is efficiently and 
competently administered, and that the U.N. gets going quickly 
with its job creation and civil society programs. If that is 
not the case, Senator, then we would certainly have to 
reevaluate our program in East Timor, but we just do not see 
the necessity of throwing money in a country where there is 
plenty of money to go around for the time being, if it is 
wisely spent.
    Senator Feingold. Well, that relates to a second question. 
Could you describe a little more USAID's priorities in East 
Timor, and how it relates to plans for donor coordination? In 
other words, has the U.S. agreed to take the lead on certain 
sectors, with the understanding that the Europeans, for 
example, will be contributing, or others will be contributing 
more to other sectors? Could you describe the sort of division 
of labor effort there?
    Mr. Randolph. Yes. Our major priority, since we view our 
strategy as a transition strategy, is the creation of 
employment. Long-term employment by way of developing the 
coffee industry which USAID started, and which has been a huge 
success, and which we hope in 5 years will either employ or 
feed 25 percent of the population.
    Second, the short-term goal of putting the East Timorese 
that I described as milling around on the street corners, 
getting very, very angry about the wealth that they see driving 
by, and the good food that they see being consumed by the 
international sector. I am pleased that we have been able to go 
in almost immediately and begin generating these employment 
projects through our Office of Transition Initiatives.
    Sometimes we are criticized for being slow moving and 
bureaucratic and encumbered, but by contrast to any other 
national agency we are really fast as the wind, and I think we 
can be proud of what we are doing in East Timor, but since 
ultimately it is going to be the U.N. and the World Bank who 
have responsibility for leading the transition, we would want 
to view our activities as essentially transitional activities.
    Senator Feingold. As we focus on the jobs and the industry 
in particular, what are some of the other major donors going to 
focus on, if you could say a little bit more about that.
    Mr. Randolph. Well, the other donors would focus on 
building institutional capacity, creating a legislature, 
creating an executive. Part of the problem there, as you know, 
is that there are very few people have more than a fourth grade 
education.
    All of the civil servants were supplied by the Indonesians, 
and the Indonesians are gone, so you have basically got a 
country which has very few lawyers, very few college graduates, 
very few people who can read and write, and it is frankly going 
to take a very long time to create the institutions of 
governance which we normally associate with a fully functioning 
country, and that is why we have decided to concentrate on 
economic growth in East Timor as the best way to minimize the 
risk of conflict and disappointment.
    Senator Feingold. Thank you, Mr. Randolph. Thank you, Mr. 
Chairman.
    Senator Thomas. On the subject of East Timor, what is your 
analysis of their ability over a reasonable time to be self-
sustaining economically?
    Mr. Randolph. I would be very pessimistic about the ability 
of East Timor to be self-sustaining economically over any 
reasonable time. I am concerned that it will remain a ward of 
the international donor community for a long time, which is 
another reason why we are concentrating on employment and 
economic growth, particularly expanding the coffee project.
    Ultimately, from the point of view of national interest, 
East Timor is probably less important to our national interest 
than it would be for the Australians and the Indonesians and 
the Asians, which is another reason why we would look to the 
countries of Asia to take the long-term lead in helping East 
Timor make the transition to a viable, sustainable society.
    Senator Thomas. The State Department's 1999 human rights 
report suggested that Cambodia's human rights situation had 
improved. There continues to be serious problems with the human 
rights record. If that is the case, why is USAID requesting 
lifting of the restrictions and sanctions?
    Mr. Randolph. I am not aware that we are requesting lifting 
of the sanctions, Senator.
    [Pause.]
    Mr. Randolph. I would have to get back to you on that.
    Senator Thomas. It is my understanding that they are 
recommending a lifting of the sanctions.
    Mr. Randolph. I know we would like to do some work with the 
local governments in the basic education sector. We believe 
that working with the younger people of Cambodia is the best 
way to create a population who are imbued with concepts of 
democracy and who have the education to make a democracy work.
    I mean, to the extent that we are asking for any help, it 
would be in the basic education sector.
    Senator Thomas. Well, I just want you to know that I agree 
with the notion that democracy and market functions are best 
instituted and developed when people see what sort of a country 
that they can have, and they see what is going on around them. 
However, there has to be some willingness on the part of the 
country that you are dealing with to move in that direction.
    For instance, you mentioned the great success in Korea and 
Taiwan. I would think you would have to say that those people 
pretty much pushed themselves into their successful position, 
and particularly Taiwan.
    Mr. Randolph. We know they have, Mr. Chairman. It is 
admirable what they have done, both in their countries and what 
they have done here in the United States. The Taiwanese-
Americans and the Korean-Americans have made such a tremendous 
contribution to this country.
    Senator Thomas. Well, it is very difficult, I am sure, to 
make a policy judgment as to where our resources are spent and, 
assuming they are limited, where we can do the best job. One of 
the interesting things I do not quite understand is the $28 
million payment for the bombing of the Chinese Embassy in 
Belgrade.
    Mr. Randolph. Yes.
    Senator Thomas. It is my understanding those funds come out 
of ESF funds, as opposed, for instance, to the gondola in 
Europe that came out of DOD funds. Why is that?
    Mr. Randolph. Mr. Chairman, that amazes me as much as it 
does you. I am going to see Mr. Roth tomorrow and I will ask 
him why, but I think it probably has something to do with the 
way OMB and the State Department and the administration budget.
    Senator Thomas. Yes. This is a little off the edge of the--
when the President goes here and there, he leaves generally 
millions of dollars in these countries. Where does that come 
from?
    Mr. Randolph. It comes from our USAID budget, and it comes 
from money that Congress and the American people appropriate 
for USAID to work abroad. For example, I was just with the 
President in India, and he announced a regional energy program 
called the SARI initiative, South Asia Regional Initiative, 
which has at its core promoting the export of clean energy 
among the nations of South Asia, and reducing greenhouse gas 
emissions, two very important goals of USAID.
    Senator Thomas. Thank you for telling me that. I have been 
wondering for some time where that sort of loose money, or 
unattached money seems to come from.
    Mr. Randolph. Well, we have been working on this 
initiative, Mr. Chairman, and it was really coincidental that 
the President was able to announce it while he was in India.
    Senator Thomas. Is it coincidental that he announces one 
everywhere he goes?
    Mr. Randolph. Well, that is not coincidental, because I 
think he likes to be able to announce things wherever he goes, 
and if you have got something that you are working on and it is 
ready to go, it will normally be announced by the President.
    Senator Thomas. It is a good deal. It is a good deal.
    Mr. Randolph. But we make a point of not announcing 
projects that are funded by money that we do not have, and I 
can assure you that will never happen in my Bureau.
    Senator Thomas. Well, my greatest concern is that the 
allocations of the effort, the allocations of dollars, go--and 
I do not say this critically, because I am sure you would 
agree--they go where they can have the greatest impact, go 
where we can have some success, go where they are consistent 
with what we are trying to do and the rest, whether it is 
security, whether it is trade, whether it is relationships, and 
so on.
    Sometimes you get the sense that this USAID operation is 
just sort of out here by itself. Tell me the difference between 
now--if you are familiar, now and before the two agencies were 
combined.
    Mr. Randolph. I really do not, at least in my Bureau, in 
the way that my Bureau does business with the State Department, 
I do not think there is a whole lot of difference.
    For example, the Secretary has said that Indonesia is one 
of four priority countries, along with Colombia, Ukraine, and 
Nigeria, and we work hand-in-glove with Stanley Roth and the 
East Asia Pacific Bureau to find money for the Secretary's most 
important priority, Mr. Roth's most important priority, and our 
Bureau's important priority, Indonesia, and in order to do 
that, we have to--we rob some of the other countries where we 
work.
    Philippines normally has a program of $40 million a year, 
and you will see that we are only doing $29 million this year. 
Money came out of South Asia, which I know is not in your 
bailiwick, but money came out of South Asia for Indonesia.
    So I think we try to stay very focused on putting the most 
resources into the countries that have the most strategic 
importance to the United States.
    Senator Thomas. The Philippines would be one of the more 
prosperous countries in this arena, would they not?
    Mr. Randolph. The Philippines has done a good job 
developing the kinds of democratic institutions and strong 
financial institutions that helped it survive the Asian 
financial crisis. There are a number of things that we are 
still doing in the Philippines. We are working on 
anticorruption activities.
    The Philippines does have an insurrection of sorts in 
Mindanao. We are working in Mindanao on economic growth to 
ensure that there are jobs for people who might otherwise join 
the Muslim militia, and that there are jobs for people who 
leave Muslim rebel groups and want to come back to civil 
society.
    Senator Thomas. Mongolia also seems to me relative to 
others--is a member of WTO. We have MFN status, permanent 
trading status with Mongolia. How would they fall into the 
category of being on your list as much as some others?
    Mr. Randolph. Mr. Chairman, I must say that I have really 
changed my mind about Mongolia. When I first came to this job, 
not knowing as much as I should--I hope I know more now than I 
did then----
    Senator Thomas. I am sure you do.
    Mr. Randolph. I did not quite understand the importance of 
a country that actually is situated between two very big 
countries with nuclear weapons, China and the Soviet Union.
    It is a country that was for years, as you know, a 
satellite of the Soviet Union, but it is a country that in the 
Europe of the nineties made clear that it wanted to be 
democratic. It held an election in 1991. We are looking forward 
to another election in the spring of this year, in June.
    We spend $12 million a year there, and given the results in 
Mongolia, which you have just pointed to as a former Communist 
country that has a democratic government, it wants to be in the 
WTO, it is trying to do everything right, given the results, 
that has been money very well spent in a country which has some 
strategic importance to the United States, and it is a country 
very close to China and Russia, and they can kind of look over 
the border and see what happens.
    It is like Korea and Taiwan. When the people in a country 
put their mind on working hard to create a democratic free 
market society, it is a beacon in that part of the world, Mr. 
Chairman.
    Senator Thomas. Yes. What is your relationship, working and 
otherwise, with the World Bank and the International Monetary 
Fund?
    Mr. Randolph. We work very closely with the World Bank, 
because the World Bank normally performs the role of donor 
coordination. You have asked how we coordinate our activities 
so that we do not duplicate them. World Bank will hold a 
conference once a year. There was a conference on East Timor 
held in Tokyo several months back. My deputy, Karen Turner, 
attended it, and this was the conference where $520 million 
plus was pledged, and then the donors all decided how they were 
going to work and in what sectors.
    I just attended a World Bank consultative group meeting on 
Indonesia in Jakarta in February, and the donors, under the 
leadership of the World Bank, came together and said, we think 
some people should work in the local government on the 
decentralization issue, others should work on environmental 
issues, others would work on judicial reform, so that the 
donors were not duplicating their efforts and the taxpayers in 
the donor countries could be assured that they were getting 
their money's worth.
    I know that there has been some criticism of the World 
Bank. It is, I think, excessively bureaucratic. I am concerned 
that the World Bank and the U.N. have been so slow to get off 
the mark in East Timor, but you know, I think it is like 
Churchill said about democracy. It may not be a good system, 
but it is the best system we have got. And at this point, in 
terms of donor coordination, it is the best system we have got.
    I think it is very important from a foreign policy point of 
view, and I know Stanley Roth feels this way, too, that we 
move, that we keep prodding the World Bank and the U.N. to get 
going in a country like East Timor so that we do not have a 
conflict created by disappointed expectations.
    Senator Thomas. Well, I think you would have to say that 
Australia and some others took a pretty heavy load in East 
Timor.
    Mr. Randolph. Yes. We very much appreciate what the 
Australians did in East Timor. When I was there, I saw the 
Australian Army in action, and they had few skirmishes with the 
so-called militias.
    Senator Thomas. Do they still have refugees in West Timor?
    Mr. Randolph. There are still refugees there, Mr. Chairman. 
There are several hundred thousand refugees. Maybe that is--I 
do not know the exact number, but there are at least 100,000. 
Many of them were pro-Jakarta civil servants, business people, 
farmers, people who wanted a relationship with Jakarta and who 
really cannot go back. They are very much like the Serbs who 
left Kosovo because of the conditions there. There is still a 
lot of ethnic tension and violence between the East Timorese--
the indigenous East Timorese and the Javanese.
    Senator Thomas. Do you, or have you had involvement in 
North Korea?
    Mr. Randolph. We do not have any direct involvement in 
North Korea. When I say we, my Bureau, the Bureau of Asia and 
the Near East. USAID is involved on the humanitarian side with 
food shipments. I think that we are shipping about 200,000 
metric tons of food to North Korea this year, with a value of 
$53 million. My Bureau is not involved in that at all. That is 
the so-called Bureau of Humanitarian Affairs.
    But I do know that we are very careful to make sure that 
the food goes to North Koreans who are starving, as careful as 
we can be, and that it is not diverted to the military or to 
the government or to officials.
    Senator Thomas. How do you do that?
    Mr. Randolph. We work with NGO's who are on the ground in 
North Korea, and who understand----
    Senator Thomas. Many of whom have withdrawn?
    Mr. Randolph. Pardon?
    Senator Thomas. Some of whom have withdrawn?
    Mr. Randolph. I just do not know enough about that 
situation, Mr. Chairman.
    Senator Thomas. Well, I appreciated this. As I said, I 
think it is very important that we make our position clear on 
foreign policy, and then the things we do are consistent with 
that, and that they are coordinated so that we can have the 
most impact possible.
    I think often we talk about many things in terms of our 
relationships, but seldom do we talk about USAID and its 
activities. I think all of us know it is there. So I think this 
has been useful, and I hope you come back again, or at least 
let us know when you think there are things that we ought to be 
doing or are not doing and, as you might suspect, we will be 
free to also share that with you.
    So thank you, Mr. Randolph. I appreciate it very much, and 
we look forward to working with you.
    Mr. Randolph. Thank you, Mr. Chairman.
    Senator Thomas. Thank you, sir. The committee is adjourned.
    [Whereupon, at 3:45 p.m., the subcommittee adjourned.]

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