[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS
APPROPRIATIONS FOR 2003
_______________________________________________________________________
HEARINGS
BEFORE A
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
________
SUBCOMMITTEE ON FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED
PROGRAMS
JIM KOLBE, Arizona, Chairman
SONNY CALLAHAN, Alabama NITA M. LOWEY, New York
JOE KNOLLENBERG, Michigan NANCY PELOSI, California
JACK KINGSTON, Georgia JESSE L. JACKSON, Jr., Illinois
JERRY LEWIS, California CAROLYN C. KILPATRICK, Michigan
ROGER F. WICKER, Mississippi STEVEN R. ROTHMAN, New Jersey
HENRY BONILLA, Texas
JOHN E. SUNUNU, New Hampshire
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 Alice Grant, Staff Assistants,
Lori Maes, Administrative Aide
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PART 3
Page
Agency for International Development............................. 1
U.S. Assistance for the Front-line States........................ 167
U.S. Assistance for Colombia..................................... 271
The Administration's Proposed Millennium Challenge Account....... 441
________
Printed for the use of the Committee on Appropriations
________
U.S. GOVERNMENT PRINTING OFFICE
81-779 WASHINGTON : 2002
COMMITTEE ON APPROPRIATIONS
C. W. BILL YOUNG, Florida, Chairman
RALPH REGULA, Ohio DAVID R. OBEY, Wisconsin
JERRY LEWIS, California JOHN P. MURTHA, Pennsylvania
HAROLD ROGERS, Kentucky NORMAN D. DICKS, Washington
JOE SKEEN, New Mexico MARTIN OLAV SABO, Minnesota
FRANK R. WOLF, Virginia STENY H. HOYER, Maryland
TOM DeLAY, Texas ALAN B. MOLLOHAN, West Virginia
JIM KOLBE, Arizona MARCY KAPTUR, Ohio
SONNY CALLAHAN, Alabama NANCY PELOSI, California
JAMES T. WALSH, New York PETER J. VISCLOSKY, Indiana
CHARLES H. TAYLOR, North Carolina NITA M. LOWEY, New York
DAVID L. HOBSON, Ohio JOSE E. SERRANO, New York
ERNEST J. ISTOOK, Jr., Oklahoma ROSA L. DeLAURO, Connecticut
HENRY BONILLA, Texas JAMES P. MORAN, Virginia
JOE KNOLLENBERG, Michigan JOHN W. OLVER, Massachusetts
DAN MILLER, Florida ED PASTOR, Arizona
JACK KINGSTON, Georgia CARRIE P. MEEK, Florida
RODNEY P. FRELINGHUYSEN, New Jersey DAVID E. PRICE, North Carolina
ROGER F. WICKER, Mississippi CHET EDWARDS, Texas
GEORGE R. NETHERCUTT, Jr., ROBERT E. ``BUD'' CRAMER, Jr.,
Washington Alabama
RANDY ``DUKE'' CUNNINGHAM, PATRICK J. KENNEDY, Rhode Island
California JAMES E. CLYBURN, South Carolina
TODD TIAHRT, Kansas MAURICE D. HINCHEY, New York
ZACH WAMP, Tennessee LUCILLE ROYBAL-ALLARD, California
TOM LATHAM, Iowa SAM FARR, California
ANNE M. NORTHUP, Kentucky JESSE L. JACKSON, Jr., Illinois
ROBERT B. ADERHOLT, Alabama CAROLYN C. KILPATRICK, Michigan
JO ANN EMERSON, Missouri ALLEN BOYD, Florida
JOHN E. SUNUNU, New Hampshire CHAKA FATTAH, Pennsylvania
KAY GRANGER, Texas STEVEN R. ROTHMAN, New Jersey
JOHN E. PETERSON, Pennsylvania
JOHN T. DOOLITTLE, California
RAY LaHOOD, Illinois
JOHN E. SWEENEY, New York
DAVID VITTER, Louisiana
DON SHERWOOD, Pennsylvania
VIRGIL H. GOODE, Jr., Virginia
James W. Dyer, Clerk and Staff Director
(ii)
FOREIGN OPERATIONS, EXPORT FINANCING AND RELATED PROGRAMS
APPROPRIATIONS FOR 2003
----------
Wednesday, March 13, 2002.
U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT
WITNESS
ANDREW NATSIOS, ADMINISTRATOR, USAID
Chairman Kolbe's Opening Statement
Mr. Kolbe [presiding]. Morning. The Subcommittee on Foreign
Operations will come to order. Thank you very much.
We welcome this morning the administrator of the Agency for
International Development, Mr. Andrew Natsios, who is making a
second appearance here before us.
When you first appeared, Mr. Natsios, 10 months ago, you
certainly faced a lot of challenges that the agency has and
participating since that time in the president's national
response to global terrorism. This has been a priority for all
of us.
I want this hearing today to complement the hearing that we
had a month ago with the Secretary of State. I think the
discussion we had that day with Secretary Powell, between the
members of the committee and Secretary Powell was very direct
to the productive. So this we hope will be your opportunity to
describe USAID's role in advancing the nation's national
security interests as determined by the president and the
Secretary of State.
Of course we know that the president and the secretary and
his advisers make the major policy decisions, but it is the men
and women of USAID that have the critical role of implementing
many of those policies on the ground in the front-line states.
We owe each of them, especially those who serve in the front-
line bureau, the ones that cover Asia and the Near East, our
special thanks for the work that they do in the face of some
significant physical dangers and certainly mental stress.
A year ago, I identified three priorities as chairman:
global health, effective management of the trade--of the
agencies funded by the bill, and export promotion and trade.
They are still priorities but, of course, they have been
somewhat subsumed by the need to support key states who are
assisting this country in the war against global terrorists who
threaten our very existence.
Last month, many of us told Secretary Powell we thought the
new national security situation was not adequately reflected in
the budget request that the administration has made for this
subcommittee. Now we understand the president is going to
submit a supplemental budget request within a few days. Of
course,we can hope that this supplemental request will remedy
some of the shortcomings that we see in the budget request or
the budget that is before us that we are looking at today. And
while I know that you cannot talk about that at this time,
perhaps you can indicate in general terms, where we can expect
to see augmented funding.
For example, the budget request that we have before us
refers to future Afghanistan assistance levels as ``to be
determined.'' There will be more discussion, I am sure, of the
front-line states as we go through this hearing.
Before returning to my original three priorities, let me
mention for a moment an issue involving taxation of our West
Bank, Gaza program by the Palestinian Authority.
Mrs. Lowey and I have been very concerned that the USAID
mission failed to inform us that such taxes were being
collected, at least since 1998. And until we made inquiries to
the State Department--and frankly I learned about this in a
press report--no action had been taken on this issue.
Let me repeat for the record that what we have told to
members of this subcommittee on many occasions, and what I have
certainly told the public, others, that I have spoken to, this
subcommittee is not going to be party to having payments made
to the Palestinian Authority. Our assistance to the people, the
Palestinians of the West Bank and Gaza is for humanitarian
purposes. It is not to support Chairman Arafat--his structure
of his Palestinian Authority.
With regard to our original priorities, the subcommittee
has championed child survival and global health issues long
before they attracted as much attention as they do today. We do
not understand why the president proposes abolishing Child
Survival and Health Fund. You cite streamlining as a reason in
your prepared statement. This subcommittee already gives
unprecedented discretion to the secretary and to USAID. Doesn't
this streamlining concept logically lead to a proposal that the
Appropriations Committee put all the discretionary spending
under the subcommittee into one singleaccount? Maybe we could
label it Support for Executive Branch Press Releases.
At this time, I am going to limit my remarks on global
health to taking note while the African AIDS crisis remains the
focus of attention, we have to continue to focus also on other
major infectious diseases, such as tuberculosis and malaria,
and on the emerging HIV pandemics in the Caribbean, in South
Asia and in other parts of Asia, as well now as in Russia.
Internal health too remains a priority for us.
As I told Secretary Powell, my second priority is
management for the Agency for International Development, and
the division of labor between it and the State Department. You
have made clear that correcting management deficiencies at AID
is your top priority as well. A good start has been made over
the past few weeks by your new management bureau team, but it
requires concurrent efforts by your policy and program bureau
coordination team. We hope that both bureaus will respond
promptly to requests for information and meetings by our staff.
Our members will continue to have suggestions for AID
activities. As I said last year, our members need to be
convinced that reasonable proposals will receive rapid and fair
consideration, return for your commitment. To have your senior
staff review detailed written suggestions will work to clarify
that support for a project in the committee report is not the
same as a check in the mail.
The Senate is cooperating on this matter too, but after
eight months our initial efforts with university directives has
not produced an effective central response mechanism within the
agency.
My final priority, the signature issue that I have had in
Congress for a number of years, is trade and export promotion.
Much of what this subcommittee is trying to accomplish will be
adversely affected if the president's trade agenda is stalled
in Congress.
His Andean Trade Preference Act, for example, is
particularly critical as the president prepares to travel to
Lima next week; it is particularly critical with the change
that is taking place in the situation in Colombia.
I am encouraged that your budget indicates additional
support for trade and export promotion, but I want to review
the substance of the individual programs under this particular
label of trade and export promotion.
Mr. Administrator, there are a number of other matters of
concern but we will take them up as we go through the
questions.
Let me just add that there has been a bit of grumbling from
members and staff about the seven-volume budget justification
in support of the appropriations request being delivered here
on March 7. It is certainly better than last year, but it is
not exactly a user-friendly document and the quality varies, I
think, among the bureaus and offices that are contained within
it. So while I want to thank you for the effort that has been
made, let's work together to try to make it even better for
next year.
Let me turn to Ms. Lowey for her opening remarks and then,
of course, we will receive your remarks, Mr. Chairman.
Ms. Lowey.
Mrs. Lowey's Opening Statement
Mrs. Lowey. Thank you, Mr. Chairman, and good morning.
I do want to join the chair in welcoming you, Mr. Natsios,
to the subcommittee's hearing on the fiscal year 2003 request
for programs administered by the Agency for International
Development. I intend to cover a wide range of topics and
issues this morning in both my statement and questions, and
look forward to a useful and constructive dialogue with you.
I have been a steadfast supporter of AID's development
program over the years and, in fact, have played a significant
role, I hope, in successful efforts to secure greater resources
for development programs. In fact, in 2002, the committee
provided increases above the amounts requested for both child
survival and disease programs and development assistance to the
tune of over $200 million, or 10 percent above the request.
This enabled the acceleration of many programs, but
particularly basic education, HIV/AIDS prevention and fighting
tuberculosis and malaria.
I am grateful that the administration has sought further
increases for 2003, but I have several concerns.
The first is that while a substantial increase has been
sought for HIV/AIDS prevention, other vital programs in child
and maternal health, TB and malaria prevention, and vulnerable
children have been cut. While the other areas where you have
requested major increases--agriculture and business, trade and
investment--have merit, many of the proposals are unproven and
many have yet to be designed.
Let me be extremely clear on the area of basic education.
This minor increase proposed is simply not adequate. As you
have indicated, 110 million primary school age children in
developing countries remain out of school. Expanding our reach
in basic education programs should be the top priority of AID,
not the fourth or fifth, as your request reflects.
I also will echo some of the comments made by the chairman
about the budget structure and management concerns. In the
past, Congress has provided resources to AID with a high degree
of flexibility and recognition of the many inherent
difficulties in carrying out effective development programs.
For the past two years, we have worked in close partnership
to develop an account structure for the child survival account
that struck the appropriate balance betweenCongress and the
executive. That careful work and trust has been scrapped by the
administration. The administration has even reneged on its commitment
to submit budget information using last year's agreed upon account
structure. AID is also in the midst of a reorganization that will yet
again change internal procedures and account structures.
I get the distinct feeling that responsiveness to Congress
is at the bottom of AID's priorities when all these decisions
are made. The extraordinary autonomy and freedom from
congressional earmarks AID now enjoys compared to other
agencies of government will have to be carefully examined and
may have to change.
Moving back to the small increase requested for basic
education, as I have indicated, it does not begin to address
the need to accelerate these programs around the world. Given
the events of September 11, if there is anything more important
than rapidly expanding basic education programs it escapes me,
frankly.
Last year's conference report called for an immediate
review of ESF-funded countries' education programs for this
specific reason. To my knowledge, that directive has been
completely ignored by the administration. The only new idea we
have been informed of to date calls for $100 million in Egypt's
assistance to be set aside in an endowment for graduate-level
scholarships. The education initiative mentioned for Africa is
still in the planning stages and the $22 million set aside for
it may, in fact, come from ongoing successful education
programs. The countries of Central Asia continue to struggle
with outmoded Soviet-style education systems and in Tajikistan
literacy rates are falling.
We must find a way to do more.
With respect to Afghanistan, we look forward to receiving
the administration's supplemental request for reconstruction. I
hope that it is adequate to meet the needs and does not leave
to our allies what the United States should be doing. The fact
that $50 million was added to the fiscal year 2002 bill for
AID's programs by this committee has given you the flexibility
to respond to immediate needs while planning for new resources.
It should be a strong indication that we will not allow
this reconstruction effort to fall into the all-too-familiar
pattern that is overwhelming international support and pledges
at the outset followed by endless foot-dragging by the U.N. and
other donors with program implementation at a snail's pace.
Without significant U.S. on-the-ground presence, the
reconstruction effort will flounder, and we must provide the
necessary resources to make it work.
I just want to add to my distinguished chairman's comments
on the shock and the astonishment when we found that the
Palestinian Authority had collected nearly $7 million in value-
added taxes in past years from goods and services purchased by
USAID, its contractors and its grantees in order to implement
USAID programs in the West Bank and Gaza. Prior to last week,
the PA had still not agreed to extend USAID and its agents zero
percent VAT status, and none of the $7 million already
collected has been refunded.
I simply cannot express adequately how much this revelation
troubles me. USAID failed to inform Congress about a situation
that has persisted for a number of years, which would have been
of specific and intense interest to many members of Congress.
It also allowed a situation to persist whereby U.S. taxpayer
money has gone directly into PA coffers. While I understand
that tax revenue is exempt from the prohibitions currently in
U.S. law against providing U.S. funds to the PA, the
arrangement that has persisted for many years clearly violates
the spirit in which this law was written and, frankly, is a
direct affront to the generosity of the American people. I
fully intend to work with our chairman to correct this loophole
at the earliest possible opportunity.
In response to direct pressure from our subcommittee
chairman and me, I understand that the PA agreed last week to
extend USAID zero percent VAT status. The speed with which this
response was achieved, frankly, leads me to believe that if
Congress had been informed earlier, we could have gotten
results earlier as well. We still have the problem of the $7
million, though, and I understand the State Department is
currently working to resolve this issue as well.
Let me be perfectly clear: If the tax money went into PA
coffers directly, where it could have been devoted to any
number of violent purposes, the refund must come directly out
of PA coffers, in my judgment. And until this happens or a
suitable payment plan is worked out, I am not sure that I can
support the continuation of the West Bank and Gaza program.
Thank you very much, Mr. Chairman. And I yield back.
Mr. Kolbe. Thank you, Ms. Lowey.
That is the second bell for a vote on the journal, and I
want members to be able to hear Mr. Natsios' opening statement,
so we are going to stand in recess until we can vote on the
journal. There will be no further vote for at least an hour,
and so I would urge members to come back as quickly as possible
here. The moment we get back we will resume with his statement.
And yes, priority will be given to those as they came in
for the beginning of the hearing.
We will stand in recess.
[Recess.]
Mr. Kolbe. Subcommittee will resume.
Mr. Natsios, we are prepared to hear your statement. And of
course, the full statement will be put in the record. Andif you
would summarize, it will get us to questions.
We expect to have a vote in less than an hour. So the
quicker we can get through this, maybe we can get through the
whole thing here.
Mr. Natsios.
Mr. Natsios' Opening Statement
Mr. Natsios. Thank you very much, Mr. Chairman, members of
the committee, for the opportunity to speak before the
subcommittee on my favorite subject, foreign assistance, and on
my favorite agency, USAID.
I want to also thank all of you for the leadership you have
shown on the extra money we received, which we certainly do
appreciate, and we are spending very carefully.
I would also, particularly, want to thank you for the $50
million, Mr. Chairman, that you and the ranking member on the
minority side and Congressman Lewis, as the chairman of the
Defense Committee, put in for Afghanistan. It was very well-
timed, because timing is everything in this sort of work,
particularly in the reconstruction after or during a war. And
that helped our staff be able to push money up very rapidly in
some critical areas of Afghanistan. So thank you very much for
doing that.
I know there are many issues, like the education issue,
which are close to members of this committee, who have provided
leadership long before I arrived at AID. And I do very much
appreciate the support and leadership of the members on these
important issues.
Our budget proposal calls for us to manage $8.48 billion in
fiscal 2003. This includes $2.74 billion for development
assistance, including child survival and health programs;
$235.5 million in international disaster assistance; $55
million for the Office of Transition Initiatives; $586 million
for operating expenses; and $95 million for a capital
investment fund, which will be focused on the reconstruction of
USAID missions to make them more secure, given the threats that
we face around the world, and for some infrastructure work in
our computer areas.
The budget also calls for $2.29 billion in Economic Support
Funds; $495 million for Assistance for Eastern Europe and the
Baltics; $755 million for the Assistance to the Independent
States of the Former Soviet Union. We co-manage these three
accounts with the State Department.
Within the next several weeks you will receive a
supplemental budget--Congress will receive a supplemental
budget from the President. I am very pleased with the initial
set of decisions. No final decisions have been made, but some
initial decisions are tentatively in place. And I have to tell
you, I am very pleased with what is in that bill. It will
answer some of your questions. It is, of course, focused on
those states, front-line states, which are critically important
to the United States in the war against terrorism, but there is
assistance in them for our kind of programs that are critically
important in this war on the soft side of American power.
I cannot say anything more about that supplemental budget
if I want to go back to my office intact. That is for the
President to announce, not me.
I have to tell you, Congresswoman, that I was more shocked
than you were when I found out about this tax in the West Bank
and Gaza. And I will tell you why, because I knew what was
going to happen to me very shortly, given the revelation of
this. And I was even more disturbed that my staff did not tell
me about this. This has been in place apparently since 1995. I
do not like surprises at all. And I told the staff, "Tell me
before things happen, so that we can fix them before they
become issues."
We did immediately act, based on the comments made by
committee members and based on my own concern about this issue.
And we have a letter in writing from the PA saying there will
be no tax in the future.
The State Department is dealing with the issue of the back
payments. And it is very clear that we want those payments and
we want them now. We have made that clear. The State Department
wants the same thing; they are doing the negotiating of this,
because this is a highly sensitive issue, given the other
things that are happening in the Middle East right now.
We will get you a report as soon as the final agreements
are reached, but those are in process as we speak--those
negotiations on that issue.
As part of the management reforms in USAID, which I have
spent a lot of my time on, I want to discuss at length, and I
have put in my statement some more details on many of the
initiatives that we have launched.
But one of the things we have done is to reorganize USAID
around what we call three new technical or pillar bureaus. In
fact, the career staff are now calling them pillar bureaus--
USAID has been built on four pillars for 40 years now, and the
pillars change in terms of--depending on the administration--
what the focus is.
The three focuses are, first, on economic growth,
agriculture and trade, because without economic growth all the
evidence is there will never be a way out for these countries
in poverty. That is the basis for the AGOA legislation which I
strongly supported when I was with World Vision in the NGO
community. Many of the big NGOs realized that that legislation
was absolutely critical as a first step.
The second is in global health. We are the preeminent aid
agency in the health area; 50 percent of our DA account goes
toward health. It will continue to go to health. We assure you
of that.
And the third area is in democracy and governance
onconflict prevention, a new focus of our agency, and on humanitarian
assistance in this bureau that I, in fact, managed in a different form
10 years ago, in the first Bush administration.
There has been a dramatic increase in HIV/AIDS funding.
Since fiscal year 1999, long before I joined USAID, the
Congress had a lot to do with that, of course. Our funding in
this budget increases from $435 million for our bilateral DA
program in 2002 to $500 million in 2003--an increase of $65
million. The total amount in DA for all health care, total
health, will go up $60 million. So there is an increase. I am
aware of the concern over the cuts that were made on some
programs.
I have to say though, in terms of the reality on the
ground, whether you say you are doing an STD program, a
sexually transmitted disease program, whether it is part of the
population program, and many of them are part of that account,
or whether it is part of child survival, because of course it
affects newborn children, or whether it is part of the HIV/AIDS
program, to be very frank with you, the program is still a
program on the ground. There are certain clinical procedures
that we follow when we do these kinds of programs. They have to
be done. They are absolutely essential to stop the spread of
that disease, but the disease itself in and of itself is
something we need to deal with.
And so the important thing is is that the DA health
programs are being increased by $60 million in this budget.
Our HIV/AIDS work will get to approximately 50 countries in
the next fiscal year--oh, I am sorry, in this fiscal year. We
are the lead U.S. agency in the fight against HIV/AIDS. Along
with the National Institute of Health and the Center for
Disease Control, the amount of money the U.S. Government is
proposing to be spent on HIV/AIDS internationally, outside the
United States in the developing world, in 2003 is $1.185
billion, almost $1.2 billion, which is a third of the total
amount of money spent in the whole world, including money spent
by the U.N. agencies, other donors and Third World countries.
Reforming USAID business systems may sound like a boring
subject, but, Mr. Chairman, you are absolutely right, in your
opening statement, that this is essential to the work of the
agency, for the programmatic work that we do in the field,
because how the business system that we have function affects
how fast we can get money obligated into the institutions that
we do work through. It affects our overhead rates.
And the five management systems I promised to correct I
spent a lot of time on working on. We now have finally, after a
very long search, John Marshall in place, who is a management
expert the career people are telling me maybe the best we have
had in 25 years in that job, and he is inspiring people to
themselves come up with innovations and improvements.
Let me go through just a few things we have done so far. We
have installed new software that can save considerable time on
small purchases. We have developed improved procedures to
recover unused funds from expired contracts. We are instituting
uniform standards. We have now 15 different models for IQCs,
indefinite quantity contracts, major mechanisms by which we
spend money. Fifteen makes it much more complicated to do these
things; we are going to go one or two models, and that is it, a
standardized format.
We have automated the personnel recruitment system. We have
also come up with new software that was just recently installed
I think last November in our procurement system. I do not know
why it took all these years to buy this system and install it,
but it is now installed, and the procurement system will run at
an automated basis now, because much of the documents we
produce for grants and contracts are the same--are supposed to
be the same--from one contract or grant to another. Why we keep
duplicating that is beyond me.
In any case, it is now automated so that that can be
programmed, and it will save a lot of time. It is also
connected into the new Phoenix system, which we have installed
in Washington, which is our new financial management system. It
has yet to be installed in the field, but we are now doing a
review of that. We hope to begin that process very shortly.
We are also simplifying the internal and external reporting
requirements for the agency and consolidating them so you do
not get so many different kinds of reports. Seven is still too
many, Mr. Chairman, but I am hoping that, as things progress,
we will meet the standards which you have set which I very much
agree with.
We have established a BTEC, a business council of career
staff, that is chaired by Fred Schieck, my deputy, that will
look into these five management areas. And I went to one
meeting. I have to say I was quite astonished at how rapidly
they were making decisions and moving things into place.
Let me talk about our program and what the major
initiatives are. The first is to reinvigorate agriculture.
Agriculture has been cut dramatically in the late 1980s and
1990s, and I think it was a disaster to do it. Seventy-five
percent of the poor people in the world live in rural areas.
They are either farmers or they are herders. Eighty percent of
the poor people in Africa live on farms. If you ask the heads
of state, the finance ministers, the trade ministers, even the
health ministers in Africa, what is the area that we need the
most help in, they will tell you agriculture.
Why? Most of them came from farms themselves, and theyknow,
if the farms are prosperous, then the country will be prosperous. If
the farms fail and there is famine, nothing else will work, because
there is no amount of aid we can possibly provide that can support all
of the social service requirements unless people have some income in
their own pockets, and agriculture provides that. So we have a major
new initiative in Africa to end hunger through a major new agriculture
initiative, a $60 million initiative.
Our program will have four elements to it in the
agriculture area: one, to mobilize science and technology to
reduce poverty and hunger; two, to develop new global trade
opportunities for farmers; three, to bridge the knowledge
divide in terms of training, outreach and adaptive research at
the local level; and four, to take the long view, promoting
sustainable agriculture and sound environmental management.
The environment and agriculture are intimately related. The
rainforests are all not being cut down by big logging
companies. They are also being cut down by farmers who do not
have the technology in order to fertilize their existing soil,
so when the soil gets depleted, they move and cut more trees
down. If we can make their farms sustainable, we can reduce the
damage being done to the environment in many of these
countries, particularly in terms of the rainforests.
We know that agricultural production is profoundly affected
by education levels, particularly education levels of women.
Studies done in Kenya show dramatic increases in agricultural
production when women have at least a sixth-grade education,
with no other interventions. So we know education has an affect
on agriculture, and that is why education is a major initiative
of the administration.
Our increase is modest, but it is still an increase. It
goes from $100 million basically last fiscal year to $150
million this year, $165 million for the next fiscal year in our
DA proposal.
We do have strategy papers that are circulating in the
interagency process. We have been working on them for some time
for that strategy, particularly in Africa.
Mitigating conflict is a very important part of what we do.
Now, we are not going to be able to mitigate international
wars. That is not the focus of what we do. But there are many
localized conflicts, Mr. Chairman, that are causing chaos in
these countries that do have potential solutions through the
kinds of work that NGOs do, conflict management techniques that
are used in the industry in this country.
We know that there are certain techniques used that can
deal with debates over land tenure, for example. A lot of
conflicts in Africa are between herders and farmers, and if you
find ways to mediate between the two, you can stop a lot of
regional wars that are extremely destructive that sometimes
become larger wars. The small wars sometimes mutate into
national wars, which is the last thing on Earth we want to see.
In terms of our regional initiatives, we want to stabilize
the front-line states of Central and South Asia. As you know,
we have a $100 million, five-year primary education program
that this committee had a lot to do with, in terms of focusing
my attention on, even before September 11, I might add.
Congresswoman Lowey was very strong on that. I know you were,
Congressman Kolbe, as well.
We know the failure to do this kind of work in the 1990s in
Pakistan has something to do with what happened on September
11. Because as the void was filled by the schools in Pakistan,
run by the more extremist element within Islam, they were
training young men who know nothing about the outside world in
a form of Islam that is actually very alien to Central Asia.
All of the stuff we are seeing, it gives the impression of
an Islamic fundamentalism in Central Asia that is indigent. It
is not indigenous. It was imported. Because there was no other
way of providing education through the public sector, parents
who had no choice turned to the private sector.
So we have a focus on Central Asia. Education is one of
those central focuses. We hope to have 4 million text books
printed within the next few weeks for the opening of school on
the 22nd of March in Afghanistan.
We have an ongoing drought there and we have a major
reconstruction program that will focus on health and on family
income and on agricultural production and on getting people off
poppy production in Afghanistan.
In terms of Africa, we have three initiatives. I mentioned
the agricultural initiative earlier.
The second is in trade. We have increased the amount of
money to help train African leaders, which they are strongly in
favor of. The prime ministers I met with regularly and the
foreign ministers and heads of state want this training program
for their ministries and their business community, and how they
can take advantage of the AGOA legislation by trade capacity
building.
Our third initiative is in Africa. We are asking for an
increase of $22 million in that budget overall. The total
amount we are spending in Africa on education is actually going
up 35 percent this year over last year, goes from, I think, $67
million in 2001 to $91 million in 2002, and $95 million in
2003, as I recall the exact figures.
Finally, there is an anti-corruption initiative in the
democracy and governance area for the coming fiscal year. We
know that unless governance improves in developing countries
that everything else will not work well. It is a critical
element of what we are doing.
And finally, we have the Andean Regional Initiative, and we
have in Latin America, a new initiative called Partnership for
Prosperity in Central America to deal with the severe drought
in rural areas and the collapse of the coffee crop, which is
causing severe problems in rural Central America.
Anyway, those are our new initiatives. I could go into much
more detail, but I have talked too long already.
Mr. Chairman, I would be glad to answer questions or move
on.
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Mr. Kolbe. Thank you very much, Mr. Natsios.
We will stick to the five-minute rule here, because we are
going to be under some real pressures here on time here.
WEST BANK GAZA TAX ISSUE
Let me just start by trying to get this issue of the West
Bank--the Gaza tax issue off the table, at least as far as I am
concerned. I appreciate very much your response. USAID did
response and the State Department did response very quickly
when we identified this problem and brought it to your
attention. And we appreciate it. We do have the copies of the
letter from the minister of planning and international
cooperation and the minister of finance in the Palestinian
Authority saying they will not impose the tax in the future.
And we will make these letters part of the record, I might add.
But we still have the issue of the $6.8 million that has
been collected and not reimbursed at this point. But let me
just focus on a couple of things.
Knowing that we said there was not supposed to be any money
going to the Palestinian Authority, have you been able to do
any investigation within your agency to determine why this
practice was allowed to continue for as long as it did?
Mr. Natsios. I have not found out why. I do know that in
1999 a very senior-level team was sent in to negotiate this
issue, and they came back having failed. Why they failed--the
people have retired from the agency who did it. And I want to
call them up and ask them why this was not fixed. It is so
obvious a political issue, it is so explosive, particularly
under these circumstances right now.
And I have to tell you, I used to have to deal with this,
in the first administration, in civil wars around the world,
where they wanted to tax our food aid. And I had an absolute
rule in USAID: We are helping people survive. We are not going
to pay taxes on our humanitarian relief.
And when I was in the NGO community, we had people trying
to say, for our private fund-raising, that when we sent aid in
it was going to be taxed. And we had an absolute rule in many
of the NGOs that we would not pay those kind of taxes.
So why this was allowed to----
Mr. Kolbe. Why didn't those people say flatly at that
point, ``Well, this violates Section 555 of the appropriations
act which says none of this money can go to the Palestinian
Authority''? Why did not they just say, ``Well, then there is
going to be no contracts; there is going to be no projects
here''? There is not a negotiation. It is either you do not
impose a tax----
Mr. Natsios. You are absolutely right. I do not know the
answer to your question. We are still looking into it.
Mr. Kolbe. No, I think we need the answer to that----
Mr. Natsios. Need your oversight.
Mr. Kolbe [continuing]. And I appreciate the fact that this
is a different administration, you are a different
administrator at this point, but nonetheless we have to make
sure that this kind of thing does not occur again.
Can you assure us that this is not happening elsewhere?
Mr. Natsios. Well, I gave an order last week, when I found
out that this was going on, for a review of all national
portfolios, even in peaceful countries where there is a
democratic government. It is not a function just of this
particular area. We should not be paying any taxes on our
assistance, period.
So there is a review going on now worldwide, for all our
AID missions on this issue.
Mr. Kolbe. And when that is completed, would you please
make me a copy of that----
Mr. Natsios. I will get you a copy of the report.
Mr. Kolbe [continuing]. Available to us?
And similarly, when you are doing your investigation, as to
why it was not felt by anybody in the agency that it was
important to come back to Congress with this.
Mr. Natsios. Or to tell me, since I am the administrator.
Mr. Kolbe. Well, tell you or the previous administrator or
to come to Congress with it. When they failed at those
negotiations in 1999, why was not Congress informed? We need to
get some answers to that.
Let me just turn to a couple of other issues in my
remaining time here.
ALLOCATIONS
One of the measures, obviously, of effectiveness is the
coordination between State Department and USAID--to measure the
effectiveness of the coordination is how long it takes you to
obligate or contract the appropriation accounts that are co-
managed.
Can you indicate whether there are significant levels of
appropriated funds from fiscal year 2001 that remain
unobligated at this time? For example, what percentage of the
economic support fund, ESF fund, not including the cash
transfers to Israel, remains unobligated? And what is being
done to alleviate this obstacle?
Mr. Natsios. I will get you a report on that in some
detail, because it actually changes from week to week as to
what is obligated and what is not.
I can tell you the money is all allocated for 2001. As you
know, the allocation money for our largest program, Egypt, was
not approved until the first week of October. It was done after
the end of fiscal 2001. And I was troubled by that.
You did pass some legislation. There has been a dramatic
change in the speed with which the approvals are taking place
for ESF for the current fiscal year. So this is very different
than it was last year.
Mr. Kolbe. But even the allocations I do not think were
just completed until just very recently.
Mr. Natsios. That is correct.
Mr. Kolbe. So here we are, four or five months after the
end of the fiscal year, and we are just completing the
allocations for the previous fiscal year.
Mr. Natsios. Right. I think one of the reasons on this
particular issue is because of the nature of the Egypt program.
Part of that is budget support in exchange for policy reforms,
and those monies were kept in accounts. And only, I think, in
January or February was there an agreement reached with the
Egyptian government on those policy reforms. So there was an
issue around our ability to release the funds, since they were
contingent on----
Mr. Kolbe. I am advised by staff that it is almost half a
billion outside of Egypt that was not----
Mr. Natsios. I will check on that with you. My impression
was----
Mr. Kolbe. It is more than just Egypt here.
Mr. Natsios. Yes, Okay. I will get back to you with a
report.
Mr. Kolbe. Let me turn--no, I want to come back to the
health care issues in some detail here. I will pass at this
point and go to Ms. Lowey.
Mrs. Lowey. Thank you, Mr. Chairman.
OVERSIGHT OF U.S. AID WEST BANK PROGRAMS
And thank you, Mr. Natsios. I think we have discussed the
issue of the VAT adequately. Except there is one other question
that remains in my mind. Can you tell us a little more about
the oversight of USAID programs in the West Bank and Gaza? What
controls are in place to ensure that funds are not going to the
PA? How are audits conducted? How do you ensure that you are
not funding individuals or groups involved in terrorism?
Mr. Natsios. When we had our hearing last year, questions
came up on the general subject. And I went back, since I had
literally just taken over when the hearing was held, and I
asked the three questions you just asked.
And I said to the senior staff in that bureau and in PPC,
``I want a system put in place so that next year, if this
question is asked, I can say that we have put a system in place
to ensure this is not happening.''
Now, I do not think the senior people--because they were
political appointees who were confirmed--in fact, I know they
did not know about this VAT tax issue, because I called them in
and said, ``You know, this is part of what I told you last May
we did not want to have, this kind of thing.'' I did not
mention this because I was not aware there was a VAT tax to be
collected.
We have put a system in of review, not just in the West
Bank and Gaza, but there are issues raised about the Lebanon
program, same issues. And I said, ``We just cannot, in a highly
politicized area, with violence going on, endanger the lives of
people--our staff or other people--because our funds are being
misused.''
So we have to have these systems in place, and it was made
very clear. Why this escaped that, Congresswoman, I do not
know. I am going to find that out, and I will get back to you
on it.
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Mrs. Lowey. Do you feel confident that, in terms of other
assistance programs that you are administering, that this is
not happening, putting aside the VAT issue?
Mr. Natsios. I am convinced of that because I have had
conversations with the mission director and the staff of the
bureau at a senior level, and I have told them what the
consequences will be if we fail at this.
Two, in many cases, we cannot do work because the intifada
is so acute right now, and has been since I took over, that
many of our programs have simply stopped. We are doing some
humanitarian programs.
The foreign minister has asked me three times not to stop--
the foreign minister of Israel has asked me three times, ``Do
not stop the water projects because they benefit both sides.''
Even though they are in the Palestinian areas, the water tables
are under the ground; they are not something that belongs to
one side of the other in the conflict. Andhe said, ``You have
to keep the programs going.''
To the extent that we have been able to, we have continued
that construction. But even that has had to slow down
substantially because of the violence that has been going on.
Mrs. Lowey. Thank you.
Basic Education
Let's move on to basic education. Again, as I mentioned in
my opening statement, I was extremely disappointed by the lack
of vision demonstrated by the fiscal year 2003 request, with
respect to the importance of providing basic education in
developing countries.
I am very proud that, working with Chairman Kolbe, we were
able to provide a total of $165 million for that purpose last
year--significantly above the president's request. And I think
the dedication of this subcommittee to this issue reflects a
consensus in Congress that basic education is the foundation of
good development. And I had hoped that the administration's
request would acknowledge and build upon this momentum.
Instead, you have requested $165 million from the
development assistance account, with additional funds coming
from other accounts. While this represents an increase over
last year's level, it by no means reflects the importance of
these programs to U.S. foreign assistance today.
Could you discuss with us the current status of our
education program in Egypt?
I was distressed to learn of a proposal to divert a
significant amount of resources to endow a program which would
provide graduate-level education. It certainly has not been the
priority of most of the people with whom I have had this
discussion.
Mr. Natsios. Let me address the Egypt program first,
Congresswoman.
I share, and I must say the president shares, your deep
interest in education. Because one of the principles I have
used over the years, both in the NGO community and AID in
designing programs and working in programs, is to try to chose
those programs that have multiple good side effects. If you
have a program that only has the affect of the narrow focus of
the program, it really does not give us the value added-ness we
would like.
The benefit of an education program--particularly, primary
education, particularly for women--for young girls--is it
affects health. Child survival rates go up just by increasing
the education level of young women.
Let me repeat, the data from the surveys in Africa and in
other areas of the world indicate that when women farmers--in
many countries, women are the farmers--get at least a sixth-
grade education that agricultural production goes up without
any other input because there are disciplines you learn in
basic education that affect other things. And so, we know it
has very good side effects and that is why we are so strong on
it.
We are only getting the interagency process. We do have the
strategy papers and they are circulating, but I do not have
authority yet. Because this is a big issue, I have got to get
other people's approval. For things that I initiate that are
not everybody else's interest in the administration, do not
have to get everybody else's approval. This is very, very
important to the National Security Council and to the
president, so everything we are doing in this area, in a very
constructive way, is being reviewed to see if there are things
we can add in. And so, there is a lot of support for this.
It is going to take a while to get a program of a large
size up and running. There is the question of absorbative
capacity, when you can have a program that is--particularly in
Africa--of this size and in Afghanistan and Pakistan.
The focuses on this, by the way, will be--there is a
teacher training program in Latin America--but the big focus is
sub-Sahara Africa and Central Asia, and you mentioned that, I
think, in your remarks and you are absolutely right--Pakistan
and Afghanistan. The literacy rates in Central Asia--former
Soviet states--are like 98 percent. So they are extremely high
now. They do have an old kind of system, but if you ask them
that is not where they want the help. They want help in other
areas in Central Asia--I mean, in the former Soviet states.
In terms of Egypt, the proposal that you meant is a
proposal circulating around. I have not approved that and
neither has the senior leadership. We have just looked at it,
Okay?
When I was in Egypt, the first time I was in Egypt was in
1982. When I was in state government in Massachusetts, I went
with the American Jewish Committee in Boston, with state
legislators, to view the Camp David Accords and it was my first
trip to Egypt. I would have to say the country is profoundly
different 20 years later than it was when I went in 1982.
And I went to the city of Alexandria and saw a model
education reform for basis education. This is in poor
neighborhoods now. And I said, ``Why are we not doing this in
other areas?'' Interestingly enough, Mrs. Mubarak visited the
same program and said the same thing, without me knowing it.
She looked at the program and said, ``This is a model program.
This is what we should be doing''--in what is called Upper
Egypt, which is the southern part of the country, which is,
frankly, the poorest area of Egypt.
Now what has happened is, because of her interest, the
governors in other areas are now asking us USAID to come in
tomodel what they did in Alexandria in other areas.
So we are looking at basic education and I asked the staff
to revisit this issue of the allocation of resources in Egypt
because of the very reasoning that you used in your comments.
Mrs. Lowey. I will have to save my questions for the next
round. Thank you.
Mr. Kolbe. Mr. Knollenberg?
Mr. Knollenberg. Mr. Natsios, welcome. I am glad to have
you here.
Middle East
Let me get into the matter of Egypt, relative to assistance
and, obviously, I would like to talk about the Middle East as
well, but I want to just centralize my thoughts on Egypt.
One of the things that I have been thinking about since the
11th of September, and I am sure everybody has, is the question
of democracy and how do we expand democracy in the Middle East?
I think it is a healthy question to think about in terms of how
we look at restructuring or reassessing what we are doing in
terms of foreign aid and U.S. aid.
I think promoting democracy is a great idea and you feel
strongly about that. Good government, rule of law, transparency
in the regulatory process. But here is what I am thinking
about: What concerns me is I think we have to put this question
of democracy front and center in what we do with our assistance
and be able to monitor or measure the results.
What I am concerned about in the case of Egypt is are we
really focusing on where the money should be going?
For example, on this order of restructuring or refocusing;
in the last 20 years--maybe 22 years--we have provided some
$18.5 billion in military assistance and about $28.8 billion in
nonmilitary or economic assistance. Where are we with respect
to the successes, and with respect to those things I mentioned?
Is democracy really on the bill? Is it growing? Is it getting
better?
But, honestly, I am not talking about eliminating aid. I am
talking about restructuring, refocusing, redirecting aid to
where it will deliver some examples of democracy being
improved. And I think that it is healthy to talk about this
kind of thing, because we are at a point right now where we
look back over the last 20 years and say, ``Have we done the
right thing or should we have rechanneled some things''
I could talk about a lot of things. I could talk about the
impartial judiciaries and the media and some other things that
maybe have not risen to the point that we would expect and I
would like your opinion to share with us as to what
restructuring, what refocusing is needed. And--what kind of a
grade do we put on the progress with respect to democracy; in
this case, in Egypt? And I am looking to you, obviously, for
answers and for any improvement.
I do not have any answers, but I just have a feeling that
we have made, perhaps, some mistakes and should alter what we
are doing to ensure successes in those areas. I would welcome
your comment.
Mr. Natsios. Thank you. Clearly, the one area of the world
where democracy has not taken root--even if the democracies, as
in the case of some African and Latin American countries are a
little fragile, they are still there. They have elections, they
have multi-party democracies, they have a free press, there is
debate going on.
The one area of the world that that has not happened, other
than Kuwait and Jordan, is the Middle East and it is
disturbing. It is not a good trend. And there is a lot of
analysis. I am not an expert in that region. I have been to the
region. I have been through Jordan many times and Israel. I was
in the Gulf War myself as a soldier and I am familiar with the
area.
I do not have a good answer for you as to why that is.
There are a lot of different theories by people more expert.
But we are looking at that now; our PPC office is talking to a
lot of scholars to ask what we need to do to encourage
democratization in countries that have not historically been
democracies.
But one thing I would say that we do know is the way in
which to do it--programmatically, in an operational sense--when
we cannot actually insist that there be democratic elections
with multi-party participation is through developing civil
society. What does that mean? It means developing an NGO
network.
Why is American democracy so robust? Why did it survive
when it was not supposed to 200 years ago? Everybody in Europe
thought our little experiment in democracy was going to end
very rapidly, as I am sure you know, and it did not. And de
Tocqueville said why--because of all of these independent
groups--he did not call them NGOs, he did not call them a civil
society, but that is what they were. If you read de
Tocqueville, it sounds like he is describing some of our
programs now in many areas of the world.
We know in countries like South Africa that the USAID
program in the 1980s to encourage civil society had a profound
affect on the ability to move toward a full democratic system
in South Africa where the entire population participated by
encouraging NGOs, by investing in the university sector, by
training reporters in investigative journalism, by doing
exchanges back and forth to show how our society worked.
We believe that can have a very good affect in laying
afoundation. But there are political issues that are beyond us USAID's
control in terms of insisting that there be elections and that kind of
thing.
Now, in terms of Egypt--you mentioned Egypt specifically--I
will just tell you what we have done with the money. You had
mentioned what we had done with the money.
Mr. Knollenberg. What I know what you have done with the
money. What I am really concerned about, are we using it
properly today? Have we used it properly in the last five or 10
years? Should we rechannel some of those monies in different
directions? And I am even suggesting it might mean reducing
some of the military and putting more into economic.
But if we are not getting the bang for the buck in terms of
democracy, there has to be some reason why. I do not mean to
suggest that you have got to know the answer. I do not know the
answer either. I think we can do better. I just do not know
what to do about getting it or making it better. But that is my
concern.
Mr. Natsios. There is more focus in the Egypt program than
there ever has been on this civil society aspect and the new
plan they put together has a much greater focus on this, in
Egypt, for the very reasons that you just mentioned. So there
is an interest in that.
The second interest is in moving a lot of the program to
Central Egypt and to what is called Upper Egypt, which is the
poorest areas of the country, for the very reasons that you
just mentioned because it was too focused on Lower Egypt. It
has been a successful program but it needs to change now, and
that is what we are in the midst of doing.
Mr. Knollenberg. Thank you.
Mr. Kolbe. Ms. Kilpatrick.
Ms. Kilpatrick. Thank you, Mr. Chairman.
Education Initiative
Good morning, Mr. Administrator. I am happy to hear that
education is one of your priorities. As we move around the
world to assist other countries, I believe education is the
most important in any country that we might do for its people,
here and abroad, that we stimulate and grow those who are able
to learn, and I believe everyone is.
The president has a new initiative in the 2003 budget, and
it is really called Education Initiative, I think; $22 million.
You alluded to it. Heretofore, there has been an education
program called Education for Democracy and Development
Initiative serving over 30 countries; partnerships with private
industry and others; and having served over 6,000 girls in
Africa. Currently funded--and I am happy that since we have
Secretary of State Powell here that the staff has met and has
worked out what the 2002 funding is. No mention of EDDI in
2003, or is there a description of what the $22 million will be
used for.
Question: Will EDDI be included? Do you have more specifics
we can look at, in terms of what the $22 million--how it will
be used, what kinds of things?
Will the partnerships that EDDI has already established
with the companies--very companies I am sure we will probably
want to keep--that include some of the bigger ones, like
Microsoft and other major corporations who have partnered with
us. And we believe that the partnership is what we need,
because public dollars will never be enough. If we can get
private participation, we always want that.
Is there more detail on the $22 million?
Mr. Natsios. I will send you, Congresswoman, because I know
you are deeply interested in this, the education strategy that
we are pursuing worldwide. And then we have specifically one
that is more tailored to Africa, but it is in the framework of
this larger strategy. And let me describe what it is.
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Ms. Kilpatrick. And is that $22 million for the world,
then?
Mr. Natsios. No, no, no. The $22 million is just for
Africa.
Ms. Kilpatrick. Okay.
Mr. Natsios. And that is only for basic education. There is
more money that is being spent on other forms of education at
the higher level. For example, we need to trainmore
agricultural scientists if we are going to get the research capacity in
the countries to improve production.
Ms. Kilpatrick. And on that point, can't we----
Mr. Kolbe. Would the gentlelady yield, just to ask can you
send the report to all the members?
Mr. Natsios. Yes, I will send it to everyone.
Ms. Kilpatrick. Certainly, Mr. Chairman. Thank you.
If we would use the wealth of knowledge that our
universities have--Michigan State University, for example, is
already there in Africa. It is a land-grant college, high in
ag, and I am sure there are other universities in America.
So when you talk about the technology transfer and the ag
needs, the universities are the prime partners that need to be
included in much of this.
Mr. Natsios. Absolutely.
Ms. Kilpatrick. And we hope that you will work with our
universities as we move into the new--but the report the
chairman asked for, you will see that we all get it?
Mr. Natsios. I will see that you get it. Let me just, sort
of, briefly summarize it.
The model education reform that I am most impressed with in
Africa is in Uganda. President Museveni is one of my favorite
heads of state. I was just with Mrs. Museveni recently. We had
a very good conversation about the spectacular success of their
program.
They have doubled the number of kids, over four years--and
I have to say it was through his leadership, but AID was one of
the--Dawn Liberi, who is our mission director there, was one of
President Museveni's--he told me this--one of his principal
advisers in the education reform. We put a lot of money into
it.
Ms. Kilpatrick. It can happen--and you are absolutely
right. It is a partnership, and the people working together can
make a difference.
Mr. Natsios. Absolutely.
Ms. Kilpatrick. I feel your commitment, and I hope you will
continue. And I would like to be very much a part of that.
Mr. Natsios. We will keep you informed.
THE CONGO VOLCANO
Ms. Kilpatrick. Okay. And number two, there has been a
horrific volcano in the Congo, and I am sure you are very
familiar with that. We helped Mozambique years ago during their
floods. A couple years ago, Chairman Callahan helped in that
effort.
Has there been any attempt to come to you to ask, or--I
know there has been in my office. But has there been any formal
requests from any of the Congo leaders to ask for assistance
from us?
Mr. Natsios. You are talking about the Goma area, the
Goma----
Ms. Kilpatrick. Right, and it is very volatile, as you
know.
Mr. Natsios. Yes. Politically, it is not under the control
of the central government, as you may know.
Ms. Kilpatrick. Yes.
Mr. Natsios. My area in the first administration was in
disaster relief and natural disasters. Of course, this was
something that, when I went there with World Vision in the mid-
1990s, I said, "Why is a refugee camp with a million people a
quarter of a mile from an active volcano?" I told the U.N. I
thought it was madness to have it located there.
AID, before I arrived, installed, with the experts in this
from other federal agencies in the U.S. government which they
have relationships with, equipment to monitor both the levels
of gas underneath the lake, which could explode, and with the
volcano for the precise reasons that you just mentioned.
Ms. Kilpatrick. Okay. I would like to follow-up with you on
that, and we will put something in writing.
Mr. Natsios. Okay. We would be glad to get back to you.
Ms. Kilpatrick. Thank you.
COLOMBIA
Then finally, Mr. Chairman, if I might, the Andean
initiative, we started Plan Colombia three years ago; I was on
this committee at that time too. We have given now over $2.5
billion. I have yet to receive a report. I have asked the
secretary of state, as well as now you. And I know that, of the
money that they get, that your portion is some $278 million of
this 2003 budget that you will manage.
Why cannot I get a report on what is happening? Is it so
clandestine and so secretive----
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Mr. Natsios. No, you will get a report.
Ms. Kilpatrick. I do not know if the rest of the members
have seen one. I have not.
Mr. Natsios. You will get a report, Congresswoman.
Ms. Kilpatrick. How do we spend the money? I know over
300,000 people have been displaced. What kind of programs are
used to be putting those displaced people back into? Are there
any programs?
Mr. Natsios. Absolutely.
Ms. Kilpatrick. What is happening with that? I mean, we
send the money, the drugs still flood our country. You know, I
do not know--certainly the supply is not down. The demand is
still high. The people in Colombia, half--a quarter which are
African-Colombians are highly displaced. I mean, I have nothing
to hold onto, no kind of report, no kind of--can you give me a
summary of----
Mr. Natsios. I certainly can. There were essentially four
elements of the Andean initiative on our side. I cannot
describe what the Defense Department and State is doing, just
what USAID is doing.
The first element is to deal with the internally displaced,
and there are a lot of them at this point. It is increasing
because of the acceleration of the conflict over the last few
months. And so, we have an active program to provide food,
medical care and shelter for internally displaced people. That
program is actually functioning the way it should, because the
people----
Ms. Kilpatrick. Are numbers of people being replaced--wrong
word?
Mr. Natsios. They are being provided for. They cannot go
back to their villages because of the conflict, which is why we
are able to help them. They have left the insecure areas.
Ms. Kilpatrick. And you are placing them in new areas where
they are being helped.
Mr. Natsios. That is correct.
Ms. Kilpatrick. What percent?
Mr. Natsios. Our program was for 300,000 or 400,000 people,
and we have provided that assistance as we had planned to. So I
know that has been implemented properly. I asked for a review
of that to see whether we should increase the percentage of
people we are assisting, because other countries are also doing
work there--the U.N. and other agencies.
But I will get back to you as soon as the report is done on
whether we should expand that.
Ms. Kilpatrick. All right. And it is three years old, the
initiative is, Plan Colombia now--Andean is too. I do not----
Mr. Natsios. Right. They were----
Ms. Kilpatrick. But you will see that we get something and
we can correspond. And I can work with you and your staff.
Mr. Natsios. There is an agriculture component, an
infrastructure component and a justice component to it. But we
will get back to you with a report.
Mr. Kolbe. Might I also add, Ms. Kilpatrick, that we have
hearing planned on April 10, specifically on Colombia on this
subject?
Mr. Kingston.
NGOS
Mr. Kingston. Here is my question to you. In terms of the
NGOs and their involvement around the world, do you feel like
we get enough credit from them for what the USA is doing?
A little background on it is, you know, one of the great
frustrations about Afghanistan is the tremendous amount of
foreign assistance we gave them and are still giving them, yet
neither Americans nor Afghans seem to know it, aside from
people who are in this room. On our food aid, I am also on the
Agriculture Subcommittee--you may know--we changed our labeling
on food assistance--but do we get the credit that we need?
I apologize for being late. It is possible you talked about
this already.
Mr. Natsios. I have not talked about it, Congressman. And
this is a frustration that I have as well. It has been the
subject of considerable discussion. In some countries it is not
that important, but in other countries, in a politicized
atmosphere it is very important.
It is an instruction from the State Department and the
White House that we need to make it very clear--and I might add
from Chairman Karzai, who I have gotten to be friends with. I
have met with him now several times in his office in Kabul. I
was on his plane coming back to the United States and then we
had a reception for him in my office. He keeps repeating, ``You
know, I am helping the United States war on terrorism. But if
you do not visibly produce assistance, even if you are doing it
and no one knows it, it is not going to help me, because I am
telling the Afghan people that the United States is going to
help us rebuild. And if they cannot see visibly that the United
States is doing, will look like what I promised is not going to
happen.''
So it is not just a function of us getting credit for our
own sake, it is the interim government is at risk if we do not.
So we have had a discussion about it and we are going
through an effort to make it much more systematic that whenever
we provide assistance to any institution, if they want to get
the assistance--I have told them all this. I met with 300 of
them and they did not argue with me. They understand the
important of this; that the U.S. government's role will have to
be very visible. There is a whole strategy we have laid out in
the last month to ensure that.
So it is a very good question, Congressman, and you are
absolutely right.
Mr. Kingston. Well, it is something that, I think, all of
us on the committee and in Congress are sensitive to, because,
I guess, we know, as members of Congress, that if you go off to
Washington and you do great things for your district, unless
you go back home and tell the people about, nobody else is
going to tell your story for you. So we understand the paradox
here: You do not want to be greedy and try to claim headlines,
but there are those that are so wrapped up in the NGO-world, as
they should be, their hearts in the right place, but do they
have a tendency to think, ``What I am doing is more noble than
simply grabbing credit for the folks back home.''
And so, we do need to push this. And if there is something
that I can do to help you, I will be glad to work with you or
the capable Mr. Fox or whomever.
UN WORLD FOOD PROGRAMME
How about the World Food Programme, in particular? Howare
they doing, the U.N. World Food Programme?
Mr. Natsios. The World Food Programme director, Catherine
Bertini, is one of my best friends in the humanitarian world.
She is just retiring. She is an American. She served in the
first Bush administration as assistant secretary of
agriculture. She is just retiring after 10 years.
And a gentleman named Morris, whom I am meeting with for a
second time today, has been approved and is about to take over.
And he is very sensitive to Congress, and knows our system
well, and is a very skilled administrator.
Catherine has made dramatic improvements in the World Food
Programme's management in the last decade. In my view, it is
one of the best managed agencies in the U.N., as a result of
her leadership, and some profound changes that have taken place
the last decade.
In terms of the assistance that we give them, a lot of
their food comes from the United States--a huge percentage of
their food. We made the decision in late October, when the war
started in Afghanistan, to put the American flag and, in Dari
and Pushtu, the two principle languages of Afghanistan, print
``A gift of the people of the United States'' on the bags. And
Agriculture agreed to put that on. I requested it, and they did
it. Ann Veneman did it very quickly. And the food going in now
has that printed on all the bags. So it is very clear where it
is from, okay.
And I told Catherine, ``If you want the food, that is the
condition: It has got to have the American flag on it.'' And
she said, ``Fine. There is no problem with WFP on it.'' And it
has been distributed and everybody knows where the food is
coming from, because it is very visible.
Mr. Kingston. Well, I know that we have a lot of allies in
the U.N. that I am sure would want to bend over backwards to
make sure America was given full credit for anything America
does. So I feel more comfortable now. I'm kidding, but you
know, we are committed with you. We will do whatever we can.
Let me ask you about a $100 million in aid to Pakistan. Do
you feel that it is being accounted for? That is one of the
questions that this committee asked Mr. Musharraf when we were
over there. And, they told us all the right answers. But it is
always good, when you are talking that kind of money, to hear
it quite often.
Pakistan
Mr. Natsios. There are two different questions. One is the
budget transfer which took place. We were concerned about that,
because there are histories in many countries. And so what
happened basically is we used the American money, at the
instruction of the State Department, to spend down their
existing debt. The cash actually never went to Pakistan. It was
used here to pay down debts they had, which freed up cash
within the budget to spend on social services.
Our job is to track that surplus money that is now being
used to make sure it is being spent in those areas. And we are
doing that. There is an accounting system in place, they were
putting in place to do that.
In terms of our own USAID bilateral program, that is a
separate matter, a different system. That experience is over 40
years, and we put in place a lot of systems to avoid problems--
there are a lot of horror stories from the past. Because of
that, we put in place systems within USAID to ensure that does
not happen.
Are they always fail-safe? No, but most of the time they do
catch things before they get out of control.
And so this is a highly visible program, it is very
important to the security of the United States. It is not just
a do-good program; it is very important to the stability of
Central Asia. And so we are putting heavy emphasis on
accountability in that program with President Musharraf and his
cabinet.
The minister of finance for Pakistan was voted the best
minister of finance of the developing world recently. He used
to work for Citibank as their Asia vice president. He is a
business man. He understands the consequences. And so he is an
ally in this, and they are being very cooperative on this.
We have not actually started spending our money yet. We are
in the design phase. We are now advertising for a mission
director. Teams have been going in to do assessments, but we
are not actually spending money yet in Pakistan.
Mr. Kingston. I have one more question, Mr. Chairman. It is
a quicky.
AIDS in Africa
Your statement says that 30 percent of the people in Africa
or in some countries are affected by AIDS.
Mr. Natsios. That is correct.
Mr. Kingston. Do you have a number of that? It says in some
countries more than 30 percent of the population is infected.
Do you have a number for the continent or breakdown country-by-
country? Or could you send it to me?
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Mr. Natsios. We will send you that. The general percentage
for sub-Sahara Africa is 8 percent, but some countries like
Botswana, which is the worst in the world, is 38 percent
infection rate among adults. It is the worst. Which is tragic
because Botswana is one of the best-lead, best-governed Third
World countries in the whole world. For them to have to deal
with this is a very great sadness I have to say.
Mr. Kingston. Thank you.
Mr. Kolbe. Thank you.
I am going to go to Mr. Wicker, because he was here when we
gaveled the hearing, and I know he has been shuttling between
two subcommittees here. Mr. Wicker, and then we willgo to Mr.
Jackson.
Mr. Wicker. Thank you, Mr. Chairman.
Let me just first follow-up on that last question by Mr.
Kingston. We are going to move from 17 to 23 priority
countries. And if your request is approved, we will be in 50
countries on HIV/AIDS. We have been in it for a while now;
where have we had some success on this issue, Mr. Natsios?
Mr. Natsios. We have had success--I should not say we had
success. The Ugandan government has provided enormous
leadership--President Museveni, once again, in Uganda, and we
have been helping him because he is providing leadership. You
cannot make this work, unless the national leadership of a
country is out in the front. Our job is to help them do their
job. And President Museveni I think will be the first to tell
you that we have been right behind him helping him with that.
We have tested over the last decade, a series of
interventions, some of which have not worked, some of which
have worked very well. Quickly go through them.
One is counseling teenage girls to delay first sexual
contact which has a profound effect in infection rates, and has
reduced infection rates among teenagers in the countries where
we have done it by 50 percent.
If we do testing and counseling--voluntary testing and
counseling--to see where the people have the infection, it
affects their behavior. There is a 50 percent increase in the
number of people willing to go through that, if they get
immediate results from the test rather than wait for results.
So we have introduced a test package that gives immediate
results to the tests right when they are in the office. And we
found that when you do that, there is a dramatic increase in
people's participation, and willingness to do that.
The third is, there is a particular drug that is given once
to a pregnant woman. It will reduce by more than 50 percent the
infection rate at which the newborn child will get infected.
Condom use is very important in this, and I have doubled
the purchase of condoms from $250 million to $500 million this
fiscal year, because we know there are many men or women who
come home with a disease, and if you do not use condoms, they
will infect their spouse.
Mr. Wicker. Okay. I do not want to take all of my time on
following up on a previous question. Let me just specifically
ask you to submit in writing, as a follow-up to this question,
in addition to Uganda, where there has been success. Even if it
is and principally because there is national leadership, if you
could be specific where our taxpayer efforts are doing well,
and what lessons we might have learned from that, I would
appreciate it.
Let me move on to Afghanistan. The International Relations
Committee is holding a hearing tomorrow and you are the star
witness.
Mr. Natsios. I look forward to that, Congressman.
Afghanistan
Mr. Wicker. I understand there is legislation being
prepared by that committee which amounts to detailed
authorizing legislation on our assistance to Afghanistan and
other front-line states. I also understand that the
administration has not yet transmitted its supplemental
request, nor published policy objectives on economic
development in the core front-line states in the region.
So let me ask you about those issues, and have you read the
bill, and what are you going to tell the committee tomorrow
that you would like for us to know a day ahead of time?
Mr. Natsios. You may ask more questions if I tell you
today.
I am going to describe to you what the reconstruction
program is. It is in writing. I will be glad to share with
committee members who are interested a copy of the outline of
the plan. We are now implementing it. We have obligated $67
million of the $167 million that we were given in January for
Afghan reconstruction. We are rapidly increasing the obligation
rates. Obligation is the transfer of funds to institutions that
will be doing the work for us.
I could go through if you want me to the details of it, but
you will get it in writing. It is based on food security, which
means livelihoods, increase in family income, job creation,
agricultural production, health care, because the health care
indicators are horrendous in Afghanistan, and fourth in
education. And we are printing textbooks that will be used in
schools in two weeks: 4 million textbooks.
Mr. Wicker. So it was reduced to writing very recently.
Mr. Natsios. No, actually we had it probably a couple of
months ago. It has been approved--see, we do not do anything
ourselves without getting interagency approval. And that is a
fairly long process sometimes, and so before I can release
stuff, I have to get other agencies to buy off on what we are
proposing, and we have done that now.
Mr. Wicker. Well, if you could then comment on the other
aspects of my question, the supplemental request and have you
read the bill that the International Relations Committee is
preparing?
Mr. Natsios. I have been briefed on it. I have not read it.
I am going to read it this evening in preparation for the
hearing tomorrow. The supplemental budget--I just talked with
Mitch Daniels--will be available in the near future. I
mentioned several weeks' time period.
I am pleased with what is in it. It does have money for the
front-line states in the war against terrorism. We arepart of
that bill, and I am very pleased how we are included but I cannot
mention any numbers if I want to keep my job. So I will just leave it
at that and let the president submit the bill to you, and you will see
whether you agree with them.
Mr. Wicker. I guess we will tune in tomorrow.
Let me just ask you finally, with renewed violence in
Afghanistan and the brutal murder of Danny Pearl, how safe is
it for USAID staff and contractors to work in those countries?
And how has the security situation affected your plans to
mobilize mission programs in Afghanistan and Pakistan?
Mr. Natsios. The security situation has always been
unstable, even before September 9, I might add. Because as you
remember, Taliban had kidnapped or arrested some people and was
putting them on trial and that sort of thing. So this is not a
stable area to work in. I have to just tell you. It is
dangerous and it has deteriorated over the last few weeks apart
from the current actions going on, which is a very, actually
very circumscribed area, the American military action.
The larger problem is insecurity in other areas of the
country. The two things we are doing about it--I am not doing,
the Pentagon is--is building, with Chairman Karzai and his
government, a new national army which is what they desperately
need to establish some national order and some stability. And
the second thing is the Europeans have agreed to train a
national police force to keep order in the streets in terms of
street crime. You have got to have both those things in place
for us to do a full reconstruction program.
Right now, we are under constraints. Our staff in the USAID
mission live in the AID mission because there are a number of
Marine guards there who are quite well armed. I was there
myself a few months ago, as I am sure you know. And you were
there yourself.
Mr. Wicker. Yes, the subcommittee was there also with Mr.
Fox who was representing USAID.
Mr. Natsios. I hope you did not have to sleep in my bed,
Congressman. But I know how much of a problem security is
because I get reports every day from our staff. We are being
very careful, but there are serious constraints on us.
Mr. Wicker. We have seen that also our workers in Pakistan
would be in some danger.
Mr. Natsios. They are not in the same kind of danger,
because there is a national police force and a national army.
Do we take precautions in Pakistan? Absolutely. It is not
the same as Afghanistan though. Afghanistan is much more
unstable.
Mr. Kolbe. Mr. Jackson?
Mr. Jackson. Thank you, Mr. Chairman.
Welcome, Administrator Natsios, and thank you for your
testimony.
Under the rules of the committee, I have five minutes. So I
am going to ask all of my questions. And also under the rules
of the committee, you have an unlimited amount of time to
answer them. [Laughter.]
Africa
First question: The president's budget reflects a $23
million decrease in economic support funds for Africa. While
there is an increase of $13 million in development assistance
funds for Africa, there is still a net loss of $10 million for
Africa. Furthermore, the decreasing ESF funds has a negative
effect on the economic growth and democracy programs that are
funded through flexible ESF resources.
Aren't we in danger of neglecting the other aspects of
development in Africa if we do not grow ESF resources on par
with other accounts for Africa? My first question.
The ESF budget cuts specifically eliminate the Education,
Development and Democracy Fund, the South Africa Development
Council Initiative, the Great Lakes Justice Initiative, and
wipes out funds for Sierra Leone, a country going through
fragile transition from civil war to peace and democracy. In
fact, the budget commits only $32 million to ensure free and
fair elections in Africa, bring peace to the Democratic
Republic of the Congo and solidify democratic change in
Nigeria. It commits only $31 million to help transition Sierra
Leone, Eritrea, Ethiopia and Angola to more stable situations.
Question number two: Do you think we can work together with
State and try to restore some of the cuts back to Africa?
Number three: The president's budget commits funds to
combating global terrorism which is absolutely necessary for
our country--from a standpoint of safety and security. I am
wondering how much of the anti-terrorism bilateral assistance
is going to Africa.
Global Health Accounts
Fourthly, I am concerned with what the administration has
proposed to this subcommittee regarding international health.
The administration's budget cuts funding for TB, malaria, and
child survival programs, all programs I believe Congress
strongly supports, and wraps up the stand-alone child survival
and health account created by my good friend from Alabama,
Sonny Callahan, into development assistance accounts.
It appears to me that the child survival and maternal
health programs are cut from $435 million down to $415 million.
Cuts to TB, malaria and all other infectious diseases funding
is down nearly one-half, from $175 millionin fiscal year 2002
to $110 million in fiscal year 2003.
Lastly, Administrator, I think some of the increases we are
making in our bilateral contributions for HIV/AIDS is a good
first step. But it seems to me that we are simply robbing Peter
to pay Paul. Could you explain to us why we are not growing all
the global health accounts equally?
Thank you, Mr. Chairman.
And thank you, Administrator.
AFRICA ACCOUNT
Mr. Natsios. Let me answer your first question. I am not
sure that the budget is properly describing in a narrative form
what is happening with the Africa account. We have a chart in
your papers on what the development assistance account looks
like for Africa. Secretary Powell and I decided even before I
became the administrator, when I had been nominated, that we
would press to have the Africa development assistance budget
increased substantially. And we have succeeded in doing that,
in terms of our proposal. Of course, I believe Congress will
approve it.
But there has been a 25 percent increase in assistance to
Africa for development--the DA account, over a two-year period,
from 2001 to 2003. It is up to $1 billion in our proposal for
2003. And it has been leveled funded or even actually be cut
over the last 10 years, through several administrations, I
might add.
So there is a substantial increase in that funding for
Africa. Much of that will be--half of that increase will be in
HIV/AIDS. The rest of it will be in education--in primary
education, agriculture and trade capacity building. So it is a
balanced strategy, in terms of what we are doing.
I think the confusion may be over the ESF account. No money
has been cut for Africa, okay? Certain programs are finishing.
You know, you have three-year programs, two-year programs. When
the program is finished, it is finished and we start new
programs. I think that is what may be misleading in the text of
what we have submitted.
The ESF account has not been cut for Africa. It has been
increased. Walter Kansteiner showed me that and I went over the
budget figures.
What has happened is, they have not allocated all of the
money; some of the money is in the central pool, but it only
can be spent in Africa. So economic development funds have not
been cut for Africa, they have been increased, but they are in
a pool. They have not been allocated by country yet. That is
money controlled by the State Department; we spend it for them
when they decide how they want to allocate it.
The DA account has increased substantially. A 25 percent
increase in two years is a--if you ask anybody who follows
this, is a very, very big increase.
Excuse me, I am told ESF has been cut. I apologize. I
thought it had been increased. It has been cut by $23 million.
Excuse me, I was wrong.
But the account for the DA has been pretty substantially.
The second question you asked was the terrorism account. I
have not seen all the country breakdowns for the supplemental
budget, but there is some for Africa. I just do not know how
much broken down. You will see it as soon as the OMB submits
it. But Africa has some front-line states in it, clearly. It is
very important.
In terms of international health, it is up $60 million, in
terms of all international health spigots, which means
infectious disease, micronutrients--a favorite program of
mine--in terms of child survival, maternal health population,
and HIV/AIDS.
What I said earlier is this: There are number of things we
do in HIV/AIDS which is also something we do in maternal health
and in child survival. For example, a mother that has sexually
transmitted disease that is pregnant has a very high risk of
the kid dying when the child is born. The survival rate
dramatically drops if the woman has STD when she is pregnant.
So part of our child survival strategy is STD strategy. That is
also part of our HIV strategy.
So a lot of these programs in the field are actually
integrated together and they have to be or they do not work.
Our population programs have condom programs in them; that is
part of our population programs, has been for 15 years. It is
also part of our HIV/AIDS strategy. We are doubling the number
of condoms from 250 million to 500 million in the central
condom fund that we have set up with speedy disbursement. Is
that a population program or is it an HIV/AIDS program? Has the
same effect.
The important factor I would point out here in all of these
health accounts is the bottom line is up $60 million. And so
there is $60 million more being spent on health programs than
there were before. And I think that is a good message.
Mr. Jackson. Administrator, if I could get some clarity,
Mr. Chairman, on the first question, since the ESF question was
still in front of us at the time. Mr. Natsios, if you could
just give me some clarity on the question I raised about the
on-par accounts, in terms of the cuts for Africa, in light of
the fragile democracies that--in light of the information that
you now have.
Mr. Natsios. We will send you a breakdown of the increases
that we put in from the DA account. What has happened here is,
there has been a merging of development assistance and ESF
during the 1990s for reasons that have to do with the cuts that
were made in foreign assistance. We are trying to separate them
now, and in many areas of the world we are taking ESF programs
that were basically funded by the State Department; that money
is being put in centralfunds and then we are taking DA money
and putting it into those same programs. Programs are not being cut in
many cases, they are simply being funded out of a different account.
There are some new democracy and governance programs we are
initiating in Africa. They are a little different, some of
them, but they are democracy and governance programs that we
think are critically important.
I have to tell you that Connie Newman, who is the assistant
administrator for Africa, sat on the board of one of the
democracy NGOs. She has a heavy interest in this. And so, we
are not going to cut democracy in Africa. It is going to be
increased, as a matter of fact, in terms of the actual bottom
line, all spigots.
The net increase in Africa, DA and ESF, net increase is $90
million. Okay? They cut ESF by $23 million, but they increased
DA by $113 million, so the net is $90 million. So it is up.
Mr. Kolbe. Thank you for clarifying that. I was going to
say a moment ago, I do not think you were doing yourself any
favors with your answer, because----
[Laughter.]
Mr. Kolbe [continuing]. Because you really just transferred
accounts, you transferred funds and they are still there, they
are just in DA instead of ESF at this point.
We have just had the vote on the--we have a vote on the
previous question. My guess is that they will voice the rules,
so it will be just one vote. I am inclined--what is your
druthers, Miss Lowey? We will stand in temporary recess, short
recess for this one vote, because I am quite sure it will be
just a single vote.
Okay. All right. We will let Mr. Kingston get his vote--Mr.
Knollenberg get his questions out of the way now, and then you
can recess it. You can go ahead and come back.
Mr. Knollenberg [presiding]. Thank you, Mr. Chairman. I
appreciate that.
NAGORNO--KARABAKH
Mr. Natsios, Nagorno-Karabakh, we, back some five years
ago, appropriated about $20 million for assistance there. And I
believe as of last year USAID had obligated some $15.8 million.
Do you know what the status is of the remaining $4.2 million?
Has it been obligated, or is it going to be obligated?
Mr. Natsios. It has not yet been obligated, but we will get
a full answer back to you, Congressman.
Mr. Knollenberg. We would appreciate a full answer because
apparently there is no money requested in the 2003 budget at
all. And yet last year I know that there was this feeling, the
agency's feeling that the work in Nagorno-Karabakh should not
come to a halt.
So if it is suggested that there is going to be more work
done, it would seem to me that we ought to have an answer or as
to when or what USAID has obligated so far.
Mr. Natsios. We will get back to you.
WORLD TRADE
Mr. Knollenberg. And what programs, obviously, that you are
going to utilize that money for.
Let me just go to trade and investment. I know you are a
fellow who believes in free trade around the world, and we
appreciate that very much. Mr. Kolbe, the chairman, obviously
is very strongly involved, as I am. And the president has said
that he wants to ignite a new era of global economic growth
through a world trading system that is dramatically more open
and more free.
I could not agree with him more, because in my home state,
there is some $51.6 billion of exports--that is the fourth
highest of any state in the country--that goes to some 200
foreign markets around the world, and many of those markets are
developing countries. But I think in order to increase trade
with these developing countries, we need to help them attract
foreign investment, expand their own interests, and their own
exports.
I think I would like to get a better sense of where you
think USAID can play a role in expanding trade, and there are a
couple or three questions you can mull over here. One is: What
role does USAID have in bringing developing countries into the
WTO? Another is be: How do the microcredit programs fit into
this concept? And how can USAID help reform commercial laws in
developing countries? There are other questions, but how can we
expand these efforts in these areas to bring about what you
want to see?
We would like to see, obviously, growing global trade.
Mr. Natsios. Bob Zoellick, my friend and U.S. trade
representative, came to see me when I became administrator, and
after he took his office. And my staff said, ``No U.S. trade
representative has ever been physically in the USAID building
until he walked in,'' which was a, sort of, sad, sort of,
commentary.
And we have agreed to have an alliance. And when he visits
the Third World, he asks to see the USAID staff, and he
recognizes them for the work they do in trade capacity
building. Because we are the principal agency in the federal
government that does trade capacity building in the Third
World.
What does that mean, trade capacity building? Well, you can
collapse barriers--trade barriers, in terms of tariffs,
Congressman, but there are other kinds of barriers. The phyto-
sanitary codes that are used, because most of these countries'
exports are primarily in the area of agriculture, and if they
do not conform to our rules, which they should,in terms of
health, they cannot export to us.
I went to a mechanized farm--a very, very sophisticated
farm in Egypt that employs 5,800 people with $1,600 a year
salaries, which is very high for Egypt, and it was like being
in California. But what they produce is not produced in the
United States, and most of what they produce is exported to
Europe; that is where their market is.
And I said, ``Well, who did all this?'' And they said,
``Well, you, AID, helped train us in what the rules were, not
the American rules for hygiene, but the European Union rules.''
So we do the training in terms of the regulatory systems that
they have to comply with in order to do exports.
The second thing we do is we help them in terms of revising
their commercial laws, in terms of copyright law. There is a
whole set of codes that you have to adopt if you want to get
into WTO. We help, one, design with them the laws; and then we
help them, in the finance ministry and the trade ministries, to
understand what that means in terms of implementation.
So it is basically capacity building in terms of training
and the design of statutes and regulations that will allow them
to enter the global trading system. And we spend a lot of money
on this. We have spent a lot of time. And I have to tell you,
it is a very successful program in terms of the--you can see
the increases in trade once the countries go through this
training program.
MICRO CREDIT PROGRAMS
Mr. Knollenberg. It is a very small amount, but what about
the micro-credit? I do not know if you touched on that or not.
But is that anything that could be a factor here of any kind?
Mr. Natsios. The micro-credit programs really are not for
export markets. There may be some, but it is a $150 million
program, it is a large program, but the size of these programs
is not large enough in terms of production to really provide
for export markets. Most of the micro-enterprise programs are
for domestic consumption.
Mr. Knollenberg. Just certain sectors that we might be more
successful in within those developing countries, certain
sectors of that developing country that we might be able to
promote?
Mr. Natsios. In terms of micro-credit or in terms of trade
generally?
Mr. Knollenberg. No, just trade generally, not micro-
credit, just trade.
Mr. Natsios. Yes, it depends on the physical, believe it or
not, the physical location of the country. What we will do is
an analysis with them what their climatic conditions are. Egypt
has two months out of the year where they can produce things
that no one else can produce for export to Europe, so they have
no competition. It is in strawberries and a couple of other
areas.
Mr. Knollenberg. So the geography plays a pretty important
part there.
Mr. Natsios. Yes, it does. Yes.
Mr. Knollenberg. All right. Well, I thank you for that. I
appreciate your responding.
We have to vote. So we will recess for a few moments. We
will be back. Thank you.
[Recess.]
HEALTH CARE ISSUES
Mr. Kolbe [presiding]. The subcommittee will resume.
And we will keep track of time, because Ms. Lowey is on her
way back here. I will do a set of questions here. Mr. Lewis is
on his way, as well.
I want to ask a couple of questions about health care
issues here. I think it is safe to say that in the front-line
states--which, by the way, that is just a curious thing. Really
not a question, but just, kind of, a comment. We seem to
undergo a constant redefinition of what front-line states are.
Maybe I should ask, do we have this week's current definition
of what front-line states?
Mr. Natsios. Congressman, we are given the list, we do not
make it up.
Mr. Kolbe. Okay. So State decides the front line.
Mr. Natsios. Yes, State decides that. I do not decide it. I
just memorize it. [Laughter.]
Mr. Kolbe. I think it is safe to say, what I understand to
be the current list of front-line states, AIDS is not a major
problem in most of those, but in countries like Afghanistan and
Pakistan and Central Asia, tuberculosis and malaria are huge
problems and they are growing and they are resurgent there. And
it is going to require additional USAID resources, perhaps more
than HIV/AIDS.
So my question really is, why does the budget proposal
suggest reducing resources for TB and malaria, while calling
for unprecedented increases for HIV/AIDS when we are focusing
on the front-line states?
Mr. Natsios. The first thing I would say, Mr. Chairman, is
the accounts out of which we deal with those issues is not the
health account, either in the supplemental or in this budget.
We have $140 million reserved between State and AID for
reconstruction of Afghanistan in 2003. It is in the existing
budget. It is not labeled Afghanistan. It comes from OFDA's
budget, OTI's budget, there is some D&G money, Democracy and
Governance, and there is food aid.
A lot of the money that OFDA spends in emergencies in cash
grants is for medical care and it deals with malaria--we do a
lot of stuff in malaria within OFDA's budget--and tuberculosis,
because if you are in a famine and a kid is acutely
malnourished and they get malaria, 50 percent of themdie. I
mean, the death rate among kids with malaria is extremely high under 5
if they are acutely malnourished.
And so, we have programs that deal with infectious disease,
but they are not labeled in the health account. They are in the
OFDA account. And there are specific NGOs that just do health-
related work in emergencies, like the International Medical
Corps, for example, out of Los Angeles.
And so, the amount that we have reserved in the budget for
2003, is about $100 million in AID's budget for the
reconstruction of Afghanistan. It is in the International
Disaster Assistance account, food aid, Transition Initiatives,
Development Assistance and the Economic Support Fund.
In terms of the Central Asian countries, which are
Uzbekistan, Tajikistan, Kyrgyzstan, Turkmenistan, and
Kazakhstan there are a number of health programs. But, once
again, as you know, the DA account is not, in any form--either
DA or child survival, those accounts are not used to fund
things in the former Soviet states; that will be in the Freedom
Support Act account.
And I do not want to describe the supplemental, because I
will get into trouble on it. But there is a health care
component of our program in Central Asia, let me just put it to
you that way. But it is not reflected in the budget. How is
that, before I get into trouble?
Mr. Kolbe. Let me follow this up with just a more general
question about the health care part of the budget. I do not
know what we are going to do, how Congress is going to react in
what is going to be a very difficult budget year. Congressman
Lewis is getting it all. [Laughter.]
And it is going to be tough at this end.
I am sure we are not going to get an allocation that is
greater than the president's request. I suspect that is the
case.
If Congress fully funds the HIV/AIDS request that the
president has made, it is going to have to be something reduced
somewhere else: economic growth, agriculture, trade. That
happens, the advocates of trade promotion, basic education,
microcredit, all of which are represented before this
committee, are going to face some tough choices. And your
desire to increase agricultural programs, which I also think--
do not disagree with, is probably going to get challenged. Do
you disagree with that?
Mr. Natsios. I did not quite hear the first part of the
question.
Mr. Kolbe. Well, the question is, if we go complete full
funding of what there is a huge amount of public pressure now
to do, which is funding in HIV/AIDS and who knows how much for
the global fund and, you know, TB, in those areas, the other
kinds of things in agriculture, trade promotion are going to
likely suffer. Do you disagree?
Mr. Natsios. Well, I hope that does not happen, but I am
aware of the pressures, Congressman. It is very clear those
pressures exist. Having been a former legislator, I know people
get mail and there are editorials written and all that.
But the reality is, the thing I would like to say before
the committee is, these issues are not separate from each
other. The onset of AIDS itself is accelerated when people are
acutely malnourished. The disease can be in a person for a long
time before it manifests itself in terms of AIDS symptoms. If a
person is acutely malnourished that can speed up that process.
So agricultural programs, as well as trade programs, by
increasing people's income, if their health improves generally,
the onset of AIDS will be slowed down.
These programs cannot be separated from each other. And I
think sometimes one of the things that all of us are concerned
about, I know you are concerned about, the people who
understand this, is that we get into the situation where there
are national issues that have a lot of currency and the other
things that do not have editorials behind them all the time get
shortchanged.
We have tried to balance that out here. I think we have
succeed in it. But I recognize the pressures are on, and I do
not know what else I can say.
Mr. Kolbe. Well, we are likely to have above-the-line,
above-the-request amounts in those areas of tuberculosis,
malaria, HIV/AIDS, even probably in basic education. It is
going to mean something else, other economic assistance stuff
is going to suffer along the way. I am just, kind of, putting
it up as a flag as we try to think about how we are going to
work our way through this.
Let me ask you another question on HIV, of the global fund.
It is really not clear to me how we are going to coordinate our
bilateral efforts with this brand new--what has the potential
for being a very large fund, the global fund for HIV/AIDS,
tuberculosis and malaria. How are we going to coordinate this?
Do you see USAID filling in the gaps behind global fund or vice
versa, the global fund going to fill in the gaps behind what we
are already doing in other countries and doing it bilaterally?
And how do you expect to coordinate this?
Mr. Natsios. Well, we had a little bit of discussion about
this very issue in USAID. And the decision was made for us to
take leadership quietly in the setting up of the fund staff;
several USAID staffers have been seconded to the fund
administratively to run it at the beginning. Two, we have
provided the funding for the initial administrative costs of
the fund, the central costs. The way in which the system will
work was actually designed by a lot of USAID staff. Andso, we
know exactly how the systems work because we help designed them.
And we are also setting up systems in the developing world
to help generate the proposals that the fund will fund. So a
lot of the proposals which are going to the fund are being
written by ministries of health with our help. And so, we
obviously know what our program is, because our staff is
running them, but the same staff are helping many ministries of
health comply with the regulations, which we also helped write,
the fund levels. So it is being coordinated simply by having
the same staff doing the fund stuff centrally, the fund stuff
in the countries, and our own bilateral program. That is how we
are coordinating it.
I should never have said this publicly, but that is one way
of ensuring it. It is the same people doing all three things.
Mr. Kolbe. Mr. Lewis, we will call on you.
Mr. Lewis. Thank you.
Mr. Kolbe. Jerry, how much of a rush are you in? She does
have----
Mr. Lewis. Well, I certainly am not going to stand in front
of the gentlelady who is very important--as long as it is not a
political meeting that you are going to. [Laughter.]
If it is not a political meeting, then I will be glad to
yield.
Mrs. Lowey. Two quick questions, with two short answers.
Thank you, again.
INTERNATIONAL FAMILY PLANNING
First of all, we talked briefly before about international
family planning. Unfortunately, your budget justifications
indicate that you are only requesting a total of $425 million
on international family planning in fiscal year 2003--a cut of
$21.5 million from the fiscal year 2002 level--and that ESF
countries will be cut from $53 million to $36 million, and NIS
countries will be cut from $25 million to $20 million. In what
specific countries will these reductions be taken? And why is
AID retreating from this area where the needs are so vast?
Maybe I should get the other question in quickly and then
you can respond in the balance of time. And this was regarding
the supplemental.
We have been expecting the submission of the fiscal year
2002 supplemental on March 18. There is a rumor that the
submission of the supplemental will be delayed by OMB because
of offsets for the domestic homeland security funds that are
being sought. Have you been asked by OMB to find offsets to pay
for new international funding programs?
Because I do not want to hold up our distinguished chairman
all the way at the end. If you can divide your time between
those. Or if you do not use up all the time, I am sure our
chairman will be delighted.
Mr. Natsios. The answer to your second question is no.
Mrs. Lowey. Okay.
Mr. Natsios. The staff would come in and tell me
instantly--yes, that is the shortest answer I will give today.
We were not asked for any offsets. And I would know about that
very quickly if they did, believe me.
Mrs. Lowey. Okay.
Mr. Natsios. The answer to your first is, I do not want to
keep coming back to the fact that many of these programs can be
titled Pop, they can be titled child survival, or they can be
titled HIV/AIDS. It is the same program. Condoms are a
principle part of our population programs. We are doubling
condom purchase--I am doing it and I am pretty conservative. As
you know, Congresswoman, I doubled it from $250 million to $500
million in this fiscal year. We are going to increase it even
more in the future years.
Is that a population program or is it an HIV/AIDS program?
The way in which we distribute this, frankly, is through the
same mechanisms that we do the population program. We do it
through the ministries of health. We do it through NGOs. We do
it through contractors.
So my bottom line was, when I looked at the budget at the
bottom I said, ``I do not want to cut the health accounts.''
Okay? We may cut one subsidiary. I know many people in Congress
are--and NGOs come in here and say, ``Well, change this from
$1.75 million in this subsidiary of a subsidiary of a
subsidiary and increase it by $250,000.'' The reality is in the
field, that is not how it works. It works in an integrated
fashion in sectors.
If the whole health account were cut, I would be sweating
right now. But it is not being cut. It is being increased by
$60 million. And that does not include, by the way, the money
we are sending to the trust fund. That is separate from the
trust fund.
Mrs. Lowey. Is that finished? Okay. I will just submit a
question then to you and we can get additional replies on this
issue, because I do not want to hold up my distinguished
colleague.
Thank you for your graciousness.
Mr. Lewis. I appreciate that.
Thank you very much, Mr. Chairman. And to the gentlelady, I
appreciate that.
Mr. Natsios, sometimes one of the better experiences we can
have is to have people who have been elected to public office
come and be witnesses, for you understand the variety and mix
of the pressures we find ourselves under. I wish I could have
been here for the medical portions of this discussion and I
know that we will have other opportunities.
BUDGET
I was heard to say in the past, however, to the Secretary
of State, former chief of staff in my other department, that it
is amazing for me to see our budget pushing at $350 billion-
plus, and he was on his knees here for $15 billion or something
like that. When, indeed, the role of the United States in the
world fits many a pattern, but it certainly is not related.
Having said that, if I were putting labels on some of your
own programs and they all come through the same process, I
would put as big a label on child survival as possible because
that has a lot of currency around here in terms of the sizzle.
And that is purely a political comment, but probably helpful,
hopefully. From there, you do give--Mr. Chairman, let me say
this to you, if I could.
Mr. Chairman. Let me say this to you. I am very
disconcerted by the prospects of this budget over time and if,
indeed, my voice would be helpful to you in the budget
process--one that I scratch my head about continually--I would
be very happy to participate. For we have got to have more
money in this whole program--all of these programs----
Mr. Kolbe. I appreciate very much what you are saying and I
think your voice probably carries more weight than mine with
the big chairman.
Mr. Lewis. I doubt that.
Mr. Kolbe. And so when it comes time for the allocations,
it would be helpful if you would speak up.
Mr. Natsios. Your comments warm our hearts, collectively,
Congressman.
Mr. Lewis. Well, the other committee does take a lot of
time, but this is a very important one.
Mr. Natsios. And it does protect our soldiers. Having been
on the other side, Congressman, I can tell you that.
Mr. Lewis. I was going to suggest, relative to medical
accounts, that we ought to be talking with the Secretary of
State about this one specific account that is going to cost a
lot of money and it can put pressure on the programs that are
very, very important, if there is a way we can structure a
separate flow, that addresses the role we are going to play
without impacting the rest of your budget.
I would be happy to talk to the Secretary of State about
that, but I think you and I ought to talk about it as well, Mr.
Chairman.
Now, from there, within your budget, you do have a
significant increase in agriculture account funding and I would
like to hear what you have to say about the importance of those
adjustments and why you give them priority.
Mr. Natsios. I am a very practical person. I want to know
what works and also I was trained in history as a student, and
I want to know what the past shows us. We have been doing this
for 55 years now, since World War II when the Marshal Plan
started.
AGRICULTURE
All of the examples--all of the examples, except for
three--and I will mention the three exceptions--of countries
that have been very poor, that have made it into middle-income
status or become First World nations have first developed
agricultural surpluses, which they have either consumed
themselves or exported. What are those countries? South Korea,
even Japan, during the occupation, Taiwan, Thailand, Greece,
Turkey, Malaysia--I can go through a whole list. The
Philippines are showing that now. Indonesia did. I know it has
problems now, but Indonesia began its industrialization after
it built up its agricultural sector.
The only three exceptions to the rule are Hong Kong,
Singapore and Mauritius--the Mauritius Islands. Why? Because,
you know, it is like saying Saudi Arabia is going to be an
agricultural country. Other than herding, you do not plant
crops in the middle of a desert. So Singapore and Hong Kong are
not going to be agricultural countries because they are not
countries. They are city states.
All of the other countries that are doing well, and there
are--Costa Rica; I go through the whole list--all of them
started with agriculture.
Now, we should learn something from that, which is
agriculture is the prelude to taking off economically. You can
go through the countries in Africa that are doing well now:
Mozambique, Ghana. Ghana went from 1990, $150 million in
agricultural exports to $400 million 10 years later. We helped
do that. Ghana is one of the best African countries right now
in terms of the progress they are making. That is first.
Second, you cannot reduce poverty if most of the poverty--
or three-quarters of it is in rural areas. What do people do in
rural areas? They herd animals and they grow crops, and that is
it. Or they live on something that is related to it, like they
treat animal skins to make them into leather.
And so if you want to build the rural economy to stop
migration to cities, to reduce the level of poverty, to
increase the living standards, it has got to be done through
agriculture.
If you have child survival projects and you keep kids alive
until they are 5 years old--which is what we do in our program,
very successfully, we have dropped those rates--you know what
happens after 5? They become malnourished, because the parents
are still so poor they cannot provide for them.
We should look at the countries we have child survival
programs for older kids to see what the malnutrition rates are.
They have been disturbingly high.
The biggest problem we are facing right now is Africa--sub-
Saharan Africa, rural Central America, because ofthe drought
and coffee crop collapse, and in Central Asia, on the subcontinent.
Those are the three areas we are focused on.
So agriculture is essential to this, essential.
Mr. Lewis. I very much appreciate that response. For the
first country, could start with America.
Mr. Natsios. That is right.
Mr. Lewis. But indeed, I have felt for many, many years it
is very difficult to talk to developing countries about
democracy and freedom and peace, and indeed terrorism, if their
children go to bed with their stomach hurting every night.
Mr. Chairman, I am sorry that I was so delayed.
Mr. Kolbe. This is the second round. Please go ahead if you
have another question or two.
Mr. Lewis. Well, I do have other questions.
You are also seeking significant funding in the democracy
and government conflict account: $119 million to $199 million.
Give me what your outline of justification is for this
increase.
CORRUPTION
Mr. Natsios. The first comment I would make is that we know
that countries that are succeeding are dealing with the problem
of corruption. And there are different degrees of it. There are
lots of humorous stories told. There is corruption in many
countries, but there is now an institution in Germany, a
worldwide NGO, Transparency International it is called. I met
with the secretary general of it; we are a big supporter of
that group.
And we know that countries that take off economically
constrain the level of corruption. So we have a new initiative
in Africa, a new initiative in Eastern Europe, a new initiative
in the former Soviet states to just say to governments, "If you
want our help, you are going to have to do something about this
corruption problem, because we are really not going to be very
successful unless you do." So that is one of our new
initiatives in that account.
Mr. Lewis. How many accounts over the years--I am not
looking for an answer here--but how many accounts in government
agencies, organizations over the years have we delivered money
for poor people and the money goes into somebody's bank
account? I mean, there is little question that that kind of
oversight should have priority. I am really appreciative of
that.
I used to chair a subcommittee dealing with housing, and we
found we were sending housing money to any number of agencies
around the country and no new housing got built. Gee whiz, I
wonder what is going on. These messages need to be delivered in
very clear terms, so I appreciate that.
Mr. Chairman, I will not ask my list of questions about
India, because you know I dwell on that all the time. We will
do that at another time, and I appreciate very much your being
with us.
Mr. Natsios. Thank you, Congressman, because I know your
committee actually had the money in your appropriation bill of
$50 million that was added in--sort of, the last minute, which
is the best way--for Afghanistan reconstruction. It made a huge
difference to us. And I have to tell you, it does affect the
security of our troops to have a robust, visible AID
reconstruction program where we have troops in place.
Mr. Lewis. Well, I must say the department was very
responsive to those of us who expressed early concern as we
went about this war on terrorism that it not be a war against
Muslims, that we communicate to poor people who are trying to
survive that we are going to be responsible to the stress they
will be under, et cetera. I mean, that responsiveness was very
helpful in the early stages, I think.
Mr. Natsios. Wise advice, Congressman.
Mr. Lewis. Thank you, Mr. Chairman.
Mr. Kolbe. Thank you very much, Mr. Lewis.
In response to his questions about agriculture, you spent a
great deal of time in your opening statement talking about it
in response to his questions. But we did a lot more, USAID did
a lot more on agriculture until about 12 years or so ago. Did
we stop because the programs were not working or we had
succeeded in this first tier of front-line states of making
them into successful in what you described? Now we are going
back to it.
Mr. Natsios. Two comments. The first is, the most
spectacular success of USAID, in its 40-year history, was in
agriculture, in the 1960s and 1970s, in what is called the
green revolution in Asia. The green revolution was created
basically by the Consultative Group on Agricultural Research, a
subsidiary of the World Bank we have been funding for 35 years
to do research. It was the World Bank itself, it was the
Rockefeller Foundation, it was USAID, even before there were
other aid agencies.
Asia would be starving now without the green revolution,
and that was an AID agriculture program, and it helped create
the conditions for the takeoff of those economies. So it was
very successful.
We tried to take the Asia model and apply it to other areas
of the world, like Africa. It does not work everywhere the same
way. We learned one very important thing painfully. If the
right policy framework is not in place, macro-economically, if
the prices are distorted, if you have central socialist control
of agricultural prices, control of seed, control of fertilizer,
if you do not have trade capacity building to export, if you do
not have the infrastructure in the rural areas to move
surpluses around,the agriculture systems will fail.
In those countries where we were sensitive to those issues,
the programs in the 1980s did work, but in many countries we
did not do the policy work we have to do.
So basically I am telling heads of state, ``You want our
help in agriculture, we will give it to you. There is a
condition, however. The policy framework is not in place, it is
a waste of time. All of the literature shows that. All of our
studies show it. And all our agricultural economists saying do
not waste your time.''
Go to the countries like Mozambique, 14 percent growth rate
last year. The worst civil war in African history, 2 million
people died. Mass starvation--I was there when it was
happening--believe me it was horrible. Fourteen percent growth
rate last year.
Mr. Kolbe. Yes, we are going to be in Mozambique next
month. Thank you for that comment. We ought to give some credit
to the Rockefeller Foundation too which was so instrumental in
bringing about the green revolution.
Mr. Lewis. Mr. Chairman, Mr. Natsios' priority here is
really a positive reflection of looking at the world that has
worked. And I think we ought to encourage it as much as we can.
Mr. Kolbe. Well, I certainly agree with that.
Mr. Natsios, you have an interesting comment, statement in
your prepared testimony about, and I am quoting a quote, a
third category of countries where there is little we can do
until the governments change their policies and practices.
Until then our programs within will be limited to emergency,
humanitarian or transition assistance, unquote.
That is an interesting--it would be a very candid admission
if we had a list of them attached to it. [Laughter.]
Mr. Natsios. And this would be my last hearing, Mr.
Chairman, if I did that.
Mr. Kolbe. Well, you know it does not do much good to say
that if we are not willing to say what those countries are. I
have got some candidate countries for it. And I will be happy
to identify a few of them here. But I am wondering if you would
identify with the kind of country you think falls into that and
how is our assistance program changing once you have
categorized those places where there is very little that we can
do?
Mr. Natsios. Well, I can think of one right now that is in
the news, and that is Zimbabwe.
Mr. Kolbe. Zimbabwe?
Mr. Natsios. It is a functional country. Ninety-two percent
literacy.
Mr. Kolbe. Haiti is certainly another one that is
dysfunctional.
Mr. Natsios. Haiti is another one, and it is sad to see it.
Haiti has been poor. Zimbabwe was a prosperous country with
one of the highest literacy rates in the developing world, and
what Mugabe has done to this country is in my view appalling,
including the outrageous destruction of the election system
that just took place. But that is a State Department question,
but it is frustrating. We have a USAID mission there, none of
our stuff goes through Zimbabwean government. We have been
working through NGOs, we have been looking through civil
society supporting people who are trying to keep alive
democracy in that country.
COLOMBIA
Mr. Kolbe. Let me ask you about Colombia. In fiscal year
2002, AID is planning to spend about $105 million in Colombian,
of which $57 million is for alternative development; it is part
of the Andean counter-drug initiative. And the request in
fiscal year 2003 is for $151 million.
We are reorienting, I believe, our development assistance
there because we have--it is failed in its initial
configuration to where--what we had for Plan Colombia. Have you
identified why our development assistance, as part of Plan
Colombia, did not work, why it did not work?
Mr. Natsios. There are two reasons why it did not work, Mr.
Chairman. The first reason is that we are not allowed----
Mr. Kolbe. Let me just--if I might just follow it up with
this, so that you could work your answer to this. To the second
question, what is going to be different about our new approach
in Colombia? Do you think it is going to be more successful
this time?
Mr. Natsios. The answer to your first question is why it
did not work. The first reason is that spraying is an essential
part of this. The government does the spraying; the government
decided not to do the spraying. We can not do alternate
agriculture under those circumstances--it does not work. You
have got to do both, okay. And we are not in control of that
agenda; the Colombian government is. We have talked with them.
I am being very candid now. I am telling you like it is,
Mr. Chairman.
Second is the insecurity.
Mr. Kolbe. Let me clarify that. Are you saying no spraying
is going on?
Mr. Natsios. Very little spraying.
Mr. Kolbe. Very little?
Mr. Natsios. Maybe I should not have said that, but it is
true.
The second reason it failed is--and it is failing, it is
not working. We are having to revise the strategy because these
alternate agriculture strategy and the strategy we havebeen
pursuing has not been successful.
Well, why hasn't it been successful? It is not because the
money is being stolen: The money is actually being well-spent
where we can spend it. The insecurity is so severe now in many
areas that we simply cannot work without having our staff
kidnapped or shot, or the farmers shot, for that matter, who
are working with us. And we cannot put our people in that
situation; we just cannot do it.
The NGOs that we are working with, local Colombian NGOs in
some areas to do this work, they cannot work in these areas,
because the killing has gotten so bad.
So there has to be some degree of government control of the
situation on the ground for an alternate development program to
work as crop substitutions for drugs. We did it successfully in
Peru, we did it successfully in Bolivia, and the condition was
the military or the police had to have control over it.
Mr. Kolbe. So what has changed? What is going to be
different now?
Mr. Natsios. There are discussions going on about things I
do not have control over, about the security situation. I do
not want to discuss them here. It is not appropriate.
We are looking at whether or not some of the infrastructure
projects could be moved into areas that are secure and maybe
draw people into those areas from the areas that they are in
now that are insecure where drugs are being produced.
So it may involve, frankly, a strategy of drawing people
out of the insecure areas where we cannot do work into areas
where we can that are secure, that will remain secure.
Mr. Kolbe. Well, that does not really--is not a terribly
satisfactory answer. But we have a hearing scheduled for April
10, as you know, dealing specifically with Plan Colombia----
Mr. Natsios. There is a lot of work done on that now.
Mr. Kolbe. We will need to get a lot more answers to that.
Mr. Lewis?
Mr. Lewis. Could I follow up on that and not talk about
Colombia, but that there are other parts of the world that have
serious potential drug resource difficulties for us? Do we
have, and is AID involved in any kind of program relative to
Afghanistan's potential problem with producing drugs?
Mr. Natsios. It is a huge problem. 70 percent of the heroin
produced in the world is from Afghanistan. Ten years ago in
Iran and Pakistan, there were about 30,000 to 50,000 addicts.
There are 3 million now in Pakistan, and 2.5 million in Iran.
And I am told by Chairman Karzai--I thought there were not many
in Afghanistan. He said, ``What are you talking about? There
are whole areas where people are hooked on heroin.''
It is one of the most severe problems for the region.
Forget the people who are getting the export of the heroin in
Europe.
Mr. Lewis. Because if we are talking about Plan Colombia,
for goodness' sakes, if that is the case, what are we going to
be doing about it?
Mr. Natsios. We are designing an alternate agriculture
program as we speak, taking the lessons we learned in other
areas into account. And as we--our staff believes we can have
some success because of market conditions and because of the
security situation. I will not go into any more depth than
that. But we are more optimistic there than we are in Colombia
in terms of potential success.
Mr. Lewis. Would you make a note to somebody that I would
like to know a good deal about that in depth?
Mr. Natsios. Yes.
Mr. Kolbe. Mr. Lewis, thank you very much.
I have a couple of other questions I will submit for the
record, trying to clarify more specifically where we are on the
reorganization of the agency. And it seems as fast as we change
our accounts then you----
Mr. Natsios. It is OMB increasing our accounts, Mr.
Chairman.
I hope that will not be in the record. [Laughter.]
Mr. Kolbe. Don't we wish?
REORGANIZATION
I was going to say, as fast as we change our accounts to
conform to the kinds of things you are doing in reorganization,
then OMB changes their accounting by eliminating the childhood
disease fund--child survival and health fund, so it is hard to
keep up with all that. But I will have some questions that I
want to submit for the record on that.
I want to just end the hearing by really taking a moment to
commend you for the terrific team that you have put together of
experienced managers that are working with you at USAID.
Assistant administrators--some of these I have known for some
times, like such as Constance Newman, who has an extraordinary
reputation for being one of the nation's top public servants
over a number of decades, and particularly as undersecretary of
the Smithsonian and director of the U.S. Office of Personnel
Management, which is where I knew her in a previous
incarnation. She has a long history of service to Africa, and
serves with me on the board of the International Republican
Institute. So I know something of her work there.
Adolfo Franco is with us here today. He is the assistant
administrator for Latin American and the Caribbean. Also has a
number of years of distinguished service at the Inter-American
Foundation. And I have gotten to know him verywell in his role
with the International Relations Committee here.
Then there are those that I have come to know more recently
in their capacity with us as chairman of the subcommittee: Dr.
M. Peterson, the assistant administrator for global health, who
has done a terrific job, I think, as Virginia's commissioner of
health and spent a number of years in sub-Saharan Africa.
Roger Winter, for humanitarian assistance; effective
advocate for refugees for two decades as executive director of
the U.S. Committee for Refugees.
Laurie Foreman, who is--now we call it the front-line
bureau for Asia and the Near East. Of course, she directed the
Nature Conservancy's Japan program after serving more than five
years prior to 1990 in the bureau she now heads. I know that
she has taken a leave for a critical family emergency, and we
are looking forward to having her back and working with her in
the near future.
John Marshall, who is your newest person for management,
spent a number of years in the private sector as IBM's
government consulting--with IBM's government consulting
organization. So he knows what transformation is.
And last, but certainly not least, let me mention your
assistant administrator for legislative affairs, Ed Fox, with
whom I have had the privilege of traveling to Uzbekistan and
the other 'stans, and is an old hand with congressional
interaction and the executive branch.
So I commend you for what you have done in assembling this
team. And I would just say, with that collection of talent and
experience, I hope we are going to resolve the USAID's
management deficiencies very quickly here and we are going to
get the agency on the track that I know that you want to see it
on.
Thank you very much.
Mr. Lewis, do you have anything further?
Mr. Natsios, with that, other questions will be submitted
for the record. And we thank you very much for appearing today.
The subcommittee is adjourned.
Mr. Natsios. Thank you very much, Mr. Chairman.
[Questions and answers for the record follow:]
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Thursday, April 18, 2002.
ASSISTANCE FOR THE FRONT-LINE STATES
WITNESS
RICHARD L. ARMITAGE, DEPUTY SECRETARY OF STATE
Chairman Kolbe's Opening Statement
Mr. Kolbe. Good morning. The Subcommittee on Foreign
Operations will come to order. Secretary Armitage, we are very
happy to have you here with us today to talk about the
President's request for fiscal year 2002 emergency supplemental
funds for the programs that are under the jurisdiction of this
subcommittee, as well as to talk about the fiscal year 2003
request for assistance to the frontline states. So our hearing
this morning is on those two topics, both supplemental and the
frontline states in the 2003 budget.
It has been just over 7 months since the attacks against
the World Trade Center in New York and the Pentagon here in
Washington. Congress has already provided $40 billion to the
President in response to those events, and we are now preparing
to respond to a second major request that totals $27.1 billion
to support the war on terrorism and provide money for homeland
security and economic revitalization. But this request includes
$1.279 billion for an international affairs program that comes
under the jurisdiction of this subcommittee.
In addition, the fiscal year 2003 budget request includes
increased assistance to many of our allies who are with us in
this war against terrorism. While much of the focus of this
hearing is going to be on the supplemental request, we need to
remember that the fiscal year 2003 budget that we will be
addressing next month also contains considerable funding for
the same purpose, and it is advisable for us to consider this
all together here today.
On March 11th, the President marked the 6-month anniversary
of the September 11th terrorist attacks in a speech that
included the following comment. Quote: We face an enemy of
ruthless ambition, unconstrained by law or morality. Against
such an enemy there is no immunity and there can be no
neutrality. Unquote.
I agree with those remarks of the President and I agree
that this war against terrorism is not finished, and no one can
say for certain that the terrorists will not attempt to strike
again here in the United States someplace. We cannot act alone
in this effort. That is why the request for the international
affairs program is just as important in its own way as the much
larger part of this request that the President has made for
defense activities. We need to provide security and military
assistance to our friends and allies in this war, because they
are putting the lives of their soldiers and citizens on the
line, just as we are doing every day.
In addition, we need to provide many of them with the
economic assistance that they need to continue to work towards
the rule of law, economic reform, all of which can provide a
brighter future for their people. Poverty and hopelessness do
not necessarily generate terrorism. They certainly can provide
the conditions under which it becomes more likely, conditions
that provide a more fertile soil for terrorism to grow in.
Congress has already given the President generous funding
and legal authority as he conducts the war on terrorism.
However, as we move forward we cannot abdicate our
constitutional responsibilities as caretakers of the taxpayers'
dollars. In that regard, we appreciate this opportunity to hear
from the distinguished Deputy Secretary of State, Mr. Richard
Armitage, regarding the details of this request.
I think I can say, Mr. Secretary, for all of the members of
this subcommittee, that any skeptical questions that you might
hear today from us do not indicate in any way a lack of a
commitment to a common goal that we all share in this war
against terrorism, but only a desire to make sure that we are
making the best possible use of the taxpayers' funds.
One of the things that I would hope is that in your opening
remarks and certainly in our questions we will address the
issue of defining the frontline states. This is, as we know, a
constantly shifting description--as well as it should be
flexible--but I think it is important for us to know how the
administration looks at this issue and whatstates would be
defined as frontline states.
With that, let me stop and give the floor to my
distinguished ranking member, Mrs. Lowey, and ask her for her
opening statement. Mrs. Lowey.
Mrs. Lowey's Opening Statement
Mrs. Lowey. And I thank you, Mr. Chairman, and I want to
join the chairman in welcoming Deputy Secretary Armitage to our
hearing, and I want to particularly thank you, Mr. Secretary,
for keeping me and this committee informed of this
administration's actions. It is very much appreciated, and I
want you to know that. Your timely calls really do make a
difference, and I thank you very much.
The events of September 11th require that we take a new
approach to our foreign assistance programs, reflected in the
administration's request for $1.3 billion in emergency funding
for a wide variety of initiatives. I am gratified that we have
now achieved a broad consensus that our foreign assistance
programs are vital to the national security interests of the
United States. I hope this recognition, which I have long
sought, will help steer many resources to all aspects of our
foreign aid programs. It is long overdue.
In that spirit, Mr. Secretary, I will begin by expressing
my support for the vast majority of items requested in the
supplemental for emergency funding. We have clearly embarked on
a new path that will involve greater focus on military and
security assistance programs, coupled with economic assistance.
This new direction puts a special responsibility on the Defense
Department to carry out programs while respecting congressional
directives and restrictions.
While I support most of the initiatives in this request, I
strongly caution the administration not to expect blanket
waivers of all existing restrictions in law in the name of
combatting terrorism. Specifically, I am concerned that
supplemental requests for ESF, FMF, peacekeeping and
nonproliferation accounts totaling over $1 billion contain
notwithstanding any other provision of law clauses
consistently.
This request also applies to all previously appropriated
funds in these accounts. The explanatory materials sent to
Congress contain no justification for these actions, Mr.
Secretary, so if there are specific concerns about existing
restrictions on specific countries, I would encourage you to
address them here today. We will work with you, but Congress
should not and will not grant this type of broad waiver.
It is my understanding that the supplemental request was
structured around the concept that funds requested will be
obligated by September 30th of this year. However, after a
careful review of your request, I have concluded that there is
no way most of this funding will be obligated by then. I also
believe that the challenges we face in these countries are far
too important for us to impose artificial deadlines on
ourselves because of budget politics.
The majority of items in the supplemental will initiate new
country programs and will significantly expand existing small
programs. I am reasonably confident that Congress will approve
almost all of this request and will provide the resources with
the appropriate flexibility. However, there are also a number
of areas where we may seek to modify the request or add
funding. In these cases, I hope that the administration will
also show flexibility, recognizing the need to work with
Congress with the understanding that not all wisdom--even
though it may be a great deal--lies in the executive branch.
Maybe with you, but not with the whole executive branch.
With respect to funding for the United Nations Population
Fund, the committee has been patiently awaiting White House
action on releasing the $34 million provided in the fiscal year
2002 bill. As you well know, because we have talked about
this--I must be honest and say that my patience has run out.
Given the continuing absence of any movement, I feel I have no
choice but to pursue a course of action in the supplemental. I
think you realize, Mr. Secretary, that it is not in the State
Department's interest to allow this issue to remain unresolved
until we mark up the fiscal year 2003 bill.
With respect to Colombia, as a follow-up to last week's
hearing, I am pleased that the administration is working with
the Colombians on severing links with paramilitary
organizations. However, as far as I know, the Colombians have
yet to take the specific steps we requested that they take.
Obtaining that cooperation is vital to achieving the consensus
in Congress that will be necessary to approve a broadening of
our commitment there.
I would also appreciate a clarification from you on the
expanded authority sought in your request. As submitted, the
language contains a broad, again, notwithstanding clause, with
specific exemptions: the human rights vetting requirements and
U.S. manpower limits. Therefore, if approved as requested, the
requirements included in the fiscal year 2002 bill on severing
of links with paramilitaries, section 567, reporting on the
safety of aerial fumigation, and notifying Congress on
resumption of the air bridge operations, will all be removed. I
hope this was not the administration's intent, and I would ask
that you address this concern in your remarks.
The supplemental request also contains language in the DOD
section authorizing the use of $100 million in DOD resources
for military assistance to foreign countries and $30 million
for indigenous forces. Although DOD has attempted to play down
the significance of this, the fact remains that it would be a
considerable sum with wide open authority for military
assistance to any country, withoutinput from Congress or the
State Department.
The Foreign Operations Subcommittee has jurisdiction over
these programs, and as far as I know, the State Department
still has the primary role in setting foreign policy
priorities.
Let me reiterate that most Members of Congress are willing
to work with the administration and support necessary resources
with appropriate flexibility, which will include a substantial
increase in foreign military financing. But this proposal, and
the cavalier manner in which it was put forward by the
President, erodes the premise that the administration is
seeking that type of partnership.
Another specific concern I have is the request for $8
million for training and equipping a domestic peacekeeping
force in Indonesia. Current law prohibits military assistance
to Indonesia, and this appears to be an attempt to circumvent
these restrictions by assisting the military, couching the
proposal as peacekeeping. In addition, recent press reports
have characterized Indonesia's cooperation with us in the war
on terrorism as extremely poor. Apparently they have been
unwilling to cooperate in efforts to locate and apprehend known
associates of Osama bin Laden residing in Indonesia. Given the
administration's continued inability to certify that the
conditions for resumption of military assistance have been met
and the absence of cooperation on terrorism from Indonesia, I
see no reason to go forward with this program.
While I know this issue lies outside the scope of the
subcommittee's formal mandate, I want to take this opportunity
to express some concerns I have about the direction of our
policy toward Afghanistan. I strongly support the war on
terrorism, Mr. Secretary. I believe that defeating terror in
the long term will require a prolonged effort from the United
States, and that is why I am concerned about the timidity I
believe our country is showing in Afghanistan right now. While
most of the big military battles may be over, the war for
Afghanistan's future has just begun, as you well know, and
winning it will take a sustained substantial commitment of U.S.
assistance and personnel.
The situation in Afghanistan right now, particularly
outside of Kabul, and our country's response to it does not
bode well for the promise of stability and prosperity in that
country. If we have time, I hope we can discuss this issue.
Finally, Mr. Secretary, we welcome the President's
announcement in Monterrey that he would seek to increase
resources for foreign assistance by $10 billion over 5 years.
However, I was really disappointed that he has chosen to put
off this effort until 2004. We have before us a request for
$1.3 billion in emergency needs related to the war on
terrorism. The fact that the President has already made a
commitment to increased resources for other development
programs indicates that he, too, recognizes that there are
other emergency needs that require immediate attention. Waiting
for the 2004 budget means that no impact from this commitment
will be felt on the ground in poor countries for at least 2
years.
Our chairman has just returned from Africa, having seen
firsthand the ravages of HIV/AIDS there. Even with the
additional resources available for HIV programs already in
place, access to testing, counseling, and treatment for this
disease remains unavailable in most rural areas, and infection
rates are continuing to climb worldwide. Illiteracy rates in
many countries in Africa remain well over 50 percent in many
countries where there continues to be no access to basic
education for the majority of children. As the continent still
reels from the internal conflicts of the past decade, the
battle for basic food security is still being fought day by
day.
The President has decided we need to do more, and I
wholeheartedly agree. We all know the needs are vast, so let us
begin today, not 2 years from now. This, too, is a matter of
national security. I look forward to your testimony, Mr.
Secretary.
Mr. Kolbe. Thank you very much, Mrs. Lowey.
Mr. Secretary, we are prepared to hear your opening
statement. As always, of course, the full statement will be
placed in the record, if you would like to summarize the
statement.
Mr. Armitage's Opening Statement
Mr. Armitage. Thank you, Mr. Chairman, and let me assure
you and Mrs. Lowey and all of the members of the subcommittee
that we have a very rich understanding that all wisdom does not
reside in the executive branch, and, indeed, we have a very
rich understanding that there is a necessary and very creative
tension that exists among the three branches of our government,
for good reason. The Founding Fathers were brilliant in that
respect. We can assure you we fully respect that.
Mr. Chairman, you have a very happy witness in front of you
today. I don't know actually who is happier, Secretary Powell
because he has returned, or Rich Armitage because Secretary
Powell returned, but you have got a pretty happy guy here
today. I realize the patience of the subcommittee is in inverse
proportion to the length of any opening remarks, so I am going
to just try to answer directly each of your questions as you
raise them.
I just simply want to say to the subcommittee, first of
all, thank you. I believe you have been great partners. That
does not mean that we didn't tussle and wrestle a bit along the
way, but you have been great partners in this creative tension
between the executive and the legislative branch. Secretary
Powell, myself, our whole Department is very grateful for that
support and for the intellectual challenges that you raise
along the way. They help us.
Second, I particularly want to thank the chairman. I can
remember an evening I caught you in your district, sir. I was
at a Georgetown basketball game, and I asked you if you could
find your way clear to go to Kabul and to go to Islamabad, and
you said you would do it because I felt we needed the Members
out there to see what was going on. I know you met Secretary
Powell in Islamabad during that trip, and I want to add a
personal thanks for that.
And I will just stand by and try to answer any questions
the members may have.
[Mr. Armitage's opening statement follows:]
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Mr. Kolbe. Thank you. That certainly is one of the shorter
statements that we have had on record.
Mr. Armitage. I can go on and on, but----
Mr. Kolbe. No. I am delighted. I think there is no doubt
about the answer to your question, Who is happier? Secretary
Powell is happy because he is not up here in front of the
committee. Testifying in front of congressional committees is
always the most sincere desire of the members of any
administration.
Mr. Secretary, let me begin, and we have a number of
members here, and more I think that will be coming in. We'll
probably have questions in a lot of areas, so I am going to try
to keep our questions to the time limit. So that we can go back
and forth as much as possible and give everybody an
opportunity, we will just keep going with rounds of questions.
We may well get interrupted by votes here very shortly here.
Afghanistan
I want to start with a question about Afghanistan. Mrs.
Lowey spoke about this issue as well. The funding request for
Afghanistan in the supplemental is $250 million. Much of that
is for the interim authority for training and equipping a new
military for Afghanistan. Of that amount, $30 million would be
provided to AID for reintegrating former combatants into Afghan
society, and another $40 million would be used for
reconstruction and rehabilitation activities.
Those items that I mentioned gives us a total of $70
million. Given the amount of damage that has been caused by
decades of war and ravaging of the violence in that region, I
think a case can be made that this is not sufficient. My
understanding is that AID did request a total of $150 million
for its reconstruction activities in Afghanistan. I certainly
don't always endorse what agencies go to OMB asking for, but I
think in this case a good case can probably be made that
additional funds are going to be needed.
I don't think we are going to be in a position to add funds
above the overall request--level requested by the President. We
may want to shift some of those funds around to provide a
higher level for reconstruction activities in Afghanistan, if
indeed we decide that that is needed.
So my question is twofold to you. One, I would just ask for
your general comments on the level of the supplemental funding
level that is requested for AID reconstruction activities in
Afghanistan. And, second, the President's budget request for
the next fiscal year, for 2003, indicates that assistance for
Afghanistan would be determined at a later date. Are you in a
position now to share with us details of how that $138 million
would be allocated for Afghanistan as part of the budget
request?
Mr. Armitage. Thank you, Mr. Chairman. You are right. Not
only in Afghanistan, but in a number of areas, many different
parts of our bureaucracy asked for enhanced levels of funding.
OMB was very strict. I believe they wanted to keep their
credibility with you and with the Congress as a whole. They
wanted to keep this directly as a 2002 supplemental, something
that is a shortfall in our 2002 funding.
Number two, as Mrs. Lowey correctly points out, the desire
from OMB was that this money be truly emergency; therefore,
money that can be obligated before the end of this fiscal year,
September 30th. That is one of the reasons that the numbers
were generally down.
More specifically, on your comment about shifting monies
around, Mr. Chairman, to more DA, we initially were wary of too
much development assistance; not because the need isn't huge,
but because access to some areas of the country and security to
those areas gave us some pause. And I was not sure myself that
we could engage actively in a very robust DA program.
About a month has passed since we put this together. I
believe in some parts of the country conditions are changing,
and that we ought to be able to work with the committee and
with the staff, if that is your desire, to perhaps talk about a
little different funding profile for developmental assistance.
On the question of the 2003 request, it is TBD. I have the
numbers. I think you have the same numbers, $139 million. Let
me make a few comments about what we are really trying to do
here. We have 2 months until we have the Loya Jirga. We are
trying to simultaneously train an Afghan army of somewhere
between 60- and 80,000; 60,000 soldiers, 12,000 border guards
and 6,000 of something else, or 8,000 troops of one sort or
another. That is why we requested the FMF. That is why we
request the $20 million in PKO funds to be able to pay the
salaries of this army until we get rolling. This is something
that our Department of Defense in the main will take on. We
hope to start May 1. I am not sure that we will be able to. It
is not entirely sure to me.
I think most of us who are involved in Afghanistan would
say that the $138-plus million that we are requesting in the
2003 budget, whether it is in refugees, migration accounts, or
whatever, is short. It is short because we didn't count on the
rapidity with which refugees would desire to return to
Afghanistan, and frankly we didn't count on the fact that the
refugee or returning refugee population has become somewhat of
a hotbed of dissatisfaction. And I don't feel fully comfortable
in putting my name next to the 2003 numbers, because I am not
sure we have settled out correctly, particularly in the refugee
accounts and the migration accounts.
Mr. Kolbe. Mr. Secretary, that is a new wrinkle. I hadn't
heard before that the funding level might actually be short in
the 03. Do you expect to either ask for an amendment or just a
reallocation of some of the--if you are talking about refugees,
you are taking about a different account, the refugee account.
Is that correct?
Mr. Armitage. Right.
Mr. Kolbe. And you would expect that more of these funds--
--
Mr. Armitage. Well, I am just pointing out to you my
personal belief, but I think my Department would certainly
stand behind it, that we are short in that area. We didn't
credit the amount of refugees and the returns, and we have got
a lot of work to do. I think we are short in our overall
refugee account.
Mr. Kolbe. And I had not heard about that number returning.
For the record, perhaps the Department could give us some
figures about the return of refugees, the numbers that have
actually returned in the recent months, and the trends, the
direction that it is going----
Mr. Armitage. Thank you, Mr. Chairman.
Mr. Kolbe [continuing]. And the expectations for that, the
numbers that would be returning.
Mr. Armitage. Yes, sir.
[The information follows:]
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Mr. Kolbe. Mrs. Lowey.
Mrs. Lowey. Thank you. Thank you again.
Mr. Secretary, as I have indicated in my statement, I think
we all agree that there is a humanitarian emergency in much of
the world today that requires the United States to increase
levels of assistance now, not 2004.
A few questions; perhaps you can just answer them together.
Given the President's commitment to this concept, first of all
why has the administration put off requesting new resources
until 2004? Secondly, would you agree that this puts off the
effects of these increased resources for 2 years? And, with
respect to HIV/AIDS, many are calling for additional resources
for both the trust fund and bilateral programs. As programs
move from prevention and awareness to counseling, testing and
treatment, it is clear more resources will be needed. What will
the administration's position be if Congress adds more
resources for HIV?
And if you can deal with that together, thank you.
Mr. Armitage. I am trying to think how to do yes, no, and
maybe, but I can't quite answer the questions like that. First
of all, with regard to the millennium account, we are taking
our time about getting into it because we are working out the
contribution criteria for various countries and what Treasury
and what State Department's roles will be in the allocation of
these funds. We are intending this year in the 2003 budget to
have a pilot program, probably in Africa, but we haven't even
defined that yet. But that is the intention, to see what works
and what doesn't, before we come forward with a rather large
increase in our overall funding.
On the question of--the second question was?
Mrs. Lowey. Putting off the resources for 2 years.
Mr. Armitage. Yes. It has that practical effect. I can only
say in my defense that if we get it right, then it is better
than going ahead in a hurry and not quite get it right. We need
to know what we are doing and not have really reached out to
all the Congress and explained ourselves articulately in just
what these monies are for and how we intend to apply criteria
and what countries are eligible, et cetera. But, yes, it delays
for 2 years.
Finally, on the question of HIV/AIDS, anyone who opposes
anything that assists and alleviates the scourge of this would
be in my view wrong. I understand competing priorities, and I
understand budget exigencies and things of that nature, but it
is not just Africa, it is all through Russia, it is through
Central Europe. This is a scourge that won't be stopped unless
we lead the way. We are the leading donor in the world. But
from the Department of State's point of view, if the Congress
adds money, we will use it well.
Mrs. Lowey. I won't pursue the putting it off till 2004,
but I hope we can have further discussions about this, because
I think we can get this money out much more quickly, and there
is a crisis in the world, and I think we have an obligation to
respond in this regard, in addition to the military.
With regard to the Middle East, it is my understanding that
among the many State Department requests for the supplemental
that were not granted by OMB was a request for $200 million to
help Israel with border and other national security priorities.
In fact, I wondered, number one, on what basis did you
recommend that the administration request $200 million in the
supplemental for Israel? Do you consider Israel to be a
frontline state in the war on terrorism, and do you believe
that Israel currently has resources sufficient to meet the
threats it currently faces, including the threat of a missile
attack from Iraq?
Mr. Armitage. I am a little embarrassed to be discussing
what is supposed to be internal deliberations of the executive
branch, but it was so well publicized in the newspapers that I
feel I must.
MIDDLE EAST
Yes, we requested $200 million for Israel. It was in the
main something that I felt and the Department felt was a legacy
from the evacuation of Lebanon that we had to honor. There were
discussions held in the then-administration about this, and
particularly for protection on the northern border which
Secretary Powell has recently spent so much time and energy on.
And by the way, for a third day in a row, it has been
relatively quiet, thank God.
The decision to not go forward with that money was based on
I think three things. First of all, the fact that Israel does
receive $2.76 billion per year in rapid-disbursing funds.
Number two, that we have a very robust program in support of
the Arrow program with digital technology. I am actually
pleased to say I started it at the Department of Defense for
the U.S., which tries to address the problem of missiles,
particularly from Iraq. And three, when things come up from
time to time, we are able to respond with the help of the U.S.
Congress.
For instance, about 2 months ago, we came to the Congress,
the DOD and State, with a request to be able to take DOD funds,
bring them to State, to allow us to buy for the Israelis
robotic EOD detection equipment, to the tune of $29 million.
For all of those reasons, a decision was made not to put the
money in this year, ma'am, in the emergency supplemental.
Mrs. Lowey. Thank you very much. I think my time has
expired. Thank you.
Mr. Kolbe. Mr. Callahan.
Mr. Callahan. Good morning, Mr. Secretary. First of all, I
think this committee would share in the wisdom of its own self
by saying to you and the State Department and to thePresident,
we are going to give you whatever resources you need to complete
Operation Enduring Freedom. So when we question you, it doesn't mean
that we are not supportive of what you are doing or the mission.
But I do wonder in reading your request, the definition of
emergency funding and coupling it with the Operation Enduring
Freedom, what Colombia has to do with that. I know you have a
bill coming up, and in addition to the money that you are
requesting here, in another section of this same supplemental
you are asking for half a billion dollars more for Colombian
assistance.
I notice that you are asking for aid to Ecuador. And while
I might support that, I have some questions about Ecuador. And
I want you to respond about the Manta base, to question you as
to whether or not we ought to condition the assistance to
Ecuador with respect to the prohibition against American forces
for using that base, which we paid millions of dollars to
prepare and turn over to Ecuador, and yet they are telling us
they are not going to allow us to use it for anything that has
to do with Operation Enduring Freedom.
So there is a question there. If this is for Operation
Enduring Freedom, what is Ecuador doing there? If we are going
to justify that, do you think we ought to condition it with the
Manta base?
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Mr. Callahan. Secondly, what is Colombia doing at this time
under Operation Enduring Freedom? I mean, that is another war
that we have, and maybe it is right, maybe it is wrong.
Mrs. Lowey touched on the fact that you didn't include any
money for Israel, but certainly you have been here on Capitol
Hill long enough to know that if you put $200 million--$100
million in for Jordan, plus $28 million FMF, that somewhere
during the process, Israel is going to get probably five or six
times that amount of money. And then when Israel gets five or
six times that amount of money, Egypt is going to come along
and say, well, we are entitled to two-thirds of whatever Israel
gets. So I don't know why we are including Jordan at this
point, even though I support King Abdullah, and I want to help
him be a successful king. At the same time, I wonder what all
this has to do with emergency funding, and is it about
Operation Enduring Freedom, or is it just a supplemental to get
your wish list that we didn't give to you for this fiscal year
under the name of some emergency funding?
Mr. Armitage. Mr. Callahan, I can assure you if it were a
wish list, it would have been a lot more robust, if I had had
my wish.
I will try to answer your question. On Colombia,
particularly why we are asking for the $35 million, we do
believe this is part of the global war on terrorism. We know,
and many of the members here know, that the FARC is targeting
Americans and not just targeting officials and infrastructure
in Colombia. Some of the money that we are requesting for
Colombia, for instance, is specifically for antiterrorist and
anti-kidnaping training. We have seen one of the candidates,
Mr. Uribe, suffer his 12th assassination attempt in 2 years. I
think I would get out of the business if that is the kind of
reception I got. But 12 in 2 years, I think, is indicative of
the size of the problem.
On the question of Jordan and then Ecuador. Jordan is a
frontline state, both regarding Iraq and its cooperation which
she has given to us, sir, on the question of al Qaeda. She has,
with us and with our various agencies of our government, broken
up safe houses. We have gotten excellent cooperation getting
into certain computer bases, computer files, et cetera. Jordan
has been terrific. And I would argue they are also doing this
in the face of a rather loyal population, given that the
majority of Jordanians now are Palestinian in origin. They have
been cooperating very closely on border security with Israel as
well.
And Ecuador, we believe we have in the tri-border area a
bit of a problem with al Qaeda and some Hezbollah elements, and
we do need cooperation. And, frankly, we are afraid as we
squeeze Colombia with hopefully the assistance and the support
of the Congress, that, like a balloon, some of the problems
might balloon out in other areas, and we want to do what we can
to try to keep Ecuador from ballooning out.
On the question of the air base, I am not informed of that.
And I have to tell you that, and I have to give you a straight
answer. I will take it and give it to you, sir.
Mr. Kolbe. Ms. Kilpatrick.
Ms. Kilpatrick. Thank you, Mr. Chairman. Good morning, Mr.
Secretary, good to see you again.
I have a couple questions. The new authority that is
mentioned in the supplemental for the Defense Department,
heretofore the State Department has really been charged with
the responsibility of foreign military financing and
assistance. I know you two are brother organizations, sister
organizations. What is the State Department's position on the
new authority?
Mr. Armitage. Well, the intention of the request for the
new authority was to allow DOD to pay cost-related
contingencies such as we had in Pakistan, for which there is no
other mechanism that existed. By that I mean when we first
started using Pakistan's bases, they were providing assistance
and fuel and other things before we had a cross-servicing
agreement with them, and we didn't really have a mechanism to
pay those. So the intention was very benign.
I think we drafted this in a rather poor way. We at the
State Department fully support the intent of that language,
but, as you may have read in the newspapers, unfortunately we
had a little contretemps about whose prerogatives were being
upheld or not. And our view and the Department of Defense's
view is that we want to work with the committee and the Defense
Committees to make sure that the prerogatives in the House and
Senate Committees and the prerogatives of the Secretary of
State, as the chairman mentioned, as the overseer of foreign
policy and foreign aid, is upheld.
Ms. Kilpatrick. Now, you just said all of what we would
like to have. The language in the supplemental kind of takes
the defense authority and leaves that not so much with the
entities you just mentioned, the subcommittees or the State
Department, but solely with the Secretary of Defense.
Mr. Armitage. I hope you will see from my comments that my
own view is we drafted that in a rather shoddy manner. We at
the Department of State support what Defense wanted to do. We
want to work this out in a way that protects our prerogatives,
first of all to tell the truth, and the prerogatives of the
Foreign Ops Committees in the House and the Senate, and work
with the Defense committees. And I can tell you that Defense
and we will come up and work with you to get language that is
appropriate that preserves those prerogatives.
Ms. Kilpatrick. So then from what you say, Mr. Secretary,
you want us to continue to work with the language and not to
have that made solely at the discretion of the Secretary of
Defense, but in a coordinated effort.
Mr. Armitage. Under the overall supervision of the
Secretary of State, which allows the Foreign Ops Committees
to----
Ms. Kilpatrick. We would appreciate that, because if the
Secretary does have that sole responsibility--terrorism, human
rights, nonpayment of dues, those kinds of things--he can
ignore those; where the State Department now has to adhere to
those. So that would be important to this committee, I am sure.
Mr. Armitage. Well, they are important to us, too.
Ms. Kilpatrick. Thank you.
And number two, Mr. Chairman, if I might, our friendly
states around the Nation of Israel--and you mentioned Jordan,
and many Palestinians live in Jordan, we can say Saudi Arabia,
perhaps a couple others who are now--and maybe I heard you say
earlier you may not be able to answer, Secretary Powell is just
returning and maybe the President has to be debriefed. But are
we losing our support in the region because of the very serious
conflict that we are now having in the Middle East? Can you
speak on that as much as you can?
Mr. Armitage. We are clearly, at least temporarily, losing
some support. All of our embassies in the Middle East have had
to be buttoned up over the past 2 weeks, and I----
Ms. Kilpatrick. What does that mean, ``buttoned up''?
Mr. Armitage. Secured against any demonstrations, et
cetera. And we have had, very unfortunately, for the first time
in, I believe, 20 years, student demonstrations in Alexandria,
Egypt, for instance, which were directed against an American
center in which a young student died. We had a young man die in
Bahrain as he actually got into our embassy; 20 or 30 people
demonstrating got into the embassy and burned some cars. So
temporarily, we are in a bit of a problem.
And Secretary Powell's comments, if you noticed in Israel
as he was departing for the United States, tried to address the
three factors in this equation: one, our support for Israel,
which is not a question; the support of Palestinian people,
that they have a right to have hopes and aspirations; and our
Arab friends, that we were trying to address these problems,
because Secretary Powell was trying to keep the streets calm.
So we have a problem.
Ms. Kilpatrick. We have a problem, and we certainly want to
work with you. You mentioned Egypt, Jordan, Saudi Arabia, some
of the other countries who have been friendly, many who are
Arab ethnicities. It is a balancing act. I think it isvery
serious. And we look toward to the debriefing that Secretary Powell
will give the President, as well as what the Congress is able to
receive, because I think we have to be actors and players in this whole
discussion as we represent the people of America.
Mr. Armitage. Well, thank you very much. I am not going to
volunteer Secretary Powell to appear; I am sure he will be
appearing on this subject. He is at a 10:30 meeting with the
President. And after that with the President he will appear
publicly, I think around noon, and make some comments about
this situation.
Mr. Kolbe. Mr. Lewis.
Mr. Lewis. Thank you, Mr. Chairman. Welcome, Mr. Armitage.
Mr. Armitage. Thank you, sir.
Mr. Lewis. I am going to follow up a bit, if I may, on the
line that Ms. Kilpatrick was following herself. I am, as you
know, chair the subcommittee that deals with national security.
Throughout the years I have served on this subcommittee, I have
rather strongly agreed with the view that the fundamental
leadership relative to the FMF should be with the State
Department. Clearly if we are looking at long-range foreign
policy, while military assistance does play a role in all of
that, if you are going to support the long-range policy
direction, one has to deal with military assistance with great
care, diplomatically and otherwise. That is the long-range
view. In the shorter term, there can be obvious difficulties
and complications.
So the law does provide that the Defense Department has
responsibility in supervising and administering some of those
funds in certain circumstances. I am concerned about the short
term. A lot of communication between DOD and State has taken
place regarding the language that has come up in the
supplemental that gives DOD authority relative to certain
portions of what essentially would be described as FMF. When we
are in a place like Afghanistan, and in a very short period of
time you are interested and actively and aggressively training
and retraining, giving capability to troops in the field, this
requires very, very quick action.
The State Department has lots of priorities around the
world. None of our major agencies are noted for quick action,
especially when there are competing priorities. So I am
concerned very much with that question. As we are training and
retraining troops in Afghanistan, as we are looking to fighting
this war across borders in the surrounding area in a relatively
short time frame, it strikes me that some authority for action
is needed by the Department of Defense.
Now, whether it needs to really massage and change
significantly existing authority, I don't know, and the broader
authority of the President. But would you help me address that
question? In DOD, is it going to totally violate your
circumstance if we have language that extends authority
relative to this kind of training and retraining?
Mr. Armitage. Mr. Lewis, I think the authority as drafted
by us is a little broader in scope than we really intended. On
the question of Afghanistan, for instance, in training the
Afghan army, et cetera, notwithstanding the elephant-like
movements of a bureaucracy, whether it is State or DOD for that
matter, the authorities that exist in FMF allow us to have very
quick disbursement.
Mr. Lewis. Allows. That is correct.
Mr. Armitage. Pardon me?
Mr. Lewis. Allows. That is correct.
Mr. Armitage. Bureaucracy. I am in it, and it is slow and
plodding.
But the contingencies that we were trying to address in
this language were more like the contingencies we found in
Pakistan, as I mentioned, when we first went in and had no
authorities to pay for some services and fuel and things of
that nature such as the use of APUs to start the jet engines.
Those are the things that we didn't know how to address. And
that is the kind of contingency we were trying to address.
I think we were a little too broad. It is why I wrote in my
letter to OMB to signal we need to work this thing out, and why
I am pledging to you--and I can pledge my brothers and sisters
in the Defense Department--to come up and work with the
committee and the Senate to make sure we have language that we
think really addresses the contingencies and doesn't trample on
both the prerogatives of the House and the Senate and, by the
way, of the Secretary of State's overview of foreign policy.
Mr. Lewis. Well, I must say that the Defense Department
does have serious capability as it relates to abusing those
monies, especially in the training arena. There is little doubt
that quick action was necessary, is necessary in other
circumstances in the immediate term in the region. We are
considering, as you know, the language that is being submitted.
And while I have reservations, I also have reservations about
my--closing the door to the request that is being made by the
Defense Department. I presume that this request and this
direction was not made without some consultation with higher
levels.
Mr. Armitage. No. We want the flexibility that is in this
language. The Secretary of State supports giving DOD that
flexibility. But what we want to make sure is that he and you
all maintain your oversight roles in foreign ops and in foreign
policy. But the general flexibility that we were seeking was
developed in conjunction with State and Defense. I don't think
we drafted this as well as we should have.It is too broad.
Mr. Lewis. You said that in your statement. I must say that
my traditional support for FMF, being within the jurisdiction
of this subcommittee as well as the State Department, is
comforted by the fact that the Secretary of State himself has
some considerable experience in both arenas. But, nonetheless,
it does bring us to the nexus of a very challenging policy
consideration that I think deserves a lot of massaging over
time.
Mr. Armitage. You are absolutely right, and we want to
massage it with you and with the Defense Department, with you
together.
Mr. Lewis. Did you have some time, Mr. Chairman? I would be
happy to move on.
Mr. Kolbe. Your time has expired. Before I call on Mr.
Rothman, I am going to exercise my prerogative, which I rarely
do, to follow up, however, on this question, because this is a
very important question, and we really need to get to the
bottom of this thing.
First of all, though you can't say it here, I will say it.
My understanding was there really was no consultation between
State and Defense on this issue. There was zip, zero, zilch,
consultation. It was just in there.
My question to you--you talk about the flexibility. That
five-line provision, notwithstanding any other provision of the
law, not to exceed $100 million from appropriations of the
Department of Defense may be used to support foreign nations,
et cetera, in the furtherance of the war on global terrorism.
Why do we need that at all?
Mr. Armitage. We were trying to address the problem that I
addressed earlier, Mr. Chairman. Before we had agreements with
Pakistan and others we were making use of their services. We
didn't have mechanisms to pay; we were getting bills without a
mechanism to pay.
Mr. Kolbe. But you do have that now, don't you?
Mr. Armitage. Where we have an agreement, yes, sir. Where
we have an agreement we have that mechanism.
Mr. Kolbe. For reimbursing them, this provision is not
necessary, is it?
Mr. Armitage. Not for Pakistan, no, sir.
Mr. Kolbe. Mr. Rothman.
Mr. Lewis. Well, what about----
Mr. Kolbe. Mr. Lewis, go ahead.
Mr. Lewis. What about Afghanistan?
Mr. Kolbe. Afghanistan?
Mr. Armitage. Well, I don't think we have a problem with
any in Afghanistan, but----
Mr. Kolbe. No, because I think the language is broad enough
to do anything in Afghanistan.
Mr. Armitage. I stated that we don't have agreements with
Pakistan. So we were trying to address the contingency that we
found in Pakistan. We didn't have the agreements that exist
that allowed us to pay. We do now have it with Pakistan and we
are in good shape.
Mr. Kolbe. Thank you. Mr. Rothman.
Mr. Rothman. Thank you, Mr. Chairman.
Mr. Secretary, as always, it is a pleasure to be with you.
You are one of the few--let us put it this way--or the best in
this administration to not only present an intelligent and
articulate answer to our questions, but you have a wonderful,
plain, clear-spoken style, and I appreciate that. And I have
the sense that you have the highest degree of integrity, and we
can rely on what you say.
Mr. Armitage. Thank you very much. There are some who have
questioned that from time to time, but I am very grateful. I
will take it when I can get it.
Mr. Rothman. So far, so good. And I am grateful.
Two questions, if I can get them in, one on the Middle East
and one on Colombia. On the Middle East, did I hear you say
that Saudi Arabia had been helpful, or--I didn't actually hear
that from you, did I?
Mr. Armitage. No, I didn't address Saudi Arabia, sir.
Mr. Rothman. Yes. I didn't hear that myself coming from
you. I note that in the frontline states' request of the
emergency supplemental, Jordan, Bahrain, Oman, and Yemen are
getting specific allocations. And then there is a general
category in addition to that of $50 million, economic
initiatives for the Middle East. Would you just spend just 45
seconds of my time on that? And if you can fit in within that
time, describe are there specific parties in the Middle East
that you are expecting to engage with these economic
initiatives, and have you approached them, and what kind of a
response have you gotten?
Mr. Armitage. Yes. The whole idea of this came out of the
meeting with President Mubarak and President Bush, where Mr.
Bush announced an economic initiative. We want to have a
certain amount of money available to match, or even exceed,
with philanthropic donors, and we can address areas that are
not traditionally addressed by us. We want to get everything
from enterprise funds in Egypt. And this is, by the way,
following along the lines of a lot of the work done by Hernando
DeSoto, the Peruvian economist, to try to make better use of
dead capital in Egypt, to try to improve education; not just
education and scholarship opportunity for the wealthy and the
well-to-do, but for others who might strive----
Mr. Rothman. Is this designed solely for Egypt?
Mr. Armitage. No, it is not, but Egypt is our test case,
and that is where we are looking at it in the first instance.We
want to broaden it to the Middle East in general and that is, hence,
the name MEEI.
Mr. Rothman. Okay. And----
Mr. Armitage. And it hasn't been discussed with Egypt.
Mr. Rothman. Have you discussed any of these initiatives
with other Middle Eastern countries yet?
Mr. Armitage. I have not. We brought a young woman, who
just happens to have the name of Liz Cheney, on board to
actually shepherd these programs. She worked for me 10 years
ago. And the reason we brought her in is that she is an expert
on the international financial institutions. That is what she
has been doing for the last 10 years. So we are trying to marry
up a certain amount of money from you all, if you are so
willing, the international financial institutions and
philanthropic donors. She has talked to Gates and Steve Case
and others.
Mr. Rothman. I think it is a wonderful idea and I wish you
well on that.
On the Colombian emergency supplemental, the $6 million
related to protecting the Cono Limon pipeline. In addition,
your 2003 request, as I understand it, has an additional $98
million, a total of $104 million to Colombia for the protection
of a 400-mile-long pipeline. I further understand that the
guerillas are attacking the first 75 miles of the 400-mile
pipeline. Is it conceivable that if we are going to spend $104
million now, and the guerrillas are attacking the first 75 of
the 400-mile long pipeline, that we are going to be asked to
fund more money for the rest of it? And let me give you some
sub-questions. And is America the sole recipient of the oil
that comes out of that pipeline, and if not--I imagine it is
not--are the other nations of the world who get oil out of that
pipeline, are they going to contribute to protecting that
pipeline as well?
Mr. Armitage. I don't think any of them are. And I may be
misinformed on that, on protection of the pipeline. I think
that others do benefit from the oil. And as a fungible
commodity, I guess, you know, oil is oil, and whether we get it
or somewhere else gets it, it all raises the general oil market
level.
Is it conceivable? Yes. Is it on the drawing board in the
administration? Not to my knowledge, sir.
Mr. Rothman. You know, I am just curious. Is this $104
million to protect the pipeline, is it really just extra--
another way to provide military assistance to Colombia to
defend themselves against these terrorists, which I would not
necessarily oppose; or is it specifically to protect this
particular pipeline which--again, I would be interested to know
how much oil Americans, the United States of America gets out
of that pipeline.
And if it is not significant and this is really just about
the pipeline and not general military assistance to Colombia,
then I darn well would like to see the other nations who are
getting oil benefits out of that pipeline contribute. Or if our
share is minuscule, what we get out of that, I would be
reluctant to support.
Mr. Armitage. I understand. I will have to take the second
part of the question. I don't know how much we get and I will
provide it.
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Mr. Armitage. On the first part, I think we have to be
absolutely clear. That pipeline is vital to Colombia in the
first instance. It is a lifeline for them. They are in a real
tussle--in my view, a tussle for survival, and I am actually
surprised more people aren't upset about it. I think the fact
that it has been going on for over 20 years has let people get
used to it.
We want to train--as my colleague, Mark Grossman,
testified, we want to train another battalion to be able to
enhance that pipeline's security. Could these forces be used in
counterinsurgency? Absolutely. Could they also be used to
protect the pipeline from insurgents and terrorist attacks?
Absolutely.
I don't think there is an ability to draw a fine line
between soldiers almost walking the pipeline and those that
might be used for more offensive prosecution of guerrillas.
Mr. Rothman. When Secretary Grossman was here, we had a
discussion about the level of financial commitment from the
Colombians themselves vis-a-vis their gross national product.
Do you have any follow-up on that?
Mr. Armitage. Yeah, we heard very clearly from several
members of the committee. I think Mr. Callahan was particularly
vocal on this subject, as were others. Mark took it back, and
we discussed it.
President Pastrana is with our President, or was
earlierthis morning, and the message that we got from that hearing was
very clear. Colombia has to do more. They have to do more, not just in
human rights and the areas that we have as a subject of our law, but
they have to do more in their own interest. And that is the message I
think President Pastrana will be getting in order to continue support.
Mr. Rothman. Are they getting that message from the
President?
Mr. Armitage. Well, he is going to get it from us, and it
was suggested to the President. I can't say that he is going to
do it. I expect he will.
Mr. Rothman. Thank you, Mr. Secretary.
Thank you, Mr. Chairman.
Mr. Kolbe. Mr. Knollenberg is next.
Mr. Knollenberg. Thank you, Mr. Chairman. Welcome this
morning, Mr. Armitage. Nice to see you.
I was not here a few moments ago when questions arose about
the supplemental funding potential for Israel; and I understand
the sequence of those questions--I have been briefed on that--
and the answers you provided.
Let me ask one more, which I don't believe was asked; and
that is simply this. Within the administration, there was
apparently a disagreement because the State Department did
recommend 200 million for Israel. Is that true?
Mr. Armitage. Yes, unfortunately I have to admit to you,
it is true.
Mr. Knollenberg. Let me ask you this question: Would you
oppose an effort by Congress to provide supplemental funding
for Israel?
Mr. Armitage. No, of course, we won't oppose supplemental
funding for Israel. I will make the point, if I might, that
additive funding is great. I couldn't afford, in what I think
is a relatively lean request, to take it out of hide.
Mr. Knollenberg. I understand that. I do appreciate that.
But you would not oppose an effort by us here in Congress to
add that supplemental money in?
Mr. Armitage. I have a good sense of my own self-interest.
Mr. Knollenberg. Thank you.
Let me go to another question. And that has to do with the
Korean Peninsula Energy Development Organization. I have been
on this subcommittee ever since we started funding KEDO and the
agreed framework; and we have had conversations about this, as
you well know. And you know my view. I have been saying for
years that we shouldn't be doing this, because of the fact that
North Korea doesn't live up to its end of the bargain. It is
very clear in our foreign operations bill that these funds will
not be available unless the administration certifies that North
Korea is complying with all provisions of the agreed framework.
Earlier this year--and you well know this--the President did
determine not to certify that North Korea is complying with all
of its requirements, in essence, that they aren't meeting the
requirements.
But, in fact, we find ourselves still funding KEDO. For
2002, it is 75 million.
Now, I recognize that----
Mr. Armitage. $95 million next year, right.
Mr. Knollenberg. That is right. But the certification has
to do with the 2002 bill.
But here we are proposing the 2003 bill, and the President
says, North Korea is not meeting the requirements. Yet we
continue to fund this KEDO.
Here is a country--I don't have to tell you; I know you
respect and understand this--that is part of that so-called
``axis of evil.'' I frankly considered them a part of that
before the President said they were. I think members on this
committee thought so, too.
So my question is, isn't there something wrong with this
picture? The President doesn't provide certification; here we
are upping the ante--we are even going beyond what we have been
doing. Why should we send this money on behalf of North Korea
under these circumstances?
Mr. Armitage. Sir, I think the only difficult conversation
you and I have ever had was about this issue.
I will note that the President did not certify, but the
language that we used was pretty careful. We said we lacked the
information to be able to certify that North Korea was living
up to all of their requirements. There are three certifications
required: one on North-South nuclear cooperation, which we
could not certify; another on nonproliferation, which we could
not certify; and the third was that they were keeping their
part of the Agreed Framework.
We lack insight and knowledge.
We didn't feel comfortable saying to you that they are
making the grades when we couldn't grade them. So we gave them
no grade. That is important.
In a way, we went somewhat towards where you have been. And
I think, over time, we will know if we are right or wrong
because the North Koreans had a recent visitor from South
Korea, Ambassador Lim Deng Wong, and indicated they wanted to
restart discussions with the United States about this matter. I
think the understanding in North Korea, it has finally hit
them, is that there is a new team in town, and that you don't
automatically pick up where your predecessor left off. A little
uncomfortable for them, perhaps, but I think the message has
gotten through.
I think we will see, as we move forward, whether it worked
out. All I know is that they have indicated they want to see
Ambassador Pritchard on this matter. So I think we went
somewhat to your direction, but we can't say they are not
living up.
Mr. Knollenberg. I do appreciate the steps that have been
taken. I appreciate the President not providing that
certification. I guess what we have to do is look again at
this, continue to look at it with very, very strong scrutiny in
mind to make sure that we are seeing some improvement over
there, because there doesn't appear to be what we like to have.
There isn't what we like to have, for sure.
Mr. Armitage. The chairman used the term about
``skeptical,'' and I understand that. It is well warranted in
this case.
Mr. Knollenberg. Absolutely. I would buy that word. Thank
you very much.
Mr. Kolbe. We will have time for one more set of questions.
We have two votes, so we will go over and vote, get the second
vote, come right back; so we won't have much of an
interruption.
Mr. Jackson.
Mr. Jackson. Thank you, Mr. Chairman. I want to start by
welcoming Deputy Secretary Armitage here today.
I also want to thank you, sir, for your testimony. Sir, I
have four questions. Does the name Suraida Salah mean anything
to you?
Mr. Armitage. Salah?
Mr. Jackson. Suraida Salah. Suraida Salah is a 21-year-old
American woman, born in Washington, D.C., who was killed in the
first days of the offensive in Ramallah. I wonder what is being
done by your office and American officials to find out
information about how and why she was killed.
Mr. Armitage. I will find out.
Mr. Jackson. Many of my colleagues have many priorities for
what you and your offices should be doing. But I think one
thing we can probably all agree on is that one of your primary
responsibilities is the protection of Americans abroad and,
certainly, Americans who are living in the West Bank.
I am concerned about what your office is doing to find
Americans who live in the West Bank, what instructions your
office has given them with respect to their security, and also
those Americans living in Israel. I specifically would like
information other than ``Travel at your own risk'' and ``Get
out.'' I would like to know what your office is doing with
respect to that.
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Mr. Armitage. Can I make a comment on that?
Mr. Jackson. You certainly can.
Mr. Armitage. I obviously will have to provide you the
numbers of Americans that live in Israel, and the numbers who
live in the territories of Palestinian origin. I will do that.
Generally--as a general matter, whether it is in Israel or
anywhere else, or the consulate in Jerusalem, we have a ``no
double standard'' policy. That is that anything that is told to
my folks in the embassies has to be made public as well. And
that is quite different from what you correctly point out are
the travel warnings which say, ``You shouldn't travel here'' or
``Travel at your own risk'' or ``Don't go there.'' But I will
get the specific answer to your question.
Mr. Jackson. I am concerned about the interests of these
Americans who were born in the United States, who are living in
this very difficult geography and situation, and what your
office is doing to instruct them and provide them with the kind
of security that they need.
We have also seen, Mr. Secretary, pictures and reports of
incredible destruction and devastation to the civilian
infrastructure in the West Bank. All of us have seen the water
systems destroyed, pipes broken, records and computers in
places like the Ministry of Education. As a matter of fact, it
was on Nightline just a few days ago, the Ministry of Housing
had its computers destroyed.
For a number of years, this committee has supported U.S.
assistance to help develop exactly this kind of infrastructure
in order to improve the lives of Palestinians, to help reduce
the threats of terrorism to Israelis. Given all the recent
damage and destruction, I am wondering, does the State
Department or USAID plan to carry out any kind of assessment of
the current IDF offensive to U.S.-funded projects?
Mr. Armitage. I know that we have discussed an assessment
of the damage more broadly, both in human terms as well as
infrastructure. And, by the way, it is both Israel and
Palestine. Obviously, in the Palestinian area the damage has
been quite extensive. We have not moved beyond that to
specifically what was U.S.-funded and what was European Union-
funded, et cetera.
Mr. Jackson. Has there been an idea of explaining to Mr.
Sharon, and also to Mr. Arafat, by Secretary Powell, that U.S.
funding of these projects--should be respected and not subject
to any offensive in the region?
Mr. Armitage. Well, is that a question, sir?
Mr. Jackson. I guess it is sir. Somewhat rhetorical.
Mr. Armitage. No, I want to try to address your question.
There is plenty of discussion between Secretary Powell and
Prime Minister Sharon and Chairman Arafat about what is going
on on both sides of the line--suicide bombings, on the one
hand, which rip away lives and aspirations of young people who
are in church or at prayer and seder. And by the same token,
there are Palestinians who are killed who are not fighters as
well. That is why Secretary Powell is trying to stop it, bring
it down.
The question of infrastructure is a horrible fallout of
this tragedy. And if we move forward we are going to have to,
and the international community is going to have to, move
forward and address this. But you can't move forward and
address the humanitarian challenge and infrastructure challenge
until we have some sort of political process that allows,
somehow, that we won't repeat this terrible tragedy.
Mr. Jackson. I accept that, and I recognize, as well, these
events are tragic. They are obviously tragic on both sides;
everyone on the committee is fully appreciative of that. But it
doesn't appear to me that this committee should be
appropriating any more money for vital infrastructure unless we
are willing to come up with the plan for protecting the vital
infrastructure that we are supporting.
So does the State Department have a plan for protecting
this committee's resources in that area, which we have designed
and specifically are spending to help reduce tensions in that
area?
Mr. Armitage. The State Department is not going to protect
infrastructure in any country. That is the business of the host
country and its authorities, and police force or its military
if it comes to that.
So the answer, I guess, would be, no, we don't, sir.
Mr. Jackson. Thank you, Mr. Secretary.
Thank you, Mr. Chairman.
Mr. Kolbe. Thank you. The subcommittee will stand
temporarily in recess. We will resume just as soon as we get
back from this vote.
[Recess.]
Mr. Kolbe. The subcommittee will resume, and since I am the
only member here, I will start asking some more of my
questions. We will go back to the regular order. We still have
Mr. Kingston, Ms. Pelosi, if they return, to go back to before
we start the second round of questions.
I want to ask a question, Mr. Secretary, about Pakistan,
which we have had some discussion about here today. We
obviously have been very successful in getting a very high
degree of cooperation with Pakistan in this war against
terrorism. I think we are all very appreciative of the support
that President Musharraf and the Pakistani Government has given
to us.
They are very much on the front door of this war, but of
course, we also know that they bear a major responsibility for
the initial success of the Taliban regime coming to power in
Afghanistan.
Now, however, we are hearing some rather disturbing reports
that the Government of Pakistan is not cooperating as closely
with the United States as it was immediately upon the events of
September 11th. As an example, Pakistan has balked at our
proposal to go into the Afghanistan and hunt down al Qaeda
terrorists. In addition, 800 of 2,000 Islamicprisoners that
have been in prison since January have been released from jail.
Finally, there are questions as to the degree of
cooperation which the Pakistani authorities provided to the
U.S. in investigating the murder of the reporter of the Wall
Street Journal, Daniel Pearl.
In a newspaper column written a couple of weeks ago Jim
Hoagland states, ``The clear instructions that Deputy Secretary
Armitage gave to the Pakistanis soon after September 11th,
`Halt all support for terrorism or else,' have with time faded
and seemingly lost their impact. Washington is now negotiating
with Musharraf, not negotiating him to act.'' Now the
supplemental request has another $45 million for Pakistan and
the 2003 includes another $250 million beyond that.
Before Congress acts on these proposals, I think we want to
have an assurance from you and others in the administration
that Pakistan continues to be a full and active partner in the
war on terrorism. Could you comment on that?
Mr. Armitage. Yes. No one is in a position to give you a
full assurance. I think I can state the facts as I know them,
Mr. Chairman.
First of all, about 2 weeks ago Pakistanis involved with
the U.S. law enforcement and intelligence operatives took down
three safehouses, had a couple of gun battles and captured one
of the leading al Qaeda figures who is now being debriefed, Mr.
Zubaydah, which is not a bad sign of cooperation.
I think to the extent there has been an interruption,
particularly on the western border of Pakistan, it was more
involved in the fact that Pakistan and India were glaring at
each other over Kashmir.
As you well know, sir, many forces were moved from west to
east on Pakistan. That trend is reversing to some extent, and
some of the Pakistani forces are going back home.
On the question of the assistance in the Pearl murder
investigation, I think it was unfortunate that the Pakistanis
apparently had Sayed for several days before they informed the
United States. But in terms of following up and helping Mrs.
Pearl and things of that nature--I should let her speak for
herself--but I talked to her during that time and she seemed to
me to be quite satisfied with their assistance.
I have a fair degree of confidence that we are going to
continue to get assistance from Pakistan. I think they have
thrown their lot in with us. I don't think they have a choice.
I can't say what you said about their responsibilities for
the Taliban and their support for the Pashtuns in large measure
for 10 years. But I can say that I have a fair degree of
confidence that they have made a decision, and they have very
little choice but to follow through with it.
Mr. Kolbe. Well, I appreciate that comment. I certainly
hope you are right. You just have the impression that maybe it
is because of the vote that is coming up and President
Musharraf is finding himself engaged in a political campaign.
Although he has no opposition in this campaign, that he wants a
very sizable vote.
But there just seems to be a noticeable coolness on the
part of the Pakistanis towards the United States at this point.
Mr. Armitage. Well, I have not personally noticed it. We
have pretty good conversations with him, back and forth. Since
the terrible grenading in the church in Islamabad, it was such
a shocking thing that perhaps we have, at least in Islamabad,
gone to ground a bit. We are not as totally active. That was a
very shocking, terrible moment for the embassy.
But I notice that, from the Secretary's point of view, he
has fairly frequent discussions with President Musharraf and
fairly congenial ones.
I have not noticed the cooling, Mr. Chairman.
Mr. Kolbe. Thank you.
We have members back who have not had a moment or chance to
ask their questions, so we will resume the regular questioning
with Mr. Kingston.
Mr. Kingston. Thank you, Mr. Chairman.
And, Mr. Secretary, it is great to have you back before
this committee. We certainly commend everything that you and
the State Department and this administration are doing to make
the world a safer place. One of the things that we politicians
will be doing a lot of this summer and this fall is taking
polls to find out what we are doing wrong and what we are doing
right and what public perceptions are out there about us that
we need to correct between now and November.
So, while we will be doing that the thought occurs to me,
well, we seem to have a lot of friends in this world, and we
still seem to have a lot of enemies. A lot of those enemies are
ones that do get foreign aid from us, and I am wondering if
there isn't some kind of a mechanism that we could use--
surveying, polling, or whatever--to find out among the
countries where we are doing things for them and we are not
getting a little more credit, indicating, in point, of course,
Afghanistan. I know it is difficult to get the word out to the
people, but as I understand, we were giving $173 million in aid
directly and indirectly to Afghanistan prior to 9/11.
Mr. Armitage. That's right.
Mr. Kingston. You know, if there is--if they are oppressed
by the Taliban government, and we are still helping them, can
we get that word out to the population that the American
people, regardless of what the Taliban is sayingabout them,
that Americans are the ones who are responsible for the grain that you
are eating or enjoying or something like that? It just appears to me,
something beyond putting our label ``Made in U.S.A.'' on the packages,
there should be something that we could do to persuade the people--you
know, not just to get credit, but it is a national security issue. We
want to make sure that our friends are our friends.
Mr. Armitage. Mr. Kingston, you point to a dilemma that
during the Taliban regime, there was humanitarian assistance.
And I think we get wrapped around our very, I think, formidable
and proper humanitarian impulse to feed people who are starving
and put behind the politics. And I don't know how you modulate
that, because the humanitarian impulse of the United States and
Americans as citizens of the world is pretty great, and thank
God, it is so.
More broadly, on finding out what works and what doesn't,
there are terms of foreign aid. I think that is what we are
getting at. I can only say that we have recognized this in the
department as a problem.
Mr. Burnham, our chief financial officer, has redone what
we call an MPP, a mission performance plan, that was to get the
missions to tell us what they spend their time on, where our
assistance goes, what we are seeing for it. Over time, we will
be able to judge if we are putting money down the proverbial
rat hole, or else there is some recognizable benefit beyond the
humanitarian impulse I think we all feel.
This has been changed this year because we want to be able
to grade ourselves a little bit, and I think it helps us in our
presentations to you.
So I am aware of the problem. I think we have started in a
minor way on the answer, but we have got a lot to do.
Mr. Kingston. I think there should be some way we can
measure what our 5-year return on investment is, if the country
is moving towards democracy or moving towards pro-West, or
there are trade benefits or something, that we should have some
idea.
And I certainly would never suggest that in a disastrous
situation like Rwanda, where we are rushing in there and people
are dying and dead, that we go out and give out our business
cards. We don't want to be in a situation like that at all.
But I think in terms of a steady, long-term partnership
with a country, it should be understood that they are getting
assistance and it is American assistance. And make no mistake.
In terms of Palestinian PLO, what kind of aid do they get
from us? Because I hear all kinds of different stories about
them getting some indirect support for this and that.
Mr. Armitage. No, we are not. The PLO, no. We had stopped
the aid to the Palestinian Authority directly and are providing
it through NGOs and other things that directly affect the
Palestinian people. And the President, a couple of days ago,
signed a new $20 million, I think, release for UNWRA
activities. I don't think we give anything to the PLO, for
sure.
Mr. Kingston. There is some, but it goes through NGOs?
Mr. Armitage. It goes to the people. The Palestinian
Authority, I think was widely seen, as corrupt.
Mr. Kolbe. Just to clarify that it goes to the West Bank,
and that none of it goes to the Authority.
Mr. Kingston. Okay.
Mr. Armitage. Yes. You are right.
Mr. Kolbe. We have a member that has joined us, who has not
had a first round of questions. We will go to Mr. Bonilla; then
we will start our second round.
Mr. Bonilla. Good morning, Secretary.
Mr. Armitage. Good morning, sir.
Mr. Bonilla. I want to start out by asking about setting up
the International Narcotics Control and Law Enforcement Project
in conjunction with Mexico. And I just want to make sure, as we
do this, that we are--I know we are looking at this as a
national project, but we want to make sure that some of the
folks that are actually on the front line along the border are
consulted, because they are the ones that have been dealing
with a lot of this for many, many years.
So is that happening? And if not, why? If not, when will
that happen, when will we start including the locals in this
project?
Mr. Armitage. I am a little hesitant to give you a really
robust answer because I am not sure I am right that we are
doing that. Your point is to recruit locals who really know
what is going on, vet them, obviously, and then put them into
the game. My understanding is, that is very much a part of this
project.
We have a different ongoing and complementary project that
we are suggesting in our supplemental--emergency supplemental
request for $25 million for border security, and is coordinated
between Frank Taylor's office, antiterrorism, and Governor
Ridge's Homeland Security. And it goes to such things as
information sharing and systems; passengers, goods that cross
our borders; creates inspection capability, including mobile x-
ray machines and things of that nature; trains and equips
Mexican law enforcement agencies to prevent migrants from
entering the United States; and creating additional entrance
high-volume lanes at ports of entry and those kinds of things.
And that is all covered in our supplementary.
Mr. Bonilla. The reason I ask that, the area I have along
the southwest border--I have almost 800 miles of the Texas-
Mexico border that includes that huge land port at Laredo. They
move a monumental amount of traffic across there every day. Not
only that; I have that area which is similar to much of the
terrain that goes west of Texas, as well, where it is very
isolated, desolate in some cases. Over the years, there might
be one or two Federal law enforcement agents, more than likely
Border Patrol, that are patrolling hundreds of miles of
territory.
So the possibilities of not just narcotics moving from some
of the areas where manpower has been beefed up to these more
desolate areas has increased; and in some cases, we are asking
park rangers to carry some of the load, especially in Big Bend
National Park. That is a huge part of that left, hanging part
of the State as you are looking at the Texas map.
So, to our knowledge, none of our folks down there have
been part of this process. And again with an 800-mile span of
border, I think that is significant.
Mr. Armitage. Mr. Bonilla, if you will entertain a call
from Rand Beers, our Assistant Secretary, I will have the
expert give you an expert answer.
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Mr. Bonilla. Okay. I appreciate that.
I only have one other question related to Afghanistan,
which I know has been discussed in great detail here today. We
heard some time ago from a Director of USAID that because of
the extreme, volatile and outright dangerous conditions that
our rebuilding personnel are operating under, that there was a
very, very serious concern when he appeared here before us a
few weeks ago.
I don't believe in that period of time much has changed,
but if it has, please let us know. If it hasn't, I guess it is
something that this subcommittee needs to continue to address.
We don't want our folks operating in that kind of environment
if we can help it.
Mr. Armitage. It was certainly an inhibiting factor when we
put together our request. We were reluctant to look for more
reconstruction aid if we weren't sure we would be able to be
safe and have a presence.
Some things have changed. For instance, in Harat, which is
in the far west of Afghanistan, our ambassador recently visited
and found the city under complete and total control. And it
seems to me that this is an area that we could start moving out
developmental assistance. So I think what the director
explained to you, sir, is it is very much a work in progress,
and we will have a couple of steps forward and an occasional
step back.
President Bush reminded us in a meeting I attended the
other day that if you look at the history of Afghanistan,
whether it is the British experience or the Soviet experience,
they did pretty well in their first year. When they took their
eye off the ball the second year and third year, it started to
go wrong way. We have to make sure we don't take our eye off
the ball, Mr. Bonilla.
Mr. Bonilla. The last thing I want to touch on is, I asked
the Secretary last year and asked it again this year at an
earlier hearing and I asked it during the hearing on Colombian
assistance on the State Department's progress on drug
certification. As you know, I and many of my colleagues believe
this entire process is flawed and needs reform. Secretary
Powell a year ago said that he understood where I was coming
from and perhaps agreed that the system needed to be reformed,
and we need to have a system of accountability that truly
deters drug trafficking. Sometimes over the years we get in
political hot water because of this system that is in place
now, that is all we have.
So my question is, is there any progress being made at the
State Department in changing this process, so it can be
actually addressed more to the legitimate reforms that are
taking place in countries?
Mr. Armitage. You know, if there is, it is not visible to
me, and so I apologize for that. I am just going to have to get
into it. But it hasn't come to me, so I suspect not much is
going on. I suspect this is a case of taking our eye off the
ball because of the war on terrorism, et cetera. But I will
give you an answer.
Mr. Bonilla. I certainly understand that. Because I know
the priorities have shifted. But that is something I am going
to keep asking about.
Mr. Armitage. I got the message sir.
Mr. Bonilla. Thank you, Mr. Chairman.
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Mr. Kolbe. Ms. Pelosi is back, so we will get her questions
and then we will begin our second round of questioning with Ms.
Kilpatrick.
Ms. Pelosi.
Ms. Pelosi. Thank you, Mr. Chairman.
Welcome, Mr. Secretary. Thank you for your good work on
behalf of our country in this capacity. As ranking on
Intelligence, we are all very, very proud to work closely with
the administration in the war against terrorism.
This supplemental is a very important one. I want to
associate myself with the concerns raised by our ranking
member, Congresswoman Lowey, about the fact that the funding
that the President had suggested, which will help us alleviate
poverty, alleviate the despair among peoples of the world, that
is so important in our fight against terrorism, is not--would
not begin until fiscal year 2004. Mrs. Lowey made that point; I
want to reinforce it with you.
I have very serious concerns that there is no funding for
HIV-AIDS in this supplemental, which is indeed an emergency and
has a very responsible place in an emergency, the supplemental.
I think that point has been made by others, as well.
I want to take this occasion and use my time though, Mr.
Secretary, to ask you a question that is very bothersome to me.
As I say, we all stand shoulder to shoulder with President Bush
in the war on terrorism. As you know, I have worked closely
with the administration in that regard. That was why I was so
disappointed last week when the administration was ambivalent,
or even cavalier, in response to the coup in Venezuela.
Promoting democracy in the world is an important pillar of
our foreign policy. Certainly it is a value in our hemisphere.
And I talked with my colleague, Congressman Callahan, when he
was chairman and I was ranking, we visited President Chavez in
Venezuela and we know full well, speaking only for myself, the
challenge that he presents to U.S. interests. This is no
defense of President Chavez, but it was a defense of
democratically elected governments.
I would like to ask you a couple questions. One is, did we
have any participation in the coup d'etat? And secondly, why
was not the administration's response to a coup in our
hemisphere more forceful and reported to a constitutional
process? The leader of the coup, upon assuming power, dissolved
the legislature, dissolved the supreme court, abolished the
constitution and said there would be no elections for a year.
I know our policies are always rooted in constitutional
reform and a democratic--respecting democratic processes. So
this coup did not represent that either. And yet the
administration, as I said, was at best cavalier, and at worst,
I think, dangerous to our interest in the nature of the
response, a reaction that was not shared by any other country
in the hemisphere.
Could you comment on this?
Mr. Armitage. Yes, ma'am. Thank you very much. I was
taught, and I believe this administration embraces, the feeling
that where principle is involved, we should be deaf to
expediency. And I think that the formulation of our statements
surrounding this event in Venezuela were not what they should
have been. They certainly don't appear to be in hindsight. But
like the music of Wagner was once described as being better
than it sounded, I think our story is a little better than has
been reported.
As to a direct answer to your question, I have no
knowledge. I have asked about any participation giving
enthusiasm to this event before it hatched. I have gotten
negative answers across the board, Ms. Pelosi.
Second, the communications that our records show in the
Department for months with the Venezuelans, whether opposition
or government, were consistent in the need to follow the
constitution and constitutional processes.
The big irony for me, besides my friend, Chris Dodd, saying
there was no adult supervision at the State Department--which
kind of hurt my feelings, because I was there; the Secretary
was gone--is that we signed in Peru on September 11th a Charter
for Democracy for the hemisphere.
Ms. Pelosi. I understand that.
Mr. Armitage. Which directly makes the point you are
making. That is the irony here.
I think our public statements weren't sufficient. We are
trying to do a little better. We have worked with the OAS;
probably Secretary Powell will attend the OAS meeting to make
the points that I think you would proud to have the government
make, your government.
But as I say, it wasn't quite as bad as it was reported,
but it was not good enough for a principled nation.
Ms. Pelosi. It didn't live up to the standards that you
have set.
Mr. Armitage. I agree.
Ms. Pelosi. I am very concerned about the participation of
Assistant Secretary Reich in all of this. Do you have any
knowledge of his participation in any of this?
Mr. Armitage. I have knowledge that he was misreported in
the New York Times, that he had called the leader of the then-
opposition interim president. That was untrue. And I think that
has been corrected today in subsequent publications. He, along
with most members, certainly in the WHA Bureau, have met as a
matter of course with both opposition and government figures. I
myself have in the normal course of my business.
As I say, I have no knowledge other than strict adherence
to the constitution as the message from the United States.
Now, during that whole time, from Friday afternoon on, I
probably talked to Ambassador Shapiro five or six times
primarily, and in fact exclusively, about what was going on,
were our people safe, were the roads to the airport open in
case we have to get them out? It was kind of a confused time.
Ms. Pelosi. Well, Secretary Reich's reputation has preceded
him, unfortunately. We had hoped that there would be a change
under this administration. So I appreciate what have you said
here today. I know this conversation will continue.
But thank you very much for answering my questions so
directly.
Mr. Armitage. Thank you, Ms. Pelosi.
Mr. Kolbe. While others were delayed getting back from the
floor, I had a chance to ask a question. We will now go to Ms.
Lowey for the second round of questions.
Mrs. Lowey.
Mrs. Lowey. Thank you for your integrity and the honor
system. I appreciate that.
Mr. Armitage. Where principle is involved, be deaf to
expediency.
Mrs. Lowey. I always can count on my Chair for principle.
Thank you.
We have discussed this issue before, but I did want to
bring it up again. As you well know, when Secretary of State
Powell appeared before this committee in February, he indicated
that the administration was preparing to send a team to China
to evaluate the, as yet, unfounded charges that the UNFPA
supports coercive practices in that country.
More than 3 months have passed since the President signed
the fiscal year 2002 foreign operations bill, and more than 2
months have passed since Secretary Powell informed us of the
formation of this team. Yet there has been no progress on any
front in ensuring that UNFPA receives the funding Congress
intended for it. In my mind, this situation truly is an
unacceptable breach of the faith in which Congress negotiated
the 2002 bill with the administration.
A few questions, Mr. Secretary. First, can you tell us who
the administration has appointed to the fact-finding mission?
When are they scheduled to depart?
Well, rather than give you four at once--go right ahead.
Mr. Armitage. I also heard you, Mrs. Lowey, be very clear
in a conversation which you and I had a couple of months ago
that patience has run out and the Congress may be taking this
matter in its own hands.
My present understanding of this situation is that former
Ambassador Bill Brown, who was the ambassador in Israel and
Thailand, as well as a State Department official for years, has
been selected. There is a woman--I just can't remember her
name. And they are vetting two doctors; they want to find one
of two doctors to go. And my understanding is they will be
embarking early May for a 2-week trip, after which the report
should be issued.
Interesting to you, to me, to others, would be that a
similar British delegation from organizations who are very
skeptical about policies of the Government of China went
recently on a similar-type mission and came back with actually
very positive things to say.
And it was reported in our diplomatic traffic about the
UNFPA activities in China, just for the record.
Mrs. Lowey. I appreciate that, because it is moving
quickly.
Let me just for the record--is my time gone?
Mr. Kolbe. No, I forgot to even turn it.
Mrs. Lowey. I won't take advantage of you. But let me ask
the rest of the questions regarding that issue. And I
appreciate your response to the first question.
I shouldn't have reminded you.
If you can tell us, what would be the scope of the
commission's investigation? Where will they visit? What will
they be tasked specifically with finding out? When do you
anticipate being able to make a determination about whether to
release the fiscal year 2002 funds? Do you anticipate this
happening before the end of the fiscal year?
Once again, let me just say, many of my colleagues and I
have made absolutely clear--and I know that you understand
this--that this is a priority item for us. Nonetheless, it is
clear that the administration has stalled in acting on specific
requests to release these funds. I hope you are not trying to
run the clock out until the next fiscal year.
Mr. Armitage. If we try to run the clock out, we will find,
as a matter of legislative directive language, I think, that is
very well understood. So I don't believe that is what is going
on.
In preparation for this hearing, I asked a few questions,
as you would imagine, because I knew you were going to be here,
and I know, because of your many phone calls to me, what is on
your mind.
I haven't seen the scope of their investigations. A 2-week
investigation, I think, will allow them to make sort of visits
where UNFPA is very active and, of course, just check with
themselves if abortions are in any way involved in UNFPA
activities. I am very hopeful that they will come back very
rapidly and allow us to spend not to exceed $34 million for
UNFPA activities.
Beyond that, I will take the question for the record and,
as expeditiously as possible, provide you a full answer. But we
in the administration are not trying to run out the clock.
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Mrs. Lowey. I know that.
Mr. Armitage. It is not in our self-interest because, as we
have discussed----
Mrs. Lowey. Just want to conclude that conversation because
you and I, I think, understand each other. We have had several
conversations on this issue.
But given that this was a bipartisan negotiation, given
that there was an agreement, given that there was an
overwhelming vote in the House on this issue, it really raises
unnecessary questions of the government's good faith in
negotiating other issues. Because to take 2 months to appoint
someone to go, and now you say--and I appreciate that it is
scheduled to leave in May; I would hope that shortly, almost
immediately after its return, the information would be
absorbed, and we can move ahead on what I feel is a very
critical program.
And, in fact, one of the first appropriations that was made
to Afghanistan was $600,000 for family planning. And most of us
understand how very important that is for poor women around the
world. So I would hope that you will accept these questions and
these comments, the way they are meant, and that we can move
forward on this issue as soon as possible.
Mr. Kolbe. If the gentlelady would yield, I would point out
to the Secretary that this is 1-year money, as the gentlelady
suggested about running out the clock; and that at some point,
you will run afoul of the Budget Impoundment Act, because it is
against the law to not spend money for policy reasons. So you
will be up against that at some point, very quickly.
Mr. Armitage. I appreciate that, sir. I know very well of
the arduous negotiations and the Mexico City language that went
into this terrific compromise.
Mr. Kolbe. Thank you.
Mr. Lewis.
Mr. Lewis. Thank you, Mr. Chairman.
Mr. Armitage, your 2003 request involves a total of just
over $16 billion. Within that package, to Israel, there is $2.7
billion proposed, and Egypt, $1.916 billion. My question
relates to the whole time that we have been involved in the
peace process, roughly 1979 to today, my figures indicate that
to Egypt has gone some $51.65 billion; to Israel, some 74.35
billion--a total of over $125 billion.
Two piece question: First, I can't see any significant
evidence of improvement of the economic circumstances of
average people, especially poor people, in Egypt during all
that time. And I am worried about stability there. Clearly,
economic opportunity, et cetera, ought to be a part of these
kinds of economic flows, and I don't see much evidence of that
at all. So if you would, address that question.
The second piece goes to Israel, where we are hoping these
monies lead to stability; and yet one of the major problems in
our difficulty there right now is the horrid circumstances of
the people who are in the West Bank largely, but who operate
within Israel as well.
The Palestinians are living in horrible conditions. They
have been the core of this confrontation. We ought to be
criticizing those pools of oil money for their lack of support,
but what have we done or what have our dollars done to help
overcome that circumstance?
Mr. Armitage. I think it is a two-part question; it is kind
of a many-part answer.
In the first--and I don't mean to be trite--the fact that
we haven't had conflict between Egypt and Israel is a
noteworthy event. But there is more to it. We have
successfully, on the military side, weaned the Egyptian armed
forces completely off, almost completely off the former Soviet
systems; and they are compatible with our systems, which both
helps us, as it did in the Gulf War, in compatible warfare, but
I also think is a guarantee that Egypt wouldn't be starting a
war because of the supply chain.
I am as despondent as you about the lot of the Egyptian
people. There are a lot of them. There are a lot of them. And
the bureaucracy in Egypt, we were joking about our own--it
makes ours look like greased lightning and then adds to, I
think, the malaise and the difficulty for ordinary Egyptians.
I can't speak to what an Egyptian would say, who has gone
to school here, who has benefited from some of the programs
that AID has put into effect, some of water purification, how
many Egyptians live because of some of those things, that
wouldn't have otherwise. I just don't have the figures. But I
suspect it is significant and yet somewhat invisible in terms
of something that you can see that betters the lot of the
people.
And Israel, the fact, on the military side, that we have
been able to maintain the Israeli military and technological
edge, is dammed important, I think. It has, I think, kept the
peace in the region for years.
Second, on the economic support front side--I think Israel
is taking another 50,000 Soviet Jews, for instance, this year.
And look at the immigration to Israel. It is very much, since
money is fungible, our funds and support for Israel that allows
the country to grow and have a future.
The money for the West Bank, as the chairman correctly
points out, does not go to the Palestinian Authority; is goes
to the people of Palestine. They are in difficult circumstances
now, and in many areas, they are in worse circumstances than
before. If we get a political processgoing, certainly we will
be coming back to you, sir, looking for money for the Palestinians, not
for the PA but----
Mr. Lewis. Mr. Secretary, when I was a newcomer here in
1979, I had just recently spent a good deal of time in Israel.
And that horrendous maze of their politics, a lot of the debate
then was saying, what do we do about stopping the desire to
extend into the West Bank, the development of communities, et
cetera, et cetera? I mean, that was really one of the thrusts
of the majority-minority debate, and there was support on both
sides to not do very much.
Clearly, that debate went nowhere because there has been
nothing but expansion. What has this money done to impact that
sort of policy, that literally has been a major source of
unrest, the expansion of the West Bank?
Mr. Armitage. The settlements particularly are a major
source of unrest. And I don't think there is a truthful answer
to you other than, I think that for a lot of reasons,
complicated reasons--some historical, some political--there has
been a reluctance to be very heavy handed with Israel. Because
we have no better ally and friend in the region, I mean, I
don't know what to say.
I don't think that heavy handedness works, actually. I
think we have to be able to develop the proper amount of
confidence in the Israelis that we are not going to leave them
in the lurch, and try to work with them, as Secretary Powell
was trying to do this week, to come to a better way of living
and to realize the vision that the Secretary, but more
importantly, the President laid out at the United Nations of
two states, Palestine and Israel, side by side, living in peace
with secure borders.
Mr. Lewis. Let me just submit that the oil centers of
control have conveniently used the Palestinians as their foil.
It might be that our tendency to be more than gentle, relative
to Israel itself, perhaps has made that foil much more
effective, as well as convenient.
Mr. Armitage. Well, we have certainly been a lot more--the
United States Government, Congress, the people have been a lot
more supportive of the Palestinian people than many of their
so-called supporters in the Arab world, in terms of money
provided and, I think, in terms of actually caring about the
welfare of and the aspirations of the people.
Mr. Kolbe. Thank you. Ms. Kilpatrick.
Ms. Kilpatrick. Thank you, Mr. Chairman. I was going to go
to Colombia, but I have got to stay on Chairman Lewis's just a
moment. 1979 was 25 years ago when I was entering the Michigan
State Legislature, where I served for 18 years, and the same
expansion of the land, encroachment of what the Palestinians
believe is their territory is a reason, one of the reasons why
we are in the predicament that we are in. No easy answers to
that, but we must acknowledge that that is really part of the
problem, and until we deal with that--and of course Israel is
our ally and I am not trying to take sides. I think America
ought to be a negotiator, a broker. I don't think we should
take sides at all. That is another problem.
Having said that--that was my editorial comment--Colombia,
since 2000 money has been spent--$2.5 billion have been spent.
Defense really administers 80 percent of it. State Department
gets 20 for humanistic, humanitarian needs. Relocation is what
I want to get to. Is there something or is there a document
within the State Department--and someone did come over and
brief me verbally. I still haven't received anything in
writing--that says how and where your 20 percent of that
humanitarian assistance has been spent in terms of putting
people back into their land? They have been dislocated because
we have moved their crops. Can you give me an update on that?
Mr. Armitage. Yes. There is a document and there are
probably lots of documents that we would be glad to provide to
you, and I think that most of us in the Department have come to
the conclusion that the alternative development, which I think
you are speaking to, has not been as successful in Colombia as
we had hoped. Perhaps we didn't have the right partners.
Perhaps we didn't understand the problems significantly enough,
and we are trying to work through that. But I don't have--
unless one of my colleagues has the figures with me right here.
Ms. Kilpatrick. If you could get back to me.
Mr. Armitage. I would be more than happy to, ma'am.
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Ms. Kilpatrick. The problem I have as a Congressperson, and
I support whatever we can do to eradicate drugs in America--I
have said it before, it is the cancer of America, of the world
really. Seventy percent of cocaine comes from Colombia. We must
do something about the interdiction, but we also have to do
something about treatment on demand in America, which is
getting further and further away from the people who need it.
So as an appropriator and a person who represents the City of
Detroit and surrounding areas, when I see people who are
addicted, for whatever reasons, and cannot get the drugs and
the drugs continue to flow and the families are devastated,
children don't have--you know, a ripple effect, it is hard for
me to continue to support on the one hand the money that is
going to Colombia and the Andean region particularly, and on
the other hand we don't have the money in our budgets here to
fund treatment on demand. So the spigot continues to flow, but
the treatment for those who are now strung out in America and
around the world does not get the attention that it needs.
You are State Department. I know we give you what you need
and you are supposed to do what you do and I am sure you do
that. As a Congressperson, many of our own discussions among
each other, we don't see the right kind of support for
communities around America where those Colombian drugs, Andean
drugs end up.
Any comment?
Mr. Armitage. Well, I mean, as a citizen I have a comment.
Ms. Kilpatrick. Let me hear that one. That is a step.
Mr. Armitage. I am intimately involved with the problem of
drug addiction and intimately aware for a lot of reasons we can
go into privately, and I know that we have to--it is not just a
matter of shutting down the supply or the demand. We have got
to get supply, demand. We have got to have education.
Treatment on demand is somewhat controversial. In some
areas I think treatment that leads to something, and, you know,
demands a performance is probably something that is----
Ms. Kilpatrick. I wouldn't have it any other way. Treatment
on demand that demands performance. Well put. That is how it
should be.
Mr. Armitage. You know, our part of this action is in the
supply end, and we are trying to attack that and try to
encourage people to have alternative crops and things of that
nature, and I----
Ms. Kilpatrick. So the money that this committee gives you
is for alternative crops and putting people back in there, and
you have some document that can show that that money----
Mr. Armitage. And they are spraying and other things that
are involved, but it is all to reduce in one manner or another
the supply of coca.
Ms. Kilpatrick. And so on the Colombian side, the people
whose crops are now fumigated and they have been dislocated,
the funds that this committee gives you guys, you use it to put
those people and children back into their homes and other kinds
of crops they may grow, cash crops and----
Mr. Armitage. Yeah. It is what we call alternative
development, to give them other development options, whether it
is other crops, et cetera. But as I said, we haven't been quite
pleased with what has gone on in Colombia in that regard and we
are looking----
Ms. Kilpatrick. Do you have a document that we can----
Mr. Armitage. Yeah, I do, ma'am, and I will be glad to
provide it, but I just don't have it at my fingertips.
Ms. Kilpatrick. Thank you. I look forward to receiving it.
Thank you, Mr. Chairman.
Mr. Kolbe. Thank you. Mr. Knollenberg.
Mr. Knollenberg. Thank you, Mr. Chairman. Mr. Armitage,
again thank you for your assistance here this morning and your
responses. I know we have covered or been told we have covered
the India-Pakistan situation a little bit here.
Mr. Armitage. I will be glad to talk about it, sir.
Mr. Knollenberg. As you know, to some extent it hasn't
dropped off the radar screen but it certainly isn't as high as
it was, for good reasons. These two countries, both of whom as
you know have nuclear capabilities, really they are still
locked in a standoff. At the present time they have a million
troops, I understand--if that is not correct, challenge me--but
on the border, and that is a little bit of presence, I would
say. I think we have to keep our eyes on what is happening over
there.
The question I would have for you--and you haven't answered
this. If you have already, you can embellish it even further.
But what is the administration doing to sustain the momentum in
our relationship with India? And I know why of course on the
India-Pakistan money choice, there is some 145 million in the
supplemental 2002 bill that went to Pakistan. Obviously there
was none for India. And they are aware of that, I know, and
that doesn't mean that we shouldn't be doing what we are doing,
but it is a question I wanted toraise. And then for the 2003
request, they have bumped theirs from $145 million to Pakistan to $305
million, a sizable jump, which is substantially over what the India
request is, which is 242. So what is the administration doing to
sustain that relationship or the momentum in our relationship with
India?
Mr. Armitage. You know, there is a great irony. When
Director Webster was Director of the Central Intelligence
Agency, in his last testimony before the U.S. Congress he said
that in his view--this was 12 years ago--in his view, the most
dangerous, volatile situation in the world was on the India-
Pakistan border, particularly regarding Kashmir. I think that
recent events, particularly from January on, have shown that he
was right then and he is probably right now. The specter of two
nations shouting and shooting and glaring at each other over a
disputed territory is not exactly unknown, but when they are
armed with nuclear weapons and they are having that kind of
engagement, then there is a real bad recipe.
The President, Secretary Powell particularly, Secretary
Rumsfeld, have worked with both President Musharraf and most
particularly with External Affairs Minister Jaswant Singh to
try to bring the level of terror, if you will, down on the
border. And although the Indians are still in large measure
forward-deployed, some of the Pakistani units, as I indicated
earlier to the chairman, have started to go back towards their
western border or to more traditional locations.
In terms of our relationship with India, the President
stated, laid this out at the Ronald Reagan Library before he
was President, that one of his major endeavors was to have a
relationship with the nation that is soon to be the largest
nation in the world, will soon surpass China. It is, as you
correctly point out, a nuclear power, but, as is often not
pointed out, it has the largest and fastest growing middle
class in the world. Multi-ethnic, multi-religious democracy,
sounds pretty good. And we have sent Ambassador Bob Blackwell
out there with pretty specific instructions about improving
this relationship. We have had Prime Minister Vajpayee here. We
have also had the opposition here. I had Sonya Gandhi in not
long ago to discuss with her the opposition's views of the
direction of India, and I think that you will find that whether
you are an American government official or an Indian government
official, you are pretty confident that we are moving in a
pretty new direction. We have recently--Mr. Lewis will be
pleased. We have made some sales of defense equipment there
that were reported in the press, which is rather relatively
unprecedented for us.
Mr. Knollenberg. The war on terrorism obviously has taken
the focus away from perhaps what it was before, and the balance
obviously between Pakistan and India is one that I am sure the
State Department is concerned about. I am sure the President is
concerned about it as well.
Mr. Armitage. What we are concerned about, sir, is if you
look at South Asia, we have never had a balanced policy. We
just haven't. And we had a policy, however, that I think people
couldn't be confident of. For instance, our relationship during
the 1980s, when things were great with Pakistan, was not about
Pakistan. It was about the war in Afghanistan. And so in a way
it was a false relationship, and what the President has tried
to do both with India and Pakistan is have a relationship that
is about them.
Now, clearly the war on terrorism gave us the entre now
with Pakistan, but we are trying to be sincere with our
Pakistani friends that we want a relationship that is about
Pakistan. It is not about your relation with India or your
relations with Afghanistan. It is about Pakistan.
The same is true about India. It is not your relationship
with China. It is India-U.S. that we want to concentrate on,
and that seems to have some resonance.
Mr. Knollenberg. I appreciate that. It is well said, I
think. Thank you.
Mr. Kolbe. Thank you. Mr. Jackson.
Mr. Jackson.
Mr. Armitage. I have some answers to Mr. Jackson's
questions. If he wants more, I can provide them later.
Mr. Jackson. Before I say anything which would count
against my 5 minutes, why don't you go ahead? Don't turn that
thing upside down, Mr. Chairman. We will wait for you.
Mr. Armitage. No. We made some calls while you were at
break, sir.
Mr. Jackson. Thank you.
Mr. Armitage. There are----
Mr. Jackson. He started my time. Go ahead, sir.
Mr. Armitage. There are 120,000 American Israelis in Tel
Aviv and 280 in Gaza, and we have 90,000 in Jerusalem,
primarily in the West Bank, the Palestinian Americans. And in
particular answer to your question, what we did during the
recent problems is with the assistance of the Israeli Defense
Force, we had organized a convoy out of the disputed areas to
bring people--which our Consul General Ron Slichter and others
took part in--to bring people out who wanted to leave the areas
where there was fighting. But I still owe you more answers and
I will provide those.
Mr. Jackson. I appreciate that, Secretary Armitage.
Mr. Lewis indicated that when he came to Congress in 1979,
there were some significant discussions on both sides of the
aisle about the territories. Representative Kilpatrick said she
was entering the State Legislature in 1979, and she was well
aware of those debates as well in the State of Michigan, which
has a very large Arab American population. In 1979, I was
entering elementary school or high school. I don't mean any
harm. But I am wondering, given that that is 25 years, and I
have heard over the course of this debate that the occupation
has been a 35-year proposition, I am wondering does the United
States Government see the occupation over the last, let us say,
25 or 35 years as a contributing factor in the present
escalation?
Mr. Armitage. I think, sir, we go back a lot further than
35 years ago to find contributing factors, to--and I am not
being trite--to actually the dissolution of the Ottoman Empire.
To some extent what you are seeing in that whole region are the
aftershocks of the Ottoman Empire's dissolution. That was 80
years ago, which has a different set of questions about the
Soviet Empire and other empires as they dissolve, how long you
feel aftershocks. Clearly settlements, probably in the main,
and occupation is a factor. But equally clearly a factor that
Israelis take into consideration every day is they want to live
a life in secure borders themselves, and I don't think the
situation gives itself to simple answers. I am not suggesting
you are suggesting it does, but there are lots of factors.
Mr. Jackson. But my question is specific about how the
United States Government views the occupation.
Mr. Armitage. Well, the government has, as successive
governments have, talked about settlement policy and
occupation. It is the reason we have engaged in so many
negotiations and attempts to resolve the question as a broker.
I am not sure in a way that we can, as Ms. Kilpatrick
suggested, be a completely honest broker. We are interested. We
are not a disinterested party. But we are interested in
fairness, but we are very interested in the survival of the
State of Israel, too. But I think we are the only broker that
can have any effect on this situation, and that is why everyone
has encouraged us to jump in with both feet and the President
dispatched Secretary Powell to the region.
Mr. Jackson. Mr. Secretary, 5 years ago the Foreign
Operation Subcommittee reached agreement for reductions of
economic assistance to Egypt and Israel over a 10-year period.
Egyptian and Israeli aid reductions were in a 3 to 2 ratio.
Egyptian military assistance was to be maintained at a constant
level. Israeli military assistance was to increase
approximately $60 million a year. After 5 years, some Members
are suggesting that our understanding with the Egyptians should
be changed. They suggest more economic assistance should be
given and military assistance should be reduced. Would reducing
military assistance to Egypt and increasing economic assistance
be in the national interest of the United States?
Mr. Armitage. I have had these discussions with Mr. Lantos
and others, and I don't believe it would be at this time. I
believe the best solution would be something that is arrived at
mutually between Egypt and the United States, and I know that
in our discussions with the Egyptians this has not been
something that they found favor with, sir.
Mr. Jackson. Would reducing military assistance be a
benefit to the U.S.-led war against terrorism?
Mr. Armitage. I can't imagine that it would. I think it was
in large measure the fact that we had a robust military
assistance program with Egypt, that we were able to cooperate
with them in the past, 10 years ago, and we may be able to
cooperate with them and interoperate with them in the future.
Mr. Jackson. I thank you, Mr. Chairman.
Mr. Kolbe. Thank you. My colleagues get to ask all these
fun policy questions. So it is left to the chairman to ask
these nitty-gritty questions about the bill itself. So I have
got a couple of these kind of boring questions here for you,
Mr. Secretary.
One has to do with the fact that other than some of the
monies to Afghanistan, all of the funds in this supplemental
request would expire at the end of the current fiscal year.
Mrs. Lowey touched on this. In other words, if they are not
obligated, they are going to get returned to the treasury. And
certainly we expect, because it is labeled an emergency
supplemental, it is going to get obligated as quickly as
possible. We want State Department and AID to do that, but we
also want to assure that important funds aren't going to be
lost if funds are delayed.
You know, we are not going to get this bill done, at the
very most optimistic, until June enacted into law, maybe July.
Is that going to give you enough time to fully obligate all of
the funds you have requested? Does it make any sense not to
keep the extended availability of these funds beyond the fiscal
year into fiscal year 2003?
Mr. Armitage. OMB, sir, wanted to keep discipline in the
administration, and that is why they put the very tight time
constraint to make it clear that this one was an emergency
supplemental. Two, we needed it now, and we couldn't wait until
the completion of the 2003, and that is why the time
constraint. If the committee and the Congress in its wisdom saw
fit to give a little flexibility, I think it would be great.
Mr. Kolbe. Well, it might not be for all of the accounts,
but it might be that there are some that will need that, and
you will know more of that as we get closer to the end of this
process. And as we do in the conference, it would be useful for
you to give us a list of those funds which may need to have the
extension of time.
Mr. Armitage. I very much appreciate that, Mr. Chairman.
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Mr. Kolbe. I would ask you if you would do that.
And the other question that I wanted to ask has to do with
the legal authorities that are involved here. Throughout the
bill, the language here, there is the phrase ``notwithstanding
the other provision of law,'' and we certainly are not trying
to constrain the administration in its prosecution of the war
against terrorism, but we also want to make sure that the
authority is used appropriately. It is my understanding that
the primary problem you face in obligating funds is the Brook
amendment.
Mr. Armitage. Yes, sir.
Mr. Kolbe. The one that is contained in the foreign
operations acts, and there is a similar statement in the
foreign assistance act, and I am talking about the provision
now that prohibits assistance for countries that are delinquent
in their debt.
Mr. Armitage. Yes, sir. Afghanistan and Ethiopia I think
are the area----
Mr. Kolbe. Yemen, I believe.
Mr. Armitage. Yemen probably.
Mr. Kolbe. Ethiopia. If we limit the waiver provisions to
the Brook amendment, could the administration obligate funds
consistent with its budget request?
Mr. Armitage. Well, I believe in Cote D'Ivoire, there are
also some--and I don't know the title of the law, but there are
restrictions on coups, and the coup was sometime ago. We are
not able to move forward yet, and so at least in Cote D'Ivoire
I think we need a little help.
Mr. Kolbe. I was just looking myself here to see where we
have Cote D'Ivoire. There is $2 million, yeah, border customs
support.
Mr. Armitage. Yes, sir.
Mr. Kolbe. Well, I think there is going to be a view on the
part of--I shouldn't try to speak for Mrs. Lowey, but I think
on this subcommittee to limit the waivers as much as possible.
If there are other places other than that Brook amendment that
applies to the countries just mentioned, it would be helpful if
you could tell us where we would run afoul of being able to
obligate these funds in other places.
Mr. Armitage. That is very generous of you, Mr. Chairman.
Thank you.
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Mr. Kolbe. Because I think otherwise you are going to find
yourself with just not getting the waivers there.
Mr. Armitage. That is very generous. I appreciate it.
Mr. Kolbe. So if you would do that, I appreciate it.
The last question I will ask has to do with Jordan. I will
also have a couple more for the record. We have a country that
has been very supportive and given us a tremendous amount of
help. I think helpful at least, if not perhaps most, in the
sense that they have not tried to inflame the situation in the
Middle East. I think that has been extremely important given
the large number of Palestinians that live in Jordan. And so I
think we should be very grateful to King Abdullah and his
administration for the attempts that they have made to mediate
peace in the region and to certainly counter the impact of the
extremist elements.
There is a request in this for $125 million, and then in
the 2003 budget the request has another $250 million through
the ESF, $198 million in military assistance. I certainly
support these requests, but I have concerns about what the rest
of Western Europe and Asia is doing in their share to support
Jordan. I think 15 percent of the budget for Jordan is
allocated to international debt service. Much of that is held
now by Western European countries, maybe some of it by Japan.
We have forgiven most of our debt over the years. Can you give
me any indication of that? What is the status of Jordanian debt
restructuring or forgiveness by Western European countries or
Japan?
Mr. Armitage. I cannot, and I will provide it for the
record with your permission, sir.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Kolbe. I would appreciate that.
Mrs. Lowey.
Mrs. Lowey. Thank you, Mr. Chairman. I am going to ask a
question about Indonesia, but before I do, I am sorry Mr.
Jackson left because I just wanted to make a very brief
statement on the Middle East. And I think it is important to
remember if we are looking historically that the Israeli people
have been talking about peace, looking for peace, not since
Oslo in 1993, as you well know, but for 54 years since 1948.
Mr. Armitage. Independence Day.
Mrs. Lowey. Since the establishment of the Jewish State,
and I think that is very important. And the Israeli people
today, as you well know, are willing to give up land. They are
willing to share in economic bounties. They are willing to
share in technology. They really are focusing on normal
relations. They want to bring about an end to the hostilities.
They want to return to peace and security in the region. And I
think it is important to remember--and I just happen to have a
quote from David Ben-Gurion, Israel's first Prime Minister,
1948, ``We offer peace and amity to all neighboring states and
their peoples and invite them to cooperate with the Jewish
Nation for the common good of all. The State of Israel is ready
to contribute its full share to the peaceful progress and
reconstitution of the Middle East.''
They have been ready for peace for a long time, and I do
hope that with the good efforts of this administration, and I
would say all the parties in the region, I do hope we are
putting sufficient pressure on the Saudis, on the Egyptians to
stand up and work for a negotiated settlement to bring peace to
the region. I don't know whether Arafat wants peace, could make
peace, can make an arrangement. I don't know. He gave up a
pretty good deal that Barak offered him last time around. But I
do know that unless the Egyptians and the Saudis and the
Jordanians are willing to stand up and support a settlement
that is leveraged by the United States, I worry about the
future of that region.
Mr. Armitage. Because the administration agrees with you,
we do think the people of Israel are willing to give up land
for peace. It is the basis of U.N. resolutions 242, 338, and
successive Israeli governments have embraced that, that we
continue this search. Thank God for Harry Truman.
Mrs. Lowey. And I thank you for your efforts.
Quickly, with regard to Indonesia, I have indicated before
the $8 million requested in the peacekeeping account for
Indonesia amounts to military assistance in my judgment under a
different name, and circumvents the certification standards of
section 572 of the fiscal year 2002 bill.
Number one, can you explain why this request is justified
and what is the status of your ability to certify the
conditions of section 572, and how would the provision of the
$8 million affect ongoing efforts to obtain the compliance of
the Indonesians on the conditions of section 572, particularly
bringing justice to members of the Armed Forces or militia
groups for human rights violations for East Timor?
And lastly rebuilding efforts in East Timor have stalled.
There will be a financing gap between known pledges and
upcoming needs. In light of East Timor's obvious progress on
the road to democracy and stability, why is there no request
for East Timor in this package?
And I just want to conclude that by saying for those of us
who have been very concerned about human rights violations in
East Timor and share their joy in the election of their new
president, I would be very appreciative of your responses to
these questions.
Mr. Armitage. Yes, ma'am. On the $8 million for what we
define as an indigenous internal. This is a term of art we use.
There was no intent to evade legislation. We believe that in
places like West Irion Jaya, Aceh, there have been sectarian
violence episodes. There are real possibilities of further
sectarian violence, that we would love to have a trained police
force with some civil affairs people who would be able to fall
in on these and take care of internal peacekeeping, and that
was our thinking on this. We are very aware of the human rights
abuses of the Indonesian armed forces, and, to my
understanding, there was no desire to evade that. It is only a
desire to not let the sectarian violence in those places get
out of hand. It is a specter that we can't stand.
We share your joy at the selection of Gusmao and his 90
percent win in the elections. The reason that Timor is not in
this is we didn't consider that part of an emergency
supplemental, and particularly in the global war on terrorism.
That does not mean to say that after the investment the
international community and the United States has put into
Timor that we are going to turn away from it. That is not the
case.
Mrs. Lowey. I would hope that we can have further
discussions, because certainly if we can put in dollars for the
military in Indonesia, I think we should consider funds to
provide some stability and important assistance to the good
people of East Timor who have been through an awful lot in the
last years.
Mr. Armitage. This is very true. We are really worried that
places that have sectarian violence, if I can finish the
thought on Indonesia, can become the breeding ground. Indonesia
is a tough problem for governance, being 14 to 17,000 islands--
no one gives me a correct total--in far-flung locations. It is
a tough problem that President Megawati hastaken on. It is an
open, very hospitable country. It is a Muslim country. It is one we
fear that al-Qaeda could operate in relatively freely, just, by the
way, like al-Qaeda operates until recently relatively freely in our
own, because we are a hospitable open country.
To have that openness combined with the sectarian violence
is a fearful specter for us. That is why we are trying to come
up with some way to train some internal peacekeepers.
Mrs. Lowey. I am going to conclude and submit my other
question for the record, but I also want to conclude by
thanking you for your direct responses, your openness. It is a
delight dealing with you. You are always there to discuss any
issue, and you are appreciated in case you didn't know it.
Mr. Armitage. Thank you very much.
Mr. Kolbe. Mr. Lewis.
Mr. Lewis. Thank you, Mr. Chairman. Mr. Secretary, earlier
I briefly mentioned that my job in this place, largely involves
another subcommittee. In the Defense Subcommittee we will
probably mark up the President's request of some $379 billion
for the 2003 year. I think the public should note with interest
that you were here speaking on behalf of a 2003 package as well
as a supplemental, but the 2003 package at a level of $16.136
billion, the defense package being 25 times that amount, and
yet the role that foreign assistance plays in our ability to
impact the world for peace cannot be discounted. Our public,
our constituents presume that we spend half our budget on
foreign aid of some kind. It is really important for the public
to understand that, and as other members have suggested, you
certainly do credit the institution that is our State
Department as well as our foreign policy by way of the way you
deal with this committee and others. So I appreciate that very
much.
Mr. Armitage. I am humbled by your comment. Thank you.
Mr. Lewis. Back to Colombia, just briefly, the Plan
Colombia swirls around our concern about Colombia as a source
of drugs impacting our country. That is a significant piece of
our committee's interaction currently. Colombia is known as the
world's kidnapping capital. I am not sure if our public really
understands why that is.
Would you kind of outline for me, and for the committee,
the numbers of kidnappings we have had, what we have done about
that, what success we have had, et cetera?
Mr. Armitage. Well, a part of our request, Mr. Lewis, gets
right at the anti-kidnap training, anti-kidnap prevention, et
cetera. We have had a presidential candidate, Bettencourt,
recently kidnapped. I described Mr. Uribe's recent escape from
an assassination attempt. There have been 12 of those. There
have been kidnap attempts as well.
Some of this is a business where people are kidnapped for
ransom. Others are a political business where they are
kidnapped to try to force a political change. It is a growing
concern. It is why we specifically address kidnapping in our
request for the supplemental, sir. I don't have figures on it.
They are pretty, I am sure, readily obtainable, but it is a
horrible problem. 3,000 in 2001 in Boab.
Mr. Lewis. Well, to say the least, that challenge
complicates our difficulty in all of our work in Latin America.
Mr. Armitage. Yes, sir.
Mr. Lewis. Some 50 years ago there was a textbook around
that was entitled Wanted in Asian Policy, and within one
chapter in that there was a discussion of India suggesting that
as India goes, may very well go Asia and perhaps our hope for
peace in the world. I must say your comments earlier, that
which I know of changing policy there, I couldn't be more
pleased with the raising of priority and new directions that
are taking place, specifically in that country, India.
Mr. Chairman, you have been more than helpful with your
time, and recognition. I appreciate it. Thank you.
Mr. Kolbe. Thank you, Mr. Lewis. Your questions have been
very much to the point and very helpful to this hearing today.
Mr. Secretary, I would echo the words of my good friend and
ranking member Mrs. Lowey in saying we really appreciate your
appearance here today, and we appreciate the directness of the
answers that you have given us. It is very refreshing to get a
government official, especially a diplomat, to come up and say
I really don't know the answer to that, or, gee, that may not
be a good policy answer. It is a political reason that we do
this. It is very refreshing to hear that and we appreciate the
directness and honesty of the answers you have given us. It has
been very helpful to us.
And with that, the subcommittee will stand adjourned.
Mr. Armitage. Thank you, Mr. Chairman.
[Questions and answers for the record follow:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Wednesday, April 10, 2002.
U.S. ASSISTANCE FOR COLOMBIA
WITNESSES
MARC GROSSMAN, UNDERSECRETARY FOR PUBLIC AFFAIRS, DEPARTMENT OF STATE
MAJOR GENERAL GARY SPEER, ACTING COMMANDER IN CHIEF, U.S. SOUTHERN
COMMAND
ADOLFO FRANCO, ASSISTANT ADMINISTRATOR OF LATIN AMERICAN AND CARIBBEAN
AFFAIRS
PETER RODMAN, ASSISTANT SECRETARY OF DEFENSE, INTERNATIONAL SECURITY
AFFAIRS
Chairman Kolbe's Opening Statement
Mr. Kolbe [presiding]. The Subcommittee on Foreign
Operations will come to order.
Mrs. Lowey will join us as soon as we have the vote. So she
is expected in about 10 or 12 minutes. We will start, interrupt
for the floor vote and then come back. But I think in the
interest of time, both of our panelists and of the members of
the subcommittee, and other events going on this afternoon we
need to get started.
We do have the ranking member of the full committee here.
Mr. Obey, thank you.
And, Mr. Lewis, thank you for being with us at the outset.
Let me just say, our hearing today is on a very important
topic, U.S. assistance to Colombia. It is our fourth hearing
for this year. And we are going to hear today from Marc
Grossman, who is the undersecretary of state for political
affairs; from Mr. Adolfo Franco, the Assistant Administrator
for Latin America and Caribbean for USAID. We are going to hear
from Peter W. Rodman, who is the assistant secretary of defense
for international affairs; and from Major General Gary Speer,
who is the acting commander in chief at U.S. Southern Command
in Miami.
As I said, I think this is a very timely subject, one that
is very important for us to be discussing. And I appreciate all
of our panelists for appearing today.
I support both this administration and the previous
administration's policies and requests for assistance for
Colombia. Last year funding for narcotics intervention in the
Andean region proved to be very controversial, but eventually
we did find a compromise, and we appropriated $645 million. The
President's request was $731 million for the Andean counter-
drug initiative. Most but not all of the money for economic
development, for democracy building and drug interdiction for
the Andean countries is in this account.
One could have predicted a heated debate last year about
our policy in Colombia, but no one could have imagined the
developments that have led us to where we are here today. After
nearly four years of fruitless and one-sided negotiations,
President Pastrana called off the peace process a few weeks
ago. I sympathize with the frustration that President Pastrana
expressed at that time and the frustration of the Colombian
people for this failed attempt to negotiate a settlement to a
40-plus year conflict given the FARC's mockery of the peace
negotiations by their continued kidnapping and bombing.
We have seen IRA terrorists arrested after leaving the
demilitarized zone on a renewed urban and infrastructure
terrorist campaign.
Earlier this year a report that was paid for by USAID, but
written by an independent contractor, known as the Gersony
Report, came to the conclusion that U.S. drug interdiction
policies of crop spraying and alternative developments have
been equally unsuccessful. Small farmers appear to have never
intended to voluntarily eradicate their coca crops. Now, with
the release of new CIA unclassified numbers, we have to
reluctantly but honestly acknowledge that there has been a 16
percent increase in coca cultivation in Colombia.
So we have a lot to discuss today.
Some members have expressed concern with the speed that the
administration has moved in labeling the FARC and the ELN as
terrorists. But it is also important to note that the AUC, the
paramilitary group, is also on the administration's terrorist
list, and as well it should be.
I am convinced that the link between the narco industry and
corruption and money laundering and terrorism--all those links
are very real. They demonstrate the problem that we are facing
of refining and focusing our policy. It is more complicated
than simply debating whether or not we should be spraying coca
fields from airplanes.
None of this discussion of how we interdict the supply of
drugs that flows nearly unimpeded into the United States begins
to speak of the actions needed by all levels of government and
the NGOs that perform heroic deeds outside the jurisdiction of
this subcommittee, including drug treatment, demand reduction,
interdiction.
My colleagues and members of this administration, let's be
honest about our policy regarding Colombia. Let's be honest
about the complexities of the problems we face down there.
Colombia is not Central America in the 1980s. It is not Vietnam
in the early 1960s. We are dealing with terrorists who get
their funding from narcotrafficking and who thrive on the
instability they create that then allows them to get more
funding.
Most alarming, of course, is that this tremendous
instability is right here in our own hemisphere.
On March 21, the president sent to Congress a $27 billion
emergency supplemental. Included in the amount was a $35
million request for new assistance to Colombia and changes in
the law for the Department of Defense and the State Department
to allow them to use funds already appropriated in fiscal year
2002 and proposed sums for 2003 for Colombia to be available to
combat terroristactivities and the threats to Colombian
national security.
I was pleased to see that the President requested these
funds remain subject to what is known as the Leahy amendment,
for human rights review. The administration also proposes to
retain the personnel cap and make no change in the cap that now
exists on the number of military and civilian personnel that
are in Colombia.
When we come back, I will ask Mrs. Lowey for opening
remarks. I want to thank our witnesses for testifying today. I
think it is the first time we have had for all four of the
witnesses before our subcommittee. And we appreciate very much
their ability to be here.
Let me ask if there is any other member--Mr. Obey, did you
have any opening comments that you would like to state, make?
Is there any other member? If not, I think we can get
through--we would like to advise you that your whole summaries
will be placed in the record. So perhaps we can get through at
least one of the opening statements. Please summarize and we
will go with the following order: Mr. Grossman, Mr. Rodman, Mr.
Franco and General Speer.
Mr. Grossman's Opening Statement
Mr. Grossman. No, I understand. I understand. I have often
been known as talking very fast, but I will see if I can do
this in seven minutes at least to convey to you as much of the
overall policy as I possibly can. And, of course, I am very
very pleased to be joined by a number of colleagues on this
table.
First of all, Mr. Chairman, Members, it is very, very
important that you invited us here to testify today on
Colombia. Mr. Kolbe, as you said, I think it is time to be
honest about our policy. I think it is time to tell exactly
what we are doing, what it is that we have accomplished, and
also to talk about the future.
For me, this comes down to one thing, which is that
Colombia matters to the United States. Congress has been a key
partner in our efforts to help Colombia defeat the demons that
it now confronts in narco-trafficking, underdevelopment, human
rights abuses and terrorism.
One other point I would like to make by way of
introduction: Many members of this subcommittee have traveled
to Colombia, and I thank you for that effort. Those of you who
have not traveled to Colombia, I would really urge you to do
so. Because you really are, for Colombians, real
representatives of what we believe in, in trying to make
progress on democracy, security and prosperity in Colombia.
I would also like to thank the Chairman and Members of the
subcommittee for the strong support that we have received over
the years on these issues. Whether it was a bipartisan
resolution that was passed after President Pastrana made his
decisions or, as Chairman Kolbe outlined, the money that you
have provided over these many years.
As Chairman Kolbe said, on March the 21st, we came here and
proposed, through a supplemental, some changes in law and
regulation. We did that because we have come to believe, as
Chairman Kolbe said, that the problems of narcotics and
terrorism in Colombia are connected. And exactly as the
Chairman said, we seek these new authorities because we believe
that we can do a better job. More importantly we believe the
Colombians can do a better job in dealing with their problems
if we have this increased flexibility.
I also want to highlight the points that Chairman Kolbe
made, which is to say that our proposition would not in any
way, shape or form seek to obviate the Leahy amendment. We want
to continue to vet all of the people that we train; we think
that is a very important thing for us and for Colombia.
Secondly we do not in any way seek to exceed the caps in what
is known as the ``Byrd amendment'': 400 people on the military
side and 400 U.S. civilian contractors.
I look forward to discussing this with you today, because
when we were doing consultations late last year, and again
earlier this year, what members said to us was, ``Do not
stretch the definition of counternarcotics. Do not play games
with the money that we have given you.''
All of us who have sat in interagency meetings have talked
to our principals about this, promised each other that we would
not do that and that we would come to you straightforwardly and
say, ``We want to make a change in what we want to do.'' Now
the question is what will you do, and what the outcome will be.
The reason we have asked for this is because the invitation
was there, and also the instruction was there not to play games
with the money we already had.
Mr. Chairman, I think it is very important to take an
overview here on what we are trying to accomplish in Colombia,
which is a hemispheric vision of democracy, prosperity and
security. I will not go into it in great detail, but you all
know that in Quebec last year 34 heads of state and governments
of this hemisphere got together and did two very important
things.
First of all, they passed a democracy clause which said
that all countries in this region to be part of the
conversation in the Western Hemisphere ought to be democracies.
Second, they discussed an improved action plan to promote
economic prosperity, protect human rights, fight drug
trafficking and organized crime. Additionally, they also set
2005 as a deadline for the Free Trade Area of the Americas.
Democracy, security and prosperity. It seems to me that the
question we have to ask ourselves is, what good are all these
principles if they get trampled in Colombia.
For me anyway, there is an assault today on Colombian
democracy. The 40 million inhabitants of Colombia are under
assault by the three narco-terrorist groups, the FARC, the ELN
and the AUC. And these groups, with combined membership of
about 25,000 combatants, massacre, kidnap and attack key
infrastructure.
The FARC and the AUC are involved in every aspect of
narcotics trafficking. I think a very important fact here is
that the income that they derive from narcotics, about $300
million a year, is one of the reasons that they have grown both
in their capacity and in their ability to do damage to
Colombia.
I would also say that these are groups that do directdamage
to your counterparts in Colombia. The AUC has killed two Colombian
legislators over the past 12 months. The FARC has killed six Colombian
legislators and kidnapped presidential candidate Ingrid Betancourt.
Groups assassinated 12 mayors in 2001, and the FARC efforts to disrupt
the March 10 legislative elections are also well documented.
I also believe that there is an assault on Colombia's
prosperity as well. The ELN and FARC bombings of the key Cano
Limon oil pipeline cost the government of Colombia almost $500
million in lost revenue last year.
Mr. Kolbe. I am going to interrupt you right at this point.
Mr. Grossman. Yes, sir.
Mr. Kolbe. I do want you to be able to give your statement,
and this is very important, and we have just barely four
minutes now--under four minutes. So I am going to interrupt and
we are going to recess the hearing.
Mr. Grossman. Okay.
Mr. Kolbe. When we come back, we will let you complete your
statement, then I will call on Mrs. Lowey for her opening
statement.
Mr. Grossman. That is fine.
Mr. Kolbe. The order for questioning will be in the order
that we already have, as people arrive. So as you come back, we
will keep that order.
Thank you very much. I apologize----
Mr. Grossman. I will be glad to slow down----
[Laughter.]
Mr. Kolbe. It will be only one vote, I believe. It is just
one vote, so we will be back forthwith.
The subcommittee will stand in recess.
[Recess.]
Mr. Kolbe. The subcommittee will resume. We will finish Mr.
Grossman's statement and then go to Mrs. Lowey for her opening
statement.
Mr. Grossman. Mr. Secretary.
Mr. Grossman. If you do not mind, I am going to slow down a
little bit, if you will give me an extra minute or two.
Mr. Kolbe. Excuse me? [Laughter.]
We have a lot of members that want to ask questions.
Mr. Grossman. I certainly do not intend to dominate this at
all.
I just wanted to just say that, we think we have got a
hemisphere consensus on security, prosperity and democracy and
that these principles really are under attack in Colombia. They
are under attack in terms of Colombia's democracy, on security
and I would say also--on the Cano Limon pipeline--that there is
an assault by the FARC, the ELN and the AUC on Colombia's
prosperity.
As I was saying, Mr. Chairman, the ELN and FARC bombings of
this oil pipeline cost the government of Colombia about $500
million a year, which is equal to about one-third of Bogota's
spending on health for its citizens. FARC strikes against the
country's power grid in February left 45 towns, including two
departmental capitals, without electricity for days. The FARC
also attempted twice to blow up dams near Bogota, and had these
efforts not been stopped, we believe they would have killed
thousands and thousands of Colombians.
Finally, we have the question of this assault on Colombia's
security. The terrorist attacks in Colombia have resulted in
over 3,000 Colombians killed in the year 2001. Another 2,856
were kidnapped with ELN, FARC and AUC responsible for almost
2,000 victims. Again, I show you a chart, over the years, on
kidnapping in Colombia.
In the former demilitarized zone the Colombian military
recently found two large FARC-run cocaine laboratories and 7.4
metric tons of cocaine. AUC Commander Carlos Castano has
publicly admitted that the AUC receives 70 percent of its funds
from narcotics.
We believe also that the FARC, the ELN and the AUC threaten
regional stability because they regularly use the border
regions of Panama, Ecuador, Brazil and Venezuela for arms and
narcotics' trafficking, resupply operations, rest and
recreation.
It also has a great impact on us as well. Since 1992 the
FARC and the ELN have kidnapped 51 U.S. citizens and murdered
10. Colombia supplies 90 percent of the cocaine consumed in the
United States. It is estimated that 60 percent of the heroin
entering the United States is of South American origin; which
is primarily Colombian.
Mr. Chairman, I would like to talk for just a moment about
Colombia's response to this attack on its prosperity, its
democracy and its security. As you all know, President Pastrana
in 1999 put out Plan Colombia, a $7.5 billion plan which calls
for substantial Colombian investment in social reform;
judicial, political, economic reform; and modernization of the
Colombian armed forces. With your help, we have done the major
job in supporting Plan Colombia.
Since July of 2000, the United States has provided Colombia
with $1.7 billion to combat narcotics' trafficking, terrorism,
strengthen democratic institutions and human rights, foster
socioeconomic development and mitigate the impact of violence
on Colombian civilians.
The question is, have we had any success? While you were
out, sir, I was talking to Congresswoman Lowey and I promised
her I would give her some examples of where we believe, since
July 2000, we have had some real success in supporting Plan
Colombia.
First, we have delivered to the Colombian National Police
eight of the 11 helicopters to be provided under Plan Colombia,
and the Colombian military has received 35 of the 54
helicopters that it is programmed to receive.
Second, the government of Colombia has extradited 23
Colombian nationals to the United States in 2001; an
unprecedented level of cooperation, and I draw your attention
to that chart on extraditions. And I believe that the reason we
have had this increase in extraditions is the increased
engagement we have had with Colombia.
Third, we have trained, equipped and deployed the Colombian
army's counternarcotics brigade which destroyed 818 base
laboratories and 21 HCL laboratories and provided security for
our aerial interdiction operations in southernColombia. General
Speer perhaps will talk more about this. But this unit, operating as
part of Joint Task Force South, is judged to be the best brigade-sized
unit in the Colombian military.
Next, Colombians and Americans sprayed a record potential
84,000 hectares of coca cultivation last year, up from 58,000
in 2000, and we have set a goal of 150,000 hectares in 2002,
and I call your attention to the chart.
Mr. Chairman, if I also might say, I took note of the point
that you made that there is an argument now about what the
right numbers are in terms of this, in terms of the spraying,
and I can tell you that the Office of National Drug Control
Policy, at our request, has asked for an outside expert to come
and see if we can sort out what the right numbers are, and I
hope that they will do that soon.
Another on my list of 11 is that, through Colombia's
Ministry of the Interior, we have funded, since May 2001, a
program that has provided protection, like our witness
protection program, to 1,676 Colombians whose lives were
threatened, including human rights workers, labor activists and
journalists.
We have also funded early warning systems which alert the
Colombian authorities to threats of potential massacres and
other human rights abuses, enabling them to act in advance. To
date we have already used this system 106 times.
Next on my list, the United States, working with
nongovernmental organizations and international agencies, have
provided assistance to 330,000 Colombians who have been
displaced by violence since mid-2001. We have a program to help
demobilize child soldiers. We have a program to help the
government of Colombia reform its administration of justice
system. We have opened 18 houses of justice which provide cost-
effective legal services to Colombians who have not previously
enjoyed access to the country's judicial systems.
We are also helping municipalities increase their ability
to manage their policies and their funds. We are working
closely with the prosecutor general's office to set up human
rights units throughout the country to facilitate the
investigation and prosecution of human rights abuses.
Furthermore the prosecutor general, as many of you know, was
here a couple of weeks ago, and we had a chance to talk to him
about the progress we are making in that area as well.
So there are 11 things that I think we have a right to be
proud of, 11 things that show the way for our support for Plan
Colombia. If we can build on them, I believe we can do even
more.
Mr. Chairman, you raised the question of alternative
development, which we remain committed to, and I am going to
let Mr. Franco present to you a revised strategy in dealing
with that today.
I want to take one minute and focus hard on the question of
human rights, because it is a concern that is central to our
Colombian policy. I can tell you that in all of our meetings
with Colombians, whether they be with civilian, military or the
NGO Community, all of us at this table and all of us who
represent the United States focus in on the questions of human
rights.
As I was reporting to Mrs. Lowey, last week the chief of
the Army staff, General Shinseki, and General Speer, went to
the highest levels of the military and said that, ``Human
rights must, must, must be among the most important of your
calculations as you move forward.'' And I believe, Mr.
Chairman, it is right to say that our human rights message is
making a real difference.
The Colombian military captured 590 paramilitary members
last year and killed 92 members in combat. Eight military
personnel, including two colonels and a lieutenant colonel,
were charged in civilian courts with collaborating with
paramilitaries or committing gross human rights violations in
2001, and that list goes on.
Still, too many Colombians continue to suffer abuses by
state security forces or by terrorist groups acting in
collusion with state security units, and those responsible must
be punished.
The situation--Mr. Chairman, you referred to it. Since
February 20th, the Colombian military has reoccupied the main
urban areas in the former zone. President Pastrana came to us
with three requests: he wanted increased intelligence, he
wanted help with the terrorist threat, and he wanted to do more
in terms of dealing with the FARC. We answered Pastrana's
request by providing increased intelligence support on
terrorist activities, expediting the delivery of helicopter
spare parts already paid for by the government of Colombia, and
assisting the Colombians with drug eradication activities in
the former zone.
But as we consulted with all of you after the 20th of
February, you recommended to us that if we wanted to do more we
should come and seek new authorities, and that is what we have
done. We are seeking new legal authorities that would allow our
assistance to Colombia, including assistance previously
provided, to be used, and I quote from the proposition we have
made to you, ``to support a unified campaign against narcotics
trafficking, terrorist activities and other threats to new
authorities.''
Expanding the authorities for the use of aircraft and other
assets to cover terrorist and other threats to Colombian
democracy will, of course, not ensure that this battle will be
won, because they are working against multiple threats.
However, we believe that if you approve this proposition, they
will give us the flexibility we need to help the government of
Colombia more efficiently and more effectively attack the
problems that they face.
Mr. Chairman, I have already committed to you and commit to
the rest of this committee that our request for these new
authorities are not a retreat from our concern about human
rights, nor does it signal an open-ended U.S. commitment to
Colombia. As you said, we are not interested in breaking the
personnel caps, and we are also not interested in changing the
rule on vetting of the kinds of forces that we hope to train in
the future in Colombia.
Mr. Chairman, in addition to the new legal authorities, we
also seek $35 million in the counterterrorism supplemental to
help the government of Colombia protect its citizens. And if
members would like to talk about that, I would be glad to talk
about that in further detail.
Two more points and then I will stop.
First, on the peace process, we remain committed to
supporting President Pastrana in his efforts on the peace
process. We supported him when he was having the peace process
with the FARC and ELN; we continue to support the peace process
with the ELN if that is what President Pastrana wishes to
pursue.
Finally, a point about Colombia's commitment: Colombia has
got to take the lead in this struggle. Colombians needto do
more. All of our conversations with Colombia have made this a very
important point, that it is their democracy, their security and their
prosperity that is under attack and they need to do more in all areas
to try to protect it.
Mr. Chairman, all of us look forward to answering any
questions that members might have. That is to say, we have this
proposition in front of you, we have some principles we think
are very important in Colombia, and we look forward to a
conversation.
Thank you very much.
[Mr. Grossman's written statement follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Kolbe. Thank you very much, Secretary Grossman.
We are going to go next to Mr. Peter Rodman, assistant
secretary of defense for international security affairs. Oh, I
am sorry, we would like to hear Mrs. Lowey's statement first.
Mrs. Lowey?
Mrs. Lowey's Opening Statement
Mrs. Lowey. Thank you very much, Mr. Chairman.
And I, too, welcome our principal witness, Marc Grossman,
and our other witnesses to the subcommittee's hearing on our
assistance program for Colombia.
I would also like to take this opportunity to thank our
chairman for holding this hearing. As he has indicated, we
intend to address both the fiscal year 2003 requests and the
fiscal year 2002 supplemental requests for Colombia.
As we begin our discussion, I want to emphasize that I
support the efforts of the Colombian government to fight
terrorism and narcotics trafficking. President Pastrana and his
government face a daunting challenge, and I am confident that
he enjoys broad support here in the United States Congress.
However, we have an absolute duty to be clear-eyed and
realistic about these challenges, and it is in this context
that I will comment today.
When Congress first considered the request for over $1
billion for Plan Colombia about two years ago, the plan, as
represented to Congress, involved the expenditure of $7 billion
from a combination of sources, including the Colombians
themselves, the United States and our European allies. The
original plan involves a sizable obligation of economic
assistance from all three sources and recognition of the simple
fact that any long-term solution to Colombia's problems would
have to include significant new investment in rural areas of
the country.
Many members of Congress who were really quite leery of
deepening our military involvement in Colombia, supported Plan
Colombia on the basis of its balance; that is, a commitment to
economic assistance, along with the strengthening of the
military and police forces. I count myself among them.
Unfortunately, that fundamental premise has not yet been
fulfilled and our partners in Plan Colombia have not lived up
to their original commitment.
In making this statement, I acknowledge that there have
been numerous complicating factors that were beyond the control
of the Colombian government. However, as we reassess our policy
and decide whether it ought to be expanded, we should not
delude ourselves, because winning this war will take many years
and significant resources from the United States. Support here
at home for the provision of those resources over an extended
period cannot be sustained without a genuine commitment from
all elements of Colombian society.
The administration has requested open-ended authority in
the fiscal year 2002 supplemental to expand the use of U.S.
resources to directly engage the FARC in military operations
under the broad rubric of fighting terrorism. The
administration has also requested $6 million in the
supplemental to begin training and equipping the Colombian army
to accelerate its oil pipeline protection program.
These requests come despite the fact that alternative
development programs in southern Colombia have been almost
completely ineffective. The strength and reach of paramilitary
forces has increased in all areas of the country with no check
from the Colombian army, and the area of coca cultivation
increased significantly last year despite our aerial spraying
campaign. Further, no real commitment to economic assistance
and infrastructure for rural areas has been forthcoming from
the Colombians and desperately needed judicial reforms have
stalled under the new attorney general.
Spending more to fight terrorism in Colombia may be the
appropriate step at this time, but it cannot be effective
without some fundamental shift in our policy. Without
comprehensive policy changes we will merely be putting a Band-
Aid on a hemorrhaging wound.
I would sincerely hope, Mr. Secretary, that the
administration will work with Congress to alter our policy so
that we can make the necessary commitment of time and resources
with confidence. None of us will be well-served by repeating
the contentious atmosphere and divisive debates of earlier
times involving our policies in Central America.
If we take this approach, the administration needs to do
several things, in my judgment, immediately. The first is
securing a real and verifiable commitment from the Colombians
on the extent to which they are willing to alter their own
budget and policy priorities to strengthen their own military
and to provide additional resources to rural areas.
The second is a fresh examination of what direct role the
United States should play in the reconciliation process with
all rebel groups.
Finally, we must reexamine the wisdom of plans to
accelerate aerial spraying throughout the country, recognize
and act on the need to increase resources to the DEA to arrest
and prosecute major narcotics traffickers, including members of
the FARC and the paramilitaries, and address the need to
immediately reorganize their efforts to improve judicial
systems in Colombia.
These are not simple changes and, cannot be achieved in the
short term. While the fundamental shift in policy that Congress
has been asked to approve appears as a simple word change in
the law, it is likely to lead to huge expenditures and expanded
United States military deployments to Colombia.
I believe there is an opportunity, Mr. Secretary, to work
together on this, because, as I said earlier, there is broad
consensus in the Congress to help Colombia. However, we need to
have better cooperation on the part of the administration than
we have seen so far. And that translates into recognizing that
our program is out of balance at the moment, and that clear
benchmarks for action by the Colombia need to be delineated and
achieved.
My final observation is that approval of this policy change
may be premature given the upcoming presidential elections in
Colombia. How can Congress act on this fundamental shift in
policy without any assurance that the new government of
Colombia will stick to any of the objectives, the policies of
the Pastrana government? It perhaps wiser to wait until those
commitments are forthcoming before approving this expanded
role.
I thank you again, Mr. Secretary, for your testimony. I
thank you for your statement, and I look forward to the
testimony of all of our witnesses.
Thank you, Mr. Chairman.
Mr. Kolbe. Thank you, Mrs. Lowey. My apologies for trying
to brush of----
Mrs. Lowey. No problem.
Mr. Kolbe. We are going to go to Mr. Rodman for an opening
statement. Let me say before he begins, however, I am going to
ask the three remaining panelists to limit theirstatements--
their verbal statements to five minutes. I ask subcommittee members to
hold their questions to that time, and I am going to ask you to do the
same, because we are never going to get to questions unless we do that.
The full statement will be placed to the record.
Secretary Rodman.
Mr. Rodman's Opening Statement
Mr. Rodman. Thank you, Mr. Chairman. I promise to be brief.
You have my full statement.
I am pleased to be here with my colleagues, because it is
important that all of the different elements of the executive
branch that are represented here have come together in support
of this--the administration's approach, which does, as
Representative Lowey suggested, include a new element: some
modifications of our existing policy.
And if I could sum up in a nutshell, the reason why we have
come together on some new elements and new approaches is
because a lot of things have changed in the past year. It is
not only that September 11 happened and heightened our
consciousness of the evil of terrorism. In Colombia itself, I
think over the past year we have perhaps come to a better
awareness or understanding of the link between narcotics and
terrorism.
In addition, in Colombia, of course, as has been discussed,
the diplomacy that President Pastrana had committed himself to
has tragically come to a dead end. And so President Pastrana
has made, in my view, a courageous decision to draw conclusions
from the failure of the peace process and to challenge the
FARC. And that is something that cries out or calls out to us
for a response.
And lastly I would say, in our view, that the improved
performance of the Colombian military over the past year is
impressive. I think this must be at least in part the result of
the assistance that we have been providing the Colombian
military. They are able to confront the challenge more
effectively. I think if a peace process were to resume at some
point, a Colombian government would be able to conduct such
diplomacy from a position of strength.
And all of this is what leaves us in the administration,
encourages us to believe that an additional increment of
support, including the modifications we have proposed, will be
effective, will have an effect, will enable the Colombian
government, which is after all a friendly democratic
government, to establish basic security and effective
sovereignty over Colombia's national territory.
This is the position of the executive branch. I certainly
believe that a consensus between Congress and the executive is
a prerequisite for an effective U.S. policy. And it is in that
spirit that we have come here today. Thank you.
[Mr. Rodman's written statement follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Kolbe. Thank you, Secretary Rodman.
Mr. Franco.
Mr. Franco. Thank you, Mr. Chairman. I am pleased to be
here as the president's representative for USAID, and to appear
before the subcommittee. Mr. Chairman, I request that my
prepared statement be included in the hearing record.
Mr. Kolbe. It will be.
Mr. Franco's Opening Statement
Mr. Franco. Mr. Chairman, USAID is proud to contribute to
broader U.S. policy objectives in Colombia because, as
Secretary Grossman has said, Colombia needs our help.
I will try to synthesize my testimony by stating very
clearly that conducting development programs in conflicted
areas like Colombia is difficult and dangerous, but we believe
that USAID has the experience and expertise needed to succeed
despite these challenges.
Some have suggested that alternative development programs
are failing because they have not yet delivered adequate levels
of assistance in remote parts of southern Colombia. Mr.
Chairman, I am here to tell you that these statements are, in
my view, overstated. While there have been some initial
setbacks, USAID's program is on track and making progress.
So far USAID has begun work with more than 5,000 farm
families in southern Colombia and we are moving quickly to
deepen and extend our reach while continuously learning and
adapting to ever-changing circumstances in that area.
Since assuming my position as Assistant Administrator for
USAID Bureau for Latin America and the Caribbean two months
ago, I have begun the process of conducting a comprehensive
review of USAID's Colombia program, and expect to travel to the
region again in the near future.
What is clear to me so far is that there are so many
unrealistic expectations and myths with respect to alternative
development. It is essential to understand that we get past
these fallacies and concentrate on the task at hand.
Mr. Chairman, please permit me to briefly enumerate these
myths. First, that wherever coca or poppy is grown, it is
possible to substitute an equivalent cash crop. Second, coca
farmers will switch to other crops, and will not revert to
planting coca if they are simply provided with alternatives.
Third, coca growers cannot cope on their own without coca. And
fourth, that large scale assistance to provide new sources of
income, in this case to 37,000 families in southern Colombia,
can be identified, tested and delivered in one year.
Mr. Chairman, the reality in southern Colombia is much
different. There is no alternative agricultural production that
can match the income of coca leaf and coca paste production by
small-scale farmers working on a few acres of land. What can be
done to help coca growers transition to other livelihoods, is
to focus on larger job-and income-generating programs in areas
where they have a chance to work. This is something we intend
to do, and we will make adjustments. In southern Colombia, this
will require developing other forms of income and employment
besides agricultural products, and working beyond the immediate
vicinity of coca plantations.
In the interest of time, just briefly, because I know the
committee is very interested in alternative development, I
would like to talk about other aspects of our program. Of the
$42.5 million that was appropriated to USAID for alternative
development in September 2000, and depending on security
conditions, which we continue to monitor, we expect that
approximately $36 million of this total will be expended by the
end of December 2002. The goal of our multi-year program is to
gradually wean Colombia and other regions from coca and opium
poppy production, and to sustain reductions in drug
cultivations that are achieved through forced eradication
efforts.
While Colombian government efforts began earlier,
implementation of our own USAID-financed programs started only
in May of 2001 with the mobilization of a technical assistance
team in Colombia. As I mentioned earlier, the USAID program is
not one year old. We anticipate, as aconsequence of adjustments
to the program, we will meet the needs of the region by providing
alternatives such as infrastructure development, small manufacturing,
as well as intensive labor infrastructure programs in the region. These
programs will provide alternative income and employment opportunities
for farmers that erradicate coca or opium poppu crops, but we ask the
committee for the time necessary to accomplish our goals. Thank you,
Mr. Chairman.
[Mr. Franco's written statement follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Kolbe. It is well within your time frame there.
General Speer.
Mr. Speer's Opening Statement
Major General Speer. Mr. Chairman, Representative Lowey,
distinguished members of the committee, thank you for the
opportunity to represent the men and women of United States
Southern Command and discuss Colombia and other issues with you
today.
First of all, thank you for your unwavering support of
Southern Command, in not only this program, but in our
activities throughout the region. And especially today, thank
you for your support to the men and women in uniform to pull it
around the world.
It is very important.
Latin America and the Caribbean is an area of increasing
importance and significance to the United States, based on
demographics, trade, resources and the proximity to the United
States at large.
But over the last quarter of a century, there has been
tremendous progress in this region toward moving in the
direction of a hemisphere composed of a community of democratic
nations.
Much of the credit for that transformation goes to the men
and women in uniform serving in the region and their day-to-day
interaction with their host nation counterparts, through joint
exercises and training, and the opportunities for foreign
officers and non-commissioned officers to attend professional
military education in the United States, where U.S. service
members serve as a role model for the conduct of a military in
a democratic society with respect for the rule of law, human
rights and subordination to civil authority.
But many of these democracies remain fragile and face the
challenges of the region, stemming from instability and
corruption that evolves from drugs and arms trafficking,
illegal migrants, terrorism and other transnational threats.
Nowhere is this more evident than in Colombia, where the
FARC, the ELN and the AUC exact terror on the population of
Colombia, financing their activities through drugs, kidnappings
and extortions.
Colombia is important to us for all the reasons Ambassador
Grossman highlighted, and it is the lynchpin in the Andean
region, and as such, has vital interest in not only what
happens in Colombia but what happens around Colombia.
Certainly, 20 February and President Pastrana's decision to
terminate the despeje and the FARC safe haven has not changed
the landscape in Colombia. The Colombian security forces moved
in very deliberately to protect the population as they
reoccupied cities in the despeje. But the real bottom line is
the Colombian military and the police lack the resources, in
terms of manpower, mobility and air mobility, to re-establish a
safe and secure environment.
And as Representative Lowey highlighted, in order to get to
those other aspects of Plan Colombia--alternative development,
social programs, judicial reform--we first must re-establish a
safe and secure environment to let those other programs take
hold.
As we look to the region, many of the other militaries and
security forces lack the resources and capabilities to protect
their own borders. In fact, although we have had great
increases--and we appreciate your support, in terms of FMF and
IMET over the last year--FMF, over the last decade alone, has
been insufficient to provide for the sustainment of the
equipment that we had provided in the past, much less to
address legitimate modernization requirements or demands for
evolving challenges.
These are the challenges that we look forward to
addressing. And I thank you, the members of the committee, for
your support of U.S. Southern Command as we try to address
those challenges, so that we do not sacrifice the gains of the
past 25 years.
I look forward to your questions. Thank you.
[Mr. Speer's written statement follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Kolbe. Thank you very much. We appreciate all of your
opening statements.
I am going to limit myself, at least in this first round,
to one question, because we have a number of people here that
wish to speak. But my first question will be for Secretary
Grossman.
Mr. Secretary, the supplemental request the administration
sent to us of $27 billion--has $35 million for additional
assistance to Colombia. There is accelerated training for the
pipeline protection, there is funding set up for an anti-
kidnapping unit, and police post reinforcement.
In addition to the funding, the supplemental, of course,
includes some language, some fairly general language, that
would lift some restrictions on assistance for Colombia, though
it keeps the limitation that is based on human rights
performance as well as keeping intact the U.S. military and
civilian personnel caps.
Mr. Secretary, in proposing to allow counternarcotics aid
to also be used for fighting terrorism, you are asking the
Congress to give the administration, it seems to me, an
unprecedented level of discretion over policy decisions with
respect to Colombia. If that is going to be the case, it seems
to me there has to be a concurrent flow of information in
consultations with the Congress.
Yet in the supplemental transmission, beyond what I just
outlined in a half-dozen words or so, there really are no
specifics about this proposal, and I do not feel the least bit
enlightened about any new direction in U.S. policy regarding
Colombia as proposed by the supplemental.
So I ask you to be as specific as you possibly can about
which funding in this supplemental and in the current year 2002
budget and which assets--U.S. assets in Colombia does the
administration propose to use for counterterrorism purposes.
Mr. Grossman. Mr. Chairman, first of all, let me take the
general point that you have asked, which is the need for more
consultations and more conversations with this subcommittee and
with the Congress. Point taken, and I would say that also an
important point, as Ranking Member Lowey said as well. We
cannot possibly accomplish this task, as Assistant Secretary
Rodman said, unless we are working as closely as possible with
you.
I hope that you would consider this hearing to be the
beginning of that and we are glad to do as much of this, either
in public or in private sessions, any way that you want.
Second point that I would make is one of the reasons--to go
back to a conversation you and I had some weeks ago. One of the
reasons that we came forward with this change in legislation
was because after the 20th of February, when we had a chance to
consult some of you, Members said, ``Please do not pretend that
counterterrorism is counternarcotics. Do not stretch the law.
Do not fool around here. If you are going to do different, say
you are going to do different.''
So, one of the reasons that we are here testifying and one
of the reasons that we made this proposition is to put it out
on the table. The question right now is: Since the 11th of
September, have our views changed, have your views changed?
Since the 20th of February, what do we want to do different in
Colombia? We made a proposition to you, a proposition, I
believe, one that you asked for, in a sense, to make sure that
we were not stretching the laws that already existed.
The way I would understand this, Mr. Chairman, and maybe my
colleagues can help me out, is what we want to do with this new
authority is essentially to make it possible for the Colombians
to use the helicopters that have already been delivered to
fight terrorism.
Right now, if the FARC is attacking place X, Y, or Z in
Colombia and it is not connected to narcotics, we do not allow
the Colombians to use those helicopters. We would like to make
it possible for them to use that equipment--and this is the
focus of it--we would like to make it possible to use that
equipment to fight terrorism.
How we do that and the way that we would work out the
mechanism is something about which we need to consult with you,
and we also need to consult with the Colombians. Because, we
want to make sure, when we do so, as General Speer said, we are
dealing with vetted units; we are dealing with units that we
have trained; and we are dealing with information that we
believe, so that we are not creating more trouble than we are
trying to solve. But this is really a focus-in on these
helicopters that we have already given.
You ask me to be a little bit more specific about the $35
million. What I would say, Mr. Chairman, is that the $25
million in what you all know is the NADR account,
Nonproliferation, Anti-terrorism, Demining and Related
Programs, is for funding for anti-kidnapping training and
equipment group for the Colombian police.
As we showed here, kidnappings in Colombia have just
skyrocketed. What we want to do, like we have in the United
States, is give anti-kidnapping and anti-hostage groups in the
police and in the military training in hostage negotiation, to
have the right kind of equipment that our SWAT teams have, so
that they can deal with the incident with intelligence and try
to get some of these hostages back and maybe some of the
kidnappings too. That is what we are focused in on.
In terms of the $6 million for foreign military funds for
training of the Colombian military unit, we said, look, we put
$98 million in the FMF proposal for this year. But the attacks,
as we have shown you, on the Cano Limon pipeline, are happening
now. It was the judgment of our military colleagues and our
Defense Department colleagues that if we spent $6 million
today, or whenever the supplemental is approved, if it is
approved by the Congress, that we would be able to get a head
start on dealing with the Cano Limon pipeline, get some of that
more secure and get some of that money flowing back to
Colombia.
Finally, the $4 million in the International Narcotics
Control and Law Enforcement account is to help organize, train,
equip and deploy Colombian police units.
As Assistant Secretary Rodman said, if you get this all
down into one bumper sticker, what we are trying to do is
trying to allow a democratic Colombia to again have control
over its territory. All of what we are doing brings it down to
that and we want the police to be out there to show Colombian
control.
Mr. Kolbe. Well, that took up my time. Let me just ask
who--which I think you can answer in one sentence----
Mr. Grossman. Yes, sir.
Mr. Kolbe [continuing]. One follow-up. Is any of USAID or
Department of Justice monies from 2002 or prior years going to
be reprogrammed as part of this authority?
Mr. Grossman. No, sir.
Mr. Kolbe [continuing]. For counter-terrorism.
Mr. Grossman. Can I give you one sentence? We are not
seeking the authority to reprogram money. What we are
interested in is a helicopter that is already delivered, be
used for counterterrorism. But if we were to reprogram, we
would come back and seek the authority of the Congress.
Mr. Kolbe. But that is not your intention at this time.
Mr. Grossman. It is my intention, yes.
Mr. Kolbe. It is not your intention to reprogram?
Mr. Grossman. No.
Mr. Kolbe. Thank you.
Mr. Grossman. But if we were to reprogram, it is not our
intention to change the way we do it.
Mr. Kolbe. Mrs. Lowey.
Mrs. Lowey. Thank you, Mr. Chairman.
I want to follow up on my statement, Mr. Secretary. And I
would like to ask you to comment on the extent to which the
administration is willing to re-examine all the elements of our
Colombian policy in the context of the standing current
authorities to allow use of United States resources to support
military operations in Colombia. There are a couple of points
that I want to mention that I would like you to address.
First of all, your statement indicates that Colombians have
committed to an increase of 10,000 in the size of their army
and an increase of 110 million in their military budget. Even
with that, the Colombians only devote about 3.5 percent of
their GDP to anti-narcotics operations. Specifically, what are
the Colombians willing to do to increase their military and
police budgets to fight the war? And what is your understanding
about the leading presidential candidates' positions with
respect to the question of more resources and increasing the
size of the army?
Two--maybe I will just lay these three items out and then
you can just comment. What are the Colombian armed forces doing
to take effective measures to sever links, including by
``denying access to military intelligence, vehicles and other
equipment or supplies, and ceasing other forms of active or
tacit cooperation at the command, battalion and brigade levels
with paramilitary groups and to execute standing orders for
capture for members of such groups,'' as required by United
States law as a condition of receiving assistance?
And when can we expect a decision of the fiscal year 2002
budget funding with respect to the certification?
And, three, given the failure of the alternate development
plans for southern Colombia and the failure of spraying to
decrease coca cultivation, why shouldn't we stop aerial
spraying until the Colombian government, with our help and
direct input from regional and local authorities, has developed
an effective means of weaning farmers from coca cultivation
with real economic alternatives?
If you could just comment on those three areas, I would be
appreciative.
Mr. Grossman. Sure. I would be glad to, Mrs. Lowey.
If I could just take one other point out of your statement,
you rightly said this support for Plan Colombia was supposed to
come from us, from the Europeans and from the Colombians. I
would say that the Europeans, in this case, certainly still
need to do more. We are doing our part. I think it is fair to
say the Colombians are doing their part. We need to focus in on
the third part. I wanted you to know that we were listening to
that.
Let me take you through the points in turn.
First of all, I think it is clear in all of our
conversations with Colombians that Colombia knows it needs to
do more militarily to help itself. As I said in my statement,
you know, this is a Colombian problem for which the United
States, for all the reasons that we have said, needs to be
involved.
You said in your statement that you were concerned about
U.S. military deployments. One of the things that I would say
is that not a single person here has ever talked about U.S.
combat troops ever going to Colombia. This is a Colombian
problem. The Colombians need to solve it.
They need to do more. And I think we ought to have a
conversation with them about increasing this level of GDP and
also making some other changes in their military, so that not
so many people, for example, are exempted from conscription,
but more people go fight, so that they show they have the
social willpower to take this on.
In terms of the leading presidential candidates, I had the
good fortune, actually with a couple of my colleagues here, to
meet all three of the leading presidential candidates when I
was in Colombia last February. My position to them was pretty
straightforward, which was that we will continue, I hope, to
support Plan Colombia, but they need to do a lot more to
support themselves and certainly to do more in the area of
human rights. I think all three of them recognized that
Colombia needs real armed forces.
I was telling you during the break, I had a chance to meet
with a number of human rights groups there, and to a person
each one of them said that one of the most important things for
Colombia right now would be a professional, trained military.
We are the people who can help them do that.
On your third point, in terms of certification, we have
not, Mrs. Lowey, made a recommendation to Secretary Powell
about that certification, but we intend to do that soon. But
the reason we have not so far is we want the Colombians to
recognize that they have to meet the standards of the law. And
to meet the standards of the law, we have asked for four or
five very specific things. We hope that we will get those
things and we hope we will get them soon.
I myself wanted to have the benefit of hearing this
committee before we made a recommendation to Secretary Powell,
but I can tell you that we intend to make it when we are
convinced that we have got what we need from the Colombians and
certainly when we have consulted with the Congress.
Finally--although perhaps Mr. Franco--Assistant Secretary
Franco will help me a little bit here--I think this question of
alternative development, why shouldn't we stop until the
Colombians do more, is, kind of, a larger question in all the
things we are doing.
You in your statement said, ``You know, maybe we should
just wait until there is an election, see who is the next
president.'' Our challenge in all of this is that the FARC, the
AUC, the ELN, do not stop their attacks waiting for an
election. They are attacking today and tomorrow and yesterday.
Coca continues to grow and it continues to come into the United
States.
I think the assistant secretary said we have got some big
adjustments to make in that program.
But I, in my travel there, and as much as I have been able
to learn about it, am convinced, as he is, I think, that
without some spraying, without some real penalty for growing
this stuff, alternative development will not work and we will
not get our way through this.
Mrs. Lowey. My time is up, so I--we will have a chance, I
guess, to get to it later.
Mr. Kolbe. We will.
Mrs. Lowey. Thank you.
Mr. Kolbe. Mr. Obey is next.
Mr. Obey. Thank you, Mr. Chairman.
First of all, Mr. Chairman, let me simply say I want to
congratulate you personally for your performance on your trip
to South Africa. Everyone I have talked to on both sides of the
aisle indicated what a spectacular job you did in driving home
the message that needed to be driven home with respect to the
AIDS problem in that country, and I congratulate you for it.
Let me simply say, gentlemen, I know you have a tough job,
but you will pardon me if I do not approach this issue as
though I am the permanent president of an optimist club.
[Laughter.]
You ever hear of Leo Durocher? There is the old story about
Leo Durocher when he was managing the Giants and he was hitting
ground balls to Eddie Stanky in practice--infield practice--and
Eddie Stanky at second base kept dropping the ball. And so,
Durocher said, ``Stanky, give me the glove. Let me show you how
you do it.'' And the very first ball that was hit to Durocher,
Durocher dropped and Durocher turned to Stanky and said,
``Stanky, you have got second base so screwed up, nobody can
play it.''
I, sort of, think that is the way the Colombian power elite
is behaving on this issue. To me--and this is not a question,
it is just an observation--to me, the question is not whether
or not it is theoretically desirable to engage in order to try
to deal with the FARC and others who are destroying that
country. Obviously, if conditions are right, it would be a good
idea.
The question to me is whether Colombia has the capacity as
a society, as a government and as an economic and political
elite to actually do what is necessary in order to give us a
decent chance of winning. And frankly, I think our chances of
seeing Colombia produce on that score are less than our chances
of seeing the Chicago Cubs win the pennant this year. I wish I
thought otherwise, but I do not based on my almost 40 years of
observation of that society. And Ijust want to reiterate my
specific concerns.
When we fought World War II, almost 90 percent of the
federal budget was the military budget. When we fought World
War II, we had about $46 billion in total revenue in this
country, in 1944, and we spent more than twice that amount just
on the war. I do not see that kind of effort coming from
Colombia. They are providing for their military budget only
about 3.5 of GDP. You might be able to beat Grenada with that
kind of a budget, but I do not see them handling their own
military problems.
They still, as you know, have loopholes in their military
draft big enough to drive a 65-foot truck through, and their
attorney general is sleepwalking. In addition to that, while
one of you--I have forgotten whom--said that our alternative
crop program is not a failure, if it is not, I certainly would
hate to see what one looks like.
And I do not say that in order to imply that I am
criticizing you or the administration. You did not start this.
We got into this under the previous administration at the
request of the White House and the speaker.
So there is plenty of responsibility for our being
involved, and I think you have got an impossible job.
But I guess I am old-fashioned enough to think that if we
are going to commit American prestige and American money and
other American resources, and if we are going to get into a
job, we at least need to the tools to do the job. And I do not
think that Colombia is providing us with the tools. You can all
do your job perfectly, and if the Colombian government and the
Colombian political elite does not step up and do theirs, this
is futile.
And so I do not want to be a naysayer, but in my view there
is nothing that I have heard here today that does not remind me
of what I have heard many times in the past; lots of individual
items that can be pointed to to show minuscule progress here
and there, but overall, when you put the picture together,
there is nothing that comes into focus that is worth looking
at, in my view.
So I simply want to say that I remain a skeptic. I would
like to know what chance you think we have of seeing Colombia
double or more its percentage of GDP that goes into military
spending. And I certainly would like to know when you think
they are going to fix the draft problems. I would certainly
like to know when you think they are really going to show the
kind of self-sacrifice that the power elite in that country
needs to demonstrate in order to have a chance of a snowball in
Hades of winning this argument with the FARC, who I regard as
nothing but thugs and useless terrorists.
Mr. Kolbe. Would one or more of you wish to comment
briefly? Secretary Grossman.
Mr. Grossman. Sure.
Congressman Obey, I cannot compete either with 40 years of
experience or with a good Durocher quote, so I will just give
that a pass.
But, I think it is a good thing to be a skeptic in all of
this. One of the reasons that we have come here to have this
conversation with you is that all of us are taxpayers and all
of us have a responsibility, and we ought to ask all of these
questions. I mean, the chairman started this hearing by saying
we ought to be honest about all of these things, and that is
what we are trying to be. I hope you appreciate that, because
we do have a hard job, and we are trying to move our way
through this in a way that is sensible for you and sensible for
us.
You asked me three questions. First of all, when did I
think the Colombians would double spending on their military?
Only the Colombians can answer that question. I hope somebody
has heard it from you here today.
But one of the things that I would say, and I do not mean
to, sort of, press this point, but I will take my chance when I
have it, is that if we could get this pipeline back into
business and if we could get $500 million, $600 million a year
of revenue back to the Colombian government, I think it might
be a start on some of the things that they might be able to do.
Second, you asked me about the draft. As I tried to answer
Mrs. Lowey, we think in our conversation with the Colombians
that they do need to do something to slim down some of these
exemptions so that more people in Colombia take responsibility
for fighting. That is something that I know I have talked to
the Colombian ambassador about. We will continue to do so. And
we would like to see that happen as well.
Third, the question of self-sacrifice, I cannot speak on
behalf of the Colombian power elite, Lord knows, but what I can
tell you, sir, is that there was a very big difference in
attitude between my trip to Colombia in August of 2001 and my
trip to Colombia in February of last year, and that attitude
changed, I think, over September 11.
I do not know how this is going to come out, and I do not
know whether, you know, all of these things will happen on the
right timetable. But when I went there last August everybody
thought I was the enemy, everybody had questions for me,
everybody was focused in all the things we were doing wrong.
But I must say, when I was there in February, people were
much more purposeful in the need to deal with the terrorism
problem, deal with the human rights problem, and deal with
their economic problem.
So, as I say, you know, our job, all of us, it seems to me,
is to spend the taxpayers' money sensibly, and I do not want to
get in an argument with you here, but I give you my perspective
back on your questions.
Mr. Obey. My time is up, but let me simply respond by
saying this. A few years ago, after another round of
reapportionment, I inherited a new county and a new city, and I
met with the chamber of commerce and the president of the
chamber of commerce said to me, ``Obey, what are you going to
do for the city of Superior?'' I said, ``I am not going to do a
blessed thing for the city of Superior until Superior figures
out what it wants to do for itself, what it wants to be.''
And I pointed out that they were sitting there trying to
compete with Duluth. Duluth had 18 planners in the mayor's
office; Superior one half-time planner. I said, ``To me, it
does not look like a real effort.'' That has changed somewhat
since then.
But all I have got to say is, if we are going to commit our
resources and our effort and our prestige, then we ought to do
it after Colombia has demonstrated it is willing to toe to the
line, not before hand. I do not believe in buying the meal
until after I know what it is going to be and whether the other
guy has got a decent chance of picking up the check.
Mr. Kolbe. Thank you, Mr. Obey.
Let me just say, as a Cubs fan, this just might be the
year. [Laughter.]
Mr. Lewis.
Mr. Lewis. Thank you very much, Mr. Chairman.
Gentlemen, we very much appreciate your presence here
today.
I would like to begin, Mr. Secretary, by getting some
general response. The Plan Colombia dollars involve $7.4
billion of capital that flows--or is in the process of flowing
from the United States. Some of it--a good part of it spent
here in the United States for equipment, et cetera.
But could you break that out in gross numbers for me as to
how that money is being or has been spent? What percentages go
to the helicopters and equipment here in the United States?
I am interested in getting a sense for what kind of
oversight we have relative to the way that money is being used,
that is, delivered in Colombia.
And I presume, Secretary Grossman, we should start with
you.
Mr. Grossman. If I could, Mr. Lewis, I will be glad to
start out and maybe ask General Speer to help me on the
military side.
Let me take on the first and third of your points. Plan
Colombia, of course, is a $7.4 billion plan initiated by the
Colombians to which we have pledged our support and over the
years, as I have said, you and the Congress have appropriated
the money. Right now what we have done, just to give you the
gross figures, in 2001 we had in the counternarcotics area,
$154 million enacted overall; $48 million for Colombia. Fiscal
year 2002, $731 million, of which $398 million is proposed to
Colombia. I am sorry that was the proposed. The enacted was
$645 million, as the chairman said, and $380 million--I
apologize.
Then we have come to you with the supplemental request of
$35 million, which is $25 million for NADR, $6 million in FMF
and $4 million in CLE.
Then, our proposal for 2003 is $731 million in the Andean
Counternarcotics Initiative and $439 million of that would go
to Colombia. Also, $98 million in FMF is proposed for the Cano
Limon pipeline.
There are two questions here. One is, is whether we want to
sustain our effort, and I think we do. And two, whether the
Colombians, as Congressman Obey said, are prepared to sustain
their effort.
Two points I would make on the Colombians' behalf--they
really should speak for themselves. But up until now, they have
now spent--if I can get this number right--$426.5 million on
social and institutional development, and $2.6 billion since
the beginning of Plan Colombia on infrastructure projects and
increasing their own military capacity. That is not a small
amount of money, and I believe that they are on track to meet
their commitment to what they signed up to do in Plan Colombia
as well.
Let me take the third point, which is, how do we look after
all this money? First thing is we rely very much on the
outstanding people we have who serve in the United States
embassy in Bogota; Anne Patterson and her crowd, whether it is
her military assistance, or the people who work for USAID. The
other thing is we have any number of reporting requirements,
and properly so, to the Congress about the number of people we
have, the way we are spending the money, plus the
certification, as Congresswoman Lowey said. And we, in
Washington, obviously, are trying to spend as much time and
effort as possible to make sure that taxpayers' money is spent
properly in Colombia. So it is a combination of those things.
I will ask Gary Speer to talk a little bit about the
military side.
Major General Speer. Thank you, sir.
It is important to point out, first of all, there is a
great misconception that the $1.3 billion of the 2000
supplemental was a military program. In reality, the Colombian
military directly benefited from only $183 million out of that
$1.3 billion.
Now, what we did with that money, the fundamental capstone,
was the training and equipping of the counter-drug brigade,
which included training and equipping three infantry battalions
and a brigade headquarters. They became operational in December
of 2000. The third battalion completed training in May of 2001.
And it is that ground force that provided security for the
spraying operations, in Caqueta and Putumayo departments, of
59,000 hectares of coca. Then that was Department of State
contract spraying.
Additionally, the helicopters are a big part of the
program. The total helicopter package in Plan Colombia was $328
million. Where we are on that: All 33 UH-1Ns, which are being
managed by the Department of State, were operational as of
December of 2000; all 14 of the Black Hawk helicopters for the
Colombian army have been delivered. We delivered between July
and December of last year. The training for that continues and
will be concluded in July of this year. And we just delivered
last month the first six of 25 Huey-2 helicopters. There is a
parallel training program for that aircraft as well.
Additionally, $180 million of that $1.3 billion went into--
let's call it U.S. military support to Colombia. And this
provided for the ISR aircraft that flew intelligence collection
missions in support of counter-drug operations in Colombia. And
then there was another $160 million for FOL upgrades
predominantly in Manta, Ecuador, but also Curacao, and design
work in Comalapa.
Mr. Lewis. General, first I want you to know for the public
record that I am very proud of Southern Command and the job
that you are doing within the region. Specifically, however,
within this area there is a request for new authority that
involves activity in terms of the narcotics problem we have in
Colombia. With the spreading-thin of proposed funding so far,
where do you anticipate the money is going to come from to
carry forward activity regarding this broadened request for
authority?
Major General Speer. Thank you, Congressman. At least as I
understand the language in the 2002 supplemental proposal, the
authority transition does not come with a bill to you. In other
words, what it means to me, in addition to what Secretary
Grossman said about the ability for the Colombians to use
Colombian helicopters not just for counter-drug missions, but
for any tactical mission or the Colombian's ability--Colombian
military to use the counter-drug brigade in the Putumayo
department, which is the best trained and equipped brigade in
the Colombian army, for any mission and not just a mission that
starts out with a counter-drug linkage. So that is what it
means to them.
What it means to me is that right now any
intelligencecollection mission I fly with counter-drug-funded assets
must be tied to an intelligence requirement that is counter-drug
specific or force protection for those participating in counter-drug
operations. So without any additional funding, what the authority would
give us is the ability not to look at Colombia through a soda straw
that defines counter-drug, but to look at the FARC not only as a drug
trafficker, but to look at the FARC as a terrorist and to look at the
FARC as an insurgent across the board.
It also means from a maritime interdiction standpoint--
again with the assets already provided--instead of just trying
to interdict drugs leaving Colombia, we can look for the
weapons going in that are fueling the FARC.
Those are just examples, sir.
Mr. Lewis. I have used my time. Thank you.
Mr. Kolbe. We will come back for another round of
questioning.
Next, Ms. Kilpatrick?
Ms. Kilpatrick. Thank you, Mr. Chairman.
And gentlemen, I am continuing with Chairman Lewis'
thought.
This expanded authority gives me real queasiness for a lot
of reasons that Congressman Obey already mentioned and some of
the things that have been discussed today.
General, you just went over--and in your own everyday
language, I am sure all you understood what you just said. As a
former school teacher and now a Congressperson who knows a
whole lot about--I should put that around--knows a little about
a whole lot of subjects, this is not one of my great ones. You
are going to have to break that down for me.
But the expanded authority that you are asking for in the
legislation--and Mr. Grossman, I was going to ask you until I
heard what he just said--because you said you want to use the
helicopters. Oh, hell, I want you to use the helicopters. I am
just not sure I want to give you expanded authority. And I want
to know if I could, is there such a way that we can do what you
just did, General, and allow you to that.
Expanding authority means a whole lot of things. Expanding
almost means no oversight from the Congress, number one, and
that you can do anything you need to do to get to what you got
to get to or what you deem necessary to get to.
Is there a way to craft that better than the language that
is in front of me, which gives you carte blanche everything?
And there may not be, you know. Somewhere for letting you use
the helicopters to doing what the general said, is this the
only way that we can get to that?
Mr. Grossman. Let me start an answer, and then I think it
would also be good if General Speer talked a little bit. As you
said, in plain, everyday language--I did too, but we are sick
people. [Laughter.]
So far, the answer to your question is no, that the law is
tightly drawn. And you drew the law very tightly----
Ms. Kilpatrick. To be tight.
Mr. Grossman. And you did it for a reason.
Ms. Kilpatrick. That was the intent.
Mr. Grossman. Exactly right. Absolutely right.
We have lived by the law, and the law says,
``counternarcotics, counternarcotics, counternarcotics, nothing
else but counternarcotics,'' and we have lived by the law. And
so we have looked at this any which way from Sunday, and we
cannot find a way other than breaking the law or, as you all
told us not to do, to stretch the law to get this job done.
All of us have been sitting in the situation room at the
White House talking about this pipeline way before September
11, and we made a promise to ourselves that we were not going
to fool around; we were not going to stretch the law. We were
going to come up to Congress and say, ``Here it is. Let's
debate it. Let's see whether people are prepared to do
something different.''
I would say, Congresswoman, that our objective here is not
to get carte blanche, nor is our objective to throw off all of
the restrictions. I think if we were interested in doing that,
we would have come up to get rid of the Leahy restrictions, and
we do not want to do that.
Ms. Kilpatrick. Okay, hold it, hold it, because we have
only got five minutes. See that sand running.
Mr. Grossman. Okay. [Laughter.]
Ms. Kilpatrick. ``The provision would allow broader
authority to provide assistance to Colombia to counter the
unified cross-cutting,'' and then it goes on.
Mr. Grossman. Right.
Ms. Kilpatrick. Tell me what broader authority you need.
Why can't we do that, rather than say ``broader authority''? I
mean, you know this better than I. I am trying to give it to
you, but without having you trample everyone's civil rights in
this country and that.
Mr. Grossman. Well, I am certainly not interested in
trampling anybody's civil rights. As you say, you wrote the law
in a very strict manner, and we are trying to live up to the
law. Moreover, we will continue to live up to the law until the
law is different.
If we wanted broader authority, we would have asked to get
rid of the caps, we would have asked to get rid of the
certifications, we would have asked to get rid of the vetting
of units. But we do not want to do any of that. Vetting is one
of the most useful and important things going.
Ms. Kilpatrick. We agree. And we thank you for not asking
for that. That would have been a little bit----
Mr. Grossman. So the idea somehow that we, kind of, want to
run rampage and skirt the Congress and not listen to anybody
anymore I think is not right.
Ms. Kilpatrick. So you are saying the only way you can get
to where you need to be to combat the violence and terrorism
that you see is to give it to you like I have read it here, the
broad stroke?
Mr. Grossman. That is our conclusion and our proposition to
you.
Ms. Kilpatrick. I would like to talk to you more on it as
the supplemental goes through.
Mr. Grossman. Anytime.
Ms. Kilpatrick. There has got to be a better way.
Mr. Grossman. Anytime.
Ms. Kilpatrick. Over 12 million Colombians are African-
Colombian. Many feel that their crops have been taken and
fumigated, some livestock have been affected, some people have
been affected, not just with the African-Colombians but with
the people throughout the country.
Is the State Department using their own guidelines and law
in this regard, as well, as they fumigate crops and move them
across the country? Are there problems? Are you aware of them,
or am I the only one getting them?
Mr. Grossman. No, no, we hear lots of reports of problems.
We hear lots of reports of people who feel that they have been
hurt in some way. I can tell you that our embassy in Bogota,
and Anne Patterson in particular, has done all that she can to
make sure that we investigate all those things.
For example, last year she contracted with Colombia's, sort
of, leading doctor in this area to review all of these cases.
They came up with not one case of where the stuff we spray hurt
any individuals.
But there are reports; we try to follow them up.
And one of the things that I promised to do, Congresswoman,
when I was in Colombia in August, was I said, ``Look, let's
just get to the bottom of this. Let's see if we can find a
third party to go out and look at all of these controversies
and see what we are doing.'' And we are about to ask the
Organization of American States to do this. We think that they
will have credibility in Colombia, they will have credibility
in the United States, and we look forward to their report.
But we are very confident that this is a safe program----
Ms. Kilpatrick. Okay, I have got some real concern there
too. I would like to work with you there.
And then, finally, Mr. Chairman, the 3.5 percent GDP that
Colombia now puts in is not enough. You know, you are asking us
to put in more dollars, and America is in a recession, although
many say we are coming out of it. If 16 percent of production
in drugs is still increasing, if 90 percent of the cocaine
still comes from there--I live in Detroit, urban America.
Mr. Grossman. Right.
Ms. Kilpatrick. We have problems where we cannot get
treatment on demand, and all the other money shifting away and
to the war on terrorism, which is taking everything, it is hard
to--I hope you can understand, it is hard to continue to do
this when what we see is a failing effort, as it relates to the
people that we represent at home.
You have a job to do, but so do we. We have to represent to
the very best of our ability. And somehow this is getting--you
know, not only taking more dollars than we can afford from our
own treasury, but at the same time many of us feel that
Colombia is doing their part in their military, which is lax,
as well as using more of their own dollars to combat the
problem.
Mr. Grossman. Well, that is a very important message that
comes from you and it is also a very important message that
comes from us to Colombia. We appreciate it.
Ms. Kilpatrick. Thank you, Mr. Chairman.
Mr. Kolbe. Thank you.
Mr. Bonilla?
Mr. Bonilla. Thank you, Mr. Chairman.
Mr. Secretary, I want to talk about demand reduction
efforts for just a second. I want to quote something from the
March 2002 strategy report from the INL. It says, ``The need
for demand reduction is a fundamental and critical part of
controlling the illicit drug trade. Escalating drug use and
abuse continue to take a devastating toll on the health,
welfare, security and economic stability of all nations. As a
result, foreign countries increasingly request technical and
other assistance. Our response has been a comprehensive,
balanced and coordinated approach, in which supply, control and
demand reduction reinforce each other.''
I read that because I want to point out that the budget for
2002 was $842 million, but only $5 million was allocated to
drug demand reduction programs. This seems to be an obviously
great disparity and does not comply with the goal of the
strategy report of a comprehensive, balanced and coordinated
approach.
The demand reduction program is one of few, if not the only
program, at INL that directly fosters the development of civil
societies. We have seen firsthand how effective drug demand
reduction initiatives have been for the NGOs. As a matter of
fact, INL evaluations have validated the success of positive
outcomes of the program, yet demand reduction receives less
than 0.5 percent of the INL budget.
My question is, this is an obvious imbalance in allocating
funds; why is this such a disparity between the two goals?
Mr. Grossman. Sir, let me, first of all, commit to get a
fuller response to you in writing. But I think the answer to
your question is that, the INL budget, of course, is basically
focused on interdiction and eradication overseas. If I was here
from the Office of National Drug Control Policy, I think I
would tell you we spend billions of dollars a year in the
United States on demand reduction. John Walters, who I think is
doing a wonderful job as the new head of ONDCP, has talked
about demand reduction. He has talked about treatment and
interdiction. So this is all part of one whole.
So I hope you will not consider that because you look at
this small part of our budget that we are not interested in
demand reduction. In fact, President Bush, every time he talks
to a foreign leader, especially in Colombia, says the first
thing we have to do is dampen the demand in the United States,
because it just sucks in all the things that we are doing.
So there is a huge amount of money being spent in the
United States on demand reduction. Perhaps it is not in Randy
Beers' budget.
Mr. Bonilla. This has been drawn to my attention. And I am
going to work very hard to try to create a more balanced
approach in these dollars. Because unless we discover
something--and we have researched this quite a bit--otherwise
this is a great imbalance here in the way these funds are
allocated. But we will be working on that.
I want to ask just a couple of other quick related
questions on drug certification. Last year, when the secretary
appeared before us, I talked about--and I put some language in
a bill, because I raised concerns that the drug certification
process was not exactly reflecting true reforms and what
countries are actually doing to combat drugs in their
particular countries. So are there any efforts now planned for
the near future to replace this ineffective certification
process with a system of true accountability? I have talked
about this for some time now. I put some report language in the
bill last year and hope that we can see some progress on that.
Mr. Grossman. Would the chairman mind if I just asked
Assistant Secretary Beers to answer that question, so we can
get an answer, Mr. Chairman? I do not know what the protocol is
here, but I am sure Randy can answer that question if the
congressman allows you.
Mr. Kolbe. Yes, we would. He needs to step up to the
microphone and identify himself here, so that we have him for
the record.
Mr. Beers. Sir, we----
Mr. Kolbe. For the record, please identity yourself.
Mr. Beers. Oh, I am sorry. I am Rand Beers, the Assistant
Secretary of State for the Bureau of International Narcotics
and Law Enforcement Affairs at the State Department.
With respect to the annual drug certification process, yes,
sir, we did comply with the revised legislation this year. We
did find it to be useful and an improvement over the previous
legislation.
We are in the process of putting together a final proposal
to come back to you all with respect to where we ought to be
going in the future. You all gave us only one year worth of
this process, so we owe you, and the Secretary took a question
in that regard in an earlier hearing.
Mr. Bonilla. What is your projection for the time that----
Mr. Beers. In the very near future, sir. We have been
deliberating on that since the Secretary took the question at
the earlier hearing, so I anticipate in the next couple----
Mr. Bonilla. Just to give me a----
Mr. Beers [continuing]. Next couple of weeks--two to four
weeks, sir, we will get back to you by then, to the Committee.
Mr. Bonilla. Thank you very much. Thank you. Thank you,
Secretary Beers.
And finally, I just have a question that might seem like it
has an obvious answer, but I just want to state for the record
the tie-in in trying to promote trade pacts and how this can
help the whole drug effort.
One of the main focuses in our plan for Colombia is a
fumigation of coca areas, a sustainable reduction of drug crop
production through alternative development. The U.S. is already
engaged in about $9 billion bilateral trade with Colombia.
However, would it not be an effective tool for President
Bush to have trade promotion authority and the Andean Trade
Preference Act? Wouldn't this allow the president to move more
effectively and quickly to offer Colombia and other countries
in the region some alternative means of income for their
farmers? And wouldn't that authority expedite USAID's five-year
goal of eliminating the production of over 7 million acres of
illicit crops?
Again, I think there is an obvious answer here, but this is
very important, very important in tying it into this problem.
Mr. Kolbe. That was a real hardball. [Laughter.]
Mr. Grossman. And I am going to take the advantage of
taking it. Actually, I made a----
Mr. Kolbe. We do need to make it quick.
Mr. Grossman. No, I made a mistake. You will see in my
prepared statement, Congressman, a very strong endorsement of
ATPA, a thank you to this Committee and to the House for
passing ATPA, and a call on the Senate to do the same. I
apologize, I took it out of my spoken statement to get the time
down; I should have left it in there. We agree with you
completely.
Mr. Bonilla. Thank you.
Mr. Kolbe. Mr. Rothman.
Mr. Rothman. Thank you, Mr. Chairman. I will be brief. I
want to catch the director's testimony before another
subcommittee that I have the pleasure of serving on.
But I would be interested to know what the Colombian
officials say to you when you express to them, which I am sure
you have, that it is the view of many in this country that
Colombia is not expending enough of its own resources to defend
itself and its people from FARC. What do they say to you as to
why they are not spending more?
Mr. Grossman. The reason I hesitate is that I think I would
have gotten a different answer last year than I got this year.
Last year I think I would have heard more, ``Well, we are in a
peace process with the FARC. Maybe it will work out. This is
not so bad. We can handle this along with your support.''
But I must say, sir, as I tried to say previously,
September 11 had a big impact on Colombia and their psyche. I
believe that what happened on September 11 made it more
possible for President Pastrana to take the decision he did on
the 20th of February. I found people in Colombia much more
purposeful the second time I was there. I believe now that they
are much more open to the kinds of conversation we have been
having here that they need to do more.
Mr. Rothman. Forgive me, and if you covered this already I
apologize, but what evidence do you have, or can you tell us,
the subcommittee, that would demonstrate your belief that they
now have a new attitude about the necessity to spend a greater
portion of their resources on their--on the threats that they
face?
Mr. Grossman. Yes, sir. I think the most important evidence
of that was the decision President Pastrana took to end the
zone. To say finally that he was not getting anywhere with the
FARC, that the peace process would end, and that he was going
to take the expense, not just in terms of money, but effort and
possibly also lives, to go in there and clean it up.
Mr. Rothman. Did he come up with a specific sum of money or
increase in percentage?
Mr. Grossman. Again, the Colombians should obviously speak
for themselves. But I know that President Pastrana has recently
proposed a considerable increase not only in the number of
people who should be in the Colombian military, but also an
extra $100 million in spending on the Colombian military.
Mr. Rothman. And how does that boost their percentage of
spending relative to the GDP on defense?
Mr. Grossman. How it would raise the 3.5 percent, I am not
sure. I will be glad to get back to you, Mr. Rothman.
Mr. Rothman. It cannot be a heck of a lot.
Mr. Grossman. No. I mean, I do not think $100 million would
raise it that much.
Mr. Rothman. Therefore, from what you have told me today, I
am not overwhelmed with the sense that they yet feel the need
to do much more than they are presently doing. And until I am
presented with evidence to the contrary, I am going to be
reluctant to want to do more from the U.S. taxpayers.
Not withstanding the fact that I am otherwise
extraordinarily sympathetic to your requests to allow us not to
look at them through--as the general said, through the straw,
but in our own self-interest to put these terrorists out of
business for our own self-interest, as well as for the
interests of the people of that region.
I would be otherwise extraordinarily sympathetic to
expanding the authority--your authority. But in terms of
additional dollars, I am concerned that expanding our authority
or allowing you to expand your authority might of its own
nature require additional expenditures or additional requests
for greater expenditures. And I do not want to go down that
road if Colombia is playing us for some suckers or they are
being irresponsible. I feel badly for the Colombian people if
their own leaders are being so apparently--I will not use that
word--their own leaders are not doing what they should to
address the magnitude of this problem.
Mr. Grossman. Mr. Rothman, part of the challenge, I think,
that we both have is--I do not mean to be colloquial here--but,
kind of, who goes first. If you consider, for example, the
report that General Speer gave you, we spent money training
what is now the best military unit in Colombia. They go out and
they knock over over 800 narcotics labs in the last year.
Does that show that they want to do more? I think it does.
Would they have done this by themselves had we not had this
training for them? Probably not. The Cano Limon pipeline, for
example, they would like to have the $500 million a year that
now dribbles away because that pipeline is closed 226 days a
year. But they cannot do that, they cannot make that extra
effort that you seek until they have got a trained and sensible
armed forces, which Gary Speer is going to do if you give him
the money.
So, you know, as someone said before, this is a complicated
problem and we have----
Mr. Rothman. But frankly, if it--maybe I am wrong, but if
it were my country and I did not have America to look to, I
would spend, as Congressman Obey said, a far greater percentage
than the three-point-whatever they are presently spending and
not look to anybody else. Initially, I would spend whatever it
took, 100 percent or 200 percent, of the budget to protect--
with all these kidnappings and murders of government officials
and regular folks on the street.
So it does not compute to me that they would withhold from
making that effort saying, ``Well, we will not do it until
America coughs up more money.'' It does not ring true to me.
And so, I am left with questions that, until they are answered,
are going to prevent me from doing what I would otherwise be
very sympathetic in allowing you folks to do.
Again, I may ultimately end up supporting you because I
want to support our efforts in that region for America's
interest, as well as for the interests of the Colombian people,
and damn the Colombian elected officials if they cannot do
their job right. But it does inform me about how I want to
treat and relate to the present Colombian leadership in the
future.
Mr. Grossman. Just for the record. I just want to be clear
that I do not want to be in a position of saying that the
Colombians will not do anything until we pony up. I think our
objective here is to make sure that the lines intersect in the
right way. So that Pastrana comes out, he proposes Plan
Colombia; the United States supports it. Colombians identify a
military unit to train; Gary Speer does a great job training
them. They go out and knock over----
Mr. Rothman. Mr. Secretary, Colombian people are very smart
people. I do not think they need us to tell them--to suggest to
them that they need to defend themselves, and that they
probably could come up with their own ideas about how to
protect their men, women and children who they are supposed to
be protecting.
Anyway, I am going to go, and I will thank you.
Mr. Kolbe. Mr. Kingston.
Mr. Kingston. Thank you, Mr. Chairman. I do want to say for
the record that I believe that our military spending is about 3
percent of GDP, and we are at war. So they are not, at 3.5
percent, exactly taking it lightly. I believe that is
approximately right, I am, you know, a little loose with the
numbers.
My question, though, General Speer, you had testified to
the Senate Armed Services Committee in March--March 5, made a
number of interesting statements about Ecuador, and I am just
going to quote here and there.
``Ecuador remains the country most vulnerable to any
spillover effects from the narco-terrorism.'' You made big
points about Ecuador's soldiers are inadequate, ``7,000
Ecuadorian soldiers on the border, but they need about
10,000.'' Their ration is 12 saltines and 15 grams of tuna--a
can of tuna a day. They are paid the equivalent of $280 a
month, which is actually less than the monthly wage to members
of FARC. So a lot of concerns here about Ecuador.
And also you made some very good points about during 2000,
12,000 Colombians fled to Ecuador; in 2000, 4,600 Colombians
requested refuge status there.
My question is, how would you assess the threat to Ecuador
and what can the United States do to help Ecuador?
Major General Speer. Thank you, Congressman. I got to be
honest and tell you, I cannot take credit for all of that, but
it sounds right.
I still remain convinced that, of the neighbors, Ecuador is
probably the most susceptible to spillover from Colombia. We
already see the FARC operating at will across the border into
Ecuador. The Ecuadorians are taking steps in terms of
reorganizing the army, specifically the 19th Jungle Brigade and
the division they have located in the north, to try to focus on
that area.
As is the case throughout the Andean ridge, the Ecuadorian
military is under-resourced to do the security job that needs
to be done to protect its borders from external threats--these
transnational threats that move back and forth.
In the Plan Colombia 2000 supplemental, it did include $20
million for Ecuador, of which $6 million of the $20 million
will actually go to the military. That will buy--in fact, it
will deliver a combination of communications equipment and some
vehicles to give them some mobility. The fundamental problem,
again, is a lack of mobility to really patrol the area.
There has recently been a change in military leadership in
Ecuador, each of the services and the chairman and joint chiefs
of staff equivalent. I am very optimistic with the leadership
change. They have still got the, shall I say, the gap in terms
of being able to resource, whether it be from Ecuadorian
sources or external support, the security force requirements
they need for that northern border.
Mr. Kingston. Mr. Franco, I have a question for you. I
understand that Ecuador, under the ARI, did not receive the
funds that they expected, and they got a disproportionate
reduction--or a proportionate reduction in the level of USAID
monies as compared to other Andean countries. Can you explain
that?
Mr. Franco. Mr. Kingston, we are in the process currently
of conducting a review of our program in Ecuador. In fact, just
to tie on to what General Speer said, we are looking at the
projects that we are carrying on along the border with the
Putumayo River. We are concerned, obviously, just as the
general had said about the spillover effect; our program has
been concentrated in that area precisely for that reason.
However, there is a distinction, and I alluded to this in
my testimony, and that is that, unlike Putumayo, on the other
side of the river, where we see--and I have tried to highlight
this--security and other significant problems from a
development standpoint--really from every standpoint,
governance, rule of law issues and so forth--on the Ecuadorian
side of the border, which is a very similar terrain in every
respect, including a lack of access to markets--it is very
difficult in Putumayo and Colombia to access other markets--in
Ecuador the northern part of the country is also isolated. So
they share similarities in almost every regard.
The only difference, I would say, from the standpoint--the
development standpoint, is that we are able to carry out
programs in Ecuador in a fashion that we are not able to do so
in Putumayo.
That does not mean we are not concerned about, as the
general has pointed out, the spillover effect in that area.
That has led us, in terms of priorities--and I am not punting
here. I am new to the job. I have been on the job 60 days. But
we are conducting a review of the program. But initiallyI can
tell you that our priorities were largely driven by the need to put
resources in those areas where we saw the greatest needs for
alternative development assistance.
And in northern Ecuador, where our program is concentrated,
from a development standpoint, the news is fairly good. In
fact, I might add that the successful productive activities and
infrastructure programs in northern Ecuador are things that we
look to replicate in Putumayo in Colombia. So I will review
that aspect of it.
Mr. Kingston. I appreciate that, and I see I am out of
time. But given the general's testimony in March to Senate
Armed Services, it does appear that it is a dire situation. And
it would be in our interests for you to review it.
Mr. Franco. We are in the process of reviewing that, sir,
and we will get back to you on that.
[The information follows:]
Report on Assistance to Ecuador
USAID provided $8 million for alternative development
programs in northern Ecuador with Plan Colombia funds in FY
2000 and FY 2001. These resources are being used to support
local community infrastructure projects that strengthen local
governments, make rural communities more cohesive, and help
communities resist pressures to produce drug crops. We are
currently providing an additional $10 million of alternative
development assistance for northern Ecuador with FY 2002 funds.
We are continuously monitoring the progress of the alternative
development program in northern Ecuador and will make
additional adjustments as necessary to support achievement of
United States Government objectives.
Mr. Kingston. Thank you.
Mr. Kolbe. Thank you, Mr. Kingston.
We are joined today on the subcommittee dais by a member of
the full committee, Mr. Sam Farr, who has a great deal of
expertise in Colombia, having spent some years there himself in
the Peace Corps.
We are pleased you are with us today, Mr. Farr, for your
questions.
Mr. Farr. Thank you very much, Mr. Chairman. I appreciate
the invitation to sit on this panel. I am not a member of this
subcommittee, but I am really keenly interested in Colombia. As
you said, I lived there as a member of the Peace Corps. And
while I was there, my younger sister was killed in an accident.
And I have, sort of, been really involved in Colombia
emotionally and politically ever since. And some of my best
Colombian friends have all been killed in this ongoing
violence.
I came here today--and it is in my written testimony--to,
sort of, talk about the issues that I think committees like
this always get into which is the edges. We have already talked
about campesinos, and spraying, and pipelines, and human
rights, and fair trade coffee. But after hearing Mr. Obey and
thinking of what we really need to do in Colombia, I have
changed it. And I am going to say some things and then ask just
a general question, or I have three questions I want to ask,
and I will just put them in my remarks.
I think we are going to hear a lot about the issues that I
came here to talk about, because in nine days there are going
to be thousands and thousands of people descending on
Washington in a thing called Mobilization Colombia--Colombia
Mobilization--to essentially petition our government to get out
of Colombia. And we are going to be sitting here defending all
these pieces of why we ought not to get out. I think what the
American public believes is that we are not having any effect
there.
And I think the American public think we are not having an
effect there, because we as political leaders in the
administration have not been very effective in communicating
that the problem is not Colombia. The problem is an America
problem. It is drugs in North America, and now drugs in Brazil,
and it is really a lack of leadership in the Americas.
And I would not say that it is a lack of leadership on the
American president's side. It is a lack of leadership by the
presidents of Central American, Latin American countries to
really recognize that this problem is a Latin American problem
and Colombia is where it is focused.
And I think we need to insist that all the resources that
we put in Latin America and any country ought to be tied to
those countries helping upgrade the democratic institutions in
Colombia. If Colombia does not make it, they are not going to
make it.
And I disagree with you: Ecuador is so poor and so rural
that if the pressures that Ecuador had--that Colombia has, they
do not have the infrastructure. They do not have the government
infrastructure. They do not have the way to respond as
sophisticatedly as Colombia has been able to. It is just a
matter of time before it squeezes into Ecuador, squeezes into
Venezuela, or squeezes into any area.
All of you on this panel, your titles of undersecretary of
state, secretary of defense, of U.S. Southern Command and
administrator of Latin America are all about that region. And
my plea is that we need to make the entire region supportive of
what we need to do to upgrade democratic institutions and
eradicate poverty and eradicate the drugs.
I do not think we are going to do it by just coming here,
which I would have done like everybody else in Colombia, to
raise more revenue and commit to that. This is an election year
in Colombia; no politician in America is going out and
campaigning, saying, ``I am going to get elected on raising
more taxes.'' Neither should we suspect that anybody in
Colombia is going to do that.
But if we do not support whomever is going to get elected,
if that next government has to come here and beg for support,
and start all over again, we have lost this thing.
So we have got to institutionalize the upgrading of these
institutions which is greater than just trying to figure out
whether we need to, you know, do crop eradication differently.
I think we need to--here is what I suggest needs to be
done. I think that Latin America needs to show its support of
Colombia, and this administration needs to provide the
leadership in doing that. And I suggest that this
administration very strongly indicate that all of the aid to
Latin America will be tied to the success of all of those
countries helping upgrade those institutions within Colombia.
I think you need to reschedule Secretary Powell's visit to
Colombia, the visit that was canceled after 9/11. I think
Secretary Powell has to make it very, very clear to the
Colombians that they have got to see institutionalized a
firewall between them and the paramilitaries. This idea that we
put in our legislation, which is I think what ties us to just
using all our equipment for narco-suppression and not allowing
the Colombian military to use this for other purposes which may
be justified now. But nobody is going to buy it here in
America, nor are they going to buy it, until we see the
Colombians being able to create a firewall that will really, in
that country, work.
Because I think they give--I mean, we read the polls. The
Colombians are--we would do it in this country, if we had a
crime spree in any community or in any state that was like
Colombia, all you would have to do is run on, ``I will use
every force I can, I will bring back the vigilante,'' and
people would support that. So I can understand why the
popularity for the paramilitaries is going up, because all
these other institutions are failing.
I think you need to take the money that we are doing for
spraying and put it in economic development. The campesinas
that I talked to in Putumayo--and I speak their language--told
me, ``If we sign those contracts, our lives are threatened.''
What the hell kind of an offer is that? You are going to offer
them some money so that they can grow an alternative crop
versus somebody offering, ``You sign the contract and you are
dead''? We do not back it up. We cannot protect those
campesinas after they sign the contract; the Colombians cannot.
And we do not have any economic incentive. Why would you want
to go with the government's Plan Colombia? Where are the
schools? Where are the roads? Where is the infrastructure?
People in America do not care just about the economics of
our community or their jobs. They care about the ability to
have a quality of life, to send their kids to school, to get
health care when they need it. That is the same for any
campesina anywhere in the world. And we do not do enough to,
sort of, develop that governance ability there.
So I think that, you know, you are not going to find a
great infrastructure in the jungles of Colombia in Putumayo,
but until we start improving the ability for Colombians to
develop and deliver their institutions of democracy, which we
all praise and why we are there in the first place, I do not
think we are going to win this plan. I think David Obey is
right; we are rearranging the chairs on the Titanic.
So my suggestion to you--and you said you wanted to listen
to members of Congress--is, one, engage all of Latin America in
this, and find some Latin American leadership outside of just
Colombia itself. It is in their self-interest to ask for Plan
Colombia, but it ought to be in the interest of all Latin
Americans.
Secondly, send Secretary Powell down there with very strong
statements that this paramilitary process, this suspicion that
there is collusion in all the reports that come back from all
the human rights groups--they are the ones that come back and
report to members of Congress.
So you can sell this committee that, you know, all of these
details may be necessary, but you cannot sell it to the whole
body out there. You cannot even get them to come to a meeting
on it. And in 10 days, they are going to be listening to their
constituents who are going to be here by the thousands, telling
them not to do any of the things you are asking today.
So I think we have a real credibility problem that we have
got to correct immediately. And that is going to be done by
addressing this as a Latin American issue, not just as a
Colombian issue.
Thank you, Mr. Chairman.
Mr. Kolbe. Well, I think we will just allow a couple of
brief comments, if you want to respond to that, and then we
will go back to asking questions.
Mr. Grossman. Sure.
Mr. Farr, thank you very much. I do not know if I really
want to respond so much as to say that I agree with practically
everything that you said. And I appreciate----
Mr. Farr. Well, what are you going to do about it?
Mr. Grossman. Well, let me--I was just trying to be polite.
Let me try to answer your questions.
First, I think in terms of bringing the hemisphere
together, that is absolutely right. One of the things that
President Bush tried to do when he was in Quebec and put out
this theme, as I tried to elaborate on in my testimony, of
democracy, the rule of law, human rights, prosperity and
security is now a goal of the entire hemisphere.
I agree with you completely, that we need to do more in the
countries around the hemisphere. We have had some success--
actually, a lot of success--with getting Mexico and its new
government more involved in Colombia. In addition I was in
Brazil a few weeks ago, and they are also, I think, coming to
recognize that how Colombia is going to go the whole area for
10 or 15 years will go.
Second, I think that Secretary Powell would like to
reschedule his visit. As you know, we have, kind of, set this
up. We designated the AUC as a foreign terrorist organizations
on the 9 of September, and we wanted them to go there on the 11
of September to give that message precisely.
I have tried to give it, General Shinseki, General Speer
tried to give it, but I know Secretary Powell would like to go
back--not to go back--I think he needs to go, because I take
your point that we need to do a better job in making this
point.
If I could just turn to Secretary Franco for a minute maybe
on alternative development.
Mr. Franco. Thank you, Mr. Secretary.
Mr. Farr, I know about your Peace Corps experience in
Colombia, your commitment to it. I know your staff was just
recently in Colombia, so I know you are an expert in these
issues.
I have to say, you have laid out a lot of challenges before
us. There is no disagreement that law enforcement and building
institutions is a critical component. And we talk a lot about
alternative development and it is a key component, but our
democracy program and good governance program is a large part
of our program in Colombia and elsewhere in the Andean region,
including Putumayo.
Mr. Farr. How much are you putting into the rural economic
development?
Mr. Franco. Rural economic development is $56.5 million of
that.
Mr. Farr. How much is the entire Plan Colombia commitment?
Mr. Franco. You are talking about the USAID portion?
Mr. Farr. Yes. Well, what about----
Mr. Franco. $104 million, of which $24 million is dedicated
to the democracy programs in the 2002 money.
Mr. Farr. But my point is that of the $1.3 billion, that is
a very small amount.
Mr. Franco. Well, I wanted to get to another component
where--I am being candid with you about the crop substitution.
You made a lot of points. I just wanted to start out with the
law enforcement and the good governance.
We agree. And we are helping the government of Colombia in
that regard. We are going to be in Putumayo. The secretary
referenced the 18 casas de justicia that we have supported, and
we are going to go to 40 by 2005.
Working with communities; we agree in an integrated
development approach. Two things: You mentioned Congressman
Obey and Mrs. Lowey. Mrs. Lowey said this can not be achieved
in the short term. We agree. There is just--this will take some
time. It is a critical component.
But on alternative development, and you know this, there is
not a crop--and this is not crop substitution, there is not a
crop that can compete with coca. There is just not. Therefore
we need to have that law enforcement, we need to have good
governance, we need to work on that, in a situation, in a
country in which security is just not present throughout the
country. That is our challenge.
Mr. Farr. You could just buy Colombian coffee at a higher
price and be better off.
Mr. Kolbe. Thank you. We have long exceeded the time here.
We will come back if you would like to ask some more questions.
Mr. Callahan has rejoined us.
Mr. Callahan.
Mr. Callahan. Thank you, Mr. Chairman, Mr. Ambassador. Good
evening. I am sorry I missed most of the testimony and
questions. Some of it will be repetitive and I apologize to you
for that, but I had another hearing in my subcommittee.
But I did have jurisdiction over this committee when the
president came to the Congress, and asked me to spearhead the
effort to participate in Plan Colombia. Originally it was
proposed to Congress that our contribution of $1.3 billion was
part of a $7 billion world contribution, including $2 billion
from Colombia toward this effort. So I guess my first question
is how much--we put up our entire $1.3 billion, how much has
the rest of the world provided on their commitment?
Mr. Grossman. Sir, as I answered the question before, we
have put up our commitment, and thank you very much. I think
the Europeans and others have put up practically nothing, and
we need to do more to get them there.
But the Colombians themselves have spent $426.5 million on
social and institutional development and $2.6 billion on Plan
Colombia-related infrastructure projects and improving their
military. We think that is a substantial commitment. And we
think they are well on their way to meeting their part of the
$7.4 billion.
Mr. Callahan. Why has the European community not
contributed? They are complaining that these drugs are now
moving toward the European community. Why are they not
participating?
Mr. Grossman. We have made the point to them again and
again that they need to participate. A little bit like I was
trying to answer Mr. Rothman's question, I have really seen a
change, Mr. Chairman, in European attitude since the 11th of
September. Before the 11th of September it was hard to get some
of our colleagues in Europe to even accept that the FARC and
the AUC and the ELN were narco-terrorist organizations. That
has really changed since the 11th of September. I do not tell
you we do not have some work to do, but I think we can use this
change in attitude to get it done.
Mr. Callahan. What nations, other than European nations,
were part of the coalition to raise the $5 billion that was in
addition to what the United States was putting up--$4 billion,
I guess?
Mr. Grossman. Well, there were a large number of countries.
I represented the United State about two weeks after I took
this job at a conference in Brussels to try to raise some of
that money. I said that time that if we took the salaries and
all the money that was spent to bring that conference together
and applied it to Plan Colombia we would have been better off,
because we did not get any extra money out of that.
What I am hoping is, and I commit to you, is that we have
to use the change in attitude after the 11th of September to
build that money up. The truth is, though, that it is only the
European Union that has money. And they need to be involved in
this in a much bigger way.
Mr. Callahan. How about Japan?
Mr. Grossman. I know the Japanese were represented at that
conference. I will tell you the truth, we have not been back to
the Japanese since that time. They are not on this list, I will
be glad to check with them.
Mr. Callahan. Well, you know, I am just concerned. It was
my philosophy when I chaired this committee, and certainly it
is the philosophy of most of the members including the
chairman, that we understand the constitutional role of the
administration to engage in foreign policy. And that the least
interference you have from Congress, the better off you are,
and you are able to perform that function effectively. And I
certainly do not want, at this stage of my life to start now
saying, I am not going to agree to give this administration
total support for their foreign policy, because I intend to do
that.
But I do not want Colombia to turn into the Middle East of
our contributions for foreign aid. And I am afraid that is what
is happening. We have provided Colombia with more money than
any other nation in this hemisphere. Now, we are proposing
another half a billion dollars toward that effort to resolve a
problem that really, as Nancy Pelosi used to say, is our own
problem. Because we keep buying these drugs and creating the
market and we have a big problem here. But I do not want to
turn this into a Middle East dependency, which I am afraid that
that is where we are heading.
I am also concerned about the fact that the administration
is not showing due respect and appreciation to Bolivia for the
efforts they have made in the total eradication of this problem
in Bolivia. The very idea that we are going to tell Bolivia,
``You are doing a good job, so we are cutting you off and we
are going to reward the countries that are not making any
progress whatsoever,'' according to the figures--and I have
seen conflicting figures as to how many hectares have been
reduced. And the same thing with Ecuador, and we do not want to
just push this problem into Peru and Ecuador, and back into
Colombia, or even over to Africa.
But here we are today saying, ``Look, the $1.3 billion did
not work. Or what you told the Congress or what the Japanese
and the Europeans told the Congress three or four years ago,
they did not keep their word. Therefore, come up with another
$500 million and we will go to work now trying to get them to
fulfill the commitment they have already given.''
I do not know what I am going to do, Mr. Secretary, at this
point, with respect to the committee and floor funding level.
But I will tell you that I am not at all satisfied with the
progress that has been made, with the commitments that have
been broken, with respect to world involvement, with the
commitments that Colombia has not kept, with the progress that
has been made. And simply pouring another half a billion
dollars in there, in my opinion, is not the correct solution.
Maybe I am wrong, and probably I might be. Because you all
are professionals, and I respect that. I certainly respect you
and your ability to negotiate and your mission. I respect that,
and I respect the president. But we are talking about a lot of
money going to a very small area that is making zero progress,
that can show me nothing has been accomplished with the $1.3
billion that I spearheaded when I was chairman of this
committee.
So I apologize if my view is different from yours, but I do
respect your position. And I certainly do not question your
motive or your aims, nor do I question anyone in the
administration.
But I just think we are turning Colombia into the new
recipient of aid for this hemisphere, when we have such
tremendous needs for assistance to other nations in this
hemisphere that we are totally neglecting. Not necessarily in
drug interdiction, but in economic situations. That we are
totally eliminating all of our--not all of them, but most of
our efforts for human rights, for quality-of-life improvement,
for educational opportunities, for trade opportunities. We are
neglecting, and putting all of our monies into a country such
as Colombia that is not showing me any strong indication of
being able to make any improvement in the problem that they are
creating for us.
Mr. Grossman. Mr. Chairman, I would just like to respond in
a couple of ways. One, Mr. Callahan, and I made a mistake.
Luckily, there are smarter people behind me. And so I want to
apologize for misspeaking. The Japanese actually have pledged
$175 million into the general international fund, Spain $100
million, European Union $95 million, falls off from there.
Maybe you would allow me to send you this as an answer for
the record, so you can get the whole thing and I would like to
then see how, kind of, people have met the pledge----
Mr. Callahan. Excuse me, pledged. That is what they
pledged?
Mr. Grossman. Exactly.
Mr. Callahan. What has shown up?
Mr. Grossman. Well, that is what I have got to find out.
See, I have all the pledges, and then I have got to make sure--
--
Mr. Callahan. That was my point. I know what the pledges
are. The pledges total $4-plus billion.
Mr. Grossman. Exactly.
Mr. Callahan. Which is----
Mr. Kolbe. I will make a pledge of a billion dollars to the
United Way this year. I do not think I will be able to fulfill
it. [Laughter.]
Mr. Grossman. Fair enough. But I think we ought to get the
facts here. We ought to answer this question.
Mr. Callahan. Well, I think I need the facts, because I do
not want to go to the floor and fight the administration on
something that I believe your heart is in the right place. And
certainly your aims are correct. Your goals are absolutely
noble. I do not question that at all. But we are talking about
a half a billion dollars.
Mr. Grossman. Right.
Mr. Callahan. You know, I had the same problem with the
Clinton administration with Haiti. Finally, they gave up on
Haiti, when they saw there was no way to make any progress in
that country. They stopped pumping money into Haiti.
And I think it is time that we look at the possibility--if
we are talking about $500 million--of diverting this to some
countries that are showing progress, and that do have true
economic and social needs that we could really make some
improvements in these countries. And then at the same time,
beef up the Coast Guard, and beef up the DEA and all of these
agencies which I visited this weekend, that are fighting this
battle, this war of drugs departing Colombia, both on the
Pacific side and on the Atlantic or the Gulf side coming to the
United States.
But in any event, Mr. Ambassador, I hope that you do not
think this is any criticism of you. Because I have great
respect for you and all of you, and what you are doing. But at
the same time, we do have an obligation that we must look at
how we are going to distribute the money. So the question is
not whether or not we are willing to give you the $500 million,
but whether some of it ought to be spent in Ecuador, some in
Bolivia, some in other South American nations to help them in
real crisis situations.
Mr. Grossman. Well, I appreciate what you say in terms of
motivation, because I think we all have the same motivation. I
would say--and I know Chairman Kolbe would like to finish--it
is a longer conversation. But I tried in my statement, and I
would like to come talk to you about it some more.
I think actually we can demonstrate some real progress in
July of 2000 in Plan Colombia. As much as we would all like?
No, but I think there is real progress to be demonstrated, and
I would like to someday come and visit with you about that.
The other point I would like to pick up is your point about
human rights and trade. I think that is exactly right, but one
of the things--and perhaps Congressman Farr is right, that we
have not done nearly a good enough job is making people
understand that your vote for Plan Colombia, and all of the
support we give for Plan Colombia, is not just military. We do
have a trade component. There is a human rights component. In a
way, of the 11 things I listed here today in terms of things
that I think we have got done, the majority of those are on the
democracy side. The majority of those are on the human rights
side, and I think we have got some things to be proud of.
On the trade side, I could not agree more with Congressman
Bonilla. We really appreciate the fact that the House has
passed ATPA, and we call on the Senate to do so.
Mr. Callahan. Well, once again, no reflection on the
professionalism of any of you guys. Because I think you are new
on the job. I know that you are not real new on the job, but--
--
Mr. Grossman. I am guilty.
Mr. Callahan. You are new in this administration, and this
administration is a new administration.
And I want to help. But at the same time, I want to give
you constructive advice. I do not want to just block it, not
that I could, but I could certainly stand on the floor and
suggest to my colleagues that maybe this money is not spent
wisely. But I hope we do not reach that position.
Thank you, Mr. Chairman.
Mr. Kolbe. Thank you.
Mr. Lewis has been waiting patient for a second round of
questions here. Mr. Lewis.
Mr. Lewis. Mr. Chairman, thank you for your courtesy very
much.
September 11th did an awful lot here at home, in terms of
Americans' resolve. A totally nonpartisan response to the fact
that we need to be together fighting a thing called terrorism.
Even if it includes going to Afghanistan and other places and
identifying leadership people, especially within a thing called
Al Qaeda, and either making efforts to capture or kill sizable
numbers of people, something that is almost beyond the former
psyche of the American public's view of the way we should
operate in the world.
In Colombia, where you have a combination of $500 million
lost with the pipeline and the capital of the world in terms of
people who have been kidnapped--I am not sure how many
kidnapped and killed--but nevertheless, its almost like a 9/11,
certainly for that country's circumstance. I would like to know
what I do not know about Colombia's policies regarding what
they are doing to coordinate intelligence activities with
information activities, with military activities and otherwise,
to identify the leadership--it is hard for me to separate
narcotics development, trade, et cetera, from terrorism.
What are they doing about identifying who the leaders are
in the three organizations, but mostly the FARC, and either
capturing or killing them in sizable numbers?
If you send a serious enough message and then you combine
that with saying to the farmers, ``We are sorry, we are going
to eliminate one way or another this growth in narcotics; even
if we have not been able to substitute crops, we are going to
eliminate this growth''--I am talking about some very hard
lines here. What is the thinking in Colombia about that kind of
hard line?
Mr. Grossman. Let me start, and then maybe General Speer
can help me as well.
I think 9/11, as I tried to tell some of my other
colleagues, had a big impact on Colombia, as well. I believe,
Congressman Lewis, that, had there not been 9/11, I doubt
President Pastrana would have taken what I consider to be a
courageous decision that he took on the 20th of February to end
the peace process and deal in his own way with the FARC. I
think that is a product of his own frustration, but also a
product of 9/11.
Both General Speer and I have talked a lot to the
Colombians about the need for them to bring together, in an
integrated way, a real plan that has to do with their security,
their information activities, their intelligence activities,
all of these things, to, kind of, get on top of this program.
And when we were there together, we had dinner with President
Pastrana in February, and I think that is something that he
understands that they need to do, and there is work going on to
do it.
We also took the occasion, General Speer and I, to make
those same points to the three leading presidential candidates,
as well.
Maybe I will just let Gary Speer talk for a moment about
his perspective on this.
Major General Speer. Thank you, sir.
One of the things that probably has not hit the press that
I can report to you, first of all, I think the Colombian
military and the Colombian police leadership, through their
intelligence efforts, have pretty good visibility on who the
leaders are in each of the three organizations and, at least
within the FARC, a pretty good idea as to the general areas
that they are located in.
Now, in terms of, that sounds real simple, why do you not
go out and do something about it, kind of, which is the next
question, I am talking about general areas, as opposed to
specifically where now the results since 20 February there have
been several and--unfortunately, in this forum--I would be
happy to provide you something for the record--several FARC
leaders that have been either killed or captured, based on
focusing on leadership of FARC fronts.
What the Colombian military did on 20 February is, the
first thing, the air force attacked known FARC infrastructure
inside the despeje, where there were no civilian population
centers. The second thing that they did is, they moved in very
deliberately to secure the five major cities within the despeje
as an effort to minimize the chance of civilian casualties.
And now, I think their focus is shifted toward trying to
get at the leadership. Because what the FARC has done in the
meantime, is avoid contact with the Colombian military. They
have broken into small groups and, kind of, gone back in the
jungles. And instead of focusing on the Colombian military,
they are using explosive tactics and, in essence, trying to
interdict the power pylons, telephone towers and things of that
nature. So I think there is some progress in that area.
Mr. Lewis. Well, it certainly strikes me that we have
identified 2,000 people within Al Qaeda that we want to capture
or kill because of the international threat of terrorism, and
if someone did that in Colombia and did it aggressively--then
when you get rid of about the top three levels, pretty soon
things are going to change without any question. So I would
hope, Mr. Ambassador and General, you can come and maybe talk
to me in circumstances where we can talk off the record about
this.
Mr. Chairman, I was going to ask a question about building
a balanced and talented capable military in Colombia, and
extending it over time, and ask for comments about FMF and
IMET, but I am afraid the audience I was going to ask the
question about that is missing from the room. So, in the
meantime, anything you want to add to the record, by way of my
questions or otherwise, I appreciate.
Did I make that point clear enough or was it too esoteric?
Mr. Grossman. I think we understand.
Mr. Kolbe. Mr. Callahan has one more question.
Mr. Callahan. Sounds like a Department of Defense
appropriation problem to me.
Two questions, I think they have already been asked, I
think, Mr. Franco and General Speer, with respect to the ARI
and Ecuador. And that has already been asked, I think, and I
will leave that for the record. And also, your assessment of
the threat to Ecuador. If that has already been asked and you
will provide, I will read it in the record.
But let me just forewarn you and the chairman and the
members of this subcommittee of something else, and also to the
Colombian officials that might be present here today. What I
ran into when I went to Colombia and I talked about this $1.3
billion for Colombia, I got all of the heads of all of the
agencies that were on our side. I got the navy there, the army
there, the police chief there and the president in one room.
And we had a sit-down agreement that this was what they needed,
$1.3 billion, and there was not going to be any independent
lobbying to Congress from these branches of government in
Colombia.
Only to find out two weeks later that the police chief and
the head of the navy were up here in Washington lobbying for
funds for their own jurisdiction. And President Pastrana has
got to realize and got to emphasize to those people that he is
the president and he is the one that we are responding to, if
we respond. And that we cannot tolerate them going behind the
president's back individually lobbying members of Congress to
try to disrupt what the president of Colombia is trying to do.
So let me forewarn you to tell President Pastrana that
heought to make certain that he re-emphasizes. Tell him last time it
lasted for two weeks.
Tell them to reemphasize it a little stronger, and maybe he
will keep the chairman from having a lot of problems when
members who are being lobbied by these people start saying this
money ought to be earmarked accordingly. So that is something
that is very important.
Thank you, Mr. Chairman.
Mr. Kolbe. Thank you, Mr. Callahan.
I realize we have gone beyond the time that we thought we
would go. And I have some questions I think we will probably
put on the record, but I am just going to ask a couple here
very quickly.
One, Mr. Franco, about the Gersony Report that I spoke of
in my opening remarks about the deals with eradication
alternative developments; a pretty bleak picture that it paints
in the Putumayo region. I know this is classified as a
confidential, so I am referring to findings that have already
been reported to the press, specifically the L.A. Times and the
New York Times.
Basically the conclusion is that, based on the last two
years, the security is really the key, and you are not going to
have alternative developments that is going to work in an area
where the AUC or the FARC are in control. So my question to you
is what impact has the security situation or the deteriorated--
or at least not improved security situation, had on USAID
alternative development programs in Colombia?
Mr. Franco. Thank you, Mr. Chairman. You are absolutely
right. We did commission a report. It is classified. And I
wanted to say at the outset it is one of many sources that we
use and that it is not the only source we rely upon as we
assess the situation in Putumayo and elsewhere in Colombia.
The situation there has deteriorated. Our program, as I
mentioned in my testimony, is only nine months old. And that is
why I at the outset want to make very clear that I think it is
important for all of us to understand that development is a
very long-term commitment. That does not mean that when you run
into obstacles, as we have in Putumayo, because of the security
situation that has deteriorated, that we do not, irrespective
of a long-term process involved, take stock on this and make
adjustments accordingly.
So what we have done--and we are in an ongoing process on
this--is to look at alternatives that address some of Mr.
Farr's concerns that has to do with good governance and rule of
law in areas where we can work in Putumayo and other places in
Colombia, turn to alternatives beyond the small farmer focus of
the initial program--not abandoning that though. We are working
with farmers currently in the region, irrespective of the
security problems, to do voluntary eradication. And we had some
success in this regard.
But we are looking for infrastructure development and other
alternatives that are non-agricultural in nature, and I will
say security is at the top of the list, but there are other
concerns, marketing concerns.
I brought a little prop. It is a can of hearts of palms
that is being produced in Putumayo currently, with our
assistance, and marketed in Bogota. So there are things we can
do and are doing and will continue to do.
Mr. Kolbe. I got a can of that last year when I was down
there. [Laughter.]
Mr. Franco, though, to follow that up, I think, as I
understand it, you have, kind of, revised your strategy so that
your alternative development strategy now relies not on
individual farmers, but more on getting the entire community
involved. But the question still is the security situation. How
is that going to be any more effective?
Mr. Franco. Well, the security situation is a problem, but
we are able--I want to make this very clear: We are not
abandoning Putumayo, we are working in Putumayo, we intend to
continue to work there. We need to assess the degree and the
types of projects and the areas in which we work, and that is
an ongoing process.
But we are not abandoning Putumayo, we just want to
underscore that, as the security situation, if it were to
worsen, then we would take stock, but at the current time we do
not think it is an impediment to carry out projects such as the
hearts of palm projects and other infrastructure projects that
we have planned in Putumayo and elsewhere in southern Colombia.
Mr. Kolbe. Well, I just hope that the security situation
allows you to carry this out. I guess that is the big problem
and the big question.
Mr. Franco. It is the big question. It is something that we
look at repeatedly. And my assessment, in conversations with
the mission, with the embassy--of course, we coordinate, we do
not dictate from Washington--and people on the ground is that
we can carry out some of these infrastructure projects. We are
looking to establish a casa de justicia in Puerto Asis in
Putumayo. So there are things we can do. We do not want to
abandon the region.
And it is an issue. I do not want to minimize it. I just
think it is important to put it in the context of expectations
of very rapid developments in light of the security problems
are going to be something that is going to take some time for
us to see the fruits of our investments.
Mr. Kolbe. A final question for Secretary Grossman. Of the
president's 2003 budget request of $537 million for Colombia,
$98 million of which is for Colombian military assistance, the
language in the supplemental request specifically includes 2003
funds, which is interesting since it includes funds that have
not been appropriated.
My question is, does this supplemental change the 2003
request in any way? Specifically, is there going to be a change
in the amount that is requested in the allocation of those
funds for counternarcotics, for alternative development, for
counterterrorism, for Colombian national security purposes?
None of that has changed? I see Mr. Beers shaking his head.
None of that is being changed in the 2003 budget request by
this supplemental; is that right?
Mr. Grossman. That is correct.
Mr. Kolbe. So you have a supplemental that has been
transmitted but a 2003 budget request that was prepared months
before, earlier----
Mr. Grossman. Right.
Mr. Kolbe [continuing]. And that is not being altered by
the changed circumstances.
Mr. Grossman. The way I want to answer your question is is
that a supplemental, in this case, from our perspective, really
was not supplemental. I mean, that $35 million was not money we
were able to get into the budget the first time around. For
example, the $4 million on building police stations or the $6
million for the pipeline to move forward or the $25 million for
kidnapping were not thingsthat made the cut the first time
around inside the administration, did not make it up to the Congress.
When there was an opportunity to have a supplemental, I
think all the people who were working on it----
Mr. Kolbe. But my point is, the language you have got in
the proposed supplemental says, ``in fiscal year 2002 and 2003
funds shall be made available.'' And you have just told me you
are not making any change, though, to 2003.
Mr. Grossman. Not in the levels, no. Not in the levels.
Mr. Kolbe. Not in the levels. You just told me also not in
the uses.
Mr. Grossman. Right. That is correct.
Mr. Kolbe. Or the distribution.
Mr. Grossman. Yes, sir.
Mr. Kolbe. So why bother to have 2003 included in the
supplemental? Why not just say, ``in fiscal year 2002 funds
available''?
I think I hear a chorus, a Greek chorus back there.
Mr. Grossman. I actually can answer this question.
[Laughter.]
That is because--it is because, the helicopters that are on
the ground now, if there were helicopters, for example, in the
Cano Limon pipeline project, which there are, and if you all
decide that we can go ahead with that in FMF, and if there is a
terrorist threat, we would like to be able to use those
helicopters as well.
Mr. Kolbe. Okay, but that is not going to change the
allocation.
Mr. Grossman. No, sir. No, sir.
Mr. Kolbe. Okay. I want to thank all of our participants
for their statements and for their participation today. We will
leave the record open. If there are any subsequent statements
that need to be made in response to questions or other
questions that will be submitted by the members of the
Committee, we will do so.
I thank you. I think this has been very enlightening, and I
think it is the first step in a very long process of
considering how we proceed in considering funding for Colombia
in the fiscal year 2002 emergency supplemental and in the
regular fiscal year 2003 appropriations process. We thank you
all very much.
The subcommittee will stand adjourned.
[Questions and answers for the record follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Thursday, June 27, 2002.
THE ADMINISTRATION'S PROPOSED MILLENNIUM CHALLENGE ACCOUNT
WITNESSES
HERNANDO de SOTO, PRESIDENT OF THE INSTITUTE FOR LIBERTY AND DEMOCRACY,
LIMA, PERU
MARY McCLYMONT, PRESIDENT AND CEO, INTERACTION
BRET D. SCHAEFER, JAY KINGHAM FELLOW IN INTERNATIONAL REGULATORY
AFFAIRS, HERITAGE FOUNDATION
Chairman Kolbe's Opening Statement
Mr. Kolbe [presiding]. Subcommittee on Foreign Operations
will come to order.
And first of all, I apologize for the delay in getting
started, and I am going to apologize in advance for what it
appears will be fairly continuous interruptions here for
procedural votes. We do have a very important hearing this
morning, one I am very delighted, I have been looking forward
to for a long time.
It is the first hearing that we have had on the subject of
the administration's proposed Millennium Challenge Account. I
was with the president in Monterrey, Mexico, in March of this
year when he challenged the United States and other wealthy
nations to demonstrate that increases in the amount of foreign
aid can actually make a measurable difference.
But the president made it clear at that time that he is
seeking a new approach that provides incentives for countries
to improve their governance, to invest in more health and
education, to support sound economic policies that promote
entrepreneurship. And I agree with what he has proposed.
I think the hearing today is going to give us an
opportunity to learn from a diverse group of experts about the
shortcomings that we have in the current approach to foreign
assistance, the opportunities that are offered by a radically
improved approach to economic development assistance.
As we work through the fiscal 2003 appropriations process--
and just a few months later we will begin consideration of the
2004 requests--our subcommittee is going to have a major role
to play in shaping the Millennium Challenge proposal.
Although the president's desire for flexibility has to be
balanced with the congressional responsibility, under the
Constitution, to appropriate funds and to oversee programs, I
believe we can move forward with the Millennium Challenge
proposal. And I hope even that we can do so with a pilot
program later this year.
It is important to note that the ongoing USAID programs
would not be reduced in order to start this initiative.
Before hearing from our witnesses, let me make just a few
more comments about the historic development conference that
took place in Monterrey earlier this year.
Leading up to this conference there was a very important
debate that took place about resource transfers from the
wealthier countries to less wealthy countries. Former president
of Mexico Ernesto Zedillo, U.S. Secretary of Treasury Rubin,
issued a report saying that the success of meeting the
Millennium objectives meant the donor countries would have to
transfer at least $50 billion more per year over the next
several years, until at least the year 2015.
Gordon Brown, a member of Parliament and chancellor of the
exchequer for the United Kingdom, announced--proposed his idea
for a Marshall plan for an extra $50 billion each year. Claire
Short, the development minister, also in the United Kingdom,
and Jim Wolfensohn, president of the World Bank, worked openly
and behind the scenes to kill, frankly, a U.S. proposal to
convert half of IDA loans to grants, an idea that has long been
advocated by many members of this subcommittee.
During these calls for additional resources, which were
largely a concerted effort to gang up on the United States,
Secretary O'Neil assumed the very positive role of playing
devil's advocate, to focus attention on the importance of
evaluating performance, questioned the overemphasis on donor
resources as a policy prescription.
Certainly, some debate about additional resources is
legitimate, was legitimate, will be legitimate, but the
opportunistic anti-American sentiment that accompanied it was
not, I think. Had this entitlement transfer debate not turned
to a focus on performance, Monterrey, I think, would have just
been marked down as another expensive and quite unproductive
gab-fest.
Why was the singular focus on resource transfer so far off
the mark? The answer, I think, is not too difficult to grasp.
The obsessive focus on resource transfers is rooted in two
assumptions that come largely from a bygone era: The first is
that foreign aid is the primary source of capital flows. The
second is that aid is perceived to be the driving force of
development.
In the 1960s, we could easily hold to these assumptions. At
that time, over 70 percent of all financial flows from the U.S.
to developing countries were in the form of development
assistance. Today, neither of those assumptions are true.
Today, 80 percent of U.S. financial flows to developing
countries are private, including investment, philanthropy and
remittances. Foreign investment flows to development countries
and among developing countries amount to $180 billion to $200
billion a year.
Official development assistance amounts to about $50
billion, annually. And remittances are rapidly approaching the
amount of ODA, or official development assistance. Some foreign
leaders are actually more interested in sustaining the
remittance flow than they are in getting the foreign aid today.
Our challenge is to get a better grasp of why some
countries attract and effectively use investment and trade
opportunities, and while others stagnate while receiving large
amounts of foreign aid.
And this is what the president is challenging us to accept
as a point of departure for increases in the amount of aid,
which he has proposed as part of the Millennium Challenge. So I
think the Monterrey conference was a step in the right
direction for modernizing our approach to development
assistance, to making it a more two-sided transaction with
motivated and cooperating countries.
How did it do this? Well, the consensus document promotes
good governance, combined with capitalism as the best path to
economic development. It calls for deepening the practice of
capitalism within countries, expanding participation in the
global trading system, complementing those changes with
investments in human capital and a strengthened rule of law.
If we are going to achieve the goals of the Millennium
Development Declaration, we will have to live up to the spirit
of Monterrey--that is, the philosophy behind the president's
new development assistance initiative. We have to help
developing countries leverage the power of capital as it fits
the peculiar situation in each country. We have to expand
opportunities for participation in the global trading system.
To reinforce and accelerate the benefits of these, there
is, of course, still a vital role that will be played by
development assistance, development assistance that is provided
by this subcommittee, to co-finance greater domestic, social,
and infrastructure investments. For countries that reject this
approach, we will still provide our share of humanitarian
assistance.
This morning, to begin our discussion of what I think is
perhaps the most important philosophical change in development
assistance in the last half-century in this country, we have,
to lead off, Hernando de Soto. Mr. de Soto is the president of
the Institute for Liberty and Democracy in Lima, Peru. His two
seminal books, ``The Other Path'' and ``The Mystery of
Capital,'' have been bestsellers worldwide. They have wide
appeal among members of congress who recognize that capitalism
has failed in much of the developing world and are trying to
understand why that is so. His institute in Lima has worked to
put his theories into practice in places as diverse as Haiti
and in Egypt, and his circle of admirers extend from such
people as Milton Friedman to President Aristide of Haiti.
Second and third witnesses, who will appear together as a
panel after Mr. de Soto, include Mary McClymont, who is the new
president and chief executive officer of InterAction, a major
organization that we work with very closely that represents
dozens of the non-governmental organizations, or NGOs, here in
the United States, that promote development and relief efforts
overseas. Her organization has produced a very useful paper on
the Millennium Challenge Fund.
Brett Schaefer is the Jay Kingham Fellow in international
regulatory affairs at the Heritage Foundation. He is a
principal author of the backgrounder that Heritage produced,
entitled ``America's International Development Agenda.''
Both organizations have gone to some length to consult
widely with a wide range of interested parties before drafting
the documents they have prepared for us here today. And we
appreciate both of them appearing here on relatively short
notice.
Let me, before I turn to Mr. de Soto for his opening
statement, let me call on Ms. Lowey for her remarks.
Ms. Lowey.
Mrs. Lowey's Opening Statement
Mrs. Lowey. Thank you, Mr. Chairman.
I join Chairman Kolbe in welcoming our distinguished
witnesses to our hearing today to discuss the president's
proposal to create a Millennium Challenge Account. It is my
hope that this hearing will begin a thoughtful and deliberative
process to shape the parameters of the new initiative and
ensure that whatever structure is ultimately agreed upon, the
additional funding effectively addresses poverty alleviation.
While the president's announcement in March at Monterrey
that the United States would increase resources for developing
countries by $5 billion over three years took some by surprise,
I view it as the culmination of the efforts of many of us who
have been working for an increased United States commitment to
poverty alleviation throughout the world for a very long time.
As I have indicated before, I initially felt that we should
not wait until 2004 to increase resources for developing
nations because this would translate into at least a two-year
delay in the funds having any effect on the ground. This
position was based on the assumption that this new account
would use existing bilateral aid delivery mechanisms, and would
largely provide additional funding to deserving countries for
basic needs in health education, food security, and governance.
However, the administration has only recently briefed
Congress on the outlines of their plan for the Millennium
Challenge Account. The information provided so far has created
significant uncertainty about both the structure for aid
delivery and the purposes for which these extra billions are
intended.
The administration will not submit implementing legislation
until September at the earliest, and is not represented here
today, in part, because critical decisions on structure and
purpose have not been made.
Given these uncertainties, I do not favor rushing into
providing funds for a pilot program in fiscal year 2003. If we
come upon additional resources for the bill, they should be
used, in my judgment, for existing critical health and
education needs or to help countries get into a position where
they will qualify for Millennium Challenge Account funding in
fiscal year 2004.
I will spell out some of my initial concerns about MCA and
will encourage any of our witnesses to comment, if they choose.
First, I am uncomfortable with the concept of creating a
fund which sets up an elaborate process to declare winners and
losers among developing nations. Out of a possible 116 eligible
countries, perhaps 20 to 25 will receive assistance initially.
This puts the United States in too prominent a role as judge
and jury of economic progress and can harm our foreign policy
interests more than it helps.
I believe that the community of interested parties who
follow foreign assistance issues are so grateful to finally
achieve a commitment for more resources that no one dares
question the administration's fundamental premise.
Second, I am concerned that the administration will end up
creating a new advisory board or Enterprise Fund-like structure
to develop criteria for the program which will make eligibility
and grant decisions. The material provided to Congress also
postulates any number of potential implementors of this
funding, including private corporations, international banks,
multi-donor international trust funds and non-governmental
organizations.
My primary concern is that we seem to be headed toward the
creation of a new structure which takes control of this account
away from traditional implementing agencies, namely State and
AID, and takes Congress largely out of the loop when it comes
to directing funding to specific purposes or even specific
countries when that is necessary.
Finally, I also have the strong impression that the
intellectual authors of this MCA concept lack a fundamental
understanding of the simple fact that sound development is not
possible without committed and competent staff on the ground to
implement and monitor AID programs. There seems to be a feeling
that we can write large grants to NGOs or even private
corporations that will achieve miraculous development results
in developing nations. We cannot expect this additional funding
to achieve results without a commitment to provide sufficient
human capacity for implementation.
I will be overjoyed if my concerns are unfounded or
addressed as we move to implementing legislation for the
Millennium Challenge Account. However, we cannot rush this
fundamental shift in our foreign aid programs, and this hearing
begins what I hope will be a series of discussions on the
topic.
Mr. Chairman, I just would like to conclude with just a
couple of quotes from the front page of the New York Times, and
I would welcome to hear your comments:
``U.S. businesses dim as models for foreigners. It was not
just WorldCom that took a beating today, it was also the United
States itself and the American Gospel about how business should
be done. After years of pumping millions of dollars into the
United States because it seemed the land of opportunity,
foreign investors are pulling back. And people around the
world, who, for decades, have looked to the United States as
the model for openness and accountability in business, have
been sorely disillusioned by the mounting waves of scandal.''
I would be interested in hearing your comment on the
impacts of what is happening in the United States, and how we
can address them. I know from the traveling I have done with
the chairman and my past visits to other countries, we talk
about transparency, transparency: ``Why do you not have a
judicial system? Why is it so corrupt? Not like the United
States.'' I certainly would be interested in your comments.
Thank you, Mr. Chairman.
Mr. Kolbe. Thank you very much, Ms. Lowey.
Mr. de Soto, we will proceed with your remarks. We
understand we have some information from you, and I know we
just asked you to kind of talk about it, summarize it, rather
than have a prepared statement. So we are interested in hearing
from you for a few minutes, and then we would like to take
questions from members so we can develop a dialogue on this.
Mr. de Soto.
Mr. de Soto's Opening Statement
Mr. de Soto. Thank you very much, Mr. Chairman and Ms.
Lowey, the distinguished ranking member, and the members of the
subcommittee, for giving us an opportunity to make a statement
on the Millennium Challenge Account.
I see there that it is got it right in terms of economic
growth. I see at least things I very much agree with, according
to our experience on the field. That of sound policy environ
being crucial to growth.
Item one, which refers to good governance and the need to
do away with corruption, to strengthen human rights and to
establish the rule of law, is right on. Item three, which are
sound policies and the need for open markets and individual
entrepreneurship, are all right.
What I would like to get into, since you have asked me for
my opinion, is the causal chain; how did this begin, and how
did it start? Where is the grandfather, where is the father,
where is the son?
And in that connection, I have put in your hands the
following document, which may be useful to look at. It is
entitled ``Dead Capital and the Poor in Egypt,'' which is one
of the countries in which we are now working with, as a matter
of fact, U.S. resources.
We are called in my heads of state of different countries.
We are now in six countries, and we have been called in by
another 15 additional heads of state to, as a matter of fact,
talk about the rule of law. The question there, first of all,
that interests them and the reason they call is and they have
not called anybody else is because we have developed a certain
ability to be able to distinguish, in terms of business, in
terms of economic production, what part of the country works
under the rule of law and what part of the country does not.
The first thing you will see from this chart, and we take
the case of Egypt--which is not much different from the other
developing countries--is that when it comes to real estate
assets, which are the majority of the holdings of any poor
people in the world, only 8 percent of them are held according
to law and 92 percent are held outside the law.
When it comes to the businesses that effective employ most
of the Egyptians, only 12 percent of Egyptians operate their
businesses inside the rule of law, and 88 percent do it outside
the rule of law.
Now, what this document also indicates is on the basis of
very precise maps and the work of over 100 Egyptians and 10
Peruvians on the field, we have been able to find out how much
it is that is held outside the law. And we start finding out
that these poor, which represent 90 percent of the population
of Egypt, own at a replacement value, not at market value,
replacement value, about $245 billion worth of assets.
Now, why is that extraordinary? Because $245 billion worth
of assets means that what the poor own already, thanks to their
enterprise, thanks to their initiative in Egypt, is 55 times
greater than all foreign direct investments in the country over
the last 200 years, including the Suez Canal and the Aswan Dam.
So, Mr. Chairman, when you were saying, you know, where is
wealth? Wealth is already among the poor. It does not really
come from foreign assistance.
It is also about 30 times bigger than all the value of all
the Cairo Stock Exchange. And it is at least 60 times bigger
than all bilateral aid and world bank loans to Egypt. In other
words, the majority of resources are already in the hands of
the poor.
So, what we--what you will also see at the end is that we
start measuring the effects of the law. And you will see that
at the end of the document, for example, it has been shown that
it takes--if you want to legally own a home and use it as
collateral, it takes about 17 years of red tape.
If you want to open a business, and all of this working
with--a little, small, private enterprise that belongs to
thepoor. If you want to open a bakery in Egypt legally, it takes 549
days, and all of these are the legal documents they have to go through.
So the first thing that I would like to point out as a
conclusion is you are right on when you say about the rule of
law. So first conclusion, only 10 percent of Egyptians work
within the rule of law.
Second conclusion, the rule of law in most developing
countries is, in effect, not a sound environment for the
development of an enterprise, in spite of the fact that the
people in developing countries that are poor own, actually,
most of the assets in those countries.
That means also that most of the resources for development
are not in the hands of development, they are not in the hands
of the rich, are not foreign direct investments, but are the
people themselves. And they are not recognized and they cannot
be leveraged and they are outside the law.
As a matter of fact, when we have done the calculation
worldwide, it turns out that the poor would have $10 trillion
worth of assets, from Russia to Egypt, all the way down to
Peru. These $10 trillion worth of assets are 90 times the value
of all bilateral foreign aid received in the last 30 years.
They are 40 times of the value of all world bank loans to
developing countries. And it is 20 times the size of all the
other stock markets, which does not make them rich, it just
shows their enormous potential.
They are, at the same time, the major source of corruption.
You can either go down the Samuel Huntington idea that, somehow
or other, we people who are not so pink or not so Protestant
are just more adept at corruption. But the other way of looking
at it is, if you are facing 449 days, you are facing 17 years
of obstacles. You are going to be corrupt because it is the
only way you are going to get into the law. You will have to
buy your way through laws like this. And so, when you deal with
a rule of law, you are also dealing with corruption.
And also, as you will see, at the end of this sheet that I
gave you, you have two deeds that we found in Egypt. One is a
deed for land, and the other one is a deed for business. Now,
what was interesting, we presented this to Egyptian cabinet who
asked us, why do we present them; these are legal
authorizations. And we pointed out that none of them were
issued by the Egyptian government. They were issued by ground,
informal organizations at the grassroots level.
Which means that people that are poor already want to come
under the rule of the law. You do not have to educate them. You
do not have to force them to be in the rule of law. Since the
legal system does not welcome them, then they have created
their own rule of law. And what you have to basically do then,
if you want to create an open, free market, is essentially
bring in the rule of law to integrate poor people in.
Now, this should, of course, not at all be something new
for the United States. This is what you did throughout the 18th
and 19th centuries. It took you, as a matter of fact, this very
U.S. Congress, over 32 preemption acts throughout the 19th
century to start bringing in all the 800 different rules of law
you had in California up until 1860. There were--every city,
every town in the United States did not have a standard time.
We had different time zones. The sheriff basically decided. You
had 700 currencies, and there were a thousand ways to recognize
property. What you did in the 19th century is you integrated
everybody under the rule of law.
This is to then say that the task of bringing the rule of
law into developing and former communist nations is not the
task of telling them how they should obey the law but,
essentially, how they should integrate the poor.
If your objectives, therefore, are put in the following
sequence, I think that they will be useful.
First of all, for somebody who is poor to understand the
value of the rule of law, he better understand it--he or she
better understand it, first of all, as a rule that allows them
to preserve their enormous amount of assets and to keep them
safe and to be able to leverage them. But they own their homes,
but they own our land and what they own are businesses. And if
the rule of law impedes them from coming in, they will not come
in to the rule of law.
So, the first place that one should start for creating the
rule of law is what you did in the 18th and 19th centuries,
which is you start off with property rights. When you put the
property rights in place, then the rest of the rule of law will
follow, because poor people will feel identified to it, will
understand that it serves them.
The second thing is that once you bring in the rule of law,
then all of a sudden everybody that has got assets will already
find out that they are represented by titles, by deeds. That
means that they can then start using their assets as
collateral, as a guarantee against loans.
It will also mean that their companies can start issuing
papers. You are talking about investments. Who would invest in
any country where against the investment you can not issue a
share or you can not issue a bond? Now, if you are outside the
law, which is the case of 90 percent of Egyptians, or 80
percent of the people outside the world, or 78 percent of
Mexico, and you can not therefore issue shares, who is going to
invest in you if you do not have the shares?
Therefore, your biggest constituency are actually the poor
in developing countries. And I think that is also important to
put into place.
Last but not least, it is also the basic tool to fight
terrorism. One of the things, of course, that one can see, for
example, after this most regrettable and dramatic event of the
bombing of the Twin Towers and the Pentagon is that, here in
the United States, you were able to say about three days
afterward who it is, who had done it and where they had lived
over the last month. You were able to trace it.
But you still cannot find Osama bin Laden, because Osama
bin Laden lives in a country, or lives in some countries, that
do not have property rights and therefore do not have
addresses. You cannot fight crime without addresses. You cannot
fight crime in a civilized manner, respecting human rights in
any country if it is not based on a property system.
So what I am trying to basically tell you is that, in the
Millennium Challenge Account your policies are right. But the
order in which they have to be followed is, first of all,
property rights for the poor, then you will get the rule of
law. And if you get the rule of law, you will get basically--
you will destroy the obstacles that are the cause of
corruption, the absolute need to corrupt your way through the
system. And you will then end up with human rights and you will
end up with credit and you will end up with investment and all
the good things that lead eventually to economic growth.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Kolbe. Thank you very much for that very concise lead-
in to all of this.
I have a couple of simple questions here. Ms. Lowey can
ask--she asked this in her opening remarks, so I am going to
ask you to comment on it right at the start.
Does what is happening with WorldCom and things here in the
United States change any of this?
Mr. de Soto. Well, I--one of the--the capitalist system is
obviously not a perfect system. And it has--and I believe that
Marx, to a great extent, was right--a tendency to concentrate
wealth and to be abusive. And the reason why when this system,
the capitalist system started out, for example, in Europe, the
Europeans made a successful go of it, like you Americans did,
like the Japanese and the East Europeans, and what is now the
former Soviet Union did not, is because you had democratic
systems which allowed you to correct your errors. You are
always able, gradually, thanks to the democracy that comes
together with the capitalism, able to correct the excesses of
capitalism.
What I see, personally see from the outside looking in, is
that you are already making a company like Arthur Andersen pay
by a total collapse. You are already making Enron pay. So what
I am trying to say is, you, in a way, you are a model, because
you seem to be able to detect abuses in time and correct them
and punish them.
In other words, your image has definitely been soiled. I
mean, a scandal on the one hand is not a nice thing to have.
But on the other hand, what is interesting about your country
versus my country is that you do get scandals, and that those
scandals allow you to correct on the way.
The capitalist system is an ongoing system. It is not an
ideal. Nobody gets into a plaza shouting, ``Viva capitalism.''
[Laughter.]
That is not the way it happens. It is just simply the best
corrective system we know about, and it is not very romantic at
all, and it is very hard on virtues and morals.
Mr. Kolbe. Thank you. I appreciate that response.
Let me turn a little bit now to the Millennium Challenge
Account and bring some of the stuff you have discussed in your
book and you discussed here this morning down to how we proceed
if we are going to do a Millennium Challenge Account.
I think a lot of the time has been spent talking about some
very esoteric criteria for country selection under the
Millennium Challenge Account, some pretty general discussion
since Monterrey on that. Let's talk a couple of concrete
examples, a couple of countries that you use and talk about in
your book quite a bit, Haiti and Peru--a country that is your
home country.
I would like to ask you, what kind of criteria would you
use to determine economic freedoms? What is a country that
would qualify for the kind of thing we are looking at doing?
How would you measure the economic freedom?
And would you rate Peru and Haiti in comparison with other
Latin American countries under the same criteria? How would you
determine good governance? Well, what kind of criterias would
you use for that, and would you rate them similarly under the
same criteria?
Mr. de Soto. Well, the first criteria I would use for
understanding whether the rule of law or the objective of the
Millennium Challenge Account are actually viable is whether
they reach the poor or not.
If you look at the laws in the Venezuela, if you look at
them in Peru, if you look at them Mexico, per se they talk
about freedom. But in fact, because, as I tried to show with
those 40 meters of obstacles that you get in Egypt, in fact,
the poor cannot access to them.
So my first criteria would be not only if you have good
laws, but essentially the question is whether those laws are
accessible to the poor. That would be my first criteria.
Because it has been now 50 years that we have been doing
everything that we have been told to do. We have been told to
balance our budgets. We have been told to get our fiscal
situation in order. We have been told to do the macroeconomic
balance. And all of that, in many cases, actually works, but it
has not reached poor people.
Let me give you an idea of how these systems sometimes
work. For example, in the case of Peru, we were told--and it
was a good idea--to privatize the telephone company, and we
did. And this company, what we found out is that when even kids
from our team, who worked for the government, went out with the
Peruvian title for the telephone company, which had a value in
1990 of $53 million on the Lima Stock Exchange, that nobody
would buy it.
And so, the Peruvian government actually spent $18 million
and three years to make a good title within the law and set up
a new legal environment for privatizing the company, until it
got to the point that the documents that were sent to Bell
South and AT&T were recognizable by foreigners. In other words,
we inserted the Peruvian Telephone Company inside the
international rule of law, the order of the global system.
And the company was sold at $2 billion. It was worth $53
million in 1990 on the Lima Stock Exchange and three years
later was sold at $2 billion, 37 times its value. That is what
a good legal environment can do.
But that which we have done to have favor the investment of
the rich in Peru, we have not done for the poor themselves.
So what I am trying to tell you is that, I think the first,
number-one criteria is we know that good laws and good
institutions help develop. The question is, are they accessible
to the poor? And unfortunately, the reply from Haiti to Peru is
that, though some progress have done in the case of Peru, where
we started working from 1990, not sufficient has been done, and
the poor are really outside the system.
Mr. Kolbe. I will come back with some more questions.
Ms. Lowey.
Mrs. Lowey. Well, let me just say I appreciate your
comments. I agree with what you are saying, but in order for
your theory to really work, you have to get the rich and
powerful in this society to agree to change the laws that make
them rich and devalue the property of the poor.
It seems to me, what was it, in the 1980s, when we tried to
establish property rights for the poor in El Salvador, and what
is it, 15 or more years later, and there is very little
success.
And if you look throughout the Third World, the rich and
the powerful are not ready to have laws that make them pay
taxes, make them provide for the poor.
And it is not only Egypt, you could go through India, where
you are having such an extraordinary economic success among the
higher end of the population and yet there is no impact on the
poor. India is probably a dreadful example. You can give
examples all over Africa.
Your theories are fine, but how do you get the rich and the
powerful to acknowledge and respect your theories and move
toward some rights for the poor?
Mr. de Soto. Thank you for your comments, Ms. Lowey.
In effect, the theory holds together. The problem is the
practice. And I think that there are many reasons for that
aside from the fact that there may be resistance from the rich.
Which gradually I have found, by the way, diminishing, at least
in every country we go to, because essentially they who call us
in to bring everybody in. You know, they are only 10 percent of
the economy and 15 percent of the economy, the writing is on
the wall, that cannot last, keep on lasting----
Mrs. Lowey. Excuse me, could you just, before you go
further, explain that? The wealthy and the rich and the
powerful bring you in to have you help them give more property
rights to the poor?
Mr. de Soto. Oh, absolutely. You see, what I am trying to
explain by these charts that I showed you. If we have these
charts, these pie circles, and we started seeing, for example,
where was Egypt 50 years ago, 50 years ago most of the poor
people did not own any of these assets which they have today.
Over the last 35 years, for example, since you have been
mentioning Haiti, the size of Port-au-Prince has increased 15
times, like most concentrations of people in Haiti. The size of
Guayaquil in Ecuador has increased about 11 times. The size of
Cairo and Lima have increased seven to eight times.
In order words, over the last 35 years, the poor have
squatted, invaded the lands of the rich and actually
appropriated them. And what we are talking about is that,
instead of resisting that, they should bring them under the
rule of law so that, actually, perfect market transactions can
take place instead of all the violence that actually comes.
So the poor have obtained an enormous amount of wealth over
the last 35 years that they did not have before. Before, what
we knew about the poor was through the Discovery Channel and
the National Geographic magazine. That has radically changed in
the last 35 to 40 years. They have come in.
So, one of the reasons we suspect that we are called in by
governments, which have very close connections to the local
money class, is because they now only have about 10 percent of
the national wealth in their hands, and it is decreasing. And
they have not been able to get the message of private
enterprise over to the poor because they have not actually
focused on the law.
Mrs. Lowey. With all great respect, it seems to me that
this is a great theory, but maybe you could give me an
example----
Mr. de Soto. Sure.
Mrs. Lowey [continuing]. Of a country where the rich have
decided now we are going to pay income taxes, and we are going
to take the poor in the country and give them their farm, or
get them to their job, and our income taxes are going to help
lift them up. I am totally puzzled.
Mr. de Soto. Yes, I will tell you. First of all, mine is
not a defense of the rich. If you read my first book, ``The
Other Path,'' I even call the rich in a country like mine not a
capitalist class but a mercantilist class that lives from
government favors.
So, if the discussion is whether we think that the rich
have got the best intentions of the world in the Third World,
my reply, my suspicions are along with yours--not even
suspicions. I absolutely document the fact that they are
essentially a mercantilist class that governs through
privileges.
But what I do point out is that in all developing countries
they are reaching such a degree of crisis that there are
chances that changes. And the reason we get called in by
governments, and most of them with very good connections to the
local private sector, is because they see that writing on the
wall.
Why, for example, has not it really worked out in El
Salvador and other places? Because, unfortunately, our message,
which was ``You have to change the law,'' was boiled down to,
in practice, ``You have to have to do land titling.''
And so, your hundreds of millions of dollars that have gone
to the World Bank, to the Inter-American Development Bank and
direct assistance, have not gone in to change the law. They
have come in to put in new computers, new types of mapping
which serve your private companies as much as they serve our
private companies.
But the real reform of property law has not taken place,
and it is a defeat for the kind of programs that we were trying
to go for and the ones that we think should take place.
But we also think that the crisis in the Third World and in
the former Soviet Union is getting to a position that most of
these things will be possible.
Where have there been successes of this sort? Well, let me
tell you, because I think that most of the successes can be
actually attributed to the--Japan, South Korea and Taiwan. And
they are very poorly documented. And you have forgotten about
them, the world has forgotten about them.
We, as a matter of fact, to find out about them, managed to
get a loan from Europe to bring together the seven surviving
octogenarians who did the Japanese property reform program
under MacArthur. MacArthur, all he did was write a three-page
edict. In this three-page edict he said you have to destroy the
feudal class and give the property to the poor in a commercial
manner. That is what he said. And the reason for that is
because, of course, he wanted to fight what he considered were
the causes of Japanese military expansion, which was a
financing by the feudal class.
He also had another problem, which was that Mao Zedong was
coming down from Manchuria to the south of China, and as he
moved, he was changing property law and passing it from the
feudal class, in the form of collectives, of course, to the
poor.
So, MacArthur had to have a reply. And he did. And he gave
it to the Japanese, and he gave it to the joint commission on
rural reconstruction in Taiwan, and he gave it the Korean
government.
And in a matter of five years--and that is the other
document I have left with you, it is just simply Japanese
posters of 1946. It shows how, under your occupation, the
Japanese in effect destroyed the feudal class, gave the poor
people their property systems, and created one of the most
powerful capitalist systems in the world.
With all the problems it is got, Japan only had a GNP per
capita--it was 10 percent above Peru's in 1945, and now it is
about 20 times our GNP. You actually did cause miracles in
three countries, because you changed the property system and
allowed the poor to come in.
So these are three countries--Japan, Korea and Taiwan--
where you did produce a very major revolution.
Which you forgot about, by the way, when you fought the war
in Vietnam, because in Vietnam, the person who titled the poor
before you did was Ho Chi Minh. As he advanced down from north
Vietnam to south Vietnam, he did titling. So, it is crucial.
Now, it is not an easy revolution, because you are talking
about changing the law. And we are simply on our way there. We
do not have a total success on our hands. We have got a theory,
that the acceptance of which increases, of which many steps
have taken place in the case of Peru. The poor did not have
titles. It had about 10 percent of them; 75 percent of them
have them now.
In the coca regions, you know, Peru was responsible for 70
percent of the production of the coca leaf, from which cocaine
is derived. We now have only about 25--we only now produce 25
percent of the coca leaf, because we went in there, we brought
them within law and we titled.
Did we produce all those big enterprises we would have
liked to see the coca farms at? No, not yet. But we did beat
the shining path, and we did lower the production of coca in
the country.
So we only have partial successes in the right direction,
and we have the same distress of the rich classes that do you.
We just think that they are up against the wall in every
developing country. And what you have to sell them is the
change of the law.
Mrs. Lowey. Thank you, Mr. Chairman.
Mr. Kolbe. Mr. Knollenberg.
Mr. Knollenberg. Thank you, Mr. Chairman.
Mr. de Soto, thank you.
The Millennium Challenge Account, I think, has the
potential to be the most important thing that we have done when
it comes to foreign assistance. And I think it has--is, in
fact, potentially the best we have done since WWII. And I
commend the president for his leadership on this issue.
I have only read just a touch of your book, so I do not
claim to be anybody who is an authority on the book, but some
things did come to mind.
One was, for example, the real challenge we face is how to
change our thinking--I am talking about the U.S. and all the
rest of the countries of the world--change our thinking from
transferring resources, which is exactly what we do with
foreign aid, to unlocking the resources of developing
countries.
And there are a couple of references in your book that I
just wanted to make mention of. You may have covered part of
this. But one of things that is very astounding to me is that
the value of savings, and I am quoting from your book, ``the
value of savings among the poor is in fact immense, 40 times
all foreign aid received throughout the world since 1945.''
You also say if the U.S. were to hike its foreign aid
budget to the level recommended by the U.N., it would take the
richest country--us--the richest country on earth more than 150
years to transfer to the world's poor resources equal to what
they already had.
The question, I think, that comes to my mind is their
assets, though, are sterile. If they cannot leverage them, if
they cannot use them for credit purposes, if they cannot divide
them up into shares and have them marketed it in some way or
sold in some way, it seems to me it is just a dead asset. It is
a sterile asset.
So, being a strong supporter of foreign aid and being a
strong supporter of assistance that has to be used effectively
all over the world, I think the Millennium Account could put us
in that direction. We have the potential to take a big step in
lifting the world out of poverty.
But my question to you, as we talk about international
development and foreign assistance, how do we change all of our
thinking about moving from transferring resources to unlocking
resources? Because you point out, as one example, Egypt and
other countries that have a huge amount of assetsbut they are
extralegal, they are not leveragable, they are not within the property
rights system.
So how do we start changing our thinking from that to the
new thinking, which would be to unlock those resources?
Mr. de Soto. Right, sir. Thank you very much for your
question.
You know, recently, as a matter of fact at the conference
of Monterrey, I was one of the 12 members of the so-called
private sector that had a chance to talk to the world leaders.
And I was in a committee that was chaired by President Aznar.
And we now have a meeting that is going to take place in Spain
as a result of what I said. Let me tell you what I said,
because it is relevant to your question.
I reminded him that, up until 1979, his country was
receiving foreign aid and that, today, it is giving foreign
aid. And the question then was, why? Now, there are a lot of
theoretical answers, but I dared to advance my own. I said
because they made accessions to the European Union. What did
the European Union do, send a lot of aid to them? Some of it of
course was very, very important. But they have especially
focused their aid on legal reform. Essentially, accession to
the European Union meant that the French, the Germans, the
Belgians, in twinning procedures, went to Madrid and said we
want to know that when a businessman or some investment has got
to take place in Madrid, it will take place in the same terms
that they would occur in Paris and Frankfurt and Brussels.
And that process of legal reform to create going from a
recantless system to a market reform system where small to
large enterprises could also prosper, in the case of Spain,
took 10 to 15 years.
So I told him, is not it very interesting, Mr. Aznar,
President Aznar, that when you decide to talk to other
Europeans, you talk about the reform of law and the rule of
law--that is what accession procedures mean. But when you talk
to us that are outside Europe, then you talk about how much
nickels and dimes you can send in our direction.
So basically what I am trying to tell you is that whenever
you want to deal seriously with development, you have to deal,
first of all, with the rule of law, and understand that.
And what I tried to explain when I mentioned the example of
Japan, where you essentially produced a large legal revolution
that actually favored the poor, for maybe military and
strategic reasons, is that you got into the right, sort of--the
right mode of mind.
Assets, as you say, are, in effect, sterile. I came into
your country, for example, at this time, and I was remembering
a conversation of mine with Francis Fukuyama, who said, ``You
know what the big difference is between countries like ours,''
he said, ``the United States and, yours, like Peru? Trust.''
And, in effect, you know, there was a recent interesting
international study that indicates that 65 percent of
Scandinavians trust each other. You know, it is done on a
worldwide scale. Fifty percent of North Americans trust each
other.
But when it comes to Brazil and Peru, 7 percent and 5
percent, respectively. Forget about Argentina; somewhere around
4 or 3 percent. We do not trust each other.
So I came in through migrations yesterday, and I said, ``I
am so glad to be in country that is so trusting.'' And as I
came in through the Immigration Service, I said, ``I am glad to
be here. My name is Hernando de Soto. I am the son of Alberto--
my mother is Rosa, who comes from the area of--'' and the man
said, ``Will you wait a second? Just show me your passport.''
And as I showed him my passport, I started then to
understand that identity is not in me, identity travels in a
document.
I go to the same hotel in Washington for the last 15 years,
and when I went in I said, ``I am going to try Francis
Fukuyama's theory about trust.'' And when he asked me, ``How
are you going to pay this time around, Mr. de Soto?'' I said,
``Herb, as usual: promptly.''
And he said, ``Will you show me your credit card?''
Okay. [Laughter.]
Capitalism travels on paper and it travels on legal paper,
so if I have an apple, there are only so many things I can do
with it, but if I have a title on this asset, I can do a
hundred things more with it that can be seen.
You go down the street in Mexico City, or you go down the
street in Washington, and the buildings are the same. Or they
might not look the same, but they are essentially good solid
buildings, and you go down and you see agricultural land, and
in the buildings people are living and in the buildings are, at
the same time, working and prospering.
But, in the case of Washington, D.C., I can name you, if
required, a hundred functions that your buildings have, thanks
to law, that they do not have in Mexico.
They can be used as mortgage, they can be use as
collateral, they can be used as an address where you can
collect bills effectively. And therefore you can supply them
with electricity and therefore you can supply them with water.
I can give you a hundred things that a building does thanks to
law.
There are two realities. There is a reality of physical
assets, the sterile assets we were talking about, sir; and
there is the reality of capitalism, whether it helps the poor
or not, which is essentially a property system. Essentially it
comes from property law. That is what really organizes all of
your capitalist system.
In effect, you know, it is a little bit like football
games. Now most of the world except you are, of course,
interested in soccer. And the reason we are all interested in
soccer is because we all play by the same rules. If you took
away those rules, and you did not have this, there would be no
soccer game.
Capitalism is a system of rules. And what I am trying to
point out to you is that 90 percent of the world does not have
them.
And I am not trying to say that that means that you should
not do what Mrs. Lowey is talking about, be sensitive to the
poor, help them if they are sick. I do not deny that. I do not
deny that poverty relief is human, and it will save a lot of
lives.
All I am trying to point out is that the amount of
resources required--as you were quoting from the book, sir, the
amount of resources required to get development going, you do
not have. But what I am trying put here is that the poor have
it as a potential.
And yes, Mrs. Lowey, it is theory, but it is damned solid
theory, and it goes into the history of your own nation.
And I am not saying it is the only thing you want to do,
but I am saying it is a crucial thing if you want to count with
more resources than even the Millennium Challenge account.
Mr. Knollenberg. Let me just--I know my time is probably
expired----
Mr. Kolbe. It is definitely expired,
Mr. Knollenberg [continuing]. But the only thing I would
ask you is this, and this is a very short question, if you
would allow me just one second,
Mr. Kolbe. Very, very quick one----
Mr. Knollenberg. Did Japan stumble into this thing or was
there some magic, some knowledge beforehand that they knew that
kept them from the abyss?
Mr. de Soto. Let me tell you what I think. What I think is
the following thing.
First of all, MacArthur did not implement these reforms;
the Japanese did. Who of the Japanese? A group of Japanese
people who believed basically in liberal democracy and who had
been behind the over 170 peasant revolts that occurred between
the Meiji restoration and the end of the Second World War,
where you won.
Now, what made it possible for Japan to make such a radical
turnaround? And this is the unfortunate and horrible message
that comes with it: Nobody changes, or rarely do people change,
unless they are in a crisis.
The Germans created a property system and destroyed the
feudal system that kept the riches of their country in few
hands only when they were defeated--that is to say Prussia was
defeated in 1806 by Napoleon, and they were not able to raise
troops to fight Napoleon back. Then they changed the property
system.
And it goes with other countries. And what I am saying that
is, unfortunately, all of these crises that occur today in
developing countries are an opportunity for change. In some
countries more than others.
But unfortunately, it always comes with a crisis, and Japan
was in a hell of a crisis. Two A bombs and they lost the war,
so they were ready to change.
Mr. Kolbe. Thank you.
Ms. Kilpatrick.
Ms. Kilpatrick. Thank you, Mr. Chairman.
Thank you, sir. It has been very intriguing sitting here
following your thoughts. Thank you for the work that you have
done.
As we discuss this new account, Millennium Challenge
account, as some of your--and it is got to be a professor--I
was just about to ask you, what exactly does the Institute for
Liberty and Democracy do? What is your mission?
Mr. de Soto. We were, first of all, working in Peru until
1996, and then we got kicked out by Fujimori. And then, we
started to get calls from heads of state of other countries to
do the following things.
First of all, to measure how big their underground economy
was, or their gray economy, or black market, or whatever you
want to call it. We call it extralegal.
Ms. Kilpatrick. From the outside?
Mr. de Soto. From the outside.
So we got calls, we are now working for Gloria Macapagal-
Arrroyo of the Philippines, for example, for President Vicente
Fox of Mexico, President Aristide, whether we are all satisfied
or not----
Ms. Kilpatrick. If he is the elected representative, I am
satisfied.
Mr. de Soto. That is about the only way to look at it. And
then--and for President Mubarak, and we have just been called
in by President Putin.
What happens with these leaders, let me tell you, it is
very clear to them that the rule of law does not work, and they
know it. And they are the first ones to suffer the
consequences, because, you know, take the case of Egypt, their
laws are only obeyed and applied by 10 percent of the
population. So the first thing they ask us is, ``Can you
measure how big it is?'' We have become very good at measuring.
Ms. Kilpatrick. Okay, stop, because I am not going to let
you use all my five minutes.
Mr. de Soto. Sorry. [Laughter.]
Ms. Kilpatrick. And you are good, you are good at it.
[Laughter.]
Mr. de Soto. We measure and then we help design the
reforms. I am so sorry: I am a Latin American; I have a
cultural disposition to talk too much.
Ms. Kilpatrick. I know. This is the U.S., the chairman
gives us five minutes, I do not care where you come from in
this committee. [Laughter.]
So, you know, I am intrigued by your theory and your
thoughts. So I was really trying to get to it because the
account that we are establishing, this new $5 billion, a couple
of principles that you may--and I wanted to talk about your
institute but you, kind of, hit on that a little bit.
One thing that intrigued me, you said, ``Property rights
for the poor have to be considered if and when a Millennium
Account is established.'' And I thought you said, ``If the
Millennium Account is going to be successful,'' and your charts
show that 88 percent of the wealth is really controlled by poor
people, although they are not documented as poor people,
because they have this wealth and on and on--suggest to me how
this Millennium Account can be successful. The criteria--the
three criteria that are already set out, yes, whether or not
property rights for the poor was not one of them.
Are you saying that, if the poor are not included, the
wonderful, most best thing that we can do will never reach
them, as witnessed by some of the graphs that you showed us
today? What ought we be doing?
Mr. de Soto. Well, but yes. What I am trying to say--I am
sorry for having taken up so much of your time.
Ms. Kilpatrick. No, you were fine, we just do not--we do
not have time, that is all.
Mr. de Soto. What I am trying to say is that I really do
think that the single most important thing you can do--and I am
not saying that it is necessarily the Millennium Challenge
account. I know very little about how you organize yourself in
the United States and how you intend to organize that money
versus the one that is being funneled by USAID versus the one
that you are going to the World Bank. I do not know about that.
Nor do I think it may be wise for me to intervene.
But what I am trying to tell you is that I am trying to
take advantage of your own crisis, the one that has come up
with international terrorism, to go back and make you think
about all the successes you have had, starting with your own
nation.
Your own nation was essentially a large legal revolution
that took place in the 18th and 19th centuries that empowered
and enfranchised people. And it was not because you inherited
the common law from the Brits. Because when California was
taken up by about----
Ms. Kilpatrick. Okay, stop.
Mr. de Soto. Yes. Sorry.
Ms. Kilpatrick. I have got two minutes left.
And I know you are going to give me a history lesson. I
know a little bit about it, but you have got to tell me, I want
you to light to what kinds of things ought this account--and
you do not have to know--you know, we are--we do have a little
struggle here in terms of what is now in State and what is now
in USA, with this USAID account. This new account will take a
loose challenge.
What is the relationship to the--with the property rights
for the poor, and what we want our account to be to reach the
poor to make the struggling countries who are coming to
democracy better?
Mr. de Soto. I think, first of all, you know what the
trauma of towards this is that I would love to point out and
say, ``You know, there are these people that are already
helping install property rights in developing and former Soviet
Union countries.'' No. That does not exist.
The trouble with what I am saying is that what you wantto
do is you have got a big tradition of law in your country, and you do
not have the vehicles to deliver to developing and former Soviet Union.
Because every time you deliver them, you basically deliver mapping and
computers, but not the change of property law.
And you are going to have to be required, I would say, to
think a little bit more about what it would mean delivering the
good sides of your law to developing countries who actually
wanted it. The proof is that since they cannot get them from
you, they have got to buy them from a puny little institute
like mine.
Ms. Kilpatrick. Thank you, Mr. Chairman.
But thank you, sir. And I did not want to be rude here, I
am just really trying to decipher and sort out. But thank you
for your testimony.
Mr. Kolbe. Okay, Mr. Rothman.
Mr. Rothman. Thank you, Mr. Chairman.
Forgive me. This is my first time being exposed to your
theory and I look forward to reading your book. So I am not
going to, with great comprehensiveness, address your theory
but, sort of, scratch off the sides of it to see how it holds
up.
You did mention that both Ho Chi Minh and the Shining Path
were engaged in effectuating your theory or were on the way--
were in the process of doing so. I do not regard either of
those two individuals, entities, as particularly great
democrats, but maybe I do not see them clearly enough. Is there
something we should be concerned about in the connection
between this theory and its attractiveness to Ho Chi Minh and
the Shining Path?
Mr. de Soto. Well, first of all, what I pointed out was not
that Ho Chi Minh and Mao Zedong were applying shall we say my
theory or our theory, but rather that they understood that for
military purposes, what you want in a guerrilla war and in a
terrorist system is to win the allegiance of the poor, because
the poor basically are you armies. And that they found that the
best way to do it was to give legal title, in a collective form
of course, to the majority of the poor they encountered.
Mr. Rothman. Forgive me, I am going to follow Ms.
Kilpatrick's model. Could not that simply be described as--and
I am being a devil's advocate because I am, on the face of it,
very sympathetic to your theory. Could not one simply say that
that is a redistribution of the wealth, and, of course, the
poor would be--would love that, and you can engender their
support by redistributing the wealth to them?
Mr. de Soto. Yes, of course. All I am trying to say is the
following thing, which is probably the hidden message in your--
and I thank you for trying to bring it out, is the following
thing. That I think we have reached such a time of crisis today
in the third world, with all of these flourishing guerrilla and
terrorist movements, that if developing elites do not go out
and actually give the poor, in the legal form, what is already
their own, people like the Ho Chi Minhs of this world and the--
of the world, who is certainly not on my favorite person list--
he has throw over 500 kilos of dynamite at my institute and
tried to blow us up. We do not like him at all--they will do
that task. Because essentially what we are now finding out is
that the poor own large amounts of land.
Mr. Rothman. Okay, so but that was, and you did list that
as one of the benefits of your theory. There is a World Bank
study that shows that investing in the education of women is a
very effective tool for alleviating poverty and improving the
economies. How do you view the results of that statement?
Mr. de Soto. Oh, absolutely. I think education is crucial.
And I think the role of women in development is indispensable.
And let me tell you how, with property, we strengthen that.
One of the things that we include in our property law is a
mechanism to facilitate marriages.
Because let me tell you what happens in our part of the
world. Since the procedures for getting married, for example,
in my country, Peru, require in all about 170 hours of red
tape, most people live together and do not get married. So when
it comes to administering the material resources of the family,
it is only the man who decides.
So what we did is part of the property law includes, I
repeat, not only the access of the poor, but the access of
women to the property rights, and that means that we have
brought down marriage licenses from about 170 hours down to
about 10, so that women could have that access.
Mr. Rothman. Excuse me. That makes sense.
Are there any models in the world, including your own
institute's work, that we could adopt in our millennium
project, whatever it is called--Millennium Challenge grants,
literally a photocopy, adopt on a worldwide basis, or is this
country-by-country different basis?
Mr. de Soto. Country by country. Country by country. You
will have a large theoretical model, which is probably your
own, the United States. You grew up from being a country of
poor immigrants, that they were basically land grabbers, that
squatted all the way from Texas all the way to California in
the gold rush system, and you gradually legalized them. You
have got that model.
But you have to go country per country, because you have
got to hook into the local law the way it is organized.
For example, when you had to legalize all the legal tenures
of land--and there were 800 systems in California after the
gold rush--you did not use the common law. You acted--and that
was what I was referring to--the 32 preemption acts by the U.S.
Congress, you adjusted to every case. You adjusted the Little
Miami River law. You adjusted to the gold rush claims. You
adjusted to the Oklahoma land rush. You adjusted to what was
happening in Arkansas.
Country by country. You have to bring out the statistics to
find out where the poor are. And do not forget that I showed
you that they were already issuing titles, and how they issued
these titles. And so that is the way that the law will work, if
you hook it into the grassroots.
Mr. Rothman. Thank you very much. Very interesting.
Mr. Kolbe. Mr. Callahan.
Okay. In the interests of time, because we started so late,
we have our other two witnesses here, I am going to ask Mr. de
Soto to step down. If we have time, we will come back and do
that. But I want to ask Ms. McClymont and Mr. Schaefer to go up
as a panel here.
Thank you very much, Mr. de Soto. We appreciate that. As I
said, I hope we can have a chance to come back and do some more
questions.
I do not know that we have an order for either of you. Who
is going to go first here?
Mr. Schaefer and Ms. McClymont.
Ms. McClymont. It does not matter to me.
Mr. Kolbe. Go ahead.
Ms. McClymont. Happy to start.
Mr. Kolbe. All right, fine. Thank you.
We do have written testimony, I think, from you, Ms.
McClymont, and of course the full testimony will be placed in
the record, if you would like to summarize it.
----------
Thursday, June 27, 2002
INTERACTION
HERITAGE FOUNDATION
WITNESSES
MARY McCLYMONT, PRESIDENT AND CEO, INTERACTION
BRET D. SCHAEFER, JAY KINGHAM FELLOW IN INTERNATIONAL REGULATORY
AFFAIRS, HERITAGE FOUNDATION
Ms. McClymont's Opening Statement
Ms. McClymont. Thank you very much, Mr. Chairman, Mrs.
Lowey and distinguished members of the subcommittee, for the
opportunity to testify before you today.
It is an honor to testimony on behalf of InterAction, which
is the nation's largest alliance of U.S.-based relief and
development organizations, with 160 members.
The announcement by President Bush of a new Millennium
Challenge Account can fundamentally change the international
landscape and mark a turning point for U.S. development policy.
The president has made clear the new resources, $5 billion by
2006, if appropriated, would be used to fight world poverty and
bring hope and opportunity to the world's poorest people.
In announcing this pledge, the president endorsed
internationally agreed targets for cutting in half poverty
around the world and for substantial improvements in health and
education in developing countries by 2015. These are known, as
you well know, as the Millennium Development Goals.
These goals--among them to educate children, help mothers
and children stay alive, advance the status of women and girls,
access clean water and reduce hunger--are all concrete concerns
that Americans believe we should support through our assistance
programs.
The Millennium Challenge Account, or the MCA, presents a
unique moment to fundamentally transform U.S. development
policy. This opportunity can not be squandered, which is why,
as alluded to earlier, the shaping of the Millennium Challenge
Account in the months ahead is such a crucial task. The stakes
are high. This hearing is a very important first step in that
process.
We very much hope the Congress will work in full
partnership with the administration and with us, the NGO
community, to fashion an innovative and effective fund. To that
end, as you note, Mr. Chairman, we have submitted some
recommendations in our paper and have submitted them to the
record.
I will touch on those specific recommendations shortly, but
if I might, I will set this account in a broader assessment of
U.S. development assistance in foreign policy very briefly.
The MCA, we believe, must be seen as just one tool to
stimulate broad-based economic growth and prosperity in
developing countries. To leverage it, a comprehensive U.S.
development strategy should be designed. This strategy should
include clear goals, realistic timetables and sufficient
resources for reducing poverty and meeting these Millennium
Development Goals through programs of assistance, trade and
economic policies, debt relief and private investment flows.
To be successful, the MCA, we believe, must be seen within
this larger strategy for development.
In short, it cannot be considered in a vacuum, if the
advance of development, which the president has called a
``central commitment of American foreign policy'', is truly to
be realized.
The fulfillment of the promise of the president's new MCA
proposal has the potential to be one critical new instrument to
fight poverty. Yet it envisions funding for a limited number of
qualifying countries. This approach does not address the basic
needs of poor people in many other nations that will not
qualify.
We know, however, that countries in which people's basic
needs are met are more stable and are less likely to become
breeding grounds for extremism.
The initiative also does not take into account humanitarian
concerns or areas that may need a global or regional strategy,
such as HIV/AIDS. That is why we will be urging that policy
makers must see it as a part of the overall aid strategy and
increase the seven existing bilateral aid accounts which we
have targeted in the foreign operations budget, which we
believe help build self-sufficiency in people through basic
education, health care, job skills, advancing women and girls
and so on.
In short, the programs funded under these accounts, if
carried out effectively, can build the capacity in people and
lay the groundwork for their nations to qualify for the MCA.
The accounts must not become an afterthought, but must work
together with the MCA to meet these important international
goals.
If we do it right, the MCA can serve as the anchor for a
comprehensive new aid policy that recognizes progress and
encourages change.
With this broader context in mind, Mr. Chairman, I will
make seven points highlighting several of the 12 key principles
from our policy paper which I would be happy to elaborate on
later. We hope these can be kept in mind in the months ahead as
this MCA is designed.
Number 1: Funds from the new account, we believe, must be
specifically targeted for poverty-focused development advancing
the Millennium Development Goals in the poorest nations.
Second: The eligibility criteria. While it makes sense to
focus on countries that fully meet these criteria, which the
president has set out--the three categories you know well--
setting the bar too high could further alienate those facing
the greatest challenges. If only the best performers are
eligible to receive assistance, then aid will go to those who
least need it. At the same time, if eligibility criteria are
not sufficiently rigorous, there is a danger that recipients
will be chosen for other reasons, such as political reasons.
Number 3: To assure maximum impact, the number of countries
that receive funding from the MCA should be limited and be
carefully matched to the available level of resources. Nothing
will diminish the support for the MCA as quickly as weak
diffused programs that do not show results.
Number 4: Developing nations should be partners in the
formation and implementation of the new account, and broad
participation of the private sector and civil society should be
evident throughout. We envision a two-step process: Once
nations have been found eligible pursuant to this criteria,
allocations from the MCA should be made in response to
comprehensive national plans or proposals from the developing
countries. A proposal should be based on a country's own
national development strategy should it exist.
A recipient's proposal should identify programs and
projects for which it seeks assistance, describe specific
development goals it expects to target and achieve and provide
measurable indicators of success. The proposal should detail
the involvement and participation of other donors, local and
national governments, private business, civil society groups
and nongovernmental organizations. We hope in this way we can
assure accountability, local ownership and donor coordination.
Number 5: Assistance under the new account should not
beprovided exclusively to national governments. Other channels, we
believe, should be used to implement the MCA.
Number 6: To determine the effectiveness and to ensure
accountability, clear benchmarks or indicators of success need
to be established in the proposal and in the grants. Because
broad-based economic growth and social development take time,
the selection of indicators and measures should be realistic
and thought of as intermediate steps. Technical assistance
should be available to help countries devise these indicators
and do a good job at measuring their results.
And finally, number 7: We believe interagency coordination
throughout the U.S. government will be critical to the success
of the MCA and actually suggest a lead agency should be
designated to administer the distribution of the funds. Given
the mission of the MCA, the current structure of the U.S.
government and the bureaucratic difficulties of building a new
entity entirely to manage this piece of development, the U.S.
Agency for International Development is in a well positioned
place to administer the program. However, the agency will need
procedures and practices that support creativity, innovation,
flexibility and quick response to ensure funds are programmed
effectively and expeditiously.
As many have noted, there is no time to lose with the
Millennium Challenge Account and we must be very diligent and
careful in its development.
Mr. Chairman, we greatly appreciate your continuing
leadership in addressing so many issues I just raised. I want
to thank you and all the members of the committee for your
willingness to work with the NGO community on matters of
foreign aid generally and of development, and now the MCA. Many
more questions remain to be addressed on the MCA and we welcome
the chance to think these through with you in the weeks and
months ahead.
Thank you very much.
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Mr. Kolbe. Thank you.
We very much appreciate your testimony, and we very much
appreciate the work your organization has done. You are a vital
part of our effort to develop this Millennium Challenge
Account, and we look forward to working with you, Mr. Schaefer.
Thank you.
Mr. Schaefer. Thank you very much.
Mr. Chairman and Ms. Lowey, members of the subcommittee,
thank you very much for providing this opportunity to speak
here today.
With permission I would like my statement and paper be
submitted for the record.
Mr. Kolbe. The entire paper will be submitted for the
record.
Mr. Schaefer's Opening Statement
Mr. Schaefer. Thank you.
This is a vital issue that could have important
ramifications for the United States, but more importantly, for
poor people around the world.
As you know, President Bush has proposed quite a large
increase in America's development assistance program. If this
were simply an increase in development assistance, I could
conclude my testimony right here with my opposition. Quite
frankly, America's development assistance program has not been
very successful. America has given over $167 billion, in
constant 1999 dollars, in official development assistance, or
ODA, to 156 countries, regions and territories since 1980. Per
capita GDP data between 1980 and 2000 is available for 97 of
those countries. These countries received over $144 billion in
inflation-adjusted ODA. These 97 countries had a median
inflation-adjusted per capita GDP of $1,076 in 1980, but only
$994 in 2000. That was a decline in real terms.
This failure is not due to a lack of resources. Between
1980 and 2000, 23 recipients of U.S. ODA received amounts
equivalent to one-quarter of their entire gross domestic
product in 2000. This is just the United States, it does not
include aid from other countries, it does not include aid from
the IMF or the World Bank.
Growth in per capita GDP for these countries was a negative
0.16 percent over that time period. Twelve countries
experienced negative growth, and only four experienced growth
in per capita GDP over 1 percent.
This just illustrates the findings of former World Bank
economist William Eastely, who concluded, quote, among all low-
income countries, there is not a clear relationship between aid
and growth, unquote.
In other words, the focus on the amount of aid is
misplaced. Policies matter far more than the amount of aid
provided.
By design, the president's MCA is more than an increase in
development assistance. It identifies three specific criteria--
good governance, investment in health and education, and sound
economic policy--in which countries must demonstrate progress
before they would become eligible for funding.
The president should be commended for his efforts to bring
accountability to America's foreign aid program.
By far the most important of these MCA criteria is sound
economic policies, which includes the rule of law. A 1997 World
Bank analysis of foreign aid found that, while assistance has a
positive impact in countries with good policies, countries with
poor economic policies do not experience sustained economic
growth regardless of the amount of aid they receive.
Economists Richard Roll and John Talbot of UCLA support
this conclusion with evidence that the economic, legal and
political institutions of a country explain more than 80
percent of the international variation in real income per
capita between 1995 and 1999.
That is in more than 130 countries that that study found
that relationship--each country bears primary responsibility
for its economic success or failure. Aid may help. It may harm,
but it cannot determine the outcome.
Some would argue that rising literacy, increasing life
spans and elimination of some diseases is proof of the
effectiveness of development assistance, and it should be its
focus; they are wrong. Assistance can have a tremendous effect,
but without economic growth, these achievements are not self
sustaining.
In other words, the benefits that accrue are not the
benefits of development. They are benefits of transfers or of
charity. These achievements would result if countries adopted
strong economic policies that lead to greater economic growth.
Contrary to what you have heard, environmental and labor
standards should not trump economic growth as an A priority.
The evidence demonstrates that countries with higher per capita
incomes invariably have higher education, health, labor and
environmental standards.
These trends hold because as the country's income
increases, so does it is ability--so does the ability of its
people and the government to dedicate resources toward these
goals. In my opinion, this is the reason why the preeminence of
economic growth should be--well, why economic growth should be
a preeminent goal over other goals of development.
The way to achieve that growth is for countries to adopt
sound economic polices and the rule of law, which are measured
by the index of economic freedom and a number of other indexes.
As shown in the index, free countries have an average per
capita income that is twice that of mostly freecountries.
Mostly free countries have per capita income more than three times that
of mostly unfree and repressed countries.
This happens because countries that maintain policies that
promote economic freedom, provide an environment that
facilitates trade in its economic growth. In addition, sound
economic policies attract potentially vast resources that dwarf
the amounts of development assistance. Total foreign direct
investment in 2000 around the world was $1.3 trillion, of which
over $240 billion went to developing countries. That is an
amount far greater than the $50 billion in global ODA last
year.
The poorest countries receiving only a small portion of a
developing country's total investment because they lack the
economic policies and the rule of law that would attract that
investment. Economic growth must be the paramount goal of
development. The average sub-Saharan African country had a per
capital GDP of $564 in 2002. In order to reach middle income
status of $1,500 per capita that country must average growth in
GDP percent a year for the next 20 years. They must average
that growth for 82 years to reach the current level of the
United States' income. That is a fundamental. That is a
phenomenal challenge to meet and that something that we have to
address.
To give you an idea of how difficult that rate of growth is
to achieve, of the 97 recipients of USODA for which we have
data, 37 achieved a growth in per capita GDP of zero or
negative on an annual basis over from 1980 to 2000. Another 27
averaged only marginal growth between zero and 1 percent
annual. And only 33 countries averaged a growth in GDP in per
capital over 1 percent from 1980 to 2000. And only three of
those over 5 percent, which is the goal, what we would be
hoping to achieve.
Given these facts, it is hardly surprising that few
developing countries are closing the gap with the developed
world. But such growth is possible. It is not an unobtainable
goal as proven by the remarkable success of Hong Kong,
Singapore and Taiwan. Not surprisingly, these countries adopted
economic freedom early and they have reaped the benefits.
If the average African nation in 1980 had grown at the rate
of USODA recipients that are considered free by the index, they
would nearly be middle income countries today. The bottom line
is that the impact of development assistance is far away by
sound economic policies. Creating an environment that attracts
these resources and allows them to be used for economic growth
should be the goal. Aid that capitalizes these policy changes,
can help the process, but it cannot substitute for it. The
focus should be on economic freedom and should be the essence
of the development and the reason MCA funds should be allocated
based on improvements in economic freedom.
As research has shown, development aid can contribute to
economic growth only when a country embraces economic freedom.
Rewarding poor performance with aid is wasting money that
another country could use more effectively. And worse, it
provides very little incentive for countries with poor policies
to adopt sound policies.
MCA should also be administered through performance-based
grants rather than loans. The grants should be dispersed only
if their country has demonstrated its commitment to economic
freedom and should support products that advance the goals of
the MCA. This would increase the coherence of the purpose for
the MCA by reinforcing its criteria for dispersing funds and
would not burden underdeveloped countries with large debt
payments.
Once the administration chooses a measure of economic
freedom, the standard for granting development assistance would
be very easy to determine that the aid is being administered to
the proper recipients. Countries that are making improvements
in economic freedom should receive development assistant. Those
that are not, should not.
Mr. Chairman, I understand the worth of maintaining
traditional aid until the Millennium Challenge account proves
its effectiveness. I believe that is why the president has
announced that he will seek additional funding for traditional
development assistance in conjunction with his request for the
MCA. However, the MCA must not be weighed down with the
earmarks, prohibitions and priorities that while based on noble
intentions, are not contributing to the effectiveness of
America's development efforts. Instead, the agency that is
chosen to oversee the MCA, should have the discretion to target
a small number of countries with proven track records in
embracing economic freedom and policies that lead to economic
growth, including the rule of law.
These decisions should be based on simple, transparent,
replicable and largely quantifiable data. Failure to do so will
only ensure that the MCA funds, however well intentioned, will
only follow in the footsteps of yesterday's aid failure.
Thank you very much for allowing me to speak here today,
and I look forward to your questions.
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Mr. Kolbe. Thank you. I think both of these statements are
very provocative and interesting.
Ms. Lowey has to leave, and I will let her go first.
Mrs. Lowey. Thank you very much, Mr. Chairman, and I will
be brief because clearly for those of us who are committed to
foreign aid, foreign assistance, both from a humanitarian
perspective and from, frankly the United States' self interest,
I think this is a conversation that needs hours rather than a
couple of minutes of a question.
So I will just ask one question and I appreciate your
comments for interaction. I appreciate all of the good work you
have done, and I agree with so much of what you said. I just
have to ask the gentleman when everything should be measured in
terms of economic freedom, does that mean, sir, that we should
not provide foreign assistance to those who are suffering from
illnesses. What about the HIV-AIDS programs? What about
investments in education?
Now, I will grant you--and I am sure my respected chairman
will grant you and all of the members of the committee--that as
we look back upon the utilization of foreign aid, we could do
better. We should have done better. So could have our
corporations here in the United States. We clearly have to put
together a better delivery system for foreign aid so that we
can be more effective in lifting people up.
But my question to you is, HIV-AIDS assistance, health
issues, TB, malaria, education--unless that country is being
measured on their success in achieving economic freedom--and I
will even grant you through economic freedom, through a better
functioning system, through better functioning courts--the
governments themselves would be able to deliver these services
more effectively. But should we cut off foreign aid to a
country that desperately needs that kind of assistance if they
are not making progress towards economic freedom?
Mr. Schaefer. I think it might be a different definition of
what we are talking about here. I am talking about development
assistance. No, assistance----
Mrs. Lowey. Well, development--excuse me.
Mr. Schaefer. I am sorry.
Mrs. Lowey. No. I just want to say that in my judgment, and
I have always been a strong advocate for education. And as I
have said, my colleague and I have increased dollars for
education, because we believe that by lifting people up and
educating not just--I mean, women and girls and families, that
they will be able to progress along the economic ladder and
achieve greater success. So I am sorry for cutting you off. But
we feel this very strongly.
Mr. Schaefer. No. I understand. And I agree with you. I
think education is very important and it does contribute to
economic prosperity in the long run. But things like HIV-AIDS
and other--tuberculosis medicines and things like that, that is
more along the lines of humanitarian assistance, in my mind.
And if you are going to provide it, it does not contribute to
long-term economic growth. It is necessary and it helps, but it
is not a catalyst in development.
But it is far more important in the economic countries----
Mrs. Lowey. Therefore, you would recommend that we continue
to invest in health----
Mr. Schaefer. Humanitarian assistance.
Mrs. Lowey [continuing]. And education, such as primary
school education for girls and humanitarian--as part of our
foreign aid program?
Mr. Schaefer. Well, I think that is very important for
countries to do. I think that is something that they themselves
can invest in and provide, as well. I think it is far more
important for countries to adopt economic policy that will lead
to economic growth and increase the resources that they
themselves have domestically to invest in those projects and
those goals. And so, be focused on economic growth.
Mrs. Lowey. As my colleague said, we are so short of time
here. But if they do not do that and people are dying of HIV-
AIDS and they need tremendous help in their whole health
delivery system, do we have a responsibility to provide that,
even though the countries are not working as effectively as
they can toward economic freedom?
Mr. Schaefer. The United States has an extensive
humanitarian assistance program. And it provides HIV-AIDS
medicine, provides medicine for tuberculosis immunizations. And
that is a very appropriate task for the United States to do,
but is not the essential task of development assistance.
Development assistance should be focused on catalyzing economic
growth, in my opinion.
And I agree that that is an important component of U.S.
foreign assistance. But development should focus on encouraging
countries to adopt policies that are going to improve the lives
of their people, increase their wealth and allow them to
increase the number of resources that they can devote of their
own to their greater education for themselves, for their
children, invest in their homes, and make their own lives
better, to make themselves better off and to increase their
opportunities as far as environmental sustainability if the
government chooses to engage in that, labor standards, if the
government chooses to engage in that. And the record shows that
that does happen.
As countries increase in wealth, they willingly and eagerly
adopt to increase labor standards. They willingly and eagerly
adopt greater and stronger environmental protections. They
invest in education. They invest in other standards that are
desirable and increase the lifestyles and welfare of their
people.
And so, this is, economic growth, leads to these results in
the longer term any way. They are desirable. But in my term,
economic growth, if it provides it anyway should be the first
and primary goal of the U.S. development policy.
Mrs. Lowey. Let me thank you very much. And I look forward
to continuing this dialogue.
Mr. Kolbe. Ms. Lowey, before you leave, if I might? With
regard to your last question. If we were two lawyers here in a
courtroom, I would say to you, Ms. Lowey, let us stipulate. And
I think that that is what we are saying here today. Let's
stipulate that we are not talking about the role of
humanitarian aid. That is necessary, and that certainly will
continue.
What I understand, as I read Mr. Schafer's remarks, that
you were commenting on development assistance. In the
conclusion there, he says that the MCA must not be weighed down
with earmarks. The Millennium Challenge Account funds should
have flexibility. And if we fail to provide it, the new
initiative will follow in the footsteps of other aid failures.
So we are talking about, what I understand the administration
to be suggesting is, we create a new approach to development
assistance. We are not talking about changing the level of
humanitarian aid that we give.
Mrs. Lowey. Let me just say this is obviously a longer
conversation.
Mr. Kolbe. And we are going to need a lot more of it.
Mrs. Lowey. And with great respect to my distinguished
chairman--for my distinguished chairman, I look forward to the
dialogue, because I think we both agree there are tremendous
needs in the world and we really have not seen, going back to
the professor's discussion regarding property rights, et
cetera, we have not seen success in real transformation in many
places of the world. And if we can make our foreign aid more
successful with your guidance and with additional dialogue, I
look forward to it.
Thank you very much.
Mr. Kolbe. Thank you very much.
I would, again, just say, in my view, the Millennium
Challenge Account will fail if we simply deduct it from other
funds. If we do not add it on, then it is clearly going to be a
failure. So it only succeeds to the extent that this is a new
program that augments what we are already doing in economic
development assistance but in new, different, innovative ways.
Mr. McClymont, in your statement, both written statement
and your remarks, you referred to the president's proposal, MCA
proposal, which we advocate for in our campaign, has the
potential to be a critical new instrument of policy. And you
say--then you have a couple of provisions. Yet, it envisions
funding for a limited number of qualifying countries.
You also say it does not take into account humanitarian
concerns, the issue that Ms. Lowey was just talking about, such
as disaster response or refugees. In your seven points, though,
you say that the number of countries should be limited and
carefully matched to the level of available resources.
I am a little bit unclear. Are you unhappy that it is going
to be limited? Are you unhappy that--or do you think it should
include humanitarian concerns? And if we spread it over all the
countries, and if it includes all the humanitarian stuff, how
is it different from what we are doing today?
Ms. McClymont. Thank you, Mr. Chairman. I will try to
clarify that if I can.
I think what I was emphasizing in the first point, what I
was stressing so much that it has got to be seen as a
comprehensive strategy. We have got to think about, I believe
and our members believe, the MCA in conjunction with the
existing development and humanitarian accounts we have now.
That is what we were trying to say.
If the MCA is to be targeted on a set of limited countries,
we have got to be sure that we are getting other countries
ready to enable them to receive that larger assistance once
they sort of graduate, if you will, into the MCA.
What the hope is, is if certain countries meet the MCA
criteria, they will benefit from rather large-scale aid, which
we believe fundamentally needs to be directed to what I call--
what I have said was the Millennium development goals--
education and health care, all the things that people need to
advance and come out of poverty, we believe.
So, I was trying to tie the two together and emphasize that
we just cannot forget about the current bilateral aid programs
and say, ``Oh yes, that is just, you know, that other stuff.''
Because that is--those are our monies and resources that are
going to be going to many, many other poor people in poor
nations. And we have got to help bring those countries up and
build self-sufficiency in their people, so that they too can
benefit and get to a point where they are able to meet criteria
in the MCA. We are just trying to tie them together.
And I would emphasize, I think we should be careful if we
are serious about the MCA, if we are really going to take this
on and learn from it and experiment with it and identify
countries that we really think do have sound, strong both
economic and other kinds of policies and are the poorest
nations, which our research has told us is the way to get
someplace, then let's target them with some money. Let's try to
learn lessons, but let's not just say, ``All those countries,
oh, they are just the good guys, that is where we will put all
the big money.'' But rather, let's tie it to the--let's think
hard about the other bilateral aid and how we fit those
together. I think that is what we were trying to emphasize.
Mr. Kolbe. Okay. Let me ask you both two technical
questions dealing with the MCA here. Neither of you really
focused on the issue in terms of the criteria. And I do not
think we should get too hung up on the criteria, but it is
important, the criteria for the selection of the countries.
Should it be based or should one of the major criteria be
based on income--per capita income of the countries? And if so,
it is dubious data that we have got. How would you measure
that, or should we just use the generally accepted standards
that the World Bank uses? And should there be some--and where
would you put the cut off for that? That is the first question.
The second is, would a country's proposals--their
involvement in developing, which Ms. McClymont referred to,
that countries need to be involved in this process, would they
need to be developing the proposals before they are selected,
or would that be after their selection as an eligible country?
Let Mr. Schaefer go first.
Mr. Schaefer. My feeling is that poverty alone is not a
virtue on this issue. You have developing countries and you
have poor people in every developing country. You want to have
economic growth occur in all of the developing countries.
Obviously, all else being equal, I would rather see a
poorer country receive the assistance. But simply to cut off
the eligible countries at 79, which is the number of countries
eligible for International Development Association loans, I
think that is unreasonable. That is a relatively low amount of
money per capita.
And if a country has $1,500 per capita, is performing well,
is enacting good policies and is most likely to get the most
benefit out of this money, then they should be a country that
is eligible for this assistance.
Especially if they are showing what you alluded to, which
is an ownership issue, which is a common word thrown about
foreign aid these days. But the best ownership is a country
that does and enacts policies that are good and conducive to
economic growth on their own, without being forced or coerced
into doing so by an outside agent--the United States, the IMF
or the World Bank. That is the essence of ownership.
If the countries are already showing a demonstrable record
in adopting sound economic policies, implementing the rule of
law and then enforcing that law once it is implemented, then
those countries are the ones that are going to benefit most
from this assistance, and they should receive priority.
And I do agree that we should focus on a finite number of
countries. There is no sense spreading this out so that it has
no impact--discernible impact, or as an incentive. We need to
focus it on a few good reformers. And I think that is the way
that the United States Millennium Challenge Account can have
the most impact and the most effect on developing countries.
Mr. Kolbe. Thank you.
Ms. McClymont.
Ms. McClymont. Mr. Kolbe, with respect to your question
about income per capita, we have indicated in our paper that we
believe we should focus on, we said, the IDA-eligible
countries, the 80 or so, as you well know. And I do not mean to
rule out entirely--and we would be happy to continue these
conversations--a larger country which has a tremendously large
pocket of poverty.
And so, I think what we have got to really be mindful of--
--
Mr. Kolbe. If I may interrupt, would you use that as the
only criteria?
Ms. McClymont. The per capita income? No, sir.
Mr. Kolbe. Okay.
Ms. McClymont. What I--also, the criteria----
Mr. Kolbe. I only asked about that, so you are answer was a
response to that. But I just wanted to make sure that is not
the only criteria.
Ms. McClymont. Absolutely not. The president has designated
those three categories. I think the question is, how do you
interpret those and what do you do with them. But absolutely,
that would be part of the criteria as we understand it and
believe, because it is both good policies and good
institutional practices in a country, but it is also the
poorest countries, as we understand the literature. So let's
focus the money in the right way, on those.
The second question, Mr. Kolbe, I believe was about the
proposals. What we envision is a two-step process, that
countries would come into the pool of eligibility--is that 15?
Is that 20? Is that 30 or 40? It is unclear. If they meet the
criteria, we again would be flexible about that.
Then countries would be asked, we believe, to submit a
proposal and to say in that proposal--or however it is
fashioned, the developing country would come forward with a
proposal, a plan, in which there had been broad consultation,
involvement of others, including civil society and theprivate
sector. We would also urge that the proposals include very clear,
realistic timetables and goals for what they are trying to achieve.
I think if we have clear objectives--and that is why we
singled out those Millennium Development goals. We know
countries are going to do many things to reduce poverty, and as
you well know, Mr. Chairman, that one of the key goals of the
Millennium Development goals is to reduce poverty and cut it in
half. It is also to get universal education and cut maternal
and child mortality and so forth.
We think that is why it is wise to have those objectives.
But then to say to a country, ``How are you going to get there;
what do you propose to get there?'' and show the U.S.
government exactly what they are going to do to get there. And
they would put forward their proposal and would or would not be
selected.
We actually believe, though, Mr. Chairman, it may be wise
to have, in this pool of eligible countries, countries
submitting proposals pretty sure that they are going to be able
to get money. We do not think it is wise to have clear winners
and losers. I think it should be clear that countries, they
will be staggered in, presumably, to this pool of eligibility,
and they submit their proposal and are pretty assured they are
going to get money because they have negotiated this with our
government, and they have put forward what they have done to
comply.
So that if it is framed that way, then maybe you can have
other countries in the eligible pool who are getting ready to
receive the larger dollars. I am just suggesting this as a
possible option. And they are getting technical assistance to
help them get to a place so that they can. So that would be our
thought about that generally.
Mr. Kolbe. Thank you. That is very helpful.
Mr. Callahan.
Mr. Callahan. Following up on the chairman's questions
about the conclusions in your statement, you infer that what we
should do, and take the chairman's suggestion, and put this in
a separate account, but to have no earmarks or no suggestions,
and yet leave all of the responsibility of distribution of
these monies to the agency in charge of the programs. You infer
later on in your conclusions that if we do not do that, then we
will simply fall back into the failed policies of the past.
Are you saying that the Congress is wrong--or is it the
position of the Heritage Foundation that we, as members of
Congress, and especially the Appropriations Committee, should
not earmark any monies with respect to monies going to State
Department for foreign assistance?
Mr. Schaefer. Well, that is up to the discretion of
Congress, of course, but----
Mr. Callahan. Well, I know what you are saying to the
Congress, but you do not think we ought to----
Mr. Schaefer. I think that in many cases the earmarks do
inhibit the ability and the judgment of the agencies and the
people on the ground to make policy decisions----
Mr. Callahan. Would not it be best, in your opinion, just
to have the Congress not earmark? I may be a secretary of state
some day. And I certainly would totally agree with you if I
were. [Laughter.]
I might be president, and I might need that flexibility in
order to determine foreign policy. But you are talking about--
on the one hand, you are talking about the future, with the new
account. On the other hand, you are saying that the Congress
has failed in its responsibilities of instructing the
administration as to what they should do with some of the money
that we appropriate to them.
And I would just like to inform you that some of the
instruction this Congress has given to the administration, even
though one time I threatened just to pass a bill giving the
administration total authority, but as you can imagine, since
strong lobbies totally disagreed with that, said, no, we should
earmark some of these monies.
But nevertheless, you are saying that we have failed
policies. But you give no credit to the successful policies--
the NGOs, as was mentioned earlier. Many of the direction
through legislative language that we have given to the
administration, various administrations, has been very
beneficial. Rotary International, for example, because we
directed the administration to become involved in this, has
eradicated polio worldwide. That is a success story regardless
of any economic programs in any country. The Child Survival
Program that has saved the lives of so many children in this
world, has been a successful direction of the administration.
So I think maybe the Heritage Foundation ought to revisit,
not their direction for this new pot of money, but their
indication to the world that Congress has failed policies of
the past. And maybe you ought to say to the world that some of
the directions that Congress has given to the administration
have been failed policies, but certainly not a carte blanch
condemnation of all of the directions this Congress has given
to the administration.
And in most every case, Congress, and especially this
committee, works with the administration to write the directive
language to their satisfaction. And in many cases, they even
request that we earmark some of the monies for certain
accounts.
So I think we ought to look--if we are going to testify on
behalf of a future appropriation for a totally new account,
that is one thing. But to say we ought not do it another way
because of the failed policy of the past maybe ought to be
revisited by the Heritage Foundation.
Thank you.
Mr. Schaefer. Thank you.
Okay. Well, of course, the eradication of polio is a very
significant achievement, there is no doubt about that. And
there are wise decisions that are made by the administration
and Congress despite, or because of, earmarks that are involved
in that money--the foreign assistance program.
But in my--my intent in my speech was that this MCA account
is intended to promote economic development, development in
poor countries. I do not think that attaching earmarks to a
source of funding whose sole goal is to catalyze economic
development and economic growth in poor nations would be served
by having earmarks to the same extent that traditional
development assistance has put down.
And you do have traditional development assistance, which
is an outlet for those earmarks and those other special
programs that you were talking about.
And then, what I am saying is that, given the failure of
aid in the past to catalyze development, I think we should try
something new.
We should try and have an opportunity, a new source
offunding, and explore new options in trying to catalyze growth and
hopefully be more successful. If we just merely repeat what we have
done in the past, then we are just ensuring that we are probably going
to have a very similar outcome.
Mr. Callahan. We do not need to belabor point. The chairman
wants to get on with it. I think even the administration and
you are suggesting that we earmark it regionally, that we spend
a percentage of the money in this hemisphere, which I totally
support--we should spend more--that we spend some of it in
Africa, that we spend some of it in areas of the world that
need it the most.
So the administration is suggesting an earmark
directionally, but nevertheless I get your point.
Mr. Schaefer. Thank you.
Mr. Callahan. Thank you, sir.
Mr. Kolbe. Thank you.
Might I suggest before I go to Mr. Knollenberg that Mr. de
Soto rejoin the table since we have very limited time left--we
will just put him right there in the middle there--and if
anybody has questions for any of the three, we will do that.
Mr. Knollenberg.
Mr. Knollenberg. Chairman, thank you.
Mr. Schaefer, you obviously are very familiar with the
Index of Economic Freedom. And I know an index has to be--there
are not many indexes out there. And we are doing something
pretty arbitrary here, because if we use one index, then it
gets to be, of course, a challenge. If we use a number of
indexes, that also has some problems too.
What would you say about your Index of Economic Freedom
being prime, only, one of? What is your view of it as a value
to those of us that need as much help as we can possibly get?
Mr. Schaefer. We are obviously very proud of our index, and
we would love to have it be incorporated into a decision-making
process of this sort. It is up to the administration and
Congress to decide whether they would want to do that or not.
There are a number of other indices out there, as you
mentioned. And perhaps not so surprisingly, there is a lot of
correlation between those indices. Our index and, for instance,
a couple of others--a person did a study finding out where our
rankings ranked according to other indexes. And the correlation
was something on the order of 80 to 90 percent.
And so, you see a lot of similarity in where countries are
ranked. And perhaps doing a correlation between our and other
indexes is a way to maybe take some of the--put some
objectivity in there, if there is a question about that. Though
I think that we do quite a good job of instituting objectivity
into our rankings, and we pride ourselves in trying to be as
quantitatively oriented as possible.
Mr. Knollenberg. Let me turn to Mrs. McClymont. On the same
issue, do you favor a particular index? Do you favor several?
Do you like the Heritage index as one? What is your thought?
Ms. McClymont. Well, sir, I do not--have not studied
carefully any and all of the indexes. We do set out in our
paper some of the concepts that we believe are critical. We
really do believe it is not just the economic policies and it
is not just the good governance and not just the investing in
health and education. It really is all those that need to come
together in a thoughtful way.
I think what is fundamental about these criteria--and we
have set out several in our paper that we would recommend to
you--but what is important is that they are all brought to bear
together in a common-sense kind of way and fundamentally that
it is as transparent as possible. When a country is selected, I
think it would be a major defeat for the fund if we were not
very, very transparent about this and enabled everybody to see
what we were doing.
Mr. Knollenberg. Thank you.
Mr. de Soto, do you have any view about various indices
that might be used to help us evaluate how we should make the
criteria fit for the Millennium Challenge Account?
Mr. de Soto. Yes. Well, I have read, for example, the
freedom index of the Heritage Foundation, which I find
extremely interesting and useful. I would simply add to it the
following question: Does it actually get to reach poor people?
You see, on the books, when you actually even study
legislation in a country such as mine or those that we work in,
our legislation looks as good as yours. And moreover, since it
is organized by Roman law, it looks even better than yours. The
issue is, does it actually get to poor people?
So one very important issue is--and to actually echo what I
think we Mrs. Lowey's concerns--is to make sure that whatever
assistance you give for economic freedom, it really gets to the
poor people.
Because, I repeat--I gave you figures of Egypt. Just let me
give you, to illustrate, the complete figures of Mexico. We
went into Mexico in 1998 at the request of now-President Fox,
then-governor of Guanajuato, who wanted to know, among other
things, for his campaign just how many Mexicans were inside the
legal economy. And let me just give the figures, so as to pass
from Egypt to Mexico, your neighbor.
The amount of people in Mexico who have to actually earn
their living and hold their assets outside the law is 78
percent of the population--78 percent, in spite of all the
legal assistance and everything, 78 percent. That 78 percent
owns $350 billion worth of assets, which is 29 times the size
of all foreign direct investment since the beginning of the
Mexican revolution, and is seven times the size of all known
oil reserves in Mexico.
So here is what I am trying to say. A huge--a very
important index is, whatever you do on the side of policies, on
the side of sound policies, on the side of the rule of law,
does it get to poor people? I think that is a crucial thing.
You see, in the United States, when you lived in the 19th
century, it was not only a technicality: Is your juridical
systems working well? Did you give assistance to the judges? Do
your courtroom procedures work? The question is, do they reach
the people? Because if they do not, then you get the class
division that Marx talked about.
Mr. Knollenberg. Yes, thank you.
Let me just come back to Mrs. McClymont. On this--one of
your seven points, you mentioned that the funds from this new
account should be targeted specifically for poverty-focused
development. I think that ties in with what I am hearing here.
But I also know that you mentioned here that the
eligibility criteria should serve as an incentive, not a reward
for good performance. How do you do that?
Ms. McClymont. Well, I think what we are trying to say,
sir, is just that, you know, you have got to be somewhat
flexible. You want to bring countries in, so you do not want to
set the bar so high that they cannot make it in. It really is a
balancing, and I do not pretend that it is easy, but that is
what we are trying to suggest. Let's not go overboard with
these strict, quantitative criteria that are going to be very
difficult to meet. Let's----
Mr. Knollenberg. The only other question, and this is a
quickie. You mentioned that there will be pressure to use
funding for special countries. What is a special country?
Ms. McClymont. Maybe that was a bad use of the term. What
we were really trying to say is we do think this needs to be
focused on the poorest countries. That is what is going to make
it work.
Mr. Knollenberg. These countries would not meet the
criteria, you say further. You mentioned that they do not meet
the particular strict criteria, but nonetheless they are
special in some way. What is special about them?
Ms. McClymont. Well, I think what we are just trying to say
is let's focus this money not for political reasons, but let's
focus it to fight poverty, as the president has suggested. That
is really what I was trying to say.
Mr. Knollenberg. Thank you.
Mr. Kolbe. Thank you, Mr. Kingston.
Mr. Kingston. Thank you, Mr. Chairman.
I wanted to talk to you, Mr. Schaefer. I am concerned, as a
conservative, at the rate of money which this administration--
the rate that they seem to want to engage in new policies and
new spending. It always seems to be something very dramatic.
Tremendous increase in federal involvement in education last
year. A lot more spending as kind of the proof that we are
compassionate, I guess. We are seeing, I think, a deserved and
justified increase in military, but then we augment that with
homeland security, and the ripple effect seems to be tremendous
into all agencies of the government.
And here we are going on a 50 percent increase for three
years. And I can say that with Chairman Callahan of this
committee, one of the big fights we had to do was to reduce
foreign aid. Very difficult.
And I think, Mr. Chairman, was it not up to about an $18
billion level? Very hard fought reductions. And maybe foreign
aid should be increased to $30 billion level, and maybe DOD
should be dropped out of $30 billion, or maybe something else.
But I guess what I am concerned about is those who testify
in front of appropriations committees never seem to worry about
where the money is coming from. But the Heritage society is
usually pretty good at that.
So I will ask you, where is this money going to come from?
Mr. Schaefer. As I said in my testimony, I could not agree
with you more. If this were simply an increase in development
assistance, I would voice my opposition, and I do. I do not
think that the existing development assistance program is at
all effective, and has proven to be more--worse than that, a
counterproductive failure in most cases.
So what I am hoping is through the MCA account, what we
have here is a different type of foreign assistance that does
not focus on the amount of monies dispersed to developing
countries, but instead provides an incentive for countries to
adopt policies that will generate domestic growth, growth that
helps those countries, helps people in those countries, and
eventually results in prices where foreign aid is no longer
necessary.
That is my hope. I may have some skepticism about whether
that is actually going to be the case or not, but if--my hope
is that that is the case. And that is why I am trying to make
sure that this money actually goes toward countries that are
good performers, countries that have already proven that they
are going to adopt policies that will lead to growth.
And I disagree respectfully with my co-panelist here. I do
not think that--this should be an incentive for countries to
adopt policies in the future. We cannot wait for them to do
things after they receive the money. That is proven to be an
abject failure.
The IMF conditionality, World Bank conditionality has been
a failure, quite frankly. The IMF and World Bank get money,
give money to countries and in return, they receive promises
that most likely and most often are not met. Then the World
Bank and the IMF receive new promises, disperse new money. And
therefore, we have this game of promises and get money in
return for it, which result in very little fundamental change.
That is why I think we should focus this money on tangible
policies that have already been enacted, countries that have
proven themselves to be good policy performers. And only then
should they be eligible for it.
We have to go back and analyze what they have already done,
and only the countries that have already proven to be willing
to adopt and to implement policies should be eligible for this
program.
Mr. Kingston. Well, why don't we go into the structure of
foreign assistance now and this should be the rule for all
foreign aid, and rather than put in a dollar amount, say ``This
is the new policy.'' And then, if this policy works, we are
going to put it into a dollar figure and at that point come
back with the 50 percent increase.
I mean, it just seems like such a quickie headline to go
out on the world stage and say you are going to do this
tremendous new spending program when we are spending the heck
out of the domestic money already. And we know that whatever we
do in the House, it is not going to be enough for the liberal
Democrats in the Senate. It is going to be added to. And they
will weaken the policy of it and increase the dollar end.
So why do we not push for policy changes now and dollar
amounts later?
Mr. Schaefer. I have worked at Heritage for going on seven
years now, and I have been fighting to reform the foreign aid
program for most of that time. I have been very unsuccessful in
doing that, quite frankly.
And so while I would support reforming the current foreign
aid program in to doing this sort of operation, that is not on
the table from what I understand. And so what I am--while I
would say, ``Yes, let's reform the current foreign aid
program.'' And if it is not successful, I have even called for
the elimination of the current development assistance.
So I am all in favor of reforming the existing program, but
this is about the MCA account, and that is why I am trying to
focus that on being as effective as possible rather than trying
to go after the current development assistance program.
Mr. Kingston. But trying to fit this into a piece of
puzzle, it might not be in the interest of this committee just
to say, ``Okay, this administration is going to do this. We are
going to go along with it.'' Maybe we should push more for the
policy changes.
Mr. Schaefer. I would love to see the policy changes apply
to every amount of development assistance. Every amount of
development assistance that the United States allocates or
disperses, I would love to see that happen.
Mr. Kingston. Let me ask, Mr. Chairman, if I have still
time, the emerging Soviet countries are not listed on here as a
targeted area. Am I correct on that? I see that Africa 30
percent, Asia-Near East 39 percent, Latin America and the
Caribbean 29 percent. But nothing for Uzbekistan, Kyrgyzstan or
any of those countries. Is that something you folks feel
comfortable about, or are they in there somewhere?
Mr. Schaefer. I think it is appropriate to assign values
for specific regions. Quite frankly, I think we should reform
good performance--I mean, we should reward good performance,
not specific regional areas of the world. And I think
arbitrarily assigning a certain percentage of the money and
challenge account to a certain region is not the proper way to
go. But I was not consulted on that.
Mr. Kingston. Okay. Let me ask Mr. de Soto one of the
issues that we on this committee have taken up and also on the
Agriculture Committee, where we do so much of the food aid, is
America getting credit for what we are doing?
And you know, we have in fact, across the hall in the Ag
Committee, you might want to see a very nice poster of food aid
being distributed. I am not sure where, but it has ``Made in
the USA'' on the package.
How, in your opinion, can we get more credit for what we
are doing? You know the issue came up very poignantly when the
folks from Afghanistan came out after 9/11--I think were
receiving $174 million of foreign assistance a year, but most
did not know that.
Now some of that is certainly the Taliban's fault, but a
lot of it is our fault that we were not getting the information
out there.
How, in your opinion, can we get that message out? That
America is a good, helpful ally and this assistance comes from
America. How do you think we can get that information out?
Mr. de Soto. I have never--not being first an American
citizen and looking at things from my own point of view----
Mr. Kingston. That is why I am asking you.
Mr. de Soto. I have never reflected upon it, but obviously
if the word is not getting around, you may want to make sure
that it does get around.
You may want to make sure that it does get around.
Mr. Kingston. Well, now, let me ask you this. I want to
make sure that it does get around. But I guess what I am saying
from your point of view, how do we get that word out there
better? Because, you are an intelligent guy. You are a
connected guy. You are kind of in a positive sense, an
establishment guy. How could the people, you know, on the
ground find that out?
Mr. de Soto. I think it has to do really with publicity and
how you get it there. For example, when the reform programs
that we carried out at a certain moment, whether it was a Peru
or any other country, we made sure that the information got to
the grassroots.
And the way you get information to the grassroots is very
different than the way you get it to elites. In the grassroots
for example, we would never think--at the grassroots level we
would never think of using a mailing list among other things.
Of course, people do not have addresses, so there is not much
of a way of getting a mailing list. We would put banners on the
streets or put a certain type of poster. There is a way of
getting that message across--there is a way of getting out.
You would actually have to target it. You would actually
target it to poor people so that they actually understand it.
For example, I would be delighted to participate because
simply I am very curious on what changes would have to be done
from what you are actually doing today.
See, we use a lot of publicity. When we go out and we have
a campaign, either to bring people inside the law, bring their
businesses inside the laws, we prepare everything to radio
jingles to television spots, to banners in the streets. And we
study whether they are effective or not.
You may want to do that as well. Maybe it is not getting
out there. I just never reflected on whether it is getting out
there or not. But you may want to do that.
It is very different making--using publicity in Peru. You
see, if a country such as mine, 80 percent of the people are
poor. And most of the people just simply do not read a
newspaper. And most of the people tune out of the news on
television.
So you have to access them in special ways. You may want to
study that. That may be a very important component of your
whole, I do not know, program.
Mr. Kingston. That is something that this committee has
been kicking around trying to figure it out. And it is not just
the PR but there is a national security question too.
Mr. de Soto. Oh, yes, definitely. The vision there--it is
unfortunate or fortunate, but you are the most powerful nation
in the world. And the tendency is to blame you for everything
that is wrong. So you may want to find out who you get there.
Mr. Kolbe. Mr. Kingston, I think you were reading from this
White House--and the fact sheets, the key facts here. Just to
clarify, one of the key facts is there where it talks about
development assistance accounts increasing. And it talks about
Africa, Asia and the Near East and Latin American and the
Caribbean. I do not think that is meant to say that those are
the only regions that would be qualified for the new MCA at
all.
That was just a fact under--information about aid.
Mr. Kingston. Those ones would get a 22 percent increase
though, I think. Is not that on there? Maybe I am----
Mr. Kolbe. USAID's core development assistance account is
expected to increase by 22 percent, and then it lists those
three regions there. But it does not say that this MCA account
and I want to make that very clear to anybody who will be
listening to this today, that the central Asian countries, the
Balkans and any others would also be eligible, Eastern Europe
countries would also be eligible if they meet the basic
criteria.
Mr. Kingston. Because if they are--my concern is as you
know, when we were over there earlier this year, they are
making a lot of strides there. They have got a ways to go
still. And we do want to encourage that and not penalize them
because they are geographically not where they need to be or
politically not as sexy as they need to be in order to get an
arbitrary amount of assistance.
Mr. Kolbe. Thank you.
We are going to wrap here. But I am just going to take a
moment to ask one or two quick questions here.
Mr. de Soto, your comments about the titling are very
intriguing and I think strike me as being on target, the
importance of property rights and the titling. But it is a
little discomforting also. And for this reason, that is, USAID
spent a lot of money, put a lot of money into various programs
for titling in different countries. I am not sure how much you
are familiar with what has been done.
But it would appear that we may not have been doing things
right in that regard. Could you comment at all on that?
Mr. de Soto. Sure, of course. The first thing I think, to
understand is that before titling can take place, before people
can be given a certificate of possession or of ownership, first
of all the law has to be in place. The law means that there has
to be a common understanding as to who owns what and who has a
right to what.
Now what happens is I think one of the big mistakes that
has been done so far, is that it is taken granted in developing
countries is that consensus, that social contract, is in place.
And the black market is just simply considered. It may be
considered like in the United States. You know, this is a place
that is small and it is where the Sopranos reign. But no, in
our country, it is 80 and 90 percent of the population.
So what happens is that when your contracts are awarded,
they are generally awarded for doing the very downstream stuff
for which there is no--where the law has not been established.
Let me give you a concrete example. We were very curious
about this and asked the World Bank many years ago, and the
Inter-American Development Bank to give us information as to
how they went about doing property programs in developing
countries. And we did not get any information.
And we had a friend in the Secretary of the Treasury who
told us, ``You know what you can do is look at their reports of
these international financial institutions to the U.S. Congress
because they are stored in the vaults of the Treasury. And we
had access to them, and we consulted them for about 90 days.
And we found out after a while that none of these programs had
actually been successful.
And the way to illustrate one of them is that the major
program that had been funded I think by the World Bank and part
of it by the Inter-American Development Bank, was a program,
the purpose of which was to give poor people, and therefore
avoid violence in the northeast of Brazil, a program which was
earmarked for $360 million. And it started in 1980.
Now what was interesting was the Brazilian Congress agreed
to indebt itself for this amount of money to give its part of
the money of course on the condition that was politically
important. You remember there was a lot of unrest at that time
in the northeast of Brazil.
And so when you start reading the reports of the World
Bank, they are very interesting. In the first years, they start
saying it is important to deal with the issues of the poor. But
as the reports continue to develop, there--what they started
reporting was not how they were decreasing poverty, but how
much mapping they were doing and how much recording systems
they were putting into place.
And by the time they had already spent $120 million of the
$360 million I think it is that had been earmarked for that
purpose, it was clear that they now knew where every house was,
where every plot of land was because they used the money for
photogrammetry, but they did not know who lived in the
building. Because if in the building people have to voluntarily
come in and record because they recognize that the source of
the rights to the ownership comes from the law and not from a
local arrangement.
So what I think happens is this, is what developing
countries actually require, and that is why I pointed out so
much of what you did in the 19th century is what you did inthe
19th century, which is first of all is the formation of law. Or what
you did in Japan and Korea and Taiwan about 1945, which was the
formation of law.
And that is why I brought out these posters of Japan. The
second one, these are posters of the national property reform
program done under MacArthur. You will see in the first circle
there, there is a tearing up of the restoration.
The second one, there are consultations with the people to
find out just whether they will accept the law or the law is
sufficiently well crafted to actually define ownership among
poor people. And as you will see, the third drawing here is the
drafting up of a new law and the objective is an anti-poverty
program because you see people with patches getting the title.
What I am trying to say is all successful programs
basically had to do was a restructuring of the law so that poor
people came inside. But the way it is taken through most state
agencies and by the World Bank is essentially without even
touching the law is especially photographing people,
photographing maps and setting up computer systems.
It does not get to the root of the problem.
Mr. Kolbe. And I can appreciate that. I think that answers
the question I had very well.
Ms. McClymount and Mr. Schaefer, would you make national
security considerations a criteria at all in the selection of
countries?
Ms. McClymont. I think, Mr. Chairman, for the purposes of
this account, we really need to focus on the poorest countries
with those criteria in mind.
Mr. Kolbe. I agree, but realistically, can you see us
putting a country similar to Iraq on the list?
Or would they just not meet it----
Ms. McClymont. I do not think they would meet the criteria.
Mr. Kolbe. They would not meet the criteria.
Ms. McClymont. Right. I think that is what is so
fundamental because good governance, human rights, investing in
people, I think it would be impossible likely for them to meet
the criteria.
Mr. Kolbe. Do you ever see national security entering into
the decision process? I do not want to state a position here.
Ms. McClymont. Well, I think the concern is this. We are
clearly not going to stop helping countries where they--needs
are not being met and they can form the basis of breeding
grounds for terrorism and so forth.
Mr. Kolbe. Right.
Ms. McClymont. And I think, Mr. Chairman, for purposes of
our seven accounts. I mean separate out Iraq, but think of all
the countries that are maybe not the good performers. That is
why we are so conscious of needing to protect those interests
in helping those people.
Mr. Kolbe. It is probably going to become a bigger question
once you develop the list of the eligible countries. Then you
have got the second choice of who gets selected out of it. We
cannot do programs in every single county that is on the list.
So which ones do we select out of a list of countries that
possess no similaritiews to Iraq? But which ones do we select?
And I guess I am asking, is national security ever a
consideration or how do we avoid it being a consideration? Mr.
Schaefer?
Mr. Schaefer. Well, if you are using our index of economic
freedom, you find that most of the countries which are
terrorist states, most of the countries which are considered
the adversaries of the United States--not so coincidentally
also have very little in the way of economic freedom, and very
little in the rule of law. And they would not eligible. They
would not even be close to being eligible for assistance if you
used the criteria based on the index.
Mr. Kolbe. But you would not use the index as the sole
criteria. I mean, you are not suggesting that Hong Kong and
Singapore should be our first two projects.
Mr. Schaefer. Hong Kong and Singapore are not developing
countries either. [Laughter.]
And so what I would say is that it is very unlikely that
they would be considered good performers if that were a
criteria.
The--now, one question that--are you talking about national
security concerns and the allocation of it, or national
security concerns and not allocating that, meaning that are we
going to provide it to reward our allies, or are we going to
not give it to our adversaries?
Mr. Kolbe. While it is clear that no MCA Funds would go to
bad actions, it is unclear if funds will be allocated devoid of
national security considerations. On one side of the coin you
have had bad actors, on the other side of the coin you have all
other countries in the world many of whom with which the U.S.
has profound national security interests.
Mr. Schaefer. Well, the reason why I ask is because we
provide substantial amounts of money for Israel and Egypt for
what I would consider are mostly security reasons, though it is
under the development assistance budget.
Mr. Kolbe. Right, so should national security interests be
intermixed with the MCK?
Mr. Schaefer. I would not advocate that at all. I think
that the MCA account should be focused on providing, on
focusing on development. And so that we should not allocate it
simply to support our security interests. That is what I am
saying.
Mr. Kolbe. It is a tough one. And I think we are going to
be grappling with that as to what degree that could be in
there.
One last question that I have, Mr. Schaefer or Mr. de Soto,
both. What would you say to a--given what is going on in the
country today with Comcast and all of these things that are
going on right now, Enron and everything else, what would you
say to a country, an MCA-designated country, about economic
freedom versus economic regulation? How much should a country--
they are trying to develop the right systems, the right rules
of law. How much should they have of each?
Mr. Schaefer. Well, I think you cannot have an economically
free state without at least some oversight and some regulation.
You have to.
And the question is at what point does it become so
burdensome that it defeats the purpose of having economically
free. And actually repress economic activity rather than
ensuring that reaped the rewards of it and you protected
property rights and that sort of thing.
And it is a fine line. You have to have some regulation but
that regulation has to be enforced transparently and in an
efficient manner and reliably. And then have a court system and
a rule of law that is a secondary enforcer of that if it is
applied unfairly.
And so you have to have an appropriate system of
regulation. And but you cannot have it be too burdensome. It is
a fine line to draw. And unless you see a specific case, I do
not know if I can get much clearer than that.
Mr. Kolbe. Mr. de Soto.
Mr. de Soto. Yes. I think that one of the reasons that your
legislation and your regulation would seem to work as opposed
to the way it does not work in countries like mine, has a lot
to actually do with instead of deciding how much weight you are
going to give to regulation, how much weight you are going to
give to say non-regulation has a lot to do with democracy.
What is interesting from my point of view about your
country is that the very process through which you create
legislation like for example, this very hearing, or the way you
implement it, actually aims generally speaking towards more
efficient outcomes than hours.
You have for example, common due notice periods. So before
your regulation is in place, people can look at it. You have
the Office of Management and Budget doing cost-benefit
analysis.
The Swiss have the system of--the position of popular
initiatives.
The Japanese have--the press clubs systems where by all
legislation and all regulation is actually well circulated
beforehand. And therefore, you can see what it is affects are.
Well, in a country for example, such a mine, let me show
you--that is why I was saying it is so important to focus what
actually happens in developing countries. And I am going to use
the example of my country. I will not use example of client
countries because they are kind of offensive.
But for example in my country Peru, since the Second World
War produces an average 28,000 laws a year, that makes about
106 per day. There is no common due notice periods, nobody has
seen the cost-benefit of the whole thing. And it does not work.
And that is really about democracy. And it does not have to do
with the big principles how much legislation you have got, how
much goes to the municipalities, what is the power of the
executive branch, it has to do with the fact that we have no
elements with which to be able to calculate the affects of the
law.
So sometimes you can go to countries where it looks like
there is a lot of regulation, but it is efficient, or there is
less regulation, but it is efficient. And the real problem in
developing nations and that may be one of the criteria you want
to put for good governance is what is the process through which
you actually create rules?
In other words, when we elect, for example, a president,
you are actually putting 28,000 blank checks in his pocket
every year. He from then on, regulates as he wants to, and then
he finds out after a year why he is so unpopular. Because he
has no way of gauging the effects of those norms.
So I think of lot of what you may want to put into sound
policy environment has to be do with how you produce rules and
regulations, how strong your democracy really is, not only
whether you have elections, but once elected, what they do.
Mr. Kolbe. Thank you.
Mr. Kingston, do you have a final question?
Mr. Kingston. No. I just find that fantastic statistic. One
hundred and one laws a day.
Mr. de Soto. One hundred and six.
Mr. Kingston. One hundred and six. So tell me what happens
after a five year period of time. I mean, how viable are these
laws?
Mr. de Soto. Well, what happens is that throughout every
developing country, now the leader gets elected with a lot of
celebration, and he goes out with a whimper. He has no affect
of knowing what he is doing.
You see you have enormous types of mechanisms.
You know, let me give you an example. Once we were told,
talking about this excessive regulation and non-regulation,
well how about the Japanese? Everything happens within the
bureaucracy. That is true. They have a very large bureaucracy.
And the Diet, that is to say your equivalent of the Congress,
actually delegates much of the decision making to the
bureaucracy. But let me tell you what happens.
So they decided something on the environment or an anti-
poverty law, then the first thing that the respective
department, say the department of interior does, is it puts
together--it goes around and looks at interaction. It looks at
the Heritage Foundation. And it brings everybody who can
possibly be interested in to a consultative committee that is
going to draft the law together with them. They can be 100
members, 150 members or 70 members.
It just makes sure that all interested parties are there.
At the same time, it assigns a press club to it, which is it
provides a huge room for up to--you know, they have thousands
of magazines in Japan, where all of the people who are writing
on it have access to a press briefing during the session of
the--which can last a year, a year-and-a-half, nine months,
whatever it is. Every day at 7:00 p.m. they get a press
briefing.
Once the law is then in place, when you have read back what
the readers have told their magazines, which have been fed back
to the press club, to the members of the committee, then the
Japanese organize, which is a public hearing in 38 different
parts of Japan at least.
This text is then brought back to congress, the Diet, and
the congressman who come from different districts--that is also
very important. Our congressmen in Latin America are not
elected by district. They are Mr. Garcia's, Mr. Chavez's list,
so they are not accountable to any specific population. They
are accountable to the nation in general which means to no one
whatsoever or the head of their political party.
So it is an election, but it is not at all like yours
because it does not have accountability.
Going back, the Japanese are elected by districts. They
then take the results of the law and they are given during the
weekend, like the British have it also, the schools. And they
open up shop at schools and they listen to people's complaints
or comments on the rule they are bringing out.
In other words, by the time a rule comes out, it is really
rooted in the grassroots so to speak. And so what I am
basically trying to say is that wherever you go and see
successful nations, they have good law producing mechanisms.
And countries like mine just do not.
And so, whether you are regulated too much, or you are
regulated too little, at the end nobody knows what it is about
and most people just disobey the law, and it is unenforceable.
Mr. Kolbe. Thank you. I was about to wrap up. Mr.
Knollenberg, if you have another question.
No.
All right, I think we have kept our witnesses longer than
anybody anticipated. But I do appreciate--we did get a late
start. And I think this has been a fascinating hearing and one
that is for me has been very enlightening and very helpful as
we begin this process of thinking it through how we proceed
with economic development assistance.
I want to thank all three of our witnesses for being here
today and taking the time to do this and to assist us in this
process.
Thank you very much.
The subcommittee will stand adjourned.
W I T N E S S E S
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Page
Armitage, R. L................................................... 167
de Soto, Hernando................................................ 441
Franco, Adolfo................................................... 271
Grossman, Marc................................................... 271
McClymont, Mary.................................................. 441
Natsios, Andrew.................................................. 1
Rodman, Peter.................................................... 271
Schaefer, B. D................................................... 441
Speer, Maj. Gen. Gary............................................ 271
I N D E X
----------
Agency for International Development
(Administrator Andrew S. Natsios)
Page
Afghanistan...................................................... 50
Africa...........................................................47, 51
Agriculture...................................................... 62
Allocations...................................................... 25
Basic Education.................................................. 28
Budget........................................................... 61
Chairman Kolbe's Opening Statement............................... 1
Colombia......................................................... 65
Corruption....................................................... 65
Education Initiative............................................. 32
Global Health Accounts........................................... 52
Health Care Issues............................................... 57
International Family Planning.................................... 60
Micro Credit Programs............................................ 56
Middle East...................................................... 30
Mr. Natsios' Opening Statement................................... 6
Mrs. Lowey's Opening Statement................................... 3
Nagorno-Karabakh................................................. 55
NGOs............................................................. 45
Oversight of USAID West Bank Programs............................ 26
Pakistan......................................................... 46
Team Work........................................................ 67
The Congo Volcano................................................ 37
UN World Food Programme.......................................... 46
West Bank Gaza Tax Issue......................................... 24
World Trade...................................................... 55
U.S. Assistance for the Front-Line States
(Richard L. Armitage)
Chairman Kolbe's Opening Statement............................... 167
Mr. Armitage's Opening Statement................................. 171
Mrs. Lowey's Opening Statement................................... 168
U.S. Assistance for Colombia
(Marc Grossman, Undersecretary for Public Affairs, Department of State)
(Major General Gary Speer, Acting Commander in Chief, U.S. Southern
Command)
(Adolfo Franco, Assistant Administrator of Latin American and Caribbean
Affairs)
(Peter Rodman, Assistant Secretary of Defense, International Security
Affairs)
Chairman Kolbe's Opening Statement............................... 271
Mr. Grossman's Opening Statement................................. 273
Mrs. Lowey's Opening Statement................................... 292
Mr. Rodman's Opening Statement................................... 294
Mr. Franco's Opening Statement................................... 308
Mr. Speer's Opening Statement.................................... 327
The Administration's Proposed Millennium Challenge Account
(Hernando de Soto, President of the Institute for Liberty & Democracy,
Lima, Peru)
(Mary McClymont, President & CEO, InterAction)
(Bret D. Schaefer, Jay Kingham Fellow in International Regulatory
Affairs, Heritage Foundation)
Chairman Kolbe's Opening Statement............................... 441
Mr. de Soto's Opening Statement.................................. 446
Ms. McClymont's Opening Statement................................ 463