[Senate Hearing 107-814]
[From the U.S. Government Publishing Office]



                                            S. Hrg. 107-814
 
      FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS 
                  APPROPRIATIONS FOR FISCAL YEAR 2003
=======================================================================


                                HEARINGS

                                before a

                          SUBCOMMITTEE OF THE

            COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                                   on

                           H.R. 5410/S. 2779

AN ACT MAKING APPROPRIATIONS FOR FOREIGN OPERATIONS, EXPORT FINANCING, 
AND RELATED PROGRAMS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2003, AND 
                           FOR OTHER PURPOSES

                               __________


                  Agency for International Development
                          Department of State
                       Department of the Treasury
                       Nondepartmental Witnesses

                               __________

         Printed for the use of the Committee on Appropriations






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                      COMMITTEE ON APPROPRIATIONS

                ROBERT C. BYRD, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii             TED STEVENS, Alaska
ERNEST F. HOLLINGS, South Carolina   THAD COCHRAN, Mississippi
PATRICK J. LEAHY, Vermont            ARLEN SPECTER, Pennsylvania
TOM HARKIN, Iowa                     PETE V. DOMENICI, New Mexico
BARBARA A. MIKULSKI, Maryland        CHRISTOPHER S. BOND, Missouri
HARRY REID, Nevada                   MITCH McCONNELL, Kentucky
HERB KOHL, Wisconsin                 CONRAD BURNS, Montana
PATTY MURRAY, Washington             RICHARD C. SHELBY, Alabama
BYRON L. DORGAN, North Dakota        JUDD GREGG, New Hampshire
DIANNE FEINSTEIN, California         ROBERT F. BENNETT, Utah
RICHARD J. DURBIN, Illinois          BEN NIGHTHORSE CAMPBELL, Colorado
TIM JOHNSON, South Dakota            LARRY CRAIG, Idaho
MARY L. LANDRIEU, Louisiana          KAY BAILEY HUTCHISON, Texas
JACK REED, Rhode Island              MIKE DeWINE, Ohio
                  Terrence E. Sauvain, Staff Director
                 Charles Kieffer, Deputy Staff Director
               Steven J. Cortese, Minority Staff Director
            Lisa Sutherland, Minority Deputy Staff Director
                                 ------                                

   Subcommittee on Foreign Operations, Export Financing, and Related 
                                Programs

                  PATRICK J. LEAHY, Vermont, Chairman
DANIEL K. INOUYE, Hawaii             MITCH McCONNELL, Kentucky
TOM HARKIN, Iowa                     ARLEN SPECTER, Pennsylvania
BARBARA A. MIKULSKI, Maryland        JUDD GREGG, New Hampshire
RICHARD J. DURBIN, Illinois          RICHARD C. SHELBY, Alabama
TIM JOHNSON, South Dakota            ROBERT F. BENNETT, Utah
MARY L. LANDRIEU, Louisiana          BEN NIGHTHORSE CAMPBELL, Colorado
JACK REED, Rhode Island              CHRISTOPHER S. BOND, Missouri
ROBERT C. BYRD, West Virginia        TED STEVENS, Alaska
  (Ex officio)                         (Ex officio)

                           Professional Staff

                               Tim Rieser
                              Mark Lippert
                         Paul Grove (Minority)
                     Jennifer Chartrand (Minority)

                         Administrative Support

                             Elnora Harvey











                            C O N T E N T S

                              ----------                              

                       Tuesday, February 26, 2002

                                                                   Page

Agency for International Development.............................     1

                        Wednesday, March 6, 2002

Agency for International Development.............................    61
Department of State..............................................    72

                        Tuesday, March 19, 2002

Department of the Treasury: Office of the Secretary..............    97

                       Wednesday, April 24, 2002

Department of State: Office of the Secretary.....................   127
Nondepartmental witnesses........................................   195















      FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS 
                  APPROPRIATIONS FOR FISCAL YEAR 2003

                              ----------                              


                       TUESDAY, FEBRUARY 26, 2002

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:20 a.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Patrick J. Leahy (chairman) 
presiding.
    Present: Senators Leahy, Durbin, Landrieu, and Bond.

                  AGENCY FOR INTERNATIONAL DEVELOPMENT

STATEMENT OF ANDREW S. NATSIOS, ADMINISTRATOR


             opening statement of senator patrick j. leahy


    Senator Leahy. Good morning. I apologize for the delay, but 
we have been voting, and Senator McConnell is also tied up on 
the floor because of the next piece of legislation coming 
before the Senate. Obviously, I will keep the record open for 
any questions that Senator McConnell has, or any statement he 
wishes to make.
    I do want to welcome USAID Administrator Natsios, who has 
the distinction of being our first witness at the first hearing 
of this subcommittee this year.
    Mr. Natsios, who is here to testify about the 
administration's fiscal year 2003 budget request for USAID's 
programs, came to USAID after a successful career both inside 
and outside of Government. In a relatively short time, he has 
brought a very needed burst of energy and enthusiasm to the 
Agency. Mr. Natsios, I commend you for boosting morale the way 
you have. I am also pleased that you have given greater 
autonomy to USAID's field missions, which are among the 
Agency's greatest strengths.
    But you also have to deal with some extremely difficult 
problems that have plagued USAID for decades. I know you are 
willing to tackle these problems that include a cumbersome, 
overburdened procurement system and dysfunctional personnel and 
financial management systems. Fixing these problems is not 
going to be easy, but we will help you.
    Now, there are other serious challenges. One we often hear 
about is that proposals brought to USAID from private 
organizations, universities, and others from outside the 
Agency, including Members of Congress, too often receive only 
superficial consideration. People seeking funding for projects 
are often sent back and forth between Washington headquarters 
and field missions, only to be told that a final decision has 
to be made at the other location. It's sort of like Major-Major 
in Catch-22. The major is out whenever he is in, and he is in 
whenever he is out.
    I have often said that USAID's greatest asset is its 
employees, who are dedicated, hardworking professionals. But, 
no one has a monopoly on good ideas, and contracts should be 
awarded to those with the best projects, not just those who 
work the system the best.
    I am also concerned the administration has decided to let 
go some of its most capable people in USAID's Legislative and 
Public Affairs Bureau. While they are political appointees, I 
would feel the same, regardless of who appointed them, because 
they have consistently acted in a professional and nonpartisan 
manner. They built solid relationships with both Republicans 
and Democrats and were outstanding advocates for USAID on 
Capitol Hill. By dismissing these experienced public servants, 
I think that the administration has probably hurt its ability 
to get what it wants from Congress.
    I have read your statement, and I agree with a good deal of 
it. The whole statement, of course, will be put in the record, 
as I know you will want to summarize it.
    While you make a convincing case for more funding for 
foreign assistance, the budget request itself falls far, far 
short. The $7.3 billion you request for USAID's programs from 
the Foreign Ops Subcommittee represents only a modest increase 
over the fiscal year 2002 level. It is actually a decrease from 
last year if you factor in emergency spending.
    This budget appears to reduce funding for programs to 
protect child and maternal health, combat infectious diseases 
like TB and malaria, and assist vulnerable children. That is 
not a budget worthy of a great Nation. I will give you one 
specific example. In your statement, you discuss USAID's Africa 
initiatives, but for education programs in sub-Saharan Africa, 
a continent of a billion people, many of whom are illiterate, 
you propose just $22 million. That is only a few times more 
than we spend on education for Vermont's 100,000 students.
    I have no doubt that you probably asked OMB for additional 
resources, and that USAID could put more resources to good use. 
I know there are tough choices that have to be made, but if the 
terrorist attacks of September 11 taught us anything, they 
taught us about our mistaken sense of invulnerability.
    We should have learned that what happens in far-off places 
can have very terrible consequences for Americans here at home. 
Whether it is a terrorist attack on an American city, the 
proliferation of weapons of mass destruction, or the ravages of 
AIDS, our security is directly and indirectly linked to events 
and conditions around the globe. With the exception of the cost 
of deploying our Armed Forces, the international affairs budget 
is what we spend on programs to protect our national security 
outside our border.
    Some may have asked a year or so ago whether illiteracy in 
Indonesia, Pakistan, or Afghanistan affects us here in the 
United States. Today, you don't hear that question being asked. 
People who are educated can earn money to feed their families 
and participate meaningfully in the political life of their 
country. In short, these people are often among the greatest 
assets to efforts to promote peace and prosperity around the 
world.
    Some of the organizations working on the front lines in 
these countries, as well as Senator McConnell and myself and 
others in Congress, have appealed for a lot more spending on 
foreign assistance to combat poverty and all the interrelated 
causes which include unchecked population growth, political and 
economic instability, corruption, destruction of the 
environment, drug trafficking, and terrorism. Year after year, 
regardless of which party is in the White House or whoever is 
in control of Congress, we do not provide the amounts of 
foreign aid that we should.
    The President's budget provides only $165 million for 
education for the world's 2 billion poorest children. The 
President's budget provides $1.3 billion for health care for 
the world's poorest 3 billion people. That is barely half the 
amount we spend on health care for Vermont's 600,000 residents. 
This is not acceptable.
    Year after year, this committee struggles to find a few 
more dollars to alleviate the suffering in refugee camps, which 
can be fertile grounds for recruiting terrorists. We argue 
about $5 or $10 million for micro credit to help the world's 
poorest families start businesses. We rob Peter to pay Paul to 
get a few more millions to vaccinate against measles, which 
needlessly kills 900,000 children each year. If anyone in this 
room is told that they could prevent a child from dying from 
measles by giving 20 cents or 30 cents, of course you would dig 
in your pockets and do it. That is, essentially, what we are 
asking for.
    We debate about funding for family planning and 
reproductive health care every year, which in this year's 
budget request is less than we spent 6 years ago.
    Despite this sorry situation, there is a ray of hope. Since 
September 11 a number of people, private citizens and a 
bipartisan cross-section of Members of Congress, have called 
for a new Marshall Plan to combat world poverty. I am pleased 
that 41 Senators, Republicans and Democrats, almost half the 
Senate, are now on record calling for an increase in foreign 
assistance funding.
    We cannot pretend that spending one-half of 1 percent of 
our Federal budget to improve the lives of 3 billion of the 
world's poor is a serious response. It is beneath a great 
country like ours. It demeans us both in our own eyes and in 
the eyes of the rest of the world.
    Political violence and terrorism do not occur in a vacuum. 
They are increasingly the result of religious and ethnic 
fanaticism that flourishes in countries plagued by misery and 
injustice. We are the richest, most powerful Nation on earth. 
We can make a number of different arguments for increasing 
foreign assistance.
    We can say, it is for our national security. And, it is. 
The more that you improve democracy and economic well-being in 
nations around the world, the less chance we have of being 
involved in conflicts against these nations.
    We can also say that it is a matter of protecting the 
public health of the United States, because every plague and 
virus is only an airplane trip away. So we can say increasing 
foreign aid is part of our health security.
    But I think it is a lot more than that. How can we morally, 
as a Nation, stand up here and, year after year, provide such a 
piddling amount? I hear all these speeches. We pound our chest 
and say how wonderful we are, and by golly, we have got some 
good rhetoric on this issue. But one-half of 1 percent to help 
the poorest of the world, when we are blessed with the 
wealthiest Nation that history has ever known, is simply 
inadequate.
    If President Bush today were to ask Congress and every 
American to support a tripling of our international affairs 
budget and explain why it is important to our national security 
and to combat international terrorism, there is no doubt in my 
mind that Congress would respond and give it to him, and the 
public would be supportive. The public understands this better, 
I think, than the administration and the Congress do.
    We have got to work together. We have got to do far better.
    I mean, how can you have children who year after year are 
condemned to blindness or to disease. Many of us in this room 
have children. We, as a simple matter of course, bring them to 
the doctor to get their shots for measles and various other 
things. But millions of children in the developing world never 
have that chance, and millions of children die as a result.


                          prepared statements


    We have received statements from Senator Mitch McConnell 
and Senator Tim Johnson that will be inserted in the record at 
this time.
    [The statements follow:]
             Prepared Statement of Senator Patrick J. Leahy
    Good morning. I want to welcome USAID Administrator Andrew Natsios, 
who has the distinction of being our first witness at the first hearing 
of this subcommittee this year.
    Mr. Natsios, who is here to testify about the Administration's 
fiscal year 2003 budget request for USAID's programs, came to USAID 
after a successful career both inside and outside of government.
    In a relatively short time, he has brought a much needed burst of 
energy and enthusiasm to the Agency, and boosted morale. He has given 
greater autonomy to USAID's field missions, which are widely recognized 
as its greatest strength.
    He also has begun to tackle some of the most difficult problems 
that have plagued USAID for decades--like a cumbersome, overburdened 
procurement system, and disfunctional personnel and financial 
management systems.
    Fixing these problems will not be easy, and the jury is still out 
on your efforts. But you have our strong support.
    There are other serious challenges. One we often hear about is that 
proposals are brought to USAID from private organizations, 
universities, individuals or others outside the Agency, including 
members of Congress, which too often receive only superficial 
consideration.
    People seeking funding for projects are often sent back and forth 
between the Washington headquarters and the field mission, only to be 
told that a final decision must be made at the other location.
    I have long said that USAID's greatest asset is its employees. They 
are dedicated, hard working professionals. But no one has a monopoly on 
good ideas, and contracts should be awarded to those with the best 
projects--not those who are most adept at working the USAID system.
    I am also concerned that the Administration has decided to let go 
some of its most capable people in USAID's Legislative and Public 
Affairs Bureau. While these were political appointees, I would feel the 
same way regardless of who appointed them.
    These individuals consistently acted in a non-partisan manner, 
built solid relationships with both Republicans and Democrats, and were 
outstanding advocates for USAID on Capitol Hill. I am sorry to say that 
losing these experienced public servants may damage USAID's ability to 
get what it wants from Congress.
    Turning to the fiscal year 2003 budget, I have read your statement 
and there is a great deal in it that I agree with. However, while you 
make a convincing case for substantially greater funding for foreign 
assistance, the budget request itself falls far, far short.
    The $7.3 billion you request for AID's programs from the Foreign 
Operations Subcommittee represents only a modest increase over the 
fiscal year 2002 level. It is actually a decrease from last year if you 
factor in emergency spending. This budget would appear to reduce 
funding to protect child and maternal health, to combat infectious 
diseases like TB and malaria, and to assist vulnerable children. That 
we cannot accept.
    Let me give you just one specific example. In your statement--and I 
recognize I am jumping the gun a bit here before you actually testify--
you discuss your ``Africa Initiatives.'' But for education in sub-
Saharan Africa, a continent of a billion people many of whom are 
illiterate, you propose $22 million. That is only 10 times the amount 
we spend on education for Vermont's 100,000 students.
    I have no doubt that Mr. Natsios asked OMB for additional 
resources, and that USAID could put more resources to good use. I also 
know there are tough choices that every Administration must make when 
putting together its budget, and this year is no exception.
    However, the terrorist attacks of September 11 taught us many 
things. They taught about our mistaken sense of invulnerability, and 
that what happens in far off places can have terrible consequences for 
Americans here at home. Whether a terrorist attack in an American city, 
the proliferation of weapons of mass destruction, or the ravages of 
AIDS--our security is directly and indirectly linked to events and 
conditions around the globe.
    With the exception of the cost of deploying our Armed Forces, the 
International Affairs budget is what we spend to protect our national 
security outside our borders. A year ago, some might have asked what 
illiteracy and unemployment in Pakistan or Afghanistan or Indonesia 
have to do with America's security. Today it should be obvious. People 
who are educated, who can earn money to feed their families, and 
participate meaningfully in the political process, are not likely to be 
training to be terrorists.
    For years, organizations working on the front lines in these and 
other impoverished countries, as well as Senator McConnell and myself 
and a few others in Congress, have appealed for significantly more 
funding to combat poverty and its many inter-related causes and 
effects. This includes unchecked population growth, political and 
economic instability, corruption, destruction of the environment, drug 
trafficking, and terrorism. Year after year, the Congress and the 
Administration failed to deliver.
    The President's budget provides only $165 million for education for 
the world's 2 billion poorest children. The President's budget provides 
$1.3 billion for health care for the world's poorest three billion 
people, barely half the amount we spend on health care for Vermont's 
600,000 residents. This is simply not a credible response.
    We struggle to find a few more millions to alleviate the suffering 
in refugee camps, which are fertile grounds for terrorist recruits. We 
argue about $5 or $10 million for micro loans to help the world's 
poorest families start businesses. We rob Peter to pay Paul for a few 
more millions to vaccinate against measles, which needlessly kills 
900,000 children each year. Year after year, we debate about funding 
for family planning and reproductive health care, which in the 
Administration's budget request is less that we spent six years ago.
    Despite this sorry situation, there is a ray of hope. Since 
September 11, many distinguished former national security officials, 
private citizens, and a broad, bipartisan cross-section of Members of 
Congress, have called for a new ``Marshall Plan'' to combat world 
poverty. I am very pleased that 41 Senators--Republicans and 
Democrats--are on now record calling for an increase in foreign 
assistance funding.
    We can no longer pretend that spending one-half of 1 percent of our 
$2 trillion Federal budget to improve the lives of 3 billion of the 
world's poor is a serious response. Political violence and terrorism do 
not occur in a vacuum. They are increasingly the result of religious 
and ethnic fanaticism that flourishes in countries plagued by misery 
and injustice.
    Have we so soon forgotten the lessons of September 11? We are the 
richest, most powerful nation in history, yet we act as though the rest 
of the world barely matters to us.
    We cannot put those lessons into effect without Presidential 
leadership. If President Bush, today, were to ask every American to 
support a tripling of our International Affairs budget, and he 
explained why it is important to our national security and to combating 
international terrorism, does anyone think Congress would not respond 
or that the public would object? The polls show unequivocally that the 
public understands these issues.
    And I know that you, Mr. Natsios, understand these issues better 
than just about anyone. The Congress and the Administration must work 
together to dramatically increase funding for these programs--whether 
through the regular budget process or supplemental appropriations. Not 
next year, or the year after, but today.
    We can do more. We must do more.
                                 ______
                                 
             Prepared Statement of Senator Mitch McConnell
    It is a pleasure to welcome you before the Foreign Operations 
Subcommittee this morning, Andy. When you testified last year, you were 
new to the job--but ready and willing to renew the focus and energy of 
the U.S. Agency for International Development (USAID). Events of 
September 11 have made this task even more imperative, and let me say 
from the outset of this hearing that you continue to have my full 
confidence and support.
    The war on terrorism that is being waged under the leadership of 
President Bush underscores the importance of programs and activities 
implemented by USAID. Targeted and effective foreign assistance 
programs can help undermine corruption, poverty, and ignorance--the 
very elements that breed terrorism. I am pleased that the fiscal year 
2003 budget request for your Agency includes increased funding for 
governance, economic development, health, and education programs.
    I want to make a few general comments on the $8.4 billion request 
for USAID, and will do so under the program pillars that the 
Administration established last year.
    The request includes $1.1 billion for activities conducted by the 
Bureau of Economic Growth, Agriculture, and Trade. This reflects an 
overall increase of $166 million over last year's level, and includes a 
$15 million increase for basic education programs. $316 million is 
slated for trade and investment programs. To further President Bush's 
call to volunteerism, USAID may want to consider a funding emphasis on 
those organizations that successfully utilize American volunteers in 
their programs, such as the International Executive Service Corps.
    The budget proposes $1.4 billion for programs administered by the 
Bureau of Global Health. I am pleased $500 million is included for HIV/
AIDS bilateral programs, but suspect that Congress may want to increase 
this amount as we go through our deliberative process. Child survival 
and maternal health programs are to receive $282 million, and I hope 
that you will explain more clearly the $37 million reduction over last 
year's funding level for these activities.
    The request for the Bureau of Democracy, Conflict and Humanitarian 
Assistance is $224 million. While I support the focus on combating 
terrorism in Central and South Asia, I also strongly encourage the 
Administration to continue to support long term democracy building 
efforts in Southeast Asia and the Western Hemisphere. Indonesia and 
Colombia, in particular, pose unique challenges that USAID must 
aggressively address today. We can pay for these programs now, or we 
can really pay for them later.
    I want to make a few, brief comments on the struggle for democracy 
in Burma. I fully concur with President Bush who stated on December 6, 
2001 that Aung San Suu Kyu is ``a tireless champion for democracy and 
human rights in Burma . . . [who] inspires countless people around the 
world who strive peace, justice, and freedom . . . [and who] has never 
wavered in her commitment to peaceful change and a process of national 
reconciliation in Burma.''
    It is imperative that the Administration not allow the aspirations 
of the people of Burma, as expressed through the NLD's victory at the 
polls in 1990, to fall by the wayside as the war on terrorism 
continues. Any and all assistance--including programs that may help 
stem the rapid HIV/AIDS infection rate in Burma--must be coordinated 
with Suu Kyi and the NLD. We should judge progress on the dialogue 
between Suu Kyi and the SPDC on concrete actions taken in the direction 
of reconciliation and peace.
    Let me close by expressing my appreciation and that of my staff to 
the outreach efforts of USAID. Ed Fox is doing a terrific job heading 
up the legislative office, and while there are many new faces, folks 
like Dottie Rayburn deserve praise for keeping in close and constant 
contact with the Senate.
                                 ______
                                 
               Prepared Statement of Senator Tim Johnson
    Mr. Chairman, I would like to thank you and Ranking Member 
McConnell for organizing today's hearing with Andrew Natsios, 
Administrator of the U.S. Agency for International Development. I look 
forward to working with both Chairman Leahy and Senator McConnell as we 
move forward with the fiscal year 2003 Foreign Operations 
Appropriations Bill.
    Foreign assistance is one of the most cost-effective, but least 
understood, parts of the federal budget. For an investment of less that 
one half of one percent of total federal spending, USAID operates field 
missions in 72 countries and has programs in over 100 countries. USAID 
programs promote economic development and humanitarian assistance to 
some of the most desperate nations in the world, often coming to 
assistance during times of national emergency or natural disaster. 
Americans should be proud of the way foreign assistance dollars are 
spent.
    I think too often, as elected representatives, we do not do a good 
enough job explaining to our constituents the importance of foreign 
assistance to our own national security. While its easy to see the 
benefits of having the best-trained and best-equipped military in the 
world, foreign assistance also plays an important role in keeping the 
American people safe.
    One of USAID's primary missions is to assist developing nations by 
encouraging economic development, promoting democracy, combating global 
health threats, and providing necessary humanitarian assistance. While 
the connection between this mission and U.S. national security is not 
obvious, one need look no further than Afghanistan to see the 
consequences to our security of a failed nation. By working to prevent 
conflict within and between nations before they begin, we lessen the 
chance we will be forced to send our sons and daughters who serve in 
the military in harms way.
    Beyond preventing nations from failing, our foreign assistance 
budget is designed to improve the lives of people in developing nations 
by helping them to create free-market democracies. Programs to enhance 
access to schooling, develop agriculture, or create civil institutions 
ultimately have benefits around the globe. As these nations rise out of 
subsistence poverty, they create new markets for global products. For 
my state of South Dakota this means new consumers for the grains and 
meat produced by family farms and ranches.
    I think all of us in Congress need to do a better job of telling 
the successes of foreign assistance funding and explaining the benefits 
of this small investment to the American people.
    Mr. Chairman, I would like to take this opportunity to discuss a 
couple of projects of importance to South Dakota. The fiscal year 2002 
Foreign Operations Appropriations Bill included a provision giving 
USAID 60 days after enactment of the bill to report back to the 
Committee on the status of ceratin University Programs. As the Chairman 
is aware, the deadline for this report is rapidly approaching and I 
wanted to highlight for Administrator Natsios two of these important 
programs.
    First, South Dakota State University has been a longstanding 
partner in the International Arid Lands Consortium--a group that 
conducts research, education, and technical assistance programs in the 
United States and with partners in the Middle East addressing water, 
land, and management issues. The International Arid Lands Consortium 
provides for unique collaboration between the United States, Jordanian, 
Israeli, and Egyptian researchers and scientists. Approximately 40 
percent of the world's land is arid or semiarid, and the International 
Arid Lands Consortium is making great strides in helping to transform 
this terrain for agriculture and habitation while also addressing the 
negative impact of urbanization and desertification.
    The second project involves fellow-South Dakotan, Ambassador George 
McGovern's campaign to end global hunger. Established by Dakota 
Wesleyan University, the George McGovern Center for Public Hunger 
Project will be an extension of George McGovern's lifelong work to 
eradicate poverty and hunger. As most already know, Ambassador McGovern 
was instrumental in creating programs to alleviate hunger including 
Food for Peace, school lunches, and food stamps and also advanced 
federal efforts to deal with poverty and hunger worldwide. Since 1998 
he has served as the U.S. Ambassador to the United Nations Food and 
Agricultural Organization. In this role, he has successfully promoted 
an international program to provide school lunches throughout the third 
world. His lifelong dream is to fully banish hunger from the earth by 
2030.
    Both of these projects were included in the Senate Report for the 
fiscal year 2002 Foreign Operations Appropriations Bill, and I look 
forward to receiving the status report from USAID.
    USAID plays a critical role in protecting our country's national 
security while also highlighting our commitment to providing 
humanitarian assistance to developing nations. I would like to thank 
Administrator Natsios for his service to our country and for his long-
standing commitment to these important foreign assistance programs.
    Once again, Mr. Chairman, thank you for organizing this hearing and 
I look forward to working with you in the coming year.

    Senator Leahy. I do not know if the Senator from Louisiana 
has anything she wanted to add to this. I would recognize her.

             OPENING STATEMENT OF SENATOR MARY L. LANDRIEU

    Senator Landrieu. Thank you, Mr. Chairman. I really 
appreciate your remarks, Mr. Chairman, and your great 
leadership in this area over many, many years, and your 
knowledge and passion that you bring to this subject, and I 
would like to associate myself with the remarks you have made 
and welcome our Administrator to work with us to try to find a 
solution to this dilemma, because it truly is beneath a great 
Nation, as the chairman has said, for us to allocate so little 
of our resources.
    Perhaps, though, there was some question before 9/11, or 
some reason that reasonable people could argue about that, but 
after 9/11 it occurs to me that it is really nonarguable, or 
nonnegotiable, or it should be so transparent and clear, the 
danger that the United States continues to put itself in if we 
do not strengthen our security by not only strengthening our 
military but investing in the development of nations around 
this world, if not because it is the right and just and moral 
thing to do, as the chairman has so eloquently pointed out, but 
it is truly in our self-interest and self-preservation, and in 
our short, medium and long-term security interests to do so, so 
I am going to prepare and have prepared for the record more 
extensive remarks along this line, but just to join with the 
chairman to urge you, as the Administrator, to urge the 
President to take a fresh look at the fact that our investments 
to secure America's future are not just--and I support his 
calls for additional military spending, but that can just be 
one pillar of what we need to build in terms of a great 
foundation of security for this Nation, and investing up-front 
in developing nations so they can be more secure and people can 
have hope in development is our best security from future wars 
and times of conflict.
    Let me just also add briefly that, Mr. Chairman, one way, 
of course, is to try to dig a little deeper, which I agree that 
we can do, and provide some hard dollars to supplement this 
budget, and other ways to think more creatively about the way 
we spend these dollars to leverage and to better coordinate the 
tremendous generosity that is out there in the world from the 
private sector, faith-based organizations, private donations.
    And I would like to say to you, Mr. Administrator, after 
spending some years working specifically in the area of the 
institutionalization of children internationally, and adoption 
and other child-specific issues, that I see a real opportunity, 
Mr. Chairman, for us, as the Scripture says, to take the loaves 
and fishes and to take what investments the United States 
makes, instead of thinking our mission is just to give out that 
money efficiently, or to think about using those few but 
precious billion dollars to leverage the money that is out 
there so that it can be used more effectively in the 
development in the underdeveloped world, and I am going to have 
some questions along that line.
    But Mr. Chairman, I thank you for being able to make these 
opening remarks.
    Senator Leahy. Thank you very much, Senator, and I 
appreciate your remarks.
    Mr. Natsios, please go ahead, and we will put your full 
statement in the record, but please feel free to summarize it 
for us.

              SUMMARY STATEMENT OF HON. ANDREW S. NATSIOS

    Mr. Natsios. I certainly will do that, Mr. Chairman. Thank 
you for the opportunity to testify before the committee. It is 
an honor for me to be here today to talk about the President's 
budget for USAID for fiscal year 2003.
    Just to make a couple of initial comments, the first is, 
not to quibble, but I think there is a misreading of what we 
have proposed in terms of the Africa budget. We do not propose 
$22 million. That is for one program within the Africa budget 
on education, the EDI program, as it is called, which was 
initiated by the last administration. It is a nice program. It 
is not where the big focus will be, which I want to put in, 
which should be in systemic reform. Our proposal for Africa for 
education is $95 million.
    Senator Leahy. Let me just make sure I understand. It is 
$95 million. What is the population we are talking about?
    Mr. Natsios. 600 million people, but many of those 
countries we do not have USAID missions. Some of them are oil-
rich and actually do not need a USAID mission, so we have to be 
careful which countries we are talking about.
    Senator Leahy. Of the countries we are talking about, how 
many people are we talking about?
    Mr. Natsios. We are probably talking about 400 million.
    Senator Leahy. So $95 million. I just want to make sure I 
have the numbers right. $95 million for those 400 million. In 
my little State, which is not a wealthy State by any means, we 
spend $2.2 billion for 100,000 students. Okay, I understand 
your answer.
    Mr. Natsios. Let me just sort of--Zimbabwe has a 92-percent 
literacy rate. The USAID program in Zimbabwe, even if there was 
no political instability, would not include an education 
component because they have a very functional education system 
there already. Botswana has over 90-percent literacy, and a 
very good educational system, and so I think there are issues 
in education in some countries. Mozambique has a very low 
literacy rate. We have done work in that country on education.
    The perception that all countries are the same I know you 
know, Senator, is not true. Some countries are very advanced in 
some areas.
    Senator Leahy. Angola is oil-rich, but it is one of the 
poorest nations on Earth.
    Mr. Natsios. It is, because it has not used its oil wealth 
for whatever, because of their security problems.
    Senator Leahy. And there are some countries, especially 
during the cold war, that we supported with large amounts of 
foreign aid even as they stole money from their people and 
deposited it into Swiss bank accounts.
    Mr. Natsios. Let me just sort of correct that one point, 
but in terms of the point that Senator Landrieu just made with 
respect to private funding, I would like to begin with that, 
because one of the four pillars of USAID work, and I use that 
because we actually have four pillars of USAID's work since I 
became administrator under the President's and the Secretary's 
leadership, and one of them, the first pillar is called the 
Global Development Alliance, and it is an attempt to harness in 
partnerships with the private sector this enormous shift in 
resources to the developing world.
    In 1970, 70 percent of all the capital flows to the 
developing world came from official development assistance, in 
other words, from foreign aid from northern countries, 70 
percent. 30 percent came from private sources. Last year, 80 
percent of the capital flows, which are also much higher in 
terms of total volume, 80 percent came from the private sector 
and 20 percent came from the public sector.
    Now, where does that 80 percent come from? It comes from 
$30 billion in remittances. We're finding people do not just 
send remittances back to their relatives in the developing 
countries just for television sets and houses. They build 
schools, and we are having discussions now with some very 
interesting diaspora groupings within the United States about 
the possibility of linking up with some of these groups to see 
if we could not add some of our money in with the remittances 
they are sending back to their village to do some of the 
development work. It is in the inception stage, but we are 
talking about it.
    Bill Gates spends as much on international health in the 
developing world from his Gates Foundation than any northern 
country in the world. It is a huge amount of money. His Gates 
Foundation has a $23 billion endowment.
    Universities spend private money, not public money, and 
NGO's, the NGO I worked for has private income of $1 billion a 
year now from all of its northern fundraising offices, $1 
billion in private money now, and we have not adequately in 
USAID yet done a good job in linking up private foundation 
money, university private money, NGO private money, capital 
money from the capital markets, and USAID funding, and one of 
our efforts now is to do that. It is called the Global 
Development Alliance, and Secretary Powell mentioned this in 
his testimony a year ago.
    We now have over 60 proposals before us, very, very 
interesting and innovative proposals to try to do what you have 
suggested, Senator, which I have to say we think alike, because 
that is something that we need to focus our attention on. It is 
one of the four pillars.
    Our budget proposal calls for us to manage $8.47 billion in 
fiscal 2003. This includes $2.4 billion for development 
assistance, including child survival and health program, $235 
million for international disaster assistance, $55 million for 
transition initiatives, $586 million for operating expenses, 
and $95 million for the capital investment fund.
    It also calls for $2.29 billion in ESF funding, the 
economic support fund, $495 million for assistance for Eastern 
Europe and the Baltics, and $755 million for assistance to the 
Independent States of the former Soviet Union, which are 
programs we co-manage with the State Department.
    We have proposed a very large increase, even though it is 
not before this committee, in the title II Public Law 480 Food 
for Peace program. It is a $335 million increase for a total of 
$1.185 billion in title II for the next fiscal year.
    All told, in the resources we are managing we have an 8-
percent increase in our spending. Now, that is not enormous, 
but it is much more than most Federal departments are getting, 
and it is actually very healthy compared to what these accounts 
have shown in the last 12 years. The Africa budget has actually 
been either level-funded, or there has actually been cuts in 
the Africa budget.
    I am an Africanist, and the Secretary has a very deep 
interest in Africa, as does the President, and we made the 
decision to increase over a 2-year period spending in Africa by 
22 percent, and so the budget for the first time in history 
will exceed $1 billion in 2003 for Africa, so there is a 
renewed commitment to do work in Africa. Half of that is for 
the HIV/AIDS pandemic, but the other half is in trade capacity-
building and an anticorruption program that we are going to be 
running with African countries, and most importantly in 
education and in agriculture, which is one of our major new 
focuses.
    Secretary Powell earlier this month----
    Senator Leahy. If I could interrupt there, because I notice 
some of your figures, I just want to make sure I understand the 
money for AIDS last year. The administration requested $369 
million for the HIV/AIDS program. The Congress, let me repeat 
that. The Congress increased it to $475 million. I mention that 
because I have heard comments from various people in the 
administration implying that the administration was the driving 
force behind reaching the amount of $475 million. I am 
delighted we provided $475 million, but we had to bring some in 
the administration kicking and screaming to it. In fact, the 
administration worked against funding for HIV/AIDS by drumming 
up support for an amendment that could have taken HIV/AIDS 
funding and transferred in to our program for interdiction in 
Colombia.
    And the administration also had a global fund request of 
$200 million, and we increased that to $250 million. I point 
this out because we had to really push and fight, and really 
had to fight against the administration's lobbyists to increase 
funding by $156 million for the various AIDS programs. I am 
pleased that the administration now thinks that was a good 
idea, and I mentioned it because I want you to know we will 
continue to work to make sure that these levels are further 
increased next year.
    Mr. Natsios. Well, Senator, I might add----
    Senator Leahy. I know I am preaching to the converted with 
you, Mr. Natsios, and I do not mean this in any way a criticism 
of you. We all know that you have to deal with OMB, but I just 
want you to know that we are here to help.
    Mr. Natsios. I appreciate that, but let me make some 
comments about HIV/AIDS, because I think there has been a lot 
of public discussion, some of which is not complete in terms of 
understanding what we have been doing. The amount the 
administration asked for for fiscal 2003 is $155 million more 
than what Congress gave us in 2002, so we have asked for a 
substantial increase over what was given to us by the Congress, 
so we were not dragged kicking and screaming. We did this 
because we believe it is one of the most serious challenges in 
Africa.
    It is the reason that the Secretary's first trip abroad--I 
am sorry, one of his early trips abroad was to Africa. I went 
with him on that trip, and it was to highlight the issue of 
spending on HIV/AIDS.
    Senator Leahy. We understand, but didn't we end up cutting 
other international health programs like malaria and TB and 
those to pay for this?
    Mr. Natsios. There were several cuts in other accounts.
    Senator Leahy. Well, seriously, what does that do for us? I 
mean, we don't make much progress if we cut critical programs 
to combat malaria, TB, and other infectious diseases because we 
have to do more for HIV/AIDS. Why don't we do both? We do not 
say we can only send one B-52 over Afghanistan to bomb Torah 
Bora if we really need two, three, or four to do the job. I 
mean just like military operations, global health is a critical 
national security issue.
    Mr. Natsios. The international AIDS account, Senator, the 
whole health account is up over what you gave us for this year. 
It is up $60 million.
    Senator Leahy. Does it cut malaria?
    Mr. Natsios. We have shifted money from some of those 
accounts into the AIDS account, but I might add these accounts 
are not run separately in the field. Our health programs are 
integrated programs in the field. The trust fund that is being 
managed internationally is a trust fund for HIV/AIDS, malaria, 
and TB, so it really is not quite accurate to say we have cut 
those accounts in terms of the actual spending in the field, 
because the trust fund is for all three diseases, not just for 
one.
    We made a decision we wanted to put more money into the 
trust fund. We shifted money out of the malaria account and the 
TB account and the HIV account and put it into the trust fund, 
but the aggregate amount we are putting into health is up $60 
million in 2003 from what you gave us in 2002.
    Senator Leahy. And if we had kept the money, the amounts 
that were there for TB, malaria, and so on----
    Mr. Natsios. It is being kept, Senator. It is being put in 
an international fund for the same purpose.
    Senator Leahy. Then why is it that the global fund for 
example is $250 million in fiscal year 2002, but it is $200 
million in your request in fiscal year 2003?
    Mr. Natsios. The total amount for the trust fund, as I 
understand it, is $500 million. It is $500 million between the 
2 years into the trust fund, and so we have proposed what we 
did this year, plus what we did----
    Senator Leahy. But it was $250 million last year, $200 
million this year, no?
    Mr. Natsios. No, it is $500 million total.
    Senator Leahy. Is that actual money, or just authority?
    Mr. Natsios. No, it is actual money. It is cash.
    Senator Leahy. So you are saying the $250 million that we 
gave last year would be at least $250 million, your request is 
$250 million again this year?
    Mr. Natsios. The amount last year----
    Senator Leahy. You have people shaking their head no behind 
you.
    Mr. Natsios. It is $50 million--I am sorry, $50 million of 
the money we shifted this year is from 2001, $200 million is 
from this year's appropriation, and then there is $250 million 
for next year.
    Now, it is not all from USAID. $100 million is in the HHS 
account, but is still going to the trust fund, so I am not 
suggesting we are putting all the money in. Part of the money 
is in the HHS budget. That is going to be transferred to us, 
then we will send one check for the U.S. Government's 
contribution to the global trust fund. All of the account money 
for that trust fund does not come out of USAID's budget, it 
comes out of two budgets, HHS and ours. That is perhaps the 
source of the confusion.
    Since I have just discussed HIV/AIDS, let me go on to the 
total amount--let me go back to this now. The total amount we 
are spending in 2003 between CDC, HHS, the global trust fund, 
NIH research for third world HIV/AIDS issues, and our spending, 
total amount spending for third world HIV/AIDS is $1.185 
billion, almost $1.2 billion in the 2003 budget. It is an 
enormous commitment, larger than any country in the world, and 
I might add----
    Senator Leahy. Could you please break that figure down. I 
want to be sure I fully understand it. Remember, I am just a 
lawyer from a small town in Vermont, so I do not understand the 
way you guys work with these numbers all the time.
    Mr. Natsios. Well, I am a former legislator from a small 
town in Massachusetts.
    Senator Leahy. Well, we like you people from the southern 
States.
    Let me ask you, so where does that $1.1 billion come from?
    Mr. Natsios. It is $1.187 billion. It comes from 
fundamentally two sources. It is our budget and the HHS budget. 
The HHS budget is broken down between the National Institute of 
Health and CDC. CDC has programs in the field. We have worked 
with them in many, many countries in the developing world, on 
the HIV/AIDS pandemic.
    Senator Leahy. And HHS is on a program designed for the 
developing world?
    Mr. Natsios. Yes. This is only money for the developing 
world. This is not for domestic AIDS work, and it is a sizeable 
commitment, and there is an issue when we scale up in any major 
crises or focus of the capacity to spend this money. We think 
we can spend this money, or we would not be proposing it.
    Senator Leahy. I grant you that. There were a lot of the 
mistakes in past years in the way in which we managed foreign 
aid. We threw good money after bad, especially to dictators who 
did little more than declare that they were anti-communist.
    But the magnitude of the HIV/AIDS problem is so large that 
while we cannot do it all ourselves we have to do a great deal 
more. You have nations that could disappear, literally 
disappear in Africa, in large part due to HIV/AIDS. And, that 
is precisely why funding for HIV/AIDS programs is so important. 
But go ahead.
    Mr. Natsios. In fact, there are 10 African countries that 
within 5 years will have either negative population growth 
rates or no population growth, and it is because such a large 
portion of the population has the disease, the infection. It is 
horrendous in a number of countries in Africa.
    And the two fastest-growing countries where the infection 
is growing even though the base is smaller is Russia and India. 
Russia is primarily among intravenous drug-users, and we are 
finding it in the populations of India in the urban areas. It 
is very disturbing, and we are seeing big rates of increase, we 
think, we do not know for sure, in Burma.
    Senator Leahy. China, also.
    Mr. Natsios. Yes.
    The second area of focus in this budget for us is in trade 
and investment. AGOA is a joint party--I think conservatives, 
liberals support it, the administration has been a strong 
supporter of AGOA too, which is a trade and investment act that 
reduces trade barriers in African countries. The Secretary is 
very strong in this, the President is, Bob Zoellick and I have 
had extensive conversations how we can work together.
    While it is not my job to negotiate tariff agreements or 
general trade agreements, it is our job to do the work to 
prepare countries in the developing world to take advantages of 
the improved trading climate when there have been, particularly 
in Latin America and Africa, these trade initiatives.
    We spend actually I think 60 percent of the total amount 
spent by the U.S. Government in trade capacity-building. What 
does that mean? The phytosanitary code of the northern 
countries can be an impediment to the export of agricultural 
produce. If they do not understand these regulations, even 
though there are no trade barriers at all, they cannot export 
to the northern countries.
    If they are producing the wrong kinds of foods, for 
example, that is their primary export, they do not have 
markets, and so we do a lot of work to show them what the 
markets are where they have a particular value added. We do a 
lot of training of trade ministries, finance ministries, we 
work with them on things such as regional trade barriers that 
may impede trade among countries in a particular region.
    And so we have asked for an increase in that, particularly 
in Africa, for that trade capacity-building.
    The third area that we are focusing on is the area of 
education. The education budget when I started was $102 
million. We proposed $165 million for fiscal 2003. Now, the two 
areas that USAID suffered the most in the 1990's was both in 
education and agriculture. In education, we only have five 
education officers left in USAID. The rest were laid off in the 
mid-nineties, in the RIF's that took place, and there have been 
no substitute officers, in other words, officers hired to take 
their place.
    We had in 1986, 1987, 248 agricultural scientists, or 
agricultural economists, in USAID. When I started 8 months ago 
we had 42 left, massive reduction in our competence in 
agriculture. We hired six since. We propose some increases in 
the agriculture budget, which is probably my first priority, 
because as you can see, if you look at the studies, the best 
way of reducing poverty in the developing world is through 
agriculture, so education and agriculture are two of our major 
initiatives in this budget.
    We also have a new initiative in terms of conflict 
prevention and conflict mitigation. We put $50 million in this 
budget that will be used in countries that our assessments show 
could be in conflicts at some point in the near future. We did 
a study when I first arrived at USAID of how many countries 
that have USAID missions, and there are formal missions in 75 
countries, another 15 countries we have a presence in but not a 
full mission, and two-thirds of those countries have had 
conflicts at some point, either full-scale civil wars or 
regionalized conflicts within the last 5 years.
    I have had some people say, well, why are you worrying 
about that? You cannot run a long-term development program in 
the middle of a civil war unless you factor in the civil war 
and how it affects your development program, and so we have a 
whole new initiative on that. We developed a really very useful 
and very interesting analytical tool for use in countries to 
determine if the mission director and the ambassador think 
things are deteriorating, whether there is a likelihood of a 
major conflict taking place, and it is almost complete. We will 
be training our staffs in the field, and it will be used to 
produce the kinds of assessments we use now in health to tell 
us whether an epidemic is taking place, or in food security to 
see if there is a hunger problem.
    In terms of regional initiatives, we are focusing on the 
stabilization of the front-line States in Central and South 
Asia. I have been to Afghanistan now twice. We have reopened 
our mission there after being gone for 23 years. We have opened 
a new mission, USAID mission in Pakistan after being gone for 
almost a decade.
    The second regional focus is in Africa, as I mentioned 
earlier. We are facing several major challenges there. The 
first is in agriculture. About 73 percent of the world's 
malnourished people will be in Africa by the year 2015 if 
present trends continue. The two areas where we are failing in 
the hunger battle are in South Asia and Africa, and the only 
way to deal with this--not the only way, the most important way 
to deal with this is through agriculture.
    Why is that? 75 percent of the poor people in the world 
live in rural areas, and they are either farmers, or they are 
herders, or they are in a supplemental trade that is dependent 
on farming, and unless we focus on agriculture in the rural 
areas, we will fail.
    Now, there is a lot of interest groups in the city that are 
focused sectorally and we do not have, until recently, a 
coalition behind more spending in agriculture. We did put more, 
$30 million more into the budget for the current fiscal year. 
We put another $60 million in for the next fiscal year for a 
total of $90 million over 2 years. That is not enough in my 
view, but it is a beginning, and we have revived the 
agriculture sector.

                           PREPARED STATEMENT

    Emmy Simmons will have her hearing before the Senate 
Foreign Relations Committee--she is a career Foreign Service 
Officer--to be the new Assistant Administrator, should the 
Senate confirm her, of the new Bureau of Economic Growth, 
Agriculture, and Trade. She is an agricultural economist, and 
in fact our senior agricultural economist at USAID.
    [The statement follows:]
              Prepared Statement of Hon. Andrew S. Natsios
    Chairman Leahy, Senator McConnell, members of the subcommittee: It 
is an honor to be here today to discuss the President's budget for the 
U.S. Agency for International Development for fiscal year 2003.
    Our budget proposal calls for us to manage $8.47 billion in fiscal 
year 2003. This includes $2.74 billion for Development Assistance, 
including child survival and health programs; $235 million in 
International Disaster Assistance; $55 million for Transition 
Initiatives; $586 million in Operating Expenses; and $95 million in the 
Capital Investment Fund.
    The budget also calls for $2.29 billion in Economic Support Funds; 
$495 million for Assistance for Eastern Europe and the Baltics; and 
$755 million for Assistance for the Independent States of the Former 
Soviet Union. We co-manage these funds with the State Department.
    In addition, the budget calls for USAID to manage $1.185 billion in 
PL 480 Title II Funds.
    In a speech at the World Bank last July, President Bush cited three 
great goals necessary to build a better world:
  --First, ``America and her friends and allies must pursue policies to 
        keep the peace and promote prosperity.''
  --Second, we must ``ignite a new era of global economic growth 
        through a world trading system that is dramatically more open 
        and more free.''
  --And third we need ``to work in true partnership with developing 
        countries to remove huge obstacles to development; to help them 
        fight illiteracy, disease, unsustainable debt.''
    The tragic events of September 11 and the ensuing war on terrorism 
have obviously had an impact on our plans and budget. This is only 
natural. We have fully supported the President's efforts in Afghanistan 
and the surrounding region. For example, we have led the international 
community by providing considerably more emergency food supplies to the 
Afghan people than any other nation. And now that the worst of the 
fighting has ended, we are starting to help the country rebuild its 
agriculture, schools, communities and institutions.
    Despite these events, our basic mission has not changed, and we 
continue to look to the President's three goals for guidance.
    If anything, the events since September 11 have reinforced the need 
for a vigorous, innovative, cost-effective approach to foreign 
assistance and international development. This is the best way that 
USAID can serve our nation's interests, fight the foes of freedom, and 
address the many problems of poverty, disease, corruption, and weak or 
dictatorial government.
    As Secretary Powell said earlier this month, ``over the past year . 
. . the broader tapestry of our foreign policy has become clear: to 
encourage the spread of democracy and market economies and to bring 
more nations to the understanding that the power of the individual is 
the power that counts.''
    Even before September 11, the forces of globalism and its many 
manifestations, both good and bad, had caused USAID to refocus its 
programs and priorities. As a result, we are reforming our management 
practices and putting new emphasis on encouraging trade and free 
markets, improving agricultural practices, managing conflict, fighting 
corruption and illiteracy, promoting education, and stemming the spread 
of HIV/AIDS and other infectious diseases.
    At the same time, we continue to maintain a strong focus on:
  --Fighting hunger and poverty through agricultural development;
  --Promoting democracy, good governance, and the rule of law;
  --Improving health, particularly for women and children;
  --Responding quickly to international disasters and delivering 
        humanitarian assistance; and
  --Promoting sustainable management of the world's natural resources.
    We are also encouraging market-oriented policies in Eastern Europe, 
helping African nations join the World Trade Organization, financing 
job creation in rural Central America to help stem illegal immigration 
to the United States, and funding research that will increase food 
production in Africa.
    To build a strong foundation for sustained economic growth, 
developing countries need peace and security, good governance, and 
educated, healthy workers. Where these conditions exist, countries like 
Thailand and many in Latin America and Central and Eastern Europe have 
made substantial progress, and we are proud of having helped them.
    Other countries--from Jordan and Morocco to Mozambique and the 
countries of Central America and the Caribbean--are emerging from the 
problems of their past. While each case is different, we intend to 
provide sustained support for countries where progress is possible, 
nurturing our relationships and monitoring our programs for 
effectiveness.
    Unfortunately, there is a third category of countries, where there 
is little we can do until their governments change their policies and 
practices. Until then, our programs with them will be limited to 
emergency humanitarian or transition assistance.
    Our budget request for fiscal year 2003 addresses each of these 
fundamental issues of development in considerable detail. For the 
purposes of this discussion, let me highlight a few of our most 
important priorities.
    Fighting HIV/AIDS.--The HIV/AIDS pandemic is devastating much of 
Africa, particularly in the south. In some countries, more than 30 
percent of the population is infected. As the disease affects young 
adults in particular, countries are losing their most educated and 
skilled workers. Business, government, and agriculture have all been 
hurt. Millions of children have lost their parents, and millions more 
will probably do so, if present trends continue. As the pandemic grows 
and spreads, the economic, social and political consequences are almost 
beyond reckoning.
    HIV/AIDS is already escalating dramatically elsewhere, particularly 
among prostitutes and intravenous drug users. Russia and India, to name 
to of the more worrisome cases, have both seen alarming increases in 
prevalence in just the past two years.
    In response to these challenges, USAID's budget for bilateral HIV/
AIDS has increased dramatically since fiscal year 1999. We hope to 
build on this, increasing our funding from $435 million in fiscal year 
2002 to $540 million in fiscal year 2003. With these resources, we are 
now able to increase the number of our HIV/AIDS priority countries from 
17 to 23, expand our regional programs to focus on ``hot spots,'' 
improve our monitoring and reporting system, create a central Condom 
Fund and allocate more program money directly to the field, where it 
matters most. Overall, USAID will work in approximately 50 countries.
    USAID is the lead agency in the U.S. Government's international 
fight against HIV/AIDS. When our resources are combined with the 
international health programs supported by the National Institutes of 
Health and the Centers for Disease Control and Prevention, our overall 
government funding for HIV/AIDS will be over $1.1 billion for fiscal 
year 2003.
    Promoting Trade and Investment.--The growth of international trade 
and investment has produced great gains in income and employment over 
the past generation. Many developing countries, however, have not 
capitalized on this, and few have seen tangible benefits from the era 
of global commerce. Capital flows freely in this global era, but it 
will only do so when the proper business environment is present. For 
this reason, USAID is increasingly focussing on improving countries' 
ability to participate in the international trading system and helping 
them reform their commercial laws and practices so that they can 
attract domestic and international investment.
    For fiscal year 2003, we intend to build on these programs, improve 
local business environments, train farmers, government and business 
leaders, and continue our highly successful microenterprise programs.
    Supporting Education and Attacking Illiteracy.--Basic education 
provides children and young adults the skills they need to help 
themselves, their families and their communities. Despite the clear 
importance of education to development, over 110 million primary-
school-age children in developing countries remain out of school. More 
than 60 percent of them are girls.
    Our budget request includes a substantial increase in funding for 
basic education programs, from $102 million in Development Assistance 
in fiscal year 2001 to $165 million in fiscal year 2003. This reflects 
our commitment to education and builds on the significant increase in 
international education funding that Congress voted for fiscal year 
2002. The new request will help fund our new Centers for Excellence 
teacher training programs in the Caribbean, launch an important new 
multi-year basic education program in Pakistan, and start rebuilding 
Afghanistan's shattered school system, among many other things.
    Incidentally, school starts in Afghanistan next month, schools 
where the Taliban had prevented girls from attending and women from 
teaching. That has changed, and I am proud that one of USAID's quick 
impact programs is supplying almost 10 million textbooks--a country-
wide curriculum for grades 1-12--to help the country's schools get 
started.
    Mitigating Conflict.--Corruption, religious and ethnic extremism 
and irresponsible governments have combined to make the past decade one 
of the bloodiest in memory. Clearly, it is in no nation's interest to 
see this trend continue.
    Wherever the United States has been involved militarily in recent 
years, USAID has played a major role in the rebuilding and 
reconciliation process. This is never an easy task. Infrastructure can 
be rebuilt, but people are another matter. It takes time for the wounds 
of war to heal. Some institutions need to be rebuilt; others must be 
started up from scratch. There are immense issues of justice that must 
eventually be faced, but in the meantime, people must eat and work and 
learn to live with one another.
    We have learned some important lessons in this field. One of them 
is the need to coordinate our humanitarian programs more closely with 
military programs, so that when the fighting ends, we can move more 
effectively from humanitarian relief to rule of law, democracy, and 
economic growth projects. Under our new conflict management initiative, 
approximately $50 million in fiscal year 2003 funds will be devoted to 
putting this new strategy into effect and fulfilling our other conflict 
management initiatives. Ultimately, we want to focus our assistance to 
problem countries more effectively so that their capacity for self-
government and peaceful conflict resolution are strengthened.
                          regional initiatives
    Stabilizing Front Line States of Central and South Asia.--Even 
before September 11th, a broad consensus had emerged that U.S. re-
engagement in South Asia was necessary to improve the region's social 
and economic conditions, and reduce the risk of regional and global 
instability. This process is now well under way.
    Last month, I visited Afghanistan again, where I was proud to 
announce that USAID is reopening the mission we were forced to close in 
1979. This follows directly on Secretary Powell's announcement that we 
are reopening our mission in Pakistan, which had been closed for nearly 
a decade.
    These two missions will play a major role in our efforts to the 
respond to pressing needs of the Afghan and Pakistani people. As 
elsewhere in South Asia, our focus will be on basic education, health, 
agriculture, rural development, and good governance programs. And we 
will continue to give special emphasis to improving the status of 
women.
    We have been present in the Central Asian Republics since shortly 
after the collapse of the Soviet Union. But clearly, the events of the 
past few months suggest that our relations with those nations are in 
the process of changing. USAID's budget request reflects this, and we 
are asking, therefore, for increased funding for our infectious 
disease, conflict mitigation, economic reform, and democracy programs.
    African Initiatives.--USAID is requesting increases in funding to 
pursue four African initiatives in fiscal year 2003. Each will expand 
upon programs managed by our field missions.
  --The first is in agriculture. A large percentage of Africa's 
        population depends on agriculture and livestock for their 
        livelihood. And yet one-third of the people go to bed hungry. 
        Given the impact of HIV/AIDS on agriculture in certain regions, 
        the situation may well get worse. Indeed, it is estimated that 
        by 2015, Africa will account for 73 percent of the world's 
        undernourished, if present trends continue.
    But there is hope. Research suggests that investments in 
agriculture have a stronger impact on poverty than in any other sector. 
Consequently, we are asking for an additional $27 million this coming 
fiscal year, of which $20 million will be devoted to cutting hunger in 
half by the year 2015. This will be done in conjunction with the 
Partnership to Cut Hunger and Poverty in Africa. This initiative will 
target seven to nine countries where we can have the most impact and 
concentrate our initial efforts on training and new technology.
  --Our second African initiative is in trade, where we are asking for 
        $15 million in the coming fiscal year to help African countries 
        take full advantage of the African Growth and Opportunity Act 
        (AGOA). This means helping businesses export and understand the 
        global trading system and encouraging governments to revise 
        their commercial laws and policies.
  --Our third African initiative is in education, where we are asking 
        for $22 million for fiscal year 2003. This initiative has four 
        components: providing scholarships so that children, especially 
        girls, can attend school; helping schools use information and 
        communications technology; training new teachers, in part to 
        compensate for those who have contracted HIV/AIDS; and helping 
        communities establish and maintain their own schools, when the 
        government is no position to help. This latter policy, by the 
        way, has proven highly successful in countries like Mali.
  --And fourth is our African anti-corruption initiative for which we 
        are asking $7.5 million in the coming fiscal year. Our 
        objective here is to improve transparency and accountability 
        and thereby help overcome the endemic corruption that 
        contributes to instability and holds back economic progress in 
        the region.
    Central America.--Given the importance of Mexico and Central 
America to our economy and the well-being of our hemisphere, we are 
planning a new initiative for Mexico and Central America in fiscal year 
2003 that we call the Partnership for Prosperity. This is a new kind of 
initiative, one that seeks to create alliances between our own border 
states and the countries of the region and that works in conjunction 
with the American Hispanic community, businesses, international 
financial institutions and foundations.
    This initiative will serve several purposes, in addition to 
building an alliance whose resources and capabilities go far beyond any 
single organization. One of the most important is to build upon the 
excellent relations between Presidents Bush and Fox and engage the 
Mexican government on trade, environment, health, safety and 
immigration issues. The initiative also seeks to further the Summit of 
the Americas' goals in democracy, development, and trade. Among the 
issues this $30 million initiative will focus on directly are illegal 
immigration, the severe decline in coffee prices, the drought that is 
affecting many parts of the region, and the growing incidence of 
malnutrition there.
    Andean Regional Initiative.--Now in its second year, the Andean 
Regional Initiative (ARI) is a 7-country regional initiative that is, 
in some ways, the successor of Plan Colombia. While Colombia remains 
the most important aspect of the ARI, the country's direct neighbors--
Bolivia, Brazil, Ecuador, Panama, Peru and Venezuela--are included in 
it, too. For fiscal year 2003, the USAID-administered portion of the 
ARI request from all accounts will total $428 million, $151 million of 
which is destined for Colombia.
    While the fight against narcotics trafficking is the central focus 
of the ARI, each country has different needs and thus a different 
program mix. In Colombia, for example, our economic growth and 
infrastructure projects are designed to encourage people to stop 
growing drugs and find decent alternatives. We are also devoting 
considerable resources to rule of law and human rights programs as well 
supporting many who have been displaced by the fighting and 
instability.
      changing to meet the challenge--management and organization
    Helping people amidst the considerable complexity of the developing 
world requires a transparent, agile, and skillful organization, and one 
that has adequate safeguards for employees, many of whom work in 
difficult if not dangerous circumstances.
    But we are also focused on performance and we are working to 
improve in every aspect of our work. To this purpose, I have made 
performance-based management a fundamental priority of our agency, for 
we recognize our obligations to the Administration, the Congress and 
the taxpayers to spend our money wisely.
    Reforming USAID's business systems is one of the most important 
keys to improving our performance. For that reason, we have established 
a Business Transformation Executive Committee (BTEC), based on best 
commercial management practices, to oversee our management initiatives 
and investments. The BTEC is chaired by USAID's Deputy Administrator 
and comprised of senior executives from each of our bureaus. Its goal 
is to set an aggressive pace in developing plans to overhaul and 
modernize the agency's core business systems.
    In the area of Financial Management, USAID plans to enhance the 
core accounting system, installed last year in Washington, to provide 
more accurate and timely financial information, and improve 
accountability and regulatory compliance. In fiscal year 2001, we were 
able for the first time in five years to produce an audited financial 
statement. Our work in fiscal year 2003 will build on this and support 
expansion of our accounting system overseas.
    In Human Resources Management, we will expand the agency's talent 
pool by increasing the recruitment of junior-level Foreign Service 
professionals and focusing on key skill areas in the Civil Service, 
such as procurement and information technology. We will also use 
recruitment and retention incentives to increase and stabilize on-board 
staff levels.
    In Information Technology, we will improve our systems security in 
order to reduce the likelihood of unauthorized access. Upgrades in IT 
software and hardware will support the expansion of the Phoenix 
Accounting System overseas and ensure that the benefits of e-government 
reach all parts of the agency.
    In procurement, in addition to the new, automated contract writing 
system we implemented last year, we are preparing a competition plan to 
facilitate outsourcing of selected functions currently carried out by 
USAID staff. Procurement training for both USAID employees and partner 
organizations will be expanded to improve the quality and consistency 
of our procurements.
    In Strategic Budgeting, we have consolidated the budgeting function 
into the Policy and Program Coordination Bureau to link resources more 
closely with policy priorities.
    In the area of performance measurement and reporting, we are 
streamlining, simplifying, and improving our annual reporting process 
beginning with our field missions and operating units through to our 
Agency-level reporting. The result will be an improved ability to 
collect and report on performance and relate it to budget requests and 
future allocations.
    Agency Reorganization.--As part of the management reforms that I 
discussed at length with this Subcommittee last May, we have 
reorganized our internal structure, creating three technical pillar 
bureaus. These are:
  --The Bureau for Economic Growth, Agriculture and Trade allows us to 
        concentrate our programs on the economic issues of 
        globalization, trade capacity building, and agriculture. The 
        bureau also has central responsibility for our environmental 
        protection, women in development, and education programs.
  --The Bureau for Global Health gives greater focus to evolving health 
        issues, especially HIV/AIDS and other infectious diseases. This 
        bureau will be our technical leader for all of our traditional 
        health, nutrition and family planning programs including those 
        that address maternal and child health and infectious diseases.
  --The Bureau for Democracy, Conflict and Humanitarian Assistance 
        allows us to maintain our focus on democracy, while tightening 
        the links between these related issues, as the number of 
        collapsed states, violent internal conflicts and complex 
        humanitarian emergencies grows. Our current conflict prevention 
        task force, which leads the conflict prevention, management and 
        resolution initiative announced last year, will be folded into 
        this bureau later this year.
    At the same time, we have also initiated a new business model, 
called the Global Development Alliance (GDA). When USAID was founded 40 
years ago, Official Development Assistance (ODA) comprised 70 percent 
of all U.S. financial flows (foundation grants, university programs, 
diaspora remittances, and private capital) to developing countries. 
Today, they comprise 20 percent. This means that we have had to change, 
as well. With the formation of the GDA last year, we have now begun 
that process.
    The GDA should improve our effectiveness, through better and 
increased collaboration with private sector, government, and non-
governmental organization (NGO) partners. It signals a new era of 
cooperation where we work together to get projects accomplished on a 
larger scale than USAID could do with only its own resources.
    You will note that this budget requests a streamlining and 
simplification of the rather complex 150 account. This merges 
Development Assistance with Child Survival and Health into one unified 
account. Let me emphasize that this does not imply any decrease in 
interest or funding for our global health programs. Indeed, we will 
continue to report on our Child Survival and Health programs as part of 
our Global Health pillar.
    In conclusion, Mr. Chairman, I would like to assure the Congress 
that USAID's budget request for fiscal year 2003 rests on a solid 
foundation of professional analysis and a strong commitment to 
performance and management reform. We know it is impossible to satisfy 
everyone who looks to us or to address every problem that arises. We 
have spent many hours trying to determine the best use for our 
resources and have had to make many painful choices. I hope my remarks 
today have been helpful in explaining our priorities.
    Thank you.

    Senator Leahy. Well, let me ask you this, and then we will 
go to the other Senators for their questions. It is interesting 
how life has changed around here since September 11. It used to 
be a time, I know when I first came to the Senate the big thing 
was to go home and go to the Rotary Club and the Chamber of 
Commerce and all and say, I am not going to send any of your 
tax dollars overseas because, after all, what do those people 
do for us. Now there is far more of a realization that it is an 
interdependent world, and we have to be involved. We have to be 
involved in foreign aid doing something more than just selling 
our products abroad through export assistance.
    I have a letter where 30 Senators, Republicans and 
Democrats, called on the chairman of the Budget Committee to 
increase spending on foreign affairs programs. I will put that 
letter in the record.
    [The letter follows:]
                                               U.S. Senate,
                                 Washington, DC, February 14, 2002.
Hon. Kent Conrad,
Chairman, Senate Budget Committee,
Washington, DC.
    Dear Mr. Chairman: As you begin work on the Fiscal Year 2003 
Budget, we urge you to support significantly increased foreign affairs 
funding as a necessary and effective tool to promote U.S. national 
security interests around the globe. Given the new realities of the 
post-September 11 world, we strongly believe that combating poverty and 
promoting democratic government are both vital strategic objectives and 
moral imperatives for the United States.
    For decades, foreign affairs programs have advanced U.S. national 
security interests by strengthening democratic institutions and market 
economies. Nevertheless, at a time when those interests are most 
threatened, our foreign affairs budget is barely 0.1 percent of GDP and 
less than one percent of the overall budget--with development 
assistance less than half of that. These percentages place the United 
States last among G-7 countries.
    Today, a third of the world's people barely survive on $2 per day. 
Just as we must have adequate resources to preempt and respond to 
terrorist attacks, so too must we address the conditions that foster 
terrorism: widespread illiteracy, hunger and disease, and the lack of 
access to democratic institutions. An increase in the foreign affairs 
budget, with a focus on programs to combat poverty and strengthen 
democracy, will help save lives and provide economic opportunities 
through improvements in education, health, shelter and food security. 
It will also provide the United States with reliable partners committed 
to combating international terrorism, narcotics trafficking, and the 
spread of weapons of mass destruction.
    In the wake of the September 11 attacks, we have a unique 
opportunity to rededicate ourselves to the cause of promoting peace and 
stability abroad, building respect for America and our values, and 
protecting vital U.S. national security interests. We must not let our 
foreign affairs budget continue to fall short of what is needed. 
Moreover, we believe that there are sufficient resources within the 
$2.13 trillion budget submitted by the President to support 
significantly increased amounts for foreign affairs funding.
    We appreciate your attention to this request and we look forward to 
working with you.
            Very respectfully yours,

                    Dianne Feinstein; Mike DeWine; Patrick J. Leahy; 
                            Lincoln D. Chafee; Christopher J. Dodd; 
                            Daniel K. Inouye; Mary L. Landrieu; Arlen 
                            Specter; Jeff Bingaman; Bob Graham; Richard 
                            G. Lugar; Joseph I. Lieberman; Gordon 
                            Smith; John F. Kerry; Robert G. Torricelli; 
                            Paul Wellstone; Daniel K. Akaka; Barbara 
                            Boxer; Russell D. Feingold; James M. 
                            Jeffords; Herb Kohl; Richard J. Durbin; 
                            Maria Cantwell; Debbie Stabenow; Harry 
                            Reid; Jon S. Corzine; Patty Murray, Barbara 
                            A. Mikulski; Edward M. Kennedy; and Susan 
                            M. Collins.

    Senator Leahy. Britain and key United States allies have 
been pushing the industrialized nations to increase spending on 
foreign aid. In testimony before the Senate Budget Committee, 
Secretary Powell stated the idea of tripling foreign aid is not 
a bad idea. I agree. I cosponsored a resolution by Senators 
Feinstein and Gordon Smith, and others, to triple it. Given the 
Secretary's comments and the support in Congress why doesn't 
the administration do that? Does the administration have any 
plan to request additional foreign aid funding in a 
supplemental this year? Could USAID spend more? Could you 
effectively spend it?
    Secretary Powell seems to think that the State Department 
could. If the administration asked for more money, could you 
handle it?
    Mr. Natsios. Yes. Is that a clear answer, Senator?
    Senator Leahy. It is. Is the administration going to ask 
for more money?
    Mr. Natsios. Senator, I am very optimistic about that, but 
it is not my job to announce supplemental budgets, and so I 
just want to say I am optimistic, I am smiling now, I am in a 
good mood, especially after what has happened in the last 2 
weeks, but it is not my job to be announcing anything. I 
suggest we wait to see what OMB and the President proposed, and 
what the Congress disposes to do, and then I will spend the 
money that I get, happily.
    And let me just add one thing, Senator, the accounts that 
the money goes into has a profound effect on what we do or do 
not do. There is not a huge--and I want to keep saying this, 
but the problem is, we do not always get the money in the 
accounts that the mission directors and the countries tell us 
they need the money in. If you ask most leaders, prime 
ministers, presidents, finance ministers, trade ministers, 
forget the agriculture ministers, in Africa, and you ask them 
what they want more money in, more than anything else, they 
will say, agriculture. Almost everyone, to a person, will tell 
you that privately, they will say it publicly.
    If you ask the Afghans--I asked Chairman Karzai--he has 
become a friend of mine. I spent a number of hours with him in 
Kabul. I traveled back on his plane to the United States, when 
he appeared before you for the State of the Union, and he said, 
this is an agricultural economy. Eighty percent of the people 
live in rural areas. Sevent-five percent of the people are 
farmers.
    Senator Leahy. In fact, I had a chance to chat with him in 
your office.
    Mr. Natsios. That is right. You came to that, Senator. 
Thank you for doing that. But it is very important the accounts 
into which this money goes, because sometimes countries will 
say, we do not need more spending in this area, we need it in 
this area instead, and the way in which Washington works is not 
always what is reflected in the reality in the field. I just 
want to add that. I am sorry, Senator, for interrupting.
    Senator Bond. Thank you, Mr. Chairman. This is exactly 
where I wanted to come in with my comments. I know Ambassador 
Zoellick was in Africa recently in a broad range of discussions 
about strengthening our alliance. We know, and you have stated 
very clearly the problem of feeding the hungry people in 
Africa.
    I have visited Asian countries like Indonesia and found out 
how much they need our agriculture, specifically biotechnology, 
genetic engineering. I have been visited by officials from 
Nigeria, South Africa, Zimbabwe, all talking about the need for 
GMO technology. One of the most articulate and impressive, Dr. 
Florence Wombugu of Kenya said, in Europe or the United States, 
GM food sounds like a luxury, but for people in poor countries 
it is the difference between a square meal and starvation. She 
is the daughter of a subsistence farmer, went into agricultural 
research, and she said a hungry person is not a myth, it is a 
person I know.
    She was asked: ``why not the green revolution,'' and she 
said: ``Well, GM is better for Africa, the green revolution did 
not really work in Africa, because it was alien. It came from 
the West. We had to educate farmers in the use of fertilizers. 
But transgenic crops can get around this because the technology 
to control insects, for instance, is packaged in the seed.'' I 
think one of the most telling statements she made is that in 
Africa GM food can literally weed out poverty.
    In Europe, some people oppose crops with herbicide genes. 
Now, in Africa, most weeding is done by women, 50 percent of 
women's labor in Africa is tied up with weeding. Reducing that 
would have a major impact in developing countries. Food is 
getting cheaper because they use more and more technology, but 
in tropical Africa it is getting more expensive, because it is 
all manually produced. People with a small salary spend most of 
it on food. If we can increase food productivity in rural areas 
it will bring the price of food down, generate more money for 
investments to turn the wider economy around.
    And as far as why Africans do not want to get fertilizers 
and irrigation, she said: ``I think that is like saying 
Africans do not need aircraft, we should go by road--we do not 
have either one--or that we should be denied computers until 
everybody has bought a typewriter and mastered it. Africa wants 
to be part of the global community. They want to be able to use 
the new technologies.''
    Do you disagree with what I have just said?
    Mr. Natsios. Senator, I agree with every single word you 
just said, and in fact it sounds like you just read our 
agriculture strategy paper.
    Senator Bond. Well, I just read your testimony. I will be 
darned if I can find a single word in there about biotechnology 
and the importance of using GM to deal with the viruses in the 
sweet potatoes and the tubers.
    Mr. Natsios. I did not put all our strategy papers in here, 
because it is a limited document. I would be happy to send you 
a copy of our strategy paper. The essence of it, Senator, is 
that we can use science to end hunger in Africa.
    Senator Bond. I agree 100 percent. This subcommittee has 
provided you money for putting biotechnology to work in the 
developing world. How is it going? Are you getting it out 
there? For a while there it was not going out, and you and I 
had a discussion about the problems. Are you getting it out 
now?
    Mr. Natsios. We are getting it out, not as fast as you 
would like or I would like, but there are capacity problems in 
some countries to accept this.
    There are six elements to our strategy. One of the elements 
is GMO science being used in the field, another is to train a 
new generation of agricultural scientists in Africa and South 
Asia in order to administer this. It is not a function simply 
of getting the seed out or the tubers. We have to get 
scientists to understand how to use this effectively over a 
longer period of time.
    Senator Bond. That is the other element. One of the most 
important things they are doing at the Danforth Plant Science 
Center in St. Louis is reaching out to train the best and the 
brightest from all these countries so that the specific 
applications of biotechnology can be adapted to their 
countries. We want them to have the trained scientists so they 
can judge the safety of all GMO products for themselves, so 
they do not have to say, well, the USEPA or the USFDA or the 
USDA judged it to be safe. They can say, we here in this 
country, your countrymen, have the science. We know. We can 
assure you it is safe.
    To me, education, sharing technology, training people in 
these countries, not just to use the genetically modified 
products, but how to improve them, to adapt them, and to judge 
them is the most important thing we can do, and I appreciate 
very much--I was a little concerned when I did not hear 
anything and when I did not read anything, but if you could 
give me a list, a description of the new projects funded, and a 
sense of what the unmet needs are, we will do everything we can 
to help you.
    I hope to be able to visit some of those countries.
    Mr. Natsios. We can give you a list, Senator. I just opened 
a biotechnology research center in Cairo. We have a very large 
program there. The minister of agriculture is a visionary 
figure in this whole science area. He and I opened it together 
about a month and a half ago, and they are doing some very 
exciting research that is improving Egyptian agricultural 
production.
    Let me just tell you one great story on this whole issue of 
improved varieties in Uganda, a thing called the cassava 
mosaic. It is sort of like a parasite that attacks the cassava 
crop, which is, of course, a root crop, that in many areas of 
Africa is the primary source of starch. Uganda produced about 
$250 million a year of cassava. They went down in 18 months to 
$3 million a year, because of the cassava mosaic attacking the 
crop.
    We introduced through USAID, I believe it was a genetically 
modified, but I am not certain--it was either improved 
variety--I think it was genetically modified, and within 18 
months we had production back up, working with the minister of 
agriculture, to $300 million a year, which was bigger than any 
time in the past in terms of production.
    We introduced the same technology as my first act in May of 
last year, because these same mosaic was attacking crops in 
what is now the Democratic Republic of the Congo--it used to be 
Zaire--and in Burundi, and in Rwanda, and it is devastating 
whole areas of those countries, so we have now introduced that 
genetic variety of cassava that is resistant to the mosaic, in 
the Congo, and production is beginning to slowly recover from 
the damage done.
    If we did not have this kind of research and science, 
Senator, we would not be able to save these people, because 
they are very good farmers, but they do not have the benefit of 
these research centers that we do here.
    Senator Bond. Well, Mr. Administrator, we would like to 
invite you to come out to the Danforth Plant Science Center, 
because we are doing those things. We could tell you the 
stories about the cotton farmers in China, where all of a 
sudden cotton production has become profitable again, because 
of BT cotton. South Sulawesi in Indonesia has come back, and 
the cotton farmers are now making enough money to feed 
themselves, their families, and strengthen the community. We 
can do the same thing around the world.
    One of the stories--and I will not impose any more on my 
colleagues' time. One of the stories that is fascinating is the 
prospect that we can genetically modify a banana, for example, 
to carry the vaccines that are needed to prevent some of the 
most devastating illnesses that affect the smallest children in 
many developing countries.
    When I told a good friend of mine who is a high official in 
the government of Singapore, he said, oh, I believe in genetic 
engineering, but do not tell me a fantasy story like that, 
because it will not be believed. Well, it should be believed, 
and we will be able to do it. We look forward to working with 
you.
    Mr. Natsios. If I can just add one more story on that 
subject, Senator, which is one of the most exciting areas, we 
know that vitamin A has a profound effect on blindness----
    Senator Bond. The beta-carotene-enriched, and we gave you 
$5 million to put into that.
    Mr. Natsios. We have put the money into it, and we are very 
excited about the prospectives, because it combines child 
survival and child health with agricultural production.
    Senator Bond. We are going to be coming to you with, we 
could add vitamin A to soy oil for Nigeria.
    Mr. Natsios. And India.
    Senator Bond. I would yield to my colleagues on the other 
side.
    Senator Landrieu. I thank the Senator for those remarks, 
because there are so many promising technologies in that area, 
and we should be certainly open to research and development, 
because it can help skip many generations of farming practices 
with what we know.
    I am going to be very brief. I have just got three 
questions, and I would like to submit some more in writing, but 
in the President's State of the Union I was so pleased that he 
recognized the ministry of women in Afghanistan. Could you 
comment for the record, because I was not able to see from the 
documents provided any funding that will be going directly to 
the ministry for women in Afghanistan.
    Mr. Natsios. Dr. Zamar, who was the lady you are speaking 
about, she is the vice chairman of the interim Government. She 
is a medical doctor. She headed an Afghan women's NGO that, I 
might add, even when nobody knew about it, the USAID was 
supporting in the late nineties, and so we provided assistance 
to her NGO. In fact, I think we are one of the few donor 
countries that did that, but she remembers.
    She came and visited me. We had a very good discussion, and 
I am pleased to announce that we are providing a $60,000 grant 
through IOM to reconstruct the women's ministry, which is her 
ministry in Kabul. The ministry right now is sort of basically 
blown up a long time ago, in the mid-nineties. She has no 
building to house her staff, and we are going in now to 
reconstruct it, so that is the first thing, because she said, 
if I do not have offices, we cannot run programs.
    Senator Landrieu. What are the commitments, besides the 
rebuilding of the building, that have been made to her and to 
the women's ministry?
    Mr. Natsios. She has requested we provide grants to a 
number of women's, Afghan women's NGO's. They are indigenous 
NGO's. They are not hers, they are other women's NGO's, and I 
think three grants were made in the last 3 weeks to these 
NGO's. I can get you a list and tell you what--they are in 
capacity-building, in training. One of them is a grant to 
produce a newspaper that will have a focus on women's issues 
that will be available in the large cities.
    Senator Landrieu. Let me ask the question this way. Could 
you give us a general idea of the amount of money that is going 
to be going to aid to Afghanistan, and what percentage will be 
given through the women's ministry, approximately, just if you 
can round it off?
    Mr. Natsios. I can tell you how much we are going to spend, 
and how we are going to spend it. We do not break down our 
budgets based on how much money goes through the ministries per 
se, and the reason that that is the case is, many of the 
ministries do not have budgeting systems yet in order to 
actually spend money. There are no bank accounts. There are no 
banks in order to actually move the money around.
    Kabul is still recovering from 10 years, 20 years of war. 
They have not recovered, and so the ministries, what we are 
doing is, we are using international organizations, and NGO's 
that are already there that have an infrastructure and a track 
record that the ministries are comfortable working with. If 
they are not comfortable working with them, we are not going to 
give the grants.
    So we will work with the ministries to decide how the money 
is programmed, and our mission director, Jim Kunder, who I was 
just with 6 weeks ago, is spending a lot of time working with 
the ministers in the interim Government on this.
    Now, the second thing is, the money will not necessarily go 
through, let us say, the women's ministry, even though it will 
affect women profoundly, and I will give you one example. We 
decided one way we could contribute to the reintroduction of 
women in a very visible way into Afghan society was through the 
schools. Why is that? Two-thirds of the teachers in Afghanistan 
who are trained as teachers are women, and schools and 
education is an obsession with Afghan families. They want their 
kids in school. Even the kids want to be in school, which is 
something I would like to bring them over and teach our kids 
about.
    Senator Landrieu. They could spend some time with my 
children.
    Mr. Natsios. I know the problem.
    So we asked women, what is the best way to do this 
systematically, not in a few grants, but how could we bring 
thousands of women in a visible way back into Afghan society? 
It is through the schools, and I visited in my last trip 6 
weeks ago the schools of Kabul, and most of the teachers were 
women, and what we are doing is two things.
    We have made a $6.5 million grant to the University of 
Nebraska to print 10 million textbooks in Dhari and Pushtun, 
the two major languages, of 127 different texts. Half are in 
Dhari, half are in Pushtun. They are being printed literally as 
we speak right now, in printing presses on the Afghan border 
with Pakistan in Peshawara, and they will be distributed--
school starts March 22. They will be distributed, 4 million of 
them we hope will be distributed before school starts in a 
month.
    The second thing we are doing with respect to this grant is 
teacher training. Many of the women said, look, we have been 
not allowed in the classroom for 8 years, we need to be 
trained--and many of them were trained in the old Soviet system 
of education--we need, would like western training in how you 
teach in the West, not just rote teaching, and so there are 20 
teams of five professors going out to do teacher training in 
the local languages, and they will teach trained master 
teachers in the schools to then retrain the teachers in each of 
the local schools, and that is being organized.
    Senator Landrieu. I thank you for that testimony.
    Mr. Chairman, I was pursuing a line of questioning, 
remembering that the President was good enough to acknowledge 
the head of the Afghan women at the State of the Union speech, 
Dr. Zamar, and I am going to be very interested to see that 
commitment to recognize her is also followed up with 
commitments of resources to strengthen the women's ministry to 
give them financial resources so that ministry can be seen as a 
very powerful tool for reform, and that it will give them some 
flexibility as to how to invest those dollars for the 
strengthening of women, because our entrance into Afghanistan 
was for many reasons, but I think in the minds of the American 
public, the oppression of women there was one of the reasons 
that this country--not the only, but one of the reasons this 
country felt so strongly about its efforts.
    Let me go on to my next two questions, very briefly.
    Mr. Natsios. If I could make one comment, the best way to 
judge how we do this is to call Dr. Zamar in 6 months and see 
what she says we are doing for her.
    Senator Landrieu. I will follow up on that. The next 
question is about the institutionalization of children 
worldwide, and I just would urge you, I am going to send some 
information to USAID, because I think you all can be very, very 
helpful in this regard.
    The United States just passed the Hague Treaty, one of the 
first international treaties on adoption that recognizes 
children have a right to be with the families to which they are 
born, but if war, famine, disease, or alcoholism or other 
things separate them from that family, the our goal now, the 
worldwide community, is to try to place those children with 
another family, because children cannot raise themselves. They 
do not do a very good job on the streets or in institutions.
    And so I would urge USAID, and I am going to send some 
information about progress that is being made in terms of using 
our resources to facilitate the strengthening of families, 
connecting children with families, kinship adoption being our 
choice, and if not, then adoption with some other--some 
societies and cultures have a very effective and informal way, 
and others have a long way to go, and I think with USAID, one 
of the best things we could do is to connect each needy child 
with a family, and then, of course, support that family unit 
for economic development, so I am going to send some 
information on that.
    Mr. Natsios. You have just described, Senator, our policy, 
which is longstanding. We try to avoid institutionalization of 
children in the developing world. It does not work very well. 
In many cases it is a disaster. In most traditional societies 
adoption is the preferred system. In fact, it was in the United 
States, too, I might add. In my home town of Hollister, that is 
how we handled problems with families 100 years ago is, they 
were adopted informally, without going to court, frequently, 
and many kids I went to high school with went through that 
system, and they were very well brought up. I think we should 
go back to a system like that.
    That is a domestic issue in Africa. There is a long tribal 
tradition of bringing children in whose parents have died. We 
do have a big problem. Our biggest challenge right now is AIDS 
orphans. We are facing massive destruction of families, where a 
grandmother is handling or bringing up 20 or 30 grandchildren.
    Senator Landrieu. I would like to help with that.
    I see my time is up. Thank you.
    Senator Leahy. Senator Durbin.
    Senator Durbin. Thank you very much, Mr. Chairman.
    Mr. Natsios, thanks for joining us. I have listened to your 
statements about the AIDS epidemic facing our world, and I 
think we share the same view. The statistics I have heard, and 
I hope that they are accurate and I would like to put them in 
the record, is that we currently have about 37 million HIV-
positive people in the world, and about, roughly 15 million 
USAIDS orphans in Africa. By the year 2005, there will be 36 
million HIV-positive cases in India alone. You have mentioned 
Russia as another country.
    Mr. Natsios. Do you mean 36 million?
    Senator Durbin. 36 million. That is the number I have been 
given. I will certainly look into it to make certain that is 
accurate before I leave it in the record, but regardless of the 
exact numbers, I think we share the view that this is a global 
emergency. Do you agree with that?
    Mr. Natsios. Absolutely.
    Senator Durbin. You have said here today you are willing to 
spend the money we send you, and I am more than happy to help 
in that regard, but the tougher question I have to ask you and 
Secretary of State Powell and the President is whether you are 
willing to stick your neck out and designate as an emergency 
your request for funds to fight AIDS. That is what this is all 
about, particularly when it comes to the global fund.
    Your funding is good in terms of bilateral aid and such. 
When it comes to the contribution to the global fund, an effort 
inspired by Kofi Anan and others to bring civilized countries 
around the world to address this epidemic, your request is 
woefully inadequate, not even close to the billion dollars that 
many of us think would be a bare minimum what the United States 
should put on the table. The only way we can reach the $1 
billion figure is if you are willing to stick your neck out and 
say, AIDS is not only a global emergency, it is a budgetary 
emergency. Will you do that?
    Mr. Natsios. Well, let me first say that I think if we put 
all of our humanitarian eggs in one basket, we may kill a lot 
of people. The global fund is one of several mechanisms through 
which we need to work. It is untested. I believe it is going to 
succeed. In fact, USAID is providing the primary staffing right 
now for the global fund administrative staff. They are from 
USAID. We seconded them there. Sixty percent of their 
administrative budget to get this thing running is from USAID's 
budget. We gave them the money, so we take it very seriously.
    We support it. It is yet untested. Some international trust 
funds have had very great success, others have been a disaster, 
and I could go through and give you specific examples, but this 
is the point, and let me just say----
    Senator Durbin. If your answers are too long I will only 
get two questions. If you could come to the point.
    Mr. Natsios. The point is, we cannot put all of our 
financial resources in the trust fund. I think it would be a 
disaster to do that.
    Senator Durbin. Let me just ask you this. Have we learned 
anything in Africa over the last 12 years about effective ways 
to fight AIDS?
    Mr. Natsios. Yes.
    Senator Durbin. Sure we have, and Uganda is a good example, 
and you are suggesting now that the idea of an international 
trust fund to fight AIDS is going to embark in uncharted and 
uncertain territory.
    Mr. Natsios. It is an administrative matter, not in terms 
of the program in the field. We know it works. The question is, 
how fast they can move the money.
    Senator Durbin. So it is a question of getting the 
bureaucratic side of it working?
    Mr. Natsios. When you are dealing with 40 countries putting 
money into a fund, you know what we have to do, we have to set 
up separate accounts for every country in this fund, because 
they all have different legal restrictions on how that money 
can be spent. It is much more complicated and managerial than 
we thought it would be.
    But let me just say, we are asking for a lot more money for 
our bilateral program. Our bilateral program is already in 
place, it is already working, and if you ask African leaders 
who is providing at the forefront, who are the storm troopers 
against HIV/AIDS outside of their country, they are not going 
to tell you about any trust funds. They are going to say the 
USAID program.
    Senator Durbin. I have been there, I have spoken to them, 
but you and I would readily concede that if this is a global 
emergency that threatens in terms of lawless nations breeding 
violence and terrorism, in terms of starvation and deprivation, 
that our bilateral aid commitment is hardly adequate to the 
need, and to suggest that we are going to hold back on this 
global fund until some group----
    Mr. Natsios. We are not holding back, Senator. We are not 
holding back. I am simply saying that what I thought you were--
or maybe I misunderstood what you said--is, you seem to say you 
want to put all of our funding into the trust fund.
    Senator Durbin. No. I am asking whether you are willing to 
increase your, what is it, $100-million commitment to the 
global fund.
    Mr. Natsios. The fund, over 2 years the commitment is $500 
million.
    Senator Durbin. I would just suggest----
    Mr. Natsios. I am suggesting, if there is going to be an 
increase beyond that, it should be in the bilateral program. I 
would disagree with you if you are suggesting----
    Senator Durbin. In other words, you are opposing the 
request by Kofi Anan to create this global fund?
    Mr. Natsios. Absolutely not. As I just mentioned to you, 
Senator, we are leading the charge to help them succeed, but 
there are other mechanisms to fight the disease. We have been 
fighting this disease for 15 years, long before any global fund 
was created. We have the programs in place right now where, 
because you gave us more money this fiscal year, we are able to 
scale up to major national programs in 22 countries now, and I 
appreciate your giving us the support and the resources to do 
that.
    Senator Durbin. Let me just suggest to you that I think we 
have done a great deal, but you have to concede that the scope 
of the challenge is growing geometrically, while our commitment 
is growing arithmetically.
    Mr. Natsios. Our commitment is growing geometrically. There 
has been a 500-percent increase in funding for HIV/AIDS by the 
U.S. Government since 1998. 500 percent is not an arithmetic 
increase.
    Senator Leahy. But with the most significant increases 
being pushed through by the Congress.
    Mr. Natsios. But, Senator, we proposed a large increase 
ourselves. I think it is a little unfair to argue that all of 
this increase is because of the Congress. We proposed the 
increase before the Congress mentioned the issue last year.
    Senator Leahy. Not really. I can show you an awful lot----
    Mr. Natsios. I have to disagree with you.
    Senator Leahy. I can show you an awful lot of speeches by 
Members of Congress proposing it, and we had to fight the 
administration's lobbyists to get to the level of money that 
was appropriated last year.
    Mr. Natsios. Senator, we asked for a large increase. We are 
spending almost $1.2 billion on this. That is not a small 
commitment. That is a huge commitment. I might add, a third of 
all----
    Senator Leahy. It is almost 1/1,000ths of our budget.
    Mr. Natsios. The money we need to spend on this, the 
principal donor is the U.S. Government, a third of all the 
money spent.
    Senator Leahy. What is the wealthiest Nation on earth?
    Mr. Natsios. Senator, a third of all the money spent 
worldwide, including health budgets in the third world, a third 
of it comes from the U.S. Government.
    Senator Durbin. If I could reclaim my time.
    Mr. Natsios. This is a little unfair in terms of the facts.
    Senator Durbin. Let me suggest to you our heart is in the 
right place, but our pocket book is not.
    Mr. Natsios. That is not true.
    Senator Durbin. Excuse me, sir, I would like to have an 
opportunity to speak. I am glad you are here, but if we are 
going to make a commitment, please concede that when you come 
before us with great pride in the American commitment to 
foreign assistance, when it is less than one-half of 1 percent 
of our budget, when we are dealing with a global AIDS epidemic 
which is probably as great a threat to the security of this 
world as terrorism, that clearly there is more we can do, and 
when the Secretary-General of the United Nations tries to rally 
the United States to please lead in creating a global fund, and 
we have managerial administrative problems in dealing with 
this, I sit here and wonder how many more people will die while 
the bean-counters push them across the table.
    Mr. Natsios. Senator, to be fair to you, we have staff in 
the field that work round the clock on this now. Now, the 
reason I am a little angry is, it looks like you are 
criticizing our program.
    Senator Durbin. I am.
    Mr. Natsios. Because the program is being successful.
    Senator Durbin. I am criticizing it not because of what we 
are doing, but the scope of our commitment.
    Mr. Natsios. The scope of the commitment is massive. I 
might add, the problem is----
    Senator Durbin. In comparison to the problem, is our scope 
massive?
    Mr. Natsios. Kofi Anan has said the amount of money needed 
is between $7 and $10 billion. We do not know precisely how 
much. We are $1.2 billion of that $7 to $10 billion. This is of 
all donor Governments in the world, and all third world 
Governments in the world.
    Senator Durbin. We are going to leave this subject, because 
you and I--excuse me. We are not going to come to an agreement 
on this. I do not question what we are doing is good and 
important. I have seen it, I have been there, you have, too, 
but I hope that in your heart of hearts, tonight before you 
turn out the light and go to sleep, you will at least concede 
that this problem is growing much more quickly and rapidly than 
our response is.
    Mr. Natsios. USAID in the last administration--I would like 
to take credit for it, but it was Brian Atwood who did this. 
When the scale-up began, we went through all of the Federal 
procurement statutes to see if there was a provision that 
allowed us to waive all those statutes in order to procure 
without going through the long process we normally do. He 
established the process for doing that, and we have permanently 
on record now a waiving, because it is an international 
emergency.
    As far as I am concerned, the AIDS pandemic is like a 
famine. Every month that goes by, more people get infected and 
will die from it, and so we have moved very rapidly in order to 
address this. One of the issues is, in many of these countries, 
is the health care system in many countries is very weak.
    Senator Durbin. I am going to interrupt you, because I 
would like to ask another question, and we can spend time and 
have a long conversation about this, but let me ask you 
directly about the food aid. There are two parts of the food 
aid request that you bring to us that trouble me. The first is 
the elimination of surplus commodities in food aid. 
Understanding, as you do, and we do, that the use of surplus 
commodities is primarily a budget tool, a way to put money into 
food assistance so that we can account for it here on Capitol 
Hill without deepening what we are now facing in deficit.
    You have made, the administration has made a policy 
decision to walk away from surplus commodities. The question I 
have to ask you is, what is the net impact on food assistance? 
Will we have more or less because of that decision?
    A second question, Senator Leahy and I share a conviction 
and a feeling that our former colleagues, Senator Leahy and 
people who served here in the Senate, Senators McGovern and 
Dole, had an extraordinarily good idea in this global food for 
eduction initiative. There was a commitment of some $300 
million by the Clinton administration, there were moneys to be 
spent this year, and you have eliminated funding for it in your 
budget.
    This money, which would try to provide in third world 
countries one nutritious meal a day at schools, I think is 
absolutely essential for many of the reasons you testified to. 
We know providing a meal at school will attract more students, 
and particularly more young girls, and I hope you will concede 
that if you want to measure the potential of a country to deal 
with social problems, look at the role of the women.
    If women are treated like chattel slaves and property, the 
worst is yet to come. By educating women we know that we give 
them a chance to have not only good self-esteem and more 
skills, but smaller families and smaller problems in the 
future. As you walk away from this commitment to this global 
feeding program for schools, I am afraid we are going to 
aggravate the problems that we all agree are part of what we 
face in this world, and I would like you to respond.
    Mr. Natsios. Well, the first is that the surplus food, the 
416(b) account, which I think, Senator, is what you are 
speaking to, which is an Agriculture Department account, not a 
USAID account, was established many years ago, but was unused 
for much of the 1990's. In other words, that account was zero 
for, I think, the mid-1990's.
    I think it was in 1998 or 1999 that because of the collapse 
of the Asia economy, and our exports were diminished, we had 
large surpluses. They decided to announce a huge--I think it 
was 3 or 4 million tons of surplus. I do not remember the exact 
amount, but it was a very large amount. Those stocks have been 
drawn down now, and it did have an effect. I have to say we may 
have sent too much food into some countries, because there are 
limits as to what you can do before you adversely affect the 
agricultural economy, and we had many complaints that too much 
had gone into some African countries, and farmers were telling 
me, you guys are hurting our markets here.
    What has been done in this budget is actually a good thing 
from my perspective, and I have a little parochial interest in 
this, but I am very big on food aid, because I managed the food 
aid budget in the first Bush administration 10 years ago, so I 
am a very strong advocate of food aid. This is the largest 
increase in title II I think we have ever had. The account this 
year is, I think, $816 million, $820 million for title II. We 
propose in the 2003 budget for title II--it is not before you, 
it is before a different committee--$1.15 billion. It is a 
$335-million increase in title II, which is I think about a 60-
percent increase in the budget.
    Senator Durbin. So the net food aid commitment of this 
budget is greater?
    Mr. Natsios. Of title II. The title 416, which is the 
surplus food, has gone down. That is going down.
    Senator Durbin. But the net food aid commitment in this 
administration's budget will be larger or smaller than the 
current?
    Mr. Natsios. It will be smaller, because the surpluses have 
been brought down, but the agreement we made----
    Senator Durbin. So the food requirements of the world have 
diminished since this fiscal year?
    Mr. Natsios. The food aid requirements were not what drove 
the 416(b) account. Surpluses in the United States drove it. 
The amount we requested that OMB gave what we asked for, I said 
we cannot survive in 2003 by eliminating 416(b) and not putting 
anything in place, so the agreement was, as the surpluses draw 
down, we need some of that--we need to keep some of it in title 
II for the Afghanistans of the world, when they take place. I 
mean, there is a drought, 4 years of drought.
    Senator Durbin. You do not quarrel with the conclusion?
    Mr. Natsios. There is no quarrel with the conclusion.
    Senator Durbin. The net food aid in your budget request 
will be less than what we are currently sending out into the 
world today?
    Mr. Natsios. That is correct, but I might add, we did not 
need all of that food in my view, and I think it was 
destructive to have so much of it in the developing world, and 
I think there is widespread agreement on that, I might add, in 
the community.
    Senator Durbin. What about the food for education?
    Mr. Natsios. The food for education is not a USAID fund. We 
run food programs in our school programs in many countries 
right now, and so we can tell you from 40 years of experience 
that it is a good idea to combine primary education in poor 
areas with a school lunch program, because it increased 
particularly girl-child participation rates.
    If the parents know their kids will eat, they tend to send 
particularly the girls, and keep them in school. Many of them 
will drop out after 1 or 2 years, so it makes great sense, and 
we have case studies to show that, and our staff has been 
running those programs long before the program was created.
    Let me add, however, in some areas there are no roads to 
move surplus food to. I mean, we run school programs in areas 
there is no way to get surplus food to, so one of the things we 
sometimes do is, we multiply the number of kids in school and 
then say, well, that is how many tons of food we need. Some 
areas, there are no roads to move surplus food to. Forty 
percent of the cost of our food programs are transportation.
    Senator Durbin. But all PVA food aid under this budget is 
going to go through your program?
    Mr. Natsios. No. I'm not an expert in the Agriculture 
Department budget, which they run and not me, but I think food 
for progress has $100 million in it for next year. That is a 
standing account.
    Senator Durbin. I have gone way too far on my time, I 
apologize to the chairman, but I sincerely hope that when we 
sit down and deliberate this budget, Mr. Chairman, that the 
premise that we need less food aid in the world is at least 
explored, if not challenged, and I sincerely hope that this 
school feeding program, which I believe you share the same 
feeling I do on----
    Senator Leahy. That is Senator Dole's and Senator 
McGovern's initiative.
    Senator Durbin. It should not be zeroed out. I hope we can 
find a way to cure that.
    Thank you, Mr. Chairman.
    Senator Leahy. I appreciate it. I think both Senator Dole 
and Senator McGovern, two men greatly respected by their 
colleagues up here, demonstrate this is not a political or a 
partisan issue.
    Mr. Natsios. It is not, Senator.
    Senator Leahy. Liberal, conservative, Democratic, 
Republican, they are both Senators who have great respect in 
this area. We could argue about who gets credit for what, but I 
am still more interested in what the bottom line is.
    I would point out that last year the administration 
originally did not request funding for AID's global fund. I 
recall going down to meet with the President. Senator Frist 
came with me. We met with the President, Kofi Anan, Secretary 
Powell, Secretary Thompson, and President Obasanjo of Nigeria. 
Only then, did the administration submit a budget amendment, 
and it was in response to a great deal of congressional and 
public pressure. While I applauded the President in making that 
request, we then had to fight with the administration to make 
sure there was actually new money, and did not take money out 
of the same programs that you and I and Senator Durbin and 
Senator Landrieu and Senator McConnell and others support.
    So let me ask you this. The budget request leaves the 
amount of assistance for Afghanistan to be determined. Does 
that mean you are going to find the necessary funds within your 
2003 budget request?
    Mr. Natsios. We--and I am quoting my boss now, the 
Secretary of State. We expect to spend the next fiscal year--
not this fiscal year, the next fiscal year--$300 million in 
Afghanistan, and we have identified $100 million within 
existing accounts. We have not listed it per se. Some of it is 
title II, some of it is FDA, some of it is OTI, some of it is 
child survival money, up to $100 million.
    The others will come, and it is not my job to announce it, 
but I am happy with the way that is moving.
    Senator Leahy. Well, let me ask you this----
    Mr. Natsios. Can I just add this, Senator, just so it is 
clear, and I do not want to confuse people, the $296 million we 
pledged in Tokyo, that Secretary Powell pledged, is for this 
fiscal year only. We only made a pledge for this fiscal year, 
because we did not know what was going to happen next year.
    Senator Leahy. And where does that come from?
    Mr. Natsios. It comes from partially food, partially money 
that was not spent by the PRM program. You remember, the $40 
million?
    Senator Leahy. He has identified the $296 million?
    Mr. Natsios. Yes. It was identified before we announced it.
    Senator Leahy. How many USAID staff are in Afghanistan now, 
approximately?
    Mr. Natsios. Approximately 10, but I just want to say we 
have to live on the embassy compound. There are security 
problems.
    Senator Leahy. I understand that.
    Mr. Natsios. We have to be very careful with that. We have 
had incidents, as you know. We do not want to have any more.
    Senator Leahy. I am concerned about the safety of our 
people working in Afghanistan. What size mission do you assume 
there will eventually be?
    Mr. Natsios. We are expecting, in terms of Foreign Service 
Officers, perhaps eight Foreign Service Officers. There are a 
number, believe it or not, of Afghans who served as Foreign 
Service nationals on the USAID staff 25 years ago. They must 
have been very young when they left. They have come back, and 
reapplied. There are a number of Afghan doctors, an agronomist, 
who want to work for us, and we are taking applications now for 
that, and we will send in some personal service contractors.
    Senator Leahy. Some of us have aged over the last 25 years. 
We have $296 million this year, $300 million next year. How 
long do you expect we are going to be putting aid into 
Afghanistan?
    Mr. Natsios. The United States or the world community?
    Senator Leahy. The United States.
    Mr. Natsios. Well, I do not presume to predict what 
Congress and the administration will do over long periods of 
time, but I can tell you it will take at least 5 years to make 
a serious dent in the reconstruction of the country, and over 
the long term 10 years to bring Afghanistan back to a robust 
economy and a functioning state.
    Senator Leahy. I tend to agree with you. I look at some of 
the immediate needs--again, I was talking with Mr. Karzai in 
your office. There are some very immediate needs, such as 
paying government workers to open up the buildings. There are 
also critical security needs, including those involving the 
international peacekeeping force also known as ISAF.
    There is a story in today's Washington Post about the need 
to expand this peacekeeping force. I believe that we are going 
to have to expand ISAF considerably, so that USAID and the 
State Department can carry out the kinds of humanitarian and 
reconstruction activities that are essential to rebuilding 
Afghanistan.
    You talk about the people of Afghanistan wanting their 
children to go to school. But you have got to have security in 
order to have successful USAID basic education programs that 
allow teachers to teach and all children--boys and girls--to go 
to school. Given that security is so important to successfully 
implement many of the USAID programs that you have talked about 
today, I would assume that you anticipate that there is going 
to be a significant peacekeeping force there for sometime to 
come.
    Mr. Natsios. This is somewhat out of my charge. However, 
let me make a stab at what you have asked, Senator, because I 
think it is a very good question.
    There is clearly security issues in Afghanistan. They are 
very severe in some areas, and not so severe in other areas. It 
depends upon the area you are in. For example, right now, the 
northeast region is relatively stable. The Kandahar area in the 
south is very unstable. That, of course, was the center of 
Taliban control where the subclan of the Pushtuns who dominated 
the Taliban come from. That is a very insecure area.
    There are a couple of NGO's that have gone back into 
Kandahar, but there is some risk in it right now, so it depends 
upon the area you are in, and what we are trying to do is take 
advantage of the most stable areas to ratchet up our efforts to 
a high level.
    I have said repeatedly on Voice of America and BBC and 
Pakistani radio that just as a warning, that if you want 
assistance in reconstructing your region, you, the local people 
and the military, the militias and that sort of thing, have got 
to provide the environment for us. Now, some people will listen 
to us, other people will not, which means some kind of force is 
necessary.
    The discussion so far has been that the United States will 
help in training a military. As I understand it, some European 
countries have agreed to do the training for the police force.
    Senator Leahy. I think we all worry about repeating the 
mistake that was made when the United States and most of the 
international community walked away after the Soviets withdrew 
from Afghanistan. We all saw what happened.
    Mr. Natsios. A terrible mistake.
    Senator Leahy. We must remain engaged in Afghanistan, and I 
expect that USAID will be there for years to come. I just want 
to make sure that they are able to safely and effectively 
operate throughout Afghanistan.
    Now, turning to the bordering country of Pakistan, we 
provided $600 million to a government that has not always 
followed the clear accounting methods of, say, a corporation 
like Enron.
    Again, I am just a lawyer from a small town in Vermont, so 
I may not understand all of these sophisticated budget 
procedures used by USAID and the State Department. How do we 
keep track of the $600 million that we provided to a 
notoriously corrupt government?
    Mr. Natsios. Well, the $600 million, Senator, that was 
approved for Pakistan is in budget support. We are not managing 
it as a USAID mission. In other words, it is not our job to 
manage project ties or establish a program for it.
    What we did do in order to ensure that at least there are 
the standards of accountability that the Congress would like in 
terms of budget support is to arrange to have their debt 
payments made with this money so that the money actually never 
went to Pakistan per se, it went to the institutions to which 
it owed this money, and then money was freed up within the 
budgets and different accounts to be spent. We are monitoring--
it is part of the agreement we have reached to monitor the 
spending of that money in the different accounts with the 
Government ministries, and we will do that.
    Senator Leahy. But you share my concern that it has to be 
watched very carefully?
    Mr. Natsios. I certainly do, Senator, and that is no 
secret, that there have been issues in Pakistan and other 
countries before, and I am very big on accountability, because 
the one thing--I support foreign aid, or I would not be here 
doing this job enthusiastically, but the one thing that always 
undercuts us is accountability issues, and so we have an 
obsession with focusing on that issue to the extent we can.
    Senator Leahy. And understand, Mr. Natsios, I do not expect 
every single program that USAID implements to be a 100-percent 
success. If every single one is an absolute success, then that 
tells me that we are not taking even measured risks to be 
innovative and, ultimately, more effective with our scares 
foreign aid dollars. Obviously in some of these programs, you 
try some things, and find they are not going to work. You learn 
from that, and you do not make the same mistake twice. I think 
it is a very difficult job to be innovative but at the same 
time manage the risks to U.S. taypayer's money.
    I am concerned, again, as I stated before, that sometimes 
the United States tends not to do as much as we are capable of 
doing. Aside from foreign assistance, there are other areas 
where, even though we are the most powerful Nation on earth, we 
are not doing enough to lead. For example, on the issue of land 
mines, we have told countries they had better do something to 
ban land mines. All these nations signed the land mine treaty. 
All of our NATO allies, every single NATO country has except 
one, the most powerful one, us.
    We take justifiable pride in the fact that we spend a great 
deal of money in removing land mines throughout the world, but 
I can tell you right now, the Congress pushed that program 
through.
    Mr. Natsios. I recall the legislation you pushed through 10 
years ago for a ban on land mines, which has been very 
effective.
    Senator Leahy. We have had to constantly push 
administrations, both Republican and Democrat in order to make 
progress on the landmine issue.
    Well, I will submit my other questions for the record and 
allow others to do that.
    I appreciate you being here.
    Mr. Natsios. Thank you, Senator.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Leahy. Thank you very much. There will be some 
additional questions which will be submitted for your response 
in the record.
    [The following questions were not asked at the hearing, but 
were submitted to the Agency for response subsequent to the 
hearing:]
            Questions Submitted by Senator Patrick J. Leahy
   usaid compliance with section 636(i) of the foreign assistance act
    Question. Mr. Natsios, I am aware of the longstanding interest that 
Senator Levin has in USAID's vehicle acquisition procedures, and am 
asking these questions at his request.
    I am informed that section 636(i) of the Foreign Assistance Act of 
1961 requires USAID to ensure that ``none of the funds made available 
to carry out this Act shall be used to finance the purchase, sale, 
long-term lease, exchange, or guaranty of a sale of motor vehicles 
unless such motor vehicles are manufactured in the United States.'' The 
Act also gives the President the authority to waive the provisions of 
this section.
    Is USAID in compliance with this statute?
    Answer. Yes, USAID is in compliance with section 636(i) of the 
Foreign Assistance Act.
    Question. What mechanisms are in place to ensure that purchases 
made by USAID, its contractors, or its grantees comply with this 
statute?
    Answer. The general USAID policy on motor vehicles is set forth in 
our Automated Directives System section 312.5.3(b). This section states 
that motor vehicles are restricted commodities, and that only U.S. 
manufactured vehicles are eligible for USAID financing unless an 
exception is authorized. Those exceptions are also set forth in that 
section. One of these is the need for a type of vehicle that is not 
manufactured in the United States, such as some types of right-hand 
drive vehicles. Another is the lack of parts and repair support in that 
particular country. Waivers can also be allowed for emergency 
requirements when non-U.S. funds are not available, and the requirement 
can only be met in time by purchasing foreign produced vehicles. 
USAID's contracts and assistance awards include this requirement. Every 
motor vehicle purchased with program funds, whether U.S. manufactured 
or foreign manufactured, must be approved by USAID. This gives us an 
extra opportunity to make sure that, if a foreign vehicle is being 
purchased, there is an appropriate waiver in place. Finally, most 
exceptions to the requirement to purchase U.S. vehicles are approved at 
the USAID overseas missions, where it is easier to assure that the 
criteria set forth for exceptions to the policy are met in that 
particular country.
    Question. During fiscal years 1997-2001 did the President ever use 
his waiver authority to allow USAID to make vehicle purchases which 
were not in compliance with section 636(i). If so, what reasons did the 
President give to justify the use of his authority?
    Answer. The Act permits waivers. Therefore, USAID considers 
judicious use of waivers to be in compliance with section 636(i). The 
President has delegated his authority to approve these waivers to the 
Secretary of State. In turn, this authority has been re-delegated to 
the Administrator, and then to the Assistant Administrators and Mission 
Directors. The reasons given to justify use of this authority are the 
same ones that are set forth in the Automated Directives System as 
acceptable reasons for waivers, i.e. types of vehicles not produced in 
the United States, lack of parts and service for U.S. vehicles, and 
emergency requirements.
    Question. Has the Administration put forth a set of criteria under 
which the purchase of a foreign-made vehicle is justified?
    Answer. USAID's policy includes a long established set of criteria 
for justifying the purchase of foreign-made vehicles. As mentioned 
previously, the criteria are set forth in the Automated Directives 
System. The Administration has not issued any new criteria.
    Question. Have these standards been imposed consistently over the 
past decade?
    Answer. Yes, they have. All waiver requests go through a clearance 
process to be certain that the justification is sufficient and meets 
the criteria set forth in the ADS section. All waivers require the 
clearance of a legal advisor, among others.
                         successes and failures
    Question. Like any CEO, I am sure you have had your share of ups 
and downs as USAID's Administrator--even after being in that job for 
only a little more than a year. What do you consider your biggest 
successes so far--it seems to me that one example is USAID's efforts to 
prevent massive starvation in Afghanistan, but what are some others? 
What are your biggest failures?
    Answer. I believe that USAID has served American interests superbly 
in our fast and targeted response to Afghanistan and the frontline 
states. Because of USAID actions, we were able to avoid a famine in 
Afghanistan. We are now having printed and expect to deliver over nine 
million textbooks to get Afghan schools open next month. This is 
helping to bring peace to the Afghan people. We have initiated programs 
in Pakistan to assist the Government's plan to re-establish public 
schools and in Central Asia to work with the NGOs and local 
communities. We are also targeting unemployment and underdevelopment 
issues in Mindanao in the Philippines.
    HIV/AIDS is another area where USAID is having success. USAID has 
become the world leader in addressing the issues of HIV/AIDS. The 
strategy we have developed and begun to implement can make a difference 
in reducing the spread of this disease.
    In all of these programs, we have been given the resources to do 
the job and make a difference. In the areas of agriculture and trade, 
USAID has led the way in developing interagency strategies to address 
these critical issues in the developing world. Yet, I fear that we have 
not yet been successful in securing the resources needed to implement 
successful strategies in these areas.
                         successes and failures
    Question. Let me mention a couple of examples of where you have 
real work to do. One is in the democracy, rule of law, and governance 
area. I think USAID has a role to play here, as does the State 
Department. But so far USAID's track record is far from adequate. I 
think our staffs should work together to figure what USAID should be 
doing to promote democracy and the rule of law, how, and where. As you 
know, Senator McConnell and I plan a hearing on these issues for next 
Wednesday.
    Answer. I agree that there is still room for improvement in our 
democracy and governance programs, including those designed to 
strengthen the rule of law. I welcome the offer to have your staff work 
even more closely with USAID on our programming of democracy and 
governance assistance. I believe, however, that USAID has made 
considerable progress, during the relatively short time it has been 
providing democracy and governance assistance, in ensuring that our 
programs are effective assistance instruments for promoting democracy, 
the rule of law and good governance. Democracy promotion is difficult, 
and even the best program may fail because the enemies of democracy may 
be too strong. Given the difficulties, I am proud of the historical 
role that USAID has played in taking the lead on the promotion of 
democracy around the world. For example, over the past ten years the 
Agency has directly contributed to irreversible democratic progress in 
countries as diverse as Bolivia, Bulgaria, and South Africa. At the end 
of last year, I created the new Bureau for Democracy, Conflict and 
Humanitarian Assistance and centralized most Washington-based USAID 
democracy staff within it. This will help us see that these programs 
get the support they need to succeed.
    We have been learning lessons as we have been doing our democracy 
and governance support work. For example, we now do a much better job 
of assessing the true political dynamics that influence a country's 
commitment to democratic reform, or the lack thereof. The Democracy, 
Conflict and Humanitarian Assistance Bureau (DCHA) has developed a 
comprehensive framework to both assess the true state of reform in a 
country and to design a democracy strategy that will most effectively 
overcome barriers to reform. When this process works, it is the 
antithesis of a cookie-cutter approach. Over the last five years, USAID 
has applied this framework in 26 countries--over a third of all those 
where the Agency has democracy programs. The next hurdle we are trying 
to cross is to make a more direct link between the findings of these 
democracy assessments and the actual programs. We believe we will be 
able to make considerable headway in this area under the new DCHA 
Bureau.
    In addition, the DCHA Bureau has begun a comprehensive study that 
will evaluate all of our democracy promotion efforts to date. At the 
end of this exercise, USAID will be able to definitively answer what 
democracy programs work, what types don't, and what factors and context 
explain our success or failure. No one else--donor or think tank--has 
ever attempted such a large effort.
                      usaid contracting practices
    Question. Another area is your contracting practices. USAID has 
become enamored with ``indefinite quantity contracts'' which transfer 
control over the management of projects to large contractors, often 
based in Washington, whose record of performance range from excellent 
to terrible. Can you comment on this?
    Answer. It is true that USAID uses contractors and grantees to 
implement far more of its programs than it used to. It is also true 
that USAID uses indefinite quantity contracts to supply many 
contractors. But it is important to keep this in perspective. All 
federal agencies are using indefinite quantity contracts more. They are 
far more efficient when you are trying to respond to changing 
circumstances around the world than individual contracts, each of which 
requires its own full and open competition. In addition, the fact is 
that USAID is not using contracts nearly as often as it uses grants and 
cooperative agreements now. About two-thirds of the total procurement 
pie is for ``assistance''--grants and cooperative agreements, usually 
with nonprofit organizations--and only one-third is for ``acquisition'' 
or contracts.
                         development assistance
    Question. The budget request appears to contain a modest increase 
for the Development Assistance account. How much of this increase is 
simply due to the transfers of program responsibilities from the 
Economic Support Fund (ESF), and not an actual increase above the 
amount spent on these types of activities in fiscal year 2002?
    Answer. First, the Administration's fiscal year 2003 request for 
Development Assistance (DA) represents a 10 percent increase over the 
fiscal year 2002 level for DA and Child Survival provided by Congress, 
which is more than a modest increase, especially when considered in the 
context of overall Federal budget constraints. Second, while there were 
some reallocations of ESF from fiscal year 2002 to 2003, overall the 
Administration's request for the ESF account increases by some $66 
million from fiscal year 2002 to 2003 and, if the continuing planned 
reductions in Israel and Egypt are taken into account, the amount 
available for other countries increases by $226 million. Third, while 
the ESF increase is focused mainly on a few countries affected by the 
War on Terrorism, with some selected reductions elsewhere, those 
reductions are more than offset by DA increases in the aggregate. In 
Africa, for example, a $23 million ESF reduction was significantly more 
than offset by a $113 million increase in DA.
    Question. Development Assistance is your key account for combating 
world poverty over the long term. Other programs provide emergency 
humanitarian relief, but they are a stop gap. There are an estimated 2-
3 billion people in the world living on less than $2 per day. That 
means that your budget request of $2.7 billion in Development 
Assistance would provide about $1 per person living in poverty. I don't 
want to minimize the impact you can have with that money, but isn't $1 
per person far less than the wealthiest nation in the world should be 
providing for these anti-poverty programs?
    Answer. Our assistance is targeted on far fewer than the 2-3 
billion people in your illustration since we do not provide assistance 
to various countries where assistance is legislatively prohibited, the 
largest of which is China. Also, while assistance from the United 
States remains an important element of international efforts to support 
development, total donor flows now exceed $50 billion; due partly to 
USG efforts, our international partners are becoming more aware of the 
need for collaborative efforts among all donors that help bring 
developing countries into the global economy. Both multilateral and 
other bilateral donors increasingly recognize that to do this requires 
helping developing countries achieve poverty reduction, good governance 
and national strategies that deal with improving health, education and 
economic prosperity. Finally, it is increasingly important to consider 
not just official development assistance but total resource flows to 
the developing world, from expanding investment, which now exceeds $25 
billion from the United States and $130 billion from all sources. It is 
for that reason that USAID is increasing still further our 
collaboration with private sector, government, and non-governmental 
organization partners by establishing alliances that pool our resources 
with those from the private sector to tackle important development 
challenges.
                            basic education
    Question. I mentioned children's education in my opening statement. 
You have requested a total of $165 million for the world, which is a 
slight increase above the current level. We spend six times that amount 
on education in Vermont. How much would it cost to mount a serious 
campaign to provide basic education to the world's children? How much 
in Afghanistan, Pakistan, Uzbekistan, and the other Central Asian 
countries?
    Answer. The global Education for All Initiative (EFA), of which 
USAID is a member of the High Level Policy Group and the Technical 
Working Group, works at the policy, resource mobilization and country 
levels. A March 2002 World Bank (WB) draft paper on accelerating EFA 
has estimated external basic education funding at $2.5 billion 
annually. This figure is contingent on improvements in education system 
efficiency and developing countries putting appropriate levels of 
domestic resources into education. An international technical meeting 
is set for April 10-11 in Amsterdam where EFA donors, developing 
countries and PVO/NGOs will review the World Bank's paper, country data 
tables and cost estimates. The Amsterdam meeting will provide the 
latest education cost estimates on Afghanistan, Pakistan, Uzbekistan, 
and the other Central Asian countries. USAID's preliminary assessment 
of the WB paper is that the annual global figure is understated because 
of the non-linear and cumulative impacts of HIV/AIDS on economies, 
institutions and the education sector. Finally, UNESCO and the World 
Bank are leading the preparation of the first EFA Annual Monitoring 
Report, which will be available later this year and will provide a 
detailed snapshot of every EFA country, including education policy, 
human capacity and resource gaps.
                         global health programs
    Question. Just as we need to know how much it would cost to mount a 
serious campaign to provide basic education to the world's children, 
what can we say about the cost of improving global health? Could we 
produce dramatic improvements in life expectancy for the world's poor 
by increasing spending by $5 per capita?
    Answer.
  --Nearly 650 million people live in the world's least developed 
        countries, where life expectancy at birth is 51 years and 1 of 
        every 10 infants dies before the age of one. These countries 
        spend an average of $13 per person on health each year; $7 of 
        this comes from government.
  --The December 2001 World Health Organization (WHO) Commission on 
        Macroeconomics and Health estimates that a set of essential 
        health interventions costing $34 per person ($21 more than what 
        is now spent) could produce dramatic improvements in life 
        expectancy. This spending would tackle malaria, TB, maternal 
        and child health and nutrition, additional vaccine-preventable 
        diseases, tobacco-related diseases and HIV/AIDS.
  --About one-fourth of this increased spending, or $5 per person, 
        would make a major difference in the fight against HIV/AIDS.
    Since the poorest countries would be expected to raise $13 more per 
person from domestic resources, the donor share of this essential set 
of services would cost $8 more per person.
                        central asia: assistance
    Question. Since September 11th, Central Asia has become an 
important region for U.S. assistance programs. When I looked at the 
request for non-military aid to these countries, I saw that funding for 
some countries in the region has been increased; for others it has been 
decreased; and for still others it has been flat lined.
    What mechanisms are in place in these countries, which are ruled by 
backward, authoritarian governments, to ensure that our assistance gets 
to those who need it most and is used, among other things, to 
strengthen democracy and civil society, and protect human rights?
    Answer. Our assistance is implemented through grants and contracts 
to U.S. based, international non-government organizations and/or U.S. 
contractors. None of our funding is provided directly to the 
governments for implementation of activities. We have a strong in-field 
presence, with a USAID regional office in Almaty, Kazakhstan and USAID 
country program offices in the capitals of the other four countries, 
which we are reinforcing with additional specialized staff. This 
management approach assures that funding is well controlled and that 
goods and service are delivered to those most in need. USAID's program 
is designed to strengthen civil society and small businesses. Our 
assistance helps them advocate for a more democratic system and fight 
corruption and human rights abuses. We believe that engaged, vocal 
citizens are essential for sustainable progress in these areas.
                     central asia: regional stategy
    Question. While I have heard some good ideas of programs for the 
Central Asia countries, I don't get the sense that we have anything 
resembling a regional strategy. Am I wrong?
    Answer. In Central Asia under the Soviet Union, Communist officials 
chosen by Moscow practically eliminated opportunities for the 
development of civil society and the private sector. Citizens of the 
newly independent republics are challenged with the need to fight 
lingering tendencies toward authoritarianism in the face of a 
deteriorating socioeconomic situation. USAID developed its five-year 
(2000-2005) strategy for Central Asia to address these issues.
    In view of the potential for instability, conflict, and state 
failure in the region, USAID is helping to mitigate the potential for 
conflict by encouraging active dialogue with civil society, promoting 
employment and income growth, and helping to improve health, education, 
and environmental conditions. The goal of the strategy is to expand 
opportunities for the citizens of the five nations to participate in 
improving their governance, their livelihoods, and their quality of 
life.
    To achieve this goal, USAID has set four primary objectives for 
each country. First, we seek the growth of small-scale enterprise and 
trade, through support for activities in finance, regulations, and 
education. Second, we are promoting a more open, democratic culture, 
through the strengthening of non-governmental organizations, electronic 
media, and parliamentarians. Third, we are encouraging better 
management of environmental resources, through support for activities 
in regional water management and energy regulation and efficiency. 
Fourth, we are promoting improved primary healthcare through activities 
encouraging community and family practices, fighting infectious 
diseases, and promoting social marketing. These are region-wide 
objectives. They are tailored in different ways to the unique situation 
in each of the five countries.
    These objectives are supplemented by several initiatives cutting 
across the entire strategy. USAID is fighting corruption and minimizing 
gender biases and increasing opportunity for alienated youth.
    Recognizing the importance of education to preventing and 
mitigating conflict in these Muslim countries bordering China, 
Afghanistan and Iran, USAID is assessing the state of primary and 
secondary education systems throughout the region to more appropriately 
target and expand its assistance.
    In response to the cooperation of Central Asian countries in the 
war against terrorism, we allocated funds from the Emergency Recovery 
Fund and are requesting increased funding for Uzbekistan and Tajikistan 
in fiscal year 2003. The Administration also may request additional 
funds for Central Asian countries in fiscal year 2002. While budget 
levels reflect the political importance of the recipients to the United 
States, they also reflect USAID's assessment of the best opportunities 
for impact. For example, through fiscal year 2002, the largest 
percentage of funding has been directed to Kazakhstan and Kyrgyzstan, 
where there has been the most progress in economic reform. 
Turkmenistan, the country most resistant to reform, has received the 
smallest percentage of funding.
    Question. The Administration has requested $368.5 million for 
family planning programs for the Development Assistance account. How 
much do you plan to budget for family planning from the Eastern Europe, 
former Soviet Union, and ESF accounts, especially proposing sharp cuts 
in the first 2 of those accounts?
    Answer. The Administration requested a total of $425 million of 
which $368.5 million is in Development Assistance [DA] funds and the 
balance of the $56.5 million is projected from the Economic Support 
Fund, the Eastern Europe and Baltic States assistance account, and from 
assistance to the Independent States of the Former Soviet Union, 
jointly managed with the Department of State.
                            family planning
    Question. Given the unmet need in family planning services, and the 
pressure of population growth on urban areas and the environment, 
shouldn't we be doing more in this area? Your fiscal year 2003 budget 
request for family planning is less than we were spending on these 
activities in 1995. How does that make any sense?
    Answer. In January 2001, the President stated his commitment to 
maintaining the $425 million funding level provided for in the fiscal 
year 2001 appropriation. His commitment to population is reflected in 
the Administration's fiscal year 2002 and fiscal year 2003 request 
levels of $425 million. Although the Administration's fiscal year 2003 
request level for population is less than the fiscal year 1995 level, 
it is higher than the annual levels of funding appropriated for 
population in each of the years over the period fiscal year 1996-fiscal 
year 2000.
                          disaster assistance
    Question. Even before the crisis in Afghanistan and the volcanic 
eruption in the Congo, the Office of Foreign Disaster Assistance was 
being called on to respond to disasters in virtually every part of the 
world. Last year, Congress increased funding for this account by 18 
percent over the Administration's Fiscal year 2002 budget request--
which still fell far short of what is needed.
    The fiscal year 2003 request for disaster assistance has been flat 
lined at $235.5 million, even though the latest report published by 
OFDA states that: ``the requirements for humanitarian assistance . . . 
are on the increase. The humanitarian community has an obligation to 
recognize this and respond in as creative and proactive manner as 
possible.''
    As the former head of OFDA, would I be wrong to assume that you 
agree that the fiscal year 2003 budget request for disaster assistance 
is inadequate?
    Answer. The fiscal year 2003 request for disaster assistance of 
$235.5 million in fact represents an increase of $25 million for 
USAID's Office of U.S. Foreign Disaster Assistance (OFDA) because the 
fiscal year 2002 appropriation of $235.5 million included $25 million 
for El Salvador earthquake reconstruction, which is being managed by 
USAID's Bureau for Latin America and the Caribbean. I believe our 
fiscal year 2003 request for OFDA is appropriate.
    Question. Have you asked OMB or others within the Administration 
for supplemental funding to help address these shortfalls?
    Answer. As I said, I do not believe the fiscal year 2003 disaster 
assistance request represents a shortfall.
                         budget request format
    Question. Last year, the Administration made separate requests for 
both the Child Survival and Development Assistance accounts. While 
there are pros and cons of separate accounts, after some disagreements 
we finally reached a point where everyone--House, Senate and the 
Administration--were on the same page, which helped with budgetary 
comparisons, transparency, and oversight.
    No one in the Administration even mentioned this to us last year. 
Why has the Administration decided to make a single request, and by 
dong so add to the already confusing format of the AID budget request?
    Answer. The Administration determined that a single account would 
afford greater programming flexibility and that USAID's financial 
management and accounting could be greatly simplified by combining 
these two accounts. In implementing development and health programs in 
the field, USAID routinely integrates activities funded from the 
separate DA and Child Survival accounts. Having to maintain separate 
account records complicates accounting and reporting on the use of 
funds in the two accounts. Nevertheless, we have clarified in our 
Congressional Budget Justification, the amounts we plan to budget for 
child survival and health programs if the funds are appropriated as 
requested.
                      tropical forest debt relief
    Question. In 1998, Congress overwhelmingly passed the Tropical 
Forest Conservation Act to protect tropical forests in developing 
countries through debt reduction.
    Last year, Congress appropriated $5 million and authorized up to 
$20 million in unobligated balances to help implement this program. 
Despite campaign promises by President Bush, the budget request 
contains only $40 millon in transfer authority from Development 
Assistance to pay for tropical forest debt relief.
    Do you know now much USAID actually plans to transfer from 
Development Assistance to these debt relief programs, if any?
    Answer. USAID will meet the President's budget request of $50 
million from Development Assistance (DA) for activities to carry out 
tropical forest conservation activities authorized by the Foreign 
Assistance Act through a combination of ongoing and new activities. To 
support this, the President has requested $25 million of new and 
additional DA funds for USAID. USAID will support the President's 
forestry initiative of a $50 million increase over USAID's current 
forestry activities using the $25 million of new and additional DA, 
plus $5 million out of our non-forestry DA base level, plus $20 million 
out of our combined non-forestry Economic Support Fund, Freedom Support 
Act and Support for Eastern European Democracy levels.
    USAID is not able to say at this time how much, if any, of the $30 
million in new forestry activities might be transferred to Treasury for 
use through the Tropical Forest Conservation Act mechanism. Should the 
Agency receive its requested DA levels, we intend to review tropical 
forest conservation needs in USAID-assisted countries and make case-by-
case determinations on which mechanism available to us would be most 
effective. In some countries this could be transferring money to 
Treasury for TFCA while in others it could be through USAID's usual 
mechanisms of direct grants, direct funding of endowments, commercial 
debt swaps under the Foreign Assistance Act Title I, Chapter 7 
authority, partnership arrangements with the private sector, or other 
arrangements.
    We note that some countries that are potentially eligible under 
TFCA are not USAID-assisted countries. We would not expect to consider 
transferring USAID appropriations to Treasury for TFCA deals in such 
countries.
                   great lakes and justice initiative
    Question. Central Africa has been plagued by some of the worst 
violence, population displacement, and genocide that the world has ever 
seen. A critical part of bringing long-term peace and prosperity to 
this region will include strengthening civil society and the rule of 
law, encouraging reconciliation, and punishing the guilty. The Great 
Lakes Justice Initiative is designed to help accomplish these goals, 
but the budget documents sent to Congress show that no money will be 
allocated in fiscal year 2002 for this program despite the fact that 
the Administration requested $10 million last year, and no money is 
even requested in fiscal year 2003. With the tremendous needs in these 
countries for this type of program, why are you not funding this 
Initiative?
    Answer. The U.S. Government recognizes the importance of supporting 
ESF-funded activities initiated under the Great Lakes Justice 
Initiative (GLJI). These activities have been effective in promoting 
stability, democracy and good governance in Democratic Republic of the 
Congo, Rwanda and Burundi for the past several years. There is not a 
specific line item in the fiscal year 2002 and fiscal year 2003 ESF 
budget request for the Great Lakes Justice Initiative. However, the 
State Department is currently evaluating recommendations to continue 
these critical activities with ESF funding in all three countries.
                          university programs
    Question. Last year the Subcommittee changed the way that 
university proposals are to be handled. In our report, we instructed 
USAID to identify an office where universities, Members of Congress, 
and others can go with inquiries about these types of requests. We also 
directed USAID to report twice on the status of the specific proposals 
listed in the Committee report. Have you identified or established an 
office within USAID to handle proposals? What other steps have you 
taken to be sure that proposals submitted by universities are handled 
appropriately?
    Answer. USAID has identified the Office for Human Capacity 
Development of the Bureau for Economic Growth, Agriculture and Trade to 
handle university proposals. To ensure that proposals submitted are 
handled appropriately, USAID is implementing a system to centralize the 
submission point and tracking of proposals. Proposals for internal 
review will be processed under a stricter time schedule, with the 
understanding that both USAID and U.S. Higher Education Community 
prefer that vetting take place through a university peer-review process 
to assure technical quality. USAID is also developing a brochure for 
the U.S. Higher Education Community to publicize the process, and soon 
will have a website on-line to improve communications.
                           west bank and gaza
    Question. We are all very concerned by the collapse of the peace 
process in the Middle East. But there are some positive things 
happening there, and I want to commend the outstanding work of the 
USAID mission in the West Bank and Gaza. It manages critically 
important programs under extremely difficult working conditions.
    None of these funds go the PLO or the Palestinian Authority. The 
funds go through non-governmental organizations for things like potable 
water, sewage treatment, and job creation. So when we talk of cutting 
off assistance to the West Bank and Gaza, we are talking about ending 
programs that help people in need and build goodwill towards the United 
States.
    Shouldn't we be taking immediate measures to create jobs, along the 
lines of our own Civilian Conservation Corps during the New Deal?
    Answer. The new $30 million JOBS project will represent a quantum 
increase in job creation. Persons employed under this project will 
perform basic social and community services, which have effectively 
collapsed because of the intifada, and the Palestinian Authority's 
inability to pay for these services due to a sharp drop in revenues.
    Question. Given that unemployment is upwards of 35 percent in Gaza 
and is especially acute among younger adults, what is USAID doing to 
help create new jobs for people who lost their jobs due to the border 
closings and other security measures?
    Answer. USAID/WBG has an on-going $12.3 million Emergency 
Employment project, implemented by UNDP, Save the Children Foundation, 
Cooperative Housing Foundation, and Catholic Relief Services, which is 
providing jobs for thousands of unemployed Palestinians. Also, the 
Mission is obligating a further $2.3 million this year for additional 
emergency employment activities to be implemented by International 
Orthodox Christian Charities and others. Finally, USAID/WBG is 
implementing a new $30 million Job Opportunities through Basic Services 
(JOBS) project through U.S. non-governmental organizations.
              alternative development programs in colombia
    Question. It is now apparent to everyone, including the GAO and 
USAID, that the Alternative Development Program in coca growing areas 
of Colombia, where there is virtually no security, was poorly designed 
and is not going to produce the desired results. We have already lost 
valuable time and money. I have my own serious doubts about the coca 
eradication program, as do many others here and even in the 
Administration. But that is run by the State Department. One thing that 
seems crystal clear to me though, is that USAID's Alternative 
Development Program and the State Department's coca eradication program 
should not necessarily be linked. USAID should do what it does best--
long term economic development in areas where there are local 
communities it can work with and the security exists to implement 
sustainable programs. Do you agree?
    Answer. I agree that linking alternative development and coca 
eradication programs can be difficult and creates some special 
challenges. However, I would like to clarify that the USAID Alternative 
Development Program in Colombia was designed to provide a flexible and 
adaptive mechanism to support US counter-narcotics objectives over a 
multi-year period. USAID never suggested that results could be achieved 
quickly, certainly not in less than one year. Our field-based 
monitoring systems, which are based on reports from contractors, 
grantees, and counterparts, identified problems early on and enabled 
the Mission to make early adjustments when constraints were observed 
that limited AD progress. We feel this is an example of proactive 
program management under difficult conditions.
    The efficacy of aerial eradication can be reduced when planes must 
avoid areas benefiting from Alternative Development Programs. At the 
same time, limiting Alternative Development Programs to areas of 
intensive coca cultivation can raise the costs and risks of development 
efforts. There are several reasons for this. For example:
  --Coca is typically grown in remote areas where there is no 
        government presence and little infrastructure. Organizing 
        development activities and creating new jobs under these 
        conditions takes more time and money than is the case in areas 
        with better infrastructure and services. At the same time, 
        because of higher production and transport costs, goods 
        produced in remote areas are less competitive in regional 
        markets.
  --Drug crops are often produced in environmentally fragile areas that 
        are not viable for commercial agriculture.
  --Drugs crops attract armed groups whose presence will often hinder 
        market-based commercial activity as well as broader community 
        mobilization in support of development activities.
  --Areas conducive to drug production are not necessarily competitive 
        for production of other agricultural products aimed at regional 
        or international markets.
    For these reasons, we have undertaken to diversify the areas where 
we conduct Alternative Development Programs. Currently we are working 
in nine different departments in Southern and Northern Colombia. We 
will continue to expand to areas we believe provide better chances of 
success at reasonable cost. These areas may not always be where drug 
crops are concentrated. In areas where opportunity for impact is more 
limited, we are restricting activities to those with less risk, such as 
smaller scale community infrastructure. Finally, we are promoting 
voluntary manual eradication of drug crops in the communities we work 
with, because many people who are opposed to aerial spraying are 
willing to eradicate manually in exchange for alternative development 
assistance.
    In sum, we agree that it does not always make sense to directly 
link development and aerial eradication efforts in a given target area. 
We will make sure that development programs generate the greatest 
possible impact in creating new employment and improved social 
conditions. We believe this is important to the long-term success of 
overall USG Colombia policy.
                              biodiversity
    Question. We recommended that USAID spend $100 million for 
biodiversity activities in fiscal year 2002. Can I assume you will 
spend that amount for programs that conservation organizations will 
regard as directly protecting biodiversity in areas where it is 
seriously threatened?
    Answer. Yes, USAID will spend $100 million for biodiversity 
activities that conservation organizations regard as directly 
protecting biodiversity in areas where it is seriously threatened. 
USAID defines biodiversity activities as those whose primary purpose is 
to conserve biological diversity in natural and managed ecosystems. 
Activities may include the following approaches: protected area 
management, community-based natural resource management, ecoregional/
landscape conservation, sustainable use of natural resources, and 
enterprise-based.
                        russia: usaid assistance
    Question. Can you tell me how much USAID has spent in Russia since 
it began implementing programs there after the collapse of communism? 
How would you evaluate the impact of our assistance programs there--in 
other words, what return have we and the Russian people got for that 
money?
    Answer. Since 1992, $2.6 billion in FREEDOM Support Act funds has 
been obligated for U.S. Government assistance programs in Russia. 
(Note: This figure does not include funds for non-proliferation and 
security programs). Of this amount, USAID has managed approximately 
$2.1 billion, and $550 million has been transferred for programs 
managed by other U.S. Government agencies.
    The primary areas in which USAID has provided assistance to Russia 
include economic reform, support for small and medium sized 
enterprises, environmental management; promoting civil society, rule of 
law, and an independent media; and health care reform. During the past 
five years, the focus of our assistance has shifted away from the 
central government to an emphasis on working with regions and 
municipalities to support reform at the grassroots level through 
partnership relationships with Russian organizations. USAID currently 
has activities in virtually every region of the Russian Federation and 
has actively supported the four U.S. Government Regional Initiative 
sites: the Russian Far East, Samara, Tomsk and Novgorod.
    Assistance dollars in Russia have provided important support to 
forces of reform, and have resulted in widespread economic reforms, 
positive trends in civil society and the rule of law, and models of 
health improvements in selected locations. The benefit to the U.S. of 
this assistance is in helping promote an evolving market democracy in 
Russia, contributing to a more stable and positive Russia in today's 
world. Although a lot has been accomplished in the past decade, there 
is a lot of work still to do in implementing economic reforms in the 
regions, and in the health and civil society areas.
    The main USAID achievements in Russia over the past ten years have 
been the following:
  --Establishing core institutions and systems for a market economy, 
        including development of capital markets institutions, such as 
        the Federal Commission on the Securities Market and the Russian 
        Trading System, and support for creation of Russian think tanks 
        which provide policy analysis to drive forward economic reform.
  --Formulating a new tax regime that supports economic growth and 
        fiscal federalism. USAID-supported think tanks helped draft key 
        tax reform legislation which was passed in 2000-2001, setting a 
        flat 13 percent income tax rate and the lowest corporate 
        profits tax rate (24 percent) in Europe. Recent passage of the 
        new land code is attributable to USAID activities begun in 1994 
        with regional governors.
  --Helping the small and medium-size business sector and the Russian 
        middle class grow rapidly. USAID assistance has introduced a 
        successful non-bank' credit model for small and medium 
        enterprises, a large proportion of which are women owned, and 
        our business management programs have helped train over 500,000 
        entrepreneurs in vital business skills.
      Recent legislation passed by the Duma and drafted by a USAID-
        supported think tank dramatically reduces licensing, 
        registration requirements, and state inspections that constrain 
        the growth of small and medium enterprises.
      In addition, USAID support for The U.S.-Russia Investment Fund 
        (TUSRIF) has mobilized private capital for investment and 
        helped strengthen indigenous financial institutions.
  --Developing and disseminating improved environmental policies and 
        practices through Russian institutions.--USAID assistance built 
        a vibrant network of regional organizations and institutes 
        which is disseminating improved environmental practices and 
        methodologies in such areas as forest management and pest 
        control.
  --Making the judiciary more independent and fair.--USAID training and 
        exchange programs have exposed Russian judicial reformers to 
        American models, which had significant effect on legislation 
        such as the Civil and Criminal Procedure Codes, which requires 
        adoption of jury trials nationwide.
  --Building civil society and independent media in the regions as a 
        democratizing and countervailing force.--USAID has helped 
        develop a network of over 70,000 civil society institutions and 
        NGOs throughout the Russian Federation. USAID has also 
        supported the existence of over 500 independent television 
        stations in the regions to provide an alternative to state-run 
        media.
  --Creating the legal basis for a private land, real estate and a 
        housing market.--USAID technical assistance has resulted in 
        major reform legislation in urban planning, land ownership and 
        use, and local self-governance, which has resulted in $150 
        billion of Russian housing being privatized.
      In addition, in 1994 USAID assisted with the Russian Officer 
        Resettlement Program, which contributed to a major U.S. foreign 
        policy goal-the withdrawal of all Russian troops from the 
        Baltic states.
    Reorienting health services toward quality primary health care, 
maternal and child health, and a focus on the HIV and tuberculosis 
epidemics.--Through USAID technical assistance, Russian health 
institutions are becoming more evidence-based and cost-effective. 
USAID's introduction of modern family planning services has helped 
reduce abortion rates; our work on preventing and treating tuberculosis 
is leading to results that exceed World Health Organization standards 
for success; and our work on HIV/AIDS prevention has provided critical 
information to youth and assisted in joint efforts against the 
epidemic.
                                 ______
                                 
               Questions Submitted by Senator Tom Harkin
                                 labor
    Question. It remains the law of the land that USAID is not to use 
any of its appropriated funds in support of any project, program, or 
activity in any foreign country that does not enforce its legal 
obligations under national and international law to not use child labor 
or otherwise contributes to the violation of the other fundamental 
worker rights and core labor standards.
    Is USAID now fully in compliance with this law and what specific 
procedures does USAID have in operation to enable you to know this 
reliably, given that your agency supports thousands of projects, 
programs, and activities in scores of foreign countries in all regions 
of the world?
    Answer. USAID takes seriously its responsibility to ensure that no 
funds are used to undermine either U.S. jobs or internationally 
recognized worker rights. To that end, USAID issued a policy 
determination in January 1994 (USAID Policy Determination-20, U.S. 
Programs and U.S. Jobs) that clearly and unequivocally forbids the use 
of its funds, whether appropriated funds or local currency funds, in 
projects or activities that: (1) could reasonably be foreseen to 
involve the relocation of any U.S. business that would result in a 
reduction of the number of employees of the business in the United 
States; (2) establishing or developing export processing zones in which 
the tax, tariff, labor, environment, and safety laws of a country do 
not apply; or, (3) would contribute to violations of workers' rights. 
This policy determination not only sets out the policy context and 
general principles but also offers specific guidance on implementing 
the policies. Among the implementation steps is a requirement that each 
grant or contract include a clause stating that no funds may be used 
for any purpose in violation of these policies. Should a grantee or 
contractor be found in violation of this provision, sanctions and 
penalties can be imposed. While we can not say with certainty that 
there has never been an instance in which this policy has been 
violated, we are certain that every effort has been made to assure 
compliance.
    In addition to prohibiting funds from being used for these 
prohibited activities, USAID has a long history of supporting 
compliance with international standards on workers' rights. USAID has 
long viewed compliance with the rights of workers to organize and 
collectively bargain as an essential element in both human rights and 
democratic governance.
    The American Center for International Labor Solidarity (ACILS or 
Solidarity Center) and its predecessor regional institutes, have been 
significant partners in implementing USAID's labor programs for over 
four decades. USAID's labor program, among other objectives, seeks to 
facilitate and encourage compliance with the ILO's Universal 
Declaration of the Fundamental Principles of Rights at Work of 1998. 
The Declaration's five core labor standards are:
  --freedom from child labor;
  --freedom from forced and indentured workforce, prison labor;
  --freedom of collective bargaining;
  --freedom of association;
  --equal treatment for workers, without discrimination.
    The Office of Democracy and Governance (DG) office supports 
strengthening trade unions that in work developing countries to support 
free, democratic trade unions. Labor unions are mass-based, often 
represent the most disenfranchised citizens, bring them into the 
political and development process, and give a voice to women and 
children.
    In February 2002, the DG Office awarded a five-year grant to the 
Solidarity Center to be funded at $9 million annually assuming funds 
are available. The Solidarity Center is an effective advocate for 
democratic reforms and sustainable development. The Solidarity Center 
programs often include collaborations with governments, other global 
international institutions, employers, and workers themselves.
    The Office of Democracy and Governance also manages The Partnership 
to Eliminate Sweatshops grants funded by the Department of State. The 
Partnership to Eliminate Sweatshops grew out of concern on the part of 
the American public that the global economy had created a climate 
conducive to abusive treatment of workers and unsafe working 
conditions. There is broad public concern that goods sold in the U.S. 
market not be produced under sweatshop conditions. Through the 
Partnership to Eliminate Sweatshops, the U.S. Department of State and 
USAID are collaborating to support programs conducted by concerned non-
governmental organizations to address these problems. These programs 
include the establishment of business codes of conduct, workplace 
monitoring systems, research and education initiatives, and worker 
empowerment.
    The objective of the program is to facilitate partnerships among 
non-governmental organizations (NGOs), universities, organized labor, 
corporate alliances, international organizations, and others to test a 
variety of approaches intended to eliminate unacceptable working 
conditions around the world. USAID is managing the programs of the Fair 
Labor Association (FLA), the International Labor Rights Fund, the 
Solidarity Center, and the Consortium of Pact and AED.
    The FLA addresses violations of internationally recognized labor 
rights in the apparel and footwear industries. It does this by 
accrediting and overseeing monitoring organizations, and by working 
with participating multinational companies, universities, and NGOs to 
assure compliance with minimum labor standards.
    The ILRF helps build capacity to among NGOs working on labor 
standards in the apparel industry. The focus of the ILRF grant is to 
develop the capacity of indigenous civil society organizations, broadly 
defined and inclusive of trade unions, to carry out these program 
objectives.
    The Solidarity Center anti-sweatshop program builds on its capacity 
to help local trade unions to empower workers. The Solidarity Center 
seeks to work with its local partners educate, organize, and give 
workers the legal tools to defend their rights under national and 
international law. The Solidarity Center also seeks to ensure that 
national labor laws are effectively enforced and mobilize international 
consumer markets to support enforcement of core labor standards.
    The Academy for Educational Development and Pact's anti-sweatshop 
program also supports local organizations, including trade unions, 
enterprises, independent media, and government bodies, to address 
abusive labor conditions in overseas factories.
    USAID has always endeavored to use appropriated funds in support of 
projects in foreign countries that respect fundamental worker rights 
and core labor standards, and address the problems encountered by 
workers in the ``export processing zones'' or EPZs.
                              child labor
    Question. For years, I have championed the need for a global 
crackdown on abusive child labor and the importance of providing 
positive alternatives for the children removed from abusive child labor 
and their families. It has been proven repeatedly that one of the most 
effective means of eliminating the worst forms of child labor is to 
afford universal access to basic education. What more can USAID do to 
help an estimated 250 million child laborers around the world to gain 
access to basic education?
    Answer. Children continue to be the most vulnerable in our world's 
society and abusive child labor remains an impediment to meeting 
Education for All goals of universal primary education and gender 
equity. USAID is helping to build child labor strategies into field 
mission initiatives in economic growth, agriculture, trade, education, 
training, democracy and governance, environment and health, women in 
development, and information technology. To mainstream USAID's focus on 
child labor, the Economic Growth Bureau's Education and Training Office 
has done the following:
  --USAID's new flagship education support instrument will include a 
        significant focus on programming for out-of-school children and 
        youth, in particular, child laborers, including children and 
        youth subjected to the worst forms of child labor (e.g., as 
        prostitutes, soldiers). We anticipate that support for use of 
        this instrument by the field will increase in the future.
  --Hired a full-time Child Labor expert in December 2001
  --Expanded outreach, information sharing and program planning with 
        the Department of Labor, UNESCO and International Labor 
        Organization/International Program on the Elimination of Child 
        Labor (ILO/IPEC), including having ILO make a child labor 
        presentation at USAID's worldwide Human Capacity Development 
        Conference held at National Institute of Health (NIH) last 
        summer
  --Has prepared 84 country profiles on child labor to help field 
        missions understand the dimensions and issues and facilitate 
        integrated program development
                        trafficking and slavery
    Question. Since enactment of the Victims of Trafficking and 
Violence Protection Act of 2000, the U.S. State Department and USAID 
have brought new clarity of purpose to coordinating and strengthening 
the interagency capacity of the U.S. Government to crack down on human 
trafficking of women and children for illicit activities around the 
world. The Task Force established for this purpose has proven useful as 
has the new reporting capacity that has brought greater attention and 
focus to this egregious human rights problem.
    Mr. Administrator, there are now at least 27 million slaves 
scattered in many industries in many parts of the world and our country 
has aid, trade and investment relationships with governments in those 
countries which do nothing about slavery in their midst. Do you agree 
that this grim reality needs to be immediately redressed and will you 
support legislation to establish an interagency process, including 
USAID, that would make ending slavery worldwide a principal objective 
of U.S. foreign policy as a matter of high priority and urgency?
    Answer. I agree that the problem of trafficking in persons, a 
modern form of slavery, needs immediate redress. To this end, the 
Administration has intensified cooperation on this issue across the 
board. The interagency mechanisms to address the problem are now in 
place. On February 13, 2002, the President signed an Executive Order 
establishing the President's Interagency Task Force to Monitor and 
Combat Trafficking in Persons. The President's Task Force has 
established a Senior Policy Advisory Group, which will have policy 
oversight and conduct programmatic reviews related to trafficking in 
persons. The United States continues to press for progress on 
trafficking in persons, slavery and other human rights issues in 
bilateral and multilateral fora as well as through the interagency 
process.
                          university programs
    Question. What process and implementing procedures have USAID 
established to enable interested colleges and universities in Iowa and 
across the nation with expertise to submit proposals for fair and 
transparent, meritorious peer review and receive USAID funding to help 
deliver programs and services to advance the core objectives of U.S. 
foreign assistance?
    Answer. USAID has identified the Office for Human Capacity 
Development of the Bureau for Economic Growth, Agriculture and Trade to 
answer inquiries and to receive and track proposals from colleges and 
universities. To better communicate how proposals are processed and 
reviewed, USAID is developing a brochure that explains a variety of 
ways in which colleges and universities can become engaged in 
delivering programs and services to advance U.S. foreign assistance, 
including a stricter time schedule. Both USAID and the higher education 
community prefer that vetting take place through a university peer-
review process to assure technical quality. USAID will also start a 
website on-line that will provide even more information.
                         new freedom initiative
    Question. In his first year in office, President Bush announced his 
New Freedom Initiative to expand the rights of Americans with 
disabilities. I applauded that initiative and I intend to support the 
President in realizing its goals.
    At the same time, I'd like to enlist your support to extend the 
principles of the New Freedom Initiative beyond the borders of U.S. 
domestic policy and into our nation's foreign policy objectives and 
development assistance programs. Currently, the United States sets the 
standard on disability policy for the rest of world in many respects, 
but eleven years after the enactment of the Americans with Disabilities 
Act (ADA), USAID has seemingly done very little globally to promote 
respect for the rights of disabled persons and access. This is 
especially disturbing because 80 percent of persons with disabilities 
in this world live in developing countries.
    For example, USAID in 2000 reported in its Second Annual Report on 
the Implementation of USAID Disability Policy that efforts to promote 
USAID Disability Policy have been ``disjointed and minimally 
effective'' and that specific programming has only taken hold in 
response to congressional mandate.
    I am wondering what you have done so far to change this dismal 
picture. More specifically, what policies have you invoked within USAID 
to help ensure that all of the programs, projects and activities with 
USAID's internal operations provide equal opportunity for people with 
disabilities and facilitate their maximum contribution to your agency's 
performance? Does USAID now play any coordinating role to make certain 
that the rights of persons with disabilities and their particular needs 
are being met government-wide by all U.S. government agencies that 
provide technical assistance and operate programs overseas. (For 
example, as new U.S. embassies are under construction in several 
countries and many more are being overhauled for security reasons by 
the U.S. State Department, what is USAID doing now to make certain that 
access for disabled persons is guaranteed in the construction or 
remodeling of these U.S. embassies and related facilities. More 
broadly, what actions has USAID implemented since you have been 
Administrator to help ensure that all projects, programs, and 
activities supported by USAID in developing countries promote greater 
respect for the basic human rights of persons with disabilities and 
afford them greater access to live full and productive lives within 
their own societies? Finally, what is USAID doing now to empower 
persons with disabilities to advocate on their own behalf and 
participate more fully in the formulation of public policies and laws 
in all countries with a USAID presence?
    Answer. As regards human rights USAID follows State Department 
policy and determinations. The issue of how the rights of the disabled 
fit under our government's definition of human rights is best addressed 
by the Department of State as well.
    Similarly in terms of USAID official facilities overseas we work 
closely and under Embassy regulations and guidelines. However in 
addition to the general under-investment for years in overseas facility 
infrastructure, USAID's unique mission often requires us to acquire, 
facilities in difficult circumstances and short time. Such realities 
often make it a Herculean task to meet even minimal security 
requirements and compromise on standards is inevitable.
    As regards USAID coordination of other Agencies disability actions 
overseas, USAID has neither the mandate nor expertise to fulfill this 
role.
    It is USAID's policy to integrate and incorporate disability 
concerns into our basic mission and resources. This we believe is in 
harmony with the Americans with Disability Act, which includes 
reasonableness as a criterion for implementation. We have clear 
examples where disability concerns have been successfully incorporated 
into our programs and continue to look for other ``case specific'' 
opportunities. For example, in Vietnam where massive disability is an 
acknowledged national concern, USAID, under the Leahy Fund, provides 
both direct prosthetic assistance and institutional strengthening 
assistance, such as the development of disability friendly construction 
codes. In Africa, democracy assistance has included assuring access to 
the voting process by disabled voters. In Latin America, to give voice 
to the disabled, we have sponsored participation in regional forums on 
disability policy. In Philippines we insisted on including elevator 
service in a USAID funded two-story university lab building because 
there was identified student need. The situations we face are so varied 
that blanket solutions or approaches are not feasible.
    Finally, as we engage in new situations such as Afghanistan, where 
disability is a pervasive social tragedy, we will be involving new and 
more extensive situationally appropriate responses. I would note that 
since I became Administrator we have sponsored a workshop with the 
disability community and State, with World Bank participation, 
precisely to investigate ways we can do better in implementing our 
policy of integration of the disabled into our activities.
                            basic education
    Question. How much of the fiscal year 2002 USAID budget was spent 
for projects and programs in developing countries to enable 
impoverished children in developing countries to gain access to basic 
education? How much has USAID requested for that fundamental purpose in 
fiscal year 2003 and how does that compare to other USAID priorities?
    Answer. Basic education is an increasingly important component of 
the overall USAID program. Fiscal year 2002 funding for USAID basic 
education programs from USAID's Development Assistance (DA) account is 
$150 million; in fiscal year 2003, the request for basic education in 
the DA account increases by 10 percent--to $165 million. This request 
represents a 65 percent increase over the fiscal year 2001 level of 
$102 million, even though the overall total for DA and Child Survival 
increases by about 25 percent from fiscal year 2001 to fiscal year 
2003. In addition, there is $15 projected for basic education in the 
ESF, SEED and FREEDOM Support Act accounts jointly managed with the 
State Department and that levels goes up as well, to about $32 million, 
in the fiscal year 2003 request.
                          operation day's work
    Question. How much funding have you requested in fiscal year 2003 
for the Operation Day's Work program, which enables American youth to 
develop projects and programs in their home communities to study the 
growing interdependence between the United States and the development 
needs of many foreign countries, perform community service, and 
contribute to projects to help their peers in developing countries?
    Answer. USAID is dedicated to the continued development of 
Operation Day's Work, our youth leadership and global awareness 
program. We are currently in the process of planning new initiatives to 
better promote Operation Day's Work to U.S. students, and are proud to 
lead this program which combines international outreach and community 
service to allow U.S. teenagers to help their peers in developing 
countries. USAID's Operation Day's Work project is funded internally 
through the Bureau for Legislative and Public Affairs' budget. The 
Operation Day's Work budget for fiscal year 2002 is $102,084.00, and we 
are currently finalizing all internal funding levels for fiscal year 
2003. We anticipate Operation Day's Work funding for fiscal year 2003 
to be similar to current levels; however, we have begun an intensive 
review of the efforts to integrate Operation Day's Work's goals, 
objectives, and teaching materials into other curriculum networks 
throughout the United States. This integration will be achieved in part 
through greater engagement with outstanding existing education and 
student leadership networks, programs, and organizations. This year the 
Operation Day's Work students in participating schools have selected 
Ethiopia as the developing project country.
                                 ______
                                 
               Questions Submitted by Senator Tim Johnson
                       afghanistan reconstruction
    Question. Administrator Natsios, I was pleased to see USAID 
recently announced $15 million in quick impact programs for 
Afghanistan. This funding, which is a part of USAID's $167 million for 
Afghanistan reconstruction, will be used mainly for education, health, 
and agriculture programs. Given the fact that the long-term success of 
our operation in Afghanistan will be judged in large part by the 
ability of the Afghan people to build a functioning civil society, 
could you outline in more detail USAID's plans for Afghanistan's 
reconstruction?
    Answer.
  --USAID's approach to reconstruction includes the following 
        components:
    --revitalizing agriculture and other livelihood options;
    --enhancing educational opportunities;
    --improving health;
    --strengthening Afghan institutions to ensure stability;
  --A key component to strengthening Afghan institutions is building 
        upon the strong tradition of civil society in Afghanistan.
  --USAID is implementing an $8 million program of community 
        development initiatives that work with local organizations to 
        respond to immediate needs, such as schools and health clinics 
        using local labor.
  --USAID also strongly encourages its international implementing 
        organizations to partner with local Afghan organizations to 
        build their capacity and ensure sustainability of projects.
    USAID will continue to pursue opportunities to engage and build the 
capacity of Afghan civil society.
                                pakistan
    Question. I know the USAID maintains a field mission in Pakistan. 
Given President Pervez Musharraf's assistance, and the assistance of 
the Pakistani people, during our operations in Afghanistan, could you 
comment on ways in which USAID is helping Pakistan cope with issues 
such as refugees, education, and economic development?
    Answer. USAID is in the process of setting up a field mission in 
Pakistan. We anticipate opening this in June or July of this year.
    The USAID program focuses on three areas: education, health and 
democracy.
    The education program will support the Government of Pakistan's 
Education Reform Strategy, and focus specifically on improving the 
quality and delivery of primary education and expanding the literacy of 
women and out-of-school youth in the provinces of Baluchistan and 
Sindh.
    The health program will help improve the health of the Pakistani 
people, especially children and women in rural areas. The program will 
provide a basic package of health services that can be sustained over 
the long-term through partnerships between the public and private 
sectors. The program will reduce morbidity and mortality in young 
children and women through child survival and maternal health services. 
A central feature of this effort will be to support reform nation-wide, 
with the aim of improving the coverage, quality, and efficiency of 
health services.
    The democracy program is working in two areas: (1) strengthening 
the capacity of local civil society organizations to engage the 
government in dialog on key development issues; and (2) assess whether 
opportunities exist to assist the political parties become more issue 
focused, develop internal democratic operation principals, and build 
the capacity of the emerging new leaders.
                        usaid hiv/aids strategy
    Question. You have expressed a particularly strong commitment to 
addressing global health issues, specifically HIV/AIDS. I share your 
concern for this issue. Nothing can overwhelm a developing country like 
the consequences of a health crisis like HIV. Many sub-Saharan Africa 
countries face nearly unimaginable long-term consequences as an entire 
generation is decimated by AIDS. Could you further outline your 
strategy for dealing with the problem?
    Answer. As you mentioned, HIV/AIDS is one of the top priorities for 
the U.S. Agency for International Development. There are six parts to 
our HIV/AIDS strategy: prevention, care, treatment and support, working 
with children affected by AIDS, surveillance, encouraging other donors, 
and engaging national leaders.
    Prevention has been the cornerstone of our policy for the past 15 
years. The single most important aspect of our prevention strategy is 
reaching young people and changing their behavior. Young people are 
often difficult to reach, but we have had some notable success working 
with local organizations to craft a message that they can embrace. In 
Zambia, for example, our work with 15-19 year-olds in Lusaka and other 
cities has helped delay the age of sexual debut by approximately two 
years. As a result, HIV/AIDS prevalence rates have dropped by nearly 50 
percent in this group.
    The second part of our strategy is the care, treatment, and support 
of those infected by the virus. While there obviously is no cure yet, 
we can help people survive longer by treating opportunistic infections 
such as tuberculosis and continuing to help countries build up their 
health care systems and infrastructure. Although prevention remains our 
primary focus, we have been providing funding for the care and 
treatment of people living with HIV/AIDS since 1987. Currently, we have 
25 such projects in 14 countries. We will also announce soon, 
antiretroviral treatment sites in three countries in Africa. In all 
three countries, we plan to create models for provision of 
antiretrovirals that governments and the private sector can expand to 
the national level.
    The third part of our strategy involves attending to the millions 
of children who have lost parents to HIV/AIDS or are at risk of doing 
so. I have been to Africa many times, and I have seen the faces of 
these children. The fact is we cannot give them what they need the 
most--their parents alive and well. However, we can do our best to help 
them, and we are. We now have 60 projects in 22 countries that provide 
these children food, shelter, clothing, school fees, counseling, 
psychological support and community care.
    The fourth part of our strategy is surveillance. The nature of the 
HIV/AIDS pandemic is that we are always learning new things about it. 
The fifth component is our ongoing effort to encourage other 
governments and multi-lateral institutions to increase their financial 
commitments to the fight against the pandemic. The United States 
provides one-third of the world's resources to fight HIV/AIDS, four 
times what the next largest donor gives. Finally, there is simply no 
substitute for leadership. Whether the issue is HIV/AIDS, democracy, or 
building free markets and institutions, the single most important 
factor in a country's development is the quality of its leaders and 
their commitment to their people's well being.
    Since becoming USAID Administrator, I have streamlined our 
procedures so that more of our HIV/AIDS program money goes directly to 
the field and it gets there faster. We have increased the number of 
priority countries we focus our resources on, strengthened our regional 
programs and are taking steps to improve our accountability.
                                 ______
                                 
             Questions Submitted by Senator Mitch McConnell
                             west bank/gaza
    Question. The strategic objectives of USAID's West Bank and Gaza 
assistance programs include promoting private sector economic 
opportunities, access to water resources, more accountable and 
responsive governance, and improved healthcare and community services. 
Since 1995, there has been a ban on providing direct support to the 
Palestinian Authority.
    How does USAID ensure that none of the funds in the fiscal year 
2003 budget--or any funds provided in prior years--benefit, directly or 
indirectly, Palestinian extremists?
    Anwer. Many Palestinian NGOs help implement USAID/WBG's programs 
through sub-grant mechanisms with American contractors and NGO 
grantees, after full and open competition. The USAID Mission, as part 
of its due diligence process prior to approving sub-grants to 
Palestinian organizations, requests background checks on these 
organizations and their key personnel. These checks are conducted by 
members of the Consulate-General and Embassy Country Teams. Only those 
organizations which pass this background check process are subsequently 
cleared to be awarded sub-grants.
    Question. How does USAID ensure that none of the Palestinian 
recipients of U.S. taxpayer funds are involved in acts of terrorism 
against Israel?
    Answer. Many Palestinian NGOs help implement USAID/WBG's programs 
through sub-grant mechanisms with American contractors and NGO 
grantees, after full and open competition. The USAID Mission, as part 
of its due diligence process prior to approving sub-grants to 
Palestinian organizations, requests background checks on these 
organizations and their key personnel. These checks are conducted by 
members of the Consulate-General and Embassy Country Teams. Only those 
organizations which pass this background check process are subsequently 
cleared to be awarded sub-grants.
    Sixteen Palestinian non-government organizations are helping the 
Mission in carrying out its health sector activities, focused mainly on 
improving maternal and child health. Fifty-nine Palestinian NGOs help 
implement USAID's Community Services project, upgrading, repairing or 
constructing social infrastructure (schools, clinics, recreation and 
community centers, playgrounds, etc.). Two Palestinian NGOs are working 
to implement elements of the Mission's private sector support program 
in trade promotion and micro-credit. Finally, 53 Palestinian civil 
society NGOs receive sub-grants from the U.S. contractor for activities 
which range from technical/vocational training and socio-economic 
research to advocacy for the disabled and the promotion of citizen 
awareness, participation and good governance, under the Mission's 
Democracy and Governance program. All of these organizations have been 
vetted through the background check process and none have been known to 
carry out acts of terrorism.
    Question. What programs can USAID support to encourage a viable 
alternative (or the political space which may allow the emergence of a 
viable alternative) to PLO Chairman Yasser Arafat?
    Anwer. USAID is helping to develop the legal framework necessary to 
balance the power among the Palestinian branches of government. Civil 
society's role in public decision making and government oversight needs 
to be increased. USAID projects fund eight organizations active in the 
democratic process ($27 million, 5-year program) to help develop an 
effective civil society. These advocacy groups focus on education, 
citizens' interests and opinions, policy analysis, women's issues and 
young leadership training. A second 5-year program will assist a wider 
variety of non-governmental organizations advocating on issues such as 
health, environment, and women's rights. USAID is helping to strengthen 
the elected Palestinian Council to fulfill its legislative, oversight 
and constituency responsibilities. USAID is assisting with the review 
of key laws, including income tax ($9 million).
    In addition, USAID supports more than 70 local civil society 
organizations with capacity-building, training in policy analysis, 
communication and leadership skills, strategic planning, management and 
conflict resolution, as well as with upgrading their internal financial 
systems and governance structures.
    Question. What programs can USAID support to educate Palestinians 
on the absolute futility of the use of violence as a means of achieving 
peaceful coexistence with Israel?
    Answer. When unemployment is up to 40 percent and half of the 
population is currently living under the poverty rate of $2 per person 
per day, it is difficult for the Palestinian people to overcome their 
feelings of desperation and loss of faith in the promise of peace.
    The USAID program in the West Bank and Gaza is intended to improve 
the conditions under which the Palestinian people live and to provide 
better social, educational and economic opportunities to help them 
realize that it is better to resolve differences peacefully and without 
resorting to violence.
    USAID funds three separate emergency job creation programs totaling 
$45 million. In addition, USAID is developing infrastructure for four 
industrial parks. When fully operational they will have the capacity to 
employ about 80,000 Palestinians. Employed people are less likely to 
participate in street violence than do the unemployed.
    USAID programs in democracy/governance are a means of promoting an 
understanding of open and transparent government and the rule of law. 
USAID funded programs which bring the Palestinians and Israelis 
together, such as USAID water activities, the Middle East Regional 
Cooperation program, and people-to-people programs, may be some of the 
best ways to stop the violence on both sides.
    Question. Given that by some estimates over 100,000 Palestinians 
lost their jobs in Israel as a result of the intifada, how effective 
are USAID micro-credit and private sector development programs in a 
depressed Palestinian economy?
    Anwer. The strong performance of Palestinian information technology 
companies at a recent exhibition to Dubai led to an invitation to the 
Palestinian Information Technology Association to open a representative 
office at Dubai Internet City--the Middle Eastern hub of information 
technology. This is evidence of resilience of the Palestinian private 
sector, even under severely stressed conditions, and its receptivity to 
USAID assistance.
    USAID will continue to pioneer support for the Palestinian private 
sector, while delivering much needed financial assistance to the poorer 
segments of society through micro-credit operations. For example, USAID 
helped to establish the Palestine Credit and Development organization 
(FATEN), a non-profit, micro-finance institution, which has thus far 
provided 18,800 micro-loans totaling $5.7 million to over 5,000 women. 
The repayment rate has been near 99 percent, which is outstanding, 
given the current economically stressed circumstances.
    Other USAID-supported private sector activities include the 
development of employment-generating opportunities for Palestinians by 
helping establish industrial estates. USAID funded physical 
infrastructure for the Gaza Industrial Estate. Phase one opened in 1998 
and houses 22 businesses with 1,200 employees. USAID is also developing 
infrastructure for the first Palestinian high-tech park as well as 
carrying out feasibility studies for two other industrial estates. When 
fully operational, the four estates will have a capacity to employ 
about 80,000 people.
    Finally, and with immediate relevance to the estimated over 100,000 
Palestinians who have lost their jobs in Israel, USAID has an on-going 
$12.3 million Emergency Employment project, with a planned further 
obligation of $2.7 million in April. Further, the Mission is currently 
receiving applications from American companies and non-governmental 
organizations interested in implementing its new $30 million Job 
Opportunities through Basic Services project, with final awards planned 
for May or June.
                                 egypt
    Question. The bulk of USAID's programs in Egypt are targeted toward 
trade and economic development, health care/family planning, and 
education.
    USAID has invested a total of $925 million in democracy and 
governance programs in Egypt, and intends to obligate $8 million in 
fiscal year 2002 funds for these activities.
    Since 1993, Freedom House has consistently ranked Egypt ``Not 
Free'' in terms of political rights and civil liberties. What concrete 
results can USAID identify for the $925 million investment America has 
already made in democracy and governance programs in Egypt?
    Answer. The bulk of the $925 million was expended between 1983-1999 
for local development and decentralization activities. These programs 
achieved many useful results at the local level, in areas such as water 
treatment, fire services, road construction, and community development. 
However, they did not produce systemic decentralization. Since 2000, 
democracy and governance programs have been reduced in scope and now 
focus on commercial court improvement, NGO strengthening, and local 
participation.
    Some accomplishments of current activities are:
  --The Administration of Justice Support Program;
  --The institutionalization of computerized case initiation and 
        registration network in two pilot commercial courts, resulting 
        in strong customer satisfaction and implementation of related 
        training;
  --32 percent of court administrators and judicial trainers who have 
        directly benefited from the training opportunities are women;
  --The provision of commercial law training programs for 3,000 judges; 
        and
  --Assistance resulted in a 50 percent reduction in case processing 
        time in the two commercial courts.
    The NGO Service Center:
  --$2 million has been awarded to 36 NGOs in support of civic 
        participation in the areas of environment, women and children's 
        rights, education, consumer protection, and health;
  --Conducted 1,073 training opportunities for NGO representatives. 
        Training covered internal governance, management, advocacy, and 
        general topics related to civil society and development;
  --In collaboration with the Mission's training program, the Center 
        trained an additional 175 NGO representatives;
  --The Center produced resource materials for NGOs and published a 
        comprehensive directory of donors and assistance providers for 
        Egyptian NGOs.
    The Collaboration for Community-Level Services Project:
  --Implementation of this pilot $5M project began in February 2001. 
        Implements local initiatives to improve the delivery of 
        services through enhanced citizen participation. In one 
        community, the project funded a summer education program for 
        140 students, aged 6-14.
    Question. How much of the proposed fiscal year 2003 allocation does 
USAID intend to use for the promotion of democracy and governance in 
Egypt, and will any funds be used to promote a more professional and 
responsible press?
    Answer. In fiscal year 2003, we propose to obligate $13.27 million 
for democracy/governance activities. We are exploring the option of 
working with Embassy/Public Affairs to develop a program to make the 
Egyptian press better informed and more professional. No specific 
amount of funding has been determined.
    Question. Why does USAID only work with non-governmental 
organizations (NGOs) that have been approved by the Egyptian 
government--which gives the government de facto control over civil 
society?
    Answer. Under Egyptian law, USAID can only work with NGOs 
registered with the Government of Egypt (GOE). In addition, the 
Ministry of Social Affairs provides a security check for NGOs who have 
applied for grants. USAID's grantee, Save the Children, selects and 
awards the grants. The GOE does not control the type of grants, or the 
training and technical assistance given to NGOs.
                     american university of armenia
    Question. The American University of Armenia (AUA) offers unique 
educational opportunities for the people of Armenia, and in the past 
received an endowment from USAID. How can USAID encourage more 
effective use of AUA on a regional basis, offering educational 
opportunities to graduate students from Russia or other former-Soviet 
Republics?
    Answer. The American University is indeed a valuable resource for 
the people of Armenia, and received an endowment from USAID in the 
amount of $9,576,000 in 1999. AUA has found a unique niche as a 
graduate institution in Armenia, supplementing the undergraduate 
education provided by local universities. It offers English-language 
education in business administration, political science and public 
policy, international and comparative law, public health, earthquake 
and industrial engineering, and English language teaching. AUA's 
attention to these professional fields has strengthened and expanded 
local understanding of the international environment, market economics, 
public policy, and, ultimately, democratic values.
    Greater awareness of AUA programs will be instrumental to its 
becoming a regional educational institution. USAID will encourage the 
use of AUA by students from Russia and the other former-Soviet 
Republics by supporting the broader dissemination about AUA's programs 
among its regional missions and their implementing agencies and 
partners. In addition, USAID has strongly encouraged AUA to work 
towards completing the requirements for accreditation. AUA has been 
consulting with the Western Association of Schools and Colleges, which 
will visit Armenia in June 2002, to further the discussion. USAID hopes 
that AUA will complete the necessary requirements for accreditation by 
that body, which will make the degree more attractive outside of 
Armenia.
    Finally, in an effort to direct the institution toward financial 
sustainability, USAID has discussed marketing of AUA's services to 
other USAID sponsored programs and international donors. This has 
resulted in the renting of conference facilities and office space of 
the University's new Business Center as well as use of local expertise 
from AUA's newly established Policy Unit to produce social and economic 
studies and analyses. USAID has provided recommendations on how to 
strengthen the Policy Unit to expand this type of service.
                nagorno-karabakh: rate of implementation
    Question. The situation in Nagorno-Karabakh continues to be dire, 
with assistance needed on all fronts--from education to healthcare and 
infrastructure development. Are USAID's programs in Nagorno-Karabakh 
running at full capacity?
    Answer. While the needs of the people in Nagorno-Karabakh are 
great, USAID is currently managing an appropriate, targeted 
humanitarian assistance program to Nagorno-Karabakh. Since 1998 $15.8 
million has been obligated for this program and USAID plans to obligate 
a total of $20 million for humanitarian assistance by the end of this 
year. USAID will continue to do work beyond the $20 million goal in 
program areas to be identified in the future.
    The current program includes activities to foster the self-reliance 
and dignity of the vulnerable in Nagorno-Karabakh by providing 
community access to potable water, rehabilitating selected shelters and 
schools, strengthening the health care system and addressing economic 
challenges by providing employment and income generation opportunities. 
There is also a project in place aimed at raising the standard of 
living for women and their families by providing financial services to 
urban and rural women. Significant resources devoted to shelter, water, 
and school infrastructure rehabilitation involved strong community 
participation and some opportunities for local employment. Finally, 
USAID is supporting a manual de-mining activity that will train and 
equip two manual mine clearance teams to operate across Nagorno-
Karabakh and destroy unexploded ordnance there. USAID will soon solicit 
interest from NGOs and PVOs to implement additional programs in the 
areas of shelter rehabilitation and health as well as extend the 
present manual de-mining activity and provide final funding for the 
current women's microcredit activity. USAID believes that its 
humanitarian assistance programs in Nagorno-Karabakh are running at 
full capacity; on a per-capita basis, they are well above those in the 
rest of Azerbaijan.
  nagorno-karabakh: utilization of humanitarian organizations like crs
    Question. Could more assistance be provided to humanitarian 
organizations in Stepanakert, such as Catholic Relief Services (CRS)?
    Answer. All assistance to Nagorno-Karabakh has been obligated to 
humanitarian organizations. In general, humanitarian assistance has 
focused on aiding people living beyond the vicinity of Stepanakert as 
their needs have been recognized as greatest. However within 
Stepanakert, USAID assistance has resulted in the establishment of a 
central family care facility for mothers and children, the completion 
of a training room in the Stepanakert Pediatric Hospital, and training 
of health-care professionals. Implementing organizations of the nearly 
$12 million of assistance already expended include Catholic Relief 
Services, Family Care, Save the Children, United Methodist Committee on 
Relief (UMCOR), International Committee of the Red Cross (ICRC), and 
HALO Trust. In July 2001, USAID granted Catholic Relief Services an 
additional $3 million to begin implementing a humanitarian activity 
aimed at improving community access to potable water, strengthening the 
health care system and addressing the economic challenges by providing 
employment and income generating opportunities. This summer, USAID 
plans to solicit interest from NGOs and PVOs to implement additional 
programs in the areas of shelter rehabilitation and health. Incremental 
funding will also be used to extend the present manual de-mining 
activity by HALO Trust and provide final funding for the current 
women's micro-credit activity. USAID believes that currently planned 
funding levels are adequate to address the needs of this program.
      nagorno-karabakh: activities that foster regional stability
    Question. Given the current stalemate in peace talks over Nagorno-
Karabakh, has USAID considered implementing regional development/
training programs to bring together Armenians, Georgians, and Azeris? 
(for example, training journalists from the region in Georgia)
    Answer. USAID has implemented a number of programs responsive to, 
and encouraged by, language on ``confidence-building measures'' 
included in the Foreign Operations Appropriations legislation.
    In 2000, USAID supported a series of workshops for women from all 
three Caucasus countries. The purpose of this activity was to increase 
the role of women in economic, political, and social life; and to 
promote and reinforce cooperation among women from all three countries.
    Also, beginning in 2001, USAID supported production of a series of 
24 interactive video links between influential individuals in 
Azerbaijan and Armenia to increase mutual understanding and tolerance. 
The television talk shows, entitled ``Front Line'', covered a broad 
range of social, political and cultural issues. This 24-part series 
included topics such as refugees' issues, the peace process, children 
and war, environment, transportation, trade and conflict, joining the 
Council of Europe and others. The potential audience was over five 
million viewers in Armenia and Azerbaijan.
    Internews/Armenia, in cooperation with the Internews programs in 
Georgia and Azerbaijan, produces and distributes weekly trans-Caucasus 
news exchange programs. The themes include employment, national dance 
and song, volunteerism, odd professions, political parties, 
transportation and roads, industry and other. Seventeen regional 
television stations in Armenia broadcast the program.
    In 2001, USAID funded the ``Momentum'' program for fifty 
participants from local government, mass media and NGOs. The goal of 
the program was to support the preparation of young decision-makers in 
Armenia to participate in policy development and self-governance as 
well as to develop conflict resolution and leadership skills. The 
program is carried out by the Conflict Management Group which aims at 
creating a regional network of new leadership capable of building 
democratic infrastructure and proposing realistic alternatives to 
democratic and cross border conflicts in Armenia and the Caucasus 
region. In 2002, USAID plans to sponsor two more training programs on 
conflict management.
    USAID/Armenia also plans to support a youth exchange activity 
within its civic education program implemented by Junior Achievement. 
The students from Georgia, and particularly from Abkhazia, along with 
students from Armenia, will participate in week-long summer camp 
programs in Armenia. USAID also participates in regional workshops 
focused on Local Economic Development that involves participants from 
all three countries who work in this area.
    In addition to the above, USAID is implementing a Regional Water 
Activity which brings together middle-level civil servants to dialogue 
on technical issues concerning the Kura and Aras river basins and ways 
to preserve them through rational water management systems.
    In the course of developing its new country development strategy 
for Armenia for fiscal years 2004-2008 USAID plans to undertake 
analysis in the area of conflict prevention. USAID Georgia conducted a 
conflict vulnerability assessment in 2001 and has an extensive 
community development program aimed at reducing tensions in Georgia.
                         south asia/afghanistan
    Question. Has the Administration firmly determined $148 million to 
be the fiscal year 2003 budget request for Afghanistan?
    Answer. No. The Administration is reviewing the needs of 
Afghanistan and has not yet determined total fiscal year 2003 
requirements.
    Question. What programs and activities, both short and long-term, 
are USAID considering for Afghanistan?
    Answer. We understand the importance of having a strategy that both 
makes an impact in the short run and lays the foundation for 
Afghanistan's long-term recovery. Our immediate high-impact activities 
include the following:
  --USAID is rehabilitating the Women's Ministry for its opening 
        ceremony on International Women's Day, March 8.
  --We are printing and distributing secular textbooks--9.7 million 
        books, for the 1.5 million children expected to return to 
        school on March 23.
  --We are continuing our deliveries of food aid and seeds. The first 
        seed deliveries began on March 14, and are marked with the 
        American flag and ``gift of the American people'' in Dari and 
        Pashto.
  --We are negotiating with WFP to provide food salary supplements to 
        270,000 civil servants for 6 months.
  --We will support the vaccination of 2.2 million children through the 
        UNICEF measles vaccination campaign in April.
  --USAID has responded to the Interim Authority's request to support 
        the establishmet of a Central Bank by providing technical 
        assistance.
    Long-term rehabilitation efforts will be guided by a strategy that 
has been vetted through the interagency process. The USG effort will 
focus on four areas:
  --First, repatriating and resettling refugees and internally 
        displaced persons.
  --Second, reestablishing food security. This will be done by 
        restoring livelihoods to create economic capacity to purchase 
        food and other basic needs; improving basic health; and 
        introducing alternative crops.
  --Third, Creating conditions for stability. We must provide 
        alternatives to those who now benefit from conflict, terrorism, 
        and drug trafficking. This will be done through rehabilitating 
        the agriculture sector, with a focus on crop substitution, and 
        through developing the country's seed systems. Water 
        availability is critical, as are the access to credit, 
        livestock rehabilitation, improvement of horticulture, and mine 
        awareness. We will mobilize primary education and invest in 
        community health as well.
  --Finally, we will work to rebuild Afghanistan as a nation state, 
        through developing governance and rule of law institutions, and 
        reestablishing functioning markets and improving the investment 
        climate, particularly for agriculture.
             establishment of a free and independent media
    Question. Do you agree that the establishment of a free and 
independent media is critical to the long-term development of 
Afghanistan and Pakistan?
    Answer. Yes. Free and independent media is essential to 
facilitating political participation, providing an outlet for dissident 
voices, and providing civil society with an independent check on 
government, all necessary for long-term peace and stability in both 
Pakistan and Afghanistan. In Afghanistan, President Karzai has recently 
signed a new media law providing for a free print and broadcast media 
sector. USAID believes this is a first and very important step in 
creating a society in Afghanistan that can resort to dialogue and 
debate before conflict and fighting.
    USAID has distributed 30,000 radios, provided support to VOA for 8-
9 stringers, funded production of daily Human. Info Bulletin; Radio 
Kabul; media advisor for Chairman Karzai. We have committed funds to 
rebuild a school to train reporters.
    Question. What programs is USAID currently sponsoring that promote 
responsible media in those countries?
    Answer. USAID has provided Internews with a $1 million grant to 
accomplish three objectives in Afghanistan in the next 8 months: (1) 
training Afghan journalists to provide balanced and fair reporting; (2) 
ensuring coverage and reporting on political, economic, and social 
issues during the reconstruction and transitional period; and (3) 
advising and and guiding the development of a media regulatory 
framework that creates an environment in which independent media can 
thrive.
    At this time there are no USAID programs working with the media in 
Pakistan.
                                cambodia
    Question. The February 3 commune elections in Cambodia were neither 
free nor fair, and over 20 opposition candidates and activists were 
murdered in the run up to the polls. Despite these major challenges, 
the democratic opposition led by Member of Parliament Sam Rainsy gained 
seats and popular support throughout the countryside.
    With parliamentary elections scheduled in Cambodia for next year, 
how does USAID intend to support the democratic opposition to compete 
in--and win--these polls?
    Answer. USAID/Cambodia has just submitted its 3-year interim 
country strategy to USAID/Washington for approval. Subject to Agency 
approval, the Mission intends to provide support to all significant 
political parties that forswear violence and accept competition in 
democratic elections. Rationales for, and examples of, the kinds of 
assistance USAID may provide include:
  --If Cambodia is to deal with pressing development issues in the next 
        five years, the 2003 election will need to include debates over 
        fundamental economic growth, health, education and natural 
        resources management issues. USAID technical assistance could 
        help stimulate debate within and between parties on how to 
        address these key development issues and articulate a choice on 
        these issues for the voters so that the new government has a 
        popular mandate for difficult changes.
  --Cambodia's political parties need to be nurtured as institutions. 
        USAID technical assistance could help political parties develop 
        forums for broader and more inclusive discussions and debates 
        on critical political issues over time, and to develop party 
        platforms.
  --USAID technical assistance could help political parties (at the 
        national and grassroots levels) develop more effective and 
        internally democratic procedures and to improve their 
        organizational capabilities, leadership skills and message 
        development. This assistance could include expanding, improving 
        and maintaining organizational structures, increasing internal 
        party communications, and planning and executing party 
        activities (such as membership recruitment and fund raising).
    USAID technical assistance could encourage and aid the 
participation of women in political life. This assistance could include 
working with women candidates seeking public office from all parties, 
in multiparty or separate single-party programs. Assistance targeted to 
female party members can help to foster their interest in issues of 
special importance to women. USAID technical assistance could also 
support the development of caucuses of elected women officials.
    Question. The fiscal year 2003 budget request includes $17 million 
for Cambodia, of which an undetermined amount of funds will be used to 
``strengthen the National Assembly.'' What programs is USAID 
considering for the National Assembly?
    Answer. A recently completed assessment of democracy and governance 
assistance options for Cambodia concluded that assistance to the 
National Assembly would not yield sufficient democratic returns. 
Therefore, assistance to the National Assembly is not foreseen at this 
time.
    Question. Does USAID believe the Assembly to be anything more than 
a rubberstamp institution dominated by the ruling Cambodian People's 
Party?
    Answer. Yes, executive interference and the influence of patronage 
politics do limit the Assembly's ability to review and monitor the 
implementation of enacted laws and policies, including use of 
government funds by the executive branch. But we have seen progress. 
The National Assembly is more independent and assertive than it was 
prior to 1998.
    Question. USAID recently completed an assessment in Cambodia. What 
are the findings of that assessment regarding the status of the rule of 
law in Cambodia, and does USAID consider the Cambodian legal system to 
be impartial and credible?
    Answer. The rule of law is severely lacking in most areas. Wealth 
and political power rather than justice serve as the basis on which 
disputes are resolved. Human rights abuses are common. Notorious 
offenses, including trafficking of women and children, undermine 
fundamental rights. The structural base for rule of law is incomplete 
and the laws that exist are only rarely enforced. USAID does not 
consider the Cambodian legal system to be impartial and credible at 
this time.
                                 burma
    Question. The primary responsibility for Burma's many ills--from 
illicit drug cultivation to an explosive HIV/AIDS infection rate--is 
the oppressive and illegitimate rule of the State Peace and Develoment 
Council (SPDC), and the inability by the regime to evidence good 
governance. Do you believe that the NLD is the legitimate government in 
Burma?
    Answer. The United States has full diplomatic relations with the 
Government of Burma. The State Department advises that we have 
downgraded our representational status in Rangoon from Ambassador to 
Charge d'Affaires because of the regime's repressive policies and human 
rights abuses. We strongly support the NLD and have called on the 
Government to implement the results of the 1990 elections.
    Question. In order to maintain accountability and transparency--and 
to ensure deliverability of assistance in a lawless environment--do you 
agree that international nongovernmental organizations (INGOs) 
operating in Burma should regularly consult with donor countries, 
including the United States?
    Answer. There are a small number of INGOs operating inside Burma 
with U.S. Government funding. We and they agree that regular 
consultations with the U.S. Embassy in Rangoon--as well as the 
Department of State in Washington, the USAID office in Bangkok that 
monitors USAID-managed programs in Burma, and USAID/Washington--are 
essential to maintaining adequate program oversight, monitoring 
conditions in Burma that effect foreign assistance efforts, and 
coordinating with other assistance programs.
    Question. Will exclusion of the NLD from the consultation process 
on programs conducted by INGOs in Burma marginalize the NLD?
    Answer. The position of the NLD within Burma and internationally is 
no way dependent on either foreign assistance provided by international 
donors or on programs conducted by INGOs in Burma.
                  colombia/andean regional initiative
    Question. Last week, President Pastrana ordered the Colombian 
military to enter FARC's safe haven, bringing to an end the efforts of 
his government to achieve a political solution to the country's 38-year 
civil war.
    FARC guerillas have repeatedly undermined the peace process. During 
the past 30 days alone, FARC staged 170-armed attacks and hijacked an 
aircraft carrying the president of Colombian Senate's peace commission.
  --How will the collapse of the peace talks impact the ability of 
        USAID to carryout its alternative development and democracy 
        building activities in Colombia?
  --Should it prove impossible to effectively and efficiently conduct 
        these activities in Colombia, will USAID seek to reallocate to 
        Colombia's neighbors, particularly Bolivia, to bolster their 
        alternative development activities?
    Answer.
  --At this point in time, the collapse of the peace talks has not 
        affected our ability to implement USAID programs in Colombia.
  --Resumption of government control in the former ``despeje'' zone 
        controlled by the FARC has led to requests for us to expand 
        some of our democracy and human rights activities there. We are 
        helping the Colombian Human Rights Ombudsman's office to 
        establish a presence in the zone. This includes putting in 
        place an early warning system designed to prevent massacres and 
        forced displacements. We are also responding to a request from 
        one of the municipalities in the zone to put in place dispute 
        resolution services in the area through our ``casas de 
        justicia'' program. Both of these programs have previously been 
        implemented elsewhere in Colombia and have shown positive 
        results.
  --The FARC is reported to have withdrawn at least part of its forces 
        from the safe haven prior to President Pastrana's announcement 
        and there have been clashes between FARC and AUC forces in 
        Putumayo. These factors have temporarily slowed implementation 
        of USAID's alternative development and local governance 
        activities in the area. As the USAID internal program 
        evaluation and the GAO correctly pointed out, violent conflict 
        and the lack of central government authority hinder the 
        successful implementation of Alternative Development programs 
        in Colombia. However, these characteristics of Putumayo have 
        not markedly changed since the end of the safe haven.
    We expect violence will remain higher than usual in the weeks 
approaching the presidential elections and change of administration in 
August. We do not expect that the continuing violence will seriously 
hamper our Alternative Development activities, because our field based 
monitoring systems allow us to detect problems before they become 
serious and take corrective action. If the situation were to 
deteriorate dramatically, we would clearly adjust our program in order 
to mitigate any regional instability.
                 usaid office of transition initiatives
    Question. OTI has a proven track record of responding effectively 
to global crises, be in East Timor or Afghanistan. The fiscal year 2003 
request includes a $5 million increase in OTI funding (to a level of 
$55 million). Is this increase sufficient, given OTI's proven ability 
to get on the ground and operational in an effective and efficient 
manner?
    Answer. I believe that Office of Transition Initiative's (OTI) 
funding level for fiscal year 2003 will be enough to allow the Office 
to respond to the high priority needs for transition assistance during 
the year. OTI has done an excellent job of using its resources 
efficiently and concentrating them on those transition countries where 
the assistance can be most effective. The Office must continue to 
husband its resources carefully, even with the five million-dollar 
increase in fiscal year 2003, because the need for transition 
assistance is pressing in the aftermath of the September 11 tragedy.

                          SUBCOMMITTEE RECESS

    Senator Leahy. Thank you very much, that concludes the 
hearing. The subcommittee will stand in recess until 10 a.m., 
Wednesday, March 6, when we will meet in room SD-124 to hear 
from Roger P. Winter, Assistant Administrator for Democracy, 
Conflict and Humanitarian Assistance, Agency for International 
Development.
    [Whereupon, at 11:50 a.m., Tuesday, Februrary 26, the 
subcommittee was recessed, to reconvene at 10 a.m., Wednesday 
March 6.]










      FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS 
                  APPROPRIATIONS FOR FISCAL YEAR 2003

                              ----------                              


                        WEDNESDAY, MARCH 6, 2002

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:07 a.m., in room SD-124, Dirksen 
Senate Office Building, Hon. Patrick J. Leahy (chairman) 
presiding.
    Present: Senators Leahy and McConnell.

                  AGENCY FOR INTERNATIONAL DEVELOPMENT

STATEMENT OF ROGER P. WINTER, ASSISTANT ADMINISTRATOR 
            FOR DEMOCRACY, CONFLICT AND HUMANITARIAN 
            ASSISTANCE

             OPENING STATEMENT OF SENATOR PATRICK J. LEAHY

    Senator Leahy. Good morning. I am pleased that the 
subcommittee is holding this hearing on State Department and 
USAID democracy and human rights programs.
    I especially want to thank Senator McConnell. He has been a 
strong supporter of these programs, often in countries that are 
not on the front pages of the papers, although the issues are 
just as important, obviously, to the people who are there. It 
was Senator McConnell's idea to hold today's hearing.
    I have to go to an antitrust hearing in Judiciary. This 
sort of thing happens when you have too many things going on at 
once, but Senator McConnell will chair this hearing after I 
leave.
    I see Lorne Craner, the Assistant Secretary of State for 
Democracy, Human Rights, and Labor. He has a lot of experience 
with these issues. I think the administration made a superb 
choice in putting him in this position.
    We were just talking about Roger Winter's involvement with 
refugee resettlement in Vermont. He is the Assistant 
Administrator of USAID for Democracy, Conflict and Humanitarian 
Assistance. He spent 20 years as the Executive Director of the 
U.S. Committee for Refugees.
    Now, USAID has requested $991 million for these activities 
in fiscal year 2003. I want to make darned sure, when you are 
talking nearly $1 billion, just exactly what is the definition 
of democracy and human rights.
    For example, the State Department was unable to tell us how 
much it is requesting for fiscal year 2003 and how much it 
expects to spend in fiscal year 2002 because the funding is 
spread among so many different bureaus. Mr. Craner, I know you 
are going to want to find this out as much as everybody else.
    This subcommittee has a strong interest in supporting both 
of you. I believe it is impossible for a country to prosper 
economically without transparent representative government 
accountable to its people, respecting the rights of freedom of 
expression and association. I have discussed this with the 
President and with Secretary Powell. I said we are signing 
checks all over the world, or at least promissory notes, in our 
fight against terrorism. I want to make sure just where it is 
going, where the money is coming from, and for what purposes.
    We see what happens when human rights and opportunities for 
open political participation are subverted. Zimbabwe, Serbia, 
Indonesia, and Haiti are some recent examples. We have been 
wanting to be helpful in each of those areas, but we have seen 
what happens when human rights are crushed and political 
dissent is subverted, corruption flourishes, and it becomes a 
thin line between where government ignores violation of human 
rights and where government is involved actively in those 
violations of human rights.
    We have learned about how to promote democracy and human 
rights partly from our own mistakes, but I am convinced we can 
do better.
    Now, I know these are not top priorities for either the 
State Department or USAID. Congress established the State 
Department's Human Rights Bureau almost 25 years ago. It has 
been consistently underfunded and marginalized within the 
Department. That has happened no matter which party has had the 
White House.
    USAID's democracy and human rights programs have to compete 
with a whole lot of other priorities like disaster and food 
assistance. I want to make sure, Mr. Winter, that you can 
support democracy and human rights and not get distracted by 
humanitarian emergencies, although sometimes I recognize they 
overlap.
    The State Department and USAID have different approaches to 
democracy programs. In many countries there is a lack of 
coordination. USAID usually takes a longer-term approach which 
involves strengthening civil society and many of the same kinds 
of activities as traditional development work. The State 
Department sometimes is skeptical of these long-term programs. 
I think of such things as just working to get both boys and 
girls into schools. In the first year, it is not going to make 
an awful lot of difference. In the second year, it will not. 
But eventually it does. Eventually it will make a big 
difference to that society. And USAID needs to recognize that 
strengthening democracy is inherently political.
    I am concerned that at the State Department each regional 
bureau has its own funds for democracy and human rights 
activities in addition to the programs Mr. Craner oversees. It 
makes it hard for one bureau to determine what the other is 
doing and where we are going.

                           prepared statement

    I will put my whole statement in the record. Mr. Craner, I 
want you to know that I am concerned about the certification on 
human rights in Colombia. I know this is expected soon. Many 
people would say expected too soon. The Colombian military has 
improved its rhetoric. They have taken a few positive steps. 
Some aspects of the situation are not better; it is even worse. 
And I do not think any objective person could find that our 
law, if you follow the letter and the spirit of the law--which 
requires the Colombian military to take effective measures--has 
been met.
    And with that, I turn this over to Senator McConnell.
    [The statement follows:]
             Prepared Statement of Senator Patrick J. Leahy
    Good morning. I am pleased that the Subcommittee is holding this 
hearing on State Department and USAID democracy and human rights 
programs, and want to especially thank Senator McConnell. He has been a 
strong supporter of these programs--often in countries that are not on 
the front pages of the newspapers, and it was his idea to hold today's 
hearing.
    I would like to welcome our two witnesses. Lorne Craner, Assistant 
Secretary of State for Democracy, Human Rights, and Labor has a great 
deal of experience with these issues. He is a superb choice for the 
important position he holds.
    Also with us is Roger Winter, Assistant Administrator of USAID for 
Democracy, Conflict and Humanitarian Assistance, who came to USAID last 
year after twenty years as the Executive Director of the U.S. Committee 
for Refugees.
    USAID has requested $991 million for these activities in fiscal 
year 2003. That is a lot of money, and I am interested in knowing what 
you mean by ``democracy'' and ``human rights''. I have a feeling we may 
be talking about some different things.
    Unfortunately, the State Department was unable to tell us how much 
it is requesting for fiscal year 2003 or how much it expects to spend 
in fiscal year 2002, apparently because this funding is spread among so 
many different bureaus. Mr. Craner, I suspect you would like to know 
this as much as we would, to find out what everyone at the State 
Department is doing in your area.
    This Subcommittee has a strong interest in supporting both of you. 
I believe it is impossible, over the long term, for a country to 
prosper economically without transparent, representative government 
that is accountable to its people and respects the rights of freedom of 
expression and association. We have seen what happens when human rights 
and opportunities for political participation are suppressed or 
subverted. Zimbabwe, Serbia, Indonesia, and Haiti are some recent 
examples, where corruption flourishes and governments have ignored or 
even perpetrated human rights abuses.
    We have learned a lot about how to promote democracy and human 
rights, partly from our mistakes. But I am convinced that we can do 
better. It is no secret that these are not top priorities for either 
the State Department or USAID. Congress established the State 
Department's human rights bureau almost 25 years ago. To this day, this 
bureau is consistently underfunded and marginalized within the 
Department, regardless of which party occupies the White House.
    At the same time, USAID's democracy and human rights programs are 
embedded in a bureau where they must compete with a range of other 
priorities, like disaster and food assistance. Mr. Winter, since those 
areas are your expertise, I wonder if you are going to be dealing with 
humanitarian emergencies, instead of democracy and human rights.
    We are told that the State Department and USAID have different 
approaches to democracy programs, and that in many countries there is a 
lack of coordination. USAID usually takes a longer-term approach, which 
involves strengthening civil society and many of the same kinds of 
activities as traditional development work, while the State Department 
is more focused on political parties and elections, and has often been 
skeptical of longer-term, less-direct approaches.
    There have been times where these two approaches have been 
successfully integrated, but we hear that your efforts have often 
ignored each other or acted at cross-purposes.
    USAID needs to recognize that strengthening democracy is inherently 
political, and that it often involves actively supporting key 
opposition figures who are committed to--and often risk their lives 
for--democratic reform and human rights. It is also important for the 
State Department to understand that it can be a mistake to put too much 
emphasis on individuals, rather than on building democratic 
institutions.
    I am also concerned that at the State Department each regional 
bureau has its own funds for democracy and human rights activities--in 
addition to the programs that Mr. Craner oversees. This makes it hard 
for one bureau to determine what others are doing, and it makes 
budgeting and oversight difficult for the Congress. As I mentioned, the 
State Department can't even tell us how much it is spending.
    I unfortunately have two other hearings, including one in the 
Judiciary Committee, that I am also supposed to be at so I cannot stay 
here long. But I do have several questions that I will submit in 
writing, and I will review the transcript of the hearing.
    My hope is that today's discussion will shed light on what works, 
what does not work, and, if you had additional resources, how you would 
use them. Senator McConnell and I strongly support these programs and 
want to be sure that you are getting the help you need.
    One final word: Mr. Craner, I want you to know that I am very 
concerned about the certification on human rights in Colombia. I know 
this is expected soon--too soon in my opinion. The Colombian military 
has improved its rhetoric, and they have taken a few positive steps. 
But overall, the situation has not improved, and in some aspects it is 
worse. I do not believe that any objective person could find that our 
law, which requires the Colombian military to take ``effective'' 
measures, has been met. I hope you will use your position to ensure 
that the law is implemented as we intended.

             OPENING STATEMENT OF SENATOR MITCH MC CONNELL

    Senator McConnell. I thank my friend, the chairman. He is 
my second favorite person who has ever chaired this 
subcommittee.
    A good and dear friend, and I thank him today for allowing 
us to have this hearing. Thank you very much, Pat.
    Let me begin my remarks with a quote from a man who brought 
down the Iron Curtain and consigned communism to the ash heap 
of history. Ronald Reagan, who embraced the power of ideas and 
freedom, said in his 1981 Inaugural Address that ``no weapon in 
the arsenals of the world is so formidable as the will and 
moral courage of free men and women. Let that be understood by 
those who practice terrorism and prey upon their neighbors.''
    As the Soviet Union and now the Taliban and al-Qaeda 
network in Afghanistan found out, no truer words have ever been 
spoken. Where America's crusade for freedom empowered the 
oppressed to discard the decaying Soviet system in the 1980's, 
no less an effort must be waged to undermine and eliminate the 
breeding grounds for today's evil empire, which are terrorists 
and their violent cells.
    While bombs and bullets are already slaying the foot 
soldiers of extremism, the global advancement of democracy and 
the rule of law will help guarantee that no port is safe for 
terrorists.
    The attacks of 9/11 make this morning's hearing on 
democracy and human rights programs even more imperative and 
timely. These activities are not relics of the cold war, as 
some have asserted, but sound investments against new threats 
and conflicts.
    The debate is no longer whether America should sponsor 
democracy and human rights programs, but where these activities 
are most urgently needed, how they are most effectively 
conducted, and just how much more we should spend on the 
promotion of democracy and human rights abroad.
    While the Muslim world may be the most obvious target for 
these programs, we should not discount those countries that are 
either closed or in transition. Ongoing democracy and human 
rights activities should be increased throughout Asia, 
including in Cambodia and Indonesia, and renewed commitments 
should be made to the champions of democracy in Burma ably led 
by Aung San Suu Kyi and the National League for Democracy. In 
the Caucuses, special emphasis should be placed on immediately 
instituting programs that will blunt the sharp sting of 
political succession in Georgia and Azerbaijan. In the former 
Soviet Union, political and legal reforms in Russia and Ukraine 
must remain a priority for the United States. And in Africa, 
human rights and political reform activities should be 
bolstered in Nigeria and Zimbabwe, two countries that are again 
at the brink of failed-state status.
    The conduct of these programs is decentralized and diffuse. 
Within the State Department, the Bureau for Democracy, Human 
Rights, and Labor, DRL, operates with a $13 million budget that 
is supplemented by activities funded by various regional 
bureaus and USAID. It is unclear to me who has day-to-day 
responsibility for the democracy and human rights portfolio or 
how consistency in programming is maintained. I would offer 
that centralizing the authority and oversight of activities 
would increase the efficiency of these programs, thus 
maximizing the effectiveness of every human rights and 
democracy dollar we spend.
    With the exception of the annual request for DRL's Human 
rights and Democracy Fund, the total amount America spends on 
democracy and human rights programs in a single fiscal year 
remains somewhat elusive. For example, I have seen estimates 
that place the fiscal year 2001 expenditures on democracy 
programs anywhere from $390 million to $500 million. USAID's 
fiscal year 2003 request of $960 million for democracy and 
governance programs is an improvement, but in 1 year alone, 
Americans will spend twice as much on chewing gum than we do on 
advancing democracy abroad.
    Let me close by commending President Bush for his steadfast 
leadership during these uncertain times. He is right to affirm, 
as he so strongly did during the State of the Union address, 
that ``America will always stand firm for non-negotiable 
demands for human dignity, the rule of law, limits on the power 
of the state, respect for women, private property, free speech, 
equal justice and religious tolerance. America will take the 
side of brave men and women who advocate these values around 
the world.''
    I want to thank you very much, gentlemen, for being here. 
What I would like to do is ask Mr. Winter and Mr. Craner to 
summarize their remarks, I guess Mr. Winter going first. And we 
will put your full statements in the record.

               SUMMARY STATEMENT OF HON. ROGER P. WINTER

    Mr. Winter. Thank you, Mr. Chairman.
    The Bureau for Democracy, Conflict, and Humanitarian 
Assistance is a new pillar bureau within USAID. The Office of 
Democracy and Governance has been moved into the former Bureau 
for Humanitarian Response.
    With respect to our budget request for the coming fiscal 
year, we have requested an increase of $100 million for 
democracy programs alone. That is an indication, along with the 
fact that the Bureau's name starts with the word ``democracy'', 
of the priority that we attach to this. I have been in the 
humanitarian assistance field for a long time. I see what the 
lack of democracy does to actual people on the ground all over 
the world.
    USAID's democracy programs operate within a framework which 
is developed by the Department of State in consultation with us 
and with others. USAID is the primary implementer of that 
policy, but the way the program operates, it is in fact a 
partnership.
    In the interest of time, as suggested by your staff, I 
would like to focus on what we are looking to do differently 
after September 11.
    First of all, we do realize the need for new approaches. 
Within the mix of things, Afghanistan of course is unique and 
we have, as you understand, a huge commitment on the 
humanitarian and rehabilitation side.
    But on the democracy and governance side, we are currently 
supporting a good chunk of the civil service sector within the 
transitional government to assure that governance actually 
delivers the basics to the Afghan people. We are committed to 
strengthening the institutions created by the Bonn Accords and 
are doing so, for example, with the Commission on Justice and 
Human Rights that the new government has set up. We are 
prepared to assist in a whole variety of ways with respect to 
the upcoming Loya Jirga to assure that it establishes 
government institutions that are legitimate, inclusive, and 
effective.
    We are, within the region, shifting our resources to assist 
states on the front line in the war on terrorism. We are 
opening missions in Pakistan and Afghanistan. We are beginning 
large democracy programs in both of those countries. We are 
investing more for democracy in the Central Asian republics. We 
are initiating a new democracy program in India. We are adding 
in a substantial amount of additional resources for a democracy 
program in the Philippines. And these are only the beginning.
    Within the administration there are not finalized 
commitments yet for funding needs for these kinds of programs. 
This is, in some senses of the word, a work in progress.
    Besides increasing resources, we are also changing, to some 
degree, our program emphasis, particularly in the Central Asian 
republics. We are more overtly addressing assistance to human 
rights activists. Our programs in Pakistan and the Philippines 
will focus heavily on building state capacity so that these 
partner governments in the war on terrorism can deliver to 
their civilians.
    In Central Asia specifically, as soon as the war on 
terrorism began, some thought our continued commitment to 
democracy there would be compromised in exchange for support in 
the terrorism war. The answer from the highest levels of this 
administration was, no, it will not be compromised, and 
increasingly our dollars are focused on independent media and 
human rights activists. Our resorces are not focused on 
propping up government ministry programs.
    We are cutting back in some places too. We are cutting back 
in Kazakhstan and Kyrgyzstan because we have been supporting 
programs that have proven to be unproductive, but we are 
continuing and expanding our programs with human rights 
activists and independent media.
    In Uzbekistan, we are expanding, by several million 
dollars, our overt support for legitimate political dissent.
    In Pakistan, we are very focused on taking steps to ensure 
that the parliamentary elections in the fall are well 
implemented. We are assisting universities and think tanks to 
provide quality public policy guidance to the Pakistan 
Government in the areas of fighting corruption and devolving 
the over-centralized government to lower levels. We are seeking 
an additional $8 million to implement the democracy and 
governance program through the new USAID mission that we are 
setting up in Pakistan.
    And there will be more. It is a very clear priority for us. 
It is a very clear priority for me personally.
    It will be very difficult. As you may be familiar, a couple 
of weeks ago, there was a Gallup Poll released. It was taken 
regarding 12 largely Muslim countries.
    Senator McConnell. Yes. What did you make of that? Could it 
be that bad?
    Mr. Winter. Well, I do not know how to argue statistically 
with Gallup.
    Senator McConnell. Are these people living in a totally 
different world?
    Mr. Winter. To some degree, it appears they do. It can be 
for a whole variety of reasons.
    Senator McConnell. Is it largely because every one of them 
has a state-owned media that has portrayed an entirely 
different picture of reality?
    Mr. Winter. I think the issue of independent media is a big 
piece of it. It is why it is a priority for us.
    The figures were shocking. In terms of favorable view of 
the Unite States, 53 percent of the population said they did 
not have a favorable view of the United States. The lowest of 
those was Pakistan. Only 5 percent of those interviewed said 
that they had a positive view of the United States. In terms of 
whether our military action in Afghanistan was justified, 77 
percent of those polled said no, only 9 percent yes.

                           prepared statement

    We have a big task before us. We have started to change 
course in terms of increasing resources to the States that we 
are concerned with here in terms of shifting the emphasis of 
what we do, but frankly, this is a work in progress. While it 
is a priority for us, there is a lot more in this story that 
needs to unfold over the next few months.
    Thank you.
    [The statement follows:]
                   Prepared Statement of Roger Winter
    Mr. Chairman, members of the Subcommittee, thank you for inviting 
me here today to discuss the U.S. Agency for International 
Development's democracy programs budget for fiscal year 2003. While I 
have appeared before the Senate on a number of occasions, this is my 
first opportunity to do so since becoming USAID's Assistant 
Administrator early last month.
    While new to USAID, I have worked in international humanitarian 
assistance for several decades, particularly in Africa. I have seen 
first-hand what happens when democracy is absent and have devoted 
considerable time to considering how USAID's democracy efforts can 
contribute to our national interests and to those of the developing 
countries we seek to benefit.
    The Bush Administration has a clear commitment to democracy. It is 
the one political system which, when effectively instituted, best 
fosters healthy political and economic competition and inhibits 
destructive conflict. Peace is the condition that makes economic and 
social progress possible, and democracy is the system that best assures 
that peace.
    As you are aware, our Administrator, Andrew Natsios, has 
reorganized portions of USAID. One aspect of this has been the creation 
of the Bureau of Democracy, Conflict and Humanitarian Assistance, a 
process that is now well under way. That democracy is the first 
functional area in this new ``pillar'' bureau's name demonstrates the 
priority we ascribe to our democracy efforts. I am very grateful to 
President Bush, Administrator Natsios, and the Senate for giving me the 
opportunity to head this bureau and serve my country.
    Helping other countries move toward democracy adds directly to our 
national security and contributes substantially to international 
stability. As we know, democracies seldom threaten their neighbors or 
turn their armies against their own citizens. They serve their people, 
not render them subservient. They seek trade, not territory; talent, 
not privilege; freedom, not tyranny.
    But even in this country, it has taken generations--and plenty of 
rough and tumble--to refine our institutions and expand our democratic 
practices to where they are today. We should not be surprised, 
therefore, that other nations less blessed than ours have struggled 
along the way. Indeed, many have yet to taste the benefits of 
democratic government, while others have just begun to do so.
    It is natural that the United States is the most important nation 
in the world when it comes to promoting democracy, the country others 
look to for ideas, leadership and guidance. USAID was one of the first 
international development agencies to bring democracy programs to the 
field, and we continue our pioneering work today throughout the 
developing world. We should have no illusions, though, that there are 
easy answers to the challenges we face. Encouraging democracy and good 
governance is slow, difficult work, even under the best of 
circumstances.
    As the President said during his State of the Union address this 
January: ``America will lead by defending liberty and justice, because 
they are right and true and unchanging for all people everywhere. No 
nation owns these aspirations, and no nation is exempt from them. We 
have no intention of imposing our culture, but America will always 
stand firm for the non-negotiable demands of human dignity.''
    This is what Secretary Powell had in mind when he appeared before 
the Senate Budget Committee last month and said: ``Over the past year, 
I believe the broader tapestry of our foreign policy has become clear--
to encourage the spread of democracy and market economies and to bring 
more nations to the understanding that the power of the individual is 
the power that counts.''
    The demands of human dignity and the need to encourage the spread 
of democracy that the President and the Secretary of State refer to is 
what motivates our agency, informs our programs, and guides our 
policies.
    The need to do this more effectively was the reason that USAID 
Administrator Andrew Natsios created the Bureau of Democracy, Conflict, 
and Humanitarian Assistance (DCHA). As he told this Subcommittee last 
May: ``our experience has proven that by promoting and assisting the 
growth of democracy, by giving people the opportunity to peacefully 
influence their government, the United States advances the emergence 
and establishment of societies that will become better trade partners 
and more stable governments. By facilitating citizens' participation 
and trust in their government, our democracy efforts can help stop 
violent internal conflicts that lead to destabilizing and costly 
refugee flows, anarchy and failed states, and the spread of disease.''
    Our democracy and governance (DG) budget for fiscal year 2003 is 
directed at doing precisely that. In doing so, we coordinate our budget 
plans closely with the State Department. For this fiscal year, USAID is 
asking for $963.6 million for our DG programs. This includes $199.9 
million in Development Assistance funds; $251.1 million in Economic 
Support Funds; $276.7 million for Eastern Europe and the Baltics; and 
$235.9 million in FREEDOM Support Act funds for the republics of the 
former Soviet Union.
    Using these ESF and DA accounts, we plan to devote $125.5 million 
on democracy and governance programs for Africa; $178.6 million for 
Asia and the Near East; and $117.2 for Latin America and the Caribbean 
in fiscal year 2003. Another $34.7 million for democracy programs will 
come from our Andean Regional Initiative funds.
    Approximately $240 million of these funds will be passed through to 
other U.S. Government agencies, such as the Departments of State, 
Treasury, and Justice for their democracy assistance programs.
    We are also asking for $27.8 million for our human rights programs 
for the coming fiscal year. The promotion and protection of human 
rights are essential to our democracy-promotion efforts, just as 
democracy is essential to the realization of fundamental human rights. 
Of course, our democracy and governance programs contain many human 
rights elements within them, and we work closely with our colleagues in 
the State Department to ensure they are well-conceived and coordinated 
through the ESF process.
    Our human rights program consists of three separate elements, each 
of which helps people with genuine and compelling needs: the Victims of 
Torture Fund, the Leahy War Victims Fund, and the Trafficking in Women 
and Children program. As you will recall, Mr. Chairman, we were pleased 
to announce a one million dollar contribution to the Afghan fund that 
bears your name when you visited our agency along with the First Lady 
and Chairman Karzai this January. For fiscal year 2003, we are asking 
for $10 million for this War Victims Fund.
    In the coming fiscal year, we plan to expand our recent DG efforts 
in three specific areas: strengthening democratic political parties; 
fighting corruption, and developing independent media. As scholars like 
Tom Carrothers have pointed out, there is a lot more to democracy than 
just holding elections. Indeed, elections are often used to hide other, 
deep-seated problems in a country's political system.
    Currently, we devote only about three percent of our DG budget to 
political party building. This needs to change. In the coming fiscal 
year, we expect to put significantly more emphasis on helping political 
parties become more democratic--and less dependent on individual 
personalities--as well as broaden their political platforms and forge 
stronger links between local and national levels. To help us do this, 
we have awarded a major, multi-year grant to the Consortium for 
Elections and Political Processes, which includes the International 
Republican Institute (IRI), the National Democratic Institute (NDI), 
and the International Foundation for Electoral Systems (IFES).
    Nothing undermines a nation's natural vitality and limits its 
development the way corruption does. Fighting corruption, therefore, 
has become one of USAID's top priorities, one that we are giving 
increasing attention to throughout the Agency. As our part of that, 
DCHA will strengthen its anti-corruption programs in fiscal year 2003, 
furthering our efforts in public awareness and institutional 
transparency. One of our key partners in this effort is Transparency 
International.
    A third area where we intend to increase our support is for 
independent media. For years we have provided technical assistance to 
national legislatures and media associations to help them craft better 
enabling regulations for the media. We also fund a number of training 
programs for journalists in emerging or partially democratic countries. 
Some of these have had excellent results, such as the one at Western 
Kentucky University which recently completed training a group of 
Indonesian radio journalists.
    Democracy is an old form of government, dating from Periclean 
Athens, but managing democracy-promotion programs is something rather 
new. For all that scholars and political scientists have spent 
considerable time defining democracy and detailing its various aspects 
and paradigms, they have provided little insight into how countries 
like ours can actually assist non-democratic societies to change their 
way of governing. There is no single answer, of course, no policy or 
approach that works with every nation. Indeed, each case is different; 
each country has it own particularities.
    But we have learned some important lessons over time. One is the 
need to evaluate programs very carefully, to analyze what works and 
what does not, and to determine the particular conditions that 
influence a country's behavior. USAID is pioneering this approach in 
the field of democracy promotion. Beginning in 1997, we developed a 
strategic assessment methodology that helps our field missions 
determine the constraints to a country's democracy efforts and the best 
approach to overcoming them. Thus far, we have completed assessments in 
26 countries, about a third of the countries in which we have democracy 
and governance programs.
    We have also begun a series of in-depth studies to determine what 
effect our rule of law, governance, and civil society programs have had 
on countries in various stages of transition. The first, now completed, 
looked at three countries where democracy has begun to take root in 
recent years: Bolivia, South Africa and Bulgaria. What we found in 
these countries, not surprisingly, was that the political will to make 
positive change was of critical importance. When that was present, our 
most effective programs were those that helped governments draft laws 
and regulations and reform legal and electoral institutions.
    In fiscal year 2002, we are continuing these studies in Ghana, 
Guatemala, and Croatia, and in fiscal year 2003 we will examine our 
programs' impact in three other states with less democratic 
governments.
    There are always more countries that need help than we have staff 
and resources to help them with. So we must make difficult choices with 
our democracy and governance programs, as with every portfolio that 
USAID handles. However much the needs of other countries press upon us, 
our highest priority is--and must always be--to serve the U.S. national 
interest. This means, in the first instance, harmonizing our programs 
and priorities with those of the President and Secretary of State. 
Beyond that, we look to countries that need our assistance the most, 
and to those where positive change seems most possible.
    The events since September 11 have naturally given new emphasis to 
our relations with Central and South Asia. In response to these events, 
we have begun to shift resources toward the region, increasing our 
funding for democracy and governance programs in Pakistan, India, the 
Philippines and Uzbekistan. While the specifics are yet to be worked 
out, we expect our DG programs in the ``Front Line'' states will 
intensify in the coming year.
    As Andrew Natsios noted when he met with the Subcommittee last 
week, our mission in Afghanistan is back in business for the first time 
since 1979. Already, DCHA has been providing assistance to the Interim 
Government, supplying badly needed textbooks and supporting the Women's 
Ministry. We have also set aside $5 million to help implement the Bonn 
Accords, and we stand ready to help the Karzai government as the 
country prepares for the Loya Jirga later this year.
    In Pakistan, where Secretary Powell recently announced the 
reopening of the USAID mission, we are supporting the national 
legislative elections scheduled for the fall.
    In the past year and half, USAID's democracy and governance 
programs have proven their effectiveness in several countries. In 
Serbia, for example, our USAID grantees worked with the opposition 
parties, playing a critical role in bringing them together so that they 
could combine their efforts and work together to defeat Slobodan 
Milosevic.
    When scandal forced Peruvian President Fujimori to leave office, we 
mobilized a team within two weeks that helped pave the way for the 
honest and transparent elections that put Alberto Toledo in office last 
spring.
    But not every country we work in affords us such opportunities.
    In Cambodia, for example, we are just finalizing the strategic 
assessment of our DG programs. Obviously, as last month's elections 
demonstrate, the Cambodian government still has a long way to go before 
it can be considered genuinely democratic.
    We are also looking very closely at this weekend's presidential 
elections in Zimbabwe. We have had democracy programs there for quite 
some time, supported through the ESF account we manage with the State 
Department. Some of our funds have supported the Southern Africa 
Development Community-Parliamentary Forum, which has some 40 monitors 
on the ground there now. As you may know, the government of Zimbabwe 
did not accredit the election observers USAID intended to finance. 
Given the climate in the country, we remain very concerned about how 
free and fair this election will be.
    We are also concerned about the situation in Madagascar, where we 
are prepared to help make a second round of voting credible--if we have 
the opportunity. Another country where we have democratic concerns is 
Venezuela, and we expect to send a DG assessment team from our Offices 
of Transition Initiatives and Democracy and Governance there later this 
month to see what might be done.
    I have just returned from Burundi, Mr. Chairman, and would like to 
make a few comments on it. I have been involved in Africa's Great Lakes 
region for more than 20 years. When I visited Burundi last August, I 
was somewhat skeptical that the peace process could be implemented 
according to the Arusha Accords, which were signed in August 2000. Now, 
however, I believe there is a real opportunity that needs to be seized. 
While the transition process is quite complicated, it does provide a 
great deal of attention to strengthening the non-executive functions of 
government, including the creation of a senate, which is just in its 
infancy. Having seen the progress made over the last few months, I am 
convinced this is a process we should serious assist.
    On November 1, Burundi began its 36-month transition. For the first 
half of that period, the administration is being led by incumbent 
President Pierre Buyoya and a new Vice President, Dometian Ndayizeye, 
who recently returned from exile. For the second 18-month period 
President Buyoya and Vice President Ndayizeye will switch positions and 
the country will prepare for provincial and national elections.
    In my view, Buyoya and Ndayizeye--and many others who have returned 
from exile--are risking their lives to help Burundi move forward toward 
more democratic, accountable governance.
    We at USAID are committed to helping them succeed. DCHA's Office of 
Transition Initiatives has already begun a series of new initiatives, 
our Office of Democracy and Governance is soon to deploy, and our 
Offices of Foreign Disaster Assistance and Food for Peace continue to 
make huge contributions to national stability and family survival. At 
the same time, our Office of Private Voluntary Cooperation is 
determining how best it can help Burundian NGOs. Also USAID's Africa 
Bureau and regional support office in Nairobi are working to help 
Burundi on a number of fronts, including HIV/AIDS.
    Together, all these initiatives can have a positive impact on 
Burundi. They are surely needed. The suffering and poverty of the 
people of that country are excruciating. For everyone's sake, that 
needs to change. Last year, for example, the United States spent $106 
million in humanitarian assistance to support the victims of Burundi's 
past failures. While such expenditures are an expression of our 
country's deep humanitarian values, it must be our goal to help the 
people of Burundi move away from that and toward more lasting solutions 
to their problems. Only internal peace can do that, and only a genuine 
transition to democracy can consolidate that peace.
    In conclusion, Mr. Chairman, I would like to express my 
appreciation for the support you and the Subcommittee have shown our 
democracy programs and assure you of my willingness to work with you 
and your staff on any issues that may concern you.
    Thank you.

                          DEPARTMENT OF STATE

STATEMENT OF HON. LORNE W. CRANER, ASSISTANT SECRETARY, 
            BUREAU FOR DEMOCRACY, HUMAN RIGHTS AND 
            LABOR
    Mr. Craner. Mr. Chairman, Senator McConnell, thank you for 
the opportunity to testify before you today. Your interest in 
this topic is welcome, but it comes to me as no surprise. You 
have both had a longstanding and intense interest in human 
rights and democracy issues.
    Senator Leahy, I have to tell you that I run across the 
Leahy law regularly, and it is an effective instrument for 
human rights.
    Senator Leahy. We just want to make sure it is being 
enforced, and if I am not here to ask questions, I have sent a 
number of letters to our embassy in Israel asking if it is 
being properly applied in our aid there. I keep getting a 
``we'll get back to you.'' I realize with anthrax, sometimes 
our mail has been delayed, but now we have a fax machine in the 
office. So, if you might look into that. We will give you more 
details on it.
    Mr. Craner. Why do I not get copies and take them back and 
make sure you get a reply?
    Senator Leahy. Thank you.
    Also, of course, my concern on Colombia.
    Mr. Craner. Yes.
    Senator Leahy. Notwithstanding my very strong support of 
President Pastrana, who I think has taken heroic measures, and 
my concern about the outrageous conduct of FARC and the 
killings that they have been involved in.
    But thank you. I do appreciate your comment. I only mention 
that because I know I am going to have to go back to Judiciary, 
and I just wanted you to have it in the back of your mind. But 
we will give you those letters.
    Mr. Craner. Okay. I will also tell you on Colombia, there 
is a great understanding within the administration, not just in 
my office, that the certification has to be credible or it will 
not go anywhere.
    And, Senator McConnell, I have to tell you you can hardly 
go to Ukraine or parts of Asia without hearing your name 
regularly, but I also want to remind you of something you may 
have forgotten. About 5 or 6 years ago----
    Senator McConnell. That is in vain or?
    Mr. Craner. No, always good.
    About 5 or 6 years ago, you went to the Senate floor to 
argue that we ought to be engaged inside of China in trying to 
move forward reforms there, and it was not a message that went 
over well at the time. I think in retrospect, a couple of us 
were way ahead of our time. But that is something that is now 
regarded as mainstream and something that should be carried 
forth, and you deserve a lot of credit for bringing up the idea 
first here in the Senate. So, I want to thank you both.
    Roger has already outlined, and I think very truthfully, 
how this administration regards democracy and human rights in 
the context of the fight against terrorism. That commitment to 
it is a bipartisan commitment I think that goes back many, many 
years.
    As we have been engaged in this process, I think we have 
learned a number of lessons about how to help these 
transitions, and we in the administration believe it is time to 
examine the lessons and find out if we can do it better than we 
are doing it. Along with the NSC and OMB, my office DRL is 
currently conducting a top-to-bottom review of all democracy 
programs to ensure that they advance, in the most useful and 
cost effective manner, national interests and subsequent policy 
decisions.
    We are looking through two prisms to do this. One is that 
it is no longer the case, the concern whether human rights and 
democracy is an American issue or a British issue or an 
Australian issue. When you have Mongolia and Mali and Mexico 
becoming democratic, it is increasingly, number one, an 
international norm, but number two, an international 
expectation. It is no longer the case that we go into foreign 
governments alone. We have a great deal of support when we do 
it, and we think we need to take that into consideration.
    The second issue we want to take into consideration is the 
goals and methods that we have been using or that we ought to 
use in the future. I would characterize those broadly as 
electoral processes, political party assistance. But I think a 
bigger issue is how to help nations consolidate their 
democratic gains and how to integrate the economic support that 
we give to these countries with the reforms that we expect from 
them, beginning with rule of law issues, and we are going to be 
trying to get at that better than we have.
    While the interagency review is going on, my office, as 
Senator Leahy noted, has been using this $13 million pot of 
funding we have. We changed the priorities. We are trying to 
focus on countries of great national interest to the United 
States, and obviously at the moment that is enlarged to include 
many more countries in the Muslim world. I will not go through 
some of the projects we have been working on, but we are trying 
to be innovative and cutting edge in terms of what we are doing 
to fund things that others might not have funded in the past 
for various reasons.

                           prepared statement

    I just want to conclude, as I did in my swearing in, by 
noting that support for democracy building and human rights is 
a very unpartisan issue in these United States. It makes my job 
much easier, much more enjoyable. We are at our best when we 
are united. Often the best example, when I was working at IRI, 
in a foreign country was for us to walk in with NDI, and it 
would stun people that the Democrats and Republicans could work 
together, but we said in our country politics is not a winner-
take-all system, that the losing party still survives when they 
lose power.
    I do look forward to working with both of you and your 
staffs in this review and in the future. Thank you.
    [The statement follows:]
               Prepared Statement of Hon. Lorne W. Craner
    Mr. Chairman, Senator McConnell, thank you for the opportunity to 
testify before you today on the U.S. Government's efforts to assist the 
development of democracy abroad. Your interest in the topic is welcome, 
but comes as no surprise; many Members of this Subcommittee have a 
long-standing and intense interest in democracy building overseas. For 
that, many in the United States and in other countries are grateful.
    For the United States, indeed for the whole world, 2001 was a year 
in which the importance of universal human rights was brought sharply 
into focus by global terrorism. On September 11, 2001 the world 
changed. As President Bush declared in his State of the Union Address, 
``In a single instant, we realized that this will be a decisive decade 
in the history of liberty, that we've been called to a unique role in 
human events. Rarely has the world faced a choice more clear or 
consequential. . . . We choose freedom and the dignity of every life.'' 
This choice reflects both U.S. values and the universality of human 
rights that have steadily gained international acceptance over the past 
fifty years.
    As the United States and our international partners commit 
resources to the fight against terrorism, we do so for all those who 
respect and yearn for human rights and democracy. Our fight against 
terrorism is part of a larger fight for democracy. In the words of 
President Bush, ``America will lead by defending liberty and justice 
because they are right and true and unchanging for all people 
everywhere. No nation owns these aspirations, and no nation is exempt 
from them. We have no intention of imposing our culture. But America 
will always stand firm for the non-negotiable demands of human dignity: 
the rule of law, limits on the power of the state, respect for women, 
private property, free speech, equal justice and religious tolerance.'' 
This world of democracy, opportunity, and stability is a world in which 
terrorism cannot thrive.
    This commitment to human rights and democracy around the globe 
continues a bipartisan tradition that goes back to our nation's 
founding, but which was considerably invigorated in the last quarter 
century. Added weight to the moral dimension of American foreign policy 
was given first in the 1970s by President Carter on human rights, and 
then in the 1980s by President Reagan on democracy building.
    In the intervening years, we have witnessed great international 
changes, mainly through the transition of states to more democratic 
systems. Even in the late 1980s, few among us could have imagined the 
collapse of the Soviet Union and East Bloc, the end of apartheid in 
South Africa, a string of increasingly democratic nations throughout 
East Asia, and the fact that our own hemisphere would, almost without 
exception, contain only democratically elected leaders. Moreover, a 
year ago no one could have foreseen the dramatic changes in 
Afghanistan, a country that suffered under one of the most oppressive 
regimes in the world, the Taliban. While early signs are encouraging--
women choosing whether to wear the traditional burqa when in public, 
young girls returning to school for the first time in years--the Afghan 
people have taken only a few steps of a long, painful journey that will 
take a very long time. They will need considerable help along the way.
    Fortunately, after almost two decades, we have learned much about 
how to assist such transitions. The Administration believes it is time 
to examine those lessons, and if needed, update, refine and institute 
policies on democracy building. Along with the National Security 
Council and the Office of Management and Budget, my office is currently 
carrying out a top-to-bottom review of our democracy programs to ensure 
that they advance, in the most useful and cost effective manner, our 
national interests and subsequent policy decisions. I would like to 
share with you some of the areas we are examining, and I would like to 
work with members of Congress to get input.
    In undertaking the review, two prisms were taken into account. The 
first deals with the increasingly international nature of democracy 
building. The second concerns our goals in pursuing such work.
    First, democracy is now accepted as an international norm; it is no 
longer the case that the United States acts alone, or with one or two 
other countries, in assisting democratic transitions in other nations. 
Since the 1990s, other established democracies have joined with us in 
pursuing, through policy and assistance, the advancement of democratic 
processes abroad. Over the past few years, nations that understood the 
costs of dictatorship best--nations such as South Africa, South Korea, 
Poland, and Chile, to name a few--began offering their experiences to 
those struggling for democracy and liberty. Indeed, in some regions, it 
is a dictatorship's neighbors, more than the United States, that will 
determine the outcome of a particular nation's transition to democracy.
    Additional evidence of the beginning of a set of international 
norms on democracy comes from efforts such as Romania's United Nations 
General Assembly resolution on promoting and consolidating democracy, 
which further describes the elements of democratic governance including 
civilian control of the military, independence of the judiciary and the 
right to due process. Further evidence of the beginning of a set of 
international norms on democracy also comes from the Community of 
Democracies enterprise. We are working to strengthen these efforts, 
which illustrate that, in every region of the globe, democracy is now 
considered to be a desirable norm and not an American or ``Western'' 
import. Our review is looking at ways to encourage these developments, 
while keeping in mind their diverse nature.
    A second, broader issue in our review concerns America's goals and 
methods in pursuing democracy programs.
    Electoral processes are an important component of democratic 
transitions. Indeed, in the early days of democracy assistance, they 
were regarded as the key indicator of a nation's political transition. 
Unfortunately, experience shows many authoritarian rulers believe that 
a poor electoral environment for political participation can be 
overcome in the eyes of some observers by a well-run election day. This 
is what some fear this weekend in Zimbabwe. In reality, an open 
electoral environment and willingness to hand over power in an orderly 
and prompt manner can go far to ameliorate what may be a less than 
perfect election day. South Africa in 1993 is a good example. We need 
to look at these experiences and our programs to determine when, and 
how best, to assist elections as a milestone in transitions to 
democracy.
    We are also examining our approach to political party assistance. 
Political parties can be a prime intermediary between the governed and 
the government; lessening the potential for conflict in a country. To 
do that, they need to sink roots within the population. An elected, 
democratically-oriented party also has the potential, more than most 
other institutions, to hasten a country's transition. Our assistance to 
such parties is therefore invaluable, but our policies regarding such 
aid have undergone wide swings in the past ten years. In the early 
1990s, for example, we provided material assistance to particular 
parties in targeted countries, but in the mid-1990s, U.S. non-
governmental organizations were being asked by some in government to 
aid communist and ultra-nationalist parties in former Soviet bloc 
nations. Somewhere in between lies a policy that adheres to legislative 
restrictions and assists those who want to advance democracy in their 
countries.
    We also need to determine how best to help nations trying to 
consolidate democratic gains achieved through the ballot box. As we are 
learning around the world, political freedom alone is often not enough. 
In an era of globalization, we are examining our programs to determine 
how to ensure a good marriage between efforts to enhance political 
freedom and efforts--bilateral and otherwise--to encourage economic 
liberalization. In some nations, winners in the democratic competition 
are many of the same forces that long resisted political and economic 
liberalization. In others, genuine political reformers don't have the 
strength or tools to stand up to entrenched economic elites. In such 
cases, the expected economic benefits of democratization do not 
materialize in an equitable manner. As a result, citizens become 
disenchanted with so-called ``democracy'' and yearn for days of 
economic stability, even if those days were far from ideal. In some 
cases, they are often willing to give up a large measure of political 
freedom to stabilize their economic situation.
    The challenge of the first quarter century of democracy building 
was elections. While expanding our knowledge and honing our tools to 
assist electoral processes, we must, in the second quarter century, 
emphasize the challenge of good governance, including transparency, 
individual liberty, freedom from corruption, and management of 
transition economies--through the rule of law, a free media, 
accountable political leadership, labor rights, and a vibrant civil 
society. As Secretary Powell said, ``the answer to the problems of 
democracy is more democracy.'' When democratic electoral processes are 
buttressed by a culture of democracy and a functioning economy, we can 
consider our job in transitional countries done.
    We are also examining whether and how nations that are just 
beginning to open up economically or politically can be assisted. In 
most cases that means working through the existing system, trying to 
catalyze a dynamic that has been instituted by the present rulers. A 
good example currently exists in the Persian Gulf, where a number of 
nations with undemocratic political systems have embarked on efforts to 
expand legislative and electoral authority. Such efforts may, in the 
end, be unsuccessful, but supporting them for relatively low amounts 
could pay big dividends in the long run.
    Keeping in mind our desire to extend democracy in a universal 
manner, but not having unlimited funds available to us, we also need to 
have a solid framework for focusing our resources. One obvious criteria 
must be the importance of the country to America's national interests, 
but we also need to be realistic about the conditions required to have 
a desired effect. Key to such considerations will be the understanding 
of the reality that our assistance is unlikely, in and of itself, to 
create the changes we seek. In countries where the local dynamic is 
already moving towards democracy our assistance can help leverage the 
cause in the right direction. The will for change at a national level 
is therefore pivital. It makes little sense, for example, to spend 
millions to train judges in a country where the ruler will not tolerate 
an increasingly independent judiciary, or fund programs in countries 
with ample private resources but without the will to pursue democratic 
goals.
                                  hrdf
    While this interagency review is ongoing, we in DRL have tried to 
take these issues into account to make our Human Rights and Democracy 
Fund (HRDF) more responsive to the needs of developing democracies and 
a more effective agent of change. Created by Congress, HRDF grants are 
provided by DRL to support democracy and human rights projects 
throughout the world.
    In the past few months, we have reoriented the criteria used to 
make HRDF grants. It doesn't make sense to sprinkle these grants among 
80-plus countries of the world. Rather, our approach is to focus on 
countries of U.S. national interest and identify the most pressing 
human rights and/or democracy issues in those countries, taking into 
account such sources as the annual Country Reports on Human Rights 
Practices, the annual Report on International Religious Freedom, input 
from the desks, our embassies, experts in the area, NGOs, visits in-
country by DRL staff, and so forth. We then formulate innovative, 
cutting-edge projects that address these issues.
    We seek programs or ideas that often have not been tried before in 
that country or region, or ones that have had merit but may have been 
deemed too risky by other USG entities. We then coordinate these ideas 
closely with USAID, the regional bureaus, and posts to increase their 
effectiveness. HRDF projects must not, for example, duplicate or simply 
add to efforts by USAID or other offices. In order to maintain a 
continuous flow of fresh ideas and innovative approaches, we won't use 
HRDF to fund programs for longer than 2-3 years. At that point, if they 
are successful, we will spin off responsibility to other entities.
    In the short months since I have been on board, we have gotten a 
number of cutting-edge projects approved. One is to establish an 
independent printing press in Kyrgyzstan, an idea that had bounced 
around in one form or another for 3-4 years but could never get any 
funding because it was deemed too risky and not ``commercially 
viable.'' This will be an extremely difficult program to implement, 
given resistance from the Kyrgyz government, logistics, and the 
daunting challenge of setting up a completely new organization with a 
sound board and management team. However, this is exactly the kind of 
idea DRL wants to support, since independent media in Kyrgyzstan has 
been under enormous pressure in recent years, yet there still exists a 
degree of latitude in Kyrgyzstan that does not exist in, for example, 
Uzbekistan.
    We have also developed a project to shed new light on the human 
rights conditions in North Korea. We are funding a program to support 
South Korean NGOs in their efforts to improve reporting on the human 
rights situation in North Korea. While the famine justifiably receives 
much attention, the repressive conditions under which the North Korean 
people live receives much less. This groundbreaking project will fill 
an important information gap in the United States and internationally. 
It will provide NGOs with the means to research and publish accurate, 
credible reporting on the human rights conditions in North Korea.
    In Colombia, the foundation of its long-standing and deeply rooted 
democracy has been shaken by 38 years of internal conflict. 
Paramilitary and guerrilla violence continues unabated and these groups 
are increasingly targeting judicial sector personnel. Although 
protection programs have been established to provide assistance to many 
vulnerable populations in Colombia, the immediate needs of justice 
sector personnel have not been addressed. In response, we are creating 
a temporary relocation program for threatened judicial personnel, which 
will provide specialized training to enhance their ability to perform 
their jobs when they return to Colombia. This program not only serves 
the immediate need for judicial protection, it also serves the long-
term goal of fortifying rule of law, thereby strengthening Colombian 
democracy.
    These are just a few examples of how we are making democracy and 
human rights programming much more dynamic.
    As I said at the beginning, we will be looking to Congress for 
ideas and thoughts as we undertake this review of democracy programs 
and continue to provide grants through HRDF. Many of you were here when 
such programs began in the 1980s, you have traveled to many of these 
countries, and have much experience and institutional knowledge from 
which we would benefit.
    I want to conclude by noting, as I did at my swearing in ceremony 
last June, that democracy building has historically been a bipartisan 
issue. During my days at the International Republican Institute, I 
worked closely with my counterpart at the National Democratic 
Institute. Americans are best when we are united; often, the best 
example we can offer overseas is that politics is not a winner-take-all 
sport. I look forward to working with Members and their staffs from 
both sides of the aisle in promoting democracy overseas, for there is 
much to do.
    Thank you. I look forward to answering your questions.

    Senator Leahy. I am going to submit my questions for the 
record. Mr. Craner, I know you have bureaucratic battles but 
protecting human rights is an important goal, and we will 
continue to support you.
    You are fortunate to have the support of Senator McConnell, 
who is one of the most effective Members of the Senate, and has 
given this a lot more than lip service. He has given a lot of 
strong support to these human rights efforts.
    It is all yours, Mitch.
    Senator McConnell [presiding]. Thank you, Mr. Chairman.
    I want to go back to the poll a minute. Have you all had 
any contact with Gallup, or are you just like all the rest of 
us? You read the results.
    Mr. Winter. I just read it.
    Senator McConnell. Somebody ought to--maybe I will--suggest 
that Gallup take surveys in other parts of the world where 
there are emerging democracies with at least a somewhat free 
press. I gather that would certainly apply in a place like 
Mexico and Mongolia. Do they have a relatively free press 
there, Lorne?
    Mr. Craner. A relatively free press and a relatively 
positive attitude towards the United States.
    Senator McConnell. I would be interested in seeing whether 
everybody hates us and everybody is deluded into the notion 
that somehow 9/11--did not one of the questions suggest that 
even they thought this was some kind of Jewish conspiracy or 
something?
    Mr. Craner. Well, again, that is partly a lack of free 
media.
    Senator McConnell. Well, that is my point. It would be 
interesting if Gallup would survey kind of emerging parts of 
the world where there is at least some democracy, some evolving 
democracy, and a relatively free press and compare the results. 
Then I think it would be easier to attribute this to what we 
think is the problem, which is not the fact that it is Muslim 
countries, but the fact that these are undemocratic regimes 
with state-controlled press that have pandered to the worst 
elements. We think that is the reason these results came out 
the way they did, but it seems to me we could use some 
comparative data to more safely reach that conclusion, and I 
would think Gallup would be interested in doing something like 
that.
    I would suggest to the staff sitting behind me that we 
ought to suggest that to them to maybe try to narrow down how 
this could possibly be. And if it is more a result of 
undemocratic regimes and state-controlled press, then I think I 
would feel a little bit better about it, but I do not think we 
really know.
    I believe in surveys. People who are in our line of work 
take surveys a lot. We plan campaigns by them. They have an 
enormous impact on public policy debate around here, and my 
assumption is that these polls were accurate. I have no reason 
to question the accuracy of it, but I would sure like to know 
more, if there is some correlation between inability to choose 
your own leaders and inability to have varying points of view 
expressed in the media and these results.
    So, I am going to suggest that my staff and you all 
conspire as to how we might encourage Gallup or other reputable 
polling organizations to give us another look at the under-
developed world or at least the emerging democratic world and 
see if there might not be a better result. Maybe there is not. 
I do not know, but it sure would be interesting to find out, do 
you not think?
    Mr. Craner. I think I would be interested. I think also the 
Secretary and Charlotte Beers would be very interested and very 
helpful on this.
    Senator McConnell. Yes. Let us come up with an effort to 
encourage somebody independent of our Government. I am not 
talking about some kind of Government activity here. We need an 
independent, reputable--Gallup would be fine as far as I am 
concerned. We need to test public opinion and get some 
comparisons here.
    Mr. Winter. I would not be surprised if the professional 
polling firms are not looking to do this because the numbers 
were so shocking.
    Senator McConnell. Well, I do not think we ought to kid 
ourselves. I would like to find out how they feel.
    Mr. Winter. Absolutely.
    Senator McConnell. Do not delude yourself. I think we ought 
to find out if it is that bad elsewhere. I hope it is not, and 
it certainly does not change your view of American policy. I 
think we ought to continue to do what we are doing regardless 
of what the polls are. I do not think it ought to determine our 
policy, but it sure would be nice to know what kind of an 
audience we have got out there.
    Mr. Craner. And how to address it.
    Senator McConnell. And how to address it.
    Mr. Winter. Yes, and what do we do about it.
    Senator McConnell. Yes. Any other thoughts on that subject 
from either of you?
    Mr. Craner. No. I think that is a good topic. My assumption 
is that it is a lack of a free media and all, but I think there 
is a sense in some countries that we could do better in terms 
of supporting democratic alternatives and I think we ought to 
be doing that. But I think this will be useful proof of that.
    Senator McConnell. Mr. Winter, you mentioned USAID's 
emphasis on supporting human rights activists and independent 
media. Is political party development part of your strategy?
    Mr. Winter. Yes.
    Senator McConnell. What are you doing in that area?
    Mr. Winter. It has not been as big a part of our strategy 
as I think it needs to be, but our long-term aim is to ensure 
that political parties effectively aggregate the interests of 
their voters and then effectively present them into the public 
governance marketplace.
    When we do do this, we coordinate our efforts with the 
State Department because it is very political in character, and 
we want to make sure our efforts are not a surprise to anybody. 
We are also careful to do this kind of activity within 
legislative parameters and we have constructed a policy for our 
field staff as to precisely how we ought to engage the 
political parties. Our preference, when we can do it, is to do 
it with democratically oriented parties of a variety of 
perspectives so we are not just linking ourselves to a single 
party, but sometimes there is only a single democratically 
oriented party for us to work with.
    My personal view--and in conversations with the staff who 
administer this activity through our Office of Democracy and 
Governance--is that we need to expand our engagement with 
political parties and be more direct about it.
    Senator Leahy. Do you have any observations on that point?
    Mr. Craner. I would very much support that. I saw a figure 
somewhere between 3 and 7 percent of AID's democracy spending 
is for party assistance, and this was at the beginning of last 
year. The spending on civil society I think was close to half. 
As somebody who has done this for a while, I think civil 
society is very, very important both in the lead up to a 
transition and cementing a transition. But if one is hoping for 
a transition in a country, depending on civil society, it will 
take a long time, whereas a democratic political party can come 
into office and begin to change the political landscape 
immediately. So, I think it is worth investing in both in a 
balanced way.
    Senator McConnell. Mr. Craner, you mentioned that State and 
NSC are conducting a review of these programs. Can a part of 
the review include consultations with us?
    Mr. Craner. Yes. I think it is important again because as 
Senator Leahy noted, the concern with human rights and 
democracy really arose from Congress, and it is important we 
all be working together on that. Absolutely.
    Senator McConnell. What programs can the United States 
support to encourage a viable alternative, or the political 
space which may allow the emergence of a viable alternative, to 
PLO Chairman Arafat?
    Mr. Craner. I think you would not know it looking at 
television, but there is in my experience a broad swath of 
people in the West Bank and Gaza who, like people everywhere 
else, would like to be left alone, would like to be able to 
make enough money to feed their kids, would like not to be 
living in a corrupt environment. And I think those people, up 
till now, have been quiet for one reason or another, but I 
think we can encourage them. Over the years, when I worked at 
IRI, we were working with some of those people who would like 
to be living in a much better economic and political 
environment, and they do not think they are getting it right 
now.
    Mr. Winter. For your information, Mr. Chairman, our 
commitments to West Bank and Gaza are amongst our largest 
commitments. I do not have the breakdown with me of precisely 
how those funds are used programmatically and what the split 
is. I will be happy to provide it for you, but it is a 
significant commitment for us.
    Senator McConnell. It just popped into my head. I should 
have mentioned it earlier. Was Turkey one of the countries in 
the Gallup poll? I do not think it was, was it?
    Voice. Yes, sir, it was.
    Senator McConnell. It was? Did they have a breakdown of 
Turkey only?
    Mr. Craner. They did and I believe it was the most 
positively inclined towards the United States of all the 
countries.
    Senator McConnell. A country with political parties and at 
least some modicum of a free press could have an impact on 
attitude.
    Mr. Craner. And in the last couple of years, partly because 
they want to get into the EU, is at least passing laws that I 
think ultimately will pay off in terms of increased democracy 
and human rights.
    Senator McConnell. Is it U.S. policy to consult on a 
continuous basis with Suu Kyi and the NLD prior to the 
provision of any assistance inside Burma?
    Mr. Craner. We have insisted on that, that we go and talk 
to her about particular program ideas.
    Senator McConnell. Does this policy extend to any 
international non-governmental organizations operating inside 
Burma?
    Mr. Craner. I do not know the answer to that.
    Senator McConnell. Speaking of Burma, has anything good 
happened there? Any ray of hope anywhere?
    Mr. Craner. I think we all had a lot more hope a few months 
or a year ago than we do today. There have been far fewer 
political prisoners released than we would have hoped. There is 
a lot less freedom than I think many people had hoped in terms 
of political activity, and so I do not see that it is getting 
near to where a lot of us had hoped it would be by now.
    Senator McConnell. Given the importance of China, in terms 
of U.S. national security and trade interests, should 
additional resources be provided to activities to promote 
political reforms and the rule of law in China? And if so, what 
additional programs can be conducted?
    Mr. Craner. There was this year a congressional earmark on 
this topic, of which my office I think will be receiving $5 
million.
    Senator McConnell. That was my earmark, I am reminded.
    One of those dreadful earmarks that all administrations 
hate.
    Mr. Craner. Of course.
    There is a capacity within China to be able to absorb 
advice from the outside. In the supplemental request that has 
been submitted, my office was put down for $4 million, of which 
I would use at least $1 million of those $4 million to put into 
China. I think there is that much capacity.
    In all countries you have an issue of absorptive capacity, 
how much more could you use, but over time, I expect the 
absorptive capacity in China to rise greatly, especially with 
WTO reform. And when I talk about rule of law in China, to me 
that does not just mean commercial law reform. It means changes 
in the political or human rights side of things that often are 
necessitated by economic reform, but they are much more 
directly relevant to everyday life for somebody in China.
    Senator McConnell. What democracy and human rights programs 
is the administration considering for Pakistan, and do 
assistance programs include political party programs?
    Mr. Winter. Well, as I mentioned earlier, in Pakistan we 
are opening a mission for the first time in a while. We are 
focused very heavily on the parliamentary elections that are 
scheduled for the fall. We have made grants directly to a 
number of think tanks and universities for the purposes of 
being able to supply the leaders of that government more 
comprehensive and useful guidance with respect to fighting 
corruption and devolving government power to a decentralized 
sort of framework rather than the over-centralized framework 
that it has now.
    Specifically, we have asked for $8 million. Keep in mind we 
did not have a mission in Pakistan, and so largely we have not 
been actively engaged in Pakistan. What we are doing now is we 
are building up a new capacity and a substantial program.
    Senator McConnell. I am just going to warn you I may have 
to take a brief recess here to do one matter before we wrap up. 
I apologize for that if I end up having to do it.
    There are going to be a number of questions that I would 
like to submit for the record to get your response to.
    I think what I want to say here is that the brevity of this 
hearing should not be construed to mean a lack of interest in 
the subject. I am deeply interested in what you are up to. This 
just happened to have come on a bad day for Senator Leahy and 
myself. He is deeply interested in it as well I know. I can 
speak for him on that.
    I think we are probably not spending nearly as much as we 
should in this area if we are going to help bring about real 
change for the better. It is not just a question of evolving 
capitalism. That is certainly important too because you cannot 
have one without the other, but the democracy side has got to 
evolve as well.
    I think of Jordan as an example where there seems to be an 
incipient democracy. And then what is the little country on the 
Arabian peninsula that seems to be in the process of opening 
up?
    Mr. Craner. Bahrain.
    Senator McConnell. Maybe those will be countries to monitor 
very closely to see if our surmise here, that the evolution of 
democracy and capitalism changes attitudes not only about us 
but just about things in general. It cannot just be an Islamic 
problem. It cannot be. People are people. I do not care where 
they live. Maybe those would be two good countries to see if 
opening up produces a change in view.
    Mr. Craner. I am hoping to get out there in April to 
Bahrain, Qatar, and Oman, and possibly Yemen, all of which are 
certainly by no means perfect democracies, but all of which are 
making the effort.
    Senator McConnell. Right. Well, you never have a perfect 
democracy to begin with. These things always evolve.
    Any final thoughts from either one of you?
    Mr. Craner. No. I think Roger and I have spent a good bit 
of time together, as I have with Andrew, and I think we are 
both committed to working more closely and coordinating more 
closely than has been the case in the past.
    Senator McConnell. Well, I know Pat and I are both 
intensely interested in what you are doing and want to be 
supportive. If you will answer the rest of the questions that 
he has and I have for the record, we would appreciate it.
    We will be particularly be discussing with you further an 
effort to try to get some other polling data out there that 
might provide an interesting correlation to what we just were 
shocked to learn about the attitudes toward America in the 
Islamic world.
    Thank you both very much.
    Mr. Winter. Thank you.
    Mr. Craner. Thank you.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator McConnell. Thank you very much. There will be some 
additional questions which will be submitted for your response 
in the record.
    [The following questions were not asked at the hearing, but 
were submitted to the Agency for International Development for 
response subsequent to the hearing:]
            Questions Submitted by Senator Patrick J. Leahy
                       state--usaid coordination
    Question. Mr. Winter, some experts on U.S. democracy programs feel 
that there is a lack of coordination between USAID and the State 
Department in many countries. Let me read to you a quote from an 
article in [the] Foreign Service Journal:

    ``More often than not, the two agencies do not work so well 
together. USAID frequently ends up working by itself on democracy aid 
programs with State officials paying little attention to activities 
they regard as marginal. Or the two organizations work at cross-
purposes, sending conflicting signals in the host country.''

    Do you agree with this statement? What steps are the State 
Department and USAID taking to improve coordination on democracy 
programs?
    Answer. Senator Leahy, as you noted in your opening statement, in 
some circumstances USAID and the State Department have differing 
approaches to democracy assistance. However, I don't believe that this 
problem is widespread. When it exists, we are addressing it. We work 
very closely with our colleagues at the State Department to coordinate 
democracy programs. We do this to make sure that U.S. democracy 
assistance goes to countries that are of high foreign policy 
importance, where assistance is needed, and where it can make a real 
difference. We also work closely with our State Department colleagues 
in Washington and in U.S. embassies overseas to ensure that democracy 
programs are focused on overcoming the biggest constraints to 
democratic reform or consolidation.
    This cooperation takes many forms. First, we work in partnership 
with the State Department's Bureau for Democracy, Human Rights, and 
Labor (DRL) and the regional bureaus at the State Department regarding 
the allocation and implementation of democracy programs funded by 
Economic Support Funds (ESF). There are two ways that ESF is allocated 
for democracy assistance programs. USAID and State closely coordinate 
in both instances.
    First, some ESF is directly allocated to USAID missions as part of 
the normal congressional budget presentation. ESF, even when allocated 
directly to a mission, is provided to USAID for a specific purpose, so 
it is never simply added to other sources of mission funding. Upon 
approval from Congress, this money is programmed by the mission. 
However, the State Department is very closely involved with the 
decision-making process about which countries should receive this ESF, 
what amount they should receive, and for what purpose. This model--ESF 
allocated directly to missions--is most common in the Latin America and 
the Caribbean and Asia and Near East regions. For example, directly 
allocated ESF funds democracy programs in Mexico, Indonesia, West Bank 
and Gaza, and Egypt.
    Second, there are also ``pots'' of democracy ESF that are allocated 
out of Washington and are either implemented by USAID missions, the 
Democracy and Governance Office when the money is used in a country 
without a USAID mission (non-presence countries), or directly by the 
State Department. Examples of these ESF pots include the Middle East 
Democracy Fund, the Africa Regional Democracy Fund and DRL's Human 
Rights and Democracy Fund. The allocation process for these funds is 
slightly more complicated. The relevant State Department bureau drafts 
an allocation memo to the Deputy Secretary requesting his approval for 
specific democracy projects to be funded out of these pots. These 
allocation memos are cleared by the USAID Democracy and Governance (DG) 
Office and the relevant USAID regional bureau (as well as many offices 
within State). When USAID will implement the program to be funded by 
ESF, USAID and State coordinate prior to the drafting of each 
allocation memo to ensure that there is consensus about which countries 
will be awarded ESF and for what purpose.
    Additional facts about USAID's role in implementing ESF-funded 
democracy programs:
  --USAID implements about 90 percent of these programs. If the program 
        is in a non-presence country, the DG office in the Bureau for 
        Democracy, Conflict, and Humanitarian Assistance (DCHA) will 
        often manage it. However, most ESF-funded democracy programs 
        are managed by USAID missions. Programs not implemented by 
        USAID are managed directly by the relevant State Department 
        bureau, sent to Public Diplomacy, or transferred to other 
        organizations such as the National Endowment for Democracy.
  --For fiscal year 2003, the request for the ESF democracy pots is as 
        follows:

                        [In millions of dollars]

DRL...............................................................    12
Africa............................................................    32
East Asia.........................................................     5
Near East.........................................................     5
South Asia........................................................     2

    State and USAID also coordinate in formal and informal interagency 
bodies. Coordination takes place at two levels: (1) at the field level, 
and (2) in Washington, as part of an inter-agency process.
  --At the field level, there is generally good coordination between 
        embassies and USAID missions on democracy programs and 
        objectives.
    --The embassy comments on and ultimately clears the USAID strategy.
    --Ambassadors often pay close personal attention to the portions 
            related to democracy programs.
    --USAID provides input to the Mission Performance Plans (MPPs) 
            submitted by embassies to the State Department.
    --The USAID strategies and the MPPs will reflect the common 
            democracy-related objectives.
    --Many embassies also have interagency committees that meet on 
            democracy sector programs and issues, or specific 
            subsectors, such as security and rule of law. USAID sits on 
            these committees, often times as the chair.
    --Additionally, there is usually frequent coordination on specific 
            items, such as the drafting of the country human rights 
            report or elections monitoring.
    --USAID democracy officers generally have on-going close informal 
            relationships with the political office and often with the 
            ambassador.
  --In Washington, USAID and State participate in Policy Coordination 
        Committees (PCC) that are established under the direction of 
        the National Security Council staff. These PCCs cover key 
        regions and high-profile countries, as well as topics of 
        concern that cut across several agencies.
    --The Policy Coordination Committee on Democracy is chaired by the 
            NSC and includes representatives from various federal 
            agencies, including several offices from State and USAID. 
            Their work thus far has focused on the future direction of 
            the Community of Democracies initiative, an international 
            body made up of governmental officials that is aimed at 
            providing mutual support and policy coordination among the 
            world's democratic nations.
    --Also of interest to the committee is the work of the Policy 
            Coordination Committee on Anti-Corruption, Transparency and 
            Accountability that coordinates our diplomatic, assistance, 
            and law enforcement agencies working on these topics.
    --For particular regions or countries, the State Department's DRL 
            Bureau and DCHA work with our respective USAID and State 
            Department regional bureaus to make sure that key democracy 
            concerns are raised in the PCCs and other inter-agency 
            venues.
    --USAID and State's Bureau for International Narcotics and Legal 
            Affairs (INL) coordinate very closely on programs and 
            policies related to police and the rule of law.
                    definition of democracy programs
    Question. Mr. Winter, I am concerned that some in the 
Administration take an overly broad view of what is considered a 
``democracy and governance'' or ``human rights'' activity. I am aware 
of instances where funds intended for democracy and governance programs 
have ended up supporting activities that most of us would consider 
development assistance or other types of programs. One example of this 
is the Great Lakes Justice Initiative where funds intended to for 
activities such as support of court systems, training of judicial 
personnel, and promoting public awareness of laws, were put towards 
building schools and wells.
    While there may be a good reason to build schools and wells in this 
part of the world, do you regard these types of activities as democracy 
and governance programs? What measures are in place to ensure that 
these funds are used for their intended purpose and are not redirected 
into other types of programs under a broad definition of democracy and 
governance program?
    Answer. Senator Leahy, I would certainly agree that programs 
dealing with schools and wells should not be categorized as democracy 
programs. Democracy and governance programs should support the Agency 
goal of ``strengthened democracy and good governance.'' Within that 
goal, there are four separate objectives.
    These objectives are:
    1. Strengthened Rule of Law and Respect for Human Rights. Programs 
under this objective include activities that support legal and judicial 
institutions, administration of justice, and judicial independence. In 
addition, programs that strengthen the awareness of, and adherence to, 
internationally recognized human rights fall under this objective.
    2. More Genuine and Competitive Political Processes. Programs under 
this objective include political party support such as activities that 
strengthen the organizational capacity and professionalism of political 
parties so they can better represent their constituencies. In addition, 
support to electoral administration bodies, voter education, and 
election monitoring fall under this objective.
    3. Increased Development of Politically Active Civil Society. 
Activities under this objective aim to build the capacity of civic 
groups, professional associations and other non-governmental advocacy 
groups that build public demand for democracy and good governance. 
Assistance to independent media and trade unions also falls under this 
objective.
    4. More Transparent and Accountable Government Institutions. 
Programs under this objective include USAID's anti-corruption efforts, 
assistance to local government and decentralization, legislative 
strengthening, civil-military relations, and assisting governments 
implement policy reforms.
    Finally, USAID recognizes that the unique context of each country 
means that an indirect approach is sometimes needed to promote 
democracy. So, support of service delivery non-governmental 
organizations (NGOs), for example, may in fact be an optimal way to 
support democracies in some societies. For example, while Nigeria was 
still governed by a military dictatorship, our small democracy program 
focused on supporting women's health organizations. These groups, among 
other activities, were trying to hold the government accountable for 
actually delivering services (in this case healthcare) rather than 
diverting public resources to corruption or waste.
    In Rwanda, as part of the Great Lakes Justice Initiative, democracy 
and governance funds were used to build schools and wells, as you 
pointed out. Through local community development committees, citizens 
were allowed to determine their own priority needs for the use of 
government resources, a first step in institutionalizing democracy in 
Rwanda. This type of community development activity is generally 
limited to post-conflict or failed state environments.
    Question. Mr. Winter, in your prepared statement, you mention the 
Leahy War Victims Fund, and funding for Victims of Torture, as examples 
of USAID's human rights programs. These strike me as humanitarian 
programs, not programs that promote respect for human rights, which is 
what we are talking about here. Do you disagree?
    Answer. As part of USAID's fiscal year 2002 budget, it was 
determined that we should combine the Leahy War Victims Fund and the 
Victims of Torture program under a single budgetary category, ``Human 
Rights.'' Certainly there is an important humanitarian objective to 
these programs. It seems to me that they also highlight why respect for 
human rights is so important. The nature of these two programs has not 
changed, nor has our commitment to them. Likewise, we remain committed 
to human rights in the stricter sense of the term. Therefore, in 
addition to these two projects, USAID also implements programs in all 
parts of the world that promote and enforce respect for human rights. 
These programs fall under our democracy and governance portfolio, and 
we will consider your concern about the future categorization of these 
funds.
                 usaid management of democracy programs
    Question. Mr. Winter, the nature of democracy programs is unlike 
many other USAID activities--such as health care, agriculture, and 
education--as they often need increased flexibility to be effective and 
do not fit standard USAID evaluation mechanisms. For years, democracy 
programs were forced into the same bureaucratic management structures 
as traditional forms of U.S. assistance. While the creation of the 
Office of Transition Initiatives was a step in the right direction, I 
am told that USAID's bureaucratic structure still presents obstacles 
for effectively running these programs.
    Am I wrong? Has this Administration taken any steps to reform 
procedures that would allow for more rapid, flexible management of 
democracy programs?
    Answer. Administrator Andrew Natsios recognized the importance of 
radically reforming USAID's management and operating procedures. He has 
given these reforms top priority, assigning some of USAID's most senior 
managers to the effort. In fact, we are all committed to addressing 
these shortcomings. We are working on seven key management reforms, 
three of which will allow for more rapid and flexible management of our 
democracy programs. These three reforms are:
  --Human Resources.--USAID is expanding the number of direct-hire 
        democracy officers at an accelerated rate. This will mean that 
        career foreign service officers will directly manage a higher 
        proportion of our mission-based democracy objectives. This will 
        allow USAID to better maintain our institutional capacity to 
        design and implement successful democracy programs.
  --Procurement.--The backlog in our procurement system is the single 
        largest obstacle to more rapid and flexible democracy programs. 
        Too often we miss windows of opportunity while we are waiting 
        for grants or contracts to be processed. USAID is taking steps 
        to automate parts of our procurement system as well as to 
        outsource selected functions currently carried out by USAID 
        staff. In addition, our Democracy and Governance Office has 
        innovative cooperative agreements for rule of law, elections 
        and political processes, and civil society that allow USAID 
        missions to get programs on the ground much more rapidly than 
        had previously been the case.
  --Strategic Budgeting.--USAID also needs to ensure that we are able 
        to more flexibly allocate money to address targets of 
        opportunity. It does no good to have highly trained staff or an 
        efficient procurement system if there is no money to implement 
        badly needed democracy programs. By merging the strategy and 
        budget functions, USAID will now be better able to shift 
        resources to high priority countries that are in need of 
        additional democracy funds.
                        usaid funding breakdown
    Question. Mr. Winter, USAID has requested $991 million for 
democracy, governance, and human rights programs, which is a 
substantial amount of money. How much of this funding falls into the 
very narrow category of strengthening and reforming judicial and 
legislative branches of government? How much funding does USAID provide 
to groups that are dedicated to promoting respect for human rights or 
prosecuting those responsible for human rights violations?
    Answer. Senator Leahy, unfortunately USAID does not track its 
budget requests in this manner. However, it is possible to answer this 
question by looking at budgets from prior years. For example, in fiscal 
year 2000 USAID obligated approximately $17 million for human rights 
programs, $75.5 million for strengthening and reforming judicial 
systems and $15 million for legislative strengthening. These figures do 
not include programs funded out of the ESF regional democracy pots, so 
the total of each of these categories is actually somewhat higher. To 
give you a broader sense of the breakdown of democracy spending, in 
fiscal year 2001 22 percent of democracy assistance went toward rule of 
law programs, 7 percent for elections and political parties, 47 percent 
for civil society, and 24 percent for good governance. Support for 
human rights organizations is captured in both our rule of law and 
civil society programs. Likewise, legislative programs fall under both 
elections and political processes and good governance.
                                zimbabwe
    Question. Mr. Winter, in Zimbabwe, President Mugabe has done 
virtually everything in his power to prevent the opposition party--the 
Movement for Democratic Change--from participating in free and fair 
elections. I want to commend our USAID mission in Zimbabwe, whose 
efforts have been smart, aggressive, and well targeted. However, this 
is an instance where democracy-building activities require more than 
well-run USAID programs on the ground.
    While the Administration has taken strong action, it is clear that 
the United States and the EU need to press President Mbeki of South 
Africa and the 14-country Southern African Development Community to 
take strong action concerning Zimbabwe.
    Has USAID urged the State Department or others in the 
Administration to put pressure on the South African community to act on 
the crisis in Zimbabwe? Does USAID consider it part of its 
responsibilities to ask the Administration to press for high-level 
diplomacy, when it furthers important program goals in the field of 
democracy and human rights?
    Answer. Senator Leahy, let me start by providing some details of 
how USAID and the State Department have played a very constructive role 
in supporting the Southern Africa community's ability to act on the 
crisis in Zimbabwe. State Department and USAID collaborated to provide 
funding to a South Africa Development Community Parliamentary Forum 
(SADC-PF) election observation delegation to Zimbabwe's presidential 
election. The delegation consisted of some 70 members drawn from 12 of 
the 14 parliaments of SADC. The report issued by SADC-PF was critical 
of the elections, concluding that ``the climate of insecurity obtaining 
in Zimbabwe since the 2000 parliamentary elections was such that the 
electoral process could not be said to adequately comply with the Norms 
and Standards for Elections in the SADC region.''
    SADC-PF recently developed these norms and standards for observing 
elections in Southern Africa, standards that adhere to international 
norms for election observation and are an important step in developing 
the institutional capacity of SADC to effectively monitor elections in 
the region. USAID, through the National Democratic Institute (NDI), 
provided the support to develop the standards, and also has supported 
the SADC-PF in observing elections in Mozambique, Mauritius, Tanzania, 
Zambia and Zimbabwe. With their statement on the Zimbabwe election, 
SADC-PF has demonstrated that it has evolved, with USAID support, into 
an important regional institution that can promote and protect 
fundamental democratic standards and processes. That is not to say that 
the United States shouldn't continue to work with the international 
community to ensure that all important actors are speaking with one 
voice in strong condemnation of the elections in Zimbabwe.
    Addressing your broader question about USAID's role within the 
Administration for pressing for high-level diplomatic engagement on 
democracy and governance-related issues. I want to assure you that we 
do this constantly. This is done both in Washington, where there are 
frequent interagency dialogues regarding democracy promotion in 
specific countries or regions, as well as in the field where embassies 
often convene formal democracy working groups to address this very 
subject. Administrator Natsios, as well as Assistant Administrators 
like me, are active advocates at all levels of the State Department, 
and with the NSC, for supporting democracy and human rights, including 
in Zimbabwe. In all cases like this, while USAID may advocate a 
specific position, the State Department ultimately sets United States 
foreign policy.
                                 ______
                                 
             Questions Submitted by Senator Mitch McConnell
                            budget breakdown
    Question. Mr. Winter, what is the breakdown of USAID's democracy 
and governance budget (i.e., what are the funding levels for activities 
that promote civil society, rule of law, political processes, and 
political party development)?
    Answer. Senator McConnell, in fiscal year 2001 the breakdown of 
USAID's democracy and governance budget was as follows:
  --Rule of Law: $139 million (22 percent of the total democracy 
        budget);
  --Elections and Political Parties: $46 million (7 percent);
  --Civil Society: $293 million (47 percent); and
  --Governance: $149 Million (24 percent); for a
  --Total fiscal year 2001 Democracy Budget: $627 million.
    Please note that these totals do not include some elements of the 
democracy budget, such as regional ESF pots, where this breakdown is 
not yet available. So the overall total, as well as funding in each 
area, is likely to be higher. However, the relative breakdown of the 
democracy budget is unlikely to change significantly.
                   definition of a democracy program
    Question. Mr. Winter, what is USAID's definition of a ``democracy 
program?''
    Answer. Democracy and governance programs support the Agency goal 
of ``Strengthen Democracy and Good Governance.'' Within that goal, 
there are four separate Agency objectives. These objectives are:
    1. Strengthened Rule of Law and Respect for Human Rights. Programs 
under this objective include activities that support legal and judicial 
institutions, administration of justice, and judicial independence. In 
addition, programs that strengthen the awareness of, and adherence to, 
internationally recognized human rights fall under this objective.
    2. More Genuine and Competitive Political Processes. Programs under 
this objective include political party support such as activities that 
strengthen the organizational capacity and professionalism of political 
parties so they can better represent their constituencies. In addition, 
support to electoral administration bodies, voter education, and 
election monitoring fall under this objective.
    3. Increased Development of Politically Active Civil Society. 
Activities under this objective aim to build the capacity of civic 
groups, professional associations and other non-governmental advocacy 
groups that build public demand for democracy and good governance. 
Assistance to independent media and trade unions also falls under this 
objective.
    4. More Transparent and Accountable Government Institutions. 
Programs under this objective include USAID's anti-corruption efforts, 
assistance to local government and decentralization, legislative 
strengthening, civil-military relations, and assisting governments 
implement policy reforms.
                  role of political party development
    Question. Mr. Winter, how important are political party development 
programs to achieving meaningful political reform?
    Answer. Senator McConnell, one of the obstacles to political reform 
plaguing the countries in which USAID works is the growing problem of 
bad governance. USAID believes that parties can play a significant role 
in facilitating political consensus for reform among the electorate and 
key decision-makers. To improve the quality of democratic governance, 
it is important that parties offer citizens a range of choices, offer 
accountability to voters, and translate the popular will into policies 
and programs. Political party assistance should not be focused solely 
on building a stronger party or parties for electoral gain. It also 
needs to tackle the much harder task of creating a competitive and 
representative political system, internal party democracy, and the 
articulation and aggregation of competing positions that give voters a 
choice.
    In addition, USAID implements legislative party programs in 
countries such as Russia, Nigeria and Mongolia which aim to foster the 
effective participation of democratic political parties in government, 
inter-party relations in legislatures, and to advance specific 
legislative reforms (e.g., electoral law reform and constitutional 
frameworks). How we state the goal of party assistance is key to 
developing the right kinds of programs and to ensuring adequate 
emphasis on the ``supply side'' of democratic governance. The goal of 
political party development programs is to create a representative, 
competitive multi-party system capable of fostering meaningful 
political reform and democratic governance.
          political party development viewed as ``too risky''
    Question. Mr. Winter, in the past, USAID has avoided political 
party development programs, deeming them ``too risky.'' In the post-
September 11th environment, has USAID reconsidered its democracy 
strategy to include greater emphasis on political party programs?
    Answer. Senator McConnell, it is fair to say that assistance to 
political parties raises some sensitive issues. For example, in some 
cases political party development programs involve a sensitive decision 
on whether to take sides (i.e., support one or some parties and not 
others). Often times, beyond the election cycle, some parties lack the 
will to reform. Finally, limited resources and management capacity 
available to many USAID missions demand strategic choices, which may 
mean concentrating on other institutions or organizations performing 
governance functions. However, USAID has not avoided political party 
development. Our primary partners in this area, the National Democratic 
Institute (NDI) and International Republican Institute (IRI), have 
supported political party development in over 50 countries over the 
past ten years. This assistance has been most prevalent in the Europe 
and Eurasia and the Africa regions. USAID has focused attention on 
helping parties address growing public disaffection, corruption, and 
overall declining effectiveness of parties throughout the developing 
world. Most recently, USAID has been working to refocus its party 
assistance on more long-term, strategic interventions that do not 
solely focus on elections. Over the past year, party and campaign 
finance disclosure has also been a new priority. Party assistance will 
be an expanding and integral element of USAID's democracy strategies. 
Effective democratic parties are essential to progress in supporting 
good governance in targeted countries.
       funding for local democracy and human rights organizations
    Question. Mr. Winter, what percentage of democracy funds 
administered by State and USAID are provided directly to indigenous 
democracy and human rights organizations?
    Answer. Senator McConnell, unfortunately, this is not something 
that we systematically track, nor is it the type of information that is 
captured by our accounting system. Direct USAID support, as well as 
indirect support via our grantees or contractors, to indigenous 
democracy and human rights organizations is common. When done 
appropriately (the receiving organization needs to be soundly managed), 
this is a very effective strategy for promoting democracy. Some 
examples of the types of organizations that receive democracy funds may 
help illustrate how this works.
  --In Russia, USAID has signed a cooperative agreement with IREX to 
        help support Russian civil society organizations. Part of this 
        grant is provided directly to several Russian intermediary 
        service organizations (ISO) located in regions far from the 
        USAID mission or IREX's project office in Moscow. These ISOs 
        provide training and small grants to help strengthen grass 
        roots NGOs throughout Russia. Therefore, via the IREX 
        cooperative agreement, these ISOs receive democracy funds, as 
        do many additional Russian NGOs that get small subgrants to 
        help fund specific community-level democracy projects.
  --Through a cooperative agreement with the International Foundation 
        for Electoral Systems (IFES), USAID provides democracy funds to 
        several regional organizations of elections officials. These 
        organizations meet to share best practices on administering 
        free, fair, and efficient elections.
  --USAID provides democracy funds directly to the Inter-American 
        Institute for Human Rights (IIHR), the premier human rights NGO 
        in this hemisphere. Human rights activists and government 
        officials from all over Latin America are sent to IIHR for 
        training and technical assistance.
                 democracy assistance to topple regimes
    Question. Mr. Winter, should U.S. democracy assistance be targeted 
to influence specific political outcomes--such as toppling oppressive 
rulers like Slobodan Milosevic?
    Answer. Senator McConnell, I think that there are examples where 
all United States foreign policy efforts should be focused on the 
democratic overthrow of oppressive rulers like Slobodan Milosevic. 
Legally, there are prohibitions that prevent USAID from directly 
impacting the results of an election. However, democracy assistance is 
often used as a tool to directly challenge the legitimacy of 
authoritarian regimes. In every country where we are promoting 
democracy, USAID's primary aim is to assist democratic reform. When a 
government, institution, or even an individual is opposed to democratic 
reform, USAID typically reduces or ends assistance to that entity. In 
authoritarian or semi-authoritarian countries, we work with democratic 
political parties, the media, and civil society organizations, not the 
government. We will also support the legislature and judiciary if they 
appear committed to democratic reform. Our strategy is to support 
organizations that broaden the space for competing ideas and views, and 
to create an environment where political transformation is more likely. 
In extreme cases, we support the democratic overthrow of an oppressive 
dictator by supporting peaceful political opposition groups. When this 
approach is matched with a high profile diplomatic offensive, it can be 
very effective--witness the toppling of the Milosovic regime in Serbia. 
A decision to overtly favor one political party or coalition is always 
made in consultation with the U.S. Embassy and the Department of State, 
and is always done in the context of the relevant legal prohibitions.
    Our preferred approach outside of extreme cases (Zimbabwe, Serbia) 
is to work with reformers in as many parties as possible to help 
broaden support for democracy among the political elite. However, when 
events warrant it, and with clear State Department leadership, USAID is 
an effective partner in overt U.S. Government efforts aimed at 
defeating despots and dictators.
                     level of usaid staff expertise
    Question. Mr. Winter, what level of expertise does USAID possess in 
the field of democracy and rule of law reform? Does USAID program staff 
have relevant experience in American political or legal processes?
    Answer. Our democracy and governance officers, both in our missions 
and here in Washington, have significant technical and field 
experience. Democracy jobs at USAID are extremely hard to get. When we 
hire from outside the Agency, we often get scores of applicants for 
each opening. This gives us the luxury of hiring highly qualified 
individuals, who often agree to take significant pay cuts to join 
USAID. It has been approximately a decade since USAID began to focus 
considerable amounts of resources on democracy. In that time, our 
institutional capacity and expertise has grown considerably. In 
addition, USAID is able to attract extremely qualified Foreign Service 
Nationals (FSN). We have former judges, leading university figures, and 
skilled democracy activists that assist our U.S. Foreign Service 
Officers in the management of our programs. Once they leave, they often 
go on to serve in high-level government positions or win elected 
office.
                  lack of agressiveness and creativity
    Question. Mr. Winter, USAID programs have been criticized in the 
past for lacking aggressiveness and creativity. How has USAID addressed 
these shortfalls?
    Answer. Senator McConnell, we are certainly familiar with these 
criticisms. I think we need to look seriously at the issues raised and 
see whether they make sense and whether we need to do better. Frankly, 
we have been quite aggressive in places like Serbia, and we are very 
creative in many places as well. USAID has contributed to irreversible 
change in places like Bolivia, Bulgaria, and South Africa. 
Nevertheless, we need to be open to criticism. For example, Tom 
Carothers in the Journal of Democracy has alleged that USAID is 
constrained by our conformity to a ``transition paradigm'' that guides 
our strategy decisions regarding the promotion of democracy. We pay 
attention to these concerns, especially when they are raised by those 
who share our strong desire to improve the quality of our democracy 
programs. We try to learn from our mistakes, so these external 
critiques are often helpful. However, we don't agree with all (or even 
most) of them.
    For example, we now do a much better job of assessing the true 
political dynamics that influence a country's commitment to democratic 
reform, or the lack thereof. The DCHA Bureau has developed a 
comprehensive framework to both assess the true state of reform in a 
country and to design a democracy strategy that will most effectively 
overcome barriers to reform. When this process works, it is the 
antithesis of a cookie-cutter approach. Over the last five years, USAID 
has applied this framework in 26 countries, over a third of all 
countries where USAID has democracy programs. The next hurdle we are 
trying to overcome is to make a more direct link between the findings 
of these democracy assessments and actual programs. Too often our 
democracy programs do not link as directly with our analysis as they 
should. However, by centralizing democracy staff within the DCHA Bureau 
and placing final responsibility for strategies with the Bureau for 
Program and Policy Coordination (PPC), it will now be easier to ensure 
that our programs are both more flexible and more aggressive. 
Administrator Natsios has given the PPC Bureau this authority for all 
USAID programs, not just for democracy programs.
                   comparison of grants and contracts
    Question. Mr. Winter, what percentage of USAID democracy and 
governance contracts are awarded to for-profit organizations, and what 
is the average dollar amount of these contracts? Please provide a list 
of democracy and governance contracts and grants USAID has awarded over 
the past two years, indicating the recipient of the contract or grant, 
the dollar amount of the contract or grant, the overhead rate of these 
organizations, and a brief program description. What does USAID deem an 
acceptable overhead rate for democracy and governance program contracts 
awarded to for-profit organizations?
    Answer. Senator McConnell, this is not the type of information that 
our procurement or accounting system tracks regularly. However, we do 
have much of the information you have requested, and will get the rest 
as soon as possible.
    We do have relevant information regarding the breakdown of funding 
that goes into grants and contracts, as well as a comparison of the 
average markup or overhead rate of our grantees and contractors. In 
addition, we have a complete list of grants and contracts awarded in 
the last two years by the Office of Democracy and Governance. We are 
working with our procurement office to provide you similar information 
from all of our mission-based democracy programs.
    In fiscal year 1999, 65 percent of our assistance went to grants 
and cooperative agreements, while only 28 percent went through 
contracts. In fiscal year 2000, 61 percent of our assistance went to 
grants and cooperative agreements, while 31 percent went through 
contacts. In both cases, the remaining funds were channeled through 
other procurement mechanisms and were not used to fund large projects.
    Based on a survey of current grants and contracts under way in the 
Europe and Eurasia region, USAID has determined that the average markup 
for grants and cooperative agreements was 81 percent. The term 
``markup'' takes into account all the indirect costs (including 
overhead) that an organization applies against its direct labor costs. 
For contracts, the average markup was 83 percent. Clearly, the 
difference, at least in the Europe and Eurasia region, is 
insignificant.
    However, cost is not the only consideration when deciding whether 
to employ a cooperative agreement/grant or contract. Other key factors 
include:
  --Ability of the prospective implementor to undertake a successful 
        program;
  --Speed of procurement;
  --USAID's degree of need to direct activities; and
  --Competition requirements.
    All of these factors influence the ultimate decision about what 
type of instrument to use. In the democracy and governance sector, this 
calculus most often leads to the decision to undertake assistance via a 
grant or cooperative agreement. Looking at fiscal year 1999 and fiscal 
year 2000, about twice as much money was put into grants and 
cooperative agreements as was put into contracts. While work in other 
sectors may have a different breakdown, the majority of democracy 
assistance continues to go to grants and cooperative agreements.
    The following is the information you requested on individual 
awards. As mentioned above, this information only covers our democracy 
office, but we will do our best to provide this information about all 
of our democracy awards.
    Of 36 active contract and grant mechanisms managed by the Office of 
Democracy and Governance, just over one third have been awarded to for-
profit organizations. The average ceiling amount of these mechanisms is 
$20,121,539, of which an average of $586,022 has been obligated so far. 
In terms of ceiling, for-profit organizations represent 38.79 percent 
of the sum of all active mechanisms managed by the Democracy and 
Governance office. However, of a total of $184,814,079 actually 
obligated through the Office's mechanisms, for-profit organizations 
account for only 4.12 percent. As you can see, the balance between the 
amount of money awarded to for-profit versus non-profit firms is quite 
striking. However, this does not track all contracts to for-profits 
awarded by missions under a global DG office contract. If these 
contracts were factored in, the result would more closely resemble the 
two-to-one ratio of grants versus contracts.

                          DCHA/OFFICE OF DEMOCRACY AND GOVERNANCE CONTRACTS AND GRANTS
              [All active contracts and grants awarded by DCHA/Office of Democracy and Governance]
----------------------------------------------------------------------------------------------------------------
                                                                  Obligated  to
         Implementing partner                 Award type              date               Agreement number
----------------------------------------------------------------------------------------------------------------
For profit--fiscal years 2000-2002:
    Management Sciences for            IQC.....................         $25,000  AEP-I-00-00-0013-00
     Development.
    Development Associates...........  IQC.....................          25,000  AEP-I-00-00-00008-00
    Management Systems International.  IQC.....................         325,000  AEP-I-00-00-00018-00
    Creative Associates..............  IQC.....................         133,900  AEP-I-00-00-00019-00
    Casals & Associates..............  IQC.....................       1,860,701  AEP-I-00-00-00010-00
    Management Systems International.  IQC.....................         250,000  AEP-I-00-00-00009-00
    Associates in Rural Development..  IQC.....................         240,000  AEP-I-00-00-00016-00
    Development Associates...........  IQC.....................          25,000  AEP-I-00-00-00004-00
    Development Alternatives.........  IQC.....................          25,000  AEP-I-00-00-00006-00
    Management Systems International.  IQC.....................       1,323,439  AEP-I-00-00-00005-00
                                                                ----------------
      Subtotal.......................  ........................       4,233,040  ...............................
                                                                ----------------
Previous:
    Management Systems International.  IQC.....................       2,483,824  AEP-I-00-99-00040-00
    Associates in Rural Development..  IQC.....................         297,116  AEP-I-00-99-00041-00
    PaL-Tech, Inc....................  Contract................         604,306  AEP-C-00-99-00032-00
                                                                ----------------
      Total For-Profit...............  ........................       7,618,286  ...............................
                                                                ================
Non-profit--fiscal years 2000-2002:
    Iris Center......................  IQC.....................          25,000  AEP-I-00-00-00012-00
    National Center for State Courts.  IQC.....................         275,000  AEP-I-00-00-00011-00
    Temple University................  Grant...................       1,750,000  GDG-A-00-01-00020-00
    IFES.............................  IQC.....................         734,500  AEP-I-00-00-00007-00
    CEPPS............................  Co-Ag...................      11,230,184  DGC-A-00-01-00004-00
    ACILS............................  Co-Ag...................       2,000,000  DGC-A-00-02-00002-00
    AED..............................  Co-Ag...................       1,300,000  AEP-A-00-01-00004-00
    Pact, Inc........................  Co-Ag...................       1,300,000  GEG-A-00-01-00005-00
    Internews........................  Co-Ag...................       1,000,000  DGC-A-00-01-00007-00
    Research Triangle Institute......  IQC.....................          25,000  AEP-I-00-00-00017-00
    SUNY-Research Foundation.........  IQC.....................         125,000  AEP-I-00-00-00003-00
    IOM..............................  Grant...................         159,910  DCH-G-00-02-00002-00
                                                                ----------------
      Subtotal.......................  ........................      19,924,594  ...............................
                                                                ----------------
Previous:
    Freedom House....................  Co-Ag...................       4,650,175  AEP-A-00-99-00016-00
    IFES.............................  Co-Ag...................       3,620,000  AEP-A-00-99-00017-00
    IDLI.............................  Grant...................       5,179,988  AEP-G-00-97-00031-00
    CEPPS............................  Co-Ag...................      69,827,023  AEP-A-00-95-00038-00
    Fair Labor Association...........  Co-Ag...................       1,339,000  AEP-A-00-99-00047-00
      ACILS..........................  Grant...................      56,434,802  AEP-G-00-97-00035-00
    International Labor Rights Fund..  Grant...................         552,880  AEP-G-00-99-00062-00
    Transparency International.......  Grant...................       3,282,716  AEP-G-00-95-00028-00
    National Democratic Institute....  Co-Ag...................       3,173,951  AEP-A-00-98-00014-00
    World Learning...................  Co-Ag...................       8,810,664  AEP-A-00-95-00024-00
    UNHCS............................  Grant...................         400,000  AEP-G-00-99-00064-00
                                                                ----------------
      Total Non-Profit...............  ........................     177,195,795  ...............................
                                                                ================
      Total awards...................  ........................     184,814,079  ...............................
----------------------------------------------------------------------------------------------------------------

    Additional Information on Contracts and Grants awarded in the past 
---------------------------------------------------------------------------
two years:

    Recipient:Management Sciences for Development, AEP-I-00-00-00013-00
    Type of Award:Indefinite Quantity Contract
    Ceiling: \1\ $9,230,141
---------------------------------------------------------------------------
    \1\ This ceiling is the maximum amount of funds that may be 
obligated into this award.
---------------------------------------------------------------------------
    Overhead rate: 5 percent
    Description: Provides missions and regional bureaus with a 
contractual buy-in vehicle for rule of law (ROL) programming. 
Activities under this indefinite quantity contract (IQC) improve and 
enhance the Agency's performance in facilitating the growth and 
sustainability of legal and judicial systems that promote ROL 
consistent with respect for human rights and market-based economies, 
commitment to legal equity, and democratic principles.

    Recipient: The IRIS Center, AEP-I-00-00-00012-00
    Type of Award: Indefinite Quantity Contract
    Ceiling: $10,098,906
    Overhead rate: 21 percent
    Description: Provides missions and regional bureaus with a 
contractual buy-in vehicle for rule of law (ROL) programming. 
Activities under this IQC improve and enhance the Agency's performance 
in facilitating the growth and sustainability of legal and judicial 
systems that promote ROL consistent with respect for human rights and 
market-based economies, commitment to legal equity, and democratic 
principles.

    Recipient: National Center for State Courts, AEP-I-00-00-00011-00
    Type of Award: Indefinite Quantity Contract
    Ceiling: $9,963,916
    Overhead rate: 4.6 percent
    Description: Provides missions and regional bureaus with a 
contractual buy-in vehicle for rule of law (ROL) programming. 
Activities under this IQC improve and enhance the Agency's performance 
in facilitating the growth and sustainability of legal and judicial 
systems that promote ROL consistent with respect for human rights and 
market-based economies, commitment to legal equity, and democratic 
principles.

    Recipient: Temple University, GDG-A-00-01-00020-00
    Type of Award: Grant
    Ceiling: $2,168,116
    Overhead rate: 26 percent
    Description: This grant fulfills a Congressional directive by 
providing funding for Temple University's law center in Beijing. The 
grant funds an expansion of the Center's program by supporting 
additional faculty from Temple and other U.S. law schools. The funding 
also provides tuition scholarships for judges and legal officials to 
attend graduate programs in the United States.

    Recipient: Development Associates, AEP-I-00-00-00008-00
    Type of Award: Indefinite Quantity Contract
    Ceiling: $22,670,918
    Overhead rate: 2 percent
    Description: This IQC provides missions and regional bureaus with 
the buy-in capacity to support elections assistance when a contractual 
mechanism is the preferred option. This mechanism may be used for 
logistical field support where control over inputs such as ballot 
production, ballot boxes and specific inputs are required as part of a 
multi-donor effort. While offering a wide range of other support 
possibilities, Development Associates may also carry out evaluations 
and assessments, or conduct technical research on cutting edge, 
elections-related subjects.

    Recipient: IFES, AEP-I-00-00-00007-00
    Type of Award: Indefinite Quantity Contract
    Ceiling: $24,102,048
    Overhead rate: 27.5 percent
    Description: This IQC provides missions and regional bureaus with 
the buy-in capacity to support elections assistance when a contractual 
mechanism is the preferred option. This mechanism may be used for 
logistical field support where control over inputs such as ballot 
production, ballot boxes and specific inputs are required as part of a 
multi-donor effort. While offering a wide range of other support 
possibilities, IFES may also carry out evaluations and assessments, or 
conduct technical research on cutting edge, elections-related subjects.

    Recipient: Consortium for Elections and Political Process 
Strengthening, DGC-A-00-01-00004-00
    Type of Award: Cooperative Agreement
    Ceiling: $70,000,000
    Overhead rate: 24 percent
    Description: The Consortium for Elections and Political Process 
Strengthening (CEPPS) brings together the International Foundation for 
Election Systems, the International Republican Institute, and the 
National Democratic Institute for International Affairs to implement 
election and political processes programming. It provides field support 
(over $16 million in fiscal year 2001 buy-ins) and rapid response 
capacity for both presence and non-presence countries, as well as a 
limited amount of research and technical guidance, based on grantee 
experience and expertise.

    Recipient: Academy for Educational Development, AEP-A-00-01-00004-
00
    Type of Award: Cooperative Agreement
    Ceiling: $5,999,687
    Overhead rate: 36 percent
    Description: This mechanism is available to missions and regional 
bureaus for civil society strengthening and also for rapid response 
programming of ESF to address foreign policy priorities for State, 
particularly in important non-presence countries. This grant supports 
innovative approaches likely to facilitate the transition to, or 
consolidation of, participatory democratic processes and economic 
development, and helps to assure that lessons learned in civil society 
programming are implemented in USAID mission programs.

    Recipient: Pact, Inc., GEG-A-00-01-00005-00
    Type of Award: Cooperative Agreement
    Ceiling: $6,000,000
    Overhead rate: 33.88 percent
    Description: This mechanism is available to missions and regional 
bureaus for civil society strengthening and also for rapid response 
programming of ESF to address foreign policy priorities for State, 
particularly in important non-presence countries. This grant supports 
innovative approaches likely to facilitate the transition to, or 
consolidation of, participatory democratic processes and economic 
development, and helps to assure that lessons learned in civil society 
programming are implemented in USAID mission programs.

    Recipient: Associates in Rural Development, AEP-I-00-00-00016-00
    Type of Award: Indefinite Quantity Contract
    Ceiling: $23,569,988
    Overhead rate: 26 percent
    Description: Decentralization changes the distribution of power 
within societies and can deepen democracy. Reversion to centralized 
authoritarianism is more difficult when power is diffused and multiple 
channels for citizen involvement have been developed. Also, moving the 
locus for decision-making closer to those it affects can improve 
government responsiveness. This IQC provides for services in the areas 
of decentralization and public administration. Two functional areas are 
included: (1) decentralization and participatory government, and (2) 
public management and administration.

    Recipient: Casals & Associates, AEP-I-00-00-00010-00
    Type of Award: Indefinite Quantity Contract
    Ceiling: $18,841,702
    Overhead rate: 7.0 percent
    Description: Provides field support and buy-in capacity for 
missions and regional bureaus in the program area of curbing 
corruption.

    Recipient: Management Systems International, AEP-I-00-00-00009-00
    Type of Award: Indefinite Quantity Contract
    Ceiling: $16,767,614
    Overhead rate: 12.8 percent
    Description: Provides field support and buy-in capacity for 
missions and regional bureaus in the program area of curbing 
corruption.

    Recipient: SUNY-Research Foundation, AEP-I-00-00-00003-00
    Type of Award: Indefinite Quantity Contract
    Ceiling: $12,039,393
    Overhead rate: 29 percent
    Description: Provides field support and buy-in capacity for 
missions and regional bureaus in the program area of legislative 
strengthening.

    Recipient: Research Triangle Institute, AEP-I-00-00-00017-00
    Type of Award: Indefinite Quantity Contract
    Ceiling: $23,941,827
    Overhead rate: 14 percent
    Description: Provides field support and buy-in capacity for 
missions and regional bureaus in the promotion of decentralization and 
democratic local governance.

    Recipient: Development Associates, AEP-I-00-00-00004-00
    Type of Award: Indefinite Quantity Contract
    Ceiling: $11,567,277
    Overhead rate: 2.0 percent
    Description: Provides field support and buy-in capacity for 
missions and regional bureaus in the program area of legislative 
strengthening.

    Recipient: Management Systems International, AEP-I-00-00-00005-00
    Type of Award: Indefinite Quantity Contract
    Ceiling: $27,936,736
    Overhead rate: 9.2 percent
    Description: Provides field support and buy-in capacity for 
missions and regional bureaus in the program area improving the 
management of policy reform.

    Recipient: Development Alternatives, AEP-I-00-00-00006-00
    Type of Award: Indefinite Quantity Contract
    Ceiling: $30,964,736
    Overhead rate: 9.2 percent
    Description: Provides field support and buy-in capacity for 
missions and regional bureaus in the program area improving the 
management of policy reform.

    Recipient: Creative Associates International, AEP-I-00-00-00019-00
    Type of Award: Indefinite Quantity Contract
    Ceiling: $28,084,136
    Overhead rate: 15.0 percent
    Description: Provides rapid response technical assistance to 
support mission and regional bureau civil society programs and assure 
consistent application of lessons learned. Services focus on building 
the capacity of local, country, and regional level civil society 
organizations. The range of technical assistance activities includes 
the design, implementation and evaluation of activities in the 
following areas: (1) institutional capacity building, (2) sectoral 
support, (3) conferencing and networking, and (4) independent media.

    Recipient: Management Systems International, AEP-I-00-00-00018-00
    Type of Award: Indefinite Quantity Contract
    Ceiling: $25,318,440
    Overhead rate: 12.8 percent
    Description: Provides rapid response technical assistance to 
support mission and regional bureau civil society programs and assure 
consistent application of lessons learned. Services focus on building 
the capacity of local, country, and regional level civil society 
organizations. The range of technical assistance activities includes 
the design, implementation and evaluation of activities in the 
following areas: (1) institutional capacity building, (2) sectoral 
support, (3) conferencing and networking, and (4) independent media.

    Recipient: Internews, DGC-A-00-01-00007-00
    Type of Award: Cooperative Agreement
    Ceiling: $2,000,000
    Overhead rate: 35 percent
    Description: This Congressionally earmarked program provides access 
for missions and regional bureaus to train journalists and other media 
professionals from developing countries to obtain a broad range of 
skills, practices, and equipment to assist them in developing 
independent media and promoting the free flow of information in their 
countries. The training takes place at Western Kentucky University with 
follow-up training in the participants' home countries. The training 
program components include, for example, journalism and production 
training, station management training, training in media law and 
advocacy, association building, internet and ``new media'' training, 
site visits, field recording equipment grants, follow-on training in 
participants' home countries, and ``training of trainers.'' All 
obligations under the earmark to date have been for training of 
Indonesian and Cambodian journalists.

    Recipient: International Organization for Migration
    Type of Award: Grant
    Ceiling: $159,910
    Overhead rate: 4.8 percent
    Description: This grant funds the Participatory Elections Project 
which will research, develop and facilitate the recognition of 
international standards for the political rights of refugees and 
internally displaced persons.

    Recipient: ACILS
    Type of Award: Cooperative Agreement
    Ceiling: $49,500,175
    Overhead rate: 22.8 percent
    Description: This agreement supports labor-related programs with 
the following objectives: (1) Promote the adoption and effective 
enforcement of core labor standards; (2) Establishment of legal 
frameworks to protect and promote civil society; (3) Increased citizen 
participation in policy processes, implementation and oversight of 
public institutions; (4) Increased institutional and financial 
viability of labor unions and labor NGOs; (5) Enhanced free flow of 
information; (6) Strengthened democratic and political culture and 
gender equity; (7) Support anti-sweatshop initiatives; (8) Promote 
broad-based, equitable economic growth; (9) Human capacity built 
through education and training; and (10) Improve health through 
workplace and peer-to-peer health education and prevention.

                          SUBCOMMITTEE RECESS

    Senator McConnell. Thank you very much, that concludes the 
hearing. The subcommittee will stand in recess until 2 p.m., 
Tuesday, March 19, when we will meet in room SD-192 to hear 
from Paul O'Neill, Secretary, Department of the Treasury.
    [Whereupon, at 10:49 a.m., Wednesday, March 6, the 
subcommittee was recessed, to reconvene at 2 p.m., Tuesday, 
March 19.]












      FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS 
                  APPROPRIATIONS FOR FISCAL YEAR 2003

                              ----------                              


                        TUESDAY, MARCH 19, 2002

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2 p.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Patrick J. Leahy (chairman) 
presiding.
    Present: Senators Leahy, Bennett, and Reed.

                       DEPARTMENT OF THE TREASURY

                        Office of the Secretary

STATEMENT OF PAUL H. O'NEILL, SECRETARY OF THE TREASURY

             OPENING STATEMENT OF SENATOR PATRICK J. LEAHY

    Senator Leahy. Good afternoon, Mr. Secretary. And sorry for 
the strange day as we moved around. I know you are leaving for 
Mexico soon. I appreciate you being here.
    Now, the Treasury Department's budget request for 
international programs totals $1.45 billion. $178 million is to 
pay one third the arrears we owe to the international financial 
institutions. That is overdue and I welcome you for doing that.
    I also welcome your proposals to make changes in the way 
the World Bank does business, including moving towards grants 
and away from loans for the poorest countries. You and I have 
discussed this before and I heard you discuss it also at the 
World Economic Summit.
    I know this is controversial among some donors but I do not 
believe, as some suggest, that it will result in less support 
from Congress for these programs.
    However, I continue to have serious concerns about 
management at the World Bank. Mr. Wolfensohn is a good friend. 
I have great respect for him. I believe he has the right 
vision. But, there are some people down there who run the 
Bank's day-to-day operations who give the term ``ingrained 
bureaucracy'' a bad name.
    I have real doubts about some of these managers and have 
expressed concerns for years about the Bank's treatment of its 
own staff, especially those who file complaints of harassment 
or other misconduct.
    There is a fear of retaliation if anybody raises their head 
at the World Bank. And if somebody makes a complaint, they risk 
their career. That is wrong.
    This is not to take away from the Treasury officials who 
deal with these institutions. They do a good job and I 
appreciate it.
    I am glad that you and the President and others from the 
Cabinet are going to Monterrey and am pleased with the 
President's announcement last week to increase foreign 
assistance by $5 billion beginning in fiscal year 2004. We do 
not know the details yet but I like the direction.
    However, before we congratulate ourselves, we should 
recognize two things: We do know there are 2 billion people in 
the world living in misery who need help now, and many of these 
people cannot afford to wait until 2004. Fourteen thousand more 
people were infected by the AIDS virus today. Tomorrow will be 
another 14,000 and the next day another 14,000.
    Second, even with the additional funds, spending on 
development assistance will be below what it was in the 1980s. 
It will only be six-tenths of 1 percent of the Federal budget, 
and one-tenth of 1 percent of our economy.
    Our foreign aid can not solve all the world's problems. But 
our aid can help obtain measurable results from governments in 
ending corruption, reforming their economies, and strengthening 
democracy.
    As much as I applaud what the President has announced, it 
is not enough. This is more about our own national security 
than anything else. Senator McConnell and I have said over and 
over that we should be doing much more.
    The British Government made a proposal to double spending 
on foreign aid. Secretary Powell has said we should triple it. 
I agree, and hope that you will consider these proposals.
    To the extent that we bring about democracy and reduce 
poverty in other parts of the world, we will improve our own 
security.
    For example, every disease is only an airplane trip away 
from where we are right now. As we saw in the paper the other 
day, the number of tuberculosis cases has gone up in Northern 
Virginia. My wife is a nurse. She told me that in the last 5 
years, she has seen firsthand a dramatic increse in the number 
of TB cases in Northern Virginia. And a very large percentage 
of these cases are from outside our borders.
    Having said all of that, perhaps the most compelling reason 
to increase foreign aid is a moral reason. We are the 
wealthiest, most powerful nation on earth. Everybody in this 
room lives well. You do, I do. We all do. And we live at a 
level, no matter whether we are the lowest paid person in this 
room, that is unimaginable in vast parts of the world. And I 
think we have a moral responsibility to do more.
    Lastly, in your prepred statement, you mention getting rid 
of legislative mandates. Last year your Department brought us a 
laundry list of requirements that you wanted changed during the 
final stages of the conference committee, and asked us to act 
in areas that are outside our jurisdiction and contrary to the 
Senate rules.
    I realize it was a new administration, but that is not the 
way to do it. Let us talk earlier in the process, and working 
together, I am sure we can reach agreement on many of these 
issues.
    When Congress finds that the administration is not acting, 
then we will act.

                           PREPARED STATEMENT

    We have received Senator McConnell's prepared statement 
that will be made part of the hearing record.
    [The statement follows:]
             Prepared Statement of Senator Mitch McConnell
    Mr. Secretary, thank you very much for appearing before our 
subcommittee this afternoon to examine the fiscal year 2003 foreign 
operations request for the Department of the Treasury and the 
international financial institutions (IFIs). In the interest of time, I 
will keep my opening remarks brief.
    Let me begin by commending the administration for its initiative to 
increase foreign aid by $5 billion over the next three fiscal years. 
There has been a growing chorus in Washington and elsewhere for 
increased foreign assistance in the wake of the September 11 attacks, 
and both this subcommittee and President Bush recognize the need to do 
more to undermine poverty and promote democracy in developing 
countries. It is in America's security interest that economic, social 
and political standards are improved on a global basis.
    It is also in our interests to ensure that foreign aid dollars are 
used in the most efficient and effective manner. A critical element of 
the President's new initiative is the linkage between foreign aid and 
those countries that demonstrate a strong commitment to good 
governance, health and education programs, and economic policies. It is 
only fitting that we use our assistance to leverage reforms--and to 
reward those nations willing to make the difficult decisions necessary 
for long term economic growth and development.
    I should point out that this linkage will come as old news to 
certain countries in Southeast Asia, the Balkans, and the Middle East. 
To the consternation of some foreign capitals, I have long operated 
under the premise that U.S. foreign assistance is not a hand out.
    I hope that you will use today's hearing to expand on opportunities 
for reform at the World Bank, the International Monetary Fund (IMF), 
and other multilateral development banks. This Subcommittee has long 
been concerned about operations and management at the World Bank, and 
at our last Subcommittee hearing for Treasury, Senator Leahy and I 
focused on personnel, management, and corruption issues. Confidence in 
the World Bank is further eroded by articles that highlight management 
shortfalls at that institution, as appeared in last year's Foreign 
Policy journal. I take it as welcomed news that you have already made 
the issue of reform at the Bank and the IMF a central theme of your 
tenure as Secretary.
    Let me close by commending you for your Department's leadership on 
the effort to combat the financing of terrorism. This is an important 
front in America's war against terrorism, and I understand that $104 
million in assets has already been blocked since the attacks on our 
soil. Keep up the good work.

    Senator Leahy. Go ahead, Mr. Secretary. You and I have had 
a lot of chats. Incidentally, I much appreciate your call 
yesterday on this matter.

               SUMMARY STATEMENT OF HON. PAUL H. O'NEILL

    Secretary O'Neill. Well, thank you very much, Mr. Chairman. 
It is a real pleasure to be here. I have a long statement which 
with your permission I would like to----
    Senator Leahy. Would you put that in the record. Just pull 
that mike a little closer. As Senator Thurmond used to say, 
pull the--oh, do we have it on now? This is a new system I am 
told, just started in here. And for us old guys it is hard as 
heck to get used to anything new.
    Secretary O'Neill. Thank you, Mr. Chairman. It is a 
pleasure to be here. I have a long statement. With your 
permission, I'll just submit it for the record.
    Senator Leahy. Of course.
    Secretary O'Neill. I have a shorter statement that I think 
may be worth going through just to create a basis for our 
conversation, if you will. Thank you for the opportunity to 
testify today about the President's budget request for 
Treasury's international programs.
    Let me begin by underscoring the emphasis that President 
Bush places on economic development as a central commitment of 
American foreign policy. The United States should and must be a 
champion of economic growth and development, particularly in 
those parts of the world where poverty is the most acute.
    In today's world, in many nations and regions, extreme 
poverty is widespread and deep and exacts an enormous human 
toll. If we care about simple human dignity, we must act to 
help raise living standards for the poorest.
    As President Bush stated last week in a speech at the 
Inter-American Development Bank, and I quote: ``This growing 
divide between wealth and poverty, between opportunity and 
misery, is both a challenge to our compassion and a source of 
instability.''
    The President has called for a new compact for global 
development, defined by new accountability for both rich and 
poor nations alike with greater contributions from developed 
nations linked to greater responsibility from developing 
nations.
    The President's proposal recognizes that sound policies 
have universal application and that development partnerships 
can only be effective if rooted in a good policy framework.
    For this reason, the adoption by poor countries of the 
reforms and policies that make development effective and 
lasting is integral to the President's proposed new Millennium 
Challenge Account.
    The concept underlying the Account is clear, that countries 
that rule justly, invest in their people, and encourage 
economic freedom will receive more assistance from the United 
States.
    The administration looks forward to working closely with 
the Congress as we move to operationalize the Millennium 
Challenge Account.
    The MDBs are also important instruments in helping us 
pursue growth and prosperity in a global economy. They serve 
vital interests of the United States, and are crucial and 
integral components of our overall foreign assistance effort. 
U.S. foreign assistance programs, including assistance through 
multilateral development banks, are important for advancing 
American foreign policy.
    The more our assistance aids in economic development, the 
greater countries' ability to engage in mutually beneficial 
trade with Americans, the greater the chances for democratic 
values to take root, and the greater the chances for government 
and social institutions to develop stability.
    The crucial importance of laying the foundation for hope 
and opportunity has only been underscored by recent events. As 
the President has said, When governments fail to meet the most 
basic needs of their people, these failed states can become 
havens for terror.
    This year's request totals $1.4 billion, including $1.26 
billion in funding for our annual commitments to MDBs, $178 
million towards clearing our arrears to those institutions over 
a 3-year period, and $10 million for international technical 
assistance programs.
    I take very seriously my responsibility to ensure that U.S. 
taxpayer resources provided in the MDBs are effective in 
achieving significant and sustainable improvements in the daily 
lives of the people living in developing countries.

                           PREPARED STATEMENT

    I am convinced that the MDBs can do a better job. And it 
has been a high priority from the beginning of the Bush 
administration to improve their performance. Our message is 
beginning to take hold, but there is much work to be done to 
accomplish our objective. And with that, Mr. Chairman, I'd be 
pleased to take questions.
    [The statement follows:]
               Prepared Statement of Hon. Paul H. O'Neill
    Chairman Leahy, Ranking Member McConnell, Members of the 
Subcommittee, thank you for the opportunity to testify today about the 
President Bush's fiscal year 2003 budget request for Treasury's 
international programs.
    Let me begin by underscoring the emphasis that President Bush 
places on economic development as a central commitment of American 
foreign policy. The United States should and must be a champion of 
economic growth and development, particularly in those parts of the 
world where poverty is most acute. In today's world, in many nations 
and regions, extreme poverty is widespread and deep and exacts an 
enormous human toll. If we care about simple human dignity, we must act 
to help raise living standards for the poorest. As President Bush 
stated last week in a speech at the Inter-American Development Bank:

    ``This growing divide between wealth and poverty, between 
opportunity and misery, is both a challenge to our compassion and a 
source of instability.''

    The President has called for a new compact for global development, 
defined by new accountability for both rich and poor nations alike with 
greater contributions from developed nations linked to greater 
responsibility from developing nations. The President's proposal 
recognizes that sound policies have universal application and that 
development partnerships can only be effective if rooted in a good 
policy framework. For this reason, the adoption by poor countries of 
the reforms and policies that make development effective and lasting is 
integral to the President's proposed new Millennium Challenge Account. 
The concept underlying the Account is clear, that countries that rule 
justly, invest in their people, and encourage economic freedom will 
receive more assistance from the United States.
    The Administration looks forward to working closely with the 
Congress as we move to operationalize the Millennium Challenge Account.
    The MDBs are also important instruments in helping us pursue growth 
and prosperity in the global economy. They serve vital interests of the 
United States, and are crucial and integral components of our overall 
foreign assistance effort. U.S. foreign assistance programs, including 
assistance through multilateral development banks, are important for 
advancing American foreign policy. The more our assistance aids in 
economic development, the greater countries' ability to engage in 
mutually beneficial trade with Americans, the greater the chances for 
democratic values to take root, and the greater the chances for 
government and social institutions to develop stability. The crucial 
importance of laying the foundation for hope and opportunity has only 
been underscored by recent events. As the President has said, when 
governments fail to meet the most basic needs of their people, these 
failed states can become havens for terror.
    This year's request totals $1.4 billion. It includes $1.26 billion 
in funding for our annual commitments to the Multilateral Development 
Banks (MDBs), $178 million towards clearing our arrears to these 
institutions over a three-year period, and $10 million for 
international technical assistance programs.
    I take very seriously my responsibility to ensure that U.S. 
taxpayer resources provided to the MDBs are effective in achieving 
significant and sustainable improvements in the daily lives of the 
people living in developing countries. I am convinced that the MDBs can 
do a better job, and it has been a high priority from the beginning of 
the Bush Administration to improve their performance. Our message is 
beginning to take hold, but there is much work to be done to accomplish 
our objective.
                         the mdb growth agenda
    There is an untapped reservoir of human potential in all countries, 
including the poorest. To fully realize this potential, countries need 
to create an environment with the institutional conditions and 
incentives required to encourage individual enterprise. These include 
the rule of law, enforceable contracts, stable and transparent 
government, and a serious commitment to eliminate corruption. Countries 
also need to provide individuals with health, knowledge, and the skills 
they need to participate in and contribute to economic activity. 
External assistance can only help if the right fundamentals are in 
place to harness this great human potential.
    Job-creating productivity growth is the driving force behind rising 
per capita income and reduced poverty, and we have been pressing the 
MDBs to focus on projects and programs that raise productivity. This 
includes operations that would improve health and education; promote 
private enterprise; enhance the rule of law, effective public 
expenditure management, accountability and anti-corruption; and open 
economies by strengthening trade capacities and investment 
environments.
    As a result of our efforts, productivity and private sector job 
creation are receiving greater emphasis in the debate on MDB policies 
within the institutions and among other shareholders. We will continue 
working actively to ensure they become a hallmark of actual 
operations.,
    We are also pressing all the MDBs to measure results. It is not 
enough to say that the MDBs are increasing funding for education, for 
example. We also need to know whether that increase is leading to 
measurable results, such as better reading and writing skills. For the 
first time, in the current IDA replenishment negotiations, the United 
States will provide supplementary funding conditioned on measurable 
results in areas crucial to economic growth and poverty reduction. My 
goal is to ensure that the successes and failures of the past 50 years 
guide and improve development efforts in the future.
    President Bush has also proposed that a higher percentage of the 
World Bank and other MDB funds for the poorest countries be provided as 
grants rather than loans. This proposal is an important part of our MDB 
growth agenda because grants are the best way to help poor countries 
make productive investments without saddling them with ever-larger debt 
burdens. It thus also will help avoid the need for future HIPC debt 
relief. The fact is that investments in crucial social sectors, such as 
education and health, do not directly or sufficiently generate the 
revenue needed to service new debt.
    I am happy to say that the new IDA-13 and African Development Fund 
negotiations are likely to have larger shares going to grants, but 
there is still disagreement on how much. It is important to reach an 
agreement on grants that will facilitate closure on these important 
replenishments.
    Private sector development is essential for economic development 
and growth. Without a transparent economic environment based on the 
rule of law, private investment simply will not happen. Opaque 
regulatory and legal environments create insurmountable barriers to 
entry for new firms, which are the lifeblood of a thriving market 
economy.
    We believe the MDBs can do more to promote and develop investment 
climates that will attract needed private capital. The MDBs could 
provide practical investment climate assessments, for example. On the 
basis of such assessments, technical assistance, project finance and 
small-business loans could be channeled more effectively to countries 
committed to policy and regulatory changes that will create conditions 
that sustain robust levels of private-sector investment, productivity 
growth, and income generation.
                      the fiscal year 2003 request
    The Administration's fiscal year 2003 budget request of $1,447 
million for Treasury's international programs reflects these 
development priorities, thus projecting U.S. leadership and 
complementing our efforts to strengthen the effectiveness of the MDBs. 
Funding of this request also will help enable the MDBs to address 
critical development issues in key regions of importance to the United 
States: supporting key countries in the war on terrorism; combating 
money-laundering and terrorist financing; providing assistance to 
countries emerging from conflict; and responding to natural disasters.
    There are three basic components to this request: annual funding 
for the MDBs, arrears clearance, and Treasury's bilateral technical 
assistance program.
1. Annual Funding for the MDBs ($1,259.4 million)
    Our request for the MDBs includes $1,259.4 million to fund fully 
our current annual U.S. commitments. This includes the first payments 
of our proposed contributions to new replenishments for the 
International Development Association ($850 million), the African 
Development Fund ($118 million) and the Global Environment Facility 
($107.5 million). Negotiations for all three replenishments are 
ongoing.
    For the International Development Association (IDA), the United 
States is proposing for the first time a results-based financing 
framework. The United States would provide $850 million in fiscal year 
2003, $950 million in fiscal year 2004 and $1,050 million in fiscal 
year 2005, with amounts over $850 million subject to the achievement of 
measurable results in areas such as health, education and private-
sector development, for example. This amounts to a total of $2,850 
million, or 18 percent above the U.S. commitment to the last IDA 
replenishment.
    We are also proposing an 18 percent increase in funding for the 
African Development Fund (AfDF), a total of $354 million over three 
years. For the GEF, the United States is proposing to contribute a 
total of $430 million over four years.
2. Arrears ($178 million)
    The $177.7 million request for arrears would be applied to all MDB 
arrears on a pro rata basis, and is part of a three-year plan to fully 
pay U.S. arrears to the institutions, which now total $533 million, 
including $211 million in arrears to the GEF. Arrears have now risen 
for the third consecutive year, after declining substantially from 1996 
to 1999. It is critical that the United States meet its international 
commitments, and I look forward to working with the Congress to pay 
down these arrears over the next three years, thus helping to ensure 
U.S. leadership and credibility on global issues of vital importance to 
the United States.
3. Technical Assistance ($10 million)
    Our request also includes $10 million for Treasury technical 
assistance programs, which form an important part of our effort to 
support countries facing economic transition or security issues, and 
whose governments are committed to fundamental reforms. This compares 
to $6.5 million in fiscal year 2002 appropriations and $3 million in 
the budget supplemental for programs specifically designed to combat 
terrorism. Treasury's technical assistance programs were created in 
1990 and 1991 to assist countries in the Former Soviet Union and 
Central and Eastern Europe. Beginning in fiscal year 1999, a direct 
Congressional appropriation allowed us to expand the program 
selectively and effectively. Our fiscal year 2003 request will allow us 
to continue current programs in countries in Africa, Asia, Central and 
South America and to expand into other countries committed to sound 
economic reform policies. We expect to spend a significant amount on 
anti-terrorist programs. Over half of the traditional programs will be 
in Sub-Saharan Africa, as has been the case for the past two years. The 
anti-terrorist programs will be global in scope, with an emphasis on a 
group of about 20 countries that the Administration has identified as 
having financial systems vulnerable to misuse by terrorist 
organizations.
                          legislative mandates
    There is one final issue that I want to highlight. I am determined 
to enable the Treasury Department to fulfill its mission to develop and 
implement our international economic policy. Currently, the 
Administration is burdened by a large number of legislative mandates 
relating to U.S. participation in the international financial 
institutions, including requirements for directed voting, policy 
advocacy, certifications, notifications, and reports, that have built 
up over time.
    The U.S. Government's policy development and implementation in 
these institutions would be improved by consolidation of these 
mandates. Some mandates go back 50 years. Some provisions overlap, or 
are inconsistent. There are 32 directed vote mandates and over 100 
policy mandates, plus numerous reports, certifications, and 
modifications. I want the Congress to be fully informed, but numerous 
vestigial reporting requirements have increased the amount of time 
senior officials spend working on these reports to levels that warrant 
serious concern. I would like to work with you to rationalize and focus 
our mandated reports and requirements.
                               conclusion
    I will continue to work hard with MDB managements and with other 
shareholders to ensure vigorous and effective implementation of the 
U.S. reform agenda. I ask for your support as we work together to 
ensure that these institutions are more effective in achieving real 
results that promote economic growth and productivity, improve the 
living standards of people in developing countries, and advance 
American interests.
    Thank you very much, and I will be pleased to respond to your 
questions and suggestions.

    Senator Leahy. Thank you very much, Mr. Secretary. 
Incidentally, in reading through your budget justification 
materials, I want to say they are easy to read and informative.
    If you are chatting with some of the other cabinet members, 
you might suggest that they take a look at your budget 
materials. As a member of the Appropriations Committee, I get 
to see everybody's and the Treasury Department's are very clear 
and coherent.
    Secretary O'Neill. Mr. Chairman, may I--excuse me for 
interrupting, but may I just give credit where it belongs, to 
Under Secretary John Taylor and the people that are seated here 
who are giving their--a good important part of their life to 
doing this work. They deserve the credit for making these 
materials more clear and more readable.
    I think we've been fortunate in being able to assemble a 
fantastic group of people, to work with a career staff who have 
given their whole life to these subjects. And I am very pleased 
to represent them, but I shouldn't be given the credit for the 
great work that they do.
    Senator Leahy. I appreciate you doing that. It will be so 
noted.
    Mr. Secretary, the press has talked a lot about you being a 
critic of foreign aid. I suppose it depends whose ox is being 
gored. I have heard a number of your statements you have made. 
In some places I found myself in agreement with you.
    In other instances I did not. Just last week, the 
Washington Post said you believe that most poor countries reap 
paltry benefits from the billions of dollars they have received 
since the 1950s. And that was a response to a World Bank report 
that describes remarkable successes from the assistance.
    It seems to me that the truth is somewhere in the middle. 
On the one hand, there are a lot of examples of World Bank and 
U.S. agencies throwing good money after bad. We certainly saw 
that during the cold war.
    If you announced you were anti-communist it did not make a 
difference what kind of a dictator you were, how corrupt your 
regime was, or how much money you were sending to a Swiss bank. 
We were going to send the money to you.
    On the other hand, we have seen improvements over the past 
decade or so. A lot of people worked very hard at this, a lot 
of very capable professionals, through both Republican and 
Democratic administrations.
    You must also agree that a lot of this assistance can help 
or you would not be asking for $1.4 billion for the World Bank, 
and the President would not be talking about requesting another 
$5 billion next year.
    The President says a world where some live in comfort and 
plenty, while half the human race lives on less than $2 a day 
is neither just nor stable. I absolutely agree with what the 
President said. In fact, it is very similar to the things, 
Senator McConnell and I have been saying for years.
    But why begin in 2004? You have seen the misery of people 
around the world. You have been a leader of a company that has 
operations all over the globe. Why cannot we start now?
    Secretary O'Neill. Mr. Chairman, I think it is in fact an 
excellent question. And I think one should not rule out the 
possibility of looking at a beginning of this idea in fiscal 
year 2003.
    I think it is not out of the question that we could come 
into agreement among ourselves and with other contributing 
nations around the world on the idea of the measures that 
should be used as a results orientation for distributing this 
money, that we could get ourselves ready in time to begin at 
least on some modest level in 2003.
    And while I am at it, I think maybe it is worthwhile saying 
the notion of where the President sees us going is to be at a 
level of--at a running rate level in 2006 of $15 billion, which 
would be a 50 percent increase over the level that we are 
operating at now.
    So we see this ramping up as we gain experience and 
knowledge in working with these ideas. But the President is 
quite serious about getting results for the money that is being 
spent.
    I think there is work to do to make sure that we get the 
measures correct. My own experience is you get what you 
measure. And so if you are wrong about what you measure, you 
can regret the results. So----
    Senator Leahy. I could not agree more that you cannot just 
throw money at a problem. But we have a whole lot of existing 
programs that have proven track records of success but are 
currently underfunded. And I am wondering about putting money 
there.
    We have talked about the $1.43 billion you requested for 
the international financial institutions, $177 million is to 
pay a third of the arrears we owe from past years; it is $263 
million more than 2002. We would like to put a lot more funding 
into existing programs that work. But where do we take it from?
    I mean, do we fund USAID's education programs or the World 
Bank? Do we fund international peacekeeping or the Asian 
Development Bank? Unless we have the money in the budget 
request, it is difficult to do.
    I agree very much in having standards that measure the 
success of programs, but I can show you a whole lot of programs 
that are working today but are starved for funds.
    Secretary O'Neill. I am thinking about the conversation I 
had with the President last week where we talked about the half 
a billion dollars that the United States has committed to the 
U.N. HIV/AIDS Fund. And we were remarking that the first of 
those funds were appropriated about a year ago, and so far 
there is no obligation in the field.
    That is to say there is no program in the field yet as a 
consequence of those funds. It is my understanding that maybe 
sometime next month there will be the first actual distribution 
of funds.
    So I guess I have the same sense of urgency you do, Mr. 
Chairman. You know, I come at this--you started by saying that 
some people have blasted away that I have been criticizing the 
institutions. And I guess I regret people interpreting what I 
am saying as critical of the institutions. Because that is not 
at all the perspective that I bring to this.
    My own view is, which comes from as you said from working 
around the world, I think--I know you have done this and other 
members of the committee have as well, if you go and see what 
it's like for people who have no reason to have hope in their 
life, and that's what their whole life is going to be about, 
then it's not too hard to be impatient about these matters.
    And to focus only on doubling the level of average income 
in low income countries from $1 a day to $2 a day is a pitiful 
vision I think.
    So I am quite with you in believing that we should be very 
ambitious about what it is we should try to do. But I also 
believe this about the President's Millennium Fund, that this 
to me is the potential lever on a fulcrum that can move all of 
the assistance that is moving through these channels around the 
world, not just our bilateral aid but our multilateral aid and 
the aid that is coming from other countries.
    It is interesting to note, you know, I was challenged about 
this last week so I got my statistical abstract out and 
rediscovered, I think maybe I knew this before, that last year 
American people and institutions gave $175 billion in 
charitable giving.
    So I think the spirit is there. And if we can do a better 
job of assembling the fundamental conditions that give life to 
hope for billions of people, there is a lot to lever here. And 
I think we can go a long way with $5 billion worth of new 
leverage.
    Senator Leahy. Let me go to a very specific thing. You 
propose that half the World Bank's aid to the poorest countries 
be changed from loans to grants, to prevent new debt from being 
piled on top of old debt on top of old debt on top of old debt.
    The Europeans strongly oppose this. Where do we stand? Is 
agreement possible, and would it be possible to channel more of 
the grant funds through nongovernmental organizations rather 
than through governments?
    Secretary O'Neill. Where we stand at the moment is I think 
we are making a little bit of progress. As we've been able to 
sit down with development ministers from other countries and 
make the arguments in a clear way where people can't get up and 
leave when it is inconvenient to continue the discussion. I 
think that those on the other side of this argument have been 
hard-pressed to explain why it is that a civilized world should 
say to developing nations that we want to give you, say, a $10 
or $50 or $100 million loan so that you can give people HIV 
drugs. And we want you to pay it back.
    I mean, when you say it out loud it is such an absurdity 
that even the strongest proponents of ``we've got to keep doing 
this loan'' look at their shoe tops because they are so 
embarrassed to continue this argument.
    And the same for inoculations, and we think the same for 
primary education, that we should say to people who are living 
on $1 or $2 a day, we are going to make you a loan. You have to 
pay it back.
    I mean, just seems like such an insane notion. And I do 
think we are making progress. Hopefully this 2 or 3 days in 
Monterey with finance ministers and development ministers and 
lots of presidents and prime ministers will help us to move 
this along.
    We are anxious to do it, because we are now holding some 
things up that should go forward. So we are--I think we are not 
being obstinate for the sake of being obstinate in this case. 
We are on the side of principle.
    And we need to bring our friends, people like Tony Blair 
and Gordon Brown along, and Schroeder in Germany and the rest. 
Because I am confident it is not the right thing to ask people 
in these conditions to pay us back money that is needed for 
basic survival.
    Senator Leahy. I have a lot of other questions but I know 
time is limited. Senator Bennett and then Senator Reed.

             OPENING STATEMENT OF SENATOR ROBERT F. BENNETT

    Senator Bennett. Thank you very much, Mr. Chairman. Mr. 
Secretary, you know I consider you one of the leading 
troublemakers in this town because you are a truth teller. And 
truth tellers are in relatively short supply, vastly needed.
    But given the culture of this town that is expecting people 
to cut and trim their opinions, they do not quite know how to 
react to you.
    May I encourage you to keep doing it. I am sure you will 
anyway, without that encouragement.
    I think you have just told the truth here. It is absurd to 
put money into a situation where it cannot grow and then expect 
it to be paid back. When you make a loan, you make a loan to a 
circumstance where somebody expects a return on that money.
    This is why I have been such a strong proponent of 
microlending, because I have been in the field, have watched 
what happens. I have a piece of embroidery in my office that I 
brought from a woman in Morocco who started her business 
creating that embroidery on a $75 microloan from AID.
    I have pushed for a massive increase in microloan funding 
and run into massive opposition at AID both in the previous 
administration, have not yet seen it in this one, and the best 
reason I can come up with as to why they were opposing it is 
because they did not control the money.
    I do not consider that a valid reason for opposing it. If 
you get the results, put more money. And if the results are 
good, put more money in it.
    The results have been good and we have seen a number, large 
number of people come out of the most miserable poverty 
conditions into a degree of relative health, financial health 
that is in their lives transforming.
    Now, by American standards you say, oh, they are still 
living in poverty. But poverty is the sense of relative 
deprivation. And by their standards they are doing extremely 
well.
    Now, let me share with you a comment that I had from a 
leading minister in a foreign government. And I will tell you 
his name off the record. I will not raise it here.
    As he and I were having dinner together in his country, and 
I said to him what do you need most. I sit on the Foreign 
Operations Subcommittee on Appropriations. What do you need 
most.
    He said, I need people I can trust, trained people I can 
trust. He said I preside over a ministry of some 50,000 people. 
If I had 15 trained people I could trust, I could fire all the 
rest of the 50,000 and we would run the economy of this country 
a whole lot better than we do now.
    He then said: When I have approached AID they say, oh, we 
do not fund scholarships. And they then off the record say, you 
are going to choose all your relatives and all your friends, 
and you are going to send them over and we are going to pay for 
them to go to college in America and we do not want to do that.
    Whereupon he said: Fine. You pick the people. You go out 
and pick the people that you think have the potential after 
getting a degree from an American university in Economics or an 
MBA or something of that kind and then send them back to me.
    Well, they'll get back to you on that. And it has not 
happened. I have been trying to promote scholarships in the 
universities in my own State from this very country just for 
this purpose.
    If you are going to put money, here is--that is the lead 
up, here is the statement, and I would like your comment on it. 
If you are going to put money into a developing economy in an 
effort to turn it into a more productive economy, if you are 
going to follow the example you have given in the press of 
trying to make South Korea happen again, you are going to need 
trained people.
    You have got to root out the corruption that is endemic in 
these countries where people think the culture is to take the 
government money, take the AID money and spread it around among 
your cronies or let it get to a bank in Switzerland somehow 
with your number on it. And nothing ever happens or very little 
ever happens.
    Have you given any thought to the question of human capital 
in some of these countries and how AID can switch its whole 
attitude, and how the World Bank or the IMF might make a 
significant contribution to human capital so that we get the 
leverage that would come from attaching intelligent humans to 
money that can make a difference instead of just going on the 
way we have been going on.
    Secretary O'Neill. Senator, I think you are onto a very 
important point. And it is not just one I think for us to 
pursue with the instrument of the Federal Government. Now, I 
must say, I was in the Middle East for a week, a week before 
last, and one of the things I was very impressed by was the 
very large number of leaders in the Middle East who had been 
trained in U.S. colleges and universities.
    I think it is a major reason why the leaders are with us 
and understand us because they had an opportunity to live here. 
And as a general point, I would add to your important concept 
of the need for trained people.
    I think it is very much in the interest of the United 
States for people around the world to understand us from having 
spent a significant amount of time here. And frankly, we need 
to do the same in the other direction.
    We need more Americans who have the authority of knowledge 
that comes from being in a place where you don't speak the 
language and in effect you are an infant again as you think 
about what you are doing in the world.
    So I am very, very sympathetic to your point that we need 
trained people and we need the side benefit, if you will, of 
people understanding each other's cultures a lot better. I 
think it would help to reduce the tensions in the world.
    And certainly as we look at important elements of how we 
should stylize this $5 billion that the President's talking 
about, this will be an important component in our thinking.
    Senator Bennett. Is there any way we can get the folks at 
IMF and the World Bank to put in some kind of human assessment 
as they make their economic assessments?
    Secretary O'Neill. Yes, sir, I think we can get their 
attention.
    Senator Bennett. Very good. Thank you, Mr. Chairman.
    Senator Leahy. Thank you, Senator Bennett. Senator Reed.

                 OPENING STATEMENT OF SENATOR JACK REED

    Senator Reed. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary.
    I will echo what I believe we have all said and all 
believe. We are spending a great deal of effort both in terms 
of treasure and more importantly in terms of the lives of 
American men and women in uniform to, as they say, drain the 
swamp.
    But I think we all recognize if your efforts 
internationally do not succeed in terms of raising the standard 
of living in so many parts of the world, that swamp fills up 
very quickly. And so this is a very important topic.
    It seems to me that in our programs in this regard there 
has been a dichotomy between at least two points, raising the 
standard of living and also encouraging American investment, 
facilitating investment, et cetera. And these two views have 
vied with each other for controlling our program direction.
    It raises in my mind some very general questions, but I 
think they have hopefully some import. How do we measure 
results? Do we have a goal that is measurable, quantifiable or 
in some way definable?
    And do we have a multi-year plan to reach those goals? 
Because we all recognize this cannot be accomplished by one 
budget submission or one round of discussions. And if you might 
comment on that, Mr. Secretary, I would appreciate it.
    Secretary O'Neill. Thank you very much, Senator. Perhaps it 
is useful to put down a couple of markers to begin with.
    First of all, I think it's important to notice that around 
the world a relatively good job in development progress has 
been done over the last 40 or 50 years. A very, very large 
component of the investment that was made was private sector 
investment, foreign direct investment for practical purposes.
    And it is also important to notice that money is--I am fond 
of saying money is a coward. And what I mean by that is it goes 
where it's likely to be treated well.
    And so when you look at the conditions for success, for 
more than usual a rapid rate of development, I think you'll 
find some common conditions. One is that money is likely to be 
treated well, and underneath that is the notion of a rule of 
law and enforceable contracts and a minimum and hopefully 
receding level of corruption.
    And those are the conditions that bring on rates of growth 
like those we have seen in Taiwan and South Korea and a few 
other places that are very substantial.
    Now, in terms of measuring results, I believe that one of 
our most important measures should be the change in the average 
standard, average income level of individuals in a country. 
Because it is pretty unmistakable and it is pretty clear 
whether you have made any progress or not.
    Now, underneath that there are a whole set of questions 
about distribution. And economists will give you more lectures 
than you want to hear about the distributive effects of raising 
the average income level. At least for me as a first 
approximation, I'd take an increase in the average and then 
we'll worry about the distribution question.
    And especially to draw the difference between a place where 
the average income level is $1 a day and on the other hand you 
look at Korea and it is $24 a day, that's a lot of difference.
    And you can deal with an awful lot of a distributional 
equity within that huge difference. It almost doesn't matter 
what the distributional consequences are.
    So average income level is an important indicator I think 
of--a change in average income level is an important indicator. 
But I want to give you a more direct example of the kind of 
measure that I believe we should work on in these millennium 
grants.
    In the millennium goals, the so-called millennium goals, 
there is what I am sure was a heartfelt need to deal with the 
subject of education. So the millennium goals say all children 
should be going to school by 2015.
    Now, no one could argue with that. But I would submit to 
you it's not a worthwhile goal if nothing happens while the 
kids are in school. And for too much of what goes on, I won't 
name the country, but believe me this is a real circumstance 
where 25 percent of the country's budget is spent on education, 
and when the children graduate from high school, they are fully 
prepared to do manual labor.
    Now, I make that point because what we really want from 
educational spending both here in the United States I would 
say, and everyplace else, for me at least the goal should be 
when children are 10 years old they should be able to read and 
write and compute at a level so that if they never saw the 
inside of an organized educational establishment again but had 
access to a library, they could educate themselves to a level 
that anyone would be proud to attain.
    That is a real measurement of success that creates the 
basis for what Senator Bennett was saying about the need for 
educated and trained people. Having a lot of people with 
certificates and no capability or knowledge is worthless.
    One of the things I would say we have been guilty of, and 
this is not to hammer the institutions, but that we in society 
have been guilty of, we have been too ready to accept input 
measures instead of output measures.
    We have also I think been too ready to have a proliferation 
of 100 desirable goals instead of the 5 or 10 that are 
determinative of whether or not the whole society works.
    So I think this charge that the President has given to me 
and to Colin Powell to develop a measurement set for how we 
should think about these millennium goals--I think is critical 
that we do it well and that it be abetted by serious people who 
care about these things.
    Because if we get the measurements right, we are much more 
likely to get everything that follows from this $5 billion 
right.
    Senator Reed. And Mr. Secretary, just quickly, there is 
obviously a multi-year aspect of this, so that I know in the 
Defense Department they have their 5-year fit-up. Are you 
looking forward to a multi-year plan which you will share with 
us along with the goals?
    Secretary O'Neill. We are. We haven't yet landed on how we 
think the ramp-up should take place. But the President's 
committed to the idea that by 2006 and afterwards should be a 
minimum of $5 billion incremental to where we are today, which 
is to say 50 percent over the $10 billion that we use as a 
benchmark for where we are going.
    And in a way, let me tie my answer together with the 
questions you and the chairman and Senator Bennett have asked.
    I think, my own view is as we can demonstrate, that is to 
say we and other people who care about these things including 
the multilateral development banks and the rest can demonstrate 
that we know what we are doing by demonstrated success, I don't 
think those who follow us will have any hesitation in asking 
for more. And I don't think the people of this country with 
their great charitable spirit will hesitate for a moment to put 
resources where demonstrated results can be shown.
    Senator Reed. Thank you, Mr. Secretary. Thank you, Mr. 
Chairman.
    Senator Leahy. Thank you. Mr. Secretary, there was an 
article in yesterday's Washington Post on how you would 
maximize the effectiveness of foreign aid. And you are quoted 
as saying: ``You say to foreign leaders you've got to create a 
rule of law that people can depend on, enforceable contracts, 
and you've got to stop being a part of the cycle of 
corruption.'' I absolutely agree with you on that.
    Now, on the one hand we read your quote in the paper and on 
the other hand, we see the administration taking what seems to 
be the opposite approach with large amounts of foreign 
assistance. Take the case of Pakistan, for example. Pakistan 
has been a key ally in our efforts against terrorism. But there 
is a long history of government corruption in Pakistan.
    In December, the administration provided $600 million for 
budget support to Pakistan, with virtually no conditions on 
that assistance. I can understand the reasons why it was done, 
but it is almost as though we say, these are what our rules 
are, unless of course we need you at the moment. And if we need 
you, we will waive all the rules.
    I do not see any indication the U.S. taxpayers will get 
their money's worth for the $600 million. There are no strings 
attached to a large amount of aid to a notoriously corrupt 
government.
    You were also quoted as saying we spend trillions of 
dollars on foreign aid, with little to show for it. Given the 
administration's approach with Pakistan, are we going to be in 
the same situation we were in during the cold war when the 
administrations of both parties shoveled money out to anybody 
who said, we are anti-communist, regardless of how the money 
was going to be spent.
    Are we going to find ourselves in a similar situation as we 
respond to international terrorism? If any nation says we are 
anti-terrorist, or we have a good place on the map; is the 
United States simply going to dole out large amounts of foreign 
aid with no strings attached? You understand my concern.
    Secretary O'Neill. I do. Let me go back.
    Senator Leahy. And I can understand the thinking behind 
providing $600 million to Pakistan, but----
    Secretary O'Neill. I understand. Let me tell you my view of 
this. And in order to do that, let me go back to November of 
2000 which is a couple of months before President Bush took 
office. And this is not to find fault with what the previous 
administration did, but just to anchor the point.
    I think in November of 2000 then Secretary Summers agreed 
with a funding for Argentina in a very large package. And if I 
remember correctly, the public and private aggregation of funds 
was something like $43 billion.
    And as you know, we came in saying we don't think this is 
the way to do business. And in April we found ourselves in a 
position of where Argentina had blown through the $43 billion 
and we agreed to in effect another $20 billion package.
    You know, when I talk to others in the administration 
including the boss about this, I said I really think in the 
longer run we know what we have said is true north. And that is 
that we should not be the endless source of funds for countries 
that don't meet these conditions of rule of law and no 
corruption and enforceable contract.
    But I don't think we can change the world overnight. It is 
going to take some time. And we have to share--we have to 
demonstrate goodwill. We have to show that we are not a 
heartless people in changing policy, and in effect we have to 
give people fair warning.
    And so we did that. And in August, in the case of 
Argentina, we agreed to another--a small package which wasn't 
good enough to carry them through. And you know the dissolution 
and the changes of governments that they have had.
    And I guess I would offer you Turkey as another case where 
they had a problematic economy, and working through the IMF 
they have made some really remarkable changes in what was going 
on there in order to secure another IMF package.
    And all of this is by way of saying I think we need to be 
really clear about where true north is. And for me true north 
is about the role of development assistance in achieving the 
conditions that we know are necessary to real economic 
development that will inure to the benefit of raising the 
average standard of living in these countries, and whereas you 
say we have an issue of realpolitik that we not confuse that 
with economic development, that we in effect use some 
discipline on ourselves so that we know the difference between 
economic development and assistance to an ally that's crucial 
from a military point of view.
    Senator Leahy. My problem is that the foreign assistance 
budget is not even one-twentieth of the Defense Department. We 
have to be very judicious in how we spend these funds, and I 
get very concerned when we start providing large amounts of 
assistance for political purposes.
    For example, there was a piece in yesterday's Washington 
Post on Uzbekistan, an autocratic nation with a terrible human 
rights record. The Post said that President Karimov is quickly 
learning the art of American clienthood as practiced by 
friendly dictators.
    First, be quickest among your neighbors to volunteer bases 
and staging areas to the Pentagon. Next, serenade Washington 
with speeches about your love of capitalism and democracy while 
releasing a political prisoner to appease the State Department. 
Finally, sit back and count the U.S. AID money that rolls in, 
$160 million for Uzbekistan this year, while quietly sustaining 
the repression that keeps you in power.
    To their credit, the State Department has worked out an 
agreement with Uzbekistan committing the government to making 
democratic and economic reforms. The real test will be if the 
administration and Congess will hold the Uzbekistan Government 
to this agreement. We have already seen some troubling 
statements from President Karimov when he was in town here 
recently. For example, he said, we have already made a number 
of these reforms. We have created a democracy in Uzbekistan.
    Not by any rational standard is there a democracy in 
Uzbekistan. I mean, this is like saying we have free elections 
in Zimbabwe. Neither one exists. But if we are going to give 
governments payoffs in order to obtain base and overflight 
rights--well, why not just say that and request enough funds in 
the foreign aid budget to accommodate these kinds of requests.
    Secretary O'Neill. But, you know, Senator, your line of 
questioning is very reminiscent of what I found when I said I 
thought financial contagion was a man-made phenomenon. And 
people said, well, what would you like to do about it?
    And I said I think we ought to put people on notice when 
it's clear that they are slipping into the financial abyss. And 
the response I got was, well, you can't do that because it will 
be a self-fulfilling prophecy.
    And I think much the same about what you are saying, in a 
way it goes to what Senator Bennett said earlier in his 
introductory remarks. It would be really great if we started 
telling the truth about all of this stuff on a regular basis. 
It would sure make life a lot easier.
    Senator Leahy. Well, we did not during the cold war.
    Secretary O'Neill. Now is a good time to start.
    Senator Leahy. Yeah, but we are not. I mean, why----
    Secretary O'Neill. I am not----
    Senator Leahy. One, I agree with you, but from what I have 
seen, especially in the cases of Pakistan and Uzbekistan, we 
may be heading in the wrong direction. Let us have the debate 
up here. We, the Appropriations Committee, cannot even find out 
how the money for our domestic programs that fight against 
terrorism is being spent, say nothing about home-land defense 
and whatnot, say nothing about overseas programs.
    Why do not we just be very blunt and say, look, this is 
payoff. We are buying your support for the moment.
    The main problem with going down this road, Mr. Secretary, 
is that the United States will have to be in a position to 
close our eyes to human rights violations. We will have to 
close our eyes to corruption. We will have to close our eyes to 
the maltreatment of other nation's citizens. In other words, if 
it is in our security interest to do so we will ignore all of 
our important values such as human rights. But, if you don't 
own territory in a region where we want to conduct military 
operations or produce a lot of oil, then we'll go ahead and 
lecture you.
    I want to avoid setting a double standard: Tough conditions 
on foreign aid to some nations, but no strings attached to 
assistance to nations who happen to be strategically located at 
the moment. We may have a little bit of trouble pulling some 
people on with us when we need them if we start doing that. Now 
maybe that is truth telling as Senator Bennett said.
    But, I mean, we have got to figure out some way to balance 
this. I think you and I agree on a lot of these things. But I 
am just trying to figure how we balance it.
    I do not want to get us into this problem we had for years 
with the cold war because in the end it ended up--it really 
ended up hurting us when we had some nations in Africa, for 
example, where there may have been real opportunities to bring 
about democracy, but because we were willing to close our eyes 
to everything they were doing, our foreign assistance ended up 
in Swiss bank accounts.
    Poverty increased and instability increased. And now it is 
hurting us.
    Secretary O'Neill. I guess I don't think that our choices 
are at war with each other so much as your question implies. I 
think for an awful lot of these things it's surprising how much 
people will change if you are willing to say what you really 
believe up front.
    It is not easy--it's not to say that things will change 
overnight, but I don't think our choices are between putting 
our values down and not. I really don't think it's that stark.
    Senator Leahy. Well, I just want to make sure we do not get 
into that, because frankly we have done that in the past. And I 
fault both Democratic and Republican administrations. And the 
temptation, there is always the short-term temptation, that the 
end justifies the means this time.
    I do not think it has to be that way. I think we can help 
people. I think we can improve our security. I think we can do 
the necessary short-term objectives, such as military 
operations, but if we carefully and effectively target our 
foreign assistance dollars, in the long run we will be far more 
secure.
    Fanaticism is fanaticism. But the more you improve 
democracy, increase openness and reduce corruption, the more 
you counter the conditions that help to breed fanaticism.
    I know you have to leave, but Senator Bennett I think had 
another question. I do not want to take all the time.
    Senator Bennett. Mr. Secretary, can you expand on your 
comment on financial contagion, that it is not inevitable.
    Secretary O'Neill. Yes, sir. I think if you look at the 
experience of the 1990s, we saw a phenomenon where in effect 
the actions on the interventions of the international financial 
institutions aided and abetted by the United States and other 
major G-7 countries had decided that there was a great risk in 
the world that if a large country or even a not-so-large 
country was permitted to go into default on its publicly held 
debt, that the world capital markets would transmit that 
phenomenon around the world in a very fast fashion and that it 
would endanger the whole world financial system.
    I think this was a broadly held view and it is why there 
were so many interventions in the last half of the 1990s. And 
they were growing in size. And it is what we found when we got 
here.
    It was my view that the, if you will, the bailouts were a 
way of saying to risk capital you don't really have any risk.
    What I mean is this. If you went into a country that 
inherently had a risk-adjusted cost of capital, say of 25 
percent, that's a warning signal to an intelligent investor. 
Because there is no way that you can get a 25 percent rate of 
return unless you have got enormous risk that you won't get 
your money back.
    What was happening because of these interventions on--I 
think with the best of intentions, was that we were teaching 
the world financial markets that what looked like a 25 percent 
rate of return was in fact a 25 percent rate of return because 
the world taxpayers were going to bail you out if the country 
failed.
    I think we needed to demonstrate that people who put money 
into these high-risk situations were going to be permitted to 
lose it and not be bailed out by the world taxpayers.
    I think we have accomplished that with the action that has 
been taken in Argentina. We have demonstrated that we are not 
going to bail out private capital. It thought it had found the 
golden goose and the world taxpayers would bail them out.
    Another thing that has happened that's really quite 
important, I think we are now down to a very few countries in 
the world that have fixed exchange rates, which I am convinced 
is a good thing. Because if you don't have a fixed exchange 
rate, it means the world capital markets are recalibrating 
sovereign debt every day. And they are looking at your facts, 
and they are looking at the risk.
    It means that you don't put yourself in a position, an 
individual country, where there can be a seeming falling off 
the cliff for a country's financial position. So I think a 
combination of moving a policy in a better direction and 
unfolding of a more integrated free-flowing world economy is--
allows us to demonstrate contagion was indeed a man-made 
phenomenon.
    It is not something that we have to in effect be paying off 
bribes, if you will, in order to defeat this phenomenon.
    Senator Bennett. Bob Dole gave me the assignment to work on 
the Mexican peso crisis. And I agree with you. I went through 
that experience and I learned a lot from it. Can you elaborate 
on the potential benefits of creating a mechanism for dealing 
with sovereign bankruptcy?
    Secretary O'Neill. I'd be happy to. I am sure you know that 
Anne Krueger at the International Monetary Fund has put forward 
a proposal about how we might in effect create the equivalent 
of a U.S. chapter 11 process for countries that find themselves 
in a difficult situation.
    Let me first say this, that I think if we can move 
countries toward the notion that the world standard is--every 
country should have investment-grade debt, then the prospects 
of having to use any kind of a mechanism including the chapter 
11 mechanism goes down substantially. In an ideal world, we 
should never have a national bankruptcy.
    Senator Bennett. When you say investment-grade debt, you 
are talking about the kind of debt we currently have with U.S. 
Treasuries.
    Secretary O'Neill. Yes. Exactly. So that for a practical 
purpose today, one can think about a 5\1/4\-percent interest on 
10-year securities. And in lots of developing countries the 
equivalent rate is 25 percent.
    That extra 20 percentage points is a measure of the risk 
that is associated with some of these developing countries. And 
then when they fall off the cliff, there is no limit. And you 
go into the kind of meltdown situation we have in Argentina.
    In fact, if we had an agreed world restructuring process 
where you have regularized rules about how creditors and 
debtors will be dealt with, it could have been used very well 
in Argentina to cope with its problems.
    We in the Treasury are working on these ideas with the 
notion that it would be great to have this kind of standby 
authority with the hope we never have to use it. But I think 
this is another instrument that we can help to put in place 
working with the IMF and the other institutions that will well 
serve us.
    It's hopefully a fire station where the only thing we do is 
keep the dogs healthy and polish the brass.
    Senator Bennett. Yeah. Well, when you talk about the need 
for investment grade debts, you go against the standard country 
club Republican view that says we have got to pay the debt down 
to zero. And I have now repented in some of those views that I 
held at some point.
    I am having the same conversations with the current 
chairman of the budget committee to try to get him to feel the 
same way. Thank you, Mr. Chairman.
    Senator Leahy. Thank you. I know you have to leave. Let me 
ask you one last question. We met our $600 million HIPC 
commitment last year. You are not requesting funds for debt 
forgiveness this year. And I know the HIPC will not solve the 
debt problems of the poorest countries, but are there plans or 
proposals to expand debt forgiveness that the United States 
might support?
    Secretary O'Neill. Well, it is an issue that we continue to 
look at. We'd like to see some additional evidence of how we 
are doing with HIPC because you know, I think you know I am 
going to personally go to Africa in May.
    I am going to look at some of these things on the ground 
and see how this debt relief has been translated into 
improvements in the living conditions of real people. But it is 
not an issue we have our minds closed to.
    Senator Leahy. When you get back, could you and I get 
together? I'd like to hear about the trip.
    Secretary O'Neill. I'd be pleased to do that.
    Senator Leahy. We will sit down and talk. I am sure there 
will be some other Senators, but I wonder if we can do it 
informally but I'd like to.
    Secretary O'Neill. Right.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Leahy. Thank you very much. There will be some 
additional questions which will be submitted for your response 
in the record.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
            Questions Submitted by Senator Patrick J. Leahy
           monterrey conference on financing for development
    Question. No one up here thinks that foreign aid is the solution to 
the world's problems. Private flows of capital often dwarf the amount 
of aid available. But as you have noted, the President himself has 
said: ``A world where some live in comfort and plenty, while half of 
the human race lives on less than $2 a day is neither just, nor 
stable.''
    The President has announced another $5 billion for development 
assistance, beginning in 2004, conditioned on the performance of 
governments that want our aid. That is a welcome step, although I want 
to see the details, but it should be done this year, not in two years. 
These are not programs that can wait. They deal directly with U.S. 
national security. You yourself have described the horrors of AIDs, and 
the misery of people living in poverty. Why wait?
    Answer. The central development challenge we and other members of 
the international development community face is how to bridge the large 
gap between the enormous needs of the poorest countries and their 
inability and/or capacity to use resources effectively. If a lack of 
finance were the primary constraint to development in the poorest 
countries, their problems would be so much easier to solve. So we have 
to focus not only on the level of new U.S. assistance but on ways to 
ensure this assistance will be effective in improving the lives of the 
poor. I am currently working with the Secretary of State in exploring 
ideas that will lead to the development of a set of clear, concrete and 
objective criteria for measuring country performance in pursuing the 
sound policies needed for the effective use of development assistance. 
I also note that the President's budget request for next year includes 
funding for the new replenishments of the International Development 
Association and the African Development Fund where in both cases U.S. 
contributions are set to rise by 18 percent above current funding 
levels.
    Question. As I said in my opening statement, any increase is 
welcome, but is this really what the world's only superpower should be 
spending?
    Answer. I believe that President Bush's proposal provides an 
enormous opportunity to spur economic growth and reduce poverty in the 
poorest countries. It will increase core development assistance by 50 
percent over the next three years. And the strong linkages to 
demonstrated country performance will help ensure that the assistance 
is effectively used in improving people's lives. Together with other 
ongoing U.S. development assistance programs, and those of private U.S. 
agencies, it will represent a very substantial U.S. engagement in 
promoting economic and social development around the world.
                             conditionality
    Question. You and the President have proposed a couple of 
significant changes in the way foreign aid is administered.
    First, you propose that half of the World Bank's aid to the poorest 
countries be changed from loans to grants, so we don't just pile new 
debt on top of old.
    The Europeans have strongly opposed this proposal. Where does this 
stand? Is agreement possible? Would your proposal make it possible to 
channel more of the grant funds through non-governmental organizations, 
rather than through governments?
    Answer. As you know, a year ago, President Bush proposed that up to 
50 percent of the funds provided by the multilateral development banks 
to the poorest countries be provided as grants instead of loans. The 
principle of substantially increased grant financing for the poorest 
countries was embodied in an agreement among donors to the thirteenth 
replenishment of the International Development Association. (IDA-13). 
Under the agreement, between 18 and 21 percent of all IDA-13 financing 
will be in the form of grants. Operationally, this means that all IDA 
financing to the poorest countries for HIV/AIDS and virtually all for 
other key social sectors in countries whose people live on less than a 
dollar a day will be provided as grants. As is the case with IDA loans, 
IDA grants will be provided to governments.
    Question. Second, you and the President propose to link increases 
in the U.S. contribution to IDA, and other U.S. assistance, to 
measurable results in reducing poverty.
    I agree this is needed, but usually it has been the Congress that 
wants to set performance benchmarks, and the State Department and the 
Treasury Department that want to water them down. Why is that? What 
types of specific measurable results are you talking about--give me 
some real examples.
    Answer. As you note, the President's budget contains an innovative 
proposal for a results-based contribution to IDA-13. Under this 
proposal, additional U.S. funding for IDA is contingent on concrete 
progress in achieving measurable results in the World Bank's programs 
in the poorest countries. In the first year, an additional $100 million 
in U.S. funding is linked to the establishment of a measurement and 
evaluation system needed to support more successful assistance 
programs, in addition to the completion of diagnostic surveys that 
assess the adequacy of country fidicuiary and sectoral policies to 
effectively utilize IDA funds. In the second year, an additional $200 
million in U.S. funding is linked to measurable progress in improving 
primary school completion rates, increasing immunization rates and 
reducing the number of days and cost required to start a new business.
    Question. I support conditioning our aid on the performance of 
governments that want our aid. But what about other types of aid? For 
example, why shouldn't we have similar performance requirements for the 
aid we give the Colombian military?
    Answer. U.S. foreign assistance serves a broad and often complex 
range of U.S. economic, strategic and humanitarian interests around the 
world. The terms and conditionalities of individual U.S. assistance 
programs reflect the type and composition of each program and the 
specific objectives it is intended to achieve. The proposed Millennium 
Challenge Account is focused on achieving measurable economic 
development results and the conditionalities are being designed 
accordingly. The design of other programs such as U.S. assistance to 
Colombia reflect the specific focus and objectives of the assistance 
which is very different from that of the MCA.
                           budget--priorities
    Question. You have requested $1.43 billion for the international 
financial institutions. That is $263 million more than the fiscal year 
2002 level. Of that increase, $177 million is to pay one-third of the 
arrears we owe from past years.
    We should pay these debts, and I commend you for requesting these 
funds.
    But there are many competing programs in the Foreign Operations 
budget, and many of them are not adequately funded in the 
Administration's request. Should we fund USAID's basic education 
programs, or the World Bank? Should we fund international peacekeeping, 
or the Asian Development Bank? These are types of choices we have to 
make.
    Jim Wolfensohn is a friend and I think he has the right vision for 
the World Bank. But I remain disappointed with the Bank's performance. 
Assuming we do not have enough money to do everything you want, what 
are your highest priorities?
    Answer. Our priorities are laid out in the President's budget 
proposal. Our request for Treasury International Programs contains no 
less--but also no more--than is needed to fulfill our obligations and 
meet our policy objectives. The $1.43 billion we have requested for the 
multilateral development banks in fiscal year 2003 consists of two 
basic elements. $1.25 billion is requested to meet the United States' 
annual funding commitments to the institutions. The annual commitments 
are essential both to the ongoing operations of the institutions and to 
U.S. leadership in improving the institutions' performance and ensuring 
that U.S. taxpayer resources are used effectively to raise living 
standards around the world. The $1.25 billion includes proposed 
increases under new replenishments for the International Development 
Association (IDA) and the African Development Fund (AfDF), concessional 
windows that provide assistance intended to raise productivity and 
improve the lives of people in the world's poorest countries. $178 
million is requested to pay one-third of outstanding U.S. arrears to 
the MDBs, which have risen for three consecutive years and now total 
$534 million. It is imperative that the United States meet its 
international commitments, and the Administration has laid out a three-
year plan to clear this rather substantial level of arrears.
    Finally, our request includes $10 million for Treasury technical 
assistance programs, which form an important part of our effort to 
support countries facing economic transition or security issues, and 
whose governments are committed to fundamental reforms. This request 
will allow us to continue current programs in countries in Africa, 
Asia, Central and South America and to expand into other countries 
committed to sound economic reform policies. We expect to spend a 
significant amount on anti-terrorist programs. Over half of the 
traditional programs will be in Sub-Saharan Africa, as has been the 
case for the past two years. The anti-terrorist programs will be global 
in scope, with an emphasis on a group of about 20 countries that the 
Administration has identified as having financial systems vulnerable to 
misuse by terrorist organizations.
                           world bank report
    Question. One of the things that really got my attention from 
yesterday's Washington Post article about the World Bank report, is 
that ``donors failed to appreciate how easily their efforts at 
development could go awry; for example, they gave money to governments 
that weren't genuinely committed to economic reform, and the 
underestimated the importance of governance'--that is, the existance of 
relatively uncorrupted, well-run bureaucracies and courts.''
    I've lost count how many times I, and others up here, made those 
arguments, and how time and again we were ignored. It still happens! In 
fact, the World Bank itself hasn't learned it. No one could call the 
World Bank a ``well-run Bureaucracy.'' I doubt I ever will, at least 
not until they get to the bottom of that fiasco with the cost overruns 
for the new building a few years ago. That was a disgrace, and so was 
the coverup. And the wrong people lost their jobs.
    Having said that, there are many intelligent, hard working, 
committed people at the World Bank. But like most bureaucracies, key 
managers seem more interested in preserving the status quo, than good 
governance.
    How do we change that?
    Answer. First, we need to hold the Bank accountable for delivering 
measurable results. Just as lending allocations should be based on a 
country's commitment to reform, so too should shareholders' support for 
the Bank be conditioned on the Bank's satisfactory achievement of key 
results. In all cases, development assistance can only be effective if 
countries create an environment with the institutional conditions and 
incentives required to encourage individual enterprise. These include 
the rule of law, enforceable contracts, stable and transparent 
government, and a serious commitment to eliminate corruption.
    Second, we need to be vigilant in conveying the message that 
governance is important. I understand that based on the most recent 
performance-based allocation review for IDA, 17 countries will have 
their IDA lending allocations significantly reduced due to poor 
governance ratings. The U.S. needs to continue to support this 
framework and apply high priority to its enforcement. We should be 
prepared to support the World Bank when it cuts back assistance to 
countries that fail to deliver effective governance and create 
conditions conducive to economic growth.
    Finally, we need to lead by example. Our bilateral assistance must 
be intently focused on ensuring that governance plays a critical part 
in the level of assistance delivered to developing countries. As the 
President has stated, good government is an essential condition of 
development. To that end, the Administration is working on a set of 
governance indicators that will determine eligibility for assistance 
from the President's proposed Millennium Challenge Account, rewarding 
nations that root out corruption, respect human rights, and adhere to 
the rule of law.
                  budget--global environment facility
    Question. Your budget document makes a strong case for funding the 
GEF. For years, some House members opposed this funding, arguing that 
it was a ``back door'' way to fund the Kyoto Protocol. In fact, it was 
nothing of the sort. Do you agree that the GEF is supporting important 
environment activities that are consistent with U.S. interests?
    Answer. GEF supports important environment activities that are 
consistent with U.S. interests. Examples of GEF projects in its core 
activities include conserving biodiversity, expanding clean energy 
production and more efficient energy use, cleaning up international 
waters and protecting fisheries, and phasing out ozone-depleting 
chemicals in Eastern Europe and Central Asia. Under the new 
replenishment currently under discussion, the GEF will expand its 
activities to support efforts to reduce persistent organic pollutants 
(POPs), which directly affect the United States, particularly the Great 
Lakes region and Alaska.
    To be sure, there is room for improvement. That is why the United 
States is advancing a strong reform agenda to help the GEF improve its 
performance and focus more on results.
                         world bank management
    Question. For years, I have expressed concerns about the World 
Bank's treatment of its own staff. I have tried to encourage the Bank 
to reform its grievance procedures. There has been some progress, but 
the basic culture remains the same. Retaliation of managers against 
employees who make complaints remains a serious problem. I am not 
convinced that cases I saw mishandled five or ten years ago, would be 
handled differently today.
    Until there are people responsible for operations down there who we 
have confidence in, I am not going to bend over backwards to help the 
World Bank. I am tired of the Bank lecturing other governments about 
good governance, pension systems, justice, and all the things those 
governments do need, and not applying the same standards to itself. I 
hope you will look into there issues, because if you talk to the right 
people, you will discover that all is not as it should be.
    The Bank has established a new ``Institutional Integrity 
Department.'' Are you familiar with this? Its purpose is to investigate 
fraud and abuse. No one supports fraud and abuse. But what is the scope 
of its authority?
    Answer. I understand that the World Bank established the new 
Department of Institutional Integrity (INT) in November 2000, based on 
recommendations by former U.S. Attorney General Richard Thornburgh. INT 
has two core functions: first, to investigate allegations of fraud and 
corruption in Bank projects, and second, to investigate allegations of 
misconduct against Bank staff members.
    Question. What protections do staff have against false accusations? 
Or invasions of privacy?
    Answer. The Bank's Staff Rules provide that knowingly making false 
accusations is itself misconduct and, therefore, is subject to 
disciplinary measures. The Bank also has a number of rules and 
procedures in place that protect the privacy of staff members. For 
example, staff members are permitted to forward allegations 
confidentially or anonymously. In addition, staff members' e-mails and 
computer files can only be reviewed by investigators with the 
permission of a Managing Director and the General Counsel. The 
investigators working in the Department of Institutional Integrity are 
also staff members of the Bank and subject to the same Staff Rules as 
their colleagues in other parts of the institution.
    Overall, I understand that the rights of Bank staff members have 
been unaffected by the creation of the new Department. For example, any 
staff member accused of misconduct must receive the allegations against 
him or her in writing, must have an opportunity to respond in writing, 
and must have an opportunity to review the investigators' report before 
it is submitted to the Vice President, Human Resources for a final 
decision. Staff members have the right to appeal misconduct decisions 
to the Bank's Appeals Committee and Administrative Tribunal.
    Question. If a staff member is questioned, do they have the right 
to a lawyer to be present, or a member of the Staff Association? Can 
you find out?
    Answer. Staff members are not permitted to be represented by 
counsel in interviews with the INT. According to Bank staff, INT's 
interviews are administrative in nature as the Bank has no authority to 
conduct criminal investigations. However, I understand that staff 
members have a right to be accompanied in interviews by another staff 
member, including a Staff Association representative, provided that the 
accompanying staff member has no involvement in the issues under 
investigation.
                              afghanistan
    Question. Many foreign officials are grossly underpaid, and that 
often leads to corruption.
    A Treasury technical assistance team is in Afghanistan helping the 
government with basic financial issues, such as putting together a 
budget. They tell us that they have seen very little--if any--
corruption and there is a real opportunity here to build an effective 
government. However, the Treasury team told us that the budget is short 
some $350 million to $500 million to pay the salaries of government 
workers.
    This budget shortfall could cause government officials to become 
involved in illegal activities to supplement their incomes, 
particularly drug trafficking. This would be a major impediment to 
Afghanistan's development over the long term, and could lead to 
situations--that you have described--where foreign aid is siphoned off 
by corrupt government officials.
    What is the Administration doing, if anything, to try to prevent 
this from happening?
    Answer. The Administration has led the international donor effort 
to help the Afghanistan government meet its needs in an effective and 
transparent manner, including meeting the needs of the recurrent budget 
required to pay the salaries of government workers and maintain 
government operations. The Administration is working closely with other 
co-chairs of the Afghan Reconstruction Steering Group (ARSG) (EU/EC, 
Japan and Saudi Arabia) and the international financial institutions to 
ensure that the Afghan government has sufficient financial resources to 
meet its recurrent budget costs as it works to get its domestic revenue 
streams online. As part of this effort, the United States is 
contributing $5 million to the Afghan Reconstruction Trust Fund, which 
will assist the Afghan government to meet its budget needs. Treasury's 
technical assistance advisor is assisting the Ministry of Finance with 
this undertaking.
                      tropical forest debt relief
    Question. In 1998, Congress passed the Tropical Forest Conservation 
Act to protect tropical forests in developing countries through debt 
reduction.
    Last year, Congress appropriated $5 million and authorized up to 
$20 million in unobligated balances to help implement this program. 
This is an important program with bipartisan support, and I want to be 
sure it gets as much funding as possible. How much of those unobligated 
funds will be used for debt reduction?
    Answer. For fiscal year 2002, Treasury had $6 million in 
unobligated balances to be used towards debt reduction under the TFCA. 
This amount, combined with the $5 million appropriation, allowed a 
total of $11 million to be allocated for TFCA in fiscal year 2002. 
Additional unobligated balances could be made available once Treasury 
has determined the final cost of bilateral debt reduction under the 
Highly Indebted Poor Countries (HIPC) program. For fiscal year 2002, 
$11 million has been allocated for agreements with Peru ($5.5 million) 
and the Philippines ($5.5 million). Negotiations with Peru have 
concluded, and discussions with Philippines are ongoing.
    Question. The fiscal year 2003 budget request contains $40 million 
in transfer authority from USAID's programs to pay for tropical forest 
debt relief. This is not what we want to do. These are Treasury 
programs that should be funded by Treasury. Why were these funds 
requested this way?
    Answer. The Administration determined that the flexibility to use 
the appropriation for grants and for debt reduction would best be 
achieved by giving the appropriation to USAID with authority to 
transfer funds to Treasury for debt reduction under the TFCA.
    Question. How much, regardless of where the money comes from, do 
you expect to spend on this program in fiscal year 2003?
    Answer. Including countries that have already negotiated TFCA 
agreements, there are currently eight countries eligible for the 
program (Bangladesh, Belize, El Salvador, Jamaica, Panama, Peru, 
Philippines, and Thailand). These countries alone owe the U.S. 
Government over $1.9 billion in concessional debt which could be 
reduced through TFCA programs in these countries, and there are 
additional countries that are potentially eligible for the TFCA 
program. Treasury staff estimate that the United States can program for 
TFCA in fiscal year 2003 the amount of funds requested by the 
President's budget. However, the inter-agency process will determine 
fiscal year 2003 country allocations.
                                 ______
                                 
            Questions Submitted by Senator Richard J. Durbin
                           monitoring results
    Question. In your testimony, you called for measurable results from 
the multilateral development banks, and further said that the United 
States would make additional funding in future years above the fiscal 
year 2003 baseline subject to achievement of such results.
    Could you please be more specific about what indicators of success 
in health, education, and private-sector development you intend to base 
your judgment on?
    Answer. The President's budget contains an innovative proposal for 
a results-based contribution to IDA-13, under which additional U.S. 
funding for IDA is contingent on concrete progress in achieving 
measurable results in the World Bank's programs in the poorest 
countries. In the first year, an additional $100 million in U.S. 
funding is linked to the establishment of a measurement and evaluation 
system needed to support more successful assistance programs, in 
addition to the completion of diagnostic surveys that assess the 
adequacy of country fidicuiary and sectoral policies to effectively 
utilize IDA funds. In the second year, an additional $200 million in 
U.S. funding is linked to measurable results in improving primary 
school completion rates, increasing immunization rates and reducing the 
number of days and cost required to start a new business.
    Question. Will you consider the status of women in your indicators?
    Answer. The indicators agreed upon in the recent IDA replenishment 
agreement does not include a formal indicator on the status of women.
    Question. How is this approach different from the conditions on aid 
that the multilateral development banks have been imposing on aid?
    Answer. The creation of a monitoring and evaluation system and 
willingness by the World Bank to track progress on a set of indicators 
is a significant new development, and directly attributable to U.S. 
pressure on the Bank and other shareholders to insist on measurable 
results in the institution. This is separate from the performance-based 
allocation system that distributes Bank resources among eligible 
borrowers based on their policy performance. Our new proposal is an 
incentive-based contribution system. It would measure progress made on 
a set of select, high development-impact indicators and the impact that 
the World Bank itself had on delivering results. If sufficient progress 
is made, the Bank would receive additional donor resources. Moreover, 
this approach focuses on real, achieved outcomes, not promises of 
policy reform that often fail to come to fruition. It builds on the 
performance system already incorporated into country assistance and is 
fundamental to maintaining and building support for IDA and other 
development assistance.
    Question. Can you tell me how you will measure poverty alleviation, 
and where that goal fits in your measurement success?
    Answer. All the indicators for which we have signaled our support 
have a direct link to alleviating poverty, are consistent with IDA's 
mission and are fairly well tracked in most countries. Most 
importantly, the pursuit of increased living standards and economic 
growth is vital to effective poverty alleviation and something to which 
this Administration is committed.
              development, hiv/aids, and results-based aid
    Question. Many countries will be unable to develop economically, 
and in fact may slide further into poverty because of the AIDS 
epidemic. Many countries are losing their civil servants and teachers--
and in fact a whole generation of parents. How will you account for the 
HIV/AIDS epidemic in your results-based development approach?
    Answer. I fully recognize the disastrous economic and social impact 
that the HIV/AIDS pandemic is having on many of the poorest countries. 
I saw the impact first-hand during my recent trip to Africa.
    Education is one of the areas particularly hard hit, with the 
disease having a devastating impact on students, teachers, and the 
operations of schools. The staggering impact on the pandemic is 
illustrated by the fact that there are now over 13 million AIDS orphans 
with this number projected to reach 35 million by 2010.
    The severity of the crisis poses an enormous development challenge. 
It also underscores the crucial importance of doing all that is 
possible in often difficult circumstances to ensure that donor 
assistance is well-targeted, well-coordinated, and rigorous in 
measuring results in terms of improvements in the number of people 
treated and, over the longer-term, in the stabilization and eventual 
reduction in the number of people infected.
                      tools for measuring poverty
    Question. I know the World Bank measures poverty based on a 
measurement of how many dollars per day on a purchasing power parity 
basis a person makes. Yet, when program officer's work out in the 
field, it is often difficult to determine someone's income. Are you 
working on other tools to measure poverty?
    Answer. The collection of accurate and up-to-date economic and 
social data poses a major challenge in the poorest countries. This 
applies to per capita income as well as to data on such key social 
information as infant and child mortality. Yet, a good poverty 
monitoring system is essential both to measure progress and to track 
the quantitative and qualitative impacts of domestic and external 
resources. The World Bank and its development partners are 
collaborating in efforts to improve country systems and capacity for 
poverty monitoring. Over the last five years there have been 
improvements in the availability and comparability of country-level 
data on household consumption, income, and other indicators. We 
continue to attach high importance to improvements in the ability to 
measure and assess results in this area.
                               user fees
    Question. Some people have charged that user fees placed on basic 
health and basic education prevent the poorest people from access to 
health care and education. What has the Treasury Department done to 
assess the impact of user fees?
    Answer. Treasury agrees that user fees for primary education and 
health should not be imposed on the poor. Cost recovery for primary 
health care and primary education services should only be considered 
after governments have taken steps to maximize the efficiency and 
equity of public expenditures. If cost recovery for these services 
cannot be avoided, the poor should be expressly exempted from user fees 
and service charges, and fee systems should be carefully monitored to 
ensure that exemption mechanisms function as intended.
    That said, Treasury has not found any evidence in its oversight of 
loans, country strategies and institutional policies that the 
multilateral development banks are conditioning their lending on the 
payment of user fees, payment of service charges, cost recovery, cost 
sharing or community financing charges by the poor for basic health 
care or education services.
                                 ______
                                 
             Questions Submitted by Senator Mitch McConnell
                       foreign assistance budget
    Question. Mr. Secretary, you have been singled out by the press as 
a ``chief foe'' to increasing foreign assistance programs. What are 
your objections to a larger foreign assistance budget?
    Answer. I have a very strong commitment to advancing economic 
development and recognize the importance of helping the poorest 
countries in their efforts to increase economic growth and reduce 
poverty. My objection is to focusing solely on dollar amounts of 
foreign assistance instead of results in improving the lives of the 
poor. Dollars make a difference in creating growth and higher living 
standards only if they are used effectively. I believe that wealthy 
nations such as the United States have a responsibility to see that 
their assistance produces real improvements in the daily lives of 
people in the poorest countries. Indeed, I strongly support the 
President's proposal to increase the U.S. contributions to the African 
Development Fund and International Development Association by 18 
percent, but we are insisting on measurable results as part of this 
increase. I also support the Millennium Challenge Account proposal, 
which will represent a 50 percent increase in U.S. development 
assistance, because it will require recipients to have a strong policy 
framework that should lead to a return on our investment.
    Question. What do you believe is an appropriate increase in our 
foreign aid budget in the post-September 11 world, and what adjustments 
should we make to ensure that our foreign aid dollars are used 
effectively?
    Answer. I strongly support President Bush's landmark proposal to 
increase development assistance substantially. The Administration's 
fiscal year 2003 budget request of $1.447 billion for Treasury's 
international programs reflects our goals of promoting economic growth 
around the world insisting that the multilateral development banks show 
results in raising living standards and reducing poverty. The $1.25 
billion request for annual commitments to the multilateral development 
banks--which includes 18 percent increases for the International 
Development Association (IDA) and the African Development Fund--will 
advance U.S. leadership in improving the institutions' performance and 
ensuring that U.S. taxpayer resources produce measurable results in 
raising living standards around the world. It was because of such U.S. 
leadership that the recently concluded IDA replenishment agreement 
includes the establishment of a measurement and evaluation system to 
measure developing countries' progress against a set of key development 
indicators. The agreement also includes concrete benchmarks for 
achievement of results in areas of health, education, and private 
sector development. The President's budget links $300 million in the 
U.S. contribution to IDA over the next three years to achieving results 
in these areas.
    U.S. leadership also demands that the United States meet its 
international commitments. The Administration has laid out a three-year 
plan to clear the rather substantial level of outstanding arrears to 
the multilateral development banks. The President's fiscal year 2003 
budget includes a request for $178 million to pay one-third of these 
arrears, which now total $534 million.
    Finally, our request includes $10 million for Treasury technical 
assistance programs, which form an important part of our effort to 
support countries facing economic transition or security issues, and 
whose governments are committed to fundamental reforms. This request 
will allow us to continue current programs in countries in Africa, 
Asia, Central and South America and to expand into other countries 
committed to sound economic reform policies. We expect to spend a 
significant amount on anti-terrorist programs. Over half of the 
traditional programs will be in Sub-Saharan Africa, as has been the 
case for the past two years. The anti-terrorist programs will be global 
in scope, with an emphasis on a group of about 20 countries that the 
Administration has identified as having financial systems vulnerable to 
misuse by terrorist organizations.
                     debt relief/poverty reduction
    Question. Beyond the Heavily Indebted Poor Countries (HIPC) 
Initiative, are there any additional international efforts to secure 
debt relief for impoverished countries?
    Answer. Although there have been calls by some non-governmental 
organizations to go beyond the HIPC initiative, I believe that we 
should focus on effective implementation of the current HIPC program, 
which is still not fully financed. As a means of helping to avoid a 
build-up of unsustainable debt in the future, the President proposed 
that the World Bank and other multilateral development banks provide up 
to 50 percent of their funding to the poorest countries in the form of 
grants instead of loans. The principle of substantially increased grant 
financing for the poorest countries was embodied in an agreement among 
donors to the thirteenth replenishment of the International Development 
Association. (IDA-13). Under the agreement, all IDA financing to the 
poorest countries for HIV/AIDS and virtually all for other key social 
sectors in countries whose people live on less than a dollar a day will 
be provided as grants.
                          foreign aid linkages
    Question. News reports from the ongoing International Conference on 
Financing for Development in Monterrey, Mexico indicate that foreign 
donors recognize corruption and lack of political will as a major 
impediment to the alleviation of poverty. Are other donors willing to 
make the linkage between the provision of foreign aid and measurable 
progress on good governance?
    Answer. Corruption remains an enormous barrier to both domestic and 
foreign investment and a tax on economic efficiency and social progress 
that poor countries can least afford. This is recognized not just by 
donors, but by the international community at large. The Monterrey 
Consensus that was endorsed by all participants in the Conference was 
very clear in recognizing that fighting corruption at all levels is a 
development priority.
    Question. Given the absolute failure of the donor community to take 
on controversial issues in some countries (such as Cambodia and Haiti), 
what assurances exist that the donors themselves possess the political 
will to hold foreign governments accountable for their actions?
    Answer. I believe that the donor community is coming to recognize 
the simple truth that sensible economic policy choices that raise 
economic growth lie at the core of all successful poverty reduction 
stories. Research has clearly shown that when a country's policies are 
sound, external assistance can have a significant and positive impact. 
Conversely, when public policies are poor, assistance will have no or 
even negative impact.
    For these reasons, country performance is becoming a hallmark of 
development assistance strategies. For example, the forty donor 
countries that contribute to the International Development Association 
(IDA) have agreed on twenty performance criteria for the allocation of 
IDA funding. These criteria accord special weight to governance. For 
the IDA-13 period, 17 countries will have their IDA lending allocations 
significantly reduced due to poor governance ratings.
    Question. What criteria are you considering to measure policy 
performance under the President's new foreign assistance initiative in 
the areas of good governance, health and education reform, and sound 
economic policies?
    Answer. In all of these areas, strong leadership is an essential 
criterion. We are considering a number of measures of policy 
performance from sources such as business surveys, expert evaluations, 
and country/multinational statistical agencies. The key issues we are 
trying to capture in each area include good governance (political 
freedoms, civil rights, rule of law, minimal corruption, enforcement of 
contracts, property rights); health and education (commitment to 
health/education, quality of health/education; and sound economic 
policies (macroeconomic stability, open markets, freedom from excessive 
regulation or government interference).
    Question. The rule of law is a critical factor in attracting 
legitimate private sector investment in developing countries. What 
additional steps can the United States take to ensure that foreign 
governments understand the linkages between the rule of law and 
investment?
    Answer. The private sector's role is the engine of economic growth. 
We should stress that in all our statements. We should stress that 
governments must take the responsibility for creating the institutional 
conditions and incentives required to encourage productivity and 
individual enterprise. These depend on the rule of law, enforceable 
contracts, and stable and transparent government. The President has 
also made it clear that the proposed Millennium Challenge Account will 
reward nations that adhere to the rule of law, root out corruption, and 
respect human rights.
    Question. What importance do you place on linking political 
reforms--that is, the democratic systems of governance--to our foreign 
assistance programs?
    Answer. Good government is an essential condition of development, 
and countries that rule justly, invest in their people, and encourage 
economic freedom will receive more economic assistance from the United 
States. As President Bush has emphasized, all people deserve 
governments instituted by their own consent. The promotion of 
democratic system of government is and will remain a fundamental goal 
of U.S. foreign policy.
                          grants versus loans
    Question. What is more appropriate for funding HIV/AIDS programs: 
loans or grants?
    Answer. Grants are more appropriate. One of the reasons why the 
United States supports a significant increase in grants funding for the 
poorest countries is that many projects that the MDBs pursue in these 
countries do not generate the necessary revenues to service loans. 
Funding to address the HIV/AIDS pandemic in Africa is a very good 
example of the type of project where grant funding is the most 
appropriate form of assistance. We believe that such assistance cannot 
be viewed as a revenue generating measure and should therefore be 
delivered entirely on grant terms.
                          terrorist financing
    Question. A recent AP story indicated that the al-Qaida terrorist 
network is again transferring funds for its operations. Are these 
reports accurate, and how and where is the money being moved?
    Answer. While there is no question that al-Qaida capacities have 
been significantly impaired by military, law enforcement, and financial 
actions, nobody claims that we have succeeded in destroying this 
organization entirely. It is prudent to assume that, despite the 
successes that we have achieved in disrupting their finances, they are 
attempting to re-group and we must maintain the vigilance that has 
produced results so far. We, and our colleagues in the intelligence 
community, are aware of the press reports you mention, but I feel that 
to comment too directly about specific allegations could reveal 
intelligence sources and methods.
    Question. What U.S. Government departments and agencies are 
involved in combating terrorist finance, and who is leading our 
efforts?
    Answer. The USG effort in fighting terrorist finance is truly 
collaborative. It involves the State Department, the Department of 
Justice, various agencies of the intelligence community, the NSC, and 
many bureaus and offices of the Treasury Department. The President's 
Budget states on page 268: ``Treasury leads the nation's war against 
the financing of global terrorism.'' Thus, Treasury has led the 
multilateral campaign to identify, disrupt, and dismantle terrorist 
financing networks. Treasury chairs an interagency committee that is 
devoted to addressing issues relating to terrorist financing. In 
addition to Treasury, this committee is made up of representatives from 
the CIA, DOD, FBI, Justice, NSA, NSC and State.
    Question. The fiscal year 2003 request contains $3 million for 
programs to combat terrorist financing. Please describe these 
activities, and are additional funds necessary to more effectively 
block assets?
    Answer. The funding requested in fiscal year 2003 will be used for 
FTE annualization. If OFAC determines additional assets are necessary, 
it will work with the Treasury Department and OMB through the budget 
process.
    Question. Are there specific countries that are not cooperating 
with U.S. efforts to locate and block the assets of terrorists? If so, 
what action is being taken?
    Answer. We have been generally successful in achieving 
international cooperation in the war on terrorist financing. All but a 
small handful of countries (all of which are already the object of U.S. 
sanctions) have expressed their support for the U.S. led war on 
terrorist financing. Over 160 countries and jurisdictions across the 
globe have implemented blocking orders against the assets of terrorists 
and their supporters. We are actively cooperating with the non-
participating countries to implement the necessary legislation and 
regulations to have these countries join in our global efforts.
                                 china
    Question. The World Bank claims as a result of foreign assistance 
``the number of rural poor people [in China] fell from 250 million to 
34 million in two decades of reform.''
    Given that China's transient labor force is estimated to be as high 
as 120 million people, is this claim legitimate? Did the World Bank 
rely on official PRC statistics for these figures?
    Answer. China's strong economic performance has been driven by its 
market-oriented reforms. China's poverty headcount has indeed dropped 
dramatically, according to official statistics and a variety of 
independent estimates. The great bulk of success was due to domestic 
rural policies that: (1) returned land to individual household 
management; (2) built roads, irrigation systems, power lines and other 
basic infrastructure; and (3) encouraged rural industries and migration 
of rural workers to distant places of employment.
    China's transient labor in fact has helped reduce poverty. Any 
family in China that only farms is virtually certain to be poor. The 
source of rural income and consumption growth in the past five years 
has been off-farm employment.
    Question. How important do you view rule of law programs that the 
U.S. sponsors in China, and should we be doing more to help bring about 
change (economic, legal and political) on the Mainland?
    Answer. Across a wide range of legal institutions and participants, 
lack of appropriate education and relevant experience cripple China's 
legal system. The U.S.-sponsored rule-of-law programs, including legal 
training and environmental law, are small but important contributions 
toward gradual improvement in this area. Active programs, such as rule-
of-law programs and other bilateral contacts, promote economic, legal 
and political change. In my view, targeted projects like these are a 
cost-effective way to encourage progress in China's market-oriented 
reforms.

                          SUBCOMMITTEE RECESS

    Senator Leahy. Thank you very much, that concludes the 
hearing. The subcommittee will stand in recess until 10 a.m., 
Wednesday, April 24, when we will meet in room SD-226 to hear 
from the Secretary of State, Hon. Colin Powell.
    [Whereupon, at 3:33 p.m., Tuesday, March 19, the 
subcommittee was recessed, to reconvene at 10 a.m., Wednesday, 
April 24.]











      FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS 
                  APPROPRIATIONS FOR FISCAL YEAR 2003

                              ----------                              


                       WEDNESDAY, APRIL 24, 2002

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:07 a.m., in room SD-226, Dirksen 
Senate Office Building, Hon. Patrick J. Leahy (chairman) 
presiding.
    Present: Senators Leahy, Durbin, Reed, McConnell, Specter, 
and Bennett.

                          DEPARTMENT OF STATE

                        Office of the Secretary

STATEMENT OF HON. COLIN L. POWELL, SECRETARY OF STATE

             OPENING STATEMENT OF SENATOR PATRICK J. LEAHY

    Senator Leahy. Good morning, Mr. Secretary, and welcome to 
this hearing. Again, I must express the appreciation of Senator 
McConnell, myself, and other members of the committee for the 
breakfast meeting with you yesterday. I thought it was a very 
candid and very welcome briefing, especially following an 
extraordinary diplomatic trip that you took on behalf of our 
country.
    I would like to begin our session today with some words 
that express feelings that are strongly felt in this committee, 
the Senate, and across the Nation. This week, our neighbor, 
Canada, is burying four of its soldiers who lost their lives as 
a result of an accidental and tragic bombing in Afghanistan, 
and I want to take this opportunity to pay tribute to these 
men. They stood shoulder to shoulder with our troops, and they 
lost their lives helping us defeat terrorism in Afghanistan. It 
is a terrible tragedy. We should not only thank the Canadian 
soldiers but also convey our deepest condolences to their 
families.
    Marcelle and I live about an hour's drive from the Canadian 
border, and we think of Canada as that giant to the north. We 
sometimes forget Canada is our largest trading partner, and we 
have no better friends. Many of us in the United States have 
ties historically or otherwise to Canada. My wife is a first 
generation American of Canadian descent, and both her parents 
were Canadians.
    Canada, like so many countries, also lost sons and 
daughters on September 11, and we grieve for them as we grieve 
for our own. It is hard to think of any country with whom we 
have closer and more personal ties. Mr. Secretary, I know you 
agree with me in these feelings.
    Secretary Powell. Yes, sir.
    Senator Leahy. Mr. Secretary, I want to commend you for the 
tone you have brought to the office, the way in which you have 
boosted morale at the Department, and the hard work you are 
doing. I would like to commend your legislative affairs staff. 
They are doing a superb job, and rarely get acknowledged.
    Now, this is an important time for you to be speaking to 
the Congress and the American people. As I mentioned earlier, 
you have just returned from the Middle East. I am going to put 
much of my statement in the record because I want to save time 
for questions. I think you may want to do the same with your 
opening statement.
    When we see the horrifying violence in the Middle East, 
something that none of us can overlook. I am forced to 
reluctantly conclude that the administration blundered badly by 
staying away when our leadership was needed most. Now, it may 
have been because the President was preoccupied with the war on 
terrorism, did not want to be identified with a policy that his 
predecessor was so deeply engaged in, or was concerned that we 
may be dragged into a quagmire that could end in failure. 
Whatever the reason, it was a big mistake. We are the only 
country that can effectively play the role of intermediary in 
the Middle East. By staying away, the situation has become so 
polarized and steeped in bitterness and hatred, the task of 
bringing peace to the region is now infinitely harder.
    Throughout this period, Mr. Secretary, I think you have 
been the exception. You have been a voice for engagement, for 
tolerance, and for fairness toward both sides. We are grateful 
that you have traveled to the region and helped to reduce 
tensions, especially among Israel's neighbors that were close 
to spinning out of control. I hope your trip is the beginning 
of a more forceful strategy for peace, because it is clear that 
normal diplomatic efforts have failed.
    Both sides say they want to live in peace, but whatever 
they have gained or suffered in the past few weeks has, I 
believe, only made peace more elusive. A two-state solution is 
the only solution, and that means a Palestinian state that is 
viable, that is worth living for, and not a state in name only. 
For the Israelis, it means being able to live free of terror 
and fear.
    Suicide bombings or other deliberate attacks against 
civilians are acts of terrorism. They can never be justified. 
No matter what definition they are given, these acts of terror 
are not justified today, they were not justified yesterday, and 
they will not be justified tomorrow.
    In fact, the strategy of the Palestinian leadership has 
been a disaster for the Israeli people, for the Palestinian 
people and for the entire region. Mr. Arafat has repeatedly 
deceived his own people. The Palestinians are industrious, 
compassionate, and proud people. They deserve far better.
    As long as either side deprives the other of the freedom, 
the dignity, and the security to which all people are entitled, 
the bloodshed will continue. President Bush was right when he 
said there has been a lack of leadership from both sides, and 
that is why, more than ever, strong U.S. leadership is needed. 
I hope that you, Mr. Secretary, will be given the support you 
need from the White House to provide that leadership.
    On the issue of Afghanistan, I believe our deliveries of 
aid have fallen short. The President called for a Marshall Plan 
for Afghanistan, but he has not requested adequate resources or 
taken the steps to provide sufficient humanitarian assistance 
or enhance security, both of which are desperately needed. I 
would like to discuss this issue further with you over the 
course of this hearing.
    I expect the Congress, as I mentioned to you when we came 
in, will support much of what you have asked for in the 
supplemental, but I am not happy about the sweeping authority 
the administration proposes for much of the funds. Your lawyers 
have sought to waive existing laws, including most human rights 
conditions and other restrictions, even though you want to give 
this aid to some of the most authoritarian, corrupt, and 
backward governments in the world. Clearly, this does not 
square with the President's recent admonition that we should 
tie our foreign aid to good governance, sound economic 
policies, and a commitment to alleviating poverty. I do not 
want us to make the same mistake that administrations of both 
parties made during the cold war, when governments that did 
little more than declare themselves anticommunist would receive 
foreign aid no matter how corrupt they might be. By doing this, 
we failed to promote the basic values--democracy, economic 
freedom, and human rights--that make this Nation great. As the 
cold war began to wind down, we followed a similar pattern by 
providing assistance to authoritarian governments that declared 
themselves to be anti-drug. With the supplemental, I am afraid 
that we are starting down a road where we give assistance to 
nations who claim to be anti-terror, without pushing for reform 
in other key areas.
    We have high standards in this country. You have maintained 
those standards both in your military career and in your career 
as a diplomat. I just want to make sure U.S. aid helps to 
promote these high standards. I will put the rest of my 
statement in the record, and yield to my good friend, the 
Senator from Kentucky.
    [The statement follows:]
             Prepared Statement of Senator Patrick J. Leahy
    I would like to begin our session today with some words that 
express feelings that are strongly felt on this Committee, in the 
Senate and across our nations.
    This week, Canada is burying four of its soldiers who lost their 
lives as a result of the accidental bombing in Afghanistan. I want to 
take this opportunity to pay tribute to these men. They stood shoulder 
to shoulder with our own troops and lost their lives helping us defeat 
terrorism in Afghanistan. It was a terrible tragedy, and we should not 
only thank the Canadians, but also convey our deepest condolences to 
their families.
    As a Vermonter who thinks of Canada as ``that giant to the north,'' 
we sometimes forget that Canada is our largest trading partner and that 
we have no better friend. Canada, like so many countries, also lost 
sons and daughters on September 11th, and we grieve for them as we 
grieve for our own.
    Mr. Secretary, we welcome you here, and we commend you for the tone 
you have brought to the office, the morale you have lifted at the 
Department, and the hard work you are doing. I also want to commend 
your legislative affairs staff. They are doing a superb job.
    With so much attention on the Middle East--and you just having 
returned from there--this is an important time for you to be speaking 
to the Congress and to the American people.
    I am going to put most of my statement in the record because I want 
to save time for questions. I would also ask you to keep your prepared 
remarks brief for the same reason. We have a lot to discuss and not 
very much time.
    Mr. Secretary, we are all preoccupied with the horrifying violence 
in the Middle East. My personal opinion is that the Administration 
blundered badly by staying away when our leadership was needed most. 
Whether it was because President Bush did not want to be identified 
with a policy that his predecessor was so deeply engaged in, or because 
his advisors were afraid that he would be drawn into a quagmire that 
could end in failure, it was a big mistake.
    The United States is the only country that can play the role of 
intermediary in the Middle East. The situation has become so polarized, 
so steeped in bitterness and hatred, that our task is now infinitely 
harder. Throughout this period, I think you have been the exception. 
You have been a voice for engagement, for tolerance, and for fairness 
toward both sides. We are very grateful that you traveled there and 
helped to reduce tensions--especially among Israel's neighbors--that 
were close to spinning out of control
    I hope your trip was the beginning of a more forceful strategy for 
peace, because it is clear that normal diplomatic efforts have failed. 
Both sides say they want to live in peace, but whatever they have 
gained or suffered in the past few weeks has, I believe, only made 
peace more elusive.
    A two-state solution is the only solution. And that means a 
Palestinian state that is viable, that is worth living for, not a state 
in name only.
    And for Israelis, it means being able to live free of terror and 
fear. Suicide bombings or other deliberate attacks against civilians 
are act of terrorism that can never, ever be justified.
    The strategy of the Palestinian leadership has been a disaster, for 
Israelis, for Palestinians, for the entire region. Mr. Arafat has 
repeatedly deceived his own people. Palestinians are industrious, 
compassionate, proud people. They deserve far better.
    As long as either side deprives the other of the freedom, the 
dignity, and the security to which all people are entitled, the 
bloodshed will continue. The President was right when he said there has 
been a lack of leadership on both sides. That is why, more than ever, 
stronger U.S. leadership is needed. I hope that you, Mr. Secretary, are 
given the support from the White House to provide that leadership.
    The only other thing I will mention in these remarks is 
Afghanistan, where deliveries of aid have fallen short. The President 
called for a ``Marshall Plan'' for Afghanistan, but he has not 
requested adequate resources nor taken steps to provide the security 
that is desperately needed. We can discuss this further after your 
testimony.
    Again, we appreciate you coming here. I will put the rest of my 
statement in the record, and ask Senator McConnell to make any opening 
remarks he may have.
    Mr. Secretary, we are here to consider your requests for a fiscal 
year 2002 emergency supplemental appropriation, and for the fiscal year 
2003 regular appropriation for Foreign Operations.
    I expect the Congress will support much of what you have asked for 
in the supplemental. However, let me say that we are not happy about 
the sweeping authority the Administration proposes for much of the 
funds. Your lawyers have sought to waive all existing laws, including 
most human rights conditions and other restrictions, even though you 
want to give this aid to some of the most authoritarian, corrupt, 
backward governments.
    How this squares with the President's recent admonition that we 
should tie our foreign aid to good governance, sound economic policies, 
and a commitment to alleviating poverty, is a mystery. It is as if, 
because these funds are requested to support what has apparently become 
an open-ended, global war on terrorism--and no one seems to know what 
is included in the term ``terrorism''--that we should write a blank 
check.
    That is what we did during the cold war, when we gave aid to any 
government that claimed to be anti-Communist, often with disastrous 
results. It is why so many people, the Secretary of the Treasury 
included, have called foreign aid a waste.
    So we do not want to get into a situation, again, where the ends 
are seen to justify the means, even if the means are unacceptable.
    I have a number of questions about your request to broaden existing 
authority to include counter-terrorism assistance for Colombia. I think 
a case can be made for it, if we see more progress on human rights, but 
the Administration has yet to articulate what our objectives are, what 
it would take to achieve them, and at what cost. We also need to be 
convinced that the Colombian Government is going to start treating the 
crisis there as a national priority, and devoting the necessary 
resources to it.
    For Afghanistan, you have requested only $40 million for disaster 
and reconstruction aid. That is less than one-third the amount USAID 
says it needs. It flies in the face of the President's speech just last 
week, and it leaves to Congress the task of shifting funds to make up 
the shortfall.
    Your Middle East Economic Initiative makes good sense to me, but it 
is a fraction of the size it should be. In Vermont, we spend over $2 
billion on public education for 101,000 students. Secular education is 
desperately needed in the Middle East, but we will barely scratch the 
surface with $50 million.
    Your fiscal year 2003 budget request is an improvement over last 
year, but not by much. I am sure you wish it were higher, and that the 
President's Millennium Challenge Fund were scheduled to begin in fiscal 
year 2003, instead of a year later. I want to discuss that with you, 
because all the problems it seeks to address are getting worse every 
day.
    We have concerns about your proposed cuts in assistance to Central 
and Eastern Europe, to the former Soviet countries, and for 
peacekeeping. We are concerned that the Central and South American 
countries are not receiving the attention they should, except through 
the counterdrug program. There are many other reasons to provide 
assistance to our southern neighbors, and I suspect the President would 
agree.
    A few small programs have been cut, like aid for East Timor--a 
needy and deserving country if there ever was one. East Timor elected 
its first President only last week. It is the wrong time for us to cut 
back there.
    You have increased funding for USAID's HIV/AIDS programs, but you 
do so by cutting funds for other international health activities. That 
makes little sense.
    Destruction of the environment has a direct impact on social 
stability and regional security. The increasing pressures on limited 
water resources is but one example. Programs in this area have been 
seriously underfunded for years, and this budget is no better.
    Your budget includes only $100 million for the Global Fund to 
Combat AIDS, TB and Malaria, and another $100 million would come from 
the Labor, Health and Human Services, and Education budget. This is 
$100 less than we provided last year, including the supplemental. The 
Global Fund just barely became operational, and it has already received 
more proposals than it has funds to support. $200 million is not 
enough.
    In the former Yugoslavia, the government continues to be an 
obstacle to the War Crimes Tribunal. We are not seeing anything like 
the cooperation called for in our law. In fact, the opposite. It is 
clear that the Federal authorities, and to a lesser extent Serbian 
officials, are engaged in a cynical process of calculating what the 
minimum is that they need to do for you to certify that they are 
cooperating, and then they will again do nothing until it is time for 
the next certification. I hope you do not succumb to this game.
    I also urge you to not unsign the Rome Treaty establishing an 
International Criminal Court, which would bring to justice those 
responsible for some of the most heinous crimes against humanity. 
Unsigning at this time would cause us to lose valuable leverage to 
shape the court in our interests, do nothing to protect U.S. citizens, 
weaken our moral authority, and create more tensions with our European 
allies.
    I have questions on each of these issues, but I want to end on a 
positive note. The Leahy human rights law has been in effect since 
1997. It says that if the Secretary of State has credible evidence that 
a foreign military or police unit has committed a serious human rights 
violation, U.S. aid to that unit must end unless the foreign government 
is taking effective measures to bring the individuals responsible to 
justice.
    There was some grumbling about the law in the early days, but since 
then it has been accepted and, for the most part, strongly defended by 
the Administration. I think that is because the alternative--that even 
when there is such evidence we would continue to support a unit that 
has been implicated in a serious crime--is indefensible. It is not a 
simple law to administer and in some instances I have strongly 
disagreed with the Department's application, or lack of application, of 
the law. I have repeatedly expressed concerns about whether the law was 
being adhered to in the Middle East. But on the whole it has been taken 
seriously, and I want you and the rest of the Administration to know 
that I appreciate it.
    Thank you.

             OPENING STATEMENT OF SENATOR MITCH MC CONNELL

    Senator McConnell. Thank you very much, Mr. Chairman, and 
welcome, Mr. Secretary, to our subcommittee. It is great to see 
you again, and we appreciate very much the opportunity to have 
breakfast with you yesterday and discuss your recent efforts in 
the Middle East.
    Let me begin by saying that I fully support the President's 
$16.1 billion foreign operations request for this year. While 
Congress will undoubtedly amend the request, as we typically do 
every year, the proposed $783 million increase over last year's 
level does reflect a growing sense that foreign aid is an 
important weapon in our arsenal against terrorism. This is one 
conservative Republican who is a believer in foreign aid, and 
who is going to help you increase our foreign aid levels. I am 
enthusiastic about the President's request to dramatically 
increase our foreign assistance over the next few years.
    You will also have my support for the $1.3 billion foreign 
operations request contained in the emergency supplemental. 
Although these funds are targeted towards countering terrorism, 
Israel was not included in the request. A convincing case can 
be made that circumstances in the Middle East have dramatically 
changed since the request was submitted to Congress last month, 
and that the issue of additional assistance to Israel should be 
revisited.
    As I said, we had an opportunity to discuss your recent 
trip yesterday morning. We appreciate the chance to do that. 
You are certainly the right man to be on the point in this very 
difficult and complex subject. The frustration with the PLO 
Chairman Yasser Arafat's leadership runs high in Washington. It 
certainly runs high here in the Congress.
    As I said when I introduced the Arafat Accountability Act 
last week, the violence-prone PLO chairman is the weakest link 
in securing a cease-fire and moving forward to a political 
settlement. We should expect that the Israeli military will be 
bivouacked outside Arafat's compound in Ramallah for as long as 
it takes to secure meaningful commitments to bring to a 
conclusive end the ongoing terrorist attacks against the 
Israeli people. It is wholly unacceptable for Arafat to talk 
peace in English and practice terror in Arabic.
    To return to the 2003 budget request, the administration 
proposes a $129 million cut from Eastern Europe. The SEED 
account provides critical assistance to such troubled spots as 
Serbia and Macedonia, countries that are far from graduating to 
developed nation status. These cuts may have unintended 
consequences, such as retarding the region's economic and 
political development. This may be a case of paying for it now, 
or paying for it later.
    Similarly, the $29-million cut to the Independent States of 
the former Soviet Union is troubling. I recognize that some of 
the pain is offset in the supplemental's $155 million request 
for Uzbekistan, Tajikistan, Kazakhstan, the Kirghis Republic, 
and Georgia, but other countries, particularly Armenia, are not 
provided with sufficient assistance that is critical to their 
development and our war against terrorism.
    To remain in the Caucasus just for a moment, the lack of 
progress in the ongoing negotiations over Nagorno-Karabakh is 
dismaying, and I know you are not happy about that, either, 
particularly after heightened expectations following last 
year's meetings in Key West. Given elections in Azerbaijan next 
year, I personally do not hold any great hope that we will see 
major progress in the coming months, but we should be 
aggressive in securing confidence-building measures no matter 
how small or seemingly insignificant. I hope that you can keep 
this on your radar screen to some extent. I know you have got 
so much going on these days, but I think a settlement of that 
dispute in the Caucasus would certainly produce a lot of 
positive results.
    Let me also just close with a few comments on the situation 
in Burma. I am not surprised by the lack of progress by the 
United Nations in facilitating talks between the military thugs 
in Rangoon and Daw Aurg San Suu Kyi. U.N. Special Envoy Razali 
Ismael's visit earlier this month was abruptly canceled, and 
while he returned to Rangoon only this week, we should not kid 
ourselves over the intention of the State Peace and Development 
Council to maintain power at all costs.
    This is a regime that should be on the axis of evil list, 
alongside Iraq, Iran, and North Korea, and it may be time to 
increase pressure on the junta through a ban on all imports to 
the United States. I know the administration is keen on 
conducting HIV/AIDS programs in Burma, but I would strongly 
council that the centerpiece of such efforts be regular and 
ongoing consultation with the National League for Democracy and 
Aurg San Suu Kyi. There is only one hope in that country, and 
she is under house arrest in Rangoon.
    I have a number of other issues including aid to 
Afghanistan, Ukraine, and Colombia that I will save for later, 
and thank you again so much for being here this morning. We 
look forward to hearing from you.
    [The statement follows:]
             Prepared Statement of Senator Mitch McConnell
    Welcome, Mr. Secretary. Let me begin my remarks this morning by 
expressing my support for the President's $16.1 billion foreign 
operations request for fiscal year 2003.
    While Congress will undoubtedly amend the request--as is our 
prerogative and as we do every year--the proposed $783 million increase 
over last year's enacted level reflects the growing conventional wisdom 
that foreign aid is an important weapon in our arsenal against 
terrorism.
    You also have my support for the $1.3 billion foreign operations 
request contained in the emergency supplemental. Although these funds 
are targeted toward countering terrorism, Israel was not included in 
the request. A convincing case can be made that circumstances in the 
Middle East have drastically changed since the request was submitted to 
Congress last month and that the issue of additional assistance to 
Israel should be revisited.
    We had the opportunity to discuss developments in the Middle East 
at yesterday's breakfast and we all recognize the complexities of the 
challenges--from ending homicide bombings to the intractable issue of 
the right of return for Palestinian refugees. You are the right man to 
walk point on this issue. But understand that frustration with the PLO 
Chairman Yasser Arafat's leadership failure runs high in Washington.
    As I said when I introduced the ``Arafat Accountability Act'' last 
week, the violence-prone PLO Chairman is the weakest link in securing a 
ceasefire and moving forward on a political settlement. We should 
expect that the Israeli military will be bivouacked outside Arafat's 
compound in Ramallah for as long as it takes to secure meaningful 
commitments that bring to a conclusive end the ongoing terrorist 
attacks against the Israeli people. It is wholly unacceptable for 
Arafat to talk peace in English and practice terror in Arabic.
    To return to the fiscal year 2003 budget request, the 
Administration proposes a $129 million cut from Eastern Europe. The 
SEED account provides critical assistance to such troubled spots as 
Serbia and Macedonia, countries that are far from graduating to 
developed-nation status. These cuts may have unintended consequences, 
such as retarding the region's economic and political development. This 
may be a case of paying for it now--or really paying for it later.
    Similarly, the $29 million cut to the Independent States of the 
former Soviet Union is troubling. I recognize that some of the pain is 
offset in the supplemental's $155 million request for Uzbekistan, 
Tajikistan, Kazakhstan, the Krygyz Republic, and Georgia--but other 
countries, particularly Armenia, are not provided with sufficient 
assistance that is critical to their own development and our war 
against terrorism.
    To remain in the Caucuses for a brief moment, the lack of progress 
in ongoing negotiations over the Nagorno-Karabakh conflict is 
dismaying, particularly after heightened expectations following last 
year's meetings in Key West. Given elections in Azerbaijan next year, I 
do not hold any false expectations that we will see major progress in 
the coming months. We should be aggressive in securing confidence 
building measures, no matter how small or seemingly insignificant.
    Let me close with a few comments on the situation in Burma. I am 
not surprised by the lack of progress by the United Nations in 
facilitating talks between the military thugs in Rangoon and Aung San 
Suu Kyi. U.N. Special Envoy Razali Ismail's visit earlier this month 
was abruptly cancelled, and while he returned to Rangoon only this 
week, we should not kid ourselves over the intentions of the State 
Peace and Development Council to maintain power at all costs.
    This is a regime that should be on the ``axis of evil'' list along 
side Iraq, Iran, and North Korea, and it may be time to increase 
pressure on the junta through a ban on all imports to the United 
States.
    I know the Administration is keen on conducting HIV/AIDS programs 
in Burma, but I would strongly counsel that the centerpiece for such 
efforts be regular and ongoing consultation with the National League 
for Democracy. There is one hope for that country--and she is under 
house arrest in Rangoon.
    I have a number of other issues--including aid to Afghanistan, 
Ukraine, and Colombia--that I intend to address later in the hearing.

    Senator Leahy. Thank you, Senator McConnell. We will put 
all statements of Senators in the record, and Mr. Secretary, it 
is your microphone.

               SUMMARY STATEMENT OF HON. COLIN L. POWELL

    Secretary Powell. Thank you very much, Mr. Chairman. It is 
a great pleasure to be back before the committee, and I thank 
you for your expressions of support, and I do have a prepared 
statement that I would submit for the record. I just have a 
brief opening statement and I will then be ready for your 
questions.
    Before beginning my opening statement, let me just respond 
to the comments that you made earlier, Mr. Chairman, and I know 
these are comments on everybody's mind, with respect to the 
situation in the Middle East. We had a chance to talk about it 
yesterday morning, and I am sure in the course of our 
questioning there will be an opportunity to say more about the 
situation in the Middle East. I have to take some exception to 
your comment that the U.S. administration, President Bush's 
administration, blundered badly and that we stayed away and 
were preoccupied by other matters. I do not think that is an 
accurate portrayal.
    Immediately upon taking office last year, we became engaged 
with Senator George Mitchell, your colleague from past days, 
and encouraged him to remain engaged with the work he was doing 
with the Mitchell Committee. He did. We encouraged the Israelis 
to participate with Senator Mitchell's group and they did, and 
we came out with a very fine report that gave us a blueprint of 
a way to move forward. We pressed hard to get both sides to 
enter into that blueprint plan, and unfortunately we were not 
successful, but it was not because we were not trying. We were 
not successful and they were not successful. The failure was 
theirs, not ours. We could not get the violence down.
    We tried again with the Tenet work plan, and the Tenet work 
plan would have provided a way in to Mitchell, but we could not 
get it started again, once again because of violence. We sided 
with, frankly, the Israeli side here by saying that you had to 
have security, you had to have some confidence that you are not 
going to have your citizens blown up by suicide bombs or other 
kinds of terrorist activities, and that Prime Minister Sharon 
had been elected to office on the basis of his commitment to 
provide security to the Israeli people. We understood that, and 
we worked with both sides trying to get the violence down.
    President Bush was the first President of the United States 
to stand before an international forum, as he did at the United 
Nations last fall, and call for the creation of a Palestinian 
State, and he gave it a name. He called it Palestine, the first 
time a President has done that, and he did it because he wanted 
to say to the Palestinian people that the United States has a 
vision for you.
    We will always be Israel's closest friend. We have been 
there from the very beginning. We will always be there for 
Israel. But at the same time, we recognize that a way has to be 
found for these two peoples to live side by side in peace 
behind secured, recognizable borders, and develop relations 
between themselves that do not come out of the barrel of a gun, 
but come out of economic development, come out of educating 
young people, come out of giving people hope and jobs. The 
President is committed to that vision. He repeated that vision 
in his April 4 speech before sending me off to the Middle East. 
I also captured that vision in my Louisville speech of last 
year.
    So we have been deeply engaged in the work of finding a way 
forward on the basis of security, on the basis of a political 
solution, on the basis of economic and humanitarian relief. Now 
the President has reaffirmed his commitment to that process, 
first by sending me into the middle of a difficult situation. 
We can talk about the trip that I took and what might have been 
achieved, and what more we would like to have seen achieved 
that was not achieved, but he is engaged. I am engaged. The 
reason I was a few moments late coming up this morning is that 
I was with the President in the situation room going over 
today's events as well as what we are going to be doing in the 
future.
    Senator Leahy. By Senate standards you are a model of 
punctuality, let me say.
    Secretary Powell. Well, if you had a driver as good as 
mine, and if you closed your eyes going through Washington 
traffic, you could be anywhere on time, as I did this morning.
    And so, Mr. Chairman, I assure you we will be engaged as a 
close, dear friend of Israel, but also as a friend to the 
Palestinian people, because they need peace, they need 
security, they need to find a place in the world. We are 
committed to that proposition as well, and I am sure we can 
expand on these few brief remarks when we get into questions 
and answers.
    But let me turn now to my shortened statement. Mr. 
Chairman, you may recall that when I was up here last year, I 
told you how important I considered relations with Congress, 
that I felt that I had an obligation as Secretary of State to 
be as open and forthcoming and as accessible to every committee 
before which I appear, and the Congress as a whole. It is part 
of my responsibility to work closely, to let you know what I am 
doing in the name of the American people to make sure that the 
State Department is well-organized, well-led, a place with high 
morale, a place with a sense of purpose, a place where the 
people are proud to be serving in this administration and 
serving the American people in the accomplishment of their 
foreign policy.
    You may also remember that I pointed out last year that I 
was not only the foreign policy advisor to the President, but 
the chief executive officer of a very large organization, and 
wearing that CEO hat I want to tell you that we have made solid 
advances over the past year: advances in hiring; bringing 
people into the Department; increasing the number of people who 
want to be a part of the State Department team; bringing state-
of-the-art information and technology to the Department; 
streamlining our overseas buildings operations, and making our 
buildings more secure for our people to work in confidence and 
comfort.
    Morale is high at the Department, and for this I think I 
owe a debt of gratitude, and all of my employees owe a debt of 
gratitude to the Congress for what you have done to help us 
develop this momentum. We are bringing the organization and 
conduct of America's foreign policy into the 21st Century, and 
I want to thank the members of the committee for the support 
that you have provided.
    Since that heart-rending day in September, when the 
terrorists struck in New York, Virginia, and Pennsylvania, we 
have seen why the conduct of foreign policy is so important. We 
have had remarkable success over the past 7 months in our war 
on terrorism, especially in Afghanistan, and we are seeing 
progress now in the Philippines and Yemen and elsewhere as a 
result of our working with governments around the world who are 
committed to the campaign against terrorism. Behind the 
courageous men and women of our Armed Forces, behind the 
stepped-up law enforcement efforts, and behind the increased 
scrutiny of an action against terrorist financial networks, 
there has been the quiet, steady force of diplomacy by 
thousands of Americans around the world, working in our 
missions, who take their job with utmost seriousness and pursue 
it with diligence.
    As a result of their efforts, we have reshaped a good part 
of South Asia, a new United States-Pakistan relationship, a 
reinvigorated United States-India relationship, a new interim 
authority in Kabul, and the Taliban and the terrorists gone, 
dead, in jail, or on the run.
    We are also forming important new relations with our 
friends in Central Asia, and helping friends and allies fight 
the scourge of terrorism from the marble-floored banks of 
Europe to the forests and gorges of Georgia.
    In his second visit to the Department last year, President 
Bush told us that despite the great tragedy of September 11, we 
could see opportunities through our tears and, at his 
direction, the State Department has been moving briskly ever 
since, making as much as possible of those opportunities.
    Over the past year, Mr. Chairman, I believe the broader 
tapestry of our foreign policy has become clear. It is to 
encourage the spread of democracy and market economies, to lift 
up countries that want to be part of that expansion, and to 
bring more governments to the understanding that the power of 
the individual is the power that counts. When evil appears to 
threaten this progress, America will confront that evil, call 
it what it is, and defeat it, as we are doing in the war on 
terrorism.
    And as you well know, Mr. Chairman, we cannot do any of 
this, we cannot conduct an effective foreign policy or fight 
terrorism without the necessary resources. The President's 
fiscal year 2003 request for foreign operations is a little 
over $16.1 billion. These dollars will support the continuing 
war on terrorism and the work we are doing in Colombia and the 
Andean region at large.
    Moreover, these dollars will help support our efforts to 
help combat HIV/AIDS and other infectious diseases, our 
essential development programs in Africa, the important work of 
the Peace Corps, and scaling up the work of the Peace Corps and 
the size of the Peace Corps, and will also make possible our 
plan to clear arrearages at the multilateral development banks, 
including the global environment facility.
    Mr. Chairman, to fight terrorism as well as alleviate the 
conditions that fuel this kind of activity, violent terrorism, 
we are requesting an estimated $5 billion. In addition to the 
initiatives outlined in our budget request for the State 
Department and related agencies, this funding includes $3.6 
billion for economic and security assistance, military 
equipment and training for the frontline states and for our 
other partners in the war on terrorism. As you noted, Senator 
McConnell, Israel is not included in this, but I take your 
point that this is something we should look at as we move 
forward.
    These dollars also include $3.4 billion out of the $3.6 
billion from foreign operations accounts such as the economic 
support fund, international military education and training, 
foreign military financing, and the Freedom Support Act, $88 
million for programs in Russia and other States of the former 
Soviet Union to reduce the availability to terrorists of 
weapons of mass destruction.
    Our ongoing programs engage former weapons scientists now 
participating in peaceful research, and help in this way to 
prevent the spread of the materials expertise required to build 
such weapons.
    A few programs of note: $69 million for counterterrorism 
engagement programs, training, and equipment to help other 
countries fight global terror, thereby strengthening, in turn, 
our own national security; $50 million to support the 
International Atomic Energy Agency in activities designed to 
counter nuclear terrorism and implement strengthened 
safeguards; and $15 million to allow us to respond quickly and 
effectively to unanticipated or unusually difficult 
nonproliferation projects or opportunities; and $4 million for 
the Treasury Department's Office of Technical Assistance to 
provide training and assistance and other expertise to foreign 
finance officers to halt terrorist financing.
    Mr. Chairman, in the 2003 fiscal year budget request, there 
is approximately $140 million available for Afghanistan, 
including repatriation of refugees, food aid, demining, and 
transition assistance. I know that President Bush, the 
Congress, and the American people recognize that rebuilding 
Afghanistan will require additional resources, and that our 
support must be and will be a multiyear effort. Moreover, I 
know we will need a lot of help from the international 
community.
    At the Virginia Military Institute last week, President 
Bush made very clear what he wants to do for Afghanistan. The 
President told his audience of eager cadets that one of their 
own, George C. Marshall, helped ensure that a war-ravaged 
Europe and Japan would successfully recover following World War 
II. Now, today, Europe and Japan are helping America in 
rebuilding Afghanistan.
    The President said that by helping to rebuild Afghanistan 
that is free from evil, and is a better place in which to live, 
we are working in the best traditions of George Marshall, and 
so we are. It will be a long, hard road. We know it, but like 
General Marshall, we also know that we must do it, and the 
international community knows that it must help.
    Mr. Chairman, we are requesting $731 million in 2003 for 
the multiyear counterdrug initiative in Colombia and other 
Andean countries that are the source of cocaine sold on 
America's streets. This assistance to Andean governments will 
support drug eradication, interdiction, economic development, 
and development of government institutions. In addition, the 
Colombians will be able to stand up a second counterdrug 
brigade. Assisting efforts to destroy local coca crops and 
processing labs there increases the effectiveness of U.S. law 
enforcement here.
    In addition to this counterdrug effort, Mr. Chairman, we 
are requesting $98 million in FMF to help the Colombian 
Government protect the vital Cano Limon oil pipeline from the 
same foreign terrorist organizations that are involved in 
illicit drugs, the FARC and the ELN. Their attacks on that 
pipeline shut it down 240 days in 2001, costing Colombia 
revenue and disrupting its economy, and causing serious 
environmental damage.
    This money will help train and equip the Colombian armed 
forces to protect the pipeline. These funds begin to apply the 
President's decision to shift from a strictly counterdrug 
effort to a more broadly based effort targeted at helping 
Colombia fight the terrorists in its midst, as well as the 
drugs.
    In fiscal year 2003, we are also requesting $1.4 billion 
for USAID global health programs. Of this amount, we are 
requesting $540 million for bilateral HIV/AIDS prevention, 
care, and treatment activities, and $100 million for the global 
fund to fight AIDS, tuberculosis, and malaria. As you know, 
another $100 million is in the HHS budget, so there will be a 
total of $200 million on top of the $300 million that was 
provided over the last year or so for a total of $500 million.
    All of this funding will increase the already significant 
contribution to combatting the AIDS pandemic, and maintain our 
position as the single largest bilateral donor. I should also 
add that the overall U.S. Government request for international 
HIV/AIDS programs exceeds $1 billion, including the $200 
million I just referenced for the global fund.
    I might digress and also mention, Mr. Chairman, that I just 
received a report from my staff that the trust fund that we 
created for the HIV global trust fund activities is coming 
along very well, and we have now reached a point where we are 
about to award contracts. I think this is quite an achievement 
under the leadership of the Secretary-General of the United 
Nations and others working with him, that we have gone from 
inception to starting to release funds that will help with the 
problem in a little less than a year's time.
    Mr. Chairman, I know that you and all of the subcommittee 
members heard the President's remarks in his State of the Union 
address with respect to the USA Freedom Corps. You heard, as 
well, his objective to renew the promise of the Peace Corps, 
and to double the number of volunteers in the corps in the next 
5 years. We have put $320 million for the Peace Corps in the 
2003 budget request. This is an increase of over $42 million 
from our fiscal year 2002 level.
    This increase will allow us to begin scaling up to the 
level the President has directed us to, and we intend that the 
Peace Corps will open programs in eight countries, including 
the reestablishment of currently suspended posts, and place 
over 1,200 additional volunteers worldwide. By the end of 2003, 
the Peace Corps will have more than 8,000 volunteers on the 
ground.
    Finally, Mr. Chairman, the 2003 request includes an 
initiative to pay one-third of the amount that the United 
States owes the multilateral development banks for our 
scheduled annual commitments. With U.S. arrears currently 
totalling $533 million, the request would provide $178 million 
to pay one-third of our total arrears during this fiscal year. 
These banks lend to and invest in developing countries, 
promoting economic growth and poverty reduction and providing 
environmental benefits. We need to support them.
    Mr. Chairman, in addition to what I have given you with 
respect to fiscal year 2003, I want to provide you with the 
main priorities of our supplemental request for 2002, but first 
let me tell you how grateful we are down at the Department for 
the efforts of this subcommittee and the House subcommittee to 
get us the $1.5 billion in crucial emergency response fund 
foreign operations that we needed to address the immediate post 
September 11 requirements, but that was just a start.
    We are asking for a $1.6 billion of supplemental funding 
for fiscal year 2002. This amount includes $322 million for the 
Department itself. These dollars will address emerging building 
and operating requirements that have arisen as a result of the 
September 11 terrorist attacks, including reopening our embassy 
in Kabul, reestablishing an official presence in Dushanbe, 
Tajikistan, and increasing security and personnel protection at 
home and abroad. This will leave about $1.3 billion for foreign 
operations.
    These funds, added to the request we have made for 2003 for 
the frontline States are primarily to deter and prevent acts of 
international terrorism, provide vitally needed military 
equipment training and economic assistance to our friends and 
allies, to expand respect for human rights and judicial reform 
in the frontline States, provide a significant and immediate 
impact on displaced persons in the frontline States, support 
civilian reintegration of former combatants and establish law 
enforcement and criminal justice systems, and provide economic 
and democracy assistance, including help with political 
development, health care, irrigation and water management, 
media development, community-building and infrastructure 
improvement, and economic and civil society reform.
    In sum, these supplemental dollars for foreign operations 
in 2002 will be directed at draining the swamp in which 
terrorists survive, and ensuring the long-term success of 
Operation Enduring Freedom. Mr. Chairman, I told the committee 
last year the conduct of the Nation's foreign policy suffered 
significantly from a lack of resources over the past decade. I 
have set both my CEO hat and my foreign policy hat to correct 
that situation, but I cannot do it without your help, with the 
help of your colleagues in the Senate and across the Capitol in 
the House.
    I ask for your important support in full committee and in 
the Senate as a whole, both for the $8.1 billion we are 
requesting for the Department and its related agencies, and for 
the $16.1 billion we are requesting for foreign operations. In 
addition, I ask for your support with a supplemental request 
for 2002. With your help and the help of the whole Congress, we 
will continue the progress we have begun.
    Thank you very much, Mr. Chairman. I am now pleased to take 
your questions.
    [The statement follows:]
               Prepared Statement of Hon. Colin L. Powell
    Mr. Chairman, members of the subcommittee, I am pleased to appear 
before you to testify in support of President Bush's budget request for 
fiscal year 2003.
    Last May, Mr. Chairman, you may recall that in my opening remarks I 
told you how important I consider interchanges such as this with the 
Congress. Our breakfast together at the State Department yesterday 
reinforced my appreciation for such exchanges.
    I believe it is an important part of my responsibilities to work 
closely with the Congress and with all the various committees. This 
will be my eighth budget hearing this year, but I consider this kind of 
interchange with the Congress as important as any other duty that I 
have.
    You may also remember that last year I told you that I believe I 
have responsibilities as CEO of the State Department as well as those 
of being principal foreign policy advisor to the President.
    Wearing that hat, my CEO hat, I want to tell you that we have made 
solid advances over the past year--advances in hiring, in bringing 
state of the art information technology to the Department, and in 
streamlining our overseas buildings process and in making our buildings 
more secure for our people.
    Morale is high at the Department and we owe this Congress a debt of 
gratitude for what it has done to help us develop this momentum. We are 
bringing the organization and conduct of America's foreign policy into 
the 21st century, and I want to thank you, Mr. Chairman, and all the 
members of this subcommittee, for giving us the support to begin this 
process.
    Since that heart-rending day in September when the terrorists 
struck in New York, Virginia, and Pennsylvania, we have seen why the 
conduct of our foreign policy is so important.
    We have had remarkable success over the past seven months in the 
war on terrorism, especially in Afghanistan, and we are beginning to 
see some success in the Philippines, in Yemen, and elsewhere. And 
behind the courageous men and women of our armed forces, behind the 
stepped up law enforcement efforts, and behind the increased scrutiny 
of and action against terrorist financial networks, has been the quiet, 
steady course of diplomacy.
    As a result, we have reshaped a good part of South Asia--a new 
U.S.-Pakistan relationship, a reinvigorated U.S.-India relationship, a 
new Interim Authority in Kabul, and the Taliban and the terrorists 
dead, in jail, or on the run. We are also forming important new 
relationships with the nations of Central Asia and helping friends and 
allies fight the scourge of terrorism from the marble-floored banks of 
Europe to the forested-gorges of Georgia.
    In his second visit to the Department last year, President Bush 
told us that despite the great tragedy of September 11, we could see 
opportunities through our tears--and at his direction, the Department 
of State has been at flank speed ever since, making as much as possible 
of those opportunities.
    Over the past year, Mr. Chairman, I believe the broader tapestry of 
our foreign policy has become clear: to encourage the spread of 
democracy and market economies, to lift up countries that want to be 
part of that expansion, and to bring more governments to the 
understanding that the power of the individual is the power that 
counts. And when evil appears to threaten this progress, America will 
confront that evil and defeat it--as we are doing in the war on 
terrorism.
    In weaving this tapestry, we have achieved several successes:
    With regard to Russia, President Bush has defied some of our 
critics and structured a very strong relationship. The meetings that he 
had with President Putin and the dialogue that has taken place between 
Russian Foreign Minister Ivanov and me and between Secretary of Defense 
Rumsfeld and his counterpart, and at a variety of other levels, have 
positioned the United States for a strengthened relationship with the 
land of eleven time zones.
    The way that Russia responded to the events of September 11 was 
reflective of this positive relationship. Russia has been a key member 
of the antiterrorist coalition. It has played a crucial role in our 
success in Afghanistan, by providing intelligence, bolstering the 
Northern Alliance, and assisting our entry into Central Asia. As a 
result, we have seriously eroded the capabilities of a terrorist 
network that posed a direct threat to both of our countries. The job is 
not complete yet--as our continuing operations in Afghanistan and our 
just-beginning Train and Equip operations in Georgia clearly 
demonstrate--but we are making headway.
    Similarly, the way we and the Russians agreed to disagree on the 
ABM Treaty reflects the intense dialogue we have had over the last 
thirteen months, a dialogue in which we told the Russians where we were 
headed and we made clear to them that we were serious and that nothing 
would deter us. And we asked them if there was a way that we could do 
what we had to do together, or a way that they could accept what we had 
to do in light of the threat to both of our countries from ballistic 
missiles. At the end of the day, we agreed to disagree and we notified 
Russia that we were going to withdraw from the ABM Treaty. I notified 
FM Ivanov--we talked about our plans for two days. President Bush 
called President Putin. Then the two presidents arranged the way we 
would make our different announcements. And the world did not end. An 
arms race did not break out. There is no crisis in Russia-U.S. 
relations. In fact, our relations are very good. Both presidents 
pledged to reduce further the number of their offensive nuclear weapons 
and we have been hard at work on an agreement to codify these mutual 
commitments. There is every possibility that we will conclude such an 
agreement next month in Moscow. This is all part of the new strategic 
framework with Russia.
    We even managed to come to an agreement on how we are going to work 
through NATO. This new decision-making relationship, which we are 
referring to as the NATO-Russia Council, or ``NATO at 20,'' will 
provide a mechanism for consultations, cooperation, joint decisions and 
joint action. It will offer Russia the opportunity to participate in 
shaping cooperative projects in areas such as counterterrorism, civil 
emergency preparedness, and joint training and exercises. Our aim is to 
have this arrangement in place for the Reykjavik ministerial next 
month. Moreover, NATO's Secretary General, Lord Robertson, announced 
last week that President Putin will be invited to Italy for a NATO-
Russia Summit on May 28.
    Mr. Chairman, as we head for the NATO Summit in Prague in November, 
where we will consider a new round of NATO enlargement, I think we will 
find the environment a great deal calmer than we might have expected.
    I believe the way we handled the war on terrorism, the ABM Treaty, 
nuclear reductions, and NATO is reflective of the way we will be 
working together with Russia in the future. Building on the progress we 
have already made will require energy, good will, and creativity on 
both sides as we seek to resolve some of the tough issues on our 
agenda.
    We have not forgotten about abuses of human rights in Chechnya or 
Moscow's WMD- and missile-related cooperation with Iran. Neither have 
we neglected to consider what the situation in Afghanistan has made 
plain for all to see; that is, how do we achieve a more stable security 
situation in Central Asia? We know that this is something we cannot do 
without the Russians and something that increasingly they realize can't 
be done without us, and without the full participation of the countries 
in the region. We are working these issues as well.
    In fact, the way we are approaching Central Asia is symbolic of the 
way we are approaching the relationship as a whole and of the growing 
trust between our two countries. We are tackling issues that used to be 
problems between us and turning them into opportunities for more 
cooperation. We have found in the last few weeks, for example, that we 
could even deal with chickens.
    And in Madrid, when the ``Quartet'' met two weeks ago--the EU, 
Russia, the United Nations, and the United States--my talks with 
Russian FM Ivanov were especially helpful in framing the message the 
Quartet crafted with respect to the crisis in the Middle East. In 
Madrid also, FM Ivanov and I agreed to meet early next month here in 
Washington to continue our discussions on the new strategic framework. 
And President Bush will visit Moscow and St. Petersburg later in May.
    Such a collegial approach to our relationship does not mean that 
differences have vanished or that tough negotiations are a thing of the 
past. What it means is that we believe there are no insurmountable 
obstacles to building on the improved relationship we have already 
constructed.
    It will take time. But we are on the road to a vastly changed 
relationship with Russia. That can only be for the good--for America 
and the world.
    With that in mind, Mr. Chairman, and in the spirit of closer United 
States-Russia cooperation, and in light of Russia's continued 
compliance with Jackson-Vanik legislation, the President hopes Congress 
will lift the application of this legislation to Russia before the 
Moscow-St. Petersburg Summit in late May.
    Mr. Chairman, we have also made significant progress in our 
relationship with China.
    A candid, constructive, and cooperative relationship is what we are 
building with China. Candid where we disagree; constructive where we 
can see some daylight; and cooperative where we have common regional or 
global interests.
    These are the principles President Bush took with him to Beijing at 
the end of February this year. After meeting with Prime Minister 
Koizumi in Tokyo and with President Kim in Seoul, the President spent a 
day and a half in Beijing and met with President Jiang Zemin, as well 
as Premier Zhu Rongji. These meetings solidified further what has 
become a markedly improved relationship--a relationship that will see 
China's Vice President, Hu Jintao, visit Washington at the end of this 
month through the beginning of next month, at the invitation of Vice 
President Cheney. In less than a year, we moved from what was a 
potentially volatile situation in April of last year involving our EP-3 
reconnaissance aircraft which was forced to land on China's Hainan 
Island after a PLA fighter aircraft collided with it, to a very 
successful meeting in Shanghai in October between President Jiang Zemin 
and President Bush and an APEC Conference, hosted by China, that was 
equally successful.
    There are certain shared interests that we have with China and we 
have emphasized those interests. They are regional and global 
interests, such as China's accession to WTO, stability on the Korean 
Peninsula, and combating the scourge of HIV/AIDS. On such issues we can 
talk and we can work out ways to cooperate.
    There are other interests where we decidedly do not see eye-to-eye, 
such as arms sales to Taiwan, human rights, religious freedom, and non-
proliferation. On such issues we can have a dialogue and try to make 
measurable progress.
    But we do not want the interests where we differ to constrain us 
from pursuing those where we share common goals. And that is the basis 
upon which our relations are going rather smoothly at present. That, 
and counterterrorism.
    President Jiang Zemin was one of the first world leaders to call 
President Bush and offer his sorrow and condolences for the tragic 
events of September 11. And in the over seven months since that day, 
China has helped in the war against terrorism. Beijing has also helped 
in the reconstruction of Afghanistan and we hope will help even more in 
the future.
    Moreover, China has played a constructive role in helping us manage 
the very dangerous situation in South Asia between India and Pakistan. 
When I could call China's Foreign Minster Tang and have a good 
discussion, making sure our policies were known and understood, it made 
for a more reasoned approach to what was--and as the snows melt may 
continue to be--a volatile situation. As a result, China has supported 
the approach that the rest of the international community has taken. 
Beijing has not tried to be a spoiler but instead tried to help us 
alleviate tensions and convince the two parties to scale down their 
dangerous confrontation which, hopefully, is happening. We will 
continue to work with Beijing as the situation evolves.
    All of this cooperation came as a result of our careful efforts to 
build the relationship over the months since the EP-3 incident. We 
never walked away from our commitment to human rights, non-
proliferation, or religious freedom; and we never walked away from the 
position that we don't think the Chinese political system is the right 
one for the 21st century. And we continued to tell the Chinese that if 
their economic development continues apace and the Chinese people see 
the benefits of being part of a world that rests on the rule of law, we 
can continue to work together constructively.
    As we improved our relationship with China, Mr. Chairman, we also 
reinvigorated our bilateral alliances with Japan, The Republic of 
Korea, and Australia. Nowhere has this been more visible than in the 
war on terrorism--where cooperation has been solid and helpful.
    Prime Minister Koizumi immediately offered Japan's strong support, 
within the confines of its constitution. And he is working to enhance 
Japan's capability to contribute to such global and regional actions in 
the future. President Bush's dialogue with the Prime Minister has been 
warm, engaging, and productive. Always the linchpin of our security 
strategy in East Asia, the United States-Japan Security Alliance is now 
as strong a bond between our two countries as it has been in the half-
century of its existence. Our shared interests, values, and concerns, 
plus the dictates of regional security, make it imperative that we 
sustain this renewed vigor in our key Pacific alliance. And we will.
    With respect to the Peninsula, our alliance with the Republic of 
Korea (ROK) has also been strengthened by Korea's strong response to 
the war on terrorism and by our careful analysis of and consultations 
on where we needed to take the dialogue with the North. President Bush 
has made it very clear that we are dissatisfied with the actions of 
North Korea, in particular that the North continues to develop and sell 
missiles that could carry weapons of mass destruction. But we have also 
made clear that both we and the ROK are ready to resume dialogue with 
Pyongyang, on this or any other matter, at any time the North Koreans 
decide to come back to the table.
    In that regard, we welcome the results of ROK Special Advisor Lim 
Dong-won's recent talks with North Korean leaders in Pyongyang, which 
included agreements on resuming dialogue and cooperation between the 
two Koreas. We are also pleased to note that North Korea signaled its 
willingness to resume dialogue with the United States. We would welcome 
such a resumption of talks; however, we have not yet received a direct 
response from the North Koreans.
    Further south, the Australians have been exceptional in their 
efforts to support the war on terrorism. Heavily committed in East 
Timor already, Australia nonetheless offered its help immediately and 
we have been grateful for that help, including the great Australian 
soldiers who have helped us on the ground in Afghanistan. The people of 
Australia are indeed some of America's truest friends.
    So, Mr. Chairman, as I look across the Pacific to East Asia I see a 
much-improved security scene and I believe that President Bush deserves 
the credit for this success.
    Another foreign policy success is the improvement we have achieved 
in our relations with Europe. In waging war together on terrorism, our 
cooperation has grown stronger. NATO invoked Article 5 for the first 
time ever on September 12. Since then, the European Union has moved 
swiftly to round up terrorists, close down terrorist financing 
networks, and improve law enforcement and aviation security 
cooperation.
    Moreover, President Bush has made clear that even as we fight the 
war on terrorism, we will not be deterred from achieving the goal we 
share with Europeans of a Europe whole, free, and at peace. We continue 
to work toward this goal with our Allies and Partners in Europe.
    In the Balkans, we are pursuing this goal by working with our 
European allies and partners to advance three inter-related objectives: 
promoting integration into Euro-Atlantic institutions, with the EU and 
NATO increasingly serving as the prime movers for engagement and 
reform; hastening the day that peace is self-sustaining and that we and 
our allies can withdraw our military forces; and ensuring that the 
region is not a safe haven or way station for global terrorism. The EU 
member nations are already supplying the majority of financial 
resources and military forces. Our success in preventing civil war in 
Macedonia while avoiding another long-term commitment of NATO forces 
was based on the type of close cooperation among NATO, the EU, and the 
United States that will remain essential to our future success. We need 
to finish the job in the Balkans--and we will. We went in together with 
the Europeans, and we will come out together.
    I also believe we have been successful in bringing the Europeans to 
a calmer level of concern with respect to what was being labeled by 
many in Europe ``unbridled U.S. unilateralism''. Notwithstanding the 
recent reaction in parts of Europe to President Bush's State of the 
Union Address, to U.S. actions on steel imports, and to undocumented 
and even at times egregiously wrong press reports about imminent U.S. 
military action against Iraq, I still believe this to be true. There 
was significant concern among the Europeans earlier last year that 
because we took some unilateral positions of principle for us that 
somehow the United States was going off on its own without a care for 
the rest of the world. Early in the Administration, this was 
particularly true with respect to the Kyoto Protocol. So we set out 
immediately to correct this misperception. Beginning with President 
Bush's speech in Warsaw, his participation in the G-8 meetings and the 
European Union summit, our extensive consultations with respect to the 
new strategic framework with Russia, and culminating in the brilliant 
way in which the President pulled together the coalition against 
terrorism, I believe that we demonstrated to the world that we can be 
decisively cooperative when it serves our interests and the interests 
of the world.
    But we have also demonstrated that when it is a matter of 
principle, we will stand on that principle. In his first year in office 
President Bush has shown the international community who he is and what 
his Administration is all about. That is an important accomplishment--
and one that is appreciated now everywhere I go. People know where 
America is coming from and do not have to doubt our resolve or our 
purpose. They may not always agree with us, but they have no doubt 
about our policy or our position. We want to ensure that this policy 
clarity and this firmness of purpose continue to characterize our 
foreign policy.
    Let me just note that this sort of principled approach 
characterizes our determined effort to reduce the threat from weapons 
of mass destruction--an effort well underway before the tragic events 
of September 11 added even greater urgency. As President Bush said at 
VMI last week, ``. . . the civilized world faces a grave threat from 
weapons of mass destruction.'' We and the Russians will reduce our own 
deployed nuclear weapons substantially. In the meantime, we are using a 
comprehensive approach, along with our friends and allies, to tackle 
WMD elsewhere, an approach that includes export controls, non-
proliferation, arms control, missile defenses, and counter-
proliferation.
    There are terrorists in the world who would like nothing better 
than to get their hands on and use nuclear, chemical, biological, or 
radiological weapons. So there is a definite link between terrorism and 
WMD. Not to recognize that link would be foolhardy to the extreme.
    In fact, terrorism, Mr. Chairman, is another example of this 
Administration's principled approach. Anyone who adopts for political 
purposes the intentional killing of innocent men, women, and children 
as they try to go about their everyday lives is going to be opposed by 
America. That is that. There should be no doubt about this commitment 
or in the understanding of this commitment. All people of every faith 
and every nation should stand unalterably opposed to such killing.
    Such principled approaches as our positions on the Kyoto Protocol 
or on missile defense do not equate to no cooperation. Quite the 
contrary. We know that cooperation is often essential to get things 
done. On our efforts to lift countries out of poverty, for example, and 
to create conditions in which trade and investment flourish, we need to 
cooperate.
    Last month, we had a good meeting in Monterrey, Mexico on financing 
development. This summer in Johannesburg, we will participate in the 
World Summit on Sustainable Development. There we will have an 
opportunity to address such issues as good governance; protection of 
our oceans, fisheries, and forests; and how best to narrow the gap 
between the rich countries and the poor countries of the world.
    And in June, the United States will participate in the World Food 
Summit conference in Rome. At the conference, we intend to renew our 
commitment to cutting world hunger in half by 2015. Progress toward 
this goal since the Summit in 1996 has been positive only in China. In 
much of the rest of the world, hunger has actually increased. We must 
do better.
    And Mr. Chairman, I know that you and the subcommittee members are 
familiar with President Bush's new Millennium Challenge Account, which 
he announced in Washington on March 14.
    With this initiative, the President has made combating poverty a 
foreign policy priority. At the same time, however, he has recognized 
that economic development assistance can be successful only if it is 
linked to sound policies in the developing countries. In sound policy 
environments, aid attracts private investment by two to one; that is, 
every dollar of aid attracts two dollars of private capital. In 
countries where poor public policy dominates aid can actually harm the 
very citizens it was meant to help.
    The funds we authorize and appropriate for this account will be 
distributed to countries that demonstrate a strong commitment toward: 
(1) good governance; (2) the health and education of their people; and 
(3) sound economic policies that foster enterprise and 
entrepreneurship.
    We envision that resources will begin to be available in fiscal 
year 2004, ramping up to $5 billion in fiscal year 2006. Then, $5 
billion every year thereafter. These resources will be separate from 
the current budget trajectory of our other aid dollars, which we expect 
to continue on their own path.
    With these resources applied in this careful way, we expect to 
fertilize the ultimate success of more and more countries making a 
determined and transparent effort to join the globalized world.
    Mr. Chairman, also among our foreign policy successes over the last 
year is our new and more effective approach to Africa--the impact of 
which was most dramatically demonstrated in the WTO deliberations in 
Doha last November that led to the launching of a new trade round. The 
United States found its positions in those deliberations being strongly 
supported by the developing countries, most notably those from Africa. 
The Congress laid the foundation for our success with the African 
Growth and Opportunity Act--an historic piece of legislation with 
respect to the struggling economies in Africa.
    In the first year of implementation of this Act, we have seen 
substantial increases in trade with several countries--South Africa by 
6 percent, Kenya by 17 percent, and Lesotho by 51 percent for 2001 over 
2000. Likewise, we are very pleased with the excellent success of the 
first U.S.-SubSaharan Africa Trade and Economic Cooperation Forum which 
was held last October.
    A large part of our approach to Africa and to other developing 
regions and countries as well, will be directly in line with what we 
have prescribed for the Millennium Challenge Account, i.e., a renewed 
and strengthened concern with progress toward good governance as a 
prerequisite for economic development assistance. Moreover, where 
conditions are favorable, our economic development assistance in Africa 
will emphasize the vigorous promotion of agriculture. Agriculture is 
the backbone of Africa's economies and must be revitalized to reduce 
hunger and to lift the rural majority out of poverty.
    In addition, we will emphasize fighting corruption and President 
Bush's new initiative on basic education. Moreover, we want to 
emphasize methods that directly empower individuals--methods such as 
micro-lending, a superb vehicle for increasing the economic 
participation and security of the working poor. The people of Africa in 
particular know that in many cases their governments do not deliver the 
health care, transportation and communication networks, education and 
training, and financial investment needed to create 21st century 
economies. They know that this must change if there is to be hope of 
economic success--of job creation, private investment, stable 
currencies, and economic growth.
    We also know and more and more of Africa's people are coming to 
know that none of this economic success is possible if we do not meet 
the challenge of HIV/AIDS. That is why I am pleased to report that 
pledges to the Global Fund to Fight AIDS, Tuberculosis, and Malaria now 
exceed $1.7 billion and continue to grow. The Fund is meeting at 
Columbia University in New York this week and is expected soon to 
announce grants to partnerships in affected countries.
    We want this Global Fund to complement national, bilateral, and 
other international efforts to fight these dreaded diseases. Strong 
congressional support will ensure that the United States remains the 
leader in this global humanitarian and national security effort.
    In our own hemisphere, Mr. Chairman, we have met with considerable 
success. Highlights have been the President's warm relationship with 
Mexico's President Fox, the Summit of the Americas in Quebec, and the 
signing of the Inter-American Democratic Charter in Lima, Peru. Now our 
focus is to create a Free Trade Area of the Americas--including, as 
President Bush has described, not only our current negotiations with 
Chile but also a new effort to explore the concept of a free trade 
agreement with Central America.
    To be sure, there are some dark clouds moving in over Latin 
America, and one of the darkest looms over Colombia where a combination 
of narco-terrorism and festering insurgency threatens to derail the 
progress the Colombians have made in solidifying their democracy.
    Our Andean Regional Initiative is aimed at fighting the illicit 
drugs problem while promoting economic development, human rights, and 
democratic institutions in Colombia and its Andean neighbors. Intense 
U.S. support and engagement has been the critical element in our 
counterdrug successes in Bolivia and Peru and will continue to be 
critical as we help our regional partners strengthen their societies to 
confront and eradicate this threat to their own democracies and to 
America's national security interests.
    But, Mr. Chairman, our counterdrug and development efforts in 
Colombia are not enough. It has become increasingly clear that our goal 
with respect to Colombia must be to help that democratic nation 
preserve and strengthen its democracy while ensuring greater respect 
for basic human rights. An end to the present conflict--peace--is 
essential to our accomplishing that goal. We must work with the 
Colombians to create the conditions where peace is possible.
    To that end, we are seeking the necessary authorities to provide 
enhanced intelligence sharing, additional training, and more 
equipment--all geared toward a security mission that is broader than 
the current counterdrug focus. We are not talking about U.S. troops 
participating in combat operations; we are talking about helping the 
Colombians secure their state and their democracy. We are talking about 
helping the Colombians fight terrorism.
    President Bush framed the issue in his meeting with President 
Pastrana last week. The President made his number one priority very 
clear: ``My biggest job now,'' he said, ``is to defend our security and 
to help our friends defend their security against terror.''
    We have made it clear and will continue to make it clear that the 
Government of Colombia must also fully commit to this task. No amount 
of additional U.S. assistance will be sufficient to turn the tide 
unless Colombia dedicates more of its own resources to this task and 
commits decisively to a policy of establishing state authority and 
effective security for its people.
    I also want to emphasize that we work with the Colombians to ensure 
respect for human rights. There is no trade off between our work with 
Colombians on human rights and elimination of the terrorist threat. Nor 
are we seeking to change the caps on the number of U.S. military and 
civilian personnel we can have in Colombia at any given time. Both of 
these concerns are still very much a part of the pattern of our efforts 
with this struggling democracy.
    Mr. Chairman, a dark cloud seemed recently to pass over Venezuela 
as well--a cloud that had been building for some time as President 
Chavez became less and less responsive to growing opposition to his 
policies, leading to increasing polarization of Venezuelan society. We 
hope that the most recent tumble of events in that country foretell a 
President much more cognizant of the demands of democracy. As President 
Bush said last week, ``if there's lessons to be learned, it's important 
that [Chavez] learn them.'' The President also said that it is ``very 
important for Chavez to embrace those institutions which are 
fundamental to democracy.''
    The Organization of American States (OAS) agreed on April 18 to 
help Venezuela regain its democratic footing. We believe there is also 
a constructive role for our own Congress--to urge the Venezuelan 
government to welcome OAS engagement and to encourage the opposition to 
join the national dialogue.
    Elsewhere in Latin America, Mr. Chairman, we have begun new 
initiatives.
    President Bush's Third Border Initiative (TBI) seeks to broaden our 
engagement with our Caribbean neighbors based on recommendations by the 
region's leaders on the areas most critical to their economic and 
social development. The TBI is centered on economic capacity building 
and on leveraging public/private partnerships to help meet the region's 
pressing needs.
    In addition to its economic provisions, the Third Border Initiative 
includes 20 million dollars for HIV/AIDS education and prevention 
efforts. This represents a two-fold increase in U.S. HIV/AIDS 
assistance to the region in just two years.
    As you are aware, Mr. Chairman, our ties to the Caribbean region 
are as much cultural and human as they are economic and political. The 
countries of the Caribbean attract millions of American visitors every 
year and the region is our sixth largest export market. Large numbers 
of Caribbean immigrants have found their way to America, including, I 
am proud to say, my Jamaican forebearers. Here people from the region 
have found freedom and opportunity and have added something wonderful 
to the great American cultural mix. But our primary goal must be to 
help ensure that the peoples of the Caribbean find new opportunities 
for work, prosperity and a better life at home.
    At the end of the day, it is difficult to exaggerate what we have 
at stake in our own hemisphere. Political and economic stability in our 
own neighborhood reduces the scale of illegal immigration, drug 
trafficking, terrorism, and economic turmoil. It also promotes the 
expansion of trade and investment. Today, we sell more to Latin America 
and the Caribbean than to the European Union. Our trade within NAFTA is 
greater than that with the EU and Japan combined. We sell more to 
MERCOSUR than to China. And Latin America and the Caribbean is our 
fastest growing export market. Clearly, the President is right to focus 
attention on this hemisphere and we will be working hard in the days 
ahead to make that focus productive, both economically and politically.
    In that regard, we have a very positive vision for a future Cuba--a 
Cuba that is free, with a strong democratic government that is 
characterized by support for individual civil, political, and economic 
rights. A Cuba in which people are free to choose their own leaders and 
to pursue their own dreams. And a Cuba that is a good neighbor to all 
in the Caribbean and in the hemisphere at large. That such a Cuba can 
exist we have never doubted--just look at the contributions Cuban-
Americans have made in our own country and you understand immediately 
what such people are capable of.
    Mr. Chairman, set against the past year's foreign policy successes 
is not just the conflict in Colombia in our own hemisphere, but several 
challenges elsewhere. In this regard, there is no question that the 
situation between Israel and the Palestinians is at the top of our 
list.
    I have just returned from the Middle East. I met with key leaders 
in Morocco, Egypt, Syria, Jordan and Lebanon, as well as with Crown 
Prince Abdullah of Saudi Arabia--and of course I met with Prime 
Minister Sharon and Chairman Arafat.
    I went to the Middle East because the President asked me to travel 
to a region in turmoil. Recent events have taken an enormous toll in 
lives lost, families shattered, economic activity frozen and mounting 
humanitarian distress.
    An additional cause of tension is the ongoing threat posed by 
attacks by Hezbollah and others across the United Nations' recognized 
Blue Line. It was for that reason I traveled to Beirut and Damascus to 
underscore the President's strong message to all parties to exercise 
restraint.
    In my consultations with our international partners during the ten 
days of my travel, and with our Arab friends and Israelis and 
Palestinians, I listened carefully and I probed hard. I found broad 
support for a comprehensive strategy as a way forward.
    The Madrid Quartet meeting, which I mentioned earlier, resulted in 
a strong declaration endorsing this comprehensive approach. In that 
declaration the United States, the United Nations, the European Union 
and the Russian Federation were united in this endorsement.
    There are three critical elements in this comprehensive strategy: 
first, security and freedom from terror and violence for Israelis and 
Palestinians; second, serious and accelerated negotiations to revive 
hope and lead to a political settlement; and third, economic 
humanitarian assistance to address the increasingly desperate 
conditions faced by the Palestinian people.
    Confronting and ending terrorism are indispensable steps on the 
road to peace. In my meetings with Chairman Arafat I made it clear that 
he and the Palestinian Authority could no longer equivocate. They must 
decide as the rest of the world has decided that terrorism must end. 
Chairman Arafat must take that message to his people. He must follow 
through with instructions to his security forces. He must act to arrest 
and prosecute terrorists, disrupt terrorist financing, dismantle 
terrorist infrastructure and stop incitement.
    Prime Minister Sharon stated his intention to complete Israel's 
withdrawal from the areas that it had occupied. He provided me with a 
time-line for the withdrawal. I stressed to the Prime Minister the 
urgency of completing withdrawal and was assured of real results in the 
specified days. I recognized the particular circumstances at the Church 
of the Nativity in Bethlehem and the Presidential compound in Ramallah, 
and I emphasized the importance of their urgent non-violent resolution.
    Improvement in the security situation, if it is achieved, must be 
linked to the second point: determined pursuit of a political solution. 
There can be no peace without security, but there can also be no 
security without peace. Only a negotiated settlement can resolve the 
conflict between Israelis and Palestinians. We must find a way to bring 
together traditional elements such as United Nations Security Council 
Resolutions 242 and 338, with new initiatives, such as my Louisville 
speech last November, U.N. Resolution 1397, and the Arab League's 
endorsement a month ago of the initiative of Saudi Crown Prince 
Abdullah.
    A number of the leaders with whom I spoke during my travel have 
expressed interest in convening a conference on the Middle East in the 
near future, a conference with international backing. As they have 
suggested, its purpose would be to restore hope, reaffirm the urgency 
of a comprehensive settlement, and resume direct negotiations in order 
to achieve that comprehensive settlement.
    At the same time we explore this initiative and other ideas to 
address the political issues, the international community must address 
the dire humanitarian problems as well as the long-term economic needs 
of the Palestinian people. During my visit to Jerusalem, I was pleased 
to announce that the United States would contribute an additional $30 
million in support of the United Nations Relief and Works Agency and 
its programs in providing health, education, relief and social services 
to Palestinian refugees. This is beyond the $80 million we already 
provide annually. We are augmenting this with emergency assistance to 
deal with the special conditions in Jenin refuge camp--tents and 
equipment to purify water and prevent the spread of disease.
    International donors will meet in Norway later this month to 
increase assistance to the Palestinian people at this time of 
exceptional need. Also, international humanitarian and aid agencies 
must have the freedom and access that they need to do their jobs. So 
this is the comprehensive approach I believe we must pursue. I left 
Assistant Secretary of State Bill Burns in the region to follow up on 
my visit. As circumstances warrant, the President is prepared to send 
DCI Tenet in the near future, to work with the parties to resume 
security cooperation between the parties. Mr. Tenet has experience in 
this from last year--experience in these kinds of organizations and 
activities--that I think will once again benefit both parties.
    Moreover, I plan to return to the region to move ahead on all 
aspects of our comprehensive approach.
    Mr. Chairman, for the Palestinian people and leaders of the 
Palestinian Authority, the question is whether violence and terrorism 
can be renounced forever and whether their sights can be set squarely 
on peace through negotiations.
    For the people and leaders of Israel, the question is whether the 
time has come for a strong, vibrant State of Israel to look beyond the 
destructive impact of settlements and occupation, both of which must 
end, consistent with the clear positions taken by President Bush in his 
April 4 speech. Israelis should look ahead to the promise held out by 
the region and the world of a comprehensive, lasting peace.
    For the Arab peoples and their leaders, the question is whether the 
promise and vision of Crown Prince Abdullah's initiative can be 
transformed into a living reality. It is important that artificial 
barriers between states fall away, and distorted and racist images 
disappear from the media and from public discourse.
    For the people and leaders of the international community, the 
question is how we can help both sides solve the deep problems they 
face.
    These are the challenges that we all face. President Bush has 
directed his administration to do what is necessary to stop the 
violence, encourage efforts toward peace, and restore the economic 
foundations of the region. Our fervent hope is that Israelis, 
Palestinians, our Arab friends, and the international community will 
also rise to this challenge.
    Mr. Chairman, with regard to other challenges in this region, Iraq 
comes next on our list. That country remains a significant threat to 
the region's stability. We are working at the United Nations and 
elsewhere to strengthen international controls on Iraq. In the last 
year, we successfully stopped the free fall of sanctions and began to 
rebuild United Nations Security Council consensus on Iraq. The UNSC 
unanimously adopted resolution 1382 in November, committing itself to 
implement the central element of ``smart sanctions'' by the end of next 
month--and I believe we are going to make it.
    This central element, or Goods Review List (GRL), identifies 
materials UNSC members must approve for export to Iraq and ensures 
continued supervision and control over dual-use goods. Its 
implementation will effectively lift economic sanctions on purely 
civilian trade and focus controls on arms, especially WMD. This will 
further strengthen support for U.N. controls by showing the 
international community that Saddam Hussein, not the United Nations and 
not the United States, is responsible for the humanitarian plight of 
the Iraqi people. We have achieved agreement with the Russians on the 
substance of the GRL and are now finalizing processes for implementing 
the list and working on a UNSC Resolution for adopting it.
    At the end of the day, we have not ruled out other options with 
respect to Iraq. We still believe strongly in regime change in Iraq and 
we look forward to the day when a democratic, representative government 
at peace with its neighbors leads Iraq to rejoin the family of nations.
    With regard to other challenges, we have a long-standing list of 
grievances with Iran, from concerns about proliferation, to that 
country's continued sponsorship of terrorism, to Iranian meddling in 
Afghanistan in a way unhelpful to the Interim Authority in Kabul. Of 
late, we have been very clear in communicating to Teheran that its 
support for terrorism must stop and that what is needed in Afghanistan 
is help, not meddling.
    If Iran renounced terrorism, if it supported the Interim Authority, 
I am convinced that we would be able to talk to Iran, that we would be 
able to have a reasonable conversation with Iranian leaders. With 
respect to the situation in Afghanistan, for example, I believe we can 
demonstrate to them that it is not in their interest to destabilize the 
government that they helped to create in Bonn. The other issues will be 
more difficult; but I do believe constructive talks with Iran on 
Afghanistan are possible.
    Mr. Chairman, let me now turn to Afghanistan and the war on 
terrorism.
    In January, I was in Tokyo to join the European Union, Saudi 
Arabia, and Japan in hosting the Afghan Donor Conference. The 
conference helped to ensure that a wide range of countries will help 
the Afghans rebuild their country. The United States pledged almost 
$297 million at the conference and others pitched in accordingly. The 
total pledged at this point is around $4.5 billion with more than $1.8 
billion for the first year.
    But the heavy-lifting with respect to Afghanistan is only just 
beginning. We have helped the Afghans remove the oppressive Taliban 
regime from their country. We have destroyed the al-Qaida network in 
Afghanistan, with American, British, and other troops fighting the 
remnants as we speak. We have made possible the delivery of 
humanitarian aid, including massive amounts of food. We have avoided 
the wholesale starvation that many predicted. Moreover, we have helped 
the people of Afghanistan establish a multi-ethnic Interim Authority in 
Kabul, led by Chairman Karzai. One of its ultimate goals is to oversee 
an agreed process, now begun with district selections of 
representatives who will help determine the composition of the Loya 
Jirgas that will lead to a broad-based Afghan government--one that 
represents all the people of the country, people of every background 
and region, women as well as men. In June the Emergency Loya Jirga will 
complete the process of creating a transitional administration, the 
next step toward our ultimate goal of a fully democratic Afghanistan.
    Many of our key allies and partners are contributing to the 
International Security Assistance Force in Kabul to help ensure a 
secure environment for Mr. Karzai to build a new Afghanistan. We want 
to do everything possible to prevent the rise of any alternative power 
to the Interim Authority and Transitional Administration, until a 
permanent government can be established and begin to take care of this 
challenge on its own.
    A budget for the Interim Authority has been established and funded. 
The Authority is beginning to meet payrolls. Police and other Afghan 
officials are being paid. Schools are opened. Reconstruction has begun, 
to include the beginning of a new national police and military. Roads 
are being opened. The United Nations, for example, recently declared 
that the road from Islamabad to Kabul, Kabul's main external lifeline, 
and the road from Kabul to Kandahar, were open to unaccompanied U.N.-
employee traffic. In other words, U.N. employees were free, and it was 
considered safe for them, to travel unaccompanied on those roads. 
Refugees are returning in record numbers. And indeed, the former King 
of Afghanistan returned for the first time in 30 years last week.
    Much remains to be done and admittedly a lot of what remains will 
be difficult to accomplish. But we believe that at long last 
Afghanistan is on a positive track.
    Mr. Chairman, I know that you are aware of the nature of the 
challenge we confront in Afghanistan. You understand what is needed to 
reconstruct this country and that foremost of all what is needed is a 
long-term commitment by the international community. If we can ensure 
such a commitment, and if we can achieve proper accountability in the 
use of the donor funds, then I believe there is a good chance of making 
significant progress in bringing a new future to Afghanistan--and 
ending the days of warlordism and political chaos that bred the Taliban 
and made a fertile ground for terrorists. And as reconstruction begins 
in Afghanistan, the war against terrorism continues. As President Bush 
said in his State of the Union Address, ``What we have found in 
Afghanistan confirms that, far from ending there, our war against 
terror is only beginning.'' The administration is working together in 
new ways never before envisioned. And that's what this effort is going 
to require. FBI, CIA, INS, Treasury, State, the Attorney General and 
Justice Department, and others, are all coming together. This campaign 
is transnational, cross-border, even global in a way we have never 
contemplated.
    We are operating in several areas right now. For example, in Yemen 
we are working with President Ali Abdallah Salih to uproot the al-Qaida 
network there. In the Philippines, we are working with President Arroyo 
to assist that country in combating its terrorists, the Abu Sayyaf--who 
as you know hold two American citizens as hostages.
    We are also deploying a small force to Georgia to assist President 
Shevardnadze in getting a handle on a tough area in his country--an 
area that has spawned and harbored terrorists in the past. These troops 
will help train and equip Georgian forces in counterterrorism 
techniques and methods.
    With respect to any new major use of military force in the war on 
terrorism, we have not made any recommendation to the President and the 
President has made no decision as yet with respect to such use of 
force. But there are many other actions that are taking place--actions 
of a law enforcement, political, diplomatic, financial, and 
intelligence-sharing nature.
    Mr. Chairman, as I said earlier a sizable portion of the 
President's budget request is dedicated to these counterterrorism 
efforts, as you will see as I turn to the specific priorities of our 
budget request for Foreign Operations.
    The President's fiscal year 2003 request for Foreign Operations is 
a little over $16.1 billion. These dollars will support the continuing 
war on terrorism, the work we are doing in Colombia and the Andean 
region at large, our efforts to combat HIV/AIDS and other infectious 
diseases, essential development programs in Africa, the important work 
of the Peace Corps and the scaling up of that work, and our plan to 
clear arrearages at the Multilateral Development Banks, including the 
Global Environment Facility.
                            war on terrorism
    To fight terrorism as well as alleviate the conditions that fuel 
violent extremism, we are requesting an estimated $5 billion. In 
addition to the initiatives outlined in our budget request for the 
State Department and Related Agencies, this funding includes:
  --Foreign assistance--$3.6 billion for economic and security 
        assistance, military equipment, and training for front-line 
        states and our other partners in the war on terrorism. This 
        includes--
    --$3.4 billion from Foreign Operations accounts such as the 
            Economic Support Fund, International Military Education and 
            Training, Foreign Military Financing, and Freedom Support 
            Act.
    --$88 million for programs in Russia and other states of the former 
            Soviet Union to reduce the availability to terrorists of 
            weapons of mass destruction. Ongoing programs engage former 
            weapons scientists in peaceful research and help prevent 
            the spread of the materials expertise required to build 
            such weapons.
    --$50 million to support the International Atomic Energy Agency 
            (IAEA) in activities designed to counter nuclear terrorism 
            and implement strengthened safeguards; and $15 million to 
            allow us to respond quickly and effectively to 
            unanticipated or unusually difficult non-proliferation 
            projects or opportunities.
    --$69 million for counterterrorism engagement programs, training, 
            and equipment to help other countries fight global terror, 
            thereby strengthening our own national security.
    --$4 million for the Treasury Department's Office of Technical 
            Assistance to provide training and other necessary 
            expertise to foreign finance offices to halt terrorist 
            financing.
    And Mr. Chairman, in the fiscal year 2003 budget request there is 
approximately $140 million available for Afghanistan, including 
repatriation of refugees, food aid, demining, and transition 
assistance. I know that President Bush, the Congress, and the American 
people recognize that re-building that war-torn country will require 
additional resources and that our support must be and will be a multi-
year effort. Moreover, as I said earlier, we do not plan to support 
reconstruction alone and we will seek to ensure that other 
international donors continue to do their fair share.
    At the Virginia Military Institute last week, President Bush made 
very clear what he wants to do for Afghanistan. The President told his 
audience of eager cadets that one of their own, General George C. 
Marshall, had helped ensure that a war-ravaged Europe and Japan would 
successfully recover following WWII. Now, today, Europe and Japan are 
helping America in rebuilding Afghanistan. The President said that ``by 
helping to build an Afghanistan that is free from evil and is a better 
place in which to live, we are working in the best traditions of George 
Marshall.'' And so we are.
    It will be a long, hard road. We know it. But like General Marshall 
we also know that we must do it. And the international community knows 
that it must help.
                     andean counterdrug initiative
    We are requesting $731 million in fiscal year 2003 for the multi-
year counter-drug initiative in Colombia and other Andean countries 
that are the source of the cocaine sold on America's streets. ACI 
assistance to Andean governments will support drug eradication, 
interdiction, economic development, and development of government 
institutions. In addition, the Colombians will be able to stand up a 
second counterdrug brigade. Assisting efforts to destroy local coca 
crops and processing labs there increases the effectiveness of U.S. law 
enforcement here.
    In addition to this counterdrug effort, Mr. Chairman, we are 
requesting $98 million in FMF to help the Colombian government protect 
the vital Cano Limon-Covenas oil pipeline from the same foreign 
terrorist organizations involved in illicit drugs--the FARC and the 
ELN. Their attacks on the pipeline shut it down 240 days in 2001, 
costing Colombia revenue and disrupting its economy, and causing 
serious environmental damage. This money will help train and equip the 
Colombian armed forces to protect the pipeline. These funds begin to 
apply the policy change I referred to earlier; that is, the shift from 
a strictly counterdrug effort to a more broadly based effort targeted 
at helping Colombia fight the terrorists in its midst as well as the 
drugs.
                       global health and hiv/aids
    In fiscal year 2003, we are requesting $1.4 billion for USAID 
global health programs. Of this amount, we are requesting $540 million 
for bilateral HIV/AIDS prevention, care, and treatment activities, and 
$100 million for the Global Fund to Fight AIDS, Tuberculosis, and 
Malaria, to which I referred earlier. All of this funding will increase 
the already significant U.S. contribution to combating the AIDS 
pandemic and maintain our position as the single largest bilateral 
donor. I should add that the overall U.S. Government request for 
international HIV/AIDS programs exceeds one billion dollars, including 
$200 million for the Global Fund.
                            the peace corps
    All of you heard the President's remarks in his State of the Union 
address with respect to the USA Freedom Corps and his objective to 
renew the promise of the Peace Corps and to double the number of 
volunteers in the Corps in the next five years. We have put $320 
million for the Peace Corps in the fiscal year 2003 budget request. 
This is an increase of over $42 million over our fiscal year 2002 
level. This increase will allow us to begin the scaling up that the 
President has directed. We intend that the Peace Corps will open 
programs in eight countries, including the reestablishment of currently 
suspended posts, and place over 1,200 additional volunteers worldwide. 
By the end of fiscal year 2003 the Peace Corps will have more than 
8,000 volunteers on the ground.
                              mdb arrears
    The fiscal year 2003 request includes an initiative to pay one 
third of the amount the United States owes the Multilateral Development 
Banks (MDBs) for our scheduled annual commitments. With U.S. arrears 
currently now totaling $533 million, the request would provide $178 
million to pay one third of our total arrears during the fiscal year. 
The banks lend to and invest in developing economies, promoting 
economic growth and poverty reduction and providing environmental 
benefits. We need to support them.
    Mr. Chairman, in addition to what I have given you with respect to 
the President's budget request for fiscal year 2003, I want to give you 
the main priorities for our supplemental request for fiscal year 2002.
    But first let me tell you how grateful we are at the Department for 
the efforts of this subcommittee and the House subcommittee to get us 
the $1.5 billion in crucial Emergency Response Fund foreign operations 
funding to address the immediate post-September 11 needs. That was just 
the start though.
    We are asking for $1.6 billion supplemental funding for fiscal year 
2002. This amount includes $322 million for the Department. These 
dollars will address emergent building and operating requirements that 
have arisen as a result of the September 11 terrorist attacks, 
including reopening our mission in Kabul, Afghanistan; reestablishing 
an official presence in Dushanbe, Tajikistan; and increasing security 
and personnel protection at home and abroad.
    That leaves about $1.3 billion for foreign operations. These 
funds--added to the request we have made for fiscal year 2003 for the 
Front Line States (FLS)--are primarily to:
  --Deter and prevent acts of international terrorism
  --Provide vitally needed military equipment, training and economic 
        assistance to our friends and allies
  --Expand respect for human rights and judicial reform in the FLS
  --Provide a significant and immediate impact on displaced persons in 
        the FLS
  --Support civilian reintegration of former combatants and reestablish 
        law enforcement and criminal justice systems
  --Provide economic and democracy assistance, including help with 
        political development, health care, irrigation and water 
        management, media development, community building and 
        infrastructure improvements, and economic and civil society 
        reform.
    In addition, we have requested legislative authority in two areas. 
First, authority that will facilitate the provision of Cooperative 
Threat Reduction and Title V Freedom Support Act assistance. This 
assistance has been critically important in the dismantlement and non-
proliferation of WMD material and expertise in the New Independent 
States. Second, as I referred to earlier, we are requesting expanded 
authorities to allow support for the Government of Colombia's unified 
campaign against drugs, terrorism, and other threats to its national 
security.
    In sum, Mr. Chairman, these supplemental dollars for foreign 
operations in fiscal year 2002 will be directed at draining the swamp 
in which terrorists thrive and at insuring the long-term success of 
Operation Enduring Freedom.
    Mr. Chairman, as I told this committee last year, the conduct of 
the nation's foreign policy suffered significantly from a lack of 
resources over the past decade. I have set both my CEO hat and my 
foreign policy hat to correct that situation. But I cannot do it 
without your help and the help of your colleagues in the Senate and 
across the capitol in the House.
    I ask for your important support in full committee and in the House 
as a whole, both for the $8.1 billion we are requesting for the 
Department and related agencies and for the $16.1 billion we are 
requesting for foreign operations. In addition, I ask for your help 
with the supplemental request for fiscal year 2002. With your help, and 
the help of the whole Congress, we will continue the progress we have 
already begun.
    Thank you, and I will be pleased to take your questions.

    Senator Leahy. Thank you, Mr. Secretary.

                              AFGHANISTAN

    You referred to the President's position on a Marshall Plan 
for Afghanistan. I was looking at a New York Times editorial 
last week on Afghanistan and it refers to the President as 
having delivered a remarkable speech in which he vowed to lead 
an international effort to rebuild Afghanistan. The New York 
Times also praised his earlier speech in Monterrey, Mexico.
    As you know, I made similar comments praising the President 
for those speeches. The editorial raised two points, regarding 
Afghanistan. It said Afghanistan remains in dire need of an 
expanded international security force, something the 
administration has rejected. Second, USAID recently asked for 
$150 million in supplemental funding for humanitarian programs 
in Afghanistan. OMB approved only $40 million, saying USAID 
could not absorb more funds because the roads were unsafe and 
so on.
    Now, I agree with the President that we must do more to 
help rebuild Afghanistan. I know you do, and, I believe, 
everybody in the Congress does, as well. We cannot walk away, 
as many did after the Russians withdrew. In addition to the 
lack of funds, we are apparently not going to expand the 
peacekeeping force, even though it is going to be months before 
the Afghan army is ready to deploy. In the interim, what is our 
strategy to maintain law and order? And, with the lack of 
security in some parts of the country, how do we get aid in to 
rebuild the schools, rebuild the hospitals, and rebuild the 
basic infrastructure--projects that are vital to show the 
Afghan people that the United States is committed to improving 
their lives?
    Secretary Powell. I think we do have a solid, comprehensive 
approach to the problem, Senator. Take what we have allocated 
so far in 2002, add to that the emergency response fund 2002 
request and 2002 supplemental request, and what we are asking 
for in 2003 it comes to a total of $813 million, including $227 
million of AID funding.
    In addition, I think we have had some success at the donors 
conference in Tokyo in asking the international community to 
come forward with close to $5 billion to assist with Afghan 
reconstruction efforts, and in other conferences we have been 
working to find the funds necessary, using different donors 
lists to find the funds necessary to rebuild the Afghan 
National Army, and so I think we are off to a good start.
    The issue of the International Security Assistance Force 
(ISAF) and its size has been one that has been discussed at 
length and debated at length. The first group going in under 
the leadership of the British accomplished the mission that it 
was sent to do as a result of the Bonn conference, and that is 
to bring stability to Kabul. The Bonn conference that set in 
place the interim authority said that as appropriate and if 
necessary the ISAF could be expanded to other sites throughout 
Afghanistan.
    It is not clear that there is a pressing need in every 
other city outside Kabul for that kind of military presence. 
The real security that is going to be needed for the 
reconstruction of Afghanistan, and not just in cities, but 
throughout the countryside, is going to come from building up a 
national army, building up a border patrol, and building up a 
police force, and that is where the focus of our efforts are 
going right now. We met several times earlier this week with 
Secretary Rumsfeld and other members of the administration to 
make sure that we are putting in place with our friends and 
allies a good plan, a comprehensive plan to build up those 
organizations and institutions.
    There is not a great deal of enthusiasm in the 
international community, even if we thought it was an 
appropriate thing to do, to contribute large numbers of troops. 
Some people have said, let us get 30,000 troops and put them in 
Afghanistan, but essentially they would be sitting around in 
cities sort of looking for the right kinds of missions, and in 
fact there is not that level of support in the international 
community for that level of commitment.
    Senator Leahy. The security situation in Afghanistan is 
very complex. You have a lot of military dressed in civilian 
clothes, inter-mixed with humanitarian workers who are trying 
to distribute aid. In many cases it's very difficult to 
distinguish the humanitarian workers from some of the military 
personnel.
    I have written to Secretary Rumsfeld on this issue. This 
may seem like a minor thing, but it is actually a very 
important issue if you are the humanitarian worker out there 
trying to build a water system or some other project, and you 
are afraid someone is going to mistake you for a combatant. 
There has got to be a way of addressing this problem.
    Back to the peacekeeping issue, I agree with you. We need 
an Afghan police force. We need an Afghan army. But, we are a 
long way from being able to rely on these forces alone to 
provide security throughout Afghanistan. I am worried about 
what we do in the interim. The police and army are months away 
from being fully operational and we have some very significant 
problems to deal with before then.
    Secretary Powell. We do have some problems. We do not have 
anarchy in the country. It is a growing administration. 
Chairman Karzai faces many challenges, but I think he is off to 
a good start. The Loya Jirga will be convening in the very near 
future to put a more permanent government in place. The 
institutions are starting to be built that will be necessary to 
govern this country.
    There is instability in various parts of the country, but 
it is not the total chaos that some have suggested it would be. 
There is a U.S. troop presence in a number of places throughout 
the country. In some cases, such as in Kandahar, it is a large 
presence. In other places, it is a much smaller presence, just 
people who can be on the scene to provide some reassurance to 
the people that there is a United States or international 
presence watching what is going on, but the real key is to 
build up an Afghan army.
    No number of European troops or troops from other parts of 
the world can substitute for a national army that is 
multiethnic, that is representative of the government. That is 
the challenge that we have to meet quickly, and those units are 
now starting to be trained and will come online in the course 
of the next year or so, and that is where we really have to 
make the strongest push and make the greatest investment.
    With respect to uniformed military personnel, we are 
sensitive to the concerns that have been raised in your letter. 
I know that Don Rumsfeld is looking at identification means, 
and I am not sure how widespread a concern this is, and I am 
not sure of any humanitarian worker who truly has been put at 
risk, or injured, because of this confusion that is alleged to 
exist.

                              MIDDLE EAST

    Senator Leahy. We will continue to have a lot of questions 
on these issues. Following up on the Middle East, I am sure 
that you are aware of U.S. law that prohibits the provision of 
U.S. assistance to units of foreign militaries where there is 
credible evidence that members of these units have committed 
gross violations of human rights. Were there any violations of 
this law in the West Bank, or areas around it, during the past 
few weeks?
    Secretary Powell. Israel, in pursuing terrorists and 
undertaking the operations in recent weeks used equipment that 
is indigenous, their own equipment, but they also used U.S. 
military equipment. We are sensitive to the requirements of the 
law, and so far I have not received any reports and have not 
yet seen the need for any inquiries as to whether or not there 
has been a violation of the law.
    Senator Leahy. Well, has anybody asked that question?
    Secretary Powell. Nobody has raised it to me yet, Mr. 
Chairman, but I will go back to the Department and see whether 
or not it has been raised. It comes up on a frequent basis, and 
we examine the particular circumstances to see whether the 
equipment is being used consistent with the law, and so far we 
have not found an inconsistent use.
    Senator Leahy. If it has been used inconsistently, will you 
notify this committee?
    Secretary Powell. If something is inconsistent with the 
law, I will certainly do what the law requires.
    Senator Leahy. We also have a Vermont Palestinian family 
trying to locate several relatives who lived in Jenin. One 
blind elderly aunt was trapped in the rubble for some time, but 
was eventually saved. I will leave with your staff the names, 
if somebody with the U.S. mission to Israel could check on that 
I would appreciate it.
    Secretary Powell. We shall. I have just made a note.
    Senator Leahy. My time is up. I was told there was going to 
be a vote.
    Senator McConnell. It has not happened yet.
    Senator Leahy. But Senator McConnell, why don't you go 
ahead. If a vote does start I will slip out so we can keep it 
going.
    Senator McConnell. Mr. Secretary, the Israelis are 
understandably somewhat skeptical about the U.N. investigation 
of Jenin, particularly since there has been no effort on the 
part of the United Nations to investigate Palestinian bombings 
of Israeli civilians. I think from their point of view, since 
the partition of Palestine in the late 1940s, Israel has had a 
uniformly unsatisfactory experience with the United Nations 
time after time after time.
    I am curious as to whether or not you think the United 
Nations ought to be requested--if they are going to start the 
business of investigating military actions in this part of the 
world--to investigate the Palestinian atrocities against 
Israeli civilians as well.
    Secretary Powell. I see no reason why any atrocity should 
not be investigated by appropriate bodies, and I do not think 
anybody would suggest there could be any justification for the 
kinds of suicide bombings that we have seen that have taken the 
lives of innocent Israeli citizens.
    On its face, it is contemptible, and I think the United 
Nations has spoken in that vein, as have we, every time it 
occurs, and in this particular instance of Jenin, it was a 
situation where the whole world was focusing on it, where it 
was difficult to get in observers to take a look at what 
happened, and we were encouraging the Israeli Government to 
make Jenin accessible quickly to representatives of the ICRC or 
other organizations that would get the facts and find out what 
really happened, as opposed to these stories and anecdotes that 
were floating out there.
    Late last week, as the issue was really becoming quite 
volatile, with people now starting to get in and seeing what 
was on the ground, and realizing that something serious had 
happened, it made sense to approach this in a more systematic 
way. We had discussions with the Israeli Government. I spoke to 
Foreign Minister Perez about it when he was with me last week, 
and the Israeli Government agreed to a U.N. resolution, 
supported by the United States and the other members of the 
Security Council, that fact-finding--not an inquisition, but a 
fact-finding mission should be dispatched to find out what 
happened in Jenin and nowhere else. The resolution speaks 
strictly to Jenin.
    Since the Secretary General announced the membership of the 
group, the Israelis have expressed some concern about the 
membership and whether it is large enough to achieve its 
purpose. They wanted to make sure that it stayed on focus with 
the resolution, and it did not stray into other areas.
    I spoke to Prime Minister Sharon about that last evening, 
and understood his concerns. I conveyed those concerns to 
Secretary General Annan, and last evening Secretary General 
Annan met with the Israeli Ambassador to the United Nations and 
went over the situation. The Israelis have dispatched a team, 
coming to New York to discuss it all with the Secretary General 
and his staff tomorrow, so I think we now have both sides 
talking to one another directly to lay out their concerns.
    Senator McConnell. Well, that certainly seems like a step 
in the right direction. You have a military background, I do 
not, but it seems to me that if the Israelis were completely 
unconcerned about civilian casualties they could have chosen an 
entirely different tactic to counter terrorism. They could have 
simply wiped out the threat from the air, could they not?
    Secretary Powell. You could wipe it out from the air, but 
there was a great deal of destruction that took place from the 
ground with bulldozers. Assistant Secretary of State Bill Burns 
went in and also took a look to give us an independent 
assessment from somebody I have confidence in.
    He says there was quite a level of destruction that had 
occurred within the Jenin camp, and it seemed to be in the best 
interest of all concerned, especially the best interest of the 
Israelis, to let a fact-finding team come in and see what the 
facts are, as opposed to the kinds of coarse speculation that 
was out there as to what happened with terms being tossed 
around like massacre, or mass graves, none of which so far 
seems to be the case. That is why we think it is important to 
get a fact-finding team in.
    Senator McConnell. Yes. It seems to me if the Israelis had 
wanted to commit a massacre it would have been a lot easier to 
do it from the air and wipe everybody out. That would be my 
definition of massacre. I hope this investigation is done in an 
objective manner.
    Secretary Powell. I think it will be, and I think the 
Secretary General is sensitive to concerns that were raised 
yesterday. I know some of the individuals on the committee. I 
know General Bill Nash, an American two-star General who is the 
military person on the committee, and I am quite confident he 
will look at this with a professional eye, and a professional 
military eye, and deal with the question you raise. It would 
have been far worse if they had used air power just to 
pulverize everything and not put any of their troops at risk.
    Senator McConnell. Yes.
    Secretary Powell. They did put their troops at risk, and 23 
Israeli soldiers lost their lives in that battle. The prime 
minister and I have spoken of this, so I think it serves the 
interests of all as a fact-finding committee to go out and lay 
the facts out for the world to see.
    Senator McConnell. Thank you, sir. Do we consider Israel a 
frontline State in the war against terrorism?
    Secretary Powell. Certainly Israel has had to deal with 
terrorism perhaps more than any other country that we know of, 
but for purposes of this particular presentation, and as this 
budget proposal was structured, Israel was not included in 
here. Israel gets funds from the United States in a variety of 
other accounts, and we are always taking a look at what else 
might be done to support Israel in its time of need.
    Senator McConnell. What is the relationship these days 
between the PLO and the PA with Iran?
    Secretary Powell. We have expressed our concern in depth 
and with considerable passion to the Palestinian authority 
about the dealings they have had with Iran. It came to a head 
with the Karine A, the ship that clearly came out of Iran and 
was headed to the Palestinian authority. We pressed the 
Palestinian leadership to accept responsibility for this ship, 
to condemn those who were responsible for it, to forswear that 
activity in the future, but I cannot tell you that it has been 
forsworn, or this kind of activity is not continuing, but there 
has been a connection between Iran and the Palestinian movement 
that has produced such things as the Karine A.
    Senator McConnell. Do we have any idea how Saudi Arabia 
plans to distribute the $100 million it raised for the 
Palestinians during the recent 3-day telethon?
    Secretary Powell. It is a subject that I will be discussing 
with the Saudi officials when I am with them tomorrow down at 
Crawford with the President. We have seen some indications, and 
we have even seen an Arab newspaper, handed to me by Chairman 
Arafat, I might add, where some of the money, at least 
according to this Arab newspaper advertisement, would be going 
to elements of Hamas, so there are some troubling aspects as to 
how that telethon money would be distributed.
    Senator McConnell. Also, I understand that there are 
reports that the Embassy of Saudi Arabia here in Washington is 
buying 30-second pro-Palestinian advertisements throughout the 
United States, including, interestingly enough, in my home 
State. I am curious as to whether or not you were aware of 
this, and if so if you had any observations about it.
    Secretary Powell. I was not aware of that, and I do not 
know that I have any observations until I see what the ads are, 
since I do not know if the ads are proper, improper, 
appropriate, inappropriate, and I do not know what the ads say.
    Senator McConnell. Looking at the Palestinians down the 
road, do you have any sense of what plans there were, if any, 
toward developing some kind of functioning democracy in a 
Palestinian state that may be created sometime in the near 
future?
    Secretary Powell. They have not started, yet, to develop in 
a way that I think we would find acceptable for the kind of 
State we want to see emerge in the occupied territories. As we 
go forward, and as we find a political route forward, one of 
the essential features of our work with the Palestinian 
leadership and the Palestinian people has to be to put in place 
a representative form of government that is answerable to its 
people, that is transparent in its financial activities, that 
has an accountable government----
    Senator McConnell. If I could interrupt you, when we see 
the associates of Chairman Arafat sitting around the table with 
them, how are they chosen? Does he pick them?
    Secretary Powell. Some of them are chosen by him. Some of 
them represent heads of organizations. The ones I have been 
dealing with are for the most part his chosen associates. Some 
have positions to which they have been elected.

                                CAUCASUS

    Senator McConnell. If I could shift to another part of the 
world just for a minute. I have had an interest in the Caucasus 
for sometime, and shortly after you came to office there was 
the Key West meeting with regard to the Minsk Group, from which 
spring a little bit of optimism that maybe there would be a way 
to solve the Nagorno-Karabakh dispute. This conflict has 
strangled both countries and inhibited the ability of Armenia 
to develop normal relations with its biggest neighbor, Turkey. 
I know you have had a lot on your plate lately, and probably 
have not paid a whole lot of attention to this issue, but I 
want to ask you if anything has happened since the Key West 
meeting?
    Secretary Powell. The Key West meeting was a good meeting, 
and frankly, I had hoped to see a lot more progress since then 
than we have seen. I am disappointed that we have not been able 
to move the process further along, but we are now getting down 
to the most difficult issues, and both presidents have staked 
out strong negotiating positions, and both presidents are 
trying to make a judgment as to what they can sell to their 
people.
    What I discovered after Key West is that some of the 
commitments that were made, and some of the directions that 
were laid out, when they actually went home to see whether or 
not they could sell those at home, it turned out they were not 
ready to be sold, and they could not move forward as 
aggressively as I would have liked.
    I am encouraged, however, that both presidents continue to 
be engaged in the process, continue to look for a political 
solution, and we continue to remain engaged with the Minsk 
Group and with our own participation.
    Senator McConnell. Given the evolving and improving nature 
of the relationship between the Russians and ourselves, which I 
think is a welcomed development, do you view the Minsk process 
as a constructive way to get this solved?
    It was my earlier view that a group that consisted of the 
French, the Russians, and ourselves was probably not likely to 
produce a positive result, because I had a suspicion that the 
Russians preferred the status quo, and really did not 
particularly want the Caucasus to settle down.
    Is the evolving relationship between ourselves and the 
Russians helpful in terms of the Minsk Group as the appropriate 
process by which to go forward and achieve a settlement? In 
other words, do you think the Russians would like to see this 
thing settled?
    Secretary Powell. I think they would, and I think the Minsk 
Group has been an effective organization. At times we have 
invoked President Putin to do something and move the process 
along, at times the French president has been involved, and at 
times President Bush has been involved.
    The presidents have talked to each other over the past year 
about it, and President Bush's relationship with President 
Putin I think is strong right now, and frankly of such a 
cooperative nature that we can work together effectively with 
the Russians and the French to keep them moving along. So the 
answer is yes, I think it is a successful arrangement, and I 
think the Russians are committed to seeing progress, and that 
is certainly my impression from my many, many meetings with my 
counterpart, Foreign Minister Igor Ivanov.
    Senator McConnell. Shifting next door, Georgia seems to be 
going in the wrong direction, and I notice that it has 
certainly been discussed of late in terms of the war on 
terrorism and our own willingness to assist them. Could you 
give me an assessment of where you see Georgia these days, 
including the state of the Abkazia problem.
    Secretary Powell. I think Georgia is still in a fragile 
state. We are doing everything we can to help Georgia, 
President Shevardnadze and their military, improve their 
ability to go after terrorists who are using the Pankesi Gorge. 
There was some concern about our efforts, and people thought 
that we were trying to introduce U.S. troops into the region, 
but we are not. What we are trying to do is train Georgian 
troops so they can do a better job of dealing with that threat 
in the gorge, which is a big distraction with respect to their 
relations with Russia, and rolls into the Chechnyan problem.
    We have also made it clear, however, that we do not want to 
see any improvement of their capability, or that improved 
capability used against Abkazia. It has to be a peaceful 
solution, and is a fragile situation. We monitor it carefully. 
We talk to all the parties, the Russians and President 
Shevardnadze, we keep encouraging all sides to find political 
ways to solve these interrelated crises in the region, and it 
is another one of those accounts that we manage on a day-to-day 
basis.
    Senator McConnell. No assassination attempts on President 
Shevardnadze lately?
    Secretary Powell. Not lately, which is progress.
    Senator McConnell. I see Senator Durbin is back. I am going 
to run and vote, and I will be back.
    Senator Durbin. Thank you very much.
    Mr. Secretary, thank you for being here, and thank you for 
your continued service to our country. You do us proud. That 
comes from both sides of the aisle.
    Secretary Powell. Thank you, sir.

                              MIDDLE EAST

    Senator Durbin. We are happy to work with you.
    May I speak first to the Middle East situation, and then to 
the global AIDS crisis. The President made it clear after 
September 11 what our policy would be in reference to 
terrorism. We would consider enemies those on the other side of 
the line, those who supported terrorism and harbored terrorism.
    How, then, can we have a working relationship with the 
Palestinian Authority when there is clear evidence of support 
for terrorism, the Karine A shipment of 2,000 kilograms of C-4 
plastic explosives destined for the Palestinian Authority, all 
of the incidents which we have seen in the news, the Passover 
massacre and other incidents? How can we reconcile what was a 
clear and resolute position after September 11 with what we are 
now facing and dealing with in the Middle East?
    Secretary Powell. It is a question I put to Chairman Arafat 
some 15 days ago. I went in to see him in his headquarters in 
Ramallah. We had a long, 3-hour conversation, and what I said 
to him is that he has to make a strategic choice, that 
terrorism and violence can no longer be seen as an acceptable 
means of finding a solution to the problem of a homeland for 
the Palestinian people, and that unless he took action, and not 
just words, but took action to move the Palestinian movement in 
a new direction and start speaking to his people, and start to 
use his ability as a leader, a leader who has been magnified 
many times over the last several weeks. Rather than being 
isolated he has become the center of attention around the 
world.
    He now has to use that leadership position to move his 
people in a new direction. He has to start speaking not just in 
English, but in Arabic, condemning suicide attacks, condemning 
violence. He has done that. There is more he can do, but as I 
have said to many people, it is not what he says, it is what he 
does.
    Senator Durbin. Have you seen those actions on his part 
after 15 days?
    Secretary Powell. I have seen statements. The violence has 
gone down. There is still violence. He cannot control 
everything. I think he can still do more as a leader of the 
people. Even as we get out of this current crisis, where we 
start to see the completion of the Israeli withdrawal which the 
President has called for, and we start to try to work security 
issues again with the Palestinian and the Israeli sides, I have 
made it clear to Chairman Arafat that if we do not see deeds 
match action, there is not much more the United States is going 
to be able to do for him.
    Senator Durbin. Are you troubled that as the opinion of 
most Americans of Arafat and his policy, if not condoning, 
supporting violence and terrorism, as the opinions of most 
Americans decline in reference to Mr. Arafat, his role and 
image in the Arab world seems to be growing by the day in 
popularity. Is this creating a rift in our international 
coalition against terrorism? Is it creating a chasm, a growing 
chasm between the Arab States and sympathizers of the 
Palestinian cause with the United States?
    Secretary Powell. It has created a strategic problem for 
the United States and, if I may say so, for Israel. Israel has 
every right to defend itself against terrorism. The President 
has said that. There is no question about it.
    I talk to Mr. Sharon I would say almost every other day. I 
spend a lot of time with Prime Minister Sharon. I know what it 
is like to be a leader of the Israeli people who has to go to 
the funerals, and so I know what he is facing, and I know his 
commitment to try to achieve security for the people of Israel.
    I also know what he has said to me in every one of our 
conversations. He knows that there has to be a political 
process. He said it again yesterday when he gave his televised 
speech to AIPAC, that he hopes that as a result of this current 
crisis we are now poised to begin negotiations and get into a 
political track that will take us somewhere. But, the current 
crisis with the Passover tragedy, that bombing, and with the 
Israeli response, it started a spiral out of control with 
respect to our strategic position and our interest with the 
neighboring Arab countries. We believe that it was important 
for us to get involved, as the President did get involved on 
April 4, because the long-term consequences of not getting 
involved, or letting that situation continue, would be very, 
very destructive to our interests and to Israeli interests.
    We saw embassies that have been no problem whatsoever 
suddenly being demonstrated against, American cars being burned 
in embassy courtyards. We became troubled by the deteriorating 
situation, and that is why the President thought, end the 
operation as soon as possible.
    It took a little longer than we had hoped it would but it 
is now in the process of coming to a conclusion, and we have 
got to get back to security discussions between the two sides. 
It is our belief, and we have heard this from Prime Minister 
Sharon and from the Arab side and the Palestinian side as well, 
that we have got to find a political way forward and we also 
have to find a way to provide economic relief and humanitarian 
support, reconstruction, help, and the building of a 
Palestinian economy.
    So all of that is a part of the equation for moving 
forward.

                                HIV/AIDS

    Senator Durbin. I could continue in this line of 
questioning. There are many items that I would like to get 
into, but I really want to focus the remainder of my time on 
the global AIDS crisis.
    There are many young people who are arrayed in the back of 
this hearing room. They are waiting in the hallways. If I had 
to sit down with them and point out something that I believe is 
happening in the world today that will have a direct impact on 
their life in the United States or wherever they choose to 
live, it would certainly be the threat of terrorism, but it 
would also be the threat of this global AIDS crisis. 8,000 
people will die today somewhere in the world from AIDS, 14,000 
will be infected with AIDS for the first time.
    We are seeing the growth of this problem beyond Africa, 
which is sadly the epicenter, to India, and Russia, and Asia, 
at a pace which has to sober anyone who has studied epidemics 
that have faced the world. Kofi Annan, the Secretary General of 
the United Nations, has issued a challenge to all of the world 
to come to the aid of developing nations and underdeveloped 
nations that are suffering from this crisis and ask for a 
pledge, an annual pledge of $7 to $10 billion.
    It is natural that he would look first to the United 
States, the wealthiest and most powerful Nation in the world. 
Mr. Secretary, this year we have pledged $300 million to this 
global AIDS fund. Next year, the President asks for $200 
million, less than is being appropriated this year, and there 
is no money being requested, as I understand it, in the 
emergency supplemental for the global AIDS crisis.
    It strikes me that we are moving at a snail's pace as this 
worldwide plague gallops away from us. Do you really believe 
that the United States is commitment to this problem?
    Secretary Powell. We could do more, I think, though we 
should not be ashamed of what we have done. We took the 
leadership in this administration last year when the Secretary 
of Health and Human Services and I went to the President and 
said, this is a catastrophe, worse than terrorism where once 
every now and again you have an incident. This is every day, 
just as you describe, Senator.
    And so we got started with the $200 million, added with the 
Congress' assistance another $100 million, and now we have 
asked for another $200 million. That is for the global trust 
fund. It comes on top of roughly $514 million of bilateral 
programs we have with respect to HIV/AIDS, and it comes on top 
of billions of other dollars that are spent throughout the 
Government to find a cure for AIDS, to do education on AIDS. We 
have a lot of money going into the HIV/AIDS crisis, and $500 
million of that large pot of money is into the trust fund.
    If we could find more to put into the trust fund, or ask 
for the trust fund, when you consider the balances and the 
offsets that the President has to consider in putting together 
a budget, I would support it.
    Senator Durbin. I would say, Mr. Secretary, that Senator 
Specter and I have offered an amendment to the supplemental for 
$700 million more committed to multilateral and bilateral 
efforts on AIDS as an emergency appropriation. I just cannot 
think of money that we could spend more wisely than to try to 
stop the pace of this epidemic.
    I think the American people understand this, too. This is 
not a problem in some other part of the world. This is a 
problem of our world, a problem that is sadly an airline flight 
away from being delivered to the United States every hour of 
every day, and I hope that we can have the support of the 
administration for $700 million.
    Secretary Powell. Yes, I will pass that on to my colleagues 
downtown and see what we can do as it comes through, but I 
could not agree with you more, sir. We need to get on 
education, we need to get on treatment, we need to get on cure, 
we need to educate our youngsters as to how to protect 
themselves.
    I am a great believer in abstinence programs. My wife and I 
have been championing those programs. I am also a believer in 
protecting oneself, and you may have noticed I got into a 
little trouble recently over this issue, but that is all right.
    Senator Leahy. Not from most of us, Mr. Secretary.
    Secretary Powell. It was interesting, we were also doubling 
the purchase of condoms within the Agency for International 
Development this past year to help those nations overseas who 
are struggling, because you have got to hit it on all fronts. 
You cannot stick your head in the sand and avoid the plain fact 
of the matter 8,000 people a day are dying, and we can do 
something about it, and we ought to do something about it. We 
are, and we can do more.
    Senator Durbin. Thank you. Let me close by just saluting 
you for your statements on MTV which drew some criticism, as 
Senator Leahy said, not from us, those of us who believe you 
have taken the right approach, abstinence first, but protection 
is critical, too.
    Secretary Powell. You ought to see the rest of the MTV 
piece. It is quite good.
    Senator Durbin. Thank you very much.
    Senator Leahy. I watched with disappointment. I thought you 
were going to sing. I was told by those who have heard you sing 
that you do it pretty well.
    Before I go to Senator Reed, let me just underscore what 
Senator Durbin has said. AIDS and infectious diseases are an 
enormous problem, and we can and should do a great deal more. 
As Senator Durbin pointed out, extremely dangerous infectious 
diseases, such as the Ebola plague, are only an airplane trip 
away from the United States.
    With respect to AIDS, I would note for the record I met 
with you, Senator Frist, President Bush, Kofi Annan, and Tommy 
Thompson down at the White House on this critical issue. While 
that was a closed meeting, I think I give away nothing by 
saying that you were very strong on the need to do more. I have 
also praised President Bush for saying we need to do more. I 
think we can.
    The pieces are slowly coming together, but only because I 
think the world is awakening to the fact that AIDS is such a 
horrendous problem. We could literally have countries 
disappear. We now have a situation in some countries where you 
have only the very young or very old, with practically nobody 
in between. The whole structure breaks down.
    Secretary Powell. Allow me to just expand on that point, if 
I may. It became so obvious to me shortly after I became 
Secretary that the HIV/AIDS and infectious diseases crisis was 
not just a health problem, it was a democracy problem, it was 
an economic problem, it was a social problem, it was a cultural 
problem.
    How can we talk about democracy and gee, let us have free 
market activities in your country, when whole generations of 
income-producers were being destroyed, were dying, leaving 
their parents behind and children who were infected, but the 
middle was gone. How could you talk about development when 
there are countries which as a result of the HIV/AIDS crisis 
have seen their life expectancy drop from something like 55 or 
60 down to 44 in a matter of a few years?
    It is a catastrophe far worse by orders of magnitude than 
any other catastrophe or problem or crisis we have on the face 
of the earth right now.
    Senator Leahy. Thank you, and as I said, I have no doubt 
about your own commitment to it. I have heard you not only in 
the public domain, but I have heard you in the private meetings 
with the President and others where you have been very strong 
on that.
    And Senator Reed, I apologize for stepping in. I appreciate 
your courtesy in letting me do that.

                              CENTRAL ASIA

    Senator Reed. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary. Let me commend you for your courageous efforts in 
the Middle East. You changed the momentum, which was headed not 
only in the wrong direction, but with increasing violence, 
perhaps irredeemable, but thank you for what you have done.
    Let me shift away from there for a moment, though, to 
Operation Enduring Freedom, and more particularly Pakistan. The 
Pakistan Government has been extraordinarily helpful to us. 
President Musharraf has been very courageous in many different 
ways, but there are increasing reports that Al Qaeda elements 
are finding refuge in Pakistan. There are tribal areas 
apparently that the government does not control.
    The concern I have is that, despite the successful military 
operations in Afghanistan, if a sanctuary exists, Al Qaeda will 
find it, reconstitute themselves, and attack us again. Could 
you comment upon efforts to work with the Government of 
Pakistan to deny sanctuary to any of these elements?
    Secretary Powell. We have been working with the Government 
of Pakistan on this issue. President Musharraf has been 
forthcoming. As you noted, Senator, these are tough areas, and 
it is not just a matter of going in and occupying them by 
military forces. It takes intelligence work, it takes liaison 
work, and President Musharraf has been quite forthcoming, more 
so than people might have expected at the beginning of this 
campaign with respect to what he is willing to do and how he is 
willing to cooperate with us. Some of the things we do not 
discuss and, frankly, the military piece of this I would leave 
to Secretary Rumsfeld or the Chairman of the Joint Chiefs of 
Staff to discuss with you.
    Senator Reed. Thank you, Mr. Secretary.

                                COLOMIBA

    Mr. Secretary, turning to Colombia, we recognize there the 
situation is deteriorating. This peace march over the last 
weekend was organized by a professor at the University of Iowa, 
Bernard Lafayette, who was temporarily detained, as a Governor 
of the province detained, as a presidential candidate detained. 
All of this is asking us and forcing us to reconsider 
restrictions that we placed on the use of American equipment 
and the number of American personnel, but I think we would be 
ill-advised to open it up carte blanche. Are you going to 
propose changes and new conditions that might be employed to 
accompany our military equipment?
    Secretary Powell. No, sir, I do not know that we have any 
need for new conditions or anything that would restrict our 
ability to conduct our programs the way we have been conducting 
them.
    Senator Leahy made a point in his opening statement with 
respect to human rights and other issues, and we will continue 
to apply those requirements of the law that the Senator and 
you, sir, are so familiar with on human rights abuses, and 
everything that has been directed in previous bills and 
legislation we will continue to comply with. We are not trying 
to get out of them.
    Senator Reed. As I understand, the American equipment can 
be used only for the counternarcotics battalions.
    Secretary Powell. American equipment was provided to the 
counternarcotics battalion because of the end of the safe haven 
program, and we are looking for flexibility with respect to how 
that equipment and how those units can be used, and how our 
support can be used, since the merger between narcotrafficking 
and insurgency activity is becoming blurred, but we are not 
looking for any means by which or any opportunity to send U.S. 
troops into active combat.
    Senator Reed. I understand that, but the template that we 
have used to define the use of this equipment and the use of 
American trainers has been restricted to the counternarcotics 
battalion. You have indicated that you are exploring a 
different----
    Secretary Powell. We are requesting in the supplemental, I 
think is the vehicle we are now using, to remove some of the 
barriers that exist between what we can do for narcotrafficking 
and what we think we now need to be able to do to fight the 
insurgency.

                                 RUSSIA

    Senator Reed. Let me raise a question with respect to 
Russia, who is emerging as a close collaborator on so many 
different initiatives. The administration is asking for waiver 
authority for the comprehensive threat reduction program, which 
suggests that there is a difficulty of meeting some of the 
certification requirements. Could you elaborate the 
difficulties certifying?
    Secretary Powell. We need more information from the 
Russians. I received a rather lengthy document yesterday that 
answers a number of the questions that we put to them. I have 
not had a chance to analyze it, but my staff is looking at it 
now. But until we are able to provide the appropriate 
certifications, we would like waiver authority, because we 
would not like to stop supporting this kind of activity, and we 
are pressing the Russians on it. They know the importance of 
getting us the information we need.
    Senator Reed. If I can raise another issue which we have 
spoken about before, Mr. Secretary, and that is the status of 
Liberians here in the United States. Many are here on a 
deferred enforced departure ruling which every year must be 
reviewed and extended with the cooperation of Secretary of 
State and the Attorney General, and I would hope that we could 
reach some type of permanent solution.
    Many of these people have been here for 10 years or more. 
They have become part of our community, and rather than having 
the annual last minute nail-biting exercise to see if DED will 
be extended, I would hope that we could work on a more 
permanent solution and, certainly, if we do not reach one by 
the end of this fiscal year, extend DED, and I would like to be 
able to work with you on that, Mr. Secretary.
    Secretary Powell. Well, thank you, Senator. I look forward 
to working with you, and let me take a look at it and provide a 
more comprehensive answer for the record.

                              NORTH KOREA

    Senator Reed. Finally, let me just raise one other issue. 
The policy towards North Korea. Having a big stick hopefully 
allows you to employ other means, rather than using the big 
stick, and we certainly have been using a big stick on North 
Korea. In the last few days, there seems to be some indication 
that they have responded by at least initiating a more serious 
discussion with the South Koreans, an indication that they 
might be quite willing to talk substantively. Are you following 
that up aggressively?
    Secretary Powell. Yes, we are. We do not step back in the 
slightest from the President's description of North Korea. We 
believe it is a regime that is not serving its people well, but 
at the same time, the President made it clear that we were 
willing to talk to them any time, any place, and without any 
preset agenda.
    It took the North Koreans a while to absorb our position 
and reflect on it, and when the South Korean minister went up 
to Pyongyang recently and was able to restart discussions 
between North and South, he also came back with a message that 
the North Koreans might be prepared to begin a dialogue with us 
again, and so we will be following up on that, and do not have 
any meetings scheduled yet, but we took serious note of this 
apparent change in attitude and we will be following up on it.
    The President's policy is one of firmness, but at the same 
time a willingness to talk any time, any place.
    Senator Reed. Thank you, Mr. Secretary. Thank you, Mr. 
Chairman.
    Senator Leahy. Thank you, Mr. Secretary, and Senator 
Bennett.
    Senator Bennett. Thank you, Mr. Chairman, and Mr. 
Secretary, let me thank you for the commitment that you have 
renewed here today to deal with Congress as a full partner. I 
appreciated the breakfast that we had with you yesterday, your 
willingness to be as candid as you were, and I commend you for 
your willingness to do that, and personally thank you, because 
it is enormously helpful--
    Secretary Powell. Thank you, Senator.

                EFFECTIVENESS OF U.S. FOREIGN ASSISTANCE

    Senator Bennett [continuing]. To those of us who have to 
face the press and our constituents and try to make some sense 
out of what is going on. We pretend that we can, and time spent 
with you empowers us to do it more effectively.
    I would be replowing old ground if I talked about the 
Israelis and the Palestinians. I think the other members of the 
committee have gone through that adequately. I would just note 
that since your trip there, there have been no more suicide 
bombers and, since your trip there, there seems to be some 
degree of settling down, and I would hope there is a cause-and-
effect relationship and applaud you for what you did there.
    I want to move into another area altogether, which is the 
more traditional area of this committee, foreign aid and its 
use around the world, and I note that many commentators have 
raised the mathematical measure of where the United States is 
in terms of percent of GDP compared to other countries. I 
consider that a completely meaningless kind of measure, but the 
measure that I look for as a former businessman, to put it in 
businessman's terms, is return on investment.
    I am less concerned with how much money we put in than I am 
with what kind of return we get on that investment, and trying 
to coin a phrase, I am more interested in movement than 
monument. That is, instead of going to these countries, as we 
do as we travel, and have someone take me out to say, look at 
what AID money bought, I want to say, well, that is a nice 
monument to American generosity, but what kind of movement has 
there been as a result of that investment towards stability and 
prosperity, because I found that even if a country is what we 
would call dirt poor, if there is a movement towards some 
prosperity, they feel pretty good about it.
    We look at them in absolute terms and we say, this country 
is terrible, but it is better than it was yesterday as a result 
of what we did, and that movement is the greatest bulwark 
against terrorism and other kind of mischief. If there is no 
hope, if there is no sense that we are moving forward, then no 
amount of money and no number of monuments can help solve that 
problem.
    Would you comment on areas of the world where you think we 
are using our AID money intelligently to get movement, rather 
than the kind of statistics we get from the AID folks, who love 
to stand here and total up all the monuments they have built?
    Secretary Powell. Well, I hope the answer is everywhere.
    Senator Bennett. So do we all.
    Secretary Powell. Yes, but I can tell you that under 
Administrator Natsios' leadership, I brought AID more closely 
into the senior leadership councils of the State Department. 
Andrew Natsios is at my staff meeting every single morning, so 
I now know what is going on at AID.
    And when you also look at what we are trying to do with the 
millennium challenge fund that the President announced just 
before Monterey, that additional $5 billion a year when it 
becomes a steady state representing a 50-percent increase, in 
all of our discussion about that millennium challenge fund, and 
in my discussions with Administrator Natsios about where we are 
going, it really goes to the heart of your question, and that 
is, we want to start investing in those countries and those 
places in the world that have made a commitment to democracy, 
to market reform, to market economics, to transparency, to the 
rule of law, to the end of corruption, so that the money is not 
going down a hole.
    I will give you the example of Afghanistan. We had a debate 
in the Department not long ago about how AID was spending its 
money, and somebody wanted AID to build a bridge in 
Afghanistan, and the bridge would have cost a lot of money, and 
we did not do it. Andrew Natsios was insistent that it is more 
important for us to build mud brick houses and mud brick 
schools than it is to build a nice, very expensive bridge that 
would eat up half the money that was available.
    Let somebody else go build a bridge. We are going to do 
things that touch the people directly, and start to invest in 
those things that give us movements and not monuments, schools, 
hospitals, clean water, health care, things that give people 
hope and start to give people the means by which they can reach 
up and become part of the 21st Century world, the 21st Century 
economy.
    One impression I have gathered over the years, and really 
over the past year since I have been Secretary of State, is 
that there is this lag between becoming a democracy and seeing 
the benefits of becoming a democracy. We had an election, isn't 
this wonderful. We have a new president, and he is accountable, 
she is accountable, and will be reelected every couple of 
years, and we have a legislature. Good. When do the good times 
start? When does the big PX open?
    Senator Bennett. If I could interrupt you, I have a friend 
who traveled in an Eastern European country after the Berlin 
Wall came down, and noticed a particular slogan over and over 
again painted on the walls, and he asked his guide, he being 
not fluent in the language, what does that mean, and the guide 
just kind of brushed him off, and he kept at it until finally 
the guide said, well, that says you cannot eat freedom.
    Secretary Powell. Exactly, and so freedom----
    Senator Bennett. They were not that thrilled about 
democracy.
    Secretary Powell. They were not that thrilled about 
democracy, because everybody said, especially you Americans, it 
is going to be wonderful, but it is not wonderful if it does 
not put food on my table or a roof over my head, or an 
education for my children, and the longer the gap between the 
beginning of a democratic tradition in the country and the 
results, the bigger the problem you have, and the more fragile 
the democracy is and will remain.
    So our development programs, AID and everything else we do 
in the Department, has to be focused on getting this group of 
people ready to take advantage of the economic opportunities 
and political opportunities that come from democracy. That 
means infrastructure, education, teaching them how to use 
computers and teaching them how to make better use of their 
land for agricultural investments, new genetic seed and all 
kinds of things, but speeding them up, speeding up their 
development so that democracy does pay off,and if we do not do 
that, we are in trouble.
    We had a conference at the Department yesterday, to show 
you how we are hitting this every way we can. We took advantage 
of the Sub-Saharan African nations being in town to have a 
conference on sovereign credit ratings, and I had to speak at 
it. I first had to ask my staff what does that mean, sovereign 
credit ratings, and it was very simple: teaching these 
countries how to apply for a credit rating in Moody's Rating, 
so that somebody will invest in these countries and start to 
put in place private investments on some secure credit basis so 
that they can start to generate economic activities in these 
countries.
    So it is our aid programs. It is such things as teaching 
countries how to get a credit rating so somebody will invest in 
their country, because if you have an aid program that teaches 
youngsters skills, you had better have the investment to create 
a place where these skills can be applied. We have to look at 
this in a far more comprehensive way than we have in the past. 
Lecture them on democracy, teach them about market economics, 
use our AID programs to invest in the infrastructure to bring a 
new generation of young people up so that they can take 
advantage of economic openness in the global marketplace and 
then at the same time making sure that we teach these countries 
about the need for transparency and openness in their systems, 
so that they can get a credit rating so that someone will 
invest in their country.
    There is nothing worse than having democracy and people you 
have educated, and no economic opportunity for them. They will 
soon fall out of love with democracy.
    Senator Bennett. Thank you, Mr. Chairman. I see my time is 
up.
    Senator Leahy. I do not think you are going to find anybody 
who is going to disagree with you on that statement, along with 
a democracy is some hope for the future, build up a middle 
class, let people have a stake in stability, is what you really 
need.
    Senator Specter.

                              MIDDLE EAST

    Senator Specter. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for going to the Mideast. You took 
on mission impossible, and I think you made some progress.
    Secretary Powell. Thank you, sir.
    Senator Specter. On the issue of Jenin, with the widespread 
claims that there was a massacre there, I know that factually 
there has been a determination that there are no mass graves. I 
know you have your Assistant Secretary Burns on the scene, who 
has been there. Are you in a position to confirm that in fact 
there was not a massacre at Jenin?
    Secretary Powell. As I mentioned to the committee earlier, 
Assistant Secretary Burns was there last Friday for 3\1/2\ 
hours. He saw no evidence of a mass grave. He saw no huge cache 
of bodies.
    Clearly, people died in Jenin, people who were terrorists 
died in Jenin, and in the prosecution of that battle innocent 
lives may well have been lost, but I do not know the right 
answer. I do not know the real answer. Neither did Assistant 
Secretary Burns. He just had 3\1/2\ hours of looking at it. 
That is why we thought it was important to get an independent 
fact-finding group in there, and that is the resolution that we 
supported in the United Nations last Friday, and the Israeli 
Government also supported that resolution.
    There has been some controversy in the last 24 hours about 
the terms of reference of the fact-finding group and the 
membership of the fact-finding group.
    Senator Specter. I do not want to put you off, but I have 
to get to a number of questions in just 7 minutes.
    Secretary Powell. I just wanted to make the point that I 
have talked to Prime Minister Sharon about it. He is sending a 
team over to talk to Kofi Annan so that we can put this fact-
finding group in the right frame of mind to do their work.
    Senator Specter. I was here at the outset of your 
testimony, but had to leave for other committee assignments. 
What you are, in effect, saying is that there are no mass 
graves. There are people killed.
    Secretary Powell. I am saying that I have seen no evidence 
of such a mass grave. Since I am not there, and I have not 
conducted an investigation, I cannot tell you what might be 
there, but right now, I have seen no evidence of mass graves, 
and I have seen no evidence that would suggest a massacre took 
place.
    Senator Specter. Well, I think that is an important 
statement to make, no evidence of a massacre. I think that is 
an important statement to have out at this time.
    Mr. Secretary, thank you for hosting us at breakfast 
yesterday. I want to raise just for a moment the issue of 
Egypt's cooperation. There is a sentiment growing in the 
Congress of concern about our approximately $2 billion a year 
to Egypt for more than 2 decades, approximating now $50 
billion. President Mubarak was in the Foreign Relations room a 
few weeks ago, was asked a lot of hard questions, and frankly 
did not give good answers.
    One of the issues was that one of the leading Cairo 
newspapers had written that the United States had dropped food 
in Afghanistan designed to injure, to sicken, and to hurt the 
people there. Now, if that happened in the United States, we 
know about freedom of the press. When it happens in Egypt on a 
newspaper reputedly closely controlled by the government, that 
is a real question.
    It has been a very, very cool peace with Israel, and I know 
that Egypt has not severed diplomatic relations with Israel, 
which is all to the good. We know the tremendous pressures that 
President Mubarak is under with Muslim fundamentalism and the 
assassination of his predecessor, Anwar Sadat, however I think 
there ought to be a little notification here that we expect a 
little more from Egypt on assisting United States goals.
    Secretary Powell. I have been disturbed with some of the 
statements that have been made in the Egyptian press from time 
to time, and particularly some characterizations of me. I have 
taken this up directly with the Egyptian authorities, and 
directly with President Mubarak. I think they should not have a 
government-controlled press, and I believe in freedom of the 
press, but when press is under some government control, and 
that freedom is abused with the most scurrilous kinds of 
falsehoods, not for the purpose of informing but for the 
purpose of inciting, then we should call it to the attention of 
the Egyptian Government, and we do.
    At the same time, I think that the investment we have made 
in Egypt over these many years has served the intended purpose 
of achieving a peace agreement between Egypt and Israel, one 
that has held. Egypt has been a great friend and supporter of 
the United States over the years, and even in this time of 
difficulty over the last several weeks, when there was enormous 
pressure on Egypt to take action against Israel, it did not, 
with respect to breaking relations and things of that nature. 
They have been very supportive and cooperative of my efforts.
    Senator Specter. Well, I just think they ought to know that 
the natives are restless.
    Secretary Powell. I thank you for that, and I will 
communicate it.

            ANTI-NARCOTICS EFFORTS IN THE WESTERN HEMISPHERE

    Senator Specter. On the subject of $731 million for the 
Andean counterdrug initiative, this is something that we have 
all been working on for a long, long time, and from what I have 
seen, when there are changes in crops in Colombia, they move to 
Bolivia or to Peru. We brought out the military, and we have 
never had any real success in cutting back on the importation 
of drugs.
    My thought has been that we ought to be upping the 
proportion--now it is about two-thirds on so-called supply, 
one-third on so-called demand, about 63-37 percent--and that we 
could do more with those dollars on education and 
rehabilitation. That comes in the context of an effort to 
utilize Cuba's willingness to have us cooperate with them on 
their air lanes and their sea lanes.
    I have introduced a couple of amendments which have come 
through this subcommittee, and they have been either eliminated 
or watered down very much in the House of Representative 
because of the very strong anti-Castro political sentiment 
there. Without getting involved in that embroglio, it seems to 
me that when President Castro makes an offer, and he did it 
directly to a group that I was with, that we can use their sea 
lanes and their air lanes to interdict drugs, we ought to be 
taking him up on it.
    Secretary Powell. Senator Specter, on the demand side I 
could not agree with you more on the problem, educating 
youngsters in America and not-so-youngsters in America to stop 
using drugs, and to recognize the destructive nature of this 
habit both for their own lives and for our society, and the 
destructive effect it has on other societies, Colombian society 
and others.
    The Andean initiative was designed to be a comprehensive 
solution, not just in Colombia but in the other nations as 
well, so that we did not just push the problem from one jungle 
to another jungle.
    With respect to the Cuban offer, I frankly have not 
examined it, and I have not studied your amendment, I regret to 
say, and I will be glad to take a look at it. But as you know, 
Castro seldom just hands you something that you want to pick up 
at first glance.

                              MIDDLE EAST

    Senator Specter. Mr. Chairman, I have one more question, if 
I might.
    Senator Leahy. Go ahead, because--I want to get a chance to 
ask questions before I go vote, but go ahead.
    Senator Specter. Mr. Secretary, the issue of the 
international conference appears to be the best alternative 
around at the moment, and picking up again on something we 
discussed at breakfast yesterday, it would be my hope that your 
leadership and the President's leadership would bring some of 
the so-called moderate Arab States to the conference table, 
such as King Abdullah of Jordan, King Mohammed of Morocco, 
Crown Prince Abdullah of Saudi Arabia, and President Mubarak 
who is always a force. Although we have had grave, grave 
difficulties in dealing with Chairman Arafat and there is so 
much distrust because of the evidence that he has personally 
participated in paying off terrorists in the Iranian arms 
shipment, it may be that he will have to be at a conference. 
However, whatever he signs will be in disappearing ink, and 
what we ought to do with our very best efforts, it seems to me, 
is to try to get those other parties to be participants, 
signators, and perhaps guarantors, so that what is agreed to 
will be carried out.
    Secretary Powell. The President has not yet decided on a 
conference as I mentioned to you yesterday morning, but we are 
certainly looking at it, and there seems to be a great deal of 
interest in the international community and among the parties 
for such a conference at a regional or international level.
    In our preliminary thinking about such a conference, if one 
was held, the same point occurred to us, that the Arabs have to 
play a more aggressive role than they might have otherwise, and 
not only for the reasons you mentioned, but to push forward and 
to put substance behind the declaration that came out of the 
Arab summit calling for an agreement between Israel and all the 
Arab States that would normalize relations and recognize 
Israel's right to exist, and no longer be threatened by any 
Arab State.
    So if they believe that, and they want to begin negotiating 
on that basis, then they pick up added responsibility for 
Palestinian action and the action of any Palestinian leader in 
the achievement of that vision.
    Senator Specter. Thank you very much, Mr. Secretary, and 
thank you for the very good job you are doing.
    Secretary Powell. Thank you, Senator.
    Senator Leahy. Mr. Secretary, we were talking about Cuba 
earlier. I happen to agree with those who say that we should be 
working with Cuba on drug interdiction. Some of the countries 
to which we provide counter-narcotics assistance have worse 
records on a range of issues.

                                COLOMBIA

    But let us talk about Colombia. I am not quite sure I 
understand the goals. I know we have spent about $2 billion on 
a counter-narcotics program in Colombia. I want to know what 
our objectives are, as they seem to be constantly changing.
    Is it to defeat the FARC, and certainly they are committing 
terrible atrocities. Or is it to defeat the paramilitaries who 
have been involved in some of the most egregious human rights 
violations and are rarely called to task for it? Or is it to 
stop cocaine coming to the United States?
    I mean, what is our final objective, and how do we measure 
success, especially in light of the fact that the Colombians 
have not lived up to the commitments that they previously made.
    Secretary Powell. I think our objective is to support 
Colombian democracy by helping Colombia deal with the threats 
to that democracy. The threat comes in several forms: First, 
the FARC and the ELN, terrorist organizations that we have so 
designated. Second, the growing of drug crops that contaminate 
the society, leads to a criminal culture and class, thereby 
threatening their democracy, and hurts America by providing 
drugs to drug users in our country.
    So I think that we have an obligation to help Colombia 
preserve its democracy by going after narcotraffickers and 
helping Colombia go after those insurgent organizations that 
threaten the viability of Colombian democracy and supporting 
the Colombian Government, especially since President Pastrana 
decided that he could not continue with this effort at 
negotiating with these terrorist organizations.
    Senator Leahy. I have enormous respect for President 
Pastrana, and he is very well represented here in Washington by 
his very able Ambassador, but I also agree with our very able 
Secretary of State, who says in his prepared statement here 
this morning, no amount of additional assistance would be 
sufficient to turn the tide unless Colombia dedicates more of 
its own resources to this task, and commits decisively to a 
policy of establishing State authority and effective security 
for its people.
    The Colombians have not met their financial commitments 
under Plan Colombia. There is about to be a presidential 
election. We do not know who is going to be president, although 
we may have an idea. We do not know what additional resources, 
if any, they are going to commit to these efforts. Why should 
we be pouring more money down there if we have goals that tend 
to be shifted almost arbitrarily, and without knowing if the 
Colombians are ever going to do their part?
    We have talked about the need for money for AIDS and for 
infectious diseases. There will be other requests, I 
understand, such as additional money for Israel. Despite these, 
and other pressures on an already underfunded foreign aid 
budget, we seem to constantly need more and more money for 
Colombia with little results. Would it be better to wait until 
after the elections in Colombia?
    Secretary Powell. No, I think we should not wait until 
after the election. I can assure you, though, that after the 
election we will be pressing the new leadership to make a more 
serious commitment of financial resources of the Colombian 
people and resources to this effort, and I cannot predict who 
the new president will be, but just watching the campaigns 
develop, it seems to me that we are probably going to have more 
aggressive leadership in power in Colombia that might be more 
receptive to the view you expressed and the view we will be 
expressing.

                      KIDNAPPED CHILDREN OVERSEAS

    Senator Leahy. Mr. Secretary, there is something I would 
hope somebody could check into. The daughter of some 
constituents of mine, Liz Henry, has been trying for 2 years to 
locate her two children. They were abducted by her former 
husband who is of Lebanese descent. She pursued a custody case 
in the Lebanese courts and she won. However, the Lebanese 
Government will not enforce the court order. It appears her ex-
husband has left Lebanan and is now in Syria. I am told that 
Ambassador Burns has raised her case with the Syrian President 
and nothing has happened.
    I mention this because, if there are representatives of the 
Lebanese Government here, I do not want them to think we have 
forgotten this case, nor will I forget it as we look at the 
budget for fiscal year 2003. I commend Ambassador Burns for 
raising this. When you are talking to him, please tell him I 
appreciate it, and I hope he will continue to push this issue.
    Secretary Powell. I will, Mr. Chairman.

                               LANDMINES

    Senator Leahy. My last thing--and somebody check whether 
Senator McConnell is coming back--this concerns an issue that I 
cannot let an appearance like this go by without raising.
    You have been a voice of reason on the issue of land mines, 
and I say that because as Secretary of State you see the 
enormous problems we face in getting our aid to areas because 
of land mines, but also as a well-decorated military person, 
one who served in combat and served as Chairman of the Joint 
Chiefs of Staff. You also have a view of it from the view of a 
soldier.
    I am concerned that we are losing momentum on this. There 
has been some poor communication in the Pentagon. There are 
people in the Pentagon at very high levels who tell me 
privately we have got to solve this. Others, though, have stood 
in the way. Former General George Joulwan has been a strong and 
helpful voice. There is lingering resentment over the way the 
United States was treated in the Ottawa process. Some of that 
resentment is valid. But I was there throughout most of that 
process, and some of it we brought on ourselves.
    Now, I know the administration is not about to join the 
Ottawa treaty. It would have been a wonderful thing had we done 
that initially. But we are the world's unmatched military 
power. We are actually the most powerful Nation history has 
ever known, and we can set the standard for the world.
    We are talking about eliminating a very small class of 
weapons. We are not talking about eliminating command-detonated 
mines, or mines with a man in the loop, or cluster munitions. 
We are only talking about mines that are designed to be 
triggered by the victim, and we have far more precise weapons 
that discriminate between enemy combatants and friendly forces 
or innocent civilians.
    If we did this, I think we would reap both military as well 
as political benefits. If it is left just to the bureaucracy, 
nothing is going to change. I mean, it is the same bureaucracy 
that told General Pershing 80 years ago we cannot give up 
poison gas as a weapon.
    It is going to take people like yourself and Secretary 
Rumsfeld. I hope you will help on that, I really do. I think 
that we do so much with the Leahy War Victims Fund and our 
demining efforts, and we spend hundreds of millions of dollars, 
but I think we should get rid of the victim-detonated mines.
    Do you want to comment?
    Secretary Powell. No. You know, Mr. Chairman, of my 
commitment to our demining efforts.
    Senator Leahy. I do.
    Secretary Powell. I am not sure of the status of Pentagon 
developments and programs, but I believe that the Pentagon 
remains committed to finding solutions to the problem they 
would have if a gap were created in that capability, and I do 
not know what the status of the programs are, but I certainly 
will encourage Don Rumsfeld and my former colleagues in the 
military to keep pressing and not abandon efforts to find such 
solutions.
    As you will recall, it was really a couple of unique 
circumstances related to Korea that convinced the military and 
convinced me when I was Chairman of the Joint Chiefs of Staff 
that we could not go along with Ottawa at this time.
    Senator Leahy. I know. But I think there are ways of 
solving the Korea situation, without going into a long 
discussion of that. I think we could do it, I think we would 
have significant moral authority worldwide, and especially for 
those few remaining countries that are not abandoning these 
types of mines, who use the excuse that the world's most 
powerful Nation will not so why should we. I do not want to 
give them that excuse.
    I know you are about to leave, or are soon to leave, and I 
think Senator McConnell is coming back. Mr. Secretary, if you 
could hang on for just a moment, because there is a roll call 
vote on and that is what is causing the problem.

                                 ANGOLA

    On Angola, today I see a country where there is a real 
possibility for peace, but you have about $1 billion in oil 
revenues that are stolen by the government. We need to join 
others like Great Britain, the World Bank, and IMF, in 
insisting that governments publicly disclose their revenues 
from oil and gas, mining, and other extractive industries. If 
this information is disclosed, it will be much harder for 
government officials to steal their country's natural 
resources. I will now turn to my good friend, the senior 
Senator from Kentucky.
    Again, Mr. Secretary, I appreciate your being here. I 
appreciate the briefing yesterday, but more importantly, just 
as an American, I appreciate the job you are doing.
    Secretary Powell. Thank you, Mr. Chairman.

                      EFFECTIVENESS OF FOREIGN AID

    Senator McConnell. Thank you again, Mr. Secretary. A couple 
of wrap-up questions in no particular order, and thank you 
again for being here.
    I thought one of the most interesting questions of the 
morning was Senator Bennett's question about whether there was 
a return on our foreign aid investments, something I am 
intensely interested in. I appreciated the President's 
stipulations attached to the $5 billion increase through the 
Millennium Challenge Account that all seem to me tended to be 
targeted to rewarding movement.
    Congress from time to time--no matter who is in the 
executive branch--wants to make contingent assistance based on 
certain behavior. Certainly, I would hope you would agree that 
foreign aid is not an entitlement, and certain kinds of 
behavior it seems to me ought to legitimately jeopardize 
American foreign assistance.
    And we understand the carrot part. That was the answer to 
Senator Bennett's question, which I wholly agree with, but what 
about the stick? What about some price to be paid in terms of 
economic assistance when your behavior seems to warrant that?
    Secretary Powell. I agree entirely. I mean, if you fall off 
the wagon, if you start to act in ways that are inconsistent 
with the philosophy under which you received the money in 
Challenge funding or in any other kind of foreign aid, then I 
certainly agree that it should not continue, or there might be 
other consequences of such action.
    At the same time, I would ask the Congress to think 
carefully before putting too many things in legislation as 
requirements,certifications, waivers required, and similar 
items that make it harder for the President and the Secretary 
of State to conduct foreign policy, and I would always welcome 
the opportunity to discuss with Members of Congress what they 
have in mind before they put it in law.

                                 EGYPT

    Senator McConnell. It has been my experience that the 
granting of waivers tends to be more popular when members of 
your own party are in the administration.
    Senator Specter brought up Egypt, and I want to go back to 
that just for a moment. I was among those getting very 
skeptical about Egypt's level of cooperation well before 
September 11. A couple of years ago when my party was in the 
majority and I actually chaired the subcommittee, I made some 
dramatic reductions in United States assistance for Egypt in 
the chairman's mark. That lasted about half a day before it was 
reversed, but the point I was making then, and I think we are 
all contemplating these days, is the question of what are we 
getting for our money?
    Now, I am not going to advocate anything dramatic. I 
understand how sensitive that situation is, and I have complete 
confidence, frankly, in you and your ability to manage this. 
But I am wondering if it has ever occurred to you that maybe 
the aid ought to be reconfigured in some way.
    A substantial part of it is military in nature, and having 
been an Egypt-watcher for some time I have not seen a whole lot 
of progress on the reform side in terms of moving ahead with a 
structure that allows people to lift themselves out of poverty. 
Do you think this current configuration of assistance, which 
has been largely unchanged since 1980, is adequate, or would 
you be open to considering a different way of looking at this 
package?
    Secretary Powell. I think it is adequate for the moment. I 
think in this period of tension we could certainly begin 
exploring with the Egyptians whether this is the right thing 
and the right balance for the future, but I do not think I 
would entertain changing it right now.

                                 RUSSIA

    Senator McConnell. Finally, let me go for the last question 
to our new relationship with the Russians, which all of us 
welcome, and I want to commend you for your role in that. I 
think this is a very positive development.
    You were discussing earlier the gap between the 
establishment of a democracy and seeing some progress, and 
Russia is a classic example of that. They went out and started 
having elections, everybody looked around, and nothing was 
getting any better, but hopefully after a decade or so there 
are some improvements, and certainly our relationship has 
gotten dramatically better.
    Do the NATO-Russia Council give Russia a veto over NATO 
decisions and, if it does not, what is the practical effect of 
the Russian NATO Council?
    Secretary Powell. No, it gives Russia no veto over anything 
NATO wants to do without Russia, and it gives NATO no veto over 
anything Russia wants to do without NATO.
    Senator McConnell. So what is it?
    Secretary Powell. It is a means by which we look at things 
that we have a common interest in working on together, 
terrorism and a number of other areas that have been suggested 
for cooperation which the Russians have found quite promising. 
We will decide at 19, without Russia, whether or not we wish to 
engage Russia on a particular item, and then the NATO-Russia 
Council meets and discusses it, and determines how 20 can go 
forward.
    If, in the process of going forward at 20, NATO finds that 
new circumstances or new requirements being placed on the 20 by 
Russia make it not appropriate to continue to go forward at 20, 
NATO will have the ability and the right to pull it back to 19. 
So it is a means by which we can cooperate more closely with 
Russia on a variety of issues of common interest to both NATO 
and Russia and other parts of Europe, and brings Russia closer 
to the Euro-Atlantic family, but at the same time does not 
destroy the essence of NATO as a unique organization that did 
not include Russia but cooperates with Russia at 20.
    Senator McConnell. One final thing. How many countries are 
likely to be included in the next round of expansion?
    Secretary Powell. Ah, Senator, nice try.
    I cannot believe you did that to me.
    The President, of course, has this under serious 
consideration. We talk about it almost every week now, and I 
think it is going to be a very healthy number. I cannot tell 
you what that number will be, and I do not even want to suggest 
a range.
    If I could close the answer, though, by saying it has been 
a marvelous evolution to watch since the days when I was 
Chairman of the Joint Chiefs of Staff and the cold war ended 
and the Warsaw Pact went away. I used to come up and testify 
before the Senate on whither NATO, why do we need a NATO, why 
doesn't it go away, and all of my Russian general friends would 
come to see me and say, you know, why do you continue the cold 
war by keeping NATO around, you should get rid of it, it is a 
relic of the cold war. We had to defend NATO for years.
    Then finally the answer became obvious, everyone wants to 
join the club. It must be doing something right, and I just 
respond to my still Russian General friends, nobody wanted to 
be in your club anymore, so the club closed, but we are handing 
out application forms all over the place. People are filling 
them out left and right. Why? Because they want to be part of a 
political and security organization that is anchored in its 
relationship with North America, with the United States and 
Russia.
    Senator McConnell. And it has discovered some new missions, 
too, has it not?
    Secretary Powell. Right, and it is taking on new missions, 
and so NATO is what gives you Canada and the United States, and 
that is important to them. The E.U. does not do that. No other 
organization does that, and they find comfort in being in such 
a partnership.
    And if I may, Senator, because we got going early, and when 
I mentioned North America and NATO I really did want to linger 
on Canada as well as the United States. Canada is such a great 
partner with the NATO alliance, and as the Senator, Chairman 
Leahy was kind enough to note earlier, and we have a lot to 
thank Canada for.
    They have always been there with us, and I, too, as all 
Americans, mourn the loss last week of those brave Canadian 
soldiers. I have not had in my career as an Army officer, as 
National Security Advisor, and now as Secretary of State, 
better friends and allies and trading partners than we have 
with our Canadian brothers and sisters to the north.
    Senator McConnell. Well, thank you very much, Mr. 
Secretary, for the wonderful job you are doing and for being 
here today.
    Secretary Powell. Thank you, sir.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator McConnell. Thank you very much. There will be some 
additional questions which will be submitted for your response 
in the record.
    [The following questions were not asked at the hearing, but 
were submitted to the Department of State for response 
subsequent to the hearing:]
            Questions Submitted by Senator Patrick J. Leahy
                      international criminal court
    Question. This month the Rome Treaty establishing the International 
Criminal Court came into force. Despite the fact that close allies, 
like Britain and Canada, with thousands of troops deployed overseas, 
support the ICC, we hear that the Administration is considering 
``unsigning'' the Treaty. Isn't a better strategy to stay engaged with 
the Court, to give our negotiators the most leverage to shape it in our 
interests? What benefits do we get by unsigning it now--giving all of 
our leverage away up front?
    Answer. On May 6, the United States notified the U.N. Secretary 
General in his capacity as depositary for the Rome Statute of the 
International Criminal Court (ICC) that the United States does not 
intend to become a party to the statute (which comes into force July 1, 
2002). We took this step in order to make clear our objections to the 
Rome Statute in both principle and philosophy, and to avoid creating 
unwarranted expectations of U.S. involvement in the Court.
    The existence of a functioning ICC will not cause the United States 
to retreat from its leadership role in the promotion of international 
justice and the rule of law. We will work together with countries to 
avoid any disruptions caused by the treaty, particularly those 
complications in U.S. military cooperation with friends and allies that 
are party to the treaty. We will also continue our longstanding role as 
an advocate for the principle that there must be accountability for war 
crimes and other serious violations of international humanitarian law.
                            millennium fund
    Question. I support the President's ``Millennium Fund'' to increase 
development aid by $10 billion from 2004 to 2006, and to tie the aid to 
good governance, sound economic policies, and combating poverty. 
However, a few months ago we gave $600 million to Pakistan, one of the 
world's most corrupt countries, with no strings attached.
    In the supplemental request, the Administration did not place any 
conditions on its request for some of the most autocratic and 
economically backward regimes in the world. Is this just because these 
governments support the war on terrorism? How is this different from 
the cold war, when we gave billions of dollars to corrupt governments 
because they were anti-communist?
    It seems like we are heading for a double standard--the Millennium 
Fund would put tough conditions on development aid, but no conditions 
on military aid. Do corruption and the rule of law only matter for some 
of the taxpayers' money? Why shouldn't the same standards apply?
    Answer. Economic Support Funds are provided in recognition that, 
under special economic, political or security conditions, the U.S. 
national interest may require economic support for countries in amounts 
and for purposes that could not be justified solely under rather 
exacting Development Assistance authorities. We anticipate that the 
Millennium Challenge Account will have even higher standards with 
regard to a county's demonstrated commitment to development and 
sustained performance.
    Economic Support Funds are intended to promote economic and 
political stability and, to the extent feasible, are to be used for 
program purposes consistent with the authorities of other accounts in 
the Foreign Assistance Act, e.g., Development Assistance and 
International Disaster Assistance. In Pakistan, for example, while the 
dollars provided were in support of a severe balance-of-payments 
problem, the government committed to direct a commensurate amount of 
local currency to meet budget gaps in important social sector programs 
specifically for basic education, health and job creation.
    Even with the Millennium Challenge Account, the United States will 
continue to have a need for ESF that permits the Administration to 
address urgent national security interests in the most expeditious and 
efficient manner.
                  foreign aid funding--millennium fund
    Question. The details of the Millennium Fund are still unclear, 
aside from some broad principles which you mention in your testimony.
    One of the problems with the President's plan is that the increases 
in foreign aid do not start until 2004--despite the fact that the 
problems it seeks to address are getting worse each day.
    Last month, I asked Secretary O'Neill if we could do more this 
year, and he said: ``I think it's in fact an excellent question and I 
think that one should not rule out the possibility of looking at a 
beginning of this idea in the fiscal year 2003.''
    Is the Administration considering a budget amendment in fiscal year 
2003 to get the Millennium Fund started sooner? Why not?
    Answer. We agree that it may be advisable to begin some limited 
Millennium Account activities, perhaps pilot projects, before fiscal 
year 2004. This subject is under discussion by the Steering Group, and 
they will most certainly consult with the Congress on this matter as 
discussions move forward.
                         colombia--human rights
    Question. There is a rumor that you are close to certifying that 
the Colombian Government and Armed Forces have met the human rights 
conditions in our law.
    I am a strong supporter of President Pastrana and of Colombia, and 
the FARC has been committing kidnappings and atrocities every week. 
There are other serious human rights problems there too, especially 
with the paramilitaries. A few months ago, the Administration said the 
Colombian Government had not made enough progress on human rights. I 
agree. What has happened in the past month to justify making the 
certification now?
    If you make the certification--and I hope you do not until there is 
more progress--that would permit the release of 60 percent of the aid. 
There is another certification that would need to be made after June 
1st, for release of the rest of the funds.
    What further, specific progress on human rights would you expect 
the Colombian military to make for a second certification? We need 
clear benchmarks, to measure progress, or else we won't see it.
    Answer. I have not yet made a decision regarding the certification 
required under section 567(a) of the Kenneth M. Ludden Foreign 
Operations, Export Financing, and Related Programs Appropriations Act, 
2002 (Public Law 107-115) (FOAA). The Department of State is currently 
reviewing information it has received from the Government of Colombia, 
Colombia's Armed Forces, the Inspector General's Office (Procuraduria), 
the Prosecutor General's Office (Fiscalia), the Vice President's Office 
and a wide range of international and Colombian non-governmental 
organizations active on human rights issues.
    Human rights remain central to our bilateral relations with 
Colombia. We will continue to engage the Government of Colombia on 
concrete measures it should take to improve its human rights 
performance, particularly the human rights record of the Colombian 
Armed Forces.
                                colombia
    Question. What are our objectives in Colombia, what would it take 
to achieve them, over what period of time, and how much would it cost 
us and the Colombians?
    Is the goal to defeat the FARC? To defeat the paramilitaries? To 
stop the cocaine coming to the United States?
    Does it make sense to spend more money, on top of the $2 billion we 
have already appropriated, before we know who the next Colombian 
President is and what his policies are?
    In your prepared testimony you say, and I quote:

``no amount of additional assistance will be sufficient to turn the 
tide unless Colombia dedicates more of its own resources to this task 
and commits decisively to a policy of establishing state authority and 
effective security for its people.''

    I agree. Given that the Colombians have not met their financial 
commitments under Plan Colombia, what should we expect to see before we 
send more aid?
    Answer. The United States. remains committed to helping Colombia--
the hemisphere's second oldest democracy--combat narcotrafficking and 
terrorism, defend and strengthen its democratic institutions, advance 
human rights, provide humanitarian assistance for those displaced by 
the conflict, and promote socio-economic development, but Colombians 
must take the lead in this struggle. In 1999, President Pastrana 
responded to the crisis undermining Colombia's democracy, prosperity 
and security with the launch of the six-year, $7.5 billion Plan 
Colombia. Plan Colombia calls for substantial Colombian social 
investment, judicial, political and economic reforms, modernization of 
the Colombian Armed Forces, and renewed efforts to combat 
narcotrafficking. To aid Colombia, in 2000, the U.S. Government 
provided $1.3 billion in assistance to the Government of Colombia's 
Plan Colombia in support of these goals. In 2001, Congress appropriated 
$381.86 million to sustain our Plan Colombia programs.
    The Government of Colombia reports it is well on its way to funding 
its commitment under Plan Colombia having spent $2.6 billion for Plan 
Colombia-related infrastructure projects, including a hospital in 
Puerto Guzman, a school in Orito and a farm to market road in Mocoa, as 
well as projects regarding human rights, humanitarian assistance, local 
governance, and the environment. Colombia has also reported that it has 
spent $426 million on social services and institutional development, 
including family subsidies and programs for job creation and youth 
training.
    The Government of Colombia's contribution to Plan Colombia is being 
used for counterdrug efforts and social and economic development 
projects. These projects include social and infrastructure programs in 
Putumayo Department, in southern Colombia, the site of the heaviest 
concentration of coca growth. Colombia has also continued to modernize 
its armed forces; stabilized its economy in accordance with IMF 
guidelines; and undertaken an aerial eradication program resulting in 
the destruction of unprecedented amounts of coca.
    President Pastrana has also announced plans to increase Colombia's 
defense budget, currently at 3.5 percent of GDP, to cover the cost of 
heightened military operations, and to add 10,000 soldiers to the army. 
We have stressed in our meetings with senior Colombian Government 
officials that Colombia needs to increase the resources it devotes to 
security, and have also begun a dialogue with the leading presidential 
candidates on this issue.
    The Administration is now seeking new legal authorities that would 
allow United States assistance to Colombia, including assistance 
previously provided for counternarcotics, to be used to support a 
unified campaign against narcotics trafficking, terrorist activities 
and other threats to national security. The decision to seek new 
authorities reflects our recognition that: (1) Colombia's terrorist 
groups are involved in every facet of the illicit narcotics trade; (2) 
the terrorist groups' efforts to promote insecurity hamper our 
counternarcotics operations; and (3) the GOC faces a heightened 
terrorist risk after the end of the demilitarized zone on February 20.
    In addition to new legal authorities, we are also seeking $35 
million in the counterterrorism supplemental to help the Colombian 
Government protect its citizens from kidnapping, infrastructure attacks 
and other terrorist actions. Our $35 million request is broken down as 
follows:
  --$25 million in Non-proliferation, Anti-terrorism, Demining and 
        Related Programs (NADR) funding for antikidnapping training and 
        equipment for the Colombian police and military;
  --$6 million in Foreign Military Funds (FMF) funding to begin 
        training for Colombian military units protecting the key Cano 
        Limon oil pipeline; and
  --$4 million in International Narcotics Control Law Enforcement 
        (INCLE) funding to help organize, train, equip and deploy 
        Colombian National Police units that will provide security in 
        conjunction with construction of reinforced police stations to 
        enable the police to reestablish a presence throughout 
        Colombia.
    Leading presidential candidates in Colombia also advocate 
continued, vigorous counter-narcotics efforts and improving Colombia's 
human rights climate. All have backed President Pastrana's request that 
equipment provided by the United States for counter-narcotics efforts 
be used for counter-terrorism as well.
    We have already engaged the leading presidential candidates on 
these issues, and will hold more intensive talks with the president-
elect after Colombia's elections.
                          middle east--current
    You have testified that you were not aware of any instance when the 
Leahy law, which bars U.S. aid to foreign security forces who abuse 
human rights, was violated in the Middle East conflict.
    I recently received a letter signed by Assistant Secretary Paul 
Kelly, responding to an inquiry on this subject which I had sent to 
Ambassador Kurtzer back in January. Mr. Kelly's letter quoted the State 
Department's Human Rights report, that ``numerous serious human rights 
abuses'' were perpetrated by Israeli security forces during the past 
year.
    Question. Are you confident that no U.S. weapons were used in any 
of those abuses? We also trained Palestinian police officers. Do you 
know if any of those officers were involved in human rights violations? 
The Red Cross and World Bank estimate damage in the West Bank to be in 
the billions of dollars. Much of the damage was to infrastructure built 
with foreign aid, mostly from the United States. Is it likely that U.S. 
taxpayers, either directly, or through the United Nations and the World 
Bank, will also end up paying a large share of the costs of rebuilding?
    Answer. The Department cannot state with confidence that no U.S.-
origin weaponry was used in human rights abuses that may have been 
perpetrated by the Israeli Defense Forces or that no Palestinian police 
officer trained by the United States committed human rights violations. 
The Department is sensitive to the requirements of the Leahy Amendment, 
which prohibits the provision of funds appropriated under the annual 
foreign operations appropriations acts to any unit of a foreign 
country's security forces if the Secretary has credible evidence that 
such unit has committed gross violations of human rights. To this 
point, although the possibility cannot be excluded that the credible 
evidence referred to in the Amendment may be developed, such evidence 
has not been produced. We currently are refining our procedures for 
implementing that amendment, including with a view to improving our 
ability to discern credible evidence of gross violations of human 
rights by specific units of foreign security forces. Updated guidance 
will be sent to posts worldwide.
    We share the goal of the Leahy Amendment to hold foreign security 
forces and governments accountable to international human rights 
standards. Our goal is to carry out security and other foreign 
assistance programs in a manner consistent with human rights standards. 
We continue to monitor this situation and the obligations the Leahy 
Amendment places on the parties and us.
    The World Bank recently estimated raw physical damage in the West 
Bank and Gaza at approximately $400 million over the 18 months of the 
intifada, plus over $300 million in additional funds as a direct result 
of the recent incursions. While some damage was suffered by donor 
supported projects, most of the damage was centered on businesses, 
houses, and roads. The international donor community has pledged to 
assist in the rebuilding of damaged infrastructure and to respond to 
the Palestinians, dire humanitarian needs. Consensus emerged at the 
recent Ad Hoc Liaison donors' conference in Oslo, however, that 
considerable attention should still be paid to the Palestinians, 
longer-term development needs. To that end, the United States is 
continuing with plans to undertake major water infrastructure projects 
and other programs with a long-term developmental impact. We are also 
continuing our projects in the areas of health, community development, 
and rule of law.
                        middle east--settlements
    Question. During your trip to the Middle East, you said ``for the 
people and the leaders of Israel the question is whether the time has 
come for a strong, vibrant state of Israel to look beyond the 
destructive impact of settlements and occupation, both of which must 
end.''
    However, Prime Minister Sharon was recently quoted as saying that 
``until the November 2003 elections, there will be no talk of 
evacuating any settlements.'' I am told that there have been 34 new 
settlements built since he took office.
    Given Prime Minister Sharon's statements, how do we make progress 
on this key issue?
    Answer. The President and I have been very clear that settlement 
activity in the occupied Territories must stop, and that occupation 
must end through withdrawal to secure and recognized boundaries, 
consistent with United Nations Resolutions 242 and 338. Israeli 
settlement activity prejudges the outcome of a key final status issue. 
We continue to monitor this issue, and address it directly with the 
Government of Israel. As for the question of possible evacuation of 
existing settlements, that is an issue that will have to be faced in 
the context of a final status agreement.
                              afghanistan
    Question. Humanitarian relief workers in Afghanistan, including 
people who have years of experience working in crisis situations, have 
expressed great concern about U.S. military personnel in civilian dress 
who are involved in humanitarian relief activities. They say this 
jeopardizes the safety of the humanitarian workers, because while the 
soldiers are armed, the humanitarian workers are not. If that line is 
blurred, it is the unarmed humanitarian worker, whether in Afghanistan 
or in the next crisis, who will be at risk. Retired military officers 
and defense officials have echoed their concerns.
    I gather the Administration is trying to solve this problem, 
although nothing I have heard sounds adequate. As a former Chairman of 
the Joint Chiefs and now Secretary of State who oversees these aid 
programs, can you help to ensure that U.S. field commanders and USAID 
personnel in Afghanistan work with NGOs to resolve this?
    Answer. Following concerns raised by the humanitarian community, 
the Department of Defense reviewed the uniform policy for the U.S. 
military personnel undertaking humanitarian relief activities. The 
uniform policy was subsequently revised to be compliant with the Geneva 
Convention. Military personnel are required to wear one article of 
military clothing and openly display their weapons. This policy both 
meets the force protection requirements of our forces and clearly makes 
the soldiers easily identifiable.
    USAID actively coordinates with the military personnel on the 
selection and execution of humanitarian assistance programs in 
Afghanistan.
                                 angola
    Question. In Angola today there is a real chance for peace. But it 
is estimated that approximately $1 billion--perhaps a third of Angolan 
state income--has disappeared annually for the past five years. 
According to the IMF, whose relationship with Angola appears to have 
broken down, approximately 90 percent of Angola's state revenue is 
derived from oil. This is not unique to Angola. Corruption on this 
scale is a cause of poverty, failed states that become havens for 
terrorists, and then we and the World Bank end up sending aid to take 
care of the people.
    The same American oil companies that, according to SEC regulations, 
have to report their tax and other payments to the U.S. Government from 
oil pumped in the United States, do not have to report their payment to 
the Angolan Government, or for that matter, any other oil-dependent 
developing country, from oil pumped there. And then elites in these 
governments steal the money. The impact in Angola alone is staggering, 
where some 1 million people face starvation conditions and where, 
according to UNICEF, hundreds of children die from preventable causes 
daily. There is a clear need to develop the capacity for holding these 
governments accountable for their expenditure of state resources and it 
seems clear that to do this there needs to be transparency of revenue 
streams. To that end, should not public disclosure of these types of 
payments to governments be the norm everywhere, especially in countries 
that want foreign aid? Will the State Department support such a 
proposal at the G-8 meeting in Ottawa in June?
    Answer. The United States strongly supports efforts to encourage 
transparency and counter corruption in Angola. As part of this effort, 
we have encouraged oil companies to be forthcoming with their data, 
especially to the IMF. We also have made known to the oil companies 
that we see value in their being as open as possible with their Angolan 
data. Nonetheless, we also recognize that these firms are private and 
that some of the information might be considered proprietary by the 
company or subject to contractual agreements with the Angolan 
Government.
    The larger question you raise--whether public disclosure of revenue 
streams from entities such as oil companies should be the norm 
worldwide--is a complex one, involving legal, political and business 
concerns. Again, in principle, this is a goal we support, but it is an 
issue that must be examined in a detailed, interdisciplinary and inter-
agency manner. We are looking at this issue now, including in 
conversations with officials from other key countries, but have yet to 
reach any conclusions.
    Question. Your supplemental request includes military and other aid 
for Uzbekistan, which has an authoritarian, Soviet style government. 
Recently, however, Uzbekistan signed an agreement with the United 
States which includes a wide range of commitments to implement 
democratic and economic reforms. Is there any reason why we should not 
tie our aid to Uzbekistan on its progress in meeting its commitments 
under that agreement?
    Answer. United States assistance to Uzbekistan is designed to fight 
the war on terrorism and address threats to Uzbekistan's stability such 
as: drug trafficking, weapons proliferation, poverty, political 
oppression, and isolation from the outside world. The assistance helps 
Uzbekistan combat illicit trafficking of weapons and narcotics across 
its borders and improve military interaction with United States and 
Coalition forces.
    The program also seeks to change the environment in which extremism 
can flourish. The United States is providing assistance on the 
grassroots level in Uzbekistan that will improve health care, promote 
the development of small and medium enterprises, improve water 
management, provide local social services, expand exchanges to the 
United States, and support human rights, independent media, and civil 
society.
    We consistently tell Uzbek officials that our ability to continue 
higher assistance levels depends on demonstrated progress in economic 
and democratic reform, and we are closely monitoring Uzbekistan's 
fulfillment of its commitments under all our bilateral agreements. 
While some reforms are clear prerequisites for the disbursement of 
funds, it would be counter-productive to condition assistance in 
general on Uzbekistan's progress on meeting specific reform 
commitments.
             fiscal year 2003 budget request--peacekeeping
    Question. At a time when peacekeeping seems to be increasing in 
importance around the world--including a critical mission in 
Afghanistan and calls for peacekeepers in the Middle East--why has the 
President's budget request for this account been cut by almost $30 
million from last year's level?
    Answer. Fiscal year 2003 PKO levels reflect a different approach 
since September 11. We have to address problems that are frequently the 
genesis of extremism and this requires shifting resources. We are 
requesting significant increases in development assistance and other 
accounts to address these problems in a more fundamental way. 
Additionally, increased stability in the Balkans and in Sierra Leone 
yields reduced anticipated PKO requirements.
                     assistance for eastern europe
    Question. U.S. assistance programs, coupled with a strong NATO 
security presence, have been critical to promoting peace and prosperity 
in the Balkans. The fiscal year 2003 budget request cuts the SEED 
account by $126 million, which some believe is too deep. In your view, 
what type of impact will this reduction in U.S. aid have? What about 
cuts in peacekeeping operations in that region?
    Answer. Since the fall of the Iron Curtain in 1989, the United 
States has provided over $5 billion in assistance to the emerging 
democracies of East and Central Europe. The 20 percent reduction--in 
funding proposed for the SEED (Support for East European Democracy Act) 
account (from $621 million in fiscal year 2002 to $495 in fiscal year 
2003) is possible because of two things. The first is the success our 
partners and we have had in creating stable, democratic, market 
economies in the region. The second is the fact that all of these 
countries are now in line for possible future membership in the 
European Union. This means that a larger share of assistance to these 
countries will come from Europe in the future.
    In several countries of Southeastern Europe, a good deal of work 
remains to be done. The $495 million requested for that purpose is a 
clear indication that the United States will remain engaged in solving 
the problems of the region.
fiscal year 2003 budget request--assistance for the former soviet union
    Question. Programs funded by the FSA account have become critical 
in advancing U.S. foreign policy goals--especially in light of the war 
on terrorism and Islamic extremism in Central Asia. Why has the FSA 
account been cut by almost $30 million in the President's budget 
request?
    Answer. We completely agree that the FSA account is critical to 
advancing U.S. foreign policy goals, including our efforts to combat 
terrorism and Islamic extremism in Central Asia. The President 
requested $755 million for this account in fiscal year 2003, as 
compared to the fiscal year 2002 appropriated level of $784 million.
    However, approximately $35.5 million in non-proliferation 
activities that are funded under the FSA in fiscal year 2002--parts of 
the Export Control and Related Border Security (EXBS) Assistance and 
Redirection of Biotechnical Scientists programs--have been proposed to 
be funded from the Nonproliferation, Anti-terrorism, Demining and 
Related Activities (NADR) account in fiscal year 2003.
    For purposes of comparing the FSA account fiscal year 2002 and 
fiscal year 2003 levels, therefore, one must reflect this proposed 
allocation from the NADR account. On a strictly comparable basis, the 
President's fiscal year 2003 request represents an increase over fiscal 
year 2002 levels--from $748.5 million to $755 million.
    Question. First the Clinton Administration decided to open the door 
to the sale of F-16s to Chile. Now Brazil appears to be on the verge of 
buying its own advanced fighter aircraft, with AMRAAM missiles. Are we 
seeing the new arms race in South America that everyone wanted to 
avoid? And none of those countries can afford?
    Answer. Chile and Brazil are both mature and stable democracies. 
They, like us, are entitled to review their own security needs in light 
of available resources. Both governments underwent a long and extensive 
process to decide on these military acquisitions. They are transparent 
in their policies toward their neighbors and with the United States.
    Since 1997 the U.S. Government has abided by our global policy of 
not introducing Advanced Radar Beyond Visual Range (AR-BVR) missiles to 
regions such as Latin America where they have not been previously 
introduced.
    If the countries of the region were to adopt a voluntary agreement 
to restrain purchases of ARBVR missiles, we would be fully supportive 
of their decision.
    Question. There are reports that East Timor expects a budget 
shortfall of at least $150 million over the next 3 years. At the donors 
conference in may, is the Administration going to work to make sure 
that most--if not all--of this shortfall is covered' by the 
international community? The United States has invested a lot to help 
get East Timor headed in the right direction. Why has the 
Administration proposed nearly a 25 percent cut in aid to East Timor 
for fiscal year 2003, when it only just elected its first president?
    Answer. The United States Government is committed to aiding East 
Timor in its reconstruction and development. U.S. bilateral assistance 
from 1999 to the present already totals $179 million. Additionally, the 
U.S.-assessed contributions for administrative and peacekeeping costs 
for the U.N. Transitional Administration in East Timor (UNTAET) are 
over $300 million.
    At the East Timor Donors Conference in Dili May 14-15, the United 
States delegation urged East Timor to exercise fiscal restraint and to 
produce a responsible budget to minimize burdening itself with debt. We 
are working with other international donors and the World Bank to 
establish a fund to cover East Timor's expected budget deficit. The 
expected revenue shortfall over the next 3 years has been revised 
downward from $154-$184 million to $90 million. At the conference in 
Dili we pledged to provide $4 million (almost 15 percent of the 
anticipated deficit this year) to cover East Timor's revenue shortfall. 
Other donors followed suit, and a total of $82 million was pledged 
towards the anticipated deficit of $90 million.
    The reduction in our request for aid to East Timor, from $25 
million to $19 million, for fiscal year 2003 reflects a phased 
reduction in spending on the coffee cooperative project as the Timorese 
develop the capacity to assume overall management of the program. The 
reductions in assistance for East Timor and elsewhere also reflect a 
greater effort to identify funds for reconstruction and redevelopment 
in Afghanistan.
    Question. In your opening statement, you mention the positive 
impact that free trade can have on economic development in poor 
countries, especially Africa. However, Oxfam recently released a 
report--in favor of free trade--that showed that developing countries 
exporting goods to wealthy nations face tariff barriers that are four 
times higher than those encountered by rich countries.
    The Washington Post said this ``is embarrassing to the Bush 
administration, which despite its free-market rhetoric has been 
reluctant to challenge politically powerful U.S. industries such as 
textiles that benefit from tariffs protecting their goods from low-cost 
foreign competition?''
    I know that trade in not your primary responsibility. However, are 
Oxfam's findings accurate? What is the Administration doing to remove 
unfair trade barriers on poor countries?
    Answer. The Administration recognizes that developing countries' 
full participation in the global trading system is essential to their 
continued economic growth and development. As President Bush said in 
Monterrey, ``to be serious about fighting poverty, we must be serious 
about expanding trade.'' We are committed to pursuing further market 
opening through implementation of the WTO agenda developed in Doha last 
fall, and the passage of the TPA will help achieve this goal in a 
number of sectors. It should also be noted that the United States' 
tariffs and agricultural subsidies are already much lower than those of 
most other countries both developed and developing.
    On a bilateral and regional basis, we have given full support to 
several congressionally mandated programs, that offer less developed 
regions enhanced access to the U.S. market--the Africa Growth and 
Opportunity Act (AGOA), Caribbean Basin Initiative (CBI), and the 
Andean Trade Preferences Act (ATPA) to name a few.
    Developing countries often have difficulty making full use of the 
enhanced market access opportunities available, as they lack the 
capacity to exploit them. Therefore, in support of the U.S. Market 
access initiatives noted before, and other trade related programs, we 
are also committed to offering less developed countries technical 
assistance and capacity building project support so that these 
countries can fully engage in and benefit from the global, multilateral 
trading system. According to a survey conducted by USAID last year, the 
United States provided $1.3 billion in trade capacity building 
technical assistance to developing countries between 1999 and 2001.
    Regarding the Oxfam report's criticism of developed country 
barriers to imports of poor countries, we strongly believe that the way 
to bring down those barriers is through WTO negotiations launched last 
November at Doha. Many of the measures called for in the report--
reduction in farm subsidies, the elimination of tariff peaks, the 
elimination of duties and quotas on products from the least developed 
countries--are in fact on the table as part of the Doha Development 
Agenda negotiations.
    Question. After September 11, we appropriated $600 million in 
budget support for Pakistan, with the expectation that those funds 
would be used to improve health and education. At the time, many of us 
expressed concern about corruption in Pakistan, and how these funds 
would be monitored.
    In the supplemental, we are asking for another $145 million for 
Pakistan, for military aid, law enforcement, and economic development.
    What has been done with the $600 million? Who is keeping track of 
it to be sure it is used for what we intended.
    Answer. A letter of agreement between the United States and 
Pakistan on use and monitoring of the $600 million was signed in 
November 2001. It was agreed that the equivalent in local currency 
would be used for social sector programs in education, health and rural 
employment. Our Embassy and USAID have been in regular contact with 
Pakistani officials and the donor community on the use of these funds. 
The Ministry of Finance recently submitted a detailed report that 
summaries the considerable work done by the GOP thus far to administer 
the grant. From the report and subsequent discussions, it is evident 
that the GOP has made available almost the entire grant to officials 
responsible for implementing the programs and has in place a system for 
monitoring. The IMF and the World Bank report that the money is getting 
out to the local areas for which it is intended. The United States and 
other donors continue to work closely with the GOP to ensure that the 
funds actually reach the local level through the newly devolved 
political and administrative authorities. We have no reports of the 
funds being channeled into unacceptable programs or misused by any of 
the recipients, but we are monitoring the situation closely.
                               education
    Question. Since September 11th, one thing Republicans and Democrats 
seem to agree on is that we should be spending a lot more to support 
secular education for children in countries with significant Muslim 
populations. Why was that not included in your supplemental request, 
since it is not part of your fiscal year 2003 budget?
    Answer. Increasing efforts to improve education in countries with 
significant Muslim populations is part of both our 2002 supplemental 
request and fiscal year 2003 request.
    The U.S. Agency for International Development (USAID) and the 
Department's Bureau of Educational and Cultural Affairs (ECA) both 
promote international cooperation with Muslim populations in the field 
of education, including assistance to academic and administrative staff 
and students.
    In fiscal year 2002, the Department has redirected 5 percent (about 
$12 million) of new exchanges budget authority ($237 million) to 
combating the root causes of terrorism. Our fiscal year 2003 request 
maintains that level. In addition, the Department's 2002 supplemental 
request includes an additional $6 million for improving education and 
promoting democracy and universal human rights among Muslims.
    USAID helps its partner countries develop effective education 
policy and delivery systems at all service levels to produce the human 
resources required to support growth and to reduce poverty. These 
efforts reflect the Agency's recognition of the crucial role education 
systems play in the economic and social development of poor countries 
and countries in transition. In fiscal year 2003, USAID will fund 
education sector interventions in over 40 percent of the countries 
where there are USAID missions. A total of $333 million from all 
funding sources is available in fiscal year 2003 for education support, 
and an additional $60 million in special education initiatives (e.g., 
in Pakistan and Afghanistan).
    USAID takes a cross-sectoral view of national, subnational and 
community education sector development grounded in policy reform and 
systems development based on the host-country's framework for political 
and economic development. The strong focus of USAID's education support 
is on basic education for children and the goals of the Dakar Framework 
of Education for All (EFA). USAID support for education is in countries 
most at-risk for not meeting EFA goals.
    The regions at greatest risk of not meeting EFA goals are sub-
Saharan Africa and South Asia with 80 percent of the out-of-school, 
primary-school-aged population, and the Middle East and North Africa 
with wide gender disparities. Many of these countries that are most at 
risk are those with a large Muslim population. In the aftermath of 
September 11, there is a growing interest within USAID to better 
support the educational needs and aspirations of the Muslim world in a 
way that modernizes pedagogy and curriculum, while building on the 
strengths and ideals of their religious, social and cultural 
traditions.
    Current education support in countries with significant Muslim 
populations includes Nigeria, Mali, Guinea, Benin, Uganda, Malawi, 
Egypt, Morocco, and Yemen. New education reform programs are budgeted 
for Kazakhstan, Tajikistan, Turkmenistan, Bangladesh, Pakistan and 
Afghanistan in fiscal year 2003, and in Indonesia with supplemental 
fiscal year 2002 funds. Up until mid-May, USAID had been planning for 
education interventions in Somalia.
    In addition to basic education interventions, USAID supports short-
term training and higher education collaborations in USAID countries, 
and student exchange programs such as Seeds of Peace for children from 
the Middle East.
    Question. What programs can the United States support to create a 
more moderate generation of Palestinian leaders?
    Answer. The U.S. funds numerous Palestinian NGOs and civil society 
organizations which strengthen the rule of law and help develop 
democratic processes. our most important program in this area is 
TAMKEEN, a 5-year, $33 million project providing grants to Palestinian 
civil society organizations working to develop democratic institutions 
and capacity building for NGOs. TAMKEEN has awarded dozens of grants to 
increase the competence of Palestinian civil society organizations, 
increasing their capacity to manage their operations and better serve 
their constituencies. USAID support for the Palestinian Academic 
Society for the Study of International Affairs (PASSIA) trains civil 
society leaders in policy analysis, communication skills, strategic 
planning, management and conflict resolution. The project also provides 
a structured, national-level dialogue forum for the discussion of 
democracy and rule-of-law issues. A recently-completed $1.2 million 
Civil Society Capacity-Building Project implemented by the American 
Development Foundation was focused on building the financial management 
and internal governance capacities of membership-based civil society 
organizations.
    These and other programs remain an important focus of our USAID 
program in West Bank and Gaza, and we believe they are critical to 
creating the environment in which the next generation of moderate 
Palestinian leaders will emerge.
    Question. How does Saudi Arabia plan to distribute the $100 million 
raised for Palestinians during the recent 3-day telethon held in that 
country?
    Answer. The Saudis have told us that the donations were a 
combination of cash and in-kind contributions, such as trucks and 
foodstuffs. According to the Saudis, because there are no Saudi 
organizations operating in the West Bank and Gaza, they plan to 
distribute these contributions thorough international organizations 
such as the Red Cross/Red Crescent and the United Nations.
    Question. Given the dislocation of extremists in South Asia and 
Southeast Asia, is there any evidence that Cambodia is being used as a 
transit point or safe haven for terrorists?
    Answer. The available evidence suggests that Cambodia is a transit 
point for human smuggling and trafficking in persons to other points in 
Asia by organized networks. Well-documented cases demonstrate the 
trafficking of groups from South Asia and the Middle East through 
Cambodia for purposes of economic migration. Given Cambodia's porous, 
borders and modest immigration controls the possibility that it is a 
transit point for terrorists on an isolated basis cannot be ruled out. 
Although we have no concrete information to indicate that Cambodia is 
being used by terrorist networks, we cannot ignore the possibility that 
Cambodia, as with other places in the region, could be so used.
    Question. Which elements of the Royal Government of Cambodia, 
including the military and police, are involved in--or are profiting 
from--the narcotics trade? Is Prime Minister Hun Sen profiting from the 
trade?
    Answer. Some elements of the Cambodian police and military are 
confirmed to be involved in the narcotics trade. However, senior 
Cambodian officials proclaim their intention to interdict illegal 
narcotics trafficking and production, and the Prime Minister last fall 
dismissed the former chief of Cambodia's national drug control office 
in a move that may have been prompted by corruption concerns. We have 
no evidence to indicate that Prime Minister Hun Sen is profiting from 
the narcotics trade.
    Question. Is there any evidence that suggests Cambodian banks are 
involved in the laundering of terrorist finances?
    Answer. The Royal Government of Cambodia has reported to the United 
Nations that it is cooperating fully in the global effort to freeze the 
assets of terrorist groups, including both those entities specified by 
the United Nations under UNSC 1373 and additional entities named by the 
United States. The available evidence suggests that the National Bank 
of Cambodia is giving its fullest cooperation in identifying and 
investigating suspect entities, although its own resources and capacity 
to conduct independent investigations are limited. Moreover, Cambodia 
has announced that it is in the process of ratifying the Convention for 
the Suppression of the Financing of Terrorism.
    Question. How does the Administration ensure that food and HIV/
AIDS-related assistance provided to the Cambodian people is not 
politicized by the ruling Cambodian People's Party?
    Answer. The U.S. Government provided $17 million in assistance to 
the U.N. World Food Program (WFP) this past year to feed some 1.7 
million people in Cambodia. In recent remarks related to this donation, 
the WFP Country Director stated that the food would be used for victims 
of flooding and poverty, rural development through food-for-work 
programs, as well as for the support of other emergency projects, all 
under the careful supervision of WFP. About $10 million in assistance 
for HIV/AIDS programs is administered through USAID, which follows 
regulations and guidelines about the proper distribution of benefits to 
the Cambodian population. It is not the policy of the U.S. Government 
to permit its humanitarian assistance to be used for political gain; we 
shall continue to remind the Royal Government of Cambodia of our 
policy.
                                 ______
                                 
             Questions Submitted by Senator Mitch McConnell
                         yugoslavia cooperation
    Question. Do you agree that in determining whether the Serbs are 
cooperating with the War Crimes Tribunal, the opinion of the war crimes 
prosecutor should be given considerable weight, and that we need to see 
steady progress?
    Answer. The Prosecutor of the International Criminal Tribunal for 
the Former Yugoslavia (ICTY), Carla Del Ponte, and other ICTY officials 
have valuable insight on the issue of cooperation by the Government of 
the Federal Republic of Yugoslavia (FRY) with the ICTY.
    We welcome recent steps on cooperation with the ICTY, including the 
passage of a law on cooperation, facilitation of voluntary surrenders, 
and the issuance of arrest warrants for indictees. However, we have 
repeatedly stressed that cooperation is a process, not an event. We 
continue to urge the FRY Government to fulfill its international 
obligation to cooperate fully with the ICTY. All persons indicted for 
war crimes, including Ratko Mladic and Radovan Karadzic, must answer 
the charges against them.
                                 israel
    Question. Given increased attacks on Israel's northern border, what 
is your assessment of the risk posed by Hizballah to Israel's security, 
and what assurances have Syria and Lebanon given that these attacks 
will end?
    Answer. We remain very concerned about the potential for dangerous 
escalation along the U.N.-demarcated line of withdrawal between Israel 
and Lebanon--the ``Blue Line''--and we have been actively engaged at 
the highest levels to prevent it. During the first two weeks of April, 
Hizballah launched almost daily shelling and rocket attacks on 
fortified IDF positions in the Sheba Farms area straddling the Blue 
Line. During the same period, Palestinian terrorists operating in 
Lebanon launched several rocket attacks against Israel and Israeli-
occupied territory. These attacks marked the most intense violence 
along the border since Israel withdrew from Lebanon on May 24, 2000. 
Our high level messages to Lebanon and Syria, including the Secretary's 
April 15 visit to Beirut and Damascus, urged these governments to take 
actions to restrain Hizballah and Palestinian terrorists, and our 
efforts brought results. Since April 13, there has only been one 
Hizballah attack (on April 26) and the situation along the Blue Line 
has remained relatively calm. We continue to call on all sides to 
exercise restraint and urge them in the strongest terms to avoid 
actions that risk provoking a dangerous cycle of escalation that would 
be in no one's interest.
    Question. Does the Administration consider Israel to be a front-
line state in the war against terrorism?
    Answer. Israel has been engaged in a decades-long struggle against 
terrorism and the United States has always supported Israel's right to 
defend itself. After September 11, the Administration developed a list 
of front-line states to support our war on terrorists of global reach. 
Israel has long been and remains a close counter-terrorism partner but 
is not a front-line state.
    Question. How would you describe the relationship between the PLO 
and the PA with Iran, and is there evidence that additional arms 
shipments from Iran are destined either directly or indirectly to 
Palestinian extremists?
    Answer. The Iranian Government has long opposed the willingness of 
the PLO and PA to negotiate with Israel. In addition to its support for 
Hizbollah, Iran has also provided varying degrees of aid to Palestinian 
Islamic terrorist groups such as the Palestinian Islamic Jihad (PIJ) 
and HAMAS. The weight of evidence is compelling with respect to Iranian 
involvement in the attempt to smuggle arms to the PA on the Karine A.
    We continue to monitor closely Iranian activities in this area.
    Question. Excluding Iraq's $25,000 payments to the families of 
homicide bombers, what assistance have other Arab countries pledged or 
delivered to the PLO, PA, or the Palestinian people?
    Answer. Arab governments have disbursed nearly $500 million 
annually in direct budgetary support to the Palestinian Authority, and 
at the April 25 donors conference in Oslo, they pledged to continue 
this support at least through the end of this year. Saudi Arabia and 
the UAE are the principal Arab providers of PA budgetary support.
    Given the Israeli suspension of VAT and customs revenue 
reimbursements to the PA, these contributions for budgetary support 
enable the PA to continue basic operations and pay salaries to PA 
employees. (The PA is the largest single employer in the West Bank and 
Gaza, and termination of Arab states, budgetary support would have a 
calamitous effect on Palestinian unemployment levels.) In addition, 
Arab states have contributed hundreds of millions of dollars in project 
support, both bilaterally and through the Islamic Development Bank. The 
IDB and major Arab donors are regular participants in the international 
donor coordination process, and have played a vital and constructive 
role in Palestinian economic development.
    Question. How effective have the Congressionally-imposed sanctions 
against Serbia been in securing the arrest and transfer of Slobodan 
Milosevic to The Hague and the release of ethnic Albanian political 
prisoners in Serbian jails?
    Answer. FRY and Serbian authorities have instituted a process for 
cooperation with the International Criminal Tribunal for the Former 
Yugoslavia (ICTY). The authorities in Belgrade have already taken 
several steps under this process to cooperate with ICTY and have 
committed to a range of others. We are in constant dialogue to convince 
them to move forward on a full range of reforms to institute democracy 
and rule of law and have encouraged our allies to deliver the same 
message. At times, conditions on our assistance have been helpful in 
focusing Belgrade on specific areas of concern and in providing 
additional pressure to force politically difficult decisions. However, 
these same conditions can also make things more difficult for those 
reform-minded politicians that we are most interested in supporting. 
Our goal remains a continuous, year-round process of cooperation with 
ICTY and Belgrade acting as a good neighbor in the region.
                       president aliyev's health
    Question. Given President Aliyev's health troubles, how would his 
untimely demise impact the ability to secure a political settlement to 
that conflict--and are there any other leaders in Azerbaijan that have 
the political stature necessary to successfully negotiate a solution?
    Answer. Both President Aliyev of Azerbaijan and President Kocharian 
of Armenia have been personally engaged, deeply and intensively, in the 
search for a solution to the Nagorno-Karabakh conflict. Were either to 
pass from the scene, progress towards that solution would be at least 
temporarily retarded--as occurred, for example, when President Ter-
Petrosian was succeeded by President Kocharian in 1998.
                                armenia
    Question. What confidence building measures are being considered by 
State as workable between all parties to the Nagorno-Karabakh conflict, 
and what costs are associated with these measures?
    Answer. As a Co-Chair of the OSCE Minsk Group, the United States 
supports measures designed to build confidence between the peoples of 
Armenia, Azerbaijan and Nagorno-Karabakh. The United States currently 
supports newly-established mine action centers and the training of 
local humanitarian de-mining teams in both Armenia ($1.5 million in 
fiscal year 2002) and Azerbaijan ($1.1 million in fiscal year 2002). 
These programs will enable each country to address a legacy of mines 
and unexploded ordinance that threatens civilians and hinders economic 
development in the region. The United States also funds humanitarian 
de-mining activities in Nagorno-Karabakh ($300,000 in fiscal year 
2002). The United States has also budgeted $1.5 million for de-mining 
and structural repairs to a water project on the Armenian side of the 
border; once completed, the project would provide water to farmers in 
both Armenia and Azerbaijan.
    Although the Minsk Group Co-Chairs have discussed a wide range of 
confidence-building measures with officials in Armenia, Azerbaijan and 
Nagorno-Karabakh, the parties have not been able to agree on terms for 
projects that require cross-border cooperation. The parties have been 
more receptive to coordinated-yet-independent projects that do not 
require direct interaction, such as a rodent-control project along the 
line-of-contact that will benefit villages in both Armenia and 
Azerbaijan. The Co-Chairs will continue to explore options for 
promoting measures, designed to improve communications and reduce 
tensions among all parties to the conflict.
                                 turkey
    Question. How can Turkey be best persuaded to open a rail link that 
runs from Turkey through Armenia, and onto Georgia and Azerbaijan? Will 
such a rail link contribute to America's war on terrorism?
    Answer. The United States is a strong proponent of helping all 
sides in the south Caucasus region work towards building a peaceful, 
prosperous and stable future for all the peoples of the region. We 
actively support the efforts of Armenia, Azerbaijan and its neighbors 
in finding a permanent and fair settlement to the Nagorno-Karabakh 
dispute, and are encouraged by the recent trilateral meeting in 
Reykjavik between Turkey, Armenia and Azerbaijan.
    We support the normalization of relations between Turkey and 
Armenia, which will bring with it a natural increase in trade, 
communication and transportation links, including rail connections. 
Agreement by all sides to expand trade in the region would foster 
greater economic opportunity and contribute to political stability. 
This would contribute to U.S. objectives for the region, including the 
war on terrorism. We are pleased with the recent increase in bilateral 
contacts between the two countries, and have told both we support 
normal crossborder activity including opening the railroad.
                                ukraine
    Question. What is State's assessment of respect for the rule of law 
in Ukraine, and what difficulties are United States businesses 
encountering in that country?
    Answer. Respect for the rule of law in Ukraine is uneven at best. 
Although the Constitution provides for an independent judiciary, the 
judiciary is subject to considerable political interference from the 
executive branch and also suffers from corruption and inefficiency. We 
have pressed Ukraine to create a business environment grounded in the 
rule of law in order to attract investment. Though some progress hag 
been made, poor corporate governance, including inadequate protection 
for shareholder rights, and the lack of confidence in investors, 
ability to enforce commercial agreements and defend their legal rights 
remain the biggest impediments to increased investment.
    United States businesses operating in Ukraine stress the need to 
improve the overall transparency of the regulatory and decision making 
processes, to ensure consistent application of laws, and to provide for 
an independent judiciary. These issues will continue to be a focus for 
our bilateral discussions.
    Question. Given the difficulty United States NGOs have encountered 
in registering with the Ukraine Government, should a portion of 
assistance be withheld to stimulate greater cooperation?
    Answer. The Government of Ukraine has voiced objections to the 
registration of several civil society activities administered by United 
States NGOs. In our meetings with the Ukrainians, we have stressed that 
the United States must be assured that it can work across a full range 
of assistance areas, and that we view democracy and civil society 
development as an integral part of our overall assistance program to 
Ukraine. In particular, we have warned the Ukrainians that failure to 
register these projects, which are standard elements of USAID programs 
elsewhere in the world, could have repercussions for the rest of our 
assistance.
    After extensive discussions, the Government of Ukraine registered 
three of the five projects in question. To date, we have been unable to 
resolve several outstanding issues concerning the remaining two 
projects, which are being implemented by the National Democratic 
Institute and International Republican Institute. We are currently 
engaged in intensive discussions with both the implementers and the 
Ukrainian Government in an effort to reach a solution agreeable to all 
sides.
                                 burma
    Question. What is your assessment of Japan's support for democracy 
in Burma, and what measures has the Administration taken to shore up 
support for the National League for Democracy?
    Answer. The United States and Japan share the same goals in Burma: 
transition to a civilian, democratic government and national 
reconciliation. Both endorse humanitarian assistance programs in non-
governmental channels. However, the United States and Japan differ on 
the timing of development assistance. We believe development assistance 
now is premature.
    The United States closely coordinates our policy toward Burma with 
other like-minded countries in order to formulate the most effective 
support for democracy and political reform. Most recently, the United 
States participated in a multilateral meeting at the United Nations 
with U.N. Special Envoy Razali on how to move the talks in Rangoon 
forward. There was broad agreement that the release of Aung San Suu Kyi 
was an event to be welcomed, but that other significant concrete steps 
would be needed before going beyond humanitarian assistance.
    Question. Are grants provided to the National Zoo's CRC Foundation 
by the U.S. Fish and Wildlife Service to protect elephants in Burma in 
compliance with U.S. policy objectives toward Burma?
    Answer. Grants provided to the National Zoo's CRC Foundation by the 
U.S. Fish and Wildlife Service to protect elephants in Burma are wholly 
consistent with U.S. policy objectives toward Burma. The funds go to 
independent non-governmental organizations for conservation activities 
and are not used in any way by the Burmese Government.
                                colombia
    Question. What financial commitments has the current Colombian 
Government made to this pipeline protection initiative, and is the 
initiative part of a broader, unified strategy to counter the FARC and 
paramilitaries?
    Answer. The Government of Colombia (GOC) recognizes that reducing 
terrorist attacks on the Cano Limon pipeline--and the resulting 
economic losses--is crucial to its efforts to meet the country's 
overall security and social needs. To do so, the GOC is: (1) creating a 
new brigade, the 5th Mobile Brigade, to provide enhanced protection for 
the Cano Limon pipeline; (2) developing a plan to increase police 
presence in the area and establish a special counterterrorism unit of 
the Prosecutor General's Office; (3) training the first of 62 special 
``Carabinero'' squadrons, with each having 150 police officers (the 
first three squadrons will be assigned to Arauca Department, where the 
pipeline originates); and (4) undertaking various social action 
projects through the Colombian Investment Fund for Peace, an autonomous 
State agency, with 64 projects, whose budgets total $2 million, already 
being executed. The Arauca ``Carabinero'' squadrons are part of a 
Colombian national strategy to increase security and the rule of law 
through the re-insertion of Colombian National Police into zones of 
conflict.
    Question. Does this assistance draw the United States into the 
middle of Colombia's civil war? What is our exit strategy?
    Answer. No. The United States strongly supports Colombia's programs 
to combat narcotrafficking and terrorism, promote socio-economic 
development, strengthen democratic institutions and protect human 
rights. This pipeline protection proposal was developed to help 
Colombia recover the nearly $500 million in royalties and revenues that 
it lost in 2001 due to terrorist attacks on the pipeline. Reducing 
these losses will provide the Colombian Government with more resources 
to invest in its efforts to meet the security, social and economic 
needs of its citizens.
    If Congress approves the new authorities that have been requested, 
U.S personnel are expected to perform essentially the same roles that 
they have over the past two years in implementing our support for Plan 
Colombia. This would include providing training and equipment, and 
logistical and intelligence support to human rights-vetted units of the 
Colombian security forces. We are also committed to maintaining the 
ceilings on U.S. permanent and temporary military personnel and U.S. 
civilian contractors providing support for Plan Colombia.
    The programs and new authorities we have requested will help 
strengthen Colombia's ability to defeat narcotrafficking and terrorism. 
However, this is clearly a commitment that will require the United 
States to provide Colombia with substantial assistance over a multi-
year period.
                     colombia--plan colombia assets
    Question. How will the proposed diversion of assets from Plan 
Colombia impact counternarcotics efforts?
    Answer. The Administration's fiscal year 2003 budget request 
includes $98 million in Foreign Military Financing (FMF) for Colombia 
to provide training and equipment to enhance the Colombian military's 
ability to protect the strategic Cano Limon-Covenas pipeline. The 
counter-terrorism supplemental submitted to Congress also requests $6 
million in FMF to begin some of this training earlier. Because the 
proposed critical infrastructure protection program will be funded 
through FMF, it will not compete for Colombian counternarcotics funds 
or draw from fund sources that have traditionally supported 
counternarcotics activities in Colombia.
    Additionally, rather than siphoning off resources, we believe that 
this initiative will help the Government of Colombia preserve and put 
to productive use resources that are currently lost through acts of 
terrorism. In 2001, the pipeline was attacked 170 times, causing it to 
be shut down for 240 days and costing Colombia nearly $500 million in 
lost revenues and royalties, Helping Colombia prevent further 
disruption of this important revenue source will allow the Government 
of Colombia to generate major resources to meet pressing social, 
developmental and security needs. In turn, increased Colombian 
investment in these areas is key to accomplishing our long-term goals 
in Colombia: reinforcing democracy, reestablishing the rule of law, 
strengthening the legal economy, and reducing the production and 
trafficking of illegal drugs.
                                colombia
    Question. When President Pastrana was in town last week, he 
indicated to members and staff of this Subcommittee that his top 
priority was the resumption of the air interdiction program in 
Colombia. Where does the pipeline security proposal rank in terms of 
his priorities?
    Answer. President Pastrana publicly requested U.S. assistance for 
pipeline security in October, 2001 and Colombian officials had begun 
discussions with us on this project even earlier. The Colombian 
Government clearly recognizes that reducing its losses from terrorist 
bombings of the Cano Limon pipeline is a key factor in developing the 
resources it needs to address the country's security, economic and 
social problems. President Pastrana has also repeatedly stated that he 
considers the air interdiction program in Colombia an important 
component in the efforts our two countries are making to reduce the 
flow of narcotics to the United States and one which he hopes to see 
resumed as quickly as possible.
    Question. Is it prudent to embark on a new policy direction in 
Colombia when elections are scheduled for May of this year, and a new 
administration will take office in August? Do we know the policy 
directions of the new administration, and can we hold an incoming 
administration responsible for commitments made by President Pastrana?
    Answer. Widespread Colombian dissatisfaction with the FARC's 
failure to negotiate seriously and its continuing outrages culminating 
in the hijacking of a civilian airliner and kidnapping of a prominent 
senator, prompted all of Colombia's leading presidential candidates to 
back strongly President Pastrana's February 20 decision to end talks 
with the FARC as well as to strengthen and professionalize Colombia's 
military.
    We have also found broad support among the candidates for 
continuing the general thrust of U.S. policy: counternarcotics, 
counter-terrorism, improving human rights conditions, and improving 
Colombia's economic situation. All have backed President Pastranals 
request that equipment provided by the United States for counter-
narcotics efforts be used for counter-terrorism as well.
    Our aim is to continue our excellent relations with President 
Pastrana while laying the groundwork for our policies to transition 
smoothly into the next Colombian administration. We have already 
engaged the leading presidential candidates on these issues, and will 
hold more intensive talks with the president-elect after Colombia's 
elections.
    Question. In your statement, you say the ``. . . the Government of 
Colombia must also fully commit to this task [of combating terrorism''. 
What is your assessment of the government's track record in fulfilling 
previous obligations, specifically as they relate to Plan Colombia?
    Answer. The Government of Colombia is well on its way to funding 
its commitment under Plan Colombia, having spent $2.6 billion for Plan 
Colombia-related infrastructure projects, including a hospital in 
Puerto Guzman, a school in Orito and a farm to market road in Mocoa, as 
well as projects regarding human rights, humanitarian assistance, local 
governance, and the environment. Colombia has also spent $426 million 
on social services and institutional development, including family 
subsidies and programs for job creation and youth training.
    The Government of Colombia's contribution to Plan Colombia is being 
used for counterdrug efforts and social and economic development 
projects. These projects include social and infrastructure programs in 
Putumayo Department, in southern Colombia, the site of the heaviest 
concentration of coca growth. Colombia has also continued to modernize 
its armed forces, boosting the number of professional soldiers from 
22,000 to 53,000 and acquiring new equipment. It has stabilized its 
economy in accord with IMF guidelines; and undertaken an aerial 
eradication program resulting in the destruction of unprecedented 
amounts of coca.
    The Colombian Government is unquestionably committed to resolving 
the crisis. President Pastrana's long commitment to the peace process 
and his eventual decision, after much deliberation, to reestablish 
control of the demilitarized zone were born of that commitment.
    Still, Colombia needs to do more. Colombia currently spends 
approximately 3.5 percent of GDP on security, a figure that is not 
sufficient for a country facing the security threat posed by Colombia's 
terrorist groups. We have stressed in our meetings with senior 
Colombian Government officials that Colombia needs to increase the 
resources it devotes to security, and we have also begun a dialogue 
with the leading presidential candidates on this issue.
                                cambodia
    Question. What is the Administration' assessment of narcotics 
production and trafficking in Cambodia, and does State share the U.N.'s 
assessment that the country has become a major heroin smuggling route 
to the West?
    Answer. Cambodia, although not a major producer of opiates or coca-
based drugs, is a transit route for Southeast Asian heroin to overseas 
markets including Australia, Europe, and the United States. There is 
little hard information on the scale of heroin trafficked through 
Cambodia, but the amount of heroin seized in the United States in 
recent years that is traceable to or through Cambodia is small.
    Marijuana is cultivated mainly for export, but is well below the 
quantities specified for countries on the majors list. Quantities 
coming to the United States are not sufficient to have a significant 
impact on the United States.
    In the past couple of years Cambodia has experienced, especially in 
urban areas, a rapid and significant increase in amphetamine-type 
stimulant abuse, which the government has characterized as a serious 
social problem.
                              afghanistan
    Question. What is the level of development that the Administration 
hopes to achieve in Afghanistan?
    Answer. We hope to rebuild the political and economic framework 
that will prevent the return of terrorism, fight drug trafficking and 
avert large-scale humanitarian crises. The first step in this process 
is to address immediate needs--humanitarian and security.
                                 nepal
    Question. What are the linkages, if any, between the Maoist 
insurgents in Nepal and al-Qaeda?
    Answer. The State Department has no evidence linking the Maoists to 
al-Qaeda. Nevertheless, Nepal's brutal insurgency threatens to bring 
further instability and human suffering to South Asia, a critical front 
in the war on terrorism. There is growing concern that the instability 
resulting from the insurgency might provide the conditions under which 
terrorists operating in the region could find safe haven in Nepal.
    Question. Does any conclusive evidence exist that demonstrates 
migration of extremists from Afghanistan or Pakistan to Nepal?
    Answer. The State Department has no evidence linking the Maoists to 
any extremists specifically emanating from Pakistan or Afghanistan. 
Nevertheless, Nepal's brutal insurgency threatens to bring further 
instability and human suffering to South Asia, a critical front in the 
war on terrorism. There is growing concern that the instability 
resulting from the insurgency might provide the conditions under which 
terrorists operating in the region could find safe haven in Nepal.
                    middle east economic initiative
    Question. How does this Initiative differ from programs and 
activities already conducted by USAID and State in the Middle East?
    Answer. We will be using the $50 million requested as part of the 
Administration's Fiscal Year 2002 Supplemental Appropriations bill to 
fund new high impact/high visibility projects immediately in three key 
areas: economic reform/private sector development; education; and rule 
of law/civil society. We will, simultaneously, be reviewing all of our 
existing economic assistance programs across the region to insure that 
our assistance money is being spent in a manner consistent with our 
national interest post-September 11.
    The supplemental funds will allow us to move immediately to fund 
quick-disbursing projects in the areas mentioned above. We are 
particularly interested in insuring the money funds projects that reach 
people at a grass roots level, where the terrorists themselves are most 
effectively recruiting. The supplemental funds provide us flexibility 
to fund new projects immediately, while we undertake the process of 
reviewing and potentially reprogramming existing assistance projects.
    Question. How does the MEEI promote democracy and good governance 
in the region?
    Answer. The MEEI will provide funding for a range of activities 
that promote democracy, rule of law and good governance. These will 
include: support for democratic reforms underway in countries like 
Bahrain, Qatar and Morocco; support for media reform, journalist 
training and exchange programs; assistance for polling organizations; 
and funding for think tanks and business associations. We will provide 
direct election and campaign support, through local and international 
NGOs, for new candidates, including women. Funds may also be used to 
support parliamentary training activities.
    Question. Which countries are targeted through the Initiative, and 
how much of these funds are destined for Egypt?
    Answer. All Middle East countries, with the exception of Iran, 
Iraq, Libya, and Syria are eligible to participate in the Initiative. 
On the question of assistance to Egypt, although no decisions have been 
made, we anticipate that its participation in the initiative will be 
funded largely by redirecting existing assistance programs.
    Question. Does the Initiative include promoting free and 
independent media throughout the Middle East?
    Answer. Yes. Exchange and training programs, including for 
journalists and other media professionals from the region, will be an 
integral part of the initiative.
                      millennium challenge account
    Question. When does the Administration plan to initiate this 
Account, and should Congress expect a request for funds for fiscal year 
2003?
    Answer. The Administration plans to include the Millennium 
Challenge Account in the President's fiscal year 2004 budget request.
    The President's new approach to development gives us an opportunity 
to show tangible results for U.S. taxpayers' investments in foreign 
assistance. We hope we can count on your support in promoting this new 
approach. We look forward to working with Congress as we move forward.
    Question. Does the Administration support increased funding for 
critical rule of law and democracy programs in China, particularly with 
that nation's entry into the WTO?
    Answer. Yes, we support increased funding for rule of law and 
democracy programs in China.
    The United States for many years has stressed the importance of 
rule of law and has worked to encourage democratic practices. China's 
accession to the WTO makes progress in these areas even more important, 
as openness to and integration with the world economy demands a legal 
system that is insulated from political influence, operates in a 
transparent manner, and treats all citizens (and officials) as equals. 
China recognizes some of the shortcomings of its legal system and is 
seeking to improve upon them. We believe the United States can play a 
constructive role in helping China move in those directions. In 
addition to continuing to work on promoting rule of law and democracy 
in bilateral and multilateral fora, this year the State Department will 
significantly expand its efforts to support these goals directly with 
programs in China.
    In fiscal year 2001, $2 million was earmarked for rule of law 
programs in China; this year that earmark has increased to $10 million, 
and the mandate for these funds has broadened to include not only rule 
of law but also human rights and democracy. The State Department 
welcomes the opportunity to make an even larger impact on progress in 
these critical areas, and has focused on programs involving legal 
reform, rights awareness, and judicial independence, transparency and 
popular participation in government, and fostering independent 
government. Democracy, human rights, and rule of law programs are 
effective as complements to our bilateral human rights dialogue. As 
long as possibilities to promote these objectives in China continue to 
expand, we can effectively program increased levels of funding.
    Question. The upcoming Chinese leadership retreat this summer is 
expected to yield changes in official Chinese Politburo positions. Do 
you expect these changes to strengthen the hand of economic reformers, 
or will hard-line elements within the Politburo emerge?
    Answer. Events including the retreat at Beidaihe in the summer, the 
16th Party Congress in the fall, and the 10th National People Congress 
next spring are projected to result in significant changes in China's 
leadership. We do not expect the leadership changes to lead to any 
reversal of the long-term policy course of economic reform originally 
set out by Deng Xiaoping. The process of economic reform, symbolized by 
China's entry into the World Trade organization in December 2001, has 
advanced China's national interests. If there were negative 
developments in the global or Chinese economies, this could cause 
setbacks for economic reform in China, but the long-term trend toward 
increased reliance on market mechanisms rather than central planning is 
likely to continue.
    Question. Chinese Vice President Hu Jintao is widely considered to 
be a successor to Chinese President Jiang Zemin. What is the 
Administration's view of Mr. Hu's commitment to economic and political 
reform within the PRC?
    Answer. The Chinese will determine their new leadership, including 
a successor to President Jiang Zemin, during upcoming meetings this 
year and in the spring of 2003. There is every indication that the 
Chinese Government's commitment to economic reform will be sustained 
through the course of imminent leadership change in China. Vice 
President Hu's remarks place him solidly in this mainstream view. With 
regard to political reform, you will recall that we have consistently 
urged that Chinese authorities establish and implement international 
standards of human rights protection. Our annual Human Rights Reports 
have catalogued our view of the shortcomings in this regard. The 
Chinese will have to speak for themselves as to the prospect for 
increased pace and scope of political reform; for our part, we will 
continue to urge improvements on the ground in China. Moreover, we will 
continue to urge China's increased interaction with the U.N. Commission 
for Human Rights and other international organizations that promote 
fundamental freedoms.
    Question. Increasingly, reports of social and economic unrest in 
the Chinese countryside hint at deep-rooted challenges that face the 
Chinese Government as it implements economic and other reforms. Do you 
believe that such unrest can be managed by the Chinese Government 
without recourse to violence, and has the Administration expressed 
concern over reports of the use of force to quell dissent in the 
countryside?
    Answer. China has implemented far-reaching social and economic 
reforms in the last 20 years and faces enormous challenges as it 
continues to move to a more open economy and society. The United States 
will continue to urge the PRC to respect the basic human rights of its 
citizens, which include freedom of assembly, freedom of association, 
and freedom of speech and conscience. We are aware of recent protests 
stemming from concerns over economic dislocations and other 
difficulties. We believe the Chinese Government can and should manage 
these challenges without resorting to violence. Grassroots elections 
and good governance are seen as means of defusing tension at the local 
level. We have repeatedly made it clear to the Chinese Government, 
through our Human Rights Reports and through high-level exchanges, that 
the Chinese Government should respect fully both the human rights of 
its citizens, including the right to peaceful protest, and China's own 
laws, which mandate direct elections at the village level. We will 
continue to closely monitor ongoing developments, particularly the 
Chinese Government's response to protests.
    Question. What is your assessment of the state of democracy and the 
rule of law in Hong Kong?
    Answer. In the past year, there was continued public pressure on 
Hong Kong's political system to evolve toward greater accountability 
and democratization. Despite the public debate over the pace of 
democratizing elections for the legislature and chief executive, the 
Hong Kong Government continued to state that the time was not 
appropriate to consider changes to Hong Kong's election arrangements. 
We continue to urge the Hong Kong Government to move forward more 
quickly to realize full direct elections. We continue to support the 
advancement of democracy in Hong Kong at a pace that is consistent with 
the aspirations of the Hong Kong people.
    The rule of law and an independent judiciary remain pillars of Hong 
Kong's free and open society. Since 1999, the Hong Kong Government has 
not re-used a mechanism requesting that China's National People's 
Congress Standing Committee reinterpret the Basic Law, Hong Kong's 
constitution.

                         CONCLUSION OF HEARINGS

    Senator McConnell. That concludes our hearings. The 
subcommittee will stand in recess subject to the call of the 
Chair.
    [Whereupon, at 12:10 p.m., Wednesday, April 24, the 
hearings were concluded, and the subcommittee was recessed, to 
reconvene subject to the call of the Chair.]













      FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS 
                  APPROPRIATIONS FOR FISCAL YEAR 2003

                              ----------                              

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.

                       NONDEPARTMENTAL WITNESSES

    [Clerk's note.--The subcommittee was unable to hold 
hearings on nondepartmental witnesses. The statements and 
letters of those submitting written testimony are as follows:]
      Prepared Statement of the International Republican Institute
   the importance of democracy assistance programs since september 11
    Thank you for the opportunity to discuss the importance of 
democracy assistance programs post-September 11. I would especially 
like to thank Senator Mitch McConnell for his continued support of 
these programs.
    In a November 27, 2001 testimony to the U.S. Commission for 
International Religious Freedom Congress, IRI's Vice President Georges 
Fauriol stated that ``in a free society, religious freedom and moral 
principles associated are fundamental measurements of social conduct, 
yet their practical application is often caught in crisis.'' September 
11 is a dramatic manifestation of such a crisis.
    Indeed, the underlying value system associated with the September 
11 terrorist attacks seriously undermines the United States' efforts to 
create a more democratic, stable, and prosperous world. It underscores 
the crucial need for assistance programs to expand, strengthen, and 
achieve sustainable democracies.
    The war on terrorism is not only a military struggle but also an 
ideological one. Through our programs' focus on democratization, IRI 
addresses terrorism's root causes not solely the symptoms. The need for 
such democratic assistance is underscored by a single truism: rarely 
have democracies harbored terrorists.
    In our efforts to provide democracy and governance assistance, 
IRI's point of reference is simple: If no viable political parties 
operate in a country, political transformation to democracy is limited. 
Political parties provide a measurement tool for democracy.
    Thus, it is a mistake to assume that a broad focus on human rights 
issues in and of itself may necessarily improve the prospects for 
democratic governance. Effective democracy assistance must have long-
term, proactive institutional engagement outlook which goes beyond 
dramatic descriptions of human rights abuses.
    Indeed, democracy assistance needs to bring about a change in 
political culture. To achieve this change requires an institutional 
engagement of political parties and instruments. From such dialogue, a 
foundation for exercising fundamental freedoms and building vibrant 
democratic systems will emerge. Without this interaction, terrorism's 
zealous restrictions on alternative and individual expressions of 
thought and action will continue. The product of such continued 
repression will be more conflict.
    Thus, U.S. democracy assistance must include programs that exclude 
cultural relativism and foster institutional engagement of political 
parties and other instruments.
                  new and old challenges mesh together
    A major challenge in IRI's work, even more pronounced after 
September 11, is the unbalanced support for civil society over 
political parties. Donor institutions often prefer to support 
``neutral'' recipients and activities. Civil society projects are 
typically more politically correct, easier to manage, and more open-
ended. These projects at times generate a self-perpetuating appetite 
for involvement and dubious evaluation criteria.
    Another challenge is the donors' poor understanding, flexibility 
and timeliness regarding the importance of political parties. Because 
the parties are seen as openly engaged in politics, the standards of 
any support are inevitably tougher, and often result in unnecessary 
funding delays or missed opportunities. Bureaucrats, practitioners and 
diplomats often shy away from direct engagement. Instead, they support 
political parties by exploring partisanship on a wider world stage. 
Consequently, there are no political party assistance programs 
sponsored by USAID in Latin America or Afghanistan, among others.
    By contrast, shifting investments within civil society is seen as 
generating a broader base of institutional and communal development. 
This perception underscores the prevalent view among donors that 
supporting political party development actually supports a narrower 
domain, one that assumes a common societal agreement about basic 
political terms of reference.
                           three propositions
    Post-September 11 IRI operates with the following three 
propositions:
    First, the war on terrorism and democracy advancement often 
overlap, but are not always symbiotic. In executing the war on 
terrorism, the United States at times engages the cooperation of 
countries and regimes which may be deficient in democratic practices. 
There is a need for reconciling a conceptual tension between current 
U.S. foreign policy interests and long-term democratization interests.
    IRI is now able to engage governments in democratic developments 
that previously were uninterested. IRI's in-country experiences suggest 
democratization assistance programs and security concerns are equally 
important. A useful corollary is that in those regions of the world not 
directly in the focus of the war against terrorism, such as in Latin 
America, lack of attention of democratic assistance may result in a 
rollback of democracy-building and a return to authoritarian-style 
government, with unforeseen consequences.
    Second, conventional humanitarian assistance should not be confused 
with democracy assistance. While agricultural development, health care 
and food safety for adversely affected populations are very important, 
they are not fundamental factors in developing democratic systems of 
governance. Commodity assistance is frequently welcomed by undemocratic 
regimes, such as the one in Haiti, because these regimes often use it 
to further their political interests.
    Through IRI's individual programs, we strive to develop regional 
long term strategies for democracy assistance. The long-term United 
States strategy in Afghanistan and the Central Asia region is unclear 
besides an USAID humanitarian assistance program focused on developing 
agricultural commodities. This creates the perception that the United 
States is not seriously interested in stabilizing the region. In order 
to demonstrate otherwise, IRI stands ready to expand and strengthen 
democracy in the wake of September 11.
    Third, sequencing between political party development and civil 
society is critical. In a fundamental democratic equation civil society 
represents demand and political parties supply. Without political 
parties, democracy cannot work, and civil society becomes marginalized. 
Venezuela is a textbook example of how imploding political parties lead 
to more authoritarian alternatives.
    Political parties not only disseminate ideas, demands, and 
resources, but also link governments to civil society. To effectively 
govern, therefore, political parties need a democratic infrastructure.
                            recommendations
    IRI experience with political parties suggests a set of criteria 
helpful to U.S. policy makers:
    (1) A strategic political party dialogue with diverse segments of 
the political community has significant payoffs.
    (2) There is a need for a long-term understanding of the societal 
interests political parties are likely to sustain.
    (3) In some special circumstances, political party engagement 
ensures a residual interest in, or protection of, issues and 
constituencies in countries viewed by Washington as constituting 
troubling relationships.
    (4) Changing public opinion through democratic political party 
development positively impacts attitudes towards fundamental human 
rights and thus toward the stability, legitimacy, and integrity of the 
democratic system. (5) Sustained engagement might ensure increased 
credibility and a future brokering role as a goodwill gesture.
    More specifically, U.S. Government donor agencies need to recognize 
that we often operate in crisis environments requiring flexibility and 
timely responses. Thus funds for democracy assistance should not always 
be shaped by traditional funding criteria. Simplifying funding 
mechanisms for crisis situations will greatly help meet the new demands 
before IRI.
    The National Endowment for Democracy (NED), created by President 
Reagan with bi-partisan support in Congress, is an institution uniquely 
flexible and knowledgeable to support democracy assistance programs. 
Supporting the NED with resources to systematically address the new 
issues facing democracy assistance is an urgent need. New funding 
mechanisms created at USAID and the State Department would better fund 
Ned's programs.
    In the post-September 11 environment, the United States must 
penetrate the cultural wall of authoritarianism by vigorously promoting 
democratic values. To achieve such aims, we need to promote political 
party programs as well as provide civil society programs and 
humanitarian assistance.
                                 ______
                                 
      Prepared Statement of the National Democratic Institute for 
                         International Affairs
    The National Democratic Institute (NDI) appreciates this 
opportunity to present its views on U.S. democracy assistance programs.
               promotion of democracy and u.s. interests
    The worldwide democratic revolution of the 1990s demonstrated the 
nearly universal appeal of democratic values and cemented a unique 
leadership role for the United States in advancing those values. A 
bipartisan policy consensus emerged that nothing better serves the 
interests of the United States than the promotion of democratic 
practices and institutions.
    Since September 11th, some analysts have argued that strategic 
considerations should take precedence over policies that promote 
respect for human rights, religious tolerance and democratic decision-
making.
    The notion that there should be a dichotomy between our moral 
preferences and our strategic goals is a false one. The United States' 
ultimate foreign policy goal is a world that is secure, stable, humane 
and safe, and where the risk of war is minimal. Yet the undeniable 
reality is that geostrategic ``hot spots'' most likely to erupt into 
violence are found, for the most part, in areas of the world that are 
nondemocratic.
    NDI firmly believes that the United States should attach the 
highest priority to democratic development as an essential element of 
its foreign assistance programs. The promotion of democracy should be 
seen as a robust and necessary element of our strategy to confront the 
new global threat of terror.
    Terrorism and political extremism pose an immediate security threat 
that must be confronted directly and forcefully. Concurrently there 
must be a new urgency in the promotion of the rule of law, pluralism 
and respect for human rights. Democracy and human rights are not only 
ideals to be pursued by all nations--they are also pragmatic tools that 
are powerful weapons in the worldwide confrontation of terror and 
extremism.
    In his address to Congress in the aftermath of September 11, 
President Bush said, ``Every nation in every region now has a decision 
to make. Either you are with us or you are with the terrorists.'' His 
warning registered everywhere, precisely because it was universally 
understood that terrorism is a threat to civilization and those who 
sustain the threat will suffer the consequences.
    Most governments, including undemocratic ones, understand that 
terrorism threatens them as much as it does the United States. Indeed, 
many leaders in countries yet to join the democratic community have 
joined the U.S.-led coalition because terrorism threatens their own 
survival in power. Our allies in Uzbekistan, Tajikistan, Kyrgyzstan, 
Kazakhstan, Pakistan, Saudi Arabia, and Egypt have faced political 
extremism and appreciate what the Talibanization of their societies 
would mean.
    However, the price for their cooperation should not include an 
open-ended sanction for their governing style, nor should the price of 
coalition exclude, even unintentionally, support for democratizers.
    Political extremists live in a symbiotic relationship with 
nondemocratic regimes. Autocracy, corruption, and the lack of 
accountability feed powerlessness, poverty, and despair. 
Authoritarianism bars change within the system; among its subjects, it 
produces easy rationales for extra-legal methods. Radical groups 
cynically exploit the discontent created by such an environment, in 
which the only outlet for political expression becomes the mosque. Some 
disaffected people come to relish their role as ``fighters'' against 
what they perceive as corruption and repression.
    During the 1980s, an important lesson was learned about political 
transformations in countries like the Philippines and Chile--that 
political forces on the far left and far right enjoy a mutually 
reinforcing relationship, drawing strength from each other and, in the 
process, marginalizing the democratic center. Prospects for peace and 
stability only emerged once democratic political parties and civic 
groups were able to offer a viable alternative to the two extremes--a 
``third way.'' These democratic forces benefited from the solidarity 
and support they received from the international community and, in the 
United States, Republicans and Democrats joined together in bipartisan 
efforts to champion their cause.
    As the United States pursues its current strategic imperatives with 
allies like Pakistan, Uzbekistan, Kazakhstan and Egypt, we can also 
work to promote a ``third way'' between authoritarianism and religious 
extremism. As much as the strongmen whose cooperation we need 
presently, democracy-builders in these countries also are our allies 
against political extremism. Their voices are important in challenging 
the misconception that democracy and Islam are incompatible, and they 
are a force that can build a genuine constituency for peace, 
development and prosperity.
    However, many democratic activists in the Middle East and Asia now 
fear that they might be caught in a kind of ``squeeze play'' between 
governments that are using the call to action against terrorism to root 
out even benign forms of political participation, and fundamentalists 
who have always regarded democratic reform as a threat to their vision 
of a religious state.
    The U.S. agenda in these countries can include help for the war 
effort, as well as support for those working for freedom of speech and 
expression, for fair elections that reflect the will of the voters, for 
representative political institutions that are accountable to the 
public, and for judiciaries that uphold the rule of law.
    There are many examples of democracy building successes, even in 
regions of the world most afflicted by terrorism and extremist 
violence.
    In Pakistan, the Human Rights Commission has been organizing 
community groups to address problems of freedom of the press and to 
encourage women to participate in political life. In Uzbekistan, the 
Human Rights Society is supporting the legal right of political 
movements to register with the state as official entities.
    In Kazakhstan, a coalition of nongovernmental organizations has 
lobbied the Parliament to overturn legislation that would eliminate the 
last remnants of independent media. In Egypt, a number of civil society 
groups led by respected academic Saad Eddin Ibrahim monitored 
parliamentary elections and reported on abuses.
    Harassment or jail has often been their reward, but in all cases, 
these democratic activists are not trying to overthrow governments--
they are trying to take away the lifeblood of extremism by providing 
political space for debate and peaceful dissent.
                           future challenges
    Even in countries which are widely regarded as democratic success 
stories, ``next generation'' democracy challenges, such as corruption, 
economic progress, political party reform, technological issues like e-
governance, women, youth and minority participation, leadership 
development and addressing public apathy and disaffection, must be 
tackled through greater linkages between the citizenry and political 
institutions and politicians.
    NDI has never believed that democracy promotion is a panacea but 
sees these activities as one element of a mix of foreign aid and 
development initiatives that include economic development and socio-
political considerations. But economic reconstruction efforts in 
Afghanistan, for example, are unlikely to succeed in the long term 
unless democratic political institutions are also developed.
    Democracy promotion programs, to be effective, must identify 
specific challenges in each country, and address those challenges while 
taking culture, tradition and history into consideration.
    It could be demoralizing and ultimately self-defeating to yield 
ground to those professional cynics who describe democratic development 
in Hobbesian terms in which war, poverty and autocracy are the natural 
state of affairs. To them, the promotion of democracy is at best a 
distraction. This pessimistic view of the world contradicts the reality 
on the ground where courageous democrats with outside support can help 
realize their people's democratic aspirations.
    The realpolitik approach is to support democratic change and take 
on the tough work that will lead to stability and economic growth in 
the long term. Who can doubt that the support the United States 
provided Solidarity in Poland, the pro-democratic forces in Chile, 
those struggling against apartheid in South Africa or Milosevic in 
Serbia have not been worthwhile investments in peace and prosperity.
                 elements of political democratization
    While there is no single model for a democratic political system, 
the components of a political democratization process are fairly 
common. Each represents key mechanisms of conflict resolution within a 
society:
    (1) Civic culture.--This is the most fundamental level of democracy 
promotion, where the goal is to educate citizens on their rights and 
responsibilities.
    (2) Intermediary organizations.--Citizens' organizations such as 
labor unions, business groups and other associations are needed. In 
societies where these groups have not existed, outside assistance to 
develop them is required.
    (3) Political parties.--These are the vehicles for healthy 
political competition, the institutional mechanisms that allow a 
society to aggregate ideas. If these groups are not organized 
democratically, or if they fail to perform their role, the democratic 
system will be threatened.
    (4) Election systems.--Developing election processes capable of 
producing a valid and representative reflection of the electorate's 
will is essential in establishing legitimate governments.
    (5) Governmental institutions.--Executive branches, parliaments, 
judiciaries and local governments must function effectively, with 
openness and integrity.
           role of u.s. non-governmental organizations (ngos)
    While the U.S. Government can set the tone, and foreign aid can 
provide needed resources for democratic development, much of the real 
work must be done by non-governmental organizations. Groups such as NDI 
are capable of assuming responsibility, yet are not constrained by the 
stringent rules of formal diplomacy. NGOs can readily share 
information, knowledge and experiences with groups and individuals who 
are pursuing or consolidating democracy, sometimes without the 
cooperation or sanction of their government.
    Moreover, in countries where one of the issues being addressed is 
the paucity of autonomous civic and political institutions, the 
fundamental idea that government ought not to control all aspects of 
society can be undermined by a too-visible donor government hand in the 
development and implementation of these programs.
    NGO initiatives must grow out of the needs of democrats struggling 
on the ground in the host country. The work should always be in the 
open and should be conducted with partners committed to pluralism and 
nonviolence. At the same time, consultation is necessary with the 
Congress, USAID missions and embassies. When public funds are used, 
transparency and accountability should always prevail.
                        u.s. government support
    NGOs such as NDI have greatly appreciated the expansion of 
democracy initiatives undertaken by USAID. These programs have provided 
the resources necessary to maintain a permanent field presence in many 
countries and to sustain, on a long-term basis, political development 
activities. We hope that needed democracy assistance resources will be 
maintained and even expanded by AID and that these programs will not, 
even unintentionally, be reduced as a result of earmarks for other 
worthy development programs.
    The U.S. Congress can play an important role by ensuring needed 
support for the National Endowment for Democracy (NED) and its core 
institutes, NDI, the International Republican Institute, the American 
Center for International Labor Solidarity and the Center for 
International Private Enterprise.
    These organizations have the expertise and the networks of 
relationships necessary to conduct effective programs around the world, 
but the need for assistance far outstrips the available resources. The 
NED's original authorization in 1984 was $31.4 million; its current 
budget, which includes the first increase in many years, is $33.5 
million.
    The NED and its core institutes give concrete expression to 
America's democratic values while serving our country's national 
interest by promoting political environments that are inhospitable to 
political extremism.
                                 ______
                                 
       Prepared Statement of the National Endowment for Democracy
    Mr. Chairman and Members of the Subcommittee: Thank you for 
allowing me to offer some perspectives on the importance of democracy 
promotion in the aftermath of the terrorist attacks of September 11, 
2001 and on the challenges that we face in approaching this critical 
task.
    The shattering events of September 11 have radically altered the 
world in which we live, compelling people in societies throughout the 
world to reexamine their fundamental goals, priorities, and 
assumptions. The current U.S. policy of targeting terrorist cells and 
the countries that harbor them militarily represents one very important 
response. But an effective long-term approach to terrorism and related 
problems must also involve helping democracy take root in those 
countries and regions that now breed or support terrorists. For 
terrorism feeds off tyranny, finding recruits among the politically 
repressed and sanctuary from states that use terror against their own 
people.
    Building effective political institutions is the surest way to 
sever the link between terror and tyranny and advance the values of 
democracy, individual rights, and cultural pluralism. In the words of 
Madeleine Albright, chairman of our affiliated National Democratic 
Institute, in testimony last week to the Foreign Relations Committee, 
``Certainly terrorists can exist in any country. But they cannot long 
operate where leaders are accountable and legal institutions respected. 
In fighting terror, democracies have a clear advantage, because they 
embrace pluralism, encourage tolerance, and enable citizens to pursue 
change in a peaceful and lawful way.''
    Mr. Chairman, promoting democratic institutions and values in 
countries and regions that serve as breeding grounds for terrorism is 
thus one of the most urgent challenges our country faces. But the 
attacks of September 11 did not sweep away or resolve the problems that 
exist in other parts of the world as well, namely problems of 
dictatorship, semi-authoritarianism, corruption, back-sliding, and 
ethnic conflict in Latin America, East Asia, sub-Saharan Africa, 
Central Europe, and the NIS.
    If anything, the attacks aggravated these problems by accelerating 
the downturn in the world economy that was already underway, and by 
heightening security concerns that dictators frequently use to 
rationalize and tighten their controls. Indeed, the gains of the past 
decade may be more tenuous today than they were before September 11, 
and democratic progress may be more difficult to achieve in the new 
international environment.
    In promoting democratic institution-building, it would be unwise to 
write off any specific country as insignificant or beyond hope. This is 
because in the globalized world that exists today, the cancer of 
breakdown in any country can metastasize to other countries and regions 
to become a threat to international peace and security.
                           a universal value
    Because democracy is a genuinely universal value based upon the 
belief that people everywhere, regardless of their religion and 
culture, can achieve self-government under the rule of law, it is the 
natural organizing principle in the struggle to defeat terrorism and to 
create a stable and peaceful world. Twenty years ago this June, 
President Reagan asserted in an address to the British Parliament that 
helped launch the National Endowment for Democracy that it was 
democracy that represented the most effective antidote to the central 
threat the world then faced. In arguing its universal appeal, he 
declared:

    ``It would be cultural condescension, or worse, to say that any 
people prefer dictatorship to democracy. Who would voluntarily choose 
not to have the right to vote, decide to purchase government propaganda 
handouts instead of independent newspapers, prefer government to 
worker-controlled unions, opt for land to be owned by the state instead 
of those who till it, want government repression of religious liberty, 
a single political party instead of a free choice, a rigid cultural 
orthodoxy instead of democratic tolerance and diversity?''

    Indeed, that people everywhere should live in a free and democratic 
society is a deeply rooted American sentiment, and that government 
should rule by the consent of the governed is fundamental to our 
deepest values.
    So the real question, Mr. Chairman, is not whether democracy 
promotion is an important weapon in the fight against terrorism and the 
conditions that breed it, but rather, whether we are prepared for the 
challenges we face in making it a priority.
                 the twin tracks of values and security
    While the short-term policy of protecting the security of American 
citizens and the longer-term policy of promoting democracy abroad are, 
for the most part, mutually reinforcing, there are circumstances in 
which they may seem to collide, especially during those periods when 
immediate security needs are paramount, as they currently are. Indeed, 
our country's post-September 11 foreign policy agenda makes calibrating 
these two tracks of U.S. policy particularly difficult.
    To see how this dilemma might manifest itself, take the example of 
a U.S. Ambassador in an Arab country in the Middle East, who must work 
overtime to persuade the host government to permit the stationing of 
American troops in the country to fight terrorism when popular 
opposition to such a presence is strong and growing, with the help of 
the government's critics. In the midst of such a delicate situation, 
can we realistically ask the Embassy to be responsible for providing 
assistance to the very kinds of voices that the host government 
perceives as its opposition? It is difficult to imagine that such an 
arrangement is easily workable, especially if the host government 
claims to be fighting actual or potential terrorists within its own 
territory.
    But what price will the United States pay down the road if it does 
not reach out to democrats in all societies? The perception that we 
have never supported those who share our values in the Middle East only 
plays into the hands of those demagogues who contend that the United 
States is anti-Muslim. This perception is complicating our efforts to 
meet our security needs. And not only in the Middle East, for it is 
easy to imagine that those who are the subject of government repression 
in places such as Central Asia could feel similar resentment if our 
government, in its efforts to fight the war on terrorism and preserve 
options with respect to energy supplies, turns its back on independent, 
democratically-oriented voices.
    For the National Endowment for Democracy and our core institutes, 
such choices do not have to be made, since our sole mission is the 
promotion of democracy. Indeed, it was precisely this scenario that the 
founders of NED had in mind when they structured it as a non-
governmental institution.
                   challenges to democracy promotion
    Mr. Chairman, what are the most significant barriers to democratic 
progress today, and what strategies are most effective in overcoming 
them?
    The countries where these barriers are greatest fall into three 
broad categories: dictatorships, semi-authoritarian systems, and war-
torn countries. The problems and program needs differ from one category 
to the other, and there is also great variation within these 
categories. Dictatorships include both totalitarian and authoritarian 
systems, and semi-authoritarianism includes countries that are moving 
toward or away from full democracy, or are not moving perceptibly in 
either direction. War-torn countries include failed states that lack 
virtually any institutions of governance, democratic or otherwise. In 
addition, there is also the additional category of transitional 
countries where there has been significant progress in democratization, 
but where democratic institutions remain weak.
    Opening dictatorial systems.--Perhaps the most difficult challenge 
facing the democracy-promotion effort is to foster the opening of 
closed dictatorial systems. As difficult as this area is, focused 
attention is necessary because the needs are so great and the courage 
of the pro-democracy activists is so admirable. Moreover, these 
countries tend to be ignored by most democracy-assistance institutions, 
which require an in-country presence (and thus the permission of the 
host government) before they will conduct programs or provide support. 
As a non-governmental organization, the NED, with its policy of making 
direct grants to indigenous groups as well as to groups based in exile, 
has been able to play an effective role in these difficult situations, 
often at a relatively low financial cost. Its objective has been to 
create internal and external pressures for liberalization by aiding 
internal pockets of activity and linking them to like-minded groups in 
other countries, thereby strengthening their resolve and impact and 
also their international support.
    NED programs in dictatorial countries place special emphasis on the 
defense of human rights and the provision of access to independent 
information, activities that are necessary first steps in opening 
closed societies. The principle governing such programs is feasibility. 
The NED presses the limits of what is possible--aiding groups working 
to create new openings, to defend democracy activists, to develop 
alternative channels for the flow of information, and to promote 
capacity development and democratic education within the democracy 
movement itself as well as the wider society. If space opens up to make 
it possible to conduct democracy programs inside dictatorial countries 
with the acquiescence of the government, NED readily takes advantage of 
this opportunity, in accordance with its pragmatic approach. If access 
to the Internet is available, even if it is highly restricted, the 
Endowment will seek to take advantage of that channel, too. The NED and 
its institutes also seek to build international pressure for democratic 
openings, as in the case of Burma, where American labor has defended 
the rights of Burmese workers in the International Labor Organization, 
and NDI has recruited more than 3,000 parliamentarians in a campaign of 
international solidarity.
    NED programs in dictatorial countries thus vary along a spectrum of 
possibility. For example, in North Korea, which is the most closed 
country, the NED has provided support to groups in South Korea that 
document the repressive conditions in North Korea and are working to 
build an international campaign for the defense of human rights there. 
In Burma, it has supported cross-border efforts that provide training, 
education, and information to Burmese groups to help them develop their 
institutional capacity and their ability to communicate internally and 
with the international community. In Cuba, where it has become possible 
to support internal democratic groups, the NED has provided assistance 
to journalists, independent workers organizations, and cooperatives, 
all the while maintaining exile-based programs that defend human 
rights, provide uncensored information, and encourage dialogue within 
Cuba and in the diaspora about the political future of the country. And 
in China the NED has conducted an even more diversified effort, aiding 
both internal programs to promote democratization, worker rights, and 
market reform; and external programs that defend human rights and 
provide access to independent ideas and information.
    In these and other dictatorial countries, the strategy is to take 
advantage of any opening, however limited it may be, and to find ways 
to strengthen independent enclaves of democratic thought and activity. 
The cause of democracy in such countries is so compelling that Congress 
has begun to provide special funding to expand programs in Burma, North 
Korea, China and elsewhere, including programs that support the rights 
of Tibetans and dialogue about Tibet's political future. A diverse, 
integrated, and flexible approach is needed, one that is multi-sectoral 
and involves both internal and external programs, and builds 
international solidarity networks and campaigns.
    Democratizing semi-authoritarian countries.--By far the largest and 
most diverse group of countries comprises the second category, semi-
authoritarianism. This is one of many terms (including pseudo-
democracy, hybrid regimes, and competitive authoritarianism) used to 
describe regimes that fall somewhere between dictatorship and genuine 
political openness and competition of electoral democracy. A factor 
common to many such regimes is that the elections are not free and 
fair, because they are constrained and controlled by the ruling party 
or otherwise distorted by fraud and manipulation. In addition, such 
regimes tend to have an overwhelmingly dominant executive; formal 
democratic structures but authoritarian political culture and 
practices; serious human rights violations; residual authoritarian laws 
even where there is a new democratic constitution; and a very high 
level of corruption and inequality. The rule of law is extremely weak, 
as are the institutions of the state that are supposed to provide 
security and look after the social and economic needs of the people.
    Ironically, these problems are the product of the democratic 
revolution of the past decades--or to be more precise, the unfinished 
democratic revolution. The fall of authoritarian regimes in Latin 
America, the Soviet bloc, and large parts of Asia and sub-Saharan 
Africa triggered major efforts to foster democratic transitions in 
scores of countries, involving the promotion of free elections, 
economic reform, civil society, good governance, and the rule of law. 
In Central Europe and the Baltic countries, as well as in parts of 
Latin America and East Asia, these efforts produced significant 
results. But in the large majority of cases they came up against 
ingrained legacies of authoritarian culture and practice. As many 
transitions stalled, hopes for an inexorable forward movement toward 
democracy gave way to the realization that democratization is a slow 
and arduous process, subject to reversals, and that some variation of 
semi-authoritarianism, more or less harsh, is likely to persist in many 
former dictatorships for some time to come.
    It is necessary to stay engaged in semi-authoritarian countries 
such as Russia, Ukraine, Egypt, Pakistan, Kenya, Venezuela, and Morocco 
whose success or failure will significantly affect the prospect for 
democratic development in their respective regions. The challenge will 
be to craft a comprehensive multi-sectoral response that seeks not just 
the strengthening of civil society and independent media, but also 
political parties that can build effective governing coalitions, as 
well as business associations, trade unions, and policy institutes that 
can mediate between the state and the market and effect real economic 
reform.
    In working to promote democratization in semi-authoritarian 
countries, it is important to bear in mind the need to:
  --Assist efforts to establish more neutral, independent, and 
        effective election administration and to assist civil society 
        organizations and the mass media in monitoring the conduct of 
        elections.
  --Work to expand the constitutional, legal, and political space for 
        civil society, NGOs, and opposition political party 
        development.
  --Establish linkages between civil society and political parties, and 
        also promote collaboration between them and independent media, 
        trade unions, business associations, and the grassroots 
        informal sector.
  --Develop practical strategies with feasible objectives, focusing on 
        building up subcultures of democratic activism that try to 
        achieve incremental gains, but that can also provide leadership 
        if and when opportunities arise for more substantial 
        breakthroughs.
  --Encourage cross-border assistance within regions as a way of 
        strengthening democratic cooperation and solidarity, sharing 
        relevant experiences, building on local momentum for change, 
        and promoting regional integration and the gradual enlargement 
        of democratic practice.
    Consolidating new democracies.--In many countries, democratic 
institutions have been established only recently and are still very 
weak, and there is broad support within and outside the government in 
favor of deepening democratic consolidation. In such emerging 
democracies as Thailand, Mexico, Bulgaria, Ghana, or Bangladesh, 
democracy cannot be taken for granted and backsliding is an ever-
present possibility. (One need only remember the complacency about 
Venezuelan democracy just a decade ago.) It is important, therefore, to 
reserve some resources for programs in such countries, even as 
resources and energies are concentrated on countries where democracy is 
less advanced. In doing so, it is necessary to pay close attention to 
the problems of governance, working to make governments more 
accountable and transparent in their functioning; generating, 
supporting, and sharing innovative solutions to problems of 
consolidation; increasing broad-based participation in the political 
process; and strengthening the capacity and transparency of political 
parties.
    The consolidation of these emerging and vulnerable democracies is 
especially important at a time when progress has stalled on so many 
other fronts. Not only do models of successful transition help lift the 
spirit of those trying to break out of semi-authoritarianism. They also 
offer practical lessons in how to overcome the obstacles to making 
democratic institutions effective. No one is more capable of 
transmitting these lessons than the activists from newly consolidated 
democracies. Their contribution to those still struggling against the 
legacies of authoritarianism is one of the less appreciated by-products 
of successful transitions.
    Healing war-torn societies.--In many regions, the political 
uncertainties unleashed by the end of the Cold War and the pressures of 
globalization have led to the breakdown of old political structures and 
to heightened religious and ethnic conflict. While the wars in the 
Balkan region have attracted the most attention, many conflicts in such 
countries as Somalia, Sudan, Democratic Republic of Congo, and 
Afghanistan have been even more devastating.
    Efforts by the international community to negotiate solutions to 
such conflicts are generally limited to holding talks among leaders of 
different ethnic, religious, or tribal factions. But peace agreements 
will not last unless civil society is brought into the process and 
becomes invested in negotiated solutions through an inclusive 
democratic process. Including civil society groups also has the effect 
of diluting the influence of some non-democratic people who control 
armed factions and thus must be part of the talks.
    In many of these situations, the NED has been able to provide 
critically-needed support to groups in civil society that defend human 
rights, educate about democracy, and provide training in conflict 
resolution. Often they use innovative techniques, including popular 
theater and concerts as well as traditional media, to build trust and 
nurture a culture of tolerance. In effect they establish enclaves of 
democratic values and inter-ethnic dialogue and become centers of 
grassroots pressure for peace and reconciliation. They also help 
marshal international support for democracy assistance and the defense 
of human rights. If negotiations are started, they can then give voice 
and representation to civil society in the process of establishing 
peace. In a post-war setting, they can also help the process of healing 
and offer an alternative model and vision of democratic social and 
political organization.
                  aiding democracy in the muslim world
    The Muslim world is a vast region that consists of more than one 
billion people and stretches some 10,000 miles from Morocco to 
Indonesia. It is an immensely diverse region politically, composed of 
countries that fall into all of the categories listed above--from 
dictatorships such as Iraq, Syria, Saudi Arabia, and Turkmenistan; to 
semi-authoritarian countries like Pakistan, Egypt or Tunisia; to 
electoral or emerging democracies such as Turkey, Mali, Indonesia, and 
Bangladesh; to war-torn countries like Algeria, Sudan, Somalia, and 
Afghanistan. Fully one-eighth of the world's Muslim population lives as 
a minority in democratic India.
    While recognizing this diversity, there are three principal reasons 
for highlighting the importance of aiding democracy in the Muslim 
world. First, there is a significant ``democracy gap'' between the 
Muslim world as a whole and the rest of the world. Only 11 of the 47 
countries with a Muslim majority (23 percent) have democratically 
elected governments, as compared with 110 of the 145 non-Muslim 
countries (76 percent); and none of the 16 Arab states is an electoral 
democracy. [Footnote reference to the latest Freedom House Survey of 
Freedom in the World] Second, it is also within the Muslim world that 
democracy is under political and ideological challenge from Islamic 
movements that preach intolerance and hatred. Such movements may not be 
broadly representative of the population in the countries where they 
exist, but their influence is considerable. Finally, since such 
movements often resort to violence to achieve their ends, it is within 
the Muslim world where the absence of democracy has provided fertile 
soil for the growth of terrorism that targets the world's democracies.
    The crisis precipitated by the attacks of September 11 and the new 
war on terrorism have placed the issue of democracy in the Middle East 
and in other non-democratic parts of the Muslim world on the agenda of 
the international community. Before the present crisis, democracy was 
often viewed as a Western system incompatible with Islamic culture and 
doctrine. The fear that Islamic fundamentalists might take advantage of 
democratic elections to impose a theocratic system, and the absence in 
the Middle East of discernible pro-democracy movements, discouraged 
efforts to support democratic development in authoritarian Muslim 
countries, especially those ruled by regimes ostensibly committed to 
protecting significant Western security and economic interests.
    Not surprisingly, political repression has helped inflame religious 
extremism by forcing dissent into the mosque. The rise of terrorism and 
the widespread realization that such extremism is connected to the 
failure of political institutions in many Muslim countries have led to 
a growing recognition that efforts must be made to encourage political 
and economic modernization in the Arab Middle East and elsewhere in the 
Muslim world where it is lagging. Accompanying this new attitude is a 
sharpened clash within Muslim countries themselves between Islamic 
fundamentalists and moderate elements, both secular and religious, 
which are prepared to challenge the attempt by extremists to seize 
control of Muslim society and Islamic faith. For these moderates, 
democratization has become a matter of sheer survival.
    They face four inter-related challenges. The first is to liberalize 
the political system, ending repression and human rights violations, 
permitting freedom of expression and association, and introducing 
genuine party contestation. The second is to modernize the state and 
the economy, so that meaningful steps can be taken to reduce poverty, 
ignorance, and inequality and to provide young people with opportunity 
and hope. The third is to control corruption and establish a genuine 
rule of law. And the fourth is to end the political abuse of religion 
and to reconcile Islam--the framework in much of the Muslim world for 
political and social activism--with modern concepts of pluralism, 
citizenship, and individual rights.
                           sending a message
    It cannot be emphasized too strongly that the precondition for 
progress on any of these fronts is a new birth of will and 
determination within the Middle East and other non-democratic parts of 
the Muslim world to strive for human rights, free institutions, and 
responsible, elected government. But having said that, it is also true 
that international support can make a crucial difference. It is needed 
from a practical standpoint, and it also sends the message that 
democratic activists in Muslim countries are not alone.
    The NED, with its multi-sectoral structure and the emphasis it has 
always placed on encouraging democratic values and ideas, has the 
capacity to provide help in all four areas. For example, NDI and IRI, 
the NED's party institutes, work with moderate political leaders, 
legislators, and parties in Muslim countries, seeking new openings to 
improve party communications and outreach, to encourage women's 
participation in politics, and to promote contacts and exchange among 
Muslim parties and between them and the major international bodies 
representing parties from around the world. CIPE, the NED's business 
institute, promotes good governance and economic reform by 
strengthening private voluntary business associations and think tanks 
as advocates of open markets, legal and regulatory reform, 
transparency, sound corporate governance, and a stronger role for women 
in the economy. NED supports a wide array of grassroots organizations 
in the Middle East that defend human rights, train women to become 
leaders in politics and civil society, and promote civic education and 
women's rights in the context of Islamic texts and traditions. ACILS, 
the NED's labor institute, trains union organizers to defend the rights 
of workers and the poor.
    NED and its core institutes see the importance of involving in 
their programs Muslims whose points of reference are within Islam and 
who are also in favor of liberal democracy--as a way of strengthening 
these elements and countering the political abuse of religion. NED 
programs in many countries already involve such individuals, as do 
regional and sub-regional programs. The efforts of such people can be 
further assisted in the Middle East and, where appropriate, in parts of 
Asia and Africa to strengthen their voice and influence; to promote a 
public discourse on Islam and democratic politics; and to develop civic 
education programs that provide a modernist treatment of the role of 
Islam in public life.
    It is also important that focus be given to the dissemination of 
first-hand accounts and systematic analyses of life in Iran, Sudan, and 
Afghanistan under the Taliban, the three contemporary examples of 
theocratic dictatorships. Conversely, there are positive lessons to be 
learned from the experiences of Turkey, Bangladesh, Mali, Senegal, 
Bahrain and other contemporary examples of Muslim countries where 
democratization has progressed. Where appropriate, efforts should be 
made to include in these networks and discussions Muslims living in 
Western Europe and North America, whose experience of democracy may 
significantly influence Islamic political thought.
    Expanding women's leadership training programs is critically 
important for the promotion of democracy in Muslim countries. 
Empowering women at the grassroots and promoting their enhanced 
participation in the political and cultural life of Muslim societies 
are preconditions for democratic progress. Programs are underway to 
develop women's leadership capabilities in the Arab Middle East, 
Africa, and Central Asia and, when feasible, in Iran and Afghanistan as 
well. Various types of media can be employed to reach larger numbers of 
women in Muslim countries.
              democracy promotion: ``do's'' and ``don'ts''
    Mr. Chairman, given the complexity of the task of promoting 
democracy at a time when security interests are so pressing, it would 
be understandable were the U.S. Government to prefer to let the 
Endowment and its institutes carry the load in helping the non-
governmental side of efforts to promote democracy in particular 
countries. Indeed, it may be a mistake to believe that in countries 
such as Egypt, the U.S. Government can do an about-face and establish 
itself as the democracy force or leading democracy advocate. It can, 
however, use the tools of public diplomacy more effectively in order to 
begin the slow process of confidence-building with those elements of 
the society that are working peacefully toward a more democratic and 
accountable society. In countries outside of the Arab world generally 
more opportunities exist for government assistance to support civil 
society actors.
    Lawmakers and the Administration can ensure that funding for 
democracy efforts is better targeted. More is not always better, 
especially if it is delivered through inappropriate mechanisms. If the 
goal of funding is to provide support to nascent pro-democratic civil 
society or non-governmental organizations, the amounts allocated and 
the mechanisms for providing the support should be defined by 
``market'' forces on the ground. Too often, funding is set at a given 
level to make a point about how much democracy is being assisted, but 
then it is funneled through expensive contractors in the direction of 
any and all local NGOs, or under the control of an undemocratic local 
government. When democracy forces on the ground see such reckless 
spending allegedly for their benefit, but in reality it is working 
against their interests, they naturally become cynical.
    It is often in this context that many of the following problems 
arise in the provision of democracy assistance to civil society:
  --the kinds of NGOs supported are ``top down,'' elitist, often 
        internally undemocratic, and based in the capital city, with 
        weak roots in society and faint connection to real societal 
        interests
  --Western donors impose their own goals and agendas on civil society 
        recipients -the organizations funded are unsustainable without 
        continued aid
  --aid has focused too heavily on NGOs at the expense of other actors 
        in civil society -aid often attracts human talent and energy 
        away from more authentic institutions into aid-inspired 
        organizations that pay higher salaries.
    Finally, it should be emphasized that there is no one way to help 
democracy take root in countries that may have no democratic tradition 
or memory. Supporting democracy is not just a matter of putting into 
place democratic processes. It requires nurturing within government and 
society democratic values, or a democratic ethos. In some places, we 
may need to emphasize the process and institutional reform aspects of 
democracy-building, but we must never overlook the fact that widespread 
anti-democratic attitudes can stymie or reverse democratic progress. It 
is critical that we understand that countries in which some 
institutional reform has occurred, including periodic elections, may 
not move in a truly democratic direction without assistance in 
developing democratic culture.
    Mr. Chairman and members of the subcommittee, it is your continued 
support, as well as that of so many other members of this body, that 
enables us to assist countless democrats in every region who are 
working to make this a more peaceful world. On our behalf and theirs, 
let me express our deepest appreciation.
                                 ______
                                 
   Prepared Statement of the Temple University Beasley School of Law
    It is a great pleasure to have an opportunity to convey our sincere 
gratitude to you and the members of this Committee for your support for 
Temple Law School's rule of law programs in China. We are proud that 
our projects are contributing to the establishment of the rule of law 
in China, and we welcome this chance to brief you on what we have 
accomplished so far and what, with your continued help, we intend to 
do.
    As you know, President Bush recently returned from a visit to 
China, where he spoke on the campus of our Chinese partner institution, 
Tsinghua University. Tsinghua University is the ideal partner as it is 
a forward looking university with a tradition of educating many of 
China's leaders, including Zhu Rongji, the current premier, and Hu 
Jiangto, the expected next President of China. Our other partners in 
this project are New York University, Brigham Young University, the 
State Agency for Foreign Experts Administration (SAFEA) of the PRC, and 
the Supreme Peoples Court and its National Judicial College. We were 
invited into China by the government because of Temple's history of 
educational involvement in China (Temple was the only American 
university to award an honorary degree to Deng Xiaoping during his 1979 
state visit to the United States) and because the Chinese government 
was aware of and impressed by a similar innovative program that Temple 
has conducted in Japan since 1994. We know that a major factor in our 
success is the trusting working relationship we have developed with our 
Chinese partners.
    The rule of law is necessary condition for a functioning democracy. 
Democracy and the protection of individual rights cannot be realized 
without a transparent, rules-based system that applies to all, 
including the government. The rule of law itself cannot operate without 
a judiciary that is well-educated in the law, honest and independent. 
Another prerequisite is legislators and regulators who are 
knowledgeable about how law operates in a democratic society with a 
market economy. All of these elements are essential to the protection 
of individual rights. When fulfilled in China, these requirements will 
hopefully result in a legal system suitable to the needs of the Chinese 
people and compatible with international legal norms and standards. The 
extent to which this occurs will be decided by the Chinese nation. We 
are proud to provide educational programs, advice and assistance 
towards these ends.
    Temple's rule of law program in China started with a Masters of Law 
(LL.M.) program. This is the first foreign law degree-granting program 
in the history of China. Our students have included national and 
provincial level judges, ministry officials, legislative branch 
officials, law professors and minority students from Western China. The 
original curriculum focused primarily upon business subjects but also 
included courses in American constitutional law and professional 
responsibility. As importantly, by using the American case study 
method, the students, including of course the Chinese judges and 
ministry officials, were immersed in appellate decisions that 
inherently exposed them to fundamental concepts of due process and 
equal protection, including the resolution of disputes through an 
independent judiciary, the supremacy of law and the submission of 
contested governmental actions to enforceable judicial review. Today, 
the Masters of Law program also offers courses in labor and employment 
law, environmental law, trial advocacy and criminal procedure. As noted 
below, with the support of this Committee, we have expanded the LL.M. 
program and instituted additional short-term non-degree judicial 
training programs. We have also undertaken a host of supporting 
activities as requested by China's Supreme Judicial Court and the 
National Peoples Congress. All of these activities now accrue as 
integrated parts of Temple's Business and Comparative Law Center (BCLC) 
which are more fully described below.
    With the development of a market economy and entry into the World 
Trade Organization, our Chinese partners fully understand the necessity 
of developing a credible legal system. Many new laws have been passed 
that could not have been imagined before, including, for example, a new 
contracts law. Our Chinese partners also appear committed to making 
major necessary reforms in the country's judicial system. Last year, 
the National Peoples Congress passed a law requiring all new judges to 
be legally-educated and members of the bar. The Supreme Peoples Court 
has issued new directives on the enforceability of arbitration awards 
and is creating a new economics court division. Currently, the Supreme 
Court is drafting a code of judicial ethics; and the National Peoples 
Congress is considering the enactment of a law governing real and 
personal property rights. At the request of our Chinese partners, we 
are honored to provide assistance on both of these projects.
    The Business and Comparative Law Center.--The BCLC consists of 
several concurrent projects that share the goal of working 
cooperatively with key Chinese legal institutions to strengthen the 
rule of law in China. This includes degree and non-degree educational 
programs for Chinese judges and legal officials; collaborative 
consultation on specific law reform projects; and providing assistance 
to the Chinese government in meeting its membership obligations for 
membership in the World Trade Organization.
    The BCLC also assists the Chinese government in developing 
transparent and well-considered laws. China is undergoing a major law 
reform effort as it becomes a member of the WTO, and we know that China 
is receptive to receiving input from experts from the United States and 
other nations in this process. Our work in China has provided us with 
crucial contacts in the Chinese legal agencies and a high degree of 
credibility.
    I am pleased to report that all of these projects are proceeding on 
schedule and as we had hoped.
        education of chinese judges and other chinese officials
Judicial Training Program
    Our faculty and administration has developed a close working 
relationship with the Supreme Peoples Court and the National Judicial 
College.
    Our judicial training programs take several forms:
  --Short Term Seminars
  --An intensive Legal English Training program in Spring, 2002
  --A month-long intensive judicial training program in the U.S. in 
        July, 2002
  --L.L.M degree programs at the Temple/Tsinghua Program and U.S. Law 
        Schools
    Brigham Young University is designing an intensive legal English 
program to train a pool of approximately 60 members of the Supreme 
Peoples Court selected by Temple from applicants proposed by the court. 
The goal is to bring the judges to a level of English language 
proficiency, which will allow them to use English language legal 
resources for study and to access these resources after they complete 
their training. From this pool of judges, Temple will select candidates 
to attend the summer judicial training program in New York as well as 
LL.M. degree candidates for Temple's Beijing and Philadelphia-based 
LL.M. programs. This course is on schedule to begin in late spring, 
2002 and is projected to run until July 15, 2002.
    N.Y.U's Institute of Judicial Training has been actively involved 
in setting up a four-week training program that is on schedule to begin 
on July 22, 2002.
    Temple's LL.M degree program in Beijing is currently training eight 
members of the Chinese judiciary and, as mentioned above, we are 
already involved in the planning for a legal English program which will 
provide us with a pool of qualified candidates for the Temple/Tsinghua 
LL.M. program in Beijing as well as Temple's LL.M program in 
Philadelphia.
The Temple Masters of Law Program
    Temple's two-year LL.M. program in Beijing, which teaches United 
States and international law, began in 1999. The program currently has 
a class of 32 students, including eight judges, three Tibetan lawyers, 
four law professors and nine Chinese government officials, including 
the Division Chief of the NPC Legislative Affairs Commission, and staff 
attorneys from the China Regulatory Securities Commission, NPC 
Committee on Internal and Judicial Affairs and the Ministry of Foreign 
Trade and Economics.
    Our curriculum includes courses on Constitutional law, Labor and 
Employment law, Criminal Procedure and Trial Advocacy, International 
Environmental Law and Business and Commercial law.
    Our Criminal Procedure and Trial Advocacy course was specially 
designed by Temple Professors Edward Ohlbaum, one of the leading 
experts in advocacy law in the United States, and Associate Dean and 
Professor of Law JoAnne Epps, an expert in criminal law and procedure. 
Professors Epps and Ohlbaum, are in Beijing at this moment teaching 
this course to our Chinese students.
    Professor Michael Wishnie of New York University Law School is 
teaching U.S. Labor and Employment law. This course if of great 
importance for a country such as China with a developing market 
economy.
    All of our programs are taught in English because English is the 
international language of law, business and the Internet. We select 
students with sufficient English language ability and invest 
significant resources to bring their language ability to the level at 
which they can study directly from primary U.S. and international 
source materials. We believe that an important aspect of the program is 
not only to impart information about the current state of legal 
thinking on the international level, but also to provide as many 
influential legal professionals as possible with the capacity to 
continue to interact with the international legal community long after 
they have completed their formal training.
    Our LL.M. students study in English and have access to a computer 
lab. They are required to do assignments using computers and legal 
research. We believe this is a crucial element of the program as it 
gives our graduates long-term access to international legal materials 
as they develop long after they graduate.
         business and comparative law forums and working groups
    One of the major goals of the Business and Comparative Law Center 
is to create working groups consisting of American scholars, attorneys, 
judges and business people who will provide technical assistance on a 
mid-to-long term basis to Chinese legislators, regulators, scholars and 
judges as they develop China's legal infrastructure to accommodate 
China's emerging market economy. The working groups will concentrate on 
selected developing legal issues of particular importance to the reform 
of the Chinese legal system.
    Temple has been meeting with Chinese academics, government 
officials and business people to ascertain the areas in which such 
working groups might be well received and fruitful and are quite 
pleased with our efforts and the results to date.
  --Temple, Tsinghua and FADA Universities and the China Society of 
        Comparative Law (CSCL) are jointly forming a Working/Study 
        Group under the leadership of Professor Jiang Ping, FADA 
        professor and Chair of CSCL, and the leading scholar of civil 
        and commercial law in China. Professor Jiang has been 
        designated the key drafter of the new Chinese property law by 
        the National Peoples Congress. The most important goal of the 
        group is to provide support through research, exchange of 
        academic visits, seminars and counseling in the various areas 
        of property law. We will also create a listserve so that the 
        discussions can continue uninterrupted.
      The first session of the working group will take place June 17-
        18, 2002, in Beijing.
  --From July 8 to August 9, 2002, eight prominent Chinese WTO scholars 
        will be in residence at Temple Law School where they will 
        pursue research on WTO issues facing China. This working group, 
        chaired by Temple Professor Jeffrey Dunoff, will include 
        meetings with key American WTO scholars for discussion and 
        professional exchanges that we expect to continue beyond these 
        meetings.
  --Professor Amelia Boss was invited to lecture at Tsinghua University 
        on electronic commerce in November 2001, by Vice Dean Wang 
        Zhemin. While in China, Professor Boss discussed the possible 
        formation of a working group on the subject of electronic 
        commerce.
  --Professor Scott Burris visited Beijing in December, 2001, with the 
        purpose of discussing the creation of a working group on health 
        law and policy. At present, Chinese legal scholarship has not 
        progressed to the point where they have even begun to consider 
        this topic despite its importance to an emerging market 
        economy. Regulatory and legal structures in this area are 
        absent or deficient. Professor Burris' visit resulted in two 
        promising initiatives--a Health Law Working Group incorporating 
        faculty at Tsinghua, Temple, the Union School of Public Health 
        /Chinese Academy of Preventive Medicine and other institutions; 
        and a plan to assist the Chinese Academy of Preventive Medicine 
        in the development of a new institute on Health Law and Policy 
        to be housed in the Chinese Centers for Disease Control and 
        Prevention, a new governmental agency now being organized.
  assisting chinese government and legal officials with wto compliance
    In addition to our overarching goal of fostering the rule of law in 
the PRC, an important goal of the BCLC is to assist the Chinese 
government with WTO compliance issues. We are pleased to report that we 
have already made a great deal of progress with respect to this goal. 
The projects listed below are in addition to the WTO working group 
described in the preceding section.
  --On December 9-10, 2001, Professor Jeffrey Dunoff, an expert in WTO 
        matters, presented a two-day seminar on WTO compliance issues 
        to 91 Chinese judges at the invitation of the National Judicial 
        College of the Supreme People's Court in Beijing, China. The 
        lectures were very well received, with the vast majority of the 
        judges giving the presentation a grade of 90 percent or better.
  --On December 11, 2001, Professor Dunoff gave a two-hour lecture on 
        WTO law to students and faculty at FADA.
  --On December 12, 2001, Professor Dunoff gave a lecture to 
        approximately 25 students and faculty at Tsinghua University 
        School of Law on WTO entitled ``Beyond Doha: The Future of the 
        Trade Regime.'' He provided all attendees with copies of three 
        law review articles he had written in the area.
  --Professor Dunoff has been invited by Yuan Jie, the Division Chief 
        of the National Peoples Congress Legislative Division to 
        address the members of her department on WTO issues. Yuan Jie 
        is currently a student in the Temple-FADA LL.M degree program. 
        Professor Dunoff has also been invited to return to the 
        National Judicial College for additional lectures on WTO 
        topics.
  --Professor Zhang Mo, the director of the BCLC, has spearheaded the 
        discussions with the Supreme Peoples' Court. In these 
        discussions the Court has asked that Temple emphasize WTO 
        issues in the judicial training programs it provides for the 
        next five years.
      The above described activities of Temple's BCLC are a modest but 
        encouraging beginning. Much remains to be done. Programs like 
        Temple's BCLC should be replicated throughout China. Additional 
        programs aimed specifically at provincial level judges and 
        regulators should be undertaken. Hopefully, a program to allow 
        American JD students to study in China for a semester will also 
        emerge. With the support of this Committee, these and other 
        innovative rule of law programs can and will flourish in China.
    Again, my profound thanks to the Committee for its support of what 
Temple is doing in China and for your understanding of its importance.















       LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS

                              ----------                              
                                                                   Page

Bennett, Hon. Robert F., U.S. Senator from Utah, opening 
  statement......................................................   107

Craner, Hon. Lorne W., Assistant Secretary, Bureau for Democracy, 
  Human Rights and Labor, Department of State....................    72
    Prepared statement...........................................    74

Durbin, Hon. Richard J., U.S. Senator from Illinois, questions 
  submitted by...................................................   121

Harkin, Hon. Tom, U.S. Senator from Iowa, questions submitted by.    47

Johnson, Hon. Tim, U.S. Senator from South Dakota:
    Prepared statement...........................................     7
    Questions submitted by.......................................    51

Landrieu, Hon. Mary L., U.S. Senator from Louisiana, opening 
  statement......................................................     8
Leahy, Hon. Patrick J., U.S. Senator from Vermont:
    Opening statements...................................1, 61, 97, 127
    Prepared statements..................................4, 63, 99, 129
    Questions submitted by.............................37, 82, 117, 177

McConnell, Hon. Mitch, U.S. Senator from Kentucky:
    Opening statements..........................................64, 131
    Prepared statements......................................6, 99, 133
    Questions submitted by.............................52, 83, 123, 187

National:
    Democratic Institute for International Affairs, prepared 
      statement..................................................   197
    Endowment for Democracy, prepared statement..................   200
Natsios, Hon. Andrew S., Administrator, Agency for International 
  Development....................................................     1
    Prepared statement...........................................    16
    Summary statement............................................     9

O'Neill, Hon. Paul H., Secretary of the Treasury, Office of the 
  Secretary, Department of the Treasury..........................    97
    Prepared statement...........................................   101
    Summary statement............................................    99

Powell, Hon. Colin L., Secretary of State, Office of the 
  Secretary, Department of State.................................   127
    Prepared statement...........................................   140
    Summary statement............................................   134

Reed, Hon. Jack, U.S. Senator from Rhode Island, opening 
  statement......................................................   109

Temple University Beasley School of Law, prepared statement......   206

Winter, Hon. Roger P., Assistant Administrator for Democracy, 
  Conflict and Humanitarian Assistance, Agency for International 
  Development....................................................    61
    Prepared statement...........................................    67
    Summary statement............................................    65













                             SUBJECT INDEX

                              ----------                              

                  AGENCY FOR INTERNATIONAL DEVELOPMENT

Additional committee questions...................................37, 82
Agressiveness and creativity, lack of............................    89
Armenia, American University of..................................    55
Democracy programs:
    Definition of................................................84, 87
    USAID management of..........................................    85
Basic education..................................................40, 50
Biodiversity.....................................................    45
Budget:
    Breakdown....................................................    86
    Request format...............................................    42
Child labor......................................................    48
Colombia, alternative development programs in....................    44
Democracy assistance to topple regimes...........................    88
Development assistance...........................................    39
Disaster assistance..............................................    42
Family planning..................................................    42
Free and independent media, establishment of a...................    57
Global Health Programs...........................................    40
Grants and contracts, comparison of..............................    89
Great lakes and justice initiative...............................    43
Labor............................................................    47
Local Democracy and Human Rights Organizations, funding for......    88
Management and organization, changing to meet the challenge......    19
New freedom initiative...........................................    49
Operation day's work.............................................    50
Political party development:
    Role of......................................................    87
    Viewed as ``too risky''......................................    87
Regional initiatives.............................................    18
State--USAID Coordination........................................    82
Trafficking and slavery..........................................    48
Tropical forest debt relief......................................    43
University programs..............................................44, 49
USAID:
    Afghanistan reconstruction...................................    51
    Burma........................................................    59
    Cambodia.....................................................    58
    Central Asia:
        Assistance...............................................    41
        Regional stategy.........................................    41
    Colombia/Andean regional initiative..........................    59
    Compliance with Section 636(I) of the Foreign Assistance Act.    37
    Contracting practices........................................    39
    Egypt........................................................    54
    Funding breakdown............................................    85
    HIV/AIDS strategy............................................    51
    Nagorno-Karabakh:
        Activities that foster regional stability................    56
        Rate of implementation...................................    55
        Utilization of humanitarian organizations like CRS.......    56
    Office of transition initiatives.............................    60
    Pakistan.....................................................    51
    Russia assistance............................................    45
    South Asia/Afghanistan.......................................    57
    Staff expertise, level of....................................    89
    Successes and failures.......................................38, 39
West bank and Gaza...............................................44, 52
Zimbabwe.........................................................    86

                          DEPARTMENT OF STATE

                        Office of the Secretary

Additional committee questions...................................   177
Afghanistan...............................................152, 181, 192
Andean Counterdrug Initiative....................................   150
Angola.........................................................174, 181
Armenia..........................................................   188
Burma............................................................   189
Cambodia.........................................................   192
Caucasus.........................................................   157
Central Asia.....................................................   163
Colombia..................................................164, 172, 191
    Human rights.................................................   179
    Plan Colombia assets.........................................   190
Eastern Europe, assistance for...................................   183
Education........................................................   185
Egypt............................................................   175
Fiscal year 2003 budget request:
    Assistance for the Former Soviet Union.......................   183
    Peacekeeping.................................................   182
Foreign aid:
    Effectiveness of.............................................   175
    Funding--Millennium Fund.....................................   178
Global Health and HIV/AIDS.......................................   151
HIV/AIDS.........................................................   161
International criminal court.....................................   177
Israel...........................................................   187
Kidnapped children overseas......................................   173
Landmines........................................................   173
MDB arrears......................................................   151
Middle East..........................................154, 159, 168, 171
    Current......................................................   180
    Economic Initiative..........................................   192
    Settlements..................................................   181
Millennium challenge account.....................................   193
Nepal............................................................   192
North Korea......................................................   165
President Aliyev's health........................................   188
Russia.........................................................164, 176
Terrorism, war on................................................   150
The Peace Corps..................................................   151
Turkey...........................................................   188
U.S. foreign assistance, effectiveness of........................   166
Ukraine..........................................................   189
Western hemisphere, anti-narcotics efforts in....................   170
Yugoslavia cooperation...........................................   187

                       DEPARTMENT OF THE TREASURY

                        Office of the Secretary

Additional committee questions...................................   117
Afghanistan......................................................   120
Budget:
    Foreign assistance...........................................   123
    Global environment facility..................................   119
    Priorities...................................................   118
China............................................................   126
Conditionality...................................................   117
Debt relief/poverty reduction....................................   124
Development, HIV/AIDS, and results-based aid.....................   122
Foreign aid linkages.............................................   124
Grants versus loans..............................................   125
Legislative mandates.............................................   103
MDB growth agenda................................................   102
Monterrey Conference on financing for development................   117
Poverty, tools for measuring.....................................   122
Request, fiscal year 2003........................................   102
Terrorist financing..............................................   125
Tropical forest debt relief......................................   121
User fees........................................................   123
World Bank:
    Management...................................................   120
    Report.......................................................   119

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