[Senate Hearing 108-]
[From the U.S. Government Publishing Office]



 
      FOREIGN OPERATIONS, EXPORT FINANCING, AND RELATED PROGRAMS 
                  APPROPRIATIONS FOR FISCAL YEAR 2004

                              ----------                              


                         THURSDAY, JUNE 5, 2003

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2:08 p.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Mitch McConnell (chairman) 
presiding.
    Present: Senators McConnell, Bond, DeWine, Burns, Leahy, 
and Landrieu.

                  AGENCY FOR INTERNATIONAL DEVELOPMENT

STATEMENT OF ANDREW S. NATSIOS, ADMINISTRATOR

             OPENING STATEMENT OF SENATOR MITCH MC CONNELL

    Senator McConnell. The hearing of the Foreign Operations 
Subcommittee will come to order. I want to welcome 
Administrator Natsios. It is always a pleasure to have you 
before this subcommittee.
    Let me begin by acknowledging the difficult task you and 
your agency face in the post-September 11 world. With the 
welcomed liberation of Iraq and Afghanistan comes the need for 
immediate and significant relief and reconstruction programs. 
These activities are often conducted in dangerous and dynamic 
environments and your courageous field staff, NGO partners, and 
contractors should be recognized for the risks they are willing 
to assume in coming to the aid of the Afghan and the Iraqi 
people.
    Emerging from decades of repression, these countries 
require the full gamut of U.S. assistance programs from food, 
water, and health care to governance, economic development, and 
rule of law programs. Concurrent with addressing the needs of 
newly liberated countries, USAID must keep an eye on those at-
risk nations--such as Pakistan, the Philippines, and 
Indonesia--where threats from terrorism have yet to subside. 
Again, a broad range of development programs are required to 
deny the breeding grounds--such as poverty, illiteracy, and a 
lack of economic opportunities--for extremist ideologies and 
terrorism.
    Finally, no less pressing or deserving of attention are 
USAID programs and activities conducted in developing countries 
in Africa, Southeast Asia, and elsewhere. There seems to be no 
shortage of global crises, whether human catastrophes caused by 
corrupt governments or health emergencies fueled by expanding 
HIV/AIDS infection rates.
    A business-as-usual approach is no longer adequate in 
meeting new and pressing demands on our foreign assistance. 
While the fiscal year 2004 foreign operations budget request is 
$2.7 billion above the fiscal 2003 level, the majority of this 
increase is targeted toward new presidential initiatives that 
appear at first glance to maximize and make more efficient the 
delivery of U.S. foreign assistance.
    For example, the Millennium Challenge Account proposes 
increased assistance to those countries meeting certain 
eligibility requirements, including a government's commitment 
to ruling justly, meaning a country's leadership has the 
political will to respect and enforce the rule of law, protect 
freedoms and liberties, and crack down on corruption. Many 
nations currently receiving U.S. foreign aid will not qualify 
for MCA funds because of this requirement. To maximize the 
impact of our foreign aid dollars, perhaps we should consider 
expanding the ``ruling justly'' requirement to our more 
traditional bilateral assistance programs.
    Let me just close with a few comments on the reconstruction 
of Iraq. First, the subcommittee would appreciate your 
assessment of how programs are proceeding on the ground and an 
analysis of those obstacles and challenges the coalition will 
face in the weeks and months ahead. Second, many of our 
colleagues and I have been contacted by American companies 
eager to assist in the reconstruction of that country and 
today's hearing affords you an opportunity to clarify how 
contracts are being awarded and where those companies can turn 
for information and assistance.

                           PREPARED STATEMENT

    Finally, it would be useful to articulate what you believe 
the long and short-term expectations of the Iraqi people are in 
terms of reconstruction and democratic governance.
    With that, let me call on my friend and colleague Senator 
Leahy, the ranking member, for his opening statement.
    [The statement follows:]

             Prepared Statement of Senator Mitch McConnell

    Welcome, Administrator Natsios. It is always a pleasure to have 
your appear before this subcommittee.
    Let me begin by acknowledging the difficult task you and your 
Agency face in the post-September 11 world.
    With the welcomed liberation of Iraq and Afghanistan comes the need 
for immediate and significant relief and reconstruction programs. These 
activities are often conducted in dangerous and dynamic environments, 
and your courageous field staff, NGO partners and contractors should be 
recognized for the risks they willingly assume in coming to the aid of 
the Afghan and Iraqi people.
    Emerging from decades of repression, these countries require the 
full gamut of U.S. assistance programs--from food, water, and health 
care to governance, economic development and rule of law programs.
    Concurrent with addressing the needs of newly-liberated countries, 
USAID must keep an eye on those at-risk nations, such as Pakistan, the 
Philippines and Indonesia, where threats from terrorism have yet to 
subside. Again, a broad range of development programs are required to 
deny the breeding grounds--such as poverty, illiteracy, and lack of 
economic opportunities--for extremist ideologies and terrorism.
    Finally, no less pressing or deserving of attention are USAID 
programs and activities conducted in developing countries in Africa, 
Southeast Asia, and elsewhere. There seems to be no shortage of global 
crises, whether human catastrophes caused by corrupt governments or 
health emergencies fueled by expanding HIV/AIDS infection rates.
    A ``business as usual'' approach is no longer adequate in meeting 
new and pressing demands on our foreign aid. While the fiscal year 2004 
foreign operations budget request is $2.7 billion above the fiscal year 
2003 level, the majority of this increase is targeted toward new 
Presidential initiatives that appear at first glance to maximize and 
make more efficient the delivery of U.S. foreign assistance.
    Fox example, the Millennium Challenge Account (MCA) proposes 
increased assistance to those countries meeting certain eligibility 
requirements, including a government's commitment to ``ruling 
justly''--meaning a country's leadership has the political will to 
respect and enforce the rule of law, protect freedoms and liberties, 
and crackdown on corruption.
    Many nations currently receiving U.S. foreign aid will not qualify 
for MCA funds because of this requirement. To maximize the impact of 
our foreign aid dollars, perhaps we should consider extending the 
``ruling justly'' requirement to our more traditional bilateral 
assistance programs.
    Let me close with a few comments on the reconstruction of Iraq. 
First, the subcommittee would appreciate your assessment of how 
programs are proceeding on the ground and an analysis of the obstacles 
and challenges the coalition will face in the weeks and months ahead.
    Second, many of my colleagues and I have been contacted by American 
companies eager to assist in the reconstruction of Iraq, and today's 
hearing affords you an opportunity to clarify how contracts are being 
awarded and where these companies can turn for information and 
assistance.
    Finally, it would be useful to articulate what you believe the 
long- and short-term expectations of the Iraqi people are in terms of 
reconstruction and democratic governance.
    I look forward to your testimony.

             OPENING STATEMENT OF SENATOR PATRICK J. LEAHY

    Senator Leahy. Thank you very much, Mr. Chairman.
    First, Mr. Natsios, we are always pleased to see you and 
glad to have you here. As you know, I have been a strong 
supporter of USAID. I am always impressed by the quality of the 
men and women who work there, both in Washington and overseas. 
I do not always agree with where the funds go, but we need to 
work together.
    I remember the mid-1990s, when some of my colleagues in the 
other party in the other body were trying to shut down USAID. 
It did not happen. I also would point out that the chairman of 
this subcommittee has been one who has strongly supported the 
wise use of foreign aid. He has done it with the care that 
Senators of both parties ought to emulate.
    But now you are under assault from your own administration 
and from some in the House and the Senate. I will give you a 
couple of examples. The President wants to set up another 
bureaucracy outside of USAID to run the Millennium Challenge 
Account. The AIDS bill which the President just signed takes 
all your HIV/AIDS money and the power to decide how it is used 
and gives it to an independent coordinator. The Pentagon, not 
USAID or the State Department, is in charge of the biggest 
international relief and reconstruction effort in recent years, 
in Iraq.
    So I look forward to hearing your perspective on the future 
of USAID. It seems to me the White House sees you as 
increasingly irrelevant.
    I am also interested in hearing your views on nation-
building. I remember the President's National Security Adviser, 
Dr. Rice, criticizing the Clinton Administration for nation-
building in the former Yugoslavia. To quote her, she said: ``We 
do not need the 82nd Airborne escorting kids to kindergarten.'' 
However, nation-building today is a major theme of the 
administration's foreign policy. It is still the same world it 
was just a few years ago, but then nation-building was a bad 
idea, today it is a good idea. We are engaged in nation-
building on a scale unlike anything since the Marshall Plan 
from Iraq to Afghanistan to East Timor to the Balkans.
    I believe we do have a strong interest in helping these 
countries rebuild, but that does not mean that I agree with 
everything that is being done. In Afghanistan, President Bush 
said we need a Marshall Plan. Last year, the administration did 
not request a cent for Afghanistan, and the amount of aid the 
President has requested since September 11 pales in comparison 
to the Marshall Plan.
    In fact, last year, when the administration did not put in 
the money for their so-called Marshall Plan for Afghanistan, 
Congress had to take resources from other, very important 
programs to give to Afghanistan. Even the amount we 
appropriated fell short. Warlords continue to wield power over 
large areas of the country. Afghanistan's future remains far 
from secure.
    In Iraq, it seems as if we are making it up from one day to 
the next. Months after the fall of Saddam Hussein, millions of 
Iraqis are without adequate water, shelter, employment, or any 
idea of what lies ahead. Yet everybody in both parties said 
these issues would have to be addressed after the war in Iraq. 
We all knew we would win the war, whether we supported it or 
not. We were sending the most powerful military the world has 
ever known against a fourth-rate military power; of course we 
are going to win. But nobody really thought much about what to 
do afterward.
    Two months ago we appropriated $2.4 billion for Iraq relief 
and reconstruction. Monday OMB said there is no coherent plan 
or strategy for what to do with that $2.4 billion.
    The President has received a lot of credit for increasing 
funds to combat AIDS. I totally agree with the President, but I 
doubt many people know that to do that his budget cuts just 
about everything else that we are doing in international 
health, all the programs that have been supported by both 
Republicans and Democrats for as long as I can remember. He 
would cut child and maternal health programs, aid for 
vulnerable children, funding to combat other infectious 
diseases, which kill millions of people, mostly children, the 
kind of diseases our people do not have to even worry about 
because it is only a matter of pennies to pay for the 
vaccinations.
    But the money for these programs is being cut to fund the 
AIDS bill. It also cuts family planning.
    Development assistance--the President's budget would cut 
funding for these core programs, agriculture, children's 
education, democracy-building--by $35 million. That makes no 
sense, and I think it goes back on the pledge that the funding 
for the Millennium Challenge Account is in addition to, not in 
place of, funding for existing programs.
    I worry about procurement at USAID. Everything you are 
trying to do is being hampered by bottlenecks in your 
procurement office. I know that is one of the things you want 
to fix and I want to know when it is going to be fixed.
    With that I will stop, Mr. Chairman.
    Senator McConnell. Thank you, Senator Leahy.

              SUMMARY STATEMENT OF HON. ANDREW S. NATSIOS

    Mr. Natsios, we will put your full statement in the record 
and if you could give a brief summary, we will maximize the 
opportunity for questions.
    Mr. Natsios. Thank you very much, Senator. I want to thank 
the committee, both parties, for the strong support that our 
Agency has received from you Senators as well as from your 
staff. Paul Grove and Tim Rieser have been extraordinarily 
helpful and cooperative with us. We do not always agree on 
everything, but we appreciate the cooperative and open spirit 
that we have in dealing with the staff of the committee.
    The last year has seen changes that none of us anticipated 
in many areas of the world, and we have began a number of major 
new activities that I would like to talk about. Last fall we 
issued a set of papers called the ``Foreign Aid and the 
National Interest Report'' that tracks where we expect foreign 
assistance to go, broadly speaking, over the next decade. It is 
on our web site. We have widely distributed it. It is done by 
some of the preeminent scholars in development assistance and 
humanitarian relief in the country. Larry Diamond, for example, 
wrote the first chapter; he is one of the two great democracy 
scholars in the United States. But it is a road map. It is a 
direction for where we need to go, what has worked and what has 
not worked.
    We have begun new initiatives in agriculture, in basic 
education, in trade capacity building. In the budget that you 
have before you, all of these areas will show increases in 
funding. Basic education goes up by over $45 million, 
agriculture goes up by about $10 million.
    In addition, we have funded both in the State budget and 
the AID budget a line item should there be a just and equitable 
peace settlement in Sudan. We are the closest we have been in 
20 years to a peace agreement in Sudan, and in our budget we 
have committed that should peace break out the U.S. Government 
would provide funds for reconstruction in Sudan.
    There is I think great excitement in the agency because of 
the enormous potential for the expansion of the foreign 
assistance program of the U.S. Government. The President has 
proposed essentially a 70 percent increase in the budget for 
foreign assistance over the next three years through the 
Millennium Challenge Account and the HIV/AIDS account. We are 
already spending about a billion dollars, all spigots, on HIV/
AIDS. The President has proposed an additional $2 billion. Of 
course, the Millennium Challenge Account is a $5 billion 
increase, the first installment of which, $1.3 billion, is in 
the fiscal 2004 budget.
    You ask, Mr. Chairman, about the Iraq and Afghanistan 
reconstruction. We would be glad to send you a detailed account 
of what is going on in both those budgets, but in the budget 
for 2004 between State and AID in all spigots for our two 
budgets, the 150 account, we have proposed $657 million in the 
2004 budget for reconstructing Afghanistan.
    This year AID alone is spending, because of your 
appropriation, $350 million in five major initiatives in 
Afghanistan. One is a major new agricultural initiative, $150 
million over three years; a health initiative to extend health 
care across the country, 400 new health clinics of the 1,100 we 
believe need to be put in place to serve the country; a 300-
mile road which is critically important to tieing the Pashtun 
south, Kandahar, with Kabul, which will be completed by 
December of this year--imagine building a road from Boston--I 
come from New England--to Washington in eight months, in an 
area that is the most insecure in the country. We are 
progressing, though, substantially.
    We have democracy and governance programs. We are helping 
the national Government with advice on options they have for 
writing their new constitution, which is a process that is 
ongoing now.
    We also have an economic governance package that went into 
effect in September of last year, October of last year, which 
helps with the selling off of state-run enterprises, all of 
which are bankrupt, a new budgeting system for the national 
Government, a new customs collection system, a new uniform 
commercial code. We helped create the currency for the country 
that was issued last fall, working with the central bank. And a 
new education initiative where we will build 1,200 schools 
across the country and double the number of textbooks. We 
printed 15 million, we are going to print another 15 million, 
for a total of 30 million. We are the source of textbooks for 
public education in Afghanistan.
    In Iraq, we have spent $450 million on the humanitarian 
relief side, mostly on food aid, to make sure there is a bridge 
between now and the time the Oil for Food program goes into 
effect later this summer.
    We have spent $98 million so far of the reconstruction 
money and another $234 million has been released by Congress 
and by the OMB that will shortly be put in the reconstruction 
accounts. We have an elaborate plan for how to spend that 
money. I can only speak for what I do. We have a plan for 
spending $1.1 billion in reconstruction and $600 million for 
humanitarian relief. We started designing that last October 
with 200 staff from AID. There are 100 AID staff now in Iraq or 
in Kuwait City where some of our offices are working.
    Finally, I would like to mention the question that you 
brought up, Senator, on the procurement system. We indeed have 
a new procurement software system which we hope to install, but 
we cannot install it until after the new Phoenix system for our 
financial management has been installed in the field. It has 
been installed in the Washington and beginning actually last 
week we initiated a 25-month plan to install Phoenix in the 
missions, in 79 missions around the world. Actually, it will be 
in a reduced number of missions--we are collapsing the number 
of accounting stations--but it will serve the field.
    Once that is in place, there are two things we can attach 
to it. One is this new procurement system, which will make much 
more efficient the way in which we do our procurements. The 
second thing we will be able to do is an information warehouse 
software package, which will allow information--the questions 
you give us now that we must manually calculate because we do 
not have and have not had for 25 years a unified financial 
management system worldwide. We will have that within 25 months 
if all goes according to plan.
    So the business systems reforms are 50 percent there, but 
they are not finished yet, and until they are I will not be 
satisfied. But we do appreciate very strongly the support of 
the committee in this.
    I want to just end by making a comment about extending the 
MCA standards, which you, Mr. Chairman, very thoughtfully 
brought up, as an option for our regular programs. We have 
proposed in fact to the White House and to the Congress a 
package that seeks to restructure AID, not from a statutory 
standpoint, but we will look at countries and divide them 
specifically into the following categories:
    Countries that just barely missed being eligible for MCA 
status, but want to make it, and they will require heavy 
reforms and focus on the areas where they failed to meet the 
MCA standards. So we will direct our resources in those 
countries in the areas where they were failing.
    The second are countries that are failed and failing 
states. We have a new bureau. It is not new any more, it is two 
years old, but we have reorganized. Roger Winter heads that 
bureau, who is widely known in the NGO community and the human 
rights community. It is a bureau that deals with failed and 
failing states, called Democracy, Conflict, Humanitarian 
Assistance. That bureau has more money in it than ever in AID 
history. It is up to almost $2 billion this year, for failed 
and failing states, for countries that are not even remotely on 
the chart for MCA, but that we do not want to forget.
    The third category are countries that are in our 
geostrategic interest. Egypt, Jordan, Pakistan are three ESF 
countries. They are in a separate category. We must make those 
countries' programs be geared to the geostrategic national 
security interests, narrowly defined, of the United States 
Government. We need to treat them in that category.
    Finally, there are countries that just are not close to 
making it. We need to ascertain in those countries whether 
there is the will to reform, and if there is the will to reform 
we will help them move toward MCA status, but it will take a 
while to get there. And if there is no will and the country is 
really stuck and there is no chance of it getting out because 
of the absence of political leadership, we will work 
exclusively through the NGO community and the university 
community and not deal with the Government.

                           PREPARED STATEMENT

    Senator, I know you have a lot of concerns about several 
countries in Asia in that category, which we would very much 
agree with you on. But we need to think clearly about which 
countries fit in which categories and restructure our program 
along those lines.
    I would like to submit my written testimony, which is much 
more lengthy, for the record.
    [The statement follows:]

              Prepared Statement of Hon. Andrew S. Natsios

    Chairman McConnell, Senator Leahy, members of the subcommittee: 
Thank you for inviting me here today to discuss the President's budget 
for the U.S. Agency for International Development for fiscal year 2004.

     THE STRATEGIC IMPORTANCE OF DEVELOPMENT ASSISTANCE IN THE NEW 
                               MILLENNIUM

    We live in an era that has seen dramatic change in recent years--an 
era that is rapidly evolving. Globalization, technology, HIV/AIDS, 
rapid population growth, terrorism, conflict, weapons of mass 
destruction and failing states--these are just some of the issues 
shaping today's world. Most of these issues--both good and bad--do not 
recognize national borders. They affect us directly and are 
dramatically altering the way in which we think and operate.
    The Bush Administration is restructuring and revolutionizing our 
national security apparatus so we can better respond to the challenges 
facing the world today. Under the President's leadership, USAID is also 
changing. Where appropriate, we are applying lessons we have learned 
over the years, whether in Afghanistan or Iraq, or in the fight against 
HIV/AIDS in Africa and around the world. This ability to adapt will 
determine our success as part of the President's resolute campaign to 
attack poverty, ignorance and the lack of freedom in the developing 
world.
    In September 2002, President Bush introduced his National Security 
Strategy. In it, the President discussed development as a vital third 
pillar of U.S. national security, alongside defense and diplomacy. Thus 
for the first time, the Strategy recognizes the importance of both 
national and transnational challenges, such as economic growth, 
democratic and just governance, and HIV/AIDS to our national security.
    The President's National Security Strategy identifies eight 
concrete goals. Two of them speak directly to our development mission. 
The first is to ignite a new era of global economic growth through free 
markets and free trade. The second is to expand the circle of 
development. Trade capacity building lies at the intersection of these 
two goals, and supports both. It promotes USAID's core concern with 
development, while reinforcing the core U.S. trade policy goal of 
further opening up and expanding international trade.
    Foreign assistance will be a key instrument of U.S. foreign policy 
in the coming decades. As a consequence, our foreign assistance budget 
is poised to rise dramatically. The President's recent budget requested 
a dramatic increase in the development and humanitarian assistance 
account, from $7.7 billion in fiscal year 2001 to more than $11.29 
billion in fiscal year 2004. It is clear that this Administration has 
taken development off the back burner and placed it squarely at the 
forefront of our foreign policy. But this is only one piece of an 
unprecedented and concerted commitment by President Bush and the U.S. 
Government make foreign assistance more effective.

              THE CHANGING LANDSCAPE OF FOREIGN ASSISTANCE

    Looking back over several decades, one must recognize that the 
developing world has made significant progress. Of the world's 200 
countries in 2001, for example, 124 were democracies at least in some 
form. This is an unprecedented number. Similarly, most of the world's 
6.2 billion people now live in countries where some form of market 
economics is practiced. This is a dramatic increase since 1980. 
Population growth rates are down, and in some parts of the world health 
and education levels have surpassed U.S. levels of 50 years ago. 
Globalization has integrated the world's markets for goods, services, 
finance, and ideas. Remarkable advances in biotechnology are bringing 
the promise of new cures for the sick and new kinds of seeds and food 
for the hungry.
    But we still face an uncertain future. In many developing 
countries, HIV/AIDS and health issues are having a dramatic impact on 
social cohesiveness and economic strength, blocking the very 
development goals we seek. Virtually all the new democracies in the 
world today are fragile; others are democracies more in name than 
substance. Nearly a quarter of the people living in developing 
countries, or about one billion people, live in absolute poverty. There 
are a host of other threats--ranging from terrorism to infectious 
disease and violent conflict--that challenge us and the developing 
nations we seek to help.
    Events such as the Monterrey Conference on Financing for 
Development and our recent report, Foreign Aid in the National 
Interest, are helping us focus clearly on what has been accomplished so 
far and what needs to be done to meet the challenges that lie ahead. 
The President's Millennium Challenge Account (MCA), announced at 
Monterrey, is a direct outgrowth of what USAID and our development 
partners have learned.
    Simply put, development assistance works best when nations have 
responsible institutions and governments that pursue policies conducive 
to economic growth. Democratic governance, sound policies, and open, 
transparent institutions are the keys to development. Performance, not 
intentions, is what matters most, so we have learned the importance of 
measuring that performance with rigorous and unbiased indicators.
    Many of the grave issues facing the developing world require us to 
take new approaches. We have to revolutionize how we think about aid in 
general and USAID in particular. The issue of how to deal with failed 
and failing states is just one example. As the President's National 
Security Strategy stated, ``America is now threatened less by 
conquering states than we are by failing ones.''
    Under the leadership of President Bush and Secretary of State 
Powell, we now have both the opportunity and the obligation to 
implement a development strategy that clearly defines our challenges 
and identifies the best approaches to address them. We are working more 
closely than ever at the interagency level to clarify the roles and 
linkages of U.S. development institutions. The work done on the MCA is 
an example of this renewed interagency coordination. Working with the 
State Department to develop a joint strategy should greatly improve 
coordination of our foreign assistance programs.

         THE MILLENNIUM CHALLENGE ACCOUNT AND THE ROLE OF USAID

    As I stated in earlier testimony on the MCA, I find it helpful to 
think of countries in five broad groupings:
  --MCA countries or the best performers.
  --Countries that just miss qualifying for the MCA and with a little 
        help have a good chance of doing so.
  --Mid-range but performing counties with the commitment to reform. 
        For these countries, our assistance will focus on achieving 
        progress in specific aspects of development, especially 
        economic growth and democratic governance.
  --Selected failed, failing, and post-conflict states that require 
        specialized assistance, post-conflict reconstruction or 
        humanitarian assistance. This is a new element of the Agency's 
        core business. In these countries our objective will be 
        establishing greater security, stability and order. Programs 
        will focus on food security, improving governance, and building 
        the collective sense of nationhood that must precede evolution 
        to more democratic forms of government and lay the groundwork 
        for countries to move toward longer-term development.
  --Countries requiring assistance for strategic national security 
        interests.
    I would like to highlight our belief that focusing on responsible 
governance and good performers must infuse all our development 
efforts--not just the MCA. This should be the case for other bilateral 
and multilateral donors as well. In this way, the MCA will serve as a 
model for all of our assistance programs. Indeed, we are already 
applying an MCA lens to our country programs, informing resource 
decisions. The strategic budgeting system that we will be adopting will 
base the allocation of resources on criteria such as need, performance, 
commitment, and foreign policy priority. The intent is to have a more 
performance-driven and cost-effective foreign aid program that is fully 
responsive to our national security objectives.

               STRATEGIC DIRECTION AND BUDGET PRIORITIES

    USAID manages program funds from a number of Foreign Affairs 
accounts directed at addressing a broad array of international issues 
facing the United States. These range from fighting the HIV/AIDS 
pandemic to sustaining key countries supporting us in the war on 
terrorism to bolstering democracy, the rule of law and good governance 
in countries important to our national security. Many of these issues 
were highlighted in Secretary Powell's excellent testimony before this 
subcommittee on April 30.
    For fiscal year 2004, the Administration's request from the 
accounts USAID manages is $8.77 billion in program funds. The account 
breakout is provided below followed by a discussion of program 
priorities.
  --$1.345 billion for Development Assistance, and $1.495 billion for 
        Child Survival and Health; $235.5 million in International 
        Disaster Assistance; $55 million for Transition Initiatives.
  --$2.535 billion in Economic Support Funds; $435 million for 
        assistance for Eastern Europe and the Baltics; and $576 million 
        for assistance for the Independent States of the Former Soviet 
        Union. We co-manage these funds with the State Department.
  --$1.185 billion in Public Law 480 Title II funds are managed by 
        USAID.
    Our readiness to manage these resources and deliver the results 
intended is of particular importance to me. The budget request for 
salaries and support of our staff that manage these programs is $604 
million. In addition we request $146 million for the Capital Investment 
Fund, $8 million to administer credit programs and $35 million to 
support the Office of the Inspector General.
    Economic Growth, Agriculture and Trade.--The Administration's 
request for these programs is $2.316 billion, including $584.2 million 
in Development Assistance.
    Economic growth is an essential element of sustainable development 
and poverty reduction. Trade and investment are the principal 
mechanisms through which global market forces--competition, human 
resource development, technology transfer, and technological 
innovation--generate growth in developing and developed countries. 
During the 1990s, developing countries that successfully integrated 
into the global economy enjoyed per capita income increases averaging 5 
percent annually. However, countries that limited their participation 
in the global economy saw their economies decline.
    In the President's National Security Strategy, he set the goal of 
igniting a new era of global economic growth through free markets and 
free trade. At the March 2002 International Financing for Development 
conference in Monterrey, Mexico, leaders of developed and developing 
counties agreed that trade and investment are critical sources of 
development finance--far outweighing foreign assistance in the broader 
context of international capital flows. President Bush pointed out that 
developing countries receive $50 billion a year in aid, while foreign 
investment inflows total almost $200 billion and annual earnings from 
exports exceed $2.4 trillion.
    I am proud that USAID has just issued a new Trade Capacity Building 
Strategy as a cornerstone of our economic growth efforts. In developing 
this strategy, USAID has worked closely with Ambassador Zoellick, the 
U.S. Trade Representative. USAID will enhance trade capacity building 
programs with new initiatives to support developing countries' 
participation in international trade negotiations and help countries 
develop trade analysis expertise. To support trade agreement 
implementation, USAID will introduce new programs to promote sound 
systems of commercial law and improved customs management. USAID will 
also help developing countries establish open and competitive markets 
in service sectors that are critical to trade and strengthen economic 
responsiveness to opportunities for trade. We will build on the success 
of the Africa Growth and Opportunity Act (AGOA) to provide market-
access for goods produced in sub-Saharan Africa. We are also 
implementing the President's Trade for African Development Initiative 
(TRADE) and preparing Central American countries to adopt a Central 
America Free Trade Agreement (CAFTA), for which we began negotiations 
earlier this year. We are also carrying out a broad range of trade 
capacity building activities throughout the Americas in support of the 
negotiations for a Free Trade Area of the Americas.
    Economic growth and poverty reduction also depend on increased 
productivity at the firm level. Strong micro-enterprise and small 
business sectors will continue to receive emphasis as important 
elements of USAID's approach to growth.
    For many poor countries with largely rural societies, agriculture 
connects poor people to economic growth. A vibrant and competitive 
agricultural and business sector fosters growth. And a supportive 
policy and institutional enabling environment encourages enterprise, 
innovation and competitiveness.
    Agricultural development remains a critical element of USAID's 
approach to economic growth and poverty reduction. Most of the world's 
poorest and most vulnerable populations live in rural areas and depend 
on agriculture. In fiscal year 2004, the budget request includes $268.4 
million in Development Assistance and $470.2 million from all accounts 
for agricultural development.
    The requirements for agricultural development are well known. 
Increasing productivity will lead to higher incomes and more investment 
in the agricultural sector. USAID programs will address these factors 
at the national, regional and local levels and increase attention to 
agriculture in Latin America and Africa. Particular emphasis is being 
given to the President's Initiative to End Hunger in Africa. We will 
also boost agriculture in developing countries by restoring the budgets 
of global agricultural research centers, training scientists, and 
funding science-based applications and biotechnology. Additionally, we 
will work to connect farmers to global supply chains by encouraging 
agricultural trade reform, supporting producer organizations and 
promoting needed market infrastructure.
    Modern biotechnology offers great promise in addressing food 
insecurity in Africa and elsewhere in the developing world. We are 
helping build national and regional biotechnology research programs 
that focus on increasing the productivity and nutritional quality of 
African food crops. A good example is our support for the African 
Agricultural Technology Foundation, a partnership between USAID and 
several private entities.
    Environment.--The Administration's request for environmental 
programs is $449.2 million including $286.4 million in Development 
Assistance.
    Environmental degradation is an increasing threat to long-term 
development with severe effects on health, trade, and poverty reduction 
efforts in general. Effects can be felt directly in the United States, 
as in the case of climate change. It is in our interest to ensure that 
policies and institutions actually support sustainable development. 
USAID's efforts will focus on four initiatives: Water for the Poor; 
Clean Energy; the Congo Basin Forest Partnership; and Global Climate 
Change, as well as ongoing programs in natural resource management, 
forestry, reducing illegal logging, and minimizing pollution.
    Democratic Governance.--The Administration's request for Democratic 
Governance from all accounts is $1.0208 billion including $164.8 
million in Development Assistance.
    Governance based on principles of accountability, participation, 
responsiveness and effectiveness is the foundation of development and 
the key to achieving progress in the three areas named by President 
Bush in the MCA--ruling justly, promoting economic freedom, and 
investing in people. Our democracy and governance programs will give 
new emphasis to strengthening public administration, assisting policy 
implementation, and providing citizen security, all of which are 
integral to democratic governance. We will continue to support 
assistance programs involving human rights, the rule of law, 
strengthening political processes, promoting civil society including 
organized labor, and building local government capacity. Anti-
corruption programs will receive special attention and funding. 
Programs to prevent trafficking of persons and assist victims of war 
and torture will also be continued.
    One of the most significant lessons we have learned is that 
governance--policies, institutions and political leadership--and not 
resources alone, matter most. Thus, USAID will reduce assistance to 
countries where a commitment to democratic governance is lacking. This 
``tough love'' approach is necessary, if we are to provide resources 
where they can be most effective. At the same time, governance is 
critically important in ``fragile'' and failed states. USAID will begin 
to selectively offer support in such countries towards the provision of 
security, stability and reconstruction which will provide the basis for 
future development.
    While we face democratic governance challenges around the globe, 
they are particularly acute at this time in the Mid East and broader 
Muslim world.
    Health and Education.The Administration's request for Health is 
$2,136.2 million from all accounts, with $1.495 billion in Child 
Survival funds. Over half of the Child Survival request, or $750 
million, is for HIV/AIDS programs. The Education and Training request 
is $425 million from all accounts, with $262.4 million of that 
Development Assistance.
    Fundamental to economic growth is improving people's health and 
education. Many developing countries' workforces will grow over the 
next two decades. As a result, some developing countries will have more 
human resources to invest in economic endeavors. But for that to 
happen, investments must be made today so that their economies grow, 
and their workers are healthy and educated.
    As we are witnessing with HIV/AIDS in many developing countries, 
health dramatically affects a country's development prospects and must 
be aggressively addressed if overall development is to take place. 
USAID remains a global leader in HIV/AIDS prevention, care and 
mitigation programs. Under the guidance of the White House Office of 
National AIDS Policy, USAID is working closely with the Department of 
Health and Human Services to implement the President's Mother and Child 
HIV Prevention Initiative and to prepare the foundations necessary for 
delivery of treatment, care, and prevention, as outlined in the 
President's Emergency Plan for AIDS Relief. USAID will continue and 
strengthen support to international partnerships, including key 
alliances with the private sector, and the Global Fund for AIDS, 
Tuberculosis and Malaria.
    USAID's programs in the areas of child survival, maternal health, 
vulnerable children, infectious diseases, family planning and 
reproductive health are cornerstones of U.S. foreign assistance. Our 
health programs save millions of lives through cost effective 
immunization, disease prevention, breastfeeding, nutrition, sanitation 
and voluntary family planning programs.
    While our leadership has brought about important successes, 11 
million children under the age of 5 still die every year, the vast 
majority of them from preventable and treatable diseases such as 
measles, diarrhea and pneumonia. Four out of every 10 people lack 
access to basic sanitation; 42 million people live with HIV/AIDS. Our 
effectiveness in preventing illness and pre-mature death contributes to 
global economic growth, poverty reduction, and both regional and 
domestic security.
    Global markets are changing, as more developing countries shift 
from production based on low-wage labor to higher-end manufacturing. 
Doing so requires workers able to learn new skills and master new 
technologies. In countries where access to primary schooling remains 
incomplete and educational quality remains inadequate, the urgency of 
educational reform is increasingly apparent. Where improvements are 
enabling more students to finish primary school, countries need to 
ensure that new skills can be acquired. Taking full advantage of the 
global economy requires workers with the academic and technical skills 
to adapt technology to local conditions. While continuing to help 
countries make educational improvemenzts, U.S. foreign assistance must 
help more successful countries maintain their upward momentum. The 
President's Education for Africa Initiative, which addresses a range of 
basic education needs, is an important element in this effort. We are 
working closely with the international Education for All program to 
provide resources for those countries who demonstrate performance and 
commitment to educating their children.
    Internal Conflict.--This budget request includes $27.7 million in 
Development Assistance specifically for intra-state conflict, as well 
as $55 million for Transition Initiatives. Additional funding for 
conflict management and mitigation can come from our various sector 
programs, most importantly Democracy and Governance and Humanitarian 
Assistance.
    USAID's goal is to be an agent for peaceful change, wherever and 
whenever possible. We cannot realistically prevent every conflict. We 
are, however, working hard to improve our ability to mitigate and 
manage conflict. Some two-thirds of the countries where we work are 
entering conflict, engaged in conflict, or just recovering from a 
conflict. The causes are complex, and there are no quick and easy 
solutions. Yet at a general level, conflict prevention and management 
entail a continuum of interventions that, done carefully, can 
strengthen the capacity of states to manage sources of tension. A 
crucial part of the solution is encouraging innovative institutions 
that can deal with problems--local, regional, national, and 
international--and resolve them peacefully.
    Our Office of Transition Initiatives provides a fast and flexible 
response capability to address the needs of countries experiencing 
significant political transitions or facing critical threats to basic 
stability and democratic reform. Recent interventions, for example, 
helped Afghanistan, Burundi, East Timor, and Macedonia. New programs 
are being initiated in Angola, Sudan, and Sri Lanka.
    Among the most important things that donors can do is develop a 
deeper, context-specific understanding of what drives conflict. This 
will require a significant investment in research and analysis among 
donors and in countries where conflict programs are being considered. 
Every major focus of our assistance has at least some bearing on 
conflict--from economic growth, to agriculture, to democracy and 
governance. We will apply a cross-sectoral, multi-disciplinary 
perspective when designing programs in environments of conflict. We 
will apply a conflict lens to each area in high-risk countries. 
Recognizing the complexity of conflict prevention, mitigation and 
management, we will coordinate closely with other USG departments and 
agencies, donors, and other partners.
    Humanitarian Aid and Failed States.--The Administration's request 
is $1.69 billion, including $1.185 billion for food, $200 million for 
the new Famine Fund, and $235.5 million for disaster assistance 
programs. USAID is addressing the challenge of forging a comprehensive 
response to failed and failing states: examining the sources of 
failure, working to build institutional capacity, and providing 
critical humanitarian aid to the most vulnerable.
    More than three million people lost their lives in the disasters of 
the 1990s. Conflict-related emergencies were the most deadly, with many 
hundreds of thousands of people killed in direct fighting. Millions 
more have been internally displaced or forced into refugee status. By 
the end of 2000, failed and failing states displaced 25 million people 
within their own countries and 12 million refugees who fled across 
national boarders. While conflict-related disasters have dominated the 
funding and focus of international assistance over the last decade, 
natural disasters still take a tremendous toll worldwide. There were 
three times as many natural disasters in the 1990s as in the 1960s. 
Extreme weather related events are projected to increase. In addition, 
HIV/AIDS and other communicable diseases are on the rise in complex 
humanitarian emergencies, with more than 75 percent of epidemics of the 
1990s occurring in conflict areas.
    The United States is the world's largest humanitarian donor. We 
provide life-saving assistance to people in need of food, water, 
shelter and medicine. Coordinated by our Office of U.S. Foreign 
Disaster Assistance (OFDA), USAID deploys quick response teams that 
include experts from USAID and other USG agencies. Our Public Law 480 
Title II emergency food aid has provided critical food needs in 
Afghanistan, Ethiopia, Southern Africa, and other protracted 
emergencies. USAID is playing a lead role in providing humanitarian aid 
in Iraq. We are prepared, and with the support of other USG agencies 
and our implementing partners, we will do our utmost to avert a 
humanitarian crisis. Along with immediate humanitarian relief, USAID is 
prepared to contribute to political reform and stability.
    We will continue to respond to humanitarian needs to save lives and 
minimize suffering. But we need to do more to reduce vulnerabilities 
that transform natural, socio-economic and political events into 
disasters. For example, the promotion of accountable governance and a 
free press will help defend against famine and conflict. The 
development of local and global capacity to anticipate and respond to 
emergencies will be reinforced by enhancing early warning systems that 
guide policies and public action in countries at risk. We will do more 
to link humanitarian response with longer-term development goals, in 
particular in health. Child immunization programs, for example, have 
sometimes served as a bridge to peace, with cease-fires respected even 
in war zones. Closer coordination with other donors will ensure our 
response is effective and the burden of humanitarian aid is more evenly 
shared.
    We will work to strike a balance among political, military and 
humanitarian strategies. By coordinating closely with the U.S. military 
we can carry out relief operations even in the midst of war. At the 
same time, we strongly affirm the neutrality of humanitarian 
assistance, which should be based on assessed need. More emphasis must 
be placed on protecting those who receive emergency relief from 
violence or human rights abuse, whether refugees or internally 
displaced persons (IDPs). We will encourage our implementing partners 
to improve accountability of humanitarian aid by adopting standardized 
measures of effectiveness.
    In his fiscal year 2004 budget, the President announced a new 
humanitarian Famine Fund. This is a $200 million contingency fund for 
dire, unforeseen circumstances related to famine. Use of the fund will 
be subject to a Presidential decision and will be disbursed by USAID, 
under the same authority as International Disaster Assistance, to 
ensure timely, flexible, and effective utilization. The Famine Fund is 
intended to support activities for which other funding is either 
unavailable or inappropriate and will increase the ability of the 
United States to anticipate and respond to the root causes of famine.
    Mobilizing Private Foreign Aid.--Today private sources of foreign 
aid account for over 50 percent of the total assistance coming from the 
United States. Foundations, corporations, private and voluntary 
organizations, colleges and universities, religious organizations, and 
individuals provide $30 billion a year in aid. Given this new reality, 
we at USAID are expanding our partnerships with a full array of private 
sources and undergone a fundamental reorientation in how we relate to 
our traditional development partners.
    Two important approaches to achieving this are: (1) our Global 
Development Alliance which works to mobilize resources from and foster 
alliances with U.S. public and private sectors in support of USAID 
objectives; and (2) Development Credit Authority which is an Agency 
mechanism to help develop credit markets and to issue partial loan 
guarantees, thereby mobilizing private capital for sound development 
projects. Examples of these partnerships are:
  --In Brazil, USAID is working with private companies and NGOs to 
        encourage low-impact logging.
  --The Digital Freedom Initiative (DFI) is an outstanding example of 
        what can be accomplished when several branches of the U.S. 
        Government and leading American companies like Cisco and 
        Hewlett-Packard join forces to help long-time friends like 
        Senegal build on Senegal's already significant information and 
        communication technology base. The DFI will also facilitate the 
        development of information communications technology 
        applications that enable small and medium-sized businesses to 
        become more profitable, find new markets, and access credit and 
        other inputs more easily. Over the life of the pilot activity, 
        we envision that more than 350,000 small businesses will be 
        involved.
  --In Angola, USAID is cooperating with a U.S. oil company to promote 
        business development in rural communities. The first activity 
        planned will assist 150,000 Angolan families affected by the 
        civil war (former soldiers and internally displaced people) by 
        providing agricultural support and training. We view this as an 
        important step in consolidating the recent peace.
  --In Guatemala, a credit guarantee covers a portfolio of loans to 
        small businesses, small-scale producers and cooperatives 
        operating in the Peace Zone, a rural area of Guatemala that has 
        suffered from political unrest, and normally is without access 
        to commercial credit.

                    OPERATING EXPENSES AND STAFFING

    The President's budget request calls for us to manage a program 
budget of $8.8 billion at a time when foreign aid challenges are 
growing increasingly complex and the environment in which we operate 
more dangerous. We face the triple challenge of addressing: (1) the 
increased strategic importance of funding key countries and programs; 
(2) rising costs of protecting U.S. personnel overseas; and (3) rapid 
retirement of many of our most experienced officers. These call on us 
to:
  --Reform our business systems to enable innovative and streamlined 
        business models for Washington Headquarters and our field 
        missions to strengthen our ability to quickly respond in 
        today's political environment.
  --Strengthen our future readiness by ensuring that our Civil Servants 
        and Foreign Service Officers have the skills and competencies 
        needed in increasingly complex settings.
  --Expand our intellectual/knowledge capital to meet future demands.
  --Ensure accountability in program implementation in increasingly 
        complicated structures.
  --Recruit the right people at the right time, train and deploy them 
        to meet our development mandate.
  --Protect the safety of our staff, overseas and in Washington.
    We request a total of $604 million for our operating expenses. This 
amount, combined with $49.7 million from local currency trust funds and 
other funding sources, will provide a total of $653.8 million to cover 
the Agency's projected operating expenses.
    In addition, we request $146 million for the Capital Investment 
Fund (CIF) to fund Information Technology to support major systems 
improvements that will strengthen the Agency's ability to respond and 
operate effectively; develop enterprise architecture in collaboration 
with the Department of State to enable an integrated accounting system 
worldwide; and, fund new office facilities co-located on embassy 
compounds where the State Department will begin construction by the end 
of fiscal year 2003.
    We also request $35 million to ensure continued operations of the 
Office of the Inspector General associated with USAID's programs and 
personnel and $8 million for managing credit programs.

                         MANAGEMENT IMPROVEMENT

    Mr. Chairman, I know that you and this Committee are very 
interested in our management reform efforts. I would like to update 
you, therefore, on our progress in this area. Meeting foreign policy 
and program management challenges requires a modern, flexible and well-
disciplined organization. In close coordination with the President's 
Management Agenda, USAID is aggressively implementing an ambitious 
management reform program including the introduction of new business 
systems, processes and changes to our organizational structures.
  --In conjunction with the State Department's Diplomatic Readiness 
        Initiative, we will ensure that the Agency has adequate numbers 
        of staff to meet present and future national security 
        challenges. In fiscal year 2004, for example, USAID will 
        recruit, train, and assign up to 50 additional direct hire 
        staff overseas to address staffing gaps resulting from 
        retirement of Foreign Service Officers.
  --We are also evaluating, with the Department of State, the 
        feasibility of more closely linking some of our business 
        systems to achieve operating efficiencies.
  --And we are working closely with the Department of State to improve 
        our support for U.S. public diplomacy and public affairs 
        efforts overseas, especially targeting the Muslim and Arab 
        worlds.
    I am pleased to report to the Committee that:
  --We have implemented improvements to the Headquarters core 
        accounting system and improved financial and performance 
        reporting. We have expanded cross-servicing and outsourcing, 
        including grant management (HHS), loan management (Riggs) and 
        payroll (NFC).
  --We have closed the Agency's material weakness on reporting and 
        resource management, and received an unqualified audit opinion 
        on four of five principle financial statements (and an overall 
        qualified audit opinion for the first time.)
  --We have made progress in improving employee morale and employee 
        satisfaction with management services. For example, my second 
        annual Agency-wide survey of all employees' opinions and 
        attitudes, completed in November 2002, showed that 63 percent 
        of those responding rated their morale as ``good'' or 
        ``outstanding.'' Improvements in performance by business 
        function ranged from 20 points for human resources and 
        information services to 37 points for financial management and 
        procurement services. While the results indicate we have made 
        progress, there remains room for improvement and we still have 
        a lot of work ahead of us.
  --We are in the process of developing a comprehensive Human Capital 
        Strategic Plan designed to address both USAID's particular 
        needs and the President's Management Agenda requirements. The 
        plan will address a critical need to rebuild and train our 
        workforce, to put the right kind of people with the right 
        skills in the right place. It will also address our need to 
        have surge capacity to meet crises such as in Afghanistan and 
        Iraq.
  --We have piloted an automated e-procurement system and deployed e-
        procurement capabilities to speed the purchase of frequently 
        used goods and services.
  --We are drafting a knowledge management strategic plan to reposition 
        the Agency as a global leader on development issues and to 
        facilitate knowledge sharing among partners and staff. 
        Completion is expected by mid-2003.
  --We have developed a strategic budgeting model to enable us to link 
        performance and resource allocation more efficiently.
    This year we began implementing the plans for human capital, 
knowledge management, and strategic budgeting. We will procure new 
acquisition and assistance software, begin pilot testing our Phoenix 
financial management system overseas, and reintroduce the International 
Development Intern program for recruitment and training of junior 
Foreign Service officers.

                             IN CONCLUSION

    This budget request is founded on three precepts:
  --Foreign aid and the Agency for International Development are 
        essential elements of our country's national security 
        apparatus.
  --Our programs are evolving to meet the challenges of the new 
        millennium.
  --We are pressing ahead with the management reforms begun in 2001 and 
        transforming USAID into an organization of excellence.
    Mr. Chairman, I would like to assure Congress that USAID's budget 
request for fiscal year 2004 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 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, and I look forward to working with you 
over the coming year as we move our foreign policy agenda forward.
    Thank you.

    Senator McConnell. As I indicated earlier, that will be 
made part of the record.
    Since we have a number of Senators here, I am not going to 
take my full 5 minutes, but I do want to begin by focusing on 
another part of the world that has been very much in the news 
this past week--Burma. I introduced yesterday along with 
Senator Feinstein and a number of co-sponsors, including my 
friend and colleague Senator Leahy, a bill that would impose 
sanctions on Burma, including a ban on exports and restriction 
on visas and the like.
    I have had an opportunity to speak with Deputy Secretary of 
State Rich Armitage, Deputy Secretary of Defense Paul 
Wolfowitz, and National Security Adviser Condolezza Rice about 
the situation in Burma and I am hopeful that the administration 
will support the bill and that we can get it through Congress 
in short order.
    But I want to focus on Burma and USAID. Last year, we put 
$1 million in our budget for HIV/AIDS programs in Burma with 
the full appreciation that the military regime that runs that 
country has no interest in its people and with the condition 
that this relief would be administered through international 
nongovernmental organizations in consultation with Burmese 
democracy leader Avng San Suu Kyi.
    I am curious, given the fact that Suu Kyi has, for most of 
the last 13 years, been under house arrest, how USAID and its 
contractor have been able to consult with her in coordinating 
the HIV/AIDS programs in Burma.
    Mr. Natsios. Senator, I do not know specifically our 
conversation with her, but I will get back to you on the 
question. I do know that we have initiated the HIV/AIDS program 
through the NGO community. There is also $500,000 I believe the 
Congress has appropriated in the budget for 2003 for democracy 
programs, which we were also supposed to and will consult with 
her as to how that money should be spent.
    We are all appalled by what has happened in the last few 
weeks. It appears that the regime has moved 10 years back in 
time. She is, as you know, under much more constrained 
circumstances. She appears to have been physically harmed in 
the latest attacks and we are extremely disturbed by the course 
of events. So we will work very closely with your staff to see 
to it that we structure our program, however modest it may be, 
along the lines of what you have suggested in your remarks.
    Senator McConnell. Well, we are hoping the U.N. Special 
Envoy Mr. Razali Ismael will be able to see her tomorrow when 
he is in the country. Somebody needs to see her to verify that 
she is still alive and well, given that she has been attacked.
    How do you provide any kind of oversight for the use of 
U.S. foreign assistance in Burma?
    Mr. Natsios. We have opened a regional office in Bangkok, 
Thailand, because we are doing increasing programs in countries 
in which we cannot have an AID presence. So that new office is 
to provide oversight for the programs we run in Laos and the 
programs that we run, limited ones, in Burma.
    Senator McConnell. Given the difficulty of carrying out any 
of these functions--since you have to do it by working around 
and not through the regime--could USAID handle an increase in 
HIV/AID funding?
    Mr. Natsios. Yes, we could.
    Senator McConnell. You could.
    Mr. Natsios. We work in countries in the middle of civil 
wars, with extraordinarily repressive regimes. Sudan, North 
Korea we have worked in before. I can give you a list of 
countries where we----
    Senator McConnell. Does the regime actively interfere with 
the NGO's inside Burma trying to help on this issue?
    Mr. Natsios. I think in the health sector they do not. It 
depends on whether or not the regime believes that the 
activities are threatening them in a direct sense, and health 
is an area where the programs tend to not be as threatening as 
some other kinds of programs.
    Senator McConnell. Well, I would be interested in any 
thoughts you might have before we start drafting this year's 
foreign operations appropriations bill as to how we might 
enhance the opportunity to consult with Suu Kyi and the NGO's 
to improve the situation in Burma.
    Mr. Natsios. We will get back to you, Senator, on that.
    Senator McConnell. Okay. I am going to cut short my round 
and then go to Senator Leahy and Senator DeWine.
    Senator Leahy. Thank you. Thank you, Mr. Chairman.
    Incidentally, Mr. Natsios, I want to call your attention to 
the efforts of Barbara Best. She has been working with my staff 
up in Vermont on the so-called LakeNet Project. It is a good 
project. I would invite you up to see it some time. I invite 
you up, Mr. Chairman, to see it. The Lake Champlain area is 
very pretty.
    Mr. Natsios, let me read you an article from a magazine 
written recently. I quote it:

    The blithe assumptions of the Iraq War's Pentagon 
architects that a grateful Iraqi Nation, with a little help 
from American know-how and Iraqi oil cash, would quickly pick 
itself up, dust itself off, and start all over again are as 
shattered as the buildings that used to house Saddam Hussein's 
favorite restaurants. In Baghdad and many other iraqi cities 
and towns, civic society has degenerated into a Hobbesian state 
of nature. Despite the heroic efforts of a scattered minority 
of mid-level Iraqi civil servants, the services that make urban 
life viable are functioning, at best, erratically. More often, 
they do not function at all. One of the few things that thrives 
now in Baghdad is a deepening distrust and anger toward the 
United States.

    In Iraq, what is USAID's role? And how do you feel about--
this was from the New Yorker magazine, incidentally. How do you 
feel about that criticism? Is it accurate?
    Mr. Natsios. First, I would say that this is a time, an 
event in progress, which is to say events change very rapidly. 
So what was true a week after the war ended is no longer true 
now.
    Senator Leahy. Let us just talk about today.
    Mr. Natsios. Okay.
    Senator Leahy. How many people do you have there today?
    Mr. Natsios. We have 100 people between the DART team, the 
Disaster Assistance Response Team from the Humanitarian Relief 
Bureau, and we have 27 people in the USAID mission, headed by 
Lew Lucke, a career foreign service officer we recalled from 
retirement who was the mission director in Jordan, speaks 
Arabic, knows the Arab world very well.
    Senator Leahy. Is he living in Baghdad?
    Mr. Natsios. He is in Baghdad right now.
    Senator Leahy. He is not living in Kuwait?
    Mr. Natsios. He was in Kuwait before the war started and it 
was difficult the first month because we did not have 
electricity, running water, et cetera, in the place in which we 
worked. I think we just moved this week into a convention 
center facility, which is quite good and has all of the 
conveniences we need to keep our staff functional. So the 
staff, more and more of them are moving up to Baghdad now.
    Senator Leahy. Would it be more--what would you anticipate 
the number of USAID workers be 2 months from now?
    Mr. Natsios. The same number. We are at what we need to do. 
We are transitioning, though, out of the humanitarian relief 
mode because we did not experience a humanitarian disaster. We 
expected three things would happen that did not happen, thank 
heavens. We expected that Saddam would turn, in his fury on the 
Kurds, the Shias in the south, the Turkmen, other ethnic groups 
that he hates and that he has visited terrible things on in the 
past. He did not do that.
    Two, we were afraid--he could consider blowing up the large 
dams and flooding the country, which he did during the Iraq-
Iran War. Third, we were afraid there would be large-scale 
population movements, internally displaced and refugees. There 
were not. There were almost no population movements.
    So there were pockets of need. We answered those and we 
have moved into a transition phase. So the Office of Transition 
Initiatives has taken the leadership now of the DART team and 
we will move into public employment programs, which we have 
begun in Baghdad neighborhoods now. Four city councils have 
been set up in Baghdad--or village councils, I should say, in 
neighborhoods, that have been elected or chosen by the people 
in the village, in the neighborhood, and they are beginning to 
make decisions. We are providing small grants for improvements 
in these neighborhoods.
    In Umm Qasr, the port, we just opened our first Internet 
cafe. They do not have the Internet, they did not until now. I 
thought it was sort of a mundane thing. It was a very emotional 
thing, because we took people from the mosque and the new city 
council and showed them what the Internet was. Several people 
were stunned and broke down during the demonstration because 
they did not know this thing--they heard rumors of it; they did 
not know it really existed. They said: We have been cut off all 
these years to this.
    Senator Leahy. I think that is an extremely positive thing. 
I was a little bit troubled. Maybe I misunderstood what you 
said earlier. I agree with you, I am delighted that he did not 
lash out at the Kurds while we were in there and that all the 
weapons he may or may not have had, that none of them were used 
against our troops.
    But you had to anticipate that there was going to be real 
problems in a number of the cities, just watching CNN at night 
and seeing the buildings being bombed, the electricity being 
cut off, water being cut off. Seeing the news about the 
looting, the destruction at the hospitals--apparently we did 
put tanks around the oil ministry, but the other places--I 
still do not have a very comfortable feeling about what we are 
doing.
    Your director is in Baghdad? He is not in Kuwait?
    Mr. Natsios. No, no, no.
    Senator Leahy. He does not go back there at night?
    Mr. Natsios. No, no, no. He comes--part of our procurement 
staff and our technical staff that does the paperwork is still 
in Kuwait because there is infrastructure----
    Senator Leahy. That does not bother me.
    Mr. Natsios. The director, in fact we talked to him 
yesterday. He is in Baghdad. He has been in Baghdad for the 
last week, I believe.
    Senator Leahy. For a week?
    Mr. Natsios. Well, he was back here to his daughter's 
graduation, I think.
    Senator Leahy. But he is there now?
    Mr. Natsios. Right.
    Senator Leahy. So you have got somebody on the ground. What 
is his security when he goes out? Can he move around in these 
areas?
    Mr. Natsios. AID has a set of armored vehicles that we use 
around the world. We keep them in a warehouse and we move them 
around wherever we need them. We used them in Bosnia and 
Kosovo. We used them in East Timor. We are using them here. So 
we have our own security, which no other, other than the 
military, no other group has, and we do use those, particularly 
the DART team.
    But let me just answer the question you asked, Senator. In 
terms of water and electricity, which are critical functions, 
this is not a poor society. This is potentially a very wealthy 
society, given they have water. It is an educated society or 
was very educated in the 1980s. It has deteriorated since then.
    Basically, the infrastructure is there; it simply has not 
been maintained for 20 years because the money has been put 
elsewhere. Right now in Iraq, other than Baghdad there is more 
electrical power and better water than there has been since the 
mid-1980s. We did this only in two months. When I say ``we'', I 
would like to say we did it all ourselves. We did it with the 
British military, the NGO community, the UN agencies. AID paid 
for a lot of it and so did DFD, the British aid agency. The 
civil affairs units have been very helpful and the rest have 
been very helpful.
    But right now in Basra, for example, the second largest 
city, they have had 24 hours electrical service now for 3 
weeks. They have never had that since before the first Gulf 
war. The water system is in far better shape. Now, is it what 
it should be? No. But it is far better than it has been since 
the Gulf war.
    So things are actually improving. And I have to give credit 
also to some of the Iraqis. We went to some cities in the south 
and the Iraqi engineer said that he would not let us fix the 
water system: We know how to fix it; we're technically 
competent; just give us the parts. We brought the parts and we 
watched them. They fixed the water system within 24 hours.
    In villages that had not had water in 10 years, Shia 
villages, that because they had been in revolt were being 
punished, they said we physically were not allowed to repair 
them. They did it themselves with our parts.
    Our doctors--I thought the doctors would be underskilled, 
but one of our very senior medical doctors said: These guys are 
as skilled as Western European or American doctors. In fact, we 
do not need even to train them. They are highly skilled 
technically. Just they have no equipment, the hospitals are in 
terrible condition for many years except for the Baathist Party 
members' hospitals, and what we need to do is bring the other 
hospitals in the Shia and Kurdish areas up to the same standard 
as Baghdad's hospitals.
    Baghdad still has problems with electrical power, but we 
are now at 70 percent of what we were in terms of electrical 
levels from before the war, and that is a dramatic increase 
over 2 weeks ago.
    Senator Leahy. My time is up and I will submit my other 
questions for the record, but especially a question I want to 
give a lot of attention to. In the supplemental, of the $2.4 
billion we put in for Iraqi relief and reconstruction, we 
included assistance to Iraqi civilians who suffered losses as a 
result of military operations. That is something we can do and 
please have your staff work with mine about it.
    Mr. Chairman, I went way over time. I appreciate your 
courtesy.
    Senator McConnell. Thank you, Senator Leahy.

               OPENING STATEMENT OF SENATOR MIKE DE WINE

    Senator DeWine. Thank you, Mr. Chairman.
    Administrator, thank you very much for being with us. I 
have two questions. They are obviously related, but they are 
separate. One is I want to congratulate you and congratulate 
the administration for putting emphasis once again on 
agriculture development, very, very important. If you look at 
where your numbers are in 2002 and 2003, very positive.
    I congratulate also this subcommittee--I was not on the 
subcommittee then, so I can say that, I guess--in the money 
that was appropriated. Our numbers that you have proposed in 
2004 are down just a little bit, but it is still pretty good 
numbers.
    I would like for you to address your vision for agriculture 
development and where that fits in in our whole overall foreign 
aid program.
    Second, I am concerned about what is the reports and what 
is going on in Africa in regard to the famine. I am pleased to 
see that the administration has requested money for the 
emergency famine fund, but I wonder if this is going to be 
enough and I wonder if you can tell us where you think we are 
going there and what the rest of the international community is 
doing.
    Mr. Natsios. With respect to agriculture, Senator, I do 
appreciate your bringing it up because this is one of my and 
the President's and Secretary Powell's big initiatives. The 
President has announced this. We announced it, one, at the 
World Food Summit in June of last year, and the President has 
made subsequent announcements at the G-8 on agricultural 
development to end hunger.
    We need to understand there is a relationship between 
economic growth in most of these countries and food insecurity 
and poverty. Most of the poorest people in the world live in 
rural areas and they are farmers or herders. If you do not deal 
with agriculture, you cannot deal with poverty.
    Why is it that the Asia giants like Taiwan and South Korea 
and Thailand have much the best distribution of wealth in the 
world? Why does Latin America have the worst distribution of 
wealth in the world? The reason is because of the green 
revolution in Asia, which AID in the mid-1960--with the World 
Bank and the Rockefeller Foundation--orchestrated. This effort 
included improving seed varieties and introducing new 
technologies in agriculture, and investing in the rural areas. 
In Latin America, they did not invest in the rural areas and as 
a result of that there is a gross imbalance between the rural 
areas in Latin America and the cities, like two different 
countries. That is not true in Asia.
    I just want to also point out that since 1980 we have 
calculated in the developing world that 50 percent of the 
improvement in productivity in agriculture is the result of 
improved seed technology. Our research scientists have produced 
improved seed that has dramatically revolutionized agriculture 
in many third world countries.
    We believe that investing heavily in these seed 
technologies can make great progress, not the end to all 
problems, because you have to connect production to markets--
you know, if you grow more food and the prices are wrong, 
farmers are not going to grow more food in the future. One of 
the causes of the complex food emergency that we are 
experiencing in Ethiopia is bad economic policies in the 
region--restrictions on trade, for example. Farmers grew more 
food 2 years ago, prices collapsed, they could not sell their 
food, and as a result many of them were in deep financial 
trouble because they had borrowed money to buy seed and 
fertilizer. They said: We are not doing this again; we are 
going to only grow enough food to survive; we are not growing 
any surpluses.
    That is when we had the crop failures. It was not just 
because of drought. It was also because of economic policies 
and lack of free trade in East Africa.
    So we believe investing in these technologies can make a 
huge difference, and we do appreciate the support of the 
committee between 2002 and 2003. There were constraints on us 
for 2004, but agriculture is very, very important.
    I might also add that there is a perception that it is only 
the large lumber companies that are destroying the rain 
forests, the Congo rain forest for example or the Amazon, the 
big companies. That is not the case. Slash-and-burn agriculture 
is widely used in the developing world by farmers who have 
completely exhausted the nutrients in the soil because they 
have no fertilizer, no improved seeds, and they are so poor 
they simply burn down more forest to grow food.
    It is a direct connection between sustainable agricultural 
development and sustainable environmental programs. They are 
connected to each other, and if you get peasants to be more 
prosperous and their incomes go up and you do the program 
right, you can do a lot for the protection of environmental 
diversity in the developing world.
    With respect to famine in Africa, we are facing a 
catastrophic situation in Zimbabwe. That is entirely manmade. 
It is made by Robert Mugabe, who leads a predatory, tyrannical, 
and corrupt Government that is wreaking havoc on Zimbabwean 
society. That is a manmade event. There was a drought, but in 
fact even with the drought there did not have to be any food 
insecurity in that country at all because half of the 
agricultural system was irrigated. It was large farms, it was 
irrigated, and the irrigation reservoirs were full. But because 
he confiscated the land and did not have anybody competent to 
run the farms, the farms did not produce any food. They would 
have produced food even in a drought because of the irrigation 
systems.
    Now the abuses in Zimbabwe are getting so horrendous that 
society is beginning to break down, and there is hyperinflation 
on top of it developing.
    The other place we face an emergency is in Ethiopia. The 
U.S. Government began last September stepping up to the plate 
to what was a fast onset famine, which normally does not take 
place. Usually we have advance warning. The Ethiopian 
Government did not get it and we did not get it and the 
international agencies did not get it.
    Why is that? Because we did not realize to what degree the 
Ethiopian people were vulnerable from the last drought and 
famine in 1999. They did not recover from it. They were 
impoverished by it and as a result they were right on the edge 
of catastrophe when this latest crop failure took place because 
of the drought in the eastern part of the country.
    We have pledged now 808,000 metric tons of food to 
Ethiopia. Walter Kansteiner was with Prime Minister Melis 
yesterday and he said there would be millions dead now but for 
the intervention of the United States. Fifty-five percent of 
all the food that went in this calendar year came from the U.S. 
Government, 55 percent.
    I do not want to go into the other donors. The British have 
been extremely generous. Between the British and the United 
States, we are leading the response. It is not just food, 
because in a complex food emergency you also have to immunize 
the kids because a lot of kids get malnourished and die of 
measles. Measles epidemics are one of the most severe 
challenges we face in famines, because when the human body 
becomes malnourished the immune system breaks down and you die 
of things like measles that most kids would not die from.
    So we have got to do immunization campaigns. Water has 
deteriorated because of the drought. So there are a set of non-
food interventions that we are now undertaking. There is a 
Disaster Assistance Response Team in the country right now. 
They will return next week and we will continue to step up the 
response.
    I want to add, Senator, if it were not for you and other 
Members of the Senate adding funds for food aid into the 
budget, we would not have the resources we need. I want to 
thank the Senate for at exactly the right time giving us the 
resources we need to increase our pledges to Ethiopia. I 
promised Prime Minister Melis in January when I was there we 
would not abandon the country and we have not done that. We 
have been the leaders, and I think there are comments in Europe 
about this now, about the fact the United States is there and 
continental Europe is not.
    Senator DeWine. Thank you.
    Senator McConnell. Senator Landrieu.

             OPENING STATEMENT OF SENATOR MARY L. LANDRIEU

    Senator Landrieu. Thank you, Mr. Chairman.
    Director Natsios, I appreciate the comments. Could you be a 
little bit more specific about the current status of women both 
in Afghanistan and Iraq? I understand that this is a 
particularly difficult and complex situation, but one that, as 
you can imagine, is crucial to the development of any 
democracy. You touched on it in your statement, but could you 
take a moment to just elaborate further on your focus and goals 
and what progress we are making?
    Mr. Natsios. With respect to Afghanistan, as you know, the 
Taliban treated women in a deplorable way. Our goal has been to 
raise the status of women within Afghan society, though I have 
to tell you it is not us who are raising. They are raising 
themselves. We are simply assisting the process. We have funded 
a series of women-run newspapers in--not Baghdad--in Kabul that 
connect the professional women of the city together, and we are 
hoping to extend this to other areas of the country.
    The second thing is, the first ministry we rebuilt was the 
women's ministry. The roof had been blown off the building and 
we put a new roof on and brought office equipment in so that 
they could have a functioning ministry. There is a new human 
rights commission which is led by one of the great women of the 
country, a doctor, and she asked for our assistance in staffing 
and we have provided technical assistance to her commission on 
the human rights issues in Afghanistan.
    The third point I would make is the way in which the status 
of women can be improved in Afghanistan as well as many other 
countries is through the education system. We made a deliberate 
decision early on to invest heavily in educational development. 
Two-thirds of the teachers in Afghanistan before the Taliban 
were women. So we began a very aggressive campaign to train 
teachers, many of whom only were literate. They were the 
literate people in the village. They were not trained as 
teachers. Many of them do not have college degrees.
    So we trained them in how you organize a lesson plan and 
how you use the books we printed. We printed books, half in 
Dari, half in Pashto, the two major languages, for all the 
major subjects from grades 1 through 12. We have printed 
already 15 million for the back-to-school campaign last year. 
They were so successful, the minister of education asked us to 
make this the permanent curriculum of the country and they have 
become; and to print another 15 million, and they were printed 
recently and they are on a ship now and will arrive shortly for 
school.
    There were very few girls in school prior to the Taliban, 
so what we did was we just allowed kids to go back to school 
and then found out where the rates of girl returns were the 
lowest and we have provided a vegetable oil subsidy for 
families who regularly send their girls to school. We have got 
the rate up to about a third now. In other words, it is not 50-
50, what it should be; it is two-thirds, one-third, but it is 
better than zero, which is what it was before in many years.
    That subsidy of vegetable oil is nutritionally useful. It 
is fat content for the diet. But it is on top of their regular 
ration, and in villages that are agricultural people love it. 
It is very valuable. So we are noticing that this incentive is 
having the effect of making sure the girls stay in school, 
which is very useful.
    Senator Landrieu. I appreciate that. Comment really quickly 
about Iraq, if you would?
    Mr. Natsios. Women had a much higher status in Iraq. Iraq 
is probably the most secularized country in the region. This 
was an urbanized society. Seventy percent of the people live in 
cities. It was one of the most sophisticated and educated Arab 
societies prior to the mid-1980s when the Iraq-Iran War started 
the downward slide of the country.
    It actually had a much higher rate of female literacy. The 
rate of literacy now has dropped dramatically in the last 15 
years for women in high school. There are girls in grammar 
school, there are not in high school. I do not remember the 
exact statistics, but I was shocked at how low the high school 
girl rate of participation was.
    Our intention is to have an aggressive campaign. A lot of 
the money we will be spending will be rebuilding, we expect, 
rebuilding or reconstructing about 6,000 schools. We have given 
grants to UNICEF to do the curriculum. There were some concerns 
we were writing all of the textbooks at AID.
    But there is going to be an effort to make sure that there 
is an equitable distribution of seats in those classrooms for 
girls, because that is an important part of society. There is a 
problem in Baghdad right now because security in some 
neighborhoods, where parents are not sending their girls 
because they have been abducted by some of these criminal 
gangs, and so the rates have gone down in Baghdad. But we are 
getting them up, we are getting them back up, in the areas that 
are now secure.
    Senator Landrieu. Well, I appreciate those comments, 
because there are a number of us, and not just the women 
Senators, although we remain very focused on this, who are 
committed to the idea that one of the great and most 
substantial long-term development improvements we can make is 
providing an excellent education both for boys and for girls. 
We must try to get children and people back into education, and 
particularly focus on the women as students and teachers. So we 
appreciate that.
    Mr. Chairman, if I could make just one comment, not a 
question, because my time is out. But Mr. Natsios, please 
review the work that some of us are doing to establish a 
permanent trust fund for the oil revenues in Iraq. This is 
important if we wish to communicate in a very concrete way that 
Americans, and hopefully our coalition partners, understand 
that this resource belongs to the people of Iraq. We want to be 
part of helping establish a framework under which those 
resources can be used to build this country out of the chaotic 
situation to a very bright future.
    There are many different models, none of which is perfect. 
Alaska has a good model; Louisiana has a smaller, different, 
but effective one; Texas has had a model; Kuwait has yet a 
different model. There are models around the world that could 
be looked at.
    The chairman of this committee has indicated an interest in 
this and we are working on the exact mechanism, but I would 
appreciate your consideration of that idea. Any comments 
briefly you might have?
    Mr. Natsios. If I could just respond to that, Senator. We 
share completely your objective and the objective of other 
Senators on the education front, not just in Afghanistan or 
Iraq but around the world. In fact, we have increased the 
education budget, primary education, by 100 percent in the last 
2 years with your support. We do appreciate that.
    But AID got out of the education business and out of the 
agriculture business in the 1990s and now that money is 
beginning to increase for those two areas. We know, for 
example, that among farmers who are women in Africa that a 
sixth grade education with no additional inputs will 
dramatically increase agricultural productivity. So education 
has a lot of side effects. It also has an effect on child 
mortality rates, has an effect on lots of things.
    So it is very desirable, very desirable that we invest more 
money, particularly in primary, but also in high school 
education.
    With respect to the trust fund, the person in charge of 
reconstructing Iraq for the United States is Ambassador Bremer. 
We are very comfortable having him there because in every 
country in the world in which we have an AID mission we report 
to an ambassador and Jerry Bremer was a career officer and head 
of Kissinger Associates, and he is a very good manager.
    He understands AID. One of his division directors is Lew 
Lucke, our mission director. Another is headed by Peter 
McPherson, who was the AID Administrator from 1981 to 1987. So 
Dr. McPherson knows AID well. He is a former Deputy Secretary 
of Treasury and one of my best friends in this business, and he 
is the head of the economics section.
    So we have people who are advising----
    Senator McConnell. Is he over there now?
    Mr. Natsios. He is there now.
    Senator McConnell. Did he resign as President of Michigan 
State?
    Mr. Natsios. He took a leave of absence from Michigan State 
until September. We are hoping it lasts beyond September 
because we are so pleased he is there.
    But the trust fund is something that we not only endorse, I 
think there is comment on the idea in the resolution that went 
through the United Nations on reconstructing Iraq. The Pentagon 
is in charge of creating that and if they want our help in 
anything we will certainly give it to them.
    But Ambassador Bremer is in charge. We report to him. We 
are very comfortable with that. We are very happy with the way 
things are moving in terms of the structure, organizational 
structure. He is providing a lot of leadership.
    Senator Landrieu. Thank you.
    Senator McConnell. Thank you, Senator Landrieu.
    Senator Bond.

            OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. Thank you very much, Mr. Chairman.
    Mr. Administrator, I would like to go back to follow the 
line of questions that Senator DeWine asked. I very much 
appreciated your comments on agriculture. We have talked about 
this many times. I believe the old saying that a well-fed 
person has many problems, but a hungry person has only one.
    With all the problems you have got on your plate, hunger is 
still one that we are very much concerned about, and successful 
agriculture development. Just to share with you, a couple weeks 
ago I had in my office a cotton farmer from South Africa, Mr. 
T.J. Butalesi. He said he had spent 40 years growing cotton 
with hard work and poverty. He said 3 years ago, despite Earth 
First and Greenpeace, he planted his new genetically improved 
cotton seed. He has more than doubled his yield. Instead of 
spraying pesticides 10 times, he has sprayed 2 times. He said 
he is now working smart rather than hard. He just built a new 
brick house and his neighbors think he is the best farmer in 
the region.
    I very much appreciated your coming to St. Louis last year 
to visit the Danforth Plant Science Center. As I think we 
discussed, there they are working with Ugandan scientists, the 
International Institute of Tropical Agrobiology and NGO's to 
develop an exciting new approach to block out the Africa 
cassava mosaic virus which is wiping out cassava crops, a 
staple in most African diet.
    I believe that you are working field trials with this. How 
is that project going? What outcome do you expect to have from 
it?
    Mr. Natsios. I agree with everything you said, Senator. I 
want to tell you, one of the highlights of my domestic trips 
was the trip to the Danforth Center. It was quite an 
extraordinary place and we are very pleased it exists and they 
can be partners with us.
    During the Johannesburg Summit, where this whole issue of 
GMO grain came up for the first time, I had dinner with the top 
GMO scientists in the universities of South Africa. These are 
South African scientists now, developing seed for South Africa 
and African farmers. It was extraordinary.
    One of the women scientists was telling me they are 
developing a new seed variety using genetic material that does 
not require almost any water. They grow almost in rock or 
desert conditions. They are going to put that into corn and it 
could deal with one of the recurring problems we have in 
Africa, which is drought.
    I said: I want to know as soon as you have research in from 
the trials on it whether this is going to be the success that 
you think. She was so excited about it. She has been sending me 
some of the material on it. We are helping to support that 
research through the suggestions you have made in the budget, 
which we strongly support continuing.
    So they have extended this GMO material to white corn--
white maize--which we do not grow much of in the United States, 
but which is a staple crop in South Africa. In some areas the 
farmers have gone from $1,000 per capita income to $10,000 
because of these improved varieties. It is not just in cotton; 
it is also in maize that this is developing. It is quite 
extraordinary.
    Senator Bond. I very much appreciate the strong stand you 
have taken in promoting improved food and agriculture through 
the use of modern biotechnology, and I believe that the 
President has stated very forcefully his policy. I thought you 
might--I would like to get an update. I heard you were rather 
clear in your warnings to certain African officials who were 
allowing Eurosclerosis, the European Luddites, to prevent the 
use of the fine genetically improved food that all of us here 
eat every day. They were refusing to feed that to the hungry 
people in their country.
    I think you made--did you make some fairly clear warnings 
to them? What is happening with that? How are we doing with the 
Eurosclerosis?
    Mr. Natsios. I will try to be a diplomat here, Senator. You 
have a little bit more freedom than I do to characterize things 
clearly.
    People were shocked when I said, the President eats and all 
of us eat our cereal in the morning and it is GMO and it has 
been for 7 years, especially if you eat Corn Flakes. And they 
looked at me, and I said: My children eat it, and there has not 
been one lawsuit in the United States, and we are a very 
litigious society, over anything, any health risks from GMO 
corn in the United States.
    It really is outrageous what has happened. I am so 
disturbed after 7 years, 7 years of distributing this food aid 
in countries around the world, that the groups that cause the 
trouble, these groups that you mentioned earlier as well as 
others, did it in the middle of a drought that was turning into 
a famine, in the middle of the Johannesburg Summit. They 
deliberately chose the middle of a food emergency to do it. I 
mean, 7 years we have been distributing it and no one said 
anything. And I mean, it was not exactly a secret that we have 
been using GMO as a central part of our agriculture for years.
    This is a trade issue. It is not a scientific issue. It is 
not an environmental issue. In fact, it is damaging the 
environment not to allow this technology to deal with these 
environmental problems in the developing world. Most countries 
in Africa cannot afford all these expensive inputs. This is one 
way of them dealing with pesticides, herbicides, and 
fertilizers that they cannot afford. This is why they cannot 
get their productivity up, but they can through improved 
varieties and through scientific research of the kind that we 
have been investing in.
    It is the potential. It is not going to solve all the 
problems because, once again, you got to connect farmers to 
markets, you have got to train people. There are other things 
you have to do. But scientific research and technology is the 
answer to part of our problem in agriculture in the developing 
world. I believe genetic research, GMO research, can be one of 
the great boons to agricultural development and to the 
alleviation of poverty in the developing world, particularly in 
Central Asia and in Africa, where the greatest poverty is in 
the rural areas.
    Senator Bond. Thank you very much, Mr. Administrator. That 
is excellent.
    I would just conclude, Mr. Chairman, by saying I thought 
somebody from the U.S. Government warned leaders in the African 
country if they refuse to feed their people the kind of food 
that we eat every day because it is genetically modified that 
they would haul them up before the World Court on genocide 
charges. I do not know who that was.
    Mr. Natsios. Well, I do not repeat some things I say.
    Senator Bond. I do not remember who that was, but I thought 
that was a nice subtle touch.
    Senator McConnell. It was indeed.
    Senator Burns, top that.

               OPENING STATEMENT OF SENATOR CONRAD BURNS

    Senator Burns. That is pretty easy.
    Thank you very much, Mr. Chairman. Director, thank you for 
coming today.
    I want to not follow up on what Senator Bond said because 
in Montana we have some of the foremost plant breeders and 
livestock growers that can increase gene pools around the 
world. I have a young man coming from Georgia, the Republic of 
Georgia, to the United States this spring. In fact, he will be 
in to see me not too long from now. We are talking about 
increased agricultural production in Georgia, which they have 
every right to expect that country to produce. He is the 
minister of agriculture and he is very forward-looking, but he 
is running into some of the same problems that we ran into down 
in Africa.
    But I want to ask you about another subject. In the 
rebuilding of the infrastructure in Iraq, there are a couple of 
things, and you hit upon one: how surprised they were about the 
Internet. We know right now there are only about three phones 
per every 100 citizens in Iraq. There is no wireless system, 
and for all those systems and the infrastructure--there are 
very few computers, of course.
    We know that the infrastructure was formerly mostly 
controlled by the military and the Government in power. The 
Government controlled it and then whenever we took out their 
communications systems we also took out the core of the 
civilian systems also.
    Right now about two-thirds of the 800,000 lines for the 
hard-wired infrastructure are there in working order. They only 
can talk to people in their local exchanges. There are hardly 
any long distance calls at all that are not wireless.
    So I am of the understanding that we cannot be very 
successful in what we want to do over there unless we have got 
a very, very strong communications system. That is part of the 
building blocks, no matter what we do in agriculture. We know 
that Iraqis have the ability to feed themselves. I mean, they 
have some very good land. They have two great rivers that can 
provide irrigation and they also have a soil base that is 
probably as good as any in the Middle East. It is a lot better 
than you'll find in Jordan and would compare to the strongest 
of the Middle East countries. We know something of their 
production.
    I just want to make a point here to you, although I will be 
talking to the people who are in charge. Once we start building 
wireless systems and that need is probably immediate--the 
systems should be interoperable; the systems should be the 
newest of wireless technology that offers broadband access to 
the world Internet. I feel there has not been a priority set on 
the communications system in Iraq. In other words we not only 
want to talk within Baghdad, but we want long distance from the 
green line to Basra.
    I would ask you to remind those that you help when they 
come to you to request aid, that we take a good, strong look at 
what we are building, at how fast we are building it, and at 
the importance of the communications system. That will be the 
overriding infrastructure other than ground transportation, 
which is pretty well taken care of. We were pretty careful 
about that.
    But I really believe, Mr. Director, and this is most 
important, there is no sense starting with an old technology. 
We are trying to get away from them towards something that we 
could apply that would give us high-speed and move a lot of 
information very, very quickly.
    As you have looked at that country, do you have any 
thoughts on what is there and where we should be going?
    Mr. Natsios. Senator, this is a very important question 
because communications is a serious problem in Iraq right now 
for us and for the NGO community, our contractors, U.N. 
agencies, and for the ministries themselves. Many of them 
cannot call the cities from the central ministries in Baghdad. 
We are looking at the issue and we will be putting together a 
set of recommendations very shortly which I think you will be 
pleased with. I do not have anything to announce yet because we 
are still researching the issue.
    There is a provision within the Bechtel contract that was 
written when we wrote it in January--it was not the Bechtel 
contract; it was the work, the RFP that was bid--that calls for 
reconstruction of the existing infrastructure. So there are two 
questions here. One is the land lines, many of which are down 
and need to be repaired. Bechtel will be doing that. That is in 
their contract. There is money aside for doing it and they have 
been ordered to do it. So that is already part of the plan.
    The question is on the wireless part of this and that can 
also be covered in the Bechtel contract. I am not sure that is 
how we are going to do it. We have not looked through that 
entirely at this point. But it is clear there is an issue. It 
has been brought to our attention and we will be acting on it, 
and we will get back to you about the details of that.
    Senator Burns. I would certainly appreciate that. They have 
hardly any fiber at all that carries their long distance wired 
lines or trunks, even in the urban areas. So that is one of my 
things. It applies not only to the way we do agriculture, but 
it also does what you want to do. In addition, it plays a huge 
role in education, for schools in remote areas, especially in 
the use of wireless technologies for distance learning.
    We have the technology to move fairly rapidly in the 
rebuilding of our education infrastructure, which is what we 
are going to do. So I appreciate your answer on that. I 
appreciate your concern. I look forward to visiting with you on 
some of those systems, because I take a very strong interest in 
that. We come from a remote State, so we know how large a role 
that communications plays in the economic development of our 
States.
    I thank the chairman. I do not serve on this particular 
Appropriations subcommittee, but he did tell me that I could 
make this little statement and I appreciate that very much.
    Senator McConnell. Glad to have you here, Senator Burns.
    Let me just mention, this hearing is going to end no later 
than 3:30. It may end sooner, but we will leave the record open 
for whatever questions any members want to add.
    Let me take another round here, Mr. Natsios. Shifting to 
the place the President just left--the Middle East--and the 
road map between the Palestinians and the Israelis, how will 
USAID be utilized to support the road map? What has USAID been 
able to do there in the past, and how you are able to implement 
and monitor programs, particularly on the Palestinian side, to 
ensure that funds do not end up in the hands of those who are 
engaged in homicide bombings?
    Mr. Natsios. Thank you, Senator. We of course have a heavy 
presence in the West Bank and Gaza, but since the second 
intifada began we have altered our program and much of it now 
is humanitarian assistance because we simply cannot continue 
under these circumstances some of the programs, although I have 
to tell you an interesting story. Two days before I was sworn 
in as Administrator, I met the foreign minister of Israel at a 
reception, Mr. Peres, in Washington. The first thing he said 
before I could introduce myself was: I know you are Andrew 
Natsios, you are about to be sworn in as the Administrator; do 
not touch the water programs, please. I said: Yes, sir.
    I met him later at a dinner in the evening. He said exactly 
the same thing. He said: I know I said this to you once before. 
Let me say it to you again: Do not touch the water programs. I 
said: Yes, sir.
    There is common interest in some things that cut across the 
conflict and the acrimony and water is one of them because it 
is so scarce. The water programs AID was running are these huge 
water purification plants that will rationalize the water 
system in the West Bank and Gaza. But, of course, they all get 
their water from the same place Israel does, which is the 
underground aquifers or from desalinization plants, which we 
are also constructing I think one of in Gaza.
    So to the extent that we have been allowed by the violence, 
we have continued these important programs. We do not go 
through the PA for any of the work we do. We do not transfer 
any money. The one thing we are doing now----
    Senator McConnell. It is 100 percent NGO, right?
    Mr. Natsios. That is correct.
    There is one project we are working on now, and this was at 
the request of both the Israeli and the Palestinian Authority, 
and that involves providing the PA finance ministry with modern 
systems of accounting and accountability and auditing to ensure 
in the future that they have the skill set to monitor how money 
is spent by some of the ministries. We have a major 
international accounting firm that is providing this training, 
and it is connected to the whole question of revenues being 
collected by the PA and by the Israeli Government.
    So there was an agreement struck and AID is playing a role 
in making--in implementing one of the few agreements that was 
made prior to this past week. It was at a mundane level, but 
both sides agreed to it, we were asked to do it, we have done 
it, and it is working, I am told, quite well. It is capacity 
building. There is no money changing hands in terms of being 
moved, but there is a training program, a capacity building 
program, which we believe will be very useful over the longer 
term.
    We are looking to the future and we have been asked to 
begin gearing up for changes that will will unfold due to 
advances in the peace process. We believe that the President 
has begun a process that is going to be a success and AID needs 
to be ready as soon as an agreement is reached to give legs to 
the peace accords from our perspective.
    We have a limited role in this, but we do have a role, and 
we have to act quickly because the longer you wait the more 
risk there is in terms of the peace settlement coming undone. 
This happens in conflicts all over the world, where if we do 
not act quickly following a peace settlement things 
deteriorate.
    Senator McConnell. So you are not expected to be asked to 
do anything different; just more of the same and quicker?
    Mr. Natsios. Well, we may be asked. There may be things in 
the peace accord, Senator, that are different than they have 
been in the past. So I do not want to presume what we will be 
doing because it may be that they actually negotiate some of 
these things.
    Senator McConnell. Senator DeWine.
    Mr. Natsios. I just want to say, I work for Colin Powell. I 
go to the morning meeting every morning at 8:30, and this is an 
issue of intense interest to him, Rich Armitage, my good 
friend, and Secretary Grossman. And we do what they ask us to, 
enthusiastically and energetically, and we will continue to do 
that.
    Senator McConnell. Well, I have a number of other questions 
about various parts of the world, but I am going to restrain 
myself. Let me end by telling you I ran into a young friend of 
mine in the airport in Louisville on the way back to Washington 
last Sunday. He was on his way to Bosnia. He works for the 
World Bank, and he was extremely complimentary of your efforts, 
the efforts of your agency in Bosnia. He was extremely 
complimentary of the USAID effort and I thought that I would 
pass that along to you because you probably do not hear as many 
compliments as you do criticisms from Members of Congress.
    Mr. Natsios. Senator, if you could get me his name so I can 
take him out to dinner next time I visit Bosnia, I would 
appreciate it.
    Senator McConnell. I will do that.
    We thank you very much for being here today and we will 
look forward to drafting your budget for next year.
    Mr. Natsios. Thank you, Senator, for your support. We do 
appreciate it.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator McConnell. 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 Mitch McConnell

                      OTHER DONORS IN AFGHANISTAN

    Question. Have contributions from other donors kept pace with 
needs? What have Middle Eastern countries provided?
    Answer. Like the United States, a number of donors have disbursed 
more than they pledged, including the United Kingdom, Japan, the 
Netherlands, Denmark and Australia.
    Contributions from the Middle East have been less generous and 
slower in disbursement.

              ACCOUNTABILITY OF ASSISTANCE IN AFGHANISTAN

    Question. How is USAID ensuring that assistance to Afghanistan is 
being used for the purposes intended? Are regular audits conducted?
    Answer. Given the security strictures in place for U.S. Government 
employees in Afghanistan, it is challenging for USAID staff to directly 
monitor all of our programming.
    In order to address this constraint, USAID has a Field Program 
Manager, whose job it is to travel around the country with the U.S. 
military for project monitoring and oversight.
    USAID has also placed Field Program Officers in each Provincial 
Reconstruction Team (PRT) to help with this critical function. On the 
Kabul-Kandahar-Herat highway project, USAID has requested a concurrent 
audit by our Inspector General.
    In addition, our Inspector General (IG) is also monitoring USAID's 
economic governance contract.

                        ELECTIONS IN AFGHANISTAN

    Question. How can the international community ensure that the 
elections are credible and reflect the will of the people--is more time 
needed to prepare?
    Answer. Successful implementation of the Bonn Agreement, including 
the June 2004 elections, is a high priority for the USG.
    We are working closely with the United Nations and other donors to 
ensure that adequate funding is made available on a timely basis for 
the elections process. Voter education and registration are immediate 
priorities.
    We are encouraging the establishment of an independent Afghan 
electoral management body, the approval of an electoral law (through 
the constitution or interim measures), and either a political party law 
or regulations that permit an enabling environment for political 
parties or movements to form, organize and participate in the election.
    The USG is providing technical support for elections processes, 
aiding the development of democratic political parties and coalitions 
of reform-minded political parties and movements, as well assisting 
civic/voter education.
    Question. What is the international community doing to ensure a 
stable and secure environment for the proposed polls?
    Answer. Security is a serious concern for all activities related to 
the elections process.
    We are working with the Afghans, the United Nations and other 
donors to determine how best to address security concerns leading up to 
and immediately following elections.

             WOMEN'S POLITICAL PARTICIPATION IN AFGHANISTAN

    Question. What programs is USAID supporting to increase political 
participation of women?
    Answer. SAID believes the Afghan Ministry of Women's Affairs (MOWA) 
provides a voice within the government to advocate for increased 
political participation for women in Afghanistan and, accordingly, has 
provided support for MOWA. USAID has also assisted NGOs working to 
increase women's political participation.
    Ministry of Women's Affairs.--This was the first Afghan Ministry to 
receive USAID assistance. USAID assisted in the physical rehabilitation 
of the Ministry of Women's Affairs (the auditorium and 11 offices) and 
provided the Minister with a vehicle, office furniture and supplies, 
two computers and a satellite phone. USAID's Gender Advisor provided 
extensive assistance in helping the Ministry develop its first National 
Development Budget recently. (Total activity funding: $178,718)
    The NGO, Afghan Women's Network, is providing returnees with job 
skills, including managerial training, and training women to 
participate in the political process. (Total activity funding: $27,352)
    The NGO, AINA, provided support to Afghan women filmmakers to make 
a film on the experience of the Afghan woman during the Taliban period 
and their hopes for the future. (Total activity funding: $97,110)
    USAID is supporting the Constitutional, Human Rights and Judicial 
Commissions to ensure that women's concerns are taken into account.
    USAID is supporting a number of programs oriented at civil society 
groups which will work to include women as well as minority groups into 
the political process. In addition, there will be targeted NGO-
implemented programs working out of the women's centers which will 
direct attention to this issue. USAID also supports to the Human Rights 
Commission.
    USAID, through the International Foundation for Election Systems 
(IFES), is advising the Afghan Government and the United Nations on 
needs for women's registration and voting.
    USAID, and its partners, the International Republican Institute 
(IRI) and National Democratic Institute (NDI), are ensuring that women 
are recipients of education in the voter education process and 
encouraging women to join political parties and movements, and for 
parties and movements to include women.

                          IRAQ RECONSTRUCTION

    Question. How do the ground realities in Iraq today differ from 
your pre-conflict expectations and how does this impact budgeting--for 
example, do fewer bridges need repair than originally anticipated?
    Answer. War damage was less severe than anticipated, while the 
extent of looting immediately post-conflict and the dilapidation of 
existing infrastructure has been extensive. With respect to 
infrastructure reconstruction, USAID, with guidance from the Coalition 
Provisional Authority, has been prioritizing emergency communications 
repair, power/electricity, and water and sanitation facilities.
    Question. Are press reports on the slow pace of reconstruction 
accurate? In addition to the security situation, what are the major 
obstacles for reconstruction?
    Answer. While the security situation poses challenges for 
reconstruction efforts, the pace of USAID reconstruction activity is 
consistent with and in some cases ahead of the pre-planning estimates 
submitted to Congress in the April supplemental request. A fundamental 
objective of all USAID support is to ensure Iraqi ownership of the 
process and sustainability of efforts, but there is a fear among Iraqis 
that Ba'athist elements could target them in retribution for their 
reconstruction work.
    Question. Are Ba'athist loyalists or Shi'a religious leaders 
actively undermining reconstruction activities?
    Answer. This question is most appropriately addressed to the 
Department of Defense. However, USAID has productively-worked with 
Shi'a religious leaders in delivery of essential services in the 
southern regions and Baghdad.

                                 EGYPT

    Question. What is your assessment of USAID's democracy and 
governance programs in Egypt?
    Answer. The current democracy/governance (DG) program consists of 
three activities: (1) the NGO service Center, which strengthens civil 
society by providing direct grants, training and technical assistance 
to NGOs aimed at improving their internal governance, financial 
accountability, and advocacy skills; (2) the Administration of Justice 
(AOJ) project, which modernizes commercial court administration and 
expedites case processing through computerization, re-engineering, and 
training of judges; and (3) the Collaboration for Community Services 
project which, through locally or appointed entities in four pilot 
communities, improves the delivery of public services.
    Proposed new components include: (1) Promote the Rule of Law 
through civil and criminal court reform and human rights activities 
such as revitalization of the legal education in Egypt, English as a 
second language training and support for NGOs that provide legal 
services to poor and disadvantaged citizens; (2) Promote Reform of the 
Egyptian Media by sending 50 journalists to the United States for 
training; (3) Support to the Embassy's Public Affairs Section to put on 
study tours to the United States and region to foster an enabling 
environment for economic, education and social reforms; (4) Support the 
Creation of an Independent Egyptian Council on Human Rights to ensure 
the adherence to human rights by receiving and investigating complaints 
and acting as a mediator, commenting on legislation involving human 
rights and ensuring that Egypt adheres to international human rights 
agreements; (5) Support the Egyptian Branch of Transparency 
International to combat government and corporate corruption by 
organizing citizen ``watchdog'' groups and, GOE cooperation permitting, 
assisting the GOE in establishing a government-wide code of ethics; and 
(6) Support Parliamentary 2005 Elections if GOE concurrence can be had.
    Question. Can you point to any specific achievements of these 
programs?
    Answer. AOJ successes include: Case processing time has been 
reduced from years to months; public confidence in the judiciary is 
increased; the Ministry of Justice has demonstrated its commitment to 
judicial reform through its massive investments ($50 million) for 
upgrading courts and providing judicial training; and building 
constituencies among judges, lawyers and court staff to support 
judicial reform.
    NGO Service Center successes include the promotion of political and 
legal rights for women in Qena governorate where a local NGO received a 
grant to assist 2,000 women obtain civil documents, and 1,200 women to 
obtain electoral registration cards and access social insurance 
benefits. More women have since petitioned local party official to 
nominate increased numbers of women for positions on local councils and 
to form a committee to promote women's awareness of their legal rights 
to obtain available services from government agencies. Another example: 
The village of Tablouha had long-suffered from poor environmental 
conditions and disease due to lack of systems for solid waste and 
garbage disposal. With USAID project assistance, a local NGO organized 
a public hearing attended by 700 residents to discuss these needs. The 
hearing resulted in two important decisions for the community: to use 
both the Village Council's and an agricultural cooperative's clean-up 
equipment to collect garbage and solid waste and to collect a monthly 
fee from 550 local inhabitants to ensure sustainability of the service. 
The fees have been used to purchase and plant over 1,000 trees in the 
area.
    CCLS: Two industrial communities that contribute significantly to 
Egypt's exports have improved their community level services. An 
employment services office and websites to promote the communities and 
their industries have been created there. The city of Dumyat is a major 
manufacturer and exporter of furniture. Manufacturers and small 
workshops have expanded their market to the United States and Europe by 
collaborating amongst themselves and with government to gain access to 
services that will help them be more competitive by improving 
marketing, designs, and quality control.
    Question. What action is USAID undertaking to ensure that its 
programs are not unduly influenced by the Egyptian Government?
    Answer. USAID maintains dialogue with the GOE concerning democracy 
and governance emphasizing: (1) USG commitment to significantly expand 
funding in this area; (2) general themes around which we propose to 
focus programming; (3) illustrative examples of the types of programs 
we propose in each area; and (4) the need to rethink funding mechanisms 
to reflect the changing nature of our assistance in this area. The USG 
is also committed to reach more Egyptians at the grassroots level and 
to implementing more activities through NGOs.
    A U.S. inter-agency group agreed that USG projects should parallel 
directly our policy approach to the GOE. For example, we should fund 
projects that are consistent with the need to open political space for 
new parties. The inter-agency group also agreed that the Embassy/USAID 
should lay out the following themes and related indicative projects 
with the GOE as primary areas of emphasis in democracy and governance 
in Egypt: political openness; media and exposure to outside views; 
civil society; and rule of law and governance.

                                 BURMA

    Question. How closely is USAID--and its contractor--coordinating 
HIV/AIDS programs with Suu Kyi?
    Answer. USAID's HIV/AIDS program was designed in close coordination 
with the U.S. Embassy in Rangoon. When the program was designed USAID 
met with representatives of the National League for Democracy (NLD) and 
other democratic opposition groups. Comments and suggestions from the 
groups were incorporated into the program design. The representative 
visited one of the project sites and liked the work that was being 
implemented. USAID continues to work closely with the U.S. Embassy and 
to seek NLD guidance on the program.
    Question. Given Burma's repressive environment, how does USAID 
ensure oversight of the use of funds inside Burma?
    Answer. USAID-managed programs inside Burma are currently limited 
to: (1) activities that enhance the ability of the American Center in 
Rangoon, within the U.S. Embassy, to reach out and provide some 
training and materials on democracy and human rights issues to members 
of Burmese democratic organizations; and (2) HIV/AIDS prevention and 
treatment. Activities to reach out to democratic opposition groups are 
carried out under the supervision of the U.S. Public Affairs Office in 
the Embassy. HIV/AIDS activities are implemented by organizations with 
whom USAID has worked for many years. These organizations have 
developed, and discussed with USAID, monitoring plans that ensure 
adequate oversight of their programs. In addition, USAID has made 
periodic site visits to monitor program activities. USAID has recently 
opened a Regional Development Mission in Bangkok to better manage and 
oversee activities in the region.
    Question. As the generals in Rangoon do not let foreign NGO workers 
travel unaccompanied throughout the country, how do these NGOs ensure 
oversight of their programs?
    Answer. USAID's experience from site visits to HIV/AIDS programs 
inside Burma has been that in many areas NGO's have relative freedom of 
movement and are not subject to government interference in their 
programs. USAID-funded NGO's have consistently reported that they are 
able to work with relative ease in many areas of Burma. Conditions vary 
greatly within Burma, and NGO's with whom we work choose areas where 
adequate program oversight is possible.

                                CAMBODIA

    Question. With parliamentary elections scheduled for July 2003, how 
confident are you that the elections will be free and fair?
    Answer. We feel that this will be difficult to judge at the present 
moment. While we are confident that the Cambodian people would really 
like to have a free and fair election it is really too early for them 
to tell at this point--and thus it is difficult for us to know as well. 
The elections will be determined to be free and fair IF the Cambodians 
feel that the process was valid and that the results indicate what was 
actually voted. In truth, this will not be determined until several 
days after the polls close--we therefore hope Washington is wary of any 
reports immediately after the election.
    Question. Would USAID support increased assistance to Cambodia if 
the repressive Cambodian People's Party (CPP) was no longer the ruling 
party?
    Answer. We would welcome increased assistance as Cambodia has 
enormous needs and the Cambodian people could benefit greatly from 
increased assistance in areas such as education, health, democratic 
development, economic growth and employment, environment, and anti-
trafficking in persons.

                   SECURITY AND ELECTIONS IN CAMBODIA

    Question. Cambodia is a case study of the long term development 
challenges that arise when substandard elections are held after years 
of turmoil. How do you assess the current security environment in 
Afghanistan, and how might security impact the 2004 elections?
    Answer. Election security is a serious concern that could impede 
the conduct of free and fair elections.
    If not adequately addressed, regional populations may be inhibited 
from organizing into parties or movements, campaigning, attempting to 
register and voting their conscience. We are working with the Afghans, 
the United Nations and other donors to determine how best to address 
security issues.

                               INDONESIA

    Question. What specific programs are being supported to counter 
extremist influence throughout the country?
    Answer. USAID's support for moderate groups long predates 9/11; 
USAID programs have provided support to moderate groups responding to 
emerging social issues, voter education including the 1999 election 
process, and women Muslim groups. Since 9/11, USAID programs to counter 
extremism in Indonesia have expanded and include work on promoting 
religious tolerance through the Islam and Civil Society Program, on 
strengthening local government management of education so that public 
schools can become better alternatives to private religious-based 
schools, and on helping Indonesia to establish a legal and policy 
environment that disrupts material support for terrorists. The three 
current programs USAID supports are:

1. Islam and Civil Society Program (ICS)
    Implementer: The Asia Foundation (with 30 Muslim Partner 
Organizations)
    Timeframe: 1997 to 2004
    Funding to date:$4,900,000
  --The ICS supports the efforts of 30 moderate Muslim organizations to 
        directly counter religious extremism and promote 
        democratization through Islamic teachings and texts in four 
        main areas: gender, media, education policy and political 
        parties.
  --Moderate Muslim groups supported by this program have played an 
        increasingly public and vocal role in calling for tolerance and 
        peace during critical periods of time such as the recent 
        military action in Iraq.
  --Education programs are based upon the premise that Islamic 
        militancy thrives on lack of knowledge and understanding of how 
        Islamic principles support democracy, tolerance, gender 
        equality, pluralism, and rule of law. Education on these 
        principles and on tenets of secular democracy and civil society 
        is an effective tool in preventing/countering militancy.
  --ICS education programs work through two main channels--formal 
        institutions of higher education, and informal programs 
        conducted in pesantren (Islamic boarding schools) or campus 
        groups. ICS-supported media programs are directly aimed at 
        countering visibility of militant Islam within the public 
        media.
    Program examples and results include:
  --New civic education curricula focused on the rule of law, citizen 
        rights and gender equality are now being implemented in 47 
        affiliates of the Islamic National University, Jakarta and in 
        six University of Muhammadiya, Yogyakarta universities (to be 
        expanded to all 35 in September 2003). 40,000 students a year 
        take this required course.
  --The Institute for Research and Pesantren Development, Makassar has 
        developed a civic education curriculum and textbook countering 
        rigid Islamic doctrines that marginalize women and restrict 
        religious pluralism, to be piloted in 24 pesantren in South 
        Sulawesi, then integrated into all 2,000 affiliated pesantren 
        in South Sulawesi.
  --Islam Liberal Network, Jakarta explicitly aims to counter militant 
        and radical Islamic movements in Indonesia. They produce a 
        weekly radio talk show on pluralism and tolerance that reaches 
        10 million listeners through a network of 40 radio stations 
        nation-wide, and publish a weekly half-page column in the daily 
        newspaper Jawa Pos and 35 syndicated affiliates, reaching 2 
        million readers with messages of anti-violence, pluralism and 
        religious tolerance. They also maintain a bi-lingual website 
        that actively campaigns against militancy
  --Islamic Education Laboratory, Yogyakarta, a university student 
        group, facilitates routine campus discussions on ``Islam and 
        pluralism'' and civil society building projects among campus 
        groups on six prominent universities in Central and East Java, 
        bringing its message of pluralism and tolerance within Islam 
        directly to target hardline student populations.
  --Study-Action Group on Indonesian Democracy/Institute for Human 
        Resources Development, Jakarta--these two organizations both 
        work directly with khotib (Mosque preachers) and mosque youth 
        groups to promote messages of pluralism and tolerance. One 
        produces a bulletin handed out by mosque youth groups to 
        worshippers after Friday prayers. The other trains Khotib, who 
        preach at the Friday prayers, and provides them with a 
        ``preachers' handbook'' of ``sermons'' on rule of law, civil 
        society, and religious tolerance.
  --Paramadina University, Jakarta, has created a handbook entitled 
        ``Islamic Jurisprudence on Pluralism'' for Muslim leaders that 
        references classical and modern Islamic texts and jurisprudence 
        that support pluralism, religious tolerance, and gender 
        equality.
  --Institute for Advocacy and Education of Citizens, Makassar, a 
        grassroots student group, broadcasts an hour-long interactive 
        talk show on five radio stations with a listenership of 1.2 
        million people in South Sulawesi.
  --Syir'ah, Jakarta is a monthly magazine explicitly designed to 
        counter the top-selling Islamic militant magazine Sabili. 
        Syir'ah has the same size, format, cover design, and 
        distribution pattern as Sabili--but a different content. 
        Instead of promoting violence and radicalism, it preaches 
        tolerance, anti-violence, gender equality, and religious 
        pluralism.

2. Economic Law, Institutional and Professional Strengthening (ELIPS) 
        II Program
    Implementer: Nathan-MSI Group
    Timeframe: 2001 to 2004
    Funding to date: $8,400,000
    The ELIPS II provides institutional-building support to strengthen 
independent regulatory commissions, the Ministry of Justice, law 
schools and professional associations, and to provide technical 
assistance in drafting, promoting, passing, understanding, and 
implementing laws, decrees, administrative orders and decisions related 
to financial crimes. Key results to date:
  --ELIPS II assisted the GOI in drafting and passing the new Anti-
        Money Laundering Law enacted in late 2002. Follow-up work 
        includes drafting of implementing regulations and key 
        amendments related to FATF compliance. Additional work is 
        assisting the newly formed Financial Intelligence Unit and 
        addressing cyber crimes. These activities are complemented 
        technical assistance being provided through the Financial 
        Services Volunteer Corps focusing on exposure to the U.S. anti-
        money laundering system.
  --ELIPS II also provided extensive input to the draft Anti-Terrorism 
        law including co-sponsoring a major conference on the Economic 
        Impact of Terrorism.
  --ELIPS II has completed a study and plan for initiatives in 
        financial crimes and completed needs assessments for financial 
        crime unit at the Attorney General's office.

3. Managing Basic Education
    Implementer: Research Triangle Institute
    Timeframe: 2003-2005
    Budget to date: $3,000,000
    This program aims to improve the efficiency and effectiveness of 
local government on strategic planning, administrative management, 
finance and budgeting to provide better quality basic education 
services in the context of decentralization, and helping to make public 
schools more viable alternatives to religious based private schools. In 
addition, the program strives to increase community involvement in 
local government decision-making on education. The program will work 
with 9 local governments on a pilot basis.
    Question. How can education programs effectively counter the 
influence of Muslim extremist schools in Indonesia, given the country's 
vast geography and USAID's relatively limited resources?
    Answer. A majority of Indonesian public and private schools are 
considered moderate and do not fall in the category of extremist or 
radical extremist schools. Indonesia is a very large country with many 
ethnic and cultural groups. To effectively counter the influence of 
Muslim extremist schools across Indonesia, a multi-faced approach needs 
to be pursued to address extremism, which includes building on our 
decentralized local government program and broadening local 
government's capacity and capability to increase community and local 
government decision-making on education. Also, the number of extremist 
schools which do not offer the national approved curriculum 
incorporating secular subjects should be encouraged to do so. Other 
elements within the multi-faced approach are described below.
  --Better understanding of Indonesia's educational system which 
        includes better monitoring of the education sector by 
        government, community groups, and NGOs concerning curriculum, 
        text books, and quality that builds on the strengths and ideals 
        of indigenous groups; greater involvement of parents and 
        community leaders in local school programs, textbooks, and 
        administration; teacher training and adequate incentives and 
        rewards for teachers; exchange programs which broaden teacher 
        and students views and their understanding of different 
        cultures and value systems which respect universal human values 
        of dignity, compassion, and tolerance; and strengthening civic 
        education in public and religious schools.
  --Promoting Tolerance and Compassion.--Combating terrorism and the 
        extremist ideas that fuel it is especially difficult because of 
        an education system that fails to include liberal democratic 
        values and religious tolerance in public and religious schools. 
        While not a silver bullet, improving the Indonesian education 
        system is a critical tool for advancing the war against 
        terrorism in the long-term and serves as an avenue for helping 
        reduce the potential sway of radical fundamentalism and 
        intolerance.
  --In a tough economic situation, Indonesian families are turning to 
        low-cost, but not necessarily better quality, educational 
        alternatives such as Islamic madrasahs and pesantren. Most 
        teach the national secular curriculum, but some focus only on 
        religious studies, sometimes with fundamentalist and anti-
        American themes sympathetic to terrorists. Expanding economic 
        opportunities for at risk-groups is critical to broadening 
        their access to quality public and moderate religious schools.
  --Expanding students access to alternative views.--The appeal of 
        extremism can be reduced by expanding the access of Muslim 
        students to democratic systems and values, and alternative 
        worldviews. The key mechanisms for assuring access to more 
        diverse and balanced points of view are increased enrollment 
        and retention of students in higher quality government-managed 
        public schools, and support to moderate religious schools, 
        focusing on civic education and promotion of democratic values. 
        By making public schools a more effective, accessible and 
        viable alternative to religious schools, we can reduce the 
        exposure of Indonesian students to extremist views.
  --Strengthening the Quality of Secular Education Provided in Muslim 
        Schools. The quality and relevance of secular education in 
        Muslim schools is often poor. In most cases, the quality 
        problems are even more acute than those found in public schools 
        because Islamic school teachers are usually not academically 
        equipped to teach secular subjects. To help create a more 
        favorable learning environment in classrooms, teachers should 
        be introduced to ``modern'' pedagogical methods that are 
        participatory and student-centered. Also, the curricula should 
        promote activity-based learning, including apprenticeships and 
        on-the-job-training to better facilitate the absorption of 
        Islamic school students into the job market once they compete 
        school.
  --Engaging Islamic School Leaders to Participate in Providing 
        Education to all Learners. Local government and community 
        leaders should be encouraged to take a more proactive and 
        positive approach to becoming more engaged with public and 
        moderate Muslim school leaders to discuss how they can better 
        cooperate and work together to reach all learners and broaden 
        the process for a shared vision of quality and relevant 
        education for all and guard against the proliferation of 
        extremist elements in Muslim schools.

                                PAKISTAN

    Question. The North West Frontier Province in Pakistan recently 
implemented sharia--Islamic--law. The Taliban provided a vivid insight 
into the repression of freedom that occurs under sharia.
    What programs is USAID conducting in this province, and what 
programs can we conduct to protect and enhance the rights of women and 
freedom of speech and thought?
    Answer. USAID's programs are helping improve the quality of life 
for Pakistani girls and women, through greater education, health care 
and economic opportunities. In our Democracy and Governance program we 
have a legislative orientation activity that has provided training to 
new legislators of which 30 percent are women. In the Federally-
Administered Tribal Areas (FATA) bordering Afghanistan, USAID supports 
120 schools where we plan to repair and provide desks, chairs, and 
blackboards. When parents believe girls are receiving quality 
education, they are much more likely to allow girls to remain in 
school. Additionally, in our Education program we are engaged in early 
education teacher training which includes women teachers. This helps to 
reduce the disparity between professional development for women and 
men. The program also helps teachers and administrators build stronger 
and more balanced curricula, addressing the needs of both boy and girl 
students. In our Economic Growth program, we are designing micro credit 
activities that specifically target women-owned and run businesses in 
some of the most impoverished regions of the country. In addition 
economic growth activities include a merit-based scholarship fund for 
needy students, especially women who would not otherwise have access to 
higher education, to attend established business schools. Finally, the 
Mission's Health program is designed to improve the overall quality of 
healthcare and to specifically address the needs of women.
    Question. What steps are we taking to ensure the financial 
integrity of assistance provided to Pakistan?
    Answer. USAID's Controller, a U.S. Foreign Service Officer, arrived 
at post in December 2002. He leads the USAID team to monitor the 
program for financial and programmatic integrity. In addition to these 
regular monitoring plans, USAID sent out a request for proposal from 
seven accredited Pakistani firms to undertake the following: (a) 
Financial pre-award surveys and periodic financial reviews of NGOs and 
other partners; and (b) Performance monitoring of the program in each 
province to measure the progress and maintain a check on the 
implementation of USAID's programs in the field. The Office of 
Inspector General (OIG) of USAID in Manila has determined that each of 
the seven Pakistani firms meets rigid U.S. standards for auditing and 
monitoring programs. In addition, later this year the OIG in Manila is 
planning a training session in USG accounting/auditing standards for 
all accounting firms including cognizant personnel from recipients and 
the Auditor General's Office of Pakistan.
    Question. How many Afghan refugees remain in Pakistan?
    Answer. While the drought has ended and many Afghans have returned 
to Afghanistan, some 235,000 refugees continue to reside in sixteen 
Pakistani camps. The camps are located in remote and harsh frontier 
areas where the refugees have little access to food and sources of 
income. Food assistance is crucial to their survival. The U.S. 
Government, through Public Law 480, Title II, will provide 2,070 MT of 
commodities in fiscal year 2003 to meet the needs of 235,000 refugees. 
U.S. assistance consists of 970 MT of vegetable oil and 1,100 MT of 
lentils. The estimated cost of the U.S. contribution is $2,036,200 
including the cost of commodity, ocean freight, and internal transport, 
storage and handling.

                      ENVIRONMENTAL HEALTH IN ASIA

    Question. While SARS has captured the attention of the world's 
media, there are other serious health issues in southwestern China, and 
Tibet, where millions suffer from environmental health problems related 
to heavy metals in domestically used coal and severe water quality 
problems. These include arsenic and mercury poisoning and fluorosis. 
The region is characterized by a karst topography, which is exceedingly 
vulnerable to groundwater contamination. These environmental health 
problems particularly strike children, condemning them to lives of 
chronic disease. This in turn affects the economic growth and vitality 
of the region.
    There are relatively simple, cost-effective solutions to these 
problems. Western Kentucky University, in concert with other 
institutions, has established a consortium of geoscience, biomedical 
and public health researchers from the United States and China. By 
studying and implementing solutions to these environmental health 
problems, the consortium will serve as an example and as a resource for 
what can be accomplished elsewhere in China and in other developing 
countries. Will your Agency work with this Consortium to implement 
solutions to these environmental health problems and save the rising 
generation of Chinese children from lives of disfigurement and disease 
and also remove the health impediments to economic growth?
    Answer. USAID follows the policy guidance of the Department of 
State on all proposed activities in China. USAID implements a Regional 
HIV/AIDS program with NGO's in southern China, and manages, at the 
direction of the State Department and the Congress, limited activities 
on the Tibetan Plateau and a rule-of-law grant to Temple University. 
Generally, USAID's environmental health activities focus on infectious 
diseases, especially the prevention of diarrhea disease and pneumonia 
in children, as well as malaria. USAID has chosen to focus its limited 
resources in these areas because the public health threat in terms of 
both child mortality and the overall disease burden in these areas are 
greatest and because there are proven and effective interventions. In a 
very few countries USAID has addressed specific problems of chemical 
contamination in the environment, such as lead exposure in children and 
arsenic contamination of drinking water. Within the existing legal and 
policy framework that guides and directs USAID's involvement in China, 
we would, of course, give full and complete consideration to such a 
proposal.

            FISCAL YEAR 2004 USAID BUDGET REQUEST FOR RUSSIA

    Question. The fiscal year 2004 budget request for Russia is $75 
million below the last year's level. While some of this decrease can be 
attributed to the transfer of exchange programs to the Department of 
State Bureau of Educational and Cultural Affairs, what programs or 
activities will USAID cut in the ``graduation process''?
    Answer. You are correct that $30 million of the $75 million 
decrease is due to the transfer of exchange programs to the Department 
of State Bureau of Education and Cultural Affairs. These important 
exchange programs with Russia will continue to be funded.
    The anticipated reduction in FREEDOM Support Act funding in 2004, 
and its implications for future funding, will force USAID, in 
consultation with the Assistance Coordinator's Office in the State 
Department, to make difficult decisions among important activities.
    During the phase-out period, we will likely continue to focus on 
the sustainability of civil society institutions across all sectors 
that will be instrumental in continuing to push for reforms and for 
building a democratic society in Russia. We will probably also continue 
to emphasize our programmatic emphasis on Russia's critical health 
problems--particularly HIV/AIDS, tuberculosis, and unhealthy 
lifestyles. In addition, given the resources and development potential 
of the Russian Far East, as well as its cultural and historic ties to 
the United States, we anticipate continuing to emphasize programs in 
this region. In view of the economic progress Russia has made, most of 
the proposed budget cuts will likely be borne by our economic growth 
programs; some are slated for early termination and others will likely 
be curtailed entirely. In some cases, those cuts are being made in 2003 
to ensure that we have the resources for other priority areas in 2004.
    Question. How will democracy programs be impacted by the decrease 
in assistance for Russia?
    Answer. We recognize that Russia's transition, particularly toward 
democracy, may well not be complete by 2008, and that as FREEDOM 
Support Act programs end, the U.S. Government must nevertheless remain 
to stay engaged in Russia's transition. It is our understanding that 
other USG agencies plan to continue to support civil society 
development and democracy via National Endowment for Democracy, Embassy 
Democracy Commission, United States-Russian citizen contacts, and 
professional and student exchanges.
    We realize that Russia continues to face challenges in democratic 
development. We are developing a strategy to phase out FSA assistance 
to Russia over the next several years that will seek to ensure a legacy 
of sustainable institutions to support civil society and democratic 
institutions. During this time, we will increasingly focus on democracy 
and rule of law to ensure that we consolidate and sustain the progress 
made over the past decade. We will seek to advance structural changes 
that are needed to create a hospitable environment for Russian civil 
society.
    FSA technical assistance programs have played a vital role in 
advancing progress toward rule of law in Russia, including vital 
support for the professionalization of Russian court administration and 
judicial training; emphasis upon the importance of judicial ethics 
(resulting in more openness by the Russian courts concerning 
disciplining of judges); reform of law school curriculum, including 
introducing and supporting clinical legal education; and supporting 
every aspect of the development of the new criminal procedure code, 
which has drastically changed the roles for Russian judges, prosecutors 
and defense attorneys. As another example, legal volunteers from 
Vermont, including judges, practicing attorneys, and staff of Vermont 
Law School, have worked with the Republic of Karelia on a professional 
development program for Karelian judges, legal educators, and 
practicing lawyers. Our focus is now on helping the Russian bar 
consolidate the gains it has made, particularly by sponsoring 
professional education events to help the bar hone its advocacy skills.

           FISCAL YEAR 2004 USAID BUDGET REQUEST FOR ARMENIA

    Question. The fiscal year 2004 budget request for Armenia is $40.5 
million below last year's level. Is this cut too drastic, and what 
programs will you terminate should Congress provide the budget request?
    Answer. While a reduction in FREEDOM Support Act (FSA) funding in 
fiscal year 2004 would reduce the scope of USAID programs, USAID does 
not believe that such a reduction would be detrimental to the progress 
and momentum in reform that it has achieved in its efforts to date. 
USAID/Armenia conducted an initial analysis on what a reduced FSA 
budget would do to its programming. Armenia has made progress in 
certain areas over the past few years, and we are able to wind down 
successful programs. For example, some of our micro-credit programs are 
now self-sustaining, our energy metering program has been successfully 
completed, and the Earthquake Zone Recovery program will end in fall 
2004. While we would not eliminate any of our major program areas, as 
described in more detail below, we would have to phase out and/or scale 
down certain programs.
    USAID/Armenia has an integrated strategy to assist in economic and 
political transition to a law-based market economy and an open, 
pluralistic democracy. The strategy also anticipates support to lessen 
the distress of Armenia's transition. With reduced funding levels, the 
Mission would continue its integrated approach, but would reduce the 
scope of activity in each of its program areas. Anticipated activities 
are grouped into five broad areas: A more competitive private sector 
(economic reform), improved democratic governance (governance), 
improved primary healthcare (healthcare reform), improved social 
protection (social protection), and more efficient and environmentally 
sound management of energy and water resources (energy and water). If 
funding is reduced, USAID/Armenia, in collaboration with partners and 
stakeholders, would focus on a more limited set of key objectives in 
each of these areas.
    Economic reform, with a focus on micro, small and medium enterprise 
development and job creation, remains a primary focus areas of the 
Mission portfolio because it is viewed as a major driving force in 
Armenia's advancement toward economic growth, equity, and political 
stability. The Mission intends to shift its emphasis toward 
strengthening institutions that implement commercial laws and policies 
in order to create a legal and regulatory environment that will 
encourage greater foreign direct investment. At a reduced funding 
level, technical assistance to micro, small, and medium enterprises in 
the sectors would be focused on sectors with the greatest growth and 
employment potential.
    Work in democracy and governance continues to be a high priority 
for the Mission, addressing three interlinked problems: dominance of 
the executive branch, a lack of democratic political culture, and 
corruption. USAID programs support strengthening citizen participation, 
non-governmental organizations, non-state media, local governance, 
anti-corruption, legislative strengthening, and rule of law. Citizens 
have demonstrated greater interest in community issues, and USAID plans 
to continue its efforts fostering this developing sense of community 
ownership and responsibility. Projects that encourage citizens to 
participate in public issues cover a variety of issues ranging from 
condominiums, police, human rights, the Constitution, local government 
and elections. These activities stimulate the ``demand side'' for 
improved democratic process. The ``supply-side'' for improved 
democratic governance is achieved through strengthening governance 
institutions to make them more effective, transparent, and accountable 
to citizens. To promote democratic governance, funding at a reduced 
level would require limiting the focus to three or four of these seven 
areas, with priorities being to strengthen the demand for better 
governance and anti-corruption.
    In healthcare reform, efforts address transition from the Soviet-
legacy system for the provision and administration of healthcare. 
Programs target financial reform, institution building, training, 
enhanced transparency, community mobilization, health education, 
medical outreach, and nutrition. With reduced funding, there would be 
fewer United States-Armenia partnerships; a decreased effort to 
strengthen primary care, reproductive health and system reform; and 
smaller-scale direct assistance programs. Efforts would continue in 
financial reform, which is essential to develop a system in which 
patients are allowed to choose care providers. Financial reform must be 
accompanied by training to shift care provision from highly-
specialized, hospital based system to preventive, primary care. The 
pace of healthcare reform would slow down with reduced funding in this 
area.
    Social protection programs serve a humanitarian purpose and build 
popular support for market and democratic reforms. With the existing 
levels of poverty, unemployment and other forms of vulnerability, 
social protection remains a priority for USG assistance in Armenia. 
USAID/Armenia will support a new vocational training program partnered 
with targeted labor development programs, as well as strengthening core 
assistance programs, including pensions for the elderly and poverty 
family benefits. At a lower funding level, our assistance in the social 
insurance system aimed at the improving pension and disability support 
and payment systems would decrease, as would the proposed skills 
training and labor development programs. Fewer vulnerable populations, 
such as the aging, will be assisted.
    The Mission's energy and water sector activities will promote more 
efficient and environmentally responsible development of these key 
public services. Improving the performance of the institutions that 
manage and regulate water and energy will improve the delivery of heat 
and water services and increase Armenia's energy security. USAID's 
support is aimed at promoting sustainable energy and water management, 
enhanced economic growth and competitiveness, reduced negative 
environmental impacts, energy security, and improvement to the quality 
of life of Armenians by supporting improved delivery of water and heat 
supply. At a reduced funding level, these goals will be harder to 
achieve due to their complexity and the length of time required. 
However, because the Mission's plans to focus on institution building, 
policy development, and pilot projects where other donors will make the 
major infrastructure investments, key objectives can be achieved at the 
reduced funding level, with careful attention to focus, planning and 
implementation.
    Question. Armenia's presidential elections in February 2003 were 
mired in controversy. How is USAID bolstering democracy in that 
country, and should more programming be done?
    Answer. By all accounts, the conduct of the recent presidential 
election in Armenia was controversial. It highlighted the strong 
tendency toward executive branch domination. Consequently, multiple 
efforts in democracy and governance continue to be a high priority for 
the Mission. These efforts address three interlinked problems: 
dominance of the legislative and judicial branches of government by the 
executive branch, a lack of democratic political culture, and 
corruption. USAID programs support greater citizen participation, an 
expanded role for non-governmental organizations, improved news 
coverage by non-state media, stronger local governance, targeted anti-
corruption activities, legislative strengthening of the National 
Assembly, and increased dependence on the rule of law. Armenian 
citizens continue to demonstrate great interest in community issues. As 
such, USAID plans to continue its efforts to foster this nascent sense 
of community ownership and responsibility. Projects that encourage 
citizens to participate in public issues cover a variety of issues 
ranging from condominiums, human rights, the Constitution, local 
government and elections. These activities stimulate the ``demand 
side'' for improved democratic processes. An improved ``supply-side'' 
for improved democratic governance is achieved through strengthening 
governance institutions to make them more effective, transparent, and 
accountable to citizens.

         USAID SUPPORT FOR THE COOPERATIVE DEVELOPMENT PROGRAM

    Question. Israel.--Is USAID considering reinstating support for the 
Cooperative Development Program?
    Answer. The Cooperative Development Program (CDP), a centrally-
funded USAID program that has enabled MASHAV, the development 
assistance arm of the Government of Israel's Ministry of Foreign 
Affairs, to develop collaborative relationships with developing 
countries around the world, is receiving its last tranche of central 
funding in fiscal year 2003. This program, which has involved 
commitments of nearly $75 million since the late 1980s, was felt to 
have fully accomplished its goals.
    In fiscal year 2001, MASHAV and USAID initiated a new partnership 
that emphasizes relationships between our two organizations at the 
country level. Individual USAID Missions are encouraged to consider 
collaborating with MASHAV on projects in which Israeli expertise is 
deemed to be appropriate. The USAID Mission in the Central Asian 
Republics has been the first to enter into such a partnership. It will 
continue to utilize Israeli expertise directly through a Mission-funded 
$5 million agreement with MASHAV, which runs until the end of fiscal 
year 2005.

                         RURAL ELECTRIFICATION

    Question. What funding level does USAID anticipate providing for 
international rural electrification in fiscal year 2004, and what is 
USAID's commitment to these programs?
    Answer. Globally, USAID anticipates providing approximately 
$35,500,000 in fiscal year 2004 for rural electrification. This number 
represents a wide range of technical assistance, capacity building, and 
policy and regulatory work that facilitates increasing access to 
electricity in rural areas. This total is at this time provisional as 
actual figures will depend on appropriation numbers and final 
determination of field programs based on field mission strategies and 
current needs. USAID is fully committed to this issue through the 
Global Village Energy Partnership (GVEP), a program under the White 
House Signature Clean Energy Initiative (CEI). The CEI aims to provide 
millions of people in the developing world with access to affordable, 
reliable, clean, healthy, and efficient energy services. USAID is the 
appointed USG Agency to lead up the GVEP which seeks to reduce poverty 
and promote sustainable development through increased access to modern 
and affordable energy services in areas either not served or under-
served by current energy delivery systems. The Partnership brings 
together developing and industrialized country governments, public and 
private organizations, multilateral institutions, consumers and others 
in an effort to ensure access to modern energy services by the poor and 
aims to help reduce poverty and enhance economic and social development 
for millions around the world. It builds on existing experience and 
adds value to the work of its individual partners. It reaches out to 
non-energy organizations in the health, education, agriculture, 
transport and enterprise sectors, and offers a range of technology 
solutions to meet their needs. This covers renewable energy, energy 
efficiency, modern biomass, liquefied petroleum gas (LPG) and cleaner 
fossil fuels. The Partnership will help achieve the internationally 
recognized Millennium Development Goals. The partnership will also 
address gender issues in order to reduce health and environmental 
hazards and increase social and economic welfare; it will build on the 
knowledge and capacity of each member of the community in energy 
delivery and use.
                                 ______
                                 
              Questions Submitted by Senator Arlen Specter

               U.S. COMPANIES AND USAID PRIME CONTRACTORS

    Question. How best can prime contractors utilize U.S. companies as 
suppliers in reconstruction efforts--is this something that can be 
written, or amended, into contracts?
    Answer. USAID policy is to buy American products as often as 
possible. However, where American equipment cannot be maintained or 
repaired, USAID documents the reasons why the purchase of U.S. products 
was not feasible. USAID cannot direct its prime contractors in terms of 
what subcontractors to use. However, in order to facilitate procurement 
opportunities for interested companies, USAID has established an 
extensive website containing detailed information on our Iraq 
reconstruction activities and direct links to our prime contractors.

                         USAID CONTRACT PROCESS

    Question. Mr. Administrator, I have been recently contacted by Dick 
Corporation of Pittsburgh, Pennsylvania, a company that is interested 
in assisting in the reconstruction of Iraq. Dick Corporation is a major 
contractor that provides quality construction services to the Army 
Corps of Engineers, the Navy, and the General Services Administration. 
In serving all of these clients, the company has been a recipient of 
numerous awards for performance excellence. Currently, Dick Corporation 
is rated by Engineering News Record as 36th in the listing of the Top 
400 Contractors and 22nd of the Top 50 Contractors working abroad. What 
is the process Dick Corporation should go through to work with AID in 
obtaining construction contracts? Has AID issued any similar 
construction contracts in the effort to rebuild Iraq?
    Answer. USAID encourages firms with demonstrated expertise in 
particular sectors to contact USAID's prime contractors. USAID posts 
the names of the prime contractors on the USAID website as contracts 
are awarded. Given that the prime contractor is legally bound to the 
parameters of the contract, the prime must determine the most 
technically appropriate and cost-effective sub-contractor relationships 
to meet the deliverables within the contract. USAID's capital 
construction requirements are being implemented by Bechtel National, 
Inc., with technical oversight provided by the Army Corps of Engineers.
                                 ______
                                 
                Question Submitted by Senator Judd Gregg

                             PEREGRINE FUND

    Question. What is the status of USAID's funding for The Peregrine 
Fund's (TPF's) Neotropical Raptor Conservation Program in Panama?
    Answer. USAID has provided funding of $1,000,000 to the Peregrine 
Fund ($500,000 each in 2001 and 2002) and will provide $500,000 in 
2003. Management of the grant is being transferred this year from the 
Washington based Regional Sustainable Development Office to the USAID 
mission in Panama.
                                 ______
                                 
            Questions Submitted by Senator Robert F. Bennett

                     ACCOMPLISHMENTS IN AFGHANISTAN

    Question. What are some of the accomplishments we can point to in 
Afghanistan?
    Answer. Below we provide USAID accomplishments organized by sector:
    Humanitarian (following 24 years of conflict and 4 years of 
drought):
  --Averted famine for between 8-10 million Afghans in 2001-2002.
  --Ensured that 5.9 million Afghans were able to survive the winter of 
        2002-2003 by prepositioning food aid and providing emergency 
        shelter kits.
  --Kept the major north-south artery (Salang Tunnel) open
  --Provided opportunities for thousands of Afghans to regain their 
        dignity and a measure of livelihood security through the 
        implementation of dozens of cash-for-work programs
    Revitalizing Agriculture and other Livelihood Options (70 percent 
of Afghans dependent on agriculture for their income):
  --Provided 3,500 MT of seeds and 3,100 MT of fertilizers for the 
        spring 2002 planting season that produced 100,000 MT of wheat 
        benefiting 60,000 farmers. These inputs helped to contribute to 
        an 82 percent increase in production from the previous year and 
        contributed to a decrease in the number of Afghans who will 
        need food aid this year.
  --In fall 2002, 5,000 MT of seed and 9,000 MT of fertilizer were 
        distributed to 113,000 farmers in 13 provinces. Estimated 
        increase in wheat crop production from this contribution is 
        42,000 MT, which translates into an additional $69 net income 
        per farmer. (Note: There is no data on average annual income in 
        Afghanistan. However, other countries with comparable social 
        indicators have annual average incomes between $100-$200 per 
        year.) FAO's crop forecast produced just prior to harvest in 
        summer 2003 indicates that the harvest could be, ``the best 
        harvest in 25 years'' and a 60 percent increase over 2002. The 
        report indicates that good rainfall, additional land in 
        production, and widespread availability of seed and fertilizer 
        account for the increase. If actual harvests are as good as the 
        pre-harvest survey predicts, Afghanistan could realize a 
        national surplus in cereals, particularly wheat, in 2003.
  --In spring 2003, 227 MT of seed and 339 MT of fertilizer were 
        distributed to 4,500 farmers in three provinces. This 
        distribution focused on increasing seed production for improved 
        varieties of a wider range of crops, rather than just cereals 
        as had been the focus in spring 2002 and fall 2002.
  --Repaired over 5,000 km of rural roads through cash-for-work; 
        carried out 250 projects related to road infrastructure 
        (culverts, retaining walls, etc.); reconstructed 31 bridges.
  --Carried out 5,245 small agricultural water infrastructure projects 
        (irrigation canals, small dams, levees, etc.)
  --Repaired and managed the traffic control system for the Salang 
        Pass, the major north-south route for Afghanistan.
  --Provided over 11,000,000 person-days of cash-for-work jobs; the 
        equivalent of 1 month of employment for half a million Afghans.
    Upcoming Accomplishments:
  --$150 million three year Rebuilding Afghanistan's Agricultural 
        Markets Project (RAMP), awarded July 2003, will include major 
        sub-programs in rural agricultural infrastructure, rural 
        financial services, and technology improvement and market 
        development.
    Kabul-Kandahar Highway Reconstruction:
  --Rebuilding 390 km of 482 km Kabul-Kandahar highway; successfully 
        met mobilization and implementation challenges presented by 
        President Bush's direction to accelerate reconstruction for 
        first layer asphalt completion by December 31, 2003. Paving 
        initiated July 1, 2003; five separate construction 
        subcontractors now mobilized and working five road segments.
    Enhancing Educational Opportunities:
  --Provided 15 million textbooks for the start of school in 2002 and 
        10.7 million in 2003.
  --Provided 4,000 basic teacher training kits.
  --Providing, since March 2002, a food salary supplement, equal to 26 
        percent of income, to 50,000 teachers.
  --Rehabilitated 142 schools, daycare centers, vocational schools, and 
        teacher training colleges.
    Upcoming Accomplishments:
  --Start accelerated learning programs for upwards of 60,000 girls who 
        missed education under the Taliban.
  --Provide emergency training for 30,000 community-selected teachers.
  --Rebuild 1,000 schools over 3 years.
    Improving Health, particularly Maternal/Child Health (Second 
highest maternal mortality rate in the world; one in four children die 
by the age of five):
  --Immunized 4.26 million children against measles.
  --Provided one-quarter of the Kabul water supply, focusing on the 
        poorest districts.
  --Carried out 3,114 small potable water supply projects (wells, 
        springs, small distribution systems).
  --Launched a water purification solution product, called Clorin, to 
        combat child mortality due to diarrhea; in partnership with 
        private sector, Clorin is being produced in Afghanistan.
  --Provided access to basic health services to an area covering 3.8 
        million people in 17 provinces; 191,724 persons have been 
        treated at these clinics (75 percent of whom are women and 
        children).
  --Rehabilitated the water systems for Kandahar and Kunduz, benefiting 
        650,000 people by increasing supply, pumping capacity, 
        extending service lines, and eliminating direct discharge of 
        human waste through provision of sanitary latrines.
    Upcoming Accomplishments:
  --Expand basic health services to an area covering 16.5 million 
        Afghans.
  --Build or renovate up to 400 basic health centers in rural areas.
    Strengthen Afghan Institutions to Assure Stability:
  --Provided $58 million total to the Afghan Reconstruction Trust Fund 
        for budget support.
  --Provided a food salary supplement, valued at 26 percent of income, 
        to 270,000 civil servants over 6 months. Recent assessment 
        concluded that a number of qualified civil servants returned to 
        their jobs because of this supplement.
  --Effectively managed the currency conversion process on behalf of 
        the Central Bank through the provision of personnel to staff 
        the 52 exchange points, counters, shredders, and transportation 
        for moving the currency. Currency has maintained value and 
        stabilized against the dollar, since its roll-out in fall 2002.
  --Rehabilitated 13 government ministries, including the provision of 
        daycare centers so that women can return to work.
  --Provided critical assistance to the United Nations for the 
        emergency Loya Jirga, including logisticians who developed the 
        plan for implementation; air operations support; educational 
        films on the Loya Jirga process for communities; international 
        observers to ensure transparency in the selection of delegates; 
        and nationwide expansion of Radio Kabul broadcasts with 
        messages about the Loya Jirga process.
  --Rehabilitated (i.e., electricity, office repairs) and/or provided 
        equipment (communications equipment, computers) to 19 
        Government ministries and offices.
  --Provided daycare centers to Ministries to enable women to return to 
        work.
  --Provided a satellite phone system and pouch mail so that the 
        central government in Kabul can communicate with its regional 
        offices.
  --Established Afghanistan's first private sector FM radio station.
  --Work with the Ministry of Finance and Central Bank to rebuild key 
        economic institutions, such as the banking system, revenue 
        collection, government financial management systems, 
        privatization, utility reform, and trade reform.
  --Establishing 18 Women's Centers nationwide with accelerated 
        learning and health education programs.
  --Supporting the Constitutional, Judicial, and Human Rights 
        Commissions.
  --Establishing community radio stations.

                          CLEAN WATER IN IRAQ

    Question. It is my understanding that access to potable water is 
one of the more pressing problems facing Iraq today. What has USAID 
done with respect to providing clean water to Iraqis?
    Answer. USAID, through support to UNICEF, is addressing the need 
for improved water supply by establishing a water and sanitation 
coordination team comprising U.N. agencies, ICRC and international 
NGOs, completing extensive water assessments and procuring and 
distributing water treatment chemicals for communities in South and 
Central Iraq.
    USAID's private sector partner for capital construction, Bechtel, 
will be rehabilitating up to 8 water treatment facilities in Basra, 6 
water treatment plants in south central Iraq, and the Sabah Nissan 
water treatment facility in Baghdad to increase treated water in east 
Baghdad by 45 percent and in overall Baghdad by 15 percent.
    Lastly, USAID plans to rehabilitate seven wastewater treatment 
plants in Baghdad, the Central region and Mosul. All require 
significant rehabilitation due to neglect during the sanctions period. 
Some have suffered additional degradation due to looting. Reducing 
sewage flow into the rivers is a key element to providing clean water 
to Iraqis and to reducing Iraq's high infant mortality rate.

           USAID USE OF AMERICAN GOODS IN IRAQ RECONSTRUCTION

    Question. Home Depot believes that $50 million in sales of supplies 
and equipment to Iraq could result in at least 300 new American jobs. 
How is USAID maximizing the use of American goods and supplies in the 
reconstruction of Iraq?
    Answer. USAID has awarded all of its primary contracts and grants 
to American firms. However, USAID is also maximizing the amount of 
Iraqi goods and services to ensure that Iraqis are fully invested in 
the reconstruction of their own country, which is also consistent with 
Administration policy.

                                 EGYPT

    Question. How would you assess the effectiveness of AID's very long 
and extensive program in Egypt? What are the prospects for real 
economic and political reform in Egypt, and how could U.S. assistance 
be used more specifically to promote those goals?
    Answer. USAID has provided Egypt with over $25 billion since the 
Camp David Accords. We have helped Egypt move from a socialist 
centrally planned economy towards a more open, market-oriented economy.
    In the 1970s, USG assistance helped restore and reopen the Suez 
Canal, one of Egypt's major foreign exchange earners, along with oil/
gas and tourism.
    Over $6 billion has been invested in physical infrastructure 
programs including electric power, water, wastewater and sanitation, 
telecommunications and transportation. Results: 95 percent of Egyptians 
have access to electricity; 22 million citizens have access to water/
wastewater services; the number of telephones increased over seven-
fold.
    Social and economic development strategies in health care, basic 
education and agriculture have improved the quality of life for 
millions of Egyptians. USAID has provided $134 million since 1990 for 
small and medium enterprise development and micro-lending programs. 
With USAID assistance, six not-for-profit business associations and two 
banks are now implementing efficient and effective Small and Medium 
Enterprise (SME) lending programs that are operating on a self-
sufficient basis. To date, 840,000 loans, valued at over 2.1 billion 
Egyptian pounds, have been extended to 340,000 Egyptian entrepreneurs 
with less than a two percent default rate. These loans have, in turn, 
helped to create more than 240,000 jobs.
    Child survival programs have been successful with infant mortality 
falling by 45 percent and mortality rates for those under age five 
falling by 53 percent.
    USAID's program has helped the Government of Egypt (GOE) take the 
steps to create a globally competitive economy by emphasizing policy 
reforms supportive of increased foreign and domestic investment, export 
oriented growth, workforce and business skills development, and 
privatization and investment in Information Technology (IT). USAID's 
efforts also culminated in the recent inauguration of an Egyptian IT 
center in Chantilly, VA that will strengthen the U.S./Egyptian 
technology partnership. In the 1990s, major reforms strengthened macro-
economic discipline, reined in inflation and privatized many state-
owned enterprises. Real economic growth averaged more than 4.6 percent 
over the decade, and per capita GDP has climbed above $1,400.
    The USG is currently negotiating with the GOE reforms that will be 
necessary to strengthen the financial sector and underpin Egypt's 
recent pound float. The floating of the pound is viewed as a 
preliminary show of commitment from the GOE to financial sector reform. 
It will enhance the competitiveness of Egyptian exports, tourism and 
economy.
    The USG is prepared to provide financial and technical assistance 
towards strengthening the banking sector, including the privatization 
of State Banks, as well as assistance to strengthen/reform insurance 
and pension systems and securities.
    The GOE hopes to negotiate a Free Trade Agreement (FTA) with the 
USG. In order to achieve success in this effort a number of actions 
will be required on the GOE's part.
    While the USG intends to continue to provide some technical 
assistance resources to trade and custom reforms, the GOE will need to 
undertake on its own initiative certain steps towards achieving an FTA.

              AMERICAN EDUCATIONAL INSTITUTIONS IN LEBANON

    Question. The American educational institutions in Lebanon are 
considered by most Lebanese and Lebanese Americans as a key component 
of the American assistance program. Congress consistently supports the 
American educational institutions. This support is demonstrated yearly 
in bill and report language. Despite strong Congressional direction, 
AID appears to resist funding the schools.
    In fiscal year 2003, Congress provided $35 million in assistance 
for Lebanon. The conference report directed that not less than $3.5 
million should be provided to the American educational institutions. 
Despite this clear statement of congressional intent, Administration 
officials have indicated they plan to provide only $2.5 million for the 
schools. Does the Administration plan to disregard the conference 
report language on the American educational institutions in Lebanon?
    Answer. The Administration continues to support to all of the 
American Educational Institutions (AEI) in Lebanon: the American 
University of Beirut (AUB), the Lebanese American University (LAU), the 
International College (IC), and the American Community School (ACS). 
However, USAID's program objectives and goals have grown, while 
available funding has decreased. The program now includes: promoting 
economic growth, building democracy and good governance, enhancing 
Lebanese government control in southern Lebanon, and protecting the 
environment, in addition to supporting the four AEIs. In order to meet 
these goals, we have turned to funding projects using implementing 
partners, such as NGOs and private-sector organizations, which have the 
capability to execute our projects but lack alternative funding 
resources. In contrast, AEIs do have endowments and the ability to 
fundraise from their alumni. The USG has a commitment to those NGO 
partners that are working on a sound and successful development program 
that has and will continue to benefit millions of people all over 
Lebanon.
    Please note that during the period of 1999-2002, the AEIs received 
$9.852 million in support from the American Schools and Hospitals 
Abroad (ASHA) fund, managed by USAID. That support averages out to be 
$2.463 million a year. For fiscal year 2003, ASHA funding to the AEIs 
will continue.
    In fiscal year 2003, the Administration has made available $24.77 
million in economic support funds (ESF) for the Lebanon program. This 
number reflects the 0.65 percent across the board cut for all ESF 
assistance levels and the $10 million which is restricted, from being 
provided to Lebanon under Section 1224 of the Foreign Relations 
Authorization Act of fiscal year 2003. Given these constraints, and 
consistent with the spirit of the language on AEIs in Lebanon contained 
in the Conference Report on Foreign Operations, Export Financing, and 
Related Programs Appropriations Act, fiscal year 2003 (which states 
that $3.5 million of the original appropriation of $35 million should 
be allocated to the AEIS), we are allocating 10 percent of the fiscal 
year 2003 ESF funding made available for Lebanon, or $2.477 million, to 
the American educational institutions in Lebanon.

                               PALESTINE

    Question. The United States has been providing approximately $75 
million a year since the Oslo process began to the Palestinians to help 
alleviate their economic difficulties. Just last month, Congress 
approved a supplemental bill that included an additional $50 million in 
U.S. assistance to the Palestinians. Since the Palestinians began their 
campaign of violence two and a half years ago, however, it has been 
increasingly difficult to send U.S. personnel into the areas 
administered by the Palestinian Authority to either monitor existing 
programs or create new ones. How would you assess the effectiveness of 
AID's programs in the West Bank and Gaza? How have you been able to 
effectively monitor and initiate new programs, given the security 
situation on the ground? How have you been able to ensure that US money 
does not go directly into the hands of leaders of the Palestinian 
Authority and that no U.S. money, either directly or through 
subcontractors, goes to groups or individuals involved in terror?
    Answer. Effectiveness of USAID's Programs in the West Bank and 
Gaza:
  --Over the past 2\1/2\ years escalating violence, terrorism, closures 
        and curfews have resulted in the virtual collapse of the 
        Palestinian economy and a growing humanitarian crisis. This 
        period has been tumultuous for Palestinian and Israeli 
        societies alike, and a potential disaster for the peace 
        process.
  --The Palestinian Authority's (PA) ability to address the severe 
        problems faced by the population has been negatively impacted 
        by the destruction of PA infrastructure and the lack of 
        internally generated resources. Consequently, much of the 
        burden for addressing the on-going crisis falls to local and 
        international NGOs, and the international donor community. 
        Reform efforts have focused on working with key PA ministries, 
        while at the same time supporting a more dramatic overhaul of 
        PA institutions and operating styles.
  --Despite a difficult political and security situation, program 
        implementation continues, albeit with some delays caused by 
        often limited access to project sites and border closures by 
        the Israeli Defense Force (IDF).
  --USAID/WBG has achieved significant results across the portfolio, 
        through use of innovative implementation approaches and the 
        dedication of the staff, contractors and grantees, and other 
        Palestinian and Israeli counterparts.
  --The Mission has helped to avert a humanitarian catastrophe; 
        initiated efforts to revitalize the Palestinian private sector 
        and to support reform; and maintained infrastructure, 
        institutional and human capacity development programs critical 
        for the formation of an independent Palestinian state.
    Effective Monitoring Given the Security Situation:
  --Because of the security situation, monitoring has been a major 
        concern. As such, the Mission has increased visits to project 
        sites through enhanced reliance on FSN staff and through the 
        expansion of Embassy and Consul General Regional Security 
        Office personnel, which permits our U.S. Direct Hire and 
        Personal Services Contract (PSC) staff to travel to the West 
        Bank and Gaza more frequently.
  --We arranged for an IG Risk Assessment and enhance audit activities 
        during the coming year pursuant to the specific recommendations 
        from the IG.
  --he Mission has exerted considerable effort to improve bilateral 
        relations with relevant Israeli officials, which has resulted 
        in permits for Mission, contractor and grantee staff to travel 
        more freely between Israel and the Palestinian Territories and 
        has facilitated cooperation generally with respect to project 
        planning and implementation.
    Ensuring That U.S. Money Does Not Go To Groups Or Individuals 
Involved In Terror:
  --USAID funds its programs through U.S. contractors, U.S. Private and 
        Voluntary Organizations (PVO), Palestinian Non-Governmental 
        Organizations (NGO), and Public International Organizations 
        (PIO).
  --To minimize the risk of Mission resources being used to support 
        terrorist organizations, USAID introduced a vetting process, 
        which has allowed the Mission to continue funding more than 400 
        Palestinian civil society organizations.
  --All USAID programs are carried out through American contractors, 
        American and international non-government organizations (NGOs) 
        and Palestinian NGOs. Furthermore, working closely with the 
        Embassy's Country Team, USAID carefully checks the references 
        of all Palestinian NGOs who are to be recipients of funds to 
        ensure that there are no links to terrorist organizations or to 
        organizations advocating or practicing violence. These 
        reference checks are periodically updated.
  --USAID and the Country Team preview requests for grants from 
        Palestinian NGOs, purpose of the grant, the NGO's previous 
        experience with managing grants, and the NGO's key personnel--
        including their dates of birth to avoid false positives in the 
        vetting process. Decisions on whether or not to approve grants 
        to certain Palestinian NGOs are based on the totality of the 
        circumstances.
  --USAID uses this information as part of its due diligence process in 
        deciding which NGOs should receive its grant funds.
    Ensuring That U.S. Money Does Not Go Directly To The Palestinian 
Authority:
  --Until now, U.S. law has required that no USG funds are to obligated 
        or expended for direct assistance to: (a) the Palestine 
        Liberation Organization; (b) the Palestinian Authority; (c) a 
        Palestinian state; nor to; (d) the Palestinian Broadcasting 
        Corporation.
  --The USG has now decided, for the first time, to give direct 
        assistance to the Palestinian Authority. A $20 million cash 
        transfer will be used to support municipal services and for 
        repair and rehabilitation of municipal infrastructure, such as 
        roads and water works.
  --The U.S. stands solidly behind Prime Minister Abbas. Under his 
        leadership, a constructive change and empowerment of 
        Palestinian governing institutions is underway. His efforts to 
        end terror and violence present real opportunity to move 
        forward on President Bush's two-state vision. Palestinian 
        reform efforts are in progress. Besides having Prime Minister 
        Abbas to work with, Palestinian Authority finances are under 
        the stewardship of Finance Minister Fayyad, and are now largely 
        transparent and therefore, accountable to the Palestinian 
        people.
  --The United States believes it is important to act now to reinforce 
        this positive progress and to signal support for Prime Minister 
        Abbas, Finance Minister Fayyad, and to help them establish 
        their authority on the ground.
  --USAID will keep close track of how these funds are used via ongoing 
        consultations with Minister Fayyad, our Consulate General in 
        Jerusalem, and our USAID presence in Gaza and the West Bank. 
        All parties are well aware that the prospect of future such 
        direct transfers would depend on the degree of success of this 
        one.
               institutionalizing private property rights
    Question. What efforts has the agency made to instill the 
principals of institutionalizing private property rights and leveraging 
capital in developing countries as propounded by Hernando de Soto and 
Institute for Liberty and Democracy (ILD)?
    Answer. USAID has a long and highly productive relationship with 
the Institute for Liberty and Democracy (ILD) and its director, 
Hernando de Soto. USAID considers ILD a key partner in its long-
standing commitment to improving property rights systems and counts it 
as one of our major success stories. The relationship began in 1982 
when ILD was a fledgling institution and continues up to the present 
day.
    Over these 20 years, USAID has provided approximately $39 million 
of financial assistance to ILD. In fiscal year 2003, USAID will provide 
an additional $6 million to ILD. A main focus of this effort is the 
establishment of an International Training Center.

                          ETHIOPIA FOOD CRISIS

    Question. The news from Ethiopia about the food situation is not 
encouraging. Could you please describe the U.S. efforts to alleviate 
the suffering in Ethiopia? Are the Europeans and non-traditional donors 
(such as China and Russia) doing their fair share?
    Answer. The U.S. Government has provided over $400 million in 
humanitarian assistance to Ethiopia this fiscal year to address both 
food and other emergency relief needs. The food, health, nutrition, 
water and sanitation, and agricultural recovery programs supported by 
the U.S. Government have already saved and will continue to save people 
from starvation and disease in Ethiopia.
    In response to the Ethiopia 2003 appeal for emergency food 
assistance, the U.S. Government has pledged approximately 878,790 
metric tons (MTs) valued at over $393 million. This represents 57 
percent of Ethiopia's total food aid requirements for 2003. Since the 
onset of the emergency in 2002, U.S. Government food aid pledges to 
Ethiopia now total over 1,000,000 metric tons valued at approximately 
$475 million. The European Community has pledged 283,570 MTs. Other 
donor countries have pledged an additional 338,786 MTs.
    Regarding non-traditional donors, India has provided 10,000 MTs of 
food aid.

                 FAITH-BASED HEALTH/DEVELOPMENT EFFORTS

    Question. What is USAID doing to encourage faith-based health/
development efforts?
    Answer. The Bureau for Global Health (BGH) is coordinating its 
efforts with the newly opened Office of Faith-Based and Community 
Initiatives (OFBCI) within USAID. In order to effectively address the 
health needs in the developing world USAID will continue to partner 
with religious organizations and local community initiatives in an 
effort to reach areas in a comprehensive manner. The OFBCI is holding 
regular meetings with the Bureau for Global Health to assess and reach 
out to new partners.
    The BGH is also coordinating with the OFCBI on eight regional 
conferences, to encourage and reach out to new partners interested in 
participating in USAID global health programs. These events will be 
held throughout the United States.
                                 ______
                                 
               Questions Submitted by Senator Ted Stevens
    Question. Please provide a chart of agriculture funding.
    Answer.

                                  CHART OF USAID AGRICULTURE FUNDING 1992-2004
----------------------------------------------------------------------------------------------------------------
                                             Dollars in
               Fiscal year                    thousands             Fund type                    Source
----------------------------------------------------------------------------------------------------------------
1992.....................................         625,277  Obligated.................  Title XII Report
1993.....................................         449,535  Obligated.................  Title XII Report
1994.....................................         415,258  Obligated.................  Title XII Report
1995.....................................         434,530  Obligated.................  Title XII Report
1996.....................................         307,825  Obligated.................  Title XII Report
1997.....................................         244,754  Obligated.................  Title XII Report
1998.....................................         331,231  Obligated.................  Title XII Report
1999.....................................         346,365  Obligated.................  Title XII Report
2000.....................................         338,104  Obligated.................  Title XII Report
2001.....................................         328,985  Obligated.................  Title XII Report
2002.....................................         446,303  Obligated.................  Title XII Report
2003.....................................         473,877  Allocated.................  USAID PPC/SPP
2004.....................................         470,200  Requested.................  2004 CBJ
----------------------------------------------------------------------------------------------------------------

    Question. Please provide a breakdown of food aid funds for fiscal 
year 2003 and fiscal year 2003 Supplemental.
    Answer.

                    FISCAL YEAR 2003 USAID FOOD FOR PEACE (TITLE II) SPENDING PLAN JULY 2003
----------------------------------------------------------------------------------------------------------------
                                                                                                Fiscal year 2003
                                                            Fiscal year 2003  Fiscal year 2003    Bill Emerson
                          Country                             non-emergency       emergency       Humanitarian
                                                                                                      Trust
----------------------------------------------------------------------------------------------------------------
Angola \1\................................................        $3,164,400      $111,012,000  ................
Afghanistan...............................................  ................        59,464,000  ................
Balkans...................................................  ................        15,536,000  ................
Bangladesh................................................        38,566,000  ................  ................
Benin.....................................................         5,749,100  ................  ................
Bolivia...................................................        29,011,614  ................  ................
Burkina Faso..............................................         6,761,300  ................  ................
Cameroon..................................................           141,609  ................  ................
Cape Verde................................................         5,177,900  ................  ................
Central African Republic..................................           300,485  ................  ................
Central America...........................................  ................        10,500,000  ................
Chad......................................................         3,959,194  ................  ................
Congo.....................................................  ................         2,300,000  ................
Djibouti..................................................  ................         3,240,000  ................
North Korea...............................................  ................        50,000,000  ................
Democratic Republic of Congo..............................  ................        35,000,000  ................
Egypt.....................................................         2,028,338  ................  ................
Eritrea...................................................         2,873,400        65,000,000  ................
Ethiopia..................................................        25,891,089       328,000,000      $129,173,200
Gambia....................................................           691,281  ................  ................
Ghana.....................................................        23,214,003  ................  ................
Great Lakes...............................................  ................        45,000,000  ................
Guinea....................................................         6,190,200  ................  ................
Guatemala.................................................        24,930,399  ................  ................
Haiti.....................................................        36,957,200         4,000,000  ................
Honduras..................................................         8,121,245  ................  ................
India.....................................................        44,774,900  ................  ................
Indonesia.................................................        14,379,600        17,000,000  ................
Iraq......................................................  ................       170,000,000        45,785,500
Kenya.....................................................        23,779,600        10,000,000  ................
Laos......................................................           660,810  ................  ................
Lesotho...................................................         1,630,635  ................  ................
Liberia...................................................         1,334,214  ................  ................
Madagascar................................................        10,481,038           726,000  ................
Malawi....................................................         3,287,200  ................  ................
Mali......................................................           203,089  ................  ................
Mauritania................................................         8,652,292  ................  ................
Mozambique................................................        17,756,116  ................  ................
Nicaragua.................................................        13,738,579  ................  ................
Niger.....................................................        10,639,592  ................  ................
Pakistan..................................................         4,289,936  ................  ................
Peru......................................................        24,551,900  ................  ................
Rwanda....................................................        13,369,300  ................  ................
Sahel/Mauritania..........................................  ................        15,000,000  ................
Somalia...................................................  ................        20,000,000  ................
Southern Africa...........................................  ................       150,000,000  ................
Sri Lanka.................................................           682,895  ................  ................
Sudan.....................................................           347,590       100,000,000
Tajikistan................................................  ................        10,000,000  ................
Uganda....................................................        19,281,517        57,122,000  ................
West Africa Regional......................................         1,142,000  ................  ................
West Africa Coastal.......................................  ................        42,000,000  ................
West Bank/Gaza \1\........................................  ................        10,000,000  ................
Yemen.....................................................  ................         2,569,610  ................
Zambia....................................................         1,500,000  ................  ................
Personal Services Contractors.............................         1,000,000         6,000,000  ................
Prepositioned Stock.......................................  ................        30,055,935  ................
Temporary Institutional Support...........................  ................         2,000,000  ................
International Food Relief Partnerships....................  ................         5,000,000  ................
World Food Program \3\....................................         2,218,830        51,000,000  ................
Farmer to Farmer..........................................  ................        10,000,000  ................
                                                           -----------------------------------------------------
      Subtotal............................................       446,000,000     1,434,955,935       174,958,700
                                                           =====================================================
      GRAND TOTAL \3\.....................................                      2,055,914,635
----------------------------------------------------------------------------------------------------------------
\1\ Pending final country allocations.
\2\ Fiscal years 2003-2002 ITSH & Unallocated.
\3\ Includes $140,380,935 prior year funds & $174,958,700 from Bill Emerson Trust Drawdown ($1,880,955,935 in
  new obligation authority).

                             RUSSIA BUDGET

    Question. As you are aware, the President cut $75 million from the 
budget for Russia, leaving a base budget of $73 million in total aid. I 
am concerned that such a drastic cut does not take into account the 
needs of the Russian Far East.
    The RFE faces numerous challenges, including limited access to 
these areas, a lack of infrastructure, a lack of basic amenities like 
running water, waste disposal and sewer systems, and high rates of 
fetal alcohol syndrome, alcoholism, and tuberculosis. This is similar 
to the situation faced by many rural villages in my state.
    Given the situation in the Russian Far East, what are USAID's plans 
for allocating scarce resources to this area?
    Answer. The anticipated sharp reduction in FREEDOM Support Act 
funding in 2004, and its implications for future funding, will force 
us, in consultation with the Assistance Coordinator's Office in the 
State Department, to make difficult decisions among important 
activities.
    During the phase-out period of our Russia program, we will likely 
continue to focus on the sustainability of civil society institutions 
across all sectors that will be instrumental in continuing to push for 
reforms and for building a democratic society in Russia. We will 
probably also continue to emphasize our programmatic emphasis on 
Russia's critical health problems--particularly HIV/AIDS, tuberculosis, 
and unhealthy lifestyles. In addition, given the resources and 
development potential of the Russian Far East, as well as its cultural 
and historic ties to the United States, we anticipate continuing to 
emphasize programs in this region.
    In view of the economic progress Russia has made, most of the 
proposed budget cuts will likely be borne by our economic growth 
programs; some are slated for early termination and others will likely 
be curtailed entirely. In some cases, those cuts are being made in 2003 
to ensure that we have the resources for other priority areas in 2004.

                          IRAQ RECONSTRUCTION

    Question. How can smaller companies and 8(A) minority businesses 
such as Alaska native corporations participate in the rebuilding 
effort?
    Answer. USAID is indeed focused on the issue of business 
opportunities for the smaller companies and 8(A) businesses during the 
Iraq reconstruction effort.
    Under the special authority which USAID awarded the Iraq prime 
contracts, it was determined in the best interest of the government to 
seek Small Business Subcontracting Plans from five of the eight 
contracts awarded. Of those five, the percentages achieved by the prime 
contractors are extremely promising and evidence that the Agency is 
determined to raise the levels of small business utilization in its 
contract award process. The resulting percentages achieved under the 
Plan reflect both the Agency's determination and the primes' compliance 
to significantly increase their draw on qualified small and 
disadvantaged businesses as reconstruction activities continue in Iraq: 
IRG (Personnel Support) at 14 percent; RTI (Local Governance) at 30 
percent; Abt (Health) at 58.5 percent; Creative Associates (Education) 
at 30 percent; and RMS (Logistics) at 29 percent. The Agency is also 
requiring a similar plan under the agriculture contract currently being 
awarded under full and open competition.
    Since USAID does not have privy of contract with any 
subcontractors, USAID holds the prime contractors responsible for 
meeting the contractual requirements, as they will select the 
subcontractors. Although USAID has provided significant and detailed 
advice on qualifying for a subcontract on the our Agency's own website, 
our Office of Procurement as well as Office of Small and Disadvantaged 
Business have encouraged interested entities as Alaska native 
corporations to contact Bechtel directly through its website where they 
can register as a qualified candidate for subcontracting opportunities 
in Iraq. We have been advised that Bechtel will review all electronic 
applications and determine which will compete on future Iraq projects 
as they arise.
    In USAID's continuing effort to support small and disadvantaged 
businesses in their drive to qualify for, and succeed in achieving 
contracts, we are seeking to improve the Agency's capability to track 
the levels of compliance of the large businesses with their 
subcontracting plans. We are also working on expanding our current data 
base of qualified small and disadvantaged businesses from which the 
large businesses and prime contractors can draw for both Iraq 
reconstruction projects as well as the Agency's universe of contracting 
opportunities.
    Question. In light of the need to create American jobs during this 
economic downturn, what are your plans to utilize American suppliers, 
shippers and contractors to rebuild Iraq?
    Answer. USAID has awarded all of its primary contracts and grants 
to American firms. However, USAID is also maximizing the amount of 
Iraqi goods and services to ensure that Iraqis are fully invested in 
the reconstruction of their own country, which is also consistent with 
Administration policy.
                                 ______
                                 
               Questions Submitted by Senator Larry Craig

                             PEREGRINE FUND

    Question. During the fiscal year 2002 and 2003 processes, the 
subcommittee twice provided $500,000 for The Peregrine Fund's 
Neotropical Raptor Program. The project is based in Panama and extends 
throughout the Neotropics.
    Although The Peregrine Fund is not as well known as other 
conservation organizations, it is still one of the most respected. They 
are best known for the successful recovery of the Peregrine Falcon and 
Mauritius Kestrel. Their work, however, extends beyond those species 
and beyond the borders of this country. Domestically, they have 
projects in Idaho, Arizona, Utah, and Texas. Internationally, they have 
projects in Greenland, Panama, Mexico, West Indies, Peru, India, 
Madagascar, Kenya, Papua New Guinea, and other countries. They focus on 
endangered birds of prey to conserve nature.
    Shortly before the Peregrine Falcon was recovered and removed from 
the Endangered Species List, The Peregrine Fund drafted Raptor 2100, 
the organization's strategic plan for the 21st Century. The objective 
of this plan is to conserve the world's 296 species of diurnal birds of 
prey. The importance of the Neotropics is obvious since the Neotropics 
is home to 91 of these species.
    The partnership between USAID and The Peregrine Fund dates back 
several years with projects in Guatemala and Madagascar. The 
Cooperative Agreement with USAID for the Neotropical Raptor Program was 
signed in September 2002. The purpose of this agreement is to establish 
hands-on conservation programs in critical areas of interest to USAID 
and to help ensure the long-term sustainability of biodiversity 
conservation through capacity building in the region.
    The Cooperative Agreement requires The Peregrine Fund match the 
$500,000 provided by the subcommittee and USAID with an additional 
$125,000. I am pleased to say that The Peregrine Fund matched these 
funds with an additional $600,000 in fiscal year 2002 and $600,000 in 
fiscal year 2003.
    Highlights from the first eighteen months of the agreement include:
  --Completed educational needs and methods assessment in the Panama 
        Canal Watershed and Darien Province.
  --Designed and implemented environmental education programs among 
        target communities near release sites in the Panama Canal 
        Watershed, forest frontier communities in Darien, and the 
        general population of Panama.
  --Recruited and trained seven indigenous Ember and Wounaan 
        parabiologists in the Darien Province of Panama.
  --Completed the first-of-its-kind Neotropical Raptor Conference that 
        brought together 150 raptor conservation practitioners and 
        decision makers from 16 countries.
  --Established Harpy Eagle captive propagation program, with 17 eagles 
        hatched and 13 released to date, and staff undergoing training 
        in raptor food production, raptor propagation, and raptor 
        release techniques. Worldwide, only 15 other Harpy Eagles have 
        ever hatched in captivity.
  --Implemented monitoring programs for two highly endangered species 
        of raptors on Grenada and the Dominical Republic.
    I have been told that during briefings before staffs of this 
subcommittee that USAID has not been complimentary about this project. 
``Unproductive'' and ``not providing the agreed upon cost share'' are 
two of the comments that have been reported to me.
    The conclusion I reach when I review the quarterly reports and 
financial status reports provided by The Peregrine Fund to USAID is 
different. The results and cost share significantly exceed the 
contractual obligation.
    Please elaborate on these comments. What was said about the 
projects and the basis from which it was said? Did you discuss these 
views with the project manager at The Peregrine Fund? If not, why not? 
If so, what was their response? Which individuals from USAID in DC have 
visited the project's headquarters? Any other locations? Any plans to 
visit?
    Answer. Latin America and Caribbean Deputy Assistant Administrator 
Karen Harbert has had discussions with Senator Craig's staff on these 
issues. The Assistant Administrator of Latin America and the Caribbean, 
Adolfo Franco, recently visited the Peregrine Fund in Panama. The Latin 
America Bureau recently hosted a meeting with the Vice-President and 
Program Manager of the Peregrine Fund in Washington to discuss this 
year and future year funding.
                                 ______
                                 
            Questions Submitted by Senator Patrick J. Leahy

                          IRAQ RECONSTRUCTION

    Question. We were given the impression, before the war, that the 
Administration was prepared to move quickly to address the immediate 
relief and reconstruction needs. In fact, OMB, USAID, the Pentagon and 
State Departments were very upbeat about their plans to avoid some of 
the mistakes we saw, and continue to see, in Afghanistan.
    I don't want to diminish what has been done, but clearly the 
Administration has not met expectations. The humanitarian crisis that 
some predicted did not happen, but there are still many Iraqis without 
electricity, shelter, telephone service, gasoline, or other basic 
necessities that many of them had before the war. Law enforcement seems 
to be virtually non-existent. How do you explain this?
    Answer. Despite challenges associated with security and looting, as 
of July 6 national electrical generation was at 3,100 MW about 75 
percent of the pre-war highest level. A key 400 kv line from Bayji to 
Baghdad West was repaired and re-energized allowing excess power from 
the North to be sent to Baghdad. High tension lines between Baghdad and 
Basra remain down, preventing excess power from the South from reaching 
the capital. Electricity in northern and southern Iraq has been 
restored to pre-conflict levels and connected areas experience 24-hour 
availability. Electricity availability in central Iraq is at 1,350 MW, 
against an estimated current demand of 1,900 MW.
    USAID has received reports that gas station lines in Baghdad are 
much shorter and on June 5, gasoline distribution exceeded pre-war 
levels of 5-5.2 million liters/day, with 5.5 liters delivered. Reports 
from other cities such as Kirkuk indicate that fuel lines are almost 
non-existent.

                         IRAQI CIVILIAN VICTIMS

    Question. Thousands of Iraqi civilians were killed or injured, or 
had their homes damaged or destroyed, in the war, many as a result of 
U.S. bombs. In the Supplemental, Congress included the following 
language:

``[$2.4 billion is appropriated for Iraq relief and reconstruction in 
Iraq] including . . . for assistance for families of innocent Iraqi 
civilians who suffer losses as a result of military operations . . .''

    The Statement of the Conferees reads as follows:

``. . . The managers intend that USAID and the Department of State, in 
coordination with the Department of Defense and nongovernmental 
organizations, will seek to identify families of non-combatant Iraqis 
who were killed or injured or whose homes were damaged during recent 
military operations, and to provide appropriate assistance.''

    This language is modeled on what we did in Afghanistan, where we 
are trying to relieve some of the suffering and the anger and 
resentment resulting from our mistakes. I don't know if you saw the May 
10th NY Times article, ``For Family That Lost 10 to Bomb, Only Memories 
and Grief Remain'', but I would encourage you to read it.
    Would you get back to me or my staff with a strategy to implement 
the law, so we can show that we are not turning our backs on these 
people?
    Answer. USAID is applying lessons learned from its experiences in 
Afghanistan to apply to Iraq, including assistance in the repair of 
damaged infrastructure based on community participation and 
prioritization. USAID has a number of mechanisms that are available to 
assist civilian victims, including its Community Action Program and 
infrastructure reconstruction efforts that address health and education 
facilities. Mission staff is actively assessing an appropriate strategy 
and will be consulting with the Office of Coalition Provisional 
Authority.

                        ARAB OPINION OF AMERICA

    Question. Last year, this subcommittee held a hearing on democracy 
programs. One of the issues we discussed was the low opinion of the 
United States held by many in the Arab world. We found it both deeply 
troubling and somewhat baffling, given that there is strong support in 
many Muslim countries for American culture and technology.
    I know that we have launched the Middle East Peace Initiative, 
increased our public diplomacy, and reviewed our aid programs to these 
countries to make them more effective.
    In spite of this, the situation seems to be getting worse, not just 
in the Middle East but in Muslim countries everywhere. A new Pew poll 
found that Arab hostility towards the United States is on the rise, 
including in key--and moderate--nations like Turkey, Indonesia, and 
Jordan. For example, when asked who they have more confidence in, 
President Bush or Osama bin Laden, 55 percent of Jordanians favored bin 
Laden and only 1 percent favored President Bush. In Indonesia it was 58 
percent to 8 percent.
    Why do you think we are losing the battle of hearts and minds in 
the Arab world?
    Do you think these programs be effective if there is no resolution 
to the Israeli-Palestinian conflict?
    Answer. We defer this question to the State Department.

                      MILLENNIUM CHALLENGE ACCOUNT

    Question. $1.3 billion of the President's fiscal year 2004 budget 
is for the first installment of the new Millennium Challenge Account. I 
support this, although I do not agree with the White House's plan to 
create a new corporate bureaucracy to manage it. Who would implement 
these programs?
    Answer. The MCA is still a legislative proposal and as such a 
number of the details await definitive legislative treatment. 
Nonetheless, the Administration has given a great deal of thought to 
how the MCC could be best implemented.
    MCA programs would be founded on a partnership and be very focused 
on one or two key strategic objectives that the country has identified 
as its top priority to stimulate growth. In order to develop a 
proposal, the MCA would ask countries to engage in a consultative 
process with all the relevant civil society and private sector groups. 
One of the central principles of the MCA is that it be a transparent 
process from start to finish. This is why it is important that the 
initial phase of developing a country proposal set the tone and 
foundation for the development partnership. While the process may vary 
considerably from country to country, the themes of transparency and 
country leadership and ownership of the proposal are critical.
    In some cases, technical assistance may be required to help a 
country develop a proposal, which the MCC could offer. However, the 
country would be managing the process; it would not be a case of the 
MCC hiring consultants to develop a proposal it wants.
    If a country's proposal is selected, a country contract would be 
negotiated between the MCC and government. This does not imply that 
those funds would only go to the government. To the contrary, it is 
anticipated that MCC funds would go to a variety of national and 
community actors and alliances. However, the government would sign the 
agreement with the MCC and have overall responsibility for managing and 
overseeing the contract. The reason a contract approach was chosen was 
to underscore that both parties have an obligation to meet the terms 
and conditions outlined in the contract.
    The Administration anticipates that MCC funds would mobilize a 
variety of economic actors in each country; to the extent that a 
development result requires a public sector investment (schools or 
roads), funds would be channeled through the government. However since 
economic growth inevitably depends on the activities and investments of 
the private productive sectors, community groups and civil society 
organizations, the Administration expects that these institutions would 
also participate, and even implement the bulk of the investments. In 
all cases, the Administration expects that MCC funds would be disbursed 
directly to the institutions implementing activities under the MCC 
contract through the most flexible, but accountable mechanisms.
    If a country selected for MCC funding has a USAID mission and 
program, USAID would likely undertake a strategic review of the 
program. In many cases, the USAID program would likely transition to 
support the MCC contract. Some programs, such as those fighting HIV/
AIDS or trafficking in persons, might well be continued, while others 
might logically be phased out or incorporated in the MCC program. 
Indeed, one of the ways that USAID would complement the MCC is that 
USAID has the ability to address regional issues, such as disease, 
water resources, transport linkages, etc., that the MCC, by virtue of 
being country-specific, cannot.
    One of the basic premises for implementation of the MCC is that it 
should be demand-driven. The Administration does not want to prescribe 
the mechanics of how activities would be implemented. The 
Administration anticipates that this would vary considerably from 
country to country, knowing there are no ``cookie-cutter'' approaches 
that would work across the board. However, the goal would be to employ 
simple implementation mechanisms that require less oversight and less 
U.S. management than traditional projects. There are a variety of 
mechanisms for spending the funds, such as contracts or grants, but 
these could be managed by the host country, following their policies 
and procedures.
    Because the management approach of the MCC would be to employ local 
institutions for country development, it is appropriate that the MCC, 
too, rely heavily on strong local institutions for the in-country 
expertise it requires. Economic and financial analysis of specific MCC 
investments can be contracted locally. Technical advisory services to 
the MCC can be contracted locally. Monitoring and evaluation can 
largely be contracted locally. Therefore, the Administration 
anticipates that the full-time presence of U.S. Government employees 
needed to manage the MCC could be significantly reduced.
    Even though the Administration envisions a strong reliance on local 
institutions, there would still be a need for limited MCC staff 
presence in the field to facilitate, manage and oversee the 
partnership. Due to the limited staffing, the Administration 
anticipates that the Ambassador and Embassy staff would play a strong 
supportive role of the MCC. We also believe that USAID field staff, 
with its development expertise and knowledge of local culture and 
context, would play a key role in supporting the MCC.
    USAID presence in the field has rightly been repeatedly recognized 
as its strongest suit. Thirty years of development experience has 
taught the Agency that country context matters a great deal. USAID's 
very capable field Missions could provide critical support to the MCC, 
helping to work with local partners, finding creative, local solutions 
to problems, and generally facilitating the work of the MCC. The basic 
USAID activity in many of the likely MCA countries has been knowledge 
transfer and building local capacity and institutions. In some cases, 
continued USAID programs in institution building might be necessary for 
a time to further build country capacity to manage MCC programs and 
resources. USAID anticipates having a key role in supporting MCC 
programs, USAID does not want to adopt a black or white approach to how 
it would relate to the MCC in every country; rather we think each 
country would need to be reviewed on a case-by-case basis.
    Question. This is supposed to be new money, yet both the Child 
Survival and Health Programs account and the Development Assistance 
account, are being cut in the President's budget. How do you explain 
this?
    Answer. The MCA reflects a key part of President Bush's historic 
commitment to increasing foreign assistance. The President's national 
security strategy placed unprecedented emphasis on the role of 
development as a tool of foreign policy. This emphasis is reflected in 
his budget for foreign affairs. In his fiscal year 2004 Budget, 
President Bush requested $28.516 billion for the Function 150 Account, 
an 11 percent increase over $25.652 billion for the fiscal year 2003 
Request. The fiscal year 2004 request for the Child Survival account is 
higher than the request for fiscal year 2003. With respect to 
Development Assistance, it is anticipated that activities in this 
account would be complemented by the MCA and the Famine Fund and would 
improve the overall delivery of effective foreign assistance.
    Question. I also have questions about eligibility for the 
Millennium Account. Countries must show that they are taking serious 
steps to combat corruption, support health and education, and good 
governance. That makes sense. But a country like Brazil would not be 
eligible for the MCA because its per capita income is too high. Brazil 
is a country of 100 million people of immense importance to the United 
States, where a small percentage of the population is very rich and the 
vast majority is desperately poor. Shouldn't we look at ways to use the 
MCA to promote better policies in regions or states of a country with 
such serious needs, and of such importance to the United States, as 
Brazil?
    Answer. MCA is part of an unprecedented and concerted commitment of 
President Bush to increase and improve the effectiveness of foreign 
assistance. It is the President's intention that the MCA, if enacted, 
would focus on the poorest countries. In the first year of the MCA, the 
President proposed that only the world's 74 poorest countries, those 
that have a per capita income of $1,435, and that are eligible for the 
soft window of the World Bank, would be considered for the program. 
That is because the MCA is targeted on spurring growth in the best 
performing poorest countries, providing the level of resources that can 
really make a difference in moving them to a higher growth trajectory. 
It will rely on country institutions--investors, business people, 
political leaders and civil society--to design and lead the economic 
growth of the country. MCA, as proposed, would therefore only assist a 
limited number of countries. That leaves the large majority of the 
developing world to USAID and other agencies and actors. Since the MCA 
has not yet been enacted, countries have not yet been selected so it is 
unclear if Brazil would qualify for MCA assistance. Nonetheless, 
assuming Brazil would not qualify for MCA, the country would still 
receive assistance from USAID.

                         DEVELOPMENT ASSISTANCE

    Question. Despite the $2.5 billion increase above the fiscal year 
2003 level, the President's fiscal year 2004 budget request would cut 
funding for the Development Assistance account by $35 million. This 
account funds everything from agricultural research to children's 
education to environmental conservation to democracy building. It funds 
the bulk of USAID's programs to alleviate poverty. How do you justify 
cutting these programs? The total amount requested for Development 
Assistance for fiscal year 2004 is $1.345 billion. That is less than my 
tiny State of Vermont spends on public education. Do you believe that 
this is enough for the richest, most powerful country in the world to 
spend on combating global poverty?
    Answer. In his fiscal year 2004 Budget, President Bush requested 
$28.516 billion for the Function 150 Account, an 11 percent increase 
over $25.652 billion for the fiscal year 2003 Request. This commitment 
reflects President Bush's strong support for programs to assist those 
less fortunate overseas. USAID's Development Assistance funding will be 
complemented by other presidential initiatives such as the Millennium 
Challenge Account ($1.3 billion requested) and the Famine Fund ($200 
million requested) to assist in the effort to combat global poverty and 
its ill effects.

                         COMPLEX EMERGENCY FUND

    Question. Among the increases is $100 million for an emergency fund 
for ``complex foreign crises.'' Are you familiar with this? Isn't it 
essentially a blank check? What limits would there be on the use of 
this fund? Could it be used for weapons?
    Since the President has asked for this authority ``notwithstanding 
any other provision of law,'' what is to prevent the fund from being 
used to supply weapons to an autocratic government that violates human 
rights?
    Between the Peacekeeping Operations, Refugees, and Disaster 
Assistance Accounts, it seems like the Administration already has broad 
authority to respond to the complex foreign emergencies. What would 
this fund allow you to do that you can't already do?
    Answer. As the President's fiscal year 2004 budget states: This is 
a proposal for a new appropriation that is intended to assist the 
President to quickly and effectively respond to or prevent unforeseen 
complex foreign crises by providing resources that can be drawn upon at 
the onset of a crisis. This appropriation will be used to fund a range 
of foreign assistance activities, including support for peace and 
humanitarian intervention operations to prevent or respond to foreign 
territorial disputes, armed ethnic and civil conflicts that pose 
threats to regional and international peace, and acts of ethnic 
cleansing, mass killing or genocide. Use of this appropriation will 
require a determination by the President that a complex emergency 
exists and that it is in the national interest to furnish assistance in 
response. This appropriation will not fund assistance activities in 
response to natural disasters because existing contingency funding is 
available for that purpose. (Source: Budget of the United States 
Government, fiscal year 2004--Appendix: International Security 
Assistance, pp. 906-7).

                          FOOD AID AND FAMINE

    Question. During the consideration of the last two appropriations 
bills--the Omnibus and the Iraq Supplemental--I worked with Senators 
Nelson and Kohl to attach two amendments that added over $1 billion 
dollars to help address food shortages, especially Africa.
    Unfortunately, during the conferences on these bills, the House 
majority, working with OMB, knocked out $500 million of this badly 
needed food aid funding. What would USAID do with an extra $500 million 
in food aid? Could it be put to good use, for instance, in Ethiopia?
    Answer. The United States remains far and away the largest donor of 
emergency food aid in the world. USAID targets its emergency food aid 
to the most severely affected populations worldwide. In the past 18 
months, the Administration has provided 500,000 metric tons of 
emergency food aid to Southern Africa. This year, U.S. donations to the 
Horn of Africa will reach about 1 million metric tons. The President's 
budget reflects a careful prioritization among the competing demands 
for international humanitarian assistance. The President's request for 
fiscal year 2004 retains our commitment to addressing the most severe 
and critical emergency food aid needs. In addition to the requested 
Public Law 480 Title II resources, the President has proposed a new 
$200 million Famine Fund specifically designed to provide a new, 
flexible tool to meet dire, unexpected famine needs. The Bill Emerson 
Humanitarian Trust is available to meet unanticipated needs.
    Question. I recognize that the Administration has requested $200 
million for a new Famine Fund. I strongly support this request. 
However, wouldn't the Famine Fund be more effective if the President's 
request did not cut more than $300 million from the Disaster Assistance 
and Title II food aid budget that could be used to augment resources of 
the Famine Fund? Aren't we just moving money around?
    Answer. Regarding your questions on food aid and famine, the 
Administration believes that the $1.185 billion Public Law 480 Title II 
request for food aid will enable the United States to meet its fair 
share of anticipated worldwide emergency, protracted relief and 
recovery, and non-emergency food aid requirements. The President's 
combined request for Public Law 480 Title II and the Famine Fund for 
fiscal year 2004 represents an increase in USAID-managed food aid 
resources of over 16 percent compared to the fiscal year 2003 
President's request. The Bill Emerson Humanitarian Trust is available 
to meet any significant unanticipated emergency food aid needs. The 
additional authority the Administration hopes to receive with the 
Famine Fund will provide it with the necessary additional flexibility 
to respond more effectively to famine threats than is currently 
possible.
    Question. What will the President's budget request mean for U.S. 
contributions to world food needs, compared to historic levels for U.S. 
contributions of 33-50 percent? What percentage of total contributions 
will the President's budget provide?
    Answer. The President's budget request was based on a review of 
projected 2003 emergency needs and emergency trends for the past 
several years. Exclusive of Iraq, if worldwide emergency food needs 
remained static, the fiscal year 2004 Title II budget request would 
provide sufficient food aid resources to meet approximately 28 percent 
of worldwide emergency, protracted relief and recovery needs. Resources 
will benefit drought victims, internally displaced populations, 
refugees, and other food insecure groups. The Administration also 
considers the Bill Emerson Humanitarian Trust as a viable tool for 
unanticipated humanitarian food needs, as has been evidenced in its 
effective use in fiscal year 2002 for the Southern Africa drought 
response and in fiscal year 2003 for Ethiopia drought relief and Iraq 
post-conflict support.

                                 UGANDA

    Question. Mr. Natsios, what do believe that it will take, in terms 
of diplomatic capital and foreign assistance funding, to obtain a 
peaceful resolution to the conflict in Northern Uganda that involves 
the Lord's Resistance Army and Government of Uganda. Please discuss 
specifics such as staffing needs, types of additional assistance, or 
legislation that may be helpful in resolving this crisis.
    I have been informed that USAID plans to spend $1.4 million in 
emergency relief to the northern areas. Is this correct? Do you believe 
that this is sufficient?
    Answer. The longstanding conflict in northern Uganda has it's 
origins in ethnic and political conflict going back to Uganda's 
earliest years as a nation. The Lord's Resistance Army (LRA) leadership 
is erratic and its objectives obscure. So in spite of the efforts of 
many well-intentioned parties, the situation is as bad as ever. 
Nevertheless, the United States is now committed to redoubling our 
efforts, and we are working to see if we can help bring about a better 
situation for the people in northern Uganda.
    USAID has responded to this humanitarian crisis with both food and 
disaster assistance, as well as development assistance resources to 
support a northern Uganda peace effort. The U.S. Ambassador in Uganda 
and the USAID Mission Director are coordinating their efforts to 
develop confidence-building measures between the Government of Uganda 
and the Lord's Resistance Army to work toward a peaceful settlement to 
the current conflict. USAID staff in Washington and the U.S. Department 
of State are also working closely together to support our diplomatic 
and foreign assistance efforts with personnel and financial resources.
    USAID/Uganda's strategic development assistance interventions in 
the northern and western districts of Uganda aim to mitigate the impact 
of conflict and increase community resilience through humanitarian and 
relief-to-development assistance. USAID's $16 million Community 
Resilience and Dialogue activity, which began in September 2002 and 
will continue through 2007, assists the victims of conflict and torture 
including communities living under threat of attack, families that have 
moved to internally displaced persons (IDP) camps, current and former 
abductees, and ex-combatants taking advantage of amnesty. USAID/Uganda 
and the Government of Uganda have plans to begin a National 
Reconciliation Dialogue to explore the roots of Uganda's various 
conflicts and how to move Uganda beyond its cycle of mistrust among 
certain groups. USAID/Uganda currently has sufficient resources to do 
this under its Community Resilience and Dialogue Program.
    In fiscal year 2003, USAID's Africa Bureau has provided an 
additional $538,000 to fund full-time staff, third-party mediation 
efforts, and conflict resolution activities. In the future, additional 
development assistance resources will be needed to fund a program that 
will provide expertise to the Government of Uganda on negotiating a 
peaceful settlement with the LRA. This technical assistance would 
support the Government of Uganda's Presidential Peace Team to 
effectively engage the LRA.
    In response to the humanitarian crisis in fiscal year 2003 as of 
July 1, USAID Office of Foreign Disaster Assistance has provided over 
$3.7 million in emergency humanitarian assistance to Uganda in the 
sectoral areas of emergency health, nutrition, water and sanitation. 
Working through nongovernmental organizations, OFDA has assisted 
affected populations in Gulu, Kitgum, Pader and Lira districts. In 
addition, USAID/OFDA has provided funds to the American and Ugandan Red 
Cross Societies and the United Nations Office for the Coordination of 
Humanitarian Affairs to support general assistance programs and the 
coordination of activities throughout the region.
    USAID's Office of Food For Peace has also provided 81,660 metric 
tons (MT) of Public Law 480 Title II emergency food assistance, valued 
at $50.1 million, through the World Food Program to meet immediate food 
needs. This amount is more than triple the fiscal year 2002 spending 
level of $15.3 million. As a result of the caseload in the north and 
the southern drought, the caseload has jumped dramatically from 250,000 
to 1.3 million people. The majority, 800,000 beneficiaries, are in the 
north and the remaining 500,000 are in the drought-stricken Karamoja 
region in the Northeast.
    In the event of a peaceful resolution to the conflict, additional 
development and humanitarian resources would be required to meet the 
needs of demobilization and reintegration of populations affected by 
the conflict. Resource levels will be determined by needs assessments 
and conditions on the ground.

                                 SUDAN

    Question. Additionally, what resources will you need to do quick 
impact programming in Sudan to help facilitate peace there?
    Answer. USAID is currently developing plans, jointly with the 
Sudanese parties and other donors, to address the funding needs of a 
quick-impact program after a peace agreement is signed. Any peace 
agreement must be followed by quick-start activities of rapid visible 
benefits to communities, rehabilitation of basic infrastructure and 
services, assistance to returning internally displaced persons (IDPs) 
and refugees, and support of the new southern entity governing the 
South. We welcome congressional interest in this matter and look 
forward to further communication as plans develop.

                          WOMEN IN DEVELOPMENT

    Question. Year after year, the Congress has recommended $15 million 
for USAID's Office of Women in Development, but USAID has consistently 
funded the Office at only about $10 million. This year I am told you 
have cut it to $6 million. What do we have to do to get the funds for 
this office that we believe it needs? Should we earmark it?
    Answer. The budget allocation for WID for fiscal year 2004 reflects 
the realignments necessary to accommodate the overall budget reductions 
for the EGAT bureau. This will not adversely affect WID field 
operations because the new ``Gender Matters'' indefinite quantity 
contract (IQC) insures that field missions will have expanded access to 
gender-related technical assistance.

                   CHILD SURVIVAL AND HEALTH PROGRAMS

    Question. As I mentioned in my statement, the President has 
received justifiable praise for signing the AIDS authorization bill. 
But at the same time his budget would cut key foreign aid programs. As 
I said on the Senate floor 10 days ago, funding for vulnerable children 
is cut by 63 percent, funding to combat other infectious diseases 
besides AIDS is cut by 32 percent, Disaster Assistance is cut by 19 
percent, and Development Assistance is cut by 3 percent. There are also 
cuts in food aid, refugee assistance, and other global health programs.
    In response to my remarks, the White House spokesman said I was 
making an ``apples and oranges'' comparison and that the Administration 
has proposed programs that would accomplish some of the same goals. Can 
you explain what he meant? Wasn't the MCA supposed to be new money?
    Do you support these cuts, at a time when SARS is showing, once 
again, how vulnerable we are to infectious diseases that originate half 
way around the world?
    Answer. The foreign assistance budget request reflects an attempt 
to maintain a balance between health and other important development 
areas. Within our parameters, our fiscal year 2004 request for health 
programs has increased compared to our fiscal year 2003 request.
    At the same time, the Administration has made HIV/AIDS its highest 
health priority. This, unfortunately, has meant a reduction in funding 
for child survival, maternal health and infectious diseases from 
previous years. To minimize the impact of lower funding, we will 
continue to work with partners in the public and private sector to 
leverage efforts, and focus on populations most in need and on the most 
effective interventions. In infectious disease we would protect 
globally important core programs in TB and malaria--given the 
tremendous burden of these diseases.
    SARS, for the time being, is still a new outbreak requiring 
investigation and emergency control, rather than a developmental issue. 
Our priority must remain focused on addressing TB and malaria, which 
kill millions each year and devastate families, communities and local 
economies. Nevertheless, SARS clearly demonstrates that health 
challenges and epidemiology will continue to change, and highlights the 
importance of planning and flexible and sufficient funding to address 
these changes quickly and effectively.

                                HIV/AIDS

    Question. Mr. Natsios, the HIV/AIDS authorization bill that the 
President signed recently recommends that funding to combat HIV/AIDS be 
allocated as follows--55 percent on treatment; 15 percent on care, and 
20 percent on prevention. In addition, one-third of the amount of the 
money for prevention must be spent on abstinence programs.
    How is [this] different from the way in which the Administration 
currently spends funds on HIV/AIDS programs? Do you support these 
percentage earmarks? Why not 50 percent, 10 percent and 30 percent ? 
Why not earmark all your health programs like this?
    The bill also establishes an AIDS ``Coordinator'' for all the U.S. 
Government's international AIDS activities. But rather than just be a 
coordinator, this person would have the final say over how every dollar 
is spent, including USAID's budget for AIDS, TB, and malaria. Why does 
this make sense?
    Answer. USAID's HIV/AIDS programs have been traditionally 
prevention-focused. However, in recent years, we have begun to 
integrate significantly more care and treatment into our programs. The 
availability of care options is essential in order for people to agree 
to voluntary testing and counseling. With major declines in the price 
of antiretrovirals (ARVs), and with greatly increased worldwide support 
for ARVs, we are now adding ARV treatment to the care programs we have 
been supporting for some time. While this will increase our treatment 
budget, it does not necessarily diminish our focus on prevention.
    As you know, the needs are great in all areas of prevention, care 
and treatment. The scope and ``maturity'' of the epidemic, and the 
available resources from the Global Fund, other donors and host 
governments vary by country. There is, then, variation in the balance 
of need between these categories in different countries. USAID, 
therefore, seeks the greatest possible flexibility in deciding how to 
program its funds, and would prefer not to have to adhere to strict 
percentages in administering these funds on a country-by-country basis, 
but can meet these percentages overall.
    Assisting in the international struggle against HIV/AIDS does have 
foreign policy implications, and needs foreign country expertise. The 
State Department, therefore, is the right place for coordinating and 
overseeing these efforts. Further, a single AIDS coordinator can 
facilitate division of responsibilities among the increasing numbers of 
U.S. agencies involved in the fight against HIV/AIDS. For over a 
decade, USAID was the only U.S. Government agency fighting the pandemic 
internationally. In recent years, however, the Departments of Health 
and Human Services, Defense and Labor have all joined the fight. More 
resources and expertise are what we need in this complex battle. 
Finally, the coordinator model for the SEED and FSA account funds has 
been successful, and we believe such a model for HIV/AIDS would be 
equally successful.

        FISCAL YEAR 2004 BUDGET REQUEST FOR FORMER SOVIET UNION

    Question. The President's fiscal year 2004 budget request would cut 
funding for the former Soviet Union from $755 million to $576 million. 
Aid to Russia would fall from $148 million to $73 million. I know of 
many USAID programs to promote legal reform, improve health care, 
combat organized crime, improve market-based agriculture, clean up 
toxic pollutants, and other initiatives that will be shut down because 
of this cut. Does that make sense to you?
    Answer. Part of the apparent large cut in the overall fiscal year 
2004 request for Freedom Support Act (FSA) assistance reflects a shift 
in funding for educational and professional exchanges from the FSA 
account in the Foreign Operations appropriations request to the Bureau 
for Educational and Cultural Affairs line item in the Commerce, State, 
Justice appropriations request.
    The lower request level also recognizes, particularly for Russia, 
progress already achieved on reform, especially economic reform. 
Programs in this area will likely be phased out over the next several 
years.
    We realize that Russia continues to face challenges in democratic 
development. We are developing a strategy to phase out FSA assistance 
to Russia over the next several years that will seek to ensure a legacy 
of sustainable institutions to support civil society and democratic 
institutions. During this time, we will increasingly focus on democracy 
and rule of law to ensure that we consolidate and sustain the progress 
made over the past decade. We will seek to advance structural changes 
that are needed to create a hospitable environment for Russian civil 
society.
    FSA technical assistance programs have played a vital role in 
advancing progress toward rule of law in Russia, including vital 
support for the professionalization of Russian court administration and 
judicial training; emphasis upon the importance of judicial ethics 
(resulting in more openness by the Russian courts concerning 
disciplining of judges); reform of law school curriculum, including 
introducing and supporting clinical legal education; and supporting 
every aspect of the development of the new criminal procedure code, 
which has drastically changed the roles for Russian judges, prosecutors 
and defense attorneys. As another example, legal volunteers from 
Vermont, including judges, practicing attorneys, and staff of Vermont 
Law School, have worked with the Republic of Karelia on a professional 
development program for Karelian judges, legal educators, and 
practicing lawyers. Our focus is now on helping the Russian bar 
consolidate the gains it has made, particularly by sponsoring 
professional education events to help the bar hone its advocacy skills.
    In 2001, an interagency task force identified health as one of the 
three priority areas for FSA assistance in Russia. Russia's growth rate 
in HIV/AIDS in 2001 was one of the fastest in the world. Multi-drug 
resistant TB is another serious problem, particularly in prisons. 
Funding for health programs has increased over the last two years and 
we plan to continue these programs for some years to come.
    Some anti-crime activities that had been funded under FSA, such as 
programs to combat organized crime and money laundering, will likely 
continue, perhaps at different levels, with alternate funding sources.
    Our strategy is not yet complete, so we don't have all the answers. 
But we are determined to help Russia preserve the remarkable gains it 
has made since 1992 and to complete the transition into a market-based 
democracy.

                            RENEWABLE ENERGY

    Question. There are more than 2 billion people in emerging markets 
without electricity. There is an enormous opportunity for U.S. 
companies that could help develop renewable energy resources to serve 
their needs. Just as an example, I'm told that there is a $700 billion 
global market to supply small hydropower technology and know-how over 
the next few years.
    While USAID seems to give a lot of attention to the oil and gas 
areas within the energy sector, renewable and clean energy technologies 
have not enjoyed the same strong support by USAID even though 
congressional intent has been clear. Last year, we provided $175 
million for energy conservation, energy efficiency, and clean energy 
programs. Are you using any of this money for oil and gas development? 
What steps are you taking to ensure that these funds are used to 
promote a wide range of renewable energy sources?
    Last year we required the President to submit a report on 
greenhouse gas emissions, as we have in past years, ``not later than 45 
days'' after the President's submission of his fiscal year 2004 budget 
request. We should have received that report already. Do you have any 
idea where it is?
    Answer. For fiscal year 2003, Congress directed USAID to spend $175 
million on global climate change mitigation and adaptation, energy 
conservation, energy efficiency, and clean energy programs. The report 
containing information on how USAID is complying with this directive is 
currently at OMB. The energy expenditures for this directive total 
$94.4 million which includes transfers to DOE and NRC. USAID's energy 
assistance programs focus on three critical policy dimensions of the 
energy sector: improved governance of the energy sector; enhanced 
institutional capacity of public, private and non-governmental energy 
sector participants, and increased public understanding of, and 
participation in, the energy sector. Creating the conditions for 
economic growth and poverty reduction requires increasing access of 
people and business to modern energy, and increasing the affordability 
of energy for consumers. This access and affordability, in turn, 
requires a transformation of energy markets for all energy 
technologies. Such market transformation involves changing the 
foundation of the sector from politics to market economics and in 
improving the effectiveness of government, private sector, and consumer 
institutions in terms of management practices, technical operations, 
resource use, and energy consumption. Therefore, our energy governance 
programs benefit all fuel sources, including oil, gas, as well as 
renewable energy and energy efficiency. Our programs in the oil and gas 
sector are modest and include developing legal and regulatory 
frameworks and some pilot scale oil field clean up activities in 
Kazakhstan. With respect to renewable energy sources, USAID funds 
activities that ensure that reformed energy sectors pay particular 
attention to all clean energy technologies and incorporate clean 
technologies and alternative energy into the mix. USAID's programs seek 
to overcome market and institutional barriers to increasing access to 
energy in rural areas and encouraging widespread adoption and use of 
clean and renewable energy systems to meet development needs. Elements 
include: supporting policies, technologies and business models that 
result in increased access to modern energy services in underserved 
areas; fostering implementation of policy or regulatory changes that 
clarify or establish rights and incentives for the cost-effective 
utilization of clean and renewable energy resources and technologies; 
mobilizing business entities to pursue clean energy projects; 
leveraging financial commitments to clean energy sources; and 
catalyzing the establishment or strengthening of host-country 
institutions for the explicit purpose of promoting clean and renewable 
energy to meet rural development needs. This program directly supports 
the White House Signature Clean Energy Initiative's (CEI) and the 
Global Village Energy Partnership (GVEP). Our programs make extensive 
use of Cooperative Agreements with U.S. NGOs that partner with in-
country institutions, Letter Grants with international development 
organizations and multi-lateral development banks, Inter-Agency 
Agreements with other USG agencies (DOE labs, EPA, USDA), and works 
closely with other USG agencies (State and Commerce).

                            ENERGY PROGRAMS

    Question. I have worked with Senator Byrd and others to open and 
expand international energy markets and export U.S. clean energy 
technologies to developing countries. These efforts help meet our 
national and international energy needs as well as address related 
trade and environmental objectives.
    The Clean Energy Technology Exports Initiative can help meet that 
challenge. This bipartisan initiative had its genesis in the Senate 
Appropriations Committee, and could aid in meeting other nations' 
infrastructure and development needs while also increasing the 
deployment of a range of clean energy technologies, including 
renewable, energy efficiency, clean coal, and hydroelectric 
technologies. The Administration has talked about this, but little has 
been done.
    I assume you agree that it is in the long-term strategic interest 
for the United States to help open and expand international energy 
markets and export a range of U.S. clean energy technologies?
    Are you aware that USAID is a leading agency involved in the 
implementation of the Clean Energy Technology Exports Initiative? How 
you are working to fulfill your agency's mandate under the Initiative's 
strategic plan?
    What actions is USAID taking to work with other federal partners 
and non-governmental organizations, private sector companies, and other 
international partners to implement this plan?
    Answer. USAID, the Department of Energy, and the Department of 
Commerce, working in collaboration with U.S. industry, spearheaded the 
preparation of a five-year strategic plan for a clean energy technology 
exports (CETE) program. A draft of the five-year strategic plan was 
completed and submitted to the U.S. Congress. The strategic plan 
outlines a program to increase U.S. clean energy technology exports to 
international markets through increased coordination among federal 
agency programs and between these programs and the private sector. 
While supplemental legislation to fund the five-year plan has not been 
forthcoming, CETE Agencies have used the strategic plan as a basis for 
reconciling inter-agency relations in a way that emphasizes 
institutional strengths and avoids overreaching for areas not in 
Agencies' missions.

                             COFFEE CRISIS

    Question. As you know, the rapid decline in the price of coffee has 
had a devastating impact on economies of developing countries, 
especially in Latin America. The coffee price crisis has also hampered 
our foreign aid and counter-narcotics efforts. The President of 
Colombia wrote a letter to me making the connection between the coffee 
price crisis and our foreign aid programs.
    In November 2002, the House and Senate passed bipartisan 
resolutions urging the Administration to come up with a global, 
coordinated strategy to deal with this crisis. What progress has been 
made in formulating this strategy? Is USAID involved?
    Answer. The Department of State is leading an interagency USG 
effort to prepare a strategy on the coffee crisis. USAID is a member of 
the drafting committee. A discussion draft has been completed and 
circulated through an inter-agency review process. It is scheduled to 
be submitted to the Deputies meeting hosted by the National Economic 
Council the week of July 21.

                          UNIVERSITY REQUESTS

    Question. We developed a new approach that USAID strongly supported 
and which I believe you are familiar with. Unlike in the past, we no 
longer specify which university requests USAID should fund, nor do we 
specify a recommended dollar amount. We do list the university 
proposals which we believed deserve serious consideration.
    Unfortunately, it has not turned out as we had hoped. Universities 
are still getting the run around. First, assuming they can locate 
someone who can give them an answer, they are told that Washington 
makes the decisions. Then they are told that the missions make the 
decisions. This goes on until the universities eventually give up, 
USAID declares victory, and we get the complaints.
    I think we may have no choice but to earmark a pot of money for 
these programs. We tried to help you, but it has not worked out. Do you 
have anything to say?
    Answer. We believe that the new Agency approach to managing 
university requests is working well. We have processed 68 university 
proposals (from 58 higher education institutions), which are listed on 
the House and Senate Reports. A summary of this approach and a status 
report on the 68 proposals follow below.
    Two years ago USAID established a Higher Education Community (HEC) 
Liaison position in its Office of Education in the Bureau for Economic 
Growth, Agriculture and Trade. Martin Hewitt now serves as the HEC 
liaison and is the key point of contact for universities seeking 
information and advice on the opportunities and programs within USAID.
    For tracking and management of unsolicited concept papers and 
proposals, the HEC Liaison is supported by a working group within the 
Agency. This working group is composed of representatives from the 
regional and technical bureaus. The working group shares the 
responsibility for either reviewing the proposal in the regional or 
technical office (if the proposal is technical or sector specific with 
no country cited) or for distribution to a USAID Mission (if the 
proposal is explicit regarding a country where the planned activity 
will be conducted). The working group shares the responsibility for 
tracking the status of higher education proposals with the HEC Liaison. 
The group communicates frequently to ensure that the improvements in 
procedures and information flow are achieving their desired results.
    In the House Appropriations Committee Report 107-663 and the Senate 
Appropriations Committee Report 107-219, Congress included the 
requirement that USAID report on the status of 68 university proposals 
listed in the House and Senate reports.
    The following actions have been taken concerning university 
proposals:
  --The HEC Liaison sent e-mails to every higher education institution 
        mentioned in the University Programs section of the Senate and 
        House Reports to direct them toward information about Agency 
        solicited competitive processes and opportunities. (Ten of the 
        universities mentioned submitted applications to the University 
        Partnerships competitive grant program).
  --The HEC Liaison made personal telephone calls to thirty higher 
        education institutions listed in the Senate and House Reports 
        to ascertain the status of their proposal submissions and to 
        provide guidance.
  --The HEC Liaison has been contacted by at least thirty higher 
        education institutions to request information about guidelines 
        for developing concept papers, proposals, and for information 
        about how the review process works (if the proposal aims to 
        work in a particular USAID/Mission, then the proposal is shared 
        with the Mission for review, if not, the proposal is reviewed 
        in a technical or regional bureau). Every call or e-mail from 
        higher education institutions to the HEC Liaison is responded 
        to in an informative and timely way.
  --The HEC Liaison has participated in numerous conferences, meetings, 
        site visits, regarding the USAID-University relationship and 
        the specifics for how Universities can address Agency policies, 
        programs, projects and obtain support for doing so.
    Following is the status of university proposals mentioned in the 
House and Senate Reports (June 23, 2003):



------------------------------------------------------------------------
Total number of universities cited.........................          58
Total number of proposals cited............................          68
Number of proposals received...............................          37
Number not received........................................          31
Of those received:
    Number of proposals approved...........................          17
    Number rejected........................................          12
    Number under review....................................           8
Total proposal funding (millions of dollars)...............          15
------------------------------------------------------------------------

    Summary:
    (1) 54 percent of proposals mentioned in the House and Senate 
Reports have been received.
    (2) 46 percent of proposals received have been funded.
    (3) 32 percent of proposals received have been rejected.
    (4) 22 percent of proposals received are under review.
    The 17 successful proposals were approved because they met the 
review criteria contained in USAID's brochure and website U.S. Higher 
Education Community: Doing Business with USAID. The criteria include 
two, which bear on the proposed activities' consistency with foreign 
policy and development goals. They are: the extent to which the 
proposal supports USAID's mandate and objectives, and the anticipated 
long-term impact of the project and the nature of the on-going 
relationship between institutions.
    The major reason that the twelve proposals were rejected included:
  --The failure to meet or support USAID's mandate or objectives in the 
        country, region, or sector
  --The duplication of ongoing efforts
  --Budget limitations in targeted bureaus, countries
  --Lack of technical merit
    In each case where proposals were rejected, a letter was sent to 
the applicant informing them of the reasons why the proposal was not 
accepted.
                                 ______
                                 
               Questions Submitted by Senator Tom Harkin

                PEOPLE WITH DISABILITIES IN AFGHANISTAN

    Question. As you may know, I have been a long-time advocate for the 
rights of people with disabilities and was one of the main authors of 
the Americans with Disabilities Act. It is very important to me that 
any reconstruction supported with U.S. funding be accessible to people 
with disabilities and allow them to equally participate in civic and 
community life. As I am sure that you will agree, it is critical that 
at this crucial period in Iraq and Afghanistan where the people in 
these two nations are rebuilding their futures, all voices be heard. It 
is my hope that the Administration has given this some thought and I 
would be eager to learn what the short-term and long-term plans USAID 
has developed to address this important issue? I use the term 
reconstruction to mean both physical structures and civil society. What 
programs does USAID have to assist people with disabilities in 
Afghanistan? Again, I would be interested in the short-term and long-
term programs.
    Answer. In answer to both questions, USAID has taken an active role 
in the development of two programs aimed at war-victims and people with 
disabilities through the Leahy War Victims' Fund. One is a million 
dollar grant to the Comprehensive Disabled Afghans Programme (CDAP) run 
by UNOPS, to address needs of disabled Afghans. The other is a $2 
million program from the Displaced Children and Orphans Fund (DCOF) 
which will address some of these issues as well.
    The Comprehensive Disabled Afghans' Programme (CDAP) has been 
selected as the lead entity to assist the Ministry of Martyrs and 
Disabled in developing national capacity in the field of disability. 
This project provides quick impact interventions that will help to 
address the problems faced by the Government of Afghanistan.
    Consultation with the disabled population of Kabul, particularly 
those involved in recent political activities, has established the need 
for community-based outreach centers for the disabled in Kabul. The 
disabled community would like to see basic rehabilitation services 
provided, along with some ancillary services, such as job assistance.
    Current procurement is open for bids for the running of five 
rehabilitation centers. It is expected that the centers will open no 
later than September 01, 2003 providing jobs, training and 
comprehensive rehabilitation services.
    DCOF has awarded a $2 million grant to three leading child-focused 
agencies-Child Fund Afghanistan (CFA--also known as Christian 
Children's Fund in the United States, International Rescue Committee, 
and Save the Children/U.S.--to assist 50,000 vulnerable children and 
families, including orphans, displaced children, working children, and 
former child soldiers.
    The three agencies, which work together as part of the NGO 
Consortium on the Care and Protection of Children with CFA playing the 
finance management role), will each focus on vulnerable children in a 
particular geographic area. CFA will work in northeastern provinces 
(Kunduz, Takhar, and Badakhshan); IRC will work in the Herat region; 
and Save the Children will work in Kabul. The work will include:
  --Specialized Community-based training
  --Targeted Community Programs like youth-led civic works projects, 
        vocational training, income generation, and infrastructure 
        rehabilitation.
  --Targeted assistance to highly vulnerable children, youth and 
        families through small grants, supplies and referrals.
    In addition, USAID will be constructing handicapped accessible 
schools and clinics throughout Afghanistan, and is facilitating the 
distribution of 10,000 privately donated wheel chairs to the disabled 
of Afghanistan.

                        SECURITY IN AFGHANISTAN

    Question. Last year, President Bush said: ``We will help the new 
Afghan Government provide the security that is the foundation for 
peace.''
    A month ago, the Washington Post reported that a private USAID 
assessment concluded that: security issues have made it ``almost 
impossible'' to manage some programs in much of the country and 
``security risks will remain high for the foreseeable future.''
    The U.N. Peacekeeping Force is limited to operating in Kabul; the 
Afghanistan National Army is years away from being an effective force; 
and there are too few U.S. troops to bring order to many of the 
outlying areas. We are told there is talk of a NATO force, but so far 
it seems to just that--talk.
    In the meantime, the Karzai government is increasingly seen as 
incapable of wielding authority outside of Kabul. I assume you saw last 
Sunday's NY Times Magazine article about the continuing power of Afghan 
warlords. Aren't you concerned that this is undermining USAID's ability 
to rebuild the country? Shouldn't the United States be showing more 
muscle against the warlords, to back up the central government and keep 
reconstruction efforts in Afghanistan moving forward?
    Answer. The security situation continues to be a constraint and has 
hampered the development and reconstruction efforts. For example, 
demining on the highway had to stop for a couple of weeks because of 
attacks against the deminers. Security problems will continue to impact 
reconstruction efforts and are a serious concern for the upcoming 
elections. USAID staff are not able to visit and monitor projects 
without being accompanied by armed security guards, or in some cases, 
the military. This can also impact the monitoring of project 
implementation.

                      AFGHAN MINISTRY OF EDUCATION

    Question. What is USAID doing to support the Afghan Ministry of 
Education? Are you providing training and equipment, so it can begin to 
do its job?
    Answer. USAID has recently awarded an $18.5 million contract to 
Creative Associates International, Inc. (CAII), to implement the 
``Afghanistan Primary Education Program'' (APEP). This program supports 
the Ministry of Education (MOE) by providing textbooks for the current 
academic year, teacher training, radio-based distance education for 
teachers and accelerated learning opportunities for girls and boys who 
were denied educational opportunities under the Taliban. In addition, 
USAID fielded an education advisor to work with the ministry and assist 
with curriculum revision and other activities to support capacity 
development at the ministerial level. CAII is providing assistance to 
the MOE with budgeting, planning, and data collection and analysis. 
USAID, working with the University of Nebraska at Omaha and other 
partners, provided 15 million textbooks for Afghan children for the 
opening of schools last year. The University of Nebraska is also 
continuing with teacher training. USAID has also committed to building 
1,000 schools over the next three years.

                   AFGHAN MINISTRY OF WOMEN'S AFFAIRS

    Question. What about the Ministry of Women's Affairs (MOWA)? Are 
you helping to build its capacity, so it can work to address the needs 
of women who have been so repressed?
    Answer. Immediately upon reopening the Kabul Mission in January, 
2002, USAID fielded a Gender Advisor, who works closely with the 
Minister in planning activities, and initiated repairs to the MOWA 
headquarters. USAID is also working with MOWA on its financial 
management systems. USAID is funding the construction of 18 women's 
centers in Afghanistan, one in each province, thereby covering over 
half the country. We are also developing programs for these centers 
whereby women can come together and learn basic technical and 
vocational skills. In addition to supporting the Ministry of Women's 
Affairs, USAID has integrated gender issues into its programming, so 
that it can address the needs of women. USAID believes that the MOWA 
should work to increase the capacity of relevant ministries to 
mainstream issues that are relevant to women. We are concerned that 
strengthening the MOWA alone will not ensure programs effectively 
targeting women and girls are incorporated in the development agenda of 
the TISA.

                    PEOPLE WITH DISABILITIES IN IRAQ

    Question. As you may know, I have been a long-time advocate for the 
rights of people with disabilities and was one of the main authors of 
the American with Disabilities Act. It is very important to me that any 
reconstruction supported with U.S. funding be accessible to people with 
disabilities and allow them to equally participate in civic and 
community life. As I am sure that you will agree, it is critical that 
at this crucial period in Iraq and Afghanistan where the people in 
these two nations are rebuilding their futures, all voices be heard. It 
is my hope that the Administration has given this some thought and I 
would be eager to learn what the short-term and long-term plans USAID 
has developed to address this important issue? I use to term 
reconstruction to mean both physical structures and civil society.
    Answer. USAID's policy regarding people with disabilities stresses 
the inclusion of people who have physical and mental disabilities and 
those who advocate and offer services on behalf of people with 
disabilities. This commitment extends from the design and 
implementation of USAID programming to advocacy for and outreach to 
people with disabilities. USAID's short-term plan has been to highlight 
this policy to our private sector partners, especially before starting 
rehabilitation evaluations of public facilities such as schools, 
hospitals and airports.
    USAID is also supporting $40 million in program funding to U.N. 
agencies, including UNICEF, and NGOs including the American Refugee 
Committee, CARE, Goal, IMC, IRC, Mercy Corps, Save the Children/U.S., 
and World Vision. The programs focus largely on Iraq's most vulnerable 
populations, which include people with physical and mental 
disabilities.

        USAID PROGRAMS ENGAGING ISRAEL IN DEVELOPMENT ACTIVITIES

    Question. The United States and Israel are in the last stages of 
terminating a program called CDR/CDP that has been remarkably effective 
in spreading Israeli technology and its unique agricultural advances to 
nations in Africa, Asia and, particularly, in Central Asia. With the 
increased AID focus on decentralization of aid programs, is there 
anything that could be done to encourage our AID missions to utilize 
the special expertise Israel brings to rural development in the 
developing world?
    Answer. First, a clarification will be helpful. CDR (the 
Cooperative Development Research program) and CDP (the Cooperative 
Development Program) are two distinct programs. Only the CDP is in its 
final year of funding. CDR continues to be funded centrally at a level 
of $1.5 million per year.
    The Cooperative Development Research Program (CDR) has been an 
effective way of partnering researchers from developing countries in 
the Middle East, Africa, Asia, and Latin America with Israeli 
scientists. In addition to agriculture, research teams who have 
competed successfully for peer-reviewed grants have focused on projects 
in health and the environment.
    In recent years, the CDR Program has included a special initiative 
that enabled scientists in the Central Asian Republics to partner with 
Israeli and U.S. researchers. Due to a funding decision made by the 
regional mission in the Central Asian Republics, this special CDR 
program will no longer continue.
    The Cooperative Development Program (CDP) received its last 
allocation of central funding in fiscal year 2003. This program was 
designed to enable the Israeli development program, MASHAV, an arm of 
the Ministry of Foreign Affairs, to work with partners in developing 
countries on agricultural issues and to provide training on a variety 
of subjects in Israel. After many years of successful expansion and the 
commitment of about $75 million, it was agreed that central funding 
from USAID for this Program was no longer needed. However, USAID 
missions have been encouraged to continue working with MASHAV, in areas 
where they and their partner institutions have great strength. USAID/
Central Asian Republics has been one of the missions that has done so, 
starting in fiscal year 2001. The program in the region has involved 
agriculture, health, and agribusiness. The Mission-funded agreement 
runs until the end of fiscal year 2005.

                        IOWA UNIVERSITY REQUESTS

    Question. Over the past several years, a few universities and 
colleges in Iowa have submitted proposals to USAID for funding. They 
have been frustrated by the endless bureaucracy and the lack of a 
transparent process wherein all universities and colleges that are 
interested in pursuing possible USAID funding would be fully informed 
in a timely fashion about submitting their proposals and supporting 
rationales to the appropriate USAID office(s) for peer review and 
merit-based decisions on which proposals would be funded. Furthermore, 
the Committee has pointed out this problem to USAID and has urged 
action on this issue in previous reports yet this continues to be a 
problem. What steps, if any, are being taken by USAID to address this 
problem?
    Answer. Two years ago USAID established a Higher Education 
Community (HEC) Liaison position in its Office of Education in the 
Bureau for Economic Growth, Agriculture and Trade. Martin Hewitt now 
serves as the HEC liaison and is the key point of contact for 
universities seeking information and advice on the opportunities and 
programs within USAID.
    For tracking and management of unsolicited concept papers and 
proposals, the HEC Liaison is supported by a working group within the 
Agency. This working group is composed of representatives from the 
regional and technical bureaus. The working group shares the 
responsibility for either reviewing the proposal in the regional or 
technical office (if the proposal is technical or sector specific with 
no country cited) or for distribution to a USAID Mission (if the 
proposal is explicit regarding a country where the planned activity 
will be conducted). The working group shares the responsibility for 
tracking the status of higher education proposals with the HEC Liaison. 
The group communicates frequently to ensure that the improvements in 
procedures and information flow are achieving their desired results.
    In the House Appropriations Committee Report 107-663 and the Senate 
Appropriations Committee Report 107-219, Congress included the 
requirement that USAID report on the status of 68 university proposals 
listed in the House and Senate reports.
    The following actions have been taken concerning university 
proposals:
  --The HEC Liaison sent e-mails to every higher education institution 
        mentioned in the University Programs section of the Senate and 
        House Reports to direct them toward information about Agency 
        solicited competitive processes and opportunities. (Ten of the 
        universities mentioned submitted applications to the University 
        Partnerships competitive grant program).
  --The HEC Liaison made personal telephone calls to thirty higher 
        education institutions listed in the Senate and House Reports 
        to ascertain the status of their proposal submissions and to 
        provide guidance.
  --The HEC Liaison has been contacted by at least thirty higher 
        education institutions to request information about guidelines 
        for developing concept papers, proposals, and for information 
        about how the review process works (if the proposal aims to 
        work in a particular USAID/Mission, then the proposal is shared 
        with the Mission for review, if not, the proposal is reviewed 
        in a technical or regional bureau). Every call or e-mail from 
        higher education institutions to the HEC Liaison is responded 
        to in an informative and timely way.
  --The HEC Liaison has participated in numerous conferences, meetings, 
        site visits, regarding the USAID-University relationship and 
        the specifics for how Universities can address Agency policies, 
        programs, projects and obtain support for doing so.
    Following is the status of university proposals mentioned in the 
House and Senate Reports (June 23, 2003):



------------------------------------------------------------------------
Total number of universities cited.........................          58
Total number of proposals cited............................          68
Number of proposals received...............................          37
Number not received........................................          31
Of those received:
    Number of proposals approved...........................          17
    Number rejected........................................          12
    Number under review....................................           8
Total proposal funding (millions of dollars)...............          15
------------------------------------------------------------------------

    Summary:
    (1) 54 percent of proposals mentioned in the House and Senate 
Reports have been received.
    (2) 46 percent of proposals received have been funded.
    (3) 32 percent of proposals received have been rejected.
    (4) 22 percent of proposals received are under review.
    The 17 successful proposals were approved because they met the 
review criteria contained in USAID's brochure and website U.S. Higher 
Education Community: Doing Business with USAID. The criteria include 
two, which bear on the proposed activities' consistency with foreign 
policy and development goals. They are: the extent to which the 
proposal supports USAID's mandate and objectives, and the anticipated 
long-term impact of the project and the nature of the on-going 
relationship between institutions.
    The major reason that the twelve proposals were rejected included:
  --The failure to meet or support USAID's mandate or objectives in the 
        country, region, or sector
  --The duplication of ongoing efforts
  --Budget limitations in targeted bureaus, countries
  --Lack of technical merit
    In each case where proposals were rejected, a letter was sent to 
the applicant informing them of the reasons why the proposal was not 
accepted.
    As for the four proposals from the two Iowa Universities (the 
University of Iowa and Northern Iowa University) cited in the 
University Proposals section of the Senate and House Reports, one 
proposal was accepted (Northern Iowa--$272,000), one was supported by 
the Department of State (Northern Iowa University), and two were 
rejected (the University of Iowa and Northern Iowa University).
                                 ______
                                 
            Questions Submitted by Senator Mary L. Landrieu

                       COMMITMENT TO AFGHANISTAN

    Question. Is the United States committed to a long-term presence in 
Afghanistan? Are we dedicating enough funds to Afghanistan? What areas 
are deserving of greater support and attention? How many years do you 
anticipate USAID's involvement?
    Answer. As President Bush has stated, the United States is 
committed to Afghanistan for the long-term and that includes USAID. 
With Administration and Congressional support, USAID intends to stay in 
Afghanistan as long as we have a role to play in assisting the Afghans 
recover from years of war, drought, and underdevelopment. The needs of 
Afghanistan have far outstripped donor resources. However, the United 
States has been, and will continue to take a lead role in delivering 
reconstruction assistance in many of the most critical areas. Since 
September 11, USAID alone has programmed nearly a billion dollars in 
assistance.
    More needs to be done to rejuvenate Afghan livelihoods to include 
job creation in both traditional (e.g., agriculture) and non-
traditional sectors. Afghans need to feel secure in order to invest in 
their and their children's future. Without a more secure environment, 
free of crime and corruption, reconstruction will be slowed. So the 
other area deserving of attention is security.
    Question. Do you support Secretary Powell's funding goal of $8 
billion for Afghanistan?
    Answer. I do support the Secretary's funding goal for Afghanistan.

                          WOMEN IN AFGHANISTAN

    Question. Would you support a requirement to set a percentage of 
aid to be directed toward the advancement of Afghan women or be 
conducted by women-led relief organizations?
    Answer. This Administration, as well as prior ones, does not seek 
or encourage earmarks, however well-intentioned. USAID's approach to 
assisting Afghan women is to incorporate them into all our programming, 
with a special emphasis on their most critical needs, rather than 
promote specific set-asides. The most critical need of Afghan women is 
improvement in healthcare. Afghanistan has the highest maternal 
mortality rate in the world along, with Sierra Leone. Many of these 
deaths are preventable. USAID's $133 million (over 3 years) health 
program focuses on maternal/child health in the rural areas where 80 
percent of Afghanistan's population live and where there are completely 
inadequate health services for women.
    The second most critical need is education. USAID's $60 million 
education program (over 3 years) emphasizes drawing girls back into 
school including construction of girls-only schools; accelerated 
learning programs for girls who missed out on education under the 
Taliban; and other incentives, such as cooking oil to families that 
send their daughters to school.
    Both the health and education components include job creation 
opportunities (teachers and community health workers) for women. 
USAID's agricultural programs are seeking to expand income generation 
opportunities to women, such as food processing and vegetable gardens. 
We have worked with a number of Afghan women-led groups and we look 
forward to continuing and expanding these relationships.

                ENHANCING WOMEN'S ROLE IN AFGHAN SOCIETY

    Question. What are we doing to ensure Afghan women will have a 
direct role in society?
    Answer. USAID is supporting activities in women's education, 
employment, and women's centers which empower them to assume a more 
direct role in society. Below we provide specific activities, with 
funding amounts, in each of these areas:
    Education/Training for Afghan Women and Girls:
  --Assistance in 2002 school year: Trained 1,359 teachers, 907 of whom 
        were women, and printed 15 million textbooks for 2002 school 
        year, contributing to an increase in girls' enrollment from 
        90,000 under Taliban in 2001 to 900,000 in 2002 school year. 
        (Total project funding including teacher training and textbook 
        printing: $7,709,535) Reconstructed 142 schools, daycare 
        centers, teacher training colleges, and vocational schools. 
        (Total activity funding approximately: $5.5 million) In 
        addition, USAID provides a food salary supplement to 50,000 
        teachers equal to 26 percent of pay. (Total USAID food aid 
        funding in fiscal year 2002: $158,600,000; Total USAID food aid 
        funding to date in fiscal year 2003: $42,662,800)
  --Assistance in 2003 school year and going forward: USAID printed and 
        distributed 10.7 million textbooks for 2003 school year. Early 
        indications show about a 30 percent increase in enrollment over 
        2002; many of these new students are expected to be girls, 
        which will be known with greater certainty when the enrollment 
        survey is completed in summer 2003. USAID's new education 
        program will support accelerated learning programs for up to 
        60,000 children, mostly girls that missed education under the 
        Taliban. USAID intends to rebuild between 1,000-1,200 schools, 
        benefiting 402,000 students, over three years. In addition, 
        USAID continues a food salary supplement to 50,000 teachers 
        equal to 26 percent of pay. (Education budget is $60.5 million 
        over three years; $7.41 million has been obligated to date)
  --Food-for-Education Program: Through WFP, USAID is supporting 
        distribution of food to schoolchildren in several districts of 
        Badakhshan Province, in northeastern Afghanistan. Approximately 
        27,000 children and 1,500 teachers and service staff in 50 
        schools have received a four-month ration of wheat flour. Under 
        this program, girls receive five liters of vegetable oil every 
        month as an extra incentive for regular school attendance. The 
        program increases school attendance, reduces dropout rates, and 
        encourages families to send girls to school.
  --Through the Afghan NGO, ACBAR, USAID supports a program to 
        encourage Afghan women and girls to read by hosting reading 
        classes and improving the country's libraries. The staff of 
        nine libraries within eight provinces is receiving training and 
        supplies of books. (Total activity funding: $61,180)
    Employment for Afghan Women:
  --Widow's Bakeries: USAID supports the World Food Program's (WFP) 121 
        Widow's Bakeries in Kabul, Mazar, and Kandahar. In Kabul, the 
        bakeries provided 5,000 children with fresh bread in school. 
        Overall, through employment and provision of subsidized bread, 
        WFP reports that 200,000 urban vulnerable people benefited from 
        this program in CY 2002. USAID support represented over half of 
        WFP's CY 2002 budget in Afghanistan.
  --Daycare Centers: Seventeen centers have been built for Government 
        ministries and offices to enable women to return to work. 
        (Total activity funding: $151,506)
  --Women's Entrepreneurship: Through USAID's work with the Ministry of 
        Finance in trade and investment promotion, USAID has written an 
        action plan, approved by Minister of Finance Ghani, which 
        includes: capacity building for women in all areas of trade, 
        including export promotion, administrative trade barrier 
        issues, licensing, and small and medium business development.
  --Income Generation Opportunities: Some examples include:
    --3,200 women, primarily widows, receive approximately $30 for 15 
            days work, producing clothing and quilts in three women's 
            centers in Charikar, Taloqan, and Maimana ($2/day is also 
            the typical wage for male labor). In addition, the women 
            receive basic health education and some English training 
            while working in the centers.
    --The women of northwestern Afghanistan are receiving tools and 
            materials to generate their own income through activities 
            such as growing kitchen gardens, embroidering, producing 
            cheese and yogurt and crafting shoes. (Total activity 
            funding: $51,072)
    --400 women returnees in the Shomali, an area devastated by the 
            Taliban's ruin of its household poultry stock, have 
            received 10 breeding chickens each to generate family 
            income.
    --100 women, mostly widows, employed in raisin processing in 
            Kandahar.
    --Rehabilitation of the offices of the NGO, ARIANA so they can 
            provide vocational training to 1,800 women. (Total activity 
            funding: $12,470)
  --Women's Employment through USAID's Major Agriculture and Rural 
        Incomes program (RAMP): Agriculture employs 70 percent of 
        Afghanistan's labor force, and Afghan women play a large part 
        in agriculture, especially in raising livestock. RAMP will 
        improve the technical capacity of Afghans for raising 
        livestock. RAMP will also provide women entrepreneurs with 
        innovative opportunities for credit and business training. This 
        activity will be particularly helpful for women-headed 
        households, which are among the most vulnerable in Afghanistan.
    Afghan Women's Centers:
  --USAID built and furnished the first Women's Resource Center. (Total 
        activity funding: $60,000) USAID is currently engaged in 
        building and providing programming for seventeen women's 
        centers throughout Afghanistan. Three of these are currently 
        under design in Jalalabad, Samangan, and Taloqan. (Total 
        activity funding: $2.7 million) The Ministry has recently 
        identified 14 more sites for USAID to build and furnish 
        centers. ($2.5 million obligated in fiscal year 2002 
        Supplemental funds) In addition, USAID will fund programming 
        for the centers, e.g., health education programs, daycare, etc. 
        ($5 million of fiscal year 2003 funds to be obligated early 
        this summer)
    Lastly, improved women's health is strongly linked to the ability 
of Afghan women to assume a more direct role in society. One of the 
central goals of the three year, $100 million REACH program is to 
reduce Afghanistan's high maternal mortality rate. The program will 
accomplish this goal by building 400 new clinics and funding 
performance grants to NGOs to provide a basic package of health 
services, particularly in rural areas, where medical care is most 
scarce. A major component of this program will be to increase women's 
access to skilled birth attendants and essential obstetrical services 
through an extensive training program. The first obligation for REACH 
is expected in the first week of May.

                       IRAQ RECONSTRUCTION BUDGET

    Question. What is the total reconstruction budget for Iraq--
including funds seized from Iraqi assets?
    Answer. This question is most appropriately addressed to the 
Department of Defense. USAID is using congressionally appropriated IRRF 
funds to provide rapid improvements to the quality of life in Iraq.
    Question. Congress recently provided $2.5 billion in the emergency 
supplemental for relief and reconstruction in Iraq. While USAID does 
not control the funds, how much has been disbursed and how much do you 
anticipate USAID to receive for reconstruction programs?
    Answer. USAID expects to receive $1.1-$1.3 billion for the 
reconstruction effort and $500 million for relief. As of July 9, $361 
million was obligated for reconstruction and over $107 million has been 
expended.
    Question. Have all USAID accounts that were ``borrowed from'' for 
pre-positioning supplies in Iraq been reimbursed?
    Answer. Yes, all the ``borrowed'' funds have been reimbursed by 
OMB.

                          IRAQ RECONSTRUCTION

    Question. In Iraq, what is your role?
    Answer. The USAID Administrator provides day-to-day executive 
direction and leadership on Agency programs and management operations 
to ensure a fast-paced relief and reconstruction effort. As in other 
countries, USAID/Iraq is led in the field by a Mission Director, Lewis 
Lucke, who reports to the Assistant Administrator of the Asia and Near 
East Bureau, Ambassador Wendy Chamberlin. Ambassador Chamberlin reports 
to the Administrator.
    Question. How many USAID staff are in Iraq? How is the security 
environment there affecting their ability to work? Is it true that 
USAID's Iraq Mission Director is actually living in Kuwait, because it 
is to unsafe to work effectively in Baghdad?
    Answer. As of July 8, USAID had 71 staff working in the region in 
support of USAID's Iraq programs. Of the 71 personnel, 35 are 
physically in Iraq. This number is limited by communication links and 
billeting space. There continue to be security incidents which limit 
the effective delivery of services, materials, and supplies. USAID's 
Iraq Mission Director is now working primarily in Baghdad. USAID has 
had full-time staff in Baghdad since April 23.
    Question. What plans do you have for increasing the number of USAID 
staff there?
    Answer. USAID recognizes the importance of providing robust 
oversight of appropriated funds. USAID's Asia and Near East Bureau has 
prepared an initial mission structure that is under review, which 
proposes 16 U.S. Direct Hire and a number of contract and Foreign 
Service National staff.
    Question. Recently, Sec. Rumsfeld said we will stay in Iraq only as 
long as necessary, and not a day longer.
    Is the United States committed to a long-term presence in Iraq to 
establish peace and security? Wouldn't a short-term departure only 
allow the forces of fanaticism and fundamentalism to re-emerge?
    Answer. USAID is focused on addressing immediate reconstruction 
requirements in Iraq and meeting the essential targets established for 
each sector in which it works. USAID expects to fully spend its portion 
of the Iraq Relief and Reconstruction Fund (IRRF) by September 2004 and 
is prepared for a long-term presence should the Administration make 
that decision.
    Question. Are we dedicating enough funds to the reconstruction of 
Iraq? ($2.4B in the Supplemental with no request in fiscal year 2004)? 
After all, the Marshall Plan had a price tag of $88B in today's 
dollars. Can we expect future supplementals and money in the fiscal 
year 2005 request to fund Iraqi reconstruction?
    Answer. USAID is prepared to implement a longer-term program should 
the President request additional resources from Congress.
    Question. What are we doing to ensure Iraqi women will have a 
direct role in society--to vote, work, go to school, and serve in the 
new government? Would you support a call to require that a set 
percentage of aid be directed toward the advancement of Iraqi women, or 
be conducted by women led relief organizations?
    Answer. USAID-supported gender programs include provisions for the 
hiring of female staff to work with vulnerable women, including as 
traditional birth attendants and for assessments; food and potable 
water support for war-affected women of childbearing age; and the 
construction of gender-specific latrines for internally displaced 
persons.
    USAID is planning to put into place in Iraq up to two major micro-
finance lending institutions. USAID's experience elsewhere shows that 
such institutional lending goes predominantly to women to start small 
enterprises. The loans are typically small loans around $50 to $300. 
These women entrepreneurs will be able to borrow privately. USAID is 
also planning to implement a macro economic program to bolster economic 
growth in Iraq.
    Regarding education, USAID will be developing an accelerated 
learning program for youth who have dropped out of school. Of these 
children, a majority are girls, and this program will be designed to 
get them back to school at the appropriate educational level. Second, 
through the water and sanitation program, USAID will ensure there are 
sanitary facilities for girls in schools, which will encourage girls to 
come back to school and increase the rate of girl's enrollment.
    Question. Humanitarian relief organizations still report 
difficulties in delivering aid to the Iraqi people. Only after people 
have food and shelter, will the Iraqis truly see America as wanting to 
liberate Iraq, and not occupy Iraq. What steps are we taking to make 
the delivery of humanitarian supplies as efficiently as possible?
    Answer. The U.S. Government has supported the United Nations World 
Food Program with cash, Public Law Title II food commodities and 
Emerson Trust food commodities in the amount of $480,033,000. With 
these and other resources, the World Food Program (WFP), in partnership 
with Iraq's Ministry of Trade, has reestablished the Public 
Distribution System and successfully completed the June ration 
distribution nationwide. More than 400,000 metric tons of wheat flour, 
rice, oil, pulses, infant formula, sugar, tea, soap and detergents have 
been distributed internally to approximately 26 million Iraqi 
beneficiaries.
    Distributions for the month of July have already begun and the 
Ministry of Trade has publicly announced the July ration through 
television, radio and print media.
    By supporting WFP, the United States has helped assure the delivery 
of more than 758,128 metric tons of food commodities to Iraq from 
neighboring countries for the month of June. This is equal to a food 
pipeline of more than 1,000 metric tons entering Iraq per hour, 24 
hours a day, seven days a week, sustained for a period of 30 days. To 
assure rapid delivery to all points in Iraq, the program is using the 
transportation corridors in Turkey, Jordan, Syria, Iraq (through Umm 
Qasr port), Kuwait and Iran.
    The WFP program is planned to continue through the month of October 
2003.

         USAID/DOD RELATIONSHIP IN IRAQ RECONSTRUCTION EFFORTS

    Question. The reconstruction effort in Iraq is being headed up 
under the DOD's Office of Reconstruction and Humanitarian Assistance 
(ORHA). Congress appropriated $2.48 billion for reconstruction and 
humanitarian aid in the supplemental bill earlier this spring. USAID 
has traditionally been the government agency to manage reconstruction 
and humanitarian assistance.
    What is the relationship between USAID and ORHA? Does USAID have 
sufficient input with ORHA so that reconstruction and humanitarian 
efforts are efficient and expedient? Is ORHA interested in USAID's 
expertise and history in the international development business?
    Answer. USAID maintains a close and productive relationship with 
ORHA and its successor, the Coalition Provisional Authority (CPA). All 
projects are approved by Ambassador Bremer and CPA's Program Review 
Board before being sent to OMB and notified to the Congress. USAID 
closely coordinates in the field with military civil affairs officers, 
CPA civilian staff and Iraqis.

             AIDS IN EASTERN EUROPE AND FORMER SOVIET UNION

    Question. This year, the President requests only $1.2 million for 
HIV/AIDS initiatives in Eastern Europe and $15.4 million in the Former 
Soviet Union. I have been to Romania three times. I know the horror 
stories of the mother-to-child transmissions and the HIV orphans. The 
AIDS problem is very real in Eastern Europe and the Former Soviet 
Union.
    The problems in Eastern Europe and the Former Soviet Union may not 
be as serious as those found in Africa, but how can we provide any 
effective treatment in Eastern Europe and the Former Soviet Union with 
such small funding allocations?
    Answer. Your concerns about HIV/AIDS in the Europe and Eurasia 
(E&E) region are well founded. Though overall prevalence in E&E is low, 
the world's steepest rise in new HIV infections is in this region, 
particularly Russia and Ukraine. The epidemic is driven primarily by 
injecting drug use and exacerbated by a host of factors including 
increased rates of sexually transmitted infections, cheap drugs, 
expanded prostitution, and human trafficking.
    The Administration has recently re-emphasized its commitment to 
combating HIV/AIDS in the E&E region, including a report by the 
National Intelligence Council, two Chiefs of Mission meetings in Kiev 
and Moscow, and a strong statement by Secretary Powell in Moscow in 
May.
    USAID's commitment to combating HIV/AIDS in E&E is demonstrated by 
our Agency maintaining levels of HIV/AIDS funding in the face of 
overall decreases in the FREEDOM Support Act and SEED Act accounts. In 
the E&E region, total HIV/AIDS funding for fiscal year 2003 is expected 
to total $19.4 million ($11.6 million from the FREEDOM Support Act 
account, $1.8 million from the SEED Act account, and $6.0 million from 
the Child Survival and Health account.) A slight increase is 
anticipated for fiscal year 2004.
    At the present time, locally funded programs and those supported by 
USAID and other donors are reaching only a fraction of the high risk 
groups that must be reached if the epidemic is to be controlled. Of 
course, more resources for HIV/AIDS could be put to good and immediate 
use in Europe and Eurasia. However, it would be a mistake to 
shortchange other urgent health needs such as tuberculosis in order to 
plus up HIV/AIDS funding. Consequently, USAID continues to strive to 
use our scarce HIV/AIDS resources in the most effective ways possible. 
In the priority countries of Russia and Ukraine, USAID missions are 
finalizing revised HIV/AIDS strategies, and the Agency is taking a 
fresh look at regional E&E programs as well. USAID will continue to 
focus on prevention programs directed at those most at risk--while also 
expanding our programs of treatment, care and support. Programs to 
prevent maternal to child transmission have already demonstrated their 
effectiveness. The U.S. Government also must continue to urge the 
leaders of Europe and Eurasia to engage the HIV/AIDS epidemic with 
increasing vigor.
    Given our budget realities, USAID is working to leverage other non-
U.S. Government resources. With USAID technical assistance, twelve E&E 
countries have been awarded nearly $250 million in grants from the 
Global Fund Against HIV/AIDS, Tuberculosis and Malaria.
    While USAID will continue to focus its global HIV/AIDS resources in 
high prevalence countries outside of Europe and Eurasia, I agree with 
you and want to underscore the need to aggressively address the 
epidemic in Europe and Eurasia now, before the window of opportunity 
slams shut. I echo the theme of the Kiev Chiefs of Missions meeting 
when I say that low prevalence should not mean low priority.

                          FUNDING FOR ROMANIA

    Question. Mr. Natsios, I am pleased to know you recently returned 
from Romania. Romania is a country that has overcome a repressive 
dictatorship to hold four national elections and implement market 
reforms. Additionally, Romania is poised to gain NATO admission this 
year. Furthermore, Romania has been a tremendous ally to the United 
States in Desert Storm, Kosovo, Afghanistan, and Iraq. Romania has 
contributed well over 1,000 troops to the war on terrorism. Moreover, 
Romania has made itself home to 5,000 U.S. Marines in the war on 
terrorism. In good times and in times of need for the United States, 
Romania has been more than a reliable ally.
    Despite the positive steps Romania has taken, Romania still 
requires our assistance to make its economic reforms, child-welfare 
reforms, and democratization efforts fully take hold, not just spread a 
few feeder roots.
    Why are we cutting development funds [from] Romania, a reliable 
ally, at a time when they need our assistance to solidify their 
reforms?
    Answer. We agree that much still needs to be done in Romania, and 
we are making excellent progress, despite very limited resources. 
Although the Administration initially debated setting a graduation date 
for Romania, none has been established. The current plan for U.S. 
assistance to Romania calls for maintaining present funding levels of 
about $28 million annually (or perhaps modestly increasing that level) 
through fiscal year 2008. Despite significant improvements by Romania 
over the past two years in macro-economic performance, economic reform 
and democratization, Romania still has much to do to improve its 
governance, transparency and other development and transition 
objectives. We will continue to monitor Romania's progress toward 
graduating from U.S. assistance to see whether a date can be set to end 
U.S. bilateral assistance funding.
    Question. How do you determine when a country ``graduates'' from 
USAID assistance? Is it common to permit countries to ``graduate'' with 
incompletes? The Millennium Challenge and your testimony state that we 
are committed to those countries headed in the right direction and 
assisting us in the war on terrorism. It seems Romania has taken all 
the right steps, only to be undercut by the United States. We let 
Romania down after WWII and allowed the Soviets to take-over. Let's not 
do so, again.
    Answer. The date for graduation from U.S. assistance is set when 
our analysis finds that a country is expected to be able to sustain 
progress towards democracy and an open market orientation without 
substantial further U.S. Government assistance. The analysis includes a 
review of country-specific program indicators designed to define 
graduation potential, standardized indicators of country progress, and 
a wide range of consultations with various USG agencies and political 
leaders. Even after graduation, a country may receive relatively small 
amounts of assistance from bilateral funding or regional funds to help 
it redress limited areas where deficiencies persist.
    In at least one of the eight countries where bilateral SEED funding 
ended, there was controversy over whether the graduation targets had 
been achieved. In that case and several others, some USG assistance 
continued, albeit at levels significantly below those before 
graduation. All countries where USAID bilateral missions have closed 
are now considered to have progressed beyond the need for further 
substantial SEED assistance.

                USAID DISASTER ASSISTANCE RESPONSE TEAMS

    Question. The USAID has dispatched DARTs to Iraq.
    How many DARTs are there in Iraq? How many people comprise a DART? 
What are the responsibilities of DARTs? Are the DARTs spread 
geographically throughout Iraq, or are they centralized in Baghdad?
    Answer. There is one Disaster Assistance Response Team (DART) in 
the Persian Gulf region, which is divided into four regional teams. All 
members of each team are a part of the same DART.
    The size and responsibilities of a DART vary depending on the type, 
size, and complexity of disasters to which the DART is deployed. 
USAID's Office of U.S. Foreign Disaster Assistance (OFDA) developed the 
DART as a method of providing rapid response assistance to 
international disasters, as mandated by the Foreign Assistance Act. A 
DART provides an operational presence on the ground capable of carrying 
out sustained response activities. This includes coordinating 
assessment of the situation, recommendations and advice on U.S. 
Government response options, and funding and management of on-site 
relief activities.
    As of July 9, 2003, there are a total of 27 DART members in the 
Gulf region. Of these 27 DART members, 19 are in Iraq, including 10 in 
Baghdad, 6 in Arbil (northern Iraq), and 3 in Al Hillah (central Iraq). 
In addition, eight DART members are located in Kuwait City. These 
numbers fluctuate as the DART members travel and respond to needs in 
the region.

                      FUNDING FOR MICRO-ENTERPRISE

    Question. The fiscal year 2004 budget request seeks $79 million for 
funding of micro-enterprise efforts globally. $79 million was funded in 
fiscal year 2002 and fiscal year 2003, so there has been no increase in 
funding for a program that produces great results.
    How many countries is USAID involved in micro-enterprise efforts? 
How does USAID determine how long it will fund micro-enterprise in a 
country before focusing efforts on a new country? What countries are in 
the pipeline to receive micro-enterprise assistance?
    Answer. In fiscal years 2002 and 2003, USAID funded micro-
enterprise activities in about 50 countries in the Africa, Latin 
America and Caribbean, Asia and Near East and Europe and Eurasia 
regions. USAID obligations over the last 3 years, from all funding 
accounts, have a generally averaged around $150 million. In fiscal year 
2001, our obligations were at $158 million. In fiscal year 2002, the 
funding level exceeds $170 million. Most of USAID's micro-enterprise 
programs range from 3 to 5 years, depending on the nature of the 
activity.
    Institutional development programs tend to take longer; policy 
reform efforts usually are somewhat shorter. In some countries, there 
have been numerous micro-enterprise projects. Countries such as 
Bolivia, Honduras, Mali, Kenya, Bangladesh, Indonesia, for example, 
have had micro-enterprise projects since the 1980's. In the coming 
year, USAID is planning to undertake micro-enterprise activities in 
some new countries, such as Afghanistan, Yemen and Iraq.

                     UNIVERSITY FUNDING DIRECTIVES

    Question. Over the past three years, this Committee has included 
several Committee directives on funding requests for Universities 
within the Bilateral Economic Assistance Account. To my knowledge these 
directives have not been followed. In fact, this Committee has included 
strongly worded language directing the Committee to adhere to these 
funding initiatives, but still to no avail.
    Why does USAID continue to ignore this Committee's directives? In 
particular, why has USAID not funded the following Louisiana State 
University programs, which have received commendation from this 
Committee--the Emergency Management Program, the Namibia Mariculture 
Program, and the Latin American Commercial Law Program?
    Answer. USAID has not ignored the Committee's directives. Two years 
ago USAID established a Higher Education Community (HEC) Liaison 
position in its Office of Education in the Bureau for Economic Growth, 
Agriculture and Trade. Martin Hewitt now serves as the HEC liaison and 
is the key point of contact for universities seeking information and 
advice on the opportunities and programs within USAID.
    For tracking and management of unsolicited concept papers and 
proposals, the HEC Liaison is supported by a working group within the 
Agency. This working group is composed of representatives from the 
regional and technical bureaus. The working group shares the 
responsibility for either reviewing the proposal in the regional or 
technical office (if the proposal is technical or sector specific with 
no country cited) or for distribution to a USAID Mission (if the 
proposal is explicit regarding a country where the planned activity 
will be conducted). The working group shares the responsibility for 
tracking the status of higher education proposals with the HEC Liaison. 
The group communicates frequently to ensure that the improvements in 
procedures and information flow are achieving their desired results.
    In the House Appropriations Committee Report 107-663 and the Senate 
Appropriations Committee Report 107-219, Congress included the 
requirement that USAID report on the status of 68 university proposals 
listed in the House and Senate reports.
    The following actions have been taken concerning university 
proposals:
  --The HEC Liaison sent e-mails to every higher education institution 
        mentioned in the University Programs section of the Senate and 
        House Reports to direct them toward information about Agency 
        solicited competitive processes and opportunities. (Ten of the 
        universities mentioned submitted applications to the University 
        Partnerships competitive grant program).
  --The HEC Liaison made personal telephone calls to thirty higher 
        education institutions listed in the Senate and House Reports 
        to ascertain the status of their proposal submissions and to 
        provide guidance.
  --The HEC Liaison has been contacted by at least thirty higher 
        education institutions to request information about guidelines 
        for developing concept papers, proposals, and for information 
        about how the review process works (if the proposal aims to 
        work in a particular USAID/Mission, then the proposal is shared 
        with the Mission for review, if not, the proposal is reviewed 
        in a technical or regional bureau). Every call or e-mail from 
        higher education institutions to the HEC Liaison is responded 
        to in an informative and timely way.
  --The HEC Liaison has participated in numerous conferences, meetings, 
        site visits, regarding the USAID-University relationship and 
        the specifics for how Universities can address Agency policies, 
        programs, projects and obtain support for doing so.
    Following is the status of university proposals mentioned in the 
House and Senate Reports (June 23, 2003):



------------------------------------------------------------------------
Total number of universities cited.........................          58
Total number of proposals cited............................          68
Number of proposals received...............................          37
Number not received........................................          31
Of those received:
    Number of proposals approved...........................          17
    Number rejected........................................          12
    Number under review....................................           8
Total proposal funding (millions of dollars)...............          15
------------------------------------------------------------------------

    Summary:
    (1) 54 percent of proposals mentioned in the House and Senate 
Reports have been received.
    (2) 46 percent of proposals received have been funded.
    (3) 32 percent of proposals received have been rejected.
    (4) 22 percent of proposals received are under review.
    The 17 successful proposals were approved because they met the 
review criteria contained in USAID's brochure and website U.S. Higher 
Education Community: Doing Business with USAID. The criteria include 
two, which bear on the proposed activities' consistency with foreign 
policy and development goals. They are: the extent to which the 
proposal supports USAID's mandate and objectives, and the anticipated 
long-term impact of the project and the nature of the on-going 
relationship between institutions.
    The major reasons that the twelve proposals were rejected included:
  --The failure to meet or support USAID's mandate or objectives in the 
        country, region, or sector
  --The duplication of ongoing efforts
  --Budget limitations in targeted bureaus, countries
  --Lack of technical merit
    In each case where proposals were rejected, a letter was sent to 
the applicant informing them of the reasons why the proposal was not 
accepted.
    As regards the three Louisiana State University programs which you 
cite:
    1. The Namibia Mariculture Program. This proposal was rejected 
because the Namibia Mission was at the time scheduled for closing.
    2. The Latin America commercial law program. This proposal has not 
been received. USAID called Louisiana State in January and was informed 
that the University might send a proposal. To date no proposal has been 
received.
    The other Louisiana State University program cited in the Foreign 
Operations Report is: A proposal to provide independent media training 
to local government officials from developing countries. This proposal 
has not been received.

                           HIV/AIDS IN AFRICA

    Question. Within the armies and militias in West and Central Africa 
and particularly in the Democratic Republic of Congo, Angola, and other 
areas of recent and current conflict, HIV/AIDS has a higher prevalence 
within the soldier population than in the general population. This is a 
particular problem with ``child soldiers''. USAID has few programs that 
directly interface with this important sector of African society. How 
can USAID work more effectively to integrate intervention strategies 
with those entities that deal with active and demobilizing military 
groups? Is a policy or legislative change necessary to permit USAID to 
work directly with host country military personnel? Is USAID 
considering working with universities and the West African Health 
Organization (WAHO) to address the HIV/AIDS crisis within the military 
and former military populations in Africa? After all, WAHO is the only 
ECOWAS endorsed organization able to deal with complex regional, 
individual and organizational change. Has USAID contemplated giving 
support to increase the institutional strength of WAHO in order to 
create a coordinated and sustainable long-term solution to the problem?
    Answer. USAID currently supports this newly constituted 
organization through its West Africa regional program. USAID is 
building the capacity of WAHO through technical assistance to develop a 
new agenda for health in West Africa, training in strategic planning 
and program design.
    Question. The United States is committing unprecedented funds, 
along with the United Nations and the Global Fund, to combat HIV/AIDS 
in Africa. That is encouraging news, but we are already seeing a 
shortage of available international public health workers. The 
additions of retro-virals to the existing public health program, which 
require an even higher level of management, create further demands. 
Even where we have cheap effective reliable drugs to deal with the 
disease, as in the case of malaria, the lack of human and physical 
health infrastructure cripples intervention efforts. There needs to be 
a program to create trained American and African intervention 
management specialists of enormous size to manage this problem. What 
plans does USAID have in mind to reinforce and strengthen African 
educational institutions to rapidly respond to this set of challenges?
    Answer. USAID is currently developing a human capacity strategy to 
address the extreme shortage of the trained personnel needed to mount a 
sustained response to the HIV/AIDS pandemic. This plan will include 
expanding the capacity of African educational institutions to provide 
additional training to existing cadres of health workers as well as 
developing pre-service training for new health professionals, and 
manpower planning for national and local governments.
    Question. Given the millions killed during the Congo/Rwanda 
conflict, the many people with HIV/AIDS, and, particularly, the number 
of demobilizing HIV positive ``child soldiers'' in the country, why 
isn't the Democratic Republic of Congo (DRC) on the target list of 
countries for major intervention efforts by the United States? Given 
the leading role of that country from the first days of the pandemic 
and the number of trained, senior research and public health 
specialists working in Kinshasa, which I understand is more specialists 
than the rest of Africa, this seems to be a contradiction. Does USAID 
have any plans for responding to the needs of the Democratic Republic 
of Congo, major strategic country in Central Africa?
    Answer. USAID is committed to addressing the HIV/AIDS pandemic in 
the Democratic Republic of the Congo (DRC). This commitment is 
reflected in the HIV/AIDS fiscal year 2004 control level of $5,000,000, 
which constitutes a 25 percent increase over the fiscal year 2003 HIV/
AIDS funding level of $4,000,000. USAID's response to the HIV/AIDS 
epidemic in DRC takes into account the fact that HIV transmission is 
fueled by war-related factors.

                         CONCLUSION OF HEARINGS

    Senator McConnell. Thank you all very much for being here. 
That concludes our hearings.
    [Whereupon, at 3:24 p.m., Thursday, June 5, the hearings 
were concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]
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