[Senate Hearing 109-]
[From the U.S. Government Publishing Office]



 
  STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS APPROPRIATIONS FOR 
                            FISCAL YEAR 2006

                              ----------                              


                         THURSDAY, MAY 26, 2005

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2:40 p.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Mitch McConnell (chairman) 
presiding.
    Present: Senators McConnell, Bennett, DeWine, Brownback, 
Leahy, Harkin, and Landrieu.

           UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT

STATEMENT OF ANDREW S. NATSIOS, ADMINISTRATOR

             OPENING STATEMENT OF SENATOR MITCH MC CONNELL

    Senator McConnell. The hearing will come to order.
    I am going to put my opening statement in the record. I do 
not think all of you should be penalized for my tardiness. 
Also, Senator Leahy is not here yet.
    [The statement follows:]

             Prepared Statement of Senator Mitch McConnell

    Welcome, Administrator Natsios. Today's hearing is on the 
President's fiscal year 2006 request for appropriations for the United 
States Agency for International Development (USAID). These programs and 
activities total in excess of $4 billion.
    As I said during the Secretary of State's hearing earlier this 
month, the ``soft'' side of our foreign aid is a critical component in 
the war on terrorism. Child Survival and Health Programs and 
Development Assistance, if targeted effectively, can frustrate the 
ability of extremists to further their hateful ideology and to recruit 
additional foot soldiers from underserved or underrepresented 
populations. Moreover, this assistance clearly demonstrates the 
generosity and benevolence of the American people.
    The ultimate success of our efforts, however, is largely determined 
by the political will and actions of foreign governments to address the 
needs of their citizens in a transparent and accountable manner. Simply 
put, the lack of freedom and the rule of law in developing countries 
blunts the effectiveness of our foreign aid. From Haiti to Cambodia, 
this maxim unfortunately has been proven true time and time again.
    Let me take a moment to commend President Bush for his leadership, 
and personal commitment, to the cause of freedom. The President's 
support for democracy is nothing short of inspirational to the 
courageous individuals who struggle for liberty, human rights and 
justice abroad--and to those of us who have long championed their 
worthy causes from our shores.
    The challenge for USAID--and the State Department--will be to keep 
pace with the President, and to this end, the Agency should consider 
highlighting the importance of democracy promotion by making this its 
own operational goal. USAID will need to conduct a stem-to-stern review 
of the way it supports democracy programs, with a greater emphasis on 
grants to proven democracy-building organizations, closer coordination 
with the State Department and the National Endowment for Democracy, and 
better appreciation for the use of technology--such as that utilized by 
Voice for Humanity in Iraq and Afghanistan. USAID should be less 
concerned with the amount it spends on democracy promotion and more 
focused on what it spends its funding on.
    In closing, it would be useful for the Subcommittee to hear your 
views, Mr. Natsios, on the significant increase in the Transition 
Initiatives account and the inclusion of emergency food assistance in 
the International Disaster and Famine Assistance account in the fiscal 
year 2006 budget request.
    Senator Leahy will make an opening statement, followed by Mr. 
Natsios, and then we will proceed to seven-minute rounds of questions 
and answers. We will keep the record open for additional questions.

    Senator McConnell. Administrator Natsios, what I would like 
to do is begin with you. Feel free to put your full statement 
in the record if you would like and then tell us what you have 
on your mind. We will then ask questions.

              SUMMMARY STATEMENT OF HON. ANDREW S. NATSIOS

    Mr. Natsios. Thank you very much, Senator. I have a longer 
statement for the record, and a very abbreviated statement for 
my public testimony.
    Mr. Chairman and members of the subcommittee, it is an 
honor for me to be here today to discuss the President's 2006 
budget for the United States Agency for International 
Development.
    Before beginning our presentation, I want to thank the 
chairman, the ranking member and their staff, and the committee 
members for the support you have shown to us in USAID to play 
the critical role that we do in our national security.
    We particularly appreciate your tremendous work on the 
supplemental budget to meet the President's request levels for 
Afghanistan, Sudan, and the tsunami-affected region. We are 
grateful that you see our work in these states as important as 
we do in winning the war on terror.
    I will, as I said, submit my full testimony for the record 
which lays out the overall justification for our budget in the 
2006 request.
    For these few minutes, I would like to address three issues 
that your staff has raised with us and that we find to be 
essential to the work of USAID.
    First is our work in democracy, second our request to shift 
funds from the Development Assistance account to the Transition 
Initiative account, and finally the partnership between the MCC 
and USAID.
    First our work in democracy. President Bush and Secretary 
Rice have emphasized the centrality of democracy, freedom, and 
good governance both to our national security and to 
development in general.
    Your staff has also emphasized the central role of 
democracy and international security. We in USAID--both our 
political appointees and our career officers--very, very 
strongly share your perspective on this important aspect of 
development policy.
    In fact, the principal reason that development fails in 
developing countries is because of the failure of governance. A 
failure of democracy or a failure of the system to allow people 
to participate in the choice of their own leaders is the 
principal reason why there is political instability that 
sometimes wrecks years of development by causing civil war or 
insurgencies.
    Countries that are accelerating their development are those 
which embrace democratic governance and in good governance 
control corruption and through that, their country progresses.
    We in USAID are dedicated to ensuring that our resources 
carry through the vision of the national security strategy of 
the President, the Secretary of State, and ultimately the 
American people by supporting the development of prosperous 
democratic partners for the United States around the world.
    We have played a central role in that. There are 400 USAID 
officers who are democracy and governance officers, 200 of 
which work in the field. And our missions, we have created a 
strike force in the Agency, in the bureau in which the 
Democracy Office is located, to act in a very rapid way when we 
believe that democracy has a chance of moving forward.
    In Iraq, USAID played a key role in supporting the Iraqi 
election process as well as helping to build democratic 
institutions in a country that was ruled with an iron fist for 
generations.
    We helped mobilize thousands of Iraqi election staff, many 
hundred Iraqi civil society organizations, and we helped Iraq 
and international organizations to field domestic election 
observers, deliver voter education, implement conflict 
mitigation programs.
    With USAID support, over 220 core election monitors were 
trained and with additional European union support, we trained 
as many as 12,000 domestic monitors.
    One indicator of election success was the higher than 
anticipated turnout in the election, but most importantly the 
275 member Iraqi National Assembly with 25 percent female 
representation was elected to govern the country, draft a new 
constitution and provide a national referendum on the 
constitution.
    Subsequently a constitutional government was put in place. 
Funding for this will be put in place later this year. Funding 
for this total effort was $114.7 million.
    In Afghanistan, we helped Afghanistan move toward the 
promise of democracy, stability, and peace, the staging of the 
Loya Jerga. There are two of them, one that elected Karzai as 
the interim president and then for the interim constitution, 
only months after the fall of the Taliban regime, owing much to 
the logistical support that we provided through USAID.
    We provided $151.2 million including logistical support for 
the Afghan transitional authority to convene the delegates 
responsible for drafting the constitution and then, of course, 
as I mentioned earlier, in the October 2004 presidential 
elections that elected Hamid Karzai as the President.
    We are also deeply involved right now in preparing for the 
parliamentary elections which are scheduled currently for 
September 2005.
    Equally dramatic democratic transitions took place in 2003 
in Georgia and 2004 in Ukraine. In the decade that preceded the 
people to power movements in these countries, we supported 
projects to build democratic institutions and civil society, 
establish the rule of law, and create a democratic legislative 
base and develop an independent press.
    In the Ukraine, for example, the USG provided $18.3 million 
to support the electoral process in the last elections. 
Partners provided consultations to the drafters of the new 
election legislation.
    More than 5 million pieces of printed voter education 
materials were distributed to over 200 communities about the 
election process and public service announcements were 
broadcast on four TV channels and 100 radio stations about the 
elections.
    There is a proposal in the 2006 budget to transfer about 
$275 million in money between the Development Assistance 
account and the Transition Initiative account. To meet the 
challenges of the post 9/11 world, we are building on our 
experience of democracy and governance and we are also adapting 
its tools to create effective programs in countries that are in 
transitions.
    Programs in countries facing fragile conditions, whether 
they are economic or political, differ from traditional aid 
programs. These programs will have high impact, visible 
results, and may have a shorter time horizon than traditional 
programs.
    For example, a cash for work program, a rapid job creation 
program may be more appropriate in lieu of a long-term job 
creation program in a fragile state to get people, particularly 
young men, off the streets, working right away because they 
otherwise can be drawn into militias that destabilize a new 
democracy.
    Another example may be using funds to restore electricity 
in a city to prevent chaos. These examples may require 
reprogramming of funds that require a 15-day notification 
process under usual authorities, but do not under the 
Transition Initiative account. By the time notification passes, 
the Agency risks missing its window of opportunity in some 
crises.
    The TI account has also been traditionally free from 
earmarks. The Agency understands the political process in a 
city into which foreign aid assistance operates and has 
attempted to adjust its expectations over the years 
accordingly. Yet, we have learned that in the case of dealing 
with fragile states, the flexibility to move funds quickly is 
imperative to helping countries move along.
    We put four countries as a pilot into the TI account not 
for the Office of Transition. It would be the USAID missions in 
the field that would spend the money, but they would have more 
flexibility in the spending of this money. These four countries 
are Haiti, Sudan, Ethiopia, and Afghanistan.
    They are not the four fragile states in the world. There 
are several dozen fragile states. In fact, the British 
Government aid agency estimates that--we have a common 
definition that are used among donor governments--there are 
about 50 to 60 fragile states in the world.
    We are doing this on a pilot basis to see how it would 
function in four countries that are critically important to the 
United States for a variety of different reasons.
    Finally, I wanted to comment on our relationship with the 
Millennium Challenge Corporation. I sit on the board thanks to 
the Congress. I do appreciate the Congress putting me on the 
Board of Directors. And we are working with them on a daily 
basis on the compact countries.
    But the board voted and the Congress, I believe, put in the 
legislation that USAID would have authority over threshold 
programs, which are countries that did not quite make the cut 
because they failed on a couple of indicators and we wanted to 
accelerate their movement into MCC status.
    So there is, I think, a provision in the statute that 
allows up to 10 percent of the appropriation each year to be 
used for threshold countries.
    We are working with the MCC very closely on these 
proposals. We have a special unit in the central office that 
coordinates this with MCC Corporation.
    Our staff has visited in partnership with the MCC all of 
the threshold countries. We evaluated the concept papers and we 
have done an initial review.
    The MCC Board of Directors will approve the final budgets 
and they have the authority to approve the plans for each 
country's threshold program. The MCC then funds them and we 
will manage the money through the USAID mission processes in 
the field missions.
    Almost all of the threshold countries, I think with one 
exception, have USAID missions in them to begin with. We do not 
expect that the addition of MCC funding for threshold 
activities will result in a loss or reduction of standard USAID 
funding. In most cases, threshold funded activities will be 
complementary to existing USAID programs.
    We believe that the complementarity between USAID and 
threshold programs will accelerate the impact of reform and 
investment which will help countries improve their prospects of 
eventually qualifying for MCC.
    The 2006 budget request for USAID supports our foreign 
policy goals of the U.S. Government and our national security 
interests.

                           PREPARED STATEMENT

    I would like to acknowledge once again the support of this 
committee in helping USAID fulfill the enormous 
responsibilities it faces today in supporting its efforts to 
promote peace throughout the world by spreading democracy, 
economic opportunity, and prosperity.
    I welcome your questions.
    [The statement follows:]

              Prepared Statement of Hon. Andrew S. Natsios

    Chairman McConnell, Members of the subcommittee, It is an honor to 
be here today to discuss the President's budget for the U.S. Agency for 
International Development for fiscal year 2006. Before beginning our 
presentation, I want to thank the Chairman and the other members of the 
committee and their staff for the support you have shown for our 
programs that allow USAID to play the critical role it does in our 
national security.

                  A NEW ERA OF DEVELOPMENT ASSISTANCE

    The President's National Security Strategy (2002) was written at a 
year's distance from 9/11 and is the first comprehensive response to 
the events of that day. Our challenges in the new era require new ways 
of thinking and operating, the document asserts. To meet them, the 
whole spectrum of our foreign policy establishment had to be engaged 
and many of its programs redesigned. This included ``defense'', 
``diplomacy,'' and ``development,'' the success of whose mission is now 
viewed as a matter of great urgency and importance. Indeed, 
``development'' today has received a level of commitment not seen since 
the Kennedy or Truman Administration.
    Part of the intention of the National Security Strategy was to 
disabuse anyone of the opinion that ``development'' was something 
peripheral to our own nation's well being. The promotion of freedom and 
development around the world is, of course, an expression of the 
highest ideals of this country. But it is more than that. post-9/11, 
the success of the cause of freedom and development is absolutely vital 
to making this a safer and a better world. As the President stated in 
his Second Inaugural, the present moment sees our highest ideals and 
our national security concerns conjoined. The task before us is great, 
and we are energized both by harsh necessity and our noblest 
aspirations.
    In that speech the President also stated, ``All who live in tyranny 
and hopelessness can know, the United States will not ignore your 
oppression, or excuse your oppressors. When you stand for liberty, we 
will stand with you. Democratic reformers facing repression, prison, or 
exile can know, America sees you for who you are: the future leaders of 
your free country.'' Supporting democratic transitions, and building 
democracy worldwide is one of the United States' most important goals, 
and one which USAID has helped support.
    USAID's work in the democracy field has contributed substantively 
to the transitions to democratic governance throughout South and 
Central America in the 1980s and 1990s and in Eastern Europe and the 
Baltic states. As an agency, USAID has played central roles to the 
democratic transitions as well in countries as diverse as Mongolia, 
Indonesia, South Africa, Georgia, and Mozambique. Wherever they are 
USAID democracy programs are distinctive for their analytic grounding, 
their comprehensiveness, their multi-year planning cycle, and their 
impact. USAID programs not only promote democracy, but they build 
democracy for the long-term.
    To help meet the challenges of the post-9/11 world, USAID is 
building on its experience in democracy and good governance. It is 
adapting its tools and knowledge to forge effective assistance programs 
in fragile states. It is looking carefully at the ``hard nuts''--the 
uthoritarian and semi-authoritarian states--while not forgetting that 
democratic governance is still at risk in many of our more stable new 
democracies. USAID's democracy program will be implemented by a 
democracy corps of over 400 who manage hundreds of millions of dollars 
in democracy programs around the world.
    When I came back to USAID as Administrator, I was called to lead an 
Agency that came into being a half century earlier in a very different 
world. I was assuming office at a moment when the nation was trying to 
redefine its foreign policy in light of the realities of globalization 
and the end of the Cold War. The Agency was subjected to doubts about 
its relevancy in the new era. It was dislocated by cuts in both budget 
and manpower. All of this took its toll on morale within the Agency.
    Early on, I called for an Agency-wide assessment to sort out our 
core missions and to better align them with the foreign policy needs of 
the new era. This exercise was undertaken to refocus the Agency, in 
order to better define and prioritize its tasks. The result was the 
Foreign Aid in the National Interest (2002) Report and the Agency's 
White Paper (2004), which identified five core missions of the Agency.
    It has been one of my chief priorities as Administrator at USAID to 
strengthen the Agency's response to the key objectives the White Paper 
identified. These tasks have been made more urgent by the events of 
that day and more central to this nation's foreign policy. The fiscal 
year 2006 budget reflects this commitment.
    In this budget we propose tying Development Assistance (DA) to 
countries' own development efforts that demonstrate that they are 
striving for the conditions that the President set forth to become 
eligible for assistance through the Millennium Challenge Account. A 
performance-based approach will be adopted to allocate a share of the 
DA account. This will compare need and performance across regions, 
based on standard criteria.
    To meet the unprecedented challenges of the post-9/11 era, USAID is 
aggressively pursuing management reform through a number of 
initiatives. By strengthening our workforce, improving program 
accountability, and increasing the security of our operatives, we are 
building the foundation of sound management and organizational 
excellence. We are also reaching out to new, non-traditional partners, 
often using the Global Development Alliance model of public-private 
partnerships.
    To make progress on these goals, USAID is requesting $4.1 billion 
for its fiscal year 2006 programs. Additionally, we anticipate working 
with the Departments of State and Agriculture on joint programs that 
total $5 billion in ESF, FSA, SEED, ACI and Public Law 480 accounts. We 
will also manage a portion of the nearly $2 billion requested for the 
Global HIV/AIDS Initiative by the Department of State's Global AIDS 
Coordinator and a portion of the $3 billion for the Millennium 
Challenge Corporation. USAID is requesting $802.4 million in Operating 
Expenses (OE), the Capital Investment Fund, the Development Credit 
administrative funds and the Office of the Inspector General to fund 
the administrative costs of managing the $8.3 billion in program funds.

                 MAJOR INITIATIVES FOR FISCAL YEAR 2006

    This year's request introduces two strategic reforms to increase 
the effectiveness of bilateral foreign aid and advance the security 
interests of the country. The first is a shift of $300 million from the 
Public Law 480, Title II food account to the International Disaster and 
Famine Assistance (IFDA) account for purchase of food locally. The 
second is a shift of $275 million from the Development Assistance 
account to the Transition Initiatives account. I would like to take 
this opportunity to explain why these reforms make better use of 
taxpayer dollars than our current approach.

               FUNDS TRANSFER FOR LOCAL PURCHASE OF FOOD

    As food emergencies have increased in complexity and magnitude, 
USAID needs to purchase some food locally in order to save lives. Given 
the widely differing conditions in the countries where we provide food 
aid, USAID needs more flexibility and access to cash in order to 
respond quickly and appropriately. When we need to save lives quickly, 
there is not always enough time to ship commodities from the United 
States. Therefore, purchasing food locally will enable us to make a 
significant impact when food is urgently needed. Under such conditions, 
food would be purchased in the country facing the emergency or in a 
nearby developing country. Funds for local purchases will not be used 
to procure commodities from developed nations.
    For fiscal year 2006, $300 million that was previously requested 
under Public Law 480 Title II is being requested under IDFA for 
emergency food aid needs. Title II funds may only be used to purchase 
U.S. commodities, whereas IDFA funds can purchase local commodities. 
Food is sometimes available close to the area of need and could fill a 
critical gap before commodities arrive from the United States up to 
several months later. With potentially lower purchase and 
transportation costs, the United States could afford to buy more food 
and reach more of the vulnerable population. In some cases, carefully 
targeted local purchases could also help stabilize local food prices, 
strengthen markets and local agrarian economies, providing a double 
benefit: improved humanitarian assistance and greater development 
impact.
    There are approximately 800 million people in the developing world 
who go to bed hungry each night. Of these, 25,000 die from hunger-
related causes each day. By using $300 million in IDFA versus Title II, 
USAID estimates that approximately 50,000 lives could be saved in acute 
emergencies by supplying locally produced food more quickly and at 
lower delivery cost. This number is based on calculations of the 
potential number of beneficiaries that could be reached using $300 
million in cash for local purchase vs. U.S. commodity purchase, while 
keeping the bulk of the Title II program intact at $885 million.
    The benefits of the Administration's proposal for added flexibility 
in meeting emergency food needs far outweigh the potential costs, and 
we strongly urge congressional support. The injection of cash into a 
local economy can also help address malnutrition in a more sustainable 
way by stimulating local agricultural production and the rural economy. 
Local purchases could also help generate local trading and marketing 
links including financing riangular, regional transactions--buying in a 
surplus producing country to send to the food emergency in the near-by 
country. The ability to purchase food in local or regional markets 
would give us another important option for meeting critical needs.
    funds transfer: development assistance to transition initiatives
    We have requested a shift from the Development Assistance (DA) 
account to the Transition Initiatives (TI) account for fiscal year 
2006. The TI account differs from the DA account in the following ways, 
essential to providing a more rapid response to conditions on the 
ground: the option to use notwithstanding authority, funding that is 
no-year, and a shorter Congressional reporting requirement, i.e., a 
five day report rather than a 15 day notification. Countries that are 
confronting crisis or are in transition from crisis to transformational 
development require rapid response to their unique situation to avert 
further problems. We are requesting $275 million for programs in these 
``fragile states.''
    Our programs on the ground in fragile states look different than 
traditional aid programs. The programs focus on activities that have 
high-impact, visible results and may have a shorter time horizon than 
traditional development assistance programs. For example, we might use 
a cash-for-work, rapid job creation program instead of a long-term job 
creation program in fragile states to get people off the streets and 
working right away. Or we may need to invest funds immediately into 
restoring electricity in a city to prevent chaos. These examples may 
require a re-programming of funds that would require a 15-day 
notification process under DA account authorities. By the time the 
notification time passes, the Agency risks missing its window of 
opportunity to prevent the country from falling deeper into crisis.
    The TI account has also been traditionally free from Congressional 
earmarks. I bring this up in the spirit of transparency. The Agency 
understands the political reality under which foreign assistance 
operates and has attempted to adjust its expectations over the years 
accordingly. In the case of dealing with fragile states, we feel that 
the flexibility to provide country programs as the situation on the 
ground requires is imperative to laying the foundation for long-term 
recovery and helping the country move from crisis towards economic and 
political stability. We have learned since 9/11 that weak states tend 
to be the vector for destabilizing forces that can have traumatic 
global ramifications. We hope that by freeing funding for fragile 
states from Congressional earmarks and allowing that funding to be 
adjusted more rapidly through changes in programs on the ground, USAID 
will be better able to do its part in applying its resources to the 
global war on terror.
    Both the Public Law 480 to IDFA and DA to TI fund shifts represent 
a step toward the Agency's vision of more clearly aligning its 
operational goals, resources and results with the development context 
in which it operates. With the help of Congress, we aim to make better 
use of taxpayer dollars through innovative use of the authorities we 
have in our present account structures. We will evaluate the 
effectiveness of this approach in the coming year and look forward to 
sharing the results of these changes with you.

               PROGRAM PRIORITIES: CORE MISSIONS OF USAID

    The five core missions of the Agency as outlined in the White Paper 
and correlative priorities within these programming initiatives follow:
  --Promote Transformational Development through far-reaching, 
        fundamental changes conducive to democratic governance and 
        economic growth. The Agency also seeks to build human capacity 
        by supporting essential human services in the fields of health 
        and education. Such endeavors are key to helping countries 
        sustain economic and social progress without continued 
        dependence on foreign aid.
    USAID's priorities for the use of Development Assistance include 
promoting human rights and democracy as well as stimulating the 
economic growth that can move countries into the global trading system. 
We have allocated assistance on a priority basis to needy countries 
that are manifesting strong commitment to reform and making good 
development progress.
    The fiscal year 2006 request reflects a substantial increase of 
support for Africa when compared to a fiscal year 2001 baseline. 
Particular emphasis is placed on expanding access to quality basic 
education, growth in agricultural productivity, and increasing trade 
capacity. USAID will help the countries in the U.S.-Central American 
Free Trade Agreement (CAFTA) with the financial and economic reforms 
that will allow them to take full advantage of trade liberalization. 
Funding for South Asia reflects the end of the relief phase for tsunami 
victims and the move to the recovery and reconstruction of this region. 
Worldwide, we will continue to work closely with the Millennium 
Challenge Corporation on the MCA ``Threshold Program''--an MCA program 
currently administered by USAID that supports countries the MCC has 
determined to be on the threshold of MCA eligibility.
  --Strengthen fragile states to improve security, enhance stability, 
        and advance reform and to build institutional capacity and 
        modernize infrastructure.
    USAID is vigorously pursuing policies that aim at peace and 
stability in Africa--with a particular focus on the Sudan. We will 
continue the effort begun in 2004 as a Group of Eight (G8) initiative 
to end famine and increase agricultural productivity and rural 
development in Ethiopia, the most populous country in the region, and 
one of the most famine-prone countries in the world. In Latin America, 
USAID is laying the foundations for stability in Haiti through various 
economic, social, environmental, and political initiatives. In the Near 
East, USAID will continue its support of Afghanistan and its 
encouraging progress toward democracy and economic growth after 
suffering from generations of war, occupation, and political 
fanaticism. Some of our efforts are listed in the box below.

              TEN MAJOR ACHIEVEMENTS--USAID IN AFGHANISTAN

    1. Coverage of health services exceeds some 4.8 million people. In 
USAID-sponsored provinces, 63 percent of the population has access to 
health services. Over 2,000 Community Health Workers have been trained 
and are active in health facilities. 4.26 million children have been 
vaccinated against preventable childhood illnesses.
    2. Civic education, political party training and observer support 
provided in run-up to recent elections. 1.3 million Afghans were 
reached through voter education activities; registered 41 percent of 
all women; monitored over 1,673 polling centers--a third of all 
centers--on Election Day; supported 10,000 observers.
    3. $101.7 million was collected through Customs Operations in 2004.
    4. Over 320 kilometers of canals de-silted and 233 irrigation 
structures repaired, improving irrigation for 310,000 hectares of 
farmland.
    5. Primary education provided to nearly 170,000 over-aged students, 
over half of them girls. Some 6,778 teachers have been trained to lead 
accelerated learning classes that allow students to complete two grades 
per year.
    6. To date, 42 million textbooks have been provided. 27 million of 
the textbooks are in both Dari and Pashto. The textbooks are for Grades 
1 through 12 in all secular subjects.
    7. Radio-based teacher training (RTT) reaches 95 percent of the 
country in daily broadcasts in Dari and Pashto, reaching approximately 
54,000 teachers. Of these, 9,582 teachers--35 percent women--have 
enrolled in the RTT course.
    8. National Women's Dormitory in Kabul rehabilitated. Enables over 
1,000 girls from rural areas to attend the medical school, the Afghan 
Education University, the Polytechnic Institute and Kabul University.
    9. Thirty-two independent FM radio stations, including three Arman 
FM commercial stations, have been established.
    10. The USAID-sponsored sections of the Kabul-Kandahar Highway are 
complete and operational, with 389 km of roadway paved, 7 bridges 
totally reconstructed and 39 bridges repaired.
  --Support geo-political interests through development work in 
        countries of high strategic importance.
    USAID's implementation of Economic Support Fund (ESF) resources for 
U.S. foreign policy goals places special emphasis on Iraq, Afghanistan, 
Pakistan and Sudan, as well as other front-line states in the War on 
Terror in the Asia, Near East and Africa regions. The Agency's Iraq 
programs will be funded from ESF and other appropriations. USAID will 
also target resources to the Muslim World Initiative to support 
countries' own efforts at social transformation. Some of our 
achievements in Iraq are listed in the box below.

                 TEN MAJOR ACHIEVEMENTS--USAID IN IRAQ

    1. Prevented humanitarian emergency--delivered 575,000 metric tons 
of wheat, reforming public distribution system.
    2. Created local and city governments in more than 600 communities.
    3. Restarted schools--rehabilitated 2,500 schools; provided 
textbooks to 8.7 million students, supplies to 3.3 million; trained 
33,000 teachers.
    4. Vaccinated 3 million children under 5 and over 700,000 pregnant 
mothers. Rehabilitated more than 60 primary health care clinics.
    5. Providing safe water--expanding Baghdad water purification plant 
and rehabilitating 27 water and sewage plants.
    6. Re-opened deep water port--dredged Umm Qasr, repaired equipment. 
Today it handles 140,000 tons of cargo a month.
    7. Restoring electric service--repaired eight major power plants 
with CPA, adding 2,100 megawatts by summer 2004.
    8. Helped CPA launch new currency and re-establish Central Bank.
    9. Reviving the Marshlands--reflooding revives ancient way of life. 
Established date palm nurseries and crop demonstrations, restocking 
native fishes (4-5 million fingerlings) and developed strategic plan of 
integrated marshland management.
    10. Establishing Good Governance--budgeting, accounting systems add 
transparency, accountability to ministries.
  --Provide humanitarian relief to meet immediate human needs in 
        countries afflicted by natural disaster, violent conflict, 
        political crisis, or persistent dire poverty.
    As demonstrated by response to the recent tsunami disaster, 
Americans respond to humanitarian emergencies immediately, 
spontaneously, and generously. We do not calculate what are deeply felt 
moral imperatives. These commitments are long-standing. They have not 
changed in the course of American history nor will they be shortchanged 
today. What has changed is the historic context in which we act. The 
Administration's innovative proposal to use a portion of food aid funds 
to purchase food locally, outlined previously, provides the flexibility 
that will help our food programs save more lives.
  --Address global issues and special concerns where progress depends 
        on collective effort and cooperation among countries. These 
        include combating HIV/AIDS and other infectious diseases, 
        forging international trade agreements, and combating criminal 
        activities such as money laundering and trafficking in persons 
        and narcotics.
    The Agency will also pursue its on-going commitments such as 
education initiatives in Africa and Latin America, the Trade for 
African Development and Enterprise initiative, Global Climate Change, 
Illegal Logging, the Initiative to End Hunger in Africa, and Water for 
the Poor. These initiatives support mainstream USAID goals and work in 
complementary ways with its programming in states undergoing 
transformational development, as well as our strategies in fragile and 
strategic states. These are implemented in a variety of ways, including 
training and technical assistance, contributions to global funds, 
bilateral assistance, policy analysis, and direct delivery of services. 
The initiatives are listed in the box below.

                        PRESIDENTIAL INITIATIVES

    African Education Initiative
    Anti-Trafficking in Persons
    Centers for Excellence in Teacher Trianing
    Digital Freedom Initiative
    Emergency Plan for AIDS Relief
    Global Climate Change Initiative
    Initiative Against Illegal Logging
    Volunteers for Prosperity

                       ADMINISTRATION INITIATIVES

    Broader Middle East and North Africa Initiative
    Initiative to End Hunger in Africa
    Middle East Partnership Initiative
    Trade Capacity Building
    Trade for African Development and Enterprise
    Water for the Poor Initiatives
    Combating HIV/AIDS.--The HIV/AIDS pandemic is more than a health 
emergency. It is a social and economic crisis that is threatening to 
erase decades of development progress. The pandemic has tended to hit 
in the most productive age groups and in developing counties that are 
least able to respond. Under the leadership of the State Department's 
Global AIDS Coordinator, USAID will continue working to prevent HIV 
transmission through a balanced ``ABC'' approach to behavior change 
that stresses Abstinence, Be faithful, and the use of Condoms. The 
President's Emergency Plan has recognized that to implement an 
effective ``ABC'' prevention strategy, our approach must be tailored to 
the culture and circumstances of the place we are working. In addition 
to prevention, USAID will expand access to anti-retroviral treatment, 
reduce mother-to-child transmission, increase the number of individuals 
reached by community and home-based care, and providing essential 
services to children impacted by HIV/AIDS.

                   MANAGEMENT REFORMS AND INITIATIVES

    To meet the complex development challenges in the age of terrorism, 
USAID needs modern business systems; organizational discipline; and the 
right number of qualified, well-trained people to manage its programs. 
It must also draw upon the talents of a whole range of partners, both 
traditional and non-traditional.
    USAID's fiscal year 2006 management priorities are to strengthen 
and right-size the workforce, improve program accountability, and 
increase security.
    Staffing.--USAID's capabilities have been weakened by a direct-hire 
workforce that was drastically downsized during the 1990s and a large 
workforce contingent reaching retirement age. The Agency needs to 
increase flexibility and develop a surge capacity to respond to 
critical new demands if existent programs elsewhere are not to be 
adversely affected. To address the critical human resources needs, 
USAID has made the Development Readiness Initiative (DRI), which builds 
on the State Department's Diplomatic Readiness Initiative, a piority. 
This is the third year of DRI implementation, the goal of which is to 
strengthen the USAID workforce and rebuild the Agency's diplomatic, 
managerial, and development efforts. The fiscal year 2006 funding 
request will help USAID meet OPM's mandate to get the ``right people in 
the right jobs with the right skills at the right time'' by increasing 
its direct-hire workforce.
    In addition to increasing overall numbers, DRI will strengthen the 
Agency's capacity to respond to crises and emerging priorities, cover 
staffing gaps, fill critical vacancies, and provide appropriate 
training. DRI will maintain the Agency's quality and flexibility of 
human resources and ensure that staff maximizes the professional skills 
needed to grow with job requirements. Our commitment to DRI will make 
the Agency more agile and better able to respond to changing foreign 
policy concerns.
    To supplement the Agency's DRI, the fiscal year 2005 Foreign 
Operations legislation provided USAID with a Non-Career Foreign Service 
Officer hiring authority. This authority allows USAID to use program 
funds to hire up to 175 individuals, with a requirement to 
proportionately decrease non-USDH staff. With this authority, the 
Agency will increase its USDH workforce by up to 350 by fiscal year 
2006 while realizing savings to its program accounts as a result of a 
decrease in the overhead costs it pays contractors and USG agencies for 
the services of USAID non-direct hire employees.
    USAID is currently undertaking a detailed workforce analysis that 
will identify the critical skill gaps that the Agency must address. 
USAID will use both the DRI and the Non-Career Foreign Service Officer 
authority to address these critical gaps, and to begin to homogenize 
its workforce by reducing the large number of less efficient and 
effective hiring mechanisms it currently uses.
    DCHA Bureau Restructuring.--To better integrate work on crisis, 
transition, and recovery, the Bureau for Democracy, Conflict and 
Humanitarian Assistance (DCHA) is undergoing reorganization and 
restructuring. The DCHA bureau will represent the Agency and assume 
responsibility for interfacing with other USG and Agencies--
particularly the Departments of State and Defense. It will represent 
the Agency in its dealings with the new State Department Coordinator 
for Reconstruction and Stabilization (S/CRS), which will lead the USG 
response to national security emergencies and crises and will work 
closely with relevant USAID bureaus to more effectively lead the 
Agency's response to such events. USAID is also taking steps to develop 
a more robust crisis response capability. This includes recruiting, 
training and deploying a new cadre of Crisis, Stabilization and 
Governance Officers.
    Partnerships.--USAID is actively engaged in identifying and forging 
agreements with non-traditional partners, including faith-based 
organizations. We are proud of our initiatives in this regard.
    The Global Development Alliance (GDA) is the centerpiece of our 
public-private alliances which brings significant new resources, ideas, 
technologies, and partners together to address development problems in 
the countries where we are represented. Through fiscal year 2004, USAID 
funded over 290 public-private alliances that used $1 billion in USAID 
resources to leverage over $3 billion in alliance partner 
contributions.
    A new obligating instrument--the collaborative agreement--was 
created by USAID and became operational in fiscal year 2005. This 
provides an alternative to traditional grants and contracts for our 
non-traditional partners. In support of the U.S. global health and 
prosperity agenda, USAID has recruited highly skilled American 
professionals to international voluntary service from nearly 200 U.S. 
non-profit organizations and companies. Three-quarters of these 
entities are new to USAID. Of these, 30 are counted among the GDA 
figures noted above. About 20 of the entities are faith-based 
organizations.
    Branding.--The USAID ``branding'' campaign is designed to ensure 
that the American people are recognized for the billions of dollars 
spent on foreign assistance. A new standard ``identity'' clearly 
communicates that our aid is from the American people, which will be 
translated in each country into local languages. The ``brand'' will be 
used consistently on everything from publications to project plaques, 
food bags to folders, business cards to banners.
    Business Transformation.--To address significant management 
challenges and improve our accountability to the American taxpayers, 
the Agency will continue to modernize its business systems and support 
joint State-USAID goals for information technology management. Joint 
procurement and financial management systems will serve both 
organizations' needs and improve program accountability as will our 
efforts to better integrate budgeting and performance information.
 ten major achievements--business transformation fiscal year 2001-2004
    1. Received two consecutive annual clean audit opinions on Agency 
financial statements that demonstrate transparent and accountable 
financial practices.
    2. Implemented an annual Agency-wide survey to assess quality of 
management services and identify opportunities for improvement, 
achieving over 25 percent increase in employee satisfaction over fours 
years.
    3. Launched comprehensive Human Capital Strategy and Development 
Readiness Initiative to identify and close critical skill gaps, 
revitalize the workforce and enhance Agency performance.
    4. Deploying a new financial management system and new procurement 
software overseas to enhance decision-making and enable fast and 
accountable transactions.
    5. Allocated additional funds to countries with the most need and 
the highest commitment through strategic budgeting. Re-allocated $30 
million to higher performing, higher need programs after an internal 
country and program performance assessment.
    6. Enhancing knowledge management systems and methods to capture 
and share development expertise and new ideas. There are 130,000 
documents in our institutional memory bank.
    7. Expanded USAID employee training tools enabling Agency employees 
to complete nearly 2,000 Web-based courses to enhance job performance. 
Trained nearly 1,000 employees on Executive and Senior Leadership to 
enhance career development opportunities.
    8. Better aligning staff with foreign policy priorities and program 
spending levels.
    9. Reduced the average hiring cycle time from closure of job 
announcement to job offer below the OPM standard of 45 days. In 
addition, the process is more predictable and systematic.
    10. Published a regulation to allow faith-based organizations to 
compete on an equal footing with other organizations for USAID funds.
    Security.--USAID continues its commitment to protect USAID 
employees and facilities against global terrorism and the national 
security information we process against espionage. The Agency will 
increase physical security measures, such as building upgrades, 
emergency communications systems, and armored vehicles. Personnel 
security, such as background investigations and security clearances, 
will be upgraded as will information security.

                               CONCLUSION

    The fiscal year 2006 budget request for the new USAID supports U.S. 
foreign policy goals and national security interests. The request 
responds to the President's priorities, including support for the 
Global War on Terrorism, and helping Iraq, Afghanistan and Sudan toward 
stability and security. It sets priorities that use aid effectively to 
promote real transformation in developing countries committed to 
reform. It also helps states that are more vulnerable or crisis-prone 
to advance stability, security and reform as well as develop essential 
institutions and infrastructure. The assistance supports individual 
foreign policy objectives in geo-strategically important states, 
continues USAID's global reach to offer humanitarian and disaster 
relief to those in need, and addresses the intrenched poverty and the 
global ills and scourges that afflict humanity.
    I would like to acknowledge the support of this Committee in 
helping USAID fulfill the enormous responsibilities it faces today and 
supporting its efforts to promote peace throughout the world by 
spreading democracy, opportunity, and prosperity.

    Senator McConnell. Thank you, Mr. Natsios.
    The way we will proceed is that I will ask questions first, 
followed by Senator Leahy and then in order of arrival: Senator 
DeWine, Senator Landrieu, Senator Harkin, and then Senator 
Brownback.
    With Mahmoud Abbas in town--some of us met with him 
yesterday and I know he was with the President today--I thought 
we would start off with a few questions regarding West Bank and 
Gaza.
    I notice that the administration has announced it would 
provide $50 million directly to the Palestinian authority. I, 
by the way, support that decision.
    How do you anticipate those funds will be used?
    Mr. Natsios. Senator, I have not been briefed on the 
President's meeting yet. I understand the President has made a 
press statement and I understand there is talk of a $50 million 
program for housing.
    But we have not gotten formal communications because the 
meeting literally took place 1 hour or 2 ago and I am waiting 
formal communications.
    The President has the authority under statute, as you know, 
to waive the prohibition of money going through the Palestinian 
Authority. We follow his lead and the Secretary of State's 
lead. Whatever they tell us to do, we will do.
    This is probably the most closely managed because it is one 
of the most sensitive programs in the world politically in the 
United States and in Israel and the PA, it is a very sensitive 
program. And we are very much aware of the concern of the 
Congress in terms of who our partner organizations are and how 
we manage that.
    We have a review process where the entire country team of 
the U.S. Embassy reviews what our plans are, how we spend our 
money in a way that is not done in most embassies because of 
the sensitivity. We are aware of the statutes that have been 
passed and the laws as to who we can deal with, who we cannot 
deal with. We are complying with those laws.
    We have one very important factor which I would like to 
assure you is very important to compliance and that is the 
Inspector General has an office in the mission. Usually they 
have regional offices. But they actually have an office in the 
mission and they do concurrent audits.
    Concurrent audits means when you are spending the money, 
they get audited, not after it is all spent.
    I have a meeting once a week privately with the IG, who is 
a separate line of information about what is happening. And if 
he knows something is going wrong, he tells me privately and I 
can fix it if the information system within the agency does not 
inform me. So we have an extra check on what is happening.
    Senator McConnell. Given travel restrictions to Gaza, how 
do your people operate in that area?
    Mr. Natsios. We meet on a regular basis with our partner 
organizations in the embassy, but now it is much more 
restricted than we would find in other places. But that allows 
us to go through the vouchers of the organizations and meet 
with them regularly in Tel Aviv to see what they are doing. We 
do make trips to the field, but, again, not as many or not as 
much as many of us would like given the security conditions 
that we face.
    We hope as the situation stabilizes, and things are calmer 
certainly than they were 2 years ago or 1 year ago, it will 
increase the chances that our staff can get out because we are 
under the direction of the diplomatic security, as you may 
know. We do not have our own security apparatus to tell us when 
to travel. We follow the State Department's instructions.
    Senator McConnell. Certainly given the outcome of the local 
elections, it is not in dispute that Hamas has a lot of 
influence in that area.
    What safeguards do you have to ensure that the NGOs who are 
operating are not either directly or indirectly supporting 
Hamas activities?
    Mr. Natsios. First, it is clear that we cannot give any 
money to Hamas or Hamas organizations and the statute is clear 
on that. We do comply with that.
    What we do before we develop a partnership with an 
organization, whether it be a traditional AID partner or an 
international NGO, an international agency or a new partner, a 
local NGO, for example, a women's group, something like that, 
we do a thorough vetting not just of the organization but also 
of the people who work for the organization. And that gives us 
some protection in terms of who we are dealing with. So there 
is a vetting process that we go through on an individual basis.
    Senator McConnell. I want to shift to Iraq for the balance 
of my round. How would you describe the pace of progress on 
reconstruction in Iraq?
    I would like for you, in answering the question, to cover 
how much of an issue in getting the work done is the security 
problem in the Sunni triangle.
    Mr. Natsios. Certainly the security situation, Mr. 
Chairman, is difficult in the central part of Iraq. But in the 
Shia south and in the Kurdish north, I have traveled myself. I 
think it was in December I was in Iraq. And I traveled without 
the kinds of protections I had to have when I was in Baghdad, 
in the greater Baghdad area.
    So there are large parts of the country that are relatively 
free of violence where we are able to do our work without 
incident.
    Senator McConnell. Therefore, are you concentrating in 
those areas?
    Mr. Natsios. No. We actually have very extensive programs 
in the Sunni areas, but there are security restrictions.
    There are probably 90,000 Iraqis now working on USAID 
grants or contracts. And they do not wear uniforms saying ``I 
work under an AID contract.'' No one knows in many cases that 
it is a contractor and an NGO working with us. It is done very 
low key.
    In fact, many of the organizations, particularly the NGOs, 
have had no deaths at all and have had no disruption of their 
operations in Iraq because they work at the community level 
very quietly and they get the support of the community and the 
local sheikhs to get their work done without any interference 
in a nonpolitical fashion.
    Have there been incidents? Yes, there have. Certainly. We 
have had the deaths of some local staff. We had a tragic 
incident a few weeks ago where a young woman who was an FSN--I 
think she is the only Foreign Service National who actually 
worked on the USAID staff in Baghdad--was killed. She was 
killed in her back yard by random fire and it was not direct 
fire. They tend to fire weapons in celebration sometimes in 
Baghdad and the bullet went up and it came down and it 
punctured her skull and she died from that. She was not being 
targeted. It was even random fire.
    From what the doctors tell us, the bullet literally came 
directly from the sky down. And in an urban area, you do not 
fire weapons like that, but that unfortunately has been going 
on in Baghdad for a long time.
    So we have had casualties, Senator, but we are getting our 
work done. I am very proud of the USAID work in agriculture, in 
education, in health, in micro finance, in the restoration of 
the marshes.
    One of the programs that is closest to my heart is the 
restoration of the marshes because next to the Kurds, the 
strongest pro American group of all of the Iraqis are the Marsh 
Arabs because they were most destroyed by Suddam, by the 
atrocities committed. And we have done enormous work on a small 
budget in the marshes to restore the people's livelihoods 
there.
    Senator McConnell. I will turn to Senator Leahy.

                 STATEMENT OF SENATOR PATRICK J. LEAHY

    Senator Leahy. Thank you, Mr. Chairman. I will put my full 
statement in the record.
    [The statement follows:]

             Prepared Statement of Senator Patrick J. Leahy

    Mr. Natsios, thank you for being here. I think we all appreciate 
what USAID is doing to respond to critical needs around the world. On 
top of everything else, you are coping with AIDS, the tsunami, Darfur, 
Afghanistan and Iraq. Any one of these challenges is daunting by 
itself.
    I also want to take a moment to respond to some of your remarks 
before the House Foreign Operations Subcommittee earlier this year.
    One of the things you said was that legislative restrictions often 
prevent USAID from doing its job. I agree that Congress needs to amend 
or repeal confusing and unnecessary provisions in the Foreign 
Assistance Act.
    But I disagree with the implication that if Congress would just get 
out of the way, USAID could do its job better.
    Over the past four years while OMB has cut your budget, this 
Subcommittee has consistently come to the rescue and added hundreds of 
millions of dollars to core USAID programs.
    There have also been many times when USAID has asked this 
Subcommittee to approve legislative authorities that were not cleared 
by OMB and in some cases actively opposed by the State Department. Had 
we not done so, authorities that USAID needed would have been bottled 
up by OMB and never seen the light of day.
    Despite your comments about the legislative restrictions that 
hinder USAID's work, the Administration has not submitted a proposal to 
rewrite the Foreign Assistance Act. Each year, the Administration's 
budget proposes only to remove almost every legislative provision in 
the Foreign Operations Act, which is not a serious proposal.
    Another issue is the red herring of ``flexibility''. The 
Administration's recent track record with increased flexibility has not 
been encouraging. Iraq is the obvious example where we are dealing with 
all sorts of waste, fraud and abuse.
    Many restrictions are on the books because of lessons learned the 
hard way. One section of the Foreign Operations Act exists because 
Congress discovered that IMET funds were used to take foreign military 
officers to Disneyworld.
    During my tenure as Chairman or Ranking Member of this 
Subcommittee, Congress has had to take the initiative when the 
Administration did not.
    It was Chairman McConnell who had to earmark democracy money in the 
Iraq Supplemental, after the Administration failed to include any money 
to pay for elections or build democracy in Iraq.
    Not very long ago, USAID's budget to combat tuberculosis worldwide 
was $4 million, which USAID at the time insisted was a ``serious 
strategy.'' We didn't see it that way, and we dramatically increased 
funding.
    Earmarks are a sore subject. We know you don't like them. But the 
fact is we are judicious about which earmarks to include. They are 
there because they have strong Congressional support, and usually 
because the Administration has failed, for no convincing reason, to do 
what we asked.
    Mr. Natsios, I hope you know that members of this Subcommittee 
believe in USAID's mission and its people, and we want to work with 
you. But the Congress has a strong interest in how taxpayer funds are 
spent, and that is going to continue.
    Thank you.

    Senator Leahy. But, Mr. Natsios, I hope you take time to 
read it. I express some concern--and I share your admiration 
for so many of your people working in the field--but I express 
concern about some comments you made at the other body in 
testifying basically sort of the idea it gives the impression 
that Congress meddles, gets involved too much, earmarks, so on. 
I will let you read it and you can let me know what you think.
    But to point out that over the past 4 years where your 
administration has cut your budget, this subcommittee, for 
example, has consistently come to the rescue and added hundreds 
of millions of dollars to it. Chairman McConnell had to earmark 
democracy money in Iraq supplemental after the administration 
failed to put any in.
    I know sometimes you do not like some of these earmarks and 
oftentimes they are ignored anyway, but sometimes it is the 
only way to get to the money that has been cut out. In some 
ways, it would be an awfully lot easier for us simply to give 
you the budget that has been requested and ignore the back-door 
requests that we get from your Agency and others saying, 
please, please, please put this money back in that has been 
cut.
    So if it is bothering you that we put it back in and add a 
few earmarks, instead it would be a heck of a lot easier to 
just simply say, okay, we will give you the money that has been 
requested and you are going to get a lot less money.
    I do want to ask one question. I will submit the rest for 
the record, although in some ways, I hate to do that because 
they rarely get answered.
    They direct us, but--last year in the statement of 
managers, they point out operation of the ``Appropriations 
Act.'' Congress cited the important work done by the Global 
Health Council.
    We urge USAID to support the council's work, but it appears 
you not only have not done that, but you abandoned 32 years of 
support for this organization. When an official of the U.N. 
population is going to speak at a panel at the Global Health 
Council's annual conference, just being they are doing that, 
you withdrew support for the conference even though this 
official is not receiving any reimbursement for her 
participation.
    Next week, the Global Health Council is hosting here in 
Washington its annual conference, 2,000 participants, the 
largest gathering of global health program implementers in the 
world, those who have to implement a lot of the programs that 
you and I both support. The topic of this year's conference is 
Health Systems.
    Obviously an important issue for a development Agency like 
USAID, which has a large portion of its budget committed to 
health. The head of the World Health Organization is chairing 
the conference. But I am told USAID does not even plan to 
participate.
    Are things so busy down at the office that nobody can even 
bother to participate?
    Mr. Natsios. Senator----
    Senator Leahy. Just curious.
    Mr. Natsios [continuing]. There are many traditional 
partners, 1,600 of them, that USAID has done business with over 
the years. I come from the community, as you know.
    Senator Leahy. I know. I am also saying this is one where 
you totally ignored what was in the manager's package written 
by both republicans and democrats, House and Senate, regarding 
the Global Health Council.
    Mr. Natsios. Well, Senator, what we have tried to do is to 
move more toward nontraditional partners in a lot of work we do 
because there is a sense out there that USAID has a fixed 
number of partners. And if you are a traditional partner, you 
get the money. And if you are not, you do not.
    I have told the career staff repeatedly, and I think they 
are listening now, that we need to move beyond the notion that 
there are entitlements in the USAID budget for any NGO, any 
contractor, any agency first.
    Second, that we need to look toward institutions, 
community-based institutions in the countries that we work in, 
more indigenous institutions.
    Senator Leahy. Mr. Natsios, I understand all that.
    Mr. Natsios. And, third, that we do more competitive 
bidding.
    Senator Leahy. But you have ignored--I mean, you do not 
even have anybody show up. When they had their annual 
conference last year, you had one Congressman. It was critical 
that somebody from UNPA was going to be there and you guys ran 
like scared rabbits.
    Now, I have put in time and time again. I have worked, cast 
chips in both sides of the aisle to get money for USAID, money 
that your own agency has told me you needed even though your 
administration said you did not. And, yet, when something like 
this comes in, it kind of makes one wonder.
    Mr. Natsios. Senator, I think USAID funds too many 
conferences around the world. I have instructed our staff to 
spend less money on conferences, more delivery of services, 
more training of staff, more scholarships, and more community-
based programming.
    I think our staff spends too much time in every sector with 
partners that are friends of mine going to conferences. So I 
put a stop to it.
    Our delegations have been too large. We put new regulations 
in place to slow that all down because I think we are spending 
too much money on that.
    Senator Leahy. Mr. Natsios, we are not asking you to fund 
any conference. The statement of managers does not do that. We 
just wondered if somebody could kind of walk across the street 
and even show up at the Global Health Council that has got 
2,000 participants who are talking about global health programs 
or if they want to take a cab the two blocks, I will be glad to 
pay for it out of my own pocket.
    You have money for other things. You are about to give a 
$75 million contract in Indonesia for a contractor who 
apparently has no expertise in that kind of work in that part 
of the world. You have got $75 million for that.
    You have really limited amounts of money that you are 
requesting for infectious diseases and, yet, we have a 
conference where people might actually be talking about that.
    I say this as somebody who has worked harder to support 
your budget than certainly anybody on my side of the aisle. I 
just wanted you to know I was disappointed.
    Senator McConnell. Thank you, Senator Leahy.
    Senator DeWine.

                   STATEMENT OF SENATOR MIKE DE WINE

    Senator DeWine. Thank you, Mr. Chairman.
    Mr. Natsios, thank you very much for being with us. Good to 
see you again.
    Mr. Natsios. Nice to see you, Senator.
    Senator DeWine. I would like to talk about something you 
and I talked about quite a bit and I know that many of the 
members of the committee are interested in.
    That is the whole issue of preventable childhood deaths in 
the world. We know there are millions of them, estimated 11 
million preventable childhood deaths every year.
    I want to talk a little bit about philosophy. If you could 
take a couple minutes to talk about that and tell me how you 
approach this. It seems to me that we kind of have two maybe 
conflicting philosophies. One is looking at this from a 
development point of view and the other is from a more triage 
point of view. Go in, save as many lives as you can, as quickly 
as you can, vaccinations, whatever it takes to get it done.
    How do you balance those two and what is the proper 
philosophy?
    Mr. Natsios. Well, there has been a focus for the last 
decade in USAID which we are now going to begin changing with 
your help and cooperation. We have been focusing on the 
delivery of service, which is appropriate. Vaccinating children 
is very important.
    But the question is for me why is not the Ministry of 
Health capacitated to do this, because that is what ministries 
of health are supposed to do in the countries that we are 
working in.
    Senator DeWine. But you have to assume there is a Ministry 
of Health.
    Mr. Natsios. Well, there is, but some of them are 
completely dysfunctional.
    Senator DeWine. Dysfunctional?
    Mr. Natsios. Yes. They do not do any work or they do not 
have the capacity to manage these efforts. And the vaccination 
rates in Africa have actually been dropping even though we put 
a huge amount of money. We give $125 million that the Congress 
appropriates to UNICEF every year for vaccination programs and, 
yet, the vaccination rates are declining.
    So the problem is there are not enough trained health 
workers who are local nationals and when they are trained, they 
sometimes leave the country to go work in Europe or the United 
States or a wealthier country, in the Gulf states, for example.
    So working with the ministries to capacitate the ministries 
to train people in those ministries is very important.
    We used to provide 20,000 scholarships a year to students, 
many of whom came from the ministries, the Ministry of 
Agriculture, the Ministry of Health, the Ministry of Water. And 
they go to American universities, get their Master's Degrees or 
their undergrad, and then they go back to the ministries and 
work. We stopped doing that. We only do 900 now a year.
    Our career staff tell me one of the most important things 
we did that we do not do now are the scholarship programs, 
because they do not just go back with a technical skill. They 
go back with an understanding of American culture, the American 
institutions, and why they work as well as they do.
    You will find, for example, if you look at the current 
Indonesian cabinet, 30 to 40 percent of the cabinet ministers 
received their degrees with USAID scholarships 25 years ago. We 
are not doing that anymore. I think that is a big mistake.
    So I told our staff I know there has been a bias against 
long-term training, but we need to go back to this and we need 
to look at making sure they have a job because the reason they 
stay here or they do not go back home is because there is no 
job for them once they get their degree.
    We have done some studies in pilots that if they are 
ensured of a job back home, a good job, they will go home and 
work in their countries.
    So building capacity is going to be a greater focus of what 
we have done in the past because we cannot keep doing this 
every year without having the countries take control of their 
own destiny.
    So there is going to be more of a focus on local capacity 
building at the health clinic level, private hospitals, private 
clinics, not necessarily just through the Ministry of Health 
but indigenous, indigenously based.
    Senator DeWine. I want to continue to explore this with you 
sometime when we have more time. And I do not disagree with 
that. It makes a lot of sense. But it is like anything else. It 
is like when we tell the FBI to worry about terrorism, they are 
not worrying about something else.
    We have to be honest with ourselves and say if you are 
doing that and you are building long-term capacity, what are 
you not doing? And, you know, I think you need to come forward 
to this committee and say we are building long-term capacity 
and this is what we are doing and it is great. And we think we 
should be doing that, but here is a hole. Seems to me there has 
to be a hole you are leaving. Do you agree with that?
    Mr. Natsios. I do agree with that.
    Senator DeWine. You need to be telling this Congress there 
is a hole.
    Mr. Natsios. Right.
    Senator DeWine. You are not doing this immunization or you 
are not doing vaccination, whatever is the hole that we are not 
doing because, you know, these are decisions that we have to be 
a part of too.
    So let me ask you another question. Let me move to this 
hemisphere. About half the people in our hemisphere live on 
less than a dollar a day. We know all the problems of the 
movement in this hemisphere now, kind of retrenching back away 
from democracy at least as far as popular opinion.
    When we look at our commitment to this hemisphere, my 
statistics, what I see shows 20 percent of our development 
assistance money, only 20 percent goes to this hemisphere, 12 
percent of our child survival and 4 percent of our economic 
support fund spending goes to countries in this entire region.
    Is that the appropriate macro picture? Is that really 
appropriate for the hemisphere that we live in?
    Mr. Natsios. A large chunk of money, Senator is given to us 
to do alternate development programs in the Andean Initiative 
of the President to deal with the narcotics problem.
    Now, these are developmentally sound programs. I am very 
proud of many of them, in Bolivia, in Peru, in Ecuador, and in 
Colombia. However, they are tied to a larger national crisis 
that we face with the narcotics trade which is undermining 
democracy in Latin America and those countries too.
    Senator DeWine. Why should that drain from these 
percentages?
    Mr. Natsios. Well, there is only a fixed amount of money 
and the administration and the Congress has determined that 
that is the first priority.
    We have an active development program in Central America 
which we put a lot of money. We have a very successful rural 
agricultural program, for example, in Honduras. We have trade 
capacity building that has----
    Senator DeWine. Excuse me. What we are saying, though, is 
again trying to talk about the policy. What we are saying is 
because we are dealing with, what I think is very important, a 
problem in Colombia, a problem in the Andean countries having 
to do with drugs, that means that because we are doing that, we 
cannot deal with child survival problems in this hemisphere. I 
am not sure I follow the logic of the policy and I am not 
saying it is your policy.
    Mr. Natsios. Sure.
    Senator DeWine. I am saying what is the logic behind that 
policy decision? We put all our eggs in one basket in this 
hemisphere and we do not put money into child survival. We do 
not put it into economic support funding. We do not put it into 
developmental systems spending.
    It seems to me it is not really--if you really look at what 
we are doing in this hemisphere, it is not a balanced approach.
    Mr. Natsios. In terms of the humanitarian for the child 
survival programs, the health programs, they are targeted based 
on the levels of child mortality, female mortality, mothers' 
mortality in having children.
    The rates have come down actually in Latin America. They 
are significantly below what they are in Africa, for example. 
And so we focus our attention in terms of our health 
programming in the areas of greatest need.
    There is one country in Latin America, as you may know, 
that is in the President's emergency HIV/AIDS program and that 
is Haiti. Haiti has child malnutrition rates and child death 
rates which are comparable to the poorest areas of the world.
    But it is fair to say that in other countries in Latin 
America that is not the case. In fact, we have had a number of 
countries like Chile graduate from our programs.
    Senator DeWine. Well, my time is up, Mr. Chairman.
    I would just say that if you look at some of the other 
accounts as far as developmental accounts, I do not think--I 
just think it is a fair statement that we as a country--and I 
am not blaming you for it--but as a country, when we look at 
Latin America, we look at this hemisphere, do not have a 
balanced approach to this hemisphere.
    I support what we are doing in Colombia and I support what 
we are doing in the war on terrorism and the war on drugs. I 
just do not think we have a balanced approach to this 
hemisphere.
    Thank you, Mr. Chairman.
    Senator McConnell. Thank you, Senator DeWine.

                 STATEMENT OF SENATOR MARY L. LANDRIEU

    Senator Landrieu. Thank you. I am going to submit my 
statement for the record and just address three questions to 
three different points.
    [The statement follows:]

             Prepared Statement of Senator Mary L. Landrieu

    Mr. Chairman: Thank you for calling this hearing so that we may 
listen to the testimony of Administrator Andrew Natsios of the United 
States Agency for International Development (USAID).
    Humanitarian assistance is a crucial part of the foreign affairs 
budget of the United States.
    For more than 40 years, USAID has administered the bulk of U.S. 
bilateral economic aid to the developing nations of the world (USAID 
provided some form of assistance to about 150 countries in 2005). And 
while USAID's programs remain a crucial part of our foreign policy, its 
role has changed, understandably, fit the needs of the present.
    Since being elected to the United States Senate I have had the 
privilege of visiting countries where USAID is responsible for many of 
the programs which assist those in great need.
    I have seen first hand the impact these programs, if well done, can 
have on the lives of people.
    I have visited Sri Lanka which was devastated beyond words by the 
Tsunami and where USAID was able to respond quickly and was able to 
provide life-saving relief to so many who would have otherwise 
perished. I visited Uganda where there are a staggering number of 
orphans due to the epidemic of HIV/AIDS and where USAID has had a 
significant presence since the revival of its relationship with Uganda 
in 1980. I have also spent significant time in Romania, El Salvador, 
Honduras, Russia, and China working to find homes for children who 
begged for the love of family.
    While it is essential that we all forge ahead with efforts to 
strengthen the roots of democracy and foster the economic security for 
people around the globe where possible, we must remember the roots of 
democracy are best founded on strong families and vibrant communities.
    I would suggest that this is one area in which USAID needs to do 
better. By your own account, there will be 40 million children without 
families by the year 2010, over 60 percent of those because of the AIDS 
epidemic in Africa. Despite this, I am concerned the Vulnerable 
Children program, which provides the necessary care, support, and 
protection for these precious children, has been slashed by 63 percent. 
You state that one of the agency's priorities is international crisis, 
but how high does this need to go?
    Another area, the empowerment of women should also be a primary 
objective due to the dramatic effect that it has on a society. 
Assisting women by encouraging equal partnership through not only funds 
but in skills and talents will benefit the spectrum of society.
    USAID has been entrusted with significant resources to assist in 
the rebuilding of Afghanistan and Iraq. While these are, and should be, 
very important in USAID's mission, it is also important that we not 
lose sight of other ``fragile states'' around the world that are 
desperate for our helping hand.
    This week the European Union (EU) announced that it is doubling its 
aid to developing countries in the next five years. The United States 
still lags far behind other countries when calculated as a percent of 
Gross Domestic Income (GDI). Norway significantly outpaces the United 
States when using these calculations and ranks first while the United 
States shows up in 22nd place.
    While our policies continue to evolve in response to crises, we 
should not ever waiver from our duty to not only our own citizens, but 
those citizens of the world. Indeed, the instability of the world 
requires that we protect others so that ourown citizens maintain the 
freedoms and quality of life we cherish.
    I appreciate you taking the time today to share your thoughts with 
the members of the Subcommittee on State, Foreign Operations, and 
related programs.

    Senator Landrieu. But first of all, Mr. Director, let me 
associate myself with Senator Leahy's remarks and also Senator 
DeWine's remarks.
    You have got some champions on this committee for USAID and 
we want to be supportive and want to help find additional 
funding, you know, where we can. This administration has 
continued to cut USAID funding by raising the Millennium 
Challenge account and some of us feel like there should be an 
increase in other categories as well.
    I am pleased to see some of the progress we are making in 
the Millennium Challenge account and the way that it is 
established. I actually think it has a lot of merit. The 
concepts are very good. And as you said, there are two 
countries that have received full funding, some more on the 
list to receive it, and that process is ongoing.
    But for USAID, we have seen a 59 percent decrease in global 
fund for AIDS, TB, and malaria, a 28 percent decrease for 
infectious diseases, a 62 percent decrease in the category for 
vulnerable children. And I could go on and on and on.
    So we want to try to be supportive because I believe that 
this is part of our diplomacy and our strategy to have us be a 
reliable partner to help other countries stand up not only 
their democratic institutions but their education systems, 
their health care systems, et cetera.
    My question and really more of a comment, I have spent not 
as much time as some of these other members in other countries, 
but over the last few years, I have been in and out of probably 
ten. I always visit with the USAID directors there.
    What occurs to me is that we have in the past and continued 
to act as sort of a super contractor as opposed to a strategic 
leverager. I like to think about the parable of the loves and 
the fishes when, you know, Jesus was challenged with having to 
feed a multitude and he only had just a little bit. I know it 
was a miracle and we cannot hope for those exact same miracles 
maybe today, but he kind of took just a little bit and make it 
really, really work.
    I kind of see that as USAID's strategic key role. You do 
not have a lot of money. But it seems to me that if you used it 
as a leverager, getting everybody to work together, I mean, all 
the NGOs working together instead of competing for grants, 
working together, and then look up and see the private donors, 
churches, faith-based organizations, corporations that need 
leadership and guidance, they have money, but they do not have 
access and they do not have power. But they have money. You 
have the power and the access.
    I just do not understand why we cannot put this together 
and have USAID's role change to be not a super contractor where 
you line everybody up and say, okay, compete. They will all put 
in proposals. We only have enough money to fund one, but you 
all spend 6 months coming up with a hundred proposals. It is a 
waste of everybody's time.
    So I just throw that out. It is not a question. But to 
think about a new way of approaching this that takes into 
account money does not grow on trees and we cannot create 
miracles, but we can work harder to spread our money.
    Number two, orphans in the world are growing exponentially. 
Your own documents say that 60 percent of an increase is going 
to be basically because the parents are dying of AIDS. And 
unlike other diseases that might take the life of one parent, 
this disease expressly takes the life of both because of its 
nature.
    So you are creating double orphans which is the way the 
international community, not single but double orphans. We have 
40 million plus in the country.
    I want to know on the record--and I was pleased to see from 
your web site this comment that you and USAID and this 
administration believe that children belong in families not 
orphanages.
    So could you comment about what USAID is doing to recognize 
this extraordinary and historic--never before has the world 
seen so many orphans. Never. Not in World War II, not any time. 
Not in the Plague. Never have we seen this many orphans.
    What are we doing as a Nation that values children and 
families to help stand this situation up?
    Mr. Natsios. Thank you, Senator. I know you have been a 
long-time supporter of USAID and you always when you travel, 
you visit our projects which we really do appreciate.
    You spent some time describing this leveraging function and 
what you basically described is the Global Development Alliance 
which we initiated four years ago. We had about 12 alliances 
when I arrived 4 years ago. I started May 1, 2001, so I have 
just passed my fourth birthday or anniversary with USAID.
    They were all successful and they leveraged a lot of money 
privately. In 1970, 70 percent of the money that flowed to the 
developing world came from USAID and 30 percent was what we 
would call private foreign aid from NGOs, corporations, 
charities, foundations, that sort of thing.
    Two years ago, the complete reverse had taken place. 
Eighty-five percent of the money that goes to the developing 
world from the United States is now private foreign aid and 15 
percent is from our Government institutions, all Government 
institutions in the U.S. Government that goes into the 
developing world.
    So we realize that there has been a profound shift in 
funding. This is not because our budget was cut over 35 years. 
In fact, when I arrived as an administrator in calendar 2000, 
the year before I arrived, ODA, Official Development 
Assistance, which is all our foreign aid, was $10 billion. Last 
year, it was $19 billion.
    The President has increased foreign assistance from the 
U.S. Government, from all Federal agencies by 90 percent. We 
expect it to go up to as much as $24 billion this year, 
although we will not know until spending is finished.
    This is not appropriated money or proposed budgets. It is 
actual spending. So there is actually going to be a big 
increase because of the increases for the President's AIDS 
initiative and the Millennium Challenge account which will 
begin to show up later this year and next year.
    So we will see larger increases in the next few years in 
foreign aid.
    Senator Landrieu. But orphans real quick as well.
    Mr. Natsios. Right. Let me just mention the GDA. We now 
have 286 alliances with corporations, nontraditional donors, 
people that we do not do business with normally, foundations, 
universities, church groups, religious institutions. And we put 
in $1.1 billion into these alliances and the private sectors 
put $3.7 billion in, $3.7 billion.
    We are one of the 18 finalists out of 1,000 applicants to 
the Kennedy School of Government Innovations and Government 
Award, with this GDA process.
    So we are leveraging money on a huge basis, a four to one 
basis, 286 of these--I can give you a list of these and you can 
see they are all over the world and they are quite innovative. 
There are new partners that we have not done business with 
before.
    In terms of orphans, it is one of the most serious crises. 
We are not going to see the real crisis until they become 
teenagers or in their twenties because if you have a country 
that is unstable and you have a very large number of 
particularly young men but also young women who have no 
parents, who are on the streets, you will begin to see gangs 
form and that will cause instability and crime in the cities 
will be massive.
    So we think there is a crisis facing us in another 
generation that we will see from this AIDS pandemic. There are 
millions of AIDS orphans in Africa now.
    Under the President's AIDS Initiative, there is a portion 
of the account that is for the care of children, of people who 
have been affected by this, but particularly for orphans.
    Our approach is the approach you have mentioned. The 
adoption of children into families is a much better approach 
than institutional care because you will get care for a lot 
more children if you do it that way. And there is a tribal 
custom, particularly in sub Saharan Africa, that is stronger 
than anywhere else in the world. Children are regarded as 
valuable in Africa.
    There is great desire in the tribes to go through a 
traditional process of adopting a child who has been orphaned. 
The problem is there is so many of them now that the system is 
getting overwhelmed and there are not simply enough families.
    But this is a serious problem and we are doing a lot of 
pilots now with community-based programs to try to integrate 
these children into families on an organized basis and a large 
scale because the scale is massive.
    Senator Landrieu. My time is up. But, Mr. Chairman, I plan 
to pursue this issue to as far as I can through this budget 
year.
    Senator McConnell. Thank you, Senator Landrieu.
    Senator Harkin.

                    STATEMENT OF SENATOR TOM HARKIN

    Senator Harkin. Thank you very much, Mr. Chairman.
    Secretary Natsios, section 579 of our bill had five 
different requirements under the heading of disability 
requirements. I know you are committed to working to 
integrating disability access and inclusion into all of USAID's 
projects throughout the world.
    Could you just kind of just briefly for the record tell us 
what progress USAID has made to date in accomplishing this?
    Mr. Natsios. Well, the first thing is, Senator Harkin, that 
we are now obligating the money that is in the ESF account 
which is controlled by the State Department. It is $2.5 million 
for people with disabilities. And we are working that in a 
partnership with the State Department for the careful use of 
these monies.
    We hope that 75 percent of this money will be spent by the 
end of fiscal 2005, but it is a 2-year appropriation, so we 
will have a little bit of time at the end of this year and 
beginning of next year to spend it as well.
    We are making as many grants and funding as possible from 
this fund to disabled people's organizations, not just groups 
that help disabled people but disabled people's organizations 
and through locally-based organizations that are indigenous to 
build capacity so that they become sustainable on their own. 
Because if you just help them once through an international 
NGO, you have no guarantee that the next year, if there is no 
funding, that will continue.
    Indigenous organizations in my view are the way we should 
be putting more money.
    We have a program to train the USAID staff in disability 
programming and that curriculum is being designed now. And 
there will be a large-scale program of instruction. It will be 
done directly by trainers and also over the Internet. We have 
large-scale IT programs where our staff learn on the internet 
because we are spread out all over the world. We are working on 
that now.
    We have designed standardized plans, which I think I have 
shown you in your office, of new schools that we are building. 
In Iraq and Afghanistan, we are building a large number of 
schools and health clinics so that they are accessible to 
disabled people.
    Senator Harkin. You can assure me that that is in place 
and----
    Mr. Natsios. It is in place, Senator.
    Senator Harkin. Okay. That is great.
    Mr. Natsios. Yes.
    Senator Harkin. That is great.
    Mr. Natsios. I will show you. In fact, we will bring you 
some pictures.
    Senator Harkin. That is great. Thank you.
    Mr. Natsios. We are aware that this is a problem. I have to 
say I have been all over the developing world and probably to 
50 countries in the last 4 years and some of the most difficult 
scenes I have seen are of disabled people, because countries 
that are very poor simply do not have the infrastructure to 
care for people. And so I am very sympathetic to your 
perspective on this, sir.
    Senator Harkin. Well, I think you are doing a great job. 
And I just want to applaud you for moving ahead on this. You 
know, a little bit here and there and we are doing a lot of 
reconstruction.
    As we have learned in the past that if you start in the 
beginning in terms of construction or reconstruction, the costs 
of making it accessible are really zero. I mean, they are just 
not anymore. It is just a design concept and how you do it.
    Because there are so many people who have suffered 
disabilities, especially in Iraq and Afghanistan, that as long 
as we are going to be doing these things, we ought to be at 
least doing them right from the beginning. So I applaud your 
effort in that regard.
    Following up on that, I just might want to ask you about 
Iraq. And does USAID have an individual or someone who is 
responsible for advising and overseeing the projects in Iraq 
from a disability perspective, making sure that they comply, 
that they do have some accessibility guidelines that type of 
thing? Do you have someone like that?
    Mr. Natsios. I have appointed in Washington Lloyd Feinberg 
to coordinate for the whole Agency and we have asked the 
mission director to focus attention on this not just in one 
sector but in all of the sectors, health, education, 
agriculture, water, sanitation.
    I can give you some excellent examples of what Iraqis are 
doing on the ground. There is a community action program, CAP, 
which the Congress generously gave, I think in the last 
supplemental, an additional $100 million.
    We are constructing an educational outreach center in the 
Maysan Governorate through the Iraqi Red Crescent Society and 
they are rehabilitating the sidewalk around the building that 
will allow it to be accessible for disabled people. And there 
are about 16,000 men and 4,600 women who are disabled who will 
now be able to get access.
    CAP is a program that uses, I think, five very well-known 
American NGOs to do small community access programs across the 
country. And I might add, it is astonishing in the middle of 
the insecurity that we face that many of these NGOs have had 
not one security incident at all because they are so imbedded 
in the community, the community protects them. And many of 
their projects are very sensitive.
    We have told them we want a focus because there are a very 
large number of amputees from the Iraq-Iran War. More than 
100,000 young men were killed in that war and there were many, 
many casualties. And they have not been cared for all these 
years. So there is a focus now on attempting to focus on that.
    Senator Harkin. Secretary, I heard your response earlier to 
a question. I forget even who asked it. But it sticks in my 
memory about not being a big fan of all these conferences that 
people run to all the time. And I might just say I tend to 
agree with you on that. Have these conferences and people go, 
and then you wonder what the conference is all about.
    But I guess to every rule, there is an exception perhaps. 
Section 579 also referenced using funds for an international 
conference of needs of persons with disabilities. Poland, I 
understand, had planned to host such a conference, but it has 
fallen through.
    The only thing I would have you think about in terms of 
this kind of a conference is because we have not really focused 
much on this with these other countries and because we, the 
United States, have come a long way in terms of universal 
design and what universal design means, I just think it might 
be good to have something like this so that these people who 
are running these programs in these other countries can come--I 
do not know if Poland wants to do it again or not, to host it--
but to learn and to get the kind of information on universal 
design which they can take back.
    I just ask you to think about that. Like I say, I tend to 
generally agree with you on sometimes conferences are just do-
good affairs, the people go and nothing really happens. But in 
this case, the transmittal of information and ideas and 
concepts of which we really have come a long way in this 
country--we are the best in the world on universal design--
might be something that you might take a look at. That is. I 
just ask you to think about that because it was in section 579.
    Mr. Natsios. I met with a minister. I do not remember his 
title, a minister in the Polish Government. He came to visit me 
in Washington and we exchanged information as to what we were 
doing.
    The Polish Government has now set up their own foreign 
assistance program and we are looking to partner with them in 
other countries. And they want to put a focus particularly on 
disabilities and we told them we would work with them on that.
    So whether the conference comes off or not, we are still 
going to work together with the Polish Government.
    Senator Harkin. Even if it is not a conference, some way of 
getting the----
    Mr. Natsios. Yes.
    Senator Harkin [continuing]. Foreign concepts and stuff out 
to these other countries. If not a conference, maybe some other 
way of doing it. Maybe just--I do not know. Maybe there is 
other ways of doing it.
    Mr. Chairman, I know my time has run.
    I really wanted to ask you just one question about the food 
aid to clear up some of the issues here. I had talked about 
this when Secretary Rice was here. There seems to be a little 
bit of confusion about the $300 million. A lot of us who have 
been involved in Public Law 480 for now 30 years on my part, 
this is a great program. It has worked well. And we are 
concerned about the taking funds from Public Law 480 for these 
emergency situations.
    Could you just kind of clear that up for me, please?
    Mr. Natsios. Sure. Senator, I ran the food aid programs 
under the President's father in USAID at a lower level. Food 
for Peace reported to me. I am devoted to food assistance as a 
concept. I have written a book on famines and I wrote the 
introduction to Fred Cuny's book on how you combat famines.
    Fred Cuny died in Chechenia. He is a celebrated figure in 
the famine relief work and he has written many books before his 
premature death.
    Fred said that we always lose a lot of people at the 
beginning of famines, particularly ones that we did not 
anticipate, or emergencies like Darfur that did not start out 
as a famine. It was just atrocities taking place because the 
places are in such remote areas; it takes 3 to 4 months to ship 
the food and get it there.
    It is in all the literature. All of the experts on famine 
would say we have a problem in the early stages. We need our 
agricultural system in the United States, not just our farmers 
but our shippers, our companies that process the food and bag 
the food and dock workers.
    This is a very important system. I would not want to 
disassemble that. And some people think this is the beginning 
of a trend. It is not. I would strenuously oppose any effort to 
undo what has been a remarkably successful program that has 
saved tens of millions of lives.
    I have watched children die in famines waiting for the food 
to arrive. We now have famine conditions in some areas of 
Ethiopia because there were very bad rains and it is much worse 
than what we had anticipated probably because there was an 
emergency 2 years ago and people are still recovering from the 
emergency 2 years ago.
    You generously provided, and several of you helped put that 
through, the fact it went through this committee, $240 million 
in additional Public Law 480, Title II which we are using. The 
day the President signed the bill, I ordered the food through 
USDA. USDA orders the food for us at our request. It is going 
to take 3 to 4 months to get there. What happens between now 
and then?
    We propose taking in the President's budget $300 million to 
put in the emergency account to allow us to do some local 
purchase. There is always food in a famine, always. I have 
never seen a famine where there is not. But it is just so 
expensive, people cannot afford it.
    We are proposing to look for surpluses for that 3- to 4-
month window at the beginning of an emergency and then huge 
amounts of food will come later from the United States to do 
the bulk of the work.
    This is simply an effort to stop early deaths in these 
emergencies, whether it is Darfur or whether it is Ethiopia or 
whether it's northern Uganda. It is not an attempt to undo. I 
would never support that, sir.
    Senator McConnell. You need to wrap up your answer, Mr. 
Natsios.
    Mr. Natsios. I'm sorry, sir?
    Senator McConnell. If you could wrap up your answer.
    Mr. Natsios. Yes. And so we would be willing to negotiate a 
talk to change the amount or to even just give the authority to 
the administrator of USAID to use part of the existing 
appropriation in Public Law 480, a certain percentage, a small 
percentage for local purchase in emergency situations.
    Senator McConnell. Senator Brownback.
    Senator Harkin. Thank you very much, Mr. Natsios, for 
clearing that up.

                   STATEMENT OF SENATOR SAM BROWNBACK

    Senator Brownback. Thank you, Mr. Chairman.
    Thank you, Director Natsios, for your life's work. You have 
worked in a lot of places and done a lot of good. You are head 
of an Agency now that helps a lot in very afflicted areas of 
the world. And I applaud your work and what you have done.
    I am going to bring up a couple of the issues that I would 
like to address and put these out in front of you.
    On malaria, I have had some discussions with you and your 
office. And I would hope as we mark this bill up that our 
malaria work will be more on delivering of actual product.
    Some I have mentioned to you privately and I am going to be 
working on it in the appropriation bill, actual product, actual 
spraying, indoor spraying for malaria or for mosquitoes in 
malaria-infested area.
    This one is one of those that I see as low-hanging fruit, 
that we really can save a lot of lives pretty rapidly if we can 
deliver product in some of these intense, tough areas.
    I know you are very familiar with that. I just mention it 
to you that it is something I am going to be working with 
hopefully the chairman, that we can get more actual product 
delivered there.
    There was water well drilling account that was put in last 
year on the House side of $9 million for water well drilling 
that we had hoped a number of private groups would start 
drilling water wells, particularly in sub Sahara Africa. Water 
is again, you know, one of these you have got to have it. You 
have got to have good water. If you can have that, that is a 
basic that you can build some other things on.
    There are a number of groups that are willing to drill 
water wells, I think pretty effectively, fairly, reasonably 
priced. And the more water wells we can drill in these places 
the better off they are.
    I hope you can look at breaking those funds free so that 
they actually can go for these NGO groups and drilling water 
wells, particularly sub Sahara Africa. That money, it was 
report language, but to my knowledge to date, it has not been 
spent or used.
    This is one of these areas Jeffrey Saks has had a series of 
articles out recently about ending poverty which is a dream 
that people have aspired to for a millennium. I do not know 
that it is possible, but, you know, there are basics to it. And 
one of them is water.
    The majority of leaders got a water bill. And I would hope 
we would break those funds free to be able to use and to 
appropriate and to actually count these folks. And, okay, we 
are going to contract with you $1 million and we want X number 
of wells drilled in these areas.
    I hope they are all posted with drilled with American 
money, American taxpayer money, and people would know that this 
money came from the United States to give them clear, fresh 
water. They need that.
    On Senator Landrieu's point on orphans--and I have been to 
some of these places. You have been to a number of them. The 
scale of orphans is just massive anymore.
    One of the things that I thought that we ought to be able 
to tap into and we tried a few years back with the Clinton 
administration, did not get it going, but the private sector in 
the United States, if you, if the agency or somebody could do a 
due diligence and went into Uganda, Zambia, somewhere and said, 
okay, if you invested in this group in that place or helped 
this group, we have done a due diligence.
    We believe this is an authentic local group. We believe 
that they are helping with a number of people. We cannot do 
this with 100 percent reliability, but we have people on the 
ground. We have checked it out and we will monitor this 
periodically.
    I think you could tap millions of dollars in the United 
States of people that want to help orphans, but they do not 
know where to put the money. They do not know who is doing 
things. I mean, they have groups that they are supporting from 
here, but they have a limited capacity too.
    That you could almost take your orphanage money if you did 
due diligence in a number of targeted countries and telling 
people, okay, this group in Uganda, northern Uganda is a 
reliable bunch and post it on your web site, do disclaimers 
about you cannot check this all the time, but we do monitor 
this group and work with them, that there would be a lot of 
funds you could tap into because people really do want to help.
    We have got a bill. It is a bipartisan bill on a bioshield 
two. This is a totally separate topic, but I just want to make 
you aware of it.
    About 90 percent of the people in the world die of diseases 
where we invest about 10 percent of the money for researching 
pharmaceutical products. Most of the research in pharmaceutical 
products goes for diseases in the western world because that is 
where the market is. So you do not get much investment in 
malaria, river blindness, sleeping sickness. You know the list 
of diseases that 90 percent of the people of the world actually 
die of but get a very small percentage of the research.
    In the bioshield two bill is a provision that says that we 
will pick certain of these diseases that we want to find a cure 
for and if you, the pharmaceutical company cannot identify a 
cure, we will let you extend a patent on your current product 
in a limited range to be able to access some funds to be able 
to do this in the developing world.
    I hope that we just target into lifestyle drugs in the 
United States and say we can give a year patent extension, 2-
year patent extension, but you have got to find a vaccine that 
cures malaria. You get that, we will give you this to get some 
of that research funding into some of these diseases that 
impact millions of people that they die of.
    That is not in your shop. I put it in front of you because 
I am seeing Gates Foundation, other people stepping up in this 
area of really a huge lack of funding in these disease 
categories where so many people die from. And what a beautiful 
contribution if we could hit on a couple of these, even one of 
them, we could save tens of millions of lives.
    I was at a meeting yesterday with Warren Hatch, Joe 
Liebermann on this topic. I think we have got the makings of a 
good possibility here and to really save a lot of lives. I put 
those out in front of you.
    Chairman, I have spoken most of my time.
    You can respond to those if you would like. I just wanted 
to lay those in front of you.
    Mr. Natsios. Senator, first, let me mention the malaria 
issue which is something that concerns me. Our staff has gotten 
malaria, I mean because three-quarters of our staff are in the 
field. We have actually had staff that has died from cerebral 
malaria in USAID over the years.
    So we take it very seriously. And we know 1 to 2 million 
people die each year from malaria, and because people do not 
get it in the west and the north, people do not focus on it. We 
focus on it because we live there. Our staff is out there all 
the time and they see the consequences.
    I have been to a village in Darfur about 10 years ago. I 
walked in. The birds were eating the entire crop. I said why do 
you not harvest the crop. The entire village had malaria. They 
could not get out of their sickbeds to harvest it and they were 
hungry the next year because the birds ate the entire crop 
literally in front of us.
    So I know it has other consequences than just the disease 
itself. And if you are under 5 and you get malaria, there is a 
50 percent chance you will die from it.
    We have invested a lot of money, $8 million in the field 
tests with other donor governments to test an Asian herb, 
artemicia. And there is a drug therapy called ACT with 
artemician. We did the field tests, worked with other agencies 
to do the field tests to make sure that, in fact, this was the 
optimum way of approaching this. It is. And there is a WHO 
report now that many donors contributed to, including us, that 
proves that this is, in fact, a very viable strategy.
    What we have done is we funded the planting of 2,200 acres 
in Africa of this herb and we are now working with companies to 
begin African companies, not western companies, to begin to 
process this in the appropriate amounts that will actually have 
the desired effect because it is very effective against 
malaria.
    It is better that the Africans do it themselves and it 
become an industry in Africa and work itself into the 
marketplace because the best way to get anything distributed in 
Africa is through the private markets.
    That is our plan. We are working on that now and we are 
beginning the process. We have now proven it works and we are 
trying to extend it. I can provide some written material to 
you, Senator, on these other issues because I know my time is 
up.
    Senator Brownback. Thank you.
    Senator McConnell. Thank you, Mr. Natsios.
    I am going to turn to Senator Bennett. And I see that 
Senator DeWine is here.
    Would you like another round?
    Senator DeWine. That is up to you, Mr. Chairman.
    Senator McConnell. Senator Bennett.

                 STATEMENT OF SENATOR ROBERT F. BENNETT

    Senator Bennett. Thank you very much, Mr. Chairman.
    Mr. Natsios, like the other members of the committee, let 
me thank you for your service, your expertise in an area that 
some might consider fairly arcane, but we appreciate your 
passion and your dedication for this.
    Listening to this, I have several items that just kind of 
jump out at me at random. First, your reference to the 
scholarship program.
    I remember a dinner I had with a finance minister of a 
country that I shall not name publicly for reasons that may 
become obvious. And I said to him--this was in his own country. 
We were having dinner together. I said to him, what do you need 
the most. And he did not hesitate for a minute. He said I need 
15 people I can trust.
    I preside over a bureaucracy that is about 50,000 people. 
And this is a country where the government is the employer of 
last resort maybe. And he said I could fire every one of them 
if I had 15 people I could trust and I keep trying to get AID 
to pay for scholarships. This particular man has a Ph.D. in 
economics from one of America's most prestigious universities. 
And he said if I could get 15 young people to come back with 
Ph.D.s from legitimate American universities, I could run my 
whole bureaucracy and fire the other 50,000.
    USAID says to me, no, we do not do scholarships. And the 
reason is you will just pick your nephew and your brother-in-
law and whatever and send them to the United States to study at 
our expense. And he said my response to them was, okay, you 
pick. Do you think our government is sufficiently corrupt, we 
will not pick. He says I still cannot get them to do it.
    So I simply tell you that story to underscore your 
dedication to the idea of scholarships. And it may not be as 
long term a payout as you have indicated in your testimony 
here. There may be a turnaround within 5 to 10 years if this 
particular fellow is indicative of the kind of help that they 
really need in the government. So I leave you with that.
    Micro credit, micro credit is one of my passions. I raised 
it with Secretary Rice when she appeared before the 
subcommittee.
    Could you comment briefly on what your plans are for micro 
credit, what percentages you plan to put out for micro credit? 
I understand you prefer private contractors.
    My own experience is that the issue is to get the micro 
credit into the hands of the people rather than to have money 
that is dedicated to micro credit eaten up with administrative 
processes. So I would like your comment on that.
    One final issue, we were in Palestine. I was enormously 
impressed with the new Palestinian leadership, specifically the 
finance minister, who is cleaning up the corruption.
    I said to him the American press says that Arafat made off 
with as much as $1 billion. That is a staggering sum. Could 
that be possibly true? And he said, yeah. He said we have 
recovered $660 million so far and we are still digging and 
finding.
    I think this may not be in your area of responsibility and 
if it is not, then correct me, but I know there are some in my 
party who say we cannot give aid directly to the Palestinian 
authority. I think that attitude was more than justified with 
Arafat skimming $1 billion off the top. I do not think it is 
justified with the new anti-corruption attitude that we have in 
this new finance minister.
    I think as a demonstration of America's confidence in the 
new government and an encouragement to them to continue at 
least the promises they have made with respect to terrorism, 
promises that Arafat never intended to keep, that we should 
make aid available directly to the Palestinian authority 
instead of insisting as some might think in the other body do 
that it goes through NGOs or some other places and has strings 
attached. I think it is very important for the legitimacy of 
the Palestinian authority to get money directly.
    So those are my concerns and I would be happy to hear 
whatever responses you might have on any of them.
    Senator McConnell. Before you respond, Mr. Natsios, I must 
go. I have asked Senator Bennett to wrap up. If Senator DeWine 
would like another round and that works for you, too, that 
would be fine. Thank you for coming.
    Senator Stevens had a statement he would like to put in the 
record as well.
    [The statement follows:]

               Prepared Statement of Senator Ted Stevens

    In the fiscal year 2006 Foreign Operations budget, the President 
eliminated $37 million in total aid to Russia from $88 million in 
fiscal year 2005, to $51 million in fiscal year 2006. I am concerned 
that such a drastic cut does not take into account the needs of the 
Russian Far East.
    The Russian Far East faces numerous challenges not present in the 
more urban areas of Western Russia, including economic and social 
development and foreign direct investment. It is in these areas that I 
see the most drastic cuts, and it is in these areas that the Russian 
Far East depends the most on foreign aid.
    In addition to completely zeroing out economic policy reform, the 
presidential request cuts in half the aid for small business 
development, improved local governance and economic development, and 
health and child welfare.
    The situation in the Russian Far East is analogous in many ways to 
the situation faced by towns and villages in rural Alaska, including; 
limited access to these areas, a lack of infrastructure, and a lack of 
basic amenities like running water, waste disposal, and sewer systems. 
Additionally, the Russian Far East has a multitude of humanitarian 
issues such as high rates of fetal alcohol syndrome, alcoholism, and 
tuberculosis. These are factors unique to the Russian Far East, and 
require special attention. The cuts the President has requested do not 
reflect the great needs that have yet to be met in the Russian Far 
East.
    Due to the similarities between the Russian Far East and rural 
Alaska, it is also important to continue working with the University of 
Alaska-America-Russia Center and Alaska Pacific University to aid 
efforts in business development and expanding health and public works 
efforts. I am pleased to see the administration support the important 
work these institutions do for the Russian Far East, and look forward 
to continued support for these programs in the future.
    I am also concerned to see that the funding used to provide 
financial support and basic equipment to drill local water wells, 
addressing the need for clean drinking water in Third World countries 
as well as rural Alaska, has been zeroed out in fiscal year 2006. This 
not only affects persons living in rural Alaska and the Russian Far 
East, but people all across the Third World who lack sufficient 
drinking water. Lack of support for these efforts could lead to a 
serious humanitarian issue in the future.
    I hope the State Department and administration will consider all of 
these issues in allocating resources to Russia and the Third World.

    Mr. Natsios. Thank you, Senator. These are really good 
questions.
    The first is there has been a policy against scholarships 
in USAID even though the career officers bitterly complain 
against it.
    We had a meeting of our 80 mission directors last week. 
Secretary Rice spoke to us. And I announced that we were 
rescinding the policy and we are going to go back to a 
scholarship program. We have got to find the money to do it, 
however. I just want to say that.
    Senator Bennett [presiding]. If you have additional 
problems, let us know and we will help you with some language 
in the bill.
    Mr. Natsios. We will. But I went to everyone and I said you 
are going to resist this. They said resist this? We have been 
waiting for this for years. We resent the policy that had been 
established earlier.
    Senator Bennett. Okay. Good.
    Mr. Natsios. So they now have carte blanche to say yes 
depending on the country and the ministry. It does depend on 
the country.
    Senator Bennett. I understand.
    Mr. Natsios. Okay. In terms of micro credit in fiscal year 
2001, we spent $156 million in micro credit. In 2004, we spent 
$190 million. And we expect to reach $200 million this year.
    I am a strong supporter of micro finance because a lot of 
the jobs created are not just, I might add, in the developing 
world but in the United States are from smaller enterprises, 
right? A famous MIT study from some years ago noted that most 
new employment in the United States is not created by very big 
companies but by small companies.
    In some countries, the ministries will say we want to have 
our own micro finance program. We want a piece of legislation 
in. NGOs are very good, and I came from the NGO community. I 
started the micro finance programs in World Vision when I was 
there 10 years. I was vice president for 5 years. USAID 
supports NGOs. We are the principal funder in the world of NGOs 
to do micro finance. But they cannot be the only ones we work 
with.
    When a government says help us write a statute that will 
get through the parliament to establish indigenous micro 
finance lending institutions, I send a technical expert to do 
that and that is usually from a university or a contracting 
agency that has expertise in this.
    Sometimes the central banks want to help rewrite their 
regulations to facilitate smaller loans. Central banks are not 
something micro lending NGOs deal with. But can it affect the 
amount of money available? Oh, profoundly if you write the 
regulations the right way.
    So technical assistance does count sometimes and we do not 
want a situation where we are having competition between the 
NGOs and these technical people because we need both of them. 
If we do not have both of them, we are not going to succeed in 
this in the longer term.
    In terms of the Palestinian Authority, the President is 
going to tell me what to do and I am going to do it.
    I happen to personally favor your position on this because 
the finance minister is very well regarded by the USAID 
mission. He is what he appears to be from what we can see and 
we work with him all the time and talk with him.
    But there is a prohibition in law against us giving money 
to the PA unless there is a presidential waiver and 
restrictions. Actually, we did not have money stolen because we 
did not put much money through the PA. And when we did, we had 
it.
    We made agreements that the money would be put in a bank 
account in the bank of our choice and there were concurrent 
audits being done to make sure that did not happen because we 
heard stories.
    Senator Bennett. He stole it from--he was an equal 
opportunity thief.
    Mr. Natsios. Yes, he did.
    Senator Bennett. He stole it from everybody.
    Mr. Natsios. Yes, he did. We think that the best hope for 
peace right now is to support the President who was elected 
democratically by his own people. He is a moderate. He wants to 
end the violence and the President met with him today.
    I do not know what agreements were made. But whatever they 
are, we are going to do them. Secretary Rice is focusing on 
this. We are focusing on it. I deal with it every week. And, 
Senator, if I am told to do it, I am going to do exactly what 
they tell me to do.
    Senator Bennett. Well, simply carry the message back that 
there is at least one appropriator who would look very kindly 
on that particular focus.
    Senator DeWine.
    Senator DeWine. I just have a couple more questions.
    You talked very eloquently about the change that you would 
like to make in regard to food aid and the flexibility you 
would like.
    I wonder if you could just talk a little bit about the 
overall issue of food aid. We were able to get a little money 
for you all in the supplemental. But as you look at the next 
budget that we are getting ready to prepare now or the 
appropriations we are working on now and the year ahead, where 
are we in the world?
    Mr. Natsios. Well, Senator, the problem with food aid and 
our budgeting process is that our budgets are put together 
about a year to a year and a half before they are actually 
appropriated.
    Senator DeWine. Right.
    Mr. Natsios. And so I cannot tell when there is going to be 
a drought or genocide or a civil war, an insurgency. And for a 
number of years now--it is not just the last 2 years--70 to 75 
percent of our funding through Title II goes to emergencies. 
And I do not expect frankly that is going to change a lot.
    We have a very serious crisis in Zimbabwe now, in northern 
Uganda, in eastern Congo, in Darfur. In southern Sudan, there 
is a drought and we do not want to disrupt the peace process 
that has taken us all these years to reach fruition. And there 
are food aid needs in the south, but particularly in Ethiopia 
where there has been a serious drought.
    I cannot predict what conditions are going to be like once 
the budget passes because it will be affected by the crop that 
is harvested this fall in many of these countries. I watch this 
on a daily basis in terms of the food programs because I know 
it means the difference between life and death for many people.
    When there is a need, USAID goes through the interagency 
process to try to access the Emerson trust. We accessed the 
Emerson trust in Darfur. And I have no hesitancy going to ask 
for assistance through that mechanism which, of course, will 
allow us the flexibility when we do not have the amount of 
appropriation we need.
    So that is a very important tool that we have. But the 
other tool that I would like is at least some degree of the 
ability to do local purchase. It could be done through the 
means in the budget which is the mechanism that I support.
    Of course, this is through different committees; it would 
be the Agriculture Committees and Appropriations Committees 
that would have to do this--is perhaps a change that allowed 
maybe 10 or 15 percent of Title II to be used for local 
purchase when there is an emergency situation that requires 
immediate attention.
    The more tools we have that are more flexible, the more 
people's lives we can save and the more crises we can prevent 
from getting to the critical point. None of us want to see 
people die. And 60 percent of the food that goes to the World 
Food Program comes from the United States. We are the largest 
donor of humanitarian assistance.
    According to the DAC, the Development Assistance Committee 
of the OECD that keeps records on all donors, on the emergency 
side, which is droughts and civil wars and natural disasters, 
the U.S. Government is 50 percent of the total for all donors 
in the world comes from U.S. Government, principally from the 
PRM account of the State Department and USAID's accounts.
    I am very proud of that. I work on it very hard. And we 
appreciate the support of the Senate and the House on these 
appropriation bills because without the appropriations, we 
cannot do this work.
    But I cannot predict what is going to happen in the future 
in terms of crops and droughts and civil wars unfortunately. I 
wish I could.
    Senator DeWine. Of course, we had to come up with a figure 
in regard to the money. So that is----
    Mr. Natsios. I am told by OMB that I support the----
    Senator DeWine. Yes, I understand.
    Mr. Natsios [continuing]. Budget as proposed. Of course, 
Senator.
    Senator DeWine. Of course you do. We understand that.
    I wonder if you could talk a little bit about the situation 
in the Congo. The reports are that 1,000 people a day possibly 
die from preventable diseases and hunger because humanitarian 
groups simply cannot reach them.
    What is USAID doing to develop new strategies for the Congo 
and other conflicts where there are large parts of the 
territory that are really just inaccessible to humanitarian aid 
groups?
    Mr. Natsios. There is, of course, a horrendous civil war 
with unspeakable atrocities. I do not even want to discuss them 
in public. They are in some cases worse, worse than what has 
happened in Darfur. The problem is there are not people 
reporting it, so the media does not see what has happened 
there.
    One of the first acts that I undertook when I became 
Administrator was to review our emergency budgets both, Title 
II and the OFDA budget, the Office of Foreign Disaster 
Assistance, a program I ran under the President's father, to 
see if we could come up with money for eastern Congo, which is 
where the focus of these atrocities are.
    The level of mass rape has been unimaginable. In some 
cities, two-thirds of the women have been raped. The violence 
against women--I have never seen anything so horrific. It is 
horrible in Darfur, but it is just as horrible in eastern 
Congo.
    We have begun a whole program to try to stop that and we 
worked with some members of the international community to see 
if we cannot get some rape convictions. And as of now, based on 
some funding we provided to institutions, international 
institutions, 70 people have now been convicted of rapes and 
put in jail in very highly visible cases.
    You do not have to put everybody in jail who commits the 
rapes. All you have to do is do it and do it visibly because it 
sends a message that you cannot have impunity in this kind of 
violence.
    The second problem that we are facing right now is one of 
the major crops that people survive on are bananas. You know, 
that is the principal crop in Burundi, Rwanda, and part of 
eastern Congo. There is a banana virus now that is spreading 
very rapidly and killing much of the banana crop.
    There is an improved variety of banana that was developed 
by some of the international research that USAID funds with 
other donors through the World Bank. And we are trying now to 
use funds appropriated in the 2005 budget to begin to spread 
this banana-resistant crop that will supplant the virus-prone 
plant that is now dying.
    We have tested this. It does work. It does not get the 
virus if it is planted. And it is just as good and just as 
productive. So we are trying to do that as a developmental 
intervention.
    The third thing we are facing now is the spread of disease. 
The number of people according to reporting that the 
International Rescue Committee has done on child deaths in some 
of the cities are simply astronomical.
    I am at a loss to figure out how the death rates could have 
been this high. It cannot be just disease. I think part of it 
must have been disruption of the markets and a disruption of 
people's family income so they cannot access the markets.
    But we are looking at this now and we have put a number of 
grants through OFDA in place to do immunizations working with 
UNICEF and the NGO Committee which we will continue.
    Senator Bennett. Well, I thank you very much. Your 
testimony has been very, very helpful.
    Mr. Natsios. Thank you.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Bennett. 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

                                ARMENIA

    Question. Congress recommended up to $3 million in fiscal year 2005 
funds for ongoing humanitarian needs in Nagorno-Karabakh--does USAID 
anticipate providing this funding?
    Does USAID have the capacity to increase activities in Nagorno-
Karabakh, and if so, what additional programmatic opportunities exist?
    Answer. Between fiscal year 1998 and fiscal year 2005, USAID 
obligated $25.2 million for Nagorno-Karabakh (including $2 million in 
fiscal year 2005).
    USAID continues to carry out humanitarian work at levels that USAID 
believes to be effective and appropriate in meeting the basic needs of 
those in Nagorno-Karabakh. USAID's humanitarian assistance to Nagorno-
Karabakh supports basic shelter, primary and maternal health, income 
generation, potable and irrigation water supply and sanitation, 
subsistence agriculture, schools, and mine clearance.

                                 EGYPT

    Question. What is the fiscal year 2006 budget request for democracy 
programs for Egypt, and does USAID intend to support indigenous 
groups--such as the Ibn Khaldoun Center--with these funds?
    Does USAID support continuation of language in current law that 
denies the Egyptian Government's veto over democracy and governance 
activities?
    What is USAID's view on the $200 million Commodity Import Program 
for Egypt--has it outlived its usefulness?
    Answer. The USAID fiscal year 2006 budget request for democracy 
programs is $25.4 million. Part of these monies will be used to support 
indigenous groups. We will fund ideas to promote political reform from 
Egyptian civil society actors, such as the Ibn Khaldoun Center.
    USAID supports continuation of language in current law that denies 
the Egyptian Government's veto over democracy and governance 
activities.
    Given the GOE's shift to a market determined exchange rate and the 
increased availability of foreign exchange, USAID is looking at options 
for reprogramming the Commodity Import Program's funding.

                           TSUNAMI ASSISTANCE

    Question. Congress recently approved $656 million for the Tsunami 
Recovery and Reconstruction Fund. The world was generous in pledging 
assistance to impacted areas following the tsunami--are pledges being 
fulfilled, and if not, which countries are delinquent?
    Answer. Figures compiled by the U.N. Office for the Coordination of 
Humanitarian Affairs (OCHA) indicate that humanitarian assistance 
commitments/contributions are about two thirds of the amount initially 
pledged by donors. In a June 6 report, the United States is listed 
among donors that have yet to fulfill their pledges, although total 
U.S. commitments to date, including DOD expenses, exceed the $350 
million U.S. pledge. OCHA reports other donors that have yet to fully 
meet their pledges include Canada, the European Commission, the United 
Kingdom, Germany, Italy, China, France, United Arab Emirates, Sweden, 
Australia, Finland, and New Zealand.

         TSUNAMI ASSISTANCE: RESPONSE OF INDONESIAN GOVERNMENT

    Question. How would you characterize the response of the Indonesian 
government, including the military, in providing relief in Aceh?
    Answer. Operating under extremely difficult circumstances, the 
Government of Indonesia (GOI) performed remarkably well during the 
initial emergency relief phase following the earthquake and tsunami on 
December 26. It acknowledged the enormity of the disaster and the fact 
that the scope of the disaster far outweighed the GOI's own capacity to 
provide emergency relief and supplies. The decision on December 28 by 
the GOI to open up Aceh to foreign donors, NGOs, militaries and media 
was heartening, as this conflict zone was a ``no go'' area for 
foreigners up until this date. This allowed a rapid ramp-up of 
international assistance efforts that was made possible, largely, by 
the close cooperation with the Indonesian military (TNI). Belying 
widespread concerns that the TNI might restrict the flow of aid or 
limit access to victims, the TNI, by and large, pitched in with 
critical logistical and manpower support. With the arrival of U.S. 
military assets on January 1, this was all the more important. The TNI 
assisted in coordinating the landing of relief planes, U.S. helicopter 
sorties and relief supply convoys. In the ensuing weeks, the U.S. 
military and TNI worked closely in providing emergency relief and 
supplies that saved thousands of lives.
    Beyond the role played by the TNI, the GOI played an important 
regional leadership role in successfully organizing an international 
donors' conference in Jakarta in mid-January, in cooperation with ASEAN 
and the United Nations. This helped bring global attention to the 
enormity of the disaster in not only Indonesia but throughout the 
region, and resulted in major pledges of assistance to all affected 
countries. As the relief phase ended, the GOI developed an overall 
blueprint for the rehabilitation and reconstruction of Aceh. The GOI 
also built temporary living quarters, which have provided shelter to 
some of the nearly 500,000 homeless survivors. With the recent 
establishment of the Aceh and Nias Rehabilitation and Reconstruction 
Agency, there is a new sense of urgency on the part of the GOI to 
provide better coordination of the recovery effort and to move more 
quickly in providing shelter, restoring livelihoods and re-establishing 
basic community services.

                            IRAQ: CONTRACTS

    Question. What percentage of contracts are security costs, and what 
is the average overhead cost per contract?
    How many contracts has USAID awarded to Iraqi entities, and will 
increasing these contracts have any impact on reducing security costs 
for activities in Iraq? Might it increase the pace of reconstruction?
    Answer. The total estimated security cost for USAID/Iraq contracts 
averages around 10 percent of the total contract value with an average 
overhead cost, including security, of roughly 37.4 percent. For 
example, Bechtel, USAID's largest contractor in infrastructure, with a 
negotiated overhead cost of approximately 30 percent, estimates 7.1 
percent for costs of security and insurance.
    USAID has not made any direct contracts with Iraqi entities. 
Through subcontracts, USAID has approximately 3,000 Iraqi partners, 
including Civil Society Organizations, Non-Governmental Organizations, 
grantees and subcontractors. For example, Bechtel, USAID's largest 
contractor has made over 160 subcontract awards, valued at 
approximately $200 million, to Iraqi entities.
    Security costs are notably reduced when Iraqis are involved in 
implementing contracts. For example, CAP and DAI, which use many Iraqi 
firms, have average security costs of 6 percent versus the overall 
average of 10 percent in security costs for USAID/Iraq contracts. 
Although involving Iraqi firms reduces security costs, it is not likely 
to increase the pace of reconstruction. USAID is presently disbursing 
$40 million weekly, sufficient to complete the reconstruction work 
assigned to us by mid-2006.

                       IRAQ: VOCATIONAL TRAINING

    Question. USAID is considering a change to the Iraq Vocational 
training and employment services contract. The committee has expressed 
support for using some of the aspects of the U.S. job corps program in 
the delivery of vocational training to Iraqis.
    As I am concerned that USAID will abandon the use of the U.S. Job 
Corps model in this contract, can you assure me that the agency will 
continue to utilize effective U.S. Job Corps approaches in the 
vocational training we are providing in Iraq?
    Answer. The U.S. Job Corps remains one of the world's most 
successful programs with regard to vocational training. USAID fully 
expects that any proposal being submitted to implement a vocational 
training program in Iraq, particularly from an American firm, would 
include the U.S. Job Corps as a basis for the implementation structure. 
However, wholesale importation of the model as a panacea for Iraq's 
vocational training needs would be insufficient as the post-conflict 
and socialist nature of Iraq's economy requires a tailored, Iraq-
specific solution. At this time, USAID is revising the statement of 
work to reflect the immediate needs for a trained workforce to allow 
Iraqis to successfully operate and maintain the public utility projects 
that will be turned over to them in late summer 2005.

                        IRAQ: DEMOCRACY PROGRAMS

    Question. What contracts and grants exist for democracy promotion 
in Iraq and how successful have these efforts been?
    How does USAID coordinate its democracy-building efforts in Iraq 
with the State Department and Iraqi Government, and does the 
Administration intend to continue to support the work of the 
International Republican Institute and the National Democratic 
Institute in Iraq?
    Answer. Grants and contracts grants exist for democracy promotion 
in Iraq with the following organizations: America's Development 
Foundation (Contract), Consortium for Elections and Political Process 
Strengthening (Grants for NDI, IRI, and IFES), Research Triangle 
Institute (Contract), ACDI/VOCA (Grant), CHF (Grant), Mercy Corps 
(Grant), Save the Children (Grant), IRD (Grant), and Voice for Humanity 
(Grant).
    Collectively, these programs have contributed significantly to the 
elections, building democratic institutions, raising public awareness 
and understanding of democratic principles and processes, encouraging 
civic participation across all ethnic, tribal, religious, gender, and 
regional lines, and assisting civilian victims of war. As a significant 
by-product of the project goals, they have directly and significantly 
increased employment opportunities and improved infrastructure.
    USAID/Iraq works hand-in-hand with Embassy Baghdad while USAID/
Washington is actively engaged in the formal interagency process as 
well as regular communication with Department of State counterparts. 
USAID's programs in the field are coordinated with the Embassy and the 
appropriate Iraqi government officials. The Administration highly 
values the work of IRI and NDI and expects to continue supporting their 
work in Iraq in fiscal year 2006, subject to the availability of 
funding. Our grantees under the Community Action Programs work almost 
exclusively with and through Iraqis, building their skills in citizen 
advocacy, collective decision-making, and other democratic processes 
while rebuilding their lives and neighborhoods. The local governance 
program implemented through Research Triangle Institute also works 
predominantly with and through Iraqis improving the capacity of 
government officials to deliver basic services and respond to the needs 
of their constituents. America's Development Foundation works with 
Iraqi civil society organizations, journalists, and media outlets to 
enable them to effectively represent issue-based points of view.

                          DEMOCRACY PROMOTION

    Question. What specific plans does USAID have to ensure it keeps 
pace with the President's agenda to promote freedom abroad, and why 
isn't democracy its own ``pillar'' within USAID?
    Answer. USAID has identified ``building sustainable democracies'' 
as one of the Agency's four overarching goals. Currently, USAID manages 
democracy programs in over 80 countries. For over two decades USAID 
programs have contributed to the rule of law, legitimate political 
processes, a robust civil society, and good governance.
    Our work includes democracy promotion to democracy building. For 
example, USAID is working with the Government of Iraq and Iraqi 
officials to build capacity in key government ministries that will 
undertake the task of governance in the new regime. A key element of 
U.S. assistance is to help Iraqis learn to make decisions at the 
grassroots level. Through its Community Action Program, the agency 
works with residents of neighborhoods to identify, prioritize, and meet 
critical community needs while utilizing democratic processes. USAID 
has committed over $129 million to date to fund 2,844 community 
projects.
    To keep pace with the President's agenda, USAID is drafting a 
``democracy building'' strategy which will be completed soon. It 
addresses the challenges of fragile and failing states, as well as 
recalcitrant states, and the linkages between governance and other 
development sectors and activities. The strategy will position USAID to 
ramp up its democracy programs.
    In addition to building a more robust Office of Democracy and 
Governance, USAID is training many new officers through the New Entry 
Professional, the International Development Intern, and the 
Presidential Management Fellow programs. The Agency currently has 
approximately 400 trained democracy and governance professionals, and 
continues to staff up.
    During the Agency's 2002 reorganization, the Center was moved to 
the new Bureau for Democracy, Conflict, and Humanitarian Assistance 
(DCHA) and renamed the Office of Democracy and Governance. The location 
of the Office of Democracy and Governance in the DCHA Bureau assures 
that democracy and governance activities will not be stove-piped, but 
rather mainstreamed within the Agency's critical programs. Over the 
course of fiscal year 2005, USAID will continue to strengthen our 
democracy programs and looks forward to working with the Committee to 
this end.

                          DEMOCRACY DEFINITION

    Question. What is USAID's definition of a democracy program, and 
what is the rationale for the Agency's preference to use large 
contractors instead of smaller, more specialized grantees in conducting 
these programs?
    Answer. The following definition of democracy and governance 
programs was agreed by USAID and the State Department:
    Democracy and governance programs are technical assistance and 
other supports to strengthen the capacity of reform-minded governments, 
non-governmental actors, and/or citizens, in order to develop and 
support democratic states and institutions that are responsive and 
accountable to citizens. They also include efforts in countries that 
are not reform-minded, to promote democratic transitions. Programs are 
organized around core concepts considered the key building blocks of 
democracy. Democracy programs promote the rule of law and human rights, 
transparent and fair elections coupled with a competitive political 
process, a free and independent media, stronger civil society and 
greater citizen participation in government, and governance structures 
that are efficient, responsive and accountable.
    USAID does not prefer to use large contractors instead of smaller, 
more specialized grantees in implementing democracy and governance 
programs. The Agency encourages all possible providers of goods and 
services to compete in the various acquisition and assistance processes 
which the pertinent federal laws and regulations require. Contracts are 
utilized when a very substantial degree of control and ongoing 
oversight of the activity is appropriate. This level of involvement is 
often required in sensitive efforts to reform governments or build 
democracy, but is inappropriate in working with grantees. However, 
USAID supports more specialized grantees extensively in its democracy 
programs.

                   COORDINATION OF DEMOCRACY PROGRAMS

    Question. How does USAID coordinate its democracy programs with the 
State Department and the National Endowment for Democracy?
    Answer. We coordinate at every level possible with the State 
Department. In the field, USAID works under the authority of the 
Ambassador, and the Mission Director reports to the Ambassador. In some 
areas, such as democracy and governance, there are often standing 
committees, led by the State Department, in which all relevant U.S. 
Government agencies in the country coordinate their activities (this 
may include the State Department, USAID, Department of Justice (FBI), 
Drug Enforcement Administration, and others). Indeed USAID feeds 
directly into the Mission Program and Planning process to ensure 
consistency and coordination at the country level.
    In Washington, the relationship is extremely rich and complex, with 
networks in both regional and functional areas, as well as a variety of 
management channels. USAID's Bureau for Policy and Program Coordination 
has the primary responsibility for linkages and coordination. The DCHA/
DG office has additional separate, lower level linkages, particularly 
with the regional bureaus and the State Department's Bureau of 
Democracy, Human Rights and Labor (DRL) Office. One example of 
coordination with DRL is represented by the Agency's regular service on 
technical review panels to evaluate proposals submitted in response to 
democracy-related RFAs issued by the State Department. In coordination 
with DRL, we are also beginning to work out a common budget format and 
improve common indicators of DG success. With the State Department's 
Policy Planning Staff, we have been involved in developing and 
coordinating strategic planning operations. With the Bureau for 
International Narcotics and Law Enforcement Affairs (INL), USAID often 
works on security issues, local governance and other areas of DG 
activity, often implementing INL funding into DG programs.
    USAID and the National Endowment for Democracy (NED) implement 
complementary programs. The two agencies share information on a routine 
basis, both in Washington and in the field, concerning their respective 
activities. USAID receives and disseminates quarterly a list of all NED 
grants, so as to not duplicate work already being done by NED. 
Moreover, USAID is the primary support agency for the National 
Democratic Institute, International Republican Institute, and the 
American Center for International Labor Solidarity, which represent 
three of NED's constituent institutes.

                      SPENDING ON DEMOCRACY FUNDS

    Question. How much did USAID spend on democracy programs in fiscal 
year 2004, and what percentage of these funds went to contractors and 
to grantees?
    Answer. USAID allocated $1,380,655,000 for democracy programs and 
activities in fiscal year 2004, inclusive of all appropriations and 
transfers channeled through USAID. Specifically within the Development 
Assistance account, USAID used approximately $148,103,000 for democracy 
and governance programs.
    During fiscal year 2004, approximately $1.04 billion were put into 
new or existing grants and contracts related to democracy and 
governance. Of this, $650.16 million or 62 percent went into grants. 
The remaining $393.21 million or 38 percent went into contracts. The 
proportion going into grants increases to 67 percent when Iraq and 
Afghanistan are removed from the calculation. In Iraq and Afghanistan, 
democracy grants accounted for 45 percent and 84 percent respectively.

                          DEMOCRACY CONTRACTS

    Question. Please provide a detailed listing of all democracy 
contracts awarded in fiscal year 2004 and 2005 on a country-by-country 
basis, including the name of contractor, the amount awarded, and a 
brief summary of contract objectives.
    Answer. USAID is currently disaggregating its fiscal year 2004 
democracy and governance programs to provide this information. This 
work will be completed shortly.

                           AVIAN FLU/HIV/AIDS

    Question. Should the Avian influenza prove pandemic, what is the 
anticipated health impact on the HIV/AIDS population in Asia?
    Answer. The virus that causes Avian influenza, called H5N1, has 
newly emerged and even the healthiest humans have little or no immunity 
to it. Current mortality rates from H5N1 infection exceed 60 percent. 
Nearly all of those who have died from Avian influenza to-date have 
been young and in general good health. Should this influenza prove 
pandemic, all people would be at risk. The Central Intelligence Agency 
estimates the death toll to be as great as 180 million people during 
the first nine months of the outbreak. While there have been no 
specific studies evaluating the impact of H5NI infection on HIV/AIDS 
populations, it is assumed that diminished immuno-competency will 
contribute to even greater vulnerability to infection and death.

                  PROGRAMS IN THAILAND REGIONAL OFFICE

    Question. Please provide a summary of all programs (including a 
brief description of activities and funding amounts) that USAID's 
regional office in Thailand manages.
    Answer. Activities managed by RDM/A fall under four strategic 
objectives--all funding is fiscal year 2005 appropriations unless 
otherwise stated:
Strategic Objective--Vulnerable Populations in the Region Assisted and 
        Other Special Foreign Policy Interests
  --Reduce Trafficking in Persons ($400,000 DA).--Emphasizes stronger 
        ties among countries in the region on trafficking issues and 
        cross border initiatives including prosecution, protection and 
        prevention as well as improved data collection, capacity 
        building and standardization of research and monitoring and 
        evaluation tools.
  --Protect Human Rights and Equal Access to Justice ($700,000 CSH; 
        $1,070,000 CSH Prior Year; $300,000 DA).--Strengthening the 
        legal framework to protect the rights of people with 
        disabilities (PWD), including enforcement of Barrier-free 
        Access Codes and Standards in construction, implementation of 
        national action plans on accessibility to public transportation 
        and reviewing and enforcing of governmental standards on 
        employment of PWDs, along with helping PWDs to acquire the 
        knowledge and skills needed to find employment.
  --Build Health System Capacity ($500,000 CSH; $500,000 CSH Prior 
        Year; $450,000 DA).--Strengthen institutional structures; shape 
        direction of prosthetic and orthotic rehabilitation; support 
        development of NGO laws to raise awareness of the role of civil 
        society in Vietnam; and, support inclusive education for the 
        disabled.
  --Establish and Ensure Media Freedom and Freedom of Information 
        (Burma) ($4,500,000 ESF; $2,366,000 ESF Prior Year).--USAID 
        will fund targeted programs at the U.S. Embassy's American 
        Center; support training and advocacy for a transition to a 
        democratic government by preparing the Burmese population 
        (inside and on the Thai border) to participate in a free and 
        democratic society. The State Department-managed portion of 
        this program supports information and media activities and 
        institution building programs.
  --Health and Education along the Thai-Burma Border (Burma) 
        ($3,000,000 ESF; $6,057,000 ESF Prior Year).--Humanitarian 
        assistance to refugees along the Thai/Burma border will 
        continue to improve access to primary health care, maintain 
        nutrition and food security for refugees and provide access to 
        health care for Burmese in Thailand residing outside of refugee 
        camps. A recently competed request for proposal (RFA) will 
        further define focus areas. Also included is the development of 
        a viable and sustainable education system recognized in and 
        transferable to Burma when refugees return to their homeland. 
        Activities include training and capacity building for teachers, 
        principals and administrators; curriculum development; and 
        special education.
  --Prevent and Control Infectious Diseases of Major Importance (Burma) 
        ($436,000 ESF; $1,000,000 ESF Prior Year).--Continuance of the 
        regional HIV/AIDS activities described below to include Burma. 
        The malaria and infectious diseases program launched in fiscal 
        year 2003 along the Thai-Burma border will continue. The RFA 
        mentioned above will determine focus areas.
  --Protect and Increase the Assets and Livelihoods of the Poor during 
        Periods of Stress ($4,216,000 ESF; $110,000 ESF Prior Year).--
        In fiscal year 2004, USAID supported ethnic Tibetan communities 
        in China. Fiscal year 2005 funds will be used to continue these 
        programs as well as an existing agreement with The Bridge Fund 
        (TBF). The Sustainable Tibetan Communities project is 
        implemented in the Tibet Autonomous Region (TAR) and in other 
        Tibetan areas outside the TAR.
Strategic Objective--Improved Regional Governance and Economic Reform
  --Improve Economic Policy and Governance ($6,000,000 DA).--A grant or 
        cooperative agreement will be competed to implement a regional 
        program that will improve public and private sector governance; 
        improve transparency and accountability; development public 
        policy reforms consistent with civil society advocacy, judicial 
        reforms, advancement of democratic processes and 
        counterterrorism measures such as anti-money laundering 
        practices; and, encourage progress toward implementation of 
        free trade agreements and the promotion of open political and 
        economic systems. This activity will include promotion of 
        further trade and investment reforms needed to meet Vietnamese 
        BTA commitments and requirements for WTO accession.
  --Improve Economic Policy and Governance ($744,000 ESF).--Technical 
        assistance and training will support USG objectives with ASEAN 
        such as enhancing administrative and implementation capacity of 
        the secretariat and building regional cooperation on 
        transnational areas such as terrorism, human trafficking, 
        narcotics and HIV/AIDS and other infectious diseases.
  --Improve Community-Based Reconciliation Efforts ($992,000 ESF).--
        Working closely with the Embassy in Bangkok, USAID will 
        identify measure and activities to promote reconciliation and 
        peace in Burma and Southern Thailand through activities such as 
        primary education, migrant rights, democracy and press freedom.
Strategic Objective--Improved Regional Environmental Conditions
  --Improve Access to Clean Water and Sanitation ($4,000,000 DA).--
        Provide technical assistance and training to Asian NGOs and 
        consumer groups to increase awareness and advocacy for expanded 
        water access through regional grants programs, working with the 
        private sector and public awareness campaigns. Planned 
        activities include linking Asian water providers with U.S. 
        utilities to assist in the development of financial plans for 
        full-cost recovery; improving operating performance; 
        identifying technologies to expand water and sanitation access; 
        and working with local and national governments to improve the 
        policy framework for tariff reform, land tenure and regulations 
        for inter-governmental fiscal transfers and other enabling 
        conditions.
  --Reduce, Prevent and Mitigate Pollution ($1,000,000 DA).--Activities 
        at the city, national and regional levels will improve urban 
        air quality while responding to the Presidential Initiative on 
        Global Climate Change. Training and technical assistance to 
        local governments will strengthen capacity to manage air 
        quality through monitoring, development of data bases and 
        emissions inventories, the use of air quality planning tools 
        and identification and assessment of improvements.
  --Improve Sustainable Management of Natural Resources and 
        Biodiversity Conservation ($3,000,000 DA).--RDM/A is assuming 
        responsibility for programs previously managed by the East Asia 
        and Pacific Environmental Initiative for forest, coastal and 
        marine resources management and biodiversity.
Strategic Objective--Improved Effective Regional Response to HIV/AIDS 
        and Infectious Diseases
  --Reduce Transmission and Impact of HIV/AIDS ($13,343,000 CSH; 
        $193,000 CSH Prior Year).--Through the Greater Mekong HIV/AIDS 
        program, USAID is supporting efforts and collaborative 
        partnerships to rapidly scale-up access to packaged prevention, 
        care, support and treatment interventions that effectively 
        reach most-at-risk populations in both country-specific and 
        region-wide contexts. Quality is maintained through south-to-
        south exchanges and centers of excellence that foster 
        institutional capacity building in remote areas currently 
        lacking quality health care service providers. Activities 
        ensure the persons living with HIV/AIDS have a role in planning 
        AIDS programs.
  --Prevent and Control Infectious Diseases of Major Importance 
        ($4,108,000 CSH; $1,000,000 CSH Prior Year).--Activities focus 
        on TB, malaria, surveillance, infectious disease control in 
        migrants and host communities on the Tai-Burmese border and 
        control and prevention of infectious diseases of local 
        importance by strengthening and expansion of treatment 
        strategies; monitoring for multi-drug resistant TB; enhancing 
        collaboration between HIV and TB programs and developing a TB 
        diagnostic algorithm; surveillance for anti-malarial drug 
        resistance; increased emphasis on drug quality surveillance, 
        adherence and drug use assessments; enhanced regional 
        coordination efforts; and capacity building. Given the 
        increasing impact of avian influenza in the region, USAID will 
        continue to act in concert with other U.S. Government agencies 
        and international organizations to prevent the spread of the 
        disease and increase the ability of affected countries to 
        manage avian flu outbreaks.

                    OVERSEAS CONFERENCE EXPENDITURES

    Question. How much does USAID spend on travel to overseas 
conferences and meetings?
    Answer. The Agency does not separately account for travel to 
overseas conferences and meetings. The best readily available proxy is 
spending under Object Class Code (OCC) 210330, which covers travel for 
conferences, seminars, meetings, and retreats. In fiscal year 2004, the 
Agency obligated $8.9 million under this OCC. Although this provides a 
general idea of spending on conferences and meetings, the data has 
several limitations, including that it covers both overseas and 
domestic travel.
    In particular, the data includes spending on seminars and retreats, 
in addition to conferences and meetings, and for USAID-hosted events, 
not simply travel and attendance at outside conferences. The data also 
may exclude spending on conferences and meetings that may be classified 
under other object class codes, such as site visits, particularly if 
the conference or meeting was completed in conjunction with a site 
visit.
    To maximize the effectiveness of available funding, the Agency has 
implemented a new policy limiting domestic and overseas travel from 
Washington. Any travel from Washington, whether program or OE funded, 
by a group of more than three staff members, including direct- and non-
direct-hire staff, must be approved in writing by the Chief of Staff.

                             OVERHEAD RATE

    Question. What is the overhead rate at USAID (including program 
funds used to cover shortfalls in operating expenses)?
    Answer. The Agency has done a significant amount of work on the use 
of Operating Expense (OE) and program funds for administrative expenses 
overseas. Based on detailed analyses, the Agency established an 
incremental overseas administrative rate of 7 percent for unbudgeted 
program increases. In other words, a $100 million increase in an 
appropriation, supplemental, or agency transfer for overseas programs 
would require $7 million in additional OE, or program funds for 
administrative purposes, for program management. The incremental rate 
reflects only variable costs.
    The analyses also showed the total overseas administrative rate is 
13 percent. This is the ratio of total administrative costs (both OE 
and program funded) to program dollars actually used to deliver 
assistance. The difference between these two rates is that the total 
rate includes both variable and fixed costs.

                        PROCUREMENT IMPROVEMENTS

    Question. What plans does USAID have to improve its procurement 
process to make it more transparent and accessible to new 
organizations?
    Answer. The Office of Acquisition and Assistance (OAA) is working 
on the following improvements in transparency and accessibility to new 
organizations.
Changes in internal USAID procurement practices
  --Class waiver to permit limited competition at the discretion of the 
        Grants Officer to organizations that have received less than 
        $500,000 in USAID grant financing within the last five fiscal 
        years.
  --Education programs to sensitize Contracting Technical Officers 
        (CTOs) to understand success of small businesses.
  --Workshop by the Small Business Association to provide information 
        on their programs.
  --Small businesses' forum in Ronald Reagan Building for USAID CTOs to 
        become familiar with the technical expertise and capabilities 
        of small businesses.
  --Quarterly outreach conferences conducted by the Office of Small and 
        Disadvantaged Business Utilization.
  --Improvement to the external website to make it user friendly.
Promotion of small businesses to large contractor firms
  --Creation of a mentor protege program to motivate and encourage 
        large business prime contractor firms to provide mutually 
        beneficial developmental assistance to small businesses.
  --Establishment of small business targets within prime contracts with 
        corresponding award for meeting goals.
  --Set aside contracts within competitions for small businesses to 
        compete amongst each other.

        AFGHANISTAN: IMPACT OF ALTERNATIVE LIVELIHOODS PROGRAMS

    Question. How successful are alternative development programs in 
Afghanistan, and what is your assessment of poppy eradication efforts 
to date?
    Answer. Implementing an effective alternative development program 
in Afghanistan is challenging, as there continue to be serious security 
constraints. Nonetheless, programs are showing success. For example, in 
Nangarhar, 14,000 rural residents were employed on a daily basis, 
earning over $1.8 million in salaries. In Helmand, over 14,000 laborers 
were employed on a daily basis earning a total of over $4.27 million. 
These successes in employment generation are significant because 
lessons from other countries show that providing alternative legitimate 
sources of income is a key component of an effective counter narcotics 
strategy.
    In addition, longer-term comprehensive provincial economic 
development programs, which are being formulated in collaboration with 
the local administrations in Nangarhar, Laghman, Helmand, Kandahar, and 
Badakshan provinces, show promise for successful alternative 
development. Implementation of these programs is just beginning and 
covers a wide range of activities including rural infrastructure, 
agricultural development, agri-business and financial services. This is 
a long term effort and we are in the early stages.
Security impact on Alternative Livelihoods
  --Faced with multiple security threats and the death of several 
        staff, the contractor implementing USAID's Alternative 
        Livelihoods program in Helmand temporarily suspended work on 
        May 19. Next week, the contractor plans to start sending out 
        armed convoys to pay Afghan farmers for work done before the 
        stoppage. The contractor is putting in place an enhanced 
        security package and plans to start work again by July 1.
  --In addition, the contractor implementing the Alternative 
        Livelihoods program in Nangarhar slowed down activities due to 
        credible security threats.
  --Suspension of both these programs resulted in job loss for over 
        26,000 Afghans employed through the Alternative Livelihoods 
        program.
Eradication
  --State/INL manages poppy eradication efforts and can respond to this 
        question.

            AFGHANISTAN: COORDINATION WITH AFGHAN GOVERNMENT

    Question. How does USAID coordinate its alternative development 
programs with the Afghan Government?
    Answer. USAID coordinates its alternative development program with 
all levels of the Afghan Government--national, provincial, district, 
and village. At the national level, USAID participates in a working 
group of several Afghan Government Ministries, donors and NGOs that is 
developing a framework that will be used by the Government to plan and 
manage development activities. At the provincial level, alternative 
development plans are being developed by USAID contractors in 
consultation with provincial authorities, who must approve them. 
Further, USAID plans to provide programs to build the management 
capacity of both provincial and district authorities. Finally, at the 
village level, local authorities are widely consulted by USAID for its 
current cash-for-work activities in order to ensure that all projects 
enjoy popular support and meet local needs.

                    AFGHANISTAN: VOICE FOR HUMANITY

    Question. Does USAID intend to continue to support Voice for 
Humanity's civic education programs in Afghanistan at the $7 million 
level recommended in the Senate report accompanying the emergency 
supplemental bill?
    Answer. Pursuant to the supplemental, USAID notified Congress in 
the Sec. 2104 financial report, of our intent to award $3 million in 
fiscal year 2005 supplemental funds to Voice for Humanity (VFH) in 
anticipation of upcoming Afghan parliamentary elections. The financial 
plan, which serves as notification, was fully cleared by Congress in 
mid-July, and we anticipate the award to VFH will be made shortly.

                     BURMA: COORDINATION OF SUPPORT

    Question. How does USAID coordinate its programs to support Burmese 
refugees and ``economic migrants'' with the State Department?
    Answer. USAID currently administers $4 million in fiscal year 2005 
ESF funds to assist Burmese economic migrants and refugees along the 
Thai Burma border as directed by the fiscal year 2005 Appropriations 
Bill. The State Department's Bureau of Population, Refugees, and 
Migration (PRM) administers approximately $3.9 million in fiscal year 
2005 ESF to assist Burmese refugees residing in camps in Thailand and 
for democracy and media activities. As such, extensive coordination 
between USAID and the State Department is critical to the success of 
the overall Burma program. The Regional Development Mission/Asia (RDM/
A) and USAID/Washington have consistently engaged the State Department 
in all matters regarding Burma ESF funds programming and are committed 
to continuing this practice.
    For example, the conceptual framework and strategic approach to the 
Request for Applications (RFA) for the Burma Border Program, was 
developed through extensive discussions between RDM/A and the Embassy 
in Bangkok, including PRM, on a regional level. The RFA concept was 
then briefed to the entire Embassy, including Ambassador Johnson, in 
October 2004 after a joint assessment visit by EAP, DRL and USAID. 
During the procurement process, USAID invited PRM to participate 
directly in the technical review and sent both a regional and a 
Washington representative to the TEC. Finally, USAID's plan to issue 
the RFA document was duly notified in the fiscal year 2006 
Congressional Budget Submission which was cleared through State.

                     BURMA: COORDINATION WITH STATE

    Question. Is it USAID's understanding that the State Department is 
the lead organization in these efforts?
    Answer. USAID receives policy guidance from the State Department 
and U.S. Embassies abroad in the implementation of all ESF funding. 
Such is the case for the implementation of programs inside and along 
the Thai/Burma border. USAID coordinates closely and collaborates with 
the U.S. Embassy in Bangkok, the U.S. Embassy in Burma and the State 
Department. USAID has and will continue to diligently implement Burma 
programs in accordance with this guidance.
    In the field, USAID's Regional Development Mission/Asia (RDM/A) has 
a team of six staff members who visit the programs on a regular basis. 
Functions performed include development, oversight, and implementation 
of individual activities. The PRM officer at the Embassy has expressed 
confidence and appreciation for the attention that USAID's RDM/A staff 
is able to devote to oversight of the Burma/Thai border programs.
    In Washington, as you are aware, with the development of a joint 
Strategic Planning Framework, State and USAID have formed a Joint 
Policy Council (JPC) to ensure foreign policy goals and development 
assistance programs are fully aligned to achieve U.S. Government 
priorities. USAID's Asia Near East Bureau and corresponding State 
Department offices participate at the working level in the East Asia 
and Pacific Policy Group which oversees Burma program operations and 
reports to the JPC.
                                 ______
                                 
            Questions Submitted by Senator Robert F. Bennett

                 FOOD AID: PURCHASING AND DISRTIBUTION

    Question. Under the administration's proposal to transfer $300 
million from the Public Law 480 Title II account to the USAID 
International Disaster and Famine Assistance account, how would USAID 
purchase and distribute the commodities? Please provide an example of 
how you would operate the program.
    Answer. The USAID Bureau for Democracy, Conflict and Humanitarian 
Assistance Office of Food for Peace would continue to have the 
responsibility to manage USAID food aid programs whether with Public 
Law 480 Title II commodities or IDFA funds. We plan to work through 
Private Voluntary Organizations and the World Food Program (WFP) to 
purchase, transport, store and distribute the food assistance. Many of 
these organizations have been procuring locally for a number of years 
and are, therefore, experienced in all aspects of conducting local 
purchases and supportive of the concept of purchasing food locally in 
appropriate circumstances.
Examples
            Sudan
  --In 2001, OFDA conducted a major local food purchase to meet needs 
        in South Sudan. The budget of $1,000,000 programmed through 
        Norwegian People's Aid was used to purchase 1,275 metric tons 
        of food including sorghum and maize. The commodities were 
        purchased in Western Equatoria and transported by land and air 
        to food deficit areas in Bahr el Ghazel such as Gogrial County 
        and Raja. At that time Raja had experienced fighting between 
        the SPLA and GOS and this food was the first relief to reach 
        the town.
            Iraq
  --For fiscal year 2003, USAID contributed $245 million to WFP to 
        shore up the ongoing universal ration system in Iraq reaching 
        27 million people. USAID supported the regional procurement of 
        330,000 metric tons of mainly food items such as bulk wheat, 
        wheat flour, rice, pulses, sugar, tea, vegetable oil, salt, and 
        weaning cereals. Items were procured from places such as 
        Turkey, Eastern Europe, Jordan, Pakistan, India, Bangladesh, 
        Vietnam and the Gulf States and transported by both land and 
        sea to reach the distribution points within Iraq.

                   FOOD AID: IMPROVING RESPONSIVENESS

    Question. I understand the need to get commodities to the country 
as soon as possible in emergency situations. However, emergency food 
aid, by definition, is sent to countries that are not functioning 
because of some type of natural catastrophe, civil war, or both. In 
other words, getting commodities to the port may be the easy part while 
getting them inland for distribution is the challenge. How would the 
administration's proposal improve on the program currently in place?
    Answer. The Administration's proposal is aimed exactly at improving 
our current program by enabling limited local purchase of food 
commodities. Emergencies have increased in complexity and magnitude, 
and USAID has not always been able to respond in the most effective 
manner to these emergency food crises. This problem has been 
exacerbated by pipeline breaks in the Food for Peace program.
    Given the widely differing conditions faced in the countries where 
we provide food aid, we must have the flexibility to respond quickly 
and appropriately. In many emergency situations, time is a critical 
factor and cash is necessary for making local purchases so that needs 
are met in time to prevent mortality rates exceeding those that are 
normal in the emergency-affected area. The authority to purchase food 
locally in limited circumstances would enable the Agency to respond 
more effectively to emergency situations.

                        VALUE-ADDED COMMODITIES

    Question. The Congress has been very supportive of the use of U.S. 
value-added commodities in the Food for Peace program to assist 
vulnerable people in developing countries. In the farm bill we 
recognized the need to improve the quality of food aid products to meet 
the needs of recipients and to maintain the reputation of U.S. food 
products overseas. We have been hearing about ongoing problems with 
corn-soy-blend being rejected by recipients due to quality problems, 
which suggests that more needs to be done. How is USAID assisting USDA 
in addressing these issues?
    Answer. Of the 2 to 3 million metric tons of U.S. food provided 
annually under Public Law 480 Title II, the majority of these products 
are high quality value added commodities. Whether wheat flour, corn soy 
blend, fortified cornmeal, bagged pulses, bagged rice, or fortified 
vegetable oil, these commodities have proven highly effective in 
restoring health, reducing suffering, and saving lives. By and large, 
these nutritious products are well received by our partners and end 
beneficiaries. Occasionally, complaints or concerns are raised by end 
beneficiaries or partners' staff. Each and every complaint is 
thoroughly investigated by USDA with our assistance. Specifically, our 
strong field presence helps ensure that the right information regarding 
the complaint is gathered by our implementing partners' staff so that 
USDA can investigate, in collaboration with USAID, the likely causes 
and possible solutions. If changes in the specifications for either 
commodities or packaging are warranted, we jointly and collaboratively 
work on making those necessary changes with USDA taking the lead on 
issuing the proper notices to the trade and invitations for award of 
quality product.
    Regarding corn soy blend (CSB), there have been sporadic reports 
over the years of CSB being clumpy, stale, or even turning an 
undesirable color when cooked. Like all complaints relating to quality, 
we are constantly working with USDA on identifying the extent of such 
problems, so USDA can find the causes and the ways to correct and 
improve the quality of the product.
    Question. The President's budget would reduce Food for Peace 
funding by $300 million and increase USAID's International Disaster and 
Famine Assistance (IDFA) by the same amount. Under this proposal, USAID 
would create a new, cash-based food aid program under foreign-grown and 
processed commodities could be purchased for shipment from foreign 
ports on foreign-flag vessels. Under Food for Peace, Title II of Public 
Law 480, USAID has been providing emergency food assistance for 
decades. Why is a new cash-based program needed now?
    Answer. Emergencies have increased in complexity and magnitude and 
USAID has not always been able to respond in the most effective manner 
to these emergency food crises. This problem has been exacerbated by 
the limited resources available for programming, and consequently, FFP 
too often has been faced with pipeline breaks. Given the widely 
differing conditions faced in the countries where we provide food aid, 
we must have the flexibility to respond quickly and appropriately. In 
many emergency situations, time is a critical factor and cash is 
necessary for making local purchases so that needs are met in time to 
prevent mortality rates exceeding those that are normal in the 
emergency-affected area.
                                 ______
                                 
            Questions Submitted by Senator Patrick J. Leahy

                                 BUDGET

    Question. Once again, the President proposes to cut core USAID 
programs. Even after taking into account the transfer of funds from the 
Development Assistance account to the Transition Initiatives account, 
there is still a cut of $70 million for Development Assistance.
    How do you defend cuts in these Development Assistance (DA) 
Programs?
    Answer. The President has requested a $49 million increase from his 
fiscal year 2005 DA request--$1.329 billion in fiscal year 2005 versus 
$1.378 billion in fiscal year 2006--for the combined DA and the 
expanded portion of the Transition Initiatives (TI) accounts. Under the 
President's budget, the DA fiscal year 2005 level should be compared 
with the combined DA-TI fiscal year 2006 request level.

            PERCEIVED CUTS IN EXISTING FOREIGN AID PROGRAMS

    Question. The President assured us that funding for the Millennium 
Challenge Corporation (MCC) would not result in cuts in existing 
foreign aid programs. Isn't that what is happening? Do you foresee cuts 
in USAID assistance to countries that qualify for MCC assistance?
    Answer. USAID does not expect to reduce its funding levels in MCC 
compact countries. The purpose and rationale for MCC is to reward good 
performers and offer them additional incentive and assistance to move 
forward in meeting their development objectives. The MCC compact is 
meant to be additive to the USAID program.
    USAID policy is to initiate a review of USAID programs during the 
annual budget review for countries that have signed an MCC compact. 
During the review, USAID will discuss how compacts may affect the 
country program management and resource request, including operating 
expenses and staff. This review does not necessarily trigger a change 
in funding for the MCC compact country. It would be a great 
disincentive to countries if it were perceived that signing an MCC 
compact implied giving up its USAID program. USAID is coordinating 
closely with MCC to ensure there is no duplication of effort.

                       INFECTIOUS DISEASE FUNDING

    Question. The President's budget would cut USAID's programs to 
combat TB, malaria, and other infectious diseases from $200 million in 
fiscal year 2005 to $141 million in fiscal year 2006.
    How can that possibly be a good idea?
    Let me give you one example of why it makes no sense. There are six 
neglected diseases which cause severe illness and disfigurement among 
millions of people in tropical countries, particularly in Africa. They 
are not easy to pronounce and most Americans have never heard of most 
of them: Schistosomiasis; Lymphatic filariasis (otherwise known as 
Elephantiasis), Onchocerciasis (otherwise known as River Blindness); 
Intestinal parasites; Trachoma; and Leprosy.
    To combat all of these diseases combined, USAID spends only a few 
million dollars, yet there are low cost and effective drugs for 
treating and in some cases preventing or even eliminating them.
    Shouldn't we be increasing funding to combat infectious diseases, 
rather than cutting it? Would you support a special initiative in the 
2007 budget to mount a serious effort to combat these neglected 
diseases?
    Answer. There are many competing priorities for funding. 
Unfortunately, the budget request reflects a number of very difficult 
and painful choices. For infectious diseases, we have tried to achieve 
the best balance within our budget parameters between the critically 
important investments that need to be made in TB and malaria and the 
smaller, yet critically important funding for other diseases.
    The budget request for fiscal year 2007 is still being developed. 
We will continue to place priority on infectious diseases that pose the 
greatest threat to lives and economies in developing countries. These 
include HIV/AIDS, malaria, TB, and avian influenza.

                             FUTURE BUDGET

    Question. A recent New York Times article said that the World Bank, 
IMF, British Prime Minister Blair, and others have all called for a 
doubling of aid for the poorest countries. In fact, I'm told that just 
this week the European countries pledged to increase their 
contributions by a total of several tens of billions of dollars by the 
year 2010.
    The United States has not taken a position. Our aid to rebuild 
Iraq, with a population of 25 million, is more than we give in foreign 
aid to 2 billion people living in poverty in the rest of the world.
    The amount of aid we give to the world's poorest countries is still 
a miniscule percentage of our gross national income.
    Do you see this changing, or are we in for more incremental 
increases in this budget, robbing Peter to pay Paul, and no change in 
the big picture?
    Are you aware of any plans by the Administration to increase our 
foreign aid significantly in response to the U.N.'s millennium goals?
    Answer. U.S. assistance to the poorest countries is increasing, and 
the President's fiscal year 2006 budget request for overall development 
assistance is almost double the fiscal year 2000 level. The new 
accounts for the Global HIV/AIDS Initiative and the Millennium 
Challenge Account are a significant part of this increase. The fiscal 
year 2006 budget request reflects the President's recognition that 
development assistance makes a vital contribution to enhancing U.S. 
national security. These two recently added accounts deal, in the first 
case, with the most serious global health issue of this millennium, and 
in the second case, with countries that rule justly, invest in their 
people, and encourage economic freedom.
    From the beginning of this Administration, the President has made 
known his commitment to providing additional international assistance. 
To underline this commitment, the President has launched several new 
initiatives that support the goals of the U.N.'s Millennium 
Declaration.

                        USE OF LARGE CONTRACTORS

    Question. I am concerned about USAID's increasing use of large 
contractors. Recently we heard about a $75 million contract to do 
democracy work in Indonesia with a contractor that as far as I know 
doesn't have a lot of expertise in this type of work or in that part of 
the world.
    Yet qualified, small organizations that know the country and 
specialize in this work cannot compete unless they can find a way to 
subcontract, which isn't always possible or desirable. I hear these 
complaints all the time. Do you see this favoritism towards big 
contracts continuing? Are you doing anything to change it?
    Should we set aside funds for grants and cooperative agreements to 
qualified small organizations so they don't get shut out?
    Answer. With significantly reduced workforce levels in the 
acquisition and assistance workforce and a doubling of our operating 
budget, USAID along with other USG agencies have increased its use of 
task orders placed against indefinite quantity contracts (IQCs).
    Under the Federal Acquisition Streamlining Act enacted by Congress 
in 1995, the ability of agencies to award multiple IQCs was expanded, 
and the procedure to provide a fair opportunity selection process for 
subsequent task order awards was further defined.
    Realizing that large businesses have won a significant amount of 
USAID IQC awards, USAID has aggressively sought to compete new IQC 
awards that include set-aside awards for small busineses. To further 
address this matter, we require large businesses to subcontract a 
percentage of their work to small businesses. For example, in USAID's 
$1.8 billion solicitation for infrastructure support for Iraq, USAID 
included a provision that provided an incentive fee, which was 
available to firms that proposed expanded use of small businesses. We 
evaluate the efforts and commitment to execution of the subcontracting 
plans of prime contractors in consideration of future awards.
    With regard to sets asides for grants and cooperative agreements, 
USAID's Office of Private Voluntary Cooperation has a program in place 
that reserves funding for designated organizations, which has been 
favorably viewed in the Private Voluntary Organization community.

                OFFICE OF PRIVATE VOLUNTARY COOPERATION

    Question. I have heard that USAID may be planning to sharply scale 
back funding for its Office of Private and Voluntary Cooperation, which 
helps to build the capacity of United States and local non-governmental 
organizations and cooperatives. Is this true?
    Given the role these organizations play in implementing foreign aid 
programs, and the difficulty they have meeting USAID audit requirements 
and competing with large contractors, shouldn't we increase support for 
this Office?
    Answer. Agency priorities are constantly being reviewed. Currently, 
increased focus is being placed on post-conflict stabilization with 
less emphasis on cross-sector NGO capacity-building programs. The 
Matching Grant Capacity Building Program, which supported PVO and local 
NGO organizational development for many years, issued its last request 
for applications in 2002, and the last request for applications for the 
NGO Sector Strengthening Program was issued in 2003.
    Attention to organizational capacity building is certainly 
important, especially for local NGOs. Newer and more nascent 
organizations are offering orientation sessions at the PVC Office's 
annual conferences on such matters as procurement, audits, and 
reporting.

              OFFICE OF ENERGY AND INFORMATION TECHNOLOGY

    Question. Each year, we recommend in the neighborhood of $15 
million for the Office of Energy and Information Technology, and each 
year USAID funds it at about half that. Given the importance of energy, 
particularly renewable energy, in poor countries where the cost of 
fossil fuels is prohibitive, why aren't we doing more?
    Answer. We are doing more in fiscal year 2005 to increase access to 
energy in developing countries. USAID reported to Congress in April 
that Agency-wide spending on energy in fiscal year 2005 is expected to 
exceed $100,000,000 to ``promote and deploy energy conservation, energy 
efficiency, and renewable and clean energy technologies,'' and reach 
nearly $104,000,000. This amount includes energy funding for the Office 
of Energy and Technology and is more than $15,000,000 above what USAID 
originally estimated it would invest in energy in fiscal year 2005 
($83.5 million).
    The vast majority of this funding is programmed by USAID missions 
in the field where the needs for and impact of USAID programs can be 
monitored most effectively. While the missions implement programs that 
increase access of developing countries to clean, efficient, renewable 
energy, the role of the Office of Energy and Information Technology, as 
a central technical office in Washington, is to support their design 
and implementation, and to provide technical leadership in how to best 
increase access of developing countries to clean efficient energy.
    In fiscal year 2005, the Bureau for Economic Growth, Agriculture 
and Trade (EGAT) allotted $12 million to the Office of Energy and 
Information Technology, of which the largest apportionment by far, $8.5 
million, is to provide such technical support to USAID field missions. 
When added to funds apportioned to EGAT's Climate Change team and 
funding in other bureaus for related energy activities, the central 
funding for energy totals $10.7 million, or about 10 percent of 
expected fiscal year 2005 energy spending worldwide.
    Note.--The Office of Energy and Information Technology was renamed 
the Office of Infrastructure and Engineering on June 16, 2005 to 
reflect the addition of an engineering services team.

                        VALUE-ADDED COMMODITIES

    Question. The Congress has been very supportive of the use of U.S. 
value-added commodities in the Food for Peace program to assist 
vulnerable people in developing countries. In the farm bill we 
recognized the need to improve the quality of food aid products to meet 
the needs of recipients and to maintain the reputation of U.S. food 
products overseas. We have been hearing about ongoing problems with 
corn-soy-blend being rejected by recipients due to quality problems, 
which suggests that more needs to be done. How is USAID assisting USDA 
in addressing these issues?
    Answer. Of the 2 to 3 million metric tons of U.S. food provided 
annually under Public Law 480 Title II, the majority of these products 
are high quality value added commodities. Whether wheat flour, corn soy 
blend, fortified cornmeal, bagged pulses, bagged rice, or fortified 
vegetable oil, these commodities have proven highly effective in 
restoring health, reducing suffering, and saving lives. By and large, 
these nutritious products are well received by our partners and end 
beneficiaries. Occasionally, complaints or concerns are raised by end 
beneficiaries or partners' staff. Each and every complaint is 
thoroughly investigated by USDA with our assistance. Specifically, our 
strong field presence helps ensure that the right information regarding 
the complaint is gathered by our implementing partners' staff so that 
USDA can investigate, in collaboration with USAID, the likely causes 
and possible solutions. If changes in the specifications for either 
commodities or packaging are warranted, we jointly and collaboratively 
work on making those necessary changes with USDA taking the lead on 
issuing the proper notices to the trade and invitations for award of 
quality product.
    Regarding corn soy blend (CSB), there have been sporadic reports 
over the years of CSB being clumpy, stale, or even turning an 
undesirable color when cooked. Like all complaints relating to quality, 
we are constantly working with USDA on identifying the extent of such 
problems, so USDA can find the causes and the ways to correct and 
improve the quality of the product.
                                 ______
                                 
             Question Submitted by Senator Mary L. Landrieu

           ADOPTION AND ORPHANS AND VULNERABLE CHILDREN (OVC)

    Question. I have read a copy of your recent publication, Children 
on the Brink, published in 2000, which details the looming 
international crisis caused by the increasing number of orphans. 
According to your own report, the number of orphans is expected to 
reach 40 to 50 million in just a few short years. As you point out, the 
largest contributing factor to this phenomena is AIDS. According to 
your figures, ``In 1990, AIDS accounted for just 16.4 percent of 
parental deaths leading to orphaning. By 2010, that number will rise to 
68.4 percent.''
    These numbers are shocking. But what is more shocking to me is that 
neither your plan for addressing the world's AIDS crisis, nor your plan 
for addressing children on the brink, include efforts to promote 
permanency through adoption. Can you explain to me why?
    Answer. As part of President Bush's Emergency Plan for AIDS Relief, 
USAID supports a range of activities aimed at a holistic approach to 
building capacity and strengthening communities to meet the needs of 
orphans and vulnerable children affected by AIDS.
    Following the death of a parent, our priority is to enable family 
members to provide the first line of protection for orphaned children. 
USAID seeks to strengthen family members' ability to provide vital care 
and support by: training caregivers, increasing access to education, 
promoting the use of time and labor-saving technologies, and providing 
training and support in income-generation and micro-finance. If a 
family member is not available, USAID works to mobilize and strengthen 
community-based responses in addition to working with governments to 
develop appropriate policies and essential services to care for these 
children.
    While our primary objective is to serve children within their 
communities, we recognize that may not always be possible. USAID 
implements programs to create special protection and care measures for 
children, including broad-level advocacy for legal protection. Where 
possible, we work with host country governments to strengthen social 
safety nets, including local adoption, where supported and allowable in 
national policy.

              USAID'S RECORD OF SUCCESS IN FRAGILE STATES

    Question. You have already alluded to the major achievement in 
Afghanistan and Iraq by USAID. While your work in the Sudan is just 
beginning, areas which USAID does have a record of contribution are in 
Haiti and Ethiopia. Over the last several years the U.S. Government, 
through USAID, has been the largest donor of foreign assistance to 
Haiti ($810 million from 1993-2005). Also, USAID has contributed 
significant amounts of financial and human capital in an effort to 
address the severe shortages and issues related to the Ethiopian/
Eritrean war.
    What is your record of success in other ``fragile states'' around 
the world that aren't garnering the exposure of Iraq and Afghanistan?
    Answer. Since its inception, USAID has worked in fragile states and 
has been a leader in humanitarian and post-conflict response. USAID has 
drawn from the lessons of this experience to innovate programmatically 
and speed the transition from relief to development. The overall level 
of assistance to fragile states has increased since the end of the cold 
war to almost one-fifth of USAID's overall resources in 2003, excluding 
Iraq.
    USAID's ``Fragile States Strategy,'' approved in January 2005, 
recognizes that work in fragile states is inherently risky due to the 
volatility and complexity of their environments. The strategy 
recognizes that while we have had many successes, there is room for 
improving the effectiveness of our response in fragile states. Building 
on that strategy, over the past 6 months we have already strengthened 
our ability to:
  --monitor fragility across countries;
  --better identify the sources and dynamics of fragility in given 
        countries;
  --focus our programs on the sources of fragility and on key factors--
        stability, security, reform and capacity building--for reducing 
        fragility;
  --apply appropriate technical responses to the needs of fragile 
        states, including through collaborative efforts with other 
        donors;
  --respond rapidly by building a corps of crisis response officers and 
        identifying possible options for streamlining internal 
        procedures and key systems--personnel, procurement, planning, 
        among them.
    The examples that follow illustrate some of USAID's successes and 
ongoing challenges in responding to fragile and conflict situations 
over the past 15 years.

                                 AFRICA

Liberia
    In 2003, 14 years of conflict ended in Liberia with the signing of 
the Accra Comprehensive Peace Agreement. USAID's subsequent 
transitional program is a model of internal and inter-agency 
integration and collaboration, including participation from the Office 
of Foreign Disaster Assistance, the Office of Food for Peace, the 
Office of Transition Initiatives, and the Bureau for Africa, as well as 
the U.S. Departments of State, Defense, and Treasury. The primary goals 
of the current development program are to enhance good governance and 
the peace process; create economic and social conditions within 
communities that will facilitate both reintegration and the 
rehabilitation of infrastructure; increase formal and non-formal 
learning and counseling opportunities; and improve community health 
practices.
    As of 2004, USAID's community revitalization and reintegration 
program created more than 500,000 days of direct employment for more 
than 10,000 ex-combatants and other unemployed Liberians, and over 
1,500 kilometers of road were improved. In addition, thousands of 
children associated with the fighting forces have been reunited with 
their families. Under the program, displaced Liberians, refugees, ex-
combatants, and other war-affected Liberians have received counseling 
and other services, including training, to help them reestablish 
communities and resume normal lives.
    USAID has also supported initiatives to ``get out the vote'' and 
provided nation-wide coverage of the election process and funded civil 
society organizations to increase their civic advocacy activities 
related to the elections, corruption, conflict mitigation, and human 
rights.

Mozambique
    In 1984, the United States and Mozambique reopened diplomatic 
relations after years of tension generated by the government's embrace 
of the Soviet bloc. That same year, USAID initiated an emergency food 
assistance program to deal with a worsening refugee crisis caused by 
the ongoing civil war, and after 1997 engaged with the government's 
shift to market-oriented reforms. These were followed by an economic 
policy reform program, support for regional transportation initiatives 
and programs to support private sector agricultural marketing. These 
programs laid the foundation for new private economic activity even as 
the war continued. The worst draught of the century in 1991-1992 saw 
USAID respond with assistance on a phenomenal scale ($225 million in 
fiscal year 1992 alone), reaching over 2 million people and 
facilitating transportation to Mozambique's drought stricken, 
landlocked neighbors.
    The second phase of USAID's engagement with Mozambique began with 
the signing of the Rome Peace Accord in October 1992, ending 16 years 
of civil war. USAID's program included support for the continuing 
emergency needs among the country's population of 5 million displaced 
and returnees; rural reintegration; infrastructure rehabilitation; 
demining; the demobilization of over 91,000 former RENAMO and 
Government soldiers; and elections. USAID financed the rehabilitation 
of over 1,000 kilometers of rural roads in the hardest hit areas of the 
country, thereby reviving long-dead market networks for agricultural 
production. USAID's programs in support of the politically charged 
October 1994 general elections--from civic education to training for 
political parties--were critical to sustaining the peace. While the 
election itself was a spectacular success and involved literally dozens 
of organizations, embassies, and Mozambican actors, USAID's innovative 
financing of the training of almost 30,000 Mozambican party poll 
monitors was one of the major reasons why the Mozambican people 
accepted the results.

Sudan
    The signing of the Comprehensive Peace Agreement in January 2005 
represented a major positive change for Sudan, which has been embroiled 
in 40 years of civil war, the longest civil war in Africa's history. 
USAID has been engaged in supporting the peace process since June 2003. 
Below are several examples of USAID's work towards helping the feuding 
sides come to the peace table.
    With the late May 2004 signing of the Naivasha Protocols by the 
SPLM and the Government of Sudan (GoS), USAID helped provide a stable 
foundation for peace by disseminating accurate information on the 
Protocols throughout southern Sudan. USAID has funded two projects, the 
Sudan Radio Service (SRS) and the Southern Sudan Transition Initiative 
(SSTI), which spread news of the protocols and facilitated grass-roots 
participation in the peace process. The SRS broadcasts 6 hours of 
programming a day in nine different languages, reaching 1.5 million 
people or 20 percent of the total population of southern Sudan. The SRS 
provides timely updates and on-the-scene coverage of the peace process.
    As the Sudan People's Liberation Movement (SPLM) transitions to the 
Government of South Sudan (GOSS) support is being provided on many 
levels to ensure healthy transition and strong systems are established. 
For instance, technical assistance and training was provided to the 
SPLM to develop a strategic framework for local governance in southern 
Sudan. Exposure visits were organized to Uganda and Ethiopia so that 
the team could examine regional models of decentralization. The final 
strategic framework developed by the team emphasizes good governance 
practices of accountability, transparency and efficiency. The model 
became the basis for a decentralized structure of governance for 
southern Sudan.
    As conflicts were increasingly fueled by the inability of the 
judiciary to respond to outstanding cases and the poor mobility of the 
few judges in the south, USAID developed the concept of mobile courts' 
whereby judges travel to areas of potential conflict to try out overdue 
cases and implement verdicts. These activities have been very 
successful in resolving long-running conflicts.
    Additionally, USAID supported the strengthening of the Women's 
Secretariat to carry out three regional Women's Conferences in Bahr el 
Ghazal, Upper Nile and Southern Blue Nile. At these large conferences, 
the SPLM women were able to identify leadership at the county level and 
elect representatives for the National Conference.

Burundi
    Hutu and Tutsi violence has plagued this small country in the Great 
Lakes Region of Africa. Bordering on the Democratic Republic of Congo, 
Rwanda, and Tanzania, the ethnic conflict has resulted in cross-border 
fighting and massive displacement of local residents. The transitional 
government that was inaugurated in November 2001, subsequently signed a 
power-sharing agreement with the largest rebel faction in 2003 and set 
in place a provisional constitution in 2004. The USAID program, 
launched in March 2002, has been supporting the peace process in 
Burundi through community development, youth vocational training, and 
governance, and media programming.
    In February 2004, USAID launched the Burundi Community-based Peace 
and Reconciliation Initiative (CPRI) to strengthen local capacities to 
benefit from and contribute to the peace process. CPRI is concentrating 
its work in two provinces where much of the worst destruction and 
displacement had occurred (Gitega and Ruyigi) through community-based 
reconciliation and participatory improvement projects, vocational 
skills training, small grants, and media. USAID trained and deployed 20 
master trainers to each of 18 communes in Gitega and Ruyigi, who then 
conducted conflict mitigation training with three groups of civil 
society leaders in each commune and in five vocational skills training 
schools. Local government officials have said the training has helped 
them improve their leadership styles and relationships with their 
constituents. CPRI has also promoted reconciliation by bringing people 
together from returning and host populations to learn marketable skills 
and jointly participate in income-generating associations. Furthermore, 
the skills training reduces individuals' dependency on land-based 
income, and therefore reduces the risk of violent conflicts over scarce 
land.
    USAID media partners, state-owned Burundi National Radio and 
Television (RTNB), and independent RSF Bonesha FM (Bonesha) obtained 
the equipment and support necessary to ensure uninterrupted, country-
wide coverage and make weekly field trips out of Bujumbura to gather 
interviews and material for programming. These advances have 
significantly mitigated conflict in Burundi, given that the timely 
dissemination of accurate and balanced information is critical to 
assuaging fears and dampening incendiary rumors.

                         ASIA AND THE NEAR EAST

Nepal
    The United States is supporting efforts to resolve the Maoist 
insurgency and address the underlying causes of poverty, inequality, 
and poor governance in Nepal, making an important contribution to 
fighting terrorism and diminishing the likelihood of a humanitarian 
crisis.
    USAID's conflict program supports government and civil society 
efforts to address the conflict and promote community solidarity. The 
newly-formed Government of Nepal Peace Secretariat is poised to play a 
key role in reaching a peace settlement between the GON and the 
Maoists. USAID provides support to the Peace Secretariat in a number of 
areas including equipment and logistics, training in conflict 
resolution and negotiation techniques, and technical assistance on key 
policy and programmatic issues. USAID is also supporting community 
mediation as a way to resolve disputes locally.
    In fiscal year 2004, USAID's agricultural programs, working in 
rural areas including the conflict-affected West and Midwest regions, 
targeted more than 37,000 small farm and forest households. Household 
incomes increased by more than $100, and more than 200,000 persons 
benefited from the promotion of high-value agriculture and non-timber 
forest products. USAID programs help Nepal increase agricultural and 
other exports, and thus people's incomes, through activities such as 
export promotion assistance and technical assistance to the Department 
of Customs.
    USAID works to strengthen community health programs, mitigating the 
impact of the conflict. Child mortality has declined by 40 percent in 
the last 10 years. The average number of children per family declined 
from 5 to 4.1 during the period. The Vitamin A supplementation program 
was implemented in all of Nepal's 75 districts and reached 98 percent 
of all eligible children.

Philippines
    Conflict in the Philippines is jeopardizing the country's economic 
and social development and represents an important threat to regional 
security and USG vital interests. USAID's conflict mitigation 
assistance seeks to address the underlying causes of conflict, and 
assistance is focused on conflict-affected areas. Activities aim to 
reintegrate former combatants and their communities into the mainstream 
economy, improve economic infrastructure, accelerate economic and 
business development, increase access to microfinance services, improve 
governance, and expand availability of social services.
    USAID helped 21,000 former combatants make the switch from guerilla 
fighting to farming seaweed, hybrid corn or rice. Three thousand of 
them have learned to produce higher value crops. With solar dryers, 
corn shellers and warehouses provided by USAID, they have increased 
their produce's selling price by as much as 35 percent. USAID has also 
helped strengthen the services of 115 banks and rural cooperatives, 
enabling them to provide loans and other services for small 
entrepreneurs profitably.

Sri Lanka
    Sri Lanka has suffered through two decades of civil war between the 
Sinhalese majority and Tamil separatists, where tens of thousands have 
died in ethnic. Hope for peace came in February 2002 when the 
government and Liberation Tigers of Tamil Eelam formalized a cease-
fire. A USAID program, launched in March 2003, has supported bringing 
all sides to the table to promote peace, especially in the regions most 
affected by ethnic and religious violence. USAID has also played an 
instrumental role in administering tsunami relief in Sri Lanka, and has 
incorporated ethnic peace-building into post-tsunami reconstruction 
efforts. Below are outlined activities that support the movement 
towards peace.
    A USAID program in Sri Lanka has supported positive interaction 
among diverse groups of people; promoted participatory decision-making 
at the community level; and facilitated the flow of accurate 
information from multiple viewpoints. Working with local NGOs, informal 
community groups, media entities, and local government officials, USAID 
identifies and supports critical initiatives that move the country 
along the continuum from war to peace.
    USAID's programs in Sri Lanka have succeeded in bringing diverse 
groups of people together. One such project in Trincomalee involved the 
provision of sanitation facilities for a resettled Sinhalese community. 
Moreover, an inter-ethnic dimension was added by purposely enriching 
the ethnic mix of the vendors who provided goods and services to the 
beneficiaries. First, the Muslim vendors supplying materials to the 
beneficiaries voluntarily offered to deliver materials directly to each 
house to help facilitate construction. In addition, Tamil laborers 
helped the Sinhalese families excavate the sites for the facilities. 
Finally, a local Sinhalese brick maker from whom USAID purchased 
building materials greeted USAID staff members who were visiting the 
site and said ``thank you'' in Tamil, using the traditional Tamil 
gesture of respect.
    In addition, USAID has trained over 4,000 officials and key 
decision-makers and 13,000 people in peacebuilding/conflict resolution/
mitigation skills. For example, USAID funded the Eastern Rehabilitation 
and Relief Organization to conduct three local youth exchange programs 
in Ampara district. Between program start-up in March 2003 and the end 
of February 2005, USAID approved 345 small grants worth approximately 
$8.58 million.

East Timor
    After a majority of East Timorese voted for independence from 
Indonesia in U.N.-sponsored referendum in 1999, local Indonesian-
supported militias wreaked havoc on the small island country in a 
scorched-earth campaign that destroyed infrastructure and homes and 
forced 300,000 into West Timor. Rebuilding the small country of 1 
million citizens was part of a USG objective to promote self-
determination and deter tyranny in the Southeast Asian region. Below 
are several examples of activities supporting the rebuilding of 
devastated East Timor.
    From the onset of independence, economic recovery was one of the 
most essential tasks facing East Timor. As a result, USAID quickly 
moved to foster economic opportunities and development. USAID invested 
$3.9 million through 469 small projects that directly engaged an 
estimated 63,000 people, putting cash directly back into the hands of 
individuals and relieving tensions evident in the population.
    The USAID provided in-kind provision of construction materials and 
commodities needed for rehabilitation of community-identified 
facilities deemed to be important for economic recovery. For instance, 
grants were made to repair agro-processing facilities, schools, water 
services, and roads. USAID also supported income-generating activities 
such as cooperative activities based on the provision of hand-tractors, 
brick making, and coffee production as well as micro-finance 
initiatives.
    USAID also supported macro-level interventions to support East 
Timor's economic recovery. For instance, technical assistance was 
provided to the Government of East Timor for meaningful participation 
in the Timor Sea Mineral Rights Negotiations, the settlement of East 
Timor's maritime and land boundaries, and technical inputs were 
provided for East Timorese officials in negotiations with the Phillips 
Petroleum Corporation on oil and gas exploration.

                           EUROPE AND EURASIA

Bosnia and Herzegovina
    The overriding United States interest in Bosnia and Herzegovina 
(BiH) remains the conversion of this multi-ethnic country from a source 
of regional instability to a peaceful, viable state on the road to 
European integration. BiH continues to struggle with the structural 
challenges of the Dayton Peace Accords. USAID is addressing BiH's 
development challenges through a program targeted at economic 
transformation, democratic reform, and the reestablishment of multi-
ethnic society.
    USAID's work on developing private sector-led economic growth has 
significantly contributed to the development of a vibrant and sound 
banking sector and the generation of new jobs. The seven-year long 
activity is directly responsible for introducing modern banking into 
BiH, creating over 15,000 new jobs, and protecting 30,000 existing 
jobs. Further work by USAID in developing a stable macroeconomic 
environment included assisting the BiH Government in becoming fiscally 
responsible by improving transparency and accountability of budget 
formulation. A financial management information system is now 
operational in the State, both entities, and 6 of the 10 federation 
cantons.
    USAID was instrumental in working on the execution of a judicial 
reform initiative resulting in a country-wide restructuring of the 
court system and a re-competition of every judicial and prosecutorial 
position. As a result of USAID's investments, objective local 
government performance measures have improved considerably, as has 
citizen perception of this level of government. USAID opened 22 ``one-
stop shops'', which have reduced waiting times for local government 
services.
    USAID's support in re-establishing a multi-ethnic society through 
facilitation of minority returns has exceeded its targets. The lives of 
more than 129,000 minority returnees were directly impacted through the 
provision of access to basic services, including electricity, water, 
schools, health centers, and roads/streets. Seven hundred and fifty 
families were directly affected, representing one-fifth of the total 
minority returns registered since 2000. Sustainability of those returns 
is ensured through provision of economic opportunities such as small 
grants and loans. More than 1,950 families received some type of 
economic incentives that contributed to income generation.

Macedonia
    In February 2001 fighting broke out between the Macedonian military 
and a newly formed Albanian insurgent group. Six months later, an 
estimated 30,000 civilians were displaced, a once expanding economy was 
in decline, and ethnic tensions remained high. In August 2001, parties 
signed a peace agreement, ending hostilities and promising political 
reform. However, socioeconomic pressures for violence persisted, with 
unemployed youth part of the problem.
    USAID created short-term employment opportunities for 2,000 of 
Macedonia's youth that focused on repairing public works in all 124 
municipalities. The program increased economic security for returnees, 
the internally displaced, and others affected by conflict. Ethnic 
tensions were reduced, and confidence in the peace process was raised.

Kosovo
    As part of the ethnic violence that plagued the Balkans during the 
1990s, Serbian militia groups forced massive expulsions of ethnic 
Albanians living in Kosovo in 1998-99. International outrage ensued, 
and NATO forces bombed Serbia and stationed NATO-led forces in Kosovo. 
A key objective of the USAID program in Kosovo was to get Serbian, 
Albanian, and other ethnic citizens to work together through their 
communities in building more peaceful and compatible within the 
ethnically diverse society.
    USAID officers were in the first group of non-NATO officials to 
enter Kosovo in late June 1999. Building on contacts developed before 
the bombing and during the program-in-exile, USAID quickly began a 
program focused on rehabilitation and democracy-building. The 
initiative helped citizens understand and responsibly exercise their 
political rights, encouraged and supported the development of moderate 
and democratic local leadership, and enabled local communities to get 
the resources they need to rebuild according to their priorities.
    USAID supported the formation of over 200 Community Improvement 
Councils (CICs) composed of 12 to 15 people each who reflect the 
political, social, and intellectual diversity of the local population. 
The role of each CIC is to identify the community's priority 
reconstruction needs, such as repairing a school or a road, and secure 
a local contribution--usually in the form of labor. USAID then provides 
the material resources. The experience of working together in a 
participatory, democratic, and constructive manner was as important a 
benefit as the humanitarian impact of the project itself.
    In fact, the CICs emerged as de facto representatives of the 
diverse interests in their communities, providing other donors and 
international agencies with information on real local needs and 
priorities as defined by Kosovars themselves. USAID leveraged over $4 
million from other donors and over $2 million in local community 
contributions.
    USAID also supported the creation of an independent media and a 
strong civil society. Media projects included rebuilding infrastructure 
for radio and television broadcasts and supporting the first 
independent Albanian-language radio station in Kosovo, as well as 
community radio and newspaper outlets across Kosovo. Civil society 
groups, which have mobilized around issues related to human rights, 
women, and youth activism, have received crucial start-up assistance 
from USAID as well.

                    LATIN AMERICA AND THE CARIBBEAN

Colombia
    Since USAID initiated support for Plan Colombia in 2000, 
significant advances have been made in providing assistance to the 
internally displaced, expanding state presence, strengthening Colombian 
democracy, and creating licit economic opportunities.
    USAID has provided support for more than 1.4 million persons that 
have been displaced by violence or forced to flee their homes after 
receiving threats from guerillas, paramilitary groups or narco-
traffickers. Most of the assistance is for physical and mental health 
services, shelter, water and sanitation, education, employment creation 
and community strengthening. USAID provides support for the 
rehabilitation of former child combatants. More than 1,375 children 
have entered the reception center thus far where they have received 
treatment, education and shelter. USAID has also helped more than 3,293 
human rights workers, labor activists, journalists and others who were 
threatened by armed groups.
    Under the peace program, USAID has strengthened the capacity of the 
High Commissioner for Peace's Office to engage in discussions and 
negotiations with illegally armed groups. USAID supported development 
of an Early Warning System that alerts the Colombian military, national 
police and other state institutions when situations occur that could 
lead to massacres or forced displacements. In fiscal year 2004, more 
than 75 percent of the alerts issued were addressed correctly by 
pertinent Government of Colombia entities.
    USAID has increased access to justice for thousands of low income 
and marginalized Colombians by supporting national coverage of the 
Justice Houses Program. A total of 37 Justice Houses have been 
established, handling some 2.7 million cases. USAID has also 
established 35 oral trial courtrooms and strengthened the capabilities 
of public defenders. The local governance program has promoted 
effective public administration by supporting more than 210 social 
infrastructure projects; creating 221 citizen oversight committees, and 
assisting 38 local governments with improvements of public services.
    USAID is working with farmers and townships that want to eradicate 
drug crops in exchange for support for construction of small 
infrastructure projects, food production, or cultivation and marketing 
of legal crops. During fiscal year 2004, USAID helped establish 
approximately 16,508 hectares of licit crops and completed 182 
infrastructure projects in 13 municipalities in coca and poppy growing 
areas. The program has benefited over 12,845 families and will help 
reduce coca cultivation in Colombia and stem the flow of illicit drugs 
to the United States.

El Salvador
    The Government of El Salvador and the representatives of the 
Farabundo Marti National Liberation Front signed comprehensive peace 
accords in January 1992, ending 12 years of civil war that caused 
enormous loss of life, destroyed a significant portion of the country's 
infrastructure, and halted productive activity in and substantially 
depopulated a major portion of the country's land area.
    USAID helped sow the seeds of future growth by reconstructing 
damaged infrastructure, financing land and titling for ex-combatants 
and civilian refugees, providing training and credit, increasing civic 
participation in the identification of priority infrastructure needs, 
broadening the role of NGOs in service delivery to rural communities, 
and attending to the special medical needs of the war disabled.
    USAID was engaged in a wide range of other programs such as 
promoting macroeconomic reforms; strengthening municipal governments; 
and reforming the judicial system, electoral processes, and 
institutions that played an important and complementary role in 
supporting the reconstruction process. This support is broadly credited 
with playing a critical role in assisting the successful transition 
from war to peace.

                         IDFA ACCOUNT INCREASE

    Question. The President's budget would reduce Food for Peace 
funding by $300 million and increase USAID's International Disaster and 
Famine Assistance (IDFA) by the same amount. Under this proposal, USAID 
would create a new, cash-based food aid program under foreign-grown and 
processed commodities could be purchased for shipment from foreign 
ports on foreign-flag vessels. Under Food for Peace, Title II of Public 
Law 480, USAID has been providing emergency food assistance for 
decades. Why is a new cash-based program needed now?
    Answer. Emergencies have increased in complexity and magnitude and 
USAID has not always been able to respond in the most effective manner 
to these emergency food crises. FFP too often has been faced with 
pipeline breaks. Given the widely differing conditions faced in the 
countries where we provide food aid, we must have the flexibility to 
respond quickly and appropriately. In many emergency situations, time 
is a critical factor and cash is necessary for making local purchases 
so that needs are met in time to prevent mortality rates exceeding 
those that are normal in the emergency-affected area.

                   U.S. RECORD ON FOREIGN ASSISTANCE

    Question. This week the European Union (EU) announced that it will 
double its aid to developing countries in the next 5 years. Some 
expressed frustration at the incremental movement toward bigger aid 
budgets that could have a significant impact to the world's poorest 
countries. While the United States is still the largest donor in terms 
of dollars spent on foreign assistance to poorer countries, we are 
often ranked last when aid transfers by developed country donors are 
calculated by percent of gross national product (GNP). Recently Britain 
disclosed details of a ``Marshall Plan'' for the developing world. 
British Chancellor of the Exchequer, Gordon Brown, said, ``we must rise 
to the challenge and we accept that we will be judged by what we 
achieve.''
    In light of these announcements and ambitions, are we doing all 
that we possibly can to assist those with the least resources?
    Answer. In the overall view, the President's fiscal year 2006 
request for development assistance is almost double what the level was 
5 years ago and has risen faster than at any time since the Marshall 
Plan. The fiscal year 2006 budget request reflects the President's 
recognition that development assistance makes a vital contribution to 
enhancing U.S. national security. To underline his commitment to 
increase development assistance, the President has launched several new 
initiatives for the poorest countries and has also established two new 
accounts for the Global HIV/AIDS Initiative and the Millennium 
Challenge Account. These recently established accounts deal, in the 
first case, with the most serious global health issue of this 
millennium, and in the second case, provide dramatically increased 
assistance to countries that rule justly, invest in their people, and 
encourage economic freedom.

                   FRAGILE STATES POLICY AND CHILDREN

    Question. In reading USAID's Fragile States Strategy document, I 
understand that the term ``fragile states'' refers ``generally to a 
broad range of failing, failed, and recovering states.'' My concern is 
that the ``Strategic Priorities'' laid out in the Fragile States 
document only mentions the world children twice in the entire document, 
and this informs my question.
    Are children being given the level of attention and commitment they 
deserve in USAID's ``fragile states'' policy?
    Answer. Children are certainly victims of fragility, and deserve 
and receive USAID's help. USAID helps children through multiple 
programs targeted at strengthening families and helping children to 
live healthier, productive lives. These programs are implemented in 
both ``fragile states'' and those embarking on a path toward 
transformational development.
    The Fragile States Strategy you cite is focused on the root causes 
of fragility--factors such as conflict, political instability, and weak 
governance. For this reason, you find limited mention of specific 
groups, including children, and our programs addressing their needs. 
But programs will clearly relate to children and youth: school 
reconstruction, textbooks and supplies, and teacher training; job 
creation focused on youth unemployment; and, demobilizing and 
reintegrating ex-child soldiers are three examples. Thus, implementing 
the strategy includes investments in problems of youth and children, 
primarily aimed at stability and security.
    While the strategy calls for increased program focus on the sources 
of fragility, USAID will continue to respond the effects of fragility. 
This includes humanitarian assistance, protection of human rights and 
abuse prevention, which will target children as a primary group. 
Moreover, most fragile states are characterized by high under-five and 
infant mortality rates. We will continue to provide immediate life-
saving services in fragile states to reduce mortality as well as foster 
healthy and productive families. However, this alone will be 
insufficient. To have a lasting impact, it is imperative that we 
address the political and social factors that continue to make these 
children (and their families) vulnerable.

         MEETING THE 10 PERCENT OVC EARMARK IN FISCAL YEAR 2006

    Question. The Global AIDS legislation directs that 10 percent of 
all Global AIDS funding be spent in behalf of orphans and vulnerable 
children. This is a seemingly hard requirement to achieve in fiscal 
year 2006 given that 52 percent of funding has been cut from the 
``Displaced Children's and Orphan's Fund.''
    How much is being spent to assist displaced HIV/AIDS orphans and 
vulnerable children and how will USAID meet the fiscal year 2006 
requirement in the Global AIDS legislation?
    Answer. The Office of the U.S. Global AIDS Coordinator informs us 
that as of June 2005, total planned allocations of fiscal year 2005 
Emergency Plan funds for the care and support of orphans and vulnerable 
children was approximately $82.5 million, or 7 percent, of Emergency 
Plan funding in the 15 focus countries.
    USAID, as a primary implementer of President Bush's Emergency Plan 
for AIDS Relief, is a part of the interagency orphans and vulnerable 
children (OVC) working group that assists the individual country 
programs to identify barriers and help meet the 10 percent requirement. 
Through this interagency process, we are confident that the fiscal year 
2006 budget will meet the 10 percent funding requirement for the care 
and support of orphans and vulnerable children.

                          VULNERABLE CHILDREN

    Question. The Vulnerable Children section of the Strategic Pillar 
category on Global Health has been cut by 63 percent. This is a drastic 
cut in light of the needs of children. Children are our bridge to the 
next generation and we must address the issues that vulnerable children 
suffer from.
    What is the rationale behind such a severe funding cut for these 
children?
    Answer. Saving the lives of children is of prime importance, and 
USAID is committed to improving the health of children. USAID supports 
various categories of activities in this area, including vulnerable 
children and programs to address the primary causes of most under-five 
mortality. We have had to make difficult choices in our budget request, 
however. Overall, we have tried to protect funding for HIV/AIDS and 
Child Survival and maternal health programs that support life-saving 
interventions with the most impact on the main killers of children.
    Within the Vulnerable Children funding category, the request 
reflects funding only for the Displaced Children's and Orphans Fund. 
This is an extremely important program that has positively changed the 
lives of millions of marginalized children over the years. Because of 
our budget constraints, we were not able to request funding for other 
activities and specifically for vulnerable children, typically included 
in the appropriations. The difficult choice we made was between those 
activities and our core child survival programs, and, for the reason 
stated above, we determined that core child survival activities were a 
higher priority.

                         CONCLUSION OF HEARINGS

    Senator Bennett. Thank you all very much. That concludes 
our hearings.
    [Whereupon, at 4:03 p.m., Thursday, May 26, the hearings 
were concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]
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