    [Senate Hearing 109-251]
    [From the U.S. Government Publishing Office]

                                                           S. Hrg. 109-251

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

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

                                    HEARINGS

                                    before a

                              SUBCOMMITTEE OF THE

                COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                           ONE HUNDRED NINTH CONGRESS

                                 FIRST SESSION

                                       on

                                   H.R. 3057

    AN ACT MAKING APPROPRIATIONS FOR FOREIGN OPERATIONS, EXPORT FINANCING,
    AND RELATED PROGRAMS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2006, AND
                               FOR OTHER PURPOSES

                                   __________

                              Department of State
              United States Agency for International Development
                             Department of Defense
                    Department of Health and Human Services
                           Department of the Treasury
                       Executive Office of the President
                           Nondepartmental Witnesses
                    Overseas Private Investment Corporation
                               Export-Import Bank
                      U.S. Trade and Development Program

                                   __________

             Printed for the use of the Committee on Appropriations

      Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                                   index.html

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                                   __________
                          COMMITTEE ON APPROPRIATIONS

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

        Subcommittee on State, Foreign Operations, and Related Programs

                      MITCH McCONNELL, Kentucky, Chairman
    ARLEN SPECTER, Pennsylvania          PATRICK J. LEAHY, Vermont
    JUDD GREGG, New Hampshire            DANIEL K. INOUYE, Hawaii
    RICHARD C. SHELBY, Alabama           TOM HARKIN, Iowa
    ROBERT F. BENNETT, Utah              BARBARA A. MIKULSKI, Maryland
    CHRISTOPHER S. BOND, Missouri        RICHARD J. DURBIN, Illinois
    MIKE DeWINE, Ohio                    TIM JOHNSON, South Dakota
    SAM BROWNBACK, Kansas                MARY L. LANDRIEU, Louisiana
    THAD COCHRAN, Mississippi (Ex        ROBERT C. BYRD, West Virginia (Ex
        officio)                             officio)

                               Professional Staff

                                   Paul Grove
                                  Tom Hawkins
                             Tim Rieser (Minority)
                            Mark Lippert (Minority)

                             Administrative Support

                                LaShawnda Smith

                                C O N T E N T S

                                  ----------

                             Thursday, May 12, 2005

                                                                       Page

    Department of State: Office of the Secretary.....................     1

                             Thursday, May 26, 2005

    United States Agency for International Development...............    69

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

                                  ----------

                             THURSDAY, MAY 12, 2005

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 2:05 p.m., in room SD-124, Dirksen
    Senate Office Building, Hon. Mitch McConnell (chairman)
    presiding.
        Present: Senators McConnell, Specter, Gregg, Bennett,
    DeWine, Brownback, Cochran, Leahy, Harkin, Durbin, and
    Landrieu.

                              DEPARTMENT OF STATE

                            Office of the Secretary

    STATEMENT OF HON. CONDOLEEZZA RICE, SECRETARY

                 opening statement of senator mitch mc connell

        Senator McConnell. The hearing will come to order.
        Thank you very much, Secretary Rice, for joining us today.
        We have the chairman of the full committee with us. I
    appreciate your being here, Senator Cochran.
        Today's hearing is really historic in at least one respect.
    Not only is this your debut before this subcommittee, but it is
    also our first-ever hearing since the subcommittee reorganized
    earlier this year to incorporate the Department of State's
    entire operation.
        Let me begin today by commending Chairman Cochran for his
    wisdom and leadership, and not just with respect to the
    committee reorganization. On Tuesday, the Senate gave its
    unanimous approval to the emergency supplemental. Senator
    Cochran deserves the lion's share of the credit in getting this
    important measure to the President in a timely manner. We all
    thank him for that, and certainly the men and women serving in
    Iraq and Afghanistan thank him as well.
        As we consider the President's fiscal year 2006 request, my
    colleagues should keep in mind that we will not succeed as a
    Nation in the global war on terror unless we employ our foreign
    assistance programs as weapons in America's arsenal. This is
    particularly true with respect to front-line states, such as
    the $920 million request for Afghanistan, $698 million for
    Pakistan, $158 million for Indonesia, and $96 million for the
    Philippines. Simply put, as we strengthen the military, police,
    and good governance of these states, we relieve the demands
    upon America's own military and diplomatic resources. Our aid
    runs the gamut from ``hard'' counterterrorism and military
    packages for foreign governments to ``soft'' child survival and
    basic health programs for rural populations. Both are integral
    components of deterring and defeating terrorism.
        As is the case every year, the subcommittee will have
    difficult decisions to make in the weeks and months ahead.
    However, the process of reviewing the $33.6 billion request for
    the State Department and foreign operations is well underway.
    This includes examination of proposed increases above fiscal
    year 2005 funding levels in such accounts as Transition
    Initiatives, Diplomatic and Consular Programs, and the
    Millennium Challenge Corporation, and decreases in others,
    including assistance for Eastern Europe and the Baltic States
    and assistance for the Independent States of the Former Soviet
    Union.
        I want to assure you, Secretary Rice, that we are attuned
    to changing realities around the world, including in such
    regions as Eastern Europe, Central Asia, and the Middle East.
    Under the President's leadership, the march of freedom across
    the globe has been truly impressive, whether in Iraq,
    Afghanistan, Ukraine, or Georgia. Please know you have all of
    our personal commitments to help advance democracy in Egypt,
    Belarus, and the Kyrgyz Republic, among other countries.
        The use of cutting edge technology in this endeavor is
    vital. If you have not already, I would encourage you to become
    familiar with the programs of Voice for Humanity in both Iraq
    and Afghanistan. These outreach activities are reaching
    important segments of those populations, including illiterate
    individuals and women.
        As has become my tradition, let me just close with a couple
    of words on Burma. The situation in that country remains
    absolutely deplorable with democracy leader and Nobel laureate
    Aung San Suu Kyi and her compatriots under continued
    imprisonment. Access to Suu Kyi since the attempt on her life
    in May 2003 has been extremely limited, and I remain gravely
    concerned for her safety. Let me be crystal clear that the
    security and welfare of Suu Kyi is the direct responsibility of
    the SPDC leader Than Shwe.
        Along with several of my colleagues, including Senators
    Leahy and Brownback, I introduced legislation earlier this week
    to renew the sanctions against this repressive regime.
    America's challenge is fairly straightforward. We need to make
    that struggle for freedom in Burma a priority for the world's
    democracies, for multilateral organizations, including the
    United Nations and the European Union, and for Burma's
    neighbors.

                               PREPARED STATEMENT

        As you and I have discussed on several occasions, the ASEAN
    chairmanship is supposed to move to Burma in 2006 with the
    meeting supposedly to occur there. I think that is
    unacceptable. I believe you share my view on that. Hopefully
    that will be a focal point for beginning to genuinely get the
    kind of multilateral cooperation we need to truly squeeze that
    regime.
        [The statement follows:]

                 Prepared Statement of Senator Mitch McConnell

        Today's hearing is an historical one. Not only is this your debut
    before this Subcommittee, but it is also our first-ever hearing since
    the Subcommittee reorganized earlier this year to incorporate the
    Department of State's entire operations.
        Let me begin my remarks today by commending Chairman Cochran for
    his wisdom and leadership--and not just with respect to Committee
    reorganization. On Tuesday, the Senate gave its unanimous approval to
    the emergency supplemental bill and Senator Cochran deserves the lion's
    share of credit in getting this important measure to the President in a
    timely manner. He has the thanks of a grateful nation, particularly our
    men and women serving in Iraq and Afghanistan.
        As we consider the President's fiscal year 2006 request, my
    colleagues should keep in mind that we will not succeed as a nation in
    the global war on terror unless we employ our foreign assistance
    programs as weapons in America's arsenal. This is particularly true
    with respect to front-line states, such as the $920 million request for
    Afghanistan, $698 million for Pakistan, $158 million for Indonesia, and
    $96 million for the Philippines. Simply put, as we strengthen the
    military, police and good governance of these states, we relieve the
    demands upon America's own military and diplomatic resources. Our aid
    runs the gamut from ``hard'' counterterrorism and military packages for
    foreign governments to ``soft'' child survival and basic health
    programs for rural populations. Both are integral components of
    deterring and defeating terrorism.
        As is the case every year, the Subcommittee will have difficult
    decisions to make in the weeks and months ahead. However, the process
    of reviewing the $33.6 billion request for the Department of State and
    foreign operations is well underway. This includes examination of
    proposed increases above fiscal year 2005 funding levels in such
    accounts as Transition Initiatives, Diplomatic and Consular Programs
    and the Millennium Challenge Corporation, and decreases in others,
    including Assistance for Eastern Europe and the Baltic States, and
    Assistance for the Independent States of the Former Soviet Union.
        I want to assure you, Secretary Rice, that we are attuned to
    changing realities around the world, including in such regions as
    Eastern Europe, Central Asia and the Middle East. Under the President's
    leadership, the march of freedom across the globe has been truly
    impressive--whether in Iraq, Afghanistan, Ukraine, or Georgia. Please
    know you have my personal commitment to help advance democracy in
    Egypt, Belarus, and the Kyrgyz Republic, among other countries.
        The use of cutting edge technology in this endeavor is vital. If
    you have not already, I encourage you to become familiar with the
    programs of Voice for Humanity in both Iraq and Afghanistan. These
    outreach activities are reaching important segments of those
    populations, including illiterate individuals and women.
        As has become my tradition, let me close with a few words on Burma.
    The situation in that country remains deplorable, with democracy leader
    and Nobel laureate Daw Aung San Suu Kyi and her compatriots under
    continued imprisonment. Access to Suu Kyi since the attempt on her life
    in May 2003 has been extremely limited, and I remain gravely concerned
    for her safety. Let me be crystal clear that the security and welfare
    of Suu Kyi is the direct responsibility of SPDC leader Than Shwe.
        Along with several of my colleagues--including Senators Leahy and
    Brownback--I introduced legislation earlier this week to renew
    sanctions against the repressive State Peace and Development Council
    (SPDC). America's challenge is fairly straightforward--we need to help
    make the struggle for freedom in Burma a priority for the world's
    democracies, for multilateral organizations (including the United
    Nations and the European Union), and for Burma's neighbors.
        The SPDC's chairmanship of the Association of Southeast Asian
    Nations (ASEAN) looms on the horizon. We must seize that as an
    opportunity to increase pressure on the junta until such time that
    Burma embarks on an irreversible path toward reconciliation and
    democracy.

        Senator McConnell. Let me now turn to my friend and
    longtime colleague on this subcommittee, Senator Leahy, for his
    opening observations, and then we will be happy to hear from
    you, Secretary Rice.

                 OPENING STATEMENT OF SENATOR PATRICK J. LEAHY

        Senator Leahy. Thank you, Mr. Chairman.
        Madam Secretary, I join the chairman in welcoming you on
    your first appearance before this subcommittee.
        I also want to thank the chairman for his continued work on
    these issues. I might say that to both chairmen, but more
    importantly for our longstanding, decades-old friendships.
        We have a lot to cover, Madam Secretary. I want to focus on
    one issue that you and I have spoken about, even before you
    were confirmed, and that is the need for U.S. foreign aid
    programs to be funded at a level that is commensurate with our
    national interests. The President's National Security Strategy
    recognizes the central role of foreign aid. I agree with the
    President on that. His fiscal year 2006 budget request for
    foreign operations, an increase of $3.1 billion over last
    year's level, is good step forward.
        But I also have serious concerns with this year's budget.
    Unfortunately, the President cuts several core foreign aid
    programs. Here are the things cut: funding for child survival
    and health programs, including infectious diseases, cut by $280
    million. The development assistance account is cut by $45
    million. Aid to Russia is cut in half. We even cut our
    contribution to UNICEF, something that seems to work very, very
    well everywhere I go in the world. And there are a number of
    other areas, promoting renewable energy, supporting democracy.
    We could and should do more.
        The programs are cut to pay for a large increase in funding
    for the Millennium Challenge Corporation. You and I discussed
    this a little bit earlier this afternoon. I support the MCC,
    but the President said we would not cut other things to pay for
    it. We had his personal assurance that other programs would not
    be cut to pay for the MCC.
        Again, I continue to support MCC, but the proposed increase
    in funding at the expense of other programs really cannot fly.
    If this year's request is fully funded, a total of $5.5 billion
    will have been appropriated to the MCC. So far, it has awarded
    one compact of $110 million, and that is to Madagascar.
    Madagascar has a population of only 15 million people. We are
    concerned about billions of people.
        I worry about having billions of dollars for this account
    just sitting in the Treasury for years when there are urgent
    needs, to promote democracy, stop childhood diseases, stop the
    deaths of millions of children between the time of birth and 2
    years old, who die of diseases that children in this country
    are immunized against.
        Your being here today is very important. I thank you for
    that. I know how busy your schedule is.
        But you have to really fight for this budget. The House
    allocation for the Foreign Operations Subcommittee is $2.5
    billion below the President's request. This creates a real
    problem for Senator Cochran, Senator McConnell, and for me. You
    have got to fight and the President has got to use the bully
    pulpit to fight for more. I know there are a lot of things on
    your mind, but these are the things that can make us safer as a
    Nation, but also respond to the fact that as the wealthiest,
    most powerful Nation on earth, we have a moral responsibility.
    We are blessed with so much. We will not stay blessed that long
    if we do not return it.
        I know that dealing with the Congress is not always
    politically rewarding. Sometimes it is not even fun, but Madam
    Secretary, you have to do it.
        Even if we got every single cent that has been required, we
    are still talking about only 1 percent of the Federal budget.
    We want to use our great wealth and our blessings to respond to
    global poverty, international terrorism, everything else. One
    percent.
        The President's budget is a positive first step. I say that
    as a member of the other party. But Democrats and Republicans
    work very closely together up here. Senator McConnell and I
    have. We try to protect this budget. We will keep on trying to
    do it, but help us. Help us get the money. A lot of people
    around the world see this as the face of our moral leadership.
        Thank you, Mr. Chairman.
        Senator McConnell. Thank you, Senator Leahy.
        The way we will proceed is we are going to have a short
    statement from the chairman of the full committee, then your
    statement, Secretary Rice, and then questions in order of
    arrival. Senator Cochran.

                   OPENING STATEMENT OF SENATOR THAD COCHRAN

        Senator Cochran. Mr. Chairman, I am pleased to join you in
    welcoming Dr. Rice to this committee hearing. It has been a
    pleasure working with the Secretary and White House officials
    as well on the supplemental appropriations bill, which the
    President has now signed. I look forward to continuing that
    relationship as the committee considers the fiscal year 2006
    budget request for the Department of State.
        The President has an important foreign policy agenda, which
    includes an emergency plan for AIDS relief, promoting global
    democracy, assisting developing countries, and reducing
    barriers to free trade.
        Madam Secretary, the committee appreciates your leadership
    as Secretary of State and your assistance in identifying our
    foreign policy priorities. We thank you for the excellent work
    you are doing in our Nation's behalf.
        Thank you, Mr. Chairman.
        Senator McConnell. Thank you, Chairman Cochran.
        Secretary Rice, we will be happy to put your full statement
    in the record, if you have one, and go right ahead.

                   SUMMARY STATEMENT OF HON. CONDOLEEZZA RICE

        Secretary Rice. Thank you very much, Mr. Chairman. I would
    like to proceed as follows, with the committee's forbearance. I
    have a statement that I would like to make about another matter
    first. I have a longer statement, which I would like to enter
    into the record and perhaps just make a few comments about it
    so that we have maximum time for questions.
        Senator McConnell. That will be fine.

                           RESPECT FOR THE HOLY KORAN

        Secretary Rice. Mr. Chairman, before I begin my actual
    testimony, I want to speak directly to Muslims in America and
    throughout the world.
        Disrespect for the Holy Koran is not now, nor has it ever
    been, nor will it ever be tolerated by the United States. We
    honor the sacred books of all the world's great religions.
    Disrespect for the Holy Koran is abhorrent to us all.
        There have been recent allegations about disrespect for the
    Holy Koran by interrogators at Guantanamo Bay and that has
    deeply offended many people. Our military authorities are
    investigating these allegations fully. If they are proven true,
    we will take appropriate action.
        Respect for the religious freedom of all individuals is one
    of the founding principles of the United States. The protection
    of a person's right to worship freely and without harassment is
    a principle that the Government and the people of the United
    States take very seriously. Guaranteeing religious rights is of
    great personal importance to the President and to me.
        During the past few days, we have heard from our Muslim
    friends around the world about their concerns on this matter.
    We understand and we share their concerns. Sadly, some people
    have lost their lives in violent demonstrations. I am asking
    that all our friends around the world reject incitement to
    violence by those who would mischaracterize our intentions.
        Thank you very much, Mr. Chairman and members of the
    committee.
        As I said, I have a longer statement that I would like to
    place in the record, but I would just like to make a few
    highlights.

                              PROMOTING DEMOCRACY

        This is indeed an extraordinary period, and I think
    everyone has spoken to that. It is a time that I think is
    unlike any other since perhaps the end of World War II when the
    United States took on the mantle of creating a stable and
    democratic Europe, a Europe at that time, that was divided in
    half but eventually became whole and free and at peace. We
    learned from that experience that if we are sound in our
    diplomacy and if we are sound in our values about democracy,
    that indeed we are safer and more secure because as democracy
    goes forward and prospers, the United States is indeed safer
    and secure. When democracy is in retreat, freedom is in
    retreat, then we are more vulnerable. We learned that in a very
    graphic and difficult way on September 11.
        The President has said that the only way to deal with the
    ideologies of hatred that we face in the world now is to
    present the world with the antidote to that, which is the
    spread of liberty and freedom. I would just like to echo
    something that the chairman said, which is that indeed we are
    watching remarkable events around the world. Who could not be
    impressed with the Rose Revolution in Georgia or the Orange
    Revolution in Ukraine or the Cedar Revolution in Lebanon or
    with Iraqis and Afghans voting in large numbers against all
    odds?
        But I think that we all recognize that times of challenge
    and opportunity also require the very hardest work and the very
    greatest concentration. What we hope to do at the State
    Department is to employ the very fine men and women of the
    Foreign Service, the Civil Service, and foreign service
    nationals in that cause.

           EQUAL IMPORTANCE OF STATE AND FOREIGN OPERATIONS REQUESTS

        The budget before you attempts to do several things. First
    of all, I just want to make the point that we must maintain a
    balance of resources between State and foreign operations. The
    diplomatic platform that we have out there, the people, our
    ability to operate in the field, our facilities, is the
    platform from which we conduct our diplomacy. We are especially
    concerned that our people will have the training that they
    need, the technology that they need, and that they will also
    have the facilities that they need, and the security that they
    need.
        In that regard, I would like to thank those who worked so
    hard on the supplemental. I know this was not an easy matter,
    but the Baghdad embassy, especially, is going to be very
    important to the safety and security and well-being of our
    people, and I want to thank you for your hard work on that.
        We are also, of course, pursuing a number of important
    strategic directions. In the global war on terrorism, we think
    very often of what our military is doing in the mountains of
    Afghanistan or along the Afghan/Pakistani border. We think of
    our men and women in uniform and what they are doing in the
    Baghdad Sunni Triangle. But we also need to think of the
    important role that our foreign assistance plays in our
    partnerships with the front-line states of Afghanistan and Iraq
    and Pakistan and Jordan and other states in the war on
    terrorism.
        What we are really doing in the support that we provide for
    these states is to allow them to become really active and
    effective warriors in the war on terrorism, and we are much
    better when we are fighting side by side with those who have
    everything to lose in the war on terrorism like the Pakistanis
    and the Afghans and the Iraqis of the world. If you just go
    back a few years, it is remarkable to think of the array of
    states that are now fighting with us in the Global War on
    Terrorism. We need to support them.
        This budget supports them in a very important way with
    foreign assistance. I think we just need to keep in mind that
    this is strategic assistance. We tend to think of foreign aid.
    This is strategic assistance that makes us more effective also
    in the global war on terrorism.
        We, of course, are trying to pursue the opportunities for
    democracy that are presenting themselves to us, it seems almost
    daily, in the Middle East where I will submit to you and I
    promise and commit to you that we are actively beginning now to
    look hard at our public diplomacy efforts in the Middle East to
    really replace the ideologies of hatred, the misinformation
    about the United States, with effective messages about who we
    are and what we are trying to do.
        But, of course, there are still many places that require
    our attention, and I would like to thank Senator McConnell for
    putting a spotlight in the supplemental on Belarus, the last
    dictatorship in Europe. I had a chance to meet with some of the
    civil society activists from Belarus. They are really people
    who look at what happened in Ukraine, look at what happened in
    Georgia, and say, why not here? It will come in time because
    these are universal values and ultimately they will triumph.
    But we have to stand with people in places like Belarus, and in
    places like Burma, to let them know that at least the United
    States is with them.
        We are also trying to improve through this budget our
    ability to respond to the tremendously fluid situations in
    which we find ourselves. You will note that in this budget
    there is a $100 million request for a conflict response fund.
    Very often between budget cycles, we have to borrow money from
    accounts and then try to pay it back because things happen that
    we did not expect. I can give you many examples, Liberia,
    Haiti, positive examples like Ukraine, and we want to be able
    to be more responsive to those kinds of emergency situations.
        We are also pursuing, at the same time that we pursue the
    democratization of places like the Middle East and remaining
    places in Europe, a very active agenda for the countries that
    still need to find their way out of poverty and in to greater
    prosperity. Indeed, the real challenge of many places, for
    instance, in our neighborhood, like Latin America, is to take
    what are already very strong democratic traditions now, very
    strong democratic impulses to strengthen those institutions and
    to make democracy begin to pay off for the people. We have seen
    a lot of turbulence in Latin America over the last couple of
    years because people are getting restless and are beginning to
    wonder if democracy will pay off.

                            TRADE AGENDA, CAFTA VOTE

        I want, in that regard, just to draw everyone's attention
    to the importance of our trade agenda in providing opportunity
    for countries, particularly in this region. In that regard, we
    will soon have an important vote on CAFTA. The Central American
    presidents were just here today with the President. They will
    tell you that this is a matter for them that is essential to
    their continued existence as democratic states. They are being
    challenged by ``populists'' across the board. In a place like
    Nicaragua, for instance, that challenge is coming from an old
    foe, the Sandinistas. We do not want to abandon the playing
    field in Central America and in Latin America to a ``populism''
    of a kind that would take us back to the 1980's. Having gone
    there once, let us not go there again. And so I just call to
    your attention the importance of the trade agenda and of CAFTA
    in particular.
        Finally, as Senator Leahy has noted, America is a country
    of great strength. It is a country of great values, but it is
    also a country of great compassion. We have tried very hard to
    let people who are still in poverty, people who are in need,
    people who face disease or humanitarian disaster, know that the
    United States will be there for them.

                            PEACEKEEPING OPERATIONS

        We are working on any number of conflicts in the world,
    Liberia, the Democratic Republic of the Congo, Haiti, and we do
    it through peacekeeping and through our ability to support
    others in peacekeeping operations. I just ask you to help with
    those missions with needed funds.
        Of course, we have a major effort in disease alleviation
    through the President's emergency program for AIDS and other
    communicable diseases.

                             DEVELOPMENT ASSISTANCE

        Finally, let me speak to a point that Senator Leahy made
    which is about development assistance. We have, in this
    administration, increased development assistance by two times,
    twice since we have been in office over the last 4 years, and
    it is because the President believes that that doubling of
    development assistance represents the commitment that we have
    to helping those who need to come out of poverty.
        We do it recognizing, however, that we have had a long
    history of development assistance that did not do the job. It
    was very often wasted, and that was because too often
    development was not seen as a two-way street. Yes, there are
    responsibilities to make resources available, but there is also
    the responsibility of the recipient country to govern wisely,
    to govern transparently, to govern accountably, and to invest
    in the health and well-being of their people.

                          MILLENNIUM CHALLENGE ACCOUNT

        The design of the Millennium Challenge Account was to do
    exactly that. It was to make a compact with the recipient
    country that any program monies would be given to a recipient
    that was planning to govern wisely and that had a record of
    doing that and fighting corruption.
        The request this year for $3 billion for the Millennium
    Challenge Account anticipates the fact that while only one
    compact has been signed, and that is with Madagascar, that we
    are seeking to conclude compacts with 10 more countries by the
    end of 2005. Those countries include Honduras, Ghana,
    Nicaragua, Senegal, Mozambique, Sri Lanka, Armenia, and
    Georgia.
        Let me just close by saying one word about Georgia. The
    pictures that you saw from Georgia were the pictures in Freedom
    Square, which were extraordinary. It was especially
    extraordinary for me as an old Soviet specialist to stand in
    this former Soviet republic and hear the Georgian people sing
    their long-banned Georgian national anthem and then to sing the
    American national anthem. It showed what our partnership means
    with small countries that are willing to take risks for
    democracy.

                               PREPARED STATEMENT

        But what they mostly wanted to talk about, in addition to
    problems that they might have with their big neighbor, was
    their Millennium Challenge program because they believe that if
    they can get this compact finished, it is going to make a huge
    difference in their ability to complete infrastructure, and to
    have energy independence. They have made tremendous inroads in
    terms of corruption. I think that what we are beginning to see
    is that when we have an incentive out there like the Millennium
    Challenge Account, people are responsive to it. So I ask you to
    think about where we are going with the Millennium Challenge
    Account. I think it is one of the great innovations in
    development assistance and it helps to show the heart of
    America.
        So thank you very much.
        [The statement follows:]

                  Prepared Statement of Hon. Condoleezza Rice

        Thank you, Chairman McConnell, Mr. Leahy, Honorable Members of the
    Committee, I appreciate the opportunity to address the Committee at
    this time of challenge, hope and opportunity for America, and for the
    world. And I look forward to working with the Congress to build a
    strong bipartisan consensus behind America's foreign policy and to
    ensure that the men and women of American diplomacy have the resources
    they need to conduct their vital mission.
        The President's fiscal year 2006 International Affairs Budget for
    the Department of State, USAID and other foreign affairs agencies
    totals $33.6 billion.
        I would like to take this opportunity to thank the Members of this
    Committee for their support and leadership in the passing the fiscal
    year 2005 Emergency Supplemental. This urgently needed funding will
    support immediate political, economic, humanitarian, and operational
    needs that will allow us to meet new challenges--and seize new
    opportunities--to build a better, safer, and freer world.
        The supplemental international affairs funding of $5.8 billion will
    ensure that we are able to respond speedily and effectively to the
    needs of our steadfast coalition partners in the War on Terror, to
    newly elected governments in Afghanistan, Iraq, the Palestinian
    territories and Ukraine who need our stabilizing assistance to move
    forward with reforms, to those seeking democracy assistance in Belarus
    and Lebanon, and to the men, women and children uprooted by war, as in
    Sudan, or swept up in natural disasters, such as the recent East Asia
    tsunami. The supplemental funds will also cover the extraordinary
    security and support costs of operating our current embassy in Baghdad,
    and the construction of a secure new embassy compound for our mission,
    as well as $60 million for the security and operations of our embassy
    in Kabul.
        Now, if I may, Mr. Chairman, I will begin my testimony on the
    fiscal year 2006 Budget Request with an overview of President Bush's
    foreign policy mission, which we seek this Committee's support to
    advance.
        In the long term, as President Bush said, ``The only force powerful
    enough to stop the rise of tyranny and terror, and replace hatred with
    hope, is the force of human freedom.'' Through diplomacy, the United
    States can create new possibilities for freedom and fresh hope across
    the globe. We must deal with the world as it is, but we do not accept
    it as it is. In places like Afghanistan and Ukraine, Iraq and the
    Palestinian territories, Lebanon and Georgia, people's desire for
    freedom and a better future is redefining what many thought possible in
    these societies.
        President Bush has charged the men and women of the Department of
    State with helping to create a balance of power in the world that
    favors human liberty, and that is exactly what we are doing. Together
    with our democratic partners around the world, we are advancing a
    forward strategy of freedom.
        Our cooperation with international partners is dramatically evident
    in Afghanistan, where last month I saw first-hand the progress that
    country has made towards stability, reconstruction, and democracy. The
    Presidential election last year was an inspiration to the world. Next
    September, Afghanistan's citizens, men and women alike, will again go
    to the polls, this time to elect a parliament. Afghanistan still faces
    many challenges, including the narcotics trade that could undermine its
    strides on so many fronts. We are committed to a comprehensive counter-
    narcotics strategy and a long-term reconstruction strategy because we
    believe in the future of a new, democratic Afghanistan--an Afghanistan
    that is no longer a haven for terrorists and tyrants, but a partner in
    security and freedom.
        To build on the positive momentum in Afghanistan, President Bush
    has requested nearly $1.1 billion in total U.S. funding, including $956
    million in foreign assistance support. This money will be used to
    invest in security, health, education, clean water and free market
    infrastructure, which together create conditions for sustained growth,
    opportunity, and to continue the fight against drugs.
        This is also a very important year for Iraq, as the Iraqis write
    their constitution and hold national elections in December. When
    President Bush traveled to Europe in February, he and his counterparts
    not only turned the page on Iraq, they wrote a new chapter. All 26 NATO
    allies are now contributing to the NATO Training Mission in Iraq. The
    European Union announced its willingness to co-host an international
    conference with the United States to encourage and coordinate
    international support for Iraq. We have followed up on this initiative
    with the European Commission, the European Parliament, EU Member
    States, other countries around the world, and the Iraqi Government.
    Today, in the midst of a tough security situation, Iraqis at all
    levels--from the town council in Fallujah to the President of the
    country--are engaging in the democratic process and they need and
    deserve our support.
        For Iraq, President Bush has requested $457 million of support for
    fiscal year 2006, including $360 million to continue work already begun
    under the Iraq Relief and Reconstruction Fund. These monies would be
    targeted towards helping the new Iraqi leadership create a functioning
    democracy and a justice system governed by the rule of law. This
    funding also will help the Iraqi government deliver basic services to
    its people, collect revenues, generate jobs and develop a free market
    system capable of joining the global economy.
        We and our democratic allies are putting the power of our
    partnership to work not only in Afghanistan and Iraq, but all across
    the Broader Middle East and North Africa. Efforts to encourage
    democratization, economic reform, the growth of civil society and
    opportunity for all through education are critical to shaping a stable
    and prosperous future for this strategically important region.
    Recognizing this, through the G-8 we have established the Forum for the
    Future--a new partnership between the democratic world and nations of
    this vast region, and we are committed to ensuring that the Forum plays
    a central role in advancing indigenous reform efforts in this vast
    region extending from Morocco to Pakistan.
        In early March in London, I participated in an important conference
    of major donors, including regional states, to help the Palestinian
    people advance their political, security and economic reforms and build
    infrastructure for self-government. The World Economic Forum in Jordan
    is expected to give further impetus to political and economic reform in
    the region.
        The path of reform in the Broader Middle East will be difficult and
    uneven. Freedom's work is the work of generations. But it is also
    urgent work that cannot be deferred.
        From Morocco to Bahrain to Afghanistan, we are seeing new
    protections for women and minorities, and the beginnings of political
    pluralism. We have seen an opening toward broader participation in the
    first-ever municipal elections in Saudi Arabia. President Mubarak
    announced Egypt's intention to open up competition in Egypt's
    presidential elections. In the Palestinian territories and in Iraq we
    have witnessed remarkably free and successful elections. And in Lebanon
    we have witnessed the dramatic popular demonstrations for freedom and
    against the continued manipulation of the government and politics by
    outsiders.
        The will of the people of Lebanon to make their own decisions and
    throw off the mantle of oppression is clear. The people of Lebanon have
    an enormous opportunity to bring about peaceful change with elections.
    We and many others support them by insisting on the withdrawal of all
    foreign forces from Lebanon, as required by U.N. Security Council
    Resolution 1559, and by supporting free and fair elections.
        In support of these hopeful trends across the region toward freedom
    and democratic government, the fiscal year 2006 budget request proposes
    enhanced funding for diplomatic and assistance activities in the Middle
    East, North Africa and other countries with significant Muslim
    populations. The request includes $120 million for the Middle East
    Partnership Initiative for reform, $40 million for the National
    Endowment for Democracy to expand efforts to promote democracy in the
    Broader Middle East and North Africa region, $180 million for Muslim
    outreach through educational and cultural exchanges, and increases for
    a wide range of other public diplomacy and broadcasting initiatives
    geared toward Muslim publics, particularly young people.
        Of course, the process of reform in the broader Middle East is not
    detached from what must happen between the Israelis and Palestinians
    toward realizing President Bush's vision of an independent Palestinian
    state living side-by-side in peace with the State of Israel.
        The Palestinian elections, and the Israeli withdrawal plan for Gaza
    and parts of the West Bank, have created a unique opportunity for
    peace. In fact, when I met with both Prime Minister Sharon and
    President Abbas they had the same opening line: This is an opportunity
    for peace we must not miss.
        President Bush has announced an additional $350 million to help the
    Palestinians build infrastructure and sustain the reform process over
    the next two years, including the $150 million in the fiscal year 2006
    budget. I'd like to thank the Congress for supporting the President's
    efforts by providing the $200 million included in the fiscal year 2005
    Supplemental. This is an important show of support for President Abbas.
    Our fiscal year 2006 budget request also contains $2.5 billion in
    assistance to Israel, which continues our longstanding strategic
    partnership and supports regional democracy and security.
        Even as we work with allies and friends to meet the great challenge
    of advancing freedom and peace in the broader Middle East and North
    Africa, we will seize other important opportunities to build a world of
    peace and hope.
        For example, the U.S.-led global war on terrorism has put Pakistan
    and India on the same side against extremism. We have de-hyphenated our
    relationship with Pakistan and with India, building strong, independent
    ties with each. At the same time that our relations with India have
    been moving forward we have the best relations with Pakistan that
    perhaps we have ever had, deepening our cooperation with Pakistan in
    the war on terrorism, supporting President Musharraf's modernization
    efforts and the liberalization of Pakistan's economy.
        During my March trip to Pakistan and India, on behalf of President
    Bush I congratulated both countries for the steps they have taken
    toward warmer relations with each other. In Islamabad, I discussed the
    need to chart a democratic path for Pakistan, including the holding of
    national elections in 2007. With India, the world's largest democracy,
    we are cooperating on a global strategy for peace, and on defense,
    energy and growth. A few weeks ago, India's Foreign Minister met with
    President Bush and they discussed ways we might accelerate our
    cooperation still further and we look forward to a July visit by Prime
    Minister Singh.
        The future of Asia is very dynamic. Our alliances and relationships
    in Asia--starting with our critical strategic and economic ties with
    Japan--will be profoundly important in creating a stable, prosperous,
    democratic region and world.
        Much of Asia's dynamism comes from an emerging China whose economy
    has become an engine of regional and global growth. This new factor in
    international politics requires us to incorporate China more fully into
    the global system.
        We are working with China in context of its WTO commitments to
    address outstanding concerns related to that ongoing integration
    effort, particularly on issues such as intellectual property rights,
    financial sector reform and improved market access. We believe that we
    and our allies and friends can help foster an environment in which a
    rising China acts as a positive force. We want China as a global
    partner, able and willing to match its growing capabilities to its
    international responsibilities. And we believe that China must
    eventually embrace some form of open, genuinely representative
    government if it is to realize the full talents of the Chinese people
    and fully reap the benefits and meet the challenges of a globalizing
    world.
        Last month, I participated in the NATO Ministerial meeting, held
    for the first time in Lithuania, one of NATO's newest members. I just
    accompanied President Bush on his visit to another new NATO ally,
    Latvia, where he had a very positive and constructive meeting with the
    leaders of Latvia, Lithuania and Estonia. The expansion of the North
    Atlantic alliance to 26 members including the three Baltic states marks
    the further advance of democracy and freedom throughout Europe.
        From Riga, we stopped in Maastricht, Netherlands, to pay tribute to
    those who served and sacrificed in the Second World War and to those
    who are standing with us today in defense of democracy and freedom in
    places like Iraq and Afghanistan.
        From The Netherlands, the President and I traveled to Russia to
    mark the 60th anniversary of the end of World War II. The visit and
    ceremonies in Moscow were an opportunity to thank those who so bravely
    fought for the victory over fascism. President Bush continued his
    dialogue with President Putin about U.S.-Russian relations and about
    Russia's future. In his recent State-of-the-Union address, President
    Putin stressed his commitment to democracy and we look forward to
    seeing how his words get translated into deeds. President Bush also met
    with civil society leaders and emphasized that a democratic, vibrant,
    prosperous Russia is in everyone's interests.
        We then went to Georgia, where we witnessed the enthusiasm of a new
    democracy first hand. And President Bush underscored to President
    Saakashvili our support for the independence, territorial integrity and
    strengthening of that young democracy.
        The seeds of democracy in Georgia, which truly blossomed from the
    Rose Revolution of November 2003, served as an inspiration a year later
    to those in Ukraine who refused to accept a stolen election. The
    political transformation within Ukraine has meant a new dynamic in
    Ukraine's relationship with the United States and our allies. At the
    NATO Ministerial last month, the alliance extended an invitation to
    Ukraine to begin an Intensified Dialogue on Membership Issues, raising
    NATO's cooperation with Ukraine to a new level. All of us welcomed the
    new leader of Ukraine, Viktor Yushchenko, to Washington. We recognize
    that he has a lot to do to reform his country, and we have a strong
    interest in ensuring the success of a democratic Ukraine.
        In Kyrgyzstan, the change of government precipitated by popular
    discontent over election fraud and government corruption will be
    followed by new presidential elections July 10. These elections offer
    Kyrgyzstan the opportunity to establish new democratic benchmarks for
    Central Asia. Working closely with our OSCE partners, we will provide
    assistance to ensure the elections are conducted freely and fairly.
    Beyond the elections, we look forward to working with a legitimately
    elected government to establish the basis for prosperity and stability
    for Kyrgyzstan and the region.
        Several weeks ago, I visited Brazil, Colombia, and El Salvador and
    took part in the Community of Democracies Meeting in Santiago, Chile.
    Our efforts in the hemisphere, in Africa and across the developing
    world are designed to help strengthen fellow democracies so that they
    can deliver the benefits of democracy to their citizens and help them
    escape poverty. Our policy is also guided by the principle that leaders
    who are elected democratically have a responsibility to govern
    democratically. We are working in partnership with developing nations
    to fight corruption, instill the rule of law, and create a culture of
    transparency that will attract the trade and investment crucial to
    poverty reduction.
        At the Monterrey Summit in 2002, all nations agreed that economic
    growth is essential to fighting poverty, and that development
    assistance works best when it goes to countries that adopt growth-
    oriented policies. This concept underlies the President's revolutionary
    Millennium Challenge Account initiative. We seek $3 billion for the
    third year of the Millennium Challenge Corporation, which helps
    countries that govern justly, adopt sound economic policies and invest
    in the welfare of their people. We also seek $2.4 billion in
    development, child survival and health assistance. The fiscal year 2006
    Budget exceeds the President's 2002 commitment for overall growth in
    core development assistance by requesting a total of $19.8 billion,
    $8.2 billion more than in 2002.
        We will also help countries enhance their capabilities to protect
    their citizens from traffickers and terrorists.
        Our fiscal year 2006 request includes $735 million for the Andean
    Counter Drug Initiative to consolidate gains made in recent years in
    eradication, interdiction and alternative development.
        We are requesting $5.8 billion in assistance to our front-line
    partners in the global war on terror. Through the provision of
    equipment and training, this assistance will help give military, police
    and other security forces the tools they need to destroy terrorist
    cells, disrupt terrorist operations, strengthen border controls, and
    prevent attacks. This assistance will also help advance economic growth
    and democratic reform, providing new opportunities for their citizens
    and addressing the hopelessness that terrorists seek to exploit. The
    request includes $698 million for Pakistan; $559 million for Colombia;
    $462 million for Jordan; $213 million for Kenya; and $159 million for
    Indonesia.
        When they engage effectively, multilateral institutions can
    multiply the strength of freedom-loving nations. We are requesting $1.3
    billion in support for the multilateral development banks, with which
    our bilateral assistance missions partner abroad to reinforce effective
    economic reform strategies. In addition, we are seeking $100 million in
    debt relief for the Heavily Indebted Poor Countries initiative, an
    effort we are pursuing in concert with the G-7, other key lending
    countries, and the international financial institutions. We are
    requesting nearly $1.3 billion for U.S. obligations to 47 international
    organizations, including the United Nations, and a little over $1
    billion to pay projected U.S. assessments for U.N. peacekeeping
    missions. And we are seeking $114 million to enhance the peacekeeping
    capabilities of non-U.N. forces, with a particular focus on Africa.
        We are encouraged by the African Union's leadership in addressing
    conflicts across the continent, specifically its mission in Darfur. The
    African Union military commanders in Darfur are doing vital work in
    providing security for millions of displaced people. We welcome the
    AU's decision to double the size of its Darfur mission to enhance its
    ability to protect civilians, and we appreciate your help through the
    Supplemental to support this expanded mission. We fully appreciate the
    urgency of the situation and we encourage the AU's consultations with
    NATO on potential logistical assistance that would enable the AU forces
    to expand quickly and sustain their operations.
        Meanwhile, we are doing all we can to ensure that the displaced
    people get the basic humanitarian supplies they need until such time as
    secure conditions are established that enable them to return to a
    normal life. And we are pressing for prompt implementation of the
    North-South Comprehensive Peace Agreement, because that accord creates
    a possible political framework for resolving conflicts in Darfur and
    other regions of Sudan. At the same time, we are working to orchestrate
    an international message to the Government of Sudan: They are
    responsible for conditions in Darfur and must cooperate to stop the
    killing and create a path for peaceful reconciliation.
        Thanks to Congress's strong backing, last month at the Oslo Donors'
    Conference to support the peace agreement, we were able to pledge $853
    million to help Sudan in fiscal year 2005. Most recently in the
    Supplemental, Congress provided additional support to help meet the
    needs of implementing the Comprehensive Peace Agreement in the south of
    Sudan and keep humanitarian supplies flowing to Darfur. I thank you for
    your generosity and look forward to further strong congressional
    support for Sudan through the fiscal year 2006 Budget. Given the
    enormity of the humanitarian, security, and political challenge, your
    continued backing is critical.
        Sudan is but one, terrible example of the broader challenge we
    face. Chaos, corruption and cruelty reign can pose threats to their
    neighbors, to their regions, and to the entire world. And so we are
    working to strengthen international capacities to address conditions in
    failed, failing and post-conflict states. President Bush has charged us
    at the State Department with coordinating our nation's post-conflict
    and stabilization efforts and we are asking for $24 million in
    operating funds for the new Office of the Coordinator for
    Reconstruction and Stabilization housed in the Department. I also
    appreciate the $7.7 million Congress has provided in supplemental funds
    for start-up and personnel costs for the Office of the Coordinator. The
    fiscal year 2006 budget proposes a $100 million Conflict Response Fund
    to quickly address emerging needs and help deploy trained and
    experienced civilian personnel immediately to an unstable region.
        The United States must stay at the forefront of the global campaign
    against HIV/AIDS, providing half of the global assistance to fight this
    scourge. The President is requesting $3.2 billion in total U.S. funding
    for care, treatment and prevention efforts. We will demonstrate the
    compassion of the American people in other ways as well. Through our
    continued support of international and non-governmental organizations,
    we will ensure that America remains the world's most generous food and
    non-food humanitarian assistance provider. We seek $3 billion in food
    aid and famine relief and non-food humanitarian assistance, including
    support for fragile states.
        In all of these endeavors, the primary instrument of American
    diplomacy will be the dedicated men and women of the Department of
    State. We would welcome your help as members of the full committee in
    ensuring that our people are well equipped for the challenges ahead in
    terms of training, technologies and safe workplaces. Secretary Powell
    and his team made important progress in these areas and we must build
    on the foundation they established.
        We are requesting $1.5 billion for security-related construction
    and physical security and rehabilitation of U.S. embassies and
    consulates, and $690 million to increase security for diplomatic
    personnel and facilities. We have a solemn obligation to protect the
    people of our diplomatic missions and their families, who serve at our
    far-flung posts in the face of a global terrorist threat.
        We must strengthen the recruitment of new personnel. We are seeking
    $57 million for 221 new positions to meet core staffing and training
    requirements. And as we seek out new talent, we also seek to further
    diversify our workforce in the process. We send an important signal to
    the rest of the world about our values and what they mean in practice
    when we are represented abroad by people of all cultures, races, and
    religions. Of course, we also must cultivate the people we already have
    in place--by rewarding achievement, encouraging initiative, and
    offering a full range of training opportunities. That includes the
    training and support needed to make full use of new technologies and
    tools, and we are asking for $249 million for investment in information
    technology.
        Public diplomacy will be a top priority for me, as I know it is for
    this Committee, and the fiscal year 2006 request includes $328 million
    for activities to engage, inform and influence foreign publics. America
    and all free nations are facing a generational struggle against a new
    and deadly ideology of hatred. We must do a better job of confronting
    hostile propaganda, dispelling dangerous myths, and telling America's
    story. In some cases, that may mean we need to do more of what we are
    already doing, and in other cases, it may mean we need new ways of
    doing business.
        If our public diplomacy efforts are to succeed, we cannot close
    ourselves off from the world. We are asking for $931 million to improve
    border security and for an increase of $74 million over fiscal year
    2005 for educational and cultural exchange programs, bringing the total
    to $430 million in fiscal year 2006. We will continue to work closely
    with the Department of Homeland Security to identify and prevent
    terrorists and other adversaries from doing harm, even as we maintain
    the fundamental openness that gives our democracy its dynamism and
    makes our country a beacon for international tourists, students,
    immigrants, and businesspeople. We will keep America's doors open and
    our borders secure.
        Mr. Chairman, Members of the Committee, this time of global
    transformation calls for transformational diplomacy. More than ever,
    America's diplomats will need to be active in spreading democracy,
    reducing poverty, fighting terror and doing our part to protect our
    homeland. And more than ever, we will need your support if we are to
    succeed in our vital mission for the American people.
        Thank you, Mr. Chairman. I would be pleased to answer any questions
    that you and the other distinguished Committee Members may have.

                                BURMA SANCTIONS

        Senator McConnell. Thank you, Madam Secretary.
        I want to ask you one quick question just for the record,
    and then I am going to turn to Iran. I assume you support the
    renewal of sanctions, including an import ban and visa
    restrictions against the military junta in Burma.
        Secretary Rice. Absolutely.

                                      IRAN

        Senator McConnell. We will be moving forward with that this
    year.
        Looking at the morning paper, it certainly reminds us again
    of the Iranian challenge. The article in the Washington Post
    that I read discussed the task undertaken by the British, the
    French, and the Germans and the rather stern statement that
    they have issued to the Iranians. I know that it must have come
    up when you and the President were with President Putin in
    Russia.
        What is the state of play of the whole Iranian nuclear
    issue? What can you tell us publicly about what you discussed
    with President Putin in relation to the Russians' relationship
    to Iran? In short, give us an update on where we are.
        Secretary Rice. Certainly. Well, as you know, Senator, we
    have been supporting the EU-3 negotiations with the Iranians,
    and we have called on the Iranians to take advantage of the
    opportunity that the Europeans have given them to demonstrate
    that they are prepared to live up to their international
    obligations. That means that the Iranians cannot be allowed to
    develop the technologies that would lead them to be able to
    build a nuclear weapon under cover of a civilian nuclear
    program.
        We have excellent cooperation with the Europeans on this.
    The Iranians have been making various threats publicly. We are
    following it very closely, but it is our hope that the Iranians
    are going to continue these negotiations because it is really
    the only reliable way for them to really be a part of the
    international system and to be accepted there.
        The Security Council always remains an option should the
    Iranians not live up to their obligations, but we are still
    hopeful that they will recognize where they are.
        With regard to the Russians, we have been in very close
    contact with them. While we do not believe, Senator, that the
    Iranians need a civilian nuclear power program, given their
    abundance of hydrocarbon sources, we nonetheless recognize that
    the Russians, upon agreeing to give them the Bushehr reactor,
    have built in a number of proliferation safeguards that could
    be quite useful. For instance, the Russians have said that they
    would provide fuel, but then there would have to be a fuel
    take-back so that the Iranians would not keep the capability of
    being able to use that fuel to develop nuclear weapons. This
    is, in many ways, very close to a proposal that the President
    made at the National Defense University, that there ought to be
    provision of fuel, but that the transfer of the technologies of
    reprocessing and enrichment should not continue.
        So we are watching the situation. We are in very close
    contact with our allies, but we are hopeful that the Iranians
    are going to take the deal that is being given to them.

                RUSSIAN TROOPS IN GEORGIA AND ARMENIA/AZERBAIJAN

        Senator McConnell. Turning to another part of your trip,
    could you give us an update of the likelihood of Russian troops
    remaining in Georgia for a long time?
        Also, even though it may not have been on your agenda, I
    have had a longstanding interest in the Armenia/Azerbaijan
    dispute over Nagorno-Karabakh, and the presence of Russian
    troops in Armenia, which the Armenians say is because of their
    concern about the Turks. Nevertheless, is there anything new in
    that area that you could share with us?
        Secretary Rice. Senator, on the Azerbaijan/Armenia/Nagorno-
    Karabakh situation, I cannot report that there is anything new.
    But as you know, we had made considerable progress several
    years ago, and it looked like we were going to be able to
    perhaps even resolve the Nagorno-Karabakh issue. We were not
    able to do it at the time. We continue to have the Minsk Group
    that works on this.
        We want to redouble our efforts again to see if we can go
    back and see if we can try and resolve this issue. We have been
    discussing with the Russians the need to deal with what we are
    calling frozen conflicts like Nagorno-Karabakh. I have had
    discussions with my counterpart, Sergei Lavarov. We believe it
    would be a very useful thing. Armenia and Azerbaijan are
    suffering from this conflict, suffering that investment is low,
    suffering that they really cannot stabilize their political
    situations, suffering, we believe, in the presence of foreign
    troops. So we would like very much to try and get this
    resolved, and we will try and redouble our efforts.
        On the Georgian bases, it was very interesting to first
    hear the Russians and then hear the Georgians on this. The
    Russians, as you know, agreed that they would leave these bases
    in Georgia. It has now been a question of when and how. When
    you listen to some, they say that they are actually closing in
    on a deal. Others say maybe they are not so close. But while we
    are not trying to get involved in the details of it in some
    sort of mediator role--that would not be appropriate for us--we
    are really encouraging the Russians to get this done and to
    remove their forces so that Georgia can regain that element of
    their national sovereignty. The Russians say that they intend
    to leave, that it is now just a matter of how and the dates.
    But we are encouraging them very strongly to do it as quickly
    as possible.

                             ABKHAZIA/SOUTH OSSETIA

        Senator McConnell. And finally, what about internal
    Georgian issues like Abkhazia, for example?
        Secretary Rice. Our message to the Georgians about Abkhazia
    and South Ossetia was that, first of all, these cannot be
    resolved by military force, that the United States would not
    support the use of military force to resolve these conflicts.
    There has to be a political solution. The Georgians are talking
    in terms that probably are going to be helpful in places like
    South Ossetia when they talk about greater local autonomy over
    decision-making. But these are part of a territorially
    integrous Georgia.
        So one of the things that the President did during his stay
    there was to have conversations across the region, in Georgia
    as well, about the need to protect minority rights, about the
    need to build multi-ethnic democracies because, if you think
    about it, if each of these separatist regions tries to start
    pulling away, there is not going to be much left of the
    territorial integrity of Georgia. So better for Georgia to have
    a sense of protecting minority rights, protecting the ability
    of people to govern their own affairs locally. But we speak
    very clearly for the territorial integrity of Georgia, and we
    have said that to the Russians as well.

                                     RUSSIA

        Senator McConnell. I am going to sneak in just one final,
    very quick question. I read somewhere that there was some
    suggestion that Stalin might be enjoying a bit of a comeback in
    Russia. Since he was originally, obviously, from Georgia, does
    his name ever come up in Georgia, or is it like he did not
    exist?
        Secretary Rice. It does not really come up in Georgia and
    it does not come up much in Russia either. In fact, despite the
    fact that it was the celebration of the end of World War II, I
    think I saw one poster, kind of old vintage poster, in this
    regard.
        I might just for the committee's sense of it, it was quite
    interesting because the large boulevard Daverska in Moscow was
    decorated with all kinds of banners to the great victory, glory
    to Russia, with a fair amount of advertisement thrown in for
    various cell phone companies and various dressmakers and the
    like. So it was a little bit incongruous for somebody like me.
        Senator McConnell. I think we would all agree Stalin
    deserves no comeback.
        Secretary Rice. Right.
        Senator McConnell. Senator Leahy.

       BALANCING MILLENNIUM CHALLENGE CORPORATION AND FOREIGN ASSISTANCE
                                    FUNDING

        Senator Leahy. Thank you. I find the description
    interesting. I remember my first trip to Russia in 1975 with
    Senator Javits and Senator Hugh Scott, as the Republican leader
    at the Senate at the time, and Senator Hubert Humphrey. There
    have been dramatic changes since those days.
        We discussed the Millennium Challenge. There is support, as
    you understand, for it. We just do not want it to be either/or.
    We want to make sure we maintain the commitments originally
    made, that we are not going to cut child health programs and we
    are not going to cut development programs, we are not going to
    cut programs to eradicate disease, and the other things that
    show the best face of America around the world. We need to
    support the Millennium Challenge and also to keep these other
    commitments.
        I will be the first to agree that not every program works.
    I have voted to get rid of programs that did not work. We have
    an awful lot of programs that do work and need more resources
    to do more.
        A recent New York Times article said the World Bank, the
    IMF, British Prime Minister Blair, and others have called for
    the doubling of aid for the poorest countries. You and I were
    in Davos and we heard Chancellor Brown say similar things. The
    United States has not taken a position. I look at Africa with
    700 million people. It gets about the same amount of aid as we
    give to Iraq with 25 million people. Actually the aid to
    rebuild Iraq is a lot more than we give to the entire world.
    The amount of aid we give is a lot of money, but it is a
    smaller percentage of our gross national income than any donor
    country, I think, except Italy.
        Is this a trend that will continue?
        Secretary Rice. Well, Senator, I would make a couple of
    points. First of all, on what we are actually doing in the
    budget in terms of development assistance and the relationship
    between that and the Millennium Challenge, the development
    assistance request is essentially a kind of straight-line
    request from what we requested last year. As you know, some of
    the decrease is represented by the fact that $275 million for
    Afghanistan and Ethiopia and Haiti and Sudan is now covered
    under something called the transition account. So it is a
    little bit masked there. The development assistance is pretty
    much a straight line.
        But as to the .7 target that people use in terms of
    official development assistance, I think that we believe that
    we should, of course, make resources available, which is why we
    have doubled official development assistance over the last 4
    years.
        Senator Leahy. But if we take out the money for the
    Millennium Challenge, the only way we do it is to take money
    from some of these basic needs. You and I should have a longer
    discussion on this, but that is a real concern. We can make the
    promises. You and I can agree on every one of these programs,
    but if the money is not there, it is like Hotspur and calling
    them from the depths. Anybody can call them, but will they come
    when you call.
        Let me ask you this. Charles Taylor. You and the President
    met with Nigerian President Obasanjo last week.

                                 CHARLES TAYLOR

        A lot of us have discussed how to get Charles Taylor before
    the Special Court for Sierra Leone. He is an indicted war
    criminal responsible for the deaths of tens of thousands of
    people. He wants a return to power. He is meddling in the
    affairs of other countries, without going into areas beyond
    what has been in the press. We all know he is.
        Why are we having so little influence getting him to the
    Court? I see Senator Gregg, my neighbor from New Hampshire. He
    and I and other Members of Congress have been urging stronger
    action. We have written letters, Republicans and Democrats. The
    other body has been the same way. This is a despicable,
    horrible person. He is a mass murderer. Why do we not bring him
    to justice and show the rest of the world that this is what
    happens to mass murderers?
        Secretary Rice. Senator, there is no doubt that we believe
    that Charles Taylor should be brought to justice. We have
    communicated that very clearly and strongly to the Nigerian
    Government.
        I would just say I would hope we would step back and look
    at what the Nigerian Government did at the time when we were
    trying to get Charles Taylor out of Liberia so that we could
    end the state of civil war there and begin to move forward.
    President Obasanjo, President Kufuor of Ghana, South African
    President Mbeke, and others went and they actually took him out
    of Liberia, and they did that really on behalf of the
    international community.
        We want to, therefore, work with them in a way that for
    them works for them to get him out of the country and to one of
    the courts. I would not focus just on Sierra Leone.
        Senator Leahy. The longer we take, the more he is
    fomenting. The harder it is going to be. How long can the
    Special Court in Sierra Leone, which is prepared to take him--
    how long can it wait?

                            COLOMBIAN PARAMILITARIES

        I am going to have some other questions on the
    demobilization of Colombian paramilitaries, following up on the
    letter that Senator Lugar, Congressman Hyde, Senator Dodd,
    Congressman Lantos, and I sent to President Uribe. We have
    spent billions down there. We were told they were going to cut
    coca production by half. We have eradicated a lot. A lot of
    coca is still cultivated. The price is still the same on our
    streets. We have human rights conditions on our aid. They are
    always certified by the State Department. We have doubts about
    whether they are being met. When you get a group like Senator
    Lugar, Congressman Hyde, Senator Dodd, Congressman Lantos, and
    myself we are crossing the political spectrum here. We really
    are concerned about what is happening in Colombia. I have a
    great deal of respect for President Uribe, but I am concerned
    about what is happening especially with the paramilitaries.
        Senator McConnell. Thank you, Senator Leahy.
        The order will be Senator Gregg, followed by Senator
    Landrieu, and then Senator DeWine. Senator Gregg.
        Senator Gregg. Thank you, Mr. Chairman.
        It is great to have you here, Secretary. It is wonderful to
    have you serving as the Secretary of State. Obviously, you
    follow an individual who did an extraordinary job, but you have
    managed to take his legacy and carry it forward with great
    ability and given us pride as a Nation that you are
    representing us around the world.

                   BALANCING STATE OPERATIONS AND FOREIGN AID

        One of the things that has happened here is that we have
    merged the State Department's two functions, the foreign aid
    function with the operational function by bringing it under
    this committee. I guess one of my concerns as the person who
    had jurisdiction under a prior incantation of the operational
    functions is that we not lose sight of the fact that you really
    cannot do a good job in foreign aid unless you maintain the
    strength of your operational side.
        The problem, of course, is it is very easy to raid things
    like the accounts for taking care of getting our embassies up
    to speed, as far as hardening them, the accounts for IT. I
    believe now the State Department has probably the best IT
    program in the entire Government, at least in my experience.
    And various other functions of just day-to-day operations. So I
    hope you will keep an eye out that the great strides which were
    made we do not turn back on.
        One little minor point I would mention is that we had
    initiated an effort not only to get our embassies and
    facilities up to a better standard of security, but we had also
    started an effort to reach out to targets where our children of
    embassy personnel go, schools, especially American schools.
    That initiative was small but it was huge in its impact on
    those schools. They were able to do things relative to
    security, which was important. I hope we will continue that
    initiative.

                         NORTH KOREA, PROGRESS OF TALKS

        On the broader issue, you have to be so conversant in so
    many areas, and you certainly are. Tell us what is happening
    with North Korea and especially what is happening with working
    with China and Japan and South Korea to try to orchestrate an
    effort there that is multilateral to do something.
        Secretary Rice. Well, we continue, Senator Gregg, to try
    with the Chinese, the Russians, the Japanese, and the South
    Koreans to hold a united front that lets the North Koreans know
    that there really is not any option but for them to abandon
    their nuclear weapons programs if they really do wish to be
    integrated in the international system. It has, obviously, its
    ups and downs because the North Koreans tend to threaten. They
    tend to draw attention to themselves with all kinds of
    announcements. But I think that the underlying fact has not
    been altered and that is that all of their neighbors are
    telling them that there is only one way out of this.
        Now, obviously, there are concerns. There are concerns that
    they would try and make something more dramatic like a test.
    You have been reading that people have talked about that. They
    are concerned that there might be proliferation from North
    Korea. Those are all things that we keep in mind and keep an
    eye on. But the key here is to really continue to keep a united
    front on the North Korean program.
        I know that the South Koreans and the Chinese are urging
    the North Koreans to return to the Six Party Talks. That is
    very important, but we want them return to the Six Party Talks
    not just to return to the Six Party Talks, but to actually be
    ready to make a strategic choice about their nuclear weapons
    programs. We have told them security guarantees are available
    to them on a multilateral basis. Some of their neighbors have
    talked about providing them fuel oil under those circumstances.
    They have asked do we understand that they are sovereign. Yes,
    we understand that they are sovereign. So the North Koreans
    have not much to gain by what they are continuing to do, and
    they have quite a bit to gain by coming back to the talks. We
    hope that that logic will eventually prevail.

                          STATE AND FOREIGN OPERATIONS

        If I may, just on the point that you made earlier. I want
    to assure you, Senator Gregg, I have got my eye on that ball
    about our people, about our facilities, about where they work,
    about how they work, about the training, about the fact that we
    need to bring more language specialists in, critical language
    specialists, and about the need that we can never again afford
    to have the kind of situation that we had in the 1990's where
    we missed a whole set of classes of Foreign Service officers.
    The technology has to be right for our people. You make the
    point absolutely correctly, which is that we cannot do any of
    this without people and without our people having the means to
    do what they need to do.
        When I go out, I always do an embassy--we call them embassy
    meet and greets, and I go out and I see these people working
    really hard in difficult circumstances. Senator Leahy mentioned
    Colombia. They are out there literally fighting the
    narcotraffic wars, and they are in places helping the
    Colombians to do that. You go to Afghanistan. They are out
    there helping people build businesses. These are not people who
    are just sitting in their offices sending back cables. They are
    out there on the front lines really carrying out the hard work
    of democracy and development. So we owe them the very best that
    we can get them.
        Senator Gregg. Well, I thank you for that commitment, and I
    agree with it, obviously. I do hope that as you set up these
    efforts, that you remember, as we build these embassies such as
    the one that you are going to build in Baghdad, the vast
    majority of the utilization of that embassy is probably not
    going to be Foreign Service personnel. It is going to be from
    other functions within the Government. We have had a little
    problem getting them to participate in the underwriting of
    that. I do hope you will continue to press some of our other
    agencies to participate in that because it relieves the
    pressure on this committee specifically, but more importantly
    pressure on the State Department in funding things like IT and
    other areas.
        I thank you again for the great job you are doing.
        Secretary Rice. Thank you very much.
        Senator McConnell. Thank you, Senator Gregg.
        Now we will turn to Senator Landrieu, followed by Senator
    DeWine and Senator Durbin.

                     STATEMENT OF SENATOR MARY L. LANDRIEU

        Senator Landrieu. Thank you. Thank you, Madam Secretary,
    for being here today and for your service and the passion and
    intensity with which you undertake your job. I have always
    found it to be inspirational, and as a member of this
    committee, I look forward to working with you.
        I agree wholeheartedly with your comments, about our
    efforts to try to expand democracy and freedom where we can,
    that it clearly is in America's interest. You mentioned some
    strategies you are undertaking and I hope we can work together
    to do that. Could you speak a moment about the special focus
    you've had on serving half the population in all of these
    countries, which are, of course, women?
        I am reminded of the images that we saw on the television
    before we went into Afghanistan. In large measure, it was ``we
    are coming in to free you and to free the women and to get them
    out of oppression and into colleges.'' Yet, we have been there
    now for several years and we do not hear too much about our
    success in that aspect. I only raise it because my own personal
    experience shows me that as we continue to try to build more
    capacity in these nations, that making sure those resources are
    spread to both the future of men and the future of women is
    important.
        So if you could just comment about the status of women
    particularly in Afghanistan and Iraq, which I know is very
    troublesome still, but also in other parts of the Mideast, such
    as our allies in Kuwait, and Saudi Arabia. What is our strategy
    for moving women into the forefront of society, having the
    right, to vote, own property, the right to exit a marriage if
    it is abusive, the right to full custody to children, the
    rights to an education, the rights to decent health care? Could
    you comment a bit about our efforts to bring democracy to that
    half of these nations?

                        FOCUS ON WOMEN IN FOREIGN POLICY

        Secretary Rice. Absolutely. Thank you, Senator Landrieu.
        We have had a very strong focus on women's rights, women's
    education, women's empowerment, and the poverty reduction for
    women because one of the facts is that when poverty reduces for
    women, it gets better also for the whole society. Very often
    women in, for instance, small business orientation can help an
    entire society, and so you will find that we have done a lot
    with microfinance around the world, for instance, because there
    women take a little bit of money, they build a little business
    maybe in textiles or something, they employ other women, and
    the village does better as a result. So we are very focused on
    women's empowerment in economies.
        We also are very focused on women's education. Here I think
    there are good stories to tell. Girls are going to school in
    record numbers in Afghanistan in a place where they did not go
    to school. That is something that America has to be immensely
    proud of. When I was in Afghanistan, you would see that little
    girls are out there with their fathers and they are sort of a
    part of the life. That is going to continue to be a major focus
    for us.
        In a place like Pakistan, for instance, we are also funding
    programs in women's education.
        Then it comes to the matter of women's political rights
    which, of course, is the ultimate guarantee that women can
    defend themselves against societies that might try and
    subordinate them. In the places where we have had a direct
    impact like Iraq and Afghanistan, I think the story is good. It
    is true that there are still age-old attitudes, particularly in
    Afghanistan, less in Iraq, that are patriarchal in the way that
    women are viewed. But women are in legislatures. They are in
    ministries. In some cases, they are ministers. We have seen
    women insist on actual percentage quotas for women's
    participation in political life.
        We have a couple of very important councils, the Afghan
    Women's Council, which the First Lady has been very involved
    with. I have meet with Iraqi women political leaders when they
    are here. The best news is that while we are trying to empower
    women, they are clearly empowering themselves. They care about
    this. They are really organizing themselves.
        I met with a group of women in Afghanistan. They were women
    doctors and women lawyers and women human rights activists.
    There was also the first woman paratrooper in the Afghan armed
    forces, which was really quite something to see.
        So I do not want to paint too rosy a picture because in
    many cases these are very traditional societies that are going
    to have to overcome a lot. But I do believe that women believe
    now that it is their rightful place, and when in Afghanistan,
    the constitution guaranteed that men and women are both
    citizens, we all sort of thought, well, that is great. They
    thought this was an extraordinary development. There is still
    work to do.
        I think it is fair to say we were disappointed about
    Kuwait, and eventually we hope that women will vote in both
    Kuwait and Saudi Arabia.
        Senator Landrieu. Well, I encourage you to continue. Not
    only are you personally a role model for what we are speaking
    about, but women of the world particularly look to you for that
    vocal, passionate leadership. When I was in Iraq, several of
    the soldiers, male soldiers, came up to me and said we are here
    to free everyone, and we want you to take that message back to
    the highest powers. So I have delivered it.

                     HAGUE TREATY ON INTERNATIONAL ADOPTION

        The second question, if I could. Are you aware of the Hague
    Treaty on International Adoption? I know you are responsible
    for many treaties, but this was one that was passed
    overwhelmingly by the Senate several years ago. Jesse Helms
    actually helped to lead this effort along with Joe Biden. We
    have not implemented it. We specifically requested from the
    former Secretary of State some action. Of course, other things
    have rightly received more priority.
        I raise this to you because it is an issue that is very
    important to Americans as a value of family life, and the value
    that children are really to be raised in families. Governments
    do a lot of things well. Raising children is not one of them.
    Children in our country and in the world should be raised in
    their biological family, in their extended family that is
    available if their parents are separated. I am wondering if you
    would make a commitment to look into that to see if we could
    get this treaty implemented. In exchange, we would agree on
    this committee to work with you to fund, whatever is necessary
    for you to do that.
        Secretary Rice. Thank you, Senator. I will look into it. I
    will get back to you with a report on where we are.
        Adoption has been an issue that, as you know, has been very
    important to the President. He very often raises these issues
    with people from around the world. He was just, not too long
    ago, raising this with the Romanians because we have had, of
    course, a number of issues there with Romania.
        But I will get back to you on what progress we have made.

                               PREPARED STATEMENT

        Senator Landrieu. I know my time is up, but I will submit
    other questions on Uganda, the AIDS issue, and particularly the
    LRA in Uganda and what we are doing to address that conflict
    near the Sudan.
        Thank you.
        [The statement follows:]

                 Prepared Statement of Senator Mary L. Landrieu

        Madame Secretary, thank you for taking the time to be here this
    morning. As you know, I consider it a great privilege to serve as a
    member of this subcommittee at such a crucial time in our Nation's
    history. While there are still some who doubt the need for foreign
    assistance and others who characterize it as charity, I see the aid we
    give to developing countries as strategic investments in freedom,
    democracy and the protection of human dignity. Providing financial
    assistance to developing countries, particularly in areas touch the
    every day lives of people such as health care, housing, nutrition, and
    education, allows us to help these countries more immediately realize
    the fruits of a democratic society. And in contrast, failing to provide
    such support, puts democracy at risk. In the words of former President
    John F. Kennedy, ``To fail to meet those obligations . . . would be
    disastrous; and, in the long run, more expensive. For widespread
    poverty and chaos lead to a collapse of existing political and social
    structures which would inevitably invite the advance of totalitarianism
    into every weak and unstable area. Thus our own security would be
    endangered and our prosperity imperiled. A program of assistance to the
    underdeveloped nations must continue because the Nation's interest and
    the cause of political freedom require it.''
        With this in mind, I look forward to having the opportunity to
    provide oversight and support to you and your agency. To me, it never
    made sense to have the federal agency charged with delivering foreign
    assistance under a different committee's jurisdiction than the federal
    agency tasked with implementing foreign policy. I, for one, would like
    to see us work to forge a stronger connection between the funding
    distributed through USAID and the policies pursued by the State
    Department because I think that it is critical that we use our federal
    resources to strengthen and support U.S. policies abroad. I know that
    this is a concept that is, at least in part, supported by President
    Bush, as evidenced by his efforts to establish the Millennium Challenge
    Account. I hope that you and I can work together to explore other ways
    to strengthen this connection.
        There are several areas of foreign policy that I believe would
    benefit from this strengthened coordination. First, I see a need and an
    opportunity for the State Department's to strengthen their role in the
    building and strengthening of families. As I have said many times,
    countries are not built on roads and buildings alone, their strength
    and vitality rests solely on the building, and sometimes, re-building
    of families. As the late Pope John Paul II was quoted as saying, ``As
    the family goes, so goes the nation and so goes the whole world in
    which we live.''
        Madame Secretary, four years ago, I had the distinct pleasure of
    meeting for an hour with the former President of China, Jiang Jiamin on
    the issue of international adoption. During this meeting, he shared
    with us that the Chinese believe every child born is born with a red
    string attached to their heart, the other end of which is tied to the
    ankle of their soul mate. It is because of this string, they believe,
    that soul mates eventually find each other and spend the rest of their
    lives together. It is his belief, that perhaps the same is true of
    children who are adopted. That when they are born, their hearts have a
    string that is tied to the ankle of their forever family, and it
    because of that heartstring that they eventually find one another.
        I will treasure the memory of this meeting forever. Not only
    because it was an extreme honor to meet with such a learned and
    distinguished leader, but because it reminds me of how profoundly
    adoption affects the world we live in. 19,237 children were adopted by
    American citizens last year. 18,477 children the year before that,
    16,363 in 1999 and 15,744 children in 1998. That is almost 100,000
    children in four years. I think it is easy for us to understand the
    impact that these adoptions have had on the adoptive families and the
    orphan children, but what I would like to focus on afternoon is the
    impact that this has for the diplomatic relations between the United
    States and countries throughout the world.
        In sheer numbers alone, the impact is evident. In real terms, these
    children are ``mini-ambassadors'' to 200,000 American citizen parents,
    400,000 grandparents, conservatively 800,000 aunts and uncles, and
    300,000 siblings. According to a recent report by the U.S. Census
    bureau, 1.6 million people in the United States were adopted, 15
    percent of them from abroad. Because of this magnificent process,
    communities all over the United States are deepening this understanding
    and affinity for the people of the world. September 11 reminded us of
    the importance of continuing to build bridges with the nations of the
    world. International adoption is one very effective and lasting way to
    build these bridges.
        Over this past year, I have also had the privilege of meeting with
    the Presidents of Kazakstan, Romania and Russia and high-ranking
    government officials from Cambodia, Vietnam, Honduras, El Salvador,
    Guatemala, Uganda, and the Ukraine. Each time the message is the same.
    They want to do what they can to make the Hague more than just a piece
    of paper with 59 signatures on it.
        These nations are looking to the United States to lead the way
    toward a system of international adoption and child welfare that is
    based on best practices. A system comprised of meaningful protections
    for the adoptive parents, the birth parents, and perhaps most
    importantly the children; a system that universally recognizes that a
    government institution is not and cannot be an adequate replacement for
    a family and works toward the shared mission of finding every child in
    this world a loving and nurturing, permanent family.
        Madame Secretary, I hope that my remarks this morning will remind
    you of the power that this issue has in shaping the world's future and
    that you will do what you can to see that it is given proper
    recognition within your department. I think that the orphans of the
    world would benefit greatly from your leadership and compassion.
        Another area that would benefit from stronger coordination is in
    the area of women's economic and political empowerment. I would like to
    complement you, Madame Secretary, and your Department, for your
    dedication to improving the lives of women worldwide. I note your work
    in both Afghanistan and Iraq and the investments we have made in
    programs there to help bring freedom and equality to the women there.
    While the efforts there have been commendable, I would argue that more
    can and should be done.
        Take for instance the micro-enterprise loan program, which
    disproportionately benefits women. It has received $150 million over
    the last five years. While impressive, in the context of a $32 billion
    foreign aid budget, I would argue we can afford to do more.
        When I have raised these concerns in the past, I have been told
    ``Senator, but since women comprise 50 percent of the population, it is
    safe to assume that 50 percent of any funding going to the country will
    be spent on improving lives for these women.'' While I am not convinced
    this is always the case, particularly in countries where the oppression
    of women has been widespread for decades, if we truly want to bring
    freedom and democracy to these countries then we must actively support
    programs that directly benefit and empower women.
        I, along with other members of this committee, have worked in the
    past to see that a portion of all funding dedicated to the development
    of emerging democracies, be used for this purpose. I am glad to see
    that this trend has been incorporated into other parts of the budget
    and I hope to see that continue.
        Finally, Madame Secretary, I want to call your attention to an
    issue that has deeply affected me since my return from Uganda nearly a
    year ago. While there I personally witnessed the terror and chaos
    imposed by Joe Kony and the Lord's Resistance Army, particularly for
    the children who have come to be known as the night commuters. What
    these children have had to live through is indescribable and should not
    be allowed to happen in a world such as ours.
        I would suggest that as we look to areas of the world that might
    benefit from our assistance and leadership that we look to Northern
    Uganda. In carrying out our goal of seeking out terrorists wherever
    they may hide, I urge us to do what we can to end the terrorist rein of
    the LRA.
        Again, Madame Secretary, thank you for being here this morning to
    share your views with us and I look forward to working with you on
    these and other issues.

        Senator McConnell. Thank you, Senator Landrieu.
        We will now turn to Senator DeWine, followed by Senator
    Durbin, and Senator Bennett.

                       STATEMENT OF SENATOR MIKE DE WINE

        Senator DeWine. Madam Secretary, good to see you. Good to
    have the country's foremost Cleveland Browns fan in front of us
    today.
        Secretary Rice. It is true.
        Senator DeWine. I could not resist it. Good to have you
    with us.
        I do not want to belabor the point that Senator Leahy made,
    but I am also concerned, I must tell you, about the
    developmental assistance figure. Again, not to belabor the
    point, but by my calculation at least, even if you figure in
    the new transition initiative country spending, we are still
    coming up by my figures about $70 million short on
    developmental assistance. So, again, it is a concern that I
    have.

                                     HAITI

        Let me talk about one of the issues that I have talked with
    you many times about, and that is Haiti. The crisis continues
    in Haiti. It is certainly not getting any better. Elections are
    scheduled this year.
        Madam Secretary, I have been a big supporter of CAFTA.
    Those of us who have been around here--for me, I was in the
    House in the 1980's--have to understand I think the importance
    of this to Central America and how important continuing the
    development of democracy is in Central America. You pointed out
    what is going on in Nicaragua. I was down in Nicaragua a few
    months ago. I understand the dynamics of what is happening
    there. I am a big supporter of CAFTA.
        But I must say I find a little inconsistency in the
    administration not supporting a trade initiative in regard to
    Haiti. I think we really could do two things at once. I have
    seen enough in regard to Haiti to know that we are not going to
    help Haiti really just by money. What we are doing we have to
    do. We have to do it for humanitarian reasons. We have to do it
    so we do not have to send troops down there again. We have had
    them down there twice in the last decade. They are going to be
    down there again at some point if things do not get better. But
    really, whether you are a Democrat or Republican, I think we
    all understand that really what Haiti needs is jobs. That is
    the only way this country is going to have a chance, the people
    are going to have a chance.
        I would just ask you again for the administration to look
    at the trade bill that we passed last year in the Senate. It
    did not pass in the House, although there was a pretty good
    effort made to get it passed, but it did not pass. That is
    really what is needed if we are going to help Haiti and if we
    are going to deal with the foreign policy problem that this
    country has. I would like for you to comment on that, but let
    me ask a couple of other questions.

                                     AFRICA

        Ethiopia, Eritrea, the stalemated border dispute. I wonder
    if you could tell us what steps you might be thinking about
    taking or are taking to help resolve that border dispute and to
    deal with the starvation and the poverty issue there.
        The Congo. If there has been an under-reported tragedy in
    the last 5 years in the world, it has been the terrible,
    terrible tragedy in the Congo. What can be done or what role do
    you see the United States playing in that part of the world?
        Three questions.
        Secretary Rice. Thank you. Yes, of course.
        Let me start with the Congo. The principal problem in the
    Congo, of course, is to try and get a stable transitional
    government in the Kabila government that can actually begin a
    political transition toward elections. We have tried to do a
    couple of things to help with that. The forces are provided
    there by the French and others.
        But we have tried to be very politically active in a
    trilateral set of discussions that we have because one of the
    problems, as you well know, is that outside forces have been
    destabilizing to the DROC. So trying to get the Rwandans, the
    Ugandans, and others to know where their armies are and to have
    them involved in the DROC, to not support the RC Agoma and the
    militia forces that are stirring up trouble in the Congo, it
    has been our role to really try and deal with that problem. We
    have had very close cooperation with the South Africans, with
    President Mbeke, in trying to keep foreign forces out of the
    Congo. We have had variable success.
        But if we can continue to do that and if we can strengthen
    the ability of the Kabila Government to stay stable for a
    while--now, the big problem, of course, is the demobilization
    of these militias that are operating in the country. Another
    big problem is to have a kind of a national unity picture going
    into the elections. We have trilateral discussions. We have
    discussions with Kabila. I can tell you I spend a good deal of
    time on the phone, at least every couple of months, with making
    the rounds, Kabila, Kagame, Museveni. We have really been very
    active diplomatically there.
        We are probably going to look at more international
    engagement as we get ready for the elections, but I think on
    that piece we are doing what we can.
        I am glad you drew attention to the Ethiopia/Eritrea
    situation because we are actually quite concerned about the
    potential for a humanitarian problem there concerning food. We
    have begun to discuss with the Ethiopians the prepositioning of
    some food supplies there to deal with what could potentially be
    a famine situation. We are not there yet, but the warning signs
    are there. I have had discussions with USAID and with Andrew
    Natsios about doing that.
        We are also trying to intensify our political efforts. Of
    course, the border is a major part of it, but also to try to
    get the government to be responsive to what may be a
    humanitarian problem that it has had trouble seeing. So on this
    one we are trying to intensify our diplomacy ahead of the game
    because we would like not to get into a crisis situation there.
    Though we do not know for certain that there will be, there is
    certainly something looming.
        As to Haiti, Senator, first of all, I want to just note
    that I appreciate your leadership on Haiti, the $20 million in
    ESF for Haiti. We, as you know, are trying to rebuild police
    forces. We are trying to do a lot of things. I had extensive
    discussions with the Brazilians when I was there. They lead, of
    course, the effort in Haiti.
        We think the Haitians can take better advantage of the
    Caribbean Basin Initiative than they are currently taking and
    that there is room there for trade improvement. We will
    continue to look at what measures we can use, but it is very
    much on our radar screen.
        Senator DeWine. Thank you, Mr. Chairman.
        Senator McConnell. Thank you, Senator DeWine.
        Now we will turn to Senator Durbin, followed by Senator
    Bennett, and Senator Brownback.

                                     SUDAN

        Senator Durbin. Madam Secretary, thank you for joining us.
    I have two questions of substance and one of style.
        The first question of substance relates to the Sudan. 38
    Senators sent a letter to you in March asking that a special
    envoy be appointed to Sudan to carry on the fine work that John
    Danforth initiated. We received a reply this week rejecting
    that notion, suggesting that Deputy Secretary Zoellick would
    continue in that capacity in some way or another. And the
    letter said that at an appropriate time, the Ambassador to the
    Sudan would be named.
        First, I would like to ask this question. The appointment
    of an Ambassador can be seen by many as a reward to the
    government of Khartoum. Is there any reason why we should be
    rewarding this government in light of what is happening in
    Darfur?
        Second, the day-to-day involvement of a Deputy Secretary
    is, of course, diminished since he has many other
    responsibilities, and I worry whether or not he would have the
    time or the inclination to really devote the kind of time that
    John Danforth did to this terrible crisis.
        I am also concerned when Mr. Zoellick recently visited the
    Sudan, he was asked about the word ``genocide,'' and he said,
    quote, he did not want to get into a debate over terminology.
    This is a dramatic departure from the unequivocal statement
    made by Secretary Powell in which he said in September of last
    year, ``I concluded that genocide has been committed in Darfur
    and that the Government of the Sudan and the janjaweed bear
    responsibility and genocide may still be occurring.''
        I just wondered if you would comment. Sadly, it sounds like
    we are back in the same word game that was played by the
    previous administration in Rwanda, and I hope that is not the
    case.

                                  CHINA TRADE

        The second substantive issue relates to China. We have lost
    millions of manufacturing jobs in the United States, hundreds
    in my own State, in the last several years because of unfair
    Chinese trade practices, literally their manipulation of
    currency. Many people believe that when the highest levels of
    decision-making are made in this administration and in previous
    administrations, that politics often trumps trade.
        I can see from statements made by you today and other
    places and answers to questions how critically important China
    is to us on North Korea. Many people that I speak to suspect
    that we are holding our punches when it comes to unfair Chinese
    trade policy because we are so dependent on the Chinese in
    trying to find some peaceful resolution in North Korea, not to
    mention the fact they are the second largest holder of the
    American national debt, which grows by leaps and bounds. So if
    you could comment on the second substantive question as to
    whether or not the State Department is winning the debate over
    those who argue we should enforce our trade agreements with
    China for the benefit of American businesses and workers.
        The last question is one of style. You said something today
    I have never heard said before, and I hope I quote you
    accurately. It was not in your written statement. You called on
    us to approve CAFTA to fight the forces of populism. You said
    that two or three times, ``the forces of populism.'' And it
    stopped me because I had never quite heard the term populist
    used in such a negative and pejorative sense. In American
    history, Thomas Jefferson, Andrew Jackson, Abraham Lincoln,
    Theodore Roosevelt were characterized at some points in their
    careers as populists. Today Nelson Mandela is viewed as a
    populist. Aung San Suu Kyi in Burma is viewed as a populist.
        Is it the position of the administration that populism is
    antithetical to the spread of democracy?
        Secretary Rice. Thank you. Let me start with the last
    question, Senator Durbin. I think populism has a particular
    meaning in the Latin American context, and I do not mean
    populism of a kind that was practiced by Andrew Jackson, I
    assure you, or by Nelson Mandela.
        By that I meant the kind that was practiced by Peron in
    Argentina. This is a kind of demagoguery that talks about the
    needs of the people and the wants of the people, and it is
    being practiced today in some places in Latin America. For
    instance, I think you could say that some of the rhetoric in
    Venezuela is of that character.
        I do not mean that the United States is unable to work with
    governments from left of center. Quite the opposite. When I was
    in Brazil, I gave a speech saying that the United States of
    America would work with any democratically elected government
    that governed by transparency, that fought corruption, that
    cared for the needs of its people, that kept its economy open,
    that traded freely. I cited in particular several governments
    left of center like Brazil and Chile with which we have had
    that kind of relationship.
        The kind of rhetoric that you do get, though, from some
    quarters in Latin America is not about responsible government.
    It is not about responsible economic policy. It is calling to
    the people who are poor and in need in a clearly anti-
    democratic way. I think if you look at the spectrum in Latin
    America, you will see that there is a growth of that kind of
    rhetoric in Latin America and we have to resist that.
        The reason that I cite CAFTA in this regard is that if you
    look at the Central Americans, you have small countries that in
    the 1980's went through horrific civil wars, that had communist
    movements that were trying to take over the countries, in some
    cases actually ruled like in Nicaragua. And we have come a long
    way when you look at the Central American presidents that were
    there with the President today who do govern democratically,
    who do have open economies, who are interested in free trade.
    The comment was to contrast what we see from a particular
    extreme in Latin America with the kind of, I think, totally
    responsible and good governance that we see from governments
    like Brazil or Chile. So that was the meaning in that context.
        Now, in terms of Sudan, we do have a charge there whom we
    have appointed. Deputy Secretary Zoellick is spending a great
    deal of time on Sudan. We all are, Senator. For instance, when
    I was at NATO, I worked to try and get NATO to agree that
    should the African Union ask, NATO would be prepared to give
    logistical support for the African Union forces when they are
    generated. I think we, hopefully, will get that agreement. So
    we are spending a good deal of time, a great deal of time on
    Sudan.
        It may be the case that at some point in Darfur there is
    need for an envoy. I think we really believe that right now the
    strategy has to be to work with the AU on a very intensive
    basis to get forces into the country to deal with the
    humanitarian situation by getting monitors into the country and
    then to contribute to the long-term process that might
    ultimately reconcile the various forces. That is the reason
    what we focus so heavily on the North-South Agreement because
    it gives the kind of framework in which you might be able to
    look at the Darfur circumstance.
        As to genocide, we believe as a Government that, yes,
    genocide has been committed there. We have, from time to time,
    said to people let us--because you remember the United Nations
    did not come out with that assessment--what we have said to
    people is let us not quibble about what it is called. Let us
    just recognize that we have a horrific humanitarian situation
    here and that we need to act. I think it is in that context
    that the deputy's remarks should be taken.
        Finally as to China, Senator, I consider it a part of my
    job as Secretary of State to defend America's trade as free
    trade and fair trade. I do not think there is a State
    Department position and a trade position here. There is a U.S.
    position, and American foreign policy should be about
    protecting a trading playing field that is level and fair so
    that America's workers and farmers can compete.
        I spent a very long time with the Chinese leadership when I
    was there. I had an entire session with the Premier that was
    entirely about economics, entirely about the need of the
    Chinese to respect intellectual property rights, entirely about
    the need of the Chinese to have a flexible market-based
    exchange rate. I believe it is part of our job to think of the
    Chinese relationship as a whole but, by all means, the need--
    especially given the size of the Chinese economy. I have said
    publicly that China cannot have it both ways. China, if it is
    going to be as it is, this huge economy, has got to be in a
    rules-based environment and has got to live up to its trade
    obligations.
        Senator McConnell. Thank you, Senator Durbin.
        We will now turn to Senator Bennett, to be followed by
    Senator Brownback and Senator Harkin.

                     STATEMENT OF SENATOR ROBERT F. BENNETT

        Senator Bennett. Thank you very much, Mr. Chairman.
        Secretary Rice, I have said in another place but I will say
    now clearly for the record how grateful I am for the trip you
    took to Europe to repair some relationships with our longtime
    European allies. I have associations in Europe and the back
    channel reaction for your trip there and your performance there
    was very positive. You hit a home run and should be publicly
    congratulated for that.
        The chairman here has a one-note that he repeats every
    time, which is Burma. Senator Leahy has one that he repeats
    almost every time, which is land mines. And trying to follow
    their sterling leadership, I have one that I repeat every time,
    which is microcredit.

                                  MICROCREDIT

        I was pleased to have you make mention of microcredit in
    your response to one of the questions. I worked hard to get
    designation of microcredit funds in the supplemental with
    respect to the tsunami because I believe one of the best ways
    we can rebuild the economy as a result of the tsunami is
    through microcredit. I have seen firsthand the way it works. I
    have a piece of embroidery in my office, which was sent to me
    from Morocco by a woman who began her business with a $20 loan
    in microcredit.
        My experience is that the--I will not use that term. That
    would be pejorative--the long-term, permanent cadre in the
    State Department is, shall we say, a little less enamored of
    microcredit than I am. They do not like funds they do not
    control, and the idea of putting money out there and making it
    available to primarily women who have the entrepreneurial urge
    is something that a more structured individual kind of does not
    like. They like to be able to control the money and how it is
    handled and monitor it and shepherd it in a way that
    bureaucracies respond to.
        So I would simply sound my one note and ask that you
    continue to see to it that the microcredit activity remains
    viable and, to the extent it is possible, continues to grow. I
    am not sure I am responsible, but in the time I have been
    sounding this one note, the amount of money from the State
    Department in microcredit has more than doubled, and I would
    hope it would continue to go in that trajectory under your
    stewardship.
        You can respond in whatever way you would like.
        Secretary Rice. Well, thank you, Senator. I am myself a big
    fan of microcredit. I think that it really does, particularly
    for women, empower them and then they do tend to create jobs
    for people around them. So it is very important.
        We are doing a lot of very interesting things with
    microcredit in USAID. When I was in Mexico, I visited a credit
    union in Mexico. We were not providing direct funds to the
    credit union. What we were doing, though, was providing
    technical assistance to the creation of credit unions there and
    out in various more remote parts of Mexico so that----
        Senator Bennett. My banker friends would not be happy to
    hear that.
        Secretary Rice. But they were really very effective units.
    I watched some people sign for their business loans, and it is
    very exciting.
        So I thank you for what you did on the tsunami. I think we
    think that was a very useful thing to do, and thank you very
    much for that.
        Senator Bennett. Thank you, Mr. Chairman.
        Senator McConnell. Senator Brownback.
        Senator Leahy. Mr. Chairman, if I could just mention I
    agree with Senator Bennett on microenterprise. I have worked
    with several Secretaries of State on that. Both Senator
    McConnell and I have tried to put money in for it. I think it
    is a great idea.
        You mentioned the land mines. Ironically enough, the work
    we have done on land mines and the work we have done on
    microenterprise often complement each other because
    microenterprise loans have been used often in places where
    people have had everything devastated because of land mines.
    They are not either/or, by any means. I know the Senator was
    not suggesting that. We should work closely together.
        Senator Bennett. Thank you. I do not know the source of
    this, but I have been told that when money goes to men, they
    get fatter and drunker and nothing else happens in the
    community, but when money goes to women, the birth weight of
    children increases and the health of the community as a whole
    improves. So let us keep the money going to the ladies.
        Senator McConnell. Senator Brownback, to be followed by
    Senator Harkin.

                       STATEMENT OF SENATOR SAM BROWNBACK

        Senator Brownback. I have not seen the empirical data on
    that.
        Maybe it is accurate.
        Welcome, Secretary. Always a delight to see you and to work
    with you. You have got a great track record.

                             MIDDLE EAST ELECTIONS

        I would note, in particular, what is taking place in the
    Middle East today which is just a matter of, I think, great
    encouragement to see what is taking place. I was recently in
    Iraq about a month and a half ago, that election having just an
    electrifying impact on the population, spilling over into
    Lebanon, seeing the Syrians move out. It is my hope that this
    Syrian regime that is currently in place starts to get the idea
    that democracy is a good thing and moving that way. Egyptians
    hopefully holding multiparty elections, although it seems to me
    there is a bit of retrenchment on that note. If there is
    something different on that, I would like to hear it.
        Iran the chairman has already asked about. I do think and I
    hope we can do more on civil society building, interior and
    exterior, on Iran. We have got some money in this budget the
    last 2 years for that, and I hope we can continue that because
    that seems to me is the biggest terrorist bed still remaining.
    There is a number of terrorist spots, but this is the biggest
    and the most potent and an open ideology that is very
    threatening to us and to Israel and to a number of others. To
    me, Iran is probably one of the most concerning, if not the
    most concerning, major geopolitical issues that is there.

                                     DARFUR

        Thank you on Darfur for reiterating the genocide
    determination on it. I would urge, as quick as you can,
    supporting movement of African Union troops and mobility. We
    put $50 million in the supplemental that just passed for
    African Union troops. I have been there. You have been in the
    region. Deputy Secretary Zoellick, just recently there. Every
    day we lose people. I am absolutely convinced, 20,000-25,000
    troops on the ground with mobility, with a broad engagement
    that they can respond and move and chase the Government of
    Sudan or the janjaweed forces, this thing is over. We may have
    lost 400,000 people in the last year and a half there. It is
    awful. Just with all speed that you can move on Darfur, you are
    going to save lives in the process.

                            NORTH KOREA HUMAN RIGHTS

        I want to take you to North Korea, if I can. We passed the
    North Korean Human Rights Act last year. Your administration
    has done more on North Korea than anybody else the last number
    of decades. We just ignored it for a long time. But the numbers
    I have seen--about 10 percent of that population in North Korea
    has died over the last 10 years by starvation, gulags. It is
    horribly repressive.
        I just held a press conference this morning showing two
    death penalties being issued on the border, the trial, the
    announcement, and then the guy shot within 5 minutes. And
    people all herded out just to see it just to try to keep people
    from going across that border.
        I believe we are not doing enough to pressure China on this
    who does hold the key on this. Now, I do not know the numbers,
    but the numbers I keep hearing are at 100,000-plus North
    Koreans in northern China and they continue to gather them up,
    repatriate them, and then they are thrown in a gulag or killed.
        I would hope you could appoint that special envoy on North
    Korean human rights.
        I would really ask if you could look at starting to allow
    North Korean refugees to come into the United States. That
    authority was given to you in that human rights act. It would
    send a powerful message to that region of the world. I have got
    a couple of sick girls to nominate. If you are concerned about
    the security--I keep hearing from the State Department, well,
    we cannot check the security of the North Korean refugees. I
    have got two. One is, I think, 12 and another 13-year-old
    girl--or 12 and 14. They are sisters. One is sick and needs
    medical assistance. I do not think there is a security issue
    with either of them. But it is a huge statement because they
    have not been allowed into the United States today. If you
    could look at that.

                              OSCE/KYRGYZ/GEORGIA

        Then in my hat as the chair of the OSCE, the Helsinki
    Commission, here just beautiful things taking place in that
    region. I am watching carefully--and I know you are--the Kyrgyz
    and what takes place there. That one, after the Ukraines and
    the Georgians, seems a little bit different taste of an
    overthrow than what the two--nonetheless, holds great promise
    to really move that country forward positively. But I do think
    we are going to need to invest time and money. Small country
    but significant and would have a significant impact.
        Then coming up, I think it is, September--maybe it is
    November--this fall Azerbaijan is holding elections. I just
    last week talked to the President, Ilham Aliyev, about their
    elections. They need to set up now for clean, fair, good
    elections. I think they know it, but they are so strategic
    where they sit between Russia and Iran. The oil pipeline is
    through that region. I think we have got to keep pushing them
    that, look, you do not just 2 weeks ahead of the election say,
    okay, we are going to have good, clean, fair elections and
    everything happens. It is months in advance, and parties are
    allowed to compete and they are allowed access to the press.
    And if that does not happen and you get something that happens
    here in the region, we cannot really stand by you and say,
    well, okay, I guess it was a fair election. I was conveying
    that and I hope others can as well.

                                     UGANDA

        This is a final comment and this is a whole bunch of them.
    But I was just in northern Uganda in December. Our embassy
    there supports providing mobility, helicopters and trucks, to
    the Ugandan Government to chase the LRA, a group of bandits,
    and a million and a half people in refugee camps for 15 years.
    I think they are significantly weakened, and mobility might
    just be the issue. We have worked with the State Department and
    Defense. They have some issues with doing that even though our
    embassy there supports it. If there is a chance that you could
    look at that, because if we can get Joseph Kony and his
    leadership and now with the North-South Agreement, we should be
    able to reduce their areas they can go into in southern Sudan
    for refuge, you will again free another million people to go
    back to a normal lifestyle that have been on the run for 15
    years. So it is a tougher call, I will wage, but I would ask
    you if you could look at that issue.
        Any of those you care to respond to or if you want to just
    take them under advisement.
        Secretary Rice. Well, thank you, Senator. I will look into
    the Ugandan issue. I know that there are some questions about
    it, but I will look it into and get back to you on the Uganda
    LRA.
        We have identified a special envoy for North Korean human
    rights. There should be an announcement of that very soon. We
    still have some details to work out, but I think we should be
    able to do that soon. I think it is a very important issue. We
    do need to shine more of a spotlight on the human rights issues
    in North Korea. We are working with Homeland Security and with
    others about what we might be able to do on North Korean
    refugees. So we should talk more about that.
        I would like very much to thank you for what you have been
    doing on the OSCE because I think the OSCE is really proving
    its worth as an organization. Kyrgyzstan was a very good
    example. We got OSCE mobilized. They sent Mr. Pederly there as
    an envoy who I think sorted out what was an complicated and
    difficult and not at all transparent situation between the
    various players in Kyrgyzstan and gave us an opportunity now to
    have elections and something that may turn out very well. So it
    is an organization I think that demonstrated its worth.
        We are very pleased that after a long, cold period with the
    Russians, they finally approved the budget for the OSCE. That
    is good news.
        We will continue to press all of these countries, including
    Azerbaijan, Belarus in 2006, that the world is watching whether
    elections are free and fair. Now, in some I think we will get
    less response--like in Belarus. I think in Azerbaijan, however,
    we have a chance to convince the Azerbaijani Government that
    they have a reason to be concerned about this.
        So I thank you, and I think it is an extremely important
    organization that is doing really good work in that part of the
    world.
        Senator Brownback. Thank you.
        Senator McConnell. Thank you very much, Senator Brownback.
        Senator Harkin.

                        STATEMENT OF SENATOR TOM HARKIN

        Senator Harkin. Thank you very much, Mr. Chairman.
        Madam Secretary, welcome again to the committee.

                              DISABILITY PROGRAMS

        I just have kind of a follow-up on something we have
    discussed on February 17 when you were here, and that has to do
    with the whole area of disability programs in the State
    Department and what we are doing in Iraq. I asked at that time
    that you look into whether people with disabilities in Iraq are
    receiving appropriate services to help get them included in
    Iraqi society.
        Today we received a letter from the Assistant Secretary for
    Legislative Affairs that outlines USAID activities for people
    with disabilities in Iraq. It is pretty comprehensive. It
    appears that there are things that are being done. I am very
    grateful for that.
        The one thing I would perhaps direct your attention to or
    those under you, anyway, is the educational services often seem
    to be provided in a segregated fashion. The document talks
    about providing educational services for children in a ``center
    for the disabled'' in Baghdad and then transferring them to
    another facility once they complete their education.
        In another instance, a community action program is working
    with an NGO to establish ``an institute for the disabled''
    rather than educating students with disabilities alongside
    their peers.
        Now, the only thing I would hope is I would hope that you
    might just send a memorandum down the line to these people
    under you and just use the words ``integrated fashion,'' that
    the people with disabilities ought to be provided this help and
    support in an integrated setting, not separating them out from
    the rest of society, but to the maximum extent possible,
    providing that in an integrated setting to the maximum extent
    possible. That is all I ask, that you might get them to think
    about it in that framework.
        Section 579 of the 2005 omnibus bill. Again, I thank the
    chairman and the ranking member of this subcommittee for
    supporting that section 579. There were five specific
    requirements listed under disability programs. One was to have
    USAID and the Secretary of State to designate a disability
    advisor or coordinator within the respective agencies. At the
    hearing on September 17, I asked you if those people had been
    designated. I still do not know if they have been designated.
    If you do not know, could you just have somebody tell me
    whether they have been designated yet?
        Secretary Rice. Yes.

                          COORDINATOR FOR DISABILITIES

        Senator Harkin. A coordinator, a certain person to
    coordinate that.
        Also, one other section of the five specific requirements
    requires that the Secretary of State and USAID Administrator
    seek to ensure the needs of persons with disabilities are
    addressed in democracy, human rights, and rule of law programs,
    projects and activities that they support. And while I am not
    asking you to provide me that information now, but if you could
    provide what affirmative steps have you taken to make sure that
    this occurs, and could you give any examples of how persons
    with disabilities are being included in the democracy, human
    rights, and rule of law programs, projects, and activities?
        Secretary Rice. Senator, do you mean in Iraq specifically
    or in general?
        Senator Harkin. No. In your own Department.
        Secretary Rice. Oh, in our own Department. Disabled
    Americans, disabled employees of the State Department. Is that
    what you are referring to? I am sorry. I did not understand.
        Senator Harkin. You have the democracy, human rights, and
    rule of law programs.
        Secretary Rice. Yes.
        Senator Harkin. And you have projects and activities.
        Secretary Rice. Yes.
        Senator Harkin. How are persons with disabilities being
    included in those programs, not just here but as you extend out
    and do those programs in other countries, how are they being
    included in those programs.
        Secretary Rice. I understand. I could actually give you one
    example that I just saw. I was just in Russia, and we met with
    civil society groups there. There was both a representative of
    Special Olympics for Russia and a person who is an advocate for
    the disabled in Russia. And this is a case that I know well
    because I know that for a long time in the old Soviet Union,
    disability was considered something to be hidden.
        Senator Harkin. That is right.
        Secretary Rice. In fact, after World War II, they swept
    disabled veterans off the streets because it was somehow
    considered a stain on the society to have disabled people.
        I was struck by the fact that these people were there, that
    they actually had disability advocates. They are part of the
    civil society programs we are funding.
        Senator Harkin. Great.
        Secretary Rice. I was told that President Putin had
    actually invited, people think for the first time in the
    history of Russian leadership, disabled people to the Kremlin
    for a meeting. So that is just one small example and I will try
    to get you some others. But I was very touched by that one
    because I do know the Soviet case very well.
        Senator Harkin. It is a great example. I did not know about
    it, but that is a great example. I just again encourage you to
    take that example and keep promoting it in all the other
    countries in which we are operating, but especially in Iraq
    because there are a lot of young people that have become
    disabled because of the war and other things. If we are going
    to try to help build a democratic system in Iraq, I would hope
    that we would think about, again, how we include people with
    disabilities in a more integrated setting rather than
    segregating them out like you just talked about the Soviet
    Union used to do all the time.

                              PUBLIC LAW 480/USAID

        Last, Mr. Chairman, if I could, Madam Secretary, a few
    weeks ago Chairman Chambliss and I, chairman and ranking member
    of the Agriculture Committee, wrote a letter to the chairman
    and ranking member of the full Appropriations Committee
    opposing the idea of diverting $300 million from Public Law
    480, Title II Food for Peace Program to a separate account
    operated by the USAID, Agency for International Development.
    The idea behind it is good because the idea behind it was to
    allow USAID to be able, in emergency settings like tsunamis, to
    go out and purchase food locally and get it out there right
    away rather than relying upon shipments from this country. That
    is good. That is fine.
        What is not fine is that they are going to take it out of
    the account for the existing Public Law 480 to do that. The
    Public Law 480 program, for all the years I have been here, now
    30, that we have looked at, it has been a great program. Some
    countries, as you know, face chronic malnutrition, and have
    chronic needs for continued food aid. I just do not think it is
    right to cut down on that in case there is an emergency
    somewhere.
        So while I support the idea of restructuring and giving you
    the power to be able to get USAID to have a separate fund to
    buy food locally, both Senator Chambliss and I are opposed to
    the idea of taking it out of the existing Public Law 480
    account. So, again, I just wanted to bring that to your
    attention and hope that you would ask your boss also to take a
    look at that and leave the Public Law 480 program the way it
    is. I am sure that you will find all the support you need here
    for the additional $300 million for the program that would be
    set up by USAID.
        Secretary Rice. Thank you, Senator.
        Senator Harkin. Thank you, Mr. Chairman.
        Senator Leahy [presiding]. Senator McConnell had to leave
    to go back to the floor. We are trying to figure out whether we
    are going to get a transportation bill through today. He has
    asked me to wrap up and not to cut anybody off. Did the Senator
    from Kansas have anything else?
        Senator Brownback. No.
        Senator Leahy. I will submit some more questions on
    Colombia. I still have a concern. We all want President Uribe
    to succeed. We want cocaine to stop coming into our country. It
    would help if we did more to stop the demand here at home. We
    could isolate Colombia. We could do anything we wanted. As long
    as Americans want to buy illegal drugs, there are dozens of
    places, including our close ally Afghanistan that will send it.
    We have got to clean up our own act. But my concern is more
    about the paramilitaries and what we do with the billions of
    dollars we spend down there and how we help ensure that human
    rights are respected.
        Let me ask you this. The State Department is just one of
    many agencies using an increasing number of private security
    contractors protecting people and cargo overseas. I am not
    talking about the regular State Department security people who
    are superb. I have traveled with them. You do all the time, of
    course.
        We have DynCorps and Black Water Security, and others, that
    use ex-military personnel as hired guns in Iraq and
    Afghanistan, Colombia, and other countries. Tragically, many of
    these contractors have been killed in Iraq. But many have also
    been involved in the deaths of others, sometimes innocent
    people. What I want to know--and I really want the answer to
    this. It may have to be in classified form. I want to know what
    are the rules governing the use of lethal force by private
    security contractors who are paid directly or indirectly by the
    State Department. That is my first question.

                                    SECURITY

        And what happens when a private security contractor paid by
    the State Department deployed overseas runs over somebody with
    a vehicle, shoots an innocent person, or otherwise causes harm
    on the job or off the job? Who is responsible? Are they or are
    we? So if somebody could get me that.
        Secretary Rice. Absolutely, Senator.

                         MARLA RUZICKA WAR VICTIMS FUND

        Senator Leahy. I appreciate your interest in being at the
    program for Marla Ruzicka this weekend. I understand the reason
    why you cannot. I would just hope, please, emphasize to the
    people in your Department the tremendous work this young woman
    did in Baghdad and Afghanistan. She was killed so tragically
    about a month ago. I think she was a model. We have in the bill
    that just passed, the supplemental, as you know, a provision to
    name the fund after her.
        Secretary Rice. Victim Support, yes. Thank you.
        Senator Leahy. This is an example of one person, so
    motivated--and you have within the State Department and
    elsewhere such people. We have them outside Government. Let's
    support them so they can get out there and help people.
        Secretary Rice. Thank you, Senator. I completely agree with
    that. Thank you for acknowledging Ms. Ruzicka. We appreciate
    that very much and want to acknowledge her service.
        If I may just say one thing about Colombia. I just want to
    assure you, Senator, when I was in Colombia, we spent a good
    deal of time on the issue of the paramilitaries, a good deal of
    time on the issue of the human rights issues. President Uribe
    tells us--and I believe him--that he believes that in order to
    be a really functioning, transparent, worthy democratic
    society, that they have to have human rights at the core of
    what they are doing. He is more than willing to answer the
    questions that we have about human rights. Of course, we have a
    number of them. But I just wanted you to know that this was an
    issue of considerable discussion when I was in Colombia.
        Senator Leahy. Well, and I am sure of it because I have met
    with him several times. We have talked on the phone. We have
    met at the embassy and in my office. I want him to succeed. I
    want whoever is president there to bring peace and democracy. I
    know that he risks his own life and his family's life. I just
    want to make sure that especially within our hemisphere, that
    people have respect for the United States and we are upholding
    our own standards of human rights. That is why I am glad you
    have had those meetings with him. I will continue to meet with
    him too. Thank you.
        Secretary Rice. Thank you.

                       ADDITIONAL SUBCOMMITTEE QUESTIONS

        Senator Leahy. There will be some additional questions
    which will be submitted for your response in the record.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing.]

                Questions Submitted by Senator Patrick J. Leahy

        Question. What are the rules governing the use of lethal force by
    private security contractors who are paid directly or indirectly by the
    State Department?
        Answer. State Department-funded security contractors, Protective
    Security Specialists (PSS), are subject to the Department's policies
    governing the use of deadly force and Rules of Engagement developed by
    each Embassy and approved by the Chief of Mission. The Department's
    policy on the use of deadly force and Embassy Baghdad's Rules of
    Engagement are attached.

        Question. What happens when a private security contractor paid by
    the State Department, deployed overseas, runs over somebody with a
    vehicle, shoots an innocent person, or otherwise causes harm on the job
    or off the job? Who's responsible; are they or we?
        Answer. The U.S. Government is not ordinarily responsible for the
    actions of security contractors. For humanitarian and foreign policy
    reasons, the State Department is developing a program to make payments
    to Iraqi civilians injured by the non-negligent or negligent actions of
    private security contractors operating under Embassy security
    contracts. Initially, this program would cover official acts, with
    possible later expansion to cover unofficial acts and other
    contractors. Tort claim payments would be available, as would so-called
    condolence payments not payable in tort. Embassy Baghdad will implement
    the program using procedures derived from Department claims procedures
    and compensation values derived from Iraqi legal norms and U.S. Armed
    Forces practice.

                              SUBCOMMITTEE RECESS

        Senator Leahy. Thank you all very much. The subcommittee
    will stand in recess to reconvene at 2:30 p.m. on Thursday, May
    26, in room SD-138. At that time we will hear testimony from
    the Hon. Andrew S. Natsios, Administrator, United States Agency
    for International Development.
        [Whereupon, at 3:45 p.m., Thursday, May 12, the
    subcommittee was recessed, to reconvene at 2:30 p.m., Thursday,
    May 26.]

      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 HON. 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.]

           LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS

                                  ----------
                                                                       Page
    Bennett, Senator Robert F., U.S. Senator from Utah:
        Questions submitted by.......................................   114
        Statements of................................................30, 99
    Brownback, Senator Sam, U.S. Senator from Kansas, statements of..32, 96

    Cochran, Senator Thad, U.S. Senator from Mississippi, opening
      statement......................................................     5

    De Wine, Senator Mike, U.S. Senator from Ohio, statements of.....25, 85

    Harkin, Senator Tom, U.S. Senator from Iowa, statements of.......35, 92

    Landrieu, Senator Mary L., U.S. Senator from Louisiana:
        Prepared statements..........................................24, 89
        Questions submitted by.......................................   119
        Statements of................................................21, 89
    Leahy, Senator Patrick J., U.S. Senator from Vermont:
        Opening statements........................................... 3, 83
        Prepared statement...........................................    83
        Questions submitted by......................................39, 115

    McConnell, Senator Mitch, U.S. Senator from Kentucky:
        Opening statements........................................... 1, 69
        Prepared statements.......................................... 3, 69
        Questions submitted by.......................................   105

    Natsios, Hon. Andrew S., Administrator, United States Agency for
      International Development......................................    69
        Prepared statement...........................................    73
        Summmary statement...........................................    70

    Rice, Hon. Condoleezza, Secretary, Office of the Secretary,
      Department of State............................................     1
        Prepared statement...........................................    10
        Summary statement............................................     5

    Stevens, Senator Ted, U.S. Senator from Alaska, prepared
      statement......................................................   101

                                 SUBJECT  INDEX

                                  ----------

                              DEPARTMENT OF STATE

                            Office of the Secretary

    Abkhazia/South Ossetia...........................................    16
    Additional Subcommittee Questions................................    39
    Africa...........................................................    26
    Balancing:
        Millennium Challenge Corporation and Foreign Assistance
          Funding....................................................    17
        State Operations and Foreign Aid.............................    19
    Burma Sanctions..................................................    15
    Charles Taylor...................................................    18
    China Trade......................................................    28
    Colombian Paramilitaries.........................................    19
    Coordinator for Disabilities.....................................    35
    Darfur...........................................................    32
    Development Assistance...........................................     9
    Disability Programs..............................................    35
    Equal Importance of State and Foreign Operations Requests........     7
    Focus on Women in Foreign Policy.................................    22
    Hague Treaty on International Adoption...........................    23
    Haiti............................................................    26
    Iran.............................................................    15
    Marla Ruzicka War Victims Fund...................................    38
    Microcredit......................................................    31
    Middle East Elections............................................    32
    Millennium Challenge Account.....................................     9
    North Korea:
        Human Rights.................................................    33
        Progress of Talks............................................    20
    OSCE/Kyrgyz/Georgia..............................................    33
    Peacekeeping Operations..........................................     8
    Promoting Democracy..............................................     6
    Public Law 480/USAID.............................................    37
    Respect for the Holy Koran.......................................     5
    Russia...........................................................    17
    Russian Troops in Georgia and Armenia/Azerbaijan.................    16
    Security.........................................................    38
    State and Foreign Operations.....................................    20
    Sudan............................................................    27
    Trade Agenda, CAFTA Vote.........................................     8
    Uganda...........................................................    34

               UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT

    A New Era of Development Assistance..............................    73
    Additional Committee Questions...................................   105
    Administration Initiatives.......................................    78
    Adoption and Orphans and Vulnerable Children (OVC)...............   119
    Afghanistan:
        Coordination with Afghan Government..........................   113
        Impact of Alternative Livelihoods Programs...................   112
        Voice for Humanity...........................................   113
    Africa...........................................................   120
    Armenia..........................................................   105
    Asia and the Near East...........................................   121
    Avian Flu/HIV/AIDS...............................................   109
    Budget...........................................................   115
    Burma:
        Coordination of Support......................................   113
        Coordination With State......................................   114
    Coordination of Democracy Programs...............................   108
    Democracy:
        Contracts....................................................   109
        Definition...................................................   108
        Promotion....................................................   107
    Egypt............................................................   105
    Europe and Eurasia...............................................   123
    Food Aid:
        Improving Responsiveness.....................................   114
        Purchasing and Distribution..................................   114
    Fragile States Policy and Children...............................   126
    Funds Transfer:
        Development Assistance to Transition Initiatives.............    75
        For Local Purchase of Food...................................    75
    Future Budget....................................................   116
    IDFA Account Increase............................................   125
    Infectious Disease Funding.......................................   116
    Iraq:
        Contracts....................................................   106
        Democracy Programs...........................................   107
        Vocational Training..........................................   107
    Latin America and the Caribbean..................................   124
    Major Initiatives for Fiscal Year 2006...........................    75
    Management Reforms and Initiatives...............................    78
    Meeting the 10 Percent OVC Earmark in Fiscal Year 2006...........   126
    Office of:
        Energy and Information Technology............................   118
        Private Voluntary Cooperation................................   117
    Overhead Rate....................................................   112
    Overseas Conference Expenditures.................................   111
    Perceived Cuts in Existing Foreign Aid Programs..................   116
    Presidential Initiatives.........................................    78
    Procurement Improvements.........................................   112
    Program Priorities: Core Missions of USAID.......................    76
    Programs in Thailand Regional Office.............................   109
    Spending on Democracy Funds......................................   109
    Ten Major Achievements:
        Business Transformation Fiscal Year 2001-2004................    79
        USAID in:
            Afghanistan..............................................    76
            Iraq.....................................................    77
    Tsunami Assistance...............................................   106
        Response of Indonesian Government............................   106
    U.S. Record on Foreign Assistance................................   125
    USAID's Record of Success in Fragile States......................   119
    Use of Large Contractors.........................................   117
    Value-Added Commodities........................................115, 118
    Vulnerable Children..............................................   126

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