[Senate Hearing 110-]
[From the U.S. Government Publishing Office]



 
  STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS APPROPRIATIONS FOR 
                            FISCAL YEAR 2008

                              ----------                              


                       WEDNESDAY, MARCH 28, 2007

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:03 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Patrick J. Leahy (chairman) 
presiding.
    Present: Senators Leahy, Bond, and Gregg.

           UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT

STATEMENT OF HON. RANDALL L. TOBIAS, ADMINISTRATOR


             opening statement of senator patrick j. leahy


    Senator Leahy. Good morning. Ambassador Tobias, I'm glad 
you're here. This is a very busy day. We considered postponing 
this hearing because the votes are set at 11 o'clock, but we 
don't have hearing dates available in April, we can't be sure 
what dates are available in May, so I'm going to put my opening 
statement in the record.
    I would hope that you would summarize yours so we can go to 
questions.
    [The statement follows:]

             Prepared Statement of Senator Patrick J. Leahy

    I want to begin by welcoming Senator Gregg who is the new ranking 
member of this subcommittee. Senator Gregg and I come from States that 
share a border and I look forward to working with him in the same 
bipartisan way that his predecessor, Senator McConnell, and I worked 
together for so many years.
    I think we both agree that the United States does not need a 
Democratic or Republican foreign policy, we need an American foreign 
policy, and that is what I intend to strive for.
    Ambassador Tobias, we appreciate you being here. We also appreciate 
your past leadership as the Global AIDS Coordinator. You got that 
program off to a good start.
    The jobs of USAID Administrator and Director of Foreign Assistance 
are quite different from either the CEO of a private corporation or the 
AIDS Coordinator, as I'm sure you have discovered.
    Today we want to focus on the President's fiscal year 2008 budget 
request for USAID, and on your proposals for reforming our foreign aid 
programs.
    I think most people would agree that there is a lot of room for 
improvement in our foreign aid budget, personnel and procurement 
policies, and programs. But the issue is how you do it, and what 
decision-making authority is retained by USAID.
    On the positive side, you have developed a more coherent process 
that will enable your office to more accurately show where and how 
funds are spent. That will help and we welcome it.
    We are also assured by your office that you consulted extensively 
during this process, although that is not what we have heard from some 
of those whose views we would have wanted to see reflected, including 
within USAID itself.
    While the budget process may be more coherent and transparent, I am 
mystified by many of the results.
    A glance at your budget request yields as many questions as 
answers. A country like Colombia, that has received roughly $565 
million in each of the past 5 years, gets the same amount for the same 
purposes in fiscal year 2008, even though we know that some things have 
not worked and that conditions in Colombia have changed.
    In Nepal, a country where years of fighting has cost thousands of 
lives, there is a chance to end the Maoist insurgency and replace 
feudalism with democracy. Yet you propose to cut our assistance.
    The Democratic Republic of the Congo, a huge country with every 
imaginable problem, has emerged from conflict and completed its first 
election in 40 years. It holds the key to the future of central Africa, 
yet you propose to cut our assistance.
    Vietnam, a country of 80 million people, seeks closer ties with the 
United States, and there are so many opportunities for working 
together. Yet, with the exception of HIV/AIDS, you propose to cut our 
assistance.
    The Congress has worked hard to increase funding for global 
environment programs, particularly to protect biodiversity in the 
Amazon and central Africa where the forests are being destroyed. Yet 
you propose to slash funding for those programs.
    Last year, you testified before this subcommittee that, and I am 
quoting you, ``our intent is not to have a USAID budget or a State 
Department budget, but a Foreign Assistance budget that will make all 
of it more coherent in a way that all of us can better understand.''
    I have mentioned just a few of many examples. I have to ask what is 
the purpose of this stated ``coherence'' if it produces illogical 
outcomes? What was the strategic thinking behind these decisions? How 
were the views of USAID program officers in the field and their 
implementing partners reflected? How were the Congress' views 
reflected?
    We know you have to make hard choices. We all face budget 
constraints. But Pakistan, Afghanistan, Iraq, and Indonesia are not the 
only countries where the United States has important economic and 
security interests. You need to make sense of this for us if we are 
going to be able to work together.

    Senator Leahy. I do want to begin by welcoming Senator 
Gregg, who is the new ranking member of this subcommittee. 
Senator Gregg and I share a border, a beautiful border along 
the Connecticut River. We've known each other for a long time 
and, of course, he had a distinguished career as Governor 
before, and I feel privileged that he's here.
    As you know, Senator McConnell and I worked together for 
years--sometimes he'd be chairman, sometimes I'd be chairman, 
but I think the hallmark of this subcommittee during that time 
was that we would try to get the foreign aid bill passed in 
bipartisan fashion. As a result, we've been able to pass the 
bill in about a tenth the amount of the time that it used to 
take. Senator Gregg, would you like to say anything before we 
begin.
    Senator Gregg. Well, let me put my statement on the record 
and say how much I'm looking forward to working with you.
    We had a great relationship over the years on a lot of 
issues and it's going to be--it's an interesting committee with 
tremendously important jurisdiction, and I'm excited to have 
the chance to be the ranking member on it, and to follow in the 
footsteps of who we've mentioned. It's such a such a great job 
and certainly a team effort here to try to make sure that our 
foreign accounts are strongly supported.
    [The statement follows:]

                Prepared Statement of Senator Judd Gregg

    Welcome, Ambassador Tobias. You have the distinction of being the 
first witness to appear before this subcommittee in the 110th Congress.
    We appreciate the opportunity to discuss the $3.8 billion, fiscal 
year 2008 budget request for the operations and activities of the 
United States Agency for International Development (USAID), and to 
learn more about your efforts to reform foreign assistance. Both are 
difficult and challenging tasks, and I know many of us are curious how 
you divide your time between your jobs of USAID Administrator and the 
Director of Foreign Assistance.
    When it comes to foreign aid reform, what is past is prologue. 
Beginning with the Foreign Assistance Act of 1961 (which provided USAID 
its mandate), numerous Administrations--Republican and Democrat--
attempted to improve the efficiency and effectiveness of foreign 
assistance. Since 1961, the goals and objectives of U.S. aid have 
changed due to the shifting priorities of Administrations and 
Congresses which seek to keep apace with an ever-changing world.
    The Government Accountability Office notes in reports dating from 
the late 1970s that investments in large infrastructure projects 
overseas (intending, in part, to blunt the influence of the Soviet 
Union) were redirected by Congress to smaller programs targeting 
agriculture, nutrition, education, healthcare, and family planning for 
the poor. During the immediate post-Cold War period, U.S. aid supported 
emerging democracies throughout the former Soviet Union and significant 
emphasis was placed on activities targeted toward economic growth and 
development.
    Following the September 11, 2001 terrorist attacks, foreign 
assistance serves a renewed purpose to improve the lives and 
livelihoods of people who might be open to the hateful and violent 
ideology of extremists. I expect that everyone who sits on this 
Subcommittee would agree that foreign aid, if properly managed, can be 
an effective bulwark against terrorism.
    Afghanistan serves as example of the success that can be 
accomplished through the generosity of the American people. It is 
interesting to note that U.S. assistance supports large infrastructure 
projects throughout that country, smaller programs intending to improve 
the lives of the most destitute Afghans, and economic growth and 
development programs. We know from the pending supplemental request for 
Afghanistan that reconstruction is a long-term endeavor and that more 
needs to be done by all international donors.
    Your immediate challenge as Director of Foreign Assistance appears 
two-fold: first, to convince often entrenched bureaucracies that change 
is necessary, and second, to work hand-in-hand with Congress to enact 
proposed reforms, including the fiscal year 2008 budget request. I 
commend you on the improved Congressional Budget Justification 
materials, and I look forward to learning more about the process by 
which the fiscal year 2008 State and foreign operations budget request 
was crafted.

    Senator Leahy. Thank you. Ambassador, would you----
    Ambassador Tobias. Mr. Chairman, Thank you very much for 
the opportunity. I think that I will follow your example and 
ask that my opening statement be submitted for the record.
    [The statement follows:]

              Prepared Statement of Hon. Randall L. Tobias

    Thank you, Mr. Chairman and Ranking Member Gregg, for the 
opportunity to testify before the subcommittee today on the fiscal year 
2008 budget for foreign assistance.
    When I came before you last year, I outlined a series of challenges 
I sought to undertake as the first ever Director of U.S. Foreign 
Assistance. Now, after nearly a year in this role, I appreciate the 
opportunity to share with you what we have achieved, and what I hope we 
can achieve together through the fiscal year 2008 budget process.

                  responsiveness to this subcommittee

    I want to begin by thanking this subcommittee for its work and for 
the support you provided before these reforms even got off the ground. 
Before discussing the budget, I would like to note our efforts to 
address your concerns raised in report language. Emphasized in fiscal 
year 2006 report language, and then re-emphasized in fiscal year 2007 
report language, this subcommittee directed that Congressional Budget 
Justification materials improve in both the timing of their delivery 
and the quality of information put forth. I am happy to say that this 
year, we delivered material to support the Congressional Budget 
Justification on February 14th, nearly a month before the March 
deadline put into report language. Further, we included standardized 
budget tables per country to allow the public to meaningfully compare 
request levels per country. In addition, we have addressed the 
coordination concerns between USAID and State programs raised in fiscal 
year 2007 report language by bringing State and USAID staff and senior 
managers to the same table to discuss budget priorities for fiscal year 
2008.
    We have done far more than make process changes, however. With the 
new budget package comes a carefully considered set of budget 
priorities that, combined, will help advance our National Security 
Strategy. I realize that not all of the changes that we are proposing 
will sit entirely comfortably with each Member of this distinguished 
subcommittee. To the contrary, it is more likely that at least one of 
the changes we propose will raise concerns with you about our 
prioritization. I look forward to engaging with you to discuss your 
concerns. Part of my drive, to lay out the budget transparently in a 
way that can be compared across countries, is so that we can have a 
discussion, using common understandings and terminology, about just 
where our foreign assistance dollars are going and what we are trying 
to accomplish by allocating them as we have.
    We have taken big steps to increase transparency, accountability, 
and coherence of strategy in the allocation of our resources, including 
the creation of one office, under my direction, to oversee all USAID 
and State foreign assistance resources. I hope to make your oversight 
responsibility less burdensome by laying our principles and priorities 
clearly on the table, and providing tools by which we can consistently 
assess results.
    Specifically, we applied six principles to the allocation of the 
fiscal year 2008 budget, in response to concerns raised by Congress and 
the President himself about the lack of coordination and coherence in 
our planning, allocation and monitoring of foreign assistance funds. I 
would like to take a moment to elaborate on them now.

                               principles

    The fiscal year 2008 State and USAID foreign assistance request is 
$20.3 billion, a $2.2 billion or 12 percent increase over fiscal year 
2006 enacted levels, the last year for which we have completed 
allocations. Given current budget pressures and a shared commitment 
with Congress for deficit control, this increase reflects the 
importance this Administration places on foreign assistance, not just 
as a moral obligation to alleviate suffering, but as a foundation of 
our national security strategy.
    As a result of foreign assistance reform, this year's request 
reflects a different approach to building the budget from previous 
years' methods, and I would like to take a moment now to explain the 
six principles that governed our prioritization.
    First, we integrated planning based on the totality of U.S. 
Government resources and the commitment to a shared goal.--Consistent 
with your request that we improve coherence and coordination of State 
and USAID foreign assistance, for the first time in our Nation's 
history, all $20.3 billion of U.S. foreign assistance under the 
authority of the Department of State and USAID, as well as resources 
provided by the Millennium Challenge Corporation, are being applied to 
the achievement of a single overarching goal--transformational 
diplomacy. In response to input received from many of you, our 
colleagues in the international development community, and our host 
government counterparts, that goal now reads: To help build and sustain 
democratic, well-governed states that respond to the needs of their 
people, reduce widespread poverty and conduct themselves responsibly in 
the international system.
    Over 100 interagency teams, organized by country, were tasked with 
ensuring that all State and USAID resources were coordinated for 
maximum efficiency and impact, and targeted to the achievement of 
shared objectives. Teams considered investments from the President's 
Emergency Plan for AIDS Relief and the Millennium Challenge Account 
(MCC) when allocating resources. As a result, in countries that will 
receive MCC Compact funds in 2008, you will see funds allocated to 
programs that will support the success of these investments, such as an 
increase in trade and investment funds and private sector 
competitiveness in Honduras, and in Ghana, a shift in funding to 
enhance the capacity of local government, who will be responsible for 
implementing the MCC Compact's programs.
    Second, we focused on country progress.--The ultimate goal of 
transformational diplomacy is to support recipient country efforts to 
move from a relationship defined by dependence on traditional foreign 
assistance to one defined by full sustaining partnership status. Now, I 
will spend a bit of time on this principle, because, while it seems 
like this is what we have been doing all along, this year's approach 
was quite different.
    In past budget years, funds were allocated first by account, then 
by sector, and lastly, by country. Much of the budget was built by 
determining so much for family planning, so much for basic education, 
so much for security assistance, and so on. Funding from within these 
sector levels was then parceled out to countries on the basis of 
multiple sector-based strategies--one for family planning, etc. You get 
the picture.
    It is not that these sectors are not critical to a country's 
development strategy--clearly they are, and we continue to evaluate 
resources by sector, ensure appropriate targeting, and incorporate best 
practices. It's a matter of what should drive the country's development 
program--country-prioritized need or a set global amount for a sector. 
We must tailor programs to the unique needs of each recipient country 
in reaching the transformational diplomacy goal.
    This year, we led with country progress. We brought together teams 
of experts from USAID and State, in consultation with their field 
counterparts, and we gave them an overall planning number for each 
country--not by account, not by sector, just a total.
    We gave them data on the status of country progress against 
independent indicators assessing poverty, human capacity, life 
expectancy, governance, and barriers to economic growth. We gave them 
the new Strategic Framework for U.S. Foreign Assistance, which outlines 
interventions according to countries' common country traits. We then 
asked them to allocate that budget to the areas that would best advance 
individual country progress, based on the opportunities and challenges 
that exist on the ground, and in turn, advance U.S. policy. The result 
is an fiscal year 2008 budget focused on country progress.
    Third, consistent with concerns raised by this subcommittee to 
align our foreign assistance resources with our National Security 
Strategy, we invested in states critical to long-term regional 
stability and prosperity.--As many of you are aware, the new Strategic 
Framework for Foreign Assistance categorizes each country receiving 
U.S. foreign assistance based on common traits and places them on a 
trajectory to measure their development progress against standardized 
indicators. The country categories are largely explained by their 
category name: Rebuilding, Developing, Transforming, Sustaining 
Partnership and Restrictive.
    In the fiscal year 2008 budget request, you will find that 51 
percent of Department of State and USAID program assistance resources 
are concentrated in Rebuilding and Developing countries. These are the 
countries that are farthest away from sustaining partnership status, as 
measured by instability, poverty, human capacity, life expectancy, 
governance, and barriers to economic growth--all critical barriers to 
regional stability and success in the War on Terror.
    We have seen the risks that ``ungoverned spaces'' can pose to our 
national security and to their regional neighbors; we are also very 
aware of the costs of these ``ungoverned spaces'' to their own 
citizens. States like Somalia, Afghanistan, Sudan, and the Democratic 
Republic of the Congo are among the poorest in the world. Their 
citizens are among the least able to access basic needs--including 
security.
    At the same time, to truly transform the development landscape, we 
need to focus on Developing States such as Nigeria, Ukraine, Georgia, 
Pakistan, Jordan, and Indonesia--states that are on the cusp of 
transitioning to economic, political and social self-sustenance, and 
that, with continuing progress, can serve as anchors for regional 
stability and prosperity. We need to work with them to help them 
strengthen their institutions to make their progress permanent.
    Fourth, we focused on demand-driven interventions that are critical 
levers for sustainable progress and transformation.--Foreign assistance 
in the past has run the risk of being a mile wide and an inch deep. 
With a thousand agendas embedded in our foreign assistance programs, 
our impact was diluted and diffuse. It is important to note, as I often 
do, that there is very little that we do in our development portfolio 
that is bad. Someone, some community, is benefiting from the services 
we are providing and the interventions we are supporting.
    But that is not the point. The real question is, are we achieving 
sustainable impact? Are we, in fact, enabling transformation? Are we 
giving people what they need to sustain further progress on their own?
    Based on the new country-driven process, we have prioritized 
resources to the areas that we believe will promote and sustain long-
term country progress. Funding is increased to programs targeted to 
improving governance and democratic participation, programs mitigating 
diseases that threaten the human and economic capacity of countries to 
progress on their own, programs that expand access to and improve the 
quality of education, and programs that enhance economic opportunity 
and the skills needed to participate in the global economy. These 
resource allocations reflect the wisdom of our interagency teams of 
country experts.
    I often think about our past practice of allocating funds as being 
similar to teaching an individual a little French, a little German, and 
a little Spanish. If we keep doing it, that person will very slowly be 
able to speak a little more French, a little more German, and a little 
more Spanish. But if we instead took the resources spent on each 
language and put them toward one language, that person would be able to 
communicate fluently, and would then be better able to learn the other 
languages on his or her own.
    Similarly, when we split up our resources into too many sectors in 
one country, progress will be slow and often imperceptible. If we 
instead focus our resources, we enhance the ability of countries to 
gain enough strength and stability in areas critical to sustaining 
further progress on their own.
    Focusing resources in this way has its tradeoffs. When one area 
goes up, unless there is an abundance of new resources, other areas go 
down. While the fiscal year 2008 budget increased by $2.2 billion over 
fiscal year 2006 enacted levels, we squeezed far more in the budget. 
The budget includes important increases for HIV/AIDS, malaria, and 
humanitarian assistance; and for countries in which there are new 
requirements and opportunities such as in Kosovo, Iran, and Cuba. The 
fiscal year 2008 budget also reflects efforts to continue to shift 
program funding, where requirements are predictable, from supplemental 
requests for Iraq, Afghanistan, Sudan and avian influenza into the base 
budget.
    Within the country-level requests, you will also find quite a bit 
of smaller, yet equally important, shifts. Country teams prioritized 
interventions that would help a country's institutions to build the 
capacity to take on challenges in the longer term. So you will see 
increases in resources for conflict mitigation, justice systems, 
executive branch institution-building, anti-corruption, basic 
education, energy services, agriculture policy, workforce development, 
and clean environment. But with these increases, certain sectors were 
not prioritized by the country teams to the degree that they have been 
funded in the past. These areas include sectors that we realize are 
important to members of Congress, including family planning, maternal 
and child health, and biodiversity. We know that putting decreases 
forward in these areas requires a robust justification of our reasons, 
and I hope we will have a substantive dialogue about why our teams made 
the choices that they did.
    At the outset of the reform process, some members of this committee 
expressed concern that greater alignment between State and USAID 
foreign assistance resources would result in a short-shrifting of long-
term development goals. I am pleased to note that in fact the opposite 
occurred. In fiscal year 2008, resources for the three objectives 
targeted to achieving long-term development progress--Governing Justly 
and Democratically, Investing in People, and Economic Growth--increase 
by 19 percent over fiscal year 2006 levels for these Objectives. The 
fiscal year 2008 request includes the largest request this 
Administration has ever made for basic education, and when projected 
fiscal year 2008 MCC disbursements are considered, investments in these 
objectives increased by 29 percent over fiscal year 2006.
    Fifth, we allocated funds intended for country programs to country-
level budgets.--In the past, ambassadors and mission directors often 
did not have a full picture of the resources being implemented in their 
countries, because some activities were planned and implemented from 
Washington. Consequently, they did not exercise full oversight over 
these programs, and doing so from Washington was costly and time-
consuming.
    To empower our mission directors, ambassadors, and country teams, 
who are our people in the field with the best knowledge of country 
circumstances, the reform process maximized resources implemented at 
the country level into country-level budgets. Resources within global 
or regional budgets that had been planned for specific countries were 
accordingly shifted to those countries' budgets and planned together 
with other country-based support. As a result, such resources can be 
implemented consistent with country strategies and benefiting from 
expertise on the ground.
    Recognizing that not all foreign assistance is most effectively 
implemented on a country basis, and that issues that transcend a single 
country's borders are best addressed as part of a global or regional 
strategy, activities such as support to regional institutions, 
multilateral organizations, or cross-cutting research remain funded 
within global and regional budgets. Humanitarian assistance, which is 
allocated on the basis of emerging crises, also remains funded within 
global budgets.
    Finally, we matched accounts with country circumstances and the 
priorities the county categories are designed to address.--Many of you 
may be used to hearing about the budget less in terms of countries and 
more in terms of accounts. There is a specific reason I have not 
mentioned accounts until now.
    Account levels did not drive our allocation process. Country 
progress did. After the country teams submitted their allocations by 
program, we centrally aggregated them to their appropriate accounts. In 
doing so, we sought to maximize the use of account authorities and 
establish clear priorities in support of effective implementation of 
foreign assistance programs.
    This means that, overall, funding for the Development Assistance 
account (DA), which has traditionally supported assistance in poor 
countries that demonstrate performance or a commitment to development, 
has been prioritized to Developing and Transforming countries. The 
Economic Support Fund (ESF), which focuses primarily on providing 
economic support under special economic, political, or security 
conditions, has been prioritized to support activities in the 
Rebuilding and Restrictive Country Categories.
    However, activities to support the poor and invest in development 
have not changed. For the three objectives supporting long-term 
development: Governing Justly and Democratically, Investing in People, 
and Economic Growth, DA and ESF totaled $3.7 billion in fiscal year 
2006. For fiscal year 2008, DA and ESF in these objectives total $3.8 
billion.
    The real change is within Restrictive and Rebuilding countries: 
Total funding in the three objectives supporting long-term development 
increased by 63 percent over fiscal year 2006 levels. However, the 
balance between DA and ESF changed, with DA declining from $331 million 
in fiscal year 2006 to $42 million in fiscal year 2008; and ESF 
increasing from $525 million in fiscal year 2006 to $1.4 billion in 
fiscal year 2008.
    Now I realize that this may have many of you worried that this DA 
decrease and ESF increase means that foreign assistance will now be 
used increasingly for political ends and that poor people will suffer. 
I know there is often a skepticism between our two branches when one 
side or the other presents a series of numbers, so let me address any 
doubts by citing a group many consider an ``Honest broker''--the Global 
Leadership Campaign. In their February 26, 2007, analysis, they point 
out, ``Overall `development-type' activities do not decline in fiscal 
year 2008 due to the shift between DA and ESF, and in fact, increase in 
the aggregate.''
    Let me assure you of this point. Our intent in shifting funds from 
DA to ESF is to draw cleaner lines around their use, as identified by 
country characteristics. Period. These cleaner lines allow us to 
justify to you why we have requested amounts for each account. There is 
no intent to take the ``development'' out of any of our development 
resources.

                        regional funding trends

    Consistent with the principles mentioned above, I would like to 
review briefly the regional funding trends you will see in the fiscal 
year 2008 budget.
    Africa.--When projected MCC disbursements are included, the fiscal 
year 2008 request for Africa represents a 54 percent increase over 
fiscal year 2006. Including actual disbursements and projected fiscal 
year 2008 disbursements from the MCC, resources for Africa have nearly 
quadrupled from 2001-2008. Over 75 percent of the fiscal year 2008 
budget will focus on Investing in People in order to address the 
crippling effects of disease and poverty, a $2 billion increase from 
fiscal year 2006. These increases are largely due to HIV/AIDS 
resources, but not entirely. When HIV/AIDS, MCC and the emergency-
oriented accounts of Public Law 480 Title II food aid, Migration and 
Refugee Assistance, and International Disaster and Famine Assistance 
are excluded in both fiscal year 2006 and fiscal year 2008 (as 
allocation of emergency funds is often unknown until the end of a 
fiscal year), there is actually a 15 percent increase in resources to 
Africa.
    East Asia and the Pacific.--With projected fiscal year 2008 MCC 
disbursements included, proposed fiscal year 2008 funding for the 
region increases by 15 percent over fiscal year 2006. Democratic 
challenges and terrorist threats require that peace and security 
programs emphasize counterterrorism and conflict mitigation while also 
maintaining military assistance for key War on Terror partners. 
Resources for these types of key security programs make up 18 percent 
of the request for the region. Countries such as Indonesia, the 
Philippines, and Mongolia collectively receive 53 percent of the 
region's request.
    Near East.--The fiscal year 2008 request for the Near East 
represents a 4 percent increase over fiscal year 2006, including 
reduced levels for Egypt and Israel under glidepath agreements. The 
fiscal year 2008 request emphasizes continued investments in Peace and 
Security and political reform. Accordingly, funding for Peace and 
Security increase by 4 percent, while investments in Governing Justly 
and Democratically increase by more than 80 percent. The fiscal year 
2008 request is concentrated in Iraq, Israel, Egypt and Jordan, 
representing 93 percent of the region's budget.
    South and Central Asia.--Funding to South and Central Asia 
increased by 6 percent in the fiscal year 2008 request compared to 
fiscal year 2006 levels for the region. Funding will continue to 
support the Global War on Terror through security, reconstruction, 
development and democracy efforts, particularly in Afghanistan and 
Pakistan, which represent 84 percent of the region's request. Success 
in these countries is critical to achieving peace, stability, and 
development progress throughout South and Central Asia. Funding for the 
five Central Asian countries declined by nearly 24 percent from fiscal 
year 2006 to fiscal year 2008. Much of the decline comes in Uzbekistan, 
where the government has worked actively to limit U.S. assistance 
related to reform, and in Kazakhstan, whose oil wealth lessens the need 
for our assistance.
    Western Hemisphere.--Foreign assistance for Latin America has risen 
dramatically since the start of the Administration, rising from $862 
million in fiscal year 2001 to a requested $1.4 billion in fiscal year 
2008 for State and USAID Administered programs. If the fiscal year 2008 
request is fully funded and MCC fiscal year 2008 disbursements are 
taken into account, resources to the Western Hemisphere will have 
doubled under this Administration, from $862 million in fiscal year 
2001 to $1.66 billion in fiscal year 2008--a 4 percent increase over 
fiscal year 2006.
    The focus of resources within the region has also changed. The 
Western Hemisphere, in general, has made significant progress over the 
last decade, although major challenges remain. Funds have therefore 
shifted from service-delivery in health and basic education, where the 
region has made progress relative to other regions, to economic growth 
and activities to help consolidate democratic gains. Our programs are 
targeted to improve government capacity and provide access to economic 
opportunity to all citizens, especially the poor and marginalized, by 
catalyzing private sector investments, reducing the cost of doing 
business, and expanding access to microcredit. With MCC disbursements 
considered, economic growth resources are up 80 percent in fiscal year 
2008. Resources to improve government capacity and strengthen 
democratic institutions are up 5 percent.
    I am aware of recent briefings where concern has been expressed 
about declining funding for our neighbors. In fact, my very first trip 
since submitting the fiscal year 2008 budget was to Bolivia, Ecuador, 
and Peru, three countries that have sustained decreases in the fiscal 
year 2008 budget. In each of these countries, the positive impact of 
our past investments was clear, and our ability to build on them with 
innovative programming and partnerships was also evident.
    Europe and Eurasia.--This region represents another success story 
in development. The fiscal year 2008 request for Europe and Eurasia 
represents a 26 percent decrease from fiscal year 2006, reflecting 
success achieved in the region. When projected fiscal year 2008 MCC 
disbursements in Georgia and Armenia are included, the reduction is 13 
percent from fiscal year 2006. While United States assistance has 
played a substantial role in supporting further integration of 
countries in Eastern Europe and the Western Balkans into Euro-Atlantic 
institutions, a number of difficult challenges remain across the range 
of foreign assistance objectives. Funds for Kosovo and Serbia represent 
27 percent of the region's request. Countries at the forefront of 
reform--Ukraine, Georgia, and Moldova--and countries that present 
democratic challenges--Russia and Belarus--together represent 30 
percent of the region's budget.

                               conclusion

    For too long, the debate between Congress and the Administration 
regarding foreign assistance has lacked focus. Very much like a ship 
with too many calibrations, the foreign assistance boat would move in 
one direction for a while, then shift directions with a new 
Administration or a new Congress, oftentimes back-tracking over the 
same course it had traveled just a few years ago. As a consequence, 
many recipient countries have not been given the tools they need for a 
long enough period of time to help their countries sustain progress. 
Globally, progress has been slow and often imperceptible.
    The fiscal year 2008 Foreign Operations budget, built on the basis 
of the principles and methodologies described above, reflects country-
based strategies for progress, evaluated within the context of regional 
challenges and opportunities, and responsive to a shared goal and 
objectives targeted to achieve that goal. And since budget planning was 
thoroughly integrated, the fiscal year 2008 budget, like a Rubic's 
Cube, relies on each individual piece to maintain the integrity of the 
whole.
    In addition to developing the new Strategic Framework for Foreign 
Assistance, we have developed a standardized set of definitions, or a 
``Development Dictionary,'' if you will, of the programs that relate to 
our five priority objectives, and ultimately to the transformational 
diplomacy goal. The Development Dictionary describes what we mean, 
across all programs and sources of funding, when we describe a program 
as ``justice system reform'' or ``conflict mitigation.'' We published 
this reference on line and have invited comments from your staffs and 
the NGO community. Every dollar of the fiscal year 2008 budget is 
identified against these common definitions, making comparisons across 
fiscal years, countries, programs, and regions transparent and easy.
    We have developed common indicators for each of the programs 
defined in the development dictionary, such that we will be able to 
compare partner, program, and country performance across agencies and 
sources of funding. We developed these indicators with input from the 
NGO community and have posted them on line, together with an email 
address to collect comments.
    We have wrapped the money, definitions, and indicators into one 
system that will be able to tell you who is getting the money, what 
they are spending it on, and what results we expect to be achieved. 
This information will come together in an annual Operational Plan 
submitted to Washington for each country where foreign assistance funds 
are provided. For the first time, starting with fiscal year 2007 funds, 
we will be able to tell you what a $1 million change from X activity to 
Y activity will mean for a program so that you can better determine 
whether such a change, and its opportunity cost, best reflects the 
impact you want to have.
    In making these changes, we sought explicitly to be responsive to 
concerns raised by Congress about the transparency of our 
decisionmaking, the coherence of our resources, and our ability to 
account for results. My hope is that the first steps taken over the 
past nine months will support a robust dialogue between the legislative 
and executive branches about funding priorities. Because with this new 
transparency of information comes a new responsibility on both of our 
parts to raise concerns where we feel our differing priorities will 
have a detrimental impact on transformational diplomacy progress. I 
look forward to hearing your input regarding the prioritization of 
resources that we have laid on the table.
    Far more than just moving the deck chairs, the reform reflected in 
the fiscal year 2008 budget represents the re-calibration of the ship. 
But only when we discuss our differing priorities, in the spirit 
intended by the balance of powers between the executive and legislative 
branches, will the ship find its most appropriate and progressive 
course. We need to develop common priorities for the ship's movement to 
sustain permanent progress.
    I look forward to engaging and working with you over the coming 
months to develop our common path and urge you to fund the full fiscal 
year 2008 request.
    Thank you.

                       TRANSFORMATIONAL DIPLOMACY

    Senator Leahy. Well, thank you and it will be. You say in 
your statement that for the first time in the Nation's history 
all of our foreign assistance resources are being applied to 
the achievement of the single over-arching goal, 
transformational diplomacy, and how democratic, well-governed 
states respond to the needs of their people, reduce wide-spread 
poverty, and conduct themselves responsibly in the 
international system. I think that is a fair summary of what 
you said, and I support that. We all do.
    But isn't that what we've been trying to do ever since 
World War II?
    Ambassador Tobias. Well, yes, I think we have. I think the 
question is: Have we been as effective in doing it as we might 
be and what can we do as we go forward to do a better job of 
it?
    Senator Leahy. I think what I mean is we do a lot of 
things. We train teachers, we strengthen healthcare systems, we 
reform judicial systems which is extremely important to build 
trade capacity. So may I ask you this: What have we been doing 
that we're not going to do and what are we going to do that we 
haven't been doing?
    Ambassador Tobias. Senator, I think that it begins with all 
of us, those in the Congress and those in the administration, 
as well as people in the NGO community and others that have an 
important interest in all of this coming to a common conclusion 
around what is it we're really trying to get done here, and 
what is the best way to get it done. So the administration has 
laid out this framework as a point of at least starting the 
discussion, with the idea being that in some instances I think 
our activities, well intended as they have been, have been more 
successful in building dependency than they have been in 
building a sustainable set of programs to allow countries to 
progress on a trajectory and eventually graduate from the need 
to be dependent on foreign assistance.
    I think that our foreign assistance has sometimes had a 
thousand objectives. We've been a mile wide and an inch deep, 
and we haven't been clear and crisp----

                       FOREIGN ASSISTANCE BUDGET

    Senator Leahy. But I can think of some of the times when we 
supported some of the worst heads of state because they said 
they were anti-communist.
    Then after the breakup of the Soviet Union it was Mr. 
Putin's method of governing. I'm not sure what the major 
changes are sometimes but after that, we said we would support 
anybody who said they were anti-drugs, because that became the 
mantra, and in a number of instances we closed our eyes to 
severe problems in countries that we were supporting because of 
that.
    Now if they say they are anti-terrorist, even some 
countries that have harbored terrorists, well, then we support 
them.
    These mistakes have been made by both democratic and 
republican administrations.
    You testified that contrary to concerns expressed by some 
Members of Congress in fiscal year 2008, resources for the 
objectives targeted to achieving long-term development, 
governing justly and democratically and investing in people 
increased by 19 percent over fiscal year 2006 levels.
    But if you take the Millenium Challenge Corporation and 
HIV/AIDS out of the equation, then how do fiscal year 2006 and 
fiscal year 2008 compare?
    Ambassador Tobias. Well, first of all, I'm not a fan of 
taking HIV/AIDS and the Millennium Challenge Corporation out of 
the equation.
    Senator Leahy. Well, the reason I ask that is because the 
Millennium Challenge Corporation has a huge amount in the 
pipeline but hasn't spent much at all, so that's why I asked 
the question.
    Ambassador Tobias. Well, the way we have done the 
calculation is to work with the Millennium Challenge 
Corporation to determine what they believe their actual outlay 
will be during the year 2008 in each of the countries where 
they have a compact. We have assessed what we believe our 
foreign assistance will be on a country-by-country basis--not 
on the size of the compact but on what will actually happen in 
2008.
    But in many countries in Africa, for example, if you look 
at an education program in a country where 20 percent of the 
teachers are dying every year, it becomes pretty clear that the 
AIDS initiative is dealing with more than just AIDS; it's 
dealing with the fundamental fabric of the country, so I really 
do think it's appropriate to count all of it.
    Senator Leahy. Let's talk about that. For example, in 
Nigeria, you said you want to help them strengthen their 
institutions and make progress permanent. But if you take out 
the AIDS money--and I'm not suggesting we do--I've been a 
strong supporter, as you know, of adding money for HIV/AIDS 
long before it became popular. But if you take out AIDS you 
only propose an additional $20 million for Nigeria, a country 
of 125 million people. You cut aid to the Ukraine by $16 
million, I believe. Georgia by $21 million. How does this show 
us strengthening their institutions? You see what I'm getting 
at?
    Ambassador Tobias. Of course I do.
    Senator Leahy. We're going to put the money in for HIV/
AIDS. I've worked closely with the President and others on 
that. Even when he hasn't had it in the budget we've put it in, 
but how do we strengthen democracy with only $20 million for 
Nigeria?
    Ambassador Tobias. Well, we're proposing to spend a 
significant amount of money on democracy programs because 
they're so incredibly important. Indeed, in a number of 
countries, unless we have rule of law and solid democracy 
programs, it's not likely that other things are really going to 
work in a sustainable way.
    But in all cases, we have put the budgets together on a 
country-by-country basis using people with expertise both here 
in Washington and in the field assessing the resources that we 
felt we could make available, and making a determination based 
on what the most compelling issues are in that country as to 
where can we spend the money and make the greatest difference 
in moving that country forward.
    Senator Leahy. Sure, but in Nigeria that's about 20 cents a 
person, and I'm not sure you're going to build an awful lot of 
democracy or better court systems in that way. I know we have a 
huge amount of money going to Pakistan and Afghanistan and 
Iraq. We have a huge amount of money that goes to Israel and 
Egypt, and a lot goes to Colombia even though it hasn't stopped 
drugs coming into this country.
    I worry about the areas where--I think you'd agree with 
me--there are going to be problems if the United States does 
not get involved. My time is up, and I yield to Senator Gregg.

                        FORMER SOVIET REPUBLICS

    Senator Gregg. Thank you, and picking up on that note I 
recognize that you've got to cover the whole globe and you have 
to--therefore you end up not putting a lot of money except into 
a few nations that have high-visibility issues, such as Iraq, 
Afghanistan, Egypt, and Israel.
    But accepting that as the context, why is the budget deduce 
the funding for the former Soviet Republics that are, basically 
it seems, some of the most fertile ground in the world for 
developing democracies, and the rule of law in countries that 
would be natural allies, especially since many of them are on 
the rim of the Middle East and represent marginally Islamic 
countries that could be friendly.
    Ambassador Tobias. Are you talking about Russia or are you 
talking about----
    Senator Gregg. The former Republics.
    Ambassador Tobias. The former Republics. Well, again, we've 
tried to prioritize within each region the countries in that 
region that our people with expertise have felt were the 
greatest priorities, and then within each country we've tried 
to prioritize those particular areas where people have felt we 
could make the most difference. I'd have to go through on a 
country-by-country basis, which I'd be happy to do, but at the 
end of the day it's----
    Senator Gregg. Let's do that, because your funding to the 
Former Soviet Republics which are now independent has been cut.
    Ambassador Tobias. Senator, I'm sorry. I'm having a little 
trouble hearing you.
    Senator Gregg. The funding to the Former Soviet Republics 
has been cut in this budget; I'm wondering why. So let's go 
through each one. Let's start with Georgia. Why did you cut 
funds to Georgia?
    Ambassador Tobias. Do you want me to find the list now?
    Senator Gregg. No. I want you to answer the question: Why 
did you cut funds to Georgia?
    Ambassador Tobias. Well, funds were reduced in the sense of 
looking at the resources that were available, and the people 
with the expertise on the region and on the countries in the 
region making the choices that with scarce resources, we would 
put the money in the places that----
    Senator Gregg. Because there was obviously a tactical 
decision made, or a strategic decision made, that you would 
focus dollars on other accounts at a more significant level and 
reduce dollars to what are now Republics that used to be Soviet 
client states. I guess the bottom-line question is: Why was 
that decision made? Clearly there was a decision made to do 
that.
    Ambassador Tobias. Well, again, I don't know how to answer 
it other than to say that it was a matter of----
    Senator Gregg. Give me some specifics as to what made 
that----
    Ambassador Tobias. There was no systematic intent to reduce 
levels in the former Soviet Republics. We considered each 
country program on an individual basis and in the broader 
context of competing needs around the globe. The request for 
the region overall reflects successes in promoting reform and 
creating legacy institutions, as well as increases for some 
countries with pressing needs or significant opportunities. As 
a result, you will see funding increases for Turkmenistan, for 
example, in response to opportunities presented by the 
transition of power in the presidency, and for Tajikistan 
(excluding emergency food aid) to respond to the urgent need to 
secure its border with Afghanistan and promote reform. Funding 
has decreased in Uzbekistan, where the government has worked to 
actively limit United States assistance related to reform and 
in Kazakhstan, whose oil wealth lessens the need for our 
assistance. In Georgia and the Ukraine, we see increasing 
capacity and contributions from host governments, thereby 
justifying lower assistance levels.
    Senator Gregg. Well, I honestly can't believe that as head 
of the foreign assistance and head of USAID, you can't give me 
something--a specific rational for why we are--we have decided 
to turn away from those nations and move the dollars to other 
nations. Other nations seem to be such fertile ground for our 
capacity to develop stable nations and nations which have 
democracy, which have rule of law, and which are potentially 
significant allies in the war against fundamentalism.
    Ambassador Tobias. Well, it certainly isn't that we've 
decided to turn away from them; it's simply been a matter of 
taking the resources that are available and trying to make a 
determination about what is the best way to use those 
resources. But I will be very happy to respond on a specific 
basis on what the rationale was in each case.

         USAID ADMINISTRATOR AND DIRECTOR OF FOREIGN ASSISTANCE

    Senator Gregg. Well, it doesn't make sense to me that there 
was a rationale in each case, because it had to be a 
philosophical decision because it's so apparent that you have 
moved away from this region of the world and moved money into 
another region of the world, specifically Africa, it looks 
like. It was a regional decision; it wasn't country-by-country, 
I don't think, but certainly the dollars have been flying out. 
How do you divide your time between being head of foreign 
assistance and USAID?
    Ambassador Tobias. In a typical day, Senator, I start my 
day, when I'm in Washington, in the State Department and spend 
the morning, usually, in the State Department. Then at about 
lunchtime I go over to USAID and we set up the schedule for 
meetings and things over there for the afternoon.
    Some days I'm over there longer; some days I'm in the State 
Department longer, depending on what's going on on that 
particular day, but that's my basic plan.
    Senator Gregg. How does that work? I mean, that seems 
inherently disjointed.
    Ambassador Tobias. Well, I think it's working well. I think 
it will work even better a year from now, because when my 
predecessor was the head of USAID and there were two separate 
foreign assistance budgets, one for USAID and one for State 
Department foreign assistance, you'd have programs coming from 
different directions in a country. There was an enormous amount 
of coordination that needed to take place, and the 
Administrator of USAID spent an awful lot of time talking to a 
variety of people in the State Department in an effort to 
coordinate.
    I'm now talking to myself for those kinds of things, and I 
think the coordination is much easier and much better, so I 
think it's been a significant improvement.
    Senator Gregg. Should there even be more integration then? 
Should, I mean, the physical location of the two organizations 
be merged?
    Ambassador Tobias. Well, I would not favor that. I think 
that we need a strong USAID, we need a strong organization of 
professionals who are focused on foreign assistance who have 
chosen to focus their careers in that way, and I'm very, very 
proud of the people in the organization, for their dedication, 
their knowledge, and their hard work.
    At the same time, I think that we need to ensure that we 
have USAID strategically lined up with what the United States 
Foreign Policy interests are in the countries where we are 
working.
    I think on the ground, on a country-by-country basis, 
historically and currently, I think it's probably worked better 
than it has here in Washington, where the U.S. Ambassador is 
leading the U.S. Government team on the ground. The USAID 
Mission Director reports, in part to the Ambassador, and in 
part back here to USAID, but is the principal professional 
development person on the Ambassador's team, and the 
integration of what the U.S. Government is doing on the ground, 
you know, begins there.
    But in the planning process, and the coordination process, 
and the technical expertise and so forth that takes place in 
Washington, it's been more fragmented than it needs to be. But 
I don't think the solution would be to totally merge the two 
organizations.
    Senator Gregg. Thank you.

                STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. Thank you very much, Mr. Chairman, and I 
would say to you and ranking member Gregg that even though I 
spend a very large part of my time working on military defense 
matters and intelligence matters, I believe this committee is 
extremely important because the old saw that in a battle 
against ideology, it's 20 percent kinetic and 80 percent 
economic development, ideological, and this committee, I 
believe, has a much more important role than we have been able 
to recognize in the budget to achieve our goal through 
diplomacy and economic development. So I think this is 
extremely important, and I am very much concerned about some of 
the things that are going on, Mr. Ambassador. Excuse me. You 
wanted to say?
    Senator Leahy. I was just going to say I appreciate that. 
I, having served on the intelligence committee here, was the 
vice chairman of it, and you see a global view that the rest of 
us do not see, and I appreciate that very much.

                 AGRICULTURE DEVELOPMENT IN AFGHANISTAN

    Senator Bond. Well, thank you. I think our members of the 
intelligence committee would agree. But Mr. Ambassador, I have 
some real concerns about some of the specifics I've learned.
    A little over a year ago I was in Afghanistan. This year, 
Senators Mikulski, Hutchison, Brownback, Cornyn, and I are 
again requesting $20 million be made out of USAID's 2008 
foreign operations bill for the establishment of a U.S. land 
grant consortium to be led by Texas A&M to implement widespread 
training activities, to assist farmers to comprehensive level 
not being achieved, to teach them how to use best techniques to 
grow pomegranates and other alternative crops and set up 
independent credit cooperatives.
    Last year USAID totally ignored the congressional intent 
when we put in $5 million and the money was dribbled out to 
individual initiatives--underway with individual colleges. The 
intent of that money was, and still is, to strengthen a 
nationwide agricultural extension system through programs 
planned and delivered by people who have been working over 100 
years to help farmers in the United States.
    I remain concerned about what appears to be a deeply 
entrenched relationship between Kimonics and USAID and Kabul 
and DC. It's making it very difficult if not impossible for 
other proven contractors and even other NGOs from getting 
funds.
    I've spoken with a number of people inside and outside of 
Afghanistan who are trying to do some good and are extremely 
frustrated when they run into the monopoly between USAID, 
Kimonics, and other large USAID contractors. Some of those 
people, I will tell you, include our military commander in 
Afghanistan, a top expert from USDA Department of Agriculture 
who was there, and President Hamin Karzaj who told me that he 
wanted to have this assistance.
    I understand over the last 4 years USAID have gone through 
some $600 million on agricultural development in Afghanistan 
and had shown darn little for it.
    Now, I know it's easier to shovel out a couple of hundred 
million dollars to a big contractor, but when it's not getting 
the job done, what I want to know is: Why will you not take the 
time and make the effort to utilize resources where we can get 
volunteers from extension services, men and women who have been 
trained for years to help farmers, why you are not willing to 
accept this idea for Afghanistan?
    Ambassador Tobias. Senator, I'm a big supporter of the 
contributions that the land grant universities make. I just 
came back from Lebanon a few weeks ago where I saw a program 
where dairy farmers who had been selling their products on the 
side of the road 2 or 3 years ago, are now competing in global 
markets because of a USAID project that created a cooperative, 
and the expertise that has come from land grant universities in 
this country to help them have the skills they need to provide 
high-quality products.
    I'll take a fresh look at what we're doing in Afghanistan 
and see who all is involved, and whether or not there's more we 
can do, because----

                     FINANCIAL SERVICES VOLUNTEERS

    Senator Bond. I want a response for the record. I know in--
I was in India about a year ago, and the President's 
agricultural knowledge initiative envisioned you using land 
grant colleges. What I want to know is why the hell we can't 
get you to follow congressional intent to start out on a small 
program in Afghanistan and save a whole bunch of money that 
nobody seems to know what good it has produced.
    I think this is--it's unbelievable that the amount of money 
that's been spent, and the apparent lack of any demonstrable 
progress. I think you can do a very good job if you'll work 
with volunteer organizations.
    By the way, that brings to mind, I had a visit recently 
from some of the outstanding leaders who had the Financial 
Services Volunteer Corp. These are experts in financial 
systems, banking from--some volunteers from our largest banks, 
from accounting institutions. They have worked in countries 
to--they developed the currency for Afghanistan. They were 
working in Indonesia to help them develop a system for 
countering money laundering.
    They have--they bring on a volunteer basis, with just 
support services needed, the expertise of our top financial 
professionals in the United States, the countries who need that 
help. They tell me that they are not getting funding anymore 
from USAID, and I would like to know why a dedicated group of 
professionals who are doing a highly sophisticated job for 
countries that need it, are being shut out. Do you know what 
the reason is?
    Ambassador Tobias. No, I don't, Senator, but I'll take a 
good look at that. I'm familiar with the organization, but----
    Senator Bond. I mean, they had John Whitehead, they've had 
other top professionals, and I'm just dumbfounded that you 
wouldn't be looking, looking for pools of volunteers that could 
help like that. Thank you, Mr. Ambassador. Thank you, Mr. 
Chairman.

                     FOREIGN ASSISTANCE BUDGET CUTS

    Senator Leahy. Thank you very much. I have some of these 
same concerns about grants going just to a small handful of 
contractors, big contractors who also have lobbyists here in 
Washington, and then it closes out others who often have very 
innovative and very good ideas.
    Now, the changes you've made to the budget process may be 
more coherent and transparent, but I'm mystified by some of the 
results. Take a country like Colombia that has received roughly 
a half a billion dollars, $565 million, in each of the past 5 
years. They get the same amount this coming year, although we 
know a number of things that have not worked. We know 
conditions in Colombia have changed.
    We know that the idea of stopping cocaine from coming into 
America has been basically a failure. The price of cocaine and 
availability is the same today as it was before we took 
billions of dollars out of programs that might've stopped 
people from using cocaine, put it into Colombia to stop it from 
coming in here.
    In Nepal, a country where years of fighting has cost 
thousands of lives, there's a chance to end the Maoist 
insurgency and bring democracy to replace a feudalist system, 
but you propose to cut our assistance.
    Democratic Republic of the Congo, a huge country. I can't 
think of many places that have more problems, but they had 
their first election in 40 years. It holds the key, I think, in 
many ways to the future of all of central Africa, and is very 
important to us. You want to cut our assistance.
    Certainly other countries, like China and others, seem to 
be ahead of us in realizing its importance but you propose to 
cut our assistance there.
    Vietnam, a country of 80 million people that is trying to 
build closer ties with the United States and the President 
actually went there last fall. With the exception of HIV and 
AIDS, you're going to cut our assistance there.
    Congress has tried to increase funding for global 
environment programs which have bipartisan support, 
particularly biodiversity in the Amazon. Central Africa where 
forests are being destroyed at breakneck speed. I mean, in 5 
year's time what may have taken 400 or 500 years before, you're 
slashing funding for those programs.
    Last year you said our intent is not to have a USAID budget 
or State Department budget, but a foreign assistance budget 
that would make all of it more coherent in a way that all of us 
could better understand.
    I'm all for that, but what good is coherence if it produces 
illogical outcomes? I mean, what do people say in the field? It 
certainly doesn't reflect what a lot in Congress and both 
parties have been saying. What is the thinking behind these 
outcomes?
    Ambassador Tobias. Senator, you are making very eloquently 
the point that I would hope to make this morning, and that is 
that I'm very, very hopeful that this year the Congress will 
not cut the administration's fiscal year 2008 request for 
foreign assistance, because we need every penny.
    If I take the $20.3----
    Senator Leahy. If I might, and I apologize for 
interrupting, but you know, we need every penny, but I want to 
know where it's spent.
    I've had times up here when we've had grandiose proposals 
for budgets in various administrations knowing that there's no 
money for the things that many people feel we should have and 
somehow we have to find the money. At Millennium Challenge 
there's huge amounts of money in the pipeline. I think you have 
to admit that started off with a very, very slow start.
    Ambassador Tobias. Well, if I take the $20.3 billion in the 
request for foreign assistance, and if I back out of that the 
Global AIDS Initiative, and if I back out of that the 
approximate $1.8 billion in funding request for those 
contingency accounts that will be allocated as we go through 
the year, like emergency food aid, and refugee assistance, and 
that kind of thing, and then if I take the 31 largest country 
programs, which I think tend to be less controversial, and 
represent those programs at $50 million or higher, I'm left, 
out of that $20.3 billion, with $3.6 billion to spread over the 
124 remaining country programs.
    So we have made some very, very difficult decisions in 
allocating this budget. We have tried to do it in a far more 
transparent way than it has ever been done historically, with a 
level of detail that neither the Congress, nor the 
administration has had access to in the past, so that as we 
continue our dialog we can determine why the decisions were 
made in putting this budget together, and understand where we 
did not get it right. What are the things that we may need to 
think about in different ways?
    But this has been a very conscious good-faith effort to try 
to be sure that each country's program is driven by what people 
on the ground in that country and here in Washington believe, 
given the resources available, can make the most difference in 
moving that country on a path toward independence.
    Senator Leahy. Well, what are the five countries that get 
the most money?
    Ambassador Tobias. Let's see. They are Israel, Egypt, 
Afghanistan, Pakistan, and Sudan.
    Senator Leahy. Sudan gets more money than Iraq? Or are we 
talking about----
    Ambassador Tobias. Israel, Egypt, Afghanistan, Pakistan, 
Sudan, South Africa, Colombia, Kenya, Nigeria, Jordan, 
Ethiopia, and Iraq. I'm talking there about the 2008 budget 
request.
    Senator Leahy. Well, maybe we have different ways to count 
how much goes into Iraq. I noticed recently the President cut 
funds for the cops program but we're adding increased money for 
police forces in Iraq. I heard in the paper today that we've 
trained them so well they went in and killed 40 people as 
revenge killings, the police did, today in Iraq.
    Anyway, my time's up. Let me yield to Senator Gregg. We're 
all trying to do the same thing. I'm just worried that we spend 
an awful lot of money in places where we aren't getting much 
out of it, and there's been too little in places where we have 
a great potential.
    Ambassador Tobias. Well, Senator, I share that concern and 
that's why we are trying, on the one hand, to make the most 
conscientious effort we can to be sure that we are spending the 
money in the most appropriate, effective way we can, and to lay 
out the data as transparently as possible so that we will all 
know how those decisions are made, and I think it will be 
easier for us to collaborate going forward as to what we ought 
to be doing.

                     ASSISTANCE FOR THE MIDDLE EAST

    Senator Gregg. Can you read those five countries again? 
Egypt, Israel--the five countries that have the highest? Egypt, 
Israel----
    Ambassador Tobias. Israel, Egypt, Afghanistan, Pakistan, 
and Sudan.
    Senator Gregg. How much money have we given to Egypt over 
the last 20 years?
    Ambassador Tobias. The 2008 request is $1.720 billion.
    Senator Gregg. What's the total we've given to Egypt and 
Israel in the last 20 years?
    Ambassador Tobias. U.S. assistance to Egypt and Israel has 
been governed by similar ``glidepath'' agreements since 1998. 
The agreement between the U.S. Government and the Government of 
Egypt established steady Foreign Military Finance (FMF) 
assistance at roughly $1.3 billion per year. In contrast, 
Economic Support Fund (ESF) assistance has declined $40 million 
per year from a starting level of $815 million in 1998.
    In the 10 years prior to the signing of the glidepath 
agreement (1988-1998), the United States obligated 
approximately $24 billion of economic and military assistance 
to Egypt. We have provided approximately $19 billion to Egypt 
since the signing of the glidepath agreement in 1998. This 
total includes fiscal year 1999 levels through the fiscal year 
2008 request, if fully funded. The share of Peace and Security 
assistance as a share of total assistance has increased from 
approximately 61 percent in 1998 to 73 percent in 2007. Peace 
and Security assistance funds primarily Egyptian purchase of 
U.S. military equipment to shift Egyptian orientation to the 
United States and to increase our interoperability.
    The agreement expires in 2008, and we are currently working 
with both Israel and Egypt on what the future may hold with 
regard to foreign assistance levels.
    Senator Gregg. So there's a lot of money going to the same 
places over and over again.
    Ambassador Tobias. That's right.

                    MILLENNIUM CHALLENGE CORPORATION

    Senator Gregg. But there's not a lot of money to places 
where we might have an opportunity to do some significant 
activities, such as we talked about earlier, the Former Soviet 
Republics. How much money is in the Millennium Challenge right 
now?
    Ambassador Tobias. I'm sorry?
    Senator Gregg. How much money is in the Millennium 
Challenge right now?
    Ambassador Tobias. I think their request, which is separate 
from the $20.3 billion, I believe their request in the budget 
is $3 billion in the 2008 budget.
    Senator Gregg. Do you know how much is unspent?
    Ambassador Tobias. No, I don't. I don't.
    Senator Gregg. How many countries qualify for the money in 
Millennium Challenge?
    Ambassador Tobias. I don't know. I don't think I have that 
data.
    Senator Gregg. I mean, do you expect any more countries to 
come on line and qualify for the Millennium Challenge in the 
near future?
    Ambassador Tobias. Well, there are a number of countries 
that are working hard to meet the MCC requirements. There are 
several countries who are in a so-call threshold status where 
we are funding threshold programs to work with them to get them 
to the point where they will meet the criteria, and yes, I 
would expect there will be more countries coming on board.
    Senator Gregg. You don't know who's in line, though, do 
you?
    Ambassador Tobias. No, I don't.
    Senator Gregg. I notice you've got Laos listed as something 
above the lowest category of nations where it seems to me it's 
a pretty repressive nation. Shouldn't it be lumped in there 
with Cuba and North Korea and----
    Ambassador Tobias. Well, these designations are determined 
by a lot of indicators that come from various organizations 
like Freedom House, and the World Bank, and so forth, and they 
fall where they fall.
    Senator Gregg. The State Department doesn't have any role 
in making those designations?
    Ambassador Tobias. Well, we have used a set of indicators, 
but the purpose of that categorization is to try to give us a 
sense of the kinds of development interventions that we likely 
need to be using in each of these categories of countries. 
Obviously in countries like that, we would expect that more of 
our effort would be focused on democracy programs.
    Senator Gregg. Well, I wish you'd go back and explain to us 
why Laos and Sudan are not in the restrictive category. I just 
don't see how either of those elements could possibly not be in 
the restrictive category. The import/export bank, what's the 
status in that?
    Ambassador Tobias. Senator, that's beyond my area of focus 
and expertise. I'll be happy to pursue anything that you'd like 
for me to, but I'll have to do that for the record.

                              AFGHANISTAN

    Senator Gregg. Okay. We've now spent how much money in 
Afghanistan?
    Ambassador Tobias. Since 2001 through fiscal year 2006, the 
U.S. Government has provided over $14.2 billion in foreign 
assistance to Afghanistan. Of this amount nearly $9 billion has 
gone for security assistance and $5.2 billion for 
reconstruction, humanitarian and governance assistance.
    Senator Gregg. Well, what are we spending the money on? 
Let's try it this way. How are we spending the money in 
Afghanistan?
    Ambassador Tobias. A lot of the money is going into 
building infrastructure that will help the economy. There's 
been a lot of money going into roads, a lot of money going into 
electricity, money going into programs to provide and enhance 
the capacity and capability of the government ministries.
    I have visited programs in Afghanistan out in the rural 
areas where we're teaching farmers, who have been former poppy 
growers, the skills to grow alternative crops. We have programs 
where farmers who have been poppy growers are being taught to 
be electricians, or plumbers, or other skills that can give 
them a livelihood in other areas.
    Senator Gregg. Do we expect that you're going to change the 
forces of the marketplace in Afghanistan and cause people to 
stop growing poppies when it's the most lucrative crop?
    Ambassador Tobias. Well, that's probably one of the most 
difficult issues in Afghanistan, and there's a hard look being 
taken right now at the whole poppy issue to look at what we've 
been doing, what's worked, what has not worked, what lessons 
can we learn from other places in the world.
    I just visited a program in Peru a couple of weeks ago 
where villagers that are growing coca leaves, it's made very 
clear to them that their coca plants are going to be 
eradicated, but if they are willing to band together and sign a 
compact with the government that they're going to get out of 
the coca plant business, then we are working with them to 
address other issues that may improve the quality of life in 
those villages--building a school, building a health clinic, 
whatever kinds of things that the village may think is a 
priority, and----
    Senator Gregg. Is that in Afghanistan?
    Ambassador Tobias. That's in Peru, but the program's been 
very successful and we're not doing that in Afghanistan but 
we're looking at that as something to take to Afghanistan as an 
example.
    Senator Gregg. I'd be interested in knowing to what extent 
the poppy growing has been abated by the dollars we've spend in 
Afghanistan. Do we have any studies to that?
    Ambassador Tobias. The United Nations Office on Drugs and 
Crime published a report in February 2007: Afghanistan Opium 
Winter Rapid Assessment Survey. With increasing ties between 
narcotics traffickers and elements of insurgency in southern 
Afghanistan, poppy cultivation in the South has increased. In 
contrast, a mixture of political will and incentives and 
disincentives, such as eradication programs funded by the U.S. 
Government, contributed to a decline in opium cultivation in 
the Northern provinces. As a result, several Northern provinces 
with very low amounts of poppy are well on their way to 
becoming poppy free.
    Senator Gregg. What percentage of our dollars--we've spent 
somewhere in the vicinity of $3 billion in Afghanistan--what 
percentage of those dollars have been directed at poppy-growing 
suppression?
    Ambassador Tobias. Since 2001 through fiscal year 2006, the 
U.S. Government has provided over $14.2 billion in foreign 
assistance to Afghanistan. Approximately 9.5 percent has been 
provided for counter narcotics.
    There are other areas in Afghanistan where we can look at 
the things we've been doing and there's been significant 
progress. School enrollment in the Taliban time was about 
900,000 people, it's now about 5 million. When the Taliban was 
there, about 8 percent of the Afghan population had access to 
healthcare; it's now about 80 percent. It used to take 15 hours 
to get from Kabul to Kandahar; it now takes about 6 hours on 
the highway that's been built.
    The economy in Afghanistan has gone from about $2.5 billion 
to $.4 billion at the time the Taliban was there, to about $8.8 
billion now, so there are a number of areas where we're making 
progress, but the drug part of the equation has not been, and 
that's why we're all taking a very hard look now at what's 
failed, and what's worked, and how can we do better.
    Senator Leahy. Afghanistan is a difficult case. We've made 
colossal mistakes in the past and again, you know, if you're 
anti-communist, so we arm the Taliban with a lot of weapons 
that they're still using. We get them Stinger missiles to go 
after--or shoulder-fired missiles to go after the Russians. I 
don't know if those things deteriorate after a while, but a lot 
of them they never turn back in, obviously, and still have.
    You say some things have worked and some haven't. If you're 
in an area where the Taliban has control, I don't know of any 
program that works. We did build the highway and I think that's 
good news, but the fact of the matter is most of the economy 
you've talked about is in the Kabul area.
    Some have said that President Karzai is really president of 
Kabul, not of Afghanistan, and that there is lawlessness 
outside. I would like to see everybody go to school. I want to 
see both boys and girls go to school, and it is hard to find a 
country that is more oppressive toward women than Afghanistan 
under the Taliban, but I'm afraid that a lot of that power is 
still with the Taliban.

                                 EGYPT

    In your budget justification--and I was thinking of this as 
I read some of the press in the last few days--you say that the 
U.S. Government supports the enactment of the political reforms 
outlined by President Mubarek during the 2005 presidential 
campaign, namely replacement of the emergency law with a modern 
counter-terrorism law, revision of the modernization law 
governing the judiciary, revision of the media law to expand 
press freedom, revision of the penal code to narrow the power 
of authorities to hold people without charge, and parliamentary 
input on broader constitutional reform. Any one of those 
happen?
    Ambassador Tobias. Well, we've been working very hard with 
the Egyptian Government in a variety of ways.
    Senator Leahy. I've talked to President Mubarek a number of 
times.
    Ambassador Tobias. Oh. I'm sorry. I misunderstood what you 
said.
    Senator Leahy. Because I've talked to President Mubarek a 
number of times. Everybody, and they're most gracious people, 
friendliest, they'll always talk to you, but name anything 
that's happened. We pour a huge amount of money in there. Name 
anything that's happened. I mean, any reforms, whether of the 
judiciary, or press freedom, any reform of political parties, 
any reforms in arresting people without charge? I mean, there 
may have been, I just totally missed it.
    Ambassador Tobias. Well, there's been some recent reforms 
in the financial services industry, for example, where they've 
gone from monopoly, a government-owned bank, to a more 
competitive banking industry, and our people there are working 
very hard with reform-minded people inside and outside the 
government.
    Senator Leahy. What has that done for people's rights?
    Ambassador Tobias. I'm sorry?
    Senator Leahy. What has that done to improve anybody's 
rights?
    Ambassador Tobias. Well, I think as the economy has grown 
and as civil society has grown, that has certainly put people 
on a journey in the right direction, but there's much, much 
more to do.
    Senator Leahy. You said puts them on a journey. If you're 
the person being thrown in an Egyptian jail because you dared 
speak out against the government, you're not on a journey in 
the right direction.
    We haven't had the right to legal counsel strengthened, we 
haven't had the media law expanded for press freedom, we have 
not had revision of the modernization law governing the 
judiciary. I don't see where the emergency law has been 
replaced. I don't see that they have narrowed the power to hold 
people without charge. Tell me honestly. Do you feel there's 
forward progress in Egypt?
    Ambassador Tobias. I think there is in some areas, but I 
think there's a great deal more to do, and I think it's 
important to ensure that the money we're spending and that the 
programs that we have in place are tied to clear expectations 
about what we believe ought to happen in that partnership, and 
lots of people are working very hard on those issues.
    Senator Leahy. I know they're working very hard. We have a 
huge embassy there, we've got all kinds of people running 
around, and it's wonderful--it adds to the traffic jams in 
Cairo, and I know they're dedicated people, but I don't see 
where we're getting a heck of a lot for our dollar there.
    I understand there are political considerations in sending 
money there, but we don't have money for other things. Senator 
McConnell and I worked to expand programs to strengthen the 
rule of law in China. Your budget justification, the fiscal 
year 2006 level for these programs was $1.1 million. In fiscal 
year 2006 we provided $20 million in the human rights and 
democracy fund for China, Hong Kong, and Taiwan. Where did that 
money go? Certainly the administrative cost wasn't $19 million 
out of that $20 million. How come there's only $1.1 million in 
there?
    Ambassador Tobias. I don't know the details of that 
program, but----
    Senator Leahy. I'm sure you're going to want to get me an 
answer.
    Ambassador Tobias. Well, what my effort is really focused 
on is trying to go forward and ensure that you know and we know 
exactly what we're proposing the money be used for, and that we 
have a very transparent way of measuring that, and that we're 
doing the best job we can focusing it.

                                  IRAN

    Senator Leahy. If the transparency is there, somebody let 
me know where the money went. I mean, when we went from $20 
million to $1 million, just what's happened. You propose $75 
million for Iran to support human rights defenders, labor 
activists, women, student, religious, ethic, minorities, rule 
of law and justice programs. Heck, I'd love to see money for 
all those things, but in Iraq if you accept money from the 
United State you become a target. Won't the same thing happen 
to Iran?
    Ambassador Tobias. Well, I think there are probably a lot 
of brave people who are willing to engage and take that risk. 
Some of that money is in----
    Senator Leahy. Take money from the United States?
    Ambassador Tobias. I'm sorry?
    Senator Leahy. Willing to take money from, as they call it, 
the Great Satan?
    Ambassador Tobias. Well, some of the money in that program 
is intended to develop a new independent media in order to 
reach the people of Iran with messages, and news, and 
information that's----
    Senator Leahy. Inside Iran?
    Ambassador Tobias. Probably not.
    Senator Leahy. I'm all for getting more media in there, and 
I understand--I've not been to Iran--but I understand from 
people I know and respect who've been to Iran that there's a 
great deal of interest in the United States. I have other 
questions for the record.
    Some of these questions Senator Gregg and I and Senator 
Bond ask, we're not trying to play ``gotcha,'' we're just very 
concerned where the money goes. I understand some of the 
political considerations; every administration's had political 
considerations. But it's one thing to speak of lofty goals; 
it's another to affect the people on the ground. I'd like to 
see more competition among those who seek these kind of grants.
    Ambassador Tobias. One of the considerations that I have 
put into the country Operational Plan Process is that any 
country where the U.S. Government program is spending more than 
15 percent of its resources with a single source, I want to see 
it put on the table and justified as to why we're doing that.
    Now as you said, in some cases where people are shorthanded 
and operating expenses have been cut, it's easier to administer 
1 big contract rather than 10 small contracts. We, the Congress 
and the administration together, need to address that, and be 
sure that people have the tools to be able to operate with a 
lot more and newer participants and I'm trying pretty hard to 
do that.
    Senator Leahy. Especially among those 10 separate 
contracts, there may be three or four that are really going to 
hit the mark and would be a model for elsewhere.
    Ambassador Tobias. Yes.
    Senator Leahy. Okay. Well, thank you. I will place the rest 
in the record. I thank you for being here. You have one of the 
most difficult jobs in Government and I don't envy you that at 
all. Thank you.
    Ambassador Tobias. Thank you, Senator.

                          SUBCOMMITTEE RECESS

    Senator Leahy. Thank you all very much. The subcommittee 
will stand in recess to reconvene at 10:30 a.m. on Wednesday, 
April 18, in room SD-138. At that time we will hear testimony 
from Dr. Kent R. Hill, Assistant Administrator, United States 
Agency for International Development.
    [Whereupon, at 11 a.m., Thursday, March 28, the 
subcommittee was recessed, to reconvene at 10:30 a.m., 
Wednesday, April 18.]
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