[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS APPROPRIATIONS FOR 2011

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED ELEVENTH CONGRESS
                             SECOND SESSION
                                ________
     SUBCOMMITTEE ON STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS
                   NITA M. LOWEY, New York, Chairwoman
 JESSE L. JACKSON, Jr., Illinois
 ADAM SCHIFF, California
 STEVE ISRAEL, New York
 BEN CHANDLER, Kentucky
 STEVEN R. ROTHMAN, New Jersey
 BARBARA LEE, California
 JAMES P. MORAN, Virginia           KAY GRANGER, Texas
                                    MARK STEVEN KIRK, Illinois
                                    ANDER CRENSHAW, Florida
                                    DENNIS R. REHBERG, Montana

 NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full 
Committee, and Mr. Lewis, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
   Nisha Desai Biswal, Craig Higgins, Steve Marchese, Michele Sumilas,
                   Michael Marek, and Clelia Alvarado,
                            Staff Assistants

                                ________

                                 PART 6
                                                                   Page
 United States Department of State................................    1
 U.S. Agency for International Development........................   97
 Department of Treasury International Development.................  273
 Peace Corps......................................................  381
 Millennium Challenge Corporation.................................  427
 Global Health and HIV/AIDS.......................................  489
 Security Assistance..............................................  579
 Oversight of Civilian Assistance for Afghanistan.................  655
 U.S. Civilian Assistance for Afghanistan.........................  783

                                ________

         Printed for the use of the Committee on Appropriations
PART 6--STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS APPROPRIATIONS 
                                FOR 2011
STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS APPROPRIATIONS FOR 2011

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED ELEVENTH CONGRESS
                             SECOND SESSION
                                ________
     SUBCOMMITTEE ON STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS
                   NITA M. LOWEY, New York, Chairwoman
 JESSE L. JACKSON, Jr., Illinois
 ADAM SCHIFF, California
 STEVE ISRAEL, New York
 BEN CHANDLER, Kentucky
 STEVEN R. ROTHMAN, New Jersey
 BARBARA LEE, California
 JAMES P. MORAN, Virginia           KAY GRANGER, Texas
                                    MARK STEVEN KIRK, Illinois
                                    ANDER CRENSHAW, Florida
                                    DENNIS R. REHBERG, Montana

 NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full 
Committee, and Mr. Lewis, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
   Nisha Desai Biswal, Craig Higgins, Steve Marchese, Michele Sumilas,
                   Michael Marek, and Clelia Alvarado,
                            Staff Assistants

                                ________

                                 PART 6
                                                                   Page
 United States Department of State................................    1
 U.S. Agency for International Development........................   97
 Department of Treasury International Development.................  273
 Peace Corps......................................................  381
 Millennium Challenge Corporation.................................  427
 Global Health and HIV/AIDS.......................................  489
 Security Assistance..............................................  579
 Oversight of Civilian Assistance for Afghanistan.................  655
 U.S. Civilian Assistance for Afghanistan.........................  783

                                ________

         Printed for the use of the Committee on Appropriations
                                ________
                     U.S. GOVERNMENT PRINTING OFFICE
 66-402                     WASHINGTON : 2011

                                  COMMITTEE ON APPROPRIATIONS

                   DAVID R. OBEY, Wisconsin, Chairman

 NORMAN D. DICKS, Washington
 ALAN B. MOLLOHAN, West Virginia
 MARCY KAPTUR, Ohio
 PETER J. VISCLOSKY, Indiana
 NITA M. LOWEY, New York
 JOSE E. SERRANO, New York
 ROSA L. DeLAURO, Connecticut
 JAMES P. MORAN, Virginia
 JOHN W. OLVER, Massachusetts
 ED PASTOR, Arizona
 DAVID E. PRICE, North Carolina
 CHET EDWARDS, Texas
 PATRICK J. KENNEDY, Rhode Island
 MAURICE D. HINCHEY, New York
 LUCILLE ROYBAL-ALLARD, California
 SAM FARR, California
 JESSE L. JACKSON, Jr., Illinois
 CAROLYN C. KILPATRICK, Michigan
 ALLEN BOYD, Florida
 CHAKA FATTAH, Pennsylvania
 STEVEN R. ROTHMAN, New Jersey
 SANFORD D. BISHOP, Jr., Georgia
 MARION BERRY, Arkansas
 BARBARA LEE, California
 ADAM SCHIFF, California
 MICHAEL HONDA, California
 BETTY McCOLLUM, Minnesota
 STEVE ISRAEL, New York
 TIM RYAN, Ohio
 C.A. ``DUTCH'' RUPPERSBERGER, 
Maryland
 BEN CHANDLER, Kentucky
 DEBBIE WASSERMAN SCHULTZ, Florida
 CIRO RODRIGUEZ, Texas
 LINCOLN DAVIS, Tennessee
 JOHN T. SALAZAR, Colorado
 PATRICK J. MURPHY, Pennsylvania    JERRY LEWIS, California
                                    C. W. BILL YOUNG, Florida
                                    HAROLD ROGERS, Kentucky
                                    FRANK R. WOLF, Virginia
                                    JACK KINGSTON, Georgia
                                    RODNEY P. FRELINGHUYSEN, New   
                                    Jersey
                                    TODD TIAHRT, Kansas
                                    ZACH WAMP, Tennessee
                                    TOM LATHAM, Iowa
                                    ROBERT B. ADERHOLT, Alabama
                                    JO ANN EMERSON, Missouri
                                    KAY GRANGER, Texas
                                    MICHAEL K. SIMPSON, Idaho
                                    JOHN ABNEY CULBERSON, Texas
                                    MARK STEVEN KIRK, Illinois
                                    ANDER CRENSHAW, Florida
                                    DENNIS R. REHBERG, Montana
                                    JOHN R. CARTER, Texas
                                    RODNEY ALEXANDER, Louisiana
                                    KEN CALVERT, California
                                    JO BONNER, Alabama
                                    STEVEN C. LaTOURETTE, Ohio
                                    TOM COLE, Oklahoma

                 Beverly Pheto, Clerk and Staff Director

                                  (ii)

 
STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS APPROPRIATIONS FOR 2011

                              ----------                              

                                       Thursday, February 25, 2010.

        FISCAL YEAR 2011 BUDGET REQUEST FOR THE STATE DEPARTMENT

                                WITNESS

 HON. HILLARY RODHAM CLINTON, SECRETARY OF STATE

                 Opening Statement of Chairwoman Lowey

    Mrs. Lowey. The Subcommittee on State, Foreign Operations, 
and Related Programs will come to order.
    The Subcommittee on State, Foreign Operations, and Related 
Programs is delighted to welcome to our subcommittee Secretary 
Clinton.
    As always, it is an honor to have you with us. Your 
dedicated service and tireless efforts have taken you to over 
47--it is hard to believe--47 countries in just 1 year. Your 
hard work as our Nation's chief diplomat is respected and 
appreciated and has had an enormous impact. After many years of 
decline, global attitudes about the United States are on the 
rise. According to the most recent Pew Research Center Survey, 
``The image of the United States has improved markedly in most 
parts of the world. In many countries opinions of the United 
States are about as positive as they were at the beginning of 
the decade.''
    Our challenges are many, and your effective representation 
of the United States facilitates stronger multilateral 
partnerships to address global threats like instability in 
Afghanistan, Pakistan, Yemen, as well as Iran's nuclear 
ambitions.
    Along with defense, diplomacy and development are essential 
elements of our national security strategy. With this budget 
request, the administration seeks diplomacy and development 
funding levels that will result in longer-term savings as we 
transition from the military to civilians in Iraq and work to 
prevent instability by addressing the root causes of conflict. 
But as we strive to foster greater stability and security 
overseas through ``smart power,'' we face pressing domestic 
needs. While there are signs of recovery in the economy, with 
10 percent unemployment, the mounting Federal debt and budget 
deficit, the creation of jobs and economic security for 
American families must be the primary focus of this Congress.
    There is no doubt that this will make it difficult to 
sustain and expand all the priorities laid out in the 
President's budget request; however, I am optimistic that we 
can balance our domestic and international priorities.
    If we are to increase our assistance in this time of 
economic security at home, we must ensure that every dollar is 
well spent. And frankly, I am troubled by recent, SIGAR, SIGIR, 
OIG reports on democracy assistance and police training in 
Iraq, large power projects in Afghanistan, and development 
programs in FATA. The 2011 budget and 2010 supplemental 
requests for significant increases in Afghanistan, Pakistan and 
Iraq require accountability to the U.S. taxpayer. Despite the 
difficult operating environments, to gain the trust and funding 
from this Congress, recommendations of the inspector generals 
should be implemented expeditiously.
    Madam Secretary, in this context we turn to the President's 
fiscal year 2011 budget request for the programs and activities 
within the jurisdiction of the State, Foreign Operations, and 
Related Programs Subcommittee. At a total of $56.6 billion, it 
is $5.4 billion, or 11 percent, above the comparable fiscal 
year 2010 level, with over two-thirds of the increase for 
diplomacy and development in the frontline States of 
Afghanistan, Pakistan and Iraq. The balance of the increase 
continues the rebuilding of civilian staff at the Department of 
State and USAID, and prioritizes three key issues: global 
health, climate change, and food security.
    I am particularly pleased the budget rebalances the roles 
between the Department of Defense and the Department of State. 
The request of $1.2 billion for the Pakistan Counterinsurgency 
Capability Fund, coupled with the doubling of funding for the 
Complex Crises Fund, in lieu of funding for DOD's section 1207, 
should ensure the State Department's effective evaluation and 
implementation of these programs in the context of our overall 
foreign policy.
    Increases for critical development, global climate change, 
food security and global health are clearly aimed at creating 
the necessary conditions in developing countries for the growth 
of democracy, economic expansion and ultimately increased 
stability, priorities we all share.
    I applaud your emphasis on global health, which hasproven 
to be one of our most effective interventions. While nearly 2.8 million 
people became infected with HIV/AIDS in 2008, this figure reflects a 20 
percent decline in new infections compared to 2000, which is quite an 
accomplishment. Clearly our efforts are making a difference. 
Accountability and results in PEPFAR programs are also reflected in the 
administration's Global Health Initiative. Coordinating with USAID's 
global health programs, they will complement one another as well as the 
investments made by other country donors and the private sector like 
the Gates Foundation; Clinton Global Initiative; Global Fund to Fight 
AIDS, Tuberculosis and Malaria, and many more. And working together, 
which is an issue that we have been talking about for a long time, 
provides efficiency and effectiveness.
    Unfortunately, the budget did not prioritize basic 
education, an issue that we have both championed for many 
years. Education is the essential foundation for health, 
economic development, gender equality and long-term security. I 
am concerned that the requested cuts of nearly $100 million for 
this critical priority could compromise our development goals. 
This subcommittee will examine this proposal very closely. I 
hope you will work with us to restore funding to this program.
    In addition, in your remarks I hope you will address 
questions regarding the administration's strategy for stopping 
Iran's quest for nuclear weapons, the justification for 
supplemental funding in light of previous assurances that 
regular appropriations would address recurrent needs, Yemen's 
ability to be a consistent partner in our fight against al 
Qaeda, and the status of the Middle East peace negotiations, 
among, I am sure, many other issues.
    Finally, I want to thank the State Department for your 
extraordinary efforts to coordinate the response in Haiti. All 
of us are following the humanitarian response closely and are 
moved by the spirit and resilience of the Haitian people. And 
frankly, I was extraordinarily moved, and I continue to be 
extraordinarily moved and proud to be an American, to see our 
presence there. We look forward to working with you to ensure 
that adequate resources are provided for this humanitarian 
response. Reconstruction activities must be preceded by careful 
planning, oversight and guarantees that the money will be well 
spent.
    So thank you again, Madam Secretary, for your service.
    I would now like to turn to my esteemed Ranking Member Kay 
Granger.

                     Opening Remarks of Ms. Granger

    Ms. Granger. Thank you, Madam Chair. I want to thank 
Secretary Clinton for appearing before the subcommittee today 
to explain the Administration's budget priorities for the State 
Department and foreign assistance programs. Madam Secretary, 
let me first say that I strongly support the objectives you 
seek to achieve with the fiscal year 2011 budget request and 
the fiscal year 2010 supplemental. However, even though the 
subcommittee has only begun to receive the details of this 
budget request, the top-line numbers are startling in their 
size. No matter how you frame the budget proposal, there is a 
double-digit increase for international affairs. Given the 
daunting fiscal situation this country is facing, I would not 
be of service to my constituents or my own conscience if I 
didn't pledge to examine the increase carefully and with some 
skepticism.
    I do recognize that the entire supplemental request and a 
large portion of the fiscal year budget request supports the 
frontline States of Iraq, Afghanistan and Pakistan, as Madam 
Chair discussed. But it was only last year that the 
Administration made a pledge to move away from supplemental 
appropriations. The subcommittee will take a close look at 
whether all of the $4.5 billion requested in the supplemental 
is, in fact, an emergency requirement when billions of dollars 
provided for these countries remain unobligated or unspent. 
There is no doubt, though, that the work being done in these 
countries is critical to achieving our national security and 
foreign policy objectives.
    I want to thank the men and women of this country in 
various Federal agencies for serving in the most difficult of 
circumstances overseas. They need our bipartisan support to 
achieve success.
    The budget request also includes a transition of some 
activities in these frontline states from the Department of 
Defense to the Department of State. I applaud the 
Administration for looking across the government to determine 
which agency is the appropriate lead, especially when our 
troops are already being asked to take on so much as we 
continue to fight two wars. But it is equally important to be 
sure that the State Department is ready to take on all of these 
responsibilities. These functions are much too critical to be 
delayed or to be done ineffectively.
    The Administration's budget request also includes billions 
of dollars in new resources for climate change, food security 
and global health. I worry that these significant multiyear 
commitments don't take into account the fiscal realities this 
country and this Congress face. I want to hear more about the 
promises made by the executive branch. I pledge to work with my 
colleagues to extract details aboutthese commitments, place 
oversight requirements on the funding provided, and keep a close eye on 
taxpayer dollars as programs are implemented.
    Madam Secretary, you have an enormous task in front of you. 
We all recognize that. We cannot let our efforts in Iraq, 
Afghanistan or Pakistan fail. We can't let other countries 
become breeding grounds for extremism. We can't let Iran's 
nuclear ambitions go unchecked, and we can't walk away from the 
fight against drug trafficking in this hemisphere. I know that 
you know that.
    In closing, I understand that balancing these and many 
other competing priorities around the world is not easy. I 
support your goal of having the right people in the right 
places so that the United States can overcome these challenges. 
I assure you I will work to give you the resources you need. 
However, there are many needs in this country as well, and this 
committee has the responsibility to ensure that our tax dollars 
are used efficiently and in a transparent method. My colleagues 
and I take that responsibility very seriously. We look forward 
to working with you so that we can better understand the full 
details of the budget request before us.
    Thank you, Madam Chair.
    Mrs. Lowey. Thank you.
    Madam Secretary. Please proceed with your statement.

                 Opening Statement of Secretary Clinton

    Secretary Clinton. Well, thank you very much. Thank you, 
Chairwoman Lowey, Ranking Member Granger, members of the 
subcommittee, Chairman of the full committee Obey. It is a 
pleasure to be here with you today. When I was last here to 
discuss our budget, I emphasized my commitment to elevating 
diplomacy and development as core pillars of American power. 
Since then, I have been heartened by the bipartisan support of 
this committee and the rest of the Congress. So let me take a 
minute to thank you on behalf of the men and women of the State 
Department and USAID who work every day around the world to put 
our foreign policy into action.
    The budget we are presenting today is designed to protect 
America and Americans and to advance our interests. Our fiscal 
year 2011 request for the State Department and USAID totals 
$52.8 billion. That is a $4.9 billion increase over 2010. Of 
that increase, $3.6 billion will go to supporting efforts in 
frontline states, Afghanistan, Pakistan and Iraq. Other funding 
will grow by $1.3 billion, or a 2.7 percent increase, that will 
help us address global challenges, strengthen essential 
partnerships, and ensure that the State Department and USAID 
are equipped with the right people and resources to meet the 
challenges of our time.
    Over the past 6 weeks in Haiti, we have been reminded yet 
again of the importance of American leadership. I am very proud 
of what our country has done, and we continue to work with our 
Haitian and international partners to address ongoing suffering 
and to help them move from relief to recovery.
    Yet I also know this is a time of great economic strain for 
so many Americans. As a former Member of Congress, I know what 
this means for the people you represent. For every dollar we 
spend, we have to show results. That is why this budget must 
support programs vital to our national security, our national 
interests, and our leadership in the world, while guarding 
against waste, duplication and irrelevancy. And I believe it 
achieves those objectives.
    Now, these figures in the budget are more than just numbers 
on a page. They tell the story of the challenges we face and 
the resources we request to overcome them. We are fighting two 
wars that call on the skill and sacrifice of our civilians as 
well as our troops. We have embarked on a dual-track approach 
to Iran that has led to a growing consensus and a new unity 
with our international partners. Because of our efforts and 
engagement under the President's leadership, we are now coming 
together with other countries to meet Iran's continuing refusal 
to live up to its obligations with a unified and effective 
response.
    We are fighting two wars that call on the skill and 
sacrifice of our civilians as well as our troops, and we 
believe strongly that what we are doing is essential to 
achieving our objectives. Specifically, as you mentioned it 
with Iran, we believe that the President's offer of engagement 
combined with the dual-track approach has left the 
international community with little choice but to impose 
greater costs for its provocative steps.
    With China, we are seeking areas of common purpose, while 
standing firm where we differ. We are making concrete the 
promise of a new beginning with the Muslim world. We are 
strengthening partnerships with allies in Europe and Asia, with 
our friends in the hemisphere, and with countries from India to 
Indonesia, from South Africa to Brazil and Turkey, and we are 
working every day to end the impasse between Israelis and 
Palestinians.
    At the same time, we are developing a new architecture of 
cooperation to meet global challenges, like climate change and 
the use of our planet's oceans. In so many instances, our 
national interests and the common interests converge, and so we 
are promoting human rights, the rule of law, democracy and 
Internet freedom. We are fighting poverty, hunger, disease, and 
working to ensure that economic growth is broadly shared.
     Our agenda is ambitious because the times demand 
it.America is called to lead, and we have no alternative. We can bury 
our heads in the sand and pay the consequences later, or we can make 
hard-nosed, targeted investments now.
    Let me just highlight three areas where we are making 
significant new investments. First, the security of frontline 
States. In Afghanistan, we have tripled the number of civilians 
in 1 year on the ground, and this presence will grow by 
hundreds more with the $5 billion in this budget. Our diplomats 
and development experts are going into Marja with our troops 
there, embedded with our troops. They are, as we speak, working 
to help set up institutions of government, expand economic 
opportunities, particularly in agriculture, and provide 
meaningful alternatives for insurgents ready to renounce 
violence.
    In Pakistan, our request includes $3.2 billion to combat 
extremism, promote economic development, strengthen democratic 
institutions and build a long-term relationship with the 
Pakistani people. This includes funding of the Kerry-Lugar-
Berman initiative. Our request also includes a 59 percent 
increase in funding for Yemen to help counter the extremist 
threat brought to our shores by al Qaeda in the Arabian 
Peninsula, and to build institutions and economic opportunity 
as an alternative.
    In Iraq, we are winding down our military presence and 
establishing a more normal civilian mission. Our civilian 
efforts will not and cannot mirror the scale of our military 
presence, but rather provides assistance consistent with the 
priorities of the Iraqi Government. So, our request includes 
$2.6 billion to help support the democratic process and ensure 
a smooth transition from the Department of Defense to civilian-
led security training and operational support. These funds will 
allow civilians to take full responsibility, and at the same 
time, the defense budget for Iraq will be decreasing by about 
$16 billion. That is a powerful illustration of the return on 
civilian investment.
    We are blessed with the best military in the world, as we 
have seen time and time again in today's wars. But we need to 
give our civilian experts the resources to do the job expected 
of them. This budget takes a step in the right direction. It 
includes $100 million for a State Department Complex Crises 
Fund, replacing the 1207 fund through which the Defense 
Department directed money toward crisis response, and it 
includes support for the Pakistan Counterinsurgency Capability 
Fund, which previously also fell under the Defense Department.
    The second major area is investing in development, so this 
budget makes targeted investments in fragile societies, which, 
in our interconnected world, bear heavily on our own security 
and prosperity. These investments are a key part of our efforts 
to get ahead of crises instead of just responding to them all 
the time. I think it will help us be better positioned to deal 
with them and maybe prevent them, and I believe also can be 
less expensive.
    The first of these is in health. Building on our progress 
treating HIV, malaria and tuberculosis, our Global Health 
Initiative will invest $63 billion over 6 years, starting with 
$8.5 billion in fiscal year 2011 to help our partners address 
specific diseases and to build strong, sustainable health 
systems for themselves.
    The administration has also pledged to invest at least $3.5 
billion in food security over 3 years, and this year's request 
includes $1.6 billion of which $1.2 billion will be funded 
through the State Department. This funding will focus on 
countries that have developed effective, comprehensive 
strategies where agriculture is central to prosperity and 
hunger remains widespread.
    On climate change, our request for $646 million seeks to 
promote the United States as a leader in green technology and 
to leverage other countries' cooperation, including through the 
Copenhagen Accord, which for the first time brought together 
developed and developing countries. And this is part of the 
administration's total request of $1.4 billion to support core 
climate change activities in developing nations.
    Our request also includes $4.2 billion for humanitarian 
assistance programs. I think, again, our efforts in Haiti have 
made clear that State and USAID must be able to respond quickly 
and effectively to human tragedies. These initiatives are 
designed to enhance American security, help people in need, and 
give the American people a strong return on their investment. 
Our aim is not to create or perpetuate dependency; we are not 
going to be just aiming at giving fish to people forever. We 
want to teach them to fish and help them devise solutions that 
will be in their best interests over time. And essential to 
this is a focus on advancing equality and opportunity for women 
and girls, who are the key drivers of economic and social 
progress.
    That brings me to the final and third area of investment. 
None of what we propose can happen if we don't recruit, train 
and empower the right people for the job. State Department and 
USAID are full of talented and committed public servants, but 
too often they have been missing the tools needed to carry out 
their missions on the ground. And rather than building their 
expertise over time, we have too often relied on contractors, 
sometimes with very little oversight and often at a greater 
cost.
    This budget will allow us to expand the Foreign Service by 
over 600 positions, including an additional 410 for the State 
Department and 200 for USAID. It will also allow us to staff 
the stand-by element of the Civilian Reserve Corps, a crucial 
tool for responding to crises. Now, while deployingthese 
personnel does generate new expenses in some accounts, it will reduce 
expenses in others by changing the way we do business. We are ending an 
overreliance on contractors. We are saving money by bringing functions 
into government and improving oversight, and we take very seriously the 
IG lessons that we are applying.
    So I hope, Madam Chairwoman and Ranking Member, we can see 
from this budget that the United States State Department and 
USAID are taking the lead in helping to carry out foreign 
policy and national security. And as we finish the first-ever 
Quadrennial Diplomacy and Development Review, we will have a 
unique opportunity to define the capabilities we need and to 
match them with the resources and the priorities.
    I hope that we will continue to be able to work together in 
the year ahead. This is essential if we are going to enhance 
the security of Americans and assure the future of American 
leadership. I look forward to that, as I look forward now to 
taking your questions.
    Mrs. Lowey. Thank you, Madam Secretary.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402A.001
    
    [GRAPHIC] [TIFF OMITTED] T6402A.002
    
    [GRAPHIC] [TIFF OMITTED] T6402A.003
    
    [GRAPHIC] [TIFF OMITTED] T6402A.004
    
                                  IRAN

    Mrs. Lowey. I will begin before I turn to my Ranking 
Member. I would like to ask two questions, one regarding Iran's 
nuclear ambitions. You stated in your testimony that we face 
urgent challenges in the Middle East. The leadership in Iran is 
dominated by hard-liners whose pursuit of nuclear weapons, 
support for terrorism through their Hamas and Hezbollah 
proxies, and assistance to armed groups in Iraq and Afghanistan 
continue to make Iran a threat to U.S. national security. The 
need for immediate action is compounded by Iran's notification 
to the IAEA that it will begin producing high-grade enriched 
uranium material clearly intended for military weapons, which 
will ignite or maybe is igniting a regional arms race.
    We are committed in the Congress to imposing tough 
sanctions, both bilateral and multilateral, to stop Iran in its 
tracks. We need assurances that the administration is doing all 
it can to put pressure on Iran and those countries who are not 
fully cooperating with the sanction efforts. So if you can 
address the immediate next steps and timelines for imposing 
additional sanctions.
    You stated recently that sanctions should target those who 
actually make the regime's decisions. How exactly would we 
target sanctions on the Revolutionary Guard and their front 
companies and the Iranian elite? What are you doing to prevent 
the U.N. Security Council from watering down any potential 
resolution and ensure that members, including Russia and China, 
fully support a tough and enforceable sanction regime? And if 
tough, binding sanctions cannot be passed in the Security 
Council, what steps will be taken with the Europeans and other 
willing countries to enforce crippling sanctions?
    Secretary Clinton. Thank you very much, Congresswoman.
    We believe that the broader the consensus on sanctions 
against Iran, the more isolation and pressure that the Iranian 
Government will feel. So it is therefore important that we do 
everything we can to get the world to speak with one voice 
about Iran's failures to live up to its responsibilities, about 
its refusal to engage seriously on its nuclear program, about 
the undisclosed facility revealed at Qom, about the rejection 
of the Tehran research reactor proposal.
    It is essential that we do everything we can to bring the 
rest of the world with us, and I would make three quick points 
about that. I believe that the President's policy of engagement 
has actually assisted our argument very significantly. The 
world has seen the United States willing to talk with Iran, and 
we have seen Iran unwilling to talk seriously with the United 
States or anyone else. The fact that under President Obama's 
leadership we were willing to do so has made much of the rest 
of the world much more responsive than they would have 
otherwise been.
    So, we are intensely pursuing diplomatic engagement around 
the issue and the content of sanctions. The State Department 
has worked closely with the Treasury Department in devising 
sanctions on individuals, on institutions, in areas of the 
economy, on a range of potential targets that we are now 
working to translate into a Security Council resolution.
    I actually believe that we have had very productive 
conversations. I personally have engaged in many different 
settings over the last month; in London when I was there for 
the Afghanistan conference, in the Gulf where I just was, and 
then next week in Latin America.
    But I want to underscore that our efforts in the United 
Nations does not preclude us from taking additional national 
measures or working with other countries to take additional 
multilateral measures. We very well could supplement any 
resolution that we get in New York, and I think that what the 
Congress has done, we support the purpose and principle of the 
legislation passed in both Houses. We are working to make sure 
that we have the strongest possible approach about how we can 
effectively impact Iran, and we are hoping that we will see 
some positive results coming in the weeks ahead.
    Mrs. Lowey. Thank you, Madam Secretary.
    Ms. Granger.
    Ms. Granger. Thank you.
    We have all been concerned about the growing threat of 
extremism in places like Yemen. Certainly the Christmas Day 
failed terrorism plot brought that to everyone's attention. 
Funding was provided by this subcommittee to allow the State 
Department to significantly increase economic and military aid 
to Yemen by 60 percent in 2010. That doesn't count the DOD 
plans to provide counterterrorism or security assistance.
    I have several questions. First, when does the 
Administration plan to consult with the subcommittee on its 
plans for fiscal year 2011? And can you provide a preview for 
what types of activities you intend to support with the 
estimated $67 million available? What additional focus does the 
Administration foresee for the $106 million requested for 
fiscal year 2011?

                                 YEMEN

    Secretary Clinton. Congresswoman, we are working very hard 
to facilitate economic opportunity in Yemen that is combined 
with our counterterrorism efforts, so that we really are 
approaching Yemen in a more comprehensive way. It is clear that 
the growth of Al Qaeda in the Arabian Peninsula is a threat far 
beyond the borders of Yemen, reaching our own shores. So there 
has been an increase in military funding and training, 
intelligence support and other activities directly aimed at 
empowering the government to go after Al Qaeda. And in the last 
several months, we have seen evidence of the success of that. 
The Yemeni military has raided training camps, arrested and 
killed a number of terrorists.
    At the same time, our assessment of Yemen is that you have 
to strengthen the institutions of the country and the economic 
opportunities available to the people of the country. I 
recently represented the United States at a conference about 
Yemen in London. It was very well attended because we are by 
far--we are not the biggest contributor. Other countries in the 
gulf and Europe are also contributing to Yemen. But, we are 
working as a united effort from the international community 
aimed at going after the terrorists, strengthening the military 
capacity of Yemen, and creating a development strategy in 
concert with the Yemeni Government.
    Ms. Granger. I was aware of the conference that you 
attended and my understanding is that the last conference that 
was held was in 2006, and there were $5 billion in pledges, but 
most of that had not been delivered. Is my information correct?
    Secretary Clinton. It is correct. And the reason is, I 
think, clear that people did not believe that the Government of 
Yemen was ready to receive either the money or the message that 
came with the money. But the situation has evolved to an extent 
where we now believe that the Yemenis are prepared to be a 
better partner, but we are going to be working hard to hold 
them accountable.
    I have discussed this at length with a lot of the other 
countries that are investing in Yemen's economic development. I 
can't sit here today and tell you that we know what the outcome 
is going to be, because we have to do several things 
simultaneously. But one indication of the seriousness of Yemen 
today vis-a-vis perhaps 4 or 5 years ago is they came equipped 
with a national development plan which included a very candid 
assessment of their own problems, and that was the first 
anybody had seen of that. So we are hoping to build on what 
seems to be a new resolve from Yemen.
    Ms. Granger. Thank you, Madam Secretary and Madam Chair. I 
would hope you would keep us informed as to our plans and how 
our money will be used in Yemen. Thank you very much.
    Secretary Clinton. Yes, ma'am.
    Mrs. Lowey. Thank you. I will be calling on Members based 
on seniority of the Members that were present when the hearing 
was called to order, and I will alternate between majority and 
minority. Each Member is asked to keep their questions to 
within 5 minutes per round.
    Mr. Obey.
    Mr. Obey. Madam Secretary, Eric Sevareid said that we 
needed to retain the courage of one's doubts in dangerous 
certainties. And I guess I am reminded of that every time I 
think about policy in Iraq and Afghanistan.
    I am concerned that, in the end, there is going to be 
tremendous pressure for us not to maintain our scheduled 
withdrawal from Iraq. And I am dubious that, in the end, the 
Government of Afghanistan or Pakistan will be sufficiently 
constant and trustworthy to enable our policy in that region to 
succeed.
    But let me put that aside for the moment and simply ask one 
question. To date, we have appropriated over a trillion dollars 
for the war in Iraq and Afghanistan. This year, we appropriated 
$73 billion for Afghanistan and $57 billion for Iraq. In the 
coming year, the administration is asking for $167 billion, 
$122 billion of that for Afghanistan, $45billion for Iraq.
    CBO has estimated the cost to maintain a minimal level of 
40,000 troops in or near Iraq could be as high as $25 billion 
per year. The total cost of the Iraq war over 20 years could be 
well over $1 trillion, all paid for with deficit spending. Over 
the next 10 years, at a minimum we are likely to spend $300 
billion in Afghanistan and $250 billion in Iraq.
    Many hundreds of billions more will be required to fulfill 
our obligations to veterans of those wars. And I am not sure 
exactly what that means in terms of lifetime costs, but I am 
certain that it is going to wind up being over $2 trillion.
    Now, in the past, our governments actually paid for their 
wars. In October, Abraham Lincoln's salary was 3 percent less 
in 1862 than it was the year before, because Congress passed an 
income tax in order to pay for that war. World War I, two tax 
laws were passed: the 1916 Revenue Act and the War Revenue Act 
of 1917. Even before we entered World War II, taxes were raised 
in 1940 to support increased defense spending. In the Korean 
War, we once again saw a substantial increase in taxes. The 
same is true during Vietnam. It has only been in the last 30 
years or so that our political leaders have chosen to cut taxes 
even as they substantially boosted spending, first on the Cold 
War and then on several hot wars.
    I raise this question simply to ask you two questions. 
Number one, what does the administration estimate the lifetime 
costs of the wars in Afghanistan and Iraq to be? And, secondly, 
why should we not at least pay for the cost of conducting our 
effort in Afghanistan? I know that decision is above your pay 
grade, but nonetheless.
    I mean, we have just seen a whole lot of talk about having 
a commission appointed in order to deal with mandatory costs, 
and yet we are continuing to borrow to pay for these wars. 
There is no sense of shared sacrifice in this country. The only 
people sacrificing are military families. Everybody else, we 
just get to put it on the cuff and it goes to the next 
generation.
    Mr. Murtha and I and 14 others have sponsored legislation 
suggesting that we ought to, on a delayed basis, at least begin 
to collect the costs of these wars. We would not have raised a 
war surtax during the recession. We would have given the 
President the authority to waive that for at least another year 
and a half. But, eventually, we wanted to send the signal that 
we were willing to pay for these, especially when we are being 
asked to freeze domestic discretionary spending for 3 years.
    Why shouldn't we pay cash on the barrel head for this 
effort so that, regardless of our doubts about the endeavor, 
that we don't wind up having to severely impinge upon what we 
need to do here at home because of the cost of that war?
    Secretary Clinton. Chairman Obey, if I may speak 
personally, it is heartbreaking to me that 10 years ago we had 
a balanced budget and we were on the way to paying down the 
debt of the United States of America. I served on the Budget 
Committee, and I watched with such consternation as we threw 
away the greatest leverage we would ever have internationally 
and the greatest opportunity we would ever have to right the 
generational imbalance that existed.
    But we are today where we are today. And we have been in 
the midst of a recession, as you rightly point out. But I 
believe strongly that we have to address this deficit and the 
debt of the United States as a matter of national security, not 
only as a matter of economics.
    And I am not going to comment on the prerogatives of the 
Congress to determine how best to do that, other than to say, 
sitting where I sit today, I would not like to be in a position 
where the United States is a debtor nation to the extent that 
we are, with the projections going far into the future, the 
kind of disadvantages that that implies for our ability to 
protect our security, to manage difficult problems, and to show 
the leadership that we deserve.
    So I would certainly think that there has to be great 
attention paid, and the moment of reckoning cannot be put off 
forever. But, again, that is within the prerogative of the 
Congress to determine.
    I do not have a lifetime estimate for the costs of the two 
wars, but we will get that to you based on our best assessment.
    But I share the concern that you and others on both sides 
of the aisle are expressing, and I wish we could turn the clock 
back. I really, honestly wish we could turn the clock back. 
Because we threw away the opportunity of not just one lifetime 
but all lifetimes in our country to put ourselves on the 
strongest possible financial footing that would have given us 
and future generations so much more security than we now have 
financially.
    Mrs. Lowey. Mr. Rehberg.
    Mr. Rehberg. Thank you, Madam Chair.
    I am going to miss the opportunity to address a couple of 
the gratuitous comments that have been made by the committee in 
the opening and some of the responses. Because diplomacy did 
not end in 2000. It did occur. And I think that you would 
probably have to agree and admit that. And so, you know, while 
some of us were new in the Bush administration, diplomacy did 
occur.
    And I had the opportunity to travel with Chairman Kolby and 
others on this committee and appreciated that opportunity to 
see some of the great things that occurred, whether it bethe 
MCC Challenge, Millennium Challenge, or the age initiative in Africa, 
that this administration has accepted and embraced and continues.
    And the deficit and the debt didn't grow. We were on a path 
to reducing the debt. I am sorry we inherited a situation 
called September 11th. When I first showed up in 2001, I didn't 
anticipate that we were going to be confronted with an act of 
terrorism that was not expected. And far be it from me to 
suggest that maybe the administration before the Bush 
administration ignored threats and didn't allow us an 
opportunity to be safe going into September 11th.
    So, you know, I would like to see some of the partisan 
politics that I sense in this hearing, you know, maybe end with 
my comments and move on to some of the things that are more 
substantive as far as foreign operations and our relationship 
with the world and such. So that is part of my comment.

                                 HAITI

    The Haitian relief, I want to thank you for the fine work 
that occurred with the administration.
    As far as the orphans issue, one of the things that we saw, 
and I had parents that were concerned, that we are along in the 
process as far as the adoption. In some ways, UNICEF became an 
impediment or a barrier.
    Is there a procedure in place that you are looking at or 
trying to improve the adoption situation for interstate 
adoption within countries that we deal with for emergency 
purposes, where, if they are along a certain path and they have 
an opportunity to be moved through the process quicker for the 
safety of the children--and I think we all are interested in 
that--that maybe some of the impediments, the problems--and 
forget the Idaho situation. That was an anomaly. But there were 
other situations where Montana parents were ready; they were 
within days of receiving their children through the process. 
And whether it was a visa, that the passport had already been 
granted, they weren't allowed that opportunity, because UNICEF 
got involved and they seemed to have an inherent objection or 
opposition to interstate adoption and created a problem for 
bringing these children out.
    Secretary Clinton. Well, Congressman, I don't believe that 
UNICEF has any objection to inter-country adoption that we are 
aware of. We will certainly double-check that.
    But on your larger question about dealing with orphans, it 
is a matter of great personal concern to me and also to the 
professional staff at the State Department. And what we are 
attempting to do is move on several fronts simultaneously.
    One, we think it is very important to help countries 
understand how they can better run their own adoption systems. 
A lot of countries culturally don't believe in adoption. They 
don't have any experience of adoption, and they are quite 
skeptical and suspicious of the whole idea.
    At the same time, we sometimes move more quickly than other 
cultures would accept in declaring someone an orphan who might 
have a relative somewhere down the line, and yet there are no 
real capabilities in these countries to search for and reunite 
children with the family members in an extended family.
    Haiti was a particularly challenging circumstance because 
all the records were--not all of them, but the vast majority of 
them were destroyed. We moved very quickly, and I am very proud 
of the work that was done, because we have different 
responsibilities within our government. The State Department, 
Department of Homeland Security, HHS all have a piece of the 
responsibility. But if we could get the records which showed 
that a child was in line to be adopted, we have moved those 
children. We have moved hundreds of them.
    On the other hand, some people got a little overanxious in 
their desire to help and tried to move children who still had 
family linkages or for whom there had been no process under 
way. We are looking hard at what happened and trying to make 
sure that we have an expeditious but extremely careful process 
so that we don't inadvertently engage in any transport of a 
child who indeed does have a family still back in Haiti.
    But we appreciate the outpouring of generosity and love 
that so many Americans have demonstrated for children in Haiti 
and elsewhere around the world. And we are looking at what more 
we can do to deal with the whole problem of orphans globally.
    Mr. Rehberg. I appreciate that. Because there were some 
problems that I think could be very easily solved, and we have 
a relationship and they were along in the process.
    Real quickly--and I don't want to get into the argument or 
the debate about private sector and contracting, because there 
obviously are problems with contracting. It is why you look at 
the defense budget. They are every bit as able to pad budgets 
as any other area. So, you know, I just happen to be one of 
those that believes in oversight of every single arena out 
there.
    But you are asking for an additional 600 employees of the 
Federal Government under this budget. Could you tell me, real 
quickly, how many were in the last budget? If I remember 
correctly, and this is strictly off the top of my head, there 
was a request for an additional 2,000 employees in the last 
budget.
    So, were those positions filled? Did you fill the 2,000, 
and this is 600 on top of the 2,000? Within the last 3 years--
or 2 years, actually, we are talking about 2,600 new Federal 
employees as opposed tothe equivalent reduction of private-
sector employees through contracting?
    Secretary Clinton. Well, we are putting these positions in 
the pipeline, and we are filling them, and we are training 
people. I can get you the exact numbers about where we are in 
the pipeline.
    Mr. Rehberg. I would like that, yes.
    Secretary Clinton. But part of the reason behind this is 
our assessment, number one, of the needs that we have. And I 
will just give you a quick example.
    You know, we have closed consulates in some parts of the 
world that are of great importance to us. Our Consulate in 
northern Nigeria, one of the largest Muslim populations in the 
world and a source of some religious conflict now, was closed 
years ago. I think we should have a consulate or at least some 
office there for the United States to have eyes and ears and 
hands on the ground there.
    So we are moving to identify needs and fill those needs, 
and we can give you a very specific breakdown. But we are also 
moving to evaluate carefully contractors. We made a decision a 
few weeks ago to replace one contractor with a full-time 
position inside. And when you looked at all the overhead and 
the costs associated with running the contract, we are going to 
save hundreds of thousands of dollars from that one position.
    Mr. Rehberg. Okay. Thank you.
    Thanks, Madam Chairman.
    Mrs. Lowey. Thank you, Mr. Rehberg. And I believe the 2,000 
would include both the appropriated positions and the positions 
funded through passport and visa fees.
    Mr. Jackson.
    Mr. Jackson. Thank you, Madam Chair.
    And I would like to welcome Secretary Clinton back to the 
committee and thank her for her testimony.
    Secretary Clinton, in order to preserve my time, I am going 
to ask you a few questions and save a couple of questions for 
the second round.
    Before I go to the specifics of the budget, however, Madam 
Secretary, the administration was widely criticized for its 
handling of the Christmas Day terror attack of a civilian 
airliner. The State Department had information, according to 
newspapers, from the perpetrator's father before he boarded a 
plane.
    Can you share with the committee--and I understand this 
question may also be appropriately addressed to the Secretary 
of Homeland Security. Can you share with us what steps the 
State Department took to provide information to the Department 
of Homeland Security that may have been provided by the 
perpetrator's father to prevent that activity and anything that 
you might have that will convince the committee and share with 
the committee that this won't happen again?
    And, secondly, for me, on another subject, it seems that 
this administration's resolve isn't quite the same as John F. 
Kennedy's resolve when the threat of weapons of mass 
destruction were 90 miles off the shore of America in 1962. I 
was born in 1965, so I missed the Cuban missile crisis, but 
from my read on history, it garnered a very different response 
from that administration.
    The idea of weapons of mass destruction in the post-9/11 
world, however faulty the data, led the last administration to 
our present conflict in Iraq. The concern that al Qaeda is 
pursuing weapons of mass destruction has our Nation in pursuit 
of al Qaeda in Afghanistan and around the globe. But in Iran, 
we know they are pursuing weapons of mass destruction.
    I am wondering how the administration justifies its 
approach to gradualism in light of the history of past 
administrations on the question of weapons of mass destruction, 
particularly when they found themselves off the shores of our 
country and/or off the shores given their proximity in the 
Middle East to our critical interests.
    And lastly, a broader question about the Secretary's 
request. There is this mood in Washington that we spend too 
much. When asked what spending we should cut, inevitably one of 
the first things mentioned is foreign aid. I don't think some 
people realize that our foreign policy goes hand in hand with 
our national security policy. You have cited time and time 
again that defense, diplomacy, and development need to be 
treated equally for the U.S. to succeed overseas.
    In your testimony, you highlighted some of the 
administration's development and diplomatic priorities. Can you 
tell the committee why these priorities are critical to our 
national interest and our foreign policy be successful if we 
only emphasize defensive spending?
    I thank you, Madam Secretary.
    And thank you, Madam Chair.

                          CHRISTMAS DAY BOMBER

    Secretary Clinton. Well, thank you, Congressman.
    With respect to the Christmas Day bomber incident, we have 
obviously studied very closely what the State Department 
actions were and what we can learn from that and what changes 
needed to be undertaken.
    The information that was brought to the attention of 
several government agencies within our Embassy in Abuja was 
immediately transmitted to the respective agencies, both in the 
intelligence community, Homeland Security and elsewhere. But as 
has been studied very thoroughly, there wasn't a connection of 
a lot of that information.
    The gentleman, the father who came in provided information 
which was followed up on. But the visa wasn't revoked because, 
at the time, the correct spelling of theson's name was not in 
the system. And when that information was received on November 19th, 
that he had a visa, then the revocation consideration was undertaken.
    The State Department, before Christmas, was involved in 
revocation decisions by discussing with the intelligence 
community whether a revocation would disrupt an ongoing 
investigation. There have been numerous cases in which a 
unilateral and uncoordinated revocation would have disrupted 
important investigations carried out by the FBI, and the FBI 
has testified to that.
    So what we have concluded is that we are going to exercise 
more immediate discretion even if it disrupts an investigation. 
So, you know, it is not all on one side or all on the other 
side.
    But you should know, Congressman, that since 2001, the 
State Department has revoked 51,000 visas, including more than 
1,700 with suspected links to terrorism. And, in addition to 
the revocation authority, consular officers around the world in 
2009 refused nearly 2 million visas.
    So this is an enormous undertaking. When you sit across 
from somebody or they are standing at the window in a consulate 
somewhere, it requires a lot of training and a lot of 
connecting dots. And some might say, ``Well, you know, gee, in 
those 1,885,000-plus visas that you revoked, there were 
probably some people who shouldn't have been.'' Well, yeah, and 
there were probably a lot of people who should have.
    So it is a very difficult set of decisions that our people 
make every single day. And we have determined that we will take 
more unilateral authority. We have informed the FBI and others, 
you know, that that is going to be our policy.
    So we are working very hard, along with Homeland Security, 
along with the CIA, the Director of National Intelligence and 
others, to be as smart and vigilant as we can. And because of 
the amount of travel and the numbers of visas, it is an 
enormous undertaking. And, you know, we do the very best we 
can, and we are going to keep learning how to do it better.

                                  IRAN

    With respect to Iran, we are engaged in very intensive 
diplomacy. And, you know, my reading of what happened with 
President Kennedy is that is exactly what he did. It was high-
stakes diplomacy. It was hard to get the world community to 
understand, going to the United Nations, making a presentation, 
getting international opinion against the placement of Russian 
weapons in Cuba, you know, making a deal eventually with the 
Russians that led to the removal of the missiles.
    That is the kind of intensive high-stakes diplomacy that I 
am engaged in, that other members of our administration are, 
because we take seriously the potential threat from Iran.
    Mrs. Lowey. Madam Secretary, I just want to make one point 
before I turn to my colleagues.
    Unfortunately, the Department of Homeland Security, in my 
judgment, is not willing to change their policy of a 30-minute 
review before a plane takes off. Many of us have been pushing 
for a minimum of 24 hours. And, in fact, the Secure Flight 
Program, which still is not on line, considered 72 hours.
    So I just mention that to my colleague because I just 
brought it up about half hour ago with the Secretary of 
Homeland Security, and I think this is something we must push. 
There is no reason why you are giving these investigators 30 
minutes to review. There will always be stragglers, but I think 
we have to look at a 24-hour time frame.
    Thank you.
    Mr. Kirk.
    Mr. Kirk. Thank you.
    Madam Secretary, I just wanted to thank you again for 
backing the Afghan surge. You had that shootout with Vice 
President Biden. He was wrong; you were right. The President 
sided with you. And the Marjah offensive is going well. We have 
nailed a number of top Taliban leaders now, and a lot of good 
news from the troops.
    You voted for the Armenian genocide resolution as a 
Senator. I hope we do that, and I hope the House of 
Representatives does that and you will let that happen.
    I also want to thank you for having Cha-hee Stanfield, a 
representative of thousands of Korean Americans who haven't met 
their North Korean relatives, meet with Bob King, and they very 
much appreciate that.
    I just want to briefly call your attention to the plight of 
Christians in Iraq. We have had a number of killings in the 
run-up to the election there. It would be an awful shame if, at 
the end of all this democratization in Iraq, that it had no 
Christian community. And your continued attention, I would 
greatly appreciate it.
    I want to raise two issues very briefly. The first is, I 
understand that we are going to do a land swap, and I hope that 
this committee has no appropriated funds involved in the 
building of a new embassy in London. Great Britain is our best 
and most friendly ally, so the need to build a huge and 
expensive fortress seems to be extravagant.
    The report is that this new embassy will cost a billion 
dollars. And just to recall, the largest building, the new 
building in Chicago is the Trump Tower. It is a four-star hotel 
and luxury offices and apartments. The 92 floors of the Trump 
Tower cost $847 million. So this proposed embassyin London is 
18 percent more expensive than the luxury Trump Tower and 92 floors. It 
feels a bit like Buckingham Palace 2.0, and that seems utterly 
extravagant. And I hope you would not request this committee would 
support this at all, because it seems like we have really run wild in 
the budget there.
    I wanted to raise, though, a separate issue, which is with 
regard to Iran, that we are not sending a clear signal to the 
Iranians. And when you look at our policy from Tehran towards 
Washington, as opposed to Washington to Tehran, here is what 
you see.
    We have a number of sanctions. I have a board here. As you 
know, in 1996, that the Congress passed the Iran Sanctions Act 
and said, ``If you invest more than $20 million in the Iran 
energy sector, you are going to get hit with sanctions.'' The 
Congressional Research Service has now listed all of these 
companies in potential violation of the Iran Sanctions Act.
    And this is just the Congressional Research Service did 
that. Your team said, we will answer the Congress back--about 
60 Republicans and Democrats sent you a letter--within 45 days. 
Feltman had that. We are now about 20 days after that.
    If the Iranians see that sanctions on the books are not 
enforced, then how would any future sanctions in any way be 
serious, one?
    Second, just two blocks from your office on the seventh 
floor of the State Department, the World Bank is still cutting 
checks to the Iranian Finance Ministry. So the last 
administration and this administration are still allowing money 
to go from the World Bank to the Iranian Finance Ministry. Wow, 
what a confused signal that Ahmadinejad gets, getting a check 
cut from 1818 H Street in Washington, D.C., two blocks from the 
White House.
    And, last, we understand that, you know, 400 Members of 
Congress have now backed the gasoline quarantine legislation in 
the House and Senate. My word from your team is, we will not 
support a gasoline quarantine absent a U.N. Security Council 
resolution.
    And with Bill Burns, I took him through a thought 
experiment. I said, I remember during the Clinton 
administration when President Clinton very wisely waited for 
the U.N. Security Council to approve our action in Kosovo 
before taking military action against Yugoslavia. And he nodded 
and said yes. And I said, that is absolutely wrong. President 
Clinton did not wait for the U.N. Security Council. The entire 
victory in Kosovo would have never happened if we had waited 
for the U.N. Security Council. There was no Security Council 
resolution possible. And President Clinton wisely did not wait 
for the gridlock in New York to stop him from saving 2 million 
Kosovars.
    And so my question to you is, how about actually enforcing 
the Iran Sanctions Act against the 25 companies that we have 
already clearly identified in potential violation? How about 
cutting off World Bank funding to the Iranian Finance Ministry, 
which is going on right now? And, how about cutting loose from 
the U.N. Security Council, repeating the great success of your 
husband, and actually implementing measures which will succeed, 
as they did in Yugoslavia?

                                ARMENIA

    Secretary Clinton. Well, first, on Armenia, let me 
reiterate what the President said last year in April, that the 
best way for Turkey and Armenia to deal with their common 
historical past is to address it as part of their effort in 
moving forward. And there has been a very important dialogue 
leading to protocols between Armenia and Turkey, which they 
have signed at a ceremony that I attended in Zurich. And we 
believe that that is the most appropriate way for the United 
States to be helpful at this time, is to continue to urge the 
ratification of those protocols.

                             LONDON EMBASSY

    Secondly, on the London embassy, we are not going to be 
asking this committee for any money because we are self-
financing it from the sale of the existing embassy and the Navy 
Annex in order to consolidate all of our operations in one 
place, in a more secure place than the Grosvenor Square 
embassy.

                                  IRAN

    And, finally, on Iran, we did make a preliminary report to 
the Congress in early February. We will follow that up with a 
classified briefing. I have taken the responsibilities to 
examine the situation very carefully, and that is exactly what 
we are doing.
    There wasn't any such inquiries before, in the last 8 
years. There was only one finding in the prior administration. 
So we are going to fulfill the responsibility of looking at it 
and consulting with the Congress as to what the outcome should 
be. And I think that we will be having a briefing in a 
classified setting, which is the appropriate forum for that.
    Mr. Kirk. Thank you. And I just hope we follow up. Imagine 
how confused Ahmadinejad is when he gets a check from the World 
Bank, from the Obama administration.
    Mrs. Lowey. Mr. Schiff.
    Mr. Schiff. Thank you, Madam Chair.
    And thank you, Madam Secretary, for being here.
    I will pick up where my colleague left off and also urge 
the administration's support for recognition of the Armenian 
genocide. We have a markup coming up next month, and I would 
urge the administration to support the legislation and, at a 
minimum, certainly not to get involvedin opposing the 
legislation. And I don't think that the prospect of reconciliation, 
much as I would like it to happen, should be used as a reason not to 
recognize the undeniable fact of the Armenian genocide.
    I wanted to discuss with you today--and I just got back 
from a trip to Yemen, Pakistan, and Afghanistan--the situation, 
in particular, in Afghanistan. I think we have really the best 
team assembled there we could possibly have, both in terms of 
the military leadership and the civilian leadership. And, Madam 
Secretary, you have some of the finest people in the world 
working in State Department and USAID there. They are just 
phenomenal, courageous, committed, wonderful people.
    I have a lot of confidence that the military operations 
will be successful within the scope of what they hope to 
achieve, that the Taliban can be routed from their strongholds 
within the next 12 to 18 months. But I have far, far, far less 
confidence that we can achieve our civilian objective. And not 
having anything to do with, again, the quality of the people 
over there, but it seems to me we are dealing with two very 
different timelines.
    We have a timeline militarily, and we have a timeline in 
terms of helping the Afghans establish the rule of law and good 
governance such that, when the military leaves, there is an 
infrastructure and governance there that is strong enough and 
well enough respected that the Afghan people won't tolerate the 
Taliban coming back in. And that is the ``hold and build'' part 
of the plan.
    And so my question is, are these timelines so different 
that they are going to come in conflict 12 to 18 months from 
now? It seems to me you would need an escalation or a surge of 
probably 30,000 State and USAID, Justice Department, 
Agriculture Department and Commerce Department civilians in 
Afghanistan to try to deal with the corruption in the Afghan 
police forces, the maladministration and corruption of the 
government. We don't have the capacity to do that.
    So what happens? If the governance is still so fragile, how 
do you continue with that work without having the military 
there in such numbers to maintain the security?

                              AFGHANISTAN

    Secretary Clinton. Well, Congressman, I hope you and all 
the members of the committee have received a copy of the 
Afghanistan and Pakistan Regional Stabilization Strategy, which 
we have submitted to the Congress, because it goes into great 
detail about everything we are doing, from agriculture to 
health care to education to women's rights.
    And, obviously, we are working closely with our military 
counterparts, as they heroically take on the Taliban alongside 
not only our international partners but, increasingly, the 
Afghan military.
    This is a very challenging undertaking, but there has to be 
a transition from the international force, the NATO ISAF force, 
to the Afghanistan people themselves. That is why we are 
emphasizing the training of the military and of the police. We 
are working, I think successfully, to make clear that we need 
good partners and that President Karzai, his government, as 
well as the military, have to do their part. And there are 
places in Afghanistan that we could transition to civilian rule 
today, and there are others where we still have a lot of work 
ahead of us.
    But we have a plan. We are going to do the best we can to 
implement that plan. I understand the questions that you and 
many others have, because this is a very hard undertaking. So I 
don't want to in any way underestimate how difficult it will 
be.
    Mr. Schiff. If I could refine it, just very quickly. Do you 
think, in the 16 to 18 months of the increased military support 
there, that in these safe havens, or former safe havens like 
Marjah, that on the civilian side we can establish a sufficient 
rule of law and good governance such that, when we downsize our 
military presence, the Taliban won't simply come back in 
because the Afghans are so fed up with the corruption of the 
Afghan Government?
    Secretary Clinton. That is our goal, and that is what we 
are working to put into place. But, ultimately, the future of 
Afghanistan is up to the Afghans. You know, they are going to 
have to stand up and demand the kind of accountability from 
their government and the delivery of services.
    We are doing all that we know to do to create the 
conditions for that. But, at the end of this process, there has 
to be a government that is functioning and effective and has 
the support of its people. And there is no way completely to 
predict that. But we are doing the very best we know to do to 
try to create the conditions for it.
    Mr. Schiff. Thank you, Madam Secretary.
    Mrs. Lowey. Mr. Crenshaw.
    Mr. Crenshaw. Thank you, Madam Chairman.
    And thank you for your testimony today.
    I have two questions, one is about Iraq and one is about 
Haiti.
    But, on balance, I think what is happening in Iraq is 
obviously positive. But, as you know, in the last year, what 
happened at Camp Ashraf is really troubling to an awful lot of 
people. I mean, once the Iraqi Government took over there, I 
guess it was back in June, the rage that occurred and just the 
awful, deplorable situation that took place there. And now to 
say we are going to move those 3,400 folks to some detention 
center certainly has got a lotof people's attention.
    Because it is not just about Iraq; it is about Iran. And, 
as you may know, I think 172 Members of the House have signed 
on as cosponsors of the resolution basically deploring that 
activity by the Iranian forces, calling on Iraq to live up to 
its commitment to provide security and then also providing for 
the United States to take necessary action to kind of provide 
for their security.
    So I wanted you to give us an update on the current status 
of that situation.
    And then quickly about just Haiti, it seems to me that out 
of that terrible, terrible situation there is an opportunity 
for some good to happen in Haiti today. And, with all this 
tremendous outpouring of international assistance from both 
private and public, is there any one entity that is kind of 
emerging as an entity to kind of coordinate all of this foreign 
assistance in both private and government? And as part of that, 
are there procedures being put in place to make sure that 
everything is being accounted for and being transparent?
    And, finally, the third part of that is what is your view 
of the government there in Haiti and their ability to kind of 
rise up and be a partner with all this international 
assistance?
    If you could comment on those two, I would appreciate it.

                              CAMP ASHRAF

    Secretary Clinton. Thank you, Congressman.
    You know, we are aware of the recent reports about 
difficulties in Camp Ashraf, and we have looked into these 
assertions. It is our conclusion that adequate food, fuel, and 
medical supplies are reaching the MEK members in the camp. 
Family visitation is not being blocked by Iraqi Security 
Forces. Foreign governments are able to conduct visits to the 
camp for any resident claiming third-country status. Yes, the 
Iraqi Government still has the stated goal of removing the MEK 
from Ashraf to another location, but there is no date for doing 
so.
    And our policy toward the MEK can be summarized briefly as 
follows: They are not refugees. They are not protected persons 
under the Fourth Geneva Convention. They are not providing 
valuable information on Iran to our government. However, we do 
support their human rights. We have repeatedly told the Iraqi 
Government that we expect their human rights to be protected.
    We have, in prior administrations, designated the MEK as a 
foreign terrorist organization. We do support Iraqi sovereignty 
over Ashraf. And we do hold the Iraqi Government responsible 
for how the members of the MEK are treated. And we expect the 
Iraqi Government to honor its written assurances that it will 
treat the MEK members humanely; it will not forcibly relocate 
them to any country where they could be persecuted for 
religious or political beliefs or where they could be tortured.
    And we support international participation in trying to 
resolve this matter. So there is a lot of information coming 
from all directions. We have tried to be very careful in 
evaluating what the facts are. And, to the best of our ability, 
that is a brief summary.

                                 HAITI

    With respect to Haiti, there is going to be a coordinating 
entity created. It will be a combination of the Haitian 
Government and the United Nations, along with a committee on 
which the United States will also participate. There will be 
measures of accountability that we are putting into place. 
There will be a conference on March 31st at the United Nations, 
cosponsored by the United States and other major donor 
countries, to lay out the way forward.
    The Haitian Government's ability was severely impacted by 
the earthquake. They are trying to kind of get themselves 
organized and focused, but it is a very difficult challenge for 
them, and we are doing everything we can to help them. They are 
very grateful for the aid, both the military and civilian aid, 
and presence on the ground from the United States.
    So we have a big task ahead of us to try to help them take 
more responsibility, but to do so in an accountable way with 
sufficient oversight for the foreign assistance funds that are 
going to flow in.
    Mr. Crenshaw. Thank you.
    Thank you, Madam Chair.
    Mrs. Lowey. Thank you.
    Mr. Israel.
    Mr. Israel. Thank you, Madam Chair.
    Madam Secretary, we really miss you in New York.
    Secretary Clinton. Oh, Steve.
    Mr. Israel. We really, really miss you in New York.
    Madam Secretary, two questions.
    One, last year this subcommittee provided USAID with $10 
million to stand up a solar village initiative which would help 
catalyze microfinancing for renewable solar projects in the 
developing world. I would just like a brief status report on 
that.

                             SOLAR VILLAGE

    Secretary Clinton. Well, we support the solar villages, and 
we welcome your interest and your initiative on the solar 
villages. In fact, I thought you might ask about it, and I 
brought a quick update for you, Congressman, because it is the 
kind of innovative approach that we support.
    The $10 million which went to USAID Clean Energy funds are 
being used for microfinance renewable energy programs. And we 
want to work with you to determine the final country 
allocations because of your interest. And so I have 
directedthat USAID reach out to you and let you know exactly what we 
are doing with that money.

                                 TURKEY

    Mr. Israel. Thank you. I appreciate that.
    Let me turn to Turkey, if I may, Madam Secretary. I am very 
concerned with the direction of Turkey. It seems to me, at 
least, that Turkey is contemplating a fundamental realignment. 
With respect to Iran, Turkey has exhibited irresponsible 
behavior, in my view, undermining international efforts to slow 
Iran's march to nuclear weapons, defending Iran's position. 
Prime Minister Erdogan, back in October, asked why those who 
were talking about nuclear weapons always pick on Iran; 
increasing volume of Turkish investment and trade with Iran.
    On Israel, October of 2009, Turkey cancelled air force 
joint exercises with Israel, publicly attacked President Shimon 
Peres. On Cypress, Turkey renews its insistence on elements of 
a Cypress solution that no western democracy could ever agree 
to, continues an illegal occupation, digs in. On Darfur, denied 
the Darfur genocide. Prime Minister Erdogan said, ``It is not 
possible for those who belong to the Muslim faith to carry out 
genocide.'' Tell that to people of the Muslim faith who have 
been annihilated by that genocide.
    We have talked about Armenia. And, finally, on the 
ecumenical patriarch, Turkey's history of religious intolerance 
continues, confiscating the property of the ecumenical 
patriarch, defying the values of 300 million orthodox 
Christians.
    It just seems to me that this is a fundamental reversal of 
Turkey's role in the world and in the region. And I am curious 
as to whether the State Department is engaging in a 
reassessment of our own relationship with Turkey in view of 
what seems to be Turkey's reassessment of its relationship with 
us and the rest of the world.
    Secretary Clinton. Well, Congressman, let me put our 
relationship with Turkey in as broad a context as possible, 
because we believe we share a vital partnership, common 
strategic interests and, of course, membership in NATO. From 
the Balkans to Afghanistan, we are working together. Turkey has 
embarked on a very ambitious foreign policy, working to try to 
reach normalization with Armenia, trying to solve problems in 
its neighborhood.
    In the NATO context, Turkey is a key contributor to our 
ISAF efforts in Afghanistan. Turkey contributes nearly 1,800 
troops. It commands a regional command. It maintains a PRT. It 
is going to have another PRT. It also contributes 500 troops to 
Kosova's NATO forces. It is part of Operation Active Endeavor 
patrolling the Mediterranean. It has been a key contributor to 
Operation Ocean Shield, which is NATO's counter-piracy mission, 
and helps patrol the Black Sea through Operation Black Sea 
Harmony.
    Now, with respect specifically to Iran, Turkey shares a 
long border with Iran. It has a lot of cultural and religious 
ties, a lot of commercial ventures with Iran, and it has access 
to many of the Iranian decision-makers. So Turkey has been very 
involved in, you know, trying to influence Iranian actions. It 
has expressly opposed Iran's acquisition of a nuclear weapons 
capability and its aggressive regional policy. And we have 
worked very hard to move the Government of Turkey to a point 
where it will assist us in pressing Iran to respond to our 
demands.
    With respect to Israel, Prime Minister Erdogan, based on 
humanitarian grounds, criticized Israel's closure of Gaza. Then 
a cabinet minister, Ben-Eliezer, visited in late November to 
meet with the Turkish Government. And I think, since that 
meeting, the government's criticism has been noticeably muted. 
But then there was a slight by the Israeli deputy foreign 
minister of the Turkish ambassador during a mid-January 
meeting, which again created and reignited tensions. Those were 
dampened when Defense Minister Barak went to Ankara.
    Both countries have confirmed their commitment to a strong 
bilateral relationship between Turkey and Israel. And, as you 
know, Congressman, Turkey was very involved in supporting 
Israel until Gaza, and then the events back and forth since 
then. But I think both countries are trying to get back on 
track with their relationship.
    We also share the concern about a resolution in Cyprus. And 
we have urged and worked with Turkey to support a settlement of 
Cyprus. Actually, the very intense negotiations that the Greek 
and Turkish Cypriots have engaged in have been publicly 
supported by Turkey.
    There is a lot that we have to do. And let me just conclude 
with the references to the ecumenical patriarch and to orthodox 
Christianity, particularly the Halki seminary. We continue to 
urge the Turkish Government to reopen the seminary. The 
President has called for it. I have called for it, both of us 
in Turkey and in the United States to protect and safeguard the 
patriarch's property rights. And there still is a very vigorous 
discussion going on about this. And when the patriarch visited 
and I hosted him at the State Department, we discussed that at 
length.
    So there is a constant, ongoing consultation. But I think 
that the context of the relationship and actions is even more 
concrete and perhaps complex than either of us has recognized.
    Mr. Israel. Thank you.
    Mrs. Lowey. Ms. McCollum.
    Ms. McCollum. Madam Chair, I would like to yield at this 
time. I am checking facts on something because I thinkfacts are 
very important to this committee, and I hope to have something to share 
shortly.
    Mrs. Lowey. Ms. Lee.
    Ms. Lee. Thank you very much, Madam Chair.
    Good afternoon, Madam Secretary.
    Let me just say, like all of us, I have been greatly 
encouraged by the Obama administration's support for rebuilding 
the capacity of the State Department and its commitment to 
utilizing diplomatic engagement as a means of reducing the risk 
of conflict and ensuring that the United States takes a 
leadership role in solving some of the most serious problems 
and sources of tension around the world. And your leadership, I 
just have to say, has been so instrumental in reshaping 
America's image and role in the world. And, for that, I am 
really, deeply grateful.
    I recently returned from traveling as part of a bipartisan 
congressional delegation to the Gulf region led by our esteemed 
Chair, Chairwoman Nita Lowey. And it was quite an amazing 
visit. You were there during that period. We learned a lot. It 
was an eye-opener. And I just have to thank, again, Chairwoman 
Lowey. It was bipartisan, and it was very, very enlightening.

                                  IRAN

    During this visit, Iran's nuclear program and the 
destabilizing force of a potential nuclear weapons capacity in 
that region was discussed, and it was really a source of an 
intense discussion. The weekend of our return, though, I think 
it was February 19th, a Wall Street Journal editorial on Iran 
concluded--and this is just a quote from that editorial: 
``Finally, the option of a military strike will have to be put 
squarely on the table.''
    Of course, I am a strong opponent of the use of military 
force, but this suggestion deeply troubles me. The possibility 
of sanctions I don't believe should ever be viewed as a 
checkmark, you know, on the path to war, which is what, 
actually, the Wall Street Journal editorialized.
    Admiral Mullen recently expressed concern that a military 
strike in Iran would not be decisive, that diplomatic levers 
would be preferable, and that such a course of action would 
carry unintended consequences.
    So am I correct in characterizing the administration's 
position that a military strike in Iran is neither appropriate 
nor preferable to other means of resolving this challenge? I 
mean, you know, I was very troubled by what the Wall Street 
Journal wrote.
    Secretary Clinton. Well, Congresswoman, the administration 
has consistently said that all options may be on the table, but 
we are trying to set the table with sanctions, with pressure, 
to change the behavior of the Iranian regime.
    That is our focus, that is what we are planning, that is 
what we are doing. And I think, you know, for all the reasons 
that Admiral Mullen referred to, that is our preference, that 
we proceed as vigorously and intensely as we can to create the 
conditions for the Iranians' change of behavior.

                                 HAITI

    Ms. Lee. Great. Thank you very much for that.
    With regard to Haiti, first let me thank you, your team, 
the leadership of your chief of staff, Cheryl Mills, for the 
response, the coordinated response, as it related to the 
tragedy in Haiti. They were, quite frankly, phenomenal. And we 
were able to do quite a bit, as Chair of the Congressional 
Black Caucus, to work with your team to help expedite the badly 
needed resources.
    I wanted to ask you--and I know that we have been in 
conversations about this, and we forwarded you a letter about 
the Haitian American community, Haitians in the diaspora, 
finding an organized and structured vehicle for Haitian 
Americans to return to Haiti to provide technical capacity-
building assistance in fields critical to reconstruction and 
development.
    And so I have a bill, which I have shared with your staff, 
H.R. 417; it is called ``The Next Steps for Haiti Act.'' And 
that would create such a mechanism for establishing a USAID-
housed effort that would do just this. And I would like to ask 
you for your consideration for that, because I think organizing 
in a way that is financed, the Haitian American community to 
return to Haiti to do this, would be very helpful.
    Secretary Clinton. Well, we will certainly take a close 
look at your bill. We share your goal of enlisting the 
expertise and experience of the Haitian American community, and 
we are looking for ways to do that.
    Ms. Lee. Thank you.
    And just one more point I would just like to raise, and I 
want to thank you for your help. You know, the three hikers 
that are in Iran, we discussed this when we were in the region 
somewhat. They were students, you know, in my district, 
University of California, and one is one of my constituents.
    And I am wondering if there is anything that you know that 
you could talk about that would give us a little bit of hope. I 
heard that the families may be allowed to visit them. That was 
the last I heard. But is there any movement at all, from your 
vantage point?
    Secretary Clinton. Well, we push every day, because we 
think it is so baseless and unfounded to hold these three young 
people. And we have called on the Iranian regime to release 
them on humanitarian grounds and, certainly, to permit as much 
access while they are detained to family and loved ones. But I 
have nothing to report.
    Ms. Lee. Okay. Thank you very much.
    Thank you, Madam Chair.
    Mrs. Lowey. Mr. Rothman.
    Mr. Rothman. Thank you, Madam Chairman.
    Madam Secretary, it is always a great pleasure to see you. 
And let me say, from what we have seen so far, it is my opinion 
that there has never been a more effective or smarter Secretary 
of State in the history of the United States than you, Madam 
Secretary.
    Secretary Clinton. Thank you.
    Mr. Rothman. We are enormously proud of you and grateful 
for your service. You are indefatigable, and you are 
extraordinarily effective for our country. Thank you.
    It is no secret that Pakistan possesses nuclear weapons. It 
is, I think, equally not a secret that if those Pakistani 
nuclear weapons were to fall into the hands of radical Islamic 
terrorists, that just before that happened India probably would 
take steps to prevent that, which makes that region very 
volatile and makes relations between India and Pakistan so 
critical.
    So I am interested in your view as to how their relations 
are these days. And does Pakistan understand, the military and 
the government, how unacceptable it would be and how 
catastrophic, in terms of inviting a conflagration in the 
region which would affect the world economy, et cetera, and 
millions of lives, if they were to not do what was necessary to 
prevent terrorists from overthrowing the Government of Pakistan 
and acquiring Pakistani nuclear weapons?
    Secretary Clinton. Well, Congressman, that is an extremely 
important issue, and it is one that we take as a very high 
priority in our efforts with both countries.
    We are heartened by the fact that they are resuming a 
dialogue. They made progress in the last dialogue between then-
President Musharraf and Prime Minister Singh. It was suspended 
when Musharraf left office; it is now only being resumed. I 
think both countries realize that there are lots of important 
issues that only they can resolve between them. But the United 
States has encouraged the dialogue, and we obviously hope that 
it will be productive.
    With respect to Pakistan's actions, we have been encouraged 
by the results of military and intelligence operations over the 
last several weeks. It resulted in the capture and detention of 
some of the key members of the so-called Quetta Shura, very 
high-ranking Taliban leaders, right up there with Mullah Omar. 
We have also been encouraged by the Pakistani military's 
successful efforts to rout the Taliban from their own country, 
from Swat to North Waziristan. And we are working very closely 
with the government, both the democratically elected government 
and the military and ISI.
    But we believe that the people and Government of Pakistan 
have, over the course of this past year, since I was last here, 
understood the direct threat to their state's survival posed by 
the extremists inside Pakistan; that it is not a problem for 
someone else; that they are operating out of Pakistan; that 
given the brutality and the horrific attacks launched against 
mosques, markets, universities, volleyball games, police 
stations, ISI headquarters, this has now been seen for what it 
is: a direct assault on the sovereignty and capacity of the 
Pakistan Government.
    So I am actually quite pleased to see the very vigorous 
response coming forward.
    Mr. Rothman. And that is--I hate to use this word or 
expression, ``trickle down,'' because I normally don't accept 
that view. But the general population in Pakistan gets that, 
Madam Secretary?
    Secretary Clinton. It is our impression that, if that were 
not the case, the government and the military would not be 
proceeding. And----
    Mr. Rothman. May I just go on to one----
    Secretary Clinton. Yes.
    Mr. Rothman [continuing]. Fast other question, but it is a 
powerful one, I think. The President's request in the Middle 
East includes $400 million in economic assistance to strengthen 
the Palestinian Authority as a credible partner in the Middle 
East peace and continue to respond to humanitarian needs in 
Gaza--$400 million.
    The Palestinian Authority recently celebrated the birthday 
of the Palestinian Authority by naming a square in Ramallah in 
honor of the terrorist who killed 37 Israelis when that 
terrorist hijacked a bus in 1978.
    The Palestinian Authority Prime Minister Salam Fayyad also 
honored a terrorist who just killed an Israeli by stabbing him 
through the window of his car and went to pay a condolence call 
to his family--the murderer's family. And finally, in a sermon 
aired on Palestinian Authority television on January 29, 2010, 
an unnamed imam made hateful remarks equating Jews with Nazis 
and saying that Jews are the enemies of the Palestinians and 
that the Jews must be killed. This is on Palestinian Authority 
television as recently as January 29, 2010.
    Are you satisfied that the Palestinian Authority is, A, 
going to be a partner for peace with our number one ally in the 
region, the State of Israel, at this stage given what has just 
recently occurred, and/or that the Palestinian Authority is 
taking the steps to end the incitements and the hatred and 
incitement to murder that is just going on right with their 
consent under their authority?
    Secretary Clinton. Well, the United States continues to 
reinforce to the Palestinian Authority leadership that all acts 
of incitement should be avoided and condemned no matter when 
and where they happen. We consider incitement still to be a 
problem, but we believe that the situation is much better than 
it was in the past. And in light of that, in response to the 
televised sermon that you were referencing this past Friday, 
the Palestinian Authority immediately told the United States 
Government that the speech was inconsistent with Palestinian 
leadership's support for a two-state solution, that it did not 
represent the policies of the Palestinian Authority. And then 
this past Friday, a sermon promoting religious tolerance was 
delivered in all 1,800 West Bank mosques by direction of the of 
Palestinian Authority.
    So we see much greater sensitivity. We see fewer incidents 
of incitement. We still take every single one of them 
seriously.
    Mr. Rothman. Thank you, Madam Secretary.
    Thank you, Madam Chairman.
    Mrs. Lowey. Are you ready, Ms. McCollum?

                             THE WORLD BANK

    Ms. McCollum. I am ready, and I thank the Chair for her 
patience, and I know my colleagues were happy to go before me.
    Madam Secretary, I want to, for the record, get something 
straight. I wanted to learn more about how the World Bank 
functioned, and so I became very involved in learning more 
about the World Bank. It is not a perfect organization. I have 
disagreements with it at times. But Mr. Kirk's statements here 
about the World Bank were misleading and, in my opinion, were 
outright false.
    The World Bank has most of its projects closed with the 
country of Iran. There are two that remain open that they are 
completing. These deal with the poorest of the poor in Iran. 
They deal with water, potable water, for children and families 
to drink and for sanitation. That is it. There aren't any 
others in the pipeline.
    And I am going to read from the World Bank's Web site right 
now. ``Does the World Bank Group follow U.N. sanctions on 
Iran?'' And it goes on to say, Yes. An independent United 
Nations specialization agency and multilateral development 
bank, the World Bank Group fully complies with U.N. sanctions 
with Iran and reviews payments and contracts under the World 
Bank financed projects to ensure that no loan, no funds are 
used to finance goods prohibited by the U.N. sanctions or for 
payments to designated entities or individuals.
    And I have been present, as many of us, when President 
Zoellick has been here, and those questions have been put to 
him before, and he has repeatedly stated World Bank policy. And 
I just felt that I had an obligation, having been present at 
those conversations, to set the record straight. So I thank the 
Chairwoman for her indulgence and letting me get the facts.
    Madam Secretary, I would like to begin now on a lighter 
note by applauding the work that you have done to reestablish 
the United States as a global leader in human rights. I am so 
excited that you are speaking out against child marriage in 
Yemen; that you are pressing Internet freedom in China; and you 
are taking an aggressive stance against the atrocious, just 
terrible legislation in Uganda to punish its gay and lesbian 
citizens. You are making the light shine brighter on the Statue 
of Liberty. Thank you so much.
    And I also want to applaud your work with Special Envoy 
Mitchell, your engagement in the Middle East, and President 
Obama's leadership on this is good. I am very pleased to see 
that we now have an ambassador back in Syria, and that we are 
engaging Syria as a partner to bring Syria into the peace 
process.

                         GLOBAL FOOD INITIATIVE

    I would like to take the little bit of time I have 
remaining to talk about global food security. The fact that 1 
billion people around the world are struggling with chronic 
hunger is a moral issue, it is an obstacle to development, it 
is a strategic concern, and you have shown great leadership in 
this. Just this past September I was in Guatemala where 50 
percent of the children are physically and mentally stunted 
because of undernutrition.
    It is no doubt that food security is the foundation of all 
the other developmental interests that we make. If students are 
hungry, they can't learn in school. If parents do not have 
proper nutrition, HIV medications don't work. So I support the 
commitment that the President and you have madeto develop a 
comprehensive food global security strategy.
    Last year I advocated on this subcommittee for reasons 
needed to support new food security initiatives. Before we make 
decisions about a second year of funding, this committee needs 
to see a detailed plan, however, on how and where the fiscal 
2010 funds are being invested. So my first question is when can 
we expect to receive this information? And then, as you know, I 
am working with Senator Lugar on the Global Food Security Act 
legislation that will authorize this major new foreign policy 
initiative. Could you please talk to all of us about your plans 
for engaging with this committee and with Congress to create 
the support we need to make this new Global Food Security 
Initiative successful?
    Secretary Clinton. Congresswoman, thank you very, very 
much. And thank you for actually believing in facts and sharing 
those facts with all the rest of us.
    On the Global Food Initiative, we are looking forward to 
briefing not only this committee, but others in the Congress, 
the Hunger Caucus and the like, who care deeply about this 
important initiative. We will try to get that set up as soon as 
possible now that the budget is up so that we can demonstrate 
to you what we are spending money on and what the way forward 
will be. But we very much appreciate your personal commitment, 
your work with Senator Lugar on this issue, because we consider 
it one of the most important initiatives of the Obama 
administration.
    With respect to Senator Lugar's legislation, it very much 
tracks with the plans that we have. We think that focusing on 
small holding agriculture plots, focusing on women who are on 
average 70 percent of the farmers who are actually farming 
those small plots, working on technological improvements like 
better seeds, better irrigation systems, will put together the 
comprehensive approach to give us the chance for a second green 
revolution. That is our goal.
    You know, the United States was the driver of the first 
green revolution. Norm Borlaug won the Nobel Peace Prize for 
his unbelievably effective work in leading that effort. So we 
want to have the same kind of impact, and I look forward to 
having you briefed and working with you as we go forward on 
this together.
    Ms. McCollum. Thank you.
    Thank you, Madam Chair.
    Mrs. Lowey. You were very patient, Mr. Chandler.
    Mr. Chandler. Thank you, Madam Chairman.
    And, Secretary Clinton, I am going to get in line behind my 
colleagues and thank you for taking on what I believe is maybe 
the most difficult job that our country has to offer, and for 
handling it with great aplomb.
    I am going to try to ask you a question that you may find 
simple to answer, and you may find it very difficult. It is 
very broad. So you can handle it any way you want to.
    I think most of the American people believe that our main 
enemy in the world today is Islamic fundamentalism. We see it 
crop up in many different places. The Muslim world stretches, 
of course, in one form or another essentially from the 
Philippines all the way to Morocco, and it covers a very large 
swath of the human population on the planet. It seems like we 
see one fire after another breaking out in different parts of 
that world. Of course, we have got the dramatic fire in 
Afghanistan and Pakistan. We deal with fires in Iraq. We deal 
with fires in the West Bank, in Gaza and Israel, Yemen, 
Somalia, all sorts of places. And it seems to me that at any 
given time fires can break out anywhere, and we have to deal 
with them. That may just be the way it is, and it may be the 
best way to approach the problem.
    But I was wondering if you could give me as concise an idea 
as you can about a broader strategy that our country is 
involved in to try to combat this problem overall. It is a 
very--again, may be a necessary way to combat it, to fight it 
country by country, but it is a broad problem that is very 
expensive when you do it that way, and I am wondering if the 
administration has a larger, more cogent plan to deal with 
this.
    Secretary Clinton. Well, Congressman, I think that the 
President's vision of outreach to the Muslim world is really at 
the core of his strategic approach. There are more than a 
billion Muslims, and the vast, vast, vast majority of them live 
peacefully, care about everything we care about, from, you 
know, getting their kids off to a good start in life to finding 
a good job, to taking care of their parents. I mean, it is a 
small but lethal group of extremists who pervert Islam for the 
purpose of seizing power, settling grievances, imposing very 
strict rules on women. They do not reflect the vast majority of 
their fellow religious believers.
    So when the President spoke in Cairo, it was to send a very 
clear message: We are not at war and we are not against Islam. 
We are not even against Islamic fundamentalism. I mean, people 
of different religions have different levels of beliefs. We are 
against terrorists and the use of terrorism to kill innocent 
people, to intimidate and turn the clock back on the rights and 
opportunities that all people, particularly women, should be 
entitled to.
    So there are many aspects of our strategy that follow up on 
the President's vision. How we work in Indonesia is not how we 
work in Yemen. How we work in Pakistan may not be what we do in 
Senegal. And I think it is rooted in your question that we look 
at the full range of opportunities we have to strengthen, 
deepen and broaden our relationships with Muslim majority 
countries, and that is exactly what thePresident has in mind 
when he speaks about the American relationship with the Muslim world. 
Next month he will be going to Indonesia, a country that he knows well, 
and the country that has the largest Muslim population in the world.
    I think that our goal is to demonstrate clearly that we are 
only focused on those extremists and terrorists who choose to 
pervert religion, who choose to pursue political gain and power 
in the cloak of religion, and that we will seek them out. We 
will find common cause with other countries to prevent them 
from gaining ground and finding safe haven to assault innocent 
people anywhere.
    Mr. Chandler. Thank you.
    Mrs. Lowey. Well, we have you for about 10 more minutes, 
Madam Secretary, and you have extraordinary endurance. You can 
see the admiration for you on both sides of the aisle. And for 
those of us who have traveled with you, we see the courage in 
speaking out against corruption, and, on the other hand, the 
average person looks at you as a rock star. So we are, again, I 
want to say, very fortunate to have you representing our 
country. We are going to have to take a quick second round.
    Several of us have talked about the difficulty in passing 
this budget. Even though we know on this committee how 
difficult it is to send the message, we all agree that it is 
very important to national security. So I would hope that you 
and the President would use your skills, which you have been 
very successful at in the 47 countries you have visited, to 
convince the American public that this is an issue of national 
security.
    A couple of short, quick questions, and one is directly 
related to the issue of our economy. Iraq has the largest oil 
resources in the world, yet it doesn't have the ability to 
maximize its resource to generate wealth by increasing 
production, and export levels are severely handicapped by 
factors within and outside the government's control. And there 
are things that Iraqis can do now to improve oil production, 
including fighting corruption, passing hydrocarbon legislation 
to address legal uncertainties, increasing cooperation between 
the Kurds and central government.
    Now, I understand there is a successful second round of 
bidding for oil service contracts in December, showing some 
progress, yet serious challenges in the oil sector remain. So 
what are the realistic prospects for the expansion of Iraq's 
oil production over the next 5 years? What are the major 
challenges Iraqis need to overcome in order to meet the oil 
production expansion goals?
    The United States has provided $53 billion since 2003 for 
the reconstruction of Iraq. The President is requesting $1.2 
billion for police training, institution building, economic 
performance and essential services. So I would like to say, in 
light of their wealth, it is time they started paying for these 
services themselves. Can you respond?
    Secretary Clinton. Yes. Thank you.
    You are right. Iraq conducted two successful oil bid rounds 
in 2009, but the significant increases in oil output and 
revenue are still several years in the future. It is going to 
take probably a decade for some of the less developed fields to 
come on line. Others will be coming on line within, we hope, 3 
to 5 years with greater production, and the Government of Iraq 
has to significantly improve its infrastructure to handle the 
increased output.
    Now, the Iraqis are increasingly using their own resources 
to fund themselves. And their funding now does exceed the 
United States in terms of their commitment to their own 
development and reconstruction. In 2009, just this past year, 
the State Department adopted guidelines for the Iraqi 
Government matching of assistance funds which requires the 
Iraqis to match at least 50 percent, and the Iraqis have 
already matched or exceeded State foreign assistance funds. We 
have an ambassador in Baghdad who is devoted to making sure 
that the Iraqi Government enforces the matching requirements, 
and we conduct a yearly review of all activities to ensure 
Government of Iraq cost sharing. And on the security side, 
Iraqi spending has already exceeded the Department of Defense's 
funds since 2006. Iraq spent $9.6 billion on its own security 
last year. It is budgeted to spend $11 billion in 2010, far 
exceeding our spending.
    So we are on the right trajectory. We just have to keep 
everybody pointed where they need to go.
    Mrs. Lowey. Thank you. And I know that we will be wanting 
to follow this issue, and we appreciate the numbers, and we 
look forward to continuing the conversation.
    Ms. Granger.
    Ms. Granger. Thank you. Before I ask just a brief question, 
I want to say that as the co-chair of the Turkey Caucus, I 
certainly share the Secretary's statements about the importance 
of U.S.-Turkey relations and Turkey's importance to the region 
and certainly to our efforts in Afghanistan.

                                PAKISTAN

    I have one question having to do with Pakistan. This 
subcommittee has provided significant funding, $1.2 billion, 
for nonmilitary aid to Pakistan in fiscal year 2010. That is 
roughly triple what was provided in fiscal year 2008, and there 
is now a new request for $344 million in the fiscal year 2010 
supplemental. I understand there is significant money still in 
the pipeline, unspent funds from prior years. I would like to 
know how much of that is unspent, and if it is unobligated and 
unspent, then why is there an emergency appropriation needed?
    Secretary Clinton. Congresswoman, I will have to take that 
for the record. We will get back to you immediately because I 
don't know the exact amount that might be unspent. I don't 
think there is much, if any, that is unobligated. But let me 
get to you specifically what is unspent.
    Ms. Granger. Thank you, Madam Chair.
    Mrs. Lowey. Thank you.
    Mr. Schiff.
    Mr. Schiff. Thank you, Madam Chair.
    Madam Secretary, I wanted to applaud you and Ambassador 
Holbrooke for the new approach to foreign aid that you have 
initiated to try to bypass some of the Beltway bandits and get 
foreign aid out of the Beltway and use indigenous nonprofits to 
help do the work, particularly in Pakistan. And I hope it is a 
policy that will be replicated around the world in terms of our 
foreign aid program. So I am a full supporter.
    I do think there were some substantive questions that were 
asked, and I had a chance to meet with some of our staff about 
it and have a discussion about the pace of moving in this 
direction. And I think it was Dr. Cullitson wrote a dissent 
through the State Department channels about some of the 
concerns he had expressed that there wasn't the capacity, for 
example, in Pakistan and maybe Afghanistan to undertake this 
effort so quickly.
    I am all for doing this as fast as it can possibly be done, 
and I think it is a great move. But I wanted to get your sense 
and how you think it is going, whether--I don't know if those 
concerns have percolated to you, but whether you think there is 
any legitimacy to them and whether any retooling needs to 
happen.
    Secretary Clinton. Well, Congressman, I certainly think it 
is quite challenging to identify, vet, fund, hold accountable, 
subject to oversight new recipients of aid. That includes the 
Afghanistan Government where we have a process where we are 
certifying ministries. If we believe they can be held 
accountable for money we give them, we do so, but there are 
very few that yet have met that standard for us. Two of the 
NGOs that are on the ground actually performing the functions--
which is one of the reasons why we are trying to get more aid 
in a direct line so it is USAID personnel on the ground, State 
Department personnel on the ground. But it is challenging.
    And similarly in Pakistan, there were a number of decisions 
that had been made in the past to fund very worthy 
organizations to provide services, education, rule of law, and 
training those kinds of important programs. But, the 
circumstances under which they operated were practically 
impossible. So even the best-intentioned, best-trained, most 
honest grant recipient couldn't get into the FATA, couldn't 
deliver the services.
    So there are security problems, there are corruption 
problems, capacity problems. But we did make the decision to 
look at every single grant and just hold them to the highest 
possible standard. We will continue to do that. But we have 
undertaken a very big task to try to supervise where the money 
goes and then try to find what the results are so that we can 
tell you that we are actually making progress. But I don't know 
any other way how to proceed.
    And again, I would hope that you and others would look at 
this regional stabilization strategy so that you can see what 
we are trying to do and also see the results, because, you 
know, there are a lot of positive things that we have gotten 
done: the National Solidarity Programme, which I know this 
committee supports.
    But, for example, one of the first questions that I got 
when I came to the Congress last year is, Why don't we do 
anything about Afghanistan's agriculture? And I said, We are 
going to. That is one of our highest priorities. Well, now we 
have 89 agricultural experts on the ground, 64 from USDA, 25 
from USAID. We have a rapid response team where USAID is 
issuing vouchers to farmers in 18 provinces, and in particular 
Helmand and Kandahar, for them to get better seeds and better 
fertilizer and the like.
    I mean, we are really moving on the ground, but sometimes 
the complexity of what we are trying to do kind of interferes 
with us delivering both sides of the story, what we are doing 
and how successful it is, yet how far we have to go. But that 
is the full range of what we are trying to get our arms around.
    Mr. Schiff. Thank you.
    Mrs. Lowey. Madam Secretary, you have been very generous 
with your time. We have one, two, three, four, five, six 
Members.
    Ms. McCollum. I have to go to Budget, Madam Chair.
    Mrs. Lowey. We have five Members who are signaling they 
would like to ask you a question. If they can control 
themselves and ask the question in 1 minute, would that be good 
for you?
    Secretary Clinton. Yes; 1-minute question and 1-minute 
answer, we will try to do that.
    Mrs. Lowey. Okay. Mr. Rehberg.
    Mr. Rehberg. Thank you, Madam Chair. And I assume we can 
ask unanimous consent to keep the record open for a period of 
time so we can share additional questions with the Secretary.

                                  MCC

    I have more on UNICEF and orphans in Haiti and such. My 
question is quick. Having been a former executive branch person 
who--I separated a program very popular to our administration 
which at that time was the Consensus Council. After our 
administration left, it got moved back into an agency, and it 
ultimately disappeared. I look at some of the press on the MCC, 
or the Millennium Challenge, and I see that there is some 
movement on the part of the administration to consider moving 
that independent agency back into anotheragency rather than it 
remaining independent. Can you give us some assurances? Because your 
request is the lowest that we have ever seen from the Millennium 
Challenge. It is not as low as we have appropriated it, but it is the 
lowest request that we have seen. Could you give us some assurances 
that that is not going to be rolled into another agency and then 
ultimately----
    Secretary Clinton. Congressman, we have no such plans, and 
I believe we have a significant increase for MCC this year. Am 
I looking around here? Yes, we have a 15 percent increase in 
our budget request. 
    Mr. Rehberg. Mine shows 1.28. Is that not correct? Well, I 
don't have it in front of me right this minute. Our 
appropriations was 1.1-, but that wasn't the request from the 
administration the last time.
    Secretary Clinton. Well, we will get you the--but rest 
assured, I support MCC. I Chair the Board. I have frequently 
spoken about the merits of MCC.
    Mr. Rehberg. So the press reports are just speculation that 
it is going to be moved to a different agency?
    Secretary Clinton. Well, I can't imagine that there would 
be anything wrong in any press reports. So I don't know how to 
respond.
    Mr. Rehberg. I just wanted to make sure that that press 
report was wrong.
    Secretary Clinton. Yes, sir.
    Mr. Rehberg. Thank you.
    Mrs. Lowey. Just for the record, we were at 1.1- last year. 
I think you have asked for 1.27-. And it is my recollection 
that the administration asked for a very generous amount. The 
Senate cut it back tremendously, and in negotiations we have 
managed to bring it up a little bit. But I know there will be a 
great deal of discussion on that issue and focusing on----
    Mr. Rehberg. Well, that was my point. They asked for more 
before, and the Senate or--I was just wondering why the 
reduction on their ask.
    Mrs. Lowey. Maybe they were just being more realistic, but 
you can certainly request that of the Secretary.
    Ms. Lee.

                                 PEPFAR

    Ms. Lee. Thank you very much, Madam Chair.
    Very quickly, let me just thank you, first of all, once 
again, for bringing on Dr. Eric Goosby to run our global 
programs through the President's Emergency Plan for AIDS 
Relief. Of course he is a constituent, but he is a phenomenal 
person, and thank you so much for that.
    Let me just ask you about PEPFAR, the Global Fund, and how 
do these initiatives fit within the new Global Health 
Initiative? I am concerned that PEPFAR--it is my understanding 
that we have $48 billion. That is what our commitment was for 5 
years, and now it seems like it is $51 billion over 6 years. So 
I want to make sure, because the need is still very great, that 
we don't back off of our commitment to PEPFAR as well as the 
Global Fund, which President Clinton actually signed the Global 
Aids and Tuberculosis Relief Act in 2000 which set the 
framework for the Global Fund.
    Secretary Clinton. We are committed to PEPFAR, and what Dr. 
Goosby is doing, which I fully support, is trying to figure out 
how we can help countries whom we are supporting with treatment 
funds begin to build sustainable health systems. Because one of 
the things that we are aware of is that oftentimes countries 
don't follow through on their own budget commitments to health 
systems because we and other donors are in there providing the 
money. So we want to do everything possible to continue to 
treat and increase the number of people on treatment, but we 
want to build something more institutional. Otherwise, it is 
not sustainable. So that is what we are working on.
    Mrs. Lowey. Mr. Kirk.
    Mr. Kirk. Thank you.

                               WORLD BANK

    Since we were talking about the World Bank--and I think I 
am the only Member of Congress who actually has worked for the 
World Bank--let me be blisteringly specific and legal. No World 
Bank projects have been recently approved for Iran, but several 
World Bank projects have been approved, and money has not been 
provided. According to the World Bank's own Web site, as of 10 
minutes ago, two major projects--the northern cities water 
project, and the Alborz land management project--have $258 
million in undisbursed, nonspent World Bank--and I will be 
legal--International Bank for Reconstruction Development, IBRD, 
funds that are pending.
    Now, as you know the World Bank as well as I do, the IBRD 
does not support projects. Checks from the IBRD under its 
charter at the Bretton Woods conference is paid directly to the 
Finance Ministry of the Islamic Republic of Iran, a government 
which you have said has stolen an election and is subject to a 
creeping military coup.
    So the question that I would have is, will the 
administration seek to block the disbursement of $258 million 
in World Bank funds from 1818 H Street, Washington, D.C., to 
support the northern cities water project and the Alborz land 
management project, which would be paid directly to the Finance 
Ministry of the Islamic Republic of Iran?
    Secretary Clinton. Well, Congressman, we will certainly 
take this up with the World Bank. As you point out, the funds 
have not been disbursed. I don't, sitting here today, know the 
reasons why they have not been disbursed, but we will look into 
it immediately.
    Mr. Kirk. Let me briefly interrupt you. These fundshave 
been disbursed on a regular basis. So we have seen hundreds of millions 
of dollars transferred from the World Bank to the Islamic Republic of 
Iran's Finance Ministry. You have another $258 million to go. So now 
that over 400 House Members and Senate Members have voted to cut off 
gasoline for Iran, certainly we could stop the disbursement of 
assistance.
    You and I were not born yesterday. We would know that the 
money paid to the Islamic Republic of Iran's Finance Ministry 
is extremely fungible. I would suggest the analogy is we would 
certainly have cut off money going from an international 
institution to the Nazi Treasury, even if the Nazis claimed 
that it was going to support some project.
    Secretary Clinton. Well, Congressman, we will raise this 
with the World Bank, and we will get back to you.
    Mr. Kirk. Thank you.
    Mrs. Lowey. Mr. Rothman.
    Mr. Rothman. In 1 minute, Madam Secretary, will you tell 
the American people why, if they would like a safer world and 
don't want to invest rightfully so, or are reluctant to invest 
American men and women's blood in defending what needs to be 
defended overseas to protect our beloved United States of 
America, it is important to have diplomats and the resources 
for those diplomats?
    Secretary Clinton. Well, your question reminds me of that 
famous saying by Winston Churchill: Jaw, jaw is always better 
than war, war. Talk and talk and talk and talk, and sometimes 
it tries the patience, and it makes people crazy with 
frustration. But talking and diplomatic activity and engagement 
is far preferable to having to engage in war.
    Mr. Rothman. At 1 percent of the budget.
    Secretary Clinton. Yes, that is right.
    Mr. Rothman. Thank you, Madam Secretary.
    Mrs. Lowey. Madam Secretary, thank you so much for sharing 
your wisdom with us. Thank you for your eloquence. Thank you 
for representing us throughout the world. We personally 
appreciate it, and we look forward to working with you. Thank 
you very much.
    The meeting is adjourned.
    [GRAPHIC] [TIFF OMITTED] T6402A.005
    
    [GRAPHIC] [TIFF OMITTED] T6402A.006
    
    [GRAPHIC] [TIFF OMITTED] T6402A.007
    
    [GRAPHIC] [TIFF OMITTED] T6402A.008
    
    [GRAPHIC] [TIFF OMITTED] T6402A.009
    
    [GRAPHIC] [TIFF OMITTED] T6402A.010
    
    [GRAPHIC] [TIFF OMITTED] T6402A.011
    
    [GRAPHIC] [TIFF OMITTED] T6402A.012
    
    [GRAPHIC] [TIFF OMITTED] T6402A.013
    
    [GRAPHIC] [TIFF OMITTED] T6402A.014
    
    [GRAPHIC] [TIFF OMITTED] T6402A.015
    
    [GRAPHIC] [TIFF OMITTED] T6402A.016
    
    [GRAPHIC] [TIFF OMITTED] T6402A.017
    
    [GRAPHIC] [TIFF OMITTED] T6402A.018
    
    [GRAPHIC] [TIFF OMITTED] T6402A.019
    
    [GRAPHIC] [TIFF OMITTED] T6402A.020
    
    [GRAPHIC] [TIFF OMITTED] T6402A.021
    
    [GRAPHIC] [TIFF OMITTED] T6402A.022
    
    [GRAPHIC] [TIFF OMITTED] T6402A.023
    
    [GRAPHIC] [TIFF OMITTED] T6402A.024
    
    [GRAPHIC] [TIFF OMITTED] T6402A.025
    
    [GRAPHIC] [TIFF OMITTED] T6402A.026
    
    [GRAPHIC] [TIFF OMITTED] T6402A.027
    
    [GRAPHIC] [TIFF OMITTED] T6402A.028
    
    [GRAPHIC] [TIFF OMITTED] T6402A.029
    
    [GRAPHIC] [TIFF OMITTED] T6402A.030
    
    [GRAPHIC] [TIFF OMITTED] T6402A.031
    
    [GRAPHIC] [TIFF OMITTED] T6402A.032
    
    [GRAPHIC] [TIFF OMITTED] T6402A.033
    
    [GRAPHIC] [TIFF OMITTED] T6402A.034
    
    [GRAPHIC] [TIFF OMITTED] T6402A.035
    
    [GRAPHIC] [TIFF OMITTED] T6402A.036
    
    [GRAPHIC] [TIFF OMITTED] T6402A.037
    
    [GRAPHIC] [TIFF OMITTED] T6402A.038
    
    [GRAPHIC] [TIFF OMITTED] T6402A.039
    
    [GRAPHIC] [TIFF OMITTED] T6402A.040
    
    [GRAPHIC] [TIFF OMITTED] T6402A.041
    
    [GRAPHIC] [TIFF OMITTED] T6402A.042
    
    [GRAPHIC] [TIFF OMITTED] T6402A.043
    
    [GRAPHIC] [TIFF OMITTED] T6402A.044
    
    [GRAPHIC] [TIFF OMITTED] T6402A.045
    
    [GRAPHIC] [TIFF OMITTED] T6402A.046
    
    [GRAPHIC] [TIFF OMITTED] T6402A.047
    
    [GRAPHIC] [TIFF OMITTED] T6402A.048
    
    [GRAPHIC] [TIFF OMITTED] T6402A.049
    
    [GRAPHIC] [TIFF OMITTED] T6402A.050
    
    [GRAPHIC] [TIFF OMITTED] T6402A.051
    
    [GRAPHIC] [TIFF OMITTED] T6402A.052
    
    [GRAPHIC] [TIFF OMITTED] T6402A.053
    
    [GRAPHIC] [TIFF OMITTED] T6402A.054
    
    [GRAPHIC] [TIFF OMITTED] T6402A.055
    
    [GRAPHIC] [TIFF OMITTED] T6402A.056
    
    [GRAPHIC] [TIFF OMITTED] T6402A.057
    
    [GRAPHIC] [TIFF OMITTED] T6402A.058
    
    [GRAPHIC] [TIFF OMITTED] T6402A.059
    
                                           Thursday, March 4, 2010.

               U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT

                                WITNESS

DR. RAJIV SHAH, ADMINISTRATOR, UNITED STATES AGENCY FOR INTERNATIONAL 
    DEVELOPMENT

                 Opening Statement of Chairwoman Lowey

    Mrs. Lowey. The Subcommittee on State and Foreign 
Operations will come to order. Today we welcome Dr. Rajiv Shah, 
Administrator of the U.S. Agency for International Development, 
for his first official appearance before our subcommittee. I am 
so pleased, Dr. Shah, that you assumed these responsibilities. 
We are really delighted that you are at the helm of USAID and 
appreciate your leadership in coordinating the United States 
Government response to the crisis in Haiti, as well as the 
tireless efforts of your colleagues at USAID. We look forward 
to discussing your long-term vision for development and global 
health, and we really appreciate your taking the time to join 
us here today. 
    As I noted last week, the mounting federal debt and budget 
deficits, as well as the need to create jobs and support 
economic recovery, will make it difficult to sustain all of the 
priorities outlined in the President's fiscal year 2011 budget 
for USAID. Within the minimal proposed increases in USAID's 
operating expenses and humanitarian assistance, funding is 
requested to continue the development leadership initiative, 
which has been a priority of this subcommittee. With these 
additional staff, USAID should decrease its reliance on 
contractors, reduce the size of contracts and grants, and 
increase direct oversight of these grants and contracts, 
leading to better performance and outcomes.
    In addition to an overview of how the DLI has been 
implemented over the past three years, I hope you will describe 
the process to ensure that the 200 new foreign service officers 
included in the fiscal year 2011 budget have the technical 
skills to carry out the Administration's and Congress's 
programmatic priorities. While efforts are underway to ensure 
that new hires have expertise in climate change and 
agriculture, experts on safe water, gender integration, and 
microfinance are also critical to the agency.
    The President's proposed assistance budget prioritized 
three issues: global health, agricultural development and food 
security, and climate change. These increases, however, are 
funded in part by cuts in other areas, including many 
congressional development priorities. Basic education is 
reduced by $82 million, safe water programs by $53 million, 
biodiversity programs $92 million. I hope you will explain for 
us how the budget for these programs was determined.
    For example, is the reduced funding a result of reduced 
demand? In the case of education, with 72 million children in 
the developing world not in school, this surely cannot be the 
case. Education is the essential foundation for health, 
economic development, gender equality, and long-term security. 
With the growing youth bulge in the developing world, children 
must be given the opportunity to become productive contributors 
to their societies. Access to education is the first vital step 
in this process.
    The budget's request of $1.35 billion for food security and 
agricultural development would support the Feed for the Future 
strategy an accountable and realistic plan that should increase 
agricultural development, especially among the poorest of the 
poor. How will USAID coordinate with other private and 
multilateral efforts in this arena? Will the Millennium 
Challenge Corporation investments in agriculture be adjusted to 
ensure that the core principles of this initiative are 
incorporated in their programs?
    Climate change is also a significant priority in this 
budget. Though increases for this initiative are primarily 
funded through climate funds at the Department of Treasury, I 
am concerned that USAID does not currently have extensive 
expertise in this area, and the current staffing plan calls for 
only 15 new officers. How does USAID intend to provide proper 
oversight and management of this new initiative? Because 
successful programs have maximum impact when efforts are well 
coordinated, I hope you will assure us that USAID's plans to 
coordinate with multilateral funds and the State Department, as 
well as provide insight into who is taking the lead on climate 
accord negotiations.
    Finally, the global health initiative provides a long 
overdue opportunity to fully integrate our health programs. The 
budget includes a $200 million reserve fund for GHI-plus 
countries. How will these countries be determined? What 
criteria will be used to make the selection? While global 
health programs have effectively demonstrated impact and 
tracked their results, the GHI strategy calls for stronger 
monitoring and evaluation. Please explain the additional 
efforts to achieve greater accountability for all global health 
programs, as well as steps you are taking to ensure that any 
changes bolster, not weaken, the effectiveness of current 
health programs.
    Both the food security and GHI strategies prioritize the 
inclusion of women and girls. I have consistently voiced a need 
for women to be in the front and center in the development 
agenda, and I am encouraged by their inclusion in these 
initiatives. Can you outline how programs will be structured to 
ensure that this priority becomes a reality? Are there any 
other steps USAID is taking to ensure gender considerations are 
integrated across all programs? As these initiatives progress 
and USAID's workforce grows, you must have the capacity to 
develop robust policy options, outlining budgetary needs, 
monitor and evaluate programs. What are you doing to address 
these gaps in USAID internal capacity? Can you speak to your 
involvement in the presidential study directive and the 
Quadrennial Diplomacy and Development Reviewprocesses? Do you 
believe the outcome of these efforts will change or improve program 
implementation?
    Dr. Shah, I look forward to our discussion today and 
working closely with you. And before we move to your testimony, 
let me turn to Ms. Granger, the Ranking Member, for her opening 
statement. Ms. Granger.

                     Opening Remarks of Ms. Granger

    Ms. Granger. Thank you, Madam chair. I am very pleased, Dr. 
Shah, that you are with us today to provide testimony and 
answer questions about fiscal year 2011 and your budget 
request. The Administration's fiscal year 2011 request for the 
State and Foreign Operations Bill, as you know, is $56.6 
million, which is a double-digit increase over the fiscal year 
2010 regular appropriation. Such a large increase comes at a 
time when domestic agencies are being cut or held at last 
year's levels.
    I have many questions about such large funding increases 
going abroad during these difficult economic times at home. I 
look forward to hearing the justification for these increases, 
including the funds requested for USAID's development 
workforce. I want to know what we are achieving with the 700 
staff already funded, and if 200 additional officers are 
required. As you know, I have advocated for increasing staff in 
order to ensure the proper balance of diplomacy, development, 
and defense so that we can more effective achieve our national 
security goals. But these investments, of course, have to be 
made wisely.
    I also hope the new funding requested for the 
Administration's initiatives, like global health, food 
security, and climate change, will be addressed. The increases 
requested for each are significant, and they come on top of new 
resources that were provided in fiscal year 2010. We need to 
better understand how these funds will be programmed, what is 
new and different about these new initiatives, and if such 
large increases can be effectively absorbed.
    Another topic I hope the Administrator will address is 
oversight of foreign assistance dollars. Proper management and 
efficient use of these resources are key priorities for me, 
particularly during this challenging economic period. I look 
forward to working together with the Chair, as always, and Dr. 
Shah to ensure that resources provided by this subcommittee are 
responsibly programmed in the field. I know that only days 
after you were sworn in as Administrator, you were tapped to 
lead the U.S. government's response to the devastating 
earthquake in Haiti. That was an enormous responsibility, so we 
did not get to have some time to talk about the subcommittee 
and your vision for the agency you lead. I certainly understand 
that, but I hope we can begin that conversation today. Thank 
you very much, and thank you, Madam Chair, as always.
    Mrs. Lowey. Thank you. Administrator Shah, your full 
statement will be placed in the record. Please feel free to 
proceed as you will. If you choose to summarize your oral 
statement, I know we will leave time for questions. Please 
proceed, and thank you again for being with us today.
    Dr. Shah. Thank you, Chairwoman Lowey, Ranking Member 
Granger, and Members of the committee. I am honored to be with 
you today to support the President's fiscal year 2011 Foreign 
Operations Budget Request.
    As you know, just a few days after my swearing in, I was 
tapped to help lead our effort to respond to the earthquake 
that occurred in Haiti. And this past weekend, Chile suffered a 
devastating earthquake as well. Our thoughts and prayers, as 
are yours, have been with the people of Chile and Haiti as we 
provide humanitarian relief and assistance. Our response in 
Haiti was targeted, swift and aggressive. Working with partners 
from across the federal government, we launched the largest and 
most successful international urban search and rescue effort 
ever. We created a robust urban food distribution system that 
reached more than 3 million individuals with critical food 
supplies at a critical time. And we increased the nation's 
infrastructure, especially the airport and the seaport, 
allowing other countries to effectively participate in the 
relief operation.
    Our coordinated medical assistance, and direct services 
provided by U.S. personnel, allowed for treatment for more than 
30,000 patients and performed hundreds of surgeries, saving 
life and limb. Haiti faces a long and steep road to recovery, 
and as the operation now transitions from rescue to recovery, 
we will continue to stand by the people of Haiti, and 
appreciate the support of this committee in doing so.
    At the same time, we will not lose sight of our other 
priorities, many of which you have summarized for us, including 
the important work USAID does to help countries achieve their 
development goals, and the critical need to strengthen our own 
capacity and our own accountability in pursuit of this mission. 
As President Obama said in Oslo last December, security does 
not exist when people do not have access to enough food or 
clean water or medicine and shelter that they need to survive.
    Secretary Clinton strongly shares this view, and has asked 
us to elevate development to stand with diplomacy and defense 
as part of our nation's foreign policy. We are doing so through 
the Presidential Study Directive on U.S. development policy and 
the Quadrennial Diplomacy and Development Review. Both 
processes allow for significant presence and representation of 
USAID and for myself.
    The fiscal year 2011 budget request will support 
development priorities that contribute directly to ournational 
security. Specifically, it focuses on three areas: critical frontline 
states, urgent global challenges, and aid effectiveness and 
accountability.
    In critical frontline states, we propose spending $7.7 
billion in State and USAID assistance in support for 
Afghanistan, Pakistan, and Iraq. We have made some progress in 
each of these countries, but we realize that significant 
challenges remain. Our focus on Afghanistan has been achieving 
greater stability and security, and we are beginning to see 
major improvements in health, education, and agriculture.
    The Administration's funding request going forward is 
designed to align with the President's Afghanistan strategy and 
is designed to encourage the stability and opportunity that 
allows for our military to draw down in time. In Pakistan, our 
request supports ongoing efforts to combat extremism, promote 
economic opportunities, strengthen democratic institutions, and 
build a long-term partnership with the people of Pakistan. The 
funding increase in fiscal year 2011 will help USAID reach 
approximately 60,000 more children with nutrition programs, 
increase enrollment in both primary and secondary schools by 
over 1 million learners, and support more than 500,000 farm 
households to improve their agricultural productivity.
    In Iraq, we have transitioned to a new phase in our 
civilian assistance relationship, shifting away from core 
reconstruction activities towards the provision of assistance 
to bolster local capacity in line with Iraqi priorities. USAID 
is promoting economic development, particularly in the private 
sector, strengthening agriculture and focusing in health and 
education.
    Our second budget priority is meeting urgent global 
challenges. In this area, we request $14.6 billion in State and 
USAID assistance to support local and global solutions to core 
transnational problems. In global health, we are requesting 
$8.5 billion in State and USAID assistance in support of the 
President's Global Health Initiative. With this additional 
funding, we will build on our strong record of success in 
saving lives in HIV/AIDS treatment, TB, and malaria control, 
and seek to focus on areas where progress has lagged, such as 
obstetric care, newborn care, and basic nutrition for targeted 
populations.
    In food security, we are proposing to invest $1.2 billion 
for State and USAID programs in food security and agriculture, 
in addition to $200 million set aside for nutrition. With these 
additional funds, we will work in countries in Africa, Central 
America, and Asia, to combat the currently rising trend of 
extreme poverty and unnecessary hunger and starvation.
    In climate change, we propose to invest $646 million for 
State and USAID programs, part of the Administration's overall 
$1.4 billion request on climate change. USAID will support the 
implementation of focused programs in sustainable landscape 
investments, as well as working with countries to develop low 
carbon development strategies and clean energy supply and 
energy sector reform.
    In humanitarian assistance, State and USAID propose to 
invest $4.2 billion. This funding allows us to assist 
internally displaced persons, refugees, and victims of armed 
conflict and natural disasters worldwide, such as the disasters 
in Haiti and Chile. With these combined investments, we will 
save lives and help make people less vulnerable to extreme 
poverty.
    Our third major budget priority focuses on enhancing 
USAID's effectiveness and accountability by investing $1.7 
billion in ongoing rebuilding efforts for USAID's personnel and 
infrastructure.
    I want to thank the committee for its foresight and 
leadership in this area, especially with respect to the 
Development and Leadership Initiative, which we believe is 
central to helping our agency rebuild and be successful. We are 
currently rebuilding our capabilities in evaluation, planning, 
budget management, and policy research to ensure that we can 
incorporate the best practices of development and innovations 
from the field in our work going forward.
    We also seek to recruit, hire, and retain best-in-class 
development professionals and accelerate the pace at which we 
deploy personnel to our priority areas and priority countries. 
By reducing our reliance on contractors to design and evaluate 
programs, we hope to save taxpayer dollars and also enable 
greater oversight and more effective program implementation.
    I know this is a time of great economic strain for so many 
Americans. For every dollar we invest, we must show results. 
That is why this budget supports programs vital to our national 
security and our ability to account for outcomes. The United 
States must be able to exercise global leadership to help 
countries as they develop more stable and sustainable 
foundations for security and well-being. This requires the 
effective use of all instruments of our national security, 
including development, and it requires a relentless focus on 
results and accountability, a focus we embrace with enthusiasm.
    Thank you very much, and I look forward to answering your 
specific questions as we go through the hearing. Thank you.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402A.060
    
    [GRAPHIC] [TIFF OMITTED] T6402A.061
    
    [GRAPHIC] [TIFF OMITTED] T6402A.062
    
    [GRAPHIC] [TIFF OMITTED] T6402A.063
    
    [GRAPHIC] [TIFF OMITTED] T6402A.064
    
    [GRAPHIC] [TIFF OMITTED] T6402A.065
    
    [GRAPHIC] [TIFF OMITTED] T6402A.066
    
    [GRAPHIC] [TIFF OMITTED] T6402A.067
    
    Mrs. Lowey. Thank you. I gather there is a vote, one 15-
minute vote, followed by two 5-minute votes.
    But let me proceed quickly because our discussion, I know, 
will be very important. I am going to be calling on Members 
based on seniority who were present when the hearing was called 
to order, and I will alternate between majority and minority. 
And we are going to each keep our questions to five minutes, 
including myself.
    As you well know, I am a strong believer in coordination 
and have been encouraging USAID and the State Department to 
improve and streamline their interagency effort. I can still 
remember a trip not too long ago to Africa where I made a point 
of asking the Ambassador, bring everyone together who is doing 
anything. Well, it was a wonderful gathering, about 50 people. 
No one knew anybody, and I thought it was a very productive 
meeting. And I think what was key there was that everyone was 
doing excellent work, but they were doing it in their own 
stovepipes of excellence, and they really did not know each 
other.
    So I think it is absolutely essential that we bring people 
together, and that the agency knows who is doing things in the 
private sector. It is absolutely essential, not only to be 
effective, but to save dollars.
    I know that Secretary Clinton shares this strong interest 
in coordination, and her efforts to establish food security and 
global health strategies reflect this vision, and I am pleased 
you have made this a priority. Maybe you can tell us how you 
are incorporating the principle of coordination into USAID 
programs. I was pleased to see USAID/DOD collaboration in Haiti 
as the lead agency in the Haitian relief efforts, and what 
lessons have you learned. So perhaps we will begin with those 
two. Thank you.
    Dr. Shah. Thank you, Madam Chairwoman. I would like to 
start with global health. That is an area where I am actually 
very proud of the way we are approaching our work. We have 
established a governance group for global health that includes 
the leaders of all of the major implementing programs, from NIH 
to CDC to USAID to the State Department's Office of the Global 
AIDS coordinator.
    Mrs. Lowey. What about international?
    Dr. Shah. Well, we are doing that here in Washington, and 
we have established an operational group that will focus 
primarily on USAID programs working with CDC and PEPFAR, since 
those are the largest groups present in countries and in 
Missions.
    Mrs. Lowey. Would you bring the information at least to 
these gatherings as to what are the countries doing, certainly, 
and what the private--CGI is doing so much, Nike--I can go on, 
Bill Gates.
    Dr. Shah. Absolutely.
    Mrs. Lowey. And Melinda.
    Dr. Shah. So thank you. We have reached out, for example, 
to more than 20 countries. We are surveying the specific full-
range of health-related activities, both in U.S. Government 
programs and across major partners, foundations, other donors, 
and multilateral institutions, like the Global Alliance for 
Vaccines and Immunization and the Global Fund, both of which we 
have reached out to specifically. What we will then do is 
select a smaller subset of those countries for the initial 
implementation.
    That implementation will involve us sitting down, looking 
at all of our contracts and programs, literally unpacking the 
portfolio of work, and entering into a new long-term 
partnership with the government and with other partners that is 
much more systems oriented, much more focused on a set of 
outcomes that are not simply disease-specific treatment 
outcomes, but maternal health outcomes, child health outcomes, 
and where all of our partners that receive our funds have a 
very specific exit strategy.
    It may be a long time before they are able to exit and the 
governments can take over the responsibilities of providing 
services, but they nevertheless need to be thinking about 
sustainability and exit from the beginning. And I think it is 
going to be a challenging process to go through that because it 
will involve rewriting contracts, restructuring programs, 
setting new outcomes. But it puts our entire programmatic 
approach on the table, as opposed to simply programming in a 
small increment of additional resources. And by doing this, we 
hope to significantly improve the effectiveness.
    I was talking just yesterday with the Global Alliance for 
Vaccines and Immunization. They have set aside nearly a billion 
dollars for health system strengthening, and we can leverage 
some of those funds by encouraging them to partner with us in 
these countries. So we will use the themes of focus, of 
leverage, of being very results oriented, and fundamentally 
changing the way we do our contract and outsourcing work to be 
systems oriented and more respectful of and in a deeper 
partnership with government. And that process is already 
underway. I suspect we will have selected countries by the end 
of April based on country feedback, based on other partners, 
and based on a country's commitments to take forward and 
sustain these big investments in their health sector.

                                 HAITI

    Mrs. Lowey. Tell us about coordination in Haiti. I think it 
is important that we understand how that has been proceeding.
    Dr. Shah. So in Haiti we have set up an office of the 
relief coordinator as part of the USAID group there, and we 
have a joint task force with the military, JTF Haiti. Between 
those two organizations, we are effectively allowing the entire 
humanitarian community to source tasks to the U.S. military in 
order to complete those humanitarian assistance tasks. And we 
track those taskings. We organize and prioritize them. And we 
do really work together as a community. In order to achieve 
many of the outcomes we have talked about, we leveraged heavily 
the U.S. Department of Agriculture, the Department of Health 
and Human Services, a number of the U.N. partners, but it 
really was that Office of the Relief Coordinator we established 
that brought together the military, the international 
humanitarian assistance groups, and other U.S. agencies in what 
is a challenging environment, but I think a far more effective 
coordinating environment.
    The feedback I have gotten from NGO partners has been that 
their experience of engaging in that process and with the 
military has been better than in prior disaster relief 
situations, and we hope that this will become a model going 
forward for how to expand and coordinate the effort and 
humanitarian responses.
    Mrs. Lowey. Before I turn to Ms. Granger, I would like to 
say that I hope you can keep us up to date on that because it 
is well known that there are thousands of NGOs that were 
operating in Haiti before this disaster, and currently are 
operating in Haiti. And many people will comment, so what were 
they doing? Now we know because we interact with these people--
we know that they are good people accomplishing good work, and 
the challenges are enormous. But I think it is very important 
that when contracts are given, and when NGOs are functioning, 
that there is really an understanding about how their work fits 
in as part of the whole, and that we have expert accountability 
sessions. I think it is absolutely essential.
    Again, where I started, when the economy is in such 
distress here--and the American people are good people; they 
want to help. But they want to be sure that the money is not 
going down the tubes to keep people employed, but that it is 
going to do good work. So I think this whole issue of 
coordination, accountability, working with all of the actors in 
the region, and your ability to let us know who is doing what 
and what is needed at any time is really essential.
    Thank you. Ms. Granger.
    Ms. Granger. Thank you. I want to return to your emphasis 
on global health. I know that pandemics are a global issue, by 
definition. I served on the Labor and HHS subcommittee, and 
that is when I first worked with pandemics. I know that USAID 
has made significant efforts to combat these deadly viruses.
    On February 24th, the World Health Organization noted 
specific concerns about the recent spread of a virus in West 
Africa and the possibility of future outbreaks when winter 
arrives in the southern hemisphere. I am also still keeping my 
eye on H5N1, which has already claimed, as you know, lives in 
Egypt and Vietnam this year. I know USAID has taken steps to 
acquire pre-pandemic vaccines for your effort to combat these 
viruses on a global scale. I am also aware of the important 
role of antivirals, such as Tamiflu, in combating influenza 
pandemics. In 2009, the Congress provided $50 million and 
reprogrammed $35 million to prepare for the H1N1 pandemic. How 
are these funds being programmed? And now that the H1N1 
thankfully was not as severe as predicted, have USAID's plans 
changed? Specifically, are both vaccines and antivirals being 
stockpiled and at what levels? What progress is being made? I 
am very concerned about the ability to have these plans and 
antiviral resources in place. Could you address that?
    Dr. Shah. Well, thank you. We are very specifically focused 
on this. We have been working in a close partnership with both 
the World Health Organization, as part of the larger 
international pandemic influenza response and surveillance 
activity, and with CDC in that context. I request the 
opportunity to get back to you on the specifics of what we have 
stockpiled and which particular commodities and products we 
have purchased and in what volumes with respect to that.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402A.068
    
    [GRAPHIC] [TIFF OMITTED] T6402A.069
    
    [GRAPHIC] [TIFF OMITTED] T6402A.070
    
    [GRAPHIC] [TIFF OMITTED] T6402A.071
    
    Ms. Granger. And also how you determine the amount of those 
antivirals. If you could get back to me on that, I would 
appreciate it. Since I have a little more time, I would also 
like to ask you one more question. I know that in the previous 
Administration, the USAID Administrator was dual-hatted as a 
Director of Foreign Assistance, a position that was created 
within the State Department. So I would like to know what you 
are going to do about that position. And again, returning to 
what the Chair asked about, the coordination of foreign policy 
agencies, what principles will be applied in that coordination, 
and delivery approaches?
    Dr. Shah. Well, thank you. I think we are very closely 
coordinated with the State Department. In fact, I report to the 
Secretary, and we take that very seriously. We have a regular 
development meeting, which is a standing essentially one-on-one 
discussion. We have a series of other ways to report and plug 
in on a set of priorities.
    In terms of the specific question of the organizational 
structure, we are working through a lot of that through the 
QDDR and the PSD processes. Those processes are now in a much 
more specific operational frame. So phase two of the QDDR, 
which is the phase we are currently in, is working specifically 
to develop a handful of operational plans that we can then 
propose in the April/May time frame. And that, I think, will 
address a number of these things.
    I would just return to one point that I made previously 
when I was confirmed, which was simply that the Secretary has 
been very committed, as is the White House and our own agency, 
to rebuilding our capacities to be more effective and more 
accountable. So we are building our policy planning capacity. 
We are reshaping our evaluation work, and hired Ruth Levine, a 
preeminent scholar from the Center for Global Development, to 
lead that effort. We have a new effort underway to build our 
budgeting processes in a way that allows for more transparency 
and accountability because ultimately accountability is making 
those tough tradeoffs. And we want to be held responsible for 
that.
    So we are doing that in partnership with the State 
Department. And as the QDDR rolls out recommendations, I think 
that will make that more concrete.
    Ms. Granger. Thank you, Madam Chair.
    Mrs. Lowey. What we will do is recess, probably for about 
15 minutes.
    Dr. Shah. Thank you.
    [Recess]
    Mrs. Lowey. Thank you for waiting for us, and the hearing 
will come to order. And we turn to Mr. Israel or Ms. McCollum.
    Ms. McCollum. Thank you, Madam Chair. Well----
    Mr. Israel. Actually, she asks better questions than I do 
anyway.
    Ms. McCollum. Well, actually, technically Mr. Israel and I 
got here together, both on the committee and the Congress. Good 
morning, Doctor, and welcome to all of your hardworking staff 
that are with you. Your vision to restore USAID as the world's 
premiere development agency is critically important to the 
success of this country's international policies. As a member 
of the subcommittee, I am committed to making this vision a 
reality. I want to evaluate and strengthen USAID and ensure 
your agency has the authority and the resources it needs to 
focus on long-term development rather than crisis response and 
contract management.
    This is an exciting moment for USAID and for global 
development. In this past year, President Obama has launched 
two major initiatives, global food security and global health. 
I applaud these commitments from the President. Food security 
and global health are my highest priorities in global 
development. Following today's hearing, I would like to talk to 
you more about both of these efforts.
    At least week's hearing, I had the opportunity to discuss 
with Secretary Clinton about food security, and I would like to 
discuss global security here with you today. Specifically, I 
want to talk about America's efforts to save the lives of 
children around the world. As a physician, as a development 
expert, and a parent, you know better than anyone that the most 
basic measure of a country's development is whether or not its 
children survive. You know that dollar for dollar, U.S. 
investments in child survival produce some of the best results 
because we have simple, inexpensive, and effective 
interventions. And I am encouraged to see the global health 
initiative is beginning to rebalance U.S. global health 
investments.
    Child survival and maternal health, neglected disease, and 
family planning are finally starting to receive more resources, 
but the rebalancing must continue. According to the Kaiser 
Foundation, in the first year of a global health initiative, 
just 6 percent of the total $8.6 billion went towards maternal 
child health. HIV programs received 64 percent. We need to do 
more to save the lives of children. Child deaths are now at the 
lowest level in history, but westill lose 24,000 under the age 
of five every day, 24,000 children under the age of five every day.
    The September 9th article in the Lancet found the rate of 
decline under five mortality as so grossly insufficient to have 
the Millennium Development goals by 2015, particularly in sub-
Saharan Africa and South Asia. Your global health initiative 
sets a goal of saving 3 million children, but it also states 
that nearly 9 million children die every year from preventable 
cause.
    I am going to challenge you and the President to set a more 
ambitious goal. With political will, we can close the gap 
between 3 million and 9 million children's death. This year's 
budget includes an increase for child survival and maternal 
health. So here are my questions. Please share with the 
committee how this investment will be targeted and what results 
the funding will produce. How do investments that save the 
lives of children and mothers fit into the overall global 
health initiative? And how will the new focus on integration 
across all global health programs work in practice?
    You are a numbers person, so I would like to hear some of 
the analysis from you as to what we can expect from our return 
in investment and saving the lives of children. Thank you, 
Madam Chair.
    Dr. Shah. Over the past 10 years, we have had tremendous 
progress in maternal and child health in both of those groups. 
As you identify, maternal and child health indicators, like 
neonatal mortality and maternal mortality have lagged and are 
projected to continue to lag such that we will not hit the 
MDGs. So the global health initiative is targeting exactly that 
statistical gap between hitting the MDGs for those indicators 
and missing that measure of success. And so we will basically 
focus on a few interventions to help make that happen.
    The first is integration at the health system level. By 
unpacking our projects and putting them back together against a 
set of specific indicators that relate to maternal and child 
health, we will effectively have significant additional 
resources going to child health and to maternal health.
    So, for example, we will look at existing implementation of 
PEPFAR projects. And in cases where we can get both the 
mandated outcomes for those programs as well as use those 
resources to help strengthen the health system and train health 
workers to be skilled attendants at birth, for instance, that 
is a win-win, where you can use existing resources to get 
better maternal health outcomes in a focused way.
    We will do that also with our GAVI partnerships and our 
resources there. Instead of just training immunization workers, 
those workers can also be skilled attendants at birth. They can 
be doing a broader range of things. And we will be looking for 
those synergies and those investments.
    The second part of it is integration at the point of 
service. So a pregnant woman and a child under two really 
should not have to go to three different places or get care 
from different providers. We will really focus on integration 
at the point of service so that there is a single place to go, 
and there are more streamlined interventions. We can do that 
across intermittent preventive therapy for malaria, for 
example, kids provided with immunization. Like that, you can do 
a lot of joint provision of services at the point of delivery, 
and we are exploring how to do that.
    And then finally, we will have some additional resources 
that will target specifically those vulnerable populations. 
Right now, those additional resources are maternal health, 
child health, and nutrition. I think nutrition is often not 
described as being as important as it is. But targeted feeding 
programs in the minus nine to two years of age effort done 
through a health system is probably the single most cost 
effective intervention, outside of basic immunization, in terms 
of improving the quality of life and getting years of life at a 
relatively low cost. And so we are really focusing on that, and 
I think that represents more than a doubling of the actual 
investment in that state. And I hope personally that we can use 
that as the point of an arrow and really bring together both 
the health and food serving intitiatives in a way that will 
give us a much bigger outcome for the investment.
    So those are just some examples. But as I mentioned, in 20 
countries, we are actively starting this process of looking at 
how we will achieve these integrations in those specific areas.
    Mrs. Lowey. Thank you. I understand Mr. Kirk is very 
gracious, and will defer to Mr. Israel.
    Mr. Israel. Thank you, Madam Chair. And thank you, my 
colleague Mr. Kirk, who will be missed on this committee, but 
going on to bigger and better things.
    Administrator, I have been focused on a project that has 
recently been funded, thanks to the bipartisan cooperation of 
this subcommittee, and that is solar villages microfinancing. 
And I am focused on that as a national security imperative. I 
used to be on the Armed Services Committee, and when I was on 
the Armed Services Committee, and I would question generals and 
admirals as to what elements we need for stability and security 
in remote and dark areas of the world, the answer would 
consistently be, well, number one, you need theempowerment of 
women; number two, you need small business models; and number three, 
you need light so the parents can read to their kids and keep their 
streets safe. Terrorists do not like recruiting in the dark. And from 
that, we modeled something called the Solar Villages Initiative, which 
would provide microfinancing in developing areas of the world to deploy 
solar panels, charge solar lanterns, cell phones, generators, dig 
wells, et cetera.
    This subcommittee provided $10 million in financing to 
start that up. Last week, Secretary Clinton acknowledged that 
the funding is in process. I think you are going to send 
somebody up to meet with me shortly to talk about the 
allocations. I just wanted to make sure that this was on your 
radar. And we have not had an opportunity to talk about your 
own views with respect to these programs, and I am interested 
in hearing your assessment as to their viability.
    Dr. Shah. Well, thank you, and thank you for your 
leadership on that issue. I used to carry with me a solar-
powered flashlight. And even in the context of Haiti, we have 
had a number of the partners that we might work with in this 
particular initiative also reach out and offer solar-powered 
streetlights and those types of items--as contributions to the 
Government of Haiti.
    We have taken a position that we would like to accept those 
things, and then sometime during the reconstruction next year 
or the year after put them to use when that can be prioritized. 
So I recognize how important and how valuable this is. I also 
think the intersection between using microfinance in a 
sustainable way, connected to the dissemination of these 
products and services, is a great intersection. We have seen 
that work successfully in some areas like Grameenphone, where 
they did this with mobile phones in Bangladesh. We have seen it 
be less successful in some other areas. So we hope that we can 
design programs that work in the space of using better energy 
technologies.
    I think as our teams work with you, we would like to learn 
more, and I would love to spend more time with you specifically 
to understand the full range of technologies we should be 
thinking about in the context of a solar village framework. 
There are great new technologies, as you know better than 
anyone, that range from the flashlights to the streetlights to 
other solar heating tanks and other things. So there are a 
range of technologies we would like to look to. And it is a 
priority for us to actually invest both in the development of 
these technologies and the deployment, using sustainable 
systems, whether that is microfinance or bottom- of-the-pyramid 
business models that can allow for things to be sold, but 
because of savings makes sense for consumers to buy. And we 
just want to understand the frame. We will present to you the 
set of thoughts we have, and we would like your feedback on 
whether those meet the frame that you were thinking of.
    But I am very optimistic that someday distributed small-
scale clean energy solutions that are essentially off-grid will 
offer a huge amount of human benefit in low-income parts of the 
world, rural communities, and that, potentially could bring 
more people energy than traditional grid-based systems over a 
20-year period. So I think it is a ripe area for investment.
    Mr. Israel. Thank you very much, Mr. Administrator. And 
again, I thank my friend from Illinois for his courtesy.
    Mrs. Lowey. By the way, Mr. Israel, you have other good 
company, too, carrying around the solar flashlights. Before the 
disaster in Haiti, I had an opportunity to interact with 
President Bill Clinton, and the first thing he showed me was a 
solar flashlight. So you have applause far and wide. Mr. Kirk.
    Mr. Kirk. This committee has funded a very expensive 
partnership vetting system for assistance to Gaza and the West 
Bank, which we are now in the second years of delay by the 
administration. The partnership vetting system is wildly 
unpopular with NGOs in the West Bank and Gaza because they just 
want the money, and they do not want much accountability. It 
should be wildly popular with AID because this is a time bomb 
waiting to go off in your PR shop when you fund a terrorist 
sponsored organization.
    Deputy Secretary Lew promised us that we would rapidly see 
this expensive and extensive PVS system that the Chairman and I 
and others of the committee have backed implemented. But still 
zip from you guys.
    Dr. Shah. We do have, as you know a very strong system in 
place in Gaza and the West Bank. And so you do know better than 
anyone how it works and how robust it is. We have been working 
with the State Department and other interagency colleagues to 
abide by congressional guidance to design and roll out a pilot 
of that system in a broader set of contexts.
    So we have been working with our NGO partners. We believe 
we have that pilot ready to be deployed. By Congressional 
mandate, it needs to be deployed both across AID programs and 
across State Department programs as well.
    Mr. Kirk. But you are two years late already, and you have 
got kind of a time bomb waiting to go off. It looks like 
because of pressure from the NGOs you do not want to implement 
it.
    Dr. Shah. Well, we have been in very close context with our 
NGOs. We have a plan to do----
    Mr. Kirk. That is what I am saying.
    Dr. Shah. Yeah.
    Mr. Kirk. That they are delaying your ability----
    Dr. Shah. I will say we are not bowing to pressure from our 
partners and our NGOs. We think we have----
    Mr. Kirk. So how many more years do we go before you 
implement this?
    Dr. Shah. Before we implement the pilot?
    Mr. Kirk. Yeah.
    Dr. Shah. Well, you know, so we will be on the Hill to 
brief the Committee on March 16th to talk about the specific 
rollout of the pilot. I do not think it will be many years. I 
think it will be--I do not want to commit myself to saying it 
will be this year, but we have the construct----
    Mr. Kirk. Oh, so you are saying even by December 31st you 
will not have this implemented?
    Dr. Shah. We have the construct of this designed.
    Mr. Kirk. Right.
    Dr. Shah. We are working with the State Department to make 
sure that we meet the congressional mandate to be able to roll 
this out across U.S. AID programs and State programs jointly--
--
    Mr. Kirk. So before I go to the news media, you cannot even 
promise by the end of this year that this will be implemented?
    Dr. Shah. I believe it will be implemented. I believe the 
pilot will roll out this year, but I will----
    Mr. Kirk. But you cannot promise that. Because you are the 
AID administrator. How about promising this committee that by 
the end of this year, it will be implemented. Take a leap.
    Dr. Shah. Look, I want to make that commitment. We know we 
can do it across our AID programs.
    Mr. Kirk. Right.
    Dr. Shah. We have vetted this with our partners. We have 
developed a pilot framework. We have to check that we can do 
that across the State Department programs as well because the 
law mandates that we do it in a joint fashion, which makes good 
sense. So I can commit on behalf of AID----
    Mr. Kirk. So it looks like the Kirk amendment will be 
necessary to order you to do this.
    Dr. Shah. I do not think so. I think we have been working 
aggressively on this. We will come out with a very specific 
plan on March 16th. I think it is the 15th or the 16th.
    Mr. Kirk. With a date for implementation?
    Dr. Shah. With a date for implementation or----
    Mr. Kirk. That will be in this year.
    Dr. Shah. Yes. I hope--yes. I am prepared for AID programs 
for this to roll out this year. I cannot speak on behalf of the 
State Department right now. I can come back to you with the 
specifics when we are ready to roll that out.
    Mr. Kirk. Okay. In writing.
    Dr. Shah. In writing.
    Mr. Kirk. Yeah, okay. What is your view on sole-source no-
bid contracts? Do you have views that square with the 
President's view?
    Dr. Shah. Absolutely. We have already put into place----
    Mr. Kirk. The President's view is that they are no good.
    Dr. Shah. I have already put in place a board for 
acquisition and assistance review that is looking at a broad 
range of contracting reform issues at USAID. It is a major part 
of our agenda going forward. We are looking at large contracts 
and how to bring those down into smaller chunks. We are looking 
at doing more local investment in local capacity building in 
our contracting.
    Mr. Kirk. But do you support granting sole-source no-bid 
contracts?
    Dr. Shah. Well, I would not want to take a tool completely 
off the table. But no, in general we would much rather compete 
the contracts. There are, you know, times when there is either 
a time pressure or a catastrophic emergency or some unique 
reason why a modest investment in that frame might make sense, 
so I would not make a generalization. But in general, no.
    Mr. Kirk. So in Haiti, World Vision has $91 million in 
projects going, delivered over 5,000 tons of aid. Catholic 
Relief Service has a current contract for $61.7 million. It has 
delivered 5,300 tons of food. CF International, a $52 million 
project. ACDI/VOCA, $37 million, delivered 64 tons. There is a 
long list of people. And when I checked, they all have years of 
experience and language capability, and that is that. When the 
earthquake hit, you decided to override them and give a sole-
source no-bid contract to James Lee Witt Associates that has 
zero French language capability and had never had an AID 
contract in Haiti before. What was the process by which you 
decided they were better than all of these experienced 
partners?
    Dr. Shah. Well, I would not say that we overrode anyone. 
Let me just describe what the purpose of that contract was. We 
were asked by the President to coordinate a whole government 
response and to do that in a manner that connected up very 
closely and effectively deployed significant military assets 
that were going into the state.
    Mr. Kirk. Did you know James Lee Witt was a registered 
congressional lobbyist?
    Dr. Shah. What we did was we needed----
    Mr. Kirk. That is a yes or no question.
    Dr. Shah. No. I want to help describe why we did the 
contract because I made the decision and I stand by it. We 
needed support to understand how to best structure our 
organization and how to best build our 
communicationscapabilities in an environment where we were going to be 
working with a broad range of agencies, including FEMA, including DHHS, 
including the DOD. And by the way, in no prior disaster response have 
we done that. We have not sent disaster and medical assistance teams 
from HHS in an international setting before. We mobilized and sent FEMA 
and several of their search and rescue teams. That had not happened 
previously.
    Mr. Kirk. But let us stick with James Lee Witt. Did you 
know he was a congressional lobbyist?
    Dr. Shah. We ran our process of checks through. We abided 
by every contracting rule in the process. What I needed was 
someone and some organization that had significant experience 
in how to structure these types of broad, whole-of-government, 
expansive response efforts, that knew how to integrate U.S. 
response assets and Haitian response assets.
    Mr. Kirk. Okay. Third time. Did you know he was a 
congressional lobbyist. That is a yes or no question.
    Dr. Shah. I ran the checks. I asked that we follow every 
procedure that we normally follow in accepting a contract.
    Mr. Kirk. Okay. Fourth time. Did you know he was a 
congressional lobbyist. This is a straight question.
    Dr. Shah. Well, I did not ask that question, but I asked 
that we follow every rule. And I said, if there are any red 
flags, let me know, and I looked at the process we followed, 
and we followed our contracting processes.
    Mr. Kirk. Did you know that he had no French language 
background among him----
    Dr. Shah. Well, I was not asking James Lee Witt to go to 
Haiti. There was a team of people that I had met with, 
including people who have been working in Haiti for the past 14 
months, like Mark Merritt, who were part of that, who were 
very, very helpful in thinking through how we would structure 
this. And I relied on their guidance in putting in place a very 
unique--the Chairwoman asked a very good question about how did 
we structure the response. We built an Office of the Relief 
Coordinator that is a unique part of our international 
response. It allowed for incredibly effective communication 
with DOD, and it allowed for engaging this other partners.
    Mr. Kirk. I am not interested in----
    Dr. Shah. And I used their guidance and their advice to 
construct that.
    Mr. Kirk. And their guidance and advice was to take a 
registered congressional lobbyist who had no operations, no 
French language experience, and had never worked with the 
Office of Foreign Disaster Assistance to get a no-bid contract.
    Dr. Shah. I think that is an unfair characterization. What 
I asked, I asked a team of people who had significant 
experience in Haiti, who had significant experience in disaster 
response, and who knew uniquely how to help me construct an 
organization that would bring together all of these unique 
whole-of-government assets, whether it was military or U.S. 
emergency relief responders into a coherent, coordinated 
effort. The President asked very clearly for a swift, 
aggressive, and coordinated response. So we did a lot of things 
very differently, and we were very worried from the beginning 
about how we were going to coordinate and bring these things 
together. They were very helpful in helping to resolve that, 
and so I stand by that decision.
    Mrs. Lowey. Mr. Kirk, is it not correct that you sent a 
letter to Mr. Shah, and Mr. Shah----
    Mr. Kirk. It is a very bureaucratic, superficial letter 
that does not describe how he was a congressional lobbyist. I 
guess I understand now that you did not know that. It does not 
describe how he had no French language background. It does not 
describe how he had no experience in any contract.
    Dr. Shah. We did not send James Lee Witt to Haiti. We sent 
--
    Mr. Kirk. You sent him to coordinate Haitian----
    Dr. Shah. No. We sent a team of people to go down and work 
with us in that early response to set up our coordination 
structure, and it worked quite well. I mean, I just want to 
impress on the committee and to share with you that it was a 
real challenge to figure out how do you coordinate all of these 
assets going down in an environment where people did not have 
communications----
    Mr. Kirk. So you have already had a lot of bad press on 
this. What other sole-source contracts do you think you could 
probably issue?
    Dr. Shah. What other--I do not----
    Mr. Kirk. Would you commit to this committee that you will 
not be doing non-competitive--you know, the President has been 
very clear, and his record in Illinois is outstanding, against 
sole-source non-bid contracts.
    Dr. Shah. Look, I do not want to do any sole-source non-bid 
contracts. But in an emergency crisis environment, for the 
purpose that we needed this support, and at the amount that 
this was, and for the purpose that it met, I stand by that 
decision.
    Mr. Kirk. It sounds like actually a terrible decision on 
your part. I hope you would, to go forward, because you are 
very young in this administrative position; you have been 
embarrassed by this. I would suggest that you might want to 
think about going with solid partners, experience in the 
country, language capability, contractors with OFDA, and not 
using a congressional lobbyist that was not on the ground,did 
not have a language background, and had no contract experience of OFDA.
    Dr. Shah. Sir, I respect your point of view. I would just 
say I spoke almost daily with a number of our NGO partners 
through this process. These partners were on the ground. They 
had been devastated by this earthquake. They were trying to do 
their operational work. And they were asking us for support. 
They were in a position to send a consulting team into our 
organization to help us understand how to latch up the 
military, FEMA, a number of other agencies that were prepared 
to provide unique capabilities to help us commit to the 
President's response.
    Mr. Kirk. Those of us who have been here before, though--we 
have been on this committee for decades watching OFDA handle 
this. And so I might reach into the USAID staff itself rather 
than go with a sole-source contract to a congressional lobbyist 
that has no language experience or OFDA background.
    Dr. Shah. I appreciate that point of view. This was a very 
different response than I think most of the other ones.
    Mr. Kirk. It does seem very different, very disappointingly 
different.
    Dr. Shah. I will just look at the numbers. We have 
treated--those DMAT teams from HHS treated 30,000 people. OFDA 
does not have the capability to do that. The five additional 
non-OFDA USAR teams saved more than 100 lives. Left to our own 
devices, we would not have been able to do that.
    Mrs. Lowey. Mr. Kirk, I think we should move on.
    Mr. Kirk. I am just worried, just to close--in other 
disasters, we have done outstanding work--OFDA is one of the 
stars of your operation--without sole- sourced contracts to 
congressional lobbyists.
    Mrs. Lowey. I certainly think, Mr. Kirk, that Dr. Shah 
could respond to any additional questions you have. In 
addition, there is specific language in the fiscal year 2010 
bill about sole-source contracts. But I frankly, putting aside 
the unanswered questions--and I am sure you will get back to 
Mr. Kirk--I want to thank you again for the extraordinary 
response. I can remember, Mr. Kirk, our discussions with Stuart 
Bowen. And in Iraq, it took them two and a half years to even 
get a computer system up and running to even be able to 
document the kinds of grants they were making. It seemed to me 
they were taking cash out of pockets and just putting them into 
the sand.
    Mr. Kirk. Oh, you backed me, and this committee banned 
sole-source contracting in Iraq, a signal that you should have 
picked up in our view on sole-source contracting.
    Mrs. Lowey. Well, there is some language in the fiscal year 
2010 bill, and we can talk again about any amendments that have 
to be made to it. But I personally want to congratulate you. In 
a crisis of such enormous proportions, I am sure you were 
acting with as much help as you can get. And I also think 
relevant to your point, Mr. Kirk, we have been trying to build 
up the capacity at USAID. And ideally, there will be a response 
team that can respond so that you do not have to go outside of 
USAID. So this can certainly be continued in other discussions, 
and I want to thank you again.
    We have a little time left, and I just want to express, my 
praise for the way you handled Haiti. I want to express my 
disappointment that the President's budget does not prioritize 
expanding access to basic education, and reduces funding for 
basic education by $85 million. And the committee has been told 
this is due to a shift within the Pakistan portfolio.
    I have to tell you, this explanation does not work for me. 
We have clear evidence from every advocate with whom I interact 
that education is a key pillar in expanding economic 
opportunity, and increasing gender equality. Without a strong, 
accountable education system that educates boys and girls, 
families just will not be able to benefit from these expanded 
opportunities. Over the past decade, I have worked with USAID 
to put in place an innovative and groundbreaking basic 
education program. And frankly, I am really disappointed that 
this budget does not build on that foundation. And I think 
wherever this committee has traveled on site to look at the 
programs, you see the difference in society when girls are 
getting education and moving on to economic development 
activity.
    So maybe you can tell me briefly why basic education is not 
one of the key development priorities in the fiscal year 2011 
budget?
    Dr. Shah. Thank you, Madam Chairwoman. It is absolutely a 
priority for us. You know, when you talk about the reduction, 
it is true that we have shifted resources from the basic 
education portfolio in Pakistan in an amount that is equivalent 
to the overall decrease compared to the 2010 estimate, 
approximately $75 million, as you note. The remainder of the 
shift in the strategic approach in Pakistan and elsewhere is 
largely around higher education and workforce development, but 
in Pakistan, because we made a big investment last year in 
basic education, we have been able to launch the largest basic 
education program we have anywhere around the world.
    It is a more than $200 million program that will work 
nationwide and prioritize, as you have asked in all of our 
work, prioritize girls' enrollments. Across the portfolio of 
work we do, 47 percent of students in schools we support are 
girls, and I was just in Haiti in Petit Goave where our school 
was one of the few structures still standing becauseit had been 
built to earthquake code and was being used both as a school and a 
relief supply shelter and where goods were being distributed.
    So we, as you know, meet high standards on construction and 
have a strong track record in certain areas. I also hope that 
in this year we will significantly expand our partnership with 
Education for All and the Fast Track Initiative, that has been 
an effort that has accelerated the numbers of people in school. 
And as you have worked with USAID we have been much more 
focused also on quality and the actual attainment, so we will 
be rolling out and reinvesting based on some key learnings 
about how to improve teacher training, how to improve testing 
and assessments of students as we have done in Kenya and 
Liberia, and take some of the lessons learned from there and 
apply them elsewhere.
    So our goal is to expand significantly the impact of our 
work by working with multilateral partners, by working more 
effectively in our direct programs. And we did not think of 
this as a reduction or a lack of commitment in any way. We are 
doing as much as we possibly can in basic education in Pakistan 
and we are continuing to have the robust commitment overall 
around the world.
    Mrs. Lowey. Let me just say that the Fiscal Year 2010 
budget included a directive to establish communities of 
learning in order to build on the fact that these serve as 
community gathering spots. Many of the schools I have visited, 
you see young girls walking two hours to get there, without 
having some cereal, any kind of porridge. Wouldn't it be nice 
if we can encourage the parents to come with them? They could 
benefit from programs that we had at a community of learning, 
we could have horticulture, and agriculture programs.
    We have had success in our own country with this model. So 
I am really an advocate of this, and the fact that you are 
making a change in Pakistan does not make up for not 
appropriating the amount of money because we need it all over 
the world. And it seems to me that if we are establishing a new 
agriculture initiative and expanding basic health initiatives, 
not to focus on communities of learning, which is a 
Congressional initiative not original to us, would be a 
mistake. Could you respond?
    Dr. Shah. Absolutely, I have had the chance to----
    Mrs. Lowey. And if you can tell me what steps USAID has 
taken to implement this directive.
    Dr. Shah. So, we have taken a number of steps in terms of 
planning and looking across our programs at certain best 
practices. I have had the chance myself to visit programs in 
Ghana and Kenya and Malawi where both USAID and also other 
partners have done very innovative programs in using schools as 
platforms for service provision, for learning in a broader way, 
and for community engagement and support. I think we will try 
and do a lot more in this area.
    I think we can use in particular, and we are already 
planning to, some of the resources in the Food Security 
Initiative to do programs that build on the school feeding 
programs and other things and leverage schools for that purpose 
as well. So we will absolutely prioritize this and can be much 
more detailed in a more formal response if you would like.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402A.072
    
    Mrs. Lowey. I would like to pursue this for another minute 
and then we will have Ms. McCollum ask you another question if 
you would give us a couple more minutes, Dr. Shah.
    Dr. Shah. Sure.
    Mrs. Lowey. In the past, basic education has been a 
bilateral program. Now with new leadership and the priority 
being placed on multilateral engagement, what is the 
Administration doing to engage the Fast Track Initiative of the 
World Bank? There are many advocates out there who are 
enthusiastic about the likely establishment of a global fund 
for education, based on the Global Fund to Fight AIDS, 
Tuberculosis, and Malaria. Can you tell us whether the United 
States is going to take a lead in establishing a multilateral 
fund? How would U.S. government technical expertise and modern 
schooling initiatives be integrated into such a global effort?
    Dr. Shah. Well, I can tell you that we will take the lead 
in organizing the international community and the multilateral 
work so that we work effectively with it. I met on Friday with 
President Zoellick of the World Bank. We talked about, amongst 
other things, education and opportunities to partner better. As 
you know, USAID has unique expertise in areas like teacher 
training, in student assessments through some verbal assessment 
methodologies that have been piloted in Kenya and Liberia and 
elsewhere. And we think we can help the international system 
which has been very focused on getting the numbers, 
appropriately focused, on getting the numbers up, also do a 
better job on quality and educational attainment and 
assessments, and thinking about using schools as a broader 
platform for service provisions.
    So there is a natural partnership there, we are in that 
discussion. Right now we have a member of our team who serves 
as the observer on the board of EFA and FTI. I personally would 
like to see a far deeper engagement. I think that is an okay 
first step, but we are going to have resources to put on the 
table to do things differently. In education we want to 
leverage the great work that has happened in the 
multilateralsystem, and we want more than an observer status on the 
various opportunities to engage.
    Mrs. Lowey. Well, it sounds great. And another great fan of 
engagement and a Member of this Committee who has been very 
much involved in depth with the World Bank, Ms. McCollum.
    Ms. McCollum. Thank you, Madam Chair, and I could not agree 
with you more. And I think I am going to ask about some other 
indicators, but before I do that, I have to agree with you, we 
have ambassadors in our office and we are doing great work and 
you have been outspoken on education and the opportunities to 
do school feeding at education as we ramp up our food 
nutrition, that is a great intersection that you just 
described. I do not have the ambassadors coming in asking for 
that very often, so I think we had better start asking them so 
they know it is important.
    So to kind of tag onto that, I would like to learn more 
about how USAID defines country ownership and how you plan to 
increase country ownership in our foreign assistance programs. 
I believe it is necessary to have a transformation of recipient 
governments into partner countries, and the only way to sustain 
development is to invest in citizens and governments developing 
into their own future.
    And I know it is tough work, but I talked earlier about the 
importance of saving the lives of children and mothers, and 
this horrible reality is that we cannot want kids and moms in 
poor countries to live more than their own government leaders. 
They have to want it just as all of us on this Committee want 
it, just as much as all the USAID workers that you have on the 
ground trying to make it happen. And as I was pointing out to 
the Chairwoman, I see my fair number of ambassadors, I know you 
see more, Madam Chair, but I have never had an ambassador come 
into my office and ask for more funding to save the children 
and the mothers in their own countries.
    Mrs. Lowey. Well I have.
    Ms. McCollum. I have not.
    Mrs. Lowey. In Pakistan, because they knew of my interest, 
and the first thing they said is, I am for education and here 
is my education minister.
    Ms. McCollum. Well, then we need to hold their feet to the 
fire. So how do we help USAID hold their feet to the fire on 
that? How can we change our policies, working with the 
Chairwoman and I, to approach and get more country commitments 
to development, not just words but action? And then how can we 
put together a plan to hold these countries accountable and for 
maintaining these commitments? So could you explain to us, as 
Chairman Lowey and I are talking to, you know, ambassadors and 
foreign ministers and health ministers and education ministers, 
that we are going to hold them accountable and if they want to 
have a partnership we expect to have a real partner?
    Dr. Shah. Well, I appreciate that comment and question. At 
the end of the day we believe that country ownership takes a 
number of different forms. First and foremost is, as you point 
out, commitment, which can be measured in financial terms, we 
can observe political commitment at the highest levels, and we 
can insist on that level of commitment both in terms of the 
senior political commitment and in terms of real financial 
commitments.
    We are doing that in the Food Security Initiative where we 
are asking participating countries to go through a process 
where they develop an effective agricultural development plan, 
it is signed off by the President of the country so it has the 
visibility and authority that we need in order for that to be 
successful, and it requires that countries significantly 
increase their spending in agriculture. Average spending in 
terms of public budget percentages are 5.5 percent. We want 
countries to meet their broad commitments to get to 10 percent 
or 15 percent as part of the process of securing additional 
funding from the United States, and that is mutual 
accountability and commitment in its most sort of rigorous form 
financially.
    We also work with countries to improve the planning 
capabilities and implementation capabilities. In Afghanistan, 
for example, we have been assessing the capabilities of the 
Ministry of Agriculture and Livestock and working with other 
partners, we are really building greater capacities there both 
for planning and for financial management and procurement to 
allow us to work more directly together. That worked in the 
health sector in that context and we are using it in other 
environments.
    And finally it involves changing the way we work, because 
if we go through those processes and then do all of our work in 
parallel contracting systems that do not have the same 
connectivity to the country leadership or the country planning, 
we will not be credible long term partners. And so to live up 
to the aspiration to do our work in partnership and not 
patronage, we will look at our contracts and we will look at 
our programs and we want to implement those things differently. 
And it speaks to our efforts at procurement reform; it will 
speak to our efforts to do multi-year planning and budgeting, 
which is very much a priority in the QDDR, and our efforts to 
build civil society interests around the core priorities as 
expressed by countries.
    So this is an area where if we are going to rebuild and if 
this agency is going to be the world's premier agency in 
development, we have to go beyond signing the Paris Declaration 
and saying we are going to work in partnership. We actually 
have to change the guts of our operating system to do that. And 
we have a number of processes already inplace to do that, and 
before the end of June I hope to roll out a new contracting set of 
guidances that will help us be better and more serious and more 
accountable long term partners with countries that do stand up. So that 
is what we are working on.
    Ms. McCollum. Madam Chair, it sounds like you and I can 
look to making some of those quality measurements, not only for 
USAID and for the other people that we work with that go into 
country to help but with our country partners as well. And 
maybe we start by asking them their education budgets and 
having them show what they have been over the past couple years 
and what they are going to be over the next couple years, the 
same with their maternal child health budgets too, I know the 
World Bank does that but maybe we ought to start doing that a 
little more ourselves. Thank you, Madam Chair. Thank you, sir.
    Mrs. Lowey. Well thank you. And I want to thank you, 
Administrator Shah. You have breathed fresh hope and life and 
enthusiasm into your position, and I really want to thank you 
for your time. This concludes today's hearing on the 
President's Fiscal Year 2011 request for the U.S. Agency for 
International Development. The Subcommittee on State Foreign 
Operations and Related Programs stands adjourned.
[GRAPHIC] [TIFF OMITTED] T6402A.073

[GRAPHIC] [TIFF OMITTED] T6402A.074

[GRAPHIC] [TIFF OMITTED] T6402A.075

[GRAPHIC] [TIFF OMITTED] T6402A.076

[GRAPHIC] [TIFF OMITTED] T6402A.077

[GRAPHIC] [TIFF OMITTED] T6402A.078

[GRAPHIC] [TIFF OMITTED] T6402A.079

[GRAPHIC] [TIFF OMITTED] T6402A.080

[GRAPHIC] [TIFF OMITTED] T6402A.081

[GRAPHIC] [TIFF OMITTED] T6402A.082

[GRAPHIC] [TIFF OMITTED] T6402A.083

[GRAPHIC] [TIFF OMITTED] T6402A.084

[GRAPHIC] [TIFF OMITTED] T6402A.085

[GRAPHIC] [TIFF OMITTED] T6402A.086

[GRAPHIC] [TIFF OMITTED] T6402A.087

[GRAPHIC] [TIFF OMITTED] T6402A.088

[GRAPHIC] [TIFF OMITTED] T6402A.089

[GRAPHIC] [TIFF OMITTED] T6402A.090

[GRAPHIC] [TIFF OMITTED] T6402A.091

[GRAPHIC] [TIFF OMITTED] T6402A.092

[GRAPHIC] [TIFF OMITTED] T6402A.093

[GRAPHIC] [TIFF OMITTED] T6402A.094

[GRAPHIC] [TIFF OMITTED] T6402A.095

[GRAPHIC] [TIFF OMITTED] T6402A.096

[GRAPHIC] [TIFF OMITTED] T6402A.097

[GRAPHIC] [TIFF OMITTED] T6402A.098

[GRAPHIC] [TIFF OMITTED] T6402A.099

[GRAPHIC] [TIFF OMITTED] T6402A.100

[GRAPHIC] [TIFF OMITTED] T6402A.101

[GRAPHIC] [TIFF OMITTED] T6402A.102

[GRAPHIC] [TIFF OMITTED] T6402A.103

[GRAPHIC] [TIFF OMITTED] T6402A.104

[GRAPHIC] [TIFF OMITTED] T6402A.105

[GRAPHIC] [TIFF OMITTED] T6402A.106

[GRAPHIC] [TIFF OMITTED] T6402A.107

[GRAPHIC] [TIFF OMITTED] T6402A.108

[GRAPHIC] [TIFF OMITTED] T6402A.109

[GRAPHIC] [TIFF OMITTED] T6402A.110

[GRAPHIC] [TIFF OMITTED] T6402A.111

[GRAPHIC] [TIFF OMITTED] T6402A.112

[GRAPHIC] [TIFF OMITTED] T6402A.113

[GRAPHIC] [TIFF OMITTED] T6402A.114

[GRAPHIC] [TIFF OMITTED] T6402A.115

[GRAPHIC] [TIFF OMITTED] T6402A.116

[GRAPHIC] [TIFF OMITTED] T6402A.117

[GRAPHIC] [TIFF OMITTED] T6402A.118

[GRAPHIC] [TIFF OMITTED] T6402A.119

[GRAPHIC] [TIFF OMITTED] T6402A.120

[GRAPHIC] [TIFF OMITTED] T6402A.121

[GRAPHIC] [TIFF OMITTED] T6402A.122

[GRAPHIC] [TIFF OMITTED] T6402A.123

[GRAPHIC] [TIFF OMITTED] T6402A.124

[GRAPHIC] [TIFF OMITTED] T6402A.125

[GRAPHIC] [TIFF OMITTED] T6402A.126

[GRAPHIC] [TIFF OMITTED] T6402A.127

[GRAPHIC] [TIFF OMITTED] T6402A.128

[GRAPHIC] [TIFF OMITTED] T6402A.129

[GRAPHIC] [TIFF OMITTED] T6402A.130

[GRAPHIC] [TIFF OMITTED] T6402A.131

[GRAPHIC] [TIFF OMITTED] T6402A.132

[GRAPHIC] [TIFF OMITTED] T6402A.133

[GRAPHIC] [TIFF OMITTED] T6402A.134

[GRAPHIC] [TIFF OMITTED] T6402A.135

[GRAPHIC] [TIFF OMITTED] T6402A.136

[GRAPHIC] [TIFF OMITTED] T6402A.137

[GRAPHIC] [TIFF OMITTED] T6402A.138

[GRAPHIC] [TIFF OMITTED] T6402A.139

[GRAPHIC] [TIFF OMITTED] T6402A.140

[GRAPHIC] [TIFF OMITTED] T6402A.141

[GRAPHIC] [TIFF OMITTED] T6402A.142

[GRAPHIC] [TIFF OMITTED] T6402A.143

[GRAPHIC] [TIFF OMITTED] T6402A.144

[GRAPHIC] [TIFF OMITTED] T6402A.145

[GRAPHIC] [TIFF OMITTED] T6402A.146

[GRAPHIC] [TIFF OMITTED] T6402A.147

[GRAPHIC] [TIFF OMITTED] T6402A.148

[GRAPHIC] [TIFF OMITTED] T6402A.149

[GRAPHIC] [TIFF OMITTED] T6402A.150

[GRAPHIC] [TIFF OMITTED] T6402A.151

[GRAPHIC] [TIFF OMITTED] T6402A.152

[GRAPHIC] [TIFF OMITTED] T6402A.153

[GRAPHIC] [TIFF OMITTED] T6402A.154

[GRAPHIC] [TIFF OMITTED] T6402A.155

[GRAPHIC] [TIFF OMITTED] T6402A.156

[GRAPHIC] [TIFF OMITTED] T6402A.157

[GRAPHIC] [TIFF OMITTED] T6402A.158

[GRAPHIC] [TIFF OMITTED] T6402A.159

[GRAPHIC] [TIFF OMITTED] T6402A.160

[GRAPHIC] [TIFF OMITTED] T6402A.161

[GRAPHIC] [TIFF OMITTED] T6402A.162

[GRAPHIC] [TIFF OMITTED] T6402A.163

[GRAPHIC] [TIFF OMITTED] T6402A.164

[GRAPHIC] [TIFF OMITTED] T6402A.165

[GRAPHIC] [TIFF OMITTED] T6402A.166

[GRAPHIC] [TIFF OMITTED] T6402A.167

[GRAPHIC] [TIFF OMITTED] T6402A.168

[GRAPHIC] [TIFF OMITTED] T6402A.169

[GRAPHIC] [TIFF OMITTED] T6402A.170

[GRAPHIC] [TIFF OMITTED] T6402A.171

[GRAPHIC] [TIFF OMITTED] T6402A.172

[GRAPHIC] [TIFF OMITTED] T6402A.173

[GRAPHIC] [TIFF OMITTED] T6402A.174

[GRAPHIC] [TIFF OMITTED] T6402A.175

[GRAPHIC] [TIFF OMITTED] T6402A.176

[GRAPHIC] [TIFF OMITTED] T6402A.177

[GRAPHIC] [TIFF OMITTED] T6402A.178

[GRAPHIC] [TIFF OMITTED] T6402A.179

[GRAPHIC] [TIFF OMITTED] T6402A.180

[GRAPHIC] [TIFF OMITTED] T6402A.181

[GRAPHIC] [TIFF OMITTED] T6402A.182

[GRAPHIC] [TIFF OMITTED] T6402A.183

[GRAPHIC] [TIFF OMITTED] T6402A.184

[GRAPHIC] [TIFF OMITTED] T6402A.185

[GRAPHIC] [TIFF OMITTED] T6402A.186

[GRAPHIC] [TIFF OMITTED] T6402A.187

[GRAPHIC] [TIFF OMITTED] T6402A.188

[GRAPHIC] [TIFF OMITTED] T6402A.189

[GRAPHIC] [TIFF OMITTED] T6402A.190

[GRAPHIC] [TIFF OMITTED] T6402A.191

[GRAPHIC] [TIFF OMITTED] T6402A.192

[GRAPHIC] [TIFF OMITTED] T6402A.193

[GRAPHIC] [TIFF OMITTED] T6402A.194

[GRAPHIC] [TIFF OMITTED] T6402A.195

[GRAPHIC] [TIFF OMITTED] T6402A.196

[GRAPHIC] [TIFF OMITTED] T6402A.197

[GRAPHIC] [TIFF OMITTED] T6402A.198

[GRAPHIC] [TIFF OMITTED] T6402A.199

[GRAPHIC] [TIFF OMITTED] T6402A.200

[GRAPHIC] [TIFF OMITTED] T6402A.201

[GRAPHIC] [TIFF OMITTED] T6402A.202

[GRAPHIC] [TIFF OMITTED] T6402A.203

[GRAPHIC] [TIFF OMITTED] T6402A.204

[GRAPHIC] [TIFF OMITTED] T6402A.205

[GRAPHIC] [TIFF OMITTED] T6402A.206

[GRAPHIC] [TIFF OMITTED] T6402A.207

[GRAPHIC] [TIFF OMITTED] T6402A.208

[GRAPHIC] [TIFF OMITTED] T6402A.209

[GRAPHIC] [TIFF OMITTED] T6402A.210

[GRAPHIC] [TIFF OMITTED] T6402A.211

[GRAPHIC] [TIFF OMITTED] T6402A.212

                                          Thursday, March 25, 2010.

         U.S. DEPARTMENT OF THE TREASURY INTERNATIONAL PROGRAMS

                                WITNESS

HON. TIMOTHY F. GEITHNER, SECRETARY OF THE TREASURY

                  Opening Statement of Chairman Lowey

    Mrs. Lowey. The subcommittee on State, Foreign Operations, 
and Related Programs will come to order.
    Mr. Secretary, my former constituent--where do you vote? 
Here or Westchester? We will have to figure this out.
    I welcome you to the subcommittee to present the Treasury 
Department's request for fiscal year 2011 international 
programs. The budget request includes $3.1 billion for U.S. 
contributions to international financial institutions, debt 
relief, technical assistance programs, a $1 billion or 33 
percent increase above the fiscal year 2010 level. The 
requested $1.073 billion for development funds at the World 
Bank includes $635 million for the Clean Technology and Climate 
Change Strategic Funds, and $438 million for Food Security and 
a new Multilateral Food Security Fund.
    I believe the significant increase will be difficult to 
fund at a time when we face severe domestic budget constraints, 
large deficits, high unemployment, all in the midst of two 
wars. Your perspective on how U.S. contributions support our 
national interests is important as this committee prepares to 
make tough funding decisions. It is critical to leverage every 
cent of taxpayers' dollars and demonstrate that it is being 
spent effectively and efficiently. I hope you can share with us 
reform priorities for each of the institutions and actions 
underway to provide greater transparency and accountability 
including program effectiveness measures at the IFIs.
    There are a number of key issues that I would like you to 
address. First, coordination on key U.S. priorities, including 
poverty reduction, economic growth, food security, climate 
change, the environment, debt relief, and technical assistance. 
How are these programs coordinated within the U.S. government 
among bilateral and multilateral organizations and on the 
ground? I am especially interested in the new food security 
trust fund and the climate investment funds administered by the 
World Bank. How will Treasury coordinate with State and USAID? 
Who has the lead within the U.S. Government? Why was the 
decision made to house these funds at the World Bank? And will 
we have enough oversight of implementation?
    As the number of funds based in Western capitals grow, 
civil society groups must be involved to ensure the voices of 
those most affected by IFI programs and lending are heard. What 
is Treasury doing to get maximum and meaningful participation 
from civil society within these new funds?
    The World Bank has been deeply involved in post-conflict, 
fragile and failed states, and I hope you will explain the role 
of multilateral development banks (MDBs) in front-line states 
and other priority countries, including Afghanistan, Pakistan, 
Iraq, and Haiti. For several years this subcommittee has raised 
concern about the World Bank's administration of the South 
Sudan Trust Fund and the slow disbursement of funds due to 
severe capacity constraints. What is the status of this Trust 
Fund?
    Lastly, while the U.S. shares decision-making with other 
countries and multilateral banks, we maintain tremendous 
influence. As you know, certain lending decisions have major 
impact on Congress's support for the Banks, and at the top of 
the list of concerns is Iran. This subcommittee is deeply 
troubled that the World Bank made a number of loans to Iran 
between 2004 and 2005 that are still being disbursed. Although 
these loans were for humanitarian and development purposes and 
were therefore legal under UN Security Council resolutions, we 
remain concerned that funding continues to be disbursed to a 
country that carries out repressive and dangerous policies that 
negatively impact Iran's own people, the region, and the world.
    It is absolutely essential that the World Bank Group not 
re-engage in lending to the current government of Iran if it is 
to maintain credibility and future U.S. support. I have urged 
Ambassador Rice to ensure the next UN Security Council 
resolution does not allow a loophole for development lending to 
continue to Iran. Nevertheless, in the absence of a new 
resolution prohibiting development funding, there should be no 
excuse for the World Bank to finance development loans to Iran 
while the regime continues to fund their nuclear weapons 
activities and support terrorist organizations.
    While we are discussing Iran, I would like to commend the 
excellent work Under Secretary Stuart Levey has undertaken. The 
February 10 announcement of sanctioning Iran's Islamic 
Revolutionary Guard Corps (IRGC) is just one clear example of 
his aggressive efforts, which I applaud, and I know this view 
is shared by this committee.
    Mr. Secretary, our discussions today on these important 
institutions for the United States interests and many other key 
issues will impact our funding decisions. We look forward to 
working with you. And before we move to your testimony, let me 
turn to Ms. Granger, the Ranking Member, for her opening 
statement.
    Ms. Granger.

                     Opening Remarks of Ms. Granger

    Ms. Granger. Thank you, Madam Chairman.
    I would like to welcome the Secretary for his first 
appearance before the subcommittee today to discuss the fiscal 
year 2011 request for the Department of the Treasury's 
International Programs. Additionally, I would like to hear 
about the current status of the International Monetary Fund, 
given the large level of funding approved last year by 
Congress.
    Secretary Geithner, I understand that several years you 
were the Assistant Secretary and then Under Secretary of the 
Treasury for International Affairs. Therefore, these programs 
under this subcommittee's jurisdiction are certainly familiar 
to you, and I look forward to our discussion.
    The President's budget request is $3.1 billion for 
Treasury's International Affairs Program, which is an almost 44 
percent increase or $396 million over last year. I would also 
like to highlight that this is a near doubling of funds in 2 
years. All of these funds are contributions to international 
financial institutions with the exception of the Treasury 
Technical Assistance and Debt Relief Programs. I hope you can 
explain why we need such a large increase for multilateral 
assistance when our bilateral assistance programs are coming 
under tighter constraints as this country continues to dig out 
from economic crisis.
    Additionally, my support for this request is in doubt when 
it is unclear to me how much influence the United States has 
over the allocation of the appropriated dollars we contribute 
each year to these banks. Specifically, I am concerned about 
corruption at the banks and how bank leadership is attempting 
to rein it in. I also fear the decreasing relevance of these 
institutions as we observe many long-term recipient countries 
that are stagnating and not progressing even after billions of 
dollars of multilateral assistance.
    It seems surprising to me that, given all the doubts that 
this Congress has about the functioning of the World Bank and 
the regional banks, the administration has committed billions 
of dollars in Climate Change Fund and Food Security Fund in the 
last year, much of which will be deposited at the World Bank. 
And just this past weekend Treasury agreed to a sizable 
multiyear capital increase to the Inter-American Development 
Bank and is in the progress of negotiating several others.
    Before this Congress is asked to provide substantial 
capital increases, I hope we will be provided convincing 
evidence that the taxpayer dollars will be used more 
effectively in the future than they have been in the past at 
these institutions. While so many countries are languishing in 
poverty ruled by corrupt governments and often subjected to 
civil strife, I would hope that the multilateral development 
banks could find a way to promote positive economic and 
political change in these countries. Otherwise, nothing changes 
except greater wealth transfers from the developed to the 
developing world.
    Secretary Geithner, I hope your testimony today can 
alleviate my concerns that, with respect to the Treasury 
request, the administration is out of touch with the fiscal 
realities of this Nation. As you know, Mr. Secretary, I am a 
supporter of using U.S. foreign assistance as a soft power tool 
to achieve our national security objectives as well as promote 
the quality of life for those living in hunger and poverty. 
However, I believe that our role in this subcommittee through 
rigorous oversight is to make it work better at achieving our 
goal. I thank you, and I look forward to your testimony.
    Mrs. Lowey. Mr. Secretary, as you know, your full statement 
can be placed in the record, so you may summarize if you wish. 
Please proceed.

                Opening Statement of Secretary Geithner

    Secretary Geithner. Thank you, Chairwoman Lowey and Ranking 
Member Granger, members of the committee.
    It is a pleasure to be here before you today. Thank you for 
those opening statements, very thoughtful statements, and I 
agree with the basic imperative you have laid out, which is for 
all of us to recognize we have a huge stake in what happens 
outside the United States. We also share a great obligation to 
make sure the resources we provide these institutions in 
support of the development, et cetera, are used as effectively 
as possible.
    I want to thank you for the support you have given these 
institutions, the Treasury, the foreign assistance budget over 
the years in recognition of those interests, and we look 
forward to working with you closely in the coming months to 
build on that record of cooperation.
    As you know, our international programs are guided by four 
basic priorities: The first is to support economic growth here 
at home and abroad. The second is to protect our national 
security interests. Third is to lift the lives of the world's 
poorest. And the fourth finally is to promote global solutions 
to address climate change and other global problems. Our budget 
request supports these key goals.
    At their core the multilateral development banks, the MDBs, 
strengthen private sector-led growth and help integrate 
developing nations into the global economy. By helping these 
countries stabilize and grow, we build new markets for U.S. 
exports and help create more jobs here at home.
    At no time has the importance of the MDBs been more evident 
than during the financial crisis. These institutions acted with 
our encouragement with exceptional speed and force to help 
cushion the effects of the crisis on the poorest and to help 
restart flows of finance and restart the flow of global trade.
    Treasury's initiatives also help support frontline states 
vital to our national security interests. Last year, for 
example, the MDBs provided $543 million in grants to 
Afghanistan and $3.35 billion in assistance to Pakistan.
    Our Office of Technical Assistance at Treasury complements 
these efforts by strengthening the financial management of 
governments around the world. Treasury, for example, helps the 
Afghan government develop a financial intelligence unit that 
helps prevent money laundering and terrorist financing.
    Of course, we support these institutions not just to 
support our own national security and economic interests but 
also to defend our ideals as a nation. More than 1 billion 
people around the world suffer from chronic hunger. At the G-8 
summit in Italy last year, President Obama pledged greater U.S. 
focus on reducing global hunger and extreme poverty. And as 
part of that, we are proposing to increaseinvestments in 
agricultural development and food security, including through a new 
multilateral trust fund for food security.
    I want to express my appreciation for the strong support of 
so many members of this committee for our work to relieve 
Haiti's debt burden following the earthquake, and I urge all of 
you to support the supplemental the President submitted to 
Congress yesterday. In parallel with your efforts, just this 
past weekend, we reached agreement with other IDB, Inter-
American Development Bank, shareholders to cancel all of 
Haiti's $479 million debt to that institution.
    Climate change of course is a global challenge, and that 
demands a global solution. We are doing our part here at home 
with a sweeping set of investments in clean energy and 
technology to help promote energy efficiency, but we can't 
solve this problem on our own. And our budget request, 
therefore, will support efforts to help reduce greenhouse gas 
emissions globally.
    Now, in order for the World Bank and the regional 
development banks to fulfill their missions in each of these 
priority areas, we ask you to fully fund our budget request. 
Our request represents just 5 percent of the total 
international affairs budget. And because our dollars are not 
only matched by other donors but used to generate significant 
additional resources in the capital markets, you get quite a 
lot of bang for the buck. In fact, every dollar the U.S. has 
contributed to the World Bank enables lending levels that are 
about 250 times that.
    Our focus on resources of course will be matched by an 
insistence on stronger reforms, stronger results in four 
critical areas. We are working to put in place much more 
disciplined financial practices to improve governance and 
management to increase transparency and accountability and to 
narrow the focus of institutions on core priorities that have 
the highest return.
    Now, to support continued progress in these reforms, we 
need to stay engaged in these institutions. As you know, our 
ability to shape these institutions, to shape what they do, how 
effective they operate rests on being a member in good standing 
which pays its fair share.
    Now, as you both recognize and as we recognize, we make 
these requests in the context of one of the most challenging 
economic environments for Americans in generations and with our 
Nation facing severe fiscal constraints, but we make it with 
the confidence that these investments will contribute to 
building a stronger global economy and promoting our national 
security interests.
    There is a long history of bipartisan support for these 
initiatives, not just on this committee. As President Reagan 
said, quote, These institutions have reflected a shared vision 
of growth and development through political freedom and 
economic opportunity. That vision has become a reality for many 
of us. Let us pledge to continue working together to ensure 
that it becomes a reality for all.
    I look forward to working with you and being as responsive 
as I can to your questions. Thank you.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402A.213
    
    [GRAPHIC] [TIFF OMITTED] T6402A.214
    
    [GRAPHIC] [TIFF OMITTED] T6402A.215
    
    [GRAPHIC] [TIFF OMITTED] T6402A.216
    
    [GRAPHIC] [TIFF OMITTED] T6402A.217
    
    [GRAPHIC] [TIFF OMITTED] T6402A.218
    
    [GRAPHIC] [TIFF OMITTED] T6402A.219
    
    [GRAPHIC] [TIFF OMITTED] T6402A.220
    
    [GRAPHIC] [TIFF OMITTED] T6402A.221
    
                                  IRAN

    Mrs. Lowey. Thank you, Mr. Secretary.
    This subcommittee, and I see members on both sides of the 
aisle, some of whom are not here today, have expressed deep 
concern about the number of World Bank loans made to Iran 
between 2004 and 2005 that are still being disbursed. In 
previous years, the subcommittee has been told that this 
disbursement could not be stopped because the United Nations 
Security Council Resolution exempted humanitarian and 
development activities. It does not make sense to me that we 
would allow this funding, which is in the hundreds of millions 
of dollars, to move forward without some effort to stop or slow 
this disbursement.
    If you could share with us what mechanisms are currently in 
place to ensure that the funding disbursed on the old loans is 
used for the intended humanitarian purposes and are not 
diverted to other purposes, and how does the Treasury follow 
these loan disbursements? What checks do you currently have in 
place to monitor the Bank and ensure it is checking the 
legitimacy of the expenditures? And what is Treasury doing to 
prevent further multilateral bank loans to Iran? And as part of 
the interagency process, what is Treasury doing to recommend 
that the UN Security Council resolutions prohibit funding for 
humanitarian and development purposes?
    Secretary Geithner. Thanks for raising this issue. Asyou 
know we oppose those loans. We don't think they should have gone 
forward. And we have been successful in blocking any further loans 
since then, and we are going to continue to work closely with countries 
around the world to substantially increase the pressure on this 
government in Iran.
    Now, these loans are--the disbursements still continuing, 
as you acknowledged, are permitted under the UN resolution. I 
do not believe they are material, but I share your concern 
about them. The World Bank has a very elaborate well-
functioning set of controls in place to make sure they go to 
their intended purposes, which are to promote development under 
this humanitarian exemption, but I just want to underscore that 
we share your view that this should not have happened and will 
not happen in the future until we have a satisfactory outcome 
with our discussions with that government in reducing their 
support for terrorism and to ending their nuclear weapons 
program.
    Mrs. Lowey. I know this is a great concern to members of 
this committee on both sides of the aisle. I want to make it 
clear, it is totally unsatisfactory if we are working together, 
and I commended Stuart Levey in particular on tightening the 
noose, tightening the sanctions, and then seeing these hundreds 
of millions of dollars going to Iran; it is essential that we 
get a clear understanding that these dollars are not going in 
the direction which I know you and I and this government has 
made clear do not want it to go.
    I also want to make it clear that, in the interim, before 
the Iran Sanctions Act is passed, this committee put in very 
tough language regarding the Export-Import loans.
    Just to refresh your memory: None of the funds made 
available in title VI of this act under the heading ``Program 
Account'' or ``Subsidy Appropriation'' may be used by the 
Export-Import Bank of the United States to authorize any new 
guarantee, insurance, or extension of credit for any project 
controlled by an energy producer or refiner that continues to 
provide Iran with significant refined petroleum resources, 
materially contribute to Iran's capability to import refined 
petroleum resources, or allow Iran to maintain or expand in any 
material respect its domestic production of refined petroleum 
resources, including any assistance in refinery construction, 
modernization, or repair, et cetera.
    There is bipartisan support for this policy, and until that 
sanctions act is passed, we have the authority under the 
Appropriations Committee to even expand on this language. So I 
would hope that you can certainly get back to us about the loan 
disbursements and the checks that you have in place to monitor 
the bank and ensure it is checking the legitimacy of the 
expenditures.
    Secretary Geithner. I am happy to do that, and you are 
right to highlight it. And I want to thank you again for 
commending the work of Stuart Levey and his colleagues at 
Treasury. They have been remarkably effective in substantially 
increasing the pressure on this regime through our financial 
sanctions, and we are working very hard every day with 
countries around the world to bring additional pressure to bear 
on this regime, and they have had a substantial effect already, 
but we are working very hard to bring additional pressure to 
bear on that government.

                                  IMF

    Mrs. Lowey. Ms. Granger.
    Ms. Granger. Last year in the fiscal year 2009 emergency 
supplemental, the Congress authorized the sale of IMF gold to 
shore up the IMF's internal operating expenses and to 
contribute a share of the proceeds to help poor countries. The 
IMF conducted a gold sale last fall. Can you tell me how much 
was raised from this sale? Was it more than was estimated, 
given the high price of gold? Has the endowment been set up by 
this sale? Are proceeds paying for operating expenses? And is 
the IMF continuing to streamline its operations and expenses, 
as was promised in exchange for the authorized gold sales?
    Secretary Geithner. You are right to point out that the 
purpose of this program was to both help fund the operational 
budget of the IMF, which under current leadership was reduced 
quite substantially, but also to free up some resources to help 
the poorest members of the IMF. I will have to get back to you 
with the details on the amount raised, and I will be happy----
    Ms. Granger. Surely you have an estimate.
    Secretary Geithner. I don't have it in front of me today, 
but I will be happy to provide it in writing to you.
    Ms. Granger. Your staff doesn't?
    Secretary Geithner. Oh, I am sure they do, but I don't have 
it with me here. If they give it to me while I am up here, I 
will read it to you. But I will be happy to get back to you in 
writing.

                                  NAB

    Ms. Granger. I have another question. The fiscal year 2010 
omnibus, we include a number of conditions on the use of funds, 
the IMF's new arrangements to borrow, the NAB. Could you give 
me an update on the NAB operation? Is it functional? Has it 
made loans? Is it serving its purposes?
    Secretary Geithner. We built those conditions into the 
agreement. That fund has reached its targeted commitments of 
$500 billion. It is not yet operational yet, but it is going to 
come into place relatively soon. And I want to underscore the 
importance of what you helped make possible, which is we were 
able to get countries around the world to put up a very 
substantial contingent reserve to help provide insurance 
against future financial crises, and the signal of that 
commitment, starting early in the spring of last year, almost a 
year ago today, was very helpful in arresting, breaking theback 
of the panic of the global financial crisis.
    So I want to commend you for your support of that 
initiative. We have been very successful in getting countries 
to put up very substantial forms of money behind this new 
emergency reserve fund. It is likely to come into operation 
relatively quickly, and we have met the conditions you have put 
into the law to make sure we are protecting our interests. 
Remember, those conditions were designed to make sure that the 
U.S. was leveraging commitments from other countries as 
efficiently as possible, and we had the chance to, how should I 
say, take stock of the merits of this arrangement, how it is 
working, relatively soon.

                                  BRIC

    Ms. Granger. I have a little more time. I have also read in 
the press that the so-called BRIC countries, Brazil, Russia, 
India and China, that they formed a voting bloc and have veto 
authority over the NAB's operation. Is that true? And if it is 
true, isn't this a threat to the accountability of the U.S. 
taxpayers' funds?
    Secretary Geithner. No threat to us. And I would say that 
all countries who contribute, they seek to maximize their 
influence as do we. And so I think what you see them do 
occasionally is--Europeans do this, other countries do this 
already--is to see where they can work together, build 
coalitions to advance their interests. But no risk to our 
interests in that context.
    And again, the basic benefit of this fund, like the IMF and 
like the World Bank and the other regional banks, is we get 
very good leverage for the taxpayers' money. And for that 
reason, it is a very effective way to promote our economic 
interests, our national security interests, because of other 
people coming alongside us putting their money in play as well.
    Ms. Granger. Thank you, Madam Chair. I will have more for 
the next round. I hope there is one.
    Mrs. Lowey. Thank you.
    Mr. Israel.

                                  IRAN

    Mr. Israel. Thank you, Madam Chair.
    Mr. Secretary, welcome. I want to pursue the chairwoman's 
discussion about the Iran Sanctions Act. I want to take issue 
with your characterization of efforts to enforce sanctions as 
remarkably effective.
    I was stunned to read in the Sunday, March 7th, edition of 
the New York Times a lead cover story with the headline, 
``United States Enriches Company Defying its Policies on 
Iran.''
    Now, the issue is not simply the enforcement of sanctions, 
which can prevent loans from going to these companies. The Iran 
Sanctions Act allows for far greater leverage. Contracts, 
Federal contracts should be denied. Export authority can be 
denied. Military licenses can be denied. Financial services 
activities can be prohibited.
    And this story notes that 49 companies doing business with 
the United States are also doing business in Iran. Your Office 
of Foreign Assets Control oversees implementation of the Iran 
Sanctions Act of 1996. You have an Under Secretary for 
Terrorism and Financial Intelligence. The work he is doing--I 
have a high regard for him personally, but it seems to me the 
work he is doing wouldn't result in headlines in stories like 
this.
    This is not you alone. I have to say, in 8 years of the 
Bush administration, there was a consistent willful defiance of 
Congress, a refusal to enforce the Iran Sanctions Act passed in 
1996. Eight years in the Bush administration, and it hasn't 
changed in this administration.
    Mr. Kirk and I have decided that if you aren't going to 
change it, we will. This is the Appropriations Committee. We 
have the power of the purse, and so Mr. Kirk and I have 
inserted language or asked for language in every single 
appropriations bill that says that none of the funds 
appropriated or otherwise made available by this act will be 
obligated or expended by any Federal department or agency to 
provide funds to any person or entity through a contract grant, 
loan or loan guarantee unless the person or entity certifies 
that Iran Sanctions is not being violated.
    So my question to you, Mr. Secretary, is, how can you 
persuade me that this language isn't necessary? What are you 
going to do to enforce the Iran Sanctions Act? And that is 
number one. The second question is, what are you doing to 
discourage those companies from engaging in illegal activity 
with Iran?
    Secretary Geithner. Congressman, we share your commitment, 
and we are working very hard to find--explore all feasible 
means to bring greater pressure to bear on this regime. I will 
be happy to work with you on that suggestion, happy to come 
talk to you in more detail about how to do this effectively. We 
will be open to any effective means for bringing greater 
pressure to bear on this government. But I--and again, I am 
happy to have my colleagues, Stuart Levey and others, spend 
more time with you on this stuff.
    This has been a very aggressive, very effective program, 
particularly in trying to convince other countries to bring 
pressure alongside ours. As you know, we have been the toughest 
of any country in this area, the most aggressive, but our 
efforts aren't going to be effective unless we have other 
countries moving with us. In any case, we share your commitment 
to this, and we will work with you to explore any feasible 
means to bring greater pressure to bear on this government.
    Mr. Israel. Mr. Secretary, I appreciate your sharing of the 
commitment, and I don't doubt that you share thecommitment. And 
I understand that we need to find all feasible and effective means.
    But this is an Act of Congress signed by a President of the 
United States. All I am asking you to do is enforce the law, 
and so what is the difference? I mean, I am saying enforce the 
law, and I think your interpretation is, we will enforce the 
law as we see fit based on our interpretation of effective 
means.
    Secretary Geithner. Of course, we are enforcing the law, 
and we are working very closely with our colleagues in the 
executive branch, including the State Department, to make sure 
we are enforcing that law.
    But we want to do better than that. We want to make sure 
that we are working with countries around the world to bring 
greater pressure to bear on this government, and it is going to 
more than just enforcing our current authority to do that. But, 
again, I will be happy to work with you and Congressman Kirk on 
how best to do that, and I commend you for your effort and 
focus to this important national security issue.
    Mr. Israel. I appreciate that. Mr. Kirk and I have 
submitted language, identical language, in every single one of 
the appropriations bills, and we will look forward to a 
dialogue with you.
    Thank you, Madam Chair.
    Mrs. Lowey. I just want to share the chair's opinion, Mr. 
Secretary, that I, and I know members of the committee, 
strongly support the views of Mr. Israel and Mr. Kirk on this 
issue and are aware that the Department of State has the key 
role in enforcing these priorities and working to try to build 
a multilateral coalition.
    So as we move forward, before our appropriations bill is 
passed, we already took action with regard to Ex-Im in this 
bill, and depending on when the Iran Sanctions Act is signed by 
the President and the actions of State in building a 
multilateral coalition, we will move forward and put additional 
restraints.
    I just want to say what I am particularly concerned about, 
having just returned from a bipartisan codel to Saudi Arabia, 
Amman, Dubai, and Abu Dhabi, that subsidiaries of our 
corporations are having a field day there, and it is of great 
concern to all of us. And that is why this recommendation of a 
certification, I do believe, and I share the gentleman's 
concern, is essential in moving further in enforcing the 
sanctions.
    So I thank you and Mr. Kirk for bringing this issue to the 
attention of the Secretary.
    Secretary Geithner. Madam Chair, could I just respond to 
Congresswoman Granger's question about gold sales? This is a 
part of the response, but I will give you the rest subsequently 
in writing, which is that the total profits on gold sales to 
date are $4.7 billion. That is the return on the sales above 
the book value held by the IMF, but I don't know what that is 
relative to what expectations were. But you asked a series of 
other detailed questions, and I will be happy to respond in 
writing.
    Ms. Granger. Thank you very much.
    Mrs. Lowey. Mr. Kirk.
    Mr. Kirk. I echo the sentiments of my chair and Mr. Israel 
here.
    I would just say that I would hope that our policy for the 
President's upcoming action is, sign it and seal it. Sign the 
Refined Petroleum Sanctions Act, and then seal off gasoline to 
Iran.
    In the briefings that we have had, it appears the Obama 
administration is against imposing gasoline sanctions on Iran. 
Your staff has given me the strong impression that you will not 
impose a gasoline sanction on Iran and that the administration 
will not consider any unilateral action that is not approved by 
the UN Security Council.
    You are getting a fusillade of opinions, and I would refer 
you to Senator Schumer's speech before AIPAC, in which he cut 
loose from the Obama administration policy and said that a 
unilateral policy of restricting gasoline is absolutely 
essential to the security of the United States and Israel.
    Now, are you in favor of what Stuart Levey said to us, 
which is basically, we are not going to do gasoline sanctions?
    Secretary Geithner. Congressman, I will state to you, as I 
did to your colleagues, we share your commitment to finding 
effective ways to bring substantially greater pressure onto 
this government, and we are working very hard with countries 
around the world in support of that objective. And we will look 
at any effective means for doing that.
    It is important, of course, to recognize that it is not 
just what we do, and of course, right now, it is not even the 
most significant thing what we do as a country, because we have 
been very aggressive. It is what we are able to convince other 
governments around the world to do because they are now the 
primary source of economic and financial assistance to this 
regime.
    But, in any case, we share your commitment to this issue. 
You are right to bring attention to it. We commend you for your 
leadership on it, and we will work with you to explore ways to 
bring more pressure onto this government.
    Mr. Kirk. It actually appears that you are going in the 
opposite direction. The Wall Street Journal reports that the 
U.S. has softened its stand on Iran sanctions and has now 
removed banking service and capital markets action from 
anydiscussion of sanctions.
    Secretary Geithner. I do not believe that report is 
correct, but I think I need to leave it to my colleague, the 
Secretary of the State, to walk you through particular strategy 
and objectives with respect to the new resolution that we are 
pursuing in the UN. But, again, we are committed, the President 
is committed, to trying to build the strongest possible 
international support for the strongest possible resolution so 
we can bring more pressure to bear on this government. We are 
making a lot of progress in this area.
    Mr. Kirk. But the President is against a unilateral use of 
the United States Navy to restrict gasoline from the Islamic 
Republic of Iran pursuant to the Act which he is about to sign.
    Secretary Geithner. No, I can't say whether that is correct 
or not. I didn't want to speak to that.
    I am just saying that we will work with you to try to find 
ways, again, to bring more pressure onto this government. And 
we are making a lot of progress trying to build support for 
this around the world.
    Mr. Kirk. Did you know that the World Bank provided $50 
million in support directly to the Islamic Republic of Iran 
Finance Ministry in 2009?
    Secretary Geithner. I don't know if that is correct, but I 
will be happy to go and check.
    But as you know, Congressman Kirk, under these loans, which 
we tried to block but were unsuccessful in blocking, which were 
permitted under the UN resolution, they are still disbursing. 
Now, right now, Iran is paying the World Bank net resources 
every year. These are not large amounts of money.
    The critical test of whether we are effective in trying to 
end their nuclear program and deal with other concerns of Iran 
is going to be what we are able to achieve in the UN and what 
we are able to achieve working with countries around the world 
to tighten substantially the existing network of multilateral 
sanctions on Iran.
    Mr. Kirk. And you are about to pay the Islamic Republic of 
Iran Finance Ministry out of the World Bank--this is literally 
two blocks from your office--$191.5 million.
    Secretary Geithner. Again, I don't--you are saying I am 
about to. I don't know that. But I will be happy to check the 
facts and get back to you.
    Mr. Kirk. I think you are about to. I think this committee 
is probably----
    Secretary Geithner. Are you saying--just to make sure I 
understand, because I want to make sure I respond in writing 
accurately, you are saying--can you repeat again what your 
concern is?
    Mr. Kirk. In 2009, the World Bank using----
    Secretary Geithner. You are referring to World Bank 
disbursements----
    Mr. Kirk. Right. Using--20 percent of that funding is from 
the United States taxpayer, sent the Islamic Republic of Iran 
Finance Ministry $50 million.
    Secretary Geithner. No. As I said, you are referring to 
these two loans, disbursement of these two loans, and you are 
right to be concerned about this. And as you know, we tried to 
oppose these. We can't block them and don't have the ability to 
do it. They are still disbursing under that. It is not, I 
believe, a material amount of resources in the context of a 
broader objective, and we are going to work very carefully to 
make sure that there are no new loans approved to this 
government by those institutions.
    Mr. Kirk. Madam Chair, there is one bigger issue that I 
think could engulf this committee, and that is Moody's reported 
on Monday that it has warned your government that the U.S. and 
United Kingdom are moving closer to losing their AAA bond 
rating. This week we have learned that Berkshire Hathaway is 
now a safer place, according to the market, to lend money to 
than Uncle Sam, and that your auctions of the notes, and 
especially the 10-year bond, were fairly disastrous yesterday.
    Secretary Geithner. That is not true, congressman, but----
    Mr. Kirk. Actually, well, should I read the L.A. Times to 
you in its coverage of your bond sales?
    Secretary Geithner. You can if you like, but I know what 
happened in the Treasury market and----
    Mr. Kirk. ``Sell-off Sends Treasury Bond Yields Soaring'' 
is the headline.
    Secretary Geithner. Maybe I could--you and I have had a 
chance to talk about this a lot in many, many hearings in the 
past; so let me just see if I can respond to your concern. You 
are right to be concerned about our unsustainable fiscal 
position. We share that concern. Our budget deficits are too 
high. They were too high a year ago when we came into office. 
And if you look forward, they are unsustainable over the longer 
term.
    Mr. Kirk. I am trying not to make a partisan point. I am 
trying to make----
    Secretary Geithner. Nor am I.
    Mr. Kirk. So I am going to try to make a point directly 
into the AOR of this subcommittee. Because we have a growing 
sovereign debt issue that even includes the sovereign debt of 
the United States, the sovereign debt situation of Portugal, 
Spain, and Greece is now becoming more dire. And my 
understanding is that the negotiations of the Greek Government 
to the EU and Germany have not yielded a Europeansolution. So 
the Greeks are now being asked to come to the IMF, an institution 
funded by this subcommittee. Is that not the situation we are in?
    Secretary Geithner. Well, Europe is trying to come together 
to find a way to help the Government of Greece dig out of their 
economic crisis. Greece is a member of the IMF. You are right 
to say the press is reporting that the Europeans are 
considering asking the IMF to play some role in the resolution 
of this crisis. Greece, as a member of the IMF, has the right 
to go to the IMF and to borrow funds if it is willing to commit 
to an economic program that can help dig its way out of the 
crisis.
    But Europe hasn't reached agreement yet on how to resolve 
this problem. They are working on it. They have the capacity to 
figure out a solution that will help Greece manage through 
this, and I am confident they are going to do that.
    Mr. Kirk. I would just say to the chair, I am increasingly 
concerned that resources at the IMF are not adequate to meet a 
growing sovereign debt crisis; that the Portuguese and Greek 
crises are only harbingers of the Spanish debt crisis, which is 
five times worse. And this may directly affect funding in our 
bill when we write it in May or June.
    Mrs. Lowey. Thank you.
    And I know that the Secretary would be happy to continue 
this discussion recognizing the severity of the problem.
    I will tell you one good thing. It is good to know that 
Moody's can be relied on for some kind of a rating. 
Unfortunately, in the last few years, that wasn't the case.
    Ms. McCollum.
    Ms. McCollum. Thank you, Madam Chair.
    Madam Chair, I appreciate your comments about loans that 
have been made in 2004, 2006, I believe; so I want to focus on 
kind of what is today.
    Mr. Secretary, in your testimony, you stated that every $1 
invested in the World Bank results, from our calculation in 
checking with others, $26 worth of development assistance 
delivered. That is a pretty good return.
    And for that reason, I have been very supportive of the 
U.S. role in advancing important development work of the World 
Bank.
    Unfortunately, this committee sometimes gets a little 
confused when we are talking about what loans and what the 
World Bank is doing and what the U.S. has a role in. There was, 
in my opinion, some distortions made about the important role 
that the U.S. plays in the World Bank. In fact, there was a 
statement made in a recent subcommittee hearing with Secretary 
Clinton, and I quote, Imagine how confused Ahmadinejad is 
receiving a check from the World Bank from the Obama 
administration.
    Secretary Geithner, is the Obama administration providing 
taxpayer funds to the World Bank through IBRD, the IFC, or IDA 
that goes to assist the Iranian President Ahmadinejad?
    Secretary Geithner. This administration is not. Those loans 
were made, as you said, back in 2005, and they were made by the 
entities of the World Bank Group. Now, we, of course, are a 
major shareholder in those institutions----
    Ms. McCollum. Correct.
    Secretary Geithner. And of course, those institutions have 
a claim on our commitments and our resources. But those loans 
were made in 2005 over our objection, but they are still 
disbursing because they are permitted under the UN resolution.
    Ms. McCollum. But we are currently, under the accounts that 
we do put money into that does developmental aid, none of that 
is going to Iran. They don't even qualify for IDA so----
    Secretary Geithner. That is right. Exactly. That is true.
    Ms. McCollum. I, too, read the Wall Street Journal, and I 
will quote from March 2, 2010: Caterpillar, of Peoria, 
Illinois, has acknowledged in the past that its equipment is 
sold to Iran, despite U.S. Sanctions that prohibit most 
American exports to the Islamic Republic. The company has said 
that its foreign subsidiaries have conducted limited sales to 
independent dealers outside Iran, which resell to customers 
inside the country. Caterpillar has said those sales have been 
in full compliance with U.S. Regulations.
    And I would differ with that.
    So going back to regarding sanctions: A group of former 
Bush administration officials have an organization that they 
called United Against a Nuclear Iran. This organization 
recently exposed an Illinois-based company, Caterpillar, for 
profiting from selling machinery including tunnel-drilling 
equipment to Iran through a subsidiary. The United Against a 
Nuclear Iran letter to Caterpillar CEO James Owen states, 
quote, In the face of overwhelming bipartisan support in the 
U.S. Congress to economically isolate Iran's oil and natural 
gas industry, Caterpillar continues to make its machinery 
available for use in the development of the Iranian oil 
industry.
    The letter further goes on that they call upon Caterpillar 
to clarify whether tunneling equipment or heavy machinery in 
Iran is used to develop for the construction of Iran's nuclear 
facilities. The prospect that the Illinois company's equipment 
right now is digging tunnels to assist Iran's nuclear program 
is very troubling.
    Mr. Secretary, we all know that money is fungible, sowhen a 
U.S. company's product is sold in Iran through foreign subsidiaries, 
companies like Caterpillar profit, and then use to influence decisions 
made here in this Capitol, our efforts are being undermined at making 
these sanctions really work.
    Mr. Secretary, does Congress need to strengthen sanctions 
to prevent companies like Caterpillar from profiting in Iran, 
and what do we need to stop that now?
    Secretary Geithner. I don't know if I can speak 
specifically to that case, so I will be happy to look at it and 
refer your questions to my colleagues, but of course, we are 
prepared to work with Congress to strengthen the existing 
sanctions regime to make sure it is being applied as 
effectively as possible. And as I said, we are working very 
hard with countries around the world to make sure we can bring 
substantial additional pressure to bear on this government.
    Ms. McCollum. Madam Chair, I have some documents to enter 
for the record.
    [Information appears on page 358.]
    Mrs. Lowey. Without objection.
    Ms. McCollum. And I went back, and I think all of us need 
to take a serious look at Caterpillar's involvement here with 
us individually on the hill.
    Mrs. Lowey. Mr. Crenshaw.

                                 HAITI

    Mr. Crenshaw. Thank you, Madam Chairman.
    Mr. Secretary, yesterday we had a briefing with the 
Department of State and talked about Haiti, and it was pointed 
out there is about $4 billion that is going to be given to them 
over the next 18 months. I think for the reconstruction period, 
it is another $11 billion, $11.5 billion. So that is about $15 
billion. Our fair share of that, I think you said, was about $2 
billion to $3 billion. And I saw where the supplemental has 
$212 million for debt relief. I am trying to understand those 
numbers.
    As I understand it, back in July, there was kind of a 
debtors conference, and all the donors agreed to forgive all 
the debt for Haiti, and certainly that is understandable. But I 
am trying to understand how, if that was in July, now we have 
another $212 million that we are going to forgive, obviously, 
in the situation they are in, that is certainly appropriate.
    So part of it I would like to understand why they have the 
debt there over these last 7 months, and partly I would like to 
understand if that is a country that is so poor that they 
qualify for debt relief, I wonder what is the criteria for a 
debt versus a grant because I just don't want this committee to 
be in a position this time next year to say, well, we have got 
some more, the fact that we have already given $2 billion to $3 
billion, but now there is some more debt that we are being 
asked to forgive. So if you could talk about that.
    Secretary Geithner. A very good question. Most of the debt 
Haiti owes to governments around the world is--very little of 
it is owed to the United States. Most of the debt they owe to 
multilateral institutions is owed to the Inter-American 
Development Bank and some other international financial 
institutions. To reduce that debt, the debt they owe to the 
IDB, costs money, but we think it is good policy because it 
doesn't make sense for us to be providing substantial resources 
directly to Haiti; it just goes to pay back the obligations 
they have to the IDB.
    So as part of this broader effort to mobilize as much 
global resources as we can to help Haiti through this, we 
thought an accord on canceling Haiti's was appropriate and 
necessary, but to do that effectively, you need to deal with 
the debt they owe to the multilateral institutions, not just 
the bilateral institutions. And our share of the cost in 
reducing the debt they owe to the IDB is the number you 
referred to in your opening--in your remarks in your questions.
    But again the simple test is, you can provide resources 
lots of different ways; it doesn't make sense for us to give 
them substantial amounts of money that just go to repay their 
multilateral and bilateral creditors. So we have worked with 
countries around the world to get them to agree to cancel or 
extinguish their bilateral debt, but we need the IDB and those 
other institutions to do the same thing.
    Mr. Crenshaw. So the IDB probably, in that intervening 7 
months, made an additional loan----
    Secretary Geithner. I don't actually know that is the case. 
I guess it is possible. So I am not sure what changed between 
July and----
    Mr. Crenshaw. Or maybe they didn't all--maybe they didn't 
agree--I mean, they all agreed to pay 100 percent of the debt, 
but maybe it wasn't paid----
    Secretary Geithner. They may not--it is possible--but I 
will come back to you on this in more detail. It is possible 
that that initial stage was just about governments around the 
world, not the international institutions. And this will be a 
critical part of it. Getting the IDB to move, too, will be a 
critical part of any effective solution----

                                  IDB

    Mr. Crenshaw. You mentioned the IDB. Let me ask you, I 
think just last week you released another $500 million tokind 
of increase their capital, and I imagine they make loans, Latin 
America, Caribbean, difficult times globally in part and also just 
because there is more demand down there. Would you comment on that? Is 
that the reason why that $500 million was added, released? And also 
comment on the fact that, from time to time, I hear that the IDB is not 
very friendly to the U.S. when it comes time for some of the 
procurement contracts. I don't know if that is true or not, but it 
seems like we are providing a lot of the money that goes in the IDB 
that we ought to get a fair shake when it comes time to procure those 
contracts. Could you comment on those two things?
    Secretary Geithner. Absolutely. At the peak of this 
financial crisis, when you saw exports stop around the world, 
growth stop around the world, we were successful in convincing 
the World Bank, the IDB, the Asian Development Bank, other MDBs 
to substantially increase the amount of resources they were 
giving to what are some of the most important markets for U.S. 
exporters. They delivered. They moved very, very quickly. They 
got a lot of loans out the door in support of reforms at 
development projects and that made a critical effort in helping 
restart the flow of trade, restart growth globally.
    In the wake of that commitment, which is substantially 
where their capital is based, we have worked with the other 
major shareholders in the IDB to reach a provisional agreement 
on how to strengthen their financial position. As part of that, 
we have reached agreement on a set of reforms to improve how 
the institution is run, to make sure those resources are being 
used in the most effective manner possible.
    I don't have with me any details on the procurement record 
of U.S. institutions in IDB-supported projects. I would be 
happy to come back to you with more detail on that. I haven't 
been exposed to concerns recently about that. But again, our 
interests are in making sure these institutions are supporting 
U.S. interests, our economic interests, our national security 
interests, and they have a very good record, including the IDB, 
of providing very good leverage for our scarce resources in 
support of those commitments.
    But when we put resources on the table to make them 
stronger, we do so only in support of a very tough, ambitious 
set of reforms that are designed to make them more transparent, 
more accountable, better run, more focussed on things that we 
think best serve our interests, and this provisional agreement 
we reached last weekend, which I think is what you were 
referring to, is in that best tradition.
    Mrs. Lowey. Mr. Chandler. We are going to try to move 
through here.
    Mr. Chandler. That is the way it always is when it comes to 
me.
    Mrs. Lowey. No. But we will come back just for you if you 
would like.

                                  IRAN

    Mr. Chandler. I appreciate that.
    Mr. Secretary, hello. I know you have been talking a lot 
already, because members are interested in it, in sanctions 
against Iran. The reason, of course, that they are interested 
in it is that none of us want Iran to get nuclear weapons. I 
have--for as long as I have been on this committee, I don't 
think there is any issue that is more important to the members 
of this committee, and that is across the board. It is 
extremely important to the members of the committee, and I 
think we all know that if sanctions don't work, we will be 
looking at options that we don't even want to contemplate, none 
of us want to contemplate.
    So it becomes imperative that we make the sanctions work. 
And I know that you have a great deal of experience in Asia. I 
know you have lived in several countries there during your 
career. Could you give us some indication of where China is on 
the subject right now? Sanctions, we all want them to work, but 
we also know that if we don't have some unanimity, some effort 
amongst all countries, that we have got a significant problem 
and that they either may not work or probably won't work.
    Secretary Geithner. You made the critical points. This is 
vital to our national security interests. And to be effective 
in bringing pressure to bear on this government, we have to get 
the other major players to come with us. This includes Russia, 
and it includes China. It is not just about Europe.
    And Secretary of State Clinton and Ambassador Rice are 
working very hard right now in trying to make sure they can 
strengthen the prospects of broad agreement among those key 
countries for a very strong resolution. That is the principal 
focus of the President's attention right now, and of course, we 
are going to work very hard to be persuasive with Russia and 
China to gain their support for a strong resolution.
    Mr. Chandler. Where does the matter stand now? From what 
you can tell, what kind of progress are we making along those 
lines? There has been some suggestion that there was some 
intransigence there on the part of those countries. Do you--
    Secretary Geithner. All I can say, Congressman, now is that 
is really a question that I should leave to my colleague, the 
Secretary of State, but she is very persuasive. She is very 
tough, and she is working on it very hard with the full 
engagement of the President. And we are going to keep at it 
until we get as much support as we can for the strongest 
resolution.
    Mr. Chandler. I see I have time. One more quick question. 
The World Bank. Are we spreading too thin? It seems like it is 
undertaking a number of different roles that it had not played 
in the recent past. All of a sudden and now we are talking 
about a global food security fund that it is going to be 
involved in. Are we spreading it too thin?
    Secretary Geithner. I don't think so. I think you are right 
to point out that, over time, what happens is we give new 
missions, new responsibilities to these institutions, 
particularly the ones that have the best record of being 
effective, and the World Bank is a step above the others, 
frankly, in how effective it is in using these development 
resources in support of things we all care about. But the 
reason why we are proposing to put a larger share of our 
overall foreign assistance budget into these trust funds and 
into the multilateral banks is because, again, we think they 
give us better leverage for our dollars, our scarce dollars, 
and we think they come with the best technical expertise, 
frankly, in running programs in agricultural development, to 
promote food security, to increase agricultural productivity, 
as well as in the areas of encouraging greater energy 
efficiency, reducing emissions.
    The World Bank has the greatest concentration of technical 
expertise in the world in those specialized areas, and I think 
our judgment is, if you build on that expertise, you build on 
those institutions, you are more likely to have other countries 
come in and have those resources mobilize in support of our 
resources with better outcomes, better returns.
    Now, I said in my remarks, that among the reforms we are 
proposing to the institutions is to try to get them to 
concentrate on a set of core objectives which we think are most 
important. And the ones we focused on are private-sector 
development, food security, agriculture development, helping 
the poorest in these countries, helping address poverty most 
directly, and in the areas of climate change. Now, there are 
other things that are important for them to do as well, but we 
want to make sure that we can concentrate their focus, narrow 
their focus on those core areas of concern to us.
    Mr. Chandler. Thank you.
    Mrs. Lowey. Mr. Rehberg.
    Mr. Rehberg. Thank you, Madam Chair. In the interest of 
time, I would like to submit some questions for the record to 
have the Secretary answer.
    Real quickly, in your fiscal year 2011 request, following 
up on his point, you are asking for $408.4 billion for the 
global agricultural and food security program. I am a real 
supporter of food aid and believe it is important to do. But my 
first concern is that it is still in the initial stages. 
Second, that Canada and Spain and the Gates Foundation are the 
only ones that have joined in so far. Third, there is no 
congressional legislation authorizing the appropriation. 
Fourth, there is a possibility that the World Bank's 
International Development Association, which is asking for 
$1.285 could do this same thing.
    So I will give you a series of six questions for the 
record, but I guess, most importantly, aren't you getting the 
cart before the horse in that there is no authorization for the 
expenditure of this fund in the first place? And what is a fair 
percentage for America to shoulder? I always look at numbers to 
see who else is involved.
    Secretary Geithner. Those are good questions. And of course 
we are working very closely with the authorizers to make sure 
we have authorizing legislation to go with this.
    Mr. Rehberg. And you anticipate that within this 12 month 
period.
    Secretary Geithner. We do anticipate that. Again, my sense 
is, just for the reasons you said, I think there is alot of 
support for this. I think people recognize that if you care about 
development and in our economic interest in development, one of the 
most important things for us to do is to reverse what was a decade long 
decline in the share of resources and investments into these things 
that can make the biggest difference.
    You are right to say that we are at the early stages still 
and trying to mobilize as much resources as we can. But we are 
confident that we have a better chance of getting more 
resources into this key priority by using this mechanism, a 
multilateral fund that works, that is located in the World 
Bank, uses that institutional expertise, that basic mechanism. 
I think we are going to have a better chance of getting more 
money from other countries if we use that mechanism.
    Mr. Rehberg. I have tried to see if any recipient countries 
are going to be on the governing board. Can you assure us they 
are not?
    Secretary Geithner. I don't know, but I will respond in 
writing. And I understand your concern again. The general 
tradition that has guided my predecessors in the past in the 
Treasury in the United States for dealing with these is, we 
want to have governing bodies where the creditors, the people 
putting up the money, have the dominant influence in what that 
money is used for.
    Mr. Rehberg. I will yield back the balance.
    Thank you Madam Chair.
    Mrs. Lowey. We are running into a time issue.
    Ms. Lee.
    Ms. Lee. I am going to be very, very quick.
    Good to see you, Mr. Secretary.
    Two questions. One is the GAO report 2008 laid out how the 
funds of OFAC are really misdirected in enforcing the travel 
ban on Cuba, and that an inordinate amount of OFAC's resources 
are tasked with an enforcement of policy that really has 
nothing to do with our risk in terms of our national security. 
So we were waiting to see the risk assessment as recommended by 
GAO, and I just want to see if that has been done. And have you 
reallocated your limited resources during this time of very 
tight budgets to areas that best address the risks to our 
national security?
    And the second question is PEPFAR, our Global Aids 
Initiative. I know in the previous bill, in the last bill, we 
authorized Treasury to assist countries with their public 
finance systems. I want to see, have you started working on 
that? Are you coordinating with State, or how is that working, 
or have you started?
    Secretary Geithner. On the first issue, you are exactly 
right that it is very important that we allocate these 
resources in OFAC to where we have the greatest national 
security concerns. I believe we are doing that, but I am happy 
to provide you more details in writing about how we use those 
resources today and how it has changed recently.
    Ms. Lee. You were supposed to do a risk-based assessment as 
recommended by GAO.
    Secretary Geithner. Again, I would be happy to come back to 
you in writing and tell you what we have done in that area and 
how we are using those resources. But you are right about the 
basic point. We want to make sure that, we don't have unlimited 
resources, we want them used to where we have the most 
important risks.
    On PEPFAR, I have to come back to you in writing. I am sure 
we are coordinating with State very closely on this, and we 
will respond to any detailed questions you have about the state 
of play on that particular program.
    Ms. Lee. Thank you.
    And I have more questions for the record, Madam Chair.
    Mrs. Lowey. Mr. Rothman.
    Mr. Rothman. Thank you, Madam Chairman.
    Mr. Secretary, great to see you again. I don't know how you 
actually read all the things you need to read with all the time 
you spend on the Hill answering our questions, but----
    Secretary Geithner. I respect very much this important 
tradition in government, and I am happy to cooperate closely. I 
do enjoy coming up answering questions. It is a good thing that 
you guys put us in the position we have to come up here and 
explain. It does take time.
    Mr. Rothman. Good. And thank you for the outstanding work 
you are doing, by the way, in all areas.
    I did want to acknowledge the issue raised today by 
Congressmen Israel and Kirk. Coincidentally, yesterday I 
announced that I would be adding to each appropriations bill 
limiting language with regard to preventing Federal agencies of 
the United States from doing business with any companies who 
did business with Iran. I was unaware of the language that Mr. 
Israel and Mr. Kirk were concurrently working on. And I do look 
forward to working with Mr. Israel and Mr. Kirk and others, the 
chairwoman, on that issue. I have used that limiting language 
device before on other issues, and it works.
    The State Department does seem to me to have the lion's 
share of responsibility of enforcing the prevention ofcompanies 
being funded through the U.S. Federal Government to do business with 
Iran. But to the--and I appreciate your saying you would cooperate and 
work with the Congress. To the extent that you have not fully scrubbed 
your Department of the Treasury in that regard, I urge you to do so. 
And the only reason I make note of that is because in a recent article 
in The Times of a few days ago referring to a State Department 
spokesperson who had reviewed 27 of the deals in question, they said 
that there were some, quote, carefully constructed mechanisms of these 
companies to get around the law, and some other problematic cases. If 
you can come up with language that will help us tighten these laws, 
please submit that language to us, and we will make it the law so that 
they cannot carefully construct loopholes through which they can do 
business with Iran.
    I just came back from Afghanistan and Pakistan, and one of 
the major issues there has to do with corruption in 
Afghanistan. And I understand, and it is reflected in your 
budget, that your Office of Technical Assistance is working 
with the Afghan government to address that. Could you comment 
on how that is going, ending the corruption or training, 
providing fail-safe mechanisms to end corruption in the Afghan 
government?
    Secretary Geithner. Again, thank you for highlighting the 
role they play. We have a group of very talented, very brave 
people, frankly, working closely with the Afghan government to 
improve a variety of things that are basic, basic to running an 
effective finance ministry, Central Bank, et cetera. I referred 
in my statement, I think I quoted a former minister saying that 
the technical assistance he got from Treasury was the best 
technical advice he had gotten from anywhere.
    This program has a great record around the world. It is 
tremendously valuable. It is a very, very small amount of 
resources with a very, very high return. And I think it would 
be--I couldn't do it in my statement, but we would be happy to 
provide more details in writing about the full extent of what 
we are doing, not just in Afghanistan, but in many other 
countries. Great record in Iraq, great record in Afghanistan, 
great record in countries in Eastern Europe, and not just in 
the areas I referred to in my testimony in preventing money 
laundering and terrorist financing, but in building the basic 
institutions of government controls, reducing corruption, 
building central banks, building payment systems. These are 
things that all governments need to operate effectively.
    Mr. Rothman. As you know, one of the reasons why the Afghan 
people, aside from the threats of the Taliban to kill their 
families if they didn't join them, were some of the Afghan 
people wanted relief from the corruption of the Afghan 
government and turned to the Taliban for protection from the 
corruption in the previous Afghan regime. So your continuing 
efforts are very important. And if you can keep us apprised of 
your efforts and the success of those efforts, we would be 
greatly appreciative.
    And please, thank your personnel, who are demonstrating not 
only intellectual and scholarly prowess, but also the physical 
courage of being in a war zone providing all that assistance.
    Secretary Geithner. Thank you for saying it. It is a great 
sacrifice. And as I said, they are not just dedicated competent 
thoughtful people, smart people, but they are brave to be doing 
it, and I really very appreciate their sacrifice, and thank you 
for highlighting it. Any place we are putting in substantial 
resources, whether we are at war or we have some other broad 
interest, you want to make sure that you are helping 
governments put in place the kind of controls to make sure they 
are not just feeding corruption and the resources when we need 
them. And so that is why it is so important to have the 
technical expertise of these bilateral programs funded 
adequately alongside what we are doing through the World Bank, 
but thank you for highlighting that.
    Mr. Rothman. Thank you.
    Mrs. Lowey. Thank you, Mr. Rothman.
    We have 1 minute left for Ms. Granger.
    Ms. Granger. The chairwoman has been kind enough to let me 
ask another question. I will ask it very quickly.
    I was talking yesterday to our Ambassador to Mexico, Carlos 
Pascual, about the violence in Mexico. I know that the Treasury 
designated 54 members of the Gulf Cartel and the Los Zetas as 
specifically designated narcotics traffickers, which is part of 
the strategy of going after the cartels' organization network. 
What else can you do in Mexico to disrupt this organization and 
prohibit the effect of this new strategy?
    Secretary Geithner. Of course, this is just one of the many 
tools we have, but it is a very important tool. Because what it 
does is, it deprives them of the ability to access financial 
resources through our institutions. And we, of course, use this 
program to make sure we are giving information to the next that 
they can use. This can be very effective.
    But as you all pointed out you need to keep moving. You can 
catch it in one area and shut it down, and it is going to move 
somewhere else. So it is a constant struggle. And Stuart Levey 
and his colleagues work every day to make sure that they are 
gradually not just expanding the scope of these things but 
tightening them in their reach. And again, it can be very 
effective. It doesn't solve the problem, but it is a very 
effective tool.
    Ms. Granger. Thank you very much.
    Secretary Geithner. Chairwoman Lowey, could I just say one 
thing? I want to just say one thing----
    Mrs. Lowey. Go right ahead.
    Secretary Geithner [continuing]. I said in my statement, 
but I want to end with this. Because, as you all said, even 
those of us who recognize the long commitment to supporting 
these institutions, these programs, you know, this is a time 
when one in eight Americans are on food stamps. Unemployment is 
10 percent, and we have got unsustainably high fiscal deficits. 
And we are living with greater constraints on scarce resources 
than we have in decades. And this is a large increase in 
request, but I want to underscore something that I think you 
understand, but I want to make sure people understand this. The 
overall international affairs budget of the administration is 
only proposed to increase 2.8 percent, just slightly above 
inflation.
    So even though we are in a time when we are fighting two 
wars, we have tremendous global challenges, huge American 
interest in being part of that, this is a very restrained 
overall budget. Our piece of it, which is a very small piece of 
the budget, is only 5 percent of the budget. We are proposing, 
as you said, a substantial increase over last year, and if you 
look over 2 years, it is a substantial increase. But we are 
doing that because we are trying to be as fiscally prudent and 
responsible as possible, because by shifting resources more to 
these multilateral institutions, we are getting a much bigger 
bang for the American dollar. So by putting a dollar--taking a 
dollar from a bilateral program and putting it into a 
multilateral program, we have a much greater chance of having 
that dollar leverage commitments from other countries. And if 
we put them through the World Bank and others, they are 
leveraged further by the borrowing capacity of the World Bank.
    So although our numbers are going up, we are a very small 
share of the overall budget. The overall budget is going up 
only modestly. And again, this shift toward the multilateral 
institutions at the margin is part of a fiscally responsible 
approach to substantially increasing the leverage we get for 
asking the American people to put up some of their taxpayers' 
money in support of these broad objectives.
    Mrs. Lowey. I just want to say, Secretary Geithner, I 
appreciate your testimony. I appreciate your closing comments. 
And the results are only as good as the accountability and the 
oversight, and we always look forward to those reports, because 
unfortunately, there have been many instances with bilateral 
aid, with multilateral aid, where that may not be the case. So 
we appreciate your oversight, and we look forward to following 
up with you. This meeting is adjourned.
    Secretary Geithner. Thank you very much.
    [GRAPHIC] [TIFF OMITTED] T6402A.222
    
    [GRAPHIC] [TIFF OMITTED] T6402A.223
    
    [GRAPHIC] [TIFF OMITTED] T6402A.224
    
    [GRAPHIC] [TIFF OMITTED] T6402A.225
    
    [GRAPHIC] [TIFF OMITTED] T6402A.226
    
    [GRAPHIC] [TIFF OMITTED] T6402A.227
    
    [GRAPHIC] [TIFF OMITTED] T6402A.228
    
    [GRAPHIC] [TIFF OMITTED] T6402A.229
    
    [GRAPHIC] [TIFF OMITTED] T6402A.230
    
    [GRAPHIC] [TIFF OMITTED] T6402A.231
    
    [GRAPHIC] [TIFF OMITTED] T6402A.232
    
    [GRAPHIC] [TIFF OMITTED] T6402A.233
    
    [GRAPHIC] [TIFF OMITTED] T6402A.234
    
    [GRAPHIC] [TIFF OMITTED] T6402A.235
    
    [GRAPHIC] [TIFF OMITTED] T6402A.236
    
    [GRAPHIC] [TIFF OMITTED] T6402A.237
    
    [GRAPHIC] [TIFF OMITTED] T6402A.238
    
    [GRAPHIC] [TIFF OMITTED] T6402A.239
    
    [GRAPHIC] [TIFF OMITTED] T6402A.240
    
    [GRAPHIC] [TIFF OMITTED] T6402A.241
    
    [GRAPHIC] [TIFF OMITTED] T6402A.242
    
    [GRAPHIC] [TIFF OMITTED] T6402A.243
    
    [GRAPHIC] [TIFF OMITTED] T6402A.244
    
    [GRAPHIC] [TIFF OMITTED] T6402A.245
    
    [GRAPHIC] [TIFF OMITTED] T6402A.246
    
    [GRAPHIC] [TIFF OMITTED] T6402A.247
    
    [GRAPHIC] [TIFF OMITTED] T6402A.248
    
    [GRAPHIC] [TIFF OMITTED] T6402A.249
    
    [GRAPHIC] [TIFF OMITTED] T6402A.250
    
    [GRAPHIC] [TIFF OMITTED] T6402A.251
    
    [GRAPHIC] [TIFF OMITTED] T6402A.252
    
    [GRAPHIC] [TIFF OMITTED] T6402A.253
    
    [GRAPHIC] [TIFF OMITTED] T6402A.254
    
    [GRAPHIC] [TIFF OMITTED] T6402A.255
    
    [GRAPHIC] [TIFF OMITTED] T6402A.256
    
    [GRAPHIC] [TIFF OMITTED] T6402A.257
    
    [GRAPHIC] [TIFF OMITTED] T6402A.258
    
    [GRAPHIC] [TIFF OMITTED] T6402A.259
    
    [GRAPHIC] [TIFF OMITTED] T6402A.260
    
    [GRAPHIC] [TIFF OMITTED] T6402A.261
    
    [GRAPHIC] [TIFF OMITTED] T6402A.262
    
    [GRAPHIC] [TIFF OMITTED] T6402A.263
    
    [GRAPHIC] [TIFF OMITTED] T6402A.264
    
    [GRAPHIC] [TIFF OMITTED] T6402A.265
    
    [GRAPHIC] [TIFF OMITTED] T6402A.266
    
    [GRAPHIC] [TIFF OMITTED] T6402A.267
    
    [GRAPHIC] [TIFF OMITTED] T6402A.268
    
    [GRAPHIC] [TIFF OMITTED] T6402A.269
    
    [GRAPHIC] [TIFF OMITTED] T6402A.270
    
    [GRAPHIC] [TIFF OMITTED] T6402A.271
    
    [GRAPHIC] [TIFF OMITTED] T6402A.272
    
    [GRAPHIC] [TIFF OMITTED] T6402A.273
    
    [GRAPHIC] [TIFF OMITTED] T6402A.274
    
    [GRAPHIC] [TIFF OMITTED] T6402A.275
    
    [GRAPHIC] [TIFF OMITTED] T6402A.276
    
    [GRAPHIC] [TIFF OMITTED] T6402A.277
    
    [GRAPHIC] [TIFF OMITTED] T6402A.278
    
    [GRAPHIC] [TIFF OMITTED] T6402A.279
    
    [GRAPHIC] [TIFF OMITTED] T6402A.280
    
    [GRAPHIC] [TIFF OMITTED] T6402A.281
    
    [GRAPHIC] [TIFF OMITTED] T6402A.282
    
    [GRAPHIC] [TIFF OMITTED] T6402A.283
    
    [GRAPHIC] [TIFF OMITTED] T6402A.284
    
    [GRAPHIC] [TIFF OMITTED] T6402A.285
    
    [GRAPHIC] [TIFF OMITTED] T6402A.286
    
    [GRAPHIC] [TIFF OMITTED] T6402A.287
    
    [GRAPHIC] [TIFF OMITTED] T6402A.288
    
    [GRAPHIC] [TIFF OMITTED] T6402A.289
    
    [GRAPHIC] [TIFF OMITTED] T6402A.290
    
    [GRAPHIC] [TIFF OMITTED] T6402A.291
    
    [GRAPHIC] [TIFF OMITTED] T6402A.292
    
    [GRAPHIC] [TIFF OMITTED] T6402A.293
    
    [GRAPHIC] [TIFF OMITTED] T6402A.294
    
    [GRAPHIC] [TIFF OMITTED] T6402A.295
    
    [GRAPHIC] [TIFF OMITTED] T6402A.296
    
                                        Thursday, March 18, 2010.  

                 FY2011 BUDGET REQUEST FOR PEACE CORPS

                                WITNESS

AARON S. WILLIAMS, DIRECTOR PEACE CORPS

                 Opening Statement of Chairwoman Lowey

    Mrs. Lowey. The Subcommittee on State and Foreign 
Operations and Related Programs will come to order. Oh, Ms. 
Granger is here just in time. And we apologize in advance--she 
got over here quick--we apologize in advance because it looks 
like they are going to be calling votes.
    So, we are going to begin and it is my great pleasure to 
welcome Aaron Williams, the Director of the Peace Corps for his 
first hearing with us to discuss the President's fiscal year 
2011 request for the Peace Corps. Mr. Williams brings a wealth 
of experience in development to the Peace Corps. He is not only 
a returned Peace Corps volunteer, but a former senior foreign 
service officer at USAID and former Vice President for 
International Business Development with RTI International. Mr. 
Williams, it is a pleasure to have you testify today.
    The President's budget request 446 million for the Peace 
Corps, a 10 percent increase over the fiscal year 2010 enacted 
level. The request includes findings to increase volunteers, 
enhance recruitment efforts, and expand to three new countries. 
On its 49th anniversary two weeks ago, we mark the Peace Corps' 
success in promoting American values and ideals throughout the 
world and increasing understanding of the global community 
among Americans. Today with 7,800 volunteers in 70 countries, 
Peace Corps volunteers are integrating into communities 
providing needed technical assistance and support for 
development programs and cross cultural exchanges. They are 
truly indispensable to U.S. foreign policy. Through 
presidential initiatives and food security and global health, 
this administration has emphasized working across U.S. 
government agencies to address the needs of the developing 
world through engagement with local stakeholders.
    We would appreciate insight into the Peace Corps 
involvement in the various presidential initiatives. Last year, 
the committee asked the Peace Corps to undertake an assessment 
of its program model, management, and operations, and can you 
update us on the progress of that assessment? In the short time 
you have been director, have you undertaken any initiatives to 
address the growing needs of the agency and alleviate the 
management strains of the current structure?
    If the Peace Corps funding is to increase at the rate 
necessary to meet the administration's goal of 11,000 
volunteers by fiscal year 2016, the agency must transition 
quickly to more effective up-to-date management and evaluation 
practices. For example, what steps have you taken to ensure 
that Peace Corps support staff are appropriately trained and 
empowered to assist volunteers? What monitoring and oversight 
is in place to measure the effectiveness of programs?
    Peace Corps volunteers have been some of the United States 
strongest ambassadors to the world, maintaining that reputation 
and influence requires adaptation to growing and changing 
needs, expeditious recruiting that ensures a high-quality 
volunteer force, thorough training, quality medical care, and 
solid support services for return volunteers. Finally and 
perhaps most importantly, we must ensure there is constant 
attention to volunteer safety.
    I hope you will address these priorities in the coming 
year. Mr. Williams, I appreciate your testimony today. But 
before we hear from you, let me turn to Ms. Granger, the 
ranking member, for her opening statement.

                     Opening Remarks of Ms. Granger

    Ms. Granger. I will be very brief because I want to hear 
from you. We all do. This is a 12 percent increase over 2010 
and 31 percent over 2009, so certainly, we are going to hear 
about that. Your internal review, how that is going, and how 
you are making these requests before that assessment has been 
completed is going to be very important. As the chairman said, 
the rate of growth is significant, so what is the capacity and 
the training to manage it? I will turn it over to you again.
    Mrs. Lowey. I think what we will do is proceed and we would 
be delighted to hear from you.

                   Opening Statement of Mr. Williams

    Mr. Williams. Thank you, very much. Chairman Lowey, ranking 
member Granger, members of the subcommittee, thank you for the 
opportunity to appear before the committee today in support of 
the President's fiscal year 2011 budget request for the Peace 
Corps. It is my intent, with your permission, to briefly 
summarize my full testimony that I have submitted for the 
record.
    It has been just over six months since I was sworn in as 
Director of the Peace Corps. It is an honor for me as a 
returned Peace Corps volunteer to serve as director, as you can 
well imagine. It is my distinct privilege to have been asked by 
President Obama to lead the Peace Corps in the eve of our 50th 
anniversary and at a time of strategic and quality growth. It 
is our great responsibility to recruit, train, and support the 
next generation of volunteers.
    Before I discuss the fiscal year 2011 budget request, I 
would like to thank this committee for its tremendous support 
of the Peace Corps. The Peace Corps' 2010 appropriation of 400 
million is unprecedented expression of support and confidence 
by the Congress. I recognize this is a time of great economic 
uncertainty for many Americans. These are difficult times in 
many ways. Yet they are also times that present new 
opportunities to serve our country. I believe the Peace Corps 
represents one of the best value propositions for the United 
States government overseas.
    Our volunteers are grassroots ambassadors for the United 
States. They represent America's values, generosity, and hope. 
Today, 7,600 Peace Corps volunteers are serving in 76 host 
countries. We are charged by the Peace Corps Act to have, at a 
minimum, 10,000 volunteers in the field each year. The last 
time the Peace Corps had more than 10,000 was in 1969.
    The Peace Corps' budget request for fiscal year 2011 is 446 
million dollars. The fiscal year 2011 request will enable the 
Peace Corps to provide support to 8,500 volunteers serving in 
approximately 79 countries worldwide in fiscal year 2011. The 
Peace Corps fiscal year 2011 budget request represents the 
continuation of the President's initiative to significantly 
increase the number of Americans serving as Peace Corps 
volunteers to 9,400 by the end of fiscal year 2012 and 11,000 
by the end of fiscal year 2016.
    The comprehensive agency wide assessment mandated by 
Congress in our fiscal year 2010 appropriations is currently 
underway. I expect this assessment to provide critical 
information and guidance to position the agency for strategic 
growth. The Peace Corps plans to submit the findings of this 
comprehensive assessment to Congress in June of this year.
    We plan to invest in quality growth at the Peace Corps. We 
intend to spend about 80 percent of the proposed fiscal year 
2011 budget on direct volunteer operations. Partnerships are an 
integral part of our growth plans. We will continue to seek to 
increase strategic partnerships with international and local 
non-governmental organizations. Through these efforts to 
explore innovative and strategic partnerships, the agency will 
expand its geographic reach and enhance the development impact 
of Peace Corps volunteers.
    Our growth model has four key strategies. First, to expand 
the number of volunteers serving in existing host countries. 
Second, to encourage third-year extensions of volunteers who 
have demonstrated extraordinary skills and a desire to continue 
in a leadership role. Third, we want to increase the number of 
Peace Corps Response Volunteers. And, finally, fourth, we want 
to pursue entry into new host countries.
    To oversee this growth, I established the Office of Global 
Operations to provide overarching strategic support and 
management of the three geographic regions. In addition to 
adding funds to the field, I am also using our resources to 
strengthen two of our key offices in Washington that support 
the health and safety of our volunteers. Keeping Peace Corps 
volunteers healthy and safe in the challenging circumstances 
under which they serve is our top objective. We want to invest 
in recruiting the next generation of volunteers.
    Peace Corps, as you know, continues to capture the 
imagination of Americans interested in public service abroad. 
In fiscal year 2009, over 15,000 Americans applied for 4,000 
positions. The Peace Corps is engaged in an intensified 
strategic recruitment campaign. The recruitment will continue 
to rely heavily on the person-to-person efforts of our field-
based recruiters in nine regional offices to build a volunteer 
Corps that reflects the diversity of America. I believe we can 
do a better job of recruiting volunteers by demonstrating the 
Peace Corps services are life-changing leadership experience. I 
certainly know this firsthand from my own personal experience 
when I served as a volunteer in the Dominican Republic.
    Another way to increase the impact of our recruitment 
effort is by investing our third goal initiatives. The fiscal 
year 2011 funds will be used, among other purposes, to promote 
educational opportunities that place returned Peace Corps 
volunteers with schools to share their overseas experiences and 
to develop educational curriculum materials for American 
classrooms. We can do a better job, I believe, of supporting 
our volunteers by beginning the process of scaling the benefits 
of service to more accurately reflect increases in the cost of 
living. The Peace Corps readjustment allowance has remained the 
same for the past 11 years. Effective April 1, the readjustment 
allowance will increase to 275 dollars per month, an increase 
of 50 dollars per month.
    We also want to be innovative. We want to invest in 
innovation and infrastructure to make sure that we can invest 
in sustainable impact. I know through careful planning and 
investment, we can have an even greater impact by creating a 
culture that values efficiency, transparency, and the sharing 
of best practices. The agency's new Office of Innovation will 
manage a bottom-up process across all of our offices and 
challenge staff to work on the issues that will promote change 
and support growth. I am also encouraging the agency to share 
ideas and best practices from the field that might be low-tech 
but high-impact and also green.
    Let me conclude by saying that throughout our history, the 
Peace Corps has adapted and responded to the issues of the 
times. Peace Corps priorities should reflect current global 
realities and the development priorities of our host countries. 
In fiscal year 2011, Peace Corps growth will continue to focus 
on sectors such as education, food security, health and HIV/
AIDS, environment, and renewable energy.
    While times have changed since the Peace Corps' founding in 
1961, the agency's mission to promote world peace and 
friendship has not. Over the last 49 years, almost 200,000 
Americans have served in the Peace Corps. I envision a Peace 
Corps that remains vibrant for another 50 years, one that 
grows, adapts, and continues to carry the torch of President 
Kennedy's dream and responds to President Obama's call to 
service.
    I want to thank the Committee again for allowing me to 
testify in support of the President's budget request. I also 
appreciate the support the members of the Committee have 
offered and your willingness to visit our volunteers when you 
travel around the world. I am pleased to answer your questions 
and thank you, very much, for this opportunity.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402P6B.001
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.002
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.003
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.004
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.005
    
    Mrs. Lowey. Thank you, sir. I think what we will start 
with, Ms. Granger, do you have one question before we adjourn 
for votes.
    Ms. Granger. In the recommendations from the assessment, I 
know you are not ready to produce that yet, but tell us what 
indications you have.
    Mr. Williams. Well, just briefly, and we are looking at 
seven areas that were included in our appropriation. Our team 
has been working on this for a couple of months now and we are 
looking at all the areas that we were asked to, including 
recruitment, training and medical care for volunteers, 
adjusting volunteer placement reflect U.S. priorities, 
coordinatation with different institutions, lowering our early 
termination rates, strengthening management and independent 
evaluation and oversight, and strengthening our third-goal 
activities. So, we have people working on each one of those 
components.
    And I think from the early indications, number one, we are 
going to come up with some very hardhitting recommendations 
that I think will please the Committee in terms of the depth 
and the scope of what we are going to look at. We are going to 
be responsive to the concerns that were raised by the 
Chairwoman and also by yourself, Ranking Member Granger, in 
terms of management structure. And we are going to deliver a 
good assessment by the end of June.
    Ms. Granger. Thank you.
    Mrs. Lowey. I think what we will best do is adjourn and we 
will try and get through these three votes as quickly as 
possible and then come back. And I thank you, again, for 
appearing before us. We shall return as soon as we can get 
back.
    [Recess.]
    Mrs. Lowey. Thank you for waiting for us, the hearing will 
come to order.
    Mr. Williams. Thank you, Madam Chairwoman.
    Mrs. Lowey. I would like to ask you about the coordination 
with other U.S. government agencies. We know, the Secretary and 
I have been talking about coordination wherever we travel 
because we find that everyone operates in their own stovepipe 
of excellence. So, I am really encouraged by steps the 
administration is taking through the global health food 
security initiatives to streamline programs. Peace Corps global 
presence sectoral breadth in agriculture, health, and education 
programmatic model make it a very natural complement to the 
U.S. government agencies working internationally.
    If you can share with us whether there is a formal process 
for communicating or standard sharing of information and best 
practices. How do you coordinate with other agencies?
    Mr. Williams. Thank you, Madam Chairwoman. First of all, I 
share your interest and support for coordination. It is very, 
very important. And Peace Corps, for example, had a 
longstanding partnership with USAID. USAID provides a small 
amount of grant funds in just about every AID mission around 
the world to support small scale grant projects of Peace Corps 
volunteers.
    But more broadly, we, for example, participate in the 
Secretary's Quadrennial Diplomacy and Development Review (QDDR) 
process. We have a representative there. We also participate in 
the overall NSC policy on development framework and it is an 
ongoing process and it is being chaired by the NSC. So, we 
certainly are we have a seat at the table and we play a role 
there.
    We also are seeking to have a broader number of 
partnerships with other federal agencies. For example, we are 
looking to work with USDA. Secretary Clinton has announced, of 
course, her new signature initiative food security and we want 
to play a role in that. As you know, historically, Peace Corps 
always had a major role in the agriculture sector and I think 
one of the things that we have not been able to do for many, 
many years now because of lack of funding has been to have a 
vigorous, robust involvement in the agriculture sector. I would 
like to do that. I would like to have more engagement with the 
land grant universities, which back in the 1960s really were 
the backbone of Peace Corps involvement of the training faculty 
members and involvement in the agriculture sector. So, I think 
we are going to expand our partnership with the USDA.
    We also are going to work closely with PEPFAR. We have had 
conversations with Ambassador Goolsby about things we can do. 
We already have a number of volunteers that work in the PEPFAR 
area. For example, in Africa, no matter what a volunteer's 
primary project is, their secondary project is probably working 
in HIV/AIDS, awareness and prevention at the community level.
    I had an interesting meeting the other day with the 
administrator of NASA, as a matter of fact, and we are looking 
for ways to work with NASA, both in terms of countries where 
they have international programs, where Peace Corps has 
programs, and also in terms of our third goal of bringing 
things back home, working in schools across the United States 
with NASA, with Peace Corps, in this particular area.
    And the agency that I plan to reach out and develop 
partnerships with would be The Centers for Disease Control 
(CDC). They, of course, are very active. As you know, they have 
a growing presence in Africa and we are in Africa and we can 
really be helpful working with them at the grassroots level.
    So, overall, I think it is important. I want to do 
everything I can to support these kinds of partnerships. I 
think this is urgent.
    Mrs. Lowey. Now, you mentioned food security and we know 
how critical that is and the administration has really ramped 
up that program. Tell us a little about what Peace Corps 
volunteers are doing in that regard. Give me some examples and 
how they can be most supportive.
    Mr. Williams. Peace Corps volunteers have been working, for 
example, one of the things that is important in schools in 
Africa, as you know, the children often come very hungry to 
school. They have very little food. And so one of the things 
that has been very important at the community level is Peace 
Corps involvement in school gardens, especially trying to help 
them grow gardens in areas that--in soils that you would not 
expect gardens to be able to grow. And so, we have been working 
very hard to support that initiative.
    The other thing is working with farmers at the grassroots 
level in terms of trying new seed trials, trying to improve the 
overall yield of the harvest. There are all kinds of 
opportunities, I think, in Africa and in Asia for Peace Corps 
to be involved at the grassroots level in food security. Same 
things in terms of water and sanitation.
    Mrs. Lowey. My dream has always been communities of 
learning, where you have the school as the center and we have 
the garden and water and training for the families, so that you 
can really have a coordinated approach. Perhaps one day we will 
have some good examples of that.
    Mr. Williams. That is a great development model, without a 
doubt. I agree.
    Mrs. Lowey. Now, Ms. Lee was here, but I guess we lost some 
people along the way, Mr. Kirk, but we have Mr. Israel.
    Mr. Israel. I will do the best I can. Director, thank you 
for being here. Last year's State Foreign Ops bill included 
House language that I inserted urging the Corps to find ways to 
channel the efforts of its volunteers to increase access to 
remote energy sources, including solar energy options. I am 
quoting. It goes on to say the Peace Corps Director shall 
report to Congress in the fiscal year 2011 hearing on these 
efforts. We are at the fiscal year 2011 hearing and I am 
looking forward to hearing about what you are doing, in order 
to promote solar and other renewable energy efforts.
    Mr. Williams. Thank you, Congressman. And I must admit that 
that is one area that I have not looked at in my first six 
months, but I certainly will do so. I believe that is 
important. One of the things that I experienced when I was a 
foreign service officer in the Caribbean is that many of the 
Caribbean islands, they use solar energy almost exclusively to 
heat water. And this is very simple, very low cost. It seems to 
me that Peace Corps should be involved in renewable energy and 
I would like to follow-up on the recommendations in which you 
put in to the legislation. I will take a careful look at it. 
But, I have to admit, I have not looked at that at this point 
in time, but I will certainly follow up and do so.
    Mr. Israel. I appreciate your candor and I understand that 
you have only been on the job for six months. I am surprised 
that your staff, when you took the job, did not sit down with 
you and say here is what the United States Congress is 
requiring you to do. You are going to a hearing, expect this 
question, since it was actually enshrined in the law.
    Mr. Williams. I understand, Congressman, and I will 
certainly rectify that.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402P6B.006
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.007
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.008
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.009
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.010
    
    Mr. Israel. Thank you. I appreciate it. I yield back. Thank 
you.
    Mrs. Lowey. Ms. Granger.
    Ms. Granger. Yes.
    Mrs. Lowey. Maybe we should go to Ms. Lee, since she did 
not ask a question yet. Ms. Lee.
    Ms. Lee. Thank you, very much. Good to see you again, Mr. 
Williams. I am glad you are here, doing a great job, and just 
want to see what more we can do to help. The Peace Corps, of 
course, is one of my real, I guess, organizations that I always 
want to see more money and more money and more money because, 
right, Madam Chair, because you do so much with so little. And 
truly, Peace Corps volunteers are our ambassadors and every 
time I have a chance to go abroad, I always try to find Peace 
Corps volunteers and look at the projects and see how they are 
doing. I am especially excited and interested in people who 
have retired and returning to the Peace Corps, you know, Peace 
Corps volunteers who are now retirees and how they work where 
they live and the type of real contributions that they make. 
So, it is really an amazing moment, I think, for the Peace 
Corps.
    I wanted to ask, and I know you cannot endorse this, but we 
talked about this a little bit or support legislation at this 
point, but I hope you look at my bill, H.R. 336. It would 
actually issue a semi-postal postage stamp in honor of the 
extraordinary work of the Peace Corps. It would sell at a 
slightly higher rate than the standard 44 cents, but all of the 
additional revenue would benefit the Peace Corps. And I have 
been working on this bill for probably 10 years. I want to have 
a Peace Corps stamp. And I understand the politics of all of 
this, but I want to keep pushing for that.
    But, I want to find out with regard to your resource 
limitations. How many countries without a Peace Corps presence 
are currently requesting volunteers, if any, and what 
percentage of countries in which the Peace Corps operates would 
you estimate that are under resourced, whether in terms of the 
sheer number of volunteers or the technical capacity of 
volunteers or whatever? And how, finally, is your recruitment, 
especially with minority serving institutions? We always wanted 
to see more diverse Peace Corps. I have done a lot of Peace 
Corps recruiting in my own district under a previous 
administration to try to get more people of color involved in 
the Peace Corps.
    Mr. Williams. Thank you, very much, Congresswoman for those 
series of questions. First of all, thank you for your hard work 
in trying to promote a Peace Corps stamp. That is wonderful. I 
am happy to hear that.
    In terms of countries asking for Peace Corps volunteers, 
one of the things that has struck me since I have been on the 
job for the last six months is that not a week goes by when one 
of our U.S. ambassadors to a country or one of the host country 
ambassador comes to visit me and says either start a Peace 
Corps program in our country, or we want to expand Peace Corps 
in our country. So, there is a long list of countries that are 
interested in having us either expand or reenter their 
countries.
    The good news is that this year, we have already gone back 
into two countries, Sierra Leone, which was a historic Kennedy-
Shriver era country. This week, volunteers arrived in 
Indonesia. And so, we are delighted to have that. Indonesia, of 
course, is a very important country. It is the most populous 
Muslim country in the world. It is another historic country 
where we were involved. So, we have announced those two. We 
have a couple of other countries that we are looking at for 
this year. So, we intend to be aggressive about moving into new 
countries.
    In terms of volunteer levels, as we build a strong Peace 
Corps with strong management systems, as we learn from the 
assessment that we are engaging right now, we are going to look 
for ways to build up our volunteer levels. In terms of the 
countries that I have visited, for example, after I was sworn 
in, I went to the Dominican Republic, Nicaragua, South Africa, 
and Thailand, those countries have long historic ties with the 
Peace Corps. We can grow our programs in each of those 
countries. And I feel confident that in 90 percent of the 
countries where we serve now, we can do that. And so, we have 
some very aggressive plans for growing.
    Ms. Lee. Madam Chair, may I just follow-up with that and 
just ask, you say Sierra Leone and Indonesia, we just . . .
    Mr. Williams. We have signed agreements and we have 
volunteers that have just arrived in Indonesia this week. In 
Sierra Leone, volunteers will arrive in June.
    Ms. Lee. Do you have a waiting list of countries that make 
these calls and want Peace Corps volunteers that we are unable 
to fulfill, in terms of 
    Mr. Williams. I would say there is a healthy list of 
countries that have called on us and are ready and willing for 
us to move forward, if we had additional resources.
    Ms. Lee. Do you have a list of those countries? Do we know 
how to kind of focus on which countries they are?
    Mr. Williams. Well, typically, when we are engaged in 
negotiations with countries, we do not mention that in public. 
But, I would be happy to give you a briefing on that.
    Ms. Lee. Okay. I would like to know just kind of which 
countries really want us.
    Mr. Williams. Sure. I would be happy to do that.
    Ms. Lee. Okay, thank you. Thank you, Madam Chair.
    Mr. Williams. Thank you.
    Mrs. Lowey. Thank you. Mr. Kirk.
    Mr. Kirk. Who introduced the Congress and this committee to 
the 10,000 volunteer goal back during President Reagan's 
administration. And I am very happy that we are now approaching 
that goal once again.
    I looked over the list of countries where we are at and 
offline we had a discussion and I want to just reprise that 
briefly. I think the Peace Corps of 20 years ago is very 
different than the Peace Corps today because 15 percent of your 
volunteers are older, far more experienced, and far more 
capable and especially for those men and women, who are more 
mature and have agricultural capabilities.
    You have, I believe, a unique role to play in Afghanistan. 
Safety and security is one of the premier values of the Peace 
Corps and putting a 22 year old in a difficult environment like 
this is not wise. But a 40 or 50 year old, who understands what 
they are getting into, but is patriotic and wants to help out 
could provide a critical level of expertise to a PRT and here 
in the Congress, we would all absolutely sing your praises and 
help your budget, if you were able to do this. So, I wonder if 
I could ask, would you consider mature, capable, especially 
agricultural experts, maybe to assist a PRT in Afghanistan, as 
part of the Peace Corps mission?
    Mr. Williams. Thank you, Congressman, and good to see you 
again. First of all, Afghanistan was a historic Peace Corps 
country and one of the things that I found is that there is a 
strong affinity group that continues to ask us about whether or 
not Peace Corps will ever return to Afghanistan. So, I would 
like to take a look at whether or not we can consider that. 
Because, as you said, it is not a place that you want to send a 
22 year old to, because first and foremost in our minds is the 
security of our volunteers. So, we will take a look at it.
    Mr. Kirk. Thank you. I would like to work with you, General 
Flynn, General McCrystal. It would be a big feather in your cap 
and I think this Committee would really like to see how the 
Peace Corps was bringing peace even to the most difficult 
environments, with some of your more capable volunteers. Madam 
Chairman, thank you.
    Mrs. Lowey. Ms. Granger, do you have any questions?
    Ms. Granger. Just one. I mentioned earlier about the 12 
percent increase. I did not really get an answer on what you 
are basing that when you have not finished your review. With 
regard to the Overseas Programing and Training Support and the 
Office of Strategic Information, Research, and Planning, you 
are only asking for a three and a six percent increase. With 
the number of volunteers that you are saying that you want to 
add, which is very significant, I certainly want to properly 
invest in training and a program evaluation. Would you explain 
that increase in funding and how you balance that?
    Mr. Williams. I think that in recent years, Peace Corps has 
not been able to invest in training of staff and training of 
volunteers to the extent that one would expect in the 21st 
century. So one of the things that I would like to see us do is 
to bolster our staff. I think you cannot grow and put more 
volunteers in the field if you do not have, number one, 
headquarters staff to support the growth and also staff in the 
field. And the other thing that makes Peace Corps somewhat 
unique and I think and ties directly to your question, Peace 
Corps relies on host country professionals to a larger extent 
than any of our foreign affairs agencies. And I think we have 
not been able to invest in their training and they represent 
the continuity of most Peace Corps operations. So, we need to 
bolster training for our host country nationals. We need to 
expand our staff in the field and in headquarters to support 
our growth. And we want to make sure that we expand training. 
And that is across the board, in terms of field staff, country 
directors, and also volunteers, because volunteers will gain 
the kind of skill sets they need to be more effective on the 
ground.
    Ms. Granger. So, you think that three percent is all you 
need to do that. Is that right?
    Mr. Williams. At this point in time, it looks like that 
would do the trick for us. But one of the things that we are 
going to learn from the assessment, I hope, is whether or not 
we need to redirect some investment in that area.
    Ms. Granger. Okay. Thank you.
    Mr. Williams. Thank you.
    Mrs. Lowey. Please excuse the attendance, but this is a 
crazy day. No indication of our passion and respect for the 
Peace Corps. Perhaps I will close with asking you about what 
you are doing in Haiti. I know you have been involved and are 
currently involved. Let me ask the question, what are you 
currently doing with the response to the earthquake in Haiti? I 
understand the Peace Corps now does not have a mission in 
Haiti. Have discussions taken place to consider the Peace Corps 
reentering into Haiti? How would Peace Corps propose to support 
volunteers in the field? Is this an opportunity to try a new 
model of increased partnering and burden sharing with NGOs? 
Does the earthquake and reconstruction efforts in Haiti affect 
the Peace Corps plan for the fiscal year 2011 budget? Please 
tell us, is the Peace Corps there? What are they doing there 
and what could they do there?
    Mr. Williams. Well, this is a subject, which is very near 
and dear to my heart for a surprising reason, Madam Chairwoman. 
I served as a foreign service officer for almost five years in 
Haiti, as did my Chief of Staff. Stacey Rhodes is here with me 
today. And we also were instrumental in convincing Peace Corps 
to establish a Peace Corps Program in Haiti, at the time that 
we served there, in the early 1980s. So, this is an important 
topic for me.
    I can tell you that before the earthquake, we were talking 
within the administration about Peace Corps considering going 
back into Haiti. I think the earthquake has made this even more 
urgent. Because we were not in Haiti, we were not one of the 
first responders and Peace Corps typically is not unless we are 
already in the country. However, we did send four Peace Corps 
staff members to work in the interagency relief effort, 
including a Haitian-American doctor, who is also a public 
health specialist and speaks French and Haitian Creole. So, we 
did contribute.
    We now have, as of last week, two Peace Corps Response 
Volunteers, the first of a larger number we hope to put into 
Haiti, working with NGOs, in partnership, as a matter of fact, 
because I think that is the most effective way right now for us 
to work in Haiti, is through partnerships.
    So, I certainly would like to entertain conversations with 
the government to look for ways to move forward. I hope that 
they will be forthcoming and we would like to be aggressive.
    Mrs. Lowey. Thank you. And I see Ms. Lee returns. So, you 
may have the last question.
    Ms. Lee. Well, let me just go back to the Peace Corps 
volunteers, the retired Peace Corps volunteers. Do you have a 
percentage or numbers and where they are posted, to get a sense 
of how they are doing and what they are doing, where they are?
    Mr. Williams. In terms of the older volunteers?
    Ms. Lee. Yes.
    Mr. Williams. The more mature volunteers? The experienced 
volunteers?
    Ms. Lee. Yes, the experienced volunteers, who share their 
knowledge, experience, and everything, their life's work----
    Mr. Williams. Exactly.
    Ms. Lee [continuing]. With this important organization.
    Mr. Williams. One thing I can say about the more 
experienced volunteers, every country director that I have 
talked to, and I now have met all 75 in the last six months, 
they really like to have these kinds of volunteers serve in 
their country for all the obvious reasons that you know so 
well. They are experienced. They serve as an anchor for some of 
the younger volunteers. They bring a special expertise. They 
made a very hard decision to decide to join Peace Corps at this 
stage of their life and so they are very dedicated.
    So, we certainly want to encourage more experienced 
volunteers, 50 plus to consider joining the Peace Corps because 
they play an important role. They represent a very important 
part of what we do. And I will be happy to follow-up and give 
you a breakdown of where we have our largest numbers of these 
experienced volunteers. One of the things that you will find is 
that they tend to be clustered in countries where we have the 
best possible medical care available for them.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402P6B.011
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.012
    
    Ms. Lee. Yes. That is what I wanted to ask you and look at 
because I think as we try to recruit more retirees, we may want 
to look at more support for them, such as the medical support 
and whatever else people would need, pharmacies, you know, 
whatever.
    Mr. Williams. I think that would be a good investment.
    Ms. Lee. Yes, I think so. So, I would look at that----
    Mr. Williams. Okay.
    Ms. Lee [continuing]. And work with you on it. Thank you, 
very much.
    Mr. Williams. Thank you.
    Mrs. Lowey. Thank you. I may change my mind and close on 
the security issue because I think it is so important. And we 
know the most important responsibility the Peace Corps has is 
to ensure the safety of its volunteers. When volunteers are not 
protected, this has been tragically highlighted by the 2009 
murder of Catherine Puzey in Benin. Unfortunately, as we know, 
this was not an isolated case. Peace Corps volunteers have been 
victims of crimes, including robbery, rape, physical assault, 
physical intimidation. In fact, I could not help but think as 
we were in Ghana a couple of years now you were with us and I 
remember this beautiful little blond hitchhiking all through to 
meet us for dinner. And I kept thinking, gutsy, gutsy, young 
woman. But, we know that the murder of Catherine Puzey is not 
an isolated case.
    And we understand that there are inherent risk in Peace 
Corps services. I cannot stress enough the importance of 
keeping volunteers as safe as possible in the communities they 
serve. So, if you can share with us what steps are being taken 
to ensure the safety of Peace Corps volunteers, what mechanisms 
are in place to ensure that Peace Corps staff in country are 
vigilant and promote appropriate safety measures. And you could 
also address the organizational changes, in terms of 
recruitment of local volunteers for the  local paid people for 
the Peace Corps, we would be most appreciative. Thank you.
    Mr. Williams. Thank you, Madam Chairwoman. As you said, 
volunteer safety and security is our highest priority. There is 
no doubt about it. And you have to admire the people who serve 
in the Peace Corps in sort of isolated communities around the 
world, for their courage, determination. And the fact is that 
one of the most important parts of their security is the fact 
that they become parts of the community. They are seen as being 
part of the community and they are supported.
    The Office of the Inspector General is in the process of 
finalizing a report and audit of the Office of Safety and 
Security. And I intend to carefully consider all of the 
recommendations that come out of this IG report, because it is 
a very, very important issue for me. That is one of my top 
priorities. And so, you can rest assured that once we get that 
report, we will sit down with the Committee and discuss it and 
make sure we take the steps and follow-up on the 
recommendations that are being made regarding that.
    In terms of in-country security, we have three levels of 
security in terms of volunteers. First of all, we have regional 
security officers that serve in about 10 countries around the 
world. Then in every country, we also have a dedicated safety 
and security officer. And then, of course, we have a 
headquarter staff of safety and security. So, we have three 
different levels of that.
    And we also have a very good system. One of the things that 
has been really one of the great improvements, I think, in 
Peace Corps, different from my generation, is that now 
volunteers, almost 90 percent of our volunteers have cell 
phones. So, they are able to stay in contact with their 
families. We are able to stay in touch with them. It is much 
easier now. We have emergency plans in place in case we need to 
evacuate volunteers.
    So, Peace Corps is paying a lot of attention to this and we 
intend to continue to do that. And I am looking forward to 
reviewing the IG report to get more information about this.
    Your third point regarding local staff, I think one of the 
things that is important is that we need to make sure that all 
local staff prior to hiring are thoroughly vetted, the same way 
one would expect in terms of USAID or the State Department, 
when they hire foreign service nationals. And that is going to 
be one of our priorities.
    Mrs. Lowey. Thank you. We were going to close, but we are 
joined by our very distinguished member, Mr. Schiff.
    Ms. Schiff. Thank you.
    Mrs. Lowey. Do you have a question?
    Ms. Schiff. Thank you, Madam Chair, and I will be quick. 
Mr. Williams, nice to see you again. I just had a couple of 
questions. There are some that believe the Peace Corps should 
recruit more volunteers who specialize in certain areas, in 
order to meet the needs of the countries where the Peace Corps 
operates. Others contend this would undermine the original 
mission of the Peace Corps and the ethos of the Peace Corps, as 
both a development assistance agency, as well as, say, vital 
public diplomacy component. How do you see this divergence of 
opinion? Do you anticipate recruiting people with more 
specialized skills? Those are what I wanted to ask and 
apologize if you have addressed. And if you have, I will just 
get the cliff notes from my colleagues later. But, I am curious 
about the response component that began in the mid-1990s and 
how that is going and whether you have adequate funding in 
order to move forward with that important initiative.
    Mr. Williams. Thank you, Congressman, good to see you 
again, also. Thank you for joining us. First of all, 
specialized skills, I think there are certain areas where Peace 
Corps certainly needs to recruit people with specialized 
skills. And many of our 50 plus volunteers come into the Peace 
Corps with those kinds of skills. For example, earlier, we were 
talking about the fact that we wanted to expand our involvement 
in Secretary Clinton's food security initiative. In order to do 
that, I think we are going to need to bring in volunteers who 
have additional skills in the agricultural sector. I want to 
also use as a bridge to develop stronger partnerships with the 
land grant universities around the country that used to be a 
really important player and partner with the Peace Corps during 
the Shriver era. And I think there are plenty of opportunities 
there. So, I think in terms of specialized skills, both in 
healthcare and agriculture, there is ample room to bring in 
people who have those kind of skills. So, we are going to 
continue to recruit those types of individuals.
    On your second point regarding Peace Corps Response, I 
often joke around the office that if Peace Corps Response or 
what used to be called the Crisis Corps, if it did not exist, I 
would have to invent it because we need to have a rapid 
response corps within the Peace Corps to respond to the Haiti-
like situations of the world. And so, we have used the crisis 
corps to go into a couple of new countries. For example, Sierra 
Leone, which we have announced we are going to go back into in 
June, we are going to use the Crisis Corps there--excuse me, 
Peace Corps Response Volunteers. So if we were to go back into 
Haiti, we would be using probably initially Peace Corps 
Response Volunteers. We have already line up about 100 Haitian 
Creole speakers who would love to go back into Haiti, former 
peace corps volunteers who have served over the years. So, the 
Crisis Corps, I think--I keep calling it the Crisis Corps--the 
Peace Corps Response Volunteers are important.
    Ms. Schiff. And do you view the Response volunteers as kind 
of the vanguard for bringing in the regular Peace Corps later 
on----
    Mr. Williams. I think so.
    Ms. Schiff [continuing]. Or the situations where you have a 
Peace Corps presence already, but there is an emergency where 
you need to supplement it?
    Mr. Williams. I think it depends on the country. For 
example, if you are going into a post-conflict situation like 
Sierra Leone or Liberia, I think a Peace Corps Response is the 
right way to go. And it also gives you a chance to learn the 
new lay of the land now that we have not been in the country 
for some time, to prepare the groundwork, start working with 
the ministries and other potential partners on the ground, and 
then prepare for a regular two year Peace Corps program. Yes, I 
think it is a very useful tool and it is part of our growth 
targets to increase Peace Corps Response.
    Ms. Schiff. Thank you, Madam Chair.
    Mrs. Lowey. Thank you, again. We are most appreciative for 
your leadership. We look forward to seeing all of the many 
changes you are making in the field and we appreciate you 
coming before us. Thank you, Director Williams.
    Mr. Williams. Thank you, so much, Madam Chairwoman, for all 
of your support of the Peace Corps. We know this is really 
something that you support. You believe in it. And we are going 
do everything we can to make you proud of what we do in the 
21st century. And I thank Congressman Schiff for joining us 
today and for your other colleagues. I really appreciate the 
chance to talk about the Peace Corps and our fiscal 2011 budget 
request.
    Mrs. Lowey. Thank you and the Committee on State, Foreign 
Operations, and Related Programs is adjourned. Thank you, very 
much.
[GRAPHIC] [TIFF OMITTED] T6402P6B.013

[GRAPHIC] [TIFF OMITTED] T6402P6B.014

[GRAPHIC] [TIFF OMITTED] T6402P6B.015

[GRAPHIC] [TIFF OMITTED] T6402P6B.016

[GRAPHIC] [TIFF OMITTED] T6402P6B.017

[GRAPHIC] [TIFF OMITTED] T6402P6B.018

[GRAPHIC] [TIFF OMITTED] T6402P6B.019

[GRAPHIC] [TIFF OMITTED] T6402P6B.020

[GRAPHIC] [TIFF OMITTED] T6402P6B.021

[GRAPHIC] [TIFF OMITTED] T6402P6B.022

[GRAPHIC] [TIFF OMITTED] T6402P6B.023

[GRAPHIC] [TIFF OMITTED] T6402P6B.024

[GRAPHIC] [TIFF OMITTED] T6402P6B.025

[GRAPHIC] [TIFF OMITTED] T6402P6B.026

[GRAPHIC] [TIFF OMITTED] T6402P6B.027

[GRAPHIC] [TIFF OMITTED] T6402P6B.028

[GRAPHIC] [TIFF OMITTED] T6402P6B.029

[GRAPHIC] [TIFF OMITTED] T6402P6B.030

[GRAPHIC] [TIFF OMITTED] T6402P6B.031

                                       Wednesday, April 14, 2010.  

                 MILLENNIUM CHALLENGE CORPORATION (MCC)

                                WITNESS

DANIEL W. YOHANNES, CHIEF EXECUTIVE OFFICER
    Mrs. Lowey. Good morning. The Subcommittee on State, 
Foreign Operations, and Related Programs will come to order.
    Today we are delighted to welcome Daniel Yohannes, the 
Chief Executive Officer of the Millennium Challenge 
Corporation, for his first hearing with us to discuss the 
President's fiscal year 2011 request for the Millennium 
Challenge Account.
    Mr. Yohannes, you bring a wealth of experience in both the 
private and public sector to the MCC, and it is a pleasure to 
have you testify today.
    The President's budget requests $1.28 billion for the MCC, 
a 16 percent increase over the fiscal year 2010 enacted level.
    As the MCC enters its sixth year of operation, we must 
examine accomplishments, shortfalls of the concluding country 
compacts, lessons learned for future compacts. And, although I 
share your belief that the MCC model holds tremendous potential 
to bring transformative change, reduce poverty, and support 
sustainable long-term economic development, this committee 
needs to hear today about the results achieved with the over $7 
billion that has already been committed to the 20 compacts and 
21 threshold programs.
    Last year's hearing focused on the proposed compacts with 
Malawi, Jordan, and the Philippines, and the committee 
appropriated $915 million in fiscal year 2010 to support them. 
Can you share the current status of these compacts and when you 
believe they will be signed?
    For several years, we have discussed the need to clearly 
articulate the short, medium, and long-term impacts of country 
compacts. In 2011, as country compacts in Benin, Georgia, and 
Vanuatu conclude, it is imperative to thoroughly evaluate the 
effectiveness and continuing impact of these programs.
    As you know, I believe that we must evaluate the poverty-
reduction successes of country compacts, not just general 
economic outputs. I hope you will provide insight on your 
efforts to do so in MCC's monitoring and evaluation programs.
    The fiscal year 2011 request also includes two new country 
compacts in Zambia and Indonesia and additional funding for a 
country compact in Malawi. I hope that accountability measures 
will be put in place, especially in a country as large as 
Indonesia, to ensure that funds are not misused and to 
innovatively measure the impact of MCC assistance.
    This year, MCC will complete its first 5-year compact in 
Cape Verde, making it the first country eligible for a second 
compact. Can you explain why MCC is choosing to pursue a second 
compact, rather than entering a new country? Isn't this a 
departure from the original MCC model?
    And, lastly, the success of all Federal agencies is 
dependent on the assurance that taxpayer dollars are spent 
effectively. The MCC was designed to improve development 
effectiveness by leveling the playing field and ensuring that 
the most effective companies are utilized. This model is 
predicated on fair and transparent contracting mechanisms. Are 
you satisfied with the current procurement mechanisms and that 
there are quality-control mechanisms in place?
    Mr. Yohannes, I appreciate your testimony today and look 
forward to discussing the fiscal year 2011 budget request for 
the MCC. But, before we hear from you, let me turn to Ms. 
Granger, the ranking member, for her opening statement.
    Ms. Granger.

                    Opening Statement of Ms. Granger

    Ms. Granger. Thank you, Madam Chair, and good to be back 
with you.
    Thank you and good morning, Mr. Yohannes. Thank you for 
appearing before our subcommittee.
    Since the first compact was signed in 2005, MCC, as the 
chairman said, has programmed over $7 billion in support in 20 
countries. You are coming on at a very exciting time for the 
MCC, but a very crucial time.
    I spent my first year as ranking member learning about the 
many, many foreign assistance programs under the jurisdiction 
of this subcommittee. We, of course, see enormous levels of 
suffering in the world in the news every day. I remain 
impressed by the generosity of the American people, not only 
through the official foreign assistance but through private 
contributions and charitable giving. However, we must examine 
our foreign assistance budget and fully utilize programs that 
build the capacity within these countries, so one day they are 
able to graduate from receiving foreign aid. MCC is one of a 
number of programs, I believe, positioned to do just that.
    Today's domestic economic situation in the United States is 
a good reminder to us that jobs are the key to long-term 
economic growth, both at home and in developing countries. The 
MCC is the best tool in our foreign assistance budget to help 
lay the groundwork in select countries that have demonstrated 
responsible governance. With this tool, governments can 
strengthen local institutions and communities and ultimately 
attract the private-sector investment necessary to provide jobs 
and generate income. The MCC's economic rate of return for its 
projects are key to a country's overall success and growth. It 
should become the model for private-sector growth in these 
countries, leading the way for increased investment and 
additional jobs.
    It is my hope to see the MCC progress from funding mostly 
infrastructure-focused programs to being a real catalyst for 
change, which was what was envisioned when the MCC was first 
created. Mr. Yohannes, given your background, I think you are 
the right person for the job. I look forward to discussing 
these topics with you.
    And I yield back. Thank you, Madam Chair.
    Mrs. Lowey. Thank you.
    Mr. Yohannes, as you know, your full statement will be 
placed in the record. You may summarize as you wish. Please 
proceed.

                   Opening Statement of Mr. Yohannes

    Mr. Yohannes. Thank you, Chairwoman Lowey, Ranking Member 
Granger, and other members of this subcommittee, for the 
opportunity to discuss President Obama's fiscal year 2011 
budget request of $1.28 billion for the Millennium Challenge 
Corporation. With this funding, we anticipate signing MCC 
compacts with Indonesia, Zambia, and Malawi and possibly 
entering into a second compact with Cape Verde.
    I would like to summarize my statement and submit the full 
version for the record, if I may.
    I come to MCC from the financial services industry. I 
appreciate how MCC makes the business of aid more businesslike. 
My priority as CEO is to show how MCC's programs are delivering 
results and changing people's lives.
    To achieve MCC's mission of reducing poverty through 
economic growth, I have set forth three priorities:
    First, being innovative. We must make smart investments 
that will produce significant returns in the fight against 
global poverty. We will strive to continuously improve our 
financing and operations by looking at what has worked and what 
we must improve, making midcourse corrections to achieve better 
results and walking away from investments, even partners, who 
are not delivering on their promises. We must adapt programs 
based on implementation challenges.
    I am committed to communicating with you as we work through 
these processes. I would like your support for critical 
legislative changes, such as concurrent and longer compacts. 
Congress created MCC to be innovative. We must live up to those 
expectations and build on our performance-based, transparent, 
country-driven model.
    Second, leveraging partnerships. Getting the biggest bang 
for our MCC investment will require more creative partnerships 
with other U.S. Government agencies, the private sector, civil 
society, philanthropic organizations, NGOs, and multilateral 
institutions.
    Third, delivering results and showing impact. We are 
committed to comprehensive monitoring and evaluation to analyze 
every MCC program as an investment. It costs money to do this 
right, and that is why monitoring and evaluation is included in 
MCC's budget request.
    We must think differently about results. Five-year 
investment programs like ours produce outputs similar to those 
of other institutions, like the number of farmers trained, 
roads built, and land titles issued. Yet this does not go far 
enough to show how MCC is improving the lives of the poor.
    During my recent visit to Ghana, I met with a farmer named 
Mavis. Mavis was one of the farmers that was trained by an MCC 
program. In Ghana alone, we trained 25,000 farmers. She told me 
how she went from producing five bags of rice to 140 bags of 
rice after one season after she participated in our training 
program. And now Mavis is investing the dividends in to the 
land, buying additional land and also buying additional 
equipment. And she now has a better life than before. There are 
hundreds and hundreds of stories like this one.
    Increases in individual incomes are only a small fraction 
of the total impact expected to result from MCC projects. Our 
impact evaluations will determine with rigor the long-term 
impact of our investments. All MCC compacts will undergo 
independent impact evaluations, and I look forward to sharing 
the results from these with you and the American people.
    Leadership in these three priority areas will require that 
MCC remains committed to ensuring gender equality in all 
programs we fund, so that women as well as men can share in the 
benefits.
    I am grateful for the strong relationship MCC has with this 
committee, and I welcome working with you to do even more to 
fight global poverty. With so many priorities competing for 
limited resources during these challenging times, we all have 
to be prepared to make tough choices. We can and we will make 
wise investments and deliver results with the resources you 
provide.
    I welcome your questions. Thank you.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402P6B.032
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.033
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.034
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.035
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.036
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.037
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.038
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.039
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.040
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.041
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.042
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.043
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.044
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.045
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.046
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.047
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.048
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.049
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.050
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.051
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.052
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.053
    
    Mrs. Lowey. Thank you for your thoughtful testimony.
    As you well know, without fail, every year we have a 
conversation about the disbursements of MCC compact funds. Now, 
we understand, certainly, on this committee the need for slow 
dispersion of funds to ensure accountability. But I am 
concerned that even those compacts that are nearing completion 
are not working effectively.
    For example, Cape Verde's country compact will conclude in 
7 months, October 2010, but only 63 percent of the compact 
funds have been disbursed. Georgia's compact will conclude in 
April 2011, but only 48 percent of the compact funds have been 
disbursed. Vanuatu's compact will also conclude in April 2011, 
but only 69 percent of compact funds have been disbursed.
    So there are several questions I have. First of all, will 
the remaining funds be disbursed before the compact concludes? 
Will you be asking to extend the term of these compacts? And, 
beyond the disbursement of funds, will these countries be able 
to complete the programmatic components of the compacts before 
the 5-year deadline?
    And, equally important as the other questions, in fact we 
would say maybe most important, what economic results have 
resulted from these compacts? And do you have concrete data 
that you can share that proves the MCC has been an effective 
tool for lifting people out of poverty?
    I think there are many people that were all excited about 
the MCC and felt this was a new way of doing business. The 
others, after a couple of years, are saying, ``Well, it is 
business as usual. What have they accomplished?''.
    I think it is very important that you explain and give us 
some concrete evidence that the MCC is doing differently and 
the results are different and more positive, moving the country 
in an independent direction.
    Thank you.
    Mr. Yohannes. Thank you, Chairwoman Lowey. I share your 
concerns. And to show results to this committee, to Congress, 
and to the American people is my number-one priority today and 
also for the next 3 or 4 years.
    Having said that, we have interim results, and the interim 
results we have are very consistent in terms of how the 
industry as a whole reports results. For example, in terms of 
the agriculture area, we have about 150,000 farmers trained. 
And I came from one of the countries, Ghana, where we have 
trained over 25,000 farmers, and every farmer I have spoken to, 
they told me how our programs are having a tremendous impact in 
terms of their ability to increase production and also being 
able to increase their income.
    Projects in Nicaragua, where we train a lot of farmers, the 
farmers there have improved their production by 75 percent in 
fruits and then also 40 percent in milk production. So we get 
stories after stories.
    In roads, the nature of the investment by design are not 
completed in 1 or 2 years, they are primarily long-term 
projects, but we have completed already about 350 kilometers, 
and we have about 1,400 kilometers that are under construction, 
and we have designed about 4,500 kilometers.
    When I was in Cape Verde, I drove on the 40 kilometers that 
was completed that connects one coastal town to another coastal 
town. What I was told in speaking to community leaders, 
government officials, and farmers, now they have access to 
markets, they have access to clinics, they have access to 
schools as a result of the 40 kilometers that was completed. 
100,000 people are benefiting from this road construction.
    In Ghana, we are not only concentrating on the agriculture, 
but also we are building a lot of feeder roads that are 
providing access to many of the farmers to the markets.
    As far as education is concerned, in Ghana alone, where I 
just went last month, we have completed 65 schools, and we are 
planning to build an additional 200 schools in the next 2 
years. And I was told, as a result of our investment in this 
sector, that we now have, you know, 40 percent more enrollment 
and the girls enrollment has increased by 100 percent.
    And, in terms of other investments we have, in addition to 
what is visible, you know, we have been able to have a 
tremendous impact in terms of policy reform. In Lesotho, for 
example, because of our compact we were able to get full rights 
for women. In Nicaragua, where we built over 100 kilometers of 
road, we were able to work with the government so now they set 
aside some funding for road maintenance. Where previously they 
only had about $3.5 million to maintain 500 kilometers, today 
that program has been expanded to include 2,700 kilometers and 
they now have about $35 million set aside for road maintenance.
    So, in addition to a lot of the visible projects that have 
been committed and are having some impact, we are seeing 
significant changes in terms of policy reforms.
    For example, we are in the process of completing the port 
in Benin and Cape Verde. Two of those projects are going to be 
transferred to the private sector for management. In Moldova 
and Georgia, where previously the management for many of the 
irrigation systems were owned by the state, now, because of our 
compact, they are going to be transferred to the private sector 
for management. So not only are we seeing tremendous results 
for the last 5 years, but also we are seeing a tremendous 
impact in terms of policies in partner countries.
    Now, when you talk about results, we are the only agency in 
this country, maybe even in the world, that looks at it 
differently. In addition to the interim results that were 
submitted and discussed this morning, we don't begin impact 
evaluations until the end of the 5 years. At the end of 5 
years, we bring in independent evaluators to tell us if our 
investments are providing the desired impact on the ability to 
raise the partner's income. We have Cape Verde and Honduras 
this year that will come to the end of 5 years, and we should 
be able to provide you with our assessment sometime next year.
    Also, from experience, I mean, you are going to see some 
results at the end of 5 years, but the much bigger result will 
begin to happen at the end of 10 years, 15 years, and 20 years. 
Our $7.5 billion investments are projected to increase our 
partners' income by $9 billion over a 20-year period. So it is 
working.
    And, also, in areas where we have learned lessons, we are 
making some adjustments. I know you mentioned your concern 
about Cape Verde. When I was there, I spoke with the prime 
minister, the finance minister, all the engineers. And the port 
that is under construction will be completed on time before 
September, and the funds will be disbursed, all of them, before 
the completion date, which is in September. So I am not 
concerned about the completion.
    I know you raised Vanuatu. I believe it is going to be 
completed, as well. Of course, due to the nature of the 
projects, it takes a long time. The first 3 years you spend 
little, but a lot happens at the end.
    Mrs. Lowey. I want to turn to Ms. Granger, and I did want 
to keep us all to our time so we can go around. However, I just 
want to mention one point, if I may, that you can think about.
    I have been to many countries in Africa, as you have, and 
in other places of the world, as well. And this was supposed to 
be a new, different model. But corruption is business as usual. 
You have seen the reports about Senegal, where the MCC just 
signed a $540 million compact in September 2009.
    Similar reports are emerging from Ghana. And Johnny Carson, 
as you know, the Assistant Secretary of African Affairs, has 
been engaging with Ghana. We are hearing reports about the 
government extracting money from newly discovered oil, using 
money in inappropriate ways.
    So we are concerned that there are many reports that are 
emerging in several compact countries that businesses are 
facing unreasonable regulation, extortionist practices by 
members of the government. And we can discuss that further when 
it is my turn again, but I want to make it clear to you that 
this was supposed to be a new process. And we are seeing 
business as usual, corruption as usual, and we are not seeing 
the lifting up of the people in the country to make this really 
different.
    So I want to turn to Ms. Granger. It may be unfair for me 
to not let you respond, but I did want to move on.
    Mr. Yohannes. Okay. All right. No problem.
    Ms. Granger. Thank you.
    As I addressed in my opening remarks, I am interested in 
your ideas and plans to involve the private sector. I have here 
in front of me an interview you gave on February 12th talking 
about how important that is. And, you know, we don't have 
unlimited foreign assistance dollars. The foundation for 
economic growth is, I believe, the private sector.
    So would you tell me why you think the foreign aid 
community has failed to grasp the role of the private sector 
and what it can play in economic development of African 
countries and other poor nations? And give me some details 
about opportunities you have identified at MCC to partner with 
the private sector in compact implementation.
    Mr. Yohannes. Thank you very much.
    One of the best ways to achieve economic prosperity is by 
bringing the private sector in as partners. We are investing 
about $7.5 billion with many of our partner countries. We look 
at it as a downpayment. I mean, it is going to have some 
significant impact, but, nevertheless, the longer impact is 
going to happen when you include the private-sector investments 
within the country as well as from outside. And many of those 
countries we work with are countries that share the same values 
as ours.
    In addition to the visible results that we have seen in the 
last 3 or 4 years, we believe that this system where we have an 
opportunity to work in partnership, primarily as it relates to 
policy, changes by making their countries very attractive to 
investment from outside as well as within.
    Having said that, we are trying to leverage the investment 
by bringing the private sector into the picture so that they 
can consider investing in many of these countries. For example, 
in El Salvador, where we do have a compact, we are able to work 
with a Virginia-based company in which we invested about $31 
million. Now they are bringing electricity to northern El 
Salvador, benefiting something like about 200,000 people.
    In addition to the private sector, since I have been on 
board for the last 4 months, I have reached out to a lot of 
other government agencies and nonprofits like the Gates 
Foundation. We are trying to find a way in which we partner 
together to leverage the investments that have been given to us 
by Congress.
    So, in the long term, I really believe the best way to 
achieve prosperity or reduce poverty in a very sustainable way 
is really to bring the private sector into the picture. That is 
the only way.
    Ms. Granger. I agree with that; I just don't see it 
happening. The chairwoman talked about the enormous investment 
and the intention of the MCC. And so, what we are saying is: 
That was the intention; here is the money that has been 
approved. But what is happening, where we can point to it and 
say, yes, this private investment has occurred or is occurring 
right now?
    Mr. Yohannes. There is some that has occurred. I think we 
have to knock on the doors of a lot of American businesses. Of 
course in some cases, we have not had a lot of interest in the 
past. But now it is our job at MCC to spread the word, the fact 
that many of those countries we work with are ready and 
prepared to accept investments from our country as well as 
investments within their own countries.
    So we have to do a lot of education, informing a lot of 
American businesses to the fact that these are countries ripe 
for investment. So we have a lot of work to do, Madam 
Congresswoman.
    Ms. Granger. Okay. I have a few minutes left, and so I am 
going to go back to the corruption issue that the chairman 
asked. And my question is, has any country had MCC funding 
delayed or stopped because fraud or corruption has been 
detected? In other words, what are the safeguards, and what has 
happened?
    Mr. Yohannes. I think that is a great question.
    We take corruption very seriously. It is the major 
hindrance to economic development. We have safeguard after 
safeguard after safeguard. And I have asked if we had lost 
anything in the past. The answer is, we have not lost a dime to 
corruption or corrupt practices because we have excellent 
safeguards.
    We have procurement agents. We have fiscal agents. We do 
audits on a quarterly basis. We don't disburse the funds 
directly to the countries; we disburse the funds directly to 
the vendors.
    And I believe we have a very good system, but I am 
committed to make sure that we continue to refine the system so 
that American taxpayers' money is not spent on corruption or 
corrupt practices.
    Ms. Granger. So are you saying funding has been stopped 
when corruption----
    Mr. Yohannes. We have not seen any money spent on 
corruption or corrupt practices because of the system we have 
put in place.
    Ms. Granger. What I am saying is, where there is funding--
or we have said, ``We approve funding,'' and then we have 
discovered the corruption, has our funding stopped? Have we 
said, ``You don't get the funding''?
    Mr. Yohannes. We monitor those countries on a yearly basis. 
We have indicators that primarily put a lot of emphasis on 
corruption. I know Chairman Lowey talked about Senegal and 
others countries. And, when we made the decision, when the 
board made the decision to fund some of those countries, a lot 
of those countries passed the corruption test. And if, in fact, 
then, the country fails some corruption indicators, then the 
board has an option to terminate, suspend, or to put on hold. 
But we have not had any country that failed the corruption test 
indicators in which the board had to make a decision.
    Ms. Granger. So the answer is no?
    Mr. Yohannes. The answer is no, yes.
    Ms. Granger. Thank you.
    Madam Chair?
    Mrs. Lowey. We will continue that discussion. First, Mr. 
Israel?
    Mr. Israel. Thank you, Madam Chair.
    I would like to continue that discussion, particularly with 
respect to Ghana, which the chairwoman raised. I want to share 
with you an editorial that appeared in the Wall Street Journal 
on February 18, 2010, headline, ``Why Africa Is Poor: Ghana 
Beats up on Its Biggest Foreign Investors.'' And let me just 
very briefly share two paragraphs from the editorial and then 
ask how you think we need to respond to it.
    Quoting from the editorial, ``President Obama headlined his 
first trip to sub-Saharan Africa last July with a stop in 
Ghana. Speaking to the parliament in Accra, Mr. Obama praised 
the country's growth and its example that `development depends 
on good governance.' Eight months later, Ghana's Government is 
turning the nation into a cautionary tale for foreign 
investors.''
    Then the editorial goes through a variety of case studies 
of capricious government meddling in a variety of potential 
deals. And it concludes, ``Attracting foreign investment has 
been a pillar of Ghana's development strategy, with the 
government pitching itself as the gateway to West Africa. 
Spooking new investors by repudiating contracts will rapidly 
ruin the country's prospects for long-term development. The 
Obama administration has so far been silent on the shadows now 
haunting the country it heralded as a source of hope and 
leadership in Africa. Getting the country back on the track of 
moderate good governance and respect for the rule of law would 
be an important example to set on the poorest continent.''
    Now, I am not making a judgment on the intricacies of this 
issue, but I wanted to know whether you are aware of these 
concerns. And what is the proper role of the MCC in helping the 
Government of Ghana correct the perception that it is 
mistreating foreign investors?
    Mr. Yohannes. Thank you very much, Mr. Congressman.
    I am very much aware of the incident. I have spoken to the 
Blackstone Group about this incident. I also have spoken to our 
Ambassador in Ghana. I have also spoken to a lot of our 
associates at the Millennium Development Agency in Ghana.
    Now, it is a matter of commercial complaint that is being 
handled by the Embassy, by the proper department at State 
Department. And, you know, our hope is that, at the end, the 
decision that will be made will satisfy both the country and 
the companies that have been impacted by it.
    But we are actively following the developments, and 
definitely it is a concern to us. And as soon as a decision is 
made, we definitely will take into consideration the results.
    Mr. Israel. Well, I appreciate that. And I think you have 
heard that this is a very significant concern on both sides of 
the aisle. And, clearly, when you have patterns of behavior by 
MCC partners that undermine the performance and chances for 
compact success, it needs to be a matter of urgent focus. And 
so I hope to engage with you. And I am pleased that you are 
aware of this and you believe it needs to be addressed. And I 
look forward to continue to partner with you on it.
    Mr. Yohannes. Thank you.
    Mr. Israel. I yield back, Madam Chair.
    Mrs. Lowey. Thank you.
    But, before I go to Mr. Rehberg, since you didn't use your 
whole 5 minutes--maybe you did; the red light is on--I just 
want to clarify--and this is the issue that three of us have 
brought out. When there is a political coup, like in 
Madagascar, the guidelines are very clear. But there are no 
guidelines that address corruption. And Johnny Carson has been 
concerned about that, we have been concerned about that. And, 
frankly, if there are no guidelines, this program is not going 
to continue to exist because it will not be tolerated.
    So I think it is essential that you address this committee, 
if not today, another day. Again, with a political coup, you 
know what to do. But when money is being extorted from a 
private investment group and political corruption continues, or 
if it was not there before when the compact was given, it is 
alive and well now, there has to be guidelines to deal with it.
    Mr. Yohannes. I agree and support your statement, 
Chairwoman Lowey. You know, corruption is one area that we take 
very seriously. And if a country fails the corruption 
indicators, then the board has an option to terminate or 
suspend the compact.
    I mean, the countries we work with, when you look in terms 
of the corruption indicators, they all have passed. Like, you 
talked about Senegal; I know you said Senegal earlier. Senegal 
passed the corruption indicators when Senegal was selected to 
get this program.
    Now, we are monitoring the situation not only by the 
indicators but also on the ground, working with our embassies. 
Again, if we see information that impacts otherwise, I just 
want to guarantee you that the institution and board is ready 
to make a decision. If we have to terminate, we will terminate. 
But, again, the scenario, we monitor it on almost a daily 
basis.
    Mrs. Lowey. Well, if you can provide some information to 
this committee. This is serious enough so that Assistant 
Secretary Johnny Carson has made visits, has discussed it. We 
have seen--I mentioned the problems in Ghana.
    Look, in Kenya, they had a threshold compact. They haven't 
gone on to the next step. And I was there not too long ago with 
Secretary Clinton, who was very eloquent in her discussions of 
corruption.
    But if you can get back to us as to what is happening in 
Senegal, and what is happening in Ghana. I think we need to put 
very clear rules in place. And in Ghana, when you see 
extortionist practices by members of government, this is 
incredibly disturbing.
    Mr. Yohannes. Madam Lowey, in fact, we are sending a high-
level delegation team to Senegal next week, both from MCC and 
the State Department. We are coordinating our efforts in 
Senegal.
    So, we are monitoring the situation on almost a daily 
basis. Of course, when you have reports like what happened in 
the last couple of months, it doesn't make us feel comfortable. 
I addressed our concerns with the President about 2 or 3 months 
ago, and I do have a response from him.
    We are coordinating all of our efforts with the various 
agencies within our government. And, again, I think next week 
or the following week, a high-level delegation from State as 
well as from MCC is going to address our concern to Senegal.
    Mrs. Lowey. Thank you.
    Mr. Rehberg.
    Mr. Rehberg. Thank you.
    Obviously, the committee is very supportive of what you are 
attempting to do. The criticism is probably procedural. I guess 
one of the questions I always want to ask is, there anything 
that Congress is doing that makes your job more difficult, 
whether it is in the authorization or the timing of 
appropriations?
    When I say the timing, I was in Senegal years ago when they 
wanted to move the town. As I understand it, that is no longer 
the project. So sometimes time is a good thing because it 
allowed them an opportunity to refocus their priorities. Other 
times, something might have gotten done quicker where there 
wasn't the turmoil within the government because, if the 
project had gotten done quicker, the economy could have turned 
around quicker and they wouldn't have the difficulties.
    So I want to reflect back on us first. Is there something 
the Congress could do to make your life easier?
    Mr. Yohannes. Thank you very much, Mr. Congressman.
    The answer is yes. We have requested your approval for 
concurrent and longer compacts. The current process used today 
is, a country can only get one compact for every 5 years. So it 
takes such a very long time, it takes anywhere from 2 to 3 
years to develop a compact. Of course, it takes 5 to 5\1/2\ 
years to get it implemented. So----
    Mr. Rehberg. That is not as a result of them taking the 
time to establish their priorities, their vision, their 
strategy.
    Mr. Yohannes. Precisely.
    Mr. Rehberg. They, in many cases, could get it done 
quicker, it could be approved quicker, and then could be funded 
quicker.
    Mr. Yohannes. If we get the concurrent compact approval 
from Congress and we don't have to wait for 2, 3 years to 
develop the entire compact, we could fund for those projects 
that have already completed compact development and feasibility 
studies, and we could deploy the funds much faster.
    Mr. Rehberg. Let me use Africa as an example. Because many 
of the governments are new and there are emerging countries, 
and they have term limits. And the one thing that we know, it 
is called the two term limits. The new leader in the country 
feels like they are the most important leader, so they want to 
break the Constitution and get that third term.
    If they could complete a project within their term of 
office, would that help? Meaning, Congress speeded it up a bit, 
made sure that the compact gets done within the 1, 2, 3-year 
period? Would that help? Because if we agreed to a compact 
based upon the government that is in place and then you have an 
election and you get somebody with an entirely different vision 
that doesn't agree, that is where your problem would exist.
    Mr. Yohannes. Well, fortunately, we have not had 
difficulties because a government changes. In fact, El Salvador 
was a classic example. We signed the current compact with the 
previous regime, and this regime was elected last year, and 
they have been very supportive and they are abiding with many 
of our principles.
    I think where we have had some challenges has been the 
amount of time. It just takes so long, the time it takes to 
develop a compact, which means that we are not able to deploy 
the funds to be able to have a tremendous impact much faster 
than the current structure.
    Mr. Rehberg. So your request of the committee is to----
    Mr. Yohannes. Give us the permission to do the concurrent 
compacts, which means we could do the projects much faster, 
instead of waiting for five different projects to be included 
under one compact.
    Thank you.
    Mr. Rehberg. Thank you, Madam Chair.
    Mrs. Lowey. Mr. Schiff.
    Mr. Schiff. Thank you, Madam Chair.
    Mr. Director, there were a couple of questions I wanted to 
ask you--one country-specific, one more general.
    The country-specific question involves Armenia. The compact 
with Armenia has been suspended a couple of times related to 
democratic governance issues, media freedom among them. The 
most recent suspension was on June 10th of 2009. And there is a 
notation in the CRS report that at least one board member noted 
the suspension was in effect a termination because the work, if 
reapproved, couldn't be completed within the compact lifespan. 
The compact was a 5-year compact that began in November of 
2005, so conceivably it could go through November of this year.
    Has there been any change in the governance issues vis-a-
vis Armenia? Is there any potential of any resumption of the 
road construction work under that compact? If you could let me 
know the status on that.
    The more general question I have relates to the State 
Department and the quadrennial review that it is undertaking. 
There have been statements by the head of policy planning, by 
the Secretary herself, indicating an elevation, as they 
describe it, of development alongside diplomacy, which suggests 
some merger of the diplomatic and development missions.
    Have you been playing a role in the formulation of that 
quadrennial review? Do you see development being subsumed as a 
vehicle of diplomacy, or how do you see that shaking out?
    Mr. Yohannes. Thank you very much, Mr. Congressman.
    In terms of Armenia's concern, Armenia is in its fourth 
year of implementing the compact. The $65 million that was 
designed to fund the road project is still on hold. However, 
the other funds that are invested in agriculture are doing 
extremely well. We have trained over 30,000 farmers, and we are 
in the process of rehabilitating 17 different pump stations. 
And we have about $4.5 million outstanding through out micro 
finance to Armenian families.
    And 25 kilometers of road have already been completed. And 
the designs for the new road, that we paid for, I understand 
construction is going to be financed by the World Bank.
    Now, when you look in terms of governance, particularly in 
terms of human rights----
    Mr. Schiff. Sir, before we move on, how much of the compact 
is remaining?
    Mr. Yohannes. About $65 million is still on hold, the money 
that was designed to fund the road project.
    Mr. Schiff. The road project.
    Mr. Yohannes. Correct.
    Mr. Schiff. And is there any change in the governance 
issues that concern MCC? Is there any potential release of 
those funds to undertake as much of the road work as possible 
before the compact is terminated?
    Mr. Yohannes. If you look, the policy indicator for 
governance in Armenia, actually, the last 3 years it has gotten 
worse than it was before. So it is still a concern. We are 
monitoring it very closely. And if, in fact, we see some 
significant changes, then I think the board would make the 
proper decision. But right now, it is going the other way 
around.
    Mr. Schiff. Well, I would love to follow up with you on 
it----
    Mr. Yohannes. Okay.
    Mr. Schiff [continuing]. In terms of specific issues that 
MCC is looking at to see change in Armenia.
    And on the other question, Mr. Director?
    Mr. Yohannes. Okay, on the QDDRs and the PSDs, they are 
both studies, one conducted by the White House, the other one 
being conducted by the State Department, we have been very 
active at the table, providing lessons learned these last 5 
years. You know, hopefully the results will come sometime this 
year. We really have not seen the final result. But our people, 
both our chief economists and our experts in the food security 
area, have been involved heavily in the last few months, really 
providing a lot of information that has worked for us at MCC. 
So I am just waiting, like you, to see the final results, Mr. 
Congressman.
    Mr. Schiff. Do you see any change in the selection of 
countries being more a function of diplomatic initiatives or 
that the choice of development missions within an MCC compact 
might be more heavily influenced by diplomatic considerations?
    Mr. Yohannes. Again, what I am hearing right now is that a 
lot of our principles are emerging as priorities for this 
administration--the country ownership, results, accountability, 
you know, all of the principles that we argue for and that we 
are committed to.
    Mr. Schiff. I think I am out of time, Madam Chair. Thank 
you.
    Mrs. Lowey. Thank you.
    We are going to start a second round.
    Ms. Lee, if you are ready, you can proceed with your 
question. Thank you.
    Ms. Lee. Thank you, Madam Chair.
    I apologize for being late. I had three hearings at one 
time. But thank you. I really wanted to be here for this. So if 
my questions are redundant, I apologize. But it is good to see 
you. And congratulations again.
    Mr. Yohannes. It is good to see you, Congresswoman Lee.
    Ms. Lee. As you know, I have been extremely concerned about 
the involvement of minority and women-owned businesses in MCC's 
compact agreements or at least in terms of supporting the 
efforts that take place, recognizing that primarily MCC 
provides for opportunities for local entrepreneurs in host 
countries. But I do know, and I have visited, actually with our 
chair, several countries and saw some MCC compacts being 
executed with U.S. partners. And I have not seen any people of 
color from our own country involved in some of these projects, 
wherever U.S. involvement is required.
    So I would like to ask you about how you are working. Do 
you work with SBA? What your procurement arrangements are when 
you hire people, like auditors, accountants, or whomever you 
hire to do whatever kind of work with MCC, how you are moving 
forward on that. As well as your workforce, how diverse is 
MCC's workforce?
    And, finally, I would just like a little bit of background 
on the compact, I believe with Malawi, that you are in the 
process of working through at this point. I am interested to 
know that, and how women are integrated and gender 
considerations as part of the compact programs as a given, you 
know, an integral component of how you negotiate these deals.
    Mr. Yohannes. Thank you very much, Congresswoman.
    In terms of employment at MCC, 50 percent of our employees 
are women and about 20 to 25 percent are people of color. And 
they are all well-represented at every level.
    In terms of our business procurements, approximately 40 
percent are primarily to small businesses. And, within that 
group, about 15 percent are primarily to minority-owned 
businesses.
    Ms. Lee. Fifteen percent?
    Mr. Yohannes. Fifteen percent.
    I am committed to expanding opportunities to small 
businesses and minority-owned businesses. So we are going to do 
a very aggressive reaching out to a lot of the small businesses 
as well as the various community groups that could help us to 
bring a lot of businesses from the minority communities. You 
know, it is 15 percent, but I would like to see it much higher 
at some point. So I am committed to make sure that we reach out 
to every available business that could be a potential partner 
in this area.
    Ms. Lee. How are you doing that? Do you have a specific 
outreach effort? How are you operationalizing that effort?
    Mr. Yohannes. We reach out primarily through our Web sites. 
But also, we are going to be working very closely with the 
Constituency for Africa. That is an organization that really 
promotes businesses. And also with other groups, as well, 
making sure that we reach out to those businesses.
    I think the best and only way, in addition to the Internet, 
is to talk to the various groups that exist in our country that 
are Hispanic business associations, women business 
associations, African American business associations, Asian 
business associations. So we tend to be very active in sending 
the message so they can participate when we have the 
procurement processes.
    Ms. Lee. Well, Madam Chair, let me just ask you--I don't 
know many members of the Congressional Black Caucus who have 
gotten any information about what you are doing. And so we need 
to figure out a way that, at least we know when you are 
reaching out to our constituency businesses, that we can help, 
because I haven't found any members who know that.
    Mr. Yohannes. I appreciate that. And I will commit to you 
that I will work with you and with congressional members.
    In terms of Malawi, it is still in the process. You know, 
we are going back and forth. The expected funding is going to 
be primarily to rehabilitate the energy sector. In fact, you 
know, the acting vice president is going back again next week 
to Malawi. Compact development has taken a little bit longer. 
You know, like many of these compacts, they have little snags. 
But we do expect to sign Malawi in the fourth quarter or the 
beginning of next year.
    Ms. Lee. And women?
    Mr. Yohannes. With gender, you know, that is an area--in 
every single project we do, it includes gender integration. In 
fact, I have asked Cassandra Butts, who came from the White 
House, who was previously the deputy counsel, to take the lead 
in that area. And we are committing every resource we have to 
make sure we have consistency in every different country.
    When I first came here about 4 months ago, I was told by a 
group that our gender integration programs may not have been 
consistent in some countries. We are providing the technical 
training as well as the financial resources that are required 
to make sure we have people that really understand and could 
monitor it and could implement it extremely well.
    Ms. Lee. Thank you.
    Thank you very much, Madam Chair.
    Mrs. Lowey. Thank you very much.
    And I just want to make a quick point relevant to your 
point, in that we urge you to carry out consultations in the 
country with the diverse group of civil society organizations, 
including women and minority groups, and consider their 
meaningful input when you are developing a compact. I think it 
is very important to reach out to the diverse groups in the 
country when you are putting the compact together.
    Mr. Yohannes. Madam Chairman, I agree and support that 100 
percent. In fact, every single compact, if it does not have 
civil society, NGOs, businesses, and others, they wouldn't 
consider the project as part of the compact. So it is a 
requirement within our system to making sure that civil society 
in that country is consulted before it becomes an agreement. So 
I support it 100 percent.
    Mrs. Lowey. Ms. Granger.
    Ms. Granger. Thank you.
    You can see there is a great concern about corruption in 
the countries, not in the MCC but in the countries you are 
dealing with. And the importance is that, if there is a history 
of corruption or a report of corruption, what safeguards are 
being established.
    I would ask you, what kind of cooperation do you receive 
from local communities to fight corruption? And does there need 
to be more outreach and ways for community members to 
anonymously report incidents of fraud or corruption?
    How are you working with those communities and with those 
compact countries to establish tougher anti-corruption 
safeguards so that, when we have this hearing the next time and 
have a follow-up, then we will have more assurance that that is 
occurring?
    Mr. Yohannes. We work with a number of groups. Number one, 
we work very closely with the State Department, particularly 
with embassies in those countries, to gather a lot of 
information, especially as far as corruption is concerned.
    We also work very closely with NGOs in those countries. 
And, also, when I was in Cape Verde, for example, and Ghana, I 
spent some time with the business community independent of the 
government and was asking them questions specifically if they 
were concerned about corruption or corrupt practices in those 
countries.
    And, of course, we put a lot of emphasis on the corruption 
indicators that are provided to us by a third party, which 
comes from that group interviewing the civil society, 
businesses, and others in those countries.
    So we have a lot of information we gather. Again, having 
said that, I believe there could be other opportunities that 
maybe I have not thought about in the past that we would be 
more than happy to work with you on.
    Ms. Granger. Thank you.
    Mrs. Lowey. The violent events of the last week in 
Kyrgyzstan are of great concern to the committee. And it is my 
understanding that MCC is currently engaged in a threshold 
program in Kyrgyzstan, and one of the stated reasons for 
discontent in Kyrgyzstan was the awareness of corruption in 
government. Given the threshold program's focus on corruption 
over the last 2 years, it leaves me a bit uneasy about the 
effectiveness of this program.
    First and foremost, have the events of the last week 
compromised the security of MCC employees and implementing 
partners? And what effect will these events have on the program 
in both the long and short term? And, finally, is MCC 
considering terminating the program, given the current 
situation?
    Mr. Yohannes. Thank you, Chairwoman Lowey.
    We had a 2-year threshold program with Kyrgyzstan for about 
$16 million, primarily intended to strengthen the criminal 
justice and the law enforcement sections of that country. The 
program comes to an end in June. We are currently working with 
the State Department and National Security Council about the 
situation before we take any kind of action. And, as soon as we 
get the green light, we will be able to make the final decision 
in terms of how to proceed.
    Mrs. Lowey. Thank you.
    Mr. Yohannes. But the program comes to an end in June. And, 
at this time, we have no plan to extend the program beyond 
June.
    Mrs. Lowey. Thank you.
    Mr. Rehberg, do you have a question?
    Mr. Rehberg. Yes, one quick question.
    If you were to give us a couple of success stories of 
completed or nearly completed or will-be completed and never 
going to ask for money again, what two countries would you 
write up as a success, so that we could look at some statistics 
and a little bit of the history and figure out where they are 
and talk to USAID and such? Could you come up with a couple?
    Mr. Yohannes. I could give you a couple. But the most 
frequently asked questions when I speak to many of those 
countries is the fact that they all want a second compact. So I 
have be very careful. If I tell you the country, then tomorrow 
I am going to be asked for a second compact.
    Mr. Rehberg. Sure.
    Mr. Yohannes. But definitely Cape Verde was one of the 
countries that we selected to be eligible for a second compact. 
And if you look in terms of what has been accomplished in that 
country, it has just been phenomenal. I went and inspected the 
port which will be completed sometime in September, which will 
open a lot of opportunity for that country for trade and 
investments.
    Projects in Georgia are doing extremely well. Projects in 
Ghana, even though there were some concerns recently because of 
some corruption issues that were discussed, the progress has 
just been phenomenal. El Salvador is continuing to do extremely 
well.
    Mr. Rehberg. Okay. I am not going to suggest that all 
projects must end, but I don't believe that it was ever 
intended that it was going to be an ongoing foreign affairs 
appropriation to these various countries. Is there an ending 
date?
    I know the compact comes to an end, but if the country has 
the opportunity to come in--I mean, I can always find more 
money in Montana year after year after year. That doesn't mean 
that eventually we shouldn't stand on our own two feet and say, 
enough is enough.
    What is the plan for ending projects, just saying ``El 
Salvador, we love you, but you are on your own now''?
    Mr. Yohannes. That is a good question, Mr. Congressman.
    And my objective is to make sure many of those countries 
replace our aid dollars with investment from the private 
sector. I believe----
    Mr. Rehberg. Okay. The question then becomes, are your 
criteria objective or subjective? Does the board of directors 
have a threshold that is available to us? Is it advertised, or 
is it just a behind-closed-doors board of directors decision to 
consider a second compact or a third or a fourth or a fifth?
    Mr. Yohannes. When you consider a second compact, I think 
you have to do a couple things. Number one, the countries 
themselves must continue to perform extremely well in all of 
the policy indicators. That is number one, all right?
    Before we can make a decision to do second compacts, we 
look in terms of the first 5-year investment's ability to 
accomplish its intended mission or goals. So it is a very, very 
good set of processes before a country is selected or eligible 
to get a second compact.
    And in the last 5 years, we had five countries that were 
graduated from low-income countries to LMIC. By definition, 
some of those countries at some point would be able to replace 
our aid dollars with private-sector investment. So it just 
varies from country to country.
    Again, our hope is that many of those countries will 
replace our investment dollars with private-sector investment 
at some point in the future. And I hope at some point in the 
future MCC will not exist and all our investment will be 
replaced by the private-sector investments.
    Mr. Rehberg. Well, probably that won't be possible because 
there are so many countries that probably need the initial 
help. It just seems like right now we are spending a lot of 
time trying to figure out how to save the countries that are in 
or how to fully fund those that currently exist, and it would 
be nice to have a strategy to end so we could bring in more 
countries, as opposed to just continuing to support those that 
are successful. And there is nothing like success breeds 
success; however----
    Mr. Yohannes. Well, some of those countries that graduate 
definitely would be candidates for other funding in the future. 
But we need to continue to work with some of the countries that 
have done a great job in terms of improving their policies and 
so forth.
    But we can't predict in terms of which countries are going 
to be next for getting a second compact. And as much as 
possible we are working in cooperation with other aid agencies 
within our government, as well as continuously encouraging the 
private sector to make sure they consider making investments in 
some of those countries, so at least the burden would not be on 
American taxpayers in the long term.
    So it is going to vary from country to country, Mr. 
Congressman.
    Mr. Rehberg. One last question: Can you name the one thing 
that is the same in all the successful countries? Is it 
agriculture? Or is it transportation? And I know you would like 
to say, ``Well, in one case it is a port, and in another case 
it is a railroad.'' But are there some things that are being 
funded that seem to be an overriding theme for success?
    Mr. Yohannes. Approximately about 50 percent of our 
investment dollars are primarily invested in agriculture. And 
that seems to be an area where it is providing a lot of food 
security for a lot of our partner countries. In addition, all 
together, when you include agriculture, infrastructure, it is 
65 percent of our investment. That has been the case in the 
past.
    However, we are looking at other areas where our investment 
could have a tremendous impact much faster and more quickly. We 
have a lot of technologies that could be employed in many of 
those countries. So, as we consider Indonesia and others, we 
are speaking to those countries to consider other alternatives 
in addition to the traditional investments that have been made. 
So----
    Mr. Rehberg. But agriculture would probably be your answer, 
or something affiliated. If it is a railroad in Mongolia, it 
probably moves agricultural products.
    Mr. Yohannes. Precisely.
    Mr. Rehberg. And if it is Benin and it is the port, it is 
probably moving agricultural products.
    Mr. Yohannes. That is correct.
    Mr. Rehberg. Okay. All right. Thank you.
    Mrs. Lowey. I want to thank you, Mr. Yohannes, for engaging 
in our committee. Given your focus on agriculture, perhaps you 
can share with us the coordination between the MCC and Cheryl 
Mills's efforts to coordinate, the whole foreign aid apparatus 
and our other agencies in government and focusing them on 
agriculture.
    Secondly, I just want to say that this committee has been 
very committed to the MCC, and we understand that the MCC has 
the great potential to lift people out of poverty. And because 
of our support, this is why we have been so concerned about the 
corruption and the stories that I know don't please you or us 
on this committee. And we hope to work through them and have 
greater dialogue with you about how to move forward. We know 
that you have done excellent work in building schools in 
addition to agriculture and roads, and we look forward to the 
dialogue.
    In closing, well, perhaps you can just address the idea of 
coordination among the MCC and the other efforts that Cheryl 
Mills is leading with regard to agriculture. And then I will 
turn to Ms. Lee.
    Mr. Yohannes. Okay. Thank you very much.
    Chairwoman Lowey, in terms of corruption, I know we talked 
about it several times, but I just want to point out that we 
have a new fraud and corruption policy at MCC. That was just 
implemented before I just got there, so it is something new. 
And then, also, we have country-by-country fraud and corruption 
assessments, which has been ongoing for some time. And all 
compacts have civil society stakeholder committees that do 
oversight. And, also, we have a system in which we receive 
anonymous tips about corruption from many of those countries.
    So I just want to add to the record that, in addition to my 
earlier statement, these are additional processes that have 
been in place for some time, even before I got to MCC.
    Mrs. Lowey. Before you get to agriculture, I did want you 
to talk about that, because 50 percent of your work is focused, 
as you said, on agriculture.
    I think the issue is the MCC has clear guidelines related 
to a political coup, and guidelines related to corruption are 
fuzzy. And because of this committee's support for the MCC, we 
would like to work with you and hear more about how you are 
going to face those challenges.
    So, if you could just address the coordination on 
agriculture between the MCC and Cheryl Mills's effort, I think 
that would be helpful. And then I will turn to Ms. Lee.
    Mr. Yohannes. Okay. Thank you, Madam Chairwoman.
    We have been working in coordination with Cheryl Mills's 
office. In fact, Kristin Penn, who is MCC's agricultural 
expert, she is on loan from MCC to the State Department. And 
because of lessons learned the last 5 years, we have done so 
much in that sector, the administration is--we are assisting 
the administration in terms of the broader response in food 
security. And so we are continually working with the State 
Department.
    Again, like I said earlier with our experiences in Ghana 
and Nicaragua and other places, we are seeing a tremendous 
progress, not only farmer training but also they are using our 
education and training in which they are producing much higher 
quantities. And also we have set aside something like 51,000 
hectares of agricultural land primarily to be used for high 
cash-crop commercial farming.
    In Ghana alone, for example, where I just was 2 months ago, 
I was at a commercial pineapple farm in which we provided the 
cold storage, where Ghana is now exporting a lot of delicious 
pineapples to Europe, earning a lot of precious foreign 
currency reserves.
    So it is working. We are providing what we have learned the 
last 5 years to the administration.
    In addition to the projects we have become extremely 
effective in making sure that both men and women are benefiting 
from our investments in agriculture. Again, when I was in Ghana 
2 months ago, I was fortunate enough to pass out land 
certificates at a ceremony in which both men and women 50 
percent benefited from our investments. So not only are we able 
to see increases in incomes of many of the farmers, but also we 
are seeing how our gender policy is having a tremendous impact.
    Mrs. Lowey. Again, before I turn to Ms. Lee, Ms. Lee and I 
were in Ghana about 2 1/2 years ago, saw that same very 
important and exciting pineapple plant. And I look forward to 
the day when you or Ms. Lee or I can go back and we will see 
many exciting businesses sponsored and encouraged by the MCC.
    Ms. Lee?
    Ms. Lee. Thank you very much, Madam Chair. And that was a 
very exciting trip, and I concur with the chair, in terms of a 
return to see these investments taking off and doing what they 
were intended to do.
    And agriculture and infrastructure programs have been, 
really, the centerpiece, I know, of the MCC. But also now I 
want to find out as it relates to basic education and health 
projects, how are they given equal consideration--or are they 
now--in MCC compacts?
    I know you revised the guidelines for--it is the economic 
and beneficiary analysis to now use health and education 
projects as examples to demonstrate positive economic rates of 
return. So have you seen any increased interest in education-
based projects in compact proposals? Are countries and people 
aware that this is an indicator on the--what is it called, the 
``investing-in-people basket''? And what are those indicators 
and how are they scored, as it relates to the health- and 
education-sector projects?
    Mr. Yohannes. Because all of our projects are country-owned 
from design to implementation, and to the extent a country 
identifies what appears to be their major constraints for 
economic development, those are the projects we work with.
    So, for example, in terms of health, we have only done two 
different projects. One is in Lesotho, where we have about 24 
percent of the population infected with AIDS. So we are working 
in coordination PEPFAR, which we are building the clinics and 
PEPFAR is really providing the medical supplies.
    And our most recent compact was with Mongolia in terms of 
health, primarily where they have huge problems with diabetes 
and high blood pressure, so we are partnering with them. But 
many of the health concerns were addressed primarily in the 
threshold programs where we provided the funding for the 
immunization of children.
    But as long as a country considers a sector to be a 
priority and to the extent that it works, we are willing to 
work with them. But, historically, it has been much more easier 
to get funding for health and education from other sources.
    Ms. Lee. Sure, but countries are aware that this is part of 
it?
    Mr. Yohannes. Definitely. Definitely. We have no sector 
requirements, no earmarks. You know, everything that was 
considered to be a major economic constraint is what we are 
working with the countries on, absolutely.
    Ms. Lee. Okay. Thank you.
    Mr. Yohannes. Thank you very much, Congresswoman Lee.
    Mrs. Lowey. Mr. Yohannes, I thank you again for your time 
and appearing before this committee.
    This concludes today's hearing on the President's fiscal 
year 2011 request for the Millennium Challenge Corporation. The 
Subcommittee on State, Foreign Operations, and Related Programs 
stands adjourned.
    Mr. Yohannes. Thank you very much for having me.
    Mrs. Lowey. Thank you.
    [GRAPHIC] [TIFF OMITTED] T6402P6B.054
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.055
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.056
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.057
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.058
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.059
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.060
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.061
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.062
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.063
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.064
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.065
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.066
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.067
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.068
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.069
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.070
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.071
    
                                         Tuesday, March 23, 2010.  

GLOBAL HEALTH AND HIV/AIDS PROGRAMS AT THE DEPARTMENT OF STATE AND THE 
               U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT

                               WITNESSES

ERIC GOOSBY, M.D., U.S. GLOBAL AIDS COORDINATOR, U.S. DEPARTMENT OF 
    STATE
GLORIA STEELE, SENIOR DEPUTY ASSISTANT ADMINISTRATOR FOR GLOBAL HEALTH, 
    U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT

                 Opening Statement of Chairwoman Lowey

    Mrs. Lowey. The subcommittee on State Foreign Operations 
and Related Programs will come to order.
    I would like to welcome Dr. Eric Goosby, the United States 
Global Aids Coordinator, and Ms. Gloria Steele, the Senior 
Deputy Assistant Administrator of the Bureau for Global Health 
at USAID, to discuss the President's fiscal year 2011 request 
for global health.
    This committee has made global health a key priority, 
providing over $30 billion over the past 5 years with 
impressive results. HIV/AIDS programs directly supported 2.4 
million people on treatment. Malaria programs have protected 19 
million families with bednets; and nineteen million women have 
access to voluntary family planning services.
    Despite expanded services, the development of parallel 
systems or ``stovepipes of excellence,'' present challenges 
with integration and efficiency. It makes no sense for a woman 
to travel east of her village for a prenatal visit, west to get 
her daughter vaccinated, and north for an HIV/AIDS test. I am 
pleased that the budget request proposes to put in place better 
coordination, particularly given the strong foundation within 
the HIV/AIDS programs.
    The budget requests $8.5 billion for the Global Health 
Initiative--a 9 percent increase that supports a coordinated 
health program in key countries, with a goal of increasing 
access to health services and reducing mortality and morbidity. 
I hope you will address how the U.S. Government-supported 
health programs will become more effective and efficient in 
target countries. Overall, I applaud the streamlining effort 
and look forward to working with both of you on implementation.
    Looking to specific health issues. The budget request 
provides a total of $1.49 billion for maternal health, child 
survival, family planning, and nutrition. In fiscal year 2008, 
USAID developed a comprehensive strategy, at the direction of 
this Subcommittee, to expand child survival programs, focusing 
resources in 30 countries. What results were attained with 
these additional resources. We would like you to share with us. 
What lessons learned will be applied to the GHI? And do we 
expect improved results with an integrated model under GHI?
    I have championed expanded access to voluntary family 
planning for many years. We still find ourselves unable to meet 
the demand in much of the developing world. And under the GHI, 
how will U.S. Government resources insure access to those most 
in need of these services? What efforts will be made to 
integrate family planning with other services for mothers, 
including child survival and Malaria programs? Other donors 
have prioritized family planning, and I am interested to hear 
how you will coordinate with them so the expanded U.S. effort 
fully complements their programs.
    With increased focus on host country ownership, which is 
critical, many remaining questions require evaluation. How will 
this new priority impact implementation of global HIV/AIDS 
programs? Will OGAC funding be provided to governments as 
budget support? Will grants and contracts with nongovernmental 
entities end or will these programs be implemented by host 
country governments? What monitoring and evaluation is in place 
to ensure consistent and accessible services for patients 
during this transition?
    Finally, although the new HIV/AIDS strategy prioritizes 
prevention, I am concerned the budget request does not reflect 
this new commitment. Although new infections have dropped and 
young people in some parts of the world are waiting longer to 
become sexually active, the number of infections continues to 
grow. Every minute, five people become infected; and nearly 25 
years into this pandemic we still do not know what prevention 
strategies work.
    This subcommittee requested a prevention strategy in the 
fiscal year 2010 conference agreement that was due to this 
committee this week but has not yet been provided. When can we 
expect this report? And what new strategies will you put in 
place to strengthen our prevention intervention? What new 
research is emerging to slow the pandemic? Obviously, 
prevention is just a piece of the picture, and U.S. funding 
will continue to support care and treatment.
    I look forward to addressing these issues during the 
question and answer portion of the hearing.
    The challenges before us are immense. I am pleased the 
United States will continue its leadership role in global 
health. We are very lucky to have your expertise, and I look 
forward to hearing your remarks and working with both of you on 
these and other global health issues.
    First, let me turn to the ranking member, Ms. Granger, for 
her opening statement. I apologize for some of my colleagues, 
because there is a signing ceremony at the White House. So I 
had to say to Speaker Pelosi 5 minutes ago, sorry, I couldn't 
go over with you. But thank you again for appearing before us.
    Ms. Granger.

                     Opening Remarks by Ms. Granger

    Ms. Granger. Thank you very much.
    I would like to welcome Ambassador Goosby and Ms. Steele 
before this subcommittee to discuss the fiscal year 2011 
request.
    The President's Global Health Initiative was announced last 
May and encompasses all global health funding under this 
subcommittee's jurisdiction. It totals $8.5 billion in fiscal 
year 2011, an increase of $684 million from last year, the 
majority of which, of course, comes from this subcommittee. 
Almost 70 percent of the request, $5.8 billion, is for HIV/AIDS 
programs under Ambassador Goosby's office, as the chairman 
mentioned.
    I want to be on record that the goals of the President's 
Global Health Initiative are impressive, they are important, 
and they are worthy of support. These goals include achieving 
better health for women and children in the developing world 
and providing a long-term plan for delivery of health services 
led by the countries themselves.
    Funding for global health programs has increased 
significantly since the start of the Bush administration to 
last year's enacted level, from $1.8 billion to $7.8 billion. 
This three-fold increase in funding has allowed for a rapid 
scale-up of our health intervention overseas.
    Now is the time to begin examining the path forward, 
because this level of increase can't be sustained while our 
country faces such a dire fiscal situation. We must examine our 
global health budget and take advantage of programs that can 
build the capacity within countries so that they are one day 
able to provide more for themselves over the long term.
    I applaud the administration for looking at how to shift 
the global health debate to sustainability, sustainability by 
recipient countries so they can graduate from U.S. bilateral 
assistance one day and sustainability by the many hospitals and 
clinics built by the United States government funding so that 
trained health care workers will provide services in the 
future.
    We have a long way to achieve these goals, but I commend 
the administration for starting the dialogue. In practice, I 
see a number of challenges, in particular the faith-based 
organizations that I hope to address during my question time.
    Additionally, I don't understand why a Presidential 
initiative of this size is not being formalized through 
authorization legislation. Instead, the administration has put 
this subcommittee in a difficult position by requesting a 
number of significant funding increases for several programs, 
maternal and child health, nutrition, family planning and 
neglected tropical diseases, but there is no legislative 
recommendation for laying out the concrete steps necessary to 
determine how those dollars might be spent differently. How can 
we be assured that the Global Health Initiative will not just 
add another layer of bureaucracy to these crucial programs?
    Finally, with respect to the U.S. contribution to the 
Global Fund, Ambassador Goosby, I understand you will be 
leaving today to fly to Geneva for the Global Fund's 
replenishment meeting. If I could suggest one message for you 
to take to the conference, it would be that the Global Fund 
must find a way to manage its demand, particularly in a 
constrained fiscal environment.
    The committee included language in the statement of 
managers last year addressing this issue, and I look forward to 
hearing from you the recommendations of the Global Fund's 
working group to manage tension between demand and supply and 
how those recommendations can be implemented prior to launching 
a tenth round of new grants.
    I thank you both for appearing before us today, and I look 
forward to hearing about your work.
    Thank you, Madam Chair.
    Mrs. Lowey. Thank you.
    Ambassador Goosby, your full written statement will be 
placed in the record. Please feel free to summarize your oral 
statement. Thank you.
    Dr. Goosby. Thank you very much.
    Well, Chairwoman Lowey and Ranking Member Granger, it is 
really an honor to have this opportunity to talk to you today. 
Your bipartisan support has been the essential ingredient to 
the program's success.
    In a time of tightening budgets and economic constraint, 
the President is seeking nearly $7 billion for bilateral HIV/
AIDS programs, bilateral TB programs and research, and 
contributions to multilateral efforts. The United States is and 
under this budget will remain by far the largest donor to 
global health and HIV/AIDS, contributing more than half of the 
global donor response.
    In addition, the President's request of $1 billion for the 
Global Fund represents the largest request made in a 
President's budget to date and maintains our status as the 
leading contributor to the fund.
    PEPFAR is the cornerstone of the President's Global Health 
Initiative, which commits $63 billion over 6 years to support 
partner countries in improving and expanding access to health 
services.
    The Global Health Initiative is about integration, 
coordination, building capacity, and creating the conditions 
for a long-term sustainability project. I want to stress that 
this new initiative will not change PEPFAR's emphasis on 
prevention, care, and treatment of HIV/AIDS but will allow us 
to ensure that communities affected by HIV have access to 
comprehensive health services to address the needs that they 
face.
    Seven years after the creation of PEPFAR, AIDS is still a 
leading cause of death in many countries and a continued threat 
around the world. Investments in PEPFAR and the global AIDS 
fight overall continue to be necessary.
    At the same time, we should take note of the difference 
PEPFAR has made. Many thought treatment never could be scaled 
up in Africa because of weak health care delivery systems--the 
need for doctors, nurses, the lack of resources. Now PEPFAR is 
directly supporting almost 2.5 million individuals on 
treatment. In 2009 alone, PEPFAR supported HIV counseling and 
testing for nearly 29 million people and care for 11 million 
people, including 3.6 million orphans and vulnerable children.
    PEPFAR's core business has been and will continue to be 
prevention, care, and treatment.
    I would like to briefly discuss some of the themes which 
will guide us over the next few years as we move from an 
emergency response to promoting sustainable country-led 
responses.
    Preventing new infections represents the long-term, 
sustainable way to turn the tide against HIV/AIDS. Over its 
next phase, PEPFAR's focus will be assisting countries in 
implementing a combination of behavioral, medical, biomedical 
and structural interventions, working with countries to target 
and research most at-risk populations and expand the evidence 
base around prevention.
    Another key focus is support for country ownership. Strong 
government leadership of the health system is integral to long-
term success.
    Last August, I wrote to our U.S. ambassadors to ask for 
their support in the transition from an emergency response to a 
sustainable program. I have been greatly encouraged by their 
leadership as our country programs develop partnership 
frameworks and accompanying implementation plans with 
governments. Our discussions are also laying the groundwork for 
engaging in partnership with countries more broadly through 
GHI.
    A heightened focus under both our 5-year strategy and GHI 
is support for strengthening of health systems. By reducing the 
HIV burden on facilities and health workers, PEPFAR frees up 
capacity to address other health needs.
    We are also supporting training of new health workers and 
expansion of infrastructure. As part of GHI, PEPFAR will 
explore opportunities for joint programming and increased 
coordination for health system activities.
    Our strategy recognizes that HIV/AIDS is a shared global 
responsibility. All the elements of a national response to 
health requires support from a mix of national resources and 
external resources. Because the United States has done so much 
on HIV/AIDS, I sometimes sense a tendency for people to 
conclude that we can or should do it all. Even if we somehow 
could do it all, globally or in any country, that would 
completely undermine the principles of country ownership and 
sustainability.
    This administration is aggressively pursuing dialogue 
around a truly shared global response in multiple form with 
partner governments, other donors, multilateral organizations 
and foundations. We must all come together if we are going to 
win this fight and continue to respond to the unmet need.
    Finally, PEPFAR represents a whole-of-government approach. 
We owe the people who lead the implementation of PEPFAR a 
tremendous debt of gratitude. Our leadership and management 
structures must support them to the best of our ability.
    PEPFAR has worked to decentralize programming and ensure 
that decisions move down to country level activities as made by 
United States country teams. We are working to further 
integrate the field perspective into its policy and 
communications, reduce the reporting burdens and paperwork 
requirements placed on the field; and I am pleased to note that 
PEPFAR's whole-of-government emphasis is being reinforced by 
GHI.
    Once again, Chairman Lowey and Ranking Member Granger, I 
appreciate the subcommittee's strong support; and I look 
forward to our question and dialogue. Thank you.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402P6B.072
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.073
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.074
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.075
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.076
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.077
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.078
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.079
    
    Mrs. Lowey. Thank you.
    Ms. Steele, your full written statement will be placed in 
the record. Please feel free to summarize your oral statement 
so we can get to questions. Thank you very much.
    Ms. Steele. Thank you.
    Chairwoman Lowey, Ranking Member Granger, thank you very 
much for inviting me to testify on the President's Fiscal Year 
2011 Budget Request for Global Health and Child Survival.
    As I begin, on behalf of USAID's staff and the people we 
serve, I want to thank you for your long-standing support for 
global health. As a result of your support, the U.S. Government 
stands as a leader in the health area; and as a result of your 
support, we have made profound differences in the lives and 
welfare and in the health of the world's poor.
    As we implement the President's Global Health Initiative, 
we once again count on your support. The GHI will build upon 
the successes of health that you have supported in the past 
years; and I want to go over some of them, as you have already 
done, Chairman Lowey.
    We have remarkable successes in PEPFAR, as Ambassador 
Goosby has talked about. We have equally remarkable successes 
in malaria. In 2009, we have reached, after 3 and a half years, 
50 million people in Africa with prevention and treatment 
measures. In six African countries, we have seen substantial 
reductions in under-5 mortality, from 19 to 36 percent. A large 
part of the reduction in under-5 mortality has been due to 
measures that we have done in malaria.
    We have also made significant progress in neglected 
tropical diseases. Since 2006, we have delivered over 221 
million treatments to over 55 million people; and we have 
reduced the cost of treatment by 41 percent. We have worked 
with the private sector and have received over a billion 
dollars to date in free drugs from the private sector.
    Our progress in TB has also been impressive. By the end of 
2008, the prevalence rate of TB had fallen by 26 percent in TB 
countries where we have been working, compared to 10 years ago.
    Our progress in family planning is also impressive. Through 
increased access and voluntary family planning services, modern 
contraceptive use among women of reproductive age in the 
developing world has increased from under 10 percent in the 
1960s to 43 percent today. In harmony with the desired family 
size, the average number of children per woman has fallen from 
over 6 percent to almost 3. We have also continued to see 
increases in the proportion of births spaced 3 or more years 
apart, as well as seeing declines in the proportion of young 
women having their first birth before the age 18.
    In maternal and child health, we have made impressive 
gains. We have reduced under-5 mortality to 8.8 million 
children. In fact, there were 15 million child deaths in the 
1980s. This represents almost 8 million child lives saved, and 
that is a tremendous accomplishment.
    While globally we have not made much impact in reducing 
maternal death, in the countries in which USAID has worked we 
have seen significant reductions in maternal deaths in the 
range of 20 to 50 percent over the last 10 years.
    However, as you know the challenges remain. Today, 530,000 
women still die from pregnancy related deaths. Over 6 million 
out of the 8 million children under age 5 die from causes that 
are easily preventable, causes such as diarrhea, pneumonia, 
malaria, complications related to birth, and malnutrition. In 
fact, maternal and child malnutrition contributes to 3 and a 
half million child deaths every year.
    There are still 9 million new cases of TB, with 1.7 million 
deaths. Nine hundred thousand people die from malaria. We still 
see 52 million unintended pregnancies occur in the world today, 
and 400,000 people are disabled by tropical diseases for which 
simple treatments exist.
    The President launched the Global Health Initiative in May 
last year; and the Global Health Initiative is intended to 
achieve greater impact than we have today, building upon the 
successes that we have accomplished. Through integration, which 
Chairwoman Lowey has talked about, we intend to be more 
efficient in the use of our resources. We intend to link 
services in the same place because we are working with the same 
service provider. We intend to integrate activities that relate 
to each other in service delivery. We want to achieve 
sustainability so that a woman who is treated through programs 
we support today will continue to receive the same high-quality 
service 5 years from now. We will implement a woman-centered 
approach that addresses the barriers that keep women from 
achieving improvements in their own and their families' health.
    We will invest heavily in monitoring and evaluation to 
increase transparency, accountability, and learning. The GHI 
will promote investments in research and innovation to scale up 
proven interventions and explore new ways of providing health 
services.
    We will continue to interact closely with other development 
partners, both bilateral and multilateral, including faith-
based organizations and community-based organizations. We 
believe that by working together more effectively we will be 
able to build upon each other's strengths and together we will 
accomplish more than if we work separately. We will design and 
implement health programs within the framework of priorities 
identified by our partner countries.
    To do all of this, we will work in collaboration with other 
U.S. Government agencies, such as CDC, NIH, Peace Corps, and 
the State Department.
    We have requested $3 billion in order to be able to 
accomplish the goals that we have set under the Global Health 
Initiative. This includes $90 million for maternal and child 
health, which includes nutrition at $200 million. We hope to 
see a reduction in maternal mortality by 360,000 women's lives 
saved by 2014. We hope to see a reduction in under-5 mortality 
by 3 million, and we hope to reduce under-nutrition by 30 
percent.
    We are requesting $590 million for family planning and 
reproductive health, and by the end of GHI would like to see 54 
million unintended pregnancies prevented. We are requesting 
$618 million from malaria so that by the end of 2014 we will 
see the reduction in the burden of malaria by 50 percent for 
450 million people. This would include starting malaria 
programs in Nigeria and D.R. Congo.
    We are requesting $230 million for TB so that we can save 
by the end of the GHI 1.3 million lives.
    We are requesting $155 million for NTD in order to reduce 
the prevalence of seven major NTDs by half among 70 percent of 
the affected population.
    In 2005, we asked for your support to be able to change our 
model in malaria, and you provided us that support. As a result 
of that, we have delivered to you some of the most outstanding 
achievements in global health today. We are asking for the same 
support today to save many more millions of lives using the new 
business model of the Global Health Initiative.
    Thank you.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402P6B.080
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.081
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.082
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.083
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.084
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.085
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.086
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.087
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.088
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.089
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.090
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.091
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.092
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.093
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.094
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.095
    
    Mrs. Lowey. Thank you to you both.
    Over the past decade, the members of the G8 have 
prioritized poverty reduction and development on their annual 
agendas, with health a consistent top priority. As the world 
faces a global economic crisis, donor countries are finding it 
even harder to meet previous commitments. For example, Canada 
will make child survival and maternal health a central issue at 
this summer's G8 meeting but, at the same time, will likely 
reduce their commitment to HIV/AIDS programs.
    If you could--whoever wants to go first--could you explain 
to us what steps will the U.S. take to ensure that donors do 
not rob Peter to pay Paul and walk away from existing 
commitments? And some have accused the U.S. of shifting 
priorities as the fiscal 2011 budget has a relatively small 
increase for HIV/AIDS and actually reduces the U.S. 
contribution to the Global Fund to fight AIDS, tuberculosis, 
and Malaria. Can you explain why this decision on the budget 
and why was the decision made on both bilateral and 
multilateral commitment for HIV/AIDS?
    Dr. Goosby. Yes, Chairwoman. Excellent questions. I will 
get right to the core of the issues and dilemmas that we are 
confronted with.
    In this time of economic severity, we have been put in a 
position of having to think smarter, be more efficient, look 
for efficiencies, et cetera. But we have also matured in our 
programs to the degree to which we now have efficiencies and 
platforms of care that we do not need to reproduce and scale up 
from the ground but add on to, look for additional 
opportunities based on those platforms to focus on new 
populations that are nearby, eliminate duplications, et cetera.
    We are confident that with a rigorous look at how and where 
we are putting our prevention programs in particular in front 
of the movement of the virus through the population that we 
will be able to effectively expand the impact of our prevention 
structures within the countries that we are already committed 
in and indeed look for opportunities--prevention opportunities 
in countries that we have less robust prevention strategies.
    In terms of the bilateral activity that you referred to 
with Canada, the maternal and child health issue is a huge 
issue. The MDGs, as you know, 3 and 4 focus on these. We have 
all been focused on this to try to respond to it.
    The leading cause of death for women in child-bearing ages 
continues to be HIV/AIDS. So we will actually be approaching 
and focusing on maternal and child health through a more 
rigorous attempt to identify, diagnose, treat, and enter 
individuals around their HIV/AIDS needs.
    We have seen drops in maternal mortality in Rwanda, in 
South Africa, and KwaZulu-Natal by those programs having an 
impact on maternal and child morbidity; and it is those types 
of synergies that we need to amplify and insist increase.
    In terms of your final issue around global responsibility, 
it is the key dialogue that we have engaged with in every 
multilateral discussion we are in. I am leaving this afternoon, 
as you alluded, to engage in activities in The Hague around 
replenishment for the Global Fund. The Global Fund continues to 
be a conduit through which countries with resources can move 
resources to countries without resources and continues to be 
complementary to our bilateral efforts and an essential 
ingredient in our ability to respond to what is, as you have 
both stated, an expanding unmet need. I think that our need to 
become more efficient, become less duplicative, look for 
opportunities to build on each other's programs affords a broad 
opportunity for us to again save resources during these 
economically severe times.
    Finally, I would say that the call for global 
responsibility that is a shared responsibility which you both 
articulated in your testimonies is really what we do need to 
start talking about everywhere. We cannot do this alone as one 
bilateral effort. We need to look for every opportunity to 
start combining our resources differently, responsibly, with 
total visibility but differently in the way we add each other's 
resources on top of the other to actually expand the number of 
people who receive care and treatment.
    So I would end with that.
    Mrs. Lowey. Thank you.
    Did you want to add to that?
    Ms. Steele. Yes. In terms of the global responsibility, it 
is a major issue outside of HIV/AIDS; and, as with Ambassador 
Goosby, I will be traveling tonight to go to The Hague in an 
event that is organized by GAVI to get donors together to show 
their responsibility towards immunization. I think this is a 
very important event, and we are taking that very seriously.
    Bilaterally, we have been working with Canada, with Japan 
in order to see what roles we can play, how we can divide up 
the responsibility so we do not duplicate the work, given our 
limited resources. I think the Global Health Initiative's 
emphasis on efficiency is very important in this regard.
    If in fact our donors will begin to reduce their 
contributions, we need to be able to maximize the impact of our 
resources; we need to reduce the duplication within our own 
programs; we need to integrate our programs that need to be 
integrated; and we need to begin working on developing 
sustainability, beginning with developing health systems so 
that in the end, in the long run, our partner countries will 
begin to be able to carry out some of the functions or most of 
the functions themselves.
    We are also working outside of the health sector with the 
economic growth sector. I think that it is important, in order 
for sustainability to occur, for the growth of the economy in 
our partner countries to happen. It is not realistic for them 
to continually depend on donor input in order to make their 
health systems function. They need to grow their economies so 
they can pay for their own services and their commodities in 
the long run.
    Thank you.
    Mrs. Lowey. Before I turn to Ms. Granger, I don't know if 
you want to comment, but that depends on the tax system in the 
country as well.
    Ms. Steele. That is correct. And in our economic growth 
sector we are providing assistance in taxation, simplifying the 
tax procedures of the countries so that we can generate more 
taxes.
    On the other end, we are working on issues of corruption to 
make sure that the taxes are used more effectively in the 
countries where we work.
    Thank you.
    Mrs. Lowey. Thank you.
    Ms. Granger.
    Ms. Granger. Thank you.
    I would like to discuss the Global Health Initiative's 
strategy to integrate health programs at the programming and 
procurement level.
    The current conscience clause, as you know, was expanded by 
the Lantos-Hyde Act so that faith-based organizations could opt 
out of any HIV/AIDS program or activity when it has a religious 
or a moral objection. I have several questions.
    First, how will the Global Health Initiative integrate 
family planning with HIV/AIDS programs so that the faith-based 
organizations aren't excluded, especially given that in some 
African countries they deliver 40 percent of health services?
    I also would like to know how the many pro-life 
restrictions on U.S. foreign assistance can be followed in an 
integrated global health program and exactly what activities 
will be jointly programmed. When, for example, the CDC just 
established its global health center to oversee its global 
health programs?
    Dr. Goosby. Will, I will start the answer to that. Those 
are two good questions.
    I think that we will, of course, follow the law and honor 
the beliefs of a NGO that is conflicted and moving forward and 
integrating or connecting to a family practice, family planning 
service model, referral on consultation, individuals who have 
parallel capability that are nearby, being sensitive to the 
fact that an organization may be conflicted around their 
ability to make a referral. But we are in ongoing dialogue with 
our faith-based partners to better understand how we can 
configure this so it is respectful and honors the letter of the 
law. So we are committed to that.
    In terms of the family planning integration piece and how 
this impacts savings, I want to just make you aware of a 
project that we are doing in Kenya, the AIDS Population and 
Health Integration Assistance Project, APHIA. This is an 
example of taking family planning, maternal and child health, 
tuberculosis, Malaria, on a PEPFAR platform of care and 
services. And instead of having five different service 
implementation efforts going concurrent, putting them together 
as one program allows us to have one overseer, one manager, one 
procurement distribution system, one pharmaceutical system that 
also interfaces with the procurement distribution system, one 
motor pool system, one monitoring and evaluation system.
    We, by doing that, are able to save enough resources to 
take what would have been one program focused on one province 
in Kenya and are now able with the same resources to give the 
same services to eight. That is a perfect example of how this 
really is a cost-savings exercise through the Global Health 
Initiative as well as PEPFAR; and as we move through the whole-
of-government idea of working better together, that is really 
kind of a graphic example of what we are talking about.
    Ms. Granger. Thank you.
    I have another question. In the fiscal year 2010 statement 
of managers accompanying the appropriations act, we included a 
reporting requirement on global health program effectiveness. 
That was included at my request. Could you give me an update on 
the status of that report?
    Dr. Goosby. We have been working on that report. It was 
mentioned and referred to in our 5-year plan.
    The prevention aspect of that, we have just finished our 
country operating plan review last Friday and are about to look 
specifically this Friday at how the prevention efforts within 
the same countries that we reviewed in the country operating 
plans have reinvigorated their prevention efforts to refocus on 
it. This will complete the data collection process that we have 
gone through. To answer you, within a couple of weeks you 
should be getting the record.
    Ms. Granger. Good. And you will come back to us on that?
    Dr. Goosby. I will.
    Ms. Granger. I am sorry. I am talking about the overall 
global report, and you are talking about the prevention report.
    Dr. Goosby. I am.
    Ms. Granger. This is the report that was asked for in 2010 
at my request, and that is the larger report we are talking 
about.
    Dr. Goosby. The larger report for the whole global health 
portfolio, we are working on. I was talking about the 
prevention report, and I will have to get back to you on the 
time frame for that, but we will report to you around those 
issues as well.
    Ms. Granger. But you have not ignored it? You are working 
on it, right?
    Dr. Goosby. Have absolutely not ignored it, yes.
    Mrs. Lowey. The GHI presents a good opportunity to 
strengthen the U.S. government's commitment to global health 
goals, and I am very pleased that the implementation strategy 
indicates that the initiative will have a strong women-centered 
focus. Can you explain exactly how the women-centered focus 
will impact programming through the initiative and what other 
U.S. goals related 20 women's health and specific commitments 
to improving maternal health?
    Ms. Steele. Thank you. That is a very good question.
    We believe that if we are able to address the health needs 
of the women, we will be able to address the health needs of 
the entire family. And we are incorporating a number of 
measures in the way that we design our programs so that there 
is a whole lot more sensitivity and awareness of what 
constrains a woman, what incentivizes a woman to go to a health 
center.
    The issue of integration is very important, as you said. By 
having separate health centers that the women has to go to, it 
serves as a disincentive. Because they are busy. They can not 
keep coming back into town in order to be able to meet their 
health needs. And so we are designing our programs to be very 
sensitive to the constraints that they are faced.
    We are pushing a very strong community-based approach to 
our health programs so that we can provide the services where 
the woman is and where her family is. We have set targets and 
goals under the Global Health Initiative. They are ambitious 
but attainable.
    From now until 2014, we hope to reduce maternal mortality 
by 360,000. We have not made global progress before, but we are 
going to do that now.
    In the area of family planning, we have set a target of 
preventing 54 million unintended pregnancies. We are helping 
women to reduce the number of births before age 18, and we have 
set a 20 percent target for that. We are also hoping to 
increase the number of women who will space their births more, 
3 years or more than they currently have been doing.
    And, of course, Malaria. We have a very aggressive Malaria 
program, and women and children are the major target clientele 
for us in Malaria.
    Mrs. Lowey. Thank you.
    The budget request documents indicate that 20 GHI plus 
countries will be chosen in the coming fiscal year. And some of 
the criteria lean towards supporting countries with the 
capacity and resources to immediately leverage new funding, 
while other criteria seem to point to less developed countries 
where the health needs are greatest. How will the 
administration balance the need to show results in countries 
with capacity versus supporting programs in countries with the 
highest needs and little capacity?
    Dr. Goosby. I would be happy to start with that.
    It is a critical dilemma that we are trying to work 
through. We want to pick countries that have high need but at 
the same time have the ability for us to put in place delivery 
systems that are responsive to those needs in a time frame that 
allows us to report back success, impact on the actual issues 
and concerns that we have targeted.
    We also want to learn from the initial countries how to do 
it in countries that are less prepared than the initial pick. 
That will be at the end of April that we come back with a 
discussion back to this committee to actually go over some of 
the specifics around the country choices.
    It is our hope that this becomes a wave that hits the beach 
and goes all the way up for all government USG activity in all 
the 80 countries that we are currently involved in and really 
becomes the new way that we approach development activities in 
the future.
    We are confident that we will be able, with a different 
relationship with country governments and engaging them from 
the beginning in discussion around how they can manage, how 
they can define unmet need, how they can oversee programmatic 
issues for implementation for these programmatic interventions 
that we are making for their populations and maintain that 
ownership, increase that ownership, and amplify that ownership.
    The last piece of it will be monetary transfer to country. 
That will only be when the country is capable of managing, when 
the country is capable of putting a transparent picture in 
place, and with our civil society colleagues in partnership, 
including NGOs and other members of civil society, that 
constellation of implementers will be defined in dialogue with 
country, with civil society, with our NGO community to complete 
and develop continuums of care and services that remain 
responsive to the needs of the population they are serving.
    Mrs. Lowey. Following up on that one, will the 
administration propose funding be provided directly--you 
touched on it--directly to governments with capacity for a 
budget mechanism rather than through bilateral agreements? As 
you know, this committee has strong concerns about the use of 
budget support. Do you have difficulty tracking and accounting 
for both impact and results?
    Dr. Goosby. Well, we are aware of this committee's 
concerns, and we share the concern. We will not move forward 
without a robust dialogue with this committee before any type 
of new relationship is initiated, but we do not foresee that 
occurring for years into this program. That type of 
relationship is something that countries will demonstrate their 
ability to, with full transparency, engage with. So we are not 
looking to that as being any part of the first wave of activity 
and would be in dialogue with this committee before we move 
forward.
    Mrs. Lowey. Did you want to say something?
    Ms. Steele. I wanted to address at the right time your 
question about achieving a balance with the GHI plus countries 
and the non-GHI plus countries.
    Mrs. Lowey. Well, following up on that, GHI will be 
coordinated through USAID, OGAG, and CDC. Indications are that 
funding will be provided through these three agencies and that 
programs will be coordinated at both the Washington level and 
the country level. Unfortunately, this model did not always 
work as well when it was used as the implementing mechanism for 
PEPFAR. So maybe you can share with us what lessons have been 
learned, what would be different about the GHI program, and how 
will funding be allocated to the three agencies? Are you 
undertaking a formal review of programmatic expertise within 
the agency to ensure the most efficient and effective 
implementation of this new initiative?
    Dr. Goosby. Yes, I will start the answer to that.
    That is exactly what we are doing. We have learned a lot 
from PEPFAR and from USAID and CDC programming to date in a 
variety of different programs.
    The PMI, as well as maternal and child health, family 
planning programs, and the PEPFAR information has given us a 
picture of a cross-agency coordination that has highlighted the 
need for us to be explicit about defining core competencies of 
each of the agencies we are working through. Once those core 
competencies are defined by the agency, they will go to an 
internal evaluation and have USAID, PEPFAR, and other HHS 
entities, as well as the Treasury, Department of Defense, and 
Peace Corps, included in thinking about how that cross 
coordination actually works through each of their respective 
agencies to transform them into program.
    We have learned that being clear and then enforcing the 
clarity around core competencies will be a necessary 
prerequisite to success. I believe we configured a governance 
process that will allow for an exchange, for the coordination, 
the vetting of ideas but real clarity in what we expect in 
moving forward.
    Mrs. Lowey. I want to say one thing. Because I remember our 
trip to Ghana very clearly, and we had asked the ambassador to 
bring everyone together, and it was a wonderful meeting. No one 
knew anyone else, and they were all operating in their own 
stovepipes of excellence, as I have learned to call it, and 
just telling us they were too busy to even know what the other 
one is doing.
    So good luck. This is the challenge.
    Before I turn to my colleague, did you want to comment?
    Ms. Steele. No, I totally agree. We have learned a lot of 
lessons, and the most important is reaching clarity of roles. 
We really have been working as an interagency both in the 
field--having heard the story about challenge and knowing from 
other experiences--and in Washington. We are doing right now, 
as an interagency, and we have been working together, pulling 
together plans as a U.S. Government team, country team, as 
opposed to separate agencies out in the field and here in 
Washington. Since the President announced the Global Health 
Initiative, we have been working together with the State 
Department, CDC, HHS, MCC, as a team, rather than separately.
    Mrs. Lowey. Thank you.
    Ms. Granger.
    Ms. Granger. I want to return to the GHI plus countries and 
the Strategic Reserve Fund and ask when we can expect the 
administration to decide which countries will be selected? And 
also why does the administration believe that no legislative 
authority is needed for new funds such as this?
    Dr. Goosby. The country selection is thinking around 
looking at what countries, looking at need, looking at 
geography, looking at the capability of each of the countries 
to engage quickly in this type of work, looking at our USG 
resources in country that can work to create the integrative 
activity at the program level are all factors that are going 
into deciding where we should start.
    Those GHI plus countries will be chosen. We will look at a 
list that we will take to this committee for further vetting to 
make the final decision, and that should be--by the end of 
April is when we should have all of that done.
    We are hopeful that this will be a blueprint for the 
broader 80 country USG footprint that is already out there, not 
to wait until we finish the 20 before we start the 80 but to 
concentrate our effort on 20 to make sure we maximize our 
ability to understand the issues around implementation and then 
bring it to the larger group.
    Ms. Granger. I know that you didn't address the need for 
legislative authority to establish the Strategic Reserve Fund.
    Dr. Goosby. You know, I would have to get back to you on 
the specifics of that.
    I don't know, Gloria, if you have a specific answer for 
that.
    Ms. Steele. No, I have no specific answer. We will get back 
to you.
    Dr. Goosby. I hear you, and we will absolutely get back to 
you on that.
    [The information follows:]

    Ms. Granger. I know that you didn't address the need for 
legislative authority to establish the Strategic Reserve Fund.
    Ms. Steele. No additional legislative authority is needed for the 
Global Health Initiative's (GHI) Strategic Reserve Fund. It will be 
funded from the overall GHCS request for FY 2011. These funds will be 
allocated to countries and in amounts to be determined after the budget 
is appropriated by Congress. The funds are requested within the five 
legislative health categories and will be used for their allowed 
purpose. The GHI Strategic Reserve Fund will be used to supplement and 
accelerate learning by USAID, and efforts to improve primary and 
specialty care health outcomes--with a focus on women, newborns, and 
children. It will provide resources for up to 10 GHI Plus countries 
above and beyond their current, growing baseline allocations. We will 
continue consultations with Congress on GHI Plus country selection and 
the allocation of the Strategic Reserve to those countries. The funds 
will continue to be tracked and reported on by each health category.

    Mrs. Lowey. Well, Ambassador Goosby and Ms. Steele, I want 
to thank you on behalf of Ms. Granger and myself for your time. 
I thought this was an excellent hearing.
    This concludes today's hearing on the President's fiscal 
year 2011 request for global health programs. The Subcommittee 
on State, Foreign Operations, and Related Programs stands 
adjourned. Thank you very much.
[GRAPHIC] [TIFF OMITTED] T6402P6B.096

[GRAPHIC] [TIFF OMITTED] T6402P6B.097

[GRAPHIC] [TIFF OMITTED] T6402P6B.098

[GRAPHIC] [TIFF OMITTED] T6402P6B.099

[GRAPHIC] [TIFF OMITTED] T6402P6B.100

[GRAPHIC] [TIFF OMITTED] T6402P6B.101

[GRAPHIC] [TIFF OMITTED] T6402P6B.102

[GRAPHIC] [TIFF OMITTED] T6402P6B.103

[GRAPHIC] [TIFF OMITTED] T6402P6B.104

[GRAPHIC] [TIFF OMITTED] T6402P6B.105

[GRAPHIC] [TIFF OMITTED] T6402P6B.106

[GRAPHIC] [TIFF OMITTED] T6402P6B.107

[GRAPHIC] [TIFF OMITTED] T6402P6B.108

[GRAPHIC] [TIFF OMITTED] T6402P6B.109

[GRAPHIC] [TIFF OMITTED] T6402P6B.110

[GRAPHIC] [TIFF OMITTED] T6402P6B.111

[GRAPHIC] [TIFF OMITTED] T6402P6B.112

[GRAPHIC] [TIFF OMITTED] T6402P6B.113

[GRAPHIC] [TIFF OMITTED] T6402P6B.114

[GRAPHIC] [TIFF OMITTED] T6402P6B.115

[GRAPHIC] [TIFF OMITTED] T6402P6B.116

[GRAPHIC] [TIFF OMITTED] T6402P6B.117

[GRAPHIC] [TIFF OMITTED] T6402P6B.118

[GRAPHIC] [TIFF OMITTED] T6402P6B.119

[GRAPHIC] [TIFF OMITTED] T6402P6B.120

[GRAPHIC] [TIFF OMITTED] T6402P6B.121

[GRAPHIC] [TIFF OMITTED] T6402P6B.122

[GRAPHIC] [TIFF OMITTED] T6402P6B.123

[GRAPHIC] [TIFF OMITTED] T6402P6B.124

[GRAPHIC] [TIFF OMITTED] T6402P6B.125

[GRAPHIC] [TIFF OMITTED] T6402P6B.126

[GRAPHIC] [TIFF OMITTED] T6402P6B.127

[GRAPHIC] [TIFF OMITTED] T6402P6B.128

[GRAPHIC] [TIFF OMITTED] T6402P6B.129

[GRAPHIC] [TIFF OMITTED] T6402P6B.130

[GRAPHIC] [TIFF OMITTED] T6402P6B.131

[GRAPHIC] [TIFF OMITTED] T6402P6B.132

[GRAPHIC] [TIFF OMITTED] T6402P6B.133

[GRAPHIC] [TIFF OMITTED] T6402P6B.134

[GRAPHIC] [TIFF OMITTED] T6402P6B.135

[GRAPHIC] [TIFF OMITTED] T6402P6B.136

[GRAPHIC] [TIFF OMITTED] T6402P6B.137

[GRAPHIC] [TIFF OMITTED] T6402P6B.138

[GRAPHIC] [TIFF OMITTED] T6402P6B.139

[GRAPHIC] [TIFF OMITTED] T6402P6B.140

[GRAPHIC] [TIFF OMITTED] T6402P6B.141

[GRAPHIC] [TIFF OMITTED] T6402P6B.142

[GRAPHIC] [TIFF OMITTED] T6402P6B.143

[GRAPHIC] [TIFF OMITTED] T6402P6B.144

[GRAPHIC] [TIFF OMITTED] T6402P6B.145

                                       Wednesday, April 14, 2010.  

                          SECURITY ASSISTANCE

                               WITNESSES

DAVID T. JOHNSON, ASSISTANT SECRETARY, BUREAU OF INTERNATIONAL 
    NARCOTICS AND LAW ENFORCEMENT AFFAIRS, DEPARTMENT OF STATE
ANDREW J. SHAPIRO, ASSISTANT SECRETARY, BUREAU OF POLITICAL-MILITARY 
    AFFAIRS, DEPARTMENT OF STATE
AMBASSADOR-AT-LARGE DANIEL BENJAMIN, COORDINATOR FOR COUNTERTERRORISM, 
    DEPARTMENT OF STATE

                 Opening Statement of Chairwoman Lowey

    Mrs. Lowey. Good afternoon. The Subcommittee on State, 
Foreign Operations, and Other Related Programs will come to 
order. I thank you, gentlemen, for appearing before us. I 
apologize for taking you away from your important 
responsibilities.
    It is a pleasure seeing you after I was present at your 
swearing in.
    Nice to see you all. I welcome our distinguished panel: 
Assistant Secretary of State for International Narcotics and 
Law Enforcement Affairs, David Johnson; Assistant Secretary of 
State for Political-Military Affairs, Andrew Shapiro; and the 
Coordinator for Counterterrorism, Ambassador Daniel Benjamin.
    Our hearing today examines the security assistance programs 
under the jurisdiction of the U.S. Department of State, which 
totals $9.9 billion, 25 percent of the foreign assistance 
request for fiscal year 2011.
    Security assistance has been appropriately and 
significantly increased in the past 4 years to protect our 
national security in this dangerous world. Not only do these 
programs support key allies in the Middle East like Israel, 
Egypt, and Jordan; they combat terrorism in Afghanistan and 
Pakistan. They also fight piracy off the coast of Somalia and 
protect us from drug cartels in Mexico and Colombia.
    Lack of resources and capacity in the State Department to 
address security needs in theatres like Iraq, Afghanistan, and 
elsewhere previously forced us to rely on the Defense 
Department. However, the provision of security assistance is 
integral to the conduct of our foreign policy, and aspects of 
our foreign affairs priorities, such as human rights, civilian 
control of the military, unified coordination of U.S. 
assistance, can be most effectively managed by the Secretary of 
State.
    I am pleased to see that as we increase capacity in 
civilian agencies the President's budget is taking steps to 
reestablish the lines of responsibility for security assistance 
at the Department of State. With increased resources, it is 
critical that the Department demonstrate capable implementation 
of the programs as well as appropriate oversight to ensure that 
programs achieve the desired objectives and that resources are 
not diverted or abused.
    Therefore, as we proceed with the hearing, I would like the 
panel to address the following:
    What are the appropriate roles and responsibilities of the 
State Department and other agencies, particularly DOD, 
regarding security assistance programs?
    What role should DOD play, if any, in assisting police and 
other nonmilitary security forces?
    What are we doing to address emerging threats from places 
like Yemen?
    How can counterterrorism assistance be leveraged to combat 
al Qaeda?
    In what situations might U.S. assistance for combating 
terrorism be perceived negatively by recipient countries' 
populations?
    Lastly, I would like the panel to discuss security 
cooperation with Mexico. Drug trafficking and other criminal 
enterprises have intimidated and overwhelmed government 
institutions in much of Mexico. News reports continue to 
highlight the violence related to drug cartels and organized 
crime which, tragically, has touched your Department with the 
murders of three people associated with the consulate in ciudad 
Juarez, and the bombing of the consulate office in Nuevo 
Laredo.
    Specifically, what effect is our assistance having on the 
flow of illegal drugs to the United States? What is the 
coordination between the U.S. and Mexico? How are the various 
U.S. agencies coordinating to ensure our security assistance is 
reinforcing our broader objectives for strengthening Mexican 
institutions? What more do we need to do? Is it more equipment? 
Do we need more equipment? How do we ensure that the roughly 
$1.4 billion in assistance this committee has provided to 
Mexico is having its intended effect? How are the various U.S. 
agencies coordinating assistance to ensure security programs 
for Mexico are enhancing and complementing efforts to 
strengthen Mexican Government institutions?
    Additionally, GAO released a report in December 2009, which 
found only 2 percent of the funding appropriated for Mexico had 
been expended. What is the current status of expenditures? How 
are such lag times allowed to exist; are they normal? Does the 
State Department find this acceptable? What is the State 
Department doing to accelerate delivery of equipment and 
training?
    I continue to believe that the State Department must 
exercise management of security assistance and development 
programs, be they training and equipping of foreign security 
officers, forces, programs to deny terrorist organizations and 
rogue states the ability to acquire weapons of mass destruction 
or providing food, water, and health services to those in need. 
These activities must fall within the context of our overall 
foreign policy, and as such, the primary authority should be 
with the Secretary of State.
    Again, thank you for testifying today. I look forward to 
our discussion. But before I turn to our witnesses, let me turn 
to Ms. Granger, the ranking member, for her opening statement.
    Ms. Granger.

                     Opening Remarks of Ms. Granger

    Ms. Granger. Thank you, Madam Chair, and thank you for 
accommodating my request for this hearing, especially at a very 
busy time. I know we are going to hear today about the 
priorities this administration has identified for the coming 
year and the assistance being requested, such as that for our 
long-term friend and ally, Israel, and for our partners in the 
Middle East, like Jordan and Egypt. They are so important, as 
is our help for Pakistan and improvements in the justice sector 
at all levels for the Afghan Government. But my focus today is 
our neighbor, Mexico, and the frightening increase in violence 
there.
    Just as the Congress was finishing here before leaving for 
our Easter break, Juarez, Mexico, a city just across the Texas-
Mexico border, was referred to in the press as the most 
dangerous city in the world. Juarez, Mexico. The mayor of that 
city spoke just days ago at the University of Texas. There was 
very tight security and there was an overflow crowd. The mayor 
talked about the violence in Juarez. Five thousand murders, 
dozens of businesses torched, death threats against him and the 
police and other elected officials.
    At our southern border, drug traffickers in places are 
turning their guns and grenades against the Mexican army. They 
are using armored cars and grenade launchers and trying to trap 
members of the military by blocking access on highways.
    Yesterday, it was reported that Mexican smugglers are using 
cloned Border Patrol vehicles. Steven Cribby, a spokesman for 
the Department of Homeland Security, said that assaults on 
Border Patrol agents are up 16 percent over last year, and 
there are reports of bounties of $250,000 offered for 
kidnapping and murdering border agents.
    Just last month, several U.S. citizens, including, of 
course, your employees, were gunned down, and last week a 
rancher was shot and killed on his ranch just this side of the 
Mexican border. That makes, according to a report today, 22,700 
people killed since President Calderon took office and took on 
the gangs and drug cartels.
    We are now at $1.33 billion of the $1.4 billion we pledged 
for the Merida Initiative, but the situation today is worse 
than when we started this important help. If we have additional 
help in the future, my concern centers around how it is turning 
out today, tomorrow, and next week, and the importance of us 
looking not at numbers and not at dollars as we sign something, 
but how is it getting the help that is needed right there.
    Secretary of Defense Gates, Secretary of State Clinton, and 
the Chairman of the Joint Chiefs of Staff Admiral Mike Mullen 
were all in Mexico, as you know, just weeks ago, looking at 
this emergency, and they certainly understood what we know and 
that the help we secured has been very slow in coming. Admiral 
Mullen in a defense hearing in March after returning from 
Mexico said, The house is on fire now. Having the fire trucks 
show up in 2012 is not going to be particularly helpful.
    You can play a very key role, and of course you would, in 
addressing the concerns we have. And I will use my question 
time to focus on some of the problems as I see them, but the 
situation on the border seems to be getting worse. I believe it 
is no less a crisis than it was. We have a pledge. We are 
meeting our pledge. But my concern is how is it playing out. I 
will ask the witnesses my questions when it comes back for 
questions.
    Thank you, Madam Chair.
    Mrs. Lowey. Thank you. Your statements will be placed in 
the record. Please feel free to summarize in your oral 
statements so that we can leave time to get to everyone's 
questions hopefully before the votes go off.
    The order of recognition will be Secretary Johnson, 
Secretary Shapiro, Ambassador Benjamin.
    Please proceed, Secretary Johnson.

            Opening Statement of Assistant Secretary Johnson

    Mr. Johnson. Thank you very much. Chairwoman Lowey, Ranking 
Member Granger, distinguished members of the committee, thank 
you for inviting us to discuss the President's fiscal year 2011 
budget request for the Department of State's Bureau of 
International Narcotics and Law Enforcement Affairs (INL).
    The INL Bureau, which I have the honor to lead, helps 
countries around the world develop their own capacity to fight 
crime, administer justice, and safeguard the rule of law, all 
of which are critical to our own national security and foreign 
policy objectives. Helping our partner nations become 
responsible international partners with full sovereignty within 
their own borders denies safe haven to international criminal 
threats.
    For fiscal year 2011, the President has requested 
approximately $2.1 billion in international narcotics control 
and law enforcement funds, or INCLE funds, to combat 
transnational crime and fight illicit trafficking. Of this 
request, 42 percent directly relates to counternarcotics. This 
marks a dramatic shift from 2 years ago when nearly 72 percent 
of fiscal year 2009 INCLE funds were counternarcotics focused. 
This shift reflects our refocused emphasis on helping partner 
nations establish their own capacity to administer justice and 
combat illicit actors.
    Each of our activities, be it civilian police training in 
Iraq or correction systems in Mexico, is designed 
collaboratively with host nations to address their specific 
needs. As a result, some of our largest programs are designed 
to meet our largest challenges. But this isn't always the case. 
Many of the relatively smaller security assistance programs 
that INL operates in underdeveloped or critical areas, ranging 
from Central America to West Africa, have a major impact in 
staving off future conflict and combating development threats.
    The President's budget request your support of INL's 
contribution in key areas such as Iraq, Afghanistan, Pakistan, 
Haiti, Mexico, and the West Bank, but it also requests your 
support for our smaller programs. Efforts to combat 
counternarcotics in West Africa will be instrumental in 
supporting stability in the region. Police training and support 
to the criminal justice systems in Lebanon and Liberia, as well 
as our support for Sudan, continue to meet urgent needs that 
support these countries' criminal justice sectors.
    Regional programs in the Caribbean, Central America, the 
Trans-Sahara, and East Asia, on drug treatment and prevention, 
intellectual property rights, anti-crime and anti-corruption, 
support for the United Nations Office on Drugs and Crime and 
the Organization of America States Inter-American Drug Abuse 
Control Commission and the continued support for the 
International Law Enforcement Academies, all of these programs 
are instrumental to our own security and our efforts to support 
the rule of law, aims that President Obama and Secretary 
Clinton and all of you strive for.
    Given the growing importance of the security sector reform 
to our Nation's foreign policy, we can and will more 
effectively adapt to battlefield environments so that our 
contract management and oversight can be fully carried out in 
the manner expected by taxpayers and by you.
    Madam Chairwoman, Ranking Member Granger, INL is committed 
to continuing our strong partnership with your subcommittee so 
we can provide the effective programmatic security assistance 
that our international partners need.
    I look forward to addressing your questions. Thank you.
    [The statement of Mr. Johnson follows:]
    [GRAPHIC] [TIFF OMITTED] T6402P6B.146
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.147
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.148
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.149
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.150
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.151
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.152
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.153
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.154
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.155
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.156
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.157
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.158
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.159
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.160
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.161
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.162
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.163
    
            Opening Statement of Assistant Secretary Shapiro

    Mr. Shapiro. Chairwoman Lowey, Ranking Member Granger, 
members of the subcommittee, thank you for holding this hearing 
today. I appreciate the opportunity to testify on how the State 
Department's security assistance programs contribute to our 
collective efforts to improve national and international 
security.
    Since being established a half century ago, the Bureau of 
Political-Military Affairs has developed a strong partnership 
with the Department of Defense in addressing the serious 
international challenges that the United States faces today. 
One of the Bureau's most important responsibilities is managing 
security assistance funds, which collectively total more than 
$7.2 billion requested for fiscal year 2011. These funds are 
important tools to the United States in today's security 
environment, and we work to ensure that they support our 
foreign policy objectives. Given the difficult economic times 
that many American families face, we are acutely aware of the 
need to make every dollar entrusted to us by the taxpayers 
deliver the maximum benefit to our national security.
    PM manages security assistance through five accounts: 
Foreign Military Financing, or FMF; Peacekeeping Operations, 
PKO; International Military Education and Training, or IMET; 
Nonproliferation, Antiterrorism, Demining and Related Programs, 
NADR, and the Pakistan Counterinsurgency Capability Fund 
(PCCF).
    The fiscal year 2011 request for the Foreign Military 
Financing Account is $5.47 billion. The programs further U.S. 
interests around the world by ensuring that coalition partners 
and friendly governments are equipped and trained to work 
towards common security goals and to share burdens and joint 
missions. The request supports funding for coalition partners 
and allies and assists in our efforts to promote U.S. national 
security, fight extremists, and advance Middle East peace.
    The fiscal year 2011 request for the Peacekeeping 
Operations Account is $285 million. PKO programs support 
ongoing regional peacekeeping missions and are increasing 
countries' capacities to participate in peacekeeping 
operations. PKO funds also support defense reform in critical 
African countries and increased counterterrorism capabilities.
    The fiscal year 2011 request for the International Military 
and Education and Training Account is $110 million. IMET 
provides military personnel from allied and friendly nations 
with valuable training and education on U.S. military practices 
and standards, including exposure to democratic values, 
civilian control of the military, and respect for human rights.
    The fiscal year 2011 request for the NADR account is $145 
million. Our NADR funds support the removal of land mines and 
unexploded ordnance, as well as the destruction of excess 
weapons and unstable ammunition. This helps protect local 
populations and removes a source of deadly supplies that 
extremists could use against U.S. forces and our partners. This 
year's request also reflects the consolidation of three former 
NADR sub accounts into two, which would provide greater 
demining and small arms-light weapons projects within the same 
country program.
    The fiscal year 2011 request for the Pakistan 
Counterinsurgency Capability Fund is $1.2 billion. Fiscal year 
2011 will be the first year the Department of State assumes 
full management of PCCF. Funds will continue to be targeted at 
building the capability of Pakistan security forces directly 
engaged in counterinsurgency efforts in contested areas 
throughout the North-West Frontier Province and the Federally 
Administered Tribal Areas.
    A more capable Pakistani military will diminish extremist 
access to safe havens from which attacks on Pakistan and on 
U.S. and international forces operating in Afghanistan are 
planned and executed. Additionally, a better trained and 
equipped Pakistani security force will facilitate efforts to 
execute our $7.5 billion 5-year U.S. civilian assistance 
strategy, which includes efforts to include basic services in 
areas vulnerable to extremists.
    A major difference in the management of PCCF in fiscal year 
2011 will be the increased State Department oversight and 
involvement throughout the execution process, which will ensure 
that this major assistance program aligns with our broader 
foreign policy objectives and complements our other foreign 
assistance programs in Pakistan and the broader region. We are 
actively working to ensure that the transition of PCCF 
management from the Defense Department to the State Department 
is a smooth one.
    Managing and implementing these five security assistance 
programs form a substantial part of the essential partnership 
between the Departments of State and Defense. In the dynamic 
security environment we face today funding of the security 
assistance programs provides our government with the flexible 
tools needed to advance U.S. National security interests.
    Thank you for the opportunity to testify before you this 
afternoon. I am committed to working with this subcommittee to 
ensure that these important programs are adequately funded and 
effectively executed. I look forward to taking your questions.
    [The statement of Mr. Shapiro follows:]
    [GRAPHIC] [TIFF OMITTED] T6402P6B.164
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.165
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.166
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.167
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.168
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.169
    
    Mrs. Lowey. Mr. Ambassador.

                Opening Statement of Ambassador Benjamin

    Ambassador Benjamin. Members of the subcommittee, thank you 
very much for the opportunity to appear before you today. I 
particularly appreciate the opportunity to testify together 
with my colleagues from the Bureaus of Political-Military 
Affairs and International Narcotics and Law Enforcement on 
President Obama's 2011 budget request.
    The President has requested $294 million for fiscal year 
2011 in nonproliferation, antiterrorism, demining, and related 
program funds for the Department's Office of the Coordinator 
for Counterterrorism. This budget reflects our three 
priorities: countering violent extremism, CT capacity building, 
and multilateral engagement. Underlying all of these, and not 
always measurable in dollars, is a renewed and vigorous effort 
to ensure that diplomacy plays a central role in our 
counterterrorism efforts.
    To successfully develop and implement CT programs, we must 
understand the dynamics of the local conditions that give rise 
to extremism. Every community, whether long-rooted or part of a 
new diaspora, possesses a unique political, economic, and 
social landscape. For this reason, one-size-fits-all CT 
programs are likely to have limited appeal and utility. 
Instead, our efforts must be tailored to fit the local context. 
Thus, it is critically important that our embassies, which are 
on the front lines of our counterterrorism efforts, play a key 
role in designing CT programs. They can best identify credible 
local partners and carry messages of moderation and 
successfully implement CT programs.
    Let me now discuss each of our key programs. First, 
countering violent extremism. Curtailing the influence of 
militants is critical to enhancing our Nation's security. The 
primary goal is to stop those most at risk of radicalization 
from becoming terrorists. Its tools are noncoercive and include 
social programs, counter-ideology initiatives, and working with 
civil society to delegitimize the al Qaeda narrative and, where 
possible, provide alternative narratives. This involves 
capacity building, outreach to civil society organizations, 
supporting mainstream voices, and educational development as 
much as it does direct messaging. It involves working through 
host governments and NGOs to engage with clerics and other 
credible influential voices.
    We intend to use CVE funding to focus on hotspots of 
radicalization and recruitment. We will work with embassies to 
develop locally tailored programs to counter the factors 
driving at-risk populations towards violence. In many cases, S/
CT will be implementing these programs and coordinating them 
through existing offices, including the Under Secretary of 
State for Public Diplomacy and Public Affairs, the State 
Department's Special Representative to Muslim Communities, and 
USAID, to avoid duplication and to ensure that we focus on the 
right areas.
    One CVE program already in its third year is the 
Ambassador's Fund for Counterterrorism, which allows posts to 
identify local partners and submit proposals to secure funding 
of up to $100,000 to counter extremism. The Ambassadors' Fund 
was previously funded under NADR/ATA, but has moved to NADR/CVE 
in 2011.
    Our fiscal year 2011 appropriations request has revised 
NADR language that broadens the definition of antiterrorism to 
include countering radicalization and violent extremism. This 
will ensure that we have the right authorities in place to 
successfully execute our CVE mission.
    TIP/PISCES. The Terrorist Interdiction Program seeks to 
constrain terrorist mobility by helping countries enhance their 
port of entry security capabilities. TIP provides participating 
countries with a computerized stop list system, known as 
PISCES, and provides PISCES hardware and software at selected 
ports of entries in consultation with host governments.
    In fiscal year 2011 we will use $33.65 million to provide 
significant biometric software and hardware enhancements that 
will assist 17 partner nations to better identify and track 
individuals entering and departing their land, sea, and air 
ports of entry. Fiscal year 2011 biometric upgrades are planned 
for Cambodia, Djibouti, Ethiopia, Ivory Coast, Kosovo, 
Macedonia, Thailand, Uganda, and Zambia.
    Antiterrorism Assistance. ATA continues to be our flagship 
counterterrorism capacity building program, and our partner 
nations have registered several concrete successes over the 
last year. S/CT and INL have increased cooperation on law 
enforcement with joint assessments in high priority countries 
such as the Philippines. Under our fiscal year 2011 request, 
India's ATA bilateral budget would almost double to $4.5 
million to meet the increasing political will on the part of 
the Indian Government, which has requested more and higher 
level training in the aftermath of the Mumbai attack.
    Counterterrorism Finance Program. The CTF programs are 
aimed at reinforcing partner countries' financial, regulatory, 
judicial and law enforcement institutions to detect, disrupt, 
and dismantle terrorist finance networks. With additional 
funding, we will expand our efforts not only focusing on key 
countries such as Afghanistan, Pakistan, and Iraq, but sources 
further afield that fund terrorists in these countries. We are 
also looking to increase in such important threat areas as 
Yemen and North Africa.
    Counterterrorism Engagement. Increased funding will help 
the United States support the efforts of multilateral 
organizations to support more effective policies and programs. 
We place great importance on engaging with the international 
community to combat terrorism, especially through the U.N. and 
regional organizations such as the OSCE, the OAS, and APEC. We 
plan to support U.N. Bodies, including the Counterterrorism 
Committee Executive Directorate, the U.N. Office of Drugs and 
Crime, and the wider Counterterrorism Implementation Task 
Force. We will use $5 million in CTE funds to increase support 
for the Regional Strategic Initiative.
    The Regional Strategic Initiative. Denying terrorists safe 
haven is a key element of U.S. counterterrorism strategy. 
Through the RSI we work with ambassadors and interagency 
representatives in key terrorist theaters of operation to 
assess the threat and devise collaborative strategies, using 
all the tools of statecraft to help host nations understand the 
threat and strengthen their political will and capacity to 
counter it. The RSI promotes cooperation between our 
counterterrorism partners; for example, between Malaysia, 
Indonesia, and the Philippines, as they confront terrorism 
transit across the Sulawesi Sea, or among Mauritania, Algeria, 
Morocco, Chad, and Mali to counter al Qaeda in the Islamic 
Maghreb.
    Let me just say in closing that we take our responsibility 
for managing the more than $294 million in security assistance 
funds requested for fiscal year 2011 very seriously. In the 
dynamic environment we face today, funding these programs 
provides our government with the necessary and flexible tools 
to advance U.S. national security interests around the globe.
    I want to thank you for the time and the opportunity to 
appear before you today to discuss these programs, and I look 
forward to your questions.
    [The statement of Ambassador Benjamin follows:]
    [GRAPHIC] [TIFF OMITTED] T6402P6B.170
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.171
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.172
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.173
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.174
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.175
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.176
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.177
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.178
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.179
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.180
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.181
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.182
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.183
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.184
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.185
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.186
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.187
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.188
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.189
    
    Mrs. Lowey. Thank you very much. I know we are expecting 
votes shortly. I understand Ms. McCollum may not be able to 
come back after votes. So why don't you begin.
    Ms. McCollum. Thank you, Madam Chair. I have two questions 
that do kind of the same theme--have some of the same things, 
so I will ask them together, and then I have a third one. Given 
the increasing violence that is in the news about the drug 
trafficking on the southern U.S. border in Mexico and Central 
America, I am curious as to why the fiscal year 2011 funding 
request for International Narcotics and Law Enforcement Account 
shows a decrease of $16.4 million for the Western Hemisphere.
    Along with this, Assistant Secretary Johnson, in your 
testimony you explain that drug traffickers adapt to our 
efforts to halt drug activities; for example, by shifting their 
operations to territorial waters and countries off of Central 
America when pressure on criminal operations in Mexico really 
started to feel the heat.
    So my question is whether the funding that this 
subcommittee provides you is flexible enough to cross accounts 
and agencies to enable that our government is adapting quickly 
when the criminals change their operations. So if you could 
answer that. And then if there is time remaining, I have a 
brief question on Sharia law.
    Mr. Johnson. Thank you very much for your questions. With 
respect to the funding levels and the changes, there are two 
broad reasons for that. First, in the case of the Andes, and in 
particular in Colombia, we have been engaged with the 
Colombians over the course of the last 2 to 3 years, 
negotiating with them what we refer to as a nationalization 
program, where they are taking over more and more of the 
responsibility for particularly the maintenance and operation 
of aircraft associated with the Colombian army. So the numeral 
goes down somewhat because of that this year, as it did the 
year before and the year before that.
    The other larger and observable piece of this is that the 
numeral for Mexico has declined a little bit this year as well. 
The reason for that is that we have largely concluded the 
request for funding that we need to assist the Mexicans to buy 
equipment and aircraft, which are by their nature quite 
expensive. And we are moving much more into the institution 
building side of things--training their police, training their 
judiciary, training their prosecutors, providing them with 
additional techniques. While there continues to be some 
equipment purchases associated with this budget, the proportion 
of that is declining over time and there is more focus on 
institution building. Therefore, the numeral goes down somewhat 
during the course of this year.
    The commitment, the activity, the engagement of both the 
individuals of the Department of State as well as the broader 
interagency though will continue to increase during this course 
of time, and you will see more people on the ground working 
with their Mexican and Central American counterparts during 
this period.
    Ms. McCollum. And the flexibility is there?
    Mr. Johnson. I think working with the committee and the 
committee staff we do have the flexibilities that we need to 
move things back and forth. Should we run into an obstacle, I 
am not very shy, and we will bring it to your attention and ask 
for some sort of relief and see if we can work out some way to 
move moneys if we need to. But as we have seen needs and as 
they have developed during the course of the implementation of 
this, we have made some changes in cooperation with the 
committee and committee staff.
    Ms. McCollum. Thank you. Madam Chair, I have a concern 
because I don't feel I have enough information. I have been to 
Afghanistan and I met with some of the judicial people that 
were working there. And scaling up, they don't have attorneys. 
It is a big country with a lot of challenges. So I know that 
there has been thoughtful conversations about Sharia law being 
used. But I want to make sure that they are thoughtful, that 
girls aren't being forced into marriage, being sold, that women 
who have been raped aren't imprisoned and that there is 
accountability and transparency if we are using that and that 
there is some training that goes forward, because other than 
that we have money supporting a judicial system that I think 
most men and women in this country and in the free world would 
find very questionable. If you could tell me what is going on.

                              AFGHANISTAN

    Mr. Johnson. We have a significant program to help develop 
the justice system in Afghanistan. I am presuming that is what 
you are referring to. And working with the Afghans there, we 
wish to expand that with this budget. It has been not totally 
but significantly a cobble-centric trick effort over the course 
of the last several years, helping the central government 
develop its institutions, training prosecutors, defense bar, 
judges for that. It is based on a system of law which includes 
Sharia but is not exclusively so. And it is really I think some 
of the popular ideas that you were talking about that are not 
encompassed in the system of law that we are supporting.
    One of the other issues that we are trying to come to grips 
with and we have brought into play the expertise at the U.S. 
Institute for Peace that is working with us is how do you 
combine what they describe as traditional systems of justice 
with the formal system. By that, they don't mean what we 
normally mean I think pejoratively by Sharia, but actually what 
they mean there is how communities get together and resolve 
disputes related to activities within that community. Shuras. 
How people work together and how you merge these systems so 
that they actually work smoothly and that they do not do 
exactly as you say, they do not become some sort of mechanism 
for violating human rights.
    Ms. McCollum. Madam Chair, thank you for the courtesy, and 
I am a supporter of traditional justice. I work with many 
native communities here that have circles in that. But I think 
we need to make sure that there are the oversight mechanisms in 
place on this issue.
    Thank you, Madam Chair, for your courtesy.
    Mrs. Lowey. Thank you. Ms. Granger.

                           MERIDA INITIATIVE

    Ms. Granger. Thank you. In December of 2009, GAO issued a 
preliminary report stating that of the $1.3 billion in Merida 
funds appropriated by this subcommittee only $830 million had 
been obligated and only $26 million of the funds have been 
spent. In response to that report, the State Department's 
response indicated that the use of expenditures was not a good 
metric to determine success of the Merida Initiative. My 
question is: If that is true, then what is the most accurate 
metrics and what metrics is the State Department using and how 
are you measuring up to those metrics?
    Mr. Johnson. Thank you. I think usually the most accurate 
way to measure whether or not we are performing well or whether 
we are moving money out the door, if you will, is through what 
funds have been obligated. That is not necessarily an ironclad 
way to do it, because it can both over report and under report. 
But it is much more accurate than ``expended.'' For example, 
the helicopters that we are providing to the Mexican police 
have been manufactured. Sikorsky has finished their work. They 
have delivered them to the army command. They are now 
undergoing the modifications that the Mexicans have 
specifically requested for them. I haven't paid a penny for 
those yet. So there is no expended funds for those even though 
Sikorsky has already completed its work.
    Under the metric that obligated, we have obligated almost 
all of the supplementary appropriations for fiscal year 2008 
and about half for the supplementary appropriation for fiscal 
year 2009. The base amounts are being invested more slowly 
because of the nature of some of the programs that they are 
investing in, more in human resources than anything else. But 
we are struggling with ways to try to push that along more 
quickly as well. We want this to happen as fast as it possibly 
can. We have no interest in being bureaucratic, if you will, 
about this. But some of the issues that we have to deal with; 
for example, we have delivered a fair amount of nonintrusive 
inspection equipment, but now I am struggling with how to deal 
with a contract protest concerning that. I have to work, of 
course, within the law and give contractors in the United 
States and people who work here adequate opportunity to 
compete.
    So we are working through some of those things but it is 
our desire, it is our aim to move this as quickly as we 
possibly can.
    Ms. Granger. I am glad you mentioned the helicopters 
because Chairman Lowey and I were in Mexico meeting with 
President Calderon in February 2009, and at that time there 
were five helicopters that we had appropriated funding for and 
they hadn't been delivered. As we were there at that meeting 
with this wonderful BlackBerry I can say, Where are those 
helicopters and why aren't they on the ground. There was a huge 
push by some very senior people to get those helicopters that 
were ready; that they confirmed yes, they are on the runway, 
but they are sitting there because some paper hasn't been 
signed.
    My report and continuing this has not been good. And there 
is a huge bureaucracy. And the bureaucracy involves the 
Department of State and DoD in getting that equipment and what 
is needed there, as I said, while the house is on fire. And it 
is on fire. Beheadings are occurring.
    So I hear what you are saying. That is certainly not the 
information that my office has or I have on this way to get 
this on the ground. I would very much appreciate your 
participation in a meeting with DoD and for us to go through 
this and see what is happening all at the table at the same 
time because this situation escalates. The news coming out 
daily is astounding. What we want is our neighbor to be safe 
and secure because it makes us safe and secure, helps us be 
safe and secure, but I would very much appreciate, if I called 
a meeting like that, for you to participate.
    Mr. Johnson. Absolutely. Juarez holds a special place for 
me. I started my diplomatic career there. We want to help in 
every way we can, and we are concentrating our work there right 
now. We are pushing this every way we know how.
    Ms. Granger. Good. Thank you very much.
    Mrs. Lowey. Thank you. Ambassador Benjamin, you had stated 
I believe in your testimony that on any given day al Qaeda 
remains the foremost security threat the Nation faces. And our 
primary counterterrorism goal remains to disrupt, dismantle, 
and defeat al Qaeda and its extremist allies. In what ways does 
the fiscal year 2011 request reflect the intelligence 
community's January 2010 assessment that al Qaeda-affiliated 
threats have grown and dispersed to multiple regions of the 
world, and how are the counterterrorism programs at DoD and 
State Department different? I am not sure if I can 
appropriately ask you, but you can speak to this room. And how 
do you interface with our current intelligence and is it 
providing you relevant information? If you can't answer the 
last question, we will just leave it.
    Ambassador Benjamin. Let me take a run at all of those 
questions. I certainly stand by my remark from late December, 
and I think I have repeated it on any number of occasions. I 
hope that as we have put together this budget request that it 
reflects the dynamic nature of the threat and will give us the 
flexibility to direct our programs to deal with the threat 
circumstances we face all around the world.
    We have, for example, in the Regional Strategic Initiative 
an effort to bring together really all the people who have the 
very best information on the ground from our posts as well as 
the Intelligence Community, the military, and other agencies. 
We have a mechanism for crafting strategies in a very real-time 
manner to deal with threats in particular areas. I believe I 
have attended five of these so far just since being sworn in 
last year.
    We also have in the form of our global accounts for 
Counterterrorism Finance, Counterterrorism Engagement, 
Countering Violent Extremism, and TIP/PISCES, an ability to 
direct the resources where they are most needed as the threat 
evolves.
    I think that it is true that the threat is different that 
we face than it was say 5 years ago, and we have seen, for 
example, in the emergence of Yemen as a place, which you 
mentioned before, as a place in which there is an AQ affiliate 
that is prepared to mount logistically sophisticated attempts 
to attack the homeland. That represents a significant departure 
from the threat we faced just a few years ago, and in the 
overall significant rise in funding across many different 
accounts for Yemen, we are dealing with that particular threat.
    You asked about how we deal with DOD. We have a very close 
relationship with the Department. Under our chairmanship at the 
State Department we have essentially a capacity building 
coordination mechanism to ensure that we aren't duplicating; 
that we have the same sense of the threat; that we are 
allocating resources as needed to exactly the right kinds of 
functions in differing countries and in differing regions.
    I would add that it is very important that we expand our 
activities, as this budget does, to countering violent 
extremism, because I believe the President came in with the 
belief that we needed to take a more strategic approach to 
counterterrorism and not deal only with those terrorists who 
are already in the field but to try to stem the tide of 
recruits, because this is critically important for our ability 
to roll back the threat over time. That is why we have directed 
$15 million, we have asked for $15 million for countering 
violent extremism so that we can make interventions in those 
environments around the world in ways that will turn those who 
are headed for violence away, those who are most at risk of 
joining the terrorist camp. I think this is vitally important.
    As for the question of intelligence, we have a daily drip 
of intelligence. We are completely plugged into everything that 
is going on in the Intelligence Community. I have an NCTC and a 
CIA detailee in my office. And we are through the interagency 
process intimately bound up with everything that is going on in 
the intelligence world both in terms of analytic and 
operations. So I don't see any deficiencies in that regard.
    Mrs. Lowey. Maybe we will leave this for another day, but 
your responsibilities are so enormous. And I think in 
Afghanistan, Pakistan, and what is happening in all the 
villages and all the provinces, I would like to certainly 
pursue this on another day.
    But I will turn to Mr. Crenshaw.
    Ambassador Benjamin. I would be delighted to.

                               TIP/PISCES

    Mr. Crenshaw. Ambassador, you talked about terrorism and 
counterterrorism that was a Terrorist Interdiction Program, 
TIP. As I understand, that helps countries that terrorist 
activity is going on, it helps in terms of border security. But 
is it correct that the administration proposes an $11 million 
cut in that program? If it is, seems like in today's world, 
with terrorism on the increase, is that the right direction to 
be moving in?
    Ambassador Benjamin. Sir, our budget reflects, first of 
all, a fairly austere environment that we are in. The budget 
that we came up with for TIP/PISCES is robust enough to fund 
the upgrades that we think are essential in the areas of 
biometrics. That is really the key initiative that we are 
undertaking right now. We will be doing biometric upgrades in 
many key countries--Afghanistan, Yemen, Pakistan, among 
others--this year and are planning for a wide range of others 
in fiscal year 2011.
    Frankly, we think that we are where we need to be right now 
in terms of the number of countries that we are in. TIP is not 
a program for a lot of very well developed countries in which 
we have lots of other ways of screening and of dealing with 
travel information. So I think that having reviewed all this, 
we think that this is really in the right place right now. We 
think it is a good program and we think this is an appropriate 
amount of funding for this coming year.
    Mr. Crenshaw. I am not clear. Is it actually a cut of $11 
million?
    Ambassador Benjamin. I believe it is a cut of a little--
about $11 million, yes, that is correct.
    Mr. Crenshaw. It just seems I hope you can do more with 
less because that is what we are all trying to do, but it seems 
to me this is something that is on the front burner in terms of 
that we have got to make sure we are helping. So I appreciate 
that.
    Ambassador Benjamin. I should emphasize it is important to 
consider TIP within the broader range of all the different 
terrorist travel programs that are going on in USG, some of 
which are classified, some of which are not. And we think 
within that framework this is the appropriate level.
    Mr. Crenshaw. On that point, you mentioned the Ambassador 
program, the counterterrorism; a lot of smaller grants. Can you 
give us an idea of how that money might be used? Maybe a 
specific example. Sometimes it seems like if you take a little 
bit of money and do a little project, how is that going to 
impact the big picture in terms of counterterrorism? If you can 
give us a real world example.
    Ambassador Benjamin. In fact, if you look at the world of 
terrorism, a lot of it is a lot of little pictures stitched 
together. We do have important programs that deal with regional 
strategies and that deal with terrorist travel and the like, 
but we also feel a strong need to be attacking those sort of 
micro environments, if you will, that are producing the 
terrorists that we face today. And so we are looking for--we 
are trying to do something that I don't think has been done 
very much in the past, and that is target programs at this very 
narrow spectrum of opinion where people are on the verge of 
being radicalized. We believe that through careful assessment 
of what the radicalizing drivers are in those particular areas, 
that we can decide whether a particular neighborhood in a 
particular country needs some kind of economic initiative, 
whether it needs something for at-risk youth, whether we want 
to push for some kind of school to be a rival to, shall we say, 
a radical institution that is the centerpiece of radical 
activity in that area. There are a lot of different things. 
There is some very interesting work going on in the 
Intelligence Community in terms of analysis of these hotspots, 
and we think that this is one way to go upstream and to stop 
people from becoming terrorists before we have to deal with 
them when they are already armed and dangerous.
    Mr. Crenshaw. How do you evaluate that to see if it is 
working? Is that something you can talk about?
    Ambassador Benjamin. Well, that, obviously, is going to be 
one of the big challenges coming up with the metrics that are 
going to assure us that we are going to be getting this right. 
And that is part of what we are dealing with now. We are 
dealing with assessments of different particular cities, areas, 
that have shown a tendency to produce terrorists. I think that 
part of the proof will be in the pudding, whether we see fewer 
radicals coming out of their areas, whether we have a sense 
that the temperature is being lowered. But we definitely are on 
the hook to produce those metrics, there is no question.
    Mr. Crenshaw. Thank you. Thank you, Madam Chairwoman.

                                  PCCF

    Mrs. Lowey. Thank you. Secretary Shapiro, in your statement 
you say that the PCCF continues to build the capability of 
Pakistan security forces who are directly engaged in combat 
operations against extremists. In light of the substantial 
funding already provided, and the $1.2 billion request in 2011, 
I would like to know, is it working? Is the intelligence 
adequate to do your job effectively? Are we able to rely on the 
Pakistan security forces? Are they actually confronting 
extremists? What metrics are you using to measure success? How 
effective has the U.S. counterinsurgency assistance to Pakistan 
been delivered and employed since 2001?
    Mr. Shapiro. Thank you for that question. Thank you for 
your advocacy in having PCCF management moved to the State 
Department and the confidence that you are showing in the State 
Department and Bureau of Political-Military Affairs in managing 
that program.
    In terms of the success of security assistance in Pakistan, 
particularly PCCF, over the last year, in our view the 
Pakistani security forces have increased their operations tempo 
and have made great stride against insurgents, including the 
capture of senior members of the al Qaeda network. They have 
strengthened their cooperation with ISAF and they have improved 
their intelligence sharing and assisting in operations in 
border areas and clearing the necessary space to allow for 
civilian assistance to commence.
    In our view, the way we evaluate the success of the PCCF is 
measured by the positive results on the ground. We have seen 
major activity operations in Swat and Waziristan, and that has 
been a positive development which we seek to continue to 
encourage.

                                  IRAN

    Mrs. Lowey. Let me go to another part of the world, because 
I am afraid the votes are going to ring any minute.
    I led a congressional delegation to the Gulf States in 
February, and it was clear from the meetings I had that our 
allies in the region are very concerned with Iran. There has 
been a whole realignment and they are all very worried and 
willing to work with us. It is clear that the leadership in 
Iran is dominated by a select few hardliners whose pursuit of 
nuclear weapons and assistance to arms groups in Iraq and 
Afghanistan, as well as support for terrorism through proxies 
like Hamas and Hezbollah, continue to make Iran a threat to 
U.S. national security and the security of our allies in the 
region. Iran continues to send shipments of weapons to its 
terrorist allies. What can the United States do? What steps can 
we take now to put a stranglehold on Iran's ability to smuggle 
these weapons?
    Mr. Shapiro. Well, obviously, we are very concerned about 
the Iranian regime's activities, and I as the Assistant 
Secretary of PM travel a few times a year to the Gulf and 
conduct Gulf security dialogue with our friends in the region, 
and I have heard some of the same concerns that you have heard. 
And we are working on a counter-smuggling initiative with our 
friends in the region. At the end of the day, we need to 
continue to put pressure on the Iranian regime so that they 
realize that they do not benefit from this type of behavior and 
that they indeed will pay a price for this type of behavior.
    Ambassador Benjamin. Madam Chairwoman, if I can just add to 
what Assistant Secretary Shapiro said.
    Mrs. Lowey. Yes.
    Ambassador Benjamin. Our effort to put sanctions on the 
Revolutionary Guard Qods Force is, I think, a very robust 
effort to go at the Iranian group that is most involved in the 
sponsorship of terror. Iran, of course, does remain the leading 
state sponsor of terror. And with this effort I think we are 
making it increasingly taboo for others to deal with the Qods 
Force and with the IRGC more broadly, and this will have a 
long-term effect on their ability to operate.
    Mrs. Lowey. Well, related to that, I am very concerned with 
Hezbollah's influence in Lebanon. I am troubled by the recent 
news reports that Syria has transferred SCUD missiles to 
Hezbollah, which would appear to be a blatant violation of the 
U.N. Security Council's resolutions.
    Who would like to address that? Can you give us an 
assessment of the number and types of missiles Hezbollah now 
has in Lebanon? How would you assess UNIFIL's performance since 
the last Lebanon war? And what is the government doing to stop 
Syria's illegal weapons trafficking?
    Mr. Shapiro. I will take the first shot and Ambassador 
Benjamin can backstop me. On the assessment, I think we would 
have to defer to the Intelligence Community for an assessment 
of the number and type of missiles as well as their capability 
to strike Israel.
    Mrs. Lowey. Assuming they have that assessment.
    Mr. Shapiro. Assuming they have that assessment. In terms 
of UNIFIL's performance, achieving full implementation of U.N. 
Security Council Resolution 1701, including its call for 
Lebanon to establish a weapons free zone in the south, secure 
its borders, and assure all weapons remain under the control of 
the Lebanese UNIFIL, remains a top priority of the United 
States. President Suleiman has consistently reiterated his 
commitment to Resolution 1701, and we are urging the Lebanese 
to take more assertive steps to combat weapons and to enforce 
the weapons free zone in the south in the process of militia 
disarmament.
    In our view, we are continuing to work with the Lebanese 
Government and UNIFIL to stop the weapons smuggling. Obviously, 
we are greatly concerned about the transfer of weapons to 
Lebanon, and we continue to monitor it very closely. As I just 
discussed, we are working with the Lebanese Government to try 
and limit it and reduce the flow of weapons into Lebanon.
    Ambassador Benjamin. I would just add to that that I 
traveled with Under Secretary Burns to Beirut and Damascus 
earlier this year and I can tell you that the messages on these 
issues in both capitols were absolutely crystal clear. And we 
have made the Syrians know our deep concern about any potential 
introduction of longer range missiles into Lebanon. And it is a 
subject that we are watching closely and are deeply concerned 
about.
    Mrs. Lowey. Before I just turn to my ranking member, 
following up on that, this Congress has been very concerned and 
has made sure that Israel's qualitative military edge has been 
maintained. It is a longstanding policy, as we know. As the 
U.S. seeks to sell even more advanced equipment in Arab states, 
what steps are being taken to ensure that these sales will not 
ultimately undermine Israel's qualitative military edge?
    Mr. Shapiro. Thank you for that question. The qualitative 
military edge and evaluating Israel's qualitative military edge 
and ensuring that it is maintained is one of my top priorities 
at the Bureau. As Secretary Clinton said, for President Obama 
and her and for this entire administration, our commitment to 
Israel's security and Israel's future is rock solid, 
unwavering, enduring, and forever. So we look at every sale in 
the region through the lens of how it will impact Israel's 
qualitative military edge. We have consultative mechanisms so 
we can understand what the Israelis are concerned about in 
terms of the regional situation. We also have a robust dialogue 
with our partners at the Pentagon to assess what the 
introductions of weapons systems in the region will mean.
    At the end of the day, we need to strike the right balance 
because we want to demonstrate to our partners in the Gulf that 
we are a reliable ally, and bolster them so they are better 
able to resist the pressure from Iran. But, at the same time, 
we want to assure that Israel's qualitative military edge is 
maintained. It is a complicated process. It requires balancing. 
But we take it very, very seriously, and we are consulting 
closely.
    Mrs. Lowey. Thank you. Ms. Granger.
    Ms. Granger. Thank you. In a conversation I had with 
Ambassador Pascual about the situation in Mexico, he explained 
to me that there was an emphasis on the Mexican police forces; 
that it is different from what it has been from where the 
military has been taking the lead up to this point. It is my 
understanding that the State Department is exploring the 
possibility of entering into agreements with State and local 
law enforcement agencies here in the U.S. with the Mexican 
police increasing their forces up to, I think, over 30,000 now. 
That seems like to me a very reasonable thing to do, 
particularly with the border States like Texas, where we have 
police training facilities and agencies and of course there is 
a huge interaction.
    I would like to know what the State Department's strategy 
is for improving Mexico's state and local police forces. Are 
they asking for this kind of help? Also, what are the 
possibilities of these local law enforcement agencies in 
helping with that?
    Mr. Johnson. Madam Congresswoman, we have been working with 
the Mexican federal authorities. And so, working through them, 
but we have a very concentrated effort in several localities, 
with a real emphasis on Ciudad Juarez, to see how we might 
assist with them strengthening and almost starting from the 
ground up yet again on their state and local authorities there. 
We have an ongoing conversation about that. We have had an 
assessment of what we might do, and we are working with the 
Mexican federal authorities to see how most effectively we can 
engage there. But we already have people on the ground who are 
working with those state and local authorities in a number of 
ways.
    With respect to how we might engage our own State and local 
facilities and capabilities here, we got a request about a year 
ago from Mexico asking for help as soon as possible, and they 
were going to start in about 6 weeks training 5,000 new 
investigators. Their aim is to train up to 15,000 over a period 
of several months or years, but initially 5,000 that they had 
recruited, who were university graduates, law school graduates, 
and this was really a different quality of police officer than 
they had brought on board before.
    In responding to that, we were able to take advantage not 
just of serving Federal law enforcement trainers--although our 
Federal Law Enforcement College was very generous with this. 
That wasn't sufficient. We also knew that some of the skills we 
were talking about are those that kind of tend to reside in 
State or local as well. So we were able to reach out to Harris 
County, Texas, to Los Angeles County, California, and to the 
City of Chicago Police Department, who were able to assist us 
with Spanish-language capable trainers who were able to deploy 
to Mexico and work with us there. It was and is a very 
effective program, one that is designed by us but in 
cooperation with the Mexicans where we have transferred that 
skill and also brought in other countries such as Colombia to 
help us with that as well.
    That was something of a pilot project, if you will, but we 
want to build on that. Kind of the next stage is to move beyond 
bringing in what was really individuals from those institutions 
and try to marry up institutions as a whole.
    We have an incipient program with the New York City Police 
Department to deploy to Haiti because they have a Creole-
speaking capability there because of the Haitian American 
community in New York. I signed a memorandum agreement with 
Commissioner Kelly about 8 weeks ago now. We are working out 
some of the final details of exactly what they would do and 
some of the kinks in the process of getting people to go and 
some legality issues. But we are confident that they will be 
able to deploy in Haiti very soon, and we want to build on that 
not just with New York, but particularly with police agencies 
that have Spanish language capabilities, because that is really 
where the need is. Those will come significantly from our 
border States, especially including Texas.
    Ms. Granger. Would you keep me aware as that occurs and the 
timeframe and how many? And in putting that together, the other 
issue is the report that has just come out giving a number of 
16,000 gang members here in the United States related to the 
drug traffic in Mexico and the cartels in Mexico. And in that 
policing and all of those issues, those programs that are going 
on, is there an awareness of that crossover gang membership?
    Mr. Johnson. Absolutely. We have had anti-gang programs in 
Mexico and in Central America for several years now. They have 
been augmented significantly under Merida. They are cross-
informational, if you will. We are learning things from those 
countries about how gangs that operate in a cross-border way 
are operating in the United States as well.
    Ms. Granger. Thank you, Madam Chair.
    Mrs. Lowey. Mr. Crenshaw.
    Mr. Crenshaw. Just a quick question. We talked about arms 
smuggling and the role Iran plays. We talked some about 
Lebanon, talked about Syria. As I understand, we have a 
memorandum of understanding with Israel relating to the flow of 
arms, rockets, other weapons into Gaza for Hamas. Can you 
update us on how that is working? Has that had an impact on the 
flow? And maybe talk about how Egypt, how that works. Are they 
doing everything they can in that regard?
    Mr. Shapiro. Yes. We have worked very closely with the 
Israelis on Gaza counter-smuggling. There is a Gaza counter-
smuggling initiative that has been set up to work with a number 
of states. It had a meeting last year, and there is an upcoming 
meeting. It is designed to focus on how to prevent smuggling 
into Gaza. We are pleased by the efforts that the Egyptians 
have made regarding counter-smuggling in Gaza, but at the end 
of the day there is a demand signal in Gaza because of--there 
is demand for these goods.
    So there are a couple of things that we need to think 
about, how do we reduce that demand signal by ensuring that 
there is enough humanitarian aid going in. And obviously we 
talk with the Israelis about that. Also, we are looking at ways 
to give the Bedouin, who do a lot of the smuggling, a better 
economic deal. So we are trying to look at creative ways to 
address that as well.
    Mr. Crenshaw. I am talking about weapons. Is it working? 
Can you see a significant impact that this memorandum of 
understanding has had over the last year?
    Mr. Shapiro. In terms of our assessment of weapons in Gaza, 
I think that we probably would have to discuss in more 
classified setting. But I would say that countering smuggling, 
you are trying to capture--when you stop smuggling, you are 
capturing both weapons and economic goods. So efforts to reduce 
weapons smuggling will also impact the other. And often they 
use the same routes. The same smugglers will smuggle weapons or 
other things. So we need to address the economic incentives 
that smugglers have and some of the networks that they are 
using.
    Mr. Crenshaw. Thank you.
    Mrs. Lowey. Let me just follow up before I turn to Mr. 
Kirk. If you can follow up on Mr. Crenshaw's questions. We 
understand that the smugglers, the Bedouins, are smuggling 
weapons and economic goods. So I would be interested in the 
same issue. With the cooperation, supposedly, of the Egyptians, 
you are saying you can't do anything about the weapons going 
through?
    Mr. Shapiro. Not at all.
    Mrs. Lowey. Can't we do more to stop the smuggling of 
weapons?
    Mr. Shapiro. What I was saying is that we are--we need to 
take away the economic incentives for smuggling.
    Mrs. Lowey. Sell the weapons on the open market?
    Mr. Shapiro. I am talking about the smugglers are paid to 
smuggle the weapons.
    Mrs. Lowey. I get that. I also understand that their 
clothing and everything else is going through. But my question 
is: If we were really determined--I think that is what Mr. 
Crenshaw is saying--if in fact the Egyptians are really 
determined, and they are building this wall, I guess you call a 
partition wall, you are saying there is nothing we can 
technically do to stop the weapons from going through?
    Mr. Shapiro. No, I am not saying that at all. I am saying 
we have been encouraged by the Egyptian efforts to stop 
smuggling and we want to encourage those, and we want to 
continue our work through the Gaza counter-smuggling initiative 
to prevent weapons from flowing.
    Mrs. Lowey. Could you discuss that further with us, the 
initiative, and how it is more effective than what it has been 
in the last few years?
    Mr. Shapiro. We have been trying to energize that process.
    Mrs. Lowey. What does that mean?
    Mr. Shapiro. Be engaging in a major diplomatic effort 
consulting both with the Israelis and the other Europeans who 
have signed up for this initiative. So we are engaged in 
intense discussions with our allies on how to prevent the 
weapons from entering Gaza.
    Mrs. Lowey. Let me just say I would like to have further 
discussion. I think we need to have a classified setting to 
tell us exactly what is being done because I am very concerned. 
There are reports again today about the SCUDs going into 
Lebanon. Today's report from Syria. I don't think we can 
continue just saying we are going to keep talking about it.
    Did you want to contribute to that?
    Ambassador Benjamin. I would just add that there is a lot 
of very technically sophisticated work that is going on that I 
don't think is yet at a stage where I think we can say it is 
delivered yet but it is in process and will be quite productive 
again. As Assistant secretary Shapiro suggested, we will 
probably do this better in a classified setting. There is quite 
a lot going on.
    I would also add that the smuggling issue is not confined 
to Gaza alone. Egypt is contending with smuggling networks that 
take it down into Sudan, into the Red Sea. Very complicated 
paths. We are looking at that. We are quite satisfied that the 
Egyptians are making a very, very serious good faith effort, 
but there is a lot of additional resources that are required 
here to really put a dent in it. These smugglers are incredibly 
innovative and resourceful. But I do think that we are on the 
right track here.
    Mr. Shapiro. We are also working with the Department of the 
Treasury to identify and designate individuals and groups 
involved in Gaza arms smuggling by cutting off the financial 
means for terrorist groups in Gaza to operate.
    Mrs. Lowey. I think Mr. Crenshaw and I understand this. I 
think we need to have another discussion in a classified 
setting, because these smugglers are getting the best of Egypt, 
the United States, the Israelis, and this is a tinder box, and 
it can become a greater tinder box. I think we really need to 
get more information on this.
    Mr. Kirk.
    Mr. Kirk. I want to ask a question related to the work that 
Congressman Israel and I are doing in regard to Afghanistan. To 
be fairly blunt, we have lost militarily the battle around the 
key dam in western Afghanistan called Kajaki Dam and have 
decided to not add to its capacity. It was the planned source 
of electricity for Helmand and Kandahar. Because the British 
can't hack it, we are not going to move forward on that plan. 
We won the battle of Marjah and Helmand. And ISAF has now 
signaled that we are going to fight the battle of Kandahar in 
June or July, from what ISAF has openly told the press.
    Congressman Israel and I have been very focused on 
providing reliable electrical power to Kandahar, because the 
writ of the government seems to end wherever electricity ends. 
I think AID staff, largely thinking that it wasn't invented 
here, is resisting this, but I will tell you just about every 
one at the Kandahar PRT is strongly--and ISAF--strongly in 
favor of building a set of generators at Kandahar airfield, 
where they can be protected, and then running a power line the 
10 miles into the city, so that when U.S. troops are fighting 
and dying we have electricity to roll in right afterwards to 
improve things.
    Are you guys going to let the bureaucracy kill the Kandahar 
power project and undermine our troops or are you going to let 
it go forward as the bipartisan majority here wants to do?
    Mr. Shapiro. I will just start off by saying this is not 
something that I think any of us here--you correctly pointed 
out it is a USAID program. So I am not familiar with the 
details.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402P6B.190
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.191
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.192
    
    Mr. Kirk. Since it is the focal point of U.S. combat forces 
and the press and the President, you should be better prepared.
    Mr. Shapiro. Okay.
    Mr. Kirk. Tends to be every major network will be there. So 
you better know your briefs.
    Mr. Shapiro. We will take back your comments and consult 
with the special representative at USAID and get you back an 
answer.
    Mr. Kirk. They will resist you, to the detriment of our 
soldiers. You need to provide electrical power where combat 
operations are happening.
    Mrs. Lowey. I just want to stress to you that this is an 
issue for the chairwoman. I have worked with Mr. Israel on it 
and Mr. Kirk on it. With an upcoming supplemental, we 
definitely want to have further discussions with you so we can 
take action.
    I am very concerned in general with several of the issues 
that have come up in recent days. I believe, sir, you mentioned 
you went to the New York City Police Department to get Creole 
speakers. Again, we probably should do this in a classified 
session, but it seems to me we are constantly just catching up. 
When it comes to intelligence or other agencies representing 
here today, I have heard at many hearings, Well, we don't have 
the language capacity and we need to train people. It would 
seem to me that--and I understand the way some of these 
agencies work. A couple months there, a couple years there, and 
then they come back and forth. But seems to me we have to look 
ahead and see where the problem is, where we need the language 
capacity, whether it is DOD or State or Intelligence and plan 
ahead for it. Frankly, I have been very concerned about some of 
the answers I have gotten.
    So if this is an issue that we should be concerned about, 
we need to have a classified briefing so we can get some better 
answers.
    I would also like to say with regard to Mr. Kirk's 
comments, I would like to perhaps, in a classified briefing, 
again--we may have won the battle, but I don't know about the 
hold part and I don't know about the cooperation with all the 
villages. It would seem to me there are too many reports about 
the Taliban moving in and threatening the villages, frightening 
the villages.
    So I would certainly suggest to this committee that I think 
we need another session to pursue the issue you brought up, to 
pursue the issue Mr. Crenshaw and I brought up, and I know 
there is a lot of concern from those who happen to be in 
another meeting today.
    Let me just, unless you have another question.
    Mr. Kirk. I have one other.
    Mrs. Lowey. Yes, Mr. Johnson.
    Mr. Johnson. If I could respond to the issue about the 
Creole speakers. I have access to literally hundreds of Creole 
from traditional sources. I wanted to develop this capacity 
with State and local providers because I thought it was in our 
best interest to do that and saw this as an opportunity and so 
did the NYPD. So this was a seized opportunity. We had Creole 
speakers at our leisure.
    Mrs. Lowey. Let me say the Creole wasn't a good example of 
the point I was trying to make because we didn't know there 
would be an earthquake in Haiti and we wouldn't know there 
would be the urgency.
    We can continue this in a classified setting, as I 
mentioned, but there are areas of the world where, as you know 
and I know, State Department, DOD, intelligence agencies, are 
rushing to get people trained, when perhaps we could have 
predicted it. Let me leave it at that.
    Mr. Kirk.
    Mr. Kirk. Two parts on the second issue, which is you have 
requested this committee approve $212 million for UNIFIL. Name 
the top three successes of UNIFIL in the last year.
    Mr. Shapiro. Well, we will get back to you for the record.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402P6B.193
    
    [GRAPHIC] [TIFF OMITTED] T6402P6B.194
    
    Mr. Kirk. Just off the top of your head. Give me the top 
two.
    Mr. Shapiro. I think from our perspective UNIFIL plays an 
important role in Lebanon. We work with them to try and prevent 
smuggling. So they do play an important role that we want to 
continue to work with them on. I can get you a more detailed 
answer for the record, but I do think that we view them as 
someone who is important to continue to communicate with and 
coordinate with as we try and develop a Lebanon that will be 
resistant to extremist influence. As we try and work to build 
up the Lebanese Government, the Lebanese Armed Forces, that 
will be able to resist the influence of Hezbollah and other 
extremists.
    Mr. Kirk. I will just follow up. I think there will be 
bipartisan concern on this issue as well.
    Utterly useless, seems to be the $212 million that you are 
asking for. You can't even keep SCUDs out of southern Lebanon. 
And we can tell you exactly where they are. But you will try to 
get $212 million out of this committee and you will not even 
get them to go into a single SCUD barn and get it out of 
Lebanon. So the question is: For $212 million in taxpayer 
money, it is a total waste of money. They have completely 
rearmed. My understanding is that under UNIFIL's AOR they have 
more missiles against Israel than they have ever had ever. Now 
they have failed to stop SCUDs from coming in, which are 
enormous vehicles that are well and easily tracked, and you 
will not be able to certify that for $212 million you will get 
a single SCUD seized by UNIFIL, will you?
    Mr. Shapiro. As of now, the assessment of what weapons are 
in and out of Lebanon, as I mentioned, would probably have to 
take place in a classified setting.
    Mr. Kirk. It used to be classified, but it is now in three 
major newspapers in the Middle East. So it is kind of out that 
UNIFIL has totally, completely failed. And you want us to give 
them another 212 million bucks. For what? You couldn't even 
specifically name the top three achievements of UNIFIL.
    Mrs. Lowey. Mr. Kirk, I think perhaps we can have more in-
depth discussions on that issue as well.
    Gentlemen, let me just say that I appreciate your coming 
here. This is a very serious issue. We have covered part of the 
globe, but I know we will look forward to continuing the 
discussion in a classified setting. Thank very much for coming.
    This hearing is concluded.
                                           Thursday, July 15, 2010.

         OVERSIGHT OF U.S. CIVILIAN ASSISTANCE FOR AFGHANISTAN

                               WITNESSES

MAJOR GENERAL ARNOLD FIELDS, USMC-RETIRED, INSPECTOR GENERAL, OFFICE OF 
    THE SPECIAL INSPECTOR GENERAL FOR AFGHANISTAN
HON. DONALD A. GAMBATESA, INSPECTOR GENERAL, USAID
CHARLES JOHNSON, DIRECTOR, INTERNATIONAL RELATIONS AND TRADE, GAO

                 Opening Statement of Chairwoman Lowey

    Mrs. Lowey. Good morning. The subcommittee will come to 
order.
    The State and Foreign Operations and Related Programs 
Subcommittee serves a vital role in supporting our national 
security by appropriating funds for diplomacy, development, and 
humanitarian response worldwide. Civilian contributions to the 
Administration's strategy are integral to the success of the 
military and the stability of Afghanistan and the region.
    For example, there are effective programs funded by the 
U.S. Government like the National Solidarity Program and the 
Maternal and Child Health programs that have contributed to 
local development and increased stability in regions of the 
country.
    However, due to recent allegations of rampant corruption 
and theft of U.S. Government assistance, concerns with billions 
in cash leaving Kabul airport, and alleged influence peddling 
and interference with and obstruction of corruption 
investigations by Afghan officials, I deferred consideration of 
the $3.9 billion requested for foreign assistance to 
Afghanistan in fiscal year 2011. The State Department's 
assessments that such activities undermine our civil-military 
mission and our responsibility to ensure Americans' hard-earned 
tax dollars are not squandered or mismanaged, especially in 
this time of economic recovery, require our urgent and thorough 
examination.
    Now, I want to make it very clear to my colleagues on both 
sides of the aisle that $4.1 billion has been appropriated for 
civilian-led assistance programs in Afghanistan in the fiscal 
year 2010 bill, and $1.7 billion has been appropriated in the 
fiscal year 2010 supplemental for civilian-led assistance 
programs in Afghanistan that passed the House July 1st and 
which the Senate will consider in the coming weeks. It is my 
understanding that 90 percent of Fiscal Year 2010 funds remain 
unobligated as programs are being developed now.
    Therefore, the Fiscal Year 2011 bill will not become law 
until the Fall after both Chambers consider it. We have the 
responsibility, the obligation, and the time to protect 
taxpayer money and get the process right; and I am very pleased 
that the Administration understands that we need accountability 
and they have agreed to work with us.
    I welcome the Special Inspector General for Afghanistan 
Reconstruction, Retired Major General Arnold Fields; the USAID 
Inspector General, Donald A. Gambatesa; and the Director of 
International Relations and Trade of the Government 
Accountability Office, Charles Johnson. These government 
watchdogs will provide insight into their audit and 
investigation findings to date, existing mechanisms to 
safeguard our assistance dollars, any gaps in oversight, and 
any evidence they have uncovered of corruption and graft within 
programs under this Committee's jurisdiction.
    Just yesterday, the GAO released a report, entitled 
Enhancements to Performance Management and Evaluation Efforts 
Could Improve USAID's Agricultural Programs, which outlined 
concerns with management and oversight of significant U.S. 
funded agriculture and alternative development programs in 
Afghanistan. Similar to previous reports, its findings indicate 
compromised effectiveness, including the lack of project 
management, defined goals and outcomes, and direct oversight. 
Please outline for us today additional procedures that USAID 
should implement to more clearly define goals and measure and 
validate outcomes.
    Because the President's strategy depends on the capability 
of the Afghans to govern effectively, we look forward to your 
evaluation of the level of commitment of Afghan officials to 
improve governance and accountability. For example, are senior 
Afghan Government officials impeding investigations into 
bribery and corruption? And, if so, what action is being taken 
by United States Government and Afghan officials to stop such 
interference and move forward with prosecutions? What steps 
have the Afghan Government taken to support anti-corruption 
efforts, and do you believe they are effective?
    Especially given President Karzai's call this past Monday 
for the international community to channel 50 percent of donor 
assistance through Afghan Government ministries, it is 
essential that the Government of Afghanistan be capable of 
managing international assistance in an effective, transparent, 
and accountable manner.
    Have the Department of State and USAID established 
conditions on the provision of direct assistance to Afghan 
ministries? If so, what are they? Are the conditions adequate? 
Are the assessments or certifications of Afghan ministries 
under way? If so, who is undertaking these assessments and what 
is the process? What recommendations do you have for the 
Administration and Congress to strengthen the assessment and 
certification process and provide greater assurance that any 
funding channeled through Afghan ministries is properly 
monitored, programmed, and executed?
    And finally, this Committee is under no illusions about the 
difficulty of implementing programs in Afghanistan, including 
security threats, a nascent banking system, challenges in 
identifying and developing credible local partners, among many 
other factors.
    In fact, just in the last 2 days, eight American servicemen 
were killed and today five Ministry of Health employees were 
kidnapped in Kandahar while on a health mission to help their 
countrymen. Our hearts and prayers go out to both our soldiers 
and their families who have made the ultimate sacrifice and to 
the Afghans who are risking their lives to rebuild their 
country.
    To ensure effectiveness of our assistance in this 
environment, this Committee has increased funding for Inspector 
Generals and mandated close consultation on implementation of 
U.S.-funded programs. In fact, some of the concerns we will 
address today may have been uncovered as a result of this 
expanded investigative capacity and the Government of 
Afghanistan's increasing ability to monitor funds and programs.
    Our discussion today of the systems currently in place to 
safeguard United States assistance from fraud and abuse and 
your insights on additional steps the Subcommittee should take 
will help us in our work in refining the fiscal year 2011 bill 
before it goes through the entire process and becomes law, we 
hope, in the Fall.
    Before turning to Ranking Member Granger, let me close by 
saying that the Subcommittee intends to hold an additional 
hearing and briefings with other top Administration officials 
to examine ongoing efforts to provide accountability and thwart 
corruption in Afghanistan. With such high stakes, and we know 
how high the stakes are, any gaps identified by our witnesses 
today must be immediately addressed to provide confidence--
confidence to the American people--that assistance for 
Afghanistan continues to advance our mission and support our 
troops in the field.
    I would like to turn to my ranking member, Kay Granger, for 
her statement before we proceed.

                     Opening Remarks of Ms. Granger

    Ms. Granger. Thank you, Madam Chair; and thank you for 
calling for this very important hearing on Oversight of U.S. 
Civilian Assistance for Afghanistan.
    I understand this will be the first in a series of 
hearings, the chair outlined that we will be holding; and I 
agree there are many issues that should be addressed and I hope 
will be addressed in these hearings.
    Let me begin by saying I share the chair's concerns about 
the disturbing news reports coming out almost every day 
highlighting the corruption problem in Afghanistan. We are all 
eager to get to the bottom of those allegations.
    I would also like the cite some of the most alarming 
results of recent surveys: A UN report earlier this year showed 
that more Afghans are concerned about corruption than any other 
public problem. Transparency International's most recent survey 
again ranked Afghanistan as one of the most corrupt places in 
the world. And just last week an Afghanistan-based group 
revealed a new study showing that bribery may be a billion 
dollar business.
    Corruption is not something that can be fixed overnight, 
but we must do all we can. This subcommittee must take decisive 
action to ensure that U.S. taxpayer funds are used as they were 
intended to be used. At the same time, I want to be sure that 
the subcommittee's actions support the broader strategy on the 
ground in Afghanistan. The strategy was not intended to be 
solely a military endeavor. The civilian side was inherently 
linked to the overall.
    As General Petraeus noted in his June 15th testimony to the 
Senate Armed Services Committee, a critically important part of 
our civilian military campaign in Afghanistan is promoting 
broad-based economic and infrastructure development. With this 
in mind, I remain concerned about any potential negative impact 
that withholding foreign assistance could have while U.S. 
military and civilians are on the ground.
    That is why it is essential that we hear from the witnesses 
before us today to get a better understanding of the oversight 
that is being conducted.
    I also look forward to another hearing with senior 
administration officials who are responsible for executing the 
civilian side of the Afghanistan strategy.
    I want to welcome today's witnesses. They are very 
important in what we are learning and how we will move forward. 
Each of you and your organizations play a critical role in 
preventing and detecting fraud, waste, and abuse of foreign 
assistance dollars; and I thank you for your service.
    The chair has already laid out many questions for you to 
answer, all of which deserve your attention, but there are a 
few additional matters I would like for you to address.
    First, I want to know that funds invested in Afghanistan 
are achieving tangible results. This starts by ensuring that 
programs are free from corruption, which I know we will discuss 
in great detail today, but it also means that U.S.-funded 
programs have clear goals and objectives that are tracked and 
measured over time.
    When I visited Afghanistan last fall, I was stunned by the 
lack of progress there. With roughly $50 billion invested by 
the U.S. since 2002, results are difficult to see. This can't 
continue. Accountability and a focus on results must be part of 
the culture of U.S. agencies, and that should funnel all the 
way down to the implementers, the Afghan Government, 
contractors, grantees, international organizations, and the 
multiple levels of awardees below them. I would appreciate 
hearing your thoughts on how we can move toward a focus on 
results and accountability.
    Next, I want to have confidence that sending more 
assistance through Afghanistan's institutions and 
nongovernmental organizations is the best course of action. I 
recognize the need to build the capacity of the government and 
local groups, but, given the recent allegations, now is not the 
time to subject U.S. funds to unnecessary risk. If the 
administration continues with this Afghan First Initiative, 
more than $1 billion could be distributed in this way. I 
believe this policy deserves intense scrutiny, and I would like 
to hear your assessment and any recommendations that the 
subcommittee should consider.
    I also want to discuss the civilian personnel strategy in 
Afghanistan. I understand the positions have tripled in the 
last 18 months, but I want to determine if the people who are 
filling those slots have the right skills to oversee such large 
programs and in such a difficult operating environment. I would 
like to hear your thoughts and any recommendations in this area 
as well.
    In closing, I look forward to getting a better 
understanding of the work your organizations have already 
undertaken and the work that is planned to address waste, 
fraud, and abuse. Your testimony will help the subcommittee 
have confidence in providing the funds necessary to support the 
President's strategy in Afghanistan.
    Thank you, Madam Chair.
    Mrs. Lowey. Thank you.
    Mr. Lewis.

                      Opening Remarks of Mr. Lewis

    Mr. Lewis. Thank you very much, Madam Chairman.
    I want to congratulate both you and Kay Granger for 
holding, beginning this series of very important hearings.
    The American public, to say the least, is skeptical about 
our having foreign assistance programs in the first place. The 
average taxpayer often thinks that we are spending 10, 15 or 20 
percent of our national product on foreign aid as it were. You 
all know that it is considerably below that. Well below 1 
percent, as a matter of fact, flows in to these areas. But, 
nonetheless, the reports that have raised the kind of alarm and 
concern that the chairwoman has expressed concern about very 
much feed that public doubt about whether these programs are 
worthwhile at all.
    While I really support strongly efforts to help you give us 
insight as to what is actually happening on the ground, please 
know that this is not a partisan consideration. Foreign 
assistance has to reflect American interests, efforts that we 
can make to make sure those dollars that are delivered get to 
those people we portend to want to help in the first place is 
critical.
    One area of interest of mine that I would appreciate your 
addressing, if you can, involves a long-standing interest about 
programs we may or may not be carrying forward effectively 
dealing with the poppy and the impact that those poppy fields 
have had to feed our enemies, if you will, to provide funding 
flows that do not help farmers for certain but instead help 
warlords. I would like to know, hear more about your evaluation 
as to programs to strengthen the agricultural sector in 
Afghanistan outside of the poppy. Any reporting you can give us 
in connection with that would be very much appreciated.
    So thank you, Madam Chair.
    Mrs. Lowey. Thank you.
    We look forward to hearing from our witnesses. I want to 
alert you all that we may have votes in about an hour. Your 
statements have certainly been submitted for the record; and to 
the extent that you feel comfortable summarizing, please 
proceed as you wish. And we--in terms of the panel, we will 
proceed as usual, go from one side to the other, giving each 
member 5 minutes.
    Let us begin with General Fields; and, again, we thank you 
for appearing here today.

                  Opening Statement of General Fields

    General Fields. Thank you very much, Chairman Lowey, 
Ranking Member Granger, and distinguished members of the 
committee.
    Again, thank you very much for inviting me to participate 
at this very important hearing. I appreciate the introductory 
comments, Chairwoman Lowey, Ranking Member Granger and 
Representative Lewis.
    I have provided the committee with a longer statement which 
I will now summarize.
    Recent press reports have alleged that billions of dollars 
have been transported out of Afghanistan via the Kabul Airport. 
We do not know at this time whether these dollars are from 
reconstruction funds or not. However, our investigators are 
aggressively working with other Federal agencies to determine 
the source of this currency.
    The lack of visibility into the movement of money and 
financial transactions in Afghanistan is one of many issues 
that puts reconstruction dollars at risk. We have identified 
problems in four broad areas: accountability, sustainment, 
metrics, and capacity development. That must be addressed to 
improve the effectiveness of the reconstruction program and 
prevent waste, fraud, and abuse.
    The U.S. Government does not have an integrated management 
system that provides complete and accurate data on all 
reconstruction activities. It does not have a comprehensive 
database on reconstruction contracts. Such systems, especially 
given the high turnover of staff, both civilian and military, 
would help to better manage U.S. projects.
    The U.S. Government has very little visibility into the 
activities of some subcontractors. This must change. SIGAR has 
identified sustainment issues in every audit it has conducted 
of an infrastructure project. Not only is the Afghan Government 
unable to pay for the operations and maintenance of donor-
funded infrastructure, it cannot pay for most of its basic 
operating expenses, including salaries.
    The international community is providing 85 percent of the 
Afghan national budget.
    We are finding that U.S. implementing agencies must do a 
better job of establishing and tracking metrics to help 
determine if a program is making progress and is sustainable. 
For example, our recent audit of our capabilities milestone 
rating system found that the system could not provide reliable 
or consistent assessments of Afghan security forces 
capabilities, a part of the reconstruction effort to which the 
United States alone has already invested over $27 billion.
    The U.S. reconstruction strategy emphasizes building Afghan 
capacity to govern. The Department of State is implementing 
this strategy by deploying more civilian experts to work in 
partnership with Afghans and channeling more reconstruction 
dollars through Afghan institutions. SIGAR is conducting an 
audit of the civilian surge to assess the extent to which these 
civilians are being deployed effectively to achieve U.S. 
reconstruction goals.
    We are also conducting a series of audits to do basically 
two things: one, examine U.S. and donor efforts to build 
Afghanistan's institutional capacity to deter corruption and to 
strengthen the rule of law and, two, the extent to which Afghan 
institutions have the systems in place to account for donor 
funds.
    These audits are having an impact. I am pleased to say that 
USAID has since told us that it plans to provide up to $30 
million over the next 3 years to support the High Office of 
Oversight, Afghanistan's key anti-corruption body; and the U.S. 
Embassy in Kabul reported that it is working with donors to 
develop capacity of the Control and Audit Office, the 
institution responsible for auditing Afghanistan's public 
finances.
    There are many challenges to providing assistance in a war 
zone, but we must do a better job to ensure that taxpayer 
dollars are not wasted.
    Building Afghanistan capacity to deter corruption and 
strengthen the rule of law will be the key to protecting U.S. 
funds from fraud and abuse. SIGAR is committed to providing 
oversight in a timely fashion so that our implementing agencies 
can make course corrections before U.S. resources are wasted.
    Thank you very much.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402C.001
    
    [GRAPHIC] [TIFF OMITTED] T6402C.002
    
    [GRAPHIC] [TIFF OMITTED] T6402C.003
    
    [GRAPHIC] [TIFF OMITTED] T6402C.004
    
    [GRAPHIC] [TIFF OMITTED] T6402C.005
    
    [GRAPHIC] [TIFF OMITTED] T6402C.006
    
    [GRAPHIC] [TIFF OMITTED] T6402C.007
    
    [GRAPHIC] [TIFF OMITTED] T6402C.008
    
    [GRAPHIC] [TIFF OMITTED] T6402C.009
    
    [GRAPHIC] [TIFF OMITTED] T6402C.010
    
    [GRAPHIC] [TIFF OMITTED] T6402C.011
    
    [GRAPHIC] [TIFF OMITTED] T6402C.012
    
    [GRAPHIC] [TIFF OMITTED] T6402C.013
    
    [GRAPHIC] [TIFF OMITTED] T6402C.014
    
    Mrs. Lowey. Thank you very much, Mr. Fields.
    Mr. Gambatesa.

                   Opening Statement of Mr. Gambatesa

    Mr. Gambatesa. Good morning. Good morning, Chairwoman 
Lowey, Ranking Member Granger, and distinguished members of the 
subcommittee. Thank you for inviting me here today to testify 
on the oversight of USAID programs in Afghanistan.
    Afghanistan's reputation for corruption and fraud is well 
known. As Ranking Member Granger reported in her opening 
remarks, a January, 2010, a report from the United Nations 
stated that it is almost impossible to obtain a public service 
in Afghanistan without paying a bribe. The latest Transparency 
International's corruption perception index ranks Afghanistan 
at 179 out of 180 countries, the second worst in the world.
    The U.S. Agency for International Development has obligated 
over $9 billion in Afghanistan and currently has more than 400 
civilian and Foreign Service national personnel overseeing 
approximately 100 ongoing grants and contracts worth more than 
$7 billion.
    Since fiscal year 2003, we have conducted 34 performance 
audits and made 128 recommendations for improvements and issued 
33 financial audits with nearly $100 million in sustained 
question costs.
    We have also initiated more than 70 investigations, with 
recoveries and savings of approximately $150 million. Moreover, 
in the past 2 years alone, we have referred 10 individuals for 
prosecution in the United States or Afghanistan.
    We have a great deal of experience conducting fraud 
investigations in Afghanistan, and we work collaboratively with 
our colleagues from the Special Inspector General for 
Afghanistan Reconstruction, the Federal Bureau of 
Investigation, and other law enforcement agencies as well as 
Afghan police officials and prosecutors.
    Although the Afghan Government has not interfered with any 
of our investigations, we sometimes have difficulty pursuing a 
case because of the concerns for the security of informants and 
witnesses. Individuals who provide us with information are 
often reluctant to continue to participate in the 
investigations out of fear for their safety. In these 
instances, we share relative information with appropriate U.S. 
government agencies within the Kabul Embassy.
    With regard to the subcommittee's concern about funds being 
transported out of Afghanistan, we have no evidence linking 
USAID assistance programs to the large quantities of U.S. 
dollars that are reportedly being shipped.
    Although Afghanistan is largely a cash economy, most USAID 
funds are provided to contractors and grantees through 
electronic transfers. In some situations, sums of money, 
generally under $25,000, are paid in cash as in the cash award 
programs. In these situations, controls have been put in place 
to ensure that funds have been used for their intended purpose.
    USAID has the following systems in place to prevent fraud 
and abuse: pre-award surveys of contractors and grantees; 
annual financial audit requirements for contracts, grants and 
sub awards; financial reporting requirements for contractors 
who receive advance payments; and program monitoring by USAID 
and third parties.
    Despite these controls, however, oversight is not as robust 
as it should be; and USAID does not have a sufficient number of 
qualified personnel on the ground to monitor projects 
effectively. However, the agency has developed a more effective 
monitoring evaluation process, to include increasing staffing 
and training.
    Our office supplements USAID's oversight by performing 
financial audits and reviewing public accounting firms to 
determine whether they are eligible to audit agency funds. 
Financial auditors pay special attention to control over cash.
    We also conduct concurrent financial audits of the highest-
risk programs, such as infrastructure programs, to provide 
early detection of potential problems.
    As part of the government's commitment to the Paris 
Declaration principles, USAID is channeling increasing levels 
of development funding directly to the Government of 
Afghanistan. By leading the resulting development projects, the 
Afghan Government can build public confidence in its ability to 
deliver programs that improve the welfare of the people. 
However, Afghanistan is still developing the capacity to manage 
projects and monitor and account for associated resources. This 
places Federal dollars in greater risk of waste, fraud, and 
abuse. USAID must develop an approach to building Afghanistan's 
capacity that balances the imperative for local engagement in 
the development process with effective stewardship of 
taxpayers' dollars.
    This concept of effective stewardship of taxpayers' dollars 
is also critical for budget support provided to the Afghan 
Government through trust funds or other instruments managed by 
international organizations. My office does not have audit 
rights to these funds, and oversight of these funds becomes the 
responsibility of the implementing entity or the Afghanistan's 
Control and Audit Office.
    The following steps could be considered to minimize risk 
associated with funding assistance programs in Afghanistan:
    One would be to require that direct assistance to the 
Government of Afghanistan be committed through specific 
projects rather than budget funding so that USAID funds can be 
traced to its end use; require concurrent audits of USAID's 
direct assistance to the Government of Afghanistan; adopt 
specific contracting practices for Afghanistan and other 
conflict settings that limit the tiers of subcontractors and 
subgrantees so that we don't have these subs of subs of subs.
    In addition to the options I mentioned, my office can take 
the following actions, as resources permit, to further mitigate 
risk:
    We can review USAID's pre-award survey and certification 
process to determine whether further strengthening is required; 
we can also conduct a review of cash disbursement practices 
employed by program implementers to see if what we are hearing 
is really correct as far as the control over the cash; and 
increase participation with other Federal agencies that are 
following the trail of expenditures in Afghanistan.
    We share the subcommittee's concerns that funding 
appropriated to foreign assistance programs in Afghanistan not 
be wasted or channeled to those who wish to do us harm.
    I would be happy to answer any questions. Thank you for 
inviting me here today.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402C.015
    
    [GRAPHIC] [TIFF OMITTED] T6402C.016
    
    [GRAPHIC] [TIFF OMITTED] T6402C.017
    
    [GRAPHIC] [TIFF OMITTED] T6402C.018
    
    [GRAPHIC] [TIFF OMITTED] T6402C.019
    
    [GRAPHIC] [TIFF OMITTED] T6402C.020
    
    [GRAPHIC] [TIFF OMITTED] T6402C.021
    
    [GRAPHIC] [TIFF OMITTED] T6402C.022
    
    [GRAPHIC] [TIFF OMITTED] T6402C.023
    
    [GRAPHIC] [TIFF OMITTED] T6402C.024
    
    [GRAPHIC] [TIFF OMITTED] T6402C.025
    
    [GRAPHIC] [TIFF OMITTED] T6402C.026
    
    [GRAPHIC] [TIFF OMITTED] T6402C.027
    
    Mrs. Lowey. Thank you very much.
    Now we are very happy to hear from Mr. Johnson. Thank you.

                    Opening Statement of Mr. Johnson

    Mr. Johnson. That you, Madam Chairwoman, Ranking Member 
Granger, and members of the subcommittee.
    I am pleased to be here to discuss oversight of U.S. 
assistance programs in Afghanistan. Strengthening the Afghan 
economy throughout development assistance efforts is critical 
to the U.S. counterinsurgency strategy and a key part of the 
United States' civilian military campaign plan for Afghanistan.
    Since fiscal year 2002, the U.S. Agency of International 
Development has awarded over $11.5 billion in support of 
development assistance programs in Afghanistan. Since 2003, the 
GAO has issued several reports and testimonies related to U.S. 
efforts in Afghanistan. In addition to reviewing program 
planning and implementation, we have focused on efforts to 
ensure proper management and oversight of the U.S. efforts. 
These are essential to reducing waste, fraud and abuse. Over 
the course of this work, we have identified improvements that 
were needed as well as obstacles that affect the success and 
should be considered in program management and oversight.
    While drawing on past work related to U.S. development 
efforts in Afghanistan, I will focus much of my testimony today 
on findings in our most recently released report which was just 
released yesterday on the USAID's management oversight of its 
agricultural programs in Afghanistan.
    My statement today will address the challenges the U.S. 
faces in managing and overseeing development programs and the 
extent to which the USAID has followed its existing and 
established performance management and evaluation procedures.
    To start, I would like to note that various factors 
challenged U.S. efforts to ensure proper management and 
oversight of U.S. efforts in Afghanistan. Among the most 
significant has been the high-threat working environment that 
U.S. and others are working in, the difficulties in preserving 
institutional knowledge due to the lack of formal mechanisms 
for retaining and sharing information during high staff 
turnover, and the Afghan Government ministries' lack of 
capacity and corruption challenges.
    It is also worth noting that the USAID has taken some steps 
to assess and begin addressing the limited capacity of the 
Afghan ministries and to address corruption challenges 
associated with those ministries.
    USAID has established performance management and evaluation 
procedures that are already in place to help oversee its 
programs. These procedures, among other things, require the 
development of a mission performance management plan, the 
establishment and approval of implementing partner performance 
indicators and targets, and the analysis and use of performance 
data.
    We have found, however, that the USAID has not consistently 
followed its established performance management and evaluation 
procedures. In particular, we found that the Afghanistan 
mission had been operating without an approved performance 
management plan to guide its management and oversight efforts 
after 2008.
    In addition, while implementing partners have routinely 
reported on the progress of USAID-funded programs, USAID did 
not always approve the performance indicators these partners 
were using and did not ensure, as its procedures specifically 
require, that its implementing partners establish targets for 
each performance indicator.
    For example, only two of the seven USAID-funded 
agricultural programs, which we highlight in our most recently 
released report, during fiscal year 2009 had targets for all 
indicators. They actually lacked targets for all indicators as 
required.
    In the absence of consistent application of its existing 
performance management and evaluation procedures, USAID 
programs may remain more vulnerable to waste, fraud, and abuse. 
For example, GAO reported in 2009 that USAID's failure to 
adhere to its existing policies severely limited its ability to 
require expenditure documentation on an Afghanistan-related 
grant that was later associated with findings of alleged 
criminal actions and mismanagement of U.S. Funds.
    To enhance the USAID development assistance programs in 
Afghanistan we have recommended, among other things, that the 
administrative USAID take steps to, one, ensure programs have 
performance indicators and targets; and, two, fully assess and 
use performance data and evaluations that it has collected or 
that it will collect to adjust current and future programs and 
address preservation of institutional knowledge.
    USAID has concurred with these recommendation and is in the 
process of developing a new performance management plan to 
guide its future efforts. We will continue to monitor and 
follow up on the implementation of all open GAO 
recommendations.
    This concludes my prepared statement, but before closing I 
would like to note that the GAO looks forward to assisting the 
Congress and the administration in its efforts in Afghanistan, 
and I would be happy to answer any questions at this time.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T6402C.028
    
    [GRAPHIC] [TIFF OMITTED] T6402C.029
    
    [GRAPHIC] [TIFF OMITTED] T6402C.030
    
    [GRAPHIC] [TIFF OMITTED] T6402C.031
    
    [GRAPHIC] [TIFF OMITTED] T6402C.032
    
    [GRAPHIC] [TIFF OMITTED] T6402C.033
    
    [GRAPHIC] [TIFF OMITTED] T6402C.034
    
    [GRAPHIC] [TIFF OMITTED] T6402C.035
    
    [GRAPHIC] [TIFF OMITTED] T6402C.036
    
    [GRAPHIC] [TIFF OMITTED] T6402C.037
    
    [GRAPHIC] [TIFF OMITTED] T6402C.038
    
    [GRAPHIC] [TIFF OMITTED] T6402C.039
    
    [GRAPHIC] [TIFF OMITTED] T6402C.040
    
    [GRAPHIC] [TIFF OMITTED] T6402C.041
    
    [GRAPHIC] [TIFF OMITTED] T6402C.042
    
    [GRAPHIC] [TIFF OMITTED] T6402C.043
    
    Mrs. Lowey. Thank you very much for your testimony. As I 
stated before, we will rotate from side to side, and we look 
forward to your response.
    I want to follow up, if I may, on the London Conference in 
January, 2010. Donors agreed to provide up to 50 percent of 
donor assistance directly through Afghan Government mechanisms. 
In anticipation of the Kabul Conference next week, President 
Karzai has called on donors to align assistance programs with 
Afghan priorities and move toward the 50 percent goal.
    First of all, can you describe what USAID has done to 
safeguard funding provided directly through the Ministries of 
Health and Finance? How much funding is provided through these 
sources on an annual basis? Does USAID anticipate providing 
direct support through other government ministries in fiscal 
year 2010? What process has USAID undertaken to assess the 
capacity of these ministries to receive direct assistance and 
what could USAID or other U.S. Government agencies do to 
increase the capacity of Afghan ministries that are being 
considered for direct government-to-government support?
    Several of you addressed changes that you are recommending 
in the oversight process. If there is anything else you would 
like to add to that, please do.
    And I would also like to know what oversight role does 
USAID have in reviewing programs and projects of the Afghan 
Reconstruction Trust Fund? Can the USAID IG or the SIGAR audit 
funding channeled through the Trust Fund?
    You may have a choice, whoever would like to respond.

                                  ARTF

    General Fields. Let me first address the ARTF, Afghanistan 
Reconstruction Trust Fund; and then I would be inclined to 
yield to my counterpart IG from USAID to discuss more of the 
details of your questions.
    First, we have not conducted an audit per se of the ARTF. 
The ARTF is administered by the UN; and our mandate, while 
broad, that I execute does not necessarily include the UN. And 
its mechanisms. However it is my intent and has been since I 
have been in this capacity to pursue the U.S. dollar to 
whatever extent it may be, wherever it may reside. And so we 
have had a dialogue with the UN; and I believe that if this 
dialogue continues I feel that we will be permitted, if 
jointly, to look into the ARTF into which the international 
community has thus far invested $900 million, of which 
approximately $300 million has been invested by the United 
States.
    We also have conducted an audit of the Control and Audit 
Office, as I pointed out in my initial statement, and I feel 
that we can potentially conduct joint audits with the CAO, 
which is somewhat equivalent to our GAO, and accomplish matters 
associated with the ARTF and the extent to which those funds 
are being implemented through whichever institution in 
Afghanistan.
    Mrs. Lowey. And the remaining, Mr. Gambatesa.
    Mr. Gambatesa. Thank you.
    I would like to follow up on the ARTF before I get into the 
other. As I said in my opening statement that we really don't 
have any audit rights in ARTF funds, oversight will be provided 
by the World Bank or by the audit office in Afghanistan. 
However----
    Mrs. Lowey. Even though $300 million of American funds are 
contributed.
    Mr. Gambatesa. Yes, ma'am. They become fungible once they 
go into the account, and they basically lose their identity at 
that point.
    Mrs. Lowey. Is there anything we can do about that?
    Mr. Gambatesa. I am not certain if we can do anything with 
that specifically. As auditors, all we can do is raise concerns 
to them and ask them to do something. But we have had dealings 
with UN. organizations before, our international organizations, 
where they don't really have to listen to us.
    But the agency, the USAID, does have some amount of 
oversight into this process from what I have been told, that 
they use a monitoring agent, PricewaterhouseCoopers, to check 
compliance with government internal controls. They participate 
in project identification and preparation and appraisal, and 
there is also a methodology they call preferencing where a 
certain amount of funds that a government can contribute can be 
preferenced. I don't know all the details, but there are 
certain ways they can do that, and it is a little bit 
complicated.
    The USAID receives reviews, reports, financial reports, 
quarterly donor reports, and annual reports basically saying 
how the funds were expended. So there is some oversight from 
the agency from the standpoint of quality control or due 
diligence, I guess is the best way to put it.
    Mrs. Lowey. We will catch Mr. Johnson on the next question, 
because my time is up. But I would appreciate learning more 
about that because, as you mentioned, Mr. Fields, we have a 
responsibility and you are looking at following all the 
dollars.
    General Fields. Absolutely.
    Mrs. Lowey. And Norway does have the responsibility for 
oversight of these funds, and we should be able to ask 
questions and pursue any trail wherever it leads. I thank you.
    Ms. Granger.
    Ms. Granger. Yes, I want to follow up on that line of 
questioning that the chairman asked, because I want to focus on 
the ministries.
    The administration has their Afghan First Initiative that 
we would be sending funds through the Afghanistan ministries. I 
understand these ministries have to be certified, so I would 
like to understand more about the process for certification and 
has the IG's office been involved in that?
    Because what I am hearing is there aren't the people--there 
is a history of corruption. There aren't enough people to do 
this oversight, and yet we are sending money directly to those 
Afghan ministries. So I would like some more information about 
that certification process, how reliable it is, and how that 
Afghan First is going to proceed.
    Mr. Johnson. If I may respond to that initially, Ranking 
Member Granger, GAO actually just initiated some work looking 
at the U.S. certification process that we are undertaking in 
terms of certifying Afghanistan ministries, and we think that 
in addition to that certification process there needs to be 
controls in place to allow the U.S. to have access to certain 
financial information to be able to go in and look at, follow 
some of the dollars. So we are going to be looking at that as a 
part of our review in terms of what specific controls or 
policies or agreements do we have in place.
    I do want to note that it is important that the Afghanistan 
ministries, as we have noted before, have that capacity as a 
part of building the capacity of the Afghan government is I 
think our certification process before we provide them with 
direct funding. It is a part of that whole of government 
approach that we are taking, and so we are planning to look 
into that in particular.
    Ms. Granger. What kind of time frame is that?
    Mr. Johnson. We just initiated that review.
    Ms. Granger. How long should that take?
    Mr. Johnson. On average, we roughly are able to produce 
things in about 6 months, 6 to 8 months, but if there are 
immediate needs we can provide you with something sooner than 
that.
    Ms. Granger. I would request that you provide this 
subcommittee with that information as it goes forward with the 
recommendation. Six to eight months puts us in a real delicate 
situation with the funding if that process isn't in place and 
the safeguards aren't there.
    Mr. Johnson. We will be in a position to provide you with 
briefings on what we have learned.
    Ms. Granger. Yes.
    Mr. Gambatesa. We haven't as yet reviewed it, but we intend 
to review the process of the precertification.
    My understanding is that none of the funds or very few of 
the funds have gone to direct budget support, that thus far the 
ministries have received funding for specific projects, which 
obviously increases the accountability because they have to say 
what they have achieved with the program.
    As we mentioned, USAID is providing training and technical 
assistance when there is a lack of capacity. Oftentimes, they 
will use a contractor to go in, an accounting firm as such, to 
go in and assess the capability of the ministry to account for 
the funding basically, to see if their internal controls and 
their accounting systems are such that they can actually 
provide a good sheet to us to determine that, in fact, the 
funds are being spent appropriately.
    My understanding is they have blanket agreements with a 
number of CPA firms to go in and actually work, and they are 
local CPA firms, so they would not be U.S. firms.
    Ms. Granger. So they are local contractors, Afghan 
contractors, that we are contracting to see if the Afghanistan 
Government and the ministries can oversee these projects, not 
the budget toward them but the actual projects, is that right?
    Mr. Gambatesa. More so of the financials, if they have the 
capacity financially to oversee the funding. That is really on 
the financial side.
    And the other part as far as the performance side would be 
the training issue of whether the ministry has the proper 
training and expertise to actually implement the programs.
    Ms. Granger. And that is also determined by a contractor in 
most cases, is that right?
    Mr. Gambatesa. I am not certain.
    Mr. Johnson. If I may also add, based on our preliminary 
work that we have done so far, with respect to the 50 percent 
target that has been established, we have noticed that between 
fiscal year 2002 and 2010 there was roughly about 18.5 percent 
of our money has been provided for program support to the 
government of Afghanistan.
    Ms. Granger. Would you say that again, please?
    Mr. Johnson. Eighteen point five percent of our USAID's 
funding has been awarded for program support to the Afghan 
Government. In fiscal year 2010, specifically, that has jumped 
up to 51 percent. So I think the direction towards the 50 
percent for AID is taking place. But those are all preliminary 
numbers.
    Ms. Granger. Thank you.
    Mrs. Lowey. I would like to just submit this letter for the 
record, a letter from Acting Mission Director Rebecca Black.
[GRAPHIC] [TIFF OMITTED] T6402C.044

    Mrs. Lowey. I am pleased to see that this issue is on the 
screen of many of the people who are here today.
    We do need an increased focus on fiduciary and governance 
framework of the Afghanistan Reconstruction Trust Fund.
    So I think this is an important step in the right 
direction, and I thank you.
    Mr. Jackson.

                     Opening Remarks of Mr. Jackson

    Mr. Jackson. Thank you, Madam Chair. I thought I beat the 
clock just before you slammed the gavel. I am grateful.
    Again, thank you, Chairwoman Lowey, and let me also welcome 
our guests to the hearing today.
    In perfect candor, I haven't heard very much today that 
gives me the impression that the United States Government has 
done and/or is doing everything that it can do to keep taxpayer 
dollars from being at risk in what almost universally each of 
you have indicated is the second-most corrupt country in the 
world, just above Somalia. My confidence today has not been 
strengthened at all by the testimony of you as witnesses, and 
that is not to cast an aspersion upon the dedicated nature of 
your service to our Nation.
    But, as General Fields indicated, the high turnover in 
terms of civilian capacity on our side, the high turnover on 
the military side of our own efforts in Afghanistan certainly 
suggest that there is a continuity problem on our side, let 
alone the expectations that we have for the Afghan officials in 
monitoring these projects.
    I have introduced a bill to help with the reconstruction of 
Liberia, and one of the key aspects of the bill is to improve 
the capacity and professionalism of the civilian government.
    Improving governance is obviously imperative to providing 
sustainable development for Afghanistan. It is also a complex 
task that requires reform in virtually every ministry and every 
level of government.
    I am interested in hearing from all of you what in your 
judgment are the most pressing priorities for improving 
Afghanistan governance and what areas of governing are making 
the most progress? What areas are also the most problematic?
    Let me start with General Fields.
    General Fields. Thank you very much, sir.
    First, if you permit me, sir, I wish to correct myself. I 
earlier mentioned that the UN oversees the ARTF. It is actually 
the World Bank that oversees the ARTF.
    But none of which, of course, precludes what I earlier 
said, that we will work with whichever entity we need to in 
order to ensure that the U.S. tax dollar is wisely used.
    In terms of what we are doing in reconstruction, let me say 
that we have spent or are spending $27 billion or more for the 
security aspect of reconstruction, $15 billion over the course 
of our involvement in Afghanistan since 2002 for governance and 
development. So, your question, sir, is very important, because 
we have devoted a lot of money to reconstructing, if you will, 
the governance sector of Afghanistan.
    In terms of a direct answer to your question, I feel that 
much is under way in addressing governance in Afghanistan, but 
it is not nearly where it really needs to be, which is why the 
issue of corruption is such an agenda item to date.
    One failure that I would ask and recommend that we not make 
should we engage in another situation similar to Afghanistan is 
that we, I don't feel--and there is little evidence thus far 
discovered by my auditors and by me personally--to suggest that 
we started in 2002 building capacity in Afghanistan. It is very 
difficult to build capacity in a nation as broken as 
Afghanistan has been and to a large extent still is. And I 
would encourage that our planners at all levels consider 
capacity at the forefront of an engagement by the United States 
into which so much money by the American taxpayer is to be 
invested.
    The justice system is still not adequate. We are working on 
it, and I feel that the United States Embassy is focusing on 
that area through training of judges and prosecutors as well as 
building facilities in which they can carry out their work. But 
we are not there yet. We have conducted audits in this regard, 
and we have reported certain recommendations to the Embassy, 
and we await responses sufficient to confirm that in fact they 
have turned to----
    Mr. Jackson. General, let me just share with you for the 
Committee, and then I will conclude, because I know my time has 
expired.
    Fifteen billion dollars in governance and capacity building 
since 2002, and yet every member of this panel has to confront 
a Washington Post article that asks the question, is the Afghan 
Attorney General on our side or not?
    Have your investigators found evidence that the Afghan 
Attorney General impeded investigations and prosecutions; and, 
if so, is this at the direction of senior Afghan officials?
    Before this committee appropriates another dollar, whether 
or not taxpayer dollars are at risk, fall within the purview of 
this Committee and the purview of that chairwoman to oversee 
that this money is being spent adequately. And what I am not 
hearing is that after $15 billion on governance that we have 
there, which means another $15 billion and another $15 billion 
and more articles like this which every one of us have to go 
back home and explain to a constituent why it is either 
sufficient or insufficient or why we may need to pull our 
troops back.
    Madam Chair, I yield back the balance of my time.
    Mrs. Lowey. Thank you.
    Mr. Lewis.
    Mr. Lewis. Thank you, Madam Chair.
    Would each of you kind of give me a yes or a no answer, 
since we are attempting to measure what has happened to 
American dollars in Afghanistan, because your advice and 
counsel you get from people who have expertise in each of your 
organizations indicate to you that there is serious 
believability relative to those charges that suggest that huge 
amounts of cash, American cash, have been leaving Afghanistan 
with some regularity. And if you do see, if your answer is yes 
to that question, would you tell us short term, what Jesse 
Jackson and I can do to see that those dollars go to the people 
we want to help in the first place and not go to somebody's 
bank account outside of Afghanistan? As much of a yes or no as 
possible from your background I would appreciate.
    General Fields. Yes. Money is leaving Afghanistan, and this 
has been reported to me by my investigators. There are 
investigations under way and which were under way prior to the 
media reporting on this matter, and we are not prepared at this 
time to give the final details because it is ongoing. But, yes, 
sir, money is leaving; and this is money that is being declared 
as the so-called owners of it depart Afghanistan.
    Mr. Gambatesa. Well, I don't think there is any doubt that 
funds are leaving, the money is leaving, but whether they are 
USAID funds that have been diverted in some way is something 
that we don't know. And we have no indication, as I mentioned 
in my statement, that any USAID funds are being sent out of the 
country, basically, as I said earlier, because there is not 
much cash out there.
    Mr. Lewis. If 85 percent of the government's budget comes 
from our assistance, certainly a ``yes'' sounds pretty close to 
being on the money to me.
    Mr. Gambatesa. I am not contradicting you. I am saying that 
we have no information to show that any USAID funds are being 
shipped out of the country in pallets.
    Mr. Lewis. So your support people are telling you that you 
think perhaps the answer is ``no'' rather than yes?
    Mr. Gambatesa. Well, I think it is more we don't know. But 
absent positive knowledge to it, and you never want to say 
never, but we have nothing to indicate that it is for sure. I 
would say no. Yes.
    Mr. Lewis. GAO?
    Mr. Johnson. Based on the work we perform, we don't have 
any specific evidence that money is leaving Afghanistan 
illegitimately. We have done some work in the past where we 
were reported on allegations and misuse of U.S. funds that were 
provided through USAID, but, other than that, we don't have any 
specific examples of money being flown out of Afghanistan 
inappropriately.
    Mr. Lewis. Thank you.
    Mrs. Lowey. Just to clarify, before I turn to Mr. Schiff, 
Mr. Fields, you are saying that you are in the process of 
conducting an investigation on those allegations, and you were 
before the media reports revealed the information. We look 
forward to hearing the results of your examination. Do you have 
any idea of the time frame?
    General Fields. Not at this time. This is an investigation 
that we started really in March. And it was really another 
investigation that was under way, and a tip through that 
investigation led us to matters relating to the departure or 
exodus of money through the airports. I don't know, Madam 
Chairwoman, when we will have completed this, but I can assure 
you that we will work this as rapidly as we possibly can.
    Mrs. Lowey. Thank you very much.
    Mr. Schiff.
    Mr. Schiff. Thank you, Madam Chair.
    I have a few questions today, and I am going to try to 
state as quickly as I can to see how many we might get through.
    I want to follow up on the chair's question, and maybe we 
just don't have enough information, but to the degree that 
money is leaving the country, and I don't know what is worse, 
the potential that this is U.S. taxpayer money that is leaving 
the country because it has been stolen or whether this is U.S. 
taxpayer dollars or other international donor assistance that 
has not been stolen but has been taken through the process and 
is being exported out of the country. Either way, it shows that 
some in the leadership in Afghanistan have no confidence in the 
nation's future, and that is I think a real, vital concern for 
our effort.
    But I would be interested to know, to the degree you can 
talk about it today, if there is money leaving the country, 
what is the likely source of it and who are the likely players 
in terms of taking it out of the country?
    More broadly, I would like to ask you about our anti-
corruption strategy which I am very concerned about. It seems 
our military is on one timeline, our anti-corruption strategy, 
our governance building is on an very different timeline which 
may take years, decades, a generation.
    Who is in charge of our anti-corruption strategy? Is there 
an anti-corruption plan?
    My understanding is that the Embassy drafted an anti-
corruption strategy but that it has been sitting at the State 
Department for about a year now; and the only thing that has 
been released is a corruption reporting guidance which, among 
other things, established an e-mail address for people to send 
reports of corruption, [email protected], but no one is 
monitoring the site.
    So people are evidently sending e-mail reports of 
corruption, but there is nobody on the receiving end.
    So I would be interested to know, are you familiar with 
this e-mail address? Do you know if anybody is monitoring it? 
If you don't know, I would ask you to find out, as well as 
whatever happened to the anti-corruption strategy.
    Do we have adequate personnel working on governance and 
rule of law? We have had a military surge, we have had a 
civilian surge, but the civilian surge has been a lot less than 
the military surge. My understanding is there are three people 
at the Embassy working on rule of law, two State Department 
people, one DOD person. Do we have adequate civilian personnel 
working on this anti-corruption strategy?
    So those are the questions that I have, as many as you 
might be able to get through.
    General Fields. Well, sir, let me comment on at least a few 
of them.
    First, I want to say that we identified anti-corruption as 
a missing component to the reconstruction effort in 
Afghanistan. From the work that we have done, very little if 
anything had been done prior to about a year ago to address 
anti-corruption in Afghanistan.
    We have thus far conducted two audits, as I mentioned 
earlier, focusing on the systems that need to be in place in 
order for anti-corruption to be properly addressed within the 
structure of the Afghanistan Government; and, therefore, our 
audits of the Control and Audit Office and the Higher Office of 
Oversight pertain to this.
    You reference, to some extent, the financial oversight and 
basic capacity of Afghanistan from an institutional standpoint. 
This is being addressed through the reconstruction effort, but 
it is one to which I think attention has been too lately 
provided.
    In terms of reconstruction strategy relating to anti-
corruption, there is one that has been put in place by the U.S. 
Embassy. An official, once again, trying to bring some degree 
of emphasis to this matter, has been put in place to oversee 
this as a part of the new leadership structure of Afghanistan 
at the ambassadorial level who will coordinate the development 
of the rule of law.
    Mr. Schiff. Can you tell me who that is? Who is that that 
is in charge of the anti-corruption strategy?
    General Fields. Newly arrived Ambassador----
    Mr. Johnson. Ambassador Klim.
    Mr. Schiff. Are you familiar with the Web site I mentioned?
    General Fields. No, sir, I am not familiar with that Web 
site.
    Mr. Schiff. If you could find out and let us know whether 
there has been anyone on the receiving end of that, I would be 
very interested to find out.
    General Fields. Aye aye, sir.
    Mr. Johnson. If I could quickly add, there is a key line of 
effort in the U.S. integrated civ-mil plan that specifically 
addresses anti-corruption issues. If you look at the civ-mil 
plan, it actually mentions corruption or anti-corruption issues 
37 times in the plan. It is through all alliance efforts with 
the Department of Defense as well as USAID and the State 
Department. So the U.S. has focused quite a bit on that in its 
new strategy going forward.
    Mrs. Lowey. I just want to say to my colleagues that we 
will have a second or third round. So if you want to vote and 
come back, we welcome you.
    Mr. Crenshaw.
    Mr. Crenshaw. Thank you, Madam Chairman.
    I am just sitting here thinking that our goal in 
Afghanistan is to try to develop a self-sustaining government, 
and what I hear today is not very encouraging. In fact, it is 
downright discouraging.
    I was there maybe 2 months ago, and we spent a lot of time 
talking about the security aspect of trying to build a police 
force and build an army. And that was right after Marja had 
happened, and that was successful. But immediately when the 
Afghani army went in, there were all these allegations of 
corruption, looting. It just seems that the corruption aspect 
pervades everything that goes on, and somehow we have got to 
get control of that.
    And when I hear you all say, well, we know money is leaving 
the country, but we really don't know what money it is or whose 
money it is, it seems to me some how some way the Afghan 
Government needs to, if they are going to stand up and be self-
sustaining, they ought to have some input into this.
    But we are not even talking about that. We are talking 
about the United States dollars going there, and we are not 
sure where our money goes. And I wonder if the Afghani 
Government knows where the money goes. Because, ultimately, 
they are going to be responsible. That is what we want to 
happen, when we send them money that they use it wisely.
    We are having a hard time figuring out just from our 
standpoint where the money goes. So that is a little bit 
discouraging in term of trying to build this self-sustaining 
government.
    I just want to say that as a general comment.
    But let me just ask you specifically. This whole business 
about multilateral aid, it seems like we are moving more in 
that direction. And when we do bilateral aid direct 
involvement, I hear the USAID person say, we are not sure, we 
are trying to put it in place, some oversight and 
accountability; and I think we all applaud that. But when it 
comes to the multilateral aspect, we seem to have very little 
oversight and accountability, and yet that is where we are 
moving. In Haiti, we are moving more toward multilateral 
business. As I read some of these reports, as much as 75, 85 
percent of the money that goes into these multilateral 
accounts, this reconstruction fund, comes from us. And yet we 
don't have any oversight. We don't have any accountability.
    So my main question is, in a broad sense, if that is the 
direction we are moving in, what are your ideas about how we 
can have more accountability and oversight in terms of these 
multilateral assistance programs? Because if that is where we 
are going and that is where we are putting all our money and 
yet we don't have any control over that, that is another big 
problem.
    Could you comment on that? I don't know who would be best, 
but I think you are all working on that. But I would love to 
hear how you think we can best deal with that.
    General Fields. Sir, I will begin and then yield to my 
colleagues.
    But, as I once again mentioned, this office, the Special 
Inspector General for Afghanistan, we will take any measure 
that is appropriate, legal, and ethical and so forth to follow 
the money. And we have been doing that.
    The capacity of my office, certainly, has not focused on 
that part, thus far, even though we have been working in 
conjunction with it and creating the dialogue with these 
international entities. But as my capacity increases, we 
certainly will focus more on that aspect of money.
    The other part the equation, I feel, is that our own U.S. 
needs to work more closely with the international community to 
put in place rules and agreements, if you will, that will allow 
the inspectors general and other appropriate oversight entities 
to peer into these funds such as the Afghanistan Reconstruction 
Trust Fund and the National Development Program, NDP, for 
Afghanistan.
    Mr. Gambatesa. Well, I think one important issue, and my 
colleague has issued a report on the Control and Audit Office 
in Afghanistan who would have the responsibility to oversee 
these multi-donor accounts that are being funded for 
Afghanistan, but that organization is woefully low as far as 
its experience, as far as its training, as far as its ability 
to function as an independent agency because it doesn't have 
the legislative authority that we enjoy.
    So one way to do it would be, and I believe that their 
audit report mentioned this, is to build the capacity of the 
control and accounting office in Afghanistan to be able to 
provide the oversight to these multi-donor funds, would be one 
way to do it.
    Mr. Jackson [presiding]. Let me allow Ms. Lee to ask her 
questions. There are about 2 minutes left in this vote.
    Ms. Lee. Thank you very much, Mr. Chairman.
    Welcome. This has been a very important panel, and thank 
you very much for your testimony.
    A couple of things. I think my question should be directed 
to General Fields.
    There was a New York Times article June 6th that cites 
Afghan and NATO officials contended that some security 
contractors or that companies at least have been charged with 
defending U.S. and NATO interests. They funneled money directly 
to the Taliban not to attack convoys or other targets, and in 
at least one case there is suspicion of a contractor compelling 
the Taliban to attack NATO forces in order to delegitimize 
competitors.
    Do you know about this? As we continue to increase our 
footprint in Afghanistan and spend billions of dollars to 
support this war, which, of course, I opposed from day one, are 
we entrenching a corruption economy which overshadows our work 
to foster development, if those reports are accurate?
    And, secondly, let me just ask you, I think earlier you 
reported that about 40 percent of your investigations involve 
procurement fraud. Is that accurate? In your experience, what 
recourse has been taken against those contractors? Has anyone 
gone to jail or prison for trying to defraud the U.S. 
Government?
    General Fields. Thank you very much.
    We have investigations under way in a number of areas. 
Fraud is one of the principal ones that we have ongoing and 
have investigated in the past.
    Yes, our investigations working in conjunction with other 
Federal agencies have resulted in either the recovery of money 
or in conjunction therewith of individuals who were found 
guilty having actually gone to jail. So there have been results 
of our efforts in that regard.
    Regarding the private security contracts and matters 
relating to money somehow finding its way to the Taliban and 
ultimately used perhaps against our U.S. interests, I am aware 
of these matters, but we have not investigated these matters to 
the full measure, and so I am not prepared to answer at the 
depth and breadth of your question that otherwise I would like 
to at this time.
    Ms. Lee. Thank you very much.
    Are you going to investigate these matters? Because it 
seems to me that if this investigation shows that these 
allegations are accurate, then we really do need to look at how 
we are fueling or funding this type of corruption economy if we 
just let that pass, if these reports are true.
    General Fields. Yes, we do plan to investigate those 
matters that we feel fall within our purview. And to some 
extent, we have at least audit work under way examining the 
process by which private security contractors arrive at their 
contracts and the mechanisms through which these contracts are 
executed in support of our reconstruction effort.
    I can assure you that as these matters continue to develop 
and I continue to build my investigator capacity we will focus 
on these matters.
    Ms. Lee. Thank you.
    And then if you find that the money has been funneled to 
the Taliban, who takes that on next? What is the next step in 
the process?
    General Fields. Well, our process works like this. If we 
take on this particular investigation--this is a hypothetical--
we conduct it to its full measure, just as any criminal 
investigation would be conducted in the FBI and other Federal 
agencies within our own community. We will determine who the 
alleged guilty folks are. We hand off those matters in the case 
of those relating to the U.S. justice system to the Department 
of Justice; and then we follow up, of course, to ensure that 
those matters are carried to the full measure. But once we hand 
them off, they are essentially in the hands of the Department 
of Justice.
    In the case of Afghanistan, it is another situation. There 
are not rules currently in place that very easily transfer an 
investigation from the hands of a U.S. entity to the Afghans 
with the assurance that the appropriate measures will follow 
and the guilty parties are brought to justice.
    Ms. Lee. Thank you very much, Mr. Chairman.
    Mr. Jackson. Mr. Rothman.
    Mr. Rothman. Thank you, Mr. Chairman. Thank you, gentlemen, 
for appearing here today and thank you for your careers of 
public service.
    I would like to start with the General, please.
    If your written testimony, I believe it says that from 
fiscal year 2002 through fiscal year 2010, excluding the 
supplemental, $51.5 billion have been spent to rebuild 
Afghanistan, 51.5 billion. Just doing a simple division, it 
comes to, I think, about $6.5 billion a year, on average. Has 
the amount of money to rebuild Afghanistan, using your words, 
has that increased? Has it remained flat? What has it been like 
in the 2 years, General, that you have been in charge?
    General Fields. The amount of money really has increased 
during the 2 years that I have been in this office. But going 
really back to just a bit beyond that, I believe we began to 
seriously invest in Afghanistan around 2005.
    Mr. Rothman. Sir, in the last 2 years, what would you say 
the number is? And I don't mean just money for reconstruction. 
I mean, as you divided it, it appeared to me, money for 
governance, and I forget the other term you used.
    General Fields. Development was the other term.
    Mr. Rothman. Governance and development and then you 
ascribed the other half or other portion to security to back up 
the governance and the other item.
    But to me, since one requires the other, both halves should 
be considered in one total sum as the expenditure we are making 
for reconstruction. So in the last 2 years, sir, what is the 
average of those per year?
    General Fields. Yes, sir. I don't know if I have an average 
for each of those individual sectors.
    Mr. Rothman. For reconstruction, sir.
    General Fields. Yes, sir. Exactly. But just to preface my 
comment here, there are three areas which define reconstruction 
in Afghanistan: security, governance, and development.
    Mr. Rothman. I understand. I only have 5 minutes. So could 
you give me the answer, please? I understand what is within 
your definition of reconstruction. For the total amount of 
reconstruction, including those three, what is the dollar 
figure, please?
    General Fields. Yes, sir. When I took over this position, 
the figure of expenditure in Afghanistan between 2002 and 2008 
was at $32 million. That figure is now--I am sorry, $32 
billion. That figure is now $51.5 billion. So within that 2-
year period, we have----
    Mr. Rothman. It is about $10 billion a year, sir, is that 
the answer?
    General Fields. Yes, sir.
    Mr. Rothman. Okay, so $10 billion a year.
    You talked about your dismay, and I share it with you, that 
there was lack of visibility of the money we have given, no 
integrated system. And it has been several years now since the 
new team is on board, which disappoints me that we still don't 
have an integrated system. The high turnover of staff, which no 
one has apprised me that that is going to be changing, that 
there will be more permanence to the staff. So that is $10 
billion a year. How many more years do you think it will take 
before Afghanistan will be reconstructed to the extent the 
administration is requiring before we can cease these kinds of 
expenditures of $10 billion a year?
    General Fields. Sir, I do not have an answer for your 
question.
    Mr. Rothman. Will it be 3 years, General?
    General Fields. Yes, sir. I will tell you, sir, because we 
did not begin with the capacity building effort in Afghanistan 
back in 2002----
    Mr. Rothman. I heard that, sir.
    General Fields. We are just turning 2 on that regard. It is 
going to take another 10 years.
    Mr. Rothman. So 10 years. Would you say at a minimum of $10 
billion a year for reconstruction or would it be greater than 
$10 billion a year?
    General Fields. I don't know the answer there either, sir. 
However, we can maximize the money that we are currently 
providing for reconstruction in Afghanistan by better oversight 
and better accountability.
    Mr. Rothman. Would you guess it would be a lot less than 
$10 billion a year?
    General Fields. I will tell you, sir, it could be a lot 
less than $10 billion a year.
    Mr. Rothman. Do you expect that within the next 5 years to 
be less than $10 billion a year?
    General Fields. I don't know, sir. But----
    Mr. Rothman. If you had to guess.
    General Fields. I would guess it could be, yes, sir.
    Mr. Rothman. It could be.
    General Fields. If we work harder at what we do and 
maximize the dollars that we are providing to Afghanistan.
    Mr. Rothman. Less than $5 billion?
    General Fields. Again, sir, I must say that----
    Mr. Rothman. General, my point is I am trying to get my 
head around this for my constituents who say, $50 billion over 
8 years, we could have used that here in the United States of 
America. You said that for the first 6 years before your 
appointment that money was not spent wisely, not accounted for, 
and you are hoping to do things better but foresee 10 more 
years of billions of dollars, if not tens or $50 billion more 
of an investment. And I am wondering, do you think 10 years 
will do it? Can you guarantee that?
    General Fields. I cannot guarantee it, sir, but I will tell 
you that I think, given what I have seen so far, it is going to 
take another no less than 5 to 10 years to move Afghanistan 
really where we feel it needs to be for us to seriously begin 
to disconnect our support for Afghanistan.
    Mr. Rothman. Given the present policy objectives?
    General Fields. Well, as I understand the President's 
policy objectives, it is to commence some level of 
disengagement in terms of----
    Mr. Rothman. No, I mean what we want Afghanistan to look 
like--I am sorry, Mr. Chairman--what we want it to look like. 
If we change our notion of what we want Afghanistan to look 
like, then we may be able to spend less and get out faster.
    I yield back. I know you have given me extra time. Thank 
you, Mr. Chairman.
    Mr. Jackson. The second round of questioning. Ms. Granger.
    Ms. Granger. Excuse me--I had to go vote--if this was 
answered, but I don't believe it is. You were talking about a 
corruption plan, a plan to eliminate the corruption or at least 
approach to a reasonable extent corruption that is a plan that 
is sitting on someone's desk, right? So we have a plan that is 
sitting on somebody's desk. We are dealing with a country that 
has had a tradition of corruption, but we are saying Afghan 
first. That is this administration's plan.
    So building capacity is one thing, but, right now, we are 
talking about enormous amounts of money. And what we are doing, 
it sounds to me, is we are auditing as it is done to say, well, 
was it done wrong, instead of putting a plan together to say, 
how do we ensure that whatever amount of money that we send or 
whatever we do with these programs in building capacity that 
there is an oversight that is reasonable.
    Who in the opinion of the three of you should be--who is 
the most capable of that oversight? If you are saying Afghans 
first, then we are saying Afghan auditors. Are there auditors 
there that are trained and that are capable of doing that? Who 
should be doing this?
    General Fields. I think it should take place on multiple 
dimensions.
    First, the very officers represented at this table in terms 
of their carrying out their interest of the United States, I 
think we should be leading that effort. And, thus far, with my 
office being a new office stood up only in 2008 that should 
have been stood up in 2002, I appreciate the funding that you 
have provided to me to get my work done. And so we will 
continue to build our staff to increase our capacity to answer 
your mail, Representative Granger, in that regard.
    But, at the same time, we are also peering into the 
institutions of Afghanistan. Again, let me go back to the 
Office of Comptroller Audit Office or the Auditor General's 
Office of Afghanistan, the High Office of Oversight. Those 
institutions must be built to their maximum extent so that they 
can really lead this effort. So it is the synergy that should 
result from the Afghans doing their part and certainly the 
United States doing ours.
    Mr. Gambatesa. One area that I have been told could be done 
is the pay for civil servants in Afghanistan is very low; and 
increasing their pay could, in fact, eliminate some of the 
problems of taking bribes, things like that.
    The other thing that I have been told is that the Afghan 
National Police started getting their pay through electronic 
means, and apparently their paychecks or their cash would be 
skimmed by their bosses, things like that that went on.
    So those two things could help increase or decrease the 
amount of corruption, at least at a certain level.
    Mr. Johnson. I would like to add that it is hearings like 
this that help ensure oversight of our efforts in Afghanistan 
and continuing these types of hearings as well as the work that 
we all do at this table.
    But, more importantly, the administration has to move 
forward, given its assessments that it has done of corruption 
in Afghanistan, and actually put controls in place, tie those 
controls to our investment of our U.S. dollars.
    But, as General Fields noted it is going to take a 
concerted effort on the part of the Afghan Government to move 
forward and to take some action with respect to corruption in 
particular.
    Ms. Granger. There is also something called a ``civilian 
uplift'' that this Congress has provided funds to triple the 
civilian staff in Afghanistan since January of 2009. They are 
in Kabul. They are out in the field. Is this enormous, a 
tripling of the staff, or do they have the right skill sets? 
Are they in place to do oversight within the country?
    General Fields. We don't know at this time, and that is why 
my office, SIGAR, is conducting an audit that is already under 
way. We are working with the State Department, the Department 
of Justice, Treasury, Health and Human Services, and Homeland 
Security to define whether or not--and certainly the Department 
of Agriculture--to define whether or not the quantity and 
quality of civilians being infused into Afghanistan are of the 
appropriate number to ensure that our strategic interests are 
carried out.
    We are also going to determine the extent to which, once 
these women and men arrive in Afghanistan, are they all hurdled 
in Kabul in a safe environment or are they out in the interior 
of Afghanistan working with the districts, the provinces, the 
provincial reconstruction teams, the councils and so forth to 
carry out their respective work?
    Mr. Johnson. If I may add, GAO has a similar engagement 
under way, and we have coordinated with our SIGAR counterparts 
as well, looking specifically at the civilian uplift in 
Afghanistan.
    One thing we are going to focus specifically on is the 
requirements that have been identified to see if a part of 
those requirements include making sure folks who are going to 
be overseeing U.S. programs are going to be a part of the 
civilian surge, not just those implementing the program but 
those who are going to be ensuring proper oversight and 
management of our programs, that those individuals are in place 
as well.
    Mr. Gambatesa. As General Fields mentioned, that if the new 
people coming in don't have the ability to get out in the 
field, then the effectiveness will be minimized.
    Also, there is a question of whether they--I am speaking 
for USAID now--whether the individuals who are in this surge 
have the requisite skills and training to take on these 
positions.
    I think what we have seen, and this has gone on so long for 
a number of years, that many of the staff are going back for 
the second and third time, and I guess thus far for the most 
part it has been fairly voluntary. I don't think the agency--
don't hold me to that; I am not positive--but I don't think 
they have had to assign someone without their volunteering.
    I think what they are seeing is they have a lot of new 
individuals coming in who may be not as experienced as others, 
and I think what you are seeing is what we are seeing is a lot 
of the newer people who are less experienced volunteering to go 
to places like Afghanistan and Iraq and Pakistan who don't 
really have as much experience as the others.
    I think there is going to be a burnout factor eventually of 
people going year after year. Eventually, they are going to 
come back around and have to go time and time again. I think 
that is going to be a problem in the future.
    Ms. Granger. Thank you, Madam Chair.
    Mrs. Lowey [presiding]. Mr. Moran.
    Mr. Moran. I thank you, Madam Chairwoman.
    Let me first address USAID Inspector General.
    You found this year that it was a 5-year program to build 
1,400 structures and, in fact, the structures that were built 
were defective. They need to be rebuilt due to a lack of 
engineering capacity and technical skills. This is not 
dissimilar from what you found 5 years ago, that the completion 
of road building projects were insufficient, inadequate. 
Basically, the construction was faulty and had to be redone; 
and AID-built schools and administrative buildings were either 
not completed or not even usable.
    Part of the problem is that we apparently are contracting 
with people with very limited capability to carry out the 
projects that they are assigned and paid to carry out. 
Personally, I feel it is very important that we give the Afghan 
people and their own indigenous companies an opportunity to 
compete and to construct the stuff themselves. On the other 
hand, if we are paying for it, it needs to be the kind of 
structure that will last and doesn't have to be rebuilt.
    But a lot of the contracts are going to non-U.S. firms that 
are simply exploiting the situation, making enormous sums of 
money and, in fact, are able to win competitive bids because 
they act in an uncompetitive field where they don't have to pay 
the kind of taxes that U.S. firms have to pay. They don't have 
the personnel standards, whether it be safety or overtime or 
insurance or any of that stuff. And so their costs are 
substantially less, plus the fact that they don't hire the 
qualified personnel that come at some price. If they are hiring 
unskilled people to do skilled labor, well, obviously, their 
costs are going to be less. And what is happening is they are 
making enormous profit margins is what I understand.
    One of the things we have done is to give a preference to 
firms so that more professional, competent, dependable firms 
can get this work done. We did that in other areas. We did that 
in Iraq, for example, finally. I think it was a 20 percent 
preference. We don't do that in the CENTCOM area now I 
understand. Do you think that would be a good idea?
    Mr. Gambatesa. I am sorry. As far as CENTCOM----
    Mr. Moran. Central Command area, that would include 
Afghanistan.
    Mr. Gambatesa. So you are not talking military. You are 
talking civilian.
    Mr. Moran. Right, I am just talking about a regional, an 
area, and that seemed to be the best. Because that is why we 
are there. Because it is part of CENTCOM's responsibility. We 
are there for a military purpose, unfortunately, more than an 
economic development purpose.
    But I am wondering whether USAID thinks that that would be 
a good idea to take that into consideration. We are paying 
firms that aren't getting the work done. We are paying them 
much more than they are worth, frankly, given the quality of 
the workmanship.
    Mr. Gambatesa. I think the strategy of the administration 
or the government is to develop the capabilities of indigenous 
organizations, and so I think that is the reason that they have 
done that through local subcontractors. But I am not certain of 
the question, sir.
    Mr. Moran. If we want the work done, sometimes you need to 
hire people that have experience in doing the work with a 
certain skill set. That skill set comes at a price. It is 
impossible for many firms with that skill set to competitively 
bid these projects if they are bidding against firms that don't 
have experienced engineers, that don't have a record of quality 
performance, that don't have to pay taxes or abide by the 
normal rules that we apply to our contractors. And so what we 
did, finally, in Iraq to get quality product, and we have done 
it in many other places, is to give what is called a 
preference. Basically, it came to a 20 percent preference. If 
you can show that you can do the work for 20 percent or less 
money over and above what less qualified contractors are doing, 
then you can still compete.
    Would you consider that to be some reasonable approach?
    Mr. Gambatesa. I think so. But, as I said earlier, I am not 
certain that the administration is going in that direction, but 
I agree.
    Mr. Moran. I know they are not. But sometimes they go in 
the direction that is pointed out through oversight reports 
that this may be a recommendation. Part of your job 
responsibility is to--when you find problems, you recommend 
solutions, don't you?
    Mr. Gambatesa. Yes, sir.
    Mr. Moran. And the fact is we are getting an enormous 
amount of deficient structures and roads and infrastructure 
that is built. And I grant we need to be developing the 
capability of the Afghan people. But what is happening is all 
we are doing is developing the wealth of the elite who know 
enough to bid on these contracts, and then they hire people who 
are unskilled, they do a slipshod job that has to be rebuilt, 
they take the money, and a lot of that money is the money that 
Chairwoman Lowey is pointing out is going out of the country.
    A hell of a lot is in this Sherpur district, where if you 
walk into the community you see these mansions; and many of 
these people that own these mansions are the very people that 
are making these contracts and taking enormous profit margins 
off the top because they represent the very small sliver of 
educated, savvy people who are wheelers and dealers and who we 
will trust to engage in contracts with us.
    So something has to be done. Something has to be changed.
    Mr. Gambatesa. I don't disagree with you. The only recourse 
that USAID would have is through the prime contractor to 
recover funding, and we have done that in some cases where we 
sent bills of collection to subcontractors who have not 
performed where the agency has recovered funding that way. But 
I agree that certainly the----
    Mr. Moran. The construction work that we are paying for is 
miserable in too many cases.
    Madam Chairman, I would just like to ask these members--and 
it is a yes-or-no answer--are you aware that in order to 
deliver fuel and supplies in many parts of Afghanistan we are 
paying the Taliban personnel for safe passage? Are you aware of 
that? Yes or no.
    Mr. Gambatesa. I have heard of it, yes.
    Mr. Moran. You have heard that.
    Mr. Johnson. Same thing, we have heard that, but we don't 
have the evidence.
    General Fields. Same here, sir. I have heard of it.
    Mr. Moran. You have heard it, but you have no direct 
evidence?
    General Fields. That is correct, sir.
    Mr. Moran. Madam Chairwoman, we have direct evidence. We 
are partially financing the Taliban to get safe passage of our 
materials, particularly fuel, to where we need it to go.
    Mrs. Lowey. I would just like to say to the panel and to 
Mr. Moran before I turn to Mr. Kirk, the purpose of this 
hearing, which encouraged by the State Department, is as we 
move forward to support our strategy to support your work and 
make the improvements and the changes that are necessary so we 
can safeguard taxpayer dollars and also focus on our mission. 
So I thank you.
    Mr. Kirk.
    Mr. Kirk. Thank you, Madam Chair. I want to thank you very 
much for holding the hearing.
    I want to say that in my view, right now, our key objective 
in Afghanistan for the next couple of months is the success of 
General Petraeus' operation in Kandahar; and I want to make 
sure that we are moving this committee and our policy forward 
to make that Kandahar operation a success.
    I note that Republicans on the committee sent a letter to 
the chair on July 7th wanting Ambassador Eikenberry to testify 
before us via teleconference. I think he is our critical State 
Department National Security Memorandum 32 man on the ground, 
and I hope the committee is able to hear from him.
    Mrs. Lowey. If I can interrupt for just a moment, did you 
get a copy of the response I sent to the letter?
    Mr. Kirk. I haven't. I hope it was yes.
    Mrs. Lowey. Well, the letter made some other points, too; 
and I hope you get a copy. Otherwise, we will send it to you.
    I have been in touch with Ambassador Eikenberry, and I also 
have been in touch with the Secretary of State and others, and 
we are trying to make all this happen.
    Mr. Kirk. Right.
    Last month, the DOD set up Task Force 2010 to ensure funds 
spent by coalition forces are achieving their intended purpose. 
One aspect will be a particular focus on the flow of dollars to 
the subcontractor level. For example, there has been a concern 
about the Sherzi contractors or the Ahmed Wali contractors, 
many different entities which may or may not be controlled by 
them.
    My understanding is State and USAID are not part of Task 
Force 2010, but the IGs and GAO have raised questions about 
similar problems that may exist in the contracting and grant 
process. In particular, one of the USAID contractors, one of 
their largest, is called Development Associates International, 
DAI, and they fired 10 staff on June 16th because of 
allegations of soliciting kickbacks. Do you have any 
information on why State and USAID are not part of Task Force 
2010, and do you think they should participate?
    Mr. Gambatesa. My understanding is they are part of Task 
Force 2010. I didn't attend the briefing, but apparently a 
handout was given that shows USAID on the chart here. So I am 
assuming they are.
    Mr. Kirk. Good.
    On this tracking of funds--and this is both for General 
Fields and you--is there a way to track subcontractors and 
subgrantees? Because especially on the DOD side we have a large 
number of construction or security companies that may or may 
not actually be owned by the same guy, Sherzi and Karzai being 
the ones in the south.
    Do you yet have a wiring diagram of all of these various 
companies and who actually owns them?
    General Fields. SIGAR does not, sir, but we have had under 
way for quite some time and we are pretty close to reporting 
out a complete assessment of the contracting situation in 
Afghanistan.
    We don't know, for example, the United States--at least 
SIGAR doesn't know and no one has been thus far able to tell us 
how many contractors we have in Afghanistan. So we are doing 
that by way of an audit on which we will report out in the near 
term.
    Mr. Kirk. And will that audit also include who actually 
owns and controls these entities? Because while it seems like 
they have a number of names, there has been talk that maybe a 
whole bunch of them are just controlled by one or the other 
family.
    General Fields. Sir, I am inclined to say that this audit 
will reveal some of that information.
    But the contracting network in Afghanistan is a very 
complicated one, particularly given the cascading nature of 
prime to other subordinates or subcontractors. But I am 
inclined to say, sir, that our investigation and our audit will 
reveal some of that which may bring light to your question.
    Mr. Kirk. My last question. I have been very involved and 
this committee has assisted me in looking at the problem of 
electrical power for Kandahar. We have a severe military 
constraint on delivering electricity generated by the Kajaki 
Dam all the way to Kandahar. And my understanding--correct me 
if I am wrong--is the British have largely given up on this 
mission and the United States has not taken up this mission of 
actually getting Kajaki electricity to Kandahar.
    The New York Times seems to have reported General Petraeus 
has backed the Kajaki power project, and so he is going to be 
using a substantial amount of SERP funds to make this happen so 
at least Kandahar can generate electrical power.
    Have you seen the Wall Street Journal reports that, of what 
Kajaki power is being generated, it is being delivered to 
districts controlled by the Taliban and the Taliban actually 
collects the payment for the Kajaki electricity?
    General Fields. Yes, sir, I have read and I have an 
appreciation for that article. I do not know the depth and 
breadth of the extent to which the electricity is, in fact, 
being siphoned off or distributed by way of Taliban.
    I will tell you that I have been to Kajaki. It is one of 
the major generating energy networks of Afghanistan. It is a 
very dangerous place. They have improved it since I was there 
about a year ago. It is now doubled in output, as acknowledged 
in the article. There are three generators there, two 
operational, as I am being informed, but the other is in peril 
right now and no clear way ahead, and I trust that General 
Petraeus and others might turn to to fulfill this engagement.
    Mr. Kirk. My hope is after Kandahar. But it might be a good 
line of inquiry, because the Wall Street Journal has 
highlighted this, an estimate of how much money the Taliban is 
collecting from electricity generated from this very USAID 
project.
    General Fields. Yes, sir.
    Mr. Kirk. Thank you, Madam Chair.
    Mrs. Lowey. Well, before I ask another question, I just 
want to thank the gentleman for bringing up this issue.
    It is my understanding that the reason they have not been 
able to continue work on the Kajaki Dam is because of security 
issues; and, therefore, General Petraeus has gotten two 
additional generators to provide electricity so they can 
accomplish the mission but continues to support the efforts if 
and when they can work on it.
    But I would suggest that there are important allegations in 
the Wall Street Journal article and we would all appreciate 
additional work to get to the bottom of it. I think this is an 
important issue, and we look forward to continuing the 
discussion.
    Thank you.
    Mr. Moran. Would the gentlelady yield for a moment?
    Mrs. Lowey. I would be happy to.
    Mr. Moran. It is relevant to this.
    I wonder if there was to be further investigation in this 
area of basically our supporting the Taliban indirectly if they 
might also look at the money that is going to the Taliban just 
for safe passage of fuel and supplies.
    Mrs. Lowey. Absolutely. And I would say to Mr. Moran it is 
my understanding that--and Mr. Kirk is probably aware of this--
there was a lively discussion between USAID and Defense, 
between USAID and probably McChrystal and now Petraeus, as to 
whether to provide those additional generators. Because they 
were concerned about exactly what you are saying would happen, 
the electricity would be siphoned off by the Taliban.
    So I think a decision was made that they had to do the 
electricity even though some of the power would be siphoned off 
from by the Taliban, and this is the concern with the Kajaki 
Dam as well.
    Mr. Kirk. Would the gentlelady yield? It is important that 
we are talking about two separate projects. Kajaki Dam is in 
Helmand Province, and the problem is the power can't get to 
Kandahar Province.
    Mrs. Lowey. But if you cut it off you would lose the 15 
percent power that you are already getting from the Kajaki Dam. 
So the question is, can you increase the power at the Kajaki 
Dam? But security problems, as I understand it, have been 
preventing that; and, therefore, General Petraeus made his 
decision to back the new project.
    Mr. Kirk. That is exactly right.
    Mrs. Lowey. So, obviously, we are coming to a close. I 
would like to add some additional questions, but I am hoping 
that we can continue this dialogue. And we will certainly have 
representatives from State to continue the dialogue in the 
following weeks and have additional briefings. But I am sure, 
given the work that you are currently doing, you are very much 
aware of all the challenges.
    I would like to close.
    I would like to make a couple of points.
    First of all, there was an issue before on multilateral 
funds. And we know that multilateral funds have been an issue, 
as Mr. Fields has said, for many years. And based on these 
concerns, the ARTF has multiple layers of auditing, I want to 
clarify that, some done by the World Bank itself, others done 
by private accounting firms led by the Norwegians in this case, 
and USAID also has the ability to audit projects and ministries 
funded by the ARTF and I expect USAID and USAID's IG to do 
additional programmatic and financial audits of this sort.
    I would just like to say, Mr. Gambatesa, there have been 
some concerns about the dialogue we had previously and if you 
can clarify that in follow-up briefings. But USAID does have 
the authority, based upon the information I have, and the 
ability to audit projects and ministries funded by the ARTF, 
and I expect that USAID will do additional programmatic and 
financial audits of this sort.
    If we are spending hundreds of millions of dollars as our 
contribution to ARTF, then we must have the ability to audit. 
We do have the ability to audit, and I would like some 
additional clarification of what we have audited, and what we 
intend to audit. If we are going to increase our contributions, 
this Committee is not going to be too happy if we don't know 
that these dollars are being audited.
    So why don't I go to Ms. Granger next for an additional 
question, and then I have--do you have an additional question, 
Mr. Moran?
    Mr. Moran. No, I am fine. I think we have made our points. 
Thank you, Madam Chairwoman.
    Mrs. Lowey. Thank you.
    Ms. Granger, I have a final question.
    Ms. Granger. I have one question.
    State and USAID have unique personnel structures in 
Washington and then in the field. And, for example, there are 
two additional State Department officials serving with the rank 
of ambassador for development and rule of law activities. This 
is in addition to the USAID mission director. So in Washington 
we have Ambassador Holbrooke's office at State and a Task Force 
at USAID that is in the process of transforming into a 
permanent Afghanistan/Pakistan office. So when we are talking 
about anti-corruption, the anti-corruption efforts are 
addressed by both of those agencies and then several other 
agencies.
    My question is, with so many actors in this, isn't there a 
risk of getting mired down in passing the buck or that some of 
the issues that really we are coming back to over and over 
about anti-corruption, who is responsible? And how are we going 
to oversee this as we move into Afghanistan and, as you said, 
do things that have not been done before?
    General Fields. First, I am pleased that the Embassy, in 
conjunction with other communities, has in fact focused on the 
anti-corruption issue. While I say there is a plan, I am really 
saying that there is a strategy that is under way. The 
refinement of that plan I feel under the leadership of the 
Ambassador, who is now overseeing that subset of the 
implementation, I think that will help lead to better answer 
some of your concerns.
    I might also point out that GAO published a report recently 
that addressed a number of strategies and programs that are 
being executed by the United States and international community 
in Afghanistan. My question would be, to what extent are those 
programs coordinated of which anti-corruption I am confident 
would be a subset? And we will look into those matters and 
report accordingly.
    Mrs. Lowey. Thank you very much.
    And I just want to say, in closing, I am very glad that the 
Defense Department and Mr. Moran, we are fortunate to have him 
here as a member of both committees, because he offers a wealth 
of information. And we are counting on both the Defense 
Department and USAID to look carefully at where our tax dollar 
money is going. And I appreciate that.
    As a final question, I would like you to tell us where you 
believe there has been progress made with U.S. assistance 
funding, what are the most significant gaps, where do you 
believe programs must be scaled up if we are going to see 
success in Afghanistan and do additional programmatic and 
financial audits of this sort? Are you planning them? Where are 
they going?
    We hear of programs that are extremely successful, both on 
the civilian side and the military side. Both the civilian and 
military side have to safeguard our taxpayer dollars. Perhaps 
you can share with us some of the changes that have been made--
and I would expect each of you respond--some of the changes 
that have been made. What is posited? If we are going to see 
success, where do you believe programs must be scaled up and 
what additional steps should we be taking?
    Mr. Johnson. I will take the first stab at that.
    The one area that we have reported on that we have seen 
progress in is the fact that the U.S. Government now has 
identified a specific strategy for Afghanistan and has 
developed an integrated civilian military coordinated plan for 
Afghanistan, something that didn't exist before, to help guide 
our efforts in Afghan. So we were quite pleased----
    Mrs. Lowey. It didn't exist since we were there in 2002?
    Mr. Johnson. On multiple occasions we requested those 
documents, and they were never able to be produced by the--
previously. But we were quite pleased to see that those things 
are now in place to help guide our efforts and that there is an 
ongoing effort to continue to update those and to work in a 
coordinated fashion among our various different elements of 
national power in the U.S. Government to do that.
    I would say that the one area that I think needs to be 
scaled up more so, and this hearing in particular addresses 
that, is the issue of Afghan Government capacity to address 
corruption issues in particular and to make sure that we have 
controls in place over all the money and the investment we are 
putting in Afghanistan.
    In terms of our plans going forward, as I noted earlier, 
GAO has initiated a review looking at what we are doing to 
certify the Afghan ministries and also look at what we are 
doing to make sure the money that we may be giving directly to 
the Afghan Government, if it goes in that direction, has proper 
controls in place, that we are building in those controls. So 
we are looking at that in particular.
    Mrs. Lowey. Thank you.
    Mr. Gambatesa. Well, I believe I mentioned earlier that for 
USAID they really need to increase the number of personnel in-
country, the properly trained staff persons in-country to 
oversee these programs. I have discussed this with 
Administrator Shaw, and he is committed to increased oversight 
and monitoring the evaluation. I am sure when he testifies next 
week or the following week, whenever it is, he will basically 
talk about some of that.
    Again, I mentioned the direct assistance issues. I think 
that if the direct assistance to Afghanistan is in the form of 
specific projects, we have much better oversight, the agency 
has much better oversight, rather than direct budget support.
    The other issue I mentioned is in this contracting issue of 
subcontracting and too many subcontractors and you lose control 
when you have subs of subs of subs and you get to the point 
where the prime has really no idea of what this third sub down 
the road is doing, and I think that is the other thing we 
should try to limit.
    My staff tells me that there has been improvement, that 
there has been some progress, and we are certainly not there 
yet. But I think it is improving to a small degree.
    Mrs. Lowey. Mr. Fields.
    General Fields. Thank you.
    The two that I will address, one, I think the civilian 
surge that is currently under way is a good idea. During my 
most recent visit to Afghanistan, which was in May, I have seen 
evidence really of the civilian surge actually taking hold. We 
are not there with appropriate numbers, we are not there yet 
with the distribution of those civilians, but our audit work 
will bear this out.
    The other point, as I have emphasized earlier, if we are 
concerned now about anti-corruption, we need to focus money in 
that direction. I think it is shameful, really, that over the 
course of our investment of $51.5 billion we have invested, the 
United States, only $1 million towards the support to the High 
Office of Oversight. This needs to change, and that is a 
recommendation I would make to this committee by way of your 
appropriations capacity. The Control and Audit Office and the 
High Office of Oversight, they need capacity, and they need 
money with which to build it.
    Thank you.
    Mrs. Lowey. Well, I thank you very much.
    I have one last question. In hearing about and having had a 
brief discussion about Task Force 2010, do you expect there 
will be any coordination between the civilian and military 
efforts? Often they are working in the same communities on the 
same issues. One of my concerns since I have been in the 
government is the lack of coordination. You can be in any 
country, not just Afghanistan, and people are operating in 
their own I call them silos of excellence doing good work, but 
they don't even know each other.
    Now given the issue of corruption and given the allegations 
that have been reported, I am very interested in knowing 
whether you expect there will be coordination between this Task 
Force 2010 and the work you are doing?
    Yes, sir.
    Mr. Gambatesa. Yes, absolutely. We will be participating 
with 2010.
    As I mentioned earlier, we have already gone to an initial 
briefing with them. And their goal is obviously to look at this 
contracting in a more overall sense. So we will definitely be 
working with them to either input and to pull out what they may 
find.
    Mrs. Lowey. Mr. Johnson.
    Mr. Johnson. Yes, same here. With respect to work we are 
going to do on certifying the Afghan ministries, any corruption 
work we do, we will be reaching out to Task Force 2010.
    General Fields. SIGAR has met with and has briefed the 
commander of the Task Force. We intend to work with them 
consistent with the mandate that we must follow to remain 
independent, but certainly we have mutual interests, and we 
will work with the Task Force to the maximum extent possible.
    Mrs. Lowey. Thank you very much. As you can see, there is 
support on both sides of the aisle for the work you are doing, 
and we are all focused on success in Afghanistan. And in my 
judgment and I know in the judgment of my ranking member, work 
on these issues that have been highlighted in our hearing today 
are critical to that success.
    Thank you very much.
    [GRAPHIC] [TIFF OMITTED] T6402C.045
    
    [GRAPHIC] [TIFF OMITTED] T6402C.046
    
    [GRAPHIC] [TIFF OMITTED] T6402C.047
    
    [GRAPHIC] [TIFF OMITTED] T6402C.048
    
    [GRAPHIC] [TIFF OMITTED] T6402C.049
    
    [GRAPHIC] [TIFF OMITTED] T6402C.050
    
    [GRAPHIC] [TIFF OMITTED] T6402C.051
    
    [GRAPHIC] [TIFF OMITTED] T6402C.052
    
    [GRAPHIC] [TIFF OMITTED] T6402C.053
    
    [GRAPHIC] [TIFF OMITTED] T6402C.054
    
    [GRAPHIC] [TIFF OMITTED] T6402C.055
    
    [GRAPHIC] [TIFF OMITTED] T6402C.056
    
    [GRAPHIC] [TIFF OMITTED] T6402C.057
    
    [GRAPHIC] [TIFF OMITTED] T6402C.058
    
    [GRAPHIC] [TIFF OMITTED] T6402C.059
    
    [GRAPHIC] [TIFF OMITTED] T6402C.060
    
    [GRAPHIC] [TIFF OMITTED] T6402C.061
    
    [GRAPHIC] [TIFF OMITTED] T6402C.062
    
    [GRAPHIC] [TIFF OMITTED] T6402C.063
    
    [GRAPHIC] [TIFF OMITTED] T6402C.064
    
    [GRAPHIC] [TIFF OMITTED] T6402C.065
    
    [GRAPHIC] [TIFF OMITTED] T6402C.066
    
    [GRAPHIC] [TIFF OMITTED] T6402C.067
    
    [GRAPHIC] [TIFF OMITTED] T6402C.068
    
    [GRAPHIC] [TIFF OMITTED] T6402C.069
    
    [GRAPHIC] [TIFF OMITTED] T6402C.070
    
    [GRAPHIC] [TIFF OMITTED] T6402C.071
    
    [GRAPHIC] [TIFF OMITTED] T6402C.072
    
    [GRAPHIC] [TIFF OMITTED] T6402C.073
    
    [GRAPHIC] [TIFF OMITTED] T6402C.074
    
    [GRAPHIC] [TIFF OMITTED] T6402C.075
    
    [GRAPHIC] [TIFF OMITTED] T6402C.076
    
    [GRAPHIC] [TIFF OMITTED] T6402C.077
    
    [GRAPHIC] [TIFF OMITTED] T6402C.078
    
    [GRAPHIC] [TIFF OMITTED] T6402C.079
    
    [GRAPHIC] [TIFF OMITTED] T6402C.080
    
    [GRAPHIC] [TIFF OMITTED] T6402C.081
    
    [GRAPHIC] [TIFF OMITTED] T6402C.082
    
    [GRAPHIC] [TIFF OMITTED] T6402C.083
    
    [GRAPHIC] [TIFF OMITTED] T6402C.084
    
    [GRAPHIC] [TIFF OMITTED] T6402C.085
    
    [GRAPHIC] [TIFF OMITTED] T6402C.086
    
    [GRAPHIC] [TIFF OMITTED] T6402C.087
    
    [GRAPHIC] [TIFF OMITTED] T6402C.088
    
    [GRAPHIC] [TIFF OMITTED] T6402C.089
    
    [GRAPHIC] [TIFF OMITTED] T6402C.090
    
    [GRAPHIC] [TIFF OMITTED] T6402C.091
    
                                          Wednesday, July 28, 2010.

         OVERSIGHT OF U.S. CIVILIAN ASSISTANCE FOR AFGHANISTAN

                               WITNESSES

RICHARD C. HOLBROOKE, SPECIAL REPRESENTATIVE FOR AFGHANISTAN AND 
    PAKISTAN
DR. RAJIV SHAH, ADMINISTRATOR, USAID

                 Opening Statement of Chairwoman Lowey

    Mrs. Lowey. Good morning. The Subcommittee will come to 
order. I am very pleased to welcome Ambassador Richard 
Holbrooke, the Special Representative for Afghanistan and 
Pakistan, and Dr. Raj Shah, the Administrator of the United 
States Agency for International Development (USAID), to share 
with us today the systems and processes to assure 
accountability of U.S. taxpayer funds, outline the joint U.S.-
Afghan strategy to combat corruption, and describe mechanisms 
to coordinate the U.S. civilian-military strategy. We 
understand the difficult environment in which the men and women 
in Afghanistan work, and we appreciate their and your 
commitment to this very crucial effort.
    Funding appropriated by this subcommittee for diplomacy, 
development and humanitarian programs plays a vital role in 
supporting our national security. Nowhere is this reality more 
evident than in Afghanistan, where the President has crafted an 
integrated civilian-military strategy to disrupt, dismantle and 
defeat al Qaeda.
    Recent media reports of rampant corruption, concerns about 
billions of dollars in cash leading to the Kabul airport, 
alleged influence peddling, reported interference with and 
obstruction of corruption investigations by Afghan officials 
led this Subcommittee to defer consideration of the fiscal year 
2011 request for funding for Afghanistan. Over the past 2 
weeks, this Subcommittee held a series of hearings, briefings 
and meetings to assess the media allegations, current oversight 
procedures, and steps the U.S. is taking to address 
accountability, transparency, and oversight gaps. This 
Subcommittee has worked quickly and diligently to help assure 
the American people that their hard-earned tax dollars are not 
being squandered or mismanaged.
    With sufficient unspent funds in the pipeline, this 
investigation has not delayed implementation of civilian 
programs in Afghanistan. Taking into account the total funding 
appropriated through fiscal year 2010, including yesterday's 
passage in the House of the Supplemental Appropriations Act for 
Fiscal Year 2010, there is funding, more than adequate funding 
in the pipeline, to continue development programs unabated 
through fiscal year 2011.
    Several themes have emerged from our investigation. First, 
despite efforts by our government and reformers within the 
Government of Afghanistan, corruption is endemic both at senior 
and civil service levels, and undermines our mission in the 
country.
    Second, oversight of programs by both the Afghan Government 
and the United States must be improved. Nearly everyone we 
heard from acknowledged the need for better trained 
investigators and auditors and for improved documentation of 
program goals and outcomes. As Secretary Clinton has stated, we 
must do a better job of monitoring and evaluating our contracts 
and grants to ensure they do not enable weak governance or 
inadvertently encourage corruption.
    Thirdly, there is a desperate need to increase the capacity 
of both the civil service and judicial systems at all levels of 
government. The legal foundations are weak. Ministry officials 
are untrained. Oversight entities lack the capability and 
independence to perform their tasks. This vacuum of capacity 
fosters a culture of influence peddling and political 
interference.
    Fourth, questions remain about the political will of 
President Karzai and the Government of Afghanistan to take the 
steps necessary for the civilian-military strategy to succeed.
    While failure in Afghanistan is not an option, success can 
only be achieved if we and our Afghan partners share common 
goals. For many months, President Karzai has been saying the 
right things but have he and his government taken the necessary 
implementation actions? For example, the cabinet approved a 
bill that established a Special Tribunal to try officials 
accused of graft. Do you believe that this Special Tribunal 
will be given the necessary independence to move forward in an 
effective manner? Will the Afghan Parliament act on the 
legislation in a timely manner? What has been the response of 
the Government of Afghanistan when confronted with evidence of 
interference in corruption cases?
    Just last week, the global community demonstrated its 
commitment to Afghanistan when nearly 70 representatives of 
foreign countries and organization attended the Kabul 
Conference. In a 10-page communique, the conference outlined 
dozens of commitments consistent with those proposed by 
President Karzai in his inaugural speech and at the London 
Conference to combat corruption and improve Afghan governance. 
How will the United States hold the Karzai government 
accountable to these commitments? What will the consequences be 
if the Afghan Government does not meet these goals?
    During our hearing with the Inspector General and GAO, one 
witness testified, our plan is that all levels should consider 
capacity development at the forefront of any engagement by the 
United States. As Afghans take the lead in managing their 
government, it is vital that they are trained in technical 
skills but also professional and ethical standards by which 
they are expected to adhere.
    Congress has provided hundreds of millions of dollars to 
increase the capacity of the Afghan Government and people. What 
has been achieved with this funding? Has the standard of the 
government's performance improved? Are finite goals and 
objectives in place? And are outcomes being evaluated to 
measure their success?
    Last week, Treasury representatives shared with us some 
positive steps to strengthen fiscal management within the 
Ministry of Finance. This progress has taken years because of 
the great challenges, including lack of capacity, which is a 
critical element for our success in light of the Kabul 
Conference commitment to funnel half of all assistance through 
the Afghan Government, yet we don't have years to wait. We need 
to aggressively pursue capacity building measures so the Afghan 
Government can expand effective governance. What conditions and 
benchmarks must Afghanistan meet prior to the provision of 50 
percent of funding through its ministries?
    Our long-term success hinges on our ability to combat 
corruption and ensure accountability for government 
expenditures, build a capable military and police force in a 
state that has never had one, create a viable legal and 
economic foundation that will provide a safe and prosperous 
future for the men, women and children of Afghanistan, and 
enable the Afghans to sustain the civilian assistance programs 
we are working so hard to establish.
    We have worked together. I want to continue to work with 
you both to ensure that we have the best prospects for success 
while assuring the American people that their funds are being 
spent in a transparent and accountable fashion.
    Before we proceed, I would like to turn to my ranking 
member, Kay Granger, for her statement.

                    Opening Statement of Ms. Granger

    Ms. Granger. Thank you, Madam Chair. Thank you for calling 
this hearing today on Oversight of U.S. Civilian Assistance for 
Afghanistan. The subcommittee has held, as you know, a series 
of hearings and briefings. Since our subcommittee markup, we 
have addressed a range of concerns, but many more important 
questions remain. As the subcommittee seeks answers, I remain 
committed to our efforts in Afghanistan because I believe they 
are critical for U.S. national security. At the same time, I am 
equally committed to ensuring that U.S. assistance is used as 
it was intended.
    I am interested in hearing from our witnesses today about 
how investment on the civilian side will contribute to overall 
success in Afghanistan. In addition, the subcommittee needs to 
know that mechanisms are in place to ensure that funds are 
being and will be spent properly. I would like to thank our 
witnesses today for being here. Both of you play a critical 
role in executing the civilian strategy in Afghanistan, and I 
thank you for your service.
    I believe the success of our civilian effort depends on 
three things. U.S. assistance programs must be focused on 
results. These funds must be spent in a transparent manner, as 
the chair said, free from corruption, waste, fraud and abuse; 
and we must be conducting our efforts alongside a reliable 
partner.
    Let me explain more fully. First, it must be clear that 
civilian investments are achieving tangible results. A focus on 
achieving measurable outcomes needs to be part of the culture 
in U.S. agencies. This should funnel all the way down to the 
implementers, the Afghan Government, contractors, grantees, 
international organizations, and the multiple levels of 
awardees below them. I know that Administrator Shah is 
committed to focus on monitoring an evaluation on USAID, and I 
hope that this is his top priority in Afghanistan.
    Next, it is critical that U.S. assistance is spent in a 
transparent way, free from corruption, waste, fraud and abuse. 
There are several elements of the administration's strategy 
that seem particularly vulnerable. My first concern is with the 
Afghan First Initiative. The administration plans to expand 
this initiative and send billions of dollars through the Afghan 
budget.
    While I certainly recognize the need to build the capacity 
of the Afghan Government, the ongoing allegations of corruption 
and illicit activity do not give me confidence that now is the 
time to subject U.S. funds to unnecessary risk. We must ensure 
that funds go to Afghan ministries for the right reasons and to 
achieve real results, not simply to meet an arbitrary goal of 
sending a certain percentage of assistance through the 
government.
    In addition to increasing aid to the Afghan Government, the 
administration also plans on channeling more funds to 
internationally managed trust funds, but it is still not clear 
to me that those funds can be properly overseen and audited by 
the U.S. Government.
    Another concern is whether U.S. staff are able to provide 
adequate oversight of assistance programs. This subcommittee 
has been quite generous in its support, allowing the tripling 
of staff in Afghanistan over the past 18 months. But increasing 
the number of staff does not necessarily mean that oversight is 
improving. It is difficult to determine if staff are able to 
ensure that contracts and grants are properly managed.
    Finally, in order for U.S. efforts to be successful, we 
must have a reliable partner. The U.S. Government can place 
appropriate safeguards on our assistance dollars, but our 
efforts will not be successful without cooperation from our 
Afghan partners. It is the administration's responsibility to 
hold Afghan officials accountable for commitments made last 
week at the Kabul Conference. There must be a renewed 
commitment to the people of Afghanistan in order to build 
confidence in their government. That starts with the Afghan 
Government living up to its promises to do more on oversight, 
transparency and delivering results for the Afghan people. 
Simply making announcements and creating more bureaucracy will 
not improve the situation. The results must be clear.
    In closing, I have described a long list of concerns, but I 
also know that the two witnesses before us today are highly 
skilled in diplomacy and development. I have confidence that 
you can address these issues. You need to make a strong case 
today so that the subcommittee can have confidence in providing 
the funds necessary and the oversight required to support the 
President's strategy in Afghanistan.
    Thank you, Madam Chair.
    Mrs. Lowey. Thank you. Gentlemen, your full written 
statements will be placed in the record. Feel free to summarize 
in your oral statements. I am sure there will be many 
questions. We will proceed as you desire, and we will proceed 
with Ambassador Holbrooke.

               Opening Statement of Ambassador Holbrooke

    Ambassador Holbrooke. Madam Chairwoman, it is a great honor 
to appear before you and your colleagues again today and 
especially to testify alongside Dr. Raj Shah, the Administrator 
of USAID. I thank you and your colleagues for your support 
yesterday in the important supplemental vote. We are very 
mindful of the difficulties presented by such votes, and we 
greatly appreciate your support.
    Before I begin, Madam Chairwoman, I would like to extend on 
behalf of the administration our deepest condolences to the 
victims of the plane crash in Islamabad today, Airblue Flight 
ED 202. I understand from our embassy in Islamabad that the 
smoke is visible throughout the city. We hear there is going to 
be a national day of mourning. There are apparently two 
Americans who were on that plane. And I just wanted to express 
on behalf of the U.S. Government and the administration our 
deep condolences.
    Secondly, with your permission, Madam Chairwoman, I would 
like to make a brief comment about the recent leaks that were 
from WikiLeaks. To be clear, as President Obama said yesterday, 
that, first of all, the leaks themselves are pretty appalling. 
And for somebody like myself who has been in and out of the 
government for over 40 years, in fact, as an author of one of 
the volumes of the Pentagon Papers, I have lived through 
something similar before, I just find it inexplicable that 
people would take the oath of office to the United States and 
violate it in such an extraordinary way.
    Having said that, Madam Chairwoman, I want to underscore 
what President Obama said yesterday, that there is nothing in 
these documents, most of which date way back to the previous 
administration, that should change anyone's judgments about the 
situation in Afghanistan and Pakistan. We have confronted these 
issues for a long time, and I do not think that they revealed 
anything which we had not discussed in detail during our policy 
reviews last year. And I will leave it at that, just to make 
clear how deeply we are upset by the leak but how there is 
nothing revealing in them that changes things.
    Madam Chairwoman, I listened carefully to the statements of 
you and Congresswoman Granger, and I would just like to make a 
few comments in addition to the testimony which we are 
submitting for the record. First of all, we share your 
commitment on the issue of corruption, governance and 
effectiveness. We have worked as partners with your 
subcommittee now since we came into office, and we are very 
grateful for your involvement in shaping the correct 
appropriations for both countries. In personal terms, I just 
want to state that as an occasional columnist for The 
Washington Post, I addressed these same issues as a private 
citizen. And when we came into office, we discovered that 
almost nothing had been done about them. We have here on the 
side of the room four poster boards which at the appropriate 
time Dr. Shah and I and our colleagues would like to brief you 
on because I think they will show that from the very beginning 
of this administration, we were taking steps, creating task 
forces, and working closely with the government in both 
Pakistan and Afghanistan to deal with this problem. We knew 
that if corruption isn't dealt with, other things won't 
succeed. We had stated that it was a malignancy that could 
destroy everything else we were doing.
    In this, we ran shoulder to shoulder with the military. 
David Petraeus and I had talked about this the very first time 
we met, and we are working together. The military has set up 
Task Force 2010, headed by Rear Admiral Kathleen Dussault to 
deal with that. I believe you have met with Admiral Dussault, 
so you know the work she is doing. And we will have USAID and 
State Department personnel assigned to Task Force 2010.
    In addition, we have the many measures which Dr. Shah and I 
will outline in a moment. And I do want to underscore our very 
deep commitment.
    Also, we have this extraordinary interagency team set up in 
the State Department. And with your prior permission, we 
brought with us today representatives of six of the 10 agencies 
we work with. The ones that are not here are the FBI, the 
Agriculture Department, the CIA, and the Office of the 
Secretary of Defense. But I would, with your permission, like 
to ask the team behind us just to stand as I mention their 
names so that you know who they are.
    The first person, who is not on our team but you all know 
very well, is Assistant Secretary of State Rich Verma. Next to 
him is one of my deputies, Dan Feldman. Next to him, our senior 
deputy, Frank Ruggiero, just returned from Kandahar. I asked 
him to come here today with his boots full of dust, but 
unfortunately, he cleaned up for you. But I think most of you 
have visited him in Kandahar. Next to Frank, Rami Shy, our 
Treasury representative, who has done a phenomenal job. I hope 
we will get a chance to address that. Next to Rami, Matt 
Stiglitz from the Department of Justice. Next to Matt, Shannon 
Darcy, who has returned from Afghanistan as one of our two AID 
representatives. Next to Shannon, Colonel Rose, one of our two 
military representatives. And in the second row, our new 
Congressional Liaison from State, Greta Lundeberg. Next to 
Greta, Ashley Bommer, who you all know is focused on 
communications. Next to Ashley, Matt Asada, David Adams from 
the Congressional Bureau, Jennifer Chartrand. And next to her, 
from the Department of Homeland Security, Raul Ortiz. DHS has a 
very important role in all these issues. And next to Raul, Mike 
McNerney.
    So with that, Madam Chair, I will yield to Dr. Shah and 
look forward to discussing the posters at the appropriate time. 
Thank you very much.
    [The statement of Ambassador Holbrooke follows:]
    [GRAPHIC] [TIFF OMITTED] T6402C.092
    
    [GRAPHIC] [TIFF OMITTED] T6402C.093
    
    [GRAPHIC] [TIFF OMITTED] T6402C.094
    
    [GRAPHIC] [TIFF OMITTED] T6402C.095
    
    [GRAPHIC] [TIFF OMITTED] T6402C.096
    
    [GRAPHIC] [TIFF OMITTED] T6402C.097
    
    [GRAPHIC] [TIFF OMITTED] T6402C.098
    
    [GRAPHIC] [TIFF OMITTED] T6402C.099
    
    [GRAPHIC] [TIFF OMITTED] T6402C.100
    
                     Opening Statement of Dr. Shah

    Dr. Shah. Thank you. Madam Chairwoman, Ranking Member 
Granger and members of the committee, I appreciate the 
opportunity to be here to address this issue today. I also 
appreciate the chance to testify with Ambassador Holbrooke. The 
two of us traveled together recently with the Secretary of 
State to attend the Kabul Conference and to work on the range 
of issues that we will be discussing today. I share his ``thank 
you'' for your recent vote in support of funding for the 
Afghanistan strategy that the President has laid out and also 
his condolences on the tragic event last night in Pakistan.
    This recent trip was an important opportunity to assess 
progress in the civilian effort and to observe the government 
of Afghanistan hosting a major international conference in 
which they laid out their strategy in areas where they commit 
to taking greater accountability. It is within the context of 
those commitments that we are able to review our programs and 
better understand the effect of the footprint of our programs 
and our spending in Afghanistan and against the President's 
strategy. I would like to just make a few remarks about our 
approach in the area of accountability and in the area of 
addressing the concerns that have been laid out.
    First, we are looking across our portfolio and have been 
for 18 months, as Ambassador Holbrooke highlights, to achieve 
greater strategic clarity for each and every program that we 
support. Programs that are designed to achieve short-term 
stabilization have specific program metrics related to what 
success looks like in that area. Programs designed to achieve 
long-term economic development in sectors like energy, 
agriculture, water management similarly are designed around 
specific outcome metrics that help us ascertain whether or not 
they are successful over time based on outcomes and not simply 
process indicators.
    We are also working to improve the analytics that 
underpinned these programs so that we can be more precise and 
more efficient in the use of U.S. taxpayer funds. For example, 
in programs aimed at achieving stability in villages and in 
rural communities, we are using tools like the District 
Stability Framework that allow us to gather through survey data 
a better understanding of what are the actual immediate sources 
of instability and how can our programming be focused to most 
effectively address those sources of instability in an 
effective way?
    Third, we have put in place a number of efforts to improve 
accountability, including taking on a more aggressive approach 
to doing monitoring evaluation and oversight. This has been a 
major focus for me in my tenure at USAID across all of our 
countries and all of our program portfolios, but it is most 
acutely felt in Afghanistan and Pakistan where we have 
significant program investments. We are doing this by using our 
Multiple Oversight System, and we will talk about that when we 
have the opportunity to step through some of the charts that we 
hope to present.
    No system is foolproof, but these systems are fairly robust 
in their ability to allow us to track the flow of funds and to 
understand process indicators that describe how those funds are 
being used in accordance with program goals. In addition, in 
Afghanistan we have the most significant Inspector General and 
Special Inspector General efforts anywhere in the world, 
covering approximately 25 percent of the entire portfolio every 
year, and every 3 to 4 years covering all of our full extent of 
USAID investments. In terms of having the capacity to conduct 
more aggressive monitoring evaluations we have, as has been 
identified, more than tripled our staff presence and more 
aggressively used our Foreign Service national staff in country 
to get out, visit programs, and ascertain progress in a direct 
manner. We are also improving our direct engagement with the 
government of Afghanistan to this end and using third-party 
contract support to help do independent third-party 
evaluations.
    Fourth, we are reviewing and improving our contract 
oversight process. We have a process that allows for very 
strong oversight on prime contracts and on subcontracts within 
those primes. There are specific areas where we are trying to 
improve oversight of subcontracts of subcontracts, and I am 
happy to discuss that as we go forward.
    The efforts that have been articulated to improve direct 
assistance efforts to the government of Afghanistan are 
specifically designed to help build the capacity in the 
ministries, in the provinces and in the districts of the Afghan 
Government to ultimately allow us the opportunity to reduce 
dependency and over time to have a sustainable governing system 
that can work without our aggressive and direct engagement.
    In all of these efforts, we abide by the strictest of rules 
with respect to compliance and recourse, which are the 
underlying fundamental things that drive our assessment of 
risks related to how we make those investments and which tools 
we use. In all cases, we have a range of tools, including host 
country contracting, direct budget support, and a range of 
intermediate efforts that can allow us to tailor the type of 
support we offer to the environment or the ministry 
capabilities that exist. And in each situation, we conduct 
thorough assessments of auditing capability and our ability to 
track money, resources and activity prior to making any such 
direct investments.
    I look forward to sharing more about our process as we go 
forward.
    I would like to conclude just by commenting that overall 
success will require improved governance at all levels in 
Afghanistan. I value the oversight and the guidance that you 
have provided, and this long-term challenge is one that we take 
on, fully understanding its importance to the President's 
strategy and how challenging it is to create improvement in a 
short time horizon. Nevertheless, our investment portfolio is 
one that is designed to address this challenge. And as we go 
sector by sector, we have tried to align our portfolio with the 
strategic dialogue that has taken place with Afghan leaders and 
with the accountabilities that they have stood up and 
articulated as the areas where they will be clearly responsible 
for ensuring improved outcomes. Overall, our priority is to 
define, track, observe and report on the results of our 
programs and how it contributes to the President's strategy. 
And while USAID programming is one part of a large and 
multifaceted diplomatic and development strategy on the 
civilian side, it is an important part, and our commitment is 
to absolutely track resources against outcomes as effectively 
as we can.
    I look forward to this discussion. Thank you.
    [The statement of Dr. Shah follows:]
    [GRAPHIC] [TIFF OMITTED] T6402C.101
    
    [GRAPHIC] [TIFF OMITTED] T6402C.102
    
    [GRAPHIC] [TIFF OMITTED] T6402C.103
    
    [GRAPHIC] [TIFF OMITTED] T6402C.104
    
    [GRAPHIC] [TIFF OMITTED] T6402C.105
    
    [GRAPHIC] [TIFF OMITTED] T6402C.106
    
    [GRAPHIC] [TIFF OMITTED] T6402C.107
    
    [GRAPHIC] [TIFF OMITTED] T6402C.108
    
    [GRAPHIC] [TIFF OMITTED] T6402C.109
    
    [GRAPHIC] [TIFF OMITTED] T6402C.110
    
    [GRAPHIC] [TIFF OMITTED] T6402C.111
    
    [GRAPHIC] [TIFF OMITTED] T6402C.112
    
    Mrs. Lowey. Thank you. And as usual, I will be calling on 
members based on seniority of the members that were present 
when the hearing was called to order. And I will alternate 
between the majority and the minority. We have a lot of 
questions this morning and just 2 hours with our witnesses. So 
I ask each member to keep their questions to within 5 minutes 
per round so all members have an opportunity to question all 
witnesses. I will begin with Ambassador Holbrooke.
    At last week's Kabul Conference, the Government of 
Afghanistan committed to 19 new goals and objectives related to 
accountability, good governance, and anti-corruption efforts. 
Well, the goals are laudable and reflect commitments that 
President Karzai made in his inaugural speech and at the London 
conference. So we know that President Karzai has been saying 
the ``right'' or ``politically correct'' things. I heard it 
when I was in Afghanistan several times. But to date, the 
actions by his government do not seem to reflect a true 
commitment to these issues.
    So a couple of questions. What evidence do you have now 
that any of the goals and objectives included in the Kabul 
Conference communique are anything more than hollow gestures to 
appease the international community? What practical steps has 
the Government of Afghanistan taken to address corruption in 
the past 6 months? What specific benchmarks are you holding the 
Government of Afghanistan to with regard to countering 
corruption? And do you believe that the new law passed by the 
cabinet to address high-level corruption will become law? Will 
it have an impact?
    Maybe I will stop at that point, Mr. Ambassador. And I will 
proceed if I have any time left.
    Ambassador Holbrooke. Madam Chairwoman, you asked the very 
same questions that the President asks, that our Ambassador and 
our Commanding General ask. If I could ask Rami Shy to bring 
this chart closer to us, perhaps we could address your question 
in very specific form. Rami is, as I said earlier, our Treasury 
person. And I would like to draw your attention specifically to 
the four vertical lines from top to bottom. And I want to 
stress, Madam Chairwoman, that this did not start with the 
Kabul Conference a week ago. This started the day we took 
office.
    On the left, the Major Crimes Task Force, we formed that in 
May of 2009. I must stress, nothing had been done on this when 
we took office. Rami was working at the Treasury Department, 
and there was no one at State, no one at AID. Rami moved out of 
our office. There are at least 30 people working full time on 
this at Treasury. Raj Shah can address the AID effort. But the 
Major Crimes Task Force mentored by the FBI, Treasury and 
international law enforcement bodies has been up. There are 169 
investigators. There are 36 active corruption cases. I hope you 
will pardon me if I don't go into details. But some of these 
cases are extraordinary, and they involve the DEA, FBI, USAID, 
State, Department of Justice, the Afghan officials. And they 
are ongoing and they are extremely sensitive in some cases. And 
they have caused some concern in some parts of the Afghan 
Government for reasons that will be obvious. But please forgive 
me if I don't go into operational details.
    The second group is the Anti-Corruption Unit. Vanna, could 
you just point to the correct one? Thank you. The Anti-
Corruption Unit was formed in April of 2009, and the U.S. 
Department of Justice has worked on that. Matt Stiglitz on the 
other side of that is our DOJ representative. And if there are 
further questions, I hope you will permit them to also respond.
    Mrs. Lowey. Can I ask you to clarify, Mr. Ambassador? When 
you are saying that there are 36 active corruption cases and 
growing, are they all Afghans? Or are our contractors part of 
this mix?
    Ambassador Holbrooke. One of the ones that I can talk about 
publicly, last year was two Afghan Americans, dual citizens, 
who were involved in a kickback scheme of about $3 million in 
an $18 million roads project. And they were brought to the 
United States under a very high tech operation run by the 
Department of Justice and the embassy. They were tried and 
convicted, and they are in jail now in Virginia. And they were 
linked to people in the government. So the answer is, a little 
of both.
    I mean, this is a work in progress. We have put it at the 
top of our priority. And as we mentioned earlier, Task Force 
2010, under Admiral Dussault, is focused on an area which is 
probably much larger than AID, the one you and I and 
Congresswoman Granger have already talked about privately, 
because the bulk of the foreign spending in Afghanistan comes 
on the military side, and that is a very opportunistic target 
for people who are looking for opportunities.
    In any case, the Anti-Corruption Unit, 79 cases indicted 
with about a 90 percent conviction rate, is that correct? Yes, 
90 percent conviction rate.
    The third vertical line, Anti-Corruption Tribunal, started 
hearings last year. Their conviction rate is also 90 percent. 
They have 223 cases in front of them. And you will see in the 
bottom chart here that General Hakeem of the border police got 
an 8-year prison term, the Ministry of the Hajj Treasury a 15-
year prison term. And then finally, the High Office of 
Oversight, which is the main anti-corruption body in the 
country. That existed in the past but was pretty ineffectual. 
From President Obama on down, we have talked about the HOO and 
the need to upgrade it, and in both his inaugural address and 
in his speech in Kabul last week, President Karzai addressed 
that. And we are, and the government has pledged to obtain 
asset declarations from senior officials, 17 have published so 
far. And we are working directly with each ministry to develop 
anti-corruption plans.
    Madam Chairwoman, is this enough? Of course not.
    Mrs. Lowey. I thought you meant in 5 minutes since my 5 
minutes is up.
    Ambassador Holbrooke. Is it a start? It is. And I will stop 
there because I didn't want to use up your time. But I do want 
to underscore that everything that brought us together today is 
something we are working on all the time, nonstop with a very 
substantial number of people. But it is daunting. It is tough. 
The circumstances of the history of the country make it 
difficult.
    Mrs. Lowey. Thank you. Ms. Granger.
    Ms. Granger. Administrator Shah, the Kabul communique 
reiterated the goal of providing assistance to the Afghan 
Government's core judgment. The administration is currently 
providing about 20 percent in direct assistance and hopes to 
get to 50 percent in the next 2 years. Building the 
government's capacity and gaining confidence within the Afghan 
population are important, but I am concerned about rushing in 
to meet an arbitrary goal. Can you assure me that this is good 
development policy? It seems to me this approach is least 
appropriate in a country where there is a low level of 
capacity.
    Dr. Shah. Thank you, Congresswoman. Let me first address 
why we are pursuing this approach and then perhaps speak to a 
slide in terms of how we hope to do it in a way that maintains 
our compliance and oversight at a very high level of diligence 
and safeguards.
    First, we believe this is exactly the right approach to be 
taking at this point in time in this setting. It is really the 
only way to build accountability and capacity in the 
institutions of governance and government in Afghanistan at a 
variety of levels, in the Federal ministries, in the provincial 
government and in the district governments. We are not pursuing 
this process by simply handing money to ministries or 
institutions. It is part of a cohesive strategy where we are 
investing and training 16,000 civil servants through the Civil 
Service Training Institute, which USAID has already established 
and supported, evaluated and finds to be very productive. We 
are specifically training civil servants in the range of 
activities we think are critical to implement these programs, 
ranging from financial management to program design to 
procurement to evaluation. And we are putting in place a 
district delivery program which is a project to help the Afghan 
Government better recruit and train an additional set of civil 
servants that will then go into district and provincial 
governments so there is more trained capacity at every level of 
government.
    That said, our transition from 20 percent current direct 
assistance to 50 percent assistance will require a significant 
and coherent assessment process and set of compliance 
standards.
    The slide to my left helps articulate how we are pursuing 
this in a way that protects our resources and allows us both 
confidence in compliance standards and the ability to have 
recourse should there be malfeasance in the use of funds. I 
start with a point about assessment. Basically our assessment 
process covers a few specific points. We need to make sure the 
organizational structure and implementation capacity of a 
ministry or any other public institution is accountable, has 
sound financial management capabilities, has a procurement 
structure that is transparent, meets our standards, and we have 
the ability for recourse should we identify that funds are used 
inappropriately. Without those clear standards being met, we 
will not and cannot proceed.
    Second, the next sort of three points under the assessment 
point are really about having a clear and identifiable audit 
trail. We have already sent an expanded service support team to 
our embassy and to our mission. They have expanded their 
capabilities by hiring both local and international auditors, 
including firms we are all quite familiar with, to make sure as 
we make these investments we are doing it against specific 
auditable trails as funds flow so that we know exactly where 
these monies are going to the same standard that we use with 
our U.S.-based contracting implementers.
    The next point on certification is particularly important. 
Our certifications are specific to programs and projects, so we 
would not be in a setting where we certify a ministry, write a 
check, and then fail to pay attention to ``are they achieving 
program outcomes?'' I was recently there to launch an 
agricultural development fund which was a $150 million 
investment. Of that, $50 million is targeted to build specific 
capacity in the appropriate ministry and in the partner 
provincial governments and district governments; and the 
remainder of the funds is a credit fund for farmers. In that 
specific example, we have metrics and numbers against how many 
farmers we expect will receive credit, which intermediate 
banking institutions will get the access to a subsidized credit 
fund, and we will be able to track those resources as they flow 
project by project and procurement by procurement.
    That is what we mean when we say, assess and make a 
determination that we can work with the ministry. And we back 
that up with very specific monitoring and evaluation of how 
those funds flow.
    Finally, on the monitoring and evaluation piece, in 
addition to what is stated here about USAID personnel meeting 
directly with the ministry at all levels, we have a range of 
tools that we use, including embedding ourselves or our 
partners in ministries so they can track and support decision 
making and funds flow, and doing retrospective reviews of 
outcomes related to the specific programs because we are 
funding specific programs, not comprehensive ministry 
activities.
    And then finally, third-party auditing. As with all of our 
work and all of our processes, we believe there needs to be 
strong third-party evaluation and auditing. We certainly have 
the ability to get out and see projects and programs. But that 
does not obviate the need to have an independent assessment. 
And in all of these cases, we will have investments that are 
carved out for third-party evaluation so we can track these 
resources.
    But I would like to just assure you that the purpose of 
this directional and strategic shift is to build the capacity 
in these institutions so they can sustain themselves over time 
and so that in the future the need for our direct engagement 
and support is much, much lower than it is today. Thank you.
    Ms. Granger. Thank you, Madam Chair.
    Mrs. Lowey. Mr. Schiff.
    Mr. Schiff. Thank you, Madam Chair. And Ambassador, thank 
you for being here and thank you for your good hard work. I go 
back and forth between trying to decide whether you or 
Ambassador Mitchell has the tougher job. And probably from week 
to week it goes back and forth between the two of you.
    I wanted to ask you the question that I wrestle with most, 
and that is, I think, that our military can clear these areas 
that the Taliban occupy. I think we can build, through USAID 
and through your efforts, we can build infrastructure, we can 
build capacity. The question I have is not can we hold but can 
the Afghans hold, a year from now, when we start drawing down 
our troops, can the Afghans hold or will the Taliban simply 
come back? And whether they can hold will depend on whether 
they have a form of governance that the Afghan people are 
willing to fight for and to die for.
    Right now, the Afghan people are very disturbed by the 
level of corruption not only in the regime but on a day-to-day 
level, the fact that to get their crops from one place to 
another they have to bribe five people on the way; that a 
police commander has to pay for his job, and then can sell the 
subordinate positions to people who can then stop people at 
checkpoints and charge them, the sort of day-to-day graft which 
is so widespread that, a relatively small number of cases at 
the higher levels of the Afghan Government may not deal with 
the endemic problem. And what I wanted to ask you, Ambassador, 
is how can we measure, how can we know if we are making 
progress towards the Afghans being able to hold once we start 
drawing down? How do we measure that, if it can be measured? Do 
you see anything that gives you confidence that we can get 
there in a year's time or longer? What should give us some 
either confidence or pause about the Afghans' ability to hold 
once we start drawing down?
    Ambassador Holbrooke. Congressman Schiff, that is the core 
question of our entire strategy, and you have described it very 
well. People often talk about clear, hold, and build. It is 
really clear, hold, build, and transfer. And it is that fourth 
area that you have really addressed. The American and NATO 
troops can hold any acre of land in the world with force, and 
they can clear it before they hold it. But the project will 
only succeed if the local authorities gradually replace the 
international forces. That is why it is a linked civilian-
military mission. But it begins with security. Rajiv Shah and I 
are committed to agriculture programs, rule of law, governance, 
subnational governance, and many other programs, health and 
education foremost among them. But those can only work if the 
Afghans can take care of their own security.
    And here I want to underscore a point which I don't think 
is appreciated enough, and yet which has a direct impact on the 
work of this important committee. And that is that the military 
forces, as the President has said, will not stay forever. Our 
commitment, as he said, is not open-ended on the combat role. 
But we will have to recognize that there is a long-term 
economic, development and security assistance component to our 
presence there as we assist the Afghans to achieve the goals 
you outlined. Specifically, in July of next year, as President 
Obama has made clear, we will begin the phasedown, the drawdown 
of American and allied combat troops. However, the pace and 
scope will be determined by the situation on the ground 
following the policy review. But there has been a widespread 
misunderstanding here which I hope we can clarify that does not 
mean the end of the international support of Afghanistan 
because the issue you talked about is a long-term issue. A 
country that has been shattered by war, 30 years of continuous 
different forms of war with a very difficult situation on its 
borders, particularly the Pakistani border, needs international 
support, and we cannot repeat what happened in 1989.
    So to be specific, the training of the military and the 
police, the support and assistance of the police and the 
military will be a longer-term project. And the work that Rajiv 
Shah and his very brave men and women in AID are doing will 
also have to continue long after the combat role is finished. 
Because what you are talking about, transferring from the 
international community, led by the U.S., to Afghan leadership 
is a gradual process. Look at the police, 85 percent are 
illiterate. You can't have an illiterate police force, but you 
can't turn it into a literate police force overnight. 
Agriculture is our most successful program because they have 
such a great tradition. But rule of law, extraordinarily 
difficult, but we are committed to it. And that is why we come 
back to your committee over and over again to ask for your 
support in shaping and continuing this set of programs.
    Mr. Schiff. Thank you. Thank you, Madam Chair.
    Mrs. Lowey. Thank you. Mr. Rehberg.
    Mr. Rehberg. Thank you, Madam Chair. By way of 
introduction, I represent the State of Montana. So I have the 
largest population of any congressional district in the last 10 
years and probably in the next 10 years because we won't get a 
second seat. So I am averaging just less than a million people 
in my congressional district. Over the course of the last 
Congress, since January 1, 2009, I have had 60 town hall 
meetings. I have another 15 coming up this week. I will tell 
you that I am noticing a change in my constituency about the 
direction of the American activities in Afghanistan, and it is 
not good. My State has been supportive. They have given the 
administration the benefit of the doubt. And I just want to 
suggest that it ought to give you at least some pause or some 
early warning signs at least. And we are not necessarily a 
microcosm of America. Montana is different than California, 
which is different, thank God, than New York and some of the 
other States.
    So I just want to suggest that as I am traveling around, I 
see a problem. And one of the problems is, nobody really knows 
who to hold accountable other than, of course, the President is 
getting either the credit or the blame at this time. Could you 
give me some indication of who we hold accountable for all of 
the difficulties as they are starting to show up, whether it is 
the corruption, the missing money, the pallets. It is easy for 
the fingers to be pointed at DOD and at State and at USAID. But 
I am confused. I can't articulate a direction right now, and I 
want to be supportive and defensive on your behalf. I just 
don't know. And I love the charts. Could we have a chart like 
that with names on it beyond the President and the Secretary of 
State and such to see, who do we, as congressmen and 
Congresswomen, hold accountable?
    Ambassador Holbrooke. Well, I say with great trepidation 
you can hold us accountable. That is our jobs.
    Mr. Rehberg. Who are ``us''?
    Ambassador Holbrooke. Well, let me answer you seriously, 
Congressman. First of all, I appreciate your support. And we 
take very seriously what you have just said about the people of 
Montana who have, on a per capita basis, had a higher casualty 
rate than almost any other State, so we are particularly 
mindful of that.
    Secondly, in terms of accountability, that is why we are 
here, and that is why we will always be available to your 
committee. Dr. Shah is the designated person in charge of a 
very large amount of money which your committee appropriates, 
and we respect that. I have a non-fiduciary responsibility 
given to me by the President and the Secretary of State to 
oversee and coordinate the civilian programs. The military 
command has its role to play in this, even if the money flows 
through another part of the House. And we should be held 
accountable by you and by the American public, and we respect 
that.
    Secondly, there is one thing you said I really would 
respectfully amend. We have not started this process now. We 
are not here today because of an article that appeared in The 
Wall Street Journal or The Washington Post. We are here today 
to report on what we have done over 18 months in an area that 
hadn't been addressed before. And this chart is a very clear 
demonstration of it because this chart--15 months ago, this 
chart would have been an empty chart.
    Mr. Rehberg. Could I ask then in my remaining time of Dr. 
Shah, how many transactions do you have at USAID? You know, we 
appropriated $50 million for reconstruction this last year. How 
many transactions were there within that money?
    Dr. Shah. I would need to check the specific number.
    Mr. Rehberg. I just had my staff go onto Wikipedia real 
quickly and look up the credit card purchases. Visa had 9 
billion transactions last year for a total of $764 billion 
worth of transactions. I will bet they are not missing as much 
money as is missing or in question here. So what we are trying 
to find is, how many transactions did you have over the course 
of this last year?
    Dr. Shah. Let me speak to that because we don't believe we 
are quote-unquote missing money. We have approximately 120--and 
I could be off by a few--major program relationships. About 40 
percent of that is cooperative agreements or grants, and the 
remainder are contract agreements with partners. They then have 
a series of subcontract agreements in order to implement large-
scale programs.
    Mr. Rehberg. So the audit that is being done, trying to 
track the money that is leaving Afghanistan is not missing 
money or that, you know, it is not yours or it is not American.
    Ambassador Holbrooke. Congressman, with great respect, we 
are not missing money. I really don't think the American public 
should draw that conclusion. We are here to figure out how to 
work together to continue to cut down on corruption. That is 
what this is about.
    Mr. Rehberg. Madam Chair, if I heard correctly, last week 
when we had our meeting, an audit is being done to make a 
determination whether that is American money leaving 
Afghanistan by the palletful.
    Mrs. Lowey. I am very pleased that both Ambassador 
Holbrooke and Dr. Shah are here today to discuss the entire 
program. We are appropriating a lot of money, and the reason I 
held up the $3.9 billion and fenced it in, that I want to 
understand the systems that are in place that have really--as 
Ambassador Holbrooke said, been neglected for years. So we are 
here to hear what they are doing. What made me fence the money 
in was The Wall Street Journal report, as I am sitting home on 
a Sunday afternoon at a Little League game, that $3 billion in 
cash was being sent to Dubai.
    Now the good news is that a couple of years ago, you 
probably couldn't even identify the $3 billion. In fact, they 
probably didn't even count it as it was being transferred out 
to Dubai. The bad news, as we are proceeding, is to look into 
all the transactions that occurred there. But at this moment, 
as an investigation is proceeding, we don't know where that $3 
billion came from. It could have been from the military, it 
could have been from contractors, it could have been from 
private investments. We don't really know.
    But this hearing and the work that we are doing is the 
whole process because I think it is essential, and as 
Ambassador Holbrooke mentioned, I am very pleased that at the 
same time the Defense Department and General Petraeus are 
looking at Task Force 2010 and Operation Spotlight to look at 
the whole package, not just USAID.
    Mr. Rehberg. Madam Chair, that is why I asked the question 
about transactions and about accountability in the chain of 
command because of course in the L.A. Times on July 26, they 
are talking about the fact that the Pentagon can't account for 
$8.7 billion in Iraqi funds. And the difficulty is, are they 
going to ask us for the money back? Do we know where the money 
went? And that is why I ask specifically about the chain of 
command.
    Mrs. Lowey. Let me say this, I can recall one of the 
hearings we had with Stuart Bowen, and he told us it took 2-1/2 
years to get a computer system up and running in Iraq just to 
account for all the expenses and all the transactions. So I am 
not surprised with that news, but I think that has to be 
explored separate from what is happening in Afghanistan. And I 
daresay, if we look into several agencies who have been 
involved, we might find some of the problems with computer 
systems and how they are accounting for all the problems.
    Mr. Rehberg. Well, Madam Chair, it just pales in comparison 
to the Cobell case with the Native Americans where literally 
our accounting procedure was down since the days of the Custer 
battlefield. That is when the money was first noticed missing, 
and they are about to settle with the Native Americans for $4.3 
billion of money we frankly don't have. And our concern is to 
get on this as quickly as we possibly can. There is no excuse 
anymore when you look at what goes on with the banking 
transactions and the credit card industry--literally $1.76 
trillion changed hands with American Express and Visa and 
Master Card and Discover--for a total of $20.2 billion 
transactions. So there is no excuse anymore.
    Mrs. Lowey. I happen to agree with you. And that is exactly 
why we are having this hearing, and that is exactly why this 
investigation will go on, and that is exactly why Dr. Shah and 
Ambassador Holbrooke are making this presentation and will 
continue to move forward in making sure adequate protections 
are in place. My taxpayers in New York, your taxpayers in 
Montana deserve answers to these questions.
    Did you want to respond? Yes?
    Dr. Shah. If I might, and thank you for the comments. We 
just don't have that specific problem in our mission in 
Afghanistan. We have a strong single computer database. We call 
it Afghan Facts. It is built off of a larger system we use 
called Facts Info. It allows us to track program outcomes. We 
have almost 500 people out there in our different hiring 
capacities that are tracking program activities plus thousands 
of additional program contractors that are mostly local that 
actually get to programs and talk to communities that are 
beneficiaries.
    Let me give you one example. Agriculture has been an area 
of significant additional investment. And given the volume of 
investment, we have been very focused on tracking the results. 
In the past year, we now know that we have employed more than 
400,000 Afghans at different points for cash-for-work short-
term programs that have helped clear canals, improve irrigation 
systems, and get water to support agricultural productivity. We 
have built more than 370 Afghan-led farm stores or depots from 
which farmers can get inputs and another variety of tools and 
implements. This has resulted in more than $32 million of sales 
in fiscal year 2009 and benefited almost 90,000 farm 
households. We have provided 675,000 vouchers to support 
farmers getting back into their trade of getting access to 
improved inputs and improving productivity. And we were with 
Minister Rahimi this past week, and he suggested that the 
combination of these efforts have led to a more than 40 percent 
increase in overall agricultural productivity year on year.
    Those are the kinds of indicators we have to track to know 
that the investments we are making are creating a sound basis 
of economic activity and productive activity that can support 
the President's overall strategy and ultimately sustain the 
types of governance, institutions and economic entities that 
will be required for Afghanistan to be an effective and well-
governed society over time without large-scale U.S. engagement.
    Mrs. Lowey. I am going to turn to Ms. Lee. But I want to 
ensure you that your concerns are shared by all of us, 
including the administration. That is exactly why we are having 
this hearing. So I thank you.
    Ms. Lee.
    Mr. Rehberg. Thank you.
    Ms. Lee. Thank you very much, Madam Chair. And it is good 
to see both of you. It is no secret that we should begin to end 
the longest war in American history, and of course that is in 
Afghanistan. So getting the right and effective mechanisms of 
development and diplomacy in Afghanistan, it really is part of 
that goal, and we have to get it right. But I am beginning to 
wonder if we are.
    At a recent hearing, this subcommittee held--I think it was 
with the Special Inspector General for Afghanistan 
Reconstruction--I was really quite shocked at some of the 
amazing, damning incidents of corruption which I think--well, 
we are aware of and even contributing to as we continue to 
increase our military footprint in Afghanistan.
    For example, I raised at that hearing a recent New York 
Times report, citing Afghan and NATO officials contending that 
security contractor companies, including those connected with 
President Karzai's family and affiliates, charged with 
defending United States and NATO interests have actually 
funneled money directly to the Taliban not to attack convoys or 
other targets and in at least one case there is suspicion of a 
contractor compelling the Taliban to attack NATO forces in 
order to delegitimize their competitors. The response of the 
Inspector General was that he was aware of these reports but 
not currently conducting an investigation or at least, you 
know, it wasn't a priority at that point.
    So I want to clarify with you, who is supposed to follow up 
on these allegations? And are we sitting back in some instances 
while U.S. funds are directly financing the ongoing insurgency?
    And then secondly, of course we learned yesterday that the 
Defense Department is trying to account for what, 96 percent or 
$9 billion provided for DOD reconstruction projects in Iraq. 
And I am wondering if you know, because I know we are suppose 
to have at least close coordination between DOD and our 
civilian reconstruction projects in Afghanistan. Are we looking 
at any way to make sure that an investigation is conducted as 
it relates to Afghanistan when we are working on DOD civilian 
projects in a joint way?
    And thank you again for being here.
    Ambassador Holbrooke. You are welcome. On your second 
point, I read the articles with the same astonishment as you 
did. They refer to Iraq. They refer to events that happened 
starting in 2003. Neither Dr. Shah nor I are in any position to 
comment on it. It is military money. It is in another country.
    In regard to your question about the Special Inspector 
General for Afghan Reconstruction, General Fields, I have met 
with General Fields and his staff many times. As you know, they 
report to Congress, not to us. All we do is provide them with 
the funds out of the State Department budget and logistical and 
housing support in Afghanistan. They report to you. And they 
have always emphasized that.
    Having said that, we support them, we cooperate with them, 
and anytime that General Fields or his team bring anything to 
the attention of Dr. Shah, myself or Ambassador Eikenberry, we 
follow up on it.
    As for the specifics you referred to, we are well aware of 
that, and the embassy does work on all of those things, and we 
covered them in our previous comments.
    Ms. Lee. But if you are well aware of them, I just want to 
get a handle on, do we have to ask for an investigation then of 
what is taking place in terms of the allegations that occurred 
in--that were raised in The New York Times article as it 
relates to contractors funneling money to the Taliban to 
convince them not to attack convoys or targets? Who would be 
responsible for investigating those allegations?
    Dr. Shah. So, Congresswoman, we appreciate the point. I 
would like to just speak to USAID's perspective on how we 
assess especially security subcontracts of grants and projects. 
First, I would highlight that as Ambassador Holbrooke 
indicated, our total security outlays are going to be far, far 
lower than military-related security outlays.
    Second, some of our activities--and we have looked at this 
carefully, like transport and fuel for construction programs, 
may require more security. But in general, we think security 
outlays as part of contracts are somewhere around the order of 
7 percent of our total spent. We have special safeguards and a 
special system for vetting subcontractors that are security 
contractors. We use the Spot database and a number of other 
mechanisms to track and approve subcontracts.
    Ms. Lee. Okay. So are we or are we not on top of the 
allegations that money is being funneled to the Taliban? U.S. 
dollars, U.S. contractors.
    Dr. Shah. For security contracts that are subcontracts of 
USAID programs, we are on top of that issue.
    Ms. Lee. So how will we know the results? Are you 
investigating it, reviewing it? When will we know if these 
allegations are true?
    Dr. Shah. So I am not sure which specific allegations you 
are referring to. But for our prime programs, we are constantly 
reviewing and evaluating the effect of our subcontracts. I am 
asking our teams to redouble efforts to look at subcontracts of 
subcontracts, and that is an area where I think more visibility 
is needed. But we are on top of this with respect to our 
programs and projects.
    Mrs. Lowey. I just want to respond to Ms. Lee for a moment 
and then I will turn it to Ambassador Holbrooke.
    At the beginning, I mentioned that I was very pleased, 
after we announced our hearings, to hear of Task Force 2010 and 
Task Force Spotlight. Task Force Spotlight is particularly 
focused on the area you are talking about, the security 
contracts. It is unfortunate that you need to create a Task 
Force 2010 and Task Force Spotlight after we have been there 
since 2002. But those are the facts of life. So that is their 
responsibility. And I do expect and they have a responsibility 
to get you some answers on that issue.
    Ambassador Holbrooke, if you want to respond.
    Ambassador Holbrooke. Actually, Madam Chairwoman, you just 
made the point I was going to make.
    Mrs. Lowey. My goodness, thank you.
    Mr. Lewis.
    Mr. Lewis. Thank you, Madam Chairman. I very much 
appreciate you and Ms. Granger bringing this hearing together. 
These witnesses are perhaps as good as we could have to help us 
focus in a different way on Afghanistan. Ambassador Holbrooke 
and Dr. Shah, we appreciate your being here.
    Ambassador Holbrooke, it was perhaps 25 years ago when I 
first asked this question relating to the poppy in Afghanistan 
that we learned a lot more about after Charlie Wilson's War. We 
have made significant progress, I gather, in connection with at 
least interdicting and in trying to deal with the cash flows 
that go to warlords and, in turn, support the Taliban and our 
terrorist opponents. I am very concerned that we haven't--in a 
comprehensive way developed a policy to try to long term deal 
with this.
    Perhaps, Madam Chair, the most lasting example of socialism 
in the world has existed between the American Government and 
agriculture. It seems crazy to me that some way we haven't been 
willing to say that the poppy and those narcotics flows are so 
important to American interests that we ought to establish an 
agriculture-like program that long term delivers money to those 
farmers in a fashion that would allow us to truly create 
different crops since some wonderful things have gone on 
between India and Pakistan or in Afghanistan, for example, in 
recent years.
    But I would like to know what thinking is going on within 
your offices regarding a project of this kind.
    Ambassador Holbrooke. Let me start, and I will let Raj pick 
up. First of all, Congressman, this administration made a major 
change in counternarcotics and agriculture policy, and I need 
to be very clear on that, even if not everyone agrees. We 
terminated American support for poppy destruction because we 
came to the conclusion, after analyzing the intelligence and 
looking at it carefully, that we were driving farmers into the 
arms of the Taliban, that our poppy crop eradication program 
was a recruiting tool for the Taliban, and that it was not in 
any way reducing the flow of opium and heroin to the West 
because the previous efforts did not address the big drug 
traffickers, the dangerous nexus between government officials, 
drug traffickers, the Taliban and the police which created this 
multibillion dollar industry in Afghanistan.
    We also found that we were spending more money on poppy 
eradication than agriculture, so we made agriculture our top 
nonsecurity priority. And I believe in a moment when Dr. Shah 
picks up from me, you will see that we are doing exactly what 
you are talking about. We have cash for work programs. We have 
AVIPA-plus programs. We work on alternate crops, saffron, 
pistachios, pomegranates. We are now with this historic transit 
trade agreement that we negotiated, that America played a 
central role in negotiating last week between Pakistan and 
Afghanistan. There is now a new market for Afghan agricultural 
goods in Pakistan of enormous importance. Remember that 
Afghanistan was an exporter of agriculture products until the 
Soviet invasion. They are really good farmers in that difficult 
rocky soil that is high, high up in the air, and they need our 
support. It is an agricultural country. When we create 
agricultural jobs, we deny a recruiting tool to the Taliban.
    Not everyone agrees with us. Some of your colleagues think 
we shouldn't have stopped crop eradication. The Afghan 
Government may do its own crop eradication, but we don't. The 
Russians have objected strongly and publicly to what we did. 
That only encourages me to think we are on the right track.
    But I want to underscore, Congressman, that everything you 
said underlies our new philosophy, and we believe that this is 
really paying off. I think that Raj and I would feel that this 
is our most successful program on the civilian side.
    And with that, I would ask Raj to pick up.
    Dr. Shah. Thank you. I would just add a few thoughts. The 
first is that we know from experience around the world that 
creating an alternative economic opportunity for poppy-growing 
farmers has proven to be more effective than singular 
eradication and destruction efforts. This is part of the 
evidence base that supports Ambassador Holbrooke's suggestion 
that we have transitioned our strategic approach.
    In terms of our strategy in agriculture, I ran through some 
of the statistics about the scale and the progress that we are 
starting to see. But it is basically based on improving staple 
crop productivity, offering high-value crop opportunities for 
both growing and caring for fruits and vegetables and other 
high-value products, like saffron, but also having real export 
markets that are supported by a local agro processing industry. 
And in each of these areas, we have programs that are 
addressing these points at scale, and we are confident that 
this is an area that can be very successful, especially if we 
can get more private investment and more agro processing into 
play, which is why just last week we launched a major 
agricultural credit fund to allow for more commercial 
production, processing and export.
    So those are the types of economic opportunities that we 
hope are the valuable alternative and the sustainable 
alternative to poppy. We are very focused on implementing that 
strategy at real scale.
    Ambassador Holbrooke. Congressman Lewis, I forgot to add 
one critical thing. In ending the crop eradication programs, we 
refocused our efforts on interdiction, major drug traffickers 
and drug czars. We could prove to you--and we would be happy to 
give you a private briefing on this--the amount of 
paraphernalia we have destroyed, the amount of opium--the poppy 
seed that we have found, and the actual production in hectarage 
has gone down by 20 percent in each of the last 2 years. We 
have destroyed an enormous amount of morphine, opium and poppy. 
And in this case, the military command under General McChrystal 
and General Petraeus has really joined us in this. This is a 
joint civilian-military effort of the highest coordination. And 
we know from intelligence reports that the Taliban have 
lamented our decision because it removed the recruiting tool.
    Mr. Lewis. Madam Chair, thank you very much for the time. 
Let me just mention that I began by saying it was 25 years ago 
I asked this question first, which would suggest that many an 
administration has come and gone since then. And I am still not 
satisfied that we really have a handle on where we are going 
with this, but we do want to work closely with you.
    Thank you.
    Mrs. Lowey. Thank you. Mr. Rothman.
    Mr. Rothman. Thank you, Madam Chair. Thank you, Mr. 
Ambassador, Dr. Shah.
    Mr. Ambassador, first of all, thank you for your 
extraordinary career in public service and your continuing to 
take on matters of great difficulty and complexity and danger. 
You are the Special Representative of the President for 
Afghanistan and Pakistan. I know we are not in a classified 
setting. But many people believe that while there has been some 
progress made in addressing what has been called a double game 
by Pakistan's intelligence services and military in supporting 
both NATO and U.S. efforts but also supporting the Taliban, 
many people believe that that is going to be an insurmountable 
obstacle to your work in producing civilian programs in 
Afghanistan, for example, that we hope will pacify the region 
and deny al Qaeda a place to train.
    Can you comment on the allegations of the Pakistani dual 
game? You mentioned the positive aspect of the trade agreement 
between Afghanistan and Pakistan. But what about the 
allegations that there is a dual game going on? And then I have 
other questions.
    Ambassador Holbrooke. The relationship between the U.S. and 
Pakistan has been characterized in a book which is about to 
come out that traces the history of it as three marriages, two 
divorces, and we inherited a really unacceptable relationship 
with Pakistan both in bilateral terms and in regional terms. It 
was unsustainable. You are not going to succeed in Afghanistan 
unless Pakistan is part of the solution. Not just Pakistan, 
however. Pakistan is part of a region that includes other major 
countries. To the west of Afghanistan, a country we have 
another kind of problem with. To the north, Tajikistan, 
Turkmenistan, Uzbekistan, and beyond them Russia. China borders 
on Afghanistan with a serious vested interest, and beyond that 
is India.
    So this is the most complicated region you could imagine. 
But at the core of it, Pakistan must be part of the solution. 
President Obama directed early last year that we change the 
relationship with Pakistan, number one, and number two, we try 
to change the relationship between Afghanistan and Pakistan in 
order to move in the direction that you have discussed.
    Mr. Rothman. Have those efforts succeeded?
    Ambassador Holbrooke. I believe we have made dramatic steps 
forward and we are not there yet. It is a work in progress. But 
if I may just be specific, I would not dismiss the transit 
trade agreement as merely a trade agreement. It is the most 
significant agreement between Pakistan and Afghanistan in at 
least 50 years. These countries have had a very troubled 
relationship going back to the day Pakistan was born.
    Mr. Rothman. I apologize. I only have 5 minutes.
    Ambassador Holbrooke. But you have raised the most 
important issue, and with your permission, I want to just 
finish this.
    So on the U.S.-Pakistan front, with your support Secretary 
Clinton has attended and chaired two strategic dialogues, one 
in March in Washington, one in Islamabad 2 weeks ago. We will 
chair a third here in Washington in October. In those dialogues 
with 13 working groups, from water and energy to a law 
enforcement----
    Mr. Rothman. But I have to interrupt you. Have you noticed 
a difference in the receptiveness on the part of the 
Pakistanis?
    Ambassador Holbrooke. Dramatic. And those people who were 
with us on the trip, Dr. Shah and I were sitting with Secretary 
Clinton. Secretary Clinton herself, everybody commented on the 
change in tone over the last year. It is improving America's 
image in the public area.
    Now on the second tier, what you are really referring to, 
we are engaged in a very intense dialogue with the Pakistani 
military, with their intelligence services. I myself have met 
with General----
    Mr. Rothman. Are we making progress in that regard? 
    Ambassador Holbrooke. We are absolutely.
    Mr. Rothman. Before my time runs out, what is the Taliban's 
interests, Mr. Ambassador? This goes to our long-term hope for 
success in Afghanistan. What is the Taliban's interest in a 
society in Afghanistan where there is rule of law, women's 
rights, and a nonpoppy agriculture where they are not getting a 
piece of the action? What is their interests?
    Ambassador Holbrooke. That is why they are opposed.
    Mr. Rothman. How do they ever get onboard?
    Ambassador Holbrooke. Well, we have this reintegration 
program which has been funded by the international community, 
which is offering the Taliban, under the tremendous military 
pressure they are facing now, a chance to renounce al Qaeda, 
lay down their arms, accept the constitution and reintegrate. 
That program has finally launched much more slowly than I would 
have preferred. It is funded with $2 million by the 
international community. The U.S. is not funding their program. 
But the Congress authorized $100 million of CERT for General 
Petraeus to work with. I think if David Petraeus was with us 
today, he would say that is the most important program he is 
working on. It addresses specifically your point.
    In other words, 70 percent, Congressman, 70 percent of the 
Taliban at least have no ideological commitment to al Qaeda, 
Mullah Omar. They are fighting either because they don't know 
the real story in Afghanistan or because of a local grievance 
and they need to be brought in.
    Mr. Rothman. And it is not religious in terms of--for 
example, girls attending school and women having certain rights 
that they don't presently enjoy?
    Ambassador Holbrooke. Well, that is a huge issue, but the 
Taliban are not fighting because of that issue. If you read 
Taliban propaganda, and we study it very carefully, they never 
mention the issue of women, girls in school because that was 
their most losing issue. What they talk about is corruption, 
the reason we are here today. That is their number one 
recruiting tool. We took the other one away, narcotic poppy 
destruction. And they talk about American and international 
forces defiling the people. And then they talk about women, but 
in a totally grotesque way that I won't even discuss here. So 
their propaganda always eliminates this because they know that 
was their biggest mistake.
    Mr. Rothman. I thank you. Thank you, Madam Chairman.
    Mrs. Lowey. Thank you.
    Mr. Chandler.
    Mr. Chandler. Thank you, Madam Chair. Ambassador Holbrooke, 
Dr. Shah, and all your staff who are sitting in those two rows 
behind you, I can't tell you how much respect I have for what 
you all do. I don't think you are ever appreciated enough. And 
I am certain that people generally don't understand the 
enormity and the difficulty of what you are dealing with, what 
you deal with on a day-to-day basis. So I want to thank you. I 
want to thank you for all of your efforts.
    Ambassador Holbrooke, I think earlier you said that the 
circumstances of this region made this a very, very difficult 
job. That I thought was one of the all-time understatements 
that I have ever heard. I just can't imagine, knowing the 
history of Afghanistan and Pakistan--I think many people in 
this country are now familiar with that history. It is a 
history of a place where both the British and the Russians, 
among others, came to grief. In my view, those two countries in 
some respects are not even really nation states or effective 
nation states. They haven't been in their history. I don't 
believe they have ever had, at least by our lights, effective 
governance. I don't think they have ever had, again by our 
terms, systems that weren't corrupt, and I don't think they 
have ever had any real economic capacity, at least in relation 
to what we are used to in this country.
    And what we are trying to do may very well be the most 
difficult undertaking in the history of this country. Again, I 
don't think that people understand the enormity of it. I 
understand why we got in this war, and I understand why we are 
in Afghanistan. I have supported it. We went in as a war of 
necessity. It is unlike the Iraq situation. But that being 
said, I think we really have to ask ourselves serious questions 
about whether or not this really is doable. As I understand it, 
our strategy essentially is this: In order to achieve success 
in this region, we have got to build opportunity for the people 
of the region. We have got to build some kind of successful 
economic system. We have got to try to put people to work. We 
have got to give them some hope of prosperity in order to have 
success. I understand that to be the basis of our strategy.
    We are even having trouble doing that in this country, and 
we are trying to do it with an area of--Afghanistan and 
Pakistan alone have over 200 million people. When you throw in 
all the rest of these areas, with the backwardness of the 
economic and governmental situation that we had there, I have 
to ask you, do you really believe that we can succeed at this? 
Do you really believe that there is a legitimate chance? We 
have already been in it for, as I think Ms. Lee said earlier, a 
longer time than we have been in any other similar 
undertaking--at least military undertaking. Can we succeed at 
this? And what kind of economy are we really trying to build in 
this area?
    Ambassador Holbrooke. Thank you for a very good question. 
Let me make three quick points. Number one, on a personal note, 
I wouldn't be in this job if I thought it was impossible to 
succeed. I would so state and make my views known as an 
alternative. So yes, of course, I believe we can succeed. But 
it is difficult. It is the most difficult job I have had in my 
career because of what we inherited and the exogenous factors, 
such as the sanctuary that we discussed a moment ago in regard 
to Congressman Rothman's equally important question.
    So we have to go back to first principles, Congressman 
Chandler. Why are we there? I don't want to waste time going 
back to 9/11. But that is why we are there. We wouldn't be 
choosing to fight on the most remote and difficult terrain in 
the world if we hadn't been attacked on September 11, 2001. And 
if the outcome is not a good one, al Qaeda will return to 
Afghanistan with the Taliban, and there will be regional 
repercussions that will extend from Beirut to the Himalayas. So 
we have to deal with those.
    Having said that, I need to be clear. This war isn't going 
to end on the Battleship Missouri or the Wright-Patterson Air 
Base in Dayton, Ohio. It is a different kind of situation. 
David Petraeus and I have talked a great deal about how this 
war ends. And it is not the subject of this hearing. It is a 
complicated issue. I will be happy to talk to you offline about 
it. But the civilian mission, the reason we are here today 
before your committee, is absolutely indispensable because this 
is not simply a war of military fronts. It is a war in the end. 
And this goes back to the question of Congressman Schiff and 
Congressman Lewis and all of your colleagues. We must have a 
way of improving the Afghan governance. And yet we cannot 
replace that government, as was implicit in the exchange with 
Congressman Schiff. What we need to do is help them establish 
themselves.
    Now, it is very a very interesting point which I don't 
think I have mentioned publicly before. When we took office, we 
inherited a mission statement from the previous administration 
which I don't know if it was public or not, but it was 
extraordinarily ambitious. It was creating a modern state, a 
modern democracy in Afghanistan with limited resources. The 
President narrowed the mission to a reasonable, achievable 
goal, and increased the resources with the support of your 
committee. That was the core of what we did in Afghanistan.
    Meanwhile, going back to Congressman Rothman's point, we 
refocused on Pakistan, which previously had been dealt with as 
a separate issue unto itself. We integrated the two countries 
without--we don't use the word AfPak in public, but it did 
imply that the fact that what happened in one country affected 
the other. That is the strategy.
    I know we are out of time, and it is a long issue, but we 
do have a strategy. It involves both countries, and we want to 
get Afghanistan to a reasonable level of stability and security 
but we are not delusional. With the illiteracy rate as high as 
they have, the poorest non-African country in the world, and 
the distortions in the situation in the economy caused by an 
international presence in history, there are limits to what we 
can do. We are seeking to protect our national security 
interests. If we didn't feel that, we wouldn't be asking you 
for the kind of support that you and your colleagues have so 
generously given us.
    Mrs. Lowey. Thank you. Mr. Moran.
    Mr. Moran. Thanks, Madam Chairman, for having this hearing. 
I have enormous regard for you, Dr. Shah. But I am not going to 
address my questions at you. I am going to address them at 
Ambassador Holbrooke because you are not particularly a warrior 
or an USAID Administrator. You are a diplomat and par 
excellence. And you are just the kind of person we need. I 
don't disagree with any of the facts that you have shared with 
us. I do disagree with your conclusions though. You have lost 
me, for whatever it is worth, in terms of the viability of this 
mission, and I noted accordingly yesterday.
    One of the turning points I think was Marjah. It was 
supposed to be an Afghan National Army offensive. We claimed it 
as successful. But when you look at the number of wounded and 
dead, 85 percent of them were Americans. There is a story I was 
told when I was over in Afghanistan that the one particular 
Marine company had given the marketplace in the middle of 
Marjah to--and they routed the Taliban. They couldn't find 
their ANA counterparts, sent out a scout. They find them in the 
marketplace sitting on the ground, smoking hash with a pile of 
stuff that they had looted from the shopkeepers. So we 
reimbursed the shopkeepers what amounted to $300 to $500 a 
piece to make up for all the goods that the Afghan Army had 
taken.
    One of the people who is in a position of consequence in 
this mission shared with me what the elders told him. We didn't 
liberate Marjah. The Taliban did, from a corrupt police chief 
that was taking everything they were making. And then the 
government reimposes somebody they brought from Germany who was 
also corrupt; in fact, had been convicted of a violent crime. I 
can't imagine why. I can only speculate that they were involved 
as a conduit or something for a drug trade or some kind of 
reason. But anyway, he didn't belong where he was put. The 
problem that the elders related was that the government is 
never going to get the loyalty of the Afghan people because it 
doesn't deserve it. It will be another generation after we 
educate the government servants and so on, but particularly the 
police and military. We don't have the political will in this 
country, let alone the resources or the lives to expend in that 
effort.
    They feel that the only hope--although it is not by any 
means a perfect solution--is the kind of government of 
conciliation, whatever you want to call it, collaboration with 
the Taliban that President Karzai has cited. That worked in 
Ireland. I am familiar with it. I know you are. You know, they 
reached out to Gerry Adams. A lot of the folks in New York City 
and other places couldn't believe they were doing that. But it 
worked. To some extent it worked in the Balkans.
    I would like to hear from you, Ambassador Holbrooke, 
whether as an imperfect situation but perhaps expedient, given 
all the other factors considered, whether you think we could 
bring about such a government? They are not so much right now 
in Afghanistan. And bring about the kind of local governments, 
justice, if you will, albeit terribly harsh that many of the 
people are looking for?
    Ambassador Holbrooke. Thank you, Congressman Moran. It is 
good to see you again. I would like to address the macro part 
of it. And with the chairwoman's permission, Frank Ruggiero, 
who has just returned as my deputy, was in Kandahar and Marjah. 
He has just been back a few days. I think he might give us a 
vivid picture of the issue that the Congressman just mentioned.
    As President Obama and Secretary Clinton and the rest of us 
have said, we support the reconciliation program of President 
Karzai that you referred to. We support it, and we also support 
the reintegration program that I discussed earlier in response 
to an earlier question.
    With three red lines, those red lines are for our own 
national security. And just to repeat them because they are so 
critical, renounce al Qaeda, lay down their arms, and 
participate in the political process. Thousands of people have 
done that. The programs atrophied after the last few years. 
Last year was a year focused on the Kabul and the Afghan 
elections, which were very messy. We got through those--a close 
call but we got through them--and now the government has 
resurrected the reintegration program. They have added what you 
correctly called the reconciliation program, and we are going 
to support it. But I would caution you, there is a lot less 
there so far than the press has speculated on.
    With that, Madam Chairwoman, could I ask Frank Ruggiero to 
answer the second part of the question? This is Frank Ruggiero. 
He is my senior deputy, and he was the senior civilian 
representative in the southern region of Afghanistan until 2 
weeks ago.
    Mr. Ruggiero. Thank you, Congressman. I was in Marjah the 
fourth or fifth day after the U.S. forces went in, and I agree 
completely with your point. When we talked to the residents of 
Marjah, what they told us was the previous government that the 
Taliban had displaced was absolutely corrupt and preying on the 
people.
    As you pointed out, the district government that we 
appointed or the Afghan Government appointed, there are 
challenges certainly with his background. We have worked, I 
think, in a pretty good manner to try to make that government 
serve some basic needs of the people that are in Marjah.
    The point I would make on Marjah is that Marjah is part of 
a larger issue.
    Ambassador Holbrooke. Just to clarify, while Frank was on 
vacation, the man you are talking about was dismissed. He is 
gone.
    Mr. Moran. Oh, he was?
    Ambassador Holbrooke. He attempted to murder his stepson, 
and that seemed like an unfortunate thing.
    Mr. Moran. Questionable background, yes.
    Ambassador Holbrooke. So the point is, the man is gone as 
of about 5, 8 days ago.
    Mr. Moran. That is great news. Good.
    Mr. Ruggiero. In terms of Marjah, we try to look at it in 
the overall effectiveness of what we are doing in the central 
Helmand River Valley. The U.S. Marines and U.S. civilians went 
into various important districts in central Helmand last summer 
and cleared those out. In Nawa and Gharmsir and in the capital 
city, Lashkar Gah, we have seen a pretty good effect of our 
counterinsurgency strategy. We have seen the same thing in Nad 
Ali, which is just north of Lashkar Gah. Marjah remains a 
challenge. But Marjah is the last area in the central Helmand 
River Valley where the vast majority of the population of 
Helmand lives that we would have to clear and stabilize. The 
Taliban recognizes that. They are putting up a significant 
fight. But I think we are making progress there.
    Mr. Moran. Thank you. Very good response. Thank you, 
Ambassador. Thank you, Frank, very much. Thank you, Madam 
Chairwoman.
    Mrs. Lowey. Thank you. We are very fortunate that 
Congressman Moran serves on the Defense Subcommittee as well as 
our committee so we get the benefit of his expertise which is 
often interesting as we discuss these issues.
    Mr. Rothman. Madam Chairwoman.
    Mrs. Lowey. Oh, absolutely. We are also----
    Mr. Rothman. I serve with Mr. Moran and was on that trip 
when we heard----
    Mrs. Lowey. Mr. Israel, who understands the issues but 
isn't on the Defense Subcommittee.
    Mr. Israel. Thank you, Madam Chair. Ambassador and Dr. 
Shah, thanks for joining us. I apologize for having had to 
leave the room.
    My district, like the chairwoman's district, is in the New 
York area. My district is 30 miles from Ground Zero, and so I 
think it is important for us to refocus on basics. You know 
there is a fog of war on the battlefield but sometimes there is 
a fog of war on this center of gravity and sometimes we lose 
sight of the basics. And I believe the basics are that we do 
have a mission to reintegrate and reconcile those who can be 
reintegrated and reconciled and to degrade and defeat al Qaeda.
    There is a second reality that I would like to share with 
you. And these aren't my words and they don't come from any 
sophisticated punditry. They come from a member of the Special 
Forces with whom I met during a visit to firebase ties near 
Musa Qala several years ago. Congressman Jim Marshall and I 
participated in a CODEL and we went to this remote fire base 
and met with some folks from the Special Forces who were 
preparing to enter Musa Qala. We were asking them about the 
history of Musa Qala and we were told that Musa Qala had 
shifted back and forth from ISAF to the Taliban, back to ISAF, 
to the Taliban. We had lost control, gained control, lost 
control repeatedly. So I asked a dumb question, and my question 
was, well, were the residents of Musa Qala for us or were they 
for the Taliban? And one of the soldiers in the Special Forces 
said, Congressman, they are for them. They are for them. He 
said, Here is what is going to happen tomorrow: We are going to 
go into Musa Qala. We are going to shoot up the bad guys. Some 
are going to be killed, the others are going to flee to the 
mountains and the caves. We are going to build a new bridge 
over the river at Musa Qala with U.S. taxpayer funds. We are 
going to build a maternity clinic in Musa Qala with U.S. 
taxpayer funds. We are going to let the governing council where 
women serve in Musa Qala and then we are going to leave because 
we are going to be ordered to the next Musa Qala. And you know 
what is going to happen? The Taliban is going to come out of 
the caves, out of the mountains, come to Musa Qala, assassinate 
the people on the governing council, blow up the bridge and 
blow up the maternity ward that we built. He said, You know, I 
am all for this winning the hearts and minds. He said, but you 
know what, hearts change, and people change their minds. He 
said, If we want to get this right in Afghanistan, you have got 
to give people an alternative and you have got to protect that 
alternative. He said, and that is going to take a long time. I 
said, Well, how long? He said, Well, how long have we been in 
Korea, Congressman? And that was very telling. And not from FOX 
News and not from MSNBC but from somebody who is doing the 
shooting.
    Now to me that is the history of Afghanistan. You just 
cannot impose order from above. The WikiLeaks was just--not new 
history, ancient history. You cannot impose order from above 
unless you are going to get people protected, but ultimately 
they are the best protectors. The one in my view--here is my 
question. Long windup. Here is the pitch. The one truly 
successful program in Afghanistan has been the National 
Solidarity Programme, in my view. Why? Because it is not made 
in the USA. It is not us going in and building a bridge and a 
maternity clinic. It is funded by us and the World Bank, but it 
is run out of the Afghan Ministry of Rehabilitation and Rural 
Development. It is in 44,000 villages. It doesn't say ``Made in 
the USA.'' It says ``Made by the People of Afghanistan,'' and 
it has largely been immune from Taliban attacks because the 
Taliban understands hearts and minds, and they don't want to 
anger local residents by blowing up their own sweat equity.
    So my question to you is, do you agree that the National 
Solidarity Programme is an effective strategy in securing 
Afghanistan for the Afghan people? And if so, what other models 
should we be supporting that are similar to the National 
Solidarity Programme?
    Ambassador Holbrooke. We totally agree with you. We have 
gone back for more funding. I have talked to Bob Zoellick, the 
President of the World Bank, about it many times. The head of 
the NSV program was in Washington recently, and we have asked 
him to come back in October--the Congress was out of session 
when he was here--in order perhaps to come up and share his 
views with you. But I couldn't agree more.
    Now as for your scenario from Musa Qala, if that is what 
happens, the strategy will not succeed. We all understand that. 
How do we prevent that pattern from occurring? That goes back 
to my earlier discussion with, I believe, Congressman Schiff 
about clear, hold, build, and transfer. If we can't transfer, 
the process will not move forward. And that will take time, 
which is why I emphasized in my earlier remarks that long after 
the combat troops have left there will have to be a continuing 
American commitment on military, the police, and economic and 
development assistance.
    And Dr. Shah may wish to comment on it because in the long 
run, he is going to have the most important role, in my view. 
Otherwise, the pattern you described will happen. But it 
doesn't have to happen for this reason, Congressman. As you 
well know--because the depth and the way you phrase the 
question suggests a substantial understanding of it, you left 
out one thing. People really don't like the Taliban. They 
really, truly don't. You talk about hearts and minds. A 
minority can take over. An armed and ruthless minority can take 
over a majority. Mao Tse-tung was really the developer of that 
thesis and he set a pattern which everyone else has followed. 
He once said, Give me two good men, and I will take any village 
in China. By good men, he meant terrorists who would have 
public beheadings of just the sort you described.
    So it isn't enough just that they don't like the Taliban. 
They have to be given security. And that security cannot be 
given indefinitely by international forces. So you and I are in 
the same place. We have the same goal. But we need your 
support. And I thank you for it. And I think Dr. Shah should 
also comment about the long-term needs for economic 
development.
    Dr. Shah. Thank you for your comment. And I just want to 
start by saying, we agree with your assessment of the National 
Solidarity Programme, and I know we have spoken with the 
chairwoman about her support for that program as well. We have 
looked carefully at the more than 22,000 community development 
groups that have come together, councils, and the work that 
they have done. I think there is a new preliminary Harvard 
study that will show the strong performance and sustainability 
of those programs. And you are right, they have been protected 
in terms of the benefits they have offered for clean water and 
improved governance and women's empowerment. We have just 
participated in an approval of the third phase of that program 
that will reinvest in about 17,400 of those councils for the 
next phase and to add an additional 10,300 communities in which 
they will do that. This is a major 5-year, $1.5 billion 
investment and the U.S. Government would be the largest single 
provider for that, doing it with international partners. And 
that is part of the funding plan going forward.
    On the longer term piece, you know, one of the reasons I 
was excited about the Kabul Conference was that it was an 
opportunity for the Afghan Government in a coherent way to 
present a viable long-term economic strategy that would provide 
access to economic resources through sustained investment in 
the agriculture sector and through a coherent approach to 
taking advantage of the mining and mineral assets that exist in 
Afghanistan. That latter opportunity has been identified 
largely by our partnership with the U.S. Geological Survey, 
funded by USAID, to help explore and make visible what 
resources are actually there. Hundreds of billions in some 
estimates, trillions of dollars of mineral resources. That 
needs to be coupled with continued sustained investment in 
local governance and local opportunities, like the National 
Solidarity Programme, and there are many other programs that we 
are trying to design in that way that benefit from that local 
piece. And it is really the two of those things, large-scale 
long-term economic opportunity connecting with this local 
vibrancy and capability of governance, when it can succeed, to 
come together and create a viable economic plan over the long 
term.
    So thank you for raising that and highlighting that 
specific program.
    Mr. Israel. Thank you, Madam Chair.
    Mrs. Lowey. I thank you for raising that issue as well 
because this committee has certainly been extremely supportive 
of the NSP program, and we look forward to seeing it expand to 
all the communities that it hasn't participated in as well.
    Ms. Granger.
    Ms. Granger. Thank you. I have three questions circling 
back to some of the answers or discussions today. So if you 
could be concise in your answer, maybe the chair will let us 
have all three of them.
    First of all, back to Mr. Lewis' question having to do with 
the poppies, there was a negative GAO report released last week 
on agriculture which said USAID can't track performance. So I 
would like your response to that.
    Also, in talking about tracking, what Mr. Rehberg was 
talking about, you explained your computer system and your 
tracking. What can you say about DOD and their tracking? If you 
can refer to that.
    And the last thing is, we started with this and have heard 
it through three hearings about one of the problems with the 
money leaving Afghanistan is the lack of a banking system. So 
why haven't we addressed the banking system? And why didn't we 
address it very early as far as rebuilding?
    Dr. Shah. I will take the first question, and perhaps ask 
Ambassador Holbrooke to address the others. On agriculture in 
the GAO report, we have looked at that very carefully and 
largely believe that we can implement most of the findings of 
that report. The distinction I would make would be between our 
ability to track the flow of funds, and the process indicators 
that are in grants and contracts and cooperative agreements and 
the actual observation of outcomes.
    So I can sit here and tell you how many Ag depots have been 
created, how many vouchers have been handed out. We are 
improving our capability to then understand, what does that 
mean for a farmer who went back, planted improved seed 
varieties and used fertilizer? What kind of a yield improvement 
did they get? What kind of an income improvement did they get? 
And how did that connect to the larger agricultural sector 
performance? We absolutely need to get to a place where we can 
do that. We are working aggressively to make that happen.
    That is the difference between what that report highlighted 
and our ability to track with strong oversight the actual flow 
of funds and the process indicators.
    I won't comment on necessarily DOD's systems for tracking 
outcomes. I was just in Bamiyan last week where we saw roads 
funded through the CERT program come together with roads funded 
through USAID programs. We certainly have a system that we 
think is pretty rigorous in terms of standards of performance 
and contracting and construction quality and sustainability. I 
think the effort to bring together the civilian and military 
sides in those settings in the PRTs is helping. At the point of 
those decisions people understand the value of those types of 
standards and that kind of oversight.
    So I am optimistic that we can get to a place where there 
is more coherence, but I can't speak specifically to the 
tracking system.
    Ambassador Holbrooke. Congresswoman Granger, on the cash 
flow system, we brought this chart with us, and I hope it can 
be added to your record. This is an extraordinarily tough 
problem and, once again, one that was simply ignored until 
early last year. There were no active banks in Kabul in 2001. 
Today there are 17. But this is one of the most underbanked 
countries in the world. As a result, almost everything is cash 
payments, either cash carry couriers or hawala system.
    I would like to submit for the record this list of things 
we are trying to do so as to save time. But only 5 percent of 
Afghans hold bank accounts, almost all of them in the big three 
cities or four cities. 95 percent of the people rely on hawala 
system, and the articles in The Washington Post and The Wall 
Street Journal left the understandable impression that that 
huge flow of money going through the airport was all illegal or 
drug traffic. Some of it is. But it is also required to fund 
their economy.
    Total imports to Afghanistan last year, $8.8 billion. Total 
exports, $2.2 billion. How is this paid for? The trade deficit, 
which is 50 percent of GDP, 50 percent, it requires these large 
cash flow movements.
    Now, how do we regulate them? It is declared, just as in 
our country. Originally we thought--and part of my team is 
right behind me, Rami Shy and Matt Stiglitz, we thought maybe 
we could get some control over this directly. We are doing a 
lot in the Gulf because Dubai is obviously the major port of 
call for this cash movement. We are working very closely with 
the government on this. We do believe some of the money is 
illicit, of course. But what we are really trying to do is move 
them to a mobile banking system. Ashley Bommer, who is in the 
second row, has been focused on that since the day she joined 
the government with me at the beginning of last year.
    For example, a small but important example, we are trying 
to pay soldiers and police through cell phone payments. And 
what happened? We did an experiment with about 50 police. And 
they came to people and said, Our salaries are much higher than 
we realized. Because they were being skimmed. And so we are 
going to try to proliferate that. Mobile banking is a partial 
solution to this. But we agree with you how important it is.
    The only thing I would caution is don't assume that all the 
money going through that airport is illicit money because if 
they couldn't move money this way, the economy would implode 
and Dr. Shah would be unable to do his programs.
    Ms. Granger. Thank you.
    Mrs. Lowey. Thank you. Before I close, I want to correct 
myself once again. In addition to Mr. Moran and Mr. Rothman, we 
have our ranking member, Kay Granger, who serves on the Defense 
Subcommittee. So we have a lot of expertise here when it comes 
to dealing with corruption and accountability.
    As I close, I want to thank you on behalf of the 
subcommittee. I do want to thank our witnesses for your candor. 
Over the past 3 weeks, the Subcommittee has delved into the 
issues of accountability and corruption in Afghanistan. As you 
know, we had a hearing with the relevant Inspectors General, 
the Government Accountability Office, as well as briefings with 
Ambassador Eikenberry, and the Treasury Department. The staff 
and myself have met with many individuals, agencies, 
nongovernmental officials who have expertise in these areas. 
And the common message in these meetings is that challenges in 
Afghanistan are complex. They are significant. They are 
multifaceted. They are difficult. But I must say from this 
hearing and your testimony, I am heartened to hear that the 
administration is taking these challenges very, very seriously.
    And just to repeat as we close, establishing a new Rule of 
Law, Ambassador in Kabul, to begin to strengthen and coordinate 
the rule of law programs, embedding advisers in the Afghan 
Ministry of Finance and the Afghan Customs Service to improve 
their capacity to track Afghan and international assistance 
funds, taking steps to put in place a ministry assessment 
process that lays the groundwork for building ministry 
capacity, put in place expanded oversight mechanisms for 
bilateral and multilateral mechanisms, creating Task Force 
Spotlight to examine private security contractors, Task Force 
2010 working with DOD to review the contracts and subcontracts 
and improving the visibility of contract funding flaws.
    I am also somewhat encouraged that the Government of 
Afghanistan at least has committed itself to additional steps 
in the areas of good governance, judicial reform, and anti-
corruption during the Kabul Conference. However, only time will 
demonstrate whether these commitments are real, and there is a 
political will to make tangible changes.
    Certainly we have heard of stories, such as the one you 
related, where some people have been arrested and charged, but 
we also know that there are many people at the top who were 
charged but not arrested and not prosecuted.
    So there is a lot of work to be done. I am very confident 
that the Secretary of State, our witnesses today, Ambassador 
Eikenberry and his team will continue to raise our concerns as 
we pursue methodology to address them. We are pleased that you 
are pursuing these concerns at the highest levels in the Afghan 
Government.
    It is also apparent from the testimony today that the 
Administration understands the importance of accountability and 
transparency for maintaining U.S. taxpayer support.
    You have heard from my colleagues. People are pained. They 
are losing their sons, their daughters. This is very, very 
difficult for our Members of Congress to go home to. And then 
when they hear stories of the corruption, the lack of 
accountability, it is very difficult to continue to be 
supportive. And I think you are aware of that.
    The war in Afghanistan was allowed to languish without 
sufficient strategy or resources for far too long. So I do 
commend the President for refocusing our efforts and our 
strategy. However, none of us should be under any illusion that 
all of the problems are behind us. And in the weeks ahead, I 
look forward to working with you, Ambassador Holbrooke and Dr. 
Shah, and the Subcommittee, to put in place safeguards to 
ensure that the funds we appropriate for programs in 
Afghanistan, where the civilian components of the 
Administration's strategy are integral to the success of the 
military and the stability of the region, are being used for 
their intended purposes, and reach the intended recipients. I 
know you are committed to it. This Committee is committed to 
it. We know we have a lot more work to do.
    But thank you for coming today and we look forward to 
continuing to reach our goal. Thank you very much. The 
committee is adjourned.
[GRAPHIC] [TIFF OMITTED] T6402C.113

[GRAPHIC] [TIFF OMITTED] T6402C.114

[GRAPHIC] [TIFF OMITTED] T6402C.115

[GRAPHIC] [TIFF OMITTED] T6402C.116

[GRAPHIC] [TIFF OMITTED] T6402C.117

[GRAPHIC] [TIFF OMITTED] T6402C.118

[GRAPHIC] [TIFF OMITTED] T6402C.119

[GRAPHIC] [TIFF OMITTED] T6402C.120

[GRAPHIC] [TIFF OMITTED] T6402C.121

[GRAPHIC] [TIFF OMITTED] T6402C.122

[GRAPHIC] [TIFF OMITTED] T6402C.123

[GRAPHIC] [TIFF OMITTED] T6402C.124

[GRAPHIC] [TIFF OMITTED] T6402C.125

[GRAPHIC] [TIFF OMITTED] T6402C.126

[GRAPHIC] [TIFF OMITTED] T6402C.127

[GRAPHIC] [TIFF OMITTED] T6402C.128

[GRAPHIC] [TIFF OMITTED] T6402C.129

[GRAPHIC] [TIFF OMITTED] T6402C.130

[GRAPHIC] [TIFF OMITTED] T6402C.131

[GRAPHIC] [TIFF OMITTED] T6402C.132

[GRAPHIC] [TIFF OMITTED] T6402C.133

[GRAPHIC] [TIFF OMITTED] T6402C.134

[GRAPHIC] [TIFF OMITTED] T6402C.135

[GRAPHIC] [TIFF OMITTED] T6402C.136

[GRAPHIC] [TIFF OMITTED] T6402C.137

[GRAPHIC] [TIFF OMITTED] T6402C.138

[GRAPHIC] [TIFF OMITTED] T6402C.139

[GRAPHIC] [TIFF OMITTED] T6402C.140

[GRAPHIC] [TIFF OMITTED] T6402C.141

[GRAPHIC] [TIFF OMITTED] T6402C.142

[GRAPHIC] [TIFF OMITTED] T6402C.143

                           W I T N E S S E S

                              ----------                              
                                                                   Page
Benjamin, Ambassador-At-Large Daniel.............................   579
Clinton, Hon. H. R...............................................     1
Fields, Major General Arnold.....................................   655
Gambatesa, D. A..................................................   655
Geithner, Hon. T. F..............................................   273
Goosby, Eric.....................................................   489
Holbrooke, R. C..................................................   783
Johnson, Charles.................................................   655
Johnson, D. T....................................................   579
Shah, Dr. Rajiv..................................................97 783
Shapiro, A. J....................................................   579
Steele, Gloria...................................................   489
Williams, A. S...................................................   381
Yohannes, D. W...................................................   427

                                  
